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6 The Social Perspective Uwe E. Reinhardt THE PRESENT SCENARIO Expenditures on health care outgalloped the Gross National Product (GNP) by about 3 percentage points per year, on average, during the 1980s. At that rate, it will take 82 years for 100 percent of the GNP to be eaten up by health care. In response to these prognostications, people tend to say, in effect, "What is the big deal? We have got a long time to figure this problem of health care expenditures out-82 years in fact." It is true: it would take only 82 years. Even if we did end up spending 100 percent of our GNP on health care, what would be wrong with that? When people ask, "What would it be like?" I say, "Very simple king-size beds from coast to coast, two Americans in each, giving each other health care, and the Japanese feeding us intrave- nously, as they do now." COSTS OF HEALTH CARE This scenario sounds comical, but not everyone is laughing at it. One person who is not laughing is an employee benefits manager of a typical American corporation. This person is 30 years old, works for General Motors, and just made a payroll entry crediting cash for $800 million in health care for people who do not work for General Motors. One can imagine him asking, "Where do I put the debit? If these people aren't working, it can't be payroll. It has got to be something else." That $800 million is in fact what General Motors pays per year for retired General Motors workers and their families, and indeed there is no clear place to record the debit. 34

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PERSPECTIVES ON EFFECTIVENESS AND OUTCOMES RESEARCH 35 In 1980, employers paid $60 billion in health care premiums for working and nonworking employees; now they pay $135 billion. This does not include what corporations pay toward Part A Medicare. In 1987, U.S. Steel spent $125 million of its $219 million net income on retirees 57 percent. Anything over 20 percent will catch a chief executive officer's attention: that 57 percent is being noticed by the CEOs of big corporations. The Health Care Financing Administration (HCFA) forecasts expenditures of $1.5 trillion in the year 2000. We can afford that amount, but is it really worth spending? That question is what gets us into this Effectiveness Initiative. Much outcomes research has shown that there seems to have been no indication for many of the procedures that have been done. In fact, patients would actually have been better off medically if they had not been done. The issue, then, is really one of appropriateness. On some cost-quality curve, is point B. which identifies a point of diminishing marginal returns to care, appropriate? Is it more appropriate than point A, where the curve is still rising? Physicians say, "If you go past B it is not appropriate, but up to B is always appropriate." Economists would not agree, for the very reason that the National Academy of Sciences gave for not putting seatbelts in school buses: it would cost $40 million a year to save the life of one 10- year-old. Therefore, an economist would say, if that is true for youngsters, it must be true for the aged, too, and we ought to stay at point A. Appropriateness means we stop short of the maximum attainable quality. Citizens have said so with votes on roads, on seatbelts, and on many other things, and they will learn to say' so for health care. That is, a raging debate will soon be upon us regarding the rationing of health services: Going from B to A means withholding beneficial services, and we will ration them. But since we are willing to ration safety on school buses, we should be willing to ration services in health care, too. VARIATIONS IN MEDICAL COSTS AND PRACTICE Why did this come about? Well, in 1972, John Wennberg found that Part B Medicare spending by counties in Vermont varied enormously, and he could not explain it. Those geographic variations in practice persist to the present. For ex- ample, hysterectomy rates vary inexplicably across counties. In 1982, age- adjusted Part A hospital expenditures in Iowa City for hysterectomy were $734 per patient; in Des Moines, they were $1,300. How can the health care in Des Moines be twice as expensive as the health care in Iowa City, particularly when residents of each city insist that health care there is the best in the world? The answer will be "practice style." Why are there so many more operations in Boston than in New Haven? Why are there far more coronary bypasses in New Haven than in Boston? Physicians answer,

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36 EFFECTIVENESS A1VD OUTCOMES IN HEALTH CARE "In Boston, they have different theories about what works than in New Haven, and after all, New Haven is some 200 miles south of Boston." Which explains a lot. Practice patterns vary along other dimensions, too. The Health Care Coalition of Florida has some interesting data, by hospital, on the cesarean section rate for commercially insured women and for Medicaid patients. In many hospitals, 42 percent of commercially insured women have cesarean sections, whereas women on Medicaid have none. What theory is compat- ible with these data? Is it a medical theory are poor women thought to be more robust than richer women? Could it be an economic theory, because Medicaid reimbursement is likely to be one-third of commercial reimbursement? Or could it be a legal theory do poor women sue for malpratice and poor obstetric outcomes less often than rich women? No one knows. REASONS FOR THE EFFECTIVENESS INITIATIVE Canadians spend a lot less than Americans as a percentage of GNP, and that raises the question, What do Americans get in health care that Canadi- ans do not get? We know what Canada does not get; it does not have 30 million uninsured or any uninsured but what do they miss that we get? That, again, leads to the question of what we actually buy for all this money. Why has this country, alone in the world, undertaken an Effectiveness Initiative? One naive theory is that American medicine decided, "We had better search what we are about. We want to be the best physicians in the world, and we will research this and do good for mankind." One could hold that null hypothesis, and one could wish it were so, but in fact I do not think it is so. I read a lovely little essay by John Ball, Executive Vice President of the American College of Physicians. He lists the mistakes organized medicine has made, and he reminded me of something that happened early in the 1980s. Medicine argued for and got the elimination of the Health Care Technology Council that [Secretary Joseph] Califano had put in with the idea that it should do outcomes and effectiveness research. The minute President Reagan was elected, the Council's budget was zeroed out, and it never met again. Up to that time, that was the only federal agency that evaluated the appropriateness of medical technology from a medical perspective and made recommendations about payment. Partly as a consequence of its disappearance, organized medicine has had little voice when decisions about payments are made, and a real opportunity to affect standards of practice has been lost. The alternative hypothesis is this: Concern over cost is without question one of the major drivers in this field, but there is also concern over quality.

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PERSPECTIVES ON EFFECTIVENESS AND OUTCOMES RESEARCH 37 Many researchers, led by John Wennberg, Robert Brook, David Eddy, Bar- bara McNeil, Kathleen Lohr, and others who worked in the 1970s and 1980s. were simply interested in quality. They realized something was wrong and studied it, with support from the National Center for Health Services Research and HCFA, to the credit of those federal agencies. These efforts were certainly a harbinger of the Effectiveness Initiative. HOW TO PROCEED IN EFFECTIVENESS AND OUTCOMES RESEARCH What is to be done? I am not expert in this particular type of research at all, but I do have an idea. The traditional model was that the physician held a theory: I do X, and Y happens. The "ideal" was that if every physician is allowed to have his or her own theory and is just left alone, health care will lumber toward the optimum. No one believes that notion any longer. The next level up was to take a bunch of the smartest people, put them in a room together, and let them come out with a consensus about good practice. However, if we had done that 20 years ago, the smartest people would have said that gastric freezing is a nifty idea. We now know that gastric freezing should not be done. Period. One hundred years ago the smartest people would have said, "Under these conditions, you bleed the patient." Thus, the pure consensus approach is not adequate either. It might be better than this current free-for-all, but it is not enough, in my view. Ultimately what we need is an empirically tested hypothesis that links medical intervention with observable outcome. We then must ask: How is a good outcome defined? In whose mind? Some surgical procedures might enable the patient to play golf or kick a soccer ball, but render him impotent. The patient will have an opinion about this. Tell a German that he can play soccer but will be impotent, and he will say, "Give me a Mercedes, I am all right." Tell a Frenchman that and all hell will break loose. I exaggerate a little to make a point: Patients' perspectives must be included in any definition of a good outcome. We will need data, as Paul Ellwood and others say, that track other data and allow us empirically to examine medical practice issues without randomized trials. It should be possible statistically to test a hypothesis without randomized clinical trials. We do it in economics all the time, and we do it in other spheres. This is the direction in which I see outcomes research going. We need empirical tests, and they will take a lot of money. There has to be a sizable investment in data bases, on the order of $50 million just for the first phase. If we in this country end up spending $100 to $200 million a year on outcomes and effectiveness research, we would not be wasting money, I assure you. It is a trivial percentage of the national expenditures on health care, and it is one of the finest investments we could make.