There was a time, I am told, when there were bookies in London who would take bets on the outcome of any kind of event. What if they were asked to accept a wager on the long-term (10 years or so) success of the American health reform legislation in controlling costs?  And if they said yes, then what kind of odds would they give?

The answer might be that, being Brits, they had heard about the legislation but didn’t know the details. Where could they look for information? With that in hand they could treat health reform as a kind of horse race. What kind of track record did similar legislation have in the past have? Would a Republican-dominated Congress in the near future (a stand in for the jockey) change the odds? And would the background dynamic of physician practices, technological developments and intensity patterns, and patient demands effect the outcome in some unforeseen ways (the state of the track)?

An obvious starting point for information would be the Congressional Budget Office, which has projected that the Patient Protection and Affordable Care Act will result in a small deficit reduction over the next decade. The Office of the Actuary of the Center for Medicare and Medicaid Services has projected a slight increase in medical costs over the same period, but still a reduction in the deficit.

More recently, other analysts have come to similarly optimistic conclusions. David Cutler and colleagues in a Commonwealth Fund report assess the impact of the legislation on health care costs for the whole health care system, not just the federal government as the above cited studies did. They project a saving of $185 billion between now and 2019, and overall expenditures in that year of $4.3 trillion, down from the $4.6 trillion projected earlier. Annual Medicare cost increases, they contend, will rise from $425 billion in 2009 to $684 in 2019, a significant improvement in comparison with earlier an earlier projected $823 billion. In short, their figures make the reform legislation a clear winner. But they did not speculate who the jockey might be, and assumed the track will not be muddy.

The policy analyst MIT’s Jonathan Gruber is on the whole optimistic, but he introduces a cautionary note. There is great uncertainty about how far the legislation will go in slowing cost growth, “mostly because there is such uncertainty in general about how to control the rate of growth in health care costs,” he wrote in the New England Journal of Medicine last month. A possibly muddy track, that is.

A recent Kaiser Health News story serves to underscore Gruber’s point. It reported that health care spending in Utah, often noted for its lower costs and well run medical institutions, has seen a significant increase its Medicare costs in recent years. “Medicare recipients,” it reports, “are receiving certain kinds of surgery more frequently and are admitted for longer periods to intensive care units during their final days.” Moreover, the story notes, a similar trend has been observed in other areas often cited – by Atul Gawande, for instance – as models for their control of costs (even at the Mayo Clinic).

By now the bookie may be a little uncertain. Maybe the sure thing of the Commonwealth report is not so sure after all. And he may be positively befuddled by an article with the catchy title, “Health Overhaul Puts Wallets in ICU,” by Grace-Marie Turner, president of the Galen Institute, an avowedly market-oriented think tank unfriendly to big government programs. Even the CBO’s revised estimate of $115 billion more than it had earlier projected, “that is still based on unrealistically high assumptions about cuts in Medicare and unrealistically low assumptions about the cost of the new law.”

In other words, it sounds like a one-eyed jockey running on a muddy track. Douglas W. Elmendorf, director of the CBO, was not notably more optimistic when he said, in a May 26 presentation, that the health legislation “does not substantially diminish the pressure” of rising health costs.

With all this incompatible information in hand, the bookie might well be nervous. If the Commonwealth report supports a 10-1 favorable odds, and the Gruber study suggests they might be lowered to 8-4, and the Kaiser report to 7-4, and Grace-Marie Turner projecting a sure loser, then 7-6 might be all he would offer. That still makes the legislation a decent bet, but hardly a certain winner. Yet is a far better bet than one that might, had the legislation failed, been placed on the nag of a pre-reform horse, a tested and wanting loser.

Daniel Callahan is editor of the Health Care Cost Monitor. His most recent book is Taming the Beloved Beast How Medical Technology Costs Are Destroying Our Health Care System.

My wife, a psychologist, once coined a useful phrase: “pathologies of hope.” The idea behind it is that, in desperate situations, people are often prone to invent improbable hopes, or to hang on to low odds, in order to cope with the likelihood of an intolerable outcome. A familiar clinical situation is when a physician is treating a clearly dying patient but provides hope to the family (and maybe himself) by saying, for instance, “I want you to know that your mother seems much improved today.” That statement may well be true but it has no bearing on the inevitable death. There can be good days and bad days in a downward trajectory.

The discussion on cost control has many elements of a pathology of hope. The aggregate evidence on rising health care costs shows that technology is one of the main drivers of cost increases. Yet it is also true that some new technologies, or better management of new ones, could reduce costs. The problem is that most of them will not succeed in doing so. As the Congressional Budget Office noted in a 2008 study, “examples of new treatments for which long-term savings have been clearly demonstrated are few…improvements in medical care that reduce mortality…paradoxically increase overall spending on health care because surviving patients live longer and therefore use health services for more years.”

That quotation suggests the need for a distinction. On the one hand, there are technologies whose direct impact might reduce costs. But on the other hand, if the patient lives longer and the possible treatments during the remaining life span are taken into account, the earlier savings will be nullified by the later down stream costs. That is one of the nastier features of medical progress, the one that is hardest to look straight in the face. I call that phenomenon the longitudinal factor.

But even if we put aside that factor (which some health care economists prefer to do), we are still left with the question of how to deal with the likelihood that some technologies may hold down costs but that most will not. To what extent do the minority of cost-saving technologies seduce us into the pathology of hope?

The seduction comes from the reality that, in the aggregate, costs can not be effectively controlled without taking draconian, politically unacceptable policy steps – and that is an intolerable thought. So, to comfort ourselves, we grab onto all kinds of hypothetical possibilities, plausible enough but with no track record.

Adding to the seduction is the deeply imbedded value in American medicine (with full cultural support from the citizenry) that technological innovation is a medical necessity. Henry J. Aaron, of the Brookings Institution, has over the years been one of the most prominent economists to show how important technology costs are in efforts to control those costs. Yet, in the end, he can’t quite stand the implication that our beloved technological innovation is the ultimate culprit. He has written that any efforts to curtail research or to place barriers in the way of “the fruits of such research…is sheer madness.”

The oft-repeated “threat to innovation” has been raised again and again against ideas for serious control of technology costs. And it is the possibility that some technological innovations may reduce costs that invites the pathologies of hope: gosh, maybe it is not so bad after all.

There is an analogy in the debate on comparative effectiveness research. Many industries and some groups of physicians lobbied successfully to make certain that the research cannot be used to set practice guidelines or to ration care. The main technical argument was that the studies would be population studies, not in the end suitable for the individual care of patients; that is, in judging the value of drugs or medical devices for them. Some technologies may be economically valuable, even if most are not, just as some drugs and medical treatments judged to be wanting in population studies will be efficacious with individual patients. Sometimes that may well be true but sometimes as well the pathologies of hope are at work, and it may not be easy to tell the difference.

For me at least the historical record shows that, for at least 40 years, efforts to control costs in general, and technological costs in particular, have not been successful. With some small rises and falls costs have always risen each year (flattening only for a time in the mid-1990s). The weakest argument, regularly used in the Congress, is that more money spent on medical research will eventually rein in cost growth. But there is considerable agreement among economists that research drives up costs.

It is that wide-lens perspective that should guide us in thinking about costs, not the fact that some cost control strategies may improve the situation. They may well do so, but my bet is that there is no good reason, without politically tough steps – for example, price controls; cost-effectiveness research; and sharp cuts in patient benefits and in payments to physicians and hospitals – that they can do the necessary work. To constantly invoke wondrous possibilities is more often than not to indulge in pathologies of hope, just putting off the day of reckoning.

Daniel Callahan is editor of the Health Care Cost Monitor. His most recent book is Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

Can this marriage be saved? The couple argued incessantly about everything prior to their wedding: the color of the dishes, whether to have children, who would manage the money and clean the toilet. When words failed, they shouted and threw things at each other. The bride’s family refused to attend the wedding. Even the groom’s family, their ladies dressed in blue, squabbled with each other about the wisdom of the marriage.

The marital vows were full of ambiguities and many prenuptial agreements were put off into the future, subject to more research and professional counseling. When the couple emerged from the church they were greeted not with rice but with foul smelling offal thrown at them by the bride’s family, accompanied by shouted promises to do everything possible to destroy the marriage. Even so, the couple held hands, looked lovingly in each other’s eyes – and only once or twice unobtrusively kicked each other.

Well, that’s one story, the one that focuses not on the Obama triumph that the reform bill represented but on the many problems and acrimony that the actual legislation left in its wake. The other story is that it was a historically important piece of legislation, that it will not be easy to dislodge, and that if history is any guide the public will eventually come to like it, as happened with Social Security in 1936 and Medicare in 1965. Its strongest asset is that it extends insurance coverage to an estimated 33 million people, mandates preventive care under Medicare, does much to close the doughnut gap in that program’s pharmaceutical coverage, puts a comparative effectiveness program in place, and strengthens primary care.

Its weakness lies in its cost control provisions, hardly any of which are immediate and direct and most of which are long-term and indirect. During its earliest phases, moreover, many of its cost – increasing provisions will be put in place. For the next few years, then, the usual costs – that is, most of them – will continue to rise at the current 6% to 7% a year, and the economic baseline of costs will be considerably higher by the time the potential savings begin to kick in.

It was long ago agreed that the most touted cost saving measures early on – prevention, information technology, and comparative effectiveness research – hold much less promise than initially believed. As for the long-term provisions, the most promising is that of the 2015 establishment of an independent Medicare Advisory Board. It will be charged, among other things, with the tasks of monitoring and controlling Medicare costs. Its most important feature is one designed to cope with the deeply embedded resistance of Congress to setting spending limits, requiring an up or down vote on its proposals. Precisely because of its potency it will almost certainly be a target for elimination or dilution. A newly proposed Senate bill to control insurer premium increases could be helpful as well.

Many others judge it as a strong measure, but I have little confidence in the 2014 establishment of state health insurance exchanges, designed to allow individuals and small businesses to comparison shop among insurers for standardized health packages. While it is hard to say many good things about the health insurance industry, I have come to believe their claim that the background costs of the present health care system allow little room for any dramatic drop in premium prices. At best the differences among policies with comparable benefits will be marginal. Similar policies will have similar costs for insurers: company A is hardly likely to offer the same benefits as company B at 25% lower costs, any more than cars or cell phones have sharply different prices for identical features.

Often used as a model for the exchange plan is the Federal Employees Benefit Program, available to all federal employees and allowing them a wide variety of shopping possibilities. It is a bad model. Its annual cost increases have, if anything, been higher than general health care cost increases, in the 8%-a-year range. Because of the background costs in the health care system, I never believed a public option plan would have been much more successful either and would in any case have covered no more than an estimated 3% of the population.

In between my best and worst choices are some that are promising, aiming to deal with those background costs. They include efforts to embody “bundling” strategies in the Medicare program, the establishment of the Patient-Centered Outcomes Research Institute to oversee comparative effectiveness research, lowering Medicare Advantage subsidies, and reforming health insurance regulation. I shudder, however, at a provision to encourage government investment in new therapies. The private sector already has much money to do that, and the historical record shows that new therapies are much more likely to increases costs than decrease them.

Many of the more moderate opponents of the final reform bill argued for an incremental strategy, one step at a time. With the cost control features of the bill much less well formed and many constructed as works in progress they still have a chance to make a difference. Not only must the strong provisions be protected from political attacks, the weak ones need to be refined and strengthened. Cost control must be managed in a coherent and unified way, moving beyond a collection of independent policies, a mark of the reform legislation. Jonathan Oberlander and Joseph White proposed one important policy aim, that of a “mechanism with the potential for system-wide control of medical spending,” to be achieved in part by “all-payer regulation.” By the latter they mean “common payment rules for medical care” and a “standard fee schedule for doctors and hospitals.”

In line with that recommendation I would add the importance of uniform cost cutting. Patients, physicians, hospitals, drug and device manufacturers, and insurers should all take simultaneously the strong hits that serious cost control will eventually require. Everyone for too long has been asking for too much of everything, from more expensive technological innovation to ever better health no matter how healthy we are, and to too much profit all around for the providers and purveyors of medical goods.

We need, in effect, a greening of medicine and health care. Just as the environment can not stand unimpeded economic growth as the ideal, neither can medicine stand the escalation of costs that comes from unimpeded medical progress and trench warfare against death. We are winning some of the biological battles, but we have come to the end of cheap victories in that warfare. We are up against the same tension that marks environmentalism; between a belief in better management and technology as the answer, and a belief that nothing less than a change in the way we live our lives, in sickness and health, will be adequate. I am on the latter side in both cases.

Daniel Callahan is the editor of the Health Care Cost Monitor. His most recent book is Taming the Beloved Beast: How Medical Technology is Destroying Our Health Care System.

There is a lot of speculation about how health care reform will affect health care costs. Some think it will reduce them, others fear it will increase them, and still others see little or no effect at all. The Health Care Cost Monitor invited several of its contributors and other public policy experts to give their views in answers to some questions. This is the fifth in a series of responses.– The Editors

In terms of curbing health care costs, is the health care reform legislation a win, a loss, or neutral?

Putting the new law in context of the stimulus investments and the president’s decision to appoint Don Berwick to head the Centers for Medicare and Medicaid Services, it is a big win. It’s the biggest coverage change since 1965, when Medicare was created, and the best potential payment change since 1983, when Medicare changed the way it reimbursed hospitals from a fee-for-service system to a system based on diagnostic groups. There is no going back from here. The status quo is unsustainable. The deficit is too great, the states’ capacity is in decline, the national economy is too important, and the public’s need to balance their costs against their expected reduced income is so great that policy implementation will be welcomed when it is understood.

Are the claims that the legislation will significantly control costs plausible?

Only an optimist will say that the cost claims in the law are plausible. The medical-industrial complex contributed little or nothing by way of policy change that will force behavior change. The opportunity to improve physician payment policy and medical technology policy was missed, but the authority to do so in the future is there and will be seized.

I counted at least 48 “cost curve benders” in the bill. Anyone believe Berwick isn’t capable of using his authority for cost curve bending? Congress can no longer afford to let the health care industry stymie CMS payment reform, or “entitlement reform” will become a joke. A lot depends on keeping Republican “anything goes in markets” types from controlling Congress.

Proponents of the reform legislation say that it is just the beginning. What other cost control measures should the president and Congress pursue?

Insurance reform is critical. It is a key to payment reform and using informed consumers and providers to lead the way to bending the cost curve. In the “mainstream” bipartisan legislation in 1994, we recommended accountable health plans, not accountable care organizations, as step one in systemic change. Nancy Kassebaum offered a National Insurance Benefit Board as a means of getting there and we agreed on national, not state, rules. Republican opponents of change can disrupt reform’s potential by undermining insurance rules and insurance exchanges at the state level, but the industry may well fight back because it knows how well it can perform if everyone plays by the same rules.

How likely is it that Congress or future presidents will undo or modify the cost control provisions in the legislation, particularly since some of them will not be politically popular?

This is the $64,000 question. This congressional Republican Party is not willing to drive Democrats to consensus on an issue that always favors Democrats over Republicans on the “whom do you trust” meter. The Republicans may win one house or the other in 2010. But, don’t count Obama out. He is mastering the details of dysfunction in both the system and its politics, and he will be formidable on an issue he didn’t expect to own, but that the Tea Party gave him. When the medical-industrial complex understands this, the ground will shift and it will be impossible to do anything but improve on this policy by encouraging more innovation and rewarding performance.

David Durenberger was a Republican U.S. Senator from Minnesota from 1978 to 1995. He was chair of the Health Subcommittee of the Senate Finance Committee, as well as author and coauthor of several health reform bills, including the Health Insurance Reform Act, which became Kassebaum-Kennedy health insurance reform bill, passed in 1996.

There is a lot of speculation about how health care reform will affect health care costs. Some think it will reduce them, others fear it will increase them, and still others see little or no effect at all. The Health Care Cost Monitor invited several of its contributors to give their views in answers to some questions. This is the fourth in a series of responses.– The Editors 

In terms of curbing health care costs, is the health care reform legislation a win, a loss, or neutral?  

The Patient Protection Act greatly expands access and it has the potential to increase quality. However, perhaps due to the effort required to create a law that could survive the turbulent political process leading to enactment, it does not create a centralized role for any single administrator, which is what is probably necessary to ensure that all of its potential cost savings are realized.

A fascinating, and heretofore unremarked, aspect of the act is that, while it takes many of the first steps toward cost control, it then leaves responsibility for actually generating the savings in the hands of many different groups, most of which are outside of government.

For example, two different government panels will be intimately involved in generating comparative effectiveness research. This research is essential for both improving quality and, more importantly for this discussion, ensuring that money is spent in the most cost effective manner. However, neither of these panels has the power to use CER findings to generate policies that maximize cost effectiveness. Instead, patients, third-party payers, doctors, and other stakeholders will have to make individual, value-enhancing choices or the benefit is lost.

Another example is the mandate for buying insurance. A single national health-insurance pool would clearly be the best method for efficiently spreading risk as broadly as possible and would allow savings generated by innovative programs to be put right back into the same pool. Under the new law, at least initially, the number of pools seems likely to expand, which could frustrate the system’s ability to fully benefit from cost saving programs.

At the same time, the new forms of insurance should lead to more uniformity in cost, coverage, and the types of people enrolled. If the pools are similar and people are able to remain in them indefinitely, the new system could generate the same savings possible with a single national pool. As with CER, the responsibility for realizing possible cost savings will rest with a far wider group of stakeholders than most models have historically contemplated. It is unclear whether this experiment will work.

Proponents of the reform legislation say that it is just the beginning. What other cost control measures should the president and Congress pursue?  

What is risky and new is expanding access while placing so much of the ultimate responsibility for cost control in nongovernmental, decentralized hands. In terms of requirements for the future, additional focus should be placed on what is necessary to ensure that the newly empowered stakeholders recognize their powers and societal obligations to control the cost of the health care system.

How likely is it that Congress or future presidents will undo or modify the cost control provisions in the legislation, particularly since some of them will not be politically popular?  

Recent history would lead us to conclude that Congress will not follow through on scheduled reductions in Medicare reimbursement rates for physicians. This failure has been the norm for some time, and is not unique to this legislation. A scheduled 21% reduction in some reimbursement rates, set to go into effect on April 1, was recently delayed until June 1, with robust bipartisan support. As the vote on this delay showed, this is not a partisan issue, but rather springs from a reaction to a cost-saving proposal that is genuinely unpopular among voters.

However, the new law ties many Medicare and Medicaid reimbursement rates together in the future, which may change the political dynamic. This country has historically tolerated very low Medicaid reimbursement rates, even as it is protective of the Medicare program, and so the question becomes whether tying the two together will raise Medicaid reimbursements, lower Medicare reimbursements, or do a little of both. It is difficult to predict which way it will go.

As to other provisions in the law, future public and political responses will depend on the regulations written to implement them, as well as the behavior and responses of health insurance companies. Health insurers have already signaled that they will aggressively interpret the law as narrowly as possible, which has triggered an equally aggressive stance from the Secretary of Health and Human Services defending what she claims is the clear intent of Congress.

The first example of this has been the public disagreement between the insurance industry and Secretary Sebelius as to whether the law will immediately prohibit insurers from considering pre-existing conditions of children when making coverage decisions. In a debate that appeared to be conducted almost entirely in the press, the insurance industry declared it would not be prohibited, the Secretary assured them it would be, sabers were rattled on both sides, and the Secretary prevailed, for now.  A public, aggressive stance taken by the insurance industry is most likely unwise, and will serve to increase political support for wide-reaching regulatory control over it. 

Right now, it is almost impossible to predict where political and public pressure will be felt, except in obvious cases such as Medicare reimbursement reductions. As the new regulatory structures are implemented, there should be changes to historic political alliances and the formation of new public groups with new interests that require political protection. People are waking up to the extraordinary importance of the rulemaking that will occur during the next three years, and how they respond to the proposed regulations in the short term may give some hint as to the new forms of interest groups that will emerge. 

Jacqueline R. Fox, J.D., is an assistant professor at the University of South Carolina School of Law. Her scholarship interests are in health law, primarily the relationship between justice, ethics, regulatory structures, and markets. foxjr@law.sc.edu; 803-777-8192.

There is a lot of speculation about how health care reform will affect health care costs. Some think it will reduce them, others fear it will increase them, and still others see little or no effect at all. The Health Care Cost Monitor invited several of its contributors and other public policy experts to give their views in answers to some questions. This is the third in a series of responses.– The Editors

In terms of curbing health care costs, is the health care reform legislation a win, a loss, or neutral?

It is hard to overstate how fiscally irresponsible this legislation is. Everywhere one looks in it one finds admirable social democratic goals that come with un-costed and, in 2010 in the United States, unaffordable price tags. No reasonable person would consider the act’s small, tentative, and horizon-focused steps toward reining in medical spending to balance massive new entitlements from a federal government that has  no way to fund the near-$100 trillion entitlements it has already granted. This gap between rhetoric and reality makes Obama, Pelosi, and Reid sound like demented Peronists every time they open their mouths.

Are the claims that the legislation will significantly control costs plausible?

Not at all. Among many reasons:

a)      The Massachusetts experience demonstrates that increased demand for services pushes up unit costs as well as overall volume of services.

b)      Rapid progress in new medical technologies (including bioengineered drugs, artificial body-part replacements, etc.) will add substantially to baseline cost projections.

c)      Myriad clever creative accounting devices in the legislation (such as 10 years of funding to pay for six years of services) will inexorably come home to roost.

d)      Further legislation by Congress, which can be expected to add new services and also new categories of entitlement recipients (for example, the estimated eight million to 12 million undocumented workers), and also to restrict the application of what tentative cost control measures are in the initial bill.

Proponents of the reform legislation say that it is just the beginning. What other cost control measures should the president and Congress pursue?

Unfortunately for the Obama administration, this is not the 1960s either economically or socially. As many European countries are now coming to recognize, the social democratic moment in history is over. The only serious measures to constrain collective costs will involve shifting the boundaries between social and individual responsibility in ways that, if they are to be socially responsible, have yet to be adequately developed (certainly pure-market Republican strategies remain utterly unsatisfactory). While upstream prevention and downstream catastrophic medical costs will need to remain well-supported collectively, long- term chronic care and other outpatient needs may require a different kind of production as well as financing model. 

How likely is it that Congress or future presidents will undo or modify the cost control provisions in the legislation, particularly since some of them will not be politically popular?

Hard to tell. The global bond market, the Chinese and Japanese governments, and other international investors may well vote before a 2011-2012 Republican-led Congress figures out what it wants to do. Particularly true if one or more of the European PIIGS default on their sovereign debt.

Richard B. Saltman is professor of health policy and management at the Rollins School of Public Health of Emory University and associate director of research policy at the European Observatory on Health Systems and Policies in Brussels. RSALTMA@emory.edu; 404-727-8743.

There is a lot of speculation about how health care reform will affect health care costs. Some think it will reduce them, others fear it will increase them, and still others see little or no effect at all. The Health Care Cost Monitor invited several of its contributors to give their views in answers to some questions. This is the second in a series of responses. –The Editors

In terms of curbing health care costs, is the health care reform legislation a win, a loss, or neutral?

As a share of our national income, health spending has grown along a straight line for half a century (see chart). Spending rises above the line when economic conditions are bad and national income grows slowly or declines. It falls below the line when national income grows more quickly. But it has never strayed far from the line despite a long history of heralded reforms – certificate of need, professional standards review organizations, prospective payment for hospitals, health maintenance organizations, and more.

We probably won’t be able to tell whether the health reform legislation makes a difference to costs in the next few years. Its effect is likely to be obscured by the poor state of the economy, which will cause health’s share of national income to rise. But even if spending sticks to its historic line, we will at last guarantee health insurance, and with it, basic health care, to everyone.

National Health Spending as a Percent of National Income (Source: Centers for Medicare & Medicaid Services)

Louise Russell is Research Professor at the Institute for Health, Health Care Policy, and Aging Research, and Professor in the Department of Economics, Rutgers University. She was a member of the first U.S. Preventive Services Task Force (1984-1988) and co-chaired the U.S. Public Health Service’s Panel on Cost-Effectiveness in Health and Medicine (1993-1996). lrussell@ifh.rutgers.edu; 732-932-6507.

There is a lot of speculation about how health care reform will affect health care costs. Some think it will reduce them, others fear it will increase them, and still others see little or no effect at all. The Health Care Cost Monitor invited several of its contributors to give their views in answers to four questions. This is the first of a series of responses. —The Editors

1. In terms of curbing health care costs, is the health care reform legislation a win, a loss, or neutral?

If the goal is to curb health care costs (i.e., expenditures), health care reform is potentially a loss, but only if someone ponies up the money. Since nobody will, it will be neutral.

While the legislation will assuredly increase pressures for more health care, the states won’t be able to afford the added costs of Medicaid (which will cover half of the newly insured), so they will have to cut reimbursement. Health care reform legislation already decreases disproportionate share payments to hospitals for the added costs of Medicaid and other poor patients and reduces payment to hospitals with “excess” readmissions (principally of poor patients). The umbrella covering the poor looks broader but leakier to me.

Meanwhile, private insurers will be reluctant to raise premiums, so they will negotiate lower payments to providers, and Medicare will cut payments wherever it can. All of these are animated by the notion that health care providers can do more for less, and besides, too much care is being provided anyway, and primary care could reduce demand even further. So if providers eliminate waste, everything will work out. As the Queen told Alice, “Sometimes I’ve believed as many as six impossible things before breakfast.”

2. Are the claims that the legislation will significantly control costs plausible?

There is no legislation that can reduce the rate of overall spending. The amount spent in the U.S. (and in every other developed country) is a reflection of its economic capacity. The recession slowed health care spending, just as the boom in the 1990s accelerated it, both unrelated to “need.” Over time, the nation does not spend more on health care than it can afford, at least for very long, nor does it spend less. The simple truth is that the reservoir of unmet need already exceeds our economic capacity, even if inefficiencies didn’t exist. The addition of still more beneficial services in the future, the products of science and technology, will further expand the potential for care.

The real question is, Who will get the care? The new legislation could make more of it available to low-income patients, but a variety of dynamics conspire to close the doors to those at the bottom of the income scale. What is most likely is more poor people will be on Medicaid, taxes will be higher, premiums will be lower, and there will be no net change in spending.

But what about the legislation’s “cost-savers?” Any savings from electronic medical records and administrative simplification will be more than matched by the added costs of new regulations. Prevention will improve lives, but it won’t save money, and the same applies to primary care. And while support for comparative effectiveness research is welcomed, effectiveness has been compared for decades (e.g. Cancer Cooperative Groups). The resulting increment in knowledge from a new federal initiative is likely to be small, while the accompanying bureaucracy is likely to be large. Tort reform is not even on the horizon. And while “waste and inefficiency” surely exist, history shows that, as yesterday’s inefficiencies are dealt with, tomorrow’s technologies produce new ones.

This is not to say that the efforts alluded to above are not important. Most will improve care. I simply do not believe that they will decrease aggregate spending.

3. Proponents of the reform legislation say that it is just the beginning. What other cost control measures should the president and Congress pursue?

The biggest cost driver is poverty. The added utilization of health care by low-income patients accounts for more than one-third of all health care in the U.S., double the added costs in Britain where poverty is less prevalent. The U.S. cannot pour health care dollars into both its scientific successes and its social failures. We can only do more of the former if we can do less of the latter. In that respect, real health care reform is social reform – education, housing, nutrition, social support networks, and jobs.

The major tool of health care reform is regulation. Traditionally, health care reform has been “insurance reform,” through instruments such as Medicare, Medicaid, prescription drugs coverage, catastrophic insurance, etc., as well as through insurance regulations, such as ERISA, COBRA, and coverage of pre-existing conditions. “Reform” of the delivery system through legislation and regulation is not new – MedPAC, ProPAC and its predecessors have tried, as have private insurers. But the massive build-up, first in the Clinton health plan and now in more exaggerated form, is a creature of post-modern ethical revisionism, which sees physicians as the greatest obstacles to quality and regulators as the instruments improvement. Regulators point to new regulations, ignoring past failures. Indeed, failure is never considered. Like the “steroid argument” of 50 years ago (after the development of prednisone), regulation either works or you didn’t use enough. This perspective ignores the historic process through which, by groping with imperfection, physicians have found more perfect solutions. We risk sacrificing the latter on the alter of the former.

4. How likely is it that Congress or future presidents will undo or modify the cost control provisions in the legislation, particularly since some of them will not be politically popular?

Although various provisions in the legislation have been justified in terms of “cost controls,” few are likely to control spending. Accountable health care, medical homes, bundled payments, prevention, primary care, etc., all have merit, but they are unlikely to decrease aggregate spending. Any savings would be plowed into care for patients not previously treated or diseases not previously treatable.

Changes affecting insurance may decrease costs for particular groups of beneficiaries, but not for the system overall – what one group saves, another will spend (e.g., savings on premiums will be reflected in higher taxes, savings on Medicare will increase the costs of Medigap). Indeed, the politics are not about overall savings but about who will spend. Measures in the current legislation that shift wealth from rich to poor and shift payments from premiums to taxes will assuredly be the focus of intense debate as the political balance changes. In the end, spending more and sharing more are the dual demands that we as a nation must confront. It won’t be easy.

It is important to note that there is virtually nothing in  the legislation that will assure an adequate supply of physicians to provide the needed care. Even without health care reform, the nation was headed for serious physician shortages, and reform has only made it worse. Without an adequate supply of qualified physicians, the fundamental goals of health care reform cannot be achieved.

Richard A. Cooper, M.D., is a professor of medicine in the School of Medicine and senior fellow at the Leonard Davis Institute of Health Economics, University of Pennsylvania. He was formerly director of Penn’s Cancer Center and dean of the Medical College of Wisconsin. cooperra@wharton.upenn.edu; 215-667-9806; http://buzcooper.com

The current health care debate across Europe makes for a decidedly unsettling counterpoint to the one-dimensional hoopla that passage of the new health reform bill has triggered off in most of the mainstream American media.

Most European policymakers are going in exactly the opposite direction to what ruling politicians and most media in the United States currently believe to be “progress.” While the U.S. is busy dramatically expanding government’s role in the health sector, European policymakers are persistently (in some cases desperately) seeking to rein in bureaucratic controls over health service delivery in their own health systems. While in the U.S. the federal government is adopting massive new financial obligations in the health sector, policymakers in much of Europe are exploring every strategy that could help reduce the public sector’s long-term financial commitments.

In Sweden, for example, one-third of all primary care is now delivered by private sector providers (both in primary health centers but also in general practitioners’ offices). Seeking to stimulate more flexibility and innovation as well as more timely access, a new national law went into effect in January requiring all 21 regional governments (which run most of the health care system in Sweden) to allow citizens to choose private as well as public primary care providers, and to allow “free establishment” of new private providers.

In Finland, rather similarly, the national government is poised to introduce new legislation to allow patient choice of public hospitals, and is internally debating the need to expand patient options inside the public primary care system (where private contracting is growing rapidly).

In Portugal, some 60% of all hospitals are now run as “public enterprises,” while in Spain there are five new types of “public hospitals under private law.” Similar efforts to roll back political control and governmental regulation on day-to-day hospital management have been introduced in the U.K. (“foundation trusts”), Norway (“state enterprises”), and in Central European countries like Estonia and the Czech Republic (publicly owned “joint stock companies”).  

In the U.K., headlines last week in the Financial Times quoted in bold letters a grandee’s conclusion that “the NHS is sleepwalking over a fiscal cliff,” referring to the massive public funding cuts that will necessarily be applied next year due to the U.K.’s disastrous public budget deficit (interestingly, a deficit that is 12% – compared to 13% this fiscal year in the U.S.).

In Germany in January 2009, the national government seized direct control over the funding of its officially private not-for-profit social health insurance system, imposing a single fixed premium rate (8% of earned income) on all German workers, to begin to reduce the cost of health care for German employers so as to make German exports more competitive in a world where Chinese and Indian, but also Polish and Slovakian workers have much lower labor costs.

In The Netherlands, a similar policy goal was accomplished in a major 2006 reform by channeling 100% of all health care costs through the individual (with employer reimbursement for 50%), to encourage cost consciousness, as well as by shifting the individual’s 50% share of health care costs from a percentage of salary to a fixed flat rate premium (with subsidies for very low wage earners – well below the Euro equivalent of the $88,000-a-year ceiling stipulated in the just-passed US legislation).

In Norway – Norway, for heaven’s sake, a country of only 5.3 million people which has a $400 billion dollar Sovereign Investment Fund of oil money set aside for future generations’ welfare needs – the Permanent Secretary of Health said publicly last October in an open seminar on the future of Nordic health systems: “The current method of delivering and paying for health services in Norway is not financially sustainable.”

The list could go on, however the point should be apparent. European health policymakers in 2010 are pre-occupied with reducing the role of government in the day-to-day management and operation of health sector service providers, and are facing major reductions in the amount of public funding that they have available to support those public services.

Returning to the U.S. from trips to Europe is like visiting a different planet. Here, the national government and its health policymakers are celebrating the establishment of major new operating and fiscal responsibilities for the federal government – that is, for corporate and individual taxpayers. One finds the ruling Democratic Party leadership in Washington increasing health care entitlements to new classes of citizens, and piling on new taxes and regulations to try to pay for them.

Moreover, consistent with past health reforms in the U.S. (except, interestingly and typically

unmentioned, the Medicare Drug expansion in 2004 that relied on private sector intermediaries) this dramatically more centralized and bureaucratized system that is being put in place in the U.S. will cost far more than official estimates predict. Reasonable estimates elsewhere in Washington total $2.5 trillion over the first six years of operation, not the $900 million claimed by the Congressional Budget Office.

Bill Gross, the dean of the bond market who is codirector of PIMCO Funds, was quoted on Bloomberg News on March 24 as saying that the newly passed health reform legislation would add $560 billion dollars to the federal deficit over the next 10 years, with only six years of new benefits.

Without question, many of the operating reforms contained within the newly passed U.S. legislation are long overdue, especially the new regulations to tame the private insurance companies. Indeed, many of these regulations mimic those in place in Netherlands, Switzerland, and other European countries that rely on private profit-making health insurers (one regulation that wasn’t adopted is the Swiss prohibition on insurers against making a profit on the so-called “basic package,” although those same companies do quite nicely on the supplemental policies that many of their insurees then buy). All of these regulations, however, cost money, and will raise – not lower – the cost of future health insurance premiums.

Moreover, defenders of the full U.S. bill can rightfully claim that the Europeans are reducing the public sector’s role and responsibilities from a very different, much more overwhelming public position, with full or near-full coverage already achieved.

Lastly, none of this is to promote the U.S. opposition Republican Party’s All-Market-All-of-the-Time solution to this country’s health care dilemma. That unconstrained and equally fantastical approach, as every European health policymaker will tell you, will necessarily lead to worsening not improving health service delivery, a dramatic drop in public prevention and health promotion activities, and higher not lower expenditures.

In short, what Europeans are seeking in 2010 is a better balance of State and Market, not capitulation to Raw Capitalism. They want a more flexible and innovative approach to service delivery that will cost less and make European economies more competitive globally.

In contrast, in the U.S., policymakers seem hell-bent on massive increases in state control, with vast numbers of new bureaucratic regulations and unsustainable new fiscal deficits. This is a strategy that will guarantee that the new health benefits bring with them a substantially less competitive economy, a lower standard of living, and, potentially, an Argentina-style default on public debt.

As the title says, it’s a tale of two continents. Something to think about as the Democrats break out the champagne.

Richard B. Saltman is professor of health policy and management at the Rollins School of Public Health of Emory University and associate director of research policy at the European Observatory on Health Systems and Policies in Brussels. RSALTMA@emory.edu; 404-727-8743.

The Congressional Budget Office has just projected that the proposed health care reform legislation, the “reconciliation bill,” will cost $940 billion over the next 10 years. In the same breath, the CBO asserted that the bill will engender reductions in the federal deficit amounting to $138 billion.

Colorado Democrat Betsy Markey has already declared that “this is the largest deficit reduction bill over the last 25 years” and Republican Senator Mitch McConnell has scoffed that “Democrats want to spend trillions of dollars on this bill in order to save $130 billion.” The bill will result in 30 million uninsured Americans buying health insurance and it will abolish some of the most egregious practices of the insurance industry, such as use of pre-existing conditions to refuse coverage. But what effect is the bill – if Congress passes it – likely to have on controlling the cost of medical care?

Spending on health care is not just problematic because so many Americans have been uninsured or underinsured. It is also a problem, as Peter Orszag (formerly of the CBO and now director of the Office of Management and Budget); Rand Corporation researchers; and the conservative think tank, the Heritage Foundation, all agree because it is the major threat to the American economy. The long-term projections of the CBO, published last July, are that total U.S. spending on health care, which was 16% of GDP in 2007, will rise to 25% of GDP in 2025 and 37% of GDP in 2050. The reconciliation bill has the potential to result in a significant decline in the percent of GDP we spend on health care each year. But whether it achieves this end depends on how several key provisions of the bill are actually implemented.

The provisions of the health reform legislation that could have a profound effect on the rate of growth of spending on medical care have to do with payment reform. And the potentially most potent payment reform strategy that appears in the bill is “bundling.”

The legislation calls for the establishment of a national Medicare pilot program to “test, develop, and evaluate” bundled payment for acute inpatient hospital care, physician services, outpatient services, and post acute care for a single episode of care. According to estimates by researchers at Rand, a system of bundled payments, could potentially decrease national health spending by as much as 5.4% in the next 10 years (if applied to both Medicare and the private sector).

The same researchers propose a 6.2% target for reducing spending on health care over the next 10 years; hence bundling alone could make an enormous difference.

The reconciliation bill also provides incentives to health care systems to form “accountable care organizations” (essentially networks of providers that agree to capitation, another form of bundling) by offering them a share in the savings they generate for Medicare if they meet quality targets. It remains to be seen how widespread accountable care organizations will become.

The bill also provides for an “Innovation Center” within CMS to evaluate, test, and expand different payment structures. Whether this provision will lead to savings depends on what payment structures are tested, how effective they are, and whether they are then disseminated.

A final provision in the domain of payment reform is the establishment of an Independent Payment Advisory Board, charged with submitting legislative proposals to reduce the per capita rate of growth in Medicare spending whenever spending exceeds a target growth rate. However, the Board is prohibited from submitting proposals that will “ration care,” a provision, like the notorious “reasonable and necessary” language of the original Medicare statute, which will no doubt serve as the basis for rejecting any plan that restricts potentially useful treatment on the basis of cost.

Beyond payment reform, the reconciliation bill would establish a Patient Centered Outcomes Research Institute to conduct research comparing the clinical effectiveness of alternative treatments. In principle, this kind of information could change medical practice to avoid the use of unnecessary or unnecessarily expensive treatments. But the bill has a built-in guarantee that the information will not be used in this way. It states that the findings of the Institute “may not be construed as mandates, guidelines, or recommendation for payment, coverage … or used to deny coverage.”

Will the bill constrain the rate of growth of spending on medical care? It could. But whether it actually will depends on the programs initiated by the various Boards, Institutes, Centers that are a critical part of the legislation.

Muriel Gillick, M.D., is a clinical professor of Population Medicine at Harvard Medical School and a physician specializing in geriatrics and palliative medicine at Harvard Vanguard Medical Associates. mgillick@partners.org; 617-509-9977.

During my 20 years as an Air Force officer, I experienced and witnessed untold misery and suffering. However, as I enthusiastically embarked on my new career as a nurse, I was unprepared for the scope of suffering I have witnessed in patients who were clearly at the end of life, and were not going to survive despite medicine’s best efforts.

Frequently decisions for patients without medical decision-making capacity are made after discussions between the physicians and families. However, what often emerges is a sense of false hope, which leads to unnecessary diagnostic tests and myriad interventions. Unfortunately, during this end-of-life struggle it’s the dying patient and society who bear the burden. Sparse health care dollars are being used inappropriately.

Although death has a contract with everyone, Americans – who I think tend to have unrealistic expectations concerning life’s natural end point – attempt to renegotiate the deal, often leading to unnecessary suffering.

Ninety-four-year old Alice was transported from the nursing home to the hospital because she had abruptly stopped eating. Upon her arrival at the hospital, Alice’s medical problems included dementia, small cell lung cancer, pneumonia, sepsis (a potentially fatal blood infection), severe dehydration, a urinary tract infection, kidney failure, and respiratory distress. Doctors worked diligently over the next couple of weeks to stabilize Alice, giving her antibiotics, putting her on intravenous fluids, balancing the out-of-whack electrolytes that were causing her kidney failure, and providing feedings via a tube in her stomach as she had lost the ability to swallow. Many in the medical community see these measures as futile.

While efforts to save Alice were actually prolonging the dying process, Alice, in her noncommunicative state, was suffering, as evidenced by the perpetual grimace on her face and the numerous groans and moans she emitted whenever she was touched or physically adjusted. Because of her tentative medical state and low blood pressure, doctors were reluctant to initiate a variety of comfort procedures, including providing Alice with opioids like morphine, which can relieve physical distress but may hasten death.

As talk of “death panels” and “rationing” continue to stir debate over the government’s role in health care, an encounter with a patient who is suffering in the midst of terminal illness is an all-too-common occurrence. To illustrate what it is like to be a nurse in the “trenches” at the bedside with patients who are at the end of life and suffering, where the focus is on unrealistic goals rather than comfort, I evoke a quote from Primo Levy, who survived the holocaust in Auschwitz: “If we know that pain and suffering can be alleviated and we do nothing about it, then we ourselves are tormentors.” As nurses, it is “we” who spend 99% of the time with patients, having developed an unabashed competency in recognizing patients’ physical and emotional needs, which are sometimes lost on physicians and certainly on families.

As a palliative care nurse practitioner at a major teaching hospital in New York, I wish to go on record as saying that many patients at the end of life whose families opt for inappropriate life-sustaining treatments are subjecting them to an indignity and suffering akin to being tortured. Patients in a semiconscious state, unable to advocate for themselves, are often thrust into a netherland of discomfort and painful interventions as they slowly unravel physiologically toward their demise. Many nurses, who spend countless hours at these patients’ bedsides, often experience moral distress and conflicted emotions, seeing the futile life-sustaining treatments as pointless and cruel.

Whereas dying is seen as a disease and death as the physicians’ failure to enact a cure, studies, including this one in the New England Journal of Medicine, document that unnecessary tests, procedures, and hospitalizations in the final months of a patient’s life often cause emotional and physical stress and pain, effectively negating any benefits associated with the treatments.

In addition to the emotional and physical costs, there are the financial costs to society to be considered as we underwrite medically futile treatment. As patients get sicker, more and more high-tech and expensive procedures are employed, which drive up the costs.

The Centers for Medicare and Medicaid Services estimates that 5% of the beneficiaries who die each year take up 30% of the $446-billion annual Medicare budget. About 80% of that money is spent during the final month, often on mechanical ventilators, resuscitation and other aggressive life-sustaining care. More often than not, the aggressive steps taken to save someone’s life are futile.

As a patient advocate, I want to lessen the unnecessary suffering and astronomical costs associated with end-of-life care in this country. Mindful that the subject of how best to honor and care for those facing death due to terminal illness or old age has always been controversial, I trust the traditions of hospice and palliative care, which both work to keep dying individuals in a state of dignity and comfort without resorting to extraordinary and ultimately futile measures. For a broader, more comprehensive view, I invoke a Buddhist teaching: “for we are alive, therefore we will die.” This is the simplest, most obvious truth of our existence, and yet very few of us have really come to terms with it.

Eugene Cauvin a palliative care nurse practitioner and a doctoral student at Pace University in New York.

The need to control health care cost came up repeatedly in President Obama’s health care reform summit last week, although there was barely a mention of one of the main drivers of those costs: chronic diseases. Seventy-six percent of Medicare spending is on patients with five or more chronic diseases, including heart disease, metabolic syndrome, end-stage renal disease, and cancer. Treatment usually doesn’t lead to a cure, but it does tend to extend patients’ lives.

Prolonging life is one of the triumphs of medicine when the result is reasonably good health. But often costly treatments for chronic diseases simply prolong the dying process, inevitably raising difficult questions about setting limits. “It is a great miracle that medicine can almost equal nature in forcing a man to remain in bed, to continue on pain of death the use of some drug.” That statement would not have been out of place at the health care reform summit, but it was written by Marcel Proust in 1923 in Remembrances of Things Past: Volume III – The Captive, The Fugitive, Time Regained. The rest of the passage, which follows, resonates today.

“I learned that a death had occurred during the day which distressed me greatly, that of Bergotte. It was known that he had been ill for a long time past. Not, of course, with the illness from which he had suffered originally and which was natural. Nature hardly seems capable of giving us any but quite short illnesses. But medicine has annexed to itself the art of prolonging them. Remedies, the respite that they procure, the relapses that a temporary cessation of them provokes, compose a sham illness to which the patient grows so accustomed that he ends by making it permanent, just as children continue to give way to fits of coughing long after they have been cured of the whooping cough. Then remedies begin to have less effect, the doses are increased, they cease to do any good, but they have begun to do harm thanks to that lasting indisposition. Nature would not have offered them so long a tenure. It is a great miracle that medicine can almost equal nature in forcing a man to remain in bed, to continue on pain of death the use of some drug. From that moment the illness artificially grated has taken root, has become a secondary but a genuine illness, with this difference only that natural illnesses are cured, but never those which medicine creates, for it knows not the secret of their cure.”

For those of us preoccupied with cost control as part of the health reform effort the last few months have been a kick in the teeth. It is bad enough that the reform drive has stalled, its fate uncertain. But that effort itself saw a constant whittling away of the tough steps necessary to halt cost escalation. There was instead an increase of assurances that, to pick the most egregious example, Medicare beneficiaries would lose no benefits (President Obama), and that other possible cuts would be on the 10-year incremental bending of the curve pathway, oh so gently leading us to the promised land.

Yet there were some of us who hoped that the reform effort would include a more pointed focus on the role of medical technology as a driver of cost escalation. It had for years, after all, been identified as the main force (in the 50% range) behind annual cost increases. That emphasis was not to be, drowned out by access issues, the overall cost of reform, and arguments about (among many others things) mandates.

A recent report from the National Center for Health Statistics may help to bring technology costs back into the foreground. Although it skirts the edge of saying so directly, its analysis and data confirm my conviction that technological progress and innovation inherently nurture cost inflation.

The economic logic of constant medical progress and innovation, the historical record shows, is to push costs up, not down. How could it be otherwise with a medical enterprise that has no final end point, no boundaries to the endless struggle against illness and death, no concept of enough is enough? 

For years many argued that more and better research were the answer to the cost problem. Just cure those expensive dread diseases.  It has never worked out that way. Basic research and the innovation it generates raise health care costs.

As the National Center for Health Statistic report puts it, “some technologies save money…many technologies, however, contribute to overall health care expenditures because they increase utilization….technology provides an increasing ability to monitor, prevent, diagnose, control, and cure a growing number of health conditions and to improve quality and length of life.” Note the phrases “increasing ability” and “growing number.” Research makes that inexorable trend possible.

If it is then a myth that research will eventually lower costs, is there greater credibility to the repeated assertion that it is not technology per se that is the problem but its misuse or overuse?  There is much to that argument and some evidence to back it up, but the National Center report suggests that the increased use of a number of the most commonly employed technologies indicates some waste, but mixed in with considerable efficacy.

It is the successful use of those technologies, not their overuse that provides much of the cost momentum. That proposition seems particularly true with the elderly, where the net result of their use to date is a life expectancy after 65 that is one of the highest in the world. That result is in part a tribute to Medicare as our home-grown single payer program, but in part also because of its permissiveness in providing the latest (and often best) technologies for the chronically ill and those suffering from multiple pathologies – where the largest portion of American health care are incurred.

Concerning the overuse contention, the European universal access systems get better health outcomes at lower costs partially as a result of greater parsimony in the use of medical technologies. But those countries are also suffering cost inflation even if it is less virulent than ours, in the 3%-to-4% range compared with our 6%-to-7%. Every health care system, moreover, is cringing at the prospect of rapidly aging societies, more expensive technologies to keep the elderly alive, and always rising expectations of what counts as adequate care. Almost all of them are beefing up their efforts at technology assessment, including cost-effectiveness research.

Unhappily, as the report notes, “once diffused into practice, it is often difficult to reduce the use of technologies, even in situations where they have been shown to be ineffective or not superior to less complex or less expensive alternatives.”

In light of political resistance to serious cutbacks in patient benefits, in either the public or private sector, the future prospect for controlling technology costs is discouraging. Even under competitive pressure and government limitations on excessive premium increases, insurers will still have to deal with the background costs of health care, which will keep rising. And as long as Medicare faces instant public hostility to, and political fear of, benefit cuts, then no options will be left other than to jack up copayments and deductibles and to reduce reimbursements to physicians and hospitals. The latter moves will reduce the political heat, but will eventually harm beneficiaries. Only if all the actors at the same time – individual beneficiaries, physicians, and institutions – give up something, give up in fact a good deal, will real cost control be possible.

President Obama’s new health care reform proposal for the February 25 “summit” is at the other end of the spectrum on cost, barely mentioning the topic. That is not just a pity, it is pitiful.

Daniel Callahan is editor of the Health Care Cost Monitor and author most recently of Taming the Beloved Beast: How Medical Technology Costs Are Destroying Our Health Care System.

In a recent Health Care Cost Monitor post, Kristin Voigt and Harald Schmidt contend that offering employees who use wellness programs in the workplace reduced insurance premiums and deductibles threatens the fairness and affordability of health insurance for those most in need. Depending on how the program is structured, this is not necessarily the case, but Voigt and Schmidt provide compelling support for their assertion.

More fundamentally, however, we ought to ask ourselves whether financial incentives to improve health-related behaviors work. If they do not work, then they will clearly fail to reduce health care costs. The evidence is decidedly mixed.

There is some evidence that financial incentives can affect simple behavior changes, such as medical compliance. For example, in a systematic review of 11 randomized controlled trials that had used financial incentives, 10 demonstrated a positive effect. In these studies, the incentives ranged from $5 to $1,000 for interventions including adherence to a tuberculosis medical regimen, dental care for children, immunization, postpartum appointments among indigent adolescents, the completion of a treatment program for cocaine dependency, and antihypertensive treatment.

Other studies have found a positive effect from small financial incentives for mammography, required hepatitis B vaccines among drug users, and keeping clinic appointments for depression. But other studies have failed to find financial incentives effective for medical compliance.

For complex behavior change of the type often included in wellness programs, such as smoking cessation and weight loss, there is almost no good evidence for a sustained, positive effect. For example, in a systematic review of 17 studies on financial incentives for smoking cessation, none of the studies found significantly higher quit rates after six months among people who had financial rewards compared with those who did not.

However, a large trial published last year randomized 878 people to either a control group or an incentives group that received $100 for completing a smoking cessation program, a further $250 for being abstinent six months into the trial, and an additional $400 if they remained abstinent six months after that. At 18 months from the initiation of the trial, the quit rate in the incentive group was significantly higher than that for the controls – 9.4% versus 3.6%.

That trial is but a single study. A sustained effect has also rarely been observed for weight loss. For instance, a systematic review of nine randomized trials on the use of incentives to reduce obesity rates found that the larger incentives produced better results, but that the difference was not statistically significant. People offered financial incentives of less than 1.2% of their disposable incomes had a mean weight change of precisely zero after 12 months. People who received financial incentives of 1.2% or more of their disposable income had a mean weight loss of 2.4 pounds at 12 months, and only 1.5 pounds at 18 months.

The same researchers who conducted the smoking cessation trial also conducted a study of financial incentives for weight loss, but their long-term results were not overly auspicious. For instance, seven months after the initiation of the trial, the mean weight loss in the control group was 4.4 pounds, compared with between 6.2 and 9.2 pounds in the incentive groups.

Overall, therefore, financial incentives for specific areas of medical compliance appear to show some promise, but there is insufficient good evidence that they work in any sustained way to alter broader lifestyle behaviors. It may be that the literature to date uses incentives over too short a time frame to affect these complex behaviors. It is also possible that the size of the incentives offered in the studies was too small. Moreover, the cost, let alone the cost-effectiveness of the incentives, is rarely explicitly recorded.

But what is clear is that the lack of good evidence that financial incentives generate a meaningful positive effect on complex behavior suggests that we cannot conclude that they will save health care costs. Therefore, governments should be cautious in endorsing them.

Adam Oliver is RCUK Senior Academic Fellow in Health Economics and Policy at the London School of Economics and Political Science. Formerly, he was a Japanese Ministry of Educa­tion research scholar at Keio University in Tokyo and a Commonwealth Fund Harkness Fellow at Columbia University. He was also founding coeditor of the journal Health Economics, Policy, and Law. a.j.oliver@lse.ac.uk; 44 (0)20 7955 6471.

In his recent book about Lincoln as a writer, Fred Kaplan described Lincoln’s disdain for the “linguistic dishonesty” of leaders of the Confederacy, who attempted to divide the nation with “a barrage of verbal propaganda that corrupted the relationship between language and truth.” Strong words, but not unlike the verbal propaganda that has created a schism between primary care physicians and specialists, which is impeding solutions to the nation’s physician shortage.

We are told that patients in areas with more primary care physicians and fewer specialists spend less on health care but get better quality, use fewer hospital and outpatient services, achieve better health status, and incur fewer end-of-life expenditures. They also have decreased all-cause mortality, lower mortality from cancer, heart disease and stroke, decreased infant and maternal mortality, and increased life spans. All quite remarkable.

While one can find a kernel of “statistical truth” in some of these studies, the associations apply uniquely to family practitioners but not general internists, who practice in the same manner. This curious anomaly results from the preference for family practice in states along the northern tier, from Maine to Washington (where poverty is sparsely distributed), coupled with an historic preference for internists in the Northeast (where there is dense urban poverty) and the low numbers of all physicians across the South (where poverty is pervasive).

It’s not surprising, therefore, that most associations between primary care and better population health disappear once race and poverty are considered. Indeed, the superior outcomes in areas with more family practitioners have everything to do with the merits of Minnesota over Mississippi and of Portland over Newark and little to do with the merits of primary care.

But what about the old saw that primary care physicians can deliver specialty care better and cheaper than specialists?  Commenting in Robert Wood Johnson’s “The Future of Primary Care,” Sheldon Greenfield, who led these studies in the 1990s, acknowledged that they lacked adequate risk adjustment, and subsequent research has shown that specialty care generally yields better outcomes, particularly for patients at greater risk, although with greater costs.

These conclusions run headlong into the Dartmouth’s Atlas, where outcomes (such as satisfaction, quality, and mortality) in the region with the most specialists and spending are “not necessarily better” than in the region with least. Yet even a casual inspection of Dartmouth’s map shows that the “high-spending region” is a scattered collection of America’s largest metropolitan areas, while the “low-spending region” encompasses the vast northern tier.

Aggregating patients living at the extremes of wealth and poverty in the former causes their average outcomes to resemble those of patients residing in the upper Midwest, but the inordinate health care expenditures associated with poverty give added weight to urban spending. What has been characterized as waste and inefficiency is, in fact, the sad result of poverty ghettos and social depravation.

What about state studies? How often have you heard that “states where more physicians are specialists have lower-quality care and higher costs?” While widely cited, this is simply the output of scrambled statistics. While Mississippi and Nevada do have low quality, they certainly do not have an abundance of specialists, as depicted graphically and portrayed to politicians. Indeed, they have the fewest specialists in the nation.

Finally, what about the belief that health care reform will get rid of waste and inefficiency – the $700 billion that Peter Orszag has assured us will be saved? Is it as he says? Do communities use more care because they have more specialists? Or do they have more specialists because they need to provide more care?

Despite 50 years of debate, economists have failed to make a convincing distinction, but maps tell the tale. It turns out that most of the “wasted” care is provided to low-income patients, particularly in the poverty ghettos of major cities. In fact, they use so much more care that it’s hard to find the “waste” that is so apparent anecdotally. And that has led to poor policy choices.

But take note. Obama has arrived from the land of Lincoln with the clear message that language and truth must be reunited. And Lincoln would probably add something about what happens when a profession is divided against itself.

Primary care physicians don’t need to be advertised as better “specialists” than specialists, nor as the fountain of long life, and falsely denigrating specialty care doesn’t make primary care physicians more valuable. Patients know their value already. And experts know that health care is better when primary care physicians and specialists work together and best when there are more of both.

The tasks at hand are to end the “verbal propaganda” that divides disciplines and confuses politicians and concentrate on expanding the supply of physicians and other health professionals so that future generations will have access to the technologically-advanced, socially-equitable health care that this nation deserves.

Richard A. Cooper, M.D., is a professor of medicine in the School of Medicine and senior fellow at the Leonard Davis Institute of Health Economics, University of Pennsylvania. He formerly was Director of Penn’s Cancer Center and Dean of the Medical College of Wisconsin. cooperra@wharton.upenn.edu; 215-667-9806; http://buzcooper.com

Massachusetts, having adopted a state requirement for universal health insurance, rapidly discovered that access to care did not improve because the supply of primary care practitioners was inadequate. The nation as a whole is bound to confront the same problem if health care reform moves forward. Both bills in Congress contain provisions for increasing the number of primary care physicians, especially in underserved regions, but they are unlikely to have much if any effect.

The most notable provisions of pending Congressional legislation concerns the expansion of funding for community health centers, which are located in areas with the most dire shortages, and expanding the National Health Services Corps to place physicians in underserved areas. Other provisions provide little more than token payments to encourage the training of more primary care physicians in U.S. medical schools and residencies. Currently, about half of all primary care physicians in the country are foreign-trained, many of them imported from the poorest countries of the world.

The legislation also attempts to increase the attractiveness of primary care practice by providing bonuses to primary care physicians. Much smaller amounts of funds would be allocated for enhancing teaching of primary care in medical schools and residencies – this is the only strategy to establish an adequate primary care infrastructure.

An expansion of primary care training is threatening to one large political constituency: academic medical centers. As a result of a succession of government policies aimed at encouraging the production of specialists, they find themselves heavily dependent on federal support. This is why deans and teaching hospital directors oppose attempts to produce more primary care physicians. True to their allegiances, they will tolerate expansion of the primary care workforce only if it specialist training is expanded, too.

A number of journal articles and blogs defend the strategy of expanding the total number of physicians, not just primary care physicians, because it will provide more physicians to address the unmet health needs of socially deprived populations. While this position may appear logical, no evidence has been cited in support of it and, experience has shown that it would actually worsen inequity in health.

In fact, a plethora of evidence shows that poor populations benefit disproportionately from greater primary care physician supply but not from an increase in specialist supply. The total number of doctors in the U.S. has increased by one-third in the last 20 years, and yet the health of the U.S. population relative to other comparable countries has worsened and health inequities within this country have widened. Areas with more specialists tend to have poorer outcomes of care and worse inequities in health between the rich and poor and across social classes and ethnic groups.

The evidence on the benefits of primary care to equity in health is strong and robust, and does not depend only on geographic studies of physician to population ratios. The evidence also comes from comparisons of areas that differ in the number of primary care facilities (rather than just number of primary care physicians), and studies that show that both effectiveness and equity in health outcomes is better where primary care practice is stronger.

 The evidence concerning quality of care is also clear: primary care physicians do better, have better overall (not just for specific diseases) outcomes, at lower cost, and the benefits are greatest for minority populations. Once a region has an adequate supply of specialists, getting more of them increases not only inequities but also the number of unnecessary interventions.

Most new physicians are drawn to specialties and geographic areas by the prospect of high incomes. In their training programs their mentors encourage them to specialize, thus leading to a vast undersupply of primary care physicians to meet most of people’s daily health care needs. Nine of our most prestigious medical schools, including Johns Hopkins, Harvard, and Columbia, do not even have a department of family medicine.  There is every reason to believe that new attempts to simply increase the physician pool will only worsen the situation.

Health care reform should, above all, build the primary care workforce and improve its distribution. Medical schools and residencies need to pay attention to primary care training, and to pay attention to developing, through research, the knowledge base to improve the adequacy of health services in the community.

Changing the culture of medical training will require a shift in thinking comparable to that which occurred a century ago in the Flexner report, which called for scientific, standardized medical education. Currently, there is no organized action to make medical education more relevant to changing health care needs (e.g., more co-existing illnesses, increasing rates of unnecessary interventions and adverse events, greater inequities in care). A concerted effort to bring this about, within both the private and public spheres, is now overdue.

Barbara Starfield, M.D., M.P.H., is a University Distinguished Professor at Johns Hopkins University. The focus of her research includes the social determinants of health and equity in health, and primary care policy. bstarfie@jhsph.edu.

For many years some economists and many conservatives have touted business management practice as the most efficient, cost-effective way to manage any complex enterprise. Curiously, no one seems to have suggested that the Medicare program is a fine candidate for just that approach. The provision in the Senate health reform bill for an Independent Payment Advisory Board may provide the opening to make that happen.

The classical prototype of a successful company is that it is centrally managed, with a CEO at the top, given strong decision-making authority by shareholders, and that it is efficient, keeps its costs under control, and sets an annual budget. Why is this model never invoked by conservatives for managing health care systems? For the obvious reason, I suppose, that it would logically move them toward a centrally controlled single payer system. But since we have in the Medicare program a home grown – but defective – model of such a system, paid for by taxpayers, run by the government, and delivering its benefits through the private sector, what better place to test a full business model?

As presently organized, Medicare violates every rule of an efficient enterprise. It has no CEO with powers of a kind expected in business. Its stakeholders, the Congress, have a right to interfere with its day-to-day operation. It has no annual budget or the fiscal discipline that imposes. It can set few limits to its expenditures, even to the present point of running an annual deficit. And it underpays its administrators in comparison with those with like responsibilities in the private sector – just as it has too few administrators in the first place.

The National Institutes of Health, the world’s preeminent biomedical research institution, exemplifies everything Medicare lacks. It has a director with strong authority, an annual and tightly managed budget, lay advisory groups, and a good relationship with Congress, one marked by deference on the latter’s part and considerable discretion in setting its priorities. Atul Gawande among others has celebrated the quality and efficiency of the Mayo Clinic, the Geisinger Health System, and Intermountain. They are all private but share a similar budget and administrative structure akin to that of the NIH—everything Medicare lacks.

The Independent Payment Advisory Board, a provision of the Senate reform bill, would provide the opportunity to put Medicare on a more solid administrative and budgetary footing, particularly for the control of costs. It would be comprised of 15 independent members whose duty would be to submit legislative proposals to reduce the per capita rise in Medicare spending. Beginning in 2118, the Board would be charged with making recommendations if Medicare spending exceeds GDP per capita plus 1%; in other words, moving down from the present 6% annual cost increase to 3%. For the first time, Medicare would have to live with an annual budget. Nothing could do more than that to make Medicare solvent in the long run, now projected by its trustees to run out of money in eight years.

To do its job properly, however, some limitations in the Senate bill would have to be removed or softened. The Board would be forbidden by the Senate bill to make recommendations that would ration care, increase revenues or change benefits, or to propose cuts in hospital or hospice coverage.

But can one imagine a good CEO running a business would continue to sell a product that would cost a huge amount to make but faced a guaranteed loss? Rationing for Medicare would simply entail making an assessment that some drugs or treatments are unaffordable or not worth the costs, threatening the overall fiscal stability of the program. It would not deny access to them. It just would not pay for them. Would such judgments in any and all cases necessarily be unsound? Can we really expect that the coming flood of baby boomers – projected to rise from 46 million in 2010 to 77 million in 2030 – can be supported in the years ahead without an increase in revenue (aka, higher taxes) and with no change in benefits?

At the least Congress should lift the long-time prohibition against taking costs into account in making Medicare coverage decisions. Would any business impose such as a rule on itself? That prohibition, together with the other restrictions in the Senate bill, makes no sense in controlling costs. They subvert its very possibility.

The trouble with taking seriously the notion that business management techniques are pertinent to health care is that, if you push far enough down that road, you can find yourself in some strange land. Given suitable power, the CEOs of large American corporations might do a fine job running Medicare. Where is Jack Welch when we need him?

Daniel Callahan is the editor of the Health Care Cost Monitor. His latest book is Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

A.B. Shaw, a British physician, once noted, “Aortic valve operations on the elderly are very cost-effective if the result is death or cure instead of prolonged illness.” While this may be a bitter observation, we know that the cost of treating chronic disease quickly surpasses acute lifesaving therapies because of the duration of treatment. Seventy-six percent of Medicare spending is on patients with five or more chronic diseases.

This post, as a follow-up to Polo Black-Golde’s post last May, analyzes the projected cost of seven common diseases affecting the elderly, and thus the Medicare program. Unless otherwise noted, all Medicare figures come from the most recent spending report from the Center for Medicare and Medicaid Studies (CMS).

Alzheimer’s disease

The number of new patients diagnosed with Alzheimer’s disease is increasing, but Alzheimer’s-related mortality is decreasing. Together, these trends account for the predicted increase in the number of people living with Alzheimer’s from 5 million today to 16 million by 2050. This growth will profoundly impact Medicare costs, given that the average annual cost of a Medicare patient with Alzheimer’s is triple that of a patient without: $13,207 and $4,454, respectively.

In 2005, Medicare spent $91 billion on patients diagnosed with Alzheimer’s, and this amount is expected to more than double to $189 billion in 2015, and increase to over $1 trillion by 2050.

Stroke

The cost of care in the first 30 days following a stroke is only $13,019 in mild cases and $20,346 in severe cases, and yet the lifetime cost of a stroke is approximately $140,048. The bulk of those costs comes in the form of chronic care and rehabilitation.

The mortality of strokes decreased 20.7% between 1995 and 2005. Over a similar period (1995-2006) the incidence has decreased 12.8%, but this trend is expected to soon reverse itself as the population ages – particularly ethnic minority groups who are at especially high risk of stroke. The result will be an increase in spending on stroke care, from $65.6 billion in 2008 to $2.2 trillion by the year 2050 if there are no changes in treatment, preventative care, or trends of risk factors (i.e. incidence of obesity).

Diabetes

Whereas the mortality of the previous two diseases is declining, the mortality of diabetes in the general population is increasing by 1.2% annually. Coupled with an exponential growth in the diabetic population (11 million in 2000, 23.6 million in 2009), and a predicted 52.9% increase in incidence rate between 2003 and 2023, the human and economic burden of diabetes in the future is certain to be overwhelming.

Currently 10% of health care dollars are spent on overall direct costs related to diabetes, amounting to $92 billion a year (1.5 times the amount spent on stroke or heart disease). The Centers for Disease Control and Prevention predicts that spending on diabetes care will reach $192 billion in 2020.

Medicare reported spending only $1.4 billion ($7,383 per discharge) on diabetes in 2007, but this number is limited to in-patient services, which excludes most diabetic care, such as insulin therapy.

End-Stage Renal Disease

Treatment for end-stage renal disease (ESRD), often caused by diabetes or hypertension, includes hemodialysis and kidney transplantation. Overall spending on ESRD treatment increased from $8.01 billion in 1996 to $33.61 billion in 2006. Recent data predicts a 150% increase in the number of patients undergoing hemodialysis and kidney transplantation in the next decade, which will continue the upward trend in treatment costs.

Medicare alone spent $23 billion on ESRD related hospitalizations in 2006, an average 9.2% annual increase from 1992.

Chronic Lung Disease

The Centers for Disease Control and Prevention lists fourth leading cause of death in the adult population as chronic lower respiratory disease, which includes bronchitis, emphysema, COPD, and asthma. The mortality of chronic lung disease is predicted to decrease at a rate of 1.5% a year until 2030, and yet the cost of treating it is predicted to more than double from $176.8 billion in 2006 to $389.2 billion in 2011 and to reach $832.9 billion in 2021. The reason for this skyrocketing increase is a 31.1% increase in the number of diagnoses predicted by the Milken Institute.

Medicare spent over $8 billion on respiratory disease, excluding pneumonia, in 2006, a figure that is bound to increase tremendously in the next decade.

Heart Disease

Heart disease has long been the leading cause of death in the United States. However, for the last 60 years, the age-adjusted mortality rate heart disease has been in decline. From 1950 to the mid-1980s, heart disease accounted for roughly 40% of all mortality; since 1986 this has slowly decreased. The most recent data from the CDC show that in 2005 heart disease accounted for 27.1 percent of overall mortality in the U.S, at an age-adjusted rate of 222 deaths per 100,000.

In contrast to the decreasing mortality rate from heart disease, expenditures are on the rise. In 2007, the overall cost of direct care for heart disease was $164.9 billion and is estimated to have been $183 billion in 2009. As the use of expensive treatments for heart disease such as pacemakers and internal defibrillators, continues to increase, so too will the cost of care. According to the Milken institute, overall cost of heart disease is predicted to reach $186 billion in 2023. In 2006, Medicare spent $24 billion on heart disease.

Cancer

The CDC reports that overall spending on direct care for cancer totaled $74 billion in 2004. While there are not any reliable cost projections for cancer, there has recently been an exponential increase in the cost of cancer drugs. Cancer treatment is especially prone to spending an exorbitant amount of money on a marginal benefit, with some treatments, such as Avastin – used for metastatic breast, colon, and non-small cell lung cancer – costing over $90,000 for a 1.5-month increase in predicted survival time, or $2,000 per day.

Medicare spent $7.3 billion dollars on inpatient cancer care, but this does not include most chemotherapy, which is administered as an outpatient service and is covered under Part B. Medicare spending on Part B drugs in 2004 totaled $10.87 billion, representing a steady 25% annual increase from the $2.76 billion spent in 1997. Given that the incidence of cancer in people above age 65 is nearly 10 times that of people under 65, as the population ages Medicare is bound to pay a large and growing portion of the nation’s over all spending on cancer treatments.

Considering that chronic diseases account for such a great proportion of Medicare’s overall spending, any increases in chronic care spending will directly affect Medicare. Ideally, Medicare spending will not increase annually more than the rate of inflation, 2 to 3%. However, each of these seven diseases explicitly underscores the fact that current trends make that goal almost impossible.

Kimberly Swartz is an intern at The Hastings Center.

Wellness programs in the workplace, such as free exercise classes, have been used for some time and offer employees the benefit of maintaining or improving their health. Some employers also offer reductions in health insurance premiums or deductibles to employees who participate in specific wellness schemes. Such programs sound like a win-win situation: employees are healthier and pay less for health care, and employers can reap the benefits of a more productive workforce.

However, these programs also raise some problems, and provisions proposed in Section 2705 of the Senate bill threaten to exacerbate them.

HIPAA legislation and subsequent regulations of 2006 allow employer-based health plans to vary premiums, copayments, or deductibles among employees as part of wellness programs. The regulations distinguish between two kinds of wellness programs: those that reward workers for participation in a health promotion or disease prevention program (such as a weight loss class or a smoking cessation program) and those that make rewards conditional on employees meeting a specific health target (such as normal BMI, cholesterol levels or smoking status).

Outcome-based wellness programs are permissible only if a number of conditions are met. One such condition is that the size of the reward must not exceed 20% of the cost of the employee’s coverage or, if the employee’s dependents are included, the cost of family coverage. The Senate bill proposes to increase this limit to 30% and possibly even 50%.

Current regulations and the Senate bill’s proposals leave open exactly how wellness schemes are to be implemented. Some employers may choose to absorb the cost of incentive payments in the short term and not increase premiums or copays, perhaps hoping to recoup the expenditure in the medium to long term through savings gained from a healthier workforce and reduced sick leave and absenteeism.

However, as explicitly recognized by the 2006 legislation, wellness programs that tie rewards to the achievement of a health status target can also be used to shift costs, both from “healthy” to “unhealthy” workers and from employers to those employees who fail to meet the stated targets (or refuse to participate in the wellness scheme).

What does this mean in practice? Based on the 2009 average of the cost of health care coverage, the 20% cap required by current legislation allows for a variation of as much as $965 per year for a single employee and $2675 for an employee with family coverage.

Despite the fact that there is no conclusive evidence of the efficacy of these schemes, or anything to suggest that the 20% threshold is often exhausted (and that further improvements could only be made with higher reimbursements levels), the Senate bill proposes quite significant increases. With regard to the current average cost of coverage for a single employee, a 30% threshold would amount to a difference of $1,447, and 50% would equal $2,412. (For family policies the sums would be $4,013 or $6,688, respectively).

These increases would disproportionately hurt lower-paid workers, who, generally, are less healthy than higher-paid workers and thus in greater need of health care, less likely to meet the targets, and less likely to afford higher premiums and deductibles.

As these numbers suggest, wellness programs can make health coverage significantly more expensive for those who cannot meet the targets stipulated by employers. This is illustrated by the wellness consultant Benicomp. The company’s Advantage plan implements wellness programs not by raising premiums, but by increasing deductibles for all employees covered under the health plan. Reductions are then offered to those workers who meet specific health targets. As the company explains, one way that such a scheme leads to savings for the employer is that individuals who cannot gain reimbursements under the scheme might be “motivated to seek other coverage options.”

People with multiple health problems and low incomes are among those who are most likely to feel the financial burden of the legislative loophole in the Senate bill, and may even lose health care coverage as a result. As such, wellness programs may seriously undermine one of the crucial goals of health care reform: to extend affordable health care coverage to all Americans, regardless of pre-existing conditions.

Making improvements to the workplace that could help workers adopt and maintain healthier behaviors is a crucially important and laudable goal. However, current provisions on wellness programs allow for highly inequitable cost-shifting to occur. Wellness programs of this kind run counter to the spirit of health care reform.

As we suggested recently in the New England Journal of Medicine, and as is urged in a letter to members of Congress by the American Heart Association and more than a hundred other patient advocacy groups, Congress should reject the Senate proposal to increase incentive levels for wellness programs.

Financial incentives have a role to play, but under fairness considerations the key point is that they must be equally achievable for all and, in particular, not penalize those who are already among the most disadvantaged. The focus should therefore shift to prevention and health promotion programs that are sensitive to the abilities and needs of lower-paid workers.

Kristin Voigt is a post-doctoral fellow in the Harvard University Program in Ethics & Health; Kristin_voigt@hms.harvard.edu. Harald Schmidt is a research associate at LSE Health of the London School of Economics, and a Commonwealth Fund Harkness Fellow in Health Care Policy and Practice at the Harvard School of Public Health; hschmidt@hsph.harvard.edu. The views expressed here are those of the authors and should not be attributed to the Commonwealth Fund, its directors or officers, or LSE Health.

The scene was a clean white surgical suite, with surgeons in light blue scrubs leaning over the patient on the table, concentrating intently on the job at hand: the ex vivo resection of the man’s liver. The photograph illustrated an article that appeared last month in The New York Times. It explained that the patient, Mr. Collison, had a cancer so entangled in his abdominal organs and blood vessels that his doctors in Milwaukee would not operate; he had to come to New York to find a surgeon willing to do so.

Dr. Tomaoki Kato and his team at New York Presbyterian Hospital/Columbia University Medical Center removed Mr. Collison’s liver and parts of other organs from his body, cut the tumor from the liver, and put the liver back in a 43-hour surgical marathon. The bill for the procedure is likely to be more than $300,000. Follow-up care will undoubtedly be hundreds of thousands more.

That’s an attention-getting number – $300,000 for a single procedure. Can we afford care like this? In the article, Dr. Kato’s boss asks, “What does this mean for medicine, doing these incredibly complex procedures to save individual lives?” He adds that the Talmudic principle that saving a life saves an entire world is “not a very health-policy, quantitative way of looking at it.”

Actually, health policy suggests that we need to ask a few questions before we conclude that $300,000 is too much. First, the bill needs to be put in terms that allow it to be compared with other medical care. Cost effectiveness analysis uses the cost of saving a year of life as the basis for comparison. So how many more years is Mr. Collison likely to live because of the operation?

Dr. Kato says that if the tumor doesn’t recur, “he could have a long, long time ahead of him.” Suppose the total cost of Mr. Collison’s care, including follow-up, comes to a million dollars. If he lives another 10 years in reasonable health, the cost for each year would be $100,000. If the total cost of his care is more, say, $1.5 million, that’s $150,000 for each year. If he lives more than 10 years, a reasonable possibility for a 59-year-old man, the cost per year goes down.

How does that compare with other medical care? Standard practice in the U.S. today includes many kinds of care that cost considerably more than $100,000, or even $150,000, to save a year of life. For example, statins to reduce cholesterol in a middle-aged man who has no other risk factors for heart disease costs more than $400,000 for each year of life saved. This figure, and the ones that follow, come from a report I wrote for the National Coalition on Health Care.

It might seem impossible for a medication that costs one person a few hundred dollars annually to cost so much for each year of life saved. But remember that statins have to be given to that man, and to others like him, for many years. The small expenses, including extra doctors’ visits and tests, accumulate over the years. Some of the men would never suffer ill consequences from their cholesterol even without statins. Since statins are not 100% effective, some men will suffer ill consequences in spite of them.  The bottom line: more than $400,000 for each year saved.

There are many other examples. Screening for diabetes in all adults 55 and older, instead of screening just those who have high blood pressure, costs more than $500,000 for each year saved. Screening for cervical cancer every two years, rather than every three years, costs more than $1 million for each year saved. These interventions may never generate bills as big as $300,000. Instead they generate a lot of smaller ones – tests for many people, for example, most of whom do not have the condition, follow-up tests, treatment for those found to have the condition. All these expenses are required to produce the final result, a life saved, a person who can look forward to a few, or many, more years.

Simple differences – focusing on higher-risk people or screening more often – make a big difference in costs, but they don’t draw attention the way a $300,000 hospital bill does. Despite their quantitative sophistication, health policy wonks, along with everyone else, too often focus on the big bills and fail to notice the implications of the little ones. The goal of medicine is to do as much as possible with our health dollars. The measure of success is not the size of an individual bill, but the cost to save a year of life.

The article reported that Mrs. Collison thinks that “even if the surgery buys her husband only a few years, it will have been worth it.” She’s speaking as a loving spouse, of course, but even from the health policy, quantitative way of looking at it, she may well be right.

Louise Russell is Research Professor at the Institute for Health, Health Care Policy, and Aging Research, and Professor in the Department of Economics, Rutgers University. She was a member of the first U.S. Preventive Services Task Force (1984-1988) and co-chaired the U.S. Public Health Service’s Panel on Cost-Effectiveness in Health and Medicine (1993-1996). lrussell@ifh.rutgers.edu; 732-932-6507.