Health Care Reform and the Cost Question

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It is done.  Yesterday, President Obama signed Healthcare Reform into law, enacting the most significant social legistlation in decades.  As Joe Biden so eloquently put it, “This is a big fucking deal.”

[Image source: The New York Times]

The cornerstone of the bill, extending coverage, was always the goal.  The big questions were how we were going to pay for it and would it bring down costs in the long-run.  On the rollercoaster ride of developing this bill, we mainly heard three answers, since the mainstream media only likes to give us information in small digestible bites we need not chew.

First, the House wanted a surtax on the wealthiest, but that could never fly in the Senate.  Second, there was the infamous public option, based on the hope that competition in the oligopolistic insurance sector would drive down costs.  R.I.P.  Finally, the bill settled on the so-called “Cadillac-Tax,” a surcharge on the most expensive insurance plans out there that aims to discourage their existence.

The effectiveness of the Cadillac-Tax was potentially diminished by the last-minute compromise to delay its effective date until 2018, and critics argue that the cost question still looms large.  But there are other measures in the bill that we’ve heard almost nothing about that will significantly impact the cost burden of this landmark legislation.

The Independent Payment Advisory Board

The bill establishes an independent 15-member advisory board to make concrete recommendations to curb costs without raising taxes or rationing care.  If health care costs continue to rise at an unacceptable rate, Congress cannot reject their recommendations without substituting equivalent savings.

Transparency of Payments and Fees

Often overlooked is the transparency this bill brings to the industry.  Ezra summarizes:

…hospitals will have to post prices. Insurance products will be presented with standardized information, consumer ratings and quality measures. The payments physicians take from drug and device companies will be in a public database. There will be independent funding for research on the relative effectiveness of different treatments. Some of these changes are small and some are big, but put together, the system is going to become a lot more visible in the coming years.

Indeed.  These are not minor.  Can you think of any other good or service you pay for without being told the price?  And drug companies and medical device manufacturers spend tons on direct marketing to doctors.  Pharma alone spends $30 billion annually.  These things go a long way towards making health care look more like any other business.

Improved Translation of Biomedical Research

Recently, I have been obsessed with Lewis Thomas – biologist, writer and one of the most brilliant minds I have ever encountered – who put the value of research spending in perspective for me.  In The Lives of a Cell, his celebrated 1974 collection of essays,  he wrote on what he called “The Technology of Medicine,”  adopting an unconventional use of the term and breaking it into three segments:

  • Nontechnology refers to the supportive therapy doctors provide to patients suffering from chronic disease.  It is essential and costly, but bears no capacity to alter the natural course of disease or its outcome.
  • Halfway technology “represents the efforts to compensate for the incapacitating effects of certain diseases whose outcome one is unable to do very much about.  It is a technology designed to make up for disease, or to postpone death.”
  • High Technology is the “genuinely decisive” technology of medicine, manifested in modern methods for immunization against diphtheria or tuberculosis.  It is that which effectively deals with disease.

Thomas argued that the cost of the high technology of medicine is pennies next to the cost of managing disease during earlier stages of no-technology or halfway technology.  He argues that if one were to manage a case of typhoid fever today using the best technology available in 1935, it would require 50 days of hospitalization, maybe surgery and cost tens of thousands of dollars, compared with today’s cost of a bottle of cloramphenicol and a brief fever.

We spend billions on halfway technology – surgeries, transplants, artificial organs, chemotherapy – and the only way to achieve high technology is to truly understand the mechanisms of disease and translate that into treatment.  The health care bill has something there too.

First, the Cures Acceleration Network is created to speed the translation and application of promising biomedical research into treatment.  Second, it establishes a new center for comparative effectiveness research to assess different drugs and treatments.  Together, these provisions may help get us to the high technology of medicine faster.

The cost question is a serious one.  Despite the criticisms, these measures and other cost containment provisions, are serious attempts to bend the curve.  Do you think it can work?

Posted on March 24th 2010 in news

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