3rd Day-6th Talk: “Technology Cost Crisis: How Technology Costs Have Contributed to the Rising Cost of Health Care” by Joseph Kaufmann, MD

Dr. Joseph Kaufman is the Chief Medical Officer and Vice President of Medical Affairs at Sierra Health Services, Inc., a managed care company selected as a "Forbes Platinum 400- Best Big Companies in America." Dr. Kaufman is board certified in both Internal Medicine and Cardiovascular Disease.He joined us today to discuss the impacts that technology has had on the costs of health care.

The national health expenditure is in excess of 2 trillion dollars per year. The average health benefit costs for an active employee in America are between $6,000-$8,000, and the average employer cost for family coverage is approximately $10,000-$12,000 per year. These numbers are equivalent to $5-$6 per hour for each employee, and the cost is rising 8%-9% per year. The rising drug costs have received the most attention. The funds allotted to medical technology accounts for approximately 20% of the growth in health care spending, and this number now exceeds $200 billion dollar per year.

What are some of the major players in increasing costs of the health care? Consumer demands and expectations are continuously increasing which leads to an overall increase in societal expectations of what medicine can do. The aging population and focus on quality of life versus a mere absence of illness also contribute to the increasing costs of health care. A few other key players are access to health care, technology, advertising (i.e. direct marketing), and a consumer lack of involvement.

Dr. Kaufmann discussed a few statistics regarding health care costs in America. Americans spend more money on health care than any other country, and healthcare is the largest industry in the U.S., comprising nearly 17% of the gross domestic product (GDP). Health care is predicted to be 20% of GDP by 2015. However, in spite of what we spend, there are still gross insufficiencies, mis-aligned incentives, and a lack of accountability for outcomes.

The term “medical technology” is broadly defined; it refers to procedures, equipment, and processes by which medical care is delivered. Medical and surgical procedures such as angioplasty and joint replacement as well as medical devices such as CT scanners and AICD fall under this category. Drugs, such as biologic agents, can also be considered byproducts of medical technology. The benefits from medical technology are undeniable. The death rate from cardiovascular disease is down 25% in the last 20 years. There are also new treatments for previously untreatable terminal conditions (i.e. AIDS). Major advances in medical technology have given us the ability to treat previously untreatable acute conditions as well. New procedures have been developed for discovering and treating secondary diseases within a disease, and this has lead to an expansion of the indications for treatment over time.

One of the biggest issues with the exponential growth of medical technology is assessing the cost effectiveness. Patients do not pay directly for health care, and this leads to a consumer lack of involvement and unreasonable demands and expectations from consumers. New technology may be clinically superior, but we have to ask ourselves: is it being utilized where it is clinically most appropriate? Also, is it being utilized where it offers the highest value compared with other treatments? There is no market mechanism for determining the value of medical technology (i.e. there is no generally accepted screening process to asses its value, the cost-effectiveness is not a criterion for regulatory approval of procedures, and manufactures do not consistently perform studies to determine the economic benefits of new procedures.)

These questions breed more questions, such as: does a particular new technology increase or reduce total health expenditure? Does it supplement existing treatment? Is it a full or partial substitute for existing treatment? How does it effect the use or cost of other health care services? Do these changes result in higher or lower health spending for each patient treated? We need to assess the level of use that a new technology achieves: does it extend treatment to a broader population? Can it reduce utilization? What is the impact of use over time? Will it affect both the type and amount of health care that people use in their lifetime? Innovation in health care occurs continuously and numerous factors interrelate making direct measurement of the impact of new technology difficult.

Dr. Kaufmann points out, however, that we cannot have it all. Advances in diagnostics, technology, and medical therapy may be able to cure us, but the price is steep. He referenced an article in the New England Journal of Medicine from 1/24/2008 entitled: “The Amazing Noncollapsing U.S. Health Care System.” This article addressed the cost crisis and the collapse of the health care system that has lasted for over 40 years. Our resilience may actually undermine the attempts at serious reform.

In conclusion, technology is becoming obsolete very quickly, so where do you draw the line? When do you decide to buy new machines knowing how quickly they will be outdated? We need to take a strategic position on these issues and consider whether the benefits outweigh the costs for new technologies that become available.