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Over the past 50 years, we have experienced a steady increase in the technology available to diagnose and treat neurosurgical problems. For most of that time, concerns about the cost of medical care were inconsequential and the need to document the effectiveness of neurosurgical care was minimal. We assumed that we were doing the best for our patients if we employed the newest technology. This is no longer the case. We now live in an era of concern about medical cost containment and the need to document the benefits of our care.
Technology and Increasing Costs of Neurosurgical Care
Health care spending in the United States has grown at a faster rate than the economy, resulting in an ever-larger share of the gross domestic product being devoted to health care. Various factors have been implicated as causes of increasing health care costs.
Prominent among these are the effects of an aging population, care of terminally ill patients, the impact of medical malpractice, excessive administrative costs and an increasing workforce.
Aging Population. According to J.P. Newhouse, health care expenditures on patients over the age of 65 are about three times as high, per person, as they are for younger patients. If the percentage of patients in the population over age 65 is increasing steadily, one would expect the cost of health care to increase as well. This argument is reasonable qualitatively but not quantitatively.
For example, since 1950 the percentage of the U.S. population over age 65 has increased by approximately 0.2 percent per year, while health care costs have shown annual increases of 4 percent. Clearly, all other factors being kept constant, an aging population can account for only a small fraction of increasing health care costs.
Care of the Terminally Ill. In a recent article published in Health Care Finance Review, it was reported that almost 30 percent of health care dollars, at least for Medicare patients, are spent in the last two years of life. Many argue that this is a waste of health care resources and a cause of steadily increasing medical costs. These are specious arguments. After all, it is not the hopelessly ill who account for the greatest expenditure but those who die unexpectedly.
Moreover, according to an article published in the New England Journal of Medicine, titled, "Prognosis, Survival and the Expenditure of Hospital Resources for Patients in an Intensive Care Unit," the percentage of health care expenditures in the last two years of life remained relatively constant over a 12-year period. Therefore, this factor cannot account for the rise in health care spending during that time.
Medical Malpractice. Neurosurgeons know too well that the threat of medical malpractice may induce some to order diagnostic procedures of uncertain utility. It is extraordinarily difficult to determine what percentage of health costs can be attributed to defensive medicine.
However, according to an article published in the Journal of the American Medical Association, titled, "The Cost of Medical Professional Liability," when estimates have been made, they account for a very small percentage of health care costs. More important, there is no direct correlation between increases in the number of malpractice cases and the steady increases in health care costs since 1940. Therefore, malpractice reform might lower the overall costs of care, but it is unlikely to influence the rate of increase thereafter.
Administrative Costs. Much has been made of the administrative inefficiency of numerous competing health care plans in the United States. It has been argued that a single payer system, such as the one in place in Canada, would result in reduced administrative costs and more money being available for health care. This argument seems reasonable but, on closer analysis, administrative inefficiency cannot account for increased spending.
According to several reports published in Health Care Finance Review, program administration costs for health insurance grew from 4 percent of total health care spending in 1940 to about 6 percent in 1990, representing a small fraction of the increased health care spending at that time. There is no evidence that the "inefficient" U.S. system has resulted in a greater annual rate of increase than the single payer plan in Canada. In fact, between 1960-1990 the annual, per capita rate of increase in health care spending in Canada averaged 4.7 percent. During the same time, the annual rate of increase in the United States averaged 4.8 percent.
Increasing Number of Physicians. An increasing number of medical specialists, particularly non primary care physicians, is often cited as a significant cause of increasing health care expenditures. This argument is unfounded, given that there is no discernable correlation between the per capita growth rates for the number of physicians and health care expenditures in the United States from 1940-1990 (Figure 1).
The Effects of New Technology
Several frequently proposed factors cannot be responsible for increasing health care costs. Rather, it is, in my opinion, that increasing medical capability (i.e. new technology) is responsible for the soaring costs of medical care. Some of the factors supporting that argument include:
- Annual increases in health care costs have remained relatively constant over the last 50 years, while steady advances in health care technology have occurred.
- The rate of increase in medical care costs has been similar in all developed countries, as has the introduction of new technology.
- Managed care plans have not been successful in limiting the introduction of new technology. In fact, the rate of increase in spending has been similar for managed care and fee-for-service payment plans.
- The cost/benefit comparisons we make in most of our economic transactions have not been applied to the purchase and use of new medical technology.
From 1940 to 1990 the annual rate of increase of health care costs in the United States remained relatively constant (Figure 2). Any factor proposed as a major cause of increasing health care costs must have been active throughout this time. It also was during this era that a stream of new health care technology was introduced.
According to G.J. Schieber, "Health care costs have increased steadily over the past 30 years in all developed countries." Whatever is driving the increase in health care spending in the United States is also at work in the United Kingdom, Japan, Italy, Germany, France and Canada. The systems in place for training and reimbursing physicians, adjudicating claims of medical malpractice and financing hospital care are widely divergent among these countries; the introduction of new technology has affected them all.
Managed care plans were supposed to curtail increasing health care costs. This has not been the case. In fact, the rate of cost increases in managed care plans and fee-for-service plans has been remarkably similar. According to reports published in Health Affairs, this may be due to the inability of managed care to moderate the use and diffusion of new technology.
In most of our economic transactions, we ask how much benefit we receive for the money we spend. This has not been the case for new medical technology. Here, the test has been whether new technology offers any potential benefit, not whether the benefit is commensurate with increased costs.
Patients demand that the latest technology be made available to them. This demand may be made at the individual level when deciding on which health care plan to enroll in, or at the electorate level in more socialized systems. Because of such demands, suppliers of medical care such as health maintenance organizations, insurance plans, hospitals or elected representatives approve the introduction of new medical technology with limited regard for increased cost.
It has been estimated that this demand for new technology can account for as much as 50 percent of the annual increases in health care spending. In a technology intensive field such as neurosurgery, the effect is likely to be greater than is the case for medical care in general.
Looking Ahead
Clearly, the introduction of new technology has had a profound effect on increasing costs of neurosurgical care in the past, and will continue in the future. As neurosurgery heads into the new millennium we will have to evaluate how health care financing reforms may impact new technological developments and what we can do to assess such technology. More importantly, we will need to be vigilant to protect the climate of innovation that improves care for neurosurgical patients.
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