The Cost-Benefit State of Healthcare

David Julian Martin, CAE

The litany of healthcare cost problems has become familiar to virtually everyone. Costs for healthcare in the United States have been rising dramatically since the 1960s. While this may be a concern to the consumer, what worries government even more is that the distribution of the burden between the private and the public sectors is shifting.

In the mid-1960s, the U.S. government bore 25% of the burden, with 5.3% of gross domestic product (GDP) consumed by healthcare costs. By 1980, the government’s share was 40%, with 8.5% of GDP supporting healthcare. According to a recent report from Centers for Medicare and Medicaid Services (CMS), healthcare spending in the United States rose to $1.6 trillion in 2002, with the government’s share accounting for 46% of health payments. Furthermore, the healthcare share of GDP increased to 14.9% in 2002.

Concern about the high and rising costs of care has prompted a wide variety of cost-containment efforts. Squeezing out “unnecessary costs” and eliminating “redundant” capacity were the watch-words of the past 20 years. However, underlying these efforts is the search for an appropriate balance between the costs of care and the benefits it provides both individuals (patients/families) and society at large.

Slowly but steadily America has become a cost-benefit state. This means that expenditure is increasingly assessed by asking whether the benefits justify the costs. The rise of the cost-benefit state is creating a number of difficult challenges for policy makers, all branches of the U.S. government, and the law in general. Those challenges are likely to intensify in the next decade. If a statute for example, allows agencies to balance lives against costs, how will the balancing occur? How can lives be turned into monetary equivalents? What is the value of life?

Many of these issues are already being dealt with at the federal level and these actions will likely influence healthcare policy of the future. For example, in environmental issues, government agencies, policy makers and courts have already taken on the issues of exempting certain risks, quantifying benefits to future generations, and balancing cost/benefit issues from the micro (in our case, patient/family level) to the macro (i.e., let’s spend less on treatment and more on prevention research). This issue has become so large that the U.S. Office of Management and Budget has developed “Best Practices” Guidelines for agency use when implementing regulations based on costs and benefits.

To illustrate this point, take the recent announcement by the Institute of Medicine (IOM):

IOM Report Calls for Universal Health Coverage by 2010:

Given the growing stress being placed on the nation’s healthcare system, the exacerbated health problems, and the substantial societal costs that result from more than 43 million Americans lacking health insurance, the President and Congress should strive to achieve universal health coverage in the United States by 2010, says a new report from the Institute of Medicine of the National Academy of Sciences. “Lack of health insurance in the United States is a critical problem that can and should be eliminated,” said committee co-chair Mary Sue Coleman, president, University of Michigan, Ann Arbor. “Achieving universal coverage will require federal leadership and support, regardless of which strategy is adopted to achieve this goal.”

Among the findings, this and other recent IOM reports noted that:

• Uninsured Americans get about half the medical care of those with health insurance. As a result, they tend to be sicker and to die sooner.
• About 18,000 unnecessary deaths occur each year because of lack of health insurance.
• Only half of uninsured children visited a physician during 2001, compared with three-quarters of insured children. Lack of regular care can result in more expensive care for preventable or treatable conditions and disruptions in learning and development.
• When even one family member is uninsured, the entire family is at risk for the financial consequences of a catastrophic illness or injury.
• Tax dollars paid for an estimated 85% of the roughly $35 billion in unreimbursed medical care for the uninsured in 2001.
• The burden of uncompensated care has been a factor in the closure of some hospitals and the unavailability of services in others. Disruptions in service can affect all who are served by a facility, even those who have health insurance.
• The United States loses the equivalent of $65 billion to $130 billion annually as a result of the poor health and early deaths of uninsured adults.

The report goes on to say that, “Politics and economics will determine what society can afford. Any major reform proposal will need mechanisms to control inflation and encourage use of efficacious, cost-effective services.” Does this leave doubt in anyone’s mind that a cost-benefit program will be necessary to achieve the goals set out by IOM?

As we pointed out in this publication previously (Poll Reveals “Bedside Rationing” Practices, August 2002), resource allocation decisions are already being made at hospital bedsides everywhere. Hospitals and healthcare workers faced with tremendous economic pressures, growing numbers of uninsured patients and lowered reimbursements, find they can only supply limited amounts of costly therapies. However, when surveyed, a vast majority of physicians (88%) indicated that it was unethical to withhold a therapy that would benefit the patient, in order to ration total healthcare dollars.

Thus it appears that while cost/benefit decisions are currently made locally and with only the cost/benefit to the patient in mind, the broader questions of cost vs. societal benefit will need to be addressed at the state or federal levels. However, will our elected state and federal leaders make the hard decisions on what care to provide to whom in order to balance the books on healthcare spending? Is it not more likely that Congress will pass legislation to implement a “cost effective” healthcare program, leaving the difficult details to government agencies to sort out? A blueprint for such sorting out already exists in numerous government documents and court rulings, and these will likely find their way into the hands of agency policy makers as this issue unfolds.

As the only organization that represents the complete multidisciplinary team of dedicated experts in ICU care, SCCM will continue to actively participate in these important policy making discussions. Continued engagement in these vital policy matters by SCCM on your behalf and on behalf of your patients is the only way to ensure adequate resources are available to care for critically ill patients.