Health beyond the headlines
High-tech is high cost

Why is Medicare So Expensive? Episode IV

High-tech is high-cost

By Abdul El-Sayed

Published on October 17th, 2012

With a $509 billion price tag in 2010, accounting for 12 percent of the federal budget, Medicare is nothing if not expensive. In the first three parts of this series, we discussed several trends that are fueling the rising cost of Medicare. First we looked at the growing, increasingly life-expectant elderly population, which has grown from 19 million in 1965 to 48 million today, living four years longer, on average then when Medicare was first passed. Then we explored the growing prevalence of obesity, diabetes, and dementia among today’s seniors, and the costs they bring to bear on Medicare.

Here, we’ll consider the growing costs of medical technologies.

One of the most important drivers of the growing cost of healthcare overall, the Congressional Budget Office (CBO) and others suggest that healthcare technologies account for up to 50 percent of yearly increases in health spending. From pharmaceuticals and surgical instruments, to the burgeoning growth in technologies for managing medical information, ours is certainly the most high-tech health system in the world.

The uptake of healthcare technologies in the elderly is particularly pronounced, accounting for a large proportion of the growth in Medicare’s cost. For example, a report on the link between healthcare technologies and costs by the CBO documented the rise in heart procedures (such as angiography, angioplasty, and bypass), dialysis, and hip and knee replacements among elderly Americans between 1970 and 2004. In every case, these procedures, which are now performed millions of times per year, were nearly unheard of in 1970—and trends in their use point squarely skyward.

But improving healthcare technologies is a good thing, right? Sure—it’s clear that some technologies have certainly improved the quality of healthcare. These include new, effective treatments for diseases like cancers and HIV/AIDS, medical information management systems that decrease medical errors and coordinate care transfers between nurses and doctors changing shifts, and surgical tools that decrease complications and improve outcomes.

But high-tech care has another side. It can also translate into high cost with little to no improvement in health to show for it.

One of the qualities that proponents of market-driven healthcare love to highlight about the American system is the innovation it has produced. But volume doesn’t always mean quality—while the latest, greatest, and shiniest all cost more money, they don’t necessarily translate into better healthcare.

A recent report by the Commonwealth Fund highlights this reality. Comparing healthcare spending across 13 high-income countries, it showed that although Americans spent substantially more on healthcare than any other country, the quality of our healthcare was, in many ways, worse. The report concluded:

“The US spends far more on health care than any other country. However this high spending cannot be attributed to higher income, an older population, or greater supply or utilization of hospitals and doctors. Instead, the findings suggest the higher spending is more likely due to higher prices and perhaps more readily accessible technology…”

One example highlighted in the report was the overuse of imaging technologies, like CT or MRI. Many American doctors own their own scanners. And because they can bill Medicare, Medicaid, or an insurance company rather than having to charge patients directly for each additional scan they perform, they have added incentives to perform more scans. At upwards of $3,000 per scan, unnecessary scans cost a lot of money. What’s worse, it’s not that additional CT scans only increase the cost of care, but they can be detrimental to patients’ health, too, because each scan carries with it a harmful exposure to cancer-causing radiation. In fact, a recent article in the Archives of Internal Medicine suggested that overuse of CT scans in 2007, alone, could cause an additional 29,000 new cases of cancer, leading to nearly 15,000 deaths.

When it comes to Medicare, the growing costs of healthcare technologies have another downside—they threaten a program that is already bursting at its seams.

There isn’t a clear policy approach to this challenge. On the one hand, some healthcare technologies are clearly beneficial, saving lives and money at the same time. On the other, Medicare must be judicious about the technologies it will pay for to avoid wasting money on technologies that have no benefit.

And while cost-effectiveness analyses and evidence-based allocation of resources seem like the right approach, the demands and perceptions of beneficiaries and the public can often stymie the most rational policies. Companies spend a lot of money advertising their latest and greatest technologies directly to consumers, stoking fear among a public that already abhors the idea that their choice could be restricted. And political interests magnify these fears even further—the recent election campaigning has been awash with claims from both sides about how the other will “destroy Medicare as we know it.”

In the next and final episode, we’ll consider how our awkward cultural relationship with death is contributing to Medicare costs.

9 Responses to “Why is Medicare So Expensive? Episode IV”

  1. November 02, 2012 at 12:06 pm, Sarah said:

    I think the overuse of imaging studies (among overuse of other diagnostic tests and treatments) is certainly being critically examined across the medical disciplines. ABIM and several other leading medical specialty organizations have been working hard on their Choosing Wisely campaign, and the American College of Physicians is also urging internists to assess the need (costs and overall value for the patient) for a test prior to ordering it in their High Value Care initiative as well.

    However, with that said, doctors who have been practicing for years, as well as newer physicians, are also concerned with cutting back on ordering such tests because, despite their recognition that, for example, too many ER docs are ordering CT scans for headache complaints, there is a competing fear of being sued for malpractice in the unfortunate event that the patient had a more complicated diagnosis that went undetected and led to patient harm. It’s a tough tangle to unwind, but I think it is important to acknowledge that leading physician organizations are working to examine and find ways to navigate through this in order to improve quality of care as well as decrease healthcare costs.
    Check out these papers published in Annals of Internal Medicine earlier this year: http://annals.org/article.aspx?articleid=1351380 and http://annals.org/article.aspx?articleid=1033300

    Also, this is a great series! Thanks for really clarifying a lot of the issues surrounding Medicare and laying them out in a way that makes them more clear for a broad range of viewers!

    Reply

  2. November 02, 2012 at 12:41 am, powell said:

    This reminds me of a times article a few months ago regarding “chemotherapy baths” that seem to be very high-cost, last-ditch efforts that haven’t been proven to actually produce better outcomes. Yet, hospitals are compelled to offer such treatments, because if they wont, then the patient may likely go to another hospital that will, and that’s lost revenue.

    I think the National Institute for Health and Clinical Excellence in the UK is a great model with regard to determining which treatments will be covered based on QALY. I believe the committee created under the ACA to evaluate best-practices and evidence-based medicine is a step in that direction, though that’s already being so politicized as is.

    Reply

  3. October 28, 2012 at 6:46 pm, Tayeb said:

    Physicians are gate keepers and can control cost. They need to be better trained to think critically and order only tests that will help them change their treatment. New physicians coming out of practice seem to order tests from a mind set that only a test can make a diagnosis and their role is to read a test and make the diagnosis rather than use the test to help them make a diagnosis.
    So medical school need to train the young physicians better and different than so far we can see.

    Reply

    • October 30, 2012 at 2:19 pm, abdulelsayed said:

      Thank you for your thoughts, Dr Tayeb! I definitely agree that this should certainly be a focus for medical training in the future!

      Reply

  4. October 22, 2012 at 8:50 am, Abbas Bader said:

    With regards to the imaging over-utilization you referred to, I feel as though prior authorization is the common countering approach found with commercial payers (I do not know to what extent this is the case with Medicare). But my opinion is that generally, when an insurance plan adds a prior authorization, it leads to 1) physicians finding a coding loophole to get scans approved or 2) those physicians that can afford to will just stop treating patients on these plans.

    Has anyone come across an effective way to discourage over-utilization of imaging (or any other high cost/potentially low utility procedures for that matter). I realize the shared savings/bundled payment models seek to do this, but I feel as though we are still a ways away from that being the norm.

    Reply

  5. October 22, 2012 at 7:19 am, Jordan Chase said:

    I’ll give you that. I’m a little jaded from my own personal experience. When I got into a minor – very minor – car accident, the doctor at the ER told me to follow up at his clinic. He put me right into that MRI machine and referred me to 6 months of physical therapy to a clinic which he was part owner of. I needed neither. I was 15 then. It left a very bad taste in my mouth.

    Reply

  6. October 17, 2012 at 10:53 am, Jordan Chase said:

    Most doctors are greedy and will do anything to line their own pockets.

    Reply

    • October 21, 2012 at 11:13 pm, abdulelsayed said:

      Thanks for your thoughts, Jordan. While I think that medicine is certainly a business, meaning doctors are operating to maximize their profits, I do think the issue is more complicated, no? In this case, the medical technologies industry, including big pharma, medical device manufacturers, and others are more to blame…

      Reply

Elevate the conversation

 
The views and opinions expressed on this website are solely those of the authors and do not represent those of the Department of Epidemiology, the Mailman School of Public Health, or Columbia University.