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Medical Technology: Health Care's Double-edged Sword
Advances in medical technology saves, extends and can improve lives. Yet technology is also a culprit in fast-rising health care costs that lead to unaffordable premiums to an increasing number of Americans.

Interview with Dana Goldman, who holds the RAND Chair in health economics and is the director of health economics at the RAND Corp. in Santa Monica, California.

  As director of health economics at RAND, Dana Goldman has been at the forefront of helping policymakers better understand the link between medical technology and health costs. Recently, Goldman and his RAND colleagues were recognized in Health Affairs for their work in developing the Future Elderly Model, which can predict medical costs and health status of the elderly in the future. Goldman is also a professor of health services and radiology at UCLA. Goldman's research focus includes labor market effects of health reform, managed care, technology assessment, and pharmaceutical regulation and innovation. Goldman is particularly steeped in understanding the role that

medical technology and health insurance play in determining medical outcomes. Goldman recently spoke to ERIU about technology's effect on health care costs and access to care. He also highlighted possible considerations for expanding health care coverage to people without health insurance.

Technology seems to be a double-edged sword when we talk about health care costs. Some technology saves money; other technology drives up costs. Does technology in medical care overall drive up health care costs?

GOLDMAN: It sure does. Technology is probably responsible for half of all the increase in health care spending. As we get more sophisticated with the way we diagnose and treat illness, it becomes very expensive because there's a lot that's done. In the past, when you sprained your knee, the doctor would say "Take an aspirin and give me a call in a couple of weeks." Now, the doctor says, "Well, we can get an MRI and I can put you on this latest pain reliever that is a brand name pharmaceutical and then we'll see what happens."

Are there areas in health care where technology saves money?

GOLDMAN: It's hard to find examples of where technology saves money, actually. One area where it probably does is vaccines. And, actually, cholesterol-lowering drugs may actually turn out to save money in the long run. Pharmaceuticals in general can be a good deal.

How is technology really driving up health care costs?

GOLDMAN: The medical device market is an example. One important area now, for instance, is the implantable cardioverter defibrillators, which are devices that will shock your heart if it goes into a life-threatening arrhythmia. Those devices are expensive, as well as stents, which are implanted after a heart attack. A lot of cardiovascular devices raise costs significantly because it is such a common condition. We also keep people alive longer and we kill one disease and then they are going to die of another disease. The fact that health care costs money and improves your health makes it no different than any other consumer good. Apples cost money but they make you happy if you like apples. The real problem, though, here is that when you go to the store and buy apples, you pay for it with your own money. With health care, you are using someone else's money.

Is there sense of what role medical technology plays in people becoming uninsured or the rise of the uninsured rate?

GOLDMAN: What has happened over time is that health insurance premiums have gone up in lockstep with the rise in health care spending. And the result is if you can get good insurance it's kind of like winning the lottery and you have access to all of these great technologies. On the other hand, it also makes that insurance very, very expensive so people are reluctant to buy it. You could think of it this way - suppose the only cars that were available to buy were Mercedes. How many people would be willing to buy a car? Probably not as many people as we have doing so now. Now, it's a better car, just like health care has gone up and gotten better over time, but you really don't have the Yugo option any more.

Why does technology drive up costs?

GOLDMAN: The first reason is because someone else is paying, and that's a really important reason. The second part is that people want their doctors to do everything they can, regardless of costs. The third reason is that the doctors have an incentive to do as much as they can, although HMOs are a notable exception. In many cases, doctors get paid more, the more they do. So you have this scenario: if it adds any therapeutic benefit to the patient, the patient wants it, the doctor wants it, and someone else foots the bill.

The other part of it is just a general observation about technology. When we first develop these technologies, such as implantable defibrillators, there is a population for which we know this is really worth it. So, for people who have life-threatening arrhythmias, of the sort that Vice President Dick Cheney has, the clinical trials are very clear that they can save these people's lives and are actually quite cost-effective. But over time, we find that other people who have other heart problems may benefit. Then, you start saying 'well, maybe everyone should have it.' So, there is kind of a technological imperative that goes on in medicine and that is when the costs go up, expand the population that gets it.

What do health care policymakers need to think about in terms of the costs associated with medical technology?

GOLDMAN: They need to think about how we can offer a reasonable health care plan, without all the bells and whistles. Otherwise, health insurance is going to be so expensive that no one is going to do anything, in this era of large budget deficits. When you are talking about 45 million uninsured, a generous health plan costs probably $7,000 per person. You are talking about hundreds of billions of dollars.

So, you need to ask, is there somewhere we can provide a basic set of services? The answer is, that it's actually very difficult, because it is hard to say, "Well, you are not going to get this, or you're not going to get that." So, they really have to think about possibly tort reform - providing some way a health plan can say, "Look, we are not going to allow access to the latest and greatest. If you get sick and you have something where you want the latest and greatest, it's not going to be covered and you can't sue us for that." There needs to be fundamental reform; tort reforms and work on how we would design better insurance contracts.

How should health care policymakers determine the cost benefit of certain technologies? What should be considered?

GOLDMAN: When computing the benefits, we need to take an expansive view. We need to think about the benefits in terms of patient time, for example. Time they can be back at work and be productive. We also need to think about fewer burdens because they're not having to wait in the doctor's office and having to make more office visits or having to make more health care visits. And, of course, improvements in quality of life as well as mortality. It's not just something that can save your life; it can make your life better.

We also need to think especially about the health care costs and any other costs that might arise as well. For example, if the treatment requires you to get a drug infused eight hours a day every day, there is a cost associated with that beyond paying for that infusion.

What would you suggest to policymakers about crafting incentives to discourage delivery of inefficient high technology health care?

GOLDMAN: I think it should go the other way. I am a little reluctant to say we should start reducing incentives for new technology. You want to increase carrots for cost-saving technology. For instance, if you can demonstrate to the FDA that your new device can actually save money, then the FDA would expedite approval and Medicare would adopt it immediately. Carrots rather than sticks can encourage these cost-saving technologies.

Do you have any final thoughts on technology and the impact on the uninsured?

GOLDMAN: It's not that medical technology is bad, per se. It is very good. The challenge for us is to figure out how to make sure it goes to the patients who most benefit, and that the costs are not passed onto future generations. That's a tricky type of policy question. But, it is one that we are lucky to be asking because it means that our health care system is innovating. It also means that we are going to be excluding some people. I don't think society should be doing that. We need to find ways to make sure that they have at least access to some basic set of services.

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Funded by The Robert Wood Johnson Foundation, ERIU is a five-year program shedding new light on the causes and consequences of lack of coverage, and the crucial role that health insurance plays in shaping the U.S. labor market.