In the first article in this AANS Bulletin series on technology and the future of neurosurgery (“High Tech, High Costs,” Vol. 8, No. 4), I made the case that the introduction of new technology has been the driving force of increasing medical care costs throughout the developed world. Consequently, such steady increases have resulted in various plans for controlling health care expenditures. This article explores how such proposals might impact the development and deployment of new technology.
United States Health Care and New Technology: Recent History
Over the last 50 years, the structure of the U.S. health care system has been conducive to developing and deploying new technology. Most of us have practiced in an era of employer and government subsidized health insurance with fee-for-service reimbursement. This structure of entitlements, subsidies and payment policies has had a profound effect on research and development efforts.
For example, health care expenditures were directed toward hospitals where specialists-dependent on expensive, sophisticated technology-performed acute, curative interventions. Innovation in surgical procedures was particularly favored, since new procedures were less regulated than drugs and devices, and reimbursement for operative procedures was generally higher than for non-procedure related care. Because our society places such a high value on new technology, individuals and organizations could best compete in this system by offering the latest technology, regardless of cost.
In addition, this system produced dramatic medical advances. It spurred the development of new technology and made the U.S. the primary site for commercialization of new health care technology developed abroad. It also resulted in the proliferation of expensive equipment and facilities and produced the most costly health care in the world.
Health Care Reform Proposals
In the early 1990s, high health care costs and concerns from the business community and federal officials about their willingness and ability to pay for them created a crisis atmosphere for health care reform. The public debate on reform has continued, focusing on the issues of access and cost.
Access was generally defined as some kind of universal entitlement to basic health care services. The U.S. system was widely criticized for the number of uninsured citizens. Costs were discussed in absolute terms, as a percentage of the gross domestic product (GDP) and in regard to the rate of increase. The U.S. was clearly an outlier in relation to absolute costs and costs as a percentage of GDP.
However, as the first article in this series pointed out, the rate of increase of U.S. health care costs was similar to that in other developed countries, but this important piece of information was largely ignored. Various proposals for reducing absolute health care costs, limiting the rate of increase of health care expenditures and improving access to health care were proposed. These proposals can be grouped into three basic strategies that will each influence the development and deployment of new technology in neurosurgery.
- Single Payer Plans. Single payer plans envision consolidating health insurance coverage into a public system administered by the federal government or by the states with federal oversight. Proposals ensure universal coverage for a standard package of benefits that would be financed through broad-based taxes with little or no patient cost sharing. A federal agency or national health care board would be charged with determining the benefit package, as well as the national health care budget. Payment for care would likely be determined prospectively, with fee schedules for individual physicians, global budgets for hospitals and capitation payments to comprehensive care organizations. Single payyer plans would promote primary care by increasing payment rates for services in relation to procedures, and by offering incentives for expanded training to primary care physicians.
- Managed Competition Plans. These plans call for the federal government to create incentives for a more competitive environment that would make consumers, employers, insurers and health care providers more aware of cost. Such plans would be required to offer a standard benefit package and to report outcomes and indicators of “quality.” No one could be denied coverage based on health care status. The advocates of such plans think that competition in this environment would force insurers and health care providers to develop integrated delivery systems and provide more cost-effective care. The most discussed managed competition plan was the Clinton Health Security Act. This plan would have limited Medicare and Medicaid spending and, when fully implemented, would have restricted private insurance plan premiums as well. Managed competition plans also contain incentives to increase the proportion of primary care physicians.
- Insurance Market Reforms. With the failure of the Clinton plan, reform efforts focused on a more incremental approach to improve access and control costs within the existing health care delivery system. Incentives to create voluntary purchasing pools for individuals and small businesses, to limit the discretion of insurers to deny coverage and to assure continued coverage with a change in employers have been advocated. The use of medical savings accounts to purchase health insurance for catastrophic illnesses with high deductibles for routine care also was proposed. These insurance market reforms do not restrict private health care spending and have the least emphasis on promoting primary care, as opposed to specialty care.
Effects of Health Care Reform
We have seen many changes in the way we practice due to Medicare health care reform and the adoption of these reforms by private insurers. Increased constraints on spending for hospital treatment has encouraged a shift to ambulatory care facilities. Increased coverage and reimbursement rates for preventive services and primary care have occurred. This, and other incentives, is inducing more medical students to consider training in primary care. Government, employers and insurers are assessing the cost-effectiveness of care and making such information available to the public. Clearly, it is becoming more difficult to compete effectively in the medical marketplace simply by offering the latest technology.
- Access and Cost. For years, the debate on health care reform has focused on access and cost. Technology entrepreneurs will have expanded markets if universal health insurance brings more people into the system and increases the use of medical services.
Conversely, potential developers of new technology may be reluctant to invest in research and development if they fear that cost containment will limit their ability to profit from new products or procedures. The impact of health care reform on new technology needs to be a high-priority concern when evaluating these proposals. The three types of health care reform plans discussed above are likely to influence new technology development in different ways.
- Insurance Market Reforms and New Technology. Insurance market reform proposals would promote increased awareness of cost, but these plans are likely to have the least impact on technology development. They do not cap private insurance spending and do relatively little to change the present environment in which effective competition among providers, hospitals and insurance plans requires the purchase and use of the latest technology.
- Managed Competition and New Technology. Managed competition plans also are designed to increase the cost consciousness of consumers and employers. They would, however, have a more profound influence on technology development. All of the proposed managed competition plans include incentives to increase resources for primary care.
Technological innovation has been linked to medical specialty care for more than 50 years. Specialists in the academic medical center environment have played a dominant role in developing and advocating the use of new medical technology. A shift of emphasis toward primary and preventive care and away from acute, curative, specialized care will almost certainly influence the pace and direction of technology development.
Moreover, many managed competition reform proposals also include measures to restrict new technology by regionalizing care. For example, the Health Security Act would have required all insurance plans to contract with academic health centers for certain specialized procedures. This would limit the market for expensive health care equipment and the profits that health technology entrepreneurs could hope to achieve.
Another aspect of proposed managed competition plans is outcomes evaluation and quality assurance, which has the potential to impact new surgical equipment and procedures. Innovations in surgical care and new surgical technology have often become widely disseminated without evaluation of their efficacy or cost. Under managed competition proposals, the pace of technology development would be slowed by the necessity to document the cost-effectiveness of new technology.
- Single Payer Plans and New Technology. Implementation of a single payer plan would have the most profound impact on technological developments. Unlike managed competition plans, single payer plans would place a stronger emphasis on primary care, regionalized care and cost-effectiveness reporting.
In addition, the government would regulate benefits covered and capital investment. Global spending caps, limitations on ownership of technological facilities, strict regionalization of specialty care, and fee limitations would profoundly influence the practice environment. Competition for patients by offering the latest technological advances would no longer be possible for most physicians and hospitals. The U.S. would no longer be the unquestioned market of choice for developing and deploying new technology. Technology dependent surgical specialties like neurosurgery would be most affected.
Looking to the Future
Health care reform continues to be debated and will likely become a very hot topic in the 2000 presidential race. Momentum is building for another attempt at a major overhaul of the U.S. health care system. All of the proposed reforms are likely to impact the development and application of new technologies in neurosurgery. Recognizing this, it is essential that neurosurgeons understand the implications of these reform proposals on their present practice and the future of neurosurgery.
Robert E. Harbaugh, MD, FACS, is Professor of Neurosurgery and Director of Cerebrovascular Surgery at Dartmouth-Hitchcock Medical Center and Chair of the AANS/CNS Committee for the Assessment of Quality and the AANS/CNS Outcomes Subcommittee. This is the second in a four-article series that highlights how technology is driving the cost of medical practice. View the first article at www.neurosurgery.org/library/bulletin/winter2000/aansbulletin.html.