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David M. Eddy, MD, PhD

David M. Eddy, MD, PhD
Senior Advisor for Health Policy and Management Kaiser Permanente

Are we in a health care crisis?

Yes, I believe we are in a health care crisis. Actually I believe there are two crises. There's a quality crisis and a cost crisis. The quality crisis is that the care that we're delivering is highly variable. The same patient can go to three different doctors and get three different recommendations. There's also a cost crisis. The cost crisis is that health care costs have historically grown at about twice the rate of the Gross Domestic Product or the generally rate of people's paychecks. This means that it's getting harder and harder for people to pay the cost of the health care.

How did we get into the situation we're in right now?

I think there's a quality problem because there's been a dramatic increase in what I'll call the complexity of health care. That is, how difficult it is for physicians to really understand the consequences of all the different tests and treatments that are now available. And it's become terribly complex. And because of that, physicians and other practitioners tend to oversimplify many of the decisions. Theys ay, "If there's any possibility of benefit, then let's do this treatment." You can see that that can lead to a gross over-use of some treatments that have very little effectiveness. You can also see that that can greatly drive up costs.

We're in an economic crisis because our medical researchers, the pharmaceutical companies, the people who manufacture tests and treatments and things like that are able to invent and develop new medical tests and treatments much faster than the general rate of the economy. So long as we have that engine out there developing new technologies, we will always be struggling against the fact that there's a mismatch between the cost of the care that we can deliver, the cost of care that is effective and that we'd all like to have, versus the amount of money that we can pay for it. And those lines, if you will, the rate at which health care costs are growing and the rate at which paychecks are growing, are going to get farther and farther apart as time goes on. This problem is going to get more and more difficult until we finally find a way of solving it.

Why can Switzerland or Germany do it for
half of what we can?

I believe that other countries, such as Switzerland and Germany, can deliver high quality health care at about half the cost that we deliver it because, quite frankly, they're more careful about the kinds of tests and treatments they do. They are more certain that patients actually need the tests that they get. They're more certain that they only give people treatments that are truly indicated for them. And they don't spend as much time on treatments that have a tiny effect compared to a very large cost. They are less likely to give those marginal treatments.

Talk about rationing of care.

If we define "rationing" as not covering some activities that might possibly add benefit, but where the magnitude of the benefit is judged to be too small to be worth the money, then, yes, the only way to control health care costs and keep the growth of health care costs within the rate at which paychecks are growing is to ration somewhat. Now that raises questions about how you ration. There, the important issue is to make sure that we ration according to the amount of value you get for a particular test or treatment. We want to make certain that we do the treatments that provide high value at a reasonable cost, and we want to cut out those things that provide extremely little or no benefit but that still generate cost. I'm not going to say that if it's one in a hundred chance and costs a hundred thousand dollars, we shouldn't do it. I'd rather leave that up to the people who are candidates for those treatments. If we want to have an insurance system that covers those treatments, that's fine, provided we're willing to pay the higher and higher bills that are required to cover those costs. So I'm not making a judgment about whether we should or shouldn't cover a particular thing. I'm just trying to say that if we continue to demand treatments that provide smaller and smaller benefit at greater and greater cost, we're going to have to pay those costs required to get those treatments. On the other hand, if we want to control our costs to the rate at which our paychecks are growing so that we can continue to afford health care, we are going to have to make some choices about which treatments won't be delivered.

How do we do that?

I think we have to do two things in order to make those types of choices. First, we have to do a much better job of understanding the magnitude of the benefit that different treatments provide. Understand that there are some treatments out there that might have cure rates of 80 percent and cost a few thousand dollars. Those are clearly very valuable treatments that we will want everyone to get. But there are other treatments out there, some of them are very widely advertised, for example, where the magnitude of the benefit is to, let's say, decrease a woman's chance of having a hip fracture by one out of 10,000 or one out of 30,000. Now, if we just ask the question "Is there benefit," we'd say, "Yes, this is a beneficial treatment. It's approved by the Food & Drug Administration," and the thought might be that everyone should be able to get this treatment. On the other hand, if we understand the magnitude of the benefit and how small it is, we're in a much better position to make choices that would allow us to not do those things that don't provide some benefit, or as much benefit. So the first thing we have to do is get a much better understanding of the magnitude of benefit that different treatments provide. The next thing we have to do is have some way of allowing or letting the public tell us how much money they want to spend for various things.

I think a good way to sort of illustrate the health care crisis that we've got is to imagine, for example, I'm walking into a car dealership to buy a new car. And let's imagine that I've got $20,000 in my pocket. I go into the car dealership and I look at one car and it costs $20,000. Then I look over here and I see another car that's better. Maybe it goes faster, has greater acceleration, better leather seats, but it costs $40,000. The crisis we're in right now in health care is that we are paying $20,000, but when we get into that store we are not only asking for that $40,000 car, we're demanding it. And we're screaming and yelling if we don't get that $40,000 car. Now the choice we have to make is, we have to decide whether we want a $40,000 car or a $20,000 car. If we do want a $40,000 car, we can deliver that. The health care system can easily and happily deliver the $40,000 car, but people have to understand that they will have to pay $40,000 to get it. On the other hand, if they really want to restrict the amount of money they spend on health care to $20,000 in the metaphor of the automobile choice, they would have to agree to accept the $20,000 car. We can't have it both ways. We can't have our cake, if you will, and eat it, too, get the $40,000 car, but only pay $20,000 for it. Can't be done. This is not a moral choice. It's not an ethical choice. It's just it can not be done. Physically, economically, you can not deliver a good or service that costs $40,000 and only be paid $20,000 for it. And here, I'm not just talking about managed care, government, or insurers, but I'm talking about physicians, pharmaceutical companies, the people who make the tests and treatments that we deliver. Things cost money. In order to receive them, we have to pay for those costs just as we do in every other aspect of our daily lives.

Why can't we simply stay in the showroom
for a lot longer?

Well, the status quo right now is not satisfactory. No one is happy. People think they're paying too much money for health care and they're not happy with the care that they're getting. So in a sense they want to pay $20,000, but they're being pushed up more to pay $25-30,000 and so forth. They want the $40,000 car, but they're not getting it. They're getting a 30,000 or $25,000 car. So they're unhappy in both respects. They're unhappy that they think they're paying too much, but they're also unhappy in that they don't think they're getting the care that they believe they deserve. That can not go on forever. Right now it's clear to everyone that we are in a crisis. We have not resolved the problem of how to pay for the care that we want. Sooner or later, one way or whether we have to resolve that problem.

Our institutional problems are worsening day by day. What damages will be caused by
leaving the system alone?

Well, hospitals are going in to deficits and there are other strains on the system because in fact the health care system is, in good faith, trying to reduce its costs as much as possible. But you can only cut costs so far. If you talk to hospitals, they'll tell you, "Not only have we reduced cost to the bone, so to speak, but we're about to go out of business." Many of the "for-profit" managed care organizations didn't make a profit at all. They functioned at a loss. Physicians are accepting lower and lower salaries. Very, very few parts of the health care economy are doing well. Most parts are doing quite poorly and it is an attempt to reduce costs. Now the fact is, it's quite clear if you talk to hospitals, physicians, and others, they can't continue to function at a loss forever, any more than a person in a small business or a mom-and-pop store can continue to function if they're losing money. They have to make enough money to stay in business. So in order to solve this problem, sooner or later, one way or another, we're going to have to be willing to pay the bills that are created by the cost of the services that we're demanding.

What about the uninsured or underinsured?

There are a couple of reasons that people are uninsured. Some of them are fixable and some of them aren't. One that's fixable is the fact that many of the people who are uninsured don't have access to what we'll call group contracts, where they're expected health care costs are averaged out over a large number of people. That averaging allows the insurance company to offer health insurance at a lower cost than they would have to charge to an individual. So there is a possible solution to that if we can create, shall we say, ways that individuals can buy insurance at the rates that groups of individuals pay. But I have to say that even when we have group rates, many people are complaining that those costs are too high for them and they decline to spend that money. Now there's only one solution to that. If we want those people to have insurance, we would have to provide it through the government. There's only one way to do that, and that is to increase taxes, because if the government is going to pick up the service by providing insurance to people who are currently uninsured, that bill has to be paid and the government gets its revenues from taxes. It would be very easy, logistically and legally, to expand our current government programs to cover those who are currently uninsured, but we'd have to understand that people would have to pay higher taxes in order to pay for that government program. And that's a choice that today, at least, we have not been willing to make.

After World War II, most of Europe embraced the concept of social insurance. Health care became nationalized in almost every other Western nation. Why didn't it catch on here?

The fact is that as disorganized and chaotic and unsatisfactory as our system is, a lot of people like it. There are a lot of different sectors of the economy that are in fact making a lot of money off of health care. One person's costs are another person's income, and about an eighth of the economy lives off of health care. So physicians, nurses, the people who do maintenance in hospitals, the suppliers of hospitals, people who sell office space, those who manufacture tests and treatments are all making money off of the health care system. And to some extent they don't mind these costs being increased. It's also quite clear that when legislation is introduced to try to resolve this health care problem, a lot of different sectors of the economy stand up and say they don't want it solved. They might try and disguise what they're saying by saying, "We don't like this particular piece of it," or something like that, but the net effect is that when we try to move toward a national solution to this problem, it's blocked by lobbying, it's blocked by legislators, it's blocked by taxpayers not willing to pay the costs.

If you have an elective procedure in Canada, let's say a knee replacement, you're not going to wait that long. Yes, you might have to wait four months. That's probably roughly the average for a knee replacement. If you're an American with private insurance that covers a knee replacement, you might have to wait two days. If you don't have insurance, you'll wait forever. So which is better, four months or two days or never for your knee replacement?

What will happen if we stay in our current path?

If we stay on this current path, we're going to have more chaos, more unhappiness. Health care costs are going to continue to rise two to three times as fast as paychecks. People will be more and more unhappy about the money they've got to pay for health care. Employers will be more and more unhappy about the amount of money they're going to have to pay for health care. Employers are going to try and push the cost back onto their employees. Employees are going to demand that the employers take on the cost. There are going to be fights between management and unions and so forth and so on. No one's going to be happy. Sooner or later we'll have to solve this problem. Basically the pain's got to be great enough that the solution is better than the current situation. All I can say is that, thus far, people would rather live in the pain, if you will, than solve the problem.

Have we not solved this problem because special interest groups are so powerful?

Special interests do have a way of shooting down programs that otherwise would be very much in the public's interest. However, I believe that solving the uninsured poor problem would be in everyone's interest. If we had insurance coverage for the 45 million people who are currently underinsured or uninsured, pharmaceutical companies would sell more drugs. Device manufacturers would sell more devices. Physicians would see more patients. Hospitals would get more patients. Hospitals and physicians would get their bills paid and so forth. Frankly, it's difficult for me to identify a special interest that would not want that problem to be solved. So that raises the question, who doesn't want it? I have to conclude that it's taxpayers, because in the end it would be taxpayers who would be paying the cost of covering the uninsured poor from a government program.

Could we pay for it out of the existing tax base?

You would think that with the amount of money we're paying in taxes, it should be possible to solve a lot of these problems. For example, to have the government cover the uninsured and pay for prescription drugs in the Medicare program and so forth. I'm not going to make a value judgment on whether or not that's possible, I'll just say that to the extent we want that to occur, that is a message that the taxpayers have to get through to their representatives. They have to tell them that they would like a higher proportion or their tax money spent on health care and they would also have to tell them, I think, to be fair, what things they want less from the government, where the government can cut back on other programs in order to provide the money for health care. I do believe that legislators would like to respond to voters and if they received a very clear message that they would like the sharp reallocation of dollars out of other government-sponsored activities and into health care, they would respond.

What is "evidence-based" medicine?

Evidence-based medicine is in fact a very simple, common sense concept. It says when we have a treatment where we know it's effects and it has benefit, we should do it. We should give patients those treatments. When we have evidence that something is not beneficial or is harmful, we should not do it. And when we don't know what the effects of a treatment are, when we don't know whether giving a treatment to a patient will make them come out ahead or come out behind, we should be conservative. Conservative means if it has any significant harms or very high cost, we probably should discourage it. Unfortunately, we just don't have good control trial evidence about the effects of a lot of treatments. And if we required that there be X amount of evidence for treatment, a lot of treatments that are commonly done would not pass that test. So we don't want evidence-based medicine to be interpreted as you can't do something or it won't be paid for unless there's perfect evidence.

One might wonder why we have to actually look at evidence, why we can't just ask experts, for example, to tell us whether or not a treatment works. The unfortunate fact is that it's extremely difficult for experts to really know what the effect of a treatment is. And it's very easy for us to be fooled. The history of medicine, both in the past and very, very recently, is filled with examples where experts were dead sure that a treatment was effective, but when we finally got around to doing the studies, we found out the treatment wasn't effective, or pmight even be harmful. We've had experts testify under oath in trials that treatments were effective and beneficial. Then when we finally get the research results, we find out that they were dead wrong. The fact is that the practice of medicine, the biology of the disease, human variation is way too complicated for the human mind, even the mind of a medical expert. And when we try and do it in our heads alone, we make mistakes.

Where do HMOs fit into all of this?

I think in general HMOs have gotten a bad rap. We have to remember that they were brought in because they were the best hope for solving a critically important problem, which is the rising cost of health care and questionable quality of health care. HMOs have the promise of both controlling costs and improving quality. Now as it's happened in the last several years, there have in fact developed some HMOs that appear to be as interested in profit as they are in delivering care. At this point we need to recognize that there is an extremely wide variation in HMOs. Many of them are not-for-profit. They don't make a cent of profit. So their incentive is to deliver the best care possible within the budget that people are willing to pay. At the other end of the spectrum we do have some companies that do seem to be motivated by profit. I would very much like to see the profit incentives decreasing or at least becoming much more reasonable and having the primary motivation from HMOs to be the real motivation that got us excited about them as a country in the first place, which is improved quality and controlled costs.

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