Affordability is a primary factor affecting health care insurance access. A primary driver of medical cost is utilization, and utilization is growing very rapidly. New technology and medical inflation magnify the cost effects of increased utilization. The result is insurance premiums with double digit annual increases, thus pricing many out of the market every year.
We can no longer afford to provide all the care that everyone wants. We must develop a strategy for rationing care and reducing costs in a generally acceptable manner.
One strategy to decrease utilization is to eliminate care that provides no benefit or may be harmful. Nobody can argue with the fact that unnecessary care should be totally eliminated from the system. Another strategy is to manage the value proposition of various medical interventions. We must make medical care more cost effective and of higher quality.
In a recent article in the Annals of Internal Medicine, Owens and Qaseem describe such a strategy for reducing utilization while preserving high value care.1 Their strategy involves the application of the following three steps.
Step one: assess the benefits, harms and costs of interventions. The benefit of an intervention can be estimated by multiplying the number of additional years of life gained by the quality of each year. Quality of life is a crude measure that can be estimated in a number of ways. A generally accepted way is the Quality Adjusted Life Year (QALY) model.
QALY assumes that the quality of an each additional year of life is as important as the year itself. Each year that an individual lives in perfect health is a QALY of 1.0. If the individual is in less than perfect health, the QALY is between 0 and 1.0. The scoring of the quality of an individual’s life is based on five equal dimensions: mobility, pain level, self-care, level of depression or anxiety and ability to conduct usual activities.2
Many current medical interventions are associated with harms. Harms can be short term or long term, and iatrogenic or random. They always are associated with costs and reduced quality of life therefore; they must be factored into any cost benefit analysis. Those interventions that only result in harms (Appendix, right of A) must be identified and aggressively eliminated.
Step two: assess the downstream net costs of an intervention. These costs should be included because they are real and would not have occurred if the intervention did not occur. Downstream savings are possible and should be included as well. Any subsequent costs or savings are a direct consequence of the intervention and must be included in the analysis.
Step three: assess the incremental cost effectiveness ratio of an intervention. Some interventions are more effective and cheaper than others, and some are less effective and more expensive. In general, choosing between those is fairly straight forward. The problem arises when an intervention is both more costly and effective. It is the incremental cost effectiveness ratio that must be assessed in order to determine the relative value of the more expensive intervention.
The authors finally group interventions into two broad categories: those that provide minimal or no health benefit and those that provide net benefit. While certainly effective in reducing medical waste, such categorization severely limits the ability to manage the various types of marginally effective care. I believe the primary reason why this was done was to avoid the complicated proposition of recommending a value of a QALY. Placing a value on QALY would permit a third and extremely valuable category of interventions where the marginal costs are less than the marginal value.
The determination of the value of a QALY is extremely complicated. Factors such as age, income, wealth, race and national origin are extremely important. Poor countries with limited resources value individuals who are productive members of society. In those countries, the young and the old are worth less than middle aged working individuals. Some countries simply value life less than others or choose to limit resources globally allocated to healthcare. Finally, some individuals choose to spend much more on the margin for an additional QALY.
The range of values for a QALY is huge. The World Health Organization places the value of a QALY at three times Gross Domestic Product (GDP) per capita, or about $22,000. The British National Institute for Health and Clinical Excellence places it at about $40,000.3 Not surprisingly, in the US the value is often quoted at $100,000 or more. No wonder the US spends much more on healthcare than others - we value each QALY more than anyone else in the world.
Once we decide on a reasonable QALY value, we then can expand our analysis to three categories of interventions in order to manage each very differently. First, interventions where the marginal benefit is more than the marginal cost (Appendix, left of B) should be fully covered and fully paid. Most public health interventions: vaccinations, prevention and wellness programs are in this category. Any management of those interventions reduces utilization and therefore overall health.4 Second, interventions where the marginal benefit is less than the marginal cost (Appendix, between A and B) should be covered and managed. This is the area where managed care must be permitted to creatively effect allocation and overall utilization. Third, interventions where the marginal benefit is not positive (Appendix, right of A) should not be covered and aggressively eliminated. Non-beneficial care causes harm and crowds out scarce resources for beneficial interventions.
Finally, once a cost curve is defined for each specific disease, we can actively bend the cost curve downward. Medical waste is rampant and medical profits are excessive.5 Even worse, those problems are very difficult to fix because each healthcare dollar saved is a dollar lost by someone else. Medical waste and profits have politically active constituents who do not care about access.
Our healthcare resources are scarce and must be utilized wisely in order to ensure access. Getting rid of interventions that are of no benefit, managing interventions of marginal benefit, encouraging interventions of high benefit and increasing the efficiency of all interventions will dramatically improve the access of healthcare to everyone.
Appendix
References
2. Parkin, D., Rice, N. Statistical analysis of EQ-5D profiles: does the use of value sets bias interference? Med Decis Making 30:556-565.
3. National Institute of Health and Clinical Excellence. Guide to methods of technology appraisal. Accessed May 27, 2011. http://www.nice.org.uk/media/B52/A7/TAMethodsGuideUpdatedJune2008.pdf
4. Buntin, M.B., Haviland, A.M. Healthcare spending and preventative care in high-deductible and consumer-directed health plans. Am J. Manag Care.17(3): 222-230.
5. Fuchs, V.R. Eliminating “waste” in health care. JAMA 302(22): 2481-2481.
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