Sixty years ago medical imaging was an X-ray and a light box. Then Raymond Damadian, M.D., used magnetic resonance to identify healthy tissue from cancer. CT, MRI. and PET scanners revolutionized medicine by making decision-making simpler, safer and more accurate.
One hundred years ago children were dying because of unsafe water and milk. Water and milk safety as a public choice began around 1910. Meat, food, drugs and devices began later. Public health may be the single greatest medical innovation of all time.
Think about all the changes that have created modern health care over the last century: insulin, vaccines and immunizations for diphtheria, whooping cough and tetanus, later polio, measles, mumps, rubella, hepatitis A and B, H flu and meningococcal meningitis.
Antibiotics and modern surgical techniques, safer and shorter acting anesthetics like fentanyl which allow patients to go home a few hours after an operation, micro and robotic surgery. Blood transfusions. Chemotherapy and radiation oncology.
Fiber optic medical instruments. Soft tissue repair. Artificial joints. Video monitors and laparoscopic instruments.
And the coffee maker in the physicians’ break room.
Yes, these last decades have been a golden age of medicine.
Since the end of the Second World War and the boom of the Post-War Generation, health care spending, as a share of the GDP (gross domestic product), almost quadrupled from 4.6% in 1950 to more than 17% in 2009. In most peer countries, the share is 9 to 11%.
Source: NEJMClearly, the advances those dollars purchased are what made these past decades such a remarkable period of medical and intellectual ferment.
But at 17% of GDP and heading, most experts believe, to 20% of U.S. GDP, are the resources devoted to medical care and new technology going to start crowding out other spending?
Three Major Trends
Victor Fuchs, PhD., writing in The New England Journal of Medicine (NEJM)(n engl j med 366;11 nejm.org March 15, 2012) said there were three major trends that contributed to the shift of resources in the United States to health care.
Rapid advances in medical science and technology.
Substantial gain in health outcomes attributed to medical care.
Increases in health care expenditures fueled by private and public insurance payers who now pay 90% of the total bill for care.
Fuchs also cited as major trends:
the increased role of the federal government in funding health care
the decline in inpatient use of hospitals (fewer admissions and shorter stays) and the expansion of hospital outpatient services
the shift in the physician workforce toward more women, more specialists, and more hospital-based physicians
new medical technologies that now present clinicians with a menu of 6, 000 drugs and 4, 000 procedures to choose from.
End of the Era?
The problem with golden ages is that they eventually have to end. Could the rising cost of modern health care be putting a squeeze on funding particularly during this period of U.S., and indeed, global, debt concerns?
The rapid growth of health expenditures, writes Fuchs, has implications for the financial viability of federal and state governments and has resulted in stagnation of wages in most industries.
In 2009, the 17% health care slice of the nation’s pie represented a larger share of the economy than all manufacturing, or wholesale and retail trade, or finance and insurance, or the combination of agriculture, mining, and construction.
Slowing Economic Growth
From 1950 through 2009, Fuchs found that there was an almost continuous increase in annual real per capita health expenditures, with the exception of a two-year pause in the mid-1990s, when the effect of managed care was at its peak.
The relative rate of increase was greater between 1950 and 1980 than between 1980 and 2009—4.6% versus 4.1% per year—primarily because of the introduction of Medicare and Medicaid in 1965.
Unfortunately, the slight slowing in the rate of growth of health expenditures since 1980 was accompanied by even greater slowing in the growth of the GDP (per capita adjusted for inflation), from 2.6% per year in 1950–1980 to 1.8% per year in 1980–2009.
Thus notes Fuchs, the gap between the rate of growth of health expenditures and that of GDP increased from 2.0% to 2.3% per year between the two periods.
Supply and Demand
Fuchs says the most important explanation for the increase in real per capita health expenditures is the availability of new medical technology and the increased specialization that accompanies it.
Between 1974 and 2010 alone, the number of U.S. patents for pharmaceutical and surgical innovations increased by a factor of six.
Second in importance is the spread of public and private health insurance, which diminishes the effect of health care prices on demand.
“There is a positive-feedback loop between new technology and the spread of health insurance: new technology stimulates the demand for insurance, and the spread of insurance stimulates the demand for new technology, ” writes Fuchs.
Finally, a small portion of the increase, typically 0.1 or 0.2 percentage points per year, is attributable to the aging of the population.
There are roughly 79 million “Baby Boomers” who were born between the years of 1946 and 1964 with about 10, 000 retiring every day. That is going to keep happening every single day for the next 19 years.
Rise of the Third-Party
Fuchs found that the sources of payment for medical care have changed significantly since 1950.
A Decline in out-of-pocket payment and a rise in third-party payment (both private and public), an increase in government’s share of payment and a decrease in the private share, and an increase in the federal government’s share as compared with that of state and local governments, have contributed to that change.
Fuchs wrote that third-party payment has grown partly because of expensive interventions that expose individuals to large financial risk.
The growth of government’s share, and especially the federal share, can be explained, says Fuchs, by the public’s desire to cover more of the public with insurance and private insurers’ difficulty in providing coverage for the elderly and the poor. Federal legislation also substantially extended public coverage for children.
Managed Care
No history of the last 50 years of health care would be complete without noting how managed care affected hospitals and physicians. Until about 1990, most insured patients could choose their providers and physicians’ decisions weren’t second guessed by insurers.
The rapid growth of health care expenditures in the late 1980s, combined with sluggish growth of the GDP, fueled a demand for change and insurers contracted with providers. Prices were negotiated in advance and physician decisions became subject to insurance company review. Fuchs says the effect on health care expenditures was dramatic as growth rates fell to 2% per year by the mid-1990s.
The 3:2:1 Formula
Since 1950, health expenditures have gone primarily to hospitals, physicians, and drugs. Fuchs found the rate of growth of expenditures in each of these categories between 1950 and 2009 to be fairly close to the rate of growth of total health expenditures.
As a rule of thumb, the ratio 3:2:1 does a fairly good job of describing the relative importance (in dollar terms) of hospitals, physicians, and drugs.
Spending for hospital care and physicians received a boost between 1950 and 1980 when Medicare and Medicaid were introduced.
Spending for drugs accelerated sharply after 1980 following the introduction of a host of new products for treating heart diseases, mental illness, gastrointestinal disorders, and cancer and a large increase in private and public insurance coverage for drugs.
The Physician Genesis
The number of active physicians in the U.S. quadrupled between 1950 and 2009.
The number of physicians per 1, 000 population increased from 1.41 to 2.73, an annual growth rate of 1.1%, with large increases in the percentage of female physicians, specialist physicians, and hospital-based physicians.
Female physicians, wrote Fuchs, have different preferences regarding annual hours of work, night coverage, self-employment, specialty choice, and other aspects of practice.
Notes Fuchs, more and more physicians are choosing to become specialists or subspecialists and those decisions have increased considerably the number of years an average physician spends in training. There are now 150 specialties, up from a dozen 50 years ago.
Changes in Organization and Delivery
Fuchs argues that the shift away from office-based practice, along with possible changes in payment systems, may portend a time when most medical care will be delivered by teams of physicians and other health care models such accountable care organizations (ACOs).
Instead of reimbursing individual doctors and hospitals per procedure, lump-sum payments are made to clinicians working as a formal ACO team.
Fuchs also cites the recent trend of a sharp division between physicians who treat outpatients and others, called hospitalists, who treat only inpatients. The number of hospitalists has grown from about 1, 000 15 years ago to approximately 30, 000 in 2011.
Another trend noted by Fuchs is the use of electronic medical records (EMRs) in physicians’ offices.
Era of Big Data?
Fuchs says perhaps the most important future trend is the replacement of the current system of organization and delivery with competition among large accountable care organizations serving defined populations.
Historians aren’t fortune tellers. Will the Golden Age of Medicine be replaced by the Era of Big Data as described in Eric Topol, M.D.’s book, The Creative Destruction of Medicine? We’ll soon know.
