Financial Anatomy of Biomedical Research
By Hamilton Moses III, MD; E. Ray Dorsey, MD, MBA; David H. M. Matheson, JD, MBA; Samuel O. Thier, MD
JAMA
September 21, 2005

The United States spent an estimated 5.6% of its total health expenditures on biomedical research, but less than 0.1% for health services research.

Biomedical research funding increased from $37.1 billion in 1994 to $94.3 billion in 2003. Principal research sponsors in 2003 were industry (57%) and the National Institutes of Health (28%).

The federal government and foundations spent $1.4 billion on health policy research and health services research in 2002. Federal funding for health services research came primarily from the NIH ($787 million in fiscal year 2002) and the Agency for Healthcare Research and Quality ($299 million in fiscal year 2002). The Robert Wood Johnson Foundation accounted for nearly 63% of the $359 million foundations gave for health policy in 2002.

This limited investment in health services research has occurred despite growing concern about the cost (eg, double digit growth in health insurance premiums) and quality (eg, errors in medicine and failure to implement best practices) of health care in the United States.

http://jama.ama-assn.org/cgi/content/abstract/294/11/1333?etoc

Comment: Many astute observers of the health care scene are now questioning the value of much of our expensive new technological and pharmaceutical products. Although new drugs may show a slight, statistically significant superiority in clinical trials, there is genuine concern that most of these new products do not have much of an overall favorable impact on the health of the target populations, especially when compared with established, less expensive products. Also, regions which have a greater capacity for providing higher tech care have failed to demonstrate a commensurate improvement in health care outcomes (though there are isolated examples of the benefits of some interventions). The point is that our research has been targeted toward creating more profitable products rather than toward more beneficial products that provide much greater value.

In contrast, consider what improvements could be made in the overall health of our entire population if only we put in place the policies already demonstrated to be effective through health policy and health services research. The impact could be readily measured in just the number of lives saved, not to mention the reduction in human suffering. Most of these policies would cost very little and could actually result in a reduction of our global health care spending.

This is not to say that we should not be investing in biomedical research, but we should be demanding that health care consumers, who are footing the bill, receive greater value than they currently are.

Government and foundation spending in health policy and health services research has been a bargain considering the rich body of beneficial policy options that it has produced. So why aren’t we putting these policies into place?

That’s not really meant to be a rhetorical question. Perhaps we could use one more survey of the policy literature addressing this question. The political scientists could help us with the “why,” but who can help us with the “how to”?

Five Pioneers Are Awarded Lasker Medical Prizes
By Lawrence K. Altman
The New York Times
September 18, 2005

The 2005 Lasker Awards for medical research are going to scientists who discovered stem cells, invented genetic fingerprinting and developed a powerful technology that played a crucial role in mapping the human genome.

The research award for stem cell work is going to Drs. Ernest A. McCulloch and James E. Till, emeritus professors at the University of Toronto and the Ontario Cancer Institute.

Sir Edwin Southern of the University of Oxford and Sir Alec J. Jeffreys of the University of Leicester in England received the Lasker Award for developing two powerful technologies, Southern blotting and DNA fingerprinting, that, the foundation said, “together revolutionized human genetics and forensic diagnostics.”

Comment: In arguing against national health insurance for the United States, pro-market advocates frequently state that a government-run program, like they have in Canada and England, will suppress innovation and technological advances that are possible only in a free-market system.

This year’s Lasker awards, presented to Canadian and British researchers, certainly demonstrate that the manner of funding health care in their nations did not suppress research and innovation. In fact, their work was conducted in an environment that spends significantly less on health care than does the United States.

Probably the two greatest technological advances of the last half century are C-T scans and MRIs. Each was appropriately awarded the Nobel Prize, which were shared with British researchers. Again, the very modest funding of Great Britain’s National Health Service did not suppress their research.

One other very important point: No matter the avenue of funds flowing into health care, whether public or private, there is absolutely no way that the health care tech industries are going to simply walk away from the $1.9 trillion that we are already spending. They will continue to do everything in their power to try to get a portion of that, including innovative research and practical applications of publicly-funded research through the NIH.

Although unrelated to this message, it is imperative that we acknowledge the fifth Lasker Award mentioned in the title: “… a nonscientist, Nancy Brinker, is the winner of the Lasker Public Service Award for creating the Susan G. Komen Breast Cancer Foundation, which has helped transform a disease once rarely mentioned in polite conversation into an international issue.”

Text of the Draft Iraqi Constitution
(Translated from the Arabic by The Associated Press)

Chapter Two: Rights and Freedoms

Article (30): 1st – The state guarantees social and health insurance, the basics for a free and honourable life for the individual and the family – especially children and women – and works to protect them from illiteracy, fear and poverty and provides them with housing and the means to rehabilitate and take care of them. This shall be regulated by law.

http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/24_08_05_constit.pdf

Comment: Freedom and democracy brings the right of health care to everyone.

Or does it?

Attitudes of Business Leaders Regarding Health Care Coverage
The Robert Wood Johnson Foundation
September 2005

The Robert Wood Johnson Foundation commissioned a survey of business owners and persons in charge of health care benefits at American businesses… to determine attitudes and trends pertaining to health care coverage issues.

Looking at trends in answers to open-ended questions

11. Respondents from smaller businesses… When asked to speculate on the one or two most important changes regarding health insurance benefits in the next five to ten years, respondents say that health care costs will continue to increase at a rate that, if not resolved, will result in too many Americans being unable to afford health care coverage. Some respondents say that this will result in the U.S. having to adopt a nationalized/socialized government health care plan to provide universal coverage to all Americans.

Differences by Company Size:

* Smaller companies worry that they will not be able to provide health insurance to their employees in five to ten years…, and if prices do not decline, they expect to see a reduction in quality of service and an increase in the number of uninsured Americans.

* Medium sized companies foresee small businesses not being able to provide health insurance to their employees and an increase in medium to larger companies defraying more of the cost to the employee. Some respondents expect to see a more “consumer-driven” form of health care.

* Large businesses focus on annual increases in the costs of coverage. These respondents expect health care to become more consumer-driven through an increase in choices and flexibility, with employees selecting portions of a health plan to buy into to cover services they expect to need. They also expect to see health savings accounts become the norm. Some respondents mention that they expect the system to revert back to that of decades in the past when only medical catastrophes were covered by health insurance.

http://www.rwjf.org/files/newsroom/091405_CoverageBusinessPoll.pdf

And…

Health Premiums Rise 6.6%
By Christopher Lee
The Washington Post
September 16, 2005

Health insurance premiums for federal employees and retirees (FEHBP – Federal Employees Health Benefits Program) will rise an average of 6.6 percent next year, the lowest increase in nine years, the Bush administration said yesterday.

The worker’s portion of the premium will rise 10.9 percent, compared with a
5.8 percent boost in the government’s portion — the disparity that rankles the union (American Federation of Government Employees).

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/15/AR2005091501560.html

Stephen Barr’s column:

OPM (Office of Personnel Management) officials said yesterday that it appears that an increasing number of enrollees have switched coverage and chosen lower-cost (FEHBP) plans.

http://www.washingtonpost.com/wp-dyn/content/article/2005/09/15/AR2005091502644.html

And…

Starbucks Chairman Focuses on Health Care Expenses
By Christina Ficara
All Headline News
September 15, 2005

Howard Schultz, chairman of Starbucks, announces his plans to spend more on health insurance for its employees this year than on raw materials needed to brew its coffee.

Schultz made the announcement at a Washington, D.C. meeting with lawmakers from his home state – one of several organized by Schultz to address “a growing health care crisis.”

Shultz said he hopes congressional leaders will put the issue “at the front of their agenda.”

http://www.allheadlinenews.com/articles/7000153490

Comment: It is not only business leaders that are anticipating a greater shift of health care costs to individuals; the government is leading the way by shifting more of the premium to federal employees, causing them to select lower cost plans that increase their financial exposure when accessing health care. Business leaders across the spectrum believe that this trend will accelerate.

Business leaders who really do care, such as Starbuck’s Howard Schultz, understand that it is now imperative that Congress address this issue.
Unfortunately, the RWJ survey reveals that business leaders support solutions that would reduce their costs, but at the expense of their employees who have health care needs.

Single payer isn’t even on their radar, except by default only after system collapse. If business believes that single payer would be the logical solution then, why isn’t it now? Don’t we want to avoid the pain?

The Price of Illness: Cost Sharing and Health Plan Benefits
By Arthur L. Baldwin III (principal and consulting actuary, Milliman, Inc.), Marian Mulkey and Matthew Kagan
California HealthCare Foundation
September 2005

From the Conclusion:

In the individual market, trends toward products with greater cost-sharing requirements are to be expected and may be desirable, since holding down premiums may help consumers purchase and maintain coverage. They are also potentially of great concern. The natural instinct of consumers asked to choose among a range of products is to focus on the predictable, recurring expense of the premium, rather than the uncertain, intermittent out-of-pocket costs associated with serious illness or injury. As consumers struggle to find products with affordable premiums, health insurance carriers will continue to do whatever they can to control premiums, including further development of products that impose greater cost sharing at the time of service.

However, individuals’ choice of products with high levels of cost sharing can have long-term repercussions, because consumers are guaranteed coverage only in the product in which they are currently enrolled. If their health or financial situation changes, those who wish to “trade up” to more comprehensive coverage will be subject to medical underwriting and may be declined, leaving them exposed to burdensome, perhaps even financially ruinous, costs. The implications for California’s most vulnerable consumers, including the poorest and sickest, are worrisome and could ultimately prompt health insurers, purchasers, policymakers, and citizens to revisit fundamental issues of how coverage and care should be regulated, financed, and delivered.

http://www.chcf.org/documents/insurance/ThePriceofIllness
ConsumerCostSharing.pdf

Comment: “The implications… are worrisome.”

Milliman, Inc. has been a leader in providing sound though sterile business advice on health care. (Many recognize the name because of their somewhat infamous publication of suggested hospital lengths of stay, a resource used by managed care organizations to reduce the duration of hospitalizations.) It is very reassuring to see that a representative of Milliman recognizes the unfortunate human impact of current trends in health care coverage, and that fundamental reform needs to be considered.

According to a preliminary survey released this week by Mercer Human Resource Consulting, “two-thirds of the large employers surveyed said that they would shift cost to employees, which include increasing the percentage of premiums paid by the employee, as well as raising deductibles, copayments, coinsurance or out-of-pocket maximums.”
(http://www.insidebayarea.com/businessnews/ci_3027958)

People are already hurting and it’s getting worse. Let’s “revisit the fundamental issues” now.

Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits, Savings, And Costs
By Richard Hillestad, James Bigelow, Anthony Bower, Federico Girosi, Robin Meili, Richard Scoville and Roger Taylor
Health Affairs
September/October 2005

Abstract

To broadly examine the potential health and financial benefits of health information technology (HIT), this paper compares health care with the use of IT in other industries. It estimates potential savings and costs of widespread adoption of electronic medical record (EMR) systems, models important health and safety benefits, and concludes that effective EMR implementation and networking could eventually save more than $81 billion annually-by improving health care efficiency and safety-and that HIT-enabled prevention and management of chronic disease could eventually double those savings while increasing health and other social benefits. However, this is unlikely to be realized without related changes to the health care system.

(This report is a product of the RAND HIT Project. It benefited from the guidance of an independent Steering Committee, chaired by David Lawrence, and was sponsored by Cerner, General Electric, Hewlett-Packard, Johnson and Johnson, and Xerox.)

http://content.healthaffairs.org/cgi/content/abstract/24/5/1103

And…

Hope And Hype: Predicting The Impact Of Electronic Medical Records By David U. Himmelstein and Steffie Woolhandler

Abstract

The current fascination with electronic medical records (EMRs) is not new. For decades, vendors have capitalized on this enthusiasm. But hospitals and clinics have ended up with little to show for their large outlays. Indeed, computing at a typical hospital has not gotten much beyond what was available twenty-five years ago. The RAND analysis continues the tradition of hope and hype. Unfortunately, behind their impressive predictions of savings lie a disturbing array of unproven assumptions, wishful thinking, and special effects.

http://content.healthaffairs.org/cgi/content/abstract/24/5/1121

Comment: It is assumed to be a given that soon we are to have greater quality, greater efficiency, and a reduction in medical error through the fulfilled promise of an integrated information technology system using electronic medical records and computerized order entry systems. The RAND article speculates on the benefits and cost savings of that Utopian concept. The Himmelstein and Woolhandler commentary explains why this is no more than a pipedream at the present. They list many of the issues that have not been resolved.

As only one example, let’s take the issue of privacy. Supporters contend that an encrypted electronic record is more secure than a paper record in a stack file. But doesn’t that record have to be accessible? Wouldn’t a system need to be in place to allow access to records of a comatose patient who is unable to give consent? If those providing immediate care would be able to gain access, then doesn’t it seem likely that others could as well. Since the goal is a nationally integrated technology system, doesn’t that mean that some patient records would require transfer through WAN rather than LAN technology, relying on the Internet? Once that record moves into a non-secure cache on the Internet, it is there forever for all the world to see. Are we really ready for that?

Who is developing this technology and for what purpose? A hint may be found in another article in this same issue of Health Affairs, reporting on use of electronic medical records in private physician offices. These offices used systems from private vendors, a process which represents another diversion of dollars from patient care to administrative intermediaries. Perhaps more alarming was the finding that the primary “benefit” of the electronic records is that they provided a means of increasing fees by upcoding, without a commensurate increase in the quality of the services provided. Is this what this technology is all about? Making more money? Private sector development and application of information technology will always hinge on the potential prospects for increasing profit.

Pete Stark has said that the technology for electronic medical records is “free” since it has already been developed and paid for by the VA system. A system developed in the public sector is designed for the simple reason to improve the care of patients. Before we could adopt a public sector system, we would need an administration that believes the government should do what it can do better.

Although the RAND HIT report is only speculative, it does threaten us with an unintended consequence (or more likely intended, considering the sponsors of the report). The political response to the concerns about escalating health care costs have been to dodge the real issues and to turn to support of information technology as the means to reduce costs by increasing efficiency. But adding an information technology system to our current fragmented system would only increase costs, and quite significantly so. Once again, we have been conned into using their rhetorical framework to debate health care reform.

Establishing efficiency is not about adding an expensive technology that wouldn’t function well under our current system. Efficiency is about reducing the profound administrative waste by adopting a single, publicly administered insurance program. Efficiency is about budgeting capital improvements to reduce the waste of excess services that result from excess capacity. Efficiency is about negotiating fair prices so that we reduce the waste of worthless or detrimental expenditures such as the marketing excesses of the pharmaceutical firms.

In spite of the challenges, we should accelerate our efforts to develop a truly beneficial information technology system. Just imagine how well an integrated information technology system would function with an integrated health care delivery system: a single payer system.