DR. GINSBURG: If you can return to your seats, it’s been a great break, but we’ve got a lot of good material to go. And I’ve got the panelist who’s going to give the first answer to the question, so I can start.
We’re going to turn--I’d appreciate it if you could take your seats.
I’d like to turn to the question of hospital capacity constraints; and in our site visits we’ve seen things that years ago I never imagined I would be seeing of, you know, sporadic constraints on hospitals. We did this issue brief on diversions from emergency departments; and in interviewing people we often were told that emergency rooms were crowded because the critical care unit was crowded and it was backing up into the emergency room.
I want to start with Dennis Farrell about whether, you know, he perceives in the hospital world that capacity constraints are becoming more than a sporadic factor. Is this going to be something that’s going to be with us and perhaps more serious over time?
MR. FARRELL: Well, specifically with respect to the emergency rooms our observations are the same, that they are all-time highs, and I think there’s probably three variables that really drive it. One, again, as Norman raised before, there is consolidation taking places, and many hospitals and their emergency rooms have been closed, and so there’s many patients are being redirected to the remaining emergency rooms.
The second component, which I think is more of a quote, unquote, policy issue is that these may not necessarily be true emergencies, but the fact that many clinics are being closed, whether they were provider-sponsored clinics or government-sponsored clinics, the reality was that these were not money makers; in fact, they were significant resource users and both at the state or federal level and specific to providers, it was a luxury that could not longer necessarily be afforded. And so what this is is really rerouting a proper delivery of care into a less appropriate method for delivery of care.
And then the last factor is unfortunately given the credit crisis that we’ve had that was brought upon us by the current fiscal environment, hospitals have not been able to invest in their plant and/or expand in their facilities unless it’s for a service that is directly bottom line focused. And an emergency room is very difficult to specifically identify that this is a bottom line winner. And so by actually expanding an emergency room which is really a redirected clinic would be economically disastrous for many hospitals, so you’re seeing them making the decision not to expand in this likely loss leader going forward.
DR. GINSBURG: So, an implication of what you said is that this is likely going to be a growing issue.
MR. FARRELL: I’ve been to hospitals, and it’s--their emergency, their official emergency room is now extended into the hallways, and they have little numbers pasted up on the walls going down the hallway. This is now my emergency room spot number 18, number 19. Fortunately they’re by an outlet so they can at least plug in some type of electrical services to it.
DR. GINSBURG: Norm?
MR. FIDEL: If a hospital doesn’t have adequate emergency room, I think the first thing that should be done is they should consider a management change in the hospital because maybe it’s a loss leader, but probably 50 to 60 percent of admissions to a hospital come through the emergency room. And it seems to me that hospital should be putting more and more emphasis on reducing the waiting times and increasing the capacity of emergency rooms. And I just can’t understand how a hospital can’t focus on that as one of their main priorities.
And I think one of the other contributors to the filling up of emergency rooms has been the relaxation from managed care plans of, you know, you can now go to any hospital emergency room at your own free will. Virtually every plan now allows that, and you don’t have to get preauthorization to go to an emergency room anymore.
DR. GINSBURG: Joy?
DR. GROSSMAN: I was just going to talk a little bit about some of the responses in our sites. In communities such as Syracuse and Greenville the approach has been to try to develop a community diversion strategy and to try to triage patients to different emergency rooms. In Boston there was a significant downsizing of beds and I think in response hospitals have opened more beds and also improved staffing to try to triage patients.
In Phoenix there’s an interesting example where the problem has been that there aren’t enough specialists that were willing to deal with emergency patients. And, Dennis, I don’t know if you’ve seen other examples of that where there’s actually a physician constraint as opposed to a hospital capacity issue.
MR. FARRELL: Yes, there is, but I think to a lesser degree in the other professions in the industry, and I know it’s something you want to get into later on, so I’ll avoid getting into it.
The biggest issue that we see, particularly with staffing for emergency rooms is not necessarily physicians, but on the nursing side.
DR. GINSBURG: Bob?
DR. BERENSON: Yeah. I was interested that both Norm and Dennis used the word "loss leader." And loss leader is you sell something cheap to make a profit off a leader activity. And I think in some cases the emergency room draws in large volumes of folks who then have expensive treatments, but the question is who’s paying for that and what is the reimbursement rate. And in certainly some big urban hospitals and some rural hospitals a substantial portion of that is Medicaid and uncompensated care. So, your loss leader is leading to further losses later on.
MR. FARRELL: Right. But again, I think the major issue here--and I don’t necessarily disagree with Norman, although I do to a certain degree--is these hospitals just are struggling. Again, I’m focusing on the not-for-profit side. The for-profits are doing quite well. They’re doing so poorly that they have to cut their nose off to spite themselves if they want to be around in a few years. And it has gotten to that level of fiscal crisis, number one. And number two, nobody--again, on the not-for-profit side--there’s very little investor appetite. I mean, the enhancers have in essence, whether be it a bond insurance company or a bank, have in essence abandoned the industry, at least for the short term, for fear that that’s where you’ll get real losses. And they’re really stuck between a rock and a hard place.
Now, again, we have seen some improvement. In fact, initially it appears that we will see an uptick in investing and borrowing additional capital for investment in plant facility, but it’s a far cry from what it was just three or four years ago.
DR. GINSBURG: We’ve talked a lot about the emergency room, but what about other parts of the hospital operation? Are we seeing or are we going to see capacity shortages, whether it comes from physical plant, shortages of nurses or other skilled personnel, or large increases in utilization?
MR. FARRELL: Well, again, it’s hard to find a hospital who’s using--I mean, this is the real scary part--not the industry--in the last three to four years, most hospitals have experienced significant growth in volume, and maybe it’s because they were successful in their market share strategy that they employed years ago, but, you know, in many ways I think there are a multitude of variables that are contributing to it.
But right now the single most important component that we’re seeing that is impacting hospitals is, in fact, the labor shortage. And again, most specifically the nursing and skilled nursing arena. Many nurses--and there are so many variables you can look at to measure it, but if nothing else, it’s just not a very attractive profession to work in a hospital today as a nurse. And there are alternatives and there’s alternatives with dignity that these professionals can achieve.
And when I look, it’s sort of what’s in the hopper coming up, you know. What we like to do is we like to look at colleges and universities and say okay, let’s--what about the programs that are being offered at the universities across the country, and invariably not only are we seeing a deep decline in applications, we’re actually seeing programs that are going unfilled. And so my concern for this industry, per se, is that this is not a short-term problem that we’re having to deal with.
And again, I come back that this is as much a policy issue that is far reaching beyond just health care but not into education where we get that literally we’re going to be in a position that the delivery of health care is going to have to be altered dramatically if we don’t do something to amend the future of the industry. I think the--you know, I was looking at some statistics and it’s somewhat scary that the average age of a registered nurse is now in the 40’s when it used to be in the 20’s. So, what that tells me is the same people are here and we don’t have any new ones coming in, you know. The only other industry I can think that’s as negatively impacted like that is nuns. They’re all in their 70’s, and we’re going down that same path.
MR. FIDEL: Farmers.
MR. FARRELL: Farmers, yeah. I mean, you know, it’s not--
MR. FIDEL: Steelworkers.
MR. FARRELL: And it hasn’t been--you know, the dot coms some said contributed to this. We just don’t see any change in that.
So, you know, getting back to your specific question, the--there are a number of variables, but the one that I think is the most acute--and no pun intended here--is, in fact, the labor shortage for the nursing employment here.
MR. FIDEL: Especially in the critical care segments of urban hospitals. And wage cost trends now are five to seven percent in the urban centers, and it’s probably half that in the rural centers, so it’s a more pressing problem where you have the urban center. And it’s true, it’s a very, very significant long-term problem, and there’s nothing on the drawing board that’s going to improve it that we see.
DR. GINSBURG: Let’s talk about pharmaceuticals for a bit. And the first question is the, you know, really stunned how three tiered cost sharing or copayments has spread. And do you see it having--given the fact that the three-tiered system works by providing incentives for patients to move their choice of pharmaceuticals towards the favored tiers, is this--do you see this having an effect on pricing in the pharmaceutical industry? Norm?
MR. FIDEL: Well, it’s true that three tier now--I think right now about 55 percent of plans now have three-tier programs at least offered. It doesn’t mean all of their corporation--corporate clients choose that, but it’s increased dramatically, and it does lower the cost trend for the corporation. It doesn’t necessarily lower the total cost trend for pharmaceuticals because you’re off-loading higher copays onto the individual, and it does change their utilization pattern somewhat, but not as much as you’d expect, and so it doesn’t have that much of an impact on total cost trends for pharmaceuticals. So, I think it’s had very little impact on the pharmaceutical pricing situation.
Back when managed care really emerged back in the ’92, ’93 period and the scenario for the drug industry was some sort of a black hole because they’d be bidding against each other enormously to make sure their drugs were on formulary and, you know, there’s limits to how much those discounts are. And, in fact, with the good drug benefits that managed care offers, there’s been a real acceleration in demand for drugs, and so it’s actually turned out to benefit the drug companies, and they’ve been in a real period of prosperity. And so I don’t think it’s really impacted pricing for pharmaceuticals.
MR. FARRELL: It certainly hasn’t impacted pharmaceutical companies’ profitability.
DR. GINSBURG: How do you see the technique--Bob?
DR. REISCHAUER: I was just going to say that until the patient and the prescribing physician know what the price out of pocket will be to the consumer, you can’t expect the pricing variability to have much of an impact and we’re probably three years away from the technology which will allow that to happen and to be in wide use. But I think we’re moving in that direction. And when we get there, I think we can expect a lot of these price angles to have much bigger impacts both on behavior of pharmaceutical companies and the behavior of physicians and the patients.
DR. GINSBURG: How do you see the--this tiered pharmaceutical copayments evolving? Is it going to get more complex to--I’ve seen five-tier systems or I’ve seen systems that have made it--coinsurance rates rather than copayments. What’s the likely evolution? Roberta?
MS. GOODMAN: I think that the five tier ends up being far more complicated than most people are going to probably be--
DR. GINSBURG: Get the mike.
MS. GOODMAN: Oh, I’m sorry.
I think the five tier will end up being more complicated than most people will be willing to deal with as a structure. But I do think that you can see a coinsurance either added as a fourth tier for particularly expensive drugs or move the third tier to a coinsurance structure away from the copayment because the third tier typically is going to have a much greater variability in what the costs are. And if you’re talking about a drug that’s $200 a month, $35 is really a very minimal portion of the cost of that drug.
MR. FIDEL: I think we’ll see larger copays for that tier, and maybe we’ll be talking about $70 copays for a month’s supply of drugs possibly in a few years rather, as Roberta said, than going to five tiers. It is pretty complex. So, that’s the way I see.
And as far as percentage of costs, which is really getting back to the old indemnity insurance, that sort of I think will come after the attempts at changing the--even--I think we’ll start to see experimentation with four- and five-tier programs before we go to a percentage of cost type of old indemnity insurance.
MS. GOODMAN: I also think we could see as WellPoint is looking at doing a move to reference pricing in specific categories so that you say, Look, this is what we pay per month for this category. You want something that costs more than that in that category, that’s basically your decision to make, and you have the freedom to make that decision, but also the responsibility to pay for the increased costs you’re incurring by making it.
DR. GINSBURG: Joy?
DR. GROSSMAN: I think that’s consistent with what we’ve been seeing in the sites, but I guess it raises a question of all of these strategies rely on the consumer part to pick up the tab.
And we didn’t see a lot of examples. We saw a few. For example, in Arkansas, Blue Cross of Arkansas, which is not exactly the--not the hotbed of care management. They were trying out an experiment to give bonuses to physicians who could meet utilization targets related to pharmacy use and things like that.
So, the question is, is there anything on the supply side to do directly with physicians or does the backlash mean that we’re not going to see anything?
MS. GOODMAN: I think that it will be a profiling issue that plans will look at the prescription patterns and see where particular physicians within particular specialties are falling on their patterns relative to the formularies and relative to the diagnoses that the patients come in with to see whether those are consistent with what they’re prescribing. But I think that in the current era the notion of a utilization-driven incentive structure is probably not a wise idea.
DR. REISCHAUER: Express Grips has just done a rather interesting analysis which is really the first national attempt to see about the variability of prescribing matters or utilization of different pharmaceuticals products holding constant types of insurance coverage, health conditions, and so on. And you don’t get the same variability you get with other procedures from the Wenburg data, but there still is a variation across states for many therapeutic classes of drugs of 1 to 1.7, suggesting that--and it’s not where you would expect either of the variations to be. And so I can see plans getting into this more than they have in the past.
DR. BERENSON: If I could just offer a couple of comments.
DR. GINSBURG: Sure, Bob.
DR. BERENSON: On the supply, I mean the docs are--I guess the AMA had a resolution about reconsidering direct-to-consumer advertising, as if you could put the genie back in the bottle at this point. In fact, I think one of the scandals, as documented recently by the Wall Street Journal, is the relationship between physicians and pharmaceutical company detail people. As one of the doctors said, he goes out to dinner every night on a different drug company.
Now, I don’t know. You can’t regulate against that. I actually wish the profession had a stronger set of ethics about those kinds of activities. But where I’m going is, is at least the potential which has worked in some places of a counter-detailing kind of approach.
One of the prow line--that’s basically where between pharmacists and others is sort of a high-level educational program to physicians about indications for medications, et cetera, as sort of a balance from what they’re hearing from the pharmacy companies. It’s costly to mount, and it strikes me that it’s a good area where instead of health plans competing necessarily with each other because they don’t get a particular first mover advantage, the others would be free riders if, in fact, it was successful where plans can actually collaborate on helping to fund programs to--counter-detailing programs to sort of educate physicians about the medications they’re using.
Clearly I agree with Roberta that the attempts at using financial incentives on physicians have not worked. The groups in California just failed miserably at taking risks in pharmacy. Didn’t want to do it. I’m not sure that’s where you can go. But at least in this area I think you could have some kind of counter pressure on the doctors.
MS. GOODMAN: I think you also need counter-detailing on the patients themselves because I think one of the things you hear from doctors these days is with all the direct-to-consumer activity that the patient comes in convinced that they need whatever it might be, Lipitor or Claritin or whatever it is. If the doctors tries to say well, no, you really don’t, the patient threatens and threatens to move to another physician and it takes a huge amount of time to try and explain all of this, and they end up writing the script because it’s the easiest thing to do and they don’t want to alienate the patient. So, I think that it goes beyond the physician community and really very much back the issue of the consumer.
DR. GINSBURG: I’d like to talk about potential policy responses to increases in pharmaceutical spending as to whether the policy analysts see something on the horizon or whether the securities analysts can talk about what people are expecting on Wall Street.
MR. FIDEL: You mean on a specific topic?
DR. GINSBURG: Yeah, in a sense like, you know, whether policy on patent issues or on direct-to-consumer advertising or over-the-counter status of drugs.
MR. FIDEL: Well, the forced over-the-counter status, I mean, that will be up to the courts. The pharmaceutical industry will fight that to the end. They certain regard their products as their own property and that the government shouldn’t be able to dictate that they can only sell it over the counter and not through prescriptions. So, that will--I know the FDA feels that they have the legal authority to force that, but the FDA thought they could regulate tobacco too and found out they couldn’t. So, that’s up to the courts, and the industry will, I’m sure, take that all the way to the Supreme Court, and it’s going to be years until we know the answer to that.
I do see a lot of activity coming up on the patent rights issues as far as trying to address what are perceived as abuses in terms of lengthening product cycles through the prevention of generic competition. I don’t think the actual patent terms are going to change. I think it will become--if there’s legislation, it will become more difficult for the brand name companies to extend beyond the normal period for patents; and, you know, you can’t stop the idea that innovation--if you find out something new about your product, you should be able to get additional patent life out of that, but it probably--the perception is that it’s been brought to the point where there’s abuse going on, and it’s more for stalling than for real legal issues.
DR. GINSBURG: Okay. Let me talk about the tax credits. The President’s proposed one and there are bills in Congress. If a tax credit were enacted so that a lot of people, say ten million people who are uninsured became eligible for a credit, what changes would occur in the market for individual insurance? Bob.
DR. REISCHAUER: I think it’s very hard to envision a tax credit going through Congress without some fundamental reform to the individual insurance market because this is a market with numerous flaws in it, and you would be in a sense exacerbating those problems. And that makes it sort of a very difficult and very controversial policy step that would probably be difficult to get through the Congress.
You also have the very real possibility that if one reformed the individual insurance market, put a more or less adequate tax--refundable tax credit out there, then the employer-sponsored insurance would begin to unravel at a rate that was difficult to control. I think there are many people--Senator Bradley for one and myself for another--who think that in the long run if we could somehow get there, this might be a better system. As Roberta said, no one would design the system that we have now if they sat down to do it. But getting from here to there is a very, very difficult undertaking which I think would probably stop legislative action on this initiative.
DR. GINSBURG: Roberta?
MS. GOODMAN: I think one of the big issues is that when you start looking at the state level there are so many mandates on the insurance coverage that it becomes very difficult to design packages that are, in fact, affordable and provide adequate basic coverage. So, you know, if you have requirements that you cover fertility treatments and this and that and the other thing, what it does is it reduces the level of coverage that the plan will have a place for basic inpatient and outpatient care because they’re trying to keep the dollar amount down to a level at which people can buy it.
So, I think that one thing that would be really critical is allowing that market to buy a fairly bare bones policy that has good--in terms of those missiles--but with good coverage for the basic catastrophic events that we would all fear in our health care lives.
DR. REISCHAUER: One aspects is that the American people, healthy American people, aren’t generally interested in buying true health insurance, you know, protection against unexpected large expenditures. What they want is health assistance, which is help me pay for the day-to-day things which I could routinely budget for if I were more disciplined and I have a middle income earnings or above.
MS. GOODMAN: And that’s one of the problems. If you look at what we expect out of our health care system, we think that it should cover anything we need anytime we want it from whoever we want it with no delays, with very little regard to whether it has incremental benefit or not. If we think it does, we should have it, and we think that somebody else ought to be paying for every last dime of the care. And that’s our basic problem.
DR. GINSBURG: Roberta, that’s the American way.
[Laughter.]
MR. FARRELL: Roberta, that’s the American way.
MS. GOODMAN: But we’re finding that there’s no such thing as a free lunch.
[Laughter.]
DR. GINSBURG: Bob, you mentioned that you don’t think legislation could go forward without reform of the individual market, but what are the key parts of reform that would have to be advanced?
DR. REISCHAUER: I really overspoke a bit, because I think you could design a system where you left the current individual market as it is and you said this tax credit, however, could be used to purchase a policy authored by the Federal employees’ benefit package or buy into Medicare, something that was in a sense nationally community rated, which is of course the big problem here. In some States that isn’t the case, and even if it were, we have to remember that the tax credit is likely to be uniform throughout the nation, because every aspect of our tax system is like that, and yet the costs of providing an equal package of health insurance vary by over 2 to 1 across the States or markets of the nation.
DR. GINSBURG: Yes. I’d like to turn to costs. I mean, certainly there’s an expectation in this panel that significant cost increases are going to continue for some time. And I want to ask the question about, at some point where we experience a crisis, where all of a sudden people are going to say this is intolerable--and I don’t know if I’m talking about an issue or perception or maybe I’m talking about an issue of, well, let’s look at how we fund health care. You know, we fund a lot of it through the tax system. That’s Medicare and Medicaid. Those revenues aren’t growing as fast as costs.
We fund another large part through employers, and we know from the past that when employer contributions to health benefits get fairly large in relation to profits, we have problems and employers do something. And I think if you could give your crystal ball about where there would be a point that years of cost increases--and also where the uninsured problem, that there’s a lot of research saying that when premiums are higher we have more uninsured people. Where would be a point that’s going to galvanize either employers or government into some significant action to respond to it?
MR. FIDEL: Well, I think underneath that is ideology, and of course there are those who favor a single-payer system, those who favor a more market-based system, but I’m sure the same people you see calling for a bill of rights and more freedom, which does increase costs, will be the first people to be calling for a government solution to out-of-control costs when they happen.
So I think it will get down to the situation where, you know, ideology comes out, and the people who believe that market forces are the best way to go will continue to fight for that, and the people who think a single-payer system is the way to go will get louder and louder as the costs keep going up.
MS. GOODMAN: I think that in a sense we’ve had a strong enough economy, and there was also a period in the mid-1990s in which the costs were fairly quiescent and there were some benefits from that, that there’s no immediate crisis. But I think if you had the economy really slow, have unemployment really rise, have people who are middle class or perceive themselves to be middle class who face very catastrophically high expenses or the potential of losing their coverage or have lost their coverage, then the debate shifts and it’s the old three-legged stool.
You know, we fluctuate between being concerned about access, being concerned about quality, and being concerned about costs, and I think right now we are very concerned about quality measured by, "I have the ability to get whatever I want whenever I want it," and access as in, "I have that access," not necessarily that the less privileged have that access. And the cost issue and the broader access issue I think have really receded.
MR. FARRELL: The only thing I would add is, I don’t think that this is singular in its focus for the United States or North America. It’s a global issue, and I don’t want to get too patriotic, but our system still is the envy of many other, most other countries. And if you look at the capital outside of the United States, whether it be to the north of us or in Europe, this is absolutely bar none the best system.
I mean, the reality is, this industry, the better you do, the more problems you bring upon yourself and the more costs you bring upon yourself in the future, and this has been around forever. I remember the cover of Time magazine with Jimmy Carter on it proclaiming the health care cost crisis. So, you know, for many reasons this will be here. It’s not going away. It will only probably fuel itself in the future.
DR. GINSBURG: Okay. Bob?
DR. BERENSON: I was just going to add, there is a World Health Organization report out, I’m not even sure if people in the United States have seen it, that ranks the U.S. as number 37. And it is, I think, a heavily flawed report, but the rest of the world, at least the sort of health service research group, doesn’t view the U.S. as the envy.
But I take your point. I would sort of associate myself with Norm’s point. At this point there’s not even a consensus of how to get a prescription drug benefit in Medicare to the public, because of an ideological split as to what Medicare should be. The idea that we will have a coherent approach, whether through a market or whether through government, to deal with the cost problem, I think is not close as long as we have divided government. And often then you get the worst, which is not either allowing the market to work well or the government to work well.
But I guess the final piece that I’d want to add, that hasn’t been said yet today, would be some consideration of the government not as a regulator but as a purchaser, and specifically Medicare in this case, and how perhaps some synergies between Medicare as a purchaser, given i is the government and has market power and will be restricted in what it’s allowed to do, but how government and other purchasers could perhaps work together on the cost problem I think deserves some attention.
DR. GINSBURG: Bob?
DR. REISCHAUER: Just to build on what Bob said, I agree with Roberta that we’re not going to see movement in this area until we get the confluence of rapidly rising costs, uncertainty among the middle class about the security of their coverage, but then one other item I think is necessary, and Bob hinted at it, and that is some other viable alternative.
We can all agree that there are real flaws with what we have, but we have a reluctance to jump off into the unknown, and the most likely source of some assurance that we know where we’re going, I would think, would be a reformed Medicare system that would show that this can be done, probably with a large element of private sector involvement in a way that is peculiarly American and acceptable, and then we move into that for the rest of the population.
MS. GOODMAN: I would also add, I think for--there has been in the Times and in the Washington Post and so on, a number of letters to the editors appearing from people with M.D. after their name, talking about the Canadian system. But it’s a case of I think you should be careful of what you wish for, in case you get it.
The Commonwealth Fund did a survey looking at physician issues in the various English-speaking countries, and there were far more substantial issues in terms of adequacy of hospital capacity, hospital staffing, access in terms of wait times for surgeries and so on in Canada than there are here. And so, you know, we go back to each person, I think you have to look at it as each country is different and has its own set of dynamics.
And I would basically echo what Dennis was saying, that we are clearly not perfect but I think that our system functions better for us as a country, given our societal values, than the systems that exist in any other country that I’ve ever looked at.
MR. FARRELL: And going back to the original question, what would effectuate change, it’s just not on the horizon, in my opinion, for a multitude of reasons. Some would say we did elect a President who is against--of course we’re not sure who we elected as President--
[Laughter.]
But the reality is, President Bush is the President and, you know, his edict is not to have significant regulation, or have government be your friend. So it’s unlikely, I can only see significant crisis bringing about change. And, you know, I’m not so optimistic like the dot-comers were three or four years ago but, you know, let’s look at what has brought upon change in the past, and we’re not anywhere near that right now.
Now, arguably, there are many, and it’s not necessarily way off base saying, well, there is actually sort of a volcano creating underneath for the large amount of either working uninsured or unemployed uninsured, or that question that society has to fund or take care of, either today or tomorrow. I just don’t see that being to the magnitude that the country has faced before, that has brought about such great change.
I mean, the reality is, most people who were elected today, were elected until the auspice of reducing taxes, cutting spending, and the economy generally has benefitted from that.
DR. GINSBURG: I want to follow up on a comment you made, that you saw Medicare reform as having the potential to, in a sense, sketch out a model that perhaps other parts of the health system will adopt, and that the model would likely have a significant private sector component. And the question is, given where we are now with the Medicare+Choice under such a cloud, will we have to wait for that to recover some way before we can proceed?
DR. REISCHAUER: Yes. I think those of us who have been advocates of premium support for a number of years are at a severe disadvantage right now, because the closest relative of premium support is Medicare+Choice, and it is not healthy and doesn’t look like it’s going to get better any time soon. And so I think really you’re right. I mean, this is not something that is going to happen in the next few years, even though the administration and many on both sides of the aisle in Congress are sympathetic to an approach like this.
DR. GINSBURG: Yes. I just have one more topic I want to cover, and then I’m going to ask the panelists if they have any final thoughts they want to make that haven’t been talked about. But is there any significant venture capital investing in health care now?
MR. FIDEL: I looked at this issue, and PriceWaterhouse data would show that venture capital into health care in 2000 went up to about $5.8 billion versus about $3.4 billion the year before and about $1.8 billion in 1995, so there was a steady increase through 2000, although in talking to some venture capital firms, they say there has been a decline in the first quarter, year-to-year.
But the real surprising--not so surprising--is that the share of venture capital had fallen from about 25 percent to 10 percent in the last four years for health care, because of the dot-com and the technology boom and all the money being funneled into that area. And now the obvious has happened. That money, now health care is increasing as a share of venture capital because of the implosion in so many areas in technology.
DR. GINSBURG: Yes, and I take it that some venture capital investing in health care hasn’t done very well, and I was wondering if there is a type of activity that is favored today.
MR. FIDEL: Also asking them, they say about a third is going to the biotechnology, pharmaceutical product area, about a third in health services, and about a third in the medical device or medical product area, so it’s about an even split right now. And two years ago there was a lot more activity in e-health type of ventures, and that has fallen off, so now it’s about one-third, one-third, one-third.
DR. GINSBURG: This would be a good time for me to ask if anyone has any parting comments, or just a great answer to a question that I couldn’t get to. I did give the questions out in advance. Before we go to the audience for questions.
Yes, Bob?
DR. BERENSON: Yes. The one area, for the last few years when I was at HCFA, I was watching the activities of the Bipartisan Commission on Medicare Reform as well as what was going on in the private sector, and it struck me that the one issue that has not gotten attention, certainly for Medicare but I think more broadly, is how to deal with new technology.
In the Medicare situation, I mean, there is now a much more transparent, open coverage process for issues, in some cases very technical issues on how do you deal with new evidence, how do you extrapolate from a couple of studies that show an indication in one circumstance, how do you extrapolate that evidence to other circumstances.
And the ultimate question is, is there a role for cost effectiveness analysis in coverage policy? It strikes me as sort of the major policy issue that has not gotten attention and deserves more.
For those who see Medicare+Choice as sort of the alternative to traditional bureaucratic Medicare, as a way to cut costs, the legislation now says the health plans have to follow Medicare coverage policy. And in some ways, in fact what we have done with Medicare+Choice is restrain their degrees of freedom to do anything different, so I’m not surprised that they’re not able to do much better than fee-for-service on cost reduction.
But I think this whole area of how to cover and then pay for new technology is one that deserves more attention.
Previous Section
Next Section
Back to Index