More Care, Lower Cost

February 1, 1999

Judith Zwolak

A study by a Tulane researcher says medical prices aren't rising as much as people tend to think. "Most people think that the price of medical care is rising because health insurance premiums keep going up," says Dahlia Remler, assistant professor of health systems management and a researcher at the Institute of Health Services Research at the School of Public Health and Tropical Medicine.

"But to an economist, that's not right. When you say prices are rising, you should be talking about the price of the same set of goods."

Medical care now is vastly different than it was in the past, making the actual cost of care slightly less expensive than a decade ago, Remler and her fellow authors argue in an article published in November's issue of The Quarterly Journal of Economics. Using 11 years of data on treatment of heart attacks at a major teaching hospital and from national Medicare records, Remler and her co-authors--David Cutler and Joseph Newhouse, both from Harvard, and Mark McClellan from Stanford--examined the changes in the cost of treatment.

Remler began this project as a postdoctoral researcher at Harvard University School of Medicine and continued to work on it when she became a faculty member at Tulane two years ago. The researchers chose to study heart attacks, or acute myocardial infarctions, because they are relatively common, fairly costly and have a discrete starting point, Remler says.

Also, since virtually everyone who has a heart attack--regardless of race, sex or socioeconomic standing--goes to the hospital for treatment, the subjects of the study should fairly represent all heart-attack victims. The study divides each heart-attack episode into four categories: medical management (drug therapy and healthy-lifestyle counseling), cardiac catheterization only (a diagnostic radiologic study of blood flow to the heart), bypass surgery (an open-heart operation that involves bypassing blocked blood vessels) and angioplasty (a procedure that restores blood flow by inflating a balloon through a blockage in a vein or artery).

"Looking at the expenditure growth we've had in this period," Remler says, "how much of it is explained by the fact that we're doing more and more bypass and angioplasty and how much is explained by an increase in the cost of a procedure?"

The researchers found that doctors used more invasive techniques to treat heart attacks and that medical management of heart-attack patients decreased dramatically from 1983 to 1994. Individuals under medical management declined from 89 percent of heart-attack patients in the Medicare sample in 1984 to 59 percent in 1991.

In the major teaching hospital sample, 65 percent of patients received medical management in the period 1983-85 compared to 23 percent in 1992-94. Taking into account general inflation, the costs of catheterization and angioplasty had actually decreased in the Medicare sample by 1.6 and 5.9 percentage points, respectively.

Bypass surgery costs increased in both the hospital and Medicare samples, by 1.9 percent (Medicare) and 3.4 percent (hospital) each year. "We're spending more and more to take care of a heart attack, but we're doing more, too," Remler says. "There really isn't much medical-care inflation, but there is a lot of quality improvement."

Performing more invasive treatments on heart-attack patients doesn't necessarily lead to an improvement in the medical outcomes, Remler concedes. To measure the benefits of these treatments, the researchers examined survival rates of heart-attack victims and assigned a value to each year of life after treatment.

"With this kind of analysis, you have to make some heroic assumptions," Remler admits. "Who knows what the value of life should be?"

Other researchers have estimated a year of life to be worth as high as $150,000, but Remler and her colleagues assigned a more conservative value of $25,000 per year. Using this figure, they measured the value of additional life less the costs to produce it and found the cost of extending a life through heart-attack treatments was decreasing 1.1 percent a year. "If you look at the cost of extending a life, it's gone down," Remler says. "The benefits of life extension outweigh the added medical costs."

The research has implications for health-care policy-makers, who may not realize the benefits associated with increased costs, Remler says. "Despite all the pressure to control medical-care expenditures, we may not want to bring down the rate of medical-expenditure growth. At least a significant share of the expenditure growth of the last few decades may have been worth it."

In the future, Remler would like to include additional measures in her evaluations of medical costs. "I'm interested in adding some quality-of-life features," she says. "It's very hard to get good measures of what people really care about and it's particularly hard to get them over time and in a consistent manner. But that's what really matters."

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