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Meeting Transcript
March 6, 2008


Council Members Present


Edmund Pellegrino, M.D., Chairman
Georgetown University

Floyd E. Bloom, M.D.
Scripps Research Institute

Benjamin S. Carson, Sr., M.D.
Johns Hopkins Medical Institutions

Rebecca S. Dresser, J.D.
Washington University School of Law

Nicholas N. Eberstadt, Ph.D.
American Enterprise Institute

Daniel W. Foster, M.D.
University of Texas, Southwestern Medical School

Michael S. Gazzaniga, Ph.D.
University of California, Santa Barbara

Robert P. George, D.Phil., J.D.
Princeton University

Alfonso Gómez-Lobo, Dr.phil.
Georgetown University

William B. Hurlbut, M.D.
Stanford University

Peter A. Lawler, Ph.D.
Berry College

Paul McHugh, M.D.
Johns Hopkins Hospital

Gilbert C. Meilaender, Ph.D.
Valparaiso University

Janet D. Rowley, M.D.
The University of Chicago

Diana J. Schaub, Ph.D.
Loyola College



INDEX

Session 1: The American Health Care Predicament


CHAIRMAN PELLEGRINO :   Good morning. Good morning. Thank you, Dan , for rounding up the troops.

Good morning officially. The first act of all of the meetings of the Council is to recognize the presence of our official government representative, our Executive Director, whom all of you know by this time, Dr. Daniel Davis . His presence makes our meeting an official governmental activity.

Thank you, Paul , for joining us. Good to have you with us.

DR. McHUGH : It's good to be here.

CHAIRMAN PELLEGRINO : This morning's session will be devoted to a topic, one of three which will make up the agenda for the next day and a half. The first topic we will address is the topic we've visited before and will be visiting this time from a different perspective, and that is the topic of health and medical care and its status in the United States and particularly from the point of view of whatever ethical issues may be involved which is consistent with the charge and charter of the Council.

We will also have tomorrow a brief bringing us up-to-date on one of the projects we're involved in but have not yet completed, and that is newborn screening. And then the final session will be a colloquium on the recently issued volume on human dignity.

Before I introduce the speakers, let me say that they are all distinguished scholars, persons, in their own disciplines and in other ways as well. Were we to read the curriculum of each and every one of them, it would consume most of the time, and I suspect the speakers themselves would rather have a little more time for their own conversation, and I think we would appreciate that ourselves as well. So I hope they will understand and the audience will understand why we do not give lengthy introductions.

Our first speaker is Dr. David Mechanic , and in very slight violation of what I just have said, I've known David for many years. He has distinguished himself in many ways and certainly has worried about, thought about, and been critical in his thinking about the health care system in the United States . He's an eminent scholar in his field.

David , without saying much further, lest I cut into your time, we welcome you and look forward to your remarks.

PROF. MECHANIC: Thank you. I have a lot of sympathy with many of my friends in medicine and in health policy who are very concerned with the growing corporation of medical care, the growth of very, very large for-profit corporations that now play such a pervasive part and which have, we think, I would say, a rather major share in creating some of the problems we now face as well as eroding the professionalization of medicine, and I see that as sort of a major background problem.

Unlike some of my friends who write about this and worry about this a lot, I personally don't see that there is much attraction in trying to fight against the for-profit nature of American medicine. I find it difficult to believe that that's going to change, just as I think it's very difficult to fight against the globalization of economies. And so my approach is to try and seek solutions within the context of some of these forces which I may not see as particularly valuable in the development of medicine, but, in fact, I see as persisting well into the future and not going away.

Let me first start with some of the broader questions that define the way in which we think about health care. And, clearly, one of my strong assumptions and beliefs is that our system is very much conditioned by our value system, our ideas, our beliefs and so on. And it's not a failure of understanding how to provide health care reform or to provide a decent health care system that serves everyone.

Most developed countries around the world have found a way. There's no one way. There are many different ways to accomplish that task. But basically the barriers to reform come, not from a lack of intelligence or a lack of know-how, but rather from a clash in values and beliefs which result in gridlock in trying to produce necessary and valuable reforms.

Underlying that is, of course, a very strong difference among peoples and governments and populations between those, the value in individualism, which, of course, is very strong in this country, and a sense of social solidarity and cohesiveness of society. And people are much less likely in our context when they discuss policy to ask the question, "What do we owe to each other?"

I've spent some time participating in policy discussions in European countries. I've spent a couple of years working in the National Health Service in England, and it's very unusual to hear, to participate, in a health discussion in those countries and not have one of the considerations that come up in talking about changes and reforms as to what that will contribute or take away from the idea of social solidarity in that country. I can't say that I've ever heard a discussion of that kind in American policy forums that I've participated in, and I think that makes us in many ways different from many other populations.

A second very big question, and one which I think we're increasingly beginning to think about and address, is the difference between treating sick people when they're sick and seeking interventions at a population level to prevent illness on a larger scale. We obviously do spend vast resources in trying to treat people when they're sick, but we give much less emphasis to the idea of finding ways of promoting population health in the larger sense. Now there is a dilemma here because when people are sick they feel very strong about health care and they want health care and the best health care when they're sick. But when you talk about population health, the probability that any individual person will benefit is relatively small compared with the benefit that's provided when one is sick. So there's much less political demand for population health change as compared with individual improvements in treatment, improvements in medical technology, and things of that sort.

Third, we are in a situation in our country abetted by many claims by individuals, which I think are faulty, that we can have it all, that everything possible can be made available to people when they have the need for medical care. And we do a bad job, I think, of reconciling what are reasonable investments in medical resources with medical demand. We find it very difficult to talk about what fair limits might be and how to set fair limits.

In other countries, if you go to the Scandinavian countries or you go to other European countries, people are quite willing to talk quite seriously about rationing. As you know in our context, "rationing" is a dirty word. And if a politician, god forbid, would mention rationing, that politician would be very much burdened politically by taking the position on that particular point of view.

We obviously have an ideological divide between the market and planned care. We have very strong market advocates who believe that we could treat medicine very much like any other market product. And through having a more competitive market, we can solve some of our problems. I happen to believe that that's an illusion. But in any case, there are intelligent people and people who feel very strongly that that is the way we could go.

We are a country in which we very much value choice, and I share that value of choice. But the issue is, how much choice? We are learning increasingly that too much choice basically is very difficult for people. People who have too many choices, in a sense, will withdraw and not make choices because they are puzzled and don't really understand how to choose among too many choices. So perhaps we have to have conditioned choice and can do much better by conditioning choice than by making every possibility open to people who find it very impossible to evaluate those different possibilities against one another.

We also live in a context where we increasingly medicalize almost every social problem, every sense of distress, and so on. There's a lot of money to be made by medicalizing social problems. The pharmaceutical companies would like to see more and more indications for use of their drugs. So there's a lot of momentum to encourage this. But it seems to me that one has to set some boundaries as to what medical care is as compared with the vicissitudes of everyday life and what kinds of things are reasonable to pay for and what kinds of things might be less reasonable to pay for.

And all this takes place in a context where there is an erosion of trust, erosion of trust in all of our institutions. There's an erosion of trust in medical leaders in particular and medical institutions, much less than in individual doctors. People still have a lot of trust in individual doctors, but they don't trust the health system and they don't trust the leaders of the health system.

At a lower level, we have various cultural influences which contribute to the great demand for medical care in this country. Americans repeatedly demonstrate a very, very strong belief in technological progress, a belief that we can solve most problems through technological advances. And, indeed, we are a very innovative country. I mean, we are technologically very, very impressive. In medicine we do some very, very impressive things. And when used properly, they contribute a great deal to the value of life and health.

Secondly, Americans are very active. They believe that, if there is a problem, there's an answer to a problem and one should vigorously seek that answer. In the case of medical care, that means that people want things done and insist on things done even if the evidence is lacking that those things are efficacious.

And it's quite interesting. In all the studies I've ever done, as many others have found, that when you talk to people about provision of services, people have much greater distrust about something being kept from them that may potentially be useful or valuable or something they want and much less distrust about over-provision of services which may be of little value and may harm them and so on. So we have a real bias toward doing something, whatever the case might be, and perhaps not enough skepticism about doing things which offer little value.

We are individualistic, as I said, and we want lots of choices, as I noted, and we live in an environment where consumerism and marketing, entrepreneurial marketing, exacerbate that increasingly with the direct-to-consumer advertising of pharmaceuticals and medical devices. That tends to get more and more exaggerated, get more and more — mobilize more and more patients to demand things they may or may not need. And as a consequence we have a situation where physicians feel terribly burdened by patients demanding things which the physicians don't believe they need or would benefit from but where the pressures are such that they accede to these demands.

I won't dwell on these things because you all really have heard about these over and over again, I'm sure. We have growing health care costs. We've never been able to quite rein them in given the nature of the health care system. The growth and costs in Medicare and Medicaid are persistent and will get worse over time. And this is not driven by people demanding more and more services, but really driven by technological innovation using more and more expensive kinds of innovations, by using more and more expensive drugs, drugs which may cost $80,000 or $100,000 a year to advance life by a month or something for a patient with, let's say, end-stage cancer. So there are these uncontrollable costs, and we really haven't figured out any reasonable way of dealing with that. So costs continue to grow far beyond the economy as a whole.

We've had a large erosion of our health insurance coverage with 47 million people uninsured. Study after study shows that the quality of care, despite our saying that we have the best care in the world, is rather poor and rather poor relative to many other European countries. So that — and I'll say a little bit more about that as I go on, but generally we do not do a very good job. And by any indicator of health that one measures across nationally, we do rather badly: infant mortality, adult mortality, various disease indices, and so on.

We have large race and class disparities in access and quality of care, which have been a growing concern. It's a very difficult problem. It's not easily addressed, but it is a problem that one would ideally like to deal with better than we do.

Of most disease, the most expensive disease is chronic disease. Generally, the studies show very poor management of chronic disease. We still are very much imbedded in an acute-care model and have difficulty developing the kinds of continuity and teams which make for a strong chronic disease care.

And unfortunately compared to countries that are a lot less wealthy and a lot less prepared than we are, we have been very slow in adapting and using the information technology, particularly the electronic health record and the various advantages it provides, which makes it much more difficult to deal with some of the problems we have to deal with in the future.

This is in great contrast, for example, to the Veterans Administration which has done a beautiful job in putting in a very sophisticated and very effective IT system; Kaiser-Permanente, which spent billions of dollars to put in a very sophisticated system; and other places like UK General Practice, which is a much less well-financed form of practice than we have in this country but where the typical general practitioner is wired and has access to many of the tools that American primary care doctors don't have access to.

There are lots of stresses. And, once again, I don't want to elaborate on these because I'm sure you're familiar with them. But it's worth just noting them in passing for our discussion.

Our system is set up in a way in terms of its incentives so there's very little incentive for strong preventive and early care approaches. We've had a very large erosion of primary care. Young physicians do not seek to be primary care doctors. They see that the hassles have increased and the remunerations are so much lower than for specialists and subspecialists. If you do invasive cardiology, you can make three times or four times what a good primary care doctor makes. And so our organizational arrangements and professional incentives are poorly aligned with our quality of care goals, the view that you really do need a strong primary care sector if you're going to adequately manage chronic disease and other kinds of problems on a longitudinal basis.

We have very unrealistic population expectations which are encouraged by the kind of entrepreneurial promotion I've talked about by direct-to-consumer advertising and the hype from the media. And many Americans, when they are sick or family members are sick, are not willing to accept limits. There is a real notion that when one is sick or when one's loved one is sick, nothing — there should be no barriers to any kind of care regardless of how little value it has relative to cost.

And ideally — and I think this is, I think, a very important point that deserves the Council's consideration and thought. Ideally, if we are going to sort of deal with these issues, we need a credible and legitimate agency to help on a neutral basis assess effectiveness and cost-effectiveness. We have lots of people doing it. There are lots of people writing practice guidelines and setting standards — professional societies, drug companies, many people who have a stake in the game — but what we need is a neutral source to provide really good scientific, valid assessments.

There are such organizations in other countries. There's a National Institute for Clinical Excellence in Britain . They've just changed their name. I think it's the National Institute for Health and Clinical Effectiveness. But we need an agency that is protected from political interference. We've had agencies in the past like the Agency for Healthcare Research and Quality which, when they tried to set standards for the treatment of back pain and so on, were attacked by the spine surgeons and almost eliminated as an agency. They lost much of their budget during that particular situation after they had studied and put out very good guidelines on the treatment of back pain. We had a technological — we had an institution in the government that evaluated new technologies. They, too, were attacked by various interested sources who didn't want an agency doing that.

And so the usual federal structure doesn't work for these kinds of agencies that will be subjected to great political attack and influence and we need a way in insulating such an agency. People have suggested that it be somewhat on the order of the Federal Reserve or something along those lines. That whole area needs a lot of thought and a lot of attention.

One of our large problems — and I understand you're going to be talking to Dr. Fisher . You'll hear more about this. But one of our large problems is that our technologies exceed our understanding of how one intervenes meaningfully, or, as Black and Welch have said, "We have a slippery slope of new technologies where, despite clinicians' best intentions, many patients have been labeled with diseases they do not really have. They may have been given therapy they do not really need."

We now have substantial empirical evidence that excessive care can lead to worse health rather than better health, and, on average, higher spending regions in the United States have lower quality of care, greater patient dissatisfaction, and higher mortality. And this is one of the arguments, one of the areas of research, that Dr. Fisher has been involved in with the Wennberg Group more generally and they have produced lots of data over time that support this basic argument.

One has to think of this, I think, theoretically in terms of where one intervenes most effectively and gets the most value for one's dollars. And if you think of this, on the left side of this curve, you have those activities, those medical activities, which are effective and cost-effective; that is, they provide lots of value for expenditure.

And then you have an area of uncertainty where, for some, physicians believe on the basis of clinical studies, not randomized-control studies, that there was medical worth. Other people are skeptical. But there is an open argument that — let me get some water, excuse me — there's an open argument that those things may have medical worth, although they might not be fully cost-effective. And you can argue that in a country as rich as ours we could afford some investment in those areas.

And then you have other areas which are wasteful and potentially counterproductive in that they do more harm than good. Economists of late have been talking about flat-of-the-curve expending, meaning that the spending yields no value for the added increments of input. However, it can also add negative value in that too much care of the wrong kind can do harm to people. And yet that kind of care many, in fact, be remunerative, be basically pushed through the advocates who have a stake in maximizing the use of such care.

Now it makes it particularly difficult, as very often the modalities, the technical modalities, that provide good important care when misused or overused provide some of this bad care. So it's not a clear case where you say, "This technology is not right or not good or not cost-effective." It's a case where you basically weigh, where you have to weigh the technology when it is properly used, when it is improperly used. And we see a lot of improper use of some of these technologies because of the economic incentives involved.

There's a gigantic growth of the use of CAT scans, for example. CAT scans could be a wonderful modality, life-saving in many instances. But when used inappropriately for every patient who walks in for every complaint, it obviously has little value and produces radiation which, when people have repeated CAT scans, don't need, and that radiation problem is also a large problem which has not been fully talked about.

This just gives you some examples from the two RAND studies. There are many, many studies of this kind where you had physicians setting standards for quality of care for people with different conditions. This is a very, very small sample. There are two papers in The New England Journal of Medicine that will give you many more examples, and you can see that the performance as measured by the standard set by these physician groups is very low. In all of these cases, both in the case of adults and children, less than half of the children were receiving indicated care for the particular problem involved.

So the problem is not only stopping — going back, it's not only stopping and doing all those things that provide no value on the right side of the curve, but doing much more on the left side of the curve that we're not doing now because there are very few incentives and rewards for health people to do those things. We do a bad job. We don't organize well to do it, and we miss doing many of the things that are highly effective in providing health care.

Now one of our problems is — I mean, it isn't all the profession or the company's responsibility. It also is part of our public's understanding and our public's demand. There are a couple of examples here which I think illustrate this issue about the difficulty of setting limits in any meaningful way.

This comes from an NORC survey, and let me just read you the question so you'll see the context. It's a long question. It's a very unusual survey question.

It says, "Imagine you're experiencing headaches. You visit your doctor and talk to him about your symptoms. You also tell the doctor you've been feeling a lot of stress lately. And after doing a complete examination, the doctor decides that the headaches are probably due to stress. You want to have an MRI to make sure everything is okay. An MRI is a special and expensive type of X ray that allows doctors to take detailed pictures of parts of the body such as the heart, spinal cord, or head. Remember that after your complete examination the doctor thinks you don't need the MRI. Then imagine you have the following conversation with a doctor about the MRI and financial incentives. And then the patient speaks first. 'I'd feel better if I had an MRI. I'm worried that you won't order it because it's too expensive.' The doctor then says, 'I can understand that you're worried about whether everything is okay. It also sounds like you're worried that I'm not ordering the test because it's too expensive. These days with managed care lots of people share your worries about this. I want to set your mind at rest because I truly do not think the test is needed at this point.'"

And the question is, "How much would you trust the doctor to put your health above costs? Would you say completely, mostly, somewhat, a little, or not at all." And you can see the distribution. And you can see why it's so difficult for physicians in working in a time-pressured environment to deal with patients who basically don't trust them not to provide something that the doctor professionally thinks is not necessary.

And in a recent survey just published in The New England Journal of Medicine of a national survey of physicians, 36 percent of physicians reported they would do an MRI scan for a patient with two days of low-back pain in a comparable situation. Let me read you that question because it's important to know what the question is to understand the answer, and here's the scenario given to the physician.

"An otherwise healthy, long-term patient presents with his first episode of low-back pain lasting two days with onset following some work around the house. He has no neuromuscular signs or symptoms. You explain to him that the symptoms will likely resolve with rest and analgesia and that you don't think any further investigation is warranted at this stage. However, the patient is convinced that he has a herniated disk and is quite insistent that he should have an MRI scan. Would you order the MRI? Order the MRI scan but say that you're doing so reluctantly? Refuse to order the MRI scan at this time," and that's the question. As you can see, 36 percent of the doctors said that they would order the MRI scan.

As you know, it's an expensive venture. Somebody has to pay for it; typically, the insurance policy. But in a sense, when insurance ends up paying for things that really aren't necessary, everyone's health care premiums go up and more people are forced out of the insurance market, so that's the dilemma, and we really haven't — we not only haven't come to terms with this, we don't seem to have the guts in a way to address the issue. As soon as someone tries to address the issue, they get attacked for rationing and thinking about socialism and stuff of that sort.

So what are the areas, the key areas, of needed reform? And I'll go through these once again rather quickly because I'm sure you're familiar with them. I'm sure you've seen them in many other contexts.

We have to improve health care access for many of the people who are uninsured by improving insurance coverage and access to services, and we have to figure out a way of allocating care fairly and consistent with the evidence, and that's simply providing whatever anyone demands at any time.

In the quality area, we have to reduce medical and hospital error which you know are big problems. We have to do much more to build effective care management. We have to redesign our incentives to promote better performance. There are lots of what are called "pay-for-performance" programs. I am rather critical of some of them. It's not — you can't do it on a small basis here and there. It has to be part of the way the whole system functions. But in any case, there is interest growing in trying to figure out, can we pay for the end product, which is better health care and better health outcomes, and what are the ways of doing that?

If we're ever going to deal with the growth of knowledge and technology and the complexity of what we're doing, we have to have better IT. We have to develop electronic health records. We have to have intercommunication. We have to do those things and those organizations that have done it have demonstrated great improvements in quality compared with the American health care system. And yet we are very, very slow in adopting any kind of comprehensive information technology. More and more doctors are using it for billing and things of that sort, but they are not using it for the kinds of things that really will add to the substance and quality of health care.

On a larger scale, we have to think of how do we, sort of , develop an evidence-based culture. We don't want people telling doctors you must do this. I'm a big advocate of protecting physician discretion. I don't believe that physicians must be held accountable for doing exactly what the guidelines say.

There's a great diversity in patients' differences in comorbidities, differences in life situations. Ultimately, we want the professional's professional judgment about what makes sense in a particular instance. However, those professionals have to be accountable, have to be accountable in terms of having a reasonable rationale for doing what they do.

I happen to like very much — I know you've met in an earlier period with Norman Daniels. I like very much his kind of thinking about how do you set limits by providing rational reasons which are then amenable to change with further information and so on. And I think we have to think much more along the lines that he and his colleagues have presented.

We, as I said earlier, need an instrument. We need an agency which improves technology assessment and drug and device evaluation and regulation. But, however, as we found in the past, we have to find a way of having an agency that is more insulated from the political pressures that we've seen in the context of the agencies that we've used in the past.

And I happen to believe that improved and increased transparency, providing information to people so they can make better choices — I think it's pretty impossible now. The information is not there. Although there is a lot of rhetoric about giving people information to make choices, if you actually try, because I tried — I follow these algorithms and see where they lead and so on. You just can't. You just can't get the information that allows you to make a reasonable choice in our current health care system.

Now generally most people want reform. The latest data just published by a Blendon survey published in The New England Journal found that in 2007, 22 percent of Republicans and 7 percent of Democrats thought the system worked well. The vast majority of people from both parties thought the system didn't work well. Twenty-eight percent of Republicans and 46 percent of Democrats felt the system had to be completely rebuilt.

So generally there's a dissatisfaction across the political spectrum, and it occurs in a context where generally there is low trust in government, there's very low trust in the Congress, low trust in medical leaders, the insurance companies, and in the media. So the issue is , how do we build the kind of trust environment in which we can compromise meaningfully among our different values and predispositions?

Now, and that's exacerbated even in medicine by the kind of breakdown in sort of views within medicine. So you have tremendous competition among specialties and sub-specialties. You get skimming. So, for example, the effort for specialty hospitals to take the more remunerative cases and organize around the remunerative cases leaving community hospitals with many more difficulties, the Congress has now temporarily banned that. You have in primary care boutique medical practices which provide more time to patients and more attention to patients, but at the cost of creating inequalities in the care available in primary care of patients.

So there are lots of divisions here, and how you begin to bring people together around those divisions and come out with some rational solution is, I think, a very, very difficult challenge for future years.

Obviously there's big money in medicine. It's now, what, $2.2 trillion and it is a source of income for many powerful interests and millions of other people. Each of these groups lobby to protect their turf through political contributions, grass-roots mobilization, and using the media.

Everyone — well, a very large majority — believe that we need reform. But when they feel their interests are at stake, they prefer to stay where we are than to accept a reform which is different than the one they particularly support. So there's little consensus on any single pathway to reform. And with the uncertainty and low trust we have in this area, for many people, for many policymakers, the status quo remains a preferable option.

Let me stop here. These are just some — I have a couple of slides which you have, I believe, which just talk about different options, different ways in which one can begin to address some of the problems we have in terms of covering more people, providing more equal access. And, once again, I'm pretty sure you're familiar with these. You've heard these advocated in various ways, and I think we might do better by having the time for discussion. So let me just stop here and see where this leads.

(Applause)

CHAIRMAN PELLEGRINO : Thank you very much, Dr. Mechanic . Dr. Rebecca Dresser , one of the members of the Council, has graciously accepted our invitation to open the discussion. Rebecca ?

PROF. DRESSER : Well, thank you. That was really a comprehensive and helpful overview for us. I appreciate that. So I have three questions. One is general and a couple are specific.

One is based on your article about muddling and rationing. I wasn't quite convinced of your defense of implicit rationing as better. Do you still think that? You just said something about more transparency. And you say that it shouldn't involve not informing people of an option that's available in order to save money, that that's not appropriate.

I guess maybe I'm one of the mistrusting people. I think that that probably does happen, say, with older people or people who are uninsured where a particular option doesn't get brought up. So I wondered how transparent can an implicit rationing system be and what your current thoughts are on that?

A second specific question that I had based on the presentation was , you mentioned medicalization. And distinguishing between the vicissitudes of ordinary life versus medical care — and I'm very interested in that area — I wondered if you had some further thoughts about that?

And then the final question is asking you for help. I really appreciated how you started out with values and gave us some general concepts. But here we are, a group of people whose expertise supposedly is bioethics, and so we're trying to frame an analysis about moral issues and moral positions, and I wondered if you had advice for us on how we might frame that in a useful way given that we're not the policy expert that you are?

So is that enough?

PROF. MECHANIC: I've been involved for many years actually in the rationing debate. I got very interested in this when I was working in the National Health Service in the Medical Research Council, and then got involved in these discussions with people in a variety of European countries.

And at the time, there was this notion that we could make all of these things highly explicit. You know, we set these explicit rules and we follow these rules in treating patients. And I've always been impressed in my observations that life is far more complicated. Patients are extraordinarily diverse in their life situations and in their preferences that people's illness situations vary greatly. We set up guidelines: How do you treat asthma, how do you treat depression, how do you treat this and that? But, in fact, the average person has many comorbidities . They tend to be taking a lot of different drugs, quite typically, and therefore it becomes very, very difficult to write meaningful rules that apply across the great diversity of patients. And as a consequence, I still very much believe that physician discretion, physician judgment, is the key. It's what intervenes between sort of all these technologies and understanding of a patient. And I believe very firmly that physicians have to be given some discretion to make judgments within the context of people's lives and so on. And I recognize that the weakness of that is that the physicians can exercise bias in this situation.

My view is for the big questions — you know, is a certain new technology going to be made available? I believe that that can be made in a very explicit way, that you can evaluate that technology, you could evaluate its benefits, and you can make a decision as to whether it's reasonable to pay for it. There might be differences of opinion, but you have a decision-making process to arrive at some conclusions about that on the best basis you can. And so you don't leave those to each individual's discretion, each individual physician's discretion. However, in many, many kinds of cases you have very, very complicated situations where what you do depends so much upon the individual circumstances as a patient. And so I have argued quite strongly that basically implicit rationing makes much more sense; that is, there should be some sort of general understanding that one should not waste resources, one should use resources meaningfully and prudently, but that physicians have to have some discretion to make decisions which are perhaps different than the sort of overall view if they feel the facts and the circumstances of the patient warrant it.

And I must say I admire — Kaiser Permanente has some understanding of what the guidelines are, but they also have a principle that any physician can override the guidelines if they feel in the case of a particular patient that overriding those guidelines has merit and is accountable to colleagues and management for explaining why they did not follow the guidelines and so on. And I believe that's the way we should go. I believe we should hold people who don't conform to the principles, the guidelines, that are set accountable for their deviations, but allow those deviations because I think they make sense. I think health care, as you know, is extraordinarily complex and people's situations are extremely complex, and I think it's very, very difficult to write meaningful rules that fit everyone, and that's why we have professionals who intervene between, sort of, rules and patients and try to make prudent decisions about how to care for them. But I've written a lot about that. That was just one example of an article I pulled out.

In the case of medicalization, I think much of that is being — I mean, I think there is a tendency to call more and more things illnesses, and I don't — I think that sort of medicalization emphasis is not warranted. Part of it comes from the promotion of products. The pharmaceutical companies are very strong in trying to push pharmaceuticals for what I would think of as normal problems of living, as a way of building their markets. And I think there is a tendency in many of these areas to over-diagnose and be far more inclusive about what is really illness versus what is unhappiness or the ordinary distresses of living.

Two of my colleagues just recently wrote a book — I think Dr. McHugh actually reviewed it in The New England Journal of Medicine , I believe — where they show, I think very systematically, that the DSM and the way it's applied tends to over — it's over-inclusive in defining depression to include many conditions which are normal responses to life's vicissitudes. And while the DSM makes an exception for bereavement, it makes no other exception, but a lot of terrible things happen to people. They lose their employment, their families break up, their loved ones become sick, they get jilted in romantic relationships that lead to sadness, but that isn't necessarily a clinical condition. That's a normal response to terrible things that happen to us. So they argue that there's a real problem in the over-exclusion of conditions, and I think that happens throughout. I mean, you know, people are now trying to sell drugs for a range of things that we have typically thought of as a normal variation in everyday life. And I think as we think about — and to the extent that it's providing, you know, very inexpensive care, I think it's humane to do it. But when one gets into sort of very expensive modalities and the use of expensive modalities, I think we have to be very careful about how we address those problems and whether we allow diagnoses to be so expanded that they include all kinds of human distress, unhappiness, and so on.

When you asked — I'm sure that — the last question was on frame of?

PROF. DRESSER : Do you have any ideas about how we might put the brakes on some of this over-medicalization in terms of if we were trying to, you know, reform and improve?

PROF. MECHANIC: Well, I mean, I think there are lots of little ways, and I think it's rather difficult because it becomes part — what happens is, you have very large amounts of money being dispensed by the pharmaceutical industry, in particular, but other industries as well, promoting treatment of things that we ordinarily would not think of as sort of medical care. And to the extent that that treatment is basically a very simple kind of counseling, I have no objection. But to the extent that it involves getting people involved in heavily sponsored technological care, I think one can think of the way in which we regulate the promotion of drugs for particular indications as now there's some question as to whether we should sort of loosen up on the ability of the pharmaceutical companies to sponsor drugs for off-label indications. They've been limited up to now.

I think that we have to basically think about what is appropriate in terms of technology. For example, when I drive home from work, I hear advertisements for total lung screening to make sure you don't have lung cancer, CAT scans of lungs. I think we have to have some standards for, you know, what — I have some concerns.

I haven't thought this through in detail, but I think we have to think about ways in which we can perhaps decide if certain kinds of advertising is misleading and restrict it in some fashion. But, once again, I really haven't thought it through and I would hate to give you an answer that's just off the top of my head.

CHAIRMAN PELLEGRINO : I have three Council members waiting to question: Dr. Eberstadt , Dr. Carson , and then Dr. Meilaender . Dr. Eberstadt ?

DR. EBERSTADT : Thank you. First of all, Prof. Mechanic , thank you for a very comprehensive and thoughtful presentation for us all. I think we much appreciated that.

I have a question about a particular suggestion that you made in the course of your presentation. You said we need a neutral and credible agency to assess effectiveness and cost-effectiveness of health care interventions. And if I understood the drift of your argument, you would see that sort of an institution possibly as being a key towards a more rational utilization of health care services in the United States .

I wanted to ask you in particular, where and with whom? And by that, I mean, where would you envision such an agency as being located in the spectrum of American society? "Agency" sounds like a government institution, but that may not be what you meant there. And credible with whom? Do you envision this as being an organization that would be credible with the life sciences and health sciences research community, with practicing physicians, with other sorts of health care professionals, with ordinary Americans who might want treatment?

The idea sounds very plausible when you describe it. I'm wondering if you could describe it more? Is this a modest proposal or how would this work?

PROF. MECHANIC: Well, I mean, basically getting back to the sort of rationing notion, there are many, many different levels on which rationing takes place. Rationing takes place when one decides what the benefit package of an insurance plan is. It takes place when one organizes services and decides where to put one's resources which then rations the man because of the availability or lack of availability of resources. One rations at the service level which is what the earlier question was referring to.

Basically, we are introducing technologies, technologies often that are not evaluated or not evaluated in any sort of serious scientific way. And then basically, patients demand them and threaten litigation if they don't have them because they learned through the media that that might conceivably be helpful in an end-of-life sort of situation.

I guess bone marrow transplants for patients with breast cancer, until the definitive control trial was done, was an example where there was lots of reason to think that this was not a valuable thing to do. When insurance companies refused it, they got sued, they got bad publicity, and they were basically sort of forced simply by the bad publicity to often relent and provide the procedure. That's less of a problem now in that case because it's pretty definitive that it was not a useful procedure.

I think people are thinking about this in terms of a protected agency which exists at a fairly prestigious level and has lots of representation from different organizations through its membership, but which is run by — which has its scientific sort of evaluative component. It has a public advisory group that provides input and so on. It's worth looking at NICE because NICE has gone through this process over several years and basically has its advisory groups, it has its negotiations with the professions. NICE, as you know, provides advice on the effectiveness and cost-effectiveness of various modalities as advice to the National Health Service.

Interestingly enough, I mean, NICE has had some perhaps unexpectable results in that in some cases NICE decisions have increased the cost of medical care because they have in some cases indicated the things that aren't being done should be done because they are cost-effective and worth doing, things that would be on the left side of my diagram; that is, many of the things where we do very poorly in providing health care which are cost-effective and valuable and we don't do because of incentives or for other reasons.

The model people generally have talked about — and I have to say right up front I haven't given a lot of attention myself to thinking specifically of what the model would be. What the model people have in mind in terms of its integrity is the Federal Reserve System where you have commissioners who are appointed through the federal process who assess in this case the health of the economy or the health technology who try to look at the best evidence as to the state of where things are going and what's valuable and what isn't and make recommendations about whether insurance programs should be encouraged to fund such modalities and so on and under what circumstances.

So we have models to look at, and I think those models are worth looking at. Whether they pertain specifically to the US , I think, is something I haven't studied, but is, I think, worthy of some study.

We've done it within federal agencies, and it hasn't worked. I mean, the best example which I alluded to was the agency for — it was called something else earlier, but it's now the Agency for Healthcare Research and Quality, which almost disappeared. They set up organizations in various universities to study the effectiveness of care in different areas. Back pain was one of the ones, and the organization they funded was at the University of Washington-Seattle to study different modalities for the treatment of back pain and develop practice guidelines. They had similar things for cardiovascular disease, for many other areas. They were called "ports" and were funded pretty substantially to do these very careful studies of the existing evidence.

And the back pain group did a lot of research and produced some wonderful, I think, publications on what we knew and what we didn't know and what seemed reasonable in the terms of treatment of the back pain. They found among other things that much of the surgery was unnecessary and did not contribute to improving function. I had chaired, co-chaired, a panel of the Institute of Medicine some years earlier on the treatment of pain for the Social Security Administration, and we, too, when we looked at all that evidence came to a very similar conclusion. So they put out these guidelines which infuriated the people who did this kind of surgery, and they organized. They organized a new organization and they lobbied the Congress very aggressively to eliminate the Agency, and they almost succeeded. I think Sen. Frist in the end interceded and the Agency was saved. It changed its name. It had a very much reduced budget as a consequence. So these are the powers out there who have something to gain and obviously are not going to sit quietly while decisions are made which they see are not in their economic interest.

We have to have an agency that has the credibility with the public and with policymakers that has the sort of power to withstand those kind of attacks. And I think if one could put it together in an appropriate way, such an agency could play a rather important role in our health care system.

CHAIRMAN PELLEGRINO : Thank you.

DR. EBERSTADT : If I could just ask one followup question? You mentioned the analogy with the Federal Reserve Board which is, I think, an appropriate analogy. When one thinks about the indicators of credibility, something like the Fed looks at the soundness of the US currency, the inflation rate, one gets a pretty good indication of whether the Fed policy is credible or not from those sorts of indications. In fact, within our lifetime there was one Fed chairman who was seen as being not terribly credible, was yanked and replaced by Paul Volcker.

What sorts of indications do you think we should look at to determine whether such an agency, if it were ever to exist, were credible in making these sorts of assessments?

PROF. MECHANIC: I think that's actually easier than in the case of the Federal Reserve perhaps. I mean, there are many, many interests out there that have a very great stake in what these judgments are, and, you know, medical-device companies, pharmaceutical companies, physician specialties, there are many, many groups that have a large stake.

And one can anticipate that they will watch these decisions very, very closely and critique those decisions very, very strongly. And you see this actually — you see this in NICE. I mean, NICE doesn't operate in a vacuum. NICE is constantly under criticism by the pharmaceutical companies and others and they negotiate these things with these groups and discuss what data these groups have. So I think obviously one has to build credibility over time. It isn't established simply by establishing an agency. But I think we have examples to look at and processes to look at by which these decisions get made and get implemented and how they get changed.

And, you know, once again, I made a reference earlier to the work of Norman Daniels . I like the idea of any organization being held accountable for its decisions and being open to a process that allows revision of decisions when new information becomes available. And I think whatever the process is it obviously has to be open to criticism and new information that becomes available.

But I think we have to have a way of providing some credible judgment as to what kinds of very expensive things we should pay for and not pay for and obviously they're not going to be the only player in the game. There will be many others. I mean, this is an area with many people who have very strong stakes and are very vigorous in protecting their stakes.

So I would see such an agency as being under much, much surveillance and a lot of criticism and presumably there would be some give and take, but I think it has to be protected from the kind of political onslaught that we've seen with the Technology Assessment agency and with the Agency for Healthcare Research and Quality.

CHAIRMAN PELLEGRINO : Dr. Carson ?

DR. CARSON : Thank you for that thorough and thoughtful review.

I'm delighted that you're an advocate of physician discretion based upon, you know, education and analysis. But I know last year a good friend of mine, a very well-known pediatric neurologist, spent a large part of the year in court because a child with a brain tumor who he had examined — he didn't recommend an MRI until 11 days later. The tumor was taken out. The child did fine. But nevertheless he was sued for not having ordered the MRI 11 days earlier. And as a pediatric neurosurgeon, I've been involved in multiple such cases defending pediatricians and others who perhaps have not had the crystal-ball ability to determine the exact timing of a study.

How can we really have a system that relies upon the discretion of practitioners when we have a rampant litigation system that penalizes them? Even if they're correct, they still have to spend an inordinate amount of time and money, and that obviously is going to affect people's judgment and make them much more likely to be bullied by patients.

PROF. MECHANIC: I think, you know, many physicians obviously worry a great deal about litigation and very often the costs are not simply the monetary costs, but the hassle and the feelings of humiliation and so on which come through that process. And lots of people are trying to think about alternative ways of dealing with error and negligence and allegations of those.

As I see it, it's a two-step process. I mean, basically there would be guidelines which indicate when something should appropriately be done, which are based on the best knowledge at the time, and to the extent that these guidelines — right now, we have many, many guidelines on everything, so there's no chief guideline. But if you had guidelines which were then seen as credible and had some authority in the minds of the various actors, the guideline itself would provide some protection in these circumstances.

The discretion comes, you know, at the point at which — when I was talking about the discretion, it's the point at which there are sort of indications that something should be done and the physician on the basis of his or her judgment decides that it is not appropriate given the particular facts of that particular case, and my argument was that that kind of discretion, you know, must be protected. That is, these guidelines are written generically. They don't apply to everyone.

People vary a great deal on many, many dimensions including the nature of their illness and their comorbidities and their age and so on and so on and that when guidelines are written they may or may not be applicable to a particular patient in a particular set of circumstances, and that's the judgment, that's the good judgment, we really want from physicians so that when physicians deviate they should be able to explain meaningfully in a credible way why they're deviating, and it seems to me that, too, would be a form of protection. But the basic guideline itself is a form of protection if the guideline is credible and widely-respected.

Now, the problem now is there are people who basically do CAT scans for everything. I mean, basically we have — the growth and the use of CAT scans is enormous and, you know, the interpretation is that the motivation is the economic motivation and not a medical motivation. But in any case, we know that the number of CAT scans being done and the overall aggregate costs are increasing quite dramatically.

There was a very interesting paper in The New England Journal of Medicine a few years ago, I believe, in which they looked at the radiation resulting from CAT scans and found that basically, you know, a few of these CAT scans begin to approximate the radiation in people that were exposed after the bombings in Japan, the nuclear, the atomic bombings in Japan, and then looked at the — you know, that's our best source of understanding the results, the cancer results, coming from exposure to radiation.

And so there's a cost. I mean, you know, there's not only a money cost, but there's a cost for people who are subjected to procedures they don't really need or that good judgment would suggest they don't really need and the dangers to them, and that's part of, I think, Dr. Fisher's argument which you'll hear later today and that is that care is not only wasteful often, but care is damaging and that one has to sort of protect both the public purse but also one has to protect patients from care which is iatrogenic, that does them more harm than good.

But the malpractice issue will continue on. I mean, there is — it's a very contentious issue. There are claims, all sorts of claims. I happen to run — I happen to be the director of a national policy program where we finance investigators to study various issues, and we just — one of our investigators just completed a book, a person who has spent a lot of time studying malpractice, Frank Sloan at Duke University, where he tries to analyze a lot of issues surrounding the malpractice issue and indicating that the data aren't quite what some of the contentions might suggest.

CHAIRMAN PELLEGRINO : Dr. Meilaender ?

PROF. MEILAENDER: I'd like to just push a little bit on two questions and hear what you have to say.

The first really, in a sense, piggybacks on Nick Eberstadt 's question. I just have a little different angle on this, your notion that we need a credible, legitimate agency to make these cost-effectiveness evaluations. I just noticed that we may be on the cusp of circumstances in which people's judgments about the credibility of the Federal Reserve may begin to waiver a bit.

(Laughter)

But you started us off with, you know, a couple of slides about the value, differing values and cultural influences that are — sort of this area is permeated by, and I think in some ways the physician-patient interaction is value-laden from the outset. And I'm just wondering sort of where the neutral place is on which this agency is supposed to stand in making cost-effectiveness judgments about sort of what we're getting. On the one hand, you see the sphere of medical care is shot through with these various values. And on the other hand, you seem to think that there is a place to stand that sort of transcends that. I have some doubts about that, but I would just like to hear you say more about that. So that's the one thing.

The other then has to do with the issue of trust in one's physicians. I mean, it doesn't seem to me to be irrational for people to at least to qualify their trust in various ways, I mean, except for the physicians on this Council, all of whom I would trust completely.

(Laughter)

But it always seemed to me that if you would just think back to your high school graduating class and the people from it who went into medicine (laughter), you know, you have some warrant for concern and your very next slide after the survey results about trusting doctors talked about medical error as an enormous problem. I mean, and it's not that I want to make a case for obsessive distrust, but it doesn't seem to me irrational for people to approach the encounter with a certain amount of hesitance or reservation. And I just wondered if you think that's wrong or what you'd say about that?

PROF. MECHANIC: I'm talking very largely about trust in medical leaders and representatives of medicine who speak for medicine in the public arena. Actually, I've done a lot of work on trust in patient care, per se, and certainly many patients enter their relationships with doctors with some skepticism and try to test their doctors to determine to what degree their physicians should be trusted. And over time, that trust builds if the relationship continues. If the patient becomes distrustful, they go elsewhere.

But patients are not experts. I mean, patients don't have the technical competence to really judge the effectiveness of a physician from a technical-medical point of view, but they do. I mean, they make assessments about competence using all sorts of cues and basically what patients say when you ask them about trust and when they talk about — and I've studied cancer patients and patients with mental illness and other conditions — basically they want competence. I mean, competence is first. But they typically have a notion that most physicians are competent, that the training and accreditation process results in most physicians being competent. But they look for cues that their physician is exercising competence.

They want what I have called "interpersonal trust." They want someone who is responsive, who listens to them, who communicates a caring for them, who indicates some awareness of their, sort of, what the patient has told the doctor in the past, and they use all sorts of cues to assess whether, in fact, the physician is a person who really cares about them, who is really interested in them, who really listens to them, and that's very important in their assessments. And, finally, they want some indication the doctor is really on their side, cares about them, will fight for them when they need it. And I think doctors sense that, too, because, I mean, studies typically show that doctors will sort of agree to give patients things the doctors don't feel they really need or necessarily will be good for them.

There are a number of studies on how doctors deal with patients who have drugs they've seen in direct-to-consumer advertising. And many, many doctors say that they give patients these drugs, particularly if they think the drugs won't do any harm, even though they think the drugs might not do any good. And, in part, they're doing it because they, in a sense, are trying to communicate that they are — there are other reasons, but they are trying to communicate that they are on the patient's side. And when you say no to patients who really feel strongly they ought to have a drug, then you get into a very difficult kind of social interaction.

But so basically I was sort of — I was talking more about the way in which medical leaders are seen, and largely they've been seen over time as self-interested and not necessarily committed to the public welfare and organizations are —

PROF. MEILAENDER: Could I just ask?

PROF. MECHANIC: Yes.

PROF. MEILAENDER: If what you just said is true, then that may be good medical care, that it elicits trust from the patient even if the physician is prescribing something that the physician isn't sure is really needed, but it might be good medical care?

PROF. MECHANIC: Well, there usually are alternatives, and actually a couple of studies now indicate that some physicians use the opportunities to provide an alternative treatment that makes more sense, and that would be good medical care from my point of view. That's simply not simply providing Vioxx because the patient saw an ad on television for Vioxx.

So I think when you talk about — I'm sorry. I think I've lost your first point. But you were talking about the credibility of?

PROF. MEILAENDER: It was just a question about whether there is some neutral place from which these credible, legitimate judgments are supposed to be made when we're judging — making cost-effectiveness judgments in the health care field.

PROF. MECHANIC: Well, once again, I think the question is to try and create an agency that has enough, sort of, built-in course currents and has enough respect to elicit credibility but we're in a domain that there will be many voices. So such an agency will certainly not exist in a vacuum. It will have to be responsive to many, many other groups that are pushing agendas which are different from their agenda to make up the best assessment.

And my view is that ultimately that won't be the only voice. I mean, we live in a pretty diverse and pluralistic and, sort of, free society, and basically their role will largely be to try and provide guidance to federal programs and to what insurance companies are willing to accept. They would provide some, I think, backbone to insurance companies that in many cases would like to have higher standards about the use of certain modalities. So I see it as being both informative, but, in the case of federal programs, perhaps having greater weight in influencing what things get covered and what things don't in part of the general benefit design.

It's not an easy issue, I mean, no matter how you look at it. It's a difficult issue, and, you know, there's a lot at stake. It's a very, very big sector and lots of people have a stake in the game. But I think we need a way of having this spokesperson for what is sensible and reasonable and provide guidance.

That would not mean, given the realities of America, that people can't buy whatever they want using their own resources to the extent that they have them, but I'm not saying that, you know, that everyone sort of has to fall in line between these standards set up by such an organization, but it would provide guidance for what organized programs decide to cover within their insurance programs or within federal programs like Medicare.

CHAIRMAN PELLEGRINO : I have two questions, one from Dr. McHugh and one from Dr. Hurlbut . The time is short. I merely mention that in passing.

DR. McHUGH : I wonder why.

(Laughter)

Well, you know, everybody here is so grateful to you for coming, David, and we all and certainly I know you as America's greatest medical sociologist and in my mind perhaps America's greatest sociologist, and so therefore I want to ask another level of question beyond the technological issues and issues that you've illuminated here today.

I want to ask a more sociological question that relates to the conclusion or at least part of the conclusion you came to being America 's second choice being the acceptance of gridlock. And there's usually a reason sociologists, and, by the way, psychiatrists, would talk about why people come to a stop, and it's because they have so much good that they've got that they're unready to risk the loss of that good in the process even of expanding the access and things of that sort which we see as needed.

And so when I think about that question in a sociological point of view, I want to know whether there is not an appreciation on our part, our American part, of something that — of the good that came from organizations or groups that the great old sociologist, Charles Horton Cooley, used to refer to as the "primary group" from which we worked first in family but often as well in certain kinds of occupational enterprises where everybody in the group saw that the goal of the group was so good that individual advantage was put aside for the good of the group and out of that contribution came, not only great advantages and progress, but great happiness in the process. Okay? And so we can see that in the family, but we also see that in certain medical situations. By the way, you see it sometimes in certain medical situations and you see it not in other similar medical situations.

For example, I've worked in a number of medical services and some of them were the most wonderfully happy places. We were paid a pittance, but we all worked for the benefit of the group and worked for the care of the patients and we took care of the sick poor in most of these places and we stayed up late at night and we did without and yet everybody was quite committed to it. Then I worked in a government agency in a hospital-like government agency and everybody was 9:00 to 5:00 and was a fuss — the patients weren't getting really good care and we wanted — we were clamoring for more resources, but it didn't really work.

Is, in other words — and here's my little question that I've come to. Is the problem how to preserve the qualities of the primary group in the face of wanting to expand and increase the supplies that are available the thing that is essentially producing this gridlock? Have we failed to remember that what we need to preserve can be hard to do in the face of wanting more and more in some way to come to us?

PROF. MECHANIC: I guess I'm not sure of your last, sort of, notion when you say —

DR. McHUGH : Let me see if I can make it clearer. As I say, I'm muddling along here, too. This is my concern.

Is the kinds of things which we agree are the trusts that is shown in certain places for medicine — you see, we trust our doctors. I can tell you I trusted the group I was working with as an intern. I trusted certain laboratories that I worked in. Certain laboratories really work in this kind of family way, you know, the progress of things. But then there are other places that don't work that way at all, and, yet, are often modeled as places where we should have more resources for these people, more things should come, they should get bigger grants, they should — I don't know what it is. But no one looks at the fact that the social quality of the primary group is what's making everybody wish they could have more of that, but you can't have more of that without being for, kind of, primary. You go out for more resources, but you don't emphasize that which is giving the quality itself. Is that —

PROF. MECHANIC: Yeah.

DR. McHUGH : As I say, I'm muddling along here, but I just wonder whether the gridlock isn't the sense that, "Hey, look!" We're not building on the very kinds of things that make things good when we're turning to say we've just got to be sure that more people have access to insurance and things of that sort. Maybe we should be emphasizing how to replicate the primary groups that do so well. How's that?

PROF. MECHANIC: Well, I mean, the real difficulty is that increasingly the kinds of things we identify with primary groups have disappeared in medicine. It's basically sort of the basic notion of the traditional primary care doctor who has a close relationship with the patient and the family, that kind of medicine is increasingly not available to people, and part of — I think part of what people are struggling with is, how do you kind of create a new community around medical professionalism that responds more meaningfully to the wide range of needs that patients have?

I got involved with the Foundation for General Internal Medicine working on the, sort of, medical professionalism. And, certainly, there are lots of people with very high ideals about what we should do and how we should do it and how we can enhance what we do with patients in a fashion that would be to everyone's welfare, including the professions.

And, you know, there is a need to sort of build a new culture in medicine. The old culture seems to no longer work. And how you build that culture, particularly in the context where you have, you know, all of these other forces operating, a very strong sort of focus on profit. I don't — you know, several of my friends who write about these medical issues of professionalism — I'm sure you know them all, you know, people like Bud Relman and others — are actually convinced that sort of the corporation and profitization of medicine has ruined it and has ruined medical professionalism and we have to go back to something else.

The trouble is, as I said at the very beginning, I just don't think it's practical to think about taking profit out of medicine in America . It's just not — it's not a reasonable sort of expectation, and so we have to think of new ways of organizing medical groups and physicians in ways that provide many of the same sort of good values of medicine without necessarily trying to change the whole world.

And there are people that are struggling to do that. There are physician groups that are struggling to do that. But I think at the cultural level — I mean, it's very hard for people who are worried about, you know, their future health care to want to give up what they feel secure with for something that they feel more insecure with. And I think that's part of the sort of major dilemma we face.

They don't mind add-ons, per se, but they're very worried about anything which will affect their kind of situation to the extent that they believe their situation is a good situation.

And this is why I think the candidates have all tried to sort of skirt that. You know, you can keep what you have if you want it, but we'll talk about the rest because they know that there is this sort of big constituency out there that the system does work well for and who are afraid of losing what they have for something which remains uncertain.

CHAIRMAN PELLEGRINO : Dr. Hurlbut ?

DR. HURLBUT : Do we actually have time for my question? Probably not, huh? We do?

CHAIRMAN PELLEGRINO : We will extend the time.

DR. HURLBUT : So, first of all, I want to say that your paper on muddling through, I really found it very interesting, and I think as a physician very true to the reality of this extremely complicated realm of human existence.

It's evident in the current political campaign that medical care is going to be a major public discussion now for at least for the next eight months, and that's good and bad. But one of the things that's troubling about it is it's so easy in speaking about medical realities especially when using anecdotal cases to inflame natural moral sentiments. Suffering is a very hard thing for a community to deal with in a collective dialogue and especially when it's brought down to the complexities of the individual cases and the relationship between doctor and physician.

So what I want to ask you about is something that's a very broad question, and the reason I bring this up is because obviously our Council isn't going to take this issue on in the broadest sense of deciding our culture's policy, our nation's policy, but we want to add ethical — a comment about ethical dimensions.

So this is a very hard question to ask or to frame properly. But in your paper, the one I'm referring to, "Muddling Through," you make two statements that strike me as quite interesting in their relationship to one another. At one point further in the paper, you say, "Rationing of health care has always been present in all systems of care," and that seems obvious because values float through. But then earlier you say, "The goal of any rationing process is to constrain expenditures in a way that provides a reasonable level of care, is equitable, and is cost-effective."

And there it strikes me that there might be other reasons for rationing or reasons not to — let me reframe that. There might be other factors going into the rationing process and that those factors could be very different if we're muddling through with an imperfect system or we try to establish a more uniform system that has a stronger authority and constraint within it.

And this is most specifically what I'm getting at: Yes, cost containment and reasonable levels of care are crucial and probably the main body of medicine is uncontroversial. But rationing could also do a lot of other things besides meet those more obvious financial goals. It could serve, for example, to encourage responsibility. It could shape the character of our culture. It could more or less send an announcement that medicine is for certain things but not other things. It could even go so far as to more or less tell people that their lives are about some things but not other things. You mentioned antidepressants and their misuse for what you were calling the vicissitudes of natural life processes.

When I look out at the future of medicine, it looks like the main body of medicine will always probably be about very serious and uncontroversial treatments and issues, but it also looks like we're going to get more and more into areas that are controversial. We did a whole report called "Beyond Therapy." And I just wanted to get your overview and ask you how you think our Council might contribute to this larger dialogue, most specifically the issue I'm referring to here, how medicine's implicit rationing shapes our culture's character.

PROF. MECHANIC: Well, that's a tough question. I think that — I mean, there's been this continuing debate, and I've been part of it both here and in Europe , between those people that think somehow, if you write all the rules upfront, you then have greater transparency and greater fairness. And my position is, first of all, you can't write the rules that well, that life is too complex and there are too many contingencies, and that bureaucracies get pretty bad at rigidly implementing rules that don't work in particular instances and that judgment has to prevail at some level.

And so my conclusion is you write the rules at the higher levels; that is, the rules are framework rules. But you have to leave room at the, sort of, intermediate level, what I call the service level, for people with good judgment to adjust those rules consistent with the contingencies of the particular situation that is being dealt with.

And there's been a lot of back and forth. There's been a lot of discussion between those who think that explicit rationing is the only way to go and other people who don't like explicit rationing. This, of course, was very salient during Oregon 's effort to develop its rationing rules and its various categories of what would be included above the line and below the line.

Interestingly enough, if you actually look at the studies of what really happened in Oregon , the lists really weren't that important in reality. There were a lot of other things that really drove the system quite independent of these lists and there are all sorts of ways of getting around the list if you really wanted to so that — yet, a lot of good things happened through that discussion.

So my feeling about — I think it's very difficult. I mean, obviously rationing, however it occurs, sends signals as to, sort of, what the frame is, and I think it's quite correct that how we talk about rationing and how we go about trying to do it can impact other areas that you mentioned, such as, what is the appropriate domain for medicine versus other areas? I mean, increasingly people talk about medicine as if it's everything. It's education. It's everything else. And at some level, we have to really, sort of, be very clear about, you know, what the boundaries are and what things, while worth doing, are not necessarily medicine, they're something else.

In the context of the individual patient care, I mean, it's quite proper and appropriate that physicians try and do whatever they can to help their patient over whatever the difficult circumstances are. But they obviously can't insure for their old age. They can't change their economic circumstances if they're dire. I mean, I think we have to be realistic about what the limits of medicine are as well as what the opportunities are. There are great opportunities, but there are also great limits.

And by having an intelligent discussion about this — and I think this is where a council of this sort contributes — one can, I think, help the public understand, you know, what these dilemmas are and what the different levels of responsibility are with different parties to health care.

There is a lot of glib discussion about patient responsibility and that kind of always annoys me in the sense that, while it's true people have to be responsible and that the people share responsibility and we should try and minimize free riders, that a lot of the assertions about responsibility and we're going to save costs through people exercising responsibility doesn't take account of the fact that many of the things we're talking about are not within the capacity or individuals or people to change.

I mean, people have all sorts of problems which are behavioral. The assumption somehow is that they simply stem from the will of the person and if the person would just be a better person and be more responsible these things wouldn't happen. But I don't think that's the way that life really goes, and that's the difficulty. But I do think it is valuable to talk about, you know, patients' responsibility as well as other responsibilities of physicians and policymakers and so on.

I don't know if I've answered your question or not.

DR. HURLBUT : Yes, that was good. It was a pretty hard question.

Do you have any specific suggestions for what our Council should comment on?

PROF. MECHANIC: Well, I mean, this is — you've obviously taken on a very big topic, but I think there are many, many aspects of the — I mean, I think the basic question I started with is the kind of question the Council can properly take on and contribute a great deal to, and that is, you know, in a society like ours, what do we owe to each other?

It sounds like a, you know, very vague, general question. But it seems to me that that is really very basic to much of what is going on. And while it doesn't lead to a very precise sort of policy recommendation, it does kind of open up the whole issue as to, you know, what our values are about the future, you know, of the country.

I happen to feel very strongly, for example, in certain principles. I mean, I always start with children. I think children . are the future resources of the country and that we have a responsibility to children to ensure to the extent that we can appropriate social development, appropriate education, appropriate health which allows them to take advantage of future opportunities.

So as I think about this — actually, in other contexts when we've talked about staging, of how we might stage some expansion of coverage, it struck me that the appropriate way and other people— and it's hardly a unique idea. The appropriate way is to start with children for both moral reasons and also pragmatic reasons. The moral reasons are that they are the resources. They are the resources of the future. You know, it's to our advantage and to their advantage to give them the capacity to make good of the opportunities our country provides. But it also is, from a financial point of view, not a terribly demanding thing; that is, children for the most part are reasonably healthy. The costs of taking care of them compared to the elderly are very modest. And so from a cost point of view, extending coverage and dealing with the problems of children is a far more manageable task than many other tasks we see as equally important and worthwhile.

But it seems to me sort of taking on some of those issues, and I think when we say, "What do we owe to each other," I think we particularly owe the children because in a sense children are largely defenseless and dependent upon what their milieu provides, and we could do a great deal to enhance their life chances through medicine as well as other means.

CHAIRMAN PELLEGRINO : Thank you very much, David , for your very extensive discussion and response to questions.

We have overrun our time a bit, so I will exert the chairman's prerogative and we'll have break now, and if you would be good enough to return at 10 after 11:00 , I would appreciate it.

PROF. MECHANIC: Thank you.

(Recess 10:45 a.m. - 11:10 a.m.)

 

Session 2: American Health Care: The Problems of Access and Cost

CHAIRMAN PELLEGRINO : Our next speaker is Mark Pauly from the Wharton School at the University of Pennsylvania , and I'll point out again to Dr. Pauly , we do not give extended introductions with a curriculum vitae because they are so impressive that it would take all the time of the discussion. So I presume you would prefer to have the time for discussion. So we await your contribution. Thank you.

PROF. PAULY: Well, I approached this task with some trepidation. When Dan asked me if I'd come and make some remarks, I said, "I'm not an ethicist. I'm just a card-carrying economist." And he said, "That's okay. That's what we want you to come and represent." And so I'll try to do that to the best of my ability.

I am, in recent years, a more vigorous consumer of issues in bioethics since I've been appointed co-director of a new flagship undergrad program at Penn, the Vagelos Program in Life Sciences and Management, where the cream of our undergraduate crop study the combination of what I call "the discovery question" in both science and management, and in a way, "the discovery oxymoron," managing science discovery, is a little bit of an oxymoron.

Of course, the students want to know not only some of the economics that I can convey to them, but they're also very sensitive to ethical issues, both in terms of justice, in some concept of justice, or (in some ways we actually try to raise anxiety about this a bit) in terms of conflict of interest. So I've at least had more reason to worry about ethical issues in my Mr. Chipsian phase that I seem to have entered as opposed to when I mostly taught Wharton MBA 's, not that they're not ethical.

(Laughter)

So I thought in my remarks I would try not to punish people who read my two papers, which I reread and I still agree with myself, so I'm happy to report that, but instead make some remarks that are intended in a way to link them to the discussion du jour of health care reform and at least in my way of thinking what I think I was trying to say there actually seems to me to be fairly strongly linked, and so my remarks on the linkage may be of interest to you, and, at worst, they'll remind you of what I said in the article, whether you agree that I made the correction well or not.

So, okay. So my version of health reform breaks down to just two questions. There are a lot of questions that circle around these, but I think there are two main issues that people talk about when they talk about health reform and pretty obvious probably.

One is cost-containment, which — and I've tried to give the most lukewarm definition of each of these two objectives in hopes that at least we might be able to achieve that at long last, although there are stronger versions. But I guess literally "cost-containment" would mean stopping growth in health care. I don't think that's going to ever happen, and actually speaking of my MBA's, they would be very disappointed if it was because that would not be good prospects for their careers. But I do think that an issue of slowing the rate of growth in medical spending is an important part of the debate.

The other part is covering the uninsured. I'll put my heart on my sleeve from a policy point of view and say I'm in favor of universal health insurance but not universal health care, at least as I understand those two terms to be defined. But this is a more less-aggressive definition of the goal, but I believe actually one that may be within our grasp if we aren't too slow about it. It's already starting to slip away. But the idea would be to make some changes that would reduce the number of people in the US without health insurance, either public or private.

My policy prejudices are — and maybe this just common sense. I actually got this from Tim Russert , I think. But it's more likely that the government would be able to do something about covering the uninsured then cost-containment. And if you know from my paper, and I'll kind of hit it here as well, cost-containment is a much higher mountain to climb and a slipperier one, too, than covering the uninsured, and so I'll say that.

But the two can be independent — and here's where I'm not so sure I agree with myself — and yet they are interrelated. So I guess let me first define the position I don't agree with. Some people are taking the political posture, especially on the Republican side, that, well, we really can't do anything about the number of uninsured people unless we get health care costs under control. I don't agree with that. Having said that though and being an economist, I have to say on the other hand, I do believe there is a connection between what's happening to health care spending and what's happening to the number of uninsured. So the connection is not one-for-one, but there's definitely a linkage.

I'm not sure whether I need to apologize too much for welfare economics, but the normative framework that I carry around in my head is one based on welfare economics.

Richard Musgrave , a distinguished theorist of public finance and the person that I studied most intensively back in the day, generated what I thought was an interesting metaphor of how economists think about government and public policy. He imagined kind of applying Adam Smith 's vision of how to improve productivity in the pin factory to government so there would be an allocation branch that would be staffed by economists and it would have sort of full control over the term "efficient" and "inefficient." We wouldn't let anybody else borrow that, not even engineers, certainly not ethicists.

(Laughter)

But there would be another branch of government staffed, I imagine, by probably ethicists and lawyers and maybe clergymen, for all I know, who would talk about the distribution of real well-being.

Now one of the theorems actually that people made a fuss about at one point in economics was showing that the allocation and distribution can't really be done in separate water-tight compartments because what you do with improving efficiency affects obviously the distribution of well-being.

But I'm going to try to justify or at least link such normative conclusions as I come to in welfare economics and recognizing the most serious problem of welfare economics which is at the abstract level we can we think characterize states of the world as efficient or inefficient. There's a fancier definition. But the kind of plain garden-variety definition of efficiency or inefficiency in economics — I'll do it that way — is a situation where there is some change that could be made that would be to everyone's benefit, and we think we can characterize it even with that kind of wimpy criterion. It actually does allow you to step into the phone booth and come out as a caped crusader against inefficient things like protective tariffs and at least under some readings minimum wage. But the dilemma or the limitation of that is that it doesn't uniquely define the most desirable state. You actually need somebody to either take up the responsibility or have received the golden tablets on which are written the social welfare function that tells you how well off various subgroups of the population ought to be based on some judgment, not based on economics.

Okay. Well, so the most important things to know about cost-containment, I guess, one way to say it is, it's not like petroleum products, so we all are observing some cases fairly painfully. I haven't got my gas bill yet. Thank goodness for global warming actually. It's been kind of a warm winter in Philly. But total spending on petroleum products is rising, and, although some people call that inflation, that's really not the right economic term either. It's just a rise in relative prices. But the interpretation of the increase in spending growth on natural gas and gasoline and so forth is you're spending more to get the same thing, and that's been the growth over the last couple of years.

In contrast for as far back as we have data, which I think goes back to around 1946, as far as we call tell — and I'll say a little bit about why this isn't the strongest proof, but it's all we've got. But as far back as we can tell, the lion's share of whatever share that is of growth in health care spending is attributed to what's called technological change.

And the intuition behind that, actually the technically correct intuition is just using inputs and outputs differently, using inputs differently to produce output. But the usual interpretation we give of it is that there's been improved technology that, in large part, the spending growth has been accompanied by new products and what can also be called new technology, new uses of existing products — for example, the discovery that greater widespread use of statins that have been around for a couple of decades would be a new and good thing to do. And so the basic punch line is that in contrast to petroleum products or other sorts of things, it's not as if we're spending more for the same thing. We're spending more for something different and arguably at least for something better.

I do need to apologize here a little bit, and I guess show some of the dirty underwear. The measure of technology is a statistical residual in the analysis of the rate of growth of health care spending. So you take your data on how spending grew last year, you see what portion of it you can attribute to the aging of the population — that's usually not all the much actually, less than 1 percent, but it's something everybody can appreciate and me especially personally — and then you also adjust it for changes in input prices, and then what's left over you call "technology." So it's really the label of our ignorance, but on the other hand, it does seem to be correlated with observations on the changes in the way medical care is produced and used both, as I said, in terms of new products and new uses.

And so if you take that as okay that most of the growth has been coming from new technology, then the two kind of evaluative questions in welfare economics would be what I called here Question 1 and Question 2. They are really the same thing but stated slightly differently. So if you were a cost-benefit devotee, you could say, "Well, I would then judge whether the spending growth that we experienced in 2006, which is the last year for which we have data, 7-point-something percent, I believe, well, that provided some positive benefit. Is the benefit greater than the cost?" So you take a cost-benefit approach.

An alternative way of looking at what is happening, especially at the level of the economy as a whole which I think can be instructive is, this is basically invoking the concept of opportunity cost. Health care I will say, as I'm sure everybody knows, is a fairly labor-intensive product, in contrast maybe to petroleum products, which are not. It's a fairly labor-intensive product. So roughly speaking, what you can at least inquire about is whether the value of the outputs that the resources being devoted to health care are producing is greater or less than the value that those resources could produce if, say, they were used in the next-best place in the economy, whatever that might be.

So, I mean, I think it's kind of a useful question, mostly because then you get, I think, back the message, nobody knows the answer, but you ask, "Well, what if all the smart young people going to medical school or nursing school and so forth who are going into health care, what if they didn't go into health care but did something else? What else would they do and would we feel happier if they went fewer into health care and more into something else?" I guess my nihilistic position here is, I don't know the answer to that, and I'm pretty sure nobody else does either. So trying to stake out a hard and fast position of the desirability or undesirability of health care spending growth, I think is largely — maybe we can find something to lean on here — but is largely undercut by the absence of information on the relative value of health care output compared to other things.

I'm pretty sure if those smart young people went to law school, I probably — this will be my last slamming-a-lawyer comment — but that would not be the greatest thing, but if they went into engineering school and, you know, stopped the bridges from falling down over the interstates in Philadelphia, I would potentially regard that as a gain. But there have certainly been some amazing things that people do and can do in health care. So that's sort of the normative comment there.

And then this sort of peels it away a bit and elaborates on the idea of why it's hard to know. It's hard to value health either in money or compared to the value of labor for other uses.

I guess this is my cue actually to try to be a little more positive and to talk about at least some people who think they know some of the answer to this value question, and I will cite David Cutler at Harvard who, along with some others, mostly everybody who has looked at this question has come out with the same answer. Well, they decide to look at the low-hanging fruit, and the low-hanging fruit was the improvement in health related to cardiovascular disease, and David and some others have tried to determine both how much of the improvement in health related to cardiovascular disease was due to new medical technology — they guesstimate 50 percent. That's actually a fairly squishy number, but I think the language is something like "nobody could prove it was less than that," and on a somewhat more substantial level even very conservative methods in the philosophical, not the political, sense of attaching — or perhaps the methodological sense — of attaching money values to health tell you that in a way the investment that we have made in spending more money on the treatment of people with heart disease and stroke as possible outcomes has been worth it with a payback ratio of something like 4-to-1 to 7-to-1.

So this isn't all just hypothetical pie-in-the-sky and it isn't all nihilistic. At least for that particular development in new medical technology and for that particular and quite important disease category, it looks like we're ahead. Or, another way to say it is — and I've actually tried from time to time to get some of my MBA's to join me in offering health plans that are atypical — why not offer a health plan that says — or slogan — "Last year's technologies at last year's premiums"? That would control health care cost.

And then we could see how many people would want to buy that plan, and my suspicion is not very many either in the public or private sector.

But now the other side is arguing that — and I'm sure that Elliott Fisher will raise this as well this afternoon, so I have him kind of in my head — arguing that compared to not having improved technology at all, we're probably better off spending the money, at least collectively or in an aggregate, than using it for what else we might have used it for, that plasma TV or, if my wife ever lets me, the pickup truck I really want to buy. But instead of spending it on those things, spending it on health is probably desirable, while we can't really prove that we've done that in the most efficient fashion, perhaps 80 percent of the benefit could have come from 50 percent of the spending growth or whatever the fraction you might want to plug in there.

And some fraction of the spending growth, as I said, is also not attributable to new technology is attributable to — well, the way it's usually phrased in the article Uwe Reinhardt and Gerry Anderson write every year for Health Affairs , the subtitle for that article always is, "It's the Prices, Stupid," and so there has been particularly, both in terms of understanding why our health spending in the US is higher than it was last year, and most especially in trying to understand why our spending is higher than it is anywhere else in world, a major contributor especially to the latter but somewhat to the former is the level of wages and prices in the US. We do pay more, not probably as much more as you might think if you watch TV, but we do pay more for pharmaceuticals — that's prices. But, of course, hospital spending and spending on health professionals is a much higher fraction of total health care spending than drug spending. And there the incomes received by physicians, by nurses, by phlebotomists, even by orderlies and clerks in the health care sector has not only been growing more rapidly than wages in general, but it's also considerably higher than in other countries.

So actually once calculated, what would health care spending as a fraction of the GDP look like in the US compared to other countries if we did the simulation and let those other countries pay their health professionals like we do, and it turned out we were third from the bottom in OECD fraction. Only Turkey and Portugal were lower than us. So at least that's important, I think, as part of the anti-Paul Krugman protective shield perhaps or something.

Anyway, some technical reasons why it's uncertain, we think, and there's increasing evidence suggesting there are important cost offsets in health care meaning — this is the way it's usually described — spend more at least on some particular kind of prescription drug if you can get people to do it and comply like blood pressure medication or hyper-cholesterol medication, that probably can save costs somewhere else in the system over time.

There is a fervent desire, I think, on the part of policymakers to want to believe that you can save money by spending money across the board. My reading on this pretty skeptical, that the actual evidence we have that spending more even on things like colon cancer screening and such would actually reduce total spending is pretty weak. Only the old, cheap pediatric vaccines, at least in my reading of it, actually have a negative net cost. But it's certainly true that a lot of preventative measures have a net incremental cost after you take out cost offsets which are low enough so that it's a highly efficient thing to do. They're worth the money, but they still cost money.

The other issue has to do with the definition of efficiency and inefficiency in economics. Here I draw a parallel to at least what I remember is the definition of efficiency from physics which was there was a kind of theoretical efficiency of a machine and then there was the actual efficiency and they differed because of friction. So when Peter Orszag took over as Director of the Congressional Budget Office, he polled all the health economists asking them how much inefficiency did they think there was in the US health care system. I think the central tendency was around 30 percent. I was lower than that, but that's the guess. But at least when I've talked to people about how they answered, they were thinking of it in terms of the theoretical improvement in efficiency, but the dilemma is that for many of the practices that seem to be inefficient, at least so far, we haven't either found a reason why they exist, which would be the first step on trying to change behavior or a good way to change behavior.

The other sobering point I'd make about cost-containment is that, suppose that we've discovered a way to put in place some of the changes in the organization and production of health care that Elliott will talk to you about — and I actually have some of my own sure-fire, can't-fail interventions, too — suppose you put all of those into place for several years, that could slow the rate of growth for health care spending. So instead of being 2 percent more than the rate of growth of GDP, it could be less or maybe even zero. The main problem is that, as long as the enterprise of developing new medical technology continues to operate in the same way and at the same pace as it has, after you phase in your cost-reducing strategy — and we actually did that with managed care. I believe had we not done what we did with managed care, Denzel Washington to the contrary not withstanding, health care cost would be 15 percent higher in the private sector than they are now. But having said all that, the magic, it will appear, will eventually go away because we really don't know any interventions to slow the long-run growth rate of health care spending, and that's sort of the last rhetorical question.

There are some things, as I said, that people think could improve efficiency, so I thought I would pick on the one which there is most consensus among economists and most puzzlement on the part of normal human beings. So we think, at least an important cause of inefficiency in health care — and this is not the pontifical "we" here: Victor Fuchs actually did a survey of health economists and almost everybody agreed with this — that one of these, at least the easiest to target, the most defensible target for something that is inefficient and is causing health care spending to be higher than it ought to be is the tax subsidy to employment-based health insurance. So in the first dot line, I actually put myself in there. We have a wonderful benefits department at Penn, and so here's what they let me do as an upper middle-class person, you know, at Wharton not earning a too-shabby salary.

What they allow me to do is to shield about $8,000 of our family health insurance premium from taxation because that's technically paid by the employer. We have a cafeteria plan at Penn which allows my wife and me to shield about the $4,000 a year that we explicitly pay as a health insurance premium. And then we put the maximum of $4,000 a year into a flexible spending account, which is also tax shielded. And, fortunately, we both inherited the gene for myopia and so we never leave any money in that account. We always have the best collection of designer prescription sunglasses on our block. But the basic punch line here is that the laws, while I'm not breaking any laws here — I guess I'm not that proud of it either, but I do try to thank the Treasury every time I get a chance — the laws allow me to shield $16,000 of my compensation from all taxes, not federal, state, and even the dreaded Philadelphia wage tax. And at my marginal tax rate, that's probably worth something like $7,000, all told.

So that's a subsidy. It is, as I said, because it's tied to the taxable income. The value is greater the higher the income for a person, and because generally that means the tax rate will be higher. When people have tried to total up how much this tax subsidy amounts to, it's at least $200 billion and growing and, of course, it's disproportionately claimed by upper middle-class workers. That may sound inequitable to you. I hope it does. At least it sounds that way to me. But the efficiency side, if I remember where I'm coming from here, it's also criticizable from the efficiency side because we believe that induces upper middle-income people to choose levels and types of insurance that are not very cost-containing, essentially because, as I've already argued with my flex account, but it would work with everything, we're splitting the cost with the Treasury, and so that causes the level and the generosity of health insurance coverage chosen by middle-class and above workers to be higher than it would otherwise be, and there's another defect, which I think I have on the next slide.

So for one other problem with the arrangement in health insurance which seems to make it function differently than other kinds of markets, even differently than other kinds of insurance markets, is it appears that when the upper middle-class wants to enhance the generosity of their benefits or to have coverage of the latest new technology, even if it's very expensive and perhaps doesn't add so many quality-adjusted life years, there's a dynamic which I'm sure you can speculate on as well as I that suggests that that's going to be the standard of insurance for everybody.

And so I think what we've been seeing — and now this is the linkage in large part to the growth in the number of uninsured — what we've been seeing over perhaps the last 10 years is a continued growth in the generosity and costliness of insurance coverage chosen by middle-class people. Middle-class people up to this point are still able to "afford" it, meaning they're willing to continue to work at firms that provide that insurance coverage and, arguably at least, they prefer to spend their rising real incomes on that improved health care than on other things. But lower middle-income people are bailing out at a pretty rapid rate. So sometimes the metaphor is, it's as if we're trying to sell a new and improved Lexus every year to everybody which might be okay if you're well-off at least up to a point, but does seem to leave an important group behind. And, yet, the obvious solution, why not create a Kia version of health insurance runs into both regulatory, ethical, and I think even market-related complexities here. So that's sort of the story there.

So now that I'm talking about the uninsured, I might as well make my remarks on the uninsured and then we can have a discussion.

Health economists have not had a great agreement on how to conceptualize why there is social concern about health care and health insurance. I think that's fair to say. There actually are in the health economic journals a fair number of articles that talk about fairness and equity. They are mostly written by British and, for some reason, Norwegian health economists. I'm not sure I understand that part. And they are a little bit — and so I'll criticize a little. They do tend to get down to what seems to somebody across the pond — maybe I'm just not sensitive enough — to be kind of the angelic density of pinheads. And some part of them are explained using cricket analogies, which make no sense to me whatsoever. So I'm not sure about that.

(Laughter)

But the way I've tried to think about the reason why we are concerned about the uninsured, which seems to be an empirical observation on the human species, is to model that or conceptualize it as a kind of externality. Externality in economics is any time when one person does something if it affects somebody else's well-being in a way that's not immediately mediated by the market. And to get back from the gobbledygook and just sort of talk about common sense, my hypothesis here is, that because I think it's true of me and true of right-thinking people I talk to, that in addition to all the other things we might want to spend our income on, we might feel depressed or sad to note that other fellow human beings are not consuming effective medical care and we might want to think about making, not a transfer to them to make them happy, but a transfer to them to make them healthy by causing them to increase their consumption of medical care.

Now, of course, if we're talking about contagious disease here and you could catch something from somebody else, you don't even have to be unselfish. Even Scrooge McDuck would pay for that, I guess. But the great bulk of medical care is not related to contagious disease, at least that's treatable at the margin. The great bulk of medical care spending comes from other things, but I think —this is an hypothesis — but I think that the thought that I would be willing to pay something to cover the uninsured, I can assure you of that. I can also tell you it's not my total income, but there's some number in between there, and the general vision here would be to use government to kind of mobilize and assemble the willingnesses to pay of the reasonably well-off and healthy in society for things that would improve the health outcomes of others.

And actually you can't avoid it. When you subsidize a good for which demand is stochastic like medical care, it is insurance no matter what you call it. You could call it "welfare," but it's still insurance. And so we generally think of this as a case for subsidizing or maybe even furnishing some kind of health insurance to those portions of the population which, absent an intervention, would consume levels of medical care so low that these externalities in consumption would be there at the margin and would be bothersome.

And although this is obviously a kind of an ethereal concept at least in terms of the standard methods of economic measurement, I'm here to tell you we have had pretty good luck, and I'm kind of revisiting this. Using this concept to explain why some states provide more generous Medicaid plans than others, there is a price elasticity out there. If you change the matching rate, they suddenly get more generous. There is an income elasticity out there. If state income rises and the matching rate doesn't offset, higher income states are more generous. In the work we did some years ago, there was also the Southern dummy. States in the South just seemed less generally inclined through the public sector than others. It may be no surprise. I don't know whether that's still true. But that seems to be something important. So that's one reason, why covering the insured [varies].

A second reason that I've been trying to pursue in my own research with Jose Pagan at the University of Texas-Pan American — we think we're getting some interesting recent results, so I'm excited about them — basically say, if you are an insured high-income person, if you live in a town where there are a lot of low-income, uninsured people, the quality of medical care you get will probably be adversely affected, not just by the potentially larger charity-care burden in your local hospital, but also by the phenomenon that especially specialized high-tech kinds of medical care need a large enough market in order to exist. So Podunk doesn't have a symphony orchestra unless it's, of course, the vacation home of a lot of well-off people, just so in a community where most people are low-income and/or uninsured, the level of sophistication of medical care will not be what it is if the average income and insurance coverage were higher and that spillover will affect insured people.

Now in some markets for better or worse, and I think mostly for worse from the point of view of goodness here, markets have been able to segment themselves so that the low quality provided to the uninsured doesn't spillover into low quality for the insured, but we think it's at least still an important influence and, particularly in the smaller cities and towns where a lot of the uninsured live, a potentially important argument.

The third argument is actually the one made by the Institute of Medicine or at least an argument made by the Institute of Medicine that I find most persuasive but it's kind of third on my list in terms of persuasive power. It basically says, think of the uninsured people. Let's make an assumption about how much more medical care they might consume and how much healthier they would be if they were insured. Let's attach a value, a monetary value, like we sometimes do as economists — as Vic Fuchs says 'It's dirty work, but somebody has got to do it' — and so we attach a monetary value to the improved health of the uninsured. It looks like the value of the improved health is more than the cost of covering the uninsured, which kind of leaves you with the question of why don't the uninsured pay for it themselves, but you may be able to invoke something there. At least those are the three arguments.

So I will try to go through quickly some simple political economy ideas here and just kind of give the 25-words-or-less summary. I believe one of the problems, one the reasons why it's been hard to make the case for covering the uninsured is related to something that I was just talking about. We don't really have good and persuasive evidence of how much good insurance does. My reading and criticism to some extent of the IOM reports on this subject is that they're written to preach to the choir. All of us in health care feel health care is a good thing, but we're not really so persuasive in explaining to people who may value private goods or, for that matter, may value other public goods, like repairing the decaying infrastructure, why improved health care is the best way to spend money.

The strongest evidence we have on the impact of insurance on the use and outcomes of medical care are for poor people generated by Ronald Reagan when he was governor of California . As you'll know from looking at my paper, as you may know, most of the uninsured are no longer poor, if they ever were, and for that population we actually have much less evidence about how much good it would do.

Then there is what I call the "Altman conundrum" named after my friend, Stuart Altman , who is the perennial chair of any health economics task force in the Washington , DC area — Stu can do a whole lunch shtick on this one — explaining the reason why we don't have health reform. It's not because people at least inside the Beltway are not eager to have health reform and reduce the number of uninsured — they even are at the Cato Institute. It's that the next-best alternative from their point of view is to do nothing. And so compromise is what's needed. And I will say, playing a little bit against character here, I am optimistic these days because I think there is compromise in the air, although we shall see.

But the fundamental political economy question I think is whether the price tag of covering the uninsured which I estimate to be at least $1,000 per tax-paying household is something that people would be really willing to pay. We may want to talk about that.

The economics of crowdout. This is, of course, one of the points of debate, particularly about the extension of SCHIP. There is a concept called "target efficiency" which basically says, if you're spending more government money to cover more uninsured people, how much do you end up spending per uninsured person that's covered? And the problem or issue is that, as you move up the distribution of income, you find a larger and larger fraction of people who already have private coverage, which means that, if you do put in place a public coverage program — and you can't just say you're only eligible for this program if you're uninsured. That's not going to work — you end up drawing into the public program a large fraction of people who would otherwise have bought private coverage. The current SCHIP numbers are about 50 percent crowdout.

In one sense, since I'm not too keen on the government actually providing health insurance for people well above the poverty line, I kind of like that result. On the other hand, I have to tell you that from a pure efficiency point of view, that's not inefficient. If you are making a transfer to families who previously had made a sacrifice to take the lousy job so they could get health insurance coverage for their kids and now you offer a subsidy to them that evens up the burden, that's not inefficient. It's a transfer and perhaps a justifiable transfer.

The last dimension of crowdout I wanted to mention here which I think is important has to do with, in a way, the problem of plumbing. So here's the way the story goes: Suppose that there was universal health insurance coverage. That should mean that there would be fewer people receiving charity care in hospitals. Right? So what you're supposed to believe then if you're the middle-income insured tax-paying family, that will cause hospitals to reduce their prices because now they don't have to cover the cost of the uninsured. When hospitals reduce their prices, what you're supposed to assume is that will cause insurers to reduce their premiums because now they don't have to pay out so much in benefits. Then when insurer premiums fall, what's supposed to happen — I actually believe this may happen eventually, but it's a little bit of a tenuous point — your employer will give you a bigger raise because now they didn't have to spend so much for health insurance. And that's the way that you get the money back that you paid in initial taxes to cover the uninsured, and I guess — I'm not going to try to sell you a bridge here, but there's a lot of possibilities for leakage there.

So here is my normative comment on plans to reduce the uninsured. I think it should include the three M's and exclude the two E's, and I guess one reason I'm optimistic is that at least two of the three M's are present in the program proposals of all of the remaining viable candidates and maybe the last M we could deal with.

So one of the M's is markets. That's not shibboleth, that's — the general idea here is that, both on the Republican and the Democratic side, people are envisioning a setting in which people, consumers, could choose — subsidized ones as well as unsubsidized ones — could choose from a wide range of different health insurance plans. It wouldn't be a single payor. It would be universal health insurance but not universal health care. People could choose and, to some extent, the differences in cost between different plans would reflect the differences in quality between different plans like the breadth of their network, so a more market-like arrangement, more or less what's available to me as soon as I bite the bullet and go on Medicare. I can choose Medicare Advantage Plan as well as the government plan.

Means testing. So the idea of offering larger subsidies to lower-income people and tapering subsidies as incomes rise seems to be present on both the Republican and the Democratic side although you actually have to read John McCain 's plan carefully to see it there, but it is there. And then this is the part that's actually a splitting of the Democratic side and certainly splits them from Republicans but the possibility or the desirability of an individual mandate. So all of those might be possible and, I think, would probably be a good thing.

The two E's, the things that I think both are bad ideas in themselves and in my judgment make it harder to get consensus on the three M's, one is employer mandates. So if you're a true-believer economist, you believe in contrast to normal human beings that the boss doesn't really pay for your health insurance. Amy Gutmann , the President of Penn, is not shelling out of her purse money for my health insurance. That $8,000 is, I like to believe, money I'm worth to the University which they would have paid me in any case. The only difference is and the reason why it's there rather than in my take-home pay is because of the aforementioned tax breaks. So it's my money. And an implication is, for an employer that currently does not offer health insurance, if you make that employer pay for health insurance, the cost, at least the lion's share of it, will not end up falling on the owners of the firm, it will end up falling on the workers in the form of either lower raises or, if their wages are close enough to the minimum wage level, more layoffs, and that seems to be undesirable from both an economic point of view and from an equity point of view.

The other thing that I think ought to be excluded if you want a reasonable discussion here is the notion that, well, we're going to be able to cut the cost of covering the uninsured greatly by improving efficiency of the system — not that it's not a good thing to try to improve the efficiency of the system, but I guess I've already expressed my skepticism. I think that, as usual, politicians who propose to pay for something largely out of reduced waste, fraud, and abuse are probably deserving of some skepticism. So my ideal here — I'll just read it off because I want to time to talk — would be an employer-enforced subsidized individual mandate for income-conditioned minimum coverage.

And so this is sort of the picture, free comprehensive insurance for the poor. As household incomes rise, the subsidy — both the subsidy and the minimum required coverage fall. Households can choose among public and privately provided plans in a market setting like today's Medicare. I actually — it wouldn't be my first choice, but I actually would be quite comfortable with Medicare for all, if by "Medicare for all" you mean today's Medicare which is not a single-payor plan by any stretch of the imagination. And the reason why I don't like employer mandates is, for one thing, they're paid by workers. But, for another thing, employers think it's their money and so they fight like tooth and nail and fairly effectively to stop health reform where they really don't have a dog in the fight.

There are some hard tradeoffs. This is my comment on the mandate controversy between the two Democratic candidates, at least from the point of view of somebody who has tenure. What I can say is, well, you'd want to pay a subsidy to make household premiums affordable, wouldn't you? And once you've done that, then it's not obvious to me why you wouldn't be comfortable having a mandate. Or to reverse it, if you're uncomfortable with a mandate, it must mean you haven't yet ponied up enough money for adequate subsidies.

The next one should say to get near-universal coverage without a mandate, you probably need about a 90 percent subsidy. So the great virtue of — one virtue of a mandate — is it allows the subsidy to be somewhat less and, therefore, less collected through the tax system.

So I think I've said a few of these — this is the sermonette part of the talk — but we do need better evidence on the health benefits of coverage for the uninsured who are not poor. My version of the price tag for an adequate subsidy plan that didn't try to hide the costs by assuming efficiencies that have yet to be determined is that it's going to cost at least $100 billion and probably about $200 billion. Interestingly enough, that's pretty close to what's collected or what's foregone by the tax subsidy. So I actually think you could get the money there, or you could get the money out of less spending on armed forces, but it is within the realm of possibility, although I think the swooning of the economy is causing that door to close pretty quickly unfortunately.

And I guess that's the last point I wanted to make, so thank you very much.

(Applause)

CHAIRMAN PELLEGRINO : Thank you very much, Dr. Pauly. We've asked Dr. Nick Eberstadt to open the discussion. Nick ?

DR. EBERSTADT : Thank you, Ed . Well, you've all just seen why Mark Pauly is widely regarded as a force to be reckoned with in the field of health economics. And, in fact, he's been a presence in the field, although his youthful vigor belies this, for fully four decades since his Ph.D. dissertation was completed. He's been interested in moral issues in health economics from the very beginning. His initial work, in fact, was on moral hazard in health economics and, as you know, when economists talk of moral hazard, they are discussing the incentives that are built into systems that encourage perverse or unwarranted, unwanted behavior. And then in his work, initial work, on health insurance in particular, he noted that there was a moral hazard involved in the potential structuring of health insurance, not only with respect to avoiding health insurance, but also in using too much health insurance depending upon the sorts of perverse incentives one could find. Today in discussing the questions of health costs and uninsured, I think he gave us a kind of panoramic outline there.

There are a couple of points I'd like to press him on for my own curiosity. In talking about health costs, of course, David Cutler and his group at Harvard have done a lot of work about perhaps excessive health costs and David Cutler is a formidable economist. Of course, Kevin Murphy is no mean economist himself at the University of Chicago . And Kevin Murphy and Robert Topel published a fairly recent study in which they tried to estimate the value of the mortality improvements and the longevity improvements to the United States since 1970, from '70 to 2000. As a very rough ballpark figure, their conclusion was that, even after you factored out medical expenditures, the net benefit to American society was in the order of tens of trillions of dollars. I think $60 trillion. You know, what's a few trillion among friends?

But I'd like to ask Prof. Pauly if he thinks that that would be comparing apples to oranges, comparing those sorts of estimated benefits of health improvements to the sorts of expenditure numbers we're talking about containing.

On the question of the health insurance crisis in the United States , Prof. Pauly 's contribution to the briefing book and his presentation here touched upon the whole question of the nature of the uninsurance, the lack of insurance problem. And I would like to invite him to say a little bit more about that.

Who are the uninsured? We get very different numbers, a difference of 10 million people — but, again, what's 10 million among friends — if we look at the Census Bureau's estimates versus the National Center for Health statistics. What's the profile of the people who are uninsured? What are the health consequences of being uninsured? Maybe we have an idea, an understanding, of what the consequences are if you're uninsurable. But what are the consequences of being uninsured after we attempt to control for demographic differences, ethnic differences, income differences, educational differences,

socioeconomic-status differences? Can we say much about what the health consequences are? And, of course, this is right up Prof. Pauly 's alley: Why are the uninsured not insured?

In my own approach to this as I try to think about this, one analogy to the health insurance question might be a housing question. Should we think of uninsured people in the United States as homeless or should we think of them as renters? Or some of each? If we compare homeowners to renters — well, if we compare homeowners to homeless people, we've got an enormous moral and ethical crisis on our hands. If we compare homeowners to home renters, we know that home renters for the most part have somewhat smaller, less capacious houses. They don't get equity, economic equity, in the system building up. But it might imply a different sort of approach here or at least a different set of questions.

And, finally, there's a question, I think, for our Council here. Mark Pauly has outlined a number of very difficult policy questions for the United States at the moment. But are these bioethical questions? We're not a council on healthcare policy or are we even a council on medical adequacy. We're a council on bioethics. Do we have more, as council members, to grapple with from Prof. Pauly 's very valuable and meaty presentation than the initial issue that brought him on the scene, the question of moral hazard? Thank you.

PROF. PAULY: Let me try answers for a couple of them. So I guess the question is, one of the questions is, what more do we know about the connection between increased spending and improvement in quality? As I suggested, not to be pejorative, but we already knew that there was going to be a big improvement in health outcomes for cardiovascular disease and stroke. There have been efforts still ongoing to try to look at the connection between increased spending and outcomes in cancer. My interpretation of those so far, although we don't have anything definitive, is that probably the increased expense pays for itself, but not too much more than that. So the ratio of benefits to costs seems smaller for that kind of disease.

I guess in terms of thinking about whether current health spending growth is like past health spending growth — I mean, the best thing — the most truthful thing to say about health spending growth is it's always something. And so for, actually, for the period of the '70s, the lead in health spending growth was increased spending on inpatient care, hospital care, largely stimulated, we think, by Medicare.

The other periods that are interesting to characterize, from about 1998 — I don't know where you draw the line here — but around 2004, the lead in health care spending growth was very definitely pharmaceuticals. Drug spending was growing double digits; in some cases, up close to 20 percent a year. That has dropped dramatically, and actually my undergraduates, I talk about health spending growth and don't people think something ought to be done to slow it, and they all agree, and then I say, "Well, but the reason it's slowing in pharmaceuticals is because the rate of discovery of wonderful new products has tailed off a lot. Does that make you happy?" And so I only do that on a sunny day so I don't make them too miserable, but that's sort of the dilemma there.

The scuttlebutt is what's taken over for drugs is medical devices, although the medical device makers keeps saying, "Don't blame us." But I think — well, it's easy to be nihilistic here, but part of the reason — let me put it in terms. If we knew much more about the relationship between spending growth and health, I think we'd be able to be much more definitive and probably much more accurate in terms of what we might suggest as policy remedies.

And I guess that takes me to the what do we know and we don't we know about the connection between insurance coverage and health outcomes. As I mentioned in my remarks, the most definitive work on that was done actually by looking at the impact of cutbacks in a Medi-Cal program on the health of poor people. And I guess I haven't memorized either the physical numbers or some dollar value, just to say that the impact was pretty stark.

There is some evidence, pretty good, that indicates that when people who are uninsured go on to Medicare and viewing that as a more or less exogenous change in their fortunes, that seems to improve their health. So those are kind of on the side of the angels.

I have tried to look at what impact insurance makes on the health of lower middle-income young women. I found that they had a lot more spent on them when they had health insurance, or spent a lot more on themselves, but that it was very hard to find any improved health effects. Part of that is because we don't really have very sensitive measures of health. So I am — well, I can only repeat what I said in my remarks. I think if we had better information on that, we might be able to be more persuasive.

In terms of how do we measure the uninsured, my summary judgment here is virtually any measure is bound to be a little squishy. But I think what's probably more important than the absolute level is the trend, and the trend is definitely not to the good and it's not as if the sky is falling all at once. But there is more or less an exorable trend upward in the count of the number of uninsured. The only time it really went down was when the Census Bureau which collects the data that's most usually cited changed their form to add a question at the end asking the respondent, "Now, you said so-and-so and so-and-so in this household was uninsured. Is that right?" And we made a million people suddenly become uninsured by adding that question. So I guess that goes to some of the softness of the measures.

There is a good policy question though I think which is, "Well, if there numbers were lower than we think, how would that affect policy?" My personal opinion of why Massachusetts was able to be first maybe — it's sort of eroding a little, but in doing something serious about the uninsured — was because they had one of the smallest uninsured percentages in the country. And so a major improvement was in reach there; whereas, in places where a quarter of the people are uninsured like Texas or California , as we already saw for California and probably will never see for Texas , they weren't even able to get it off the ground.

We do know some of the reasons why people are uninsured. In fact, we know a fair amount about that. The main economic reason is that if people are in settings where health insurance costs more for the same premium — or for the same benefit, they are less likely to have it. So we mostly can drive that off of employment-based group health insurance. So if you're in a large group where the loading of insurance is also quite low, pretty much in the ballpark of what Medicaid is able to do incidentally and probably in the ballpark of what a true estimate from Medicare would be, you get a very high rate of take-up of health insurance and a very high rate of offering of health insurance, in the 90 percent-plus level. As you go down both the firm-size distribution and the income distribution, people fall away. So even relatively high-wage people working in very small firms are considerably less likely to have insurance even if they're middle-class than if they worked in large firms. And then when you go to the people who don't have access or haven't put themselves in a setting where they have access to employment-based group health insurance and so have to turn to the individual insurance market, I actually — I do want to say I believe the individual insurance market is not as bad as a lot of people say, but it's not all that good, partly because, unless you choose a high-deductible plan with a health savings account you're not going to get a subsidy and in a way partly because it's the dumping ground for all of the hard-to-insure people that have fallen out of the group insurance system. So it's not — I probably should say I'm on the board of a small nonprofit health insurer in Upstate New York, but so I maybe have less of a belief about the intrinsic evilness of people who run health insurance companies. But I think the individual market in a way is interesting to me these days in part because it's peculiar, but in part because it is the vehicle that might need to be relied on, however flimsy it is and however bendable it is, for actually making some steps forward if that's going to be done through the private health insurance system.

CHAIRMAN PELLEGRINO : Thank you very much. Dr. Carson ?

DR. CARSON : Thank you for that very spirited presentation.

Certainly it's an extraordinarily worthwhile thing for us as a society to try to cover those individuals who are not covered. But in addition to covering them, I wonder what your thoughts are about, in the inclusive of that coverage, trying to change their behavior? And by that, I mean, you know, a large number of uninsured frequent emergency rooms and places that really are quite expensive and inefficient and, perhaps, creating systems that might encourage them to seek coverage in a clinic, which is much less expensive, but more importantly might be able to address some of the long-term issues that in the long run would save us a lot more money than just patchwork every time they get a problem.

PROF. PAULY: Well, so as you know, I'm skeptic that you can save money by spending money. But I do believe that there are lot of interesting possibilities about insurance design that could improve things from where they are right now. The most obvious thing to say is that health interventions which have a very high cost-effectiveness ratio and which, for some reason, people are disinclined to use when the cost-sharing is set at the typical level might be candidates for lowering the level of cost-sharing.

So even in the design of most of the health savings account, high-deductible health plans, there's usually an exemption from the high deductible for certain identifiable preventative activities: Immunizations for children; for people who have been diagnosed with high cholesterol or high blood pressure, the appropriate pharmaceutical interventions there. So some sense is, I think, trickling into the system.

I guess the best way to formulate my own position on it is to say the design of an insurance plan in terms of — and you can offer incentives for people or disincentives depending on what you do with the cost-sharing. That sounds to me like a great question that a market could answer with different health insurers imagining or trying out different sorts of ways of doing it.

I'm much less skeptical or much more skeptical, I guess, on trying to have a consensus of experts agree on the ideal level of cost-sharing for everybody. But I do think there's a lot of possibility for creativity there, some of which we're already starting to see.

Having said that though, I probably would — I have to mention, although I'm not sure whether I'm proud of it or not. Out of the, sort of, most important scientific and intellectual breakthrough, not only in health economics but economics in general, which was the Health Insurance Experiment, the RAND Health Insurance Experiment, which basically can be interpreted in a lot of different ways, and how it's interpreted depends on whether you talked to the physicians who worked on it or the economists who worked on it. But the economist party line, at least my interpretation of it — I think they wouldn't disagree violently — is to say, "Beyond providing catastrophic coverage, which everybody in the RAND experiment had, it doesn't look like a further lowering of the level of cost-sharing produces much, if any, of an improvement in health for the, sort of, average population."

The only subpopulation where there was a big improvement were low-income people initially of poor health especially with high blood pressure. But for the average American, at least especially the average middle-class American, I lay awake at nights worrying they don't even have catastrophic coverage. But if we could get catastrophic coverage to them, I'd regard that as a major accomplishment and then actually believe we could wait and see whether it needs to be improved beyond that point.

To some extent, at least my amateur political theory here sort of goes along with Altman's conundrum. When you try to design a health insurance plan that would be offered to people and maybe even mandated as in Massachusetts, you tend to get a Christmas-tree effect where every group wants to make sure their benefit is loaded on there, and then that tends to make it so expensive that either the uninsured can't afford it or the taxpayers think they can't afford it.

But I would certainly endorse the idea of trying to use cost-sharing both to direct people to things that look highly effective that they may be somehow underestimating and may be dissuading them from things that are really not worth the money.

CHAIRMAN PELLEGRINO : Any other questions? Dr. Hurlbut and Dr. Dresser .

DR. HURLBUT : Just to give us a larger overview of what all this money is going for in health care spending — you mentioned drugs, for example?

PROF. PAULY: Uh-huh.

DR. HURLBUT : I don't want to exaggerate this to mention in medicine, but I brought up earlier the changing arena of medical care. And so, for example, when I was a medical student, male-patterned baldness was not considered a disease and now it's a multi-billion dollar pharmaceutical dimension. Right?

And can you give us some idea of what, assuming this might become a larger portion of medicine, at the present, how large a portion of medicine is — and I've got several different categories here I'd like you to comment on. First of all, how much of increased health care has come from what you might call lifestyle drugs or elective procedures like cosmetic procedures? They estimate there have been 2 million breast augmentations in the United States . That's quite a lot of money, I suppose — and lifestyle drugs. Even in a certain sense abortion is an elective procedure, not a therapeutic intervention exactly in the typical form, although it's hard, of course, to qualify that because the expense of abortion would have ended up as an expense of obstetrical care. But to what extent is that? What portion of medical expenditures is that?

And, second of all, what percent is experimental procedures? I mean, at the major medical centers, the university medical centers, it's obvious to anybody that works there they're very expensive things taking place that are in a way experiments or explorations for the future of medicine. I remember when I was a medical student at Stanford, Norm Shumway was pioneering heart transplant. It's become somewhat of a mainstream medical procedure, but it might not of. Can you give us some estimate of how much of medical, what's lumped into medical, is that?

And also, finally, what percent is inordinately expensive procedures that, if you had a certain theory of how distribution of care should take place you might cut those off if — you see what I'm getting at?

PROF. PAULY: Uh-huh, yeah. Well, I won't take very long to answer because I don't know the answer. I do know that when people attempt to kind of classify things you always get arguments about it. My own guess is that, as a fraction of the total, the lifestyle and giggle products are probably not all that large. Partly that's because the fraction of the total that goes for all prescription drugs including the ones that affect health is only about 10 percent. So that's not where most of the money is going. For the other ones, about all I can say is, it would be useful to know the answers to those. I don't.

One thing I do know the answer to, so I might as well mention it, is what the people sometimes ask, is what about the expenses for people in the last year of life? And my interpretation of the data there is that the proportion of the expenses that is going to that subset of the population has remained quite constant over time. It's not that we're spending a lot more on heroic measures there.

But, you know, I haven't looked at the other end of the distribution of things that almost everybody would agree we could do without unless, of course, you're the professional association representing the people who do that thing. I don't know the answer to that one.

DR. HURLBUT : Can I ask a followup question then? So one of the things we could perhaps in our Council contribute to is some anticipatory comment in the sense that seeing in some sense where medicine is heading and we're obviously not going to make a dramatic effect on the immediate situation, but we might help frame the discussion for the future.

Do you see trends in medicine that have a specific relationship to what a council on bioethics might comment on? I mean, I don't mean to overemphasize this, but one of them does strike me as those issues related to medicalization of natural life processes, and that's just an example. But do you see others? Where do you see medicine going, and how might an ethics council comment on that so we might shape where medicine goes, not just how it's paid for.

PROF. PAULY: Uh-huh. Well, let me try to offer some thoughts on that. I don't have a coherent-like view of it, but one point is for people who are not poor, at least from an economist's perspective, we wouldn't be that interested in making a value judgment. It's their money, and as long as they know what they're doing, setting aside the tax subsidy, of course — yeah, I guess I wouldn't want the Treasury to be paying 50 percent of some of things, which it probably is. But setting that aside, the truest economist answer would be, if people want to spend their money on those things, that would be okay with us, and we might resist an attempt to impose some kind of external judgment on it.

For people's whose care is mostly supported by the government, ultimately by the taxpayers, though, I guess those are the right kinds of questions to ask, although I think any kind of a differentiation proposal tends to raise a lot of opposition. That hasn't stopped, of course, Medicaid programs from paying such very low payment rates that the level of access to a wide range of providers for that population is much lower than for the average person.

So, I guess, those would be the main answers. I do think in my vision of how a market arrangement might work would be one in which — and to some extent we talk a lot about why this hasn't happened — this sort of Alain Enthoven's vision — there should be a variety of different health plans including the really buff and really good-looking health plan or the, you know, good-enough health plan, the pretty-good health plan, and let people choose amongst them.

As I mentioned in my remarks though, perhaps for good reason, what we see in the market is really not much product differentiation in the private sector, not a whole lot of choice about a lot of things that might matter, and then in principle people could make choices about — at least my take on how to address the kinds of questions you're raising for the bulk of the population would be to say, "I'll invoke the sainted market as a way to settle that as opposed to having it judged by some external standard." You can't, of course, pass the buck on people who are being paid for primarily by taxpayers.

CHAIRMAN PELLEGRINO : Thank you. I have a request from three Council members to speak: Dr. Dresser , Dr. Meilaender , and Dr. Lawler . I announce this at this point because we're under a rather stringent requirement for being back here at 2:00 . There's a special problem with our afternoon speaker, Elliott Fisher , which I'll explain at the end of this session. So I would ask for the usual brevity.

PROF. LAWLER : I'll pass. I'm all right. I'll be glad to pass.

CHAIRMAN PELLEGRINO : Rebecca ?

PROF. DRESSER : All right. Well, these are not a big deal, so you can be brief. On your third-to-last slide, you were talking about your ideas. The poor would get free comprehensive insurance. As household income rises, the subsidy and the minimum required coverage both fall. Why would the minimum required coverage fall?

And then my other question was, it's embarrassing to hear what a great subsidy most of us get, and I'm ashamed. Is targeting the subsidies to people like us part of the realistic discussion? Is that something that might really happen, or is that just idealism?

PROF. PAULY: Okay. Well, so the — what was the first question again?

PROF. DRESSER : In your plan, you would have —

PROF. PAULY: Oh, what does that mean? So one way would be to describe the other end of the spectrum. You've got the poor person with the comprehensive coverage. At the other end of the spectrum, you have Bill Gates who, in my view, wouldn't need a subsidy and if he wanted to buy a high-deductible health plan, that wouldn't bother me.

So not that people would necessarily choose to do this as income rises, but I guess to state the other way around, I am actually quite nervous about high-deductible health plans owned by lower middle-income people because at least it seems plausible to me there that the out-of-pocket payment may deter them from doing things that may be good for them and maybe the rest of us would care about. So you could be permitted to choose a much less comprehensive plan if you're an upper middle-income person and you would get a much smaller subsidy, if any. That would be sort of the data point there.

Absent the tax subsidy, we think that those people, despite what your intuition might tell you, would actually choose considerably less comprehensive plans. The general conjecture is that the average out-of-pocket payment in a private plan which is now about 20 cents on the dollar, it might go up to about 30 cents on the dollar, so a 50 percent increase though in the effective price of medical care.

In terms of whether people are interested in this idea or, if targeted, it is in two of the candidates' plans, and I'd be interested in seeing how long it survives. John McCain actually proposes to abolish it entirely and to convert that plus a bunch of other things like Medicaid into a system of just a flat $2,500 tax credit for an individual, $5,000 for a family. I haven't been part of that, so I'm a little worried if the numbers add up. My calculations are you'd need about $500 million to do that and you'd only get about $200 million out of the tax subsidy. You'd have to find the rest of the money somewhere else. And then Hillary Clinton in her plan has a proposal, I believe, to limit the amount of the tax exclusion in some dimensions. So there is some talk about it.

As long as I'm talking about these things, I believe, probably because one of my Ph.D. students was working there, the Council of Economic Advisors came up with a wonderful idea that, of course, has sunk without much a trace, the impediment to removing this inefficient and inequitable subsidy. Well, at one point, a group of us wrote a proposal more or less along the lines that I described where we calculated that by removing the tax exclusion we could actually pay the tax cost and the subsidies in the proposal, and we further calculated what fraction of the population would end up being better off when the dust cleared where their subsidy would be bigger than — the subsidy from the new plan would be bigger than the subsidy they were currently receiving, and I think it was like 60 percent of the population was better off. I came to Washington , and they told me that was the wrong 60 percent. So there's a political resistance to taking away tax breaks much beloved by the middle class.

What the Council proposed to do was to cap the exclusion at $15,000 when offered that exclusion of health insurance premiums from taxation for everybody who bought the basic minimum level of coverage so that there was no incentive at the margin. If you were willing to settle for a high deductible health plan to go further, you didn't get a bigger tax break. And it was scored actually as budget-neutral on that because the limit was going to increase at the economy-wide rate of inflation rather than the health care costs.

So I believe there are a lot of possibilities for creativity in trying to do something about that mechanism. And at least one potential benefit from doing something about it is that you wouldn't hear as much from health economists. You know, we'd be satisfied.

CHAIRMAN PELLEGRINO : I think we might be able to work Dr. Meilaender and Lawler in. I'll take a little bit of the Chairman's prerogative to cut into the luncheon time, which is not a popular thing to do. So, Gil , I didn't make it attractive. Did I?

PROF. MEILAENDER : No. It's an invitation to be hated actually.

(Laugher)

PROF. PAULY: There's a moral hazard here though I need to point out.

PROF. MEILAENDER : Well, I'll ask my question really quickly then. I suspect you can answer it easily.

Right at the start with your two parts of reform, the cost-containment, the covering the uninsured, and you had your preference, but you said the two were independent, though you qualified that in certain ways. And just a word about that? I mean, it seems counterintuitive to think of them as independent, not just because you'd be covering more people, but at least in my mind the more I get, the more I want in a sense. And so just a word about the independence of these two aspects?

PROF. PAULY: Well, I kind of said they're independent and they're not. The main way that they're dependent is that the rise in the price or the total expenditure of health care for the insured middle-class, as I mentioned, seems to be exacerbating the problem of the uninsured at the level of the lower middle-class. The positive argument as to why it's not as serious as it seems is to note that the real cost to the economy of covering the uninsured — they're 16 percent of the population — isn't 116 percent of what we currently spend on health care or the total expense wouldn't rise to that level. And the reason is that the uninsured currently receive a fairly large volume of services, not as much as the insured. So I think the politician who says when we cover the uninsured it will actually be cheaper, that can certainly be true in specific circumstances, but as far as know in research that's not true across the board.

Nevertheless, so here's the arithmetic I do in my head. If the uninsured use about three-quarters of the medical spending that they would use if they were insured and they're 16 percent of the population, the real cost to the economy of covering the uninsured would be 4 percent of medical care spending, which is within the measurement error.

But the story I told about how hard it is for the taxpayers to get the other 12 percent back is probably one of the impediments. I mean, I do think that, as I've hinted — well, I guess I don't want to water this down too much. But the price tag for at least making a substantial dent in the number of uninsured that exists right now is probably something that could feasibly be paid by both the health care system and by the tax system.

So in that sense, we needn't hold off covering the uninsured for some method of slowing the rate of growth of health spending. Of course, it is true — and I suppose this is what you're thinking of — that once we cover the uninsured entirely we in a sense put in the public sector the same problem we already have for covering all of senior citizens, that as their health care cost rises that gets put into the tax system and that raises some problems.

So to some extent you have to have a willingness to ignore the long run because the long run seems so impossible. But I think that might be left to its own time.

CHAIRMAN PELLEGRINO : It's your option?

PROF. LAWLER : I'll pass.

CHAIRMAN PELLEGRINO: Thank you. The reason we're wanting to be somewhat more strict on time than we usually are — and we try to be strict — is that our afternoon speaker, Dr. Elliott Fisher, has a personal problem. He has a daughter who is in the hospital at the present time, and I think very properly he is being with her rather than with us in presence. However, modern technology has made it possible for him to engage in a telephone conference with us, and we've agreed to that. And he will present his slides as well and have comment, so that he will not be there, but he must begin and we must begin at 2:00 o'clock .

So have a good lunch. I think you've only lost a few moments. Thank you, Peter, for your diffidence. We appreciate it, and have a good lunch.

(Luncheon Recess 12:31 p.m. - 2:10 p.m. )

Session 3: The Paradox of Plenty

CHAIRMAN PELLEGRINO : Thank you very much for returning so promptly, members of the Council.  Dr. Fisher is on the phone.  Do you hear me, Dr. Fisher ?

DR. FISHER :   I hear you fine.  Can you hear me? 

CHAIRMAN PELLEGRINO :  Yes, I can, very, very well.  I think we'll proceed along the lines of the agreement we made.  Dr. Fisher will give us a short presentation, describe his slides, and then we'll open it up to discussion.  Thank you again once more for taking time out from your visit with your daughter to speak to us.  We appreciate it very, very much.  It's all yours.

DR. FISHER :   Well, first it is a great honor to be here and to join you to talk about something that I care about deeply and to share some of what we've learned and some of the challenges we face.

If we go to the first slide, this is a graph of projected spending on Medicare and Medicaid prepared by the head of the Congressional Budget Office, Peter Orszag, and published in the New England Journal.  Can you hear me okay when I speak this way or is there any problem?  You folks are okay?  Am I speaking clearly enough?

CHAIRMAN PELLEGRINO : Yes, you're speaking superbly.

DR. FISHER :   Great.  Thanks. I will ask occasionally, "Am I on the right slide?"  I want to make sure we're looking at the same thing.  So this slide shows projected spending on Medicare and Medicaid.  The upper line reflects the current growth rate of spending in Medicare and Medicaid projected over the next 30 or 40 years.  And what you see is, if current trends continue spending on Medicare and Medicaid alone will account for 20 percent of the gross domestic product, approximately the same share as is made up now by all of government spending.  There are profound potential impacts on both the public and private sector from the increase in cost.

The same article by Peter Orszag highlighted the pretty remarkable variation that is observed in per capita Medicare spending across U. S. Regions, two-fold differences at least between the areas with the lowest spending regions, the pale regions, and some of the lower spending areas within the pale-colored regions, and much higher spending on some regions, reaching well over $10,000 per beneficiary in some of the higher spending regions, one of which is McAllen, Texas; another is Miami.  I'll come back to those later.

This is largely based on work that Dr. Wennberg and I and others have done up here at Dartmouth .  The focus of our work recently has been trying to understand the causes of these variations.  Most recently we have now been able to look at the care provided by specific hospitals and their associated medical staffs, so when we published the Atlas of Chronic Disease two years ago, we looked at variations in the patterns of practice across academic medical centers, because it turns out that when patients are seriously ill they get almost all of their care from the institution where they first get their care. 

In this particular case, in order to control for differences in illness across different populations and be sure that we're looking at similarly ill populations, we look at the care of patients with chronic illness who are in the last two years of their life. 

In this graph each of the blue dots—are we all looking at Slide 4?  Chairman Pellegrino ?

DR. ROWLEY Three.

DR. FISHER :   Slide 4 is up?

CHAIRMAN PELLEGRINO :  Yes.

DR. ROWLEY This is four. 

DR. FISHER :   I'm sorry, I might have forgot to say "next."

DR. ROWLEY This is on medical care, which is what he—medical center, which is what he talked about before.

DR. FISHER :   So what is shown on Slide 4­—and I will try to use the numbers so the technicians should be able to see these on their screen. 

DR. ROWLEY [inaudible]

DR. FISHER :   I'm sorry?

CHAIRMAN PELLEGRINO : If you're going to communicate with Dr. Fisher , use your microphone and put it on.

DR. FISHER :   I missed that.  Are we on Slide 4?

DR. ROWLEY Yes.

CHAIRMAN PELLEGRINO :  Yes, we are on Slide 4.

DR. FISHER :   Okay.  Thank you.  So this is—each of the blue dots represents per-beneficiary spending during the last two years of life for beneficiaries who died between 2000 and 2003 and who had chronic illness at the time of their deaths during those last two years.  The blue dots represent the hundred top academic medical centers in the United States according to AAMC, so you see almost three-fold differences in use of resources and Medicare spending across these hospitals.  The red dots represent what are the U. S. News and World Report's top ten honor role academic medical centers during this period.  The data for those hospitals are shown on the right. 

So what you see is greater than two-fold differences in per beneficiary across what some might call the best academic medical centers in the world.  So if we go to Slide 5—so next slide— Uwe Reinhardt looked at data similar to this and was motivated to ask the question, "How can the best medical care in the world cost twice as much as the best medical care in the world?"

That has been a wonderful motivation for our research.  If we go to Slide 6, I'll set you up for what I plan to talk about over the next 40 minutes.  First I want to talk about what we know, what the evidence shows so far, about the differences, the implications for health, the differences in spending across regions, then what we think we know and what this might mean for science and policy.  I want to emphasize that the work I'm sharing with you has been broadly supported.  We have had many wonderful funders, and I have numerous collaborators who should all be here presenting this with me.

So let's go the next slide.  It should be Slide 7.  The first major set of studies we did looked at patients who had heart attacks, colon cancer, hip fracture, or were participants in the Medicare current beneficiary survey, which is a random sample of the Medicare population over age 65.  We took advantage of the differences in spending across regions because those essentially represent a natural experiment.

We were able to control carefully for illness differences across communities in ways that managed to persuade the reviewers.  I won't bore you with the details.  But essentially we convinced the reviewers that we would get as close as one could get, using what the economists would call instrumental variable analysis, to creating a randomized trial.  We looked at the care of patients in the pale areas with those four conditions and essentially compared it to the care of patients in the areas of increasing intensity.  We measured intensity after adjusting carefully for price and for illness differences across the region. 

Let's go to the next slide, Slide 8.  The first thing we looked at was the content of care.  I want to spend a moment on clarifying three categories of services that we think are actually critical to understanding how health care works in thinking clearly about the unwarranted variations in practice that we see across U. S. regions.

First, effective care.   These are services where we know all patients with a particular set of clinical indications should receive that specific treatment.  There are no tradeoffs involved, so the example, if you're having a heart attack you want someone either to give you a clot-busting drug or you want them to quickly put in a stent or a little balloon to push the blockage that's in your coronary artery out of the way.  In those cases the right rate across regions would be everybody having a hundred percent compliance with these evidenced-based guidelines.

The second category is what we refer to as a preference-sensitive care in a very normative sense.  These are treatment choices that entail tradeoffs among the risks and benefits where patients' values and preferences, we believe, should determine the treatment choice.  That does not happen to be the case currently in practice.  Generally physicians tend to prescribe treatments that they think are the correct treatment, and we believe this is an important issue.  It's not the major focus of my talk this afternoon.  The example would be coronary bypass graph for stable angina where the benefits are improved angina for most patients, no general benefits in most cases in terms of life expectancy, but there is a trade off.  That is, most patients will experience improvement in their angina, but about ten to twenty percent of patients will have some degree of cognitive impairment or harm as a consequence of the procedure.  Therefore, this is a choice between whether you want to play tennis or whether you want to remember your daughter's name.  That's a choice that we believe only patients can make.

The third category are services where utilization is strongly associated with the local supply of health care resources, like the frequency of physician visits, specialist consultations, use of the hospital or ICU at the site of care, and the other things that will go along with that. 

Next slide.   I think we should all be looking at Slide 9, "Reperfusion in 12 hours for AMI" with a little red dot there.  Dr. Pellegrino , is that correct?

CHAIRMAN PELLEGRINO :  Yes, it is correct.

DR. FISHER :   Thanks.  So at least you're still awake. Is anyone else awake?

CHAIRMAN PELLEGRINO :  I have insomnia.

DR. FISHER :   All right, well, thank you for my tolerance of my slight ribbing.  I really wish I were there with you.  It would be so much fun for me and for you, I think.  However, let me explain this slide.  It's a complicated slide, and I'm going to show you several others that look like it. 

What this slide shows is the ratio at which this particular service, in this case an effective care reperfusion in 12 hours, is provided in the highest spending region, which is labeled "Quintile 5" (that's the fifth of the country that has the highest spending rates) compared to Quintile 1 (that is, the fifth of the country, the pale areas on that earlier map, that has the lowest spending rates). 

49.8 percent of patients get reperfusion within 12 hours in the high-spending regions, and 56 percent of them get it in the low-spending regions.  The dot is therefore off to the left, and this is usually where I ask everyone to raise their hands and answer the question how many people think they are doing better in the low-spending regions.  And then, of course, I can't see, but Dr. Pellegrino will affirm that everybody is raising their hand.

This says care for this particular piece of evidence-based practice is better in the low-spending regions than the high-spending regions.

Let's go to the next slide, which should be Slide 10.  What we see is that for four of the six measures of effective care, quality measures collected by the Medicare program from chart review in 200,000 patients, care was better in the low-spending regions, and it was no different for two of the six measures.  In ambulatory care we see that for three of the four measures, care was better in the low-spending regions than the high-spending regions.

Does everybody understand these graphs?  I see lots of people nodding.  Good.

CHAIRMAN PELLEGRINO :  Heads are bobbing.

DR. FISHER :   Good.  So let's go to the next slide, Slide 11, which many of you may have seen.  Looking at the relationship between Medicare spending per capita on the horizontal axis and on the vertical axis the ranking of each state according to the Medicare program's comprehensive measures of quality that were developed by Steve Jenks when he was with the QIO program, we see what is a quite strong negative relationship on overall technical quality between increased spending and quality rankings.  Spend more, technical quality, the provision of effective care, is worse.

Let's go to the next slide, so we should all be looking at Slide 12.  This is for preference-sensitive care.  This was one of the surprises that we found in the data.  That is, if you live in a higher-spending region, getting about, this time, $3,000 more each year per Medicare beneficiary, you don't buy more major elective surgery after your heart attack, even any more bypass surgery. 

Now, I'm going to take a little detour because some of you may have heard that Dartmouth looks at variations in practice across regions and has shown, as we do, four- to six- to ten-fold differences in rates of exactly the procedures that I'm showing you here across U.S. regions.  So this may seem paradoxical, and I want to explain it for a second.  So let's go to the next slide.

This should be Slide 13 and you should see five little groups of dots, which are either a Rorschach test if you tend to be a psychiatrist or a turnip if you're more of an organic farmer.  So Quintile 1 to Quintile 5.   Each of those dots represents the rate of coronary artery bypass surgery in the hospital referral regions that comprise each of those spending groups.  So Quintile 1 would be the pale areas on the map that I showed you earlier, the lowest spending regions.  Quintile 5 would be the highest spending regions.

We still see dramatic variation in rates of surgery within communities of differing spending levels.  So marked variation in surgical rates for preference-sensitive, or elective surgery, as some might describe it, but no general overall increase in the rate of elective surgery in the higher-spending region. 

Let's go to the next slide, Slide 14.  That should be the old slide, and then we go to Slide 15, I hope—oh, no.  This is a bill I probably got left in there.  Can you hit the forward, and you should have still Slide 14 but with two groups of dots.  Is that correct?

CHAIRMAN PELLEGRINO :  Correct.

DR. FISHER :   So what you see for major elective surgery, no increase in the provision of major elective surgery as we spend more across region.  Very interesting and kind of fun finding. So all of you on the Council took plenty of multiple choice tests when you were in college or medical school.   I set you up to say there are three categories of care, so you know where the money has to be being spent, in the higher spending region.  Let's go to Slide 15. 

What you see is 30 percent greater use of office visits in the red high-spending regions compared to the low-spending regions, twice as many inpatient visits per capita.  This is among beneficiaries in the high-spending regions compared to the low-spending regions who had one of those three conditions and adjusting for their health status at the time of hospitalization.  It's actually in the year after your AMI or, in the bottom graph, the last six months of life for all patients over the five years of follow-up. 

So similar patients in high-spending and low-spending regions, 30 percent more office visits, two times as many inpatient visits, two and a half times as many inpatient specialist consultations, and four times as many visits to psychiatrists.   They're not sure whether that means they're more depressed in the higher-spending regions or that they're more effectively treated for what depression they have.  That study is still to be done.

They spend more time in the hospital, 30 percent more discharges, and each of those stays is slightly longer.  So total inpatient days in the year after your heart attack are greater, and two times as many days in intensive care units.   Again, identical patients, twice as much time in an ICU.  And then, of course, if you're horizontal in a bed and more specialists are seeing you, you're going to get more minor tests and procedures, and these are just some selective procedures that we have shown.  And, finally, in the highest-spending regions patients are treated much more aggressively at the end of life, much more likely to have a feeding tube, much more likely to undergo an attempted resuscitation.  

Let's go to Slide 16.  This summarizes what we know about the content of care, but we, of course, haven't addressed the problem of health outcomes.  That was the major intent of the research, to understand whether all of this additions spending, which is mostly related to how frequently people are seen and how much time they spend in the hospital.  Now we know that.  Does that increase your length of life?  And the answer, if we go to Slide 17, is no.  In fact, slightly the opposite.   That is, if you are living in one of the higher-spending regions, on average patients with heart attacks, colon cancer, and hip fracture are more likely to die in the five years following their initial event than those in lower-spending regions, 2 percent higher for the hip fracture patient and 5 percent higher for the heart attack and colon cancer patients. 

We looked at functional status.  There was no improvement in functional status and no slower rate of decline in the higher-spending regions.

Since then, if we go to Slide 18, we have now analyzed data from physician surveys with about 15,000 physicians practicing around the country.  And what we see when we interview physicians is that those in the higher-spending regions compared to the lower-spending regions perceive that the overall quality of care, their ability to provide high-quality care, is worse.  They are more likely to describe inadequate quality of communication among physicians.  They are more likely to describe greater difficulty ensuring continuity of care.  They are much—their overall assessment of their ability to provide high-quality care is lower in the high-spending regions compared to the low-spending regions.  And my favorite finding of the whole ten years of work is that in these regions, which you will soon learn have 30 percent more hospital beds and 65 percent more specialists, they are more likely to perceive a shortage of hospital beds.  That is, it's difficult to get patients into the beds.  And in those regions which have 75 percent more medical specialists than interns on average, they say it's harder to get a new consultation with a medical specialist.

Part of this wonderful paradox of plenty, which has been such fun to try to unravel, when we look at patient-perceived quality we see lower satisfaction with hospital care and worse access to primary care. 

Most recently we've begun to look at trends over time in health outcomes, and this is perhaps the most worrisome finding of the work that we have done.  First let me show you what has happened across regions that differ in their growth rate.  So let's look at—this is thanks to Google maps.  This should be Slide 21, is that correct?

CHAIRMAN PELLEGRINO :  No.  Nineteen is what you have up there.

DR. FISHER:   We'll let's charge forward.  Nineteen should be patient-perceived quality.  Let's go to Slide 20, which just sets you up to look at trends over time.  Thank you, Dr. Pellegrino .

And now let's go to—this is hard to remember because I'm advancing my slides and I'm thinking that I'm—the reflex is to assume that you are.  Thank you for correcting me.  So let's go from Slide 20, which says I'm going to look at differences in trends over time across differing regions, right?  We're going to look at what happens to those regions that grow the most quickly compared to those regions that grow in their health spending more slowly.

Let's go to the next slide and look at an example of what's happened in two cities.  This should be Slide 21, and you should be looking at a map of southern Texas .

CHAIRMAN PELLEGRINO :  Correct. 

DR. FISHER :   Okay.  I'm going to compare what happens in Medicare spending between El Paso , Texas , and McAllen , Texas , both border towns, both in Texas , and let's look at what's happened. 

This should be 1994.  It's not shown on the slide.  In 1994 spending, we see that utilization of hospitals, physician services, labs and testing on health care were quite similar in El Paso and McAllen .  Understand the bar graph?  You should be looking at Slide 22.  These two communities were relatively similar early in the '90s. 

The upper red bar on Slide 23 represents what's happened to the growth in spending in El Paso from—in McAllen in the upper bar, the red bar, versus the green, which is El Paso .  Let's go to Slide 24 so we look at the most recent data.  This is from 2003.  What we see is per capita spending in McAllen on short-stay hospitals has increased dramatically, mostly due to increased utilization of those hospitals.  Spending on physician services—

CHAIRMAN PELLEGRINO :  We've got a disconnect on slides.

DR. FISHER :   It's Slide 24?

CHAIRMAN PELLEGRINO :  It's labeled 24.

DR. FISHER :   And you do not have two bar graphs there?

CHAIRMAN PELLEGRINO :  No. 

DR. FISHER :   What do you have?

CHAIRMAN PELLEGRINO :  What we have is the "Paradox of Plenty," "Content/Quality of Care," et cetera, but no bar graph. 

DR. FISHER :   Okay.  For the higher-spending region?   Yeah.   So let's go back for a moment to what I think is your Slide 23 now. 

CHAIRMAN PELLEGRINO :  We're on 23.

DR. FISHER :   So that should have the two diverging lines, is that correct?

CHAIRMAN PELLEGRINO :  No.  It has a bar graph. 

DR. FISHER :   Oh, boy.  All right, so we're going to be off numbers.  So 23 there, is that—you have two bar graphs—

CHAIRMAN PELLEGRINO :  It has bar graphs, "Short-Stay Hospitals," "Physicians"—

DR. FISHER :  Right.  And does McAllen look a lot higher than El Paso ?

CHAIRMAN PELLEGRINO :  Yes, that's true. 

DR. FISHER :   Okey doke.  So what you see is the growth in spending in McAllen is pretty wide, and these cities have diverged dramatically over this ten-year period.  Okay?

Let's go to the next slide.  I don't know what's happened to our numbers here, but it should say "The Paradox of Plenty," what the higher-spending regions get. 

CHAIRMAN PELLEGRINO :  That's correct.  Twenty-four, "The Paradox of Plenty."

DR. FISHER :   Great.  So when we look at the bottom, "Trends over Time," we've looked at what's happened to survival in AMI in the rapid-growing communities compared to the slow-growing communities.  We know overall there have been dramatic improvements in survival in AMI over this 15-year period.  But what's very interesting is that the regions that grew the most rapidly have the slowest improvement in heart attack survival and so fell further behind the lower-spending, more conservative regions.

So let's go to the next slide, which should be a pop quiz if I'm really lucky.

CHAIRMAN PELLEGRINO :  Correct.

DR. FISHER:   So everyone has to do this and fill out their napkin.  If all U.S. regions could adopt the practice patterns of the most conservative U.S. regions, the pale areas on the map, such as northern California or Rochester, which of the following statements would apply:  U.S. health care spending would decline by over 30 percent; the projected deficit in the Medicare trust fund would be postponed by at least 25 years, and we could send 30 percent of the U.S. health care workforce to Africa and in theory improve the health of both continents; or, your last choice, all of the above? 

I see everybody is raising their hands to say Number 4.  That's great.  So I believe this is in fact what would happen if we could do that, but we recognize that that is not going to be easy to do.  But it should frame our thinking about the magnitude of waste within the U. S. health care system. 

So my first major point, which I think will be your Slide 26—is that correct?

CHAIRMAN PELLEGRINO :  Correct.

DR. FISHER :   It should be "What I Know."  This is a summary of the first section of the talk; that is, higher spending is largely due to overuse of supply-sensitive services like hospital and ICU stays, physician visits, and, at the margin, greater use of these services is worse. 

So let's try to figure out what's going on.  I'm going to—some of this is more hypothetical, some of it is grounded in some of the research we've done, but we're trying to tease out what are the causes in the differences in practice across regions and what might explain the worse quality we see in the higher-spending regions.

So let's go to the next slide.  It should be a slide that says, "General Attributes of U.S. Health Care:  the assumption that more is better," and I think this is a general attribute of U.S. health care which pervades all of U.S. health care at the current moment.  This particular book by David Cutler , who has become a close friend as we've started to work together to try to think about the opportunities for reducing the amount of waste in health care.   But Prof. Cutler has argued strongly that we do need to increase spending, that the increased spending we have made has resulted in dramatic improvements in life expectancy, and those improvements have been worth it.

I think this notion that we must spend more and must continue to spend more is a general attribute of U.S. health care.  We'll come back to this again. 

A second attribute well-recognized by all of us is the current information we have about current treatments, whether it's Vioxx.  This is an advertisement that ran the very day that Merck withdrew the drug from the market.  We have inadequate information on the risks and benefits of the treatments that we offer to our patients.

Third issue, going to Slide 30, I think there is a recognized and growing tension between science and professionalism on the one hand and the market forces that are driving U.S. health care.

Is it Slide 30 you have now?  It's Slide 31?  You're looking at "We do Botox"—somewhere there?

CHAIRMAN PELLEGRINO :  Looking at 30 right now.

DR. FISHER :   Let's go to the next one, which I think should be "Growing tension"? 

CHAIRMAN PELLEGRINO :  Twenty-nine.  What's going on?

DR. FISHER :   I think the challenge is somewhere your slide version and mine got separated, and I have—what slide number is this one?

CHAIRMAN PELLEGRINO :  Twenty-nine now, entitled "What might be going on." 

DR. FISHER :   I have to mentally subtract one from my copy of the presentation. 

My colleague Robin Larson looked at advertising by academic medical centers, and I only chose two to advertise here to emphasize the challenge of commercialism that confronts academic medicine at the current moment.  University of Washington I chose because I trained there.  The advertisement for Botox is quite startling.  And then I chose the ad that they found to look at from Johns Hopkins about uterine fibroids because it was the most puzzling of the advertisements that we came across.  None of us thought we would feel better knowing more about uterine fibroids.

Let's go to the next slide.  I think there is a growing recognition led by many, including David Blumenthal at the Massachusetts General Hospital , of the conflicts of interest in academic medicine and elsewhere in the current environment.  But these factors pervade all of the United States and do not give us much insight into the regional differences in spending.  So we've been trying hard to sort those out. 

Let's go to the next slide.  It should be Slide 31:  "Regional Differences in Practice and Spending.  What are the underlying causes?"  We have looked quite carefully at the role of patient preferences, how do patient preferences differ across U. S. regions, and they don't differ much.  There is a light preference for specialist care in high-spending regions.  There's no difference in preferences requesting tests if the doc says   you don't need it, and there's no difference in preferences for aggressive end-of-life care, where we see the greatest differences in practice across U.S. regions.

We've looked for malpractice environment, and it does explain a little bit of a difference in spending across regions but no more than 10 percent of the two-fold differences we see.  Where we think the problem lies is this issue of capacity and payment systems.  Let's go to the next slide.

If we look at what should be Slide 33—you should have Slide 32, "Capacity and Payment" at the top, what are the regional differences, what are the underlying causes?  If you push the advance, I think a little map should pop up, if I'm correct.

CHAIRMAN PELLEGRINO :  That's correct.

DR. FISHER :   Hallelujah.  This is a scary process, Dr. Pellegrino .

CHAIRMAN PELLEGRINO :  Scary for me, too.

DR. FISHER :   You should have a map there reminding you.  Pale areas, low spending; red areas, high spending.   Let's push the advance one more time, and you should see a bar graph up here; is that correct?

CHAIRMAN PELLEGRINO :  Correct.

DR. FISHER :   Wonderful.  And what you see is that we have the red bar represents the high-spending regions where they have, as I mentioned earlier, more hospital beds and—32 percent more hospital beds on a per capita basis and 65 percent more medical specialists.

Let's go, I think, to the next slide, and here you see a scatter graph, I hope—

CHAIRMAN PELLEGRINO :  Correct.

DR. FISHER :   — cardiologists on the horizontal axis, cardiologists per capita, and the frequency of cardiology visits on the vertical axis.  So a strong positive relationship.   The more cardiologists you have per capita, the more likely you are to see a cardiologist. 

Let's go to the next slide.  This should be a graph that has some grayed-out stuff, and we're talking about the capacity-and-payment system because capacity is strongly correlated but interestingly explains less than 50 percent of the differences in spending across communities.  Because of the second factor, we do have a payment system that keeps us all fully occupied. 

Let's go to the next slide.  Oh, gosh.  I apologize for the misspelling if "evidence" is missing an "e" on your slide.  The question is, what's the role of physician judgment in driving the differences in spending or in practice across regions.  What we did is , we used clinical vignette to sort this out.  And we found that in clinical settings were there is strong evidence—the evidence is black and white, the trials are strong—there is no difference in answers across regions of different spending levels.  People are likely to day "do it" at about equal rates in high-spending and low-spending regions. 

But if go to the next slide, when we look at decisions where what we call the gray areas—discretionary decisions—where there is no evidence to guide practice, physicians in the high-spending regions make very different decisions.  For instance, in this particular vignette the question was, "In general, how often do you schedule routine follow-up visits for your patients with well-controlled hypertension?"  Physicians who practice in low-spending regions, only 22 percent of them would say, "I would need to see them in three months or less," whereas almost half of those in the high-spending regions said, "I should see these patients in three months or less." 

We were clued into this question by running focus groups of physicians in Miami , the highest-spending region in the country, and Oregon , one of the lowest.  And in those focus groups the physicians in Oregon said, oh, we would never see our patients—maybe once a year, maybe every six months, which reflects the data that we received from the national survey when we did it. 

When we asked the physicians in Miami that question, they almost all said, "I would see my patient with well-controlled hypertension every month."  So where physicians—and we found this to be generalizable to other clinical vignettes where judgment was a key element of the decision.

So there's no difference in intervention rates when decisions have strong evidence, but physicians are much more likely to intervene in the gray areas.  In the high-spending regions they're more likely to refer to a specialist, more likely to see a patient more frequently, and more likely to admit an identical patient—that is, a patient in this clinical vignette—to a hospital. 

That should have been, I think, your Slide 38.  I'm sorry if I failed to mention advance it, so this should be the summary slide, Slide 38. 

CHAIRMAN PELLEGRINO :  Thirty-eight. 

DR. FISHER :   Is that correct, 38? 

CHAIRMAN PELLEGRINO :  Yes.  It's entitled "Regional Differences in Practice and Spending." 

DR. FISHER :   Perfect.  If you go to the next slide, you should see one more line added at the bottom about trainees, is that correct?

CHAIRMAN PELLEGRINO :  No. 

DR. ROWLEY Yes.

CHAIRMAN PELLEGRINO :  "Trainees"?

DR. FISHER :   "Trainees" at the bottom.

CHAIRMAN PELLEGRINO :  Oh, yeah.  Right you are.  Correct.

DR. FISHER :   I heard a yes and a no.  I'm—

MALE VOICE:   You're there.  You're fine.  [1]

DR. FISHER :   Thanks.  So our most recent study, which has been published as an abstract and which is now under review because the abstract findings were published, was quite interesting.  We looked at trainees in internal medicine.  We developed a score that assessed their ability to practice conservatively when doing the right thing meant watching the patient or withdrawing therapy or doing the least invasive treatment when the options were—this is on the national exam that all internists take.  And we found that trainees in higher-intensity environment were more likely to make mistakes of overuse.  They were less likely to do the appropriate conservative treatment. 

So what's going on?  Let's go to the next slide, which is my summary slide of our hypothesis about what is driving the differences in practice across regions.  What I think is going on is that the clinical evidence—so does this say "Likely Diagnosis," your slide?

MALE VOICE:   Yes.

DR. FISHER :   Hallelujah.  So I think the likely diagnosis is that local capacity in clinical culture drive practice and spending.  Clinical evidence, principles of professionalism that we were trained with are critically important, but they are in fact a limited influence on clinical decision making.  Physicians practice within a local organizational context and policy environment that profoundly influence our decision making.  Payment system ensures that any existing capacity and any new capacity we bring in, whether we recruit more cardiologists or more orthopedic surgeons or whether we build more hospital beds, as in McAllen , Texas , the payment system ensures that that is fully utilized.  And then that capacity helps determine local culture. 

What we believe is happening is that because—for a primary care physician, for example, managing a patient with depression or managing a patient with back pain, in the current payment environment where you cannot afford to see a patient for more than 10 or 15 minutes, if there is an orthopedic surgeon for the patient's back pain, you will be much more likely to refer that patient.  So whatever capacity you have in place is taken advantage of.  Moreover, if there are lots of specialists in your community, we are likely to learn a specialist-oriented pattern of practice.  But the consequence is that where there are reasonable—that is, these gray area clinical decisions, reasonable individual clinical and local decisions lead in aggregate to higher utilization rates, greater costs, and inadvertently worse outcomes.

Let's go to the next slide.  You should see the question, "Why harm?"  Right? At the bottom?

Male Voice:   Yes.

DR. FISHER :   So what I think are the three major causes—and these are outlined in the article that I believe you have about avoiding the unintended consequences of growth in medical care.  There are three major mechanisms.  In higher-spending regions we are more likely because there are more of us to treat patients with milder disease.  We look harder for it.  We diagnose more patients who would not have been diagnosed in the absence of those diagnostic tests.  This is the problem of overdiagnosis.  And when you intervene in patients who are not very sick, the benefits are quite, quite small but the potential for harm is almost as great as it is in the higher-risk populations, and this has been well shown in a number of studies.

Second is because there are more physicians involved with a given patient's care, the care is much more complex.  It is less likely to be clear which physician will be responsible for following up with a patient about adherence with medications or for writing the discharge orders for their beta blocker if they have heart disease or for their cholesterol-lowering drug.  Greater complexity of care.   And what we see when look across either hospitals or regions, we see two- to three-fold differences in the proportion of patients who are seeing ten or more different physicians.  You're three times as likely to have ten or more physicians involved in your care in a high-spending system, academic medical center, than in a low-intensity academic medical center. 

And, finally, patients spend more time in the hospital.  Identical patients spend more time in the hospital in high-spending regions.  And hospitals are dangerous places if you don't need to be there.

Now, this is a—I gave this theory, this theoretical argument, to the American College of Radiology about eight months ago, and I got quite a vehement e-mail response from one of the members of the college.

Let's go to the next slide.  He sent me a brochure that is being sent around to urologists by Siemens.  He questioned whether this was just about the gray areas.  And I want to share this with you because I think it's a real challenge, really, to the professional integrity of our—the professional integrity of medicine.

So if you go to the next slide, Slide 42, I believe, on your slide set, it should say, "Just the Gray Areas" capitalized. 

CHAIRMAN PELLEGRINO :  You got it. 

DR. FISHER :   So this is the cover of the brochure that was sent, I think, to probably all urologists in the country.  It offered a new quick-start package.  The notion was if you buy one of these CT scanners you can do quite well in your practice. 

Go to the next slide.  It's laid out exactly how easy it is to profit from this, so that in Scenario C, where the practice orders ten procedures per day, which is not a very high rate for one of these CT scanners, the return on investment over 5 years is $2.1 million in net revenue to the practice—profit to the practice.

Now, in case you're not a person who likes numbers and needs implicit messages to make this absolutely clear, let's go to the next slide, Slide 45.  It should be a picture of a very happy urologist who is now able to sit back and relax because Siemens is taking care of the problem and helping him step by step. 

Let's go to the next slide.  It should be Geoff Smith, the radiologist.  He mailed back to me, which I now share with my medical students as a challenge to all of us.  He said, "These marketing ploys are wildly successful across the entire country.  Patients are viewed as the ball in a pinball machine, popped back and forth, ringing up profits, until finally they escape past the paddles and can no longer render income.  I believe that the fingers controlling those paddles often use those gray areas of judgment as an excuse to shoot the patient back to the triple-score bumpers.

"Speaking just as some guy out in the boondocks, I can tell you that life's more like the Star Wars trilogy than one would guess.  There's a dark side.  Difficult to resist and only a very few are able to throw themselves over the precipice to escape its clutches once they are embroiled within."

I gave this talk as grand rounds at the University of Colorado-Denver just a few weeks ago, and three physicians in the relatively small grand rounds audience came up to me and said they used to be in private practice but came to academic medicine in a salaried practice because of exactly this problem, the sense that they had to corrupt their professional values in order to practice medicine in the current environment. 

So let me try to summarize the second portion of my talk about what's going on with a cartoon.  Let's go to the next slide.  If we're lucky, this should be a cartoon, two physicians standing side by side.  Do you have it there?

CHAIRMAN PELLEGRINO :  Yes.

DR. FISHER :   "There.  There it is again, the invisible hand of the marketplace giving us the finger." 

So let's go to the next summary slide of the major points.  "Overuse is largely a consequence of reasonable differences in clinical judgment that emerge in response to local organizational attributes (capacity, clinical culture) and financial incentives that promote unnecessary growth and more care."  So that's the problem.

Slide 40, the next slide, should be setting us up, returning to the outline.  The challenge we have is something about aligning incentives.  The current incentives are not aligned with the best interests of patients or, I think, the best interests of physicians or the scientific integrity of our academic enterprise.

So do you have this outline slide back in front of you now? 

CHAIRMAN PELLEGRINO :  Yes.

DR. FISHER :   All right.  I am just wrapping up, so I'm going to summarize with what I think—I'd like to leave you with some ideas to consider.  Let's go to the next slide.  We have our group here.  I've been trying to think of what are the underlying causes, the diagnosis, of the problems we see in medicine right now and what are the principles we should use as we think about trying to address the problems we see.

The first problem is I think there is a constrained view of science in academic medicine and public policy.  We tend to focus on biotechnology.  We tend to assume that the only problem is about correctly allocating the biomedical interventions, the specific treatments that we develop, and making sure they get to the right patient and that we have better evidence about it.  But I think the data that we've developed over the last 20 years highlights the problems of care delivery in clinical practice, and we did not have good science understanding either the causes of the variations across U. S. regions or the consequences of those variations and what we should do about them. 

We have been trying to do this, thankfully, with wonderful support from the National Institute of Aging and others, but this has not been a major focus of investment in the scientific enterprise within the United States .  So our prescription would be moving toward a more balanced investment in the science of disease biology and the sciences of clinical practice and evaluation.  

The second problem is our failure to recognize the key role of the local system, the capacity and clinical culture, as a driver of rising costs and poor quality and that that local culture happens at the level of the hospital and the physician group, the network within which physicians are practicing and the capacity of that local delivery system.

It happens across the academic medical centers that I showed you in that fifth slide, and I'll come back to those academic medical centers in a second.  But the prescription here should be to foster the development of local organization, local delivery system, that can be accountable for the care for the populations they serve and take responsibility for the care of patients over time and that are large enough to have their performance measured.

We are working very hard with the Medicare Payment Advisory Council, with the Congressional Budget Office, Mark McClellan and I and others, to try to figure out how can we foster the development of accountable care organization that can take responsibility for coordinating care and that can have incentives not to purchase that MRI scanner, to be rewarded for conservative practice.

So the third problem is this assumption that more is better and the tendency that the American public has to equate less care with rationing.  Now, if we look across the U.S. health care system, we see that the lower-spending regions are not rationing care, they are not denying beneficial treatment for the populations they are serving.  The extra visits provided in the high-spending regions are not providing benefits on average.  Patients might think they are, and that's part of the problem. 

So the remedies here would be compared to the effectiveness research, much better information about the risks and benefits of the biomedical interventions that are under development and that we are developing to know in whom they are beneficial and what are the benefits and risks.

We then move to a model of informed patient choice, and we've been advocating this at Dartmouth for many years.  Jack Wenberg has been taking the lead on this, and others, including Al Mulley , are talking about the fundamental importance of shifting from a doctrine of informed consent that essentially says, "I, the physician, knows what is the right things for you, and I think you should have this treatment."  The doctrine of informed patient choice would say we have an obligation as physicians to present balanced information to the patients we see about the risks, benefits, and uncertainties and help them understand how their own values align with those different risks and benefits, and move toward a doctrine of informed patient choice:  shared decision making where the patient's values are guiding the decision.

There is very important work going on in Washington state in this regard.  The legislature there has passed legislation which will try to move the State of Washington toward a standard with the physicians of informed patient choice, which would protect the physicians from liability as well as provide much better information for patients about the risk and benefits, for example, of bypass surgery.

But the third thing we need in terms of the challenge of inadequate information and equating less care with rationing, we need much better performance measures about how local delivery systems are doing.  I believe that if we could show information that was convincing and persuasive that a low-spending medical group or academic medical center that costs $3,000 less per beneficiary was providing actually better care convincingly to the public, the public would choose to have $3,000 in their pocket rather than receive unnecessary treatments, the wasteful care that characterizes the higher spending systems.

But that's going to be hard without addressing the fourth issue, which is our payment system rewards more care, increased capacity, high margin treatments, and entrepreneurial behavior.  So we need to change our payment system, and I think we need to think about shared savings and some other models as an interim approach.

Let's go to the next slide.  I want to end by highlighting the contrast between three members of the honor roll of academic medical centers and the differences in spending across these centers.  You should have a slide that says, "Three members of U.S. News and World Report's Honor Roll":  UCLA, Mass General, and the Mayo Clinic. 

Medicare does a very good job measuring the quality of inpatient care and all three of these hospitals achieve high scores on these measures:  82 percent at UCLA, 86 percent at Mass General, and 90 percent at the Mayo Clinic in Rochester .  But the differences in spending across these systems are fairly dramatic, nearly a two-fold difference.  Medicare spending at UCLA on patients in their last six months of life is twice what it is at the Mayo Clinic, and this is a consequence of a pattern and practice that has 19 days in the hospital as compared to 13 at the Mayo Clinic and more than twice as many physician visits in the last six months of life at these higher spending systems.  That greater resource use has very important implications for the future of the U.S. health economy. 

Let's go to the next slide, and these are some questions that I'll leave you with that I think are challenging for all of us.  What are the implications of these differences in resource use for the future affordability of health care?  If everyone could adopt the current resource use levels of the Mayo Clinic, health care would be much more affordable.  Might we be able to cover the uninsured?  I think the challenges of covering the uninsured relate to an understanding of the challenge of the flexibility with which physicians and hospitals deploy themselves across the population. 

Obviously if we can go from three to six visits per year for patients with well-controlled hypertension, we could currently accommodate the uninsured if we could figure out a mechanism for achieving coverage, and we don't necessarily need to increase spending to do so.

What about the challenges posed to the rest of the U.S. economy by the increased spending that is being devoted to medical care?  And there are very different pathways offered by a practice that would look more like the Mayo Clinic than like UCLA.

Do we need to expand the physician workforce?  Great question. If we adopted the physician workforce benchmarks at the Mayo Clinic, we would not need to increase the physician supply at all to accommodate the aging of the U.S. population and the baby boomers through the year 2020. 

And what about the research priorities of academic medicine?   We have not had much attention by academic medicine to the differences in practice across the hospitals, and I think that deserves some more attention. 

It's really been a treat to talk with you.  I'm sorry it was less of a conversation, but I needed to get some information across, and I'm happy to talk for as long as you are interested in taking questions. 

We can go to the next slide if you like, which I think should be a reminder of what the health care system looks like when you look from 30,000 feet .  We have some serious challenges.  Thank you very much.

CHAIRMAN PELLEGRINO : Dr. Fisher , thank you very much for a splendid presentation, particularly under some trying and difficult circumstances.  We appreciate it very, very much.  Let me say it now:  we hope you daughter is doing well, and we want to thank you for participating with us.

We will now turn the discussion over to members of the council, but first we have Dr. Daniel Fisher , who is going to open the discussion.  Dr. Fisher, I'm sure you know, is Chairman of the Department of Medicine at the University of Texas Southwestern, an experienced clinician who will give us his point of view in opening questions for the rest of the audience.  Dan ?

DR. FOSTER Well, Dr. Fisher was the speaker, and Dr. Foster is the answerer, so—

DR. FISHER :   Hello, Dr. Foster . 

DR. FOSTER Hi.  How are you.   I don't have a whole lot to say.  I had read your paper and enjoyed very much the presentation of the slides.  I think I would make a general philosophical statement to start with.

First off, from the early days of the country, we have operated in an economic system which is generically called capitalistic.  The county has been filled with entrepreneurs.  It looks like almost every place that you turn these days that the country is characterized by economic greed.  What I mean by that is, we have major companies like Enron or whatever in which the salaries, even if you're fired for the stock going down, are enormous.  I mean, the driving force—it's not alone for me to say this—appears to be economic greed.

It used to be when de Tocqueville was here, when he talked about communitarians, what he said is we actually have a tripartite system.  We have a governmental system which is to assure the rights of citizens, including the very peculiar phrase in the Declaration, the right to pursue happiness.  And then the economic system was designed to assure that there was enough in terms of income that one could achieve enough physical and other things to achieve happiness.

And then we had a communitarian system, which was quite remarkable.  He thought this was the most remarkable thing, I believe, about the country; that is, that there were—all citizens who were communitarians, that they put the community above themselves, so they were volunteers.  They supported hospitals and churches and museums and all the other things that fell through the crack between the government and the economic system. 

And what we have seen, although there are companies that contribute massively to communitarian things, still there is this dominant sense of achievement in economic terms.  It does not surprise me at all that if you have more physicians or more hospital beds in a community that the costs are higher because the hospital, like every company, and the physicians, like every worker, wishes to be economically secure.  And as a consequence, they may from time to time or frequently choose between a lesser cost procedure or a higher cost procedure.

It doesn't surprise me at all that there is a relationship between the numbers of resources and the money that is spent.  Moreover, I don't think it's likely that you can have a group of people to tell a hospital not to buy a 7.2 Tesla magnet as opposed to a 1.5 when you can make a fortune by doing cardiac MRIs.  It's very helpful in the individual patient clinically.  They're not going to do that because they're in the process of staying solvent and making money.  And many of the systems—I can only speak about Dallas .  The biggest private hospital in Dallas owns about 27 hospitals all around, maybe higher than that.  And the drive there—and you get fired if you don't do it—is to make money or make your stock go up. 

I don't believe that the drug companies are going to be humanitarian in terms—they will build—to get a patent difference that will allow them to maintain a drug will make slight changes that don't account for anything because they're in the business, as Relman pointed out, of making more money.  Decisions are not made for communitarian reasons; they are made for profit reasons, because that's what our system does.

So I'm not surprised about that.  Conversely, the reason we have no general internists is because they're so poorly paid.  I have a son who is a general internist.  He came to talk to me this week.  He said, "Dad, I don't know how long I can keep going."  He's an old-fashioned internist.  He puts his own patients in the biggest private hospital and takes care of them rather than turn them over to a hospitalist.  And we hire nurses that make more than he does.  Out of our graduating class last year of residents—we have a very big program. 

We have 150 residents in internal medicine, so about 55 go out.  Three went into general internal medicine.  And, as Relman pointed out when he was here, you can't get an internist in big cities.  The only place that we have them is our medical school because we still take Medicare.  Nobody else in Dallas takes Medicare as new patients.  We don't do it because—if I see a patient, I may get $40, and I've spent an hour with a patient.  And I write a lot of books and stuff like that.  You would think in a merit system I ought to be paid more, but it doesn't happen.  It doesn't happen that way.

So on both sides we see that it's the monetary factor that is making these decisions.  And I believe—as Dr. Pauly said this morning, I don't believe we can change that.  I don't believe that a group of saints could change that model.  You might do it by explicit rationing, as we heard this morning, but nobody is—if you're Mother Teresa you're going to take care of people in India for free.  You remember when the head of Time Magazine came there and she was scrubbing a gangrenous leg and he said, "I wouldn't do that for a million dollars."  That's a very perceptive statement.  "I wouldn't do that for a million dollars."  And she said, "Neither would I." 

I think the model is good.  The only question that I would raise, and I may not understand the methodology that surprises me as somebody who has hung around with science for a long time, is that it was a universal conclusion of the study that all—all—of the top five communities and all of the lowest communities and little towns and so forth did better in terms of outcomes. 

I'm very suspicious when I see ten or twelve points.  All.   I mean, maybe somebody in the third percentile or somebody—there surely should be at least some of these honorific academics, even if you give the beds and so forth.  It looked too pure to me, but maybe I misunderstood that.

The final thing I'd want to say is that, in the last comments that were made, is that if a patient by choice chooses something—unless they're paying for their whole care—that's $3,000 less, that's not going to be money in their pocket.  That's not the way it goes.  And I think even in the honor place—I happened to have evaluated the Department of Medicine not too long ago at Mayo Clinic.  I know that system extremely well.  We spent—I spent a full week up there evaluating.  They wanted to see how they were doing in terms of medicine.

The discrepancy between payments for physicians at the Mayo Clinic is different from what it is in a community like New York or Philadelphia and so forth.  The salary discrepancies are not so much there.  And, secondly, they've had that tradition for years, that you're a salaried physician.  And it's cheaper to live in Rochester than it is to live in Los Angeles .

So my summary statement is that—and I want to say one other thing, and this I can't prove in any way at all except that I—it's a cynical thing to say that physicians make their choices for money.  Now, if you said they make their choices solely for money, that would be even worse.  But my own impression from interacting with hundreds of physicians is that most of them are decent, honorable people, and they want to make good money.  And they go into cardiology because they get—plus, it's also exciting.  But the implication of this just taken on the surface is that it's pretty sad.

I think the argument that Dr. Fisher is making is that it's not on the physicians.  I think he's saying it's what he said several times.  It's the community that you work in, it's the facilities that have to be paid for. if you can make more with more magnets and so forth.  But it could be read that the physicians are cynical, and I don't want that to come away.  I don't think he—I'll give him a chance to answer that.  I'm talking more about that than I want to.

But I believe, to go back to what I said initially is, I don't think in this country that we can change the drive to make money whether it's at industry or whether it's in professional life you can do it.  And that's why I don't know exactly what the solution would be to these things that we've seen. 

So I enjoyed your talk very, very much, but it's—I'm not as optimistic.  I think I would probably join with Dr. Pauly that I don't think that making saintly demands on a society is going to change things very much. 

CHAIRMAN PELLEGRINO :  Thank you very much, Dan .  I hope you'll forgive me for the lapsus linguae .  It's a combination of synaptical disconnect and perhaps, Paul, if you could explain the reason—

DR. FOSTER:  Now, what I thought you were doing, I thought you were giving me a big compliment because Dr. Fisher had been so great that you would say, "Well, maybe one of these days you'll be a Dr. Fisher" or something. 

CHAIRMAN PELLEGRINO :  You're a very charitable man, Dan .  Thank you very much.  Now I will talk to Dr. Fisher .  Do you wish to respond to Dr. Foster 's comments?

DR. FISHER :   I would love to say a couple of things.  One of the challenges is the mic—your end got cut up, and I may have missed a few things, but I want to comment on three things. 

First, the issue of financial incentives and people needing to make money and greed; second, the issue of no findings that go better in the high-spending regions, and I'll come to that in a second; and then the question of whether there is anything to do about all this.

First, I agree with him completely that the United States has a culture of both hard work and wanting to be rewarded for one's work.  And I agree with him that whether it's hospital boards—and I've spent a lot of time with them—or with physicians, I believe everybody is trying to do a good job.  I do believe that the pressures on in the current payment system are outlined well in his comments about general internists and the impending collapse of primary care.  The current incentives don't support the kind of systems that we need to provide good care. 

The second question is, have we ever—sort of the skepticism that my findings were too cute.  First I would encourage you to read the papers.  We've really looked pretty hard, and we have one paper now under review looking at patient responses to care, patient perceptions of care at higher-spending regions compared to lower-spending regions in great detail, and there is in that paper one of the eight dimensions that we look at where patients prefer care in the higher-spending regions.  So this is some good news there.  And, interestingly, they like their doctors better. 

I don't think I'm breaking some embargo of review and that my co-authors will shoot me.  So there are some things that people appear to like better.  But let's go to the third question of whether there is anything we can do about it. 

My father, who is a lawyer, Harvard Law School , when asked about what he thought would happen in the future, he said that wasn't his job.  His job was to try to make the future better.  I think the question is, can we devise systems that would have incentives for good performance, incentives for better care coordination, incentives for physicians to work together, and allow them to be rewarded not for increasing capacity, not for seeing patients more frequently, but rewarded for good conservative practice. 

And I think we're making headway.  I don't—it's going to be hard work.  The question of how we help physicians form groups that could be rewarded for conservative practice.  It's a difficult one that we are working on at the current time.  But I think if we designed—I am optimistic, and I've learned to distinguish hope from optimism.  But I am indeed optimistic that we can make some changes to the current payment system that would allow groups of physicians and their affiliated institutions, to the extent we can foster collaboration rather than competition between hospitals and physicians, that would allow them to be rewarded for not growing at the rates they are now growing and were illustrated on the slide of Peter Orszag, head of the CBO.

The models are difficult to implement, this notion of a shared savings program.  But I think we should look hard at trying to devise market mechanisms that would reward physicians both for good practice and for better care and would reward them financially.  And that's the model that we're trying to work for.

I agree with you that simply exhortation, "Don't buy this scanner," that's never going to work.  But I do think that the practices within systems with less capacity seem to be just as good as those with more, and the challenge is to get the incentives aligned to design good care-delivery systems.

So I appreciate all your comments.  I think our challenge is how are we going to work together to do something about it. 

CHAIRMAN PELLEGRINO : Dan , any further comments? 

DR. FOSTER This is Dan again.  Thanks very much.  I appreciate that.  And I meant to say one other thing.  I certainly agree with your first paper about the fact that getting all these CT scans looking for coronary in the arteries and so forth, oftentimes in the lungs you're going to see a little granuloma and then you have to take it out because you think it might be a lung cancer.  So I just want to say that I want you to continue doing what you're doing.  And I just wanted to add that little thing to it. 

DR. FISHER :   I appreciate that.  This is hard work.  We have a lot to do together. 

CHAIRMAN PELLEGRINO :  Thank you both.  Are there further questions, comments?  Dr. Rowley .

DR. ROWLEY:  I'd like to know in discussions of how one moves forward and develops a more altruistic system, do you think that a single-payer system with the federal government is likely to be more conservative in terms of the use of medical facilities than the fee-for-service system that we currently have, or at least have in some areas and for some segments of society?

DR. FISHER :   That's a tough question.  It's a great one.  I think that most visions of a single-payer system involve maintaining the fee-for-service approach.  That is, physicians for a national health program single-payer system simply proposes to leave our current fee-for-service system in place but have it financed by a different tax system and payment system. 

My sense is that will not solve the problems with the delivery systems that we've outlined.  I think the question of whether a single-payer system or a multipayer system will be better for the care of patients is hard to answer.  I think realistically politically we are going to end up with a multipayer system, at least over the next five years, and Leonard Schaeffer and others are predicting if we don't do something constructive to stem the growth of health care costs in the next five, maybe eight years before the next eight-year presidential cycle that there will then be draconian cuts just to payment levels, and the system will be severely punished.  And we may end up with a single-payer system.

But I think multipayer systems might work just as well if we think about fostering this local collaborative model that's rewarded for better care.  I've discussed this model now in Wisconsin and Vermont and New Jersey .  Most recently it seems to be emerging in Oregon the notion that there has been a real barrier to physicians and hospitals working together to improve care and that we ought to—there's interest in models that would allow us to do better both in terms of care coordination across the spectrum of care that patients experience.  And that's been the focus of my work.  It's on the delivery system side, less on the payment system side.  And I think we need to do both.  We need to think about how to reform the insurance system, but my guess is we'll have multiple payers, multiple insurers, the government and others, and so we also need to work on the delivery system.

In Vermont the notion is a private-public collaborative to think about new payment models for these local delivery systems. 

CHAIRMAN PELLEGRINO : Dr. Meilaender .

PROF. MEILAENDER :   Thanks very much, Dr. Fisher .  It was really fascinating.  I just have one question about the general finding that in many respects the higher-spending regions have worse outcomes.  I should maybe know the answer to this question.  I don't know.  But in your data, are these regions—there are undoubtedly variables among them with respect to population density, racial makeup, class makeup, and so forth.  Is that all taken into account?  Does that enter into your calculations in any way or not?

DR. FISHER :   That's a great question.  Our reviewers were quick to ask the question.  If you look at that map one immediately thinks, hold it, Dr. Fisher is talking about the southeast, about New York and New Jersey compared to Oregon and Wisconsin , where everybody is healthy.  The way we addressed that question was several fold.  First, because we looked at patients with heart attacks or—just take heart attacks, for example.   In those communities, the incidence of heart attack is actually lower in some of the low-spending regions, the healthier regions.  But once you've had a heart attack, it sort of takes account of differences in the prevalence of risk factors across communities.  That is, those who are heavier or have more risk factors for smoking are more likely to have a heart attack.  But we looked quite closely, and the characteristics of the heart attack patients in low-spending and high-spending regions were very similar.

The second thing that we did was we said, "All right, yes, they are more urban."  We repeated all of the studies, all of the mortality analyses, stratifying for different kinds of characteristics.  So there are high-spending and low-spending rural regions.  There are high-spending and low-spending urban regions.  So we looked at this relationship in each of those strata, and we found exactly the same result.

I think we had 72 different strata we looked at: regions with low and high HMO prevalence; we looked only at blacks; we looked only at whites; men versus women; underlying risks based on predictive models of how likely you were to die following your heart attack or hip fracture.  So we think we did a pretty good job taking account of those differences. 

The review process at the Annals of Internal Medicine in their first articles list two years, eight different reviewers.   And so I think the science is pretty good.  I'd be happy to talk further, but we'd bore everybody to tears.

CHAIRMAN PELLEGRINO :  Further questions?  Anyone? Dr. Dresser .

PROF. DRESSER :   Thank you.  I'll take a shot at something.  I wonder if you could put your findings into an ethical framework.  It sounds to me as if you're saying patients in some regions are getting medically unnecessary care, and we know that because of the outcomes in the other regions.  And so as a result, there's a lot of waste and some degree of harm to patients.  And if we could take that waste and use it for other things, like covering uninsured, that would be an ethical improvement.  Could you elaborate or correct me on that?

DR. FISHER :   I think that's right.  I think because we have focused our attention on whether a patient should get a very expensive drug or not and the likely cost implications or that or rationing.  Because of the way we think about these things as clinicians, we focus on should you treat a patient with high cholesterol versus someone with low.  We focus on the biology and intervention.  We have missed this category of care called supply-sensitive services.

It's not about what care is provided, what specific services, it's about how the care is provided, which kind of provider delivers the service, what's the most efficient way.  Should it be done in an outpatient setting or a hospital setting?  We've ignored those.  They certainly don't lend themselves easily to ethical analysis because those decisions are so difficult and require such judgment. 

Do I admit this patient with heart failure to the hospital now or do I try to manage them myself overnight?  There's no evidence to guide us on that.  It's easier if I can get them a bed because they'll be hospitalized, and we think it's better care. 

So I think there's an important dimension of practice within the United States that is ignored when we think about rationing care.  I don't believe it is rationing not to provide services.  Let me try to say that another way.  I think rationing implies the denial of beneficial services, and so I think there is an ethical challenge posed by how to deal with this.  I think when we talk about 47 million uninsured or we talk about starting to ration high cost but clearly beneficial treatment—a new drug is going to cost $100,000 a year but extend patients' lives substantially, and we say, "Well, maybe society can't afford it."

We ought to be thinking about the choice of providing that drug and all of the waste in current practice.  I think there's a tremendous opportunity to improve the efficiency of care.  If you take Salt Lake City as a benchmark, if you take—we're trying to do this at Dartmouth to reduce our utilization rates on these discretionary services.  We recently decided, thanks to our data,   not to build a new wing on the hospital.  That will save the community a lot of money that we might be able to devote to other things.  So I think there is an ethical framework here.  Bringing it to bear in individual clinical encounter is going to be harder.  And that's why I shift my focus for reform from an emphasis on individual clinical choices to context, environment, and incentives, focusing on the organizational context within which providers work and then trying to get the incentives aligned so that at least they are rewarded for providing better care even if it's less care.

One of the great challenges faced by organizations striving to do quality improvement work, say, now around heart failure or around other conditions, if you succeed in reducing—in improving care and lower hospitalization rates, you actually risk losing money.  So we need to focus on the incentives. 

Is that a partial answer to your question?  I'm happy to follow up on the conversation.

PROF. DRESSER Yeah, that's an answer to work with.  Thank you.

CHAIRMAN PELLEGRINO :  Other questions, responses, comments?

DR. FISHER :  Can I make one more comment on the ethics?

CHAIRMAN PELLEGRINO:  Yes, please.

DR. FISHER :   I just finished an article.  It will come out as part of the National Academy of Sciences' magazine, and I show that—basically I used the last slide.  And I think academic medicine faces a serious, really ethical challenge.  That is, how can we call for additional physicians, which we know will increase the cost of health care, and how can we look at the differences in practice and care delivery spending between—and you don't to choose just the Mayo Clinic.  You can look at Intermountain Health Care.  You can look within Massachusetts .  You can look within New York City .  Large differences in practice.

How can academic medicine—and is it moral?  I'll ask you all to ignore the differences in spending and their implications for both the ability to pay for education for our children, the ability to cover the uninsured, the ability to pay for new clearly beneficial things while ignoring these differences in spending. 

I think there is an ethical challenge there to academic medicine.  At least that's the stance I'm taking, that my colleague Jack Wennberg and I are both taking.  So help us with that.  Is it an ethical question that we should pose to academic medicine?

CHAIRMAN PELLEGRINO : Dr. Hurlbut .

DR. HURLBUT Maybe somebody wants to respond to what he just expressed first.

CHAIRMAN PELLEGRINO :  I didn't see any—

DR. FISHER :   It was a rhetorical question.  Not to worry. 

CHAIRMAN PELLEGRINO :  There was no body language suggesting a desire to respond.

DR. HURLBUT Dr. Fisher , I thought your presentation was really interesting, as were the readings you gave us.  I want to ask you about something that we're going to talk about tomorrow morning, which is newborn screening.  And, of course, implicit in that are larger questions about genetic screening at various stages of human life, preimplantation, antenatal, and postnatal. 

Here's an example of something that relates to a particular paragraph in your paper which I had known about abstractly but was stunned to read, and that's the comment that it's increasingly clear that the population with an occult disease is many times larger than the population destined to become sick from it.  And you go on to explain how microscopic examination of specimens from individuals without known cancer reveal high rates of thyroid, breast, and prostate cancer.  I think my colleagues will know this.  I put that on the record who are reading or listening otherwise. 

As I thought about that and I thought about the implications of newborn screening, it really raised some interesting questions for me.  I just thought maybe you'd have some things that could help us on this and it might relate actually into some of the other ideas you've presented to us.  Four categories come to my mind, and maybe you could comment on each of them. 

One is the cost of procedures like screenings themselves could exceed—could be very, very large and in many ways could displace the efforts we make to cure diseases.  Do you see what I'm saying there?

DR. FISHER :   Absolutely.

DR. HURLBUT:  Then second, there's going to be a big problem associated with communication with patient populations that are not scientifically trained and don't necessarily have strong intuitive mathematical minds, and a lot of this information is going to just be statistical probabilities, not direct correlations between finding and the likelihood of disease.  It's going to be a little like your paragraph: occult disease, if you will. 

And then also it's going to invite all sorts of interventions, some of which will carry their own risks and some of them will have strange sort of psychosocial dimensions.  I'm sure you know what I'm talking about with regard to that.  And then finally the possibility that in the efforts to make a more cost-efficient system we may end up with impositions.   In this case of newborn screening, they're mandated screenings now, which are kind of impositions, but for the most part we are pretty happy with that.  But it could lead to impositions for interventions eventually—or at least strong pressures for interventions.

Could you just comment on this?  We're searching in this council arena for ways we can contribute not so much to overall policy formation but with comment on professional conduct and ethical valences to this overall policy issue.  So I thought this was a good subject you might be able to contribute to us in the perspective from which you've already delivered your comments. 

DR. FISHER :   I would be happy to talk about it, but the fourth point I didn't understand.  I've got notes on the first three. 

DR. HURLBUT Well, it was a little more draconian, but the idea that once a genetic disease or proclivity to disease is identified, there might be strong pressure to intervene even when there is no symptomatology.  You know, the preemptive things all the way from diets to maybe pharmaceuticals and so forth.  I mean, here I'm thinking of—my mind goes to very troubling prospects, like suppose there's proclivities toward the use of addictive substances or antisocial behaviors or proclivities toward obesity and you could preempt that with a drug or—I'm just—you've spoken, I think, wisely and intuitively about the culture of practice that prevails.  How are we going to make sure a culture of compassion accompanies that culture of practice when we come to the fact that many diseases are—many conditions are preclinical and yet we could intervene against them early.  Do you see what I'm saying?

DR. FISHER :   Yes.  Now I understand completely.  First, let me say that I think this is one of the most important challenges we face over the next decade.  Because of advances both in imaging technologies and their sensitivity and in terms of our increasing ability to identify markers, be they genetic or others, that might be seen as risk factors for disease.  And therefore we are tempted to screen and begin to intervene.  So I think it's a critically important question.

I think the wisest person I know about this is the colleague with whom I wrote the paper that you're citing, Dr. Gilbert Welch, who has a book out about this, and it's the major focus of his work in trying to understand how best to help the public understand these issues and what we need to think about as we decide to implement new screening tests or to look for occult disease.  You're absolutely right.  Costs can be tremendous, and even the most recent example of the genetic screening tests for prostate cancer, which can stratify men into four risk groups.  There's already the folks who published the New England Journal article who, I understand, are already offering a commercial test—little troubling in that on the evidence that intervening for those at low or high risk remains inadequate.  There is no evidence with which to guide it.  There has not been a study done yet to know whether the screening will be beneficial.

So the costs can be high and the consequences are uncertain and largely unevaluated.  I think the challenge of communicating with patients and with physicians is difficult.  We physicians are trained to believe that early intervention is better, and yet the science would say not always.  So whether it's screening for lung cancer in the Mayo Clinic trial or earlier intervention in cancer therapy where stage shift is such a problem and—well, I think communication with patients and with physicians about the difficulty of understanding this problem is really important.  And if you want, I can certainly help the Council by providing some of the papers on this issue for additional reading.  So I think think you are absolutely right.  Those first two issues—and the third issue about interventions having risks is absolutely correct. 

Yesterday Dr. Welch was telling me about a patient followed for osteoporosis not having an easy time managing—she actually didn't have osteoporosis but was being aggressively treated because she'd been screened and found to have a slightly low T score.  She had osteopenia, slightly thin bones.  No intervention—none of the biochemical interventions seemed to help her, so they sent her to an endocrinologist who did a careful thyroid exam, found a little nodule.  The nodule turned out to be papillary carcinoma, but we don't know what—most papillary carcinomas will never cause trouble, but she ended up with a thyroidectomy.

So you're absolutely right that these interventions have risks, and the public is largely unaware of them.  Often they think, especially in the cases of early cancer diagnosis, that their life has been saved when, in fact, most of those cancers would not have caused trouble on average for the population If you follow them.  This was overdiagnosing. 

So I think in terms of the psychosocial consequences, we have to be aware that it cuts both ways.  It could make people feel worse:  "Oh, I have a cancer diagnosis.  I've got cancer."  But if you think of the vitality of breast cancer survivors and the sense of renewed vigor and renewed life that they get after they've survived their cancer, I'm not actually sure whether they would be assessed as being harmed or benefitted by their diagnosis, a very challenging evaluative problem for those of us who want to understand what is the impact of these diagnoses on population health.

I think the challenge of imposing treatments on populations—I think in all of these cases the question comes down as much as possible on demonstrating the benefits of intervention on an entire population while accounting for the risks of the harms of the intervention before we advocate adoption of the screening test.

So one thought—I mean, this may be an area—and there has been some talk in policy circles where it really would help the country if we paid attention to, say, the U.S. Preventive Services Task Force.  What is the best evidence on this particular screening test?  What is the quality of the evidence?  And Medicare and other payers might wisely say, "We are not going to pay for and we discourage your receiving tests that are not recommended by a body that is evaluating their potential impact on population health. 

Are those some helpful ideas?  I'm not sure. 

DR. HURLBUT Yes, that was very helpful.  I know there have been several studies that have recommended prenatal screening of not just women over 35 but of all women, and the costs associated with that will be huge.  But what's troubling about that beyond the costs and what's seductive about it beyond the benefits of knowing something early and doing something positive about it, is that it puts the society at—it implies a certain attitude toward what it means to have a medical condition.

In other words, the very idea that you would know about having a disease either in the womb—a child who will have a disease or a person who has an occult expression before there is any manifest symptomatology, it creates a culture with a certain difference of attitude than the one that most of us grew up in.  And I find it troubling because I think that—as I look out at it, I can imagine there would be some very significant cost savings associated with some of these early detection systems.  Now, it could just be very burdensome and we decide not to do it, both in costs and in social process, but it could also be very efficient to do it, at least in some disorders, some of which might be actually controversial.  Certainly prenatal screening is controversial because of its association with abortion.

So I just—I mean this is sort of a vague reflection now on your papers, but it really struck me that sometimes more medicine is not just less efficient in terms of its costs and somewhat of a burden on the patient but can change the character of your general society too, just general attitude of what human life is and how it unfolds naturally.  And it can also do something, I think, that you haven't exactly mentioned, but make us a society preoccupied with disease. 

I mean, I think pregnancy has already been affected by this, the sense that you have to do a lot of things to make sure your baby isn't going to be damaged.  And a lot of that is very good.  Of course, ultrasound and so forth.   There are some interventions that can be done.  But you know what I'm saying?  The general feeling that we'll become more preoccupied with disease and what might cause our death than we do actually living our lives.   Well, it's an exaggerated statement.

DR. FISHER :   I share your concern.  Both Dr. Welch and I and our colleagues up here at Dartmouth are working very hard to try to think about how to reverse the trend toward medicalization and how to help the public understand the choices they face.  It's an uphill battle in a culture where, as I believe we discussed earlier, there's lots of money to be made by making healthy people sick.  The device manufacturers, those who produce the tests, and those—the industry interest in taking treatments that are very beneficial in those who are very sick and the very small benefits in those who are pretty healthy. 

But the goal of industry and the pharmaceutical industry, because there is such a large population there, is to make us—is to shift the definition of disease to increase the population.  And Dr. Welch—I almost included three slides from Dr. Welch's recent synthesis of the work on hypertension where it is clear that we are labeling more and more patients what used to be prehypertension and no one would have mentioned it to you except maybe tell you, "Dr. Fisher, you ought to do a little more walking" or "Why don't you watch our diet."  No one would have mentioned the diagnosis, but now we are being encouraged to treat vast numbers of people. 

Most of the population has mildly elevated blood pressure.  Two things happen.  One is you're treating people who have a very small chance of benefit.  You're labeling them as hypertensive, which we know causes increased absenteeism in the studies that have been done, but we also are more likely, because there are so many of those patients, to ignore the patients with severe hypertension.  Right now only half the patients with established hypertension on average are being effectively managed.  So not only do we risk labeling the less ill people, but it diverts all of our attention from those who really need our care and would benefit substantially from better care.

So I think you're posing a great question.  I'm not sure I can solve it for you for the prenatal screening, but I think it is a very important problem for society to come to grips with, because otherwise we will all be sick.

CHAIRMAN PELLEGRINO : Dr. Peter Lawler .

PROF. LAWLER I really am listening to all this from the point of view of someone who doesn't know much about it.  I'm not a physician.  Except I really don't know what to think about it.   I mean, Bill is right.  We live in a time when people are preoccupied with risk factors of every thought, every kind, and prehypertension just sounds dumb. I mean, next it will be pre-prehypertension or something.  And so, no doubt, you are getting people alerted unnecessarily and so forth.  But the general tenor of the discussion is something like this:  if medicine is too conservative, your cancer will be diagnosed too late and so you will die.  If medicine is too aggressive, you'll be treated for cancers that you never would have known about and never would have bothered you, and you'll have a thyroid procedure that is completely unnecessary. 

So what's an average guy to do here?  We don't want to be too conservative, but the reigning wisdom is we don't want to be too aggressive; we don't want to be too conservative.  How can anyone measure exactly what is correct on this?  Because on the one hand we don't want to get all excited about prehypertension or pre-prehypertension; on the other hand, perhaps we're not sufficiently concerned about real, life-threatening hypertension that's a big-time risk factor.

So in a certain way, doctor, aren't you just pushing in the other direction against aggressiveness, telling us in fact that conservative medicine is in fact less dangerous.   So you may be convincing me that I should never go to the doctor again for fear of what might happen to me.  On the other hand, when people die of cancer you always get that "Tsk tsk.  Went to the doctor too late. Weren't aggressive enough."

CHAIRMAN PELLEGRINO :  Thank you, Peter .  Dr. Gazzaniga .

DR. GAZZANIGA Elliott , nice to hear your voice again.

DR. FISHER :   Yeah, hi.  How are you doing? 

DR. GAZZANIGA I'm fine.  I was wondering if you might comment on the general question of group versus individual data.  As we all know, there's tremendous individual variation in biology and biomedical phenomena, and so much of medicine now is really trying to aggregate groups, find the mean and see if there is a significant difference between them when within each group there's tremendous individual variation.  So the drug action on you may be one thing; on me it may be another.  And yet if we put this into an average it looks like there may be no effect of the drug.

In our own MRI work we've always moved forward by group data, but now we're looking at the individual data.  It's so reliably specific and varied that you have to take note of it.  And also as we're moving biomedically into more individual medicine, personal specific biologic state medicine, how are you going to deal with that, or how is biomedicine going to deal with the fact that the individual variation is really where modern medicine is going?

DR. FISHER :   Well, thanks for giving me such an easy question.  This is a really important problem.  If you look at Rodney Hayward 's work, which I'm not sure many of the council members will be aware of, but a very nice set of studies from a guy at the University of Michigan who sort of highlighted the problems in randomized controlled trials and the use of the group data.  What his work has shown and some have shown is that you can have two different problems.  One is interventions that look effective on average can be highly beneficial to some in the group and either of no benefit or harmful to others.  And if you have a negative randomized trial that shows the drug didn't work on average, you can then look at the data and find in fact there were subgroups who benefitted from the drug and others who did not.  Therefore, the average effect was null or negative but there was a subgroup who benefitted substantially.

The Institute of Medicine held a workshop last summer of which this was one of the problems discussed.  And I think we're compelled as scientists to try to learn about whether the individual predictions we make based on our understanding of biology and our understanding of the pharmacology and pharmacogenetics, if you will, of the patient and try to test our prediction that these patients will be likely to benefit.  So the notion of much more comprehensive evaluation of drugs, much more effort to prespecify subgroups early that might benefit, much greater use of observational research with good baseline data collected on the characteristics of the patients that would let us understand better how the heterogeneity within the population affects the benefits of the treatments that we're providing patients.  And it's going to require what the IOM called a learning health care system.

I think the emergence of good electronic health records, the emergence of some sort of population-based registries that allow us to follow patients over time and do much better postmarketing surveillance of both devices and new pharmaceutical agents offers at least the best shot most smart people—and I probably wouldn't include myself in those—the best shot at addressing the question you're asking.  Is that a fair—it's an important problem.

DR. GAZZANIGA Yes.  Thank you.

CHAIRMAN PELLEGRINO :  Further questions or comments?  Dr. Fisher , any closing remarks? 

DR. FISHER :   I want to thank you all for listening to a disembodied voice.  I know it can be very hard.  I really appreciated the opportunity to be with you and your flexibility in acknowledging my need to be with my daughter this morning.  She is doing well.  So thank you very, very much, and please let me know, Dr. Pellegrino , if there's any additional materials that we can help the Council with.

CHAIRMAN PELLEGRINO :  Thank you very much.  We really appreciate your being with us.  The circumstances under which you've done it are a bit difficult.  We understand that and are glad to have the news about your daughter.  And on behalf of all the members of the Council, I thank you.

[1 ] Was unable to identify who said this.

 


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