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Technology fueling higher medical costs

Published Oct. 9, 2005

Ross H. Arnett III knows the Medicare program inside out and can rattle off billion-dollar budget figures without blinking.

But when the federal official is asked what drives medical costs up so fast, he thinks back to the bill his mother-in-law got from a Pennsylvania hospital after her husband was felled by a massive heart attack.

"He had been stone cold dead for two hours by the time he reached the hospital, and they still gave him $6,000 worth of care," said Arnett, director of the Office of National Health Statistics. "We give people every last treatment no matter what the cost-benefit ratio."

Decades of double-digit annual growth in the nation's medical bill have finally forced Arnett and other Americans to pay heed to where their health dollars are going.

The nation will spend $911-billion this year, 14.6 percent of its gross domestic product, on health care. That covers everything: aspirin, heart transplants, nursing homes, dental checkups, everything.

The bill was up from $832-billion last year and $675-billion in 1990. Back in 1965, when Medicare was launched, Americans spent just $42-billion on health care, or 5.9 percent of the gross domestic product.

This cost spiral, more than the plight of the nation's 37-million uninsured, has compelled President Clinton to prioritize health care.

Polls show that many Americans believe the problem could be solved if doctors and drug companies, hospitals and insurers would stop raising their fees so rapidly.

But most experts agree it is not greed but technology that fans the fires of medical inflation.

And they point out that most consumers have third-party insurance cushioning them from the bills, and most doctors are rewarded for ordering more tests and procedures. Fear of malpractice lawsuits also spurs doctors to do more rather than less.

"Technology in medicine is not like technology in industry," said Dr. James S. Todd, executive vice president of the American Medical Association. "If you put a robot on an assembly line, you've saved money. If you put an MRI (magnetic resonance imagery machine) in a hospital, you've added 10 people to the payroll."

A recent AMA study blames the cost spiral in part on Americans' being "overinsured." The doctors' lobby noted that health insurance is a tax-free fringe benefit for most workers and that many consumers pay only 20 percent of health costs out of pocket.

That spurs demand far "beyond what it would be if consumers faced the true cost of services," the AMA said.

Dr. Arnold S. Relman, the retired editor of the New England Journal of Medicine, laments that medicine has changed from a largely non-profit social service to an entrepreneurial industry driven by profits.

"Medicine for the most part now is practiced as if it were a business," he said. "Hospital administrators talk about their market share and cash flow, and the government calls them providers."

Growth in health care spending

Here is a look at the growth of health care spending since 1965 and projections to the year 2000.

The figures are from the Congressional Budget Office. Figures from 1992 and beyond are projections:

1965: $42-billion, 5.9 percent of the gross domestic product.

1980: $250-billion, 9.2 percent.

1985: $423-billion, 10.5 percent.

1990: $675-billion, 12.2 percent.

1991: $752-billion, 13.2 percent.

1992: $832-billion, 14.0 percent.

1993: $911-billion, 14.6 percent.

1995: $1.089-trillion, 15.7 percent.

2000: $1.631-trillion, 18.9 percent.