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The changing health care environment
The Changing Health Care Environment
MARK V. PAULY, Ph.D. Philadelphia,
In 1985, the rate of growth of national health expenditures was more than twice the overall rate of growth in prices in the United States, while the percentage of health expenditures relative to the Gross National Product reached a record high of 10.7 percent. There have been almost no changes in the fraction of direct patient payments for medical care since.1980, or in the fraction paid by third parties or the government. Consequently, cost increases in the gross price of medical care are being transferred directly to the patient population. The expense associated with medical treatment and the availability of managed care systems (Health Maintenance Organizations and Preferred Provider Organizations, among others) have contributed to the increasing cost consciousness of patient and physician alike. One of the areas in which the spiralling costs of medical care are most deeply felt is in the treatment of hypertension. The direct costs for treatlng this condition, which affects more than 25 percent of the American population, exceed $8 billion annually. Furthermore, hypertension is a chronic condition in which the cost of treatment is continuously apparent to the patient. Moderate and severe hypertension is more likely to affect elderly and black patients, the people who are least able to pay for therapy. Difficulty in paying for therapy is becoming an increasingly important problem due to the trend among physicians to prescribe newer and more expensive antihy pertensive drugs Instead of the more commonly used diuretics and beta blockers. Due to the cost-conscious attitude of patients, the physician who chooses the more expensive drugs may run the risk of losing patronage among mlddle- and upper-income patients. In the case of lower-income patients, prescribing expensive drugs may result in noncompliance. In order to guard against incursions by managed care systems and ensure the best care for low-income patients, physicians must assume a cost-conscious attitude toward the treatment of hypertension.
Pennsylvania
Hypertension is a major health care problem in the United States, affecting more than 60 million Americans at a direct cost exceeding $8 billion. The indirect costs of hypertension, which are much greater, can only be understood in terms of the general environment of health care in this country-and in the particular needs of the various classes of hypertensive patients. This article reviews the current state of the health care environment and the reasons why hypertension is a matter of particular concern, not just to those people intimately involved in the treatment of hypertension, but to those involved in making public policy in general. Some recent empiric studies on the costs of hypertension, which are
From the Leonard Davis Institute of Health Economics, Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania. Requests for reprints should be addressed to Dr. Mark V. Pauly, Leonard Davis Institute of Health Economics, University of Pennsylvania, 3641 Locust Walk, Philadelphia. Pennsylvania 19104.
December
31, 1988
The American
Journal
of Medicine
Volume
81
(suppl 8C)
3
SYMPOSIUM
TABLE
ON ANTIHYPERTENSIVE
I
Percent Percent National
change change health
Adapted
from
Growth
TREATMENT-PAULY
in National
Health Expenditures
in national health expenditures ity Gross National Product expenditures as a percent of the Gross
and in the Gross
National
Product
THE CHAvGItjG QVERVIEW
HEALTH
CARE ENVIRONMENT:
AN
We are living in an era in which medical care costs are a matter of concern. Table I, which compares national health care expenditures with the growth of the Gross National Product, indicates some of the reasons for concern. The nominal rate of growth in the national health expenditure has decreased somewhat in the last couple of years, but so has the overall inflation rate. In 1985, the rate of growth of national health expenditures was more than twice the overall rate of growth in prices in the United States, a disturbing trend [1,2]. Indeed, the rise in real health expenditures (adjusted for general inflation) was actually higher last year than it was in some years in the late 1970s. So while some progress has been made in slowing the degree of growth, there is still a strong, underlying trend toward higher health care costs. Even more worrisome is the growth in the fraction of all goods and services produced in the United States that are devoted to health care. Last year that fraction reached a record high of 10.7 percent of the Gross National Product (Table I). The glimmerings of hope that were offered by the pet-forman,ce in 1984, when the fraction fell slightly, have been erased to some extent by the subsequent increase. The overall picture created by these data presents a disturbing trend of rising real costs in health care. This is a problem that has provoked concern on the part of providers, payers, and patients alike. Although there is some evidence that we are having an impact on the situation, it is clear that the problem of high and rising costs is still significant. tt will take a great deal of effort before costs can be brought under control. Table II illustrates the percent distribution of personal health care expenditures by source of funds in selected years from 1970 to 1984. The data indicate that there has been almost no change in the fraction of direct patient payments for medical care since 1980, or in the fraction paid by third parties [l]. Moreover, there has been very
December
Product
1970
1975
1980
1982
1983
1984
1985
13.4 7.5 7.6
12.1 9.3 8.6
13.3 11.2 9.4
13.9 6.0 10.5
10.6 7.7 10.7
9.9 10.8 10.6
8.7 a.7
10.7
[1,2].
especially germane to this problem, are summarized. Finally, the article points out some implications of the growing economic problem for practicing physicians. The conclusions suggest alternatives to physicians who treat hypertensive patients, in regard to both their patterns of care and their attitudes toward cost.
4
Nationa!
31, 1986
The
American
Journal
of Medicine
little change in the fraction paid by the government. In contrast to the experience of the 1960s and 1970s cost increases in the gross price of medical care are now being transmitted directly into increases in what the patient actually pays. Due to these changes, and to the perception of the changes by the public and the health care establishment, we have entered into an era of cost-conscious medicinein the sense that providers, patients, and payers all express concerns about cost. Although the rhetoric of cost containment-like the rhetoric of the Nixon-Carter medical cost “crisis’‘-goes somewhat beyond reality, one can stilt predict with certainty that professional concern, patient choice, and competitive and financial pressures will combine to foster a more cost-effective style of medicine. If nothing else, the heightened ratio of medical cost growth to the growth of the Gross National Product will keep interest in this problem in the forefront in the near future. A second aspect of the general environment that should be noted is that there have been changes in the ways in which patients and employers cope with rising health care costs. The most obvious change is the surge in enrollment in Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and other managed care systems [3]. These systems offer consumers the opportunity of choosing a form of delivery that can help control health care costs-in one respect-by putting pressure on providers. Such pressure affects all physicians in the market, both those in the HMO and those outside the HMO, and induces them to pay more attention to costs than they have in the past. Another change in the way people cope with health care costs is not as easy to measure but is equally important. It is accounted for by the evolving demographics of the patient population. The prime age consumers of medical care, people on the verge or in the middle of middle age, are a better-educated population than their predecessors. They are more affluent, they are used to dealing with sophisticated concepts, and they are interested in “buying smart” when it comes to medical care. Reverence has declined, wariness has risen, and patients increasingly have the motivation and the ability to do something about costs. All of these factors are making patients more willing to concern themselves with the cost of the medical care they get and to make choices, for example, as to what health
Volume
81 (suppl
6C)
SYMPOSIUM
care provider they will use, based on those cost considerations. Of course, the surge in the number of physicians has also influenced the ability of patients to make their preferences felt. COSTS OF TREATING
AND TREATMENT
In the future, people will be even more concerned with the cost of treating their hypertension. One of the reasons for this is the rising cost of antihypertensive drug therapy, a major component in the total cost of treating patients with hypertension. Figtire 1 provides some information on the annual cost of several different types of drug therapy for hypertension. The first two pairs of bars indicate the costs of the specific brand of antihypertensive drug and the generic version of the same drug for the two traditional types of drug therapy: diuretics and beta blockers. The next two pairs of bars describe the current annual drug costs of two
December
31, 1966
Total 1970
TREATMENT-PAULY
Percent Distribution of Personal Health Care Expenditures by Source of Funds: Selected Years, 1970 to 1984
II
HYPERTENSiON
The general issues discussed in the previous section affect all health care in this country, not just that for hypertension. Nevertheless, hypertension is a matter of special concern to the health care community for several reasons. First, hypertension is a disease of widespread prevalence, affecting more than 25 percent of the population. Managing care for such a large segment of the population is a major challenge. Second, the care that is provided for the hypertensive population is costly. At least $8 billion is currently spent on direct medical care alone in the treatment of these patients. Furthermore, hypertension is associated with considerable morbidity and mortality. It is also one of the relatively small number of conditions for which there is evidence in large populations that feasible changes in the pattern of care actually affect morbidity and mortality rates. The Rand Health Insurance Study found that hypertension is one of two conditions for which there is a difference in measured indicators of health outcomes between persons receiving free care and those who pay something out-of-pocket [4]. More importantly, perhaps, hypertension is a chronic condition. This means that the cost of its treatment will be apparent to the patient month after month, because much of that expense is accounted for by prescription drugs and physician office visits, neither of which is well covered by insurance. Cost, therefore, is of prime concern to the patient. And because it is a non-emergency, non-debilitating condition, patients will have the time to seek out the most cost-effective care. The patient can change physicians or join an HMO, among other alternatives, to reduce out-ofpocket costs. For its part, the administrative staff of the HMO can contemplate changing the way the HMO treats its patients. These and other factors will certainly lead to a greater tendency on the part of patients to use cost information, whether they are members of HMOs or in fee-forservice. DRUG COSTS
TABLE
ON ANTIHYPERTENSIVE
1975
100.0 100.0
1980
100.0
1982 1983 1984
100.0 100.0 100.0
Direct Patient Payments
All Third Parties
40.5 32.5 28.5 27.1 27.4
59.5 67.5 71.5 72.9 7i.6
27.9
72.1
Private Health Insurance and Other Private = Funds +
Government
25.1 28.0 31.9
34.3 39.5 39.6
33.1
39.8
33.0 32.5
39.6 39.6
Adapted from [l].
newly emerging types of antihypertensive drug therapy, angiotensin converting enzyme inhibitors and calcium channel blockers. Measured by drug costs alone, the two new forms of therapy are two to seven times as costly as the more traditional therapies. The concern here is that, if in fact there is a substantial shift from the less expensive to the more expensive forms of therapy, there will be a substantial increase in the costs borne by patients. Of course, drug costs alone are not all that matters. One should also determine whether the newer drugs are associated with fewer laboratory tests or fewer adverse outcomes requiring ambulatory or inpatient care. In the case of middle-income patients, one would expect to see the concern about increased costs reflected primarily in changes in the choice of physician. After all, what ought to matter to a patient, especially one without 100 percent insurance coverage against prescription drugs (which is the rule rather than the exception), is the total cost of care received, not just the physician’s fee. And what may well matter, especially in a future scenario in which patients increasingly “buy smart,” is a concern for the cost of the drug that the physician is prescribing. The physician who chooses the more expensive drug, either by oversight or by conscious choice, may well run the risk of discouraging patronage by those patients who are aware of costs. This will surely be the case if the more expensive drug is not known to improve outcome or reduce side effects. Consequently, with regard to the middle- or upper-income patient, the main problem for the physician who is not meticulous about tailoring therapy to the patient’s situation and choosing the least costly form of therapy would be the potential of losing the patient to other physicians. With regard to the other part of the hypertensive population, low-income patients, there is another consideration relating to cost that is potentially even more serious. With the cost of drug therapy for hypertension rising, these pa-
The
American
Journal
of Medicine
Volume
61 (suppl
6C)
5
SYMPOSIUM
ON ANTIHYPERTENSIVE
TREATMENT-PAULY
1
COST TO PATIENTS * (IN DOLLARS)
figure 1. Average year/y retail costs to patients of medications used for treating mild to moderate hypertension. Estimated cost comparisons are based on published cost Drug Topics (Redbook Update, August, 1986) plus 10 percent, plus $2.00 pharmacy fee per 100 units (single asterisk). The United States Food and Drug Administration has not yet approved calcium channel blockers for the treatment of hypertension (doubk asterisks). However, physician utilization of these drugs does occur. Estimates are provided for cost comparison purposes only. The shaded area represents the cost of hydfochiorothiazide (a generic diuretic) and the average cost of a potassium supplement (single dagger). The specific trade name drug prices are averaged into the generic drug category (double dagger). ACE = angiotensin converting enzyme.
tients may respond not just by thinking about another physician, but by thinking about not taking medication at all. This conclusion is supported by the research of Shulman et al [5] recently reported in the Americari Journal of Public Health. This study documented the kinds of problems patients have had in paying for antihypertensive medication in Georgia. Table ill shows the results of this study, which was based on data gathered in a 1981 survey. If one compares the two extremes of the economic spectrum, black women and white men, one finds that black women are about three times as likely as white men to say that they have a problem with the cost of medicine all or most of the time. Slack women in the study have an average income of approximately $2,000, and white men in the study have an average income of approximately $7,000. So the basic pattern is there: an inverse correlation between income and the perception of cost as a problem. Low-income people are mure likely to say that they have a problem with the cost of medication for hypertension. What are the consequences of this perception? Comparing the responses of black women with those of white men, and the responses of black men with those of white men, the study shows that either group of non-white persons is more likely to say that the cost of medication sometimes makes them unable to afford prescription re-
6
December
31, 1996
The American
Journal
of Yediclne
fills. Therefore, even in 1981, when the vast majority of antihypertensive prescriptions were for inexpensive diuretics and beta blockers, lower-income patients had a cost problem. The message for the future is clear: the more expensive medication becomes, the less likely it is that low-income patients will be willing to comply with therapeutic regimens. For the physician who is working with low-income patients, consequently, the choice for many patients may not be between a low-cost drug with side effects and a drug four times as expensive with fewer side effects; the choice may really be between a low-cost drug with mild side effects and no drug at all, if the patient fails to comply with a recommendation to use an expensive drug. In summary, with regard to middle-income patients, paying attention to cost pays off both for the patient and the physician, in terms of lower cost for the patient and more patronage for the physician. With regard to lowincome patients, there is reason to fear that not paying attention to cost may actually result in reduced compliance and increases in morbidity and mortality. Another reason why physicians might be concerned about cost, especially fee-for-service physicians, is the growth of HMOs and PPOs. Most of us are familiar with the fact that this growth has been rapid. Table IV shows the actual numbers. There was more than a 25 percent
Volume
81
(suppl 6C)
SYMPOSIUM
TABLE
III
TREATMENT-PAULY
Percentage of Hypertensive Patients Reporting Economic Barriers to Antihypertensive Medication and Medical Care by Race, Sex, and Blood Pressure Level for Adults 18 Years or Older in Georgia, 1981
Race/Sex/ Blood Pressure Level Percent reporting cost of medicine is a problem ail/most of time’ Hypertensive patients Mild/controlled Moderate/severe Percent reporting times when unable to afford prescription refill for antihypertensive medicines* Hypertensive patients Mild/controlled Moderate/severe Percent reporting cost of office visit is a problem all/most of the time+ Hypertensive patients *Among +Among Adapted
ON ANTIHYPERTENSIVE
those receiving antihypertensive those being treated or followed from [5].
medication. for high blood
While Men
White Women
Black Men
Black Women
14.0 14.1 11.0
17.9 17.7 37.7
27.3 25.4 49.9
37.0 36.4 42.4
22.4 21.7 36.2
5.5 5.4 8.8
9.7 9.8 0.0
29.7 28.6 41.8
34.1 31.8 54.2
15.5 36.5
10.0
13.7
14.4
27.5
16.1
Total
16.4
pressure.
increase in growth in HMO enrollment last year, and a huge rate of growth in the number of PPOs, though it
began from a low base [3,6]. I am not one of those who thinks that the future of the medical care market is like that of the automobile market, with a few chains of HMOs dominating the scene-or even a chain of McHealthys. And I do not expect consumers to become so price-conscious that they will question their doctor about every therapeutic decision. Nevertheless, these data clearly suggest that even fee-for-service physicians are likely to be under more pressure to pay attention to the cost of medications they prescribe for patients in the future. Particularly with the advent of drugs of much higher cost, that concern can be expected to be even greater. COMMENTS
In conclusion, a physician’s failure to be meticulous about cost is probably not going to empty out the waiting room immediately. In Victor Fuchs’ metaphor, the medical care economy is like an ocean liner: it will not turn or stop on a dime. On the other hand, there will be some implications for the financial well-being of physicians, as well as for the physical well-being of patients, which arise from the failure to pay attention to the cost of medication. It is apparent that there will be rewards in the future for physicians who are cost-conscious about their prescription patterns. Cost consciousness will translate into more patients for one thing, because patients will appreciate the financial benefits. That is true for rich and poor alike. An extra $300 a year would be of benefit to anybody. Second, cost consciousness could also be the key to patient compliance, especially for low-income patients. Third, cost consciousness guards the fee-for-service practice against
December 31, 1988
incursions from managed care systems, to the extent that fee-for-service physicians may be able to claim that they operate almost as cost effectively as the HMO. And finally, for those physicians who do want to participate in an HMO, a cost-conscious attitude presumably makes it easier to accomplish. To be sure, there is more to medical care than cost, and probably cost is not the most important factor patients consider when choosing a physician. They think about personality, competence, and location. Part of the reason for focusing on cost, however, is that it is one thing that physicians can easily alter. They may not be able to do much about their personality. They may not be able to do much about their office location or their perceived competence in the short run. But for better or for worse, they can and do change their patterns of prescribing. There is reason to believe that many of tomorrow’s patients will want to know more about the options in treating hypertension. Not everyone will necessarily want to choose the lowest cost options, however. Some patients may be willing to pay more for drugs that have fewer side effects. The obvious way to deal with this situation is for TABLE
IV
Growth
of HMOs and PPOs 1984
Number Number of HMOs Total enrollment in HMOs [3] Number of PPOs Adapted
from
[3]
[6]
337 16.7 million 241
1985
Percent Increase 16.2 22.4 589.0
Number
Percent Increase
480 21 .I million 343
42.4 25.7 42.0
[3,6].
The American Journal of Medicine
Volume 81 (suppl EC)
7
SYMPOSIUM
ON ANTIHYPERTENSIVE
TREATMENT-PAULY
physicians to spend time counseling patients, explaining to them the costs and the consequences of various forms of drug therapy. One should not make the error of assuming that quality of life (avoiding side effects) is the only thing that matters to patients, nor should one make the error of assuming that only cost matters. For patients who need to receive antihypertensive medication, both will matter. The college-educated and prosperous generation
now moving into middle age will seek such an approach, and the low-income population will need such an approach. What does this mean to the physician? I think the basic message to be conveyed to practicing physicians, especially those in the fee-for-service sector, is that even more in the future than in the past, prescribing cost-effective medicine will be the best course of action for the individual provider, no matter what the rest of the market does.
REFERENCES 1.
2. 3. 4.
8 *
Leavitt KR, Lazenby H, Waldo DR, et al: National health expenditures, 1984. Health Care Financing Review 1985; 7: l36. Health care spending’s share of GNP reaches a new high. Medical Benefits 1986; 3: 1-2. Interstudy, Inc.: National HMO Census, 1985. Brook RH, Ware JE Jr., Rogers WH, et al: The effect of coinsurance on the health of adults. Report R-305 HHS, the Rand
December
31, 1986
The American
Journal
of Medicine
5.
6.
Volume
Corporation, Santa Monica, California, December 1984. Shulman NB, Martinez B, Brogan D, et al: Financial cost as an obstacle to hypertension therapy. Am J Public Health 1986; 76: 1105-1108. American Medical Care and Review Association and Institute for International Health Initiatives: Directory of preferred provider organizations and the industry on PPO development. Bethesda, Maryland: The Institute, 1985.
81 (ouppl
6C)
MARK V. PAULY, Ph.D. Philadelphia,
In 1985, the rate of growth of national health expenditures was more than twice the overall rate of growth in prices in the United States, while the percentage of health expenditures relative to the Gross National Product reached a record high of 10.7 percent. There have been almost no changes in the fraction of direct patient payments for medical care since.1980, or in the fraction paid by third parties or the government. Consequently, cost increases in the gross price of medical care are being transferred directly to the patient population. The expense associated with medical treatment and the availability of managed care systems (Health Maintenance Organizations and Preferred Provider Organizations, among others) have contributed to the increasing cost consciousness of patient and physician alike. One of the areas in which the spiralling costs of medical care are most deeply felt is in the treatment of hypertension. The direct costs for treatlng this condition, which affects more than 25 percent of the American population, exceed $8 billion annually. Furthermore, hypertension is a chronic condition in which the cost of treatment is continuously apparent to the patient. Moderate and severe hypertension is more likely to affect elderly and black patients, the people who are least able to pay for therapy. Difficulty in paying for therapy is becoming an increasingly important problem due to the trend among physicians to prescribe newer and more expensive antihy pertensive drugs Instead of the more commonly used diuretics and beta blockers. Due to the cost-conscious attitude of patients, the physician who chooses the more expensive drugs may run the risk of losing patronage among mlddle- and upper-income patients. In the case of lower-income patients, prescribing expensive drugs may result in noncompliance. In order to guard against incursions by managed care systems and ensure the best care for low-income patients, physicians must assume a cost-conscious attitude toward the treatment of hypertension.
Pennsylvania
Hypertension is a major health care problem in the United States, affecting more than 60 million Americans at a direct cost exceeding $8 billion. The indirect costs of hypertension, which are much greater, can only be understood in terms of the general environment of health care in this country-and in the particular needs of the various classes of hypertensive patients. This article reviews the current state of the health care environment and the reasons why hypertension is a matter of particular concern, not just to those people intimately involved in the treatment of hypertension, but to those involved in making public policy in general. Some recent empiric studies on the costs of hypertension, which are
From the Leonard Davis Institute of Health Economics, Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania. Requests for reprints should be addressed to Dr. Mark V. Pauly, Leonard Davis Institute of Health Economics, University of Pennsylvania, 3641 Locust Walk, Philadelphia. Pennsylvania 19104.
December
31, 1988
The American
Journal
of Medicine
Volume
81
(suppl 8C)
3
SYMPOSIUM
TABLE
ON ANTIHYPERTENSIVE
I
Percent Percent National
change change health
Adapted
from
Growth
TREATMENT-PAULY
in National
Health Expenditures
in national health expenditures ity Gross National Product expenditures as a percent of the Gross
and in the Gross
National
Product
THE CHAvGItjG QVERVIEW
HEALTH
CARE ENVIRONMENT:
AN
We are living in an era in which medical care costs are a matter of concern. Table I, which compares national health care expenditures with the growth of the Gross National Product, indicates some of the reasons for concern. The nominal rate of growth in the national health expenditure has decreased somewhat in the last couple of years, but so has the overall inflation rate. In 1985, the rate of growth of national health expenditures was more than twice the overall rate of growth in prices in the United States, a disturbing trend [1,2]. Indeed, the rise in real health expenditures (adjusted for general inflation) was actually higher last year than it was in some years in the late 1970s. So while some progress has been made in slowing the degree of growth, there is still a strong, underlying trend toward higher health care costs. Even more worrisome is the growth in the fraction of all goods and services produced in the United States that are devoted to health care. Last year that fraction reached a record high of 10.7 percent of the Gross National Product (Table I). The glimmerings of hope that were offered by the pet-forman,ce in 1984, when the fraction fell slightly, have been erased to some extent by the subsequent increase. The overall picture created by these data presents a disturbing trend of rising real costs in health care. This is a problem that has provoked concern on the part of providers, payers, and patients alike. Although there is some evidence that we are having an impact on the situation, it is clear that the problem of high and rising costs is still significant. tt will take a great deal of effort before costs can be brought under control. Table II illustrates the percent distribution of personal health care expenditures by source of funds in selected years from 1970 to 1984. The data indicate that there has been almost no change in the fraction of direct patient payments for medical care since 1980, or in the fraction paid by third parties [l]. Moreover, there has been very
December
Product
1970
1975
1980
1982
1983
1984
1985
13.4 7.5 7.6
12.1 9.3 8.6
13.3 11.2 9.4
13.9 6.0 10.5
10.6 7.7 10.7
9.9 10.8 10.6
8.7 a.7
10.7
[1,2].
especially germane to this problem, are summarized. Finally, the article points out some implications of the growing economic problem for practicing physicians. The conclusions suggest alternatives to physicians who treat hypertensive patients, in regard to both their patterns of care and their attitudes toward cost.
4
Nationa!
31, 1986
The
American
Journal
of Medicine
little change in the fraction paid by the government. In contrast to the experience of the 1960s and 1970s cost increases in the gross price of medical care are now being transmitted directly into increases in what the patient actually pays. Due to these changes, and to the perception of the changes by the public and the health care establishment, we have entered into an era of cost-conscious medicinein the sense that providers, patients, and payers all express concerns about cost. Although the rhetoric of cost containment-like the rhetoric of the Nixon-Carter medical cost “crisis’‘-goes somewhat beyond reality, one can stilt predict with certainty that professional concern, patient choice, and competitive and financial pressures will combine to foster a more cost-effective style of medicine. If nothing else, the heightened ratio of medical cost growth to the growth of the Gross National Product will keep interest in this problem in the forefront in the near future. A second aspect of the general environment that should be noted is that there have been changes in the ways in which patients and employers cope with rising health care costs. The most obvious change is the surge in enrollment in Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and other managed care systems [3]. These systems offer consumers the opportunity of choosing a form of delivery that can help control health care costs-in one respect-by putting pressure on providers. Such pressure affects all physicians in the market, both those in the HMO and those outside the HMO, and induces them to pay more attention to costs than they have in the past. Another change in the way people cope with health care costs is not as easy to measure but is equally important. It is accounted for by the evolving demographics of the patient population. The prime age consumers of medical care, people on the verge or in the middle of middle age, are a better-educated population than their predecessors. They are more affluent, they are used to dealing with sophisticated concepts, and they are interested in “buying smart” when it comes to medical care. Reverence has declined, wariness has risen, and patients increasingly have the motivation and the ability to do something about costs. All of these factors are making patients more willing to concern themselves with the cost of the medical care they get and to make choices, for example, as to what health
Volume
81 (suppl
6C)
SYMPOSIUM
care provider they will use, based on those cost considerations. Of course, the surge in the number of physicians has also influenced the ability of patients to make their preferences felt. COSTS OF TREATING
AND TREATMENT
In the future, people will be even more concerned with the cost of treating their hypertension. One of the reasons for this is the rising cost of antihypertensive drug therapy, a major component in the total cost of treating patients with hypertension. Figtire 1 provides some information on the annual cost of several different types of drug therapy for hypertension. The first two pairs of bars indicate the costs of the specific brand of antihypertensive drug and the generic version of the same drug for the two traditional types of drug therapy: diuretics and beta blockers. The next two pairs of bars describe the current annual drug costs of two
December
31, 1966
Total 1970
TREATMENT-PAULY
Percent Distribution of Personal Health Care Expenditures by Source of Funds: Selected Years, 1970 to 1984
II
HYPERTENSiON
The general issues discussed in the previous section affect all health care in this country, not just that for hypertension. Nevertheless, hypertension is a matter of special concern to the health care community for several reasons. First, hypertension is a disease of widespread prevalence, affecting more than 25 percent of the population. Managing care for such a large segment of the population is a major challenge. Second, the care that is provided for the hypertensive population is costly. At least $8 billion is currently spent on direct medical care alone in the treatment of these patients. Furthermore, hypertension is associated with considerable morbidity and mortality. It is also one of the relatively small number of conditions for which there is evidence in large populations that feasible changes in the pattern of care actually affect morbidity and mortality rates. The Rand Health Insurance Study found that hypertension is one of two conditions for which there is a difference in measured indicators of health outcomes between persons receiving free care and those who pay something out-of-pocket [4]. More importantly, perhaps, hypertension is a chronic condition. This means that the cost of its treatment will be apparent to the patient month after month, because much of that expense is accounted for by prescription drugs and physician office visits, neither of which is well covered by insurance. Cost, therefore, is of prime concern to the patient. And because it is a non-emergency, non-debilitating condition, patients will have the time to seek out the most cost-effective care. The patient can change physicians or join an HMO, among other alternatives, to reduce out-ofpocket costs. For its part, the administrative staff of the HMO can contemplate changing the way the HMO treats its patients. These and other factors will certainly lead to a greater tendency on the part of patients to use cost information, whether they are members of HMOs or in fee-forservice. DRUG COSTS
TABLE
ON ANTIHYPERTENSIVE
1975
100.0 100.0
1980
100.0
1982 1983 1984
100.0 100.0 100.0
Direct Patient Payments
All Third Parties
40.5 32.5 28.5 27.1 27.4
59.5 67.5 71.5 72.9 7i.6
27.9
72.1
Private Health Insurance and Other Private = Funds +
Government
25.1 28.0 31.9
34.3 39.5 39.6
33.1
39.8
33.0 32.5
39.6 39.6
Adapted from [l].
newly emerging types of antihypertensive drug therapy, angiotensin converting enzyme inhibitors and calcium channel blockers. Measured by drug costs alone, the two new forms of therapy are two to seven times as costly as the more traditional therapies. The concern here is that, if in fact there is a substantial shift from the less expensive to the more expensive forms of therapy, there will be a substantial increase in the costs borne by patients. Of course, drug costs alone are not all that matters. One should also determine whether the newer drugs are associated with fewer laboratory tests or fewer adverse outcomes requiring ambulatory or inpatient care. In the case of middle-income patients, one would expect to see the concern about increased costs reflected primarily in changes in the choice of physician. After all, what ought to matter to a patient, especially one without 100 percent insurance coverage against prescription drugs (which is the rule rather than the exception), is the total cost of care received, not just the physician’s fee. And what may well matter, especially in a future scenario in which patients increasingly “buy smart,” is a concern for the cost of the drug that the physician is prescribing. The physician who chooses the more expensive drug, either by oversight or by conscious choice, may well run the risk of discouraging patronage by those patients who are aware of costs. This will surely be the case if the more expensive drug is not known to improve outcome or reduce side effects. Consequently, with regard to the middle- or upper-income patient, the main problem for the physician who is not meticulous about tailoring therapy to the patient’s situation and choosing the least costly form of therapy would be the potential of losing the patient to other physicians. With regard to the other part of the hypertensive population, low-income patients, there is another consideration relating to cost that is potentially even more serious. With the cost of drug therapy for hypertension rising, these pa-
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1
COST TO PATIENTS * (IN DOLLARS)
figure 1. Average year/y retail costs to patients of medications used for treating mild to moderate hypertension. Estimated cost comparisons are based on published cost Drug Topics (Redbook Update, August, 1986) plus 10 percent, plus $2.00 pharmacy fee per 100 units (single asterisk). The United States Food and Drug Administration has not yet approved calcium channel blockers for the treatment of hypertension (doubk asterisks). However, physician utilization of these drugs does occur. Estimates are provided for cost comparison purposes only. The shaded area represents the cost of hydfochiorothiazide (a generic diuretic) and the average cost of a potassium supplement (single dagger). The specific trade name drug prices are averaged into the generic drug category (double dagger). ACE = angiotensin converting enzyme.
tients may respond not just by thinking about another physician, but by thinking about not taking medication at all. This conclusion is supported by the research of Shulman et al [5] recently reported in the Americari Journal of Public Health. This study documented the kinds of problems patients have had in paying for antihypertensive medication in Georgia. Table ill shows the results of this study, which was based on data gathered in a 1981 survey. If one compares the two extremes of the economic spectrum, black women and white men, one finds that black women are about three times as likely as white men to say that they have a problem with the cost of medicine all or most of the time. Slack women in the study have an average income of approximately $2,000, and white men in the study have an average income of approximately $7,000. So the basic pattern is there: an inverse correlation between income and the perception of cost as a problem. Low-income people are mure likely to say that they have a problem with the cost of medication for hypertension. What are the consequences of this perception? Comparing the responses of black women with those of white men, and the responses of black men with those of white men, the study shows that either group of non-white persons is more likely to say that the cost of medication sometimes makes them unable to afford prescription re-
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fills. Therefore, even in 1981, when the vast majority of antihypertensive prescriptions were for inexpensive diuretics and beta blockers, lower-income patients had a cost problem. The message for the future is clear: the more expensive medication becomes, the less likely it is that low-income patients will be willing to comply with therapeutic regimens. For the physician who is working with low-income patients, consequently, the choice for many patients may not be between a low-cost drug with side effects and a drug four times as expensive with fewer side effects; the choice may really be between a low-cost drug with mild side effects and no drug at all, if the patient fails to comply with a recommendation to use an expensive drug. In summary, with regard to middle-income patients, paying attention to cost pays off both for the patient and the physician, in terms of lower cost for the patient and more patronage for the physician. With regard to lowincome patients, there is reason to fear that not paying attention to cost may actually result in reduced compliance and increases in morbidity and mortality. Another reason why physicians might be concerned about cost, especially fee-for-service physicians, is the growth of HMOs and PPOs. Most of us are familiar with the fact that this growth has been rapid. Table IV shows the actual numbers. There was more than a 25 percent
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Percentage of Hypertensive Patients Reporting Economic Barriers to Antihypertensive Medication and Medical Care by Race, Sex, and Blood Pressure Level for Adults 18 Years or Older in Georgia, 1981
Race/Sex/ Blood Pressure Level Percent reporting cost of medicine is a problem ail/most of time’ Hypertensive patients Mild/controlled Moderate/severe Percent reporting times when unable to afford prescription refill for antihypertensive medicines* Hypertensive patients Mild/controlled Moderate/severe Percent reporting cost of office visit is a problem all/most of the time+ Hypertensive patients *Among +Among Adapted
ON ANTIHYPERTENSIVE
those receiving antihypertensive those being treated or followed from [5].
medication. for high blood
While Men
White Women
Black Men
Black Women
14.0 14.1 11.0
17.9 17.7 37.7
27.3 25.4 49.9
37.0 36.4 42.4
22.4 21.7 36.2
5.5 5.4 8.8
9.7 9.8 0.0
29.7 28.6 41.8
34.1 31.8 54.2
15.5 36.5
10.0
13.7
14.4
27.5
16.1
Total
16.4
pressure.
increase in growth in HMO enrollment last year, and a huge rate of growth in the number of PPOs, though it
began from a low base [3,6]. I am not one of those who thinks that the future of the medical care market is like that of the automobile market, with a few chains of HMOs dominating the scene-or even a chain of McHealthys. And I do not expect consumers to become so price-conscious that they will question their doctor about every therapeutic decision. Nevertheless, these data clearly suggest that even fee-for-service physicians are likely to be under more pressure to pay attention to the cost of medications they prescribe for patients in the future. Particularly with the advent of drugs of much higher cost, that concern can be expected to be even greater. COMMENTS
In conclusion, a physician’s failure to be meticulous about cost is probably not going to empty out the waiting room immediately. In Victor Fuchs’ metaphor, the medical care economy is like an ocean liner: it will not turn or stop on a dime. On the other hand, there will be some implications for the financial well-being of physicians, as well as for the physical well-being of patients, which arise from the failure to pay attention to the cost of medication. It is apparent that there will be rewards in the future for physicians who are cost-conscious about their prescription patterns. Cost consciousness will translate into more patients for one thing, because patients will appreciate the financial benefits. That is true for rich and poor alike. An extra $300 a year would be of benefit to anybody. Second, cost consciousness could also be the key to patient compliance, especially for low-income patients. Third, cost consciousness guards the fee-for-service practice against
December 31, 1988
incursions from managed care systems, to the extent that fee-for-service physicians may be able to claim that they operate almost as cost effectively as the HMO. And finally, for those physicians who do want to participate in an HMO, a cost-conscious attitude presumably makes it easier to accomplish. To be sure, there is more to medical care than cost, and probably cost is not the most important factor patients consider when choosing a physician. They think about personality, competence, and location. Part of the reason for focusing on cost, however, is that it is one thing that physicians can easily alter. They may not be able to do much about their personality. They may not be able to do much about their office location or their perceived competence in the short run. But for better or for worse, they can and do change their patterns of prescribing. There is reason to believe that many of tomorrow’s patients will want to know more about the options in treating hypertension. Not everyone will necessarily want to choose the lowest cost options, however. Some patients may be willing to pay more for drugs that have fewer side effects. The obvious way to deal with this situation is for TABLE
IV
Growth
of HMOs and PPOs 1984
Number Number of HMOs Total enrollment in HMOs [3] Number of PPOs Adapted
from
[3]
[6]
337 16.7 million 241
1985
Percent Increase 16.2 22.4 589.0
Number
Percent Increase
480 21 .I million 343
42.4 25.7 42.0
[3,6].
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physicians to spend time counseling patients, explaining to them the costs and the consequences of various forms of drug therapy. One should not make the error of assuming that quality of life (avoiding side effects) is the only thing that matters to patients, nor should one make the error of assuming that only cost matters. For patients who need to receive antihypertensive medication, both will matter. The college-educated and prosperous generation
now moving into middle age will seek such an approach, and the low-income population will need such an approach. What does this mean to the physician? I think the basic message to be conveyed to practicing physicians, especially those in the fee-for-service sector, is that even more in the future than in the past, prescribing cost-effective medicine will be the best course of action for the individual provider, no matter what the rest of the market does.
REFERENCES 1.
2. 3. 4.
8 *
Leavitt KR, Lazenby H, Waldo DR, et al: National health expenditures, 1984. Health Care Financing Review 1985; 7: l36. Health care spending’s share of GNP reaches a new high. Medical Benefits 1986; 3: 1-2. Interstudy, Inc.: National HMO Census, 1985. Brook RH, Ware JE Jr., Rogers WH, et al: The effect of coinsurance on the health of adults. Report R-305 HHS, the Rand
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Journal
of Medicine
5.
6.
Volume
Corporation, Santa Monica, California, December 1984. Shulman NB, Martinez B, Brogan D, et al: Financial cost as an obstacle to hypertension therapy. Am J Public Health 1986; 76: 1105-1108. American Medical Care and Review Association and Institute for International Health Initiatives: Directory of preferred provider organizations and the industry on PPO development. Bethesda, Maryland: The Institute, 1985.
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