Expert looks at health care assets, liabilities
Expert looks at health care assets, liabilities
Small investment can lead to big returns
(Editor’s note: William Peck, MD, director of the Center for Health Policy and an Alan A. and Edith L. Wolff Distinguished Professor of Medicine at the Washington University School of Medicine in St. Louis, discusses with Clinical Trials Administrator how to view health care and medical research within the ethical model of a balance sheet.)
CTA: One talk you’ve given at national research conferences is on how health care impacts human research. Please tell me a little more about this.
Peck: One of the things I try to do is frame health care in terms of a balance sheet, with assets and liabilities. Opportunities and challenges are another way of looking at it. If one looks at assets, a premiere asset is our incredible research enterprise. It’s the most productive in the world and has produced miraculous improvements in health care in the past century, but particularly in recent decades. It’s an engine that will produce more than we can imagine. So that’s a major asset.
There are other assets I could numerate, and there are liabilities if you will. The question is can we preserve our major assets while eliminating the impact of liabilities?
CTA: Would you please explain what you mean by the term "balance sheet?"
Peck: It’s a snapshot in time of the financial status of an organization, and it can be applied to dynamic decision-making. Together with other forms of financial statements, it can have tremendous weight in terms of understanding a business.
So the idea is there has to be some way of addressing the liabilities that exist; if the liabilities are too substantial, the value declines and the value in terms of health care, of course, is related to quality, including all aspects of quality and cost.
For example, the development of this research enterprise, which we’re so proud of and which has had such an impact, is not inexpensive. On the other hand, only a small fraction of the money we spent on health care is devoted to medical research. When you look at federal export and supportive industries, including pharmaceuticals and diagnostics, you are looking at around 3% to 4% of the total amount we’re spending on health care is put into research, which is a small investment.
If one throws in development in addition to more fundamental or clinical and applied research the number is a little higher. So we’ve gotten a tremendous bang for that investment.
One of the reasons why there are investments in research is it’s a great thing to do; it’s a public service, improving health.
There is very little that’s more important than improving health and protecting the health of the country. Also, there’s another motivation, and this is seen particularly in the private sector of pharmaceutical and medical device industries, and that is many of these companies are into it for the profit, so they have a dual sense of responsibility: They have a responsibility for improving health and a responsibility for generating profits to satisfy their shareholders, and that’s the way we do business in America.
CTA: What other assets and liabilities do you put on the balance sheet?
Peck: If one looks at other assets, we have an extremely well-trained medical work force, including physicians and other resources. There are some shortages, but the professionals we have are well trained. We also have academic medical centers that combine research and care. We have a modern hospital system, which is very well-equipped. So we have these assets, one could say.
And I would say that another asset is our willingness to spend so much money on health care.
But we have to look at liabilities, too. The liabilities are that we’ve underinvested in public health and have somewhere around 45 million Americans who have no health insurance and an unknown number who are underinsured. And the costs of our health care are the highest in the world per capita, per gross domestic product, and our health statistics are not in the top group among developed countries overall. We have inefficiencies in delivery of health care and a certain frequency of medical errors and so forth. We have a punitive tort and malpractice system that creates groundwork for an untold but appreciable amount, and we have a costly amount of defensive medicine. So those are the liabilities and are among the reasons why our statistics don’t look so good.
Also, this uninsured and underinsured population has limited access, and we also have disparities in access among class, racial, and ethnic minorities, whether or not they’re insured.
CTA: How does medical research fit into this equation?
Peck: Medical research will continually work to improve health care. Many advances in health care research create an increased cost, but some don’t.
Focus on prevention
The ultimate goal is to focus our research increasingly on prevention which is the most likely route to reducing costs. And the same thing could be said for early cures.
There are many illnesses which we don’t well understand. We don’t understand some illnesses well enough to think about prevention, and there are a variety of chronic diseases, which are costly in terms of morbidity, financial costs, and suffering. We can palliate these diseases, but many of them we can’t cure in their early stages or prevent them, and medical science will elucidate these approaches. But we’re far away from that.
Take, for example, AIDS. It has been recognized as an entity since 1980. We know a lot about AIDS; we know a lot about the virus and how it affects people, and so on.
We now have some treatments that are good, but we haven’t been able to prevent infection except by social intervention, and that doesn’t seem to work very well.
It would be ideal if we had a vaccine, but we’re some years away from a vaccine. When we finally have a vaccine, assuming we can distribute it worldwide, that will come close to solving that problem as we have in the cases of smallpox and polio. So a vaccine will be a bonanza in terms of preventing AIDS, and this is one way in which research can ultimately save lives, suffering, and costs.
CTA: Should the pharmaceutical industry be doing anything differently with regard to the medical/research balance sheet?
Some critics say the pharmaceutical companies don’t put enough money into developing vaccines and other preventive measures?
Peck: This is a very tough time for the pharmaceutical industry, and this is an extraordinarily complex subject. They do some great things and continue to do some great things, and I think there’s much that can be done.
Hopefully, they’ll see fit to regulate themselves more effectively without losing the energy and investments required to develop new treatments and cures. Just look at the impact of statin drugs in terms of coronary artery disease.
These are substantial. Look at new approaches for effectively treating certain kinds of cancers and leukemia and on and on. There’s much that can be said. They have done some wonderful things, but they’ve also come upon some problems, some of which were their own creation, that have to be addressed.
The question is should the government control the pricing of drugs, which is an important issue: if the government does control pricing of drugs, what impact will that have on research and development?
CTA: Is it an ethical issue when a large portion of the population can’t afford some life-saving drugs, like the statin drugs?
Peck: Then we get into issue of personal responsibility for health and that’s another tough question. It’s been pretty well established that there are a variety of behaviors that contribute to ill health and therefore to cost for the world.
Wouldn’t it be nice if we could change all those behaviors overnight, or in course of a decade? And that presents a great problem, but there’s no question these behaviors add significantly to the cost of health care, including smoking, dietary indiscretion, lack of exercise, sedentary existence, abusing alcohol and other drugs, and so forth.
So it’s easy to look at one line of issues and say, Wouldn’t it be nice?’ But it all has to be considered in the totality of contributors. Some people think that we should have a single payer system in this country, and it should be the federal government who buys all the drugs and negotiates prices with the pharmaceutical industry, and we’d all be happy.
Others think the system would not be easily accepted by the American population because of the fear that it would produce a de facto form of rationing and consumer opportunities would be reduced. You’d have cues of people waiting for services and on and on, and there would be the threat of not adequately capitalizing our industry for hospitals and equipment and so forth.
And I think, in any case, it would be difficult to have any system in this country that would not allow people access to private insurance. It’s interesting to me that the Canadian Supreme Court of Quebec ruled that the country could not prohibit private health insurance. One of the bedrocks of the Canadian system is its single payer system, and the Supreme Court is saying you have a single payer system, but people need access to private insurance which they haven’t had in Canada.
The single payer system in Canada is not socialized, but in England there is a socialization of the health care industry, although people are allowed access to private insurance. So they have two tiers.
CTA: Isn’t the cost of our medical care today part of the problem? People used to not have health insurance and just paid for their care out-of-pocket, right?
Peck: My father was a general practitioner and went into practice in the early 1930s, and people paid cash when they went to see him or paid in kind with fruits and vegetables. And how people were hospitalized then — there wasn’t much a hospital could do, and there was very little medicine could do. The whole rise in cost has been mediated by our needing to do more things, including medical technology, which includes medical research.
The output is a major driver in the increase in health care costs. Other drivers include an aging population, and it will be an increasing driver as the baby boomers enter the hallowed ground of the elderly. Also, inefficiencies are a driver. Some people think the fact that consumers are not burdened by much financial responsibility for health care is a driver of costs, and I believe that defensive medicine is a driver of cost. So we have all these drivers that have emerged over the past 40 to 50 years. Just look at the imaging advances that have occurred in the past 30 to 40 years. I think they are a major driver of cost, but the benefit has been tremendous.
CTA: So where do you think we stand now on the overall balance sheet?
Peck: We’re trying to improve things in an incremental way. There’s no overall solution on the near horizon. There are many things being advocated that are on the positive side of the ledger. I do believe if we insured the uninsured we would ultimately save money. There are economic data that support that; but I don’t see a big movement to insure the uninsured.
I do believe there should be some kind of insurance available for a much larger fraction of Americans. The employers who pay for health insurance and health benefits of over 150 million Americans, the employers who are self-insured or pay through health plans are increasingly cost sharing with their employees as a way of getting out from under the cost and as a way of creating more personal responsibility. And the question is what will be the health outcomes of that as consumers are put into the position of having to make choices? Will they have enough information to make informed choices?
The application of information technology to health care has been to improve efficiency, reduce medical errors, and increase productivity, and that has merit I believe and is slow going.
There are advocates of paying physicians for the quality of performance rather than per visit, and there has been tort reform here and there. At the end of the day, when all of these things are done, are we going to wake up in five to 10 years with better health and reduce the increases in cost? If we don’t, I suspect then we’ll see a greater push for a larger solution.
CTA: One talk youve given at national research conferences is on how health care impacts human research. Please tell me a little more about this.Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.