Cutting waste by making rules: promises, pitfalls, and realistic prospects.

• Author: Blustein, Jan
• Position: The Law and Policy of Health Care Rationing: Models and Accountability

American medical costs, one hardly needs to say, continue to rise relentlessly. In 1990, health expenditures consumed approximately 12.2% of America's GNP.(1) A decade earlier, the share was 9.1%.(2) In 1970, we spent approximately 7.4%.(3) There has developed an apparent consensus--among government, labor, and profession leaders--that costs must be contained. At the same time, there is widespread agreement that access must be universalized. As a result, many believe that excruciatingly hard choices are unavoidable.

This perceived dilemma has led to a great deal of talk about rationing.(4) The tenor of the commentary indicates that it is a fearsome solution to our present troubles--painful and divisive, entailing choices that no one wants to make but which must be faced due to inescapable scarcity.(5) Both contemporary rhetoric and current health policy, however, hold out the hope of a far more agreeable alternative. Galvanized by the realization that much medical care is of uncertain value, and bolstered by findings that show significant variation in medical practice patterns, a coalition of policymakers, politicians, and researchers is now actively engaged in seeking to contain costs by eliminating wasteful care. This appears an attractive course. Waste-cutting, unlike rationing, does not connote the cruel denial of necessary care. On the contrary, it suggests saving people from medical interventions that would not have done them any good. If "rationing" is the fearsome alternative, "cutting waste" is the benign one.

While consensus grows that wasteful practice is a problem, there is considerable disagreement about the solution. Such disagreement is hardly suprising, since cutting waste is merely a goal, not a program. Cutting waste can mean any of a number of things. It can mean regionalizing services, instituting yearly expenditure targets, implementing managed care systems, or developing elaborate review mechanisms to constrain the diffusion of new technologies. Indeed, the idea of "cutting waste" is so broad in its potential scope that it can subsume many hotly debated reforms in the field of health policy. Like Health Maintenance Organizations, competition, and Diagnostic Related Groups before it, it is another vaunted panacea, the new great answer to arrive on the American health policy agenda.(6)

This essay critically assesses the widely advertised plan to cut waste by making microallocational rules for the provision of medical care. Such rules, variously denominated "practice parameters,"(7) "clinical guidelines,"(8) and "standards of care,"(9) are aimed at ensuring that no patient is subjected to "wasteful" care by specifying what treatments particular patients should receive. For example, the rule that "healthy patients under 40 years of age without a family history of heart disease should not be given an electrocardiogram" is a practice parameter. It could be used by physicians to guide day-to-day treatment decisions. It could also be used by payers to control reimbursement, and by policymakers to appraise aggregate data about medical care utilization.(10)

Our analysis raises the fundamental but too-little discussed question of what constitutes waste. Our central claim is that so-called "wasteful" practice is a conceptual hodgepodge, which encompasses treatments that are (1) ineffective; (2) of uncertain effectiveness; (3) ethically troubling; or (4) not allocationally efficient.(11) From this starting point, we address issues of rule making and resource allocation and ask the following questions: Can all four of these types of wasteful care be identified in ways that are scientifically defensible and administratively practicable? What obstacles must be faced to make cutting waste by making rules into a policy in each case? Are there American insitutions and attitudes that would make such rule making more costly, and therefore less attractive, than it seems? And can any (or all) of these four types of waste be cut without confronting the dilemma of difficult choices? But before approaching these questions, we begin by briefly reviewing the ways in which the problem of wasteful care has been framed by health care analysts, providers, and policymakers.

1. LOOSE TALK ABOUT "WASTE."

   Terms like "wasteful," "ineffective," "inappropriate," "of unproven effectiveness," "unnecessary," and even "irrational" are used loosely and often interchangeably in the literature that is critical of current medical practice. Commentators have lamented the prevalence of unnecessary elective surgery,(12) gratuitous "little ticket" diagnostic tests,(13) and expensive treatments for AIDS patients.(14) It is tempting to assume that these practices share some fundamental characteristic that places them within a unified category of wasteful medical treatments.

   Although the temptation is evident, assimilating various "inappropriate" types of care within the rhetoric of waste cutting is at best confusing. Take the example of the rules that determine when physician office visits are "medically necessary."(15) As one physician explained it:

   Medicare has set guidelines that for a given condition, you're only allowed to see patients so many times. That doesn't mean that you can't see them more often-you certainly can-but they won't pay for it....

   It takes a great deal of time ... because I have to explain to them why Medicare may not pay for their visit to me. You're legally obliged to explain to the patient that this is considered medically unnecessary. Well, that choice of words implies to most patients that you're giving poor medical care. You're making them come back too often. And I think it's terrible.

   It wastes 20 minutes of my time explaining to them that no, its not really medically unnecessary, that that's just how Medicare has chosen to word the new form ....(16)

   Making "expensive" synonymous with "medically unnecessary" seems a particularly troubling example of bureaucratically sanctioned linguistic drift. But it is not just linguistic territory that has been invaded by the waste cutters. Utilization review companies have moved beyond the realm of previewing surgical procedures and into the field of making allocational choices in the cases of very sick and dying patients. They employ "case managers" to direct the costly care of their sickest enrollees. This strategy can pay off handsomely. "[M]any cost-management companies are strengthening their 'case management' of patients who are seriously ill, with advanced cancer or AIDS, for example, or recovering from a stroke. 'The savings can average $10,000 to $15,000 per case and be as high as $400,000.'"(17) While some case managers may be truly well-intentioned, intervening to help patients and save them from painful overtreatment, they also represent economic interests that will inevitably conflict at times with the interests of the patient. In the future, we are likely to hear more from case managers about "inappropriate," "ineffective," and "medically unnecessary" care. When we do, it will be hard to know exactly what this means. Is the proposed treatment harmful or worthless? Is it futile or just too costly?

   These ambiguities must be faced in formulating a sensible strategy for controlling the cost of medical care in America. It would be enormously agreeable if cost containment could be achieved by cutting out a homogeneous wedge of present practices (Figure 1). But our analysis suggests that waste is heterogeneous (Figure 2), a claim worth exploring at some length. We need to know more about the four different types of waste. How prevalent are they? How do we determine that particular treatments fall into one of the four categories? What political, social, and professional obstacles will arise when standards are introduced forbidding wasteful practices? Will waste-cutting erect barriers to beneficial care, or can waste-cutting bypass such choices in medical care allocation? These four questions are at the core of the following section. Our main findings are summarized in Table I.

2. A TAXONOMY OF "WASTE"

   1. Ineffective (or Harmful) Treatment

      Some Americans, expert and lay, believe that much of medical care is ineffective or positively harmful. In part a generalized rebellion against authority of the 1960s, and nurtured by the consumer health movement of the 1970s, this view found a passionate voice in Ivan Illich's 1976 book, Medical Nemesis.(18) His scathing critique of the medical profession's "poisons"(19) and "black magic"(20) never found widespread public acceptance. But the 1980s brought a wider condemnation of the medical profession. Today's conventional wisdom is that doctors have little idea of what they are doing.

      Consider what doctors, to say nothing of patients, don't know about the value of just one procedure. Every year about 80,000 Americans get a carotid endarterectomy, a kind of Roto-Rooter job on clogged neck arteries. Typically costing $9,000, counting the bill for a hospital stay, the operation is designed to prevent strokes. Another triumph of modern medicine? Or an overly risky, overdone alternative to cheaper drug therapy? Incredibly, no one knows for sure, and no one is tracking the patients on a systematic basis to find out.

      The same holds true for scores of other medical ministrations. Food companies know the impact of a redesigned ketchup bottle on sales. But the virtuosos performing hysterectomies, installing pacemakers and bypassing diseased coronary arteries have only patchy information about the real payoffs. "Half of what the medical profession does is of unverified effectiveness," asserts Dr. Paul M. Ellwood, Jr. of Minneapolis, [one] is a phalanx of physicians who want to cut down on the guesswork.(21)

      Academic medicine is trying to answer this criticism. Researchers in a relatively new branch of investigation, clinical epidemiology, are trying to sort out which medical maneuvers are effective. Ideally, the research...