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well at home or in an extended care facility. However, it is not known how prevalent these types of illness may be. While the need for home care and nursing home care is substantial, especially among the elderly, relatively few of those who could benefit require hospitalization. Many experts contend that patients for whom hospitalization is justified on medical grounds will not, as a practical matter, be placed in another appropriate setting unless the hospital is operating at near capacity, requiring a serious search for alternatives, or unless incentives are changed, notably for physicians, to cause them to look for alternatives. Moreover, home health care programs that pay for housekeeping and other non-health services may be called on to make substantial expenditures for services now provided at no cost by friends, relatives and volunteers. There is little documentation showing the impact of home and extended care on the overall costs of health care.

3. Physician Extenders. For some time it has been acknowledged that physicians can delegate a substantial number of tasks that they have traditionally performed to well trained assistants, commonly referred to as physician extenders, With adequate support from physicians, physician extenders can diagnose and treat large numbers, estimated as high as 70 to 80 percent, of health problems which physicians have traditionally dealt with themselves, A study of physician extenders, commissioned by the Health Resources Administration of the U.S. Department of Health, Education and Welfare, concluded that "given the assumed task delegations and the expected level of acceptance, the median estimate of the need of physicians in the target years (1980, 1985, and 1990) could be lowered by as much as 22 percent.' In a study reported in the "New England Journal of Medicine" in January of 1974, the addition of two physician extenders enabled two family practitioners to increase the number of families under their care by 22 percent in the course of a year.

There are few studies which have dealt extensively with the cost issue, although there are frequent claims that care provided by physician extenders is more economical. Obviously, their impact on health costs will depend on the effect they have on the overall supply of services and on the charges for their services. Similarly, questions remain concerning the training that should be required of physician extenders and the degree of physician supervision needed to protect the interests of the patient.

4. Surgical Centers and Ambulatory Surgery. Surgical centers are free-standing, ambulatory centers designed to perform minor, sameday surgery. Many are privately owned, frequently by physicians. Their principal benefits appear to be patient and physician convenience because of faster scheduling and cost savings. In one area studied, Phoenix, Arizona, it was found that the surgical center was charging less for similar operations and apparently had caused a reduction in prices charged for outpatient surgery by community hospitals in some instances.

However, comparisons based on charges are misleading because to a large extent the hospitals are paid by third parties on the basis

of their costs, which may be quite different from their charges. For example, both a hospital and a surgical center may charge $100 for a specific surgical procedure. For the surgical center, the $100 charge is the amount that patients or their third parties are expected to pay. The hospital, on the other hand, is largely reimbursed on the basis of its costs, so that if the cost of performing the procedure in the hospital is more than the $100 surgical center charge, the hospital would be the more expensive of the two. Alternatively, if the hospital's costs were less than the $100 charge, the hospital would be the less expensive. Another complicating factor is that some of the overhead costs of a hospital that are paid in connection with a surgical stay will have to be paid by the cost-paying third parties, whether surgical patients go to that hospital or to a surgi-center. Studies to assess the impact of surgi-centers on health costs and the quality of care they afford are currently being carried out by the Department of HEW. In addition to surgical centers, ambulatory surgery can also be performed in outpatient departments or scheduled for the operating rooms of hospitals. Health maintenance organizations such as the Kaiser Health Plans frequently use both approaches as alternatives to hospitalizing patients.

5. Institutional Efforts to Improve Efficiency. In a number of instances, hospitals and other institutions have joined together to share services which have resulted in cost savings or cost containment. The most common arrangement, according to the American Hospital Association, is group purchasing, where a number of hospitals jointly purchase their supplies and some of their equipment. Other shared services include shared laundry services, food, and computer services, which have reduced unit costs. There are instances of hospitals forming consortia for the purpose of lowering clinical costs through such means as agreeing to close pediatric and maternity departments of member hospitals to eliminate an overall surplus of such services, and agreements to refrain from the establishment of duplicative, expensive equipment and services, There is no documentation of the impact these approaches have on the overall costs of care provided through the institutions involved.

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Our behavior does affect our health. Recent studies by Lester Breslow and others in California showed that people live considerably longer and have considerably fewer health problems if they observe simple health habits such as getting the right amount of sleep, eating properly, and refraining from smoking and excessive drinking. However, we know relatively little about how to educate and motivate people to assume good health habits in the absence of excessively authoritarian measures.

Another dimension of health education relates to the proper use of health services. Some experts contend that informed health care utilization, e.g. seeing doctors early in the course of medical problems, can lessen the seriousness of such problems and lessen the cost of creat

As noted in the following section on preventive services, there


is little consensus as to the impact that possible changes in health services usage would have on the incidence of disease or on costs. There is evidence, however, that involving patients with certain kinds of health problems in their own care can improve their prognosis and save money. At the Tufts Medical Center, for example, it was possible to reduce hemophilia patient costs from $5,780 to $3,209 per patient by instructing the patients in self-infusion. At the University of Southern California Medical Center, it was possible to reduce emergency room visits by 50 percent for diabetics through a program of counseling and information developed by the Center.

Finally, health education might be able to provide people with a more realistic assessment of the role medical care actually plays in maintaining and improving our health. Advocates of such measures contend that many people believe that larger health care expenditures will automatically bring better health care, and that this unrealistic expectation is the principle justification for increasing demand for more and more expensive health services.

It is frequently noted that much disease and poor health, and the consequent costs, could be prevented or made less severe if we simply applied what we know today about prevention. Prevention, in addition to health education referred to earlier, includes such actions as maintaining clean water and air, sanitation, the fluoridation of water supplies, immunizations against specific diseases, and screening programs. Many of what might be termed traditional public health programs such as the chlorination and fluoridation of water supplies are widely perceived to be effective in reducing disease. Immunizations are also generally effective.

There is widespread disagreement, however, about the effectiveness of such preventive efforts as screening programs and routine physical examinations. The major disagreements regarding screening programs which attempt to detect a wide range of diseases relates to the effectiveness of screening in influencing the incidence of any of the illnesses they attempt to detect. There is more widespread agreement concerning particular types of screening tests for segments for our population, e.g. hypertension screening, pap smears, screening for Rh incompatibility in pregnant women and serologic tests for syphilis in sexually active patients. Such tests meet the criteria of accuracy, physician acceptance of the findings, and the likelihood of patient compliance with prescribed treatment and behavior.

An approach under increasing criticism by health care experts is annual physicals for everyone. Most of the criticism relates to their high cost and the limited use of the findings in maintaining or improving health. There is considerable, although not unanimous, agreement that annual physicals are useful for certain groups such as young children, persons over 40, and persons on their first visit to a new doctor.

In speaking to the issue of prevention, Dr. Richard Spark, an associate clinical professor at Harvard Medical School, stated in a New York Times Magazine article of July 25, 1976:

As unpleasant as it may sound to those who would like to believe otherwise, most diseases can be detected only after symptoms appear.

Furthermore, with the exception of hypertension, there is no convincing evidence that treatment of diseases before the onset of symptoms offers any long-term advantage over the treatment that is initiated after the symptoms arise.


Industry Efforts to Control Health Expenditures

In commenting on the cost of health care to industry, the Council on Wage and Price Stability reported:

If the trend in contributions to employee health benefit plans from 1965 to 1973 (the latest year for which data have been published) were projected forward to 1975, it would show contributions in 1975 to be over 300 percent of those in 1965.

Health care is a larger cost component of a car built by General Motors than is steel. Business and labor, through payments for the Medicare program, health insurance and out-of-pocket payments for health care, occupational health and safety programs, and health expenditures under the employees compensation programs, may spend approximately as much as the Federal Government for health.

Their large and rapidly rising expenditures for health insurance have prompted business organizations to look for ways of containing health costs. Some companies now advocate health maintenance organizations for their employees as an alternative to fee-for-service medicine. The R. J. Reynolds Tobacco Company in Winston-Salem, North Carolina, recently developed a health maintenance organization for its employees and their families. General Motors attempted unsuccessfully to persuade the auto workers union to increase employee co-payments as a means of reducing the use and cost of health services. Companies such as Goodyear Tire and Rubber Company have contracted with a medical society-sponsored peer review organization in an effort to cut down on the use of unnecessary hospital services. Many companies such as those in the Rochester, New York, area actively support health planning as a means of cost containment.

The Council on Wage and Price Stability analyzed industry efforts to hold down the costs of medical care. They identified the following 93 projects, over half of which were begun during or after 1973.

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A national health insurance program without strong expenditure controls could add substantially to the cost of health care. Some who criticize proposals for national health insurance on the grounds that it would be too expensive are concerned not only about meeting existing health care expenditures but also about the possibility that such a program, given the state of the art of applying controls, could not resist the pressures to increase expenditures.

On the other hand, it could be argued that the present fragmented system for financing health services is itself a major handicap to expenditure control that could be remedied by national health insurance. If all or most of the health care providers' incomes were from a single program, a budget could be established that would set an overall limit on the nation's health care expenditures. Also, a single payment program might help restrain increases in health costs by strengthening health facility planning efforts and medical education and training programs designed to provide for a more efficient allocation and use of health resources. It could also be argued that a national health insurance program could offer meaningful financial incentives to encourage changes in the way medical care is provided that would make the health care delivery system more economical.

Given our present knowledge, there is no sure way to determine which of these arguments will prove accurate. The choice will probably hinge more on values and goals--the willingness to pay for specified services--than on technical considerations.


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