In a news story about the care provided to premature infants in neonatal intensive care units (NICUs), reporter Alex Halperin illuminated the miracles and unintended consequences of health care technology. With the use of modern methods, vastly more premature infants now survive early birth—often by many weeks, even months—than was imagined possible a few decades ago. That’s amazing.
It’s also extremely expensive. The cost of medical care for a single premature infant can total hundreds of thousands, even a million dollars, in just the first several months.
Of course, insurance cushions the financial blow for families with coverage. The large insurance payments that hospitals with NICUs receive for saving premature infants’ lives are also good business. Halperin documented how high insurance payments for NICU care help subsidize less profitable hospital services. This serves as an incentive for hospitals to invest in NICUs and to expand the sophistication of technology they offer.
Health economists have long pointed to the march of technological progress as the driver of ever higher health care spending, even as it improves and saves lives. Health insurance plays a mediating role, by spreading the cost of technology—like expensive NICU care—over a large population. It’s an almost circular relationship: technology drives costs, insurance makes them easier to pay, and the types of care for which insurance reimburses generously garner greater investment and experience faster technological progress. We tend to be drawn to, and demand, the latest high-tech care, and insurers tend to reimburse for it more generously. NICUs are one example.
But what if insurance didn’t reimburse hospitals as generously? Would that slow the technological engine? A recent study by Indiana University scholars examined this issue by looking at how the lower reimbursement by Medicaid programs for the care of pregnant women affected the expansion of NICUs. In areas where more people likely switched from private coverage (which reimburses more) to Medicaid (which reimburses less), NICU adoption was slower.
The lesson is that how generously health care technology is reimbursed can affect how rapidly it develops and expands.
Unfortunately, high-tech care isn’t always the right care. It’s possible to overinvest in state-of-the-art machines and in specialists. Those machines and specialists can do amazing work, and we’re drawn to the stories of the premature infants who survived because of them. Everybody wants to save a baby.
But there are limits to how much we can spend—how much we’re willing to spend—on health care. What if saving 1 newborn in a high-tech NICU comes at the price of lower spending on less-specialized care—such basic preventive care that could be provided by a greater number of primary care practitioners—that could save the lives of many older children and adults?
Such a trade-off is implicit in what kinds of care are reimbursed by insurers and public programs and at what rates. Because insurers don’t reimburse as generously for lower-tech and primary care as they do for NICUs and the specialists that work in them, the health system underinvests in and underprovides subsequent services that NICU premature infants need as they grow into young children and adults. Spending $200 000 on preventive care, treating obesity, or other interventions instead of on care for 1 very premature infant would “save a hundredfold more lives,” Craig Jackson, MD, MHA, medical director of neonatology of Seattle Children’s Hospital told Halperin.
Of course, we neither want to deny life-saving care for a premature infant nor have other patients forgo care because of that choice. And yet such trade-offs are manifest in our policy. Not all premature infants are saved and not all of those treated in NICUs and survive receive the subsequent care we might wish for them. This reality of the implicit trade-offs is hard to confront, but that doesn’t make it any less real.
About the author: Austin B. Frakt, PhD, is a health economist with the Department of Veterans Affairs and an associate professor at Boston University’s School of Medicine and School of Public Health.He blogs about health economics and policy at The Incidental Economist and tweets at @afrakt. The views expressed in this post are that of the author and do not necessarily reflect the position of the Department of Veterans Affairs or Boston University.
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