Managed health care plans and the Medicare program have had some
success slowing growth in spending for doctors, hospitals and home
care agencies. But managed care has been much less successful
reining in spending on new life-enhancing medical devices and
Advances in technology -- from laser treatments to the latest
surgical procedures with miniature instruments -- are one of the
reasons for the re-acceleration in the overall costs of health
insurance, after several years of slow or zero growth. Sales of new
medical devices in the United States rose 30 percent the last five
years, outpacing the 22 percent rise over all in health care
and all other categories except prescription drug sales, which were
up 50 percent.
"About half the growth in real per-capita health costs is
associated with medical technology" including advances in procedures
and drugs, said Mark Freeland, deputy director of the National
Statistics Group in the Health Care Financing Administration.
Increased medical costs were cited Thursday by Humana, a managed
care company with 6.2 million members, as it announced that its
quarter earnings would fall below Wall Street's expectations.
Paradoxically, many of the new procedures are promoted as reducing
costs: a $3 million laser device that provides an alternative to
brain surgery can pay for itself by reducing the costs that surgical
procedures and lengthy hospital recoveries would have previously
required. But health plans are finding that over all, technology
costs are surging, in large part because the new procedures are more
available or more attractive to more people -- fostering a demand
that insurers cannot stem.
Patients who are hesitant about traditional open surgery, for
example, will eagerly agree to minimally invasive procedures with
miniature instruments to repair heart valves or remove defective
The pattern was clear at Health Partners, a big, nonprofit
Minnesota health maintenance organization. In only two years, from
1996 to 1998, the HMO counted double-digit growth in the number of
procedures for every thousand members in eight categories, including
some of the most expensive: brain and nervous system procedures,
heart and artery surgery, orthopedics like hip and knee replacements
and organ transplants. Premature infants were another big-ticket
At Children's Hospital in Minneapolis, where many patients are
tiny premature babies, "there has been a technological explosion and
a tremendous increase in survival rates and the good news is, we did
not have an increase in extremely damaged children," said Dr. Ronald
Hoekstra. But with the advances, he added, costs are bound to go up.
One of Hoekstra's patients, Simon Hagman, a strapping 30-pounder
who celebrated his third birthday late last month, has already made
personal contribution to the economics of high technology health
care. Health Partners, his family's plan, spent $1.2 million on
life- saving care for Simon, whose birth only 22.5 weeks after
conception was dangerously premature.
Simon, born weighing 1 pound, 4 ounces and only 12 inches in
height, lived for 14 months in the neonatal unit at Children's
Hospital. With the help of sophisticated procedures and technology,
he overcame three heart attacks, several bouts of pneumonia and a
threat of blindness. He went home, with 24-hour nursing, still
dependent for a time on an oxygen system that augmented his
"Miraculously, Simon survived without brain damage," said his
mother, Tracey Hagman.
A dozen years ago, there would have been small hope for an infant
with Simon's precarious medical profile. For premature babies with
severe problems who did qualify for the less-advanced treatments
available then, the medical charges were about $250,000.
The new drugs and procedures were welcomed as essential to
excellent care. "It's the right thing to do, but it's very
expensive," said George Halvorson, chief executive of Health