Medical Necessity - American Health Lawyers Association

Appendix A Issue Paper to Establish a Common Basis for the Colloquium Discussion
■ Identification of stakeholders in
the medical necessity debate and
their key concerns and interests;
■ A preliminary list of issues for
consideration by the Colloquium
panel, focusing on potential
bases for improving the systems
for making medical necessity
determinations; and
■ A set of five core questions
developed by AHLA to guide
the Colloquium discussion.
HEALTHCARE IN CRISIS:
RISING COSTS AND
REDUCED ACCESS TO CARE
Access to affordable and adequate
healthcare for residents of the
United States has been an issue
of concern at least since the end
of World War II. The perceived
relative importance of the issue
has varied over time, often in
response to changes in the rates
of healthcare cost inflation and
the impact of measures taken to
address that trend. A dramatic rise
in healthcare spending preceded
the managed care revolution that
occurred in the early 1990s, for
example.
As Americans born during the
post-war “baby boom” approach
retirement age, the issue has taken
on particular critical importance for
the largest government program,
Medicare, which faces not only the
rising per capita costs experienced
by all health plans, but also
substantial growth in the number
of newly-eligible beneficiaries.
Costs for private and employmentrelated
health insurance rates are
again soaring; the government
programs designed to provide care
for the aged, disabled, and impoverished
are struggling under rising
per capita costs and dramatically
increasing eligible populations;
and the number of persons without
any form of health insurance is
rising to levels unprecedented
since health insurance became
common after World War II.
Several statistics from the Center
for Medicare and Medicaid
Services’ (CMS) most recently
issued report on national healthcare
expenditures highlight the
dimension of the problem of
providing healthcare to all
Americans: 5
■ It is estimated that $1.6 trillion
was spent on healthcare in the
United States in 2002.
■ Healthcare spending constituted
approximately 15 percent of the
gross domestic product in 2002.
■ Healthcare spending is projected
rise to $3.1 trillion, or 17.7
percent of the gross domestic
product, by 2012.
■ Per capita healthcare expenditures
between 1970 and 2002 —
adjusted for inflation —
increased more than 400
percent (from $1,300 to
$5,540), and are expected to
double again within six years.
■ Per capita healthcare expenditures
in the United States are
materially higher than those
of many other developed
countries, while some health
indicators in the United States
are materially lower.
■ Government sources provided
less than 25 percent of healthcare
spending in 1960; in 2000,
they provided more than 43
percent.
Skyrocketing healthcare costs
always generate debate over
reforming the nation’s healthcare
“system.” A variety of factors typically
are cited as the culprit: rising
high prices in the “market basket”
of healthcare goods and services;
alleged overutilization by physicians
and hospitals; alleged price-gouging
by private health insurers; our
aging population; the exponential
growth of high-cost medical
technology; 6 the costs of medical
malpractice insurance; and the
costs of “defensive” medicine.
Not surprisingly, the reality is far
more complex. For example,
estimates of the impact of new
medical technology on healthcare
costs have ranged from 19 percent
to 50 percent of the increases,
both from the added costs of using
the technology in appropriate
cases and alleged overutilization.
At the same time, it is undisputed
that such technology can generate
significant positive effects on the
economy, including — but not
limited to — healthcare costsavings
over the long-term. 7
Similarly, although the “graying
of America” increases aggregate
national healthcare costs to the
extent that per capita expenses for
seniors are higher, the absolute
increase in healthcare costs that
can be attributed to age is very
small. At the same time, the fact
that people are living longer and
will increase the demand for
healthcare also must be taken into
consideration. America’s aging
population adds to government
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