8 tion, intensive care uses more of everything: more space, more equipment, more laboratory tests, and more labor, especially nursing time. Its cost is high-at least three times that of ordinary ward care. Because intensive care beds account for 5 percent of all hospital beds and ward beds for the remaining 95 percent, the average cost per hospital day is more than 10 percent higher than it would be if all hospital beds were in wards. Without intensive care, the cost per hospital day could have been $143 in 1976 instead of the $158 actually recorded. Intensive care is widespread and growing. When Russell examines what we get for our money, she finds evidence that its benefits are seldom large or dramatic. For example, although some studies of intensive care for heart attacks show a reduction in mortality, at least an equal number do not. A carefully designed British study found no difference in mortality between heart-attack patients given intensive care and those treated at home. Studies of other conditions suggest that, although intensive care does not reduce mortality, it does reduce complications and disability in those who survive. "In the emotionally charged atmosphere of medical care," Russell says, "the momentum of a new technology often puts the burden of proof on those who question the evidence for it, rather than on those who propose it. The result is that the technology quickly becomes the accepted thing to do.... But even without the perfect test, it is clear that the benefits of intensive care are fairly small.... Its costs are of the first order of magnitude." Renal dialysis the use of an "artificial kidney" to sustain victims of kidney failure-presents a more striking example of the cost problem. A series of inventions and experiments in the late fifties and early sixties made it possible to use dialysis to prolong the lives of people with chronic kidney failure. The first programs of long-term dialysis were set up in the early sixties, supported largely by federal money for medical research. By 1967 about 1,000 people were on long-term dialysis, but another 6,000 died each year because there wasn't enough money to treat them. In 1973 the medicare program began to help pay the costs of dialysis and kidney transplants for virtually anyone who needed them. By June 1977 approximately 35,000 dialysis patients were receiving medicare benefits, and the number is expected to reach 60,000 or more by the mid-1980s. Today there are some 60 new dialysis patients per million per year, compared to 35 per million ten years ago. The increase reflects more liberal admissions criteria, the number of people per million population considered suitable for long-term dialysis having nearly doubled in ten years. The old criteria excluded the very young, the elderly, and those with serious diseases other than kidfailure. Today there is essentially only one criterion ney THE BROOKINGS BULLETIN for acceptance into a dialysis program: disabling uremia (an excess of metabolic wastes in the blood). Another change is the shift from dialysis at homethe least expensive setting-to dialysis in outpatient centers. Before medicare started paying for dialysis, 40 percent of all dialysis patients dialyzed at home, which costs about $7,000 per year as against $15,000 to $25,000 in an outpatient clinic. By 1977 this proportion had dropped to 20 percent, and medicare was paying an average of $16,800 per patient annually. Dialysis at outpatient centers relieves families of a heavy responsibility but costs the taxpayers much more. According to Russell, these trends are the inevitable response to a financing program that removes cost as a constraint on the use of medical resources. Renal dialysis unquestionably prolongs the lives of people who could not survive without it. But, as the costs to the people making the decisions have declined, dialysis has been extended to people who gain less from it in added life and quality of life. And the shift to dialysis centers reflects the tendency to push investment to the point of small or zero benefit when the costs facing decisionmakers are small or zero. Where to Draw the Line? The economics of renal dialysis and other technologies points to the heart of the cost problem: that to pursue every possible gain in medical care, however small or expensive, is enormously, perhaps infinitely, costly. Included in Russell's study is a comparison of the cost control policies used in Sweden, Great Britain, France, and the United States. The experience of these countries suggests that policymakers can choose among four levels of intervention to guide the diffusion of medical technology and thus the use of resources. Each step in the hierarchy represents a growing commitment to cost containment over other goals, starting at the lowest step with no concern about cost at all. The United States was in this stage in 1965, when the Heart Disease, Cancer, and Stroke Amendments established regional medical programs to promote new techniques for caring for patients with these diseases and to translate research into practice. Moving to step two, governments concern themselves with whether new technologies are being used efficiently. Without making judgments about the volume of use, they ask whether that volume is being produced at the lowest possible cost. In the United States, promoting technology gave way to improving efficiency during the decade between 1965 and 1974, when the federal government required each state to enact certificate-of-need laws. Since the states have been unguided in applying those laws until recently, a coherent national policy has not yet emerged. VOLUME SIXTEEN, NUMBER ONE Though their respective policies are different, Sweden and France intervene directly in an effort to promote efficiency and control hospital costs-Sweden, through a regional approach in which hospitals are graded according to the services they provide and the populations they serve; France, through a detailed system of regulation aimed directly at controlling the adoption of medical technologies and apportioning them in fixed ratios of equipment to population. But Sweden, with 9.2 percent of its GNP devoted to health services, and France, with 8.1 percent, are hardly more successful than the United States in controlling medical costs. All three governments and many others-assume that it should not be necessary to go beyond step two, or perhaps to the edge of step three, to reduce cost growth to an acceptable level. They take the level of medical services as given. Step three gets governments into the business of questioning, even testing, the benefits of medical technologies. When a government concludes from expert opinion or controlled experiments that a technology is unwarranted, it can try to prevent its use-for example, by prohibiting the purchase of capital equipment. The recent establishment of the National Center for Health Care Technology suggests that the United States is moving in this direction. In step four, the government explicitly acknowledges that it may not be desirable to provide every kind of care that has some benefit, however small or costly. Con 9 trolling costs then means deciding that some things, although beneficial, are not beneficial enough to justify their cost. In that case resources, and therefore medical services, must somehow be rationed. Of the four countries Russell studied, only Britain has accepted the need to limit, and therefore to ration, medical resources. Resources can be rationed in several ways. • At one extreme, the total resources available for medical care could be limited without making judgments about particular kinds of care. As in Britain, the national budget for medical care could be set at less than the amount needed to satisfy the demands of patients and providers at zero prices, and rationing could be achieved by queuing. This happens in Britain, where the waiting list for hospital admissions is long, and fewer people are on renal dialysis than there are in the United States or Sweden. Alternatively, prices could be partially reintroduced in the form of coinsurance that would require patients to pay some part of the costs they incur; the fraction could be related to income. The choice between these alternatives would depend partly on whether it seemed preferable to ration by queuing or by price. Russell warns, however, that neither method is likely to be sufficient by itself. For example, most proposals for coinsurance include an upper limit, related to income, on the amount the patient must pay in a year. Beyond that point, thirdparty payment takes over completely and some other means of rationing must be used. • At the opposite extreme, the government could make decisions about each technology individually, based on the technology's costs and benefits. The decision would specify whether it should be provided at all, at what level, where, and to what kinds of patients. But judging technologies one by one would require a great deal of information that the other methods of rationing do not. In practice, Russell says, the best system almost certainly would be a mixture of the two approaches, with the exact proportion determined by balancing the arbitrary nature of the first approach against the heavy information requirements of the second. Russell neither advocates rationing of medical services nor endorses any particular proposal for controlling costs. Rather, her study seeks to contribute to a better understanding of the choices that face us, if we are serious about controlling medical care costs, and to suggest some of the considerations involved in deciding on the best policies for controlling them. Louise B. Russell is a senior fellow in the Brookings Economic Studies program. Her study, financed by a grant from the National Science Foundation, is the nineteenth in the Brookings Studies in Social Economics series. 10 When Troops Are The latest of the Brookings Studies in Defense Policy contends that an obsession with "youth and vigor" denies the U.S. armed forces the technical expertise that is vital to the operation of an increasingly complex military establishment. Moreover, according to the authors, the adoption of policies that would keep highly trained military personnel for longer periods of service "not only would allow the nation to field more effective armed forces but could save money as well." Youth or Experience? Manning the Modern Military was written by Martin Binkin and Irene Kyriakopoulos. Binkin, a senior fellow in the Brookings Foreign Policy Studies program, has written extensively on defense manpower issues. Kyriakopoulos is a research associate in the same program. In their analysis, Binkin and Kyriakopoulos examine the mix of age and experience in the armed forces and trace the evolution of the forces' occupational structure. They attribute the military's accent on youth-nearly 20 percent of armed forces personnel are in their teens and more than half are under age 24-to several factors: a youthful force has long been considered a less expensive force; the military have traditionally set a premium on "youth and vigor," largely on the ground that military occupations demand extraordinary physical prowess; and the services tend to limit the proportion of older career-minded people so as not to inhibit a "reasonable" flow of promotions. But a youthful force, the authors note, is necessarily inexperienced. At last count, nearly 40 percent of all Youth or Experience? Manning the Modern Military, by Martin Binkin and Irene Kyriakopoulos. Published June 1979, 84 pages, $2.95 paper. military personnel were either trainees, apprentices, or helpers. Only three of every five were fully productive. In an earlier era the armed services needed physically robust but relatively unskilled troops, and the experience factor was secondary. Indeed, during much of the nation's history, infantrymen and ablebodied seamen constituted the bulk of the military rank and file. During the Civil War, for example, about 95 percent of all soldiers and sailors served in those jobs for which physical vigor and stamina were essential. As the military kept pace with technological developments, technical skills became increasingly important. 1 THE BROOKINGS BULLETIN By World War I the proportion of "combat" jobs had declined to 40 percent, and by World War II to 25 percent. Today those positions account for barely 16 percent of the total. As a result of technological substitution, the armed services today require relatively few equipment-laden, foot-slogging "grunts" and a great many technicians, specialists, and craftsmen whose duties closely resemble those performed by their counterparts in the civilian labor force. In these tasks, the authors contend, technical know-how and experience, rather than the physical attributes associated with youth, are critical for effective job performance. While Binkin and Kyriakopoulos do not dispute the importance of physical strength and endurance in the combat forces, they question whether young people are really better able than their older counterparts to meet the rigors of combat duty. The answer, they find, is far from clear. Although physical capacity diminishes with age by most measures, research indicates that the rates of decline vary widely. One study finds, for example, that the average 40-year-old possesses more than 95 percent of the cardiac output and about 90 percent of the respiratory capacity of the average 30-year-old. In "speeded activities"-running and simple reaction tasks-differences in performance between 20- and 30-year-olds are negligible. And the authors cite evidence suggesting that "maximal muscle strength is achieved between the ages of 25 and 30, gradually diminishing until age 50, after which a sharper decline occurs." The authors conclude that, important as it may be, the requirement for youthfulness and vigor is neither overwhelming nor applicable to all of the jobs in the military services. The authors also dispute the view that a youthful force is less expensive than an experienced one. It has long been taken for granted that an older force is more costly because (1) experienced personnel command higher pay than do those with less experience; (2) the cost of military retirement is higher for experienced personnel, VOLUME SIXTEEN, NUMBER ONE because they are more likely to become eligible for retirement annuities; (3) extra financial incentives are needed to induce many to remain in the armed forces beyond the initial enlistment period; and (4) older persons have more dependents on the average than do their younger colleagues, thus giving rise to higher medical, housing, travel, and other dependent-related costs. From their analysis, however, Binkin and Kyriakopoulos conclude that the cost of retaining experienced workers is less than the cost of replacing them. This is so because the pay of junior people has grown substantially more over the last decade than has the pay of those in the more senior grades; the costs of recruitment and training have risen sharply; and lower grade enlisted personnel are now more likely to have families and thus impose dependent-related expenses previously incurred only by more senior members. The net effect, say the authors, is that the cost of maintaining the young and inexperienced segment of the military work force has grown to the point where an increase in the proportion of experienced personnel would be cost-effective. Moreover, the projected decline in the number of youths en 11 The authors calculate that retaining an additional 14,000 trained personnel would save almost $300 million. To the extent that the necessary inducements are overstated, the savings would be even larger. Perhaps more important than the monetary saving is the increase in U.S. military effectiveness that would result from more experienced forces. Binkin and Kyriakopoulos recognize that the Pentagon's ability to make more than modest changes in the experience level of the armed forces is, in a practical sense, limited by prevailing laws and policies, most notably the military retirement system. They conclude that the proposal recently advanced by the President's Commission on Military Compensation and other efforts to rationalize the system have missed the mark. An effective redesign of the system, they contend, must await settlement of the larger issue: What level and structure of compensation will enable the armed forces to achieve and maintain the appropriate level of experience? tering the labor force will make recruitment more diffi- The Army Engineers Meet cult and make a more experienced military force even more cost-effective. To illustrate the financial consequences of moving toward an older, more seasoned force, the authors analyze the long-term effects of a 25 percent increase in the reenlistment rate of journeymen completing their first term of service. They find that the cost of attracting, training, and paying new recruits more than offsets the higher payroll costs, larger retirement obligations, increased support costs, and substantial inducements (allowing for bonuses of up to $25,000 for each additional reenlistee) associated with the more senior force. the Environmental Movement During the late sixties, federal resource and public works agencies were sharply attacked by two groups whose interests often overlapped: environmentalists and advocates of increased public participation in bureaucratic decisionmaking. Some of the worst offenders against the environment, these groups discovered, were large agencies such as the Atomic Energy Commission, the Department of the Interior, and the Army Corps of Engineers. Spurred by mounting public demand, Congress passed 12 the National Environmental Policy Act of 1969, which requires federal agencies to consider the environmental consequences of their actions. Subsequent guidelines call on the agencies to provide for greater citizen involvement in decisions affecting the environment. A few years later, however, neither public pressure nor legislation had brought about major organizational or programmatic changes in the federal bureaucracy, with one exception: the Corps of Engineers, an agency with more than 35,000 employees and an annual budget of $2.5 billion. To the surprise of its critics, this large bureaucracy appeared to be making a noteworthy attempt to accommodate itself to both the spirit and the letter of the law by encouraging wider public participation in project planning and by showing greater awareness of environmental considerations. Can Organizations Change? is a study of the Corps of Engineers' apparently atypical response to these new demands, and of the resulting changes in its organizational goals, internal structure, external performance, and methods of decisionmaking. The authors, political scientists Daniel A. Mazmanian and Jeanne Nienaber, first examine the Corps' traditional functions-primarily flood control and the maintenance of inland waterways -and its overall response to the new requirements thrust upon it by Congress. Then they focus on five projects: flood control, navigation improvements, and irrigation on the Missouri River; a new lock and connecting channel in the Mississippi River-Gulf Outlet below New Orleans; flood control and related water resource projects in Contra Costa County, California; wastewater management for the Cleveland-Akron area; and flood control on the Snoqualmie River near Seattle. In each case, Mazmanian and Nienaber trace the Corps' response to external pressure for change, with emphasis on the form and substance of public participation in planning and executing the project. To gauge the THE BROOKINGS BULLETIN effects of public participation, the authors analyzed information gained from interviews with Corps officials, critics and advocates of the projects, and a random survey of members of the public who participated in planning. Mazmanian and Nienaber give the Corps high marks for its conscientious efforts to institute open planning and to set new standards of environmental awareness. In keeping with its redefined mission, the agency has brought in new personnel with nonengineering backgrounds and altered its formal structure in a serious attempt to cope with environmental considerations. The authors also find encouraging signs that the Corps is Can Organizations Change? Environmental Protection, Citizen Participation, and the Corps of Engineers, by Daniel A. Mazmanian and Jeanne Nienaber. Published March 1979, 220 pages, $4.95 paper, $11.95 cloth. translating its environmental responsibilities into new programs. But with the long lead times required for planning Corps projects and the inevitable tendency to return to traditional modes of operation, it remains to be seen whether the Corps will want or be able to continue taking environmental factors into account. Equally uncertain is the outcome of the Corps' experiment with public participation in planning. The case studies suggest to Mazmanian and Nienaber that open planning has a substantial effect on bureaucratic decisionmaking when it is used. They note, however, that the Corps has used open planning in a limited number of projects, and that it apparently has not been convinced by experience that open planning is beneficial or desirable. They conclude that only outside pressure of the sort generated in the late 1960s and early 1970s seems likely to prompt the Corps to institute open planning throughout the agency or to encourage other forms of public participation. 54-267 0 - 80 - 28 |