Since 1980, the year of Business Week's first conference on cost containment, many new techniques in cost containment have appeared on the horizon. To understand cost containment in context, let's first list the major approaches.

• Patient incentives, including copayments, deductibles
• Provider surveillance, including bill checking and generic drugs -Managed care
• Standards of care, including data analysis and the use of DRGs
• Case management
• Home, long term and hospice care
• Patient power
• Medical necessity and approach

Let's identify how these techniques help and hurt the patient in these different areas of focus.

-Patient incentives, including copayments, deductibles

These focus for cost containment by and large demonstrates the limitations of the psychological assumptions of economics. Economics often assumes that patients operate only logically and that health care decisions are like other consumer decisions--especially those for mass marketed, low risk, definitively priced merchandise.

To justify a focus on this area, experts often cite research that shows that a great percentage of office visits in general often are medically unjustified or are psychosomatic in nature. The result has been a steadily increasing reliance on copayments and deductibles, or cost shifting. While a Rand study has shown indeed that copayments have an impact on patient decisions, the resulting deferral of inquiry and action on long-term health problems may not be cost-effective in the long run. Moreover, cost shifting assumes patients have been successfully educated in how to manage the entire medical system; we are far from that point. Lastly, it ignores the fact that the bulk of medical purchasing decisions are still dictated by the physician.

The truth is that most medical expense in a person's life occurs with the onset of a chronic or terminal condition, culminating with the bulk of the expenditure occuring during the last few months of life: focusing on office visits and the first $250 or $1000 of the bill is missing the mark. The result is an attempt to manipulate a player who essentially is powerless today in the system.

-Provider surveillance, including bill checking and generic drugs

Some of the early gains in cost containment came merely from checking hospital bills. Numerous studies show that most hospital bills contain numerous errors, mostly in the hospital's favor: services never rendered, double billing, questionable pricing and services that were unsatisfactory.

An added area where claims surveillance pays off is with insurance claims handling. Insurers are much like the IRS, staffed with underpaid, underqualified staffs that experience high turnover. One corporation discovered Blue Cross had doubled billed one month--to the tune of $100,000. Simply keeping track of claims often justifies the use of a claims payment service or software. This is one area where patients can exercise control over the financial aspects of their condition--especially where it impacts cash flow.

Overcharging can swiftly run up expenses to a policy's lifetime or condition maximum. Many patients are unaware of this secondary effect since many of the firms that overcharge are lavish with care and attention--a stark contrast with the rest of the system. The reality is that most patients do not comparison shop their pharmaceuticals, home care, long term care or physician directed care. This makes the motivational basis of lifetime or condition maximums illusory and the approach itself a concept that again targets the least powerful player in the system--the patient. Moreover, most HMOs offer unlimited care since actuarially the cost of million dollar cases is not that great a part of the total. This focus discriminates against patients who need care the most--the seriously or terminally ill, or the catastrophically injured.

-Managed care, including PPOs, etc.

Originally, managed care meant care delivered through a Health Maintenance Organization. HMOs ideally offer a chance to pay for prevention as well as more traditional forms of care. It makes sense to have one physician act as a coordinator of care in complex cases and to have all major specialties easily consultable under one roof. HMOs can significantly reduce the amount of nonreimbursed medical expenses since they define medical care more globally.

However, HMOs work best with well educated patients--patients who have power and will use it. To this type of patient HMOs offer a single point of leverage on the system, usually through an ombudsman. The patient has a further advantage with HMOs since as a new player in the system they have an unusual degree of regulatory scrutiny.

Lastly, not all HMOs are ideal. Many in fact have failed. Patient power starts with researching the original decision to join. Choose wisely. Using a reference such as the Consumer Reports book Choosing the Right Health Care Plan can help.

-Standards of care, including data analysis and the use of DRGs

With the rise of corporate health cost containment, the emphasis shifted towards establishing standards of care. The government developed its own approach in this direction, now often used by corporations or their insurers, with reimbursement based on Diagnosis-Related Groups, or DRGs. DRGs are average prices, weighted according to region and factors specific to the severity of the condition, imposed on hospitals.

DRGs started the Medicaid squeeze on hospitals. The result however is an aggravation of the overall cost situation. Hospitals have shifted their costs increasingly onto commercial insurance payors, usually corporate health plans. This has motivated increased cost shifting to patients who can pay, patients with private insurance. This in turn aggravates the gap between Medicaid and private care--already a major gap. For example, a study about to be published shows that three-quarters of GMHC's male long-term survivors are those with private insurance; the cost situation is one reason why this happens.

No DRG system will work unless it is price control for everyone. The government with DRGs has ironically shifted costs precisely to those people least able to impact them. The further irony is that this creates more need for Medicaid which aggravates the cost shift even more.

-Case management

Increasingly sophisticated techniques have developed for chronic, complex or terminal conditions. They generally are called case management and are used primarily by large employers where there are sufficient numbers of cases to justify the special costs.

Case managers can cut through many of the complications and limitations of the medical system, especially with new conditions such as AIDS. Properly managed, they can can inreinstitute common sense in medical care, such as arranging for payment of new procedures, integration of public and private care and bending a benefit plan's provisions to meet genuine medical need. The existence of good case management services, plus good benefits, often justifies a search for a job with a large corporation for someone who has a chronic condition.

However, they are subject to the same abuses as any other new entrepreneurial service. This is true since their true client is the corporation and/or its insurer, not the patient. This is especially true since much of their decision making is behind the scenes, not part of the medical record and without any current regulation in force.

Case managers' power stems from the insurer's discretion in its obligation to pay. Insurers for years have used and abused this power; case management is primarily an extension of this power, arming and in the best of cases tempering it with increased knowledge as to how a chronic, complex or terminal condition ought to be managed. It is better to have a "super-nurse" try to manage the financial aspects of care rather than an underpaid insurance clerk.

-Home, long term and hospice care

The holy grail of cost containment has been home care and its related programs. Compared to typical hospital "hotel" charges, this kind of care theoretically makes a great deal of sense--to the patient as well as the payor. However home care has served as a case in point to highlight the entrenced positions of players in the existing system and why conceptual cost containment often doesn't work out that way in practice.

The one thing going for the existing system is predictability. In the world of insurance that counts for a lot. As a result, both hospitals and insurers have been reluctant at best to back home care; at worst they see it as diminishing their revenues.

Into the breach have rushed a host of entrepreneurial solutions. Profit margins are much higher in these new firms than in the established industry because the area is new, unregulated and left alone by the big players. This has tended to diminish the cost savings.

Long term care has grown both because of the changing nature of disease to more lingering, chronic conditions and because of the pressure to no longer use hospital beds for this type of care. Since the costs of acute care tend to fall in a crisis episode, they can be more easily estimated. The opposite is true for long term care. The problem is complicated by lack of regulation, a spurt of entrepreneurial ventures (and failures) and a lack of standards and definitions as to what exactly constitutes this level of care.

Hospice care has the potential for all of these problems. However since much hospice care is provided in the nonprofit sector and since it remains a very small sector of cost, there is rarely any cost containment focus on hospice care.

All three modes of care offer high benefits for patients. However the potential for gaps in coverage, high deductibles and copayments, overcharging and poor quality care remain severe problems that compromise the dream.

-Patient power

The prime cost containment tool is to return decision making to the patient. Historically, the physician held this power until the rise of the hospital as the central delivery point for care. Since the proliferation of the hospital administration professions, two major problems have developed: there is no longer a central point of responsibility in the system and the patient concerns have been nearly lost.

The first step towards patient empowerment is patient education. AIDS has accelerated this trend to the point where patients are setting the agenda for their care, indicating how experimental and extensive they want their care to be. Patients are questioning and weighing the tradeoffs for invasive or risky procedures. Patients are shopping their medical providers, from doctors to specialists to hospitals.

Ultimately, the patient must become the primary determinant in the health care system. Only then will things be set in balance and perspective. This will only occur when patients have a single voice and when the groups that represent them band together to make patients again a player in the system.

-Medical necessity and approach, starting with second opinions

Second opinions were among the first techniques introduced. Research clearly indicates that the use of medical procedures is often a function of what medical personnel are available--not actual medical need. Further research questions the need for a variety of "traditional" surgical procedures ranging from tonsillectomies, circumcisions, hysterectomies, etc.

Questioning the medical necessity for procedures and drugs is probably the second most important technique for cost containment, after patient power. Much of the existing medical machine stems from procedures and institutions that were set in place to deal with infectious diseases--starting with the hospital. Most current medical training also stems from the same preoccupation with germ theory medicine--the basis of the victory of the AMA in the early 1900's over other, competing schools of medicine.

The irony is that by allowing a much greater variety of approaches to medical problems, we may open up fundamentally new ways to health that also incur much less expense. Part of our current problem may stem from the entrenchment of the 1910-spawned medical apparatus that seems increasingly concerned with its own professionalization and less concerned for its patients and their health.

No one will ever deny that the drugs and the interventions are part and parcel of the medical process. Yet as long as little focus is put on how these increasingly complicated chronic and terminal conditions develop and spread, especially what part lifestyle factors play in that process, we will condemn ourselves as in 1910 to always being in the repair and recuperation business, to always be attending the physicians instead of them attending us. As long as we deny the power of patients and the community as one of the most important participants in this process, we will deny them and ourselves the ultimate resource that could bring about affordable care in this country.