Spending on Health Innovation as Investment

02/28/2017 04:35 pm ET

The February issue of the peer-reviewed Lancet journal reports on a once-unimaginable truth about 21st century longevity: as soon as 2030, the average life expectancy in OECD countries will be 85. The study further projects that South Korea will overtake Japan as “the oldest nation” on the planet, where a girl born in 2030 will have a 57 percent chance of hitting the over-90 longevity mark.

But this modern longevity also demands profound changes in the operations of society – how we work, what transportation and education look like, and, perhaps most urgently, what we do about healthcare spending and long-term care models.

In the US, as elsewhere, age-related healthcare costs are already huge – and swelling. Those over-80 account for 24 percent of Medicare beneficiaries, but 33 percent of Medicare spending. In fact, average Medicare spending per person doubles between the ages of 70 and 96. Much of this cost is driven by chronic conditions like COPD, heart disease, diabetes, and dementia, which often develop with age and account for nearly 90% of US healthcare costs.

Now that the more and more of us in the US and the rest of the industrialized world will have hundred year lives, 20th century approaches to health spending can no longer hold.

What can be done?

One of the most promising solutions to improve care, reduce costs, and create efficiencies is found in the technology innovation of Remote Patient Monitoring (RPM). RPM helps patients, physicians, and caregivers to monitor and manage ongoing care, including prevention and wellness through earlier detection and even earlier treatment modalities, especially in a patient’s home. Specific applications include tablet-based patient education, videoconferencing with healthcare providers, and devices to prompt and track diet, exercise, and medication adherence.

These tools flip traditional go-see-the-doctor-when-you’re-sick models on their head, and they enable better, more consistent care.

Multiple studies have shown that RPM reduces costs and improves health outcomes. The Veterans Health Administration – a pioneer in this area – found that RPM can cut hospitalizations by as much as 40% for some diseases, and realize annual savings of $6,500 per patient. Overall, it’s estimated that widespread adoption of RPM could save the US as much as $6 billion annually.

But there’s a problem: Medicare currently reimburses for RPM only in a few narrow cases, such as when a patient lives in what is mysteriously deemed as a remote area. This limits utilization and savings, discourages ongoing product innovation, and keeps millions of patients from improving their quality-of-life. We already use technology in nearly every aspect of our daily lives, so why are we so reluctant to embrace its healthcare applications?

Like RPM itself, changing CMS policy (the government body that determines pricing and reimbursement models for Medicare and Medicaid) to encourage RPM will require disruptive 21st century approaches. From a public policy perspective, it will be essential that the Congressional Budget Office (CBO), which advises spending through its traditional budgeting analysis also change to meet the realities of 21st century demography. In this respect, RPM, like so many other health innovations, should be understood not as a cost to be avoided, but a valued investment that could save billions. As just one example, RPM enables virtual doctor’s visits, which would reduce the stress, time demands, and productivity losses of those caring for frail older parents. Surely, this is as good a use of technology as Facebook or Twitter.

Childhood vaccinations demonstrate the foolhardiness of applying short-sighted, traditional budget analysis to health investments like RPM. For instance, 1993’s Vaccines for Children program expanded on decades of childhood immunization efforts, by bringing greater urgency and resources to providing vaccines to low-income families. From 1994 to 2013, it’s estimated that this program prevented 21 million hospitalizations and 700,000 deaths – generating net savings of $295 billion in direct costs and $1.4 trillion in societal costs. Like childhood immunization, RPM reimbursement under Medicare and Medicaid would entail up-front spending, but avoid ER trips, nursing home placement, and other costly forms of eldercare. Moreover, as with other medical innovations, America would lead our older world in finding healthcare breakthroughs.

If the CBO embraces this vision of value, then taxpayers, older patients, and the American healthcare system will be able to take full advantage of the pioneering tech-industry solutions that are beginning to emerge.

Advanced RPM platforms, which will soon enter US and global markets, can enable patients, caregivers, and providers to share customized health data, educational materials, and situational best practices through leading-edge technologies. If these are widely adopted, then hospital admissions and readmissions, as well as ER visits, will be reduced. This would also substantially improve management of chronic conditions and cut overall costs, while improving quality of life.

As The Lancet reminds us, continued gains in life expectancy are not only a cause for celebration, but an impetus for change. If we want to continue to increase longevity, with quality of life to match, then we urgently need public policy hospitable to 21st century innovations such as Remote Patient Monitoring. The CBO, legislators, and CMS should embrace these technologies, which offer a cost-effective solution to one of the greatest dilemmas facing our nation and world.

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