• How to ration? (Continued)

    David Leonhardt’s piece today on a plan to reduce Medicare costs without harming health is worth a full read. We know that federal spending on Medicare and other health programs is unsustainable so we have to do something. And “something” means paying less or providing less. (Just saying “no” to every proposal is not going to lead us to a good place.) So we have to be smart about this.

    Here’s the idea, as described by Leonhardt,

    In the new issue of the journal Health Affairs, two doctors, both former Medicare officials, have laid out a plan to […] give expensive new treatments three years to prove that they worked better than cheaper treatments, or their reimbursement rates would be cut to that of the cheaper treatments. […]

    The treatment of prostate cancer offers a good example of the trouble with the current system. I devoted a column to prostate cancer last year, and the Health Affairs article — by Steven Pearson of Massachusetts General Hospital and Peter B. Bach of Memorial Sloan-Kettering Cancer Center — uses it as a case study, too.

    The brief version is that the options for treating prostate cancer include three forms of radiation. One of them, three-dimensional radiation, costs Medicare about $10,000. Another treatment, a targeted form of radiation known as I.M.R.T., came along a decade ago and initially cost about $42,000. Lately, Medicare has also started covering a third, proton radiation therapy, for which it pays $50,000.

    No solid research has shown I.M.R.T. to be more effective at keeping people alive, with minimum side effects, than three-dimensional radiation. The backing for proton therapy is weaker yet. As Dr. Pearson says, “There is even less evidence on whether proton therapy is as good as other alternatives than there was for I.M.R.T. when it was the new kid on the block.”

    But Medicare today doesn’t pay for good outcomes. It pays for any treatment that it deems reasonable and effective.

    The idea is a good one. I particularly like the use of prostate cancer treatment as an example (something I’ve studied; no publications though).

    What could be wrong about not paying more for care that doesn’t prove to be better? One objection could be based on (valid) heterogeneity in the population. One treatment may be better–even far better–and cheaper, on average, but the more expensive one could really be best for a small subpopulation for some reason. Could those individuals get the more expensive care? I think they should be able to. One way they could is if they have to pay for the difference (or some of it) out of pocket or pay for supplemental insurance that does so.

    That might strike some as unfair. It is! But I don’t see a good way around the problem. If the system permits exceptions and pays for the more expensive procedure because a doctor orders it and says it is really necessary then we’re back where we started. Doctors are going to want the higher reimbursement associated with the more expensive procedure.

    See how difficult this is? Rationing is hard! Yet it is necessary, based on something. If you want that something to be related to cost and effectiveness then we have to measure effectiveness, publish the information, set insurance (public or private) payments based on it, and people have to pay the marginal cost of alternative treatment options. If you want to ration in another way, then what is it, how would it work, and how can you get our political system and medical culture to support it?

    • It really is a great column, and I agree.

      For some additional reading, Zeke Emanuel wrote a nice piece in Archives of IM in ’07 that is worth a read. What is essential in a basic medical package, ie, what distributive justice dictates all should receive. Naturally, all other services would be “rationed” with OOP costs:

      Although a detailed reform proposal is beyond the scope of this article, a sustainable and just tiered health care system should meet five criteria:

      1. The core benefits package should cover an adequate level of health care.

      2. The core benefits package should be guaranteed to all Americans, without means testing.

      3. The core benefits package should be designed to attract a sizable majority of the population to use it without supplementation to the higher tiers.

      4. Payment for higher-tiered services and coverage should be made with after-tax dollars and should not provide exemption from tax obligations to financially support the core benefits package.

      5. Easy adjustment of the core benefits package should be possible in response to changes in technology, data about efficacy, and demand for higher-tiered services.

      There is contrarian view by another author in the same edition.

    • “. If the system permits exceptions and pays for the more expensive procedure because a doctor orders it and says it is really necessary then we’re back where we started. Doctors are going to want the higher reimbursement associated with the more expensive procedure.”

      I think this is where ACOs might work. If you calculate the size of the population that would benefit from the more expensive surgery, you could budget accordingly. Let the physicians within the appropriate specialty divide up the cases accordingly.


    • This idea is similar to reference pricing in drugs – pricing the new drug at the same level as existing proven treatments unless the company provides evidence of superior benefit. They sweeten the pot by giving 3 years for evidence development before lowering the reference price hammer.

    • I agree that the problem of subpopulations is a very real one, but I don’t think it is fair or necessary that people who have the misfortune of being in such a group should have to pay the additional costs. It doesn’t mean you give in to “My doctor said so” as the only deciding factor. If the subpopulation is real, it can be studied scientifically, and objective criteria for membership in the subpopulation can be discerned. “I have a particular genetic variation” or “I have a strong family history, and it has been shown that history is is relevant, ” etc. The catch is that doing the science to tease all of this out can be quite expensive. So maybe this approach has to be limited to situations where disease prevalence and costs add up to substantial cost savings overall.