The ACP Advocate Blog

by Bob Doherty

Wednesday, October 6, 2010

Should Medicare pay less for less effective care?

From its inception, Medicare has been agnostic about the effectiveness of different treatments when it sets payment rates. Once a treatment is found to be "reasonable and necessary," Medicare establishes a payment rate that takes into account complexity and other "inputs" that go into delivering the service. But it is prohibited by law from varying payments based on how well an intervention works.

This would change under a "dynamic pricing" approach proposed by two experts in this month's issue of Health Affairs. The article itself is available only to Health Affairs subscribers, but the Wall Street Journal health blog has a good summary. The researchers propose that Medicare pay more for therapies with "superior" results and the same for two therapies with comparable effectiveness. A new service without any evidence on its relative effectiveness would be reimbursed in the usual way for the first three years, during which research would be conducted on its comparative effectiveness. If such research found that the service was less effective than other interventions, Medicare would have the authority to reduce payments; if it was found to be more effective, Medicare could pay more than for other available interventions. The WSJ blog gives an example of how this would work:

"They [the authors] use intensity-modulated radiation therapy, which was rolled out in the early 2000s, as an example. Medicare's reimbursement for the treatment was set at about $42,000 for prostate cancer treatment, compared to $10,000 for an older form of radiation - though there were no gold-standard studies comparing the risks and benefits of the two procedures. Hospitals bought the spiffy new equipment ... and Medicare spent an estimated $1.5 billion more on prostate cancer treatment, the authors write. If that reimbursement rate had been guaranteed only for three years before being revisited, there'd have been an 'incentive for manufacturers and clinicians to perform the research needed to evaluate the clinical performance of the new therapy in comparison to the standard three-dimensional treatment,' the authors write."

Arguably, such dynamic pricing could save Medicare (and taxpayers) many billions of dollars and improve outcomes by encouraging more research on effectiveness and rewarding physicians and hospitals for providing more effective treatments. Such a radical departure from Medicare agnosticism on clinical effectiveness, though, would almost certainly be opposed by manufacturers and providers with a vested interest in sustaining higher payments. Consumers and patients might worry that Medicare would use pricing to reduce their access to potentially beneficial services s just to save money. Physicians might chafe that the government is cutting their reimbursement based on population-based research that might not take into account the unique circumstances of their own patients. Politicians likely would scream that the government would be allowed to use its new pricing authority to "ration" care. (The accusation that Comparative Effectiveness Research could lead to "rationing" resulted in Congress writing language in the Affordable Care Act to expressly prohibit Medicare denials based "solely" on such research.)

On the other hand, at a time when rising health care spending threatens to break the (federal) bank, can the country afford Medicare's agnosticism in what it pays for services of differing effectiveness?

Today's question: Do you think Medicare should pay less for less effective treatments and more for more effective ones?

10 Comments :

Blogger PCP said...

I see this being a one way street. No way do we ever get paid more for better than expected outcomes.
When have we last seen a carrot. It has always been stick or "the lure" of the absence of stick.

It seems the issue here is that Bob and Co. trust Gov't to be an honest broker. They do not understand that for the better part of 4 decades, the practice of medicine has been under attack.

I suspect they are about to get a rude awakening at the end of the year when discussion over whether to cut medicare physician payments 23% is discussed. Of course I do not expect these visionaries to admit their advocacy strategy was faulty. I have concluded this is more ideological to them than about advocating for their membership.

October 6, 2010 at 4:18 PM  
Blogger Jay Larson MD said...

It usually takes decades to show if one treatment is "more" effective than another, and that is for population based research, not individual analysis. By the time one treatment has been shown to be more effective than another, 10 more newer treatments have been developed. This is like driving a car looking out the back window.

In the example given, there were patients that would do better with intensity-modulated radiation therapy and others that would do better with the older type of radiation. Besides what is considered "better" in the example? longer disease free survival? Lower radiation side effects? Who defines "better"?

Dynamic pricing could save Medicare some money in the short term, but my guess is that down the road the costs would be higher because the right treatment for that one patient may not be the "preferred" treatment. This has the smell of a "Medical treatment" formulary.

Rather than Medicare spending more and more on the latest gadgit and gizmo, it should invest in the physicians that use their brain to choose the right treatment for the patient. That is how the cost curve is bent down and outcomes improve.

October 6, 2010 at 6:37 PM  
Blogger Harrison said...

No
Medicare should not try this.
Evidence based medicine is still too immature to support such decisions.

Time and education efforts will improve the reliability of EBM and the appropriate use of EBM with patients.

Heavy handed use of EBM will make it even more unpopular.

If physicians consider the evidence supporting tests and therapies with their patients they will increasingly choose effective tests and therapies.

Harrison

October 6, 2010 at 6:50 PM  
Blogger Arvind said...

More of the same bogus argument. The best argument for such a method is for diseases whose outcomes depend 100% on the physician's intervention, such as radiation for cancer. Unfortunately, most of the common diseases such as diabetes, hypertension, hyperlipidemia, obesity, etc. are far more dependent on patient behavior than physician intervention. So, if I have a diabetic that is fully motivated and works diligently with me to lower his A1c fro 8.5 to 6 % with diet & exercise alone and another diabetic that just ignores my advice and gets from 8 to 9 % in spite of "approved" medication regimen, which one will I get credit for and what will be my fault?

Do you think you and your friends at Comparative Effectiveness (Ivory) tower can answer this question?

Let each patient decide what is effective for him/her, and be held responsible for his/her actions for a change.

October 6, 2010 at 9:04 PM  
Blogger w said...

Another example of the ongoing fallacy of central planners that "if only we are a bit smarter with our central planning it will work better." The problems of incomplete knowledge and of unintended consequences are never addressed directly.

October 7, 2010 at 8:11 AM  
Blogger Steve Lucas said...

Taking my life into my hands I see the other side of this argument. Let me start by stating all of the doctors make very good and very reasonable points. We do need to make it clear what we are measuring, and who is setting the EBM standards of care.

Now for the opposing view: As a patient I have watched medications and treatments come and go. The problem is; I have no way of determining what treatments are the most effective and how to best maximize my medical dollar.

Here is an example that I understand. Recently Medicare cut reimbursements for in office infusion v. oral cancer treatments. The finding was that oral medications worked as well and the office charges were excessive.

I am not a cancer patient, but do understand it is easier to take a pill than sit while hooked up to an IV.

While I see the pitfalls in this system, as a business person I am more than aware that all of the pharmaceuticals being marketed today are backed by drug company’s research, not independent findings. Key opinion leaders are used to promote drugs at “educational” seminars and meetings and off label use is rampant. The results have been large financial gains for the drug companies and questionable outcomes for patients.

The almost weekly drum beat of FDA fines and findings may be at least slowed by older proven therapies being reimbursed at the same level as new and improved therapies. Medicine needs to constantly move forward, even slowing down will result in lost opportunities.

The issue really becomes can we afford to pay ever increasing prices for the new and improved. Is one XR pill better than two pills a day? Is back surgery the gold standard for lower back pain, or is time and proper care a first option?

All of you want only what is best for your patients. Sadly, not everyone in medicine shares that view. Your view is specific to your practice and patient panel. Many look at their patients as numbers in a financial game and being able to “maximize” (word used by one doctor I visited) their income is their only goal.

Thank you for caring.

Steve Lucas

October 7, 2010 at 1:49 PM  
Blogger Arvind said...

I agree with Steve, except that the solution is not central planning and CER. Medicine is an art and a lot of times benefit is in the eye of the beholder/patient. I had a patient of mine insist that by correcting his profound vitamin D deficiency (which discovered through my practice of screening people whom I have a suspicion) I cured his chronic depression, so he could reduce his anti-depressant medication. There is no EDM data to support this theory, but the patient got the benefit. More recent studies do confirm a role of vitamin D deficiency in depression. So in the CER/EBM world of centrally planned health care, I would be an outlier even though my patient benefited.

So the answer is to to remove price-fixing and allow people to purchase the value-based care they feel they should get, not what the govt ordered.

October 8, 2010 at 10:30 AM  
Blogger Steve Lucas said...

Arvind makes the important point that it all comes down to the doctor/patient relationship. Insurance is there to financially support a reasonable course of action. Pharma should not even a part of the discussion, other than as a provider of product.

My best medical care, fortunately limited, has always been when there was a clear relationship between myself and the doctor. No outside interference.

Much of what we are discussing here is due to commercial, profit motivated, outside interference.

Doctors need to make a living, patients need reasonable cost. The problem is all of those who have inserted themselves between us. Doctors incomes are falling and patient premiums are rising at an unsustainable rate.

Much of what we see is an effort to control cost through modifying patients and doctors behaviors. The results will be, I am sure, only more rules and regulations.

Steve Lucas

October 8, 2010 at 2:34 PM  
Blogger PCP said...

Steve, I think you and most plain thinking doctors can agree on those points you have raised.
Sadly this all started with Medicare and the Health insurance Oligopoly.
All the other 3rd party providers of good and services was where the cost containment efforts should have been directed. Instead the ACA hurts the Doctor and the patient most in the ways you describe.
I am faced with a situation where Medicare(as an internist my largest payer)an effective monopoly pays and internist about 60 dollars for an approximately 15 minute office consultation. Considering the approximate 60% overhead of most practices(again mostly out of my control due to Gov't rules and regulations, litigation climate, inflation etc)
My effective pay for that service is about $24. With the projected cuts of 30% over the next few months, the mere "threat of that going to $6" is unsettling to me.
That is where they have us as a profession.

The interlopers are laughing all the way to the bank, they know that their goods and services are a lot more scalable than my time and services. Their margins are far heftier and they have just found 30 million newly tax subsidized customers.
On the other end, we will all be paying for it in higher taxes in due course.

Doctors and patients need each other, the interlopers need to be reigned in, but sadly in our system of crony capitalism what we get is the ACA.

October 12, 2010 at 5:51 PM  
Blogger Dharmesh said...

What we say on this blog, does any thing will ever make a difference. I am just curious to know -- what we need to cut the cost down is get rid of the malpractice. everyone in this country goes to the medical school to help someone - goes thru 12-15 years of schooling not to go in hurt someone or take anyone's life. mistakes do happen, if you don't trust medicine - do not go to hospital, don't go to a physician, go to some voodoo land. Do whatever you please...but at the end Don't just blame your doctor.. everyone in field of medicine goes with hope to have rewarding feeling after making a difference in someone life, by hoping to do well for someone. yet ever since I have graduated and seen others practice, every action is to save their behind....I do not blame physician - it is the patient that makes health care so hard to afford.

October 26, 2010 at 11:42 PM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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