Congressional Pressure for Coverage of New Technology

As we debate the possible implementation of a government health plan, it’s good to take a deeper look at decision-making within the current federal health plan – Medicare.

The New England Journal this weekhas an essay about the Medicare decision not to cover CT Colonography (an alternative to colonoscopy to screen for colon cancer.) The editorialists endorse the Centers for Medicare and Medicaid approach – pointing out that there are not good efficacy studies for the geriatric population. While the CT scan might be less odious for patients than a colonoscopy, a higher incidence of polyps in the elderly will lead to a higher rate of colonoscopies after CT colonography than in a younger population.

This reminds me of a case 5 years ago that was approached quite differently, which was reported very ably by the Washington Post. Harvard Link:

In this instance, there was scant evidence of efficacy of PET scans to diagnose early Alzheimer’s Disease, and the evidence that anti-Alzheimers medications helped delay clinical disease progression was marginal. The Medicare Coverage Advisory Committee recommended against coverage and the Alzheimers Association agreed based on its literature review. But CMS and the association both soon came under a full assault by lobbyists.

"We ran into a lot of people . . . who were obstacles," [the industry lobbyist] said…[and] "Guess what? They're all gone!”

Ted Stevens (yes, that Ted Stevens, who was senior Senator from Alaska and the Chair of the Senate Commerce Committee) threatened to hold up funding for CMS – and eventually CMS relented and provided coverage for PET scans for this questionable indication. That’s not an especially evidence-based method of determining insurance coverage!

The evidence for CT Colonography is improving every few months – so it might be that CMS should eventually approve this as a screening test for colon cancer. Ang its good news for evidence-based decision-making that Stevens is no longer in the Senate.

Let’s see how much pressure Congress exerts on CMS to reverse its appropriate decision not to cover this procedure yet. The example of offering coverage for PET scan for Alzheimer’s Disease demonstrates one of the potential weaknesses of a public plan. A public plan (and private plans too) should be insulated from this type of political pressure.

A Well-Meaning But Expensive Idea In New York Goes National

Last year, Attorney General Andrew Cuomo of New York accused the major national health plans of underpaying health care providers because they were using a database from Ingenix which set “usual and customary” prices too low. In January, the health plans settled, agreeing to pay a penalty and fund a nonprofit organization that would set prices fairly and transparently. See an older post for a further explanation of this issue.

Now, Senator Jay Rockefeller has convened the Commerce Committee to investigate the issue nationally. The preliminary conclusion is that “large health insurers in every region of the country are relying on faulty databases to underpay millions of valid insurance claims.”

There’s a real conundrum here. In the US, we have a serious unit cost problem. We have fewer hospitalizations, fewer office visits, and fewer prescriptions than other OECD countries– yet our cost per unit of service is so high that we spend more than twice as much on health care as western European countries while we leave over 15% of our population uninsured.

Bashing the health plans is popular, to be sure. Further, United’s ownership of Ingenix does appear to be a conflict of interest. But the fruit of Cuomo’s labor is that effective unit prices will be even higher, and physicians who have a high amount of leverage are more likely to opt out of health plan contracts with set fee schedules and demand higher payment, driving unit costs higher still. As we struggle with how to afford health care, this is a step backward. Hopefully, the Senate Commerce Committee will not pursue a legislative remedy that will make health care even less affordable.

Will PhRMA’s $80 billion Help Fund Health Care Reform?

The Pharmaceutical Research and Manufacturers of America (PhRMA) announced $80 billion in concessions over the next 10 years to help make health reform affordable. The American Association of Retired Persons (AARP) endorsed the deal, and a substantial portion of these dollars are said to be dedicated to a discount drug program for senior citizens in the “donut hole” in Medicare Part D. Beneficiaries who have spent $2700 for medicines currently have no coverage until their costs hit $6100 when ‘catastrophic’ coverage comes into effect. The Wall Street Journal reports that some portion of the $80 billion will be used to underwrite insurance expansion, although that’s not consistent with the PhRMA press release or reporting from the Washington Post, the New York Times , or the Los Angeles Times.

$80 billion is a lot of money – although still does not approach the savings the pharmaceutical manufacturers might have to identify if the coalition of the willing (AMA, AHA, AHIP, PhRMA, AdvaMed, and SEIU) hope to find $2 trillion in savings over the next decade.

Is this a good deal for the pharmaceutical manufacturers? The Wall Street Journal reports that Wall Street analysts think so – and project that this price concession might increase drug sales by as much as $12 billion a year. How does that work?

1) The donut hole in Medicare Part D is not an accident – it’s a conscious attempt fashioned by the Bush administration to increase price sensitivity of Medicare beneficiaries. Getting rid of this donut hole could substantially decrease price sensitivity, which is good for brand name drug manufacturers.

2) Decreasing the gap between brand name and generic prices for the elderly will help decrease profit margins for generic manufacturers

3) The pharmaceutical industry has high fixed costs – so every extra sale (even at a reduced rate increases profit margin

4) It’s better for the pharmaceutical industry to keep its price discipline and offer discounts only to selected groups who would otherwise not purchase, rather than offer broader price discounts.

So – I’ll be anxiously awaiting word on how this $80 billion is allocated – and whether it lowers overall medical costs, or increases them.

Fraying of the Employer Health Care Safety Net

Health Affairs published an excellent article on-line earlier this month demonstrating that most Americans of modest income (200-400% of poverty level) are at high risk of spending more than 5 or even 10% of their income on out-of-pocket health care costs. [Abstract] [Full Text] [Harvard Link] The researchers (some from the consultancy Watson Wyatt) used national data on benefit design (Kaiser Family Foundation/ HRET) coupled with national data on health care claims (from Thomson Reuters) – and showed that well over half those at 200% of the federal poverty level with expenses in the top quartile would spend more than 10% of their income on out of pocket health care costs. The paper is important because unlike other published works, this does not rely on people’s recall of their medical expenses. Considering that even physicians don’t know what things cost, and bills can take months to arrive, using a national claims database is a better approach.

The researchers used 2006 utilization data and 2007 benefit design data – and the results showed more underinsurance than when they did a similar study in 2004. Deductibles were highly associated with an increase in underinsurance, as were high deductible health plans which did not include an employer health savings account deposit. As the authors point out in their discussion, the 2004-2007 period was marked by job growth and economic expansion – things would likely look substantially more dire if we were looking at 2008-2009 data.

The Boston Globe led today’s front page with an article describing patients who were delaying necessary medical care, and the American Medical Association’s weekly paper this week notes that physicians are seeing increased cancellations and decreased office volume.

Clearly, health care reform will only be successful to the extent that cost increases are moderated (or even reversed). Given the degree of individual financial risk in the current system, it’s not surprising to see wide public support for a government health plan. Reining in employer health care premium costs by shifting more risk to employees is likely to leave even more Americans with a feeling (and the reality) of health care insecurity.