Modernizing Medicare

The Sunday Review in the NT Times this week contained an outstanding critique of Medicare.  According to the critique by Jane Gross, the problem with Medicare is that its bloated spending is designed to benefit Big Pharma and pay-for-service doctors while doing essentially nothing to help individuals deal with end-of-life nursing needs.  As Gross succinctly states about the universal medical coverage afforded by the 1965 Medicare law – “What Medicare paid for then is no longer what recipients need or want today.”

Medicare provides essentially unlimited coverage for any drug or treatment that Big Pharma or doctors can invent or create.  In fact, much of Medicare’s supporting legislation specifically prohibits the agency from considering cost or cost-effectiveness in approving coverage for various drugs or treatments.  Is it any wonder that America’s healthcare industry is thriving and that its share of America’s GDP and will soon reach 20%?

By contrast, Medicare provides almost no coverage for nursing care for frail or demented old people, and this absence of coverage is what prompted Gross to become an expert on this issue.  According to Gross, her mother, who was incapacitated by a stroke, received neurosurgery of questionable benefits under Medicare, but had to pay for her own nursing care for a decade until she had depleted her $500,000 estate, at which time she became eligible for welfare-type nursing coverage under Medicaid.  Her mother shamefully called herself “a welfare queen.”

Obviously, her mother should have used some of her estate to buy nursing-home coverage, but only a small percentage of Americans do.  Most rely on the likelihood that they will die without lingering, but sadly that does not happen to millions of Americans:

• “By now, you may be wondering if your parents have a half million dollars for old age. Or if you or your children do. You may be counting on quick and easy deaths. Shoot me, so many people say. Alas, 70 percent of the elderly will need extended care before they die. Denial is powerful but doesn’t pay the bills.”

So there are two components to this issue.  Assuming that we can’t change the amount of Medicare dollars available for the elderly, the optimal reform of Medicare should consist of equal amounts of (a) cuts to inefficient drugs and treatments, and (b) increases to efficient, desirable services.

Refusing to pay for inefficient drugs and treatments, however, is a concept that opponents can easily demagogue.  Please recall Sarah Palin and the Republican Party wailing about Death Panels, i.e., anyone who refuses to pay for any drug or treatment that the patient and the doctor want.  The reasoned response should be that the government will never come between a patient and the doctor, but don’t expect the government to give them an unlimited charge card to do whatever they want.  That is economically crazy.

Demagogues will be difficult to defeat because people are fearful and the demagogues will leverage those fears.  For example, I have a friend who is getting ready to go on Medicare, and his ortho has recommended to him that if he wants to have his knew replaced, he should have it done now with private insurance because coverage for it under Medicare might be taken away at any time.  I thought this was an Urban Legend, but the Times critique actually listed joint replacement as the type of treatment that shouldn’t be covered by Medicare in certain situations – e.g., if the patient has dementia that will prevent him/her from receiving physical therapy.

Gross lists the following as examples of treatment that in the past year has been determined to be ineffective, but which remain fully covered by Medicare:

• Feeding tubes, which can cause infections, nausea and vomiting, rarely prolong life. People with dementia often react with agitation, including pulling out the tubes, and then are either sedated or restrained.
• Abdominal and gall bladder surgery and joint replacements, for those who rank poorly on a scale that measures frailty, lead to complications, repeat hospital stays and placement in nursing homes.
• Tight glycemic control for Type 2 diabetes, present in 1 of 4 people over 65, often requires 8 to 10 years before it helps prevent blindness, kidney disease or amputations. Without enough time to reap the benefits, the elderly endure needless dietary limits and needle sticks.

Reformers should explain that, for every dollar saved by eliminating ineffective drugs and services, the saved money will be redirected toward improved coverage for nursing care.  This will force the demagogues to argue not only that the drug or treatment is effective, but that it is more beneficial than improved coverage for nursing care.

Two important aspects of this issue that were not addressed in the critique:

• The critique acknowledges that individuals, either reasonably or unreasonably, decline to buy coverage for nursing care when they are younger and the coverage would be affordable.  But there is no discussion of possible tax reforms that might encourage more individuals to buy such coverage at that earlier time.
• Paul Ryan’s plan to reform Medicare relies heavily on the federal government issuing payment vouchers that would enable private insurers to develop flexible coverage options.  Thus, we can hope that private insurers will take advantage of this flexibility to create affordable policies that provide enhanced coverage for nursing-home care and restricted coverage for state-of-the-art, cutting-edge drugs and treatment.  If Jane Gross is correct (and I think she is), many Medicare beneficiaries will choose a policy with reduced coverage for neurosurgery and joint replacements and enhanced coverage for nursing care.

Exploding medical costs because of unlimited coverage

Do you wonder why health-insurance premiums are going up so fast?  President Obama likes to blame the insurance industry.  Two recent newspaper articles, however, suggest that there are other systemic intractable causes:

1. An article in the NY Times today reports that there are three promising new drugs that can help a man with late-stage prostate cancer live an additional six
   months – i.e., his life expectancy can be increased from 18 months to 24 months.  The problem is that the drug therapy could cost as much as $500,000 over the course of treatment.  Of the potential patients, 80% are on Medicare, and although Medicare is running out of money, the article reports that the expensive treatment will probably be covered.
2. An article in the NY Daily News last week reported that New York had become the 26^th state to require “that health insurance cover the screening, diagnosis, and
   treatment of autism spectrum disorders.  Such coverage would include toddler screenings, speech, physical and occupational therapy – and behavioral treatment.”

Sarah Palin warned about Death Panels and Republicans rail against rationing, but there is no way to get medical costs under control unless we start limiting coverage.  America can’t afford unlimited coverage.

 

Room for Debate – What Medicare services to cut immediately?

The New York Times has a weekly column titled, “Room for Debate,” in which ten subject-matter experts debate an issue by providing a succinct explanation of their position.  This week’s column asks the experts to identify those Medicare services that should be cut immediately.

Politicians would never answer a question like this because they know that specific answers get them in trouble.  Instead, they insist on talking in
generalities.  Among their favorite stock answers is to “eliminate waste and fraud.”

Of course, some would argue that Medicare doesn’t need to cut services if other efficiencies can be obtained.  In fact, some conservatives would demagogue this issue by saying that cutting services is rationing and puts us on a slippery slope to death panels.

I agree that Medicare reform will need to focus on finding efficiencies, but there is much benefit to be gained by cutting some
services, and this column is an excellent starting point for the discussion.  It suggests cutting the following:

1. Aggressive therapies.  Stop paying for CPR, dialysis and other aggressive therapies when patients have no chance for cure or recovering
   function.
2. PSA tests.  Medicare should stop paying for prostate cancer screening in men over the age of 75.
3. Three ideas from one expert – (1) Aricept, the Exelon Patch and other drugs for Alzheimer’s disease that doctors agree have limited, if any, utility for the patient and are essentially placebos for family members; (2) Joint replacements for people with advanced Alzheimer’s disease who are too cognitively impaired to participate in physical therapy and thus will never walk again after the surgery; and (3) Mammograms, pap smears, colonoscopies and other cancer screenings when —– and only when —- nobody has even bothered to ask the
   patient whether they would treat cancer if it were found. Some would, thus lengthening their lives. Others, depending on age, philosophy and what else ails them, would decline.
4. Dual eligibles.  These are the nearly nine million people, representing one in five Medicare beneficiaries, who are eligible for services
   through both Medicare and Medicaid.  They are stuck in a crevice between Medicare and Medicaid where no one is overseeing their total care, leading to gaps, duplication and poor outcomes.  Providing them with truly integrated care could significantly improve their lives and also help reduce health costs by providing timely, appropriate managed treatment.
5. “Medically necessary” care.  Medicare’s payment standard is not patient-centered. One guiding principle is: “Is this service or procedure “medically necessary”? Medically necessary is a murky and malleable term, and too often patients, those most directly affected, do not get to choose what medically necessary means.  Saying “no” to nonbeneficial care is only part of the answer. Medicare beneficiaries and their families have the right to honest, objective, compassionate information to help them make difficult choices, especially at the end of life.
6. Outsourcing the evaluation of treatments to Britain.  Because Americans are cost-control wimps, Medicare should stop paying for treatments that the British Medical Journal says probably don’t work.  Today, United States agencies that try to not pay for ineffective treatments face the wrath of Congress, egged on by the surgeons and drug companies whose revenue is threatened. So far, U.S. agencies have pretty much always backed down, and just paid for everything.  The British control costs in part by having the will to empower a hard-nosed agency, the National Institute for Health and Clinical Excellence, to study treatments and declare some ineffective. Some hope the United States will create a similar agency, but I fear it would be hopelessly politicized and declawed.
7. Rely on hospices instead of I.C.U.  Medicare should stop paying for futile end-of-life care provided in intensive care units (I.C.U.s). In other words, hospital care for the terminally ill that has no curative potential and is solely life-prolonging should not be covered.
8. Comparative Effectiveness Research.  There is no requirement that a new therapy be proven better than its predecessor.  Comparative Effectiveness Research was funded in the recovery bill of 2009. As projects are funded and evidence accumulates, consideration should be given to whether equally or less effective treatments should be covered by Medicare when there is a significant
   disparity in cost.
9. Reducing overhead.  Eliminating unneeded overhead, like Medicare Advantage, would save Medicare nearly $100 billion annually.  [This expert’s response sounded suspiciously like “waste and fraud.”  If I were grading these responses, I would sent it back and ask him to focus on medical services that could be cut.]
10. Oncologists.  Many cancer patients spend their last days undergoing treatments that both oncologists and hospitals know will give them a
    few extra weeks, at best a couple of months.  Too many hospitals let oncologists decide whether a palliative care team can see someone he views as “my patient.” Why?  Hospitals are afraid of their “rainmakers” (physicians who bring in well-insured patients). So the oncologist is allowed to block the consult, while ordering more chemo. Over half the profits in oncology flow from drug sales.

Comparative-effectiveness research and healthcare rationing

A few days ago I blogged about the Independent Payment Advisory Board (IPAB), which was created by ObamaCare to reduce the rate of growth in the cost of Medicare.  Although IPAP is intended to recommend changes to Medicare reimbursement rates and is specifically prohibited from making any recommendation to ration health care, Republicans and some Democrats are actively attempting to terminate the Board because they believe that draconian cuts to reimbursement rates would be equivalent to rationing. 

Rationing is currently a dirty word in Washington.  Any program that arguably leads to healthcare rationing is at risk.  Although Republicans are loathe to admit it, RyanCare is a variation of rationing because its Medicare vouchers will not be adequate to buy today’s full-coverage Medicare.  We can fully expect partisan Democrats to demagogue this issue as much as Republicans do.  Let’s hope this bipartisan demagoguery fails to damage the invaluable comparative-effectiveness research (CER) contained in ObamaCare.

CER has been defined as the generation and synthesis of evidence that compares the benefits and harms of alternative methods to prevent, diagnose, or treat a clinical condition or to improve the delivery of care. CER attempts to measure the relative effectiveness of treatment, whereas standard research focuses on efficacy (whether the treatment works or not). 

An expert in the field of CER who has studied geographic variation in healthcare that patients in the U.S. receive – a phenomenon called practice-pattern variation – has concluded that if unwarranted variation were eliminated, the quality of care would increase and healthcare savings up to 30% would be possible.

Another study has revealed that patients in the highest-spending regions of the country receive 60 percent more health services than those in the lowest-spending regions, yet this additional care is not associated with improved outcomes.

Council for Comparative-Effectiveness Research

President Obama is a big supporter of CER, and he took advantage of the American Recovery and Reinvestment Act of 2009 (the Stimulus Act) to set aside $1.1 billion for CER and to create a Council for CER to coordinate the research across the federal government.  In the development of the law, there was disagreement over whether CER could be used to limit (rationing?) healthcare options, and ultimately, the law provided that CER should only be used to increase the quality of treatment, not to limit options.  That doesn’t make any sense – why should government pay for treatment that is relatively ineffective? 

Because of the explicit prohibition on rationing and the fast-moving nature of the Stimulus Act, the $1.1 billion for CER stayed under the radar.  That changed, however, when President Obama made further changes to CER under the Patient Protection and Affordable Care Act of 2010 (so-called ObamaCare).  When Sarah Palin and her cohorts demagogued ObamaCare for rationing and death panels, they never identified the provisions in the law that prompted this concern.  Subsequent commentators, however, have focused on the Patient-Centered Outcomes Research Institute (PCORI), which replaced the Council for Comparative Effectiveness Research.

Patient-Centered Outcomes Research Institute (PCORI)

Section 6301 of ObamaCare provides, “The Secretary may [.....] use evidence and findings from research conducted [.....] by the Patient-Centered Outcomes Research Institute.”  According to Republican senator Kyl, “That means the government, not patients and doctors, has the power to make health care decisions that affect you. A bureaucrat decides if your health care is an effective use of government resources.”

ObamaCare also says the following about comparative-effectiveness research:

• Defines comparative clinical effectiveness research as “research evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of 2 or more medical treatments, services, and items.”
• Establishes that the purpose of the Institute is “to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence concerning the manner in which diseases, disorders, and other health conditions can effectively and appropriately be prevented, diagnosed, treated, monitored, and managed through research and evidence synthesis that considers variations in patient subpopulations, and the dissemination of research findings with respect to the relative health outcomes, clinical effectiveness, and appropriateness of the medical treatments, services, and items.”
• Provides that the Institute “shall identify national priorities for research, taking into account factors of disease incidence, prevalence, and burden in the United States (with emphasis on chronic conditions), gaps in evidence in terms of clinical outcomes, practice variations and health disparities in terms of delivery and outcomes of care, the potential for new evidence to improve patient health, well-being, and the quality of care, the effect on national expenditures associated with a health care treatment, strategy, or health conditions, as well as patient needs, outcomes, and preferences, the relevance to patients and clinicians in making informed health decisions, and priorities in the National Strategy for quality care established under section 399H of the Public Health Service Act that are consistent with this section.”
• Instructs that the Office of Communication and Knowledge Transfer, “in consultation with the National Institutes of Health, shall broadly disseminate the research findings that are published by the Patient Centered Outcomes Research Institute … and other government-funded research relevant to comparative clinical effectiveness research…. The Office shall provide for the dissemination of the Institute’s research findings and government-funded research relevant to comparative clinical effectiveness research to physicians, health care providers, patients, vendors of health information technology focused on clinical decision support, appropriate professional associations, and Federal and private health plans….   Shall not be construed as mandates, guidelines, or recommendations for payment, coverage, or treatment.”

Section 1182 of the Act explicitly limits the Secretary’s use of comparative-effectiveness research:

• “The Secretary may only use evidence and findings from research conducted under section 1181 to make a determination regarding coverage under title XVIII if such use is through an iterative and transparent process which includes public comment and considers the effect on subpopulations.”  (This provision was quoted above out of context by the Republican Senator Kyl.)
• “Nothing in section 1181 shall be construed as (1) superceding or modifying the coverage of items or services under title XVIII that the Secretary determines are reasonable and necessary under section 1862(l)(1); or (2) authorizing the Secretary to deny coverage of items or services under such title solely on the basis of comparative clinical effectiveness research.”
• “The Secretary shall not use evidence or findings from comparative clinical effectiveness research conducted under section 1181 in determining coverage, reimbursement, or incentive programs under title XVIII in a manner that treats extending the life of an elderly, disabled, or terminally ill individual as of lower value than extending the life of an individual who is younger, nondisabled, or not terminally ill.”
• “Paragraph (1) shall not be construed as preventing the Secretary from using evidence or findings from such comparative clinical effectiveness research in determining coverage, reimbursement, or incentive programs under title XVIII based upon a comparison of the difference in the effectiveness of alternative treatments in extending an individual’s life due to the individual’s age, disability, or terminal illness.”
• “The Secretary shall not use evidence or findings from comparative clinical effectiveness research conducted under section 1181 in determining coverage, reimbursement, or incentive programs under title XVIII in a manner that precludes, or with the intent to discourage, an individual from choosing a health care treatment based on how the individual values the tradeoff between extending the length of their life and the risk of disability.

Thus, the language appears to give the Secretary authority to rely on research from the Patient- Centered Outcomes Research Institute to assist in making coverage decisions.  But the Institute’s research focuses on the relative effectiveness of various treatment options, not on rationing coverage based on a cost-benefit analysis.  Thus, the 85-year-old guy appears able to get his knee replaced. 

Deficit hawks have complained that the Council for CER in the Stimulus Act had greater promise for slowing the growth of healthcare spending and that its replacement PCORI is currently precluded from examining the most important component of CER – i.e., cost-effectiveness.

Cost-effectiveness

Cost-effectiveness analysis considers the comparative effectiveness and costs of different treatments. The goal is to provide evidence of which treatments provide the most health benefit per dollar of expenditure. Deficit hawks argue that the expanded use of cost-effectiveness analysis is desirable and inevitable to limit growth in U.S. medical costs.  Incorporating costs into the analysis of comparative effectiveness can help focus resources on treatments and interventions that provide greater value for the money. But conducting and using formal cost-effectiveness analysis in treatment and insurance coverage decisions is highly controversial. Cost-effectiveness analysis raises the prospect of formal rationing of medical care because it costs too much.

The concept of cost-effectiveness is central in the economics of healthcare.  Although cost-effectiveness for Medicare is currently hugely controversial, it is already being applied by the Veterans Administration and, thought the states, in Medicaid.   Big-government types believe that cost assessments and judgments of benefits in relation to costs should be left to patients and physicians, but deficit hawks like me believe that a centralized government system for comparing cost-effectiveness is an essential part of CER.  American government has limited resources, and it needs to decide how much to spend on healthcare and how to most effectively spend it.

The liberal alternative for balancing the budget – supplemental sales tax and death panels

New York Times columnist Paul Krugman is one of America’s most influential liberal economists.  This past Sunday he created a firestorm on a Sunday talk show by declaring that America’s budgetary mess will require not only a national sales tax, but also death panels. 

You may recall that Sarah Palin was ridiculed by liberals and the press when she asserted that ObamaCare would lead to death panels.  Now it appears that Palin wasn’t being reactionary; she was being prescient.   

To dampen the firestorm that his comments created, Krugman promptly issued a clarification in his blog.  (See Conscience of a Liberal, November 14, 2010 posting attached below.)   In his blog, Krugman explained that America’s budgetary mess is so severe and systemic that only radical game-changers will suffice.  Obviously a national sales tax is a game-changer that many conservatives have recommended for years to replace the national income tax.  Unfortunately, Krugman is not talking about a national sales tax to replace the income tax; he wants a sales tax to supplement the income tax. 

Just as the national income tax, which was ratified in 1913 as the 16^th Amendment, enabled the federal government to expand to an unprecedented level, Krugman admittedly believes that a supplemental sales tax will enable the federal government’s share of GDP to increase a few more percentage points. 

Good luck on selling that to the American people.  There is no question that Americans are unwilling to pay for more government services, so the role of a statesman is to quit telling voters that more government services can be had without paying for them.  

Krugman’s second game-changer is the implementation of death panels.  Although his blog post attempts to ameliorate his comments by saying “not really death panels,” it then goes on to say “at some point, how much we’re willing to spend for extreme care.”  Well, that is precisely the death panels that Sarah Palin was railing against.  She correctly foresaw that (a) ObamaCare would not adequately “bend the cost curve,” but rather would drive up the total cost of medical care in America, and (b) the only way to pay for the increase costs would be to eliminate coverage for certain procedures, especially for the elderly. 

Paying for terminal care is not a new issue.  My first recollection of this issue was Colorado governor Richard Lamm suggesting in 1984 that the elderly “have a duty to die.”

• “We’ve got a duty to die and get out of the way with all of our machines and artificial hearts and everything else like that and let the other society, our kids, build a reasonable life.” 

This plain talk earned him the sobriquet “Governor Gloom.”  Since then, the relative cost of terminal care has become more problematic.

Republicans, of course, demagogued the issue during the ObamaCare debate by claiming that the government should not come between a doctor and his patient.  That is patent nonsense.  Whoever is paying the bill, government or insurance company, has a role because the doctor is not going to do anything without an assurance of being paid.  That fact was dramatically revealed today in a USA Today article on an Arizona man who forfeited a life-saving liver transplant because he could not raise the $200,000 needed for the surgery.  http://www.usatoday.com/news/nation/2010-11-17-arizona-cuts-liver-transplant_N.htm?loc=interstitialskip.

But Democrats are certainly not innocent when it comes to demagoging.  During the ObamaCare debate, Florida congressman Alan Grayson described the Republican alternative in a particularly grotesque way:

• “It’s a very simple plan. Here it is. The Republican health care plan for America: Don’t get sick. That’s right, don’t get sick. If you have insurance, don’t get sick. If you don’t have insurance, don’t get sick. If you’re sick, don’t get sick… but it’s not quite a foolproof plan so the backup plan in case you do get sick – if you get sick America, the Republican health care plan is this: die quickly. That’s right. The Republicans want you to die quickly if you get sick.”

I believe the federal government is already too big and powerful, so providing it with the wherewithal to get even bigger is a bad idea.  Because of the popularity of a national sales tax, I think it is an idea worth trying, but only if we concurrently phase out the income tax.

Regarding so-called death panels, I believe that government and private insurers cannot afford to give doctors/patients a blank check for whatever treatment they agree on.  That is a prescription for exploding costs and diminishing benefits.  Cost-benefit decisions have to be made, not by the doctors and patients, but by the people who ultimately pay for the treatment – i.e., insurance policyholders and government taxpayers.  Just don’t call them death panels. 

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The Conscience of a Liberal by Paul Krugman

November 14, 2010, 12:40 pm

Death Panels and Sales Taxes

I said something deliberately provocative on This Week, so I think I’d better clarify what I meant (which I did on the show, but it can’t hurt to say it again.)

So, what I said is that the eventual resolution of the deficit problem both will and should rely on “death panels and sales taxes”. What I meant is that

(a) health care costs will have to be controlled, which will surely require having Medicare and Medicaid decide what they’re willing to pay for — not really death panels, of course, but consideration of medical effectiveness and, at some point, how much we’re willing to spend for extreme care

(b) we’ll need more revenue — several percent of GDP — which might most plausibly come from a value-added tax

And if we do those two things, we’re most of the way toward a sustainable budget.

By the way, I’ve said this before.

Now, you may declare that this is politically impossible. But medical costs must be controlled somehow, or nothing works. And is a modest VAT really so much more implausible than ending the mortgage interest deduction?

So that’s my plan. And I believe that some day — maybe in the first Chelsea Clinton administration — it will actually happen.