Category Archives: Medicare

Era of Accountable Care

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For many months I’ve been talking about the array of health transformation initiatives the Department of Health and Human Services has been deploying as both demonstrations and programmatic changes.  I’ve been characterizing this strategy to create more accountability as an evolving menu, buffet, or map – sort of like those magical Harry Potter maps where the lines keep appearing on the parchment to create a recognizable image.

As part of releasing the final rules for the Medicare Shared Savings Program, HHS also put forth a document subtitled “Menu of Options for Improving Care,” which is a list of some of the landmarks in the future map of an Era of Accountable Care. This document listed “options for healthcare providers of all sizes, types, all across the country” to work together to coordinate patient care, improve quality and lower costs. Besides the Medicare Shared Savings Program for Accountable Care Organizations (ACOs), these options include:

  • Partnership for Patients ($1B over 3 years)
  • Bundled Payments for Care Improvements (4 models proposed and 4 more planned)
  • Comprehensive Primary Care Initiative (Medicare partnering with Medicaid and private payers in 5-7 local markets to support primary care improvement)
  • FQHC Advanced Primary Care Practice Demonstration (with HRSA)
  • Advanced Payment Accountable Care Organization Model (pre-funding for physician groups wanting to form ACOs for the Shared Savings Program)
  • Pioneer Accountable Care Organization Model (demonstration program for advanced ACOs)
  • Financial Models to Support State Efforts to Integrate Care for Medicare-Medicaid Enrollees

The Menu document clearly indicates a coherent strategy for doing what the Medicare Payment Advisory Commission recently recommended: “Medicare payments should strongly encourage providers to move towards [ACOs, bundled payments, capitated models, shared savings programs] and make FFS less attractive.”

HSS’ Menu document is an initial description of the map HHS is drawing for providers about these more attractive options.  In contrast, in all the debate about health reform and Medicare there has been very little discussion about the future of Fee-for-Service payments or how to make FFS more sustainable -  except for the $300B budgetary hole and pending 30% fee reduction in  Medicare’s physician payment system’s Sustainable Growth Rate formula.  However, making “FFS less attractive” is certainly one of the transformational “sticks” Medicare has been wielding based upon provisions in the Accountable Care Act* and through other Medicare initiatives such as Value Based Purchasing, not paying for Never Events, and using Competitive Bidding for certain products and services.  And the future will see more and expanded use of these types of initiatives to “make FFS less attractive.”

CMS Has Already Been Transformed

Another significant distinction between HHS’ current actions and what they have traditionally done is that HHS is not moving forward alone by modifying Medicare and Medicaid.  Instead they are actively seeking to work in alignment – if not outright partnership – with private payers.  This is clearly stated in the CPCI and the Multi-payer Advanced Primary Care Initiative, which has already started in 8 states.

I have previously written about Accountable Care, (and how it is fundamental for successful health reform), and with the unveiling of the menu from HHS I am encouraged that we are on the way to an Era of Accountable Care – because that is what people really want and society needs, i.e. Accountability for Clinical Outcomes and Accountability for Economic Results.  It is only through those two avenues of accountability that we will achieve my version of the 3-Part Aim:

  1. Saving Lives
  2. Cutting Costs
  3. Creating Jobs

Health Reform is Essential for Creating Jobs

“Creating Jobs” doesn’t usually appear in lists about the goals for health reform, but it is really a fundamental reason for fixing our fractured healthcare system: By reducing the financial bite healthcare is putting on families and companies – as well as creating security for access to health insurance for individuals – health reform will pour capital and confidence into the economy leading to the creation of jobs.  That will be an era of healthcare that we can all count on.

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* The given name for the health reform legislation is the “Patient Protection and Affordable Care Act,” and it is often referred to as the Affordable Care Act or the ACA.  However, I believe the transformational components of the ACA are its features that will create accountability for the clinical and economic outcomes our healthcare system produces, and thus I call it the Accountable Care Act.  In the context where others are referring to this law as Obamacare, or as a government take-over of the US healthcare system, or portrayed voluntary counseling as death panels, then I am very comfortable nick-naming the ACA the Accountable Care Act.

Selling Healthcare Changes – Loss Aversion & Adoption of Innovations

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Healthcare issues ranging from national health reform to stem cell research have become a major force in political rhetoric – often overwhelming substantive information. This creates challenges for individuals and organizations seeking to achieve positive changes as their communications are swamped by election-driven messaging.

Creating and implementing successful communications programs in this turbulent environment is easier when the principles of “loss aversion” and the factors affecting the adoption of innovations are used constructively.

Loss Aversion & Campaign Messages: Swinging Votes Not Actions
Campaign communications – particularly negative messages – are very effective because they use loss aversion principles to leverage people’s reluctance to embrace change.

I have repeatedly heard that people need to believe they will receive a gain that is twice as large as their potential loss before seeking to make a change.  However, that 2:1 ratio is derived from some specific social psychology experiments, while loss aversion research demonstrates that the ratio varies depending upon the magnitudes of the risks and rewards for the individual.  For example, many people would willingly wager 10 cents on a coin flip if they could win 11 cents by guessing correctly – if nothing else just for the “fun” of playing, and because losing 10 cents isn’t a big deal. However, very few people would wager $1,000,000 on the same coin flip for the chance to win $1,100,000 – even though the odds and the loss-gain ratio are the same, (and in the player’s favor), because the significance of the risk is much greater.

Kahneman 1991 Loss Aversion Figure

Source: Kahneman et. al. 1991

While these principles are not unique to healthcare, their power for influencing people’s perceptions and actions is greater for healthcare issues because of healthcare’s very personal nature and most people’s impression that they have some healthcare expertise acquired through first-hand experience. [Reader Participation: Insert your story here about a friend or relative who has "educated" or "advised" you with a personal healthcare story, or how someone - perhaps a stranger - has offered healthcare advice based upon something that happened to them, or someone they knew, or they just heard about from someone else.]

The principles of loss aversion make it very, very difficult for potential short-term and individual gains to be the foundation for effective communications campaigns about healthcare improvements for the following reasons:

  1. Loss aversion means that most people are going to want to see a potential gain that is a multiple of the potential loss – and those most affected by a proposed change will see the potential loss as much more significant, and thus require an even larger potential gain in order for them to not oppose it.  (And those most affected will also be the most active and vocal in their opposition.)
  2. For most people, healthcare changes have significant levels of perceived personal risk – whether it’s changing their health insurance benefits, choice of physicians or hospitals, how they can obtain access to new or experimental treatments, or even very specific changes such as stem cell research, abortions, end-of-life counseling, genetic or autism screening, etc.
  3. While potential losses are well understood by most people – since they know what they currently have and realize that change will be “something different” – potential gains are usually much harder to visualize and believe in. (This is why the current Administration has said that under the new health reform law people can keep their current health insurance plans if they like them.)
  4. People’s trust in government and large organizations, (e.g. corporations), has plummeted in recent years, greatly reducing people’s confidence that changes advocated by these sources will actually produce the promised gains. Specifically, in “calculating” potential losses and gains most people will greatly discount potential gains from government or corporate initiatives. For example, suppose a proposed government healthcare change is described as having a gain of 10 and a potential risk of 3. [These numbers are obviously only arbitrary representations of the magnitude of how potential changes might be valued.] This change might be seen as having a gain-risk ratio of 10:3, but a general distrust of government actions could discount the potential gain to 25%, (which is about where Congress’ approval rating is right now), resulting in a perceived gain-risk ratio of only 2.5:3 – and this assumes that people don’t inflate the potential losses because of their low opinion of government, which could make the perceived ratio 2.5:6 or 2.5:9.  Clearly this is not a situation where people would eagerly support a change in something as important as their health.

This means that even for a proposed change where the best projections indicate significant benefits to many, many people, any individual or organization who opposes the change, (for political or other reasons), has a very easy time crafting messages and images that are very effective in undermining support for the proposed change.  (For example, the combination of the following phrases has been effective in undermining support for the new health reform law: “Government Takeover,” “Death Panels,” “Unconstitutional,” and “You Lie.”)

Overcoming Loss Aversion and Negative/Counter Messaging
The solution to overcoming such undermining messages that play on people’s concerns about losing what they have (and know) – as well as their mistrust of governments and other large organizations – is to present proposed changes in ways that expand people’s confidence in and understanding of the potential gains, while also minimizing the perceived loss potential.  One way to do this effectively in a communications strategy is to address the 5 factors influencing the adoption of innovations that Rodgers first described in the 1960s:

  1. Relative Advantage
  2. Compatibility
  3. Simplicity
  4. Observability
  5. Trialability
    [These are derived from Rogers 2003 book and it's earlier editions, and described by Dealy and Thomas in their 2006 book.]

Selling Health Reform as Positive Innovation
Shifting to a “selling” campaign that incorporates these factors – while minimizing the potential affects of loss aversion – moves the communications dynamic away from the slippery losing slope of loss aversion’s context to one that is more favorable to thinking about the longer-term and more tangible benefits of the proposed changes.  For example, the broad communications campaign for the bipartisanlly supported Medicare prescription drug benefit, (Part D -  enacted in late 2003, benefits started in 2006), emphasized  how much individuals would save, rather than the long-term value and security of having  insurance – which is what Part D plans are, they are insurance, not a discounted purchasing scheme. (A USA Today article stated that an average person who enrolled in a Medicare Part D plan would save $1,100 in 2006.)

The Result: While people who did purchase Part D plans were generally happy with their plans, about 10% of Medicare beneficiaries (~4.5 million people) didn’t have prescription drug coverage in 2007 despite some plans costing less than $10 per month. The large number of people who decided to not purchase this very low cost insurance is even more striking because individuals’ premiums increase by a “penalty” of 1% per month for every month between their initial period of eligibility and their enrollment date. (This penalty is to reduce adverse selection, which occurs when people wait until they are ill before getting  insurance.) Unfortunately, the number of Medicare beneficiaries without drug coverage doesn’t appear to be declining – in 2010 it was still about 10% of beneficiaries, and this compares very poorly to the very low percentage of people who declined Medicare Part B coverage.

The significant number of Medicare beneficiaries who decided not to purchase a Part D plan could be due to their aversion to a perceived loss being stronger than the positive messages used to sell the benefits of the plans.  This imbalance results from the gains being presented as short-term financial savings, (rather than the long-term benefits of having insurance), and thus didn’t utilize the factors for improving the adoption of innovations, i.e., Part D insurance plans is comparable to other insurance they have, it is not  complicated (except for the initial large number of choices), they can observe it, the plans can be tried, and the insurance provides a significant relative long-term advantage.

Bottom Line – Sell the Value & Spirit, Not the Calculation
The bottom line is that selling the value of healthcare changes – whether it’s national reform or narrow innovations – needs to encompass broader, longer-term, and tangible values, rather than short-term calculations that may be both uncertain and not believed, while also deflecting and undermining opposing arguments, i.e. capitalize on the factors that ease the adoption of innovations while minimizing people’s inherent aversion to potential losses.

And in closing, (at least for this posting), how these principles were used in a negative way to sell a non-healthcare change might be a useful illustration:

Buying a house with an unaffordable mortgage was seen as OK before 2008 because the potential for loss was believed to be very small – since prices were rising and foreclosures were rare so there was very little to trigger an aversion. And owning a home is compatible with most people’s desires and daily lives, home ownership is observable, renting is akin to a trial of ownership, brokers and agents made it all very simple, and home ownership has potentially great financial and social advantages. However, in retrospect it’s clear that purchasing a home was vastly wrong for many people – and potentially involved outright fraudulent communications – because they had been led to believe in illusory loss-gain (a.k.a. risk-benefit) calculations.

Fixing or Fracturing Medicare?

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Reducing Medicare spending has been one of the focal points in the debt ceiling negotiations, and it was reported that the President is considering throwing the idea of raising the eligibility age for Medicare into the pot as part of a stone soup recipe that might get enough Congressional Ds and Rs to swallow the end product.

Increasing Medicare’s Eligibility Age is Bad Policy and Worse Politics
While increasing Medicare’s eligibility age to reduce spending makes simple arithmetic sense using the formula Spending = Number of People x Spending per Person, like almost everything in healthcare, what is simple is often 30 degrees wrong. And raising Medicare’s eligibility age is no exception because it has significant fiscal and political problems.

First, that simple arithmetic formula ($=#($/#)) doesn’t account for the reality that older Medicare enrollees are more expensive than younger ones, so the savings from eliminating people who are at 65 and a few years older only saves a fraction of the average per person Medicare spending.

Second, raising the age of eligibility won’t eliminate all those people under the new enrollment age since some of them will still qualify because they are disabled or have end-stage renal disease – and these enrollees are more expensive than average too.

Third, eliminating the youngest (and least expensive) enrollees from Medicare will cause the Part B premium to increase because by law it has to account for a fixed percentage of all Medicare Part B spending.

Fourth, those individuals age 65+ who would be ineligible for Medicare would have to buy private insurance – or continue to be covered by their employers’ retiree health plans or state Medicaid programs. And just as they are generally less expensive than older Medicare beneficiaries, they are also more costly to insure than the average person under the age of 65.  Which means that they (or their former employers or Medicaid – which the Federal government also partially pays for) would be paying more per/person for their insurance. AND, including these individuals in the now forming insurance exchanges would raise premiums for everyone else in the exchanges. (In a report released in March, the Kaiser Family Foundation found that raising Medicare’s eligibility to 67 in 2014 would “result in an estimated net increase of $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree health-care costs,” as well as $0.7 billion more spending by states for their Medicaid plans in 2014.)

So the final score is bad fiscal outcomes, (Medicare is saving less money than might be quickly conceived), along with a bunch of bad political outcomes: People aged 65+ without Medicare would pay the highest private sector premiums – either directly or via their former employers or Medicaid – and middle income people on Medicare would see a Part B premium increase. Of course those effects could be mitigated by subsidizing the Part B premiums and the private sector insurance (and Medicaid) costs to lessen these impacts – and the political fallout. But then what happens to those Medicare “savings?”  If that’s the “deal” that is struck, it would be a direct hit to begin fracturing the fundamental social contract that has defined Medicare since it’s founding – and subsequent whacks would likely be to incrementally increase enrollment age and otherwise cut eligibility criteria.

A Better Idea
A better solution is to actually improve Medicare – and (spoiler alert) much of what is needed to do that was contained in the ACA and the fiscal stabilization legislation.  Specifically, changing incentives for providers from volume to quality and creating support for the adoption of healthcare IT systems.  Neither of these will occur rapidly, but just as real medicine doesn’t cure people like Dr. McCoy did on Star Trek or Dr. House does on TV today, really changing a system as complex as the one that delivers the services that Medicare pays for won’t occur quickly.  The first stones on that path have been laid (e.g. ACO concepts, advanced primary care that coordinates care, similar pilots/demos, and penalties for delivering low value care, a.k.a.”value based purchasing”), and veering off that path  because it’s “hard” or not as speedy a trip as some would want, is like jumping into a turbulent river to get downstream faster without any idea where the rapids or waterfalls might be, or what carnivores (or nasty microbes) are waiting for a tasty snack.

Health Law Is Reforming System Via Market Forces

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All the controversial rhetoric about the new health reform law is missing a huge reality:  The law is driving dramatic changes in the real world.  Almost every major health delivery system is preparing to reorganize how they provide care to hundreds of millions of Americans by becoming Accountable Care Organizations (ACOs).

Health Systems are Voting With Their Wallets
The magnitude and level of financial interest in ACOs – and proof that it is not just cautious planning – were dramatically illuminated by recent actions and a Washington Post article:

  • On Thursday, HHS released the long anticipated proposed rule for ACOs and Medicare “Shared Savings.” For the rest of the day the Federal Register’s website was nearly shut down by people trying to download the 429 page document.
  • Today’s Washington Post article, “Complicated health-care law leads to payday for consultants,” includes figures about the tens of thousands of dollars consultants are charging for strategy sessions about how to think about ACOs, and the millions of dollars in fees they are getting for actually helping health systems to become ACOs. Health systems were signing consultants up for these engagements before the draft regulations were released because of their expectations of how dramatically competition among ACOs will change their financial incentives and structures. And some of the phrases in the article highlight the level of importance being placed on ACOs: “ACO frenzy,” “Oversubscribed,” “Glittering high fees” and, “I have never seen anything quite like this in my 35 years in this business.”

Bottom Line
I could write more about the proposed ACO rule, my interactions with health systems looking to become ACOs (and the organizations helping them), and how ACOs will very likely produce significantly more savings for Medicare than the Congressional Budget Office has projected, but the bottom line looks like this:

  • ACOs are happening.
  • The Medicare ACO/Shared Savings rule will shape their form, but not their creation.
  • ACOs – and their quality/efficiency incentives payments – will fundamentally transform health care in the US.
  • This transformation will be like an avalanche as health systems compete locally to demonstrate how much more Accountable they are to patients and payers, i.e. how they provide higher quality at lower costs than their competitors down the street or across the river.
  • While the official title of the new health law is the “Affordable Care Act,” it very easily – and perhaps more accurately – should have been called the “Accountable Care Act” because it is that part of the law which will actually lead to more affordable care for more people.

As always, stay tuned and keep your seat belts tightly fastened for the upcoming wild ride. Like a roller-coaster, the fun is just beginning.

Roller Coaster

Accountable Care Now

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If all arrows in Washington pointed to the same spot for solving the healthcare and Federal spending problems could the politicians, pundits and policy people agree?  Or would it take some new and powerful force to shine a spotlight and focus the collective vision on this solution, and what would that force be?

These are the two questions I’ve been asking myself as the battle over Federal spending has become near white-hot, and as it has become increasingly clearer that long-term Federal solvency and deficit reduction will require addressing the growth in healthcare spending – particularly Medicare.

Federal Outlays and Spending - Medicare - 2010 Pie Chart[Source: Kaiser Family Foundation "Medicare Spending and Financing," February 2011]

To summarize the highlights of this situation:

  • Cutting non-defense discretionary Federal spending can’t produce the reductions needed to significantly impact the deficit – contrary to the general misunderstanding about how the Federal budget is spent. (See this recent Washington Post article, and the bullet below from an associated poll.)
    • “There are widespread misperceptions about the state of the federal budget. A majority of voters incorrectly believes the federal government spends more on defense/foreign aid than it does on Medicare and Social Security (63%). Also, a similar majority (60%) incorrectly believes problems with the federal budget can be fixed by just eliminating waste, fraud and abuse. Voters do not casually agree with these untruths- at least 40% strongly agree. Further, less than half (44%) believe Medicare and Social Security costs are a major source of problems for the federal budget (49% disagree).”
  • Medicaid spending is high but counter-cyclical, so improvements in the economy and employment will reduce those costs by cutting the number of people using the program
  • Social Security is a straight numbers issue – while the Baby Boomers are increasing the program’s numbers, the per person cost growth is close to CPI
  • Medicare is not counter-cyclical, its growth is a combination of the Baby Boomer influx and the per person growth rate, which is projected to be about 7%.  The result is that since Medicare accounts for about 15% of total Federal spending, the Medicare program is the keystone to solving the Federal fiscal puzzle

Solving the Medicare Puzzle
Wouldn’t it be great if there were a way to reduce Medicare long-term spending, and one that most politicians and policy people agreed was the right solution?  Fortunately there is.  And it’s already in Federal law: It’s a concept that many Democrats and Republicans have repeatedly endorsed because it increases local control and decision-making, while shifting incentives from quantity of services to quality of care.  This new model is called Accountable Care Organizations (ACOs), and it was included in the new health reform law, (a.k.a. Patient Protection and Affordable Care Act, or “Obamacare”).  This short provision in the law adds ACOs as a fundamental change to Medicare, (i.e., not just a pilot or a demonstration), and it enables Medicare to pay ACOs in any way that both Medicare and the healthcare provider (or delivery system) agree to.  Further, it encourages Medicare to work with private payers to enhance the motivations for creating successful ACOs. [See 1899(i)(3) and 1899(j) of Title XVIII of the Social Security Act (42 U.S.C. 1395) as added by Public Laws 111-148 & 111-152.]

So why isn’t there a collective multi-partisan and multi-stakeholder rally of support for ACOs?

  • Making healthcare delivery systems and providers into effective ACOs won’t happen quickly – it will require a stepwise transition.  (However, many, many hospitals, health systems, group practices and others are gearing up for the transition – which will likely involve bundled payments and focused bonuses for achieving desired outcomes – but the roads to becoming a full ACO will be varied and lead to many different successful structures.)
  • The proposed rules for the ACO provisions of the health reform law haven’t been issued yet, so there is still significant uncertainty about how Medicare will implement their new authority.
  • Political philosophy against government programs – particularly on the national level – is now a very strong force focused on repealing “Obamacare” like college students during spring break fixated on a blinking “Free Beer” sign.
  • The ACO provisions lack the specific payment formulas or dollar amounts that fiscal forecasters desire for building models and developing multi-year estimates.  As a result, the savings projections, (a.k.a. scoring), have estimated only very modest reductions in Medicare spending since there is significant uncertainty about how ACOs will develop and evolve.

Solutions
Here’s why those savings projections are too conservative, and what can be done to swing the political tide the other way:

  • Hospitals, healthcare systems, other providers, and other organizations are already preparing to become ACOs.  That is, rapid movement towards ACOs is happening across the country, and it needs Medicare to be a positive – and maybe even aggressive – supporter.  This private sector movement is similar to the reaction health providers and payers had to the potential national health reform legislation in 1993-95 – (see chart below) – but this time the reform is actually in law, and the private sector responses are much broader and intense…. From what I am seeing, this activity is about 10 times greater in terms of resources being committed, and plans being developed and implemented.
    US National Health Expenditures 1960-2007
    [National Health Expenditure Increases: Actual and Adjusted for CPI]
  • The other “solutions” to reducing Medicare spending are the typical “cuts” in payments to hospitals and doctors, or reducing benefits to seniors…. But for either of those to significantly reduce long-term spending would require politically and socially untenable changes to Medicare. In addition, these changes would involve much greater Federal government intrusion in actual care delivery decisions than would effectively implementing the ACO provisions of the ACA.
  • For Americans to be receiving UnAccountable Care as the norm is no longer acceptable – just as driving cars without seat belts or dumping raw sewage into rivers is also not acceptable today, even though it was the norm in the past.  Just as the standards of care for medical practice change, so should the overall structure of care delivery. For example, high blood pressure in the elderly used to be accepted and not treated because the thinking was that the high pressure was a good thing and needed to push blood through hardened arteries.  That idea is no longer accepted, and not treating hypertension today would be UnAcceptable care.
  • There needs to be a public groundswell for “Accountable Care Now.” This can be true grassroots support, grass-tops advocacy from opinion leaders, and even “astro-turf” campaigns from national advocacy organizations and companies.  The end result needs to be getting public opinion and voices to be coherent and loud for change.  What matters is that the chorus for “Accountable Care Now” sound something like:

What Do We Want?

Accountable Care!

When Do We Want It?

Now!

Bottom Line
If Medicare beneficiaries, organizations paying for healthcare, (including Medicare and Medicaid programs), and everyone else – including leading healthcare professionals – start a drum-beat for “Accountable Care Now,” it will become UnAcceptable to be delivering or paying for UnAccountable Care. And elected officials across the spectrum, pundits, and policy leaders will have to – and want to – start looking under the Accountable Care spotlight and put their efforts toward making Accountable Care a reality Now – or at least ASAP.

Fundamentals of Health Reform and Transformation

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Trying to follow what’s being written about implementing health reform has been like trying to drink a waterfall. Having followed these issues for many years I’ve gleaned some fundamental aspects about many of the ideas and recommendations that simplifies how to approach this flood – including how to evaluate ideas and proposals like Patient-Centered Medical Homes (PCMH), Accountable Care Organizations (ACO), Shared Savings, Health Information Exchanges (HIE), Pay-4-Performance (P4P), etc…

Structure v. Reimbursement Systems/Arrangements
First, discussions and descriptions that don’t  affirmatively recognize the distinction between Structures and Reimbursement Systems can create significant confusion. For example, the requirements for a PCMH to be recognized by the National Commission for Quality Assurance are structural, but how they are reimbursed will strongly influence how successful such practices are for improving quality of care and controlling costs.

Similarly, at one level ACOs are structures for organizing care – albeit to assume some level of financial risk.  But their reimbursement systems and arrangements (both external and internal) will be tremendously important for their clinical and financial success. For example, the health reform law has a “Shared Saving Program” for Medicare and ACOs, but it specifically state that Medicare can reimburse ACOs under three different options:

  1. A shared savings arrangement (essentially a one-sided risk situation where the ACO can get savings but isn’t at risk if costs are higher than projected)
  2. Partial capitation (i.e., some two-sided risk)
  3. And, any other type of arrangement that the Secretary of HHS thinks makes sense.

Until the proposed recommendations for this part of the health reform law come out, (and they are expected very soon), it is mostly speculation as to what each of those three options might look like – as well as what related options might be created as demonstrations by the new Center for Medicare and Medicaid Innovation.

Process v. Outcome Measures
Another confusing aspect of discussions about reformed or transformed healthcare is a blurring between measuring processes and outcomes – both clinical and economic.  Part of this blurring occurs because  process measures are often used as proxies for outcomes. While these type of proxy measurements are common in clinical medicine, (e.g., blood cholesterol levels are a proxy for risk of heart attacks and stokes), using them for broad transformations in healthcare is more challenging because there is generally a very strong desire to see the savings (or improved clinical outcomes) before investing time or money to expand the reforms.

Conclusion: Focus on the Fundamental Big Questions
So, to simplify thinking about how to create a better healthcare system in the US, I recommend coming back to these two sets of questions:

  1. What is the structure? And what are the reimbursement systems/arrangements?
  2. What process and outcome measures will be used to evaluate the new structures and reimbursement systems?  And how do those process and outcome measure relate to each other, i.e. how do we think the process measures lead to better outcomes?

The Path Forward for National Health Reform

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The path forward for health reform is becoming clearer now that the dust from the Democrats losing their 60th vote in the Senate is settling.  While a freestanding, comprehensive law now seems very unlikely, achieving the core goals of health reform are possible via the regular order of a Reconciliation bill, demonstrations and pilot programs, waivers, existing authorities, and the appropriations process.

It’s the Stupid Economy
First, the President has appropriately reraised jobs and the economy to be his highest priority.  This shift may both help defuse the hyperpartisaness that has enveloped health reform, and increase action to improve the economy and create jobs since they are the source of the public’s ongoing angst and frustration.  However, the Administration and Congress should continue to pay attention to health reform since people’s concern over the economy and job-lock are partially driven by worries about the affordability of health insurance and healthcare.  In addition, location-lock for small businesses and entrepreneurs because of different state health insurance laws may be supressing job growth in those sectors… something I recently investigated in moving from Massachusetts to DC.

Reconciliation – Part 1
Second, any action related to health reform will need to embrace fiscal responsibility and deficit reduction.  This clearly points towards a Reconciliation bill that reduces the growth in Medicare spending, (and extends its solvency), along with some Medicaid changes to accommodate increasing enrollment while limiting States’ fiscal exposure in a down economy.  This type of Reconciliation bill would be similar to those that both Democratic and Republican controlled Congresses have passed in the last 20 years.  (In the current political alignment, Democrats will have to counter Republicans’ accusations that they are cutting Medicare rather than just slowing spending growth. Both characterizations are “true” depending on your political objectives.)

Strategic Demonstrations, Pilot Programs and Waivers
Just nipping and tucking at Medicare spending and increasing Medicaid’s enrollment and financial support to the States won’t meet anyone’s definition of health reform.  Therefore, to move the US health system along the path of reform to expand coverage, improve quality and control costs, there are targeted initiatives that the Administration and Congress can pursue to push forward with reforming health delivery and financing:

First the Administration can get much more aggressive with its use of Medicare demonstrations and pilots. These can build upon the HIT and CER programs included in last year’s stimulus bill as stepping stones for health reform.  The Administration already started in this direction with their “Demonstration Grants for the Development, Implementation, and Evaluation of Alternatives to the Current Medical Liability System” announced last September.  Granted this program was designed to provide some cover for Congressional moderates and to probably curry favor with some clinician groups, but the Administration also has the ability – and in some cases the legislative authority – for many other types of demonstrations and pilots.  For example, they could:

  • Proceed rapidly with the Advanced Primary Care (APC) model type of Medical Home demonstration they announced last September – and which I wrote about previously.
  • Resurrect the straightforward Medicare Medical Home demonstration that Congress authorized in 2006 for eight locations. (In 2008 authorization was expanded to as many locations as HHS wants.)  This demonstration was scuttled last fall because the evolving health reform legislation had language replacing it with two new ones.  Since the draft regulations for this program were completed in December 2008, they would just need to be updated and finalized for the program to start later this year or January 2011.  There is also no reason that this Demonstration couldn’t run in parallel with the APC Medical Home demonstration – perhaps in different geographic locations.

For these and other demonstrations and pilot programs, the key for success will be structuring them somewhat like clinical trials so that people and organizations are assessing very similar, if not identical things.  This would not be “cookbook medicine” since these demonstrations should focus on the organization of care delivery and not on individual care decisions. For example, the Medical Home demonstrations mentioned above are about the organization of services provided by primary care practices, not the specific decisions made by clinicians for individual patients.  Similarly, the use of surgical checklists is an operational process that has been shown to reduce errors, increase the quality of care, and reduce costs.  However, it does not specific what procedures the surgeon performs or how the anesthesiologist delivers medicines, etc.

One of the failings of past demonstration programs has been that they have been structured to analyze what people are already doing rather than ways of delivering care that might improve outcomes. For example, the Medicare care coordination demonstration that reported its “conclusions” last year failed to demonstrate very much since it was an evaluation of 15 different types of programs.  In addition, demonstrations are sometimes caught up in significant political and parochial interests.  This was the case for a demonstration program involving “Centers of Excellence” for cardiac care at hospitals.  This demonstration program was scuttled the first time around – and hobbled thereafter – because the hospitals in the demonstration’s geographic locations not deemed “Centers of Excellence” complained quite strongly – particularly to their Members of Congress.

Thus, evaluating what people and organizations are already doing is easy, but may not provide much useful information since care organizations tend to vary greatly in how they operate, even within local areas, so drawing specific conclusions from these types of semi-focused studies is difficult.  Conversely, evaluating specific care practices is harder because it requires changing day to day activities for clinicians and providers, but this type of more controlled experiment can actually demonstrate the value of a change.  And lastly, any of these demonstrations can be undermined by political or parochial forces so that the demonstration is stopped, delayed, or its requirements so diluted that the conclusions are of little value. Thus, to make these demonstrations valuable, career and political officials need to be diligent and have fortitude when they are developing, approving, and overseeing the creation and implementation of such demonstrations and pilots.

Expanded Use of Existing Authority
Once research projects have demonstrated and validated improved ways of delivering care, Medicare, (and possibly Medicaid and other Federal programs), could use their existing authority to pay more for the adoption of these changes – or pay less or not at all when they are not adopted.  For example, Medicare and private payers have stopped paying for so-called “never events,” i.e. clinical events that are completely avoidable and thus should never happen.  Similarly, it is probably within Medicare’s existing authority to not pay – or pay less – for surgeries or the insertion of central intravenous lines when a validated checklist is not used.  These checklists are process steps that have been proven to work and yet have not been universally adopted, which raises the question as to why Medicare is paying for clinical situations where these improvements are not used.

Medicare and Medicaid Waivers
Beyond demonstrations and pilots, and the use of existing authorities, Medicare and Medicaid waivers are other tools that can be used to implement significant changes. Waivers for Medicaid are much more common, and the entire Medicaid program could be viewed as a 50+ bags with 1,000+ waivers.  Technically these waivers are intended to “demonstrate” better ways of running Medicaid programs that would provide information for changing all Medicaid programs across the country.  In practice, these waivers have proliferated like Tribbles in a storage bin of triticale grain, with most States using many waivers for different aspects of their Medicaid programs.  (For example, Arizona didn’t have a Medicaid program until 1982 when it created its program under a statewide waiver. And Massachusetts’ health reform expansion law was only possible because of a revised/renewed Medicaid waiver.)

Medicare waivers are less common than Medicaid waivers, but can be more powerful.  For example,  Maryland’s Medicare waiver has enabled the state to run an all-payer rate setting system for hospitals for many years. And in the near future Massachusetts may be seeking a Medicare waiver to implement an all-payer bundled payment system that their Special Commission recommended last July.  Such a state-wide payment reform system would be an even more dramatic health reform step than the state’s insurance coverage expansion and coverage mandates. But it remains to be seen if the Massachusetts legislature will proceed with this important cost containment and quality improvement step – and if they can get a Medicare waiver when they are ready to ask for it since the Federal Government’s attitude toward such waivers may be different in 2012 or 2014 than it might be today, or was last summer.

Reconciliation – Part 2
It is clear that cost containment for Medicare, expansion of Medicaid, a flurry of demonstrations, pilots, waivers and the use of existing authorities would not constitute significantly health reform since even all together those initiatives would not significantly advance progress towards universal insurance coverage – a fundamental goal of health reform. And one of the criticisms of using the Reconciliation process in the Senate has been that the insurance expansion provisions and coverage mandates in the House and Senate bills would be stripped out under the Reconciliation rules.

However, having successfully included provisions in a Reconciliation bill when I was told that they would definitely be stripped out, I know that under the peculiar rules of Reconciliation all numbers that are the same are are not equal, and there are ways to configure provisions and their implementation to effectively achieve the following:

  • Implement significant and strong regulations/requirements/standards to prevent insurance and coverage denials, and pricing problems that are currently permitted under various loose state laws;
  • Create strong incentives for insurance coverage for most, if not all Americans;
  • Provide subsidies for low income people and small businesses to make health insurance affordable; and
  • Reduce the so-called “donut hole” in the Medicare drug benefit.

The first three of these are really the fundamental parts of health reform, and improving Medicare’s Part D benefit is a widely agreed upon goal. The other aspects of the legislation that was moving through Congress are important, but not really essential – and the public plan option has always been redundant and politically explosive pair of suspenders alongside the belt of strong insurance regulations.  In addition, these provisions are also supported by two of the major industries that could have opposed health reform – insurers and biopharmaceutical companies.

There may be some who would criticize the first three of these changes as causing prices to go up, etc. as they transform the health insurance marketplace in most states, but the reality is that this would replicate what has happened in Massachusetts – first with their insurance reforms in the early 1990s, and more recently with their coverage mandates and expanded low-income subsidies.  And despite some public rhetoric, it is working very well, people like it, and it provides stability and security for insurance coverage.  What it hasn’t done is address costs – which is why the state is looking at an all-payer bundled payment system which would give clinicians, provider organizations, and others  incentives to control spending without being intrusive into their care practices.

Paying for these legislative changes will of course be a challenge, but with a renewed focus on fiscal and social responsibility for the Federal Government and financial institutions, there are innovative ways to have all these health reform changes not result in an increase in the Federal deficit.

Conclusions:

  • The Administration and Congress should be making the economy and jobs their #1 priority, but should continue to work on health reform since health costs and the vagaries of the health insurance system continue to fuel people’s angst about job security and the overall economy.
  • Significant health reform can be done without massive restructuring in one sweeping bill.  Rather coverage can be expanded and costs controlled by constantly pushing and shoving, and massaging and tweaking. Many successful government programs have been built and improved over many decades using such an “incremental” approach – so it is a valid avenue for improving such a complex, multipronged, pervasive, and sinewy “industry” as healthcare.
  • Important and significant provisions were included in last year’s stimulus law, and additional government actions should be viewed as building on those initial steps.
  • Change is hard, but explaining the immediate and long-term benefits for individuals and society will be important for deflecting politically driven mischaracterizations.  In addition, pointing to Massachusetts’ success with insurance regulation and coverage expansion should demonstrate that such changes work in the real world.  And while many other parts of the country point to Massachusetts as a liberal, “Taxachusetts,” socialist enclave, the state’s recent election of Republican Scott Brown to serve the remainder of Ted Kennedy’s Senate seat should fully refute that mischaracterization.  If a state can elect Scott Brown, then they can’t be all that knee-jerk, socialist-liberal.

Next Steps
The next steps in the annual Federal legislative dance will be the release of the President’s budget proposal tomorrow, followed by the start of the Congressional budget process. The two things to remember about the President’s budget proposal are that it was written and locked up before the Massachusetts Senate election, and this document is generally as much about making political points and sending specific messages as it is about the numbers for specific programs and initiatives. That is, within the Administration’s overall 3 year freeze on non-security discretionary spending there will certainly be proposals for program increases and decreases, but it is Congress that actually makes these determinations. Thus many of the numbers and programmatic initiatives in the President’s budget proposal may be designed to score points with specific groups and to force Congress to make the hard decisions about where to get additional funding for its favorite programs that the President’s budget proposes cutting. For those who thought that President Obama would somehow transform or transcend the Washington political process this may come as a bit of a shock, but the reality is that the framework of the Constitution and the evolving nature of the US government and society promote the separation of powers and a balancing act among them, which at times can look something like an uncivil war.

Healthcare Policy and Healthcare Politics – Summer 2009

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As Congressional Committees appear to be steadily walking towards the starting line for considering health care reform legislation next week, I’ve been thinking about various healthcare policy and political events and activities that will influence the substance and process for these efforts over the coming months – and perhaps years.

Because a complete examination of all the important events and documents from the last several months and years would be too long for a single post, summarized below are some of my observations and thoughts about the meaning of 5 touchstones that people will likely reference in the coming months as part of the health reform dialogue:

  1. Massachusetts’ health coverage and reform initiative
  2. The Senate Finance Committee’s 3 Policy Option Papers
  3. Frank Luntz’s health care talking point paper for Republicans
  4. The May 11th letter from 6 national groups to President Obama
  5. The Democratic Party’s development of Organizing for America

As discussed below, each of these activities and documents has dual (or dueling) policy and political goals, (i.e. changing policy to improve the healthcare system, or designed to win political points), that may be aligned or in conflict.

1. Massachusetts Health Coverage and Reform Initiative

  • The original legislation was a political compromise that included:
    • The use of private insurance to expand coverage
    • An individual mandate
    • An employer penalty for not having all their workers insured (a.k.a. play or pay)
  • Single payer is discussed and supported in Massachusetts, but wasn’t part of the state’s health reform initiative
  • The state’s Commonwealth Connector insurance exchange doesn’t include a public plan choice/option
  • Despite not being a single payer system, nor including a public insurance plan option, the state’s initiative expanded insurance coverage to more than 97%
  • With the success of increased insurance coverage has come expanded demand for primary care services and subsequently longer waiting times for those services
  • The state is looking at various processes for controlling costs as a second outcome to be achieved
  • The state’s ability to control health care spending will likely require Federal regulatory and/or legislative cooperation from programs such as Medicare, Medicaid, and ERISA

2. Senate Finance Committee’s Policy Option Papers

  • Between April 29 and May 20th the Senate Finance Committee released 3 papers describing options for health delivery system transformation, expanding coverage, and cost savings and revenue raising.  (The Committee also held hearings on these papers.)
  • The overarching theme in these papers is transparency and accountability
  • Several issues are notable for their absence from the papers:
    • Discussion of a single payer option for overall reform
    • Cost savings estimates for a public plan option
    • Changing or repealling Medicare Part D’s “Non-Interference” provisions as a source of revenue
  • The only mention of ERISA is in the savings and revenues paper – It is not discussed in the context of health delivery transformation or expanding coverage
  • Medicare’s physician payment formula problem is discussed, and the cost of a 10 year freeze is cited as $285 billion
  • Accountable care organizations (ACOs) and care coordination are frequently mentioned goals, but the papers generally only propose demonstrations or pilot projects rather than definitive programmatic changes

3. Frank Luntz’s “The Language of Healthcare 2009″ Paper

  • This paper advises Republicans how to talk about healthcare in a purely political context.  It doesn’t substantially address policy aspects of health reform issues, and it is all about winning as many Republican and moderate hearts without considering their minds
  • The goal of Luntz’s talking points are to paint Democrats’ health reform plans as leading to government bureaucrats making health care decisions, rationing of care, and denying access to necessary care
  • The paper builds upon the premise that patient-doctor relationships are good and that government bureaucrats are bad.  It specifically states that the Democrat’s “government takeover” of the healthcare system will result in a bureaucrat putting “himself between you and your doctor, denying you what you need”
  • Luntz’s paper leverages people’s fear about loss of control and autonomy, but it doesn’t address people’s immediate and real concerns that high costs are denying people access to the insurance or care they need – in effect rationing based upon the ability to pay for the ~49 million people in the US without health insurance and the millions more who are underinsured because they can’t afford their co-payments or deductibles

4. May 11th Letter to the President from 6 National Groups

  • The 2 page letter from AdvaMed, AHA, AHIP, AMA, PhRMA, and SEIU is mostly political posturing
  • The letter uses all the right phrases:
    • “access to affordable high quality health care”
    • “transform the health care system”
    • “transparency that supports effective markets”
    • “aligning quality and efficiency incentives”
    • “encouraging coordination of care”
    • “adherence to evidence-based best practices”
  • Karen Ignagni deserves big kudos for pulling together the other 5 groups and getting agreement for the letter, but herding their collective seagull-like members into agreement for specific reform proposals – other than an individual mandate to have insurance – will be a much bigger challenge, as Paul Krugman recently discussed in his recent column
  • Getting all these groups to the same side of the same table is a success of process, but not a successful outcome.  A collective meeting of minds of similar groups was necessary for the enactment and implementation of Massachusetts’ coverage expansion law, and it is also being used in the state’s efforts to control the growth of healthcare spending

5. Organizing for America (OFA)

  • The Democratic National Committee (DNC) is working to develop OFA as a program to capture the grassroots energy and organization of the Obama campaign, with the goal of using OFA to support the Administration’s policy initiatives – the first of which is healthcare, to be followed by energy and education
  • On May 16th I attended an OFA-MA organizing meeting – along with about 500 other people from around the state. The open Q&A and my discussions with individuals made it clear that single payer has strong and wide support in this group, despite candidate and President Obama’s consistent message that if we were designing a system from scratch, single payer would be an attractive option, but given our immediate needs and problems, other significant targeted changes are needed to improve people’s lives by increasing coverage and controlling costs quickly and effectively.  (Not too mention that such targeted changes face much lower political hurdles than a single payer reform option.)
  • OFA is gearing up for Congress’ consideration of heatlhcare legislation by organizing house parties across the country on June 6th to gather individual stories and prepare the OFA grassroots rooters to engage their elected representatives, the media, and whoever else they can reach on healthcare reform

Conclusions

  1. How to pay for health reform still hasn’t been determined, and this summer Congress will also have to “fix” Medicare physician fee schedule – which will cost about $20 billion/year
  2. The most difficult aspects of health reform, (outside of paying for it), are how to do risk/severity adjustments for payments and quality analyses, how to measure the success of initiatives using a blend of process and outcome measures, and how to estimate, (or “score”), costs or savings from many of these initiatives – particularly for those that involve behavior change, disease prevention or health promotion, or are expected to act synergistically with other initiatives, such as patient-centered medical homes or other care coordination intensive models
  3. Agreement on principles is easy, but agreeing to specific proposals is difficult because one person’s waste is another person’s income
  4. ERISA is the 500 pound gorilla-issue sleeping in the corner
  5. Massachusetts is different than most other parts of the country – both in terms of policy and politics – but its experience presents valuable lessons about the process for bringing stakeholders to the same table and for creating a health insurance exchange with low-income subsidies
  6. Politics will be required to enact national health reform legislation, but the specific policies put into new laws will be important for determining their success or failure upon implementation, because a disconnect between politics and policy can result in legislation that produces outcomes different from what are intended.  For example, the Balanced Budget Act of 1997 changed the Medicare managed care program, (and renamed it Medicare+Choice), with the goal of expanding managed care options for people enrolled in Medicare.  However, following BBA ’97 Medicare+Choice options decreased rather than increased.  In addition, success or failure of one initiative sets the environment for the next, e.g. the failure of BA’97 to expand Medicare+Choice enrollment created the context for the development of the Medicare Part D prescription drug program in 2003.  Similarly, the success of Massachusetts’ expansion coverage law has enabled the state to explore options for controlling overall health spending as a next step – something that would not have been possible if the expansion law had failed or been derailed…… as it had been twice before.

Footsteps


Precedents and Comparisons for Health Reform

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Discussion of health reform this year often touches upon how the process and substance are so different than what occurred in 1993-4, even though many of the people engaged in the current effort were also involved then too.

Historical events are clearly important for setting the political and policy environment for any legislation, and in healthcare there are very clear examples of stagger-stepping to success:

At the Federal level, health insurance/coverage laws and proposals date back to the 1930s:

  • National health insurance for the elderly was supposed to be the second part of a new social safety net – after the creation of Social Security
  • Medicare and Medicaid were created in 1965.
  • In the 1980s and 1990s, Medicaid was repeatedly expanded in small increments, and in 1997 the State Children’s Health Insurance Program was built on top of Medicaid.
  • Massachusetts’ coverage expansion laws:
    • Universal Coverage Law in 1988 (delayed and repealed in 1996)
    • Major Medicaid Waiver in 1996
    • Revised Medicaid Waiver and State Law for Insurance Coverage Expansion in 2006

Medicare expanded outpatient prescription drug coverage:

  • Medicare Catastrophic Coverage Act in 1988 (repealed in 1989 before implementation)
  • Medicare Cancer Coverage Improvement Act added very limited coverage for outpatient prescription drugs to treat cancer in 1993
  • Medicare Prescription Drug Improvement and Modernization Act in 2003 added the new Part D outpatient prescription drug benefit and a temporary prescription drug discount card program. (The discount card program was in effect from June 2004 through 2005, and the Part D benefit started in 2006.)

Learning from the Crazy Quilt
All these laws have created a crazy quilt structure, but this history also has lessons for the current Federal health reform efforts:  First, repeated attempts at taking on an issue can lead to success.  Second, incremental success, (or success in incremental steps), may be achievable when larger changes are not.  And third, compromise and inclusion of various approaches and provisions in a final product can mean the difference between stalemate and success.

This last point is why I think that the Medicare Modernization Act and Massachusetts’ 2006 experience are very important for the current debate.  In both cases, various compromises were made – on both policy and politically related aspects of the legislation.  In Massachusetts, the biggest compromises involved the inclusion of both individual and employer mandates, as well as primarily using private insurance for expanding insurance coverage. Similarly, in the MMA’s Part D program, the estimated costs was capped at $400 billion over 10 years, private insurance was used as the vehicle for providing the new drug benefit, and the standard benefit was biphasic to limit government costs while providing a significant benefit to the few individuals with very high drug costs, and a limited benefit to many more people. (See graphic of the 2009 standard benefit below.)

Medicare Part D 2009 Standard BenefitSource: Kaiser Family Foundation Fact Sheet “Medicare Prescription Drug Benefit,” March 2009

Current Efforts Have Learned from History?
The Obama administration’s position and actions have been consistent with these lessons, and it is seen in their willingness to discuss all possible options for moving towards universal coverage, containing costs and improving quality.  However, they are also clearly constrained by exploding budgetary pressures – particularly in the near term.  While it is possible that the bailout funds, (and government purchase of “toxic assets”), will eventually create positive returns, that will certainly take several/many years, and the need for health reform can’t wait that long.

Therefore, the successful efforts in Massachusetts and with the Medicare Prescription Drug Benefit demonstrate the importance of compromise and cobbling together positions supported by various factions within a single law so that it will have broad support – which facilitates both passage and implementation. After all, a baseball player improves his batting average by learning how to hit and by studying great hitters like Ted Williams, rather than by learning how to strike out, or by studying Mario Mendoza’s swing.

Improving Cancer Care and Medicare’s Cancer Coverage

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The New York Times and Wall Street Journal both had articles yesterday about a new rule clarifying how Medicare would decide whether or not to pay for off-label uses of medicines to treat cancer.  These articles describe controversies around Medicare relying on several compendia containing information about such off-label uses to make these coverage decisions, how some of the compendia may have industry connections, and how the new rule might increase Medicare spending.

I have a long history with this issue.  As a Legislative Assistant working for Congressman Sander Levin in the early 1990s, I was very involved in writing the legislation that first changed Medicare law to require Medicare Part B to pay for off-label used of medicines to treat cancer.  This change was seen as promoting both good medicine and good fiscal policy:  It promoted good medical practice because there was evidence that physicians were admitting patients to hospitals to give them off-label chemotherapy for cancer because Medicare wouldn’t reliably pay for it in outpatient clinics.  Thus, patients had to travel farther, and were potentially at risk for hospital acquired infections and other problems from being in the hospital when they didn’t need to be.  And it was good fiscal policy because Medicare was paying more for these patients to be in the hospitals than it would for them to get the same treatments as outpatients.  This is why the Congressional Budget Office estimated that this change to Medicare law wouldn’t cost Medicare any money.  (They estimated saving for Part A of Medicare, and some additional costs for Part B, with the net costs being essentially zero.)

What the Times and Journal articles don’t mention is that under Medicare law, off-label coverage for cancer treatments also occurs if there is “supportive clinical evidence in peer reviewed medical” journals that have been approved by the Department of Health and Human Services.  (See the language for the entire provision in Section 1861(t)(2) of the Social Security Act.)  The peer reviewed literature option was included so ensure that Medicare paid for appropriate off-label cancer treatments for very rare or unusual cancers and treatments that might never make it into the compendia, and to include the most up to date published information for making coverage decisions.

The 1993 law, and the subsequent refinements to it, were designed to improve Medicare’s coverage for cancer treatments.  With about 50% of people with cancer being over age 65, Medicare’s policies thus drive many decisions about cancer treatments for all Americans.  And despite the requirements for off-label coverage, being treated for cancer certainly presents huge medical and financial burdens for many people – something that the creation of the Medicare Part D outpatient prescription drug program was intended to help with.  However, because of a peculiar wording in the 2003 law that created the Part D program, the coverage for off-label cancer treatments under Part D was more restrictive than under Part B.  (Essentially, it was easier to get Medicare to pay for an off-label cancer treatment when the medicine was injected by a physician than if the medicine was a pill.)  Fortunately – after a lot of discussion and lobbying by patient advocacy organizations including the Medicare Rights Center – that situation was changed by Congress in the summer of 2008.  So as of January 1, 2009, the rules for off-label coverage for cancer treatments are the same under both Parts B & D – although I’m sure there will be some snags and bumps in getting all the Part D plans up to speed on how to appropriately apply these coverage rules.

Balancing Costs v. R&D Incentives
How to control the costs of such treatments while also providing incentives for the development of new and better medicines is a difficult public policy balance.  Higher reimbursement amounts for cancer treatments would increase the incentives for developing new and better treatments and cures for cancer.  But high reimbursements could also increase costs for patients and their insurance companies.  This balance becomes particularly difficult when a new treatment is much more effective than previous treatments, it doesn’t produce very unpleasant (and costly) side-effects, it needs to be taken much less frequently, or if it actually produces a cure.  In such cases, the new medicine’s very high per dose costs can be criticized.  But this analysis may look very different when put into the context of the value the medicine provides to the patient, and the overall costs incurred by Medicare (or the private insurer) and the patient.

Cost & Clinical Effectiveness Research
Such challenging balances and calculations are what biopharma companies, biomedical researchers, clinicians, insurance companies, government regulators and others struggle with whenever a new treatment is developed for a serious condition.  This is the essence of clinical and cost effectiveness research – an area of health policy that is beginning to be much more widely discussed:  It has been part of bipartisan Congressional discussions and was highlighted in last year’s Presidential campaign.  How the government and others increase their support for this type of research, (i.e. inside government or through some independent or semi-independent agency), how the information from this research is reflected in reimbursement policies, and how clinicians are educated about and use this information, could dramatically improve the quality and value of the health care we all receive for cancer and many other conditions.  Only time will tell if that happens, or if too many competing interests snarl up the process with cost savings being put before quality improvement, with the goal of cost containment pushing the information into reimbursement decisions before it is fully analyzed – or as someone once said, trying to get to the dough before the bread is fully baked.  (Yeah, I know, very bad dough pun.)