The current health care debate across Europe makes for a decidedly unsettling counterpoint to the one-dimensional hoopla that passage of the new health reform bill has triggered off in most of the mainstream American media.

Most European policymakers are going in exactly the opposite direction to what ruling politicians and most media in the United States currently believe to be “progress.” While the U.S. is busy dramatically expanding government’s role in the health sector, European policymakers are persistently (in some cases desperately) seeking to rein in bureaucratic controls over health service delivery in their own health systems. While in the U.S. the federal government is adopting massive new financial obligations in the health sector, policymakers in much of Europe are exploring every strategy that could help reduce the public sector’s long-term financial commitments.

In Sweden, for example, one-third of all primary care is now delivered by private sector providers (both in primary health centers but also in general practitioners’ offices). Seeking to stimulate more flexibility and innovation as well as more timely access, a new national law went into effect in January requiring all 21 regional governments (which run most of the health care system in Sweden) to allow citizens to choose private as well as public primary care providers, and to allow “free establishment” of new private providers.

In Finland, rather similarly, the national government is poised to introduce new legislation to allow patient choice of public hospitals, and is internally debating the need to expand patient options inside the public primary care system (where private contracting is growing rapidly).

In Portugal, some 60% of all hospitals are now run as “public enterprises,” while in Spain there are five new types of “public hospitals under private law.” Similar efforts to roll back political control and governmental regulation on day-to-day hospital management have been introduced in the U.K. (“foundation trusts”), Norway (“state enterprises”), and in Central European countries like Estonia and the Czech Republic (publicly owned “joint stock companies”).  

In the U.K., headlines last week in the Financial Times quoted in bold letters a grandee’s conclusion that “the NHS is sleepwalking over a fiscal cliff,” referring to the massive public funding cuts that will necessarily be applied next year due to the U.K.’s disastrous public budget deficit (interestingly, a deficit that is 12% – compared to 13% this fiscal year in the U.S.).

In Germany in January 2009, the national government seized direct control over the funding of its officially private not-for-profit social health insurance system, imposing a single fixed premium rate (8% of earned income) on all German workers, to begin to reduce the cost of health care for German employers so as to make German exports more competitive in a world where Chinese and Indian, but also Polish and Slovakian workers have much lower labor costs.

In The Netherlands, a similar policy goal was accomplished in a major 2006 reform by channeling 100% of all health care costs through the individual (with employer reimbursement for 50%), to encourage cost consciousness, as well as by shifting the individual’s 50% share of health care costs from a percentage of salary to a fixed flat rate premium (with subsidies for very low wage earners – well below the Euro equivalent of the $88,000-a-year ceiling stipulated in the just-passed US legislation).

In Norway – Norway, for heaven’s sake, a country of only 5.3 million people which has a $400 billion dollar Sovereign Investment Fund of oil money set aside for future generations’ welfare needs – the Permanent Secretary of Health said publicly last October in an open seminar on the future of Nordic health systems: “The current method of delivering and paying for health services in Norway is not financially sustainable.”

The list could go on, however the point should be apparent. European health policymakers in 2010 are pre-occupied with reducing the role of government in the day-to-day management and operation of health sector service providers, and are facing major reductions in the amount of public funding that they have available to support those public services.

Returning to the U.S. from trips to Europe is like visiting a different planet. Here, the national government and its health policymakers are celebrating the establishment of major new operating and fiscal responsibilities for the federal government – that is, for corporate and individual taxpayers. One finds the ruling Democratic Party leadership in Washington increasing health care entitlements to new classes of citizens, and piling on new taxes and regulations to try to pay for them.

Moreover, consistent with past health reforms in the U.S. (except, interestingly and typically

unmentioned, the Medicare Drug expansion in 2004 that relied on private sector intermediaries) this dramatically more centralized and bureaucratized system that is being put in place in the U.S. will cost far more than official estimates predict. Reasonable estimates elsewhere in Washington total $2.5 trillion over the first six years of operation, not the $900 million claimed by the Congressional Budget Office.

Bill Gross, the dean of the bond market who is codirector of PIMCO Funds, was quoted on Bloomberg News on March 24 as saying that the newly passed health reform legislation would add $560 billion dollars to the federal deficit over the next 10 years, with only six years of new benefits.

Without question, many of the operating reforms contained within the newly passed U.S. legislation are long overdue, especially the new regulations to tame the private insurance companies. Indeed, many of these regulations mimic those in place in Netherlands, Switzerland, and other European countries that rely on private profit-making health insurers (one regulation that wasn’t adopted is the Swiss prohibition on insurers against making a profit on the so-called “basic package,” although those same companies do quite nicely on the supplemental policies that many of their insurees then buy). All of these regulations, however, cost money, and will raise – not lower – the cost of future health insurance premiums.

Moreover, defenders of the full U.S. bill can rightfully claim that the Europeans are reducing the public sector’s role and responsibilities from a very different, much more overwhelming public position, with full or near-full coverage already achieved.

Lastly, none of this is to promote the U.S. opposition Republican Party’s All-Market-All-of-the-Time solution to this country’s health care dilemma. That unconstrained and equally fantastical approach, as every European health policymaker will tell you, will necessarily lead to worsening not improving health service delivery, a dramatic drop in public prevention and health promotion activities, and higher not lower expenditures.

In short, what Europeans are seeking in 2010 is a better balance of State and Market, not capitulation to Raw Capitalism. They want a more flexible and innovative approach to service delivery that will cost less and make European economies more competitive globally.

In contrast, in the U.S., policymakers seem hell-bent on massive increases in state control, with vast numbers of new bureaucratic regulations and unsustainable new fiscal deficits. This is a strategy that will guarantee that the new health benefits bring with them a substantially less competitive economy, a lower standard of living, and, potentially, an Argentina-style default on public debt.

As the title says, it’s a tale of two continents. Something to think about as the Democrats break out the champagne.

Richard B. Saltman is professor of health policy and management at the Rollins School of Public Health of Emory University and associate director of research policy at the European Observatory on Health Systems and Policies in Brussels. RSALTMA@emory.edu; 404-727-8743.

The Congressional Budget Office has just projected that the proposed health care reform legislation, the “reconciliation bill,” will cost $940 billion over the next 10 years. In the same breath, the CBO asserted that the bill will engender reductions in the federal deficit amounting to $138 billion.

Colorado Democrat Betsy Markey has already declared that “this is the largest deficit reduction bill over the last 25 years” and Republican Senator Mitch McConnell has scoffed that “Democrats want to spend trillions of dollars on this bill in order to save $130 billion.” The bill will result in 30 million uninsured Americans buying health insurance and it will abolish some of the most egregious practices of the insurance industry, such as use of pre-existing conditions to refuse coverage. But what effect is the bill – if Congress passes it – likely to have on controlling the cost of medical care?

Spending on health care is not just problematic because so many Americans have been uninsured or underinsured. It is also a problem, as Peter Orszag (formerly of the CBO and now director of the Office of Management and Budget); Rand Corporation researchers; and the conservative think tank, the Heritage Foundation, all agree because it is the major threat to the American economy. The long-term projections of the CBO, published last July, are that total U.S. spending on health care, which was 16% of GDP in 2007, will rise to 25% of GDP in 2025 and 37% of GDP in 2050. The reconciliation bill has the potential to result in a significant decline in the percent of GDP we spend on health care each year. But whether it achieves this end depends on how several key provisions of the bill are actually implemented.

The provisions of the health reform legislation that could have a profound effect on the rate of growth of spending on medical care have to do with payment reform. And the potentially most potent payment reform strategy that appears in the bill is “bundling.”

The legislation calls for the establishment of a national Medicare pilot program to “test, develop, and evaluate” bundled payment for acute inpatient hospital care, physician services, outpatient services, and post acute care for a single episode of care. According to estimates by researchers at Rand, a system of bundled payments, could potentially decrease national health spending by as much as 5.4% in the next 10 years (if applied to both Medicare and the private sector).

The same researchers propose a 6.2% target for reducing spending on health care over the next 10 years; hence bundling alone could make an enormous difference.

The reconciliation bill also provides incentives to health care systems to form “accountable care organizations” (essentially networks of providers that agree to capitation, another form of bundling) by offering them a share in the savings they generate for Medicare if they meet quality targets. It remains to be seen how widespread accountable care organizations will become.

The bill also provides for an “Innovation Center” within CMS to evaluate, test, and expand different payment structures. Whether this provision will lead to savings depends on what payment structures are tested, how effective they are, and whether they are then disseminated.

A final provision in the domain of payment reform is the establishment of an Independent Payment Advisory Board, charged with submitting legislative proposals to reduce the per capita rate of growth in Medicare spending whenever spending exceeds a target growth rate. However, the Board is prohibited from submitting proposals that will “ration care,” a provision, like the notorious “reasonable and necessary” language of the original Medicare statute, which will no doubt serve as the basis for rejecting any plan that restricts potentially useful treatment on the basis of cost.

Beyond payment reform, the reconciliation bill would establish a Patient Centered Outcomes Research Institute to conduct research comparing the clinical effectiveness of alternative treatments. In principle, this kind of information could change medical practice to avoid the use of unnecessary or unnecessarily expensive treatments. But the bill has a built-in guarantee that the information will not be used in this way. It states that the findings of the Institute “may not be construed as mandates, guidelines, or recommendation for payment, coverage … or used to deny coverage.”

Will the bill constrain the rate of growth of spending on medical care? It could. But whether it actually will depends on the programs initiated by the various Boards, Institutes, Centers that are a critical part of the legislation.

Muriel Gillick, M.D., is a clinical professor of Population Medicine at Harvard Medical School and a physician specializing in geriatrics and palliative medicine at Harvard Vanguard Medical Associates. mgillick@partners.org; 617-509-9977.

During my 20 years as an Air Force officer, I experienced and witnessed untold misery and suffering. However, as I enthusiastically embarked on my new career as a nurse, I was unprepared for the scope of suffering I have witnessed in patients who were clearly at the end of life, and were not going to survive despite medicine’s best efforts.

Frequently decisions for patients without medical decision-making capacity are made after discussions between the physicians and families. However, what often emerges is a sense of false hope, which leads to unnecessary diagnostic tests and myriad interventions. Unfortunately, during this end-of-life struggle it’s the dying patient and society who bear the burden. Sparse health care dollars are being used inappropriately.

Although death has a contract with everyone, Americans – who I think tend to have unrealistic expectations concerning life’s natural end point – attempt to renegotiate the deal, often leading to unnecessary suffering.

Ninety-four-year old Alice was transported from the nursing home to the hospital because she had abruptly stopped eating. Upon her arrival at the hospital, Alice’s medical problems included dementia, small cell lung cancer, pneumonia, sepsis (a potentially fatal blood infection), severe dehydration, a urinary tract infection, kidney failure, and respiratory distress. Doctors worked diligently over the next couple of weeks to stabilize Alice, giving her antibiotics, putting her on intravenous fluids, balancing the out-of-whack electrolytes that were causing her kidney failure, and providing feedings via a tube in her stomach as she had lost the ability to swallow. Many in the medical community see these measures as futile.

While efforts to save Alice were actually prolonging the dying process, Alice, in her noncommunicative state, was suffering, as evidenced by the perpetual grimace on her face and the numerous groans and moans she emitted whenever she was touched or physically adjusted. Because of her tentative medical state and low blood pressure, doctors were reluctant to initiate a variety of comfort procedures, including providing Alice with opioids like morphine, which can relieve physical distress but may hasten death.

As talk of “death panels” and “rationing” continue to stir debate over the government’s role in health care, an encounter with a patient who is suffering in the midst of terminal illness is an all-too-common occurrence. To illustrate what it is like to be a nurse in the “trenches” at the bedside with patients who are at the end of life and suffering, where the focus is on unrealistic goals rather than comfort, I evoke a quote from Primo Levy, who survived the holocaust in Auschwitz: “If we know that pain and suffering can be alleviated and we do nothing about it, then we ourselves are tormentors.” As nurses, it is “we” who spend 99% of the time with patients, having developed an unabashed competency in recognizing patients’ physical and emotional needs, which are sometimes lost on physicians and certainly on families.

As a palliative care nurse practitioner at a major teaching hospital in New York, I wish to go on record as saying that many patients at the end of life whose families opt for inappropriate life-sustaining treatments are subjecting them to an indignity and suffering akin to being tortured. Patients in a semiconscious state, unable to advocate for themselves, are often thrust into a netherland of discomfort and painful interventions as they slowly unravel physiologically toward their demise. Many nurses, who spend countless hours at these patients’ bedsides, often experience moral distress and conflicted emotions, seeing the futile life-sustaining treatments as pointless and cruel.

Whereas dying is seen as a disease and death as the physicians’ failure to enact a cure, studies, including this one in the New England Journal of Medicine, document that unnecessary tests, procedures, and hospitalizations in the final months of a patient’s life often cause emotional and physical stress and pain, effectively negating any benefits associated with the treatments.

In addition to the emotional and physical costs, there are the financial costs to society to be considered as we underwrite medically futile treatment. As patients get sicker, more and more high-tech and expensive procedures are employed, which drive up the costs.

The Centers for Medicare and Medicaid Services estimates that 5% of the beneficiaries who die each year take up 30% of the $446-billion annual Medicare budget. About 80% of that money is spent during the final month, often on mechanical ventilators, resuscitation and other aggressive life-sustaining care. More often than not, the aggressive steps taken to save someone’s life are futile.

As a patient advocate, I want to lessen the unnecessary suffering and astronomical costs associated with end-of-life care in this country. Mindful that the subject of how best to honor and care for those facing death due to terminal illness or old age has always been controversial, I trust the traditions of hospice and palliative care, which both work to keep dying individuals in a state of dignity and comfort without resorting to extraordinary and ultimately futile measures. For a broader, more comprehensive view, I invoke a Buddhist teaching: “for we are alive, therefore we will die.” This is the simplest, most obvious truth of our existence, and yet very few of us have really come to terms with it.

Eugene Cauvin a palliative care nurse practitioner and a doctoral student at Pace University in New York.

The need to control health care cost came up repeatedly in President Obama’s health care reform summit last week, although there was barely a mention of one of the main drivers of those costs: chronic diseases. Seventy-six percent of Medicare spending is on patients with five or more chronic diseases, including heart disease, metabolic syndrome, end-stage renal disease, and cancer. Treatment usually doesn’t lead to a cure, but it does tend to extend patients’ lives.

Prolonging life is one of the triumphs of medicine when the result is reasonably good health. But often costly treatments for chronic diseases simply prolong the dying process, inevitably raising difficult questions about setting limits. “It is a great miracle that medicine can almost equal nature in forcing a man to remain in bed, to continue on pain of death the use of some drug.” That statement would not have been out of place at the health care reform summit, but it was written by Marcel Proust in 1923 in Remembrances of Things Past: Volume III – The Captive, The Fugitive, Time Regained. The rest of the passage, which follows, resonates today.

“I learned that a death had occurred during the day which distressed me greatly, that of Bergotte. It was known that he had been ill for a long time past. Not, of course, with the illness from which he had suffered originally and which was natural. Nature hardly seems capable of giving us any but quite short illnesses. But medicine has annexed to itself the art of prolonging them. Remedies, the respite that they procure, the relapses that a temporary cessation of them provokes, compose a sham illness to which the patient grows so accustomed that he ends by making it permanent, just as children continue to give way to fits of coughing long after they have been cured of the whooping cough. Then remedies begin to have less effect, the doses are increased, they cease to do any good, but they have begun to do harm thanks to that lasting indisposition. Nature would not have offered them so long a tenure. It is a great miracle that medicine can almost equal nature in forcing a man to remain in bed, to continue on pain of death the use of some drug. From that moment the illness artificially grated has taken root, has become a secondary but a genuine illness, with this difference only that natural illnesses are cured, but never those which medicine creates, for it knows not the secret of their cure.”

For those of us preoccupied with cost control as part of the health reform effort the last few months have been a kick in the teeth. It is bad enough that the reform drive has stalled, its fate uncertain. But that effort itself saw a constant whittling away of the tough steps necessary to halt cost escalation. There was instead an increase of assurances that, to pick the most egregious example, Medicare beneficiaries would lose no benefits (President Obama), and that other possible cuts would be on the 10-year incremental bending of the curve pathway, oh so gently leading us to the promised land.

Yet there were some of us who hoped that the reform effort would include a more pointed focus on the role of medical technology as a driver of cost escalation. It had for years, after all, been identified as the main force (in the 50% range) behind annual cost increases. That emphasis was not to be, drowned out by access issues, the overall cost of reform, and arguments about (among many others things) mandates.

A recent report from the National Center for Health Statistics may help to bring technology costs back into the foreground. Although it skirts the edge of saying so directly, its analysis and data confirm my conviction that technological progress and innovation inherently nurture cost inflation.

The economic logic of constant medical progress and innovation, the historical record shows, is to push costs up, not down. How could it be otherwise with a medical enterprise that has no final end point, no boundaries to the endless struggle against illness and death, no concept of enough is enough? 

For years many argued that more and better research were the answer to the cost problem. Just cure those expensive dread diseases.  It has never worked out that way. Basic research and the innovation it generates raise health care costs.

As the National Center for Health Statistic report puts it, “some technologies save money…many technologies, however, contribute to overall health care expenditures because they increase utilization….technology provides an increasing ability to monitor, prevent, diagnose, control, and cure a growing number of health conditions and to improve quality and length of life.” Note the phrases “increasing ability” and “growing number.” Research makes that inexorable trend possible.

If it is then a myth that research will eventually lower costs, is there greater credibility to the repeated assertion that it is not technology per se that is the problem but its misuse or overuse?  There is much to that argument and some evidence to back it up, but the National Center report suggests that the increased use of a number of the most commonly employed technologies indicates some waste, but mixed in with considerable efficacy.

It is the successful use of those technologies, not their overuse that provides much of the cost momentum. That proposition seems particularly true with the elderly, where the net result of their use to date is a life expectancy after 65 that is one of the highest in the world. That result is in part a tribute to Medicare as our home-grown single payer program, but in part also because of its permissiveness in providing the latest (and often best) technologies for the chronically ill and those suffering from multiple pathologies – where the largest portion of American health care are incurred.

Concerning the overuse contention, the European universal access systems get better health outcomes at lower costs partially as a result of greater parsimony in the use of medical technologies. But those countries are also suffering cost inflation even if it is less virulent than ours, in the 3%-to-4% range compared with our 6%-to-7%. Every health care system, moreover, is cringing at the prospect of rapidly aging societies, more expensive technologies to keep the elderly alive, and always rising expectations of what counts as adequate care. Almost all of them are beefing up their efforts at technology assessment, including cost-effectiveness research.

Unhappily, as the report notes, “once diffused into practice, it is often difficult to reduce the use of technologies, even in situations where they have been shown to be ineffective or not superior to less complex or less expensive alternatives.”

In light of political resistance to serious cutbacks in patient benefits, in either the public or private sector, the future prospect for controlling technology costs is discouraging. Even under competitive pressure and government limitations on excessive premium increases, insurers will still have to deal with the background costs of health care, which will keep rising. And as long as Medicare faces instant public hostility to, and political fear of, benefit cuts, then no options will be left other than to jack up copayments and deductibles and to reduce reimbursements to physicians and hospitals. The latter moves will reduce the political heat, but will eventually harm beneficiaries. Only if all the actors at the same time – individual beneficiaries, physicians, and institutions – give up something, give up in fact a good deal, will real cost control be possible.

President Obama’s new health care reform proposal for the February 25 “summit” is at the other end of the spectrum on cost, barely mentioning the topic. That is not just a pity, it is pitiful.

Daniel Callahan is editor of the Health Care Cost Monitor and author most recently of Taming the Beloved Beast: How Medical Technology Costs Are Destroying Our Health Care System.

In a recent Health Care Cost Monitor post, Kristin Voigt and Harald Schmidt contend that offering employees who use wellness programs in the workplace reduced insurance premiums and deductibles threatens the fairness and affordability of health insurance for those most in need. Depending on how the program is structured, this is not necessarily the case, but Voigt and Schmidt provide compelling support for their assertion.

More fundamentally, however, we ought to ask ourselves whether financial incentives to improve health-related behaviors work. If they do not work, then they will clearly fail to reduce health care costs. The evidence is decidedly mixed.

There is some evidence that financial incentives can affect simple behavior changes, such as medical compliance. For example, in a systematic review of 11 randomized controlled trials that had used financial incentives, 10 demonstrated a positive effect. In these studies, the incentives ranged from $5 to $1,000 for interventions including adherence to a tuberculosis medical regimen, dental care for children, immunization, postpartum appointments among indigent adolescents, the completion of a treatment program for cocaine dependency, and antihypertensive treatment.

Other studies have found a positive effect from small financial incentives for mammography, required hepatitis B vaccines among drug users, and keeping clinic appointments for depression. But other studies have failed to find financial incentives effective for medical compliance.

For complex behavior change of the type often included in wellness programs, such as smoking cessation and weight loss, there is almost no good evidence for a sustained, positive effect. For example, in a systematic review of 17 studies on financial incentives for smoking cessation, none of the studies found significantly higher quit rates after six months among people who had financial rewards compared with those who did not.

However, a large trial published last year randomized 878 people to either a control group or an incentives group that received $100 for completing a smoking cessation program, a further $250 for being abstinent six months into the trial, and an additional $400 if they remained abstinent six months after that. At 18 months from the initiation of the trial, the quit rate in the incentive group was significantly higher than that for the controls – 9.4% versus 3.6%.

That trial is but a single study. A sustained effect has also rarely been observed for weight loss. For instance, a systematic review of nine randomized trials on the use of incentives to reduce obesity rates found that the larger incentives produced better results, but that the difference was not statistically significant. People offered financial incentives of less than 1.2% of their disposable incomes had a mean weight change of precisely zero after 12 months. People who received financial incentives of 1.2% or more of their disposable income had a mean weight loss of 2.4 pounds at 12 months, and only 1.5 pounds at 18 months.

The same researchers who conducted the smoking cessation trial also conducted a study of financial incentives for weight loss, but their long-term results were not overly auspicious. For instance, seven months after the initiation of the trial, the mean weight loss in the control group was 4.4 pounds, compared with between 6.2 and 9.2 pounds in the incentive groups.

Overall, therefore, financial incentives for specific areas of medical compliance appear to show some promise, but there is insufficient good evidence that they work in any sustained way to alter broader lifestyle behaviors. It may be that the literature to date uses incentives over too short a time frame to affect these complex behaviors. It is also possible that the size of the incentives offered in the studies was too small. Moreover, the cost, let alone the cost-effectiveness of the incentives, is rarely explicitly recorded.

But what is clear is that the lack of good evidence that financial incentives generate a meaningful positive effect on complex behavior suggests that we cannot conclude that they will save health care costs. Therefore, governments should be cautious in endorsing them.

Adam Oliver is RCUK Senior Academic Fellow in Health Economics and Policy at the London School of Economics and Political Science. Formerly, he was a Japanese Ministry of Educa­tion research scholar at Keio University in Tokyo and a Commonwealth Fund Harkness Fellow at Columbia University. He was also founding coeditor of the journal Health Economics, Policy, and Law. a.j.oliver@lse.ac.uk; 44 (0)20 7955 6471.

In his recent book about Lincoln as a writer, Fred Kaplan described Lincoln’s disdain for the “linguistic dishonesty” of leaders of the Confederacy, who attempted to divide the nation with “a barrage of verbal propaganda that corrupted the relationship between language and truth.” Strong words, but not unlike the verbal propaganda that has created a schism between primary care physicians and specialists, which is impeding solutions to the nation’s physician shortage.

We are told that patients in areas with more primary care physicians and fewer specialists spend less on health care but get better quality, use fewer hospital and outpatient services, achieve better health status, and incur fewer end-of-life expenditures. They also have decreased all-cause mortality, lower mortality from cancer, heart disease and stroke, decreased infant and maternal mortality, and increased life spans. All quite remarkable.

While one can find a kernel of “statistical truth” in some of these studies, the associations apply uniquely to family practitioners but not general internists, who practice in the same manner. This curious anomaly results from the preference for family practice in states along the northern tier, from Maine to Washington (where poverty is sparsely distributed), coupled with an historic preference for internists in the Northeast (where there is dense urban poverty) and the low numbers of all physicians across the South (where poverty is pervasive).

It’s not surprising, therefore, that most associations between primary care and better population health disappear once race and poverty are considered. Indeed, the superior outcomes in areas with more family practitioners have everything to do with the merits of Minnesota over Mississippi and of Portland over Newark and little to do with the merits of primary care.

But what about the old saw that primary care physicians can deliver specialty care better and cheaper than specialists?  Commenting in Robert Wood Johnson’s “The Future of Primary Care,” Sheldon Greenfield, who led these studies in the 1990s, acknowledged that they lacked adequate risk adjustment, and subsequent research has shown that specialty care generally yields better outcomes, particularly for patients at greater risk, although with greater costs.

These conclusions run headlong into the Dartmouth’s Atlas, where outcomes (such as satisfaction, quality, and mortality) in the region with the most specialists and spending are “not necessarily better” than in the region with least. Yet even a casual inspection of Dartmouth’s map shows that the “high-spending region” is a scattered collection of America’s largest metropolitan areas, while the “low-spending region” encompasses the vast northern tier.

Aggregating patients living at the extremes of wealth and poverty in the former causes their average outcomes to resemble those of patients residing in the upper Midwest, but the inordinate health care expenditures associated with poverty give added weight to urban spending. What has been characterized as waste and inefficiency is, in fact, the sad result of poverty ghettos and social depravation.

What about state studies? How often have you heard that “states where more physicians are specialists have lower-quality care and higher costs?” While widely cited, this is simply the output of scrambled statistics. While Mississippi and Nevada do have low quality, they certainly do not have an abundance of specialists, as depicted graphically and portrayed to politicians. Indeed, they have the fewest specialists in the nation.

Finally, what about the belief that health care reform will get rid of waste and inefficiency – the $700 billion that Peter Orszag has assured us will be saved? Is it as he says? Do communities use more care because they have more specialists? Or do they have more specialists because they need to provide more care?

Despite 50 years of debate, economists have failed to make a convincing distinction, but maps tell the tale. It turns out that most of the “wasted” care is provided to low-income patients, particularly in the poverty ghettos of major cities. In fact, they use so much more care that it’s hard to find the “waste” that is so apparent anecdotally. And that has led to poor policy choices.

But take note. Obama has arrived from the land of Lincoln with the clear message that language and truth must be reunited. And Lincoln would probably add something about what happens when a profession is divided against itself.

Primary care physicians don’t need to be advertised as better “specialists” than specialists, nor as the fountain of long life, and falsely denigrating specialty care doesn’t make primary care physicians more valuable. Patients know their value already. And experts know that health care is better when primary care physicians and specialists work together and best when there are more of both.

The tasks at hand are to end the “verbal propaganda” that divides disciplines and confuses politicians and concentrate on expanding the supply of physicians and other health professionals so that future generations will have access to the technologically-advanced, socially-equitable health care that this nation deserves.

Richard A. Cooper, M.D., is a professor of medicine in the School of Medicine and senior fellow at the Leonard Davis Institute of Health Economics, University of Pennsylvania. He formerly was Director of Penn’s Cancer Center and Dean of the Medical College of Wisconsin. cooperra@wharton.upenn.edu; 215-667-9806; http://buzcooper.com

Massachusetts, having adopted a state requirement for universal health insurance, rapidly discovered that access to care did not improve because the supply of primary care practitioners was inadequate. The nation as a whole is bound to confront the same problem if health care reform moves forward. Both bills in Congress contain provisions for increasing the number of primary care physicians, especially in underserved regions, but they are unlikely to have much if any effect.

The most notable provisions of pending Congressional legislation concerns the expansion of funding for community health centers, which are located in areas with the most dire shortages, and expanding the National Health Services Corps to place physicians in underserved areas. Other provisions provide little more than token payments to encourage the training of more primary care physicians in U.S. medical schools and residencies. Currently, about half of all primary care physicians in the country are foreign-trained, many of them imported from the poorest countries of the world.

The legislation also attempts to increase the attractiveness of primary care practice by providing bonuses to primary care physicians. Much smaller amounts of funds would be allocated for enhancing teaching of primary care in medical schools and residencies – this is the only strategy to establish an adequate primary care infrastructure.

An expansion of primary care training is threatening to one large political constituency: academic medical centers. As a result of a succession of government policies aimed at encouraging the production of specialists, they find themselves heavily dependent on federal support. This is why deans and teaching hospital directors oppose attempts to produce more primary care physicians. True to their allegiances, they will tolerate expansion of the primary care workforce only if it specialist training is expanded, too.

A number of journal articles and blogs defend the strategy of expanding the total number of physicians, not just primary care physicians, because it will provide more physicians to address the unmet health needs of socially deprived populations. While this position may appear logical, no evidence has been cited in support of it and, experience has shown that it would actually worsen inequity in health.

In fact, a plethora of evidence shows that poor populations benefit disproportionately from greater primary care physician supply but not from an increase in specialist supply. The total number of doctors in the U.S. has increased by one-third in the last 20 years, and yet the health of the U.S. population relative to other comparable countries has worsened and health inequities within this country have widened. Areas with more specialists tend to have poorer outcomes of care and worse inequities in health between the rich and poor and across social classes and ethnic groups.

The evidence on the benefits of primary care to equity in health is strong and robust, and does not depend only on geographic studies of physician to population ratios. The evidence also comes from comparisons of areas that differ in the number of primary care facilities (rather than just number of primary care physicians), and studies that show that both effectiveness and equity in health outcomes is better where primary care practice is stronger.

 The evidence concerning quality of care is also clear: primary care physicians do better, have better overall (not just for specific diseases) outcomes, at lower cost, and the benefits are greatest for minority populations. Once a region has an adequate supply of specialists, getting more of them increases not only inequities but also the number of unnecessary interventions.

Most new physicians are drawn to specialties and geographic areas by the prospect of high incomes. In their training programs their mentors encourage them to specialize, thus leading to a vast undersupply of primary care physicians to meet most of people’s daily health care needs. Nine of our most prestigious medical schools, including Johns Hopkins, Harvard, and Columbia, do not even have a department of family medicine.  There is every reason to believe that new attempts to simply increase the physician pool will only worsen the situation.

Health care reform should, above all, build the primary care workforce and improve its distribution. Medical schools and residencies need to pay attention to primary care training, and to pay attention to developing, through research, the knowledge base to improve the adequacy of health services in the community.

Changing the culture of medical training will require a shift in thinking comparable to that which occurred a century ago in the Flexner report, which called for scientific, standardized medical education. Currently, there is no organized action to make medical education more relevant to changing health care needs (e.g., more co-existing illnesses, increasing rates of unnecessary interventions and adverse events, greater inequities in care). A concerted effort to bring this about, within both the private and public spheres, is now overdue.

Barbara Starfield, M.D., M.P.H., is a University Distinguished Professor at Johns Hopkins University. The focus of her research includes the social determinants of health and equity in health, and primary care policy. bstarfie@jhsph.edu.

For many years some economists and many conservatives have touted business management practice as the most efficient, cost-effective way to manage any complex enterprise. Curiously, no one seems to have suggested that the Medicare program is a fine candidate for just that approach. The provision in the Senate health reform bill for an Independent Payment Advisory Board may provide the opening to make that happen.

The classical prototype of a successful company is that it is centrally managed, with a CEO at the top, given strong decision-making authority by shareholders, and that it is efficient, keeps its costs under control, and sets an annual budget. Why is this model never invoked by conservatives for managing health care systems? For the obvious reason, I suppose, that it would logically move them toward a centrally controlled single payer system. But since we have in the Medicare program a home grown – but defective – model of such a system, paid for by taxpayers, run by the government, and delivering its benefits through the private sector, what better place to test a full business model?

As presently organized, Medicare violates every rule of an efficient enterprise. It has no CEO with powers of a kind expected in business. Its stakeholders, the Congress, have a right to interfere with its day-to-day operation. It has no annual budget or the fiscal discipline that imposes. It can set few limits to its expenditures, even to the present point of running an annual deficit. And it underpays its administrators in comparison with those with like responsibilities in the private sector – just as it has too few administrators in the first place.

The National Institutes of Health, the world’s preeminent biomedical research institution, exemplifies everything Medicare lacks. It has a director with strong authority, an annual and tightly managed budget, lay advisory groups, and a good relationship with Congress, one marked by deference on the latter’s part and considerable discretion in setting its priorities. Atul Gawande among others has celebrated the quality and efficiency of the Mayo Clinic, the Geisinger Health System, and Intermountain. They are all private but share a similar budget and administrative structure akin to that of the NIH—everything Medicare lacks.

The Independent Payment Advisory Board, a provision of the Senate reform bill, would provide the opportunity to put Medicare on a more solid administrative and budgetary footing, particularly for the control of costs. It would be comprised of 15 independent members whose duty would be to submit legislative proposals to reduce the per capita rise in Medicare spending. Beginning in 2118, the Board would be charged with making recommendations if Medicare spending exceeds GDP per capita plus 1%; in other words, moving down from the present 6% annual cost increase to 3%. For the first time, Medicare would have to live with an annual budget. Nothing could do more than that to make Medicare solvent in the long run, now projected by its trustees to run out of money in eight years.

To do its job properly, however, some limitations in the Senate bill would have to be removed or softened. The Board would be forbidden by the Senate bill to make recommendations that would ration care, increase revenues or change benefits, or to propose cuts in hospital or hospice coverage.

But can one imagine a good CEO running a business would continue to sell a product that would cost a huge amount to make but faced a guaranteed loss? Rationing for Medicare would simply entail making an assessment that some drugs or treatments are unaffordable or not worth the costs, threatening the overall fiscal stability of the program. It would not deny access to them. It just would not pay for them. Would such judgments in any and all cases necessarily be unsound? Can we really expect that the coming flood of baby boomers – projected to rise from 46 million in 2010 to 77 million in 2030 – can be supported in the years ahead without an increase in revenue (aka, higher taxes) and with no change in benefits?

At the least Congress should lift the long-time prohibition against taking costs into account in making Medicare coverage decisions. Would any business impose such as a rule on itself? That prohibition, together with the other restrictions in the Senate bill, makes no sense in controlling costs. They subvert its very possibility.

The trouble with taking seriously the notion that business management techniques are pertinent to health care is that, if you push far enough down that road, you can find yourself in some strange land. Given suitable power, the CEOs of large American corporations might do a fine job running Medicare. Where is Jack Welch when we need him?

Daniel Callahan is the editor of the Health Care Cost Monitor. His latest book is Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

A.B. Shaw, a British physician, once noted, “Aortic valve operations on the elderly are very cost-effective if the result is death or cure instead of prolonged illness.” While this may be a bitter observation, we know that the cost of treating chronic disease quickly surpasses acute lifesaving therapies because of the duration of treatment. Seventy-six percent of Medicare spending is on patients with five or more chronic diseases.

This post, as a follow-up to Polo Black-Golde’s post last May, analyzes the projected cost of seven common diseases affecting the elderly, and thus the Medicare program. Unless otherwise noted, all Medicare figures come from the most recent spending report from the Center for Medicare and Medicaid Studies (CMS).

Alzheimer’s disease

The number of new patients diagnosed with Alzheimer’s disease is increasing, but Alzheimer’s-related mortality is decreasing. Together, these trends account for the predicted increase in the number of people living with Alzheimer’s from 5 million today to 16 million by 2050. This growth will profoundly impact Medicare costs, given that the average annual cost of a Medicare patient with Alzheimer’s is triple that of a patient without: $13,207 and $4,454, respectively.

In 2005, Medicare spent $91 billion on patients diagnosed with Alzheimer’s, and this amount is expected to more than double to $189 billion in 2015, and increase to over $1 trillion by 2050.

Stroke

The cost of care in the first 30 days following a stroke is only $13,019 in mild cases and $20,346 in severe cases, and yet the lifetime cost of a stroke is approximately $140,048. The bulk of those costs comes in the form of chronic care and rehabilitation.

The mortality of strokes decreased 20.7% between 1995 and 2005. Over a similar period (1995-2006) the incidence has decreased 12.8%, but this trend is expected to soon reverse itself as the population ages – particularly ethnic minority groups who are at especially high risk of stroke. The result will be an increase in spending on stroke care, from $65.6 billion in 2008 to $2.2 trillion by the year 2050 if there are no changes in treatment, preventative care, or trends of risk factors (i.e. incidence of obesity).

Diabetes

Whereas the mortality of the previous two diseases is declining, the mortality of diabetes in the general population is increasing by 1.2% annually. Coupled with an exponential growth in the diabetic population (11 million in 2000, 23.6 million in 2009), and a predicted 52.9% increase in incidence rate between 2003 and 2023, the human and economic burden of diabetes in the future is certain to be overwhelming.

Currently 10% of health care dollars are spent on overall direct costs related to diabetes, amounting to $92 billion a year (1.5 times the amount spent on stroke or heart disease). The Centers for Disease Control and Prevention predicts that spending on diabetes care will reach $192 billion in 2020.

Medicare reported spending only $1.4 billion ($7,383 per discharge) on diabetes in 2007, but this number is limited to in-patient services, which excludes most diabetic care, such as insulin therapy.

End-Stage Renal Disease

Treatment for end-stage renal disease (ESRD), often caused by diabetes or hypertension, includes hemodialysis and kidney transplantation. Overall spending on ESRD treatment increased from $8.01 billion in 1996 to $33.61 billion in 2006. Recent data predicts a 150% increase in the number of patients undergoing hemodialysis and kidney transplantation in the next decade, which will continue the upward trend in treatment costs.

Medicare alone spent $23 billion on ESRD related hospitalizations in 2006, an average 9.2% annual increase from 1992.

Chronic Lung Disease

The Centers for Disease Control and Prevention lists fourth leading cause of death in the adult population as chronic lower respiratory disease, which includes bronchitis, emphysema, COPD, and asthma. The mortality of chronic lung disease is predicted to decrease at a rate of 1.5% a year until 2030, and yet the cost of treating it is predicted to more than double from $176.8 billion in 2006 to $389.2 billion in 2011 and to reach $832.9 billion in 2021. The reason for this skyrocketing increase is a 31.1% increase in the number of diagnoses predicted by the Milken Institute.

Medicare spent over $8 billion on respiratory disease, excluding pneumonia, in 2006, a figure that is bound to increase tremendously in the next decade.

Heart Disease

Heart disease has long been the leading cause of death in the United States. However, for the last 60 years, the age-adjusted mortality rate heart disease has been in decline. From 1950 to the mid-1980s, heart disease accounted for roughly 40% of all mortality; since 1986 this has slowly decreased. The most recent data from the CDC show that in 2005 heart disease accounted for 27.1 percent of overall mortality in the U.S, at an age-adjusted rate of 222 deaths per 100,000.

In contrast to the decreasing mortality rate from heart disease, expenditures are on the rise. In 2007, the overall cost of direct care for heart disease was $164.9 billion and is estimated to have been $183 billion in 2009. As the use of expensive treatments for heart disease such as pacemakers and internal defibrillators, continues to increase, so too will the cost of care. According to the Milken institute, overall cost of heart disease is predicted to reach $186 billion in 2023. In 2006, Medicare spent $24 billion on heart disease.

Cancer

The CDC reports that overall spending on direct care for cancer totaled $74 billion in 2004. While there are not any reliable cost projections for cancer, there has recently been an exponential increase in the cost of cancer drugs. Cancer treatment is especially prone to spending an exorbitant amount of money on a marginal benefit, with some treatments, such as Avastin – used for metastatic breast, colon, and non-small cell lung cancer – costing over $90,000 for a 1.5-month increase in predicted survival time, or $2,000 per day.

Medicare spent $7.3 billion dollars on inpatient cancer care, but this does not include most chemotherapy, which is administered as an outpatient service and is covered under Part B. Medicare spending on Part B drugs in 2004 totaled $10.87 billion, representing a steady 25% annual increase from the $2.76 billion spent in 1997. Given that the incidence of cancer in people above age 65 is nearly 10 times that of people under 65, as the population ages Medicare is bound to pay a large and growing portion of the nation’s over all spending on cancer treatments.

Considering that chronic diseases account for such a great proportion of Medicare’s overall spending, any increases in chronic care spending will directly affect Medicare. Ideally, Medicare spending will not increase annually more than the rate of inflation, 2 to 3%. However, each of these seven diseases explicitly underscores the fact that current trends make that goal almost impossible.

Kimberly Swartz is an intern at The Hastings Center.

Wellness programs in the workplace, such as free exercise classes, have been used for some time and offer employees the benefit of maintaining or improving their health. Some employers also offer reductions in health insurance premiums or deductibles to employees who participate in specific wellness schemes. Such programs sound like a win-win situation: employees are healthier and pay less for health care, and employers can reap the benefits of a more productive workforce.

However, these programs also raise some problems, and provisions proposed in Section 2705 of the Senate bill threaten to exacerbate them.

HIPAA legislation and subsequent regulations of 2006 allow employer-based health plans to vary premiums, copayments, or deductibles among employees as part of wellness programs. The regulations distinguish between two kinds of wellness programs: those that reward workers for participation in a health promotion or disease prevention program (such as a weight loss class or a smoking cessation program) and those that make rewards conditional on employees meeting a specific health target (such as normal BMI, cholesterol levels or smoking status).

Outcome-based wellness programs are permissible only if a number of conditions are met. One such condition is that the size of the reward must not exceed 20% of the cost of the employee’s coverage or, if the employee’s dependents are included, the cost of family coverage. The Senate bill proposes to increase this limit to 30% and possibly even 50%.

Current regulations and the Senate bill’s proposals leave open exactly how wellness schemes are to be implemented. Some employers may choose to absorb the cost of incentive payments in the short term and not increase premiums or copays, perhaps hoping to recoup the expenditure in the medium to long term through savings gained from a healthier workforce and reduced sick leave and absenteeism.

However, as explicitly recognized by the 2006 legislation, wellness programs that tie rewards to the achievement of a health status target can also be used to shift costs, both from “healthy” to “unhealthy” workers and from employers to those employees who fail to meet the stated targets (or refuse to participate in the wellness scheme).

What does this mean in practice? Based on the 2009 average of the cost of health care coverage, the 20% cap required by current legislation allows for a variation of as much as $965 per year for a single employee and $2675 for an employee with family coverage.

Despite the fact that there is no conclusive evidence of the efficacy of these schemes, or anything to suggest that the 20% threshold is often exhausted (and that further improvements could only be made with higher reimbursements levels), the Senate bill proposes quite significant increases. With regard to the current average cost of coverage for a single employee, a 30% threshold would amount to a difference of $1,447, and 50% would equal $2,412. (For family policies the sums would be $4,013 or $6,688, respectively).

These increases would disproportionately hurt lower-paid workers, who, generally, are less healthy than higher-paid workers and thus in greater need of health care, less likely to meet the targets, and less likely to afford higher premiums and deductibles.

As these numbers suggest, wellness programs can make health coverage significantly more expensive for those who cannot meet the targets stipulated by employers. This is illustrated by the wellness consultant Benicomp. The company’s Advantage plan implements wellness programs not by raising premiums, but by increasing deductibles for all employees covered under the health plan. Reductions are then offered to those workers who meet specific health targets. As the company explains, one way that such a scheme leads to savings for the employer is that individuals who cannot gain reimbursements under the scheme might be “motivated to seek other coverage options.”

People with multiple health problems and low incomes are among those who are most likely to feel the financial burden of the legislative loophole in the Senate bill, and may even lose health care coverage as a result. As such, wellness programs may seriously undermine one of the crucial goals of health care reform: to extend affordable health care coverage to all Americans, regardless of pre-existing conditions.

Making improvements to the workplace that could help workers adopt and maintain healthier behaviors is a crucially important and laudable goal. However, current provisions on wellness programs allow for highly inequitable cost-shifting to occur. Wellness programs of this kind run counter to the spirit of health care reform.

As we suggested recently in the New England Journal of Medicine, and as is urged in a letter to members of Congress by the American Heart Association and more than a hundred other patient advocacy groups, Congress should reject the Senate proposal to increase incentive levels for wellness programs.

Financial incentives have a role to play, but under fairness considerations the key point is that they must be equally achievable for all and, in particular, not penalize those who are already among the most disadvantaged. The focus should therefore shift to prevention and health promotion programs that are sensitive to the abilities and needs of lower-paid workers.

Kristin Voigt is a post-doctoral fellow in the Harvard University Program in Ethics & Health; Kristin_voigt@hms.harvard.edu. Harald Schmidt is a research associate at LSE Health of the London School of Economics, and a Commonwealth Fund Harkness Fellow in Health Care Policy and Practice at the Harvard School of Public Health; hschmidt@hsph.harvard.edu. The views expressed here are those of the authors and should not be attributed to the Commonwealth Fund, its directors or officers, or LSE Health.

The scene was a clean white surgical suite, with surgeons in light blue scrubs leaning over the patient on the table, concentrating intently on the job at hand: the ex vivo resection of the man’s liver. The photograph illustrated an article that appeared last month in The New York Times. It explained that the patient, Mr. Collison, had a cancer so entangled in his abdominal organs and blood vessels that his doctors in Milwaukee would not operate; he had to come to New York to find a surgeon willing to do so.

Dr. Tomaoki Kato and his team at New York Presbyterian Hospital/Columbia University Medical Center removed Mr. Collison’s liver and parts of other organs from his body, cut the tumor from the liver, and put the liver back in a 43-hour surgical marathon. The bill for the procedure is likely to be more than $300,000. Follow-up care will undoubtedly be hundreds of thousands more.

That’s an attention-getting number – $300,000 for a single procedure. Can we afford care like this? In the article, Dr. Kato’s boss asks, “What does this mean for medicine, doing these incredibly complex procedures to save individual lives?” He adds that the Talmudic principle that saving a life saves an entire world is “not a very health-policy, quantitative way of looking at it.”

Actually, health policy suggests that we need to ask a few questions before we conclude that $300,000 is too much. First, the bill needs to be put in terms that allow it to be compared with other medical care. Cost effectiveness analysis uses the cost of saving a year of life as the basis for comparison. So how many more years is Mr. Collison likely to live because of the operation?

Dr. Kato says that if the tumor doesn’t recur, “he could have a long, long time ahead of him.” Suppose the total cost of Mr. Collison’s care, including follow-up, comes to a million dollars. If he lives another 10 years in reasonable health, the cost for each year would be $100,000. If the total cost of his care is more, say, $1.5 million, that’s $150,000 for each year. If he lives more than 10 years, a reasonable possibility for a 59-year-old man, the cost per year goes down.

How does that compare with other medical care? Standard practice in the U.S. today includes many kinds of care that cost considerably more than $100,000, or even $150,000, to save a year of life. For example, statins to reduce cholesterol in a middle-aged man who has no other risk factors for heart disease costs more than $400,000 for each year of life saved. This figure, and the ones that follow, come from a report I wrote for the National Coalition on Health Care.

It might seem impossible for a medication that costs one person a few hundred dollars annually to cost so much for each year of life saved. But remember that statins have to be given to that man, and to others like him, for many years. The small expenses, including extra doctors’ visits and tests, accumulate over the years. Some of the men would never suffer ill consequences from their cholesterol even without statins. Since statins are not 100% effective, some men will suffer ill consequences in spite of them.  The bottom line: more than $400,000 for each year saved.

There are many other examples. Screening for diabetes in all adults 55 and older, instead of screening just those who have high blood pressure, costs more than $500,000 for each year saved. Screening for cervical cancer every two years, rather than every three years, costs more than $1 million for each year saved. These interventions may never generate bills as big as $300,000. Instead they generate a lot of smaller ones – tests for many people, for example, most of whom do not have the condition, follow-up tests, treatment for those found to have the condition. All these expenses are required to produce the final result, a life saved, a person who can look forward to a few, or many, more years.

Simple differences – focusing on higher-risk people or screening more often – make a big difference in costs, but they don’t draw attention the way a $300,000 hospital bill does. Despite their quantitative sophistication, health policy wonks, along with everyone else, too often focus on the big bills and fail to notice the implications of the little ones. The goal of medicine is to do as much as possible with our health dollars. The measure of success is not the size of an individual bill, but the cost to save a year of life.

The article reported that Mrs. Collison thinks that “even if the surgery buys her husband only a few years, it will have been worth it.” She’s speaking as a loving spouse, of course, but even from the health policy, quantitative way of looking at it, she may well be right.

Louise Russell is Research Professor at the Institute for Health, Health Care Policy, and Aging Research, and Professor in the Department of Economics, Rutgers University. She was a member of the first U.S. Preventive Services Task Force (1984-1988) and co-chaired the U.S. Public Health Service’s Panel on Cost-Effectiveness in Health and Medicine (1993-1996). lrussell@ifh.rutgers.edu; 732-932-6507.

As the debate on the Senate health reform bill winds down, some assessment of its viability in managing costs is in order. The best that can be said is that the prospect is uncertain, what the weather bureau might call “mixed precipitation” if it was in the Congressional prediction business.

The most notable and disturbing trend can be seen in what Peter Orszag said in late November as he tried to put the Senate and House bills in a good light. We need, he said, “to move toward the high-quality, lower cost health system of the future, and the reform reforms underway in the House and Senate will put us firmly on that path”

In short, as his language – “of  the future” and “on that path” – and much of the two bills make clear, the most common time frame is 10 years, which seems to me a dangerously slow stroll into the future. Even if the present rate of 6% annual cost inflation slowly abates, the baseline costs of the system will be much higher a decade from now.

In a December 10 report the Office of the Actuary of the CMS noted that Medicare costs per beneficiary usually increase over time as a result of price growth, more utilization of services, and greater intensity or complexity of those services. The report then discussed how difficult it will be for the proposed Independent Medicare Advisory Board to manage those costs. Since then the prospect that such a Board will make it through the Congressional debate has faded. The CMS did not say how hard much harder it would be without such a Board.

Atul Gawande received his usual attention in his most recent NewYorker article, claiming that the lack of a grand strategy for cost control may be just fine and that a variety of experimental approaches might well do the job just as they once did (and continue to do) in agriculture. That is not a fast-track method of bringing about change, and of course some of the experiments may not work or may be hard to implement on a national scale, as has happened before with Medicare pilot projects.

There is nothing per se wrong, and much good, to be said about such efforts. But they represent one more capitulation to the mañana approach that seems to have caught on, and exemplified as well in deferred starting dates for many important reforms, 2014 and 2015 in many cases. Better late than never, one might say, but it is like walking with deliberate slowness to call 911 to report a fire.

Hardly less striking has been the way in which one potentially fast moving and strong idea after another has been abandoned, watered down, or is on a death track: the public option plan, the Medicare Advisory Board, the excise tax on the costliest insurance plans, and the scheduled 2l.2% cut in Medicare payments to physicians (likely to give way to small increase).

While I have painted a bleak picture there are some good cost control features in the Senate and House bills: restructuring Medicare Advantage plans to reduce federal subsidies; reducing  annual market basket updates for inpatient hospital, home health, skilled nursing facilities, and hospice; and a requirement for the Secretary of the Department of Health and Human Services to negotiate drug prices for Medicare part D plans.

My worry is that a reform plan that works well to improve access will be achieved at the price of still more compromises on costs. That has been the trend so far. If that happens we are likely to be faced with a health policy doomed to a short life.

Medical care in general and Medicare in particular will not suddenly collapse. It will just rot away. A lower cost, affordable, and sustainable policy will require that everyone – doctors, patients, hospitals, and the assorted medical industries – understand that nothing less than a system guaranteeing decent care for all combined with a far more modest model for that care will suffice to get us into a tolerable future.

It comes to this: universal health care and universal self-sacrifice. That is the only way a decent society can give its citizens what they need in the long run. But the short run is the place to start, and that does not appear likely.

Daniel Callahan, editor of the Health Care Cost Monitor, is the author most recently of Taming The Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

Elimination of a public insurance option to curb health care costs by competing with private insurers. Comparative effectiveness research that can’t be used to make coverage decisions. These are just two of the many compromises that have been made, and will be made, in an effort to write health care reform legislation. Compromise is inevitable, but how much compromise is too much – so extreme that it is unethical? Philosophy offers some insights.

Health reform is a moral imperative; our health care system is peppered with injustices that must be remedied. But no health care system will be perfectly just. This may have nothing to do with social “weakness of will” in bringing about a just health care system. Rather, the very complexity of health care systems today (economically, technologically, organizationally) and the heterogeneity of health needs will result in “built-in” injustices, no matter how we reorganize, refinance, or rebuild those systems. Health reform can reasonably hope to achieve only a “just enough” health care system. This raises a challenging moral problem.

If we have minimalist health reformers, satisfied to rid the system of a few injustices (as I believe is true of the Republican reform proposals), do they deserve moral praise for having brought about a somewhat more just reformed health care system? Or do they really deserve moral criticism for being too timid or too indifferent to serious injustices preserved in the system?

Alternatively, there is nothing morally commendable about being uncompromising, dogmatic or fanatical about health reform, even in the name of justice. Defeating substantial but imperfect health reform efforts to maintain one’s own purity of heart at the price of prolonged injustices in an unreformed system yields a “purity” that is deeply stained. Both the Catholic bishops and abortion rights activists could be criticized on this point.

We are left then with this problem: How should we judge that certain compromises regarding health reform are “just enough,” more worthy of moral praise than moral criticism? No simple moral principle or moral formula will yield an answer to this question. But we do have some capacity to distinguish more serious from less serious injustices. 

Our health reform efforts will not be “just enough” if we fail to provide secure access to needed, effective, cost-effective health care for the medically least well off. Patients whose health problems threaten them with a premature death or functional disability if they cannot get care that is available to insured individuals should be at the top of the list. Thus, a just enough health reform plan ought to reduce to near zero from 45,000 the number of uninsured or underinsured individuals who die prematurely for lack access to effective medical treatments. 

I should add that being terminally ill does not automatically get someone included in the category of medically least well off, as far as health care justice is concerned. Although those individuals are unfortunate, their fate is not a product of unjust social policies (for the most part). They do have just claims to cost-effective and effective palliative care. But they may not have a just claim at social expense to extraordinarily expensive interventions (many of these new cancer drugs) that yield only extra weeks or months of life on average, especially if those massive social costs would threaten our commitment to meeting the just claims for health care of those who can benefit much more.

A “just enough” health reform effort ought to minimize overtreatment of terminally ill patients. This is directly related to the next point.

A “just enough” health reform effort ought to assure equal access for all to a comprehensive range of effective and cost-effective medical interventions. They should constitute a “basic” plan guaranteed to all. Perhaps such a plan is an ideal, not politically achievable right now, but approximating this ideal deserves moral praise.

A “just enough” health reform effort will require shared sacrifice from all. Serious cost control is essential to the long-term viability and justness of a reformed health care system. Hospitals, physicians, drug manufacturers, and insurers cannot charge “whatever the market will bear” for their services. 

Prospective payment mechanisms will need to be widely deployed to nudge all of these parties into more cooperative and efficient health care delivery practices. Strong regulatory and competitive pressures, such as would be created by a national health insurance exchange open to all and risk-adjusted to preserve a level playing field would help to motivate insurers to improve efficiency with or without a public plan option. It would also likely reduce dramatically the number of health insurers.

Patients must be willing to give up marginally beneficial costly health services, at least at social expense, in order to protect the affordability of the basic plan guaranteed to all. Doing so would reduce the aggregate size of the government subsidies needed to make the plan affordable to the working poor and possibly also the middle class. Even with subsidies many households will still feel some financial pain, but this will be marginal pain relative to the current plethora of bankruptcies precipitated by health expenses. 

If these recommendations are closely approximated in the health reform legislation that emerges from Congress, we will have compromise that is sustainable, affordable, and “just enough.” But even then the morally appropriate stance for the advocates of these limited reform efforts would require these words: “We are sorry that we were unable to accomplish more to remedy what we acknowledge are serious remaining injustices in our health care system. We will redouble our efforts to reduce them through continued advocacy for policies that will achieve that goal.”

Leonard M. Fleck, Ph.D. is professor of philosophy and medical ethics in the Center for Ethics and Humanities in the Life Sciences at Michigan State University. He is the author of Just Caring: Health Care Rationing and Democratic Deliberation(Oxford University Press, 2009). He recommends a recent book by Richard Thaler and Cass Sunstein Nudge: Improving Decisions about Health, Wealth, and Happiness (Yale University Press, 2008). fleck@msu.edu; 517-355-7552.

Imagine for a moment that you are in charge of the U.S. health care system, and must decide whether to pay for a new cervical cancer screening test, let’s call it PapFinder. For every $800,000 spent on PapFinder, health care providers will add one year of life to the population of women receiving this test. Given this information, would you choose to add PapFinder to the standard diagnostic arsenal?

About a decade ago, I presented a national sample of U.S. physicians with a question like this, and almost of them stated that PapFinder (a hypothetical test, by the way) was too expensive, bringing benefits so rarely that they would not offer this test to their own patients. The desire to prevent and treat cancer, it seems, had limits.

Or did it? I presented a random sample of these physicians with a different choice. I asked them whether they would offer annual pap smears (well-established tests in routine clinical use) if they learned that the tests cost more than $800,000 to save one year of life – a figure that came directly from the medical literature. Given this information, physicians were nearly unanimous in saying they would offer their patients this test.

Same cost, same infrequent benefit, but very different attitudes. What’s going on here? And what do the results of this decade-old study tell us about the recent hubbub around mammography screening and, indeed, about the ongoing health care reform debates?

For starters, health care economists are nearly unanimous in holding that interventions that cost more than $800,000 per life year are not a wise use of resources. (Most endorse cost-effectiveness thresholds closer to $100,000.) That means that doctors’ attitudes toward PapFinder appeared quite rational: lots of money, little benefit … not a smart idea.

Why, then, did doctors remain enthusiastic about pap smears even after learning about the $800,000 figure? As a physician working in behavioral economics, I am quite familiar with the irrational forces influencing people’s attitudes towards health care interventions. In this case, a lot of such forces were at work. 

For starters, physicians were influenced by loss aversion. People don’t like having things taken away from them. Doctors were used to providing annual pap smears to their patients, and they knew that their patients would be upset if they no longer offered such tests. We see parallels in current mammography debates, with many women in their 40s responding anxiously to the idea of no longer receiving annual mammograms.

Second was the belief that earlier detection of cancers is always better than later detection, a belief that has also influenced the mammography controversy. This idea is not supported in the medical literature.

In fact, medical science has discovered that some early cancers pose little threat to people’s lives, with the cancers growing so slowly that any intervention to thwart them would cause more harm than benefit. We’ve even learned that some cancers can regress over time. But these cold hard medical facts stand little chance against the hot passions of cancer psychology: doctors and lay people, understandably frightened by the thought of cancer, cannot believe that early detection could be anything but good.

Third was the limited human attention span. When we contemplate important decisions, it is difficult to consider all of the relevant factors, and thus we focus our attention on the most obvious ones. Deciding whether to live in Michigan or California, for instance, we think about the weather while ignoring other important differences between these two states – differences in daily commuting, for example, a factor that has been shown to have far more impact on people’s lives than climate. 

Similarly, when people make decisions about cancer screening, they focus most of their attention on cancer – if the test detects cancer, they conclude it must therefore be worthwhile. People don’t pay as much attention to other aspects of the test. If it mistakenly characterizes a benign lesion as cancer, for example, it will cause undue anxiety or even lead to unnecessarily and potentially harmful treatments. But we don’t give such factors much weight when contemplating whether to utilize the tests.

Everyone who cares about this country should care about finding ways to reduce health care costs. The recent debates over mammograms reveal just how difficult it will be to achieve this goal, for controlling costs will require us to overcome very powerful psychological forces. The biggest impediment to successful reform of our health care system, thus, is not blue dog democrats or obstinate republicans. It is human nature.

Peter Ubel, M.D., is George Dock Collegiate Professor of Medicine at the University of Michigan, and author of Free Market Madness: Why Human Nature is at Odds with Economics—and Why it Matters (Harvard Business Press, 2009). paubel@umich.edu; 734-615-8591.

Dear Senator Lieberman,

Your pledge to filibuster any legislation that contains the mislabeled “public option,” which many view as a stalking horse to collapse the current employer-based system into a federally run single payer system, has given you a pivotal role in the health reform debate. Combined with your concern that current proposals are unaffordable, you have staked out a centrist position that mirrors the beliefs of a clear majority of middle class Americans.

Doing nothing at all, however, is also not a viable alternative, which most Americans also realize. The existing health system is not clinically, fiscally nor morally sustainable, a position that I know you share as well.

These two seemingly contradictory policy positions open the door for you to insist that the majority Democrats adopt a fundamentally different strategy, creating a less complex, less fiscally unacceptable set of reforms that could resolve many of current health sector problems but in a manner that would gain broad support across the country.

The key to a workable strategy is to split apart the current massive “comprehensive” proposals into a series of separate bills, bringing up for consideration the least controversial ones first. Not only would this sequential process ensure that a number of widely acceptable reforms could in fact be passed, but it would also reduce the opportunity for some senators less honorable than you to hide unsavory side deals deep in a massive and unreadable document.

How would this work in practice?

There are four different types of reform measures contained within the current omnibus legislation, each of which could be brought up as an independent freestanding bill:

1. Security for People with Insurance. This bill should be submitted, voted on, and passed into law before any other health reform legislation is introduced. It would encompass the many regulatory measures that guarantee to those Americans who already have private insurance coverage (some 60% of the population) that they will be able to count on it when they need it. The most obvious examples are the prohibitions against refusing to cover pre-existing conditions or dropping individuals when they get sick, and copayment ceilings to eliminate medical-related bankruptcies.

All these measures mimic the regulatory strategy that other countries, like Switzerland and the Netherlands, have long been used to steer for-profit private insurers, in effect transforming them into a public utility. Indeed, in Switzerland private insurers are prohibited from making a profit on the basic health insurance – a measure that should also be considered in this regulatory package.

Of course, all these regulatory measures (except the last) will cost additional money to implement, and, unless modified as in proposal 2, below, will likely increase premiums. However, there is broad agreement among the citizenry that these measures are essential, and until these measures are passed and implemented – until existing health insurance is seen as “safe” – a majority of the middle class will not trust or support any additional effort by Congress to reform other aspect of the health system. .

2. Cost Reduction. The existing omnibus bill makes only a slight bow toward the types of fiscal restructuring that most experts agree is necessary to adequately constrain costs. Creating a medical home for chronically ill patients, increasing the relative pay of primary care as compared to specialist physicians, and requiring Medicare to receive the lowest rate for pharmaceuticals negotiated by private sector pharmacy benefit managers (such as Medco) are all examples.

Note that none of these measures calls for explicit rationing of necessary services or other highly controversial intrusions of federal power into individual medical decisions. Measures such as requiring counseling on living wills for Medicare recipients should be kept for a separate bill entitled, “Rationing Publicly Paid Health Care,” which is unlikely be brought up for consideration until after the 2010 election.

3. Expanding Coverage to the Uninsured. The passage of bills 1 and 2 make it possible to consider extending coverage to the complex mix of citizens (and only citizens and legal immigrants) who currently are not insured. This third category of reform probably should consist of several separate bills, again with the easiest to pass being brought up first.

This process arguably would start by extending Medicaid to all income-eligible citizens, and extending the income eligibility ceiling to 150% of the poverty rate. Since the 50 states are in terrible fiscal shape and cannot cover their 45% share of the cost, this legislation should only come into force contingent on passage a separate piece of legislation paying for it, as in proposal 4, below. 

By extending Medicaid to all those it was intended to serve when it was passed in 1965, all legal citizens below the poverty line would then have full coverage. This would free the Congress and the American people to have a free-ranging debate (which they have not had thus far) on how to cover the remaining different groups of uninsured. 

Additional, separate bills could be introduced sequentially that would address the largest of these groups. One bill could require parents to cover children until age 26 unless those children had separate coverage. A set of arrangements could be made for dealing with the unemployed through the extension of COBRA coverage, although, as with Medicaid expansion, a rider should prevent implementation until a separate funding bill is passed.

4. Paying for the Uninsured. This is the most difficult of the four reform topics, which is why it should be left for last. It is also separated out so that there can be a clear debate on the financing issue. Further, a specific requirement for discussion of all health financing bills should be that all new federal expenditures must be costed out on a 30-year basis, including all interest on borrowed funds. This would add precipitously to any new spending proposal, and allow the American citizenry to understand the full extent of what it will cost current taxpayers and – inevitably – their children.

Most importantly, the first separate funding bill to be brought up should be for the Medicaid extension from proposal 3, above. This bill should force the federal government to undergo all of the recession-related financial savings measures recently adopted by most state and local governments across the country (and similar to those adopted by most private employers).

Before a single cent of additional taxes is levied, Congress should impose A) a total hiring freeze on every branch of the federal government, except for the uniformed services, B) an across-the-board 10% pay cut for every federal employee, starting with the president and every member of Congress, and C) additional furlough days, based on a sliding scale tied to future federal revenue shortfalls.

The bill should further specify that every cent of savings from this program will be directed to fund the Medicaid extension, and that no additional funds will be applied except to make up a shortfall after the savings from this federal government austerity plan are applied. Only after the passage and immediate implementation of this austerity measure (as with the security of insurance bill in proposal 1, an emergency preamble is in order) should any new tax burdens of any kind be considered.

Taken together, this four-part process would probably take somewhat longer to legislate than the omnibus health reform bills now in Congress. However the separate, sequential nature of this approach is much more likely to ensure passage of key health reforms that the majority of the American people want. It would also ensure a free and open debate about all financing issues, and require that the federal government itself take the first steps by putting the country’s most expensive government – and the only government not currently subject to the recession – on a long-overdue fiscal diet.

I urge you, Senator Lieberman, to use the leverage you now have as the necessary 60^th vote in the Senate to demand that the above strategy of sequential health reform be adopted. Your actions could well represent the last viable chance for major health care reform in this presidency.

Richard B. Saltman is professor of health policy and management at the Rollins School of Public Health of Emory University and associate director of research policy at the European Observatory on Health Systems and Policies in Brussels. RSALTMA@emory.edu; 404-727-8743.

Eventually, it will dawn on many Americans that nothing less than rigorous, science-based, and mandatory guidelines will be necessary to control the ever-rising costs of health care. By “mandatory” I mean that they will be used to set coverage benefits, determining what will and will not be provided, and using cost as one criterion. They will have to start with the Medicare program and, if the past is any guide, they will be adopted by the private sector.

There are no other methods on the horizon, much less in the proposed reform legislation, at all likely to bring the rate of annual cost escalation down from the present 6% level to the 3% needed for long-term affordable and sustainable health care. Only the power, and the will, to say no to patients, doctors, hospitals, and industry can do that job. And only rigorous treatment standards, and if necessary price controls, can do that.

The recent outburst of anger by many at the recommendation by the U.S. Preventative Services Task Force that routine mammography not begin until age 50 shows how difficult it will be to move toward that goal. A number of disturbing features of the outburst make that clear. The most notable feature was the absence of any serious objection to the scientific quality of the research behind the recommendation. Instead, it took the form of a charge (with no evidence to support it) that its tacit aim is to ration care, and a forerunner of likely efforts to turn recommendations into rules.

Hardly surprising was that the assault was spearheaded by those groups most effected professionally and monetarily by the recommendation, the National Cancer Institute, the American Cancer Society, and the American College of Radiology. 

A common criticism as well was that the recommendation was a threat to the doctor-patient relationship, presented as the final and absolute arbiter of treatment decisions. That criticism echoed a major reason (along with industry opposition) why the $1.1 billion comparative effectiveness program initiated as part of the President’s stimulus package was immediately neutered by prohibiting its research findings to be used to formulate treatment guidelines or even recommendations. The screening guidelines were taken as an ominous warning of worse to come, that of the slippery slope hazards of a recommendation, and even one which in fact took no power away from doctor-patient decisions.

Perhaps the most common reaction, however, was one bound to plague every future finding of comparative effectiveness research – much less the even more desirable cost-effectiveness research (if we ever get it). How can we tolerate any finding, the indignant response seemed to say, that shows that even one statistical death will result from a research-dominated calculus based on population studies?

It was once said that one picture is worth a thousand words. It might now be said that one statistical death in a government recommendation that encompassed thousands is one too many. The task force calculated that there would be one death in every 1,900 women undergoing annual mammography over a 10-year period; that is 19,000 procedures. Of course many more lives could be saved if every woman over age 20 was screened annually. Even the critics of the government recommendation did not go that far, tacitly recognizing that it makes sense to set some limits – but not conceding the rationality of doing so.

Shortly before the breast screening debate got under way The New England Journal of Medicine published an account of a little-known program in Washington State called the Health Technology Assessment Program, designed to be used by various state health agencies. The purpose of the program, initiated by the legislature with only one negative vote in 2006, is to assess the clinical effectiveness, safety, and cost effectiveness of those technologies thought likely to be overused or underused or to raise questions of safety or cost effectiveness.

If it is determined that a technology should not be covered, even in cases of medical necessity, the state will not allow it in their programs. The assessment agency can, that is, ration care failing to meet its standards, but also mandate beneficial treatment that can raise costs. 

That program points us in the right direction for cost control: an agency that assesses technologies and makes binding decisions about them. If the Mayo Clinic, Geisinger, and Intermountain are taken to be exemplary models for the organization and delivery of health care, the Washington technology assessment program should be emulated to control costs.

The Senate health reform bill’s proposed Medicare commission to monitor the program and keep its spending in check, combined with the work of a strengthened comparative effectiveness effort (to encompass cost effectiveness as well), could come close to doing what the Washington state program does. That would be serious reform of a kind now absent, and the ingredients for doing so can be found in the Senate and House bills, but in a diluted form. They only need some fortification. A lot of it.

Daniel Callahan is editor of the Health Care Cost Monitor and author of the new book, Taming the Beloved Beast: How Medical Technology Costs are Destroying Our Health Care System.

Every fall we go through the same ritual: Congress compares the actual Medicare expenditures for physician fees to its projections and if spending exceeded the target, which it has each year since 2003, and then fees for the coming year are reduced. In the next phase of the ritual, the doctors cry foul, asserting they are being sacrificed to the gods of the balanced budget. Just as the knife is about to fall, Congress revokes the evil decree. In the end, reimbursement typically goes up, not down.

With each passing year that no adjustment is made, the reduction required to bring Medicare into compliance with long-range targets grows. This year, as a result, the “Sustainable Growth Rate” formula requires fees for some subspecialists to fall. Among the hardest hit will be cardiologists and radiologists. Payment to cardiologists for office visits is supposed to fall by 8%. Payment for several tests commonly ordered by cardiologists is also supposed to fall, with SPECT-perfusion imaging (a study sometimes performed as part of a stress test) dropping 36% over the next four years.

Predictably, the American College of Cardiology is outraged, asserting that these changes would spell the death knell for cardiology. Most likely, according to the economist Uwe Reinhardt, Congress will come to the rescue of the cardiologists, though a definitive overhaul of the SGR formula as part of the health care reform package appears unlikely.

But whatever happens this fall, should reimbursement for visits to cardiologists and for diagnostic tests decrease?

The answer is that adjusting fee-for-service payment rates is the wrong way to go about controlling the escalating cost of medical care. Simply decreasing the income of cardiologists and increasing it for primary care physicians will not stimulate more medical students to go into primary care (one of the arguments advanced for the readjustment), and lowering reimbursement for selected tests will not prevent excess utilization of procedures (the main justification for this step).

A very real concern is how cardiologists are likely to respond if their fees are cut. Some argue that they will stop taking Medicare patients. This seems implausible, as most cardiac patients are over 65 or disabled and are enrolled in Medicare. There simply will not be enough privately insured patients to go around.

Some cardiologists will close their offices and move their practices to the hospital, where they can get better reimbursement. This would limit access for patients, particularly in rural areas. It might also result in higher hospitalization rates. One of the few ways in which medical costs have fallen in the past decade is through the move from the inpatient setting to the outpatient setting – reversing this trend would be extremely undesirable.

What about cutting reimbursement for cardiac tests – is this a good idea? Imaging expenses have risen more rapidly than any other physician services billed to Medicare: from 2000 and 2006, expenditures rose 17% per year, going from $3.6 billion to $7.7 billion for MRI, PET, and CT scans alone. And the use of cardiac imaging has been rising at 26% per year – with no evidence of improvement in patient outcomes.

Slashing reimbursement for SPECT scans – the test singled out this year – may well be counterproductive. One device manufacturer has already predicted  that physicians will simply substitute a different but equally expensive test, cardiac PET scan imaging. In addition, cardiologists claim they will shut down their in-office diagnostic services, arguing that the services will no longer be lucrative enough for them to perform, and refer patients to the hospital, which will result in higher system-wide costs.

It is difficult to believe that the decreased fees will be of sufficient magnitude to produce this dramatic change. More likely, a fall in the per-test reimbursement will stimulate a further increase in volume. Referral of patients for in-office tests is a major source of revenue for cardiologists. In fact, the preponderance of the evidence indicates that self-referral leads to excess utilization.

The right response to the overuse of diagnostic tests is to put a damper on self-referral. One modest attempt in this direction is the “sunshine” provision in the House bill and the Senate Finance Committee bill, which would require physicians to tell patients if they are referring them to testing facilities in which they have a financial stake. The Senate Finance Committee bill would also require doctors to offer Medicare patients a list of alternative testing facilities. But taken together, a decrease in the amount paid both for office visits and for in-office testing might, as the cardiologists argue, result in a move of all cardiac services to the more expensive hospital environment.

Cardiologists, radiologists, primary care doctors, device manufacturers, and hospitals all function within a complex ecosystem. Simply modifying the Medicare fee structure will result in adaptation by the component parts to try to maximize revenues and maintain key power relationships. The cardiologists’ threat that they will move their practices to hospitals or order different diagnostic tests are examples of the kind of flexibility that preserves an ecosystem – and makes reform so challenging.

The fix will require more profound and systemic change. For example, a single global payment to a cardiologist to care for a patient with heart disease, rather than fee-for-service payment for office visits and tests, would lead to judicious use of hospital care, outpatient visits, and diagnostic tests. Simply tinkering at the margins is doomed to fail.

Muriel Gillick, M.D., is a clinical professor of Population Medicine at Harvard Medical School and a physician specializing in geriatrics and palliative medicine at Harvard Vanguard Medical Associates. mgillick@partners.org; 617-509-9977.

With the support of budget hawks, liberal health care reformers, and the innovative biologics industry, both Senate and House versions of health care reform propose a framework to bring the societal benefits of generic drugs to the often-expensive biotechnology drugs known as biologics.

In the political arena, the proposals pit high-risk, high-tech biotech companies against the low-research, low-margin generics industry, but for society at large the challenge is to strike a balance between innovation and cost savings, between short-term savings and long-term benefits. Get that balance wrong and both innovation and long-term cost savings would vanish along with the biologics industry. 

The generic drug industry as we know it now did not exist before 1984, when the Hatch-Waxman Act enabled a pathway for abbreviated approval of innovative small-molecule drugs (ie, chemicals, usually pills) whose patents had expired. That pathway allowed newly constituted generic drug manufacturers to rely on the clinical and other data of the long-toothed innovator for approval of chemically-identical copies of off-patent drugs.

Prior to this Solomonic experiment, any proposed identical drug copy would have to submit a full clinical and nonclinical review package for approval, a lengthy, costly and unattractive proposition. Now, that law has been an overwhelming win-win success: a boon for a new generics industry, a boon for U.S. consumers, and, maybe most surprisingly, a boon for innovator companies. 

That last sentence may seem counter-intuitive, but true innovators require a market that isn’t strangled by old growth trees. The certainty of time-limited exclusive markets (at the theoretical maximum, limited by a 20-year patent life, but in practice averaging about 12-to-13 years, since patent clocks must start running well ahead of first sale) provides the date-certain “controlled burn” that opens the ground to new trees.

Before this mechanism, a pioneering innovator could in practice perpetually extend market dominance, with a decade or two of market-clout to crowd out even clearly superior new products. Whether a clearly superior product could in fact displace the perpetual market leader wasn’t the point; with a 10-to-20-year investment required to bring a challenger forward, only the very powerful few could try.

Now, 25 years later, the U.S., with its unique combination of a generic pathway and a non-price-controlled market for innovation, enjoys the lowest generic drug prices in the world. And we are just entering the golden payoff of this great social experiment: by 2015 fully 85 percent of small-molecule (chemical) drug prescriptions written in the U.S. are expected to be for a low-cost generic. (That percentage was 67.3 percent as of 2007.) And with a still-free market for innovation, that innovation engine continues to try to create the transformative products that we all hope are available one day for our own and our children’s future ills.

And all of that innovation cost is being borne on the backs of a shrinking percentage of the prescription market. But it is still working.

Does that math mean that new drugs are at launch more expensive than they would be if we had no generics? You bet. The whole generics experiment is a balancing act of pay-now, save later. So far that balancing act seems to be coming out to benefit society.

It may seem surprising that blockbuster drugs like Enbrel, the breakthrough treatment for rheumatoid arthritis; erythropoietin (EPO), for anemia; and a long list of anticancer antibodies were not already subject to Hatch-Waxman, but in 1984 the science that led to these life-saving protein products was mostly science fiction. But it isn’t history alone that left these drugs out of the generics bonanza; it is the difficulty in defining just what a generic “copy” might be.

Unlike small-molecule drugs, which are defined precisely, down to the last atom, biologic drugs are not approved with such a precise specification, but rather are approved as the process that creates them. The active ingredient in Lipitor, a small molecule drug and the leading drug for lowering cholesterol, is precisely the calcium salt of one spacial arrangement of 76 atoms, C₃₃H₃₅FN₂O₅.  By contrast, although we know a great deal about the composition of Enbrel (eg, it has approximately 7000 atoms, more or less), that drug is defined not by its chemical structure but by the process that produces it.

Even after the patents for Enbrel run out, the information about exactly how it is produced may not be publicly known; that trade secret may be known only to the manufacturer and to the FDA. The FDA cannot by law just hand over this manufacturers secret information, which may and usually does involve manufacturing know-how that the manufacturer may be using in other, still patented, drugs. (A generic copier of an off-patent small-molecule drug also usually has to create methods of producing that exact copy, but since the molecule is defined by its composition not its process, any way will do.)

Handing over all the details of the manufacturer’s production information (which would require a change in present property law) is not in fact what generic manufacturers of biologics seek. They seek to introduce a brand new concept called “similarity” in order to bypass this identity problem with biologics. What is being proposed is the ability of a potential generic manufacturer to introduce a “similar” molecule to the innovative product, abandoning the principle of exact copy that is the basis of Hatch-Waxman, in an abbreviated approval process that relies in whole or large part on the clinical data of the original innovative product.

How similar“similar” has to be, to be safe and effective, is a complex issue, ideally settled on hard science, case-by-case by FDA, but the prospective political problem in even considering this concept of “biosimilars” or “follow-on-biologics” is in balancing the legitimate and useful societal desire to have lower costs that might result from availability of such a follow-on biologic against the equally legitimate societal desire to continue to have new innovations. 

In small molecules, patents and patent life provide the principal means to insure this balance. But patents protect identity. They aren’t designed to protect “similarity.” While some overly broad patents may have been issued in the early days of biotechnology, increasingly the patents issued today narrowly protect the described innovation.

That patent narrowness is as it should be. But if “similarity” is enough to compel the FDA to use an innovator’s clinical data to benefit a proposed “follow-on” copycat, what protects the innovator, with patent-life intact, from this unfair free ride?

It seems that by moving from identity to similarity, that protection cannot be guaranteed any longer merely by patents: the day after an innovative biological product is introduced, there could be “follow-on” competition, just different enough to escape the patent but similar enough to allow the freeloader to avoid running expensive and risky clinical trials. If similarity opens the data files of the innovator, few if any biologic innovators would make the initial investment (and, by the way, there would then be no follow-on biologics in the future either; generics require innovators for society’s benefit to continue).

So, in order to insure the balance of innovation and generic savings, it is necessary to protect the innovator with some protection outside of the patent system. What has been proposed in both House and Senate bills is to enable an abbreviated and accelerated “follow-on biologic” or “biosimilar” after the innovator product, relying in whole or part on the innovator’s clinical data, but to only allow this use of the innovator’s clinical data after 12 years of market exclusivity. This “data exclusivity” then becomes the primary umbrella shielding the innovator from unfair appropriation of its expensive and hard-won innovative data, allowing a fair period of market exclusivity to recover a return on investment. 

And why 12 years? Well, you will hear all kinds of scientific arguments citing the complexity of biologic molecules and densely documented economic arguments citing the expense of their initial innovative development and the market’s economics. These detailed arguments are compelling, and most argue strongly for somewhat longer than 12-year data exclusivity.

But in the end, a simpler answer can be given: 12 years of data exclusivity approximates the actual market exclusivity for small molecules, and that balance has worked out pretty well there.  Too much longer and one is seeming to give biologics an unfair advantage over small-molecules (and unfairly delaying society’s low-cost benefits from follow-ons), and too much shorter would signal strongly to innovators – and to their investors – that they should rationally cease innovation in biologics, since future innovation may not pay.

 Whenever the political process engages in changing the rules in a market, there is always the real risk that unintended negative consequences will swamp expected benefits. Considering the millions of patients awaiting new treatments for arthritis or cancer or Alzheimer’s, and considering the proximate potential that the understanding of the human genome holds for new ways to tackle these and other diseases using modern biology, an ancient principle of medicine should hold sway in the halls of Congress: first do no harm. Twelve years of data exclusivity for innovative biologic drugs may not be exactly the right number, but it is pretty similar to whatever that number is.

Joshua Boger, PhD, is the founder and former CEO of Vertex Pharmaceuticals Incorporated, a leading biotechnology company that works exclusively on small-molecule drugs for major diseases. He is the immediate-past chairman of the Biotechnology Industry Organization (BIO), chair of the New England Healthcare Institute and a board member of The Hastings Center. jsboger@aol.com.

Those concerned with the relationship of medical technology to health care costs should not miss Barry Meier’s article last week in The New York Times. Using the example of implantable defibrillators, he describes many market dysfunctions, including Medicare’s “laissez-faire approach” to soaring spending, the misalignment of physician and hospital incentives, financial ties between physicians and device companies, and the failure to develop good data through registries to track outcomes of competing devices.  The list goes on.

It is clear that if we cannot redesign the payment and delivery systems to reward value, we cannot raise quality or control spending. And to date, the device industry has successfully undermined efforts to manage utilization, align incentives among physicians and hospitals, and develop and use meaningful data.  

It is in the DNA of for-profit companies to expand markets, grow market share, create markets where none existed, and extract profit. That is true whether the product is Cheerios, iphones, or defibrillators. However, our dysfunctional health care marketplace and our politically compromised Medicare program seem unable to demand value in return for billions of health care dollars.

Medicare has become a political battleground. Pressure from health industry and provider forces in 1989 blocked Medicare and Medicaid from including cost effectiveness in its assessment of new medical technologies.

Despite improvements in Medicare’s coverage process in the 1990s, which determine if and under what circumstances Medicare will cover and pay for new technologies or procedures, my research has shown that the policies are rarely enforced and don’t change physician behavior. And, Medicare’s payment methodology allows the calculation of the flat rate “diagnostic related group (DRG)” to include all the input costs – so the rates build in the high costs of certain technologies. 

Admittedly, the Medicare pricing method is fraught with irrationalities and arbitrariness – all greatly lamented by those subject to it. But, overall, Medicare has been a pushover to both rising prices and excessive utilization.

As costs continue to rise without reform, however, CMS is likely to try to ratchet down prices across the board. Given what the Dartmouth Atlas research has taught us about regional variations in technology utilization, downward pricing pressure will punish those who use technology appropriately and give others the incentive to do more to make up the lost income.

The device industry has also fought hard against efforts among physicians and hospitals to align their interests for greater efficiency and lower costs. There has been a strong industry backlash against “gain sharing demonstrations” – the term refers to a process to allow hospitals and physicians to benefit from efforts to reduce expenditures. Integrated and accountable health plans – with insurance, hospital, and physician functions aligned – have done a better job than conventional fee-for-service providers in resisting unnecessary and harmful overutilization and are better positioned to pay for value not volume.

While I’m a strong advocate of health reform and am mindful of the challenges, the current proposals have backed away from many of the changes required to use technology more effectively. The comparative effectiveness provisions have been watered down, with bans on the use of cost information and restrictions on the use of any comparative information for actually making decisions. Gather data, but don’t use it, is the message.

Efforts by the Blue Dogs to reduce wide variations in utilization from region to region (we need to study what the Dartmouth Atlas has demonstrated for years), while quite timid, have also been watered down by pilots and demonstrations. I’m more hopeful that the payment reforms in early stages at the Centers for Medicare and Medicaid Services (bundling payments for episodes of care and pay for performance demonstrations, for example) might bear some fruit in the long run.

CMS must have the authority and the tenacity to implement these reforms. But for now, even discussion of managing the use of technology gets converted into cries of “rationing” or “government interference.”

Meanwhile, proposals in the House bill to levy a 2.5 percent excise tax on the sale of medical devices and in the Senate Finance Committee bill to assess $4 billion in annual fees on the medical device manufacturers are completely at odds with the need to reduce health care costs. If, as Barry Meier described, the outlays for implanted devices in Medicare are at $76 billion and rising, taxing the manufacturers hardly gets at the challenge. I’m not opposed to these taxes because they might “stifle innovation,” as the industry alleges; I’m opposed to them because they won’t control costs, and may actually raise them.   

 I’m a great fan of innovation in medicine. I’m also a great fan of innovators. They will respond to incentives. Our current system does not demand value or reward value. The best of our medical innovators will fight change, but, if required, will respond to rational incentives to provide value and lower costs with the kind of innovation that we need. Our politicians have to have the courage to demand it. 

Susan Bartlett Foote, J.D., is a professor emerita at the University of Minnesota. Her research has focused on the influences of public policies of health care services, with an emphasis on innovation in medical technology. She is the author of Managing the Medical Arms Race: Innovation and Public Policy in the Medical Device Industry. She served on the CMS Medicare Coverage Advisory Committee from 2004 to 2006. foote003@umn.edu; 651-336-7995.