The debate about the Obama Administration’s plan to greatly increase comparative effectiveness studies is both predictable and destructive. We need such data, but many people are terrified of its collection and use and are fighting against it. This is part of the continuing fallout from our refusal to directly and honestly confront the allocation challenges presented by costly medical care.
This problem is predictable because just about all participants in the health care system in the United States have manipulated effectiveness data to further their own goals. This manipulation has poisoned the well, causing people to confuse effectiveness research with the distortions that have so often followed its collection and the harm those distortions have caused.
Done skillfully, manipulation of data can increase drug company profits, reduce political fallout from difficult resource allocation decisions, justify denials of claims for third party payers, and help avoid difficult discussions about scarce medical resources.
A good example of how we fail to confront cost directly, how this failure leads to data distortion, and how we can repair the problem, can be seen in the Medicare program. Once a treatment falls within an area of care covered under the Medicare Act, the only statutory requirement that guides further coverage decisions is that the care must be “reasonable and necessary.” This language was taken from an Aetna policy that was offered to federal government employees in 1965, the year Medicare was created.
Congress has not changed the “reasonable and necessary” language since the law was passed, making it a time capsule of our health care system as it was in 1965. When patients in the 1960s filed lawsuits against their insurance companies to compel coverage of a denied claim, courts interpreted the common contract phrase “reasonably necessary” in a way that protected the treating doctor’s autonomy. If the doctor said the disputed care was reasonably necessary, the court deferred to the doctor’s judgment. It would have been deemed inappropriate for an insurance company to practice medicine, and this was considered to be a medical judgment.
Our health care landscape has changed dramatically since then. The federal HMO Act of 1973 allowed national HMOs and managed care hybrids to spread across the country. Laws prohibiting the corporate practice of medicine have been repealed in most states and we have grown used to the gatekeeping role of third party payers.
Perhaps most importantly, the Employee Retirement Income Security Act (ERISA) became law in the 1970s. ERISA is the federal employee benefit law that regulates employer-based pension and health plans. It pre-empts most state lawsuits related to these benefits, which means that people who receive benefits from an ERISA plan cannot sue the plan administrator for damages caused by it failing to pay for medical care.
The majority of health insurance contracts are administered without fear of any significant liability. They reserve a gatekeeping role for the plan administrator, and cost-effectiveness plays a large, usually unspoken, role in the benefits a patient receives. The ERISA pre-emption has become one of the few significant health care cost-reducing laws we have.
Medicare has few of the cost-saving tools these other third party payers have. The Medicare Act of 1965 has not been altered to allow Medicare a significant gatekeeping role. There is no ERISA or HMO Act for Medicare. The plan has not been altered because there is a perception of high political cost for doing so.
There are two cost-sensitive options for Medicare that frighten Congress. The first is raising taxes to pay for the increasingly expensive plan and the second is rationing health care to reduce its cost. Both are considered political suicide. This creates a complex pressure from Congress to the administrators of Medicare, as it must administer the plan in a way that protects Congress from either option.
The constant pressure to satisfy contradictory political goals has driven Medicare’s cost saving choices underground. To avoid this, Medicare has repeatedly tried to make transparent, rational, ethical considerations of cost a part of its coverage decisions, but has always failed.
On at least three occasions, it has proposed regulatory schemes for making coverage decisions that take cost-effectiveness or cost-benefit analysis into account. These schemes met with thousands of negative comments, and have never been enacted.
In truth, these regulatory schemes could not be enacted because the Medicare Act, as written, does not give the Medicare administrator the right to consider cost when making a coverage decision. Congress must amend the act, changing the language discussed above, so that cost is a permissible part of the coverage determination.
Medicare has long grappled with cost. Currently, it tends to respond to expensive new technologies by limiting coverage to subgroups of patients. Rarely does it entirely refuse coverage, and then only when it is relatively clear from the available data that denial is justified. Instead, it does a political dance.
The careful manipulation of data for purposes of achieving maximal cost savings appears to be an essential tool the program uses. Consider implantable defibrillators. The data presented to CMS in the early 2000’s by the device manufacturer applying for coverage showed a predictable and important usefulness for these devices in a small percentage of people across a large population of potential recipients. More data was needed to see if a narrower group, far more likely to actually benefit from the devices, could be identified.
Rather than approve the defibrillators for the entire population that the data justified, an impossibly expensive result, by 2004 Medicare was shaping a decision to approve coverage for a narrow group of patients that many commentators argued was an arbitrary subset created entirely for the purpose of saving money. Medicare subsequently required all beneficiaries who received the device to have data collected from them about the device; Medicare uses that data to continually update and refine the original coverage decision.
By not entirely denying coverage and by remaining flexible in the face of new data, Medicare manages to save money, defuse political tension, and avoid directly addressing cost concerns.
However, in the defibrillator case described above, Medicare also appeared to distort data, claiming to have initially found a significant scientific limitation on who should receive the technology where the limitation most likely did not exist. This type of behavior risks undermining the quality of care a doctor gives a patient. Private sector third party payers traditionally follow Medicare coverage decisions when they limit access to care, amplifying the ramifications of this type of decision.
Without the capacity to explicitly consider the cost implications of new technology, Medicare is in an impossible situation. Stewardship concerns for the program appear to require cheating in difficult situations. This is particularly awful for Medicare, as it is also at the forefront of promoting evidence-based medicine, constantly looking for reliable evidence to use in making coverage decisions.
Those who oppose the collection of comparative effectiveness data are worried about cost concerns being a part of medical decision-making. However, cost concerns are already a part of our medical system, and have been for decades. As counterintuitive as it might appear, we need to legally empower decision-makers to explicitly consider cost in order to more firmly define and protect the values we want our health care system to embody. By refusing to do so, we have driven cost concerns underground.
Jacqueline R. Fox, JD, is an assistant professor at the University of South Carolina School of Law. Her scholarship interests are in health law, primarily the relationship between justice, ethics, regulatory structures, and markets. foxjr@law.sc.edu; 803–777-8192.
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Comparative Effectiveness Research and Medicare
Medicare’s coverage decisions are still guided primarily by the requirement that treatments only be “reasonable and necessary.” However, this principle is complicated by Medicare’s inability to take costs into account.
The debate about the Obama Administration’s plan to greatly increase comparative effectiveness studies is both predictable and destructive. We need such data, but many people are terrified of its collection and use and are fighting against it. This is part of the continuing fallout from our refusal to directly and honestly confront the allocation challenges presented by costly medical care.
This problem is predictable because just about all participants in the health care system in the United States have manipulated effectiveness data to further their own goals. This manipulation has poisoned the well, causing people to confuse effectiveness research with the distortions that have so often followed its collection and the harm those distortions have caused.
Done skillfully, manipulation of data can increase drug company profits, reduce political fallout from difficult resource allocation decisions, justify denials of claims for third party payers, and help avoid difficult discussions about scarce medical resources.
A good example of how we fail to confront cost directly, how this failure leads to data distortion, and how we can repair the problem, can be seen in the Medicare program. Once a treatment falls within an area of care covered under the Medicare Act, the only statutory requirement that guides further coverage decisions is that the care must be “reasonable and necessary.” This language was taken from an Aetna policy that was offered to federal government employees in 1965, the year Medicare was created.
Congress has not changed the “reasonable and necessary” language since the law was passed, making it a time capsule of our health care system as it was in 1965. When patients in the 1960s filed lawsuits against their insurance companies to compel coverage of a denied claim, courts interpreted the common contract phrase “reasonably necessary” in a way that protected the treating doctor’s autonomy. If the doctor said the disputed care was reasonably necessary, the court deferred to the doctor’s judgment. It would have been deemed inappropriate for an insurance company to practice medicine, and this was considered to be a medical judgment.
Our health care landscape has changed dramatically since then. The federal HMO Act of 1973 allowed national HMOs and managed care hybrids to spread across the country. Laws prohibiting the corporate practice of medicine have been repealed in most states and we have grown used to the gatekeeping role of third party payers.
Perhaps most importantly, the Employee Retirement Income Security Act (ERISA) became law in the 1970s. ERISA is the federal employee benefit law that regulates employer-based pension and health plans. It pre-empts most state lawsuits related to these benefits, which means that people who receive benefits from an ERISA plan cannot sue the plan administrator for damages caused by it failing to pay for medical care.
The majority of health insurance contracts are administered without fear of any significant liability. They reserve a gatekeeping role for the plan administrator, and cost-effectiveness plays a large, usually unspoken, role in the benefits a patient receives. The ERISA pre-emption has become one of the few significant health care cost-reducing laws we have.
Medicare has few of the cost-saving tools these other third party payers have. The Medicare Act of 1965 has not been altered to allow Medicare a significant gatekeeping role. There is no ERISA or HMO Act for Medicare. The plan has not been altered because there is a perception of high political cost for doing so.
There are two cost-sensitive options for Medicare that frighten Congress. The first is raising taxes to pay for the increasingly expensive plan and the second is rationing health care to reduce its cost. Both are considered political suicide. This creates a complex pressure from Congress to the administrators of Medicare, as it must administer the plan in a way that protects Congress from either option.
The constant pressure to satisfy contradictory political goals has driven Medicare’s cost saving choices underground. To avoid this, Medicare has repeatedly tried to make transparent, rational, ethical considerations of cost a part of its coverage decisions, but has always failed.
On at least three occasions, it has proposed regulatory schemes for making coverage decisions that take cost-effectiveness or cost-benefit analysis into account. These schemes met with thousands of negative comments, and have never been enacted.
In truth, these regulatory schemes could not be enacted because the Medicare Act, as written, does not give the Medicare administrator the right to consider cost when making a coverage decision. Congress must amend the act, changing the language discussed above, so that cost is a permissible part of the coverage determination.
Medicare has long grappled with cost. Currently, it tends to respond to expensive new technologies by limiting coverage to subgroups of patients. Rarely does it entirely refuse coverage, and then only when it is relatively clear from the available data that denial is justified. Instead, it does a political dance.
The careful manipulation of data for purposes of achieving maximal cost savings appears to be an essential tool the program uses. Consider implantable defibrillators. The data presented to CMS in the early 2000’s by the device manufacturer applying for coverage showed a predictable and important usefulness for these devices in a small percentage of people across a large population of potential recipients. More data was needed to see if a narrower group, far more likely to actually benefit from the devices, could be identified.
Rather than approve the defibrillators for the entire population that the data justified, an impossibly expensive result, by 2004 Medicare was shaping a decision to approve coverage for a narrow group of patients that many commentators argued was an arbitrary subset created entirely for the purpose of saving money. Medicare subsequently required all beneficiaries who received the device to have data collected from them about the device; Medicare uses that data to continually update and refine the original coverage decision.
By not entirely denying coverage and by remaining flexible in the face of new data, Medicare manages to save money, defuse political tension, and avoid directly addressing cost concerns.
However, in the defibrillator case described above, Medicare also appeared to distort data, claiming to have initially found a significant scientific limitation on who should receive the technology where the limitation most likely did not exist. This type of behavior risks undermining the quality of care a doctor gives a patient. Private sector third party payers traditionally follow Medicare coverage decisions when they limit access to care, amplifying the ramifications of this type of decision.
Without the capacity to explicitly consider the cost implications of new technology, Medicare is in an impossible situation. Stewardship concerns for the program appear to require cheating in difficult situations. This is particularly awful for Medicare, as it is also at the forefront of promoting evidence-based medicine, constantly looking for reliable evidence to use in making coverage decisions.
Those who oppose the collection of comparative effectiveness data are worried about cost concerns being a part of medical decision-making. However, cost concerns are already a part of our medical system, and have been for decades. As counterintuitive as it might appear, we need to legally empower decision-makers to explicitly consider cost in order to more firmly define and protect the values we want our health care system to embody. By refusing to do so, we have driven cost concerns underground.
Jacqueline R. Fox, JD, is an assistant professor at the University of South Carolina School of Law. Her scholarship interests are in health law, primarily the relationship between justice, ethics, regulatory structures, and markets. foxjr@law.sc.edu; 803–777-8192.