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It’s a Mad, Mad World: Medicare and Cost-Effectiveness
The recent establishment of the Patient-Centered Outcomes Research Institute (PCORI) stipulates that its findings from comparative effectiveness research cannot be construed as mandates for coverage recommendations and that the government cannot use these reports to determine coverage and payment decisions. This in effect, prohibits PCORI from determining cost-effectiveness of alternative treatments. This explicit stipulation in the PCORI legislation under the Affordable Care Act makes this bill “business as usual” since the enactment of Medicare in 1965.
I was curious about the origins of this policy so I called a colleague who was an expert in the area. He said it was a complicated issue and suggested I read a 2005 article by Jacqueline Fox in the Buffalo Law Review entitled “Medicare Should, but Cannot, Consider Cost: Legal Impediments to a Sound Policy.” After reading this article, I became aware how this policy was determined by the initial legislation and why it hasn’t changed much over the past 46 years, in spite of repeated thwarted efforts to do so.
Apparently, it all began at the time of Creation, when Medicare was being enacted. Opponents of the act spearheaded by the American Medical Association insisted that there be “no appearance of the government interfering in physicians’ decisions regarding their patient care.” Thus the inclusion of the “reasonable and necessary” language that permeates all Medicare coverage decisions in the past and today.
Statutory language stipulates that:
“No payment may be made under Part A and Part B for any expenses incurred for items or services which…are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” (42 USC section 1395y (a)(1)(A) (2002).
According to Fox, the “necessary” standard is what CMS uses to decide whether or not to cover a given procedure or technology. “Reasonable” is related mostly to reimbursement rates. “Necessary” is defined by the prescribing physician.
Fox describes a poignant moment in 1970 when the Senate Finance Committee released a report on the cost of Medicare where they observed that “as structured, Medicare had little incentive for providers to contain costs or to produce services in the most efficient and effective manner.” (page 604) The Committee proposed Professional Standards Review Organizations (PSROs) charged with determining the less expensive site of treatment and determining whether there was a less expensive treatment available. The latter recommendation obviously did not make the final statute.
In 1979, Carter proposed a hospital cost containment bill but was defeated after opponents said it would “lead to rationing and would inhibit the development of life-saving technology.” (page 607)
In 1983, the Prospective Payment Assessment Commission was charged with assessing the safety, efficacy and cost-effectiveness of new and current in-use medical procedures and technology. In reality, the enacted legislation relied on medical necessity and how much to pay for a service rather than cost effectiveness of alternative treatments. Fox notes that putting cost control on providers was easier than putting it on the public.
Fox draws a picture of a mad world.
Congress understands all too well the “potent political and social ramifications of including costs in any manner as a factor for national coverage determinations.” (page 631) So care is implicitly rationed, hidden from the public sight.
Present-day Congress has entered a dialogue about costs in Medicare. Currently, their continued attitude towards excluding costs reflects the general attitude of the public. How can we change this? First and foremost, we must have continued conversations with entities that have influence on the attitudes of the public such as the media, social networks, community leaders and other national and regional influential figures.
It’s time to reflect on how we can change the Medicare law through thoughtful dialogue. The government needs vehicles outside of PCORI to look at cost after effectiveness and evidence has been determined. Obtaining the evidence through comparative effectiveness will certainly help in reducing unnecessary and unproven therapies. It’s time the government incorporates language into its legislation that introduces cost in its coverage decisions if the system is to remain sustainable.
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