Medicare Policies May Be Saying No Cost Is Too Great

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The debate over health care reform extends well beyond politicians and lobbyists.

Academics and health care professionals are scrambling to weigh in on possible fixes to a system whose costs are either chewing up or beefing up the bottom lines of American business — depending on whether the company is paying for health insurance or selling health care products.

The Website of the prestigious New England Journal of Medicine recently explored the cost-benefit analysis of innovative, yet expensive and limited use treatments in a report titled “Listening to Provenge – What a Costly Cancer Treatment Says About Future Medicare Policy.”

The report, authored by two researchers at the Center for the Evaluation of Value and Risk in Health at Boston’s Tufts Medical Center, focuses on a new treatment for prostate cancer, wherein the drug, Provenge, primes the patient’s own immune system cells to attack cancer cells.

The cutting-edge technology has no significant side effects, but also happens to have almost no measurable effects of any kind: Tumors don’t shrink. Blood tests are unchanged. But men with otherwise intractable prostate cancer who get the procedure tend to live a bit longer —4.1 months is the median.

And it’s very, very expensive — about $93,000 for a course of treatment.

The Food and Drug Administration approved Provenge, developed by Dendreon , in April 2010. Likewise Medicare. Those approvals were for men with the most severe form of prostate cancer. But would Medicare pay for so-called off-label use, where doctors prescribe a drug or procedure for a use not formally approved by the FDA?

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In this case, the use would likely be for men whose cancer is not so severe — a use the FDA decided had only modest evidence to support it. If paid for by Medicare, the market would be much larger, along with the attendant expense. And if Medicare pays for it, private insurance companies will be pressured to do so for men not old enough for federal coverage.

The authors of the NEJM paper, James Chambers and Peter Neumann, tracked the course of that argument through the Centers for Medicare and Medicaid Services, the body that decides what gets paid for.

CMS ordered a highly unusual extra round of examination of the evidence that Provenge works. The final decision is scheduled to be released in June, but preliminary reports indicate the treatment will get the green light.

Chambers and Neumann say this is an example of why Medicare should be allowed to negotiate prices for medications and procedures.

“In all likelihood, sipuleucel-T [Provenge] is a harbinger of many more cases of expensive emerging technologies, particularly therapies for cancer. With the CMS unable to absorb the costs of all high-priced technologies, future coverage decisions promise to be complex and perhaps contentious affairs,” they write.

Healthy Business - A CNBC Special Report
Healthy Business - A CNBC Special Report

Which simply assumes that the ethical thing to do is to provide this treatment to all who seek it — that the medical standard of care demands the approval.

But that’s an assumption that needs to be examined, according to another recent academic paper, this one posted to a blog run by the journal Health Affairs. The paper is titled “Medicare’s Embedded Ethics: The Challenge of Cost Control in an Aging Society.”

The authors say that what seem to be independent ethical decisions about treatment are actually being driven, in part, by decisions made by Medicare about coverage.

Here’s how most of us probably assume the process works:

A new treatment is developed. It goes into use. Medicare looks at the evidence and the demand for the new treatment, and decides it has become part of the “standard of care” for which the system ought to pay. And gives the approval.

But the paper’s authors, Sharon Kaufman and Wendy Max of the University of California San Francisco, say the process is not so straightforward.

What actually happens, they say, is that Medicare approval sometimes creates an implied standard of care rather than follows it.

If Medicare pays for a treatment, then doctors will be more likely to prescribe it. Patients will be more likely to demand it — even for off-label (new and different) uses. And once the use becomes common enough, it becomes part of what everybody considers the standard of care — the ethical (and legal) standard for what patients ought to expect.

“Physicians do not and cannot ignore what becomes standard of care, and these standards are deemed to be the right of every patient,” Kaufman and Max write. “With every new intervention shown to be effective for some, “need” is ratcheted up beyond the boundaries of the original study population....Standards and need reinforce one another and contribute to more recommendations and demands for treatment.

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The paper examines the use of implanted cardiac defibrillators — once considered a last-ditch treatment. These days, they are being used much more frequently, with unforeseen consequences, say Kaufman and Max say.

Some of those consequences are financial — the cost of the devices plus the costs of further and even more heroic treatments for a patient, who would otherwise not have lived to need them.

But some of the consequences have nothing to do with money, says Max, the co-director of theInstitute for Health & Agingand adjunct professor of medical economics at the University of California, San Francisco.

“There is life extension and then there is quality of life,” she says.

An independent ethical evaluation of a new treatment could consider the financial cost and the other downstream effects if a treatment becomes widely used. But the government evaluation process is supposed to consider neither money nor quality of life, thus short-circuiting other ethical discussions, Max said.

“I don’t think we would put costs at the front of the list. But when you decide to approve something, there are many implications and one of them is financial,” says Max. “Every dollar spent on health care can’t be spent on education or defense.”

Healthy Business - A CNBC Special Report
Healthy Business - A CNBC Special Report

But even tiptoeing into this discussion means navigating a political minefield where “death panels” lurk, she acknowledges. The intention of their paper, she says, is to raise a point that is too often lost.

“We hoped people would acknowledge and understand that Medicare-approving technology makes it the law, in a sense,” she says. “It is the ethical angle that has been missed.”

She and Kaufman figure that parts of the 2010 health-care reform law might nudge the system into considering the costs of treatment — and the government’s own influence on what becomes expected and demanded by patients. But they say not enough has been done.

“The key question — what cost is too much? — has not been addressed by legislation or coverage decisions,” they write. “It can only be addressed in a new approach that understands and considers the links among evidence-based therapeutics, payment criteria, and the making of standards, options and need.”