The Great Medicare Cost Debate: Lessons from the Pharma Discussion

The media are now full of the first salvos in the political debate unleashed by two dramatically different plans to contain Medicare costs and cut the Federal deficit--Rep. Paul Ryan's proposal to pay seniors vouchers and force them to buy private insurance; and Pres. Obama's proposal that lays heavy responsibility on the Independent Payment Advisory Board (IPAB). Today's Kaiser Family Foundation Health Policy Report yields a cross section of opinion.

On the (moderate) Republican side, former Wisconsin governor and DHHS secretary Tommy Thompson hints at the sort of demagoguery being aimed at the IPAB from the "death panel" and anti-"rationing" crowd, though his version is quite tame by comparison: http://www.huffingtonpost.com/tommy-g-thompson/reform-medicare-dont-cut-_b_851038.html

Gov. Thompson objects strongly to the "unelected" IPAB being given any control over cost-cutting, which he says we should "put...back where it belongs -- in the hands of doctors and patients." So if the IPAB shouldn't be allowed to cut costs, then how should it be done? The Guv proposes, "the administration should use its discretion to begin to experiment with capitated payment, where one fee is paid for a patient episode of care, regardless of how many procedures are performed. This gives the physician a financial incentive to improve quality by performing the right procedure the first time. Under a capitated system, the government is not on the hook to pay for unneeded procedures." Hmm. I thought we tried that in the 1990s. We called it managed care, and the public rose up in rebellion at the idea that unelected insurance execs were denying them the expensive treatment they thought would save their lives. The improved version of this plan that is part of the new health reform law had to be called "Accountable Care Organizations" so that no one would imagine that it had anything to do with the bad ol' managed care.

Merrill Goozner at the Fiscal Times has a different take: http://www.thefiscaltimes.com/Blogs/Gooz-News/2011/04/20/Gooz-News-Health-Reform-Assumes-Its-Role-as-a-Punching-Bag.aspx

Gooz (as he goes by in the blogosphere) has the opposite worry--not that IPAB is too powerful, but that it's not powerful enough. We've tried giving Congress the power to cut Medicare costs and they have flunked every time. But some experts worry that IPAB will end up making silly across the board cuts, that will seriously affect seniors' ability to access good quality as well as wasteful care, simply because they are not empowered to make the precise surgical cuts that a panel of experts ideally would. But you'd never know that that was the issue, adds Gooz, so long as politicians are too busy using IPAB as a handy punching bag to address the real issues.

Meanwhile, in the sober realms, Meredith Rosenthal of Harvard Public Health offers what is supposed to be a balanced assessment of the Ryan vs. Obama plans in the New England Journal of Medicine: http://healthpolicyandreform.nejm.org/?p=14260&query=home.

Rosenthal makes a number of excellent points about how, if we are not careful, the most vulnerable patients could end up getting the short end of the stick. (Not that that's ever happened before in the US of A.) In the end, however, sober turns turgid when the best summary Rosenthal can offer is: "Debate over these options should recognize the inherent trade-offs among the certainty of cost control, the likelihood of achieving cost savings while preserving as much high-value care as possible, and the risk that the most vulnerable Americans will pay the highest price for fiscal discipline." Rosenthal makes some good points about how weak is the evidence base that the Ryan plan would actually achieve the cost savings promised without seriously cutting into access to affective care, especially among lower-income patients. But the analysis seems to go off target a bit in stating that the problem with the Obama route is that we cannot exactly predict in advance how much money would be saved, as opposed to whether the mechanisms being proposed would be likely to work. Rosenthal does not at all address Gooz's concern about whether the IPAB could actually make the cuts that are needed.

So what in heck does any of this have to do with the topic of this blog, which is not health reform? The question I ask is whether we can draw any lessons from our long conversation about medicine and the pharmaceutical industry, that has now, by the way, been going on since February, 2007, in case anyone is counting. I think at least one lesson can be drawn, which relies on economist's Uwe Reinhardt's basic law, Health care expenditures = health care incomes. When you talk about cutting future Medicare costs, you are talking about taking money out of the pockets of somebody who now gets that money, or thinks they will in the future. And the pharmaceutical industry has proven one thing for sure. If you take government out of the picture, and eliminate those evil "experts" who demand scientific evidence before they'll approve an intervention for payment, and instead put the decisions "back where it belongs -- in the hands of doctors and patients"--well, clearly you have put it in the hands that the historical record shows that industry marketing can most easily manipulate. Until we find a way to lessen the stranglehold that the for-profit marketers now have over how physicians and the general public now think about what care is good and what is bad, we can look forward either to Medicare costs zooming into space as they are now, or else some system of dysfunctional cost-cutting that fails to preserve the best medical care for all patients. And we can be sure that corporate lobbyists are working overtime behind the scenes to be sure that their industry suffers no financial loss in the name of cost containment and deficit reduction.