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.

Health Reform: What Are the Big Guys Most Scared Of?

This post is about health reform. My only excuse for posting it on this blog is that one of the major players in the current debate is our ol' pal, the pharmaceutical industry. There is thus some overlap between issues that could make or break efforts to reform health care in the US, and the issues we regularly address here.

Some background: On Monday, a group of major health care interest groups, most of whom have in the past been staunch opponents of health reform, sent a letter to President Obama (http://graphics8.nytimes.com/packages/pdf/politics/20090511_HealthGroups_Letter.pdf). They promised to support his cause of making health care more affordable in the US by working to lower the annual inflation rate of health care costs by 1.5%, which would save 2 trillion dollars over 10 years. They would do so through such measures as better coordination of care, standardized insurance forms, more information technology, and eliminating unnecessary tests and procedures.

Reactions varied. The President himself expressed himself as very pleased with the letter (http://www.nytimes.com/2009/05/11/health/policy/11drug.html?_r=1&ref=us). Columnist and economist Paul Krugman was both very pleased and somewhat wary, noting that a gift from these guys was likely to be a Trojan horse, but that on balance, having them at the table rather that flinging Harry and Louise ads at you from a distance was a positive move (http://www.nytimes.com/2009/05/11/opinion/11krugman.html). Psychiatrist and blogger Doug Bremner was much less polite, referring to the four biggest guys in the group as the Gang of Four, and suggesting you could trust that gang about as far as you could throw them (http://www.beforeyoutakethatpill.com/index.php/2009/05/11/2556/).

My own somewhat long-winded reaction follows.

This year so far I have found myself feeling oddly detached from the health reform debate. You'd think by contrast that I'd be passionately engaged. For many years I have been a member of Physicians for a National Health Program and I strongly favor a single-payer-type plan. This year, the chances that something might really happen seem greater than any time since 1993, and so far, Obama's approach has been demonstrably smarter than the Clintons' ill-fated effort in that earlier year (largely because Obama has plotted out each of the Clintons' earlier mistakes and avoided them).

You'd think that I'd be passionate for single-payer, and I'd be passionately enraged at the recent treatment of single-payer advocates by the Democratic leadership, with the most extreme manifestation being the arrest of several PNHP folks at Sen. Max Baucus's committee room because they had the nerve to demand that their plan at least be considered rather than ruled off the table. Single-payer advocates were dragged out of the room in handcuffs while the Senator fawned over representatives of the special interest groups that signed onto the letter.

On the one hand I am deeply distressed by the way Baucus and Company are treating my friends and allies. On the other hand I fully sympathize.

When no action seems possible, a politician can make friends with a wide range of folks. When it seems that something actually has become possible, your margins narrow. You have to make a shrewd calculation. You figure that you can wring so many concessions out of your foes, and then you have to settle for the best compromise you can get, or the time to make a deal will have passed you by. In such times your worst enemies, if you are a Democrat, are your former allies who stand just to the left of where you think you are going to have to draw the line in order to get a deal. The people who imagine that you are their ally, and who are going to try to push you just a bit farther than you think you can safely go, and who will consider you a vile traitor if you don't go along with them, have now become your greatest headache.

Last October I had to give a lecture on ethics and health reform. I said that one of the major reasons that we have not yet gotten to health reform is that everyone has a Plan A but no one has a Plan B. Each group of advocates has a preferred way of doing reform, whether single-payer, Massachusetts style, medical savings acounts, or whatever. There are so many such proposals out there that none can command a clear majority in its favor. Where we get into real trouble is that advocates for these various plans, once they see that they are not going to get everything they want, have no reformist fall-back position. They conclude that the next best plan is the status quo, and take their football and go home. So the majority vote, ironically, ends up being for the broken non-system of health non-care that virtually everyone in the US agrees is a huge mess and embarrassment.

So I have been of late less and less happy to be seen in the company of my PHNP friends because they refuse to offer any Plan B. It is single payer or nothing. On the one hand I think it is important that single payer at least be discussed and debated, and it is a shame that our political types imagine that it is a complete nonstarter. And to offer your Plan B too early in the game is of course a self-defeating negotiating strategy. But at some point, if we could get meaningful reform in 2009 but cannot hope to achieve a full single-payer system right away, a single-payer-or-nothing stance will become self-defeating too.

Let me put it in ethical terms. Suppose the Plan B could extend health insurance coverage to an additional 10 million Americans; and let us also suppose that there is nothing about Plan B that would make further extension of universal coverage harder to achieve in the future. Suppose you oppose Plan B because it is not single payer, and the end result is no reform at all this year. I think you have some ethical explaining to do to the 10 million folks whom you deprived of coverage.

Now, having said all that, I have some sympathy with Obama and Baucus and others who wish my single-payer allies would disappear. But now let me turn it around and ask what the behavior of the Gang of Four, or whatever you call them, tells us.

We have developed a general strategy or assessing the drug industry's probable motives, based on the apparent fact that the industry could not honestly say what it really thinks if its life depended on it. It has wrapped itself up in so many layers of PR and marketing flimflam that its leaders no longer know truth from falsehood. So you cannot depend on any statement from the industry as evidence of its real concerns and plans. What do you do? You watch its behavior to see what it seems most scared of. In that way we discover, for instance, that sunshine laws are pretty likely to put a serious spoke in the industry's wheels. How do we know? Because legislators in Massachusetts reported that they saw unprecedented swarms of drug industry lobbyists descend upon their statehouse when they considered (and passed) a sunshine bill.

So what is the Gang of Four, one of which is PhRMA, really, really scared of in health reform? As we have seen in previous posts, the industry is really scared of comparative effectiveness research. It seems as if they are really scared of single-payer. They are even more scared of having the government offer a publicly-financed insurance option alongside of commercial insurance, beause that might pass while they think single payer won't pass--and they see any sort of government-sponsored insurance for the whole population the camel's nose under the tent for single-payer in the future.

None of this is rocket science. What do we have to do to reform health care so as to make it affordable and efficient in the future, so that we can cover all Americans? We have to rein in out-of-control administrative costs, which eat up roughly a quarter of each private insurance dollar, while the administrative costs of government-run health care runs about 3-5%. And we have to find ways to eliminate the roughly one-third of US health "care" that provides no benefit to patients but huge profits to industry and to providers.

So if either single-payer, or a government-sponsored public insurance option alongside commercial insurance, really were to work, the people who would suffer are the providers and the industries who today collect the bills for that one-third of "care" that is unnecessary and non-beneficial; and the commercial insurers who charge those high administrative costs (part of which they rake off as profits). So guess which groups don't want those things to happen. And guess which groups don't even want CE research, that will start to prove what works and what does not. Guess where PhRMA is among that gang.

Let's get hypothetical again. I am reminded of a story about Britain's National Health Service. It became law in 1948. Initially the British Medical Association fought tooth and nail against it, just as the AMA in the US has fought health reform ever since 1920. But in the end, the BMA more or less acquiesced. Aneurin Bevan, the Labor minister who took the lead role in the negotiations that led to the NHS, was asked how he brought the BMA around. He replied, "I stuffed their mouths with gold." In the end he built so many fee increases for docs into the NHS that he simply bought off their opposition.

So let's say that in the end the Gang of Four were willing to bargain just like the BMA did. (They should, after all; they are in it for the money.) If only we were to sweeten the pot enough for each of them--something nice to guarantee the drug companies so many more years of excessive profits; something to allow the private insurers to stay in business and make a small bundle; assurances to the cardiologists that they could keep on putting in a lot of their caths and stents unmolested despite dubious outcome data--they'd back off and let us have a system of universal coverage. At what point would we be duty bound to protest this extortion and fight for a "pure" plan in the public interest? At what point would we say, oh what the hell, give them the extra that they want and let's cut a deal, next year or the year after we'll just have to go after them again and hope for better results?

Maybe that's the way to make sausage and health reform. I fear my single-payer friends don't want to hear that.