Should Medicare Consider Cost-Effectiveness When Setting Reimbursement Rates?

Medicare reimbursement rates should be based on how cost effective the treatment is for a particular illness, according to a piece by two policy experts in the October edition of Health Affairs.

“Steven Pearson and Peter Bach also suggest that Medicare could hold off for up to three years on reviewing any new service that is added to the benefit package for which there is no evidence that it is as good as current treatment,” CQ Healthbeat reports. “Pearson is the founder and president of the Institute for Clinical and Economic Review at Massachusetts General Hospital’s Institute for Technology Assessment, which evaluates the comparative effectiveness of medical interventions. Bach, a former top adviser for the Centers for Medicare and Medicaid Services, is a pulmonary and critical care physician.” Because of the need to control the growth in Medicare spending, “it seems inevitable that comparative effectiveness research will be considered an important potential tool in this effort,” they say.

“The pair says that even though Medicare does not typically use comparative effectiveness research now in deciding whether to cover a treatment, the agency should incorporate the work. They propose basing payments for a new treatment on whether it is superior, comparable, or inferior to the alternatives. The higher the treatment is rated, the more money Medicare would pay for it. … The suggestions for tying Medicare rates to comparative effectiveness research comes despite restrictions in the health care law about how Medicare can use research funded” (Adams, 10/5).

MedPage Today: “The 2009 economic stimulus bill included $1.1 billion to fund comparative effectiveness research, and the Affordable Care Act (ACA), the healthcare reform law passed six months ago, established the Patient-Centered Outcomes Research Institute to identify priorities and conduct research to compare the clinical effectiveness of different medical treatments. But the ACA explicitly forbids the new institute from considering costs of things like drugs, devices, treatments, services, or diagnostic tools in its comparative analyses. That language was added after discussions over using cost in comparative effectiveness research turned into a debate about ‘rationing'” (Walker, 10/5).

The Wall Street Journal Health Blog: Pearson and Bach “use intensity-modulated radiation therapy, which was rolled out in the early 2000s, as an example. Medicare’s reimbursement for the treatment was set at about $42,000 for prostate cancer treatment, compared to $10,000 for an older form of radiation — though there were no gold-standard studies comparing the risks and benefits of the two procedures. Hospitals bought the spiffy new equipment … and Medicare spent an estimated $1.5 billion more on prostate cancer treatment, the authors write. If that reimbursement rate had been guaranteed only for three years before being revisited, there’d have been an ‘incentive for manufacturers and clinicians to perform the research needed to evaluate the clinical performance of the new therapy in comparison to the standard three-dimensional treatment,’ the authors write” (Hobson, 10/5). 

The Fiscal Times: “Pearson dismissed concerns that reference pricing would discourage innovation in medicine by making companies reluctant to invest in new technology. ‘It would be okay if it leads some companies to leave some projects on the drawing room table,’ he said. ‘We want them to prioritize the development of products that really have a superior patient outcome. The system doesn’t work hard to do that now,’ he said. The proposal received a cool reception from device makers, one of the industries that would face new hurdles for raising prices under reference pricing. ‘AdvaMed (the industry trade group) supports comparative effectiveness research to inform patients and their providers in selecting the most appropriate care for individual patient needs,’ said Ann-Marie Lynch, executive vice president of payment and health care delivery policy. ‘CER should not be used to deny coverage, or otherwise limit access directly, or indirectly through the reimbursement system'” (Goozner, 10/5).

Meanwhile, “[t]he Agency for Healthcare Research and Quality has started giving $473 million in grants and contracts for projects to use IT systems to compare the effectiveness of medical treatments,” Washington Technology reports. “The grants are being awarded with funding from the economic stimulus law and will include developing patient registries, clinical data networks, and other forms of electronic health data systems that can be used to generate data about treatment outcomes and options” (Lipowicz, 10/4).

American Medical News adds that “[p]hysicians comprise the majority of a new 21-member panel that will guide federal efforts to compare how effective different treatments, devices and drugs are on a particular condition or disease. The nonprofit Patient-Centered Outcomes Research Institute, created by the national system health reform law, will have at least 11 physicians. … The national health reform law created PCORI to advise federal agencies on comparative effectiveness research and on funding research. PCORI also will set guidelines for such research and release results to the public. But the panel is prohibited from releasing practice guidelines or coverage recommendations” (Trapp, 10/5).

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