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Comparative Effectiveness Could Save Medicare Billions, Study Says

By Roxanna Guilford-Blake for HealthLeaders Media  
   October 07, 2010

The "comparative effectiveness" of different treatments for the same medical condition became a hot-button issue in the healthcare reform debates. But despite federal funding  for research into how to compare various treatments, the Affordable Care Act limits the abilityof the federal government to draw on comparative effectiveness research to determine what can be covered under Medicare. 

Politics aside, using such research to determine how much to pay for newly covered services could yield billions of dollars in savings without threatening patient choice, according to a paper in the October issue of Health Affairs.

"We believe that the time is ripe for Medicare to use comparative effectiveness research to reach a new paradigm of paying equally for services that provide equivalent results. To accomplish this goal, the program's coverage and reimbursement processes would need to be linked from the outset, when the evidence for or against a service's comparative clinical effectiveness would be weighed," Steven Pearson and Peter B. Bach write in their paper, "How Medicare Could Use Comparative Effectiveness Research In Deciding On New Coverage And Reimbursement."

The issue isn't political; it's how Medicare can use evidence to its best advantage, Pearson tells HealthLeaders.

Pearson is president of the Institute for Clinical and Economic Review, an academic comparative effectiveness research and policy program based at the Massachusetts General Hospital's Institute for Technology Assessment. Bach is an attending physician at Memorial Sloan-Kettering Cancer Center in New York City and former adviser to the CMS.

Under their three-pronged approach:

1. Medicare would pay more for interventions that research demonstrates provides superior results for patients.

2. When two interventions demonstrate comparable clinical effectiveness, Medicare would pay the same amount for each.

3. When a new service or treatment lacks any comparative evidence, Medicare would set a tentative payment to allow time for research on its effectiveness. After three years, if there were no clear evidence the new intervention had a clinical advantage, Medicare could reevaluate its payment.

"Paying equally for comparable results is a powerful principle, and the model we suggest would allow equal payments to be implemented without uprooting the entire incentive system for innovation," they write.

This "dynamic pricing" model could save Medicare billions of dollars over time, they say, and benefit providers: It offers "not only the prospect of better evidence with which to care for individual patients, but also the beneficial and sobering effect of removing perverse incentives to invest in and deliver services that add to the cost but not the quality of care."

Such an approach would require new legislation and, Pearson and Bach acknowledge, it would undoubtedly be highly contested. Nevertheless, Pearson told Health Leaders he's optimistic that the model he and Bach propose will avoid many of the political problems that beset comparative effectiveness during the debates about reform. "This ultimately will not be a Republican or Democratic question," he says.

"This is not about saying 'no.' It's about saying 'yes, and we will pay you more' or 'yes, and we will pay you same,' or 'yes, and we will give you benefit of the doubt for [three years] to stimulate innovation.'"

The article is one of several in the October issue of Health Affairs that examine comparative effectiveness research. The issue is funded by the National Pharmaceutical Council, the WellPoint Foundation, and the Association of American Medical Colleges.

See also:

Federal Panel Hears Advice, Concern About Comparative Effectiveness Research Efforts

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