A Modest Proposal: Pay More for Care Only if It's Better

It doesn't make sense to Peter B. Bach, MD, why Medicare pays more for some new types of care when there's no evidence showing they're actually better than the old way.  It doesn't make sense to me either.

There are many examples of how the system is wrong, says the associate attending physician at Memorial Sloan-Kettering Cancer Center in New York. "We have a steady introduction of new technologies, and drugs, and devices that are never really evaluated against the old ones, though they cost us a lot more money."

Are they really worth it?

In a paper published this week in the journal Health Affairs, Bach and Steven D. Pearson, president of the Institute for Clinical and Economic Review in Boston, propose a more sensible approach.

Enter the era of comparative effectiveness research, which the Centers for Medicare and Medicaid Services could use to reset the federal reimbursement system. Instead of just paying whatever to whomever, only services with higher relative value would justify higher payment.

Right now, however, implementing their suggestion is prohibited by no fewer than eight sections of the Affordable Care Act. Here's how this system would work.

When considering whether to cover a particular service, be it a new cancer drug, cardiac defibrillator, or expensive surgical device, CMS would also determine—right then and there—how the service's effectiveness compares to the usual standard of care. It would look at the evidence and ask: Is it better, the same, or perhaps worse, or do we even know? If we haven't tried to find out, perhaps we should.

This scrutiny would place this new treatment in one of three categories:

Superior:  Service that are truly more effective or cause fewer side-effects compared to the current clinical standard, would receive higher payment.

Comparable: If the new service is just as effective as alternatives, it would be reimbursed the same as those other services.

Insufficient Evidence:  If there's no evidence the service is superior, comparable or inferior, payment would be set on a cost-plus basis for three years, after which CMS would reevaluate.  After three years, if evidence remained insufficient or demonstrated no advantage, payment would be lowered.

If that evidence showed the service was actually inferior to prevailing standards of care, "Medicare could reevaluate whether the service was reasonable and necessary." If evidence showed comparability or superiority, payment would go up.

"The majority of services covered under Medicare have historically fallen into this (insufficient) category because the evidence has been insufficient to determine their comparative clinical effectiveness," Pearson and Bach wrote.

In my interview with Bach, he pointed to the variety "of cardiac defibrillators with different price points that have never been compared. There are implants like that as well. And the truth is that cancer drugs come on the market that have never been compared to the cheaper alternatives."

A case in point is expensive intensity-modulated radiation therapy developed in the last decade.

Clinicians presumed it was better than the old way because it focuses radiation just on the tumor cells rather than surrounding tissue. But there have been no randomized trials showing better tumor cell eradication or reduced toxicity, the authors say.

Yet that's not reflected in the price Medicare pays. "For prostate cancer—the most common form of cancer for which this new therapy was used—reimbursement to providers for a single course of treatment was set at approximately $42,000," he and Pearson wrote. With the old way alternative, three-dimensional therapy, Medicare paid only $10,000.

"This discrepancy led providers around the country to buy intensity-modulated radiation therapy machines and to abandon conventional three-dimensional therapy," he and Pearson wrote. That made it difficult to recruit clinicians or patients for clinical trials to compare the two, and the added cost to Medicare's prostate cancer treatment bill topped $1.5 billion.

A 2008 paper by Timothy Wilt MD at the University of Minnesota published by the Agency for Healthcare Research and Quality illustrates the problem.

Wilt referenced cryotherapy, laparoscopic or robotic-assisted radical prostatectomy, primary androgen deprivation therapy, high-intensity focused ultrasound (HIFU), proton beam radiation therapy, or intensity modulated radiation therapy (IMRT), saying "It is not known whether these therapies are better or worse than other treatments for localized prostate cancer because these options have not been evaluated in randomized clinical trials."

Bach and Pearson acknowledge companies that design new medical technologies and go through an expensive regulatory process to get them approved might be upset. They'd think they were no longer guaranteed high rates of reimbursement for their efforts, and innovation would be stifled.

But innovation would not be stifled, Bach says, because drug and device makers would get three years to prove the superior merits of their products compared with other standards of care.

"Medicare could help enable this by taking the view that, for some period of time, the introducer of the new product gets a chance supported by the government to prove superiority," Bach says. "Failing that, we and the taxpayer and (Medicare) beneficiary shouldn't be paying more for the new thing than the old thing if they're equivalent."

The authors acknowledge an important downside. In this new era where new care services get tested for effectiveness, they might only be available first in academic settings equipped to conduct such trials. "Patients in rural areas and others without ready access to academic sites might have less access to newly covered services," they wrote.

But that's a justifiable trade-off, they believe.  Remember, they caution, these are services to be reimbursed at reference-price levels or at usual levels during a trial period are services lacking evidence to demonstrate that they are better than other options," they wrote.  In fact, any new evidence could show that they are actually worse.

Indeed, some now question the efficacy of a variety of expensive spinal fusion surgeries that are invasive, cause a higher rate of infections, require longer recovery time and often do not resolve pain after two years any more than if the patient were given medications and physical therapy.

Bach and Pearson acknowledge that changing Medicare's approach to coverage and reimbursement could require even more legislation and authority. And it would, they wrote, "be highly contested by those with a vested interest in existing reimbursement systems."

But they are guardedly optimistic for four reasons:

1. Medicare's ballooning costs must be tempered.

2. The idea of paying equally for comparable results resonates with patients and policymakers. 

3. State Medicaid programs and private insurers could be first adopters with lessons learned from smaller scale approaches.

4. Such a policy may not need legislative overhaul at all, but might be woven into the regulatory process.

During our chat this week, Bach conveyed his frustration with what the authors described today's "perverse" system of payment incentives.

"What new technologies do we want disseminated if the justification for disseminating them is just that they get a higher reimbursement rate?" he asked. "To us, a higher reimbursement should come with greater effectiveness, not 'just because....' "