One would think that insurers would want to do their own comparative effectiveness research to find out whether cutting edge drugs, devices and procedures really provide greater benefits.
Past experience tells us that newer treatments are not always better for many patients. Often, they are effective for a small group that fits a particular profile, but not for most of us. And they are almost always more expensive. Wouldn’t it make sense for the insurers to invest in comparative clinical trials? They could save billions, and show their customers that they were watching out for them—protecting many of them from needlessly aggressive, potentially risky, care, while covering the treatment for those who would benefit.
Below, an excerpt from Dr. Jerry Avorn’s superb book, Powerful Medicines: The Benefits, Risks and Costs of Prescription Drugs explains why for-profit HMOs rarely engage in such research:
“But where’s the competitive advantage for us?” the executive asked. I didn’t understand. “Let’s say we spend all that money to do the study, and we prove that the less expensive drug works just as well, at a fraction of the cost. Would we publish that information in a medical journal?”
“Of course,” I said. “It would be a great study. The results would have huge implications for years.
“But then everyone would have that information,” he replied. “It wouldn’t give us any competitive advantage over the other HMOS. What good would that do for us? The other managed car companies could just take those findings and use them for their own benefit. In business, we call that the ‘free rider problem.’”
Funny, I thought. In universities we call that “discovering something important.”
“One would think that insurers would want to do their own comparative effectiveness research to find out whether cutting edge drugs, devices and procedures really provide greater benefits.”
I’ve often thought of that when it came to cancer drugs. It amazed me not only that some private insurance carriers didn’t like to pay for Oncologic In Vitro Chemoresponse Assays, but that they don’t emphatically mandate it as a requirement for obtaining chemotherapy reimbursement against ill-directed treatments.
The validation standard that private insurance companies is accepting from molecular profiling tests is accuracy and not efficacy. The “bar” has been instantly lowered. No longer will it be essential to prove that the use of a diagnostic test improves clinical outcomes, all they have to do for these molecular profiling tests is prove that the test has a useful degree of accuracy. However, when it comes to the validation standard they want for cell-based profiling tests, it is efficacy.
The cell-based profiling tests have the same entitlement to be judged by the same validation standard as molecular profiling tests.
However, profit, as we have seen, is a powerful motivating force. Among the private payors, at least, the profit motive is entirely consistent with the goal of the test, which is to identify efficacious therapies irrespective of drug mark-up rates.
The evidence in support of these assays is more than sufficient to justify the funding of comparative effectiveness research -validation trials, if any more truly are needed, as claimed – speciously and self-servingly – by the medical establishment.
Everyone is scared to death – and rightly so – at what is going to happen to the healthcare economic system with the introduction of increasingly expensive new drugs that benefit only a small percentage of patients who receive them, hence the headlong rush to develop tests to identify molecular predisposing mechanisms whose presence still does not guarantee that a drug will be effective for an individual patient.
Nor can they, for any patient or even large group of patients, discriminate the potential for clinical activity among different agents of the same class, such as Sutent, Tarceva, Iressa, and Nexavar.
The FDA could benefit too, as they find themselves under increasing pressure to allow new drugs into marketplace while at the same time protecting the safety of potential recipients of those drugs as well as the financial interests of those who will have to pay for them.
It explains the new paradigm of requiring a companion diagnostic as a condition for approval of new targeted therapies. The pressure, in fact, is so great that the companion diagnostics they’ve approved often have been mostly or totally ineffective at identifying clinical responders (durable and otherwise) to the various therapies.
I think that in both of these areas – private insurance carriers and the FDA – there is a very real opportunity to make a substantial impact and contribution, an interest in saving the healthcare system perhaps billions of dollars a year (and thereby the healthcare system itself) by ensuring that expensive treatments are used appropriately.
Committee chairpersons, committee members and persons in congress who may have personal interests not only in discovering new cancer treatments – everybody wants that – but also, in the “here and now,” using currently-available cell-based assay technologies to improve the effectiveness of existing drugs and save lives today by administering the right drug to the right patient at the right time.
Maybe I am naive? But I think part of the answer is that generally there is great resistance to any change. And insurance companies smell mega-change on the immediate horizen.
And of course the dialogue that you cite between Dr. Jerry Avorn and the unnamed for profit HMO executive reveals the moral bankruptcy of the for profit model and the executives who run these companies.
Dr. Rick Lippin
Southampton,Pa
First, if all of the large insurers did their own research and published the results, it would be a wasteful duplication of effort. Second, if the cheaper drug turned out to be just as effective as the more expensive one and insurers stopped covering the more expensive drug or only reimbursed it at the same rate as the cheaper drug but Medicare continued to pay the same percentage of the cost for both, the private insurers would be vilified for denying care just as they were when they first denied coverage for bone marrow transplants for late stage breast cancer patients.
The free rider problem could possibly be resolved via a public / private partnership with each entity contributing funding in proportion to its aggregate medical claims costs. Even then, there would be issues around what studies to pursue with limited resources and how to conduct them. Alternatively, it would probably be better if an independent public entity performed this function. Collective industry efforts could supplement the public effort with coordination between the two as to what projects will be funded. An anti-trust exemption might be necessary if the industry wanted to move in this direction.
Simple arithmetic.
Profits are a percentage function of revenue.
A smaller revenue stream yields a smaller profit.
Carried to to an extreme, if costs shrink to zero so do the profits.
Barry
The government wasn’t reducing payment for cancer care under the new Medicare bill (MMA). They were simply reducing overpayment for chemotherapy drugs, and paying cancer specialists the same as other physicians. The government can’t afford to overpay for drugs, in an era where all these new drugs are being introduced, which are fantastically expensive.
Although the new Medicare bill tried to curtail the chemotherapy concession (which encourages the maximal use of chemotherapy), private insurers still go along with it. What needs to be done (in cancer medicine at least) is remove the profit incentive from the choice of drug treatments. Medical oncologists should be taken out of the retail pharmacy business and let them be doctors again.
The new system still had major flaws, in that it continued to provide incentives to administer chemotherapy, in the same way that surgeons have a financial incentive to recommend surgery. Also, it is a certainty that there would be large difference between the profit margins of administering different drugs, providing continuing incentives to base drug selection on profit margin.
At least the new system was an improvement from the standpoint of cancer patients, taxpayers, and advocates of basing drug selection on individual tumor biology, rather than on a least common denominator approach which invited conflicts-of-interest medical decision-making.
“One would think that insurers would want to do their own comparative effectiveness research to find out whether cutting edge drugs, devices and procedures really provide greater benefits.”
I have never been confused about what insurers “would want”. During the height of the hype about HMOs, I knew that they didn’t know how to “manage care” and furthermore really didn’t care. They do know about how to cut costs however.
I am not sure that if an insurance company published something about the comparative effectiveness of various treatments/drugs I would even believe it.
It seems to me that the proper people to investigate comparative effectiveness are NOT the Drug companies or Insurance companies, but academic institutions (and I am even a little worried about some of them given the recent disclosures of kickbacks paid to them by device and drug companies) and the government.
Gregory, Dr. Rick, Hootsbuddy, Gregory (wnd comment) Barry,-
Gregory–
I know that you have deep and long experience with ( and knowledge of) cancer drugs.
So it is worth spotlighting what you say:
“Everyone is scared to death – and rightly so – at what is going to happen to the healthcare economic system with the introduction of increasingly expensive new drugs that benefit only a small percentage of patients who receive them, hence the headlong rush to develop tests to identify molecular predisposing mechanisms whose presence still does not guarantee that a drug will be effective for an individual patient.
“Nor can they, for any patient or even large group of patients . . .
” I think that in both of these areas – private insurance carriers and the FDA – there is a very real opportunity to make a substantial impact and contribution, an interest in saving the healthcare system perhaps billions of dollars a year (and thereby the healthcare system itself) by ensuring that expensive treatments are used appropriately.”
My comnent: Yes!
.
Dr. Rick —
I’m afraid that your phrase–“mortal bankruptcy” –is indeed the right phrase.
Hootsbuuddy–
Yes, all for-proift heatlh care comapanies have a vested interst in seeing health care spending grow–thus their reveneues and profits grow..
But as a soceity, we cannot afford to see the $2.7 trillion that we now spend on healthcare swell 3 or 4 times faster than GDP growth or wages.
Barry–
You write:
“First, if all of the large insurers did their own research and published the results, it would be a wasteful duplication of effort.”
A duplifcation of what effort?
A duplication of the comparison effectiveness research that President Obama is suggesting that we (taxpayers) should fund?
I think the president is right.
But why should for-profit insurers proffit from this taxpayer-funded investment in research?
If Medicare stops paying for something becuase medical evidence shows it is not effective, so will private insurers— as long as Medicare, makes the investment, does the work , and makest he case to the public. )
Why should the 50% of all Americans own cannot afford to own stock (or own very very little) , yet stll pay taxes, subsidize the other 50% —who benefit from this type of “corpoate welfare” (taxpayers subsdizing corporations)?
See Gregoy’s second comment.
Gregory–on your second comment (addressed to Barry–)
Yes!
“But why should for-profit insurers proffit from this taxpayer-funded investment in research?”
Because that’s the way a free market works! /sarcasm
eRobin–
I’m afraid you’re right. Another reason markets don’t work for healthcare.
Another reason insurers haven’t done much comparative effectiveness (other than integrated delivery systems, which have done a lot) is that they don’t want to piss off doctors more than they already have. Comparative effectiveness from a payer is perceived as a direct threat to provider revenue and practice patterns (rightly so). The relationship between providers and insurers is not a good one, and insurers who get doctors up in arms are not at a competitive advantage. As I’ve mentioned before, I work for a health insurer. I’ve seen this attitude of wanting to keep doctors calm and not giving them new things to complain about many times. It’s pretty pervasive, and is a direct result of the battles insurers fought with providers in the 90s, which in a way both sides ended up losing (both felt they lost) and both ended up winning (the relative truce resulted in runaway spending growth, increasing everyone’s revenue).
A couple remarks have been made that it is not in insurers’ interest to lower the cost of health care, because higher costs mean higher premiums, and thus more revenue and profits (assuming margins don’t compress). That’s true as far as it goes, but the same point could be made about car insurance and a similar point could be made about any good that is sold. That doesn’t mean competition must fail to keep costs low. For example, it isn’t to Dell’s or HP’s advantage if the cost of computers keeps going down and PCs are basically commodities, and yet that is what has happened.
So the problem is really the failure of competition to keep costs in check among providers, drug makers and insurers. The problem is not the mere fact that higher prices, other things being equal, mean higher revenues.
By the way, about those battles in the 90s: as I, Maggie and others have noted before, insurers did come out the worst. Their public image was effectively destroyed by the physicians, whereas insurers were unable to dent the aura of the physician who is on top of the latest science and is acting in the best interest of the patient.
In the mid 90s it became a widespread belief that insurers made enormous profits and did so by denying care to people who needed it and were entitled to it by the benefits they had purchased. The idea that an insurer profits when a sick person doesn’t get care is now embedded in a lot of people’s minds, and is almost universal on the left half of the political spectrum, even in Congress. According to a recent survey (which I lost, does anyone remember it?) Americans think insurer profits are over 3 times higher than they are, and have no understanding of the point we’ve been discussing in this thread: the more care that is denied, the lower the medical cost trend and the less premium will be charged next year.
And think also about the fact that you rarely hear the converse point about physician perverse incentives: doctors have no financial interest in keeping you well, because they only get paid when you are sick. Worse, the sicker you are and the more you need help, the better for them. There is no public outrage about this. Another sign that insurers lost the message war.
The fact that they did lose is one of the biggest things holding us back now in attempting real health care reform that doesn’t just insure more people, but sets the conditions to create more effective, efficient care. There is no constituency demanding comparative effectiveness, lower specialist payments, or an end to fee for service as we know it. Makes it that much harder to overcome the objections of special interests.
This looks good to me.
http://healthpolicyandmarket.blogspot.com/2009/06/health-wonk-review-health-reform-whats.html
It seems to toss the ball back into the “private” court.
Comments?
Hootsbuddy & jd
Hootsbuddy–thanks for the link.
Bob L’s idea is based on the idea that:
“central planning could not make the discreet decisions necessary to distinguish between expensive care and necessary care that providers and patients, looking at the specific patient situation, and driven by the proper incentives, could.”
This just isn’t true.
These decisions are too important and too expensive to be made by one patient (who has no medical training and a natural bias to refuse to accept the fact that, in many cases, there is no treatment that will save him) and one doctor– (the majority of whom are, as Dr. Atul Gawande points out, “average.”)
Gawande published an excellent piece in the New Yorker titled “The Bell Curve” (you can Google it) where he pointed out that doctors, like electricians, plumbers, teachers, journalists- etc. live on a bell curve.
At one end of the curve, a small cluster of physicians are outstanding–absolutely brilliant.. At the other end of the curve a small cluster are bearly competent. In the center, the vast majority are “average” or “mediocre.”
Add to that, the fact that, today, no one doctor can know everything he needs to know–even in his own specialty . . .
The smartest doctors like to work in groups–or,at least, consult with each other.
Unfortunately, the less smart doctors in the middle tend to think they know what is right.
Given the cost of healthcare today- and the stakes for the economy and for patients who won’t get the care they need if we continue to squander dollars on unncessary, ineffective care,
we really don’t want these
decisions made by one frightened layman and one middling doctor.
We need guidelines set by the very best doctors in the field. The comparative effectiveness oversight goard and panel the adminisration has appointed would do that. It’s primarily made up of excellent physicians–plus nurses, patients’ advocates, a former physical therapist. No faceless gov’t beaurocrat/bean-counters.
Individuals doctors shouldn’t be FORCED to follow guidelines- and MedPac wouldn’t do that.
But if an individual doctor isn’t following them mostof the time he should be required to explain why, and provide evidence, in each case. (Perhaps he has an unusual pool of patients for whom normal guidelines won’t work. )
When it comes to healthcare, every other developed country in the world uses “central planning” (govt’ regulation) to set guidelines,contain spending and ocver everyone. And overall health and healthcare is better–at a much, much lower cost.
We don’t want ad hoc “bed-side ratioining.” For one thing, evidence shows that when individual doctors make the decision as to who should get the extra test or procedure, minorities get far less care.
They don’t even get necessary painkillers in ERS. (ER staff tend to assume that they are drug addicts–and of course some are–but most are not.)
That’s a major problem with “up close and personal” ratoining/decision-making.
I often agree with Bob L., but his objection to “central planning” is phrased in very old-fashioned, Cold War language.
Another name for “central planning” is “government regulation.” The current economic meltdown has taught us that we need more governement regulation, and less laissze-faire chaos and scams.
Bob L. writes: “A Medicare-like Public Health Plan option would simply lead to successive rounds of fee discounting—not rooting out the 30% of the system that is waste .”
This simply isn’t true, as anyone you has read the
MedPac (Medicare Payment Commission) reports of the past 3 or 4 years knows.
Those 200 and 300 page reports are all about rooting out waste. And they explicitly say that what we don’t want to do is simply cut fees across the board.
To the contrary, MedPac calls for hiking fees for primary care physicians, and taking a close case-by-caes look at other fees to see how much the procedure Benefits Patients.
President Obama favors the idea of giving MedPac the power to implement its recommendations– for Medicare, and presumably, for a Single Payer option.
Bob writes: ” America Was Built Not on Central Planning But on Individual Ingenuity – Patient-centered solutions cannot occur in a system driven by central planning—the solution needs to be about expert health care providers using their ingenuity in literally a million places every day toward better cost/quality results.”
Individual ingenuity? The type of ingenuity that brought us sub-prime mortgages and derivatives?
There is too much money on the table in our health care system (just as there was on Wall Street. This brings the wrong people out of the woodwork.)
Calling for “individual ingenuity” is inviting people to scam the system.
Finally , if we followed Bob’s plan, How many wealthy patients would give their physicians expensive gifts at Christmas, become friends with them and offer them the use of their ski lodge or summer home if it was left to the “discretion” of the individual physician to decide who should get extra (unnecessary, but the patient doesn’t understand that) care?
Neither the patient nor the doctor would think of this as a scam. Just similiar people who send their kids to the same private schools, belong to the same clubs, share the same politics, becoming friends, and doing the generous things that friends do for each other. . .
Meanwhile, if the doctor wants to keep costs down, he has to prescribe significantly less care for other patients in order to balance the cost of providing extras for some patients. . .
Medical guidelines need to be based on medical evidence, not personal ties. And a public sector plan, along with Medicare,could require health care providers to pay attention to those evidence-based guidelines–and require hosptials to approach benchmarks (established by places like Geisinger and Mayo Clinic) by bundling payments to doctors and hospital— with bonuses for better outcomes at a lower cost.
I’m afraid that when Bob L. talks about individual doctors and patients making “discreet decisions” he is really talking about discrimination.
P.S.– I am so sorry to hear your e-mail account was hi-jacked. Exactly the same thing happend to me a few months ago. Horrible.
And I will let you know when it is possible to buy the DVD on line.
J.D.
Good to hear from you and thanks for your comments.
I basicaly agree, but let me add:
You are right that just as private insurers would like to see the price of health care high, boosting their revenues and profits, so computer-makers would like to see the price of laptops spiral.
But consumers have the power to lower lap-top prices. Lap-tops are not a necessity. Many people don’t need them, and while I do, I can wait a year to buy a new lap-top–until someone comes along with a good product at a lower price.
Sick patients don’t have that luxury–and 80% of our healthcare dollars are spent when patients are very ill.
I agree that private insurers don’t want to try to contain costs because they don’t want to anger doctors.
A public-sector insurer would have more clout: many doctors (and virtually all hospitals) wouldn’t be able to stay in business unless they had business from Medicare/Medicaid and the public-sector option.
Doesn’t this mean that that a public-sector option woudld be free to grossly under-pay them?
No, enough doctors could do well (as they do now in wealthy cities) either refusing all insurance or only accepting the private insurance that paid signifcantly more.
A share of patients would choose those private insurers.
If the govt’ paid too little, the percentage of patients who choose those better-paying private insurers would swell, leaving the govt plan with poorer, sicker patients, raising its costs.
So the government just couldn’t make reimbursements too low.
Also the gov’t (MedPac/Medicare) has already announced that it wants to hike fees for primary care providers–and providers who achieve better outcomes . . .
I agree that the majority of people believe that insurers make huge profits–which certainly hasn’t been true in recent yars.
Single-payer advocates have persuaded many that insurance company profits and adminsitrative costst are the mamjor drive behind health care inflation.
As you know, that isn’t the case. Overuse of advanced medical technologies on patients who won’t benefit is the biggest problem.
But, as you suggest, the vast majority of patients just don’t want to believe that their doctors might be over-treating them. -It’s just too scarey. People want to feel they can trust their own doctor.
But–and this is the good news– many people are willing to believe that Other People’s doctors are over-treating them.
Many middle-aged Americans have seen doctors over-medicating and over-treating their parents–both during old age and during their final six months.
People will tell you how a friend had a surgery that didn’t help him–and probably wasn’t necessary.
Finally, many physicians realize that over-treatment is a real problem. They probably don’t think they are over-treating patients (this is only human) but they know that colleagues in their specialty are.
This is the constituency for comparative effectiveness and all of the reforms that we want to see. . . . .
I remain hopeful!
Thanks Maggie, I’ve been reading, just not commenting much.
The survey that I mentioned is here: http://www.wellpoint.com/pdf/Premium%20Cost%20Drivers.pdf
Page 4 has the information on how high Americans think insurer profits are. I had done a non-scientific survey on Daily Kos about 2 years ago and got very similar results. The misperceptions are extreme.
I certainly agree that the market for care is not sensitive to price in the same way that the market for computers is, and that government intervention is needed to make markets work. So-called consumer-directed plans are not the answer. I’m an Enthoven fan.
You make an interesting point about people being more willing to accept that other people get too much care than that they do, and similarly with doctors. I’m sure that’s right. Yet, I’m also sure that once reform comes and it becomes clear that something will be taken away, the irrational forces will come out. I wish the ground had been set better than it has been to resist the urges to overtreat by both physician and patient. And for the physician, there is still the pure economics of it, and that is a huge factor. The closer we get to real reform, the bigger the blowup we will get from the AMA and AHA. I really do think it will get ugly and vicious.
HEALTH CARE SCAMS & SOLUTIONS
The Democratic Party is moving into shark-infested waters with its efforts to provide “universal health coverage for all”. If they “succeed”, they are likely to face a monumental backlash as people learn they have been scammed. MY ADVICE:
MANDATES & “AFFORDABILITY”: Most important, avoid the deadly MANDATE to buy “health insurance”, under the guise of “universal care for all”. What it actually would do is tax or penalize people who can’t afford insurance premiums. It wouldn’t GIVE most of us anything. Especially beware assets tests – Medicare requires divestment down to $2,000 before receiving any assistance with premiums – & many seniors who can’t afford the Part B yearly deductible & the co-pays are dependent on their nest egg income to survive. MINIMUM POLICIES & MOCK COVERAGE. This “coverage” would also be useless because the same moderate-income citizens could not struggle past the co-pays & deductibles involved to get care. “Affordable” is a word easily thrown around by those comfortably situated. To say, “We’ll GIVE you universal health care!” & instead, hand us a bill and no way to the doctor is a SCAM!
THE PRODUCT OFFERED IS AN EXPENSIVE LEMON. Our health care system is inferior to most countries – we’re about #37. The third-leading American-killing ‘disease’ is conventional medicine itself. An article in the Journal of the American Medical Association Vol 284, Jul 26, 2000, based on a report from the Institute of Medicine, confirmed this. Prescription drugs kill between 106,000 & 130,000 per year; hospital infections around 90,000, while total kills by medicine approach 230,000 to 250,000. Worse, “The vast majority of drugs — more than 90 percent — only work in 30 percent or 50 percent of the people” – this from a large drug company executive. SCAM!
WHAT’S REALLY NEEDED: World Health Organization (WHO), says a prime factor for why other industrialized nations outrank the U.S. (in health outcomes) is that they maintain a pluralistic approach to health-care delivery. This means many modalities & alternatives are allowed to thrive and openly compete in the medical marketplace, as distinct from the U.S., in which the government essentially supports a medical monopoly by a single modality – “conventional” medicine. EXAMPLES: England, with better health results than we, spends $2,000 per capita (covering everyone) vs. our $8,000 each, with many unable to get care. Their five homeopathic hospitals are under the National Health. Germany’s Commission E, during the 1980’s, carefully researched herbal and traditional remedies for safety and effectiveness – those they approved could be prescribed under their national plan.
HOW TO GET THERE: The “health care” system in the U.S. is a corporate, commercial enterprise driven & controlled by the pharmaceutical & high tech medical industries, designed to sell the kind of treatment that makes big bucks for these folks. Any “universal health care” plan that is federal government-run will be under the thumb of the same corporate interests. However, some enlightened states and health insurance companies are already taking a more sensible road, with state mandates for CAM (Complementary & Alternative Medicine) & insurers offering policies that include CAM health options. So, the best of the floated federal options would be non-profit health cooperatives at the state level, with federal funding and greater latitude, some of which (like Washington state) might allow choice of licensed health practitioners such as naturopathic & homeopathic physicians, acupuncturists, etc. As for funding, a surtax on the wealthy seems the fairest means – these folks right now pay the lowest taxes in years.
It would be a great study. The results would have huge implications for years.