There have been a number of articles (1,2,3)
discussing the financial incentives built into the healthcare system in the
United States. Built into these discussions are two key assumptions: (1)
that financial incentives are influencing treatment decisions and (2) that
changing those financial incentives will lead to substantial cost savings for
the same quality of care. The recent release
of Medicare Part B payment data from 2012 has
made available some anecdotal evidence that these two key assumptions are in
fact correct. With this data it is possible to identify both the
level of use and cost of individual therapies. Here are some examples
of inefficiencies that are built into the way that healthcare decisions are
incentivized in the USA.
Example: Hemophilia. The treatment with the highest minimum
annual out-of-pocket expenses from the CMS data is “Factor VIII recombinant NOS”. This is a
replacement for a missing protein in the blood of patients with Hemophilia A
(also used to treat Von Willebrand disease). The disease causes
spontaneous bleeding and according to the World Hemophilia
Foundation children with
severe, untreated Hemophilia A typically do not survive to adulthood. However, with
treatment life expectancy is close to normal. Based on the CMS
data table, the average cost to treat a senior with this condition is
nearly $250,000/year with Medicare covering almost $200,000. In addition,
the treatment is not a cure; it must be continued for the life of the patient.
In the portion of Medicare Part B that we can see, over $70
million – about $0.62 for every working American – was spent treating 357
seniors with Factor VIII recombinant NOS; those 357 seniors themselves were
responsible for around $18 million in total costs.
There are other first line therapies for the treatment
of Hemophilia A. In particular there is a non-recombinant version of
factor VIII that is derived from blood plasma (also
listed in the table). The major
difference in these two products is
the chance of transmission of communicable disease through the use of plasma
products. However, due to modern techniques for detecting HIV and
Hepatitis as well as pasteurization techniques, “no blood-borne
transmission of hepatitis viruses or HIV has occurred in the last 20 years." Nonetheless,
there are only 55 patients (13 percent of those treated with factor VIII or
factor VIII recombinant) who are receiving plasma based factor VIII. If
CMS had a mechanism for moving the patients on recombinant factor VIII to the
non-recombinant version, it would lower its own costs by at least $34 million
per year - $68 million if we extrapolate to the full size of Part B.
Example: Rheumatoid Arthritis. There is a similar comparison that can be
made for two of the rheumatoid arthritis (RA) drugs listed in the "expensive treatments" table, and
while the price differences are not nearly so dramatic, the number of patients
affected is much larger. Infliximab ($13,430.70/year) and Tocilizumab
($10,997.55/year) are two competing therapeutics for RA. The two have
been compared head
to head in a clinical trial with
Tocilizumab either equivalent or outperforming Infliximab on all measures of
disease progression. Nonetheless, Infliximab was given to 42,645 patients
in 2012 while Tocilizumab was given to only 2216. This comparison is not
perfect because Infliximab is also an approved treatment for inflammatory bowel
disease (IBD). However, the prevalence of IBD among seniors is much lower than
that of RA. Even if we suppose that only a quarter of the Infliximab
patients could be moved to Tocilizumab, Medicare would have saved $26 million
on just this change in 2012.
Example: Prostate Cancer. Many of the most expensive treatments on
the list are cancer therapies. Sipuleucel-T auto CD54+ is a treatment for
end-stage, hormone refractory prostate cancer. Based on the three clinical
trials that have been run using the treatment, it adds an average of about 4
months to the lifespans of treated patients. With the relatively high
cost, it is likely that Sipuleucel-T auto CD54+ is inaccessible to most of the
population of Medicare patients. If we estimate the prevalence of late
stage prostate cancer based on statistics from cancer.org concerning death rates, then the
problem afflicts around 30,000 men per year.
How do we, as a society, value those four months? Is it obvious
that all 30,000 men with late stage prostate cancer be treated with
Sipuleucel? This would require that every working American contribute
approximately $2/year. Is it obvious that they shouldn’t? Similarly, it
is difficult to deny factor VIII replacement to the 412 seniors in our data set
who needed treatment in 2012, but do we as a society need to pay double for the
recombinant version?
Perhaps even more important than these questions is this one: if
patients are responsible for 20% of the cost of their therapies, why aren’t
they demanding less expensive therapies when they are equally effective? The answer to
this is probably very simple; Americans – and this sometimes includes
physicians – simply don’t
understand or think about the financial consequences of medical
decisions. Very few people realize that if you order “J7190” instead of
“J7192” from the menu of therapeutics (see
the table), you get the same result, but your medical bill will drop by
almost $10,000 per month.
Of the 4,309 different procedures that are commonly practiced and
for which Medicare made at least a partial payment under Part B in 2012, 37 of
them cost more than $10,000 per year. Of these procedures, 31 of them are
medications. Currently, CMS is legally banned from bargaining with
pharmaceutical companies for the price of medications. Instead it is
bound on one side by the prices those companies set and on the other by the
working definition of medically
necessary. Physicians and pharma companies are generally making the
purchasing and pricing decisions and both of them benefit from higher prices!
One solution to this problem is to demand that prices for
medications be set in some way other than asking the companies who produce them
how much they would like us to pay. On the other hand, letting the
manufacturer set the price is the way that a free market society works. Another
option is to change the incentive structure for the buyers. Under Part B, physicians generally get a
percent of the cost back in profit. What would happen if this profit were unrelated
to the cost of therapy or even inverted? Alternatively, perhaps the best solution is to
ensure that the patients understand how much they are spending and what they
are getting for their – and taxpayer – money.
