The Affordable Care Act invests in research to compare the effectiveness of different treatments, but it doesn’t allow Medicare to use that research to make coverage or reimbursement decisions. Currently, the program uses a “reasonable and necessary” standard when evaluating a new drug or procedure and sets a “payment level with the primary goal of reimbursing hospitals or providers for their cost plus some profit margin.” The manufacturer is not required to prove that the service in question is equally or more effective than other available options and so the government ends up spending billions of dollars a year on ineffective or overpriced treatments.
In this latest issue of Health Affairs, Steven Pearson and Peter Bach have a plan to change all that. “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,” they write. “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.” Medicare would pair its traditional “reasonable and necessary” standard with an assessment of the treatment’s comparative effectiveness. Pearson and Bach propose classifying treatments into three separate categories:
1) Superior comparative clinical effectiveness: if the service is more effective or has fewer side effects, or both than the most relevant clinical standard.
2) Evidence of comparable comparative clinical effectiveness: the service’s clinical effectiveness was comparable to its most relevant alternative. Such a service would be assigned a payment level equal to that of the alternative.
3) Insufficient evidence to determine comparative clinical effectiveness: insufficient evidence for whether the new service is comparable, superior, or inferior to relevant alternatives. The program would set payments according to the current cost-plus reimbursement formula for a period of three years. At the end of this period, Medicare would decide whether additional evidence was now available to determine if the service were superior, comparable, or inferior to alternatives.
The authors use the example of intensity-modulated radiation therapy, a treatment first introduced into practice in the early 2000s, which uses “computers to create three-dimensional pictures in order to target the highest possible dose of radiation to cancerous tumors while sparing normal tissue.” Clinicians felt that intensity-modulated radiation therapy was an advance to the traditional three-dimensional therapy, but “there had been neither randomized trials nor contemporaneous cohort studies comparing the effectiveness and toxicities of intensity-modulated radiation therapy to traditional three-dimensional therapy”:
Under the existing reimbursement system: The reimbursement rate is set in recognition of the increased cost of the necessary equipment and the complexity of its treatment planning process. A single course of treatment was set at approximately $42,000. For three-dimensional therapy providers received only $10,000. “This discrepancy led providers around the country to buy intensity-modulated radiation therapy machines and to abandon conventional three-dimensional therapy.” Medicare costs increased an estimated $1.5 billion per year to for prostate cancer alone.
Reimbursement Using Proposed Framework: Medicare’s decision to cover the treatment would have been accompanied by a determination that there was insufficient evidence with which to judge the comparative clinical effectiveness of the newer treatment against the standard three-dimensional therapy. Thus, the new treatment would have been slated to receive the higher—$42,000 per course—reimbursement for only three years.
Over that period, “if the evidence had shown that the new treatment had lower risks of side effects than the old one, then reimbursement for the new service would have remained higher.” If not, “Medicare would have reduced its reimbursement for the new therapy to equal that paid for the traditional treatment.” “Intensity-modulated radiation therapy would still have been available to patients, but incentives for developing less expensive versions of the treatment would have been strong. And Medicare would not have been trapped into years of significantly higher payments for a new technology that might not improve patients’ outcomes more than the older treatment.”
This is filled with all kinds of complications and will be subject to intense resistance from PHRMA and devise manufacturers who’ll argue that the approach stifles innovation and keeps needed treatments out of reach. Politicians will interpret this as an effort to ration care and many others will have trouble reconciling this payment system with the unfortunate conventional wisdom that any medical advance as an improvement over existing treatment. As Pearson and Bach explain, we’ll have to make some trade-offs, but that’s something worth considering. “When there is insufficient evidence to assess comparative effectiveness, it is possible that further evidence would show that a new service was inferior to existing options, at least for some types of patients. Limiting the rapid dissemination of such a service is likely to be in the best interest of most patients. Therefore, it is neither unethical nor without precedent for Medicare to institute a coverage and reimbursement strategy that may limit access to some new services.”