Medicare: Smart Cuts v. Dumb Cuts

by Jonathan Cohn | August 23, 2011

You've heard it many times before: The government's long-term budget problem is primarily a health care problem. The cost of Medicare and Medicaid, together, are rising faster than our willingness to pay for them. Something has to give. The question is what.

On the op-ed page of today's New York Times, Ezekiel Emanuel and Jeffrey Liebman say the "what" is Medicare. Yes, they want to cut the program. But the two former White House advisers, one an oncologist and one an economist, want do it carefully. 

Right now, they explain, Medicare pays a lot of money for treatments that don't do much good and, in many cases, do considerable harm. Among the examples they cite are the reimbursements for the controversial cancer therapy Avastin.

The manufacturer has long claimed that Avastin, which helps treat some cancers, also would benefit late stage breast cancer treatments. And the FDA approved it for that use on a provisional basis, pending evidence to back up the claim. But the evidence never materialized, prompting the FDA recently to deny full approval for those cases. Medicare, though, has decided to keep paying for it anyway, at $88,000 a year.

One reason, undoubtedly, is that refusing to cover Avastin would provoke cries of "rationing" from the right. But what do these conservatives propose instead? They oppose the taxes it would take to sustain a program that would guarantees beneficiaries coverage of all treatments, regardless of evidence. And they oppose other changes, such as paying providers or producers less, that would limit its expense. 

Their solution is the Paul Ryan plan: To convert Medicare into a private voucher that would simply cover a lot less, leaving individual seniors far more exposed to out-of-pocket expenses. Rest assured that, in such a world, large numbers of seniors would miss out on a lot more than unhelpful, potentially dangerous cancer treatments. They'd miss out on care that could actually ease their pain or prolong their lives.

To be clear, Emanuel and Liebman are wary of too much government control. Their preferred solution to the problem is the one in the Affordable Care Act:

The responsibility for ending unnecessary medical spending needs to be placed in the hands of doctors and hospitals. This can happen only if we change our fee-for-service payment system. Today doctors and hospitals that develop new programs to keep patients healthy lose money in two ways. They spend money re-designing care and then, with fewer office visits and hospitalizations, the payments they receive go down.
The seeds of a solution lie in the accountable care organizations, medical homes and bundled payment reforms that were authorized by last year’s Affordable Care Act. Accountable care organizations are groups of health care providers and hospitals that work together to treat patients. Medical homes coordinate primary care services. And bundled payments consolidate the many costs of an episode of care, like a hospitalization, into a single payment, incentivizing efficient delivery of tests and treatments. All of these reforms allow payments to be based primarily on the number of patients cared for and the quality of that care rather than on the volume of services provided.

The rap on Accountable Care Organizations, so far, is that the regulations are too onerous or (depending on who's talking) too weak to do the job. I imagine it will take the government some time to get these regulations just right. But that sort of experimentation, with a variety of cost-cutting approaches attempted over many years, may be the only way to control health care costs in a humane way. 

Note:  Emanuel and Liebman also warn against across-the-board cuts in reimbursements to providers and producers, as the debt ceiling would impose if Congress doesn't impose $1.5 trillion in deficit reduction on its own. In principle, I agree: These kinds of across-the-board cuts are a very crude tool for containing the cost of Medicare. In this particular case, though, I think the automatic cuts would be pretty mild -- and not the type to cause widespread hardship.

Source URL: http://www.newrepublic.com//blog/jonathan-cohn/94074/medicare-emanuel-liebman-cut-avastin-aco-ppaca-reform