What’s
Wrong Today:
Last week,
the NYT
covered the release of payment data by Medicare to doctors which showed that the
50 physicians who got the most Medicare money in 2012 were ophthalmologists. While
some of that may come from questionable billings, it mostly results from doctors’ incentives to
choose more expensive drugs than necessary. From Bloomberg: (brackets by the Wrongologist)
system works: When a doctor administers a drug in his or her office, Medicare
pays 106% of its average selling price. The doctor keeps the extra [money] as
compensation for administering the injection
How does
this work with ophthalmologists? The drug Lucentis is used to treat macular
degeneration, and it cost Medicare almost $2,000 a shot in 2012.
Another drug,
Avastin, which works just as well,
costs about $50. If you were the doctor, playing within a system that pays you 6%
of the drug’s cost, which would you choose? Since Medicare spent nearly $1
billion on Lucentis in 2012, this tells you that most ophthalmologists went
with the expensive drug.
This
problem goes well beyond the decision to use one drug for macular degeneration. Of
the $20 billion Medicare spent on drugs administered by doctors in 2010, 85%
went to the 55 most expensive drugs. In what seems unlikely to be a coincidence,
42 of those drugs also showed an increased use from
2008 to 2010.
Get that?
You’re an ophthalmologist. You see a patient with macular degeneration. You
have two options. One pays you $3. The other pays you $120. Which are you going
to choose?
We’re not
talking about costs to the patients. We’re talking about payments to doctors.
Medicare is going to cover the cost of the drug no matter what (which is also
crazy, since one costs them 3900% more than the other). We’re talking about the
“profit” the physician or practice makes. They get $3 or $120.
Do we
really think that doctors are absolutely not influenced by this?
The
Centers for Medicare & Medicaid Services, (CMS) the agency that runs
Medicare, is required to pay for treatment that a doctor deems medically
necessary, and it lacks the authority
to direct treatment based on cost. All Medicare can do to control costs
is tell doctors the price of what they’re prescribing, as well as the
alternatives. That means, they have almost no power over the choice of drugs.
To remedy some
of this, President Obama’s latest budget proposed lowering the administrative
fee to 3% from 6%. This would save Medicare an estimated $7 billion over 10 years. That’s not chump change. While it is a
step in the right direction, it changes the math to $1.50 for Avastin and $60
for Lucentis, probably not enough to change behavior.
A different
approach would be to impose a dollar cap on doctors’ administrative fees, such
as setting a fixed fee per injection, regardless of drug. Bloomberg suggests
that a better approach would be to adopt the tactics used by private insurers
and use price signals to promote the least expensive drug options:
giving doctors a larger administrative fee for choosing generic drugs. Or
beneficiaries – who now pay 20% of the cost of the drugs they receive – could
be charged lower copayments when they use generics. The government could even
direct doctors to use a generic when one is available
Even
though some Docs will undoubtedly still try to game the system, all (!) Congress
has to do is authorize Medicare to
negotiate prices. As the country’s #1 buyer of medical equipment and
prescription medications, it’s the easiest, most effective way to rein in
costs.
Doctors
should choose the drug that clinical trials have shown to be the most
effective. When there’s no appreciable difference in effectiveness, they should
choose the cheapest. Since there’s no free lunch and Medicare’s financial
solvency is in doubt, cost must
be taken into consideration. If Lucentis is only marginally more
effective than Avastin (or not at all), then in a world of funding scarcity, Medicare would
be justified in covering only the latter (at a savings of approximately $1900 a
dose).
The question
is, who came up with the dumb idea to pay doctors not in proportion to their
effort or the health outcomes they achieve, but in proportion to the price of
the drug they prescribe?
Think it was Congress?
Lot’s to do, but lots of stakeholders to appease. We also need to reform drug patenting to make small changes NOT patentable. (We also need to reform patenting for digital tech – that’s much much worse). We need to remember that patents are not a right, but a privilege. An economic monopoly that is supposed to be temporary.