Broad Reforms, Narrow Goals for Medicare Reform

Kerri Houston

Treatment methods and disease outcomes have changed and advanced so rapidly over the last few years that patients, treatment centers and doctors struggle to keep up with new therapy options.

Nowhere is this more visible than in cancer treatments.

Cancer is the second-leading cause of death in the United States yet there has nowhere been a worse lag in keeping up with administrative functionalities of innovative disease management than in the Medicare system.

When designing the Medicare, Prescription Drug, Improvement and Modernization Act of 2003, Congress and its adjunct band of medical experts and healthcare economists took care to address the entire spate of the system's pharmaceutical pricing schemes in its quest for broad-based, market centered reforms for all of Medicare.

As with any overhaul of a massive governmental bureaucracy, at least one stakeholder group is likely to get wrapped around the axle of detail, and in the case of the MMA, a number of clinical oncologists have objected vehemently to a shift in pricing mechanisms for reimbursement in the treatment of Medicare's cancer patients beginning next January.

The method that Medicare was using to reimburse clinical oncologists for chemotherapy agents and other cancer drugs was grossly out of balance.

Payments were based on the Average Wholesale Price -- a theoretical pricing fiction. If it really existed, it would be the average "sticker" price of a drug set by U.S. wholesalers, but the U.S. General Accounting Office, the U.S. Department of Health and Human Services and numerous members of Congress have referred to AWP as a fraud, a waste, and a rip-off with no connection to actual prices paid for the drugs by doctors and hospitals.

This flawed system has been overpaying cancer doctors for generic and brand drugs for years. In turn, that overpayment is ultimately borne by taxpayers and patients in the form of higher co-payments. Conversely, oncologists were not being paid fairly for their own administrative treatment outlays, including the cost of highly trained staff needed to administer and monitor chemotherapy treatments.

The government now estimates the cost of the new Medicare prescription drug plan at $534 billion between 2004 and 2013 -- a 30-percent increase in its original estimate before the plan is even implemented.

Drug costs in Medicare Part B, the sub-program that pays for chemotherapy in hospitals and clinics, have been increasing at the rate of 20 percent per year. In seven years, the first baby boomers will reach the retirement age of 65, and it is estimated that in 20 years there will be 76 million retirees in Medicare, vs. 34.8 million in 2003.

As the main risk for cancer is age, the costs of treatment for all cancers is a critical part of the reform equation. Due to advanced diagnostic and surgical techniques and pharmaceutical innovations, cancers deaths in aging populations are declining. Over the last 10 years, deaths from lung cancer have declined by about 2 percent; prostate and breast cancers deaths have fallen nearly 3 percent; and deaths from colorectal cancer -- which strikes 90 percent of its victims after age 50 -- is down 1.5 percent over 15 years. But over 1.3 million new cases of cancer will be diagnosed this year.

Systemic reforms must consider the implications of this data and implement long term, broad-based solutions. The short-term, narrow focus of a few must yield to the broader vision -- including adjusting the reimbursement schedules for cancer treatment.

Many reforms in the MMA are designed to fix problems or implement new programs that relate to the cost of medications. On May 3, enrollment in the new prescription drug card plans opened, with the cards activated June 1.

In June 2006, seniors can opt to purchase drugs through plans that will use formularies and utilization review to deliver discounts, and Medicare payments for chemotherapy drugs will then be based on real pricing determined through competitive bidding.

Other market-based cost containment measures include competition within the insurer market, disease management protocols, and incorporation of ideas acknowledging that increased use of pharmaceuticals in the treatment of all disease decreases treatment costs and improves outcomes. Industry analysts estimate that each dollar spent on new pharmaceuticals saves more than $4 in hospitalization costs, and that new drug therapies account for 40 percent of the worldwide life expectancy increase of two years since 1986.

Medicare has increased the fees paid to oncologists for administration of therapies, and will adjust patient co-payments for drugs to accurately reflect the true market price. The plan includes a transitional payment year for doctors to adjust their own bookkeeping before new drug reimbursement formulas go into affect next year. Such changes have cured the overpayment for drugs and the underpayment for services.

A small cadre of oncologists is fighting the changes by scaring patients with the idea that these adjustments will directly hinder treatment. The American Society of Clinical Oncologists has harshly criticized this approach, but is protesting these changes under the MMA nonetheless.

The charge to "pick your battles" is always good advice, and this applies particularly to expending political capital. Congress is currently not willing to nullify these changes, nor is the administration. If there are cancer care issues relating to Medicare that need to be addressed, then the oncologists should lead the charge. Seniors should have the best care possible and cancer doctors must be treated with the appreciation and respect they deserve.

Inciting doctors to launch a protest on a road that leads to nowhere does not serve them well, and may even hurt them politically. There are many checks and balances built into the new system for evaluating changes; all parties concerned must help them work effectively. To do otherwise risks an insolvent system that delivers for no one.

--

(This editorial was originally published as a UPI Outside View Commentary)

###

Kerri Houston is Vice President of Policy for Frontiers of Freedom. She is a policy analyst and expert in media, marketing and external relations for the public policy community. Her areas of expertise include tax, social security reform, and healthcare. Prior to joining Frontiers of Freedom, Ms. Houston served as National Field Director for the American Conservative Union. She was also executive director of State Policy Network and director of external affairs for Dallas' Institute for Policy Innovation. A strong proponent of individual and economic liberty, Ms. Houston is a Brain Trust columnist for Investor's Business Daily, and her opeds have appeared in The Wall Street Journal, The Washington Times, The Dallas Morning News, Forbes magazine, Intellectual Ammunition, and numerous other print, internet and institutional publications. She has appeared on Fox News and MSNBC, and was a frequent guest on Politically Incorrect with Bill Maher. Ms. Houston is a member of the National Paycheck Protection Working Group and an advisor to the Texas Conservative Coalition’s Health and Human Services Task Force. She serves on the Board of Directors for GOPUSA.com and the Board of Advisors for The Project for California’s Future. She was also nominated to serve on the President’s Commission to Strengthen Social Security. Well known for her dedication to presenting public policy in a way that will “pass the dinner table test,” Ms. Houston brings a sharp wit and a practical spin to her areas of expertise.

khouston@ff.org