Health Affairs

Sue Ducat
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From Health Affairs

Medicare Should Use Comparative Effectiveness Research to Decide Reimbursement for New Services, Say Researchers

October Health Affairs Examines Role of Costs in Deciding Comparative Effectiveness; and How It Can Influence Physician Practice and Manufacturer Investment

Bethesda, MD -- The Affordable Care Act puts strict limits on the ability of the federal government to draw on comparative effectiveness research (CER) to determine what can be covered under Medicare. But researchers writing in the October issue of Health Affairs say using the research to determine how much to pay for newly covered services could yield billions of dollars in savings without threatening patient choice.

"The time is ripe for Medicare to use comparative effectiveness research to reach a new paradigm, which would include equal payments for services that provide equivalent results," say authors Steven Pearson and Peter B. Bach. Pearson is president of the Institute for Clinical and Economic Review at Massachusetts General Hospital's Institute for Technology Assessment. Bach, an attending physician at Memorial Sloan-Kettering Cancer Center in New York City, was an advisor to a CMS Administrator during the G. W. Bush administration.

Under the three-pronged model set forth by Pearson and Bach, Medicare would pay more for interventions that research had demonstrated provided superior results for patients. By the same token, when two interventions demonstrated comparable clinical effectiveness, Medicare would pay the same amount for both. When a new service or treatment lacked any comparative evidence, Medicare would set a tentative payment while research on the intervention's effectiveness was carried out. After three years, if there was no clear evidence that the new service had a clinical advantage over an alternative intervention, Medicare could reevaluate what it would pay for the service.

The authors say this "dynamic pricing" model could save Medicare billions of dollars over time and would prevent the program from being "trapped" into paying more than was warranted for interventions. They cite the experience with Medicare payment for intensity-modulated radiation therapy in the early part of the decade, a new form of targeted radiation therapy often used to treat patients with breast or prostate cancer. When Medicare covered this treatment, there were no trials or studies that compared its effectiveness to conventional radiation treatment. Because this therapy required more expensive equipment, Medicare agreed to pay $42,000, compared to $10,000 for the traditional approach. This led more providers to buy the equipment needed to offer the new therapy in favor of the traditional approach and wound up costing Medicare $1.5 billion more each year on prostate cancer treatment alone, without any evidence of superior clinical outcomes.

Under the new model, Medicare would have only paid higher prices for intensity-modulated radiation therapy for three years. During that period, manufacturers and clinicians would have had to perform research to compare the performance of the newer therapy to the traditional approach. If evidence showed that the therapy did not offer clinical advantages, Medicare would have cut the price for intensity-modulated radiation therapy to the level it paid for conventional radiotherapy. If evidence showed that the intervention was superior to the traditional approach, Medicare would continue to pay a higher rate.

The authors admit there are several challenges to advancing their model. It would require new legislation, and would undoubtedly be highly contested by those with a vested interest in keeping the status quo. But Pearson and Bach say the idea of paying equally for comparable results is one that would resonate with Americans and help move Medicare to solid financial footing.

The article is one of several in this month's issue of Health Affairs which examine the implications of the new investment in comparative effectiveness research. The October issue of Health Affairs is funded by the National Pharmaceutical Council, WellPoint Foundation, and Association of American Medical Colleges.

Highlights of other articles:

• Stanford University's Alan Garber and Dartmouth Medical School's Harold Sox look at the role cost-effectiveness analysis can play in comparative effectiveness research. Although the Affordable Care Act limits the role of cost-effectiveness analysis in government-sponsored comparative effectiveness research, Garber and Sox say such information does not have to be "rationed" and that research sponsored by the newly formed Patient-Centered Outcomes Research Institute will improve the quality of cost-effectiveness research done by others. "There is a difference between what the law says the institute, which will sponsor comparative effectiveness research, can do, and what the field as a whole should be doing," says Garber, a physician and Director for Center for Health Policy and Center for Primary Care and Outcomes Research at Stanford. He and Sox say that the Institute can avoid commissioning cost-effectiveness analyses and still require research that it supports to provide the information to help others investigate the cost-effectiveness of health care interventions. Private health insurers, physician groups, hospitals, or public health agencies can use this analysis. And, the restrictions that the Affordable Care Act placed on the use of cost-effectiveness thresholds in Medicare don't apply to their use by these other groups or by patients, they say.
  
  
• A paper by James Robinson of the University of California at Berkeley, points out that proponents of comparative effectiveness research have sometimes implied that better evidence on effectiveness will by itself lead to lower health care costs. In fact, evidence needs to be coupled with economic incentives in order to influence the use, appropriateness, and cost of care. His paper analyzes the four principal tools now used by health insurers to influence health care costs, including coverage limits, consumer cost-sharing, provider contracting and drug pricing, and outlines how they will need to evolve to incorporate comparative effectiveness research evidence.

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears each month in print, with additional Web First papers published weekly at www.healthaffairs.org. You can also find the journal on Facebook and Twitter. Address inquiries to Sue Ducat at (301) 841-9962 or sducat@projecthope.org

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