Category Archives: Health Economics

This is not rocket science but simply how markets work.

There is a sub-text to the debate regarding costs in medicine.

Our republican friends say they worry that health reform will result in health care rationing. Their concern is that somewhere in the system might be a mechanism to evaluate the results of care and decide whether expensive interventions do anything and provide value.

These are the same guys that want to do away with Medicare and Medicaid and replace it with a system of “self-insurance” using high deductible health insurance and a health savings account.

Regarding HSA’s and high deductible policies, Consider the average person’s retirement savings (see below) and the average and median incomes in the U.S. (approximating $50,000-$60,000/year).

How much health catastrophic health care will the average person’s savings and “health savings account” with high deductibles cover? FYI the deductibles run between $3000 and $10,000/year and this does not take into account other co-pays and uncovered medical expenses. Most certainly such a HSA proposal formalizes the economic rationing of care–if you don’t have the money you don’t get the care.

US Savings rate compared with other industrialized countries:

In the last 10 years health insurance costs have increased 130%, drug costs have similarly skyrocketed with new cancer drugs in the range of $100,000/year.

Meanwhile savings in IRAs and other retirement accounts at various ages (2007 figures adjusted to 2009) are:

• < 35: $6,306
• 35 – 44: $22,460
• 45 – 54: $43,797
• 55 – 64: $69,127
• 65 – 75: $56,212
• 75+: (sample size insufficient)

Medicynical Note: Does anyone really think that most people will be able to adequately fund another type saving account, HSA–when their retirement is already underfunded? Does anyone really think HSA’s will adequately fund health care with drugs costing in the range of $100,000/year? That’s true economic rationing of care.

Interesting editorial in the Journal of Clinical Oncology looking at the high costs of cancer care and raising the issue of health technology assessment programs (HTA) to evaluate cost/efficacy.

They note that HTA’s examine:

• Is the new treatment effective? Although surrogate end points such as response rate may be sufficient evidence of efficacy for regulatory agencies (eg, rise in hemoglobin after administration of erythropoietin stimulating agent), HTAs generally demand more direct evidence of benefit (eg, improved quality of life measured by a validated instrument, or improved survival).
• Which patients benefit? If the clinical trial population excluded particular patient populations, are they likely to have the same benefit as the patients included in the study?How does it compare to other available treatments?
• At what cost?

The editorial compares the costs in other countries and their rationale for paying for or not covering certain drugs.

“To calculate an ICER, one simply divides the average net cost of the treatment by the average net benefit in life expectancy (adjusted for the presumed quality of the increased longevity). For example, the increase in longevity of 0.33 months (6.2 months versus 5.9 months with gemcitibine alone) or 0.028 years associated with erlotinib in patients with pancreatic cancer at a net cost of approximately $11,500 would have an estimated ICER of $410,000/life years gained and $510,000/QALYs (if one discounts the life years gained by 20%, since those extra days in are in far from perfect health). A recent review of published cost-effectiveness analyses of cancer-related interventions (of which only half were pharmaceuticals) found that 8% were reported to be both cost saving and more effective (dominant) and 52% had an ICER of less than $50,000 per quality-adjusted life-year (QALY) gained, resulting in approximately 60% being below the ICER threshold used by NICE for determining their willingness to pay. The ICER was greater than $100,000 per QALY gained in 14% of interventions examined, and interventions were cost increasing and less effective in 11% of analyses. (Medicynical emphasis) Although cost effectiveness is not considered explicitly in the United States, an ICER of $100,000/QALY is often cited as a threshold for being reasonably cost effective.

The editorial references an article by Mason et al. comparing the approach in the U.S. and the U.K. It concludes:

Anticancer drug coverage decisions that consider cost effectiveness are associated with greater restrictions and slower time to coverage. However, this approach may represent an explicit alternative to rationing achieved through the use of patient copayments.

Medicynical Note: It’s apparent that we have reached the point where increased expenditures on health care at 2-3 time the inflation rate cannot be sustained. We actually reached this point 20 years ago but ignored it. Will we be able to do something constructive now? Or will our non-system move increasingly to rationing of care by copayments and the patient’s ability to pay.

Remember in our country the total savings of most people amount to less than the cost of one of these new targeted therapies.

Check out the ratings and cost of Health Care here compared with Australia, Canada, Germany, Netherlands, New Zealand, and UK.

It is apparent that the U.S. is lagging in adoption of national policies that promote primary care, quality improvement, and information technology. Health reform legislation addresses these deficiencies; for instance, the American Recovery and Reinvestment Act signed by President Obama in February 2009 included approximately $19 billion to expand the use of health information technology. The Patient Protection and Affordable Care Act of 2010 also will work toward realigning providers’ financial incentives, encouraging more efficient organization and delivery of health care, and investing in preventive and population health.

For all countries, responses indicate room for improvement. Yet, the other six countries spend considerably less on health care per person and as a percent of gross domestic product than does the United States. These findings indicate that, from the perspectives of both physicians and patients, the U.S. health care system could do much better in achieving value for the nation’s substantial investment in health.

Medicynical Note: We will need to improve our non-system’s inefficiencies and develop an approach that provides value, maintains quality, and improves access. The Patient Protection and Affordability Act of 2010 is an important first step. The question is whether our democracy, while in economic crisis, has the will to do this.

It’s enough to make a Medicynic’s day.

The Medicare Prescription Drug, Improvement, and Modernization Act, enacted in 2003, substantially reduced payment rates for chemotherapy drugs administered on an outpatient basis starting in January 2005. We assessed how these reductions affected the likelihood and setting of chemotherapy treatment for Medicare beneficiaries with newly diagnosed lung cancer, as well as the types of agents they received. Contrary to concerns about access, we found that the changes actually increased the likelihood that lung cancer patients received chemotherapy. The type of chemotherapy agents administered also changed. Physicians switched from dispensing the drugs that experienced the largest cuts in profitability, carboplatin and paclitaxel, to other high-margin drugs, like docetaxel. We do not know what the effect was on cancer patients, but these changes may have offset some of the savings projected from passage of the legislation. The ultimate message is that payment reforms have real consequences and should be undertaken with caution.

And:

“Physicians don’t always respond to incentives the way most people expect, but in this case they do respond in a way that makes sense to economists. It seems logical on the one hand that when you pay less, you get less. However, in this case, since a high proportion of an oncologist’s income depends on prescribing, paying less per drug results in more drugs,” study first author Mireille Jacobson, of the non-profit RAND Corp., said in the news release.

Interesting recent articles in the Journal of Clinical Oncology on treatment of cancer in those over age 80.

The crux of the debate was whether the elderly (over age 80) cancer patient is treated less aggressively and whether this adversely effects outcome.

Women age ≥ 80 years have breast cancer characteristics similar to those of younger women yet receive less aggressive treatment and experience higher mortality from early-stage breast cancer.

And on the other hand:

The authors found a trend for poorer survival in women 80 or older who received chemotherapy. This may have been due to more aggressive tumors or increased treatment toxicity in the treated group. Because of the descriptive and retrospective nature of this study, unmeasured variables, such as cognitive function, performance status, and patient preferences may confound the reported relationships.

But it needs to be fully acknowledged that elderly patients are known already to be less able to tolerate aggressive treatments as their younger comparators.

Elderly patients have more comorbidities and tend to tolerate aggressive chemotherapy and radiotherapy more poorly than their younger counterparts. Much of the data available today is based on retrospective studies of trials that included patients with good performance status and patients of all ages. However, retrospective analyses of ordinary trials without age-specific entry criteria are potentially biased by intrinsic selection that govern enrollment. Hence, it is hazardous to extrapolate results observed in these analyses to the general population of elderly lung cancer patients. Thus, specifically designed prospective studies are mandatory to provide definitive recommendations for the treatment of elderly patients with lung cancer. Relevant prospective data are available only for advanced NSCLC. Elderly patients with lung cancer are at risk for both empirical undertreatment resulting in poor survival and excessive toxicity from standard therapy. Hence, phase III randomized trials are needed to define specific standards of care for the elderly.

Medicynical Note: For someone who has lived over 80 years the promise of a 2-4 month improved outcome is not impressive. This is particularly the case with highly toxic, expensive, and not fully covered by insurance treatment options.

Interestingly the elderly, when facing the reality of the diagnosis and the limits and toxicity of therapy, most often choose treatment that maintains quality of life. The challenge for the medical oncologist is to make sure patients fully understand the risks and benefit –without bankrupting them.

Given that we are talking about applying treatments with known outcomes in younger people, I’m not sure that the elderly will go for a treat/no treat randomization in a phase III trial. The issue is more whether or not to risk the side effects and toxicity, or rediculous costs of treatments and not so much the extent to which the treatment may provide benefit–particularly if we are talking about a few months improvement in survival as is often the case.

Sad but not surprising news regarding the U.S.’s child mortality being reported in Lancet (full text online May 24 and available with registration). The report notes declines in the rate of child death worldwide but our rate of decline (the U.S.’s) is significantly less than elsewhere. Currently 6.7 child deaths/1000 occur here. In most of Europe and Canada the rate is now under 5–in Singapore it’s under 3. There appears no good explanation for this discrepancy other than the unevenness and cost of our non-system.

Underscoring historic recent gains in global health, the number of children younger than 5 who die this year will fall to 7.7 million, down from 11.9 million two decades ago, according to new estimates by population health experts. But as much of the world makes strides in reducing child mortality, the U.S. is increasingly lagging and ranks 42nd globally, behind much of Europe as well as the United Arab Emirates, Cuba and Chile.

Singapore, the country with the lowest child mortality rate in the world at 2.5 deaths per 1,000 children, cut its rate by two-thirds between 1990 and 2010. Serbia and Malaysia, which were ranked behind the U.S. in 1990, cut their rates by nearly 70% and now are ranked higher.

The data instead suggest broader problems with the nation’s fragmented, poorly planned healthcare system, Murray and other healthcare experts say. Although the U.S. spends nearly twice as much per capita on healthcare as most other industrialized countries, researchers are finding substantially higher levels of preventable deaths from diseases such as diabetes and pneumonia.

Other countries with slow rates of decline include Britain, New Zealand and South Korea, which have all fallen in the international rankings since 1990. All three are still ahead of the U.S.

link: Child mortality rates dropping, study finds, but U.S. lags

Medicynical Note: The article in the LA Times puts some faith in notion that the newly enacted health care law will approach our uncoordinated non-system that costs twice as much as elsewhere. That remains to be seen as many in our culture don’t feel there is a collective responsibility to assure access to affordable health care. In this we remain a remarkable outlier in the world.