Savings elusive
Many popular reform proposals, though, are unlikely to save much money, particularly during the next 5 or 10 years, according
to the Budget Options report. Permitting the federal government to negotiate lower Medicare drug prices with pharmaceutical companies, for example,
is likely to produce "small if any savings," the budget analysts conclude. The main problem is that the Secretary of Health
and Human Services (HHS) would not have sufficient leverage to secure significant discounts. HHS might negotiate small savings
for certain single-source drugs by persuading manufacturers to reduce individual prices, but that measure would not be enough
to make a visible difference.
Insurers, pharmacy benefit managers, and manufacturers make the same claim about the disadvantage of centralized price negotiations,
but Congress still may support such a move for political reasons. Former Congressman James Greenwood, now president of the
Biotechnology Industry Organization, told reporters at a September 2008 briefing that members of Congress assume that either
Medicare negotiates prices or drug companies charge whatever they want. The legislators fail to realize, he noted, that every
drug under Part D is subject to "very tough negotiations" between the private parties.
Similarly, CBO describes how prevention and disease-management programs may reduce the need for expensive care for some patients,
but that such initiatives have costs, especially if provided for large populations.
Antiobesity and antismoking campaigns may enable people to live longer, but in the long run will increase demand for care
for the elderly. And modifying the system for identifying and penalizing medical malpractice similarly would have only a modest
impact on total healthcare expenditures. Many policymakers support wider adoption of health information technology (IT) as
a key strategy for lowering healthcare costs and improving the quality of care, but implementation will be costly at first.
Comparing effectiveness
Both public and private health officials also believe that comparative research on which drugs and medical procedures are
most effective can reduce inappropriate and expensive care. In assessing the potential savings from such efforts, CBO projects
that total spending on healthcare could decline by about $8 billion over 10 years, but up front costs would eat into most
of those gains and yield limited savings.
Even so, support in Congress for establishing an independent comparative-research organization is growing. Senate Finance
Committee Chairman Max Baucus (D-MT) has proposed creating a nonprofit, quasi-governmental entity that would contract with
public and private organizations to obtain evidence of the clinical effectiveness (CE) of medical products and treatments.
A key issue is whether such a CE research program addresses costs as well as treatment effectiveness. Insurers and payers
maintain that effectiveness research must weigh prices and expenditures to be useful to the healthcare system, as does the
United Kingdom's National Institute for Clinical Excellence (NICE).
While paltry gains may diminish enthusiasm for some reform proposals, high costs will doom others. Part D critics want to
fill in the confusing and costly coverage gap in the Medicare drug benefit. But such a move, says CBO, would cost $42 billion
during 2010–2014 and $134 billion over the next decade. That high price tag makes it unlikely that Congress will eliminate
the doughnut hole, but the inequities of the system will continue to draw criticism of the Part D benefit. For example, many
seniors stopped taking prescribed medications or switched to other drugs because they exceeded their coverage limits.
These issues will be addressed in the coming months under several initiatives. Congress moved quickly to reauthorize the State
Children's Health Insurance Program, but still has to tackle the 2010 budget, tax changes and additional economic stimulus
proposals. And the Medicare physician-pay fix looms ahead.
Last summer, Congress enacted a limited Medicare reform bill that put off hard decisions on revising Medicare's outmoded payment
system for reimbursing doctors. In fact, the legislation calls for a 20% cut in physician fees in 2010, setting the stage
for another heated battle over Medicare rates and regulations. Many legislative experts believe that Congress will not have
enough time to address broad health issues this year, but reform advocates insist that American industry cannot compete globally
unless the nation develops a more efficient and cost-effective healthcare system.
Jill Wechsler is Pharmaceutical Technology's Washington editor, 7715 Rocton Ave., Chevy Chase, MD 20815, tel. 301.656.4634, jwechsler@advanstar.com
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