Healthcare Rationing: UnitedHealth Comes Up With a New Chemo Wrinkle
United Healthcare's effort to "bundle" charges for cancer care is in line with the current national trend -- supported by the healthcare reform law -- to move away from fee-for-service physician payments. But the United pilot is also something more: It shows how payers could put the brakes on the rapidly escalating costs of new technology by creating incentives for doctors to use perfectly adequate but less expensive tests and treatments.
U.S. cancer care costs about $100 billion a year, and cancer treatment outlays are growing at double-digit rates annually. One reason for the high spending on cancer is that oncologists themselves buy chemotherapy drugs at wholesale and then bill the government and private payers at the retail price. The difference was $532 million in 2000.
Oncologists' profit on cancer drugs accounts for half of their revenue in some cases. So naturally, the physicians' incentive is to order the most expensive medications. The differences in cost can be enormous. The drugs for treating one type of lung cancer, for example, can cost Medicare from $1,322 to $7,092 per month.
To be fair, patients react differently to specific drugs, and some patients do better on novel therapies, which are often more expensive. But that may not always be the reason why their chemotherapy costs more.
What United is doing in its test with five oncology practices is to pay the doctors a set fee for chemotherapy for breast, lung, and colon cancer. The health insurer also pays an extra case management fee but expects the physicians to follow national clinical guidelines in choosing courses of treatment. The lump sum is based on what United paid the oncologists under the old rules in 2010, and will be frozen for the foreseeable future. Yet some doctors say they're happy with that, apparently because they expect other payers to cut their reimbursement.
The expectation is that this approach will encourage doctors to make the best medical decisions for their patients, while restraining their use of the most expensive drugs. Regional insurers in California, Pennsylvania, and Washington are said to be negotiating similar limits on cancer care. Aetna is working with 250 Texas oncologists to get them to follow clinical guidelines on chemotherapy after an analysis showed that this could lower costs by 35 percent.
While some observers view the United pilot as an experiment with payment "bundling," the concept can also be interpreted as a way of trying to limit the impact of technology on health spending. As new chemotherapeutic agents come to market, their vendors tout them as the latest and greatest, even if their value in comparison with existing drugs is limited. Since doctors benefit by selling costlier drugs, and patients want to survive as long as possible, these new agents are an easy sell.
From the viewpoint of the employers, consumers and taxpayers who foot the bill, they're not such a great bargain. But in today's environment, it's impossible for health plans to refuse to cover an FDA-approved drug; and to impose steep copays on patients who may be facing a death sentence would invite public opprobrium. So United's approach makes a lot of sense because it encourages doctors to prescribe less costly drugs out of self-interest. This could be a model for efforts to restrain the use of other high-cost, low-value technologies.
Are we on the verge of a breakthrough in this area? I think not. But as this case shows, there are ways to incorporate cost effectiveness analysis into health care delivery. Similarly, a recent Health Affairs paper suggests a way for Medicare to use cost effectiveness in its reimbursement approach. Human ingenuity can be a powerful tool when we're between a rock and a hard place.
Image supplied courtesy of Flickr
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