Medicare and Health Care Cost Containment

Suppose you hired a purchasing agent to represent you in making a vitally important purchase. The agent proposes making the purchase for half the quoted price. The seller protests. What would you do?

According to today’s New York Times, you take the seller’s side.

The story is complicated, and all the information is not at hand. Medicare has proposed new payment rules for Bexxar and Zevalin, two radioimmunotherapies for non-Hodkins lymphoma. Effectiveness is not in question. The agents represent an important life extending and perhaps life saving advance in treating a common form of cancer.

Under the new rules Medicare will reimburse hospitals approximately $16,000 for the treatment, which patients receive only once. GlaxoSmithKline, which markets Bexxar, says it is priced around $30,000 per treatment. Biogen Idec prices Zevalin similarly.

The drug companies, the physicians who administer the treatment, and patient advocacy groups, have all attacked Medicare. One especially powerful article in Newsweek – “How Washington Is Nixing a Cancer Cure” – portrays Medicare as an uncaring, devious bureaucracy, peopled by “bean counters.”

It may turn out that Medicare’s analysis, according to which $16,000 is a fair payment, is incorrect. But two things in the story as it has unfolded so far bother me.

First, none of the protesters say anything about the ethical duty to support Medicare cost containment. Medicare is our purchasing agent. We all contribute to it through payroll taxes. If we (all stakeholders) do not support its cost containment efforts, Medicare will go down the tubes, but only after it siphons vast sums away from other socially important uses. Medicare cost containment is an ethical duty, not a shameful action by “bean counters.” Perhaps Medicare has made a mistake, but it is fighting the good fight here.

Second, the sad fact is that health sector trust has eroded. Drug companies deserve to be thanked for developing effective treatments like Bexxar and Zevalin. But the multiple Pharma scandals make it hard to take company protests about unfair reimbursement at face value. Perhaps worst of all, Pharma’s efforts to co-opt patient advocacy groups lead to uneasiness about the advocates’ position on what the price should be.

From what I glean about the two drugs, I have no doubt that in a country as wealthy as the U.S. they should be available to patients with non-Hodgkins lymphoma. But I also have no doubt that we all need to support Medicare’s efforts to rein in health care costs.