The cost of health care: Current expenditures unsustainable

Part two of HemOnc Today’s series on health care spending looks at the way other health care systems ration care.

The rationing of care is a hot-button topic in the current health care reform debate in the United States. The idea of setting limits on care is anathema to one of the basic tenets of American medicine: Only the patient and his doctor should make decisions about treatment.

However, according to census data, the United States spends more money on health care than any other nation with, in most cases, poorer outcomes, while leaving roughly 45 million people without health insurance. In comparison, Canada and the United Kingdom, which insure everyone through publically funded health care, spend less money and often achieve better results. One key component to their systems is rationing care.

In part one of this two-part series, HemOnc Today looked at the high cost associated with cancer care, particularly at the end of life. One potential method to hold down medical costs in cancer, and others areas, is rationing, which is the systemic and explicit denial of certain treatments for certain patients. Implicit rationing already exists in the United States — those who cannot pay for care generally do not get it except in emergency situations — but is it time for the United States to consider explicit rationing?

Craig Earle, MD, director of health services research for Cancer Care Ontario and the Ontario Institute for Cancer Research, said a two-tiered system may be best in the United States. Photo by CPimages/S. Sacco

In an editorial published by The New York Times in July, Princeton University bioethicist Peter Singer, MD, argued that the United States must begin rationing health care or risk bankrupting the entire country. “It is hard to see how the nation as a whole can remain competitive if in 26 years we are spending nearly a third of what we earn on health care, while other industrialized nations are spending far less but achieving health outcomes as good as, or better than, ours,” he wrote.

One state, Oregon, has already started down that road with mixed results.

The Oregon Health Plan

The Oregon Health Plan was introduced in 1989 at the urging of John Kitzhaber, MD, a former emergency medicine physician who was then-president of the state’s legislature. The law expanded the state Medicaid program to cover all state residents living below the federal poverty line. At the time, it was the only health care prioritization of its kind.

The enacted legislation created Oregon’s Health Services Commission. The 11-member commission included, among others, five physicians, one public health nurse and one social worker, and it was tasked with drafting a prioritized list of health services.

The commission determined the relative effectiveness of thousands of condition/treatment pairs. In addition, health outcomes for a given condition were compared against a specific treatment, alternative treatments or no treatment. The list was then modified after public hearings, dozens of focus groups and a survey of 1,001 state residents. The commission had to consider not only the cost-effectiveness of a given treatment, but also the importance of treating a given ailment.

In theory, the priority list would draw a line — the state would pay for condition/treatment pairs above the line, but would not cover pairs below that line.

The priority list was introduced in 1993 and is revised every two years as part of the budget process. Darren Coffman has been on the commission staff since 1989 and has served as director since 1997. He said the methodology that goes into setting the prioritized list was updated in 2006, and that new methodology went into revisions made to the list in 2008.

The new list includes some rudimentary mechanisms to measure the impact of a medical condition on a person’s healthy life-years, pain and suffering, the impact of a medical condition on the population at-large and the impact of a medical condition on vulnerable populations. The plan also measures the impact of prevention and early intervention, and its effectiveness in treating a condition.

“Effectiveness overall is the main driver of the methodology,” Coffman told HemOnc Today. “Cost is used to break ties when there are two services that have about the same effectiveness and impact on an individual and the population as a whole.”

Coffman said the legislature’s primary goal in enacting the plan was to expand medical coverage to low- income residents. At its height, the plan reduced the percentage of uninsured Oregonians from approximately 17% in 1992 to 11% in 1997; however, Coffman acknowledged that percentage is about 16% today, which he attributed to the weak economy and its impact on state budgets.

He argued that as originally conceived, the state would reduce benefits in times of revenue shortfalls, and he said that had happened at least four times since the health plan was enacted. Mandates from the federal government had limited the state’s ability to adjust benefits in response to economic realities.

“Because we’re working under a Medicaid waiver, we have to get approval from the Department of Health and Human Services for any changes to the benefit package, and they have not approved some of the reductions the state legislature has called for,” Coffman told HemOnc Today. “To some degree, that has not allowed us to deal with some of the revenue shortfalls we’ve had over the years.”

Oregon’s budget for 2009-2011 is $53.8 billion. Coffman said saving money was not the top priority in drafting the health plan, but the plan saves about $32 million on health care annually. A review of the plan published in 2001 in the Canadian Medical Association Journal, said the Oregon Health Plan saved about 2% of estimated health care costs, a figure Coffman did not dispute.

However, although rationing was built into the plan, Oregon’s plan does not implement much. Coffman said that only about 10% of total costs are not covered by the state’s plan.

“Of that 10%, about 5% are not typically covered by a traditional commercial plan,” he said. “Maybe about 5% of the total costs represented by the prioritized list represent newly excluded services under the Oregon health program. If it’s as much rationing as people were expecting, I’m not sure. We do exclude services typically covered by commercial plans and other Medicaid programs.”

The published review also said Oregon’s plan had not resulted in widespread rationing of services, and that the number of services denied for coverage was small and of little medical value.

“On the contrary, the benefit package covered by the OHP under its rationing system is more generous than under the state’s old Medicaid system, and for some crucial services, such as mental health and dental care, it is considered superior to commercial insurance in Oregon,” wrote Jonathon Oberlander, PhD, and colleagues in the review. “The absence of wide-scale rationing in Oregon, as well as the gap between impressions of the plan and the reality of its operation, is illustrated by the fact that coverage for transplants — which were singled out rhetorically as a target for cutbacks by the plan’s architects — is actually more generous and comprehensive today than before the OHP rationing scheme was enacted.”

The authors of the review said Oregon was caught in what they called “the political paradox of rationing.” Even as the public wants to cut costs, voters pressure elected officials to maintain benefits, so little rationing actually takes place. That is not the problem in the United Kingdom, where one leading critic said the National Institute for Health and Clinical Excellence, better known as NICE, is “ruthless” when it comes to rationing care.

The United Kingdom and NHS

NICE describes itself as “an independent organization responsible for providing national guidance on the promotion of good health and the prevention and treatment of ill health.” The organization gives guidance on individual health technologies, the management of specific conditions, the safety and efficacy of interventional diagnostic and therapeutic procedures, and the cost-effectiveness of those therapies.

NICE uses the quality-adjusted life-year to measure the health benefits and cost-effectiveness of a given treatment. The organization compares the present value of expected quality-adjusted life-year with and without treatment or relative to another treatment to determine the relative health benefit associated with a given therapy, and compares that number against the cost of therapy. NICE has set the cost-effectiveness threshold at roughly $33,000 per quality-adjusted life-year.

The institute essentially serves as the gatekeeper for medicine in the United Kingdom. The National Health Service will not cover medicines and therapies unless they win approval from NICE. Patients who want access to therapies not approved by NICE either have to go through private insurance or file a 10-page exceptional circumstances proposal with the NHS explaining why the treatment is necessary.

In 2008, Karol Sikora, MD, PhD, was one of 26 medical professors in the United Kingdom who signed a letter published in The Sunday Times of London calling on the NHS to overhaul the way it handles the approval of new cancer drugs.

Karol Sikora

“The big headache in Britain at the moment is with cancer drugs from NICE,” Sikora told HemOnc Today.

According to Sikora, there are little delays in obtaining drug approvals, such as market authorization from the European Medical Evaluation Agency. That means that the drugs are available in pharmacies, hospitals and to private patients, but are not available through the NHS. That availability is dependent upon a NICE ruling, which may take up to three years, he said.

“If NICE approves the drug, there’s no problem. If they turn it down, there’s also no problem — the patient can’t have it. It’s when these drugs that are in limbo between being licensed and being approved that we have a problem,” Sikora said.

In addition to cancer drugs, access to care can also be problematic. Sikora said that although the NHS has made great strides in shortening waiting times for patients, it can still take as long as six months from the time a patient begins complaining about symptoms for a physician to get test results confirming a diagnosis.

“For radiotherapy, for example, in the NHS we’ve set a target of 31 days for treatment,” he said. “Some people have been waiting three months for radiotherapy. Most U.S. centers would laugh at that — they treat most patients within a week of referral. Whether it really has a huge impact on outcomes is not clear, but it certainly has a huge impact on someone’s psyche.”

Still, the NHS remains popular. According to one study, 73% of Britons reported having confidence in the national health system, a percentage identical to that of Canadians, compared with only 56% of Americans.

However, Sikora, who spent two years at the World Health Organization, said that there is no good health care system in the world; every system is struggling. The ideal system, he said, would be a two-tiered scheme in which the government guaranteed certain basic services such as emergency medicine and preventive medicine. Those who wanted more extensive and expensive medical insurance would be able to purchase that coverage on the open market.

The Canadian way

Craig Earle, MD, is director of health services research for Cancer Care Ontario and the Ontario Institute for Cancer Research. He is also a native Canadian who practiced in Ottawa for two years before spending 10 years with Dana-Farber Cancer Institute in Boston. Similar to the debate going on in the United States today, when Canada first implemented its government-funded health care system in the 1960s, there were cries of socialism and warnings about the inevitable decline in care, he said. Therefore, he is not convinced that there is something inherent in the American character that would prevent the introduction of a single-payer system.

“Any survey that’s done now shows that Canadians love their system, recognizing that it’s not perfect, and would never give it up,” he said. “Similarly, Medicare for patients older than age 65 has proved to be a very popular system. It’s not that people change their character after age 65, it’s that this is a good idea that should be extended to the whole population.”

Earle said Canada does not ration care in the same way as NICE. Instead, the Coordinating Office for Health Technology Assessment, Canada’s equivalent to the British system, limits the availability of certain technology and procedures. A background briefing examining the Canadian system written in 2002 and updated in 2005 showed that Canadians waited 12.3 weeks for an MRI scan, and the average time from an initial visit to an internist through to surgery was 17.7 weeks.

“Things that are considered urgent, like cardiac surgery, those things get done,” Earle said. “Cancer surgery, maybe it’s done next week or in two weeks instead of tomorrow. When you get into things like some orthopedic procedures that are more lifestyle-related rather than life or death, those are the things where a patient may be waiting for several months.”

Although the idea has long been regarded as “un-Canadian,” Earle said the country is slowly developing a two-tiered system in which the government covers certain procedures, and patients who want to go beyond that or want to speed up the process buy private insurance.

“There has been an evolution that some mix of private and public is probably the best and most sustainable way to go,” he said.

Limiting spending

The experiences of the United Kingdom and Canada with publically funded medicine may or may not mean much in the United States. Although Americans, in theory, said there should be a limit to health care spending, as Oregon’s experience shows, the public may not be willing to put that belief into practice. “That said, no system, not even your system at three times the expenditure (of the United Kingdom), is a bottomless pit,” Sikora said. “It will run out of money in the end.”

So, how does the United States cut its health care bill and simultaneously insure another 45 million people? Earle said a public system should be, at a minimum, worthy of consideration. Sikora said he believes that single-payer systems are on the way out because they become too expensive and because they become political weapons for whichever party holds power.

“They’re doomed everywhere in the world because they just become inefficient and bureaucratic,” Sikora said. “Older people consume the most health care in any system in the world, while generally paying lower taxes. That means if you’ve got a tax-based system like ours, the only way you can get more money into the system is by levying heavier taxes on the younger people. You get to the point where the younger people rebel because they’re asked to pay for the health care costs of older people who are paying less tax. That can’t work long term.”

Instead, Sikora envisions a system that blends aspects of the United States and the United Kingdom systems to provide universal coverage without wrecking the economy.

“It’ll have multiple competing providers and multiple competing insurers,” Sikora said. “What we’re going to try to stay away from is this rigid fee-for-service structure you have which is very expensive, especially if physicians get financial reward for installing and using equipment. Our system is not the answer, but you could blend some of the best features of American medicine and British medicine and come up with a scheme.”

Earle said a quick way to cut medical costs in the United States would be to allow the government to negotiate lower prices for pharmaceuticals. That practice is specifically banned as part of a deal between the Obama administration and pharmaceutical companies to cut drug costs by $80 billion over 10 years, but that agreement is not law, and Congress could ignore that pact when it finalizes health care legislation.

“Any of these sorts of things have to happen at the higher policy level,” Earle said. “A doctor has to do whatever he can for the particular patient in front of him. Any concerns about cost and cost-effectiveness have to be done at a higher level outside of the doctor-patient relationship.”

Robert E. Moffit, PhD, director of the Center for Health Policy Studies at the Heritage Foundation and formerly a senior official in the Department of Health and Human Services during the Reagan administration, does not foresee an American version of NICE as the answer.

“I’m not saying it couldn’t work, I’m saying it wouldn’t be politically acceptable,” he said. “It’s politically acceptable in Britain because the British are much more willing to accept the idea that the government will tell them what they can and cannot have. Americans are not likely to put up with that kind of thing. That’s why there’s so much hostility to rationing in this country, and that’s why people in the administration are running around saying they aren’t doing any such thing.”

Moffit envisions a market-based plan in which Americans get tax credits to shop for their own insurance. Under his plan, low-income people are subsidized by the government, and the government guarantees a minimum basic level of care. Competition, he argued, will control costs and improve service so more people can have health insurance for less money.

“The question is, ‘What kind of process do we want to have for making decisions about how we limit medical services? Who’s going to make the key decisions?’” he said. “The folks in favor of a Canadian- or British-style system want the government to make that decision. One of the arguments in favor of a market approach is that ultimately those decisions will be made by individuals.” – by Jason Harris

Is explicit rationing of health care inevitable in the United States?

For more information:

• Carter L. Cancer specialists blame NICE over drug rationing. The London Telegraph. Aug. 24, 2008. Available at: http://www.telegraph.co.uk/news/uknews/2613653/Cancer-specialists-blame-Nice-over-drug-rationing.html. Accessed Aug. 14, 2009.
• Fojo T. J Natl. Cancer Inst. 2009;doi:10.1093/jnci/djp177.
• Guram J, Moffit RE. The concept of a federal health board: Learning from Britain’s experience. [The Heritage Foundation Web site]. Dec. 4, 2008. Available at: http://www.heritage.org/Research/HealthCare/wm2154.cfm. Accessed Aug. 3, 2009.
• Ham C. BMJ. 1998;316:1965-1969.
• Irvine B, Ferguson S, Cackett B. Background Briefing: The Canadian Health Care System. Available at: http://www.civitas.org.uk/pdf/Canada.pdf. Accessed Aug. 3, 2009.
• Oberlander J. CMAJ. 2001;164:158-1587.
• Singer P. Why we must ration health care. The New York Times Magazine. June 19, 2009. Available at: http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html. Accessed Aug. 3, 2009.
• Sulmasy DP. J Clin Oncol. 2007;25:217-222.