Pop the Cost Bubble: Unallot Medicare

Victor Sandler

Here’s a dirty little secret: Cutting health care costs is not that difficult, nor will it harm patients. That’s because it only involves giving up unnecessary medical care—tests and treatments patients may want but really don’t need because they don’t benefit their health.

How is this supposed to happen? In Minnesota we call it “unallotment.” When the state had to reconcile a projected multibillion dollar budget deficit this year, and the Republican governor and Democratic lawmakers couldn’t agree on how to do it, the governor simply “unalloted” billions of dollars of planned expenditures.

Medicare should do the same. All Congress has to do is pass the MedPAC Reform Act of 2009 (SF 1110) and give it teeth. We can then unallot the 30 percent of Medicare expenses that most health care experts believe are unnecessary. That’s the 30 percent that goes for tests, drugs, and devices that don’t have any proven benefit but sell like hotcakes anyway.

When Gov. Tim Pawlenty decided to cut medical expenditures during the unallotment process, he took no prisoners. More than 30,000 indigent adults will simply have their medical insurance eliminated starting next March. Medicare would take a higher road, eliminating unnecessary care and costs, not “unnecessary” people.

There are, of course, alternatives. We could raise taxes by $1 trillion or so. Or we could pray that the $30 trillion of unfunded Medicare liabilities is just an actuarial error. But I think it would be more prudent to stop payment for care that does not help such as prescribing statin drugs for elderly people without coronary disease, doing PSA testing in elderly men, performing mammography in elderly women, doing coronary CT angiography, doing Pap smears on women who have had a hysterectomy for benign disease, and authorizing chemotherapy for patients with advanced cancer who are debilitated and close to death.

President Barack Obama would have you believe that electronic medical records, preventive medicine, and comparative effectiveness research hold the key to cost savings. These things will promote quality, but they won’t cut unnecessary costs, which is what we need to do. Paying twice as much per capita for health care as other developed countries and ranking 22 out of 23 among those countries in terms of quality of care is sinful.

The real reason why we can’t seem to contain costs is inertia. And that inertia is driven by three factors. First, the ethos of American medicine, fostered by the media and society, is that more medical care is good and newer care is better than older care. Oftentimes, particularly in my specialty, geriatric medicine, where margins of safety are thin and life expectancy is short, the opposite is true. But, for sure, “more” and “newer” are almost always more expensive.

Second, most doctors, particularly specialists, eat what they shoot. The more stents they place, the more hysterectomies they perform, the more CT scans they read, the more they earn. Most doctors are good people, doing what they believe is in their patients’ best interest. But there clearly are incentives to do more, not less.

Third, and most insidious, is the conflict of interest that pervades health care in this country. Drug and medical device companies pay for 80 percent of medical research and 70 percent of continuing medical education. Worse, 60 percent of medical school department chairs are paid consultants of these companies, and 80 percent of physicians who author clinical practice guidelines have financial relationships with the pharmaceutical industry.

By all means, we should provide health care to all Americans. But let’s look for misspent dollars to defray the cost. First, we need to pass the MedPAC reform act and use it like a fine surgeon’s scalpel to carve out unneeded care. The savings likely will be compounded because reimbursement decisions made by Medicare are usually replicated in the private market. Second, we must resurrect primary care, which is the foundation of any efficient health care system. The number of doctors entering internal medicine, family medicine, and geriatrics has dropped precipitously. Incentives must change if we are to alter this maldistribution of medical manpower.

Third, we need to minimize ineffective care at the end of life. Frail elderly and terminally ill patients too often receive unwanted, unneeded, and expensive care. Better integrating hospice and palliative medicine into our care system will solve this problem.

Finally, we need to encourage the development of integrated health care systems. The Mayo Clinic, Intermountain Health of Utah, and Kaiser Permanente are examples of such integrated systems. They have proved that they can lower medical costs by 20 percent compared with other provider organizations that are not structured this way.

If these measures don’t work, I suppose we could borrow a few trillion more. China, could you spare a dime?

Victor Sandler is an internist and geriatrician. He also is bioethics committee co-chair for the University of Minnesota Medical Center, Fairview, medical director of Fairview Hospice, and a member of the State of Minnesota’s Health Service Advisory Council. This piece originally appeared on Minnesota Medicine, and is republished here with the Author’s permission.

Spread the love

Categories: OP-ED

Tagged as: , , ,

8 replies »

  1. Dr Sandler,

    Very nice points. But sometimes it is advised by physicians themselves about the tests. Also, the healthcare insurance has been changed a lot since you published this.

    SO what is your take on this not?


  2. -Cutting spending is easy. Cutting costs isn’t. Worth remembering the difference between “costs” and “spending.”
    -No mention of defensive medicine as a driver of costs? Really?
    -No recognition of the role that a government cost-management – e.g. price fixing – system, the RBRVS played in creating the primary care crisis in the first place. Imposing price controls as a means of cutting spending (they do nothing to affect real costs) is both ineffectual and leads to massive misallocations of resources.
    -You are confusing demography for efficacy in your assessment of Kaiser-Utah-Mayo. Take a Mormon software-engineer with advanced prostate cancer and replace him with a schizophrenic street person with a heavy crack habbit who comes in with the same problem and see what happens to your metrics.
    -Let’s hope that the quality measures referenced above aren’t based on life-expectancy and infant mortality stats that are so distorted by variable standards concerning what constitutes a “live-birth,” variations in teen pregnancy rates, and demographic factors that neither doctors nor hospitals can do anything about (murder, suicide, drownings, DOA’s from traffic accidents, etc).

  3. I want to know what the “unnecessary” treatments and tests are. I don’t really think that overall there is any “unnecessary” treatments when caring for a patient.

  4. In regards to “authorizing chemotherapy for patients with advanced cancer who are debilitated and close to death,” there is an obvious need for technologies to better match treatment to each patient, by testing the individual properties of each patient’s cancer, instead of lumping all cancer patients into one category and stop authorizing care.

  5. Great identification of some of the cost drivers, and at a high level Dr. Sandler points out necessary changes to reduce costs. However, appointing a command and control oversight board (Medpac) will not effectively change physician behavior. And cutting fee schedules will result in more cost shifting. Encouraging more organized physician groups where higher income is tied to quality and peer review, is the only way to get physicians in the efficiency game – which we must have. Oh, and you forgot malpractice reform!

  6. On the other hand, when Medicare refuses to pay for something one’s doctor deems necessary, the result will be to shift the cost from the government to the patient. I had surgery several days ago for “debridement” of a knee injury complicated by “cellulitis.” As part of the “preadmission” process, I was presented with several forms requiring me to acknowledge that several of the diagnostic tests ordered by my doctor probably would not be covered by Medicare, specifically, “electrocardiogram, tracing, prothrombin time, and thromboplastin time, partial.” The charges for these come to a little over $500. Whether these are in fact covered or uncovered is beside the point. The point is that, if your doctor tells you something is necessary, you are probably going to go forward with it, even if you have to fund it yourself. I don’t know that I would consider this a meaningful reduction of “health care costs.”

  7. Paying twice as much per capita for health care as other developed countries and ranking 22 out of 23 among those countries in terms of quality of care is sinful.
    Depends on how the rankings are done. Please provide a cite to the study which includes the methodology. Thank you in advance.

Leave a Reply

Your email address will not be published. Required fields are marked *