The health care cost debate takes place on two stages using two languages, one scientific, the other economic. The net result is a failure to communicate.
The scientific texts emanated over the weekend from the American Society of Clinical Oncology meeting in Chicago. Ongoing clinical trials showed that science has come up with new drugs that can reduce the incidence of breast cancer and prolong life for people with skin cancer. The former is an estrogen inhibitor that would have to be taken by tens of millions of older women to have a major impact on reducing the rate of breast cancer. The latter would only be given to a subset of the 68,000 new cases of melanoma each year, and would extend life from a few months to a few years for some of the 7,700 who die from the disease each year. Again, most of those people are older, although there are a number of younger people, especially young women, who disproportionately get advanced skin cancer.
For both groups, the cost to the health care system when these drugs are approved, as they inevitably will be, will be calculated in the billions. Medicare will pick up the lion’s share of the tab, since most of the patients in both groups will be over 65.
Now let’s step around the corner to stage two, where the debate in this morning’s papers (if you read the Washington Post and New York Times every day, as I do) is over Rep. Paul Ryan’s plan to turn Medicare into a voucher program. Paul Samuelson, the top economics columnist in the Post, essentially endorses the plan saying “under Ryan’s plan, incentive would shift. Medicare would no longer be an open ATM; the vouchers would limit total spending.” What he doesn’t say is that it would only limit total spending by government. It would require seniors to pick up a growing share of the bill, and limit their own purchasing of health care, either by purchasing plans that didn’t cover expensive end-of-life care, or simply denying themselves routine treatments to avoid co-pays and deductibles.
Paul Krugman properly attacks this as a radical shift of costs onto seniors (which it would be), and goes on to say:
Medicare has to get serious about cost control; it has to start saying no to expensive procedures with little or no medical benefits, it has to change the way it pays doctors and hospitals, and so on. And a number of reforms of that kind are, in fact, included in the Affordable Care Act. But with these changes it should be entirely possible to maintain a system that provides all older Americans with guaranteed essential health care.
That, of course, begs the question of what’s essential. Is a cancer prevention drug that cost $1,000 a year and will, if reimbursed by Medicare, cost billions annually to reduce the incidence of breast cancer from 14 per 1000 to 10 per 1000 “essential”? Is a drug that extends the life of a few thousand people an average of six months or so at a cost of $500 million a year “essential”?
America’s love affair with scientific medicine shows no sign of ending. Incremental improvements in cancer care and other advanced technologies are inevitable in the years ahead, since the government ($31 billion a year) and the private sector (over $50 billion a year) continue to make health R&D the nation’s number one priority when it comes to science (it’s 20 times greater than what we pour into energy R&D, for instance, even though a good argument could be made that man-made climate change due to excessive burning of fossil fuels poses the greatest planetary threat to human health).
Somebody in the not too distant future is going to be given the job of rationing this expensive health care (I’ve given up on even having a national or rational discussion about limiting the outrageous prices that the private sector charges for these treatments). Samuelson is right in his conclusion that “the only questions are when and on whose terms” this rationing will take place.
For my money, I’d rather have a government-appointed panel, chosen by our elected leaders, that has to submit its recommendations to Congress do it. The alternative is having an insurance company’s hidden panel make those decisions. Those decisions will be made without public oversight, and then announced to the world through the mechanism of price, with those who can’t afford the tariff being the ones who experience the rationing.
Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect, The Washington Post and Financial Times. You can read more pieces by him at GoozNews, where this post first appeared.