How Rationing Eye Care Can Save Medicare Billions

How Rationing Eye Care Can Save Medicare Billions

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The House Republicans on Thursday took another swipe at the alleged rationing in Obamacare, voting to eliminate the independent advisory panel that will propose cuts in Medicare spending when it grows substantially faster than the rest of the economy.

Most people have never heard of the Independent Payment Advisory Board, but they certainly got an earful about “death panels” and “rationing” in 2010 when Republicans used it to attack the Democrats’ health care reform bill. Stoking fear of death panels and rationing helped the Republicans win control of the House.

The IPAB has nothing to do with death panels or rationing. The 15-member panel of experts will offer Congress options for holding down Medicare’s spending whenever it grows out of control. Congress has the option of either allowing those cuts to go into effect, or enacting its own menu of cost control measures.

There is no shortage of skeptical analysts who suggest Congress will be just as likely to reject IPAB recommendations and substitute nothing at all. After all, every Congress over the past decade has rejected imposing previously enacted cuts on physician pay. Why will the IPAB cuts be any different?

The reality is that neither party has a good track record when it comes to holding down Medicare spending, and the level of debate Thursday reflected their perennial obsession with the next election, not the next generation. “Do you remember death panels?” cried Rep. Jack Kingston, R-Ga., on the House floor. “It’s not necessarily a death panel, but it is a rationing panel and rationing does lead to scarcity for some. Who’s going to get the needed treatment, an 85-year-old or the 40-year-old with children?”

“The rationing is in the Republican plan," responded Rep. Chris Van Hollen, D-Md., the ranking member of House Budget Committee. "What they do is allow insurance companies to ration people's health care." Never mind that insurers who cover Medicare beneficiaries must follow Medicare’s coverage guidelines.

It’s ironic that the symbolic vote – it will go nowhere in the Senate – took place on the day after a entirely different outside advisory panel met at the Centers for Medicare and Medicaid Services to discuss coverage issues. The hearing offered a revealing glimpse into how rationing could actually save beneficiaries and the government billions of dollars a year without jeopardizing care one iota. That’s right, billions.

The panel considered whether there was enough scientific evidence to support a Medicare decision to pay for drug treatments that can postpone diabetes-caused visual deterioration and blindness, known as diabetic macular edema. The Food and Drug Administration is considering an application by Roche/Genentech for a very expensive drug called Lucentis that can correct the condition.

How expensive? Lucentis costs $1,624 for a monthly shot that will be needed for the rest of the diabetic’s life. FDA approval is expected very soon since clinical trials published last year showed it is very effective.

But there is another drug available for the condition, which is also made by Roche/Genentech. It is called Avastin, and it is equally effective because it is essentially the same drug. The only difference is that Roche/Genentech packages Avastin in very large doses for its primary use, which is fighting cancer. Eye doctors have figured out that if you break those vials of Avastin into the smaller doses appropriate for direct injection into the eye, the treatment doesn’t cost $1,624, it costs $43.

This doesn’t just affect the government purse. Seniors who get the shots – and there are 325,000 Medicare beneficiaries with diabetic macular edema who will potentially qualify for the treatments – must pay 20 percent of the cost of these drugs as their co-pay. What would you rather pay every month: 20 percent of $1,624 ($324.80) or 20 percent of $43 ($8.60)?

If everyone on Medicare who is eligible for the treatment receives Lucentis, it will cost the government $6.3 billion a year, a technology assessment submitted to the committee said. If they receive Avastin, the government will pay only $167.7 million.

The committee didn’t consider pricing issues, unfortunately. Medicare by law can’t consider price when evaluating whether it will pay for treatments. And the Affordable Care Act, yes, the same reform law that Republicans are trying so desperately to repeal, says comparative effectiveness research paid for by the government (like the technology assessment on diabetic macular edema) cannot be used to make payment decisions.

So the committee simply voted on the scientific evidence. Eight of nine panelists said that both drugs (as well as two other expensive drugs in that class) worked about the same.

Right now, both drugs are being used “off label” because the FDA hasn’t approved either. But Medicare contractors in about half the states are paying for them. Once the FDA approves Lucentis for the condition – the company won’t submit an application for Avastin because it isn’t in its interest to do so – CMS will begin paying for the pricier drug everywhere. Medicare will always pay for an FDA-approved drug. Physicians, who get a small mark-up on the price of drugs they use in their offices, will have a major incentive to use the more expensive, on-label product.

A rational government agency that is allowed to consider price would only pay for the off-label drug Avastin. Instead, what we have is irrational non-rationing that within a few years will be costing the government and seniors about $7 billion extra a year. Maybe Congress should hold a vote on that.


spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.