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You Win Some, You Lose Some, Part II

Bull with DollarA few days ago we looked at the nitty gritty of the American Recovery and Reinvestment Act (ARRA), which is the stimulus package that President Obama recently signed into law.

Overall, we think that healthcare got a good shake.

That’s not surprising: The tax credits and aid to the state governments will help folks to access coverage while also creating jobs.

Not convinced?

The Obama administration has set up this website to track the stimulus dollars and to show their impact.

On March 2, 2009, for example, $155 million stimulus dollars were released to pay for 126 new health centers that will serve uninsured and low-income Americans.

The website not only shows where those dollars are going, but also how many patients they will assist AND how many jobs will be created.

The stimulus includes funding for two additional areas that we did not talk about earlier. They are:

Healthcare-Related Research

  • Lawmakers designated $1 billion for government research comparing what works and what doesn’t work for medical procedures, pharmaceuticals and devices.
    • An example of such research: In 2002, the federal government found that expensive drugs to treat high blood pressure were less effective (and more dangerous) than inexpensive diruretics that flush excess fluid and salts from the body.
  • The National Institutes of Health (NIH) will get nearly $10 billion to research cancer, heart disease and other common illnesses.

Why do we need comparative effectiveness research?

  • In “Where Do U.S. Health Dollars Go?” we reported that medical technology is a main driver when it comes to health care spending growth.
  • In other words, our constant development and use of new prescription drugs, medical devices and other procedures is one of several reasons (the others being the cost of administration and the rising rate of obesity) why our total healthcare bill is spiraling out of control.
  • We already know that some new technologies are not actually any better than those that came before, despite costing significantly more money (and certain new procedures may even be riskier).
    • As we showed here and here, for example, new prescription drugs do not have to out-perform their older counterparts to be approved by the Food and Drug Administration (FDA) for sale. Drug companies simply have to show that they are more effective than a placebo.
    • Government-sponsored comparative effectiveness research will allow scientists to compare new and existing treatments head-to-head.

There are two criticisms of this type of research:

Opponents of comparative effectiveness research argue that the findings will be used by the Centers for Medicare and Medicaid (CMS) to deny popular treatments because they do not deliver enough bang for the buck.

  • But the legislation authorizing the funding specifically notes that the findings are not meant to mandate coverage, reimbursement, or other policies for any public or private provider.
  • There is a difference between comparative effectiveness research and cost effectiveness research:
  • Cost effectiveness research takes into account the price of a treatment or medication in comparison with its benefits and risks when making recommendations about whether or not the procedure should be covered.
  • Comparative effectiveness research, on the other hand, simply compares two treatments side by side to determine which one is better. And if the better procedure also happens to be older, and cheaper, that is an added benefit.
  • It is interesting that most policymakers consider cost effectiveness research too controversial to touch. Americans are not ready to discuss whether or not an expensive drug that will extend a person’s life for a few months should be covered.

Supporters of comparative effectiveness research believe that the findings will not actually be used at all by the CMS to determine which treatments to cover (meaning that the government will continue to pay for newer, more expensive procedures even if the older options are shown to be just as effective).

  • We think that this funding is a good first step: As the research becomes more readily available, the CMS is likely to take the results into account. Why?
  • Already, the CMS is using comparative effectiveness research to make coverage decisions.
  • For example, the CMS recently proposed to stop paying for virtual colonoscopies after a study showed that:
  • Virtual colonoscopy saves fewer lives every five years than traditional colonoscopy saves every ten years.
  • And the cost of virtual colonoscopy is double that of other colonoscopy procedures.

Health Information Technology (HIT)

  • $19 billion was set aside to pay for HIT updates and to increase the use of technology in healthcare.
  • In our article on this topic, we showed that up to $50 billion will be necessary to set up an interoperable, nationwide HIT system. This initial funding is a good first step and down payment towards that goal.

As we pointed out in our first post on the stimulus, the legislation did not receive the widespread bipartisan support that the President hoped for.

Folks are wondering what this will mean for other healthcare reform initiatives that are being introduced.

Specifically, President Obama recently included a $634 billion reserve fund in his budget proposal to finance universal insurance coverage.

He proposes paying for this fund by reversing the Bush tax cuts for wealthy Americans and by cutting government spending for Medicare Advantage (MA) plans. MA plans are the private insurance options offered to seniors that actually cost the government 13% more than just providing the coverage itself.

Some business leaders think the lack of bipartisan support for the stimulus means that the proposed budget will be a shoo-in. They figure that if the administration was able to pass the stimulus quickly and without Republican support, they will be able to do the same with the budget.

Others are more pessimistic, and believe that Mr. Obama should continue to work towards bipartisan compromise. Without the Republican support that Obama did receive on the stimulus- moderate Republican Senators Collins and Snowe of Maine, and Specter of Pennsylvania signed on- the bill might not have passed at all.

We’ll keep you updated on the budget debates as the process moves forward.

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