Medicare's Fatal Weakness: Expensive
New Technologies are Rationed
by Edmund F. Haislmaier
Recent news stories
-- such as the Washington Post's "Medicare to Cover Cardiac
Device," which appeared at the time of the second Bush/Cheney
Inauguration -- illustrate both the achievements of American
medicine and the failure of Medicare to deliver its benefits
to senior citizens.
The device in question
is called an "implantable cardioverter-defibrillator,"
or ICD. It is a battery-powered, credit card-sized device implanted
under the skin. It functions as a sophisticated, 'intelligent'
pacemaker. It is, literally, a lifesaver for patients at risk
of arrhythmia -- the sudden onset of an irregular heartbeat that
quickly produces cardiac arrest and death.
irony is that Dick Cheney was around that Inauguration Day because
several years ago he had an ICD implanted.
The first, simple
pacemaker was implanted in 1958. Advances in materials and information
technologies enabled medical device companies to make steady
improvements so that, by 1985, the FDA approved the first implantable
defibrillator and by 1989 the first cardioverter-defibrillator
that could deliver a multi-stage shock therapy to correct heart
rhythms. Since then, device companies have continued to innovate,
simultaneously making ICDs more sophisticated and less costly.
But the story involving
Medicare isn't so positive. Medicare first agreed to pay for
ICDs for a limited number of patients in 1986. But it was not
until 1991, and then again in 1999, that Medicare further expanded
its definition of 'medical necessity' to cover ICDs for more
In the spring of
2002, armed with new clinical trial data from the New England
Journal of Medicine, ICD makers asked Medicare to further expand
coverage. A year later, Medicare's Coverage Advisory Committee
unanimously endorsed the expansion. By that time, private insurers
were already paying for ICDs for patients with the same characteristics
and the American Heart Association and the American College of
Cardiology had already revised their treatment guidelines.
But not until June
of 2003 did Medicare agree to a further coverage expansion, and
then only to one-third of the recommended patient population.
Only now is Medicare finally agreeing to the full ICD coverage
criteria the private sector adopted two and a half years ago.
In announcing plans
to expand coverage for IDCs, Medicare touted that it expects
25,000 more patients will receive IDCs in 2005, "potentially
saving up to 2,500 lives." Thus, we may infer that Medicare's
foot-dragging, bureaucratic coverage process probably resulted
in the avoidable deaths of between 5,000 and 10,000 Medicare
patients over the past two and a half years.
A big reason for
Medicare's foot-dragging on IDCs is cost. At about $30,000 for
the device and the surgery, the expense of expanding coverage
will quickly reach billions. Yet, while Medicare dawdled, the
private sector continued to innovate. In May of 2003, the FDA
approved yet another new ICD costing about $10,000, or half as
much as earlier models.
The hard truth is
that, like national health systems abroad, Medicare saves money
by limiting the availability of life-saving care. This deadly
delay is the program's default response to advances in medical
technology. (It is also a disturbing omen of the potential for
drug rationing once Medicare begins paying for prescriptions
The inevitable political
calculus of any government health program, even one for the elderly,
is that at a relatively modest cost per person it can provide
"free" care to the vast majority of its beneficiaries.
The savings come from spending less on the few who need substantial
or expensive treatment -- and dead patients are a two-fer. Not
treating them means the program not only saves money today, but
also doesn't spend money on them in the future.
Instead of expanding
Medicare to cover all Americans, as Senator Ted Kennedy (D-MA)
called for on January 12, Congress should accelerate and expand
the small, patient-centered Medicare reforms it enacted in 2003.
Under those reforms, Medicare would subsidize, but not directly
provide, health insurance. Beneficiaries would pick, from an
approved list, the private plan they prefer and use their Medicare
subsidy to pay for it.
those private plans would lose market share if they didn't quickly
cover new, proven treatments.
The model is the
Federal Employer Health Benefits Program, which has operated
this way longer than Medicare's existence, and provides better
coverage at lower cost than Medicare for 9 million federal workers,
retirees and their dependents. Among those it covers: a 74 year-old
Massachusetts Senator, a 65-year-old Vice President with an ICD
and my 79-year-old mother.
Oh, and Mom is one
of 300,000 retirees who, under the old Civil Service System,
are covered only by FEHBP and not by Medicare. You couldn't pay
her to switch to Medicare. Says something, doesn't it?
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Edmund F. Haislmaier is a member of the board of directors of
The National Center for Public Policy Research. Comments may
be sent to [email protected].