Medicare Costs a 'Substantial Problem' but Can Be Reined In

Roxanne Nelson

February 12, 2015

Cancer patients, oncologists, and the public at large feel that Medicare spending is problematic, but all believe that costs can be reined in without harming beneficiaries, according to the findings of a new survey.

Overall, respondents felt that all players in the system, including healthcare providers, contributed to high costs. Most also supported enabling Medicare to refuse reimbursement for more expensive treatment if less costly, equally effective treatment was available, but all groups opposed annual ceilings on Medicare spending per patient.

The survey was published online January 26 in the Journal of Clinical Oncology.

"There were two unexpected findings of note," write the authors, led by Keerthi Gogineni, MD, MSHP, Hospital of the University of Pennsylvania, in Philadelphia. "First, health care providers are no longer impervious to criticism as a major contributor of high costs."

"Second, the majority of respondents supported changing Medicare policy to limit reimbursements for expensive tests and treatments when a cheaper equally effective alternative existed," they point out.

The survey included 326 patients with cancer, 250 oncologists, and 891 individuals from the general public. Of this group, the majority thought Medicare spending was a moderate or "big" problem (75.8% of patients; 97.2% of oncologists; 75.3% of the general public).

A large percentage of respondents also thought that Medicare could curb spending without causing harm to patients (65.6% of patients; 74.0% of oncologists; 69.7% of the general public).

The authors also note that there was a broad consensus (more than 90% across the three groups) that pharmaceutical companies added to the high costs by charging too much for drugs.

Similarly, more than 80% of participants thought that insurance company profits contributed to high Medicare spending, but physicians, hospitals, and patients were also perceived as sharing responsibility for that as well.

A Note of Caution

Jeffrey Peppercorn, MD, Massachusetts General Hospital, Boston, believes that the major finding of this survey "is that there is consensus among physicians, patients, and the general public that costs of health care are a problem, and that controlling costs including for Medicare is an important goal."

Dr. Peppercorn coauthored an accompanying editorial in collaboration with Lynn J. Howie, MD, Duke University Medical Center, Durham, North Carolina.

In an interview with Medscape Medical News, Dr Peppercorn explained that the "point of our editorial was to sound a note of caution in assuming that the other findings in the study signal consensus on a solution."

All of these groups felt that high drug prices contributed, but the perspectives of manufacturers were not represented, Dr Peppercorn pointed out.

"Patients and the public saw physicians' fees as a problem, a view that was not shared by the physicians surveyed," he said.

More than three quarters of the public (81.0%) and 58.0% of patients thought excessive physician charges added to costs, as compared with only 18.8% of oncologists who believed this to be the case.

In addition, 79.4% of the public and 66.9% of cancer patients also believed that fraudulent activity on the part of physicians and hospitals contributed to high Medicare costs.

Another difference of opinion was that physicians generally accepted the concept of an independent review panel to consider cost-effectiveness (63.6%), but the majority of patients (45.7%) and the public (32.8%) did not.

One of the major findings emphasized by the authors in their discussion was that there seemed to be agreement that when equally effective drugs existed, it is acceptable to use the less expensive one, explained Dr. Peppercorn. "The authors claimed that this signaled strong consensus in support of reference pricing."

However, both Dr. Peppercorn and his editorial coauthor question whether there is really consensus on that issue, given the reality of what this could mean in terms of access to drugs and for drug development.

"It is likely not what people think they are endorsing with the simple statement that they agree with using a lower-cost alternative when two treatments are equal," he said. "History has shown us that it is very easy to demagogue these issues and to break down apparent consensus quickly by pointing out potential limitations on care that might follow from such policies."

Variation Among Subgroups

Reducing Medicare spending has been a major focus of recent Congressional budget discussions. In 2012, more than $900 billion was spent in the United States on healthcare programs, according to the authors, with $541 billion alone spent on Medicare. Growth in Medicare and other health-related programs has been faster than growth in the overall economy, and the long-term fiscal stability of the government depends on continuing to moderate the growth of healthcare costs and, in particular, Medicare and Medicaid expenditures.

However, how physicians and older Americans view Medicare costs, the sources of its financial challenges, and what they would consider to be acceptable and unacceptable for controlling Medicare spending has not been well studied, write the authors.

Thus, Dr Gogineni and colleagues sought to determine how cancer patients, oncologists, and the general public viewed Medicare spending and if they would support cost-containment measures. This knowledge would be important in identifying acceptable strategies to lower expenditures.

Of the cancer patients, 23.6% had breast cancer, 17.2% had hematologic cancers, 15.0% had lung cancer, 9.2% had colorectal cancer, 8.3% had prostate cancer, and 26.7% had other malignancies. More than half (53.1%) were actively receiving chemotherapy, 7.4% were receiving radiation therapy, and 19.9% were receiving other types of treatments.

Virtually all (97.9%) of the patients were insured, with 42.9% by Medicare.

In the physician group, 85.6% were oncologists or hematologists, 13.6% were radiation oncologists, 60.8% were community based, 33.6% were academic, and the remaining individuals had other affiliations.

A total of 8.8% of physicians reported having cancer themselves, and 64.0% said that a close relative had undergone cancer treatment.

In the group identified as the general public, 57.6% were women, 70.9% were white, 26.6% had at least a college degree, and 44.0% identified themselves as Democrats. Most of them (88%) had healthcare coverage, with 37.9% covered by Medicare. Nine percent reported having cancer, and 46.2% reported having a relative treated for cancer.

Among the general public, regardless of political affiliation, age, or level of education, the prevailing belief was that Medicare spending was a big or moderate problem. Across the board, the public also believed that Medicare could reduce spending without denying anyone healthcare that really helps them.

There was more variation among certain subgroups. Those who were highly educated were less likely to believe physicians' fees significantly contributed to high costs (odds ratio [OR], 0.14; P < .001). Blacks and Hispanics (relative to whites) were more likely to believe that fraud by providers contributed significantly to high healthcare costs (among blacks: OR, 25.02; P = .004). The same held true for respondents aged 55 to 64 years (OR, 3.56; P = .005) and those aged 65 to 74 years (OR, 3.73; P = 0.03).

Solutions Not So Simple

When looking at solutions for cutting costs, men were significantly more in favor of allowing Medicare to refuse payment when there was a less costly alternative available (OR, 4.74; P = .0053). Those who were male or Democrat were more likely to believe that asking wealthier patients to pay more was an acceptable solution (men: OR, 2.20; P = .012; Democrats: OR, 2.36; P = .017).

But as far as solutions go, Dr Peppercorn emphasized that "we need to be honest about the issue of cost containment."

"Very often when discussing costs, we conflate the issues of out-of-pocket costs to the patient and costs to society," he said. "Out-of-pocket costs to the patient are largely a function of our insurance system and cost-shifting, which has increased in recent years, to the patients."

Even if costs were for the patients tomorrow, there would still be very high societal costs for treatment.

"We also have to be honest about the components of cost of care in terms of value," he continued. Although there is definitely waste and therapies are being used that have little or no impact, most of the rising costs of care stem from advances in treatment.

"There are increasing numbers of people with cancer, particularly as the population ages, and there are a growing number of interventions in nearly all cancer settings, and people are now living longer with cancer, which is, of course, a good thing," said Dr Peppercorn. "Providing more care for more people, for longer periods of time, costs money."

He also noted that physicians do need to play a role in controlling costs, "but we also need to play a role in highlighting costs of care that do yield value in terms of improved outcomes."

Thus, some of the conversation should be about making sure that there are resources to provide quality care for everyone and to support research when there are so many promising drugs in development and a revolutionary understanding of how to treat cancer on the molecular level, he added.

"I do think we can avoid some spending in the current system without doing harm, but that at some level we will have choices to make between spending on care that is valuable and other social priorities, like housing, education, defense, public health system, and even cancer research," noted Dr Peppercorn, adding that one of the best ways to understand the tradeoffs is to conduct more cost-effectiveness research and to start considering cost-effectiveness at the level of access (by private insurers, Medicare, and Medicaid), if not by the US Food and Drug Administration.

"Other countries debate the tradeoffs involved when a new drug can improve outcomes but is expensive, and people don't always agree on where government agencies draw the line, but we don't even have the conversation," he added.

The study was supported by the Pfizer Medical and Academic Partnership Program, which served as sponsor of a Research Fellowship in Bioethics to Dr Gogineni. Dr Gogineni reports research funding from Pfizer. Dr Peppercorn reports relationships with Genentech, Inc (Roche Holding), GlaxoSmithKline, Healthwell Foundation, the National Rural Electric Cooperative Association, and Novartis.

J Clin Oncol. Published online January 26, 2015. Abstract, Editorial

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