Thomas C. Novelli05.19.08
Coverage Determination Processes for Devices on the Horizon
The prevailing sentiment among most healthcare and budget experts in Washington is that demands on federal resources have reached a critical point. The growth of entitlement spending has risen to a level where difficult decisions will have to be made about the future of several programs. At the forefront of the federal budget debate are the two largest areas of entitlement spending: Medicare and Social Security. Both programs constitute a significant portion of the budget and, therefore, require functioning as effectively and efficiently as possible.
While Social Security is expected to reach insolvency in the next few decades, Medicare is at the epicenter of the budget debate. The Centers for Medicare and Medicaid Services recently released the Medicare Trustee Report regarding the current state of the program. According to the report, Medicare expenditures were $432 billion in 2007, or 3.2% of gross domestic product (GDP), and are projected to increase to nearly 11% of GDP in 75 years. The trustees also reported that Medicare’s Hospital Insurance (HI) Trust Fund would become insolvent earlier in 2019 than reported last year. HI expenditure growth is estimated to average 7.4% each year during the next 10 years—a higher rate than either GDP or Consumer Price Index growth. This year, the HI Trust Fund will spend more than its income, and beginning in 2009 until the Trust Fund is insolvent in 2019, about $443 billion will need to be transferred from the federal treasury to cover beneficiaries’ hospital insurance costs. These statistics are alarming for both lawmakers and stakeholders. While many agree that extensive problems exist, it appears a more daunting challenge is to find agreement on both causes and solutions.
Within the context of the budget debate, a more pertinent dialog involving the medical technology industry has unfolded over the past few years. At the core of this debate is determining which factors are responsible for the sustained increases in expenditures in the Medicare program and, ultimately, how to address those factors to control costs. Some argue the induction of new technologies into the market is the primary cause for increased spending. However, on closer examination of the data, the salary, benefits and overhead costs for staff represent nearly 70% of a hospital’s expenditures. Other factors, such as liability insurance, also drive up the cost of healthcare.
While this debate carries along, lawmakers and regulators appear to move forward with policies that may affect coverage policies for medical technologies. In recent years, the Congressional Budget Office (CBO) has released specific reports addressing the increased spending in federal healthcare programs. Although the facts demonstrate otherwise, the CBO also points to technology as a driving factor of increased healthcare costs. However, the CBO fails to capture the long-term value of technologies that result in better outcomes or shorter hospital stays.
In an effort to address the perceived impact of new technologies, some in Washington have begun to explore various ways to control cost. One such idea is comparative effectiveness.
The Debate About Comparative Effectiveness
There has been a significant growth in the development of medical technologies over the past 20 years, and more importantly, clinical benefits have increased several-fold because of these developments. Patients are now living longer, healthier lives. However, the influx of multiple medical technological developments has resulted in more patients being treated, which ultimately increases costs. For example, patients are receiving imaging and other diagnostic tests more in the past decade than ever before. While there is no doubt that theses tests are revealing patient ailments, payers are looking more closely at the utilization rates to determine if therapies or tests are reasonable and necessary. Insurers, including Medicare, want to see a greater correlation between the increased allocation of resources and benefits in the beneficiary pool. For Medicare, comparative effectiveness is seen as a viable solution to address this issue.
Comparative clinical effectiveness research has been discussed as an avenue for producing information to help healthcare decision makers—such as patients, providers and public and private payers—reach informed, evidence-based decisions. Comparative effectiveness research is a term that has been defined by people in many different and unique ways. Most, if not all, agree that comparative effectiveness research compares the effectiveness of two or more healthcare services or treatments. It compares outcomes resulting from different treatments or services and provides information about the relative effectiveness of treatments. Specifics about the research and the definition, however, seem to be sources of contention in the current dialog. In particular, two areas that are the source of the most contention are the definition of “effectiveness” and whether costs should be included in comparative effectiveness research.
So what, exactly, does effectiveness mean? Determining clinical benefit or effectiveness is not something that is easy to quantify. The factors included in the research and how they are measured can greatly influence the results of a comparative effectiveness study. Measuring the benefits and effectiveness of a treatment often requires making assumptions about the population that is benefiting from the specific treatment. For example, to what extent will the benefits from the treatment vary across the country and in different settings? How should the benefits observed in a clinical trial be extrapolated to the rest of the population?
It also is important to note that effectiveness is different from efficacy. A treatment’s effectiveness is the effect of the treatment in routine clinical practice. Efficacy and effectiveness research results may differ because often in clinical practice, patients may have more than one illness, doses may vary, methods of administering the treatment may vary and patients simultaneously may take treatments for multiple illnesses. Moreover, large segments of the potential patient population often are excluded from efficacy trials to achieve a more uniform study population.
Another point of issue in the comparative effectiveness debate is whether to include costs. Much of the controversy surrounding whether costs should be included in comparative effectiveness research lies in the question of how the results will be used. The issue is most controversial if results that include costs are used to make insurance reimbursement, pricing, or coverage decisions. The inclusion of costs in research tends to not be as controversial when the results are not directly linked to medical and health policy decision making. One reason for the disagreement is that policymakers may disagree about the way costs are measured or which costs are included in a research study.
Issues of Interest for Device Manufacturers
Why, then, is comparative effectiveness research of concern to device manufacturers seeking reimbursement? It is important to examine the realities that exist in treatment options. To begin, it will be important to pay attention to how effectiveness studies will be designed. Will a treatment study compare the effectiveness of a drug versus device? Or a device versus a device? Most comparative effectiveness studies tend to last well beyond the lifecycle of the device.
For instance, if a research study to determine the effectiveness of a treatment lasts at a minimum of three years, it would be difficult to ignore the reality that medical devices are products of continuing and improving innovation and technology. Most medical devices have a market lifespan of about 18 months before the next-generation model is available. In many cases, the newer generations will bring greater clinical benefit to a patient. Thus, by the time a comparative effectiveness study is complete, it is possible that a device may be on the second or even third generation, which may be substantially different and provide significantly more clinical benefit than the prior device. Therefore, it becomes much more difficult to make a coverage decision based on this incomplete information.
It appears that Congress has an appetite to move forward on legislation on comparative effectiveness. Most recently, Sen. Max Baucus (D-MT), chairman of the US Senate Committee on Finance, announced legislation that would create a private-public entity that would work with federal health agencies to establish comparative effectiveness methodologies. Although the legislation mentioned that costs initially would not be included in research studies, it left open the possibility that they could be included down the road. With a limited legislative schedule ahead, it appears that there is a short window of opportunity to move forward on such measures. However, comparative effectiveness will continue to be part of the dialog as Congress deals with the looming, long-term budget constraints.