Updated at 2:25 p.m. on Nov. 24 to reflect continuing legislation.
The federal government would fund research into available treatment options to determine the most cost-effective ones available to physicians.
Medicare's spending boom in recent decades is inextricably linked to a health care system that rewards doctors and hospitals for using new and more expensive treatments. Studying the cost effectiveness of different medical procedures alone won't suddenly make physicians more cost-conscious, but proponents of this offset hope it would be a start.
These studies are already prevalent in some industrialized countries with universal health care. When a new medical treatment is proposed in Great Britain, for example, the National Institute for Health and Clinical Excellence asks "what else is out there, is it essentially worth the extra money," according to Robert Blendon, a professor of health policy and political analysis at Harvard.
Those decisions can be controversial. In New Zealand, a similar review agency called PHARMAC initially denied women with breast cancer the drug Herceptin, proven in American trials to be effective at keeping cancer in remission. Public outcry eventually forced PHARMAC to approve Herceptin, but only for a nine-week course, not the recommended 12 months.
The stimulus package set aside $1.1 billion for comparative effectiveness research, and some proposed health care reform plans would spend even more. Sen. Jon Kyl, R-Ariz., fought the $1.1 billion this spring and spotlighted countries like Britain as cautionary tales.
"Think about this a moment," Kyl said on the Senate floor in April. "Do you want Washington bureaucrats, such as those who brought you the AIG mess, making your health care decisions for you and your family?"
Proponents of these studies in the U.S. counter that the goal is not to ration health care but merely to compile a list of the best treatments, not necessarily in terms of cost but pure medical efficacy.
Given the necessary research outlay, the CBO does not anticipate any net savings until after 2019. Given some modest cost cuts resulting from the studies' findings, the CBO estimates $860 million in research spending between 2010 and 2019.
Works Best When Combined With
Two other offsets, if implemented simultaneously, could help speed up the timeline for government savings. The first is health IT.
"The clinical trials are long and expensive to do," Blendon explained. "The only way people envision this is with huge piles of data and you can go through and, say, compare 50,000 people with lower back pain and figure out what works and for whom."
With electronic medical records, research on the comparative effectiveness of different treatments will be faster and cheaper. Without it, the federal government may be better off relying on private industry's research, despite its obvious biases.
Once verdicts on the cost-efficiency of different treatments start trickling in, it won't matter much if doctors, insurers and patients aren't adopting those recommendations. To that end, changing the way seniors pay for Medicare and potentially restricting supplemental insurance policies could go a long way. If patients have to pay a larger share of their medical coverage out of pocket, they are more likely to find the most cost-efficient treatment, instead of the newest or most expensive.
Both the Senate and House plans would establish comparative effectiveness councils to study and report on the best medical treatments.
• "The Risks Of Comparative Effectiveness" -- National Journal, May 23, 2009 (subscription)
• "My Drug Problem" -- The Atlantic, March 2009