Should Medicare (and other health plans for that matter) be required to cover every drug, every hyper expensive medical procedure and every therapy that holds a modicum of benefits? Asked another way, should some types of rationing be allowed?
Everything is rationed. Your house is rationed. Your groceries are rationed. If you protest and inform me your local Kroger is stocked with all manner of goods as evidence groceries are not rationed, you would be wrong. The price on each item is called price rationing in economic parlance. Medicare already rations to some degree. Relative value units and diagnosis related groups are a form of price controls on what hospitals and physicians are paid. I would claim that is a form of rationing. Another form of rationing is prior authorization and procedures to determine which medical services are covered. For instance, experimental medicine is never covered.
In 2021 the Alzheimer’s drug, Aduhelm was approved against the FDA advisory committee’s recommendation. It came with all kinds of nasty side effects. It initially was priced at $57,000 a year, with another $30,000 in required physician visits and monitoring. I wrote this three years ago:
Is this good news for patients suffering with Alzheimer’s disease? Probably not and certainly not for taxpayers. The clinical trial data found little evidence the drug works. One Phase 3 clinical trial showed a slight slowing in cognitive decline, while the second clinical trial failed to show any improvement.
More than six million Americans are living with Alzheimer’s dementia. Every one of them could potentially be on Aduhelm, even if they are unlikely to benefit. Back-of-the-envelope math suggests an annual cost of $600,000,000,000. In the year after approval premiums for Medicare Part D (drug plans) increased in anticipation of huge cost increases due to Aduhelm. The drug has since pulled it from the market due to the backlash.
There are numerous drugs that cost more than $1 million a year. Some are cancer drugs, some are one-time treatments, while others must be taken repeatedly. Then there are therapies, like weight-loss drugs, that are priced much lower and extremely popular.
Hardly a day goes by but what I read about supposedly new therapeutic benefits of weight-loss drugs. Many of these are implausible, such as treating gambling addiction, substance abuse and numerous other claims of benefits unrelated to weight. Indeed, drug makers are funding clinical studies hoping to force Medicare and health insurers to cover weight-loss drugs for more patients.
Estimates vary but something like two-thirds of Americans are overweight, while one-third are obese. By 2050 it is estimated that half of Americans will be obese, while one-quarter will be extremely obese. Weight-loss drugs are popular, but patients can expect to pay $1,000 a month if they do not have insurance that covers weight-loss drugs. Medicare does not cover weight-loss drugs for people who are overweight but otherwise healthy. However, if you have diabetes with obesity, Medicare will cover weight-loss drugs.
What would it cost to expand weight-loss drugs in Medicare? According to one study it would cost anywhere from $3.1 billion a year to $6.1 billion a year. But wait, that assumes only 5% or 10% of respective Medicare beneficiaries are on the drug. People tend to put on weight as they age. One-quarter of Medicare beneficiaries are obese. That $3 billion to $6 billion figure should probably be increased to $15 billion, maybe $25 billion. From the study:
Efforts to expand coverage need to consider the likely costs of doing so. However, estimating future spending on these products is challenging for several reasons. First, the prices of these medicines are often proprietary. Second, it is uncertain how many people will be prescribed a medication or how many will adhere to it. Third, these drugs may affect the use of other health care services. Fourth, these products may be approved for other indications that lead to expanded coverage independent of a policy change.
Some drugs are great investments, while some are poor values. As more therapies become available, the idea of allowing Medicare to reject some drugs due to poor value will undoubtedly come up from time to time.
The entire report is worth reading: Expanding Medicare Coverage Of Anti-Obesity Medicines Could Increase Annual Spending By $3.1 Billion To $6.1 Billion | Health Affairs