Medicare spending disparities may sharpen Obama's pen

June 10, 2009

How will Obama foot the bill for his proposed health-care reform initiative, which is projected to cost at least $1 trillion? Cancer care could suffer more cuts.

According to government economists, Obama's health-care reform proposal will cost at least $1.5 trillion. Both sides of the aisle agree on one thing--cutting health-care costs is essential to fund this grand ambition. However, since the passage of the Medicare Modernization Act (MMA) in 2003, the oncology community should circle the wagons whenever there's talk of health-care reform on Capitol Hill; it will almost certainly lead to deeper cuts in oncology reimbursement.

Medicare, the major insurance provider for many of our cancer patients, is now being seriously looked at as cost saver. A recent New Yorker' article focusing on geographical variations in health-care spending caught the President's eye. The piece asked a central question: why is the small border town, McAllen, Texas, one of the most expensive health-care markets in the country. In 2006, Medicare spent $15,000 per beneficiary in McAllen, which is almost twice the national average.

According to an article in the New York Times, President Obama summoned his aides to the Oval Office, and, referring to the New Yorker piece, the President said 'this is what we have to fix."

But "fixing" the geographic variations in Medicare spending requires cutting or capping payments in areas in which per-beneficiary spending is above a certain threshold. Any form of 'Medicare benefit redistribution' would spark a huge bi-partisan battle in Congress.

Proponents of implementing a Medicare spend and cap threshold contend that higher-cost areas don't generate better outcomes than lower-cost ones. They simply overuse medical services.

Opponents of Medicare cuts, many of whom are Democrats, make the case that there are no valid data to fully explain the cost variability in the program. Moreover, how is overuse of medical care determined?

In short, over-utilization of services in higher spending areas is generally cast as the culprit. Medicare is fraught with problems and certainly needs attention. But parsing out which Medicare services are redundant or unnecessary requires more data than we currently have, especially in the delivery of cancer care.

Health-care reform, in one iteration or another, seems inevitable. Under MMA, which was billed as reform, community oncology practices across the country took deep cuts to their bottom line. Some didn't survive. The new legislators in DC need to fully understand the economics involved in the complex delivery of cancer care before more reimbursement cuts are pondered.

Good intentions for the overall system could have bad consequences for our cancer patients.