March/ April 2013 The Republican Case for Waste in Health Care

Conservatives love to apply “cost-benefit analysis” to government programs—except in health care. In fact, working with drug companies and warning of “death panels,” they slipped language into Obamacare banning cost-effectiveness research. Here’s how that happened, and why it can’t stand.

By Phillip Longman

That’s important to know and long overdue. Most ordinary Americans would be shocked to learn how little research has been done on the outcomes of different practices in medicine, including on the actual health effects of such common, costly, and invasive procedures as back and heart surgery. For example, from 2000 through 2005, American cardiologists performed more than seven million coronary artery angioplasties, arthrectomies, and stent insertions. Yet only in recent years has there been any research to determine whether these procedures work any better than simple noninvasive treatments, such as aspirin or cholesterol pills, for patients with stable coronary disease. It turns out that they don’t.

Yet while the work of PCORI is important, it will never tell us what we most need to know to get the waste out of the U.S. health care system. That’s because, as PCORI’s executive director told a health care conference in 2011, “You can take it to the bank that PCORI will never do a cost-effectiveness analysis.”

PCORI’s work compares benefits to benefits, but not, as a matter of law, cost to benefits, and that’s a big deal. Such research does not tell us, for example, whether measures to prevent a stroke would be more cost-effective than measures to deal with its consequences. The same is true of all other government research into “comparative effectiveness.”

And by ignoring costs, such research also cannot tell us how to make sure that the money we spend on health care saves the most lives or reduces the most suffering. More fundamentally, even if the work of PCORI and other comparative effectiveness research could answer those questions, the government could not act on the information. That’s thanks to obscure but deeply consequential language inserted into the Affordable Care Act by the very corporate interests that stand to lose the most from our actually knowing which drugs and procedures offer the highest value.

The story of how this happened and what it means is full of perverse ironies. Leading up to the Obama years, mainstream health care policy experts and many politicians in both parties generally agreed on the need for the federal government to fund cost-effectiveness studies. As far back as 1996, a panel convened by the U.S. Public Health Service called for evaluating specific drugs and treatments based on how many years of healthy life they produced per dollar. When President George W. Bush signed the Medicare Modernization Act into law, he authorized $50 million to study the clinical effectiveness and appropriateness of health care services, including prescription drugs, while Bush’s Medicare program administrator, Mark McClellan, pushed for using such research in Medicare coverage decisions.

Conservatives have long championed the use of cost-benefit analysis in other realms, including those that involved putting a dollar value on both the length and quality of human life. In 1981, for example, President Ronald Reagan issued Executive Order 122911, which established the still-routine practice of evaluating consumer safety and environmental regulations based on the estimated number of lives saved per dollar. In 2003, under the Bush administration, the Environmental Protection Agency even went so far as to adopt the so-called “life expectancy” factor in cost-benefit analysis, which recognizes that more years of life are saved when children are spared death than when elders are. At the time, it wasn’t conservatives who objected, but some environmentalists and senior groups, who characterized the policy as imposing a “senior death discount.”

As late as 2008, Republican presidential nominee John McCain issued a position paper, entitled “Straight Talk on Health System Reform,” that reflected the bipartisan consensus on the need for government research into the actual value of different drugs and treatments. Based on the thinking of one of his health care advisers, Gail R. Wilensky, who had long championed the cause, the position paper stated, “We must make public more information on treatment options and doctor records, and require transparency regarding medical outcomes, quality of care, costs and prices. We must also facilitate the development of national standards for measuring and recording treatments and outcomes.”

President Obama came to office strongly sharing this conviction and committed to putting it into practice. But as it happened, even the administration’s most tentative moves in this direction were met by a firestorm of opposition from the drug and medical device lobbies. This opposition would have far-ranging consequences, including, in the end, an effective ban on government even sponsoring cost-effectiveness research in health care, let alone using it as a guide for setting health care policy.

The firestorm began in early 2009, when, as part of the stimulus bill, the administration proposed $1.1 billion (or one-twentieth of 1 percent of total U.S. health care spending at the time) for research into the efficacy and safety of different medical procedures. In an accompanying report, the administration explained that the research could help eliminate costly treatments. Immediately, pharmaceutical companies and device makers pounced.

“You have to be very careful,” warned W. J. “Billy” Tauzin, then president of the Pharmaceutical Research and Manufacturers of America, in explaining why he mobilized his industry’s legions of lobbyists in fierce opposition to the administration’s proposal. “An arrogant staffer writing a report was about to dramatically change the direction of health care in America,” Tauzin told the Los Angeles Times, adding ominously, “I hope it is a clear warning. There are a lot of beehives out there. You don’t just go around punching them.”

Soon, the entire conservative noise machine was in full swing. Just how much of this was the result of marching orders from Tauzin and his lobby, and how much was the result of Republican ideologues seizing on what they saw as an opportunity to destroy Obama’s chances for passing comprehensive health care reform, will remain forever hard to sort out, but the effects were devastating. On January 23, 2009, the Republican Study Committee sent out an alert that Obama’s true intent was to create “a permanent government rationing board prescribing care instead of doctors and patients” (emphasis in original). “Every policy and standard,” the statement warned, “will be decided by this board and would be the law of the land for every doctor, drug company, hospital, and health insurance plan.”

Within days, more than sixty patient advocacy groups, many of them funded by the drug industry, cosigned a letter to influential members of Congress making parallel arguments, which also appeared in a Wall Street Journal editorial and op-ed piece by George Will. The American Spectator took up the task of mobilizing the pro-life movement, writing, “Euthanasia is another shovel ready job for Pelosi to assign to the states. Reducing health care costs under Obama’s plan, after all, counts as economic stimulus, too—controlling life, controlling death, controlling costs.” By early February, Rush Limbaugh was outraging and terrifying his listeners by charging that a new federal bureaucracy “will monitor treatments to make sure your doctor is doing what the federal government deems appropriate.”

Phillip Longman is a senior editor at the Washington Monthly and a lecturer at Johns Hopkins University, where he teaches health care policy. He is also a senior fellow at the New America Foundation, where Atul Gawande is a board member.


  • booch221 on March 04, 2013 11:38 AM:

    So it's not the Military Industrial Complex that will bankrupt America, it's the Medical Industrial Complex.

  • markg8 on March 06, 2013 9:07 AM:

    Great article, awful title.

  • Rich on March 15, 2013 11:15 AM:

    The article is misleading as it is informative. This kind of research is, if anything, more common than it was a few years ago. the real problem is the recommendation part, particularly given that agencies like FDA, CDC, etc. are expected to make recommendations to the provider community and funders of services like HRSA are expected to put directives on what they fund.

  • jr13 on March 16, 2013 3:07 PM:

    Miami/Dade is the fraud capital of the south for years they have fleeced the system. all insurance claims should be gone over line by line. the way it seems to be they wait too long to check and the company's that filed the false claims are long gone.

  • Victor on July 30, 2013 8:31 AM:

    So, your case for this being 'The Republican Case for Waste' is that Republicans offered some ammendmants that didn't pass and a Democrat, Baucus, offered an ammendmant THAT CAUSED THIS that DID pass?

    How much of a partisan hack can you possibly be?

    You say 'Conservatives have long championed the use of cost-benefit analysis', and you reference Reagan & Bush, both of whom passed bills which USE that cost-benefit analysis. Even McCain indicated he wanted cost-benefit analysis to continue, as you cited above. Then you make the innane statement that 'President Obama came to office strongly sharing this conviction and committed to putting it into practice'...except he passed into law the ACA, which DIRECTLY OPPOSES that statement, right?

    There is so much more irrelevant and non-journalistic chaffe in this article. I can only hope that people will actually READ the article instead of the farce title you've used. You need to revisit any classes on journalistic integrity you have taken.

  • Brandon on July 30, 2013 9:22 AM:

    You are right about there being waste in the system. You are wrong about why it is there and how to fix it. People believe health care is "free." To be more efficient, users of health care need to be are of the costs. Moving the decisions to a bureaucracy would not help.

  • mike on July 30, 2013 1:20 PM:

    Fraud will be even higher when all of this kicks in.

    Why not talk about that.

    Taking peoples word on whether or not they can afford it and deserve subsidies! Seriously?????

    And lets talk about whether or not they will ask for and have to show an ID to qualify, if they do, then why dont they have to show it to vote.

    If not, then anyone can get care and not be rejected, and not have to pay. How much fraud will that cause????

    BOTTOM LINE, tort reform and open insurance borders is all that is needed to fix costs.