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

Republicans and the drug industry did not succeed in killing off cost-effectiveness research at that point, but they had sent a powerful shot across the bow. The stimulus bill passed and included some provision for the research Obama wanted. But politicians on both sides of the aisle were deeply intimidated by how a once second-tier issue that enjoyed support from wonks and politicians in both parties had suddenly become the target of a death ray of demagoguery.

The message would still be ringing in their ears later that year as the national agenda turned toward comprehensive health care reform. The architects of “Obamacare” knew full well, of course, that there was no conceivable way to expand access to health care, improve its quality, and simultaneously “bend the cost curve” unless medical practice became far more driven by information about the actual costs and benefits of different treatments. They knew it wouldn’t be necessary, appropriate, or even practical to use such cost-benefit analysis to determine what specific treatments doctors could give specific patients. But they also knew that such information was absolutely necessary to guiding rational decisions, on, for example, how much Medicare should pay, or whether it should pay at all, for treatments that offered fewer benefits than lower-cost alternatives.

After all, why should Medicare pay surgeons tens of thousands of dollars to perform costly, dangerous back surgeries if research established that the patients undergoing these operations do better with low-cost physical therapies? Isn’t medical practice supposed to be driven by science? And how is the public supposed to know how to allocate health care dollars if no one even knows the value of different procedures?

Accordingly, bills introduced by Democrats in both the House and the Senate called for the creation of some kind of entity to do the necessary research. But by the summer of 2009, the death ray was back, and now packing super-high voltage that threatened the political life of anyone who stood anywhere near these bills.

We all remember Sarah Palin’s sensational talk about “death panels.” And who can forget the images of lawmakers being assaulted in town hall meetings that summer by constituents even as erstwhile “moderate” Republicans like Charles Grassley fanned the flames. What many people don’t know, however, is how this firestorm forced the administration and Democrats in Congress to cave on the very measure most necessary to improving the quality of the U.S. health care system and, by extension, making it sustainable.

During the legislative battles that eventually lead to the passage of the Affordable Care Act, Republicans repeatedly introduced amendments that would bar the government from any use of cost-effectiveness research in health care. For example, in September 2009, Republican Senator Jon Kyl introduced an amendment “prohibiting the use of taxpayer dollars to conduct cost-based research and ration care.”

Meanwhile, conservative Democrats, such as Senate Finance Chairman Max Baucus, though remaining publicly committed to the idea of government sponsoring some kind of “comparative effectiveness research,” also began introducing measures that would ensure strong industry influence over any entity conducting the research. After the August 2009 recess, Baucus introduced legislation stipulating that the research not be done by a federal agency, but rather by a nonprofit group with the drug and medical device industries well represented on its board.

At the same time, according to Brookings fellow Kavita Patel, who was then following the legislative maneuvering as a White House aide, the pressure was on all Democrats to back away from cost-effectiveness research. In an account published in Health Affairs in 2010, she recounted how
“[a]n endless stream of organizations, citizens, researchers, and thought leaders weighed in with Senate Finance Committee staff,” with at least “some” warning “of the ramifications of using cost-effectiveness in the research.”

Their lobbying was effective, especially after Republican Scott Brown was elected to the Massachusetts Senate seat vacated after the death of Ted Kennedy. At that point, the Democrats’ balance of power was shifting away, and so was any thought of holding out for an independent federal agency that would study cost-effectiveness in health care. Instead, with Baucus driving the train, Democrats found a way to capitulate that would allow them to give the opposite impression to all but those who were paying very close attention.

In its final language, the ACA specifically bars policymakers from using cost-effectiveness as a basis for even recommending different drugs and treatments to patients. In practical effect, the ACA ensures that such research won’t even be done, let alone be used as a criterion for guiding how the nearly $2.6 trillion the U.S. spends on health care each year might be put to best use. Here’s what you need to know to understand how the fix was put in behind the scenes and why correcting it must become a high priority for health care reformers.

To understand the story, you have to be familiar with a basic concept that researchers around the world use to measure cost-effectiveness in health care. It’s known as a QALY. What’s a QALY? It stands for quality-adjusted life years, and despite its technical sound, it’s based on the common sense we all use in our day-to-day lives.

Let’s start by asking ourselves what it is that we mere mortals want from health care. Of course, most of us would like it to help us live to a ripe old age. But we also want health care to improve not just the quantity, but to the extent possible also the quality of our lives. If a genie came to you and said she would grant you any wish, you might blurt out that you wanted to live to be 110. But what if she granted your wish and at the same time condemned you to living out the rest of your years in extreme pain or in a coma? Obviously, quality of life is a factor, and often a huge one, in what we want from health care.

Researchers evaluating the effectiveness of different health care practices and policies recognize that, too. Say the comparison is between two different drugs. People who take the first live one year longer in perfect health than those who don’t. People who take the second drug also live one year longer than those who don’t, but as a side effect, they also go blind. Which is the better drug? Obviously, the first one.

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.