HCI3 Update from the Field: The Medicare Data Release Effect
Newtown, CT - April 11, 2014
It's funny to see how fast the cockroaches scurry when you turn on the light - This week Medicare released a set of data on physician payments that's making a lot of folks nervous, and I'm not talking about the physicians because they're simply optimizing around bad incentives. As I've repeatedly said, it's difficult to be good when you're encouraged to be bad. So who's heading for cover? Well let's start with those who are knowingly pushing overpriced drugs and devices. Now that everyone has become aware of the significant overuse of some of these therapies, and their outrageous cost compared to more reasonable alternatives, we can finally shine a light on the stupidity of the incentives that are driving the behaviors. Even someone with a medium IQ can figure out that a fixed percentage markup on a more expensive product will yield a greater dollar revenue to the one using that product. As such, why in the world would physicians - who generally have high IQs - use Avastin at $50/injection (and a markup of $3) when they can use Lucentis at $2000/injection (and a markup of $120)? They can't be blamed for making a rational decision. However, those who have devised these idiotic payment schemes are the real culprits and should be held accountable for the billions that are being wasted at the taxpayer's expense. And we should also force the manufacturers who are providing "rebates" to physicians...let's call them for what they really are: bribes...to reimburse the Treasury for the excess profits they have made. In addition, let's now shine a permanent light on the malfeasance that the AMA's RUC has wrought on the country. It's noteworthy that for years it was led and influenced by Ophthalmologists - the very same who are at the top of the Medicare food chain.
What this means to you - In the short term, the release of these data may not mean much. But there's a lot we can do to make sure it does in the medium to long term. First and foremost, health plan contracts shouldn't emulate the silliness of Medicare rules, in particular when it comes to injectable drugs. Lee Newcomer's efforts at United Health Care address this problem for cancer care, and others should follow this good example. Similarly, plans like Horizon, BCBNC, BCBSSC and others who are creating bundled payments for ortho procedures are finally encouraging a compression of implant costs. Second, let's recognize that the distortions in the Relative Value Scale, which governs Medicare physician fee schedules and often is the basis for commercial plans' fee schedules, have created this world of haves and have nots. That can and should be fixed by health plans if they adjust their conversion factors. Third, and more importantly, this data release shows how incredibly bad fee-for-service incentives have been for the country, and has to lead us to permanently eradicating its ill effects. So now that the cockroaches are heading for shelter, get the Raid out.