Published — July 29, 2013 Updated — May 19, 2014 at 12:19 pm ET

The other Washington could hold the key to Medicare’s cost crisis

Washington state won’t pay for medical procedures that are unsafe, unproven or cost too much. Why can’t Medicare do that?


Arthroscopic knee surgery: one of the treatments limited in Washington state’s Health Technology Assessment program. (Shutterstock)

A recent federal assessment of Medicare’s fiscal health contained a shred of good news — the public health insurance program for the elderly is burning through cash at a slightly slower rate than expected. Yet declining health care costs haven’t bought much time. According to that May report by the Boards of Trustees for Medicare, the program is slated to run out of money in 2026, only two years later than previously forecast.

In order to cut costs and put Medicare on a stronger footing, many health policy experts say the program must stop covering procedures that do little to improve patient health or are not worth the price tag. But the Centers for Medicare and Medicaid Services (CMS), the agency that administers the program, has for the most part failed to implement such cost-cutting measures, because its authority is limited, cuts are controversial and Congress frequently interferes.

Washington state, however, is making the tough choices. In 2006, the legislature in the Evergreen State established its Health Technology Assessment, a program that evaluates medical procedures and devices paid for by state public employee insurance, worker’s compensation and Medicaid, the joint federal-state insurance program for low-income individuals and families. The assessment program is run by a state-appointed committee of 11 practicing doctors, nurses and health professionals. It’s charged with ensuring covered medical care is safe, effective and worth the cost. Its decisions are binding.

Since the program’s inception, the committee has cut coverage for 21 medical procedures and devices and set strict conditions for covering others, many of which Medicare continues to pay for. The procedures include popular and expensive treatments like arthroscopic knee surgery, back pain injections, CT heart scans, and lumbar fusion. By state estimates, the committee has saved Washington more than $40 million a year. If Medicare had followed Washington state’s lead and cut funding for the same procedures, experts say it would have saved billions.

Limiting or rationing care paid for by public insurance programs is at the center of the broader health policy debates and pits fiscally minded experts against the medical industry and some doctors, who bristle at government interference in patient care. From the vantage point of Washington, D.C., Washington state’s ability to limit health care spending by cutting or rationing procedures — the “third rail” of federal health care politics — is nothing short of miraculous.

But in Washington state, which is known for its progressive politics, the measure, requested by former Democratic Gov. Christine Gregoire, sailed through the legislature, albeit with an appeals process amendment the governor vetoed. “Medicare should be doing this, but it gets rolled by the Congress,” said Dr. Robert Berenson, a health policy expert at the Urban Institute and former commissioner of the Medicare Payment Advisory Commission (MEDPAC), an independent agency that advises Congress on issues affecting Medicare. Berenson pointed to several high-profile examples of Congress meddling with coverage policy, including the case of the late Sen. Ted Stevens of Alaska, who at the behest of the PET scan industry almost single-handedly forced Medicare to cover the scan as a test for Alzheimer’s, a policy that existing science did not support.

Congress interferes with Medicare coverage directly, Berenson said, by making laws requiring that the program cover certain services, and it influences policy indirectly by putting pressure on CMS at the behest of patients and the medical industry. Berenson added that there is no political will to cut services to seniors, even if individual procedures are not proven or cost far more than other options. “People are afraid of being accused of rationing care, death panels, that sort of thing,” Berenson said.

Washington saves, Washington spends

Like Washington, Oregon and Minnesota also have public committees that use safety, effectiveness and cost considerations to limit insurance coverage. But Washington is known to be the most aggressive, which has attracted the ire of doctors, the medical industry and others. In 2011, when the assessment program challenged the cost effectiveness of unlimited glucose monitoring supplies for diabetic children, The Wall Street Journal editorial board called it the “pro-diabetes board.” The program ultimately decided not to make any change to the policy.

In Washington, D.C., both patient advocates and the medical industry find receptive ears in Congress when program cuts are proposed. Thomas Scully, former Medicare administrator under George W. Bush, said both political parties have a “Dr. Jekyll and Mr. Hyde” personality disorder when it comes to Medicare spending. Republicans tend to be fiscally conservative, yet they don’t want government bureaucrats mandating what gets cut. Democrats tend to be more comfortable with big-government policy solutions, yet they chafe at limiting care for seniors.

Scully, who supports giving CMS more ability to make cost-based decisions about care, said the shrill political rhetoric from detractors is usually “complete b–s—.” “Should price and comparative-effectiveness be a factor? Yeah. Could you take it too far? Possibly. But you’ve got a long way to go until then.”

To understand the extent to which Washington state differs with Washington, D.C. on science and cost-based coverage decisions, consider vertebroplasty and kyphoplasty, two high-cost types of spinal surgeries. In 2011, Washington state ended coverage for both procedures, which treat compression fractures of the spine. The same treatments cost Medicare a total of more than $40 million that same year. Researchers, however, say there is little evidence that the surgeries lead to better long-term outcomes than no treatment at all.

Between 2009 and 2011, the Health Technology Assessment also reviewed three common, expensive and controversial treatments for chronic back pain: spinal injections, spinal stimulation, and transcutaneous electrical nerve stimulation.

The assessment committee ended coverage for three types of spinal steroid injections, which are short outpatient procedures intended to reduce inflammation and pain. That saved more than $4.5 million a year, according to the state. It stopped paying for small surgically-implanted devices that send electrical pulses to the spinal cord, which saved $1.8 million yearly. It also ended payment for pocket-radio-sized “TENS devices,” which deliver electrical current to nerves via electrodes attached to the skin, which saved another $900,000.

In each case, the committee voted that the evidence did not show the procedures and devices were safe, effective, or worth the money. Yet Medicare continues to pay for all of these services, to the tune of $285 million in 2011 alone, according to government data. The situation is the same for many of the other 29 procedures or devices cut back by the assessment.

Josiah Morse, the director of the Washington program, downplays the role of cost in the decisions. Morse said in most cases there isn’t enough research on the cost-effectiveness of medical technologies, so the committee makes most of its decisions based on safety and effectiveness. Yet the result is a cost-savings bonanza for the state.

“The federal government right now is not where the action is,” said Larry Kessler, a professor and medical cost-effectiveness expert at the University of Washington School of Public Health. “If someone makes a gold-plated heart valve that cost a million dollars, if it’s safe and effective, the FDA has to approve it,” Kessler said. “[The] system is set up to allow products to go on the market regardless of our ability to pay for it as a nation.”

Coverage Policy: How Washington stacks up to Washington

There are a number of reasons why Washington state is more efficient than Medicare at limiting coverage for expensive or ineffective procedures. Most importantly, the Centers for Medicare and Medicaid Services have no authority to consider cost in their coverage policy decisions. By statute, Medicare is required to provide care that is “reasonable and necessary,” said Donald McLeod, a CMS spokesman. “If it works, we pay for it without regard to cost.” In fact, Medicare pays for many procedures, drugs, and devices that are not proven to work. In one high-profile 2011 case, for example, the program decided to continue covering the drug Avastin for breast cancer, even after the Food and Drug Administration revoked the drug’s approval for treating that disease because it was not shown to be safe and effective.

That’s not to say Medicare never excludes procedures. In one high-profile case, CMS in 2009 decided not to cover the imaging procedure virtual colonoscopy for colorectal screening after finding there is not adequate evidence that it provides health benefits. Yet decisions like this one are relatively rare.

In 1989, Medicare proposed adding cost as a criteria for coverage decisions, but withdrew the plan after a vast outcry by the medical industry. Health policy experts differ on whether or not the “reasonable and necessary” language prohibits CMS from considering costs without additional guidance from Congress.

But that’s unlikely to happen anytime soon. Indeed, Congress is giving the opposite message. The Affordable Care Act includes a provision expressly forbidding Medicare from using cost-effectiveness to determine coverage or reimbursement, which is a legacy of a political compromise intended to soothe Republican concern over bean counters rationing care for the elderly to save a buck.

Nonetheless, as part of the health care compromise, Congress has set aside a growing amount of money to research the science behind medical procedures. The health reform law established the non-government Patient Centered Outcomes Research Institute, which is funded by a tax on insurers. The institute will help direct comparative-effectiveness research. And the 2009 economic stimulus provided $1.1 billion for comparative-effectiveness research to compare drugs, medical devices and procedures to find out which work best.

Some prominent Republicans are particularly concerned that comparative effectiveness research will take medical decision-making away from doctors. During the 2009 debate over health reform legislation, Sen. Orrin Hatch, R-Utah, echoed the claims of comparative effectiveness research detractors — that since patients are unique, what works for one may not work for another. Hatch said that limiting the procedures doctors can offer sets them up for malpractice lawsuits. The research “gives trial lawyers a powerful, government-backed tool that will increase the number of frivolous lawsuits instead of containing skyrocketing costs of health care,” Hatch wrote in a press release.

But unlike the Washington state program, federal initiatives on comparative-effectiveness research are purely advisory. The experts do not set policy, which leaves the process open to politics and health industry influence.

“I think they do not have the structure that made our program successful,” said Leah Hole-Curry, program director of Washington’s Health Technology Assessment until 2011. “If they [CMS] get a powerful group of representatives who think they made a bad decision, ultimately that’s who they report to.”

Hole-Curry said Washington state puts little stock in Medicare coverage decisions when it considers the same procedures. “There is low trust that the evidence becomes the basis of the decision, especially if it’s highly political,” she said. “There is a perception that CMS has to play within Washington, D.C., rules.”

Medicare coverage policy most often set far from D.C.

Yet when it comes to setting Medicare coverage policy, relatively few decisions are actually made in Washington, D.C. The Centers for Medicare and Medicaid Services administers the program, but the nuts-and-bolts processes of running the program, including making coverage decisions and paying claims, are performed mostly by private insurance companies that contract with the federal government. Each year, Medicare does institute a dozen or more “national coverage decisions,” often on high-profile or costly procedures. Other procedures are subject to so-called local coverage determinations by the regional insurance contract administrators. The result is a fragmented program in which a procedure Medicare pays for in New York is not necessarily covered in Kansas.

Detractors concede Medicare does not have the manpower to take on coverage decisions for all procedures, but they say regional administrators are frequently swamped by the influence of drug makers, medical device companies and local physicians, who often believe procedures work, even if the prevailing science says otherwise. Further, gathering and analyzing the data is time-consuming and expensive, and contractors have little incentive to put much effort into the process.

“If you are the contractor and you get paid for efficiency in processing claims, what’s the benefit of holding them up?” said Susan Bartlett Foote, a health policy expert and professor emeritus at the University of Minnesota School of Public Health.

When Medicare does go through the national coverage determination process, it is often swamped by the influence of physicians and manufacturers, as in the 2007 case of cardiac CT scans, a radiology procedure used to diagnose heart disease. CMS medical officers determined that there was little evidence supporting the scans. Yet when CMS released a proposed decision that would have put strict limitations on the procedure, the radiology industry mounted a frantic lobbying campaign that resulted in Medicare backing down.

Foote said Medicare coverage decisions traditionally influenced the coverage policies of state and private insurers, but she said that’s changing as private insurers and states like Washington have become more savvy at doing their own research. That has led physician groups and other medical industry interests to “coverage shop,” particularly when introducing a new technology or procedure. “They are always looking for what’s the best place to get something positive,” said Foote. They then leverage a positive outcome to push for coverage from other payers. “They will say, ‘Blue Cross Blue Shield was positive, so you better take a second look,’ ” Foote said.

Washington state faces industry pressure

Coverage shopping also means the decisions of Washington’s Health Technology Assessment have the potential to reverberate far beyond the state; medical societies and device manufacturers worry that failure to win a coverage battle in Washington could lead to lost coverage in other states. As a result, there’s strong industry interest in the program. In the years since 2006, when Washington passed the law establishing the assessment, the medical industry has tried to limit the damage by pushing for more influence, Hole-Curry said. There have been failed requests for the committee to follow care guidelines set up by medical specialty societies and include “subject matter experts” as voting members of the panel.

The committee, which is supported by three full-time staff, holds public meetings, usually four times a year, to decide coverage rules based on evidence it receives from contracted researchers. Industry and the public have a chance to weigh in during the public comment period, which is 30 minutes at the end of each meeting. “There are some that say the program is not transparent enough,” Hole-Curry said. “I would recast that as there is not enough ability for industry to influence the program.” The program’s annual budget is $1.2 million.

That’s not to say that industry, and beneficiaries, have been unable to influence Washington decisions. When the program considered setting limits for glucose monitoring supplies for children (which Hole-Curry said account for two-thirds of the cost of treating diabetic patients in the state) it faced organized resistance by parents who protested that their children would die without unlimited supplies. “It was pretty effective, I must say,” Hole-Curry said. Diabetic children covered by state-funded programs continue to receive unlimited glucose monitoring supplies, unlike adults.

But so far, Washington’s legislature has not bent to industry pressure and continues to leave coverage decisions to the group of medical experts it assigned the task. And other states are taking notice as they struggle with rising costs, especially for Medicaid. They have to, said Mark Gibson, director of the Center for Evidence-based Policy at Oregon Health & Science University, which staffs an evidence-based decision advisory project with 13 member states as diverse at New York and Arkansas. States, which are required to balance their budgets “can’t say, ‘we’ll borrow money to pay for it later like the federal government does,’” Gibson said.

At the federal level, however, Berenson of the Urban Institute says there is little will to follow Washington state’s path. “Congress is very proud that CMS does not do evidence-based coverage policy,” he said. That sort of policy, he said, “is currently a lost cause.”

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