Tom Daschle's Plan for Health Care Rationing

How the new health czar would save money by limiting care

President-elect Barack Obama has nominated former Sen. Tom Daschle (D-S.D.) to become the new Secretary of the Department of Health and Human Services—a.ka., the new "health care czar." Since losing his Senate seat 2004, Daschle has been promoting health care reform proposals. His most comprehensive plan is outlined in his new book Critical: What We Can Do About the Health Crisis. One of Daschle's more ambitious proposals is the creation of a Federal Health Board (Fed Health) modeled loosely on the Federal Reserve Board. Like the Federal Reserve, Daschle's Fed Health "would be composed of highly independent experts insulated from politics."

One of the central goals of Fed Health would be to compare the effectiveness of various medical procedures and drugs. Daschle asserts that such research into comparative effectiveness would produce substantial cuts in health care costs.

For example, in Critical, Daschle argues that Fed Health "could help define evidence-based health benefits and lower overall spending by determining which medicines, treatments, and procedures are most effective—and identifying those that do not justify their high price tags." Daschle adds, "We won't be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost effective. That means taking a harder look at the real costs and benefits of new drugs and procedures."

Notice that Daschle is conflating two kinds of comparisons—clinical effectiveness and cost effectiveness. Determining clinical effectiveness—that is, comparing different treatments to find out which ones work better—is certainly an appealing idea. After all, no patient would want an inferior treatment when a better one is available. However, determining cost-effectiveness is a much more fraught activity. How much is an extra few months of life worth? How much more should be spent on treatments that have fewer nasty side effects?

Daschle explicitly models his Fed Health on Britain's National Institute for Health and Clinical Excellence (NICE). NICE evaluates treatments for both clinical and cost effectiveness. A treatment may be clinically beneficial, but patients may not get access to it through Britain's National Health Service (NHS) if NICE determines that it's too expensive.

But will comparative effectiveness research really reduce health care spending, as Daschle claims? Not by much and not soon, according to a 2007 report by the Congressional Budget Office (CBO), if the research is limited to comparative clinical effectiveness.

Why? Because obtaining comparative effectiveness information costs money, too. To get a preliminary estimate of the benefit/cost ratio of comparative effectiveness research, the CBO used as its starting point a 2008 bill in the House of Representatives which would have established a Center for Comparative Effectiveness Research. The CBO calculated that the new Center's outlays would amount to $2.4 billion over 10 years. Then the CBO estimated that Medicare and Medicaid would save a total of $1.3 billion through reduced expenditures as a result of the comparative clinical effectiveness research. Spending money on comparative effectiveness research would cost $1.1 billion more than it saves the federal government over the next ten years. These amounts are tiny in comparison to the $2.3 trillion that Americans spent on health care in 2007.

The CBO concludes, "Generating additional information comparing treatments would tend to reduce federal health spending somewhat in the near term—but the effect may not be large enough to offset the full costs of conducting the research over the same period of time." In other words, determining comparative clinical effectiveness—determining that certain treatments are better others—simply will not result in big health care savings.

But what about cost-effectiveness comparisons? That could indeed save the feds some money, but only at the price of limiting patients' access to medical treatments. Let's look again at how Britain's NICE operates. According an article in the November 6 issue of the New England Journal of Medicine, "NICE considers treatments cost-effective if their cost-effectiveness ratio is £20,000 ($34,000) per QALY (quality adjusted life year)." If an action gives a person an extra year of healthy life expectancy, that counts as one QALY.

How does this work out in practice? Currently, NICE appears ready to rule out four new effective treatments for kidney cancer because they merely double patients' life expectancies from six months to a year. As Cambridge University oncologist Tim Eisen explained, "If an intervention which doubles progression-free and overall survival in a disease where nothing else works is deemed to be cost-ineffective, the chances of introducing any new cancer medication must be deemed remote."

If NICE rules against the new anti-cancer drugs, British kidney cancer patients will have access only to a treatment that is 20 years old and which works in 10 percent of patients. On the other hand, by paying only for the older treatment, the National Health Service will save British taxpayers some money. Basically, NICE determines when the good of society outweighs the benefits to individuals. The result is that British NHS patients don't have access to many treatments available in the U.S., including clinically effective drugs for Alzheimer's, colon cancer, and rheumatoid arthritis. NICE is a way to administer centralized bureaucratic rationing.

Daschle avoids using the "R-word" in his book, and he expresses irritation when asked about it. According to the Black Hills Pioneer, Daschle recently said, "A myth is that we don't ration. We ration in the worst possible way, on the inability to pay." Of course, the converse formulation is that we "ration" based on the ability to pay. Most people don't think it's "rationing" when someone pays more for a bigger house, a faster car, or a fancy restaurant meal. In the health care context, it means that some fortunate people are still free to choose to pay for treatments they and their physicians think may benefit them.

The CBO report makes it clear that comparative clinical research won't significantly cut health care costs. The upshot is that Daschle's Fed Health would be able to cut costs only by limiting access to care. Daschle wants to apply Fed Health's cost-effectiveness recommendations to all federal health care programs (about 45 percent of all U.S. care expenditures). In addition, he suggests that the federal tax exclusion for health insurance would be retained only for insurance that complies with Fed Health's recommendations. Ultimately, Daschle's talk of comparative effectiveness research is just a smokescreen for a plan to establish bureaucratic centralized health care rationing.

Ronald Bailey is reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

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  • sage||

    I suppose this is yet another suit that thinks health care is a "right."

  • ||

    Is this where the bitter, sarcastic use of the word "nice" came from?

    Example: "A 3-year waiting list for pancreatic cancer surgery? Nice."

  • Naga Sadow||

    I'm lookin forward to a health czar. Everyone in my family lives past the average. Plus we rarely get sick! My superior genes will win out in the survival of the fittest game! Ha!

  • creech||

    What means "higly independent?" Never worked in the health care industry as a provider or insurer? Never worked for any pharma company or got grants for research? Has no golfing buddies or relatives who did same? Never a board member of AARP or some other advocacy group? Owns no mutual funds with health care holdings? [Like Cheney was independent of Haliburton?] And just where are these "highly independent" persons going to get there knowledge of the health care industry if not through first hand experience? How are they going to identify which experts get to testify?

  • libertarian democrat||

    This idea should be anathema to anyone interested in increasing the quality of healthcare, no matter what sort of political ideology one follows.

  • ||

    I'm not sure "centralized health care rationing" is quite punchy enough as a propagandistic buzzword.

    Try to work "baby-killer" and "terroristic" in there somewhere.

    Because, really, most people already have their health care rationed by HMOs, and just pointing out that it's going to be centralized doesn't sound that bad.

  • Nigel Watt||

    Except that you have a chance of switching HMOs, but it's pretty hard to switch regulators.

  • sage||

    Because, really, most people already have their health care rationed by HMOs

    I thought most people didn't have health care, joe.

  • ||

    Because, really, most people already have their health care rationed by HMOs, and just pointing out that it's going to be centralized doesn't sound that bad.

    While the canard about HMOs rationing health care may have been true in the 80s in California, it is not true these days, and you can appeal denied claims to the state, where the overturn rate is around 90%.

  • Paul||

    Like the Federal Reserve, Daschle's Fed Health "would be composed of highly independent experts insulated from politics."



    Welcome to the first failure of the plan.

  • ||

    Nigel is right, but not for much longer.

    Nationalized health care is coming, probably sooner than later. I think it's time to stop railing against it and come up with the most libertarian method of implementing it.

    Note: I'm not endorsing it, just accepting reality, and when I get bent over I'd rather have lube than take it dry.

  • Paul||

    Because, really, most people already have their health care rationed by HMOs, and just pointing out that it's going to be centralized doesn't sound that bad.

    Decentralized rationing is better than centralized rationing.

  • ||

    "We won't be able to make a significant dent in health-care spending without getting into the nitty-gritty of which treatments are the most clinically valuable and cost effective. That means taking a harder look at the real costs and benefits of new drugs and procedures."



    What really sucks about this is that with global warming there will likely be a shortage of ice floes to set the elderly adrift on.

    Seriously, compared to health care costs for the young and middle aged, what health care is cost effective for an 80 year old?

    Governor Lamm was just ahead of his time.


  • ||

    Because, really, most people already have their health care rationed by HMOs, and just pointing out that it's going to be centralized doesn't sound that bad.

    Decentralized rationing is better than centralized rationing.


    [sarcasm/]BUT BUT BUT Paul, Obama is going to be the head of the rationing committee, not some evil corporate suit! that is enough to make the whole plan work wonders for everyone! for a real world example, look at how well the Fed Reserve worked out for us and how it completely remained independent of political pressure! [/sarcasm]

  • sage||

    That's right, I forgot. Central planning will work once the right people are in charge.

  • ||

    John-David: My 2nd best proposal--mandatory private health insurance--is outlined here.

  • ||

    Why would we want them to be insulated from politics? If they are insulated from politics, they are accountable to no one. I presume that's the point of the exercise, to install socialized medicine in a way that can't be challenged.

    Isn't three years longer than the expected lifespan for untreated pancreatic cancer?

  • Reinmoose||

    Here the vast majority of anti-socialized medicine posts have been looking at the British system, and we've been told that they're not representative of all socialized medicine systems - that there are ones that work a lot better, like France's.

    I think it's time for universal health-care proponents to own up and admit that we're getting the short end of the stick.

  • Paul||

    Why would we want them to be insulated from politics? If they are insulated from politics, they are accountable to no one.

    Right, like our current elected politicians are so accountable...

  • Nigel Watt||

    That's right, I forgot. Central planning will work once the right people are in charge.

    See my argument with joe earlier.

  • libertarian democrat||

    After re-reading that article, Ron, I must say it's really great.

  • ||

    Isn't three years longer than the expected lifespan for untreated pancreatic cancer?

    Yes, it is. And as a matter of fact it is longer than the expected lifespan for treated pancreatic cancer. By the time the cancer is detected prognosis is very poor. (I had a good friend who died of this cancer.)

  • ||

    I must confess, Ron, that I would take a more sanguine view of mandatory private health insurance if we had a definition of health insurance that made it something that actually resembled insurance.

    But that particular dead horse has been beaten beyond recognition around thes parts by now.

  • ||

    John-David | December 23, 2008, 3:28pm | #

    Nigel is right, but not for much longer.

    Nationalized health care is coming, probably sooner than later. I think it's time to stop railing against it and come up with the most libertarian method of implementing it.


    Wouldn't the libertarian thing to do be to throw a monkey wrench in socialized medicine once it is implemented?

    To make as inneficient as possible so people rebel against it?

    To frivolously run up the costs as much as you can, so people look back favorably at when it was more free?

    Barring that, the bold ones should refuse to pay taxes?

  • ||

    Of course the hard truth is that rationing of some kind is always going to be important, and is going to become more important. We are currently spending around 16% of GDP on healthcare with costs still climbing. By 2050 the costs of our entiltments (chiefly medicare, and medicaid) will eat up the entire federal budget and more.
    http://www.pgpf.org/

    We need a comperhensive approach that tackles both the demand for health services (by enourging healhy living) and the supply/cost side.

    Obviously part of the solution is restoring lin between who pays for health care, and who gets it. So that people do a bit better job of rationing themselves. IMHO, probably the best way to do that would be some type of prebate for those deemed fit.

    Of course the whole situation is full of conflicts between how the free market should work, and libertarian ideals, and the more limited liberties etc for what will probably take place.

    But our current system is bankrupting our country, and is hugely inefficient to boot.

  • sage||

    Wouldn't the libertarian thing to do be to throw a monkey wrench in socialized medicine once it is implemented?

    To make as inneficient as possible so people rebel against it?

    To frivolously run up the costs as much as you can,


    I thought that handing it over to the government (the rest of the way) would take care of that.

  • Invisible Finger||

    most people already have their health care rationed by HMOs, and just pointing out that it's going to be centralized doesn't sound that bad.

    How stupid can you get? People HATE having their health care rationed by HMO's. Somehow I don't think people will think "not too bad" when there's no way out and they can't even dream of getting a job with better health care some day.

    Obama is already worse than Bush, simply because he's more cynical. Gotta hand it to 'im, pretty hard to be worse before even being sworn in, but there ya go. Built-in shittiness; lower expectations below whale-poop so that he can successfully live down to expectations. His 2012 campaign can be selectively endpointed: "Are you better off than you were 3 years ago?"

  • ||

    When can we pack up all the czars and send them to Russia where they belong?

  • ||

    Ah, people jumping on the blame Obama bandwagon already.

    Say you rent a house and the tenant (person A) before you (person B) trashed it. You spend great effort and money to make the required repairs. Who's at fault for the expense and energy for the repairs?

    There is going to be a lot of people that will fault person B. It wasn't wrong to make the mess on the taxpayer's dime, it's wrong to clean it up on their dime.

  • ||

    Right, like our current elected politicians are so accountable...

    In principle, they can be voted out of office. That's why the left focuses so much on judicial undermining of legislative perogative: in many cases the outraged public can't oust the offender and so have no means to reverse policy.

  • ||

    Passing unconstitutional laws are not a legislative perogative, for either the left or right.

  • Justin||

    I bet ol' Daschle doesn't want us to know where he got his interesting glasses either.

    But I have a guy in Malasia, and now Daschle's going to look like an even bigger idiot.

  • Sam Grove||

    I'm not sure "centralized health care rationing" is quite punchy enough as a propagandistic buzzword.

    How about "totalitarian health care"?

  • ||

    I hereby state for the record that I will, until my dying day, vote for whichever party bans the word "czar" from government documents, references, speeches, statements and jokes. I want that word dead and the corpse shipped back where it belongs.

    America has no czar. America needs no czar.

    Oh, and socialized medicine, boo, hiss, etc. Carry on.

  • Paul||

    I hereby state for the record that I will, until my dying day, vote for whichever party bans the word "czar" from government documents

    So what you're saying is you won't be voting.

  • ||

    agreeing with johnny clarke, for a different reason. the word is "царъ", pronounced "tsar". the first letter is a "ts" and the last letter, the silent "hard sign" is the rarest letter in russian. it would be worth a lot of points in a russian scrabble game.

  • ||

    "modeled loosely on the Federal Reserve Board"

    Yeah, because that worked out really well for us...

  • sage||

    Oh, and not that joe was actually defending this action in his ONLY comment on this thread, but I feel the need to point to this:

    sage | November 6, 2008, 10:28am | #

    You know, I like joe, and he makes very intelligent arguments. But I have a feeling things are going to get very difficult for him on this blog. It's been easy to hate Bush since most of us don't like him either. But when a lot of Obama's ideas are exposed to the light they are going to look very ugly, and hard to defend.

  • ||

    "Nationalized health care is coming, probably sooner than later. I think it's time to stop railing against it and come up with the most libertarian method of implementing it."

    why??? why join a future failure just to be blamed when it fails.

    liberal cards to be thrown:
    poor/poverty
    race
    lack of regulation
    greed

    i say give them the driver's seat. what libertarians should be concerned with is building and marketing.

    liberals value the idea over the implementation so failure is just a matter of time. the ideas may not be so bad but the centralized, top-down, all chips in one basket approach to every solution is.

  • ||

    This thread has a silent premise--that people will hate and resent government-sponsored health insurance when they've experienced it. That seems unlikely.

    Here in America, Medicare is very popular: even the "conservative" party campaigned to extend its drug benefits. Elsewhere in the world, no serious politician campaigns to abolish, or even re-structure, the health schemes in France, Germany, Japan, etc. And even the UK's National Health Service (which gets a lot of hate here) is extremely popular. As is Canada's.

    So the more-likely outcome is that the US follows the rest of the world in adopting national health insurance and likes it. Eventually the program will only draw sniping from the same impotent political fringe that still snipes at Social Security and fiat money.

  • ||

    Modeled on the Federal Reserve? So, they'll figure out how to distribute more and more health care, but it will just make us sicker?

    -jcr

  • ||

    people already have their health care rationed by HMOs

    Yes, and that's a strong argument for abandoning the regulations that created and support the HMOs.

    -jcr

  • Rose||

    pireader -- I think that's probably true, sad to say, unless (God forbid) quality might get so low that people have to pay doctors under the table. A lot of Americans are going to be uncomfortable with corruption.

    Efficiency is a hard thing to gauge at a personal level. Some folks will be better off under nationalized health care. Many will be worse off, but not enough to notice, or they'll never realize that the government is the cause of their troubles. As far as I know, few of the jobless during the Depression blamed Roosevelt's administration; no matter how hard times were, the prevailing attitude was that the government was doing its best to help.

  • ||

    There is no rationing in America by ability to pay. Hospitals must provide necesary care regardless of ability to pay.

    Apparently liberals would rather have the poor die in line than heavan forbid go bankrupt to live.

  • sage||

    Here in America, Medicare is very popular:

    Yeah, unless you're a doctor trying to get remimbursed from it. Or a taxpayer watching as billing errors and fraud add up to billions a year. Yeah, very popular.

  • ||

    Pireader,

    Yes, because fiat money and Social Security are working soooo well.

    How much purchasing power has your dollar lost since the founding of the Fed? Could be one reason why your medical care is so "expensive", don't you think?

    How much are you going to get back from Social Security versus how much you were taxed - er, I mean how much you "paid" into it?

    Will some people "like it"? I guess some will. But how many of the 300 million Americans will really "like it"? Probably about the same amount of people who "like" the DMV or the IRS.

    Being forced and coerced into submission - and accepting what the political class demands - to the point where you just have to "learn to live with it" is not the same as people choosing to like it and voluntarily paying.

  • ||

    Piereader - re: "impotent fringe" & "UK NHS - extremely popular".

    That is a ad hominem attack and ad populum argument... probably the two biggest intellectual fallacies going around today.

  • ||

    The rest of the world thinks that America is a joke because they focus on killing people in strange lands, and not on providing their own citizens with health care.

    Every time the issue is raised, the bullshit artists go into high gear. Ask a Canadian if they want to drop their system?

  • Rose||

    No, it's not an ad hominem, or at least needn't be. It's a point about the political process. Universal health care can be both bad and popular. And, Frank, universal health care can be popular (in the sense of polling well) without really being the best solution.

    I'm not being anti-democratic here. I'm saying voting or polling preferences are a pretty weak gauge of what individuals want. Buying preferences do reflect what people want, because the individual herself bears the cost if she makes a choice that's not in her best interest. But the marginal cost of voting for a bad policy (or, even more so, talking up support for a bad policy) is nil. I could argue for the U.S. to become a velociraptocracy, if it gained me the respect of everyone around me ... and I wouldn't need to worry that the direct consequence of my conversations would be the tyranny of our dromaeosaurid overlords.

    I suspect the majority of college-educated folks who support universal health care are part of this phenomenon. It helps you seem like a nicer person to say you support it; and it won't be individually your fault if the policy turns out to be disastrous.

  • ||

    Well put Rose.

    Frank -

    I think many people here will agree that much of US foreign policy is extremely flawed and that war is a great evil.

    That said, I don't think that criticizing Daschle is "bull shit art".

    Asking if "cost efficiency" would be put over an individuals life or medical progress is something I think many people across the spectrum would be concerned about.

    Yes, that's also a problem with HMOs. But that doesn't give the government a free pass to do the same thing in the name of covering everyone.

    The left these days is very busy pretending that the US is somehow the worlds most immoral country ever... for whatever reason they find conveinent... libertarians are sometimes guilty of this too in my opinion... but as you know, other countries have their own sad history and problems to deal with.

    Calling America "a joke" when trying to discuss US medical care is the type of thing that bitterly ends a discussion, or attempts to... it gets us nowhere and leads to absolutist statements like piereaders above.

    Aloha and Happy New Year.

  • ||

    I think the artivle misses the point. The US currently has mutltiple health care systems. Military Veterans, Medicare, Medicaid, Federal Gov Workers, state government workers, everybody else with insurance, illegal alien, unisured American.

    "Everybody else with insurance category" is basically taxed to support the other categories that either pay nothing for minimal care or pay way less than what they receive. The Daschle plan is really a way of reducing the most expensive procedures available on various government plans, without being so crass as to say that is what you are doing. I suspect that private insurance will be available for those that want an extra $500,000 or whatever in experimental procedures.

    Even worse people in the "Everybody else with insurance" category, aka productive citizens, are forced to reduce productivity because they cannot pursue opportunities without adeqate health cover.

    I do not believe that people currently with private health insurance will be affected, they were not getting the excluded procedures anyway.

    This is also a consequence of the War on Terror, which has broke the bank of US healthcare. In particular GWOT is producing lots of injuries(government liabilities) instead of deaths. This means that government healthcare will have to reduce costs(procedures covered), or find new revenue from its aging and new immigrant populations. (That was a joke)

    Put it all together and what Dashle is proposing is a politically paletable way to refuse expensive procedures to unproductive (tax consuming) citizens. Bravo. I think Reason should applaud the plan.

  • Praveen||

    Explicit health care rationing in federal programs is exactly what we need.

    I'm all for market-oriented medicine in the private market. If you're willing to pay, you should always have the right to any treatment you desire and can afford.

    But if you rely on the federal government for treatment, you should expect, and demand, explicit rationing along QALY lines so that your taxpayer dollars are not wasted. Limitless health care is impossible, and the sooner we recognize that rationing of government dollars is part of the solution, the better.

  • ||

    Cost effectiveness has a lot more meaning than "how much is a year of your life worth". Take medications. Is it worth it to spend twenty times the amount for an newer generation of drug that, clinically, is no more effective than the older one- but just may decrease the incidence of a fairly rare side effect - say, 2% of the patients receiving it may encounter?
    Or, is it more cost effective to place the older drug on formulary, but if the patient shows signs of that side effect- say, diarrhea- then switch him over to the newer drug? 98% of the patients taking the older drug NEVER have that side effect, the other two percent are switched over to the newer drug right away- and you save a bundle.
    How much is 2% of the population taking the drug ending up with diarrhea for a day, or even a few days worth? Millions? Should we do as big pharma would like, and place everyone on their new, not more effective, but less prone to diarrhea formulation that will net them countless millions more each year?
    That's cost effectiveness. I work for the VA, and we've done a pretty good job, in these past ten years, of keeping our costs down, and our patient satisfaction high (look at the research- patient satisfaction is higher than any private healthcare system, and our costs have stayed under control). The writer of this article is just trying to scare you into thinking you'll lose out on important, much more clinically effective treatments because they'll be too expensive, and you, or a loved one, will die because of it. Bull.
    When we do find a much more clinically effective treatment at the VA, we grab onto it- and, with the high number of veterans we care for meaning $$$ in quantity alone, strongarm the pharma or device company down to a much more reasonable price.
    Please read both viewpoints, folks. This guy is definitely giving you the FEAR view- look up the research, the factchecks- it's so easy now- and don't let your health, and your families, be beholden to these fearmongers.

  • Byron Dickens||

    The real way to fix our health care system here in the US would be to move away from having insurance pay for everything back towards paying for healthcare out-of-pocket. That would force the healthcare industry to become subject to matket forces by making providers be competitive.

    If patients had to pay for their own care, two things would happen. One, people would stop going to the doctor and getting antibiotics for every little sniffle because "insurance will take care of it." Two, people would throw a fit when they saw the bill. "Ten dollars for a roll of gauze? I'm not paying that! I can buy it at the drugstore for two!"

  • ||

    Byron Dickens, you forgot three: People will die of curable ailments because they can't afford treatment. Yeah, that market is the answer to everything. At least we would eventually solve our overpopulation problem.

  • ||

    Gus, you forgot something: People will die of curable ailments under socialized medicine because the government refuses to pay for treatment.

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