Medical Costs and Benefits: Who Decides?

Earlier this year, the Food and Drug Administration approved a new prostate cancer treatment, a vaccine called Provenge in which primes a patient's immune system to attack prostate tumors. The drug costs around $90,000 per patient. and extends their lives on average by about four months. Since many men suffer from prostate cancer late in life, government-run Medicare would be expected to pay for most of the treatments. Currently, federal medical bureaucrats are not supposed to take costs into account when deciding to use a treatment. However, as the Washington Post reports today:

Federal officials are conducting an unusual review to determine whether the government should pay for an expensive new vaccine for treating prostate cancer, rekindling debate over whether some therapies are too costly.

The Centers for Medicare & Medicaid Services, which dictate what treatments the massive federal health-insurance program for the elderly will cover, is running a "national coverage analysis" of Provenge, the first vaccine approved for treating any cancer. The treatment costs $93,000 a patient and has been shown to extend patients' lives by about four months.

Although Medicare is not supposed to take cost into consideration when making such rulings, the decision to launch a formal examination has raised concerns among cancer experts, drug companies, lawmakers, prostate cancer patients and advocacy groups….

"To charge $90,000 for four months, which comes out to $270,000 for a year of life, I think that's too expensive," said Tito Fojo of the National Cancer Institute. "A lot of people will say, 'It's my $100,000, and it's my four months.' Absolutely: A day is worth $1 million to some people. Unfortunately, we can't afford it as a society."

Others agreed, especially given the modest benefit.

"I'd like to think cost doesn't need to come up when it's a slam dunk," said H. Gilbert Welch of the Dartmouth Institute for Health Policy and Clinical Practice. "But when it's a close call like this, it certainly has to be a factor. That's $100,000 Medicare can't spend elsewhere."

Of course, when decisions are made for "society" they turn into all-or-nothing political battles in which special interests contend to divert streams taxpayer dollars in their direction. If the breast cancer advocates win, then the prostate cancer lobby loses. Of course, benefit/cost tradeoffs must be made even in the context of health care. Such intimate decisions should be made as much as possible by individuals.

One proposed way out of the political win/lose dynamic of government-run health care is found in Rep. Paul Ryan's (R-Wisc.) Roadmap for America's Future Act. That act would begin to unravel the fiscally unsustainable Medicare mess by providing vouchers to senior citizens to buy private health insurance. This would allow a market in health insurance to develop in which people could make explicit their preferences in medical coverage. Some will choose to sacrifice vacations and new cars so that they can purchase high end insurance policies that would cover pricey new treatments like Provenge. Why should "society" a.k.a., federal bureaucrats, decide what sacrifices should be made when individuals are perfectly capable of doing that on their own, if "society" will just let them?