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.