the future of Medicare

Healthcare for the elderly in the United States is in an untenable financial situation. This is the result of a convergence of factors: an aging population with increasing life expectancy; the pharmaceutical and device industries devising new and very costly techniques and applying them to this population; the sophistication of patients, demanding them. All of these together lead to health care expenses for the elderly that are consuming an unsustainable portion of the GDP.

Although this problem exists in other countries as well, it is particularly onerous in the US because of the malpractice industry, coupled with the notion that if something goes wrong, someone should pay. In other countries, there is a greater acceptance of the inevitability of things going wrong, a greater reliance on the paternalistic doctor-patient relationship and much lower malpractice rates and awards. This is not to say that paternalism and low malpractice awards are necessarily better or fairer or right, but it does explain the ability of the healthcare system in other countries to significantly limit outlays.

The future of Medicare, in my opinion, lies in some combination of the following approaches:

1. Conventional fee-for-service Medicare. This is what got Medicare into financial difficulty in the first place, and is unsustainable in its present form. However, the current trend, which will certainly accelerate, is towards drastic ratcheting down of Medicare payments to providers in order to keep costs manageable. This will continue and will accelerate the flight of doctors and other providers out of fee-for-service Medicare entirely. Because of this provider flight, fee reductions alone would not be politically feasible, but there will be other alternatives open to patients. As a result, fee-for-service Medicare will become the refuge of a greatly reduced number of highly efficient, low-overhead practitioners as well as those willing to accept much lower incomes.

2. Medicare managed care. This involves Medicare paying a fixed sum to an insurance company, in return for total care of the patient. Insurance companies are highly skilled at gaming the system and figuring out how to enroll the healthiest patients, so Medicare will end up paying more for the care of healthy patients than it would have had they been in fee-for-service. Not a good solution.

3. The new Accountable Care Organization (ACO) approach. This is basically the same as Medicare managed care, but this time, the organization assuming responsibility for the patient’s care is not an insurance company but a healthcare organization, ACO, presumably organized around a hospital system. Medicare thinks it can get a better deal out of the ACO’s than it could out of insurance companies. And hospitals and providers suffer from the delusion that they can provide quality care at low rates (something nobody else has been able to do). There is much enthusiasm for this approach right now, and everyone seems to be scrambling to get on the bandwagon. But there are numerous pitfalls. What happens when a patient wants / needs to get care for an expensive problem outside the ACO? When a patient ends up with a month long ICU stay at another hospital? Who pays? If the original ACO has to pay, it will be ruinous. If Medicare foots the bill, there will be a mad rush to dump the sickest patients onto outside institutions. And again, how should an ACO be able to solve the problems that are inherent in the costly healthcare of the elderly?

4. Finally, there is the voucher approach, where Medicare gives patients vouchers to pay for insurance on the private market. Of course, insurance that provides real quality care for a large population of sick, elderly patients will be extremely expensive, not affordable without supplementing the vouchers substantially.

[As an aside, what about single payer, in all this? I used to think that single payer was desireable but not achievable in this country. Medicare for all seemed to me to be a laudable if illusory goal. But single payer doesn’t have the answer to the cost problem any more than Medicare does. Given the state of Medicare, I no longer think single payer is even particularly desireable. ]

In my opinion, all four of the approaches listed above are likely to be adopted, to varying degrees. A poorly reimbursed fee-for-service system with relatively few providers, managed care and ACO’s, and a voucher system. But none of these approaches solve the underlying problem of the spiraling cost of medical care in an aging, litiginous and sophisticated population.

And so, the end result will be characteristically American: you gets what you pays for. The affluent will pay for expensive insurance, supplementing the Medicare vouchers with their own cash. The rest will have to deal with sparse fee-for-service and cost-shifting managed care and ACO’s (assuming these don’t eventually all fold).

Michael Jacobson, MD
New York, December 21, 2011

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The zoster vaccine

The lead article in yesterday’s NEJM, A vaccine to prevent herpes zoster and postherpetic neuralgia in older adults, presents the results of a VA Cooperative Study looking at the efficacy of a high potency, live attenuated VZV vaccine developed by Merck from the Oka/Merck strain. The results are encouraging, with a reduction in the incidence of herpes zoster of 51.3% during 3 years of follow-up.

The authors state that the incidence of post-herpetic neuralgia was reduced by 66.5%. They are referring to the incidence in the overall study population: there were 27 cases of PHN among the 19,254 subjects who received the vaccine, vs. 80 cases among the 19,247 subjects who did not receive the vaccine. If you look at the number of cases of PHN among patients with zoster, the numbers are 27/315, vs. 80/642, a reduction of about 31%. Both of these numbers are important to judge the vaccine.

In other words, the vaccine reduced the incidence of zoster by about a half, the overall incidence of PHN by about 2/3 and the incidence of PHN among patients with zoster by about a third.

What about the choice of vaccine? The study used a live attenuated vaccine that was of higher potency than the standard vaccine given to children. Why not study the vaccine that is already available in the United States? Two reasons, one medical, one economic:

  • Medical: a higher potency vaccine may be necessary to boost the immune response in older patients sufficiently to prevent zoster.
  • Economic: a new vaccine formulation for this specific purpose can be priced much higher than the already available childhood vaccine.

Turning to the economic consideration first, in the accompanying editorial, Gilden states:

“To nonindigent recipients of the currently used childhood VZV vaccine (Varivax), the price of vaccination is between $50 and $100 (the sum of the cost of vaccine plus the visit or facility fee). An adult vaccine might cost more, given its greater potency. Nevertheless, the zoster vaccine appears to have been highly cost-effective in the Shingles Prevention Study (i.e., in the range of $2,000 per quality-adjusted life-year gained, even assuming a vaccine cost of $500).”

Clearly, Merck stands to make a lot of money if the vaccine used is a new one, costing several hundred dollars, rather than the existing vaccine which costs under $100 per dose.

What about the possibility of using the currently available vaccine, possibly with a booster dose, rather than a new, higher potency one? The vaccine used in this study contained between 18,700 and 60,000 plaque-forming units of virus, versus about 1,350 pfu’s in the Oka/Merck vaccine that is commercially available and is administered to children. In the concluding paragraph of the current study, the authors state:

“The minimum potency of the zoster vaccine administered to subjects in the study was at least 14 times greater than the minimum potency of Varivax (Merck), the vaccine currently licensed to prevent varicella. A preliminary study indicated that potencies of this magnitude are required to elicit a significant increase in the cell-mediated immunity to VZV among older adults hence, the need to formulate a high-potency vaccine for this study. We know of no data to suggest that the licensed varicella vaccine would be efficacious in protecting older adults from herpes zoster or postherpetic neuralgia. Thus, we do not recommend the use of the current varicella vaccine in an attempt to protect against herpes zoster and postherpetic neuralgia. “

The authors provide no references to back up the results of their “preliminary study” indicating that such high potencies are necessary. In fact, a 1992 article published by some of the same authors of the current study, Immune response of elderly individuals to a live attenuated varicella vaccine, seems to indicate that such high doses may not be necessary. From the abstract of that article:

“The Oka strain live attenuated varicella-zoster virus (VZV) vaccine was administered subcutaneously to 202 VZV-immune individuals who were 55 to greater than 87 years old. The dose administered varied from 1100 to 12,000 pfu… Most significantly, VZV-specific proliferating T cells in PBMC of vaccinees were increased in frequency from 1 in 68,000 to 1 in 40,000… Dose and age of the vaccinees did not significantly influence the magnitude of the mean cell-mediated immune response…”

I understand that pharmaceutical companies may reformulate a drug before launching a large, expensive trial for a new indication, in order to maximize their profit. That’s how the health care market works. And it may well be that a higher potency vaccine is necessary to achieve adequate protection.

Still, it would have been nice if the authors of this trial had justified their use of a new vaccine with a published reference.