The Most Expensive Health Care In the World

As a reader of this web site, you are informed and aware, so you no doubt saw the stories that came out yesterday about the data trove the government just released on what individual doctors bill Medicare. The shocking news was that some have managed to charge the government millions of dollars, including one ophthalmologist, Salomon Melgen, who billed Medicare an incredible $21 million in 2012 alone, and who just happens to be caught up in an investigation of influence peddling with a Democratic senator. But before this story disappears with some head-shaking about scandal and fraud, we should take note of what it teaches us about why we have the most expensive health care system in the world.

A lot of people had the same reaction to that detail about the Florida ophthalmologist: How on Earth is it possible for one doctor to bill $21 million to Medicare in one year? The good doctor's answer is that he has a large practice, but the biggest reason comes down to one word: Lucentis. It's a drug for macular degeneration, made by the pharmaceutical company Genentech. The company has another drug, Avastin, that is chemically almost identical and is just as effective. But Avastin costs $50 a dose, while Lucentis costs $2,000 a dose. And Medicare pays doctors a six percent fee on top of the cost of whatever drug they're dispensing. So if you're an ophthalmologist who has a patient with macular degeneration and you dispense Avastin to them, you get $3. If you dispense Lucentis, you get $120. Dr. Melgen billed Medicare for $11.8 million in Lucentis alone.

It should be said that there are other kinds of doctors near the top of the Medicare billing list (some oncologists, some pathologists), so the whole problem isn't this one drug. But by law, Medicare can't say that it will pay for one competing drug but not another, even if they're equally effective. Medicare may be something like a single-payer system for the elderly, but it lacks many of the advantages of single-payer systems in other countries that are much more strict about setting costs for care.

And as we've been debating health care over the past five years, every time someone has proposed ways to get a handle on some of these costs, like conducting comparative effectiveness research to determine which treatments really work and are worth their cost, Republicans have cried "Rationing! Death panels!" And then they turn around in almost the same breath and say Medicare's costs are out of control so we have to turn it into a voucher program and cut benefits.

If nothing else, this story should point us to one policy change we could make pretty easily: get rid of that six percent fee and just give doctors a flat fee for writing prescriptions. Make it $5, or $10, or any number that makes sense. There's no reason in the world that the fee should be tied to the price of the drug; all that does is give doctors an incentive to prescribe the most expensive medication they can. That wouldn't solve all of Medicare's problems, but it would be a start. Of course, the pharmaceutical lobby would pull out all the stops trying to keep that six percent fee in place. But that's no reason not to try.

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