Health Reform: The Coming Rationing of Medical Devices

The decision is not whether or not we will ration healthcare, the decision is whether we will ration it with our eyes open.

Donald Berwick, MD, CMS Administrator, Interview about Comparative Effectiveness Research, 2009

While squabbles over the rules for approving new medical devices rarely attract much attention outside the insular world of manufacturers, regulators and medical professions, a fight is brewing that could have a major impact on efforts to control health-care spending.

Merrill Goozner, “Soaring Costs Pinned on Medical Devices, The Fiscal Times, June 7, 2011

June 9, 2011- Scarcely a day passes that I do not hear, see, or read an ad about a new center for joint replacement of knees or hips. Hospitals, medical centers, surgery centers, and orthopedic centers run these ads with increasing frequency.

Clearly these ads are responding to patient demands for joint procedures, to the expertise in providing the replacements, to the growing desire for them in an aging population, and to the promise of more profit in an era of diminishing reimbursements.

Americans want to remain as young as they can as long as they can. And they want to live a pain-free, fully-functional life, which is why 773,000 joint replacements were performed in 2009.

Who can quibble with these demands for a better, pain-free existence?

Medicare can, for it must foot the bill(pardon the pun). Medicare questions whether it makes sense to leave it to government to pay for people left to their own devices.

Which is why, of course,the Accountable Care Act slapped a 2.3 percent excise tax, projected to generate $20 billion over the coming decade, on the medical device industry.

According to government and industry experts, the latest devices – from heart valves and defibrillators to artificial knees and hips – are more expensive than older devices, and marketing surrounding the introduction of new devices drives rising health care costs.

Device industry officials say there are over 8,000 medical device companies in the U.S. Last year they generated about $136 billion in sales and employed over 422,000. To handicap the industry with taxes and regulations, claim device manufacturers, stifles innovation and reduces employment.

Medicare is likely to respond by tightening regulations through the Federal Drug Administration. Down the road, CMS will demand new devices show better value than older devices through comparative effectiveness studies, or else it will not pay.
CMS and the FDA will not use the verboten "R" word, rationing. Instead it will declare, with a semi-scientific, self-righteous, an a so-rational tone in its voice, that it will only pay based on “value-based evidence.”

Meanwhile the industry may go offshore or to Europe to develop its products. If waiting lines grow too long for joint procedures, patients may go abroad for treatment. Among physicians, there will be a movement for balanced billing, meaning patients can pay-out-of-pocket outside of Medicare through a private contract with physicians for a joint replacement or any other procedure should they so desire.