To Pay or Not to Pay
New medical technologies and drugs, such as
Viagra, are leaving employers in a quandary over whether the
treatments are medically necessary and worth the cost-forcing
HR into an uncomfortable position.
By Daniel B. Moskowitz
One of the unexpected side effects of Viagra, the
new drug for male impotence, is part of an issue stretching across
most headlines these days: Just what medical innovations will
a health-care plan cover?
The Philadelphia Inquirer editorialized that decisions
should be made "with the same careful skepticism that scientists
and physicians use."
With Viagra, the issue is not only the cost - around
$10 per pill - but also frequency. Brookline, Mass. - based
Harvard Pilgrim Health Care, for instance, began by offering
members as many as 10 pills per month, but after getting $400,000
in claims in the first month following the Food & Drug Administration's
March 27 approval of Viagra, it cut the allotment to four. CIGNA
and Oxford Health Plans set the limit at six; United Health Care
at eight.
The issue goes deeper. What kind of obligations
for medical treatment is appropriate for a third- party payer
to assume? "There are going to be a lot of life-enhancing
prescriptions coming down the pike, and this is going to set
the precedent," says Fred Hamacher, vice president for compensation
and benefits at Dayton-Hudson Corp., a Minneapolis-based department
store chain.
Yet the process of deciding when to pay for new
medical technology and when to say "no" - or at least
when to wait for more evidence - is not that different for Viagra
than it is for dozens of other new treatments that come on the
market each year. Still, the brouhaha surrounding the pay-or-
don't-pay question for the impotence treatment is going to increasingly
force HR managers to defend not just individual decisions but
how those decisions are made.
Self-insured employers also have to consider the
legal obligations imposed by the Employee Retirement Income Security
Act. "An ERISA plan has a fiduciary duty to use plan asset
frugally," warns Fred Hunt, president of the Society of
Professional Benefit Administrators in Chevy Chase, Md. In other
words, a company can get into trouble by being too generous.
Managed Care's Influence
Managed care has greatly increased the complexity
of the new treatment evaluation process. In the days when indemnity
coverage was the norm, screening diagnostics were usually not
covered at all, and the plan promised to pick up its portion
of the tab for all medically necessary treatment procedures that
were no longer experimental.
Insurers had to make the judgment call on when
an innovation crossed the line from experimental to mainstream
- tougher for procedures than for drugs, where at least an FDA
marketing OK can be read as marking the boundary - but on most
coverage issues, they left it up to the providing employer.
The central question on coverage was what the contract called
for: Only when there were specific exclusions - for birth control
devices or drugs, or for fertility treatments - was a new technology
spurned.
With managed care, of course, the plan selects
a preferred method among competing approaches and, says Clifford
Goodman of the Lewin Group, a Washington-based health-care policy
research concern, "managed care, in its dogged pursuit of
cost reduction and cost-effectiveness, has changed some of the
terms on which the new technologies are developed, tested, sold
and reimbursed."
John Reinhard, physician adviser to the Technology
Management Information Exchange of the 13 nonprofit managed care
plans united in the HMO Group, acknowledges the legitimacy of
that conclusion. "Managed care in general is reluctant
to implement tests without safety and efficacy data. When we
don't know, we tend to be very conservative," he says.
All too often those making the assessments don't
know. "Unfortunately, there are too few and limited studies
being conducted on the effectiveness and safety of new medical
technologies in everyday practice and on the cost-effectiveness
and safety of new medical technologies in everyday practice and
on the cost-effectiveness of these technologies," says Neil
Powe, director of John Hopkins' Welch Center for Prevention,
Epidemiology and Clinical Research in Baltimore. But even if
the issue now is value - which alternative provides the best
result for the expenditures - any analysis of what to pay for
and what to reject begins with a look at effectiveness.
When the question of a new treatment does come
up - usually through requests from employees and occasionally
because the matter has been in the press - Dayton-Hudson convenes
a panel of experts to advise on the coverage. First they are
asked whether the diagnosis for which the new treatment is intended
is a clear one and whether it is usually made accurately.
"If they misdiagnose this all the time it's
something you want to stay away from," Hamacher says. Then
comes the question of effectiveness of the new treatment and
of whether the studies have been large enough and rigorous enough
to prove the effectiveness is really sound. The experts are
also asked to report on adverse side effects. For instance,
Dayton-Hudson stopped paying for stomach reduction treatments
because the complication rate was deemed unacceptably high.
Cost is a consideration, but not much of one at
the department store chain, Hamacher insists. "I can't
remember a conversation where we said, ‘No, that costs too
much. We're not going to do it."
Passing the Buck
At most employers, however, the typical response
to whether to cover new treatment or diagnostic methods are passed
off to the insurer or third-party administrator. "We're
certainly not qualified to make the decision ourselves if it
involves the clinical area," says Dwaine Hartline, group
insurance manager for Hershey Foods Corp. In Hershey, Pa. "We
usually accept the medical policies of the administrator we have
chosen."
Adds Robert Dankmyer, corporate benefits vice president
of Marriott International in Bethesda, Md.: "I'm not a physician,
and I don't know all the methods they go through to show something's
medically necessary."
Medical necessity is the keystone of the analysis.
Cosmetic surgery, for instance, is almost always an excluded
item in health plans. Much of the debate over Viagra - especially
at plans, such as Aetna U.S. Healthcare, Prudential and Kaiser
Permanente, that have decided not to cover it at all - is whether
there is a medical necessity to restore or improve a man's sexual
functioning.
Officials at Kaiser, which will continue its policy
to pay for as many as 12 Viagra pills a month until present contracts
run out, say the company was trying to strike a balance "between
quality- of-life treatments and those deemed medically necessary."
The likely total expense of covering the impotence treatment
- $100 million a year, or $11 for each member of a Kaiser plan
- simply wasn't justified.
Typical of the approach to defining medical necessity
is the process at Oxford, which asks four questions:
Is the treatment consistent with the diagnosis?
Does the treatment meet the standard of good medical practice?
Are the benefits more than simply making things easier
for the patient or provider?
What is the safest, most appropriate supply level?
That analysis might show, for instance, that one
new, more expensive drug that can be taken only once a day for
an acute condition, instead of four times a day, will so improve
compliance that the patient will be more likely to avoid acute
episodes. It therefore would be medically necessary. If another
new once-a-day remedy merely makes things a bit easier for the
patient without a medical payoff, then that treatment should
not be covered.
Analysis is also necessary by the plans since the
National Committee on Quality Assurance will not accredit an
HMO unless it has a formal technology assessment procedure.
The Technology Evaluation Center of the Blue Cross
and Blue Shield Association is probably the most important voice
in technology assessment because it advises not only all the
nation's Blue Cross/Blue Shield but also Medicare and many non-Blue
plans. Prudential, for instance, says that its technology assessment
staff relies heavily on TEC reports.
TEC used to insist that it took an exclusively
clinical approach - that its conclusions would be sullied if
influenced by cost. That's no longer the sole approach. Now,
on such issues as cervical cancer rescreening methods, the question
is not what works, but what is most cost-effective.
That means that when the payoff is fairly immediate
and demonstrable - such as the peptic ulcer treatment approved
by the FDA two years ago that attacks the causative bacteria
rather than merely masks the symptoms that return and return
- acceptance is quick. But the call is tougher when the likely
medical improvement is only marginally better at a substantially
higher cost than existing products.
Whether the analysis is being done by TEC or the
kind of in-house teams assembled by CIGNA or the permanent in-house
staff of physicians and nurses used by Aetna, the beginning is
always clinical effectiveness. How well-run were the studies?
How persuasive were the results? But that's only a beginning.
The analysts weigh how complicated the medical
treatment is, trying to gauge how well the results obtained by
top researchers working in cutting-edge facilities will be replicated
in more ordinary settings. And they also try to guess at how
widely available the necessary expertise is and if there are
enough physicians in enough communities who are ready to use
the procedure.
Past Practice
But the fact remains that careful medical analysis
doesn't always dictate the results. A payer has to examine what
benefits it promised to provide and to be consistent about its
decisions.
For instance, a plan that in the past had paid
for the available treatments for impotence - individually expensive
but unpopular enough so that claims were small - might find it
hard to say "no" to Viagra. And benefit consultants
are warning that a plan that does not include women's contraceptive
coverage may have to consider whether paying for Viagra would,
for the sake of consistency, obligate it to add that coverage.
And only the payer can make the philosophical determination
at the heart of a decision on whether baldness or smoking or
skin discoloration is the kind of condition that an employer
or plan wants to cover when it comes to corrective procedures.
Moreover, "clinical judgment often deviates
from what the technical assessment says," explains Reinhard.
This is especially true when the new approach, despite questionable
results in its initial testing, holds out the only hope for an
otherwise terminal patient.
Employee morale weighs in too. Dayton-Hudson has
again resumed paying for stomach reduction surgery - albeit in
a limited class of cases - because some obese employees are convinced
it is the only way they will get relief.
And after long refusing to pay for treatment for
attention deficit disorder, Dayton-Hudson now picks up the tab
for drugs controlling the condition. "The more I know about
Reptilian, the less I want to pay for it," Hamacher admits,
but the refusal to reimburse "was becoming a huge employee
relations problem."
Robert Vetch, professor of medical ethics at Georgetown
University in Washington, suggests that the best way to finesse
such employee relations problems is to poll employees to find
what workers think should be covered - and whether they are willing
to foot the extra premiums such coverage would require.
But such an approach might not work very well in
making the Viagra decision for employers, since there's little
public consensus. A poll by the Henry J. Kaiser Family Foundation
released early this summer showed that 49 percent of Americans
thought health plans should cover Viagra, while 40 percent thought
they should not and 11 percent had come to no conclusion.
