One often-heard criticism of the health-care reform legislation that President Barack Obama has now signed into law is that it won't do enough to rein in the cost of treatment. U.S. medical spending has soared to $2.5 trillion per year (a price tag that has more than doubled in 15 years) and represents 18% of the nation's gross domestic product. Can Obamacare begin to cope with that?
The answer is a qualified yes. Tucked inside the 2,400-page bill is an item (it's right there on page 1,617) that has generated far less attention and political heat than other parts of the White House's plan to expand medical coverage to 32 million uninsured Americans. The measure requires the U.S. to put aside $500 million or more a year for something called "comparative effectiveness research," an ungainly name for a process Obama hopes will reduce costs. The studies, designed to show which drugs, devices, and medical treatments work best, could have an enormous impact on the delivery of health care in the years ahead, scrutinizing everything from cholesterol drugs and heart stents to hospital procedures.
By using statistics-driven research methods, its backers say, comparative effectiveness promises to bring scientific rigor to medical decision-making that is too often influenced by tradition and marketing. As such, the research is one of the few measures in the new law that has any chance of flattening America's medical cost curve, according to Boston-based health-care analyst John Sullivan of Leerink Swann.
That also means that comparative effectiveness may be "a headwind for the health-care industry," Sullivan says. "If research shows that less complex and maybe less expensive products and therapies work just as well, that is not good news" for many companies. On top of that, the new health-care reform law tightens restrictions on insurers and requires that most Americans be covered.
Comparative effectiveness is not the only tool in the law designed to pry savings out of the system, says Peter Orszag, Obama's budget director. The legislation also tests new payment systems for doctors, penalizes hospitals for high readmission rates, and creates an independent commission to evaluate which treatments Medicare should pay for, he says. "I don't think there's any one piece that, by itself, is the end-all, be-all" for slowing the growth in medical expenses, Orszag says. "Together, they work to move toward a higher-quality, lower-cost system over time."
Orszag, a lanky, high-octane economist who trained at Princeton University and the London School of Economics, has been a leading evangelist for comparative effectiveness research. As a scholar at the Brookings Institution in Washington, Orszag was perplexed that so much attention was being paid to the rising cost of Social Security, even though health care represented a far larger share of the nation's economy. Orszag eventually discovered the Dartmouth Atlas of Health Care, a national study on the variations in how medical resources are distributed in the U.S.
That research suggested that $700 billion in annual savings could be achieved by eliminating wide disparities in the cost of similar procedures, especially those in which pricier options don't produce better outcomes. "Huge efficiencies could be gained if we change the way we practice medicine," Orszag said in a May 2009 interview, as he lobbied for the creation of a government institute to gather the evidence.
Republican critics, meanwhile, argued throughout the yearlong overhaul struggle that the concept was a stealth effort to deny health care to people who need it. Orszag prevailed. Last year, Congress approved $1.1 billion in stimulus funding for effectiveness research. The new legislation creates a nonprofit Patient-Centered Outcomes Research Institute and charges it with setting a national agenda for the studies, as well as providing more money and disseminating results.
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