Code Red: Two Economists Examine the U.S. Healthcare System

August 17, 2010

Avastin, Rationing, and Death Panels

Filed under: Efficiency,Health Reform,Health spending,Medicare,Rationing — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 9:39 am

President Obama’s health reform legislation empowers a new Independent Medicare Advisory Board (IMAB) to curtail spending. Republicans fear that IMAB restrict access to costly technologies, going so far as to call IMAB a “death panel.” The appointment of Donald Berwick, an advocate of cost-effectiveness research, to run Medicare has fanned the fires of discontent. But most everyone thought that this would remain a theoretical issue for political talking heads, at least for a few more years. Until yesterday.

Yesterday, an FDA advisory panel recommended rescinding approval of Avastin for treating metastatic breast cancer. The recommendation followed new research showing that Avastin extended the time until cancer worsened by one month; previous research had showed benefits of five months on average. That is right, Avastin is efficacious, but the benefits are small. Citing the high monthly cost ($8000), the panel ruling was nearly unanimous.

If the FDA follows the panel recommendation, this would be the first time to my knowledge that cost effectiveness trumped efficacy and safety. The U.S. would join other nations in saying that there is a price that we are not willing to pay in order to improve health. Republican Louisiana Senator David Vitter wasted no time in saying that the FDA was rationing healthcare. “I shudder at the thought of a government panel assigning a value to a day of a person’s life,” he said.

Such hypocrisy. Republicans have wasted no time trying to trim Medicaid budgets, nutritional programs, housing subsidies, and other expenditures that improve the health and happiness of low income Americans. They do this on the grounds of affordability. If we can’t afford to keep low income Americans healthy, sheltered and well fed, how are we supposed to afford Avastin?

Despite what Mick Jagger says, we can’t always get what we need, let alone get what we want. We ration all the time, making implicit judgments about benefits and costs. The FDA advisory panel is making these judgments explicit. I haven’t seen all the data and I don’t know what benefit/cost threshold was used by the panel. And I wonder if the panel valued the hope that Avastin gives patients and loved ones. But these are accounting issues and should not deflect from the fact that resources are scarce and we are always rationing.

I would much prefer to see the market ration access to Avastin. Perhaps Senator Vitter does as well. (If he truly believes that all Americans should have unfettered access to all health care services, regardless of cost, then he must believe that the sky is the limit for health spending.) The FDA should stay the course with Avastin and let individuals decide whether they want to purchase it themselves (or sign up for a health plan with very generous drug benefits.) But those who can’t afford it, or who choose a health plan that does not cover it, will not be able to receive the drug. This is rationing, but it is through private choices rather than government coercion.

If we don’t privatize Medicare (and I am not holding my breath), then we will still have to face up to government rationing, because Medicare is publicly funded and will therefore require public decisions about how to spend scarce dollars. Why demonize those who understand the reality of rationing and want to openly debate how to do it?

Senator Vitter and all of your Republican colleagues, stop the demagoguery. You are big supporters of traditional Medicare, an indemnity insurance program in which tens of millions of Americans spend other people’s money with little direct financial accountability. So please answer this simple question: How do you propose to rein in Medicare spending? You oppose cutting payments to providers. Your only other choice is to cut the quantities of services they provide. Isn’t that rationing?


  1. Ah, Medicare, the ultimate political paradox. Benefit recipients want the providers to be paid more, or at least, not to be paid any less. However, taxpayers do not want to pay any more into the system. Diametrically opposing forces. With the aging of the boomers, I fully expect that we will see the ‘pay-out’ side of the argument win, which means we will see an increase in taxes on the ‘pay-in’ side of the equation. The son will pay for the father’s sins!

    Comment by Brian H — August 23, 2010 @ 10:36 am

    • As a baby boomer, I know just what you mean. Well, my two sons are not gainfully employed as of yet, so perhaps someone else’s kids will have to pay!

      Comment by dranove — August 23, 2010 @ 11:12 am

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