When to pay for expensive medical innovations

Medical advances have been growing at a rapid rate, and many of them carry expensive price tags. That has turned into a double-edged sword for those who manage healthcare dollars, according to Business & Health magazine.

Health plans trying to spend money wisely walk a difficult financial tightrope. They do not want to waste funds on less-than-optimal treatment, nor do they want to withhold resources from beneficial procedures. And the stakes can be high. Earlier this year, jurors in California ordered Aetna U.S. Healthcare to pay $120.5 million to a widow for refusing to cover an experimental stomach cancer treatment advised by her husband's doctor.

Little is known about how-or even if-plans use economic evaluations, primarily because "it's dangerous to say you're not covering something because of cost," according to Peter Neumann of the Program on Economic Evaluation of Medical Technology at Harvard University's Center for Risk Analysis. Cost is a significant factor, of course, because many health plans are eager to jump on the bandwagon when an innovation will slash expenses. Many were quick to adopt a new test to detect an ulcercausing bacterium for about one-fourth the cost of the previously used biopsy. When the bottom line is less certain, plans are often more reluctant to get on board.

In a perfect world, decisions on which new procedures receive coverage and which do not should be based on evidence, but that is easier said than done. Plans have technology assessment systems to evaluate new innovations, but these assessments vary wildly, and many plans are "making [coverage] decisions by the seat of their pants," Neumann said. For example, regardless of the evidence concerning effectiveness, plans will offer alternative therapies because they have proven to be good marketing tools. They also will bow to prevailing medical practice, continuing an old standard over a new and more cost-effective treatment in communities where the older technology remains the norm.

Adding a further complication, the Internet has made consumers more knowledgeable. About 60 million Americans went to the Internet for health information in 1998, according to a Harris Poll, with 90 percent saying their research was useful. However, some of these patients will insist their plans pay for questionable medical approaches their doctors would never choose for first-line therapy. One study of HMO dispute resolution in California found that plans routinely override denials when patients object and the dollar amount is not very high.