PPACA Establishes New Outcomes Research Institute to Promote Evidence Based Medicine: Some Express Concerns About Funding and Objectives

Buried in the thousands of pages of the Patient Protection and Affordable Care Act (PPACA) is Section 1181, which authorized the establishment of the Patient Center for Outcomes Research Institute (PCORI), an independent, non-profit organization charged with “evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury.”

Why do we need this research? Studies show there are significant variations in the practice of medicine. Even with the same diagnosis, some physicians will often address the issue with different treatments. Choice of treatment also varies among regions, a fact documented by a Dartmouth Institute for Health Policy and Clinical Practice study titled, “Reflections on Geographic Variations in U.S. Health Care”. This study created an atlas that depicts variations in the nature and cost of health care. 

In particular, the study found:

• A more than two-fold variation in per capita Medicare spending in different regions of the country.
• Potential cost savings estimates ranging from 20-30%, but these may be an underestimate given the potential savings in low-cost regions.
• Three other groups have come to 30% waste estimates -- the New England Healthcare Institute, McKinsey, and Thomson Reuters.
• There is enormous scope for improving the efficiency and quality of U.S. health care.

PCORI will seek to find answers to a host of medical questions.  According to the PCORI website, it will:

• Conduct research to provide information about the best available evidence to help patients and their health care providers make more informed decisions.
• Assess the benefits and harms of preventive, diagnostic, therapeutic, or health delivery system interventions to inform decision-making, highlighting comparisons and outcomes that matter to people.

How will this research be funded? Section 6301 of PPACA amended the Internal Revenue Code to authorize the IRS to levy a tax of $1 per person, per year health insurance fee on “specified health insurance policies” and “applicable self-insured health plans” based on the average number of lives covered under the policy or plan. The tax is not levied on government insurance plans, but will be used to fund PCORI. The tax will increase to $2 per person, per year in 2013. The question concerning the applicability of this tax to FSA accounts is subject to further debate and, as such, the Treasury Department has issued Notice 2011-45 to request comment on implementation of the tax.

The decision to keep PCORI as a non-profit, non-governmental agency may be seen as an effort to stem some of the controversy surrounding the organization. While everyone agrees we can’t afford to continue to pay for unnecessary and unproductive health care treatments, this institute is not without controversy.  

Like the deliberations on PPACA adoption, it was alleged by PPACA opponents that the federal government was establishing a “death panel” designed to control costs by limiting necessary health care, similar to organizations in Canada and the United Kingdom that limit expensive but life-saving care. Proponents of PPACA strongly denied that was the case. The proponents agreed to create the PCORI as an independent organization with a .com address instead of creating an agency in the government with a .gov address.

The debate over PCORI has only intensified. Kathryn Nix, a policy analyst at the Heritage Foundation, has argued that PCORI may be independent in name only. Nix has said, “The more concerning thing is not the institute itself, but how the findings will be used in other areas…Will they be used to make coverage determinations?’’ 

The PCORI’s director, Dr. Joe Selby, defended PCORI’s independence, saying, ““We are not a policy-making body; our role is to make the evidence available.’’

As with so much of the PPACA, there are both positive and negative aspects to this issue. Everyone agrees that we need further research on what constitutes the best medical practices. Everyone agrees that we must not pay for ineffective health care or expensive health care that is no better than other care that is more cost effective.  On the other hand, could this process ultimately be used to limit expensive, potentially life-saving treatments?  We can’t predict that will happen here, but we do note that similar processes have resulted in that being the case in Canada and the United Kingdom. Only time will tell.

Please continue to monitor www.benefitmall.com and www.HealthcareExchange.com for further health insurance reform developments.