The study, released on Wednesday by the 34-nation Organization for Economic Cooperation and Development, or OECD, said Americans pay more than $7,900 per person for healthcare each year — far more than any other OECD country — but still die earlier than their peers in the industrialized world.

The cost of healthcare in the United States is 62 percent higher than that in Switzerland, which has a similar per capita income and also relies substantially on private health insurance.

Meanwhile, Americans receive comparatively little actual care, despite sky-high prices driven by expensive tests and procedures. They also spend more tax money on healthcare than most other countries, the study showed.

An “underdeveloped” U.S. primary care system is plagued by shortages of family doctors and high rates of avoidable hospital admissions for people with asthma, lung disease, diabetes, hypertension and other common illnesses.

U.S. survival rates are the world’s highest among breast cancer patients and the second highest, after Japan, for people with colorectal cancer – due in part to effective early screening, the study showed. The study also said Americans experience generally good acute hospital care.

“It’s a very, very mixed pattern,” said Mark Pearson, head of the OECD health division. “You get a very high quality of care for your money in some areas. Very poor quality, compared to other countries, in other areas.”

The quality and cost of the $2.6 trillion U.S. healthcare system are at the forefront of a rancorous national political debate over how to regulate and pay for treatment, particularly for the poor and elderly.

The 2010 U.S. healthcare reform law, which seeks to control costs over time by altering incentives for doctors and other providers, faces a constitutional challenge in the Supreme Court, and Republican presidential candidates on the campaign trail have called for its repeal.

LESS CARE, MORE MONEY

Federal spending on Medicare and Medicaid, the government programs for the elderly and the poor, is also a leading target of efforts to narrow the yawning U.S. fiscal deficit.

The OECD said U.S. public spending on healthcare reached 8 percent of the economy versus a 7 percent OECD average in 2009, the latest year for which comparison figures are available.

A forum of developed nations set up to foster global development, the OECD said U.S. life expectancy of 78.2 years ranked 28th – just behind Chile’s and well below the average of 79.5 years among member nations.

The growth in U.S. life expectancy over the past half century is also below average, gaining only 8.3 years since 1960 compared with an 11.2-year OECD average.

The United States was ranked fourth from the bottom for premature mortality, which focuses on deaths among younger people. The measure, which reflects dangers posed by violence, accidents and environmental hazards, puts America behind all others save Hungary, Mexico and Russia.

Pearson said researchers believe national mortality rates increasingly reflect the quality of healthcare, though more than half of the equation is still believed to lie with other indicators including lifestyle and diet.

Americans have fewer doctors and hospital beds, make fewer doctor visits, go to the hospital less often and stay for shorter lengths of time than about three-quarters of the other OECD countries.

But the United States is at the front of the pack when it comes to costly medical procedures including knee replacements, MRI and CT scans and tonsillectomies.

And it is consistently at the top of the cost chart for a number of procedures including caesarean sections, which are almost twice as expensive in the United States as in Germany.

Pharmaceuticals also cost about 60 percent more than in a range of European countries.

Pearson said one reason prices are higher in the United States is that the healthcare system lacks what other countries have: an effective government mechanism that acts to keep prices down.

“That’s simply not there in the U.S. system. So it’s a structural defect,” he said.

The proposed solutions, which include a national stockpile of cancer medicines and a nonprofit company that will import drugs and eventually make them, are still in the early or planning stages. But the sense of alarm is widespread. “These shortages are just killing us,” said Dr. Michael Link, president of the American Society of Clinical Oncology, the nation’s largest alliance of cancer doctors. “These drugs save lives, and it’s unconscionable that medicines that cost a couple of bucks a vial are unavailable.”

So far this year, at least 180 drugs that are crucial for treating childhood leukemia, breast and colon cancer, infections and other diseases have been declared in short supply — a record number.Prices for some have risen as much as twentyfold, and clinical trials for some experimental cures have been delayed because the studies must also offer older medicines that cannot be reliably provided.On Wednesday, Dianne Nomikos, 65, went to M. D. Anderson Cancer Center in Houston for a 9 a.m. appointment to receive Doxil, a vital medicine for her ovarian cancer. She was told to go home and wait until new supplies arrived.“My life is in jeopardy,” she said through tears in a telephone interview. “Without the drug, who knows what’s going to happen to me?”

The Obama administration is considering creating a government stockpile of crucial cancer medicines. The Centers for Disease Control and Prevention already stockpile antibiotics, antidotes and other drugs needed in the event of a terrorist attack or earthquake.Under one plan, the government would store the dry ingredients for cancer drugs and, in the face of a shortage, distribute them to hospitals, where pharmacists could mix them into injectable compounds.Dr. Richard Schilsky, a professor of medicine at the University of Chicago, said the number of cancers diagnosed in a year was easy to predict. “So we ought to be able to make a pretty good estimate of the grams required to treat every patient in the country in any given year,” he said.

Legislation proposed in both the House and the Senate would give the Food and Drug Administration the power to demand that drug makers give early warnings of possible supply disruptions. Senator Amy Klobuchar, Democrat of Minnesota, said the idea behind the bipartisan bill came after she found that the agency had prevented 38 shortages last year after getting early alerts of problems at drug makers.“I can’t say the drug companies are excited” about the proposed legislation, she said in an interview. “But we need to give the F.D.A. more time.”A group of leading oncologists has started a not-for-profit drug company that it hopes will soon be able to import supplies of some of the missing medicines. The company will eventually manufacture the drugs itself, according to Dr. George Tidmarsh, a pediatric oncologist and biotechnology entrepreneur who will lead it.

“We have a meeting with the F.D.A. next week,” Dr. Tidmarsh said. “This unfolding tragedy must stop, and right now.”More than half the recent shortages have resulted because government or company inspectors found problems like microbial contamination that can be lethal on injection. Others have occurred because of capacity problems at drug plants or lack of interest because of low profits, according to the F.D.A.

Doxil, the cancer drug Ms. Nomikos needs, is made by Johnson & Johnson. Monica Neufang, a company spokeswoman, said, “Our third-party manufacturer has had some manufacturing issues related to capacity.”
Heather Bresch, president of the generic drug giant Mylan, says the shortages grow out of a sweeping consolidation of the generic drug industry into a few behemoths that compete only on price and have foreign plants that are rarely inspected.

“The race to the bottom has led to an increase of products coming from plants in China and India that may have uncertain supply and may have never been inspected,” Ms. Bresch said. “If the F.D.A. was required to inspect foreign drug plants at the same rate it does domestic ones, we might not have so many of these shortages.”Ms. Bresch has helped to broker an agreement that would require the industry to pay $299 million a year for increased inspections of foreign drug plants, a deal that must be approved by Congress and one she says will prevent some shortages.

Top government officials have held a blizzard of meetings in recent weeks to tackle the shortage issue, and more are expected over the next month — including a public advisory meeting at the F.D.A. and hearings in Congress.“Drug shortages represent a pressing public health issue, and we are actively working to understand the causes, the full scope of the problem in the U.S. and internationally, and possible solutions,” said Dr. Howard K. Koh, an assistant secretary for health.
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A crucial problem is disconnection between the free market and required government regulation. Prices for many older medicines are low until the drugs are in short supply; then prices soar. But these higher prices do little to encourage more supply, because it can be difficult and expensive to overcome the technical and regulatory hurdles. And if supplies return to normal, prices plunge.Executives at Premier, a hospital buying cooperative, said that in April and May its members received hundreds of offers from obscure drug wholesalers to sell drugs in short supply at vastly inflated prices. Of the 636 offers that included a price, 45 percent were at least 10 times the normal rate and 27 percent were at least 20 times normal.

Such sales offers are legal as long as suppliers prove that they bought the drugs appropriately. Some wholesalers buy certain drugs in large quantities because they are betting there will be a shortage. The excessive buying can help make their predictions come true. “We never like to see a situation where people can profit off of a national crisis and engage in price gouging,” Mike Alkire, Premier’s chief operating officer, said in an interview.

Joyce Burke, 47, of Mooresville, N.C., has breast cancer and is worried that she might not be able to get Taxol, which is in short supply. A drug that might have been substituted for Taxol has a side effect that leads some patients to lose their fingernails.“I was not looking forward to losing my fingernails,” she said.

On Thursday, she received her first dose of Taxol, and her doctor said he had secured enough of the drug to give her a second dose in a little more than a week. She will need four doses to complete the treatment.
“And I asked, ‘What happens if you can’t find the rest?’ ” Ms. Burke said. “It’s not nearly as effective if you switch drugs midway through.”

The report, from the inspector general of the Department of Health and Human Services, could be used by lawmakers trying to cut drug prices as Congress looks for ways to rein in the cost of Medicare under the new deficit-reduction law.

Under existing law, the Congressional Budget Office estimates that the cost of Medicare’s outpatient drug benefit will increase an average of nearly 10 percent a year, to $175 billion in 2021, from $68 billion this year.

Medicaid and Medicare receive discounts in the form of rebates, which are paid by drug manufacturers when their products are dispensed to people enrolled in the programs.

The inspector general, Daniel R. Levinson, found that rebates reduced spending on 100 widely used brand name drugs by 19 percent in Medicare and by 45 percent in Medicaid. After taking account of the rebates, Mr. Levinson said, Medicaid paid significantly less than Medicare for the same drugs.

Federal law specifies how the discount, or rebate, is calculated under Medicaid, the program for low-income people. The minimum rebate for a brand-name drug was increased last year to 23 percent of the average price that manufacturers receive for sales of the product to retail pharmacies.

Drug companies must pay additional rebates to Medicaid if a drug’s price rises faster than general inflation, measured by the Consumer Price Index. The inspector general said these added rebates accounted for slightly more than half of all rebates paid to Medicaid on the top 100 drugs. Prices for many of these drugs have been rising at a brisk pace.

“The inflation-based additional rebate is the primary reason Medicaid rebates are substantially higher” than Medicare rebates, Mr. Levinson said.

“Manufacturers for virtually all brand name drugs under review paid inflation-based rebates” to Medicaid because their prices rose faster than inflation, the report said.

For 68 of the 100 brand-name drugs examined in the study, the Medicaid rebate was at least twice as large as the rebate paid to Medicare.

About 30 million older Americans and people with disabilities receive drug coverage through Part D of Medicare. More than 50 million low-income people have drug coverage through Medicaid.

When Congress added a prescription drug benefit to Medicare in 2003, it prohibited the government from negotiating drug prices on behalf of Medicare beneficiaries and stipulated that outpatient drug coverage should be provided entirely through private insurers like UnitedHealth and Humana, under contract with Medicare.

Insurers have aggressively negotiated with pharmaceutical companies, so Medicare’s prescription drug program has cost the government less than originally predicted. But the private insurers have not obtained discounts or rebates as large as those secured by Medicaid, the inspector general said.

The study comparing Medicare and Medicaid was required by the new health care law.

Drug companies oppose the type of discounts required by Medicaid, seeing them as government price controls. Drug makers say they prefer Medicare’s market-oriented approach, in which discounts are negotiated by drug plans and manufacturers.

Two Democrats, Representative Henry A. Waxman of California and Senator John D. Rockefeller IV of West Virginia, recently introduced bills that would require drug manufacturers to pay the higher Medicaid rebates for drugs provided to Medicare beneficiaries who are also eligible for Medicaid. President Obama’s deficit-reduction commission has endorsed the proposal, saying it could save $49 billion over 10 years.

The deal puts Highmark into the hospital business in a big way, and floats a life preserver to a hospital system that has been losing money each quarter, including a $22 million operating loss in the quarter ending March 31.

Executives from both Highmark and West Penn Allegheny called the partnership “a historic transaction for Pittsburgh,” one that will put WPAHS on sure financial footing, and will help maintain a viable option to the region’s largest hospital system, the University of Pittsburgh Medical Center, which controls more than half of the hospital beds in the region and many of its physicians, too.

“They are well-capitalized, and we’re not,” said David L. McClenahan, WPAHS board chairman, speaking of Highmark. “That’s putting it mildly.” In the decade since the collapse of the Allegheny Health Education and Research Foundation, whose bankruptcy eventually bore the West Penn Allegheny Health System, WPAHS has been persistently starved for capital, he said.

WPAHS wanted to remain independent, that was no longer an option, financially, he said. Had the deal with Highmark not materialized, WPAHS was preparing a budget that would have included the autumn closure of West Penn Hospital.

While the short-term goal of this partnership is to preserve a “fragile” Pittsburgh hospital system, the long term goal, said Highmark CEO and President Kenneth Melani, is the creation of a new model of health care, one that is outcomes based, with an integrated delivery and financing system.

“Health care services are becoming less affordable,” he said. “It’s important to have choice. It’s important to have a second system.”

He also said that while the Highmark-WPAHS partnership is the primary product of this deal, the two institutions will also work to strengthen relationships with other regional hospitals and physicians’ practices.

Also announced today, Christopher Olivia, president and CEO of West Penn Allegheny Health System, will step down from that position, effective immediately. He will take on a consulting position at Highmark, he said at the press conference this morning.

With Dr. Olivia’s departure, Dianne Dismukes has been named interim president and CEO. Ms. Dismukes last month was named executive vice president for hospital operations at WPAHS, replacing Dawn Gideon.

Following the signing of a tentative “term sheet,” Highmark “is immediately providing a $50 million grant to the WPAHS” to strengthen its West Penn and Forbes Regional hospitals “while assuring the continued delivery of quality medical services by the entire system.”

Highmark is making “a total financial commitment of up to $475 million over four years, including $75 million to fund scholarships for students attending medical schools affiliated with WPAHS, and to support other health professional education programs,” according to the morning’s press release.

Earlier this month, Dr. Olivia announced that WPAHS would open a regional campus of Temple University’s School of Medicine.

Throughout the morning, Highmark and West Penn officials took some verbal jabs at UPMC, noting more than once, for example, that WPAHS is the only local hospital system currently offering live transplants, as a result of having UPMC suspended those operations last month after a patient received a kidney from a donor with hepatitis C.

Officials from Highmark and WPAHS organizations (which are both non-profits) also tried to draw a distinction between WPAHS and UPMC, saying UPMC is not behaving like a not-for-profit community asset in the way that it tries to “maximize revenue” and put WPAHS out of business.

Highmark and UPMC relations have frayed in recent months as negotiations over a new reimbursement contract are at an impasse, with Highmark claiming that UPMC wants too much money, and UPMC saying that it cannot, and will not, sign a deal with an insurer that is now partner with a UPMC competitor.

The partnership’s framework will be fleshed out over the coming two months, and the organizations hope it will be approved within six months. Some aspects of the deal may need state approval.

“Ultimately, we expect the Department will be one of the regulators that has a role in reviewing and approving the proposed arrangement between Highmark and West Penn,” said Pennsylvania Insurance Department Commissioner Michael F. Consedine in a statement.

“However, no formal agreement has yet been signed and no filing has been submitted to the Department for its review.”

Cathy Stoddart, staff nurse at Allegheny General Hospital and an SEIU member and union leader representing the system’s 2,000-plus nurses, said the deal may prove beneficial for staff.

“I’m actually pretty excited,” she said. “To have our system have money is something that hasn’t happened in 11 years.”

Read more: http://www.post-gazette.com/pg/11179/1156765-100.stm#ixzz1QsjoQ4wP

The study is the first of its kind aimed at understanding “adverse events” in hospitals — essentially, any medical care that causes harm to a patient, according to the Department of Health and Human Services’ Office of Inspector General.

Patients in the study, a nationally representative sample that focused on 780 Medicare patients discharged from hospitals in October 2008, suffered such problems as bed sores, infections and excessive bleeding from blood-thinning drugs, the report found. The federal Agency for Healthcare Research and Quality called the results “alarming.”

“Reducing the incidence of adverse events in hospitals is a critical component of efforts to improve patient safety and quality care” in the U.S., the inspector general wrote.

The findings “tell us exactly what some of us have been afraid of, that we have not made much progress,” said Arthur Levin, director of the independent Center for Medical Consumers and a member of an Institute of Medicine committee that wrote a landmark 1999 report on medical errors. “What more do we have to do to make sure that sick people can rest assured that they’re not going to be harmed by the care they’re getting?”

Among the findings in the report obtained by USA TODAY:

•Of the 780 cases, 12 patients died as a result of hospital care. Five were related to blood-thinning medication.

Two other medication-related deaths involved inadequate insulin management resulting in hypoglycemic coma and respiratory failure resulting from oversedation.

•About one in seven Medicare hospital patients — or about 134,000 of the estimated 1 million discharged in October 2008 — were harmed from medical care.

•Another one in seven experienced temporary harm because the problem was caught in time and reversed.

About 47 million Americans are enrolled in Medicare, a government health insurance program for people 65 and older and those of any age with kidney failure.

The adverse events found in the study weren’t necessarily due to medical mistakes, said Lee Adler, a University of Central Florida medical professor who was involved in the study. For example, he said, an allergic reaction to a penicillin injection is an adverse event, but it’s a medical error only if the patient’s allergy was known prior to the shot.

Among the problems identified in the report were Medicare patients who had excessive bleeding following surgery or a procedure. For example, one patient had excessive bleeding after his kidney dialysis needle was inadvertently removed, which resulted in circulatory shock and an emergency insertion of a tube to allow breathing.

When the tube was removed the next day, the patient inhaled foreign material into his lungs and needed lifesaving medical help, the report said.

Peter Pronovost of Johns Hopkins University, co-author of the book Safe Patients, Smart Hospitals, said medical mistakes are “an enormous public- health problem.”

“We spend two pennies trying to deliver safe health care for every dollar we spent trying to develop new genes and new drugs,” Pronovost said. “We have to invest in the science of health care delivery.”

While most patients prefer supportive measures that avoid a hospital death, U.S. patients received more chemotherapy. Ontario patients have more days in hospital, have more use of emergency rooms, and were much more likely to die in hospital.

An editorial about the study concludes the rates of inpatient deaths are too high in the U.S. and much too high in Ontario.

The study was done by the National Cancer Institute and specifically compared end-of-life care for lung cancer patients. The identified patients were 65 and older who died with non-small cell lung cancer.

The data came from The Ontario Cancer Registry and the U.S. Surveillance, Epidemiology, and End Results(SEER)-Medicare data bases for 1999-2003.

Patients in both countries used health-care services extensively, particularly in the last month of life. Ontario patients had hospital admissions and used emergency room services at rates that were statistically significantly greater than those of U.S. patients.

More than twice as many Ontario patients died in hospital (48.5 per cent of short-term survivors compared to 20.4 per cent in the U.S.). Yet, a majority of Ontario patients reported they would prefer to die at home.

In each of the last five months, chemotherapy rates were statistically significantly higher among U.S. patients than among the Ontario patients. It was noted that American doctors may have a more aggressive attitude toward treatment and that oncologists paid by Medicare can profit from some chemotherapy whereas oncologists in Ontario do not have a financial incentive to prescribe chemotherapy.

The authors of the study, including Joan L. Warren of the National Cancer Institute, felt the findings will inform health-care planners and policy makers about opportunities for change.

Above: Testing a G.M. vehicle. The Transportation Department says each life saved is worth $6 million.

[NYTimes] — As the players here remake the nation’s vast regulatory system, they have beengrappling with a subject that is more the province of poets and philosophers than bureaucrats: what is the value of a human life?

The answer determines how much spending the government should require to prevent a single death.

To protests from business and praise from unions, environmentalists and consumer groups, one agency after another has ratcheted up the price of life, justifying tougher — and more costly — standards.

The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.

The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.

The Transportation Department has used values of around $6 million to justify recent decisions to impose regulations that the Bush administration had rejected as too expensive, like requiring stronger roofs on cars.

And the numbers may keep climbing. In December, the E.P.A. said it might set the value of preventing cancer deaths 50 percent higher than other deaths, because cancer kills slowly. A report last year financed by the Department of Homeland Security suggested that the value of preventing deaths from terrorism might be 100 percent higher than other deaths.

The trend is a sensitive subject for an administration that is trying to improve its relationship with the business community, much of which has bitterly opposed the expansion of regulation. The White House said the decisions on the value of life were made by the agencies. The agencies, for their part, referred any questions to the White House.

“This administration utilizes the best available science in assessing the benefits and costs of any potential regulation, drawing on widely accepted methodologies that have been in use for years,” Meg Reilly, a spokeswoman for the Office of Management and Budget, which oversees the rule-making process, said in an e-mail.

Several independent experts, however, said that the increases were long overdue, noting that some agencies had been using the same values for more than a decade without adjusting for inflation. One office at the E.P.A. cut the value of life in 2004.

“Agencies have been using numbers that I thought were just too low,” said W. Kip Viscusi, a professor of economics at Vanderbilt University whose research is cited by most of the federal agencies as the basis for their calculations.

Businesses would prefer to discuss the consequences of the increases — new regulations and higher costs, which they say are hampering economic growth — rather than suggest that the government has overstated the value of life.

But some industry representatives said assigning a value to life was inherently subjective, and that the recent changes were driven by the administration’s pursuit of its regulatory agenda rather than scientific considerations.

“It looks like they just cooked the books — they just doubled the numbers,” said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, a trade group for the trucking industry, which faces higher costs under some of the Transportation Department’s new rules. The Bush administration rejected a plan in 2005 to make car companies double the roof strength of new vehicles, which it estimated might prevent 135 deaths in rollover accidents each year.

At the time, Transportation officials figured that the cost of the roofs would exceed the value of lives saved by almost $800 million. So the agency proposed a smaller increase in roof strength that might save 44 lives a year.

Last year, the Obama administration imposed the stricter and more expensive roof-strength standard, and it published a new set of calculations showing that the benefits outstripped the costs.

Most of the difference came from the increased value of human life. By raising that number to $6.1 million from a figure of $3.5 million in the original study, the Obama administration rendered those 135 lives — and hundreds of averted injuries — more valuable than the roofs.

The pattern of increases is scrambling a long-standing political dynamic. The business community historically has pushed for regulators to put a dollar value on life, part of a broader campaign to make agencies prove that the benefits of proposed regulations exceed the costs.

But some business groups are reconsidering the effectiveness of cost-benefit analysis as a check on regulations. The United States Chamber of Commerce is now campaigning for Congress to assert greater control over the rule-making process, reflecting a judgment that formulas may offer less reliable protection than politicians.

Some consumer groups, meanwhile, find themselves cheering the government’s results but reluctant to embrace the method. Advocates for increased regulation have long argued that cost-benefit analysis understates both the value of life and the benefits of government oversight.

“If analysis is going to be imposed on the rule-making process, we want higher values for injury and for fatalities,” said Robert Weissman, president of Public Citizen, which pushed the Transportation Department to reconsider the roof-strength regulation.

But Mr. Weissman said he still believed that such analysis was an impediment to necessary regulation.

“The bigger picture is absent,” he said. “How do you do cost-benefit analysis on global warming? It constrains the imagination. It really is a constraint in terms of bounding what is given serious consideration.”

The current rise in the value of life is based on the work of Professor Viscusi, who wrote his first paper on cost-benefit analysis as a Harvard undergraduate in the early 1970s. He won a prize and found a career.

The idea he and others have since developed in a long string of studies is that differences in wages show the value that workers place on avoiding the risk of death. Say that companies must pay lumberjacks an additional $1,000 a year to perform work that generally kills one in 1,000 workers. It follows that most Americans would forgo $1,000 a year to avoid that risk — and that 1,000 Americans will collectively forgo $1 million to avoid the same risk entirely. That number is said to be the “statistical value of life.”

Professor Viscusi’s work pegs it at around $8.7 million in current dollars.

Before the current administration, only the E.P.A. had fully embraced this methodology. Other agencies relied instead on the results of surveys asking Americans how much they would spend to avoid a given risk. This technique tends to produce significantly lower results. An even older technique, which yields even lower numbers, is to sum the wages lost when a worker dies. In 2000 the E.P.A set a baseline of $7.8 million, updated to current dollars. But in 2004, the office that issues clean air regulations reduced that baseline by $500,000 in an analysis of proposed limits on emissions from industrial boilers.

Last year, the E.P.A. directed its various offices to return to the 2000 baseline, adjusting that figure for inflation and wage growth. In some recent studies, the E.P.A. has used a figure of $9.1 million after making those adjustments.

The agency said at the same time that it was working to set a new standard. In a white paper issued in December, it raised the possibility that people might place a higher value on avoiding a slow death from cancer than a quick death in a car accident. It also broached a concept it described as “altruism,” the idea that people may place a higher value on the common good than on their own survival.

John D. Graham, who oversaw the use of cost-benefit analysis during the George W. Bush administration, said that the scientific justification was “quite strong” for raising the values used by the Transportation Department, but he cautioned that the E.P.A. was going too far.

“Why should the same clinical condition be valued differently at different federal agencies?” Mr. Graham, now dean of the School of Environmental and Public Affairs at Indiana University, asked in an e-mailed response to questions.

Many experts similarly ask why life itself should be valued differently. Agencies are allowed to set their own numbers. The E.P.A. and the Transportation Department use numbers that are $3 million apart. The process generally involves experts, but the decisions ultimately are made by political appointees.

The Office of Management and Budget told agencies in 2004 that they should pick a number between $1 million and $10 million. That guidance remains in effect, although the office has more recently warned agencies that it would be difficult to justify the use of numbers under $5 million, two administration officials said.

Close observers of the process point to two reasons for the variation in numbers. First, they say that setting a single standard is not worth the high-stakes battle that would be required with advocates on both sides. The Obama administration, like its predecessors, has preferred to deal with the issue informally, on an agency-by-agency basis.

Second, they say the lack of a standard preserves flexibility.

The Food and Drug Administration issued a rule in 2009 requiring new warning labels on packages and bottles of acetaminophen and other drugs. Its justification valued life at $5 million. A few months later, the agency acknowledged that it had calculated the cost of adding one new label, while requiring two new labels. However, the agency continued, the benefits still exceeded the costs because the value of life was $7 million.

A few months later, in an unrelated rule regarding salmonella, the agency once again cited a value of $5 million, which it said best reflected the available research. And in its recent study on cigarette labels, the agency cited a value of $7.9 million.

“The reality is that politics frequently trumps economics,” said Robert Hahn, a leading scholar of the American regulatory process who is now a professor at the University of Manchester in England. But he said that putting a price tag on life still was worthwhile, to help politicians choose among priorities and to shape the details of their proposals.

“Even small changes,” he said, “can save billions of dollars.”

He uses his upscale Miami Beach home as a production studio for Playboy photo spreads, and his MySpace page shows him posing with celebrities such as Paris Hilton and Aerosmith’s Steven Tyler.

Alexia Fodere There’s something else about Dr. Wayne that doesn’t resemble a normal family-practice doctor: his earnings from Medicare, the government insurance program for the elderly and disabled. Dr. Wayne took in more than $1.2 million from Medicare in 2008, according to a person familiar with the matter, a large portion of it from physical therapy. That’s more than 24 times the Medicare income of the average family doctor, according to a Wall Street Journal analysis of Medicare-claims data.

The regimen of physical therapy Dr. Wayne said he usually provided—30 minutes each of heat packs, massage, electrical stimulation and ultrasound—is also unusual.

Stephen Levine, a former board member of the American Physical Therapy Association, said those services are usually used in conjunction with more sophisticated forms of therapy, such as neuromuscular reeducation. Used on their own, with rare exceptions, “it’s a form of abuse,” said Mr. Levine. “Wouldn’t we all love to…have someone rub our backs and have the government pay for it—but it’s just not appropriate,” he added.

Dr. Wayne, a 50-year-old osteopath, denies abusing the system and hasn’t been accused of wrongdoing by authorities. He says his regimen “does wonders” if used correctly. He adds that he gave physical therapy to “patients who needed it, with appropriate diagnoses, and I should get paid for it.”

Medicare administrators apparently felt otherwise. In 2009 he says he was placed on heightened scrutiny and eventually sold his business. But not until he had received more than $2.6 million from Medicare between 2007 and 2009, according to the person familiar with the matter.

Physical therapy, which cost Medicare almost $3.5 billion in 2008, offers a case study in how Medicare polices its payments. Even when Medicare identified providers whose physical-therapy billing raised red flags, it kept paying thousands or even millions of dollars, sometimes for years, The Wall Street Journal found. Among the cases:

•A physical therapist in Brooklyn who billed for so much therapy—more than $2.5 million in 2008 alone—that it would have been virtually impossible for him to have performed it all within state and Medicare guidelines, fraud experts say. Medicare has continued to pay him, shelling out nearly a million dollars through July of this year.

•A second doctor in Florida who pocketed more than $1.8 million from Medicare in 2007, much of it from physical therapy on patients with an extremely rare condition. Even after a Medicare antifraud contractor flagged this doctor, the agency paid him at least $6.7 million over more than two years.

•A Houston doctor whose Medicare billing under her provider number spiked from zero to more than $11.6 million in less than a year. At the time, this doctor was being investigated for misconduct in a company owned by a Nigerian with an alleged history of fraud.

There are plenty of reasons why Medicare often fails to stop questionable payments up front. To protect law-abiding doctors and hospitals—the vast majority—Medicare is required to pay nearly everybody within 30 days. Medicare says it is reluctant to suspend payments to providers who may have made honest mistakes, out of concern that beneficiaries might go without needed treatment. Law-enforcement agencies and Medicare contractors, overwhelmed by the sheer volume of Medicare fraud cases, can’t investigate and prosecute them all. Sometimes, prosecutors and investigators ask Medicare to keep paying so as not to tip off targets of an investigation.

But a central problem is that Medicare hasn’t fully exploited its most valuable resource: its claims database, a computerized record of every claim submitted and every dollar paid out.

“That’s really the crux of the issue,” said Kimberly Brandt, who led Medicare’s antifraud efforts from 2004 through June of this year. She said the program is “definitely on the right path” to making better use of its database, “but it’s not going to be a flip of the switch or an easy transition.”

The Wall Street Journal originally identified Dr. Wayne and the other medical providers discussed in this article through a Medicare database that is much more limited than the one available to fraud investigators. The database, obtained in conjunction with the nonprofit Center for Public Integrity, contains records only through 2008, and includes the claims of just 5% of randomly selected Medicare beneficiaries.

Under a three-decade-old court decision protecting physician privacy, Medicare is prohibited from releasing to the public details of doctors’ billings. The Journal agreed not to publish individual physician billing information obtained solely through the database as part of its arrangement with the Centers for Medicare and Medicaid Services, or CMS. Billing figures for doctors named in this article were obtained from the providers themselves or from others familiar with their businesses.

Peter Budetti, the head of CMS’s new antifraud arm, says Medicare is moving away from its traditional “pay-and-chase” approach, in which it tries to recover improper payments already out the door. He says he’d like to emulate the credit-card industry, which has developed software to flag suspicious charges before paying them. “Fraud prevention is our new emphasis,” he said.

The main responsibility for flagging fraudsters lies with a network of private contractors that are tasked with mining the data.

There are occasional false alarms. About two years ago, a claim for a prostate exam performed on a woman raised suspicions, according to executives at one Medicare contractor. It turned out to be a legitimate case because the patient had undergone a sex-change operation.

The final line of defense is law enforcement. The Bush and Obama administrations have expanded multiagency strike forces—called HEAT, for Health Care Fraud Prevention and Enforcement Action Teams—into new cities beyond their original base in southern Florida. In contrast to most previous efforts, these teams mine claims data to decide which cities, types of fraud, and providers to target. Since March 2007, federal health-fraud prosecutors with these strike forces have charged more than 850 defendants for alleged frauds exceeding $2 billion in billings, according to the government.  

A Journal analysis of the 5% database focused on the physicians and physical therapists in private practice who performed the most physical-therapy treatments per patient. Only 3% of providers administered 90 or more treatments per patient; the national average was about 40. That top 3% accounted for more than 14% of all Medicare physical-therapy expenditures from 2003-2008, or an estimated total of nearly $1.3 billion. While some of that billing would be legitimate, said Mr. Levine, much of it would likely be abusive or fraudulent.

One Florida physician—not Dr. Wayne—made almost all his money from physical therapy, according to the Journal’s analysis of the 5% database. According to separate billing totals reviewed by The Wall Street Journal, this internal-medicine doctor took home more than $8.1 million from Medicare from 2007 through 2009.

The Journal cannot name this doctor because the paper was able to learn a crucial piece of information about his practice—the type of disorder he billed for—only from the database, not from any other source.

From 2006 through 2008, more than 40% of this doctor’s patients in the database were described as suffering from brachial neuritis. That’s a rare nerve-and-muscle condition estimated to occur in about three out of every 100,000 Americans. In 2008, the Florida doctor earned at least 25% more from brachial neuritis patients than any other provider, according to the Journal’s database analysis.

A contractor in charge of ferreting out fraud in Florida—SafeGuard Services LLC, owned by Hewlett-Packard Co.—flagged this doctor for heightened scrutiny at least as early as June 2007. But it wasn’t until September 2009 when Medicare stopped paying nearly all of his claims, according to a government official with knowledge of the matter. During that time, Medicare paid out more than $6.7 million to this doctor, according to the billing totals reviewed by the Journal.

Officials from SafeGuard and CMS declined to comment, citing the policy against discussing any particular provider.

In the 1990s, this doctor filed for bankruptcy. On a recent morning a Porsche and a late-model Mustang sat in the driveway of his spacious middle-class home. Asked about his medical practice, the doctor said, “I don’t have anything to say to you,” and shut his door.

The Journal’s analysis suggests one center of intensive physical-therapy billing is Houston. That’s where Dr. Theresa Rice works. Dr. Rice, who is in her late 70s and received her medical degree in the Philippines, has been licensed to practice medicine in Texas since 1981, public records show.

In 2004, she was convicted of shoplifting $748 in jewelry from a Foley’s department store. In an interview, Dr. Rice at first denied the conviction, saying there must have been a computer error. After being told that the Journal had her booking photo, she admitted that she had shoplifted. “I lied to you,” she said.

In 2007, the Texas Medical Board began probing Dr. Rice for her involvement in a business owned by a Nigerian businessman “who has a history of fraudulent activity, and is sought by authorities under several known aliases,” according to a Medical Board document. Dr. Rice approved home health services based on patient assessments made by an unqualified physician assistant, and she could provide no medical records for those patients, the Board found.

Dr. Rice said she was duped in that case, an explanation the Medical Board accepted. She was fined $1,500 and required to take a course in medical ethics, according to the Medical Board document.

Dr. Rice billed Medicare nothing in 2007 for services she performed or supervised, according to a person familiar with her business. But starting in October 2008, billing under her provider number skyrocketed. In less than a year, Medicare received claims totaling over $11.6 million and paid out more than $7.1 million.

Medicare stopped paying in mid-2009, when federal investigators shut down the clinic where she worked, City Nursing. That clinic was owned by a different Nigerian businessman, Umawa Imo. At least seven people have been indicted on health-fraud charges connected to the clinic, in what a senior law-enforcement official called the largest physical-therapy fraud in Houston history. The alleged scheme involved several people of Nigerian descent as well as at least two American doctors, according to the federal indictment and law-enforcement officials. Medicare paid out about $27 million over 28 months, according to the indictment.

Dr. Rice wasn’t indicted and maintains she was duped again. Mr. Imo has pleaded not guilty to health-care fraud and conspiracy charges. His lawyers said he is innocent and trusted the people running the clinic.

Short of an audit or investigation, there is often no way to tell who actually performs physical therapy. That’s because doctors who “directly” supervise physical therapists—meaning the doctor is in the same office suite at the same time the therapy is being performed—don’t need to state on the claim form who administered the therapy. It’s billed as if the doctor performed it.

In the case of City Nursing, the clinic where Dr. Rice worked, an affidavit for a search warrant alleges there was only one physical therapist. The indictment charges that patients were paid to sign documents saying they had received physical therapy that never happened.

Dr. Rice is now working at a storefront operation called Clinica de la Familia. A CMS spokesman said she’s no longer eligible to get paid by Medicare and declined to provide further details. Of her current clinic, Dr. Rice said, “We are not doing any fraudulent thing.”

Federal authorities say that in Brooklyn, physical-therapy abuse appears to be especially rife among Russian immigrants. A Journal analysis of the 5% database shows that eight of Medicare’s 30 top-earning physical therapists work in Brooklyn. Seven of them have names that seem Russian or from neighboring nations.

Brooklyn physical therapist Aleksandr Kharkover billed Medicare for more than $2.5 million in 2008, according to a person familiar with his business, and received more than $1.8 million.

On an autumn weekday at about 9:00 in the morning, two Journal reporters arrived at Mr. Kharkover’s home, a brick bungalow. He appeared in a white T-shirt emblazoned with the slogan, “Freedom isn’t free.” Asked if billing $2.5 million to Medicare fit with his records, he replied, “I’d say that fits.”

Mr. Kharkover and two people familiar with his practice said he sees patients only in their homes. Fraud experts say this makes it virtually impossible for him to have legitimately billed such high amounts.

New York State allows a physical therapist to supervise only two assistants on home visits, and the therapist must be in the same home at the same time as his assistants, according to New York State and Medicare officials. Unless Mr. Kharkover held therapy sessions in which several patients congregated in one home, he would effectively be limited to billing little more than what he himself could perform.

Under generous assumptions, a single therapist could earn $1 million from Medicare in a year by working 12.5 hours a day, seven days a week, with no time off. Medicare paid Mr. Kharkover more than $960,000 in the first seven months of this year, according to the person familiar with his business.

CMS and its main New York antifraud contractor, SafeGuard Services, declined to comment on Mr. Kharkover.

Mr. Kharkover declined a second interview. His attorney, Montell Figgins, said his client is a “successful businessman,” adding that “there is no reason to believe my client was doing anything illegal.”

As for Dr. Wayne, he said he expanded physical therapy at his clinic near Miami’s design district because his patients needed it. Medicare regulations require that physical therapists billing under a physician must have completed an accredited physical-therapy education program. But Dr. Wayne said he trained his “office girls” to do the work in part because hiring full-fledged physical therapists was too expensive.

Referring to Medicare’s therapist-education requirement, he said, “I interpret that as, ‘If I train them in physical therapy, that should be good enough.’”

Dr. Wayne acknowledged grossing $1.1 million or $1.2 million from Medicare in 2008, and estimated his take-home that year from his clinic was roughly $400,000. He said his Medicare reimbursements plummeted after March 2009, when he says Medicare tightened scrutiny of his billing. According to the person familiar with the matter, Medicare paid only about 12.5% of his claims in the second half of 2009.

Dr. Wayne said he is appealing many of the denied claims, but that the drop in Medicare reimbursements and other business issues led him to sell his practice and caused him financial distress. On a recent evening, he opened envelopes from a bank, and said they were notices of bounced checks.

Still, full-scale replicas of medieval knights’ armor greet guests at his home, and hanging on the walls are what he said are two original Picassos, several Dalis and photographs by Helmut Newton. Also present recently was Eliza Carson, a Playboy model who said she’s 20 years old. She barely glanced up from texting on her phone as she asked Dr. Wayne how he managed to keep his hair spiky when he sleeps. He explained that he uses an airplane pillow.

Dr. Wayne now works in a pain-management clinic in Fort Lauderdale. He said he doesn’t have a board certification in pain management, and said the clinic accepts only cash. Of his patients at the clinic, Dr. Wayne said, “I write their pain prescriptions, and they’re gone.”

—James Oberman, Anton Troianovski and Gina Chon contributed to this article.

Jeffrey Kahn directs the Center for Bioethics at the University of Minnesota Medical School. And, Jeffrey Kahn, have four million births through IVF trumped all the moral and ethical questions that were posed by the procedure?

Dr. JEFFREY KAHN (Director, Center for Bioethics): I think at the outset there was such concern about the new and uncertain technology that this proposed that people were quite afraid. But four million births later, those early issues went away, but new ones certainly came in the aftermath.

SIEGEL: As for the old issues, though, I mean, there were concerns of the potential eugenic consequences of IVF, that it wouldn’t just help people who couldn’t conceive, but it would help people who couldn’t conceive with the kind of mate they would like to conceive. That, I guess, is part of life today.

Dr. KAHN: Absolutely. And I think that technology has evolved in ways that have brought some of those concerns to light so we can now test embryos outside of the body and make decisions about which ones to implant based upon the results of those tests. And that’s what people were fearful of in 1978. The technology just didn’t exist until well into the 1990s.

SIEGEL: You spoke, though, of concerns that were anticipated back in 1978 that have developed. What would place in that category?

Dr. KAHN: Well, I think things around new combinations of parents, effectively. So now we have the ability to combine sperm from one man, egg from one woman, that resulting embryo can be implanted into a third woman. And then the child born from that pregnancy can be raised by a separate couple.

So we have, in that case, five different people involved in the creation and eventual rearing of a single child. And that, I think, wasn’t thought about in prospect quite in the way that it turned out to be a reality.

SIEGEL: There is another area of concern, which is the notion that embryos that are not implanted are frozen and whatever we do with them, are we doing that with human life? Is disposing of them disposing of human life?�That problem persists.

Dr. KAHN: Absolutely. And I think it’s something that was foreseen in some respect. But the numbers at which we create and now store the excess embryos has really gotten to the point where we need a societal conversation and maybe a policy decision about what to do with those leftover embryos. The estimates are something like a million frozen embryos left in the United States alone. And we don’t really have good plans for what ought to be done with them.

SIEGEL: What about the ethical and moral issues for doctors? That is, should they facilitate multiple births for a woman who has no apparent means of support of sextuplets or octuplets? Or is it the doctor’s job to honor the patient’s wishes and let the chips fall where they may?

Dr. KAHN: Well, it may be even a more fundamental conflict than that, in that we think about the right to have children as a basic fundamental liberty that we recognize. And so, when an individual says I’d like to have children, we don’t usually ask why or how many or what techniques do you propose to use.

And so we have the technology that allows us to create these high multiple birth pregnancies bumping up against what we think of as a quite fundamental liberty. And we really haven’t wrestled that to the ground either. And that’s an issue that started in 1978, and then certainly persists today.

SIEGEL: There’s another level of discussion of medicine, which is what do we think are the normal needs of making people well that should be covered by insurance plans – public and private. Have we settled that one when it comes to fertility treatments and IVF? Do we understand what it is that every woman or every couple is entitled to?

Dr. KAHN: No, absolutely not. In fact, in the United States there’s quite a variety of coverage when it comes to reproductive medicine techniques. So some policies will cover a few cycles of in-vitro fertilization for any one individual. Many, many policies don’t cover it at all, viewing it not as treatment of an illness or a disease but something that is rather more optional than that.

So it is far from being a settled issue when it comes to who pays and if they pay for it, how much.

SIEGEL: Jeffrey Kahn, thank you very much for talking with us today.

Dr. KAHN: My pleasure.

SIEGEL: So Jeffery Kahn, who is director of the Center for Bioethics at the University of Minnesota Medical School.

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The study was conducted by researchers from the Harvard School of Public Health and was published in the September issue of the journal Health Affairs. Researchers found that attempting to reduce the number of medical malpractice lawsuits would result in only a negligible effect on the cost of health care, and reducing the cost of defensive medicine would do little more.

According to the U.S. Department of Health and Human Services, the total cost of health care in 2008 was $2.3 trillion, breaking down to about $7,681 per person. The Harvard researchers analyzed a number of factors and components of the nation’s health care system and determined that in 2008 the U.S. spent about $55.6 billion on medical malpractice lawsuits and defensive medicine, representing about 2.4% of the entire budget. Of that, $45.6 billion was spent on defensive medicine; meaning only about $10 billion, or 0.13%, was actually spent on medical malpractice lawsuits and costs.

Defensive medicine involves medical tests and procedures performed primarily to avoid medical malpractice liability and not to improve or safeguard the patient’s health. The findings of the study indicate that defensive medicine costs far less than most health care experts thought, researchers said.

In another malpractice study published in the same issue of Health Affairs, researchers from the Center for Studying Health System Change in Washington, D.C. and some of the same researchers from the Harvard study found that not only would limiting medical malpractice lawsuits not make a large impact on the cost of health care, but it also would not prevent doctors from performing defensive medicine. The study found that placing malpractice caps on non-economic damages resulted in no significant difference in doctors’ perceptions of malpractice risk.

The findings shore up a health care costs report in March by the consumer advocacy group, Public Citizen, which found that payments for medical malpractice lawsuits were at an all-time low and suggested that the entire cost of medical liability in the U.S. was between 0.6% and 1.3% of the national cost of health care. Their study found that some states with strict tort reform laws saw health insurance costs, and the number of uninsured, skyrocket.

The Public Citizen report also found that the U.S. health care system could save far more money by improving the quality of health care. This would reduce both the need for medical malpractice lawsuits and the expensive costs of extra hospitalization and treatment for avoidable medical problems such as hospital-acquired infections, wrong site surgeries, bedsores, and hospital-acquired pneumonia.