Costly New Treatments Put Insurers in Quandary : Health: Firms must decide who gets high-tech care. Refusing coverage can mean an even costlier court case.

The mother was in a strong state of denial, said Dr. Ron Bachman, a geneticist at Kaiser Permanente in Northern California.

Her young son had early, mild symptoms of Peliazeus Mersbacher syndrome, a degenerative disorder marked initially by tremors, problems in walking and unusual eye motions. It is usually fatal in the teens.

Although three of her great uncles had died from the disease, she was sure her son did not have it, despite physicians’ certainty that he did. She wanted them to perform a new genetic test to rule it out.

But the test is done in only one academic laboratory in the country, costs $3,000 and can detect at best 20% of the mutations that cause the disease, Bachman said. In short, he said, “it had a limited chance of telling us something we already knew for sure.”

As a new generation of expensive drugs, medical procedures and genetic screening tests becomes increasingly available, the dilemma Bachman faced is becoming more common throughout the medical profession. Responding to these developments--especially those involving biotechnology and genetics--insurance companies have to make critical, controversial decisions about whether to cover them.

The need to make such decisions is coming at a time when the insurance industry is under increased criticism for, among other things, excluding coverage for patients with existing conditions or with genetic defects that make them susceptible to illness.

Insurance companies for decades have had to make hard choices about covering myriad tests, treatments and drugs. But with the genetics boom opening up new medical arenas, those choices are more complex and uncertain than ever. Already, companies are facing pressures to pay for unnecessary genetic tests. And Kaiser and other companies are funding significant numbers of so-called “anxiety amnios”--expensive amniocentesis tests for pregnant women under 35 who are at no particular risk of having a child with a birth defect but are apprehensive nonetheless.

New genetic advances have the potential of being a “black hole” for soaking up much larger portions of an insurer’s funds, said Dr. Edward Schoen, a Kaiser pediatrician. Every time a new gene is discovered, such as those that cause cystic fibrosis and colon cancer, it opens the possibility of widespread--and expensive--testing for its disease. New drugs produced by genetic techniques, such as Pulmozyme for dissolving lung mucus in cystic fibrosis patients, are often much more expensive than conventional drugs.

“We are already living in a world of health care reform,” said Dr. Ian Leverton, chairman of Kaiser’s New Technology Committee, which decides when coverage will be provided. “We have to look at what our priorities really are because we don’t have enough money to do everything.”

The bottom line, said Dr. William McGiveny, vice president for clinical evaluation research at Aetna Life & Casualty, is that “we don’t want to withhold good medical care from patients because of cost. But we don’t want to pay for medical technologies that are not proven to be safe and effective.”

The effort to shore up the bottom line can be very expensive, as Health Net learned recently. A jury awarded $89 million in damages to the family of Nelene Fox, a Riverside breast cancer patient who sought, but did not receive, coverage from Health Net for a potentially life-saving procedure called autologous bone marrow transplantation. That decision, which is being appealed, sounded a clear warning to insurers that the courts are carefully watching over their shoulders.

As well they should be, critics argue, because the most commonly used reason for denying coverage--that a treatment is “experimental”--is highly ambiguous.

The Fox family’s attorney, Mark O. Hiepler of Oxnard, said: “Our case, and the continuing debate, have proved that insurance companies can’t define what it (experimental) means. . . . The companies use an experimental exclusion as the greatest tool for rationing health care without appearing to do so.”

Assemblyman Bob Epple (D-Cerritos) last year introduced a bill that would require insurers to justify their decisions not to cover experimental procedures and to shorten the appeals process so that a decision on coverage is made before the patient dies.

“It may sound cold and heartless--and it is--but HMOs and insurance companies bank on the expiration of the patient,” said Denyne M. Kowalewski, Epple’s chief of staff.

The bill passed, but was vetoed by Gov. Pete Wilson, who argued that the required administrative procedures would increase health care costs. Epple has introduced it again this year.

Insurers have yet to subject many gene-based technologies to the decision-making process. But most experts agree that virtually all of the potential problems that loom for genetics have been covered in the controversy over autologous bone marrow transplants, often known as ABMT.

The procedure “is a microcosm of today’s health care quandary,” Aetna’s McGiveny said.

Bone marrow transplants are the treatment of choice for leukemia, but are considered experimental by many researchers for the treatment of breast cancer. That disease strikes 180,000 women each year, killing 46,000, making it the most common cancer to strike women and the second most lethal, behind lung cancer. About a third of the patients are potentially eligible for ABMT, which is, in essence, a form of high-dose chemotherapy.

The procedure becomes necessary when patients require extraordinarily high doses of anti-cancer drugs to eradicate all traces of the tumor. But such high doses also kill bone marrow and would be lethal without further intervention. To avoid this problem, surgeons remove some of the patient’s bone marrow before chemotherapy and treat it to kill any tumor cells that may be in it. After chemotherapy, the marrow is re-infused, restoring the patient’s immune system.

The procedure, which typically costs $100,000 to $200,000 and is used on patients who have had conventional chemotherapy, radiation or surgery, has roughly a 5% to 10% risk of killing the patient, compared to a 1% risk for chemotherapy alone. But it also has a one in four chance of curing the disease, a much higher rate than is normally achieved in patients who have suffered a relapse. Clinical trials directed by the National Institutes of Health that will assess ABMT’s value will not be completed for at least two years.

Few critics have argued with the process by which insurers decide broadly that they will pay for a new technology like ABMT. Rather, it is the case-by-case decrees on which patients qualify for a treatment or test that generate disagreements and lawsuits.

In most cases, the decision is made by a new technologies committee composed of physicians whose primary criterion, they say, is not cost, but whether the benefit of the treatment is worth the costs.

“Mr. Kaiser is not sitting up there making decisions for us,” Bachman said. “We as doctors have to say this is what we should offer, and it needs to be factored into the dues (insurance costs).”

It is not the ordinary physician who is providing most of the consumer care who makes such decisions, but rather the department head, the university dean, the internationally recognized expert. At Kaiser and some other large companies, the experts are in-house. Blue Cross, Aetna and Blue Shield, among others, use outside experts, who are unpaid and have no financial stake in the decisions, according to company officials.

Critics charge that these experts are one step removed from the process of caring for patients and thus lack an intellectual and emotional appreciation of the patients’ needs. Insurance officials argue that these elite physicians are the most knowledgeable about the procedures in question and the most competent in evaluating their efficacy. “They bring to us . . . what they believe to be the best standards of practice,” said Dr. David Chernoff, corporate medical director for Blue Cross of California.

Typically, the committees review all the available literature about a new technique or drug, and they often interview the people who developed it. They address a number of key questions, including:

* Is the procedure safe? One of the arguments against ABMT has been its high risk, but it is covered by many insurers. However, the implantation of artificial hearts and baboon hearts has proved too debilitating to the patient to be covered.

* Is it effective? ABMT can prolong life for certain breast cancer patients, particularly those whose tumors are still sensitive to anti-cancer drugs. Most companies now cover the procedure, even though it is considered experimental, for patients who meet very specific criteria. Fetal cell transplants for Parkinson’s disease are not covered by insurance because the evidence is not strong enough that they are helpful.

* Is it medically necessary? That is, can the same results be achieved with an existing--and cheaper--procedure?

* Can the risks and benefits be quantified? Is it cost-effective? Screening of the entire population for cystic fibrosis would probably not be cost-effective, according to studies by Dr. David Witte of Kaiser.

“CF screening won’t save the insurer money,” said his colleague, Dr. Tracey Lieu. “But it may be justified if we judge the benefits to society worth the costs.”

Ultimately, the new technology committees vote on whether a new procedure or drug is “experimental” or “non-experimental.” If a procedure is ruled experimental, a company can, and usually does, deny coverage for it. If it is ruled non-experimental, the procedure is almost always covered.

However, fear of litigation is driving Kaiser and others away from the experimental vs. non-experimental classification.

“If push comes to shove, the courts are unlikely to accept experimental as an adequate reason for not treating terminal patients,” Leverton said. “But they are perfectly willing to listen to arguments about the ‘appropriateness’ of treatments.”

Perhaps more important, he added, is “if we have time for an in-depth consultation between the clinician, the patient and the family, (then) we can usually reach agreement on the appropriateness of treatment as well.”

Each company typically evaluates about 30 new drugs or procedures per year, approving about two-thirds on the first pass. Some come back for re-evaluation several times.

Blue Shield’s committee reviewed ABMT three times between 1989 and 1991 before approving it, Chernoff said. The first two times, he said, “there were just a couple of (scientific) articles about it, and they suggested that perhaps it had a high mortality. . . . Subsequently, there was an explosion of literature supporting the appropriateness of the procedure.”

Other companies have ruled that ABMT is still experimental, but have decided to pay for patients who meet appropriate criteria.

Critics concede that the approval process is well designed and fair, but they argue that the decisions reached by the committees are not always implemented fairly.

Dr. William P. Peters and Dr. Mark C. Rogers of Duke University reported last month that insurers can be “arbitrary and capricious” in denying coverage for ABMT, even though they approve 77% of requests for coverage.

They reported in the New England Journal of Medicine that they examined the records of 533 breast cancer patients who were candidates for ABMT and concluded that the decision to deny coverage for 121 patients did not seem to be related to the normal selection criteria for the procedure. Those denied coverage, they found, did not appear to be sicker or less likely to respond to chemotherapy--two of the primary criteria for the procedure.

One possible way to overcome such capriciousness is the growing use of an ombudsman service, such as that run by Grace Monaco in Washington, D.C. Monaco has compiled a list of about 140 oncology experts at medical schools throughout the country.

At the request of an insurance company, she selects three or four from the list to review the medical records of a patient who has sought ABMT (or some other controversial procedure) and been denied. The panel decides if the treatment is appropriate and makes a recommendation to the company, which usually pays for the procedure if the panel approves it.

Aetna has sent 151 ABMT cases to Monaco, McGiveny said, and 59 have been denied because the treatment was not appropriate for them.

Attorney Hiepler, for one, believes this is the wave of the future.

“These are the people that should be left to decide on really tough cases, and their decisions are virtually litigation-proof,” he said. “If I find out that good people like this don’t think it (ABMT) should take place, I won’t touch the case.”