Full article in PDF
Comments from Kip Sullivan:
"I'm passing along an article in the latest Harper's that you must read.
The author is Trudy Lieberman, a writer I have long enjoyed reading.
Trudy's
main argument is that the ACA has given Republicans what they have
always wanted -- a health care system that forces Americans to buy
high-deductible policies from the insurance industry. She quotes Obama
saying the ACA reflects Republican principles.
Her secondary
point is that the Republican/ACA system is doing nothing to lower costs,
and is shifting more and more costs onto the backs of patients.
This
article confirms my belief that the ACA is going to become even more
unpopular in a few years than it is now, which is to say it's going to
become an even heavier albatross around the necks of Democrats than it
is now. The question is how badly the ACA will damage Democrats and the
movement for universal coverage in any form -- single- or
multiple-payer. I entertain the possibility that the backlash could be
so severe Republicans will take control of the White House and both
houses of Congress in 2020 and repeal whatever is left of the ACA. To
forestall the backlash, Democrats must do more than run from the ACA or
dig in their heels and defend it.
Kip"
Friday, July 10, 2015
Tuesday, July 7, 2015
Health Insurance Companies Seek Big Rate Increases for 2016 - The New York Times
Health Insurance Companies Seek Big Rate Increases for 2016 - The New York Times
Comment by Don McCanne
Although it will be
about three months before we have the final health insurance premiums
for 2016, the information we have already can warrant a few preliminary
observations.
about three months before we have the final health insurance premiums
for 2016, the information we have already can warrant a few preliminary
observations.
* The Affordable Care Act
appears to have failed on delivering its promise of controlling global
health care costs. The primary reason given by the insurers when
submitting requests for much higher premiums for 2016 is that health
care costs were much higher than their actuaries anticipated.
appears to have failed on delivering its promise of controlling global
health care costs. The primary reason given by the insurers when
submitting requests for much higher premiums for 2016 is that health
care costs were much higher than their actuaries anticipated.
*
Some complain that new enrollees were less healthy and thus drove
spending up, but under the individual mandate, increases in enrollment
were across the board and not concentrated amongst the less healthy.
Some complain that new enrollees were less healthy and thus drove
spending up, but under the individual mandate, increases in enrollment
were across the board and not concentrated amongst the less healthy.
*
There may have been some pent up demand amongst new enrollees (e.g.,
joint replacement) but that is only a transient surge which does not
warrant long term premium increases. Much of the pent up demand will
have been ventilated as most of the remaining uninsured are ineligible
by immigration status or by personal hardship. The numbers who are
eligible but decline coverage will only trickle in as health care needs
develop.
There may have been some pent up demand amongst new enrollees (e.g.,
joint replacement) but that is only a transient surge which does not
warrant long term premium increases. Much of the pent up demand will
have been ventilated as most of the remaining uninsured are ineligible
by immigration status or by personal hardship. The numbers who are
eligible but decline coverage will only trickle in as health care needs
develop.
* It appears that the increases in
the benchmark silver plans will not be as great as the increases
currently receiving considerable publicity. Requests over a ten percent
increase were required to be made public whereas increases under ten
percent will not be known until plans are marketed prior to the November
1 beginning of open enrollment.
the benchmark silver plans will not be as great as the increases
currently receiving considerable publicity. Requests over a ten percent
increase were required to be made public whereas increases under ten
percent will not be known until plans are marketed prior to the November
1 beginning of open enrollment.
* Because
rate increases vary considerably amongst the plans, many individuals
will be forced to choose between paying higher rates by staying in their
current plans or changing to plans with lower rates but with different
narrow provider networks thereby potentially sacrificing continuity of
care.
rate increases vary considerably amongst the plans, many individuals
will be forced to choose between paying higher rates by staying in their
current plans or changing to plans with lower rates but with different
narrow provider networks thereby potentially sacrificing continuity of
care.
* Respected institutions such as
Geisinger in Pennsylvania and Scott and White in Texas are asking
staggering premium increases, indicating that the supposed cost
containment features of ACA are having a negligible impact on legitimate
spending.
Geisinger in Pennsylvania and Scott and White in Texas are asking
staggering premium increases, indicating that the supposed cost
containment features of ACA are having a negligible impact on legitimate
spending.
* Little is being said about the
insurance underwriting cycle. Large, well capitalized insurers are able
to price their products more competitively, decreasing the market
presence of less competitive insurers. Once market dominance is
established, insurers are free to drive up premiums as much as 20 to 40
percent, as reported in this New York Times article. The regulated
medical loss ratios are generous enough to allow market performance
(profits) to excel, as confirmed by current Wall Street activity in
health insurance equities.
insurance underwriting cycle. Large, well capitalized insurers are able
to price their products more competitively, decreasing the market
presence of less competitive insurers. Once market dominance is
established, insurers are free to drive up premiums as much as 20 to 40
percent, as reported in this New York Times article. The regulated
medical loss ratios are generous enough to allow market performance
(profits) to excel, as confirmed by current Wall Street activity in
health insurance equities.
So are we going to
wait until October when the premium rates are announced, and then do
nothing other than continue to stand back and observe because the
insurers will reassure us that silver benchmark plans didn’t go up that
much - maybe 4.4 percent - even if it means that the enrollees have to
switch plans and find new providers in a different narrow network? Is
this the good that’s coming out of all of this? What about those who
want to continue with their current providers, but face a 20 to 40
percent premium increase? Will the death spiral bleed over from insurers
to patients?
wait until October when the premium rates are announced, and then do
nothing other than continue to stand back and observe because the
insurers will reassure us that silver benchmark plans didn’t go up that
much - maybe 4.4 percent - even if it means that the enrollees have to
switch plans and find new providers in a different narrow network? Is
this the good that’s coming out of all of this? What about those who
want to continue with their current providers, but face a 20 to 40
percent premium increase? Will the death spiral bleed over from insurers
to patients?
Enough. Single payer.
Monday, July 6, 2015
Great Comment was Posted to the Last Article Below
From: doktada
Medicare is a nice term like Medicaid or NHS (National Health Service), but they been under siege in recent decades. I went to a recent retirement planning event and Medicare was explained. It's better than basic insurance but still has holes in it. A lot of money can be saved by using the single payer concept. Let's put it in terms a business can understand. How does it work ? 4 simple rules:
1. Who is covered? Everyone
2. What is covered ? Everything
3. Who controls care ? Patient and doctor (provider)
4. Who pays ? Government pays providers (workers pay Medicare tax)
What's in it for business (those job creators) ?
1. No more health insurance part of benefits department
2. No more negotiating for corporate healthplans
3. No more training employees on how their plan works
4. No corporate health insurance premium subsidies.
How's it save money ?
1. The trillion dollar insurance middleman eliminated
2. Government has larger economies of scale.
3. Less or no profit points saves employers and employees money
4. Results in healthier population. Tens of thousands less deaths annually from postponing care until too late.
Medicare is a nice term like Medicaid or NHS (National Health Service), but they been under siege in recent decades. I went to a recent retirement planning event and Medicare was explained. It's better than basic insurance but still has holes in it. A lot of money can be saved by using the single payer concept. Let's put it in terms a business can understand. How does it work ? 4 simple rules:
1. Who is covered? Everyone
2. What is covered ? Everything
3. Who controls care ? Patient and doctor (provider)
4. Who pays ? Government pays providers (workers pay Medicare tax)
What's in it for business (those job creators) ?
1. No more health insurance part of benefits department
2. No more negotiating for corporate healthplans
3. No more training employees on how their plan works
4. No corporate health insurance premium subsidies.
How's it save money ?
1. The trillion dollar insurance middleman eliminated
2. Government has larger economies of scale.
3. Less or no profit points saves employers and employees money
4. Results in healthier population. Tens of thousands less deaths annually from postponing care until too late.
Saturday, July 4, 2015
Insurance Companyies' Warped Approach to Competition
The Commonwealth Fund
June 24, 2015
How Insurers Competed in the Affordable Care Act's First Year
By Katherine Swartz, Mark Hall, Timothy S. Jost
Abstract
Prior to the Affordable Care Act (ACA), most states’ individual health insurance markets were dominated by one or two insurance carriers that had little incentive to compete by providing efficient services. Instead, they competed mainly by screening and selecting people based on their risk of incurring high medical costs. One of the ACA’s goals is to encourage carriers to participate in the health insurance marketplaces and to shift the focus from competing based on risk selection to processes that increase consumer value, like improving efficiency of services and quality of care. Focusing on six states — Arkansas, California, Connecticut, Maryland, Montana, and Texas — this brief looks at how carriers are competing in the new marketplaces, namely through cost-sharing and composition of provider networks.
From the Conclusions
The ACA reforms will surely stimulate continuing adaptations by carriers, providers, and policymakers, and we expect the competitive strategies in the marketplaces to evolve as consumers and carriers gain more experience with marketplace competition.
****
Comment by Don McCanne
What should the consumer expect from marketplace competition? Business experts tell us that competition is the key to higher quality at lower cost. So what has competition between private health insurance plans brought us?
Based on international comparisons, our health care quality is mediocre and our health care costs are by far the highest of all nations. The insurers have been ineffective in improving either of those. Okay, but what about the health plans themselves? Are we receiving high quality insurance products at low prices?
Before the Affordable Care Act (ACA), insurers competed primarily on the prices of their insurance premiums, and they still do. Before ACA, the most effective method of keeping their premiums from increasing more than they did was to exclude people from coverage who actually needed health care. The most important purpose of insurance is to make health care access affordable by diluting risk through insurance risk pools. Yet the insurers instead excluded risk by attempting to insure only those who could pass underwriting standards in the individual market, or by pricing group plans out of the market if they experienced high health care utilization.
A quality risk pooling program would be designed to ensure that everyone receives essential health care, yet by excluding those who have the greatest needs for care, the insurers abandoned any effort to ensure quality in their insurance products.
As far as costs are concerned, health care costs continued to escalate out of control, demonstrating that the insurers could not deliver on the promise of lower costs either.
What has happened since ACA was implemented?
Although the act prohibits medical underwriting, the insurers are still using devious methods to discourage individuals with greater heath care needs from enrolling. As an example, drugs used for certain chronic conditions are placed in upper tiers of drug coverage which require greater coinsurance payments, pricing these products out of reach for the patients, which deters them from joining the plan in the first place. Plans also are still selectively marketed to healthier populations. Professionals and institutions noted for providing care to high needs patents are frequently left out of the insurers’ networks, chasing away patients who use these providers. Again, these efforts to exclude those with needs confirm that the insurers are still marketing low quality insurance products that fall short of the health care needs of the community.
This new report from The Commonwealth Fund shows that the insurers are using two innovations to improve their competitive positions in the marketplace: cost sharing and narrow provider networks.
Cost sharing through deductibles, co-payments, coinsurance, and exclusion of coverage erects financial barriers to care, reducing the use of beneficial services and thus allowing the insurers’ premiums to be priced more competitively. An insurance product that is designed to keep people away from care that they need is a low quality product.
Narrow provider networks reduce health care utilization by preventing coverage of health care professionals and institutions that may be the most appropriate for the patients’ conditions, requiring them to turn to lesser care or no care at all. Also, care may be made less accessible simply by increasing the distances needed to travel to network providers while excluding nearby providers from the networks. Again, insurance products designed to impair access to appropriate health care providers are low quality products.
Thus, with ACA, insurers are impairing quality through the use of the barriers of cost sharing and narrow networks. And regarding costs, it appears that they are again on an upward trajectory. Health care prices have not been controlled. The only slowing has been due to a modest reduction in the use of beneficial health care services caused by these barriers that the insurers have erected. The insurers have failed again on their promise of higher quality at lower cost.
What about the future? The Commonwealth Fund report states, “we expect the competitive strategies in the marketplaces to evolve as consumers and carriers gain more experience with marketplace competition.” We know what this means. The insurers will not be looking for ways to pay for more beneficial health care services. They will be introducing more innovations that prevent patients from getting the care that they need. That’s the way that the marketplace for health insurance products works.
Medicare doesn’t work that way. Instead, efforts are made to include everyone who is qualified and to include all health care professionals and institutions. At the same time, payments are based on legitimate costs and fair margins - a system that is less costly because of administrative efficiencies.
If we really want higher quality at a lower cost, we need to improve Medicare and expand it to cover everyone. The private insurance industry certainly is never going deliver on quality and cost since they will do better for themselves with their warped approach to competition.
Is it Time to Nationalize the Drug Industry?
Reuters
June 30, 2015
Novartis to test new pricing model with heart failure drug
By Ben Hirschler
Novartis plans to test a novel pricing model with some customers when it launches its keenly awaited new heart failure drug Entresto, the Swiss company's head of pharmaceuticals said on Tuesday.
Entresto, also known as LCZ696, is the first new drug in decades for helping patients whose lives are in danger because their hearts cannot pump blood efficiently. As a result, it is widely expected to generate billions of dollars in annual sales.
How the product should be priced, however, is a dilemma for Novartis, since the company wants to reach as many patients as possible and it knows it will be competing with very cheap - though less effective - older medicines.
David Epstein said he was talking to several healthcare customers about a system under which they would get the drug at a discount but then pay Novartis more if, as expected, it successfully reduces the need for costly hospital visits.
"We are beginning to share the risk," he said in an interview.
The idea of moving from a simple pay-per-pill model to one based on clinical outcomes is being considered by several drugmakers, and Novartis already has such a system in place for one customer using its multiple sclerosis drug Gilenya.
But Entresto could be an important test case because the drug will push up immediate drug costs markedly for a large number of patients, while having the potential to reduce their long-term medical bills.
The issue of drug pricing has come to a head recently, thanks to the launch of extremely expensive new medicines for cancer and hepatitis C, which are straining healthcare systems and adding to co-payment costs for patients.
Epstein, whose team is in the final stages of deciding the price for Entresto, declined to detail a likely cost per pill. But he said it would take into account "cost offsets", such as fewer hospitalizations, as well as the value added from improving patients' lives.
"We going to try and be fair and reasonable," he said.
****
Health Economics
October 2014
Cost-Offsets of Prescription Drug Expenditures: Data Analysis Via a Copula-Based Bivariate Dynamic Hurdle Model
By Partha Deb, Pravin K. Trivedi and David M. Zimmer
Summary
In this paper, we estimate a copula-based bivariate dynamic hurdle model of prescription drug and nondrug expenditures to test the cost-offset hypothesis, which posits that increased expenditures on prescription drugs are offset by reductions in other nondrug expenditures. We apply the proposed methodology to data from the Medical Expenditure Panel Survey, which have the following features: (i) the observed bivariate outcomes are a mixture of zeros and continuously measured positives; (ii) both the zero and positive outcomes show state dependence and inter-temporal interdependence; and (iii) the zeros and the positives display contemporaneous association. The point mass at zero is accommodated using a hurdle or a two-part approach. The copula-based approach to generating joint distributions is appealing because the contemporaneous association involves asymmetric dependence. The paper studies samples categorized by four health conditions: arthritis, diabetes, heart disease, and mental illness. There is evidence of greater than dollar-for-dollar cost-offsets of expenditures on prescribed drugs for relatively low levels of spending on drugs and less than dollar-for-dollar cost-offsets at higher levels of drug expenditures.
****
Comment by Don McCanne
With the marketing success of outrageously priced drugs, the pharmaceutical industry is now devising schemes to be sure that their new products that are protected by patents will continue to be introduced with similar outrageous prices. This concept of adding “cost offsets” to the pricing is not new, but it now has a label that supposedly legitimizes its inclusion in pricing decisions.
In the past, pharmaceutical firms have cited the high costs of drug research as an excuse for high prices of new products (though the high prices of the past were nothing compared to the five and six digit prices of today’s new products). As the public discovers that the drug industry's advertising budgets are typically three times their research budgets, and much of the research is funded through government programs such as those of the NIH, the firms apparently have decided that this argument is no longer as persuasive, and so they have to find another reason to justify outrageous pricing.
“Cost offsets” is a convenient label for adding to the the research, marketing, administration and profit costs of the products. These “cost offsets” include such concepts as money saved by fewer hospitalizations, fewer expensive interventions for progression of disease processes, and for the added value of prolonged lives or the added value of higher quality lives.
Think about that. What gall it takes for these pooh-bahs of the pharmaceutical world to suggest that they are entitled to capture, for themselves, not just the costs and legitimate profits, but the value of the benefits of their products, through higher consumer prices, whether paid individually or through some form of public or private insurance.
This perverse type of thinking is not limited to Novartis’ David Epstein. Bayer’s Marijn Dekkers 18 months ago said, about their expensive cancer drug, Nexavar, “we did not develop this product for the Indian market - let’s be honest - we developed this product for Western patients who can afford this product, quite honestly.”
Perhaps more despicable is this entry from a draft of the infamous Trans-Pacific Partnership Agreement, which contains the following in its statement of principles: “(d) the need to recognize the value of pharmaceutical products and medical devices through the operation of competitive markets or by adopting or maintaining procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical product or medical device.”
Not only did the pharmaceutical industry buy off Congress when they went the route of the market-based Affordable Care Act instead of an efficient single payer Medicare for all, they have demonstrated to us that their primary goal is to achieve the greatest returns for their executives and shareholders no matter the cost to the ultimate consumers - the patients.
There could not be an industry that cries out more for government intervention to protect consumers than the pharmaceutical industry (oh wait, the private insurance industry, of course, but that's another topic). Many suggest that it is time to demand negotiation of drug prices, or even to dictate fair prices. But should that be our opening position? How about calling for nationalization of the industry, at least their U.S. subsidiaries. That should get their attention. They have to know that we're serious about wanting relief from their greed.
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