Equal treatment under the law. A foundational pillar of American life. Except when it comes to drug makers who benefit from favorable treatment by the federal government.
For far too long, prescription drug companies have profited immensely under a system that affords them monopolistic powers to set prices devoid of government or public scrutiny.
Even during the pandemic, while much of the economy took a beating, the pharmaceutical industry continued to benefit from the high prices they charge. In fact, 9 of the 10 biggest profit margins recorded last summer belonged to drug companies.
As the nation’s economy sputters back, Big Pharma continues to raise prices and block patient access to lower-cost alternatives. It is beyond time to tame the soaring prices of prescription drugs once and for all.
For years, health care players have skirted around concrete actions to truly impact drug prices. Efforts to cut costs for consumers have translated to higher costs for health plans, resulting in a cost shift instead of a cost reduction. We, as private, nonprofit insurers, believe in the ambition and innovation possible in a free market – but the market has failed in this instance and it’s time for the government to take action.
That is why the Alliance of Community Health Plans (ACHP) is putting its support behind reforms that can make a real, lasting impact for consumers and the entire health system. For the first time, a national health care payer organization is stepping up and supporting pragmatic and progressive reforms that can truly begin to rein in the price of prescription drugs.
This includes backing the dramatic step to grant the Secretary of Health and Human Services the power to negotiate lower prices for the highest-priced medications for which there is no competition, in addition to other actions.
Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! (And yes, this week’s is a tad late!) –Matthew Holt
In this week’s health care tidbits, you may be wondering what happened to health policy under Joe Biden. He said no to Medicare for All because instead he was going to create a public option and lower the Medicare age to 60. Yet both those two policies seem to have vanished into the night. Presumably that’s because they think they’re a hard political sell and maybe that’s right. But why? This past week a massive study of American consumers shows that Medicare recipients are much happier with their experience than people with employer-based coverage. And employer based coverage is no better than Medicaid! To wit, the study showed:
Compared with those covered by Medicare, individuals with employer-sponsored insurance were less likely to report having a personal physician and were more likely to report instability in insurance coverage, difficulty seeing a physician because of costs, not taking medication because of costs, and having medical debt. Compared with those covered by Medicare, individuals with employer-sponsored insurance were less satisfied with their care.
Compared with individuals covered by Medicaid, those with employer-sponsored insurance were more likely to report having medical debt and were less likely to report difficulty seeing a physician because of costs and not taking medications because of costs. No difference in satisfaction with care was found between individuals with employer-sponsored private health insurance and those with Medicaid coverage.
I guess the new AHIP slogan is, “we’re just as good as Medicaid!” But you have to wonder, why are the rest of us being forced to consume an inferior product?
John Maynard Keynes, the famous British economist, was born and raised in Cambridge, England, and taught at King’s College. He died in 1946. He is widely recognized today as the father of Keynesian economics that promoted a predominantly private sector driven, market economy, with an activist government sector hanging in the wings ready to assume center stage during emergencies.
Declines in demand pointed to recession. Irrationally exuberant spending signaled inflationary increases in pricing, eroding the value of your money. Under these conditions, Keynes encouraged the government and central bank to adjust fiscal and monetary policy to dampen the highs and lows of the business cycles.
Keynesian economics were popularized in America in the 1930’s by a University of Minnesota economist who would go on to become Chairman of Economics at Harvard. For this, he is often referred to as “The American Keynes”, and was highlighted this week in the New York Times by Nobel economist, Paul Krugman, for his association with another tagline, “Secular Stagnation.”
When that economist, Alvin Hansen, first described the condition, he was working on FDR’s Social Security Plan. He defined it as “persistent spending weakness even in the face of very low inflation.” Krugman’s modern-day description? “What we’re looking at here is a world awash in savings with nowhere to go.”
Krugman is not the only economist sounding the alarm. Larry Summers, Harvard economist and Treasury Secretary under Bill Clinton, recently wrote, “The relevance of economic theories depends on context.” On the top of his list of current environmental concerns restricting investment and growth is the strong belief that the number of available workers is in steep decline.
Just days ago the CDC added fuel to the fire when they reported a 2020 birth rate in the U.S. of 55.8 births per 1,000 women ages 15 to 44. That was 4% lower than in 2019, and the lowest recorded rate since we started collecting these numbers in 1909. Our lower birthrate is further aggravated by declines in numbers of immigrants and a flattening of the movement of women into the workforce. Add to this the general aging of our population. To put it in perspective, Americans over 80 now outnumber Americans 2 and under.
Admit it: you’ve been following the story about the huge container ship stuck in the Suez Canal. It’s about the size of the Empire State building laid flat, and somehow ended up blocking one of the busiest waterways in the world.
As serious as this was for global shipping and all of us who depend on it, much hilarity ensued. Memes exploded, using this as a metaphor for almost everything, healthcare included. Once there started to be hope for getting the Ever Given free, people started new memes that it should be “put back.”
Well, I’m a sucker for a funny meme and a good metaphor too. Our healthcare system is that canal, and we’re the unfortunate ship. Only it doesn’t look like we’re getting unstuck anytime soon.
The Ever Given got stuck a week ago. It is one of the world’s largest container ships, but high winds, poor visibility (due to a dust storm), and, perhaps, human error caused things to go sidewise, literally. It got stuck on the banks. Over 300 other ships have been blocked as a result; alternative routes add several thousand miles to the trip, making it a tough choice between waiting/hoping and rerouting.
I spend most of my time thinking about health care, but a recent The New York Times article – How the American Unemployment System Failed – by Eduardo Porter, caught my attention. I mean, when the U.S. healthcare system looks fair by comparison, you know things are bad.
Long story short: unemployment doesn’t help as many people as it should, for as much as it should, or for as long as it should.
It does kind of remind you of healthcare, doesn’t it?
The pandemic, and the associated recession, has unemployment in the news more than since the “Great Recession” of 2008 and perhaps since the Great Depression. Last spring the unemployment rate skyrocketed well past Great Recession levels, before slowly starting to subside. Still, last week almost a million people filed for unemployment benefits, reminding us that unemployment is still an issue.
Keep in mind that unemployment rates do not tell the full story, as they don’t count those only “marginally attached” to the workforce – people who would like to work but have given up – and counts part-time workers who would like to work full time as “employed.” The “true” unemployment rate is reckoned to be much worse than the official rate.
Congress has enacted several COVID relief measures, including in late December, to extend duration, amount, and applicability of unemployment benefits, but our unemployment systems remain predominantly state designed and administered. The shortcomings of these systems have been severely exposed over the past few months: neither the processes nor the actual technologies supporting them proved robust enough for the volume of applicants. Last December Pew Trusts reported that “unemployment payments were weeks late in nearly every state.”
In Part 1 of this series, I reviewed the relevant context of our post-ACA healthcare system to show why President-Elect Joe Biden’s healthcare plan is perfectly reasonable. In this part, I will critically evaluate that plan to show what he got right and what he got wrong or missed altogether.
Joe Biden plans to get rid of the current limit (400% of the federal poverty level) on who qualifies for health insurance premium subsidies and instead convert it to a flat percentage of income (8.5%), which means anyone whose health insurance is going to cost more than 8.5% of their annual income would qualify for a subsidy. And those subsidies would be more generous, being based on a gold-level insurance plan’s price rather than a silver-level insurance plan. He also plans to create a new government-run health insurance company to offer an insurance plan—a “public option”—on the private market, which would be available to private market health insurance shoppers and some other groups as well.
Ok, now for some evaluation of all that.
First, let me frame how I am going to evaluate Joe Biden’s plan.
There are three problems healthcare reformers are usually trying to solve. They want to (1) increase access to care, (2) decrease healthcare prices, and (3) improve the quality of care.
But if we merge the last two goals into one, we can say they want to (1) increase access, and (2) improve the value of care (Value = Quality / Price). We will take these one by one.
Goal 1: Increase Access
How will Joe Biden’s plan do at increasing access?
There are three things to consider when evaluating access-increasing policies. The first is how many people will be covered. The second is how much it will cost. And the third, almost universally forgotten, is how much it will interfere with efforts to accomplish the second goal to improve the value of care.
Feeling good about your holiday spending? You’ve made it through most of this mostly horrible 2020, maybe lost a job or even a loved one, but still probably found a way to buy presents for your loved ones and maybe even to give some money to charity. Indeed, charitable giving was up 7.5% for the first half of 2020, despite the economic headwinds.
Then there’s MacKenzie Scott.
Ms. Scott, as you may recall, is the former wife of Amazon founder/CEO Jeff Bezos. She got Amazon stock worth some $38b in their 2019 divorce, which is now estimated to be worth around $62b. She just gave away $4.2b – and that’s on top of $1.7b she gave away in July.
In case your math skills are impaired, that’s $6b in six months, which Melissa Berman, chief executive officer of Rockefeller Philanthropy Advisors toldBloomberg: “has to be one of the biggest annual distributions by a living individual.” Ms. Scott has vowed: “I will keep at it until the safe is empty.”
Private foundations are required to distribute at least 5% of their endowments each year; Ms. Scott not only has given away 10% of her net worth this year alone, but she hasn’t even used a foundation to do so. As The New York Timesreported: “Ms. Scott’s operation has no known address — or even website. She refers to a “team of advisers” rather than a large dedicated staff.”
She doesn’t make recipients plead for money through grant applications. She doesn’t specify how the money is to be used, or require reports on how it is spent. She doesn’t expect her name on anything. She doesn’t even make public how much she is giving each recipient (although some choose to do so).
I’ve been working on a Spring lecture for President’s College at the University of Hartford titled, “The Constitution and Your ‘Right to Health Care’ in America.”
My description reads, “This lecture explores the recent political history and legal controversy surrounding attempts to establish universal health coverage in America. “Is health care a right?” viewed within the context of the Bill of Rights and especially the 9th and 10th Amendments?”
Self-described libertarian-conservative John R. Graham, a health policy analyst in the Trump administration’s HHS, writing on the topic in 2010 stated that, “As a non-lawyer, my understanding is very simple: The Ninth Amendment states that ‘the enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.’ So, if you claim a ‘right to health care,’ there’s nothing in the Constitution that denies your claim. Indeed, libertarians and conservatives should be more willing to concede a ‘right to health care,’ because once it’s defined as a right, the entire weight of the Constitution comes down against federal (and perhaps even state) control.”
This bit of semantics crash-lands with common sense, as it did in my own state in 1965 when the Supreme Court in a 7 to 2 decision (Griswold v. Connecticut) dismantled an 1873 Comstock Law that prohibited married couples from buying and using contraceptives. Writing for the Court, Justice William O. Douglas declared that “specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees that help give them life and substance.” Though marital privacy was not mentioned in the Bill of Rights, legal analysts have suggested that Douglas was asserting that logic dictated that marital privacy “is one of the values served and protected by the First Amendment through its protection of associational rights, and by the Third, the Fourth, and the Fifth Amendments as well.”
Justice Goldberg concurred at the time, writing: “The language and history of the Ninth Amendment reveal that the Framers of the Constitution believed that there are additional fundamental rights, protected from governmental infringement, which exist alongside those fundamental rights specifically mentioned in the first eight constitutional amendments. . . . To hold that a right so basic and fundamental and so deep-rooted in our society as the right of privacy in marriage may be infringed because that right is not guaranteed in so many words by the first eight amendments to the Constitution is to ignore the Ninth Amendment and to give it no effect whatsoever.”
We are all are anxiously awaiting the approval and delivery of a cure to the novel coronavirus – or better yet, a vaccine.
Amid the race to develop a safe and effective vaccine, some may be inclined to give drug companies a pass on their well-established bad behavior related to pricing and market competition.
But that would be an awfully expensive mistake.
As the COVID-19 pandemic claims more lives and families’ livelihood, policymakers and the public must press drug makers for more information on the products they are developing. The country must be protected against price-gouging for therapies that could bring the pandemic to a halt.
Yes, we need America’s biopharmaceutical companies to develop a cure or vaccine so we can resume our normal lives. And yes, they should be compensated for their work.
Humana has 4m Medicare advantage members with ~2/3rds of those in value-based care arrangements. The report has lots of data about how Humana makes everything better for those Medicare Advantage members and how VBC shows slightly better outcomes at a lower cost. But that wasn’t really what caught my eye. What did was their chart about how they pay their physicians/medical group
What it says on the surface is that of their Medicare Advantage members, 67% are in VBC arrangements. But that covers a wide range of different payment schemes. The 67% VBC schemes include:
Global capitation for everything 19%
Global cap for everything but not drugs 5%
FFS + care coordination payment + some shared savings 7%
FFS + some share savings 36%
FFS + some bonus 19%
FFS only 14%
What Humana doesn’t say is how much risk the middle group is at. Those are the 7% of PCP groups being paid “FFS + care coordination payment + some shared savings” and the 36% getting “FFS + some share savings.” My guess is not much. So they could have been put in the non-VBC group. But the interesting thing is the results.