There are rumblings that a large number of Republican representatives are pushing to reform the Medicare Prescription Drug Program. Hallelujah.
There are several problems with this ill-conceived and poorly-executed program. They are all related to a core issue – the plan is voluntary and appears to be structured to promote adverse selection; that is, only the people that need drugs will sign up for it. Here’s why.
1. The deductible is very low – $250 annually – and cannot be changed by any health plan.
2. Monthly premiums are estimated to be $35 per senior.
3. There is a late enrollment penalty (that only starts in May of 2006) that is 1% per month. To quote Bob Laszewski of Health Policy and Strategy Associates, you can “wait 30 months until you can make money off the drug plan and it will only cost you $10.50 more per month than if you had enrolled at the beginning.”
What does all this add up to?
Well, seniors will run the numbers. They will calculate what they are paying for drugs today, then add up program’s the monthly premium cost, deductible, their co-pay (25% of the cost of their drugs), and compare the two. Seniors that will “make” money will enroll, seniors that won’t benefit, will stay away.
This is not insurance per se; it is just a terrible business proposition.
Bob’s prediction is not many health plans are going to jump at the opportunity to sell these programs; he’s undoubtedly right.
So, the news that some Congressman have decided they don’t like the program is welcome news. It is somewhat distressing, but wholly unsurprising, that they waited until after the election to have this “ah-hah” moment.
Peter Rousmaniere is both a good friend and a very astute observer of things health care, insurance, political, and just plain interesting in nature. He publishes a daily missive entitled “Three Witnesses”; below is an extract from his 12/30/2004 edition.
I am encouraging Peter to enter the world of the blog – if you agree, please email him at firstname.lastname@example.org.
the passage begins – Washington Post economic strains on American workers worsening
Highly edited down – PFR
“Over the past two decades, companies have moved en masse away from traditional pensions in which employers pay the cost and employees get a set amount after retiring. Employer-based health care coverage has fallen as well, not just for workers in low-wage jobs, but increasingly for those in middle-class jobs. One analysis estimates that there were 5 million fewer jobs providing health insurance in 2004 than there were just three years earlier. Overall, nearly 1 in 5 full-time workers today goes without health insurance; among part-time workers, it’s 1 in 4.
Those who manage to keep their benefits often must pick up their share of the higher cost. Employee contributions for family coverage were 49 percent higher in 2004 than they were in 2001, and contributions for individual coverage were 57 percent higher, according to the Kaiser Family Foundation. ”
I was reading a blog from a practicing generalist, who was making the point that health care costs are increasing due to technology, and that this was benefiting patients. There were no statistics to confirm this (longer life expectancies, better survival rates, improved functionality), but I take his point. There is no question technology is improving many people’s lives.
However, technolgy can be a two-edged sword, especialy for those who get a false negative or positive on a prostate cancer screen, and take/don’t take action based on what is acknowledged to be a very poor test.
As one from the “payer” side, I’d recommend we take the argument on health care costs a step further. Like it or not, employers pay a significant portion of health care costs, both directly (premiums) and indirectly (cost-shifting for uninsured, FICA taxes, income taxes, etc.)
The real issue employers have with health care costs is they have NO sense for their return on the investment. And that is the fault of the medical and managed care communities. Employers carefully assess each investment into plant and equipment, personnel and training, investment options and new products. They calculate RoIs carefully, assess performance constantly, and get as comfortable as possible with an expenditure BEFORE they make the investment.
Think about health care – what do employers get? Happy employees? Rarely – health insurance is a terrible “good” – people only use it when they are ill or injured, it is convoluted and difficult to understand, and they have to pay for part of it too!
Actually, what employers SHOULD be thinking about is the demonstrated ability of a health care provider to “deliver” healthy, fully functional employees and families, thereby enhancing productivity and, therefore RoI. Health insurance is an investment in productivity.
If we can evolve to this way of thinking, much of the present bickering about health care costs will end. Sure, there will be arguments about impact rates, who delivers what benefit, and what evaluation methodology makes the most sense, but that will signal we are talking about the right things.
So, the next time someone complains about charges, costs, or premiums, ask them how that “good” will help them function. They won’t know the answer, but perhaps they’ll start thinking about it.
With the nomination of of Mike Leavitt to the post of Secretary of Health and Human Services, President Bush has sent a clear signal of his intentions to drastically reform the Medicaid system. Leavitt, a former governor of Utah, was instrumental in helping Utah secure a waiver from HHS that enabled the state to make significant changes in its Medicaid program.
These changes represented significant trade-offs, namely funding expanded coverage (adding populations not previously covered by Medicaid) by implementing cost sharing for beneficiaries and cutting some benefits.
Mr. Bush has made it quite clear that he intends to move the nation towards the “ownership society”. In the case of Medicaid, the implication is the states will receive block grants of funds from the federal government, funds that they will have significant discretion in regards to how they spend them. According to the LA Times, “In the past, the administration has proposed capping the federal share of Medicaid, currently about $180 billion a year…Medicare faces pressure to cut payments to hospitals and other providers.”
The net result – states will “own” Medicaid, be free to develop and implement their own programs, and do so with minimal interference from the feds.
While this sounds great at first blush, even Republican governors have serious concerns. In essence, their concern is that the President is making Medicaid a “defined contribution” program, thereby limiting the federal government’s future expenditures. This is a marked change from the present “defined benefit” form of Medicaid, where the governments (state and federal) are allocate enough funds to cover the benefits provided to qualified individuals’ costs. Remember, the feds took over the provision of health care to the poor in large part because some states were not doing what federal legislators deemed an adequate job.
In addition to his experience as Utah governor, Mr. Leavitt was head of the EPA and got his start as an insurance broker in Utah. Leavitt is known for his political prowess and willingness to stick to the task. While he will be tasked with Medicare reform and other issues, Leavitt will likely start with Medicaid.
This nomination is the clearest possible signal that Medicaid is in for the biggest change in its forty-some years of existence.
The Piper Report is a health-care oriented blog focused on Medicare, Medicaid, and some employer-based health programs. The author is well-read and well-informed about governmental programs, and seems to be on top of the latest research, with a heavy emphasis on governmental programs pertaining to drug coverage.
For example, Piper’s latest contribution summarizes some of the latest thinking regarding Medicare prescription drug programs.
Other links on Piper’s blog include the National Pharmaceutical Council’s health care cost:quality equation and a prognostication about possible Congressional action on Medicare.
As you travel through the blogosphere, you’ll encounter sites such as Mr. Piper’s that provide a depth of insight into a specific topic unobtainable anywhere else. Kudos to Mr. Piper et al for their willingness to share their perspectives.
The panacea that is drug reimportation is finally getting its due. I’ve been wondering what the big hoopla is regarding “cheap” drugs from Canada and other foriegn nations. Sure, the Canadians and other countries use their monopolistic buying power to negotiate cheap prices from drug manufacturers, and some American consumers may be able to save significant dollars (barring a more significant decline of the US$) by piggybacking on those nations’ smart buying.
But on the whole, buying drugs from Canada is NOT an answer to the US drug cost inflation problem.
A just-published HHS study on the reimportation of drugs demonstrates that this “strategy” provides negligible savings.
Leaving aside the question of how a country that consumes 2% of the world’s pharmaceuticals can supply a nation that consumes over 50%, the real implication is clear – reimporting drugs is no solution. While it may be politically expedient, it is merely allowing US consumers to use the leverage of the Canadian government to buy drugs at a marginally lower cost.
Interestingly, the same US politicians that bought into the (at the time politically attractive) Medicare Drug bill also included provisions prohibiting the US government from negotiating with drug manufacturers. Thus, the politicians refused to allow the US government to employ the same “price lowering” tactics used by the Canadians, tactics that were delivering prices so attractive to voters that these politicians were in favor of allowing drug reimportation.
Have your cake, eat it too, and don’t get fat. Or in this case, please the big pharmas, protect the little guy, and thus preserve both campaign donations and votes. What a great country.
An excellent summary of the issues surrounding drug reimportation is provided by California HealthLine.
A recent post on the HealthBeat blog concerns a 2002 survey of employees of the US FDA. The survey indicates many FDA scientists are concerned about drug safety after approved drugs were on the market.
The study found that fully 2/3 of FDA scientists “lack confidence in the agency’s process for ensuring drug safety…(and) Nearly one in five said they had been pressured to approve or recommend approval for a drug despite safety and quality reservations.”
Other findings addressed drug labeling concerns:
“Only 12% of scientists were completely confident that FDA “labeling decisions adequately address key safety concerns” while 30% were not at all or only somewhat confident”
and perhaps most troubling, internal political pressure to approve new medications:
“Nearly one in five scientists (18%) said that they “have been pressured to approve or recommend approval” for a drug “despite reservations about the safety, efficacy or quality of the drug.”
The full study, conducted by the Office of the Inspector General of DHHS, reports on potentially dangerous gaps in the approval and marketing of prescription drugs.
As pressure grows on the FDA in the wake of the Cox-2 fiasco (Vioxx and Celebrex to the layperson), it is likely this survey will get increased attention.
Of note, the present head of CMS (Center for Medicare and Medicaid Services, Dr. Mark McClellan, was formerly the Commissioner of the FDA.
McClellan was Commissioner from 11/2002 to 3/2004, so his tenure post-dated the survey.
The HealthLawProf blog has an interesting post about the need for the FDA to set up an independent testing arm. The post opines positively about this idea and makes a solid case.
The blog cites a NYT article, and provides a good synopsis (brief and to the point).
The Agency for Healthcare Reseach and Quality (AHRQ), recently published a study examining hospital admission patterns. The study indicates that a significant percentage of admits could have been eliminated if the patient had received appropriate care earlier.
It will be no surprise to faithful readers that there is significant variation across geography, with rates highest in the west. AHRQ theorizes that this is due at least in part to the greater distances people in rural areas have to travel to seek care; thus preventing them from receiving care earlier in the disease process.
Poverty, rural locations, and diagnosis are also key variables influencing the “avoidable admit” rate. There was much more variation for chronic than for acute conditions:
“Among the 10 chronic conditions, differences in admission rates between the lowest and highest income communities range from 76 to 278 percent.”
The report notes significant cost implications –
“Potentially preventable hospitalizations are a significant issue with regard to both quality and cost. During the year 2000, nearly 5 million admissions to U.S. hospitals involved treatment for 1 or more of these conditions; the resulting cost was more than $26.5 billion.1 While some hospitalizations were likely inevitable, many might have been prevented if individuals had received high quality primary and preventive care. Identifying and reducing such avoidable hospitalizations could help alleviate the economic burden placed on the U.S. health care system. Assuming an average cost of $5,300 per admission, even a 5 percent decrease in the rate of potentially avoidable hospitalizations could result in a cost savings of more than $1.3 billion.”
Medpundit, a blog published by a practicing MD has an excellent and brief summary of the recent Celebrex news. The net is celebrex increases the risk of cardiovascular events significantly; and the higher the dose, the greater the risk increase.
While we can blame the FDA, the big pharmas, consumers, physicians, and the big bad wolf, our time will be much better spent learning from this fiasco.
Early lesson – stick with the proven meds, which in this case are Tylenol et al, and ibuprofen et al. They have the benefit of much lower cost, very similar outcomes, and a much longer track record.