Part of the reason why medical debt is so high is because many Americans don’t have enough savings to pay their deductibles and other out-of-pocket costs, according to a second KFF analysis.
Driving the news: Health insurance plans’ out-of-pocket limits prevent enrollees from paying limitless sums of money for medical care. But that doesn’t mean they protect people from having to pay several thousands of dollars — which not everyone has lying around.
- Deductibles alone, which people must pay before coverage for most services kicks in, are frequently thousands of dollars and can exceed the amount of liquid assets a household has.
By the numbers: Over 40% of multi-person households can’t cover a mid-range employer family plan deductible of $4,000, and 61% don’t have enough to cover a high-range deductible.
- The ability to pay out-of-pocket costs varies significantly by income.
Americans owe at least $195 billion of medical debt, despite 90% of the population having some kind of health coverage, according to new research from the Peterson Center on Healthcare and the Kaiser Family Foundation.
Why it matters: People are spending down their savings and skimping on food, clothing and household items to pay their medical bills, Adriel writes.
About 16 million people, or 6% of U.S. adults, owe more than $1,000 in medical bills, and 3 million people owe more than $10,000.
- The financial burden falls disproportionately on people with disabilities, those in generally poor health, Black Americans and people living in the South or in non-Medicaid expansion states, per the research.
Go deeper: 16% of privately-insured adults say they would need to take on credit card debt to meet an unexpected $400 medical expense, while 7% would borrow money from friends or family, per the research, which focused on adults who reported having more than $250 in unpaid bills as of December 2019.
It’s not yet clear how much the pandemic and the recession factor into the picture, in part because many people delayed or went without care. There also was a small shift from employer-based coverage to Medicaid, which has little or no cost-sharing.
- While the new federal ban on surprise billing limits exposure to some unexpected expenses, it only covers a fraction of the large medical bills many Americans face, the researchers say.
The Mark Cuban Cost Plus Drug Co. launched its online pharmacy in January, offering low-cost versions of high-cost generic drugs. And it all started with a cold email.
Alex Oshmyansky, MD, PhD, fired off an email to Mr. Cuban with a simple subject line: “Cold pitch.” The then 33-year-old radiologist told Mr. Cuban about work he was doing in Denver with a compounding pharmacy and the business plan behind a company he founded in 2018, Osh’s Affordable Pharmaceuticals.
“I asked him a simple question, because this was when the whole pharma bro thing was going down,” Mr. Cuban said on NPR podcast The Limits, referring to convicted felon Martin Shkreli. “I was like, ‘Look, if this guy can jack up the prices 750 percent for lifesaving medicines, can we go the opposite direction? Can we cut the pricing? Are there inefficiencies in this industry that really allow us to do it and really make a difference?'”
Dr. Oshmyansky answered yes. Their weekly email correspondence continued for months. The Mark Cuban Cost Plus Drug Co. was quietly founded in May 2020, and Dr. Oshmyansky now serves as its CEO. The company is organized as a public-benefit corporation, meaning it is for-profit but claims its social mission of improving public health is just as important as the bottom line.
“We basically created a vertically integrated manufacturing company that will start with generic drugs,” Mr. Cuban told NPR. A major component of the strategy is to bypass pharmacy benefit managers, which Mr. Cuban likens to bouncers at a club.
“They’re the ones who say, ‘Hey, I’m controlling access to all the big insurance companies. If you want this insurance company to sell your drug, you’ve got to pay the cover charge. All these drugs pay the cover charge to these PBMs through rebates, and because they’re paying the cover charges, the prices are jacked up,” Mr. Cuban told NPR. “We said we’re going to create our own PBM, we’re going to work directly with the manufacturers, and we’re not going to charge the cover charge.”
The Mark Cuban Cost Plus Drug Co. marks the prices of its drugs up 15 percent, charges a $3 pharmacy fee to pay the pharmacists it works with, and a fee for shipping. “That’s it,” Mr. Cuban said on NPR. “There’s no other added costs. The manufacturers love what we’re doing for that reason.”
Others have set out before to disrupt pharma the way Mr. Cuban and Dr. Oshmyansky intend, but their downfall is cooperating or giving in to the PBMs, the entrepreneur noted.
“People always ask, well why didn’t somebody do this before? The reality is there’s so much money there, it’s hard not to be greedy,” Mr. Cuban said on the podcast. “If you get to any scale at all, those PBMs will start throwing money at you and saying, ‘Look, just play the game.’”
Mr. Cuban has indicated he has no intention to play the game.
“I could make a fortune from this,” Mr. Cuban told Texas Monthly last fall. “But I won’t. I’ve got enough money. I’d rather f— up the drug industry in every way possible.”
Net prices of brand-name drugs have increased significantly over the last decade. But savings from generics have driven average prescription prices down in Medicare and Medicaid, Axios’ Caitlin Owens writes about a new analysis by the Congressional Budget Office.
Why it matters: The analysis reiterates that the generic market is largely working as it’s intended to.
By the numbers: The average net price of a prescription fell from $57 in 2009 to $50 in 2018 in Medicare Part D, and from $63 to $48 in Medicaid.
- The drop is largely attributable to the growing use of generics, which jumped from 75% to 90% of all prescriptions nationally during that time frame. The average price for a generic prescription also fell in both programs.
- But the average net brand-name prescription price more than doubled in Part D and increased by 50% in Medicaid, per the analysis. These increases were driven by higher launch prices for new drugs and price increases for drugs already on the market.
Job losses from the COVID-19 pandemic are the highest since the Great Depression. A year and a half later, most Americans who lost their health insurance along with their job remain uninsured.
Most Americans who lost their jobs and health insurance more than a year ago remain uninsured.
Over 1,200 Americans who are still unemployed due to COVID-19 were surveyed by AffordableHealthInsurance.com. At least four out of five in all participants don’t have insurance coverage.
To be exact, 56% of Americans who remain unemployed since being laid off due to the COVID-19 pandemic lost their health insurance along with their job. In addition, 23% of workers did not have employer-provided health insurance prior to losing their jobs.
Even before the pandemic, small businesses struggled to absorb the cost of providing health insurance to their employees, said health insurance advisor and nursing consultant Tammy Burns in the Affordable Health Insurance study.
“Companies have cut costs by going with high-deductible plans and sharing less of the cost towards the insurance,” Burns said. “This makes it cheaper for employees to get their own health insurance through the Affordable Care Act (ACA) marketplace. At larger companies, health care costs are growing faster than worker wages, so a large amount of an employee’s check goes to insurance. Therefore, many workers opt out because they can’t afford it.”
Majority of Those Who Lost Health Insurance Still Lack Coverage
Of the 56% of unemployed Americans who lost their health insurance along with their job, 81% are still uninsured.
This lack of coverage is impacting certain groups more than others. There are also several contributing factors to why the number of unemployed Americans without health insurance remains high.
These factors are:
- Men more likely to remain uninsured than women
When broken down by gender, men are more likely than women to have lost their health insurance when they lost their jobs at 66% and 44%, respectively. However, women are twice as likely as men to have not had health insurance in the first place at 31% and 16%, respectively.
Currently, men are slightly more likely to still be uninsured. Eighty-four percent of male survey respondents do not currently have health insurance, compared to 75% of women.
- Majority of unemployed Millennials, Gen Xers still uninsured
Our survey also found that certain age groups are more likely than others to still be uninsured after a pandemic-related job loss.
Eighty-six percent of individuals ages 35 to 44, and 84% of both 25 to 34 year-olds and 45 to 54 year-olds remain without health insurance after being laid off. Comparatively, 67% of unemployed individuals 18 to 24, and 58% of those older than 55 are still uninsured.
Americans ages 25 to 44 are also the age group most likely to have lost their health insurance when they were let go from their jobs (66%).
- Inability to Afford Private Insurance The Top Reason to Remain Uninsured
The high cost of individual insurance is the number one reason Americans still unemployed from the pandemic remain uninsured.
Sixty-seven percent of those uninsured can’t afford private health insurance. Eleven percent of people who still lack health insurance say they did not qualify for government-funded health insurance, despite the fact that a number of states expanded access to Medicaid during the pandemic.
A lack of understanding about how the ACA marketplace works may also play a role in why uninsured Americans are not pursuing all possible avenues to get health insurance.
“People are scared of the ACA because it involves a lot of personal information, like taxes,” Burns said. “I have found that many people are afraid it is ‘the government being in my business.’ There is a lack of knowledge about how helpful and affordable the ACA is now. There needs to be better education about this program.”
- One in five uninsured Americans choose not to have health insurance
The survey also found 20% of unemployed Americans who are uninsured choose to forgo health insurance altogether.
This is particularly true for men, 22% of whom are choosing not to have health insurance, compared to 15% of women.
Younger adults are also more likely than older Americans to opt out of health insurance if they are unemployed. Twenty-five percent of 25 to 34 year-olds, and 20% of 25 to 34 year-olds choose not to have health insurance.
- Medication, Routine Checkups Skipped Due to Lack of Insurance
A lack of insurance has serious short- and long-term implications for individuals’ health and well-being. The biggest impact: 58% of uninsured individuals are no longer getting routine care, which could hinder their ability to identify more serious underlying issues.
Other impacts include no longer taking doctor-prescribed medication (56%); delaying planned medical procedures (46%); not seeking treatment for chronic issues (44%), and no longer receiving mental health treatment (41%).
- Three-quarters of older Americans not getting regular check-ups
Our survey also found that those at greater risk for medical issues, based on age, are the most likely to be skipping their routine check-ups. Three-fourths of uninsured individuals over the age of 55 (76%) say they are not going for regular doctor visits because of their lack of insurance, the highest percentage of any age group.
Meanwhile, 64% of individuals 35 to 44 are not taking doctor-prescribed medication, which can have both short- and long-term negative effects.
- Majority of Uninsured Americans “Very likely” to be Financially Devastated by Medical Emergency
Given that so many individuals are already hard-pressed to afford health insurance, it’s not surprising that many of them will also be in a dangerous place financially if there is a medical emergency.
Fifty-nine percent of uninsured people are “very likely” to be financially devastated by a medical emergency, while another quarter are “somewhat likely” to face financial ruin in the event of a medical emergency.
How much should we pay for drugs? That’s the question at the center of American Hospital Association v. Becerra, a sleeper of a case involving billions of dollars in federal spending and a chance to reshape two doctrines at the heart of administrative law.
Drugs, money, and the law: Sounds sexy, right? Still, you could be forgiven for never having heard of the case, which will be argued on Tuesday. It arises out of a technical dispute over how Medicare, the federal program that insures 63 million elderly and disabled people, pays for some of the drugs that hospitals dispense to patients in outpatient departments — in particular, chemotherapy drugs and other expensive anti-cancer medications.
The case centers on part of a 2003 law that gives Medicare two options for how to pay for those drugs. Under the first option, Medicare would survey hospitals about what it cost them to acquire the drugs. Medicare would then draw on the survey data and reimburse hospitals for their “average acquisition costs,” subject to variations for different types of hospitals. It’s a rough-cut way to make hospitals whole without requiring them to submit receipts for every drug purchase.
But Medicare immediately encountered a problem: It just wasn’t practical to survey hospitals about their acquisition costs. Fortunately, the law anticipated that possibility and gave Medicare a second option. In the absence of survey data, Medicare could pay the “average price” for the drug, “as calculated and adjusted by the Secretary [of Health and Human Services] as necessary for purposes of this [option].”
This approach turned out to be costly. A drug’s “average price” is fixed elsewhere in the Medicare statute, typically at 106% of the drug’s sale price. As a policy matter, this “average sales price plus 6%” approach is hard to defend. Because 6% of a large number is bigger than 6% of a small number, hospitals have an incentive to dispense more expensive drugs, even when there are cheaper and equally effective therapies.
Other developments soon made the payment policy look even more dubious. Back in 1992, Congress created something called the 340B program to support health-care providers that serve poor and disadvantaged communities. Eligible providers get steep discounts on the drugs that they purchase — anywhere between 20% and 50% of the normal price.
Initially, few hospitals qualified for the 340B program. Today, more than two-thirds of nonprofit hospitals participate. (For-profits are excluded from the program.) For years, Medicare kept paying those 340B hospitals 106% of the average sales price of their outpatient drugs. The upshot was that hospitals were buying highly discounted drugs and then charging the federal government full price. That heightened the incentive to prescribe very expensive medications — which is partly why Medicare spending on outpatient drugs has ballooned, growing an average of 8.1% per year from 2006 through 2017.
Federal regulators were troubled by the gap between hospital costs and Medicare payments. In their view, the point of the 2003 statute was to cover hospitals’ costs, not to subsidize 340B hospitals. That jibes with the Medicare statute more generally: Its “overriding purpose” is to provide “reasonable (not excessive or unwarranted) cost-based reimbursement.”
So Medicare adopted a rule that, starting in 2018, slashed the reimbursement rate for 340B hospitals’ outpatient drugs (or, more precisely, a subset of them) to 22.5% less than the average sales price. That was still generous, since on average the 340B discount is about one-third of a drug’s price. But it was much less generous than before, and Medicare estimated that the change would save taxpayers $1.6 billion every year.
The American Hospital Association, together with two hospital trade groups and three hospitals, filed suit. Had Medicare chosen option one, the plaintiffs argued, it could have focused on acquisition costs and even distinguished among hospital groups in setting payment rates. Instead, it chose option two, which says that Medicare must pay a drug’s “average price” — not its acquisition price — and doesn’t provide for discriminating between hospitals. While the plaintiffs acknowledged that Medicare could “adjust” the average price, they argued that a cut from 106% to 77.5% of the average sales price was not really an adjustment. It was a wholesale revision of the statutory scheme.
The plaintiffs encountered an obstacle right out of the gate. To prevent courts from second-guessing Medicare’s choices about how much to pay for outpatient care, the Medicare statute says that “[t]here shall be no administrative or judicial review” of those choices. In the government’s telling, Congress precluded review because Medicare has a fixed annual budget for outpatient care. Increasing payments for one type of care thus requires cutting payments for other types of care.
That linkage means that, if the plaintiffs win, it’s not just that they should have been paid more for certain drugs. It’s that all hospitals should have been paid less for other services. (That helps explains why coalitions representing rural and for-profit hospitals have filed amicus briefs in support of Medicare.) Unwinding that decision would be an administrative nightmare — which is why Congress precluded review in the first place.
As the plaintiffs see it, however, the government simply misreads the scope of the preclusion language. Though it generally precludes review of reimbursement decisions relating to outpatient care, it doesn’t cross-reference the subsection relating to outpatient drugs. Both the district court and the U.S. Court of Appeals for the District of Columbia Circuit agreed, invoking the strong presumption favoring judicial review of agency action.
On the merits, the plaintiffs fared less well. Though they won in the district court, the D.C. Circuit held that Medicare reasonably read the 2003 law to allow it to align hospital reimbursement with hospital acquisition costs. Medicare’s interpretation — and the scope of its authority to “adjust” payment rates — was thus owed deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, a 1984 decision holding that courts generally should defer to agencies’ reasonable interpretations of ambiguous statutes. Judge Cornelia Pillard dissented, arguing that the statute unambiguously foreclosed Medicare’s interpretation.
The plaintiffs asked the Supreme Court to review a single question: whether Medicare should receive Chevron deference for interpreting the 2003 law in the manner that it did. Tantalizingly, the plaintiffs noted that “[i]t is no secret that members of this Court have raised concerns about whether Chevron deference, particularly when applied as indiscriminately as it was in this case, violates the separation of powers.”
The Supreme Court bit. In its order granting certiorari, however, the court instructed the parties to brief an additional question: whether the Medicare statute precludes the lawsuit. What that means is that — in addition to resolving whether hospitals are entitled to billions of taxpayer dollars — the court will have the chance to address two foundational doctrines of administrative law: the presumption of reviewability and Chevron deference.
Arguably, AHA v. Becerra offers an unusually vivid example of the costs of a strong presumption of reviewability. If the plaintiffs win, what’s the remedy? Is Medicare supposed to reopen every outpatient payment decision that it’s made since 2018, given that paying more for 340B drugs means it should have paid less for other services? The plaintiffs say no, arguing that Medicare wouldn’t be required to make any retroactive adjustments. But the government fears otherwise and the answer is not at all clear. Isn’t that the kind of mess that preclusion is meant to avoid?
I’ve called in my academic work for abandoning the presumption of reviewability precisely because it disrespects Congress’ reasonable desire to shield some administrative decisions from judicial review. In recent years, however, the Supreme Court has evinced no interest in doing so — the presumption of reviewability remains “strong.” We may soon find out just how strong it is.
But the big question about the case is whether the court will use it as a vehicle to reconsider Chevron deference. In the plaintiffs’ view, it is galling — “an affront to the separation of powers” — that the courts would defer when Medicare has exploited a purported ambiguity to sidestep Congress’ clear instructions about how much to pay hospitals. Several of the conservative justices, including in particular Justices Clarence Thomas and Neil Gorsuch, may be receptive to the argument. If so, the right wing of the court could use the case to narrow or even overturn Chevron, with potentially dramatic implications for the scope of executive-branch power.
Whether the court will do so is anyone’s guess. The justices could easily resolve the case on narrower grounds. Maybe the statute unambiguously forecloses Medicare’s interpretation of the law, as the plaintiffs argue. Or maybe, as the government claims, Medicare properly exercised its explicit authority to “adjust” prices for outpatient drugs.
Neither of those holdings would be the sexiest decision that the Supreme Court has ever issued. It would be technical, arcane — even boring. Given the financial stakes, however, it would be significant nonetheless.
After months of negotiations, House Democrats on Friday passed their version of the Build Back Better bill—an expansive $1.7 trillion package that contains some of the largest health reforms since the Affordable Care Act’s passage in 2010.
While the overall scope of the bill is roughly half the size of President Biden’s original $3 trillion proposal, many of Democrats’ key health care provisions made it in, albeit with some modifications. What’s more, the Congressional Budget Office projected that while the overall bill would add $367 billion to the deficit over the 10 year period, the health care provisions would all be largely paid for by provisions aimed at lowering drug prices.
Below, I round up the five biggest health care changes included in the House bill.
1. Health care coverage expansions
The House bill leverages the ACA’s exchanges and federal tax credits to expand access to coverage in two ways. First, the bill would extend the American Rescue Plan’s enhanced ACA tax credits through 2025. The enhanced tax credits, which are currently slated to expire in 2023, fully subsidize coverage for people with annual incomes up to 150% of the federal poverty level (FPL) and have enabled people above 400% FPL to qualify for subsidies and capped their premium costs at 8.5% of their incomes.
While Democrats had originally proposed to permanently expand those subsidies, they ultimately had to scale back this—and other proposals—to ensure they could cover the costs. But as we’ve seen in the past, it is much harder to take away an existing benefit or subsidy than it is to create a new one—so while the current bill was able to cover the cost of the health care provisions by making them temporary, lawmakers will have to revisit the tax credits before 2025 and find new money to either further extend them or permanently authorize them. This is one of several health care provisions we could see the Senate take a closer week at in the coming weeks.
Second, the House bill takes aim at the so-called Medicaid coverage gap. The bill would enable residents below 138% FPL who live in states that have not expanded their Medicaid programs to qualify for fully subsidized exchange plans through 2025. While an earlier version of the House bill included language for a new federal Medicaid program covering those below 138% FPL who live in non-expansion states to begin in 2025, the final House bill contains no such program.
Instead, the bill aims to encourage non-expansion states to expand their Medicaid programs by reducing their Disproportionate Share Hospital (DSH) payments by 12.5% beginning in 2023—a significant cut that the American Hospital Association (AHA) estimates would reduce DSH payments in those states by $2.2 billion over five years and $4.7 billion over 10 years. At the same time, expansion states would see their federal match for spending on the Medicaid expansion population rise from 90% to 93% from 2023 through 2025.
While the AHA and others are pushing back against the proposed DSH payment cuts—the move addresses the moral hazard component that critics raised about earlier versions. It no longer rewards holdout states for not expanding their programs—effectively punishing those who did and are now on the hook for 10% of their expansion population’s costs. It’s a clever move, and one we’ll be watching to see if it survives the Senate.
2. New Medicare benefits.
The House bill adds a hearing benefit to Medicare beginning in 2023. The hearing benefits would cover hearing aids and aural rehabilitation, among other services. While this is certainly a win for many Medicare beneficiaries who do not have or cannot afford private Medicare Advantage plans, this is significantly scaled back from the original proposal to add hearing, as well as dental and vision benefits.
However, given that Sen. Bernie Sanders (I-Vt.) has named Medicare benefit expansions as one of his top priorities, it’s possible we could see this topic revisited in the Senate. But any meaningful change would mean Democrats need to find more money to cover the costs—and so far, that has proved challenging.
3. Medicaid home and community care.
The House bill allocates $150 billion for home- and community-based care. The funding would be used to help increase home care provider reimbursement rates and help states bolster home- and community-based care infrastructure.
While the funding is down from an original proposal of $400 billion, the Biden administration—and the Covid-19 pandemic—have made it clear that home-based health care will continue to grow and be a key player in the U.S. health care delivery system. Providers looking at their offerings should keep an eye on how states are investing these funds and building out home-based health care delivery in their areas.
4. Lowering the costs of prescription drugs.
Democrats scored a huge win in the House bill, and that is securing Medicare authority—albeit narrower authority than they sought—to negotiate prices for some of the highest-priced Part B or Part D drugs. Under the bill, HHS would be able to select 10 drugs to negotiation in 2025, up to 15 drugs in 2026 and 2027, and then up to 20 drugs per year in 2028. To be eligible for negotiation, a drug could no longer be subject to market exclusivity.
Drug manufacturers that do not negotiate eligible drug prices could be subject to an excise tax. This was perhaps one of the most contentious provisions debated in the health care portions of this bill. Democrats for years have been seeking to give Medicare drug pricing authority, but intense lobbying and Republican—and some Democrat—objections have kept this proposal on the shelf. While it’s not the first time the House has passed a bill with drug price negotiation—it is the first time we are in a place where the Senate could reasonably pass either this or a modified version of the proposal.
The bill also would redesign the Medicare Part D benefit to create an annual cap of $2,000 on seniors’ out-of-pocket drug costs, and impose an inflation rebate on drug manufacturers’ whose drug prices rise faster than inflation (based on 2021) in a given year.
5. Other notable provisions.
The House bill also includes provisions to permanently fund CHIP, bolster the country’s pandemic preparedness and response, and bolster the health care workforce through new training and workforce programs, the nation’s first permanent federal paid family and medical leave program, investments in childcare, and more.
While the health care provisions in the House bill are notable, it’s important to remember that this is not the end of the road. The House bill now goes to the Senate, where the Senate parliamentarian will check provisions against the Byrd rule—a Senate rule requiring reconciliation bills to meet certain budgetary requirements.
Democrats also will enter a new round of negotiations, and industry groups—including PhRMA and AHA—are expected to launch a new round of lobbying. PhRMA objects to the bill’s drug price negotiation provision and AHA is fighting the provision to reduce DSH payments in non-Medicaid expansion states by 12.5%. Any Senate-passed reconciliation bill will need to go back to the House for final approval before it can go to Biden’s desk.
But this is not the only thing on lawmakers’ plates in December. Members of Congress also face several other deadlines, including addressing looming physician payment cuts and passing end of the year spending bills. The short-version is, while there’s a lot to learn from the House-passed bill, it’s possible the Senate version could look very different—and it may take several weeks before we see that bill take shape.
Monthly premiums that cover physician and outpatient care for Medicare patients will increase by 15% next year, the Biden administration said in a notice Friday evening.
Why it matters: People on Medicare are getting slammed with a big hike during an election year, due largely to the big price tag from the questionable Alzheimer’s treatment, Aduhelm, and uncertainty stemming from the coronavirus.
By the numbers: Standard Medicare Part B premiums will be $170.10 per month next year, up from $148.50 per month this year.
- That equals an extra $259.20 in extra costs over the course of the year, just in premiums.
- The Part B deductible also is increasing 15%, from $203 to $233.
Between the lines: Medicare is still determining whether it will pay for Aduhelm yet, but federal actuaries have to plan for a “high-cost scenario of Aduhelm coverage,” regulators said.
- The FDA approved Aduhelm in June, and Biogen priced Aduhelm at $56,000 per year on average.
- That price tag, along with all of the hospital and doctor costs associated with administering the drug and ancillary tests, could lead to “very significant” costs for the taxpayer-funded program, according to the notice.
The bottom line: The pandemic has made it difficult to predict future Medicare spending, such as trying to determine whether patients will get more non-COVID care that had been put off.
- But Aduhelm — a treatment that has not conclusively proved that it improves brain function of Alzheimer’s patients — is now a high-profile example of pharma pricing power affecting Medicare patients’ pocketbooks and represents a redistribution of taxpayer money into Biogen’s coffers.