Category Archives: Highly Specialized Drugs

The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

Posted on by • Posted in American Hospital Association (AHA), Congressional Budget Office (CBO), Consumer Price Index (CPI), Cost Management, Cost Reduction, Forecast, Health Policy, Health System, Healthcare Industry, Healthcare Market, Healthcare Price Index, Healthcare Reform, High Cost Therapies, High Deductible Health Plans, High Drug Prices, High Premiums, Highly Specialized Drugs, Hospital, Hospital Industry, Market Outlook, Market Trends, Out of Network, Out of Pocket Expenses, Prescription Drugs, Value-Based Contracting, Value-Based Healthcare • Leave a comment
The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

Last week, 2 important economic reports were released that provide a retrospective and prospective assessment of the U.S. health economy:

The CBO National Health Expenditure Forecast to 2032: 

“Health care spending growth is expected to outpace that of the gross domestic product (GDP) during the coming decade, resulting in a health share of GDP that reaches 19.7% by 2032 (up from 17.3% in 2022). National health expenditures are projected to have grown 7.5% in 2023, when the COVID-19 public health emergency ended. This reflects broad increases in the use of health care, which is associated with an estimated 93.1% of the population being insured that year… During 2027–32, personal health care price inflation and growth in the use of health care services and goods contribute to projected health spending that grows at a faster rate than the rest of the economy.”

The Congressional Budget Office forecast that from 2024 to 2032:

  • National Health Expenditures will increase 52.6%: $5.048 trillion (17.6% of GDP) to $7,705 trillion (19.7% of GDP) based on average annual growth of: +5.2% in 2024 increasing to +5.6% in 2032
  • NHE/Capita will increase 45.6%: from $15,054 in 2024 to $21,927 in 2032
  • Physician services spending will increase 51.2%: from $1006.5 trillion (19.9% of NHE) to $1522.1 trillion (19.7% of total NHE)
  • Hospital spending will increase 51.6%: from $1559.6 trillion (30.9% of total NHE) in 2024 to $2366.3 trillion (30.7% of total NHE) in 2032.
  • Prescription drug spending will increase 57.1%: from 463.6 billion (9.2% of total NHE) to 728.5 billion (9.4% of total NHE)
  • The net cost of insurance will increase 62.9%: from 328.2 billion (6.5% of total NHE) to 534.7 billion (6.9% of total NHE).
  • The U.S. Population will increase 4.9%: from 334.9 million in 2024 to 351.4 million in 2032.

The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024): 

“The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April… Over the last 12 months, the all-items index increased 3.3% before seasonal adjustment. More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month. The index for food increased 0.1% in May. … The index for all items less food and energy rose 0.2% in May, after rising 0.3 % the preceding month… The all-items index rose 3.3% for the 12 months ending May, a smaller increase than the 3.4% increase for the 12 months ending April. The all items less food and energy index rose 3.4 % over the last 12 months. The energy index increased 3.7%for the 12 months ending May. The food index increased 2.1%over the last year.

Medical care services, which represents 6.5% of the overall CPI, increased 3.1%–lower than the overall CPI. Key elements included in this category reflect wide variance: hospital and OTC prices exceeded the overall CPI while insurance, prescription drugs and physician services were lower.

  • Physicians’ services CPI (1.8% of total impact): LTM: +1.4%
  • Hospital services CPI (1.0% of total impact): LTM: +7.3%
  • Prescription drugs (.9% of total impact) LTM +2.4%
  • Over the Counter Products (.4% of total impact) LTM 5.9%
  • Health insurance (.6% of total) LTM -7.7%

Other categories of greater impact on the overall CPI than medical services are Shelter (36.1%), Commodities (18.6%), Food (13.4%), Energy (7.0%) and Transportation (6.5%).

Three key takeaways from these reports:

  • The health economy is big and getting bigger. But it’s less obvious to consumers in the prices they experience than to employers, state and federal government who fund the majority of its spending. Notably, OTC products are an exception: they’re a direct OOP expense for most consumers. To consumers, especially renters and young adults hoping to purchase homes, the escalating costs of housing have considerably more impact than health prices today but directly impact on their ability to afford coverage and services. Per Redfin, mortgage rates will hover at 6-7% through next year and rents will increase 10% or more.
  • Proportionate to National Health Expenditure growth, spending for hospitals and physician services will remain at current levels while spending for prescription drugs and health insurance will increase. That’s certain to increase attention to price controls and heighten tension between insurers and providers.
  • There’s scant evidence the value agenda aka value-based purchases, alternative payment models et al has lowered spending nor considered significant in forecasts.

The health economy is expanding above the overall rates of population growth, overall inflation and the U.S. economy. GDP.  Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic.

As Campaign 2024 heats up with the economy as its key issue, promises to contain health spending, impose price controls, limit consolidation and increase competition will be prominent.

Public sector actions

will likely feature state initiatives to lower cost and spend taxpayer money more effectively.

Private sector actions

will center on employer and insurer initiatives to increase out of pocket payments for enrollees and reduce their choices of providers.

Thus, these reports paint a cautionary picture for the health economy going forward. Each sector will feel cost-containment pressure and each will claim it is responding appropriately. Some actually will.

PS: The issue of tax exemptions for not-for-profit hospitals reared itself again last week.

The Committee for a Responsible Federal Budget—a conservative leaning think tank—issued a report arguing the exemption needs to be ended or cut.  In response,

the American Hospital Association issued a testy reply claiming the report’s math misleading and motivation ill-conceived.

This issue is not going away: it requires objective analysis, fresh thinking and new voices.  For a recap, see the Hospital Section below.

Private insurance’s costs are skyrocketing

Posted on by • Posted in 2020 Election Issues, Health Insurance Industry, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Highly Specialized Drugs, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.axios.com/health-insurance-costs-private-medicare-medicaid-c40bb6f1-c638-4bc3-9a71-c1787829e62e.html?utm_source=The+Fiscal+Times&utm_campaign=7d18fa690b-EMAIL_CAMPAIGN_2019_12_16_10_26&utm_medium=email&utm_term=0_714147a9cf-7d18fa690b-390702969

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The cost of private health insurance is out of control, compared to Medicare and Medicaid. You see that clearly if you take a long-term view of recently released federal data on health spending.

Why it matters: This is why the health care industry — not just insurers, but also hospitals and drug companies — is so opposed to proposals that would expand the government’s purchasing power. And it’s why some progressives are so determined to curb, or even eliminate, private coverage.

By the numbers: Per capita spending for private insurance has grown by 52.6% over the last 10 years.

  • Per-capita spending for Medicare grew by 21.5% over the same period, and Medicaid 12.5%.

Private insurance generally pays higher prices for care than Medicare, which generally pays more than Medicaid.

  • There’s a long-running debate about whether public programs deliver efficiency because of their purchasing power, or simply underpay.
  • Democrats have proposed a variety of steps to curb health care costs, including cutting payments for out-of-network care, competition from a public insurance plan, and steep payment cuts through Medicare for All.
  • Industry opposes most of them.

The bottom line: The industry knows cutting government spending can only go so far. Any effort to rein in health care costs will have to confront the growth in the cost of private insurance.

 

 

 

NY Local employers predict 3.6% increase in health benefit costs in 2020

Posted on by • Posted in Chronic Care Management, Chronic Diseases, Consumerism, Cost Management, Health Insurance Coverage Adequacy, Health Insurance Industry, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Highly Specialized Drugs, Hospital, Hospital Industry, Out of Pocket Expenses, Telemedicine • Leave a comment

https://www.crainsnewyork.com/health-pulse/local-employers-predict-36-increase-health-benefit-costs-2020?utm_source=health-pulse-tuesday&utm_medium=email&utm_campaign=20191028&utm_content=hero-readmore

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Employers in the metro area expect their spending on benefits to rise 3.6% next year after accounting for changes designed to hold down costs, according to an analysis by Mercer.

That trend would be lower than the 3.9% increase employers experienced this year, with local organizations spending $16,059 per active employee. That’s more than 20% higher than the average cost per employee nationwide.

The benefits consultant broke out the responses of 170 employers in New York City, its surrounding counties, northern New Jersey and southern Connecticut for Crain’s from its 2019 National Survey of Employer-Sponsored Health Plans.

In the area, the average contribution to premiums for an individual employee is $199 a month in a PPO plan, $169 a month in an HMO and $107 a month in a consumer-directed health plan, which tends to have a higher deductible.

The median deductible for members in a PPO plan was $500 locally.

Nationwide, there was a split, with the average deductible for businesses between 10 and 499 employees increasing nearly 13%, to $2,285, while employers with 500 or more workers raised the average deductible in a PPO plan just $10, or 1%, to $992.

Companies are looking to telemedicine and management programs for their highest-cost members as ways to keep fees down, said Mary Lamattina, a senior consultant at Mercer. She said most clients she works with have at least one beneficiary with $1 million in annual medical expenses.

“Employers are getting away from cost shifting and looking at other ways to tackle affordability,” she said.

Nationwide, employers spent 3% more on health costs this year, driven in part by specialty drug spending. Costs for specialty drugs rose 10.5% this year.

Ninety percent of employers with 500 workers or more said they viewed monitoring or managing high-cost claimants as important or very important. One strategy companies reported using was introducing a tech-enabled chronic care management program for conditions such as diabetes.

About 88% of large employers said they offer telemedicine as an option, but only 9% of eligible employees had taken advantage of the programs.

Lamattina pointed out that utilization was nearly four times higher at organizations that waived a copay for telemedicine use, compared with employers that charged a $40 copay. “

“Utilization can be driven by the cost,” she said. “Convenience is really key to getting people to use the benefit.” —Jonathan LaMantia

 

Out-of-pocket costs rising even as patients transition to lower-cost care settings

Posted on by • Posted in 2020 Election Issues, Consumerism, Denial Rates, Emergency Care, Health Insurance Coverage Adequacy, Health Policy, Health System, Healthcare Financial Management Association (HFMA), High Deductible Health Plans, High Drug Prices, High Prices, Highly Specialized Drugs, Hospital, Hospital Industry, Out of Pocket Expenses, Primary Care, Rev Cycle Management, Urgent Care • Leave a comment

https://www.healthcarefinancenews.com/news/out-pocket-costs-rising-even-patients-transition-lower-cost-care-settings?mkt_tok=eyJpIjoiWldZeVlXTm1aVEF6TVdKbSIsInQiOiJjbWFzeVA2TGlWZkNkXC9odGxcLzdLczFZSDYxd1hoYW04b0wxY0ljQ25zblpYN1VWc2FMWFFCQWpmc2tCYmE4d1Z3eVdMd2htY3JiSjZ3N2Urek43SHFJbWFsckdRbUNycFJoQjhzZm5VcGpJUUhKUDlBMWF2eGJzRUhmZGFlUUx0In0%3D

Patients saw increases of up to 12% in their out-of-pocket responsibilities for inpatient, outpatient and ED care in 2018.

A new TransUnion Healthcare analysis has found that most patients likely felt a bigger pinch to their wallets as out-of-pocket costs across all settings of care increased in 2018. The new findings were made public yesterday at the 2019 Healthcare Financial Management Association Annual Conference in Orlando.

The analysis reveals that patients experienced annual increases of up to 12% in their out-of-pocket responsibilities for inpatient, outpatient and emergency department care last year.

In 2017, the average inpatient cost was $4,068; the average outpatient cost was $990; and the average emergency department cost was $577.

In 2018, the average inpatient cost was $4,659; the average outpatient cost was $1,109; and the average emergency department cost was $617.

FUELING THE TREND

There are certain factors that are influencing this trend, according to Jonathan Wiik, principal of healthcare strategy at TransUnion Healthcare.

“Patients are becoming more aware that emergency care is expensive and somewhat inefficient,” Wiik said. “No one wants to go to the emergency room unless we have to, because we don’t want to deal with the time there or the expense. They aren’t the best place to get primary or even urgent care.”

Another factor, he said, is that providers realize the emergency department is a care setting of last resort for many. Providers want to make sure that have room in the ED for cases that are real emergencies, so they’re essentially curating their patients, steering patients to the most cost effective settings possible — often primary care, which is the least expensive setting.

Noting that the biggest annual increases were in inpatient and outpatient care, Wiik said that was largely a function of utilization and just a general wariness, in addition to the fact that most EDs have pretty flat contracts. Financial communication with patients is also an issue.

“Most people can’t afford the average out-of-pocket, so providers are really trying to educate patients as early as they can about those costs,” said Wiik. “Emergency care is a really hard place to educate people on finances, let alone collect on them.”

RISING COSTS

The analysis found that, during a hospital visit, patients are likely experiencing cost increases that continue the trend of higher out-of-pocket costs. About 59% of patients in 2018 had an average out-of-pocket expense between $501 and $1,000 during a healthcare visit. This was a dramatic increase from 39% in 2017. Conversely, the number of patients that had an average out- of-pocket expense of $500 or below decreased from 49% in 2017 to 36% in 2018.

And with out-of-pocket costs increasing, the trend toward consumerism is growing as more patients, payers and providers transition to lower cost settings of care.

One example: Inpatient care, traditionally the most expensive healthcare option, has seen a leveling off with the percentage of price estimates remaining at 8% between 2017 and 2018. The percentage of outpatient services estimates, generally about one-quarter of the cost of inpatient services, rose in that same timeframe from 65% to 73%.

“Patients are likely seeing more providers and payers recommending that they take advantage of cost-effective healthcare options, which brings down costs for all parties,” said Wiik. “This is especially important as costs continue to rise in all areas of healthcare, particularly in inpatient, outpatient and emergency department services.”

This is having an impact on providers, payers and patients, he said.

“Let’s pretend Joanna had an MRI in her head, and that ran $3,200. That might have been paid by Blue Cross Blue Shield, and $100 out of Joanna’s pocket. Now Joanna’s paying $300. Most patients don’t look up how much the MRI’s going to be. They just get the bill later and try to figure it out. I think the patient portion of the bill is going to be in the 35, 40% range very soon. What that means is we’re quickly approaching half of the bill coming from the patient and half from the payer. That’s not insurance anymore, that’s a bank account.”

A recent Kaiser Family Foundation study indicated that 34% of patients are finding it difficult to pay their deductible before insurance kicks in. In addition to patients being challenged to make payments, the trend is that providers are also feeling the pressure of increased denial rates and write-offs, which is increasing bad debt.

Considering these factors together — increased out-of-pocket expenses, a patient’s challenge to make payment, and increased denial rates — collecting payments from all payers is critical for providers. In order for providers to ensure they receive payment for the patient-care services rendered, it is vital that they implement strategies that maximize reimbursements.

 

 

The drug pricing debate is stuck in the past

Posted on by • Posted in 2020 Election Issues, ACA, Biologics, Biosimilars, Competition, Food and Drug Administration (FDA), Gene Therapy, Generic Drugs, Generic Entry, Health Policy, High Drug Prices, High Prices, Highly Specialized Drugs, Limited Competition, Out of Pocket Expenses, Patent Protections, Precision Medicine, Preexisting Conditions • Leave a comment

https://www.axios.com/drug-pricing-debate-stuck-in-past-10ba315e-0ddf-4013-8c5a-f8ee89c2f530.html

Illustration of falling pills and coins

There’s a scientific and economic revolution happening in medicine, and the political debate over drug prices isn’t keeping up. Not only are policymakers struggling to agree on solutions, they’re mostly talking about yesterday’s problems.

Why it matters: Medical innovation is already hurtling toward a new era of highly specialized drugs — some are even tailor-made for each individual patient. They may be more effective than anything we’ve seen before, and also more expensive. But the drug-pricing debate is more focused on decades-old parts of the system.

The big picture: “We haven’t really contemplated how we’re going to absorb some of these things,” Food and Drug Administration Scott Gottlieb said. “These are good problems to have…but they are policy challenges.”

Where it stands: Congress is mainly squabbling over proposals to reduce prices by boosting competition — by making it easier to start developing generics, or by changing patent protections that help pharmaceutical companies keep their rivals at bay.

Yes, but: Those regulatory tools were designed for a world in which pharmaceutical companies develop relatively simple drugs and try to market them to a big group of people. But science is rapidly moving away from that world.

  • Gene therapy, for example, is the new wave in cancer treatment. It helps patients’ own immune systems fight off cancer — which means each dose is custom-made for each patient. It’s a highly promising approach, but treatment can come with a price tag north of $1 million once all is said and done.
  • The old dichotomy of a brand-name pill followed by a generic version of that pill doesn’t really hold up for custom-made drugs.
  • So tools that try to promote competition simply may not work as well. “I don’t think they’re solutions for gene therapies because I think you’re ultimately going to have to figure out ways to capitalize those costs,” Gottlieb said.

Even without being custom-made, many new drugs are still trying to treat smaller groups of patients — like people with the same specific genetic mutation.

  • “Generic entry might not prove to be as successful for addressing this problem as it has historically been, and I think it’s because we fundamentally have shifted into these other types of products where competition is just more challenging,” Vanderbilt’s Stacie Dusetzina said.

Most of these new drugs belong to a class known as biologics. They’re more complex than the drugs we’re used to, and therefore have the potential to be more precise in the way they interact with your body.

  • “The way drugs are produced and made now is quite different from the way they were produced and made in the early ‘80s, and that’s both because…you have a lot of these drugs being made for small populations, and for biologics the science is so much more complicated,” said Rachel Sachs, a professor at Washington University.
  • Biologics don’t have traditional generic versions; the equivalent are products known as “biosimilars.”
  • The Affordable Care Act created a pathway for the FDA to approve biosimilars, but that market has been slow to take off, and at least in the early going, biosimilars often don’t offer the same steep discounts as traditional generics.

Promoting competition isn’t the only idea in the world, but more muscular price controls are much more controversial.

  • Most of these new, complex drugs are administered at a doctor’s office, not picked up from a pharmacy. The Trump administration has proposed tying Medicare’s payments for that class of drugs to the lower prices that other countries pay, and Democrats support direct Medicare price negotiations.

The bottom line: “One version of ten years from now will have very limited competition in certain types of markets, either because the market has eroded it to be that way or because the drugs that are coming out will by definition have limited competition,” said Rena Conti, a professor at Boston University.