Private insurance is health care’s pot of gold

https://www.axios.com/jp-morgan-2020-private-health-insurance-prices-costs-1e92f969-bffc-4584-a3c9-e8c4072b5144.html

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Private health insurance is a conduit for exploding health care spending, and there’s no end in sight.

The big picture: Most politicians defend this status quo, even though prices are soaring. And as the industry’s top executives and lobbyists gathered this week in San Francisco, some nodded to concerns over affordability — but then went on to tell investors how they plan to keep the money flowing.

 

Where it stands: More than 160 million Americans get private insurance through an employer or on their own, and per-person spending in that market rose by almost 7% in 2018, the highest annual growth rate in 14 years.

  • “Prices are definitely going up,” Owen Tripp, CEO of health tech startup Grand Rounds, told me this week during the annual J.P. Morgan Healthcare Conference.
  • His company’s vast amount of commercial health data shows big increases in what companies are spending on hospitals, doctors, specialty drugs, devices and out-of-network services.

 

What they’re saying: Many in the industry admit price inflation has been hammering the commercial markets for years.

  • “Cost per unit is the primary driver,” Cigna CEO David Cordani said. He did not mention the exploding costs of administering health insurance.
  • One hospital system at the conference acknowledged that “the number one cause of personal bankruptcy is our industry” — before going on to tell investors about the hospital’s strong margins.

 

Multiple hospital executives claimed they charge commercial plans higher prices to make up for the lower rates they get from Medicare and Medicaid.

  • “Every health system I know of loses money on every Medicaid and every Medicare patient,” Amy Compton-Phillips, a top clinical executive at Providence St. Joseph Health, told me.
  • But the evidence overwhelmingly shows that hospitals’ explanation doesn’t hold water.

 

Drug spending has risen at a slower rate than hospital and physician spending.

  • But in the commercial market, drug companies also have tripled their spending on programs that cover all or part of patients’ out-of-pocket costs, then bill insurers for the full freight.
  • “It’s an intriguing theory,” said Stephen Ubl, CEO of PhRMA, the pharmaceutical industry’s main lobbying group. “But I would be shocked if we were a significant contributor” to the increased private spending.

 

The bottom line: The private market is the main pot of money that everyone is chasing at the J.P. Morgan conference, and most in the industry don’t see the ballooning spending within that market as a problem.

 

 

 

 

The Health 202: Who doesn’t like the new North American trade deal? Pharma.

https://www.washingtonpost.com/news/powerpost/paloma/the-health-202/2020/01/17/the-health-202-who-doesn-t-like-the-new-north-american-trade-deal-pharma/5e20ddda88e0fa6ea99cf6d9/

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Congress has yet to pass major legislation lowering U.S. drug prices. But there are signs within President Trump’s newly passed North American trade deal that the pharmaceutical industry’s grip on lawmakers may be slipping.

The Senate gave the president his long-sought win yesterday just ahead of his impeachment trial, approving in an 89-to-10 vote a sweeping economic pact between the United States, Canada and Mexico that governs more than $1.2 trillion worth of trade between the three countries.

Lawmakers stripped from the final deal several provisions favored by the drug industry that would have boosted efforts by makers of brand-name drugs to quash competition. It was hailed by manufacturers of generic drugs, hospitals and other health providers, who said it sets up a strong and fair foundation for how pharmaceutical products could be treated in future trade agreements with China and the United Kingdom.

The altered U.S.-Mexico-Canada Agreement is “the most balanced trade agreement the U.S. has ever signed,” Jonathan Kimball, vice president of trade for the generic drug group Association for Accessible Medicines, told me.

“I think one of the most important parts of the trade deal is Democrats and Republicans realize the system must change and the bipartisan majority who voted for it have put a marker down that things are changing,” Kimball said.

Indeed, an overwhelming majority of senators from both parties supported the agreement, which the House passed last month by a similarly wide margin, my Washington Post colleagues Erica Werner and Rachel Siegel report. It replaces the 25-year-old North American Free Trade Agreement, something Trump repeatedly pledged in 2016 to do.

What’s most significant about the USMCA and prescription drug development is what it didn’t include.

An earlier version would have set the period in which the makers of new brand name drugs are protected from competition at 10 years. That’s two years less than the current 12-year “exclusion period” — but enshrining it in the trade deal would have required Congress to gain permission from Mexico and Canada before altering it in the future.

The original trade deal would also have created additional pathways for makers of branded drugs to extend their exclusivity periods — a practice that’s already common as they seek to maximize earnings off a drug before it has any generic competitors. The companies argue these longer exclusivity periods are necessary to let them reclaim their spending on research and development.

Such practices typically involve biologic drugs, medicines that come from living cells containing proteins and other materials that can treat diseases such as cancer or rheumatoid arthritis. It’s these biologics that are the biggest driver of high drug prices.

So makers of branded drugs were predictably excited about version 1.0 of USMCA and disappointed by version 2.0. Stephen Ubl, president of the Pharmaceutical Research and Manufacturers of America, said the stripped-down final version “removes vital protections for innovators.”

“The only winners today are foreign governments who want to steal American intellectual property and free ride on America’s global leadership in biopharmaceutical research and development,” Ubl said in a statement the group issued when the House passed the deal in December.

But the rest of the health-care industry sees the USMCA as a rebuke of an industry that’s already under fire for hiking drug prices while continuing to pocket huge profits.

“Congress and the White House have rightly recognized that at a time when 58 million Americans struggle to afford their prescription drugs, it would be a step in the wrong direction to further enable Big Pharma’s anti-competitive tactics,” said Lauren Aronson, executive director of the Campaign for Sustainable Rx Pricing, a coalition of health groups that includes hospitals, doctors and insurance plans.

From a pure trade standpoint, USMCA isn’t terribly consequential for the U.S. drug industry. Canada and Mexico are not even close to the U.S.’s top trading partners of pharmaceutical products.

Rather, it’s China that produces many of the ingredients U.S. drugmakers use to develop their medicines. Any trade agreement Trump negotiates with China if he wins a second term as president will be more important commercially to the industry. And if that time comes, supporters of the USMCA are hopeful the deal will be used as a starting point.

“We think we now have a template moving forward where both Democrats and Republicans have a trade agreement that supports access to affordable medicines,” Kimball said.

 

 

 

 

 

The health care debate we ought to be having

https://www.axios.com/what-matters-2020-health-care-costs-7139f124-d4f7-44a1-afc2-6d653ceec77d.html

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Americans worry a lot about how to get and pay for good health care, but the 2020 presidential candidates are barely talking about what’s at the root of these problems: Almost every incentive in the U.S. health care system is broken.

Why it matters: President Trump and most of the Democratic field are minimizing the hard conversations with voters about why health care eats up so much of each paycheck and what it would really take to change things.

  • Instead, the public debate focuses on ideas like how best to cover the uninsured and the relative virtue of health care “choice.”

The U.S. spent $3.6 trillion on health care last year, and almost every part of the system is pushing its costs up, not down.

 

Hospitals collect the biggest piece of the health care pie, at about $1 trillion per year.

  • Their incentive is to fill beds — to send as many bills as possible, for as much as possible.
  • Big hospital systems are buying up smaller ones, as well as physician practices, to reduce competition and charge higher prices.
  • And hospitals have resisted efforts to shift toward a system that pays for quality, rather than volume.

 

Drug companies, meanwhile, are the most profitable part of the health care industry.

  • Small biotech companies usually shoulder the risk of developing new drugs.
  • Big Pharma companies then buy those products, market them aggressively and develop a fortress of patents to keep competition at bay as long as possible.

 

The money bonanza is enticing some nontraditional players into the health care world.

 

Insurers do want to keep costs down — but many of their methods are deeply unpopular.

  • Making us pay more out of pocket and putting tighter restrictions on which doctors we can see create real and immediate headaches for patients.
  • That makes insurers the most convenient punching bag for politicians.

 

The frustrating reality: Democrats’ plans are engaging in the debate about possible solutions more than the candidates themselves.

  • It’s a tacit acknowledgment of two realities: That controlling the cost of care is imperative, and that talking about taking money away from doctors and hospitals is a big political risk.

 

What they’re saying: The top 2020 Democrats have actually released “insanely aggressive” cost control ideas, says Larry Levitt, executive vice president at the Kaiser Family Foundation. “But they don’t talk about that a lot.”

  • Medicare for All, the plan endorsed by Sens. Bernie Sanders and Elizabeth Warren, would sharply reduce spending on doctors and hospitals by eliminating private insurance and paying rates closer to Medicare’s. Estimates range from about $380 billion to nearly $600 billion in savings each year.
  • Joe Biden and Pete Buttigieg have proposed an optional Medicare-like insurance plan, which anyone could buy into. It would pay providers less than private insurance, with the hopes of putting competitive pressure on private plans’ rates.
  • The savings there would be smaller than Medicare for All’s, but those plans are still significantly more ambitious than the Affordable Care Act or most of the proposals that came before it.

 

Yes, but: The health care industry has blanketed Iowa with ads, and is prepared to spend millions more, to defend the very profitable status quo.

  • The argument is simple: Reframe the big-picture debate about costs as a threat to your doctor or your hospital. It’s an easy playbook that both parties, and the industry, know well. And it usually works.

 

The bottom line: “Voters want their health care costs reduced, but that doesn’t mean they would necessarily support what it would take to make that happen,” Levitt said.

 

 

 

 

How the Health Insurance Industry (and I) Invented the ‘Choice’ Talking Point

It was always misleading. Now Democrats are repeating it.

There’s a dangerous talking point being repeated in the Democratic primary for president that could affect the survival of millions of people, and the finances of even more. This is partly my fault.

When the candidates discuss health care, you’re bound to hear some of them talk about consumer “choice.” If the nation adopts systemic health reform, this idea goes, it would restrict the ability of Americans to choose their plans or doctors, or have a say in their care.

It’s a good little talking point, in that it makes the idea of changing the current system sound scary and limiting. The problem? It’s a P.R. concoction. And right now, somewhere in their plush corporate offices, some health care industry executives are probably beside themselves with glee, drinking a toast to their public relations triumph.

I should know: I was one of them.

To my everlasting regret, I played a hand in devising this deceptive talking point about choice when I worked in various communications roles for a leading health insurer between 1993 and 2008, ultimately serving as vice president for corporate communications. Now I want to come clean by explaining its origin story, and why it’s both factually inaccurate and a political ploy.

Those of us in the insurance industry constantly hustled to prevent significant reforms because changes threatened to eat into our companies’ enormous profits. We were told by our opinion research firms and messaging consultants that when we promoted the purported benefits of the status quo that we should talk about the concept of “choice”: It polled well in focus groups of average Americans (and was encouraged by the work of Frank Luntz, the P.R. guru who literally wrote the book on how the Republican Party should communicate with Americans). As instructed, I used the word “choice” frequently when drafting talking points.

But those of us who held senior positions for the big insurers knew that one of the huge vulnerabilities of the system is its lack of choice. In the current system, Americans cannot, in fact, pick their own doctors, specialists or hospitals — at least, not without incurring huge “out of network” bills.

Not only does the current health care system deny you choice within the details of your plans, it also fails to provide many options for the plan itself. Most working Americans must select from a limited list made by their company’s chosen insurance provider (usually a high-deductible plan or a higher-deductible plan). What’s more, once that choice is made, there are many restrictions around keeping it. You can lose coverage if your company changes its plan, or if you change jobs, or if you turn 26 and leave your parents’ plan, among other scenarios.

This presented a real problem for us in the industry. Well aware that we were losing the “choice” argument, my industry colleagues spent millions on lobbying, advertising and spin doctors — all intended to muddy the issue so Americans might believe that reform would somehow provide “less choice.” Recently, the industry launched a campaign called “My Care, My Choice” aimed in part at convincing Americans that they have choice now — and that government reform would restrict their freedom. That group has been spending large sums on advertising in Iowa during this presidential race.

This isn’t the first time the industry has made “choice” a big talking point as it fights health reform. Soon after the Affordable Care Act was passed a decade ago, insurers formed the Choice and Competition Coalition and pushed states not to create insurance exchanges with better plans.

What’s different now is that it’s the Democrats parroting the misleading “choice” talking point — and even using it as a weapon against one another. Back in my days working in insurance P.R., this would have stunned me. It’s why I believe my former colleagues are celebrating today.

The truth, of course, is that Americans now have little “choice” when it comes to managing their health care. Most can’t choose their own plan or how long they retain it, or even use it to select the doctor or hospital they prefer. But some reforms being discussed this election, such as “Medicare for all,” would provide these basic freedoms to users. In other words, the proposed reforms offer more choice than the status quo, not less.

My advice to voters is that if politicians tell you they oppose reforming the health care system because they want to preserve your “choice” as a consumer, they don’t know what they’re talking about or they’re willfully ignoring the truth. Either way, the insurance industry is delighted.

I would know.