Welcome to the New Health-Care Debate

https://www.bloomberg.com/view/articles/2018-08-03/health-care-debate-helps-republicans-hurts-conservatives

America’s health-care debate is entering a new phase. Liberals, inspired by self-described socialists such as Senator Bernie Sanders and Representative-to-be Alexandria Ocasio-Cortez, are excited about the possibility of “Medicare for All.” Republicans have at the same time largely abandoned efforts to enact major reforms of health care.

This new phase of the debate is full of opportunity for Republicans, and peril for conservatives.

But perhaps it would be better to say that the debate is reverting to an older pattern. For roughly four decades, liberals have highlighted the flaws of the existing health-care system, chiefly high costs and unequal access, and proposed increased governmental involvement as the solution. Conservatives talked up the dangers of bigger government, chiefly even higher costs and the disruption of existing arrangements, and reminded voters of the virtues of the status quo.

Most of the time, health care has been a back-burner issue, and discontent with the system has been a modest source of political strength for liberals. When health care has become a dominant issue, however, public fear of disruption has helped conservatives. From 2009 through 2016, Republicans were able to exploit public unhappiness with the changes that Obamacare first threatened to make and then did make.

There have been two brief exceptions to this pattern. In 1995-96 and 2017-18, Republicans advanced their own sweeping changes to health policy. Led by Newt Gingrich 20 years ago, they tried to reform Medicare and Medicaid. Over the last two years, they tried to replace Obamacare and reform Medicaid. 1

Both times the public’s fear of change was turned against Republican politicians, who did not like the pressure one bit. Most of them are relieved to have dropped their party’s Obamacare and Medicaid proposals. They are eager to settle into the familiar role of criticizing liberal health-care proposals.

There’s plenty to criticize. In polls, most people say they like their existing insurance policies — which may be a way for them to signal to politicians that they fear their meddling with those policies. The single-payer plans that are ascending among Democrats would by definition threaten most existing coverage.

These plans pose much bigger political risks than Obamacare did. Obamacare was carefully designed to insulate Democrats from charges that they were turning people’s coverage upside down.

In selling the legislation, President Barack Obama spent much of his time reassuring people that they could keep their doctors and their insurance plans if they liked them. The law mostly avoided changes to the employer-provided coverage through which most Americans get health care.

Yet Obamacare still provoked a backlash. That backlash was especially intense when, in the fall of 2013, it resulted in a significant number of plan cancellations. But many voters have also resented the narrower networks and higher premiums and deductibles that Obamacare has foisted on them.

As even more sweeping left-wing proposals move to the center of the debate, Republicans can reclaim the advantage of opposing disruption. But they may also again be saddled with the disadvantage of being associated with an unsatisfactory status quo.

They are in charge of Congress and the White House; they have been talking about reworking the health-care system for years; and they have succeeded in making significant changes, albeit much less ambitious ones than they sought. They have, for example, ended the fines on people without health insurance that were a major part of Obamacare. In addition, the Trump administration is in the process of liberalizing the rules for short-term insurance plans that do not have to comply with the regulations Obamacare imposes on most other plans.

The Republicans therefore have some, and growing, political ownership of the health-care system. The more they argue against left-wing proposals to change the system, the more ownership they will have.

For Republican politicians, defending even a flawed status quo is probably preferable to trying to impose disruptive changes to it. But if they adopt that position, it will mean that the only solutions on offer to popular concerns about health care will be left-wing ones.

It will mean, as well, that occasionally liberals will have enough political power to enact some, and maybe a lot, of their preferred changes to the system. We will move, that is, toward a health-care system with a larger and larger degree of governmental control even as Republicans make political gains by resisting that trend.

The new shape of the debate may be good news for Republican politicians, then, but it’s bad news for conservatives who favor limited government and free markets.

  1. Arguably there was a third exception: In 2011 and 2012, Paul Ryan led congressional Republicans to endorse increasing competition within Medicare as part of their budget proposals. They did not, however, attempt to advance legislation that would actually change Medicare.

 

 

 

 

Chart of the Day: Where Prescription Drug Spending Goes

http://www.thefiscaltimes.com/2018/08/03/Chart-Day-Where-Prescription-Drug-Spending-Goes

 

U.S. spending on pharmaceuticals totaled $480 billion in 2016, according to a report published this week in Health Affairs.

“Two-thirds of this total ($323 billion) was captured by drug manufacturers in the form of net revenues,” the researchers from Memorial Sloan Kettering’s Center for Health Policy and Outcomes write. “The remaining third ($157 billion) was retained as gross profits in the supply chain. Of this share, nearly half was captured by retail and specialty pharmacies ($73 billion), and about 20 percent ($35 billion) by providers, such as hospitals and doctors’ offices. PBMs and wholesalers together captured approximately 25 percent ($23 billion and $18 billion, respectively).”

The takeaway: The analysis — which factors in the entire prescription drug supply chain, including pharmacies and pharmacy benefit managers as well as drugmakers themselves — shows that prescription drugs make up closer to 15 percent of all health care spending rather than the 10 percent more typically cited.

 

 

How drug companies are beating Trump at his own game

https://www.politico.com/story/2018/08/03/trump-drug-prices-companies-721145

People pass the Pfizer headquarters in New York. |Getty Images

 

Recent price freezes and rollbacks are symbolic measures with little lasting impact.

A July tweet from President Donald Trump sent panic through the C-suites of some of the world’s biggest drug companies, prompting Pfizer and nine other companies to roll back or freeze prices.

But there’s less to those announcements than meets the eye. The gestures turned out to be largely symbolic — efforts to beat Trump at his own game by giving him headlines he wants without making substantive changes in how they do business.

The token concessions are “a calculated risk,” said one drug lobbyist. “Take these nothing-burger steps and give the administration things they can take credit for.”

Of the few companies that actually cut prices, for instance, most targeted old products that no longer produce much revenue — such as Merck’s 60 percent discount to a hepatitis C medicine that had no U.S. revenues in the first quarter.

Others volunteered to halt price increases for six months — in some cases, just weeks after announcing what is normally their last price hike for the year.

“A lot of this shit is meaningless to satisfy Trump,” said another drug lobbyist.

The industry’s deft response to Trump’s tweet shaming has also become a test of whether his administration is serious about following up with an aggressive crackdown on the companies or will simply declare victory based on token measures and move on.

“I think right now it’s a lot of noise, not a lot of substantial impact to the companies,” said Les Funtleyder, a health care portfolio manager at E Squared Asset Management, which owns shares in Pfizer. The prospect for meaningful change “is out there … but that will take motivation on the part of regulators and policymakers.”

Analysts are in broad agreement that the spate of recent concessions won’t hurt bottom lines, or rein in drug prices beyond this six-month period, because many companies already increased prices this year — in some cases, just weeks before publicly pledging to freeze them for the rest of 2018.

“There’s the glass-half-full and glass-half-empty interpretation,” said Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh. “Glass half full says we have never before seen pharma promise not to raise prices anymore. So this is a step forward — including for patients. Glass half empty is that these are token measures — either on drugs few people use, or drugs that just had their price raised, and that prices will just go up next year.”

Either way, Gellad said, “this is not the kind of structural change we want in the market so that prices go down.”

Drug prices are a fixation for Trump, who rants about them in conversations with aides and advisers, according to people close to the president. He sees the issue as a political winner, especially among his conservative — and largely older — base, which relies heavily on prescription drugs. And after facing huge hurdles moving his legislative priorities through Congress, he sees this as something he can win on by using his executive authority.

That has put huge pressure on Health and Human Services Secretary Alex Azar, a former top official of Eli Lilly and Co.

“They talk three times a week, and they never have a conversation where drug pricing isn’t a topic,” said one person briefed on the conversations, adding that Trump has also interrupted Cabinet meetings to encourage Azar to brief the group on the latest developments.

But even as Azar implements his 44-page blueprint aimed at lowering prices, Trump has grown impatient with the glacial pace of rulemaking and arcane details of drug policy.

His outlet is Twitter, where he can marshal the rage of his millions of followers in an instant. White House aides say he sees his Pfizer tweet as a warning shot to other drug companies — part of a public “shaming” campaign designed to pressure companies to take voluntary steps to lower prices.

That strategy diverges sharply from what Azar is saying publicly — raising doubts about how serious the administration is about cracking down on drugmakers.

The HHS secretary’s rhetoric often targets pharmacy benefits managers — the obscure middlemen who manage the drug side of patients’ health insurance benefits — not drug companies. And targeting the middlemen is a play directly out of pharma’s strategy book — drug companies have long sought to pin patients’ frustration with rising costs on PBMs. HHS has also signaled it wants to overhaul a drug discount program for hospitals that could put money back in pharma’s pocket.

Pfizer CEO Ian Read himself praised the president’s blueprint on the company’s recent second-quarter earnings call, just a few weeks after Trump’s Pfizer tweet.

“I don’t think the administration is gunning for [pharma],” said Ronny Gal, a financial analyst at Sanford Bernstein. Everything they are doing right now is “scratching around the problem,” he said.

“You can tell by the way the stock has performed that investors aren’t too concerned,” Funtleyder said. “They figure, ‘OK, the pharma companies waved the white flag for now, so they’re out of the cross hairs.‘”

Meanwhile, HHS and drug industry officials have worked closely to show Trump they are getting results, administration and pharmaceutical industry sources tell POLITICO.

In private meetings with drug officials, HHS officials ask what steps they’ve taken that they might relay to Trump to keep the president satisfied, said drug company sources.

“They’re also like, ‘Hey, don’t be stupid. If you’re going to do something you feel like we can mutually take some credit for, let us know. … If you can get a good tweet out of it, don’t be an idiot. Let us know [ahead of time],’” said one person familiar with the conversations.

“They’ve said: ‘What would it take for you to lower prices?’” said another top drug industry official.

“There is a real fear that Trump only understands things very simplistically,” said a lobbyist for several drug companies. “So they want to keep tossing treats for him or he will go after blunt instruments,” like government drug price negotiations — steps neither the conservative leadership at HHS nor the drug industry want.

Observers both inside HHS and outside the administration see Azar’s drug pricing team as a buffer for the drug industry.

“To be candid, the secretary is pro-patient, pro-innovation and pro-competition and, quite frankly, really standing in between the industry and some faster ways to lower prices that some would say are not pro-competition,” said HHS’ John O’Brien, a senior adviser to Azar, at a drug cost event one day after Trump’s tweet attacking Pfizer.

Azar prefers the industry and HHS work to make change together, rather than it being adversarial, according to people familiar with HHS’ strategy.

He publicly touts industry price freezes and reversals “in part to show Trump they’re making progress, but also to show the industry that you get recognized for playing ball,” said a person familiar with the discussions.

The White House, meanwhile, was thrilled about the industry’s recent price freezes, even as officials acknowledged the companies’ announcements are only a first step — and promised what one official characterized as a “deluge” of drug price-related regulatory action in the coming months.

“Nothing about what they do or don’t do is going to really turn the tide in a major, major way on a voluntary basis,” the official said of the drug companies’ actions, promising that the administration will take aggressive action.

In the meantime, the White House isn’t ruling out more Twitter shaming.

“You’ll see continuing of the tweeting and announcing different actors doing good or bad things in the market,” the official said.

That will get particularly tricky for the industry come January, when drugmakers would typically take their biggest price increases of the coming year — and when their public concessions sunset.

“They can live with the changes that were made — but they can’t live with not raising prices forever,” Gal said. “It’s a noose they put their head into. In January, we will see what happens with that noose. Does it tighten or not?”

 

Stabilizing and strengthening the individual health insurance market

https://www.brookings.edu/research/stabilizing-and-strengthening-the-individual-health-insurance-market/?utm_campaign=Economic%20Studies&utm_source=hs_email&utm_medium=email&utm_content=64960143

Image result for Stabilizing and strengthening the individual health insurance market

Stability has long been an issue for the individual health insurance market, even before the Affordable Care Act. While reforms adopted under the ACA initially succeeded in addressing some of these market issues, market conditions substantially worsened in 2016.

Insurers exited the individual market, both on and off the subsidized exchanges, leaving many areas with only a single insurer, and threatening to leave some areas (mostly rural) with no insurer on the exchange. Most insurers suffered significant losses in the individual market the first three years under the ACA, leading to very substantial increases in premiums a couple of years in a row.

For a time, it appeared that rate increases in 2016 and 2017 would be sufficient to stabilize the market by returning insurers to profitability, which would bring future increases in line with normal medical cost trends. However, Congress’s decision to repeal the individual mandate and the Trump Administration’s decision to halt “cost-sharing reduction” payments to insurers, along with other measures that were seen as destabilizing, created substantial new uncertainty for market conditions in 2018.

This uncertainty continues into 2019, owing both to lack of clarity on the actual effects of last year’s statutory and regulatory changes, and to pending regulatory changes that would expand the availability of “non-compliant” plans sold outside of the ACA-regulated market. These uncertainties further complicate insurers’ decisions about whether to remain in the individual market and how much to increase premiums.

In “Stabilizing and strengthening the individual health insurance market: A view from ten states” (PDF), Mark Hall examines the causes of instability in the individual market and identifies measures to help improve stability based off of interviews with key stakeholders in 10 states.

The condition of the individual market

In the states studied—Alaska, Arizona, Colorado, Florida, Iowa, Maine, Minnesota, Nevada, Ohio, and Texas—opinions about market stability vary widely across states and stakeholders.

While enrollment has remained remarkably strong in the ACA’s subsidized exchanges, enrollment by people not receiving subsidies has dropped sharply.

States that operate their own exchanges have had somewhat stronger enrollment (both on and off the exchanges), and lower premiums, than states using the federal exchange.

A core of insurers remain committed to the individual market because enrollment remains substantial, and most insurers have been able to increase prices enough to become profitable. Some insurers that previously left or stayed out of markets now appear to be (re)entering.

Political uncertainty

Premiums have increased sharply over the past two to three years, initially because insurers had underpriced relative to the actual claims costs that ACA enrollees generated. However, political uncertainty in recent years caused some insurers to leave the market and those who stayed raised their rates.

Insurers were able to cope with the Trump administration’s halt to CSR payments by increasing their rates for 2018 while the dominant view in most states is that the adverse effects of the repeal of the individual mandate will be less than originally thought. Even if the mandate is not essential, many subjects viewed it as helpful to market stability. Thus, there is some interest in replacing the federal mandate with alternative measures.

Because most insurers have become profitable in the individual market, future rate increases are likely to be closer to general medical cost trends (which are in the single digits). But this moderation may not hold if additional adverse regulatory or policy changes are made, and some such changes have been recently announced.

Many subjects viewed reinsurance as potentially helpful to market conditions, but only modestly so because funding levels typically proposed produce just a one-time lessening of rate increases in the range of 10-20 percent. Some subjects thought that a better use of additional funding would be to expand the range of people who are eligible for premium subsidies.Actions to restore stability

Concerns were expressed about coverage options that do not comply with ACA regulations, such as sharing ministries, association health plans, and short-term plans. However, some thought this outweighed harms to the ACA-compliant market; thus, there was some support for allowing separate markets (ACA and non-ACA) to develop, especially in states where unsubsidized prices are already particularly high.

Other federal measures, such as tightening up special enrollment, more flexibility in covered benefits, and lower medical loss ratios, were not seen as having a notable effect on market stability.

Measures that states might consider (in addition to those noted above) include: Medicaid buy-in as a “public option”; assessing non-complying plans to fund expanded ACA subsidies; investing more in marketing and outreach; “auto-enrollment” in “zero premium” Bronze plans; and allowing insurers to make mid-year rate corrections to account for major new regulatory changes.

Conclusion

The ACA’s individual market is in generally the same shape now as it was at the end of 2016. Prices are high and insurer participation is down, but these conditions are not fundamentally worse than they were at the end of the Obama administration. For a variety of reasons, the ACA’s core market has withstood remarkably well the various body blows it absorbed during 2017, including repeal of the individual mandate, and halting payments to insurers for reduced cost sharing by low-income subscribers.

The measures currently available to states are unlikely, however, to improve the individual market to the extent that is needed. Although the ACA market is likely to survive in its basic current form, the future health of the market—especially for unsubsidized people—depends on the willingness and ability of federal lawmakers to muster the political determination to make substantial improvements.

Read the full paper here