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Consumer Choice — for Healthy People?
The Trump administration wants to promote health-care coverage by using a special kind of health insurance known as short-term policies. This, the administration argues, would “provide more affordable consumer choice for health coverage.”
But this isn’t just about consumer choice. By promoting short-term policies, the administration is making a trade-off: lower premiums and less coverage for healthy people, and higher premiums for people with preexisting conditions who need more comprehensive coverage.
Short-term policies predate the Affordable Care Act and aren’t required to follow its regulations. For decades, they were marketed as temporary coverage to people who, for example, were between jobs. By design, short-term policies were not renewable and coverage typically lasted for three to six months.
Presently, under rules issued during the Barack Obama administration, they can provide coverage for only up to three months. The Trump proposal, however, would allow short-term policies to last up to a year.
That is an important distinction because allowing the policies to last longer makes them easier to substitute for plans regulated by the ACA. Coupled with rising premiums for ACA plans, the short-term option could become more attractive to a lot of people.
While around 56 percent of people with ACA-regulated plans qualified for tax credits to pay for their coverage in 2017, others — nearly 7 million people — weren’t shielded from premium increases.
Compared with policies that meet ACA standards, short-term policies are, indeed, cheaper — as a recent study I co-authored shows. Two websites selling such short-term plans list premiums as low as 20 percent of the cheapest marketplace plan.
But here’s where those trade-offs come in.
For starters, short-term policies cover less. None of the policies we reviewed covered maternity care; 71 percent don’t insure prescription drugs; 62 percent excluded substance-use treatment; and 43 percent excluded mental-health services.
When these benefits were covered, it was often limited. For example, some plans capped the mental-health benefit at $3,000. The cheapest plans also applied high deductibles and other cost sharing that exceeded $20,000. By contrast, marketplace plans cover essential benefits with no dollar caps and limit annual patient cost sharing to $7,350.
Insurers also medically underwrite short-term policies, meaning they won’t sell them to just anyone. We estimate about 1 in 4 adults under the age of 65 has a “deniable” condition — such as diabetes, cancer, HIV/AIDS or pregnancy — that would make it impossible to buy a short-term policy. Applications specifically ask about these conditions, and a “yes” answer will get you turned down.
Other preexisting conditions might not trigger a denial, but they often will be flagged so that no related treatment is covered. If a healthy applicant buys a short-term policy and then gets something scary — such as cancer — he or she could be screened again for evidence the condition existed, undiagnosed, when the policy was issued. If so, treatment won’t be covered; otherwise, coverage will end at the policy term and no new underwritten policy will be offered.
Marketplace plans, by contrast, take all applicants, cover preexisting conditions and let you keep your policy and renew it even if you get sick.
Those are key trade-offs — lower premiums for less protection. But at the moment, fewer people may be willing to accept them. That’s because short-term policies don’t satisfy the ACA’s individual mandate, which means if you’re only covered by short-term policy, you could owe a penalty (either $695 or 2.5 percent of your income, whichever is greater).
But Congress eliminated that penalty, beginning in 2019. That change — along with the Trump’s administration’s decision to expand short-term regulations — could lead to more people buying short-term policies next year.
This will affect everyone in the individual market. For insurance, the risk pool is key. About 80 percent of health-care spending in any year is attributable to about 20 percent of people. For the risk pool to be stable and premiums affordable, the healthy 80 percent need to participate.
The risk pool is undermined anytime policies outside the ACA framework compete directly against policies that follow ACA rules. People will be more likely to leave the ACA pool if they can get by on skinnier short-term coverage. And they will be more likely to remain in the ACA pool, or return to it, when they can’t. That will further drive up the cost of ACA coverage. By one estimate, repeal of the mandate penalty, combined with increased short-term policy sales, could raise premiums for marketplace policies by another 18 percent next year.
People don’t buy health insurance in case they stay healthy. Overwhelmingly, they want protection against high medical bills in the event of serious illness or injury.
That’s the trade-off we face. Promoting short-term policies would give people the option of buying cheaper coverage while they are healthy. But it will make coverage more expensive once they get sick.
A Supreme Court victory for lowering drug prices
A recent Supreme Court decision on patents — Oil States v. Greene’s Energy Group — marks an understated victory, with far-reaching consequences that will positively impact families and communities across America. This case has deep implications for basic economic fairness, with the judiciary recognizing the importance of keeping critical checks in systems that have become far too imbalanced.
In the national media, this case is being held up as a victory for Silicon Valley and the wealthy tech elites. Perhaps this makes sense: The decision handed down April 24 preserves a process for disputing and overturning unmerited patents, helping curb the glut of patent trolls polluting the industry. But this is not just a victory for the ensconced Palo Alto bubble — working families are silent winners of this week’s Supreme Court decision.
In 2011, Congress created within the U.S Patent Office a body called the Patent Trial and Appeal Board (PTAB). While the patent office examines and grants patents, which are akin to giving a monopoly power for a period of time for an invention, the PTAB serves as an appeal body when such rights are disputed. This week’s SCOTUS decision affirmed that the PTAB can continue its role in ensuring that monopoly rights given through a patent can be reversed.P
Why is this important for ordinary Americans? Abuse of the patent system is directly tied to skyrocketing drug prices.
Americans of all political stripes are united on one thing: Drug prices have spiraled out of control. One in 4 Americans cannot fill their prescriptions because they can’t afford them. Nineteen million Americans are forced to go overseas to buy their drugs because companies don’t price fairly. And pharmaceutical companies get away with their exorbitant pricing by abusing our patent system.
In order to maintain monopolies on life-saving treatments, pharmaceutical companies often file dozens of unmerited patents on their drugs, blocking the generic competition that lowers prices. For example, Celgene has applied for over 100 patents on just one cancer drug, Revlimid. As a result, Celgene will likely make an extra $45 billion while Americans should have been able to access cheaper alternative generic options years ago.
The PTAB can curb that abuse and help restore integrity to our patent system, stopping drug companies from holding a wrongly issued monopoly for years or even decades more. In fact, roughly half of the pharmaceutical patents challenged through the new PTAB reviews are found to be unmerited. This includes patents on expensive drugs: The blockbuster multiple sclerosis drug Copaxone, for example, is one drug the PTAB found to have been wrongly granted patents, thus allowing cheaper versions of the medicine to enter the market.
But more broadly, this Supreme Court decision offers a bit of respite and a rare moment of bipartisan consensus in an increasingly fractured America. The decision strikes at the heart of basic economic unfairness and the ways in which power has become concentrated in the hands of industries — like the pharmaceutical industry which works hard to lobby and advocate and influence to ensure that no checks and balances exist to curb their unfettered power. The Supreme Court upheld a basic mechanism to curb that power.
There is more work to be done. Congress must continue to improve upon the system it built in 2011. We must work to ensure our patent system rewards true invention and allows healthy competition, rather than encouraging frivolous patenting that rewards corporations at the expense of everyday Americans.
But the Oil States decision offers a glimmer of hope for patients and communities who are struggling to get medical treatment. This week’s Supreme Court decision makes it possible to believe that those families may have a shot at affording the medicines they so desperately need.
How A Drug Company Under Pressure For High Prices Ratchets Up Political Activity
Business looked challenging for Novo Nordisk at the end of 2016. As pressure mounted over the pharma giant’s soaring insulin prices, investors drove its stock down by a third on fears that policymakers would take action, limit prices and hurt profits.
Then things got worse. A Massachusetts law firm sued the company and two other pharma firms on behalf of patients, claiming that high insulin prices of hundreds of dollars a month forced diabetics to starve themselves to minimize their blood sugar while skimping on doses. At least five states began investigating insulin makers and their business partners.
As scrutiny rose, Novo Nordisk engaged in what analysts say is a time-honored response to public criticism. It aggressively ratcheted up spending to spread its influence in Washington and to have a louder say in the debates over drug prices.
The drugmaker’s political action committee spent $405,000 on federal campaign donations and other political outlays last year, more than in 2016 — an election year — and nearly double its allocation for 2015, data compiled by Kaiser Health News show.
“We remain committed to being part of the discussion,” said Tricia Brooks, head of government relations and public affairs for Novo Nordisk, acknowledging scrutiny over insulin prices but saying the company has many other issues to work on with policymakers. “I don’t want us to run away from it and hide or keep our head down and wait for it to roll over.”
Novo Nordisk also spent $3.2 million lobbying Congress and federal agencies in 2017, its biggest-ever investment in directly influencing U.S. policymakers, according to the Center for Responsive Politics.
Part of that surge included summoning more than 400 Novo Nordisk employees to contact lawmakers and their staffs on Capitol Hill, “a huge increase from anything we’ve ever done before,” Brooks said.
Taken together, the increases represent a “major corporate policy shift” for the company and appear to be a classic business response to growing political risk, said Kent Cooper, a former Federal Election Commission official who has tracked political money for decades.
The pharma industry as a whole has behaved similarly, cranking up political contributions and lobbying. Meanwhile, despite much talk about change, Congress and the Trump administration have done little to control drug prices or threaten drug-company profits.
Pharma businesses overall made political donations of $12.1 million last year, down from a $13.6 million election-year surge in 2016 but 9 percent higher than the haul for 2015, according to the KHN analysis. Pharma industry lobbying expenses surpassed $171 million last year, the highest level since 2009, during negotiations over the Affordable Care Act, according to CRP.
“It’s been hot in the health care arena for — how many years now?” said Steven Billet, who teaches lobbying and PAC management at George Washington University. “Anybody in this world now is sitting there thinking, “When I go back to the board next year, I’m going to ask for 15 percent more in my [lobbying and campaign finance] budget. Because this isn’t going away.’”
Like most big corporations, Novo Nordisk runs a political action committee, or PAC, which solicits employee donations and gives the proceeds to political candidates’ campaigns. The company is Danish. Only workers who are U.S. citizens or permanent residents are allowed to support the PAC.
Like many PACs, Novo Nordisk spreads money to both parties, concentrating on powerful committee members and other leaders. Since 2013 it has given $22,500 to House Speaker Paul Ryan, a Republican, and $20,472 to South Carolina’s James Clyburn, a member of the Democratic House leadership.
Brooks gave the PAC $4,370 last year, the data show. Some employees gave as little as $20 or $30.
The firm’s influence-seeking has grown along with its U.S. sales, which went from hundreds of millions of dollars in the early 2000s to some $9 billion last year. Its biggest business is diabetes, including various types of insulin whose list prices have more than doubled in recent years.
The wholesale list price for a vial of Novo Nordisk’s Levemir, a long-acting insulin, went from $144.80 in 2012 to $335.70 in January, when the price rose 4 percent, according to Connecture, a research firm.
Even Alex Azar, a former Eli Lilly executive who became Health and Human Services secretary in January, said in his confirmation hearing that “insulin prices are high, and they’re too high.” Along with Novo Nordisk and Sanofi, Lilly is one of the three big insulin makers under investigation by state attorneys general for price increases that seem suspiciously similar in size and timing.
Sanofi and Lilly both spent more last year on political donations and federal lobbying than Novo Nordisk. Lilly’s political spending was $548,100 for 2017, up 12 percent from 2015, the previous off-election year, the data show. Sanofi’s was $527,200, down from 2015.
But potential insulin price limits threaten Novo Nordisk more than those companies because diabetes-related drugs account for an exceptionally big portion of its business, analysts said. Several proposals under consideration by Congress could lower insulin prices or limit future increases.
One would allow the Medicare program for seniors to negotiate prices for covered drugs, thus lowering the cost.
Other proposals would make it easier for competing, “biosimilar” alternatives to break through the thicket of patents created by sellers of complex drugs such as insulin. Others would bring more transparency, requiring companies to publish and justify price increases.
None of the proposals has made it out of congressional committees. In the face of inaction by Washington, Novo Nordisk’s stock has recovered much of the ground it lost in 2016.
Novo Nordisk rejects suggestions that it coordinated price increases with competitors. So do Sanofi and Lilly.
List prices such as those tracked by Connecture don’t reflect what patients or their insurers ultimately pay, said Novo Nordisk spokesman Ken Inchausti. Growing discounts and rebates substantially reduced the reported list price, he said.
Even including discounts, however, the company’s net profit margin for 2017 was 34 percent, its highest since at least 2000, when it was half that high.
Official filings show Novo Nordisk lobbyists have been weighing in on numerous measures related to drug prices, including proposals to import less expensive drugs from Canada.
The company lobbies Washington on a wide range of issues including diabetes prevention, budget matters, chronic disease and making obesity an accepted medical disease that insurers will pay to prevent, Brooks said.
But last year’s increase in campaign donations and lobbying doesn’t look like business as usual for Novo Nordisk, said Billet, a former AT&T lobbyist who directs GWU’s Legislative Affairs program.
“I’m not surprised,” he said. “They’ve obviously had some issues recently. This is maybe a predictable enough element in their strategy.”
As Proton Centers Struggle, A Sign Of A Health Care Bubble?
https://khn.org/news/as-proton-centers-struggle-a-sign-of-a-health-care-bubble/
The Maryland Proton Treatment Center chose “Survivor” as the theme for its grand opening in 2016, invoking the reality-TV show’s tropical sets with its own Tiki torches, palm trees and thatched booths piled with pineapples and bananas.
It was the perfect motif for a facility dedicated to fighting cancer. Jeff Probst, host of CBS’ “Survivor,” greeted guests via video from a Fiji beach.
But behind the scenes, the $200 million center’s own survival was less than certain. Insurers were hesitating to cover procedures at the Baltimore facility, affiliated with the University of Maryland Medical Center. The private investors who developed the machine had badly overestimated the number of patients it could attract. Bankers would soon be owed repayment of a $170 million loan.
Only two years after it opened, the center is enduring a painful restructuring with investors poised for huge losses. It has never made money, although it has ample cash to finance operations, said Jason Pappas, its acting CEO since November. Last year it lost more than $1 million, he said.
Volume projections were “north” of the current rate of about 85 patients per day, Pappas said. How far north? “Upper Canada,” he said.
For years, health systems rushed enthusiastically into expensive medical technologies such as proton beam centers, robotic surgery devices and laser scalpels — potential cash cows in the one economic sector that was reliably growing. Developers got easy financing to purchase the latest multimillion-dollar machine, confident of generous reimbursement.
There are now 27 proton beam units in the U.S., up from about half a dozen a decade ago. More than 20 more are either under construction or in development.
But now that employers, insurers and government seem determined to curb growth in health care spending and to combat overcharges and wasteful procedures, such bets are less of a sure thing.
The problem is that the rollicking business of new medical machines often ignored or outpaced the science: Little research has shown that proton beam therapy reduces side effects or improves survival for common cancers compared with much cheaper, traditional treatment.
If the dot-com bubble and the housing bubble marked previous decades, something of a medical-equipment bubble may be showing itself now. And proton beam machines could become the first casualty.
“The biggest problem these guys have is extra capacity. They don’t have enough patients to fill the rooms” at many proton centers, said Dr. Peter Johnstone, who was CEO of a proton facility at Indiana University before it closed in 2014 and has published research on the industry. At that operation, he said, “we began to see that simply having a proton center didn’t mean people would come.”
Sometimes occupying as much space as a Walmart store and costing enough money to build a dozen elementary schools, the facilities zap cancer with beams of subatomic proton particles instead of conventional radiation. The treatment, which can cost $48,000 or more, affects surrounding tissue less than traditional radiation does because its beams stop at a tumor rather than passing through. But evidence is sparse that this matters.
And so, except in cases of childhood cancer or tumors near sensitive organs such as eyes, commercial insurers have largely balked at paying for proton therapy.
“Something that gets you the same clinical outcomes at a higher price is called inefficient,” said Dr. Ezekiel Emanuel, a health policy professor at the University of Pennsylvania and a longtime critic of the proton-center boom. “If investors have tried to make money off the inefficiency, I don’t think we should be upset that they’re losing money on it.”
Investors backing a surge of new facilities starting in 2009 counted on insurers approving proton therapy not just for children, but also for common adult tumors, especially prostate cancer. In many cases, nonprofit health systems such as Maryland’s partnered with for-profit investors seeking high returns.
Companies marketed proton machines under the assumption that advertising, doctors and insurers would ensure steady business involving patients with a wide variety of cancers. But the dollars haven’t flowed in as expected.
Indiana University’s center became the first proton-therapy facility to close following the investment boom, in 2014. An abandoned proton project in Dallas is in bankruptcy court.
California Protons, formerly associated with Scripps Health in San Diego, landed in bankruptcy last year.
A number of others, including Maryland’s, have missed financial targets or are hemorrhaging money, according to industry analysts, financial documents and interviews with executives.
- The Hampton University Proton Therapy Institute in Virginia has lost money for at least five years in a row, recording an operating loss of $3 million in its most recent fiscal year, financial statements show.
- The Provision CARES Proton Therapy Center in Knoxville, Tenn., lost $1.7 million last year on revenue of $23 million — $5 million below its revenue target. The center is meeting its debt obligations, said Tom Welch, its president.
- Centers operated by privately held ProCure in Somerset, N.J., and Oklahoma City have defaulted on debt, according to Loop Capital, an investment bank working on deals for new proton facilities.
- A facility associated with the Seattle Cancer Care Alliance, a consortium of hospitals, lost $19 million in fiscal 2015 before restructuring its debt, documents show. Patient volume is growing but executives “continue to be disappointed in the slower-than-expected acceptance of proton therapy treatment” by insurers, said Annika Andrews, CEO of SCCA Proton Therapy.
- A center near Chicago lost tens of millions of dollars before restructuring its finances in a 2013 sale to hospitals now affiliated with Northwestern Medicine, documents filed with state regulators show. The facility is “meeting our budget expectations,” said a Northwestern spokesman.
Representatives from ProCure and the facilities in San Diego and Hampton did not respond to repeated requests for interviews.
“In any industry that’s really an emerging industry, you often have people who enter the business with over-exuberant expectations,” said Scott Warwick, executive director of the National Association for Proton Therapy. “I think maybe that’s what went on with some of the centers. They thought the technology would grow faster than it has.”
In the absence of evidence showing protons produce better outcomes for prostate, lung or breast cancer, “commercial insurers are just not reimbursing” for these more common tumors, said Brandon Henry, a medical device analyst for RBC Capital Markets.
The most expensive type of traditional, cancer-fighting radiation — intensity modulated radiation therapy — costs around $20,000 per treatment, while others cost far less. The government’s Medicare program for seniors covers proton treatment more often than private insurers but is insufficient by itself to recoup the massive investment, analysts said.
The rebellion by private insurers “is very, very good” and may signal the health system “is finally figuring out how to say no to low-value procedures,” said Amitabh Chandra, a Harvard health policy professor who has called proton facilities unaffordable “Death Stars.”
Proton centers are fighting back, enlisting patients, legislators and nonprofits to push for reimbursement. Oklahoma has passed and Virginia has considered legislation to effectively require insurers to cover proton therapy in more cases.
An entire day at the 2017 National Proton Conference in Orlando was dedicated to tips on getting paid, including a session titled “Strategies for Engaging Health Insurance on Proton Therapy Coverage.”
Proton facilities tell patients the therapy is appropriate for many kinds of cancer, never mentioning the cost and guiding them through complicated appeals to reverse coverage denials. The Alliance for Proton Therapy Access, an industry group, has online software for generating letters to the editor demanding coverage.
In hopes of navigating a difficult market, many new centers are smaller — with one or two treatment rooms — and not as expensive as the previous generation of units, which typically have four or five rooms, like the Baltimore facility, and cost $200 million or more.
Location is also critical. Treatment requires near-daily visits for more than a month, which may explain why larger centers such as Maryland’s never attracted the out-of-town business they needed.
To make the finances work, hospitals are combining forces. The first proton beam center in New York City is under construction, a joint project of Memorial Sloan Kettering, Mount Sinai and Montefiore Health System.
Smaller facilities, which can cost less than $50 million, should be able to keep their rooms full in many major metro areas, said Prakash Ramani, a senior vice president at Loop Capital, which is helping develop such projects in Alabama, Florida and elsewhere.
Maryland’s center hopes to break even by year’s end, executives said. That will involve refinancing, converting to nonprofit, inflicting losses on investors and issuing municipal bonds.
But plans call for four centers soon to be open in the D.C. area.
“It’s a real arms race,” said Johnstone, the former proton-center CEO, who has co-authored papers on proton-therapy economics. He is now vice chair of radiation oncology at Moffitt Cancer Center in Tampa, which doesn’t have a proton center. “What places need now are patients — a huge supply of patients.”
HENRY KOTULA 