Health care giants are dependent on payments Trump wants to end

https://www.axios.com/drug-prices-medicare-cvs-humana-unitedhealth-trump-1d66d7d6-66ea-4150-89f5-e3b357b17bb2.html

An older man grabs his prescription drugs at a pharmacy counter.

The 3 big health insurers that control a majority of Medicare’s prescription drug coverage — CVS Health, Humana and UnitedHealth Group — are arguably the most at risk from the Trump administration’s plan to eliminate rebates within Medicare.

The big picture: These companies rely heavily on rebates to offset the costs of covering seniors’ prescriptions. Losing those rebates would shift billions of dollars away from them, and they could lose customers if they raise premiums to make up the difference.

By the numbers: Axios analyzed the Medicare businesses within the companies’ 2018 filings with state insurance commissioners.

  • UnitedHealthcare paid $7.3 billion in prescription drug claims and received $4.1 billion in rebates, according to its major subsidiary in Connecticut.
  • Humana paid $7.1 billion in prescription drug claims and received $3.9 billion in rebates, according to its major subsidiary in Wisconsin.
  • CVS paid $6.3 billion in prescription drug claims and received $3.5 billion in rebates, according to its SilverScript subsidiary.

Between the lines: Those rebates offset more than half of what these 3 companies had to pay for people’s prescriptions.

  • That’s well above the average for all Medicare drug plans, which was just 25% in 2018 (Table IV.B8).
  • Plans don’t keep Medicare rebates as profit, and instead pass them back to the federal government. (They do, however, keep a small percentage of rebates from their commercial plans.)
  • The companies did not respond to requests for comment.

The bottom line: CVS, Humana and UnitedHealth — all of which vehemently oppose Trump’s proposed rebate rule — are “overly dependent on rebates to keep premiums low [so they can] buy market share, which is what these guys have been doing for the past decade,” said Emily Evans, a health care managing director at investment research firm Hedgeye.

  • If those rebates go away, sooner or later the big 3 would have to raise monthly premiums to avoid losses.
  • And hiking drug plan premiums could persuade seniors to switch to competing plans that don’t rely on rebates and therefore won’t need to raise their premiums as much.

 

 

 

Hospitals Stand to Lose Billions Under ‘Medicare for All’

For a patient’s knee replacement, Medicare will pay a hospital $17,000. The same hospital can get more than twice as much, or about $37,000, for the same surgery on a patient with private insurance.

Or take another example: One hospital would get about $4,200 from Medicare for removing someone’s gallbladder. The same hospital would get $7,400 from commercial insurers.

The yawning gap between payments to hospitals by Medicare and by private health insurers for the same medical services may prove the biggest obstacle for advocates of “Medicare for all,” a government-run system.

If Medicare for all abolished private insurance and reduced rates to Medicare levels — at least 40 percent lower, by one estimate — there would most likely be significant changes throughout the health care industry, which makes up 18 percent of the nation’s economy and is one of the nation’s largest employers.

Some hospitals, especially struggling rural centers, would close virtually overnight, according to policy experts.

Others, they say, would try to offset the steep cuts by laying off hundreds of thousands of workers and abandoning lower-paying services like mental health.

he prospect of such violent upheaval for existing institutions has begun to stiffen opposition to Medicare for all proposals and to rattle health care stocks. Some officials caution that hospitals providing care should not be penalized in an overhaul.

Dr. Adam Gaffney, the president of Physicians for a National Health Program, warned advocates of a single-payer system like Medicare for all not to seize this opportunity to extract huge savings from hospitals. “The line here can’t be and shouldn’t be soak the hospitals,” he said.

“You don’t need insurance companies for Medicare for all,” Dr. Gaffney added. “You need hospitals.”

Soaring hospital bills and disparities in care, though, have stoked consumer outrage and helped to fuel populist support for proposals that would upend the current system. Many people with insurance cannot afford a knee replacement or care for their diabetes because their insurance has high deductibles.

Proponents of overhauling the nation’s health care argue that hospitals are charging too much and could lower their prices without sacrificing the quality of their care. High drug prices, surprise hospital bills and other financial burdens from the overwhelming cost of health care have caught the attention (and drawn the ire) of many in Congress, with a variety of proposals under consideration this year.

But those in favor of the most far-reaching changes, including Senator Bernie Sanders, who unveiled his latest Medicare for all plan as part of his presidential campaign, have remained largely silent on the question of how the nation’s 5,300 hospitals would be paid for patient care. If they are paid more than Medicare rates, the final price tag for the program could balloon from the already stratospheric estimate of upward of $30 trillion over a decade. Senator Sanders has not said what he thinks his plan will cost, and some proponents of Medicare for all say these plans would cost less than the current system.

The nation’s major health insurers are sounding the alarms, and pointing to the potential impact on hospitals and doctors. David Wichmann, the chief executive of UnitedHealth Group, the giant insurer, told investors that these proposals would “destabilize the nation’s health system and limit the ability of clinicians to practice medicine at their best.”

Hospitals could lose as much as $151 billion in annual revenues, a 16 percent decline, under Medicare for all, according to Dr. Kevin Schulman, a professor of medicine at Stanford University and one of the authors of a recent article in JAMA looking at the possible effects on hospitals.

“There’s a hospital in every congressional district,” he said. Passing a Medicare for all proposal in which hospitals are paid Medicare rates “is going to be a really hard proposition.”

Richard Anderson, the chief executive of St. Luke’s University Health Network, called the proposals “naïve.” Hospitals depend on insurers’ higher payments to deliver top-quality care because government programs pay so little, he said.

“I have no time for all the politicians who use the health care system as a crash-test dummy for their election goals,” Mr. Anderson said.

The American Hospital Association, an industry trade group, is starting to lobby against the Medicare for all proposals. Unlike the doctors’ groups, hospitals are not divided. “There is total unanimity,” said Tom Nickels, an executive vice president for the association.

“We agree with their intent to expand coverage to more people,” he said. “We don’t think this is the way to do it. It would have a devastating effect on hospitals and on the system over all.”

Rural hospitals, which have been closing around the country as patient numbers dwindle, would be hit hard, he said, because they lack the financial cushion of larger systems.

Big hospital systems haggle constantly with Medicare over what they are paid, and often battle the government over charges of overbilling. On average, the government program pays hospitals about 87 cents for every dollar of their costs, compared with private insurers that pay $1.45.

Some hospitals make money on Medicare, but most rely on higher private payments to cover their overall costs.

Medicare, which accounts for about 40 percent of hospital costs compared with 33 percent for private insurers, is the biggest source of hospital reimbursements. The majority of hospitals are nonprofit or government-owned.

The profit margins on Medicare are “razor thin,” said Laura Kaiser, the chief executive of SSM Health, a Catholic health system. In some markets, her hospitals lose money providing care under the program.

She says the industry is working to bring costs down. “We’re all uber-responsible and very fixated on managing our costs and not being wasteful,” Ms. Kaiser said.

Over the years, as hospitals have merged, many have raised the prices they charge to private insurers.

“If you’re in a consolidated market, you are a monopolist and are setting the price,” said Mark Miller, a former executive director for the group that advises Congress on Medicare payments. He describes the prices paid by private insurers as “completely unjustified and out of control.”

Many hospitals have invested heavily in amenities like single rooms for patients and sophisticated medical equipment to attract privately insured patients. They are also major employers.

“You would have to have a very different cost structure to survive,” said Melinda Buntin, the chairwoman for health policy at the Vanderbilt University School of Medicine. “Everyone being on Medicare would have a large impact on their bottom line.”

People who have Medicare, mainly those over 65 years old, can enjoy those private rooms or better care because the hospitals believed it was worth making the investments to attract private patients, said Craig Garthwaite, a health economist at the Kellogg School of Management at Northwestern University. If all hospitals were paid the same Medicare rate, the industry “should really collapse down to a similar set of hospitals,” he said.

Whether hospitals would be able to adapt to sharply lower payments is unclear.

“It would force health care systems to go on a very serious diet,” said Stuart Altman, a health policy professor at Brandeis University. “I have no idea what would happen. Nor does anyone else.”

But proponents should not expect to save as much money as they hope if they cut hospital payments. Some hospitals could replace their missing revenue by charging more for the same care or by ordering more billable tests and procedures, said Dr. Stephen Klasko, the chief executive of Jefferson Health. “You’d be amazed,’ he said.

While both the Medicare-for-all bill introduced by Representative Pramila Jayapal, Democrat of Washington, and the Sanders bill call for a government-run insurance program, the Jayapal proposal would replace existing Medicare payments with a whole new system of regional budgets.

“We need to change not just who pays the bill but how we pay the bill,” said Dr. Gaffney, who advised Ms. Jayapal on her proposal.

Hospitals would be able to achieve substantial savings by scaling back administrative costs, the byproduct of a system that deals with multiple insurance carriers, Dr. Gaffney said. Under the Jayapal bill, hospitals would no longer be paid above their costs, and the money for new equipment and other investments would come from a separate pool of money.

But the Sanders bill, which is supported by some Democratic presidential candidates including Senators Kirsten Gillibrand of New York, Cory Booker of New Jersey, Elizabeth Warren of Massachusetts and Kamala Harris of California, does not envision a whole new payment system but an expansion of the existing Medicare program. Payments would largely be based on what Medicare currently pays hospitals.

Some Democrats have also proposed more incremental plans. Some would expand Medicare to cover people over the age of 50, while others wouldn’t do away with private health insurers, including those that now offer Medicare plans.

Even under Medicare for all, lawmakers could decide to pay hospitals a new government rate that equals what they are being paid now from both private and public insurers, said Dr. David Blumenthal, a former Obama official and the president of the Commonwealth Fund.

“It would greatly reduce the opposition,” he said. “The general rule is the more you leave things alone, the easier it is.”

 

 

 

Wall Street is still selling off health care stocks

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Yesterday, UnitedHealth Group posted $3.5 billion of profit in the first quarter — its second-most profitable quarter ever — and collected more than $60 billion of revenue, Axios’ Bob Herman reports.

Yes, but: UnitedHealth’s stock price tanked by 4%, which consequently dragged down shares of the other major health insurers and hospital chains. Cigna’s stock price plummeted 8%, and Anthem and Humana were close behind. HCA tumbled 10%.

Driving the news: Wall Street remains fearful of “Medicare for All” becoming a reality, and UnitedHealth CEO Dave Wichmann tried to get ahead of the message by telling investors that single-payer would “jeopardize” people’s care.

  • Many investment bank analysts were perplexed by the sell-off, considering that UnitedHealth has more cash than it knows what to do with.
  • Steven Halper of Cantor Fitzgerald wrote to investors: “What more can you ask for? Take advantage of poor sentiment.”

The big picture: Medicare for All discussions matter far more to Wall Street right now, and that makes the industry’s Q1 financial reports a lot less important.

 

 

 

Medicare buy-in polls better than single-payer

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A Medicare buy-in is more popular than switching to a single-payer health care system, according to a new poll from Quinnipiac University.

By the numbers: Overall, voters were split on the wisdom of single-payer — 45% said it would be a bad idea, and 43% said it would be a good idea.

  • Respondents were more bullish on letting people buy into Medicare, with 51% saying it’s a good idea and 30% saying it’s a bad idea.

Republicans were the difference-makers. They overwhelmingly oppose single-payer (79% against), but a plurality of Republican voters (43%) support a Medicare buy-in.

Between the lines: Although the political battle between these rival plans is playing out primarily as a litmus test in the 2020 Democratic primary, Democrats seem fine with either proposal.

  • 69% of Democrats said single-payer is a good idea, compared to 62% who said the same for a Medicare buy-in.

Yes, but: Even a Medicare buy-in limited to people older than 50 — pretty much the smallest option on the table for Democrats — would still provoke a big fight from industry.

 

 

Justice Dept. now wants the entire ACA struck down

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The Justice Department now wants the courts to strike down the entire Affordable Care Act — not just its protections for people with pre-existing conditions.

This is a stunning escalation, raising both the real-world and political stakes in a lawsuit where both the real-world and political stakes were already very high.

Where it stands: Judge Reed O’Connor ruled in December that the ACA’s individual mandate has become unconstitutional, and that the whole law must fall along with it.

  • At the time, the Trump administration argued that the courts should only throw out the mandate and protections for pre-existing conditions — not the whole law.
  • But in a one-page filing last night, DOJ said the 5th Circuit Court of Appeals should affirm O’Connor’s entire ruling.

Why it matters: If DOJ ultimately gets its way here, the ripple effects would be cataclysmic. The ACA’s insurance exchanges would go away. So would its Medicaid expansion. Millions would lose their coverage.

  • The FDA would lose have the authority to approve an entire class of drugs.
  • The federal government would lose a lot of its power to test new payment models — in fact, the administration is relying on some of those ACA powers as it explores conservative changes to Medicaid.

Politically, this makes no sense. Chuck Schumer and Nancy Pelosi must be dancing in the streets.

  • Health care — specifically pre-existing conditions — was overwhelmingly a winning issue for Democrats in 2018.
  • This lawsuit already had Republicans in an unpleasant bind.
  • Now the administration is doubling down, putting even more people’s coverage on the chopping block.

What they’re saying:

  • “The bad faith on display here is jaw-dropping,” pro-ACA legal expert Nick Bagley writes.
  • “I was among those who cheered the selection of William Barr as Attorney General and hoped his confirmation would herald the elevation of law over politics within the Justice Department. I am still hopeful, but this latest filing is not a good sign,” said Jonathan Adler, a conservative law professor who helped spearhead the last big ACA lawsuit.

 

 

 

The Trump Administration Now Thinks the Entire ACA Should Fall

https://theincidentaleconomist.com/wordpress/the-trump-administration-now-thinks-the-entire-aca-must-fall/

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In a stunning, two-sentence letter submitted to the Fifth Circuit today, the Justice Department announced that it now thinks the entire Affordable Care Act should be enjoined. That’s an even more extreme position than the one it advanced at the district court in Texas v. Azar, when it argued that the court should “only” zero out the protections for people with preexisting conditions.

The bad faith on display here is jaw-dropping. Does the administration really think that the very position it advanced just month ago is so untenable that it must now adopt an even crazier view?

Much as it may dislike the fact, the Trump administration has an obligation to defend acts of Congress. Absent that obligation, the sitting administration could pick and choose which laws it wants to defend, and which it wants to throw under the bus. Indeed, the decision not to defend is close cousin to a decision not to enforce the law. If the ACA really is unconstitutional, wouldn’t continuing to apply the law would violate the very Constitution that empowers the President to act?

Even apart from that, the sheer reckless irresponsibility is hard to overstate. The notion that you could gut the entire ACA and not wreak havoc on the lives of millions of people is insane. The Act  is now part of the plumbing of the health-care system. Which means the Trump administration has now committed itself to a legal position that would inflict untold damage on the American public.

And for what? Every reputable commentator — on both the left and the right — thinks that Judge O’Connor’s decision invalidating the entire ACA is a joke. To my knowledge, not one has defended it. This is not a “reasonable minds can differ” sort of case. It is insanity in print.

Yet here we are. An administration that claims to support protections for people with preexisting conditions has now called for undoing not only the parts of the ACA that protect such conditions, but also the entire Medicaid expansion and parts of the law that shield those with employer-sponsored insurance from punitive annual or lifetime caps. Not to mention hundreds of rules having nothing to do with health insurance, including a raft of new taxes, mandatory labeling of calorie counts at chain restaurants, and rules governing biosimilars.

Maybe you think this level of disdain for an Act of Congress is to be expected from the Trump administration. Maybe it’s too much to process because of Russia and immigration and North Korea. But this is not business as usual. This is far beyond the pale. And it is a serious threat to the rule of law.

 

 

Insurers don’t pay full price for medicines, why do you?

https://www.letstalkaboutcost.org/

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A new study found net prices for medicines grew just 1.5% last year. Unfortunately, it doesn’t feel that way for you. Forty percent of a medicine’s list price is given as a rebate or discount to the government and middlemen, like insurers and pharmacy benefit managers (PBMs).

These rebates and discounts exceed $150 billion annually, but insurers don’t always share these savings with you.

Visit LetsTalkAboutCost.org to find out more.

 

 

1 big thing: Everything will be a fight

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Insurers and hospitals came out swinging yesterday against Democrats’ proposal to let people older than 50 buy into Medicare — a reminder that almost any expansion of public health coverage will provoke a battle with the health care industry.

Between the lines: Politically, an age-restricted Medicare buy-in is about as moderate as it gets for Democrats in the age of “Medicare for All.”

  • It is not a proposal for universal coverage, and it’s a far cry from trying to eliminate private insurance. It would be optional, only a relatively small slice of people would have the option, and they would need to pay a monthly premium.

Yes, but: Being on the more moderate end of the political spectrum does not shield you from a fight.

  • Expanding Medicare would hurt hospitals’ bottom lines, because Medicare pays hospitals less than private insurance does.
  • That’s why the Federation of American Hospitals said yesterday that the idea “would harm more Americans than it would help.”
  • The buy-in plan would primarily compete with employer-based health coverage (that’s what people between 50 and 65 are likely to have). And America’s Health Insurance Plans said the idea “is a slippery slope to government-run health care for every American.”

The bottom line: Any proposal that would compete with (never mind eliminate) private coverage, particularly employer coverage, will meet this kind of resistance.

That’s why Medicaid is the public program Democrats and industry can agree to love. Expanded access to Medicaid has rarely been an alternative to commercial insurance — it’s usually an alternative to being uninsured.

  • The uninsured were the primary beneficiaries of the Affordable Care Act’s Medicaid expansion, and the Medicaid buy-in proposals now popping in the states are aimed at the people who are most likely to be foregoing private ACA coverage because of its cost.

 

 

 

Kamala Harris’ ‘Medicare for all’ would mean massive disruption for healthcare, and the industry is prepared to fight it

https://www.washingtonexaminer.com/policy/healthcare/kamala-harris-medicare-for-all-would-mean-massive-disruption-for-healthcare-and-the-industry-is-prepared-to-fight-it

Image result for Kamala Harris' 'Medicare for all' would mean massive disruption for healthcare, and the industry is prepared to fight it

Democratic presidential contender Sen. Kamala Harris wants to “move on” from the current healthcare system in favor of a plan that would roll everyone in the U.S. onto a government plan known as “Medicare for all,” doing away with private health insurance.

As the California Democrat and others in her party make their case, however, they will face considerable opposition not only in the insurance industry, but across the healthcare sector, which would see massive upheaval from the plan. And polling suggests that the public, roughly half of which relies on private insurance, isn’t quite on board.

Drug companies, insurers, doctors, and hospitals have united in recent months to fight national government healthcare. One healthcare industry group, called the Partnership for America’s Health Care Future, has launched a five-figure digital ad campaign arguing that “Medicare for all” would cause massive disruption, higher taxes, lower quality care, and less choice for patients. It plans to spend six figures bashing “Medicare for all” over the course of 2019.

“Whether it’s called Medicare for all, single payer, or a public option, one-size-fits-all healthcare will mean all Americans have less choice and control over the doctors, treatments, and coverage,” said Lauren Crawford Shaver, the group’s executive director.

Other candidates for the Democratic nomination, such as Sens. Elizabeth Warren of Massachusetts and Kirsten Gillibrand of New York, are, like Harris, co-sponsors of the Medicare for All Act, legislation led by Sen. Bernie Sanders, I-Vt. Although it has “Medicare” in the name, the bill would go much further than current Medicare, which covers adults 65 and older and people with disabilities. It would pay for emergency surgery, prescription drugs, mental healthcare, and eye care without a copay.

Children would be enrolled in the government plan soon after the the bill’s passage, and the rest would be gradually phased in after four years. This would mean that roughly half of the U.S. population, the 177 million people in the U.S. covered by private health insurance mostly through work, would be moved onto a government plan. Employers would pay higher taxes rather than pay for private plans.

In defending the need for a government system, Sanders has blasted insurance companies, saying upon unveiling the bill that they “make billions of dollars in profits and make industry CEOs extremely wealthy.”

But healthcare providers, not just insurers, benefit from the current fragmented system, in which insurance is purchased by employers, the government, and individuals. They charge private insurers more to make up for the gap left by patients who are uninsured or are on government programs, which pay less for their services.

If all privately insured individuals were to have Medicare instead, and if it were to pay the same rates it does now, then doctors and hospitals would see big losses caring for patients who moved from private coverage to the government plan. Healthcare providers have said that if taxes don’t go up to pay for the difference, then doctors and hospitals will face pay cuts and layoffs, leading to facility closures and long lines for care.

Hospitals serve as the main employer in many communities. For patients, that would mean losing not only a healthcare plan they might be satisfied with, but also doctors they worked with for years or hospitals they relied on in their communities.

The Medicare for All Act has not been scored by the Congressional Budget Office, but analyses from the Mercatus Center at George Mason University and the left-leaning Urban Institute found it would raise government spending over a decade by $32.6 trillion.

Overall healthcare spending, though, would actually fall by $2 trillion, as private spending on healthcare would collapse. The cut would be achieved, however, through paying 40 percent less to providers than what they were getting from private insurance.

Another obstacle to “Medicare for all” is the fact that the public isn’t fully convinced by the idea of nixing private insurance, a recent poll from the Kaiser Family Foundation shows. Initially, 56 percent of those polled favored the Medicare for All Act, but then when they learned it would do away with private health insurance, the support fell to 37 percent.

Candidates are going to face pushback within their party. House Speaker Nancy Pelosi and other Democratic leaders have not embraced government healthcare, instead pushing for adding funding to Obamacare.

But proponents of allowing the government to have a more extensive role in healthcare point out that waste is prevalent in the current system. Patients receive unnecessary medical care, such as repeated tests or surgeries that either don’t make them healthier or even make them worse.

These proponents agree with Harris that health insurance companies are unnecessary. Wendell Potter, an advocate of a government-financed healthcare system and president of the Business Initiative for Health Policy, said in a statement that polling results show the healthcare industry’s misinformation campaign to spread “fear, uncertainty, and doubt” was effective. He said that commercial health insurance companies don’t have an incentive to lower healthcare costs and make sure patients can access care.

Potter, a former health insurance executive, described how the information campaign worked, saying the goal was to “make people believe that private health insurance companies were a necessary part of the healthcare system, and to scare them into thinking that a ‘Medicare for all’ system was expensive and impractical, and that it would cause a significant drop off in the quality of care.”