Senate rules could undercut Democrats’ prescription drug plan

“Democrats have a multi-pronged strategy for addressing drug prices in the Build Back Better Act. First, they would allow Medicare to negotiate with pharmaceutical manufacturers on the prices of a certain number of prescription drugs, something they have been promising to do for years. But Democrats also want to limit drug companies’ ability to hike the prices of their medications for everyone — regardless of what kind of health insurance they have — in the future.

To do that, Congress has proposed requiring drugmakers to pay rebates for any price increases, in either the Medicare health program or the commercial health plans that cover 180 million Americans.

But, as Politico reported this week, the plan to apply the inflation-indexed rebates to the commercial market could be in trouble.

Senate Republicans — at the urging of the drug industry — plan to challenge whether the rebates for commercial health plans are permissible in a bill passed through the budget reconciliation process.”

“the Byrd Rule requires that all the provisions in a budget reconciliation bill directly change federal spending or revenue.

Republicans will argue that the purpose of the provision is to control drug prices for the private plans, full stop, and that does not have anything to do with federal spending or revenue — at least not directly.

The Democratic counterargument would be that applying these rebates to commercial plans would have a serious, more than incidental, effect on the federal budget. The federal government subsidizes almost all private insurance plans in one way or another, and so lower or higher costs for those plans could have major implications and lower costs for private health plans could also mean higher wages for workers, who would then pay more in taxes.

Who wins is likely ultimately a decision for the Senate parliamentarian.”

“what would happen if the parliamentarian determines rebates covering commercial plans cannot be allowed under the Byrd Rule?

The big fear, voiced by advocates of the Democrats’ plan, is that drug companies would extract higher prices from the commercial market in order to make up for the revenue they would lose from Medicare once that program’s new price controls take effect.

According to several experts, that appears unlikely. Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, covered why in a lengthy analysis published in September.

“Fundamentally, for this to occur, it would have to be the case that drug companies are benevolently choosing not to profit-maximize at present,” Adler told me this week, “which I find rather difficult to believe.””

“Under the current plan, drugmakers would pay a rebate based on their sales volume in both the Medicare and commercial markets. In that scenario, there would be little reason to raise list prices faster than inflation, because you are paying the penalty based on the entire market.

But if those rebates can’t include the commercial market, the penalty will be based on the Medicare market only — making it a smaller price to pay if a company does decide to hike the list price of a drug at a rate higher than inflation.”

Do high deductibles lower healthcare prices? Price Controls VS Managed Market Healthcare.

Video Sources: Do high deductibles lower healthcare prices? Price Controls VS Managed Market Healthcare.

High-Deductible Health Plans Reduce Health Care Cost And Utilization, Including Use Of Needed Preventive Services Rajender Agarwal et al. 10 2017. HealthAffairs. https://www.healthaffairs.org/doi/10.1377/hlthaff.2017.0610 Does High Cost-Sharing Slow the Long-term Growth Rate of Health Spending? Evidence from the States Molly Frean and Mark

Medicare’s benefits are full of holes — and patients keep falling through

“Medicare is one of America’s flagship government programs, immensely popular with the public, a critical safety net for people over 65 — and it is full of holes.

The program’s benefits are not as comprehensive as most other kinds of health insurance Americans carry. Unlike with commercial health insurance or with Medicaid, which covers people in or near poverty, there may not be a limit on what a person on Medicare may have to pay out of pocket for their medical care.

Medicare also doesn’t cover dental or vision services, which are essential to the health of the over-65 population that it serves. The benefits for long-term care are meager, placing an enormous financial burden on patients and their families.

Two things can be true at once: Medicare has been a tremendous success in eliminating poverty from medical expenses among the elderly, compared to the pre-1965 status quo, and it is, as currently constructed, woefully inadequate to the realities of modern health care.

Democrats in Congress appear to recognize this problem. They plan to include some expansion of Medicare — by adding new benefits and perhaps making more people eligible — in the major budget reconciliation bill they hope to pass in the coming months.

For now, they appear to be focused on adding new dental, vision, and hearing benefits. They are working with finite resources; money spent on new benefits is money that can’t be spent on adding more people to the rolls or lowering patients’ out-of-pocket costs for other medical services.”

Medicare Is About To Run Out of Money. Democrats Want To Make the Program Cost Even More.

“Medicare’s board of trustees produced their annual report on the program’s fiscal health. That report contained some expected yet nonetheless alarming news: Medicare’s hospital insurance (HI) trust fund, itself a kind of accounting fiction, will be insolvent in just five years. Starting in 2026, the HI fund, which covers inpatient hospital services, will be depleted.

The program will have to rely on the HI fund’s incoming revenues, essentially operating on a cash flow basis—and there won’t be enough cash. In 2026, the HI fund will only cover about 91 percent of its bills. In the years that follow, that gap will only grow larger. So without changes to the program’s financing, doctors, hospitals, and other medical providers will face rapidly reduced payments from the program, with ensuing ripple effects on both the wider economy, roughly a sixth of which revolves around health care services, and on the provision and availability of health care.

If anything, the program’s fiscal problems may be even worse than that: The new report assumes that an array of cost-reduction measures, including a series of technical tweaks the physician payments and bonuses, will persist. But they also note that Medicare’s “long-range costs could be substantially higher than shown throughout much of the report if the cost-reduction measures prove problematic and new legislation scales them back.

As anyone who has even a passing familiarity with attempts to control the cost of federal health care programs through doctor payment tweaks knows, those sorts of measures often prove problematic—which is to say, doctors don’t like them, and thus, for political reasons, Congress overrides those payment changes.”

The new Alzheimer’s drug that could break Medicare

“Medicare’s inability to determine the price it pays for aducanumab is a uniquely American problem compared to health systems in the rest of the developed world. Countries like Australia and the United Kingdom have independent boards that evaluate a new drug’s effectiveness and set a price based on that estimated value. The US pharma industry says the US system is important for encouraging innovation, and companies have made amazing breakthroughs, such as the hepatitis-C drugs that effectively cure that disease.

But, as the standards for approving have sometimes seemed to slip in recent years, the chances of the FDA approving very expensive drugs with only marginal benefits have risen.

“We don’t require prices to reflect the value of treatment, period,” Dusetzina said. “Companies can price their drugs as high as they want. Companies can also get drugs approved with little evidence.”

So Biogen is planning to charge $56,000 annually for aducanumab. ICER, which evaluates the estimated value of new drugs, estimates, based on the clinical evidence, that it’s worth more like $8,000; perhaps as little as $2,500 or as much as $23,100. Regardless, the price announced after Biogen secured FDA approval “far exceeds even this optimistic scenario,” ICER concluded.”

Charging patients just $10 more for medications leads to more deaths

“Researchers at Harvard University and the University of California Berkeley examined what happened when Medicare beneficiaries faced an increase in their out-of-pocket costs for prescription drugs. They found that a 34 percent increase (a $10.40 increase per drug) led to a significant decrease in patients filling their prescriptions — and, eventually, a 33 percent increase in mortality.

The rise in deaths resulted from people indiscriminately cutting back on medications when they had to pay more for them, including drugs for heart disease, hypertension, asthma, and diabetes.

“We find that small increases in cost cause patients to cut back on drugs with large benefits, ultimately causing their death,” the authors — Amitabh Chandra, Evan Flack, and Ziad Obermeyer — wrote. “Cutbacks are widespread, but most striking are those seen in patients with the greatest treatable health risks, in whom they are likely to be particularly destructive.””

“This finding challenges an important assumption embedded in American health care policy. In the 1970s and ’80s, the RAND Health Insurance Experiment concluded that small copays encouraged patients to use fewer health care services without leading to worse health outcomes. That helped establish a new economic argument for insurers to ask their customers to put more “skin in the game”: it would encourage more efficient use of health care services with no downside.

But that premise presumed people would be rational. For example, if they are being asked to pay more money for prescription drugs, they would cut back on less-valuable medications first. The Harvard/Cal study didn’t detect any such rationality. When costs went up, people just stopped filling their prescriptions for statins — high-value drugs that are effective in preventing heart attacks.

The researchers explained it like this: The way patients behaved when faced with higher out-of-pocket costs would suggest that they placed very little value on their lives. They literally stopped taking high-value drugs because of the price.”

“If patients can’t make good value judgments, the economic argument for cost-sharing starts to crumble, and it starts to seem like eliminating cost-sharing — increasing the likelihood patients will continue to take the medications they need to stay alive — would be a cheap way to “buy” people more health. As the researchers wrote, “improving the design of prescription drug insurance offers policy makers the opportunity to purchase large gains in health at extremely low cost per life-year.””

“Eliminating out-of-pocket costs would come with a price: Insurers would likely charge higher premiums to offset the loss of the copays and coinsurance that currently reduce their direct costs. But if the goal is better health outcomes, that is arguably a price worth paying.”

America’s Middle Class Gets More Welfare Than the Poor

“programs for the poor are only a tiny portion of the U.S. welfare state. In fact, the Congressional Budget Office estimates that more than 60 percent of American households receive more in government benefits than they pay in taxes. To get an idea of just how big the American welfare state has become, consider that those transfer payments from the federal government are equal to 34 percent of all wages and taxes in the U.S.”

“The largest transfer programs are the middle-class entitlements, Social Security and Medicare. In addition, a large portion of the third biggest entitlement program, Medicaid, actually goes to the middle-class elderly and disabled individuals, not the poor. Those three programs alone now make up more than half of all federal spending.”

“we need to understand that, in practice, when an individual pays Social Security taxes, none of those taxes are set aside for that individual’s benefits. Rather, they are used to pay benefits to those who are currently retired. Social Security is merely a transfer payment from workers to retirees. In that sense, it operates exactly the same as any other transfer or welfare program.”

“Many individuals will receive more than taxes paid plus a reasonable amount of interest on those taxes.”

“according to the Social Security system’s trustees, the program faces a future shortfall of more than $43 trillion7 (measured in discounted present value over an infinite horizon—that is, if the government put away $43 trillion today and earned 3 percent interest on those funds, it would have enough money so that, combined with payroll taxes, it could pay all future benefits). Unfortunately, however, the federal government doesn’t have an extra $43 trillion. As a result, there is simply no way that Social Security can pay future benefits without a massive tax increase.”

Sorry, Bernie Sanders: Taiwan’s Single Payer System Isn’t an Argument for Medicare for All

“Sanders’ Medicare for All bill calls for no copays and no premiums and effectively outlaws private insurance as we know it. It is substantially more generous than Taiwan’s system, which means it would be substantially more expensive.”