Following up on my last blog post about how the pharmaceutical industry rips us off with its greed and disregard for the public interest, we need now to ask a more fundamental question—whether health care costs can ever be contained across the medical-industrial complex, given the failure of past incremental reform attempts, including the ACA after almost six years since its passage? Even more important, it seems obvious that we can never achieve universal access to affordable care unless and until we can get control of health care costs.

A brief look at cost containment under the ACA shows the dimensions of the problem, now reaching crisis proportions:

  • Drug prices are going through the roof, without any price controls, especially for specialty drugs; examples include Sovaldi, at $1,000 a pill, costing $84,000 for a 12-week treatment of hepatitis C ($94,500 when combined with another agent) (1), Daraprim at $750 a tablet after an overnight price hike of 5,000 percent for the life-threateningtoxoplasmosis (the price may be reduced later due to public outrage) (2), and the combination of Yervoy and Opdivo for advanced melanoma at $250,000 for the first full year of treatment. (3)
  • Cell and gene therapies for leukemia are now coming into use at a price of more than $500,000 per patient, according to Citigroup. (4)
  • Even if insured, patients can expect to pay at least 40 percent of these costs under insurers’ policies of “adverse tiering” for specialty drugs.
  • Specialty pharmaceuticals are estimated to account for 50 percent of drug spending by 2019. (5)
  • Most major pharmaceutical companies have either been convicted of fraud or reached fraud settlements for such practices as price manipulation and kickbacks.
  • As hospital systems expand and consolidate, they may raise prices by as much as 40 or 50 percent. (6)
  • We waste an estimated $150 billion a year on hospital bureaucracy and another $300 billion on private insurers’ overhead and the paperwork they impose on physicians. (7)
  • By 2024, U. S. health care spending is expected to account for almost one-fifth of our GDP. (8)

What happens when a patient has to deal with these rapidly increasing health care costs, especially when so many Americans are uninsured, underinsured, with stagnant annual incomes not keeping up with inflation? First, of course, many forgo care; already one in five don’t fill a prescription, and that number will certainly increase as more specialty drugs come on line. Patients confronting a new serious illness, such as cancer, may be helped by community support through bake sales and other efforts, but that is just another indicator of a system that doesn’t work. In desperation some may seek help by turning to crowd-funding or social media. (9) But many will be forced to forgo care altogether, have worse outcomes that could have been prevented in a more fair system with effective mechanisms of cost containment. Some will also end up declaring bankruptcy due to medical bills.   

Meanwhile, of course, the impacts of continuing unrestrained prices and costs of health care will have a devastating impact on public programs such as Medicare and Medicaid. Taking hepatitis C as an example, it is a serious illness affecting some 3.5 million Americans that can now be cured by Sovaldi and its accompanying agent at a cost approaching $100,000 per patient. Many of these patients depend on Medicaid for care, but Medicaid chiefs from both red and blue states are already calling for outright price controls and/or federal help to states trying to provide this treatment. (10)

Given the present political landscape in Congress, we can expect this appeal to fall on deaf ears, more cutbacks of an already underfunded Medicaid program, and a growing public health problem as hepatitis C remains undertreated. Medicaid programs in Pennsylvania are already denying nearly half of prescriptions for its treatment. (11)

We operate as if we can afford everything that our mostly for-profit health care industry brings to market, with little concern for its scientific evidence or individual, family, and governmental budgets. Already we know that up to one-third of health care services that are provided are either inappropriate or unnecessary, with some actually harmful. (12) More than 30 million full-body CT scans are performed each year for screening purposes, despite the lack of evidence of benefit or approval by the FDA or the American College of Radiology. (13) Dr. Peter Bach, oncologist at Sloan-Kettering Cancer Center, has estimated that 30 to 40 percent of spending on cancer care is of marginal value. (14)

Despite the goal of the ACA to make health care more affordable, we have to admit that it has failed to do so, and that containment of health care costs is still just an illusion in this country. Drug companies, medical device makers, hospital systems, and insurers are still free to set prices at what the traffic will bear, while the government is prohibited from negotiating prices, the FDA is permissive in some of its approvals, and cost-effectiveness analysis is not part of how we approach coverage or reimbursement policies.

Here are just three markers of how unaffordable health care is now, clearly a financial hardship for much of our population and unsustainable even into the near future:

  • The costs of health care for a typical family of four covered by an average employer-sponsored PPO plan in 2015 is $24,671; they have more than doubled over the last ten years, and will exceed $25,000 in 2016. (15)
  • The median annual income for American households in 2015 is about $53,800.
  • Because of the high cost of cancer drugs and care, patients with cancer in the U. S. are more than twice as likely to declare bankruptcy as patients with other diseases. (16)

We have to recognize that the more unaffordable health care becomes, the less access to essential care Americans have and the worse their outcomes will be. In order to fix this huge and growing problem, we need to think much more broadly about needed approaches, which will have to include a larger role of government to rein in excesses of the free market.  Single-payer national health insurance would allow the government to negotiate drug prices, establish annual budgets for hospitals and other facilities, and start a transition toward a more service-oriented industry. Other approaches would also help, including increased scrutiny of mergers among hospitals and drug companies, increased anti-trust enforcement, shortening patents that now extend monopolies, ending pay-for-delay by drug companies, banning direct to consumer advertising, restricting the revolving door between government, K street and industry, and tougher penalties for health care fraud.

Pie in the sky? Yes, if we think we can’t ever do it. But no, if we look at what almost all other advanced countries have already done.    

References:

1. Rockoff, JD. Once-a-day hepatitis pill approved. Wall Street Journal, October 11-12, 2014: B1.

2. Pollack, A. Drug goes from $13.50 a tablet to $750 overnight. New York Times, September 20, 2015.

3. Loftus, P, Winslow, R. Melanoma treatment will cost $250,000. Wall Street Journal, October 2, 2015: B2.

4. Plumridge, H. Cancer therapies face hurdles getting to patients. Wall Street Journal, October 7, 2014: B1.

5. Express Scripts. 2011 drug trend report (Internet). St. Louis, MO, Express Scripts, April 2012.

6. Pear, R. F.,T.C. wary of mergers by hospitals. New York Times, September 17, 2014.

7. PNHP press release. Bureaucracy consumes one-quarter of U. S. hospitals’ budgets, twice as much as in other nations. Physicians for a National Health Program. Chicago, September 8, 2014.

8. Potter, W. The more skin in the game, the more Wall Street likes it. The Progressive Populist, April 15, 2015.

9. James, SD. Crowd-funding can help cure cost of cancer care. NBC News, June 4, 2015.

10. Associated Press. States ask Congress to intervene on drug prices. St. Louis Post-Dispatch, October 19, 2014.

11. Sapatkin, D. Medicaid denies half of prescriptions for new hepatitis C drugs, Penn study finds. Philly.com, November 14, 2015.

12. Wennberg, JB, Fisher, ES, Skinner, JS. Geography and the debate over Medicare reform. Health Affairs Web Exclusive W-103, February 13, 2002.

13. Brenner, DJ, Hall, EJ. Computed tomography—an increasing source of radiation exposure. N Engl J Med 357: 2277-2284, 2007.

14. Bach, P, as quoted in McNeil, C. Sticker shock sharpens focus on biologics. News. J Natl Cancer Inst 99 (12): 911, 2007.

15. 2015 Milliman Medical Index. Will the typical American family of four be driving a “Cadillac plan” by 2018? Milliman Research Report, Seattle, WA.

16. Ramsey, S, Blough, D, Kirchhoff, A et al. Washington State cancer patients found to be at greater risk of bankruptcy than people without a cancer diagnosis. Health Affairs (Millwood) 32 (6): 1143-1152, 2013.