A common myth among opponents of single-payer national health insurance (NHI) is that it would cost too much and break the bank. This belief is based in part upon an assumption that patients would overuse health care if they gained access to it without any cost-sharing when they seek care. Cost-sharing has been a lynchpin of consumer-directed health care (CDHC) since the early 1990s, which assumes that patients who have more “skin in the game”— through deductibles, co-payments, and other out-of-pocket costs—will make more prudent decisions about their own health care. But that policy and assumption have been discredited by actual experience over the last 25 years. In fact, the more cost-sharing is imposed on patients with higher deductibles, co-payments and out-of-pocket costs, the more they underuse care by delaying or avoiding necessary care. (1) Moreover, when Canada shifted over to its single-payer financing system in the 1970s, there was only about a 5 percent increase in their use of health care, mostly for necessary care that had been delayed or forgone. (2)

We have to face some inconvenient facts about what we are already spending—and wasting—in our current health care system, six years after enactment of the Affordable Care Act (ACA)—a misnomer given the following facts:

  • The ACA continues high cost-sharing in many of its plans and has failed to control costs or prices to the point that one in three Americans cannot afford necessary health care. (3)
  • There is rampant profiteering and waste in the ACA, as illustrated by these two examples: the administrative overhead in the growing market of private Medicare plans is six times that of traditional Medicare (4), and private insurers have been gaming the ACA’s risk-coding program, under which they are paid more by overstating the health risks of older and sicker enrollees. (5)
  • We pay $2.1 trillion in taxes to fund health care in this country, $6,560 per person, more per capita than in Canada or any other nation. The costs to our government in paying for private health coverage (28 percent of all health spending) and tax subsidies for private employer-sponsored plans and other privately paid care ($326 billion in 2015), indicate that we are already paying, as taxpayers, almost two-thirds of total health care costs in the country. That would be enough to provide universal access to health care for all Americans if it were to be re-directed from the inefficiencies and waste of private insurers to patient care in a simplified national single-payer financing system coupled with a private delivery system. (6)
  • The landmark 2013 study by Gerald Friedman, professor of economics at the University of Massachusetts, finds that NHI, when enacted, will save $592 billion a year by cutting administrative waste of private insurers ($476 billion) and reducing pharmaceutical prices to European levels ($116 billion). (7)
  • Professor Friedman’s ten-year projection for funding H. R. 676, the single-payer Medicare for All bill in the House, estimates that $9.6 trillion will be saved from administrative economies, lower pharmaceutical prices, and lowered rate of medical inflation, that $19.7 trillion will be saved on private insurance premiums, reduced out-of-pocket spending, and other private health spending, that $17.5 trillion will be raised from the financial transactions tax, the high-income surtax, and the payroll taxes, and that the deficit will be cut by $2.8 trillion. (8)
  • With the ACA, the government is paying more than $1 trillion in subsidies to private insurers between 2015 and 2024 (9), even though 29 million people are still uninsured and tens of millions underinsured, and there is still no cost containment is in sight.

Opponents of NHI use disinformation and distortion of its costs in the everyday debate over health care, especially during this election season. Reports of other studies ignore the savings that Friedman has projected, such as that by Kenneth Thorpe, economist at Emory University, who underestimates administrative savings with single-payer and ignores other savings, such as elimination of subsidies and savings on drugs and medical equipment. (11) Seemingly unaware of these savings, Hillary Clinton, as the Democratic presidential candidate, without apparent concern for the growing costs and unaffordability of care, restricted access, and flight of large insurers from the exchanges, contends that it would put a heavy tax burden on the middle class and still does not support NHI (although in 1994, in the absence of health care reform, she called it inevitable by 2000!) (12)

The costs of health insurance and health care are now exceeding $25,000 for a family of four with employer-sponsored PPO coverage, making the costs of care less affordable all the time. Continuing the ACA or repealing/replacing it with a Republican “plan” will only make matters worse. We have to recognize that private insurers are gaming the system to their advantage and holding us up for more generous bailouts as they exit the ACA’s exchanges in droves. We can no longer afford their greed and wasteful bureaucracy. As access to care is further restricted by their higher premiums and narrower networks, we can only expect growing political backlash across the political spectrum.

John Geyman, M.D. is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans

visit: http://www.johngeymanmd.org

1. Davis, K, Schoen, C, Stremikis, MPP. Mirror, Mirror on the Wall: How the Performance of the U. S. Health System Compares Internationally. New York. The Commonwealth Fund, 2010 update.

2. Armstrong, P, Armstrong, H, Fegan, C. Universal Health Care: What the United States Can Learn from the Canadian Experience. New York. The New Press, 1998, 131-132.

3. Pollitz, K, Cox. C, Lucia, L et al. Medical debt among people with health insurance. Kaiser Family Foundation, January 2014.

4. Woolhandler, S, Himmelstein, DU. Single-payer health plan wouldn’t cost U. S. more. Philadelphia Inquirer, February 5, 2016.

5. Potter, W. Health insurers working the system to pad their profits. Center for Public Integrity. August 15, 2015.

6. Ibid # 4.

7. Friedman, G. Funding H. R. 676: The Expanded and Improved Medicare for All Act. How We Can Afford a National Single-Payer Health Plan. Physicians for a National Health Program. Chicago, IL. July 31, 2013. Available at: htpp:.//www.pnhp.org/sites/default/files/Funding%20HR%/20676_Friedman_final_7.31.13.pdf

8. Friedman, G. An open letter to the Wall Street Journal on its Bernie Sanders hit piece. September 15, 2015.

9. Congressional Budget Office. Insurance Coverage Provisions of the Affordable Care Act. Washington, D.C., April 2014.

10. Ibid # 7.

11.  Himmelstein, DU, Woolhandler, S. On Kenneth Thorpe’s analysis of Senator Sanders’ single-payer reform plan. The Huffington Post, January 29, 2016.

12.  Clinton, H, speaking to a group at Lehman Brothers Health Corporation, June 15, 1994. As reported by Health Care for All-WA Newsletter, Winter, 2015, p. 9.

  • Comments Off on Would Single-Payer National Health Insurance Break the Bank?

Uwe Reinhardt: “It is hard to see a way out of this dilemma”

Posted by on Friday, Aug 26, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Why Are Private Health Insurers Losing Money on Obamacare?

By Uwe Reinhardt, PhD
JAMA Forum, August 25, 2015

The report last week that Aetna, one of the major US health insurance companies, would leave most of the health insurance exchanges established under the Affordable Care Act (ACA) of 2010 follows similar accounts the media that Anthem,  Aetna, and other large private health insurers are contemplating withdrawing from the so-called ACA marketplace. The companies say the reason behind these actions is they are losing hundreds of millions of dollars on the business coming to them from these exchanges. To make up for the losses, some insurers, though by no means all, have quoted premium increases in excess of 25% for 2017.

This development seems puzzling, as it comes in an era of historically low growth in total national health spending. The latest estimates published by the Centers for Medicare & Medicaid Services (CMS), which provides estimates of current and projected national health spending, indicate that spending growth at only 4.8% in 2016 and project health care spending growth to be only 5.8% per year for the decade 2015-2025.

Furthermore, as a report published by the Urban Institute notes, even in 2010, the year the ACA became law, its impact on total national health spending was estimated to be an increase in annual spending of only 2.5% above what would have been spent anyway. In addition, the report also notes that the CMS now projects that total US national health spending during 2014-2019 will be $2.5 trillion lower than projections made in 2010.

Why, then, in the face of these historically low growth rates, have premiums on the ACA health-insurance exchanges for 2017 increased at such high rates?

The core of the answer to this question can be read in the chart (at the link below), showing the highly skewed distribution of per capita health spending across the US population. The phenomenon is known as the “80-20 rule,” indicating that 20% of any large insured populations tends to account for 80% of all health care spending on that population.

Individuals in the high spending categories typically have multiple health problems requiring expensive treatments. A question that has troubled US health policy for decades has been what kind of health care these individuals with multiple conditions should receive and who should pay for it, assuming that only few very well-to-do US residents could afford to purchase their health care with their own resources. Here, it is helpful to remember that the US median disposable family income is only about $54 000, not even enough to cover the annual cost of some effective specialty drugs.

The contributions individuals make out of their paychecks toward employer-sponsored health insurance are community rated, which means that they are the same for all employees of the firm, regardless of their health status and even age. So healthy employees are forced to subsidize less healthy colleagues through the premiums they pay. With the ACA, the Obama administration sought to provide the same deal for US individuals purchasing health insurance in the individual market.

For health insurers, however, this approach can be called an unnatural act, because it forces them knowingly to issue policies to very ill people at premiums evidently far below these individuals’ likely claims on the insurer’s overall risk pool. Actuaries and health policy analysts understand that this approach can work only if all individuals, healthy and ill, are mandated to purchase coverage for a defined, basic package of benefits, at the community-rated premium—thereby forcing young and healthy individuals to subsidize with their premiums the health care of individuals with medical conditions in the insurer’s risk pool.

However, for purely political reasons, the ACA mandate for all persons in the United States to be insured was rather weak, leading many younger or healthier individuals simply to forgo purchasing health insurance and paying the relatively low fines for doing so. Over time, this practice naturally will drive up the community-rated premiums, inducing even greater numbers of young and healthy individuals to forgo insurance coverage, leaving private insurers with ever-more expensive risk pools.

The result of this adverse risk selection (the scenario in which sicker-than-average people purchase insurance while young and healthy people do not) has been that some private health insurers underpriced their policies on the ACA exchanges, perhaps to gain market share early on or because they simply did not anticipate quite the adverse risk selection that occurred.

It is hard to see a way out of this dilemma, given the current political climate. The task is doubly difficult in the United States, because the health care system is structured to yield prices for health care products and services that are twice as high or higher than the prices of identical items in other countries, driving US per capita health spending also to be twice as high as in many other developed countries. Thus, it is much more expensive in the United States than in other countries to provide health care to all residents, especially those who are ill and poor.

If health care costs in the United States were lower, most people would probably agree that ill, low-income citizens should receive the needed health care that is available to better-off individuals. The problem is that our health system is in danger of pricing kindness out of our souls.


Although many readers are quite familiar with the concept of adverse selection presented here, the take-home message today is contained in the last three paragraphs of Uwe Reinhardt’s article. By relying on private insurers to control spending, we have driven per capita health care spending up to twice the average of nations with far better health care financing systems. According to Reinhardt, “The problem is that our health system is in danger of pricing kindness out of our souls.”

  • Comments Off on Uwe Reinhardt: “It is hard to see a way out of this dilemma”

JAMA: Answer to high cost of prescription drugs?

Posted by on Thursday, Aug 25, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

The High Cost of Prescription Drugs in the United States: Origins and Prospects for Reform

By Aaron S. Kesselheim, MD, JD, MPH; Jerry Avorn, MD; Ameet Sarpatwari, JD, PhD
JAMA, August 23/30, 2016


The increasing cost of prescription drugs in the United States has become a source of concern for patients, prescribers, payers, and policy makers.

To review the origins and effects of high drug prices in the US market and to consider policy options that could contain the cost of prescription drugs.

We reviewed the peer-reviewed medical and health policy literature from January 2005 to July 2016 for articles addressing the sources of drug prices in the United States, the justifications and consequences of high prices, and possible solutions.


Per capita prescription drug spending in the United States exceeds that in all other countries, largely driven by brand-name drug prices that have been increasing in recent years at rates far beyond the consumer price index. In 2013, per capita spending on prescription drugs was $858 compared with an average of $400 for 19 other industrialized nations. In the United States, prescription medications now comprise an estimated 17% of overall personal health care services. The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents. The availability of generic drugs after this exclusivity period is the main means of reducing prices in the United States, but access to them may be delayed by numerous business and legal strategies. The primary counterweight against excessive pricing during market exclusivity is the negotiating power of the payer, which is currently constrained by several factors, including the requirement that most government drug payment plans cover nearly all products. Another key contributor to drug spending is physician prescribing choices when comparable alternatives are available at different costs. Although prices are often justified by the high cost of drug development, there is no evidence of an association between research and development costs and prices; rather, prescription drugs are priced in the United States primarily on the basis of what the market will bear.

Conclusions and Relevance
High drug prices are the result of the approach the United States has taken to granting government-protected monopolies to drug manufacturers, combined with coverage requirements imposed on government-funded drug benefits. The most realistic short-term strategies to address high prices include enforcing more stringent requirements for the award and extension of exclusivity rights; enhancing competition by ensuring timely generic drug availability; providing greater opportunities for meaningful price negotiation by governmental payers; generating more evidence about comparative cost-effectiveness of therapeutic alternatives; and more effectively educating patients, prescribers, payers, and policy makers about these choices.

Possible solutions

* Patenting
* Anticompetitive strategies
* Price negotiation
* Addressing extraordinary shortage or pricing problems
* Generic drug policies
* Follow-on biologic policies

* Drug product selection laws
* Price negotiation

Health Care Organizations
* Price negotiation
* Information dissemination

Improving Competition
(Use the link below to access a more detailed explanation of how they would “improve competition”)

Government Efforts to Reduce Drug Prices
In theory, the most effective way for a government to reduce drug prices would be for it to set them for the entire marketplace, as central governments do in countries such as Sweden, or to engage in international reference pricing and set prices at levels similar to those of other countries. Taking such a step in the United States would have major marketplace ramifications and is not at present politically feasible, in part because of the power of the pharmaceutical lobby in Washington, DC.



Americans pay more than double what other nations pay for drugs

By Stephen Feller
UPI, August 23, 2016

The cost of prescription drugs in the United States far outpaces prices in similarly industrialized countries, and the continuously rising costs are causing concern in every part of the healthcare industry, from patients and doctors to insurance companies and government officials.

Researchers at Harvard Medical School suggest in a new study, published in the Journal of the American Medical Association, that the nature of the American drug marketplace, as designed and regulated by the government, bears a large part of the blame.

A doctor’s group called for the United States to move to a single-payer health insurance system, potentially similar to those in Canada and England, to make care more available to everyone while bringing down costs.

They argue that between the number of people seeking care and the single-payer system creating the ability to aggressively negotiate the cost of drugs, overall healthcare costs in the United States would go down, while people get healthier.

“I do think there are a lot of improvements that can be made to the U.S. system without tossing it out the window and starting over with the type of system you’d find in a European country,” Kesselheim said.


This JAMA article provides a comprehensive explanation as to why pharmaceutical prices are so high in the United States, and they even provide a few suggestions as to what might be done about it. The major error they make is that they assume that the problem should be addressed by US-style quasi-market solutions but not through a government solution that they say “would have major marketplace ramifications and is not at present politically feasible, in part because of the power of the pharmaceutical lobby in Washington, DC.”

We are already deeply involved in supposed marketplace solutions, and yet drug prices continue to skyrocket. We really do need a  government health care financing infrastructure that is designed to serve patients rather than private sector shareholders. The obvious model which would be most suitable for the United States would be a single payer national health program.

The lead author, Aaron Kesselheim, says, “I do think there are a lot of improvements that can be made to the U.S. system without tossing it out the window and starting over with the type of system you’d find in a European country.”

But we would not be starting over with the delivery system which is really what counts in health care. We would improve it and make it non-profit, but its basic structure in delivering health care would remain the same. It is only the financing system which would change dramatically, making it far more equitable, efficient and effective, while finally slowing health cost increases to sustainable levels.

JAMA is allowing free access to this article (link above). It is well worth reading if you want to understand why we are in this mess with pharmaceutical pricing. But as you read their suggestions, think about how a single payer system would be so much better.

Above all, reject the same old, tired and worn out argument they present that a better system is not “politically feasible,” and the industry lobbyists would not let us make the changes anyway. The logical conclusion we should arrive at is that we need to replace our legislators who are listening to the lobbyists with legislators who will, instead, listen to us, the people.

  • Comments Off on JAMA: Answer to high cost of prescription drugs?

Mylan CEO Heather Bresch: EpiPen is my “baby”

Posted by on Wednesday, Aug 24, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

The EpiPen was her ‘baby.’ Now this pharma CEO is in the hot seat over price hikes

By Damian Garde
STAT, August 24, 2016

Drug company CEO Heather Bresch affectionately describes the humble EpiPen as her “baby,” a once-middling product that she turned into a blockbuster.

With aggressive advertising — and even more aggressive price hikes — Bresch has fostered the EpiPen into a bestseller that brings in more than $1 billion a year in revenue for Mylan Pharmaceuticals.

Even (Martin) Shkreli, widely perceived as a paragon of greed after hiking a drug price by 5,000 percent, decried Mylan as a group of “vultures.”

The EpiPen, an auto-injector used to reverse life-threatening allergic reactions, is inextricably tied to Bresch, whose ascension at the company tracks with the product’s rapid growth.

She has also become one of the drug industry’s highest-paid CEOs, pocketing more than $18 million in cash and stock last year.

Among the Senate’s membership is her father, Joe Manchin, a populist West Virginia Democrat whose influence is woven throughout her rise in the drug industry.

Bresch first adopted EpiPen in 2007, when Mylan purchased the generic drugs division of Germany’s Merck KGaA for $6.7 billion.

Bresch was promoted to chief operating officer at Mylan shortly after the deal with Merck KGaA. The official corporate announcement touted her MBA from West Virginia University. Months later, an exhaustive investigation by the Pittsburgh Post-Gazette revealed that she hadn’t finished the MBA program — and a later independent report found that university officials had falsified her transcripts to conceal that fact, adding in grades “pulled from thin air.”

WVU’s provost and business school dean later resigned, and the university revoked Bresch’s degree.

In 2015, Mylan announced that it would move some of its operations overseas in search of a more favorable tax rate. The tactic, known as an inversion, exploits what President Obama has called “one of the most insidious tax loopholes out there.” For Mylan, inversion meant shifting its business address to the Netherlands through a complicated transaction with Abbott Laboratories.

Senator Bernie Sanders had tweeted that “there’s no reason an EpiPen, which costs Mylan just a few dollars to make, should cost families more than $600.”

If Mylan loses too much value, it could struggle to defend itself from a future hostile takeover. But Bresch herself is well-insured: According to a recent analysis from Bloomberg, if she’s deposed in a merger, she’s in line for a $61.5 million golden parachute.


Aaron Carroll also discusses EpiPen as a case study in health care system dysfunction:

Much is being written about Mylan’s price gouging of its life-saving injectable epinephrine – EpiPen – charging over $600 for a product that costs less than a dollar to make, so rather than discussing the background, comments will be limited to the ethical underpinnings of this decision to gouge us.

Actually, nothing further need be said about the ethics of Mylan and its CEO Heather Bresch since they scream out at you in a cursory reading of the STAT article excerpts above. In an oft-repeated scenario, they created nothing but paid billions for a company that made their targeted product – billions of dollars that must be recovered through sales – then generated skyrocketing returns through escalating price gouging, and even avoided taxes through inversion. As CEO Bresch says, that’s her “baby.”

We sure get a lot of talk from Congress and the administration about outrageous drug prices, yet all we get from them is more talk. It almost makes you want to start a revolution (Bernie style) and nationalize the pharmaceutical industry (and some of the other industries while we’re at it). Well, maybe not a complete government takeover, but mandate that they be converted to non-profit public service corporations. We can start negotiations over nationalization and then come to the compromise of converting to non-profit private sector corporations, wherein the gains serve the public interest rather than being drained off to the one-percenters.

  • Comments Off on Mylan CEO Heather Bresch: EpiPen is my “baby”

Des Moines Register says government should not rely on private insurers

Posted by on Tuesday, Aug 23, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Government should not rely on private insurers

By The Editorial Board
The Des Moines Register, August 22, 2016

Aetna announced last week that it was reducing participation in health insurance exchanges created by the Affordable Care Act. It will sell plans in only four states next year, including Iowa, down from 15 this year. This follows similar market exits from UnitedHealth Group and Humana.

This is yet another reminder of why government should not rely on private companies to deliver health insurance to Americans. History has repeatedly shown this is a costly, dangerous and unsustainable idea. Yet politicians refuse to listen to history.

When Medicare was created in 1965, the goal was to insure seniors through a program administered by the government. In traditional Medicare, Uncle Sam directly pays providers for health services. The program is reliable, predictable and has low administrative costs. But politicians saw an opportunity to funnel public money to for-profit insurers to take over the job of administering benefits.

In the 1990s, private “Medicare+Choice” plans saved taxpayers no money while insurers demanded more and more money from the government. The companies failed to turn a healthy profit and disappeared. Fortunately, seniors could return to traditional, government-run Medicare.

Instead of learning from that experience, Congress embraced private insurers again in 2003. Medicare Advantage plans resulted in taxpayers paying 14 percent more per senior than the cost of care in traditional Medicare. Yet these plans are popular with seniors, who pay lower monthly premiums — and vote. Earlier this year, the GAO reported the feds improperly paid Medicare Advantage companies $14.1 billion in 2013. That’s billion with a “b.”

Lucky private insurers. Unlucky taxpayers. Reckless politicians.

Then there are governors, including Terry Branstad, who insist on handing over Medicaid administration to for-profit companies. Let’s take a look at how this has worked in Florida, where former Gov. Jeb Bush pushed the idea, arguing the cost of Medicaid operated by the state was “unsustainable.”

Privatization was rolled out statewide in 2014. Almost immediately, insurers complained they were losing money. They asked the state for a $400 million raise and a 12 percent increase in rates. This, of course, jeopardized any savings taxpayers may have realized. Two months ago Florida received a surprise Medicaid bill: It owed $433 million in unpaid reimbursements to insurers.

Then there is the Affordable Care Act.

One of the law’s fundamental flaws is its reliance on private insurers to provide coverage to millions of Americans through exchanges. With no “public option” safety net to offer government coverage if companies jump ship, the insurers have incredible political and financial power. They can, in fact, try to hold the government hostage. Pay higher reimbursements, don’t dispute our business decisions, do what we say or we are dropping out of exchanges.

Enter Aetna.

In a July 5 letter, Chief Executive Mark Bertolini informed the Justice Department that if it sued to block Aetna’s dealt to acquire Humana Inc., the insurer would reduce its presence in exchanges. The Obama administration says such a merger would increase consumer costs.

“If the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses,” he wrote.

Is that a warning? A threat? And how is the Obama administration supposed to respond?

The Justice Department sued to block the merger. Then Aetna announced it was scaling back its offerings in exchanges.

Americans’ access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.


There is much discussion today about moving forward with reform by introducing a public option – a competing government insurance plan – into the ACA insurance exchanges. Yet that would leave in place the current health care financing system, including the multitude of private insurers. As this editorial explains, the government “should not rely on private companies to deliver health insurance to Americans” as “this is a costly, dangerous and unsustainable idea.”

Under our current system, the design of a public option would be very similar to existing private plans. That would perpetuate the flaws of the individual insurance model when what we need is a universal, prepaid health care system. Also, a public option designed as an individual plan to compete with private plans would fail to capture almost all of the efficiencies of a single payer national health program, leaving in place our dysfunctional, fragmented system of a multitude of public and private plans.

The editorial provides a very powerful message on why private insurers should be excluded from our health care financing. Once the public clearly understands that then we can explain to them why we should not accept even a fragmented system of public programs, even if dominated by a “public option” individual insurance plan. We need one single, efficient government financing program like Medicare, except even better.

  • Comments Off on Des Moines Register says government should not rely on private insurers

Drug prices in the U. S. are already approaching a crisis point for many patients unable to afford their prices, often despite being insured. These examples indicate how serious this problem has become:

  • The use of prescription drugs by Americans, partly driven by direct-to-consumer advertising since the 1990s, has reached an all-time high.
  • Many people take five or more medications, especially those with chronic conditions.
  • Under the catastrophic drug coverage plan enacted in 2003, the Medicare Part D program, beneficiaries pay just 5 percent of the bill when their drug costs pass $4,850; insurers pay 15 percent of the remainder, with taxpayers paying 80 percent, thereby incenting drug companies to drive their prices sky high. (1)
  • Yearly out-of-pocket costs expenses for cancer drugs often amount to one-half the average annual household income (2), and many cancer patients are forced to reduce the frequency of their prescribed drugs and cut their spending on food and clothing to get by. (3)
  • The cost of Gleevec, a 15-year old pill for leukemia, averaged $10,893 per month in 2014, four times its initial price. (4)
  • According to the Milliman Medical Index, the cost of prescription drugs for a typical family of four covered by an average employer-sponsored preferred provider organization (PPO) in 2016 came to $4,270, about four times higher than in 2001. (5)
  • The U. S. Department of Health and Human Services projects that total drug spending will reach $535 billion in 2018, almost 17 percent of all health care spending. (6)
  • Between May 2015 and May 2016, prices received by drug makers rose by nearly 10 percent, the second highest increase among the 20 largest components in the Producer Price Index, despite pushback from insurers, scrutiny by U. S. lawmakers, and growing public concerns about drug costs. (7)

Now enter the Trans-Pacific Partnership (TPP), a massive, pro-corporate “free trade” agreement negotiated mostly in secret by large corporate players in the world economy. It was negotiated over seven years in closed-door sessions excluding the press, policy makers, and the public. Its 30 chapters were released in November 2015, with most chapters granting specific new rights and powers for corporations. As a regional trade agreement, it includes 12 countries—the U. S., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, all of which signed the document “in principle” earlier this year. None have yet ratified it.

If ratified, this is what the TPP would do:

  • Require every signatory nation to grant a new 20-year monopoly for new uses of old medicines.
  • Provide other options for patent extensions, or “ever greening.”
  • Give companies marketing exclusivity protections that create monopoly even when a drug is off-patent.
  • Provide drug companies with greater opportunities to influence government drug coverage and reimbursement policies.
  • Lock in rules that would limit competition and contribute to preventable suffering and death. (8)

In effect, the TPP would give drug companies wide latitude to jack up prices and costs of medications with their expanded monopoly rights and keep lower cost generics off the market. Its rules could not be altered without consensus by all signatories to the agreement. Moreover, even in countries such as Canada and Australia, where the pharmaceutical sector and drug prices are regulated by the government, the TPP could have profound effects on the criteria these countries use in decisions about drug safety and effectiveness, the approval process, listing of drugs on public formularies, post-market surveillance and inspection, and the future pricing of drugs. (9)

We have an epidemic of prescription drug use with harms not just to affordability of necessary care but also to patient safety. As the drug industry rolls on with its advertising and lobbying campaign for increased revenues for its CEOs and shareholders, adverse drug reactions have become the fourth leading cause of death in the United States, killing more than 2,400 people every week. Dr. Donald Light,    professor of comparative health care at the University of Medicine and Dentistry of New Jersey, sums up the problem this way:

Flooding the market with hundreds of minor variations on existing drugs and technically innovative but clinically inconsequential new drugs, appears to be the de facto hidden business model of drug companies. In spite of its primary charge to protect the public, the FDA criteria for approval encourage that business model . . . The clear conflict of interest and approving so many new drugs with few clinical benefits serve corporate interests more than public interests, especially given the large risks of serious harm. (10)

The TPP will make all this even worse. If ratified in this country, as it could be in a lame duck Congress after the November elections, the TPP would drive drug prices in the U. S. even higher than they now are, limit competition further, and prevent the government from negotiating drug prices, as the Veterans Administration has done for many years, successfully gaining discounts of about 42 percent. The drug industry’s trade and lobbying group, PhRMA, would be the main beneficiary of TPP policies, all at patients’ and taxpayers’ expense:

The current political landscape regarding the TPP raises worrisome concerns. It has had the support of most Republicans and many Democrats, including Hillary Clinton until she recently changed her position. President Obama has been pushing for its passage as part of his legacy. PhRMA is lobbying heavily for its enactment, including $238 million in 2015 and campaign contributions of some $50 million in this last year. (11)

There are some bright spots that give us hope that the TPP can be defeated and that an expanded role by government can alleviate this crisis in drug costs and prices. Since the TPP will also ship more jobs overseas to lower-cost labor markets, push down U. S. wages and increase income inequality, a growing number of organizations have joined together to oppose it, including labor unions, consumer, senior, health, human rights, and civil rights organizations. According to a recent AARP survey, 81 percent of respondents over age 50 think that drug prices are too high and 90 percent want politicians to do something about it. Proposals have been made in at least 10 states demanding transparency in drug pricing, while California has Prop 61 on the November ballot, which would block state agencies from paying more than the prices negotiated by the VA for prescription drugs. (12) The

American Medical Association and the American Association of Health-System Pharmacists have joined together in calling for a ban on direct-to-consumer drug advertising. (13)

TPP is a danger to this country. It would only serve corporate masters, and must be defeated.

John Geyman, M.D. is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans.

visit: http://www.johngeymanmd.org

1. Alonzo-Zaldivar, R. Drug firms gouge taxpayers by gaming Part D
catastrophic coverage. Associated Press, July 25, 2016.

2. Kantarjian, J, Steensma, D, San Juan, JR et al. High cancer drug prices in the United States: Reasons and proposed solutions. J Oncology Practice, May 6, 2014.

3. Zafarm, SY, Peppercorn, JM, Schrag, D et al. The financial toxicity of cancer treatment: A pilot study assessing out-of-pocket expenses and the insured cancer patient’s experience. Oncologist 18: 381-390, 2013.

4. Associated Press. Study: Insurers’ spending on costly meds soared from 2003-14. July 6, 2016.

5. Milliman Medical Index: Healthcare costs for a typical American family will exceed $25,000 in 2016 and have tripled since 2001. PRNewswire, May 24, 2016.

6. Reuters. U. S. health agency estimates 2015 prescription drug spend rose to $457 billion. New York Times, March 8, 2016.

7. Walker, J. Drug makers’ pricing power remains strong. Wall Street Journal, July 14, 2016.

8. TPP: Threats to affordable medicines. Washington, D.C. Public Citizen, December 30, 2015.

9. Lexchin, J, Gleeson, D. The Trans Pacific Partnership agreement and pharmaceutical regulation in Canada and Australia. Intl. J. Health Services, August 11, 2016.

10. Light, DW. Serious risks and few new benefits from FDA-approved drugs. Health Affairs Blog, July 6, 2015.

11. Quigley, F. Disgusted with sky-high drug prices, California voters take on Big PhRMA. Truthout, August 18, 2016.

12. Ibid # 11.

13. Bulik, BS. Pharmacists join physicians’ rallying cry for a ban on PhRMA’s DTC advertising. FiercePhRMA, June 20, 2016.

When income is too high for a subsidy for ACA plans

Posted by on Monday, Aug 22, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Without a subsidy, couple faces higher insurance premiums

By Carla K. Johnson
Associated Press, August 20, 2016

With a household income too high for a federal subsidy, Bruce Mainzer and Beth Shadur are bracing for higher health insurance premiums in 2017.

As in other states, many insurers in Illinois have requested double-digit rate increases. Americans ineligible for the government subsidies that help cover their premiums will be hit hardest.

Health insurance already takes a hefty bite out of the couple’s budget. They pay $1,200 a month for a bronze plan with high deductibles, which means they pay $13,000 annually out of pocket before their coverage even kicks in.

“It has been a challenge, and it causes us to dip into our retirement savings and increase our debts,” Mainzer said.

On top of the cost, they’ve experienced the hassles of major disruptions in the Illinois insurance market. For one, their insurance company recently folded. It was one of the struggling co-ops set up under the federal health care law.

They are switching to Aetna in October but will start shopping again for another insurer a month later because Aetna recently said it is bailing out of the Illinois exchange-based marketplace.

They are in good health, but Mainzer has a blood disorder, a pre-existing condition that led insurers to reject him before the Affordable Care Act took effect. He was able to get coverage only through Illinois’ high-risk pool, at about the same price he pays today.

Mainzer rejects the “repeal and replace” Republican solution, in part because getting rid of the law would mean that insurance companies could go back to denying coverage for people with pre-existing conditions.

“Ultimately, it’s clear that health care is not something that can be efficiently provided by the private sector,” he said. “The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”



Experts Predict Sharp Decline in Competition across the ACA Exchanges

By Dan Mendelson
Avalere, August 19, 2016

A new analysis from Avalere finds that nearly 36 percent of exchange market rating regions may have only one participating insurance carrier offering plans for the 2017 plan year and there may be some sub-region counties where no plans are available. Nearly 55 percent of exchange market rating regions may have two or fewer carriers.

“Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017,” said Dan Mendelson, president of Avalere.


An important measure of the success of the Affordable Care Act is how well it is working for middle and upper middle income working families who are not eligible for employer-sponsored health plans. The experience of the two-income couple described in this AP article demonstrates that it is not working so well for some.

Bruce Mainzer and Beth Shadur received their coverage through the ACA exchange in Illinois, but it was with one of the co-ops that failed (giving us a hint of what might happen to a “public option” once the private insurers provide their input into the design of such an option).

They had then applied for coverage with Aetna, but now it is pulling out of the Illinois exchange. Fewer plans will be available. In fact, according to the Avalere report, over one-third of exchange market rating regions throughout the United States will have only one plan available, eliminating competition as a means of holding down premiums (not that it was particularly effective anyway).

Because insurers in the exchanges have been experiencing losses, typical premium increases are expected to be in the double digits for 2017. For their bottom-tier bronze plan which has high deductibles, this couple has been paying $1,200 per month for coverage. Next year it will certainly be higher. Also the instability of plan coverage destabilizes access to health care because of the incongruity of the narrow provider networks.

In rejecting single payer, progressive politicians say that we should build on the success of ACA. What changes would you make in the system so that it would work well for Bruce and Beth? When you think about it, it is obvious that mere tweaks will not work. The changes that they need would require comprehensive reconstruction of the health care financing infrastructure.

Well, Bruce Mainzer has figured it out. As he says, “Ultimately, it’s clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

  • Comments Off on When income is too high for a subsidy for ACA plans

CMS response to steering dialysis patients to private plans

Posted by on Friday, Aug 19, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

CMS examines inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans

Centers for Medicare and Medicaid Services, August 18, 2016

The Centers for Medicare & Medicaid Services (CMS) today issued a request for information seeking public comment on concerns that some health care providers and provider-affiliated organizations may be steering people eligible for, or receiving, Medicare and/or Medicaid benefits into Affordable Care Act-compliant individual market plans, including Health Insurance Marketplace plans, for the purpose of obtaining higher reimbursement rates. CMS also sent letters to all Medicare-enrolled dialysis facilities and centers informing them of this announcement.

The request for information and letters to providers focus on situations where patients may be steered away from Medicare or Medicaid benefits, which can among other concerns, result in beneficiaries experiencing a disruption in the continuity and coordination of their care as a result of changes to their network of providers.

In addition to asking for more information on instances of problematic steering of consumers to individual market plans, CMS is also considering potential regulatory and operational options to prohibit or limit premium payments and routine waiver of cost-sharing for qualified health plans by health care providers, revisions to Medicare and Medicaid provider enrollment rules, the imposition of civil monetary penalties for individuals that fail to provide correct information about consumers enrolling in a plan, and potential changes that would allow issuers to limit their payment to health care providers to Medicare-based amounts for particular services and items of care.


In a previous message we described how some dialysis centers were steering patients away from Medicare and Medicaid and into private plans which have much higher payment rates. CMS is now assessing this problem and considering various measures to address it.

CMS’s primary concern seems to be that they want to protect the private insurers from high cost patients, especially in light of the fact that the nation’s largest private insurers are withdrawing from the ACA exchanges because of their exposure to high needs patients. The punitive interventions they suggest are aimed at the providers rather than the insurers. Particularly noteworthy is the recommendation to allow private insurers to reduce their provider payments down to Medicare rates.

If CMS established the principle that they can have recourse to price controls for privately insured patients, then why should we have to continue to pay the private plans extra for their superfluous administrative excesses and investor returns?  For that matter, why should we continue with an inefficient, fragmented health care financing system wherein our public administrators are bending over backwards to cater to the private insurers at an extra cost to those of us paying the bills?

In these thousands of daily messages on the heaps of rotten policies in health care financing it seems like there must be a pony in here somewhere. Single payer, perhaps?

  • Comments Off on CMS response to steering dialysis patients to private plans

Medicare Advantage plans pay hospitals less than does traditional Medicare

Posted by on Friday, Aug 19, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

By Laurence C. Baker, M. Kate Bundorf, Aileen M. Devlin and Daniel P. Kessler
Health Affairs, August 2016


There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

From the Discussion

Knowing how Medicare Advantage prices compare to those of FFS Medicare is important for public policy. Health spending is the product of price and quantity. If Medicare Advantage prices are lower than those of FFS Medicare, then Medicare can obtain the same quantity of services for less money through Medicare Advantage than through FFS Medicare.

Contrary to conventional wisdom, we found that Medicare Advantage plans paid lower prices for hospital services than FFS Medicare — around 8 percent lower in both 2009 and 2012 — once the DRG and geographic-area mix of FFS Medicare was made comparable to those of Medicare Advantage.

If differences in hospital mix are also accounted for, Medicare Advantage’s hospital prices are about 5.6 percent less than those of FFS Medicare. Thus, about a third of the 8 percent difference is attributable to the narrower hospital networks in Medicare Advantage, compared to FFS Medicare.

Our results also show how Medicare Advantage can be used to get a better deal (at least from hospitals) for the Medicare program as a whole, by adjusting administered prices across geographic areas and DRGs to better reflect the market.

Finally, consistent with previous research, we found that the rates commercial plans pay to hospitals are significantly higher than those of either Medicare Advantage or FFS Medicare and that they are rising.


The pro-market authors of this study have shown that the private Medicare Advantage plans pay hospitals less than traditional Medicare pays, concluding that the private plans “get a better deal for the Medicare program.” But that conclusion is not true if you look at the whole picture.

Because the private Medicare Advantage plans were being paid more than what was being paid for comparable care in the traditional Medicare program, Congress included in the Affordable Care Act adjustments to reduce the overpayments. However, the private plans have continued with their mastery of gaming the system to increase their payment rates, such as selective marketing to healthier populations and upcoding to receive greater payments through risk adjustment. This has been with the complicity of the people in HHS who have used innovative administrative tools and creative accounting to more than offset the required reductions. The private plans are still receiving greater payments than are being made for comparable patients in the traditional Medicare program.

Since the private plans are receiving larger payments, and, according to this study, are paying less for health care, the Medicare program is getting a worse deal, and it is the private insurers themselves who are getting a great deal, at a cost to taxpayers. This extra money that the insurers are siphoning out of the system is going to overpriced administrative services and, yes, to extra profits.

Although the private insurers are pulling out of the ACA exchanges because they cannot make their business model work there, they boast to their investors that their commercial accounts are highly profitable (employer-sponsored plans) and that their government accounts – especially the Medicare Advantage plans – are producing extraordinary returns for the investors (and humongous compensation packages for the corporate executives). We are paying for this through higher premiums for private plans and greater taxes for privately-managed government programs. A well designed single payer system should fix that.

  • Comments Off on Medicare Advantage plans pay hospitals less than does traditional Medicare

Bernie Sanders is not giving up on Medicare for all

Posted by on Wednesday, Aug 17, 2016

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Sanders Statement on Aetna’s Decision to Withdraw from Health Insurance Exchanges

By Senator Bernie Sanders
August 16, 2016

U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement Tuesday after Aetna announced plans to withdraw from Affordable Care Act health exchanges in 11 of 15 states where it currently operates:

“It is disappointing that Aetna has joined other large for-profit health insurance companies in pulling out of the insurance marketplace. Despite the Affordable Care Act bringing them millions more paying customers than ever before, these companies are more concerned with making huge profits than ensuring access to health care for all Americans.

“In my view, the provision of health care cannot continue to be dependent upon the whims and market projections of large private insurance companies whose only goal is to make as much profit as possible. That is why we need to join every other major country on earth and guarantee health care to all as a right, not a privilege. That is also why we need to pass a Medicare-for-all single-payer system. I will reintroduce legislation to do that in the next session of Congress, hopefully as part of the Democratic Senate majority.”


Since the Clinton Camp was successful in keeping single payer out of the Democratic Party platform, much of the media seems to believe that it has completely gone away as an issue. The good news is that Bernie Sanders assures us that it hasn’t. We need to do our part to be sure that the nation knows that.

  • Comments Off on Bernie Sanders is not giving up on Medicare for all

About this blog

Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.