Valeant avoids double-digit price hikes with 9.9 percent increases

By Ed Silverman
STAT, September 22, 2016

In response to intensifying criticism over drug prices, Allergan chief executive Brent Saunders promised not to raise prices by more than single-digit percentage points. So far, no other head of a large drug maker has spoken publicly about this notion or agreed to do the same thing.

Yet some companies may adopt this approach quietly — and push the envelope in the process.

How so? One way is to raise prices on drugs by 9.9 percent. And this is what Valeant Pharmaceuticals did last week.

The drug maker, which has been widely vilified for buying older medicines and then jacking up the prices to sky-high levels, increased list prices for three eye medicines by exactly 9.9 percent, according to Wells Fargo analyst David Maris.

The “9.9 percent increase versus an even 10 percent seems very odd and may be an attempt to stay under the radar of managed care plans and states looking out for double-digit price increases,” Maris wrote in an investor note.

The 10 percent threshold has taken on more than symbolic weight, though.

A bipartisan group of congressional lawmakers last week introduced a bill that would require drug makers to justify their pricing and provide a breakdown of their costs before raising prices on certain products by more than 10 percent. The legislation largely mimics bills that have been introduced in more than a dozen states, although only Vermont has passed such a law.

https://www.statnews.com/pharmalot/2016/09/22/valeant-drug-prices-brent-saunders/

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Comment:

By Don McCanne, M.D.

For a pharmaceutical firm infamous for abusive pricing of their products, a 9.9% increase is an obvious attempt to keep under the radar by avoiding a double digit increase, but nobody is fooled by this. Valeant could have had a 9.8% increase, but, no, it had to be 9.9%.

In spite of the extensive adverse publicity, the industry continues to gouge. It’s time for our government to represent us by introducing publicly-administered pricing – paying legitimate costs plus fair profits. The industry will not walk if we are giving them a fair deal.

Would You Like Some Insurance With Your Insurance?

By Bram Sable-Smith
Kaiser Health News, September 21, 2016

Gap plans, used to cover out-of-pocket expenses like high deductibles, are becoming increasingly popular among consumers and businesses.

Gap insurance is in a category of insurance known as “limited benefit.” No matter how bad a person’s situation, the plan will pay out only a certain amount of money.

Now, there’s renewed interest in gap plans. With monthly premiums on health insurance going up, more people are choosing cheaper, high-deductible options. In 2016, more than 90 percent of people buying insurance under the ACA chose plans with an average deductible of $3,000 or higher.

“The cost of health insurance is going up, and businesses have been forced to deal with that by raising their deductibles or increasing out-of-pocket costs for their employees,” said (Alex Forrest, an insurance broker in South Carolina).

With a gap plan, he said, companies can offer a package of health benefits that keeps out-of-pocket-expenses for employees down.

“That’s actually just insurance for my insurance,” said freelance designer Susannah Lohr.

Health economist Deborah Chollet of Mathematica Policy Research, an independent research firm, said the insurance reforms in the ACA were designed “basically to drive these kinds of creative insurance arrangements out of the market.”

Because gap plans aren’t major medical insurance, Chollet explained, they’re not regulated by the health care law and can avoid complying with consumer protections built into the law. So the companies providing gap insurance, she said, “can ask you about your health status, they can deny you coverage, they can do all of the kinds of things that the Affordable Care Act prohibits.”

http://khn.org/news/would-you-like-some-insurance-with-your-insurance/

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Patient Protection and Affordable Care Act
Sec. 3210. Development of New Standards for Certain Medigap Plans

(a) (1) IN GENERAL.—The Secretary shall request the National Association of Insurance Commissioners to review and revise the standards for benefit packages described in paragraph (2) under subsection (p)(1), to otherwise update standards to include requirements for nominal cost sharing to encourage the use of appropriate physicians’ services under part B. Such revisions shall be based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems and made consistent with the rules applicable under subsection (p)(1)(E) with the reference to the ‘1991 NAIC Model Regulation’… To the extent practicable, such revision shall provide for the implementation of revised standards for benefit packages as of January 1, 2015.

https://www.gpo.gov/fdsys/pkg/BILLS-111hr3590enr/pdf/BILLS-111hr3590enr.pdf

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National Association of Insurance Commissioners (NAIC)
Letter Re: PPACA Sec. 3210

December 19, 2012

Dear Secretary Sebelius,

Pursuant to section 3210 of the Patient Protection and Affordable Care Act (ACA) you have requested the National Association of Insurance Commissioners (NAIC) to review and revise the NAIC Medicare supplement insurance (Medigap) model regulation to include nominal cost sharing in Medigap Plans C and F to encourage the use of appropriate physicians’ services under Medicare Part B. Section 3210 directs the NAIC to base these revisions on evidence published in peer-reviewed journals or current examples used by integrated delivery systems.

Consistent with the process established by the Social Security Act for changes to Medigap standards, the NAIC appointed the Medigap PPACA (B) Subgroup (Subgroup) comprised of state insurance regulators, representatives from the Centers for Medicare and Medicaid Services (CMS), insurers and trade associations, consumer advocates, and other experts in the areas of Medicare and Medigap.

The NAIC has performed its requested review of the standards for Plans C and F under Section 3210 of the ACA. We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F. We hope that you will agree with this determination.

Medigap is a product that has served our country’s Medicare eligible consumers well for many years, offering them security and financial predictability with regard to their Medicare costs. Medigap’s protections are now inappropriately being held responsible for encouraging the overuse of covered services and increasing costs in the Medicare program.

We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. As you are aware, Medigap plans pay benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.

The statute requires the NAIC to base nominal cost sharing revisions on “peer-reviewed journals or current examples of integrated delivery systems”. However, the Subgroup discovered that there is a limited amount of relevant peer-reviewed material on this topic. None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income). Most of the studies do not consider the same population of health insurance beneficiaries as those that purchase Medigap products.

http://www.medicarerights.org/pdf/NAIC-Letter-12-2012.pdf

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Medigap Reform: Setting the Context for Understanding Recent Proposals

Kaiser Family Foundation, January 13, 2014

This issue brief contextualizes recent proposals to change Medigap plans in order to understand how they may affect Medicare beneficiaries, using recently available data.

Many proposals and recommendations would prohibit Medigap plans from providing first-dollar coverage by requiring plans to include deductibles for Part A and Part B services.  Such proposals are designed to discourage utilization (and reduce spending) by exposing beneficiaries to greater costs when they seek medical care.

Table 1 at this link lists proposals:
http://kff.org/medicare/issue-brief/medigap-reform-setting-the-context/

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Comment:

By Don McCanne, M.D.

It is really a sad commentary on the dysfunctional state of our health care financing system when insurance deductibles – supposedly designed to make patients better health care shoppers – have caused such great financial burdens that a market of plans has been generated to insure against deductibles and other cost-sharing losses that frequently are no longer affordable.

Let’s take a closer look at gap plans that are designed to fill in the deficiencies in traditional coverage.

It is the high deductibles that have brought this issue into the forefront. There are two primary reasons for the growth in the prevalence and in the dollar amount of the deductibles. One is that health insurance premiums have continued to become less and less affordable. Both individuals and employers who purchase plans are looking for relief, and high-deductible plans do have lower premiums.

The other reason is that the policy community is dominated by a partnership of right-wing ideologues who insist that patients must feel financial pain when they access health care services, and centrist policymakers who worry more about premiums, figuring that public insurance subsidies (ACA) and public welfare programs (Medicaid) will protect those who are less able to afford care, while accepting, with regret, the increasing burden placed on middle-income Americans.

So is gap insurance designed to help pay deductibles a reasonable solution? If the gap policy is adequate to increase the actuarial value of the combined coverage of gap plus high-deductible plans to the levels of more traditional health plans then the combined premiums must be higher since the administrative costs of two insurers would be greater than those of one comprehensive insurer alone. Besides, under the gap plans patients could face other coverage problems since the plans do not have to comply with the regulatory and benefit requirements of qualified health plans as defined by the Affordable Care Act.

Let’s turn to a gap program with which we have considerable experience – the Medigap plans that cover some of the coverage gaps in the traditional Medicare program.

The stand-alone traditional Medicare program leaves individuals vulnerable to high out-of-pocket costs if they have significant medical problems. Many are protected with additional coverage such as retiree health benefit plans, VA health benefits, Medicare Advantage plans, or dual coverage with Medicaid. Most individuals not eligible for these plans purchase Medigap plans to avoid losses from significant gaps in the Medicare coverage. But, once again, being covered with multiple plans increases administrative costs and complexity. It would be much more efficient and less costly to have an improved Medicare program for everyone that did not necessitate additional coverage. Medigap, particularly, is a wasteful intrusion that should be eliminated by folding the Plan F Medigap benefits into the traditional Medicare program (while making other improvements in Medicare while we’re at it).

Yet the right-wing ideologues and the wimpy moderate policy wonks that follow them have been insisting that we need to reduce the benefits of the Medigap plans. Specifically they would mandate deductibles under their consumer-directed ideology – making patients more thrifty health care shoppers. Innumerable studies have show that deductibles cause patients to forgo beneficial health care services – not a policy position we should be supporting.

How pervasive this concept is was demonstrated by Sec. 3210 of the Affordable Care Act. That section required the National Association of Insurance Commissioners (NAIC) to come up with a recommendation based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems to support requiring cost-sharing to be included in the Medigap plans, in order to make patients better health care shoppers, and that the recommendations would be implemented by January 1, 2015.

Why didn’t this happen? NAIC reported that they were “unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F.”

Further, “None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income).”

Unfortunately, their take-home message has been ignored by the policy community who continue to clamor for more cost sharing. Specifically, NAIC stated, “We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. As you are aware, Medigap plans pay benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.”

Yet the Kaiser Family Foundation report on Medigap reform includes a table with a dozen different proposals from across the political spectrum calling for controlling Medicare costs by increasing the financial burden placed on Medicare beneficiaries with Medigp plans.

We don’t need insurance to insure our insurance. We need a national health program that would ensure that everyone has affordable access to all essential health care services. That will never happen with our current system; ACA patches cannot possibly accomplish that. Single payer Medicare for all, without gaps, is what we need.

Is Direct Primary Care the Solution to Our Health Care Crisis?

By Edmond S. Weisbart, MD, CPE, FAAFP
Family Practice Management, Sep-Oct 2016

Direct primary care (DPC), a reformulation of concierge medicine, has intrinsic appeal to overburdened physicians. Its advocates promise a competitive income at a fraction of the volume of patient responsibilities, and they claim it as a patient-friendly, consumer-driven strategy that can meet the needs of patients across the economic spectrum.

However, there are potential downsides to DPC, which this article will discuss.

1. DPCs exacerbate the growing physician shortage.

Retainer practices such as DPC practices commonly close their panels when they reach about 900 patients, which is much lower than the typical practice panel size of around 2,300 patients.

2. DPCs are essentially unregulated insurance, capitating physicians and removing vital patient protections.

Paying a monthly fee for a specific range of services is one definition of an insurance model. Despite that, DPCs often fall outside of insurance regulation.

3. DPC relies on an erosion of medical benefits.

Much of a patient’s health care requires services beyond primary care. High-deductible health plans can expose patients to full retail pricing for these additional services and medications unless their plans have negotiated discounted rates. These health care costs can quickly become a hardship for many patients.

4. DPCs exacerbate disparities in care.

Although the evidence is still emerging, DPCs may be choosing to locate in areas most able to financially support the model. Studies have suggested that DPC physicians have smaller proportions of African-American, Hispanic, and Medicaid patients and see smaller proportions of people with diabetes.

The wrong solution to a real problem

U.S. physicians are among the least satisfied in the modern world.5 Much of this dissatisfaction is related to the amount of time spent on non-clinical administrative functions, particularly tasks related to insurance companies. Physicians’ desire to reduce frustrating administrative work is understandable, but DPC is not the solution. Physicians considering a transition to DPC need to consider the impact on physician shortages, disparities in health care, and patient access to health care services outside the DPC.

http://www.aafp.org/fpm/2016/0900/p10.html

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Comment:

By Don McCanne, M.D.

What problem is being addressed by the establishment of direct primary care practices (DPC)? The administrative hassle in dealing with a multitude of payers is replaced with a single retainer fee paid by the patients. That benefits physicians by reducing overhead expenses and freeing up time for a more relaxed clinical work environment.

Patients enrolled in DPC practices benefit from improved accessibility and more personal attention for their routine primary care needs. DPC physicians are not included in insurer provider networks thus their patients pay not only the retainer fee but they are also responsible for the full deductible of their catastrophic plans. Thus DPC practices cater to the carriage trade whereas less affluent individuals find the arrangement to be truly unaffordable should they develop problems requiring specialized care or hospitalization.

Do physicians have an obligation beyond the patients in their own practices? Should they be supporting policies to ensure that adequate affordable care is available to all members of the community at large? DPC reduces both access and affordability. In spite of implementation of ACA we still have intolerable disparities in care, and DPC will only exacerbate those disparities.

DPC is designed to allow physicians to retreat to their cosy practices while escaping from their moral obligation to meet the health care needs of the community at large. They are supported by their wealthy clients, or customers, or patrons, or whatever they’re called.

If these physicians really supported the positions they held when interviewed by the medical school admissions committees, instead of fleeing to DPC practices, they would be advocating for reform that would bring essential, affordable care to everyone – an improved Medicare for all. It is painful to listen to their curt dismissal of reform that would bring health care justice to all.

Are Nongroup Marketplace Premiums Really High? Not in Comparison with Employer Insurance

By Linda J. Blumberg, John Holahan, and Erik Wengle
Urban Institute, September 2016

Abstract

We compare unsubsidized 2016 nongroup marketplace premiums to the average employer sponsored insurance premiums in all 50 states and 73 metropolitan areas. We adjust second lowest cost nongroup marketplace premiums to account for the differences in actuarial value, induced utilization, and age distribution of enrollees. We find that nationally, nongroup marketplace premiums are 10 percent lower than the average employer sponsored insurance premium, after the adjustments. There is variation at across states and metropolitan areas, but more than ¾ of states and more than 80 percent of metropolitan areas having lower marketplace than employer premiums.

Conclusions

Premiums in the nongroup insurance Marketplaces attract considerable attention, with some concerned that average growth rates since 2014 are high in some areas and that this might signal a fundamental weakness with the new nongroup insurance markets. This analysis places nongroup Marketplace premiums in a context where we can compare them, apples to apples, with employer-based insurance. Our findings show that in more than 75 percent of states and more than 80 percent of the metropolitan areas we can study, nongroup premiums are actually lower than employer premiums in the same area, even though nongroup insurance tends to have higher administrative costs per enrollee than does average employer coverage. In fact, once adjusting for year, actuarial, and associated utilization differences, half of states’ nongroup Marketplace premiums are lower than their average employer premiums by double-digit percentages. Metropolitan-area findings are similar.

In a previous analysis, we found that Marketplace nongroup insurance premiums tend to be lower in rating areas with more participating insurers and in those with Medicaid insurers or provider-sponsored insurers participating (Blumberg et al. 2016). Nongroup Marketplace premiums may tend to be lower because Marketplace insurers are more aggressive in offering narrower provider network plans than their group market counterparts. Other market characteristics may play roles, such as premium transparency and plan comparability. The large differentials between nongroup and employer premiums in many areas also may indicate that nongroup premiums continue to be underpriced in some areas; the large premium increases seen in several states may be part of the process through which these markets will reach a stable equilibrium.

Thus, with few exceptions, the level and growth of nongroup premiums in the Marketplaces should not be interpreted as evidence that these new markets are weak. Nongroup insurance, when adjusted to make its premiums comparable to employer premiums, is much more often than not lower cost than the average coverage offered through employers. But the persistent, uncomfortable truth is that health care is an expensive commodity, regardless of the market in which one purchases it.

http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000931-Are-Nongroup-Marketplace-Premiums-Really-High-Not-in-Comparison-with-Employer-Insurance.pdf

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Comment:

By Don McCanne, M.D.

Much has been written about the anticipated large increases in premiums for the nongroup health plans being offered through the ACA exchanges (Marketplaces) compared to the more modest increases in premiums of employer-sponsored group plans. This new Urban Institute report shows that premiums adjusted for plan equivalence for the nongroup exchange plans have actually been lower than those of employer plans. So what is the significance of this?

Although numerous factors no doubt contributed to this difference, it is likely that the most important was the strategy of insurers to initially offer lower premiums to gain market share with the intent of later adjusting premiums upward once competitors were reduced or eliminated. The miscalculation resulted from the fact that most employers did not drop their plans and thus there was not a large influx of healthy workers into the exchanges. There also was a component of adverse selection since many younger, healthier individuals stayed out completely, increasing the costs of covering the less healthy enrollees. Higher administrative costs of the nongroup plans compared to the employer plans were largely offset by lower negotiated rates for the narrower plan networks.

So the higher premium increases in the exchanges were necessitated primarily by initial lowballing and also by higher spending than anticipated. The insurers, with all of their actuarial talent, fell short, and some of the nation’s largest insurers are withdrawing.

So what is the lesson here? This is simply one more example of why supposed marketplace competition is a cumbersome and wasteful way to finance a health care system. An equitably-funded universal risk pool is not only more efficient, it is more equitable as well – including everyone, at a cost they can afford.

Crisis looms as Australians look to ditch private health insurance

By Adam Gartrell
The Sydney Morning Herald, September 17, 2016

Almost 70 per cent of Australians with private health insurance have considered ditching or downgrading their cover in the last year in the face of relentless price rises and diminishing value for money, polling has found.

Close to 80 per cent of people believe health insurance companies put profits before patients and more than 90 per cent are concerned they’re trying to “Americanise” the health system to boost their bottom line.

Asked for their opinion on the statement “private health insurers put profits before patients”, 53.5 strongly agreed and 24.4 per cent agreed. Fewer than 10 per cent of people disagreed with the statement.

A whopping 73 per cent said they were “very concerned” about the creeping Americanisation of the Australian health care system and a further 18.6 per cent said they were “somewhat concerned”.

http://www.smh.com.au/federal-politics/political-news/crisis-looms-as-australians-look-to-ditch-private-health-insurance-20160916-grichb.html

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Comment:

By Don McCanne, M.D.

Under their conservative government, Australia seems to be creeping toward American-style privatization of their health insurance. Over 90 percent of Australians are concerned about this “Americanization” of their system. Can’t we learn something from them?

Senators Introduce Resolution Calling for Health Care Public Option

U.S. Senate, Committee on Health, Education, Labor & Pensions
September 15, 2016

Today, Oregon’s Senator Jeff Merkley and Senators Charles E. Schumer (D-NY), Patty Murray (D-WA), Dick Durbin (D-IL) and Bernie Sanders (I-VT), along with 22 of their colleagues, introduced a Senate resolution calling for a public option in the health insurance market.

Senate Resolution

Supporting efforts to increase competition and accountability in the health insurance marketplace, and extend accessible, quality, affordable health care coverage to every American through the choice of a public insurance plan.

After nine whereases:

Resolved, that the Senate supports efforts —

to build on the Affordable Care Act by ensuring that, in addition to the coverage options provided by private insurers, every American has access to a public health insurance option which, when established, will strengthen competition, improve affordability for families by reducing premiums and increasing choices, and save American taxpayers billions of dollars.

http://www.help.senate.gov/ranking/newsroom/press/senators-introduce-resolution-calling-for-health-care-public-option

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Comment:

By Don McCanne, M.D.

This week an intensive campaign is being initiated in support of a “public option” – offering the choice of a public, nonprofit insurance plan which competes with private health plans. Our enthusiasm should be tempered.

Following are a couple of points to keep in mind, especially when you hear promises that the public option is a giant step towards single payer:

* A public option will be only one more player in our costly, fragmented system of funding health care. It alone will bring us none of the important features of a single payer system such as efficiency, equity, systemic cost savings, and universality. The profoundly wasteful administrative complexity will remain.

* Previous efforts by Congress, heavily influenced by the insurance industry, to design a public option led to a highly flawed model that would prevent the “unfair” competitive advantage that a government program would otherwise have over the private insurance industry. This same insurance industry influence is precisely why the co-op models authorized by ACA are now failing. And there is absolutely no reason to believe that the insurance industry might change its tune now.

* The public option has been characterized as a Medicare buy-in. But Medicare is an equitably funded social insurance program covering everyone who is eligible, whereas the public option would be just another individual plan in a market of private plans, likely with higher premiums because of adverse selection.

* If a public option were to be enacted some believe that it would be only a matter of time before everyone would want in once it demonstrates its superiority, and then we would have a de facto single payer system. You need look only at the experience with the conspiracy between Congress and the private insurance industry in the establishment of the private Medicare Advantage plans that compete with traditional Medicare. Congress has given the private plans an unfair advantage so Medicare beneficiaries are moving from the public program to the private plans in ever greater numbers – the exact opposite of what the public option supporters visualize.

* The Affordable Care Act drew support of much of the progressive community as it seemed to them to be the only politically feasible approach at the time. Thus the clamor for comprehensive reform died down. We are hearing again that single payer is not feasible, but the public option is. When the public option is enacted, it will be mislabeled as single payer, and then it will be exposed for the miserable failure that it will be because it was designed by the private insurance industry to fail (like the co-ops). The single payer concept will have been tarnished, and it could be decades before our nation would recover and be ready for reform that really works. In the meantime, millions would have gone broke, suffered, and died merely because we didn’t think single payer was feasible.

Many look to Jacob Hacker for inspiration on enacting and implementing a public option. But he has identified the greatest barrier to moving forward. In a recent Vox article, he wrote, ”Private plans lobbied aggressively against the public option in 2009 on the grounds that it would amount to unfair competition. But insurers don’t want a level playing field; they want the field tilted in their favor.”

Now see if you can find a Congress that doesn’t tilt the field in favor of the private insurers. Not even on the horizon.