Correction: State No Longer Looking to Administer Medicare

By Anne Galloway
VTDigger, October 26, 2014

Two recent stories about the relationship between Medicare and Green Mountain Care, the state’s planned universal publicly financed health care program – often called single-payer – were inaccurate. The stories were based on statutes on the Legislature’s website that had not been updated.

Section (e) of chapter 18, Public Private Universal Health Care System, in Title 33, Human Services, still states online that, “The Agency shall seek permission from the Centers for Medicare and Medicaid Services to be the administrator for the Medicare program in Vermont. If the Agency is unsuccessful in obtaining such permission, Green Mountain Care shall be the secondary payer with respect to any health service that may be covered in whole or in part by Title XVIII of the Social Security Act (Medicare).”

Act 144, which was enacted in 2014, repeals that section, though the statutes have not been updated online.

Section (f) of the same chapter now reads, “Green Mountain Care shall be the payer of last resort with respect to any health service that may be covered in whole or in part by any other health benefit plan, including Medicare, private health insurance, retiree health benefits, or federal health benefit plans offered by the military, or to federal employees.”

State officials have said they are no longer seeking to administer Medicare as part of Green Mountain Care, and the law reflects that change.

It is currently unknown what Green Mountain Care will cover or what private supplemental health insurance policies will be offered once the program is in place.

Gov. Peter Shumlin has said there is no reason to expect that currently available supplemental coverage options for Medicare would change if the state moves forward with a single-payer health care system.

Correction: State no longer looking to administer Medicare

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Vermont Act 144

An act relating to miscellaneous amendments to health care laws.

Sec. 1  Principles for Health Care Financing

  (3)  As provided in 33 V.S.A. § 1827, Green Mountain Care shall be the payer of last resort for Vermont residents who continue to receive health care through plans provided by an employer, by another state, by a foreign government, or as a retirement benefit.

Sec. 2 Vermont Health Benefit Exchange

  (4)  To the extent permitted by the U.S. Department of Health and Human Services, the Vermont Health Benefit Exchange shall permit qualified employers to purchase qualified health benefit plans through the Exchange website, through navigators, by telephone, or directly from a health insurer under contract with the Vermont Health Benefit Exchange.

Sec. 6  Administration; Enrollment

  (e) [Repealed.]

  (f) Green Mountain Care shall be the payer of last resort with respect to any health service that may be covered in whole or in part by any other health benefit plan, including Medicare, private health insurance, retiree health benefits, or federal health benefit plans offered by the military, or to federal employees.

Governor signed bill: May 27, 2014: http://www.leg.state.vt.us/docs/2014/Bills/H-0596/ACT0144%20As%20Enacted.pdf

Green Mountain Care: http://www.greenmountaincare.org/vermont-health-insurance-plans

Vermont Health Connect: http://info.healthconnect.vermont.gov/healthplans

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Shumlin Won’t Pursue Single Payer If It Doesn’t Help Economy

By Bob Kinzel
VPR, September 12, 2014

Act 48, the law that put Vermont on the path to a single-payer health care system, was passed in 2011. It called on the governor to unveil a single-payer financing plan in January of 2013.

That didn’t happen because Shumlin said he needed more time to develop a plan. Shumlin said he would be ready to release his proposal in January of this year.

But Shumlin missed this deadline as well. He now says he’ll unveil his plan at the start of the Legislative session in January.

Shumlin says there’s no point pursing a single-payer option if the effort will hurt the state’s business community.

“If we come up with a financing plan that doesn’t grow jobs, economic opportunity, and make Vermont more prosperous, trust me, we’re not going to do it,” said Shumlin.

http://digital.vpr.net/post/shumlin-wont-pursue-single-payer-if-it-doesnt-help-economy

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Comment:

By Don McCanne, MD

Many consider Vermont to be the trailblazer for a state single payer program, serving as a model for other states to enact single payer reform. Vermont does have lessons for the rest of us. Let’s see what they are so far.

Green Mountain Care is Vermont’s program for Medicaid and for Dr. Dynasaur (Vermont’s Medicaid program for children and pregnant women). Most participants are now required to enroll in PC Plus – a Medicaid primary care managed care program. Vermont Health Connect is Vermont’s health insurance exchange (marketplace) under the Affordable Care Act through which individuals and small businesses can purchase insurance.  Many Vermonters still have access to other programs such as Medicare, employer-sponsored health plans, retiree plans, and federal employee programs such as FEHBP and Tricare. So far this is not really much different than programs in other states – certainly far from single payer.

What about Medicare? Vermont has given up on attempting to become the administrator of Medicare, much less rolling Medicare funds into a universal single payer program. Gov. Peter Shumlin has even stated that “there is no reason to expect that currently available supplemental coverage options for Medicare would change.” Thus apparently they are continuing even the private Medigap supplements and private Medicare Advantage plans.

What about Green Mountain Care – the Medicaid program that was to be the single payer for Vermont? A few months ago legislation was signed by Gov. Shumlin that stated, “Green Mountain Care shall be the payer of last resort with respect to any health service that may be covered in whole or in part by any other health benefit plan, including Medicare, private health insurance, retiree health benefits, or federal health benefit plans offered by the military, or to federal employees.” Further, “Green Mountain Care shall be the payer of last resort for Vermont residents who continue to receive health care through plans provided by an employer, by another state, by a foreign government, or as a retirement benefit.” At this point in time, that does not look like a program that is being remodeled to fulfill the role of a single payer.

The original Vermont legislation called on Gov. Shumlin to unveil a single payer financing plan in January, 2013. He missed that deadline and again missed the next one in January, 2014. He now says that he intends to release a plan in three months. We will have to wait to see what that proposal is, but at this late stage he is saying, “trust me, we’re not going to do it,” if the effort will hurt the business community. That seems quite tenuous for having worked on it a couple of years.

Many still talk about the enabling ACA waiver that Vermont will obtain in 2017, but the ACA section 1332 waiver applies only to the subsidies and some specific requirements of ACA. Even combined with Sec. 1115 Medicaid waivers and waivers for Medicare demonstration programs, especially considering the ERISA barriers, we simply do not have enough leeway for states to independently establish their own bona fide single payer systems.

The point is that we must have comprehensive federal legislation if we wish to establish state-level single payer systems. We need need the federal funds currently used in other federal health programs such as Medicare and Medicaid, and we need relief from federal statues and regulations such as ERISA. It would be far better to simply enact a national single payer program, but those who wish to pursue a state model must still advocate for comprehensive federal legislation.

Regardless, we can have single payer if we all work together to create the momentum for federal legislation, state and/or national, but none of us will see single payer if we each confine our activities to our respective states. Many have called for a cooperative effort. This is it!

Section 1557 of the Patient Protection and Affordable Care Act

U.S. Department of Health and Human Services

Section 1557 is the civil rights provision of the Affordable Care Act.  Section 1557 prohibits discrimination on the ground of race, color, national origin, sex, age, or disability under “any health program or activity, any part of which is receiving Federal financial assistance … or under any program or activity that is administered by an Executive agency or any entity established under [Title I of ACA]….”   Section 1557 is the first Federal civil rights law to prohibit sex discrimination in health care.  To ensure equal access to health care, Section 1557 also applies civil rights protections to the newly created Health Insurance Marketplaces established under the Affordable Care Act.

http://www.hhs.gov/ocr/civilrights/understanding/section1557/

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Behind in Pay, Behind in Benefits

By Beth Umland
Mercer, October 17, 2014

It’s well known that working women earn less money than their male counterparts, but they may also be at a disadvantage when it comes to health benefits. Using data from Mercer’s National Survey of Employer-Sponsored Health Plans, we compared companies with workforces that are 65% female or more to those with workforces that are 65% male or more. About half of the mostly female companies are in health care and about a quarter are in the services sector, while mostly male companies are found predominately in manufacturing. The percentage of employees in collective bargaining agreements is about the same for the two groups, at just under 15%. Not surprisingly, when the workforce is mostly female, the average salary is about $10,000 less than when the workforce is mostly male.

Pay and benefits tend to go hand in hand. The health benefits at organizations with predominantly female workforces are also less generous than in those with predominantly male workforces. Because women generally use health services more than men, the disparity in benefit levels has an even greater financial impact. Women use maternity services, and childbirth, the leading cause of hospitalization in the US, accounts for a quarter of all hospital stays. We found that average employee contributions as a monthly dollar amount are higher in mostly female companies: For coverage in a PPO, the most common type of medical plan, the monthly contribution for family coverage is 31% higher. In addition, average in-network and out-of-network deductibles and out-of-pocket maximums are consistently higher. For example, the average in-network PPO deductibles in mostly female companies are $727 and $1,614, respectively, for individual and family coverage, compared to $557 and $1,318 at mostly male companies.

And the benefit gap doesn’t end with active employment. Mostly male companies are also more likely to offer retiree medical benefits – 27% offer medical coverage to pre-Medicare-eligible retirees, compared to just 19% of the mostly female companies.

Currently, about a third (36%) of companies with mostly female workforces do not provide coverage to all employees working an average of 30 or more hours per week. They will be required to do so in 2015.

http://ushealthnews.mercer.com/article/252/behind-in-pay-behind-in-benefits

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Comment:

By Don McCanne, MD

It’s shameful. Although the Affordable Care Act (ACA) specifically prohibits discrimination based on sex, employers are still able to provide plans that are based on the underwriting characteristics of their employees. This Mercer report compares workforces that are over 65% female with those over 65% male and shows that females receive less generous health benefits – paying 31% more for deductibles and 31% more for the premium contribution for family coverage.

This is a direct result of the fact that ACA was designed to perpetuate employer-sponsored health plans. Had Congress enacted a single payer national health program instead, not only would sex-based underwriting have been eliminated, the financing of the entire health care system would have been changed to an equitable system based strictly on ability to pay.

Female workforces are paid about $10,000 less than male workforces. Under single payer, their share of health care financing would have been less than for males, since income taxes are progressive. For men who might think it is unfair that women should pay less in health care taxes, they could help fix that by supporting pay equity.

Public Trust in Physicians — U.S. Medicine in International Perspective

By Robert J. Blendon, Sc.D., John M. Benson, M.A., and Joachim O. Hero, M.P.H.
The New England Journal of Medicine, October 23, 2014

One emerging question is what role the medical profession and its leaders will play in shaping future national health care policies that affect decision making about patient care.

Research suggests that for physicians to play a substantial role in such decision making, there has to be a relatively high level of public trust in the profession’s views and leadership. But an examination of U.S. public-opinion data over time and of recent comparative data on public trust in physicians as a group in 29 industrialized countries raises a note of caution about physicians’ potential role and influence with the U.S. public.

In a project supported by the Robert Wood Johnson Foundation and the National Institute of Mental Health, we reviewed historical polling data on public trust in U.S. physicians and medical leaders from 1966 through 2014, as well as a 29-country survey conducted from March 2011 through April 2013 as part of the International Social Survey Programme (ISSP), a cross-national collaboration among universities and independent research institutions.

In 1966, nearly three fourths (73%) of Americans said they had great confidence in the leaders of the medical profession. In 2012, only 34% expressed this view. But simultaneously, trust in physicians’ integrity has remained high. More than two thirds of the public (69%) rate the honesty and ethical standards of physicians as a group as “very high” or “high” (Gallup 2013).

Today, public confidence in the U.S. health care system is low, with only 23% expressing a great deal or quite a lot of confidence in the system. We believe that the medical profession and its leaders are seen as a contributing factor.

This phenomenon does not affect physicians in many other countries. Indeed, the level of public trust in physicians as a group in the United States ranks near the bottom of trust levels in the 29 industrialized countries surveyed by the ISSP. Yet closer examination of these comparisons reveals findings similar to those of previous U.S. surveys: individual patients’ satisfaction with the medical care they received during their most recent physician visit does not reflect the decline in overall trust. Rather, the United States ranks high on this measure of satisfaction. Indeed, the United States is unique among the surveyed countries in that it ranks near the bottom in the public’s trust in the country’s physicians but near the top in patients’ satisfaction with their own medical treatment.

Part of the difference may be related to the lack of a universal health care system in the United States. However, the countries near the top of the international trust rankings and those near the bottom have varied coverage systems, so the absence of a universal system seems unlikely to be the dominant factor.

The United States also differs from most other countries in that U.S. adults from low-income families (defined as families with incomes in the lowest third in each country, which meant having an annual income of less than $30,000 in the United States) are significantly less trusting of physicians and less satisfied with their own medical care than adults not from low-income families.

In drawing lessons from these international comparisons, it’s important to recognize that the structures in which physicians can influence health policy vary among countries. We believe that the U.S. political process, with its extensive media coverage, tends to make physician advocacy seem more contentious than it seems in many other countries. Moreover, the U.S. medical profession, unlike many of its counterparts, does not share in the management of the health system with government officials but instead must exert its influence from outside government through various private medical organizations. Moreover, in terms of health policy recommendations, the U.S. medical profession is split among multiple specialty organizations, which may endorse competing policies.

Nevertheless, because the United States is such an outlier, with high patient satisfaction and low overall trust, we believe that the American public’s trust in physicians as a group can be increased if the medical profession and its leaders deliberately take visible stands favoring policies that would improve the nation’s health and health care, even if doing so might be disadvantageous to some physicians. In particular, polls show that Americans see high costs as the most important problem with the U.S. health care system, and nearly two thirds of the public (65%) believes these costs are a very serious problem for the country. To regain public trust, we believe that physician groups will have to take firm positions on the best way to solve this problem. In addition, to improve trust among low-income Americans, physician leaders could become more visibly associated with efforts to improve the health and financial and care arrangements for low-income people. If the medical profession and its leaders cannot raise the level of public trust, they’re likely to find that many policy decisions affecting patient care will be made by others, without consideration of their perspective.

http://www.nejm.org/doi/full/10.1056/NEJMp1407373

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Comment:

By Don McCanne, MD

Another unique feature of the U.S. health care system that sets us apart from other nations: “You just can’t trust doctors nowadays, but my doctor is really good.” What can we make of this?

In general, individuals are relatively satisfied with their personal care. Low-income individuals are less satisfied, but that is likely related to the deficient financing of their care and the consequences of that – a characteristic of our fragmented, dysfunctional system of financing health care. But, overall, our system is capable of ensuring patient contentment.

It is the confidence in physician leadership that has deteriorated. The authors of this article suggest some possible explanations, but it is more likely that the image of the profession at large has changed from that of the dedicated personal physician steeped in the Hippocratic tradition, to that of the high-tech, entrepreneurial agent of the medical-industrial complex. Combine that perspective with the very high costs of health care today – costly care which physicians orchestrate – and it is no wonder that the public is no longer as trusting of the profession. Only “my doctor” is immune to this.

When you look at the role that the AMA had in the enactment of the Affordable Care Act, it is evident that they were not there to represent patients; they were there alongside the other elements of the medical-industrial complex – especially the insurance, pharmaceutical and hospital industries – to be sure that they got their own share of the action. The only patient advocates present were the consumer organizations that chose the default option of “political feasibility,” becoming “strange bedfellows” of the private insurance industry.

There are many dedicated individual physicians and other health care professionals who clearly place patients first. They are well represented in organizations such as Physicians for a National Health Program. They are also well represented in the AMA and the various specialty organizations, but, as a collective voice, they are ineffective in communicating the tradition of caring; rather they passively communicate the acceptance of the medical-industrial complex – a very sterile advocacy position.

Let’s indulge in a fantasy. Let’s imagine that our professional organizations all joined together in a clarion call for comprehensive, affordable, high-quality care for absolutely everyone – including those low-income individuals who distrust the profession today. Single payer would bring us such quality that is truly affordable.

With a voice unified in support of the patient, what do you think would then happen to the level of confidence that the public has in the medical profession? Physicians would once again relish respect as a noble profession advocating for their patients.  As an aside, it would also mean that they would have a very pleasant work environment and be adequately compensated for their efforts. If the system works for patients, it will work for physicians.

Administrative Work Consumes One-Sixth of U.S. Physicians’ Working Hours and Lowers Their Career Satisfaction

By Steffie Woolhandler and David U. Himmelstein
International Journal of Health Services, Volume 44, Number 4 / 2014

Abstract:

Doctors often complain about the burden of administrative work, but few studies have quantified how much time clinicians devote to administrative tasks. We quantified the time U.S. physicians spent on administrative tasks, and its relationship to their career satisfaction, based on a nationally representative survey of 4,720 U.S. physicians working 20 or more hours per week in direct patient care. The average doctor spent 8.7 hours per week (16.6% of working hours) on administration. Psychiatrists spent the highest proportion of their time on administration (20.3%), followed by internists (17.3%) and family/general practitioners (17.3%). Pediatricians spent the least amount of time, 6.7 hours per week or 14.1 percent of professional time. Doctors in large practices, those in practices owned by a hospital, and those with financial incentives to reduce services spent more time on administration. More extensive use of electronic medical records was associated with a greater administrative burden. Doctors spending more time on administration had lower career satisfaction, even after controlling for income and other factors. Current trends in U.S. health policy—a shift to employment in large practices, the implementation of electronic medical records, and the increasing prevalence of financial risk sharing—are likely to increase doctors’ paperwork burdens and may decrease their career satisfaction.

From the Discussion

A few studies have examined the amount of time physicians spend on billing and insurance-related paperwork—a narrower definition of administrative work than we used. A 2000 California study estimated billing and insurance-related work consumed 4.9 percent of physician time. In a 2006 survey, physicians reported spending 3 hours per week interacting with private insurance plans, with primary care doctors and solo practitioners reporting slightly higher figures; 81.5 percent perceived that this work was increasing. A companion 2006 survey of office-based private practitioners in Ontario found they spent 2.2 hours per week interacting with insurers (vs. 3.4 hours in the United States when Medicare and Medicaid were included along with private insurers). Differences in the time spent on these tasks by non-physician office staff were even larger; 20.6 hours of nurse time per physician in the United States versus 2.5 hours in Canada; 53.1 hours per week of clerical time in the United States versus 15.9 hours in Canada; and 3.1 hours per week of senior administrators’ time in the United States versus 0.5 hours in Canada.

Much time and money are currently spent on medical billing and paperwork. A simpler system could realize substantial savings, freeing up more resources to expand and improve coverage.

International Journal of Health Services (click on the article for the abstract): https://www.baywood.com/journals/previewjournals.asp?id=0020-7314

Full article: http://org.salsalabs.com/o/307/images/Physician%20admin%20time_IJHS.pdf

PNHP Press Release: https://www.pnhp.org/news/2014/october/administrative-work-consumes-one-sixth-of-us-physicians%E2%80%99-time-and-erodes-their-mor

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Comment:

By Don McCanne, MD

The health care system in the United States is unique for its profound administrative waste. This article by Steffie Woolhandler and David Himmelstein demonstrates the intensity of the administrative burden on physicians – a burden that is correlated with lower career satisfaction.

The good news is that we could reduce that burden and improve satisfaction by adopting a single payer system such as they have in Canada. But then the bad news is that we have left the political agenda in the hands of those who are adept at buying the votes in Congress – especially the insurance and pharmaceutical industries.

It doesn’t have to be this way. After all, we are a democracy, but we have to make the effort to have our voices heard.

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Bureau of International Information Programs, U.S. Department of State

What Is Democracy?

The essence of democratic action is the active, freely chosen participation of its citizens in the public life of their community and nation. Without this broad, sustaining participation, democracy will begin to wither and become the preserve of a small, select number of groups and organizations.

At a minimum, citizens should educate themselves about the critical issues confronting their society–if only to vote intelligently for candidates running for high office.

http://www.ait.org.tw/infousa/zhtw/docs/whatsdem/whatdm3.htm

Health Care Price Transparency and Economic Theory

By Uwe E. Reinhardt, PhD
JAMA, October 22/29, 2014

Citizens in most economically developed nations have health insurance coverage that results in only modest cost sharing at the time health care is used. Furthermore, physicians, hospitals, and other clinicians and entities that provide health care within most systems outside the United States are paid on common fee schedules uniformly applied to all clinicians, health care organizations, and insurers. That approach spares the insured the need to seek out lower-priced health care and obviates the need for transparency on the prices charged by individual clinicians and organizations that provide health care.

Not so in the United States, where every private health insurer negotiates prices with every health care practitioner and organization, where large public health insurance systems such as Medicaid and Medicare pay fees that do not cover the full cost of treating patients covered by these programs, and where uninsured, self-paying patients can often be asked to pay whatever can be extracted from their household budgets, sometimes with the help of debt collectors and the judiciary. Economists call the approach price discrimination, which means the identical service is sold to different buyers are different prices.

This approach to pricing health care has led in the United States to a system in which, at one end of the spectrum, hospitals and physicians are expected by society to treat low-income patients free of charge, on a charitable basis, or for modest fees that do not cover the cost of those treatments and then to finance that informal catastrophic health insurance system for the poor out of the other part of their enterprises that they can operate as profit-maximizing business firms. This is true even in some of the large segment of institutions referred to as not-for-profit. The harsh excesses that this quest for profits in health care can unleash—even among not-for-profit hospitals—have been well reported in various articles in the popular press.

Private employers in the United States have played a pivotal role in the evolution of this system. They hired as their agents in health care the private insurers who helped put that system into place, and they supported it. To gain better control over the growth of their health spending, employers have of recent resorted to a technique long recommended to them by the market devotees among health economists, namely, putting the patient’s “skin in the game,” as the jargon goes. It is done with health insurance policies imposing on the insured very high annual deductibles before insurance coverage even begins, followed by significant coinsurance, perhaps requiring patients to pay 10% to 20% of every medical bill, up to a maximum total annual out-of-pocket expenditure that can potentially exceed $10 000 for a family.

This approach of shifting more of the cost of employment-based health insurance visibly and directly into the household budgets of employees amounts to rationing parts of US health care by price and ability to pay and delegates the bulk of the hoped-for belt-tightening to low-income families. Because the word rationing is anathema in the US debate on health policy, the strategy has been marketed instead under the felicitous label of consumer-directed health care, presumably designed to empower consumers in the health care market to take control of their own health care. However, this strategy, based mainly on economic theory, so far has put the cart before the horse.

In virtually all other areas of commerce, consumers know the price and much about the quality of what they intend to buy ahead of the purchase. This information makes comparison shopping relatively easy and is the sine qua non of properly functioning markets. By contrast, consumer-directed health care so far has led the newly minted consumers of US health care (formerly patients) blindfolded into the bewildering US health care marketplace, without accurate information on the prices likely to be charged by competing organizations or individuals that provide health care or on the quality of these services. Consequently, the much ballyhooed consumer-directed health care strategy so far has been more a cruel hoax than a smart and ethically defensible health policy.

http://jama.jamanetwork.com/article.aspx?articleid=1917413

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Association Between Availability of Health Service Prices and Payments for These Services

By Christopher Whaley, BA; Jennifer Schneider Chafen, MD, MS; Sophie Pinkard, MBA; Gabriella Kellerman, MD; Dena Bravata, MD, MS; Robert Kocher, MD; Neeraj Sood, PhD
JAMA, October 22/29, 2014

Conclusions

Use of price transparency information was associated with lower total claims payments for common medical services. The magnitude of the difference was largest for advanced imaging services and smallest for clinician office visits.

http://jama.jamanetwork.com/article.aspx?articleid=1917438

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Comment:

By Don McCanne, MD

In a JAMA editorial commenting on an article about price transparency and health care spending, Uwe Reinhardt first describes the ridiculous system we currently have, concluding, “the much ballyhooed consumer-directed health care strategy so far has been more a cruel hoax than a smart and ethically defensible health policy.”

He then discusses the article by Christopher Whaley and his colleagues in which they describe price savings resulting from health care price shopping: an average of a mere $1.18 for clinician office visits, $3.45 for laboratory tests, and a more impressive average savings of $124.74 for advanced imaging services.

Imaging aside, think about that one dollar saved by shopping office visit prices. Does that one dollar really pay for the labor involved in price shopping, much less the additional transportation costs and other inconveniences of going to a different doctor, not to mention the disruption in care provided by a primary care medical home? Not exactly a shopper’s paradise.

Even the more significant savings in advanced imaging can have drawbacks if it results in non-coordinated care outside of a system functioning as an integrated unit, whether or not it is technically a single integrated health care entity.

But what is really important here lies in Uwe Reinhardt’s comments. As he states, “other clinicians and entities that provide health care within most systems outside the United States are paid on common fee schedules uniformly applied to all clinicians, health care organizations, and insurers. That approach spares the insured the need to seek out lower-priced health care and obviates the need for transparency on the prices charged by individual clinicians and organizations that provide health care.”

Other nations pay the right amount to sustain he system, without the waste of overpaying some nor the threat of inequitable access caused by underpaying others. No matter how much price transparency we have in the United States, our highly dysfunctional, fragmented system of financing health care will never get pricing right.

Yes, we need a single payer national health program. Under such a system the pricing would be transparent to our public administrators, and who better could determine whether or not the price is right? We surely can’t.

CVS Smoke-Free Pharmacy Benefit Excludes Tobacco-Selling Rivals

By Bruce Japsen
Forbes, October 20, 2014

CVS Health (CVS) confirmed its Caremark pharmacy benefit management subsidiary would sell a smoke-free drugstore network to employers and health plans that would provide subscriber discounts for using “tobacco-free” pharmacies.

The move, which would benefit CVS Health pharmacies given the company’s decision to stop selling tobacco, could at the same time hurt rivals like Walgreens, Wal-Mart and others because a health plan subscriber that would use pharmacies outside the Caremark smoke-free network would pay higher co-payments and related cost-sharing.

CVS Health is able to exact some control on customer choices of prescription purchases through its Caremark pharmacy benefit management (PBM) subsidiary, which has contracts with CVS pharmacies as well as myriad other drugstore chains and independent pharmacies.

“Following our announcement that we would no longer be selling tobacco at CVS/pharmacy, a number of our pharmacy benefit management clients approached us about developing a tobacco-free pharmacy network,” Carolyn Castel, vice president of corporate communications at CVS Health said in an e-mailed statement to Forbes.

“As a result, CVS Health is in the process of identifying pharmacies that do not sell tobacco products to participate in such a new offering. We look forward to making this new pharmacy network available to our clients who choose this offering and providing their plan members with an option to select a tobacco-free environment for their prescription fulfillment needs.”

The Wall Street Journal’s Pharmalot blog reported CVS Health’s Caremark PBM would require a co-pay of “up to $15,” but CVS Health wouldn’t confirm any specifics on a cost-sharing structure.

It’s believed to be a first, according to health benefits analysts who see CVS Health’s move as a narrow network strategy, which is becoming more common from insurance companies and pharmacy benefit managers.

Insurers and benefit managers can better control costs by limiting plan subscriber choices to a smaller group of medical-care providers. By limiting choices, insurers say they can better focus on quality of medical care that is delivered to plan customers.

http://www.forbes.com/sites/brucejapsen/2014/10/20/cvs-smoke-free-pharmacy-network-would-exclude-tobacco-selling-rivals/

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Comment:

By Don McCanne, MD

Last month CVS announced, with considerable fanfare, that it would discontinue sales of tobacco products at its drugstores – a move that would cost it $2 billion in annual sales. After a month-long publicity campaign touting its altruistic action in support of a healthier America, we learn of the not-so-noble purpose of their decision.

They are claiming that in response to this move, numerous pharmacy benefit manager (PBM) clients approached them to request that they develop “a tobacco-free pharmacy network.” Sure they did. One month ago, they announced the end of tobacco sales one, but making that announcement one month ahead of their intended schedule. By splitting the announcements, they a get a twofer: favorable publicity for ending tobacco sales, and then publicity for a new PBM program that would allow them to “focus on quality of medical care” by selling drugs in a tobacco-free environment (as if there were a difference in identical pills sold in their tobacco-free stores versus the stores of their competitors that still carried tobacco products).

They are clearly being dishonest when that say that this concept arose only as an afterthought when their PBM clients suggested that it would be a good idea to segregate tobacco-free chains in their PBM plans. Obviously this was a carefully thought out marketing plan. Tobacco-free was a ruse. Their obvious deception in their releases should make us question the integrity of their entire organization.

So what are they really doing? Two of the most important moves in health insurance products have been to shift more costs to the consumers (whom we call patients) and to establish narrow networks that are anti-competitive, benefiting the insurer financially. CVS now owns one of the nation’s largest PBMs: Caremark.

What they are doing is to establish a narrow network of tobacco-free pharmacies (primarily CVS) which will be dominated by CVS’s own Caremark PBM. If the customers (patients) obtain their prescriptions outside of their narrow network, they will be required to pay larger out-of-pocket costs. Wow! With their own PBM they are introducing the health insurer innovations of higher patient cost-sharing and narrow networks. We’re screwed again!

How would it be under single payer? We would have a national formulary that included all appropriate medications. Pharmaceuticals would be priced properly through bulk purchasing and other forms of administered pricing, and they would be paid for through equitable public financing. There would be no crooks controlling the gates that would otherwise impair access to the medications that we need.