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

Abstract

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

Objectives
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.

Evidence
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.

Findings
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

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

State
  * 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.

http://jama.jamanetwork.com/article.aspx?articleid=2545691

***

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.

http://www.upi.com/Health_News/2016/08/23/Americans-pay-more-than-double-what-other-nations-pay-for-drugs/8501471964588/

***

Comment:

By Don McCanne, M.D.

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.

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.

https://www.statnews.com/2016/08/24/epipen-mylan-bresch/

Aaron Carroll also discusses EpiPen as a case study in health care system dysfunction:
http://www.nytimes.com/2016/08/24/upshot/the-epipen-a-case-study-in-health-care-system-dysfunction.html

***

Comment:

By Don McCanne, M.D.

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.

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.

https://www.statnews.com/2016/08/24/epipen-mylan-bresch/

Aaron Carroll also discusses EpiPen as a case study in health care system dysfunction:
http://www.nytimes.com/2016/08/24/upshot/the-epipen-a-case-study-in-health-care-system-dysfunction.html

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.

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.

http://www.desmoinesregister.com/story/opinion/editorials/2016/08/22/editorial-government-should-not-rely-private-insurers/89107404/

***

Comment:

By Don McCanne, M.D.

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.

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.

http://www.desmoinesregister.com/story/opinion/editorials/2016/08/22/editorial-government-should-not-rely-private-insurers/89107404/

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.

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.”

http://bigstory.ap.org/article/900bafbce1e44be2a0f2f9c30a76f634/without-subsidy-couple-faces-higher-insurance-premiums

***

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.

http://avalere.com/expertise/life-sciences/insights/experts-predict-sharp-decline-in-competition-across-the-aca-exchanges

***

Comment:

By Don McCanne, M.D.

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.”

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.”

http://bigstory.ap.org/article/900bafbce1e44be2a0f2f9c30a76f634/without-subsidy-couple-faces-higher-insurance-premiums

***

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.

http://avalere.com/expertise/life-sciences/insights/experts-predict-sharp-decline-in-competition-across-the-aca-exchanges

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.”