By Andrew W. Mulcahy, Christopher M. Whaley, Mahlet G. Tebeka, Daniel Schwam, Nathaniel Edenfield, Alejandro U. Becerra-Ornelas
RAND, Research Report, January 28, 2021

Conclusion

Although several prior studies compare drug prices in the United States with those in other countries, the most recent of these studies used data that are nearly a decade old. In our analysis using 2018 data, we found that, with the exception of unbranded generics, 2018 drug prices in the United States were substantially higher than those in other countries. The United States had lower prices for unbranded generics than most comparator countries. Unbranded generics account for 84 percent of U.S. prescription drug volume—a much larger share than the 35 percent for the OECD comparison countries—but only 12 percent of prescription drug spending at manufacturer prices. In contrast, brand-name originator drugs accounted for only 11 percent of U.S. prescription drug volume and 82 percent of U.S. prescription drug spending. Overall, the United States’ considerable unbranded generic market share and low average unbranded generic prices did not fully offset higher brand-name originator prices.

The magnitude of the difference between prices in the United States and those in other countries was substantial. For all drugs, U.S. prices were 256 percent of prices in other countries. U.S. prices for brand-name originator drugs were 344 percent of prices in other countries. U.S. prices for unbranded generics were 84 percent of prices in other countries. Although different methodological decisions did change the magnitude of results, the overall pattern of higher drug prices in the United States was generally consistent—again, with the exception of unbranded generics. All G7 comparator countries had lower prices than the United States; France, Italy, and the United Kingdom had particularly low prices across drug categories regardless of methodological decisions.

The results of our study provide evidence that prescription drug prices are higher in the United States than in comparison countries. These results are consistent with the existing literature. Although we apply an estimated adjustment to U.S. prices to approximate rebates and other discounts applied to manufacturer prices as one of our sensitivity analyses, we recognize that the resulting prices will almost certainly differ from the actual net price to payers for individual presentations. We also recognize that resulting price indices will understate differences between prices in the United States and other countries because they adjust only U.S. prices downward even though rebates and similar discounts are increasingly common in other countries.

Future analyses should examine the association between purchasing power and drug prices across countries. We also recommend studying specific active ingredients and presentations that contribute most to the differences in aggregate prices between the United States and other countries, and we recommend long-term tracking of price indices that are relevant to the nascent U.S. biosimilars market.

The full study (71 pages) can be downloaded at this link:
https://www.rand.org…

News release:
https://www.rand.org…

Comment:

By Don McCanne, M.D.

This current RAND study confirms that U.S. drug prices were 256 percent of drug prices in other countries, while brand name originator drugs were 344 percent of prices in other countries. Although these brand drugs represented 82 percent of U.S. prescription drug spending, they accounted for only 11 percent of U.S. prescription drug volume. High prices indeed.

The one positive note is that 84 percent of U.S. prescription drug volume is for unbranded generics, but it represented only 12 percent of prescription drug spending at manufacturer prices. However the large volume of low cost generics does not make up for the exorbitant prices of the brand name originator drugs. We are continuing to spend way too much on brand name drugs. Think of all of the television ads that you see for these expensive drugs.

Although the authors recommend further analyses of these relationships, it really is time to switch to government administered pricing which we could easily do by enacting and implementing a well designed, single payer, improved Medicare for All. Decades of relying on markets has just not been effective.

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By Sheryl Gay Stolberg, Abby Goodnough and Margot Sanger-Katz
The New York Times, January 28, 2021

President Biden, seeking to expand access to health care and strengthen the Affordable Care Act, used his executive authority Thursday to order the reopening of enrollment in the health law’s marketplaces and a re-examination of Trump administration policies that undermined protections for people with pre-existing medical conditions.

His aim, he said in a brief signing ceremony in the Oval Office, was to “undo the damage Trump has done.”

Mr. Biden’s first step is to reopen enrollment for health coverage offered through the federal marketplace created under the health law, also known as Obamacare. His intent is to offer coverage not only to those who lost it during the pandemic, but also to those who did not have insurance and now want it, according to a senior administration official who previewed the new policy during a conference call Thursday morning.

The so-called special enrollment period will run from Feb. 15 to May 15. The official said the reopening would be accompanied by the kind of robust patient outreach — including “paid advertising, direct outreach to consumers and partnerships” with community organizations and advocacy groups — that was abandoned by the Trump administration.

Mr. Biden’s actions take aim at a number of Mr. Trump’s policies. In 2018, citing complaints about the price of Obamacare coverage, the Trump administration issued a rule that extended the length of less expensive “short” term policies from three months to up to three years. Such policies do not have to cover pre-existing conditions and can exclude common benefits like maternity care, mental health care or prescription drugs. The former administration also made it easier for small businesses to band together and offer plans that escape some of the requirements of the Affordable Care Act. Mr. Biden has asked federal agencies to re-examine these rules, which could take months to undo.

https://www.nytimes.com…

Comment:

By Don McCanne, M.D.

Open the enrollment period. Plus undo a number of Mr. Trump’s policies. More of the same.

Tens of millions remain uninsured and tens of millions more are underinsured. We continue to waste hundreds of billions of dollars on private insurer-induced administrative excesses. Not a hint of what he might do about that. Instead, we’ll have many months to undo Trump’s policies so that we’ll be left with … what? The same old system that hasn’t been working for tens of millions of us.

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By Amy Finkelstein
The New York Times, January 22, 2021

Cutting waste while preserving critically important treatment is the holy grail of health care policy.

One of the pandemic’s startling effects is that despite the overwhelming need for Covid-19 treatments and vaccinations, health care spending in the United States has declined sharply.

This indiscriminate reduction in spending closely resembles the unfortunate effects of an array of policies over the past half-century intended to reduce unnecessary medical care. These too cut essential and inessential care alike.

Excessive administrative costs, high prices and inappropriate medical care are the three major culprits in wasteful spending, driving insurance premiums and taxes without helping patients.

For decades, the driving principle behind reducing needless medical care has been that if patients or their providers have financial “skin in the game,” they will make prudent decisions.

The economic theory is simple: If something becomes more expensive, people will buy less of it. And the empirical evidence is overwhelming: When patients have to pay more, they use less medical care.

To encourage only essential care, there has been a widespread shift to paying a fixed fee for a patient, regardless of what treatment is provided. A hospital might be paid $25,000 for a patient’s knee replacement. Or a network of health care providers might be paid $10,000 a year for all of a patient’s health care needs.

One reason it is so hard to trim waste is that physicians and regulators have already eliminated so many demonstrably harmful or useless treatments.

Low-value doesn’t mean no-value-ever.

But most medical procedures are different. They are a matter of judgment.

That doesn’t mean we should stop trying to cut waste. But a simple, miracle cure for excising most unnecessary medical care? Don’t buy it, with or without insurance coverage.

Amy Finkelstein is the John and Jennie S. MacDonald professor of economics at M.I.T.

https://www.nytimes.com…

Comment:

By Don McCanne, M.D.

The United States has the highest per capita health care costs of all nations, yet we are often receiving only mediocrity for our spending. For this reason, measures are often taken to reduce demand for care by making it more expensive, especially through high deductibles and other cost sharing. But excess demand is not the reason our costs are so high compared to other countries, rather it is due to high prices and, especially, excess administrative costs.

Using cost sharing is detrimental because it causes patients to forgo beneficial health care because of the out-of-pocket costs, especially if the cost sharing is truly unaffordable. We need to look at other methods of reducing spending – especially methods that have been successful in other countries with more reasonable levels of health care spending.

Also inappropriate medical care has been blamed for some of the excess spending, but that is not a feature specific to our nation. Much of it is low-value care, but that is not the same as no-value care. Forgoing a scan that has a low probability of detecting a serious problem for which effective intervention is available can be disastrous if diagnosis is deferred until intervention is not effective. It is for this reason that it would be difficult to reduce spending by forging low-value interventions and procedures. We cannot be expected to save money by cutting out what is considered waste only retrospectively.

High prices? Yes, we can use government administered pricing to pay legitimate costs plus fair profit margins. This should ensure that services and products would be available without spending exorbitant amounts. The primary objection to government administered prices is not based on economics, but rather it is based on politics. Other nations are effective in overriding politics; we can be too.

But the most important reason for our high spending is excessive administrative costs – a feature relatively unique to the U.S. health care system. We are heavily dependent on private commercial insurers. Not only are they responsible for tolerating the highest health care prices, they are also responsible for selling us excessive administrative services that they use to try to shift more of the costs to the patient – the exact opposite of what insurance should be doing. Not only do the patients pay more, but many of these administrative services are used to prevent patients from having the care that they should have.

This leads to the problem expressed in the title of Professor Finkelstein’s article: why it’s so hard to cut waste in health care. The fact is, it isn’t hard. The biggest waste is unneeded administrative services which we could dramatically reduce merely by getting rid of private insurers and enacting and implementing a well designed, single payer, Improved Medicare for All program. We could save literally hundreds of billions of dollars that could be used for unmet health care needs.

You don’t need to be a professor at M.I.T. to understand how simple that would be.

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By Alan Weil, Adam Gaffney
Health Affairs, January 26, 2021

Have health economists been underestimating supply-side constraints when making predictions regarding cost and utilization for universal health coverage programs, such as Medicare For All? That’s certainly what Dr. Adam Gaffney, a pulmonary specialist from Cambridge Health Alliance and Harvard Medical School, and colleagues posit in a new policy paper published in the January 2021 issue of Health Affairs.

As Gaffney and co-authors note in their paper, “focusing only on the impact of health care reform on government expenditures is short-sighted.” On the supply side, there’s a natural limit to doctor and nurses’ time as well as the number of hospital beds in a given facility.

Their analysis suggests that while first-dollar universal coverage expansion would increase ambulatory visits by about 7-10% and hospital use by about 0-3%, modest administrative savings could offset the costs of these increases.

On this episode of A Health Podyssey, Alan Weil and Adam Gaffney take listeners through health reform economics 101 before sharing the implications of the paper, ultimately questioning whether health reform is too focused on a demand-side framework.

Alan Weil, Health Affairs Editor-in-Chief: “If we free up physicians’ time, we say, ‘Oh, there’s going to be more utilization,’ and in a fee-for-service world, more utilization is more cost, but if you change how a physician spends time from administrative tasks to clinical care, they’re more productive and that actually isn’t a new cost to the health care system. That’s a more efficient use of the money we have, and it actually, once you move out of a fee-for-service world, that isn’t a cost-creating phenomenon.”

Adam Gaffney, former president of PNHP: “We do need to actually plan so we can have supply when we need it, and not just where it’s revenue-generating.”

Reader Comment:

By Don McCanne, M.D.

This Podcast is really important because it answers President Biden’s question he asked repeatedly during the campaign, “How can we pay for Medicare for All? We can’t afford it.”

Ironically, he has chosen the most expensive method of expanding coverage. On top of what we are already spending, he is going to give more taxpayer subsidies to the private commercial insurance industry – the source of the highest prices, and, even worse, the source of profound administrative waste, both their own and the administrative burden they place on the health care delivery system.

Medicare for all would greatly reduce the administrative waste by eliminating the private insurers, saving hundreds of billions of dollars, plus prices would be set at a lower level – enough to cover costs plus fair profit margins.

But the most important reason that single payer Medicare for All would be affordable is explained in this Podcast. Listen to it if you haven’t, and then encourage President Biden and his advisers to listen to it as well.

https://www.healthaffairs.org…

The Health Affairs article, “Pricing Universal Health Care: How Much Would The Use Of Medical Care Rise?” by Adam Gaffney, David U. Himmelstein, Steffie Woolhandler, and James G. Kahn was previously covered in the Quote of the Day, “We can easily afford to include everyone in Medicare for All”:
https://pnhp.org…

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United States Government Accountability Office (GAO), December 2020

What GAO Found

GAO found that when rural hospitals closed, residents living in the closed hospitals’ service areas would have to travel substantially farther to access certain health care services. Specifically, for residents living in these service areas, GAO’s analysis shows that the median distance to access some of the more common health care services increased about 20 miles from 2012 to 2018. For example, the median distance to access general inpatient services was 3.4 miles in 2012, compared to 23.9 miles in 2018—an increase of 20.5 miles. For some of the less common services that were offered by a few of the hospitals that closed, this median distance increased much more. For example, among residents in the service areas of the 11 closed hospitals that offered treatment services for alcohol or drug abuse, the median distance was 5.5 miles in 2012, compared to 44.6 miles in 2018—an increase of 39.1 miles to access these services.

GAO also found that the availability of health care providers in counties with rural hospital closures generally was lower and declined more over time, compared to those without closures. Specifically, counties with closures generally had fewer health care professionals per 100,000 residents in 2012 than did counties without closures. The disparities in the availability of health care professionals in these counties grew from 2012 to 2017. For example, over this time period, the availability of physicians declined more among counties with closures—dropping from a median of 71.2 to 59.7 per 100,000 residents—compared to counties without closures—which dropped from 87.5 to 86.3 per 100,000 residents.

Median Distance in Miles from Service Areas with Rural Hospital Closures to the Nearest Open Hospital that Offered Certain Health Care Services, 2012 and 2018:

• General Inpatient
  • 2012: 3.4
  • 2018: 23.9
• Emergency Department
  • 2012: 3.3
  • 2018: 24.2
• Alcohol or drug
  • 2012: 5.5
  • 2018: 44.6
• Coronary Care Unit
  • 2012: 4.5
  • 2018: 36.1

https://www.gao.gov…

Comment:

By Don McCanne, M.D.

The declining numbers of rural hospitals have been of concern for many years. Of perhaps greater concern is the decline in the availability of health care providers in counties where rural hospitals closed. Look particularly at the extra distance that must be traveled if you are having a heart attack. That delay could be a matter of life or death.

One of the advantages of a single payer improved Medicare for All program is that it includes regional planning that is based on need. If rural hospitals and their facilities are needed, then they should be available, regardless of cost.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Many see COVID-19 as a moment for change, with improving access to health care as the shift they most want to see.

Robert Wood Johnson Foundation, January 2021

This ongoing survey from RAND Corporation attempts to understand the views and values of those who are most at risk to the adverse impacts of COVID-19 by surveying people with lower and middle incomes with a focus on communities of color. It measures the attitudes of the same group of respondents over a year with four waves of collection.

Wave 2 Key Findings

• Many people—even those who may have been hit hardest by the pandemic and long-standing inequities—still do not see systemic racism as a barrier to good health.
• Respondents’ willingness to risk their own health to return to “normal” has actually gone up slightly over time.
• More than 70 percent of respondents see the pandemic as a moment for positive change. Black and Hispanic respondents are also more likely than white respondents to endorse this statement.
• Respondents who see an opportunity for positive change believe society should prioritize expanding access to health care and reducing income inequality.
• Nearly two-thirds of respondents believe the government should ensure health care as a fundamental right. White respondents are less likely to endorse this statement.
• Black respondents report lower trust in government than white and Hispanic respondents.

Wave 1 & 2 Reports can be downloaded from this link:
https://www.rwjf.org…

Comment:

By Don McCanne, M.D.

This survey of lower- and middle-income households with an oversample of Black, Hispanic and Asian Americans reveals that these sectors surprisingly do not see systemic racism as a barrier to good health, but they also are willing to risk their own health to return to “normal” during the pandemic. Nevertheless, over 70 percent believe that the pandemic is a moment for positive change.

They believe that we should prioritize expanding access to health care and reducing income inequality. Nearly two-thirds of respondents believe the government should ensure health care as a fundamental right, but white respondents are less likely to endorse this statement. Black respondents report lower trust in government than white and Hispanic respondents.

Beliefs are as they are, though surveys have their limitations. Beliefs would improve if we made a greater effort to make health care access universal while reducing income inequality, but it does appear that all camps could stand to be exposed to more education on our problems and their solutions, especially in public health and public policy.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By John E. McDonough and Sherry Glied
The Milbank Quarterly, January 21, 2021

Every US administration since 1966 has had to engage in Medicare policymaking. The program covers 61 million elderly and disabled Americans, accounts for 14% of all federal spending, and, unlike the larger Social Security program, requires myriad legislative and regulatory tweaks each year to continue its operations. The Biden administration, like its predecessors throughout the program’s 55-year history, will need to perform this regular program maintenance. In addition, Congress and the administration will face two kinds of policy challenges. Some prominent Democrats, including many of Biden’s former competitors in the Democratic primary, see Medicare as a critical stepping stone to a unified system of health insurance coverage for all Americans. They will want to see changes to the program that extend its reach. On the other hand, Medicare actuaries and many conservative members of Congress see the program as an underfunded giant hurtling toward insolvency by 2024. While the administration will need to respond to the insolvency problem, it should try to leverage that response to simultaneously achieve progressive gains.

Job number one is to fix the coming Trust Fund budget hole.

While almost all Americans support Medicare’s survival and solvency, neither of the obvious options for achieving that objective – new taxes or funding cuts – is popular.

A key win-win would be action on prescription drug pricing, a policy goal that the Trump Administration pursued aggressively, but with limited success. Some drug price containment strategies can be achieved through Executive branch regulatory actions, but such regulatory savings will not fill the Trust Fund hole. One problem is that Medicare prescription drugs are funded through Parts B (inpatient) and D (outpatient) of the program, which means that savings achieved through lower prices for drugs would not directly improve Part A solvency. A more comprehensive legislative strategy will be needed. For example, imposing effective controls on prices for inpatient hospital and outpatient drugs, which can be achieved legislatively within reconciliation rules, could be combined with a shift of, say, home health services from the Part A to the Part B benefit as David Cutler and co-authors have recommended. This combination would improve the Trust Fund balance while simultaneously offsetting new costs in general revenue-funded Part B with drug cost savings.

Another health policy area in which savings, and program improvements, may be possible is Medicare Advantage (Part C). Currently, 38% of all Medicare enrollees are enrolled in Medicare Advantage private plans, and the fraction has been increasing steadily. Throughout the program’s history, there have been concerns that private plans have been overpaid. In 2010, the ACA made substantial structural changes to Medicare Advantage to reduce such overpayments. The resulting savings helped to extend the fiscal life of the Part A Trust Fund from 2016 to 2030 and also funded a portion of the ACA’s coverage expansions.

Despite the ACA’s reforms, concerns about overpayment in Medicare Advantage (MA) persist. Recent research documents that many MA plans aggressively code their enrollees’ diagnoses to generate higher risk-adjusted payments from the Centers for Medicare and Medicaid Services. Most of the benefits of these coding adjustments, which cost the federal government billions every year, accrue to plans, not beneficiaries. Because Medicare Advantage plans cover both Part A and Part B benefits, legislative changes in the payment formula for Medicare Advantage would contribute to Trust Fund solvency. These could be combined with improvements to traditional Medicare that would enhance the financial protection available to those who do not participate in Medicare Advantage, such as a cap on out-of-pocket spending.

Slim majorities in Congress will make it hard for the Biden administration to pursue plans that expand Medicare eligibility. But improving the existing program may advance progressive agendas. A curious feature of the Democratic presidential primary debate around “Medicare for All” is that the “Medicare” option promoted by candidates was not the existing Medicare program. The existing program’s flaws make it a less-than-ideal base for expansion. Fixing the Trust Fund budget hole, improving the efficiency of program payments, and, most importantly, extending financial protections that traditional Medicare offers its beneficiaries would make the existing Medicare program a more viable option and framework for future expansion.

https://www.milbank.org…

Comment:

By Don McCanne, M.D.

In our quest for single payer Medicare for All, we frequently speak of an improved Medicare for All. The current Medicare program is not satisfactory. At a minimum, we need additional coverage such as a Medigap plan to cover the deficiencies in the traditional Medicare Program, particularly the lack of an out-of-pocket cap on spending.

Actually Medigap Plan F had many features that if they were rolled into the traditional Medicare program would go a long way toward establishing the improved Medicare that we want. In fact, it was so good that Congress outlawed non-grandfathered Plan F plans when they established the Affordable Care Act, since Congress has always catered to the private insurance industry, and Plan F competed very favorably with the private Medicare Advantage plans, except the premium was too high.

Folding in the Plan F benefits would have been much more efficient, reducing the administrative costs considerably. As it is, the claims are processed twice, once by the Medicare administrator and again by the private Medigap insurance plans. These plans, of course, are designed to provide profits to the insurers, so they must charge high premiums to cover not only the medical benefits but also the extensive administrative costs and also the profits. We would be much better off with the benefits rolled into the plans and paid for through equitable taxes. Plus we would not be billed separately for deductibles, coinsurance and lack on caps on out-of-pocket spending. There are several other measures, such as covering long term care and drugs directly, that would improve Medicare that we will not go into here.

Another more immediate concern is the overpayment that we taxpayers make to the private Medicare Advantage plans. Not only are the MA plans being overpaid, funds which they keep, they also are using insurer gimmicks to improve their returns – cherry picking and lemon dropping, limited provider networks, upcoding to expand payments, using prior authorization to deny benefits, passing costs on to surprise bills – measures that reduce benefits but increase their profits. and part of that is paid by us through general tax revenues rather than just by the plan beneficiaries. We are paying them their administrative costs used to cheat patients out of their benefits and to cheat taxpayers out of their dollars. UnitedHealth just reported $15.4 billion in profits alone for 2020. We would be much better off without them.

Generally, incrementalism is a bad idea. However, without a favorable political climate, we might consider taking a transitional step of improving Medicare so that it can later serve as the basis of a comprehensive, efficient, equitable single payer, Medicare for All. As the authors state, that “would make the existing Medicare program a more viable option and framework for future expansion.” First we would try to enact an improved Medicare for All. If that doesn’t work with a president who is opposed, we could then be working on fixing our current Medicare so it would serve as a viable framework for future expansion.

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