PNHP

Stuart Butler on Section 1332 waivers

Stuart Butler on Section 1332 waivers

Why Section 1332 Could Solve the Obamacare Impasse

By Stuart Butler, PhD
The JAMA Forum, April 28, 2015

Section 1332 of the ACA, known as “State Innovation Waivers,” allows states, starting in 2017, to apply to the federal government for 5-year renewable waivers from key provisions of the legislation. For instance, states could request changes to or exemptions from the individual and employers mandate, the market exchanges, the exchange subsidies, the Essential Health Benefits requirements, and other provisions. Moreover, states can combine waivers from ACA provisions with waivers from Medicaid provisions (so-called 1115 waivers), Medicare, the state Children’s Health Insurance Program, and waivers available through “any other Federal law relating to the provision of health care items or services.”

Section 1332, however, is not a blank check for states to ignore the whole intent of the ACA, even assuming the White House or the next administration were open to that. It has important fine print. To obtain a waiver, a state’s proposal must retain important protections, such as guaranteeing that health plans accept an applicant regardless of their health status or other factor. The proposal’s coverage must be “at least as comprehensive” and cover “at least a comparable number of its residents” as the ACA, and insurance must be as affordable. Any state plan must also be budget neutral for the federal government.

Even with these limitations on state plans, section 1332 could lead to state health plans in the future that change the ACA beyond recognition. A Republican state like Arkansas, Utah, or Texas, for instance, could use the section to take the federal money for Medicaid expansion as a block grant and turn it into subsidies for families to buy private coverage. These or other states could also end the mandates on individuals and employers, perhaps using government-encouraged auto-enrollment for insurance to meet the ACA’s coverage projections. Meanwhile, states like Vermont, Oregon, and Hawaii could design waivers to create a form of single-payer health system.

The political ramifications of this wide flexibility under section 1332 are immense. For instance, Republican opponents of the ACA, recognizing that the foreseeable congressional makeup means outright repeal of the ACA is not feasible even if Republicans win the White House in 2016, would have a strategy for states to exit much of the ACA. Meanwhile liberals in other states would have a tool to move closer to their dream of a single-payer system. And the White House could claim that even in the Republican states with sweeping waivers, the ACA had been fully implemented. Moreover, the 1332 waivers would allow many of the technical problems of the ACA to be fixed at the state level without going to Congress.

http://newsatjama.jama.com/2015/04/28/jama-forum-why-section-1332-could-solve-the-obamacare-impasse/

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Comment:

By Don McCanne, MD

Stuart Butler’s name may be familiar to you as he was the policy expert that described the Heritage Foundation’s model of health care reform that was a counter proposal to the Clinton effort, and later became the model that formed the basis of the Affordable Care Act. We should take heed of his words on the potential of the state innovation waivers authorized by Section 1332 of the Affordable Care Act.

After ultraconservative Sen. Jim DeMint became president of the Heritage Foundation, Stuart Butler moved to the Brookings Institution and was thus less handicapped than he had been with the extreme right-wing political polarization at Heritage. His recent messages have been directed toward solutions that supposedly defuse the politics so that we can move forward on policy.

Without repeating any of his points made above, obviously he believes that the states should move forward with their own concepts of reform that would comply with their respective political climates. However, most of the flexibility he suggests would appeal to conservatives, though he mentions single payer to appease those in liberal states.

The problem is that Section 1332 is quite amenable to piecemeal measures that would gradually move health care further in the direction of a system that places more of the responsibility on the individual, making health care less affordable and less accessible (as if it were not bad enough already). Yet Section 1332 waivers cannot lead to single payer without enabling comprehensive federal legislation. Section 1332 is a setup for conservative policies, yet hardly opens the door for single payer. Acting on a state level alone, liberals cannot expect much more than tweaks to the Affordable Care Act.

Stuart Butler is now even better positioned to drive the dialogue on reform. If the politicians continue to listen to him, forget the dream of a more egalitarian system.

Pharmaceutical firms contribute to wealth inequity

Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices

By Jonathan D. Rockoff and Ed Silverman
The Wall Street Journal, April 26, 2015

On Feb. 10, Valeant Pharmaceuticals International Inc. bought the rights to a pair of life-saving heart drugs. The same day, their list prices rose by 525% and 212%.

Neither of the drugs, Nitropress or Isuprel, was improved as a result of costly investment in lab work and human testing, Valeant said. Nor was manufacture of the medicines shifted to an expensive new plant. The big change: the drugs’ ownership.

“Our duty is to our shareholders and to maximize the value” of the products that Valeant sells, said Laurie Little, a company spokeswoman.

More pharmaceutical companies are buying drugs that they see as undervalued, then raising the prices. It is one of a number of industry tactics, along with companies regularly upping the prices of their own older medicines and launching new treatments at once unheard of sums, driving up the cost of drugs.

Since 2008, branded-drug prices have increased 127%, compared with an 11% rise in the consumer price index, according to drug-benefits manager Express Scripts Holding Co.

Early last year, Mallinckrodt PLC paid $1.4 billion for Cadence Pharmaceuticals, though the Ofirmev pain injections that were the crown jewel of the deal were projected to have just $110.5 million in 2013 revenue, according to a Mallinckrodt conference call with analysts discussing the deal. Three months later, the list price for a package of 24 Ofirmev vials jumped almost 2½ times to $1,019.52, according to health-care data firm Truven Health Analytics.

“It seemed like highway robbery,” said Erin Fox, who directs the drug-information service at University of Utah Health Care.

The price increases can be very lucrative for companies. Horizon Pharma PLC upped the price of Vimovo pain tablets after buying the rights from AstraZeneca in late 2013. On Jan. 1, 2014, its first day selling Vimovo, Horizon raised the list price for 60 tablets to $959.04, a 597% increase. Horizon raised the price again on Jan. 1 this year to $1,678.32 for the tablets.

After Valeant agreed to buy the drugs in early January, the company hired a consultant to look at their prices. The consultant found the prices didn’t reflect the benefits of the drugs to patients and the costs that hospitals save by using the medicines, the person said. Valeant decided to raise the price. The list price of a one-milliliter vial of Isuprel, a treatment for abnormal heart rhythms, jumped to $1,346.62, up from $215.46, according to Truven. Meantime, a two-milliliter vial of Nitropress, which combats dangerously high blood pressure and acute heart failure, increased from $257.80 to $805.61.

http://www.wsj.com/articles/pharmaceutical-companies-buy-rivals-drugs-then-jack-up-the-prices-1430096431

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Comment:

By Don McCanne, MD

It seems that everywhere you turn these days there are articles covering the skyrocketing prices of pharmaceuticals.

One factor used by the pharmaceutical firms to explain their price increases is the benefit patients receive from the drugs – benefits that the pharmaceutical firms claim are so valuable that the prices should be much higher than their costs of doing business. When you have a superior product, you sell it at a higher price, with the financial benefits accruing to the owners of the firm. That’s the way markets work.

This WSJ article describes an even more nefarious process of market manipulations of drug prices. Pharmaceutical firms are buying the rights to the products of other firms, often buying the firms themselves, paying very high prices for these rights. There are several examples in thus article, but an even more egregious example is the action of Gilead Sciences in buying up the rights to the newer, more effective Hepatitis C drugs, again paying outrageous prices for those rights. They are recovering this capital cost by charging $1,000 or more for each pill sold, when a course of treatment may be 84 pills.

Think about that. A massive amount of capital is paid out, requiring the purchasing firm to charge much higher prices for those drugs to recover the funds paid to acquire the drug rights. Who receives the capital paid out? The wealthiest tier – the tier that holds by far the largest percentage of shares in public and private corporations. Who is paying higher prices to compensate for the capital purchase of the drug rights at inflated prices? It is predominantly middle-income Americans in the form of direct drug purchases or indirectly through insurance premiums, taxes for public programs, or forgone wages to pay for employer-sponsored benefits.

Thus the pharmaceutical firms are compounding the inequitable shift of capital from the workers to the wealthy (described by Piketty, Saez and others). This is being done through financial constructs for which Wall Street is so infamous. As patients, we are powerless to impede this process. It is the responsibility of government to provide the appropriate oversight to correct these injustices. Yet what did they do? Through the Affordable Care Act they handed more power and control over to the insurers and the pharmaceutical firms, leaving us at their mercy, even though mercy is not a quality found in amoral corporations.

These injustices would not be tolerated in a single payer system.

How Much Would You Pay for an Old Drug? If You Have MS, a Fortune

Older medicines for multiple sclerosis get more expensive with each new therapy developed

By John Tozzi
Bloomberg Business, April 24, 2015

Imagine Apple’s first iPhone is still on sale today. Now imagine it costs many times its original price of $599, and that the price goes up every time a new, competing phone is released.

That bizarro world is what the market for multiple sclerosis drugs looks like, as described in a new paper in the journal Neurology. And doctors are calling for it to change.

MS is a chronic disorder of the nervous system that afflicts about400,000 Americans with a variety of symptoms, including fatigue, difficulty moving, and vision problems. When the first therapies to treat MS were approved in the 1990s, they cost $8,000 to $12,000 a year. Subsequent drugs entered the market with higher prices. The competition didn’t drive down cost, as Economics 101 would predict. Instead, the prices of the older drugs increased and rose several times faster than the overall rate at which drug costs increased.

Here’s a chart of how much each of the MS drugs in the study cost when they hit the market and how much they cost in 2013:

Now all the MS drugs cost between $50,000 and $65,000 a year, including the ones that went for less than $10,000 when they made their debut. “Our data suggest prices of existing [therapies] paradoxically rise, quickly matching prices set by the newest competitor,” the authors, from Oregon State University and Oregon Health & Science University, write. (The paper left out the two most recent MS therapies because data weren’t available. It also excluded one older drug that’s rarely prescribed for MS because of safety concerns.) 

A lot of the recent discussion about drug prices in the U.S. has been about expensive new therapies for the liver disease hepatitis C. Those pills are highly effective, curing most patients after a course of a few months, and manufacturers have argued that the high prices are justified, especially if they avoid more costly treatments, such as liver transplants, later on.

There is no cure for MS, though, and patients typically take medication for years or decades. The changes in price for older drugs matter because those drugs are often widely prescribed. Copaxone, approved in 1996, is still the bestselling MS therapy, with 2014 retail sales of $3.4 billion in the U.S., according to data from Bloomberg Intelligence.

The new analysis in Neurology is based on the drugs’ average wholesale prices—essentially the list price. Health plans typically negotiate discounts off that price. “Nobody’s paying the list price,” said Robert Zirkelbach, spokesman for the drug industry group Pharmaceutical Research & Manufacturers of America, who had not seen the study. “As you have more players in the marketplace, insurers and pharmacy benefit managers are able to negotiate even steeper discounts.”

Other data supports the Oregon researchers’ analysis. The three MS drugs approved in the 1990s—Bayer’s Betaseron, Biogen’s Avonex, and Teva’s Copaxone—had total U.S. sales of $2 billion in 2006, according to Bloomberg Intelligence data that track what pharmacies pay wholesalers. That figure tripled to more than $6 billion by 2014, even as several competing therapies were approved.

The price hikes seem to move in lockstep, as this chart from the Neurology article shows. 

It’s not clear why the cost of MS drugs is increasing so much faster than drug prices overall. There are no generic versions of MS therapies on the market, as there are with many other classes of drugs, and generic competition often brings prices down. (The first MS generic, a version of Copaxone, was just approved. It’s unclear when it might reach the market.) The MS drugs are also part of a complex category of drugs known as biologics that are more difficult to develop and manufacture than traditional pharmaceuticals. Still, the researchers compared MS with another set of biologics, used to treat rheumatoid arthritis, and the prices for MS increased much faster.

The researchers decided to look at MS drug costs after two neurologists at Oregon Health & Science University had trouble getting medication for their patients, said Dan Hartung, the study’s lead author and an associate professor at Oregon State. “We have a market for health care and pharmaceuticals that tolerates, at least up until now, fairly high prices for medication,” Hartung said.

That may be changing. While insurance companies and patients have long complained about high drug costs, physicians are increasingly joining them. Doctors at Memorial Sloan Kettering Cancer Center denounced expensive cancer drugs on the New York Times op-ed page in 2012. Doctors have also taken to academic journals to argue for lower prices for leukemia drugs. In an editorial in Neurology accompanying the study, two Canadian researchers call what’s happening in the MS market a brazen money grab by the drug industry.

“Like big banks, pharma cannot be free to ravish the marketplace unfettered,” they write. “There is a need at times to grab the big banks or big pharma by the lapels and make it clear that they are seriously out of line and are hurting people.”

http://www.bloomberg.com/news/articles/2015-04-24/health-the-price-of-multiple-sclerosis-drugs-only-goes-up

John McDonough on Vermont’s single payer lesson

The Demise of Vermont’s Single-Payer Plan

By John E. McDonough, Dr.P.H., M.P.A.
The New England Journal of Medicine, April 23, 2015

On December 17, 2014, Vermont Governor Peter Shumlin publicly ended his administration’s 4-year initiative to develop, enact, and implement a single-payer health care system in his state. 

In reality, the Vermont plan was abandoned because of legitimate political considerations.

In many states, legislators continue filing bills to establish state single-payer systems. Because of Vermont’s failure, their path is both clearer and more difficult. Any other state considering this path will find obstacles similar to Vermont’s.

In the early 1990s, I served as a Massachusetts legislator who took a turn as the state’s leading single-payer advocate. After years of failure, I reluctantly concluded that single payer is too heavy a political lift for a state. Though the economic case is compelling, our body politic cares about more than just economics. In 2011, many observers thought that Vermont, a small and progressive state, was the ideal locale in which to try single payer. No more.

At some point, perhaps 5 to 15 years from now, as the size and scope of Medicare, Medicaid, and the ACA subsidy structure balloon far beyond today’s larger-than-life levels, our political leaders may discover the inanity of running multiple complex systems to insure different classes of Americans. If advanced by the right leaders at the right time, the logic of consolidation may become glaringly evident and launch us on a new path. If such consolidation is to occur, like it or not, I believe it will happen federally and not in the states — and no time soon.

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From the audio:

“People who like the state approach refer to how the Canadian health care system started with the adoption of universal coverage for hospital services in the province of Saskatchewan back in the 1940s, and that is the idealized model. I just am unclear, unsure, doubtful how relevant that model is in an advanced developed system like those in the United States and the fifty states at this point.”

John McDonough is a professor of public health practice and director of the Center for Executive and Continuing Professional Education at the Harvard T.H. Chan School of Public Health.

NEJM article and audio: http://www.nejm.org/doi/full/10.1056/NEJMp1501050

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Comment:

By Don McCanne, MD

Professor John McDonough, as an academic and as a legislator, has long been in the trenches with single payer. He knows what he is talking about.

The problem with using Saskatchewan as a model for reform in the United States is that Canada began with a clean slate whereas we have complex federal and state financing systems that will need to be replaced. States alone cannot do it without federal action.

Though we need federal reform, it will not happen in the immediate future since the politics are not in alignment. We need to intensify our efforts with the basics: education, coalitions, and grassroots organizing.

Until we get the politics aligned, activists should continue advocating for whatever state reforms are possible that would move us closer to health care justice. But do not let up in the least on the drumbeat for a single payer national health program – an improved Medicare that would cover everyone.

Are we seeing the end of low priced generics?

Teva Offers to Buy Mylan in $40.1B Cash-and-Stock Deal

By Linda A. Johnson, AP
ABC News, April 21, 2015

Generic drug giant Teva formally offered to buy fellow drugmaker Mylan for about $40.1 billion in cash and stock on Tuesday, despite Mylan’s cold shoulder and the certainty the proposed acquisition will bring intense scrutiny by antitrust regulators.

If Israel-based Teva Pharmaceutical Industries Ltd. succeeded, the combination would dominate the global generic drug market, be a major contender in some other specialty drug categories — and have the leverage to try to raise generic drugs prices.

After years of stability, generic medicine prices recently have risen several percent a year on average. Some have skyrocketed by up to 1,000 percent, generally when competition vanishes due to consolidation or shortages caused by manufacturing quality problems.

A tie-up wouldn’t just increase Teva’s scale, allowing it to boost profitability by cutting jobs and other costs. It would increase its leverage in negotiating drug prices with insurers and other payers, noted Les Funtleyder, health care portfolio manager at E Squared Asset Management.

“That’s going to feed into regulators’ interest,” he said.

That’s particularly true in the U.S., where seven of eight prescriptions filled are for generics and employers, insurers and government health programs encourage their use to hold down costs.

http://abcnews.go.com/Business/wireStory/teva-offers-buy-mylan-401b-cash-stock-deal-30476610

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Comment:

By Don McCanne, MD

New pharmaceutical products usually enter the market at the maximum prices that the market would bear. So it was always a relief when the patents expired and patients could obtain much less expensive generic versions of these drugs.

Now that almost 90 percent of prescriptions have generic versions available, the industry is busy trying to find ways of increasing generic drug prices, and they have been successful with prices rising as much as tenfold. One of the methods has been to gain greater control of markets through consolidation. That explains Teva’s interest in purchasing Mylan. Drug shortages, whether or not contrived, have also been a method of boosting prices. In many instances, drug prices sharply increased after the line was purchased by another firm, partly to recover capital investments, but no doubt to simply increase profits.

Is that the way markets should work? Supposedly markets should bring prices down, but today’s market innovations have been raising prices – almost intolerably so in the drug markets. The greater dependency on pharmacy benefit managers has only added a new wasteful administrative layer on top of our already overpriced drugs.

This would not be tolerated under a single payer system. Our own public purchaser of health care products and services would demand appropriate pricing – just enough profit to keep the pharmaceutical firms interested in pursuing their fair portion of our national health expenditures. But PhRMA had a front seat when the Affordable Care Act was constructed. That lobbying investment is really paying off for them now.

Obamacare check-up

Experts offer ‘report card’ on the Affordable Care Act

By Robert Speer
Chico News Review, April 23, 2015

First the good news: The Affordable Care Act, aka Obamacare, has added millions of Americans to the health insurance rolls in the past year and a half.

Now the bad news: The program is dauntingly complex, unpopular with much of the citizenry, and vulnerable to political obstructionism. That last bit is a large part of why 30 million people remain uninsured.

This was the evident consensus of a panel of three experts who offered a “report card” on the ACA to an audience in the Enloe Conference Center on Thursday (April 16). The event was moderated by Enloe CEO Mike Wiltermood.

The panelists were Amber Kemp, vice president for health care coverage for the California Hospital Association; Dr. Richard Thorp, a Paradise internist and past president of the California Medical Association; and Dr. Bill Skeen, executive director of the California chapter of Physicians for a National Health Program (PNHP). Each gave a PowerPoint presentation.

Kemp’s was a statistics-heavy overview of the ACA’s implementation. It showed that, in the 13 states and District of Columbia that embraced the ACA by expanding Medicaid and setting up their own health insurance exchanges, the program is working reasonably well in qualifying more people for Medicaid or subsidized insurance purchased on the exchanges.

For political reasons, the governors of 37 states, most of them Republican, chose not to set up exchanges, forcing residents to use the federal exchange instead. They also refused to expand Medicaid, even though the federal government would have paid nearly all of the cost. Many poor people in those states continue to go without coverage.

California, which got on the ACA bandwagon early, has been especially successful, Kemp said. Now all but 3 million to 4 million Californians have health insurance, and half of them are undocumented foreign residents ineligible for benefits (a bill now in the state Legislature would end that prohibition). Nearly 2 million people have purchased subsidized private insurance through the state’s health exchange, Covered California, while 12 million Californians—nearly one-third of the population—now receive Medi-Cal.

The ACA is characterized by uncertainty, however. There are many reasons for that, Kemp noted. For example, the U.S. Supreme Court has yet to rule on King v. Burwell, a lawsuit that, if upheld, would prohibit subsidies in the 37 states using the federal exchange, causing some 5 million people to lose their insurance and effectively creating a second, pricier health insurance system for residents of those states.

Approval of King v. Burwell also would reverberate in states with their own exchanges, inasmuch as most of their insurance companies also operate in states served by the federal exchange.

The ACA is having a huge impact on physicians as well as patients, Thorp told the audience.

It’s the largest insurance expansion since Medicare was approved in 1965, he said, and is flooding doctors’ offices with new patients. But having an insurance card is meaningless unless a person can find a provider, and today there is a grave shortage of providers, especially in rural areas.

These days, young doctors tend to have spouses who are themselves professionals, and finding jobs for both of them in a small town can be difficult, if not impossible. Also, Medi-Cal doesn’t pay sustainable amounts, and some of the Covered California plans pay less than Medicare, Thorp said, so some doctors aren’t enrolling on the exchange.

On the positive side, he said, the ACA encourages innovative ways of engaging with physicians (texting, Skype, etc.), is pushing providers to develop smooth methods of transferring patients’ electronic medical records, and is fostering a move away from fee-for-service care toward outcome-based payments.

“The Affordable Care Act is not going away,” Thorp insisted. “Doctors and hospitals are adjusting to it, and patients are becoming more knowledgeable” and skillful at navigating the health care system as they learn to use the online services provided by Covered California.

From Skeen’s perspective, as one of the 20,000 members of PNHP, the country has taken the wrong path on health care.

In 2009, when Congress and the president set about drafting health insurance legislation, they had a choice. They could have expanded Medicare, a proven system that is a model of simplicity and effectiveness, to cover everyone, Skeen said, or they could develop a program based on the existing private-insurance model.

They chose the latter, and the result was the ACA.

The problem is that private insurance is profit-driven and primarily serves shareholders, not patients. Companies can increase their profits in only two ways—by increasing costs or cutting services. Neither is good for patients.

The ACA has placed a limit on profits, and more people are covered, all of which is good, Skeen said. “But coverage is not the same as access, and access is not the same as care.”

Besides, Covered California insurance isn’t cheap, Skeen said. He personally has a neighbor who had major surgery, and her deductible, copays and other costs forced her to declare bankruptcy. In his own case, Skeen added, he and his spouse pay more than $27,000 annually for health care, just for the two of them.

Yes, taxes would have to go up to finance an expanded Medicare, but individuals would pay less than they’re paying now for health insurance, and they would enjoy a service that would make life much easier for patients, doctors and hospital administrators alike.

The 50th anniversary of the signing of the bill creating Medicare is coming up, on July 30. It will be a good time to reflect on the differences between the two approaches, Skeen suggested, adding, “There are those of us who still dare to dream.”

https://www.newsreview.com/chico/obamacare-check-up/content?oid=16924081

Why are the elderly reluctant to support health care for all?

Obamacare, Hands Off My Medicare

By Thomas B. Edsall
The New York Times, April 22, 2015

A number of factors underpin the anti-redistributionist shift in public opinion that I wrote about last week.

First, and perhaps most important, is the emergence of significant resistance to downward redistribution among the elderly, a major voting bloc.

The views of older voters deserve scrutiny. They “worry that redistribution will come at their expense, in particular via cuts to Medicare,” Vivekinan Ashok, a Ph.D. candidate in political science at Yale; Ilyana Kuziemko, a professor of economics at Princeton; and Ebonya Washington, a professor of economics at Yale, write in a March 2015 Brookings Institution essay, “Support for Redistribution in an Age of Rising Inequality”— an essay my Times colleague Neil Irwin also discussed in a recent column that asked why Americans don’t want to soak the rich.

In the end, Ashok, Kuziemko and Washington conclude that “the elderly have grown increasingly opposed to government provision of health insurance and that controlling for this tendency explains roughly half of their declining relative support of redistribution.”

What the Brookings essay neglects to explore are the material circumstances of over-65 voters that might affect their views on redistribution. Over a third of retirees depend on Social Security for 90 percent or more of their annual income, according to the Social Security Administration. In the zero-sum competition for federal dollars, the cost of major spending programs like the Affordable Care Act has to be made up by spending cuts elsewhere.

The Obama administration has reported that the Affordable Care Act will be financed in part by $716 billion in Medicare cuts over 10 years. Somewhat improbably, the administration also contends that cuts of this magnitude will not reduce services to Medicare beneficiaries.

The decline in support among the elderly in the United States for redistributive social spending stands in contrast to Britain, Germany, Sweden and Australia where Ashok, Kuziemko and Washington found that older people were more supportive of redistribution than those of working age. In most European countries, health care is guaranteed regardless of age, while in the United States, before the enactment of the Affordable Care Act in 2010, only the elderly were guaranteed health coverage through Medicare.

This lends support to the authors’ conclusion that “seniors, a group unique in having guaranteed health insurance during our sample period, may increasingly feel that expansions of redistributive programs could come at their expense.”

Further increasing anxiety among the aged in the United States is the shift from defined benefit pensions, which guarantee payments, to defined contribution pensions, which do not.

“Our best assessment is that retirees are falling short and will fall increasingly short over time,” Alicia H. Munnell, Matthew S. Rutledge and Anthony Webb, researchers at Boston College’s Center for Retirement Research, wrote in November 2014.

“The new demographic transition is a longevity transition: how will individuals and societies respond to mortality decline when almost all of the decline will occur late in life?” Karen N. Eggleston, director of the Stanford Asia Health Policy Program, and Victor R. Fuchs, professor emeritus of economics at Stanford write in a 2012 study. The combination of longer lives and unreliable pension benefits increases retirees’ dependence “on transfers from the working population for living expenses, including large consumption of medical care,” Eggleston and Fuchs note.

In his new book, “The Business of America Is Lobbying,” Lee Drutman, a senior fellow at the New America Foundation, provides insight into a crucial element of this power shift.

Beginning in the early 1970s, just as support for redistribution began to decline, “corporate America began to devote attention and meaningful resources to politics,” Drutman writes. “The 40-year trend has overwhelmingly moved in one direction: growth. Corporate lobbying expenditures now dwarf the comparable investments of unions” and public interest or citizen groups.

From 1998 to 2012, the ratio of corporate/trade association lobbying spending to union/public interest group spending went from 22 to one to 34 to one, Drutman found.

In a November 2014 article “The Ideological Asymmetry of the American Party System,” Yphtach Lelkes of the University of Amsterdam, and Paul Sniderman of Stanford, both political scientists, develop an intriguing argument on how Republicans have mobilized public opposition to Democratic social policies that initially carried strong popular support.

The conservative strategy, they write, is to portray “social welfare policies as benefiting particular interest groups rather than society as a whole.” The more the electorate sees a policy or program as “particularistic” — as opposed to universalist — the less backing the public will give the program.

On a broader scale, the political scientists Jacob Hacker and Paul Pierson, in their chapter of the 2013 book “Representation: Elections and Beyond,” have sought to understand the logic of working-class white “support for the G.O.P. in an era of runaway inequality.”

Hacker and Pierson argue that not only has business mobilized for over four decades now, but so, too, have conservative foundations, think tanks and the religious right.

“There was a common theme linking these disparate trends: all of them worked to diminish the presence of organized voices addressing the economic concerns of ordinary Americans in Washington,” Hacker and Pierson write. “G.O.P. electoral inroads among less affluent voters have occurred alongside declining public confidence in government and growing perceptions that politicians are excessively responsive to ‘special interests.’ ”

The authors add, “In this context, calls for limited government and self-reliance receive greater hearing, especially when there are few contrary organizational signals pushing voters the other way.”

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Comment:

By Don McCanne, MD

A half century ago, when the nation seemed ready to ensure health care for everyone, it was decided instead to establish programs for the two groups with the greatest needs: Medicare for retirees and Medicaid for the poor. It was intended that Medicare eventually would be expanded to include everyone.

As it turns out, these two programs have such strong political support that they not only survived the half century, they will be perpetuated indefinitely as a result of the decision to enact the the policies contained in the Affordable Care Act rather than to expand Medicare, as originally intended.

Thomas Edsall provides us with a background of understanding why our seniors so passionately support Medicare while demanding that we keep the government out of their Medicare. No matter how progressive a person’s views are, there is always an element of self-interest, and quite appropriately so. Edsall, in expanding on his anti-redistributionist article of last week, explains that seniors are concerned that further redistribution to others risks reduction of redistribution to themselves, though they might not think of it in those terms. It is this fear that has contributed to declining support by our seniors for health care for all.

Of course, conservatives, through massive lobbying efforts, have leveraged this view to convert it into policy. Those who would suffer the most through a reduction in redistribution have been particularly tenacious in clinging to the idea that greater benefits for others would reduce benefits for themselves. You know that’s true because it’s on Fox News.

In reality, a well designed system of redistribution would improve benefits for everyone. The cost would be borne disproportionately by those who are already spending massively to thwart programs of social justice.

Thomas Piketty and others have shown us that disproportionate taxation (progressive taxes) is precisely what we need, and the concentration of income and wealth at the top is so great that the lifestyles of the rich would not be impaired in the least. But just try to tell that to the elderly lady carrying the picket sign stating, “KEEP GOVERNMENT HANDS OFF MY MEDICARE!”

Medicare for all would cut health costs

By Johnathon Ross, M.D.
The Blade (Toledo, Ohio), Letters, April 21, 2015

Your series on preposterously variable health-care prices usefully pointed out one of the key symptoms of our sick health-care system (“The cost of care,” April 5, April 12). Sadly, making prices transparent will not help to control costs, because there never will be a normal market for most health-care services.

For most goods and services, higher prices control cost and are somewhat markers of quality. If the price is too high, you just walk away. In health care, the most expensive services are often the least optional and most needed. If you walk away, you may die.

Only occasionally do patients have the time or knowledge to shop for services. And services are ordered by clinicians, not patients.

Uncertainty and danger create an abnormal market. Expensive tests often help to sort dangerous from innocent symptoms.

Most economists agree that for health care, there is a market failure. How can skyrocketing costs be controlled?

When markets fail, regulation of prices is the second best solution. Medicare uses regulated prices to control costs more successfully than the rest of the health-care profession.

Multiple studies confirm that the simplicity of an improved Medicare-for-all system could save about $400 billion and would save about 30,000 lives yearly. These savings would cover all uninsured people and improve benefits for the rest of us.

Systems similar to Medicare have been used worldwide to control costs while providing good access to services, for about half of what we spend.

It will be a huge political fight to get profiteering middlemen, such as insurers, out of the way. But no change comes without a demand. We must demand it of our leaders and lawmakers.

Just knowing the prices will never work. An improved and expanded Medicare for all would save lives and save money. It is the right thing to do.

Dr. Johnathon Ross is past president of Physicians for a National Health Program. He resides in Ottawa Hills.

http://www.toledoblade.com/Letters-to-the-Editor/2015/04/21/Medicare-for-all-would-cut-health-costs.html

Doctor Deb’s New Prescription

By Hamilton E. Davis
A Vermont Journal, March 25, 2015

One of the most important principles underpinning health care reform in Vermont is the proposition that health care financing should be separated from employment. If you lose your job, or if your employer doesn’t pay for health insurance, that shouldn’t leave you without access to health care.

That principle was one of the victims of Governor Peter Shumlin’s decision last December to scrap the financing portion of his single payer reform initiative. The cost of shifting to public financing of the entire system was estimated at north of $2 billion, and Shumlin and his staff decided it couldn’t be done.

At the beginning of the legislative session in January, Shumlin built back a small piece of financing into his budget proposal, but that plan involved only getting more money for Medicaid as a way to reduce the cost of health care somewhat. It did nothing to move health care financing away from its employment base. One of the things the Shumlin planners never did was to take seriously the idea of moving toward public financing in a series of steps, rather than one big leap.

The idea of doing nothing structural on the finance side was unacceptable, however, to some of the advocates of reform. One of those was Dr. Deb Richter, a Montpelier-based physician, who has been one of the leading proponents of single payer health care reform for two decades. When Shumlin signed the health care bill in 2011, he pointed specifically to Richter as the leading player in the reform effort.

A few weeks ago, Richter proposed a new approach to the financing side of health care reform—a single payer system for primary care in Vermont. Richter called for the state to finance just primary care for now at a cost of roughly $160 million, to be paid for by a payroll tax, and possibly other revenue sources. If the whole cost were to be borne by the payroll tax, the rate would be about 1.2 percent.

Those numbers are not insignificant, but they are far below the figures bruited during the first four years of reform for a fully elaborated single payer system. The payroll tax estimates during that period ranged from 8 percent to 14 percent; that combined with the $2 billion plus total tab presented an insuperable barrier to action in the near term.

Richter’s plan has been sponsored in the House by Rep. Leigh Dakin, a Democrat from Chester, and in the Senate by Sen. Jeanette White, a Windham County Democrat; the measure has several co-sponsors in both chambers. The House bill has sponsors from Republican, Democratic and Progressive members.

Richter envisions the plan would work like this:

Every Vermonter would be eligible for primary medical care, paid for by the state. There would be no premiums, co-pays, or deductibles. Primary care doctors as well as nurse practitioners would be paid a lump sum per month for each resident in their panels. Richter used a figure of $500 per person per year, although she says the figure could almost certainly be lower. Vermonters enrolled in Medicare would get most of their costs paid by the federal program, but Vermont would pick up any co-pays or deductibles.

People could go to any primary care provider they chose, which Richter considers to be an incentive to high quality. “Patients can vote with their feet, if they think they are not getting what they need from a particular doctor,” she says.

Richter argues that public financing for primary care would confer a host of benefits to residents of the state as well as to the health care system itself. Primary care providers treat all the health care needs of a person, in contrast to specialists, who focus on a specific disease, like cancer, or a specific organ, like the liver or the eyes.

By making sure that residents can get quick access to primary care when they need it, Richter says, we can reduce the amount of specialty care needed in emergency rooms or when the medical problem has become more serious. She also points out that it is cheap: primary care uses just five percent of the total per capita cost for a given patient.

Moreover, financing primary care would provide a necessary boost to primary care providers, who usually get paid less, often far less, than specialists. The entire primary care network, in Vermont and in the country for that matter, is badly stressed by the increasing demands of technology and administration, she says.

“The leading reason is that they’re not given enough time with patients,” Richter says. “Primary care, above all, takes time with patients—not so much with computers, algorithms, questionaires…the actual time spent with patients has been dangerously eroded.”

It is important to note that the Richter proposal would advance a second critical principle of health care reform, the notion that in order to establish a financially sustainable delivery system we have to move away from fee-for-service medicine, which is a powerful incentive for overuse. The Richter scheme would represent the first movement toward lump sum per person payment for health in Vermont, or anywhere else in the country, for that matter.

Richter and her sponsors do not expect any final action on the primary care legislation in the current session. The whole idea needs considerable study, and to that end the health care bill now working its way through the House contains an appropriation of up to $200,000 for the development work. The Shumlin administration has not endorsed Richter’s proposal, but they are giving it serious consideration.

Shumlin himself has told Richter he is open to the idea, and his senior staff, including Lawrence Miller and Robin Lunge, are beginning to vet the numbers. There is no shortage of difficult issues to resolve, especially in getting such a scheme to mesh with federal requirements. But when asked whether the administration is taking the Richter proposal seriously, Miller replied:

“Absolutely.”

http://www.avermontjournal.com/blog-current/

Lawmakers should authorize cost study of universal primary care in Vermont

By Deb Richter, M.D.

PNHP note: The following is the written testimony of Dr. Deb Richter presented to a committee of the Vermont General Assembly on April 16, 2015, regarding selected sections of H. 481, “An act relating to supporting health care initiatives and establishing payroll and sugar-sweetened beverage taxes.”

I am here to testify about Sections 17-21 Universal Primary Care of H. 481.

These sections amount to a request to do a study of the cost and impact of publicly funding primary care for all Vermonters.

This may seem like just another study like all the others that will just sit on a shelf and never amount to anything.

However, this study amounts to a calculation that is needed to determine how much it would cost to provide publicly funded primary care to all Vermonters.

Why primary care?

  • Primary care is the most important sector of health care. It is the backbone of a health care system, without which the system will fail patients. It is the sector of care that all of us need whether we are sick or healthy.
  • One of the main reasons systems throughout the world have half the per capita costs that we do is due to their strong primary care infrastructure.
  • We do not need a study to prove that primary care lowers costs and improves population health. That is well documented and not in question. Primary care has been shown to lower overall health care costs and it is the only sector shown to improve population health. (I cited studies which back up these claims in my presentation in January.)
  • It is essential that all Vermonters have unfettered access to primary care.

The proposal is to publicly finance the private insurance and out of pocket portion of primary care. A rough estimate for this is about $160 million. This is a back of the napkin calculation and clearly we can’t move forward without a more accurate assessment as to exactly how much would be needed. $160 million is about 3 percent of what will be spent on health care in Vermont this year. The offset in reductions in private insurance premiums would likely around 5 percent. But again we need an accurate assessment.

With this everyone has access to primary care.

Another major reason to publicly fund primary care is to serve as a recruiting and retention mechanism for primary care practitioners.

The study will look at changing the way we pay primary care practitioners from a fee for service mechanism to a monthly capitated payment.

Primary care in Vermont and in the rest of this country is in trouble. We are facing a growing need for primary care yet the workforce is shrinking.

Primary care has become a less attractive choice for medical students and our workforce is aging.

In Vermont in the year 2000, 9 percent of all primary care physicians were over age 60. By 2010, 21 percent were over age 60. For General internal medicine physicians, 26 percent were over age 60 in 2010. 

Estimates are that by 2030 Vermont will need 119 primary care practitioners. 

This is a nationwide problem and we are competing with other states for candidates, so it is essential we make primary care in Vermont a more attractive choice.

The study is estimated to cost about $200,000. That is an infinitesimally small fraction (.0004) of what we will spend on health care this year. If it leads to serious consideration of the primary care proposal it will have been worth every penny.

I would encourage the committee to separate out the analysis of the cost of universal primary care from the assessment of the cost of the publicly financing the entire health care system (the whole thing) as there is a need to:

  • Do it first because it can be done fast. The larger study of how to fund the entire health care system can be done over time.
  • Second reason is we need it to be done by October to get it ready for the next legislative session.

http://legislature.vermont.gov/assets/Documents/2016/WorkGroups/Senate%20Health%20and%20Welfare/Bills/H.481/H.481~Dr.%20Deb%20Richter~Written%20Comments~4-16-2015.pdf

Price gouging by drug manufacturers

State questions rise in overdose drug price

By Brian MacQuarrie
The Boston Globe, April 20, 2015

Attorney General Maura Healey is demanding that companies selling naloxone in Massachusetts explain why the cost of the drug, which is used to reverse heroin overdoses, has skyrocketed since former governor Deval Patrick declared a public health emergency a year ago.

The drug, often marketed under the brand name Narcan, has become a critical tool for emergency workers who use it to revive overdose victims. Without Narcan, thousands of overdoses during the past few years would have resulted in deaths, authorities have said.

To help ensure that distributors are not taking advantage of a sudden surge in demand, Healey’s office last week asked the distributors to provide detailed records of all naloxone sales to public entities in Massachusetts since April 1, 2014, less than a week after Patrick’s declaration made the drug available to all first responders.

Since then, price increases “have strained access to this life-saving medication at exactly the moment when it is most needed,” the companies were told in certified letters. “Our office has heard regularly from local law enforcement and public health workers worried about their ability to maintain supplies.”

Healey’s office sent certified letters requesting answers by April 30 to Moore Medical of Farmington, Conn.; Bound Tree Medical of Dublin, Ohio; McKesson Corp. of San Francisco; and Southeastern Emergency Equipment of Wake Forest, N.C.

Kristin Hunter, a spokeswoman for McKesson Corp., told the Globe that the company “does not set wholesale prices or the retail drug prices paid by consumers or health plans.”

Those prices often are set by the manufacturer. Staff from Healey’s office identified Amphastar Pharmaceuticals of Rancho Cucamonga, Calif., as the producer of much of the naloxone used in Massachusetts, and said they have been in discussions with the company about pricing since February.

Amphastar officials did not return repeated phone calls from the Globe requesting comment.

http://www.bostonglobe.com/metro/2015/04/19/healey-investigates-rising-price-for-drug-that-reverses-overdoses/Wav71qeW4gbMAwb9bcx2tI/story.html

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Comment:

By Don McCanne, MD

Drug manufacturers recently have been engaged in outrageous pricing practices for essential drugs that they produce – the hepatitis C drugs being an egregious example.

Narcan – a crucial life saving drug that reverses narcotic overdoses – now has much wider distribution since it has become available to first responders. The manufacturer – Amphastar Pharmaceuticals – in what has to be more than a mere coincidence, chose this time to sharply increase the price of this drug.

When the market is dysfunctional, it is the responsibility of government to intervene. The United States has shirked its responsibility. We need to revise our approach.

A single payer national health program functions as a monopsony – a single purchaser of products and services. In private markets, monopsonistic pricing can be as evil as monopolistic pricing like the example of Narcan. The difference with a government monopsony is that it gets pricing right – an adequate price to be sure that products and services remain available, yet at a price that does not gouge the taxpayers who fund the system.

Do Americans believe that health care is a right?

Has Obamacare Turned Voters Against Sharing the Wealth?

By Thomas B. Edsall
The New York Times, April 15, 2015

With the advent of the Affordable Care Act, the share of Americans convinced that health care is a right shrank from a majority to a minority.

This shift in public opinion is a major victory for the Republican Party. It is part of a larger trend: a steady decline in support for redistributive government policies. Emmanuel Saez, an economics professor at Berkeley and one of the nation’s premier experts on inequality, is a co-author of a study that confirms this trend, which has been developing over the last four decades. A separate study, “The Structure of Inequality and Americans’ Attitudes Toward Redistribution,” found that as inequality increases, so does ideological conservatism in the electorate.

The erosion of the belief in health care as a government-protected right is perhaps the most dramatic reflection of these trends. In 2006, by a margin of more than two to one, 69-28, those surveyed by Gallup said that the federal government should guarantee health care coverage for all citizens of the United States. By late 2014, however, Gallup found that this percentage had fallen 24 points to 45 percent, while the percentage of respondents who said health care is not a federal responsibility nearly doubled to 52 percent.

“The Structure of Inequality and Americans’ Attitudes Toward Redistribution,” suggests that Democratic programs providing tax-financed benefits to the poor are facing growing hostility. The author of the paper, Matthew Luttig, a Ph.D. candidate in political science at the University of Minnesota, found that while “numerous political theorists suggest that rising inequality and the shift in the distribution of income to those at the top should lead to increasing support for liberal policies,” in practice, “rising inequality in the United States has largely promoted ideological conservatism.”

I asked two experts, Jacob Hacker, a political scientist at Yale, and Robert Frank, an economist at Cornell, if Luttig’s conclusions are consistent with their own research, and both said he is on target.

“The General Social Survey shows there has been a slight decrease in stated support for redistribution in the US since the 1970s, even among those who self-identify as having below-average income,” according to Saez and his three co-authors, Ilyana Kuziemko, a professor at Columbia Business School, Michael I. Norton, a professor at Harvard Business School, and Stefanie Stantcheva, a junior fellow at Harvard.

Even worse for Democrats, the Saez paper found that “information about inequality also makes respondents trust government less,” decreasing “by nearly twenty percent the share of respondents who ‘trust government’ most of the time.”

The findings of the Saez group are consistent with Luttig’s. Taken together, they suggest that even if Democrats win the presidency and the Senate in 2016, largely on the basis of favorable demographic trends, the party will confront serious hurdles if it attempts to deliver material support to working men and women and the very poor. Redistribution is in trouble, and that is likely to tie American politics in knots for many years to come.

Matthew Luttig:  The Structure of Inequality and Americans’ Attitudes Toward Redistribution

http://poq.oxfordjournals.org/content/early/2013/09/11/poq.nft025.abstract

Ilyana Kuziemko, Michael I. Norton, Emmanuel Saez, and Stefanie Stantcheva:  How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments

https://www0.gsb.columbia.edu/faculty/ikuziemko/papers/kuziemko-norton-saez-stantchevaNBER13.pdf

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Comment:

By Don McCanne, MD

Thomas Edsall states that, as income and wealth inequality have expanded, the number of Americans who believe that health care is a right has declined from a majority to a minority. Of particular concern is Matthew Luttig’s finding, supported by others, that “rising inequality in the United States has largely promoted ideological conservatism.”

What mechanism might explain this? Gilens and Page have shown that the very wealthy have control over the political process. Part of that control is through the media and other forms of public communication.

Redistribution (or transfer) refers to the process of collecting taxes, largely progressive, and distributing those funds based on public need. Some public services benefit everyone, but other services disproportionately benefit those with basic needs who do not otherwise have the funds to pay for them.

Those who benefit from tax reduction have been successful in creating the meme that government redistribution through tax and spending policies is is an inappropriate role of government, a concept that, ironically, is especially prevalent amongst the poor and relatively uneducated.

Quoting from Kuziemko, Saez, et al (link above):

“About 5,000 respondents were randomized into treatments providing interactive information on U.S. income inequality, the link between top income tax rates and economic growth, and the estate tax. We find that the informational treatment has very large effects on whether respondents view inequality as an important problem. By contrast, we find quantitatively small effects of the treatment on views about policy and redistribution: support for taxing the rich increases slightly, support for transfers to the poor does not, especially among those with lower incomes and education.”

Further, they state:

“An exception is the estate tax — we find that informing respondents that it affects only the very richest families has an extremely large positive effect on estate tax support, even increasing respondents’ willingness to write to their U.S. senator about the issue.”

In addition:

“We also find that the treatment substantially decreases trust in government, potentially mitigating respondents’ willingness to translate concerns about inequality into government action.”

So what can we make of this? 

The nation strongly supports Social Security and Medicare – both very important programs that involve redistribution – yet the topic of redistribution is rarely mentioned in discussions of these programs, with the exception of those who would reduce redistribution by privatizing these programs.

Although many have concerns about redistribution of income, that does not seem to carry over to their views on redistribution of wealth. When people understand the degree of wealth inequality and the selective application of estate taxes, they become even more supportive of taxing those large estates.

Just as people believe the meme that “the government can’t do anything right,” even though they truly support most specific government programs, people seem to be swayed by the newly implanted meme that redistribution is a function of a government that cannot be trusted, even though they support specific programs involving redistribution. This seems to represent the phenomenon wherein empty rhetoric threatens to spill over into policy positions.

Conservatives and libertarians do support catastrophic insurance plans – clearly a private sector redistribution from those who do not experience specific losses to those who do. So the opposition is not to the concept of redistribution itself, but rather it is an ideological opposition to the government role in redistribution.

A component of this opposition is the objection to being forced to participate in a redistribution pool such as health insurance coverage. Some individuals would prefer to accept the risk of personal financial ruin even if their losses are passed onto their fellow Americans. It is the latter reason that establishes the legitimacy of the government in requiring participation of all – preventing individuals from electing to be free riders at a cost to the rest of us. Nobody supports policies requiring themselves to pay more to cover those who shirk their responsibilities to pay their own share (ideally through equitable taxes).

So do Americans believe that health care is a right? The answer is muddled by rhetorical memes, but, in general, they actually do believe that the financing of health care is a collective responsibility.