Left-Leaning Economists Question Cost of Bernie Sanders’s Plans
Corporations Killed Medicine. Here's How to Take It Back
Saturday, 13 February 2016 00:00 By Fran Quigley, Foreign Policy in Focus | Report
Along the path toward the creation of a global capitalist system, some of the most significant steps were taken by the English enclosure movement.
Between the 15th to 19th centuries, the rich and the powerful fenced off commonly held land and transformed it into private property. Land switched from a source of subsistence to a source of profit, and small farmers were relegated to wage laborers. In Das Kapital, Marx described the process by coining the term land-grabbing. To British historian E.P. Thompson, it was "a plain enough case of class robbery."
More recently, a similar enclosure movement has taken place. This time, the fenced-off commodity is life-saving medicine. Playing the role of modern-day lords of the manor are pharmaceutical corporations, which have taken a good that was once considered off-limits for private profiteering and turned it into an expensive commodity. Instead of displacing small landholders, this enclosure movement causes suffering and death: Billions of people across the globe go without essential medicines, and 10 million die each year as a result.
Many people curse the for-profit medicine industry. But few know that the enclosure erected around affordable medicines is both relatively new and artificially imposed. For nearly all of human history, attempting to corner the markets on affordable medicines has been considered both immoral and illegal.
It's time now to reclaim this commons, and reestablish medicines as a public good.
Medicines as a Public Good
Most of us define public goods broadly. We use the term to refer to benefits like law enforcement, street lights, and mass transit, which are collectively provided and deliver shared value to all. Economists narrow down that definition somewhat, saying that public goods are non-rivalrous and non-excludable in their consumption.
Non-rivalrous means that any one person can benefit from a good without reducing others' opportunity to benefit as well. My eating an apple prevents you from consuming it, so that's a rivalrous good. But I can watch the same TV show as you without lessening your opportunity to enjoy it as well - that's non-rivalrous.
Non-excludable means what it sounds like: A person cannot be prevented from consuming the good in question. Clean air is a good that can be enjoyed by all without the possibility of denying access to those who don't register or pay a fee. But access to a private swimming pool is an excludable good. The classic example of a non-rivalrous, non-excludable public good is a lighthouse: One ship benefitting from its warning doesn't subtract from any other ships' chances of enjoying a similar benefit, and there's no practical way of limiting the lighthouse's warnings to a select few.
As the English enclosure movement proved, exclusivity can be artificially created by literally or figuratively walling off common access. Exclusivity can be undone as well: The modern open-source software movement takes a good that some have tried to make exclusive - software code - and freely shares it, leading to a plethora of creative developments.
In terms of medicines, an individual pill is rivalrous, but the details of the formula for creating that pill are not. Knowledge is a classic public good, in that it can be shared widely without penalty to the original owner. As Thomas Jefferson said, "He who receives an idea from me, receives instruction himself without lessening me; as he who lights his taper at mine, receives light without darkening me."
The public health implications of access to medicines generate another core quality of public goods: positive externalities.
One person's consumption of an essential medicine provides clear benefits beyond the direct consumer. Vaccines, for example, prevent the recipient both from getting ill and from spreading the disease to others. If a society vaccinates widely enough, the chain of disease transmission is broken, leading to the quintessential public good of mass immunity. Global distribution of the smallpox vaccine, for example, has led to the eradication of a disease that once infected 50 million people a year.
Obama's budget plan would allow greater scrutiny of high drug prices
Buried deep within President Obama's $4-trillion budget plan are a couple of healthcare proposals that could change everything for U.S. consumers.
The fact that the drug industry wasted no time in dismissing the ideas — and that their Republican friends in Congress said they wouldn't even look at them — should tell you something big was afoot.
The Department of Health and Human Services broke out Obama's healthcare proposals in a 173-page document. You have to wade all the way to page 75 to find what may be the single most important policy idea.
It's labeled "Establish Transparency and Reporting Requirements in Pharmaceutical Drug Pricing," which is a bureaucratic way of saying that drug companies should have to justify their ridiculously high prices.
"Currently, limited public information exists on how pharmaceutical manufacturers price drugs, and no law requires manufacturers to report on the costs driving their pricing decisions," HHS says.
"To bring greater transparency to prescription drug pricing, this proposal requires pharmaceutical manufacturers to publicly disclose production costs, including research and development investments and discounts to various payers for specific high-cost drugs that the secretary identifies through regulation based on the public's interest," it goes on to say.
That means exactly what it looks like. Drug companies would have to say how much they spend to develop, manufacture, distribute and market certain prescription meds so that health authorities could make sure that people aren't being ripped off.
While administration officials have been floating trial balloons for months about the need for greater drug-price transparency, Obama gave the idea significantly more political heft by including it in his official budget plan.
You don't have to look farther than recent headlines to understand why such a measure is warranted. Gilead Sciences raised eyebrows when it priced its hepatitis C drugs at about $1,000 a pill.
Former Turing Pharmaceuticals Chief Executive Martin Shkreli bought the rights to a 62-year-old drug used to treat infections in AIDS patients and others and raised the price 5,000%.
And as I reported recently the price of a drug commonly used since the 1970s to treat swimmer's ear in kids has soared by about 3,000% after licensing rights changed hands multiple times through a series of mergers and acquisitions.
When I asked the current manufacturer of Cortisporin-TC Otic Suspension, Endo International, why a drug that once cost a few bucks now goes for $200, I was told that "Endo has taken price increases in line with market conditions and competitor product pricing."
In other words, Cortisporin costs a small fortune because drug companies can get away with charging that much.
The Obama administration is proposing that Endo and others come up with a better explanation than that — or, presumably, face the possibility of a regulatory crackdown.
Stephen J. Ubl, head of Pharmaceutical Research and Manufacturers of America, a.k.a. PhRMA, a.k.a. the lobbying group that showered $18 million on lawmakers last year, was not amused.
He called the price-disclosure requirement "harmful and misguided," and said it would "hurt patients."
"Mandating public disclosure of proprietary information would undermine our competitive market-based system and incentives for innovation," Ubl insisted.
Really?
"It's hard to see how that would be the case," said Trevor Gallen, a health economist at Purdue University. "It certainly would undermine their bargaining power. But from a market perspective, more information is good."
On the other hand, Gallen said he was wary of a government agency "picking winners and losers" by applying increased scrutiny to pricing of specific drugs.
"Why only have disclosure for drugs in 'the public's interest'?" he asked. "Why not for all drugs? Anything that allows for the discretion of political figures is fairly suspect."
It's unclear from the budget proposal what government officials would do with this pricing information. Would regulators set limits on how much could be charged to consumers? Would they settle for shaming drugmakers by publicizing the data?
Joel Hay, a health economist at USC, said setting limits on prescription-drug prices could backfire for consumers. He said drugs are more widely available when manufacturers can cut deals at different prices with different insurance systems.
Then maybe what's needed is a leveling of the playing field. Right now, Medicare is prohibited by law from negotiating prices with drugmakers. If pharmaceutical companies' pricing is to remain a closely guarded secret, at the very least we should allow our largest public insurance system to flex its market muscle on behalf of patients.
Obama is proposing that as well in his budget. The Health and Human Services secretary would be empowered "to directly negotiate prices with manufacturers for high-cost drugs ... covered under Part D," Medicare's prescription-drug program.
Drugmakers would be able to access Medicare's 52 million beneficiaries only if they agree to haggle and to "supply HHS with all cost and clinical data, as well as other information, necessary to come to an agreement on price."
Private insurers almost certainly would demand equal treatment in their own negotiations with drug companies, thus placing even more downward pressure on prices.
PhRMA's Ubl hates this idea too.
He said allowing Medicare to negotiate drug prices would "fundamentally alter the structure of this successful program ... jeopardizing access, driving up premiums and reducing choice."
The drug industry clearly likes things the way they are, operating in the shadows and to a great extent being unchallenged on pricing.
It doesn't seem a stretch to think that Obama is doing a little grandstanding in his last-ever budget plan.
This much is clear, though: U.S. drug prices are out of control and something needs to be done.
Also, any time business interests say greater oversight would harm consumers, and any time Republicans say there's no need to even consider additional regulation of an industry, they're almost always acting out of self-interest, not the best interests of society.
And that's just sick.
Jayne O'Donnell, USA TODAY
In 2010, the non-partisan Rand Corporation estimated 27 million people would have exchange policies this year and the Congressional Budget Office at that time was estimating 21 million for 2016. CBO even said last June that 20 million people would have plans purchased on the exchanges this year. Just 12.7 million signed up for plans, however, by the end of open enrollment Jan. 31 and about 1 million people are expected to drop their plans — or be dropped when they don't pay their premiums.
"That’s not the only mistake CBO made but it was a really big one," says Brian Blase, a former aide to the Senate Republican Policy Committee, who is now a senior research fellow at the free-market Mercatus Center, which is funded in part by Charles and David Koch, two industrialists who have long opposed the Affordable Care Act.
Late last month, CBO revised its estimate down to an average of 13 million people a month enrolled on the exchanges this year.
Health and Human Services Secretary Sylvia Burwell last week called the recent enrollment numbers "a success" and it is on track to beat her lowered projection that 10 million people will have paid-for plans at the end of 2016.
The law has led to a drop in the uninsured rate to about 12%, which is down more than 5% since the requirement that people have health insurance took effect in early 2014, according to Gallup. Along with the nearly 13 million who bought plans on the government exchanges, it's also unclear how many millions of people are buying individual policies through insurance brokers and companies. But concerns remain and the mix of people buying plans on the exchanges.
Both supporters and critics of the law agree that the exchanges need a better balance of low and higher-income people buying insurance as insurers set their rates based on who they expect will purchase plans. If there are more unhealthy people, rates go up and lower income people tend to have more health problems. But higher-income people tend to already be insured too.
The two sides also agree the plans have proven too expensive for many people who make more than 400% of the federal poverty limit ($97,000 for a family of four), making them ineligible subsidies and tax credits to help pay for their insurance. The Centers for Medicare and Medicaid Services reported last month that just 3% of those buying plans on the federal and state exchanges earned more than this amount. The Urban Institute, a research nonprofit that does work for state and federal government as well as foundations, estimated last year that 25% of exchange customers would earn more than 400% of the poverty limit.
Reasons why supporters say enrollment is lower than the original projections include:
• The process hasn't completely recovered from the disastrous rollout of the federal Healthcare.gov website in the fall of 2013, says Matthew Buettgens, a senior research associate with the Urban Institute.
• CBO expected a lot more employers to drop their plans and send workers to the exchanges for their coverage, notes Katherine Hempstead, director of the insurance coverage team at the Robert Wood Johnson Foundation. That hasn't happened, however.
• CBO also thought more people who didn't get subsidies would still buy on the exchanges, but several million are believed to buy direct from insurers or brokers. While that affects the overall enrollment numbers for the exchanges, Hempstead says, it also means these people are still getting better plans with ACA's protections, including a prohibition against discriminating with preexisting conditions.
Critics say signups were slower than expected because having insurance may not be as important to people as the administration thought it would be, given other financial needs. And it's often cheaper to pay the penalty and pay cash for health care, insurance brokers say. That's unless people are eligible for subsidized coverage.
Young, healthy people in particular don't feel like they should have to pay for benefits the plans have to cover, such as mental health and maternity care, says Sam Gibbs, executive director of AgileHealthInsurance.com, a private insurance exchange. Nearly half of the firm's clients are in this bracket and purchased insurance plans that don't meet the ACA but will protect them in the event of a serious injury or illness. They will pay the tax penalty and still save money, Gibbs say.
Donald Kirkendall, an insurance broker in Orlando, Fla., was paying $247 a month for a Cigna plan two years ago, but after that premium increased too much, he switched to an Aetna plan that got canceled because it didn't comply with the ACA. The Humana plan he switched to just increased to $697 a month.
"Who can afford that?" he asks. "And I do this for a living."
One of the two insurers in Alaska was told late last month that it couldn't sell or renew plans any more in the state due to its precarious financial situation, but Moda Health got a reprieve last week and can now sell through 2016. Insurance broker Trish Mack, who is based in Anchorage, says she has had at least a dozen clients who weren't eligible for subsidies come in to enroll in insurance but decide to pay the penalty instead of for insurance.
CMS has already made some changes to address insurers concerns, most notably by reducing the number of special enrollment periods when people can sign up for plans. Insurers have complained they wound up with too many sick people because the administration allowed too many people to sign up during the year — and some waited until they were sick and dropped coverage later.
Christopher Condeluci, who helped draft the law as a Senate Finance Committee Republican aide and supports aspects of it, says it's a problem that "three years into the law's implementation, the market is not stabilized." Condeluci, an attorney who is now a principal in CC Law & Policy, says insurers need more flexibility to offer plans that are affordable and cover only what people really need.
No single way to reverse middle Maine’s decline — but the first step is easy
by David Farmer - BDN
Age, economics and partisan politics are creating a crisis in Maine — and rural Maine in particular.
Maine’s median age is 43.5 years, making our state the oldest in the country by that measure. We’re also behind only Florida in the percentage of the population that’s 65 or older.
Between 2010 and 2013, every county in Maine saw a more than 90 percent increase in the number of people between age 45 and 64. And Maine has one of the highest percentages of baby boomers, who account for 29 percent of the population.
Our rural areas are depopulating, even as the overall state population struggles to hold steady.
But age and population growth are only part of the story.
As The New York Times reported in November, new evidence shows that the death rate for white middle-aged Americans, ages 45 (Ouch!) to 54 is rising. White and middle-aged. That’s us!
And the rate at which we’re dying — statistically speaking — is going up.
“Something startling is happening to middle-aged white Americans. Unlike every other age group, unlike every other racial and ethnic group, unlike their counterparts in other rich countries, death rates in this group have been rising, not falling,” The New York Times reported.
The initial read on the data attributed to the rising mortality rate to things I might call depression-related: suicide, substance abuse, alcoholic liver disease and heroin and prescription drug overdoses.
When it comes to drug overdoses, it’s not just those of us in middle age who are falling victim. Additional research by The New York Times found that drug overdoses are driving up the death rate for young white people, between the ages of 25 and 35. To put that in context, this generation is the first since the Vietnam War to experience higher death rates than the generation before it, the Times reported.
Drugs alone, however, aren’t the only causes. The Commonwealth Fund took a deeper dive on the research about us pre-geezers, which creates a more nuanced explanation of growing mortality rates.
For whites ages 45 to 54, deaths from suicide and substance abuse were up. But, more importantly, the Commonwealth Fund discovered that progress against other common killers for this population — heart disease, diabetes, and respiratory illnesses — had either stopped or reversed as well.
“The early 21st century has been challenging for many middle-aged white Americans. Since 2000, their incomes have declined, fewer are employed, and fewer are married. Social commentators of different political leanings have documented these changes and ascribed many to the same underlying causes: fewer economic opportunities for those without a college degree; greater social isolation and distrust; weakened community organizations like churches or local clubs; and the splintering of society along class, geographic, and cultural lines,” the Commonwealth Fund wrote.
As reported by USA Today last week, middle-class income is shrinking faster in Maine than in all but eight other states. It grew by only 2.2 percent between 2010 and 2014. Income is gravitating toward those already on top.
The headline is ominous and ties these issues together: “States where the middle class is dying.”
The Commonwealth Fund translated this list of woes into at least a possible solution that can help to counter both the effects of substance abuse and the mortality gap for Mainers from treatable diseases.
“Given the breadth and complexity of the problem, there will be no quick or easy answer. However, one thing is clear: We should continue to work to ensure that everyone has access to affordable health insurance and health care — especially in states that have not expanded their Medicaid programs to include all low-income adults,” the Commonwealth Fund wrote.
Again, this year, Maine is considering whether to accept federal dollars to expand access to health care through MaineCare, Maine’s Medicaid program. A bipartisan group of lawmakers are making another push, but so far they appear to running up against partisan hurdles, both from Gov. Paul LePage and some of his allies in the Maine House of Representatives.
There’s no single way to address Maine’s economic and health problems. But making sure that more people can see a doctor when they need one will save lives — and it will help our economy grow and make it possible for more people to stay in rural parts of the state.
If we want to put the genie back in the bottle on early deaths, more effectively fight addiction and improve our economy, expanding Medicaid is a critical first step.
Medicare's History Belies Claim That Medicare-for-All Would Disrupt Care
by Steffie Woolhandler and David Himmelstein
Hillary Clinton and others charge that Bernie Sanders' Medicare-for-All plan would disrupt and threaten Americans' health care. But the smooth rollout of Medicare-for-Seniors in 1965 -- which many had also predicted would bring chaos -- belies that charge.
Medicare, signed into law on July 30, 1965, went live just 11 months later. By then, 18.9 million seniors had signed up, 99 percent of those eligible.
To accomplish this feat (largely without computers) the Social Security Administration mailed an information leaflet and sign-up cards preprinted with each individual's name and Social Security number (see example below) to seniors on the Social Security and railroad retirement rolls, as well as Civil Service annuitants and a million other seniors identified through IRS records.
Image: Social Security Administration History Archives
To contact hard-to-reach seniors, the federal government reached out to nursing and retirement homes, employers, unions and civic organizations offering to help people apply; organized hundreds of local information meetings; and enlisted postal workers, forest rangers and agricultural representatives to help locate residents of remote areas. The Office for Economic Opportunity hired 5,000 low-income seniors who went door-to-door in their neighborhoods.
All told, Medicare's overhead costs for the first year totaled only $120 million (equivalent to $882 million in 2015). By comparison, setting up the insurance exchanges for private coverage under Obamacare cost more than $6 billion -- about seven times as much. But even the modest figure for Medicare's start-up costs is an overstatement since it includes the cost of processing six months' worth of medical bills, not just the enrollment costs. Moreover, Medicare and Medicaid (which was passed at the same time) displaced several smaller federal health assistance programs, saving about $383 million (in 2015 dollars) on their overhead costs.
Even as it became clear that Medicare enrollment was proceeding smoothly, many saw disruption ahead. The Association of American Physicians and Surgeons (AAPS), a group to the right of the American Medical Association (AMA), threatened that 50,000 doctors would boycott Medicare. (Today, the AAPS is sounding the alarm that Medicare-for-All would take away "what remains of your doctor's liberty.") Wall Street Journal headlines warned that "Most MDs Won't Cooperate," and foresaw a "Patient Pileup," as "flocks of Medicare beneficiaries ... suddenly clog the nation's 7,200 hospitals."
None of this came to pass. Doctors continued to care for elderly patients, mostly accepted Medicare payment, and soon came to rely on Medicare as an economic pillar of their practices. Even the AMA, which had spent millions fighting Medicare's passage (including an infamous ad campaign featuring then-actor Ronald Reagan) cooperated in the program's implementation. Hospitals ran smoothly, with only a handful reporting more than minor of problems.
But Medicare did cause a major disruption, it disrupted Jim Crow hospital care.
The 1964 Civil Rights Act banned racial discrimination in facilities receiving federal funds (which included most hospitals), but enforcement was lax until Medicare.Many hospitals, particularly in the South, still refused to care for black patients at all, while others relegated them to separate entrances and shabby basement wards. Black physicians were often barred from hospital staffs, and in many locales ambulance services were separate, and distinctly unequal.
The 1964 Civil Rights Act banned racial discrimination in facilities receiving federal funds (which included most hospitals), but enforcement was lax until Medicare.Many hospitals, particularly in the South, still refused to care for black patients at all, while others relegated them to separate entrances and shabby basement wards. Black physicians were often barred from hospital staffs, and in many locales ambulance services were separate, and distinctly unequal.
With Medicare on the horizon, federal officials made it clear to hospitals that segregated hospitals would be excluded from the program. In the spring of 1966, three months before Medicare took effect, 51 percent of American hospitals were still segregated. By August of that year, 99.5 percent had desegregated.
While Medicare ended overt racial segregation in hospitals, segregation by insurance remains legal and common -- and often perpetrates de facto racial segregation. Most of New York City's prestigious academic medical centers -- and many hospitals elsewhere -- maintain separate clinic systems, and even separate wards, for Medicaid patients (the 33 million uninsured need not apply).
Medicare-for-All would give all Americans complete and equal coverage, completing the disruption of hospital segregation that Medicare began a half century ago.
Aside from that welcome disruption, Medicare-for-All would greatly simplify life for hospitals and doctors. Instead of the laborious and expensive task of billing patients and their insurers for each Band-Aid and aspirin tablet, hospitals would receive a lump-sum budget, much as we pay for a fire station. Doctors would bill one plan, using one billing form instead of the dozens of complex billing schemes -- each with its own rules and redundant documentation requirements -- that we face today.
Most important, Medicare-for-All would end many of the disruptions that our patchwork coverage system currently inflicts on patients. All Americans would, for the first time enjoy a free choice of doctor and hospital, and would never again be forced to change doctors merely because their insurance changed, or their doctor was dumped from their insurer's network. And patients' lives would no longer be disrupted by financial ruin from medical bills.
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