Getting Old Is a Crisis More and More Americans Can’t Afford
by Michelle Cottle - NYT - August 10, 2021
Growing old is an increasingly expensive privilege often requiring supports and services that, whether provided at home or in a facility, can overwhelm all but the wealthiest seniors. With Americans living longer and aging baby boomers flooding the system, the financial strain is becoming unsustainable.
Consider the demographics. In 2018, there were 52.4 million Americans age 65 or older and 6.5 million 85 or older. By 2040, those numbers will hit 80.8 million and 14.4 million, respectively. From now until 2030, an average of 10,000 baby boomers will turn 65 every day. Already, demand for care dwarfs supply. The Medicaid waiting list for home-based assistance has an average wait time of more than three years.
Next, factor in the financial reality of seniors. Nearly half of U.S. households headed by someone 55 or older have no retirement savings, according to 2016 data. Many Americans over 65 face trying to get by on Social Security income alone, which provides an average retirement benefit of $18,516 a year.
Compare this with the price of long-term care. Nationwide, the median cost of a semiprivate room in a nursing home is more than $93,000 a year, according to the 2020 Genworth Cost of Care Survey. The median yearly cost of employing a home health aide full time is around $50,000. And tens of millions of Americans are providing unpaid care to family members, costing the caregiver thousands in expenses per year on top of lost work time and wages.
The numbers don’t add up. Or rather, they keep adding up and up as families’ financial stability goes down and down.
The gloomy reality is that most seniors will require long-term care. Almost 70 percent of Americans turning 65 today are expected to need extended services and supports at some point. About 20 percent will need care for more than five years. Despite this, the majority of those age 40 and over have done no planning for their long-term care, according to a 2021 survey by the AP-NORC Center for Public Affairs Research.
Many Americans simply assume their needs will be handled by Medicare. No. Medicare handles post-acute care, generally for people who have had a hospital stay. It does not handle routine living assistance or custodial care. The bulk of that responsibility falls to Medicaid. But Medicaid is a means-tested poverty-assistance program that, with variations from state to state, requires seniors to spend down their countable assets to about $2,000 before qualifying for help.
To avoid forcing middle-class seniors to impoverish themselves, Medicaid eligibility requirements need to be loosened. Dramatically. But that would place even greater financial pressure on the already strained program and the government budgets that fund it.
In many areas of life, people commonly guard against financial catastrophe by purchasing insurance. But the market for long-term care insurance has proved problematic. Unlike with health care or auto insurance, most people don’t bother buying long-term care coverage. Those who do tend to be the most at risk for needing care. This drives up premiums and creates what experts call a death spiral: The higher premiums rise, the fewer people who can afford them and the more likely those who do buy are to file claims.
Most insurers have abandoned the long-term care business. Remaining policy options are limited. They tend to be prohibitively expensive or provide insufficient benefits — or both.
In 2012, a broad cross-section of policy experts, consumer advocates and industry representatives formed the Long-Term Care Financing Collaborative to explore more sustainable funding models. The central recommendation of the group’s final report, issued in 2016, was the creation of a universal public insurance program.
Many developed nations, including Japan and much of Western Europe’s, have established long-term care insurance programs of various shapes and sizes. For the United States, the collaborative recommended a catastrophic plan that would cover back-end costs for people who wound up needing a high level of care. Individuals would be responsible for the first year or more of costs — a sliding time scale would be based on their lifetime income — after which benefits would kick in.
People could choose to cover the upfront expenses however they see fit, including savings. Ideally, a catastrophic public plan would help revive the private market as well. With the risk of open-ended claim costs largely neutralized, insurers could provide better, more affordable policies.
The program would need to be universal — meaning mandatory. The Affordable Care Act sought to establish a voluntary long-term insurance program, the CLASS Plan. But it faced the same adverse selection problem that plagues the private market and was dissolved over fiscal viability concerns before ever getting off the ground.
Funding could come from any number of mechanisms, including a new value-added tax or a payroll tax — say, one that applied only to income above a certain level, just as the Social Security tax applies only to income below a certain level.
Variations on the catastrophic-plan idea have received support from many quarters — most recently from Representative Thomas Suozzi, a New York Democrat and former certified public accountant. Last month he introduced legislation that would establish such a program. Under his WISH Act, workers and employers would each contribute 0.3 percent of wages to a long-term-care trust fund. He is pitching the plan as a public-private partnership that would save the private market as well.
The current political landscape is not promising for this level of reform. Republican lawmakers chafe at anything that smacks of a new entitlement — not to mention a tax increase. And President Biden has vowed not to raise taxes on anyone making less than $400,000. But the long-term care crisis will only worsen, and people need to begin sounding the alarm.
The outlook may be more promising at the state level. In 2019, Washington State passed the nation’s first state-run long-term-care insurance program. The WA Cares Fund is to be funded by a 0.58 percent payroll tax on employees. Starting in 2025, eligible residents can receive benefits of $100 per day, with a lifetime cap of $36,500.
Washington’s system is not a catastrophic model. But the program is a recognition of the long-term financing crisis that the nation is facing and of the need for new solutions. Other states — and Congress — should take note.
Democrats unveil $3.5 trillion budget blueprint, without a measure to raise the debt limit.
by Katie Rogers, Heather Murphy, Charlie Savage - NYT -August 10, 2021
‘Big, Bold Change’: Democrats Unveil $3.5 Trillion Budget Blueprint
Senate Democrats hope to pass the budget blueprint by the end of the week. It would boost spending on health care, child and elder care, education and climate change, while bypassing an expected Republican filibuster.
Senate Democrats unveiled our budget resolution with reconciliation instructions, which is the first step in unlocking the legislative process for a budget reconciliation bill later this year. The Democratic budget will be the most significant legislation for American families since the era of the New Deal and the Great Society. It is big, bold change, the kind of change America thirsts for. It will lower costs for Americans. It will cut taxes for American families. It will create millions of jobs while tackling the climate crisis, and it will be paid for by wealthy paying their fair share. The divisions in our country and our politics today have their roots in the decline of economic mobility. Now, the American people don’t expect one piece of legislation to solve all our nation’s ills. No single law can do that. But we have to start in a bold, strong way, rebuilding the basic social contract for middle-class American families and for everyone struggling to get there, a promise of equal opportunity and equality, helping middle-class Americans stay in the middle class, building ladders to help others climb into that middle class. And at its core, that’s what this budget is all about.
https://www.nytimes.com/live/2021/08/09/us/politics-news
Editor's Note - This next comment is from the Health Justice Monitor, a newsletter from PNHP
-SPC
U.S. Health System Implosion / Tipping Point
U.S. longevity down to 78.5 years, other nations 81-84.
U.S. pervasive race disparities in private insurance and health.
U.S. health spending twice the wealthy country average.
U.S. uninsured = 33 million pre-COVID; underinsured = 1/3 of insured.
U.S. healthcare access & outcomes the worst among wealthy countries.
U.S. financial barriers to care for sick high in Medicare Advantage.
U.S. medical debt skyrocketing, impoverishing and imperiling lives.
U.S. insurer profits skyrocketing for years and during COVID.
U.S. ambulance services separate, costly, & unreliable.
U.S. doctors burning out from billing-laden EHR.
Comment: by Jim Kahn
Our "system" is no system.
Thousands of health plans, summing to premature death and massive profits.
By no useful metric is it succeeding.
Unbridled corporate greed prevails.
It's imploding in front of us.
Is it sustainable?
It can't be.
When is the tipping point?
To a simple, logical, efficient & generous, equitable, humane solution.
Single payer.
Now.
(thanks to Eli Marx-Kahn for input)
Mirror, Mirror 2021: Reflecting Poorly
Health Care in the U.S. Compared to Other High-Income Countries
Abstract
- Issue: No two countries are alike when it comes to organizing and delivering health care for their people, creating an opportunity to learn about alternative approaches.
- Goal: To compare the performance of health care systems of 11 high-income countries.
- Methods: Analysis of 71 performance measures across five domains — access to care, care process, administrative efficiency, equity, and health care outcomes — drawn from Commonwealth Fund international surveys conducted in each country and administrative data from the Organisation for Economic Co-operation and Development and the World Health Organization.
- Key Findings: The top-performing countries overall are Norway, the Netherlands, and Australia. The United States ranks last overall, despite spending far more of its gross domestic product on health care. The U.S. ranks last on access to care, administrative efficiency, equity, and health care outcomes, but second on measures of care process.
- Conclusion: Four features distinguish top performing countries from the United States: 1) they provide for universal coverage and remove cost barriers; 2) they invest in primary care systems to ensure that high-value services are equitably available in all communities to all people; 3) they reduce administrative burdens that divert time, efforts, and spending from health improvement efforts; and 4) they invest in social services, especially for children and working-age adults.
Introduction
No two nations are alike when it comes to health care. Over time, each country has settled on a unique mix of policies, service delivery systems, and financing models that work within its resource constraints. Even among high-income nations that have the option to spend more on health care, approaches often vary substantially. These choices affect health system performance in terms of access to care, patients’ experiences with health care, and people’s health outcomes. In this report, we compare the health systems of 11 high-income countries as a means to generate insights about the policies and practices that are associated with superior performance.
With the COVID-19 pandemic imposing an unprecedented stress test on the health care and public health systems of all nations, such a comparison is especially germane. Success in controlling and preventing infection and disease has varied greatly. The same is true of countries’ ability to address the challenges that the pandemic has presented to the workforce, operations, and financial stability of the organizations delivering care. And while the comparisons we draw are based on data collected prior to the pandemic or during the earliest months of the crisis, the prepandemic strengths and weaknesses of each country’s preexisting arrangements for health care and public health have undoubtedly been shaping its experience throughout the crisis.
For our assessment of health care system performance in Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States, we used indicators available across five domains:
- Access to care
- Care process
- Administrative efficiency
- Equity
- Health care outcomes.
For more information on these performance domains and their component measures, see How We Measured Performance. Most of the data were drawn from surveys examining how members of the public and primary care physicians experience health care in their respective countries. These Commonwealth Fund surveys were conducted by SSRS in collaboration with partner organizations in the 10 other countries. Additional data were drawn from the Organisation for Economic Co-operation and Development (OECD) and the World Health Organization (WHO).
Pandemic profits: top US health insurers make billions in second quarter
Health companies see decline from record profits of last year – but where is the scrutiny of such vast sums?
by Amanda Holpuch - The Guardian - August 6, 2021
Five of America’s largest health insurers reported more than $11bn in profits in the second quarter – a decline from the same period last year when the Covid-19 pandemic helped drive sky-high profits.
The rise in profits last year was a result of people in the US seeking less medical care because of fears about Covid-19 while still paying for health insurance. Companies warned pent-up demand could have an effect on their bottom line, but medical use still has not returned to normal rates.
The scrutiny insurers faced last year after reporting such high profits – in some cases doubling the amount they made the year before – has largely faded away.
The House Energy and Committee launched an investigation into insurers last August, but the results of that have not been made public.
In a November article for the Journal of the American Medical Association (JAMA), Dr Joshua Sharfstein at Johns Hopkins Bloomberg School of Public Health and others called for part of the windfall to be allocated to other parts of the health system, such as beleaguered public health departments which couldn’t afford to contact trace.
“A lot of public health departments are really still struggling to find funds for contact tracing, testing even when the local insurer was sitting on huge profits,” Sharfstein said. “I think part of the dysfunction of the US response was the fact that money was accumulating in one part of the healthcare universe while it was desperately needed in another part.”
The American Rescue Plan and other government funding initiatives have helped fill some of the gaps in public health funding, but Sharfstein, the public health school’s vice-dean for public health practice and community engagement, said it would have been better recoup some of the insurer profits to prop up these systems instead of using taxpayer money.
The article also advised regulators to seek greater transparency on how the money was used, but other than the congressional investigation there has been little action on that front.
At the same time, Americans have borne the brunt of the financial crush from the pandemic and resulting recession.
In a survey conducted between March and June, 36% of adults with health insurance said they had a medical bill problem or medical debt, according to a Commonwealth Fund study published last month. People who had Covid-19, lost income or lost their employer-sponsored health insurance had higher rates of medical bill and debt problems than those not affected by those issues.
Consumers will see some of the profits from last year. Under the Affordable Care Act, there are limits on how much insurers can spend on profits and administration. Money in excess of that limit is paid to customers in rebates. The Kaiser Family Foundation (KFF) estimated in April that insurers would be issuing about $2.1bn in rebates this year.
There is still uncertainty for health insurers about what could come this year, especially with the Delta variant driving a rise in cases across the US. But in the second quarter earnings reports, they showed little evidence of it affecting their bottom line.
UnitedHealth Group reported $4.37bn in profit and increased its earnings outlook after beating expectations for profit and revenue. Anthem reported $1.8bn in profit and said Covid-19 variants and slowing vaccination rates added uncertainty to the second half of the year, but still raised its earnings forecast.
Humana, which provides coverage to a large share of seniors, had the most dramatic drop in earnings compared to the same period the year before – with a 68.7% drop to $588m. Executives acknowledged uncertainties with the pandemic, but said they expect 2022 to be a more normal year.
These results echoed a broad review of health insurer filings by KFF, which found that most insurers expect health use to return to the levels it was at before the pandemic and aren’t factoring additional costs into next year’s premiums, or the cost consumers pay each month for healthcare. Georgetown University’s Center on Health Insurance Reform (CHIR), also analyzed early filings and found that most insurers consider the pandemic to be “a one-time event, with limited, if any, impact on their 2022 claims costs.”
United, Anthem and Humana posted their results in July, but the insurers who shared their earnings this week, when there was more public concern about the Delta variant, saw their stock prices fall after sharing their results.
This is in part because one of the companies, CVS Health, also announced it would raise wages for employees at its 9,900 retail locations. The health giant reported $2.78bn in profits on Tuesday and said starting next summer it would raise wages to $15 an hour – at a cost of $600m over three years.
Cigna also beat expectations, with $1.47bn in profit, but its stocks fell after the company reported costs for providing medical services were starting to recover.
https://www.theguardian.com/us-news/2021/aug/06/us-healthcare-insurance-covid-19-coronavirus
US ranks last in healthcare among 11 wealthiest countries despite spending most
US spends 17% of GDP on healthcare but struggles with affordability and has the most administrative hurdles
by Lauren Aratani - The Guardian - August 5, 2021
The US is last on a ranking of healthcare systems among 11 of the wealthiest countries in the world, despite spending the highest percentage of its GDP on healthcare, according to a new report from the Commonwealth Fund.
The country struggles with deep problems in affordability of healthcare, which affects access and equity, and it is the country that has the most administrative hurdles when dealing with healthcare. This is despite the US spending 17% of its gross domestic product on healthcare, “far above” the other 10 countries, according to the report.
The other countries analyzed in the report were Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland and the UK. The ranking is based on 71 measures across five areas: access to care, care process, administrative efficiency, equity and healthcare outcomes.
The report notes that unlike the other countries in the study, the US does not provide universal healthcare coverage. Americans are more likely to have problems paying medical bills and have their insurance denied. A larger percentage of Americans say they spend a lot of time on paperwork for medical bills, and doctors report having more trouble prescribing medication for patients because of restrictive health insurance coverage.
Americans also deal with lackluster access to care, with more American adults going to the emergency room for non-emergency care. Doctors of the top-performing countries are usually readily available by phone or on nights and weekends. The US also has the largest disparity in care among income groups.
“We have almost two healthcare systems in America: one for people with means and insurance, and another one that falls short for people who are uninsured or don’t have adequate insurance coverage,” Eric Schneider, the lead author of the report and senior vice president for policy and research at the Commonwealth Fund, told the Washington Post.
The one area that the US did well on is the care process, with Americans more likely to get mammography screenings and flu vaccines and having more talks with their doctor on nutrition, smoking and alcohol use.
Health statistics reflect the reality of having the worst healthcare system on the list: the US has the highest infant, maternal and avoidable mortality rates. The country also has less support for early childhood education and support systems, like unemployment protection, for workers, leading to poorer health outcomes.
Schneider said the country’s comparably weak healthcare system made it harder for the US to handle the Covid-19 pandemic.
“One could predict, based on the inequities and the relatively weaker primary care, that we would be in a position to struggle in fighting the pandemic,” he said.
What’s Actually Wrong With the U.S. Health System
A report shows why American health care performs so poorly compared to its rivals—and suggests the Obamacare replacement proposals aren’t the way to fix it.
by Olga Khazan - The Atlantic - August 6, 2021
On the heels of the Senate’s latest attempt at replacing the Affordable Care Act, the Commonwealth Fund has released its latest evaluation of what, exactly, ails the U.S. health-care system. Once again, the think tank found the U.S. medical system performed the worst among 11 similar countries, all while spending more.
The United States fared especially badly on measures of affordability, access, health outcomes, and equality between the rich and poor. The United Kingdom ranked first, and the other countries in the comparison were Australia, Switzerland, Sweden, the Netherlands, New Zealand, Norway, Germany, Canada, and France.
Countries ranked on overall health-system performance. Photo from the Commonwealth Fund.
America does perform well, comparatively, when it comes to doctor-patient relationships, end-of-life care, and survival rates after major issues like breast cancer or strokes. However, the United States does less well on measures of population health: It had high rates of infant mortality and a low life expectancy at 60 years. It also has the highest rate of “mortality amenable to health care”—deaths that doctors and hospitals can prevent—and has experienced the smallest reduction in that measure in the past decade.
Mortality amenable to health care, 2004 and 2014. Photo from the Commonwealth Fund.
The ways to fix these issues, according to Commonwealth Fund experts, are to increase the rate of insurance coverage and access to primary care, streamline the insurance system so that there are less administrative hurdles for doctors, and funnel more money toward better nutrition and housing, rather than specialty care.
On a call with reporters, experts from the think tank said they had not yet had a chance to closely examine the revised Senate health-care bill. But it is rather similar to the past Republican repeal-and-replace proposals, especially with approach to Medicaid.
The new bill would allow insurers to sell health plans that charge sick people more, cover only some health problems, or deny coverage based on pre-existing conditions, as long as they also sell Obamacare-compliant plans. The bill would also make cuts to Medicaid, the health-insurance program for the poor. A score for this bill from the Congressional Budget Office is expected next week, but the agency’s previous estimate was that 22 million Americans would lose coverage under a plan like this.
“In general, the proposals we’ve seen would reverse the progress, especially on insurance coverage,” said Eric Schneider, senior vice president for policy and research at the Commonwealth Fund, on the call. “We suspect that alone would be taking us in a direction different from the solutions. The disparities we observe related to income would likely not get better under Medicaid cutbacks.”
As insurance coverage declines, the Commonwealth Fund authors say less access to primary care would make American health outcomes even worse. The Senate bill would also expand the use of health savings accounts—a way of paying insurance premiums before taxes are taken out—which Commonwealth Fund president David Blumenthal said only adds to the “complexity” of American insurance.
Percentage of doctors who report spending time getting patients medications. Photo from the Commonwealth Fund.
Simplifying insurance, meanwhile, could make it better. For example, American doctors spend a comparatively abnormal amount of time on “getting patients needed medications or treatment because of coverage restrictions,” the Commonwealth Fund finds, and having patients who are signed up for plans that don’t cover certain conditions or procedures, or that demand high deductibles from them before care is provided, would not remedy that.
But, according to this report, a single-payer system is not necessarily the only way to go. One of the top performers in the Commonwealth Fund’s model is the Netherlands, a country where insurers are predominantly private companies who sell their plans to customers, many of whom are subsidized by the federal government. In other words, it looks like Obamacare on steroids.
In the Netherlands, insurance is considered a social service, and it’s much more heavily regulated than in the United States. People are required to buy insurance, just like under Obamacare, and so less than 1 percent of the population is uninsured. (The Senate bill would eliminate the individual mandate.) Premiums are funded in part through payroll taxes and in part through subsidies that much of the population receives, according to a 2009 paper by Washington and Lee University law professor Timothy Jost. The list of essential benefits is generous and also regulated by the government. Rather than allow insurers to pick only the healthiest customers to insure, the Dutch government redistributes the risk among insurers by making those with healthier risk pools pay into a pot of money that other, less fortunate insurers can draw from.
Dutch people all pay a deductible of around $500, and unlike in the United States, providers there aren’t allowed to balance bill if insurance doesn’t fully cover their services. What’s more, primary-care doctors provide after-hours care, which helps explain why 77 percent of Dutch people say they “saw a doctor or nurse on the same or next day the last time they needed medical care.”
Granted, the Dutch government has faced the typical health-care quandaries—like how to control costs while giving people access to the procedures they need—but at least according to this report, they are doing much better than the United States is. It serves as a counterpoint to the popular view, among some liberals, that you must have single payer for good health care.
You do, however, need to get almost all of your population insured and treat insurers more like public utilities than free-wheeling upstarts.
PhRMA’s misleading description of Medicare drug-price legislation
by Glenn Kessler - Washington Post - August 10, 2021
“They want to repeal a protection in Medicare that protects access to my medicines. They call it negotiation, but it really means the government decides what medicines I can get.”
— Sue from Ohio, who says she had Type 1 diabetes, speaking in a television advertisement sponsored by Pharmaceutical Research and Manufacturers of America (PhRMA).
This ad is appearing in heavy rotation on cable news networks and during public-affairs programs like CBS’s “Face the Nation” and NBC’s “Meet the Press.” It’s part of a PhRMA initiative called “Voters for Cures,” which features the voices of ordinary Americans.
Sue (a real person) is also featured in a PhRMA YouTube video in which she describes how she was diagnosed with Type 1 diabetes, an autoimmune disease, when she was 36, just after her youngest sister died of cystic fibrosis. “Tell Congress to Stand Up,” the video declares at the end. “Protect Medicare NOW.”
In the ad, Sue says that she depends on Medicare to obtain her medicines and that proposals in Congress “would make it harder for people on Medicare to get the medicines we need.”
For years, lawmakers and presidents have tried to change the way prices for drugs are negotiated in Medicare, with little success. It might finally happen this year. President Biden, in an executive order, said that it is the “policy of my Administration to support aggressive legislative reforms that would lower prescription drug prices, including by allowing Medicare to negotiate drug prices.” The outline of the proposed budget reconciliation bill supported by Biden, released Aug. 9, said it “reduces prescription drug costs for patients and saves taxpayers hundreds of billions.”
The details still need to be negotiated, and ads like this one show that lobbyists will be out in force seeking to shape the outcome.
We obviously take no policy position on these proposed changes. But our antenna is alerted whenever we see “Mediscare” ads that seek to frighten seniors about possible changes in Medicare. Does PhRMA have a basis to make this claim?
The Facts
At issue is something called “the noninterference clause.” When Part D of the Medicare program, which helps pay for prescription drugs, was created under President George W. Bush, lawmakers included a provision that prevents the federal government from having a direct role in negotiating or setting the prices for drugs in Medicare Part D. The prescription benefit is operated exclusively through private insurance plans under contract with Medicare, with the government generally reimbursing providers 106 percent of the average sale price.
Many Democrats have never been happy with the noninterference provision and have long sought to repeal it. The theory is that if the health and human services secretary were given the authority to directly negotiate drug prices, it could help bring down the cost of drugs, especially newer, high-priced medications.
The Congressional Budget Office in 2007 determined that the impact would be negligible unless the HHS secretary was also given tools to exert pressure on drug manufacturers. So policymakers have sought ways to ensure that the government had some sticks in its negotiating arsenal.
One bill, the Elijah E. Cummings Lower Drug Costs Now Act, passed the House last session and has been introduced again. It would empower the HHS secretary to negotiate prices for selected drugs — 25 at first, with the number growing larger over time — that have little competition and account for substantial spending. In theory, government negotiation would be limited to a subset of drugs that don’t have generic alternatives, such as expensive oral cancer drugs that account for a relatively large share of spending but have relatively few users.
The cost of the drugs in six high-income countries — Australia, Canada, France, Germany, Japan and Britain — would be used as a benchmark, with a goal of negotiated prices no higher than 120 percent of the international price.
Moreover, the secretary would have the right to impose financial penalties, an escalating excise tax, on companies that do not reach an agreement.
That last provision impressed the CBO enough that the nonpartisan agency concluded that the secretary would have enough leverage to reduce the cost of expensive drugs. The CBO said the bill would save more than $450 billion in government-provided health plans between 2020 and 2029. The CBO also said the law would add $45 billion in revenue because lower drug prices would reduce premiums for employer-provided health insurance, thus allowing for more taxable compensation.
In a 2021 working paper, CBO analysts described how they had modeled the negotiations to determine that prices would fall between 57 percent and 75 percent, relative to current prices. “The gain to the government was estimated to be the avoided cost of purchasing the next-best alternative treatment, plus the incremental clinical value of using the drug of interest instead of the alternative (measured in dollars), minus the agreed-upon price of the drug,” the paper said. “The manufacturer’s gain was estimated to be the revenue from selling the drug in the United States.”
In the Senate, Sen. Ron Wyden (D-Ore.), chairman of the Finance Committee, in June issued “principles” for drug pricing reform, including that Congress must give the HHS secretary “both tools and guidelines to negotiate a fair price” and “create the right incentives to ensure that pharmaceutical companies participate in the negotiation process.” He has not released legislation yet; drug-price negotiation is a harder sell in the Senate than the House.
PhRMA officials said that the ad’s language was based on provisions in the House bill, known as H.R. 3, as well as Wyden’s principles, as both would repeal the noninterference clause. (There are other pending bills as well, such as one offered by Democratic Rep. Lloyd Doggett of Texas.) But congressional aides involved in the legislation were mystified by Sue’s claims in the ad, saying the proposals would not allow the government to remove drugs from what is known as the formulary, the list of drugs that may be prescribed by a Plan D sponsor.
“If you review the principles document they are referring to, I think it will be apparent that there is no policy suggesting that we are planning to ‘repeal a protection in Medicare that protects access to my medicines’ or let ‘the government decide what medicines I can get,’” said Taylor Harvey, a spokesman for the Finance Committee.
Medicare Part D is supposed to cover at least two drugs in each therapeutic class that treats a condition. But six classes of drugs — anticonvulsants, antidepressants, antineoplastics, antipsychotics, antiretrovirals and immunosuppressants — have been deemed “protected” so that Part D plans are required to cover “all or substantially all drugs” available. “There’s nothing in our principles document that references the six protected classes or any potential changes to that part of the law,” Harvey said.
Juliette Cubanski, deputy director of the program on Medicare policy at the Kaiser Family Foundation, was also puzzled by the ad’s claim.
In H.R. 3, “there’s no requirement for the government to establish a formulary, as private Medicare Part D plans do, or make decisions about which drugs to cover and not cover under Medicare. Those decisions would still be made by individual Part D plans,” she said, noting that “most drugs would not even be subject to the negotiation process.”
“The framing of the noninterference clause — which prohibits the government from being involved in price negotiations between manufacturers and plan sponsors — as a ‘protection’ is interesting, since in the 15 or so years since the MMA [Medicare Modernization Act] was passed, I don’t think that adjective has ever been used to describe it, since that provision doesn’t have anything to do with access to medications,” Cubanski added. “While PhRMA may want to frame the discussion around drug price negotiation as one of access to medication, this framing doesn’t accurately reflect the process of negotiation as laid out in H.R. 3.”
Debra DeShong, PhRMA’s executive vice president for public affairs, defended the ad by arguing that removing the noninterference clause would have long-term consequences that are not fully understood. In effect, PhRMA is saying that the ripple effects of government price-setting ultimately could lead to fewer options for patients.
“Government negotiation, whether through a price-setting policy like H.R. 3 or as outlined in legislative proposals from Rep. Doggett or principles released by Senator Wyden, inevitably limits patient choice, especially if that policy is intended as a cost-saving measure,” DeShong said. “Even if health plans are left to make formulary choices, if government-negotiated drugs are cheaper, health plans will steer patients to the government-selected drugs to keep their costs and premiums low. The long-term implications for the marketplace are that the government is picking winners and establishing a de facto group of preferred medicines that limits access and choice.”
The CBO as recently as 2019 said that one way to put pressure on companies would be “authority to establish a formulary,” though as we noted that is not envisioned in the legislation. DeShong asserted that “such proposals move the United States closer to a single national formulary for Medicare, similar to how some governments in other countries heavily control which medicines are and are not available to their citizens.”
PhRMA officials pointed to a 2020 analysis by the Hayden Consulting Group, which concluded that H.R. 3 could lead to a preference for drugs whose prices had been negotiated downward by the government, leaving non-price-controlled drugs with a sliver of the market and reducing incentives for innovation.
The Pinocchio Test
PhRMA is trying to put a human face on a public relations problem for the industry. There’s a lot of anger at high drug prices, leading to the political pressure to do something. The ad starring Sue is intended to warn that — someday down the road — the changes being contemplated would lead to fewer options.
You obviously don’t get something for nothing. If drug prices are cut because of government pressure, then there will be an impact. To a large extent, the impact is unknowable. Health plans currently steer enrollees to their preferred medications, but the drug manufacturing market may adapt in ways not yet understood.
The ad misleadingly suggests that legislation is designed to restrict Sue’s drugs and make it harder for Medicare patients to get drugs. That’s not the intention at all. Drug manufacturers don’t want to have to negotiate with the government. But they shouldn’t describe a worst-case scenario as a legislative provision. The legislation does not call for a government-mandated formulary, notwithstanding Sue’s concerns that the government one day would choose her medicines.
We wavered between Two and Three Pinocchios. We ultimately tipped toward Three. The market implications are impossible to predict, giving PhRMA a foothold to warn about the possible impact. But that’s not an excuse for claiming there are provisions in the legislation that do not exist.
Three Pinocchios
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