Posts Tagged ‘health care’

A Trump Choice for Veterans — Shulkin Out. Hope for Veterans In?

March 31, 2018

Shulkin favored the status quo of limited health-care options.

Former Veterans Affairs Secretary David Shulkin speaks at a news conference at the Washington Veterans Affairs Medical Center in Washington, March 7.
Former Veterans Affairs Secretary David Shulkin speaks at a news conference at the Washington Veterans Affairs Medical Center in Washington, March 7. PHOTO: ANDREW HARNIK/ASSOCIATED PRESS

It wouldn’t be a normal week in Washington without a Trump Administration personnel melodrama. But this week’s removal of Veterans Affairs Secretary David Shulkin is important on the policy merits, and let’s hope his successor is more amenable to allowing retired service members to make their own health-care choices.

On Thursday Mr. Shulkin took to the New York Times to warn of “political appointees choosing to promote their agendas instead of what’s best for veterans” by supporting “privatization leading to the dismantling of the department’s extensive health care system.” This self-justification exercise will not be remembered as the most graceful exit.

Mr. Shulkin has been on the way out for several weeks, and his euphemisms are about his months of infighting with White House and other Administration officials. The unsubtle innuendo in the press is that Mr. Shulkin was run out by the nefarious Charles and David Koch through a policy group called Concerned Veterans for America.

Yet no one except Mr. Shulkin is talking about “privatization.” Concerned Veterans for America in a white paper has sketched out a plan to restructure the VA and allow it to focus more on the expertise its doctors have developed in, say, post-traumatic stress and prosthetics. The plan includes a premium-support payment so vets could buy discounted private coverage from a menu, much like federal employees do. A current vet who preferred to be treated for diabetes elsewhere would be free to make that choice.

At bottom this is a debate over political control and cost because allowing choice outside the system is expensive. We know that denying that escape valve often traps veterans in subpar facilities with unresponsive bureaucracies. But politicians have never wanted to take on the veterans interest groups that are attached to the status quo.

Mr. Shulkin indicts private industry though VA’s single-payer system has been responsible for some of the most macabre health-care scandals in history. Manipulated wait times that resulted in death; an opioid doctor known as “the candy man”; recall the many horror stories in 2014 from Tomah, Wis., to Phoenix.

So what’s going on? “Privatization” is in part a straw man to obscure Mr. Shulkin’s own behavior, including ethical lapses on misusing VA funds on travel. More substantively, Senator Jerry Moran at a hearing earlier this year called out Mr. Shulkin for “double talk,” by which he ostensibly meant claiming to support, while really opposing, a proposal that would provide more health-care choices for veterans.

The best bill before Congress is Mr. Moran’s with Senator John McCain. After rampant VA scandals, Congress in 2014 created a choice program that allows certain vets to receive care outside the VA. But the system is based in part on where a vet lives and wait-list times, not the severity of the ailment or needs of the patient. The Moran bill would correct this dysfunction with new standards and streamline many programs that allow vets to receive private care. The bill also opens up access to telemedicine and walk-in clinics, among other useful changes.

President Trump has chosen Ronny Jackson as a VA replacement, and the rear admiral is best known as the White House doctor. The rush is to declare him unqualified, and we wonder if Mr. Trump has put his nominee in a tough spot. Rear Admiral Jackson probably felt he couldn’t say no to his Commander in Chief, but he hasn’t been immersed in the emotive and complex politics of veterans.

He will now face a long and tough confirmation process in the Senate, and Mr. Trump had better not start bashing Rear Admiral Jackson if he stumbles as the President has other cabinet officials.

But checking the right boxes on a résumé didn’t help Mr. Shulkin, who by press reports couldn’t run his own communications department. That sounds less stressful than Rear Admiral Jackson’s stint in Iraq with a surgical shock trauma platoon. One piece of advice: Don’t become a target with first-class travel, stock trades or free Wimbledon tickets.

The White House managed the Shulkin affair with its usual backbiting and disorganization. But if the goal is to transform the VA to deliver better and more efficient health care for veterans, then perhaps the real Trump mistake was choosing Mr. Shulkin in the first place.

Appeared in the March 31, 2018, print edition.


Beware: Hospitals think ‘do not resuscitate’ means you don’t want to live

March 28, 2018
 New York Post

Why Some Americans Are Skipping Health Insurance

March 26, 2018


Prices and deductibles are rising. Networks are shrinking. And even some well-off Americans are questioning what they’re paying for.
Illustration: Cathryn Virginia

In tiny Marion, North Carolina, the Buchanans decided that $1,800 a month was too much to pay for health insurance, and are going without it for the first time in their lives.

In Harahan, one bend of the Mississippi river up from New Orleans, the Owenses looked at their doubling insurance premiums and decided no, as well. “We’re not poor people but we can’t afford health insurance,” Mimi Owens said.

And in a Phoenix suburb, the Bobbies and their son Joey will go uninsured so the family can save money to cover their nine-year-old daughter Sophia, who was born with five heart defects.

Across America there are thousands of people like the Buchanans, the Owenses and the Bobbies making the same hard decision to go without health insurance, despite the benefits. They’re risking it—betting that they’ve got enough savings, enough of a back-up plan, or enough luck to get them through a twisted knee, a cancer, or a car wreck.

Bloomberg is following a dozen of these families this year in an effort to understand the trade-offs when a dollar spent on health insurance can’t be spent on something else. Some are financially comfortable. Others are scraping by.

While the share of Americans without health insurance is near historic lows four years after the Affordable Care Act extended coverage to almost 20 million people, the Trump administration has been rolling back parts of the law. At the same time, the cost for many people to buy a health plan—if they don’t get it from a job or the government—is higher than ever.

No one had to tell the Buchanans about the risk. Dianna, 51, survived a bout with cancer 15 years ago. Keith, 48, has high blood pressure and takes testosterone shots. They live in Marion, North Carolina, and make more than $127,000 a year from the small IT business Keith runs and Dianna’s job as a physical therapy assistant, with some additional income from properties they own. That puts them in the top fifth of households by income.

But their insurance premium was $1,691 a month last year, triple their mortgage payment—and was going up to $1,813 this year. They also had a $5,000 per-person deductible, meaning that having and using their coverage could cost more than $30,000.

What sealed the deal was when Blue Cross and Blue Shield of North Carolina and the major hospital system in Asheville, Mission Health, couldn’t reach an agreement, putting the hospital out of network. Keith Buchanan compared the fight to a cable company battling with a broadcaster over what channels to carry.

“It was just two greed monsters fighting over money,” he said. “They’re both doing well, and the patients are the ones that come up short.”

Blue Cross and the hospital eventually made a deal, but enough was enough for the Buchanans. Instead of insurance, they’re paying $198 a month for membership in a local doctors’ practice. They get unlimited office visits and discounts on medications and lab tests. They also signed up for Liberty Health Share, a Christian group that pools members’ money to help pay for medical costs. Liberty costs $450 a month, including a $150 surcharge based on the couple’s blood pressure and weight.

Three days after dropping their Blue Cross coverage at the start of the year, Keith took a wrong step and injured his knee.

It could have been worse. He got it checked out at an urgent care center, where the visit and an X-ray cost him $511. That’s still less than he was paying in premiums to Blue Cross.

“If we can control our health-care costs for a couple of years, the difference that makes on our household income is phenomenal,” Buchanan said. The couple doesn’t have children.

There’s plenty of evidence that having insurance is a good thing. People with health coverage spend less out of pocket on medical care and are less likely to go bankrupt. They see the doctor more often and get more preventive care. They’re less depressed and tell researchers they feel healthier. Some studies suggest having insurance reduces the likelihood of death.

Despite those benefits, some 27.5 million Americans under age 65 were uninsured in 2016, about 10 percent of that population, according to the Kaiser Family Foundation. The most common reason: the cost was too high. A Gallup poll suggests that, after declining for years, the percentage of adults without coverage has increased slightlysince the end of 2016, when President Donald Trump was elected promised to dismantle Obamacare. Other data show no significant change.

The Affordable Care Act wasn’t just an expansion of insurance coverage. It also rearranged how Americans’ medical costs are distributed, favoring some and asking others to pay more.

People near the poverty line got Medicaid for free, while those making more—up to about $100,000 for a family of four—got subsidies to lower the price of private health plans.

Above that threshold, people pay the entire price. Because the law barred insurance companies from charging sick people more or refusing to cover them entirely, costs for healthy people went up as well. Some insurers have left the market, while others have sharply raised premiums to compensate for actions taken by Congress and the administration to weaken the law.

The Bobbie family remembers the problems that the ACA was intended to solve.

Their daughter Sophia was born with serious heart defects, and the organs inside her tiny abdomen were in all the wrong places. She spent the first two weeks of her life in a neonatal intensive care unit. On her six-month birthday, she had open-heart surgery. At nine months, doctors operated on her stomach.

Sophia qualified for Arizona’s Medicaid program. But when she turned 2, the Bobbies were told they made too much money for her to get low-cost state coverage. Her father Joe Bobbie, who co-owns a Philly steak shop with his brother, reduced his take-home pay so Sophia would still qualify.

She had another heart operation just before she turned 3. In just a few short years, her parents were told, Sophia’s medical costs had come to well over $1 million. Before the ACA, no private insurer was willing to cover Sophia’s pre-existing conditions.

“Every door, every option, everything was just slammed in our face,” Sophia’s mother, Corinne, said.  Medical costs that insurance didn’t cover piled up. The family skipped vacations and nights out, and lost their house and car because they couldn’t make the payments.

Corinne and Joe Bobbie, with their children Sophia and Joey.
Source: The Bobbie Family

Those sacrifices have been tough on the Bobbies, but they’ve let Sophia have a relatively normal life. She takes medication for blood pressure and blood-thinners, and a daily antibiotic because she was born without a spleen. She goes to school, rides horses, and plays piano. A recent tumble from her horse frightened her mom, but Sophia jumped up and climbed right back on.

When Obamacare coverage became available in 2014, the Bobbies, who made about $55,000 last year, bought a policy for Sophia that now costs $217 a month.

Adding Sophia’s seven-year-old little brother Joey, who’s healthy, would have cost another $160 per month, with a $6,000 deductible. So he’s uninsured, and so are Joe and Corinne. The money they save risking their own medical and financial health goes to paying Sophia’s bills.

“Every single decision that you make has to be very carefully calculated so that your finances don’t fall apart,” Corinne Bobbie said.

The Trump administration proposes to make it easier for Americans to buy cheaper health plans, which could open more affordable options for the rest of the Bobbie family. But those less-expensive choices, such as short-term health plans, would lack some of the consumer protections created by the Affordable Care Act that allowed Sophia to get coverage in the first place.

The tax proposal that became law in December will also lift the Affordable Care Act’s requirement that every American have coverage or pay a fine. Economists warn that these changes could further weaken insurance markets, pushing up costs for sick patients like Sophia—and forcing more people into similar choices.

Some states are already trying out the new rules, offering plans that don’t adhere to ACA’s requirements. In Idaho, the state’s Blue Cross insurer attempted to offer a “Freedom Plan” with annual limits on care and questionnaires that would let it charge higher premiums to people who are sick or likely to become so. The Trump administration reluctantly judged that such a plan would violate Obamacare’s rules. But federal officials encouraged Idaho to explore offering similar policies as short-term plans that can offer skimpier benefits and lower prices.

In Harahan, Louisiana, outside New Orleans, Mimi Owens learned this year that her family’s $750-a-month plan with Humana Inc. was being discontinued. A new plan for her two daughters and husband on the ACA market would cost close to $1,600. Their family makes about $147,000 from a small business selling class rings and gowns to schools.

Owens said they go to the doctor “for a sniffle, for a flu,” and have a few regular prescriptions, so they looked into short-term health plans and tried out a Christian health-sharing ministry for a few months. The best solution she’s found so far is paying $130 a month to join a direct-primary-care group, which she calls “the best care we’ve ever had.”

It doesn’t cover the big things, though. An accident like a car crash could wipe out their finances.

“We were raised to have insurance,” Owens said. “This is crazy to us.”

— With assistance by Hannah Recht

Health-Insurance Premiums Loom as Election Issue

March 25, 2018

Lawmakers, at an impasse, omitted from spending bill an effort to restore payments to insurers. Now they’re rushing to assign blame for expected rate increases

A health insurance marketplace navigator in Nebraska last November helped a client sign up for health insurance. Insurers are set to announce premiums for 2019 this fall.
A health insurance marketplace navigator in Nebraska last November helped a client sign up for health insurance. Insurers are set to announce premiums for 2019 this fall. PHOTO: NATI HARNIK/ASSOCIATED PRESS

Health-insurance premiums are likely to jump right before the November elections, a result of Congress’s omission of federal money to shore up insurance exchanges  from its new spending package.

Lawmakers from both parties had pushed to include the funding in the $1.3 trillion spending law signed Friday, but they couldn’t agree on details. A battle has already begun over how to cast the blame for the expected rate increases.

Democrats blame GOP lawmakers for the failure of negotiations over the funding, saying Republican leaders demanded the inclusion of abortion restrictions they knew would be unacceptable to Democrats. Republicans say that they negotiated in good faith and that Democrats rejected reasonable rules on abortion.

The finger-pointing comes as health care is expected to be a top issue in this year’s midterm elections. Both parties face political risks, although polls have so far shown voters are more likely to hold Republicans responsible for high costs. In a Wall Street Journal/NBC News poll last summer, when GOP lawmakers were pushing to repeal the Obama-era Affordable Care Act, 43% of voters said Democrats would do a better job handling health care and 26% said Republicans.

In a recent special election in Pennsylvania, health care was ranked as a top issue by 52% of voters, according to a survey by Public Policy Polling, a firm aligned with Democrats. In that race, Republican Rick Saccone lost to Democrat Conor Lamb in a district Mr. Trump carried by almost 20 points.

Health-insurance premiums have been rising sharply for people who buy insurance on their own, rather than getting it through work or other programs, and dwindling participation by insurers has left such consumers with fewer choices.

Some lawmakers from both parties had pushed to include in the spending bill measures aimed at stabilizing the individual health-insurance market, especially restoring payments to insurers that offset the cost of subsidies they are required under the ACA to provide to some low-income consumers. President Donald Trump ended the payments last year, saying they were illegal because the money hadn’t been appropriated by Congress. The proposals also sought to give states money to help with expensive insurance claims.

Omitting the measures from the spending bill dims the prospects for such legislation this year. While some lawmakers are likely to push for separate legislation, the odds of passage are high amid rifts in Congress over whether to help support the health law as well as on the abortion restrictions.

That deals a blow to insurers who must soon determine what rates to charge next year. Without the payments, insurers may raise premiums or curtail participation in the ACA exchanges. The Congressional Budget Office estimates that gross premiums for a popular middle-priced plan offered through the insurance exchanges are, on average, about 10% higher this year than they would have been if the subsidies to insurers were funded, a figure set to grow to 20% by 2021. The CBO also expects premiums to rise as a result of the repeal of the requirement that most people have coverage or pay a penalty, something that might encourage healthier people to forgo insurance.

Democrats blame the expected premium increases on an ongoing push by the Trump administration and congressional Republicans to dismantle the ACA. Increases in health-care costs “have been exacerbated by the Trump administration’s efforts to sabotage the Affordable Care Act and destabilize health-care insurance markets,” said Sen. Elizabeth Warren (D., Mass.).

Republicans fault the ACA and its regulations for stifling competition and driving up premiums, saying the GOP cannot be blamed for the problems with a law the party has forcefully opposed for years.

Sen. Lamar Alexander (R., Tenn.) said Democrats torpedoed the stabilization measures in the spending bill by rejecting proposals to ban the funds from going to private insurers that cover abortions. This is similar to so-called Hyde language that applies to other government programs, Mr. Alexander said.

“We’ll let the Democrats scramble and continue in their embarrassment to explain how they’re going to vote to apply the Hyde language to 100 different programs in the omnibus bill, but not to a 40% health-insurance decrease,” Mr. Alexander said, referring to one prediction of how much a stabilization bill would cut premiums.

Democrats said Republicans were trying to seize on the stabilization effort to extend abortion restrictions beyond a careful compromise enshrined in the ACA, which says insurers can cover abortions but can’t use federal funding to do so.

Health-policy experts disagree on how much a stabilization bill would have helped. Even without additional funding from Congress, they say, any higher premiums will be offset for many people by other subsidies.

Some ACA supporters even worry that a stabilization plan would backfire. By giving more money to insurers, they say, it would allow insurers to keep individuals’ premiums lower, so the size of their subsidies would be reduced.

And many House Republicans view stabilization funding as a bailout of insurers. They are concerned that if they were to pass it, they would be punished by GOP voters for shoring up the health law they promised to repeal.

Still, without the stabilization funding, many lawmakers worry they could face political blowback in the fall, when insurers announce premiums for the next year.

“It’s about what the headlines will be about premium increases in the fall,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. “The optics are real in a political sense.”

New Jersey Aims to End Its Doctor Shortage: State opens first private medical school to open in more than six decades

March 24, 2018

Hackensack Meridian School of Medicine at Seton Hall University is state’s first private medical school to open in more than six decades

After it opens for its July term, Hackensack Meridian School of Medicine at Seton Hall University in Nutley, N.J., ultimately will educate some 3,000 students.
After it opens for its July term, Hackensack Meridian School of Medicine at Seton Hall University in Nutley, N.J., ultimately will educate some 3,000 students. PHOTO: KATY KOZ

Years in the making, Hackensack Meridian School of Medicine at Seton Hall University is finally ready for students.

The school, located at the former Hoffmann-La Roche campus in Nutley, N.J., is a joint venture of Seton Hall University and Hackensack Meridian Health. The college began accepting applications this week for its first class of 55 physicians, who will begin studies this July.

One of the school’s goals is to keep physicians in New Jersey, which is facing an estimated shortage of 3,000 doctors by 2020, said Robert Garrett, co-chief executive officer for Hackensack Meridian Health.

“We’ve seen a huge exodus from New Jersey with medical students receiving education out of state,” said Mr. Garrett. “We’re hoping to reverse a talent drain.”

Over just a few days, 400 people have applied, according to a spokeswoman for Hackensack Meridian, the state’s largest health network.

The school is New Jersey’s first private medical school to open in more than six decades, and now is the only one in the state. Over time, the school will grow to roughly 150 students per class, according to Hackensack Meridian. Combined with the classes from Seton Hall’s College of Nursing and its School of Health and Medical Sciences, some 3,000 students ultimately will call the college home, the network said.

The campus occupies some 100,000 square feet over 17 acres in a sprawling site about 12 miles from Manhattan. The buildings that comprise the medical school have state-of-the-art equipment left behind when Hoffmann-La Roche, a Swiss health-care company, moved its Nutley operation to California.

The new medical school announced its move into the former campus in January 2016. Since then it had been working toward accreditation, which it received in February.

Students will complete their training in the 16 hospitals that are part of the Hackensack Meridian Health network, school officials said. The curriculum will emphasize population health, officials said, and pair doctors with other health professionals to shadow families living in poor communities, the officials said. Over time, the expectation is for students to learn how to “partner with people from a broad range of disciplines” to best care for patients, said Dr. Bonita Stanton, the founding dean of the school.

Students will have the option of a year-round, three-year program, which would shave expenses from an annual tuition that runs upward of $50,000, officials said. A fourth year could be spent on a dual-degree program with engineering, for example. The school will open with an endowment of $100 million for scholarships, a school official said.

Write to Melanie Grayce West at

Death of Texas teacher highlights true cost of US drugs

March 22, 2018

Flu victim should have paid much less for her medication, data show

No automatic alt text available.

By David Crow in New York
Financial Times
March 22, 2018

When Heather Holland, a primary school teacher, went to collect her flu medicine at a local drugstore in Texas in January, she balked at the price. The pharmacist said she would have to pay $116 out of her own pocket, so she left empty-handed.

Her husband returned to the pharmacy the next day to pay for the medicine, a generic version of Tamiflu, and Mrs Holland starting taking the drugs. But her condition continued to deteriorate. A few days later she died in hospital. She was 38.

There is no way of knowing whether Mrs Holland, who was in otherwise good health, would have survived if she had taken the medicine sooner, although the delay cannot have helped.

A Financial Times analysis of confidential and public pricing data has found that Mrs Holland should have paid much less for her flu medication.

Her story captured the attention of a US public already outraged by the soaring cost of healthcare, and prompted many to ask the same question: how is it that a common flu drug — which is on the world’s list of essential medicines — can end up costing so much in America?

The answer lies in part in the miserly health insurance policies now held by millions of Americans, but also in the way that access to drugs is managed by for-profit “middlemen” like CVS Health’s Caremark, Express Scripts and UnitedHealth’s Optum.

These middlemen, officially known as pharmacy benefit managers or PBMs, are unique to the private US healthcare system. Their business model involves amassing millions of patients from different health insurance plans, before using the combined heft to demand big discounts from drugmakers.

Pharmaceutical companies that refuse to discount their medicines can find themselves frozen off the lists of drugs that PBMs are willing to pay for, which can have a chilling effect on their sales. More often than not they agree to the price cuts.

But critics allege that PBMs have opaque business models that boost their profits while pushing up costs for patients.

If Mrs Holland had not used her insurance card and instead paid outright herself, she would have been charged roughly $107 for 10 tablets of generic Tamiflu, according to several pharmacies contacted by the Financial Times.

The cost would have fallen further still if she had foregone insurance and printed off a savings coupon from the website GoodRx. A 10-tablet pack of generic Tamiflu, also known as oseltamivir phosphate, can be bought by without insurance for about $52 with a coupon at Walmart, the grocery chain.

“What’s the point of having insurance, if it means you end up spending more than if you were uninsured,” asks John Norton from the National Community Pharmacists Association.

In Mrs Holland’s case, it is hard to lay the blame for the $116 charge at the door of the pharmaceuticals industry, which has borne the brunt of anger over soaring drug prices in recent years.

The list price for a 10-tablet pack of generic Tamiflu is about $129, according to figures seen by the FT, but the real negotiated price is significantly lower.

According to confidential invoices seen by the FT, pharmacies can acquire a pack of Tamiflu for $45.46 if they contract with the Walgreens Boots Alliance Development, a large purchasing organisation that supplies its own stores, other big chains, and independent pharmacists.

Other large drug purchasing consortiums, like Red Oak, of which CVS is a member, and an alliance of Walmart and McKesson, the wholesaler, can source the drug for a similar sum, according to people briefed on the negotiations.

That means the real amount being booked by generic drugmakers that sell the medicine is often below $45.46, after allowing for a cut taken by the wholesaler.

So why did Mrs Holland end up paying $116, and what happened to the roughly $70 difference?

Mrs Holland had such a high out-of-pocket charge because she was enrolled in a meagre health plan offered by the Teacher Retirement System of Texas (TRS), which charges families a monthly premium of roughly $1,300.

The state of Texas contributes just $75 per member each month, a sum that has remained constant since 2003, even as healthcare inflation has risen at an average of around five per cent a year over the past 14 years.

The true price of drugs? Tamiflu’s 5 different rates
Pharmacy acquisition cost — amount paid by pharmacist to manufacturer / wholesaler

Cash price with coupon — amount patient would pay with drug discount coupon

Cash price — amount patient would pay in cash without coupon

Out of pocket — amount patient in Texas teachers / CVS Caremark plan would pay

Wholesale acquisition cost — list price advertised by drug manufacturer

The TRS health plan has what is known as a high-deductible: members have to cover all expenses until they hit a predefined limit of either $5,000 or $10,000 per family, at which point the insurance kicks in and covers 80 per cent of their drug bills.

TRS outsources management of its health plan to two companies: Aetna, a health insurer, which looks after medical benefits like visits to the doctor and hospitals procedures, and CVS Caremark, a PBM, which controls access to medicines. The companies recently announced plans to combine in a $69bn deal.

When Mrs Holland’s husband filled her prescription, a large chunk of the $70 difference was paid by the pharmacist to CVS Caremark, which kept an undisclosed cut before handing the remainder back to the Texas health plan.

A spokesperson for CVS Caremark said it could not comment on Mrs Holland’s case for privacy reasons, but added: “Our hearts go out to any family who has lost a loved one under these circumstances.”

CVS Caremark and other PBMs have touted their ability to secure discounts from drugmakers, as proven by the case of generic Tamiflu: pharmacies can acquire the drug for 64 per cent lower than list price.

But they have come under increasing scrutiny over what portion of these discounts they keep to boost profits, especially at a time when patients are struggling with rising healthcare costs.

“The vast discrepancy in what a drug costs the pharmacy and the amount it is sold for to the patient is pure profit for someone in the supply chain,” says Michael Rea, chief executive of Rx Savings Solutions, which makes software to help employers and patients cut their drug bills.

Stung by claims that drugmakers are solely to blame for soaring prices, the pharmaceuticals industry recently launched an advertising campaign with the slogan “Share the Savings”, arguing that discounts negotiated by PBMs should be handed back to patients.

“I don’t let pharmaceutical companies off the hook, but it’s true what they’re saying,” says David Mitchell, a pricing campaigner at Patients For Affordable Drugs. “The amount being paid by the PBM for the drug is much lower than the list price, and they are taking a huge piece of the action on the way through.”

PBMs insist their practices have a deflationary effect on drug spending overall. Although they do not disclose how much of the negotiated discount they keep, they insist the vast majority are returned to health plans.

Share this graphic
However, the Trump administration recently signalled that its long-promised push to lower drug prices will focus on PBMs. At an event this week, Alex Azar, the US health secretary, said he would bring forward proposals in a month to explore “how we bring discounts that the middlemen right now are getting to our patients”.

The largest health insurer, UnitedHealth Group, which operates its own PBM, Optum, said this month that it would pass on the “overwhelming majority” of discounts to some of its clients.

CVS also offers “point-of-sale” rebates to 12m of its 94m plan members, meaning that negotiated discounts feed through to the patient. Ultimately it is up to plan sponsors like TRS whether they offer the feature to their patients.

If others follow suit, it could mean a hit to profits for some companies in the healthcare supply chain. But it might also go some way to lowering the soaring drug bills being paid by patients like Mrs Holland.


Restricted access

It is a bizarre feature of the broken US healthcare system that insured patients can sometimes end up paying more for medicines than people without coverage.

Some pharmacists say their contracts with insurers and pharmacy benefit managers can prevent them from informing the patient they could buy the drug at a lower price.

“We need to remove those constraints, so the pharmacist can be more proactive — they can help the patient find the best price by asking the right questions,” says John Norton from the National Community Pharmacists Association.

A group of bipartisan senators have introduced legislation designed to stop these “gag clauses” being included in contracts, while several states are also pushing new laws that target the practice.

PBMs and insurers say they back legislative change, and insist that such contractual arrangements are not commonplace.

“We support the patient always paying the lowest cost at the pharmacy counter,” says a spokesperson for the Pharmaceutical Care Management Association, the trade association for PBMs.

They add: “To the degree this issue was ever rooted in more than anecdotal information, it has been addressed in the marketplace.”

How to Complete the Escape From ObamaCare

March 16, 2018

Congress eliminated the individual mandate. There’s a way around the other onerous regulations.

The he tax-reform provision repealing the penalty on those who refuse to participate in ObamaCare has freed millions of Americans to escape a system that exploits them. But while Americans can escape ObamaCare, they still can’t buy insurance in the individual market independent of ObamaCare because private insurers are prohibited from selling it. If this prohibition can be removed through the granting of state waivers by the Department of Health and Human Services, or by the passage of a new federal statute, ObamaCare will collapse into a high-risk insurance pool for the seriously ill rather than become a stepping stone to socialized medicine.

The politics of the ObamaCare debate changed dramatically when the Congressional Budget Office determined that repealing the coverage mandate would save an astonishing $338 billion over 10 years. The saving would come from undisbursed subsidies, as lifting the tax penalty would induce an estimated 4.6 million people to flee from the exchanges. The number of Americans enrolled in ObamaCare plans is projected to plummet to 7.4 million by 2021, a mere 2.2% of the population.

The repeal of the tax penalty will progressively worsen ObamaCare’s risk pool as healthy enrollees who currently pay more into the system than the expected value of their coverage exit the exchanges. Premiums will rise at an accelerating rate for those who stay in the exchanges, forcing Democrats to find new funding or watch the program implode.

How to Complete the Escape From ObamaCare

There are two ways to restore Americans’ freedom to buy health insurance independent of ObamaCare. First, HHS should grant waivers to states that want to let private insurers offer state-approved plans exempt from ObamaCare’s coverage mandates and rigged risk pool, enabling these states to expand health-care freedom inside their own borders. Second, Congress should amend ObamaCare to permit insurers to sell individual policies outside of the exchanges that are totally independent of ObamaCare regulations, which would dramatically increase the options available to every American.

Idaho is the first state to allow plans that stray from ObamaCare’s coverage mandates, and Blue Cross of Idaho has proposed five “Freedom Blue” plans outside the state exchange. The plans provide coverage similar to what is available on the exchange, but many are listed at about one-third the price because premiums are set to match individual health-risk profiles rather than subsidize the riskiest enrollees. The new plans also boost affordability by offering higher deductibles.

Idaho’s best chance at obtaining the feds’ blessing for its state-approved plans is to make the plans renewable every 12 months. This would allow them to qualify for the limited-duration exemption recently expanded by HHS. In a March 8 letter the administrator of the Centers for Medicare and Medicaid Services told Idaho Gov. Butch Otter : “These state based plans could be legally offered under the PHS [Public Health Service] Act exception for short-term, limited-duration plans.”

Democratic leaders in Congress were quick to recognize that Idaho’s plan to grant health-care freedom to its citizens posed a mortal threat to ObamaCare. Sens. Patty Murray and Ron Wyden were joined by Reps. Frank Pallone and Richard Neal in sending an intimidating letter to the director of Idaho’s Department of Insurance, threatening massive fines and demanding emails and phone records. Since Idaho has shown no sign of backing down, this battle is certain to escalate. Democrats clearly understand that if Idaho is able to market its “Freedom” insurance, as many as 30 Republican-led states will quickly follow its lead. Health-care freedom in Idaho could lead to the de facto end of ObamaCare throughout America.

The Trump administration and Congress are also working to expand health-care freedom nationwide. When the current administration reversed President Obama’s policy of making cost-sharing payments to keep insurance companies in the exchanges, insurers responded by raising the price of their federally subsidized benchmark insurance options. This premium increase on the benchmark policies triggered an automatic increase in the subsidies, all funded by federal taxpayers. State insurance regulators conveniently looked the other way in 2017, but ObamaCare specifically granted the federal government rate-review powers to prevent insurance companies from gaming the system. The benchmark ruse is unlikely to pass HHS scrutiny in 2018.

Before the repeal of the tax penalty, Democrats couldn’t bear the political cost of being seen as dismantling ObamaCare, but they will be forced to act as the program contracts. As healthier families flee the exchanges and premiums spiral, Democrats will be desperate to boost the subsidies. Politically, it will be very difficult for Democrats to deny people who have voluntarily left the exchanges the freedom to buy their own health insurance independent of ObamaCare regulations. Their stubborn reluctance to permit more-flexible plans will provide cover for Republicans to oppose increasing subsidies to the exchanges.

State and federal action to restore health-care freedom would allow new health-care initiatives, such as the partnership among Amazon, Berkshire Hathaway and JPMorgan Chase , to increase innovation in the insurance market. If more than 40% of people enrolled in the exchanges are expected to flee even when the only alternative is to become uninsured, we can expect the number exiting the exchanges to grow substantially when private alternatives are made available. This accelerated exit will reduce ObamaCare to a high-risk insurance pool. At that point the country can have a real debate about how high-risk care should be structured and funded, and whether it should be administered by states or the federal government. Such a program would undoubtedly enjoy stronger bipartisan support than America’s current restrictive health-care law.

Mr. Gramm, a former chairman of the Senate Banking Committee, is a visiting scholar at the American Enterprise Institute.

Appeared in the March 16, 2018, print edition.

Putin Won’t Lose the Election, but He’s Losing Russians

March 8, 2018
With incomes stagnant and growth tepid, Moscow plans to spend trillions of rubles to boost the economy.
Tanks at UralVagonZavod’s factory in the Ural Mountains.


Six years ago, when President Vladimir Putin last ran for president, workers at the UralVagonZavod factory in Nizhny Tagil volunteered on national television to come to the capital to confront the Muscovites who’d taken to the streets to protest his continued rule. In early March he was back at the Ural Mountains plant for a campaign stop, telling employees, “I tried not to let you down.”

While no one in a hand-picked group of listeners there challenged him, the mood among some of their colleagues in the gritty city isn’t nearly so upbeat. Layoffs and wage cuts have swept the state-owned company, a Stalin-era giant that churns out battle tanks and other heavy equipment. “Salaries are down 40 percent,” says Alexei Dimitrov, who heads a small union at the factory that’s filed a suit challenging the wage cuts. “They left us no alternative but to go to court.

Even with Putin cruising to a virtually certain win in the March 18 election, the Kremlin is worried that pocketbook issues are a growing liability. Never mind that a credit rating company elevated Russia out of the “junk” category last month. For many, the pain of the most recent recession—which at seven quarters was the longest of Putin’s rule—lingers. Video simulations showing new missiles seemingly targeting Florida got most of the attention at Putin’s state of the nation address on March 1, but he actually devoted more of the speech to promising to lift living standards that are lower than they were during his last campaign.

“We need to make a decisive breakthrough in the prosperity of our citizens,” Putin said. “Falling behind is the main threat, that’s our enemy.” He pledged to halve the number of Russians living in poverty—now 20 million—and boost per capita income by half by the middle of the next decade.

Putin’s ambition at the start of his 18-year rule was to overtake Portugal in living standards—a milestone that looks increasingly out of reach. Incomes more than doubled in the first decade of his tenure, but they’ve stalled and are roughly where they were in 2010. In a January poll commissioned by the central bank, almost two-thirds of Russians said their financial situation hasn’t improved in the past 12 months, and nearly half expect little difference over the coming year.

With little prospect for another big runup in oil prices or an easing of Western sanctions, the Kremlin’s options for igniting growth are limited. The central bank estimates the best Russia can hope for is 1.5 percent to 2 percent a year. Among the factors holding back the economy are a shrinking workforce and years of underinvestment.

In his speech, Putin cataloged trillions of rubles in spending planned for health care, pensions, and roads, but he was vague about how he’d pay for it. Despite the recent upgrade in its credit rating, Russia is unlikely to significantly step up its foreign borrowing, as the Kremlin remains wary of increasing Western leverage over the country, particularly with sanctions in place. That’s why his aides have spent months working up a package of painful measures to offset planned new spending, according to people involved in the discussions.

Among the proposals on the table are raising income taxes and eliminating breaks for food and other necessities, as well as trimming benefits. Near the top of the list is an increase in the retirement age, now 60 for men and 55 for women. “If we don’t raise taxes or the pension age, it will be difficult to seriously improve pensions and the quality of health care,” said Maxim Oreshkin, minister for economic development, during a March 5 appearance on a late-night talk show.

“The challenge for the next term is to set in motion the mechanisms of restructuring the economy, shifting its structure toward sectors that develop human capital,” says Yaroslav Kuzminov, dean of the Higher School of Economics in Moscow and a frequent adviser to the government on economic policy. Curbing the country’s reliance on oil and gas exports is easier said than done, though—just ask Saudi Arabia. Boosting investment in education and infrastructure is a good start, but it may not be enough to arrest Russia’s slide in the economic league tables. The country broke into the top 10 in 2008, after almost a decade of oil-fueled growth, but it will fall back to No. 17 within the next 15 years as South Korea, Spain, and Turkey, among others, leapfrog it, according to a December study by the Centre for Economics & Business Research in London.

In Nizhny Tagil, Dimitrov and his colleagues at UralVagonZavod aren’t having much success in the courts with their legal challenges to the wage cuts. But they got a little boost just a few days before Putin’s visit, when the factory unexpectedly announced a raise of 6 percent, the first since 2016. “That will improve the workers’ mood a bit,” but it’s far from enough to make up for the losses of the last few years, Dimitrov says.

BOTTOM LINE – On the eve of presidential elections, Putin pledged greater investment in roads and pensions. Measures to offset the additional spending will arrive after the polls close.

Uncle Sam must rein in retirement benefits or we’re headed for economic disaster — “the most predictable economic crisis in history.”

March 6, 2018

By Brian M. Riedl


The American polity recently tore itself apart debating the morality of adding $1.5 trillion in tax cuts to the national debt. Yet the $82 trillion avalanche of Social Security and Medicare deficits that will come over the next three decades elicits a collective shrug. Future historians — and taxpayers — are unlikely to forgive our casual indifference to what has been called “the most predictable economic crisis in history.”

Over the next 30 years, according to data from the Congressional Budget Office, Medicare will run a $40 trillion cash deficit, Social Security will run a $19 trillion cash deficit and the interest on the resulting program debt will be $23 trillion. (To inflation-adjust these figures, trim by one-third.)

CBO projects that, over the next 30 years, the national debt will grow from $20 trillion to $92 trillion ($52 trillion after inflation) — or much higher if interest rates return to historically typical levels.

Politicians brush aside the issue by promising easy fixes. Tax the rich? Doubling the 35 and 37 percent tax brackets to 70 and 74 percent would close just one-fifth of the long-term Social Security and Medicare shortfall. Even seizing all annual income earned over $500,000 would not come close. Popular proposals to more aggressively tax banks, investors, hedge-fund managers and oil and gas companies are a cumulative rounding error compared with these deficits.

On the spending side, slashing the defense budget to European levels would close just one-seventh of the gap. Cutting waste and foreign aid can close only a small percentage of it.

In reality, balancing the long-term budget without reforming Social Security and Medicare (and fast-growing Medicaid) would require either nearly doubling income-tax rates across the board or eliminating nearly every remaining federal function.

Steep economic growth could close only some of the shortfall. Growth rates will already be limited by the labor-force slowdown caused by Baby Boomer retirements and declining birth rates.

That leaves productivity to drive growth. Even assuming the white-hot 1.8 percent rate that prevailed from 1992 through 2005, the resulting higher incomes and tax revenues would seem to close 40 percent of the funding gap — until one accounts for the fact that higher incomes would automatically result in higher Social Security benefits when these workers retired.

Finally, there’s the argument that Social Security and Medicare represent an unbreakable, unamendable promise to the elderly, consequences be damned. Of course, today’s teenagers never signed up for this budget-busting deal. Besides, benefits have been repeatedly expanded far beyond what current retirees were promised while working.

Those reasonably claiming “I just want the benefits I earned!” should be considered allies for reform. Setting lifetime Social Security and Medicare benefits equal to the net present value of each person’s lifetime contributions to the systems — and not a penny more — would eliminate most of the long-term shortfall.

More realistically, Social Security can be addressed by gradually raising the eligibility age and more aggressively means-testing benefits for wealthy retirees. Medicare reform can require that upper-income seniors pay the full cost of their physician and drug coverage (which, unlike hospital coverage, is not “earned” with prior payroll taxes) and eventually transition to a premium-support model that harnesses private-sector choice and competition to slow cost growth.

These reforms would largely shield younger taxpayers, because drowning the next generation in taxes is no better than drowning them in debt.

Restructuring cannot wait. Every year of delay sees 4 million more Baby Boomers retire and get locked into benefits that will be difficult to alter, and yet the window is closing fast on the longstanding promise to exempt current and near-retirees. More than one-third of all Baby Boomers have already retired, and another third will retire over the next six years.

Ultimately, the math always wins. The deficit will continue expanding, key programs will continue to be squeezed and taxes will rise until politicians and voters finally confront the elephant in the room.

Brian Riedl is a senior fellow at the Manhattan Institute. Reprinted with permission from National Review.

Red and Blue States Move Further Apart on Health Policy

February 28, 2018

Cost and the scope of coverage will look very different depending on which party is on control

Health-care options in any given state are likely to depend on which party controls the statehouse. Here, a hospital room in Cumming, Ga., early this year.
Health-care options in any given state are likely to depend on which party controls the statehouse. Here, a hospital room in Cumming, Ga., early this year. PHOTO: ROBERT RAY/ASSOCIATED PRESS

Democratic and Republican states are moving in opposite directions on health policy, leaving Americans with starkly divergent options for care depending on where they live.

The Trump administration and congressional Republicans, by easing many of the Affordable Care Act’s nationwide requirements after failing last year to repeal the entire law, are effectively turning major components of health policy over to the states. The roughly half of states controlled by Republicans are therefore moving aggressively to roll back the law widely known as Obamacare, while the smaller number of Democratic states are working to bolster it.

As a result, the health-care options in any given state are likely to depend on which party controls the statehouse. That dictates access, cost and coverage, particularly for the roughly 17 million people nationwide who buy their own insurance and the 29 million people who lack it entirely.

Increasingly, state health-care policy reflects the ruling party’s goals. In Democrat-controlled California, a patient with a costly medical condition may likely get relatively affordable premiums, while a young, healthy and self-employed professional could pay more. In Republican Texas, the sicker patient will likely do less well or go without coverage, while the younger, healthier one will have less-comprehensive options that may cost far less.

“You’re seeing red and blue states moving further from each other,” said Sam Richardson, a health economist at Boston College. “You’re going to have blue states hang on to what they can. For red states, the more they can dismantle Obamacare, the more they’ll look like before Obamacare. They’ll have higher rates of uninsured, but other innovations.”

This divergence reflects a seismic rollback of the Obama administration effort to promote a more standardized, nationwide health system. The ACA sought to have the healthy help cover the costs of the sick and the wealthy help cover the poor, and it has led to about 20 million people gaining health coverage. But Republicans have long balked at the ACA’s idea of taxing higher earners to pay for health care and have opposed the law’s mandate that individuals who don’t get care through their job or through a government program get coverage or pay a penalty.

The divergence has existed for years. Eighteen largely GOP states never accepted the federal money to expand Medicaid under the ACA. But now it is widening, with GOP states seeking work requirements in the program, and that gap is also accelerating in the individual insurance market.

After congressional Republicans tried repeatedly last year, unsuccessfully, to repeal the health law, they did repeal the individual mandate, beginning in 2019.

In the meantime, the Trump administration has worked to take apart the law piecemeal. One proposal would allow the type of less-comprehensive health plans limited under the ACA. Another would let businesses and some individual band together in associations to get non-ACA-compliant plans. Those actions, along with a willingness to impose new requirements on Medicaid, have emboldened Republican-led states to further undercut the law they have long opposed and raised alarm in Democratic states, where lawmakers are preemptively looking to buttress the law from any GOP policy changes

Health and Human Services Secretary Alex Azar at a conference last week in Washington.
Health and Human Services Secretary Alex Azar at a conference last week in Washington. PHOTO:JOSE LUIS MAGANA/ASSOCIATED PRESS

On Tuesday, 20 Republican state attorneys general sued to overturn the law, arguing that it is unconstitutional now that the individual mandate has been repealed.

Under the administration’s proposals, states are expected to be get more flexibility in waiving some ACA requirements and oversight of plans that don’t comply with the ACA.

Democrats say non-ACA-compliant plans would siphon younger and healthier people away from the law’s exchanges, which they say would cause premiums for older and less-healthy people to jump. Republicans say being able to offer cheaper and less-comprehensive plans amounts to more consumer choice.

Health and Human Services Secretary Alex Azar told reporters he is exploring options to let states “create affordable, individualized insurance” for their systems.

“There is no single one right answer,” he said.

States like Indiana and Kentucky are being allowed to impose certain changes on Medicaid for the first time, like requiring recipients to work or undertake similar activities before they get benefits. In Idaho, Republican Gov. Butch Otter is largely flouting the ACA by letting insurers sell plans that don’t comply with the law.

By contrast, Democrat-led states such as California and Maryland are looking to block or limit the expansion of cheaper and less-robust health plans that don’t adhere to ACA rules. Nearly a dozen states are considering measures requiring residents to have health coverage, essentially re-imposing an individual mandate with new modifications.

Health Care in America: Insurance Gaps and Medical Deserts
In Trenton, Tenn., and similar rural communities around the country, many residents are underinsured or uninsured and struggle with medical costs, often forgoing care. This burdens local hospitals, which in turn close or scale back care, putting patients at risk. Photo: Clara Ritger/The Wall Street Journal

Washington state Insurance Commissioner Mike Kreidler said he is drafting a rule that would ban so-called short-term plans, which aren’t ACA-compliant, from being carried longer than 90 days.

“How are we going to protect this from the feds?” Mr. Kreidler said. “You’re going to see states take these types of action.”

New Mexico, at the behest of the state legislature, is studying plans to allow more people to buy into Medicaid, a state-federal program for the low-income and disabled.

As the states fight it out, the Republicans’ proposed and actual changes could erode some of the ACA’s basic goals like ensuring that health insurance bought by individuals meets certain standards, and that it is priced equally regardless of a person’s medical history.

States with a large share of Democratic legislators, especially those with a Democratic supermajority, are more likely to have generous public health insurance programs and more regulated private insurance than red states, according to a 2015 report by University of Houston researchers.

“If I was chronically ill and didn’t get insurance through an employer and if I was in a red state, I’d be really worried right now,” said Nicholas Bagley, a University of Michigan law professor.

Republicans counter that greater autonomy works best. GOP-designed arrangements tend to allow for lower taxes, they say, while letting individuals find insurance policies that work for them, rather than forcing people into rigidly defined plans.

“Give us flexibility at the state level,” Republican Ohio Gov. John Kasich told reporters recently. “Let me design a Medicaid program I want. Let’s change the Obamacare essential benefit to what I want.”

Insurers that offer ACA plans want to see those markets strengthened, so that rates wouldn’t surge and enrollment, particularly among healthier consumers, would remain steady.

But some companies see a business opportunity in the potential growth of non-ACA-compliant plans. UnitedHealth Group Inc. Chief Executive David Wichmann has said his company has a lot of experience in the types of policies that would increase under the Trump administration’s proposals.

Write to Stephanie Armour at