Focusing on Congressional Efforts to Control Healthcare Pricing, They Do Not

Perhaps, I am on the wrong side of the argument on how to control healthcare costs of which one proposed solution is a part of the latest budget bill passed in a bipartisan effort in Congress on December 19, 2019. Others may disagree with me on my thoughts.

What was passed was superficial and will not fix the rising cost of healthcare which drives increased healthcare insurance deductibles and premiums. Oh, and surprise billing in hospitals still lives! Fixing surprise billing was set aside by Congress.

The latest bill (H.R. 1865) to impact the ACA passed the House 297 to 120 and the Senate 71 to 23. In the bill, the Health Insurance tax will be repealed in 2021, the Cadillac tax in 2020, and the Medical Device tax in 2020. The repeal of the three taxes will result in the loss of a projected revenue of $373.3 billion over 10 years. The largest projected revenue loss will come from repeal of the Cadillac tax ($197 billion), followed by the Health Insurance tax ($150.8 billion), and the Medical Device tax ($25.5 billion).

All repealed for Congress to be able to say we pushed back on costs and helped to prevent the rising costs by blocking mandated tax increases. Except they also undercut the ACA and increased the annual deficit.

I am going to skip the history involved in the delays of these taxes and go right to my objections after I tell you what these taxes were expected to do.

Cadillac Tax: As Newsweek reported in 2017, the so-called “Cadillac tax” would have capped the tax deductions individuals could claim based on their health insurance benefits. It would have imposed a 40 percent excise tax on employer-sponsored plans that exceeded $10,000 in premiums per year for a single person or $27,500 for a family. The Cadillac tax was set (for the umpteenth time) to take effect in 2022. The reasoning for this tax was to capture special plans for Execs whose plans were hidden amongst the regular plans.

Health Insurance Tax: The CMS’ Office of the Actuary calculated that the net cost of private health insurance grew 15.3% in 2018, up from 9.5% in 2017, the biggest increase since 2003. The actuaries said this was driven largely by the temporary reinstatement of the Health Insurance tax, which was suspended by Congress this year. Actuaries can say what they wish too, except it ignores the last 10 years of increased healthcare costs untouched by this tax.

Medical Device Tax: The medical device tax was a 2.3 percent excise tax on gross sales of medical devices used by humans (not animals) such as x-ray machines and hospital beds. It was implemented in 2013 but had been suspended since 2015, according to the Tax Foundation. It was thought the increase in healthcare would spawn the sales f equipment (it has) and the revenue  would subsidize the ACA.

Preventing the implementation of these taxes does “nothing” to forestall increasing healthcare insurance deductibles and premiums and healthcare costs. Also keep in mind, portions of the ACA were passed under Reconciliation, the loss of revenue from the tax cancellation may cause other cuts to the ACA as the ACA must be deficit neutral at 10 years which is 2020 (?). Fix the issue!

Past the leap, what will impact the rising costs and resulting prices of healthcare and healthcare premiums.

The issue with healthcare insurance deductibles and premiums rising has nothing to do with the three taxes which only one of the three have an impact on costs today and Congressional actions could have a greater impact on the future of the ACA. It is the rising prices and base costs stupid as Uwe Reinhardt pointed to in the past and would do also today. There are any number of papers, studies, articles, etc. pointing to the same issue repeatedly. And why the our elected politicians (including my own) who represent us do not point to the healthcare industry as the cause is baffling to me. Not to let healthcare insurance off the hook, with each price increase, their take increases. Some quickie articles and I am done.

•  Funded by the Commonwealth Fund and published by Health Affairs, the costs impacting healthcare. Researchers analyzed hospital and physician prices for inpatient and hospital-based outpatient services as well as for four high-volume common services: cesarean section, vaginal delivery, hospital-based outpatient colonoscopy, and knee replacement. From 2007 to 2014; hospital-prices for inpatient care grew 42 percent compared to 18 percent for physician-prices for inpatient hospital care and hospital-based outpatient care, hospital-prices rose 25 percent compared to 6 percent for physician-prices. There was no difference in results between hospitals directly employing physicians and indirectly employing physicians. Hospital prices accounted for over 60 percent of the total price of hospital-based care.
• Kocher and Berwick; While Considering Medicare For All: Policies For Making Health Care In The United States Better,”  “The biggest drivers of premium increases are hospital price increases. Hospital prices have risen much faster than physician prices: a whopping 42 percent from 2007 to 2014. Hospitals have exploited market consolidation to raise prices by employing multitudes of specialist doctors, making them “must haves” in insurance networks. In theory, consolidation should generate administrative cost synergy and quality benefits, but the facts have not borne out that promise. We believe that no hospital should be able to charge prices that are more than Medicare prices plus 20 percent, “
• The ICER Report (Unsupported Price Increase Report) compared the percentage increases in the Wholesale Acquisition Cost (WAC – second Column) to the increase in the Medical Care Consumer Price Index (CPI) over the same period and excluded those drugs with a WAC increase less than 7.32% or two times the increase in Medical Care CPI over the same period. The medical care CPI is one of eight major components of the CPI recorded and reported by the US Bureau of Labor Statistics. Price increases of twice Medical Care CPI without delivering any discernible or increased impact for the patient, healthcare, society, etc.? A major portion of economic growth inflationary? No comments from the Fed, etc.
•  “Trends in Prices of Popular Brand-Name Prescription Drugs in the United States,” In this economic evaluation of 49 common top-selling brand-name drugs, 78% of the drugs that have been available since 2012 have seen an increase in insurer and out-of-pocket costs by more than 50%, and 44% have more than doubled in price. And also here; Does President Trump Read JAMA Network Open?

The links are to the articles which are accessible to you and some of the links are also to my own words which also cite the links and other supporting evidence of how the congressionally backed healthcare industry is picking our pockets. They are good reads and will support my contention of legislating pricing transparency is a fools errand. Go after the industry. By the way, this bill can be called a huge give away to the healthcare industry.

Bipartisan giveaways to the pharmaceutical industry in the recent H.R. 1865 passed by the Senate.

– Delay in the bill to prevent Surprise Billing.

– H.R. 1865 Page 1503: A provision of the spending bill (H.R. 1865) would expand the definition of a biologic drug to include “chemically synthesized polypeptides,” medicines such as Novo Nordisk’s Victoza. Public Citizen and the Association for Accessible Medicines warned the provision revising current law gives these drugs a 12-year exclusivity period for biologics well beyond the former five-year of exclusivity granted to small-molecule drugs. The bill enables companies extend product monopolies at the expense of American patients.

The argument by the pharmaceutical industry has been the exclusivity is needed to recoup the costs of R&D, manufacturing, and bringing a new drug to market. The Coalition Against Patent Abuse claims the extension of exclusivity allows the industry “to significantly delay competition for newly-developed medicines, particularly those used to treat diabetes.” There is controversy in this change in identifying the impact of it going forward with some claiming it will help in the bringing to market new generic drugs sooner. The industry is jumping up and down as the bill favors them. Go figure.

World Health Organization, Technical Report on Cancer Drugs: The median time to generate revenue to fully cover risk-adjusted R&D cost of US $794 million was 3 years (range: 2 years; 5 years, n=73). For the maximum estimated risk-adjusted cost of R&D (US$ 2.827 Bn), the time to cost recovery was 5 years (range: 2 years; 10 years, n=56). A threshold analysis found that 99% of the 45 cancer medicines with sales data for 10 years from their first year of launch had generated incomes sufficient to at least offset the risk-adjusted R&D costs irrespective of the assumed threshold values for R&D costs. Do they really need 12 years of exclusivity when they just struck it down in the NAFTA remakes?

Single Payor: I started a conversation with Kip Sullivan in Minnesota who is active in bringing about Single Payor there. He is well versed in Single Payor. Policy Analysis by Kip Sullivan, Healthcare for All – Minnesota. Here are three articles explaining Single Payor, another talking to Bernie Sander’s plan falls short, and also the House’s Jayapal healthcare plan. Good reads.

Run75441 (Bill H)