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Another Look at Drug Pricing, Costs, and Why

Median total costs Table for the most common prescriptions of each of the 49 high-volume brand-name drugs from 2012 through 2017 as detailed in JAMA Network Open’s “Trends in Prices of Popular Brand-Name Prescription Drugs in the United States” 2019.”

A Bit of A Summary: This particular table relates back to a post I wrote; Does Trump Read JAMA Network Open? which reviewed the latest JAMA findings (Trends in Prices of Popular Brand-Name Prescription Drugs in the United States) on pharmaceutical price increases from 2012 to 2017. It is another in a series of articles which have looked at the rising prices of pharmaceuticals. The World Health Organization (2018) findings reflected on R & D costs for cancer drugs and the amount of time needed to recoup those costs (median of 3 years for $750 million) with an average return of $14. 50 for every $1 invested in R & D for cancer drugs.  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).

Click on the JAMA Table: Median Total Cost of Top-Selling Brand-Name Drugs 2012 – 2917 to enlarge and again to magnify if needed.

Taken “From the Trends in Prices of Popular Brand-Name Prescription Drugs in the United States” findings, substantial cost increases among these drugs was near universal, with a 76% median cost increase from January 2012 through December 2017, and almost all drugs (48 [98%]) displaying regular annual or biannual price increases. Of the 36 drugs available since 2012, 28 (78%) have seen an increase in insurer and out-of-pocket costs by more than 50%, and 16 (44%) have more than doubled in price. Insulins (ie, Novolog, Humalog, and Lantus) and tumor necrosis factor inhibitors (ie, Humira and Enbrel) demonstrated highly correlated price increases, coinciding with some of the largest increase in drug costs. Relative price changes did not differ between drugs that entered the market in the past 3 to 6 years (2012 – 2017)  and those having been on the market longer (number of drugs, 13 vs 36; median, 29% increase from January 2015 through December 2017; P = .81) nor between drugs with or without a Food and Drug Administration – approved therapeutic equivalent (number of drugs, 17 vs 32; median, 79% vs 73%; P = .21). Changes in prices paid were highly correlated with third-party estimates of changes in drug net prices (ρ = 0.55; P = 3.8 × 10−5), suggesting that the current rebate system, which incentivizes high list prices and greater reliance on rebates, increases overall costs.

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 .

CPI for Medical consists of medical care services (professional services, hospital and related services, and health insurance) and medical care commodities (medical drugs, equipment, and supplies). ICER using overall Medical CPI and not a lone services or commodity related one or subcomponent(s) of either or each was to reflect increases in drug prices relative to inflation in the overall price of medical care. The 77 drugs shown in the ICER Table 2.2 had an increase in Wholesale Acquisition Cost (WAC) greater than 7.32% over  the two-year period (4th quarter 2016 – 4th quarter 2018). The remaining 23 drugs were excluded from further analysis even though they may have been greater than one times CPI.

The ICER Table 2.3 depicting 9 drugs of the 77 shows  the percentage change in net price (Column 3) over the two-year period from the fourth quarter of 2016 to the fourth quarter of 2018, and the and the increase in drug spending during calendar years 2017 and 2018 and the 4th column depicts net revenue after discounts, rebates, concessions to wholesalers and distributors, and patient assistance programs same as Table 2.2 in the report. Only the ICER Table 2.3 is shown here (JAMA chart above).

The first seven drugs under assessment did not display evidence meeting the criteria accepted evidence grading system called GRADE. As a result, the seven are reported as having price increases “unsupported by new clinical evidence.” GRADE is a method used by systematic reviewers and guideline developers to assess the quality of evidence and decide whether to recommend and intervention.  GRADE differs from other appraisal tools for three reasons: (i) because it separates quality of evidence and strength of recommendation, (ii) the quality of evidence assessed for each outcome, and (iii) observational studies can be ‘upgraded’ if they meet certain criteria.

So What Does All of This Mean?

Other reports recognize similar. Healthcare costs are increasing at a much higher rate than inflation, enough so, JAMA is reporting patented pharmaceutical price increases to be 50% to 100% between 2007 and 2014, as are the generic versions, and those introduced during 2007 and 2014 have seen similar sizeable increase. The exhibited JAMA report details the increases.

The ICER report goes a bit further and establishes a benchmark of increase at twice Medical CPI and whether a price increase greater than the benchmark can be justified by the result of significant value brought to the market to account for the increase. At greater than a generous twice Medical CPI, the top nine drugs exceeded this benchmark and after investigation,  did not bring significant value to the market place following the 4 significant values claimed by pharmaceutical companies. This analysis was completed on  9 of 77 drugs having price increases greater than twice Medical CPI. Seven of the nine drugs were shown to have price increases for which additional value could not be substantiated. The remaining two had evidence of clinical value which could not be examined at this time. Then there is the balance of the 77 drugs which have had price increases greater also. Legit or not?

Remember, the ICER is the organization which justifies pricing for many of the new drugs coming to the market place.

The World Health Organization Report reviews the costs of R & D for Cancer Drugs which pharmaceutical companies blame as a the major factor for higher prices over the life of their patents. The WHO document reports the R & D costs are recouped in a median 3 to 5 years for R & D investments of $750 million to $2.8 Bn. Drug patents are significantly long than the recovery. Rent taking . . .

This is just pharma alone and I did not look at hospitals, clinics or hospital supplies. Briefly, “Health Affairs – Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007–14″ reports  inpatient care at hospital prices grew 42 percent, while physician prices grew 18 percent. Similarly, for hospital-based outpatient care, hospital prices grew 25 percent while physician prices grew 6 percent. Both this report and Kocher and Berwick’s “While Considering Medicare For All: Policies For Making Health Care In The United States Better: Health Affairs” point to increases in hospital care as the leading cause of increased healthcare insurance premiums.

The emphasis by politicians has been on the pricing of drugs without looking at the supply chain and the PBM’s influence on it; without looking at the costs of R & D, the return from sales revenue and how quickly those costs are recovered; and without looking at the exclusivity granted drugs through patents that allow the ability to increase pricing without a returning benefit clinically, socially, to the system, and most of all to the patient. The emphasis by government should be a review of drug costs to establish a fair market value/price. I do not see a foundation being established for the setting of pricing.

 

Trends in Prices of Popular Brand-Name Prescription Drugs in the United States, JAMA Network Open, Nathan E. Wineinger; Yunyue Zhang; Eric J. Topol, May 2019

Unsupported Price Increase Report, Institute for Clinical and Economic Review; David M. Rind, Foluso Agboola, Varun M. Kumar, Eric Borrelli, Steven D. Pearson; October 2019

Technical Report, Pricing of cancer medicines and its impacts; World Health Organization; 2019

While Considering Medicare For All: Policies For Making Health Care In The United States Better; Health Affairs; Kocher and Berwick; 2019

Health Affairs – Hospital Prices Grew Substantially Faster Than Physician Prices For Hospital-Based Care In 2007–14;” Health Affairs; Zack Cooper, Stuart Craig, Martin Gaynor, Nir J. Harish, Harlan M. Krumholz, and John Van Reenen; 2019

 

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Georgetown University Report Finds Number of Uninsured Children Now at Highest Levels –

Since Major Provisions of Affordable Care Act Took Effect

Key Findings:

  • The number of uninsured children in the United States increased by more than 400,000 between 2016 and 2018 bringing the total to over 4 million uninsured children in the nation.
  • These coverage losses are widespread with 15 states showing statistically significant increases in the number and/or rate of uninsured children (Alabama, Arizona, Florida, Georgia, Idaho, Illinois, Indiana, Missouri, Montana, North Carolina, Ohio, Tennessee, Texas, Utah, West Virginia), and only one state (North Dakota) moving in the right direction.
  • Loss of coverage is most pronounced for white children and Latino children (some of which may fall into both categories), young children under age 6, and children in low- and moderate- income families who earn between 138 percent and 250 percent of poverty.
  • States not expanding Medicaid to parents and other adults under the Affordable Care Act have seen increases in their rate of uninsured children three times as large as states that have expanded Medicaid.

Causes of Decreased Coverage

The Georgetown Health Policy Institute (full report) details in its report the following factors have contributed to the erosion in children’s health coverage: efforts to repeal the Affordable Care Act and cut Medicaid; an intentional delay by the Republican administration to fund the Children’s Health Insurance Program (2017); the elimination of the individual mandate penalty (2019); cuts to enrollment outreach and advertising pre-ACA enrollment; inadequate oversight by the federal government of state Medicaid programs which create more red tape barriers; and an administration enacted, climate of fear of deportation and intentional confusion for immigrant families discouraging them from enrolling eligible children in Medicaid or CHIP (2016).

The Republican party has made it a goal to repeal the ACA as passed by Barack Obama and Democrats early on in its administration. Under President Trump, the Republicans have done everything possible to deny healthcare coverage to legal immigrants and their families, the poor, and those who are marginalized. The full report includes a series of charts which pictorially represents the issues briefly cited here. It also includes a state by state analysis of the uninsured. It should come as no surprise, the South has 52% of the total uninsured children with Texas have 21.5% of the total uninsured children in the nation.

The Number of Uninsured Children Is On the Rise,” October 2019, Georgetown Health Policy Institute, Joan Alker and Lauren Roygardner

Families looking for information on how to enroll their children in Medicaid or CHIP should call 877-KIDS-NOW or visit insurekidsnow.gov

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Unsubstantiated Drug Price Increases

The ICER (Institute for Clinical and Economic Review)

Is an independent and non-partisan research organization. Its purpose is to evaluate the clinical and economic value of prescription drugs, medical tests, and health care and health care delivery innovations. ICER conducts rigorous analyses of all clinical data with key stakeholders to include patients, doctors, life science companies, private insurers, and the government and translate the evidence into policy decisions that lead to a more effective, efficient, and just health care system.

As explained by their site information, ICER is known as the nation’s independent watchdog on drug pricing. It’s drug assessment reports include a full analysis of how well each new drug works and the resulting “clinical value, quality of life, benefit to the health-care system and society” used to establish a price. Using the drug assessment report, a “value-based price benchmark” is established  reflecting how each drug should be priced addressing all four factors. Reports also evaluate the potential short-term budget impact of new drugs to alert policymakers to situations when short-term costs may strain health system budgets and lead to restrictions on patient access. Ensuring objectivity in its work, all ICER reports are produced with funding from non-profit foundations and other sources that are free of conflicts of interest from the life science industry or insurers.

What I have seen in the past is the ICER establishing pricing for new drugs taking into consideration these factors; “the patient’s quality of life, and the resulting benefits to the health-care system, and society.” This is the first time I am seeing the ICER looking at price increases and determining whether the value delivered substantiates a price increase. By the numbers: Here are the drugs (and manufacturers) highlighted in a recent ICER’s report, with the increase in net spending attributable to each drug’s price increase, and citing the increases could not be justified by the value delivered.

The figures reflect the dollars Americans spent on drug copays and other out-of-pocket costs in addition to the higher amounts people paid through health insurance premiums and taxes.

Past the leap is an explanation on how the ICER reached its conclusions for the nine drugs and the limitations to this findings.

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Trump’s Attack on Seniors and Medicare

It is a given, Trump’s new executive order  is calling for “market-based” pricing or whatever the market will bear pricing to replace Medicare set pricing. Trump sees a conflict between Medicare and the market. Well he is right; but, his solution ll only aggravate the problem of costs.  It will drive up costs for everyone in Medicare, destroy traditional Medicare as healthcare for the elderly, steer more people into costly commercial healthcare, reduce Medicare funds at a faster pace, and allow the already profitable healthcare industry to increase profits well beyond what it is today.

But, but are Medicare Advantage Plans ripping people and Medicare off? “Yes they are” a for-profit industry is profiteering by taking advantage of a system of healthcare for which they wanted to be a part. As Trump signed the EO, it is stunning to watch a bunch of seniors up on the stage clapping as el jefe was showing off his executive order allowing commercial healthcare to further pickpocket them, exploit healthcare, and destroy Medicare. All smiles there . . .

Medicare Advantage programs are managed differently than Fee for Service traditional Medicare. Besides providing a series of services not found in regular Medicare, the MA plans instituted a different form of physician/hospital payment called Capitation. Capitation Payments are theoretically used by managed care organizations to control health care costs. The VA is a good example of this type of managing costs. A capitation payment model  controls the use of health care resources by putting the physician at a financial risk if too many services are provided to patients or if quality decreases as witnessed by return patients for the same disorder or illness. To ensure patients do not receive suboptimal care through under-utilization of health care services, MAOs measure the rates of resource utilization in physician practices. These utilization reports are then made available to CMS to measure health care quality, utilization, costs, etc.. They are also linked to financial rewards such as withheld fees and bonuses.

Past the leap, I explain how the capitation model can be gamed by Advantage plans.

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Trump’s Executive Order, Backdoor Privatization of Medicare – Updated

Trump’s Executive Order is Backdoor Privatization of Medicare,” Social Security Works, Nancy Altman, October 3, 2019

Thursday and I had to search around for someone who is an expert on Medicare Advantage Plans and Original Medicare. Nancy is one of those experts. Friday and Andrew Sprung has his commentary Trump’s Bid To Destroy Medicare up on xpostfactoid blog.

Commercial Healthcare Insurance has been become more and more expensive over the years with copays increasing, deductibles increasing, and premiums going up. Todays commercial healthcare insurance costs a single person ~$7200 and a family ~$20,000 with the single person paying 18% of the premium and a family paying 31% of the premium. Approximately 36 million people make less than $25,000 annually (retail workers, personal care attendants, warehouse workers and others as well). In a crude calculation, xpostfactoid: “The past ten years of healthcare cost increase relative to wage increase might cost a full-time average wage earner with family coverage $3,000-$4,000 this year in added costs and decreased wages, or, say, 6-8% of income.”

Today’s Employer sponsored Healthcare Insurance is unsustainable. The same holds true for Medicare Advantage plans due to the Commercial healthcare Insurance offering it as well. There are few controls which can be applied on the commercial side of the healthcare industry which is why there is a big push for true single payer healthcare of which Medicare and Medicaid are. If you wish more detail on how commercial healthcare insurance has exploded in cost, my earlier post Health Benefits for 2019: Premiums Inch Higher, Employers Respond To Federal Policy offers more detail pictorially and in verbiage.

As I have written other times, Medicare and Medicaid have been instrumental in reducing excessive U.S. healthcare costs. Medicare and Medicaid set the prices paid to providers with provider input and commercial healthcare insurance uses those prices to set their payouts. Medicare hospital rates are an approximate half of those paid on average by commercial healthcare insurance. Rates paid to physicians average about 78% of commercial insurance rates. In high-demand specialties and in regions with fewer providers; commercial healthcare insurers often pay four, five and six times Medicare rates. If you remember from Kocher and Berwick’s article, they proposed setting commercial Healthcare (while it still exited in the interim) payouts at 120% of Medicare rates.

This action by Trump and Republicans is a huge giveaway to the commercial healthcare insurance sector and the healthcare industry. Right now Medicare Advantage uses Medicare rates. If they can beat Medicare Rates, they keep the difference. If they can not meet the rates, the consumer pays the difference. What Trump has done is reverse the format. Medicare Advantage Negotiated Rates will be used to set Medicare Fee For Service rates to providers.

Past the leap is the President of Social “Security Works” Nancy Altman’s statement on Trump’s Executive Order talking about Trump’s lies.

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Health Benefits for 2019: Premiums Inch Higher, Employers Respond To Federal Policy

The argument has been, if people like their private and company sponsored insurance plans they can keep them; but can they afford to do so?

In a recent LA Times and KFF survey, 40 percent of respondents said they had difficulty affording health insurance or health care or had problems paying medical bills. An approximate one-half of respondents said they or a family member skipped or postponed getting health care or prescriptions in the past twelve months due to cost concerns. Those with higher deductibles were more likely to report problems with affordability and were likely to say their insurance worsened over the past five years as compared to people with lower deductibles. Over the last decade, deductibles have increased 162% (see chart below).

The annual Kaiser Family Foundation Employer Health Benefits Survey: In 2019 the average annual premium for single coverage rose 4 percent to $7,188, and the average annual premium for family coverage rose 5 percent to $20,576. On average, covered employees contributed 18 percent of the cost for single coverage and 30 percent of the cost for family coverage with variation across firms. Of the 9,000 firms the survey was sent to, 4,395 firms answered this question of whether they offer healthcare insurance for a response rate of 58 percent.

Fifty-seven percent of firms offered health benefits to at least some of their workers. Smaller firm employees faced a higher risk of affordability especially during recessions. Fifteen percent of all covered workers including the 35 percent of covered workers in small firms are in plans with a worker contribution of more than half of the premium for family coverage (2019). In firms with a high percentage of low-wage workers, the average worker’s share for family coverage was 41%. This is many ways to say the same thing, the cost of healthcare is increasing and private company plans may no longer have a lessening capability to pay for healthcare.

Employer-sponsored health insurance is the largest source of coverage in the United States, covering about 153 million nonelderly people. I am sure many people would like to keep the private healthcare insurance and pay less for premiums than what they are.

Premium and Deductible Increase Charts and key thoughts after the leap

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“House Democrats’ Drug Price Strategy versus a Cost Strategy”

The House Democrats just released their drug pricing plan (summary) on the 19th. I read through it rather quickly and I found it to be interesting and having targets which could work. Rather than jump right into this, let’s talk about purchasing a bit and then what I believe would be better.

In a purchasing negotiation there are two typical ways used to negotiate a price to your company. The first strategy is to tell a supplier you have done a market study, another supplier can offer a better price, and  all things are equal between him and the other supplier. The supplier has a choice of beating the new price or offering something else of value to the customer which will negate the difference and can not be acquired from the other supplier (whip-sawing a supplier is unethical and many do it).

The second strategy requires more work and requires you to understand the cost of materials, the process and its cost, and the overhead involved. It does establish a base in which a buyer can use to negotiate with “all” suppliers. With the former strategy, you are guessing whether you have a good price because you do not know the cost of manufacture. Purchasing has to be a bit more than just a clerk.

The House plan intends to negotiate on pricing using other countries (Australia, Canada, France, Germany, Japan, and the United Kingdom) pricing to measure against for the same drug. The legislation establishes an upper limit for the price as no more than 1.2 times of the volume-weighted average of the price of the six countries reached in their negotiation. Australia, Japan, and United Kingdom use a cost-based method of pricing a drug.

Here is a brief explanation of the House plan:

Year 1 and each successive year, the Health and Human Services (HHS) secretary would identify up to 250 brand name drugs appearing to lack pricing competition and having the greatest cost to Medicare and the US healthcare system. The data would be collected from Medicare, Medicaid, and healthcare insurance to determine aggregate cost based upon price and volume of sales.

The total of 250 items picked with:

  • the top 125 drugs in Medicare Part B responsible for a full 96% of Part B spending,
  • and 125 drugs responsible for 45 percent of the spending in Part D.

As show in the chart. “More” to be read after the leap.

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Three Mile Island to Close

Eighty year old retired salesman John Garver the morning of March 28, 1979 remembers the acrid odor permeating Harrisburg as he walked out of a restaurant in Pennsylvania’s capital city.

“We had this smell in the air, wondering what it was. Well it didn’t take us long to find out … that the accident started.”

Fourteen miles away, the “accident” was unfolding in Unit 2 at the Three Mile Island Nuclear Power Plant, triggering panic, confusion, and within days an evacuation order.

The partial meltdown sparked national protests, prompted increased safety standards for the nuclear power industry, and largely stymied the industry’s momentum for decades until recent alarm over climate change has made some begin to embrace expanding carbon-free nuclear power.

Today, the remaining reactor (Unit 1) will generate its last kilowatt of energy and close. Three Mile Island was not a victim of the anti-nuclear movement; but rather, it lost out to simple economics. Even though the plant is licensed to operate until 2034, Exelon Generation is ceasing operations after the state of Pennsylvania earlier this year refused to throw the company a financial lifeline to keep it open.

The plant’s four cooling towers will remain a part of the landscape for now as foreboding concrete tombstones seemingly out of place in the bucolic Susquehanna Valley of central Pennsylvania and a reminder of what happened March 28, 1979.

Taking a Second Look

Senator Cory Booker; “Right now, nuclear is more than 50% of our non-carbon causing energy. People who think we can get there without nuclear being part of the blend just aren’t looking at the facts.”

Economic factors such as cheap natural gas and increasingly affordable renewable sources are slowly driving nuclear power out of business. Additionally, diminished demand has also hurt profitability in addition to rising operational costs. The closure of the Three Mile Island facility will leave 97 commercial reactors at 59 plants, scattered across 30 states, remaining in operation.

According to U.S. Energy Information Administration, the Watts Bar Unit 2 in Tennessee was the last nuclear power plant to come on line in 2010. Two more reactors are under construction in Georgia (Nuclear Regulatory Commission [NRC]). No more are planned as of yet.

Pro-industry group, World Nuclear Association: “Public confidence in nuclear energy in the US declined following the Three Mile Island accident. It was a major cause of the decline in nuclear construction through the 1980s and 1990s.”

Harrisburg resident and Chair of the Three Mile Island Alert organization Eric Epstein: “If there is a good thing that happened because of TMI, it had ignited a fierce debate on the viability of nuclear power being safe, reliable, economical, etc.”

It still remains to be seen if more reactors will be built to supplement US energy needs.

Three Mile Island closes: meltdown changed nuclear energy in America,” USA Today, Ledyard King, September 20, 2019

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“Great Drug Companies Out There”

About the time I finished up my post on Biden, I get this article from Dan discussing how Biden is kissing the butts of drug companies to more-than-likely get campaign donations. Everyone else has been concentrating on individual (you know people of lesser means) donations and many candidates have refused to take corporate donations. Biden is not ashamed to take money from corporations. Gee, whata surprise!

Candidate Joe Biden: “By the way, great drug companies out there — except a couple of opioid outfits,” the former vice president told donors at the Dallas home of David Genecov, a craniofacial surgeon.

Biden’s comment came during a discussion of medical research and the cancer “moonshot” initiative he launched during the Obama administration following the death of his son, Beau Biden, in 2015. That effort included his push for companies to collaborate more on research.

While praising the research of pharmaceutical companies, Biden also complained, complained about the high drug prices being experienced by people. Such issues had not stopped him before in supporting Republican candidates for Congress in the last election.

In 2018, Joe Biden came to Michigan’s 6th Congressional District to give a speech to the Economic Club of Southwestern Michigan and pivoted to the topic of Republican Fred Upton at the expense of the Democrat candidate Matt Longjohn. Matt came the closest to beating Upton and Biden gave Fred the boost he needed. Upton had won the district by 20% in previous elections and won it this time by less than 5%.

Biden was paid $200,000 to give a speech to a Republican business crowd supported by Fred Upton in Benton Harbor, Michigan during which he praised GOP Congressman Fred Upton even as Democrats were close to winning Upton’s seat in the gerrymandered Michigan 6th District during the midterms.

It was said Biden came to the 6th District to campaign for Fred Upton because Fred helped to push the 21st Century Cures Act through Congress in support of Biden’s moonshot plan. There is no confirmation of this. The Economic Club of Southwestern Michigan is heavily sponsored by Republican interests and also in one form or another by the Uptons. You would think with Repubs owning the House and the Senate back then, there would be a few issues of making this happen?

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Joe Biden: “How Are We to Pay for Single Payer Healthcare Alias Medicare for All?”

Joe knows the answer to this question and he is baiting the other candidates. Joe has a history of supporting big business interests as witnessed by his aggressive support of the banking industry with bankruptcy laws favoring banking against the needs of citizens and with a special intended harshness when it comes to student loans. Joe has sponsored or cosponsored every bankruptcy bill since 1997. With his question and his healthcare bill, I believe Joe  is courting the healthcare industry and the healthcare insurance industry’s support. Other candidates need to call Joe out on this.

Before moving to Medicare4All or a form of it, we need to attack the costs of healthcare which are rising at a clip greater than inflation.

Much of the payment for improved healthcare will come from negotiating with pharmaceutical companies, reducing the increasing cost of hospital inpatient and outpatient care, rolling back unnecessary pricing increases, reducing costs to 120% of Medicare costs today, etc. There are enough cost targets to attack which should provide a wealth of lower costs and funding for expansion. Healthcare Cost Drivers Pharma, Doctors, and Hospitals

Kocher and Berwick gave an outstanding recital of how we will get from Medicare and Commercial Insurance to just Single Payer Medicare4All. “While Considering Medicare For All: Policies For Making Health Care In The United States Better.” It is unlikely, Congress will move on Medicare4All in the beginning. It will take time. Today’s Medicare is not free from issues.

As the Director of Medicare and Medicaid and upon departing the position, Donald Berwick made this observation of today’s Medicare:

“20 to 30 percent of health spending is ‘waste’ that yields no benefit to patients, and that some of the needless spending is a result of onerous, archaic regulations enforced by Medicare and Medicaid.

He listed five reasons for what he described as the ‘extremely high level of waste.’ They are overtreatment of patients, the failure to coordinate care, the administrative complexity of the health care system, burdensome rules and fraud.

Much is done that does not help patients at all and many physicians know it.”

Within the PPACA, the issues with ACOs must be fixed. The initial PPACA ACO strategy has given hospitals the ability to exploit the market through consolidation, eliminating or minimizing competition in regions, leading to increased pricing, and enabling the employment of specialist doctors, making them “must haves” in insurance networks. As planned, the ACOs should have generated administrative cost synergy and quality benefits instead of enabling ACOs to consolidate and control prices.

Single payer does not use ACOs. In single payer, the government will pay hospitals, healthcare professionals, pharmaceutical and healthcare supply companies. The government will also set the budgets for hospitals and healthcare. Single Payer in Vermont was going to fail and failed due to cost because it used 3 ACOs to manage its plan. Bernie Sanders is also using ACOs in his plan. “Why the Bernie Sanders Bill Is Not Single Payer” The only fear I have of this type of arrangement is the influence of the healthcare industry on those determining pricing and accepting costs. The healthcare industry is attempting to establish a methodology using value brought to the patient clinically and in quality of life with resulting benefits to the health-care system and society also. It is an argument on the issue of the morality of higher prices. Single Payer will have to contend with this as much of the pricing argument is not justified.

The plan should be to gradually move from insurance administered healthcare (what Kocher and Berwick propose) to a single payer system similar to what Sanders proposes but minus ACOs. As I explained, there are enough cost targets to pay for much of the implementation to be derived from reducing costs in the present healthcare system.

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