Nurse: Dr Perkins, Mr Smith called. He said he called his insurance company and they told him that if YOU will fill out the form saying he REALLY needs the Lantus insulin, they will pay for it.

Me: I have filled out that form. That insulin is Tier 2 on his insurance. It isn’t that they won’t pay, it’s that he has to pay 50% of the cost until he reaches his maximum which is $7,000 in a year.

Nurse: He won’t like that.

Me: (exasperated) Have him call President Obama. Or, if he’d prefer, give him George W Bush’s number.

Prior to 2006, people on Medicare did not have prescription cover. Folks on Medicare would be discharged from the hospital after their congestive heart failure was made better through diuresis only to go home to a Lasix free household and re-accumulate fluid. Predictably, within the next several weeks the patient would be back again, drowning in their own fluids. We would try to cobble together enough samples and inexpensive generics to keep these folks out of the hospital. Another strategy was to talk them out of eating so they could afford the “good” medications.

In 2003, as part of the Medicare Modernization Act, Medicare Part D was created. The law, rather than directing Medicare to negotiate with the drug companies directly, created opportunities for private companies to “compete” for patients and to negotiate with drug companies. While not ideal, for the first 10 years it worked pretty well. My patients were able to get necessary drugs (with an emphasis on generics) for relatively reasonable prices.  Part D Providers were required to have drugs in each of the therapeutic classes making care relatively straightforward. Patients with congestive heart failure could be on the medicines necessary to avoid readmissions. Pharmacies were reimbursed for their services and pharmacists were elevated to part of the care team.

The design of the benefit was a little different from that of traditional medical pharmacy benefits. Instead of non-specific co-pays, the design included “tiering” (having a group of drugs that has low out-of-pocket costs and another group that is typically equivalent and name brand but less cheap) and included the concept of co-insurance (instead of paying a flat $25 co-pay, one might pay 25%-50% of the costs) for the so-called specialty drugs. At relatively high level, the out-of-pocket costs were capped which protected the patient to an extent but only after about $7,000 had been paid. The law dictates that only the Part D Providers may negotiate and that the federal government is directly prohibited from doing so. The patient, as is alway the case, doesn’t get to negotiate with anyone.

After 10 years of flat growth, the costs of drug benefits are rapidly escalating. This is being passed on to the consumers. The reasons are several fold. First, number of specialty (Tier 4) drugs have increased from 20 to 200. These drugs typically require coinsurance and thus result in  a lot of the out-of-pocket increase. One pill of a new cancer drug might cost $1000 and might cost the patient $500 until his or her deductible is reached, typically at about $5,000. Second, a number of plans have moved drugs formerly covered under a co-pay into a tier requiring coinsurance.  Approximately 60% of Medicare beneficiaries are in plans that have had common drugs such as Crestor and long-acting insulin moved into a tier where coinsurance used instead of a co-pay. The law does not set limits on coinsurance and some of the rates are as high as 50%.  Lastly generic drugs, which used to require the lowest co-pay, are being priced much higher and are being placed in co-insurance tiers by insurance companies.

This increase in prescription costs is not limited to Medicare beneficiaries. Many people with high deductible “bronze” plans purchased (family deductible about $12,000) on the exchanges are noticing the same thing. The EpiPen controversy, in part, is a consequence of people moving to these higher deductible plans without looking into exactly how the savings in premium might translate into increased out-of-pocket costs. In fairness to patients, having spent some time trying to figure out what the out-of-pocket cost might be for an EpiPen under a given insurance, I do not blame them for being confused.

What should our response be? Over 70% of Republicans and 90% of Democrats feel that the government should be directly involved in price negotiations, at least for Medicare. If not directly, similar rebates to those given to Medicaid would potentially lower costs for all consumers.  Lastly, patients can ask for substitute medications rather than use those that require significant out-of-pocket outlay. For the EpiPen, where the manufacturer has been “ruthless in fending off competition and in getting support for its predatory pricing practices, including within the US and the EU” it may not be possible but for others it never hurts to ask.

Over half of all Americans pay under $400 annually for out-of-pocket medical costs of all types and many pay nothing. As health economist Uwe Rheinhart pointed out last week, we need to get everyone engaged in the health system  to create the political will to fix it.  We can accomplish this by strengthening the penalties for non-participation so that  everyone will be affected. Or we need to get over this notion that everyone deserves access to healthcare and only the rich should be protected at all times from anaphylaxis. After all, J. Wellington Wimpy didn’t get a hamburger every time he asked.

 

 

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