When I think about a “dumping” problem, it brings to mind those people who dump their trash along the roadside – or in my parking lot. They’re anxious to get rid of something they don’t want and too lazy to do it in the proper way.

John C. Goodman, healthcare economist writing in Forbes, says ObamaCare has a similar problem. The system encourages dumping of those patients insurers don’t want to enroll and medical conditions patients don’t want to pay for until they must.

Goodman says:

·       Group plans dump their sickest, most costly enrollees on the individual market

·      Individual market plans dump these same enrollees on each other

·      Individual patients dump their costs on other individuals by waiting to insure until they get sick

 

In other words, ObamaCare has created an environment where everyone is trying to avoid accepting responsibility for costly healthcare. Here’s how it works.

How Group Plans Dump Costs on the Individual Market

Before ObamaCare, when you left your employer’s group plan and purchased your own individual policy, you paid rates based on actuarial analysis. That means they calculated a fair policy rate based on your medical condition. If you were a high-risk patient and denied coverage, a state high-risk pool subsidized your insurance, funded by a small premium tax on all commercial insurance.

Since ObamaCare everything has changed. Imagine you’ve worked for 40 years for the same employer and then get cancer and have to quit work. You’re forced off your employer’s plan and must get ObamaCare insurance on the Individual market. The individual plan must absorb the full cost of your cancer treatment and your old employer plan that benefitted for 40 years from your good health now is exempt from paying for the cancer treatment. This is unfair to the new insurer – and to the other individuals who pay for their insurance from the same insurer.

Moreover, the new insurer can’t calculate the fair price of your treatment because ObamaCare did away with actuarial analysis and mandated 3 to 1 premium spread instead of the usual 6 to 1. That means the sicker patients pay less and the healthier patients pay more than the real cost of their insurance. This is unfair to healthy patients in the Individual market.

How Health Plans Dump Costs on Each Other

Health plans naturally try to make their plans appealing to the best customers. When actuarial analysis was used, all customers were good because actuaries could predict the expected costs of insurance and rates reflected those calculations. But with actuarial analysis eliminated, health plans are now trying to appeal only to healthy patients who cost them less.

To achieve this goal, health plans create narrow networks with high deductibles that exclude the best doctors and the best medical centers in order to make their plans unappealing to the sickest patients. Healthy patients don’t mind since they don’t expect to use the plans. Sick patients know they will be using the plans so they steer away from plans that don’t offer the best care. The low premiums in these plans attract the healthy patients and the sick patients stay away.

In other words, instead of trying to attract customers, health plans are trying to avoid customers – those that will cost them more than they can charge. They hope their competition will get stuck with the customers they don’t want – the expensive ones.

How Individuals Dump on Each Other

Before ObamaCare you needed to carry health insurance before you got sick. If you got sick without coverage, no insurer would cover you for pre-existing conditions.

Since ObamaCare, you can get insurance after you get sick. It’s like buying fire insurance for your home after the fire! ObamaCare makes this possible because there is a long list of exceptions that allow people to obtain insurance outside the annual open enrollment period – after they know they need it. Others may purchase a cheap plan before they get sick and then upgrade when they know they’ll need better coverage.

These people are gaming the system – and passing the real cost of their healthcare on to other individuals who must pay higher rates to make up for the losses.

Is there a better way?

Goodman says there is. He says premiums in the individual market are two to three times higher than they should be. But to change this will require the federal government to give up control to the states.

He says states should be given the authority to make dumpers pay the full cost of their own behavior, although they could choose other options as well. He proposes the following changes – which will require changes in federal law:

·      Group insurers should pay for any above-average costs they send to the individual market. Employers who do not provide post-employment insurance would pay a small premium tax to compensate insurers who must absorb above-average costs to insure these individuals. Even better would be allowing employees to take their insurance with them when they leave their employer (like an IRA or 401 K plan)

·      Insurers in the individual market should pay for any above-average costs created when an enrollee leaves their plan for some other plan. Medicare Advantage could serve as a model. This would give insurers an incentive to accept sicker patients

·      Individuals should not be allowed to game the system.Those who try should pay a higher premium. You can’t buy insurance after the fire! Actuarial analysis should replace ObamaCare’s “community rating”

These are wonderful ideas but, alas, they require Congress’s approval. As long as Democrats believe single-payer healthcare is a political winner and Republicans can’t agree on how to fix ObamaCare, these ideas will never happen.

 

In the world of cancer treatment, more is not always better. That’s the lesson being learned by cancer treatment specialists through a series of recent studies.

For years oncologists have generally approached the challenge of cancer treatment with the attitude that more treatment is better – unless it kills you! They pushed the envelope of cancer drugs as far as the body would allow in a desperate attempt to stave off the onslaught of cancer cells. In general, this approach has produced improved cancer survival rates.

But now that cancer survival rates have improved, many are questioning the use of expensive cancer drugs when conditions don’t seem to warrant their use.

Peter Loftus, writing in The Wall Street Journal, reports a federal study, presented at the recent annual meeting of the American Society of Clinical Oncology, showed that many women with early-stage breast cancer could safely skip commonly used chemotherapy after surgery. This finding could potentially spare tens of thousands of women a year from chemotherapy side effects such as nausea and early menopause.

Another study presented at the meeting concluded that many patients with advanced kidney cancer could forgo kidney –removal surgery and instead take a drug called Sutent, manufactured by Pfizer, Inc. The study was funded by Pfizer.

A study by a U.K. health institute found that reducing treatment with Roche Holding AG’s breast cancer drug Herceptin to six months instead of twelve months reduced potential heart-related side effects and its cost without sacrificing effectiveness.

Rising Cost of Cancer Drugs

Part of the impetus for these studies, usually funded by government, is to lower the cost of cancer treatment by reducing the use of expensive cancer treatment drugs. The average U.S. monthly price of oncology drugs more than doubled to $15,535 per patient in 2015 from $7,103 in 2006, according to a May report in the Journal of Oncology Practice. Overall U.S. spending on cancer drugs doubled from 2012 to 2017, to nearly $50 billion, according to IQVIA Institute for Human Data Science.

The rising cost of cancer drugs has led patients and health insurers to question the assumption that “the maximum dose that they can physically cope with is the right dose,” said Christopher McCabe, executive director of the Institute of health economics, a health-policy non-profit in Edmonton, Alberta.

Unfortunately, the economics of such treatment decisions is highly influenced by the motives of those doing the studies. Pharmaceutical companies do studies that tend to encourage the use of their drugs. Governments that pay for the drugs do studies that tend to discourage the use of the drugs.

But at least one drug company executive thinks it is a good thing to analyze the effectiveness of current drug regimes. Pascal Soriot, CEO of Astra-Zeneca, said in a recent interview, “It is of course a threat, but I think it’s the right thing to do. The debate should happen.”

In 2006, the National Cancer Institute started a large clinical trial to test whether women at intermediate risk of recurrence could safely skip chemotherapy. Over 10,000 women were enrolled in the study. Women in the low risk group were assigned to receive hormone therapy alone, while those in the high-risk group received both hormone therapy and chemotherapy. In the intermediate-risk group, the most challenging for treatment decision-making, more than 6,700 were assigned either the combination treatment or hormone therapy alone.

Nine years later the results showed 83.3% of those who received hormone therapy alone were free of disease while 84.3% of those who received both hormones and chemotherapy were disease free. Obviously, the chemotherapy in these patients was unnecessary.

Studies like this can spare thousands of women the side effects and potential permanent harm from toxic chemotherapy agents. They can also substantially lower healthcare treatment costs. Sometimes less is more.

 

ObamaCare has winners and losers. One of the big winners is CVS.

Much has been made of the unholy alliance between Big Pharma – the pharmaceutical manufacturers – and the Obama administration that passed the ObamaCare legislation in 2010. Much less has been said about how the drug stores that serve as middlemen in the process have made a killing off ObamaCare, too.

The Wall Street Journal editorial board says CVS operates a pharmaceutical benefits manager (PBM) that acts as a middleman between insurers, pharmacies and drug manufacturers. PBMs decide which drugs are listed on a formulary, how much pharmacies are reimbursed and how much insurers pay.

For example, Ohio contracts with five managed-care organizations (MCOs) to administer Medicaid benefits, four of which outsource their drug benefits management to CVS Caremark, the CVS PBM. So CVS has 80% of the market in the state of Ohio.

The state uses drug claims data to set its annual drug budget. Therefore, if claims increase the state will allocate more Medicaid funds for drugs the following year. However, CVS appears to be billing the state for far more than what it is paying pharmacies, which drives up taxpayer costs. CVS does not report actual drug payments to the state or the MCOs.

WSJ says CVS is attempting to eliminate its competition from independent pharmacies. They interviewed eight current or former independent pharmacists in Ohio who complained CVS had slashed payment rates below the pharmacists’ wholesale drug costs. CVS then pockets the increased “spread pricing” – that is the difference between what the PBM pays the pharmacies and what they charge the state.

ObamaCare’s Impact

This situation has greatly increased as a direct result of ObamaCare. The Medicaid expansion encouraged by ObamaCare has increased Ohio’s Medicaid population by more than half to 21.4% of all Ohio residents. This is mostly due to the redefined eligibility for Medicaid under ObamaCare in those states that voted for expansion. The result is Medicaid is now the biggest insurer in rural areas where independent pharmacies predominate.

Ohio state Senator Dave Burke, who runs an independent pharmacy and also serves on the state Joint Medicaid Oversight Committee, says two-thirds of the Medicaid drug claims he processes are below what he pays for the drugs. He says CVS payment rates are “take it or leave it.” If pharmacists refuse to accept Medicaid prescription, they risk losing CVS contracts for Medicare Part D and commercial plans that are the main source of profit in their business.

The impact of all this on independent pharmacies in Ohio has been huge. In the last three years, Ohio has lost 164 independent pharmacies while CVS has added 68.

This problem is not limited to Ohio. Arkansas Independent Pharmacies found that CVS Caremark billed Medicaid plans more than twice as much on average as what their pharmacies got paid. Data from fully-insured commercial health plans showed that CVS paid itself over $60 on average more per prescription than independent pharmacists.

This is just more evidence that the expansion of Medicaid has been a costly exercise in government control of healthcare that is being exploited by private industry. The winners are CVS and others like them; the losers are Medicaid patients, independent pharmacies and taxpayers.