This year saw increased pressure on the healthcare industry to merge, get bigger or perish. Skimpy health insurance plans received the green light. Medicaid expansion spread into three more red states. We saw more rule changes tailored to destabilize the health insurance market.
The year in review
► Mergers pick up
► Medicaid expansion grows
► Generic drug price fixing scheme
► Skimpy health plans greenlighted
► Band-aid for Medicare drug prices
► GOP driving up insurance prices
► Employees to pay more
► Texas judge out in left field
Mergers and more
Consolidation has increased across health care with hospitals, drug manufactures, benefit managers and insurers.
• The Cigna – Aetna merger were blocked, but for the most part the Justice Department has been less critical than under past administrations.
The nation’s hospitals have been merging at a rapid pace. The hospitals claim that consolidation benefits the consumer.
♦ In many places the population may be too small to support more than one hospital. And in some rural areas the number of uninsured too high for the local hospital to survive without joining a larger hospital.
♦ In larger cities mergers kill off competition.
The New York Times examined 25 metropolitan areas with the highest rate of consolidation from 2010 through 2013. Their analysis showed that the price of the average hospital stay soared, with prices in some areas going up as much as 54%.
Big name mergers in 2018
♦ CVS and Aetna received approval to merge.
The merger combines one of the top U.S. drugstore chains with the third-largest health insurer. The merger is valued at $68 billion. To gain approval Aetna agreed to sell their Medicare prescription drug plans.
• Aetna’s standalone prescription plans will be sold to WellCare Health Plans Inc.
If you wondered why your Aetna plan gives a much better deal on prescriptions filled at CVS, now you know.
♦ Cigna Corp. and Express Script join.
Cigna Corp. arranged a $54 billion takeover of Express Scripts. The deal combines a health insurer with a major pharmacy benefits manager. Blue Cross Blue Shield is planning to drop Express Scripts and create their own pharmacy benefits manager.
♦ Amazon joins the drug business.
Amazon Inc. dropped $1 billion to buy the online prescription company PillPack.
♦ Walgreens is the last remaining standalone pharmacy chain. Walgreens holds a 26% stake in drug distributor AmerisourceBergen Corp. Talks of a merger are said to be ongoing.
Medicaid expansion grows
The voters in Idaho, Utah and Nebraska decided to expand Medicaid. This runs counter to their state leaders.
In some cases, it was a fight to just get the question on the ballet.
♦ Implementation will be the hard part. Republicans still control these state legislatures. They are likely to try to thwart the people's wishes.
The Deep South remains the last bastion of saber-rattling. The Deep South also continues to have the highest percentage of uninsured in the nation.
Generic cartel probe picks up steam
An antitrust lawsuit started in 2016 over two drugs. It has now morphed into a major price-fixing probe involving 16 companies and 300 drugs.
♦ The unfolding case is starting to look like it could involve the largest cartel in U.S. history.
Some of the biggest names in generic manufacturing are involved: Mylan, Teva and Dr. Reddy’s. Mylan denies any wrong doing. Two former executives of another company, Heritage Pharmaceuticals, have pleaded guilty and are cooperating.
• What is being alleged is of course overcharging. Officials say that anti-competition agreements drove up prices as much as 2,000% in some cases.
This one will be playing out in the courts for some time.
Skimpy health insurance gets the green light
The Trump administration issued new guidance that endorses health plans that do not protect people with pre-existing conditions. The new plans do not need to provide all the benefits required by the Affordable Care Act.
The plans might work for healthy people that never get sick.
♦ Insurers will be able to offer fewer benefits and have more restrictions, hence the term skimpy. This is a return to the consumer beware days before Obamacare.
The Trump administration boasted that premiums will be much lower and people will have the freedom to purchase what they want.
♦ In truth, most Americans have a poor grasp of how health insurance works.
Insurance companies know this and as a result we can expect that along with lower prices there will be a lot of heartache as people come to find out they bought something that really doesn’t protect them from financial disaster.
Drug prices to come down for Medicare folks
That is the claim put out by the Trump administration. The fine print turns out to be something different.
♦ Medicare can save money if we just stop paying for things. That is the cruel message coming out of the White House.
Reduce number of drugs
♦ In late November, it was announced that the latest plan to cut costs for Medicare involves reducing the number of prescription drugs that must be made available to people with cancer, AIDS, depression, schizophrenia and certain other expensive conditions.
Under the administration's proposal, health insurance plans that provide drug coverage to Medicare beneficiaries would no longer have to cover all of the drugs in six "protected classes."
♦ The change will take effect in 2020 and will lead to lower out-of-pocket costs. About 45 million people have drug coverage under Medicare Part D.
The people depending on a drug the administration doesn't like will undoubtedly be shocked and are not likely to view this action as a savings.
Step therapy to be allowed
Medicare advantage plans were given permission to start rationing prescription drugs. No one wants to use the words rationing so they use the words “step therapy” instead. The result is the same.
♦ Starting in 2019, Medicare advantage plans can reduce the number of drugs they cover. This will save Medicare lots of money. But what if you need the drug not on the “list”?
If more than one drug has been approved to treat a condition, your insurance company can require you to first try the one they think is best. This is almost always the cheapest one for them to cover. If that drug doesn’t work then you can step up to a more expensive drug.
♦ “This is a really great idea and there will be a huge savings in Medicare spending,” so we were told.
If you are on the receiving end you probably won’t be happy. Especially, if your needs are critical and you and your doctor agree you would get well faster if you took a specific medication.
♦ Seniors are asking, if you want to reduce drug costs why doesn’t Medicare negotiate directly with pharmaceutical companies? Answer: Not allowed to, by law.
Who made the law???
Medicare to directly negotiate with drug companies
That was the phrase along with the words “revolutionary” that President Trump used. It is a bit of a stretch once again.
• The Centers for Medicare and Medicaid (CMS) plans to experiment with setting drug prices for many drugs administered by doctors through Medicare Part B program.
♦ This would be for drugs administered in a doctor’s office or medical facility, not a prescription filled at your local drugstore. Prescriptions are covered under Medicare Part D.
Under the new model that will be tested in 50% of the country, Medicare would pay doctors prices pegged to an International Pricing Index. The index being based off of the average sales price in other countries with economies comparable to the United States.
• The proposed scheme invisions third-party vendors obtaining drugs and distributing them to doctors and hospitals. The vendors would be responsible for billing Medicare.
The vendors would seek volume discounts and compete for business, not Medicare. The third-party vendors sound a lot like a benefits managers.
♦ Groups including the American Hospital Association, American Medical Associatin and pharmaceutical groups have critized the plan. They say among other things that the plan would reduced reimbursements and increase vendor fees.
The administration hopes that by paying doctors this way it eliminates any incentives they may have to prescribe more expensive medications, since they would no longer be reimbursed based on a percentage of the drug’s cost but instead receive a flat fee.
♦ For someone who must receive a medication in an office setting, this new policy could possibly result in lower out-of-pocket costs. However, many Medicare Advantage plans already cover these types of in office treatments as a part of the office copay.
It is not clear yet how many people will really benefit from this new policy. It is also not clear yet how many doctors will decide to stop seeing Medicare patients because of this new policy.
• The Obama administration tried to change how physcians are paid for Part B drugs but they ran into fierce resistance.
♦ The Trump administration wants to appear tough on the pharmaceutical industry, a least before an election. But the administration has yet to actually make any hard decisions or push any new policies that would upset the industry.
Driving health insurance prices up
The Trump administration has taken steps that experts warned would drive up health insurance premiums.
♦ The administration continues to refuse to honor agreements with insurance companies to make cost-sharing reduction payments.
Insurers are still required to provide plans with cost-sharing reductions for lower income people purchasing plans through the Marketplace. Premiums have gone up to cover the missed payments.
♦ Short-term health insurance policies can now be used long term.
♦ Skimpy health insurance plans are back.
♦ The Republican tax bill of 2017 zeroed out the tax penalty for not having health insurance. The chickens come home to roost next year.
The Kaiser Family Foundation looked at insurer rate filings for 2019. The researchers estimate that 2019 premiums have risen an additional 6% because the individual mandate penalty will not be enforced.
♦ The cumulative effect of actions by the GOP and the Trump administration is estimated to have resulted in 16% higher premiums than would have occurred if they had left things alone.
Employees to pay more
This is hardly new. More companies are planning to make their employees pay more for health insurance next year. Raising premium contributions and increasing annual deductibles is the norm.
• Annual deductibles have been climbing about eight times faster than average wages.
Employer-sponsored health coverage is the most common form of health insurance in America, covering about 152 million people.
♦ The average deductible for a single person has now climbed to $1,573. This is more than double since 2008. As deductibles get too high people start avoiding needed medical treatment, this in turn leads to a sicker workforce.
As health care costs rise health insurance premiums will rise, companies will continue to be under pressure to shift more costs to their employees or give up profits.
Investors punish companies when profits go down so look to rising deductibles to continue.
Obamacare is unconstitutional
The year ended with a Texas judge shocking the nation by issuing a logic-defying decision that the Affordable Care Act is unconstitutional now that there is no longer a penalty for not having health insurance.
The decision has no immediate effect other than to fire up the Democratic base.
This is a story all its own.