Drugs and devices: expensive. Hubris: priceless.

This morning I was listening to the Morning Edition on NPR, and heard a story about the tax on medical devices that is written into the healthcare law. As you can imagine, there is opposition to such a tax by the manufacturers, as they are concerned about the usual, "stifling innovation" (yawn). It's hard to be amused by anything to do with healthcare these days, but here is a part of the conversation that had me in LOLZ (my 14-yo's expression):

ARNOLD: Okay. So here's how this new tax works. When a medical device gets sold, there will be a 2.3 percent sales or excise tax. Now, people who support this tax say that the medical device makers are exaggerating about the impact. Paul Van de Water is an economist with the left-leaning Center on Budget and Policy Priorities. He says that this tax is basically the same as a sales tax that you pay at the grocery store.

PAUL VAN DE WATER: The grocery store is collecting the tax. The grocery store is the institution that sends the tax to the state government, just the way the medical device manufacturer is going to write the check to the Treasury.

ARNOLD: Van de Water says that the tax doesn't really target the medical device makers that much. They'll just pass most of the cost along to their customers, who are mostly big hospitals, the same way a grocery store charges their customers. But the industry disagrees. David Nexon is with the medical device trade group called AdvaMed.

DAVID NEXON: There's a difference between a tax that, you know, an individual consumer pays as opposed to one that you're negotiating a price with a large, sophisticated buyer.

ARNOLD: In other words, Nexon says a hospital chain will push back and resist paying anything extra.

NEXON: In this very competitive market, it's extremely difficult for our members to raise prices.

Hah! Is he saying what I think he is saying? That because individual consumers are too dumb to understand about externalizing additional expenses, such as taxes, it is easier to put one over on them than on the savvy hospitals? Could he possibly mean that only "large, sophisticated buyers," and not ordinary consumers, would never stand for the information asymmetry they thrive on? That the individual consumers just don't have the power that hospitals do to push up against potentially predatory pricing? 

The last time I heard or read anything this blatant was in this New York Times piece from December 2009. This is a company executive talking about the rationale for the company's cancer drug's disproportionately steep price:

Mr. Caruso also said the price of Folotyn was not out of line with that of other drugs for rare cancers. Patients, moreover, are likely to use the drug for only a couple of months because the tumor worsens so quickly, he said. So the total cost of using Folotyn will be less than for many other drugs with lower monthly prices.

Wow, do these people get paid to advance their organizations' agendas? For my money they are not doing such a hot job at anything other than confirming all the societal views of them. Are they too stupid to realize that, even if you think stuff like this, you shouldn't say it out loud? How embarrassing.

Bottom line? Their drugs and devices: expensive. Their hubris: priceless.


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ACA: The reports of its death were greatly exaggerated

This is a big day for President Obama's signature legislation, the Affordable Care Act. The Supreme court upheld its constitutionality, and the punditdom thinks that further challenges are unlikely. On the other hand, if Romney takes the White House in the next election... Well, you can guess what will happen then.

It has been interesting to watch the run-up to this decision. Most recently I have been amused by surveys finding that on the one hand many American people are in favor of the pre-existing condition inclusion (this part of the bills forbids insurance companies to discriminate against people with prior health conditions), as well as the provision that allows young adults to stay on their parents' insurance policies through a certain age. On the other hand, reportedly the majority of Americans are against the healthcare law, and most also oppose the individual mandate provision (this is the part where everyone has to buy insurance or pay a tax). Given this imbalance in the public opinion, a more pertinent survey should have assessed how well people understand these provisions in the first place. And this would have had to establish how well the public gets our whole healthcare "system."

To start from the beginning, any healthcare system can be judged on three criteria:
1. How accessible is it?
2. Is it of adequate quality?
3. How expensive is it?

The answer to the first question provides one of the rationales for the individual mandate. Currently there are about 50 million people without health insurance in the US, and, hence, without adequate access to the system. Many of these people are the young and the healthy who gamble on staying young and healthy. And many are consigned to relying on expensive emergency care when this gamble fails. Some of them go bankrupt trying to pay for it, while others become "safety net" cases, where the institution that cares for them swallows the costs. These institutions do get some public dollars for providing safety net care, but not nearly enough to break even. Since many of the 50 million don't buy health insurance because they cannot afford it, the healthcare bill provides a way to create more affordable insurance products.

The answer to the second question is not related directly to the individual mandate. Since much of this blog is devoted to the issues of healthcare-associated harm, I do not wish to belabor this point here. Suffice it to say that the bill does try to address this catastrophic situation, though it remains to be seen if it will succeed.

The third question is the crux of the story. Many have said that the escalation of healthcare costs is unsustainable, and I subscribe to this notion: I am not sure how much more than $2.6 trillion/year we want to pay for this insatiable beast. Yet judging by the near-revolt that "death panels" rhetoric caused, the citizenry is not interested in being thoughtful about what services make sense. The vehement knee-jerk to the "R"word shuts down the discussion before it even starts. So, OK, how do we pay this ever-increasing bill? Moreover, since we are all happy with the government mandate for all insurance to pay for pre-existing conditions, how do we propose to pay for this additional coverage? Short of printing money (not generally a good idea) or creating a single-party payer system that regulates these expenditures, the only way is to broaden the pool of revenue. The way the ACA has proposed to broaden this pool is through the very individual mandate that is anathema to our American way of life. But without it, there is no broadening of coverage, and there is no paying for every intervention that we seem to feel entitled to.

I doubt very much that the ACA will substantively contain healthcare costs. I even doubt that it will solve the quality problems, but I am willing to wait and see on that. This bill is but s band-aid on an arterial bleed. However, I do believe that upholding this legislation allows us to take the first steps toward a reasonable national dialog about the kind of healthcare system we need. This dialog will not be helped by stupid surveys that reinforce our willful ignorance. We have the opportunity to move this conversation to a higher level, where people begin to understand the issues we are up against more deeply. Let's take it.                      

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Blind and toothless: The future of middle class in America?

Since it's Friday, we'll steer clear of academic subjects and just tell a story. This is a story of a good friend of mine who works in an editorial position for an interdisciplinary humanities journal. This journal is based at a prestigious private liberal arts institution, and thus she is on staff at that institution. This story is about her, but also about how well the Massachusetts health law is working for people like her. I will call her Jo.

Jo is in her early 50s, a single mom of two lovely teenage boys. Their father who is separated from Jo, although in the picture, does not provide any child support for various reasons. Thus she carries sole financial responsibility for her family.

Well, you say, she is on the journal's editorial staff, she is loaded, right? Nah, surely you are not so naïve as to think that this is a high-paid position at a humanities publication. Let's just say that she is not the 1%; why, she is not even in the top one-half. Would you believe me if I told you that a high-ranking editorial staffer gets a salary that is only 2x above the federal poverty level threshold? So much for those wealthy elite academic East Coast types! But she does get her healthcare insurance through her employer, and this is fortunate, right? Well, here is the rub.

Jo has a complex health condition that affects her entire body, including skin, teeth, eyes, heart, lungs and viscera. Despite this, she is optimistic, upbeat and one of the most patient parents I have ever met. But here is what gets her goat: it is the very fact that she gets her health insurance through her employer! How can this be?

Here is how. The cost of her basic restrictive HMO insurance through her employer is over $5,000 per year. And this flat rate is not affected by the salary level of the employee; in other words, the janitor and the university president get to pay the same amount of money for the same plan. In addition to this, her office visit copay is $20, and her medication co-pays are between $10 and $30 for a month's worth of medication. As you can imagine, for someone with a complicated chronic condition, these co-pays can add up quickly, and they do, to a shocking $2,500 per year. And this is before any allowance for the boys' medical needs or dental or eye care for any of them. Once you add everything up, Jo spends over 1/4 of her entire not-so-stellar income on healthcare. But if we do add dental and eye expenses into the mix (remember, her condition affects these organ systems as well), her healthcare expenditure comes to 40-50% of her annual income! And this is just for draconian restrictions of an HMO! AND, this does not cover all of the time that she spends on the phone finding providers that take her insurance and on schlepping miles away to see that single specialist that the HMO will pay for.

But wait, you say, you live in Massachusetts, the land of socialism, gay marriage and healthcare for all. Why can't she just dump this lousy and expensive employer-provided coverage and go to the Mass Connector, where everyone is equal and all get what they need for what they can pay? And furthermore, you say, isn't the PPACA, the new healthcare law of the land that is fashioned after Romneycare in MA, going to take the choice away from people and MAKE them get insurance through these exchanges rather than through their employers? Jo must be an idiot not to be taking advantage of this communist healthcare state! Hmmm, let's see now.

Jo has had a number of discussions with the staff at the Connector. And yes, you are right in that, if she switched to one of their plans, she would qualify for a plan very similar to her present one for about 1/5 of what she pays now. And the co-pays? Why those would shrink to $0 to $10. How's that for a deal? But here is the catch: According to people she has spoken with at the Connector, a person who has health insurance offered through her employer is not permitted by law to take advantage of the Connector deals if the employer plan offers coverage that meets the minimum standard in the law. And hers does. Ironic, isn't it?

So Jo goes on struggling with the financial burden of her crappy and expensive employer-provided insurance, only now she has to pick and choose: Can she afford to replace her failing dental bridge ($4,700) or should she just choose something so frivolous as feeding her children instead? This is a choice that is not a choice at all, is it? And if these are the choices that we can expect with the PPACA, well, then, we have the law that we deserve: one that will make sure that the investors in the "healthcare" marketplace continue to get handsome returns. But start getting used to people who cannot see their computer screens showing up to work without their teeth!        


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