Category: Health plans

The right idea on generic co-pays

published date
March 22nd, 2007 by

With Wal-Mart and others charging low, low prices for generics –below that of typical co-pays, some health plans are realizing that the right out-of-pocket price for generics might be $0. Independence Blue Cross in Pennsylvania has extended its “no-pay co-pay” initiative for the rest of the year and is beginning to incorporate the concept into benefit designs. There’s nothing like free to get people to speak to their physicians about generics and counter advertising of brand name drugs. With so much competition in the generics market health plans don’t need to pay much for generics anyway, if they buy wisely.

It’s not a brand new idea, but maybe in the coming months and years we’ll see greater use of negative co-pays: paying patients to take generic drugs for chronic conditions where there’s a return on investment for the health plan in terms of lower costs for hospitalization.

Upgrade or downgrade?

published date
March 20th, 2007 by

As Massachusetts works through the details of its universal health plan requirements, there is some danger that we’re going backwards in the area of prescription drug coverage. Consumer advocates have argued successfully that the health insurance plans endorsed by the Connector should include prescription drug coverage. I’m sympathetic with that notion.

On the other hand, it now appears that tens of thousands of already insured residents are going to be forced to “upgrade” their policies to include prescription coverage. That’s unfortunate. If everyone had such insurance, no one in this state would bother going to Costco or Sam’s Club for low-priced generics –and overall spending on drugs would be higher.

When I started my company, we considered buying insurance without prescription benefits. The price difference between plans with and without pharmacy coverage was substantial, and we weren’t taking any prescription drugs at the time. I figured we could save the difference and if we ended up needing expensive drugs we could just suck it up for a while until we could change policies and ride out the waiting period for drug coverage. The only reason we didn’t do it was the tax implications. Health insurance premiums were deductible, but out-of-pocket spending on drugs was not.

There’s a danger in trying to protect consumers by dictating what coverage is adequate. I faced a similar situation in looking into long-term care insurance for a relative. This relative didn’t mind paying up to $500,000 or even $1 million in nursing home costs, but wanted to protect her estate above that. But due to the wisdom of the state legislature, it was impossible to buy coverage where the benefits didn’t kick in immediately. Of course the government was trying to protect people from getting tricked into buying policies they didn’t understand, but the result for my relative was that the available coverage wasn’t worth it.

Let’s be careful in micro-managing health insurance benefit design.

If all politics really is local, health care reform has a shot

published date
March 15th, 2007 by

Our local newspaper, the Brookline Tab has been filled lately with news of the town’s impending budget deficit and the consequences for town services. Today’s lead story is Fire chief flames station shutdown; warns response time could triple. Basically, the town may shut down one of its fire stations. Recent articles have discussed the need to cut the schools’ budgets. Not good.

There are variety of reasons that this town and many, many others (not to mention cities, states, and the Federal government) have budget problems, but health care costs for current employees and retirees is a big part of it. In my view a lot could be accomplished for the town’s finances by following private industry and being less generous with coverage. Meanwhile, a letter to the editor uses the budget problem to argue for single payer:

The gloom-and-doom article in the… TAB.. about Brookline’s $3.2 million budget shortfall… neglected to mention the easiest way to save money for the town and the commonwealth. We need single-payer health-care reform.

She goes on to lay out some arguments for single payer that I’m not sure follow directly from the budget issue, but it’s intriguing nonetheless that she’s made the linkage between the town budget and health care costs.
Most people in this town have health insurance and –despite the high and rising costs– aren’t too worried about losing it. But they will be hopping mad about fire station closures, school de-funding and other negative consequences. When it comes to making tradeoffs, I bet a lot of the towns’ citizens would favor doing something about health care costs rather than losing vital services or paying higher taxes. Count me among them.

Thanks Humana!

published date
March 8th, 2007 by

I’d already heard through the grapevine about a recent Sierra Health Services conference call –where Sierra admitted they were getting hammered on their SierraRx Plus plan, which offers full coverage through the Part D donut hole. But I hadn’t realized that a competitor may have been the source of some of the trouble.

Sounds like Humana may have sent unattractive candidates over to Sierra after (wisely) discontinuing its own doughnut hole coverage. From Kaiser’s Daily Health Policy Report:

CMS officials are investigating whether Humana inappropriately advised the highest-cost beneficiaries in its Medicare prescription drug benefit plans to switch to plans provided by Sierra Health Services… “We believed our level of adverse selection was in part due to certain high-utilizing members being referred to us by another PDP provider. We did not agree to these referrals.”

Sierra complained to CMS, which took up the investigation.

Humana doesn’t really deny sending members over to Sierra. And it seems to me like Sierra just screwed up and offered too good of a deal.

Naysayers on MA health reform will have to wait a little longer to celebrate

published date
March 6th, 2007 by

Free-market ideologues like Sally Pipes from the Pacific Research Institute salivate over the opportunity to point out failures of government intervention in the market place, especially in liberal bastions like MA and CA with turncoat Republican governors! They’re so hot and bothered about MA’s health reform law that they are jumping the gun. This is from Pipe’s op-ed piece in last week’s Wall Street Journal (Intensive Care for RomneyCare)

When then-Gov. Mitt Romney, a Republican, introduced a universal health-insurance plan in the Bay State early last year, it was widely acclaimed. But less than a year after passage, RomneyCare is in the intensive care unit, soon to be wheeled into hospice.

Reality fully hit in late January of this year, when private insurers submitted bids to the bureaucracy that would administer the new program. The average premium for the unsubsidized plans was not $200 per month — as Mr. Romney promised from the stump — but rather $380. That’s more than 15% of the target audiences’ income — and for a plan with a $2,000 deductible and a total cost sharing of $5,000. People were stunned, outraged. Naturally, “greedy” private insurers were blamed. Politicians called for price controls.

As John McDonough from Health Care for All (HCFA) points out, the $380 wasn’t a real average anyway. It included high bids from plans that weren’t interested in playing. And new Governor Deval Patrick has since jumped in and jawboned the plans into offering premiums that actually get pretty close to the $200 and in some cases go below. (If you want to understand this whole topic in serious detail, you must check out HCFA’s A Healthy Blog.)

I’m a strong free market guy myself, but let’s not fool ourselves that the answer to the social and economic problems of the US health care system can be divined from strict ideological principles.

The MA health reform bill–and it’s really not RomneyCare– is an excellent idea for MA. It can work here because we already have low levels of uninsured and extra money devoted to uncompensated care. It’s not going to work like that on a national level.

So as much as I think the whole edifice of employer-sponsored health care is likely to fall apart over the next decade, it still makes sense to promulgate the MA, employer-based mandate. The way I see it, once (almost) everyone is insured –and it could happen in the next year or so–  the focus will turn to how to improve efficiency and quality in health care delivery. With luck we’ll shift away from what the Boston Globe calls the “arcane demographic data and risk assumptions” of actuarial science that goes into the calculation of premiums and into the very tangible and sometimes personal aspects of how health care is delivered.

It’s no bad thing that the deductibles for the new plans are going to be relatively high –something like $2000 for an individual or $4000 for a family. It will help create a cost and service oriented market in routine services. MinuteClinic start your engines!

And Governor Patrick did exactly the right thing by twisting the plans arms to alter their assumptions and bring the price down. The plans are going to have to suck it up, or spread costs to other customers in the name of getting everyone on the books in the near term. Though Pipes may wince, the Governor is part of the market, too.