At any rate, there are significant flaws in the Affordable Care Act, and most of them stem from the very notion of "insurance." Here, I have to point out that, in my humble opinion, "insurance" itself is a flawed concept. For example, it takes only a moment's thought to realize that insurance companies are highly motivated to collect premiums, and are just as highly unmotivated to pay claims -- premiums are money in the pocket, claims are money out of the pocket. The converse is true of the insured. Everything else is just a variation on this theme. For example, one might argue that all business has "business expenses," and the payment of claims is just a matter of a business expense, just a part of doing business. True enough, but it's just another way of painting the same basic conflict of motivation. If they want to stay in business and make a profit, they must limit expenses while maximizing revenue. Of course, there are other ways to "maximize revenue," most of which have nothing what-so-ever to do with the exchange of premiums for claims. Insurance companies are holding money against the possibility of a future claim, and while they hold the money, they invest it, ostensibly maintaining enough liquidity to pay claims as they arise. I'm not attuned sufficiently to the industry to know how much of Aetna's profits come from the differences in the premium/claim exchange and how much comes from investment, but in my unsophisticated way, I strongly suspect that the former is merely the means of gathering capital for the latter.
At one level, of course, there is nothing "wrong" with this. When we're talking about car insurance, or home owner's insurance, or the like, there isn't the same level of "moral hazard." When our federal flood insurance found every loophole possible and failed to pay much of anything after a flood destroyed the value of our home, it was financially devastating, but even so only financially devastating. As my father would put it, we're still here, still above the grass. With health insurance, and the health care system, there is an inherent hypocrisy. Robert Reich has a pithy way of putting it, "It lies in the structure of private markets for health insurance — which creates powerful incentives to avoid sick people and attract healthy ones. Obamacare is just making this structural problem more obvious." Ostensibly, health insurance is designed to provide for health care in cases of illness or accident. Instead, it provides a strong incentives for the insurance companies to avoid the sick, and for the reasonably healthy to avoid health care. Let me get personal again. I do not engage in any high risk health activities, like illicit drugs or sky diving. I do not smoke. I do enjoy a beer now and again, but only beer, and even so I drink in moderation. Although I could stand to lose a few pounds, I am not obese and have a generally healthy diet. Having said all this, should I "get ill," given the combination of barely affordable premiums and the cost of a doctor's visit, I would not see a doctor until the duress of the illness became unbearable. At my age (62), I know I should have routine "preventative care," but that is a luxury that we simply cannot afford. At my age, I know there are symptoms that I should take more seriously even if I'm not debilitated. Still, I am in reasonably good health, and I will not seek medical care until I absolutely need it, at which point it might be too late.
But what about my neighbors and fellow human beings? Here's a more egregious example, one that has hit the news cycle, but will likely quickly fade -- the cost of the EpiPens. Chirlane McCray in a recent Washington Post editorial, writes "in 2007, Mylan pharmaceutical company won a near-monopoly on the device. The company used its new power to raise the price of EpiPens by more than 400 percent in recent years. Because it could." How Mylan achieved a "near monopoly" is another story, but such "near monopolies" are endemic throughout the pharmaceutical industry, mostly as a result of the current status quo of intellectual property and patent laws which postpone the production of more affordable "generic" drugs, sometimes indefinitely. As NBC reports it, Among the usual advice for lower your prescription drug costs is to seek out a generic alternative. But because of the patent on the EpiPen delivery device, a true generic doesn't exist. Patients are instead buying abroad where the EpiPen is cheaper, and resorting to other devices that deliver epinephrine, including DIY syringes."
At any rate, the issue is politicized, however briefly. NBC news reports that "Vermont Sen. Bernie Sanders, the former presidential contender and a member of the Senate Committee on Health, Education, Labor and Pensions, told NBC News in a statement: 'The drug industry's greed knows no bounds. There's no reason an EpiPen, which costs Mylan just a few dollars to make, should cost families more than $600. The only explanation for Mylan raising the price by six times since 2009 is that the company values profits more than the lives of millions of Americans.'" Sanders has a point, and to make an even sharper point, the company executives value their salaries more than the lives of millions of Americans. Again, as NBC news reports, having achieved the near monopoly Mylan's sales, their sales went up, "and while sales of the life-saving drug rose to provide 40 percent of the company's operating profits in 2014, as Bloomberg reported, salaries for other Mylan executives also went up. In 2015, President Rajiv Malik's base pay increased 11.1 percent to $1 million, and Chief Commercial Officer Anthony Mauro saw his jump 13.6 percent to $625,000." Meanwhile, as McCray points out, "many families will have to make huge sacrifices to scrounge up more than $500 every year. (They expire.) And some children will have to go back to school without this medication because their families can’t afford it. That is unconscionable."
This story is one thing, but almost as an aside, McCray notes that "If you have good insurance, your policy may cover most of the cost. But people with high deductibles or no insurance are left scrambling." Here's the thing. The cost of claims against the insurance has something to do with the cost of the insurance itself. Good insurance might cover "most" of the inflated cost of the EpiPen, but doing so raises the cost of the insurance itself. It's not just people with high deductibles or no insurance, it's everyone who has insurance. It's just one example, of course, but multiply that example by the hundreds of other necessary drugs and the scope of the problem becomes clearer. Again, as NBC reports, "The pharmaceutical industry has seen steep increases in the past few years. Along with specialized drugs like ones for cystic fibrosis, decades-old generic prices have spiked. When one company, Turing Pharmaceuticals, raised the price of a drug used by HIV patients 5,000 percent overnight, the ensuing uproar pressured it to pledge lower its prices. Though, nearly a year later, a search on the drug-price comparison site GoodRx shows pharmacies are still selling it for the same amount or higher." The inflated costs of drugs in turn inflates the cost of insurance. CNBC reports that
The leading health insurance lobbying group America's Health Insurance Plans, scoffed at Mylan's move [to reduce patient costs by providing co-pay assistance]. "We've seen this time and time again. Rather than actually taking steps to address the real problem of soaring drug prices, pharma companies try and cover their price hikes through patient assistance programs and co-pay support," said Clare Krusing, spokeswoman for AHIP. "None of which will make a drug more affordable for the people who need it most. Exorbitant price increases on prescription drugs are leading to higher premiums and out-of-pocket costs for patients, and pharma companies continue to deny that reality," Krusing said.
And so we are caught in a vicious cycle. Krusing is, of course, complaining about the cost of claims, which cut into the profits of the insurance companies, and is blaming big phrama for the rising cost of claims. In turn, big phrama, like Mylan, points the finger back at the insurance company. Heather Bresch, the CEO of Mylan, told CNBC "the problem of drug prices isn't with Mylan or even the pharmaceutical industry, but instead with a health-care system that often requires consumers to pay not just insurance premiums [but] also out-of-pocket for prescription medications, sometimes to the full retail price." She goes on to say, "The patient is paying twice. They're paying full retail price at the counter, and they're paying higher premiums on their insurance." Untimately, CNBC paraphrases her to say "that the health-care system is in crisis, causing the patient to pay for full retail prices at the drug counter and rising premiums on their health insurance. She said that creates a bubble that is going to burst, and that patients need to get engaged in their health care." Indeed.
It's worth pausing a moment and looking at the description of Mylan provided by Wikipedia. Mylan is "an American-Dutch global generic and specialty pharmaceuticals company registered in the Netherlands and with operational headquarters in Hatfield, Hertfordshire in the United Kingdom." Their corporate headquarters are in Canonsburg, PA. OK, where does one begin to disentangle that? In the same interview, CNBC reports "she also acknowledged that high retail prices of EpiPens in the United States effectively subsidize the cost of the devices when they are sold in Europe, at just $100 or $150. Many of the countries there have government-run health-care systems that limit drug prices charged by manufacturers, unlike the U.S." Whether the world is a better place for it, as she asserts, can be debated, but the upshot comes back to this. Mylan charged inflated prices in the US "because it could," unlike the other countries, where government run health care systems limit drug prices.
One of the arguments against government run health care (or anything else for that matter) is inefficiency, and one must admit that a truly competitive economy might drive the prices down. Here's where Mylan's "near monopoly" re-enters the story. One might suggest that one role of government in capitalist economies is to maintain the competition that regulates pricing to reasonable levels -- profitable to the company, but not so profitable as to be "uncompetitive" in the vaunted market place. The Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914 are all designed to do just that -- prevent cartels, limit mergers and acquisitions, and prohibit the creation of monopolies, all of which strive to eliminate competition. Mylan, however, does not have anything resembling a traditional monopoly. They have a near monopoly on a very specific, but necessary drug, and the government, far from breaking up the monopoly, protects it, and it does so for good reason. One might suggest that another role of government in capitalist economies is to maintain intellectual property rights, the creations of the intellect where a monopoly is assigned to designated owners by law. Along with protections for artistic creations, there are trademarks, copyright, patents, industrial design rights, and in some jurisdictions trade secrets," and those statutes that protect intellectual property that have allowed Mylan to maintain their near monopoly and the punitive pricing on a particular, but necessary drug, EpiPens. We have, as it were, competing values, and which role of government should prevail? Should the "monopoly" be broken up, allowing others to manufacture and distribute "generic" versions of the drug, which would, of course, benefit those who are threatened by toxic allergic reactions? Or should "intellectual property" be protected, along with the exorbitant profits that often accompany the "monopoly" assigned by law, which admittedly encourages the sorts of "creativity" that lead to new and beneficial drugs?
In this particular case, of course, we have chosen the latter, and we are caught taking turns blowing on the balloon of health care costs, the inflated drug prices (among other things) leading to inflated insurance costs. There are a lot of reasons to be wary of the military-industrial-complex, and some of them would carry over to a healthcare-industrial-complex, but here I would simply point out that the monopoly of force belonging to a "government-run-military" has not led to a plethora of impoverished defense contractors nor to a dearth of creativity in thinking through ways to effectively kill one another. Just as we have a military dedicated to our security and the projection of American power abroad, perhaps it is time, as Robert Reich put it, for "a government-run single payer system – such as is in place in almost every other advanced economy – dedicated to lower premiums and better care for everyone."
No comments:
Post a Comment