The rising costs of health care premiums and drugs

The rising costs of health care premiums and drugs
February 23 01:00 2015

The rising costs of health care premiums and drugs

In the Sunday Inquirer from February 1, Robert Calandra wrote about a Germantown couple, the Clarks, and their problems getting affordable health insurance. For 2014, with household income of $33,000, the Clarks obtained coverage within their means because they benefitted from a tax-credit subsidy. This year, Mr. Clark started collecting Social Security and that raised their household income by $8,000. Then their 2015 premium went up 15% and their subsidy shrank, so their out-of-pocket cost would have been $455 a month, even with the subsidy.

That was unaffordable, so Mr. Clark contacted a “certified application counselor” to help them find a plan. The one the counselor obtained for the Clarks costs them a reasonable premium of $50 a month, but it comes with an annual deductible of $11,500. That means with an income of $41,000, the Clarks must first pay 28% of it for medical bills before their insurance kicks in.

If the Clarks are at all typical, would anyone still doubt that insurance and other health care costs are again becoming unaffordable for many people in this area?

Clearly, rising health care costs have again grown out of control. That’s not just an arbitrary judgment. After five years of unusually slow growth, total U.S. spending on health care will once again increase faster than gross domestic product.

A report last September from the Center for American Progress (CAP) found that anywhere from 37% to 70% of the slower growth in health care costs during recent years resulted from the smaller demand caused by the economic recession. That study’s senior author was Ezekiel Emanuel from the University of Pennsylvania.

Several policy analysts also believe that another 20% of the slow cost growth in previous years came from higher copayments and deductibles that health insurance plans keep raising. Such “cost shifting” to consumers reduces demand but it also deters people from seeking care.

Another finding by the CAP was that most of the cost containment associated to this point with the Affordable Care Act consists of one-time savings that will not continue.

Then last week the Altarum Institute, a nonprofit health systems research organization, published more recent data showing U.S. health care spending even rose significantly in 2014. Their analysis shows health spending grew 5% last year, compared to 3.6% in 2013.

Rising drug prices: a big part of total growth in health costs

Dr. Robert Pearl, the CEO of the Permanente Medical Group and a professor at Stanford, wrote an article last month where he placed exploding drug prices at number one on his list of five trends driving up overall medical costs.

“Under today’s rules,” according to Dr. Pearl, pharma companies “can exploit their monopolistic market position and current U.S. patent laws to maximize profits. And for now, it’s patients, employers and insurers who get stuck with the bill.”

An example supporting Dr. Pearl’s concern emerged this month when CVS Health, the pharmacy and benefits management conglomerate, highlighted the budget busting potential of PCSK-9 inhibitors, an emerging class of cholesterol medications. CVS forecasts that the class will cost the U.S. $150 billion a year.

The medical policy analysts at CVS implicitly blast pharma’s anticipated role in driving up that cost figure. They anticipate pharma will expand the application of PCSK-9’s from people with familial hypercholesterolemia to those who are intolerant or unresponsive to statins.

Although the CVS policy people don’t explicitly make the point, it’s clear that after the industry puts statin-refractory patients on PCSK-9’s, pharma would next use their marketing muscle and financial inducements to physicians to make that class the preferred therapy for everyone else with elevated lipid levels.

Another budget-busting drug class will be the PD-1/PDL-1 inhibitors for cancer. Those products will start appearing on the market later this year. Although most Wall Street analysts project this as a $35 billion class, there are compelling projections that forecast annual sales for the class as closer to $100 billion.

By combining the cost consequences of the PCSK-9’s, the PD-1/PDL-1 inhibitors, some emerging autoimmune therapies and a couple of other drug classes, U.S. taxpayers and consumers face a staggering bill. To paraphrase Everett Dirksen, the late U.S. Senator from Illinois, a $100 billion here and a $100 billion there and, pretty soon, you’re talking about real money.

Even the approximately 55% of Americans who receive health care coverage through their work face costs that are spiraling into the stratosphere as premium contributions, deductibles and co-pays keep rising.

It would be useful the hear about the experiences of other Delaware Valley residents in dealing with mounting health care costs.


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