What Insurance? A Pricey Co-Pay For The Insured
18 CommentsBy Ed Silverman // April 14th, 2008 // 10:10 am
Health insurer are rapidly adopting a new pricing system for very expensive drugs, asking patients to pay hundreds and even thousands of dollars for prescriptions for meds that may save lives or slow the progress of serious diseases, The New York Times writes. Under the old system, patients pay a fixed amount - perhaps, $10 to $30 for a scrip, no matter the actual cost. Now, insurers are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month.
Hundreds of drugs are priced this new way, the Times points out, adding that the meds are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents. Insurers say this keeps everyone’s premiums down at a time when some of the most innovative and promising new treatments can cost $100,000 and more a year, the Times writes.
The system, often called Tier 4, began with Medicare drug plans and is now found in 86 percent of those plans. Some have even higher co-payments for certain drugs, a Tier 5. Recently, Tier 4 began showing up in insurance that people buy on their own or acquire through employers, according to Dan Mendelson of Avalere Health, a research organization, and is the fastest-growing segment in private insurance. Five years ago it was virtually nonexistent in private plans, he tells the paper, but now, 10 percent of them have Tier 4 drug categories.
“This is an erosion of the traditional concept of insurance,” Mendelson tells the Times. “Those beneficiaries who bear the burden of illness are also bearing the burden of cost.”
Take Robin Steinwand, 53, who has multiple sclerosis. In January, she went to refill her scrip for Copaxone. Steinwand had been insured with Kaiser Permanente for 17 years through her husband, a federal employee, and had been taking Copaxone since MS was diagnosed in 2000, buying 30 days’ worth of the pills at a time. Even though the drug costs $1,900 a month, Kaiser required only a $20 co-payment. But when she picked up her scrip at her local pharmacy, she was handed a bill for $325. “I charged it, then got into my car and burst into tears,” she tells the paper.
Dianne
I also have MS and was on Copaxone. A few years back, I found an interesting study by two researchers who found that taking Copaxone every other day was just as effective as daily injections. The article can be found at:
This Is MS - Copaxone Every Other Day | Unbiased Multiple Sclerosis Research, News, and Community
Excerpt from This is MS: “We are aware of two published studies (Fletcher 2002, 1999) that evaluated the safety and efficacy of 20 mg doses of Copaxone when administered daily (QD) or every other day (QOD). Although the second trial (Fletcher 2002) included patients with Relapsing-Progressive MS (RPMS), it should be noted that Copaxone is only FDA-approved for RRMS and not RPMS. The authors of these studies concluded that the QD and QOD treatment groups were equally effective.”
Also, Judy Graham’s book, Multiple Sclerosis: A Self-help … - Google Book Search was of great help to me. Judy, who lives in England, is a writer, editor and broadcaster. At 26 she was diagnosed with MS. By working with scientists looking for answers, she learned about MS, and how to manage the disease. Through those efforts, she reversed her symptoms, and has remained well for over thirty years. (See: Multiple Sclerosis Resource Centre About The Author Judy Graham).
I would not tell anyone to throw their medicine away. However, a little traditional medicine with a little holistic might be a good option.
And to Robin, if you’re reading this, God bless.
Dianne
AA
This is absolutely criminal and disgraceful.
Due to not having health insurance, I can at least plan ahead of time to buy my meds from Canada. But many people, particularly if they have cancer can’t do that.
Nathan and HC, what good is innovation if the people who need it are priced out of the market?
Just when I think it can’t get any worse, it does.
AA
Nathan
Wow — that is a tough issue. Here are a couple of my initial thoughts:
1) Traditional health insurance has always been “an 80/20″ type of system where the user pays 20%, not a flat fee. Why should drugs be any different?
2) A co-pay system hides true cost of heath care. We, as a society, need to have a national “debate” of sorts. How much is our health worth? People hate to look at this issue directly in the face: Our health comes with a price. World-class health care is NOT a right — it is a privilege and it is a commodity. I know it sounds callous — but it’s true. We trade our dollars for our health. It’s a commodity. While we fail to recognize this fact, our health care spending is spiraling out of control. We need a sort of evolving definition of “basic healthcare” (which is a right) and “world-class healthcare” (which is a commodity). Co-pay systems hide the cost of health care and prevent this sort of dialog from taking place.
Mark Mills
Although I agree insurance companies shouldn’t have to cover near 100% of the cost of a drug that would help ease the symptoms and possibly the progression of a chronic disease, I do think the drug companies have a responsibility to ease the cost to the insurance companies and make their money from volume sales when there may be a very large population of people in need of these drugs.
For example, there are 1.3 million people in the USA alone and many more throughout the world with Rheumatoid Arthritis. Humira is a proven drug for easing symptoms and progression of moderate to severe RA along with many other diseases. Yet the average cost for 2 injections per month is $1500.00. Most insurance companies are requiring one third of the cost be paid by the insured making the cost $500.00 a month plus the monthly premium. Reducing the cost by just 1/3rd would make it accessible to more disease sufferers and reducing the cost by ½ would benefit even more people…and the drug companies would still make their millions.
I have moderate to severe Rheumatoid Arthritis and was on Humira for 3 years. It was a like a miracle. I was able to function better and with much less pain. It is a wonderful drug and helped me be more active and productive in society. When the co-pay increased to $500.00, I could not afford it anymore. I have been without Humira for six months now and almost daily feel and see the deterioration this disease is causing to my body, both physically and mentally. To function daily is quit a chore. I’m not looking for handouts just a far price on these drugs so that I will have a chance to live the rest of my life somewhat comfortable and be productive. And…I would like to know I will be able to hold my grandkids when that time comes.
Bob Freeman
Nathan, I disagree with you on the issue of right vs. privilege. I view health care as a social good and one which requires government intervention to prevent or correct market failure; hence, I consider it a fundamental human right.
You are correct in stating that a 20% coinsurance rate is the norm, but the increasingly high prices of specialty pharmaceuticals is putting that beyond the reach of some insured patients unless they have supplemental insurance or flexible spending accounts for out-of-pocket costs.
I recognize that price controls result in market shortages but would argue that the insurer is the one at fault in this instance. The % of the total premium due to specialty drugs is quite small–their imposition of co-insurance at these levels is frankly suspect. There are other contributing factors, viz., the shift of drugs in Medicare Part B to Part D (in the case of Medicare) insurers are adopting for their markets.
Nathan
Bob,
I understand how and why people think that health care is a “right”. But the reality is that it costs money. We think of adequate food and water as “rights” too — but they are also commodities bought and traded for money. If money is in limited supply (it is), then the things that it buys are ALSO in limited supply. We as a society need to have a serious introspection about how much our health is REALLY worth. Nobody wants to put a dollar value on an added 6 months of human life. I understand why nobody wants to place a dollar value on it. But if we are going to seriously address our uncontrolled spending on health, then we are going to seriously have to debate about the monetary value of human existence.
How much money is an added year of life worth? How much money is 10% reduction in cardiac arrest? How much money is it worth to save the life of an unborn baby with congenital defects?
In the long run, we just can’t afford to infinite spend dollars whenever the grim reaper knocks at our door.
After saying all that, I also realize that health insurance plans “cap out” at a yearly maximum out-of-pocket. It seems that the above-mentioned plans should also provide similar coverage for very high-priced medicines.
Bob Freeman
No disagreement from me, Nathan, on the realities of scarce resources. I also agree with your points about societal decision-making and the difficult questions about how much we are willing to spend.
Prior to even addressing those questions; however, I would only add that we pay an unacceptible level of administrative costs in our fragmented health insurance system. I believe it’s around 23%. That, to me, is an area that should be addressed: the great amount of administrative fat or slack in our system. HIT will help to an extent but there’s a long way to go.
Former pharma Marketing Exec
Nathan,
From my perspective, the skyrocketing cost of health care is a result of the fact that we do not view it as a basic human right. The fact of the matter is that we have commodified it to the point where we cannot, without great difficulty, make it affordable to all those who are entitled to access it(thinking about the 42 million who go without it).
There are excess costs in the system and we have managed to add layers, which in my view are unnecessary. Drug distributors and pharmacies all take a cut, but in some cases the cut they take is exorbitant and not in line at all with the role they play in getting the drug to the patients. Who will argue what profit anyone should make? That is a tricky question which we can debate forever.
The fact of the matter is, European countries and Canada do manage to serve their citizens better. Yes, they pay higher taxes for it, but they get peace of mind when and if they need to access their system.
Nathan, you said “In the long run, we just can’t afford to infinite spend dollars whenever the grim reaper knocks at our door.” Well my question is, then why are we in this business at all? Maybe when someone gets a disease it was natures way of keeping the population in control. If we think that way why bother with anything? After all, death is inevitable, no one lives forever. When and who decides when someone gets treated or not? Do we set up a panel that looks at what value and quality a person may give back to society that will help us decide who is entitled? Do we set up criteria? Maybe we have already. Maybe those 42 million Americans are poor and maybe we should be less benevolent with them? But if these poor Americans turn out to be all immigrants of a particular class, would denying then access to health care make us participants in an act of genocide?
Does are health care cost so much so that we can actually provide for those citizens who cannot pay for their own?
Its a slippery slope…
HorusCat
Bob and Nathan,
Hi! Bob, I just read an article in our paper about Wellpoint’s claims costs. They are paying out about 82-83 cents of every dollar in claims. I don’t know if that includes their admin costs or not.
Nathan, I am with you that health care is a commodity. Unfortunately, the entitlement mentality means that people think it should come at no apparent cost to them. I wondered, when I read the blog, whether the woman in the blog would consider giving up one of her cars (assuming they have a car payment) in order to buy her Copaxone? What about eating beans and rice twice a week? My experience with many people who “can’t afford their meds” is what they mean is “I don’t want to make the sacrifice necessary to buy my meds.”
The same is true of all our medical care, not just meds. Studies show that when women have to pay a MINIMAL co-pay $5-10 for a mammogram, they quit getting them. Yet I suspect those same women are paying $5 for a pack of cigarettes of $3 for a cup of Starbucks.
And Nathan, you are exactly right when you say we have to start asking ourselves the really hard questions. How much is 2 more months of life worth? One of my docs told me today about a tragic case he had this weekend: a young man had some sort of cardiac event and is in virtual brain death. But the parents are holding out….would they be so desirous of holding on if they were paying out of pocket for his end-of-life care? Insurance and Medicare/Medicaid allow us to duck the ethical questions we need to ask.
Bob, I sell a biologic, and I agree with you that this represents an insurance co. decision to cut costs where they can–MS patients are a minority and don’t have a voice. So they can get away with this sort of co-pay. Some companies are responsive, though; my company has limited the co-pay for any patient to $50/month for one year, hoping that they can use the time to find alternative insurance.
M Helm, MD
Bob, Thank you for that last comment. I will be the last to defend some of the outrageous prices that expected for treatments of some chronic diseases. (Remember these are not cures - if you cure a patient, they don’t generate any long-term revenue.)
I’m also of the “health care is a social good” philosophy. But, I’m a libertarian (little “l”), so I don’t put a lot of other things in that category. I’m also of the opinion that less is more.
A couple of simple ideas would go along way toward improving access to these (and all) medicines.
First, If there was one price which all customers paid, regardless of their “class of trade,” their ability to negotiate better prices, or their market leverage. This price I believe should include a reasonable return on research investments (those actually incurred, and not already generating a benefit through some tax write-off scheme), as well as a small amount for coverage of medical communication (not DTC advertising of erythropoetin or anti-TNF antibodies on prime time television).
All pricing and returns need to be very transparent. It is shameful that some of the disease specific charities fund basic research which leads to commercialization of products which the sufferers can’t then afford. If you want to compare this to the way we deal with public utilities, go ahead. As a group they tend to do okay, though maybe not as flashy as PhRMA companies.
Second, If there were one set of rules and adminstrative processes to secure coverage this would reduce the burden on providers and patients. Ideally the “one set of rules” would also go with a single payor in each of hundreds or thousands of “health service areas.” Yes, this is a single payer concept - an approach which insurance companies do not want anyone to think about. This would coincidentally wring out most of the wasted 20% or so administrative costs in the system. If the single payer geographic units were small enough, policies could be tailored to specific local problems. Sure there would still be insurance executives around, but they would be bidding on the business in an area and ideally working to the good of all, not attempting to find ways to squeeze more profit out of the money that comes in with premiums and claims processing services.
Here’s the math. If you get to keep 20% of available health dollars you handle, but you cover only 10% of covered lives(and therefore health costs) in an area, you would make just as much money if you only kept 2% of the available funds, but covered 100% of the available lives. The going rate would likely be no less than 4% in “administrative overhead.”
Less duplication, more efficiency, reasonable access to treatments, better patient care, happier providers, healthier paitents - Solving the problems of the world on the blog-o-sphere sure is easy!
Nathan
I agree it’s a slippery slope — but that doesn’t mean we shouldn’t try to address it. You are correct — by our collective ignorance of this issue we have already “decided” as a society that the 42 million uninsured people are not “worthy” of basic health care. Is this the right decision? Almost certainly not! But it’s a decision we’ve already made by NOT addressing this issue head-on. By addressing the issue head-on we might come up with something a little more equitable.
As for why we are in this business, that’s obvious: we should do whatever we can to improve health care for everyone. However, we (as a society) need to recognize that our recourses are limited and we are becoming technically CAPABLE of providing health care that we are unable to afford. Hopefully technical advances will not just provide BETTER health care, but will also provide CHEAPER health care.
In the past, death was a physical reality with no way around it. In another 50 to 100 years, death is likely to become more of an ECONOMIC reality. (ie. I’ll die when I can’t afford to continue the heroic medical measures needed to sustain my life.) Obviously we aren’t there yet — but we are approaching it more rapidly all the time. People talk about stem-cells like they are a panacea. People don’t realize that stem-cell treatments are generally going to be very personalized — not “out of a box” like our current pharmaceuticals are. Treatment will be VERY VERY expensive. Will insurance cover it or will the cost be born by the patient?
Here’s a scenario that Ed’s article seems to be pointing to: What if specialty drugs (cancer medications, etc) become SO expensive that insurance simply won’t pay for them? Patients are forced to use only older generic medications. The cost of specialty medications (and the benefit gained) is essentially only born by the “elite” of society. Once the drugs loose patent protection, then “the masses” have access to them. Is this something desirable? What if we have to choose between this scenario and an alternative scenario in which those same lifesaving drugs simply never get invented because there wasn’t a profit motive for developing the drugs in the first place? Maybe I’m overly pessimistic – but I don’t see a whole lot of “good” options. We’ll be choosing the “least evil” option.
HorusCat
Former,
I have to go with Nathan here. We simply can’t afford our technical advances; nor have we asked ourselves the ethical questions that go with these advances. We could pour 100% of our GDP into medical care and provide all extraordinary measures for everyone and keep them alive as long as possible. Do we want to do this?
I think we have to accept that we can afford to offer a basic level of care to everyone, and then allow those who want more to purchase it. We do this with food, clothing and shelter. Why should medicine be different?
We also have to look at overuse. If you read some of the physician blogs on the web, you will see that overuse of the system is endemic and significant. This is overuse by those with and without insurance. Medicaid patients who take ambulances to the ER because they don’t want to cough up the money for a bus to the clinic. The patient who has had leg pain for a year, but one night at midnight decides to call the EMTs and go to the ER. On and on. Patients do this because they do not see the cost of what they are doing. If a patient had to pay a basic fee for using the ER (say $10), overuse would probably be cut in half.
That is the problem with any 3rd party payor system. As long as an individual isn’t spending his own money, he will careless about what he does.
I think we should have out-of-pocket costs for everything and for everybody. Even if a Medicaid patient only has to cough up 50 cents, they should have to do it. And any 3rd party payor system should penalize those who do not get their preventive care done. You choose not to pay $5 and get your mammogram? Then you incur a higher cost when and if you get breast cancer.
Those are just some of my random thoughts.
Bob Freeman
M Helm, MD, Nathan & HorusCat: interesting discussion from a very diverse group.
M Helm, to your point, there isn’t a single price in our entire health care system. Instead we have cost-shifting and differential prices throughout, from hospitals to physicians to labs and community pharmacies. Insurance companies price-discriminate, not only on experience but also on single-person contracts vs. family contracts.
Horus, I don’t like cost-sharing for essential services such as mammograms, vaccinations and the like. It is true that people don’t value preventive services so you have only two options: bring the transaction price down to near zero or impose penalties on people who have voluntarily elected to forgo them. I prefer the former over the latter.
Nathan, insurance is best set up to insure against the financial loss from rare events. Actuarial methods tend to be less accurate in forecasting utilization and costs in “small groups”, and this may be as much of the problem as the unit costs of the drugs. As long as we want a pluralistic financing system, we’re going to encounter these problems.
As I have posted before, I am an unapologetic, unrepentant liberal (recovering socialist, more accurately) so I want to see a mandatory universal national health insurance system that provides a safety net for all citizens as is the practice in Europe.
Former pharma Marketing Exec
Nathan,
Good dialog. I would say though that for the 42 million Americans who cannot access health care, as far as they are concerned the day has arrived where death is an economic reality.
You and I both know that sometimes drug prices are they way they are just to “open a market” and not necessarily because they are more costly to produce.
Interesting comments on Stem Cells - no I do not think they are the panacea, they do have some drawbacks. However, I respectfully disagree with the argument that the use of this technology and personalize therapy in general needs to be so expensive. Once the technology is discovered and honed, it will be applicable to a wide variety of diseases. This is an area of interest of mine. The choice will always be ours, do we out price it, or do we make it accessible to everyone? That depends on whether we want to keep with our elitist approach.
As far as drugs never getting invented because of lack of incentives, not highly likely. For those that have nothing, something will be incentive enough. After all isn’t this how commerce started way back when?
HC: Interesting points on the overuse of health care and co-pays. If it were just a matter of $5.00 here or 0.50 cents there, no problem. But we are talking about co-pays much bigger than that, and this is where I have a problem.
I get statements for what my health care costs when I access it and my monthly premiums remind me of what I am paying. So, I am not so sure I can relate to what you are saying about not being aware of what the cost of health care is.
As for not affording our technical advances - again I would have to ask, then why have we put ourselves in this predicament? Actually this is like saying, “although my desire to drink has turned me into an alcoholic, I just might as well accept the fact that I can’t stop - that is just the way it is”.
Hmm, not to make light of the subject, maybe we need to think in terms of a 12 step program….
Joking aside, Nathan, I hear what you are saying with the analogy of handling commodities like gas and electric. But I would remind you that they are still affordable and to some extent you can chose to make your house greener and to some extent you can control what you pay monthly. This is not the same with drugs and health care. You cannot predict what illness you will get and how much health care you can receive and benefit from. So, it needs a little more thought.
Bob Freeman
Former Marketing Executive, I can understand the plight of the 42 million without insurance because I have been in that situtation. Before returning to academia, I was an independent consultant and found the cost of COBRA ($1300/month) beyond my means. When I finally found a policy for me and my wife with a $800 month premium and a $2500 deductible, I gladly snatched it up. I eventually learned that it denied virtually every claim after the deductible unless I fought them tooth and nail.
Anyway, I digress except to point out if one does not have coverage one is very much aware of prices and one is charged full price, not the ones that are negotiated by managed care organizations and the like.
harpy
Pony up, kids. Let’s put some stats behind all of the baseless claims of who costs how much and who deserves what. The WSJ Health Blog posted a study that says it’s the rich people with health insurance who are clogging ERs, not the poor. Any facts out there say otherwise?
Sherri Bassett
Hello,
I have been prescribed Humira for my chronic chrones disease. My copay is $150.00 and I cannot afford this. Is there any agency or company out there that can help me with this issue?
Thank you
Sherri
Bob Freeman
Sherri, I would have to ask you a number of questions that wouldn’t be appropriate for you to answer on a public board. Let me throw out a list for you to think about:
1). Have you checked with Abbott directly to see if you qualify for any company-sponsored discount program? Their web site should have a link to patient assistance programs–you don’t have to be “poor” to take advantage of the program. (That’s sort of a blanket statement on my part). It may be possible to reduce the copay or eliminate it depending on your circumstances.
2). If you’re a Medicare patient (or a senior without coverage) in certain states that have Patient Assistance Programs, those state programs might off-set some or all of the copay. A partial list of states include NY, NJ, IL, OH, PA. These are programs primarily for either the aged or disabled and have income levels. They also “wrap” around Medicare to reduce cost-sharing.
3) If the Abbott site is a problem to navigate, go to PhRMA’s and link to companies that participate in their “discount card” program.
(Disclaimer: I do not own any pharma company stocks or chain drug store stocks except what may be in my state retirement system.)
Please feel free to contact me at freeman@pharmacy.tamhsc.edu and I’ll help if I can, or if you’re comfortable, add more detail to your question on PharmaLot and perhaps others can add advice.