Last summer, in one of my favorite posts, I talked about how insurance companies are still trying to be evil bastards and the need for state regulators to step in and compel them to be grudgingly unwilling not as evil bastards:
Insurers are required to accept and cover HIV patients. They don’t want to. So they are trying to avoid them by being fugly.
Insurance companies still want to tilt their risk pools to be as healthy as possible while letting their competitors eat the costs of covering the known sick….
This incentive structure creates an adverse selection mechanism collective action problem. We are seeing this problem emerge with AIDS/HIV drugs in Florida….
The simplest legal way to target unattractiveness to HIV patients is to make the drugs as expensive as possible.This anti-social but rationally based business model should make the plan very unnattractive to individuals with HIV. They will logically look at the market and look for a plan that does not completely fuck them over.
The same logic applies to diabetics, cancer survivors, transplant recipients and other high cost individuals…Once one plan in a market decides to make themselves as unattractive as possible, every other plan has to either follow suit in making themselves unattractive or be willing to take on massive health costs as they become the preferred plan for HIV positive individuals.
What are the policy solutions?
A… much more plausible solution is to take a regulation from Medicare Part D, “protected classes” and require all insurers to offer at least all chemical/bio-equivilant compounds for HIV, diabetes etc at a “reasonable” formulary tier. If there is a brand and a generic chemical available, the insurer could offer the generic at the “protected class” rate and the brand at a worse tier. The goal would be to force all insurers to not compete on avoiding the sickest people by forcing them to offer the same formulary at roughly the same rates of attractiveness for identified high cost diseases.
California is effectively taking a twist on this policy solution. The Sacramento Bee reports that Covered California is mandating that there is a seperate monthly out of pocket limit for prescriptions as well as mandating reasonable teiring of drugs.
The four board members unanimously agreed to impose $250 monthly limits on out-of-pocket prescription costs for most patients, creating a precedent that other government health exchanges could follow….
The board also adopted changes for 2016 that include prohibiting health insurers from placing all drugs to treat certain conditions, such as HIV, in their highest price category.Some plans have placed all treatments for HIV and hepatitis C into a category that requires patients to pay up to 20 percent of the drug’s cost rather than a copay of $10 or $20.
Covered California is mandating an even playing field where the health insurance companies no longer have an easy route to make themselves as ugly as possible to people who have high cost conditions.
japa21
Bravo.
Richard Mayhew
@japa21: This definately was not on me, just simple policy analysis of the relevant incentives and how to revert those incentives to actually making people better instead of being hideous.
srv
So pharma will never be able to recoup their costs in drug development.
I’m ok with this, there are too many pills as it is and they interfere with the natural course God intended.
Richard Mayhew
@srv: No, pharma will be able to charge whatever the hell they want as long as the insurer agrees to pay for the pill.
These policy changes do 2 things:
1) Break down the monthly consumer cost-sharing of a prescription from OOP maximum to $250/month, so if a person is on a prescription for 10 months, they’ll pay $2,500 in co-pays for it and the insurer pays the rest
2) Prohibit insurers from placing all drugs (including generic versions) that are used to treat particular diseases on the most expensive tiers of a formulary. This policy, by insurers, is explictly used to force sick people to get their insurance from someone else. It is purely a cherry picking/buggering thy neighbor net social surplus decreasing mechanism that is used to avoid covering sick people at a particular insurance company.
hackle67
@srv: Oh, FFS. Did you read the post? It was riddled with avoidable spelling errors, but it was still intelligible. Pharma’s profits have nothing to do with this issue. It’s about what percentage of the cost insurers are making the insured pay out of pocket. Oh, wait. You’re a troll, right? D’oh! My bad.
srv
@Richard Mayhew: Oh, so there’s no way $147500 of a Hep C treatment won’t be soshulized.
I guess there goes the abstinance policy.
joel hanes
California’s recent Democratic insurance commisioners have tended to rock.
RSA
On the other hand, maybe it will just cut into the pharma companies’ 20% profit margins.
Soprano2
Now if only they could tackle the problem of there being no generic insulin available. Insulin has been around for decades, so it seems ridiculous to me that there is no generic available. I don’t know how people who don’t have decent insurance manage when they have diabetes. Even with Medicare and a Medicare Advantage plan my husband spends thousands of dollars a year for insulin for his diabetes. He can’t control it with diet and exercise either, he’s not overweight or badly out of shape and he still has high blood sugar. Once he hits the donut hole, which usually happens sometime in June, the medicine costs over $200 – $300 for a monthly supply, and he has two of those insulin pens that he uses every day – a long-acting and short-acting insulin. He was told that switching to regular needles wouldn’t help the the cost, because that insulin isn’t generic, either.
Keith G
Were it not for a community-based non-profit which steps in to give me a good deal of financial support on insurance costs, I could either afford to purchase my antiviral medications for HIV or I could pay my rent and almost all my other expenses. I couldn’t do both.
Belafon
In October, Balloon Juice should publish all of Richard’s health care posts in a single book/ebook. That way we can give it to all those people who need to enroll but have been confused by all of the propaganda.
DCSwede
Is SRV always a dick, or only about medical insurance issues?
Valdivia
@Belafon:
Seconded.
And kudos to California, where progressive solutions get tried and can be an example to the rest of the nation.
jl
@Soprano2: The usual story of why no generic insulin is that it is not a simple molecule, but a complicated hormone. First insulin products were from animals. Incremental developments produced purer animal derived products, then semi-synthetic and then synthetic versions, and then fine tuned and tinkered versions that have better properties for controlling diabetes.
So, as I understand the issue, it is a problem of an interaction between almost non-stop incremental improvements in a complicated product and US patent policy that allows patent protection of each incremental improvement. Most economic welfare analyses I read in medical journals give the opinion that this is OK, since, from what I read, docs say well, so far there have been no true ‘me too’ developments. Each incremental development is a medically significant improvement.
What is missing is a discussion of what is the probably of success in undertaking research to develppe each incremental improvement, apart from the major breakthroughs (say from animal to recombinant insulin) . Patents work best to produce socially efficient innovation when the probably of success of a new innovation is not close to zero and not close to one. Maybe US patent policy should back off from allowing patents on every new incremental development in insulin technology.
I can;t say I know the answer, but you have to consider both the value of the innovation, and riskiness of the R&D required, to understand what degree of patent protection is best.
Germy Shoemangler
Another 19th-century fable from Ambrose Bierce:
Roger Moore
@srv:
FTFY. The whole thing about how expensive it is to develop new drugs is an elaborate line of bullshit. It includes unnecessary stuff like marketing expenses that actually dwarf the development and testing costs.
jl
Thanks for informative post. One of my main concerns was this type or really and truly socially wasteful useless gaming between all the robots breakfast of metal policies and (I believe) still badly under regulated insurance markets would produce problems in access to care, even for insured.
California has had a regulatory regime that is not strong compared to other states, but I think that is being fixed by some good insurance commissioners.
States with good regulatory regimes may be pushing system towards something more efficient that the current robot’s breakfast: something approaching uniform basic basic contract, or a set of a very few uniform basic contracts, at least along some critical dimensions that govern adequate care.
srv
@Belafon: I was going to credit Mr. Mayhew for his tagging to aid in the search of his catalog here, but I notice this post isn’t helpfully tagged.
Dennis G. used to do that an made if very difficult to track his posts until someone here helpfully linked all of his Confederate GOP series manually.
Once again, the BJ Ombudsman fails us.
Ed. I hereby nominate the Steeplejack for Ombudsman. I realize this will eat into John’s Hola Fruita budget. But we must all make sacrifices.
https://balloon-juice.com/2010/05/08/open-thread-670/#comment-1750442
Belafon
@srv: Cynicism sometimes gets the best of all of us, doesn’t it?
Richard Mayhew
@srv: It is tagged as Wonkery (98% of my healthcare posts) and “All we want is life beyond the thunderdrome” (~10% of my posts non-exclusive)
@Belafon: You volunteering to be an editor… I have 300,000 plus words written, so want to help me get it down to 40,000 words?
srv
@Belafon: It is cynical for people to think their literary catalog will not be of interest to future generations, but I am always optimistic they will see the error of their ways.
jl
@Richard Mayhew: I thought you used ‘money for hookers and blow’ for the health insurance industry posts.
Richard Mayhew
@jl: I was warned early on that I was not allowed to add to the amazingly long list of active tags unless it was urgent. Hookers and blow are always voluntary activities, so I kept away from them
Amir Khalid
@Belafon:
A good idea, but wouldn’t it entail Richard Mayhew having to out himself?
Richard Mayhew
@Amir Khalid: Nope, I’ll self-publish/E-publish under Richard Mayhew
Belafon
@Richard Mayhew: You wouldn’t want me to do it. I would be thinking about the program I should write to do it instead. Though, if you’re serious, I know someone who actually could.
Mnemosyne (iPhone)
@Soprano2:
Out of sheer nosiness, did they diagnose your husband with Type II or with LADA (Latent Autoimmune Diabetes of Adults, aka Type 1.5)? If they told him it’s type II but he’s insulin-dependent, ask them to re-screen him for LADA. It turns out that many adults who were diagnosed with type II but require insulin probably have LADA instead. Not sure if it will make any difference with the insulin, though.
srv
@Richard Mayhew: Never listen to John. Once you are given the keys, you can do anything you want. Think Mad Max.
We can’t even get enough liberals in a row to get an ombudsman, or one tag for healthcare related posts.
Roger Moore
@Amir Khalid:
Publishing doesn’t require you to reveal your name. The US has a very long and distinguished history of anonymous and pseudonymous publications going back to Poor Richard’s Almanack and The Federalist Papers. A more recent example would be Primary Colors. I would guess that anyone who really wanted to could probably dox Richard pretty easily; there can’t be that many people with his job, job change, and known hobbies.
jl
@Richard Mayhew:
” I was warned early on that I was not allowed to add to the amazingly long list of active tags unless it was urgent. ”
Who presumes to warn you about what you can put on the Mayhew Health Care Wonkblog? That guy who posts pet pics once in a while? Surely not that guy.
Amir Khalid
@Roger Moore:
Did Joke Line come out as the writer of Primary Colors, or did he get outed?
Richard mayhew
@Roger Moore: I figure I would last 12 hours to a determined doxxing
Richard mayhew
@Belafon: I have been thinking about it as there is a book somewhere in my archives
RSA
I think you’d write a very good book. In fact, I’ll suggest getting crowd-sourced funding for a good editor, so that it would be the best possible book.
Roger Moore
@Amir Khalid:
He was forced to admit it. People who cared thought the style was suspiciously similar, and that was backed up by a computer analysis. He tried to deny it for a while, but eventually came clean when his denials weren’t working anymore.
Soprano2
@Mnemosyne (iPhone):
He was diagnosed with Type II about 10 or so years ago, then about three years ago his doctor put him on insulin because the other drugs had stopped working. I’ve never heard of LADA, I need to mention that to him. That might be what he has at this point.
Mnemosyne (iPhone)
@Soprano2:
It really only started hitting the news a couple of years ago, so I’m not surprised he hasn’t heard of it. From what they can tell, it’s basically the same process as Type I, only it hits you as an adult. There are specific markers his doctor can look for in a blood test that can help make the determination. Good luck!