Insurers are good evil bastards.
They need to have two core competencies. First they must be able to accurately assess risk. Secondly, they must be able to say “No.”
On a good day, health insurance companies wish they were as popular as syphilis. Everyone loves to punch insurers and insurers roll with it as they don’t need to be popular to be profitable.
HHS Secretary Azar is taking that track as he talked about what he wants to do about high drug prices last week. First he says that the Federal government will not negotiate drug prices as the only way to get a good deal is to credibly threaten to exclude ineffective or low value drugs from a formulary:
The only way that direct negotiation saves money is by doing something this administration does not believe in: denying access to certain medicines for all Medicare beneficiaries, or setting prices for drugs by government fiat….
This is just after he went weedy into the details about Medicare Part D protected classes:
In Part D, we’ll be giving Medicare plans the same negotiating power that private sector plans already have—we know this approach works.
Let me briefly lay out how this will happen. We know right now that Medicare Part D is not getting the deals it should on some expensive, important drugs.
For instance, there are six types of drugs that are automatically put into Part D categories that are called “protected classes,” because they’re vital to treating some serious conditions….
Part D protected classes require an insurer to cover “all or substantially all” of the drugs in these six classes right now. There is little ability to for a Part D buyer to say either “No” or “No, not at that price”.
Non-Medicare/Medicaid insurers attempt to control their drug acquisition costs by either excluding certain drugs from the formulary (the list of covered drugs) or placing some drugs on low cost sharing levels and other drugs on “arm and a leg” cost sharing tiers. Insurers say no.
Secretary Azar is saying that Medicare/CMS won’t say No but they are thinking about outsourcing the “No” to private insurers.
This is a legitimate trade-off on how to get lower prices or more variety of drugs.
It is also a class case of outsourcing the screaming at the decision makers to the insurers. Nothing wrong with that, but that is what is happening here.