Category: Health Care Costs

Laszewski: Death Spiral Is on Its Way

On the expected increase in rates:

If the health plans do issue double digit rate increases for 2015, ObamaCare is finished…

Simply, health insurance plans that cost middle-class individuals and families 10% of their after-tax income and have average Silver Plan deductibles of more than $2,500 a month are not attractive and people won’t buy them any more enthusiastically next fall than they already have…

One thing that could save ObamaCare:

Give carriers the ability to swap current benefit mandates (that were set by regulation not statute) for lower premiums and deductibles and be completely transparent in what those trade-offs are while still complying with the underlying statutory requirement that the plans must be worth at least 60% of total health care costs. The administration has the power to do this within the scope of the law. (More)

New York Might Drive Its ObamaCare Exchange Premiums Up Another 30 Percent

According to the U.S. Department of Health & Human Services’ March enrollment report, New York’s state-run ObamaCare exchange has signed up fewer than half the people who were determined eligible for the exchange when they enquired.

qweWhat is the problem? One seems to be that the provider networks available in the exchange are very narrow.

What the proposed solution? At a recent presentation, exchange officials threatened to impose out-of-network access requirement on insurers who bid to participate in the exchange. If rolled out in the direction the officials appeared to point, this would be an Any Willing Provider (AWP) provision, long a lobbying priority for organized medicine:

The lack of out-of-network benefits for individuals shopping on the exchange has been criticized by some business leaders, physicians and legislators, who say it provides little choice for consumers and hurts doctors who can be bullied by insurers into accepting lower reimbursements. Insurance executives say they need that leverage to keep premiums low and attractive to consumers shopping on the exchange…If out-of-network doctors and hospitals were required to be reimbursed by the insurer, premiums could rise as much as 30 percent, according to the insurance industry.

More Evidence That the Exchange Plans Don’t Want the Chronically Ill

woman-in-hospitalBrian Rosen, senior vice president for public policy for The Leukemia & Lymphoma Society, said the group studied premiums and benefits for patients with blood cancer in seven states, including Florida, California, Texas and New York. They found 50 percent co-insurance rates for specialty drugs on several plans in Florida and Texas, while the highest co-insurance rates on California plans were 30 percent and in New York, co-pays were typically $70.

Under the law, insurers can’t charge an individual more than $6,350 in out-of pocket costs a year and no more than $12,700 for a family policy. But patients advocates warn those with serious illnesses could pay their entire out-of-pocket cap before their insurance kicks in any money. (AP)

Laszewski on the Numbers

The vast majority of those who are entitled to subsidies have not claimed them:

It looks to me the Obama administration will claim at least 6 million enrollments by the end of March. But that will mean 75% of subsidy eligible people will not have bought a plan…

But adjusting that number for those not paying (15% to 20%), the real net enrollment number will be closer to 5 million…

There is a reason why millions of people are not signing up:

Stressed Over MoneyUnder ObamaCare, a family of four making $59,000 a year is expected to pay almost $5,000 a year net of the federal premium subsidy (more than 10% of their take-home income) for the Silver Plan that has an average deductible of almost $2,600 a year, or pay a fine of about $400. How many families like this have an extra $5,000 in their family budget to buy a policy with a deductible this high? Would this be a hardship for them?

A family of four making $71,000 a year would be expected to pay $6,700 a year net of the subsidy for a plan with the same average $2,600 deductible, or pay a fine of about $600. Would this be a hardship for them? (More)

Henry Waxman Writes a Letter — Wipes Out $18 Billion of Biotech Market Value

The New York Times reports that Rep. Henry Waxman and three Democratic colleagues wrote a letter protesting the price of Gilead’s new hepatitis drug, Sovaldi. A twelve-week course of Sovaldi costs $84,000 — about $1,000 per pill.

iStock_000007047153XSmall“Our concern is that a treatment will not cure patients if they cannot afford it,” the congressmen said in their letter, which was sent on Thursday.

It was signed by Henry A. Waxman of California, the ranking Democrat on the committee, and Frank Pallone Jr. of New Jersey and Diana DeGette of Colorado.

Gilead’s stock fell 4.6 percent, to $72.07 on Friday. Nervous investors took down the shares of some other big biotechnology companies as well, worried that pressure on drug prices would increase. Biogen Idec and Alexion Pharmaceuticals both fell 8 percent, Vertex Pharmaceuticals 5 percent and Celgene nearly 4 percent.

Why Bundled Payments May Not Reduce Costs

Hand Holding Cash…[T]he results of this analysis show that the case for bundled hospital payments for the privately insured is much weaker — post-acute care and other ancillary services account for a relatively small share of overall spending on hospitalization episodes, and they account for almost none of the variation in episode spending from one hospital to another.

Study. HT: Austin Frakt.

Cost of the ObamaCare Exchanges


Source: Phil Kerpen, American Commitment.

New FDA Rule on Generic Drugs Could Hike Costs $4 Billion per Year

seniors-and-prescriptionsA proposed FDA rule on labeling generic drugs could increase generic drug-makers’ exposure to product-liability lawsuits. This could add $4 billion a year to the cost of generic drugs, according to Scott Gottlieb, MD, and colleagues.

  • A new regulation proposed by the Food and Drug Administration will compel generic drug makers to update their drug labels to reflect purported “new” safety issues.
  • The regulation will result in increased drug prices and leave generic drug firms vulnerable to “failure to warn” tort suits, but produce no public health benefit.
  • It would be far more efficient and effective for the FDA to either review and update generic drug labels itself or adopt a more rational and logical oversight process, known as Prior Approval Supplements. Either approach would allow updating of drug labels without additional tort liability.

Does ObamaCare Deserve The Credit (or Blame) For Rising Deductibles?

become-richGalen Benshoof, a guest blogger at The Incidental Economist, writes that rising deductibles are not entirely a consequence of ObamaCare, but also the rise of Health Savings Accounts and associated high-deductible, consumer-driven health plans over the last decade.

However, Benshoof’s description of the effect of consumer-driven health plans suffers from misunderstanding:

In the 1990s, some conservatives gravitated to a health insurance scheme that shifted costs and responsibility onto workers. They called this consumer-directed health care (CDHC), although the real beneficiaries were employers.

ObamaCare Payments to Insurance Companies Almost As Much As Subsidies for Individuals and Families


CBO estimates that subsidies to individuals for premiums will cost the government $13 billion this year and that cost-sharing subsidies — payments that reduce out-of-pocket payments by low-income enrollees for medical goods and services — will cost an additional $3 billion, for a total of around $16 billion. That’s only slightly more than the nearly $15.5 billion that insurers can expect in direct payments from the government.

Source:Doug Badger.