Thursday, May 15, 2008
Drugs, The Patient, and The Insurance Company
The desire to take medicine is perhaps the greatest feature, which distinguishes man from animals.
— Harvey Cushing, Life of Sir William Osler
Health insurance companies are constantly looking for new ways to make money. Two of the major impediments to their quest are sick people and the drugs they need. Clever, as a good corporation should be, they have figured out how to overcome the second of these obstacles. Two techniques are employed. The first is practicing medicine just the way doctors do even though few, if any, insurance companies have attended medical school.
When a doctor prescribes a specific drug for a patient (whom it has never met) the insurance company may decide that the generic equivalent of that drug is just as good for the patient as the one that the physician prescribed and refuse to pay for the physician prescribed drug. In that event, if the patient wants to use the prescribed drug the patient must pay for the drug out of his or her own pocket. There is, however, a built in appeals process that patient and doctor can go through if they would like to prove that the trained doctor’s decision is more medically accurate than the corporation’s but it is a somewhat cumbersome process. Why the company insists on substituting its judgment for the doctor’s judgment is best known to the insurance company. As creative as this is on the part of the insurance company, it is not the most dramatic example of saving money through creative insuring.
A recent report in The New York Times discloses that some insurance companies have realized increased profits by reducing the amount of money they are willing to pay for certain prescription drugs taken by their insureds. It seems like such an obvious thing to do that the only remarkable thing is that the insurance companies have not thought of it before now.
Before the companies became creative in reimbursing for drug costs, the insured was required to pay a fixed amout (known as a co-pay) for a prescribed drug that that went anywhere from approximately $5.00 to $50 the amount of the co-pay being determined by the company and on whether the drug was a Tier 1, 2 or 3 drug. The insurance company paid the difference between the drug’s co-pay and its actual cost to the insurance company. Then, a funny thing happened on the way to the pharmacy. The insurance companies invented Tier 4 into which they placed REALLY expensive drugs.
People taking Tier 4 are the beneficiaries of the new policy. Here is how three randomly selected insurers have made themselves its beneficiaries.
The American Association of Retired Persons (AARP) requires patients taking Tier 4 drugs to pay 30 percent of the cost of the drugs with no limit on how much the insured ultimately has to pay. The drug Sprycel is a tier 4 drug that blocks the growth of cancer cells and eliminates the need for chemical infusions. It costs $13,500 for a 90-day supply. AARP requires the insured to pay $4,500 for each 90-day prescription and AARP pays the balance. First Health Life & Health also charges a flat 30 per cent for Tier 4 drugs without any limit on what the insured pays.
Kaiser Permanente, by contrast, tempers profitability with mercy. It requires its insureds to pay only 25 percent of the cost of Tier 4 drugs and places a $325 limit on how much the insured has to pay for each prescription.
Increasing the insurance companies’ profitability is not the only benefit from the new program. For Medicare beneficiaries who have to pay 5 percent of their drug costs after they’re through what’s known as the doughnut hole, the increased amount they are forced to spend gets them through the doughnut hole more quickly. (Not all Medicare beneficiaries will see the benefit in that.) Another benefit that will, however, be obvious to its beneficiary is the cost savings that inures to the benefit of employers who furnish health insurance to employees.
Karen Ignagni is president of America’s Health Insurance Plans, an organization that represents most of the health insurance industry. She pointed out in the New York Times story that lower outlay for prescription drugs means the insurance companies can charge employers lower premiums, thus providing a cost benefit to employers. Adding those benefits to those enjoyed by the insurers makes it obvious that the new policy is a win-win except, of course, for those who can no longer afford to take drugs.
In George Bush’s United States 47 million people have no health insurance. In George Bush’s United States 9 million children have no health insurance. Thanks to the creation of Tier 4, we will soon have a new class of citizen. It will comprise people who have insurance but are unable to pay for the drugs needed to keep them in or restore them to, good health. In a few years we will know how many people are members of their class. They will join the uninsureds as statistics.
Discuss this column
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First of all, great article enjoyed reading it. Love the pictures also. Black and white always gets to me.
Secondly, coming from Canada, I’m a bit put off by US politics and the fine print thereof. I usually drop the names and stick with the rest of the story so you’ll rarely hear me passing a judgment on a US politician – I barely know them and honestly, I don’t care. Hopefully my comments don’t suffer too much because of it, although I’m thinking this is rather another vantage point.
However being your northern neighbor, the bigger picture does in fact interest me a lot. And in your case it’s the incapacity for the US to get rid of those modern day health Shylocks. They seem to be preparing the same thing for us too.
Often dismissed as “part of the way the economy works”, healthcare when left to those who care more for the health of their portfolios has the karma of a self-engulfing black hole. A never ending spiral of profits for the investors at the expense of the sick.
I think the only way to come to terms with the problem is to come to admit that no philosophy is absolute, that pure capitalism can’t work.
In this regard, all I’ve seen as of late coming from the US is a series of side-steps to prevaricate around the bush (so to speak). The system is broken and in a state of disrepair but no one wants to admit it so no steps are taken to fix it.
My other point of view is that insurance has a strong role to play in the actual problem. As I see it, most health execs (oxymoron?) can turn around and tell people who find the price of healthcare out of control to just go and get insurance. I’m willing to bet what people are paying for their insurance today is what it would have cost them for their full Medicare bill 20 years ago. And arguably insurance is what keeps the price of healthcare in the US high. So I say why spend money on insurance schemes when you can put it in a working healthcare system? Naaaa… it would be a sign that the system doesn’t work as advertised and that’s a no-no.
There is also another take on this. What if, in the end, health insurance is just a surcharge, since in the end, the money is coming from public funds and the sick who have to pay? Why pay a private, for profit corporation to smooth out the discrepancies (and doing a lousy job of it also!) while taking a nice chunk in return? Well this would mean that for years the US public was conned or at least coerced and that is too much to admit, I guess.
Mind you, I shouldn’t be talking too much – the current load of leaders in Canada look like they’d love to get their fingers into the healthcare cookie jar also.
— Louis Horvath Tuesday, May 20, 2008 #
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