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Reforming Rx Pricing
First Reform Pharma Campaign Contributions

Both political parties seem to be in agreement that skyrocketing drug costs of specialty drugs and new drugs coming on the market threaten to bankrupt the system. Yet pharmaceutical companies, pharmacy benefit managers (PBMs) and their powerful lobbying efforts have a proven track record in preventing bold measures to address high drug prices.

It’s no mystery why we cannot have an unified national policy on how to control outrageously high prescription medications. It all begins with campaign contributions that impact how national drug policies are made.

According to a recent analysis by STAT, over two-thirds of Congress (374 of 535 voting members) have received campaign contributions from the pharmaceutical industry during the 2020 election cycle. During 2020, the drug industry sector donated $14 million to influence 72 senators and 302 members of the House of Representatives. Overall, however, the Pharmaceutical Research and Manufacturers of America raised nearly $527 million in 2019 and spent roughly $506 million on ‘dark money’ groups, according to OpenSecrets. More specifically, the drug industry focused on those in key committees that impact healthcare legislation. (It should also be noted that Pharma has funded more than 2,400 state lawmaker campaigns in 2020.)

Such campaign contributions must meet certain guidelines to be legal. These contributions can certainly influence those who wish to get elected (or re-elected) to powerful and influential positions to influence government health policy. Quid pro quo is alive and well for those we elect to Congress and our statehouses. I would like to believe that influence cannot be bought, but politics is an ugly process. The lawmakers who accept these contributions represent both sides of the aisle. As STAT mentioned, “Despite the drug industry’s apparent interest in preventing Democrats from controlling both Congress and the White House, contributions were almost evenly split between major political parties: $7.1 million went to Republicans, and $6.6 million went to Democrats.”

Iowa Senators

Have Iowa Senators, Charles Grassley and Joni Ernst, resisted the urge to accept drug-industry money?

According to STAT, Senator Grassley, who has a proposal to fix drug prices, received a total of $32,500 from the drug industry during the 2020 election cycle. The specific donations from each drug company can be found in the STAT analysis. Grassley, it must be mentioned, does not propose that the Health and Human Services Secretary negotiate drug prices with Pharma. Pharma desires to avoid having the federal government directly control drug prices.

As for Senator Joni Ernst, the results are even more pronounced. Sen. Ernst, who was in a re-election dog fight with Theresa Greenfield in 2020, required ‘all hands on deck’ from campaign supporters. Sen. Ernst received $102,000 in campaign contributions from various drug companies. Again, STAT provides the breakout of the specific contributions from each drug company. Sen. Ernst has pressed for “lower prescription drug costs,” but to do so, the U.S. must “adhere to market-driven principles” that would be more pleasing to Pharma than having government-negotiated pricing.

It’s worth noting that House Representative Richard Hudson, Republican from North Carolina, was the top recipient for drug industry funds – $139,500 in 2020. Rep. Hudson is on the influential Energy and Commerce Health subcommittee, which oversees a large portion of healthcare legislation in Congress.

Summary

The drug industry has hastened yet another addiction crisis – the reliance on campaign contributions that compromises objectivity toward fixing a long-standing problem in our healthcare system.

Understanding the drug pricing policy in our country must first begin with how our congressional representatives are funded during their campaigns. Yes, this may sound too simplistic, but in our government – specifically with healthcare – it boils down to following the money trail. This is the ugliness of how policymaking works in Washington and our statehouses. Until campaign financing can be ethically cleansed, we are mere pawns in a game that will largely be decided by others – regardless of how we vote.

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Almost One-Third of Hospitals Not Compliant
with Price Transparency Requirements

According to Guidehouse, a consulting services firm, 30 percent of hospitals analyzed across 27 states are not compliant with either of the two price transparency rules required by the Centers for Medicare & Medicaid Services (CMS).

The price transparency rules became effective January 1, and U.S. hospitals are required to disclose their pricing with payers two different ways:

  1. Comprehensive machine-readable file – This consists of a single file that contains five types of standard charges for all the items and services provided by the hospital. Acceptable formats include .XML, .JSON, and .CSV formats. The five standard charges include:
    1. Gross charges
    2. Payer-specific negotiated charges
    3. Discounted cash price
    4. De-identified minimum negotiated rates
    5. De-identified maximum negotiated rates
  1. Consumer-friendly shoppable services file – This consists of a set of at least 300 shoppable services, which includes 70 CMS-specified services and 230 hospital-selected services. Hospitals can opt to use a patient price estimator tool to fulfill this requirement.

What Guidehouse Found

More than 1,000 hospitals were recently analyzed across 27 states by Guidehouse. Overall, about 70 percent of the hospitals were compliant with at least one of the two files, while the other 30 percent of providers were not compliant with either. According to Guidehouse, non-compliant hospitals have expressed “they either have significant resource constraints to meet these requirements (COVID-19 or otherwise) or have a lack of understanding of the ruling.”

Guidehouse analysis also found that:

  • 60 percent of hospitals that were analyzed were compliant with the consumer-friendly shoppable services file, while 40 percent were not.
  • 48 percent of hospitals were compliant with the machine-readable file, while 52 percent were not.
  • Larger hospitals and health systems were most likely to be compliant and were often using existing tools to comply with the shoppable services portion of the law.
  • The machine-readable files that do exist are inconsistent in terms of format and content, which often requires significant data transformation and enhancements necessary to make the data usable to consumers and researchers.

By the way, non-compliant hospitals would be penalized $300 per day and face withholding of Medicare payments if they are not in compliance with the CMS.

Des Moines Hospitals – MercyOne and UnityPoint Health

As mentioned in my January blog, two Des Moines hospitals – MercyOne and UnityPoint Health – did not comply with the machine-readable file requirements, and, according to a more recent review, non-compliance continues. However, both hospitals do offer a personalized cost-estimator online tool. To what extent these tools comply with the CMS requirements is unknown at this writing.

I did attempt to perform a personalized cost-estimation on the MercyOne website, but when I was prompted to select a Blue Cross plan in a drop-down box, I could not find an option similar to my plan – Wellmark (BC/BS) PPO – the largest health plan offered within Iowa. Other BC/BS plans were offered as alternatives, but none would fit my requirements – a confusing process.

As for UnityPoint Health, I provided my Wellmark identification and group number, but was booted out of the cost-estimator page and suggested that I call a phone number for further assistance. Both Mercy One and UnityPoint, in my estimation, are successfuly making it difficult for the public to gain access to their coveted negotiated prices with commerical payers. But this is no different than what is happening around the country.

Why Does this Matter?

Most Iowans are covered by employer-based health coverage, and 150 million Americans have coverage through employers. Because of this, employers are forced to find new ways to ensure they are receiving the best prices for their employees’ health coverage. Currently, the gold standard of hospital prices is what Medicare pays hospitals. It is extremely difficult, however, for employers to learn how much they (or their selected insurance companies) are paying hospitals when compared to Medicare reimbursement prices.

In the past, employers were assured by insurers that hospital prices were ‘discounted’ by a handsome amount. But this approach can be rather disingenuous. Negotiated ‘discounts’ off grossly-elevated chargemaster prices do not help employers keep costs affordable. Instead, employers now see the need to negotiate prices UP from the publicly-known Medicare prices, rather than DOWN from the irrelevant chargemaster prices that nobody pays.

Summary

In short, the compliance with price transparency requirements appear to be comparable to a ‘cat and mouse’ game between some hospitals and the enforcement efforts of CMS. Yes, healthcare pricing is both complicated and secretive, but this is by design. It is quite apparent that hospitals have little desire to reveal their negotiated prices with the public. This subject matter will continue to evolve over time and will be included in future blogs as more information becomes available.

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New Kaiser Survey on Employer Health Coverage Released

National Study on Employer Health CoverageNearly every September for the past two decades, I have released our survey findings from the Iowa Employer Benefits Study and, during that same month, would eagerly await the results from the annual Kaiser Family Foundation Employer Health Benefits Survey. The Kaiser findings put a complementary national perspective to our Iowa results.

Unfortunately, due to the Covid-19 pandemic, I pumped the brakes on surveying Iowa employers for this year. Kaiser, however, did pursue their national survey and it was released a little later than usual – on October 8.  The results provide an important glimpse into what is happening to employer-sponsored health insurance around the U.S.  Overall, Kaiser surveyed 1,765 non-federal public and private organizations with three or more employees, and from this number, 540 employers were located in 12 Midwestern states (an average of 45 employers per state). The Kaiser study, I must mention, does not break out the results by each state, only by region.

Key Findings by Kaiser

The Kaiser survey is very helpful because it documents national health trends for employer-sponsored plans. Some of the key findings in 2020 include the following:

  • About 56 percent of employers offer health benefits, a percentage that remains unchanged over the past five years. Similar to Iowa, the larger the employer, the more likely health benefits are offered. About half (53 percent) of U.S. organizations with fewer than 50 employees offer health coverage, and nearly all (99 percent) of the organizations surveyed by Kaiser with at least 200 employees offer health coverage.
  • The average single and family premiums increased by four percent over the past year, while worker’s wages increased by 3.4 percent and inflation increased by 2.1 percent.
  • The average annual premium for single health coverage is now $7,470, while the average family health premium is at $21,342. Over the last five years, the family premium has increased over 22 percent, and over the last 10 years, it has increased 55 percent.
  • On average, covered workers contribute 17 percent of the total single coverage premium and 27 percent of the premium for family coverage. In our 2019 Iowa study, we found that covered workers contributed 18.6 percent for single coverage while workers for family coverage contributed 30 percent of the premium.
  • The average single deductible found by Kaiser now stands at $1,644, which is remarkably similar to last year’s $1,655 average. In 2020, 83 percent of covered workers have a deductible in their plan, similar to last year.
  • Most large organizations (81 percent) offer at least one type of wellness or health promotion program. However, among those that offer the coverages, only 11 percent) view the programs as “very effective” at reducing the organization’s health care costs.
  • About 83 percent of surveyed employers who offer health benefits say they are satisfied with the overall choice of providers available through their insurance plans, however, only two-thirds (67 percent) say the same about their mental health and substance abuse networks.

The 2020 Kaiser survey was conducted from January to July, with about half of the interviews conducted before the full extent of the pandemic had been felt by surveyed employers.  Kaiser President and CEO Drew Altman acknowledged, “…our survey shows the burden of health costs on workers remain high, though not getting dramatically worse. Things may look different moving forward as employers grapple with the economic and health upheaval sparked by the pandemic.”

Because of this, next year’s survey will provide a more realistic look at how the pandemic may have impacted employer-sponsored health benefits in the U.S.

To learn more about the Kaiser study, the article was published in the peer-reviewed journal Health Affairs.

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