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By 2025, 38 Percent of State & Local Budgets will be Consumed by Healthcare

Do you ever wonder why so many of my blogs are about healthcare? It’s actually quite simple. The healthcare ‘problem’ is constant, unbridled, unsustainable, frustrating and largely because it is covered in green – money green.

The cost of healthcare has been, and continues to be, the bane of existence in our lives. It has become the new ‘weather’ in our discussions, as most everyone talks about it, but very little has been done to change it.

Another example of just how dangerous healthcare costs have become was recently reported by Fitch Ratings, a financial information services organization with operations in more than 30 countries. Their analysis states (suggests) that rising health insurance costs and retirement rates will increase budgetary pressure on U.S. state and local governments – which will adversely impact their financial ratings.

Developing their own 10-year scenario analysis for state and local budget allocations, Fitch assumed that healthcare and pension expenses would continue to grow rapidly while no policies would be implemented to offset this growth. From this, Fitch found that healthcare and social services would increase from annual budgets of 27.6 percent in 2005 to an estimated 38.3 percent by 2025. Consequently, budgets for state and local spending for education, transportation/public safety/environmental and housing would each decrease, largely due to being crowded-out by growing healthcare costs.

Inaction during this time (2018-2025) by local and state policymakers and administrators will only cause this problem to fester – the proverbial “can being kicked down the road” for later generations to tackle. State and local budgets cannot afford this to happen, not now, and certainly not in the future.

One need look no further than what is happening in our public-school systems here in Iowa and around the country. Paychecks for teachers have become skimpier, causing school teachers, students and supporters to strike. A recent story by Kaiser Health paints a very realistic picture of what Fitch’s findings reveal for our state and local communities in the months and years to come.

On top of the Fitch analysis, a PricewaterhouseCoopers report on employer-sponsored healthcare projects a six percent medical-cost growth in 2019. Although this growth rate is similar to the past five-year trend in medical cost growth, it nonetheless continues to exceed the annual consumer price index (CPI). This presents the “unsustainable” cost paradigm for consumers and employers who foot the majority of the medical bills through higher premiums, deductibles and charges. Having access to healthcare remains important, but so too, are controlling the cost of the care received. Healthcare prices are largely opaque, requiring a persistent push for price and outcome transparencies that have so far eluded the healthcare industry.

As far back as 442 B.C., Sophocles expressed the message don’t blame the person who brings bad news. With that said, hey, I’m only the messenger – don’t shoot me!

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Prescription Drug Pricing – The Reenactment of Harry Houdini

Noted for his sensational escape acts in the late 19th and early 20th centuries, Harry Houdini used chains, ropes, locks, straightjackets under water and a host of other props to escape from assured harm, if not death. Crowds were enthralled with his heroics, and they paid him for this gross but thrilling form of entertainment.

To protect his unique career, he was a master on safe-guarding his escape secrets, and was very quick to sue others who imitated his escape stunts.

Fast forward to today. We continue to be entertained by protégé’s of Houdini, now better known to be ‘magicians.’ Some are quite well-known: David Copperfield, David Blaine, Ricky Jay, Penn & Teller, among others. One common rule that all legitimate magicians adhere to is quite simple:

NEVER reveal the magic secret.

The biggest magician we have today, is not really a magician, but certainly ‘appears’ to act like one.

The pharmaceutical industry – and many key middlemen side players, such as pharmacy benefit managers (PBMs) – are in the business of obfuscating facts from reality. In June, I wrote a piece about this problem on my The Health Autonomist blog. Like magicians, who know how to manipulate their audience into a false sense of free will, pharmaceutical players want the public to believe that efforts are being made to keep the medication costs as affordable as possible and, in return, ‘reasonable’ profits are justly-earned to keep costs down.

The chart below shows just how unbridled the costs of prescription drugs have become (found in the yellow line since 2013). Rarely do I repeat the same visual, as this one appeared in last week’s blog, but this chart demonstrates just how rampant drug prices have become when compared to other types of health services.

Yet, a host of games are being played that cause the patient to receive minimal benefit from their actions – with much of the financial gain being retained by the ‘altruistic’ players who tout their allegiance to the patient. One example is found on the Kaiser Health News webpage:

A very insightful report, “Getting to the Root of High Prescription Drug Prices,” was recently released by The Commonwealth Fund, that provides an in-depth description of the many problems inherent in drug pricing. More importantly, the report describes many possible actions that policymakers and stakeholders can agree on to find bipartisan solutions to many identifiable problems. By the way, regulating drug prices or purchasing drugs through Canada are not long-term solutions, just band-aid approaches to a persistent open wound.

A newly-published ProPublica article, “Take the Generic Drug, Patients are Told – Unless Insurers Say No,” reveals that pharmaceutical companies are increasingly cutting deals with PBMs and insurance companies to push more expensive name-brand drugs over their generic-equivalents. Such actions suggest that higher profits are being sought, often at the patient’s expense. ProPublica’s other new article about generic drugs serves notice that pharma continues to find innovative ways to make money at the public’s expense.

I enjoy infographics, as they can help make something that is very opaque appear a bit more understandable. Even within the insurance industry, the shenanigans that happen in the PBM world are often difficult to understand – leaving many of us to sort truth from fiction. Through Pembroke Consulting, SSR Health, Kaiser Health News et al., an infographic was produced that does a reasonably good job of exposing the secrets behind the curtain of obfuscation on drug pricing.

Like tricks performed by accomplished magicians, the drug-pricing profession profits from sleight-of-hand tricks that must never be revealed to the public.

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