The healthcare industry continues to feed its addiction to obscene profits instead of better, more affordable patient care. While Americans are bombarded with relentless direct-to-consumer advertising (DTCA) pushing dubious drugs to an unwary public, health plan sponsors can provide a much-needed antidote. Read More about Billions Spent Pushing Low Value Drugs Directly to US Consumers

Health Affairs has launched a timely analysis of physician, hospital, and other health care provider prices in private-sector markets and their impact on overall spending. We applaud this pursuit of definitive answers but until such truths are revealed, employers won’t have any cost relief any time soon.

The Forefront series, Provider Prices in the Commercial Sector, kicked off with an excellent article discussing what Health Affairs considers “under-explored burning questions in the price debate” that they think deserve attention. We couldn’t agree more!

Read the full article when you can. In the meantime, we’ve highlighted key takeaways to help frame this important conversation for employers and all stakeholders seeking lower health care costs and a better member experience.

  1.   Do Poorly Set Public Prices Distort Commercial Prices?

Our current systems for setting prices in public programs are flawed. For example, Medicare pays different amounts for the same service delivered in different settings and reimburses more for higher cost drugs. Additionally, relative value units for physician services are often inaccurate. Although there is some evidence that higher Medicare prices lead to higher commercial prices, more evidence is needed.

  2.   How Should Services Be Defined?

Our payment systems rely on very granular service definitions. For example, there are ten CPT codes for office visits. This creates opportunities for providers to choose more lucrative codes and adds administrative costs. The general sense is that our system has erred on the side of too little standardization. Broader service categories may be desirable.

  3.   How Does Quality Respond To Changes In Pricing?

Cross-national evidence suggests countries paying lower prices do not suffer significantly worse quality of care. Studies of mergers and prices suggest antitrust activities may lower prices but not degrade quality, supporting the position that policies intended to lower heath care prices do not necessarily impact quality adversely.

  4.   How Should We Price New Digital Services?

Given the fee-for-service chassis of the US health system, the instinct is often to create codes for these services and then assign prices, but that is problematic. For many interventions, there is limited evidence about their appropriate use.

  5.   How Much Spending is Flowing Outside of The Claims System?

Most pricing research is based on claims data, a valuable but flawed resource. Increasingly, funds are flowing from payers to providers outside of the claims system via fixed payments, quality bonuses, or shared savings from alternative payment models.

  6.   Are Pay-for-Performance Systems Worth It?

There is a growing body of evidence suggesting value-based care incentives are not effective. Often, quality measures are not tied closely enough to health outcomes to merit additional payments. Operating these models is expensive and may distract from other activities. It is reasonable to conclude that some of these systems should at least be scaled back, maybe even abandoned, until better, more targeted approaches to eliminating substandard care and improving quality can be designed.

  7.   To What Extent Do High Prices Reflect Higher US Production Costs and Why?

While we know market power and a lack of pricing transparency and direct competition is an important determinant of higher prices in the US, a further understanding of production costs would be valuable. In part, health care prices likely reflect higher labor costs in the US. Prices of technologies are higher in the US compared to other nations. And the complexity and fragmentation of the American health care system create higher administrative costs, driving higher prices.

Closing Thoughts

It takes time to delve into these questions and implement solutions for changing the American health care model. The more immediate imperative for employer commercial plan sponsors is to take the reins now with a health plan that is proven to reel in claims overspending while improving benefits and providing a better member experience.

From stagnant wages to crushing medical expenses, employee net income has plummeted, preventing American workers from saving adequately for retirement. Pending legislation seeks to alleviate this crisis while a growing number of employers are boosting retirement benefits by reducing health care costs. Read More about How to Boost Employee Retirement Benefits by Slashing Health Care Costs

From targeting the Affordable Care Act to clamoring for COVID relief funds, annual federal healthcare lobbying expenditures have risen a staggering 70%. Nearly $714 million has been spent influencing legislation to favor the industry and maintain obscene profits. Who’s spending all this money? Read More about Annual Health Care Lobbying Rises 70% to a Whopping $714 Million

Multiple studies affirm that millions of Americans are underinsured or completely uninsured. These grim results include the 54% of the population covered by employer health plans. While outrageous healthcare and premium costs are part of the problem, it’s clear employers need to step up and do better. Read More about What Good is Health Insurance That Robs Benefits and Hurts Health?

In the ongoing battle for talent acquisition and retention, 2 in 3 employers plan to expand their employee benefits program in the next 12-18 months. Yet 8 in 10 say out-of-control health care costs impede their ability to stay competitive. Is it really possible to compete without overspending? Absolutely! Read More about How to Fund Competitive Benefits to Attract and Retain Talent

According to the National Institutes of Health, telehealth services have been around since the 1920s using the limited technologies of their time. A century later, virtual care has become commonplace thanks to the global pandemic… and it is here to stay, especially for mental health services.

A study published by the Centers for Disease Control and Prevention shows that in the first three months of 2020, telehealth usage grew 154% over the same period in 2019. While much of the initial surge was related to COVID-19 (contagion, social distancing, staffing shortages, etc.), 93% of telehealth patients sought care for conditions other than COVID-19 during the 2020 study period.

Clearly patients appreciate the convenience and benefits of telehealth for a multitude of services. What about practitioners? How do they perceive the value of telehealth as a way to deliver care?

The Journal of the American Medical Association surveyed mental health, primary care, and specialty care providers to learn more about their experience. Questions covered telehealth quality and ease of use as well as the proportion of care delivered via phone, video, and in-person visits.

At the time of the survey, mental health practitioners had significantly more telehealth encounters (40.3%) than other types of providers, likely because “telehealth was being used for MH (mental health) care well before the onset of the COVID-19 pandemic.”

Survey results show that mental health practitioners:

• Prefer video visits over phone visits for remote care by as much as 86.4%
• Rate the quality of video visits as equivalent to (up to 50.1%) or better than (up to 41.7%) in-patient visits for both new and established patients
• Report fewer challenges to delivering phone and video care (5.6%—26%) compared to primary care (7.6%—9%%) and specialty care (13.7%—63.8%) providers

While efforts are being made to reduce barriers to telehealth in general, employers can take action now by including coverage for free remote behavioral health services in their employee health plan, thus removing a financial barrier to seeking this important care and improving employee satisfaction.

While patients grapple with runaway costs and the indignities of the U.S. healthcare system, the largest health insurance firms posted solid year-over-year earnings growth for the first half of 2022. In fact, experts don’t think they’ll struggle at all despite worrisome economic conditions.

These same experts also believe insurers with diverse revenue streams will stay strong as they absorb the impacts of lower enrollment as a result of inflation; rising medical costs; a possible recession, which could reduce employer-based enrollment; and the resumption of Medicaid eligibility redeterminations.

Why the disparity between insurers and the insured?

The answer is two-fold, according to Ge Bai, Ph.D., a professor at Professor at Johns Hopkins Carey Business School and Johns Hopkins Bloomberg School of Public Health.

In an interview with AIS Health, Bai points out that “insurance companies, because of their market position, are able to pass on inflation impacts to their end consumers.” Plan sponsors and ultimately, their members, bear the brunt of higher costs while insurers pocket greater profits.

Bai also articulates what many hesitate to say… that insurance companies “have pretty much captured customers. It’s not a very competitive market.” With little competition and no incentive to change current business practices, the greed and inequity will surely continue.

Employers and plan sponsors cannot rely on monopoly legacy insurance companies to care about their best interests. They need to take a more progressive approach and find an employee health plan that does care, especially with today’s rising inflation and the possibility of recession.

Consumers cheered when the Hospital Price Transparency rule took effect in January 2021, requiring that facilities publish their payer-specific negotiated rates for drugs and services. Despite the positive news, there remains a blatant lack of compliance that continues to keep patients in the dark.

Everyone deserves a less costly, more compassionate health plan, especially those being treated for cancer. To follow up on how well the new rule was driving transparency, JAMA Internal Medicine conducted a study of private-payer prices for 25 commonly used cancer therapies at 61 cancer treatment centers so designated by the National Cancer Institute.

In its review of the JAMA study, Cancer Therapy Advisor summarizes the results by saying, “A majority of National Cancer Institute (NCI)-designated cancer centers violated federal law last year by failing to disclose payer-specific prices for cancer therapies.” By year-end, only 44% had disclosed private-payer prices for at least 1 of the 25 top-selling therapies. The remaining 56% remained utterly opaque and in defiance of the rule.

The JAMA study further estimated the acquisition costs for each of the 25 therapies and the extent to which they were marked up by the hospitals administering them. Median markups across all centers and payers ranged between 118% to a whopping 634%. Negotiated prices also varied considerably between payers at the same center.

JAMA concludes by stating, “The findings of this cross-sectional study suggest that, to reduce the financial burden of cancer treatment for patients, institution of public policies to discourage or prevent excessive hospital price markups on parenteral chemotherapeutics might be beneficial.”

It’s important to ensure that employer health plan sponsors pay fair prices not only for medical services and retail pharmacy drugs, but also for all drug claims on the medical plan, like those used for cancer treatment.

Advisors and employer health plan sponsors are best served by health plan administrators like Vitori Health that incorporate reimbursement controls for drugs delivered in facility care settings. This can have a significant impact in reducing overspending for employers and patients going through difficult life and death treatments.

In a unanimous and bipartisan decision, the Federal Trade Commission (FTC) will investigate the secretive practices of six of the largest Pharmacy Benefit Managers (PBMs) in the country. Diverse stakeholders are hopeful this action will unravel years of corruption and reduce prescription drug prices.

The FTC demanded records detailing the business practices of CVS Caremark, Express Scripts, Optum Rx, Humana, Prime Therapeutics, and MedImpact Healthcare Systems. The action has been praised by plan sponsors, pharmacy industry groups, and community pharmacy owners who are subject to clawbacks and additional fees that limit competition and consumer choice.

Of particular concern is the growing trend toward vertical integration… a closed loop in which PBMs are owned by or affiliated with large national health plans. They are also integrated with mail order and specialty pharmacies, significantly expanding their profits and reach in the pharmacy supply chain.

Lina M. Khan, Chair of the Federal Trade Commission, summarizes the situation in this recent quote. “Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system. This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors, and patients.”

Practices to Implement Now

While the FTC conducts its long overdue investigation of the self-serving predation of legacy PBMs, employers and plan sponsors can seek out pharmacy benefit plans that take a more equitable and contemporary approach.

Plans should incorporate these key management features:

• A plan design driven by lowest net cost + medically-appropriate drug procurement and transparent administration
• Rx pricing technology that departs from discounts off fictitious prices created by PBMs under investigation
• A formulary based on comparative effectiveness, not one filled with high-cost drugs that are essentially bribed by rebates
• Rigorous clinical management with manual, evidence-based prior authorization controls vs. the auto-authorization used by the troubled legacy PBMs
• Built-in advocacy for securing manufacturer financial assistance and alternative drug sourcing channels for high-cost and specialty medicines

The FTC confirms that PBM operations have been “difficult or impossible to understand for patients and independent businesses across the prescription drug system.” Employers should be encouraged by the Rx management options currently available and the industry-wide changes that are likely to result from the FTC’s probe.

While there is an imperative for immediate accountability, the immortal words of Reverend Dr. Martin Luther King, Jr. remind us that “the arc of the moral universe is long, but it bends toward justice.”