Its Still the Prices Stupid with Four Vignettes

It’s Still the Prices Stupid with Four Vignettes Illustrating the Pricing Problem For Consumers Gerard Anderson, Ph. D, Professor

Main Findings • Despite many restructurings of the US and other health systems - prices remain the primary reason why the US spends more on health care than any other country • On key measures of health care resources per capita (hospital beds, physicians, and nurses), the US still provides significantly fewer resources compared to other industrialized countries • The main difference from 15 years ago is the growing differential between public and private sector prices in the US – Private sector prices are approximately double the public prices – Hospitals and physicians will adjust their costs to the revenues they receive so as private sector prices increase so do costs

How Higher Prices Affect Consumers • Four vignettes can explain how consumers are effected by high prices – – Helping Amish negotiate what they will pay for a premature baby Is my anesthesiologist in network? Paying for ultra expensive drugs Paying for drugs while having multiple chronic conditions • What can be done in each case?

The Amish • An Amish leader has a member whose child was born prematurely and incurred a $1. 2 million hospital charge • The Amish do not believe in insurance and always pay their bills in full • He believed the bill was much too high and wanted to know what an insurer would pay • I ended up negotiating the Medicaid rate for him with the hospital CEO – 80% discount • Solution - Hospitals and physicians should not be permitted to charge 5 times what it cost to provide care or what they routinely accept from insurers

Colonoscopy • I had a routine colonoscopy at Hopkins • I knew the hospital and gastroenterologist were in network • Hopkins could not tell me the name of anesthesiologist because they are assigned that morning • Anesthesiologists have highest markup over what Medicare pays and the most OON – Most likely to be owned by private equity • She walked in when I was about to have the procedure, which is the perfect time to interview an anesthesiologist over price and credentials • Limit OON bills to a percent of Medicare

Spinraza • A Hopkins physician who is worked his entire career on children with muscular atrophy came into my office • He told me there is a new drug on the market whose cost is $750, 000 in the first year and $350, 000 in subsequent years • People in East Baltimore cannot afford even minimal cost sharing • What can he do? • Hopkins allocates $4 million to help a few babies get the drug • Now there is a new drug for muscular atrophy that is a cure but cost $1. 6 million • The challenge is promoting R&D while making the drugs affordable to both patients and payors – The US should pay similar rates to other countries and limit price increases post launch like other countries

Multiple Chronic Conditions • 20% of Medicare beneficiaries have 5+ chronic conditions • They take an average of 16 different drugs per year and incur large bills for prescriptions • The Medicare program has coverage gaps at the beginning , in the donut hole, and the beneficiary pays 5% in the catastrophic phase • For the beneficiary dependent solely on social security drug cost can be 25% of their income • A cap on OOP spending at $2000 is needed

Role of the Consumer • The Amish leader simply wanted to pay what was reasonable • I wanted to pay the doctor the in network rate • The doctor wanted the patient to pay something the patient could afford for the drug • The social security recipient with multiple chronic diseases wanted to pay a reasonable portion of their income for drugs