Tagged Health Care Costs

Doctors Argue Plans To Remedy Surprise Medical Bills Will ‘Shred’ The Safety Net

Chances are, you or someone you know has gotten a surprise medical bill. One in six Americans have received these unexpected and often high charges after getting medical care from a doctor or hospital that isn’t in their insurance network.

It’s become a hot-button issue in Congress, and high-profile legislation has been introduced in both the House and Senate to make the medical providers and insurers address the billing question and take the consumers out of the dispute.  That means doctor specialty groups, hospitals and insurers are among the stakeholders that could be financially affected by the outcome.

The effort has caught the attention of Physicians for Fair Coverage, a coalition formed by large companies — firms such as US Acute Care Solutions, U.S. Anesthesia Partners and US Radiology Specialists — that serve as corporate umbrellas for medical practices. The group is running a $1.2 million national commercial about these congressional efforts. The ad began airing in mid-July.

The ad issued a warning: “What Congress is considering would cut money that vulnerable patients rely on the most. That means seniors, children and Americans who rely on Medicaid would be hurt.”

We wondered: Will any of the surprise billing proposals being debated in Congress really affect Medicaid and these patients — “shredding the safety net,” as the ad claims? So we dug in.

We reached out to Physicians for Fair Coverage (PFC) to find out the basis for this claim, but the phone number listed on their website no longer worked. Several emails and a direct message on Twitter later, we connected with Forbes Tate Partners, the public relations firm that produced the ad. We were then referred to Megan Taylor, a spokeswoman for PFC.

“When we talk about the safety-net, we’re talking about the health care system that the uninsured and underinsured rely on — like emergency departments, where two-thirds of the acute care is provided to uninsured Americans and where half of the acute care provided to Medicaid and Children’s Health Insurance Program patients is delivered,” Taylor wrote in an email.

To be sure, studies have shown that ERs see a large share of vulnerable patients. But independent experts we spoke with still didn’t follow the ad’s logic.

“I’d like to think that I’m fairly well-informed about surprise billing legislation, but I’m struggling to understand what argument they are even trying to make here,” Benedic Ippolito, a research fellow at the American Enterprise Institute who has testified before a Senate committee on this issue, wrote in an email.

Focusing On The Real Trouble Spot

The surprise medical bill legislation is an effort to help consumers who generally mistakenly thought they were getting health services covered by their insurers but instead find themselves dealing with an out-of-network provider.

The insurance often covers a small portion of services, and the patient is on the hook for the rest. It’s called a “balance bill.” That happens, for example, when people seek care at an in-network hospital but the doctor treating them doesn’t accept their insurance. The consumer can be responsible for paying the entire bill.

Most surprise bills come from specialty physicians — such as anesthesiologists, radiologists and emergency room doctors — like those in the practices represented by Physicians for Fair Coverage.

There are two major solutions on the table in the congressional legislation: arbitration, which would send the insurers and health care providers through an independent review to determine a fair price, and benchmarking. The ad doesn’t explicitly say so, but it’s referring to benchmarking.

Under this approach, when a doctor sees an out-of-network patient, the patient’s health plan pays the doctor the median of what other doctors in the area are paid for the procedure.

The ad paints a grim picture — complete with photos of children, families and even older patients in wheelchairs — of what will happen if Congress adopts benchmarking. It suggests insurance companies will offer doctors artificially low in-network rates, which, in turn, will bring down out-of-network rates. Those low rates will make it hard for doctors and hospitals to make up for uncompensated care or low payment rates from Medicaid and Medicare patients. The concern is that this will make it difficult for emergency rooms and rural hospitals to operate and force them to close.

Taylor pointed to California’s 2017 law that set up a statewide benchmarking system as Exhibit A.

“By setting a guaranteed benchmark rate at the median in-network rate, it means that insurers can push doctors out of their network, by cancelling contracts or demanding artificially low rates, in order to make the benchmark rate the default. In California, where a benchmark rate has been implemented, doctors report that insurance companies are already doing this and that Californians’ premiums are rising,” she wrote in an email.

She also cited a letter from the California Medical Association about this state law that reiterated how it is affecting patients’ access to care.

So we turned to Anthony York, the director of communications for the California Medical Association, to ask about how the law was affecting the supply of doctors. He said at least nine medical facilities in the state have no anesthesiologists that are in network for some local health plans.

For instance, he added, a search on Anthem Blue Cross, Blue Shield of California, United Healthcare and Health Net shows no contracted anesthesiologists within 30 miles of Children’s Hospital of Orange County.

But Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, wrote in an email that there is not enough data yet from California to say whether insurance companies are kicking doctors out of networks. He said networks are often in flux as insurers and providers wrestle about payment rates or other contract issues.

“Despite what the medical association is saying, we don’t have any evidence on this question one way or the other,” Adler said. “Of course there are anecdotes of contract cancellations, but contracts change over frequently.”

How Does Medicaid Fit Into This?

One thing needs to be clear: No piece of surprise bill legislation is cutting the federal funding for Medicaid or Medicare. The text of the House bill doesn’t even mention either program; the Senate bill mentions them only in the course of data collection or cost studies.

“No one on Medicaid would be affected one way or the other by any of the surprise billing proposals on the table,” noted Adler.

So how can the commercial claim that either one is “shredding” the safety net? It goes back to Taylor’s view that the safety net includes having access to an emergency room. This point brings up a broader issue raised by the ad: that ERs would close if physicians were paid the median in-network rate for out-of-network services.

And that drew skepticism from Adler, who pointed out that many factors are responsible for emergency physician shortages or rural hospital closures. Letting doctors send large bills to patients, he said, won’t keep ailing hospitals open.

“That’s a completely illogical and contradictory set of claims they’re making,” he wrote.

Both he and Ippolito think the link to ER closures is overblown.

Ippolito called the commercial a “vague scare tactic.” He acknowledged that problems do exist with rural hospital closures and emergency room staffing, but he said solving those problems should be separate from dealing with surprise bills.

“Policymakers should solve surprise billing in the best way they can,” he wrote, adding that concerns about access to care should be “dealt with directly.”

Our Ruling

Physicians for Fair Coverage claims in this commercial that Congress is considering a surprise billing solution that would “cut money that vulnerable patients rely on.”

This, in itself, is inaccurate. Neither of the proposed pieces of legislation would cut money to any programs, specifically Medicaid, CHIP or Medicare.

There is also scant evidence that these proposals would trigger emergency room closures. The group claims the consequences of this proposal would ultimately lead to ER closures. But experts say their evidence is anecdotal at best.

This claim raises serious health system alarms — reduced access to care, higher premium costs and even shuttered emergency rooms — without logically supporting these concerns.

We rate it as False.

Watch: What Happened To That $500K Dialysis Bill

After Sovereign Valentine suffered kidney failure, he got a $540,842 bill for 14 weeks of out-of-network dialysis care. Here, he and his wife, Dr. Jessica Valentine, described their experience. Their Bill of the Month story was told by KHN, NPR and CBS.

The Differences Between ‘Medicare For All’ And A Public Option

Kaiser Health News’ senior Washington correspondent, Julie Rovner, appears on C-SPAN’s “Washington Journal” to explain the differences between key health programs being touted by Democratic presidential candidates: “Medicare for All” and an optional government health plan, often called a public option. You can see the program here.

States Given Until End Of Year To Outline Overhaul On How They Approach Opioid Use By Their Medicaid Populations

Along with the opioid guidance, CMS also is directing states to design and implement a program to track and manage the prescribing of antipsychotic medications for children in Medicaid. Other Medicaid news comes out of New York, Louisiana and Kansas, as well.

Canadian Pharmaceutical Groups Urges Officials To Act Before There Are Drug Shortages From U.S. Importation

Innovative Medicines Canada has in early drafts even urged the country to ban drug exports “unless otherwise permitted by regulation.” The group’s efforts suggest the industry is eager to derail the Trump administration’s plan to allow Americans to import cheaper drugs from their northern neighbor.

Growing Reliance On Charity, Crowd Funding To Pay For Medical Bills Means Stressed Patients, Inequities In Care

The new trend of relying on those strategies for those who are underinsured ends up giving an advantage to those with more resources, larger social networks and stories better suited to dramatic online appeals. “We shouldn’t be the solution,” said GoFundMe Chairman Rob Solomon. “We know we’ve become a kind of de facto safety net.… But we’re only scratching the surface of all the need out there.”

Medicare Boosts Payment Rates For Pricey New Treatments, But Health Providers Disappointed It’s Not More

“Under this plan, I have concern that access to CAR T won’t be universal,” said Jayson Slotnik, a partner at Health Policy Strategies. Some argue Medicare should pay for 80 to 100 percent of the pricey cancer treatment. In other Medicare news, CMS finalizes a long-requested wage index boost.

Drugmakers Now ‘Masters’ At Rolling Out Their Own Generics To Stifle Competition

When PDL BioPharma’s $40 million blood-pressure medicine faced the threat of a generic rival this year, the company pulled out a little-known strategy that critics say helps keep drugs expensive and competition weak.

It launched its own generic version of Tekturna, a pill taken daily by thousands. PDL’s “authorized” copycat hit the market in March, stealing momentum from the new rival and protecting sales even though Tekturna’s patent ran out last year.

PDL’s version sold for $187 a month versus $166 for the competing generic, made by Anchen Pharmaceuticals, according to Connecture, an information technology firm. PDL’s brand-name Tekturna runs about $208 a month.

The plan is “to maximize profit at this point,” Dominique Monnet, PDL’s CEO, told stock analysts in March. With the boost of PDL’s house generic, “the economics would still be very favorable to us” even against the generic rival and even if prescriptions plunged for the brand, he said.

Lawmakers who created the modern generic-drug industry in the 1980s never imagined anything like this — brand-pharma companies maximizing profits by appearing to compete with themselves.

But it goes on all the time. In fact, there are now nearly 1,200 authorized generics approved in the U.S., according to the Food and Drug Administration. While these might look like products that would push prices down, authorized generics can be as profitable as, if not more profitable than, brand-name drugs.

“Authorized generics are not generic drugs,” Dr. Sumit Dutta, chief medical officer for drug-benefit manager OptumRx, told Congress in April. “The marketing and production of authorized generics is exclusively controlled and directed by brand-drug manufacturers. They do nothing to promote competition.”

Last year, authorized generics appeared at the rate of about once a week. High-profile examples in recent years included Mylan’s generic version of the EpiPen anti-allergy injector, introduced to soothe public outrage after the company raised the brand price 400%. In March, Eli Lilly said it would launch a less expensive generic of its Humalog insulin, whose branded list price has also soared.

Of all the ways drug companies try to protect sales as patents expire — changing doses, adding ingredients, seeking approval to treat new diseases — authorized generics are by far the most profitable, returning $50 for every dollar invested, research firm Cutting Edge Information calculated in 2015.

Brand-drug companies say authorized generics increase competition even if they’re not an independent product.

This “reduces prices and results in significant cost savings,” said Holly Campbell, spokeswoman for the Pharmaceutical Research and Manufacturers of America, or PhRMA, the brand-drug lobby. “Congress should reject attempts to delay, restrict or prohibit authorized generics.”

But critics say authorized generics hurt long-term competition and often perversely increase costs, even in the short term.

Authorized generics don’t just steal sales from existing generic rivals. Critics say they erode incentives to make generic drugs, partly by thwarting the intent of Congress to let one company temporarily have generic business to itself after a brand patent expires.

Tactics like this can “stave off generic competition and make sure that generics can’t get much of a foothold when they do get to market,” said Robin Feldman, a professor at the University of California Hastings College of the Law, who studies pharma policy. “That’s the game. And drug companies have become masters at this.”

Authorized copycats may help explain why relatively few true generics are reaching the market despite a surge in approvals, analysts say.

The 1984 Hatch-Waxman Act founded the modern generic business by establishing rules for safety and competition, including granting six months of market exclusivity to the first generic rival to each brand. The idea was to give the first mover a profitable head start to attack the established pill.

Few realized the law left room for brand companies to launch their own generics at the same time as or even earlier than rivals, often slightly lower in cost and nearly indistinguishable to patients and doctors from the brand as well as any independent generics.

PDL acquired Tekturna from Novartis via an affiliate in 2016 and soon learned that Anchen was planning a generic. It moved quickly to fight back.

PDL’s authorized generic version of Tekturna “was timed to secure us the benefit of being first to market,” before Anchen’s version was even on the shelves, PDL’s CEO, Monnet, told analysts. “We believe this provides [PDL] with a distinctive competitive advantage.”

PDL was so confident the authorized generic, called aliskiren, would produce substantial revenue without much effort that it got rid of its Tekturna salesforce of 60 people.

“There’s a lot of parts of the system that just automatically switch” to generics, whatever the source, said Maxim Jacobs, who follows PDL’s stock for Edison Investment Research. So even if the authorized generic isn’t much cheaper than the brand, “it’s almost like a no-brainer” to roll one out, he said.

Monnet was unavailable for an interview, a spokesperson said. Anchen did not respond to requests for comment.

Oddly enough, authorized generics can be more profitable than the brand-name drug even if their list prices are much lower, OptumRX’s Dutta told Congress. That’s because they usually aren’t subject to rebates that flow from the drugmaker to middlemen such as OptumRX and effectively lower a brand’s revenue.

“These authorized generics often result in net prices higher than the brand drugs they replace,” he told Congress. “Authorized generics are just another tactic for drug manufacturers to improve profitability.”

The list price for the authorized generic of Humalog insulin is half the brand’s — $137 versus $275. That apparent discount offered limited relief to uninsured patients paying cash and generated spirited headlines saying Lilly had lowered the price significantly.

But the move won’t cost Lilly any money, said another senior pharmacy benefits executive who asked for anonymity to speak candidly about a vendor. After rebates, $137 is about what the drug giant nets for Humalog now, the executive said. And it’s still far higher than what insulin costs in other countries.

“It’s a parlor trick,” the executive said. “They’re bending to political pressure, but are they taking any money out of the system? They’re not.”

Lilly’s Humalog generic, called insulin lispro, and Mylan’s EpiPen copycat departed from the traditional playbook by launching well before patents for those brands expired. The companies were trying to calm outrage over rising prices rather than fend off generic rivals, analysts said.

Generic Humalog “was made available to help people paying full retail price for their insulin” because of coverage gaps or lack of insurance, said Lilly spokesman Greg Kueterman.

The mere threat of an authorized generic can also smother competition.

A 2013 Supreme Court ruling challenged deals in which brands blatantly paid rivals to keep generics off the market. So pharma firms came up with an alternative: They could would hold fire on an authorized clone if generic firms agreed to delay launching their products or gave some other concession, according to the Federal Trade Commission.

Both sides win. The brand stretches its monopoly beyond the life of the patent, while the generic firm avoids facing an authorized rival later on.

Authorized generics can generate outsize profits in yet another way: as a method to game Medicaid contracts that costs taxpayers hundreds of millions of dollars a year, according to investigators for the Health and Human Services Department.

Brand-pharma companies routinely “sell” authorized generics to a corporate affiliate at a sharp discount, establishing an artificial wholesale price, said Edwin Park, a research professor who studies Medicaid at the Georgetown University Center for Children and Families.

Because of complex discounting formulas, this strategy minimizes rebates the drugmakers owe to Medicaid, found HHS’s Office of Inspector General.

Congress is eyeing bipartisan legislation to close that loophole, which the Congressional Budget Office estimates would save the federal government $3.15 billion over 10 years.

The next frontier in authorized generics involves harder-to-make biologic drugs, such as generic Humalog, which are made from components of living organisms, analysts say.

Such products tend to be expensive and highly profitable, producing especially strong incentives for brand companies to preserve their franchises.

Makers of valuable biologics such as arthritis drug Humira have avoided the kind of competition from generic-like “biosimilars” that exists in Europe, partly due to patent extensions and litigation settlements.

But once patents do expire, authorized biosimilars are likely to be an integral part of their profit-preservation tactics, analysts say. In February, Lilly asked regulators to clarify their stance on “branded biosimilars” — a clear indication of its interest.

The query is “part of a number of questions Lilly and others have posed” about shifting FDA treatment of biologics, said Lilly spokesman Kueterman.

Must-Reads Of The Week From Brianna Labuskes

Happy Friday! August has arrived, which means lawmakers have officially blown this pop stand of a humid swamp and headed back home. A quick programming note: I’ll be following their lead, which means the Breeze will be on a brief hiatus for Aug. 9 and Aug. 16. I’ll be back in your inboxes on Aug. 23, so don’t miss me too much.

Now that housekeeping is out of the way, here’s what you may have missed this week.

To the shock of no one, both nights of the Democratic debates heavily featured attacks over health care, which has become an almost shorthand for the division in the party between progressives and moderates.

On Night 1, Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) stood like unmovable twin pillars defending “Medicare for All” against jabs from their rivals. The progressive health care plan was slammed as “political suicide” and an overreach in which the left might as well “FedEx the election to Donald Trump.” The conversation dominated the entire first half-hour of the debate, a sign of just how volatile the issue is — and how it’s unlikely to fade into the shadows anytime soon.

The second night pitted former Vice President Joe Biden against Sen. Kamala Harris (D-Calif.), who had just earlier in the week released her own health plan. (The SparkNotes: It keeps private insurers but also expands Medicare and would be phased in over 10 years.) The barbs weren’t quite as sharp on the second night, but the clear divide between the flanks of the party was solidified.

Other notable things coming out of the debate nights:

• Why aren’t the candidates talking about preexisting conditions? Is there just too much else going on? The issue helped create a cohesive, easy-to-understand message for the Democrats during the midterms, yet it took until Night 2 before the popular topic was mentioned in any of the debates.

Bloomberg: Democrats’ Health-Care Feud Eclipses Message That Won in 2018

• The temperature has most definitely shifted on gun control in the past 10 years. Even moderate Montana Gov. Steve Bullock spoke about the need to remove the NRA’s influence from D.C. (note: that was taken by some as a sidestep from having to comment on restrictions, but he didn’t shy from the topic completely as candidates have in elections past).

The New York Times: Pete Buttigieg On Gun Violence: ‘I Was Part of the First Generation That Saw Routine School Shootings’

• What was missing? Opioids, Flint (for the most part) and drug prices. Although this week’s debates took place in Detroit, not far from Flint, the water crisis got only a brief mention. The country is being ravaged by the opioid epidemic, yet it’s been mentioned by candidates only in passing. And even the perennial hot topic of high drug prices didn’t spark any memorable moments. We are only four debates in, though, so we’ll check back in September.

The Washington Post: Black Voters Hear Little in Debate to Excite Them

Vox: The Democratic Debates Mostly Ignored the Opioid Epidemic

The Washington Post: Democrats’ failure to talk about drug prices was ‘a missed opportunity’

For comprehensive roundups of fact checks, hot takes and play-by-plays, check out these Morning Briefing pages.

Intra-Party Brawl Between Progressives, Moderates Over Health Care Dominates First Half-Hour Of Debate

Biden, Harris Butt Heads Over Health Care: Second Night Of Debates Solidifies Deep Intraparty Divide On Hot-Button Issue

Meanwhile, insurers are having to perform a delicate tightrope act as the Democrats put them on blast on a national stage. They want to fight these plans but also stay out of the spotlight in case investors start getting jittery about the prospects of a Medicare for All-type proposal actually passing.

The Wall Street Journal: Health Insurers Walk Delicate Line Against Democrats’ Health Proposals


Medicare has become the belle of the ball for Democrats, but what is the program really like? Yes, Medicare is popular, but its has its own limitations and is unlikely to be a panacea for all the health industry’s woes. The truth is, there are important things that Medicare currently doesn’t cover, and the program allows for a lot of low-value care.

The New York Times: A Question Rarely Asked: What Would Medicare for All Cover?

The New York Times: Medicare for All? For More? Here’s How Medicare Works

Nowadays, if a candidate supports a public option instead of Medicare for All they’re viewed as a moderate, but that wasn’t always the case. Historically, a public option was a “very progressive policy.”

The Washington Post: Once considered a far-left idea, ‘public option’ insurance swerves into the mainstream


The Trump administration — some say in an effort to gain ground on health care for 2020 — had two big announcements this week.

The first came in the shape of a federal rule that would force hospitals to publicly disclose the closely guarded discounted prices they negotiate with insurance companies. The requirement is part of a broader strategy that we’ve seen from the administration that focuses on increasing transparency. Critics of the tactic say that because of health care’s unique and complex makeup, those newly disclosed numbers can be meaningless to patients.

The New York Times: Hospitals Would Have To Reveal Discounted Prices They Give Insurers, Under Trump Rule

Trump also managed to hang onto headline space amid the two-night debate extravaganza with the announcement that HHS will set up a system so Americans can import cheaper drugs from Canada. This was an about-face for Secretary Alex Azar, who just a year ago called importation a “gimmick.” Don’t think this is going to be a free-for-all, though. There are quite a few limitations in place. “This is a plan to make a plan on importation,” said Rachel Sachs, a law professor and drug policy expert.

The New York Times: Trump Administration Weighs Allowing Drug Imports For Cheaper Prescriptions

Meanwhile, Canadians are like, “Excusez-moi? Keep your mitts off our prescription drugs, please and thank you.”

The Associated Press: Canadians worried by plan to let Americans import drugs


Despite the national outrage over family separations and promises from government officials that they’re now “rare,” new data shows nearly 1,000 children have been taken from their parents since the separations were ordered stopped. Although officials have said they take the children only when their safety is in question, a look at the reasons documented in the new report call that assertion into question. Among the cases was a man who hadn’t changed his sleeping daughter’s wet diaper and a father who lost his child because of a conviction on a charge of malicious destruction of property with alleged damage of $5.

The Washington Post: ACLU: U.S. has taken nearly 1,000 child migrants from their parents since judge ordered stop to border separations


The always hotly anticipated annual hospital rankings from U.S. News & World Report dropped this week. The Mayo Clinic in Rochester, Minn., nabbed the top spot on the adult honor roll, while Boston Children’s Hospital ranked first on the children’s list.

U.S. News & World Report: Hospital Rankings And Ratings


In the miscellaneous file for the week:

• In the months since the Paradise fire, I’ve read some great play-by-plays, but this one is particularly enthralling. This particular tidbit grabbed me: When talking about giving fire safety tutorials to kids, Paradise emergency operations coordinator Jim Broshears said you’ll always get a student who keeps asking about more and more complicated scenarios.

“At some point, they’ve painted you into a corner and, well, do I tell an 8-year-old kid, ‘In that case, you’re going to die?’ Do you tell a community, ‘If this particular scenario hits, a bunch of you are going to die?’ Is that appropriate? I don’t know the answer.” He added, “I think that people are going to conclude that now.”

The New York Times Magazine: ‘We Have Fire Everywhere’: Escaping California’s Deadliest Blaze

• It’s a common enough image to call up: a boot camp drill sergeant yelling at a soldier, loaded to the gills with gear, to push through the heat. But what happens when that scenario turns fatal? It’s an issue that’s becoming more urgent as temperatures continue to rise, yet an investigation shows that efforts to prevent deaths have been uneven at best.

NBC News: As The World Grows Hotter, The Military Grapples With A Deadly Enemy It Can’t Kill

• What happens to patients when the price of a month’s supply of a crucial psychiatric drug jumps from $16 to $348? “We were seriously looking at dog clomipramine for a patient of mine with OCD,” one psychiatrist said in response to the price hikes on the 55-year-old drug. The example highlights the human toll of what investigators have called one of the most “egregious and damaging price-fixing conspiracies” in U.S. history.

Bloomberg: Drugmakers’ Alleged Price-Fixing Pushed A Needed Pill Out Of Reach

• Another NYPD police officer committed suicide, bringing the total since June up to five. The commissioner had already declared a mental health crisis before this last death and urged officers to reach out and seek help.

The New York Times: Fifth N.Y.P.D. Officer Since June Dies by Suicide, Police Say


That’s it from me! Have a good weekend, and beginning of August!