Did you know that when you lay down $10, $20, or $30 for a copay at the pharmacy that you may be overpaying for the prescription itself — and a third party may be pocketing the difference? Or that you might save money by not going through insurance at all and paying a reduced cash price for the medication? Such is the head-spinning – and sometimes unethical – world of prescription drug benefits in the second decade of the 21st century.
Middlemen called Pharmacy Benefit Managers (PBMs) can skim extra profit by overcharging for medications. The PBMs’ ostensible purpose is to negotiate favorable pricing with pharmaceutical companies on behalf of insurers, including Medicare. But sometimes, especially with cheaper generic medicines, PBMs excessively mark up those prices and keep the remainder for themselves – causing consumers to pay more than they should. Unfortunately, this practice is especially costly for older Americans living on fixed incomes.
Unsuspecting customers are particularly vulnerable when paying co-pays at their local pharmacy, where PBMs can “claw back” excess profits. Here’s how it works:
A patient goes to a pharmacy and pays a co-pay amount — perhaps $10 — agreed to by the pharmacy benefits manager, or PBM, and the insurers who hire it. The pharmacist gets reimbursed for the price of the drug, say $2, and possibly a small profit. Then the benefits manager “claws back” the remainder. – Bloomberg, 2/24/17
(See also the graphic at the bottom of this post for a more detailed explanation of clawbacks.)
Though most customers are unaware of this practice, Bloomberg news reports that it is disturbingly common. More than 80% of independent pharmacists surveyed said that they have experienced clawbacks from PBMs at least 10 times a month.
In some cases, there is a simple way for customers to protect themselves from clawbacks. They can simply ask the pharmacist for the cash price of the prescription. If the cash price is lower than the co-pay, the customer can elect to pay it and bypass the insurance coverage for that medication. Consumers can also use prescription drug apps to determine the cash price (and available discounts) for various medications.
Unfortunately, PBMs do what they can to keep customers ignorant of this option. In fact, many PBMs (including one called OptumRx) contractually forbid pharmacists from educating customers about potential alternatives.
Pharmacists who contract with OptumRx in 2017 could be terminated for “actions detrimental to the provider network,” doing anything that “disparages” it or trying to “steer” customers to other coverage or discounted plans… – Bloomberg, 2/24/17
Some PBMs further restrict customers’ rights by mandating that enrollees in certain insurance plans use mail order and specialty pharmacies that they own, creating a conflict of interest.
Up to now, PBMs have operated with little transparency, so that no one really knows the inner workings of their deals with the drug companies or the details of their pricing structures. But pressure has been building on Capitol Hill. After all, the federal government is the largest health care provider in the country and is motivated to keep prescription drug costs under control. Hence, a bipartisan bill called the Prescription Drug Price Transparency Act (H.R. 1316) seeks to strengthen oversight of PBMs in the Medicare, Medicaid, and Federal Employee Health Benefit programs.
Three other bills – one in House and two in the Senate – have been introduced requiring greater transparency and accountability for PBMs. Meanwhile, New York State (under the leadership of Governor Andrew Cuomo) has unveiled new regulations for PBMs, and other states may do the same.
PBMs have also become the target of lawsuits (16 of them since October of last year) and have invited scrutiny from the U.S. Justice Department, which has alleged that the industry “is rife with conflicts of interests and undisclosed arrangements entered into at customers’ expense.”
Of course, the nascent clampdown on PBMs has to be seen in the context of soaring prescription drug prices overall, which are the main driver of rising medical costs. President Trump pledged to bring down drug prices, but so far has not delivered. Incremental measures to crack down on pricing abuses by PBMs are a good start. But until consumers receive actual deliverance from prescription price gouging, they will have to try their best to protect themselves.
With all the skill of a surgeon wielding a machete, President Trump signed an executive order today that could undermine the affordability and quality of health insurance in America. Republicans in Congress couldn’t enact their ill-considered legislation to repeal Obamacare, so the President hastily reached for his pen, despite admitting earlier this year that he had no idea “healthcare could be so complicated.”
The executive order instructs Trump’s cabinet agencies to look at ways to allow insurers to sell health policies across state lines. The aim is to open-up association health plans (currently covering employees of various businesses and organizations) to people in the individual market. These insurance policies would not be subject to Obamacare rules mandating coverage for pre-existing conditions or essential benefits, in theory making them cheaper – but also skimpier.
These lower-cost, bare bones plans could siphon off younger and healthier enrollees, leaving older and sicker patients in the Obamacare exchanges and driving up their premiums. Ultimately, this could result in a death spiral for Obamacare, as we discussed on today’s Behind the Headlines Facebook Live broadcast. The administration’s own Centers for Medicare and Medicaid Services (CMS) says on its website:
Older Americans between ages 55 and 64 are at particular risk: 48 to 86 percent of people in that age bracket have some type of pre-existing condition.
To some, the idea of selling insurance across state lines sounds appealing. (Republicans have been proposing this scheme in one form or another since 2005.) Senator Rand Paul (R-KY) has been pushing it hard this year. But evidence – and history – indicate that the idea doesn’t work. This Kaiser Health News video briefly and crisply explains why.
Not only does the selling-across-state-lines concept undermine important patient protections and drive up premiums for the most vulnerable, it has never proven viable for insurers or the insured. According to today’s Hill newspaper:
A few states have opened their borders to out-of-state health insurers, and the response has been a uniform, “Thanks, but no thanks.”
One of Obamacare’s architects, Dr. Zeke Emanuel, told CNN today that, in addition to other concerns, association health plans have a “checkered history” and are especially vulnerable to fraud and scam artists. “Hundreds of thousands of people could be affected by fraud, unreimbursed medical bills,” he warned. Emanuel also cautioned that patients with employer-provided insurance could see their rates rise “significantly.”
The biggest problem of all, though, is that Trump’s executive order may well be illegal. The New York Times reports:
Several experts in healthcare and employment law said Trump’s plan could violate the U.S. Employee Retirement Income Security Act (ERISA), a federal law that governs large group plans that must be provided or maintained by employers or employee organizations.
In fact, a coterie of Democratic states attorneys general are poised to sue the administration if it enacts these harmful changes.
For all the Republicans’ talk of federalism, the executive order would actually weaken states’ power to regulate insurance markets, which is one of their primary responsibilities in the health care arena.
But as with the President’s trickle-down tax plan and other haphazard policies, history, precedent and data don’t seem to matter to this White House. That’s especially troubling when – once again – the most vulnerable members of society will pay the price.
The GOP had scarcely emerged from the defeat of their latest Obamacare repeal legislation when they pivoted lightning-quick from healthcare to taxes. The tax reform plan the party unveiled last week may ultimately endanger the well-being of older Americans more than the vanquished healthcare bill. Here’s why: The nonprofit Tax Policy Center estimates that the GOP tax plan will reduce federal revenues by a net $2.4 trillion in the next 10 years. As the deficit grows, Congress will look to cut spending. Republicans have already called for deep cuts to Social Security and Medicare, and would no doubt come after those programs looking for massive savings. Seniors’ earned benefits could be used as piggy banks to pay for reckless tax cuts that largely benefit the wealthy.
Americans for Tax Fairness put it his way:
“[The tax plan’s] eye-popping cost will lead to deep cuts in Social Security, Medicaid, Medicare, and public education that will leave working families in the cold.”- Americans for Tax Fairness
… while House Democratic leader Nancy Pelosi predicted:
“Make no mistake: after Republicans’ tax plan blows a multi-trillion dollar hole in the deficit, they will sharpen their knives for Social Security, Medicare, Medicaid.” – House Minority Leader Nancy Pelosi
Budget hawks (including President Trump’s budget director Mick Mulvaney and House Speaker Paul Ryan) have long dreamed of cutting Social Security and Medicare. Once their tax plan balloons the deficit, they will have the perfect excuse for gutting those programs – even though Social Security and Medicare Part A are completely self-funded by workers’ payroll contributions; they contribute not a penny to the deficit.
In fact, the budget cutters’ knives are already sharpened. The 2018 House Budget resolution calls for nearly $500 billion in cuts to Medicaid over the next decade. That would be devastating for the 1.4 million seniors who rely on Medicaid for long-term care, and millions of others who are dually eligible for Medicaid and Medicare. The House budget resolution also includes nearly $500 billion in cuts to Medicare over the next ten years. Under the House budget plan, Medicare would be privatized and the eligibility age raised from 65 to 67 (an effective benefit cut). If these changes are enacted, seniors will be left to fend for themselves in the private insurance market with vouchers that may not keep up with rising costs.
Despite President Trump’s protestations that the GOP tax plan won’t benefit the rich, that’s precisely who would reap the biggest gains. (Trump himself could save an estimated $1 billion in taxes!) According to the Tax Policy Center’s analysis:
“Taxpayers in the top 1 percent would receive about 50 percent of the total tax benefit from the tax overhaul, with their after-tax income forecast to increase an average of 8.5 percent.” – Tax Policy Center
On the other hand, some in the middle class would see their taxes go up. One in seven households earning between $48,000 and $86,000 per year would pay more in taxes next year; the proportion would double during the next decade. For households earning $150,000-217,000 a year, one third would immediately pay more in taxes.
Republicans claim that the tax cuts will pay for themselves through intense economic growth. They have tried this before (Most recently, with the Bush tax cuts in the early 2000s), and it didn’t work out. Instead, deficits swelled, reinforcing budget hawks’ instincts to cut programs for the most vulnerable members of our society, including and especially seniors. One of the (repentant) architects of the failed trickle-down economics of the 1980s, Bruce Bartlett, put it best in a recent column for USA Today:
“Tax cuts and tax rate reductions will not pay for themselves; they never have. Republicans don’t even believe they will, they are just excuses to slash spending for the poor when revenues collapse and deficits rise.” – Bruce Bartlett, former Congressional economist
To paraphrase W.C. Fields, it seems as if news of the death of the Graham-Cassidy bill is greatly exaggerated. As veteran Kaiser Health News correspondent Julie Rovner tweeted this morning:
FWIW I will not believe health bill is really dead until I see it with an actual stake through it.
Her caution is well warranted. Anti-repeal advocates breathed a sigh of relief last Friday when Senator John McCain (R-AZ) announced his opposition to the bill. But opponents of Graham-Cassidy still need one more GOP vote to kill it before the September 30th deadline, and so far only McCain and Senator Rand Paul (R-KY) have announced as ‘No’s. Some Hill-watchers are wary of Rand Paul’s position and predict he will flip to ‘Yes’ at the last minute, as he has done previously. On the other hand, this weekend Sen. Ted Cruz (R-TX) threw cold water on Graham-Cassidy because he says it doesn’t go far enough in undoing Obamacare regulations:
“Right now they don’t have my vote, and I don’t think they have Mike Lee’s either,” Cruz said. “I want to be a yes.” – Senator Ted Cruz
Seeing their Obamacare repeal bill appear to collapse before their eyes, Senators Lindsay Graham (R-SC) and Bill Cassidy (R-LA) have now sweetened the deal to try to buy off two wavering moderate Senators, Lisa Murkowski (R-AK) and Susan Collins (R-ME). The Graham-Cassidy bill was changed over the weekend to give away tens of millions of dollars to two of America’s least populous states. Alaska would net $3 million more in federal health spending than under current law from 2020-2026, and Maine $43 million. Of course, when Graham-Cassidy’s block grants to states expire in 2026, both states will lose funding along with the other 48. Steven Dennis of Bloomberg handicaps it this way:
These buy-offs may or may not bring Senators Murkowski and Collins over to the ‘Yes’ side. Nor should they. Both Senators have expressed deep concerns about other parts of the bill: Sen. Murkowski for its elimination of protections for pre-existing conditions; Sen. Collins for its deep cuts to Medicaid. And of course, these bribes for Alaska and Maine do not make the Graham-Cassidy bill any less egregious. Every major group of stakeholders – insurers, doctors, hospitals, patients, and all 50 state Medicaid directors – have condemned this bill as a reckless assault on America’s health care system. National Committee president Max Richtman lays out the case in testimony given to the Senate Finance Committee.
The Republicans supporting Graham-Cassidy don’t seem to care as much about improving healthcare as they do about fulfilling a reckless campaign promise and scoring a legislative “win,” even though the vast majority of the American people would actually lose. Premium subsidies would be eliminated, pre-existing conditions no longer protected, essential benefits gutted, and Medicaid decimated to the point where crucial services would be cut for seniors, children and the disabled. One look at this chart from Kaiser Health News showing where most Medicaid spending goes makes it crystal clear who gets hurt if Graham-Cassidy becomes law.
Senators Graham and Cassidy, along with their enablers in the Trump administration, will continue to falsely claim that their bill protects people with pre-existing conditions, when by leaving it to the states to decide, there is no such protection at all. If states seek waivers to pre-existing conditions, insurers can jack up rates for patients with diabetes, cancer, heart disease and other chronic illnesses to the point of unaffordability.
Instead of believing more pablum, or trusting that the Republican-led Senate will do the right thing, we must keep up the pressure on wavering Senators (especially Collins and Murkwoski) to vote ‘No’ when the bill comes to the floor later this week. If we are to see a stake through Obamacare repeal, we must make sure to put it there ourselves.
The woman President Obama called one of America’s “quiet heroes” passed away September 12th in New York City. Edith Windsor, 88, was a champion of LGBT rights, whose victory in the landmark United States v. Windsor Supreme Court case allowed married same-sex couples to collect the same federal benefits as heterosexual couples in states that had legalized gay marriage.
Edith Windsor’s 2013 victory inspired Kathy Murphy, a Texas widow who was denied Social Security survivor’s benefits after the death of her wife, Sara. With the help of the Lambda Legal Defense Fund, Murphy, a member of the National Committee to Preserve Social Security and Medicare, sued the Social Security Administration (SSA) in 2014 for the right to collect survivor’s benefits. Murphy’s case was later folded into the Obergefell v. Hodges Supreme Court case that legalized same sex marriage and access to spousal benefits for same-sex couples nationwide in 2015.
Thanks to Edith Windsor, Kathy Murphy, and millions of supporters across the country, same-sex couples became eligible for the full range of Social Security spousal benefits, including retirement, survivor, death and disability protections. This led to the development of a National Committee sponsored community outreach and education initiative called Know Your Rights which helped thousands of LGBT couples and families understand their Social Security benefits.
Edith Windsor lived with her partner, Thea Spyer, for 40 years, finally getting married in Toronto in 2007. (Their home state of New York didn’t legalize same-sex marriage until 2011). Windsor was denied an estate tax exemption for married couples after Spyer died, and sued the federal government for a tax refund, leading to the landmark Windsor decision.
The diminutive Windsor, a retired computer programmer for IBM, never sought the spotlight but embraced her role as a well-known LGBT activist.
The National Committee celebrates Windsor’s life and her landmark achievements. She was that ‘ordinary person’ caught up in extraordinary circumstances who bravely stepped forward for the cause of equality, the “quiet hero” who gave voice to couples asking only the same benefits as everyone else.