5 Costly Healthcare Megatrends
By: Ayla Ellison
There are five trends that emerged in 2014 that are likely to prove costly in 2015, according to a recentForbes article by Robert Pearl, MD, CEO of The Permanente Medical Group.
1. Hepatitis C drugs with high price tags. In 2014, Foster City, Calif.-based pharmaceutical company Gilead Sciences introduced two new hepatitis C drugs. One of the drugs, Sovaldi, was developed by Pharmasset, and Gilead purchased the rights to it for $11 billion. After purchasing the rights, Gilead priced the drug significantly above the price Pharmasset had set for the drug, according to Dr. Pearl. A course of Sovaldi costs between $84,000 and $150,000 per patient or $1,000 and $2,000 per pill.
Driven by Sovaldi sales, Gilead’s revenues increased to $6.04 billion in the third quarter of 2014, up from $2.78 billion for the third quarter of 2013. Gilead’s net income also significantly increased, growing from $788.6 million in the third quarter of 2013 to $2.73 billion in the third quarter of 2014. Total sales for Gilead’s six antiviral medications were $5.54 billion for the third quarter, and Sovaldi made up $2.79 billion of those sales.
Due to the high price of Sovaldi, 35 states require prior authorization before Medicaid patients can be prescribed the drug. This means patients in those states are required to have a liver biopsy to determine the severity of the disease before receiving the drug.
Dr. Pearl says, “Under today’s rules, companies like Gilead can exploit their monopolistic market position and current U.S. patent laws to maximize profits. And for now, it’s patients, employers and insurers who get stuck with the bill.”
With much concern around the pricing of specialty drugs, including Sovaldi, Dr. Pearl wonders if the new Congress might intervene and stop companies such as Gilead from “gouging drug prices in the future.”
2. Limited access to care. According to a recent Gallup poll, the uninsured rate among adults in the U.S. fell to 12.9 percent by the end of 2014, which was a significant drop from the 17.1 percent uninsured rate at the end of 2013. Many insured Americans had “reasonable access to primary care in 2014,” according to Dr. Pearl. However, he says that trend may not continue as the Patient Protection and Affordable Care Act only increased Medicaid payments for primary care physicians in 2013 and 2014, which could limit some patients’ access to care.
Dr. Pearl’s prediction is in line with other industry experts’ views. Regarding the issue, David A. Fleming, MD, president of the American College of Physicians, also sees the access to care issues that will present themselves due to the Medicaid reimbursement cuts. He told The New York Times, reducing Medicaid payments “at a time when the population enrolled in Medicaid is surging,” makes no sense.
Along with access to care for Medicaid patients being a potentially costly issue in 2015, Dr. Pearl also sees the looming Medicare reimbursement cuts as potentially leading to the same access to care problems for those aged 65 and older.
3. High-deductible health plans. Although the uninsured rate is falling, more people have high-deductible health plans that require them to pay thousands of dollars in out-of-pocket costs before their insurance kicks in.
The rise in high-deductible health plans is partially attributable to employers shifting healthcare costs to their employees. According to an Aon Hewitt analysis, employee premiums and out-of-pocket healthcare expenses have doubled since 2009 and continue to rise. Additionally, on average, workers will also have to pay $2,487 in out-of-pocket costs in 2015, which is up more than 8 percent from $2,295 in 2014.
Many of those purchasing health insurance plans through the online marketplaces also choose plans with high deductibles because they have lower monthly premiums. Some of these plans have deductibles of more than $5,000, and according to Dr. Pearl, 80 percent of people with deductibles in that range “will end up paying for all of their own healthcare expenses themselves in any given year.”
4. Narrow networks. Accountable care organizations, which are focused on improving healthcare outcomes while reducing costs, are one of the healthcare models created under the PPACA. However, according to Dr. Pearl, ACOs have failed to “significantly reduce total healthcare costs.” As a result, narrow networks were formed by insurance companies in an attempt to lower costs.
Narrow networks were an extremely controversial topic in 2014 and the subject of several lawsuits filed by and on behalf of patients who realized they no longer had access to their physicians after narrow networks were put into place. For instance, in September 2014, Santa Monica, Calif.-based advocacy group Consumer Watchdog filedlawsuits against health insurers Cigna and Blue Shield of California alleging the companies misled consumers about the size of their networks.
Dr. Pearl wonders if ACOs will be able to lower total healthcare costs in 2015 or “will the participating physicians and hospitals simply use their expanded market dominance to raise prices?” He also wonders if narrow networks are the right way to lower healthcare costs.
5. Investments in technology. With CMS giving financial incentives for meaningful use of EHRs in 2014 and a focus on improving price transparency, technology was a major focus of the healthcare industry last year. However, Dr. Pearl said, “The improvements many hoped for haven’t matched the hype.”
For instance, the influence of big data has been limited so far because “the information has been more about correlation than causation,” according to Dr. Pearl.
Regarding price transparency, “the data has been voluminous,” said Dr. Pearl, but its “impact on cost has been minimal” due to information being difficult to access and “largely inaccurate.”
Due to setbacks so far, Dr. Pearl wonders if technology will be able to help improve healthcare quality and lower costs in 2015. He also wonders if big data will live up to the hype of if it will just overwhelm providers.
Source URL http://www.beckershospitalreview.com/finance/5-costly-healthcare-megatrends.html