Utah sends employees to Mexico for lower prescription prices

SALT LAKE CITY (AP) — Ann Lovell had never owned a passport before last year. Now, the 62-year-old teacher is a frequent flier, traveling every few months to Tijuana, Mexico, to buy medication for rheumatoid arthritis — with tickets paid for by the state of Utah’s public insurer.

Lovell is one of about 10 state workers participating in a year-old program to lower prescription drug costs by having public employees buy their medication in Mexico at a steep discount compared to U.S. prices. The program appears to be the first of its kind, and is a dramatic example of steps states are taking to alleviate the high cost of prescription drugs.

Utah sends employees to Mexico for lower prescription prices

Lindsay Whitehurst, Associated Press

Sunday, February 9, 2020

SALT LAKE CITY (AP) — Ann Lovell had never owned a passport before last year. Now, the 62-year-old teacher is a frequent flier, traveling every few months to Tijuana, Mexico, to buy medication for rheumatoid arthritis — with tickets paid for by the state of Utah’s public insurer.

Lovell is one of about 10 state workers participating in a year-old program to lower prescription drug costs by having public employees buy their medication in Mexico at a steep discount compared to U.S. prices. The program appears to be the first of its kind, and is a dramatic example of steps states are taking to alleviate the high cost of prescription drugs.

In one long, exhausting day, Lovell flies from Salt Lake City to San Diego. There, an escort picks her up and takes her across the border to a Tijuana hospital, where she gets a refill on her prescription. After that, she’s shuttled back to the airport and heads home.

Lovell had been paying $450 in co-pays every few months for her medication, though she said it would have increased to some $2,400 if she had not started traveling to Mexico. Without the program, she would not be able to afford the medicine she needs.

“This is the drug that keeps me functioning, working,” said Lovell, who works at an early-intervention program for deaf students that's part of the Utah Schools for the Deaf and Blind. “I think if I wasn’t on this drug ... I’d be on disability rather than living my normal life.”

The cost difference is so large that the state's insurance program for public employees can pay for each patient’s flight, give them a $500-per-trip bonus and still save tens of thousands of dollars.

Other states have taken new approaches to addressing the high costs of prescription drugs. California is looking at launching its own generic-drug label. Louisiana has a Netflix-style program for hepatitis C drugs, where the state negotiated a deal to pay a flat fee rather than for each prescription.

Several states are looking at creating boards aimed at keeping prices affordable, and four have started what’s expected to be a lengthy process to begin importing drugs from Canada under a new Trump administration plan.

The Utah program was created under a 2018 state law dubbed “right to shop,” by Republican Rep. Norm Thurston. The Public Employees Health Program offers it only for people who use a drug on a list of about a dozen medications where the state can get significant savings. Of the 160,000 state and local public employees covered by the insurer, fewer than 400 are eligible, according to Managing Director Chet Loftis.

Officials have tracked the medications from the manufacturer to the pharmacy to the patient, to make sure people are getting the same drugs they would at home, he said. They contract with a specialty pharmacy that works with one of the region's largest private hospital systems. A representative from a company, Provide Rx, escorts patients from the San Diego airport to Hospital Angeles in Tijuana and back across the border.

Lovell has a prescription from her doctor in Utah, and each time she travels to Mexico she sees a doctor at the hospital as well. She updates the doctor on her condition, gets her prescription, and takes it to the pharmacist, who gives her the medication.

Provide Rx also works with a dozen or so private companies, some of whom offer similar bonus programs to their staffers, said general manager Javier Ojeda.

Just over a year after the program began, the state has saved about $225,000, Loftis said.

Though the number of people participating is relatively small, the savings add up quickly. The annual U.S. list price for the drug Lovell takes, Enbrel, is over $62,000 per patient. With the Mexico program, after the cost of the flight and the bonus, the state still cuts its expenses in half.
“It makes sense for us to do this,” Loftis said.

Thurston had hoped more people would sign up, saving the state $1 million by now.

But officials are optimistic more people will sign on now that they see the program is working. They have expanded to offering flights to Canada, where there’s a clinic in the Vancouver airport and the travel costs are about the same.

While importation of prescription drugs is illegal because drugs sold in other countries haven’t been approved by the Food and Drug Administration, the U.S. allows people to bring in a three-month supply for personal use.

There have been long been more informal trips across the border elsewhere; Democratic presidential candidate Bernie Sanders has taken bus trips with patients from border states into Canada to highlight the cost of prescription drugs. But the Utah program appears to be the only formal state program of its kind, said David Mitchell, a cancer patient and the founder of the advocacy group Patients For Affordable Drugs.

“It is unfortunate and, in fact, wrong that the citizens of this great country have to travel to other countries to get drugs they need at affordable prices,” he said.

Others say the “pharmaceutical tourism” approach has risks and doesn’t solve the issue of high prescription drug prices in the United States. Peter Maybarduk with the nonprofit advocacy group Public Citizen said people can come across unsafe medications in other countries, and it’s important not to undercut the importance of U.S. regulators.

“It is a Band-Aid for people who really need it,” he said. “We need reform of the system as whole.”

In most other countries, national health programs negotiate lower drug prices at large scale, and sometimes refuse to cover the most expensive ones. Meanwhile, patents generally run much longer in the U.S. than other countries, allowing for monopolies. Drug makers also often point to the high cost of creating a drug to bring to market.

Utah truck driver Jason Pierce has been grateful to find the drug Stelara, the only effective treatment for his psoriasis. It’s also expensive, so he and his wife, a Utah health department employee, started traveling to Mexico to get his shots.

Their insurance through her state job covers it completely, so the trips don’t save them any money. But with both flights covered through the state program and the $500 bonuses, they can make a short vacation.
“It’s pretty easy,” he said. The drug is “exactly the same.”
And the travel means the drug saves their public insurer thousands, helping save taxpayer money and bring down premiums, his wife, Robbin Williams, said.

“I just think it's the moral and right thing to do,” she said.

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Millions in U.S. Lost Someone Who Couldn't Afford Treatment

Story Highlights

• 34 million adults know someone who died after not getting treatment
• 58 million adults report inability to pay for needed drugs in past year
• Little progress seen by Trump administration in limiting rising drug costs

WASHINGTON, D.C. -- More than 13% of American adults -- or about 34 million people -- report knowing of at least one friend or family member in the past five years who died after not receiving needed medical treatment because they were unable to pay for it, based on a new study by Gallup and West Health. Nonwhites, those in lower-income households, those younger than 45, and political independents and Democrats are all more likely to know someone who has died under these circumstances.

Knowledge of Deaths in Last Five Years After Inability to Pay for Needed Treatment

"Has there been a time in the last five years when a friend or family member passed away after not receiving treatment for their condition due to their inability to pay for it?"

	Yes
	%
U.S. TOTAL	13.4
Race
White	9.6
Nonwhite	20.3
Annual household income
Under $40,000	18.5
$40,000 to <$100,000	11.1
$100,000+	9.1
Age
18-44	16.9
45-64	12.4
65+	6.6
Party ID
Independent	16.4
Democrat	14.8
Republican	4.9
Gallup-West Health National Healthcare Study, Sept. 16-30, 2019; n=1,099

These data are based on surveys with 1,099 U.S. adults across all 50 states and the District of Columbia, conducted Sept. 16-30, 2019. Respondents were asked, "Has there been a time in the last five years when a friend or family member passed away after not receiving treatment for their condition due to their inability to pay for it?" These results are not meant to quantify the number of people who have died after not being able to pay for medical treatment, including prescription drugs, but rather the number of people who report knowledge of a death under such circumstances. In all, the Centers for Disease Control and Prevention estimate that about 2.8 million persons died in 2017 in the U.S. across all causes.

Dovetailing with these results is a rising percentage of adults who report not having had enough money in the past 12 months to "pay for needed medicine or drugs that a doctor prescribed" to them. This percentage has increased significantly, from 18.9% in January 2019 to 22.9% in September. In all, the 22.9% represents about 58 million adults who experienced "medication insecurity," defined as the inability to pay for prescribed medication at least one time in the past 12 months. The increase reflects a marked rise among women of over five percentage points to 27.5%, widening the gender gap to over nine points when compared with the 18.1% rate for men. And while data among both political independents and Republicans are statistically unchanged since September, medication insecurity among Democrats has risen over six points to 27.7%.

U.S. Medication Insecurity, January and September 2019, by Gender and Party ID

"Has there been a time in the last 12 months when your household has been unable to pay for medicine or drugs that a doctor had prescribed for you because you didn't have enough money to pay for them?" (% Yes)

	January 2019	September 2019	Change
	%	%	pct. pts.
U.S. TOTAL	18.9	22.9	+4.0*
Gender
Male	15.2	18.1	+2.9
Female	22.3	27.5	+5.2*
Party ID
Independent	14.5	17.0	+2.8
Democrat	21.0	27.7	+6.7*
Republican	20.3	23.1	+2.5
* Statistically significant change (p<.05)
Gallup-West Health National Healthcare Study, January 2019 (n=3,537) and September 2019 (n=1,099)

Republicans See Much More Progress Than Others on Drug Costs

Against a backdrop of millions of Americans who know people who have died after not being able to afford needed treatment, and millions more recently experiencing medication insecurity personally, most respondents agree that U.S. consumers are paying too much for prescription drugs. Close to nine in 10 U.S. adults report that the costs of prescription drugs are "usually much higher" (69%) or "tend to be somewhat higher" (20%) than what consumers should be paying for them, compared with only 1% who believe them to be much or somewhat lower. These perceptions are shared by political and demographic subgroups, with only modest differences between groups in the percentage viewing drug prices as too high.

Americans' Assessments of U.S. Prescription Drug Prices, by Party ID

"Based on everything you have read and experienced, please indicate which of the following statements most closely align with your opinion regarding the cost of prescription drugs in the U.S.?"

	U.S. total	Repub.	Ind.	Dem.	Approve of Trump	Disapprove of Trump
	%	%	%	%	%	%
Usually much higher than what consumers should be paying	69	64	66	76	64	74
Tend to be somewhat higher	20	22	21	16	20	19
About right	9	12	10	6	13	6
Tend to be somewhat lower	1	0	1	0	0	0
Usually much lower than what consumers should be paying	1	0	1	1	0	1
Gallup-West Health National Healthcare Study, Sept. 16-30, 2019; n=1,099

While perspectives on the price of medicine relative to what consumers should be spending are largely uniform, perspectives regarding President Donald Trump's success at curtailing rising drug prices are more divided along party lines. When asked, "How much progress has the Trump administration made to limit the rising cost of prescription drugs in the U.S.?" two-thirds of respondents -- split evenly -- report "not very much" progress or "none at all." But only 31% of Republicans express this sentiment, compared with 66% of independents and 96% of Democrats. Nearly nine out of 10 adults who disapprove of the job Trump is doing also report little to no progress.

Evaluation of Trump Administration on Curtailing Rising Costs of Prescription Drugs, by Party ID

"How much progress has the Trump administration made to limit the rising cost of prescription drugs in the U.S. -- a great deal, a fair amount, not very much or none at all?"

	U.S. total	Republican	Independent	Democrat	Approve of Trump	Disapprove of Trump
	%	%	%	%	%	%
A great deal	7	14	6	2	13	3
A fair amount	20	49	16	1	43	5
Not very much	33	25	34	39	29	37
None at all	33	7	32	57	7	51
Not very much/None at all	66	31	66	96	35	88
Gallup-West Health National Healthcare Study, Sept. 16-30 2019; n=1,099

Bottom Line

The substantial number of Americans who know someone who has died after not receiving treatment because of their inability to pay for it, coupled with the rise in the percentage who have not had enough money to pay for their prescriptions, underscores the urgency of the U.S. healthcare cost crisis. These realities starkly highlight the significant practical implications of drug prices on U.S. residents, as well as the effects of healthcare policy action -- or inaction.

With millions of residents knowing someone who has died in the past five years after being unable to pay for needed treatment, the ramifications to public trust in the U.S. healthcare system could be significant. This erosion of trust is likely exacerbated by the estimated 58 million adults who have themselves been unable to afford prescribed drugs at least once in the last 12 months. The level of medication insecurity is high and rising, and is doing so against a backdrop of overwhelming public sentiment regarding the inappropriately high prices of prescription drugs. The rise in reported 12-month medication insecurity among women and Democrats dovetails with rising uninsured rates for related subgroups over the course of 2019, and could be, in part, a reflection of the decreased coverage among these constituencies.

Drug prices directly affect consumers, and with the U.S. one year away from the 2020 election, presidential candidates will increasingly be asked to explain and defend their policy positions regarding rising drug costs. Only 7% of U.S. adults report that the Trump administration has accomplished "a great deal" on the issue, and voters are clearly expecting more from their elected officials than what has been accomplished in the past three years. In Congress, meanwhile, the U.S. House of Representatives is expected to vote soon on House Democrats' plan to curb soaring prescription drug prices by allowing the federal government to negotiate prices of certain drugs, including insulin products and single-source brand-name drugs with no generic competition. The U.S. Senate is considering a separate, bipartisan proposal that would cap seniors' out-of-pocket costs and require drug manufacturers to reimburse Medicare if prices rise more than the inflation rate.

Given these ongoing challenges, West Health and Gallup have committed to measuring public opinion on a wide array of issues relevant to healthcare costs on a recurring basis, providing stakeholders and policymakers with the information they need to gauge whether progress is being made on these most critical issues of our time.
View complete question responses and trends.

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How Non-Profit Hospitals Are Driving Up The Cost Of Health Care

Last year, when New York Governor Andrew Cuomo was battling to win the Democratic primary, his campaign solicited a donation from the Greater New York Hospital Association, according to a recent report from The New York Times. The hospital lobbying group gave over $1 million to the New York State Democratic Party. And not long after, according to the Times, "the state quietly authorized an across-the-board increase in Medicaid reimbursement rates." The increase is expected to cost taxpayers around $140 million a year.

The hospital lobby is a juggernaut in New York, as it is in other states. Over the last year, hospital lobbyists have fought reforms for billing transparency in Ohio, minimum nurse staffing levels in Illinois, and cheaper payment rates in North Carolina. Last month, a leaked email from the Kentucky Hospital Association showed that it was urging members to donate to gubernatorial candidates to "assure access."

In Washington, D.C., the hospital lobby is battling Medicare for All as well as efforts to end surprise billing, which is when Americans go to in-network providers but then — surprise! — end up getting billed for more expensive, out-of-network services. Three-quarters of Americans say they oppose the practice, and leaders from both political parties have been working to end it. Yet, hospital lobbyists are making reform really difficult. Which is weird, because most hospitals are nonprofits.

More Than Just Quid Pro Cuomo?
A recent study by Yale School of Public Health economist Zack Cooper and colleagues takes a look at hospital politics and helps shed light on why American health care is so insanely expensive.

In 2003, President George W. Bush began fighting for a major expansion of the Medicare program. The Bush Administration knew it would be a hard sell, alienating small-government Republicans and putting Democrats in the awkward position of supporting Bush's agenda before an election year.

Cooper says their study was inspired by one of his grad students, who served as a congressional aide when this legislation was being passed. "And the rumor was the U.S. Health Secretary, Tommy Thompson, was on the floor of the House with a notebook, writing down members of Congress who voted for the bill," Cooper says. Thompson allegedly did this to sweeten the deal for lawmakers on the fence, offering to reward supporters by "bumping up payment rates to hospitals in their districts" through a special provision, Section 508.

Cooper and his colleagues have spent years investigating whether this was true, filing Freedom of Information Act requests and crunching data. They've uncovered evidence that suggests it was true. They find that legislators who were on the fence and voted "yea" for the legislation were 700% more likely to see a large bump in Medicare payment rates to hospitals in their district. Between 2005 and 2010, Congress shelled out over $2 billion to 88 hospitals through the horse-trading Section 508 provision. It was a clear win for these hospitals, which spent the money on more equipment, buildings, services, and staff.

Dropping opposition to the Medicare expansion also ended up being a political win for lawmakers on the fence. Not only did the special provision funnel extra federal funds to their districts and create jobs; the lawmakers ended up seeing a 65% increase in contributions from people who worked in their state's health care industry and a 25% increase in overall campaign contributions. "It's suggestive to me that this was in a sense a quid pro quo," Cooper says, adding that their analysis shows how health care spending becomes a "piggy bank" for political influence.

Giving New Meaning To The Term "Nonprofit"
"Hospitals are the largest individual contributor to health care costs in the U.S," Cooper says. Americans spend over a trillion dollars a year at hospitals. That's about a third of national health spending, which now consumes almost 20% of U.S. GDP. Cooper's research shows that, after a long period of consolidation, the cost of hospital services has been exploding. Between 2007 and 2014, hospital prices grew 42 percent.

The irony is most hospitals are "nonprofit," a status that makes them tax exempt. Many (but not all) do enough charity work to justify tax benefits, yet it's clear nonprofit hospitals are very profitable. They funnel much of the profits into cushy salaries, shiny equipment, new buildings, and, of course, lobbying. In 2018, hospitals and nursing homes spent over $100 million on lobbying activities. And they spent about $30 million on campaign contributions. Health industries have also been funneling hefty sums into dark money groups. But their political power isn't just the result of lobbying or electioneering. Hospitals are often the biggest employers in states and cities across America.

Health care reformers direct much of their ire at the nation's health insurance companies. Perhaps they're the easiest targets because they're faceless paper-pushers, located outside their districts or states, who are often the only entity in the system controlling costs. Studies suggest insurance administration and profits do contribute to wasteful health care spending, but they're just one contributor to a bloated system. Hospitals, which often escape criticism, are a significant part of the problem.

We reached out to the Greater New York Hospital Association to get a response to criticism of the appearance of a quid pro quo between them and the Governor of New York. They stressed that state hospitals "hadn't received a Medicaid rate increase in 10 years" and that while they "aggressively lobbied" to change this, they deny the interpretation that suggests their large donations were motivated by increasing Medicaid rates. They say, instead, the donations were aimed at defending the Affordable Care Act from "relentless attacks" from lawmakers in the nation's capital.

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Waste accounts for one-quarter of healthcare spending

A new study found waste accounts for roughly one-quarter of all U.S. healthcare spending, an estimate that's in the same ballpark as its predecessors. 

The cost of waste in the U.S. healthcare system ranges from $760 billion to $935 billion annually, according to a JAMA review of 54 peer-reviewed studies, government reports and other information, released Monday. The study found one-quarter of that could be cut using interventions found to reduce waste.

Two previous studies on the subject from 2012 estimated waste at roughly 30% and 34% of total healthcare spending.

"There have been a lot of changes in the healthcare system in the last seven years," said Dr. William Shrank, an author of the study and chief medical and corporate affairs officer for health insurer Humana. "We thought it was an appropriate time to update that study." 

Shrank undertook the research with a Humana colleague and a third researcher from the University of Pittsburgh School of Medicine.

One reason the new study's estimate is lower than previous ones is because it took the conservative approach of not extrapolating Medicare-only data to the broader population, whereas previous studies did. Shrank said Medicare-only research represented the minority of contributing studies.

The current study divided waste into six previously identified categories. Administrative complexity accounted for the most waste, at $265.6 billion annually. Below that was waste due to pricing failure, which costs $230.7 billion to $240.5 billion annually. Failure of care delivery accounts for $102.4 billion to $165.7 billion annually. Overtreatment or low-value care results in $75.7 billion to $101.2 billion in waste annually. Waste related to fraud and abuse costs between $58.5 billion and $83.9 billion annually. Finally, failure of care coordination generates $27.2 billion to $78.2 billion in waste annually. 

The study also estimated potential annual savings from measures shown to cut waste. In aggregate, those interventions could save $191 billion to $282 billion annually, or about 25% of the total cost of waste. 

"There's always going to be some waste," Shrank said. "I don't think we'd ever expect to see zero waste." 

But there were no interventions in the scientific literature to chip away at the biggest culprit: administrative waste. Shrank said that's because those efforts tend to happen within businesses and aren't widely disseminated. He hopes this study encourages more shared learning across the healthcare industry. 

The key takeaway theme of the study, in Shrank's mind, is that aligning payers and providers through value-based care initiatives can go a long way toward cutting waste. He said sources of administrative complexity like prior authorization, utilization management or other billing issues are simply methods payers use to reduce waste. 

"In an environment where payers are pre-paying physicians or sharing risk with physicians for the management of populations, much of these sources of administrative complexity can be reduced or eliminated or streamlined," he said. 

Other experts drew far different conclusions. 

Former CMS Administrator Dr. Don Berwick, the Institute for Healthcare Improvement senior fellow who wrote a 2012 JAMA study on healthcare waste, said value-based payment arrangements like bundled payments and accountable care organizations have been shown to generate 1% to 3% in cost savings—a "big gap" from the waste estimates researchers have published. 

"I tend to be an optimist and I'm grateful for the progress, but I suspect we're going to need bolder approaches to changing the financing of healthcare than we have accepted so far," he said. 

Similarly, Dr. Ashish Jha, professor of health policy in the Harvard T.H. Chan School of Public Health, said research has shown almost no value-based care programs have yielded improvement. Even the most effective form of value-based care, physician-led ACOs, have produced savings up to roughly 3%. 

"I've got literally dozens of studies I can point to that show it's having little to no impact," he said. "This is not one where people just get to have differing opinions. You've got to bring some evidence to bear for why it's going to be useful, because all the data so far show things heading in one direction." 

Berwick said he thinks the solution to healthcare waste will need to be a political one. People must mobilize to say, " 'It's enough. We're not going to put up with this kind of administrative waste,' " he said. " 'We're not going to put up with this obscene pricing. It's time to stop.' I don't know without that kind of political force, how these circumstances can be changed." 

Jha thinks part of the solution will be to address healthcare's irrational pricing. One potential tool is price transparency improvement that will help people shop around for the lowest-cost care, although there's not much evidence that such efforts are helpful in lowering prices. 

Enhanced regulation of healthcare monopolies could also help, Jha said. In recent years, he said federal agencies haven't adequately pushed back against mergers and acquisitions, but that's partly because they're underfunded. Another difficult but potentially helpful task would be to either break up large health systems or enable new providers to enter markets, he said. Jha said the federal government could lower drug prices by importing generic drugs from other countries and potentially negotiating drug prices directly. 

Shrank believes stronger payer and provider relationships will help chip away at waste by allowing for more value-based partnerships. Those bonds must be built on trust and transparency, he said.

"In the absence of trust, that relationship is much more limited and our ability to take better care of people and reduce waste similarly will be far more limited," Shrank said. 

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A Long Era of Low Health Care Inflation May Be Coming to End

• Medical price hikes slowed down after the Great Recession
• Economists warn return to historical patterns is in store

Since the late 2000s Great Recession, historically low increases in health-care prices have helped hold down inflation. That may be about to change.

Hospital prices increased 2.2 percent in December, the fastest rate in four years, according to an analysis by Altarum, a nonprofit health-care research organization. The group analyzes data from the Bureau of Labor Statistics and other sources to estimate the underlying prices that health plans and consumers pay for medical goods and services.

While overall medical inflation was restrained last year, the report warns that “we could very well be at the cusp” of a return to a more typical pattern where increases in health-care prices outpace the broader inflation rate.

“We have lots and lots of experience where health-care prices grow more quickly than economy-wide prices,” said Paul Hughes-Cromwick, co-director of sustainable health spending strategies at Altarum. The reversal in recent years “is not normal,” he said, and he doesn’t expect it to last.
In recent days, financial markets have become more concerned about the potential for a faster-than-expected increase in prices throughout the economy. A report showing strong wage gains by U.S. workers last month helped briefly push stocks into a correction, a retreat of more than 10 percent from their recent peak.

Price Hikes Slow 

Until the Great Recession, medical prices usually outpaced inflation.

Source: Altarum analysis of data from BLS and Macroeconomic Advisors

Rising prescription-drug prices have made headlines, but drugs account for only 10 percent of total health spending in the U.S. The bulk of outlays goes to hospitals, doctors, and other professional services. Price increases in those sectors have been restrained, partly because of limits on how much Medicare pays hospitals and physicians under the Affordable Care Act and other legislation.

Slow growth in health-care prices has been dragging down the core price index for personal consumption expenditures, the Federal Reserve’s preferred measure of inflation, economists at the Federal Reserve Bank of San Francisco estimated in November. If health inflation matched its pace in the mid-2000s, it would add 0.3 percentage points to the current rate of inflation.

Though health-care inflation is expected to accelerate, “it appears unlikely to return to its prerecession level,” which could moderate overall inflation, the Fed economists wrote. Some of the changes that held down Medicare payments are permanent, and commercial insurers often base their reimbursement rates on Medicare, said Adam Shapiro, a research adviser at the San Francisco Fed.

Like the government, employers have tried to hold down their health costs. They’ve shifted more of the burden onto workers through higher deductibles and cost-sharing. Both the U.S. government and private health plans are experimenting with paying providers based on how well they take care of patients, rather than the volume of services they provide.

At the same time, hospitals and doctors groups are increasingly combining their businesses, giving them greater power to command higher prices.

Prices are just one determinant of overall health-care spending, along with the amount and intensity of care. Health spending accounts for roughly 18 percent of overall U.S. economic activity, the highest in the developed world.

“We’re already devoting too much of our overall economic product to the health sector and not getting a great value for it,” Hughes-Cromwick, the Altarum official, said. Any increase in medical prices will further strain the budgets of governments, employers, and households that pay for it, he said.

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(Note: The chart is interactive at the website.) 

Unnecessary Medical Care: More Common Than You Might Imagine

Marshall Allen

From

It's one of the intractable financial boondoggles of the U.S. health care system: Lots and lots of patients get lots and lots of tests and procedures that they don't need.

Women still get annual cervical cancer testing even when it's recommended every three to five years for most women. Healthy patients are subjected to slates of unnecessary lab work before elective procedures. Doctors routinely order annual electrocardiograms and other heart tests for people who don't need them.

That all adds up to substantial expense that helps drive up the cost of care for all of us. Just how much, though, is seldom tallied. So, the Washington Health Alliance, a nonprofit dedicated to making care safer and more affordable, decided to find out.

The group scoured the insurance claims from 1.3 million patients in Washington state who received one of 47 tests or services that medical experts have flagged as overused or unnecessary.

What the group found should cause both doctors, and their patients, to rethink that next referral. In a single year:

• More than 600,000 patients underwent a treatment they didn't need, treatments that collectively cost an estimated $282 million.
• More than a third of the money spent on the 47 tests or services went to unnecessary care.
• 3 in 4 annual cervical cancer screenings were performed on women who had adequate prior screenings – at a cost of $19 million.
• About 85 percent of the lab tests to prep healthy patients for low-risk surgery were unnecessary – squandering about $86 million.
• Needless annual heart tests on low-risk patients consumed $40 million.

Susie Dade, deputy director of the alliance and primary author of the report released Thursday, said almost half the care examined was wasteful. Much of it comprised the sort of low-cost, ubiquitous tests and treatments that don't garner a second look. But "little things add up," she said. "It's easy for a single doctor and patient to say, 'Why not do this test? What difference does it make?' "

ProPublica has spent the past year examining how the American health care system squanders money—often in ways that are overlooked by providers and patients alike. The waste is widespread – estimated at $765 billion a year by the National Academy of Medicine, about a fourth of all the money spent each year on healthcare.

The waste contributes to health care costs that have outpaced inflation for decades, making patients and employers desperate for relief. This week Amazon, Berkshire Hathaway and JPMorgan rattled the industry by pledging to create their own venture to lower their health care costs.

Wasted spending isn't hard to find once researchers—and reporters— look for it. An analysis in Virginia identified $586 million in wasted spending in a single year. Minnesota looked at fewer treatments and found about $55 million in unnecessary spending.

Dr. H. Gilbert Welch, a professor at The Dartmouth Institute who writes books about overuse, said the findings come back to "Economics 101." The medical system is still dominated by a payment system that pays providers for doing tests and procedures. "Incentives matter," Welch said. "As long as people are paid more to do more they will tend to do too much."

Dade said the medical community's pledge to "do no harm" should also cover saddling patients with medical bills they can't pay. "Doing things that are unnecessary and then sending patients big bills is financial harm," she said.

Officials from Washington's hospital and medical associations didn't quibble with the alliance's findings, calling them an important step in reducing the money wasted by the medical system. But they said patients bear some responsibility for wasteful treatment. Patients often insist that a medical provider "do something," like write a prescription or perform a test. That mindset has contributed to problems like the overuse of antibiotics – one of the items examined in the study.

And, the report may help change assumptions made by providers and patients that lead to unnecessary care, said Jennifer Graves, vice president for patient safety at the Washington State Hospital Association. Often a prescription or technology isn't going to provide a simple cure, Graves said. "Watching and waiting" might be a better approach, she said.

To identify waste, the alliance study ran commercial insurance claims through a software tool called the Milliman MedInsight Health Waste Calculator. The services were provided during a one-year period starting in mid-2015. The claims were for tests and treatments identified as frequently overused by the U.S. Preventive Services Task Force and the American Board of Internal Medicine Foundation's Choosing Wisely campaign. The tool categorized the services one of three ways: necessary, likely wasteful or wasteful.

The report's "call to action" said overuse must become a focus of "honest discussions" about the value of health care. It also said the system needs to transition from paying for the volume of services to paying for the value of what's provided.

ProPublica is a nonprofit newsroom based in New York. You can follow Marshall Allen on Twitter:@marshall_allen. 

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U.S. healthcare spending skyrockets to $10K per person

A new analysis from the Office of the Actuary at the Centers for Medicare & Medicaid Services and published by Health Affairs indicates that healthcare spending has exploded, reaching $3.2 trillion in 2015. 

The rising cost of private health insurance, hospital care, physician and clinical services, and prescription drugs are a few reasons that in 2015 healthcare spending in the United States grew at a rate of 5.8% and reached $3.2 trillion.

Those figures equate to $9,990 per person, according to a new report from the Office of the Actuary at the Centers for Medicare & Medicaid Services and published by Health Affairs.

The main drivers of the growth are increased use of services as millions of previously uninsured people gained insurance through the Affordable Care Act and increased spending for retail prescription drugs.
 

Indeed, spending on prescription drugs increased 9% in 2015. Although this is lower than the 12.4% growth in 2014, CMS noted it is significantly higher compared to 2.3% growth in 2013.

On a per-enrollee basis, overall spending increased by 4.5% for private health insurance, 1.7% for Medicare and 3.8% for Medicaid.

However, CMS said in a statement the annual rate is still below the rates of most years prior to the passage of the Affordable Care Act. Following the implementation of the healthcare reform law, 9.7 million individuals gained private health insurance coverage and 10.3 million more people enrolled in Medicaid coverage, according to the report.

"Our significant progress in reducing the nation's uninsured rate, while providing strong protections for Americans if they get sick, would not be possible without the Affordable Care Act," said CMS Acting Administrator Andy Slavitt in the announcement of the findings. "As millions more Americans have obtained health insurance, per-person cost growth remains at historically modest levels." 

Despite the significant changes in health coverage in 2014 and 2015, analysts predict health spending will increase in the next decade due to the aging of the population, changing economic conditions and faster medical price growth.

Other highlights from the report:

• Growth in expenditures for hospital care increased from 4.6% in 2014 to 5.6% in 2015, reaching $1 trillion. Analysts noted that this was primarily due to nonprice factors, such as the use and intensity of services. The main drivers of this faster growth in 2015 were private health insurance and Medicaid, with slower growth in Medicare hospital spending somewhat offsetting their effect.
• Physician and clinical services also rose from 4.8% in 2014 to 6.3% in 2015, with total expenditures reaching slightly less than $635 billion—or 20% of overall health spending. The growth in clinical services spending was driven by continued fast growth in outpatient care centers, such as community health centers, kidney dialysis centers, and outpatient mental health and substance abuse centers.
• Total per-enrollee private health insurance spending increased by 4.5% in 2015, compared to average growth in per-enrollee spending of 7.4% during 2000-2009.
• Medicare spending, which represented 20% of national total healthcare spending in 2015, grew 4.5% to $646.2 billion, slightly slower than the 4.8% growth in 2014. Medicare prescription drug spending had an 11% increase in 2015 following a 14.5% increase in 2014.
• Medicaid spending, which totaled $545.1 billion, accounted for 17% of total spending on healthcare.
• Out-of-pocket spending reached $338.1 billion. This figure includes direct consumer payments such as copayments, deductibles and spending not covered by insurance, excluding premiums.
• Retail prescription drug spending continued to outpace overall health expenditure growth in 2015, increasing 9% to $324.6 billion after rising 12.4% in 2014. Growth in prescription drug spending was faster than that of any other service in 2015, according to the analysis. This is due in part to increased spending for new medicines, such as specialty drugs to treat hepatitis C, higher costs for existing brand name drugs, and increased spending on generics.

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