Archive for June 14th, 2010

Is Cost-Plus Health Care Finance Doomed?

Monday, June 14th, 2010

Managed care isn’t working and everyone knows it. PPO discounts are touted to be significant and substantial, yet health care costs keep going up every year.

Enter Cost-Plus health care financing.

Cost-Plus health care financing makes sense to a growing number to Texas employers. Since hospitals publish their cost-to-charge ratios with the federal government, some employers are using that as a benchmark to reimburse hospitals their cost, plus a profit margin that is fair and reasonable.

As Cost-Plus grows and more employers jump on the cost-plus band wagon, what will hospitals do to fight this transparent intrusion into their financial ledgers to protect profits?

In the scheme of things, one might conclude that a market driven cost-plus approach to financing health care, if ultimately pervasive within the health care delivery system, could ultimately serve the function of insuring that hospitals have enough income to recover their costs. But the rub lays in the ability of the hospitals to increase their incomes and the only way to do that would be  to increase their costs, a perverse notion in a free enterprise capitalist system.

So, one could conclude that as the cost-plus health care financing phenomenon takes hold, costs will increase at probably the same level as we have experienced under managed care for the past 20+ years. After all, everyone deserves to make a profit.

Editor’s Note: Molly “Tsun Su” Mulebriar writes: “For every point of view, the is an opposite point of view worth discussing. It is in everyone’s best interests to consider all possibilities to be better prepared in the future. Knowing your enemy is the first step towards ultimate victory.”

Blue Cross VS Pfizer

Monday, June 14th, 2010

Blue Cross Names and Shames Pfizer Execs Linked to Massages-for-Prescriptions Push

By Jim Edwards | Jun 10, 2010

Blue Cross Blue Shield’s lawsuit against Pfizer (PFE) to recoup money it overpaid for Bextra and other drugs that were promoted for unapproved, “off-label” uses gives an idea of just how bad the “Bad Old Days” of drug marketing really were. Blue Cross claims Pfizer bought airfare to Caribbean resorts for 5,000 doctors who also received up to $2,000 “honoraria” each, plus golf games and massages just for listening to lectures about the now-withdrawn painkiller.

Blue Cross has also introduced a new tactic into the legal game of attempting to recover monies paid for illegally promoted pharmaceuticals: it names individual Pfizer executives as defendants, presumably in an attempt to “name and shame” them. Previously, plaintiffs in similar cases just sued the company they wanted money from.

The suit doesn’t say the named executives specifically arranged the trips. Rather, it accuses them of preparing sales materials to convince doctors to use Bextra for surgical pain, an off-label use, among other acts. Pfizer says:

This is a case of an insurance company seeking its money back for medicines that physicians prescribed appropriately using their best medical judgments.  Pfizer denies the allegations brought by the insurer in this case.

Most of the allegations are not new — they’re based on the $2.3 billion settlement Pfizer reached with the feds in 2009. (Disclosure: They’re also based on three stories I previously published on BNET: see related stories below.)

But Blue Cross does provide some numbers that indicate the massive scale of Pfizer’s infamous Bextra business:

Pharmacia paid targeted physicians both airfare and two to three days’ accommodations at lavish resorts in the Bahamas, Virgin Islands and across the United States. Pharmacia further entertained these physicians with golf, massages and other recreational activities. And Pharmacia paid them honoraria between $1,000 and $2,000 for attending. The number of attendees at this event often ranged from 50-100 health care professionals.

Pharmacia held almost 100 of these meetings. By simple arithmetic, Pharmacia thus promoted unapproved uses and dosages of Bextra to and provided entertainment for over 5,000 health care professionals.

The executives named as defendants are Rick Burch, a former svp who planned and launched Lyrica; Jake Friedman, a former vp of sales responsible for promoting Lyrica and Geodon; Pfizer’s executive director Mark Brown; and Matthew Lustig, a former South Florida district sales manager, who distributed documents to sales agents who promoted Bextra, Blue Cross says.

The most interesting name there is Lustig’s: He’s the least senior person on that list. At a company of Pfizer’s size, he’s pretty low on the totem pole, especially as it’s quite well established that Pfizer’s off-label push for Bextra was backed by management.

Blue Cross appears to be sending a message to all Pfizer employees, no matter how lowly: Don’t push off-label drugs onto patients we cover, because we’re taking names.

2011 Group Health Costs To Increase

Monday, June 14th, 2010
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Report: Employers to see 2011 medical costs jump


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Jun 14, 2:36 AM (ET)


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INDIANAPOLIS (AP) – Companies that offer employee health insurance expect another steep jump in medical costs next year, and more will ask workers to share a bigger chunk of the expense, according to a new PricewaterhouseCoopers report.

For the first time, most of the American workforce is expected to have health insurance deductibles of $400 or more, the consulting firm said in a report released to The Associated Press.

Deductibles are the annual amount a patient pays out of pocket for care before insurance coverage starts. They are generally separate from co-payments and coinsurance.

Two years ago, only 25 percent of companies participating in the annual survey said they asked employees to pay deductibles of $400 or more. That grew to 43 percent in 2010 and is expected to pass 50 percent next year.

Employees who are asked to pay more through things like higher deductibles help keep cost growth in check because they use less health care.

The health care reform law passed by Congress and then signed by President Obama in March has just started to unfold and will have little impact on costs next year, said Michael Thompson, a principal with PricewaterhouseCoopers.

“In general, it’s a continuation of a fairly high rate of medical inflation,” he said.

PricewaterhouseCoopers found that medical costs are expected to rise 9 percent next year. But this doesn’t mean workers will see their monthly premiums jump by the same amount.

Employers typically try to soften the impact of a cost increase by absorbing some of it, changing insurance plan designs or asking employees to pay higher deductibles or a larger coinsurance percentage.

For instance, a medical cost increase of more than 9 percent was forecast for 2009. But the average annual premium rose only 5 percent for family coverage that year and stayed flat for single coverage, according to a separate study from the Kaiser Family Foundation.

The 9 percent medical cost increase projected in 2011 is actually slightly smaller than the 9.5 percent jump PricewaterhouseCoopers is seeing this year. Thompson said several top-selling drugs will lose patent protection next year and become exposed to lower-cost generic competition. That will help temper the increase.

The PricewaterhouseCoopers report also found a steep drop in the percentage of employers that subsidize retiree health coverage. It said only 22 percent of employers with more than 5,000 workers subsidized retiree coverage after age 65 this year. That’s down from 37 percent in 2009.

“It’s a major cost and one that employers have for years now been moving away from,” Thompson said.

PricewaterhouseCoopers compiled its report by analyzing e-mail survey results from 674 companies in 30 different industries across the country. Most of the companies participating had 1,000 employees or more. The firm also interviewed health plan executives and reviewed analyst reports.

Editor’s Note: The self-funded groups we currently manage wll not see increases in costs in 2011.