Can costs of big-ticket health care treatments be contained?

Can costs of big-ticket health care treatments be contained?

May 1st, 2017 by Steve Johnson in Local Regional News

POLL: Should Medicare negotiate with drug companies for lower prices?

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The higher costs for specialty drugs are not always bad for insurers. Though initial costs may be high for chronic diseases such as hepatitis C or multiple sclerosis, the long-term costs without the drug may be even higher.

Even if the long-term cost is not higher, insurance companies are required to pay for a new drug once it is proved to be effective.

"A lot of them don't have another alternative," said Sherri Zink, senior vice president and chief data officer for BlueCross BlueShield.

But if drug costs keep going higher and higher, insurers will be forced to keep raising rates or find some way to limit access to the drugs.

"There's a limited amount of money in the system. There is a cost associated with everything," said Mary Danielson, a BlueCross BlueShield spokeswoman. "Unfortunately, there are a limited number of resources across the entire health care system, so we can't meet every single individual's need."

For generic drugs such as insulin, a dose of competition might be the proper treatment.

Allowing Medicare to use its bulk-buying leverage to bargain for drug purchases, for example, might lower prices. So could allowing foreign companies to sell their products in the U.S.

"These costs are not based on the research and development costs for the drug," said Dr. Ilana Graetz, a health policy expert at the University of Tennessee Health Sciences Center in Memphis. "They are just charging what the market will bear, and if you have no competitors, the market will bear a lot."

Drug companies counter that Medicare is so huge that it could force them to agree to its prices, fair or not, and they raise concerns about quality controls for foreign-made drugs.

Some experts recommend price controls for the new, custom drugs.

Former Centers for Medicare & Medicaid Services head Andy Slavitt said in an interview that because other countries regulate prices, U.S. consumers get stuck with higher bills.

"Every country in the world, including those that have market-oriented systems, has some mechanism to control the price of medication — every single country except ours," he said. "That means every country can control prices, so in order to make a profit, drug companies are left to raise the cost in the U.S."

Insurers also are working with hospitals and doctors to be certain the drugs they prescribe really help patients, and to consider costs when writing prescriptions.

"When a new drug comes out, not everybody is a good candidate for it," said Dr. Andrea Willis, senior vice president and chief medical officer of BlueCross BlueShield. "We want to match the right therapy with the right people, so we are not just paying for what is new in the pipeline."

But that is not easy.

"Doctors have no idea how much you have to pay for [drugs]," Graetz said. "Everyone has different insurers with different plans and doctors can't keep track of it."

Another sticking point is that pharmaceutical companies advertise heavily to consumers, who may then insist their doctors give them a new drug even though it may not be a good fit for them.

A tougher issue is whether insurers should be required to pay for drugs if their effect is limited. It is rare that any new drug "cures" cancer or some other disease (the hepatitis C drug is an exception).

Instead, a clinical test may conclude that, for example, for 40 percent of people with a certain type of cancer, taking the drug extended their lives an average of six months.

Is the drug worth the cost? If you are one of the patients, that six months is very important, giving hope that perhaps an even bigger breakthrough will be announced in time to save you.

But it leaves insurers in a bind, not wanting to be labeled as deciding whether very ill or elderly patients should live or die.

"In other countries, they require devices and drugs go through not just effectiveness studies, but also value-based studies," said Graetz. "Does the added benefit justify the added cost?

"But when you start talking about that here, people start talking about death panels and how you are valuing money over care. It doesn't seem as politically viable here but it is to our own detriment, when we are spending close to 20 percent of our GDP on health care."

Chronic conditions also may be cheaper but harder to treat.

Tennesseans tend to smoke more than other people, eat less healthy food and get less exercise, boosting rates of diabetes, heart and lung diseases and other disorders. But getting people to stop eating French fries and sugar-laden drinks is difficult given the barrage of advertising touting how delicious they taste.

"Even though it is daunting, if we were to stop trying to promote and educate wellness, the problem could be worse," said BlueCross BlueShield's Willis. "It's a battle that's worth fighting for."

"Health is not just about what happens when someone presents at the emergency room with a heart attack and diabetes, but rather what happens two years before that event," Slavitt said.

One intermediate step is to do routine preventive testing. Some people don't seem to be aware that many preventive tests, such as mammograms or colonoscopies, are covered by their health insurance with no co-payments. BlueCross BlueShield now gives its customers a scorecard that shows which no-cost preventive tests they have completed.

A promising alternative may be health plans run by employers, who have an incentive to control costs and keep benefits affordable.

"What we see employers doing now is putting in wellness programs and incentives to drive more healthy behaviors around weight loss activities," Zink said.

She said insurers also are trying to convince patients to use the proper health care providers and not immediately head for the nearest emergency room. She said 50 to 55 percent of ER visits could have been avoided with a trip to a primary care physician or a mini-clinic.

"But that goes back to convenience, to the time of day — if your child is sick in the middle of the night, you want to go to the ER to make sure everything is OK," Zink said.


Another approach to controlling costs is to change the way doctors and hospitals are paid.

The Obama administration suggested paying doctors and hospitals based on the quality of care rather than fees for services provided.

In the past, each provider cared about getting paid for improving your health, but there was little incentive to worry about whether what any other provider did for you actually worked.

Your primary doctor, for example, would determine that your knee was in bad shape and give you a bill and refer you to a specialist. The specialist would run tests and give you another bill and another referral, this time to a knee surgeon. The surgeon would perform the operation and refer you to a rehab facility, which would turn you over to a physical therapist to help you exercise at home — and each would tag on its own bill.

But no one in the chain did much followup to see if the knee replacement was working, and if you ended up back at the hospital, no one was affected. You simply started the entire process all over again, with a new set of bills. And if your doctors ended up charging more than those across town, no one noticed.

Starting a year ago, the Centers for Medicare & Medicaid Services began telling a test group of 800 hospitals they would be paid a set fee of $25,500 for a knee or hip operation, no matter what the actual cost. Over time, CMS said, the costs would average out. And if a patient returned to the hospital, CMS would take back some money because obviously somebody hadn't done their job properly.

That means hospitals, doctors and physical therapists now need to pay more attention to whether you actually go to rehab after the knee surgery, whether you get your prescriptions filled, and whether the physical therapist is actually gets you to exercise and get your knee in shape.

Not all doctors are happy with the change, arguing their medical judgment is subordinated to procedures dictated by hospitals and insurance companies.

Tom Price, the former Georgia congressman and orthopedic surgeon who now heads the U.S. Department of Health and Human Services — which oversees CMS — is among the ranks of doubters, so it is not clear whether he will continue or expand the program.

Hospitals, on the other hand, seem to have seen that a lot of their good work was being undone once patients left the hospital. Patients often weren't filling prescriptions or taking them properly, and they were ignoring doctor's orders for exercise or diet or followup care.

"One of the things they are doing is giving penalties to hospitals that have too many readmissions," Graetz said. "The hope is that will get doctors to better network with the outpatient clinics in the area and get followup care for patients so they don't come back to the hospital."

Contact staff writer Steve Johnson at 423-757-6673,, on Twitter @stevejohnsonTFP, and on Facebook,