Drug Costs Soar

By George W. Chapman

Last year, we spent $603 billion on drugs. That’s about $1,800 per person in the US. Half of the $603 billion was spent on specialty drugs alone. Soaring prices, not increased utilization, drove up the overall drug spending. Specialty drug prices have increased a staggering 43% over the last five years. To reign in drug costs, the Inflation Reduction Act caps all Medicare Part D drug price increases at the inflation rate and out-of-pocket spending for Medicare members is limited to $2,000 annually. This went into effect Oct. 1, 2022. In addition, Medicare will finally be allowed to negotiate a handful of drug prices — but not until 2026. Seemingly in anticipation of prices being controlled by Medicare, drug manufacturers increased the prices of some 1,200 products an average 31.6% from July 2021 to July 2022. In the meantime, physicians are lobbying Congress not to cut their payments by almost 5% next year. With inflation at 8%, the 5% cut is tantamount to a 13% decrease in reimbursement.

Trinity Health Losses

The 88 Catholic hospital system lost $1.4 billion in the fiscal year just ended June 30.

St. Joseph’s in Syracuse and St. Peter’s in Albany are local members. Two other national Catholic hospital systems, CommonSpirit and Ascension (Lourdes in Binghamton), lost almost $2 billion each. Deficits were attributable to declining revenues and significant contract labor (mostly nursing) costs. In fairness to hospitals, their fees are either predetermined by Medicare and Medicaid or predetermined with commercial insurers. So, unlike drug manufacturers, they cannot arbitrarily raise prices to increase revenues.

Large national hospital systems have not fared much better than smaller local or regional hospital systems. Industry observers have speculated that the smaller systems (comprised of “across the street mergers”) may be more efficient because their proximity allows them to share clinical staff, consolidate overhead, and merge departments.

Industry experts Kaufman and Hall don’t see things improving for hospitals through next year. If hospitals continue to lose money, they will be forced to make painful staff cuts, mostly in non-clinical areas, to keep their doors open.

Medicare Open Enrollment

You are eligible for Medicare the month you turn 65. Open enrollment, which began this Oct. 15, allows people to change their plan for 2023.

Medicare anticipates the trend to enroll in Advantage plans will continue with 32 million seniors, or more than half of all eligible seniors, enrolling. Advantage plans are operated by commercial carries like United, Humana, Aetna, Blues, Cigna and Anthem. As the popularity of Advantage plans grows, so do the markets served by the carriers. These plans offer more services than traditional Medicare, often for no additional cost, such as dental, vision, hearing, transportation and even meals.

Incredibly, Advantage Plan premiums are expected to decrease 8% in 2023. Open enrollment for the Affordable Care Act and most employer plans began Nov. 1. The Kaiser Family Foundation estimates ACA premiums will increase 10% and commercial-employer premiums about 7%.

Nurse Practitioners in Mental Health

Prior to the pandemic, 11% of adults suffered from depression and anxiety. Since the pandemic, it is up to 40% of adults.

As the stigmatization associated with mental health declines, more and more people are seeking treatment. But therapists are struggling to keep pace and meet the demand.

Adding to the problem, since 2011, the number of practicing psychiatrists (MDs) has declined 6%. Most don’t accept Medicare and many don’t accept any insurance. Psychiatric nurse practitioners are increasingly critical in providing mental health services. Their numbers have increased 162% since 2011. Since then, NPs have provided 30% of all mental health visits. Start-up companies are assisting these NPs with establishing and running their private practices by lowering overhead and billing costs and contracting with both Medicare and commercial insurers.

Consumer surveys reveal 70% of respondents worry about their mental health coverage. Many plans still restrict coverage or have expensive copays.

Out of Pocket Costs Concerning
A survey of 8,000 adults by the Commonwealth Fund revealed insurance does not provide enough financial protection against rising healthcare costs.

43% of those surveyed were inadequately covered and 9% had no coverage. 29% of those with employer sponsored insurance and 43% of those with individual insurance were underinsured because of high out-of-pocket expenses like deductibles and copays. Underinsured is defined as spending more than 10% of your income on out-of-pocket costs. 50% of those surveyed said they could not pay an unexpected medical bill of $1,000 within 30 days. Pollsters West Health Gallup asked 5,000 adults to grade US healthcare for affordability, equity, accessibility, and quality. 44% of respondents graded US healthcare “F” and 33% graded it “D.” Only 22% of those taking the poll rated US healthcare either “A” or “B.”

Virtual Care Offering

Virtual care was growing VERY slowly in the several years prior to the pandemic.

The technology was there, but the acceptance by both providers and consumers was not.

The pandemic caused virtual care, by necessity, to rapidly proliferate. It is now widely accepted by insurers, providers and consumers and it is integral to healthcare access and delivery.

The Massachusetts Blues have teamed up with the Carbon and Firefly healthcare systems to offer their members virtual primary and mental health care by early 2023. The Blues are touting better outcomes, easier access, lower costs, less anxiety and improved outcomes. There will be no copays. You will be able to access your provider via laptop, desktop or phone. In addition to no commuting, waiting times will be minimal. There will be wellness coaching and support and specialists will be engaged, as necessary. The Blues will also provide free medical devices, such as blood pressure monitoring, to its members. United Healthcare, Aetna and Cigna are all considering similar products.

George W. Chapman

George W. Chapman is a healthcare business consultant who works exclusively with physicians, hospitals and healthcare organizations. He operates GW Chapman Consulting based in Syracuse. Email him at gwc@gwchapmanconsulting.com