Thursday, June 11, 2009

A good day

Today was a good day because I enjoy having my opinions vindicated.

First, the New York Times reported that the American Medical Association opposes the inclusion of a public option in the reformed health care system. Common sense at last. The public option as envisioned by Sen. Kennedy would eclipse the private health insurance market and impose low Medicare level pricing on providers who ultimately would have nowhere to shift their losses. As Prof. Uwe Reinhardt noted, every dollar of healthcare expense is a dollar of someone's income. The AMA later issued a press release that "The AMA opposes any public plan that forces physicians to participate, expands the fiscally-challenged Medicare program or pays Medicare rates, but the AMA is willing to consider other variations of a public plan that are currently under discussion in Congress."

The Wall Street Journal also reported that debate is not limited to the public option. Controversy has arisen over the health insurance exchange feature, which has been proposed by everyone because the devil is in the details. As noted in the article
Health insurers, seeking to protect the market for employer-sponsored plans,
argue that if subsidies are available only for standardized plans on offer in
the new exchange, then more people might leave their company health plans. For
instance, a provision in the bill proposed this week by Sen. Edward Kennedy (D.,
Mass.) would make exchange plans available to employees if their employer
doesn't offer coverage deemed affordable.
This opt-out concept could affect the FEHB Program which offers employees a wide range of plans with varied benefit designs and pricing.

Second, I have considered the First Databank average wholesale price fixing class action settlement coming out of the federal court in Boston to be a complete waste of effort. The judge order a prospective roll back of prescription drug prices, and the prescription drug manufacturers and pharmacies are furiously working to offset the roll back. The Wall Street Journal today raised questions about the value of the settlement to consumers. The report notes that

Prices of drugs are determined by a host of middlemen. Pharmacy-benefit
managers, which pay pharmacies on behalf of employers and insurers, are
typically paid for their services based on the AWP benchmark. And PBMs also use
the benchmark to figure out what they pay pharmacies.

It is unclear to what extent PBMs, once they became aware that the benchmark had allegedly been fraudulently inflated, compensated by reducing the amount they were paying pharmacies.

Meanwhile, pharmacies say that a rise in the benchmark wasn't their fault and that they can't afford further reductions in their margins. They are
negotiating with insurers to keep their pay constant, regardless of whether the
benchmark is rolled back.

And the beat goes on. The parties who objected to the First Databank settlement have filed an expedited appeal with the U.S. Court of Appeals for the First Circuit.

There also is a related class action settlement with McKesson involving a $350 million settlement fund which is OK in my book, although as the Journal points out it may be difficult for consumers to recover. The court will consider the fairness of that settlement on July 23.

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