Today’s post is about an obscure policy shift that harms the sick and the poor, and it starts with one of the most hated parts of health insurance: The deductible.
Deductibles are supposed to control healthcare spending by discouraging people from seeking unnecessary healthcare. (I know, I know; healthcare economics is full of shit like this.) See this post from the libertarian Cato Institute in 2010, making the case for high deductibles:
Take just one example. If everyone were to receive a CT brain scan every year as part of their annual physical, we would undoubtedly discover a small number of brain cancers much earlier than we otherwise would, perhaps early enough to save the patient’s life.
But given the cost of such a scan, adding it to everyone’s annual physical would quickly bankrupt the nation. But, if they are spending their own money, consumers will make their own rationing decisions based on price and value. That CT scan that looked so desirable when someone else was paying, may not be so desirable if you have to pay for it yourself. The consumer himself becomes the one who says no.
The argument is essentially that without high deductibles, people will be hitting up their doctors for expensive CT scans and fun surgeries willy-nilly. Rather than trying to control healthcare spending in America by, say, setting prices or discouraging providers from recommending unnecessary procedures, deductibles aim to control it by making it expensive to get (most) healthcare.
Here’s the obvious problem: Even if you accept the horrible logic of inflicting financial pain on individuals to fix much broader and more complicated healthcare spending problems, deductibles are an incredibly blunt instrument for preventing people from using ‘too much’ healthcare. They prevent people from accessing healthcare whether that care is necessary or not; whether it’s a cheeky CT scan or a life-saving drug.
The problem in American healthcare is not just too much spending overall. It’s too much money being spent on some people and not enough on others, as well as a lack of availability of the actually appropriate kinds of care. (For example, emergency room care is very expensive, but going to the ER is the only way some people receive care at all, because they’re uninsured and destitute. For these people, the problem isn’t that they’re getting ‘too much’ healthcare; it’s that they’re getting a lot of the wrong, expensive kind of healthcare, and none of the cheaper, appropriate kind they need.) It’s a little bit like using a machete when we need a scalpel, but it’s also just entirely the wrong kind of tool for the job, aimed at entirely the wrong target; it’s more like using a gun to change the TV channel.
I’ve written a little bit before about the ridiculous stuff that economists said about healthcare during the early years of the Affordable Care Act, like that penalizing people who don’t buy health insurance would prevent uninsured people from gobbling up care on everyone else’s dime by making them buy insurance instead. (It did not do that and also what are you talking about, have you heard of a hospital bill, etc.) The same assumptions show up in that Cato post from 2010: that the people who need to be controlled with high deductibles are people with generous insurance plans who are consuming healthcare like they’re interns gobbling up the free lunch at a think tank panel. That patients are consumers who are making bad purchases, not people who want to stay alive.
The trouble is that, after 11 years and a huge increase in deductibles, we know that isn’t the case. People with high deductibles are more likely to be low-income, and they use less preventative primary care—perhaps because it costs money to go there, and if they had more money, they’d buy a better plan that didn’t have a deductible. They’re also more likely to have chronic health conditions, which require good health insurance to control adequately.
Which brings us to today’s interview. Nick Miller was diagnosed last year with multiple sclerosis (MS), and was prescribed glatiramer acetate, the generic form of Copaxone. This drug costs $2300 a month. Like many expensive drugs, the manufacturer, Mylan, has a co-pay assistance program. These are common, particularly for new, expensive specialty drugs. Under these programs, the manufacturer subsidizes the cost to patients of getting the medication, which encourages doctors to prescribe it and makes it easier for patients to get them.
On a broad policy level, there are a few problems here. First, the existence of these programs deflects from the fact that the drug companies are the ones setting the high prices for their products in the first place. High prices increase the cost of healthcare for everyone in the end. Critics (insurers, mostly) also say it encourages doctors to prescribe expensive new brand medications, knowing that the drug company itself will pick up the tab, instead of cheaper alternatives that are just as effective.
Or, does it? Insurers absolutely love to talk about encouraging patients to use Cheaper Equivalent Alternatives for drugs—even when those drugs are not actually equivalent. Often, insurance plans will even require you to try cheaper alternatives before covering the more expensive brand names, a process called step therapy. Nick’s plan requires him do that, which is why he’s on the cheaper generic. Sometimes that process harms patients, who get sicker while they’re trying the worse drug. It happened to me in the UK: The Conservative government brought in new step therapy requirements, meaning I had to try generic sumatriptan nasal spray before I was allowed to get the medicine I had been taking for years, Zomig, for migraines. (The difference there is that I tried sumatriptan once, threw up immediately, then rang up my doctor and told them that, so they just prescribed me the Zomig. There was no insurance company to convince or waiting period.)
Still, payers get very mad about these co-pay assistance programs. Under the Trump administration, they won this argument: CMS issued a rule permitting insurance plans not to count the value of that assistance towards a patient’s deductible. That means if a copay assistance program is paying thousands a month for your drug, the insurer can still make you pay for the full cost of the drug after that assistance is exhausted, as if the co-pay program hadn’t paid them anything, until you hit your deductible. (51% of US workers are enrolled in high deductible health plans.)
That was the situation for Nick, who has a $6000 deductible. His insurance plan covers none of the cost of medication until he hits that, and then 50% of the cost until he hits his out-of-pocket maximum of $8500. Before the rule, Nick’s out-of-pocket maximum would be entirely met by the co-pay assistance program’s $9000 max (which would also eliminate his responsibility for his doctor’s visits and other medical needs). Not anymore. After he runs out of the co-pay assistance, which happens after just a few months of filling $2300 prescriptions, Nick has to shell out more than my apartment’s rent each month to get his drug, until he’s paid up all $8500. This policy change costs Nick and patients like him thousands of dollars per year; it means that just having MS means he needs to have an extra $8500 a year lying around. Nick was lucky that he could afford that outrageous cost for a couple months, and then his boss covered the cost of the drug. The same wouldn’t be true for most other patients, nor is it necessarily true for the rest of Nick’s life. What happens if he loses that job?
The ostensible justification for this rule change is to encourage doctors to prescribe cheaper alternatives. But Nick is already on the “cheaper alternative,” the generic glatiramer acetate. That drug was priced just 15% lower than the brand Copaxone when it hit the market. Researchers at Oregon Health & Science University found the “pretty minimal impact” of glatiramer entering the market on prices for these drugs; instead of a reduction, the price for the brand name drug actually increased by $441. Copaxone is much more expensive than the generic, at more than $7,000 after GoodRx coupons, but Nick is still on the cheapest drug available, and it’s still unaffordable. So how is this supposed to encourage anyone to do anything differently—unless what they really want is for Nick to stop taking meds at all?
If patients like Nick had hoped that a change in administration might lead to a reversal of the Trump rule, they got disappointing news this April: The Biden administration declined to include any change in the policy in its benefit and payment parameters rule for 2022, leading to criticism from patient advocacy groups like the HIV + Hep Policy Institute. (These patient advocacy groups are often funded by the pharmaceutical industry; this particular group’s treasurer works for Gilead, one of the largest pharmaceutical companies.) In fact, in its rule, Biden’s CMS actively “encourage[d]” insurers to consider not letting copay assistance count towards a deductible (emphasis mine):
recognizing the market distortion effects related to direct drug manufacturer support amounts when consumers select a higher-cost brand name drug over an equally effective, medically appropriate generic drug and as part of our efforts to combat the high and rising out-of-pocket costs for prescription drugs, we encourage issuers and group health plans to consider the flexibility to exclude these amounts from the annual limitation on cost sharing as one tool that could be used to address these concerns.
Note the language: “Consumers select” a higher-cost drug, like they’re buying Tide instead of Target detergent, not being prescribed medicine for life-threatening conditions by their doctors. The Cato Institute would be proud.
Co-pay assistance programs are, of course, a broken way to address a very fucked-up system. The responsibility for high drug prices is squarely with pharmaceutical companies, and they’re not heroes for subsidizing the cost as a marketing gambit that also increases their market share. The right way to address the problem would include abolishing insurance companies and nationalizing drug production, or at least setting prices for drugs. But we don’t do things the right way here. Instead, like so many healthcare cost problems, patients are the victims of a battle between much bigger players. Just as hospitals and insurance companies bicker over who’s grifting whom in the surprise billing war, leading to patients getting screwed, here we have insurers and employers sticking huge medication costs on patients in the name of lowering healthcare costs. (If that’s true, why is my insurance premium still so damn expensive?)
But maybe that’s why this happened. Patients, especially poor ones with high-deductible plans, are easy to victimize. It’s easier politically to do something that harms ordinary people than it is to take on the pharmaceutical industry or health insurers. Poor, chronically ill patients won’t fund ads against you or withdraw campaign donations. If you’re lucky, they’ll vote for you anyway, given the alternative; or they might just die, and think of all the money that saves.
This interview has been edited and condensed.
Nick: Last summer I started having numbness in in my legs, a weakness in my leg. And I saw the neurologist, they sent me to the ER to get an MRI in December. The MRI and the spinal tap they did diagnosed me with MS. My symptoms are not too bad, they've actually gone away quite a bit now, so I'm feeling pretty good right now and I'm on the medicine, so that is good. They put me on the Copaxone, or the generic version. It's the weakest version that they have, basically—for the insurance you have to do the step therapy to get to the higher version. I'm not going to need the higher version yet, I guess, because I'm doing so well. I'm living with it pretty well — I'm kind of lucky that they caught it early.
The first symptom that now I realize was MS was I had a weakness in my leg. And I thought it was a knee injury that I had, but then the first neurologic symptoms was I had numbness, my feet were asleep. And then it crept up to my stomach too, so I went to the neurologist for that and he told me, you need go to the emergency room now so that we can get you an MRI as soon as possible.
Sick Note: That must have been quite scary.
Nick: And it was during COVID, all that stuff.
Sick Note: How much are you paying for this drug that you're on right now?
Nick: It's $2300 a month. It's three injections a week, so for 12 vials, it's $2300. And this is the generic version of the weakest drug. It's the only one that that's been around long enough to even have a generic version, and it's $2300 a month. It's insane.
Sick Note: And so you said you have insurance, but you just haven't met your deductible yet?
Nick: I have met it now.
Sick Note: After the deductible, how much is it?
Nick: After the deductible, they'll cover 50% of it until I reach my out of pocket maximum. My deductible is $6000 and my out of pocket is $8500. So basically, yeah, $8500 bucks a year, then I finally meet my deductible and then it's free. I'm lucky, my boss actually offered to pay my out-of-pocket.
Sick Note: Oh, that's nice. What do you do for work?
Nick: I'm a software developer.
Sick Note: Has your boss been paying the whole time? Or were you just shelling out $2300 a month for this?
Nick: I shelled out for a little bit, and then he just mailed me a check for the whole thing.
Sick Note: And so just to clarify, you pay $2300, that's the entire amount, until you meet your deductible?
Nick: Yeah, because it's a specialty, higher tier medication. So they don't cover any copay on it until you reach your deductible.
Sick Note: And so you get you get this insurance through your work?
Nick: We don't have insurance at work. I just have it through the healthcare marketplace. We're just a small software company. Just me and my boss, really.
Sick Note: Do you know what kind of plan you're on?
Nick: I can't remember. It's Blue Cross Blue Shield, Blue Advantage HMO. It's definitely the lower one. I mean, I've never had any health problems. And so I just didn't really try to get good insurance.
Sick Note: Right. And when did you sign up for this particular plan? Was it after the diagnosis?
Nick: I've had the same plan the whole time. I was in the hospital when I renewed the plan. I literally got the diagnosis on the day that I could have changed it if I wanted to, and I didn't.
Sick Note: Well, I mean, you had a lot to think about. Do you think when open enrollment comes around next time, you might pay more for a better plan?
Nick: Definitely, because I'd love to be able to potentially get on a different medication, too. I think the more modern thinking for MS is to try to get you on the highest efficacy drug immediately, or as soon as possible. Because... Why not? Wait until you can't see?
Sick Note: If you weren't on this drug—if your boss hadn't paid for it, you couldn't afford it, or whatever—what would happen, symptoms-wise?
Nick: Well, it's hard to say. I mean, they don't really know. It's relapsing-remitting, I could go years without having any new symptoms. You never know.
Sick Note: But it's kind of a gamble.
Nick: Yeah. Definitely don't want to take that gamble.
Sick Note: You first reached out to me about the drug companies’ [co-pay] programs.
Nick: So the drug manufacturer, Mylan, they give you basically $9,000 to go towards paying [for the drug] every year. And if your insurance is good enough, to where they're actually paying a copay before you reach your deductible, that $9,000 could potentially cover the whole [cost], you could pay $0. But since my insurance is bad, it doesn't pay until I reach my deductible. The whole problem is that the assistance doesn't go towards your deductible. So it's useless, it's completely useless. I mean, I got it free for a few months, and then I started having to pay, but none of it went towards the deductible.
It doesn't make any sense. I thought it had always been like that, but I watched that Majority Report YouTube show. And a caller called in and mentioned that they had HIV and they mentioned that their assistance program stopped going towards their deductible, a couple years ago. I looked it up and I realized that Trump changed that policy, which I don't even understand why. Why would you change that?