Selling Unicorns: Focusing on "Who Pays" Crowds Out the More Important Discussions

APRIL 18, 2017
TROY TRYGSTAD, PHARMD, PHD, MBA, PHARMACY TIMES® EDITOR-IN-CHIEF
THE PROBLEM: WE ARE ENTERING AN ERA OF HEALTH CARE VERSUS BUTTER
Guns verses butter is a popular Economics 101 concept that holds that there is an important balance between investment in the war front and investment in the home front to win a war. Too many guns and the result is not enough food (or economic engine) to fund the war effort. Too much food and, well... nobody wants to go to war without guns.

We are now entering an era of health care versus butter in which we are rapidly approaching the point where health care spend (at 18% of the gross domestic product and rising) is crowding out the rest of our economy and we are having to increasingly choose between the two as our preglobalization, post-WWII “walking around money” dries up and deficits soar. Every state legislature is trying to figure out how to pay teachers and simultaneously fund Medicaid. Every town has citizens who have to choose between food/clothing/shelter/transportation and health care bills. Absent a miracle, the debate over financing our health care system will only intensify as hard choices between spending on health care versus everything else become ever more prevalent.

THE NEVER-ENDING ARGUMENT: WHO SHOULD PAY FOR HEALTH CARE?
or more than a half-century now, we’ve been debating who should pay for health care: patients, consumers, employers, taxpayers, or charities? Left-right-center, socialists, and libertarians can all make reasonable arguments for or against various ideologically informed policies to decide who pays for health care delivery. Arguments about fairness and compatibility with markets are all right and good, but they miss the larger threat to our economic well-being: the cost of delivering health care. We’ve spent too much time arguing over who pays for health care and very little on why we overpay for it.

SELLING UNICORNS: IT IS A DISSERVICE TO THE AMERICAN PEOPLE TO FOCUS EXCLUSIVELY ON WHO PAYS FOR HEALTH CARE
As an interested observer of health economics, my goal here is not to side with a particular ideology, but rather to point out that deciding who pays will not entirely fix how much we pay or the value we get in return for what we pay. As a result, we see a lot of “who pays unicorns” being sold as cure-all remedies to unsustainable spend.

Unicorn #1: We can subsidize our way out of increasing expenditures.
This Unicorn proposes that the solution to making health care more affordable to the average citizen is to decrease the burden of health insurance through subsidizing premiums. Whether a voucher, a tax credit, or a benefit from an employer or a state, our system is rife with subsidies to bring down out-ofpocket costs—although the opposite is often the result. If an automobile’s manufacturer’s suggested retail price is $20,000 and everyone gets a $15,000 coupon to go buy a car, what do you suppose happens to the price of that car? It goes up with little or no improvement in the car itself since the consumer is less price sensitive. Subsidizing premiums simply relieves pressure to demand cost-effective care delivery from the system.

Unicorn #2: We can impose price sensitivity without consequence or pain.
The counter strategy to subsidies that decrease price sensitivity is financing vehicles, such as flexible spending accounts and health savings accounts that attempt to encourage efficient markets andpurchasing behavior. Well, there are 2 problems with these: first, health care expenditure growth is outpacing income growth. Health care insurance premiums for the average family rose to $18,142 in 2016. Yet, the US median household income in 2015 was only $55,775. That’s nearly a third of a family’s yearly income allocated to insurance, absent government or employer support, and that’s before out-of-pocket spend for what the plan doesn’t cover. If household income continues to rise more slowly than health care prices, good luck selling voters on higher out-of-pocket spending as the solution. Consumers are already maxed out. The second problem relates to smart spend on care. Price sensitivity may lead to poor investments in prevention and wellness. What if we are all inclined to spend less on things that make us healthy and more on things after we get sick (thus spending more in the long run)?

Unicorn #3: You can prevent discrimination based on preexisting conditions without spreading that risk to the healthy.
This defies simple math. If an individual’s risk represents $100,000 per year and 9 others represent $10,000 per year, the $100,000-peryear individual can’t be in the same risk pool without spreading the expense to the other 9. High-risk pools are no different than other types of plans, except that high-risk pools spread the risk to taxpayers instead of premium holders in the same plan. Both suffer the same fundamental problem: really sick people need expensive care, and there is no way around it.

Unicorn #4: Everyone can access (and receive) needed health care without the transfer of income or wealth.
Ah yes, the biggest unicorn of them all. If a liver transplant costs $500,000 (remember from above, the median US household income is $55,775 per year) or if an individual’s premium is $100,000 per year (because of liver disease), does he/she really have access?

Pooling risk is at the heart of the construct of insurance. If everyone is to maintain the ability to access needed health care, we can pool risk either at the nation-state level or at the group level (and require everyone to join a group). Either way, those who are healthier or wealthier foot a greater part of the bill. There is no third door.

SELLING SUSTAINABILITY: WE NEED TO FIGURE OUT HOW TO PAY FOR HEALTH CARE IN A MANNER THAT PRODUCES VALUE
Who pays for health care deserves a robust debate, including a discussion of value per dollar spent. Regardless of ideology, we must endeavor to do the following:
• Supply care at a lower cost per unit (incentivize efficiency)
• Decrease demand for low-return care (reduce cost centers)
• Increase demand for high-return care (increase investments)

This will likely require a mix of patient responsibility, provider accountability, and community-based solutions. Partisans need to rally around value-reinforcing policy ideas from all corners of the political spectrum.

THE DISPENSING PHARMACY PARADOX: WE’VE HIT ROCK BOTTOM ON UNIT COST
Unlike other sectors of health care that continue to thrive without much attention to cost, pharmacy has already felt the downward pressures of cost-containment. The buy–sell percentage spread and dispensing fee continue to decrease with each passing year and is nearing rock-bottom. Rather than focus on the value of what pharmaceuticals can bring to a population’s health (and ancillary support services needed to optimize their use), payers and policymakers often put pharmacy first on the chopping block and largely ignore the other 80% to 90% of health care spend that produces little value.

THE OPPORTUNITY: MEDICATION OPTIMIZATION SERVICES AS AN INVESTMENT WITH HIGH RETURN
We spend roughly $300 billion on outpatient pharmacy and almost nothing on optimizing the use of those drugs to increase health. A value-based delivery system is not possible without the provision of medication optimization services and supports. The “who pays” debate continues to crowd out the “how we pay” discussion, driving pharmacy practice closer to commodity status as the only sector called upon to reduce costs.

Reimbursement based on outcomes rather than units should reverse the trend of commoditizing pharmacy and finally subject other sectors of health care to the downward pressures on cost that pharmacy has alone endured for the greater part of 3 decades. Any health reform discussion that focuses exclusively on who pays for health care, without consideration for how we pay for it, will crowd out the value discussion and leave pharmacists at the wayside.
 

REFERENCES
1. Health insurance: premiums and increases. National Conference of State Legislatures website. ncsl.org/research/health/health-insurance-premiums.aspx. Published November 15, 2016. Accessed February 16, 2017.
2. Household income: 2015. US Census Bureau website. census.gov/content/dam/ Census/library/publications/2016/demo/acsbr15-02.pdf. Published September 2016. Accessed February 16, 2017.

SHARE THIS SHARE THIS
0

Treatment of Melanoma 

In this Pharmacy Times program for Health Systems Pharmacists, Nanaz Amini, PharmD, RPh, MS, of the Angles Clinic, provides a pharmacist’s perspective on the management of melanoma.  


Pharmacy Times Strategic Alliance
 

Pharmacist Education
Clinical features with downloadable PDFs


Next-Generation Pharmacist® Awards


3rd Annual Convenient Healthcare and Pharmacy Collaborative Conference


SIGN UP FOR THE PHARMACY TIMES NEWSLETTER
Personalize the information you receive by selecting targeted content and special offers.