The health plans to be marketed in the California insurance exchange, established under President Barack Obama’s health reform law, will follow the lead of Medicare and a growing number of commercial insurers by charging co-insurance payments ranging from 10 to 30 percent on a number of high-cost “specialty” drugs. These include medications for treating rheumatoid arthritis, multiple sclerosis, hepatitis C, breast cancer, leukemia and other conditions.
Advocates for the sick are unhappy that Covered California has decided to adopt this model, which imposes much higher costs on many patients than more traditional policies that offer the drugs for a flat co-payment.
“It’s disappointing that the state is in a way institutionalizing what we believe is a practice that harms those who are in the greatest medical need,” says Lisa Nelson, director of state government affairs for the Leukemia and Lymphoma Society.
Whether sick patients would be financially worse off in the exchange depends on their current insurance coverage — and on which of the four basic exchange plans they choose, since each has different premiums, co-insurance levels and annual caps on patient out-of-pocket spending.
Covered California’s spokesman, Dana Howard, said the exchange officials had to balance several important factors, and in the end they believed the decisions they made were “the most feasible way to provide health plans that are affordable both in terms of premiums and cost sharing.” He noted that lower-income people, who would be most affected by the high drug costs, are also the ones who will benefit the most from subsidies intended to reduce their premiums and out-of-pocket costs.
Sonja Radovic, a 45-year-old working mother of two who was diagnosed with breast cancer five years ago, would not qualify for any of those subsidies. She said her expense for Feraston, a hormonal drug, could skyrocket by as much as 10 times should she ever need to buy coverage through the exchange — from the current $860 a year to $8,600 under the plan with the lowest premium.
She is confident that her employer, a small business with 11 employees, will keep its current coverage, though that could conceivably change should the economy sour again. “What part of ‘Affordable’ are they not understanding?” Radovic asks. “And that’s just on one drug. What about other even more expensive specialty drugs?”
Feraston is far from the most expensive medication. The average cost of treating a variety of cancers with one of five specialty drugs is $3,682 per month, or $44,184 a year, according to Express Scripts, the giant St. Louis-based pharmacy benefit-management company. For multiple sclerosis, the average cost is $3,584 per month, and for hepatitis C the monthly price tag is $3,284.
Kalydeco, the only effective therapy for cystic fibrosis, can carry a price tag of up to $180,000 per year, says Suzanne J. Tschida, a vice president at Optum RX, a Minnesota-based pharmacy benefit-management company whose main operations are in Irvine.
In 2012, specialty drugs accounted for 24.5 percent of all U.S. prescription drug spending, even though less than 2 percent of the population is affected by the related illnesses, according to Express Scripts.
Still, if you are one of the unlucky 2 percent and you’re paying 20 or 30 percent of even the somewhat-less-stratospherically-priced drugs, it could quickly overwhelm your household budget. For plans in Covered California, the amount patients must pay out of their own pockets each year before their insurers will cover 100 percent of their medical expenses is as high as $6,350 for individual plans and $12,700 for family plans.
“I think it shows that these benefits designs essentially discriminate against people who have these serious illnesses,” says Dan Mendelson, CEO of Avalere Health Inc., a Washington, D.C.-based medical data company.
An Avalere study showed that when monthly out-of-pocket payments hit $100, 10 percent of patients stopped filling their prescriptions. At $500 a month, 25 percent stopped. That can lead to sicker patients and an even greater financial burden on the health care system down the line, many observers argue.
Not everybody buying coverage in the exchange will be affected equally. In Covered California’s second least-expensive plan, individuals with incomes between $15,856 and $22,980 will face much lower co-insurance payments, reduced or no deductibles and an out-of-pocket maximum of just $2,250. Howard acknowledges that it might still be “a strain” for those people to cope with their medical expenses, but “we think this $2,250 annual limit on their payments will help many avoid bankruptcy.”
Mendelson notes that Covered California did not invent this type of health-plan design. It is merely following a trend that started with Medicare’s Part D drug benefit and has been adopted in recent years by many commercial insurers. The proportion of private commercial plans that make enrollees pay a percentage of specialty drug costs rather than a flat dollar co-payment rose from 14 percent in 2008 to 34 percent last year, according to Avalere.
“In some ways, the implementation (of such plans) by the exchange makes the affordability of specialty drugs a more visible problem, but it’s not introducing a new problem for the people who need these drugs,” says Ha Tu, a senior researcher at the Center for Studying Health System Change, a Washington, D.C.-based think tank.
Joan W. Clements, a 70-year-old Costa Mesa resident who was diagnosed with chronic myeloid leukemia nearly 12 years ago, knows that as well as anybody. She has been kept alive for more than a decade by Gleevec, a revolutionary drug that has turned her disease from fatal to manageable. Over the past decade, Clements has seen the total cost of her Gleevec nearly double, from $6,000 to $11,000 a month.
With a 30 percent co-insurance payment under her Medicare drug plan, and a gap in coverage known as the “donut hole,” Clements’ out-of-pocket payments for the drug would be unaffordable on the modest Social Security income that she and her husband, Jerry, receive each month. Luckily for her, Novartis, which manufactures Gleevec, provides a subsidy to cover the amount that Medicare doesn’t. Otherwise, says Clements, “I would be dead.”
Nelson, of the Leukemia and Lymphoma Society, says California could have chosen differently. She notes that the insurance exchange in New York limits patient liability on specialty drugs to a flat dollar co-payment that tops out at $70 per prescription.
Tu argues that such a generous benefit will lead to a spike in premiums that will deter the young and the healthy from buying insurance and create an ever-sicker pool of insured people whose medical needs will only reinforce the escalating cost of insurance. In California, that is unlikely to happen, she says, though the high co-insurance payments are “a horrible thing for people who are sick.”
Why some drugs cost so much…
By 2019 or 2020, specialty medications are expected to account for half of all drug spending. Managing their fast-rising costs is key to keeping health insurance premiums affordable for all.
Sources: Express Scripts; Ha Tu, Center for Studying Health System Change; Avalere Health Inc.
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