Legislating Drug Prices

Loyal readers of my blog (both this one and my prior blog for St. Luke’s Health System) know that I try very hard to present health care issues fairly, objectively and from a non-partisan viewpoint. I try to outline both sides to these issues, state the pros and cons, and write my analysis in a way that non-medical people can understand and make their own judgment. However, at the end of these pieces, I also state where I come down on the issue, because some readers want to know. But, I am very careful to be clear when I am presenting facts and when I am presenting opinion.

I don’t know if I can do it this time. I won’t have any problem being objective about the specific proposals. Frankly, while I do think one is better than the others, if I were asked to solve the drug pricing problem (and I haven’t, but Mr. President, you know how to reach me), I would propose a completely different scheme.

The problem that I will have is in not rolling my eyes and making faces at some of the utterly ridiculous things being said as reasons some legislators do not want to support any regulation of drug prices. So, I am going to give it a try, but my apologies in advance.

Well, I am going to fail right off the start. I have to editorialize about the crazy drug pricing methodology that is being embraced by drug manufacturers and academicians. There is no need to get into all the complexity to explain the problem of it. Let’s just understand that this new and prevailing drug pricing philosophy is that the drug price should be tied to the number of Quality Adjusted Life Years (QALY). This measurement accounts for both the quality and quantity of life added by a treatment. If a treatment were to cure a disabling disease that generally took the lives of children, but those treated children would now lead normal lives with normal adult life expectancies, then the QALY would be very high. The QALY is then multiplied by a value of a year of added life and the number can be quite high, which explains why we now have medications on the market with six and seven figure price tags, including one for which a course of treatment costs more than $2 million.

Now, at first blush, you might think that a drug that cures a bad disease and allows a child to live a normal life expectancy should be priced high. But, the absurdity comes in when you apply this same pricing philosophy to anything other than drug prices. For example, if a child has a perforated appendix and is not operated on, a certain number of those children will die. Does that mean an appendectomy should be priced at millions of dollars? Heat and electricity can be life-saving to a child during the winter. Should our power bills be in the hundreds of thousands of dollars? What about water? Winter coats or blankets? In all other industries, the price for products and services has some correlation to cost. The reason drug manufacturers can think about pricing drugs in the hundreds of thousands or millions of dollars? Health insurance.

Now, if I did not convince you that pricing drugs (or anything else for that matter) based on QALYs is crazy, then consider this. Asking two questions has helped me immensely in setting out compensation methodologies, health care policy positions and making many other decisions. What incentives am I creating, and are they aligned to my objectives? Knowing the rules, how will people do end-runs around it to maximize their position to my detriment?

In this case, let’s just think about the first question. What incentives does this pricing methodology create? It incentivizes drug makers to place their investments in diseases of children that limit their life expectancy, because then the QALY can be quite high. Now, that is a good and worthwhile incentive. Nothing has broken my heart more than children who die of various diseases. But, let’s look at the second part of that first question – are those incentives aligned with our objectives? I want cures for children, but I would also like research into and development of cures for dreadful diseases like Alzheimer’s. If a huge part of the drug price is the number of years of additional survival, how much effort is going to go into developing a treatment for Alzheimer’s disease when the average age at diagnosis is 80? Additionally, we are facing a problem right now of drug makers not investing in antibiotics, at a time when we are seeing infections emerge whose causative organism is resistant to all or most all currently available antibiotics.

Okay. Enough editorializing for the moment. Let’s look at some of the current proposals.

Not surprisingly, Republicans and Democrats have very different approaches to this problem. The one approach that has general agreement is to cap seniors’ out-of-pocket spending under Medicare drug plans[1]. Currently, there is no limit on how much a senior might be required to pay for medications pursuant to co-pays and co-insurance. This is very important because surveys suggest that nearly 1 in 4 seniors struggle to pay for medications, and that due to costs, about 29 percent do not take their medications as directed, not filling prescriptions, skipping doses, cutting medication doses to spread their medication out more, or substituting their medication for something else over-the-counter.

Limiting seniors’ medication costs and ensuring that seniors take their medications as prescribed serves a very important policy objective. Given that medications are the mainstay of therapy to control congestive heart failure, diabetes, high blood pressure, asthma and many other conditions that if not controlled result in a high rate of hospital admissions, subsidizing the cost of these medications is far more economical than paying the much higher costs of hospitalization.

The House bill (Democratic)[2] would require the Medicare program to negotiate the prices of at least 35, but up to 250, prescription drugs a year[3] and cap the prices Medicare would pay for those drugs based on the prices paid in other countries[4]. The price negotiated by Medicare would also be available to commercial insurers, and drug-makers who declined to agree to a negotiated price would be subject to an excise tax of up to 95 percent of the gross sales of the medication. President Trump, early on, had given his support for this kind of approach pointing out that Americans were subsidizing the costs of drug development for the world. More recently, he has indicated that he would not support this bill. Given that Leader McConnell refuses to have hearings or a vote on this bill, it is DOA to the Senate.

The other significant bill on drug pricing comes out of the Senate Finance Committee[5] and is championed by Sens. Grassley (R-IA) and Wyden (D-OR). This bill would penalize drug-makers that raise their prices faster than the rate of inflation. As a point of reference, the current inflation rate is around 2 percent, and drug-makers typically announce drug price increases twice a year, with the first being in January and those price increases for 2020 averaged around 6 percent (Pfizer increased prices on 40 drugs by more than 9 percent). Unfortunately, there are only about ten Republicans in the Senate who have signed on to this bill and Sen. McConnell has thus far refused to put the bill before the Senate for consideration.

Okay. Prepare yourself. I am going to begin editorializing again. Republicans have objected to “price controls” and interference with a free market as reasons, including allowing the Medicare program to negotiate prices of drugs it pays for, not to support either bill. There is just one problem – the pharmaceutical industry is not a free market[6]. It is also ironic that while many have objected to price controls being applied to drug pricing, they have supported price controls in the context of surprise billing (that’s a whole other story).

In any other industry, when the government intentionally creates a monopoly or establishes a single provider of a service (much as it does with pharmaceutical companies when it grants them exclusivity through a prolonged period of patent protection), the government also imposes regulated rates. With the tremendous lobbying power of the pharmaceutical industry, Congress has refused to impose any rate regulation. Congress is even balking at limiting pharmaceutical companies from raising the price of drugs in excess of inflation. Instead, a number of pharmaceutical companies came out and stated that they would limit price increases to no more than 10 percent – that is five times the current inflation rate. And, these are drugs for which there is no substitute or competitor.

Now, the other more incredulous argument is that we cannot allow Medicare to negotiate drug prices because we must preserve a free market. I will admit right away that I am not an economist. But, isn’t negotiation the very hallmark of a free market? As far as I know, the sales of cars and houses occur in a free market. Would these legislators seriously want us to believe that they would just go in and offer the sticker price on a car or the listing price on a home (okay, maybe they would have to in Boise) without any negotiation?

I just wish we could have serious policy debates and negotiations in Congress. I would respect legislators who would just be honest about their opposition to these bills, rather than proposing a ludicrous rationale or insulting the intelligence of voters. If you want to argue that supporting these bills would inhibit development of new drugs, then we can have a rational debate about that. If you want to argue pharmaceutical companies are a powerful driver of our economy and we don’t want to do anything to hurt their earnings or their stock prices, okay then; lets discuss that. If you even just want to be honest and say that it is expensive to run campaigns and therefore you are dependent upon pharmaceutical company financial support, or alternatively, your re-election prospects would be hurt by negative ads sponsored by pharmaceutical drug companies against you if you did not support them; at least your honesty would be refreshing. But, when you say silly things like we have to protect the free market for medications, then we just don’t know whether you are clueless or whether you think we are.

In my next blog post, we’ll consider another proposal to control drug prices that is unlikely, in my opinion, to work – drug importation from other countries.

[1] The cap would be $2,000 under the House bill and $3,100 under the Senate Finance bill. To give you an idea of the problem being addressed, more than 1 million Medicare beneficiaries cross the catastrophic threshold for prescription drug costs every year, which in 2019 was $5,100 in out-of-pocket costs.

[2] The Lower Drug Costs Now Act of 2019 (H.R. 3).

[3] Under current law, the government is actually forbidden by legislation passed in 2003 from negotiating the prices of medications for the Medicare program.

[4] To be eligible for negotiation the medication would have to meet criteria of being costly and not having a competing generic version. In addition, insulin is specifically excluded from eligibility for negotiation. The countries whose drug prices would be averaged to set the benchmark would be Australia, Canada, France, Germany, Japan and the United Kingdom.

[5] S 2543. The Prescription Drug Pricing Reduction Act of 2019.

[6] Evidenced by federally-granted periods of exclusivity and patent protections that can last a number of years to 20 or more years and the statutory prohibition on the federal government against negotiating prices of medications for the Medicare program and on states for negotiating the prices of medications for the Medicaid program.

Public Option – The Trojan Horse of Healthcare Reform

The Trojan Horse

The political system is designed to bring disparate views toward middle ground. The healthcare proposals by Democrats and Republicans – “Medicare for all” and short-term and association health plans, respectively– that I referred to in last week’s blog post, could hardly be more diametrically different.

There is another, little understood but perhaps appealing solution that is being proposed under various tag lines, such as former vice president Joe Biden’s “if you like your private insurance, you can keep it” or Mayor Pete Buttigieg’s “Medicare for all who want it.” The more technical name, public option, sounds like choice, and who wouldn’t like that? With neither party seeming to have a good solution, I could foresee many people being lulled into supporting one of these plans.

The reason I call it the “Trojan horse” concept is that it appears harmless on its face, but nothing else has the potential to gain wide support that could quickly evolve the market to exactly what progressives are proposing – single-payer, universal health care – and have the beauty of actually being proposed and carried by moderates in the party. Public opinion surveys show that more Democrats support a public-option plan than single-payer plans, and just over 40 percent of Republicans support a public option.

There are many permutations and few details available about how those Democratic presidential candidates who are supporting the public option would structure it. That makes a big difference. Would the public plan for the public option be Medicare? Would it reimburse providers at Medicare rates? Can employees leave their employer-sponsored plans and sign up for the public option? Would there be premiums for the public option, and if so, how would they be structured? Does the public option cover all services covered under Medicare? Would there be out-of-pocket expenses under the public option plan?

If the public option was a Medicare buy-in, these plans would have a significant competitive advantage over commercial insurance plans – much lower administrative costs, no or few marketing dollars, broader networks, comprehensive benefits packages and non-negotiated provider payments that tend to be far less than commercial plan payments to providers – all factors that would allow these public option plans to be offered at a significantly lower premium, and likely in the majority of cases, a lower deductible.

The experience from the public exchanges has shown that people will change insurance plans for a premium savings of $5 per month. The premiums for the public option should be far less, likely precipitating significant moves from commercial coverage to the public option, especially once those signing up confirm that their physicians and hospitals are on the public option plan (which will almost certainly be the case).

As large numbers of people move to the public option plan, the insurance pools for commercial payers likely would shrink significantly, adversely affecting smaller plans. As still more people move over to the public option during ensuing years, commercial insurance would become progressively less viable. Bond and other ratings of commercial insurers would be adversely affected as soon as the legislation is enacted and stock prices of publicly traded insurance companies would drop as soon as the legislation is introduced.

The end result would be a significant shift to “Medicare for most,” if not “Medicare for all,” and a progressive decline and deterioration of the commercial insurance market. It would occur with much greater acceptance of the public, and instead of the forced transition under the Sanders or Warren plans, the transition would happen over a number of years, without Americans even realizing it is happening.

Therefore, the public option really is the Trojan horse that would lead to nearly the same outcome as those candidates proposing a more immediate move to Medicare for All. Either approach will profoundly impact the American health care delivery system – in some good ways and some bad ways. I’ll have more to say about the impacts of Medicare for All, whether as proposed by Sens. Warren and Sanders or whether the indirect result of implementing a public option in a future blog piece.

Health Care and the 2020 Election

We enter into the 2020 election with very different views between Republicans and Democrats (and even within the Democratic party) as to how to solve our health-care challenges. Unfortunately, the national discussion is misguided. Despite the fact that health care is the number one issue for voters and their concern is how to pay for it, Republicans have focused their efforts on eliminating or crippling the ACA, and Democrats have focused on how to provide more coverage and what benefits should be included. There could not be a wider disconnect between the voters and their elected officials, and neither party has a plausible solution to our health-care spending problem.

The National Health Care Debate and the Trojan Horse

Why is the national discussion misguided?

First, the debate centers around two issues – who should be covered (ACA, Medicare for all, guaranteed issue, etc.) and what benefits should be covered (short-term health plans that don’t cover all the essential health benefits, Medicare for all with dental, vision, and long-term care coverage, etc.).

These are not unimportant issues, but none of these ideas will solve the spending issue.

Second, these matters are not even what is important to voters. Survey after survey shows that Americans are primarily concerned about the cost of their medical care, not who is covered and what benefits are covered.

Here’s the real problem. The Centers for Disease Control and Prevention (CDC) has determined that 75 percent of health-care spending goes to treating and managing chronic diseases. According to the CDC, the 10 most expensive chronic diseases contributing to U.S. health-care spending are:

  1. Cardiovascular diseases
  2. Smoking-related health issues
  3. Alcohol-related health issues
  4. Diabetes
  5. Alzheimer’s disease
  6. Cancer
  7. Obesity
  8. Arthritis
  9. Asthma
  10. Stroke

Many of these conditions are preventable or avoidable, but I am alarmed by the growing prevalence of many of these diseases and risk factors and the development of many of these conditions at a younger age.

Let’s take a few examples.

High blood pressure is a risk for cardiovascular disease and stroke, two of the chronic diseases listed above. It is estimated that in 1999-2000, there were 40.4 million women and 46.6 million men with hypertension. From 2015 – 2016, those numbers jumped to 53 million and 55.2 million, respectively.  

Another example is diabetes. The overall prevalence of diabetes is rising steadily. Previously, type 2 diabetes was predominantly a disease of middle-aged and older individuals and historically has been referred to as “adult-onset diabetes.” There has been a significant decline in the age of onset, and we are seeing this disease much more commonly in children and adolescents; a recent study revealed that one in five adolescents has pre-diabetes. I cannot tell you how shocking that is.

One in four adults has prediabetes, and while not everyone with pre-diabetes will develop diabetes, the concern is that many will. Many also have additional risk factors for cardiovascular disease, stroke and even cancer, including obesity, high blood pressure and high cholesterol. Diabetes is, in turn, a risk factor for cardiovascular disease, so the increased incidence may result in more cardiovascular disease, and the significantly earlier onset of diabetes may mean that we will see cardiovascular disease earlier in life.

Similarly, we are seeing growing prevalence of obesity and at a younger age. About one in three of American youth are overweight. Obesity is a risk factor for cardiovascular disease, diabetes, Alzheimer’s disease, cancer, arthritis and stroke. Obesity has now been associated with at least nine cancers – esophageal, pancreatic, colorectal, breast, endometrial, kidney, thyroid, liver and gallbladder.

My point is that even if we are successful in covering more individuals with insurance and providing more benefits, the pipeline of chronic disease is growing, and with that, health-care spending will increase. We will be seeing chronic diseases at earlier ages, resulting in a significant impact to employee productivity and absenteeism.

Therefore, even with the focus on improved efficiency, transparency in pricing and lower health-care prices, it is certain that health-care spending will go up significantly over the coming years and decades – unless we do something radically different.

At least eight of the 10 diseases listed above can be prevented or the risk reduced. The question is whether we as a society, and as a matter of health policy, will decide that we need to change the focus of our efforts from putting out fires to preventing the fires in the first place, so to speak. This would require significant investments in addressing the social determinants of health. Over a period of years, this would decrease the prevalence of these chronic diseases and therefore, our national health-care spending.

While the political system is not designed to reward long-term investments, these investments would do a lot more than decrease our health-care spending. Decreasing the number of people with chronic diseases at the prime of their lives would positively impact workplace productivity, absenteeism and employer health-plan costs. Improvements in education, one of the social determinants of health, are likely to result in increased wages, increased state GDP and less demand on Medicaid, and has been correlated with better health.

Surprisingly, I have rarely been asked, from a policy standpoint, how I would redesign the American health-care system to solve the current problems and challenges. A huge part of my plan would be an investment in addressing social determinants of health, preventive care, health screenings, health education and a focus on activity and healthy eating. For the past couple of years, we have seen the first-ever declines in American life expectancy. This is not just a failing health-care delivery system. This is a failure of society to address risks that are affecting our children.

Since the national discussion is what it is, let’s discuss some of the current proposals.

Medicare for All

There are many variations on this theme. The purest form (but neither proposal is pure Medicare for All) most resembles the proposals from Sens. Bernie Sanders and Elizabeth Warren. They are advocating for a single-payer (Medicare), universal (cover everyone) health plan.

It would be difficult to contemplate the cost for such a program and what this would mean in terms of corporate and individual tax rates; their proposals expand Medicare benefits, making their concept significantly more expensive than just an expansion of Medicare. They propose adding vision, hearing and dental coverage, which are not currently covered under Medicare. However, the part that adds tremendously to the cost is coverage for long-term care.

Keep in mind that the commercial market for long-term insurance has almost collapsed and most Americans wouldn’t be able to get a long-term health-care policy even under a free market, because of the adverse risk. If an insurer is willing to underwrite such a policy, most Americans can’t afford it. To imagine a Medicare program covering every American for long-term health insurance is to imagine an astronomical price tag attached to it.

While public support for “Medicare for all” has certainly increased over the past several years, that support significantly erodes when voters are told that their taxes will go up to pay for it. Further, though it is difficult to think of a scenario where it could pass the House, the Senate and be signed by the president, Democrats would have to, at a minimum, hold the House, take control of the Senate (60 votes) and have a Democrat in the White House. Even with all of this, as President Obama discovered in 2009, the lobbying resistance would be intense.

Democrats lost control of the messaging for “Medicare for all” long ago. Some candidates went overboard and indicated that they would cover everyone, including undocumented aliens. For citizens who have been struggling to pay for their own care, the thought that Democrats would now provide health care for free to undocumented aliens was offensive to many.

They then completely missed the messaging on the cost. Instead of realizing that just defending the cost of current Medicare benefits for every American would be a challenge, they added on expensive additional benefits for which there was no American outcry of demand. The conversation soon moved on to whether the middle class would be hit by tax increases and by how much; there was no discussion of the fact that middle-class Americans currently pay more than $8,000 per year for their insurance and all of this would go away under the Sanders and Warren plans.

Sens. Sanders and Warren also allowed the conversation to go off the rails when they proposed to get rid of all the insurance companies. That would likely happen under their proposals, but it wasn’t the point, and polls began to reflect that people overall were happy with their insurance plans. I doubt that this is even the case. My guess is that people are happy with their choice of doctors and hospitals under their plans, but I have yet to meet someone who tells me they love their insurer.

I believe Americans were reacting to fears of not being able to see the doctors and go to the hospitals of their choice, but under the Sanders and Warren models, most hospitals and physicians in the country would be in the network, which would be tremendously larger than the networks most Americans are currently in.

Get Rid of the ACA

While Republicans say they want to preserve guaranteed issue, their talk and actions do not support that (see last week’s blog post for a full discussion on this topic) and again, polling data demonstrates that this is important to Americans.

First, the Trump administration has supported short-term health plans, association health plans and ministry health plans. These are not guaranteed-issue policies. These plans place annual limits on benefits, charge higher-risk individuals more in premiums, can include waiting periods and exclude pregnancy coverage or charge separate co-insurance for pregnancy. None of these provisions would be allowable under the ACA.

These plans are obviously meant to remove young, healthy people from the larger insurance pool, making their health insurance premiums lower while increasing insurance costs for everyone else. More than one in four Americans under age 65 have something that could be characterized by an insurance company as a pre-existing condition. These plans will not meet their needs.

Further, a return to the days of excluding people from coverage for pre-existing conditions also means returning to the very undesirable situation where people believe they have coverage only to learn of their condition after purchasing insurance and the insurance company determining that, based upon prior symptoms or test results, the condition was pre-existing, even though the patient was unaware of the condition.

Finally, despite the rhetoric of Republicans supporting guaranteed issue, they have launched a constitutional attack on the ACA (see Texas v. United States above) that, if upheld on appeal, will end guaranteed issue, and they have been unable to draft any bill that could be enacted to protect guaranteed issue in the event of the ACA being struck down.

It is unfortunate that there is no discussion by politicians of either party as to the real issues driving health care costs and the tremendous threat that we face of even higher health care spending in the future. Perhaps I will write more about this in the future.

However, for now, the national discussion is what it is and people are being asked to make a choice. Therefore, my intention will be to inform you sufficiently about these various proposals so that you can make your own decision. In my next blog piece, I will explain to you what I refer to as the Trojan horse – the public option. This is something that few people understand, but you need to. This is what Iowa Democratic front-runner Mayor Pete Buttigieg is proposing, as well as former Vice President Biden. A public option would have huge implications for the entire health care industry, impacting it far more than the Affordable Care Act did. I’ll also have more to say about Medicare for All since it appears that Sen. Bernie Sanders is likely to win the New Hampshire Democratic primary and came in a very close second in Iowa. Finally, I will write about another proposal, this one from the Trump administration, concerning Medicaid block grants – something, for the sake of Idahoans, I hope the Idaho legislature does not pursue.

Health Care and The State of the Union

In his State of the Union speech before Congress last night, President Trump stated, “I’ve also made an ironclad pledge to American families. We will also protect patients with pre-existing conditions.”

I have come to judge politicians not by what they say (not that that is not important), but what they do. Using this framework, I would have to say that President Trump, his administration and Republicans in the Senate are not keeping this pledge and quite the contrary, have actually made efforts to significantly weaken protections for patients with pre-existing conditions.

First of all, let’s understand what the issue is and what some of the associated insurance terms mean. The Centers for Medicare and Medicaid Services (CMS) estimates that 129 million Americans, or basically 1 of every 2 Americans, could be denied affordable health insurance based on pre-existing conditions without the protections of the Affordable Care Act (ACA) or group insurance, such as employer-sponsored insurance. This could happen in plans that are not ACA-compliant through a process called underwriting.

For those of us old enough to remember, before the ACA, we would have to answer a number of questions about our health in an application for insurance coverage. Together with a review of medical records, insurance companies could then deny coverage, exclude coverage for the pre-existing condition, provide for a waiting period of say a year during which claims related to the pre-existing condition would not be covered and/or charge significantly more in premiums to cover the pre-existing condition. Many people were unable to get insurance coverage or obtain coverage at an affordable rate if they had a pre-existing condition. This then meant that their underlying condition(s) went untreated, the person got treatment, but then went into significant debt or even bankruptcy or the patient depended upon charity care or Medicaid once they went through their assets to pay for care as long as they could.

When dealing with pre-existing conditions, there are two phrases that are important to understand. Guaranteed issue means that insurance coverage cannot be denied based on your pre-existing condition(s). Guaranteed issue is a requirement of ACA-compliant plans. But, if insurance companies were merely required to accept everyone with pre-existing conditions, they would then adjust your premiums to account for the increased risk of loss (payments by the insurance company) related to your pre-existing condition. For many with pre-existing conditions, this insurance coverage would be unaffordable.

So, this is where community rating comes in. Community rating, another feature of the ACA, requires that premiums be offered that do not vary with the illness burden that an individual has, but rather is tied to the geographic area in which the person lives. For example, insurance coverage will, in general, be less expensive in the mountain states than on the east coast of the country because of the higher cost of living and therefore higher wages that have to be paid to health care workers on the east coast compared to in the mountain states. But a person with diabetes would not be charged a higher premium for the diabetes regardless of where he or she lives. The only factors the ACA allows for insurance companies to use to factor into premiums beyond where their insureds live are age, gender and smoking.

Here is why I come to the conclusion that the President, his administration and Republicans are not acting consistent with the President’s pledge and his comments in the State of the Union address:

  • Texas v. U.S. I have written about this case on my blog. It is a case brought by 20 Republican states challenging the constitutionality of the individual mandate, and in turn, the entire ACA, after Congress reduced the penalty associated with the individual mandate to zero in the 2017 Tax Cuts and Jobs Act. It is not essential to review these constitutional issues here to make my point.

If the Republican states are successful in their challenge (and so far, they have been in the federal district court, with a decision that the individual mandate is unconstitutional being affirmed by the U.S. Court of Appeals for the Fifth Circuit), then the key provisions of guaranteed issue and community rating may also be struck from the ACA if the courts ultimately decide that the individual mandate is integral to these provisions. I predict that the federal district judge will conclude that is the case (though I believe that is a legally incorrect conclusion), but I do hold out hope that the U.S. Supreme Court will conclude that the individual mandate can be removed from the ACA without the need to strike down other provisions of the ACA.

So, what does President Trump have to do with this? Well, in the overwhelming majority of cases, the Department of Justice defends existing laws from constitutional challenges. There are exceptions to be sure, but they are quite few. Generally, on those rare occasions when the Department of Justice does not defend the constitutional challenge, it is because the current administration is very opposed to the current law on political grounds. For example, the Obama administration’s justice department did not defend a constitutional attack on DOMA – the Defense of Marriage Act – due to political objections to its provisions.

The Department of Justice has not defended most of the challenge against the individual mandate, and in turn, the ACA. Certainly, President Trump and many Republicans in Congress have not made a secret of their disdain for the ACA.

Because of the Republican states’ challenge that not only is the individual mandate unconstitutional (an argument with which I agree), but that as a result the remainder of the ACA must also be struck (an argument with which I strongly disagree from not only a legal analysis, but also with respect to the severe disruption this would cause to the American health care system – the topic of a future blog post), the failure of the Department of Justice to make a full-throttled defense to preserve the remainder of the ACA other than the individual mandate, and especially to fail to defend the law without a viable alternative in hand that could pass the House and Senate and be signed by the President, is a display of the administration’s contempt for the ACA without an equal concern for the well-being of the huge number of Americans who would then lose the protections of guaranteed issue and community rating.

  • On July 28, 2017, Senate Republicans voted to repeal “Obamacare,” but were thwarted by Sen. John McCain’s now famous thumbs down “no” vote. Though they came dangerously close to repealing the ACA, once again, they had no viable alternative capable of gaining enough support to be enacted by Congress that would protect guaranteed issue and community rating. Had Republican Senators been successful in their repeal effort, millions of Americans with pre-existing conditions would likely have lost their insurance coverage, and for some, perhaps their lives.
  • Despite President Trump repeatedly proclaiming that Republicans would be the party of health care and that he would roll out a new health care plan that would be far better and protect those with pre-existing conditions, no such plan has been put forth, and in fact, the President has indicated there will be no such plan until after the 2020 election. Given that health care is the number one issue for voters, one would think that if a great plan existed, Republicans and the President would want to tout that during the 2020 campaign.
  • Another action that threatens coverage for those with pre-existing conditions is the administration’s push for short term plans and other non-ACA-compliant plans, such as association health plans. While less expensive, these non-ACA plans do allow for underwriting and generally have fewer covered benefits – two features that work to dissuade those with pre-existing conditions from purchasing them. The problem is that these plans do attract younger and healthier individuals that then takes them out of the risk pools with older individuals with pre-existing conditions, which in turn, causes premiums for plans that cover pre-existing conditions to go up and become less affordable for those who need coverage for these illnesses or disabilities.

So, certainly, I cannot come to the conclusion that Republicans are the party of health care. Rather, I think the current President and Congress have done more to harm health care coverage for the most vulnerable more than any other administration I can think of. Further, rather than carrying out an “ironclad pledge” to protect people with pre-existing conditions, the current President, administration and Republicans in Congress are the single biggest threat to continued protections for those with pre-existing conditions.

Now, before you conclude that I am a “never-Trumper” or Democrat, neither of which is true, let me say that while Democrats have scored high in my book for protecting those with pre-existing conditions, I have plenty to fault Democrats on their health care policies, as well. In fact, I will be getting to that, probably in my next blog piece.

It has become increasingly clear to me that Washington D.C. is broken and unlikely to fix health care. That means it falls upon us in the industry to fix it. Unfortunately, there are few health systems, insurance companies or physician groups willing to take the financial risks and do the hard work it would take to transform health care.

St. Luke’s Health System is one of those health systems actively working to transform health care and fix it – provide unparalleled quality, move from fee for service to full risk arrangements, improve access and improve affordability. That work began under my leadership of the health system and will now continue under the new CEO, Chris Roth. While we acknowledge that Washington is unlikely to fix health care, all we ask is that Washington not get in our way of fixing it. That means protecting affordable coverage for those with pre-existing conditions. Loss of protections for those with pre-existing conditions will mean poorer health outcomes, more bad debt and more charity care – all things that we will have to react to and deal with rather than doing the work we have embarked on to transform health care.

What You Need to Know about the New Coronavirus

Everything You Need to Know about the Wuhan Coronavirus (2019 Novel Coronavirus (2019-nCoV))

What is a virus?

A virus is a small (you cannot see a virus with the naked eye) infectious agent that cannot replicate itself without infecting a host cell. But, once a virus infects a suitable host cell, its genetic material can replicate and dramatically increase the amount of virus in that host (the viral load) as it spreads through many other cells of that host. How severe the viral infection will be in humans often depends upon the age of the person who is infected, the general health of the person infected and how strong the immune system of the person is. There are viruses that are relatively harmless to adults with normal immune systems, but that can cause severe disease or death in children with certain forms of immune deficiency.

There are many types of viruses. Some cause infection in humans; others do not. Of those that do infect humans, they all vary in terms of how contagious they are (how easily transmitted from one person to another), how they are transmitted (through the air, through an animal bite, through close contact, through exposure to bodily fluids, or through sexual contact), how easily they are transmitted (e.g., the measles virus is unusual in that it can remain contagious in a room long after an infected child has left the room, while most other viruses will require closer contact), and what parts of the body they primarily attack and how they are manifest (e.g., skin (rash), upper respiratory tract (coughing, sneezing, runny nose), or central nervous system (meningitis, encephalitis)). Viruses that infect humans have varying incubation periods, i.e., the period between the time of exposure to the time of illness. Generally, these incubation periods are a number of days, but can be weeks, and in the case of some viruses, e.g., the AIDS virus, the incubation period can be months to years.

There is not a cure for most viral infections. Generally, we provide supportive treatment – ensuring that the person maintains sufficient fluid intake, managing symptoms and often providing some sort of isolation of the patient or protective measures for caregivers and visitors to try to minimize the spread of the virus. In most cases, if the infected person has a normal immune system, it will ramp up to attack and kill the virus and rid the body of the infection.

However, we do have immunizations for many viruses that provide varying degrees of protection from getting infected with the virus in the first place and that help create a sufficiently large population of people who are immune and not particularly susceptible to the virus (herd immunity) that even if someone does get infected, human-to-human spread will be minimized and not cause an epidemic.

We do have treatments for some viral infections. These anti-virals are typically drugs that impair the ability of the virus to replicate, allowing the body’s own immune system to rid itself of the virus.

What is a coronavirus?

Coronaviruses are a type of virus that are grouped together because of common features. They were first identified in the 1960s and up until 2002, there were four known strains that caused infection in humans, and all of the illnesses associated with coronavirus up until that time were relatively mild, causing cold-like symptoms. These viruses got their name from the spikes on their surface, which when viewed under special microscopes resemble a crown (the Latin word for crown is coronam).

When and why did the new, much more severe strains of coronavirus emerge?

The four, relatively mild strains of coronavirus involved human-to-human transmission. The three severe strains of coronavirus that emerged since 2002 all appear to have been transmitted from animals to humans. Two of these strains emerged in China and one in Saudi Arabia. There is speculation, and mounting evidence, that these new threats may be due to markets that sell exotic animals for human consumption that keep the exotic animals in close confinement and in some cases, poor sanitary conditions. Epidemiological evidence and DNA sequencing of these new viruses can help us trace the origins of these infections.

In November 2002, a new strain of coronavirus (SARS-CoV) was first recognized in China, and it subsequently caused a world-wide outbreak in 2002-2003 with 8,098 identified infections, resulting in 774 deaths. The illness was named severe acute respiratory syndrome (SARS).

In 2012, a new coronavirus strain causing infection was identified in Saudi Arabia. That illness was called Middle East Respiratory Syndrome (MERS) and the virus was named (MERS-CoV).

The current seventh strain of coronavirus was identified by Chinese officials on January 9, 2020 while investigating an outbreak of pneumonia in Wuhan City, Hubei Province, China that began in December 2019. This new virus is named 2019 Novel Coronavirus (2019-nCoV). Epidemiologic studies have connected many of the initial cases to a particular market in Wuhan City that sells exotic animals for human consumption. Many viruses that can be transmitted from animals to humans are not easily then transmitted from human to human. However, because many of the early cases had no connection to this exotic animal market, it is believed that human-to-human transmission is now accounting for the majority of cases, especially since the market has been closed and cases continue to emerge.

Early DNA sequencing studies are ongoing, but it appears that the 2019-nCoV came from a bat. Because the time of year was not one that would be associated with much bat activity, it is suspected that a bat transmitted the virus to an intermediate host (another animal) that in turn infected humans. The SARS-COV was determined to have been transmitted to humans through civet cats and the MERS-CoV through camels. The early evidence also suggests that the 2019-nCoV may have emerged from a virus related to SARS.

How does human-to-human transmission of the 2019 novel coronavirus occur?

Transmission appears to occur when an infected person coughs or sneezes and spreads the virus in droplets through the air to other people who are in close (within about 6 feet) proximity. We believe that these droplets then land in the nose or mouths of a healthy person, and these droplets can then be inhaled into their lungs, setting up infection in a new person. It is not known yet whether this virus, like some others, can survive for any period of time on surfaces following an infected person’s cough or sneeze and then be passed on to a healthy person by them touching the surface where the droplet has landed and then placing their hand to their mouth or nose, and recently, there has been some cause for concern that the droplets might be able to transmit the virus through contact with a healthy person’s eyes.

How contagious is this new virus?

We simply do not know yet. There is some reason to believe that the risk of human-to-human transmission is still low and may require sustained, prolonged, close contact with the infected person. This is in large part, due to the fact that we have not seen a lot of cases within families. However, we just recently observed the first two instances of transmission from a patient to a family member in the U.S. and it was after such prolonged, close contact.

What is the incubation period for this virus?

The period of time from exposure to the onset of symptoms appears to as short as several days and as long as 14 days. The concerning news is that it appears that people can be contagious prior to the onset of symptoms. Unfortunately, before that was known, passengers arriving from Wuhan, China were screened for fever and other signs of illness, but then admitted into the United States if negative. Unfortunately, we now realize that it is possible some of these travelers might still be infected and contagious, even if they did not have fever or report symptoms.

What are the symptoms of 2019-nCoV?

Infected people have ranged between mild cold-like symptoms to severe respiratory illnesses, including fever, cough, shortness of breath and pneumonia.

How serious is the infection?

While the statistics are likely to change (for the better) as we get better at identifying these cases, it appears that 20 percent of those who become ill will develop severe illness and perhaps about two percent of those who become infected and symptomatic will die. However, these numbers are very unreliable at this stage of investigation. It could be that we are missing many mild cases, which will make both of these statistics over-exaggerated. As of the time of this writing, only one death has occurred outside of China (Philippines).

How many cases of 2019-nCoV are there in the United States?

This is a constantly evolving number, as we are early on in the transmission of this disease. Some people are suspected to have this illness and have been tested, but test results are not back yet.

The United States has declared a public health emergency. This means that non-U.S. citizens who have been to China within the past 14 days are banned from entry into the U.S. and federal funds have been released to assist the Centers for Disease Control (CDC) and other public health agencies monitor, assess and control this public health threat.

World-wide, there are more than 17,000 confirmed cases of this infection. Most of these are in China. There are now eleven confirmed cases in the U.S. and another 82 patients undergoing testing. The test is not available other than through the CDC, and therefore there is a considerable time lag between testing and obtaining results.

So far, the states that have one or more cases of identified 2019-nCoV cases are Arizona, California, Illinois, Massachusetts and Washington. At the time of this writing, there are no cases in Idaho.

Should I get tested for 2019-nCoV?

Keep in mind that we are in the middle of cold and flu season. If you have cold-like symptoms, the overwhelming likelihood is that you have a cold or perhaps the flu.

The only reasons for us to be concerned and test you for 2019-nCoV would be that you have traveled to China in the past two weeks or someone with whom you have close contact has traveled to China in the past two weeks.

If you are a health care leader, a board member, or just someone interested in understanding health care in the U.S., you need to know about this case!

Texas v. United States

I have written about this case, a huge existential threat to the Affordable Care Act (“ACA”), on a number of occasions. Even before this case attracted much media attention, and even though many legal scholars dismissed the challenge as being very weak, I was advising readers of my prior blog to take notice and follow along, as I believed it was a sleeper and had a very significant likelihood of success.

Republican attorneys general and governors of 20 states (Idaho is not a party to this suit) brought a constitutional challenge to the individual mandate (the provision that requires that people, with some exceptions, maintain ACA-compliant health insurance or pay a penalty) after Congress reduced the penalty to $0 in the 2017 Tax Cuts and Jobs Act.

The ACA had withstood a constitutional challenge in 2012 when the U.S. Supreme Court agreed that the mandate to purchase insurance could not be sustained under the Commerce clause or the Necessary and Proper clause of the U.S. Constitution, but ruled that the individual mandate was a constitutional act of Congress based on its taxing power. The Court construed the penalty to be a tax to save the ACA from being ruled unconstitutional. Key to that finding was the fact that the penalty raised revenue for the government.

After the penalty was reduced to zero, those challenging the law argued that it could no longer be construed as a tax. Because Congress has no constitutional power to compel Americans to purchase something, if this penalty is no longer a tax, the provision is no longer constitutional. The district court judge who heard the case agreed.

When a provision of a law is unconstitutional, courts must determine whether the illegal provision can be severed from the law, allowing the remainder of the law to stand without the unconstitutional provision. Separation of powers calls on courts to preserve laws passed by Congress when possible, but the judge in this case determined that the individual mandate was so integral to the law as a whole that the ACA must be struck down in its entirety.

That precipitated an appeal to the U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”), and a panel of Fifth Circuit judges ruled 2-1 to affirm the lower court’s ruling that the individual mandate was unconstitutional but that the judge’s severability analysis was not thorough and exacting enough. The court of appeals remanded the case (sent the case back) to the lower court judge to go through a provision-by-provision analysis to determine which portions of the ACA must also be struck down, which may or may not result in the same conclusion as his original ruling.

The court of appeals’ ruling that the individual mandate was unconstitutional was not a surprise. It had been my hope that the court would, in so ruling, determine that the remainder of the ACA was severable and allow the ACA to stand without the mandate. This would preserve guaranteed issue (people cannot be turned down for insurance based on pre-existing conditions) and community rating (people cannot be charged more because of their pre-existing conditions).

At the time the ACA was enacted in 2010, it was understood that the mandate would be critical to ensure that insurance companies could have a sufficient risk pool if they could not deny those with pre-existing disease and could not charge more for them. The logic was that many more insured would be needed, particularly the young and healthy who could help subsidize care for older and sicker individuals through their premiums.

It was a reasonable policy, but what became clear with time was that the carrots – advance premium tax credits and subsidies – were likely more persuasive than the stick – the individual mandate’s penalty. Even after the penalty was reduced to zero, ACA plans have remained fairly stable in enrollment (preliminary numbers suggest that enrollment for 2020 may only be down about 2 percent from last year and that last year, premiums went up by only about 5 percent attributable to removal of the mandate’s penalty).

Senators and representatives have suggested that when the penalty was reduced to zero in 2017, there was not a belief that this would upend the ACA; part of the criticism of the district court judge was that he seemed to place his emphasis on the intent of the 2010 Congress in enacting the ACA (strong belief that the ACA could not function without the individual mandate), as opposed to the 2017 Congress that zeroed out the penalty (when there was much less concern that the ACA could not function without the penalty).

The Trump administration is largely not defending the law, and Republicans have no replacement bill that can pass both chambers of Congress and be signed by the president in the event that the ACA is struck down. The American health-care delivery system would undergo tremendous changes if the ACA were to be struck down: People could be denied insurance based on pre-existing conditions, people who were able to get insurance could be charged more for the insurance or their pre-existing condition could be subject to waiting periods or riders, children up to age 26 would no longer be assured of coverage on their parent’s insurance policy, the prohibition against annual and lifetime limits of coverage would go away, Medicaid expansion would no longer be funded and the public insurance exchanges would no longer be funded, just to name some of the changes.

The Democratic states that are defending the ACA could take one of three actions: (1) allow the case to proceed on remand and then appeal the case again once the lower court judge issues his new ruling; (2) request an en banc hearing (a hearing before the entire Fifth Circuit); or appeal the case to the U.S. Supreme Court.

The first option would likely take a long time (perhaps a year) and would result in continued uncertainty about the survivability of the ACA and would mean the case will not be decided prior to the 2020 election.

The second option is discretionary on the part of the Fifth Circuit Court, and I doubt it would be granted. Even if the Court were to grant a hearing en banc, the Court as a whole is even more conservative in my judgment than the three judges involved in the recent ruling, and therefore, I would not expect a better or different outcome.

The third option, the option the Democratic states chose, is discretionary on the part of the Supreme Court. The Court grants very few of these requests, and I suspected that since this case has not finished running through the lower courts, the Supreme Court would be reluctant to take it up. However, it was possible that the Court would decide to grant the appeal given the magnitude of importance of this case and the fact that its current state leads to a great deal of uncertainty.

If the Supreme Court had granted the request (which would require four justices to agree to hear it), unless the Court agreed to expedited review (which would require five justices to agree), a decision would still not be likely prior to the 2020 elections. If the Court did agree to hear the case and expedite it, we could have had a decision by summer.

The Democratic states filed the necessary request with the Supreme Court, including a request for expedited review, and the Court denied the request for expedited review last week.

This was not a surprise. The only part of the decision that I believe is ripe for review has to do with the constitutionality of the individual mandate without a penalty. To me it seems clear that it is not constitutional, and it would be very surprising to me were the Supreme Court to hold otherwise.

But to me, that is not the important question. Even if the individual mandate must be struck, as I stated above, most everyone agrees that the mandate’s penalty is not necessary for the ACA to continue to operate as intended. The important question is the severability question.

If the mandate can be severed from the ACA, we are in business. Almost nothing will change. However, if it is not severable, and even if just the guaranteed issue and community rating provisions of the ACA must fall with the mandate, the American health-care delivery system will be very seriously disrupted. Because the appeals court did not address severability, we generally would not consider this issue ready for Supreme Court review. The Supreme Court certainly could decide the issue, but it would be highly unusual.

Meanwhile, the ACA continues to be the law of the land, and we enter into the 2020 election with very different views between Republicans and Democrats (and even within the Democratic party) as to how to solve our health-care challenges. Unfortunately, the national discussion is misguided. Despite the fact that health care is the number one issue for voters and their concern is how to pay for it, Republicans have focused their efforts on eliminating or crippling the ACA, and Democrats have focused on how to provide more coverage and what benefits should be included. There could not be a wider disconnect between the voters and their elected officials, and neither party has a plausible solution to our health-care spending problem. I will write more about this next week.

My First Blog Post

What is this blog, who should read it and what will you get?

Be yourself; Everyone else is already taken.

— Oscar Wilde.

This is the first post on my new blog. I’m just getting this new blog going, so stay tuned for more. Subscribe below to get notified when I post new updates.

What is this blog about?

I cover important current national and state-level issues in health care – particularly health care policy and health care law. Because of the nature of the topics I cover, they are at the intersection of health care and politics.

Why is this blog important?

Unfortunately, sources of information about these important issues are often biased, come with a particular political point of view or are written or sponsored by industry interests. Of course, I have biases of my own, but I also have the ability to present an issue objectively and discuss the pros and cons of all sides of the issue so that readers can make an educated opinion on the issue for themselves. I believe that if you give readers balanced and complete information, they will be able to engage in the discussion productively and come to well-informed opinions and solutions.

Of course, there are few issues in health care that I do not have an opinion about, and there are many who, because of my background and experience, want to know how I come out on a particular issue. I will share those opinions with you on the blog, but I will be clear and explicit with you when I am expressing my own view. You can then take it for what its worth.

Who is this blog for?

Really, any one with an interest in topical health care policy and legal issues. However, there are some who may have a particular interest in this blog:

  1. Health care CEOs. Health care leaders are very busy and barraged with information. They simply cannot read everything, and much of what they get is not completely objective. This is a site where CEOs can get up-to-date, important information on topics of importance to health care leaders that they can trust. As a recently retired health system CEO, I know what information CEOs need, and there are few other sources of information written by a CEO for CEOs. This is also a source of information that CEOs can use to provide important updates to their teams and their boards.
  2. Board members of hospitals, health systems, insurance companies and other health care organizations. Health care is complicated. It is particularly challenging for board members who come from other industries to understand the complexities of health care. This blog can serve to keep board members informed about important issues that their companies are likely dealing with, as well as to keep them informed as friends, family, neighbors and colleagues ask them about these topical issues since they are likely aware that they serve on a health care board.
  3. Students and other health care leaders. Students of health care will appreciate how complex issues are presented in an easy to understand blog. Current and future health care leaders need a good source of current information, but also a source that may challenge their thinking or help them think about current health care challenges in a fresh and new way.
  4. Journalists. Health care reporters and journalists can at times be challenged to get the information and background that will really help them understand a complex issue that they must digest in very little time in order to hit deadlines and to ask interviewees the “right” questions. This blog will help them do just that.
  5. Legislators. Legislators have a tough job. They have to make law about complex issues in areas of industry that they may not be expert in. To make matters worse, they are often inundated by parties and lobbyists that are interested in what is best for their business, not necessarily what is best for that state or our country. This is an unbiased source of information to help legislators understand these complex issues and the pros and cons of various positions.

Who am I and why should you trust what I have to write?

I am a physician, board certified in Internal Medicine. I practiced for ten years. I am also a health care attorney. I have taught a course titled Regulation of Health Care Professionals for about 13 years, first at the University of Houston Law Center and most recently at the University of Idaho College of Law. I have also written a text book by the same title.

I was the CEO of a large teaching hospital in the Texas Medical Center for almost four years and most recently, I was the President and CEO of a health system for a little over ten years. That health system was recognized for being a national leader in quality and for its transformation of its business model from fee for service to value (full risk arrangements).

While a health system CEO, I had a blog for about 8 years – Dr. Pate’s Prescription for Change.

How often will I post new information?

I am going to try to write something weekly. I am not going to commit to a specific day. There may be times that I miss a week. There will be others will I will post something more frequently, especially when there is breaking news. So, be sure that you are subscribed to the blog so that you receive notice when I have a new blog post. You can also follow me on twitter. I will tweet my new blog posts. My current twitter handle is @drpatestlukes, but I will be creating a new twitter handle soon given my impending retirement from St. Luke’s Health System. I will let you know as soon as that new twitter account is set up.