Category Archives: Policy and politics

How immigrants help health reform succeed


Medicare turns 50 today, which has provided an opportunity for all manner of retrospectives and speculation about what the future holds. The Partnership for a New American Economy is publicizing one of my favorite arguments: that immigrants are a key reason that Medicare is still solvent.

Their 2014 study (Staying Covered: How Immigrants Have Prolonged the Solvency of One of Medicare’s Key Trust Funds and Subsidized Care for U.S. Seniors) concludes:

  • Immigrants are subsidizing Medicare’s core trust fund
  • Immigrants played a critical role subsidizing Medicare’s Hospital Insurance Trust Fund during the recent recession
  • Medicare’s Hospital Insurance Trust Fund would be nearing insolvency if not for the contributions of immigrants in recent years

Bottom line: immigrants contributed $182 billion more to the Hospital Insurance Trust Fund between 1996 and 2011 than they received in benefits. Meanwhile, US-born citizens sucked out $69 billion more than they paid in.

But the argument for open integration goes far beyond the Medicare story. As I wrote back in 2011 (We need a liberal immigration policy to support health care reform)

  1. Immigrants innovate and create economic growth. This growth is how the country gets wealthier and better able to support health care expenses without raising tax rates
  2. Immigrants can use their intellectual capital and training –whether acquired abroad or here– to fill healthcare jobs such as primary care physician, pharmacist, nurse that would otherwise go unfilled

We have very stupidly made the US less welcoming to immigrants at the same time that talented people have more opportunities in their birth countries and while other countries have made it easier for educated immigrants to thrive. I partly blame the current state of affairs on the post-9/11 mentality. We’ll pay for it in the long run in healthcare and in the economy at large.

Image courtesy of Stuart Miles at

By healthcare business consultant David E. Williams, president of Health Business Group.

Fast progress on transgender benefits

Bruce Jenner’s transition to Caitlyn Jenner has brought transgender issues quickly to the fore. What I had not realized is that major employers and the federal government are well on their way toward providing coverage for transition-related health care. I’m not in a position to comment on the adequacy of the coverage, but just want to make the point that it’s advanced faster than I thought.

According to Business Insurance (Transgender benefits gain attention of employers), the Office of Personnel Management recently required Federal Employee Benefit Plan providers to cover transition-related care, citing an emerging consensus that such treatment is medically necessary.

About half of large employers offer transgender-related surgical coverage compared with 5 percent in 2007, according to a National Business Group on Health survey.

Transgender-related benefits are varied, and include “mental health counseling, hormone replacement therapy and gender reassignment surgery. Some employers… include coverage for facial feminization or reducing the Adam’s apple…” Not every employer offers all categories of benefits.

Private employers aren’t required by law to offer such benefits, but they have various motivations. They include:

  • An increasing belief that such coverage is medically necessary, and therefore in keeping with the overall philosophy of health insurance
  • A desire to increase competitive positioning in recruiting –including for employees that do not themselves expect to use such coverage but are looking for employers that are progressive
  • A realization that the overall costs are likely to be small, typically less than 0.5% of total health care costs
  • A defensive view that not offering such benefits could lead to discrimination claims

I don’t typically think about insurance benefits being in the social and cultural vanguard, but at least based on this example that may not be a fair assessment.

By healthcare business consultant David E. Williams, president of Health Business Group.

Follow-on biologics: Another ho-hum assessment

Do you like my new idea?

Do you like my new idea?

Proponents of follow-on biologics are invariably surprised that their hopes for product introductions and price competition outpace reality. Instead of stepping back and asking whether the whole concept of biosimilars makes any sense from a cost reduction standpoint they persist in recommending tweaks to the existing regime and asking for patience as we await results.

The New England Journal of Medicine published a Perspective on the topic last month (Progress and Hurdles for Follow-on Biologics), which followed the usual script. Rather than blog about it I wrote a letter to the editor. I didn’t expect to see it published –after all NEJM receives lots of letters and I don’t have the right academic credentials. Sure enough it was rejected, so here it is:

Sarpatwari et al. (June 19 issue) mistakenly expect the market for follow-on biologic drugs to evolve in a similar manner to the market for generic versions of small molecules. As a result they are surprised that prices of follow-on biologics are stubbornly high and competition low. But follow-on biologics are more like me-too versions of small molecule products, where similar drugs are introduced in the same class. Remember, Lipitor was a me-too product, the fifth statin on the market. Lipitor didn’t compete on price, however. Instead Pfizer used superior marketing to differentiate. I expect similar behavior in biologics.

The authors’ misunderstanding leads them to faulty recommendations designed to encourage development of more follow-on products. If the goal is to reduce costs without depressing innovation, then a wiser approach would be to regulate the price of the original biologic after it has been on the market for a decade or so. That would enable innovators to earn healthy financial returns, eliminate the expense and risk to patients of clinical trials of follow-on products, and reduce demands on FDA inspectors.

David E. Williams, MBA
Health Business Group
Boston, MA

Image courtesy of stockimages at

By healthcare business consultant David E. Williams, president of Health Business Group.


How narrow is a narrow network?

Is narrow good or bad?

Is narrow good or bad?

Health Insurance Exchanges are one of the most interesting and potentially impactful features of the Affordable Care Act. The exchanges allow eligible individuals to compare health plans on an apples-to-apples basis and choose the one that’s most appropriate for their individual circumstances.

Health plans are interested in participating in these exchanges because they offer one of the few sources of member growth. Federal subsidies make exchange plans affordable for middle income buyers who make too much to qualify for Medicaid.

Not surprisingly, exchange customers are price conscious shoppers. That means plans have to work hard to offer low enough premiums to be competitive. The Affordable Care Act outlaws some of the ways health plans used to stay competitive, such as charging different prices based on health status, refusing to cover certain patients, making exclusions for pre-existing conditions, and offering skinny benefits packages.

One of the few things plans can do is to offer different networks of physicians, hospitals and other providers. Exchange plans have embraced the concept of “narrow networks,” which offer a smaller than usual collection of providers as a way to hold down costs. I have heard and seen a lot of anecdotes about what this means in practice, but now there is some real data.

Avalere has conducted an analysis of health plans in the top five exchange states to compare the size of exchange plan networks with the size of commercial networks in the same geographies. Sure enough, the plans included an average of 34 percent fewer providers on average, and 42 percent fewer oncologists and cardiologists.


Although anyone’s initial reaction is that a bigger network is better, that is not automatically the case. If the narrower networks exclude the wasteful, low quality providers the result could be increased quality and cost effectiveness.  If network inclusion is based just on unit costs, then who knows the outcome on quality. And if fewer providers means it’s harder to get an appointment, that could be problematic. Patients might even end up spending out-of-pocket for out-of-network coverage.

I asked Avalere vice president Elizabeth Carpenter to answer a few questions that immediately came to mind: You report the average, but how much variability is there? How have network sizes changed since last year? How often do exchange members go out-of-network?

Elizabeth answered the first question as follows, “Overall, we did see noticeable variation among the five states we examined. However, interestingly, it was not consistent across provider type. For example, exchange plans in one state may cover a higher percentage of primary care physicians than another state’s exchange plans but may cover a lower percentage of hospitals.”

As I expected, Avalere hasn’t yet done the work to answer the other questions. Clearly there are lots of interesting studies to be done on the impact of exchange plans on costs, quality, and the overall insurance market. I eagerly await them.

Image courtesy of marcolm at

By healthcare business consultant David E. Williams, president of Health Business Group.

The specialty drug pricing conundrum: Caps may raise costs, not lower them

Money, money, money

Money, money, money

It used to require hundreds of thousands of patients taking a drug to make it blockbuster. But over the last decade drug companies have figured out that they can get to $1 billion in product sales with much smaller populations. The key: sky-high prices.

The math is simple. A drug that goes for $1000 per year needs 1 million patients to get to the billion dollar mark, but if the price is $100,000 it takes just 10,000 patients. At $200,000 it’s 5000. Anyway, you get the idea.

You don’t see these dynamics in other fields, but healthcare is different. The two big drivers: third-party payment that shelters patients from the real costs of treatments and an aversion to talking about anything that could be construed as “rationing.”

In fact, as Kaiser Health News reports (States Limiting Patient Costs For High-Priced Drugs) public policy is moving even further away from using cost-sharing to constrain demand by limiting out-of-pocket payment amounts to as low as $100 per month. These policies will backfire as cost containment mechanisms because they will just end up boosting premiums.

Some other states are considering bills to require manufacturers to report their costs for high-priced drugs. That strikes me as pretty useless as well. If it’s a first step toward capping prices, that may discourage companies from moving forward with risky development programs for orphan diseases.

So what can be done, if anything? Well, a few things:

  • Use step therapy and similar programs to try less expensive treatments before defaulting toward the priciest. These programs are used today, but too often patients jump right to the high-priced specialty drug without seeing if something else would work
  • Shift the site of service for infused drugs away from hospital outpatient settings toward the home or physician’s office, which is much less costly
  • Encourage comparative effectiveness research and the adoption of quantitative measures such as Quality Adjusted Life Years (QALYs) to compare the efficacy of different treatments
  • Demand real-world, patient outcomes data from marketed products
  • Once a specialty (biologic) product has been on the market for several years and its patents have expired, regulate its price. This is a safer, more cost effective approach than encouraging so-called biosimilars

Image courtesy of Salvatore Vuono at

By healthcare business consultant David E. Williams, president of Health Business Group.

King v. Burwell: A frivolous lawsuit

What do you think will happen to Obamacare if I press this button?

What do you think will happen to Obamacare if I press this button?

Some are surprised that Chief Justice John Roberts came out so strongly for the government in King v. Burwell, the lawsuit that aimed to bar insurance subsidies from Obamacare exchanges run by the federal government.

I’m not a lawyer or Supreme Court scholar but to me Roberts’ stance isn’t surprising at all. King v. Burwell was a joke –an exemplar of the type of “frivolous lawsuit” some on the right are so fond of citing. Roberts wants the Court to be taken seriously both now and in retrospect, so this was an easy decision.

Let’s face it:

  • Congress’s intent was clear –to provide subsidies regardless of the mechanism a state chose to implement its exchange
  • There was no discussion by anyone at the time of drafting about any difference in subsidization on state v. federal exchanges
  • Every state –including those led by Obamacare foes, interpreted the law the way Congress intended
  • The legal argument was the result of opponents sifting through the minutiae of the law to find any argument that might be used against it
  • The plaintiffs –if they even understand the argument– have not been harmed by the law

Frankly, it’s hard to take the consenting Justices seriously.

Image courtesy of Stuart Miles at

By healthcare business consultant David E. Williams, president of Health Business Group.