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Insurers and Hospital Industry Caught Spreading More “False Alarms”

October 24, 2016
Yet again, Big Insurance and its allies have been caught making claims that are just not true.

It began with an op-ed from America’s Health Insurance Plans (AHIP) President Marilyn Tavenner and American Hospital Association President (AHA) Rick Pollack in The Hill trying to blame others for ever-increasing  insurance premiums.

Next, they tried to suggest drug costs are to blame for skyrocketing hospital costs.

The study was funded by both the American Hospital Association and the Federation of American Hospitals. According to STAT News, the study “gathered pricing data from 712 US community hospitals and two group purchasing organizations” and found drug spending by community hospitals increased by over 23 percent.

Unfortunately for them, the hard data shows their claims are wrong.  Try as they might to shift the blame, they can’t hide from the facts.

First, on their skyrocketing insurance premiums:

A recent study from Avalere examined insurers’ 2017 rate justifications and found that prescription drugs are not a major driver of insurance premiums.

In fact, spending on hospitals and doctor visits account for a large majority of the rise in premiums.

More broadly, IMS Health found that the price of net branded drugs rose just 2.8 percent in 2015--that’s roughly on par with inflation. Also, a recent PwC report noted “Drug spending is still a relatively small portion of overall health spending and, as such, concerns of ever-increasing cost growth from new cures may trigger false alarms.”

False Alarms.

And when it comes to hospitals, once again, it’s clear that our industry is the solution and not the problem.

As Adam Fein of Pembroke Consulting noted in STAT News, many hospitals can mark up the costs of drugs in order offset their own losses:

“They cherry-picked the time period and the drugs, and ignored the opportunity to recapture revenue that hospitals have,” he said. “I think it’s more of a political study than an actual measurement of drug costs.”

And hospital markups on drugs are enormous—an average of 590% according to a recent study published in Health Affairs. The authors found that these markups are used to “maximize revenue” and are used by hospitals to supplement any lost income due to lower reimbursements from government payers. These markups can increase out-of-pocket costs for patients and increase premiums.

This phenomenon is nothing new however.

Innovations from the biopharmaceutical industry can save money to both the patient and the broader healthcare system—curbing costly hospital stays and doctor visits.

And yet, according to CMS’ own data, Big Insurance forces patients to pay 5 times more in cost-sharing for prescription drugs than they do for hospitals.

Big Insurance is doing everything it can to keep from covering patients. Through outrageous cost-sharing or specialty tiers, they’re more eager than ever to push sick people from their plans.

The insurance industry will do anything to deflect blame for their own broken system. We’re on the cusp of a new golden age of medicine consisting of 21st century breakthroughs. Yet we’re paying for it with an American insurance system that has barely changed since the early days of the Cold War.

As I’ve said repeatedly, we want nothing more than for our organizations to come together and find lasting solutions to fix our broken healthcare system. In fact, that’s the only way true and lasting reform will actually happen.

But there is simply no way to find that solution if Big Insurance and their allies refuse to acknowledge the problem in the first place.

I stand ready and eager to be a part of the solution, but until then, I will continue to set the record straight when those in the insurance industry attempt to use us as a scapegoat.