By George W. Chapman
As previously reported, the Inflation Reduction Act (IRA) caps out-of-pocket copays for drugs at $2,000 annually starting this year. This is great news for seniors, many of whom paid a lot more than $2,000 a month in copays.
Unfortunately, the $2,000 cap does not apply to consumers covered by employer commercial plans.
Medicare is able to cover the additional cost associated with the $2,000 cap by paying billions less for drugs. That is accomplished by the Inflation Reduction Act (part two) which gives CMS the authority to finally negotiate prices with manufacturers.
Until the IRA, negotiating drug prices was literally prohibited by law which is testament to the power wielded by the drug manufacturers lobby. CMS is allowed to negotiate the price of 10 drugs effective next year. Congress has begrudgingly agreed to allow CMS to negotiate. Why not negotiate all drugs, you ask? It might have a little to do with campaign contributions from the drug lobby. In 2023, members of both sides of the aisle received an average of $57,000. Be that as it may, 10 is better than nothing. If the new administration is looking to cut costs, then what Medicare pays for drugs
is a great place to start.
The chart below shows the negotiated price, deemed the MFP or maximum fair price, (fair to whom?) of the 10 drugs prices effective next year, versus the average price paid by countries with universal healthcare. (I couldn’t find the current 2025 price per drug paid by Medicare.)
Despite our best effort at negotiations, we are still paying way more than other countries. Imagine the copay for Imbruvia at $10,619 a dose without the $2,000 cap!
The second chart shows the approximate total population in millions of the countries that pay (still) far less than the US despite our-soon-to-be “reduced” 2026 price. Medicare alone covers 70 million people. That is more than the total population of seven of the 10 countries listed. Where is our strength in numbers when it comes to negotiations? Where is our volume discount? The amount of money that would be saved if Medicare could negotiate on behalf of our total population (335 million) would be hundreds of billions. I’m including the savings that would also be achieved by commercial insurers as well. But until the stranglehold the drug lobby has on congress is eliminated, don’t expect much improvement in healthcare costs let alone delivery.
Medical Debt
Medical debt has forced many people into personal bankruptcy. The $2,000 cap on out-of-pocket costs for drugs established by the Inflation Reduction Act may well prevent many bankruptcies for seniors in the future. The Federal Consumer Financial Protection Bureau just issued regulations which (at least) bars medical debt from affecting your credit rating. Credit agencies cannot include your medical debt on credit reports. The regulation also precludes lenders from considering medical debt when considering loans for borrowers. But despite the media frenzy and uproar over healthcare equity created by the murder of United Healthcare CEO Brian Thompson, don’t expect any substantial changes to how healthcare is delivered for the foreseeable future.
Bird Flu
Understandably, post-COVID-19, we are hyper aware of any potential epidemic. Bird flu has been getting a lot of attention lately. As of early January, there has been just one death attributed to bird flu or the H5N1 virus. The deceased was a senior (older than 65) resident of Louisiana with multiple underlying medical conditions. He was exposed to a backyard flock of wild birds. To date, there has been no indication the virus is spreading person to person.
MD Pay Cut
The January bill to fund the government another three months did not include a provision to halt an illogical and unfair 2.8% cut in Medicare physician reimbursement. Considering that inflation is hovering around 3%, the 2.8 % reduction is tantamount to a 5.8% cut. Like all businesses, medical practices content with increasing labor, supply and insurance costs. But unlike other businesses, medical practices cannot compensate for rising costs by increasing charges. Few if any patients are directly impacted by physician charges as third-party insurance establishes physician reimbursement. Withdrawing from Medicare and commercial insurance and going 100% self-pay is financial suicide. Compounding the Medicare cut is the potential for commercial carriers to mimic Medicare reimbursement and lower their physician payments. The Medicare cut is just another reason for physicians to eschew private practice.
Ransomware
Hacking patient records costs U.S. healthcare almost $2 million a day. In the past six years, breaches have cost U.S. healthcare almost $22 billion. Healthcare organizations incur 17 days of down time per occurrence, according to a report by Comparitech. Six hundred and thirty-four attacks in the last six years affected more than 88 million patient records. Razor-thin operating margins make total cyber security impossible. Medicare and commercial payments do not take into consideration the added costs of cyber security. The advent of AI will only make it easier for the bad guys to hack into information systems. To add insult to injury, Medicare actually penalizes healthcare organizations when they are hacked.
Online Therapy
If you’re having trouble finding a mental health provider, you’re not alone. Roughly half of mental health providers accept insurance and almost as many don’t accept new patients. According to a Wall Street Journal survey, only 44% of Ph.D.s and psychologists accept insurance, let alone new patients. Many people are frustrated because the dearth of in-network providers creates long wait times of often several months. Online therapy is attempting to fill the void. Forbes Health has rated online providers. The top nine are: BetterHealth, Talkiatry, Cerebral, Talkspace, Brightside, Regain, Team Counseling, Faithful Counsel and Our Ritual. Services include depression, anxiety, stress, anger management, insomnia, panic attacks, eating disorders, trauma, relationships, life counseling, bereavement and more. Per Forbes, the best online therapy options were broad telehealth sites that include therapists: Amwell, Doctor On Demand and MD Live. You can get traditional therapy appointments focused on live video sessions. Ongoing therapy may require a subscription. It is best to contact your insurer before proceeding.
George W. Chapman is a healthcare business consultant who works exclusively with physicians, hospitals and healthcare organizations. He operates GW Chapman Consulting based in Syracuse.