Health Care Costs: How Do We Fix This Broken Record?

A broken record is figuratively defined as a statement or experience that is frequently, and perhaps tediously, repeated. If you’re a regular reader of this blog, you might think that I’m starting to sound like one. But as health insurers across New York prepare to submit rate requests to state regulators, I find myself answering the same questions – year after year – about why insurance premiums are rising.

The fact of the matter remains that over the past three years, the drivers of health care costs have not changed. And while there’s a lot of talk at the state and national levels about how to fix the problem, few dare to take on the true culprits: drug prices and hospital consolidation.

The recent launch of several six-figure drugs used to treat rare genetic disorders is the latest fuel in the drug-pricing firestorm. Take Exondys 51, for example. The drug is used to treat Duchenne muscular dystrophy, a rare disease affecting about 15,000 boys in the U.S. The drug received provisional FDA approval back in September after some scientists argued that the drug maker’s research was flawed. The drug sells for a staggering $300,000 to $2 million a year, depending on the patient’s weight. If follow-up studies don’t show that the drug provides a clinical benefit, Exondys 51 will be pulled from the market.

And then there’s Spinraza, a drug used to treat spinal muscular atrophy, a rare condition that often kills children before their second birthday. The drug helps children sit up, stand on their own, and walk short distances. Spinraza sells for a whopping $750,000 a year.

I was recently heartened when Governor Andrew M. Cuomo included measures to reign in drug spending in his state budget. One of his proposals, which attempted to reduce pharmacy costs for the state’s Medicaid program, was ultimately approved but narrowed by lawmakers. Meanwhile in Maryland, the state legislature recently passed a bill that would allow the state’s attorney general to bring civil action against drug manufacturers when price gouging is suspected. If approved, the law would require drug makers to justify price increases of off-patent or generic drugs.

President Trump has vowed to take action against pharmaceutical companies he says are “getting away with murder,” but the American public remains skeptical. According to a recent survey by venture capital firm Venrock, just 5 percent of business executives believe drug prices will see meaningful reform.

On the hospital side, little is being done to temper rising costs fueled by consolidation. Researchers at the Center for Health Policy at Brookings and Carnegie Mellon University’s Heinz College (say that five times fast!) said consolidation continues to drive up costs and reduce quality. The report tells an all too familiar story about the direct correlation between consolidation and higher insurance premiums, citing hospitals in highly consolidated markets that are able to extract higher rates from health insurers, thus leading to rising insurance premiums.

Here in New York, there is not much stopping hospitals from getting bigger. In fact, some might say we are actually encouraging it. The state budget includes $500 million for the Health Care Facility Transformation program, which helps struggling hospitals to be acquired. The budget also includes $30 million in cuts to a program that was pushing hospitals in the direction of value-based payments. If that wasn’t bad enough, the legislature rejected Governor Cuomo’s proposal to penalize hospitals for avoidable ER visits.

While you may think I sound like a broken record, I’m willing to bet you will soon, too. That is, when you inevitably hear in the coming months that insurance premiums are rising again. I’ve said it before and I’ll say it again (at the risk of sounding like a broken record): Health insurance premiums are nothing more than a reflection of health care costs. So please, don’t shoot the messenger.