What’s a small state to do? (A health care agenda for Maine’s next governor)

Here in Maine, we’ll have a new governor come January. That combined with federal action that has undermined the Affordable Care Act (ACA) makes this a good time to ask what we, as a small, poor, mostly rural state, can do to improve health care for our residents.

In case you’ve been distracted by all the other news; in addition to the Administration’s sabotage over the past two years, there is a pending court case that puts protections for those with preexisting conditions at risk, plus Republicans are already talking about trying again to repeal the ACA if they keep control of Congress. All these events come together to heighten the need to change Maine law to guarantee the protections codified by the ACA. If the past few years has taught us anything, it’s that victory is fragile. So even if the Democrats take back the House (a result far from certain), we will still need to proceed.

While it’s important to talk about ACA protections, when we talk about a health care agenda for Maine, we need to talk about much more. We need to talk about fulfilling the ideal that every individual has “access to the health care they need when they need it.” Access implies it is affordable to the individual; health care implies it is quality care. Or to put it another way, as a state we should be talking about health care and the interrelated components of access, cost, and quality.

My message to you today is one of hope – turns out when we dive into the details, there is a lot we can do.

Let’s start with a list. Below the list, I’ll dive into varying degrees of detail about each of the components. Before we get started, a note about hubris – I have spent my career (and life) coming to grips with how much I don’t know. This list and the descriptions are just a beginning. I hope they represent a decent start at creating a health care agenda for Maine, but I’ll consider this a success if all they do is start the conversation.

Access

• Implement Medicaid expansion
• ACA Defense
• Regulate short-term medical plans and association health plans
• Provide state enrollment assistance to fill in for federal reduction
• Codify in Maine law the ACA’s pre-existing condition exclusion prohibitions
• Codify in Maine law that health care coverage means coverage of an essential benefits package
• Consider a state individual mandate to purchase insurance (NJ and MA have already done so)
• Address remaining uninsured

Cost

• Work on an all-payer global budget proposal for the state
• Create a Medicaid buy-in plan as a public option for the 2020 plan year
• Revise Maine’s reinsurance program 
• Address prescription drug cost issues 

Quality 

• Work on social determinants of health
• Address rural health care starting with maternal health
• Restore public health infrastructure 

I’m sure some of you are wondering why one item did not make my list. It was a deliberate decision not to include the pursuit of a state-based single payer system. I support the principle of universal coverage – remember, single payer is just one way to achieve that goal. I have questions about single payer – I’m not convinced it is the right option for our country at this point in our history – but even if you disagree and think single payer is the way to go, it’s just not a realistic goal for Maine in 2018.

“Across the country, many Democratic candidates who made that a centerpiece of their campaigns in key districts this year lost their primaries, in some cases getting clobbered by rivals who offered vaguer health care plans or backed a more incremental approach.” (Why ‘Medicare for all’ is playing poorly in Democratic primaries).

For more information, read what is probably my favorite piece on the topic: Single Payer Is Not a Principle (The principle is universal coverage. There are several ways to get there. We need to remember this. By Harold Pollack)

“Much of the internal Democratic Party debate confuses instrumental operational questions with questions of core principle. By which I mean, to put it more simply: Single payer is not, in itself, a principle. It is one way to organize health-care financing. A regulated patchwork of private insurers undergirded by public subsidies and the individual mandate is another. In other words, these arrangements are a means to an end, not ends themselves. After all, most American progressives would be thrilled to see the Dutch or German health-care systems enacted here, though neither of these is actually single payer in the sense that Medicare is.

The end—the core principle at stake—is universality. A wealthy and humane democracy must provide decent health coverage to everyone—coverage that actually works to prevent and treat serious illness, injury, and disability. On this principle, progressives are in total agreement. We’re no longer debating the goal of universal coverage. We’re debating how to get there. And it’s important to remember that.”

Now, as promised some more details on the agenda items.

ACCESS

Regardless of what you think about the ACA, there is no denying that it provides health coverage to more people than have ever had it before. But the work is not done. 

Implement Medicaid expansion

The first task is obvious. The new governor should instruct the Maine Department of Health and Human Service to implement the Medicaid expansion already passed by the voters and confirmed by the legislature.

ACA defense

While Medicaid expansion has gotten the most attention, many actions can be taken on the state level to counteract GOP sabotage on the national level. These include (but are not limited to) regulating Association and Short-term medical plans, providing enrollment assistance to make up for the reduction in federal funds, defense of pre-existing condition exclusion limitations, essential health benefits and community rating, and finally consideration of a state-level mandate (passed in NJ, existing in MA, although I acknowledge this would be a heavy lift here in ME).

In the event, the current lawsuit arguing that with the suspension of the mandate penalty, certain provisions of the ACA are null and void, compared to other states, Maine has limited (but insufficient) protections. As you can see in this chart from The Commonwealth Fund, independent of the ACA Maine would still have guaranteed issue meaning everyone could get a policy. However, the prohibitions on preexisting condition exclusions would go away, meaning that while you would be able to get a policy, it might not cover the condition for which you most need coverage (e.g., you have a heart problem, and cardiac care would be excluded).

Address remaining uninsured

To begin to address this question, we must ask, after ACA implementation, who remains uninsured? The following is excerpted from the Kaiser Family Foundation resource pages: Key Facts about the Uninsured Population. 

“Most uninsured people are in low-income families and have at least one worker in the family. Reflecting the more limited availability of public coverage in some states, adults are more likely to be uninsured than children. People of color are at higher risk of being uninsured than non-Hispanic Whites.

Undocumented immigrants are ineligible for Medicaid or Marketplace coverage.14 While lawfully-present immigrants under 400% of poverty are eligible for Marketplace tax credits, only those who have passed a five-year waiting period after receiving qualified immigration status can qualify for Medicaid.”

In other words, the bulk of the uninsured are those living in states that have not expanded Medicaid, undocumented individuals and those who have concluded that despite available assistance they still cannot afford coverage. 

Implementing Medicaid expansion, as discussed above, will go a long way towards providing coverage to those currently without, but we also must find creative ways to provide care to the undocumented, and as we discuss below, find ways to address the overall cost so that the available assistance is enough to make coverage affordable.

COST

The US spends a greater percentage of its money on health care than any other nation. In the old days, some thought that was because we had better care and some thought that was because we had more care – but it turns out neither is true. The one simple reason we spend more is our prices are higher. We don’t get more tests or other care than many other countries, and we don’t have better outcomes than many other countries (remember, higher cost doesn’t mean higher quality). What we have are higher prices. As the late, great economist Uwe E. Reinhardt put it with his coauthors in their seminal 2003 paper: It’s the Prices Stupid. 

However, when we talk about people not being able to afford health care (we’ll get to all the myriad ways that express itself) and look to rectify the situation, addressing the fundamental issue of high prices must be at the top of the list.

Let’s start by acknowledging that it is not just the uninsured who have cost issues with medical care. From a Kaiser survey: …”That brings the total percentage of non-elderly people with insurance and affordability problems to 26.2%” (It's not just the uninsured — it's also the cost of health care).

As mentioned above, the cost issue expresses itself in different ways – for some it is high premiums (remember, with the ACA’s medical loss ratio provision insurers are limited in how much they can charge above the cost of services paid out – so the bulk of the premium is determined by the underlying cost of care), and for some it is high out-of-pocket costs such as high deductibles and high coinsurance levels. For many, these high out-of-pocket costs are exemplified by what they pay for prescription drugs (we’ll get to drug costs in a minute). 

We can see that steps to lower premiums and out-of-pocket cost would help many, but it will be by fundamentally lowering the cost of care that would be most impactful.

All-payer Global Budgets

One state has made more progress than any other in addressing the underlying cost issue – that is Maryland and their use of an all-payer global budget. Briefly: “all payers in the state set annual global budgets for hospitals to cover both inpatient and outpatient care. The idea was that the fixed, predictable revenues would give hospitals flexibility to invest in care improvements and make care more valuable for patients and payers.” (Maryland's radical all-payer model was just extended through 2023)

This model is one of, if not the most promising experiment going on in the country to get prices under control. I don’t underestimate the difficulty in bringing an equivalent system to Maine, but it would have a real impact. I believe we must work on a global budget proposal for the state

Medicaid buy-in

While we work on long-term solutions, there are steps to take that can immediately help some of the various groups impacted by affordability issues.

For those who can’t currently afford coverage, because they are either not eligible for subsidies or the subsidies they are eligible for are insufficient, I continue to encourage the introduction of a Medicaid buy-in plan as a public option for the 2020 plan year. Creating a “Medicaid buy-in” option would provide a more affordable health coverage than currently available.  The Medicaid buy-in benefits from using the government reimbursement rates instead of prices negotiated by commercial insurers. It is also worth exploring providing this option to small employers.  Over the years we’ve heard from many small employers that they would like to do more for their staff re health benefits, but they can’t afford the premiums. One of the advantages of creating a Medicaid buy-in for Maine residents is that while being a less expensive option, it can be nearly revenue neutral for the state’s budget. Recently this idea has gained popularity as being something that a state can construct without Federal action/approval, unlike a Medicare buy-in or a national public option, ('Medicaid-for-all' Rapidly Gains Interest in the States). 

Revise Maine’s Reinsurance Program

Another way to reduce premiums is by reinsurance – provided the reinsurance program brings “new money” into the system. Maine recently received approval (and funding) from the CMS to restart the MGARA (Maine Guaranteed Access Reinsurance Association) through a 1332 waiver. We saw from the two sets of proposed rates filed before the approval (rates assuming approval and rates assuming no program) the federal money, along with the assessment on all private health coverage in the state, will lower premiums. However, I propose revising the reinsurance program making it less complex and administratively burdensome. As I said when the waiver passed – some reinsurance is better than no reinsurance, but a more straightforward less complex plan would be much more efficient than the one we currently have.

Prescription Drug Costs

One of the most visible examples of health care cost problems the prescription drug cost issue. Before we can evaluate what state action can truly be impactful, we need to start by understanding that the drug pricing problem is not a single issue, it is several overlapping issues. The complexity of the issue means, sadly, there is not one silver bullet to fix it. 

Let’s start with paying for the drugs – when we do; we need to understand both out-of-pocket costs to individuals who are insured, costs to individuals who are not insured, and costs to the various elements of the system including private payers like large employers, the federal government, and state governments.

Some solutions that have been offered, such as limiting out of pocket (OOP) costs in insurance, would only shift the dollars around. We can mandate that OOP costs for insured individuals don’t exceed a certain amount per year (although as a state, we can only issue mandates for limited subsets of the covered population), but in isolation, all that does is increase costs elsewhere by driving up premiums. This is not to say that the amount spent by individuals shouldn’t be considered – it must be – but it can’t be considered in isolation.

It’s also worth thinking about the different cost issues when we look at the brand and generic dichotomy. Both types of drugs require attention, for reference note that brand drugs account for 73 percent of retail drug spending, despite comprising only 11 percent of prescriptions (http://www.gphaonline.org/media/generic-drug-savings-2016/index.html). 

Starting with generic drugs, some of the issues that need to be addressed are:

• Biosimilar obstacles - Five of the top 10 selling drugs have biosimilars approved, but most are not on the market due to litigation
• Generic introduction obstacles – Generic manufacturers can’t get samples from brand manufacturers; patent lawsuits slow the generic development process and pay not to play contracts exist
• Generics with only a single source yield higher prices

On the brand side, the factors leading to high costs include:

• Lack of competition during the patent exclusivity period – this is by far the largest issue
• Extension of patent exclusivity period by slight changes to a formulation that may not provide clinical benefits
• Cost-plus reimbursement for physician-administered drugs in Medicare means providers are incented to use higher-priced medications

Maine has recently passed legislation attempting to address some of these issues, the impact the measures will have remains to be seen. As mentioned above, there are no silver bullets. It is likely that any measure that impacts the cost of drugs will involve limiting the choices available in an individual’s coverage. Those who propose more negotiations should remember that the only way to effectively negotiate is by being willing to walk away. Other countries have done a better job than us at controlling their drug costs because they have said no to some drugs. We can make progress on the issue, but it will be done in incremental steps and undoubtedly involve trade-offs.

QUALITY

Even if we were able to snap our fingers and eliminate all the access and cost issues associated with providing health care, the work would be far from done. I can’t begin to cover this topic in any comprehensive fashion, but it’s vital that as we think about moving forward as a state, the quality of care be part of the conversation. 

To begin, let’s acknowledge that medical care is only a small part of what determines a person’s health status. The implication is we need to expand our definition of quality care to cover as many determinants as possible. There are five generally accepted determinants of health:

1. Biology and genetics. Examples: sex and age
2. Individual behavior. Examples: alcohol use, and smoking
3. Social environment. Examples: discrimination, income, and gender
4. Physical environment. Examples: where a person lives and crowding conditions
5. Health services. Examples: Access to quality health care and having or not having health insurance.

Social Determinants of Health

When we talk about quality, we need to expand our discussion from just talking about health services. One field of work revolves around the Social Determinants of Health:

“Our health is also determined in part by access to social and economic opportunities; the resources and supports available in our homes, neighborhoods, and communities; the quality of our schooling; the safety of our workplaces; the cleanliness of our water, food, and air; and the nature of our social interactions and relationships. The conditions in which we live explain in part why some Americans are healthier than others and why Americans more generally are not as healthy as they could be.” 

Rural health

There are a myriad of issues that need attention. Rural hospitals have been closing impacting the availability of care. It may be the right decision to close certain hospitals, but we need to assure that there are appropriate replacements for needed services. Maternity care is one area where providers have not found it “cost effective” to locate needed services in sparsely populated areas. While that may be an appropriate decision for the provider group, it may not be an appropriate decision for society. We need to acknowledge that maternity care is a “public good” – a service that we all have a stake in seeing made available regardless of profitability – and create a system where expectant mothers are getting the care they need. Similarly, we need to assure access to emergency services. The question of how to structure a cost-effective system that both provides quality care and accounts for individuals barriers (transportation, lodging for family members, etc.).

Restore public health infrastructure

During LePage’s two terms in office, we’ve seen the closing of school-based health centers, the ending of public health partnerships and the elimination of public health nurses. We need to restore services and recreate an efficient, effective public health system here in Maine.

The areas listed above merely scratch the surface of the work that needs to be done. I’d be remiss not to mention that there is already much work on quality issues being done here in Maine. Continuing and enhancing that work is vital.  

CONCLUSION AND DISCLOSURE

As we’ve seen, there is much Mainers can do to continue our tradition of caring for each other. As I noted above, this list isn’t meant to be “final,” it’s meant to begin the conversation. I hope it shows the breadth of actions we can take to bring us closer to the ideal of providing everyone the health care they need when they need it.

Finally, I note this is a good time for the discussion due to the impending change in governors. But please note I am not affiliated with any specific campaign. A check of the public record will show that I have contributed to Janet Mill’s campaign and I state proudly here that I intend to vote for her. But I bear sole responsibility for this piece; the campaign was in no way connected to its creation.

The President’s Drug Price Address: Smoke and Mirrors With a Dash of Policy

I wanted to believe something would come of this speech-- I really did. As a candidate, the President talked about doing something material about drug pricing including having the government (through Medicare) directly negotiate prices as well as other substantive changes. Sadly the speech given by the President and the accompanying “plan” released by HHS (American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs) will do little to impact drug prices. To be fair there will be some impact, but nothing fundamental will change.

In case you’re wondering, it’s not just me who had that reaction, and it’s not just those who oppose the current administration. The stock market also found nothing to be concerned about on behalf of the drug manufacturers. As noted by Bob Herman in Axios: Pharma stocks boom after Trump's drug speech. This headline from EndPoints News sums up the general reaction to the speech: Trump’s ‘sweeping action’ to lower drug prices mocked by analysts as relieved investors trigger rally in Big Pharma stocks.

I spend a lot of time (my wife would say too much) thinking about drug prices. I write a weekly newsletter for ICER on the drug industry and recently, I had the opportunity to speak to Maine Senator Angus King about high drug prices. To understand what was and wasn’t addressed by the President’s speech, we need to start by understanding the problem; during my conversation with the Senator, I discussed how the drug pricing issue is really several different problems. Let’s look at those issues and how the President did and did not address them.

One way to categorize the problems is by looking at two dichotomies (generic vs. brand and price vs. cost) and the resulting four areas of concern (understanding there are overlaps and interaction between the categories):

• Generic drugs (availability and lack of competition)
• Brand name drug (including unique issues for specialty and orphan drugs)
• Cost to the system
• Price individuals pay (out-of-pocket cost) 

The President touched on these issues and added his standby, criticizing other countries. In the words of Jonathan Cohn in the Huffington Post: “There is one element of the administration’s drug strategy that has a distinctly Trumpian tinge to it: criticism of other countries.” (Trump’s Plan On Prescription Drug Prices Looks Nothing Like What He Promised).

Let’s start with this one – The President argues that other countries "extort unreasonably low prices". The problem with that characterization is that it’s just not true. Other countries negotiate drug prices (remember, he said he wanted Medicare to negotiate while campaigning). Additionally, no one thinks the prices other countries pay for drugs impacts what we pay – do you think if a firm was getting more in England that would make them charge you less? And finally, even if it was true that foreign prices were the fundamental issue, how does he think he is going to influence what other countries pay for drugs

However, as I mentioned above, there were some positives in the speech. Many of the positives were the steps outlined to address the issues around generic drugs – perhaps the area that is “simplest” to fix. Before we proceed, for reference note that while fixing the problems around generics is important, brand-name drugs account for 73 percent of retail drug spending, despite comprising only 11 percent of prescriptions (http://www.gphaonline.org/media/generic-drug-savings-2016/index.html).

Among the generic issues that need to be addressed are:

• Biosimilar obstacles - Five of the top 10 selling drugs have biosimilars approved, but most are not on the market due to litigation (biosimilars are generic versions of biologics)
• Generic introduction obstacles – Generic manufacturers can’t get samples from brand manufacturers, patent lawsuits slow the generic development process, and pay not to play contracts exist
• Generics with only single source yield higher prices

The administration’s plan includes some specific measures to impact these issues. Additionally, before release of the administration’s plan, there was already some movement on these with the FDA identifying the issues, the CREATES Act trying to control in some of the abuses, and the new non-profit generic drug manufacturer being started by an alliance of hospitals (currently over 1/3 of the hospital systems in the country are participating).

Sadly, while there are some concrete steps in the administration’s plan, overall the document is a laundry list of proposals with no timeline for implementation. The document also has many places where it discusses seeking input on addressing identified issues (although the plan itself discusses no method for providing input). Seeking input is good, but clearly, this plan is not “the most sweeping action in history to lower the price of prescription drugs for the American people” as the President claimed during his speech.

Next, let’s talk about brand name drugs; among the factors leading to high costs are:

• Lack of competition during the patent exclusivity period 
• Extension of patent exclusivity period by slight changes to a formulation that may not provide clinical benefits
• Cost-plus reimbursement for physician-administered drugs in Medicare means providers are incented to use higher-priced medications

There is not much in the administration’s plan to address these issues (although there is reference to increased use of value-based purchasing, a way of assigning and paying more appropriate prices for drugs based on research into the drug’s value) and the administration’s plan does identify the physician-administered drugs as an area to address.

There are other more fundamental ways to change the way drugs are developed not touched on by the administration’s plan. Ideas such as “prizes not patents” that would offer a set dollar amount as a prize for a new drug that treats a specific condition and Building a NASA for Prescription Drugs would be game-changing: I’d love to see these ideas getting more attention and discussion.

Cost to the system - one proposal receiving attention is requiring manufacturers to include the list price of the drug in their advertising. I have my doubts about this – both with the legality of the measure and with the impact it would have – but it certainly sounds good, doesn’t it?

Out-of-pocket costs - the plan does focus on i current system of rebates used by manufacturers and pharmacy benefit managers (PBMs) on behalf of the drug purchasers. The President singled out PBMs as being a problem, and there is no doubt they have garnered their share of profits. Certain actions such as working to provide more transparency to the rebates and eliminate gag clauses (that prevent pharmacists from talking about less expensive options) are positives that will reduce what an individual (if they are insured) pays at the drugstore.

However, it’s worth noting that while some of the rebate money goes to the PBMs, much of it goes to the payers where it is used to reduce premiums (the medical loss ratio rules in the ACA see to that). So ultimately, the system won’t save any money, and many individuals won’t save much since they will face higher premiums in exchange for the lower copay or coinsurance amount.

Also, worth noting is that the environment is not static. The PBM landscape was already in a state of upheaval as the CVS-Aetna and Cigna-Express Scripts deals move forward. It is unclear what these new relationships will mean for how PBMs conduct their business.

Another way the administration’s plan tries to address costs is the proposal to allow Part D formularies (formularies are a list of drugs covered by the plan) to have one drug per class instead of two – the theory being this will allow for “tougher negotiations.” Like with so much in health care, the implementation of this idea will determine its impact on patients. Restricted formularies can be an appropriate cost-saving strategy, but they must have adequate exception procedures. While many will be able to use the drug in the formulary, there will always be some who need one of the alternatives. Moving from two drugs per class to one will increase the number who will need to go outside the formulary increasing the importance of an appropriate exception process.

Above, I’ve done my best to approach the Administration’s plan with an open mind. There are some parts of the plan that will help although there is not as much substance as we had hoped. The President did not include two of his major campaign promises – Medicare directly negotiating prices and the importation of drugs from other countries. (Personally, I was not disappointed at the omission of the importation idea – I don’t think it would work as discussed in Appendix 1 below.)

After so much build-up, the reality is that the plan is just smoke and mirrors with a dash of policy thrown in.






Appendix 1 - Drug Importation

This idea, while not included in the administration’s plan is popular. Several states (Vermont being the farthest along) are looking to do this on their own. However, I remain skeptical and believe that at best this might be a transitional solution. Before I get to the reasons I don’t think this strategy will work, let me comment on the safety argument against importation. I consider this a scare tactic and not a reason to oppose importation – I’m sure all else being equal it would be possible to ensure the safety of Canadian drugs being imported into the US.

However, all else is not equal, and there are fundamental reasons why the strategy won’t work long term. Importing drugs from other countries is essentially outsourcing out drug pricing problem. There are difficult discussions to be had and decisions to be made regarding drug pricing; it won’t work if we try to point to Canada and say I’ll have what they’re having…

Other countries have lower prices than us for a reason. They obtain them by negotiating the countries single price for a drug. The key to a successful negotiation is the ability to say no – that above a certain price the purchase won’t be made – in the US we don’t negotiate a single price for everyone. And while some benefit plans do say no to certain drugs, most government plans (like Medicare and Medicaid but not the VA) essentially are not allowed to say no.

Why would a manufacturer agree to supply enough drugs at the Canadian price to export to the US when they are currently earning a higher price in the US? It would be a simple matter for them to restrict the Canadian purchasers from reselling the drugs, or to restrict the supply so that there was no product available for export. Again, while importation sounds like a good idea, if tried at any scale I don’t believe it would work.




Appendix 2 - Additional Resources

• Kaiser Health Tracking Poll – March 2018: Views on Prescription Drug Pricing
• Prescription Drug Spending in the US Health Care System (American Academy of Actuaries)
• Policy Strategies For Aligning Price And Value For Brand-Name Pharmaceuticals (Steven Pearson, Len Nichols, Amitabh Chandra)
• What are the recent and forecasted trends in prescription drug spending? (Peterson/Kaiser Charts)