What I'm Reading: PBM front groups, Biden on prior authorization and American's $88 billion medical debt problem

I’m constantly coming across articles and research reports about pharmacy benefit managers (PBMs) and the role they play in saddling Americans with high out-of-pocket costs for their prescription medications. But because much of what I read is in relatively obscure industry publications or behind a paywall, many folks, I’m finding, are completely in the dark when it comes to PBMs. Several readers of this newsletter–and even a legislative assistant to a congressman whose portfolio includes health policy–have asked me what a PBM is.

So we’ve decided to launch a PBM beat here at HEALTH CARE un-covered. We’ll take you through the history of what has become a massive and very profitable business for Big Insurance–or at least for Cigna, CVS/Aetna, and UnitedHealth, which collectively control 80% of the PBM market. We’ll even bring you insights from a former chief medical officer at one of the big three PBMs. He’s now a PBM and health care reform advocate.

To get started on PBMs 101, take a look at this brief Wall Street Journal video, which explains the fundamentals of the murky PBM world.

Front group season

Speaking of profits, big insurance companies are getting growing percentages of their revenues and earnings from PBMs and so-called Medicare Advantage plans. Both are under more scrutiny than ever and as a result, the industry is rolling out a massive lobbying and PR campaign to try to block Congress and state lawmakers from passing legislation that might trim those profits.

But you will not see Big Insurance visibly leading the charge. Big Insurance execs know people consistently rank health insurers among the most despised American companies, so they will pour millions of dollars into their trade associations and front groups to carry out the work.

The main trade group for PBMs is the Pharmacy Care Management Association (PCMA), which gets most of its funding from the big insurers mentioned above that have a firm grip on the PBM market. But the industry clearly has decided that a front group with no apparent ties to the insurers is needed to push back against reform advocates’ efforts.

Meet the Campaign for Sustainable Rx Pricing (CSRXP), a new group that includes not only PCMA but also AHIP and the Blue Cross Blue Shield Association, the big trade groups for Big Insurance. Other members include CVS, Anthem and Kaiser Permanente as well as a relatively new physician group, called America’s Physician Groups. When you look at that group’s website, you’ll see that many of the physician practices are owned by CVS, Cigna, UnitedHealth and other for-profit insurers and private equity firms. If you live inside the DC area, you likely will begin seeing CSRXP ads pop up in subway cars and Metro stations. That’s because their target audiences are politicians and their staffers.

Many of the CSRXP members are also members of another Big Insurance front group called the Partnership for America’s Health Care Future (PAHCF), which was created to fight reform proposals at both the federal and state levels. Among the groups’ shared members is the Federation of American Hospitals, which represents for-profit hospitals. But one PAHCF member is notably absent from the CSRXP roster: the Pharmaceutical Research and Manufacturers Association, better known as PhRMA. CSRXP wants to persuade you that PhRMA alone is at fault for the soaring deductibles patients have to pay at the pharmacy counter.

On the Medicare front, if you’re a DC insider you’re already seeing ads from a new Big Insurance-funded outfit called the Coalition for Medicare Choices. Its mission is to “protect” Medicare Advantage plans, which are highly profitable corporate-run Medicare replacement plans. Indeed, this front group–which according to its website is “powered” by AHIP–is sponsoring the Washington Post’s The Health 202 newsletter this week. You can see the ad here. We’ll break down the group’s talking points in the weeks ahead. But for now, know that the word “Choices” in the group’s name is especially noteworthy. I wrote an entire New York Times op-ed about how Big Insurance uses the single word “choice” to mislead and confuse us. 

And you can expect Big Insurance to pump a lot more money into another of AHIP’s offspring, the Better Medicare Alliance, which represents corporations like Humana, UnitedHealth, and CVS/Aetna, the big Medicare Advantage players.

Another flank to protect

Big Insurance is also under scrutiny for its increasingly aggressive use of prior authorization as a tool to deny coverage for medically necessary care. HealthLeaders Media reports that the cost of prior authorization denials increased 67% for hospitals in 2022:

The average hospital system saw 110,000 claim denials due to prior authorization and other factors in 2022, according to a recent survey. Denials rose to 11% of all claims last year, up nearly 8% from 2021. Prior authorization denials on inpatient accounts were a key driver behind the dollar value of denials increasing by 67% in 2022.

The Biden administration is joining the scrutiny of prior authorization. As Healthcare Finance News reports, the administration is responding to demands from health-care providers to reform prior auth: 

Chiquita Brooks-LaSure, administrator for the Centers for Medicare and Medicaid Services, and U.S. Surgeon General Vice Admiral Vivek H. Murthy recently convened an in-person roundtable discussion on reforming prior authorization in federally-sponsored healthcare programs, at which providers pressed CMS to finalize the reforms to alleviate administrative burdens. The Biden administration has said it's looking to remedy documented abuses in the prior authorization program and ensure patients' timely access to medically necessary care. 

Axios reports that most states are also now looking at prior authorization:

 Efforts to overhaul the prior authorization process are hitting a crescendo in state legislatures, with at least 40 states expected to consider measures that would streamline the way doctors must obtain health plan sign-offs before they can order procedures, tests or treatments. Officials like Surgeon General Vivek Murthy are blaming administrative burdens like prior authorizations for physician and health worker burnout…Clinicians say the situation has worsened in recent years, causing delays for patients, including those with chronic conditions that haven't changed in years.

Out-of-sight out-of-pockets

HealthLeaders Media reports that:

Half of the respondents in HDHPs said they've received a surprise medical bill, with 53% saying they had received a bill that did not match the upfront price estimate. More than a third (34%) of those with HDHPs stated they've been harassed by a medical debt collector, while 44% said they had experienced financial hardship from bills.

Managed Healthcare Executive reports that out-of-pocket costs are high despite the level of care provided:

A recent study found that out-of-pocket (OOP) costs for emergency surgeries are higher despite the level or quality of care received. Authors of the study, which was published in Jama Network, found that patients with commercial insurance had total and OOP costs that varied by facility for common EGS conditions without any association with quality of care, even after adjusting for patient, insurance, and clinical factors. According to the report, one in five households in the United States are in medical debt, totaling $88 billion.

Fierce Healthcare reports that employers need to pay attention to the harm out-of-pockets are causing people with diabetes–and to their bottom lines: 

Diabetes patients suffer when their employers move them into high-deductible health plans, increasing the odds that they will need to be rushed to emergency departments for severe hyperglycemia by 25%, a new study shows. The odds of this happening increase by 5% for each year an employee’s enrolled in a high-deductible health plan (HDHP). Mayo Clinic researchers concluded that “individuals with low income and from minoritized racial and ethnic groups were especially susceptible to the detrimental outcomes of HDHP transition. HDHP enrollees may be rationing or foregoing necessary care, which is detrimental to their health and ultimately increases the morbidity, mortality, and costs associated with diabetes.”

Insurers raiding the Medicare Trust Fund: WSJ, KHN weighs in; retirees waking up

Wall Street Journal reports that the government thinks it is overpaying for Medicare, spelling trouble for Insurers:

Health insurers had the best of both worlds last year. Their stocks benefited from a rotation into value and their profits weathered the inflationary environment as healthcare utilization remained low. But as managed-care companies kick off earnings season, sentiment has shifted. That isn’t because of what the most recent earnings will show. In fact, industry behemoth UnitedHealth Group Inc. earlier this month reported a 12% increase in revenue to $82.79 billion, topping analyst expectations. Yet that did nothing for the stock, which is down 8.2% for the year. The trouble brewing for insurers centers around potential government action on Medicare Advantage, the private plans that have grown increasingly popular with seniors. The plans also are very profitable for insurers. A recent Kaiser Family Foundation analysis showed that average gross margins for Medicare Advantage plans were double those of plans in the marketplace and commercial group markets. But as more seniors switch to Medicare Advantage, questionable practices that drive up their profitability have come under increasing scrutiny and the federal government seems intent on making changes that could affect their bottom line.

Kaiser Health News asks: Did your health plan rip off Medicare?

Its review of 90 previously secret government audits revealed millions of dollars in overpayments to Medicare Advantage health plans for seniors. The audits, which cover billings from 2011 through 2013, are the most recent financial reviews available, even though enrollment in the health plans has exploded over the past decade to over 30 million and is expected to grow further. KHN has published the audit spreadsheets as the industry girds for a final regulation that could order health plans to return hundreds of millions, if not billions, of dollars or more in overcharges to the Treasury Department — payments dating back a decade or more. The decision by the Centers for Medicare & Medicaid Services is expected by Feb 1.

Becker’s Payer Issues reports that New York City’s Medicare Advantage plan is “dead”:

A plan to shift New York City retirees' coverage to Medicare Advantage has stalled indefinitely. Courts have blocked the city's proposal to charge retired city employees who opt out of a Medicare Advantage plan a $191 monthly premium, ruling it violates a city law that requires retirees receive free health coverage for life. New York City Mayor Eric Adams has asked the city's council to change the city's laws to allow the fee. Council leadership has said it has no plans to vote on the bill, the New York Daily News reported.

And Vermont Biz reports that legislative leaders are opposed to a plan to move state retirees into Medicare Advantage plans:

State legislative leaders said they’re “deeply concerned” about the Administration’s stated intention to move Medicare-eligible state retirees from the State of Vermont’s insurance plan into Medicare Advantage plans without the support of state retirees. We are particularly concerned about the potential legal, financial and health implications and believe this shift undermines collective bargaining rights. 

Advocates find a victory against Trump’s REACH

On a related front, Physicians for a National Health Program (PNHP) declared a significant victory in an ongoing fight against another Big Insurance move to privatize Medicare, a Trump-era holdover called REACH, which would shift Medicare beneficiaries–without their consent–into accountable care organizations. PNHP’s president, Philip Verhoef, M.D., wrote in a February email that:

For the past 18 months, an incredible coalition of Medicare champions has worked tirelessly to push back against the privatization of our most important and beloved public health program. We’ve raised the alarm about the REACH program, which places third-party middlemen between Traditional Medicare beneficiaries and the care they need.

Despite our efforts, the program has continued to grow, from 53 Direct Contracting Entities in 2021, to 99 such entities in 2022, to 132 REACH entities as of January 1. But in a major victory for our campaign, I’m happy to report that the growth of Medicare REACH ends today.

Don’t take my word for it. Listen to what Elizabeth Fowler, Deputy Administrator and Director of the Center for Medicare and Medicaid Innovation, told the California Public Employees' Retirement System recently:

“We have no plans to open up another application period [for REACH],” she told the CalPERS Board. “There will not be any more than 132 organizations in the model and most likely no more than 2.1 million beneficiaries.”