Cost Control’s Growing Complexity

By Zack Buck

A paper entitled “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured” has a number of health policy experts talking this week. Authors Zack Cooper, Stuart Craig, Martin Gaynor, and John Van Reenen—as part of the Health Care Pricing Project—present new findings demonstrating that geographic areas with low Medicare costs and geographic areas with low private insurance costs are nearly completely unrelated. That is, locales with comparatively low Medicare costs are not necessarily areas with comparatively low costs for care paid for by private insurers. Though stunning, this lack of relation between the two metrics does make sense; the report notes that Medicare’s costs are largely driven by the amount of provided care and services, whereas care paid for by private insurance is largely affected by the price at which the care is set by each hospital. (Kevin Quealy and Margot Sanger-Katz of the New York Times have a number of interesting graphs and charts that reflect the study’s findings here.)

Indeed, before the study, and because of a dearth of private insurance pricing data, many simply believed that locales that were cheaper for Medicare were cheaper for private insurance—that is, areas that were great stewards of Medicare funds were likely efficient for private insurers as well. But this new paper demonstrates that this is not true. The two metrics are completely separate.

At the risk of overstating it, this finding could drastically change the paradigm for controlling health care costs going forward. The paper got the attention of Atul Gawande, who noted its importance in an article for The New Yorker. There, Gawande revisits the story of McAllen, Texas, which focused on exploding Medicare costs largely driven by large volume. (I even look at the McAllen story in a forthcoming article here because of its fascinating impact on cost control for Medicare.)

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Bioethicist Art Caplan: Shkreli Isn’t to Blame For High Drug Prices in U.S.

A new piece by Bill of Health contributor Art Caplan on NBC News:

Should we care about Martin Shkreli, the man I call the “Wolf of Pharma Street”? His hoodie-wearing perp walk sparks outrage, but he is diverting attention from far bigger and more important systemic problems regarding the cost of drugs for all Americans.

Shkreli, the former Turing Pharmaceuticals CEO, has been indicted by the feds for allegedly running a Ponzi scheme to keep his various drug company investments afloat.

Before the feds came calling to charge him with securities fraud, Shkreli had secured the manufacturing license for Daraprim which is used to treat nasty, often fatal protozoal infections in, among others, those with AIDS. Shkreli, grinned, flipped the rest of humanity the bird, and raised the 62 year-old drug’s price by 5,500 percent; from $13.50 to $750 per tablet overnight — thus retiring the “Biggest Jerk in Health Care Award” forever. […]

Read the full article here.

Bioethicist Art Caplan: Cruz or FDA – Who do you trust with your health?

Bill of Health contributor Arthur Caplan and his colleagues have a new piece up on The Hill Blog:

Sen. Ted Cruz (R-Texas) not only wants to be your president; he wants to decide what medicines you can get. On Dec. 10, Cruz and Sen. Mike Lee (R-Utah) introduced legislation intended to speed up Food and Drug Administration review of drugs and devices that have been approved in certain foreign countries. The Reciprocity Ensures Streamlined Use of Lifesaving Treatments (RESULT) Act would require FDA to approve or reject within 30 days of application any drug or device that has been approved in a “trusted” foreign country — specifically, Canada, Australia, Israel, Japan, and the European Union members. Should the FDA reject an application, Congress can override the agency. […]

Read the full post here.