Freedom Line Blog

In our contentious national healthcare debate, there’s one point on which we can all find a rare point of consensus:  the benefit of achieving greater transparency in medical billing and fees.  

Unfortunately, the manner by which the Biden Administration has implemented the “No Surprises Act” that took effect on January 1 so far has failed to protect consumers from obscure and needless insurance costs.  Although the No Surprises Act aimed to reform the out-of-network reimbursement process, some insurance companies continue to exploit what are known as “shared savings fees,” which in turn keeps costs higher than necessary for both employers and their employees alike.  

The Department of Labor, however, can help rectify the problem by requiring greater transparency going forward.  

By way of background, “shared savings fees” derive from out-of-network medical claims, and more specifically refer to out-of-network cost-management fees.  They’re sold to health insurance plan sponsors, typically employers, as a form of protection against surprise medical bills charged to employees.  In other words, shared savings fees ostensibly provide a mechanism for employers to save money by lowering out-of-network healthcare costs when they arise.  

The problem is that in practice, they often impose hidden fees that result in higher premiums and dubious benefits for plan sponsors and covered employees, as we explained alongside a dozen other free-market organizations in a recent coalition letter to the U.S. Secretary of Labor:    

In some cases, shared savings fees exceed total administrative fees for many plan sponsors, and some may not even be aware of the total amount they are paying in those fees.  That is partly a function of a significant lack of transparency, since insurance companies do not routinely report their revenues from shares savings programs.  Unfortunately, the No Surprises Act does not directly address those fees, and we believe that insurers should more responsibly disclose the fees that plan sponsors are charged every year to help reduce healthcare prices for millions of American families.   

The No Surprises Act should’ve made shared savings fees unnecessary.  As long as shared savings fees continue to exist as “administrative fees,” the problem of higher healthcare costs and fewer choices for consumers will fester.  The Labor Department must therefore require higher transparency and full disclosure to employers and other health plan sponsors regarding shared savings fees to help resolve this outstanding and wholly unnecessary problem.  

Gallup just released a new survey summary under the sobering headline “Americans Sour on U.S. Healthcare Quality,” but what’s perhaps most notable is when the distinctive downturn began — as ObamaCare took effect and government control over our healthcare increased significantly:

We at CFIF often warn how attempts at “drug price controls” will only succeed in killing lifesaving drug innovation, in which the U.S. leads the world without a close second.

Joe Biden’s so-called “Inflation Reduction Act” constitutes a perfect illustration, and in a Wall Street Journal piece entitled “The Inflation Reduction Act Is Already Killing Potential Cures,” USC Schaeffer Center for Health Policy & Economics fellow Joe Grogan shows how “we’re already getting signs of the damage”:

One poorly crafted provision is driving companies away from research into treating rare diseases.  In its Oct. 27 earnings statement, Alnylam announced it is suspending development of a treatment for Stargardt disease, a rare eye disorder, because of the company’s need ‘to evaluate impact of the Inflation Reduction Act.’  Alnylam’s decision turns on a provision in the Democrats’ bill that exempts from price-setting negotiations drugs that treat only one rare disease.  The company’s drug is currently marketed as treating only amyloidosis, and thus is exempt from Medicare’s price setting.  If Alnylam proceeded with research into treating Stargardt, it would lose its exemption.”

And that’s not even the end of it.  Earlier this week, Eli Lilly announced termination of a blood cancer drug because, “In light of the Inflation Reduction Act, this program no longer met our threshold for continued investment.”

Mr. Grogan proceeds to offer a must-read primer on how and why this is happening, then concludes by admonishing the next Congress convening in January to abandon this instant disaster and promote innovation instead of cheap Biden Administration talking point schemes:

The Democrats may have achieved a short-term talking point for the midterm elections, but in the long term this partisan healthcare bill will prevent patients from receiving innovative, lifesaving treatments.  A new Congress would serve Americans well by replacing the Inflation Reduction Act with an approach that recognizes the need for economic incentives to bring new treatments to patients.”

Good advice.

In the wake of this month’s catastrophic election results for Joe Biden and his party, many leftists stubbornly rationalized that voters were upset that Biden hadn’t seen more of his agenda passed, and that the answer to Biden’s and Democrats’ ills was to step on the gas and pass more of that agenda.  Well, the new ABC News/Washington Post poll offers and instant rebuttal.  The survey is nothing short of catastrophic for Biden and Democrats as 2022 approaches, with Republicans scoring record preferences (see image below).  But note something else:  This poll was conducted November 7 – 10, AFTER Biden’s “infrastructure” spending bill was passed.

“Build Back Better” Is a Loser

We at CFIF have detailed the catastrophic potential effects of passing Biden’s even larger spending bill currently before Congress, including its potentially devastating consequences for American healthcare and pharmaceutical innovation:

Specifically, they’re attempting to cement agreement on provisions that would empower the federal government to begin “negotiating” drug prices with manufacturers and imposing draconian penalties upon providers that don’t play ball.

That constitutes a scheme to bring price controls to American healthcare, with catastrophic effects, according to analyses from both the non-partisan Congressional Budget Office (CBO) as well as the University of Chicago.”

This new ABC News/Washington Post poll should offer a cautionary tale for Senators Joe Manchin (D – West Virginia), Kirsten Sinema (D – Arizona) or anyone else even contemplating voting for it.

In this week’s Liberty Update we highlight the potentially catastrophic threat of H.R. 3, the healthcare and drug price control bill that Joe Biden and Nancy Pelosi are attempting to rush through Congress.  The Wall Street Journal helpfully offers further insight this morning on how H.R. 3 would threaten lifesaving U.S. pharmaceutical innovation and leadership, including on things like the Covid vaccines:

Companies that refuse the government’s price must pay a 95% excise tax on all revenue they generate from that drug in the U.S.  They’d also have to offer the government price to private insurers.  There’s no “negotiation” when a gun is pointed at your head.  A new study in the Journal of the American Medical Association estimates that drug spending in the U.S. would have been 52%, or about $83.5 billion, lower in 2020 based on the bill’s formula.  The research outfit Vital Transformation estimates the bill would reduce bio-pharmaceutical earnings by $102 billion a year…

The hugely successful mRNA Covid vaccines are the result of years and billions of dollars in research.  BioNTech initially set out to create cancer vaccines and linked up with Pfizer in 2018 to work on a more effective flu vaccine.  Biotech firms are trying to use mRNA technology for personalized cancer vaccines, autoimmune treatments and gene therapies.”

Americans cannot allow Biden, Pelosi and Schumer to jeopardize our future health on behalf of their hyper-partisan agenda.

Today, continuing our longstanding opposition to the ruination of American healthcare by importing foreign price controls and socialized medicine, CFIF proudly joins a 75-group coalition letter to the Centers for Medicare and Medicaid Services opposing the interim final rule to implement the “Most Favored Nation” (MFN) model under Section 1115A of the Social Security Act, which forces physicians, patients and providers into a mandatory demonstration under the ObamaCare Center for Medicare and Medicaid Innovation (CMMI), and which ties prices paid for medicines in Medicare Part B to the prices paid in socialized healthcare systems of foreign nations.

Specifically, the letter explains in detail how the rule will do nothing to stop foreign freeloading off of American pharmaceutical innovation, it will reduce access to new cures (just as it has in those foreign nations), it threatens millions of high-paying American jobs, it moves America one step closer to government-run healthcare and it utilizes ObamaCare to circumvent Article I of the U.S. Constitution.

As demonstrated once again by U.S. pharmaceutical leadership in quickly developing coronavirus vaccines, we’re the envy of the world in this regard.  The last thing we need at a moment like this is to undermine our status with a potentially catastrophic unforced error like this.

Although the year 2020 was a trying one in so many ways, one bright spot that we at CFIF repeatedly highlighted is the wondrous way in which America’s pharmaceutical sector came to the rescue, achieving in one year what typically takes a decade or more:  devising and perfecting not one, but multiple lifesaving vaccines.  It’s therefore no surprise, but welcome nonetheless, that Americans’ approval of our healthcare sector and its workers skyrocketed.  Their remarkable achievements have not gone unnoticed:

Medical Sector Approval Skyrocketed

Socialized medicine advocates curiously but persistently suggest that European models offer a superior alternative to the American healthcare system that relies more on private market forces and strong intellectual property rights.  Gallup offers an important corrective, even if unintentionally.  Whereas the percentage of Americans rating their healthcare as positive has remained within a high 76% to 83% window for years, Europeans consistently rate their healthcare satisfaction substantially lower, with only Germany matching American satisfaction levels:

Germany:  84% approve/15% disapprove

United Kingdom:  76% approve/22% disapprove

France:  74% approve/25% disapprove

Spain:  68% approve/31% disapprove

Italy:  51% approve/487% disapprove

That’s important to remember as calls for socialized medicine become louder amid the coronavirus pandemic and as November elections approach.

Senator Martha McSally (R – Arizona) has broadly proven herself a stalwart ally of conservatives, libertarians and the Trump Administration in her brief tenure on Capitol Hill.  A former U.S. Air Force A-10 pilot, her votes have confirmed President Trump’s phenomenal array of judicial nominees and advanced his economic agenda to bring us arguably the greatest economic conditions in history.

She must be careful, however, to avoid potentially catastrophic missteps on the issue of healthcare and prescription drugs.

Specifically, Sen. McSally has introduced legislation and supported other Senate Finance Committee proposals that would introduce drug price controls from socialist foreign healthcare systems to the U.S., empower the Department of Health and Human  Services (HHS) to directly and bureaucratically negotiate pharmaceutical prices, allow importation of potentially dangerous drugs from foreign countries and introduce components that would erode our world-leading patent system.

It’s not by accident that the U.S. accounts for over two-thirds of all new lifesaving and life-improving pharmaceuticals introduced to the world – it’s the direct result of our strong patent protections here, and our more market-oriented approach.  In contrast, foreign nations that have introduced the principles contained in some of Sen. McSally’s legislation and bills that she supports inevitably suffer shortages, as even the United Nations World Health Organization (WHO) has acknowledged:

Every time one country demands a lower price, it leads to lower price reference used by other countries.  Such price controls, combined with the threat of market lockout or intellectual property infringement, prevent drug companies from charging market rates for their products, while delaying the availability of new cures to patients living in countries implementing those policies.

Of all new cancer drugs developed worldwide between 2011 and 2018, 96% were available to American consumers. Meanwhile, only 56% of those drugs became available in the Canda, 50% in Japan and just 11% in Greece, as just three examples. Patients in nations imposing drug price controls simply don’t receive access to new pharmaceuticals as quickly as Americans, if they ever receive them at all.

Senator McSally mustn’t sacrifice her conservative principles on behalf of prescription drug legislation that will make matters worse for American consumers, not better.  She should withdraw her proposed bill and renounce the Senate Finance Committee’s proposal, and instead support more market-based solutions that have proven effective not only with pharmaceuticals, but across all economic realms.

Alongside other conservative and libertarian organizations, we at CFIF have been highlighting the clear and present danger of Nancy Pelosi’s (D – California) proposed healthcare legislation H.R. 3 in letters to Congress and commentaries.

Pelosi’s bill includes an astonishing 95% tax on total pharmaceutical sales – not on profits, but sales – for private companies that don’t play ball to Pelosi’s satisfaction. Her proposal would also impose foreign price controls, completely restructure the popular Medicare Part D program, and create a compulsory arbitration mechanism overseen by government bureaucrats…  Pelosi’s legislation would jeopardize nearly $1 trillion in U.S. pharmaceutical investment, undermine patent protections, suffocate drug innovation and ultimately punish consumers. That’s far too high a price to pay, and responsible members of Congress must therefore stop Pelosi’s bill in its tracks.”

Now, a new nonpartisan Congressional legal analysis suggests that it’s also likely unconstitutional.  In fact, the report cites three separate provisions of the Constitution that Pelosi’s effort to commandeer Americans’ healthcare choices under federal bureaucrats’ control:

The Program created by Title I raises a number of legal considerations.  First, because the negotiation under the Program is intended to lower the prices manufacturers can charge for certain selected, single-source drugs, the Takings Clause of the Fifth Amendment may be implicated.  Second, the Program’s enforcement mechanisms – the excise tax and civil monetary penalties – may raise questions relating to the scope of Congress’s taxing power and the Excessive Fines Clause of the Eighth Amendment.  Third, the Program’s limitation on judicial review may prompt questions regarding Congress’s powers to limit the subject matter jurisdiction of Article III courts.  Finally, in setting forth the parameters of the Program, the language of Title I may implicate certain statutory interpretation questions.”

There’s reason enough for Congress to resolutely reject Pelosi’s H.R. 3 due to the negative impact that her proposal would inflict upon Americans’ healthcare, our world-leading pharmaceutical innovators and our healthcare industry more broadly.  The fact that it’s likely unconstitutional offers another reason to avoid the protracted sort of legal battles that would ensue, so that Congress can work toward solutions that actually improve American healthcare, like stronger patent protections and free-market principles.

In the ongoing debate over healthcare reform, it’s important to keep our collective eye on the ball.  In that vein, as CFIF has repeatedly emphasized, we must ensure that free market principles prevail, and that includes protecting patent rights rather than weakening them.  Otherwise, American consumers will pay the price in fewer pharmaceutical innovations, shortages and worse health outcomes.

After all, as we’ve often pointed out, it’s not by accident that the United States accounts for an astonishing two-thirds of all new pharmaceuticals in the world.  That reflects the fact that we lead the world in intellectual property (IP) protections and avoid the destructive price controls that nations favoring socialized medicine impose.  As a consequence, patients in those countries don’t receive the new lifesaving and life-enhancing drugs that we do.

Unfortunately, there’s bad news to report in that regard, as Representative David Cicilline (D – Rhode Island) has introduced the misnamed “Affordable Prescriptions for Patients Through Promoting Competition Act.”  Most conspicuously, his proposal would begin prohibiting patent protections for pharmaceutical innovators developing improvements to their existing products.

Here’s why this is important.  Existing laws that have made us the most innovative nation in history allow for patent protection for new and useful improvements to existing pharmaceuticals.  Such improvements can help patients in such ways as eliminating side effects, reducing the necessary frequency or dosage, enhancing potency, boosting effectiveness or even addressing other illnesses beyond the drug’s original purpose.

But if innovators can no longer expect patent protections for the billions of dollars and years of hard work invested in developing them, then those innovations will begin to dry up.  Developing new or improved drugs typically requires over 10 years, and only approximately 10% of new discoveries actually make it to market after regulatory approval.  Accordingly, we must enhance the prospect that the fruits of innovators’ labors will be obtainable, not diminish them.

Representative Cicilline’s proposed bill is therefore a potentially catastrophic one for American consumers, who rely upon pharmaceutical innovators more and more to save lives and maintain health.  We therefore call upon all Members of Congress to oppose it.

Bad news, socialized medicine advocates.  The latest Gallup survey on the issue shows that Americans still overwhelmingly rate their healthcare as positive.

Notably, ratings have improved since Donald Trump replaced Barack Obama, and began chipping away at ObamaCare.

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Bad News, Socialists

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Socialized medicine advocates thus have their work cut out for them in selling their program to the American electorate.

In our recent weekly Liberty Update commentary entitled “On Pharmaceuticals, HHS Contemplates Disastrous New Price Controls,” we explain how government price controls undermine intellectual property (IP) rights, stifle American innovation and ultimately punish consumers in the form of fewer new pharmaceuticals.  We therefore encourage the Trump Administration to rethink a toxic new proposal along those lines, and instead pursue a course more in accord with its generally excellent stewardship of our economy and markets to date.

In his latest weekly commentary entitled “Not Healthy to Be Naive,” John Stossel agrees, and in a nice blurb explains the real-world consequences of drug price controls:

[G]overnment-run systems save money by freeloading off American innovation.  American drug companies, funded by American customers, fund most of the world’s research and development of pharmaceuticals.  New drugs and devices are expensive, so sometimes in Britain, says Pope, ‘whenever a new drug comes on the market that can save lives, the government just doesn’t have the funds to pay for it.’

Patients, accustomed to accepting whatever government hands out, don’t even know about the advances available elsewhere.  Single-payer systems also save money by rationing care.  Hence the long waiting times for treatments declared ‘nonessential’ in Canada, Britain and, for that matter, at American veterans hospitals.”

Hopefully, the Trump Administration is listening and corrects course.

Another instructive visualization of ObamaCare’s unsustainable trajectory.  Doing nothing is not an option.

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ObamaCare's Implosion

As Barack Obama’s presidency sputters toward its end, there’s new bad news to report regarding his signature “achievement.”

As illustrated by an alarming new Gallup poll, ObamaCare has become a worsening disaster for Americans experiencing it personally.  To be sure, ObamaCare has been a public disapproval disaster since its inception.  But now, according to Gallup, a record number of Americans are reporting that it has personally worsened their healthcare:

Currently, 29% of Americans say Obamacare has hurt them and their family, up from 26% in May, and the highest Gallup has measured to date.  Meanwhile, the percentage who say the ACA has helped their family dropped from 22% to 18%.  The bulk of Americans, 51%, continue to say the law has ‘had no effect.’  As more provisions of the law have taken effect over the years, the ‘no effect’ percentage has dropped from the first reading of 70% in early 2012.”

Nancy Pelosi infamously claimed we must pass ObamaCare to find out what’s in it.  Well, Americans are finding out what’s in it firsthand, and they’re liking it even less.

Barack Obama’s solemn assurances regarding ObamaCare, including “If you like your  doctor, you can keep your doctor,” have been exposed as fraudulent.  That’s a main reason why his main “legacy” has remained terribly unpopular since its inception.

Now, another alarming factor has been added to the miserable litany:  Middle-class Americans have had the cost of it all increasingly heaped upon them.  Since 2000, U.S. healthcare spending has jumped from 13.3% of our economy to 18.2% this year.  The news gets worse for the middle class:

The government has taken on a larger share in recent years as more people age into Medicare, and the Affordable Care Act [ObamaCare] expanded Medicaid and provided subsidies for low-income people buying insurance on state exchanges.  Middle-class households are finding more of their health-care costs are coming out of their own pockets.  David Cutler, a Harvard health-care economist, said this may be ‘a story of three Americas.’  One group, the rich, can afford health care easily.  The poor can access public assistance.  But for lower middle- to middle-income Americans, ‘the income struggles and the health-care struggles together are a really potent issue,’ he said.”  (emphasis added)

Overall, middle-income Americans’ healthcare spending is 25% higher than what it was in 2007.  That means far less income to spend on other discretionary items, whether eating out, vacationing, clothing, automobiles, etc., and provides another clue as to what has made Obama’s tenure the worst stretch of economic growth in recorded U.S. history.

Heckuva job, Barack.

Maligning pharmaceutical enterprises is a curious perennial dance, one that becomes even more active during presidential campaign seasons.  That always struck me as odd, since it seems a sign of societal advance that we can complain about the price of something that saves lives and improves living conditions rather than lamenting its nonexistence.

Regardless, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) offers an instructive corrective entitled “4 Charts Explain the Economics of Drug Development.”  It is worth the brief examination and passing on to others, because it helps rebut many of the politicized myths that threaten the goose that lays the golden eggs:

“It’s not just the science that goes in to developing medicines that’s complicated.  The economics that drive the industry, allowing resources to be available so people can have access to beneficial new medicines is complicated, too.”

Each chart is worth 1,000 words, but the four broad takeaways are:  (1)  It takes ten years and $2.6 billion to bring a single drug to market;  (2)  In 2014, pharmaceutical companies spent $51.2 billion on research & development;  (3)  Only a few drugs, however, become commercial successes;  and (4)  The end result is that pharmaceuticals’ enormous investments result in people living longer and better lives.

Something to keep in mind as sometimes silly presidential campaigns get even sillier, at least in terms of maligning the innovative pharmaceutical industry.

When even The New York Times issues lamentations as the consequences of ObamaCare become more clear, it’s obvious that things aren’t going well:

Health spending grew faster than the economy in 2014, and the federal share of health spending grew even faster, as major provisions of the Affordable Care Act took effect.  Total spending on health care increased 5.3 percent last year, the biggest jump since 2007, and accounted for 17.5 percent of the nation’s economic output, up from 17.3 percent in 2013, the Department of Health and Human Services said in its annual report on spending trends.”

But not to worry.  The Obama Administration assures us that things are fine:

The spending report comes as the Obama administration is already on the defensive over rising premiums and deductibles on insurance policies sold through the health law’s exchanges.  Last month, United Health Group, one of the nation’s largest health insurance companies, significantly lowered its profit estimates and blamed the federal health care law.  Obama Administration officials said Wednesday that the rise in health spending last year did not undermine their conviction that the Affordable Care Act had been a boon for the nation.”

Of course, this is the same administration that assured us just hours before the Paris terrorist attacks that ISIS is contained, not to mention that “if you like your doctor, you can keep your doctor, period.”  Per Nancy Pelosi’s claim, we’re finding out what’s in ObamaCare, and the only question is whether this or the Iran nuclear accord – which we’re now told Iran didn’t even sign – will prove the worse of Obama’s two signature “achievements” as time progresses.

As ObamaCare enters the real world and departs Barack Obama’s “If you like your doctor, you can keep your doctor” fantasy world, it is already proving a slow-motion disaster for Americans.  This week, The Wall Street Journal featured a front-page article entitled “Rising Rates Pose Challenge for Health Law,” and the news is grim:

Insurers have raised premiums steeply for the most popular plans at the same time they have boosted out-of-pocket costs such as deductibles, copays and coinsurance in many of their offerings.  The companies attribute the moves in part to the high cost of some customers they are gaining under the law, which doesn’t allow them to bar clients with existing health conditions.  The result is that many people can’t avoid paying more for insurance in 2016 simply by shopping around – and those who try risk landing in a plan with fewer doctors and skimpier coverage.”

The report proceeds to describe the magnitude with greater specificity, and it is astonishing:

Premiums for individual plans offered by the dominant local insurers are rising almost everywhere for 2016, typically by double-digit percentage increases, according to a Wall Street Journal analysis of plan data in 34 states where the Healthcare.gov site sells insurance.  More than half of the midrange ‘silver’ plans are boosting the out-of-pocket costs enrollees must pay, while more than 80% of the less-expensive ‘bronze’ plans are doing so.”

Meanwhile, a new Gallup survey released this week shows that the percentage of Americans rating their healthcare quality as excellent or good has plummeted from 62% in 2010 when ObamaCare was enacted to 53% now.  The survey also reveals that the percentage who are satisfied with healthcare costs has actually declined from 26% in 2009 to 21% today.

As experience with ObamaCare increases with implementation, the situation promises to get worse by the day.  Obama, Harry Reid and Nancy Pelosi passed, now we’re staring at the reality of what was in it.

For some time now, Barack Obama and his apologists have trumpeted slowing healthcare costs as somehow attributable to ObamaCare.  Never mind that the declines predated Obama’s election, and that even The Washington Post gave him three Pinocchios in its Fact Checker analysis of this claim on November 5 of last year:

Healthcare inflation has gone down every single year since the law [ObamaCare] passed, so that we now have the lowest increase in healthcare costs in 50 years – which is saving us about $180 billion in reduced overall costs to the federal government and in the Medicare program.”

To illustrate how he played the role of rooster taking credit for the sunrise, healthcare cost inflation reached 7% in 2003, but plummeted to approximately 2% before Obama even took office.

Regardless, but healthcare costs are spiking again as ObamaCare actually takes effect:

Growth in national health spending, which had dropped to historic lows in recent years, has snapped back and is set to continue at a faster pace over the next decade, federal actuaries said Tuesday…  The jump comes after five consecutive years of average spending growth of less than 4% annually – a rate touted by the Obama Administration as the lowest since the government began tracking health spending in the 1960s and a sign that the health law’s Medicare provisions were helping rein in health costs.”

Ooops.

Chalk up yet another failure of ObamaCare, which helps explain why it remains so unpopular among Americans as we “find out what’s in it” in the words of Nancy Pelosi.