The Health Shopper

Today, the provision known as the Medical Loss Ration will drop. This provision requires health insurance companies to spend 80% of their consumers’ premiums on medical care, as opposed to marketing or overhead costs. If they do not do this, the companies will be required to send back a rebate check detailing the amount they did not spend on medical care.

The Department of Health and Human Services has detailed the parameters for qualification as a medical expenditure, though these rules are still being “fine-tuned”.

In the past, employers have offered various weight loss, diet and nutrition, and smoking cessation classes, but the programs have done little to ameliorate poor health practices – and they’ve failed to pull in a crowd. Now, along with the free programs, many employers are tacking on much higher premiums for unhealthy employees.

While the programs will remain voluntary, employees will likely find that utilizing them will be beneficial in the long run. From lowered premiums to employer bonuses to HSAs, the financial rewards for taking advantage of the programs are likely to be a big push for employees. For example, Union Pacific employees can currently receive up to $300 in employer contributions to their HSAs if they complete a provided health assessment, don’t use tobacco, and go in for an annual physical.

According to Reuters almost 40 percent of employers will begin hiking premiums for unhealthy employees in 2012, more than doubling the 19 percent of employers using the penalty strategy this year.

Earlier this week we reported on open enrollment 2011-2012. Wall Street Journal just came out with a helpful article examining significant aspects of this season’s open enrollment. Here are the highlights:

• Many employees will face increased out-of-pocket expenses, which are the charges they pay for health-care services. Notably, there will be a jump in the use of high deductibles—the upfront sums employees pay before coverage kicks in. To help workers defray those costs, some employers are offering financial incentives to those who make efforts to track and improve their health.

• Employees also will likely see at least small upticks in their monthly premiums for coverage, while some employers are trimming costs by offering a smaller array of doctors and hospitals.
• Even if employees opt for the same plan they had last year, they should watch for changes that might not be obvious, such as having to pay more to use medical providers that are outside the insurer’s network.
• You should delve into the details of plans’ charges before you choose one. Keep an eye out for where you will owe co-insurance, which is a percentage of the cost of care and tends to be more expensive than a flat co-pay, and for fees that may not count toward your out-of-pocket maximum.
• For consumers, a health savings account—which can be set up by people whose health plans meet certain requirements, such as high deductibles—has some advantages over other types of accounts. Unlike a flexible spending account, which is another type of tax-free account linked to health expenses, an HSA’s contents can be held over from year to year. Moreover, an HSA stays with you if you move to a different employer, and it can be used to save for medical expenses in retirement.

It’s that time of the year again, folks! The Surpreme Court’s 2011-2012 term began yesterday on Oct. 1, and a number of cases have reached the Court’s desk, two of the which have important implications for health care.
According to Andrew Cohen at The Atlantic, “in Caraco Pharmaceutical v. Novo Nordisk, the justices will broker a dispute between generic drug manufacturers and their brand-name counterparts. And in Mayo Collaborative Services v. Prometheus Laboratories, the justices will return again to the issue of whether a doctor’s diagnostic methods may be patented”.
The former, Caraco Pharmaceutical v. Novo Nordisk could massively impact prices of pharmaceuticals and the consumer’s access to generic drugs. The Mayo Collaborative Services v. Prometheus Laboratories case examines whether labs can patent certain diagnostic tests.
The star of the health care cases, however, is the Affordable Care Act. The constitutionality of reform has long been a subject of debate, and CNN predicts that we may have a verdict on the case by next June.
So keep your eyes peeled: there are big cases coming up in the high courts!

On the whole prescription drug prices have been steady for some time and are projected to remain so through 2012. According to HHS, approximately 900,000 beneficiaries are currently receiving discounts of up to 50 percent on brand-name drugs through Medicare and have seen greater accessibility in generics.

But a recent study from NERA Economic Consulting reveals that seniors, particularly those on specialty tiers in their health plan, are currently “largely unaware” of the often-exorbitant costs of prescription drugs. “Specialty tiers”, as defined by NERA, are separate prescription categories that include “higher-cost, brand name medications… used to treat conditions like cancer, multiple sclerosis, rheumatoid arthritis, HIV/AIDS and lupus”.

The results of the study showed that Medicare consumers were not aware of Medicare Part D plans’ differences in prices of medicines for more serious recurring issues. They also misjudged the out-of-pocket costs for specialty-tier medications and thought they would be paying a co-pay (as opposed to coinsurance) for a prescription drug on the specialty tier. Overall, Medicare beneficiaries underestimated the prices of prescription drugs but, even worse, were not certain how much they were paying for each drug.

Medicare beneficiaries should consult with doctors and speak with Medicare or the provider directly before opting to use (and pay for) any prescription drugs.

As of Jan. 1, a variety of preventive screenings and services have been fully covered under Medicare. However, beneficiaries may not be fully aware of the new preventive services offered. The Centers for Medicare and Medicaid Services (CMS) has acknowledged that public awareness of the benefits needs to be increased, and that more needs to be done despite continuing efforts.
According to CMS, over 50 percent of Medicare beneficiaries utilized the new preventive screenings, but very few of the Medicare recipients have taken advantage of the Annual Wellness Visit, which includes consultations with health care providers to go over medical history, genetic inclinations, prescriptions, risk factors, choices for treatment, and to create screening schedules and take basic measurements.
Some of the free screenings include:

• Annual mammogram
• Annual prostate cancer screening
• Annual diabetes screening, twice a year for prediabetic patients
• Colonoscopy every 10 years, every 2 years for high risk patients
• Bone mass measurement every 2 years

On Sept. 1 the Obama administration will begin review of proposed premiums and rate hikes in 10 states, which currently do not sufficiently regulate health insurance rates. The federal government’s ability to broadcast and expose unfair or unreasonable rate increases under reform is expected to serve as a major protection for consumers, who saw rate increases of 20% or more last year.

Alabama, Arizona, Idaho, Iowa, Louisiana, Pennsylvania, Missouri, Montana, Virginia and Wyoming will all be subject to federal review of health insurance premiums. The government will review both individual and small group health plans for all but three states. Iowa, Pennsylvania and Virginia will be subject to review of only individual health plan rates
Oregon consumers have benefitted from similar federal rate regulation, with a recent proposed hike of 22% whittled down to about 12%.

Approved by the Senate Health Committee, a new bill would allow the California Department of Managed Health Care and the Department of Insurance to reject health insurance rate hikes. Any increase that department officials find to be “excessive, inadequate or unfairly discriminatory” could be rejected.

The bill mandates regulators’ approval before a hike passes. So far, 35 other states have a similar regulation.

Last week two separate Supreme Court rulings set precedents for pharmaceutical companies:

• Pharmaceutical companies can use prescription records from doctors in marketing. The court ruled that Vermont’s law preventing drug makers from honing in on doctors’ prescriptions was unconstitutional under the First Amendment. VT planned to lower the cost of prescription drugs by circuitously pushing doctors to prescribe cheaper generic drugs.
• Generic drug makers cannot be sued in state court for defective labels, because manufacturers can’t modify any medication’s label without FDA approval. This is promising for the consumer because it bolsters the currently frail generic drug industry, which is undergoing shortages of many generics.

When it comes to prescription medication, there’s a lot we don’t always get. As a consumer it’s important to know the basics of pharmaceuticals and make an informed decision.

What exactly is a drug formulary?
According to Blue Shield of California, a drug formulary is “a list of preferred generic and brand-name medications approved by the Food and Drug Administration (FDA) that are covered under your Blue Shield prescription drug benefit”. It should be mentioned that a drug’s being on the list doesn’t necessarily ensure that a particular physician will prescribe that drug. The point of the formulary is to keep health care costs down for the consumer by guiding them toward the most cost-effective prescriptions and simplifying the process by providing drugs from one set of medications.

How do brand name and generic drugs differ?
The truth is there’s hardly a difference. The FDA holds generic medications to the same standards as brand name drugs. There is often variation in the inactive elements of the drug such as coatings, but generic and brand name drugs are identical in their active ingredients. Brand name drugs tend to run costlier due to marketing, development, and research that goes into the production; generic drugs are more simple to produce, making them less pricey. Given that prescription medications are usually among the most expensive aspects of individual and employer-provided health care plans – and that both drug prices and prescriptions are on the upswing – opting for generic medications where possible and comparison shopping for drugs can result in huge out-of-pocket savings for the consumer.

The Congressional Budget Office has some news on federal health care spending, and it’s not all good: one projection asserts that federal health care spending could nearly double in the next two decades, comprising around 11% of the nation’s GDP (currently 5.6%). A less optimistic projection of the health care budget presents the debt at 100% of GDP in the next decade, almost 200% by 2035.

The numbers are startling, but there’s a catch: CBO is using pre-ObamaCare growth rates. Given the effects of the Affordable Care Act, from doctors’ payment cuts to decreased insurance subsidies, CBO has stated that the level of federal health care spending would not be easy to maintain long-term.

With the constitutionality of the Affordable Care Act currently up for debate in federal courts, what are your thoughts? Do you consider Medicare and Medicaid as a priority regardless of debt?