Healthcare and the Middle Class

Experts in the past felt strongly that the way to fix healthcare costs was to get the consumer or patient more involved financially with their care.  Numerous programs were implemented to make this happen.  The first was making the employee begin to pay for a portion of their healthcare premiums.  They would pay more for traditional coverage and perhaps pay less for HMO or more economical coverage.  Likewise, employees were offered plans with higher deductibles that could benefit those that remained healthier.  Healthcare spending accounts gave the consumer even more control of their care as they almost acted like insurance companies for the first level of care.

Prescription tiers of copay and donut holes were implemented to make the consumer share the cost of the drugs they took.  The thought was that some financial hurt would lead to more economic thinking around the choice of drugs for a specific problem.  The patient would be allowed to use almost any drug, as they were all on the plan’s formulary,  but they paid dearly for the more expensive ones and got generics for next to nothing.

This might be a good time to step back and see if the system is working.  It would seem that one of the biggest concerns is the huge impact this has had on the middle class in our country.  For those with lots of money, the marginal expenses of the employee contribution for insurance or the high copays really mean very little.  For the poor, who are covered by Medicaid and have tremendous government coverage for their children the cost is less of a concern because there is less sharing of costs taking place.  The major burden of all this falls on the middle class.

Take a look at this piece in The Atlantic and see how this has evolved.  Note that the growth of employee expenditures for insurance has grown at four times the rate of growth in earnings over the last decade.  Pay has not gone up very much on an annual basis and a huge portion of that increase has gone to paying more for health insurance.

It is important to look at this from the drug industry’s perspective.  Even though the middle class worker is paying more for their care, they can’t really impact the ultra expensive parts of healthcare.  They expect a certain level of healthcare and when that involves medical tests, hospital stays, surgery and other procedures the costs for these are well beyond what the patient can control.  This has led to the massive increases in expenses that have led to the high insurance rates for employers that gets passed on to employees.  It is a vicious cycle.  But the consumer can control a couple things.  First they can not go the physician and we have seen this over the last couple of years where office visits have been down dramatically.  And secondly, they can save money when they are given the choice as to which drugs to take.  It is perhaps at this last stage where they have the greatest choice.  Having spent so much of their income on insurance and deductibles it is here where they say thank goodness I can get a generic for only $5 a month!  This is how the current system is hurting our industry.

This is perhaps why the pharmaceutical industry should be looking for the most radical ways to change the overall system.  You see at the end of the day the industry, that perhaps provides the most value for the buck, is getting hurt the most by the huge costs of care.  There is no money left over for prescription drugs and consumers are settling for what they can afford.  If the system demanded greater financial scrutiny throughout the entire process, perhaps there would be money for drugs that for individual patients could provide significant advantage.  The industry should be the biggest proponent of healthcare reform as its survival may depend on change.

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