Axios Vitals

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January 09, 2019

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1 big thing: More Dems embrace public coverage

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State and local Democrats are embracing a bigger role for public insurance programs — or at least, they want to be seen as embracing a bigger role for public insurance programs.

Driving the news: New York City Mayor Bill de Blasio put together an extensive media rollout yesterday for what he billed as a revolutionary plan to “guarantee health care for every New Yorker,” through a locally run public option.

  • Washington state Gov. Jay Inslee also announced his own plan for a statewide public option.
  • A day earlier, California Gov. Gavin Newsom called for expanding the Affordable Care Act’s premium subsidies in his state.
  • Democrats in Colorado’s legislature are also eyeing a public insurance option.
  • A handful of other states — most notably New Mexico — are also expected to look seriously at Medicaid buy-in proposals this year.

Yes, but: Some of these plans aren’t as Earth-shattering as they may seem.

  • De Blasio’s pitch, for example, largely seems to either extend or simply reiterate the availability of existing programs.
  • Details about Inslee’s proposed public option are also patchy.

The big picture: The political calculus here is a lot more clear than the policy. If you’re a Democrat, especially a progressive Democrat, especially a progressive Democrat with at least some national profile or ambition, you want to be on the side of expanding access to public insurance programs.

  • This is an echo of “Medicare for All” — a popular political alignment with a whole lot of policy debates and decisions still to come.
  • But having some work left to do on policy isn’t the end of the world.
  • States’ efforts to set up new programs, or to expand access to Medicaid, will help inform a lot of future decisions about what’s most effective and most politically feasible.
  • That will shape other states’ efforts, as well as the 2020 campaign.

2. Day 2 at #JPM19

Bob Herman was back at it for Day 2 of the J.P. Morgan Healthcare Conference and has you covered:

The two sides of the drug negotiating table.

  • Eli Lilly CEO Dave Ricks and CVS Health CEO Larry Merlo sure agreed on a lot on their drug pricing panel, with some predictable differences. Ricks said high deductibles are preventing people from getting medications they need, while Merlo argued cost-sharing and rebates help keep premiums down. Neither point addressed the high overarching prices.

[sigh] Here comes the "value" talk.

  • Novartis CEO Vas Narasimhan and other executives continued to tout "value-based" drug pricing, and Bluebird Bio took a page out of college tuition payment playbooks by proposing a five-year installment plan for its new gene therapy. But there's no evidence value-based deals save money, and installments wouldn't change the seven-figure price of Bluebird's treatment.

Not-for-profit hospitals greet Wall Street.

  • A total of 26 not-for-profit hospital systems pitched banks and municipal investors over the first two days. They sang a similar chorus from last year: Research and "value-based care," again whatever you want that to mean, are great. But hospitals also are still cool with filling their beds so they can pay down debt, construct glitzy buildings and buy new technology. 

Growth forecasts for China.

  • "We're not $1,400 iPhones," Brian Yoor, the CFO of Abbott Laboratories said. "Health care is a very sticky, very good place to be."

3. Medical marketing hits $30 billion

The health care industry spends roughly $30 billion per year on marketing, according to a new study published in the Journal of the American Medical Association. That’s about a 70% increase over the past 20 years.

By the numbers: Marketing to doctors makes up the biggest share of promotional spending, but direct-to-consumer advertising is growing the fastest. And pharmaceutical companies are by far the biggest spenders.

  • Drug companies spent $20 billion on marketing to health care professionals in 2016, mostly to provide free samples of their products.
  • Pharma companies spent another $6 billion on marketing to consumers.
  • The number of ads has also skyrocketed. Drug companies paid for 4.6 million total ads, including 663,000 TV commercials, in 2016, up from just 79,000 total ads in 1997.
  • Hospitals, clinics and other health providers spent a total of roughly $3 billion on direct-to-consumer advertising.

Why it matters: Some critics don’t believe direct-to-consumer drug advertising should even be legal (the U.S. and New Zealand are the only countries that allow it), and those billions are baked into the prices we pay for drugs, hospital care and other services.

  • Realistically, though, there’s no reason to expect promotional spending to slow down, especially as the pharmaceutical industry shifts toward more expensive biological therapies. Those drugs are already making up a bigger share of all industry advertising, according to the paper.

4. Out-of-pocket costs and "Medicare for All"

Adapted from a Peterson-Kaiser Health System Tracker chart. Spending is in purchasing power parity equivalents. Chart: Axios Visuals
Adapted from a Peterson-Kaiser Health System Tracker chart. Spending is in purchasing power parity equivalents. Chart: Axios Visuals

One detail that should get more attention in House Democrats’ "Medicare for All" hearings: how much patients will have to pay out of pocket, if anything, the Kaiser Family Foundation’s Drew Altman writes in today’s column.

Sen. Bernie Sanders' version doesn’t include any deductibles or other forms of cost-sharing. If that actually passed, it would make the U.S. more generous than any of the other developed nations that Democrats like to cite as models. They all make the patients pay something.

  • Even the U.K.'s National Health Service requires copays for some drugs, and consumers pay a substantial amount for long-term care.
  • As the chart shows, consumers in other high-income countries spent an average of $857 per person out-of-pocket on health care in 2016, ranging from $467 in France to $2,326 in Switzerland.
  • A zero cost-sharing approach is sure to make any Medicare for All plan more expensive — because if the patients aren't paying for any of the costs, the government has to pick up the entire bill.

The bottom line: If and when the idea gets more serious scrutiny, look for Democrats to add at least a modest level of cost sharing to deter unnecessary care and keep costs down.

Go deeper: Read the column.

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