States are attempting to impose price controls on pharmaceuticals. Ambitious attorneys general and left‐wing interest groups have joined to target drug makers for a host of alleged offenses.
Doctors across the nation have sued nine major health insurers over their reimbursement policies. Aetna has broken industry ranks, agreeing to a $300 million settlement, but the rest of the class‐action lawsuit continues.
Fixing the health‐care system seems more difficult than ever.
The focus of much criticism has been on health maintenance organizations, which are designed to limit care. While they are an important option in a competitive medical industry, government and businesses are increasingly pushing reluctant patients into HMOs.
Doing so is supposed to save money. Yet Hewitt Associates reports that HMO premiums will rise 22 percent this year.
The percentage of the public viewing HMOs as doing a good job fell from 51 percent to 29 percent between 1997 and 2001. This has led nearly half of all states to pass any‐willing‐provider laws mandating that managed‐care networks accept any doctor or hospital agreeing to its fees and rules. Consumers get more choice, but HMOs lose bargaining power to exact lower fees.
Individual managed‐care companies have become the target of special disdain. For instance, California’s WellPoint Health Networks, the nation’s third‐largest system (by enrollment), has been criticized for the high salary of its CEO, Leonard Schaeffer – No. 19 among America’s top 500 firms – and its takeover of nonprofits, such as Blue Cross/Blue Shield of Georgia and Missouri.
A WellPoint cost‐cutting tactic is to lobby the Food and Drug Administration to move drugs from prescription to over‐the‐counter status. In 1998, the company petitioned to shift the anti‐allergy drugs Allegra, Claritin and Zyrtec to OTC. Last year, WellPoint filed a similar motion for Clarinex.
Normally, drug makers lead the push for OTC status; Claritin was moved to OTC in December only after manufacturer Schering‐Plough dropped its opposition. But now FDA Commissioner Mark McClellan is considering acting on his own initiative.
By allowing patients to self‐medicate, OTC increases consumer choice and reduces costs. However, most insurers, including WellPoint, do not cover OTC medications. So in the near term, at least, only insurers save money – indeed, patients actually may have to spend more money for the same medicine.
Insurers, and especially HMOs, also make it hard for patients to receive competing prescription drugs. For instance, Dr. Lewis Kanter, an allergy specialist in Camarillo, north of Los Angeles, complains that he is “bombarded with paperwork” from insurers if he doesn’t direct patients to OTC Claritin.
Some insurers simply drop coverage. Last fall, Aetna requested permission to stop paying for non‐sedating antihistamines altogether. California responded by advising insurers not to drop coverage for an entire class of drugs just because one went OTC. This rule, like state any‐willing‐provider laws, expands choice, but only by increasing insurer costs.
The problem with HMOs is not HMOs per se, but the environment in which they operate. Government policy inadvertently discourages provision of quality health care, as exemplified by the artificial emphasis on HMOs.
Because the federal government doesn’t tax employer‐provided health insurance, businesses provide insurance, which means they choose providers and plans. Most companies, understandably, are more interested in constraining health care costs than expanding coverage. Thus their ever‐stronger push, mirrored by government policy, to get patients into managed care.
The system makes no sense. Employers don’t provide auto or homeowner’s insurance.
Similarly, people need to be able to tailor health insurance to their own circumstances, and thus choose the right balance between cost savings and coverage limitations. One solution is placing medical savings accounts on a level playing field with traditional insurance, thereby returning health‐care decisions to employees.
There are only two reform paths for today’s broken system. The first is to fully nationalize the system, which would sacrifice coverage and quality to save money. The alternative is to reintroduce consumer choice and industry competition to medicine.
Congressional Democrats and Democratic presidential candidates want to take the first course. For the American people’s sake, the Bush administration and Congress must travel the second.