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The President famously promised that you could keep your health plan and doctor. For many people, both of those pledges are turning out to be false. And now, you might not be able to keep your medicine, either.
There are two reasons why. The first has to do with the higher out of pocket costs patients will face. The second issue may be even more significant.
Simply put, many drugs may not be covered at all, and the costs patients incur by buying them with cash won’t count against out of pocket caps. This has repercussions for drug makers with big portfolios of specialty and primary care drugs (more on that later). But most of all, it has implications for patients.
Drugs on your health plan’s formulary will typically have fixed co-pays. These costs usually count toward your deductible and the out of pocket and lifetime limits on the total amount of money that your health plan can ask you to spend.
As the Wall Street Journal recently reported, these co-pays can already be substantial, pushing people quickly to their annual out-of-pocket limits — $6,350 for individuals and $12,700 for families (after which insurers pay the full tab).
People whose annual income is at or below 250% of the Federal Poverty Level will qualify for cost-sharing reductions. (That comes out to families of four earning less than about $60,000, or individuals earning less than $30,000). But people qualify for these cost-sharing subsidies only if they enroll in a higher cost, “silver” Obamacare plan.
Take, for example, the drug Copaxone for multiple sclerosis.
If you buy the highest cost platinum plan, the out of pocket costs drop to $792 a month. But you’re probably better off with the cheaper bronze plan anyway.
Since you’re going to hit your out of pocket cap regardless of your plan, you might as well save money on the premium (which doesn’t count against your deductible or out of pocket limits) and race to the $12,700 spending cap as quickly as your family can.
After all, the provider networks (and formularies) used by low cost “bronze” and high cost “platinum” plans are often the same. The only thing that varies between different “metal” plans is typically the co-pay structure. Why pay higher premiums just to lower your co-pays when you’re going to hit the out of pocket caps anyway.
By purchasing a costlier, gold or platinum plan, you typically can’t “buy up” to a higher benefit. What you’re really doing is just prepaying the cost sharing.
But at least — in this model case — the drug Copaxone was partially covered under the Obamacare plan’s formulary. Consider an even bigger problem lurking inside the law.
The co-pay structure, and the out of pocket caps on consumer spending only apply to costs incurred on drugs that are included on a plan’s drug formulary. This is the list of medicines that the health plans have agreed to provide some coverage for.
If the drug isn’t on this formulary list, then the patient could be responsible for its full cost (with little or no co-insurance to help offset that cost). Most of the Obamacare plans have “closed” formularies where non-formulary drugs aren’t covered. Moreover, the money consumers spend won’t count against their deductibles or out of pocket limits ($12,700 for a family, $6,350 for an individual).
These are the ways that Obamacare cheapens the health coverage in order to pay for all of its expensive mandates. Obamacare is a throwback to the old HMO model of the 1990s, which promised a broad package of coverage for primary care benefits like vaccines, and routine doctor visits. But to pay for these benefits, the Obamacare plans skimp on other things – principally the number of doctors you’ll have access to, and also, the number of costlier branded drugs that make it onto formularies.
Many Americans rejected these restrictive HMO model plans in the 1990s, in favor of PPO-style plans that had higher cost sharing for routine health services, but offered broader access to doctors and have bigger drug formularies. What Obamacare says, in effect, is that Americans made the wrong choice when they rejected those HMO plans in favor of PPOs. The President thinks the more comprehensive, but restrictive HMOs were the better choice after all.
In response to the drug formulary issues, and the potential for important drugs to remain completely uncovered, staff at the Centers for Medicare and Medicaid Services is arguing that patients will have the option to appeal formulary decisions — to try and compel a health plan to cover a given drug.
But this appeals process can take months. And there is no sure chance of winning.
If a drug costs tens of thousands of dollars a year, how many patients will be able to foot that bill out of pocket until they win an appeal. Or take the chance that they could lose the appeal, and be stuck with the full cost of the drug?
The biggest problem in all of this is that consumers will have a very hard time figuring out where they stand. In many cases, the health plans being offered in the Obamacare exchanges don’t make information about their drug formularies readily available. In some cases, it doesn’t seem to be published anywhere.
The government was supposed to mandate that plans made this information easily accessible. But in many cases, that never happened.
In fact, state and federal regulators must have approved the health plans without reviewing final drug formularies. Many plans are also not publishing information about their networks of doctors, or when they do; the information is unreliable (listing, for example, doctors who argue that they aren’t part of the plans).
There are some things we know about these formularies.
Under the law, the Obamacare plans benchmarked their drug formularies off of one of the health plans already operating in each state.
In selecting this benchmark, they could have to select from one of four options:
They could choose from: 1) One of the three largest small group plans in the state by enrollment; 2) one of the three largest state employee health plans by enrollment; 3) one of the three largest federal employee health plan options by enrollment; or 4) the largest HMO plan offered in the state’s commercial market by enrollment.
Because there’s a wide variation in the breadth of the drug formularies maintained by these four options, there is also wide variation in the Obamcare plans.
The formulary you’ll get depends most of all on which state you live in (and which benchmark was chosen by the state regulators).
It also appears that the final regulation on all this, issued by the Department of Health and Human Services, gave states some latitude to nix drugs that might otherwise be listed on the benchmark formularies they selected. That regulatory wiggle room seems to undermine the whole idea of having a benchmark plan.
So can you find a good drug plan in Obamacare?
Generally speaking, the benchmark plans that are part of the Federal Employees Health Benefits Program have the best drug formularies, some of the large HMOs, the worst. In many cases, states benchmarked their Obamacare plans to state employee health programs, which usually fall in the middle.
But there is a lot of variability.
For example, when it comes to costly, molecularly targeted cancer drugs, some benchmark plans cover 11 drugs, but other plans cover as few as seven. I found one plan in North Carolina that doesn’t cover Actonel for osteoporosis, Aubagio for multiple sclerosis, or Xeljanz for severe rheumatoid arthritis, among other “non formulary” drugs.
In California, a state that Obamacare’s architects are holding up as the model of success, some of the major exchange players—including Anthem, Blue Shield of California and Health Net—have posted their exchange formularies on their websites. Unfortunately, they’re not easy to find — and incomplete.
As another excellent analysis finds, a lack of standardization and on-line tools makes it hard for consumers to compare between plans.
Some of the published lists do not show all of the covered drugs. For instance in California, Blue Shield’s document states that only the most commonly prescribed drugs are shown in its published formulary. Anthem’s published list is also not comprehensive.
Some analysts have tried to look across the plans, but comparisons are as hard for experts to make as they are for consumers.
One study by Avalere Health of 22 carriers in six states looked at the benchmark plans that the Obamacare plans would be tied to. It found that the numbers of drugs listed as available on formularies ranged from about 480 to nearly 1,110.
Even if your drug makes it onto the Obamcare plan’s formulary, getting access to a medicine can still be a costly affair for patients.
In the same study, researchers found that 90% of the lowest-cost bronze plans require patients to pay 40% (on average) for drugs in tiers 3 and 4, compared with 29% co-pays in current commercial plans. Most of the Obamacare silver plans also require patients to pay 40% for the highest-tier drugs.
Drug makers with big portfolios of specialty and primary care drugs, for their part, will have to fight on a state-by-state level to make sure that the benchmark formularies that state regulators adopt allow open access to their medicines.
There’s word that companies like Pfizer [NYSE:PFE] and Merck [NYSE:MRK] have been beefing up their state operations for just this purpose.
They are late to the challenge.
Drug makers were focused on a condition that health plans must have more than one drug per class. But these firms may have been focused on the wrong proviso.
Many formularies are shaping up to be very restrictive even while meeting that minimum standard. The biggest challenge will be in getting new drugs onto existing formularies. The process is likely to be long, slow, and austere.
Health plans are cheapening their drug formularies – just like they cheapened their networks of doctors. That’s how they’re paying for the benefits that President Obama promised, everything from free contraception and screening tests to a leveling of premiums between older (and typically costlier) beneficiaries, and younger consumers.
But the need to fund these promises will put drug formularies in play for the long run. New medicines will remain off formularies, or make it on after long delays. Patients will find that costlier specialty drugs are simply not covered.
Like a lot other parts of Obamacare, uncertainty around drug costs and coverage is becoming another one of the scheme’s unpleasant surprises.
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