American seniors are one of the biggest victims of rising healthcare costs and prescription drug list prices. While those aged 65 and older account for just 16 percent of the national population, they make up 36 percent of all health care spending. In Florida, where the senior population is one of the biggest in the country, healthcare reform that reduces these rising costs is especially needed.
At my health practice in Fort Myers, I encounter seniors struggling with these cost pressures daily. These Medicare beneficiaries are confronted with a variety of costs, including secondary insurance programs that often aren’t necessary given that more than 80 percent of medications prescribed are available in a low-cost generic version.
At the recent Democratic presidential primary debates in Miami, the candidates argued that rising healthcare costs require expanding Medicare coverage to all Americans under a socialized system where the federal government would cover all costs. Yet Medicare for All would unfairly dilute the Medicare program into which seniors have contributed their entire lives. It would usher in similar problems plaguing universal healthcare plans worldwide including rationing and long wait lists.
A better approach to lowering healthcare costs for seniors and all Americans is to reduce the role of third-party payers including insurers and the government. Such reform would redirect the money that's currently wasted on bureaucracy, administration, and market distortions to patients' wallets via lower healthcare costs.
Consider the direct primary care healthcare model. In this membership system that I use at my practice, patients contract directly with doctors for their primary care needs, which includes the option of generic drug dispensing at significantly lower costs. Market efficiency allows us to beat the insurance price for many healthcare procedures and prescription drugs.
Take a couple of examples of medications that I prescribe and dispense. We sell a hypertension drug, losartan, for the near wholesale price of $12.50 for a 3-month supply. Contrast this price to $150 for that Medicare beneficiary told me she paid out of pocket for the same supply. We also charge $15.20 for a 90 days’ supply of the popular antiplatelet medication, Plavix, which is $60 less than the patient’s co-pay under Medicare. Remember that co-pay costs are just initial out of pocket payments. What gets charged to the Medicare Part D insurance pool is even more.
Government reform efforts to increase price transparency and streamline the dominant healthcare delivery method are also promising. Exhibit A is a rule issued earlier this year by Health and Human Services that addresses the biggest cost driver of prescription drugs: The complicated drug supply chain that is characterized by cronyism, secret dealings, kickbacks, and anticompetitive behavior. Middlemen known as pharmacy benefit managers control the medications “allowed” on the list of drugs insurers will cover and disregard physician prescription preferences. In exchange for placement on these formularies, they demand billions of dollars in kickbacks, known as "rebates," from drug manufacturers. HHS estimates that these rebates account for about 30 percent of prescription drug spending.
The HHS rule would streamline this complex drug supply chain by eliminating these rebate payouts and directing them to patients at the prescription drug counter as lower prices. The rule only applies to government payers such as Medicare, meaning seniors will be the biggest beneficiary. No wonder nearly three-quarters of American seniors support it, according to a recent Morning Consult poll.
Ironically, this commonsense rule to lower drug prices is facing stiff opposition from the nation’s biggest seniors’ organization, the AARP, which has submitted multiple public comments opposing it. AARP members should be aware that the group has a vested interest in maintaining the status quo before taking its opposition at face value.
AARP partners with the insurance giant UnitedHealth to offer seniors supplementary Medicare coverage, earning more than twice as much in royalties as it does from all membership dues. The nation's health insurers are unsurprisingly leading the charge against the rebate rule because it threatens their massive rebate payments. It’s likely then that AARP royalties would fall if rebates do.
The root cost of rising health care costs is the health insurance oligopoly, which federal health programs like Medicare have propped up. UnitedHealth and other providers eat at both ends of the health care spend margin. They demand lower prices from suppliers and higher premiums from consumers.
The current healthcare system is so distorted that one major political party is calling to completely nationalize it. But there is another option outside the Medicare for All versus status quo debate. Namely, reforms that reduce the influence of inflationary third-party payers. Whether this takes the form of direct primary care or streamlining the supply chain as the HHS rebate rule seeks to do, the result will be the same: lower prices for seniors who need it most.
Dr. Raymond Kordonowy leads the private primary care practice Internal Medicine Lipid & Wellness in Fort Myers. He represents the Southwest Florida Chapter of The Free Market Medical Association and serves as a Florida Medical Association, Lee County Chapter delegate.