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Reduce Senior Healthcare Costs By Reducing Third-Party Payers

July 24, 2019 - 6:00am
Raymond Kordonowy, M.D.
Raymond Kordonowy, M.D.

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. 

Comments

M4A would not diminish Medicare and in fact expand upon it. Read the proposed bill and quit relying upon lobby-backed media outlets for your source of information and their fear mongering. Seniors who have contributed their entire lives would be receiving an expansion in coverage, in addition to dental, hearing, vision and mental. Long waits? We already have long waits. Lower healthcare costs by eliminating 3rd party payers? You still keep a giant faction of the increasing costs and profiteering of the industry intact, which costs will still continue to rise. How about eliminate the middle man completely, ie the private health insurance industry, then you would eliminate almost all the bureaucracy. Each and every American would be covered, and each and every American politician would now have a duty to protecting those coverages since they would receive the same exact level of care, and expanding upon them as needed, instead of the constant back and forth between insurers, government, docs, patients, insured and uninsured. You all complain about how government can't get anything right, that's because 2 sides actively working to sabotage the other and their ideas, while profit driven entities get theirs at the end of the day and Americans are driven further in debt, further health issues, or dead. Tired of hearing the ACA is cause for all the cost issues, but healthcare costs have been rising and outpacing inflation since the 70's.

Your long rebuttal makes a typical assumption, that Dr.’s who care for patients don’t understand what’s going on. Come live in my office for a month and between patients I’ll explain the real world of health care to you. I don’t rely on lobbies for my information- I live this every day.

Disintermediation. Will reduce consumer costs in medical care - and in every other field of business, also!

Spoken just like a lawyer with a pulled license (the very worst kind of intermediary)

GREAT article Doctor ! "AARP" has NEVER been anything more than a "Shill" salesman for insurance companies; Just like "Planned Parenthood" has never been anything more than a "stalking-horse" for Margaret Sanger's "genocidal plan" for ABORTING the black race... AND DEMOCRATS have shamefully ALWAYS sanctioned both of of these despicable agencies and their financial supporters (both Government & corporate) ! Hmmmm,.. wonder what "AARP's" and "Planned Parenthood's" ~plan~, for 'Reducing Senior Healthcare Costs' MIGHT LOOK LIKE,... maybe by "reducing Seniors" via euthanasia..maybe..? Seems more and more we're "heading in that direction", by virtue of the "demographic cultural-shift" we've been experiencing beginning in the TWO 44th Presidential Terms... WAKE UP AMERICA... YOUR "POLITICAL CLASS" HAS RUN AMOK...! ! !...DON'T ALLOW IT TO CONTINUE...*VOTE*

the system was easier to control/manipulate prior to the enactment of O-care because these kinds of problems are the "unanticipated consequences" of an action. The private sector and the markets are much better controlling prices, salaries to physicians and drug dealers, and others involved in the healthcare system than are bureaucrats. Perhaps, applying artificial intelligence to this broken system may have a positive impact.

Government is NOT in the insurance business and they do poorly at anything other than blowing things up. Thanks to the arguments in congress we can not even keep our borders secure. Does anyone really believe that government can control the healthcare issue without screwing it up even more?

Government seems to be doing pretty well with Medicare and Tri-Care. (???)

Your assessment of health spending and proposal to cut out third party insurers is spot on! Unfortunately, most access to health care is being channeled through health insurance plans. People have health insurance, while costs of health services and premiums continue to increase.

I agree- there is a major tension tugging people’s health care dollars and insurance has 3 of the 4 corners in their hands. Until we stop demanding mandated insurance (threaten not to buy their offerings), things will not improve. http://thedoctorsreport.net/2018/03/new-thinking-for-health-care-competition/

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