ACA, Subsidies and Better off Americans (which means many FIRE)

[MichaelB]

This is one of those discussions that benefit from some actual data. I took a look at Pfizer's 2015 financial statement (here). Just one company, only three years of data and just browsing over the data. Still, a couple of things jump out:

Gross profit margins are 80%, while R&D cost is only 15%. Over the past 3 years they invested roughly the same amount of cash in research as they did buying back stock. The high drug prices aren't only funding product development, they are also funding the high sales expense and shareholder return. The bombardment of tv commercials to generate demand would seem to support that view.

Regarding pricing in the US vs the rest of the world, companies don't price higher in one location to make up for low prices elsewhere. That's not how pricing works. Businesses price as high as they can everywhere, and they show profit everywhere. They don't offer a product at a loss or inadequate profit. That is to say, the "fully cost loaded " product sold in a European country is profitable, and if the EU found evidence that the pharma company was selling at a loss it would be subject to anti-competition regulations.

The price in the US is higher because the consumers pay it.

 

[Fermion]

Regarding pricing in the US vs the rest of the world, companies don't price higher in one location to make up for low prices elsewhere. That's not how pricing works. Businesses price as high as they can everywhere, and they show profit everywhere. They don't offer a product at a loss or inadequate profit. That is to say, the "fully cost loaded " product sold in a European country is profitable, and if the EU found evidence that the pharma company was selling at a loss it would be subject to anti-competition regulations.

The price in the US is higher because the consumers pay it.

"Gilead Sciences is seeking to convince governments and multilateral agencies worldwide that hepatitis C can be eliminated with a demonstration project in Georgia offering free drugs to all those who need them.
The unprecedented program will make the Caucasian country a testbed for uprooting the liver-destroying disease, using Gilead's highly effective but costly pill Sovaldi, plus its newer product Harvoni once approved."




Free has to be below cost to produce, even if you advertise there in the Georgian version of the thrifty nickel.

 

[travelover]

I think perhaps they are undercharging elsewhere which causes them to overcharge here........... .

Or maybe drug companies are using every trick in the book to maximize profits.

But sometimes, drug companies deploy questionable strategies to maintain their monopolies, the study says. The tactics vary, but they include slightly tweaking the nontherapeutic parts of drugs, such as pill coatings, to game the patent system and paying large “pay for delay” settlements to generics manufacturers who sue them over these patents.

Pharmacists in 26 states are required by law to get patient consent before switching to a generic drug, the authors wrote. This reportedly cost Medicaid $19.8 million dollars in 2006 for just one drug: a statin called simvastatin whose brand name is Zocor. Costs ran higher because pharmacists didn’t get patient consent and Medicaid had to pay for the costlier brand name drug even though a cheaper product was available.

Although drug manufacturers often cite research and development costs when defending high prescription prices, the connection isn’t exactly true, Kesselheim and his team found, citing several studies. Most of the time, scientific research that leads to new drugs is funded by the National Institutes of Health via federal grants. If not, it’s often funded by venture capital.

htthttp://time.com/money/4462919/prescription-drug-prices-too-high/p://

 

[Montecfo]

Said her husband was self employed and they could not afford it... I said she could probably get a cheap plan if they income was so low... maybe $200 a month cost to them.... her comment "We cannot afford $200 per month".... Sooooo.... at least a family of 3 (she brings her daughter in as she is home schooled) and maybe more and you do not think health insurance is important enough to pay $200 per month

This is my point. Most of the folks who are still not covered simply do not see the value of coverage. A subsidized cost of $200 for a family of 3 is still too expensive?

I think we need to work on better educating people on the value of insurance, so they will choose to purchase it.

 

[movingrightalong]

Want to see medical costs go down? Mandate that all insurance covers wellness visits, but also requires the person to pick up the 50% of all other medical procedure up to $5k/year. Allow people to get some of the $5k back when filing taxes depending on income.

Why is the average cost of a facelift about $6k and the average cost of an partial knee replacement about $50k? Because people shop around for a facelift and insurance picks up the bill for the knee. If people had some skin in the game they would care what it costs.

Try this, next time you go to the doctor for a procedure, ask them what it would cost if you did not have insurance, bet you they do not know. If I needed to get a MRI on my knee and I was going to have to pay 50%, would I look for the place that was closer to $500 than to $3,000. I may also be willing to wait a week if the doctor thinks that it is a sprain than to demand I get one right away.

When things are subsidized, the prices tend to rise fast like college or medical costs. The more of a subsidy a person gets, the more likely the provider will raise the price. If the price of some was completely covered by someone else, why would I care about cost or even looking for something cheaper? It is the same principle with people on a business trip, if your company is picking up the tab you don't look at the price, if you are picking up the tab you look at the price and that goes into your decision.

*ding ding ding ding - winner, winner chicken dinner.* This is critical if we ever want to see a normalization in the price of healthcare.

 

[ziggy29]

The stmt was in context of people saying they cannot afford to buy insurance.... and I say they are not looking properly or are just lying...

Without a subsidy, a family at (say) 500% of FPL in a very high cost area probably can't reasonably afford decent individual health insurance and deal with all their other expenses as well. Where I live, yes, it's very doable, but in the SF Bay Area, or the NYC area, or in DC or Boston, not so easy.

 

[Mr._Graybeard]

The first thing we need is transparency in cost of services. How can a consumer shop for the lowest price if the negotiated fees are a proprietary secret?

 

[MRG]

The first thing we need is transparency in cost of services. How can a consumer shop for the lowest price if the negotiated fees are a proprietary secret?

There you go. Mixing common sense into an industry that has none. Never work :sly:

 

[GTFan]

But if they are making so little, then they should be getting a pretty good credit to help pay for that premium...

Who said they were making so little? These are single folks making somewhere in the neighborhood of $40-50k a year (my guess). You don't get crap for subsidy when you're at the 400% FPL mark and for singles that's just shy of $50k. There's no way they're paying $700-800 a month for a Bronze plan when they'll get basically nothing other than catastrophic coverage for it.

I don't think you understand how the market doesn't work for a lot of folks on the edge of not getting subsidies, especially given that the cheapest policies they can get have unaffordably high deductibles. Again, these aren't dumb folks. We also have a resident health insurance broker on staff and she says they're screwed.

 

[GTFan]

Why are bronze plans crappy? I can afford any plan I want. I will never qualify for a subsidy. I chose to buy the bronze HSA plans because I think it makes sense to pay for as much of the medical care for my family myself and buy protection for something I couldn't really afford.

Because we're not the normal folks that can't afford a $6800 deductible.

 

[MRG]

Because we're not the normal folks that can't afford a $6800 deductible.

+1

What I see is folks who think they can't afford the deductible are many times the same who will roll the dice and go without. Horrible problem to have, expecially if you bet wrong.

 

[Texas Proud]

Without a subsidy, a family at (say) 500% of FPL in a very high cost area probably can't reasonably afford decent individual health insurance and deal with all their other expenses as well. Where I live, yes, it's very doable, but in the SF Bay Area, or the NYC area, or in DC or Boston, not so easy.

I will agree that it can be harder in some places.... but since I am not there I am not hearing from these people... so I still stand by my stmt on the people I hear it from...

And like Montecfo said, $200 a month for a family of 3 should be a no brainer IMO... heck, even in the high cost areas I would think it should be a no brainer... but I can understand that costs there are high on almost everything.... then again, it might be a lifestyle choice... instead of Manhattan, move out to NJ somewhere or even LI... sure, it is a long commute, but still cheaper...

 

[jcretire77]

$1054 per month for the very lowest cost Bronze for two, ages 57 & 59. The deductible is $13,100. We have been spoiled having worked for a corporation that provided health insurance to its employees.

 

[ShokWaveRider]

$1054 per month for the very lowest cost Bronze for two, ages 57 & 59. The deductible is $13,100. We have been spoiled having worked for a corporation that provided health insurance to its employees.

We cannot afford that at $57 & 63. I would have to put all our assets in a trust and use the emergency room. If that was the norm.

 

[jcretire77]

I agree. We will play the game as long as we can and apply for tax credits. Our income will be very low for a number of years. Hopefully until Medicare. We are healthy for our ages, but anything can happen.

 

[nun]

I agree. We will play the game as long as we can and apply for tax credits. Our income will be very low for a number of years. Hopefully until Medicare. We are healthy for our ages, but anything can happen.

Medicare won't necessarily be much cheaper. You'll have to pay for Part B and then some sort of supplemental insurance and a drug plan. Just like now you'll have the choice between premiums and coverage/deductible amounts for that extra insurance. I know that my insurance costs will go up when I go onto Medicare.

Also I think we'll see change in Medicare soon and it will be interesting to see how that changes how much we are charged and how we pay for post 65 medical care.

 

[CRLLS]

Medicare won't necessarily be much cheaper. You'll have to pay for Part B and then some sort of supplemental insurance and a drug plan. Just like now you'll have the choice between premiums and coverage/deductible amounts for that extra insurance. I know that my insurance costs will go up when I go onto Medicare.

Also I think we'll see change in Medicare soon and it will be interesting to see how that changes how much we are charged and how we pay for post 65 medical care.

We're switching over to Medicare from ACA in 2017 and can confirm the cost is not any better. However, I'm not convinced that a Supplement is required. Among other things, the Supplement policy covers the final 20% that Medicare does not cover. You know, the amount that we cheerfully accepted as our share under a good "company policy" when employed. Of course we ARE getting a supplement policy...... But I'm not sure it is necessary. There are many inequalities within Medicare that not everyone is treated equally, just like the ACA policies.

In the mean time, I will use my 1200+/ month subsidy for a bronze policy that the hospitals nearest to me are in-network. The cheapest Bronze plans' hospitals are more than 2X the distance.

 

[ivinsfan]

We're switching over to Medicare from ACA in 2017 and can confirm the cost is not any better. However, I'm not convinced that a Supplement is required. Among other things, the Supplement policy covers the final 20% that Medicare does not cover. You know, the amount that we cheerfully accepted as our share under a good "company policy" when employed. Of course we ARE getting a supplement policy...... But I'm not sure it is necessary. There are many inequalities within Medicare that not everyone is treated equally, just like the ACA policies.

In the mean time, I will use my 1200+/ month subsidy for a bronze policy that the hospitals nearest to me are in-network. The cheapest Bronze plans' hospitals are more than 2X the distance.

What you mean is the cost in not any better for your personally, you are going from subsidized plan to subsidized plan, why should it be any better?

For those of us paying full price Medicare is much better. We choose one of the best supplemental policies for my DH as he developed a condition that will need frequent monitoring and have spend no additional out of pocket money since, but I'm not sure we are ahead on that numbers game.

 

[GTFan]

I will agree that it can be harder in some places.... but since I am not there I am not hearing from these people... so I still stand by my stmt on the people I hear it from...

Well yeah but I hate to say it - your world is a lot smaller than the reality that many people face with the ACA. In fact I would argue that the repeal push has been driven by the folks that find it unaffordable. I don't think people would so loudly complain about the mandate (and penalty) if that were not true.

 

[Texas Proud]

Well yeah but I hate to say it - your world is a lot smaller than the reality that many people face with the ACA. In fact I would argue that the repeal push has been driven by the folks that find it unaffordable. I don't think people would so loudly complain about the mandate (and penalty) if that were not true.

I guess we will agree to disagree.... if you are making $40K a year the plans seem to be very affordable... as you had mentioned, in a few high cost areas it might not be as affordable, but that leaves a whole lot of the country with semi-affordable coverage...

The problem that I had is the high deductible... where you paid almost everything out of pocket until you paid over $6K for one person... the premiums were not a concern...

 

[MRG]

Well I think the definition of affordable is different based on the value you personally place on having health insurance. I've heard folks complaining any costs to them aren't affordable. These folks aren't living in my world.

 

[euro]

Can't speak to this particular case, but I think that the general sentiment is valid that many don't think that having health care is a spending priority. When the uninsured get free care, it is off the backs of those that have already stepped up to pay for their own care.

+1 totally agree!

 

[euro]

If this is true, then Americans are being shafted. Who is supposed to be looking out for our interests so this does not happen?

The White House and Congress - alas, lobbying forces are powerful and regulations are unpopular

 

[euro]

Whether the prices in the US are a true reflection of the development costs or a product of a broken system is something that needs to be honestly investigated.
... snip.....

The prices in ANY market is a reflection of what that market will bear in that particular location, and it has little or nothing to do with where the research and development are done. The US market, becasue it can/is willing to bear the highest prices, is the most lucrative market for for ALL pharmaceutical companies, regardless of where they are located, and ALL companies will charge the maximum they can get. It's the free market system. Capitalism is good, but it is NOT perfect.

 

[euro]

We could get some mighty cheap drugs if you could not sue and testing was limited to a year or so.

But only if we were willing to get serious about tort reform. Cutting that much of the development process will absolutely lead to higher risks for the patient. Under current law, the moment the first patient is affected by a serious side-effect or even death, flocks of lawyers descend on the Pharma company claiming reckless endangerment, etc. and sue for hundreds of millions of dollars in damages.
Unfortunately, we can't have it both ways.