The Road to a Better Healthcare System Runs Through Insurance Reform

Guest column: By Kenneth E. Thorpe

America has a healthcare spending problem. But it's not that we spend too much, per se. Rather, we spend staggering sums of money treating the devastating complications of chronic diseases, instead of helping patients prevent those conditions in the first place.

That's exactly backward. If policymakers want to bend the healthcare cost curve, they need to enable patients to ward off, or at least manage, the chronic conditions that account for roughly 90% of total health spending -- before those diseases cause heart attacks, strokes, kidney failure, amputations, and other expensive complications.

To do so, policymakers will have to reform the way health insurers manage prescription drug coverage. Too often, insurers and the pharmacy benefit managers (PBMs) they hire to administer their drug plans make it harder for patients to obtain medically necessary treatments.

Right now, even after patients receive a diagnosis and their doctors prescribe a treatment, there's no guarantee they'll get the medicine they need. Health insurers ultimately decide which medicines their plans will cover, what patients will pay for them, and what conditions patients must satisfy before their plan covers a particular drug.

And just because a medicine is covered doesn't mean patients can afford it. In fact, even though health insurers negotiate hundreds of billions of dollars in rebates and discounts from drug manufacturers every year, patients often don't receive those savings at the pharmacy counter.

Instead, many plan enrollees pay coinsurance based on a medicine's undiscounted list price -- including when substantial rebates have been negotiated behind the scenes.

That arrangement pads insurer and PBM profits in the short run, but increases the likelihood that patients will ration pills or stop taking their medicines on schedule to save money -- and then get sicker and need more expensive hospitalizations down the road. Those downstream costs often dwarf the cost of medications. Indeed, America already spends more than three times as much on hospital care as it does on retail prescription drugs.

Thankfully, efforts to address these problems have been gaining momentum in recent years. Congress, federal regulators, and states across the country have all taken steps to increase oversight of health insurers, improve transparency in prescription drug coverage, and reexamine the role PBMs play in administering those benefits.

That's a good start. But the real test of any reform is whether it makes it easier for patients to obtain and afford the medicines their doctors prescribe.

To that end, policymakers should require greater transparency in insurance coverage decisions and ensure negotiated savings reach patients at the pharmacy counter. They can also take steps to limit the unnecessary utilization-management practices -- including excessive prior authorization, step therapy, and other coverage restrictions -- that obstruct patients from obtaining the treatments their doctors prescribe.

Health insurers exist to control healthcare costs. That's an important responsibility. But success shouldn't be measured by how much they reduce spending on prescription drugs specifically. It should be measured by whether they're helping keep patients healthy -- and reducing the total cost of chronic disease.

Kenneth E. Thorpe is the Robert W. Woodruff Professor of Health Policy at Emory University and the chairman of the Partnership to Fight Chronic Disease. This column originally appeared at DCJournal.com

Disclosure: Thorpe is the honorary chair of the Partnership to Fight Chronic Disease, which has received pharmaceutical industry support. The views expressed are his own.