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More Health Care-Related Research

By May 19, 2022Commentary

A couple of health care notes.  Most drug coverage in health plans is managed by firms called pharmacy benefit managers.  The largest ones are all owned by big health plan firms, like UnitedHealth owning Optum Rx, Cigna owning Express Scripts, Aetna/CVS owning Caremark and Prime Therapeutics being owned by a number of Blues plans.  These firms are supposed to get the lowest prices for their health plan and employer customers, but rarely do.  Instead they are rife with conflicts of interest through a rebating, discounting and fee structure.  This study finds that while rebates increased over the last few years, the PBMs generally failed to pass those savings on to payers or consumers.  In particular, the rebates and discounts rarely affect what the consumer pays.   (JAMA Study)

And the latest Altarum Institute health spending briefs indicate that health care, which is 20% of the economy, is beginning to contribute to inflation.  National health spending in March rose by 4.8% year over year, but if you eliminate the effects of government spending in 2021, the rise would have been 6.8%.  For the entire first quarter the year over year rise was 4.9% or 7.1% with adjustments for the special government spending.  The entire economy is estimated to have grown at 10.6% in the quarter, without adjusting for inflation, but has since dramatically slowed.  We are on track to spend about $4.5 trillion on health care this year.  About $3.9 trillion of that is for personal health care, with hospital costs making up the largest sub-category, followed by physician services.  Physician services and drugs are showing the fastest growth in spending.

On a price basis, the ability of government programs to dictate price is holding down overall health care inflation, but private health plans are experieincing significant rises, which are expected to increase throughout this year, as providers push for higher reimbursement as their own labor and other costs grow.  On a headline basis health care prices grew only 1.9% year over year in April, far lower than economy-wide inflation.  But government prices rose only .2% while private sector prices grew by 3.2%.  Utilization growth has also begun ticking back up and was 2.9% year over year in March.  I expect that we will see very strong growth in both health care spending and prices in the second half of 2022, which means more pain for employers and consumers.  (Altarum Briefs)

Join the discussion 2 Comments

  • Shelli says:

    Former UHG/UNH employee: please write more about this. The public is woefully unaware of the criminal profits churned via PBMs. I am as free market as they come, but was always perturbed at the industry consolidation in the name of “efficiencies for the consumer” with 0 benefit passed to members. The collusion between rebates and formulary PBM reps and big pharma also disturbed me. The money in drugs is unlike anything else, whether it’s corner dope slingers or corporate America.

    • Kevin Roche says:

      If you looked at pre-epidemic posts, search under the “drugs” tag, you will see a bunch of posts on the drug industry. As I transition back to more health care stuff I will keep posting on it. Thank you for reading.

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