Change in drug insurance could be costly to somc caner patients

According to a front page article in today's NY Times, insurance
companies have been quietly changing the way they share costs for some
expensive drugs. Whereas previously, if they covered the drug at all,
they just charged a fixed copay, they will now charge some percentage of
the cost of the drug which could range from one fifth to one third. The
change started with Medicare Part D plans, most of which do it, but it
has been increasingly taken up by private medical insurers. They do it
to restrain the rate of increase of medical insurance premiums in the
face of increasing employer resistance to the cost.

Since my cancer has not recurred, I'm not really familiar how much HT
drugs cost, but I've heard that Lupron, for example, can be pretty
expensive. But suppose someone comes up with a miracle drug which can
keep prostate cancer in remission without serious side effects. Since
the number of men needing such a drug is still a relatively small part
of the population, it is likely such a drug would be very expensive, as
many other cancer drugs are. It could easily happen that such a drug
would be unavailable to you, even though you had what you thought was
good insurance because you couldn't afford your share of the cost, which
could range from hundreds to thousands of dollars per month.

It turns out that in some cases you may be able to switch to a plan that
only charges a copay, but of course such a plan might cost a lot more,
and you have no assurance the new plan won't start doing the same thing.


It can be argued that people who are healthy shouldn't pay for the care
of people who are sick. That violates the basic principle of insurance,
which is to share risk and costs and the larger the insured pool the
better. If you start segregating the population into different
insurance pools, the pool with the sicker people will be more expensive
and, if they have a choice, healthy people will migrate to the less
expensive group. So the sicker pool will get sicker and more expensive.
(In the extreme case, each person could be his/her own insurance pool,
which would mean each of us would pay the total cost of our individual
health care.) This is called the problem of adverse selection. There
is no magical way around it. It has nothing to do with ideology.

In principle, there still wouldn't be a problem if the total cost of
health care never exceeded a certain amount which one could expect a
reasonably prudent person to amass. But that is clearly not true for
medical care. My wife and I, thanks to TIAA CREF doing well in the 90s,
have enough of a retirement accumulation to last us provided we don't
live too long. And, in the interest of prudence we have some additional
savings. We live comfotably, but we don't spend freely as if there were
no tomorrow. But it is easy to envision medical costs using up enough
of what we have so we literally would not have enough to live on.
Fortunately, we have Medicare, which so far at least has put a limit
(still too high) on what we have to spend on medical care. I keep
hoping that if things get bad enough with respect to the costs of
medical care to affect us that the American people will do something
unheard of, such as electing people who will actually do something about
it, but I am not holding my breath waiting for that to happen.

I think this indicates a fundamental problem with private medical
insurance. Insurers can and do charge different rates to different
classes of people. The basic incentive is to cut costs by managing
risks, i.e., whom they insure. That is what, from a corporate
perspective, they should be doing. But imagine the uproar if the
government run part of Medicare started charging radically different
rates to different people based on how sick they were. It just wouldn't
be politically feasible for them to do it. (But many Medicare Part D
plans, which are private, apparently do it with respect to expensive
drugs. We shall have to wait to ss if that remains politically
feasible.) A single payer system, whether run by governments of by some
external agency, doesn't suffer from this drawback. Its basic incentive
is to reduce costs. It can exhort people to live healthier life styles
and perhaps encourage more preventive medicine, but there isn't much
more it can do. But it can try to control costs by bargaining with
providers---which is something private insurers also try to do but can't
do as effectively, again because of the size of the pool. That may
have downsides too, but if the public doesn't like them it can make its
will known through political pressure.

Note that public health insurance, which in effect every advanced
country but the US has, is very different from "socialized medicine" in
which the government actually employs the providers. Examples of the
latter are the National health Service in Great Britain and the Veterans
Administration in the US. Such an arrangement has advantages and
possible dangers of its own. Such service can be pretty good, e.g., lots
of prominent American politicians are happy to get their medical care at
Walter Reed, or it can be not so good as some people say it is in Great
Britain. The medical care in France and Germany, from what I've heard
about it, is generally as good or better than that in the US and costs a
lot less, but I don't know to what extent, if any, docotrs are slaried
by the government in those countries.

In the US, we are just not going to get a single payer system any time
soon. The proposals that make the most sense to me are to set up a
mixed system in which private insurers can't segregate by risk and
provide also a Medicare like alternative. If the private insurers can
manage to thrive in such a system and provide good care while
controlling premiums, they will survive. If they can't, they will leave
the business for more lucrative opportunities. If I unserstand Canada
correctly, they basically ban private medical insurance. If it takes a
long time to schedule certain elective procedures compared to the US, it
is, I think, basically because the difference provincial insurance
systems won't pay for enough of them to reduce the waiting time. The
Canadians can of course change that if they have the will to, but
Canadians appear willing to sacrifice more for the common good, i.e., to
keep down costs, than American are. In any case, there is no
significant support for such a system in either of the two major
political parties and no presidential candidate has proposed one.

I don't believe it is possible to deal with these problems through the
tax system since few people have high enough incomes or enough other
resources to pay the potential costs. Of course you could reimburse
them the full amount using tax rebates, but i can't see that flying
politically, and it would require many people who don't now file to
learn how to do it.