Cavalcade of Risk #164 now online

Emily Holbrook hosts this week's collection of "the most important and well-written posts within the blogosphere pertaining to risk and insurance" (well-put, Emily!).

Drug Addiction

Drug addiction can be a real problem, and the pharmaceutical manufacturers know that. To preserve profits, they want to make sure you stay addicted to their products.

With money makers like Lipitor going generic, how will companies like Pfizer maintain market share and profits?

With coupons.

Pfizer Inc. tested the new trend last year and now offers copay coupons that can bring insured patients six of its medicines for as little as $4 a month each. That includes Lipitor, which was taken by more than 3.5 million Americans until generic competition arrived last Nov. 30.

Experts predict more drugmakers will do the same for some of their big sellers, as the companies weather big revenue drops from an unprecedented wave of top-selling drugs whose patents are expiring. The trend is the latest attempt by drugmakers to hold onto business at a time when they are increasingly under siege. Drug companies including Pfizer, Merck & Co. and Bristol Myers-Squibb Co. are squeezed by rising research costs, the weak global economy and pressure from Europe, China and elsewhere to reduce drug prices.

Cleveland, "Coupons aim to keep people off generic drugs", August, 2012

Maintaining market share, even with reduced margins, is a key to survival.

While the deal slashes Pfizer's profit, the company still makes more money than it would if all its customers defected from Lipitor to a generic. Ian Read, CEO of New York-based Pfizer, recently said the strategy on Lipitor alone brought the company hundreds of millions of dollars in extra profit.

The coupons only work with private insurance, though. Patients with Medicare or other government health insurance are barred from using them.

It should be noted that generics are not necessarily the same as brand name. Some people experience unpleasant side effects from generics and switch back to brand drugs.

Also, time release generics often don't have the same level of effectiveness of brand name. Brand name drugs have "perfected" the extended dosage delivery system while many time release generics have a tendency to spike early after ingestion which reduces the effectiveness. This is especially true with psychotropic drugs.

Grapes, blueberries and miracles

In addition to its potential cancer-fighting benefits, turns out that red wine (and blueberries!) contain a "miracle molecule" that may prevent "Help, I've fallen and I can't get up!" Syndrome. We've written about resveratrol before (most recently here), and its ability to fight Alzheimer's and cancer. But scientists have now found another benefit:

"As these animal [lab mice] age, they lose some of their motor coordination. Very similar as to humans do as they age. And when we gave them out the resveratrol, the older mouse has less loss of motor coordination.”

Although red wine is most often cited as a primary source, resveratrol is also found in blueberries. In fact:

"We just used blueberries in our study and actually when they eat the whole fruit it’s actually more effective than the resveratrol alone and you don’t need as much.”

So there.

Poppa Pizza

That Compassionate British Health System

It appears that the MVNHS© has some competition:

"A disabled man who lost both legs and four fingers to diabetes has been asked to prove he is unable to work by the Department of Work and Pensions"

One supposes that he could easily find a job as a mid-level bureauweenie in the Department of Work and Pensions, since that doesn't seem to entail much physical exertion. Of course, he may be over-qualified on the intelligence front.

Plan to fix COBRA and help small businesses

The income I make administering COBRA for employers aside, I have always thought it was a terrible idea. Not just because it was so poorly written that employers had to spend two decades in court to learn to comply, but why should employers be liable for the medical care of ex-employees?

The most ironic part of COBRA, as implemented, is society determined we should help those losing their insurance transition to new insurance, yet society passed the cost onto a very small population of people. People only take COBRA if the premium is less then they expect to have in claims; very few people take COBRA because it is the responsible thing to do. Employers can expect COBRA electors to not only be money losers but big time money losers, that keep a hand in their pocket for 18, 29, or 36 months.This burden doesn't fall on society but 25, or how ever many people work at the company, people that are unfortunate to have worked with this individual, or a family member, previously.

I have seen healthy groups turn into max rated cases or companies even have to drop insurance due to cost from COBRA enrollees. If you believe the public should step up and help these individuals then the public should foot the bill.

I would suggest that individuals eligible for federal COBRA be enrolled into Medicare under the same provisions as current law. Eligible for 18-36 months, ends when other coverage is available, priced at a more age appropriate rate. Not only would this end the burden on employers but would lower cost if Medicare could ever do anything about their fraud as Medicare reimburses less then most private insurance.

CMS, through the IRS. would also be in a far better position to police individuals becoming eligible with other coverage.

Employers could then invest this savings in current employees and their benefits. They would also be out from under the huge liability of sending a notice to the wrong address or failure to comply with other notification requirements that could bankrupt them.

Where did all the doctors go?

A recent report by Merritt Hawkins, one of the country’s largest physician recruiting firms, shows that by 2014, 75% of all physicians will be working for hospitals or large groups. How could this have happened?

“Squeezed by high costs and shrinking insurance reimbursements, independent doctors are closing up shop or going to work at hospitals or bigger group practices where they aren't directly responsible for overhead costs.”

For those who regularly read InsureBlog, I have reported on how the lack of increased insurance reimbursements is decimating the private medical doctor. Seems like not much has changed:

"Our projection reaffirms the trend that fewer and fewer doctors are going into solo practice or staying in solo practice," Travis Singleton, senior vice president with Merritt Hawkins, told CNN. "It shows that no one wants to hire a solo doctor; no one wants to be a solo doctor. This is a dying breed of physician that is quickly disappearing from the American landscape"

Having worked with representatives of Merritt Hawkins, I can attest to how difficult it is for a small practice to recruit a new physician. The trend for medical school graduates is to seek out a six figure job, working only 40 hours a week, in a great location, with great schools and amenities. I then asked the representative if they want a pony with that. Gone are the days when a doctor graduates from medical school, hangs out their shingle and then works to built up a clientele of patients. Of course during this process, the doctor “eats what he kills”, meaning his income comes directly from the number of patients that he sees. Hospitals and large groups have the ability to pay a physician a salary at graduation that is often only achieved after a decade of working:

“As hospitals staff up, they are plucking off physicians who once ran independent practices but couldn't afford to stay in business ... How a "solo" doctor practices today is dramatically different from 20 or 30 years ago. Back then, the solo doctor was truly independent ... They had the financial means to pick a place, set up their office, hire their staff and get going. But the economics of delivering health care have changed considerably over the years, making it much more expensive for doctors to run an independent office."

The result is that they often don't, choosing instead to seel their services to a hospital system which can provide the logistical and billing support at a much lower cost.

For anyone working in healthcare this is not new, but for those individuals who are experiencing the loss of their doctor or for those who are being forced into a large medical group where there is no choice of which physician to see, this is shocking:

"Hiring of physicians by hospitals definitely accelerated since 2008 as the economy weakened, reimbursements to doctors were shrinking and health reform passed"

As I have discussed previously, this situation is a direct result of the lack of increases in the Medicare Fee Schedule since early last decade. Beginning in early 2000, it was determined that the Medicare Fee Schedule needed to be kept in check by a formula called the SGR, or Sustained Growth Ratio. The result of the SGR is that for every year since early 2000’s the government has determined that the fee schedule needs to be cut. The percentage cut for this year has not been announced, but last year’s cut was around 30%, which was deferred once again. Since all private insurance fee schedules are based on Medicare’s fee schedule, the lack of an increase on Medicare’s part has resulted in an across the board lack of increase on all fee schedules.

I was recently doing some consulting work with a restaurateur who lamented the small profit ratio in food and wondered if he should have gone to medical school. I explained to him the state of medicine today and then to put it in his terms, I asked him what would happen to his business if he had to charge for his food what he charged in the year 2000 but still have the overhead of year 2012. He hugged me, realizing that his lot wasn’t so bad.  The reality is that private doctors are going bankrupt and going out of business and new graduates are not enthusiastic about taking on the costs and the workload of a private practice without the financial rewards. So this is how the long established practice of private doctor’s end, not with a bang but with a merger.