Healthy Skepticism Library item: 85

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

 

Publication type: news

Pignarre P.
Health insurance: the bitter American lesson,
LE MONDE 2004 Jan 8

Full text:

Americans discussed throughout the year 2003 their health insurance model, at the time of the installation of a drug benefit system for the elderly with low income and without private insurance (Medicare). Until now, their hospital health spending was supported by the authorities within the framework of the Medicare program, but, the outpatient prescription drugs remained totally supported by the patients. This debate could be very instructive for the French public.

The American and French health insurance systems are at the ends of a spectrum which goes from most individualistic to most collective. All the reforms imagined today in France to solve our difficulties tend to bring us closer to the American system. It’s worth thus knowing its effects. To do it without being accused of anti-American bias, the best thing was to let speak the American observers themselves.

In the United States, the big pharmaceutical laboratories fix freely the public price of their drugs. From now on, each time the American government negotiates a trade agreement, it tries to include a clause extending this system and withdrawing any capacity of negotiation to the national States on the drug prices. Australia is the first target today.

Frightened by the electoral consequences, its government has until now resisted. But they’ll take a rain check.

But how then to limit the absolute power of the pharmaceutical industry ? If the laboratories fix their prices freely, the risk is indeed to get quickly a doubling, even a tripling of the price of the main drugs. Why shouldn’t they if there is no limit? It would be the way for the industrialists to maintain very high profits which they until now guaranteed to their shareholders whereas the rate of innovation seriously slowed down.

That would quickly explode the systems of benefits. The freedom of prices is only possible if there is no national social Security based on the European, Australian or Canadian models, which can function only if the spending is controlled and thus prices fixed by the authorities. But by what to replace the social Security, because nobody moreover wants a system without insurance which would lead to – on top of political disorders – a considerable fall of consumption and the ruin of the industrialists?

The idea is to make manage the social Security by private insurances in competition. They have the possibility, each one for itself, to negotiate the prices with the manufacturers. The private insurance companies negotiate discounts on the (free) public prices with each laboratory. How do they manage it? The insurances have a means of pressure: they establish “forms” where the drugs which they reimburse are registered (the others are not refunded, except after a long procedure at the end of which a provisional authorization can be granted in a precise case).

What is the scope of the discounts? It is a secrecy, but they are estimated to vary between 20 % and 50 %. In the same logic, the [private insurances] are led lo create networks of doctors and hospital which their members must obligatorily consult to get the benefits. They dictate to the doctors even the duration of the consultation. In the projects of the French reform, that is called the “basket of health care”. It is thus only by limiting the list of the accessible drugs and, more generally, of the accessible care that the Americans manage to control their prices.

To decontrol the drug prices, the States should be led to dismantle their national social Security system. Or, conversely, while dismantling the social Security, a future decontrol of the drug prices is made possible.

This system has an immediate effect of exclusion: partial price control concerns only the insured persons. Those who do not have an insurance – often the poorest, working in small companies where there is no benefit scheme – pay the drugs at the public price, the highest.

It is here that are revealed all the difference between a solidarity based system, which must benefit the poorest, and an insurance based system which limits the risks according to the investments that each individual can make.

It is the difference between the Welfare state, and what certain American theorists call from now on the Enabling State, the State “which makes able the individual”.

It is a true social revolution which is proposed to us with the Enabling State. The State gives up all its functions of social protection: retirements, unemployment, health insurance, and puts them in the hands of private companies. Any specificity is withdrawn from the mutual benefit societies, at the origin of all the socialized redistribution forms. The mutual benefit societies are put in the legal obligation to function on the model of the private insurances.

The State does not intervene any more but by giving tax cuts, inevitably uneven. It is the way taken in France with the pension reform: the “supplementary pensions”, that each one from now on has to subscribe, will entitle to an income tax cut. Too bad for the poorest, who does not pay any taxes or few taxes: the State will not be able to help them to settle a pension!

The political choice, for the Americans, is: to have access to all the drugs, but at very high prices, or to limit the prices, but having then access only to a limited number. It is the kind of alternative in which the liberalism likes to lock up the populations and wrongfully naive governments. Any other solution seems then out of reach. The trap is closed again. The feeling is created that there is no rational way to leave an infernal alternative.

The more the insurance companies are powerful and represent a high number of policy-holders, the more they are in good position to obtain large discount.

Who benefits from these discounts? No control is possible, because their amount is not made public and, from now on, the big companies which pay the health insurance of their employees – as Ford – complains more and more about the “diversion” of this money to the single profit of the insurance companies.

The unfortunate insured persons are thus faced not only with the giants of the pharmaceutical industry, but also with the giants of the insurance, sometimes with their employer as well, who are increasingly reticent to pay the insurance premiums. Three against one!

How to believe that competition will benefit them rather than the insurances or the laboratories? If these are the companies of which they are the employees, which pay a part of their health insurance, then this part tends to decrease with the passing years. A big company as Wal Mart insures in 2003 only half of its million of employees. The policy-holders thus have all the chances to be the fall guy.

No wonder that the Americans see their health expenditure soaring year by year and representing from now on 14 % of their gross domestic product (a little more than 9 % in France), for a total service less good than in the majority of the European countries, as the OECD statistics testify. The overcost of the assumption of responsibility of the health insurance by private insurances could approach 50 %!

In its competition with the insurances for the share of the cake at patient’s expense, the pharmaceutical industry struggles on several fields. It initially obtained in the United States – what remains prohibited in Europe – the right to make advertising in the newspapers and on television for its prescription drugs only. It allows to increase the pressure of the patients on the doctors and the insurance companies to oblige them to deliver certain drugs which were not included in the forms. The pharmaceutical industry should also prevent any constitution of a strong countervailing power able to oblige it to lower its prices. It is one of the objectives of the reform which was adopted by the American members of Parliament: any negotiation on the prices is forbidden for Medicare.

Moreover, to be entitled (from 2006 on) to the very partial Medicare drug benefits, the elderly people will be strongly incited to take out a private insurance which will be subsidized by the State and to which the management of Medicare will be delegated. Until now, Medicare entirely managed its business without intervention of the private insurance.

One of the principles of the reform is to balkanise what is still national in Medicare. One could thus think that the Medicare policy-holders who will choose a private intermediary would enter the system of the restrictive forms, the only way to drop the prices. But, there still, under the pressure of the pharmaceutical industry, the new law prohibit in this case the drawing up of such lists! The private insurances will not be able thus to obtain discounts on the prices, as they do for their other members. The pharmaceutical laboratories won a point against the insurances, but the patients are always the losers in any case.

The system is thus likely to become completely unmanageable. As the budget of the State devoted to this program will not be able to exceed 400 billion dollars over 10 years (2006-2016), the only solution will remain to increase the part paid by the patients, their monthly contribution, or to change the threshold of the expenditure from which the drugs are refunded (the Congress’ Budget Committee already calculated that the deductible would be raised of 10 % from 2007 on).

It was believed that the reform aimed at helping the elderly people with low income. It will only be useful in fact to distribute liberally 40 billion dollars per year to the pharmaceutical industry first and then to the private insurances. According to the most optimistic calculations made by the American press, that will amount as a whole refunding the drugs at a rate of 33 %, even if the conditions can be different depending on the private companies which will be selected to manage the system from one State to another and one year on the other.

Is this the way on which France must embark?

Small clarification: the systems of health insurance in Europe benefit almost all the population and not only the poorest.