Congress mulls cap on what Medicare enrollees pay for drugs
By RICARDO ALONSO-ZALDIVAR
Monday, February 25
WASHINGTON (AP) — With health care a top issue for American voters, Congress may actually be moving toward doing something this year to address the high cost of prescription drugs.
President Donald Trump, Democrats trying to retire him in 2020, and congressional incumbents of both parties all say they want action. Democrats and Republicans are far apart on whether to empower Medicare to negotiate prices, but there’s enough overlap to allow for agreement in other areas.
High on the list is capping out-of-pocket costs for participants in Medicare’s popular Part D prescription drug program, which has a loophole that’s left some beneficiaries with bills rivaling a mortgage payment.
The effort to cap out-of-pocket costs in Medicare’s prescription plan is being considered as part of broader legislation to restrain drug prices.
Limits on high medical and drug bills are already part of most employer-based and private insurance. They’re called “out-of-pocket maximums” and are required under the Obama-era health law for in-network services. But Medicare has remained an outlier even as prices have soared for potent new brand-name drugs, as well as older mainstays such as insulin.
“The issue has my attention,” said Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, which oversees Medicare. “Out-of-pocket costs are a concern of ours, particularly at the catastrophic level.” His committee has summoned CEOs from seven pharmaceutical companies to a hearing Tuesday.
While Grassley said he hasn’t settled on a specific approach, the committee’s top Democrat, Oregon Sen. Ron Wyden, recently introduced legislation that would cap out-of-pocket costs at about $2,650 for Medicare beneficiaries taking brand-name drugs. One co-sponsor is Minnesota Sen. Amy Klobuchar, a Democratic presidential candidate.
In Des Moines, Iowa, retired special education teacher Gail Orcutt is battling advanced lung cancer due to radon exposure. Although she has Medicare prescription coverage, she paid $2,600 in January for her cancer medication and will pay about $750 monthly for the rest of the year. She said it cost more last year for a different drug — $3,200 initially and then about $820 monthly.
Someday her current drug may stop working, said Orcutt, and then she’d have to go on a different medication. “What if that is two or three times what I’m paying now?” she said. “It’s not sustainable. The country needs more problem-solving for the common good and not the corporate bottom line.”
At a recent House Ways and Means Committee hearing, three expert witnesses with varied policy views concurred on limiting drug costs for Medicare beneficiaries. “This is still the only program that does not provide that protection to its beneficiaries,” testified economist Joe Antos of the business-oriented American Enterprise Institute. The House committee also oversees Medicare.
Before the hearing, the committee’s chairman and top Republican released a joint statement unusual in polarized times: “We agree that the time is now to take meaningful action to lower the cost of prescription drugs in the U.S. health care system,” said Reps. Richard Neal, D-Mass., and Kevin Brady, R-Texas.
John Rother of the National Coalition on Health Care is a longtime participant in national health care debates, and his organization represents a cross-section of interest groups. “There is a common recognition of a problem, and also a sense that they want to move something this year,” he said.
At issue is the Medicare prescription benefit’s “catastrophic” protection. Experts say it was intended as a safeguard but isn’t working that way, either for beneficiaries or taxpayers.
Catastrophic protection was enacted before the advent of drugs costing $1,000 a pill. It kicks in after beneficiaries have spent about $5,100 on medications, under a complex formula.
After that, the beneficiary is only responsible for 5 percent of the cost of the medication, and taxpayers’ share rises to 80 percent. The patient’s insurer covers the remaining 15 percent.
The problem for beneficiaries is that there’s no dollar limit to what they must pay. For example, 5 percent of a drug that costs $200,000 a year works out to $10,000.
Numerous experts also say there’s a problem for taxpayers.
Generally, the Medicare prescription benefit is financed with a mix of government subsidies and beneficiary premiums. But in the catastrophic portion, most of the bill is passed directly to taxpayers. That neutralizes the incentive for insurers to negotiate lower prices with drugmakers. Catastrophic is the fastest growing cost for Medicare’s Part D.
The administration has supported an approach recommended by experts that would shift most of the responsibility for high-cost medications onto insurers, while capping what beneficiaries must pay. That would force insurers to seek lower prices. But it may well raise premiums.
About 3.6 million Medicare beneficiaries with Part D coverage — or 9 percent — had “catastrophic” costs in 2015, according to the nonpartisan Kaiser Family Foundation. Of those, about 1 million had to pay their share in full because they didn’t qualify for financial assistance provided to low-income beneficiaries.
“This affects people with serious conditions such as cancer and multiple sclerosis,” said Tricia Neuman, a Medicare expert with Kaiser. “People on Medicare can still face huge expenses for their medication because the Medicare drug benefit was designed without a hard cap on out-of-pocket costs.”
Opinion: Approach to Rising Drug Prices Means Rejecting International Price Controls
By Pete Sepp
President Trump’s America First agenda guides his policy on everything from taxes to immigration. But his State of the Union address featured a nod to the international price-control scheme for pharmaceuticals that the Department of Health and Human Services is currently considering, which would put American interests second to bureaucratic price controls of foreign governments.
Make no mistake: This proposal would harm innovation and the quality of health care at home. That’s why the Trump administration should scuttle the plan and instead refine policies that build on America’s strengths and leadership in health innovation.
Congress recently held a hearing on prescription drug prices, and explored many of the complex factors going into pharmaceutical costs. Chairman Richard Neal, D-Massachusetts, said in his opening statement, “One of the challenges we face is understanding the underlying problem. Drug companies point to the PBMs who point to the insurance companies who point to the hospitals.”
Multiple factors are certainly at play, as Neal said, but some of the solutions put forward by legislators and by the Trump administration would make the problem worse, not better.
Drug prices are an important issue for millions of Americans, and there are many paths forward for policymakers. Removing FDA red tape and unnecessary medication taxes, and increasing government oversight of health care programs are all legitimate ways that the government can tackle this issue head-on.
Unfortunately, the signals being sent by HHS would make it harder for Americans to get the pharmaceutical treatments they need.
The proposal currently being considered by HHS would allow for international price controls set by foreign governments to serve as benchmarks in the United States. This would mean creating an “International Pricing Index” to tie what the government will pay for for certain Medicare Part B drugs to what other countries with socialized medicine and price controls say the drugs should be worth — not their actual value to patients and providers. Besides the obvious violation of American sovereignty, this would mean Americans are hostage to the pricing schemes of international bureaucrats. There’s no good reason Trump should allow this to happen.
The American drug market is already unfortunately saddled by slow bureaucratic procedures. The Food and Drug Administration is historically cautious when reviewing and approving new drugs. Although FDA has been admirably working to moderate this tendency, it frequently takes over a decade for new cures to hit the market. Generics and biosimilars are held back too.
Yet despite all this, almost half of all new pharmaceutical innovation still occurs in the United States — and it’s because we allow our own policy to guide innovation. Pharmaceutical research and development in the United States leads the world, and Americans have access to cutting-edge treatments that are unavailable in other countries. Current government regulations handicap too much innovation in the United States — why make matters worse by introducing European-style controls that would undermine America’s leadership in life-saving drug development?
Economists agree that the international pricing index would be disastrous for Americans. In an open letter to HHS Secretary Alex Azar, 175 economists write that this proposal would be “to the detriment of the health care system at large and investments in U.S. research and development … patients will suffer as cures are delayed or entirely undeveloped.”
The HHS International Pricing Index plan would be rejecting the America First vision that the president espouses and moving away from the free-market vision that HHS itself articulated prior to floating this plan. Taxpayers would suffer too, because the cures developed in this country help to save precious resources that would otherwise have to pay for even costlier treatments in Medicare, such as hospital stays or surgeries. Over the long run, Medicare’s finances will worsen, all for some illusory short-term “savings” supposedly generated by following Europe’s command-and-control approach.
The HHS pricing scheme would drive down American investment in key life-saving drugs by implementing international price controls. Fortunately, there are better ways — solutions that build upon the American exceptionalism the administration so often stresses. By doing things such as tackling harmful regulations, repealing unnecessary medical taxes, and making sure that the government tightens its oversight role, more progress will be made on controlling prescription drug prices.
ABOUT THE WRITER
Pete Sepp is the president of the National Taxpayers Union. He wrote this for InsideSources.com.
How electric cars could make America’s crumbling roads even worse
February 25, 2019
Author: Jay L. Zagorsky, Senior lecturer, Boston University
Disclosure statement: Jay Zagorsky owns a Tesla Model 3.
Partners: Boston University provides funding as a founding partner of The Conversation US.
U.S. roads and bridges are in abysmal shape – and that was before the recent winter storms made things even worse.
In fact, the government rates over one-quarter of all urban interstates as in fair or poor condition and one-third of U.S. bridges need repair.
To fix the potholes and crumbling roads, federal, state and local governments rely on fuel taxes, which raise more than US$80 billion a year and pay for around three-quarters of what the U.S. spends on building new roads and maintaining them.
I recently purchased an electric car, the Tesla Model 3. While swerving down a particularly rutted highway in New York, the economist in me began to wonder, what will happen to the roads as fewer and fewer cars run on gasoline? Who will pay to fix the streets?
Fuel taxes 101
Every time you go to the pump, each gallon of fuel you purchase puts money into a variety of pockets.
About half goes to the drillers that extract oil from the earth. Just under a quarter pays the refineries to turn crude into gasoline. And around 6 percent goes to distributors.
The rest, or typically about 20 percent of every gallon of gas, goes to various governments to maintain and enhance the U.S. transportation’s infrastructure.
Currently, the federal government charges 18.4 cents per gallon of gasoline, which provides 85 percent to 90 percent of the Highway Trust Fund that finances most federal spending on highways and mass transit.
State and local government charge their own taxes that vary widely. Combined with the national levy, fuel taxes range from over 70 cents per gallon in high-tax states like California and Pennsylvania to just over 30 cents in states like Alaska and Arizona. The difference is a key reason the price of gasoline changes so dramatically when you cross state lines.
While people often complain when their fuel prices go up, the real burden of gasoline taxes has been falling for decades. The federal government’s 18.4 cent tax, for example, was set way back in 1993. The tax would have to be 73 percent higher, or 32 cents, to have the same purchasing power.
On top of that, today’s vehicles get better mileage, which means fewer gallons of gas and less money collected in taxes.
And electric vehicles, of course, don’t need gasoline, so their drivers don’t pay a dime in fuel taxes.
A crisis in the making
At the moment, this doesn’t present a crisis because electric vehicles represent only a small proportion of the U.S. fleet.
Slightly more than 1 million plug-in vehicles have been sold since 2012 when the first mass market models hit the roads. While impressive, that figure is just a fraction of the over 250 million vehicles currently registered and legally drivable on U.S. highways.
But sales of electric cars are growing rapidly as how far they can travel before recharging and prices fall. Dealers sold a record 360,000 electric vehicles last year, up 80 percent from 2017.
If sales continue at this breakneck pace, electric cars will become mainstream in no time. In addition, governments in Europe and China are actively steering consumers away from fossil fuels and toward their electric counterparts.
In other words, the time will come very soon when the U.S. and individual states will no longer be able to rely on fuel taxes to mend American roads.
What states are doing about it
Some states are already anticipating this eventuality and are crafting solutions.
One involves charging owners of electric cars a fixed fee. So far, 17 states have done just that, with annual taxes ranging from $100 to $200 per car.
There are a few of problems with a fixed fee approach. For example, the proceeds only go to state coffers, even though the driver also uses out-of-state roads and national highways.
Another is that it’s regressive. Since a fixed fee hits all owners equally, regardless of income or how much they drive, it hurts poorer consumers most. During debate in Maine over a proposed $250 annual EV fee, opponents noted that the average person currently pays just a third of that – $82 – in state fuel taxes.
Oregon is testing another solution. Instead of paying fuel taxes, drivers are able to volunteer for a program that lets them pay based on miles driven rather than how many gallons they consume. The state installs tracking devices in their cars – whether electric or conventional – and drivers get a refund for the gas tax they pay at the pump.
The program raises privacy and fairness concerns especially for rural residents who have few other transportation options.
Another way forward
I believe there’s another solution.
Currently, carmakers and others are deploying large networks of charging stations throughout the country. Examples include Tesla’s Superchargers, Chargepoint, EVgo and Volkswagen’s proposed mobile chargers.
They operate just like gas pumps, only they provide kilowatts of electricity instead of gallons of fuel. While electric vehicle owners are free to use their own power outlets, anyone traveling long distances has to use these stations. And because charging at home is a hassle – requiring eight to 20 hours – I believe most drivers will increasingly choose the convenience and speed of the charging stations, which can fill up an EV in as little as 30 minutes.
So one option could be for governments to tack on their taxes to the bill, charging a few extra cents per kilowatt “pumped into the tank.” Furthermore, I would argue that the tax – whether on fuel or power – shouldn’t be a fixed amount but a percentage, which makes it less likely to be eroded by inflation over time.
It is in everyone’s interest to ensure there are funds to maintain the nation’s road. A small percentage tax on EV charging stations will help maintain U.S. roads without hurting electric vehicles’ chances of becoming a mass market product.
How a Green New Deal could exploit developing countries
February 25, 2019
Author: Olúfẹ́mi O. Táíwò, Assistant Professor of Philosophy, Georgetown University
Disclosure statement: Olúfẹ́mi O. Táíwò does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
The Green New Deal has changed the conversation among progressive Democrats about how to deal with climate change, from simply managing a disaster to how to take advantage of an existential threat to build a more just society.
However, should this legislative concept be transformed from the hypothetical framework it is today into actual policies, some of the solutions it engenders could make global inequality worse. As a scholar of colonialism, I am concerned that the Green New Deal could exacerbate what scholars like sociologist Doreen Martinez call climate colonialism – the domination of less powerful countries and peoples through initiatives meant to slow the pace of global warming.
The clearest cases of colonialism involve the unmistakable signifiers of foreign control: planted flags, and the formal and institutionally recognized assertion of authority over foreign lands. Only five countries in the world were not colonized by European empires in one way or other after the 15th century.
The history of colonialism has many clear milestones, including the 1494 Treaty of Tordesillas between Spain, Portugal and the Vatican that divided the world outside Europe between the two Iberian empires. At the Berlin Conference of 1884, European powers divvied the African continent among themselves.
U.S. colonialism has often been less stark. But the United States does occupy land that belonged to people who lived in North America before European settlers arrived. Following the realization of its “Manifest Destiny,” it also went beyond its coastal borders by taking over many islands, including those in Hawaii, the Philippines, Puerto Rico and Guam.
Likewise, overt foreign influence and control has become the exception rather than the rule, even for the original colonial powers. Throughout much of Africa and Asia, global empires like the British preferred a strategy of “indirect rule,” with chieftaincies, monarchies and other power structures that let them delegate their domination to local elites.
Neocolonialism and climate colonialism
In 1946, there were only 35 member-states of the United Nations. Once most former colonies had become independent countries by 1970, that number had swelled to 127. Amid this wave of independence, rich countries continued to exert control over former colonies through a system Ghana’s first prime minister, Kwame Nkrumah, first called “neocolonialism.”
Rather than directly running other countries, neocolonial domination is accomplished through levers of political and economic leverage.
Green New Deal policies could empower communities on both sides of U.S. borders, and could expand the powers of poor nations to determine their own destinies. Or they could promote climate colonialism, a term that can mean different things to different people.
To me, it’s the deepening or expansion of foreign domination through climate initiatives that exploit poorer nations’ resources or otherwise compromises their sovereignty. Others focus more on how formerly colonized countries are paying the price for a crisis caused disproportionately by the emissions from more industrialized nations – their current and past colonizers.
Land-grabbing and exporting solar power
But the Green New Deal will not meet any definition of climate justice if it becomes the next chapter in a long history of U.S. industrial policies that have oppressed people.
During the 19th century, when the transcontinental railway system arose, the U.S. gave land to rail companies it had taken it from Native Americans in a series of coerced treaties and wars. Similarly, responding to global warming may require vast tracts of land to grow food and carry out new policies as the climate changes. A global land rush is already underway around the globe.
Take, for example, carbon offsets: a form of investment in greenhouse gas emissions reduction that lets the buyer “offset” the effects of their emissions-producing activity.
But much of the available land is in poor countries, and inhabited by people who are those countries’ least politically powerful. This can put them in competition for the land that provides their basic needs with powerful private interests from the world’s most powerful countries.
For instance, a research institute reported in 2014 that Norwegian companies’ quest to buy and conserve forest land in East Africa to use as carbon offsets came at the cost of forced evictions and food scarcity for thousands of Ugandans, Mozambicans and Tanzanians. The Green New Deal could encourage exactly this kind of political trade-off.
Efforts to boost energy security can also drive climate colonialism. The African continent is, paradoxically, both home to the world’s largest solar power plant – the Noor Ouarzazate complex in Morocco – and people who are the least connected to grid.
Solar power may end up giving more Africans access to electricity but at the same time, many large renewable energy projects in North Africa could soon boost the European electric grid, bolstering European energy security with a climate-friendly source of power while millions of sub-Saharan Africans have none of their own.
Daniel A.M. Egbe, the coordinator of the African Network for Solar Energy, calls this linkage of large-scale solar farms with foreign power grids “a new form of resource exploitation.”
The Green New Deal’s stated goal of meeting all of America’s considerable and potentially increasing energy demand with renewable or zero-emission sources could create an incentive to go this route too, with Mexico. California already imports electricity from Baja California state and business interests stand ready to expand cross-border grid links throughout Central America if that proves feasible.
I see a serious risk that connecting the U.S. grid to Mexico and Central America could drain power out of the isthmus into the U.S. at the expense of Central Americans.
Justice without borders
To be clear, I do not believe the Green New Deal will necessarily lead to climate colonialism and I see its emphasis on climate justice as a good start. Technologies and policies are tools, and how they function depends on how they are designed and how they are used.
The U.S. could, for instance, do more to subsidize renewable-energy technologies, because American innovation can expedite their adoption everywhere.
The U.S. could also follow the lead of the federal government’s National Academy of Sciences and fund a “substantial research initiative” on negative emissions, which the Intergovernmental Panel on Climate Change identifies as necessary to prevent the worst climate change scenarios.
The Green New Deal, in its current draft form, is just as compatible with this path as it is with climate colonialism. But I do believe that achieving a version of climate justice that doesn’t end at U.S. borders will require the right vision, values and strategies.