I think a good incremental move toward a public option would be to allow early retirees to pay into Medicare. The ACA is great, but it really is designed for working people that don’t have access to employer sponsored health insurance. If you don’t work, the way the subsidies work is not really fair to those who pay their living expenses out of IRA withdrawals because those withdrawals are income in the calculation of the subsidies but capital gains on other investments are not. It’s not awful, but just makes it complicated. Since we will be on Medicare in a few years it would have been nice to pay a rate that decided on some other manner than income, set up our supplemental policies, and get established with doctors who take Medicare.
I am impressed by the initial drug negotiation list. These are long-time blockbusters from many brands for many conditions that have reached the point where they need access expanded* and regulated. We've historically used the generic market to fulfill this role which has run into reliability issues so we need an alternate pathway.
Most interesting to me is how the exclusion criteria REINFORCE the free-market generic option as an alternative. The companies can pick their poison and, to me, still seem incentivized to find the next 7-to-11 year free-market blockbuster. I do think this "development engine" needs to be reinforced with some reduced FDA approval barriers.
We'll see if the negotiations start overreaching as they expand. At some point, the "backlog" will be cleared and the lists will be harder to cherry-pick. I think it's overall worth solving today's problem and worrying about second order effects if and when they emerge because we do have some levers to throttle.
Excellent piece, as usual. One thing in particular got my attention because I know nothing about it: "the White House political operation doesn’t have a good working relationship with the Department of Health and Human Services". Well, that's a bummer. Can anyone fill me in on this
"Even inside the OWS context we should be thinking more about the fact that it took 65 days to invent the first Covid vaccines and then another 270 to test them"
65 days to invent COVID vaccines after 25 years of work on an ignored technology.
How about the health care messaging strategy of loudly and repeatedly thanking Trump for his great work developing Covid vaccines? The goal being to cause distrust among a particular stripe of (R) voters who evolved into fervent antivaxxers between 2020 and 2022. Keeping some of them at home on Election Day seems to me far more important than attempting to gain new converts on the basis of healthcare issues.
It also gives nice positive messaging for those swing voters that like to hear messages of bipartisanship. And the polarized people on both sides have the right response when you praise Trump for vaccines, because they care even more about vaccines than saying nice things about Trump.
"one that imposes a fee on companies that raise the price of prescription drugs faster than the overall rate of inflation ... creates an economy-wide disincentive to raise prices."
That's a great idea if you believe that only evil, greedy drug companies would raise prices faster than the rate of inflation.
Now, I have no love of drug companies, and I loathe prescription drug ads (no, I will NOT ask my doctor if Xyzumab is right for me, go away!). But I can easily imagine a scenario where, say, ingredient X is necessary for making an insulin drug, and the supply of X cratered during the pandemic and still hasn't recovered. So now, shortage of X --> X is expensive --> the only way to make the drug is to raise prices or else sell at a loss. A consumer may say, "Oranges are too expensive, I'll buy apples instead," but a drug manufacturer can't very well say, "X is too expensive, no problem, we'll swap in ingredient Y instead," not unless they want to have an awkward conversation with the FDA. Is it fair to punish the drug company with a fee in this case? I would argue not.
While Matt said "Medicare ... recipients can now get the full suite of adult vaccines for free" ( in practice mostly means shingles), it is important to note that for Medicare to cover this, you must be signed up for (and paying for) Part D, which covers medications (and, it turns out, vaccines.). Not having Part D, I paid $400 for the RSV vaccine and $200+ for the first shingles vaccine.
Modest proposal: Medicaid buy-in for small businesses. Businesses with 25 employees or less should buy in to Medicaid at-cost.
It would encompass every restaurant, every small construction company, every two-men-and-a-truck plumbing outfit, every startup tech company, and every LuLaRoe consultant in America - and a lot of journalists. It's a part of the market that is actively shunned by insurance companies.
There are a lotta cross-pressured Trump voters in that group. To Matt's point about Trump's "moderation," he did promise the government would fix healthcare and a lot of people voted for him because they thought he would do that.
I further think that states could enact a Medicaid buy-in with just an ACA waiver. No need for Congress to act at all. Just have Biden sign the waiver.
I do realize this feels like small ball compared to Medicare for All. But it'd have an outsized impact and it would poll through the roof.
As Sean notes, private health insurance pays much more than Medicaid, sometimes dramatically so. Also health care providers constitutionally can just refuse to accept Medicaid patients- you can't force them to run their businesses at a loss! So imagine your program and then none of these people can find a doctor that will treat them
Medicaid pays providers way less than the cost of actually providing care. This will much more strain on providers, and even more providers will no longer accept Medicaid patients.
Hot take: Democrats should talk as much as possible about their successes and their popular ideas. Definitely agree here. Are they failing to do so? Maybe; I don't have enough information.
But between the bright pundit's ideas and reality always falls the shadow. Matt writes, "I would compare the minimal volume of attention it’s gotten to the widespread discussion of Biden’s student loan activities." Do you know why that is? It's because the latter is *controversial.* You know, the kind of thing that excites the media and gets that earned attention. The governor of Kentucky talking about healthcare issues or the usual Democrat talking head doing so on Meet the Press will disappear into the void unless something happens that causes it, as they say, to become viral.
Now if you can show me that Biden talks five times as much about student loans as about bringing pharmaceutical costs down, I'd say we have a problem. I don't think that's the case, though.
My advice to the Democrats, which is worth what they pay for it, is: wait for the Republicans to slip up on some healthcare point in the public sphere and then jump on it like crazy showing their mendacity and highlighting the Democrats' great results and future plans.. Preferably a lot closer to the election than now. Otherwise, spend your time preparing for the big push next year and worry less about winning debating points right now.
I think there were a some good things passed, but want to push back on two of the things that Matt highlights as good:
1) As mentioned elsewhere, we're not negotiating over drug prices, we're setting a number and then telling drug companies they have to accept it or deal with an excise tax of 95%. In any other circumstance we would recognize this is not negotiation. It would have been perfectly fine to set a price limit the government finds reasonable and not be willing to pay more. But the excise tax and including all drugs by that manufacturer in the deal makes this a price control. So at least call it that. And also recognize that the reason its there is that Democrats didn't want to have to deal with the potential blow back of a drug company not accepting the price and choosing not to sell to the government.
2) The limit on drug prices increasing more than inflation - If you know going in that if your costs suddenly increase by 20% (fire the a factory, worker shortage, etc) but you can't ever raise your prices more than CPI (target 2%), then won't you just set the initial price much higher so as to build in a larger cushion?
More broadly, its fascinating to compare Matt the deregulator when it comes to land use and Matt the regulator when it comes to healthcare. It makes so much more sense to build a basic single player plan that allows for real negotiation on prices, then allow the public to purchase additional care on top of that. Instead we're slowly building an ever increasing thicket of rules and regulations that will make it harder and harder to navigate...just like developers trying to build in NYC.
Just the drug in question (I posted wrong elsewhere, will correct)
====
An excise tax will be levied on drug companies that do not comply with the negotiation process. The excise tax starts at 65% of a product’s sales in the U.S. and increases by 10% every quarter to a maximum of 95%. As an alternative to paying the tax, manufacturers can choose to withdraw all of their drugs from coverage under Medicare and Medicaid. In addition, manufacturers that refuse to offer an agreed-upon negotiated price for a selected drug to “a maximum fair price eligible individual” (i.e., Medicare beneficiaries enrolled in Part B and/or Part D) or to a provider of services to maximum fair price eligible individuals (such as a physician or hospital) will pay a civil monetary penalty equal to 10 times the difference between the price charged and the maximum fair price.
=====
And maybe that ability to "walk" on selling any other drugs to medicare/medicaid keeps this as a negotiation? Because at least Medicare risks losing something if the company walks? (in terms of the public screaming at them for not having these drugs because they tried to charge too much)
1) As an alternative to paying the tax, manufacturers can choose to withdraw all of their drugs from coverage under Medicare and Medicaid
2) In addition, manufacturers that refuse to offer an agreed-upon negotiated price...will pay a civil monetary penalty equal to 10 times the difference between the price charged and the maximum fair price.
They can say no, but the penalties for doing so are severe.
I think #2 only applies to a price already agreed to, that they have to make sure to not overcharge medicare-eligible individuals even if medicare doesn't _directly_ buy it.
I think it's not "in addition to the tax/choise in #1" but an additional piece of info
The way I read that is even if you decide to pull out of Medicare, you can't offer it to individuals covered by Medicare through private hospitals or doctors without the civil monetary penalty.
This is one in a series of posts MattY has made about "democrats should be talking about this" or "democrats should be talking about that". Sometimes it's the Biden White House rather than "democrats", but the exact path to "talking about" has always been diffuse.
MattY, if you're looking for ideas for future posts or even a series, I'd like to see a nuts and bolts examination of political communication strategies. Who among a political party should be/is deciding their message, how much authority should the party grant them to do so, and what is the path to getting the message out?
Besides just talking about the message, is there a way for Democrats to better improve the medium? Can they build a smarter, more focused strategy for getting out their message (whatever that message might be)?
I second this idea! I would be very interesting to read Matt Y’s thoughts on this.
See also “message discipline “ and to what extent the party should be blamed/held responsible for the utterances of its most extreme wingnutty members.
"Another very important provision taking effect this year is one that imposes a fee on companies that raise the price of prescription drugs faster than the overall rate of inflation."
How can we save people money? I know, tax things they buy more! That'll certainly bring down cost.
There are so many obvious ways for this to have unintended consequences I'm surprised Matt even brought it up as a potential positive. First, the obvious one: taxing things make them more expensive. This doesn't require any explanation. Second, of course companies are going to game the system. That means, for example, increasing prices by inflation, even when prices would naturally go down, to hedge against future cost increases. Third, this incentives companies to introduce new medicine or new formulations of old medicine at higher prices to get around these taxes. Think of how butchers in the UK during WWII invented new cuts of meat to get around price caps for previous cuts of meat. And that's just off the top of my head. People with billions of dollars of incentives to avoid this tax will find market-distorting ways of doing so to the detriment of everyone.
One example would be when there's competition between two drugs in the same class, even if they're both covered by patents. One manufacturer might drop the price to undercut the other. They might be more reluctant to do so if they're prevented from increasing the price later.
Maybe to better game the system, the pharma companies should hire some marketing people from the packaged snack food industry. You know, keep the price the same (or even lower it!) but make the pills slightly smaller or surreptitiously reduce the number of pills in the container.
One thing I don't understand on the "Democrats should message differently/more on XYZ" pleas is what it really means to message. How does "messaging" actually work? It's certainly impossible to get anything through to political opponents that isn't demagogued through partisan news first. I consume a lot of news and not sure I really get anything from the Biden administration other than really simple and big stuff filtered through the NYT - "Biden signed something that forgave 10B of student loans", or whatever.
We got a lot of messaging from Trump because he got through to everyone on Twitter.
Why isn't there a 30 second daily update from Biden/Harris/Buttegieg/etc. when I open Netflix? Why isn't there a 2 minute daily Biden podcast?
This sounds like a revival of the old Saturday radio broadcasts that previous presidents would deliver. I believe the practice started with Carter; they certainly ran through Clinton, but I don’t know when they stopped.
Well said, Matt.
Yes, but about reducing costs and making it more efficient in delivering health outcomes per dollar spent, not just about who pays,
I think a good incremental move toward a public option would be to allow early retirees to pay into Medicare. The ACA is great, but it really is designed for working people that don’t have access to employer sponsored health insurance. If you don’t work, the way the subsidies work is not really fair to those who pay their living expenses out of IRA withdrawals because those withdrawals are income in the calculation of the subsidies but capital gains on other investments are not. It’s not awful, but just makes it complicated. Since we will be on Medicare in a few years it would have been nice to pay a rate that decided on some other manner than income, set up our supplemental policies, and get established with doctors who take Medicare.
I am impressed by the initial drug negotiation list. These are long-time blockbusters from many brands for many conditions that have reached the point where they need access expanded* and regulated. We've historically used the generic market to fulfill this role which has run into reliability issues so we need an alternate pathway.
Most interesting to me is how the exclusion criteria REINFORCE the free-market generic option as an alternative. The companies can pick their poison and, to me, still seem incentivized to find the next 7-to-11 year free-market blockbuster. I do think this "development engine" needs to be reinforced with some reduced FDA approval barriers.
We'll see if the negotiations start overreaching as they expand. At some point, the "backlog" will be cleared and the lists will be harder to cherry-pick. I think it's overall worth solving today's problem and worrying about second order effects if and when they emerge because we do have some levers to throttle.
*Article about expansion here https://www.kff.org/medicare/issue-brief/how-medicares-new-drug-price-negotiation-program-could-expand-access-to-selected-drugs/
Excellent piece, as usual. One thing in particular got my attention because I know nothing about it: "the White House political operation doesn’t have a good working relationship with the Department of Health and Human Services". Well, that's a bummer. Can anyone fill me in on this
"Even inside the OWS context we should be thinking more about the fact that it took 65 days to invent the first Covid vaccines and then another 270 to test them"
65 days to invent COVID vaccines after 25 years of work on an ignored technology.
"Healthcare is closely linked, conceptually and practically, to abortion rights"
In roughly the same sense that firefighting is closely linked, conceptually and practically, to arson.
Sir, this is a pro-choice Substack.
How about the health care messaging strategy of loudly and repeatedly thanking Trump for his great work developing Covid vaccines? The goal being to cause distrust among a particular stripe of (R) voters who evolved into fervent antivaxxers between 2020 and 2022. Keeping some of them at home on Election Day seems to me far more important than attempting to gain new converts on the basis of healthcare issues.
It also gives nice positive messaging for those swing voters that like to hear messages of bipartisanship. And the polarized people on both sides have the right response when you praise Trump for vaccines, because they care even more about vaccines than saying nice things about Trump.
"one that imposes a fee on companies that raise the price of prescription drugs faster than the overall rate of inflation ... creates an economy-wide disincentive to raise prices."
That's a great idea if you believe that only evil, greedy drug companies would raise prices faster than the rate of inflation.
Now, I have no love of drug companies, and I loathe prescription drug ads (no, I will NOT ask my doctor if Xyzumab is right for me, go away!). But I can easily imagine a scenario where, say, ingredient X is necessary for making an insulin drug, and the supply of X cratered during the pandemic and still hasn't recovered. So now, shortage of X --> X is expensive --> the only way to make the drug is to raise prices or else sell at a loss. A consumer may say, "Oranges are too expensive, I'll buy apples instead," but a drug manufacturer can't very well say, "X is too expensive, no problem, we'll swap in ingredient Y instead," not unless they want to have an awkward conversation with the FDA. Is it fair to punish the drug company with a fee in this case? I would argue not.
While Matt said "Medicare ... recipients can now get the full suite of adult vaccines for free" ( in practice mostly means shingles), it is important to note that for Medicare to cover this, you must be signed up for (and paying for) Part D, which covers medications (and, it turns out, vaccines.). Not having Part D, I paid $400 for the RSV vaccine and $200+ for the first shingles vaccine.
Costco's price list is at https://www.costco.com/pharmacy/adult-immunization-program.html
Modest proposal: Medicaid buy-in for small businesses. Businesses with 25 employees or less should buy in to Medicaid at-cost.
It would encompass every restaurant, every small construction company, every two-men-and-a-truck plumbing outfit, every startup tech company, and every LuLaRoe consultant in America - and a lot of journalists. It's a part of the market that is actively shunned by insurance companies.
There are a lotta cross-pressured Trump voters in that group. To Matt's point about Trump's "moderation," he did promise the government would fix healthcare and a lot of people voted for him because they thought he would do that.
I further think that states could enact a Medicaid buy-in with just an ACA waiver. No need for Congress to act at all. Just have Biden sign the waiver.
I do realize this feels like small ball compared to Medicare for All. But it'd have an outsized impact and it would poll through the roof.
As Sean notes, private health insurance pays much more than Medicaid, sometimes dramatically so. Also health care providers constitutionally can just refuse to accept Medicaid patients- you can't force them to run their businesses at a loss! So imagine your program and then none of these people can find a doctor that will treat them
Medicaid pays providers way less than the cost of actually providing care. This will much more strain on providers, and even more providers will no longer accept Medicaid patients.
Hot take: Democrats should talk as much as possible about their successes and their popular ideas. Definitely agree here. Are they failing to do so? Maybe; I don't have enough information.
But between the bright pundit's ideas and reality always falls the shadow. Matt writes, "I would compare the minimal volume of attention it’s gotten to the widespread discussion of Biden’s student loan activities." Do you know why that is? It's because the latter is *controversial.* You know, the kind of thing that excites the media and gets that earned attention. The governor of Kentucky talking about healthcare issues or the usual Democrat talking head doing so on Meet the Press will disappear into the void unless something happens that causes it, as they say, to become viral.
Now if you can show me that Biden talks five times as much about student loans as about bringing pharmaceutical costs down, I'd say we have a problem. I don't think that's the case, though.
My advice to the Democrats, which is worth what they pay for it, is: wait for the Republicans to slip up on some healthcare point in the public sphere and then jump on it like crazy showing their mendacity and highlighting the Democrats' great results and future plans.. Preferably a lot closer to the election than now. Otherwise, spend your time preparing for the big push next year and worry less about winning debating points right now.
I think there were a some good things passed, but want to push back on two of the things that Matt highlights as good:
1) As mentioned elsewhere, we're not negotiating over drug prices, we're setting a number and then telling drug companies they have to accept it or deal with an excise tax of 95%. In any other circumstance we would recognize this is not negotiation. It would have been perfectly fine to set a price limit the government finds reasonable and not be willing to pay more. But the excise tax and including all drugs by that manufacturer in the deal makes this a price control. So at least call it that. And also recognize that the reason its there is that Democrats didn't want to have to deal with the potential blow back of a drug company not accepting the price and choosing not to sell to the government.
2) The limit on drug prices increasing more than inflation - If you know going in that if your costs suddenly increase by 20% (fire the a factory, worker shortage, etc) but you can't ever raise your prices more than CPI (target 2%), then won't you just set the initial price much higher so as to build in a larger cushion?
More broadly, its fascinating to compare Matt the deregulator when it comes to land use and Matt the regulator when it comes to healthcare. It makes so much more sense to build a basic single player plan that allows for real negotiation on prices, then allow the public to purchase additional care on top of that. Instead we're slowly building an ever increasing thicket of rules and regulations that will make it harder and harder to navigate...just like developers trying to build in NYC.
95% excise tax on everything? Or just the drug in question?
Just the drug in question (I posted wrong elsewhere, will correct)
====
An excise tax will be levied on drug companies that do not comply with the negotiation process. The excise tax starts at 65% of a product’s sales in the U.S. and increases by 10% every quarter to a maximum of 95%. As an alternative to paying the tax, manufacturers can choose to withdraw all of their drugs from coverage under Medicare and Medicaid. In addition, manufacturers that refuse to offer an agreed-upon negotiated price for a selected drug to “a maximum fair price eligible individual” (i.e., Medicare beneficiaries enrolled in Part B and/or Part D) or to a provider of services to maximum fair price eligible individuals (such as a physician or hospital) will pay a civil monetary penalty equal to 10 times the difference between the price charged and the maximum fair price.
=====
And maybe that ability to "walk" on selling any other drugs to medicare/medicaid keeps this as a negotiation? Because at least Medicare risks losing something if the company walks? (in terms of the public screaming at them for not having these drugs because they tried to charge too much)
So they are free to say no and just rely on selling to privately insured Americans.? That seems fair.
1) As an alternative to paying the tax, manufacturers can choose to withdraw all of their drugs from coverage under Medicare and Medicaid
2) In addition, manufacturers that refuse to offer an agreed-upon negotiated price...will pay a civil monetary penalty equal to 10 times the difference between the price charged and the maximum fair price.
They can say no, but the penalties for doing so are severe.
I think #2 only applies to a price already agreed to, that they have to make sure to not overcharge medicare-eligible individuals even if medicare doesn't _directly_ buy it.
I think it's not "in addition to the tax/choise in #1" but an additional piece of info
The way I read that is even if you decide to pull out of Medicare, you can't offer it to individuals covered by Medicare through private hospitals or doctors without the civil monetary penalty.
Am I misreading that?
Where are you getting that verbiage?
A.D.'s post above....
This is one in a series of posts MattY has made about "democrats should be talking about this" or "democrats should be talking about that". Sometimes it's the Biden White House rather than "democrats", but the exact path to "talking about" has always been diffuse.
MattY, if you're looking for ideas for future posts or even a series, I'd like to see a nuts and bolts examination of political communication strategies. Who among a political party should be/is deciding their message, how much authority should the party grant them to do so, and what is the path to getting the message out?
Besides just talking about the message, is there a way for Democrats to better improve the medium? Can they build a smarter, more focused strategy for getting out their message (whatever that message might be)?
I second this idea! I would be very interesting to read Matt Y’s thoughts on this.
See also “message discipline “ and to what extent the party should be blamed/held responsible for the utterances of its most extreme wingnutty members.
"Another very important provision taking effect this year is one that imposes a fee on companies that raise the price of prescription drugs faster than the overall rate of inflation."
How can we save people money? I know, tax things they buy more! That'll certainly bring down cost.
There are so many obvious ways for this to have unintended consequences I'm surprised Matt even brought it up as a potential positive. First, the obvious one: taxing things make them more expensive. This doesn't require any explanation. Second, of course companies are going to game the system. That means, for example, increasing prices by inflation, even when prices would naturally go down, to hedge against future cost increases. Third, this incentives companies to introduce new medicine or new formulations of old medicine at higher prices to get around these taxes. Think of how butchers in the UK during WWII invented new cuts of meat to get around price caps for previous cuts of meat. And that's just off the top of my head. People with billions of dollars of incentives to avoid this tax will find market-distorting ways of doing so to the detriment of everyone.
If drug makers have the ability to raise prices, in what way would prices "naturally" go down?
One example would be when there's competition between two drugs in the same class, even if they're both covered by patents. One manufacturer might drop the price to undercut the other. They might be more reluctant to do so if they're prevented from increasing the price later.
Good comment.
Maybe to better game the system, the pharma companies should hire some marketing people from the packaged snack food industry. You know, keep the price the same (or even lower it!) but make the pills slightly smaller or surreptitiously reduce the number of pills in the container.
/s
One thing I don't understand on the "Democrats should message differently/more on XYZ" pleas is what it really means to message. How does "messaging" actually work? It's certainly impossible to get anything through to political opponents that isn't demagogued through partisan news first. I consume a lot of news and not sure I really get anything from the Biden administration other than really simple and big stuff filtered through the NYT - "Biden signed something that forgave 10B of student loans", or whatever.
We got a lot of messaging from Trump because he got through to everyone on Twitter.
Why isn't there a 30 second daily update from Biden/Harris/Buttegieg/etc. when I open Netflix? Why isn't there a 2 minute daily Biden podcast?
Great idea. Buttigieg would be awesome at giving 30-second daily (or longer weekly) updates. Do it, Mr. Secretary!
This sounds like a revival of the old Saturday radio broadcasts that previous presidents would deliver. I believe the practice started with Carter; they certainly ran through Clinton, but I don’t know when they stopped.