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Friday, October 11, 2013
Heading Clovis's Direction
The other SWIPIAW and I are heading to Machu Picchu and the Galapagos this afternoon. Back in three weeks; I hope I don't miss too much while I'm gone.
It also points to regulations and lobbying as to blame for the high prices of simple inhalers.
But it comments too on why it is not so expensive in most other countries. And the reason is the same one you and AOG deplored in that AIDS medicine case I presented: govt. action.
So you are basically paying dearly for your strong support for 'absolutely free markets' (Big Pharma being now your feudal lord).
I would like to know what is your defense of their practices, charging fortunes for medicine so old that its patent expired in most of the world.
Um, it's not much of a free market if regulations and lobbying are a significant driver of the price. How can you possibly call that an "absolutely free market"?
Let me quote from the article - "The high prices in the U.S. are because the F.D.A. has set the bar so high that there is no clear pathway for generics"
Again, your solution seems to be to have the government solve problems created by the government. I ask, why not just not have government create the problem in the first place?
P.S. This is a classic case of the free rider problem - American consumers are paying the development costs for drugs used elsewhere. Breaking patents would lead to having very few new drugs. I ask seriously, would you prefer that situation?
--- How can you possibly call that an "absolutely free market"? --- I used quote marks to indicate it was not one in reality - for their main players were able to rig it.
--- I ask, why not just not have government create the problem in the first place? --- After learning here a few bits about your Lobbying laws, AOG, I can not understand why you direct the blame to govt. only. It is quite clear this is a manipulation induced by Lobbying forces.
The govt. was only a tool they used to achieve their ends.
What the people in many other countries do is to also use govt. as a tool to drive the prices down, by stimulating competition.
You look to prefer to almost delete this tool - government - even though it is necessary for so many other things. The problem is, IMO, you then will only make sure there is no other tool for the weak side of the equation to defend itself from the strongest one.
--- This is a classic case of the free rider problem - American consumers are paying the development costs for drugs used elsewhere. --- Did you bother to read the entire link, AOG? The patent here is about old medicine, a few of them centuries old - they even cited one even the Egyptian mummies used. "American consumers" did not exist when a few of those medicines were already known.
They only altered some petty details of the inhalation process, ensuring only the new one was approved by your FDA, and the rest of the history is a case of robbery without use of guns.
Actually, it is not clear whether American consumers are paying development costs for drugs used elsewhere.
As I commented, the big hole in the story is that it does not address where new drugs come from. Big Pharma is mostly European.
Guy ignores the other part of the story which notes that for many drugs the key ingredient is made by only one firm, so there is a perfectly free market that is a monopoly.
The disappearance of popular prescription drugs (like the contraceptive sponge) because the sole manufacturer bailed is also not a feature of the free market that we see extolled very often at Great Guys.
I read the story with care because my wife has severe asthma. As the story says, asthma is much easier to control than it used to be (but see the sad end of Laporshia Massey). Last week she was prescribed a new drug.
She says it seems to be working better than the old one. It costs $36,000 a year. Good thing we're rich.
"The govt. was only a tool they used to achieve their ends."
OK, so let's take away that tool. That's what I mean by not having government create the problem in the first place.
"What the people in many other countries do is to also use govt. as a tool to drive the prices down, by stimulating competition."
No, imposition of arbitrary pricing by government is not "stimulating competition", it's free riding.
"Did you bother to read the entire link, AOG?"
Yes I did. Did you read your own quote? "They only altered some petty details of the inhalation process, ensuring only the new one was approved by your FDA".
That is, what is stopping those old drugs from entering the market is the FDA. Government regulation. That aspect of this that is not a free market. That is government controlled.
P.S. It's still robbery with guns, because if you cross the FDA, men with guns will come after you. Big Pharma can't do that.
P.P.S. We learn today from Mr. Eagar that if a company is European, Americans don't pay for the products. I never realized that.
"the big hole in the story is that it does not address where new drugs come from. Big Pharma is mostly European."
What did that mean, then? I read it as saying the big hole is "because Big Pharma is mostly European it can't be Americans paying new drugs". Otherwise, why bring it up and juxtapose it like that?
--- P.S. It's still robbery with guns, because if you cross the FDA, men with guns will come after you. Big Pharma can't do that. ---
Yes, it can. The guys at FDA are obeying rules devishly devised by Big Pharma.
The Maphia boss sends his thugs to hit on you, and you blame the thugs only. Kill the thugs and the boss will find new ones - but your libertarian prescription is smart as that.
My reasoning is, someone is paying for it. Who do you think fits that category? Did you not just point out how much more Americans are paying for pharmaceuticals?
The guys at FDA are obeying rules devishly devised by Big Pharma.
Do you have any evidence for that beyond paranoia?
This is also a classic example of why I am a libertarian. You outline a problem created entirely by government regulation. Rather than trying to fix the regulatory capture, or "regulate smarter", you want to just slap on more misguided regulations (price controls). Actually fixing the problem is apparently not a prescription smart enough for you. This is precisely why I take your view as creeping totalitarianism, because every problem always leads to more regulation, never better regulation. It makes me think that the latter is not actually something of interest to you.
P.S. If we eliminated the FDA, where exactly would Big Pharma find more thugs? Or if we allowed consumers the market freedom to buy non-FDA approved drugs, where would Big Pharma gets its thugs? You might try thinking through your analogies, rather than just reciting the cant phrases.
=== My reasoning is, someone is paying for it. Who do you think fits that category? Did you not just point out how much more Americans are paying for pharmaceuticals? === Your reasoning would be correct if, and only if, every profit they make were directed to research, and if only the US were giving them profit. As it happens, most of what you pay, even more in old and rebranded medicine, is only directed to make a few people richer than they deserved to be, and not necessarily to research. Also, they profit very well in most of the world, their only source of income is not the "American consumer".
=== Do you have any evidence for that beyond paranoia? === No, AOG, I am only a deluded crazie. You pay $150 for the same medicine I pay here $20 - without any govt. control of prices at all - but the only reason for that is, well, you Americans are generosity in human flesh.
=== [...] you want to just slap on more misguided regulations (price controls). === Really? Can you find a quote where I suggested price controls?
=== This is precisely why I take your view as creeping totalitarianism, because every problem always leads to more regulation, never better regulation. === You assume some form of regulation I never suggested, than use it to tell me I am a deluded nut defending creeping totalitarianism.
Next time, please give me the benefit of doubt. Who knows I am only suggesting better regulation, instead of more stifling ones? Who knows I do find it absurd that your govt. changed the inhaler method for pseudo-ecological reasons? Who knows I am perturbed by the fact Big Companies can induce your govt. to do that?
=== Or if we allowed consumers the market freedom to buy non-FDA approved drugs, where would Big Pharma gets its thugs? === It would not need thugs anymore - they would be free to sell you sugar advertised as medicine.
most of what you pay, even more in old and rebranded medicine, is only directed to make a few people richer than they deserved to be
And your evidence for this is?
Can you find a quote where I suggested price controls?
In most (almost all?) countries that pay lower prices for pharmaceuticals, the "govt. action" you endorse is price controls. E.g., Canada. Or Brazil. You write "Who knows I am only suggesting better regulation, instead of more stifling ones?" I would say that (1) your endorsement of "govt. action" contra-indicates that, as well as (2) blaming Big Pharma rather than the FDA and its poor regulation and reacting strongly to the suggestion the problem was in the FDA.
they would be free to sell you sugar advertised as medicine
Possibly. There would not, however, be armed thugs to get me if I chose to not purchase such things. I would also think general laws against fraud would apply. Or, if you want to stimulate competition, vigorously enforce "FDA approved" vs. "NOT FDA Approved" labeling and see if people really want that regulation.
Clovis wrote: "The NYT has one piece today that made me think of you..."
To me, there was only one sentence fragment in the entire article that was worthwhile: "...federal government announced that it would require manufacturers of spray products to remove chlorofluorocarbon propellants..."
That explains absolutely all of the pain everybody's experiencing. Get rid of that ridiculousness and then there's no problem. Then all of the older, out-of-patent, perfectly good medicines and inhalers, become very cheap and widely available.
My daughter has asthma, the new medicines and inhalers don't work worth shit relative to the old ones, never mind that the old ones cost one-tenth as much, she can't breathe very well anymore, and it's all due to idiotic governmental regulations.
Sorry, this one is a real hot-button topic for me and in that whole article, the only sentence I can focus on is the one I quoted above.
Clovis wrote: "The guys at FDA are obeying rules devishly devised by Big Pharma."
I completely agree with that.
It's just our reactions are different. Mine is to reduce government so there's less opportunity for large corporations to form symbiotic relationships with it that milk the citizenry.
Your reaction is to increase government involvement to fix the problem.
I'm sure your approach is catastrophic, you're sure mine is disastrous ("but your libertarian prescription is smart as that").
It's also possible that both approaches are catastrophic and that America (and then possibly the west) is on its way down.
I've been to Washington (many times, unfortunately), I've worked with lobbyists and lawyers, I've talked to congressmen (never a Senator though) and their staff, I've dealt with bureaucrats, and at each level, what's overwhelmingly clear to me, is that the emergent behavior of the system is one that promotes corporate capture of the government. Nearly every time more agencies are added, every time more potential for regulations are added, and every time government scope and power are increased, it simply adds additional taxpayer resources for corporations, politicians, and bureaucrats to capture. Like clockwork.
Let me ask you this. After the financial crisis began, in the midst of vast populist outrage, a enormous piece of legislation was enacted to "remedy" the problems and structures that were factors in causing the financial crisis. Did those regulations make us less likely to have a future crisis and to what degree? Did those regulations reduce Wall Street profits? Did those regulations help make Wall Street more competitive? Did those regulations help the economy and to what degree? Were there significant benefits of those regulations OTHER THAN to further entrench the remaining Wall Street firms and make it very difficult for new firms to compete?
If in the middle of such a crisis, corporations can still totally manipulate the government, why do you believe that the government can be an instrument of positive change?
--- In most (almost all?) countries that pay lower prices for pharmaceuticals, the "govt. action" you endorse is price controls. E.g., Canada. Or Brazil. ---
Actually, so you can have an ideia how I was not thinking about price controls necessarily, I have just learned that my own country practices it.
Really, I did not know - and asking around, most people don´t also.
Checking the rules and how it works, it is a system of ceiling prices. The drug companies, when introducing new medicine, post a maximum price for the govt. Using a set of criteria, the govt. settles a maximum price.
The study you linked only shows that, usually, this maximum price the govt. settles down is 35% lower than the one the company lobbies for. As the price the company asks for is arbitrary, it is not hard to guess they already ask for a price higher than they expect to get.
As far as I could see in the discussions, this maximum price rarely is the one practiced by the pharmacies: competition makes the price usually to be far lower than the ceiling. So we can argue that this "price control" here is not so much of a control. IOW, the govt. regulation is not inducing losses to the companies.
I need to learn more before deciding if this is "better and smart regulation", or "stifling" one. I really do not know by now. What I can tell you, though, is that I am open for the possibility that it may work and be benign - while you discard this possibility based on ideology, instead of empirical checks.
--- I would also think general laws against fraud would apply. --- Sure they apply - and who do you think will be able to prove the fraud happened? Today, the definition of fraud itself in this area depends on the existence of a regulator like the FDA.
't's never about fixing problems, it's always about more power and money for the government.'
Really? The origin of FDA was not about fixing a problem?
Tnere are some very bad things going on in the unregulated end of Big Pharma right now. You, Guy, are well-situated to find out about them. Just strike up an acquaintance with some clinical researchers at the med school and ask, What do you think about human trials in China?
----- My daughter has asthma, the new medicines and inhalers don't work worth shit relative to the old ones, never mind that the old ones cost one-tenth as much, she can't breathe very well anymore, and it's all due to idiotic governmental regulations. -----
Can you please give me the name of the active substance (and also the producers, etc) of the old ones? And also of the new ones?
I would like to check if here we have the old ones, or if the new ones are in place, and also to compare prices. I will post here the comparison.
I was taking a general look at the prices I can find in our online drug stores, and I can not possibly imagine how Harry's wife spends $36.000 a year in asthma medicine (is it a joke?). Either I am not finding the equivalent medicine, or it would be impossible to spend a tenth of that here with this kind of medicine.
If you wish to have the same comparison, Harry, please give me the name of the medicine.
--- I'm sure your approach is catastrophic, you're sure mine is disastrous ("but your libertarian prescription is smart as that"). ---
Actually, I am not sure of anything in this matter. I may try and argue what I think is most probable, but I am aware of my limits here.
I can envisage a limit where your Libertarian view really leads to a very efficient economy, with most people doing well and poverty a forgotten concept. And maybe this is what gives me pause: looks too good to be true.
It does not mean, though, you may well be right.
I am keenly aware on how government excessive regulations and interventions may lead to disaster. The more I think about how things work in Brazil, compared to how things work (or used to work in US, if I take your pessimistic outlook :-), more I think you are right in many aspects I never thought before. I am only not convinced, yet, you are right on it all.
--- Did those regulations make us less likely to have a future crisis and to what degree? --- I may be misinformed, but AFAIK, very few regulations were imposed to the financial market after the crisis, business has been going on as usual for them.
But I agrre with you, most probably any further regulation may be manipulated for their own interests. They are powerful, much more than any govt IMHO, for there are few people they can not buy, and those are easy to destroy:
Clovis wrote: "Can you please give me the name of the active substance..."
Albuterol (Salbutamol). The active ingredient has stayed the same between old and new, but they changed the inhalers. The new ones just don't work well.
Albuterol is the emergency measure. For example, when she's out running and suddenly can't breathe, she uses the inhaler and it provides some immediate relief and generally adequate relief in 15 minutes or so. The old ones provided nearly complete relief within seconds. They changed the propellant in the inhaler.
The albuterol itself has long been off-patent and costs almost nothing (something like 10 cents a dose). For example, it can be used in a raw (non-inhaler) form with a nebulizer (which is a gizmo that vaporizes the medicine for direct inhalation). This works quite well and we use it when she's having a serious attack (for which the damn new inhalers don't work) as a last attempt to avoid a hospital visit.
The inhalers changed several years ago. They were also pretty cheap (though still significantly more expensive than the standalone albuterol). But then the EPA & FDA ganged up on asthma users and made the propellant in the then existing inhalers illegal. Pharma companies patented a new inhaler based on a different propellant, and now it's more than our $20 copay for the inhaler, so I'm estimating around an order of magnitude increase. Not sure which Pharma companies hold the new patents.
I wouldn't even mind the inhaler being more expensive if it worked as well.
Well, she hasn't died yet. She has been blue though, which looks okay on a smurf, but not so good on my daughter. If your child ever turns blue, you'll see what I mean. I hope that you never experience that.
The gas it uses is HFA134a, which is a substitute for CFC ones:
http://www.wikigenes.org/e/chem/e/13129.html
So it is probably something very much alike your daughter buys.
I do not know if the non-CFC are still commercialized here. I also do not know if CFC based ones are forbidden. I doubt it, more probably the market here is only adapting to the standard outside, since most laboratories are multinationals.
If you want, I can take a closer look to find the old CFC ones - I have no problem in packing and sending it to you.
AOG: the price above is almost 50% below the ceiling price ruled by our govt. regulations.
" It set up shop in the K Street offices of Drinker Biddle, a major DC law firm. Between 2005 and 2010, it spent $520,000 on lobbying. (It probably spent even more; as a trade group, it's not required to disclose all of its advocacy spending.) Meanwhile, IPAC lobbied for other countries to enact similar bans, arguing that CFC-based inhalers should be eliminated for environmental reasons and replaced with the new, HFC-based inhalers."
It looks like the lobbying worked here too. Or, well, this must be only a coincidence and I am following my paranoia believing otherwise...
It's crony capitalism aka fascism -- the polar opposite of competition and the purpose is to fill the pockets of the participants with our money while gaining power on to themselves, scaring us plebes into believing that we are incapable of making our own decisions and making the world, not safe for democracy, but for tyranny.
If anyone had any doubts prior to the last several weeks, those doubts must have been resolved.
The stage has been set, the actors are on stage and the play is about to begin. The last act has only been penciled-in and there is still a small chance it can end well, but it doesn't look at all promising.
Clovis wrote: "I also do not find studies that point to worsened action of the new non-CFC inhalers."
First, I want to thank you for offering to send the old style inhalers (if they had been still available there). That was very, very kind.
I know that the studies show equal efficacy. I also know other asthma sufferers that match the studies in that they found no difference in the inhalers.
However, I know some asthma sufferers other than my daughter that also respond poorly to the new inhalers.
I have no good explanation, but some guesses.
Explanation 1: It's all in her mind. Unfortunately, even if so, it would still be helpful to have the old inhalers!
Explanation 2: It may be that the efficacy at 10+ minutes or even less might be similar even for my daughter and others like her, but in those first seconds after the attack, when she can't breathe and is totally panicked, the old inhalers would work enough to take the panic away almost instantaneously, and that relaxation would then be a positive feedback loop that would also help the attack subside. The new inhaler may not work quite as fast for anybody. It doesn't get her going on the positive feedback loop as quickly, and even a minute is a long time when you can't breathe. Even worse, she then remembers it didn't work last time, so next attack it ends up being sort of an anti-placebo ("nocebo") effect. In other words, a mix of a subtle difference and it being mostly in her mind. The difference of some number of seconds may not be measurable in a trial.
Explanation 3: The new inhalers may work better for some people and worse for others like my daughter so it averages out to similar efficacy.
Explanation 4: While not common, there have been cases of fraud in FDA trials. There's some small chance that they fudged the results in order to get the older inhalers banned so they could reap the benefits of the repatent. If the new inhalers were shown to be less effective, the FDA would've had a very hard time prohibiting the old ones.
Explanation 5: Some combination of the above.
Explanation 6: Something else.
The good news is that she's been taking Singulair (montelukast sodium) for nearly two years now and it's helped a lot. No hospitalizations since she's started taking it and I don't think we've even had to use the nebulizer. The lack of inhaler efficacy is still an issue, but she hasn't turned blue since she started Singulair either. So I'm annoyed with the whole inhaler thing, but no longer panicked.
You have made a good set of hypothesis. I would go for 2 and 3.
You daughter probably grew up taking the old inhalers and, as she was very young, it may be her body adapted to the CFC action in some optimal way. Now her body is less malleable and, by comparison, the action of the HFA is less fine tuned.
In the few people in family with ashma I know of, the pattern is to have it diminished when passing to adult life, with a worsening after the 60s. Maybe you won't need to worry much from now on.
'I was taking a general look at the prices I can find in our online drug stores, and I can not possibly imagine how Harry's wife spends $36.000 a year in asthma medicine (is it a joke?).'
No joke. It's a new product, she's had it only about 10 days.
The first month ($3,000) is a gift from the manufacturer. Who could afford to try it out at that price?
We have a gold-plated insurance plan which will pay 99% for the first year. No certainty after that.
I have no idea (too busy to try to find out) where this new drug came from, or why its price is what it is.
We were less shocked than we might have been since Tricia has another prescription (not for asthma) that costs $24,000 a year.
Our co-pay on that is about 10%.
Altogether, our 2-person household consumes (at American prices) something like $80,000 a year in prescription medicines and a couple thousand more in prescription medicines that are also sold over-the-counter.
The insuror waffles. Sometimes it covers OTC ones, as prescriptions, sometimes not.
Like I say, it's a good thing we are rich.
My share of the costs this year will probably be $4,000-$5,000.
It's better than being dead, which is one alternative.
Quite a few working Americans have gross pay in the $250/week range, so even if they had insurance (many don't), the co-pays for even ordinary-priced drugs would be a serious burden.
Instead of railing against Obamacare, every American not in that position should be on his knees thanking whatever deity he worships.
I start to understand why the US has such an expensive health care.
In a system where most of the insured people only pay a small fraction of the costs of drugs, Big Pharma is in effect setting the rules to extract money from the insurance pool. In the end everyone is paying for those high medicine prices.
Maybe it explains why the asthma medicine (and others) price can go so high in the US, while the same medicine (with the same new non-CFC gas) remains cheap here and in other places.
Contrary to AOG's belief that govts. are to blame, I think this is not the main explanation here.
In Brazil, it is uncommon for health insurance plans to pay for medicine - even the very good ones have strong caps on that in most cases.
So, as the medicine is usually paid for by the people directly, their prices can not grow unbounded, by simple demand dynamics.
It is an interesting case of very sub-optimal dynamics obtained in a completely private system with few refulations (of course, I am talking about the pre-ACA period).
Now, with the ACA enteing in this scenario, it is a very good question if the dynamics may change. In principle, it should not, since in the previous configuration Big Pharma already dominated the dynamics within a insurance market place.
But if it changes, and the prices of medicine go down, I imagine one of the paths would be by... well, govt. being more intrusive, to the dispair of Libertarians. This is a topic I will follow from time to time to see how it evolves...
You are right that government is not the source of the craziness.
One of the results of 'no coverage for pre-existing conditions' and 'no portability' has meant that people with coverage from an employer are locked into that job.
This violently contradicts one of the principle points of the rightwingers, which is that complete job insecurity and mobility are required for an efficient, innovative economy.
They don't really believe that, but they say they do.
So you'd think they would welcome anything that encouraged worker mobility. I'll bet nobody can find a rightwinger speaking in favor of portability.
Harry, Your take is as usual totally skewed. Conservatives don't endorse employer paid health insurance in the first place, so why would we have a position on portability.
I could go further and try to explain that Skipper's conniption fit about the imaginary part-timing of the workforce hasn't happened in Massachusetts or Hawaii and isn't going to happen in the other states because of health insurance.
Most (but not all) good workers want fulltime, secure jobs and will apply where they can get them. Idiots who decide to screw over their workers because of a hissy fit over the ACA will end up selecting from a pool of second-raters.
You know why medical costs seem higher now than back in the days when the indigent (if lucky) went to the county hospital? Artificial knees.
And so on.
Until 1945, medical care was basically palliative and therefore cheap. Now doctors can fix things, but it costs money.
It costs so much because so much money spent on health care goes to support the federal bureaucracy. it certainly isn't going to doctors who are planning to retired in droves... and you may not have noticed, but it's a buyer market for labor.
I wish I was in a position to advertise for workers at every level and state categorically that the salary does not include health insurance and then watch the avalanche of applicants.
You still haven't explained why Medicaid didn't do the job it was supposed to do.
Harry wrote: "Idiots who decide to screw over their workers because of a hissy fit over the ACA will end up selecting from a pool of second-raters."
That may well be true. It may also be true that my company will lose its employees and end up selecting from a pool of second-raters.
We re-up for health insurance for the employees every fall for 12-months starting in January. Our broker is currently unable to get us a quote as all the insurance companies that will insure us are very busy with Obamacare and the exchanges. But he said to estimate an increase of 25% to 100% in premiums over this year.
Even the lower end, 25% is big enough that I'll have to pass the vast majority of that on to workers (I simply don't have the money not to) and that will be the same as a substantial pay cut for them. I suspect at least some of them will leave and I won't be able to replace them with people talented enough to do the job. So my company will shrink again. Bummer!
The alternative that were seriously considering is to completely drop health care insurance. Then I can actually raise their salaries significantly. The younger ones probably will just pay the fine and won't worry about health care, the older ones can get insurance on the exchanges. In this case, the younger ones might stay and the older ones are more likely to leave to get health care insurance from a big company.
Of course if we drop health care insurance, I won't have insurance (I may be able to be covered under my wife's plan, we're not sure yet - we're nearly certain that the kids can be covered and that's what counts). Oh well. I'll just pay the fine and if I get sick I'll sign up on the exchanges then - if they're working.
Bret, great minds really do think alike (see comment above). I proposed hiring people stating up front that you do not provide health insurance and let them deal with their health needs themselves. It may just be what saves the economy.
Thanks for sharing your experience - this kind of information is worth a hundred pieces of the NYT, and I would still be less informed then.
For the typical worker in your company, to pass on the 25% of increase in health care costs means to decrease his salary by how much?
And to drop the insurance at all means to increase his salary by how much?
Depending on the answers for those questions, it may be very easy to decide. And it may even happen that it will not imply anyone dropping the job.
I, for one, would probably prefer to pass on to ACA and have a good increase in salary, than to have it diminished just to have the same health coverage as before (one case is a new situations with a plus, the other an old - hence not funny - situation with a minus).
It may be worth to assign how much of your employees are older and younger, and see their profiles for decision making (if they play always safe or take risks) before making the decision.
All in all, it is a wonderful problem in game theory. I envy you for that, Bret :-)
Clovis wrote: "For the typical worker in your company, to pass on the 25% of increase in health care costs means to decrease his salary by how much?"
The following numbers are off the top of my head, but I think they'll be within 10% one way or the other.
Let's take a 50-year-old employee with a family of four. His health insurance (for the whole family which we cover) is $1,800 per month, or roughly $21,000 per year. A 25% increase means his premiums go up a bit over $5,000 per year. The employee would have otherwise expected to see a $2,000 cost-of-living salary increase, so the difference that he'll have to pitch in is $3,000. But no matter how you slice it, he'll be getting $5,000 less per year than he otherwise would have. So he'll probably start looking for other jobs.
I think I need to make a few things clearer:
1. Three years ago, before Obamacare was law, we had an 18% increase, which is comparable to a 25% increase, so I have no idea how much of the increase we get this year will be due to Obamacare. The broker implied that a lot of it will be, but that could easily just be an excuse. I just don't know and have no way of finding out.
2. These large premium increases are being experienced by every small and medium size business in San Diego, maybe in the rest of the country too, so at least I'm not alone.
3. A 25% increase may be survivable. A 100% increase is not without dropping insurance. The good news is that when we got the 18% increase three years ago, the broker predicted 20% - 25% so I'm hoping he just overestimated again.
4. Large companies often self-insure. Their costs are going up much, much more slowly. I don't know the relevant parts of Obamacare legislation, but I'm guessing they have a huge and increasing competitive advantage over everybody else because they only have to pay for their own workers and those payments don't have to subsidize the costs of anybody else. Assuming I lose my employees, they will go to large companies, where their total compensation package will be better, at least in the short term.
Yes, premiums have been going up 25% or so for years and years. To blame it on Obamacare is like raising a flag that says, 'I don't know the first thing about health insurance.'
Even smallish companies self-insure. For example, when I worked for a company with slightly over 100 employees, it self-insured.
Basically, it contracted Blue Cost to administer billing and settled up differences at the end of the year.
One year, there were 7 employees pregnant, and I asked the boss what would happen if one had a million-dollar premie?
I was going to disagree with "premiums have been going up 25% or so for years and years" but I realize it's so ill defined as to have no meaning. Our premium increase was 168% but I'm sure that was just a coincidence.
Eagar once again demonstrates that he has no idea what "rightist" means in the USA - "I'll bet nobody can find a rightwinger speaking in favor of portability".
Every right winger I know who speaks on the subject goes on about that. Here is one counter-example from CATO. Eagar doesn't believe this because the proposed solution to portability is less government, not more, especially since the lack of portability in our current system is a direct result of the New Deal.
Let me also say, as a small business owner, my experience is basically like Bret's.
So maybe you've read the ACA enough to answer me: why is it that you have no way to keep your old insurance, but big companies can keep providing their own self-insurance for their employees as before? Or they can't?
Bret,
Were you to cancel health insurance and give your employee the $23,000 increase in salary, do you know how much would he pay to have a comparable coverage in the private (or ACA?) market?
I find it interesting that you cover the employee's family too. So hiring young single people is cheaper for you than older ones with families? The experience the older ones bring is enough to justify the higher costs?
Clovis asked: "...do you know how much would he pay to have a comparable coverage in the private (or ACA?) market?"
I'm not sure about the ACA, but in the private market he'd pay more-or-less the same for the insurance. ***BUT***, he would do it with at least some after tax dollars whereas when I buy it for him, I do it with pre tax dollars. On a $23,000 salary increase, an engineer in California would lose more than $10,000 to federal, state, and other miscellaneous taxes. That's why so many people get their health insurance through their employer rather than buying it on their own where it would be more portable. There are ways to minimize the tax hit some (Health Savings Accounts and things like that).
Yes, it is way cheaper to hire a young single person. Their salary tends to be way lower as well. But experience does have some value. And young, single people often become young married people with children remarkably quickly and the whole birth process is really expensive for an employer as well.
One of my partners seems to avoid hiring young people who seem likely to want to start a family for that very reason. I like families and children so I'm the opposite (but don't tell my investors!).
I one worked for a woman who had a business (not the one I worked for) staffed entirely by single women, mostly divorced or abandoned with young children; mostly ones who had been out of the work force for a while.
In other words, women who had a hard time finding jobs.
She provided reasonably good benefits, including health care, and when offering a job would hand out a sheet showing her total costs: SSI etc.
In some cases, the pay was less than half the total.
It worked for her because the takehome pay she offered was very low.
It baffles me that the advocates of deregulation do not seem to understand the friction introduced into the system by avoiding single payer.
50 comments:
I've first read the topic and thought "wow, he is letting go of Libertarianism!". Not so.
Have a nice holidays, you've chosen very well.
While you are there, you may try your Indiana Jones archeologic habilities, and try to discover how the Inca Empire really disappeared.
Test if AOG's theory with the Romans - it was socialism! - nailed the Incas too :-)
Have a wonderful time and safe trip back home!
Bret,
The NYT has one piece today that made me think of you:
http://www.nytimes.com/2013/10/13/us/the-soaring-cost-of-a-simple-breath.html?hp&_r=0
It also points to regulations and lobbying as to blame for the high prices of simple inhalers.
But it comments too on why it is not so expensive in most other countries. And the reason is the same one you and AOG deplored in that AIDS medicine case I presented: govt. action.
So you are basically paying dearly for your strong support for 'absolutely free markets' (Big Pharma being now your feudal lord).
I would like to know what is your defense of their practices, charging fortunes for medicine so old that its patent expired in most of the world.
Um, it's not much of a free market if regulations and lobbying are a significant driver of the price. How can you possibly call that an "absolutely free market"?
Let me quote from the article - "The high prices in the U.S. are because the F.D.A. has set the bar so high that there is no clear pathway for generics"
Again, your solution seems to be to have the government solve problems created by the government. I ask, why not just not have government create the problem in the first place?
P.S. This is a classic case of the free rider problem - American consumers are paying the development costs for drugs used elsewhere. Breaking patents would lead to having very few new drugs. I ask seriously, would you prefer that situation?
AOG,
---
How can you possibly call that an "absolutely free market"?
---
I used quote marks to indicate it was not one in reality - for their main players were able to rig it.
---
I ask, why not just not have government create the problem in the first place?
---
After learning here a few bits about your Lobbying laws, AOG, I can not understand why you direct the blame to govt. only. It is quite clear this is a manipulation induced by Lobbying forces.
The govt. was only a tool they used to achieve their ends.
What the people in many other countries do is to also use govt. as a tool to drive the prices down, by stimulating competition.
You look to prefer to almost delete this tool - government - even though it is necessary for so many other things. The problem is, IMO, you then will only make sure there is no other tool for the weak side of the equation to defend itself from the strongest one.
---
This is a classic case of the free rider problem - American consumers are paying the development costs for drugs used elsewhere.
---
Did you bother to read the entire link, AOG? The patent here is about old medicine, a few of them centuries old - they even cited one even the Egyptian mummies used. "American consumers" did not exist when a few of those medicines were already known.
They only altered some petty details of the inhalation process, ensuring only the new one was approved by your FDA, and the rest of the history is a case of robbery without use of guns.
Actually, it is not clear whether American consumers are paying development costs for drugs used elsewhere.
As I commented, the big hole in the story is that it does not address where new drugs come from. Big Pharma is mostly European.
Guy ignores the other part of the story which notes that for many drugs the key ingredient is made by only one firm, so there is a perfectly free market that is a monopoly.
The disappearance of popular prescription drugs (like the contraceptive sponge) because the sole manufacturer bailed is also not a feature of the free market that we see extolled very often at Great Guys.
I read the story with care because my wife has severe asthma. As the story says, asthma is much easier to control than it used to be (but see the sad end of Laporshia Massey). Last week she was prescribed a new drug.
She says it seems to be working better than the old one. It costs $36,000 a year. Good thing we're rich.
"The govt. was only a tool they used to achieve their ends."
OK, so let's take away that tool. That's what I mean by not having government create the problem in the first place.
"What the people in many other countries do is to also use govt. as a tool to drive the prices down, by stimulating competition."
No, imposition of arbitrary pricing by government is not "stimulating competition", it's free riding.
"Did you bother to read the entire link, AOG?"
Yes I did. Did you read your own quote? "They only altered some petty details of the inhalation process, ensuring only the new one was approved by your FDA".
That is, what is stopping those old drugs from entering the market is the FDA. Government regulation. That aspect of this that is not a free market. That is government controlled.
P.S. It's still robbery with guns, because if you cross the FDA, men with guns will come after you. Big Pharma can't do that.
P.P.S. We learn today from Mr. Eagar that if a company is European, Americans don't pay for the products. I never realized that.
'P.P.S. We learn today from Mr. Eagar that if a company is European, Americans don't pay for the products. I never realized that.'
Not what I said.
"the big hole in the story is that it does not address where new drugs come from. Big Pharma is mostly European."
What did that mean, then? I read it as saying the big hole is "because Big Pharma is mostly European it can't be Americans paying new drugs". Otherwise, why bring it up and juxtapose it like that?
AOG,
What is your reasoning here? "America is rich and we pay alone for all the news drugs"?
Do you know how big a share of Big Pharma worldwide profit is in US alone?
AOG,
---
P.S. It's still robbery with guns, because if you cross the FDA, men with guns will come after you. Big Pharma can't do that.
---
Yes, it can. The guys at FDA are obeying rules devishly devised by Big Pharma.
The Maphia boss sends his thugs to hit on you, and you blame the thugs only. Kill the thugs and the boss will find new ones - but your libertarian prescription is smart as that.
Clovis;
My reasoning is, someone is paying for it. Who do you think fits that category? Did you not just point out how much more Americans are paying for pharmaceuticals?
The guys at FDA are obeying rules devishly devised by Big Pharma.
Do you have any evidence for that beyond paranoia?
This is also a classic example of why I am a libertarian. You outline a problem created entirely by government regulation. Rather than trying to fix the regulatory capture, or "regulate smarter", you want to just slap on more misguided regulations (price controls). Actually fixing the problem is apparently not a prescription smart enough for you. This is precisely why I take your view as creeping totalitarianism, because every problem always leads to more regulation, never better regulation. It makes me think that the latter is not actually something of interest to you.
P.S. If we eliminated the FDA, where exactly would Big Pharma find more thugs? Or if we allowed consumers the market freedom to buy non-FDA approved drugs, where would Big Pharma gets its thugs? You might try thinking through your analogies, rather than just reciting the cant phrases.
Responsive government. It's never about fixing problems, it's always about more power and money for the government.
AOG,
===
My reasoning is, someone is paying for it. Who do you think fits that category? Did you not just point out how much more Americans are paying for pharmaceuticals?
===
Your reasoning would be correct if, and only if, every profit they make were directed to research, and if only the US were giving them profit. As it happens, most of what you pay, even more in old and rebranded medicine, is only directed to make a few people richer than they deserved to be, and not necessarily to research. Also, they profit very well in most of the world, their only source of income is not the "American consumer".
===
Do you have any evidence for that beyond paranoia?
===
No, AOG, I am only a deluded crazie. You pay $150 for the same medicine I pay here $20 - without any govt. control of prices at all - but the only reason for that is, well, you Americans are generosity in human flesh.
===
[...] you want to just slap on more misguided regulations (price controls).
===
Really? Can you find a quote where I suggested price controls?
===
This is precisely why I take your view as creeping totalitarianism, because every problem always leads to more regulation, never better regulation.
===
You assume some form of regulation I never suggested, than use it to tell me I am a deluded nut defending creeping totalitarianism.
Next time, please give me the benefit of doubt. Who knows I am only suggesting better regulation, instead of more stifling ones? Who knows I do find it absurd that your govt. changed the inhaler method for pseudo-ecological reasons? Who knows I am perturbed by the fact Big Companies can induce your govt. to do that?
===
Or if we allowed consumers the market freedom to buy non-FDA approved drugs, where would Big Pharma gets its thugs?
===
It would not need thugs anymore - they would be free to sell you sugar advertised as medicine.
most of what you pay, even more in old and rebranded medicine, is only directed to make a few people richer than they deserved to be
And your evidence for this is?
Can you find a quote where I suggested price controls?
In most (almost all?) countries that pay lower prices for pharmaceuticals, the "govt. action" you endorse is price controls. E.g., Canada. Or Brazil. You write "Who knows I am only suggesting better regulation, instead of more stifling ones?" I would say that (1) your endorsement of "govt. action" contra-indicates that, as well as (2) blaming Big Pharma rather than the FDA and its poor regulation and reacting strongly to the suggestion the problem was in the FDA.
they would be free to sell you sugar advertised as medicine
Possibly. There would not, however, be armed thugs to get me if I chose to not purchase such things. I would also think general laws against fraud would apply. Or, if you want to stimulate competition, vigorously enforce "FDA approved" vs. "NOT FDA Approved" labeling and see if people really want that regulation.
Clovis wrote: "The NYT has one piece today that made me think of you..."
To me, there was only one sentence fragment in the entire article that was worthwhile: "...federal government announced that it would require manufacturers of spray products to remove chlorofluorocarbon propellants..."
That explains absolutely all of the pain everybody's experiencing. Get rid of that ridiculousness and then there's no problem. Then all of the older, out-of-patent, perfectly good medicines and inhalers, become very cheap and widely available.
My daughter has asthma, the new medicines and inhalers don't work worth shit relative to the old ones, never mind that the old ones cost one-tenth as much, she can't breathe very well anymore, and it's all due to idiotic governmental regulations.
Sorry, this one is a real hot-button topic for me and in that whole article, the only sentence I can focus on is the one I quoted above.
Clovis wrote: "The guys at FDA are obeying rules devishly devised by Big Pharma."
I completely agree with that.
It's just our reactions are different. Mine is to reduce government so there's less opportunity for large corporations to form symbiotic relationships with it that milk the citizenry.
Your reaction is to increase government involvement to fix the problem.
I'm sure your approach is catastrophic, you're sure mine is disastrous ("but your libertarian prescription is smart as that").
It's also possible that both approaches are catastrophic and that America (and then possibly the west) is on its way down.
I've been to Washington (many times, unfortunately), I've worked with lobbyists and lawyers, I've talked to congressmen (never a Senator though) and their staff, I've dealt with bureaucrats, and at each level, what's overwhelmingly clear to me, is that the emergent behavior of the system is one that promotes corporate capture of the government. Nearly every time more agencies are added, every time more potential for regulations are added, and every time government scope and power are increased, it simply adds additional taxpayer resources for corporations, politicians, and bureaucrats to capture. Like clockwork.
Let me ask you this. After the financial crisis began, in the midst of vast populist outrage, a enormous piece of legislation was enacted to "remedy" the problems and structures that were factors in causing the financial crisis. Did those regulations make us less likely to have a future crisis and to what degree? Did those regulations reduce Wall Street profits? Did those regulations help make Wall Street more competitive? Did those regulations help the economy and to what degree? Were there significant benefits of those regulations OTHER THAN to further entrench the remaining Wall Street firms and make it very difficult for new firms to compete?
If in the middle of such a crisis, corporations can still totally manipulate the government, why do you believe that the government can be an instrument of positive change?
AOG,
---
In most (almost all?) countries that pay lower prices for pharmaceuticals, the "govt. action" you endorse is price controls. E.g., Canada. Or Brazil.
---
Actually, so you can have an ideia how I was not thinking about price controls necessarily, I have just learned that my own country practices it.
Really, I did not know - and asking around, most people don´t also.
Checking the rules and how it works, it is a system of ceiling prices. The drug companies, when introducing new medicine, post a maximum price for the govt. Using a set of criteria, the govt. settles a maximum price.
The study you linked only shows that, usually, this maximum price the govt. settles down is 35% lower than the one the company lobbies for. As the price the company asks for is arbitrary, it is not hard to guess they already ask for a price higher than they expect to get.
As far as I could see in the discussions, this maximum price rarely is the one practiced by the pharmacies: competition makes the price usually to be far lower than the ceiling. So we can argue that this "price control" here is not so much of a control. IOW, the govt. regulation is not inducing losses to the companies.
I need to learn more before deciding if this is "better and smart regulation", or "stifling" one. I really do not know by now. What I can tell you, though, is that I am open for the possibility that it may work and be benign - while you discard this possibility based on ideology, instead of empirical checks.
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I would also think general laws against fraud would apply.
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Sure they apply - and who do you think will be able to prove the fraud happened? Today, the definition of fraud itself in this area depends on the existence of a regulator like the FDA.
't's never about fixing problems, it's always about more power and money for the government.'
Really? The origin of FDA was not about fixing a problem?
Tnere are some very bad things going on in the unregulated end of Big Pharma right now. You, Guy, are well-situated to find out about them. Just strike up an acquaintance with some clinical researchers at the med school and ask, What do you think about human trials in China?
You will hear horror stories.
Bret,
-----
My daughter has asthma, the new medicines and inhalers don't work worth shit relative to the old ones, never mind that the old ones cost one-tenth as much, she can't breathe very well anymore, and it's all due to idiotic governmental regulations.
-----
Can you please give me the name of the active substance (and also the producers, etc) of the old ones? And also of the new ones?
I would like to check if here we have the old ones, or if the new ones are in place, and also to compare prices. I will post here the comparison.
I was taking a general look at the prices I can find in our online drug stores, and I can not possibly imagine how Harry's wife spends $36.000 a year in asthma medicine (is it a joke?). Either I am not finding the equivalent medicine, or it would be impossible to spend a tenth of that here with this kind of medicine.
If you wish to have the same comparison, Harry, please give me the name of the medicine.
Bret,
---
I'm sure your approach is catastrophic, you're sure mine is disastrous ("but your libertarian prescription is smart as that").
---
Actually, I am not sure of anything in this matter. I may try and argue what I think is most probable, but I am aware of my limits here.
I can envisage a limit where your Libertarian view really leads to a very efficient economy, with most people doing well and poverty a forgotten concept. And maybe this is what gives me pause: looks too good to be true.
It does not mean, though, you may well be right.
I am keenly aware on how government excessive regulations and interventions may lead to disaster. The more I think about how things work in Brazil, compared to how things work (or used to work in US, if I take your pessimistic outlook :-), more I think you are right in many aspects I never thought before. I am only not convinced, yet, you are right on it all.
---
Did those regulations make us less likely to have a future crisis and to what degree?
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I may be misinformed, but AFAIK, very few regulations were imposed to the financial market after the crisis, business has been going on as usual for them.
But I agrre with you, most probably any further regulation may be manipulated for their own interests. They are powerful, much more than any govt IMHO, for there are few people they can not buy, and those are easy to destroy:
http://www.independent.co.uk/news/business/news/segarra-claims-ny-fed-fired-her-for-goldman-finding-8875352.html
while you discard this possibility based on ideology, instead of empirical checks.
Your evidence for that is?
AOG,
---
[Me] while you discard this possibility based on ideology, instead of empirical checks.
[AOG] Your evidence for that is?
---
Three months of rattling conversation with you.
It must be all those links I provide. Clearly doing that is the work of ideology, not empiricism. Got it.
Clovis wrote: "Can you please give me the name of the active substance..."
Albuterol (Salbutamol). The active ingredient has stayed the same between old and new, but they changed the inhalers. The new ones just don't work well.
Albuterol is the emergency measure. For example, when she's out running and suddenly can't breathe, she uses the inhaler and it provides some immediate relief and generally adequate relief in 15 minutes or so. The old ones provided nearly complete relief within seconds. They changed the propellant in the inhaler.
The albuterol itself has long been off-patent and costs almost nothing (something like 10 cents a dose). For example, it can be used in a raw (non-inhaler) form with a nebulizer (which is a gizmo that vaporizes the medicine for direct inhalation). This works quite well and we use it when she's having a serious attack (for which the damn new inhalers don't work) as a last attempt to avoid a hospital visit.
The inhalers changed several years ago. They were also pretty cheap (though still significantly more expensive than the standalone albuterol). But then the EPA & FDA ganged up on asthma users and made the propellant in the then existing inhalers illegal. Pharma companies patented a new inhaler based on a different propellant, and now it's more than our $20 copay for the inhaler, so I'm estimating around an order of magnitude increase. Not sure which Pharma companies hold the new patents.
I wouldn't even mind the inhaler being more expensive if it worked as well.
Well, she hasn't died yet. She has been blue though, which looks okay on a smurf, but not so good on my daughter. If your child ever turns blue, you'll see what I mean. I hope that you never experience that.
Bret,
I truly hope not to see my son turning smurf either.
I did a fast research and found one typical inhaler with this substance.
It costs near $10 a 200 dosis inhaler. It is in portuguese, but you can see the specifications here:
http://www.medicinanet.com.br/bula/317/aerolin_spray.htm
The gas it uses is HFA134a, which is a substitute for CFC ones:
http://www.wikigenes.org/e/chem/e/13129.html
So it is probably something very much alike your daughter buys.
I do not know if the non-CFC are still commercialized here. I also do not know if CFC based ones are forbidden. I doubt it, more probably the market here is only adapting to the standard outside, since most laboratories are multinationals.
If you want, I can take a closer look to find the old CFC ones - I have no problem in packing and sending it to you.
AOG: the price above is almost 50% below the ceiling price ruled by our govt. regulations.
Oh, boy. We do need to copy you guys all the time.
I've just found out that our "FDA" also prohibits the CFC inhaler since 2011.
Interesting though that our prices for those inhalers did not inflated like yours. An interesting study case if I could gather more information...
Bret,
I also do not find studies that point to worsened action of the new non-CFC inhalers.
Have you guys asked a doctor about it? Or asked him for other substances that could bemore effective?
Oh, a a last one to AOG:
----
[Me] The guys at FDA are obeying rules devishly devised by Big Pharma.
[AOG] Do you have any evidence for that beyond paranoia?
---
Look how other people are paranoid too:
http://www.motherjones.com/environment/2011/07/cost-increase-asthma-inhalers-expensive
One quote:
" It set up shop in the K Street offices of Drinker Biddle, a major DC law firm. Between 2005 and 2010, it spent $520,000 on lobbying. (It probably spent even more; as a trade group, it's not required to disclose all of its advocacy spending.) Meanwhile, IPAC lobbied for other countries to enact similar bans, arguing that CFC-based inhalers should be eliminated for environmental reasons and replaced with the new, HFC-based inhalers."
It looks like the lobbying worked here too. Or, well, this must be only a coincidence and I am following my paranoia believing otherwise...
It's crony capitalism aka fascism -- the polar opposite of competition and the purpose is to fill the pockets of the participants with our money while gaining power on to themselves, scaring us plebes into believing that we are incapable of making our own decisions and making the world, not safe for democracy, but for tyranny.
If anyone had any doubts prior to the last several weeks, those doubts must have been resolved.
The stage has been set, the actors are on stage and the play is about to begin. The last act has only been penciled-in and there is still a small chance it can end well, but it doesn't look at all promising.
Clovis wrote: "I also do not find studies that point to worsened action of the new non-CFC inhalers."
First, I want to thank you for offering to send the old style inhalers (if they had been still available there). That was very, very kind.
I know that the studies show equal efficacy. I also know other asthma sufferers that match the studies in that they found no difference in the inhalers.
However, I know some asthma sufferers other than my daughter that also respond poorly to the new inhalers.
I have no good explanation, but some guesses.
Explanation 1: It's all in her mind. Unfortunately, even if so, it would still be helpful to have the old inhalers!
Explanation 2: It may be that the efficacy at 10+ minutes or even less might be similar even for my daughter and others like her, but in those first seconds after the attack, when she can't breathe and is totally panicked, the old inhalers would work enough to take the panic away almost instantaneously, and that relaxation would then be a positive feedback loop that would also help the attack subside. The new inhaler may not work quite as fast for anybody. It doesn't get her going on the positive feedback loop as quickly, and even a minute is a long time when you can't breathe. Even worse, she then remembers it didn't work last time, so next attack it ends up being sort of an anti-placebo ("nocebo") effect. In other words, a mix of a subtle difference and it being mostly in her mind. The difference of some number of seconds may not be measurable in a trial.
Explanation 3: The new inhalers may work better for some people and worse for others like my daughter so it averages out to similar efficacy.
Explanation 4: While not common, there have been cases of fraud in FDA trials. There's some small chance that they fudged the results in order to get the older inhalers banned so they could reap the benefits of the repatent. If the new inhalers were shown to be less effective, the FDA would've had a very hard time prohibiting the old ones.
Explanation 5: Some combination of the above.
Explanation 6: Something else.
The good news is that she's been taking Singulair (montelukast sodium) for nearly two years now and it's helped a lot. No hospitalizations since she's started taking it and I don't think we've even had to use the nebulizer. The lack of inhaler efficacy is still an issue, but she hasn't turned blue since she started Singulair either. So I'm annoyed with the whole inhaler thing, but no longer panicked.
Bret,
You have made a good set of hypothesis. I would go for 2 and 3.
You daughter probably grew up taking the old inhalers and, as she was very young, it may be her body adapted to the CFC action in some optimal way. Now her body is less malleable and, by comparison, the action of the HFA is less fine tuned.
In the few people in family with ashma I know of, the pattern is to have it diminished when passing to adult life, with a worsening after the 60s. Maybe you won't need to worry much from now on.
'I was taking a general look at the prices I can find in our online drug stores, and I can not possibly imagine how Harry's wife spends $36.000 a year in asthma medicine (is it a joke?).'
No joke. It's a new product, she's had it only about 10 days.
The first month ($3,000) is a gift from the manufacturer. Who could afford to try it out at that price?
We have a gold-plated insurance plan which will pay 99% for the first year. No certainty after that.
I have no idea (too busy to try to find out) where this new drug came from, or why its price is what it is.
We were less shocked than we might have been since Tricia has another prescription (not for asthma) that costs $24,000 a year.
Our co-pay on that is about 10%.
Altogether, our 2-person household consumes (at American prices) something like $80,000 a year in prescription medicines and a couple thousand more in prescription medicines that are also sold over-the-counter.
The insuror waffles. Sometimes it covers OTC ones, as prescriptions, sometimes not.
Like I say, it's a good thing we are rich.
My share of the costs this year will probably be $4,000-$5,000.
It's better than being dead, which is one alternative.
Quite a few working Americans have gross pay in the $250/week range, so even if they had insurance (many don't), the co-pays for even ordinary-priced drugs would be a serious burden.
Instead of railing against Obamacare, every American not in that position should be on his knees thanking whatever deity he worships.
Harry,
I start to understand why the US has such an expensive health care.
In a system where most of the insured people only pay a small fraction of the costs of drugs, Big Pharma is in effect setting the rules to extract money from the insurance pool. In the end everyone is paying for those high medicine prices.
Maybe it explains why the asthma medicine (and others) price can go so high in the US, while the same medicine (with the same new non-CFC gas) remains cheap here and in other places.
Contrary to AOG's belief that govts. are to blame, I think this is not the main explanation here.
In Brazil, it is uncommon for health insurance plans to pay for medicine - even the very good ones have strong caps on that in most cases.
So, as the medicine is usually paid for by the people directly, their prices can not grow unbounded, by simple demand dynamics.
It is an interesting case of very sub-optimal dynamics obtained in a completely private system with few refulations (of course, I am talking about the pre-ACA period).
Now, with the ACA enteing in this scenario, it is a very good question if the dynamics may change. In principle, it should not, since in the previous configuration Big Pharma already dominated the dynamics within a insurance market place.
But if it changes, and the prices of medicine go down, I imagine one of the paths would be by... well, govt. being more intrusive, to the dispair of Libertarians. This is a topic I will follow from time to time to see how it evolves...
'Sub-optimal' is kind. It's crazy.
You are right that government is not the source of the craziness.
One of the results of 'no coverage for pre-existing conditions' and 'no portability' has meant that people with coverage from an employer are locked into that job.
This violently contradicts one of the principle points of the rightwingers, which is that complete job insecurity and mobility are required for an efficient, innovative economy.
They don't really believe that, but they say they do.
So you'd think they would welcome anything that encouraged worker mobility. I'll bet nobody can find a rightwinger speaking in favor of portability.
Harry, Your take is as usual totally skewed. Conservatives don't endorse employer paid health insurance in the first place, so why would we have a position on portability.
Because they need to hire people?
What does hiring people have to do with health care?
I explained that in my comment just before.
I could go further and try to explain that Skipper's conniption fit about the imaginary part-timing of the workforce hasn't happened in Massachusetts or Hawaii and isn't going to happen in the other states because of health insurance.
Most (but not all) good workers want fulltime, secure jobs and will apply where they can get them. Idiots who decide to screw over their workers because of a hissy fit over the ACA will end up selecting from a pool of second-raters.
You know why medical costs seem higher now than back in the days when the indigent (if lucky) went to the county hospital? Artificial knees.
And so on.
Until 1945, medical care was basically palliative and therefore cheap. Now doctors can fix things, but it costs money.
It costs so much because so much money spent on health care goes to support the federal bureaucracy. it certainly isn't going to doctors who are planning to retired in droves... and you may not have noticed, but it's a buyer market for labor.
I wish I was in a position to advertise for workers at every level and state categorically that the salary does not include health insurance and then watch the avalanche of applicants.
You still haven't explained why Medicaid didn't do the job it was supposed to do.
Harry wrote: "Idiots who decide to screw over their workers because of a hissy fit over the ACA will end up selecting from a pool of second-raters."
That may well be true. It may also be true that my company will lose its employees and end up selecting from a pool of second-raters.
We re-up for health insurance for the employees every fall for 12-months starting in January. Our broker is currently unable to get us a quote as all the insurance companies that will insure us are very busy with Obamacare and the exchanges. But he said to estimate an increase of 25% to 100% in premiums over this year.
Even the lower end, 25% is big enough that I'll have to pass the vast majority of that on to workers (I simply don't have the money not to) and that will be the same as a substantial pay cut for them. I suspect at least some of them will leave and I won't be able to replace them with people talented enough to do the job. So my company will shrink again. Bummer!
The alternative that were seriously considering is to completely drop health care insurance. Then I can actually raise their salaries significantly. The younger ones probably will just pay the fine and won't worry about health care, the older ones can get insurance on the exchanges. In this case, the younger ones might stay and the older ones are more likely to leave to get health care insurance from a big company.
Of course if we drop health care insurance, I won't have insurance (I may be able to be covered under my wife's plan, we're not sure yet - we're nearly certain that the kids can be covered and that's what counts). Oh well. I'll just pay the fine and if I get sick I'll sign up on the exchanges then - if they're working.
Bret, great minds really do think alike (see comment above). I proposed hiring people stating up front that you do not provide health insurance and let them deal with their health needs themselves. It may just be what saves the economy.
Bret,
Thanks for sharing your experience - this kind of information is worth a hundred pieces of the NYT, and I would still be less informed then.
For the typical worker in your company, to pass on the 25% of increase in health care costs means to decrease his salary by how much?
And to drop the insurance at all means to increase his salary by how much?
Depending on the answers for those questions, it may be very easy to decide. And it may even happen that it will not imply anyone dropping the job.
I, for one, would probably prefer to pass on to ACA and have a good increase in salary, than to have it diminished just to have the same health coverage as before (one case is a new situations with a plus, the other an old - hence not funny - situation with a minus).
It may be worth to assign how much of your employees are older and younger, and see their profiles for decision making (if they play always safe or take risks) before making the decision.
All in all, it is a wonderful problem in game theory. I envy you for that, Bret :-)
Clovis wrote: "For the typical worker in your company, to pass on the 25% of increase in health care costs means to decrease his salary by how much?"
The following numbers are off the top of my head, but I think they'll be within 10% one way or the other.
Let's take a 50-year-old employee with a family of four. His health insurance (for the whole family which we cover) is $1,800 per month, or roughly $21,000 per year. A 25% increase means his premiums go up a bit over $5,000 per year. The employee would have otherwise expected to see a $2,000 cost-of-living salary increase, so the difference that he'll have to pitch in is $3,000. But no matter how you slice it, he'll be getting $5,000 less per year than he otherwise would have. So he'll probably start looking for other jobs.
I think I need to make a few things clearer:
1. Three years ago, before Obamacare was law, we had an 18% increase, which is comparable to a 25% increase, so I have no idea how much of the increase we get this year will be due to Obamacare. The broker implied that a lot of it will be, but that could easily just be an excuse. I just don't know and have no way of finding out.
2. These large premium increases are being experienced by every small and medium size business in San Diego, maybe in the rest of the country too, so at least I'm not alone.
3. A 25% increase may be survivable. A 100% increase is not without dropping insurance. The good news is that when we got the 18% increase three years ago, the broker predicted 20% - 25% so I'm hoping he just overestimated again.
4. Large companies often self-insure. Their costs are going up much, much more slowly. I don't know the relevant parts of Obamacare legislation, but I'm guessing they have a huge and increasing competitive advantage over everybody else because they only have to pay for their own workers and those payments don't have to subsidize the costs of anybody else. Assuming I lose my employees, they will go to large companies, where their total compensation package will be better, at least in the short term.
Yes, premiums have been going up 25% or so for years and years. To blame it on Obamacare is like raising a flag that says, 'I don't know the first thing about health insurance.'
Even smallish companies self-insure. For example, when I worked for a company with slightly over 100 employees, it self-insured.
Basically, it contracted Blue Cost to administer billing and settled up differences at the end of the year.
One year, there were 7 employees pregnant, and I asked the boss what would happen if one had a million-dollar premie?
His answer: the company would go broke.
I was going to disagree with "premiums have been going up 25% or so for years and years" but I realize it's so ill defined as to have no meaning. Our premium increase was 168% but I'm sure that was just a coincidence.
Eagar once again demonstrates that he has no idea what "rightist" means in the USA - "I'll bet nobody can find a rightwinger speaking in favor of portability".
Every right winger I know who speaks on the subject goes on about that. Here is one counter-example from CATO. Eagar doesn't believe this because the proposed solution to portability is less government, not more, especially since the lack of portability in our current system is a direct result of the New Deal.
Let me also say, as a small business owner, my experience is basically like Bret's.
AOG,
So maybe you've read the ACA enough to answer me: why is it that you have no way to keep your old insurance, but big companies can keep providing their own self-insurance for their employees as before? Or they can't?
Bret,
Were you to cancel health insurance and give your employee the $23,000 increase in salary, do you know how much would he pay to have a comparable coverage in the private (or ACA?) market?
I find it interesting that you cover the employee's family too. So hiring young single people is cheaper for you than older ones with families? The experience the older ones bring is enough to justify the higher costs?
Clovis asked: "...do you know how much would he pay to have a comparable coverage in the private (or ACA?) market?"
I'm not sure about the ACA, but in the private market he'd pay more-or-less the same for the insurance. ***BUT***, he would do it with at least some after tax dollars whereas when I buy it for him, I do it with pre tax dollars. On a $23,000 salary increase, an engineer in California would lose more than $10,000 to federal, state, and other miscellaneous taxes. That's why so many people get their health insurance through their employer rather than buying it on their own where it would be more portable. There are ways to minimize the tax hit some (Health Savings Accounts and things like that).
Yes, it is way cheaper to hire a young single person. Their salary tends to be way lower as well. But experience does have some value. And young, single people often become young married people with children remarkably quickly and the whole birth process is really expensive for an employer as well.
One of my partners seems to avoid hiring young people who seem likely to want to start a family for that very reason. I like families and children so I'm the opposite (but don't tell my investors!).
I one worked for a woman who had a business (not the one I worked for) staffed entirely by single women, mostly divorced or abandoned with young children; mostly ones who had been out of the work force for a while.
In other words, women who had a hard time finding jobs.
She provided reasonably good benefits, including health care, and when offering a job would hand out a sheet showing her total costs: SSI etc.
In some cases, the pay was less than half the total.
It worked for her because the takehome pay she offered was very low.
It baffles me that the advocates of deregulation do not seem to understand the friction introduced into the system by avoiding single payer.
I see. The health insurance you don't have would be portable.
Got it.
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