Transcript of BioCentury This Week TV Episode 150
Joel Ario, Managing Director, Manatt Health Solutions
Caroline Pearson, Vice President Health Reform, Avalere Health
Taylor Burke, Assistant Professor Health Law and Policy, Department of Health Policy, George Washington University School of Public Health and Health Service
PRODUCTS, COMPANIES, INSTITUTIONS AND PEOPLE MENTIONED
Medicare, Part D
Centers for Medicare and Medicaid
Department of Health and Human Services
Steve Usdin, Senior Editor
Erin McCallister, Senior Writer
STEVE USDIN: Will patients be able to get the drugs they need when the Affordable Care Act kicks in?
ERIN MCCALLISTER: This week, from the "bronze trap" to platinum care, we examine drug access and health exchanges.
STEVE USDIN: I'm Steve Usdin.
ERIN MCCALLISTER: And I'm Erin McCallister. Welcome to BioCentury This Week.
NARRATOR: Your trusted source for biotechnology information and analysis, BioCentury This Week.
STEVE USDIN: Starting January 1st, millions of Americans will receive health insurance through state health exchanges created by the Affordable Care Act. But consumers will have to begin making choices sooner when enrollment starts in October. Participants will be able to pick from four different coverage level: platinum, gold, silver, and bronze. The platinum plans will have higher premiums, but the lowest deductibles and out of pocket costs.
Bronze plans will have the lowest premiums, but the highest deductibles and co-pays. When it comes to drugs, the situation will be even more complex. Each state will have different rules about the drugs and biologics that must be available in plans that insurers offer on the exchange. Some states will offer more than one drug plan within each level. That means more choice, but more decisions, as individual consumers make priorities based on co-pays and the list of available drugs.
Later in the program, BioCentury Senior Writer Erin McCallister will dig into the details of drug access under the Affordable Care Act with Caroline Pearson of Avalere Health and Taylor Burke of George Washington University. First, for an overview, I'm joined by Joel Ario, Managing Director of Manatt Health Solutions. Prior to joining Manatt, Mr. Ario directed the federal government's work on health exchanges.
Mr, Ario, to start with, what is a health exchange? Who's going to be on them? What are they going to get on them?
JOEL ARIO: Well, about 15% of the population will be eligible for these exchanges. So the first point, Steve, I think that's important is for the 85% of us who already get insurance either through our employer or through Medicare or Medicaid, things pretty much stay the same in 2014. But for that 15%, it really is going to be a revolutionary change. People that today are in that marketplace, if they try to buy insurance, the first thing they encounter is a lot of health questions before they can be determined.
STEVE USDIN: They're called prior conditions. They want to know what your health status is, so they can know whether to insure you and how much it's going to cost.
JOEL ARIO: Long questionnaire, and then the questionnaire has to be checked out with the doctors and so forth. So that all goes away. Insurers are prohibited from using health status in any form to either determine your eligibility or to price the insurance. So much easier to get right into the marketplace. The second thing is that there will be more affordable premiums because the government will help people with their premiums through tax credits all the way up to 400% of poverty. That's like $90,000 for a family of four.
So you get some assistance. It's a sliding scale, so you get some assistance. So now you've got no health questions and affordable premium. But here's where it gets really revolutionary different and where it will also eventually work through the rest of the market. Instead of having just a couple choices in front of you, you will have many choices on all of these exchanges.
There will be dozens of choices, in some cases, hundreds of choices. So suddenly new choice--
STEVE USDIN: And so one of the sets of choices that people are going to be faced with are these so-called levels. There's going to be bronze, silver, gold, platinum levels of insurance that they can get. What does that mean?
JOEL ARIO: Well, those are ways of standardizing, because as soon as you say to people you're going to have lots of choices, dozens or even hundreds of choices, most people get a little scared by that, because they say, how am I supposed to sort out that many choices? So that's the fourth change. It's going to be a new marketplace, in the same way that today, people when they go to search for information, they no longer start from scratch and have to figure out the whole process. They go on Google, type in a few letters, and it takes them through a process.
And that's how the exchanges are going to work, too. They will help you sort through your choices and get you to the right choice for you pretty quickly, in some cases, in a matter of minutes. Now, it does depend on if you have particular health needs and you really want to dig deep into your choices, there will be a ton of information up there. But for most people, they'll want to search the database and kind of quickly zero in on which choices are best for them. And they'll have these ways of choosing the standardization.
STEVE USDIN: And fundamentally, these four categories, they're really different levels. You pay less for the lower metal, if you want to call it that way. You pay more for platinum. And you get more. It's like anything in life. You get more for the ones that you pay more for.
JOEL ARIO: It's really a trade-off. If you buy at the low end, the bronze plan, pretty skinny premium. But you might have a $5,000 deductible on that plan. If you buy up at the top end, platinum, it's going to be a lot more expensive to purchase it, two or three times as much, depending on the marketplace, but your deductibles will be very low. And your cost strain will be very low.
So you'll have these, but you will know that if I'm looking at three different bronze plans, they may have different attributes. But all of them will be worth the same amount for the average consumer. It's just a matter of how the benefit is divided up exactly. And the platinums will all be the same.
So there will be with this new world of lot of choice, there will be ways to sort through and figure out how to compare apples to apples.
STEVE USDIN: So one of the things that I want to get to, because I think people have a misconception about this, there's a lot of talk about the fact that a few states are going to run their own exchanges, the federal government's going to run many of the exchanges. But what's really important is that just because the federal government is running an exchange in two states, they're not necessarily going to be the same. They're not going to be the same, right?
JOEL ARIO: That's correct. There are still state-by-state marketplaces, sometimes run by state officials, sometimes run by federal officials. But when a consumer goes into the marketplace, they shouldn't know the difference. Both marketplaces should be designed. They all will be designed with these four metal levels, as you described, a lot of different choices, some markets more than others. Different states have made different choices about how many options should be available.
Some of them have limited that. But even in the cases where it's limited, there's going to be more choice for people than there is today.
STEVE USDIN: And there's also going to be different benefits that are going to be available. So if somebody's in one state and somebody else is in another state just across the border, they may have different medicines that they can get, different physician networks that they have access to.
JOEL ARIO: One of the main reasons why it is different state to state is because the provider, the hospital and physician networks, are different. If I live in Arkansas, I don't want to buy a plan from New York, where the plan is geared to the New York provider network and none of those providers are available to me in Arkansas. So each plan is state-based, built on the physician and provider and hospital networks that are in that state.
STEVE USDIN: Mr. Ario, one of the things that people are going to have to understand is what subsidies and what other kinds of help from the government they can get on the plans. How is that going to work?
JOEL ARIO: Well, there are two kinds of subsidies. First of all, everyone that's below 400% of poverty, which is, again, about $90,000 for a family of four, will have a subsidy that's pitched to their income on a sliding scale. And they'll be able to take that into the marketplace and then purchase, buy up, pay a little bit of their own money to buy a more expensive plan, or buy down and get even a cheaper plan and save money on the front end.
Or in the second kind of subsidy people get on the low end, if you're below 250% of poverty -- so you're down there in the $20,000 or $30,000 range if you're a family of four -- then you also get help with your cost sharing. Most people today pay some part of their health bill through cost sharing, and that can be very expensive for a low income person.
STEVE USDIN: Cost sharing is deductibles, co-pays, coinsurance, right?
JOEL ARIO: That's correct. When you go to the doctor, you pay $25 co-pay, or you may pay a 10% co-insurance. If you're very low income, below 250% of poverty, you get, in addition to your income-based subsidy you also get a reduction in your cost sharing. It's important to say everyone in this new market is going to have skin in the game, because they'll get these subsidies, but then they'll be either able to buy the product that the subsidy is pegged at, which is a silver plan. But in many cases, if they wanted to buy down to a bronze plan, they might have to pay almost nothing for the premium and have higher cost sharing.
STEVE USDIN: Explain that a little bit. What does it mean that they're pegged at the silver plan?
JOEL ARIO: The silver plan is the second least costly type of plan. There will be four different standard levels of plan on the exchanges. And the subsidies are pegged to that second lowest priced plan. If you want to buy the cheapest type of plan, which is a bronze plan, then you'll get even more help with your premium. In some cases, you won't have to pay anything for premium.
But you will have a higher cost sharing when you use services.
STEVE USDIN: And to make that clear for people, because I think this is a very hard concept, in order to get the most help with your health costs, you have to be pay a little bit more for a plan. If you buy the absolute cheapest plan, but you have significant health costs, that could actually be the most expensive thing for you in the long run.
JOEL ARIO: Over time, what you're going to see on the exchanges is that they'll give you information that will combine what your premium payment is with what your likely cost sharing is, based on your situation. It'll be calibrated to help you figure that out. But for people who have high utilization, yes, they would want to buy a more expensive plan up front, so that they didn't have as much cost sharing.
That would come out maybe better for them. If you don't think you're going to go to the doctor very much, then you might buy a cheaper plan up front with a lot of cost sharing. And then you take the risk that if you end up needing more utilization, you're going to end up paying more for each individual visit to the doctor. So there is a tradeoff between low premium, higher cost sharing or higher premium, less cost sharing.
But both of them, as consumers understand this market and get more savvy to how it works and pricing and so forth, with a lot of tools -- there are going to be tremendous tools available on the internet to help people through this -- they will then be able to make the best decision for themselves.
STEVE USDIN: In a moment, my BioCentury colleague Erin McCallister will discuss consumer choice with Taylor Burke of George Washington University and Caroline Pearson of Avalere Health. First, here's an example of how differences in plans could affect consumers.
The patient's out-of-pocket cost for the most popular multiple sclerosis drug, Copaxone, will vary greatly based on the plan level. Here's an estimate from Healthpocket Inc.
ERIC MCCALLISTER: How will consumers access drugs in the new world of health care exchanges? For that and a more in-depth understanding of how it affects participants, I'm pleased to be joined by Caroline Pearson from the health care consulting company Avalere and Taylor Burke from the School of Public Health at George Washington University. Caroline, let's start with you.
We heard about the different costs for the plan levels -- bronze through platinum. How different will the drug options to be on the bronze plan versus, say, the platinum plan?
CAROLINE PEARSON: I think it's going to be variable by plan. Each plan could set its own benefit design. So we may well have carriers that choose to cover drugs at a higher level with lower cost sharing and some carriers that tended to cover the drugs at a lower cost sharing level. Across the board, I think regardless of the metal level, there's going to be aggressive cost sharing at the higher tiers.
So for specialty drugs and branded products, we're seeing coinsurance amounts around 50%.
ERIC MCCALLISTER: And specialty drugs are biologics and things like that for cancer.
CAROLINE PEARSON: Cancer drugs, anything that is an injectable medication or, as you said, biologics. So costs for those are going to be very high across the metal levels, whereas costs for generic drugs should be relatively modest.
ERIC MCCALLISTER: We've seen varying reports about the people that are going to be enrolling in these plans. Some reports say it'll all be healthy for people. And other reports say oh, no, it's going to be mostly high-risk people. So if it is mostly healthy people, does drug access really matter, and how important is it that patients see that, Taylor?
TAYLOR BURKE: I think it very much so matters, and it's still important. And while it's true that maybe in the first year or so of exchanges, you may see more enrollees that are sicker and need more health care services versus the young and invincibles. But depending on how successful the outreach campaign is to get people enrolled in the plans themselves, I think that over time, we're going to see an evening out of the exchanges and have them be robust and well-working.
But just to say that someone's young and invincible and therefore won't need access to drugs, that may be true today, but tomorrow anything can happen to you. And so therefore, making sure that there's a robust package of pharmaceuticals in every plan option, from bronze all the way up to platinum, inside of the exchanges is incredibly important no matter who the beneficiary.
ERIC MCCALLISTER: And Caroline, within the bronze plan, is there just going to be one formulary or drug list that all bronze plans offer, or will we see some differences just within the bronze level?
CAROLINE PEARSON: There's going to be minimum formulary requirements in each state. And those will vary depending on what the state has selected as its benchmark plan. So health plans in every state will have to cover the same number of drugs in each class -- so each type of drugs -- as is covered in the state benchmark. But what specific products are included on the formulary is up to each health insurer to decide.
ERIC MCCALLISTER: So like a BlueCross could offer a particular diabetes drug, and then maybe Aetna might offer the same number of diabetes drugs, but maybe a different set of branded diabetes drugs than the BlueCross one.
CAROLINE PEARSON: Exactly. So taking the anti-diabetic example, in a state like California, the plans will only be required to cover five different chemical entities or five different unique drugs. And they could pick among any of the anti-diabetic agents that they wanted to count towards those five. Of course, they have the option to cover more, but that's not required.
Whereas in a state like Texas and Florida, plans will have to cover up to 21 drugs, and so they'll have less flexibility about which ones to exclude, since most will be required to be covered.
ERIC MCCALLISTER: And Taylor, in this first year, are we going to see a lot of variability between plans, and over time will that change? Will we start to see some aggregation around the norm where all plans offer the same thing?
TAYLOR BURKE: Yes and no. I think that in the first roll out, you might see great variability, much like we saw in Part D. Remember in Part D, when that rolled out in the early 2000s and the mid 2000s, there was fear that no plans would show up. And then a ton of plans showed up. And now it has sort of shaken out such that the most successful and useful plans are still taking part in the Part D program.
And so I think the same thing will happen in exchanges. I think that in the first go around, we're going to see large variability. But then the insurance companies will see what the user rates are and will see what the cost is and whatnot. And then plans will be shaken up from year to year, depending on not only with the consumer needs, but also the bottom line of the insurance companies themselves, who need to stay in business.
ERIC MCCALLISTER: The whole point of the exchange was to have a competitive marketplace. But in some states, for example, in Rhode Island, only two carriers have signed up to provide plans in Rhode Island. But in California, 12 carriers. And the same in Oregon. So what are the implications of competition for drug access?
CAROLINE PEARSON: As you might expect, the larger states that are going to have more enrollees expected to enroll in their exchanges, those are the states that are really commanding a significant number of health plans that are interested in joining the market. Those are the states where the national carriers who have been somewhat choosy about which markets they should enter are actually offering products. Whereas smaller states like Rhode Island, like Vermont only have a couple of carriers each.
And as a result, we may see premiums be a little bit higher in those states since there's not going to be as much competition among health plans to win enrollment.
TAYLOR BURKE: And I would just add to that, that in Rhode Island, they are doing direct negotiation with these plans instead of putting an actual solicitation on the street.
ERIC MCCALLISTER: Next up, how drug benefits in the exchanges might compare to Medicare Part D. But first, here's an example of how diabetes patients have vastly different choices in the California and Vermont exchanges.
NARRATOR: Now, back to BioCentury This Week.
ERIN MCCALLISTER: We're talking with Taylor Burke and Caroline Pearson about accessing drugs in the new health exchanges. Taylor, one program that I think a lot of Americans are familiar with is Medicare Part D for seniors. Either they've signed up their grandparents or their parents for it in one way or another. And that is strictly dedicated to prescription drugs. And I'm curious, is there any lessons they can be learned from Part D that we might see in the exchanges?
TAYLOR BURKE: Absolutely, I think that there are several things that we learned from Part D that are absolutely applicable to the role out of exchanges in the drug plans inside of plans that will be offered through exchanges. Let's first remember that when Part D was rolled out, all sorts of hemming and hawing as to how awful the program was, how many problems there were going to be. And now, we're looking at nine out of 10 seniors are very happy with the Part D program.
And so whenever you're launching something of this magnitude, there's bound to be roadblocks. There's bound to be some obstacles. And so knowing that, I think we have to get ready for some bumps in the road, but nothing that will stop the train. I think that the IT part is going to be big.
The subsidy solution in terms of getting the subsidies out there is going to be big. And also, troubleshooting is going to be massive on the front end.
ERIN MCCALLISTER: But there is a slight difference, too, because in Part D, they're going in and they're looking specifically for their drugs. And here, in the exchanges, it's a little bit different. So can you talk a little bit about that?
CAROLINE PEARSON: I think the major difference is the exchanges are really going to be comprehensive health insurance coverage. So in Medicare Part D, there's actually a search tool right on the website. Seniors can go in. They can enter their current prescriptions and find a plan that covers those prescriptions and includes their pharmacy.
That's probably not going to be the case, at least in the early years of the exchanges. We're not going to have searchable formularies. And in fact, since most people are going to be looking at comprehensive health insurance, they'll be considering other factors like whether their doctor is in network, what the cost sharing is for other services. So it's going to be a complicated purchasing decision to understand how different people make choices and I think lowest cost plan may be the way that a lot of people go, simply because think they have difficulty evaluating all the rest of the benefit.
ERIN MCCALLISTER: Another difference, I think, with Part D is that in Part D, there are these protected classes. There's this group of six drug classes that you have to substantially cover all drugs in that class -- cancer drugs, immunosuppressants and others, anti-epileptic agents. Does that exist in the exchanges, and without it, if it doesn't, what are the implications of that?
TAYLOR BURKE: Well, one of the implications of not having the five protected classes is that hopefully it will drive prices down somewhat, so that each plan doesn't have to have an entire package of lots of specialty drugs like we're talking about that they may not need. However, each class needs to have at least one drug in there, if not more than one drug, as reflected in the benchmark chosen by the state. So depending on which plan you're looking at depending on which state you're in and depending on which carrier's plan you're looking at, you may have to check very carefully as to which drugs are offered if you need a specific kind of medication for a specific condition, which may not be readily available in the first month or so of the exchange.
But after a while, it'll get smoothed out so that we know exactly what to buy.
ERIN MCCALLISTER: And in terms of the evolution of Part D, I know that you threw out the statistic that nine of 10 seniors are pleased with Part D, but in terms of drug access, how has that evolved since Part D started? Have fewer drugs been offered over the last few years, Caroline? Or has it continued to be fairly generous?
CAROLINE PEARSON: Yeah, I think we've seen relatively generous formularies consistently in terms of the number of drugs covered in Part D. But we have seen plans really pushing to continue to be able to offer low-cost products in the market. And so we've seen a lot of use of specialty pharmacies and restricted networks in order to keep those prices down.
ERIN MCCALLISTER: Thanks. Next, we'll get some final thoughts from our panel at what the first year of health exchanges might look like.
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ERIN MCCALLISTER: We're wrapping up our conversation with Caroline Pearson and Taylor Burke about drug access and the new exchanges.
For the states that are running their own exchange, and there's about 14 of them, there's been a fair amount of transparency in terms of the plans that are going to be offered and the cost. But for the federally run exchanges, there hasn't been a lot of information. When will we start to see more information on those exchanges?
CAROLINE PEARSON: So unfortunately, we may not have a lot of information until close to open enrollment, which starts October 1. CMS is going to certify all of the plans that should participate on the federal exchange early in September. And then once people go on to buy health insurance, that's likely when we're going to see more information about both the benefit design and the formularies.
ERIN MCCALLISTER: OK. And Taylor, the whole point of the exchange was to improve access to health care and also access to drugs. And I'm curious, how soon will we start to be able to know whether or not this is working? I'm sure there's going to be numbers about how many people enroll, but is that really a clear indicator of whether or not people are actually getting access to health care?
TAYLOR BURKE: It's a great question. And that's the million dollar question we all want the answer to. When you're talking about revamping a fifth of the entire US economy, it takes time. What we know right now is that the current system is unsustainable. That's for sure.
And so launching into our health care reform era, as it were, is a generational thing. We're going to have to give it time. And be able to measure access and whether the access has actually improved health outcomes is not an easy task. And so we are going to develop those metrics and be able to tell year from year how we're doing, but I would expect us not to get any good, hard data on that for a few years out. Because it is such a huge program that is aimed at providing better access to those who need it.
ERIN MCCALLISTER: And Caroline, what are some of -- Taylor alluded to and we've talked, there's a lot of technology involved. So should we just expect pitfalls in that first year? And how important is the first year versus the second or the third year?
CAROLINE PEARSON: Sure. I think we have to set expectations appropriately and anticipate that there are going to be bumps in the road, as Taylor said. And I think there's a lot of added functionality that we could layer into the system that would help people better access care. And those features will be added in future years. But in the first year, it's really going to be about making people aware of what's available to them, getting them onto the website, and getting subsidies to folks that need them.
ERIN MCCALLISTER: And Taylor, just to finish up. That first year, isn't it also kind of important to send the message that this thing is a working, so that we get more people in that second year?
TAYLOR BURKE: Absolutely. Absolutely. The messaging is going to be key, coming from both the Department of Health and Human Services, CMS specifically, but also the White House. And getting the message out and making sure that people understand what's out there and what's available is absolutely essential and is going to have a huge effect on the success of health reform generally.
ERIN MCCALLISTER: OK. Great. Well, that's this week's show. I'd like to thank our guests, Joel Ario, Caroline Pearson, and Taylor Burke.
Remember, you can share your thoughts about today's show on Twitter. Join the conversation by using the hashtag #biocenturytv.
For Steve Usdin, I'm Erin McCallister. Thanks for watching.