November 18, 2009

Costs of prescription drugs, health insurance goes up, way up, while we wait for health care reform

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While the nation pauses, waiting to see if health care reform is passed by Congress, journalists have been busy examining price increases drug makers and health insurance companies have pushed through in recent months and years.

rita_hibbardwebThe trends were revealed in separate pieces over the past few days, one focused on health insurance rate increases, and the other on drug price hikes.

Oregonian reporter Bill Graves reports this morning that average premiums for for individuals and small businesses have climbed by more than 140 percent in seven years. State regulators in Oregon have approved every rate increase requested by Oregon’s largest health insurance companies over the past three years he found, lowering the rate hike requests in only seven of 40 cases.

Graves reports:

“In Oregon, insurance premium increases are forcing small businesses and individuals to join the growing ranks of the uninsured. The number of Oregonians covered by commercial insurance dropped by 88,000 between early 2008 and last summer, many of whom joined the estimated 614,000 residents already without insurance.

And you’ll be shocked, shocked, to learn what Graves found when it came to pay raises and bonuses paid to top health insurance executives. This as the companies try to put the blame for the rate hikes on hospitals and doctors.

“The CEO at Oregon’s Regence BlueCross got a $365,912 bonus last year on top of his $368,149 salary. Kaiser’s CEO in Oregon got a 59.2 percent boost in compensation last year, including a $142,049 bonus and $69,825 in other pay on top of his $479,956 salary. A company spokesman said the money was justified to bring his pay more in line with peers.

At the same time, The New York Times’ Duff Wilson finds that drug companies have been raising their prices at the fastest rate in years, perhaps in anticipation of more scrutiny under health care reform.

“In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992. “

Wilson points out this trend runs counter to the direction of the Consumer Price index, which has fallen by 1.3 percent in the past year.

He quotes two experts who point to unusual price increases occurring in the past when Congress has added benefits, such as when drug benefits were added to Medicare a few years ago.

“When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. He has analyzed drug pricing for AARP, the advocacy group for seniors that supports the House health care legislation that the drug industry opposes.

— Rita Hibbard

One thought on “Costs of prescription drugs, health insurance goes up, way up, while we wait for health care reform

  1. Hi Rita — Thanks for pulling these pieces together to give us a more complete picture.

    I recall that in 1985, while I was working briefly in the health insurance biz, then-secretary of Health and Human Services Margaret Heckler famously said of some Reagan era health reforms, “The monster of health care inflation is dead.”

    She obviously got that wrong.