Wednesday, February 23, 2005

Vioxx and Health Insurance....
From Holman Jenkins' column in today's Wall Street Journal:Good Drug, Bad Customers - IIIn which Mr. Jenkins examines the winners and losers in what many predict is inevitable: the return of Vioxx to the marketplace:
If Merck returns the drug to the marketplace, big winners will be patients, who'd at least have an option restored to them. Doctors would have reason to be gratified too. They've gotten off lightly in the Vioxx controversy. Vioxx was a useful drug, but also a grossly misprescribed one. That's a financial judgment as much as a medical judgment. At $2 a pill, Vioxx did nothing for millions of patients that a generic, nonprescription 15-cent pill wouldn't do.

The big loser would be the insurance industry. Its attitude toward prescription drugs is "we don't want to pay for them" unless they save money by reducing the need for expensive hospital visits. Prescription drugs for mild chronic pain don't readily fit this description. Vioxx appealed mainly because it cut the risk of tummy bleeding compared to cheaper pain relievers, but even so it was a hard sell to insurers. For every patient who avoided a trip to the emergency room, insurers could expect to buy about $30,000 worth of Vioxx, and that's assuming the drug was cleverly restricted to patients at high risk for bleeding ulcers.
And an interesting fact:
So how come insurers spent $5.6 billion on Cox-2s in 2003, with 65% going to patients at low risk for tummy bleeding? More damning still, a University of Maryland study found that the more generous a patient's insurance, the more likely he was to be taking a Cox-2 -- and the less likely he was to need it. For the patients with the best coverage, in fact, there was basically zero correlation to need.
And more:
On this topic, GM's ever-rising health spending has become everyone's favorite case study, with endless repetitions of its claim to spend $1,400 per car on health care for its employees and retirees. Never mind that this figure is virtually impossible to distill useful meaning from. GM's spending per car on health care is right in line with private health care's share of the total economy -- about 8%.

Instead, the relevant questions are: Why does GM buy health care directly for its workers, when it doesn't buy their food, housing or beer? Answer: a tax incentive for companies to pay their employees in-kind in health care.

And: Does this lead auto workers to allocate a bigger share of their incomes to health care than they would if they were allocating the dollars directly? Yes, for reasons economists long ago consecrated with the phrase "tragedy of the commons." (Look it up.)

The sad truth is that neither doctors nor insurers nor GM are prepared to sacrifice a huge tax benefit for "health insurance" even while they whimper about the consequences and beg government to do something about it. We use quotation marks around "health insurance" because what insurers are selling these days is not true insurance but a mechanism to launder medical consumption through a third-party payment mill to qualify for a tax benefit.
(Emphasis mine)
How much could be saved if health insurance was used like other forms of insurance, a protection against unforeseen risk? Would you buy Vioxx (or Prevacid) instead of Tylenol or Motrin (or OTC Pepcid) if you had to pay the whole cost out-of-pocket?
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