As long as I have been in politics, I have been keenly aware of the role that health insurers play in driving up health costs in the U.S. Let’s be frank: health insurance companies profit by denying medical care and try and hold Democrats hostage by demanding we either go along with their money-making schemes, or that they will walk away from the insurance markets critical to ensuring the continued success of Obamacare.
I resent this ultimatum and believe that we should be expanding access to Medicare for even more Americans, in order to diminish the influence of the health insurers. Of course, no one wants to eliminate the health insurance industry entirely, because for some customers (like government employees and union members), they do offer good coverage.
But, let me run some numbers by you that should concern you about the state of the health insurance industry in the U.S. According to the most recent statistics from the federal government, our National Health Expenditure (NHE) in 2022 “grew 4.1% to $4.5 trillion in 2022, or $13,493 per person, and accounted for 17.3% of Gross Domestic Product (GDP)…[and] “Private health insurance spending grew 5.9% to $1,289.8 billion in 2022, or 29 percent of total NHE.”
And, according to a report from Reuters, “Over one third of all healthcare costs in the U.S. were due to insurance company overhead and provider time spent on billing.” In other words, about a third of the nearly $1.3 trillion we give to health insurers goes to bureaucratic overhead, not healthcare.
Looking at the profits of the biggest health insurers in 2023, is even more discouraging: “UnitedHealth Group: $22.4 billion,” “CVS Health: $8.3 billion,” “Elevance Health: $6 billion,” and “Cigna Group: $5.2 billion.”
According to a recent report in Axios, “the revenues of six for-profit parent companies making up nearly 30% of total U.S. health spending last year.” But one of the most surprising aspects of this outrageous situation with insurers, is that Senator Bernie Sanders (I-VT), on MSNBC, in a segment about the diabetes and weight loss drugs Ozempic and Wegovy, claims that the reason for their high prices is that the drug company who makes these medications overcharges the health insurers.
Sanders claims that the drug maker, Novo Nordisk, charges insurers more than they offer the same drugs for in some European countries so he is investigating them. While the company does charge more in the U.S., it doesn’t tell the whole story. The drug maker also gives rebates to health insurers and pharmacy benefit managers (PBMs) who are both supposed to negotiate lower prices for patients with these rebates.
But there is no assurance that even if Novo Nordisk did lower their cost to insurers and PBMs, that patients would save. This is because the PBMs and insurers typically take those rebates and pocket the cost savings. In fact, this is why the Federal Trade Commission is investigating PBMs for “negotiating rebates and fees with drug manufacturers that may…impact the costs of prescription drugs to payers and patients.” In other words, PBMs are not passing their cost savings onto Americans.
Or, another line of the FTC inquiry is that PBMs have become vertically integrated, merging with insurance companies and pharmacies. These vertically integrated corporations often demand drug companies offer (secretly negotiated) rebates that if they don’t get, they then deny patients access to those medications. Which means that either the drug companies go along with the shakedown, or they can’t sell their drugs to patients. But again, even if the drug makers do lower their prices and offer even bigger rebates to the insurer or PBM, there is no guarantee any of those cost savings are realized by the patient.
Also from Axios, what the FTC should additionally be considering about health insurers is that,: “Three of them processed nearly 80% of prescription claims last year, one of them is owned by the nation's largest pharmacy chain and one has become the largest U.S. employer of doctors.
Ultimately, if the insurance companies and the PBMs helped to ensure lower drug prices, but are having the opposite effect, maybe someone should do something. Senator Bernie Sanders is chairman of the Senate Health, Education, Labor and Pensions committee, which has jurisdiction to hold the insurers and PBMs accountable. If we really want lower drug prices in this country, putting all of the blame on drug companies is ineffective because of the role insurers and PBMs play to inflate the price of medications.
Of course, I don’t think Bernie Sanders – a member of the Democratic Socialists of America – loves health insurers and PBMs. I believe that he thinks that he can have more success in lowering drug prices by putting pressure on the pharmaceutical industry. But, this punishes the drug company that created lifesaving and life changing treatments like Ozempic and Wegovy, and rewards the middle men who drive up drug costs. This is neither progressive nor the way to lower the price of healthcare in America.
Hank Naughton is the Executive Director of the Centrist Democrats of America
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