Jonathan Blum of CareFirst BlueCross BlueShield gave a great talk on delivery system transformation at the Leonard Davis Institute today. As someone that has worked for the Center for Medicare and Medicaid Services (CMS) on cost-control initiatives and now does similar work for a commercial insurer, he had a unique perspective on optimal strategies for curbing the rise in healthcare spending.
Unsurprisingly, he pointed out that brand name medications are a major driver of rising costs for health insurers (and thus a major driver of rising premiums). For both personal and legal reasons, insurers have a hard time saying no when physicians and patients push for expensive treatments.
Drug companies know this and so they have a extremely strong negotiating position when choosing a price for their therapy. They rightly predict that individual consumers, pressured by glossy advertisements, will demand their expensive medications; insurers will be unable to say no for an extended period of time; and when these costs push up premiums for everyone, this consequence will be so dissociated from its cause that it will lose emotional salience to the general public.
Continue reading “An insurer’s perspective on healthcare costs”