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Shortsightedly, the Inflation Reduction Act Caps Out-of-Pocket Drug Costs

11/29/2024 12:00 AM

Shortsightedly, the Inflation Reduction Act Caps Out-of-Pocket Drug Costs.

Sounds great, but this is a really, REALLY bad idea.

Introduction

Today we are going to discuss the Inflation Reduction Act.  On October 22, 2024, the US department of Health and Human Services (HHS) published an article titled “Biden-Harris Administration’s Inflation Reduction Act Saves Medicare Enrollees Nearly $1 Billion in Just the First Half of 2024.”  We will discuss what this means, and what the consequences are to general health and finances in the US

The Problem

Let’s dive into this article and what we should think about this piece of legislation.

Politics

First, HHS is, or should be, apolitical.  The very title of this article is offensive and designed to persuade the reader that Biden and Harris should be praised for saving Medicare enrollees nearly $1 Billion.  HHS is a science-based agency and anything that advocates for a political party or candidate is wildly inappropriate.

Unintended Consequences

Paved With Unintended Consequences | Hoover Institution Paved With Unintended Consequences

Government doesn’t and shouldn’t do anything.  The preamble to the Constitution states this new government should

Nowhere does it state “cap the maximum out-of-pocket expense for Medicare patients.”   In fact, government interference in business has any number of unintended consequences.

Boeing Oversight

The government is supposed to be overseeing what Boeing produces, a job they contracted back to Boeing causing the door to fly off and the software crashes that killed hundreds.

Rent Controls

The Brookings Institution took a look at rent controls in various urban centers and concluded

“Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood.”

CAFE and Car Sales

In 1975 the government enacted Corporate Average Fuel Economy (CAFE) in the wake of the oil crises.  It states that the average fleet fuel economy must be what they mandate.  Because trucks were considered to be for working individuals, like electricians and plumbers who used them for small business, they were exempted.  This had the unintended consequence of incentivizing the rush toward trucks weighing over 6000 pounds.  In case you were wondering, trucks don’t get very good mileage, the exact opposite of the intention of this bill.

Simple Corruption

Milk regulation in Montana should be sold in 12 days of pasteurization. 21 days is standard.  NPR did a story about this and concluded that this is pure protectionism for the fifty or so milk producers two milk processors in Montana. One of these producers, Greg Hertz, is a member of the state government.  Go listen to the audio in the link. For your information neighboring Idaho has 12% lower price.

Healthcare.gov

Finally, let’s look at the debacle with healthcare.gov.  What you don’t realize is that all those policies are nothing more than a way to funnel money through the government and the insurance companies are really in the business now of squeezing it hard enough to make profit.  This is one reason I say that government can’t do anything.  Look at the site itself.  It is “written” in WordPress, a wholly unsuitable platform, using tens of thousands of “programmers” and billions of dollars, crashed due to poor planning and didn’t work correctly for months.  

No, keep government as far away from everything as possible.

Raising the Price for All

The article states that 1.5 million saved ‘nearly $1 Billion.’  The article doesn’t state where the money comes from.  Since it has to come from somewhere we assume it comes out of the premiums the rest of us pay for our healthcare.  The premiums you pay for healthcare.

Where the Money Doesn’t Go

There is a lot of negativity about ‘Big Pharma.’  Let’s look at what really happens though.  These manufacturers produce.  They produce a lot.  

“…the US leads in the discovery of approved drugs, by a wide margin (118 out of the 252 drugs). Then Japan, the UK and Germany are about equal, in the low 20s each. Switzerland is in next at 13, France at 12, and then the rest of Europe put together adds up to 29. Canada and Australia put together add up to nearly 7, and the entire rest of the world (including China and India) is about 6.5, with most of that being Israel.”

Go read the linked article.  It is fascinating.  If we curtail the profits of these manufacturers, new treatments evaporate.  Without these new, innovative treatments, health suffers all over the world.  You can say what you want about the systems and the profits of the pharmaceutical companies, but they work, and work better than anything else in the world.

The Solution

The solution of course is to streamline and automate processes.  Take business mostly out of the medicine.  Sure, pay the smart people, the scientists, to do what they do, but cut out the MBAs, bankers and financiers who don’t actually contribute anything to the solution and do consume valuable resources.   This is where Sentia comes in.  We streamline and automate processes and have even partially automated the production of new software.  No, this is not AI, AI isn’t even really a thing except marketing in the same way blockchain, big data, and the dot com gold rush were.  We are like BASF.  We make the products you need better, faster, easier and cheaper.  Our main goals are

The way we accomplish this just like anything else: break the larger problem down into manageable chunks, then solve the problems of those chunks.  The idea is to produce an Electronic Medical Records System (EMR) that is then vended by our new insurance company.  This is provided free of charge to the practitioner.  More on that later.  When the practitioner uses the EMR to document a patient encounter, we, the new insurance company detects new procedures and pays for covered procedures in real time.  That’s it.  No medical coding, no claims adjudication, no negotiation, no denials, just a fast, easy payment.  That saves you money because as the insurance company, we provide the coverage on a cost plus basis.  The cost is the actual risk incurred by the individual based on smart people called actuaries telling us what that cost will be on average.  To that we add a $10 per month maintenance fee to manage the data.  That is it.  There are some discussions to be had around insurance fraud, patients who require millions of dollars of treatments per year and that kind of thing, but we have thought about and solved those problems.

The Numbers

Cutting out all the monkey motion endemic with the old, legacy insurance companies should save the average consumer 47% on his or her insurance.  That is correct, legacy insurance only returns 53% of your premium as benefits on average.  Further, there are more savings to be had.  If the EMR is provided for the practitioner we would see these average savings:

If we eliminate medical coding with out new paradigm, we see these savings  

If we turn compliance and efficacy reporting into a one click report, we see these savings

These savings are over and above the 47% we quoted above and if totaled up look like this

All these numbers are collated and explained, with references in our substack article “Ancillary Costs That Drive up the Bill for Healthcare.”  This all points to the fact that medical finance is being done absolutely wrong.  The only way to fix it is to streamline and automate the whole thing.

The Execution

Doctors aren’t the best at seeing holistic solutions.  They go to medical school and intern for 10-15 years and are indoctrinated on HOW TO DO THINGS, writ large.  That is fine and doctors are great at what they do, but these aren’t those kinds of problems.  Every doctor, everywhere, every time will say “what I do is different and can’t be automated.”  Maybe, probably not, but maybe, but we aren’t talking about actually dispensing care, we are talking about documenting it.

There are no Specialties

If you are a Ferrari mechanic, you may not know how to work on a Maserati.  You are a specialist, nay, an artist at your craft.  We are not talking about art however.  We are talking about documentation.  If your Ferrari needs a water pump, the service writer at the Ferrari dealership writes “leaks water and overheats.”  These are symptoms.  The Ferrari mechanic diagnoses that the car needs a water pump, and them performs the water pump procedure.  This procedure is different from the procedure the Maserati artist performs, but the documentation is exactly the same.  Substitute your healthcare for that process and you find amazing similarities, including that you do not need a specialized EMR for the practice.  That also means that we should be able to design and build an EMR that only has one ‘specialty’ and one code set.  Since there are about 135 specialties, that would make this EMR 135 times faster to code, and make it sustainable and maintainable.  

For example, you don’t have an engine documentation system and a transmission documentation system, and a differential documentation system, so why in the world are medical documentation systems written this way?

We discussed this in my article on substack entitled “You Don’t Need Specialties in Medical Records,” in detail and with documentation

There are No Codes

We talked about medical coding earlier.  The only thing medical coding does is to make it easier for the insurance company to deny your claim.  They see a CPT (go look it up) code and know what that is and can and do just deny it with no other adjudication.  The practice, meanwhile, has spent its collective time and resources doing the procedure documenting the procedure, paying a medical coder to translate the procedure into code the dumb insurance companies can understand and an office staff to fight with said insurance company.  In reality there are no codes.  This is a construct the insurance company made up to make their own lives easier, sloughing off all the difficulties onto the medical professionals.  Luckily, the smart people at the National Institutes of Health have come up with a universal medical language system, called oddly enough, the Universal Medical Language System that assigns discreet, structured values and definitions to anything can be measured or done to a human body.  Only with this universal diagnostic definition set can we achieve interoperability and easy transfer of medical records between systems.  The UMLS is a database (or should be, they send you a list and the importing to the DB is left as an exercise for the student) including SNOMED_CT (the Systematic NOmenclature of MEDical (and Clinical) Terms(a suite of designated standards for use in U.S. Federal Government systems for the electronic exchange of clinical health information), RxNorm (normalized names for clinical drugs and links its names to many of the drug vocabularies commonly used in pharmacy management and drug interaction software) and VSAC (Value Set Authority Center(a repository and authoring tool for standard lists of codes and terms from biomedical vocabularies)).  These document, as mentioned, everything that can be done to a human, including drugs, and also include over 180 different medical nomenclatures, like Epic and Cerner, allowing the user to easily translate between UMLS and any other source of data or between any two disparate sources.  The best part is that the documentation is all written in such a way that it is all self-referencing, meaning that if you figure out how to use one, you’ve figured out them all.

Notice that nowhere in there did we talk about codes or coding.  You don’t need them.  I detail and document all of this in my article “What medical Software Companies are Doing Wrong” on substack.

Adoption

We have discussed the benefits of the new EMR and its new insurance company.  What we really need to do is to completely take over medicine and here is our plan to do that.

First, we have to apply these kinds of efficiencies to all aspects of dispensing medicine.  To do that we need to add these additional modules:

You can see this list in my article “Changing Healthcare, a 15 Minute Explainer” on substack.

Once we have complete control of the medical industry, or at least a small portion of it, proving our concept, we can then turn our attention to the cost of drugs.  To do this we apply the same principles to drugs that we applied to medicine in general: cut out the bankers.  They are worthless, only gum up the works and are INCREDIBLY expensive.  There are 300,000,000 people in the US.  With each of them paying us $10 each per month, that puts $36 Billion per year in our pockets.  With the software written, we can use that money to build facilities, and hire the smart kids that come up with the drugs and double their salaries.  That leaves the bankers, financiers and MBAs, with a company that has no product.  We then start our own Pharmacy Benefits Manager (PBM) either as part and parcel of the insurance company/EMR or for a tiny additional charge, like $2 per month and let the smart people go be smart and let them and you have the benefit of their own labors.

       

Conclusions

We have shown why it is not bright to limit payments from Medicare consumers.  We have shown a way to achieve better results than just throwing taxpayer money at the problem.  We have described a system that will produce these better results. We have already built this system and it is in prototype at this very second.  For those of you in the cheap seats, I’ll say that again: we already have this system in prototype and can show it off.  

We have shown a way to  reduce the cost of health insurance by far more than half.  Then, we will be not only the cheapest medicine in the world, but also the best.  We already have the best doctors and the best equipment; we just need to implement the above detailed framework to give them all the tools necessary for success.

We have this system in prototype now, fully functioning. 

Contact us here or on our site and we will be happy to provide a demonstration of the fully functional prototype.

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We have built a comprehensive health information system to keep the patient healthy and on the right track with the ability to incentivize healthy living.  Implementing this system should be fairly simple and will completely revolutionize the way healthcare is paid for, saving countless lives.  We have shown a way to use this system to make the best healthcare system in the world also the most efficacious and the most affordable, and a way to move toward value-based care.

 



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