After months of debating over the merits of a Kentucky drug rebate bill that provides cash rebates for prescriptions written by physicians located in that state, the General Assembly and Governor Beshear finally agreed to implement the program this year. Kentucky is the first state to establish such a program and it’s expected that other states will soon follow suit.
While the bill provides significant benefits to residents of Kentucky, it also comes with a hefty price tag. Let’s take a look at the costs associated with the bill, as well as how the drugs affected by the bill are prescribed. (All drug costs are from the Truven Health Analytics Center for Policy Research)
How Expensive Is It?
Even before implementing the new law, the state’s healthcare system was already among the most expensive in the country. Per-capita healthcare costs are among the highest in the nation, and the state spends more on healthcare than on education. One of the driving forces behind the rapidly rising healthcare costs is the increasing popularity of high-risk medical treatments. For instance, the state-funded cancer programs in Kentucky and other states provide treatment for cancer, but it’s become clear that these treatments aren’t just for cancer patients. Instead, people are being diagnosed with cancer just to take part in the research studies associated with those treatments. Similarly, the rapid growth in the number of surgical procedures and other high-risk medical treatments has driven up healthcare costs. For example, in 2008, the most recent year for which data is available, Kentucky spent over $12,000 per patient on surgery, compared to the national average of $6,000.
The Results Of The New Law
Before 2004, Kentucky did not participate in the Medicare program, but it has since become one of the largest Medicaid expansion states. Enrolling more than 400,000 people in Medicaid, Kentucky spent more than $19.3 billion on healthcare in 2018, the most recent year for which data is available. The new law will provide an estimated $28–$29 billion in Medicaid spending over the next 10 years. While the state is spending more on healthcare than it has in the past, it’s still substantially below the national average.
One of the major goals of the new law is to move the state’s Medicaid population toward a more conservative healthcare plan. The new law will give the state’s Medicaid program the flexibility to use a managed care organization to provide healthcare to its eligible clients. Managed care organizations are insurance companies that provide a coordinated form of healthcare to their enrollees. In most cases, managed care organizations contract with healthcare providers to offer a package of healthcare services to their members. The healthcare providers agree to accept a predetermined amount of money from the managed care organization for providing healthcare to specific group of people. In return, the healthcare providers get to keep a portion of the overall bill.
The Growing Popularity Of High-Risk Medical Treatments
The new Kentucky law will provide big benefits to the state’s healthcare system, but the rapidly rising cost of healthcare is more than just a problem in Kentucky. Across the country, the number of patients undergoing high-risk medical treatments is on the rise. Often, these treatments are completely unnecessary and may even be harmful. In fact, many of these treatments are being pushed by the pharmaceutical industry, who stand to gain a lot from our continued reliance on drugs and medical devices. It’s not hard to see why: the profits from drug sales provide huge financial incentives for pharmaceutical companies.
One such example is the drug Covid-19 test and treatment. While the development of a Covid-19 test has certainly benefited the pharmaceutical industry, the drugs that are being developed to treat Covid-19 have not yet been priced at levels that would make them affordable for the average American. In fact, it will be many years before those drugs are available through conventional insurance programs. Even before Covid-19, drug companies were already profiting from America’s reliance on their products.
Why Do You Need To Know This?
Before delving into the specifics of the new law, let’s take a quick look at why you might want to know more about the rise in healthcare costs. The cost of healthcare looms large over many American’s personal finances. It’s one of the more significant items on a family’s budget and it can be a major source of stress for those struggling with debt. The demand for healthcare continues to grow, even as the costs continue to rise.
Forbes, a popular business magazine, ran an article last year that profiled the healthcare industry’s top 25 trends for 2019. Several of the trends that were mentioned will have an impact on your finances:
- Digital Healthcare
- Personalized Medicine
- Health IT
- Telehealth
- Matching Donors To Patients
- Predictive Analytics
- Remote Monitoring
- E-Health Recruitment
- Genomics
- Expanded HCM (Hospice and Compassionate Medicine)
The availability of healthcare in your state is governed by a mix of federal and state laws. In order to get the best healthcare possible, you need to be aware of the laws governing your state.