By the time the maker of OxyContin pleaded guilty to a federal charge of misbranding the drug in 2007, Purdue Pharma had spent a decade selling opioid prescriptions through commercial health plans. Five years later, with restrictions tied to the plea deal expiring, Purdue saw a new sales opportunity in an "aging population with painful conditions," according to internal company documents. As the U.S. opioid crisis deepened, records show, Purdue sharpened its focus on the federal government’s Medicare prescription program for seniors. Between 2012 and 2013, Purdue deployed an email marketing campaign to healthcare providers, launched new advertising in a long-term-care medical journal, and armed its sales force with patient vignettes to share with doctors. Each effort emphasized OxyContin’s insurance coverage through what’s known as Medicare Part D. "Medicare Part D is the only significant and growing book of business for OxyContin," a McKinsey analysis for Purdue found in 2013. Telling doctors the opioid was covered by Medicare was only one part of the equation. To secure that coverage, Purdue had to negotiate terms with two corporate giants in the Medicare business, UnitedHealth Group and CVS Health. A Barron's investigation—the second in a series on pharmacy-benefit managers, or PBMs—found that Medicare coverage administered by arms of UnitedHealth was a top source of OxyContin sales, at a time when government watchdogs were raising alarms about opioid use and spending in the program. UnitedHealth and CVS wear multiple hats in Medicare Part D. They serve as so-called sponsors of drug plans that seniors can purchase each year. They also operate PBMs, the middlemen that negotiate between drugmakers and insurance companies.
Every country aims to control medical costs, and many wealthy nations—Switzerland, for example—also rely on private insurers to help manage care. What sets America apart is its patchwork system that pits loosely regulated, profit-driven players against each other. The result: enormous administrative waste, uncertainty for patients and little added value. The U.S. spends almost twice as much as comparable wealthy countries, including those with private insurers, on healthcare. Cracking down on insurance companies can only go so far in rectifying the disparity. That is because the bulk of America's health bill stems from the high cost of hospital services, drugs and care in general. Even if we were to eliminate insurer profits, we wouldn't make much of a dent in the high cost of U.S. healthcare. But that doesn't mean the insurance system can't work better. The roots of today's fragmented system can be traced back to a quirk in U.S. history. Unlike most high-income countries, which created centralized government systems to ration care in the 20th century, the U.S. followed a different path shaped by historical circumstances. During World War II, wage controls prompted employers to offer health insurance as a tax-free benefit to attract workers.
Employers are using transparency data to try to slow growth of their healthcare costs, and "the last thing you want to do is start over," said James Gelfand, president and CEO of the ERISA Industry Committee, which represents large employers who finance their own health plans. His group is among the organizations still pressing Congress to act next year. "Congress' failure to act is deeply disappointing, but employers and other advocates will redouble our efforts," Gelfand said. "This will get done." While there are reports that many hospitals are not fully complying with transparency rules, federal regulators have sent thousands of warning letters to hospitals and fined just over a dozen. The rules require hospitals to list the prices they accept from all insurers for thousands of items and services, from stitches to delivery room costs to X-rays. For consumers, hospitals must also provide a list of 300 "shoppable" services, including bundled prices accepted for common services such as having a baby or getting a hip replacement. Insurers in July 2022 were similarly required to list their negotiated prices, not only for care at hospitals, but also surgery centers, imaging facilities, laboratories, and doctors' offices.
Why the higher prices? Hospitals and doctors' offices are paying more for workers, in large part due to labor shortages, rising wages and high turnover. Prices have also been pushed higher by consolidation among hospitals. Over the past couple of decades, the price index for what the Labor Department classifies as medical care—which includes visits to doctors, hospital stays, prescription drugs and medical equipment—has risen roughly 40% faster than the overall pace of inflation. Healthcare tends to rise more quickly than overall inflation because of high labor costs in the sector, as well as advancements leading to new and more expensive drugs and treatments. Demand for healthcare is also increasing as the population ages. The average worker pays a premium of $114 a month out of pocket for their share of employer-provided insurance, or $525 a month for family coverage. Both figures are up roughly 30% from a decade ago.
After a UnitedHealthcare executive was gunned down on a New York City sidewalk, an eruption of bitter online commentary celebrated the killer's presumed motive: avenging the denial and delay of health insurance coverage. Many spoke from personal experience. Every year, health insurance companies deny tens of millions of patient claims for medical expense reimbursements, and the tide of those denials has been rising, according to surveys of doctors and other health-care providers. Insurers also have been increasingly demanding that doctors obtain approval before providing treatment, similar surveys show, causing delays in patient care that the AMA says are "devastating."
Democrats are pessimistic that Congress will enact new rules around the health insurance industry, even as they try to appear responsive to growing calls for reform following the killing of UnitedHealthcare CEO Brian Thompson, whose murder unleashed a torrent of anger on social media against the U.S. health system, and insurance companies specifically. While politicians have roundly comdemned the violence, the apparent assassination has exposed the deep cynicism with which much of the public, on the right and the left, sees the insurance industry.