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Transcript: Sutherland’s Congressional Series event with Rep. Ben McAdams and visiting scholar William Smith

September 9, 2019

The following are unedited and electronically transcribed remarks delivered by both Rep. Ben McAdams (D-Utah) and William S. Smith, Pioneer Institute’s visiting fellow in the life sciences, during the event Reining in the Cost of Healthcare 

Watch the full event here.

Rep. Ben McAdams: Well, first of all, thank you, Rick Larsen and the Sutherland Institute. It’s great to be with you today. I just wanna thank you for what the Sutherland Institute provides here in our community, the civil dialog, from my principled perspective, a perspective that sometimes I find myself in agreement with, sometimes in disagreement, and always trying to find common ground. And I wanna particularly thank you for, over the summer, for bringing Arthur Brooks to Utah. While I was in D.C. and wasn’t able to attend, I followed the media coverage and was so pleased to read his book, “Love Thy Neighbor,” which is informing my style and approach that I take in Washington. And similar to the quote that Rick shared with us, Arthur Brooks said that, “What we need in Washington is not less disagreement. What we need is better disagreement.” And I think that’s completely accurate, and I think that’s true of the Sutherland Institute.

I’ve been in public service in Utah for about 10 years…well, actually starting as representative of Salt Lake City, not as an elected official but working for community affairs for Salt Lake City, and then later was elected to the state Senate and then as county mayor. And when I was working for Salt Lake City, had the opportunity to sit down with a group of five people, including a representative of the Sutherland Institute, where we crafted the Utah Compact, a document that has become known nationally for the Utah approach to compassionate, sensible immigration reform, and I think serves today as a model for how we can approach immigration reform at the federal level.

I will also add a disappointment that a decade later, we are still talking about it as a model and an aspiration, not as something that’s in the rear-view mirror of something we have accomplished at the federal level. But thank you, Sutherland Institute, for that.

I also wanna recognize that in Utah, if you’re wanting to craft sensible public policy, Sutherland Institute has always been, and should be, on the places to visit for Utah public officials, Republican or Democrat. And I’m reminded of a conversation I had when I was working on a different issue and came to meet with the Sutherland Institute. We were going through the specifics of the issue. I was looking to find common ground. As a Democrat in Utah, you’ve gotta be really good at building alliances and building friendships and looking for compromise. And I’ve more often than not been able to do that with the Sutherland Institute. But I’m reminded of this one instance where we were meeting and I finished the presentation, and they said, “We wanna commend you for coming and meeting with your staunchest opponents to discuss this issue. Thank you for that.” And I said, “It’s my hope that we won’t be staunch opponents, but we will find an area to compromise and to move forward.” There was a pause…it wasn’t Rick. There was a pause, and the response was, “Well, staunch opponent is probably a better word.” So it goes in policy making and public service. But always willing to engage and have civil conversation. So, thank you to the Sutherland Institute.

And thank you for hosting this congressional speaker series and for including me. It has been a delight to follow the media coverage about this congressional series and learn what my colleagues are also working on as a resident, a citizen of the state of Utah. And for all of the citizens of the state of Utah, it’s such a unique and important opportunity to hear from our elected officials. I appreciate the chance to have a thoughtful, more in-depth discussion about some of the issues that we are working on today. I think we need more of this type of dialog as we search for common ground and as we search for a way forward on complicated questions that confront Utahans and confront our nation. Again, what we need in Washington is not less disagreement, but better disagreement. And I see this congressional speaker series as part of better disagreement that leads us to solutions.

For me, I think it doesn’t get more complicated than the issue of the high costs of health care and how that affects individuals, how it affects families, businesses, tax payers, our economy, and the state and federal governments. A recent column from Drew Altman, a health care expert at the Kaiser Family Foundation, led with this observation. He said, “Buying a new car every year would be a very impractical expense,” although I see Greg Miller here. He may disagree.

Man: Some would argue with that.

McAdams: Yeah, some would take issue with that. Thank you to the Miller family, also. He said, “Buying a new car every year would be an impractical expense. It would also be cheaper than a year’s worth of health care for a family.”

So as we look…and we want strong families and we want our families to be financially sound, resilient, and self-reliant. And yet, the high cost of health care is the equivalent of buying a new car and paying it off every year. He also notes that health care for a family covered by a large employer cost, on average, $22,885 last year. That would buy you a Ford Focus, a Toyota Corolla, or a Hyundai Sonata. About $15,000 of that comes from employer contributions to employee premiums. Workers will chip in an average of $4,700 per year in premiums, and another $3,000 out of pocket. Combined, that’s almost four times more than the average family spends on gas every year.

A May 2019 Gallup poll puts health care costs at the top of the list of family financial problems. Seventeen percent named health care, followed by lack of money, or low wages, at 11%. That’s more startling when you consider the good economic times and low unemployment levels we have right now. We are in a time of prosperity, and our families are struggling to pay for their health care. According to the poll, the older you are the bigger the concern becomes. Twenty-three percent of those individuals 65 and older say that health care costs are the biggest problem for their families’ finances. The high cost of health care is an issue that I hear about everywhere I go, whether it’s a poultry farmer in rural Utah or a mom sitting at her kitchen table in Sandy. Everyone is affected by having access to affordable, quality health care.

 A recent Deseret News poll showed that more than half of Utahans are worried about paying for health care, and 77% said that the health care system in America needs to change. What I hear from Utahans is that they want fair prices for their medication and fair prices for their health care services. They also want to be able to comparison shop, which requires more transparency in our health care. They want to choose their own doctors. They don’t want to be blindsided with huge, surprise medical bills. Health care is an incredibly large part of our economy. Americans spent $3.6 trillion on health care in 2018, including premiums, out-of-pocket costs, and taxes. To put that in perspective, $3.6 trillion is about the same size as Spain and Canada’s entire economies combined. It’s more than $11,000 per person, per year here in the U.S.

An alarming fact is that the U.S. health care spending is growing faster than the broader economy. So it is outpacing economic growth, which means more money is taken out of people’s paychecks to pay for a system that both worries and frustrates patients. America also spends about twice what other high-income nations do on health care. But at the same time, some of our outcomes, like life expectancy and infant mortality, they lag far behind other countries. We are paying more and getting less in many instances. So why is that? The lead author of one study from the London School of Economics points to, one, administrative complexity, two, higher drug prices, and three, higher prices for many aspects of U.S. health care overall. 

So, between 2010 and 2026, prescription drug prices in the U.S. are expected to increase by 193%. That’s over a 16-year period. The author of that study also highlighted the lack of price transparency across our system, and that that is a contributing factor to the high price of prescription drugs. Some in the Democratic Party, specifically some running for president, point to that and say, “Let’s throw out the existing system of private insurance and replace it with ‘Medicare for All.'” Most are somewhat vague about how much that would cost and how it would be paid for. To be clear, I do not support Medicare for All. I think I just upped your social media engagement too, with that comment. I think it would be incredibly disruptive, for starters, and to throw 170 million Americans off their current private health insurance. But let’s see what voters think.

The Kaiser Family Foundation’s director of polling and survey and research conducted six focus groups in three states, in Texas, Florida, and Pennsylvania. These are states that oftentimes decide the outcome of our presidential and national elections. Each had 8 to 10 people who vote regularly and said that health care will be important to their presidential vote in 2020. When asked what they knew about Medicare for All, few offered any description beyond, “Everyone gets Medicare.” When asked about the repeal of the Affordable Care Act, almost all said that Republicans did not have a plan to replace it. When voters in the groups were read basic descriptions of proposals to expand government coverage, many thought they sounded complicated and like a lot of red tape, something that government’s very good at. They also worried about how such plans might strain the current system and threaten their own ability to keep seeing the providers that they like and providers they trust. Finally, most did not see current health reform proposals as solutions to their top problems: paying for care, or navigating the health insurance system and red tape.

So, switching to the issue of what we have now and how to improve our current system, I was the only member of Utah’s House delegation to vote to oppose the administration’s backing for the courts to overturn the Affordable Care Act. Such a decision to eliminate the ACA would have devastating effects, particularly for everyone who now gets coverage despite a pre-existing condition. More than 1 million Utahans have a pre-existing condition, including 218,000 children. And when I say that I hear about health care very frequently, probably the most frequent concern that people raise is a pre-existing condition that afflicts a loved one or family member, and fear of returning to the old days where people with pre-existing conditions are not covered. And how devastating that is, not only to somebody’s life, but devastating to a family and a family’s stability and finances. So no doubt, if the ACA were suddenly gone, hundreds of millions of Americans would be denied coverage in the future or, at the very least, face incredibly higher premiums. So no doubt, the debate will continue on how we cover people and thus ensure that they have access to health care, not only physical access but access through health care that’s affordable.

As a practical matter, I’m working towards fixing the flaws in the Affordable Care Act and making it work better. I want to acknowledge that the Affordable Care Act, while it’s solved some of our biggest problems in health care, there are problems that it did not solve and other problems that were created. And I believe we need to come together, Republicans and Democrats, and work to fix the system that we have. It’s rare to see both parties in Washington and both the legislative and executive branches working together and agreeing on anything. But the silver lining to the public’s concern about the high cost of prescription drugs is this, all sides are talking about doing something to address it, to address the high cost of prescription drugs. Some in Utah are doing more than just talking about it.

Prescription drugs play a critical role in helping to prevent, manage, and cure various conditions and diseases. Drug costs and drug shortages prompted the American Medical Association to drop a policy declaring…to adopt, I’m sorry…prompted the American Medical Association to adopt a policy declaring, “Drug shortages are an urgent public health crisis.” And in response, Utah’s own Intermountain Healthcare has launched a nonprofit company called Civica Rx to ensure that essential generic drugs used by hospitals are available and affordable to everyone. This is the private sector stepping in to solve a critical health shortage. Civica Rx, this project and venture of Intermountain Healthcare, today reached its one-year anniversary. Congratulations.

That new nonprofit, what they’re doing is offering long-term volume certainty to manufacturers and increased competition for older generic drugs. It’s already announced two drugs that it will manufacture to offset shortages, one that has recently shipped. Two commonly used injectable antibiotics. That project and Civica Rx and those generic drugs that they are manufacturing and shipping will help save lives and get people out of the hospital more quickly. I’ve co-sponsored and voted for two bi-partisan bills to help lower the cost of prescription drugs. One is called the CREATES Act, or HR965, which would ensure that generic drug manufacturers get access to the samples that they need to develop competing drugs. Senator Mike Lee is the lead sponsor on this bill in the United States Senate. The other that I’ve co-sponsored and voted for is the BLOCKING Act, HR938, to help ensure generic manufacturers bring their products to market rather than delay their products in favor of competition. Generic drugs are less expensive than the brand name equivalents and can mean substantial savings for patients.

There’s also a prediction that a Senate bill co-sponsored by Senator Charles Grassley of Iowa and Senator Ron Wyden of Oregon will pass the Senate before the end of the year. It would limit the out-of-pocket cost for seniors and Medicare’s Part D prescription drug program to $3,100 per year. The bill would also force drug companies to pay Medicare if they raise drug prices faster than the rate of inflation. The bill passed with a bi-partisan majority out of committee. Senator Grassley has also said that President Trump supports the bill. I’m looking forward to reviewing related House legislation to address some of the issues with Medicaid Part D very soon.

In addition to protecting pre-existing conditions and people with them, I’ve worked to strengthen our existing health care market. I support a bill called the State Health Care Premium Reduction Act, HR1425, to create a permanent federal reinsurance program. So, this creates a permanent federal reinsurance program. Reinsurance is insurance for insurers, or large companies that want to protect themselves against very large losses. So, it helps to further spread the risk of spikes in coverage. So, for companies that provide, for example, insurance to individuals through the ACA marketplace, reinsurance can help them to protect against very high cost enrollees whose claims reach into the hundreds of thousands or even millions of dollars.

Reinsurance would help to reduce the pressure to increase premiums on everyone in order to cover the risks of those extraordinary high-cost cases. Many states have already launched reinsurance programs with bi-partisan support and have successfully lowered individual market premiums. In Maryland, for example, Republican governor Larry Hogan promoted a reinsurance program that resulted in 2019 premiums that were 13% lower, on average, than 2018 premiums. I’m a co-sponsor, along with the rest of Utah’s House delegation, of HR2328, the CHIME Act, which reauthorizes Community Health Centers Fund and the National Health Service Corps for an additional four years.

Many, many low-income Utahans, as I know from my time as the mayor of Salt Lake County, they still struggle to see a health care provider in a timely manner or to get preventative services for their children. Investing in community health centers helps with access to preventative care and allows them to stay healthy, to miss fewer days in school or at work and to keep small problems from becoming big problems and emergencies that send them to the hospital. In the same preventative vein, I’ve signed on to a bill with my colleague Chris Stewart to raise the age to purchase a tobacco or vaping product to 21. Tobacco is an addictive drug, and using it causes serious illness and death, as we know.

Health care costs in Utah alone related to tobacco use are almost $550 million per year. Nearly 90% of smokers first try a tobacco product by the age of 18. But if someone has not started tobacco by the age of 26, they are likely to never start. Utah has been a leader in this. Representative Steve Eliason championed a bill that successfully passed the state legislature, and the rest of the country should follow Utah’s lead. Now, I know that it won’t stop all youth and young people from starting tobacco, but the less successful it is, the more successful we will be in reducing tobacco use.

At a time when we’re all worried about rising health care costs, this is a common sense step to take to prevent illness and the associated costs of treating people with smoking-related diseases. More than 34 million people in the U.S. still smoke, and tobacco use costs our country approximately $175 billion in direct medical costs annually. Reducing smoking will reduce the cost of health care for all of us. I’m also working to strengthen the development of Utah’s care provider workforce. Nationally, we’re facing shortages of doctors, particularly in rural areas and in primary care. I’ve been an advocate for programs at the federal level that support training such as the Nursing Workforce Program and the Children’s Hospital graduate medical education program. And thanks in part to the Affordable Care Act, only about 10% of the U.S. population lacks health care coverage today. Though, through the hard work of former Utah senator Orrin Hatch and others at the state level, we’ve also done a good job of ensuring that the children of hard-working, low-income parents are covered under the Children’s Health Insurance Program.

Medicaid coverage, Medicaid expansion, will provide coverage for thousands of low-income, single adults in Utah, as well as more children and pregnant women. I am a strong supporter of the state moving forward with Medicaid expansion, as approved by the voters last fall. So, to summarize, cost of care for some communities such as rural areas and quality of care remains challenging. Forty-three percent of all insured Americans said in 2017 that it was difficult to pay their medical bills before their deductible kicked in. These are real cost issues that families are struggling with today. They don’t have the luxury of waiting for a partisan debate over health care that does nothing but reinforce gridlock in Washington.

As a former mayor myself and Utah state senator, my experience has taught me that our different backgrounds and perspectives make us stronger when we harness our differences for the benefit of Team Utah. I’m committed to working for bi-partisan solutions that will move forward the debate and will result in meaningful action towards making affordable, quality health care available to everyone in our country. I’m a proud member of Team Utah, and I’m working to heal a broken Washington and find common ground solutions to our challenges. Thank you.

Rick B. Larsen, Sutherland Institute president: So, we’ll spend about 15 minutes…

McAdams: Great.

Larsen: …taking some questions. Again, if you’ve written anything on a card, please hold it up and a staff member will be coming by. While those are being collected, Congressman, can I have you comment on something? I think you did…well, I know you did the interview. I think it was with the Salt Lake Tribune editorial board, where you made the comment, “Coverage is only a piece of the puzzle. Access is the better goal.” Would you expand on that a little bit?

McAdams: Yeah, I think…you know, and that was in reference to “The Salt Lake Tribune” asking me about my position on Medicare for All, and my concern is that many people see this as the panacea that will solve all of our health care problems. And I wanna point out that I have grave concerns about throwing out the existing system and coverage for 170 million Americans for a system that I don’t believe is capable…while Medicare works for a lot of people, I don’t think it works for everyone. And so, an example that I give, I was recently touring Intermountain Healthcare with a colleague of mine and looking at their telemedicine and the innovations that have happened in telemedicine. Now they are taking high-quality health care to rural Utah in innovative ways that increase the quality of care that they can receive, allow them to receive that care close to their support network, their family, their faith groups that support them, and receive it close to home versus getting transported here to the Salt Lake Valley to receive health care. That is an incredible improvement in quality and also an innovation that ultimately probably makes our rural hospitals economically viable so we can continue to provide those services there.

My fear is that, while through a Medicare for All approach, we may guarantee that everybody has coverage, that doesn’t mean that we will continue to have access, innovation, and quality improvements that the private market continues to bring. And I will acknowledge that I’m a bold and proud capitalist. And I will also acknowledge that our system, while it has created the greatest country on earth and been copied around the globe and lifted millions of people out of poverty and into middle class and opportunity, we also, that system has its flaws and it’s left people behind. And we can work to fix that. But it also has cured diseases and improved health care for millions. And so, to be cognizant that while you may have coverage through a Medicaid plan, that doesn’t mean you will have access to the health care services that you need in a timely fashion.

Larsen: Thank you. That actually tees up this next question, in a way. So, in the policies world, you hear people referring to other models of health care, sometimes without a full understanding of those other models. I’m talking about around the world. If only we had health care like…name the country. Are there lessons to be learned from the health care models in other nations? Or do they stand out?

McAdams: Yeah. Certainly, there are lessons to be learned. And we should always be evaluating what has worked in other places. But we should also recognize that there are pros and cons to any system and that we are unique as a country. I served an LDS mission in Brazil where there is universal access to health care, and it’s also not very high-quality health care. And there is a second health care system that you can buy into that’s much more expensive. I think that one of the things…a service that the United States has provided to the globe is the incredible investment in medical research and the innovations and technologies that we’ve developed. One of the things that I want to see, though, is that when U.S. companies develop treatments and even cures for diseases, that…oftentimes, they recoup the cost of that research through the cost of the prescription drugs…that American health care consumers are treated fairly and equally with health care consumers in other countries, that we are paying an equal share and we’re not subsidizing treatment in other countries through our research and development.

So, there are plenty of things we can learn from other countries. We should always be looking. Our system, as I said, we have some serious flaws with our health care system. People are not satisfied with the current system. We also have some incredible strengths. We should look at what we can learn from places around the globe, but we also need to recognize that we are doing some amazing things, especially in the realm of medical research and development right here in the United States.

Larsen: Your position on health care tees up this question well. And the author of the question made the point this is not a combative question. It’s a real question. Why does the government need to play a role in health care? What are the pros and cons? Where is it necessary? Where isn’t it?

McAdams: So, in my experience in government, limited experience at the federal level, but six years as the mayor of Salt Lake County, I think there are things that government does well and things that government does incredibly poorly. I’m, as I said, a proud capitalist, a believer in free enterprise and free market system, recognizing that that system sometimes goes and behaves in a way that may be undesirable. Government can come in and make sure that there are appropriate and safe guardrails on that free enterprise system. So, an example that I would give is I do support a free market health care system. That system also results in a world where an insurer can deny coverage to individuals with pre-existing conditions and undercut the cost of their competitors by doing so. So, you create a race to the bottom.

So, what happened with the Affordable Care Act is we came in and said… You know, my wife and I, we have four kids, and we’re generally pretty healthy. So, as a…now, not necessarily that I would do this, but an American health care consumer that’s maybe pricing for health care would look and see that this plan is cheaper for my family. Maybe the reason it’s cheaper is it doesn’t provide coverage for pre-existing conditions. But consumers are gonna go to the less expensive plan and it crowds out, and you have a race to the bottom. It crowds out other plans that would maybe provide some of that coverage.

So, I think the government stepped in appropriately so and said, “We’re gonna place a guardrail on our health care system that does not allow an insurer to deny coverage based on a pre-existing condition.” I think that’s an appropriate role of government. Also, in my experience, government isn’t always the best…while government can set some of the ground rules that we all should play by, I don’t think government is the best provider of a service. We are slow to respond to trends. We are slow to execute on new research and information. We’re slow to change. We are slow to heed what data and evidence would tell us. And I think government is oftentimes more persuaded by anecdote than data. And I think there are inherent strengths in government. There are inherent weaknesses. We should look to take advantage of the strengths that we have and what we can provide to a marketplace, but also recognize our weaknesses. And that’s where a strong and robust private health care market, I believe, is in the best interest of all health care consumers. 

Larsen: Thank you. Is health care a right? 

McAdams: I think health care is fundamental to quality of life. Health care and access to health care is fundamental to family stability and family peace of mind. I think it is fundamental to economic prosperity. So, whether or not it’s a right, I think it is in the best interest of a civilized society to make sure that individuals have access to high-quality health care so they can focus on being prosperous and stable and giving back to communities. Strong societies are comprised of healthy people. 

Larsen: Okay, thank you. This is an interesting question. You know, a lot of people listening to debates, especially partisan debates, are wondering what happened to personal responsibility. So there’s no doubt, and you cited one really good example, that personal behavior can impact health. And yet, those personal choices become an overall expense to everyone. Where should the guardrails be? Where are people responsible for their own behavior? Take tobacco, for instance, and the consequences of that. And when should they live with the result of their own choice as opposed to being taken care of at great expense? 

McAdams: Well, I think that is a part of the conversation that’s missing from the health care debate. We have a system right now that I think primarily…I’m gonna give an example of my time as mayor and what we did. But when I was elected mayor, we had our traditional health care system where you pay a copay and you go and you can receive health care services. But we had a high-deductible plan. And if you’re on the high-deductible plan, it was gambling, essentially. If you were healthy and thought you were gonna be healthy for the next year, sign up for the high-deductible plan. You can save a few thousand dollars. But if you predicted poorly, one of your children got sick or you had an illness, then you lost $5,000. And I didn’t like that plan as an employer. As the mayor of Salt Lake County, we had several thousand employees. We want our employees to focus on doing their jobs well and working hard and not having the risk that could throw their entire life out of balance.

So, I went to my HR team and said I wanted to revamp our health care. We also were seeing, by the way, at the county, health care costs were increasing annually by about 15% to 20% per year. And when revenues were increasing by 1% to 2% per year and our health care costs were increasing by 20% per year, it was eating up our ability to do other core services that the people wanted us to do: cutting grass in parks, plowing snow, fixing street lights. And you have to spend more on the health care of your employees. And so I said, “Something’s not right with our health care.” So we revamped and came out with another plan. We had a high-deductible plan that wasn’t gambling. We paired it with a personal health savings plan. And the county was gonna contribute a lump sum annually into our employees’ personal health savings plan. We predicted we’d have health care savings down the road, and we’d take a portion of those savings and put it into a health care plan. 

So, I’ll give you a personal example. We were on the original plan when I first was sworn in as mayor, and one of my sons got hurt and needed stitches. So I rushed into the emergency room, paid a copay, and he got stitches. Then we switched to this high-deductible plan with a personal health savings plan. We had money in the account that my employer had contributed. But if I didn’t spend it, I kept it in the health savings account that would build up over time. And eventually, if we had built up, it would be some retirement income for us. So, another child got injured, and my wife said, “Before you go to the emergency room, I wanna see if there’s a clinic nearby, because the emergency room’s gonna ding us pretty hard out of our personal health savings plan. Do we have another option?” She found a clinic. She said, “It’s just an extra 10-minute drive.” The cut wasn’t that bad. He did need stitches, but it ended up being five stitches. She said, “Here’s a bag of ice. Go to the clinic.” We went, and we saved a couple thousand dollars, personally. The county also, by the way, under this approach, saved money. 

So, personal responsibility, I think, has to be part of it. We have to instill in the individuals a reason to care about their health care. Rather than just taking what comes to them, you know, because we had a personal financial incentive, we became informed about our health care. We would ask a doctor if there was a generic available that would be adequate instead of a name brand. We would price compare with other providers and look for the lowest cost option that would get us what we hoped for in our health care. We became smart consumers of our health care. Salt Lake County, by the way, saw our health care annual costs go from a 15% to 20% increase per year to about a 5% to 6% increase per year. So, we were saving tax dollars. Employees felt they had more choices in their health care. 

And that system…we talked at the federal level a lot about increasing transparency. I believe we need to do that. But if we increase transparency and the consumer has no reason to care if it’s transparent or not or no reason to look for the lowest-cost, highest-quality option, then transparency will do very little. So, I think we do need to inject into it personal responsibility. And that would also get to, you know, I will then know if I give up smoking, if I exercise, I also will save money for myself. And we just don’t have a system…even the private market system we have right now does very little to encourage personal responsibility and encourage people to be smart consumers of their own health care. 

Larsen: Thank you. So, as if health care isn’t a thorny enough issue, let’s combine it with another thorny issue. Is there any legislation you’re aware of that’s working to lower the cost of education for medical doctors? And I would add, is that a viable idea? Too many doctors enter their practice with more than $400,000 in debt which eventually trickles out into the cost of health care to the public. 

McAdams: That is a great question. I’m not actually aware of any legislation. That doesn’t mean there isn’t any. But I’ve heard of some innovative ideas about the cost of medical education. And, you know, as a student myself, I’m not a medical student, but beneficiary of low-cost loans and Pell grants that helped me to complete my college, and I’ve more than paid back that financial assistance that I received in college. And, you know, that’s something I’d like to look at, the student loan grants and also…especially in some of the areas…there are some existing programs right now that assist with student loan repayment for individuals, for example, who practice rural medicine. And so it’s something that I think is part of the equation for sure…part of the solution. 

Larsen: This is a targeted but interesting question. Will the bill to raise the smoking age to 21, does that include military posts and bases? I know there are issues with gun ownership, smoking, all kinds of things that are a little different on base than they are for the younger enlisted person off base.

McAdams: Yeah. My understanding is that it does, and I’d have to go back and refresh my memory on the specifics of the legislation. But my understanding is that it applies to all sales. 

Larsen: Sorry, a couple of these questions are lengthy. They’re good questions. How can we balance competition in health care markets, ensuring that protecting both access and affordable coverage? This kinda goes to the free market side of balancing competition. So, the question isn’t about government weighing in, it’s how do you balance competition in the markets? Since we’re advocating for a market approach, where’s the balance between cost and access? 

McAdams: So, I’m gonna answer that in the context, maybe, of prescription drugs because I think we see that playing out. And I wanna acknowledge there are some times where…and I’ve seen this in my service, the best of intentions sometimes have the worst consequences. And sometimes, the best of intentions have good consequences and unintended negative consequences at the same time. But an example being the cost of prescription drugs, we hear horrific stories about high cost of prescription drugs, individuals who are paying $100,000 a month for a prescription drug. And I think one of the things that we’re really good at in politics is oversimplifying problems and oversimplifying solutions. 

But an oversimplification of this is maybe there are a couple of things. I think part of the reason that we have high-cost prescription drugs is bad actions by some of the prescription drug companies, the manufacturers who, in the legislation that I talked…one of the pieces of the legislation that I’m sponsoring, you have prescription drug companies that will go out and buy out the production of generics so they stop the competition of a less expensive, sometimes even more effective drug so that their name brand drug is the only option on the market. That’s another great place, I think, where the government can come in and say, “While that approach might be allowed in an entirely free market, that’s a behavior that we are not going to allow, because it warps our system to the detriment of consumers.” 

But I wanna recognize another reason why we have exorbitantly high prescription drugs, and that is we are researching and finding treatments and cures for rare diseases that we have never heard about before. The pace at which humanity is curing diseases that have been with us through the ages, it’s breathtaking, and it’s impressive, and it’s something to be really proud of, the quality of life that we’re delivering to people who, just a decade ago, would have had no hope. Now, when you talk about a cure to a disease that afflicts one in a million, the research into that disease is gonna be expensive, and to recoup the costs of that research is gonna be difficult. And so, when you have a smaller number of individuals who can pay for the drug to recoup the costs, the price goes way up. 

Now, we could come in as a government and arbitrarily cap all prescription drugs at a certain amount. And what you’d see is probably some of that research into rare diseases would dry up because there would not be a model for funding and investing in the research to cure those rare diseases. That would be an awful consequence, a well-intended action that would have, I think, really awful consequences for individuals. So, I don’t think that’s the right approach is to arbitrarily cap the price of all prescription drugs at a certain amount. But what we can do, coming back to this other approach, which is reinsurance. So, we may have a risk pool comprised of, you know, Sutherland Institute supporters and followers. And you can extrapolate, you know, what it’s gonna cost to cover that, and everybody chips in and you cover that coverage. 

But then somebody’s diagnosed with a rare disease that we decided we want to allow…that the cost of the drug is gonna be $100,000 a month, and you just didn’t anticipate that because it’s a one in a million-type sickness and you had no idea that somebody was gonna be diagnosed that. So you have several options. You could call it a pre-existing condition and deny them coverage. And that’s kind of heart-wrenching, and we decided we don’t wanna do that. You could raise the premiums for everybody, which would be really expensive and probably unaffordable. And you’d start seeing participants in your plan finding health care elsewhere, which would then essentially deny coverage to that same individual as well. Or we could come in and we’re gonna have this reinsurance program that health pools across the country can, for a price, buy reinsurance that if you do have that health care that costs $100,000 a month, you’ve got another insurance plan that kicks in. It’s insurance for the insured that kicks in and you’ve spread that risk across the entire U.S. and then made it affordable. 

So, I think that’s maybe how I would say the interaction of we do want a free market system, this free market system is curing diseases and finding treatments at a rapid pace. And it is so impressive we don’t wanna shut it down, but we have to recognize how we’re gonna account for that. And I think this reinsurance proposal has had success in other states and shows promise. 

Larsen: So, we have time for one more question. I’m just scanning here. Half of the remaining cards in my hand go back to this issue of personal responsibility. So, I’m gonna consolidate these into a question that maybe gives you a chance to respond from a different perspective. We talk about health plans that pool risk and spread it out as an efficiency. What do you think of the concept of pooling high-risk people who choose to live risky lifestyle behaviors, of pooling them at a greater cost because of their own behavior rather than spreading the risk over an entire population of those who may be more conscious in their efforts to take care of their own health? 

McAdams: I mean, I think that’s an innovative approach, probably something we don’t necessarily do right now. I think, you know, you take somebody who maybe chooses to smoke, right? I would think…first time I’m thinking about it, so I guess I’m brainstorming on the spot. But I would hope, I guess, that private sector can incorporate lifestyle choices into pricing the health care model. And I think that would be the best way to do it is to make sure that that’s allowed from a private insurer. 

Now, you know that we all are different genetically. And there may be common behavior that isn’t risky but because of my genetics, exposes me differently than everybody else. I would be too careful about the government dictating personal choices and personal behavior, but I think the private sector may be able to do that adeptly. It is something that could be abused. And so, you know, if you were careful about ensuring that it’s not abused, I think it could be an option. You know, I think, at what level you’re gonna go, I think, again, that’s probably where it’s appropriate for the private sector to do it and some guardrails to ensure that it’s not done in an abusive fashion but, you know, do I…from Scandinavian descent, did I not wear a sunscreen? I don’t know. Are they gonna be following me and checking that? But I think personal responsibility has to be part of it. Basic things, healthy eating, exercise, smoking, things that we know that are clear and broad health risk is something that should be factored in. 

So, I’m gonna come back to that personal responsibility and just add one more thing, and that is I think there’s also two sides to that. It’s maybe personal responsibility in my lifestyle choices. That’s important. But I again wanna reemphasize the personal responsibility in my health care choices. If everybody has access to health care, can we exercise that access in a way that rewards cost-saving innovations that provide higher-quality health care at a lower price instead of removing incentives and putting health care just on autopilot? Or we remove incentives for innovation and research and into better, less expensive ways to achieve the same outcomes?

VISITING SCHOLAR:

William S. Smith: Well, thanks to Sutherland and Derek for inviting me. A shout out to Rayanne Matlock who made my travel effortless in getting here, and my thanks to Congressman McAdams who…It doesn’t happen often in Boston, but a dispassionate constructive of health care. I don’t know why. It just doesn’t. And a note on conflict of interest. You know, as was mentioned, I was an executive at Pfizer for a long time, so whenever I speak in Boston and I say something nice about the industry, I get accused of pumping up my stock portfolio. Don’t I wish it were true? I’m putting my third kid through a private college, so it’s all gone, I assure you. I don’t have any conflicts on that front.

Thanks to the Congressman also. I think he understands some of the big trends that are happening in the drug pharmaceutical marketplace, and I want to expand on that and drill down on that because I think it’s poorly covered in the media. I’m not saying it’s fake news. I’m just saying it’s not just well covered as it could be. If you go back to the 1970s, there was great concern that the pharmaceutical business model was not serving the needs of patients with rare diseases, so-called orphan diseases, which generally is defined as diseases with a prevalence of 200,000 people or less. 

But, like most companies, pharmaceutical companies wanted to find products that had millions of potential customers. And so they did their research on common conditions, hypertension, diabetes, hyperlipidemia, and more common conditions. This caused some concern in Congress. In 1983, they stepped in and created powerful new incentives for companies to find cures for rare diseases. And under the Orphan Drug Act, companies who discovered an orphan drug could be assured of seven years without competition, as well as steep tax breaks on their R&D that they wouldn’t get with non-orphan drugs.

And pharmaceutical companies also started to understand that it was easier for insurance companies or the government to restrict access to blockbuster drugs by requiring patients to fail on cheaper alternatives than it was to restrict access to rare disease drugs, where many times there was only one therapy available. So gradually, since ’83, the number of rare disease drugs has been ticking up every year, but then a little more than a decade ago breakthroughs in our understanding of the human genome, as well as the human cell, has caused an explosion of knowledge about the causes of rare disease. And this initiated many new clinical trials for rare disease drugs, and the trickle of rare disease drugs has turned into a flood.

The FDA recently reported that 34 of the 59 new drugs approved in 2018 were for orphan diseases, so the majority of drugs last year were for orphan diseases. And in 2017 and 2018, the FDA approved 174 new uses or indications of drugs to treat orphan diseases. That’s 25% of the new uses of drugs that were discovered in the last two years. It was 25% of all the uses that were discovered since 1983. So what’s happening is the pharmaceutical business model has been inverted. Whereas decades ago companies were searching for a drug that could treat millions of patients and the companies could charge $1,000 and get to a billion dollars in revenue, a blockbuster, now they’re searching for drugs that has a patient universe of 5,000 that will secure a billion dollars in revenue through $200,000 price tags. That’s what’s happening. I’m not making judgements one way or the other, but that’s what’s happening.

So before we talk about the money, let me mention some of the things that the Congressman understands and he mentioned in his talk. There’s a lot of good news around this. We’re seeing treatments for terrible rare diseases that are akin to biblical miracles. There is a condition called Leber’s congenital amaurosis, a genetic disorder that causes blindness in young children. You’re born with sight, and then you gradually lose it. A Philadelphia company, Spark Therapeutics, developed Luxterna, a gene therapy that returns sight to blind patients. So young children who were blind can now see. This is a miracle. Or consider spinal muscular atrophy, or SMA, a disease that in its two most severe forms will kill 100% of infants by age 2, and it’s a terrible disease. Novartis has developed a treatment called Zolgensma that appears to be a cure. Babies who had a sure death sentence might be able to live a normal life.

The acting FDA commissioner, Ned Sharpless, when talking about Zolgensma, admonished the media to talk more about the wonder cures before they start to talk about costs. “This is a completely novel, almost magical miracle that ends a devastating disease for lots of kids, and the thing you care about most is the price? I mean, really, if you’re so cynical that you can’t see how wonderful and great this is, you need to start rewearing your happy hat.” The current era of medical discoveries, if it were the art world, would be considered the High Renaissance, the time of Raphael, da Vinci, and Michelangelo, an era of staggering human achievement.

Okay. That’s the good news. Let’s talk about the bad news. The bad news is Luxterna costs $425,000 per eye, or $850,000. Zolgensma costs $1.2 million for a course of treatment. So spending on orphan drugs was 4% of the total in 1997. It was 10% by 2017, and it’s projected to grow 12% a year until 2024, double the rate of non-orphan drugs. For orphan drugs, the average per-patient cost is $150,000 per year versus $33,000 for non-orphan drugs. So let me now say something controversial. These expensive new drugs for orphan diseases are not breaking the bank. They are causing great problems for some individual patients, but they’re not breaking the bank of the U.S. health care system. So how can I say, given the shocking sticker prices, that are not…And this is something the Congressman is supportive of, generic drugs.

Remember, all those blockbuster drugs invented by pharma companies in the ’80s, ’90s, and 2000s are being taken by tens of millions of patients, and guess what? They’re going off patent and becoming very inexpensive. Lipitor, the largest selling drug in the history of the world, was the biggest selling drug at Pfizer. Generated $90 billion in revenue for companies that sold it. I recall when I worked at Pfizer, it was about $400 a month as a branded drug. I talked to a prominent health insurer in the Midwest, and he told me that the generic price for Lipitor, the same product, is now $4 a month. So it went from $400 a month to $4 a month.

So during 2019 alone, and you don’t hear this story ever, collapsing drug prices. During 2019 alone, the U.S. will see $26 billion in savings from patent expirations, and $95 billion will be saved over the next five years because these drugs are going off patent and saving a lot of money. So what’s happening is orphan disease drugs are getting very expensive, but it’s being offset by patent expirations. And we’re seeing drug prices that are not out of control. I know that’s counterintuitive. It doesn’t align with the headlines, but that really, if you look at the data, that’s what’s happening.

And the trend in generic drugs is very promising. During 2018, 90% of prescriptions that were written by doctors in the U.S. were for generic drugs. And the average out-of-pocket cost, largely because of generics, has dropped $1.23 for the average patient since 2014. So, on average, you’re seeing a drop in out-of-pocket cost. You’re not seeing outrageous expenses for a lot of people, but there is a genuine problem. There are people who can’t afford their prescriptions, particularly in these rare disease areas. These stories are not fake news. If you’re on a couple of drugs where the patents have expired, you’re probably saving a lot of money on your copays and others. But if you’re on a rare disease drug that costs tens of thousands of dollars and your health plan has high coinsurance requirements, you may be struggling.

 About 2% of patients would sound small, but it’s millions of people, pay more than $1,500 out-of-pocket annually, and coinsurance and copayment rates are growing. They’re getting bigger. More people are in high deductible plans, and they have high coinsurance rates. The explosion of gene and cell therapies for rare diseases and rare cancers is going to continue. That’s what’s coming out of these laboratories. There’s no doubt about that. The cost of the drugs are gonna be very high, but the number of people taking them will be smaller than the blockbuster drugs of the past. So my advice to policymakers, in a dispassionate, constructive way, is that the rare disease patients, the orphan disease patients are the ones that need the most help.

If you’re a patient that requires a $1 million therapy and you have a 20% coinsurance, you have a problem. And the entire insurance system should be designed precisely to help this type of person. Well, how can we do that? Reinsurance is one of those ideas the Congressman talked about. But let’s talk about incentivizing payers to consider value-based reimbursement, and what I mean by that, in a very simplistic way, is if there’s a million-dollar medicine that comes along, it should have a warranty like an expensive car. If the medicine proves dangerous or does not work, the price should come down or some refund should be made back to the health plan and to the patient.

Many expensive drugs don’t work for patients because of their genetic makeup. Why should they be paying full price for an expensive drug that doesn’t work? In addition, payments should be made in installments so that payments can be stopped if the drug stops working or some new side effect that wasn’t anticipated developed. We got to have a new way of thinking about paying for these very expensive therapies, and there’s some very smart people. There’s a whole organization at MIT. There’s one at Duke that are thinking about this value-based reimbursement payments. It’s a complicated area, but it’s a real solution for a real problem.

And, second, you know, I’m not an insurance expert, but I think state insurance officials need to start to rationalize the coinsurance system a little bit, as the Congressman did in the city. While not all plans operate this way, it makes no sense to me for a patient to have a $600 to $500 coinsurance payment on a $60,000 knee replacement but another patient have $15,000 in coinsurance on a $60,000 drug. I think the insurance system hasn’t caught up with the changes in the pharmaceutical marketplace that are coming out.

So this is what insurance is for, right? You’re diagnosed, you didn’t anticipate it, with a very, very expensive disease and your insurance is supposed to kick in. That’s what you bought it for. And many times, it’s not caught up in the drug world. So, finally, my advice to policymakers is not to fight but embrace these medical miracles. Millions of patients who would face the death sentence may be able to live longer. And when we’re talking about some of these gene therapy research, we’re talking about potential cures for sickle cell anemia, muscular dystrophy, hemophilia, cystic fibrosis, some very terrible, awful diseases.

There are a huge number of clinical trials going on right now for those diseases, and they’re showing promise. Patients are being cured in some of these trials. So my advice is to embrace this. Think about the patients who have the most acute problems, not everyone. You don’t have to appeal to everyone. A lot of people around generic drugs, and they’re perfectly affordable. Think about the people that really have problems. Drill down on that. Roll up your sleeves and get something done. Thank you.

Watch the full event here.

Sutherland Institute is pleased to present content from our Congressional Series and other events. Perspectives expressed by guests and participants may not reflect those of Sutherland. The Institute does seek to provide a civil forum to express those views. 

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