Thursday, June 19, 2008

New Diabetes Technology: Should Insurance Companies Pay?

Recently, Kerri has chronicled her struggles to get insurance approval of a continuous glucose monitor. She is hardly alone in her battle with healthcare providers to get coverage; many people struggle with this very issue. In fact, late last year, went live on the web as the only site dedicated to helping people secure reimbursement for their continuous glucose monitoring systems.

Manny at TuDiabetes sent out a request yesterday asking if we would post his video on this subject. At first, I was resistant to the idea, not so much because I disagree with him, but more because I think the insurance companies have been demonized, I think unfairly.

To some extent, I think the technology does deliver improved management for certain people, but in my opinion, the frustration over coverage (or lack thereof) should not really be directed at the insurance companies, but to the manufacturers, who frankly, have done next to nothing to get their product covered. In fact, they have largely left the task of justifying coverage to the Juvenile Diabetes Research Foundation to conduct the studies, rather than doing it themselves.

I have found myself playing the role of devil's advocate, asking people to look at the situation from a business perspective. The insured patients are, 99% of the time, NOT the insurance company's customer, rather it's the employers who buy the policies, and they are under enormous pressure to keep costs under control or they risk losing their customers to rivals. It's no secret that the insurance companies have a fiduciary responsibility to make a profit for their shareholders (which, by the way, are what many of you're 401K's and/or pensions are invested in, incidentally), and frankly, they make money, but not on a ROI basis at a comparable level to the drug and medical device companies. The insurance companies are essentially forced to make their decisions from this business perspective. It's true that they would for the most part, rather us have complications, but its NOT because they haven't fully analyzed the economics.

Insurance is all about managing odds, and the simple fact is that by denying this coverage, the odds are in their favor, because chances are extremely high that you will not even be covered by them when complications actually do strike. First, many people are likely to have several insurance carriers over the years due to job changes, or simply because employers negotiate deals with new companies (see my post here for more on that). The simple fact is that in most cases, those costs will be soaked up and paid for by Medicare, so our tax dollars end up absorbing that cost, but few if any insurance companies will be saving much of anything by actually paying the cost of this costly technology. In other words, they have everything to lose by paying it and stand to gain little if anything by covering it.

In my opinion, the real crooks here aren't the insurance companies, but the manufacturers of this costly technology -- no one is trying to deny them the chance to earn a profit, but they don't need to rape, pillage and plunder us and our healthcare providers in the process! Let me also add that the only way to really effectively address this is to abandon the for-profit insurance system we now have ... something I'd LOVE to see happen, but I doubt we'll ever see that because of industry lobbyists in Washington! The odds are that we still also won't have any form of universal coverage by the end of 2009, regardless of who wins the White House, because we're now so far into debt for the Iraq war that whoever is in the White House or in Congress will really have their hands tied as to what they can realistically hope to accomplish given the budget situation. Who should we be thanking for that?

Others have justifiably argue that the U.S. tax code also should share some of the blame, and they have valid points. The U.S. government does not allow this medical expense to be tax deductible until it has reached 11% of your gross income. Think about what that means -- taxing my medical supplies that you might be forced to pay cash for is not sound policy under any circumstances, yet its done and no one is complaining to their Congressional reps about it while they have no problems blaming their insurance companies. Let's also remember that consumers pay anywhere from 35%-40% more than the list price of the sensors, so true cost of the sensors may be even more when considered at the after-tax cost.

To be sure, the insurance companies are hardly guilt-free; but I would argue they are being blamed unnecessarily for tax policies and poor healthcare policies that are really decided in Washington and in State Houses across the country.


Anne said...

I think it would be interesting to see how profitable some of these companies are (eg, Dexcom, Animas, even Lilly currently). I think initial pricing has a lot to do with recouping investments for R&D and future R&D plans. I don't have the hard facts in front of me but I wouldn't assume that all manufacturers are out there to "pillage," even though, in our capitalistic society, that does seem to be a common theme.

BetterCell said...

Michael Moore's movie, "Sicko" really shows what all these Insurance/HMO's are all about.........Especially the non-approval form letter that was sent out to a patient needing a procedure that would have saved his Life, but termed "experimental" by the Insurance company.
The patient's Life was ended a week later.

Anonymous said...

Scott, surely prices will come down once investment costs have been recouped. I mean, after all, Lilly brought us rDNA insulin with the promise that it would be ever so much cheaper than natural insulin . . . and look how cheap it is now, practically a give-away!


Kevin Pammett said...

Thanks for making such a convincing video. I totally agree !
Thanks -
- Kevin Pammett
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The Old Man & His Dog said...

You either work for an insurance company or are clueless. I used to work for an insurance company. It IS their policy to deny as many claims as possible without damaging their reputation too much. Especially if it involves an elderly person that has no clue how to fight them and just pays the claim that was denied to avoid the confrontation. I saw the waste! I saw the HUGE bonuses paid to those that kept claims down at any cost! I saw the money spent to lobby! Funny how all that waste seems to really make an insurance company look "barely" profitable so they can justify the increase in premium to continue the cycle. Wake up dude. I'm not saying the manufacturers are innocent, but at least they are out there inventing ways to help us. Want to blame someone other than the insurance companies? Look at pharmaceutical companies. Don't get me started on them!

Scott said...

To The Old Man & His Dog, The simple fact is that using an argument that covering the cost of a $3,000 device plus the ongoing supplies that must accompany it is justified because it somehow "saves" money for the insurance company by preventing complications, therefore its in their best interest to cover it is a joke. By the time a majority of patients get complications, the odds are overwhelming that they will no longer be covered by the insurer anyway, so it IS in their best interest to deny paying for these devices.

That's hardly innocent, but by the same token, the manufacturers of these products aren't even doing clinical trials to justify the expenditure for their costly devices ... they're relying on charitable organizations like JDRF to do it for them. Medtronic, incidentally, made $2.5 billion in 2007, so they can easily afford to conduct (or perhaps I should say "engineer") clinical trials to justify the CGMS systems. I believe the only way this issue will ever really be resolved is to abandon the for-profit insurance system now in place, and that's never going to happen.

The real issue is not who is to blame, as there's plenty of that to go around, but which party has done more to justify their position on the issue? On that basis, I think the manufacturers are pretty far behind the insurers.

Anonymous said...

I agree with you 100%, Scott. The blame lies everywhere, of course, but in my opinion, insurers carry the smallest amount of blame in the healthcare financing debacle. The consumer carries the largest portion, because, in this era of no responsibility, they think they are not supposed to have any healthcare costs just becuase they carry insurance (look up the history and purpose of insurance if that statement makes no sense to you). The providers, suppliers, and pharmaceuticals carry the next largest portion of the blame by being too eager to delve into the deep pockets any third-party payer system creates. And, no, I'm not an employee of an insurer - fact is, I make my living trying to get as much reimbursement as possible from them.