UnitedHealth overcharged cancer patients for drugs by over 1,000%

You just answered my question:

Is it the case that UnitedHealth and Cigna each own (or control) one of the "big three" PBMs? If so, that is a just crazy - the control insurance premium pricing, benefit decisions, AND the pricing of covered medications?

yadaebo wrote below "Medical Loss Ratio (MLR) is capped at 85% in the US which means 85% of revenue must go to patients". Does controlling a big PBM allow an insurance company a loophole?

> subsidiary Optum Specialty Pharmacy and the prices triple or quadruple over MSRP if you buy from OSP using insurance versus if you pay cash.

As an European, this is mind boggling.

UHC double-dips because they own Optum even though Optum is "independent". It's fucking disgusting. How they were allowed to buy Optum and didn't have every regulator in the country on the case is beyond me.

I $truggle to think how $omething like thi$ wa$ allowed to happen.

Bastards.

I don't want you to give them the benefit of the doubt. I certainly don't think they deserve it. I do think, however, that a conversation about "overcharging" goes nowhere until people talk about exactly where charging ends and overcharging begins.

> I take issue with the claim that in order to say something is too expensive that you must be able to precisely propose an alternative price.

If you want to be quantitative of course you do. How hard is it? Margin of error is allowed. If you want to be qualitative, vague and wishy washy, that has its place too, but at some point someone is going to ask for a quantitative assertion, otherwise you get nowhere.

> I have no idea what the correct margin for essential cancer drugs is.

So let's talk about it and think about it and form an idea. There's no universally right or wrong answer, but you should at least be able to decide what answer is right to you.

> I don’t think it should be a 10x markup.

What about 1x markup?

> Intuitively, it seems that there’s something wrong with price gouging

There is, but you're relying on the word "gouging", and without identifying what price you think is gouging vs reasonable profit, stopping at the point where you express that "too much is too much" doesn't get us any closer to having actionable goals.

I agree, but we can't talk about "over" without talking about where the line is.

For those who want to really understand the impact that PMBs play on the overall US healthcare system I highly recommend reading the "The Price We Pay: What Broke American Health Care--and How to Fix It" by Marty Makary, MD. The system of legalized kickbacks that they use isn't widely recognized but it will have to be reformed if we ever want to bring down prescription drug spending.

https://www.bloomsbury.com/us/price-we-pay-9781635575910/

> which should infuriate you

Oh it does!

Well, at least that one I understand. That is, other countries have much stricter pricing controls on medications, while the US does not. So pharmaceutical companies argue that it's essentially the US that makes drug discovery worth it - they basically say that if the US had strict price controls too, then it means that drugs research wouldn't be viable to invest in in the first place. Not at all arguing that's true (I don't know), and even if it is true it just means the American customer for those medications is carrying the load for everyone else, which besides just being unfair doesn't seem sustainable in the long term.

But again, at least that one I theoretically understand. PBMs make no sense to me whatsoever.

Correct - they aren't an insurance company, they are a racketeering organization committing fraud under the guise of being a "healthcare" company that is vertically integrated with every facet of the healthcare supply chain.

All this on top of being a for-profit corporation whose mission is quite literally to enrich shareholders, instead of helping patients navigate the healthcare system.

RICO them.

They also are the largest employer of doctors in the United States.

They've essentially constructed their own single-payer health care provider, but instead of being paid for by tax dollars it's a publicly traded company whose primary goal is to increase shareholder value.

Can you explain how discount cards (like GoodRx) work?

What I believe has broken in the US, UK and is well on the way to breaking in Australia, is the confidence that principles will win over greed. If you believe there is a critical mass of good principled people who will stand against selfishness, then being principled is a smart choice. If you do not have that belief, being principled feels like a foolish extravagance. As many have said before, it's got to the point people have more faith in a zombie apocalypse than in citizens cooperating for their own common good.

"chart goes up and to the right!" seems to excuse just about anything in some peoples' political philosophy.

much shareholder value was increased, I'm sure.

I feel people defend them by opposing any other approach to solving this. Politicians in particular say things like "preserving customer choice", which I think just means having the ability to select among all the terrible insurance companies who will treat you poorly.

This is why we need to install National Health Care. Single payer systems get the best rate, and we can make a national decision over how much we can afford. The current system is insane and unsustainable.

Sure, I'll defend them, conceptually at least. I think most actors in this system are in some sense corrupt, and I don't think insurers are the most corrupt. Pull up the 2022 National Health Expenditure table, "National Health Expenditures by Type of Expenditure and Program: Calendar Year 2022" and look at combined hospital and physician expenses compared to insurer expenses; it's pretty black-and-white.

> Does anybody defend them?

There was this Luigi guy who almost got them a momentary sympathy vote ... but the greater public ultimately felt he went too easy on them.

> $500 / month

What the actual f!?

That saving is double the total cost of my private health insurance in Australia!

This includes the “Medicare levy” tax I pay at the highest rate because I get an above average income.

Health insurance cost is something I just don’t think about.

My missus reminds me every few years to combine our plans because it might save us AUD 250 per… year. Maybe.

I haven't seen any defenses of insurance companies lately. In fact, it seems like insurance companies are the only safe target for criticism of US healthcare problems right now.

> Virtually every insurance provider is going up 15-20% / year to the point that it’s completely unsustainable.

The elephant in the room is that healthcare costs are going up. Even if we waved a magic wand and eliminated health insurance overhead, profits, and executive pay, your rates would still be going up that same 15-20% per year.

This is the part that seems to confuse everyone. There's a common misconception that insurance companies are raking in huge profits and that prices would plummet if we could just eliminate those profits. You see it throughout this thread with phrases like "dancing on the graves all the way to the bank" and blaming "capitalism" or "corporate greed" with the implication that insurance companies are the purveyors of this greed.

Yet we have non-profit insurance companies. They're not appreciably cheaper. If you look at insurance company profits, they're actually relatively low for companies that large. If you map healthcare spending on a big pie chart, the slice that goes to insurance company administrative overhead and profits is not that big. Single digit percentage. Even companies with socialized medicine have some overhead in this same slice.

The problem is multifactorial. The challenge is that it's not politically safe to touch on some of the drivers of US healthcare costs. Everyone loves to point at insurance companies and drug pricing because it's easy, but things get much quieter when you point out that our doctors, surgeons, and providers are paid substantially more than their peers in other countries. Americans also love to consume more healthcare and many would be very upset if they were forced to accept the level of allowed care and delays in other countries. It's not just insurance companies who have decision trees about when and what care is allowed. Americans also consume medications at an extremely high rate. Again, they don't take kindly to suggestions that we limit prescribing or drug prescriptions (see outrage over the DEA limits on amphetamine production or complaints about hesitancy to prescribe opioids, even though we already consume far more opioids than most countries).

Many Americans also live unhealthy lifestyles which contribute greatly to healthcare costs, but it's taboo to mention that. Everyone has seen the life expectancy charts showing US lagging international peers, but fewer people have seen the per-state version that shows that life expectancy depends heavily on where you live (and therefore what you eat, how active you are, and the local culture). Instead, the only acceptable target of blame is our food. While we have some room for improvement, we're not going to solve the obesity epidemic and lifespan problems by banning red dyes. Lifestyles and diets need to change, but that's a difficult topic. Much easier to point the finger at insurance companies, "CEOs", and the food industry and pretend that those cover all that is wrong with healthcare.

This is why it's politically difficult to accomplish anything in the United States. If anyone tried to copy and paste the health care system of a European country, from doctor pay to allowed procedures to more limited prescribing practices, there would be riots. People want all the healthcare, they want it now, they want it how they decide, and they want someone else to pay for it.

It's easy to just blame the insurance providers, but keep in mind:

Everybody expects a higher standard of care, because now we treat things that we didn't even know about in the past. For example, I have a CPAP and went through surgery for sleep apnea. 50 years ago, who knows what would have happened to me?

Medical providers are incentivized to "find" things to bill for. For example, I went to a podiatrist for foot pain, and she tried to figure out how to have me visit monthly.

Likewise, end-of-life issues can get very expensive, because it's hard to say "no" when loved ones' emotions are fragile.

The army of middlemen the doctors and hospitals need to hire to deal with the insurance companies adds a lot to healthcare costs in the US. Not to mention the armies of middlemen hired by the insurance companies themselves.

While every healthcare system has administrators, the US system with its thousands of different systems interacting with thousands of other individuals makes for a nightmarishly complex problem. Doctors in countries with socialized medicine complain about the government administrators too, but at least they only have one system to deal with.

The profit margin is just the shareholders' cut though.

What about the CEO salary? What about his secretary? The rent they pay for the buildings they occupy? Going down that path, how much of the operational expenses of private insurance meaningfully improve patients' health?

Even using more accurate financial indicators like Operating Cash Flow and Free Cash Flow still leave lots of room to obfuscate egregious behavior.

I don't know, people who talk about profit margins as if they mean anything in this context are either financially naive or are trying to muddy the water.

I'm not sure a low profit margin is indicative of a company providing a moral degree of service to their insured. Certainly naive profit margin percentages don't show the terptitude of overcharging cancer patients.

For someone who doesn't get this, if a company like UHC buys an entire hospital group they can use that expenditure to legally "hide" profits by reducing their "profit margin" short term while decreasing competition in the space.

If a company acquires enough debt in a given year they can "hide" nearly unlimited profit margins legally.

On a larger scale, a company (UHC) can dump money into "external" money losing ventures that just serve to hold wealth and take that money off their balance sheet, once that entity takes on enough debt the same company (UHC) can acquire it taking on that debt and reducing their profit margin yet again.

GE Capital and Amazon are poster children for having done this process in a legal fashion.

As a beginners guide, if you have access to a talented accounting firm you can ask about these approaches to get started:

1. Management & Consulting Fee Arrangements (Especially with Related Parties)

2. Transfer Pricing (in Multinational Contexts)

3. Debt Pushdown & Thin Capitalization

4. Special Purpose Entities (SPEs) or Variable Interest Entities (VIEs)

5. Intellectual Property (IP) Holding Companies

I would be inclined to agree with you, the issues is related to the healthcare vastly overcharging for basic acts such as giving simple drugs such as ibuprofen or paracetemol.

The only reason healthcare is so expensive is because a dysfunctional insurance industry exists.

>"Average health insurance profit margin in US is ~3%. That's not a greedy profit margin."

Could it be that good chunk of the profits is eaten by overinflated salaries of major execs?

Profit motives for medical / biotech research, yes. What innovations have insurance companies made in the last 100 years besides to squeeze out more profit?

We are talking about delivering care, not innovative medical technology. The biggest single target for innovation in care delivery is to get rid of private insurers.

I think the graph at the top of this article really says it all: https://www.economist.com/graphic-detail/2019/05/22/republic...

Even if that's true for the actual pharmas, how are insurance companies like UHC innovating? They're just middlemen.

They're totally wrong. War is what funds innovations.

Imagine all the innovation we're missing on every day a country isn't being invaded!

By informing them that most of that is funded by taxes and students doing all the work, not corporations and not based on their revenue. If anything, they have an incentive not to make better treatments because better often means less profitable.

Competition is what drives innovation. There are many ways to chase profits without innovating.

I'd say we have an unsustainable system, and innovation that makes it less sustainable is not particularly helpful.

Profit motive can also drive profiteering.

But when UnitedHealth requires medications to be purchased from Optum health (with whom they share a parent company), they can jack up the price of a drug and keep some of that 85% too.

> If anything it’s the providers who are screwing over patients by gaming insurance and taking more than is necessary from the shared insurance pool of money.

If the 85% gets larger, so does the 15%. Both sides gain when the cost increases.

The more revenue an insurer brings in, the larger that 15% slice of the pie. The fact that they have a capped MLR is beside the point.

I’m not an expert but I’m wary of anyone who has a simplistic view of what seems to be a complex system. This, plus looking at the profit margin of UHC paints a more nuanced picture (net profit margin is not that high. the dollar amount is high because the scale of the company is big). (Not that I want to make money from denying people healthcare, no matter how much internal logic there is to it…)

But it does seem like there’s a serious prisoners dilemma type situation going on in American health care. It’s easy to point fingers at someone else.

The situation is also coupled with a toxic political environment where a Trump voter can simultaneously be against “Obamacare” and think that Trump is going to improve access to healthcare, and a Harris voter can be pro Obamacare and ignore regulatory capture by pharmaceutical companies- e.g., both sides so convinced they’re right and the other side is wrong they won’t be seen to agree on anything common sense.

so by increasing the cost of patient care, they can take out more profits.

The problem is that it is different. What other industry sells a product that you might need in order to survive or to not be disabled which requires the dedicated efforts of multiple professionals with a decade of post-secondary education? What other industry sells a product that you might suddenly need at a moment’s notice that is the only way you’ll survive the day, that requires sophisticated equipment, dedicated facilities, and a team of the aforementioned highly educated professionals?

Most industries are either optional things you want to have but can live without, or necessities you need on an ongoing basis that need more than a few minutes of individual attention.

There’s a lot more to medicine than emergencies and lifesaving treatments. But I think those are the original sin from which the rest flows.

The basic question is this: should people be left to die if they have a sudden life-threatening event (heart attack, hit by a bus, shot) and they can’t demonstrate an ability to pay for treatment? (Note, not the same as not being able to pay for treatment. This would potentially apply to a rich person who got mugged and left for dead, for example.)

Few will answer “yes.” And everything else flows from the “no.” The US’s universal health care system is built around it. We pretend we don’t have universal health care, but we do. It’s just tremendously shoddy and weird. The one place with universal care is the hospital emergency room. Those have been required to treat everyone regardless of ability to pay since 1986. Once you start doing that, the rest flows from there. People start saying, what if it’s not critical to survival but they’ll be crippled without it? What if it’s life critical but there’s time to verify payment?

Can we do better without removing that? No doubt. But we’ll have a hard time getting to a proper competitive market.

Other industries with these characteristics (police, firefighting, rescue, ambulance if you count that separately from medicine) are usually handled by the government or at least contracted by them.

Medicare administrative costs are around 2% of total program spending [1] compared to typically >10%. While what you're saying on the surface may be true from the numbers you are comparing, the fact of the matter is that healthcare costs are becoming more and more expensive during a time when many are experiencing a cost of living crisis.

The US gets a bum deal on costs and outcomes and while we can argue on which specific changes will move which specific needle I think it's clear that one of the major differences compared to the rest of the world is that running healthcare as a for profit enterprise has failed to deliver on the promise of good outcomes for as affordable a price as possible both on an individual and country wide level.

[1] https://www.politifact.com/factchecks/2017/sep/20/bernie-san...

Honest question as someone who prefers single payer but acknowledged it's not a silver bullet: how much of the costs are nurses and doctors vs. admin? It seems to me there's a lot of overhead in passing the bills around to get paid. I just had my appendix out last year and got billed 8 times by 8 different firms, each with payment portals, call centers, billing providers, etc. I assume there's a lot of inefficiency internally too.

I have good news! If you move it to the public sector, you will effectively pay doctors less money for the same work. That's because the way it works currently is that the doctors have to deal with private insurance bureaucracy. By freeing them from this responsibility, they have more time to take care of patients, which should effectively gets you more medical bang for your buck.

It is already established fact that Medicare is more efficient than private insurance: https://www.healthaffairs.org/do/10.1377/forefront.20110920....

6.1% profit margins is a lot when it should not be for-profit in the first place. Why is anyone making a profit off of administering necessary services?

What is the operating profit of your local firefighter brigade?

What is the operating profit of the interstate highway system?

What is the operating profit of your local water/sewer department?

Not a single person in this country doesn't need healthcare at some point. It's not an optional for-profit good.

> It shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security.

You seem to be making a weird connection here, but maybe I misunderstand you.

Are you truly suggesting that countries who have socialized health care do so because they've been affected by war on their territory at some point?

A historical aside, the reason private health insurance was created in the US was World War 2.

I could be misremembering pieces, but the long and short of it was that salary compensation was capped/restricted during World War 2 and so companies began offering benefits outside of salary, private health insurance among them, to retain their employees.

There are plenty of countries with 'socialized' healthcare that had no wars in their territories.

I'm not sure I follow that argument - Canada shares a continent.

> shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security

I forgot about the world-class healthcare the populations of Africa, the Middle East and the war-ravaged parts of Asia enjoy.

I agree there is probably a link between war and healthcare. But the link flows through civic pride and identity, and population-wide familiarity with the horrors of war, more than it does from any sense of military preparedness. (That said, I've never seen an American politician try to sell universal healthcare as a national security imperative. Hmm...)

>It shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security.

Sounds like https://xkcd.com/1122/

For instance, Canada, which also arguably "never had a world war on the continent" has public healthcare. What gives? What about all the central/south american countries that don't have public healthcare?

Don’t you think it’s possible if drug advertising is banned then perhaps some of our media organizations may be at least slightly more inclined to investigate some of these hostile practices?

Yes, the profit flows into the pharmacy, which happens to have substantially the same owner.