Tier 4 Meds: When Is Health Insurance Not Insurance?

April 14, 2008

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Is health insurance even insurance anymore? The high cost of intensive drug therapies is being shifted back onto patients – and not because the procedures are considered “experimental.”

The New York Times’ Gina Kolata wrote a piece today about a new kind of financial catastrophe striking Americans who have – or think they have – health insurance. The problem is with so-called “Tier 4″ drugs, which are typically prescribed for severe medical conditions. These medications are extremely expensive, and insurance companies have been exempting them from the usual rules (like fixed copays and out-of-pocket limits) that protect their members from financial shock. As a result, people who think their they’re protected financially are being hit by huge drug bills.

Patients aren’t bearing more of the cost for these medications because they’re experimental – a reason that’s often used for denying certain treatments. They’re bearing more of the cost because they’re expensive, at least as far as some quick research today could determine. And, as Jonathan Cohn of The New Republic observes, the political debate isn’t even addressing this part of the problem.

How bad is it? Take one breast cancer patient in the Kolata piece, for example, who lives on Social Security disability and has Medicare coverage:

(Her insurer) declined to say what Tykerb might cost, but its list price according to a standard source, Red Book, is $3,480 for 150 tablets, which may last a patient 21 days. Wellcare requires patients to pay a third of the cost of its Tier 4 drugs.

That’s nearly $400 every three weeks. Or, how about the MS victim whose Kaiser coverage changed unexpectedly, so she didn’t find out until she picked up her usual prescription?

Now Kaiser was charging 25 percent of the cost of the drug up to a maximum of $325 per prescription. Her annual cost would be $3,900 and unless her insurance changed or the drug dropped in price, it would go on for the rest of her life. “I charged it, then got into my car and burst into tears,” Ms. Steinwand said.

Ezra Klein’s not sure how Tier 4 drugs are designated. (But he got curious about it, too. See his post and my reaction.) Ezra writes:

(Kolata’s) article vaguely implies that Tier Four is simply composed of costly drugs that insurers are dumping on patients. My understanding of the situation is that Tier Four is actually composed of largely experimental and unproven treatments that don’t seem to offer benefits in line with their cost. If it’s the former, then this really is, as the article seems to suggest, a cruel and crazed practice. If it’s the latter, then it’s exactly what we need to be doing.

I wish Ezra was right, but he’s not. Here are a couple of examples of the logic used to transfer these costs to customers. Blue Cross and Blue Shield of North Carolina says Tier 4 drugs are “medications classified by BCBSNC as those which require special dosing or administering, are typically prescribed by a specialist and are more expensive than most medications.” That’s it: nothing about “experimental.” And the UPMC health plan, affiliated with the University of Pittsburgh health system, says this:

The fourth tier is for specialty drugs, which are high-cost medications and biologicals, regardless of how they are administered (injectable, oral, transdermal, or inhalant). These drugs also have the highest level of copayment. These medications are often used to treat complex clinical conditions and usually require close management by a physician because of their potential side effects and the need for frequent dosage adjustments.

These two descriptions are typical of the way insurers describe Tier 4 drugs. Defenders of the Tier 4 system will say that health premiums will become unaffordable if these costly treatments, which can exceed $100,000/year, are paid by insurance. There’s some truth to that. But here’s the problem with that argument: The function of insurance is to protect individuals from expenses they can’t afford. Once you start withdrawing that protection, it’s a misuse of language to describe the product you sell as “health insurance.” It needs to be called “health cost offset,” or “selective health cost mitigation,” or something else that doesn’t promise more than it can deliver.

If costs have become so high that the private health insurance system can’t provide affordable coverage that protects people from financial harm, then the entire system needs to be re-envisioned. Remember: In all the debate about “universal healthcare,” most politicians are really talking about “universal health insurance.” But if it isn’t really “insurance” anymore, what are they offering voters?

(Kevin Drum has also written about this issue)

9 Responses to “Tier 4 Meds: When Is Health Insurance Not Insurance?”


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