By James C. Sherlock

The featured image above is from my friends at AARP.  We continue to work together to improve Virginia nursing homes.  

Basic Medicaid and CHIP, which I support, are threatened by soaring costs. 

I have recommended bringing Medicaid expansion home to the states to fund to protect the basic program at the federal level while addressing unsustainable federal borrowing.

This piece will address the increasing slope of the medical cost curve driven by new therapies very expensive to develop and to furnish through insurance.  

Speaking frankly, the quickest way to lower therapy costs is to shut off the supply of new drugs.  Once current ones age out of protected status, costs would indeed drop.  But few will wish to go down that road with such therapies as individually-tailored cancer vaccines on the horizon.  

A pessimist would say that since everyone eventually dies of something, it is not clear that life- and quality-of-life-extending therapies would actually lower the costs of medical care in the long run.  

An optimist would point to the outsized costs of chronic diseases and take a different view.

But all of that is just jabber.  

We begin this discussion knowing that government insurers will be pressured to cover the costs of new therapies.  By the loudest voices.  Including those of everyone who feels that they or their loved ones will be advantaged by the new drug.

But commercial insurers will not be so pressured, because individuals and businesses are cost sensitive.

Which brings us to the costs of GLP-1 drugs as a canary in the coal mine for Medicaid costs.

Becker’s Payer Issues has just reported:

Blue Cross Blue Shield of Massachusetts reported a $400 million operating loss in 2024, driven by spending on GLP-1 medications and other rising medical costs. The nonprofit insurer reported its financial results for 2024 on Feb. 28. The company posted a -4.3% operating margin in 2024, compared to a 0.4% margin in 2023.

In a news release, CFO Ruby Kam said medical costs are rising at the fastest rate in more than a decade. Costs are rising across almost every category of services, but GLP-1 drugs have had the single largest impact, she said. GLP-1 drugs accounted for nearly 20% of the insurers’ pharmacy spending in 2024.

The insurer is repricing its plans to reflect higher costs and cutting administrative spending, including through hiring freezes and eliminating some jobs, according to the release. In a statement, CEO Sarah Iselin said the company does not expect the trend to change any time soon.

BCBS covers two million Massachusetts residents.  That is the same number of residents covered by Virginia Medicaid.  So it is perhaps worthwhile to look further.

Virginia Medicaid covers GLP-1 drugs, but there are requirements for approval.  

• Providers must attest to the patient’s obesity as disability and life threatening (i.e. puts the patient at risk for high morbidity conditions);
• Patients must have tried and failed weight loss via comprehensive lifestyle intervention; 
• Patients must have tried and failed a non-GLP-1 weight loss drug;
• Patients must have a BMI of at least 40 kg/m2 or a BMI of at least 35 kg/m2 and two or more chronic conditions.

The article continued:

In 2023, Blue Cross Blue Shield of Michigan reported a $544 million underwriting loss driven by rising medical costs. The company later dropped coverage of GLP-1 drugs for weight loss in its fully-insured commercial plans.

So two million clients of commercial insurer BCBS of Michigan are denied coverage because of costs.  But Virginia Medicaid covers 2 million (relatively) poor Virginians for the same drug.  

Americans get cost sensitive when they can see health insurance money come out of their pockets directly.  They budget.  They make choices.

For government healthcare, apparently shielded by the rule of big rolls, that rule has seldom applied.  Politicians buy votes with coverage expansion for government insurance for which there is no budget.  

This is not a GLP-1 issue.  That is just an example.

It is perhaps time for citizens to start caring about health care cost in the public sphere.  We may wish to examine how our elected leaders treat our money and the sums they borrow from our grandchildren.