Here are the key points from Chapter 6:
Health insurance, like firefighting, is based on the collective sharing of risk through regular payments (premiums). However, unlike firefighting, health insurance requires additional fees from the insured, such as co-pays and deductibles, which can be burdensome and deter people from seeking or getting appropriate care. These out-of-pocket costs have increased over the years and can be especially challenging for those with chronic conditions.
Utilization Management determines what insurance will cover, involving practices like formulary restrictions, which limit access to certain medications by listing preferred drugs at lower costs. Network restrictions dictate where patients can fill prescriptions and seek care, often requiring them to use in-network pharmacies. Prior authorization and step therapy are additional measures that can delay access to medications, requiring approval from the insurer or the trial of lower-cost drugs before covering more expensive treatments. Utilization management isn’t inherently wrong; it’s necessary in many cases to drive competition between similar treatment options (e.g., plans need to be able to direct patients to one drug or another to get companies to compete on price for larger market share), but it can be unjust when used to deny access to appropriate care.
Insurance pools society’s resources to cover medical treatments, with about 8% of premiums going toward branded medicines, incentivizing the development of new drugs. This spending on branded drugs ensures that over time, we continuously pay for newer and better medications as older ones become generic. We spend under 2% of our healthcare dollars on generics. About 80% of our healthcare dollars cover healthcare providers and services, including hospitals and nursing homes, whose costs keep rising. This reality points to the importance of continuing to incentivize new drug development to improve health and reduce hospital stays.