Reigning in the exorbitant costs of healthcare

The money involved is staggering – and the costs of healthcare, escalating at 10 percent per year, are hardly a mystery when you contemplate the multibillion-dollar investments in the sprawling industry.  

In a sense, Cayman insurers are helpless in the face of the behemoth, combating costs when they can, but focused mostly on preventive care and wellness initiatives, especially as regards chronic noncommunicable diseases, described as “epidemic” by Director of Public Health Kiran Kumar. 

The topic is particularly relevant in the run-up to the Ministry of Health’s annual healthcare conference Nov. 20-22 at the Ritz-Carlton, Grand Cayman, titled “Winning the War Against Chronic Non-Communicable Diseases.” 

The conference will feature a dozen speakers on a variety of topics, including diabetes, cardiovascular disease, cancer, mental health, respiratory ailments and obesity. Clinical experts will advise on lifestyle changes and early detection, weight control, diet, exercise and constant monitoring. 

Health City Cayman Islands physicians will discuss the island’s first broad-based 12-week study on Cayman Atrial Fibrillation in the Elderly, seeking to build a database of the community’s estimated 3,000 residents over age 65 to determine the prevalence of heart problems. 

No insurers will address the conference, however, and the extremes in healthcare costs are likely to be addressed only tangentially. 

The Cayman Islands National Insurance Company, a government-owned entity that insures more than 14,000 members, including civil servants, veterans, seamen, the indigent and, recently, the general public, is the islands’ largest insurer. It was formed explicitly to control the costs of healthcare. 

In 2012, the Cayman Islands government subsidized $22.6 million of CINICO’s $57.5 million costs. Subsidies for 2011 and 2010 were $21 million and $19.9 million, respectively. The company reported a loss of $2.6 million in 2012, an improvement of some $400,000 from 2011. 

Dr. Kalila Bodden, CINICO’s medical case manager, says the cost of cancer drugs alone makes things difficult for everyone. “It is common knowledge that oncology drugs are expensive,” she says. 

The company covers the costs of those drugs, she says, although they must be prescribed at the Cayman Islands Hospital and the Health Services Authority. 

According to WallStreetOasis.com, however, a self-described “authority on investment banking, private equity, hedge funds, sales and trading, venture capital and finance,” oncology drugs are a $4 billion to $5 billion market, “depending on who you ask, [and] growing at a faster clip of roughly double digits.” 

For example, the U.S. Food and Drug Administration recently approved a new oncology drug, Zydelig, for three types of leukemia. Drug developer, California-based Gilead, priced Zydelig “at a slight discount” of US$7,200, compared to the US$8,200 of its competitor, according to pharmaceutical website Fiercepharma.com. 

Gilead designed its new drug to be used in combination with another medication, boosting treatment costs to US$12,000 per month, according to the site. Industry analysts, it reports, “have said the drug could hit $1.5 billion by 2017.” 

Facing firepower like that, CINICO appears nearly powerless when it says, “If a CINICO member requires prescription medication, then the member may attend the [HSA] for care. Prescription medication is covered as per the CINICO plan that the member has subscribed.” 

While government subsidizes CINICO, manufacturers’ costs are relentless. Gilead’s hepatitis C drug Sovaldi costs $1,000 per pill, and between US$84,000 for 12 weeks of treatment and US$168,000 for 24 weeks of treatment. The drug works only 90 percent of the time. In the second quarter of 2014, Gilead generated approximately US$3.48 billion from sales of Sovaldi. 

It is little wonder CINICO recommends wellness and preventive programs, most recently operated by its new Medical Case Management Unit. 

The unit, Bodden says, “will soon commence offering CINICO members a chance to enroll in their chronic-disease program … offered to those high-risk CINICO members diagnosed with certain chronic, noncommunicable diseases.” 

She did not provide details, saying only “further information will be available soon.” 

Presumably, diabetes control and prevention will form part of the Medical Case Management Unit, but it is already a long-standing part of CINICO programs. 

The HSA, Bodden says, “offers a diabetic clinic every Tuesday and Thursday between 2 p.m. and 5 p.m. at the General Practice Department.” The sessions offer “the chance to learn more about diabetes and its management, as well as how to control, and in some cases, reverse the disease.” 

Diabetes patients registered with the HSA in 2010 – the most recent year with reliable figures – numbered 1,889, or 3.4 percent of Cayman’s population, compared with 1,450 in 2006. More than 55 percent of the patients in 2010 were between 10 years old and 14 years old. Almost 28 percent were aged 15 years to 19 years. 

Seeking to “reverse the disease,” however, does not appear to be in the best interests of the pharmaceutical industry. WallStreetOasis says the market for diabetes drugs is approximately US$40 billion, and is growing between 6 percent and 10 percent annually. 

The site named the new – and heavily TV-advertised – type II diabetes drug Invokana, as an example, 

The drug was created last year by New Jersey-based Janssen Pharmaceutical Companies, an arm of Johnson & Johnson. According to a Janssen spokeswoman, Invokana’s wholesale price is US$8.77 per pill. Retail cost for the 100-milligram tablet, without co-pays or coverage, is $10 per pill. By contrast, the older and more familiar drug metformin costs as little as 25 cents per pill. 

Meanwhile, analysts pegged Invokana’s 2013 earnings at $111 million, predicting $667 million, a nearly 600 percent rise, by 2016. 

Costs like these force the hands of insurers, who are looking after their own financial survival as much as that of their clients: “CINICO is taking a proactive approach to improve the wellbeing of our members,” Bodden says, seeking to reduce the cost of claims, battling back with clinics, websites and rewards.  

“CINICO believes that good health should not only be encouraged, but rewarded,” the doctor says, naming LiveWell Optum and BestLifeRewarded as chief online resources. 

She is unable to say how many CINICO clients suffer with noncommunicable diseases, waiting for “better numbers once the CINICO Chronic Disease Management Program starts providing statistics,” but promises a “wellness benefit” under a new “Health Insurance Regulations (2013 Revision).” 

The insurer’s portals also offer advice regarding mental health, a sensitive subject traditionally taboo in polite conversation. 

CINICO, she says, covers “medically necessary” mental health care at the Cayman Islands Hospital, which has only limited and short-term facilities for treatment. “If services are not available there, then the member will be referred locally or overseas as deemed appropriate by the referring physician.” 

WallSteetOasis indicates treatment may not be so simple. Calling medications promoting mental health “neuro/mood products,” the site says the market “directly treats patients with mood disorders such as ADHD [attention deficit hyperactivity disorder] and schizophrenia” and pegs its value at “roughly $40 billion to $50 billion in size,”  

Meanwhile, costs are not limited simply to treatments and medications.  

Healthcare equipment and devices, WallStreeetOasis says, are among the larger segments in healthcare and include joint replacements, trauma surgeries, surgical equipment and navigation systems, endoscopic and communications systems; and neurosurgical, neurovascular and spinal devices. 

One million hip and knee replacements are done annually in the U.S., costing as much as US$10,000 per surgery. More than 4 million hernia repairs are done, 2 million appendectomies, and 2.5 million colons reconstructed, at costs “that range from as low as a few thousand dollars to tens of thousands,” the site says. 

Analysts peg the market for endoscopes, devices that examine the interior of the body – cameras, processors, displays/monitors and various accessories – at $28.2 billion in 2013, growing between 5 percent and 7 percent annually. 

Last on WallStreetOasis’s list is the neurotechnology market – neurosurgical devices for spine-related issues. Spinal implants, it says, are “approximately a $5 billion to $6 billion market [with] low single-digit growth.” 

The writers briefly isolate spinal devices from the larger spinal area, and peg the 2013 market between US$10 billion and $12 billion, with annual growth between 4 percent and 6 percent. 

The struggle shows few signs of abating, although Health City Cayman was founded on Dr. Devi Shetty’s vision of radically reduced costs to consumers, achieved largely through volume performance of medical procedures. 

That vision may be the only thing preserving patients from either bankruptcy or delayed, even foregone, treatment – and the potentially negative consequences of that. Considering the revenues involved, however, change is unlikely to arrive quickly. 

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Soaring healthcare costs, including exorbitant prices for prescription drugs, affect insurers, hospitals and patients.

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