It’s not the kind of truism you stitch in needlepoint and hang on the wall, but in health care almost every opportunity is also a problem. And the growing number of recommended immunizations for both children and adults — a golden opportunity to realize managed care’s dream of keeping more people well more of the time — is also a growing short-term financial headache for health plans.
This winter, for example, when the Centers for Disease Control and Prevention recommended that Merck’s Gardasil HPV4 vaccine be considered for boys and men ages 9 to 26 to prevent genital warts and curb the spread of the virus that causes cervical cancer in women, there was an almost audible shiver. Granted that the CDC hasn’t yet added the three-dose series of $120 shots to its firmly “recommended” list for males as it has for females (and even females’ adherence is far from universal), observers still wondered: “Where’s the money going to come from?”
Carol Lee, president and CEO of the California Medical Association (CMA) Foundation, says her group is working on a cervical-cancer initiative. In the process, she has talked to health plan leaders about vaccinations and the new health reform law’s requirement that such preventive services be provided without copayments. The plan execs, she says, “are concerned about their increased costs, and they’re right — it will increase costs,” she says. “The theory is that providing more preventive care will mean lower costs long-term. But plans are businesses, and they’re not going to see those savings right away.”
Should the HPV4 vaccine be given to all boys as well as all girls? Goldsboro, N.C., pediatrician David Tayloe, MD, immediate past president of the American Academy of Pediatrics (AAP), believes it should. “Our state has told us we can give it to boys,” he says, “and though it’s been slow to catch on in our office, it makes perfect sense. HPV is a sexually transmitted disease, and it’s the cause of cervical cancer, and it’s going to be passed around from boys to girls. We might as well wake up and smell the coffee.”
Trouble is, the nation’s roster of recommended immunizations to prevent disease — for both children and adults — is becoming a costly brew. “When I came into practice, you gave the measles-mumps-rubella vaccine, the diphtheria-tetanus-pertussis vaccine, the polio vaccine and that was all,” says Tayloe.
It’s different today. CDC figures show that while all of a child’s recommended vaccines from birth through age 18 cost just $70 in 1990 and $370 a decade later, they now total $1,195 for a boy, while for a girl (for whom HPV4 is a must) they are $1,483.
The costs of caring for these kids, of course, fall indirectly on the health plans that carry them on the rolls. “Our costs for vaccines are rising, particularly for newer vaccines,” says Doug Hadley, MD, medical officer and director of the coverage policy unit for Cigna. “We expect them to continue to rise at or above the medical inflation rate.”
Why physicians complain
The persistent national trend implies upward pressure on premiums, never a popular prospect even in plusher times. And it has been accompanied by a growing chorus of complaints from the people who, along with the government, do most of the direct vaccine-buying: participating doctors.
“Insurance companies pay primary care physicians either at cost or barely above the cost of administration for each vaccine we give, with no allowance for contribution to the overhead necessary to keep an office running,” wrote San Antonio pediatrician Lindsay Irvin, MD, last year in an “open letter” to President Obama in the San Antonio Express-News. She stated that she was caught between insurance companies “who reimburse however they want and can change their rate of payment without warning at any time” and drug companies “many of whom have a monopoly on each specific vaccine.”
Indeed, there is evidence that many doctors are feeling the pinch. In a survey of 1,280 physicians reported in the December 2008 Pediatrics, Gary Freed, MD, MPH, of the University of Michigan School of Public Health found that nearly half had at some time delayed purchase of a vaccine because of its cost, and 11 percent said they’d considered giving up administering vaccines because of inadequate payment. “If cost drives pediatricians and family-practice physicians out of the immunization business . . .,” wrote the Atlanta Journal-Constitution editorial board when the study came out, “the fear is that public health clinics might be overwhelmed. That in turn could lead to new outbreaks of childhood diseases.”
Irvin sounds the same warning note: “Ultimately what we’re going to see is a resurgence of disease.”
Other doctors, however, are more sanguine. “Immunization is a very profitable service that I offer — but I’ve found that you have to shop around,” reports Joel P. Karasek, MD, a solo pediatrician in St. Joseph, Mo. By signing up to purchase his vaccines through a national co-op called the Pediatric Foundation (and thereby agreeing, when there is a choice, to steer his business to the products of Merck and Sanofi Pasteur) he is able to buy vaccines at prices that usually allow his health plan payments to cover his costs and time with a comfortable margin. And when proffered payment levels aren’t adequate, he gets them raised. Says Karasek, who contracts with “everybody who comes along”: “We talk to our plans and let them know what our costs are. We’ve been successful in every instance in getting them to increase their reimbursement.”
Such persuasive powers may differ from place to place, of course, depending on local market realities. Prices and payments do vary. According to another study published in Pediatrics in which 76 private practice doctors described their vaccine-buying practices and vaccine payments, the difference between the maximum and minimum prices from manufacturers for specific vaccines varied from as little as $4 per dose to more than $30. And the variation between top and bottom payment to physicians for individual vaccines ranged from $8 to more than $80.
What the doctor ordered
“Some insurance companies pay really well and some don’t,” agrees the AAP’s Tayloe. “As insurance companies have kind of taken over all of medicine — some good and some bad — we’ve had to work with them for every penny we squeeze out,” he says.
In the old days, Tayloe would bill for well-baby visits at a price that would cover his cost and overhead for injections and the staff time and facilities it took to give them. Then administration fees came in when the federal Vaccines for Children program was launched in 1993. Today that program furnishes vaccines free to doctors for Medicaid patients (thus permitting no markup on the vaccines themselves) and pays doctors a small fee, usually less than $10, for giving a shot.
In a pediatrician’s lament, Tayloe contrasts that fee with the $21 the federal government gives doctors for the “low-maintenance procedure” of giving immunizations to oldsters under Medicare. “Now, think about giving children vaccines,” he says. “They are screaming, it often takes two nurses to hold down the children over the age of 1, and their parents have read all this garbage from Jenny McCarthy [prominent vaccine skeptic] about how vaccines cause autism. It’s a multifactorial pain in the neck.” And besides buying the vaccine product or receiving it free, he adds, doctors “have to store it, inventory it, and insure it. Because if that refrigerator goes out during the night and you lose your vaccine, you have to have really good insurance or you’re just slam out of luck.”
The doctor explains that there are three widely quoted price levels for each vaccine: the “average sales price” (ASP), the “average wholesale price” (AWP) and the CDC list price. “Medicare pays physicians either AWP or ASP, depending on the product,” he says, adding that the government has resorted to these “low-ball” numbers partly because “some doctors have abused Medicare in drug-purchasing schemes. But these are kind of stale numbers. The CDC list price is regularly updated.”
According to Tayloe, AAP research shows that administration adds from 17 to 28 percent to the product price. “We think the CDC list price plus 17 to 28 percent is a fair way to do business,” he says. So, health plan execs, take note: That’s how to keep doctors happy — though it doesn’t explain what to do if your competitors are getting away with paying less and your shareholders wonder about your generosity.
“We’re not trying to make an unconscionable profit on this thing,” says Tayloe. “But we’ve got to stay in business.”
Says Cigna’s Hadley: “We’ve set up a national fee schedule that takes into account physicians’ office inventory cost for vaccines, over and above the manufacturer list prices.” He adds that his company’s vaccine payments have won “strong physician support” from the AAP and the American Academy of Family Physicians.
Experts say that immunizations are one of medicine’s great success stories, and that story continues. “There are some fascinating new vaccines in the pipeline, many of them related to cancer,” says Lee of the CMA Foundation. So, is an ounce of prevention still worth a pound of cure — or maybe a little more?
“Well, it probably is at Kaiser Permanente, and maybe a couple of other plans, and maybe at a given employer,” says Walter Kopp, CEO of San Francisco-based Medical Management Services, which helps hospitals, health plans, and medical groups manage their relationships. (After inviting and receiving e-mailed questions, Kaiser declined to speak to us for this article.) “But with employers switching health plans quite often, some plans argue that the investment they make today may not benefit them a year from now, because they may no longer have that employer signed up.” It’s the old musical-chairs phenomenon.
Still, Kopp doesn’t share Irvin’s alarm about the present situation. “If you look at the way health plans regard their overall investment, in terms of its value to the patient — where, say, prenatal vitamins are perhaps the most cost-effective things they buy, while the least cost-effective might be care in the last week of life — immunizations rank pretty high on the list,” he says.
Kopp thinks the vaccine-cost squeeze on physicians will become less of a problem simply because more and more physicians will become employees of larger “coordinated, integrated, and accountable” provider organizations better able to manage the efficient purchasing and maintenance of vaccines.
Paradoxically, however, it was going solo that prompted Karasek of Missouri to study up on the vaccine-cost situation and “shop around,” he says. “I was scared about it when I went solo about five years ago,” he recalls, “because the practice I was in before had been having trouble with that.”
Look for the vaccine cost picture to grow more complex in coming years. While most health plans cover the standard recommended immunizations, new targeted products at higher costs will threaten to bust the budget unless, as is already happening in some cases, they are covered by way of a nonstandard vaccination benefit. And the issue won’t be a challenge just for pharmacy directors and bean counters, but also for government relations types, as state governments eager to improve the public health — and not always hip to unintended consequences — slap new legal requirements on health plans’ coffers. (In the article above, read about such a bill set to be voted on soon in California.)
Vaccines and what they can do really are good news for U.S. health care, and for the insurers that provide it.
But whoever coined the well-known upside-down slogan had a point: Every silver lining does have a cloud.
2010 represents minimum cost to vaccinate a child (birth through 18); exception is no preservative influenza vaccine, which is included for children 6–47 months of age.
HPV excluded for boys because it is not routinely recommended by the ACIP.
Federal contract prices as of February 1, 1990, September 27, 2000, and April 6, 2010.
Source: Centers for Disease Control and Prevention
Vaccination by the numbers
How vaccines save
Who administers vaccines to kids?
Sources: American Academy of Pediatrics, Centers for Disease Control and Prevention
|How plans cover adult vaccines
|Coverage by health plans of vaccines recommended by the Advisory Committee on Immunization Practices
||% of plans that cover it in 75%–99% of products
||% of plans that cover it in all products
|Measles, mumps, rubella
|Tetanus, diphtheria, pertussis
|Source: America’s Health Insurance Plans, 2008 Adult Immunization Survey
The vaccine-cost squeeze will become less of a problem for doctors as they become employees of larger corporations, predicts Walter Kopp, of Medical Management Services.
“We’re not trying to make an unconscionable profit,” says David Tayloe, MD, of the American Academy of Pediatrics about paying doctors better for immunizing children.
“Our costs for vaccines are rising, particularly for newer vaccines,” says Doug Hadley, MD, who oversees Cigna’s coverage policy. “We expect them to rise at or above the medical inflation rate.”