12/18/2013 04:49 pm ET | Updated Feb 17, 2014

The Democratization of Health Care: The Specialty Tier Example

If I mentioned "specialty tier" to you, would you have any idea what I was talking about? Specialty tiers are seldom considered in everyday conversation, but if you become ill, you may learn that a specialty tier is essential to your survival.

In most developed countries, medical care (including drugs, devices, and professional services) is purchased primarily through insurance (through a private insurer, through government-mandated social insurance, or through social welfare), because the average consumer does not have the financial capacity to purchase health care directly in the marketplace. Group health-insurance plans have evolved in response to this incapacity. The principal feature and benefit of group insurance (private or public) is the pooling and sharing of beneficiary risk. This feature allows the members -- the consumers -- to purchase essential and efficacious medical therapies whose costs might otherwise be prohibitive.

Unfortunately, over the past thirty years, insurers and payers have tended to reflect less risk in the premium and shift the costs of health care to the insured at the moment of care in the forms of copayments, deductibles, and coverage limitations. This trend has undermined the primary benefit of health insurance to many beneficiaries: sharing of collective risk to afford what would otherwise be unaffordable.

Specialty tiering is a case in point. the most expensive medications, costing hundreds or thousands of dollars per month, are commonly tiered as specialty drugs. Specialty tiering works by shifting costs to consumers whose illnesses require them to consume products that the insurer has decided should require a coinsurance rate. The member pays a percentage of the drug cost, as opposed to the typical copayment that the insurer assigns for other drugs on its formulary. From the consumer perspective, the difference between a copayment and a coinsurance rate for a medication may be significant.

Specialty tiers are problematic because they chip away at the risk-pooling effects of insurance by shifting a significant percentage of the cost of expensive medical treatments to beneficiaries, possibly forcing the less affluent to choose between paying for basic living expenses and taking their medications. The central principle of insurance is a sharing of risk among the community of beneficiaries. Insurers (public or private) violate that principle when they establish conditions that require some members at a critical time of need to pay proportionately more for medical care.

The federal government is the single largest purchaser of health care in the United States. Between Medicare and Medicaid, it buys nearly a trillion dollars in health care annually. While government's mission is quite different from that of the private insurer, the dominant school of thought maintains that government should use its purchasing power to reduce overall consumer demand for health care by instituting price controls, shifting costs to beneficiaries in government health care programs, and reducing the availability of new therapies. One of the major insurance programs that government manages is Medicare. It was created as a response to a serious problem: The private market did not and could not work for a large proportion of the nation's elderly and disabled population. Given the health risks of the elderly, the premiums that plans quoted for seniors were well beyond the ability of most to pay. Medicare provided a means of insuring tens of millions of elderly consumers who otherwise could not afford health insurance.

Medicare was designed as a social insurance program, rather than as a social welfare program: The program is funded, at least in part, by mandatory contributions from wage earners and employers, benefits are paid from a fund earmarked for that purpose, and Medicare pays out its benefits under the same set of rules for all qualified individuals participating in the program, regardless of health or economic circumstances. One factor that distinguishes Medicare from private insurance is that the former is mandatory. By statute, almost all wage earners and employers must contribute. A cost shifting agent that discriminates among beneficiaries -- such as a specialty tier, which can impact those least able to pay the most--has no place in a social insurance program. Government has a fiduciary responsibility to manage Medicare equitably. The benefit is not means tested, those with higher incomes do not pay more into the system, and certainly the distribution of the benefit should not be subject to coinsurance, which has the potential to discriminate against the financially less able, people living with diseases that require expensive medical therapy, and those whose biology causes them to metabolize drugs differently.

Recently, forty patient advocacy organizations signed a letter asking Leon Rodriguez, Director of the Office for Civil Rights, US Department of Health and Human Services, to investigate specialty tiers as inherently discriminatory. The group wrote, "Specialty tiers are an example of a priori discrimination based upon disease state, treatment modality, and ability to pay. Secondarily, specialty tiers discriminate against certain demographic groups that disproportionately experience lower family incomes, incidence or prevalence of certain diseases, and access to early medical intervention."

You may choose to ignore this discussion about specialty tiers as an obscure policy flap best left to the insiders, but the day may come when you learn more about specialty tiers than you care to know. Health care has been democratized, and your advocacy is important to making it work for everyone, including yourself.