For years, various patient advocate groups have been helping folks get health insurance. In particular, the AKF (American Kidney Fund) has been paying the premiums for folks who are undergoing dialysis.

Way back when the federal government began covering the cost of dialysis, the waiting period was 1 year before Medicare began paying the tab. Given these facts, the patient (or the patient’s insurance company) was on the hook for that first year’s cost for dialysis. After that point, pretty much all costs shifted to Medicare.

This meant that if the AKF could raise the funds and cover the insurance premiums for patients, they would not incur health care bills that would threaten the family with bankruptcy. (Dialysis costs some $ 35K a year- after the costs of the operation to have a dialysis access site.) This has been the practice of the AKF for decades.

AKF bought insurance for patients even after the feds changed the rules for the waiting period, upping it to 18 months. AKF had obtained regulatory approval to make such payments back in 1997; this was requested because a great deal of the money comes from providers of dialysis, from equipment manufacturers, etc. It is to their benefit to have the program function.)

But, in 2014, the CMS (Center for Medicare Systems) promulgated rules (Interim Final Rule, March 2014) that changed the existing practice. They notified the Marketplace Exchanges (the insurers on those exchanges) that they could deny premium payments from non-profits making premium payments for insureds. The only payments that had to be accepted by the insurers would be those from tribal groups, federal and state programs, and the Ryan White/HIV program. (They did say nonprofit premium payments would be covered in future issued rules.)

What did that interim statement effect? Insurance companies operating in 34 states rejected all AKF (and other health nonprofit) premium payments for any enrollees with chronic diseases. The insurance companies claim they have concerns that such payments could end up skewing the risk pool in which they operate.

(Just to keep the problem in perspective, about 80000 AKF grant recipients are covered by Medicare Part B, COBRA, employer group health, and other commercial plans. Only 6400 recipients are covered by the Obamacare programs. But the insurance companies are refusing payments for all 86400 enrollees. That totals about 20% of all patients undergoing dialysis in the US.)

But, such programs exist for way more than just dialysis. You know that because you see the taglines on drug advertisements: “If you can’t pay for this drug, contact Joe Blow who will discuss our discounted purchase program- or our free drug program”.

They are referring to patient-assistance charitable organizations, commonly called copay charities. There are about seven very large (and a slew of smaller ones) that provide assistance to about 40 million Americans. almost all of whom are covered by Medicare.

This means the drug bills are paid for by US taxpayers. That $ 1 million donation from drug company A can mean thousands of patients continue to take the drug involved at costs of $10, $20, or even $ 30 million. Not a bad return on investment.

And, many of the drug firms that make these donations have made them to “cover” (as in providing political cover) a price increase on the drug. Which means they get an even bigger return on their investment. And, many (unsuspecting) citizens have “feel good” attitudes about the company- never realizing the financial charades involved.

When compared to the dialysis copay charity (which is, at best small potatoes when compared to big Pharma), this is big business. The 7 biggest copay charities received way more than $ 1 billion in donations. Which has grown by more than  100% since 2010. And, that means significant returns for the drug companies, who are truly the funders of such copay charities.

In 2003, Congress set the current system in motion. It afforded large scale growth for the copay industry. When Medicare was expanded to cover prescription drugs (Medicare Part D), the law stipulated that drugmakers could provide direct help to patients insured by commercial firms, provide discount cards to patients- but NEVER if the patients are covered by Medicare. That’s considered a kickback.

Instead, the drug firms donate to “bona fide, independent” charities that can work with Medicare enrollees. Guess what- there was an explosive growth in such charities.
PAN Foundation, the largest US copay charity, grew from $ 36 million back in 2010 to some $800 million in 2015. From where did this money come? Big Pharma, of course. In particular, five drug firms anted up more than $ 350 million of that total. Given this largesse, it also shouldn’t surprise you that this charity is considered to be highly efficient. Because it spends virtually nothing on fundraising- about 1% of the costs for similar sized charitable efforts. (It doesn’t have to- Big Pharma knows the donations to these copay charities means bigger profits.)  In the meantime, this process is draining funds from Medicare.

It doesn’t hurt that these charities pitch the drug company “donors” all the time. Showing them how their donations are really marketing efforts; $ 1 spent by Big Pharma will return $ 5 (or more) in revenue to their firms.

This entire process is considered ok. But not the charities paying the insurance premium for dialysis patients.

Just because.