May 10, 2016

Higher Drug Costs Linked to Obamacare

  • Americans are paying more for prescription drugs under Obamacare.
  • Obamacare plans have narrow networks of doctors, narrower lists of covered drugs, and higher out-of-pocket costs for the drugs that are covered.
  • Out-of-pocket expenses for prescription drugs in the most popular type of exchange plan are twice as high as they are in the average employer-sponsored plan.

Health care costs have ballooned under Obamacare, with prescription drugs leading the way. According to a report by S&P released on Monday, drug costs rose by nearly 16 percent in 2015. Spending on drugs in the individual insurance market – where Obamacare plans are sold – rose an astonishing 50 percent.


A report from Emory University last fall found out-of-pocket expenses for medications in a typical Obamacare silver plan are twice as high as they are in the average employer-sponsored plan.

For people with chronic health conditions, Obamacare means higher drug costs

Out of pocket increase number of chronic conditions

The average person with a chronic condition – such as arthritis, diabetes, heart disease, or hypertension – would pay $396 more if she lost her coverage at work and had to switch to an Obamacare plan. The added costs would be even higher for sicker patients. Someone with four of these conditions would be stuck paying an extra $1,145 per year on Obamacare.

When drug prices go up this dramatically, people tend to fill their prescriptions less often. For patients with chronic illnesses, this can mean higher costs down the road when their manageable condition gets worse.

According to an analysis by the research firm Milliman, one reason people are paying more is that exchange plans are more likely to have a deductible for prescription drugs. About half of silver exchange plans have pharmaceutical deductibles, while about 80 percent of employer plans do not. As a result, patients in Obamacare silver plans pay an average of 46 percent of their total drug spending, while patients in a typical employer-sponsored plan pay 20 percent.


Obamacare came with a laundry list of requirements for health plans. For many plans, the only way to comply with the law and not go bankrupt was to narrow options for doctors and drugs. Almost all of Obamacare’s silver plans – the most popular option under Obamacare – have closed drug formularies. If a drug’s not on the list, you could be left to pay the entire cost on your own.


Another way Obamacare contributes to rising drug prices is that Obamacare imposed a new tax on manufacturers and importers of prescription medicine. The tax was designed to raise $27 billion in just the first 10 years of the law. Democrats don’t like to admit that raising taxes leads to higher prices, but that is what happens. Before the law went into effect, the Congressional Budget Office acknowledged that Obamacare would lead to higher drug prices.


Defenders of Obamacare would rather talk about rising drug costs than talk about rising health care costs – since much of the rise in health care costs is caused by Obamacare. In many cases, the rising drug prices Americans are experiencing are also due to Obamacare. Democrats’ proposals for new restrictions on pharmaceutical manufacturers and insurance plans will not bring down costs. They will only take away incentives to develop more cures and treatments.

Congress should be trying to encourage competition and innovation. Americans should be able to sign up for the coverage that is right for them – not be relegated to second-tier health insurance that doesn’t cover the drugs they need. The way to bring down the costs of drugs – and premiums, deductibles, and treatment – is to repeal Obamacare.

Issue Tag: Health Care