Healthcare mortgages for patients are absurd

The term "Sweet Science" refers to boxing. The term "Dismal Science" pertains to economics. I've always found it amusing that the former--the realm of brain swelling and swell fellows like Don King--was coined a few decades before the latter.

Then again, having just read this recent article in Science Translational Medicine about a new proposal to finance healthcare services by a rarefied economist and oncologist, being married to Jake LaMotta seems preferable. That's because the article is an acknowledgement that the underlying economics of the U.S. healthcare system are no longer sane, and that the best course of action is to double down on that insanity.

And what exactly did Andrew Lo, of MIT's Sloan School of Management and David Weinstock, M.D., an oncologist at the Dana-Farber Cancer Institute and professor at Harvard Medical School, propose?

To pay for pricey curative drug therapies, they suggested mortgages for patients. The financing option would cover the out-of-pocket costs of new drugs to cure hepatitis C (retail price: About $84,000 to $100,000), or Glybera, a gene therapy for the extremely rare lipoprotein lipase deficiency (about $1 million).

They suggest a mortgage primarily because these drugs are curative as opposed to treating chronic symptoms for life. As a result, their costs are all front-loaded, which means providers want their money immediately. And since there seems to be a market gap for this kind of financing, they suggested that the financial markets (like mortgage-backed securities) secure these loans to spread the risk among many investors and therefore create a sustainable market.

"The stark reality is that many patients do not have access to transformative therapies solely because of affordability ... new financing structures can improve access, drive down per-patient expenditures, and provide the biopharmaceutical industry with greater incentives to develop transformative therapies over incremental ones," the pair write.

Moreover, the authors suggest the proposal even though they acknowledge it would be more financially feasible for insurers to actually provide full coverage. "However, in the current political atmosphere, patients fail to receive optimal care with each passing day, despite the fact that we have both the methods and the financial means to provide such care," they observe. They also say that having patients take out mortgages to pay for their care is "distasteful." Oh, and that the already inflated prices for these medications would likely rise because such a financing mechanism would likely increase demand.

How would this work? Let's assume a patient has a $40,000 co-payment for the hepatitis C medication. This could be financed with a nine-year mortgage at a 9.1 percent interest rate (which is several points above the rate someone with good credit could obtain). That works out to a payment of around $544 a month.

Of course, that's manageable, perhaps even pocket change, if you earn more than $300,000 a year. But if you're the average American household earning around $54,000 a year, the numbers don't represent pocket change but a gaping hole in their pocket. Your take-home pay is about $3,000 a month. That payment would represent 18.1 percent of net income.

There is an upside to their proposal: If the drugs don't work, the patient wouldn't have to repay the mortgage (only a dismal science could find a silver lining in dying).

Of course, there are alternatives. The smartest and most influential people in our society (read: MIT economists and Harvard-affiliated oncologists) could stop writing articles saying that U.S. public policy and politics are so broken that reform is laughable. Instead, they could tack left and agitate to allow Medicare to actually purchase drugs in bulk, or push lawmakers to place some price caps on pharma products, or regulate insurers so they don't keep on cost-shifting to patients to the point of providing an expensively worthless product.

Or they could tack right, and propose ways for consumers to set up personal corporations with taxpayer ID numbers that can be used on their hospital admission forms in lieu of Social Security numbers. Once the bill comes in, the provider is offered a choice: Negotiate or the corporation is dissolved--ending legal recourse for collections.

Public sentiment is behind either or both. That's why Bernie Sanders, a champion of universal healthcare, has remained a persistently popular candidate of the left. And among the reasons Donald Trump–whose ability to duck personal financial responsibility is legendary–has so far been outperforming his other Republican opponents.

Throwing the American public another way to get into debt, structured in ways similar to how the housing market crashed eight years ago, is not only unoriginal thought, but utter and dreary surrender. Americans are not in a capitulating mood. They want to fight. Proposals must be molded to fit that sentiment. – Ron (@FierceHealth)