Government Price Controls & Drug Addiction

 

Variety of Medicine in Pill BottlesIn a recent print issue of National Review, David French has a sobering article describing how the Veterans Health Administration is overdosing veterans on prescription drugs. A veteran himself, French has plenty of anecdotes about his buddies:

They couldn’t sleep, so they had to take Ambien. They were depressed, so they were taking Lexapro. They had chronic neck and back pain after hanging 90 pounds of gear on their frame day after day, month after month, so they took Lortab. They were anxious, so they took Xanax.

It was as if a VA doctor had simply listened to a list of symptoms, located a pill to address each complaint, loaded up the patient with prescriptions, and called it “treating” a soldier with PTSD.

In 2014, an inspector-general report found that the VA was systematically over-medicating its patients – even to the point of death.

Wisconsin’s Senate race is being roiled by a report on the VA facility at Tomah, a place so notorious for freely writing narcotics prescriptions that it gained the nickname “Candyland.”

(David French, “Casualties of the VA,” National Review, Vol. LXVIII, No. 12, July 11, 2016, pp. 20-21.)

Chemotherapy Payment Reform: Medicare Is Missing the Elephant in the Room

 

cigarettes-2Last May I wrote about the uproar over Medicare’s proposed changes to how it will pay doctors who inject drugs in their offices. This largely concerns chemotherapy. Currently, physicians buy the drugs and Medicare reimburses them the Average Sales Price (ASP) plus 6 percent. The proposed reform would cut the mark-up to 2.5 percent and add a flat fee of $16.80 per injection.

I did not think the reform would have a positive impact, but I also thought criticism was overblown. Well, Medicare has managed to irritate all the affected interest groups to such a degree that it is likely to toss the proposal and go back to the drawing board.

When is President Obama Going to Admit Obamacare is a Colossal Failure?

 

Progressive supporters of health reform wanted a public plan option to compete with private insurers offering insurance in the state and federal health exchanges. To draw support from progressives, proponents of the Patient Protection and Affordable Care Act (ACA) created a type of nonprofit health insurance cooperative that would compete with established health insurers. Consumer Operated and Oriented Plans, or health insurance COOPs, as they are commonly known, were a political compromise for those who supported allowing non-seniors to buy their way into Medicare or a similar public program.

Health Insurers, Hospitals Cannot Figure Out How To Pay For Catastrophic Care

 

Physician and Nurse Pushing GurneyAn advocate of consumer-driven health care, who makes the case that individuals should control most of our health spending directly, will not get very far before hearing the rebuttal: “When you have a heart attack or get hit by a bus, you won’t be in any condition to negotiate which hospital you go to.”

Fair enough, which is why we advocate insurance for catastrophic events, just like for houses or automobiles. However, in the current system, insurers and hospitals are dropping the ball on even that:

Last Year’s Medicare “Doc Fix” Is Already Breaking Down. Here Are Some New Fixes

 

man-in-wheelchair(A version of this Health Alert was published by Forbes.)

What a difference a year makes! In April 2015, a bipartisan super-majority in Congress overwhelmingly passed a bill to give the federal government even more control over how doctors practice medicine on Medicare beneficiaries. Advertised by Republican and Democratic leaders as a permanent solution to the flawed way Medicare paid doctors, the Medicare Access and CHIP Reauthorization Act (MACRA) was actually Republican politicians’ first vote for Obamacare.

The president himself confirmed this shortly after signing the bill, congratulating leaders of both parties at a White House garden party celebrating the law’s concentration of power within the U.S. Department of Health & Human Services: “I shouldn’t say this with John Boehner here, but that’s one way that this legislation builds on the Affordable Care Act. But let’s put that aside for a second.”

The MACRA was largely pushed the professional societies which claim to represent physicians. Unfortunately, practicing physicians who see patients all day were too busy to pay attention to how the federal government was going to impose itself even more on their practices. In a survey of 600 physicians published earlier this year by Deloitte, half had never heard of MACRA and one third recognized only the name.

That blissful ignorance is dissipating, in the wake of a lengthy rule proposed by the Centers for Medicare & Medicaid Services (CMS) last March. Just the first step in implementing the many technical requirements necessitated by MACRA, the rule has been described as “962 pages of gibberish” by Margalit Gur-Alie, a leading healthcare consultant.

As more practicing physicians have learned about MACRA and the proposed rule, a deluge of comments have forced the Acting Administrator of CMS, Andy Slavitt, to admit its implementation might be delayed beyond its January 2017 start date. This delay provides a window of opportunity to make some changes that could re-direct MACRA in a more positive direction, according to a new report published by the National Center for Policy Analysis.

Well Duh! Combat Opioid Abuse by Tracking Prescriptions

 

Both houses of Congress have passed a bill to tackle opioid abuse. The bill funds training for emergency medical technicians and emergency room personnel and makes drugs to reverse the effects of opioids more readily available in an emergency. According to an article in Modern Healthcare, the legislation just passed should have taken advantage of existing safeguards to strengthen state drug monitoring programs to prevent opioid abuse enabled by doctor shopping. The bill does increase grants to states for drug monitoring programs. But the bill does not require states to ensure doctors actually check the state database.

Weakening Business Case For Health Insurance

 

BoeingBoeing, the giant aerospace concern which is celebrating its centennial this year, has been cutting out the middle-man for health benefits:

In another sign of growing frustration with rising health costs, aerospace giant Boeing Co. has agreed to contract directly for employee benefits with a major health system in Southern California, bypassing the conventional insurance model.

The move, announced Tuesday, marks the expansion of Boeing’s direct-contracting approach, which it has already implemented in recent years in Seattle, St. Louis and Charleston, S.C.

In other examples, Intel Corp. contracted directly with a major health system in New Mexico, where it has several thousand employees.

Retailers Wal-Mart and Lowe’s took a different approach, striking deals with select hospitals across the country for bundled prices on specific surgeries. The companies steer workers to those hospitals.

(Chad Terhune, “Boeing Contracts Directly With California Health System for Employee Benefits,” Kaiser Health News, June 21, 2016)

I recently discussed evidence that insurers inflate rather than decrease prices for medical goods and services.

Ambulatory Surgery Centers Saved $38 Billion in Private Health Spending

 

Doctors Moving a PatientNew research from the Healthcare Bluebook (sponsored by the Ambulatory Surgery Center Association) indicates the privately insured population saved $38 billion by using Ambulatory Surgery Centers (ASCs) instead of hospital outpatient departments for day surgeries. That figure includes $5 billion of lower out-of-pocket costs paid by patients directly.

What is remarkable is that only 48 percent of procedures (such as joint replacement) that can currently be done in either setting are actually done in ASCs. Assuming it would not be appropriate for three percent of surgeries to be done at ASCs (due to complexity), the study estimates shifting the balance of procedures to ASCs would save yet another $38 billion. Plus, shifting other procedures, not currently done at ASCs, would save another $56 billion.

CPI: Medical Prices Resume Upward March

 

BLSDue to vacation, I did not discuss June’s release of the Consumer Price Index for May, in which medical care prices were very moderate. This continued that which was observed in May (for the April CPI).

Unfortunately, prices for medical care resumed their upward march in the June CPI, released today. At 0.4 percent, prices for medical care increased twice as fast as the CPU for all items. Price changes for medical care contributed 16 percent of the price change for all items. Prescription drug prices, especially, resumed their increase. Prices for medical care services, on the other hand, were in line with the CPI for all items.

Over the last twelve months, prices for medical care have increased over four times faster than prices for all items other than medical care. Medical care price increases have contributed almost one third (29 percent) to the price increase of one percent for all items. Claims that consumers have experienced relief from medical prices are simply not grounded in data.

(See Table I below the fold.)

PPI: Health Prices Remain Tame

 

BLSAlthough I did not discuss June’s release of the Producer Price Index (PPI) for May at this blog (due to vacation), prices of pharmaceutical preparations did not increase at all. Similarly, they remained flat in today’s PPI release for June.

Prices for final demand goods (less food and energy), and prices for all final demand health services were either flat or down in June. Similarly, price changes of health services for final demand were all lower than price changes for final demand services overall. The same was true for both goods and services for intermediate demand.

For the last 12 months, prices of health goods and services (especially pharmaceutical preparations) have increased significantly more than prices of other goods and services, but the trend of disproportionately high health price increases might be breaking down.

(See Table I below the fold.)