Health Status Related to Income Not Insurance


Women joggingAn extremely thorough analysis of changes in incomes and mortality in the United States, 2001 through 2014 presents some sobering conclusions for those who think fixing our health system will make us healthier. The research, let by Raj Chetty of Stanford University, ran data on incomes and mortality through a battery of statistical tools.

It is well understood that people in high-income households are healthier than those in low-income households. The latest research demonstrates how important incomes are to health status. Forty-year old men in households in the highest quartile of income (mean = $256,000 annually) had an average life expectancy just under 85 years in 2001. This increased by 0.20 years (a little over ten weeks) by 2014. For those in the lowest quartile ($17,000), life expectancy was about 76 years in 2001, and it only increased 0.08 years (a little over four weeks) by 2014.

Obamacare is likely to accelerate this gap, because it significantly reduces incentives for people in low-income households to increase their incomes.

Flash GDP: Health Services Over One Third of GDP Growth


BEAThis morning’s advance (flash) estimate of GDP for the first quarter (usually subject to significant future revision) showed very weak growth dominated by spending on health services. Health services spending of $19.5 billion (annualized) comprised over one third of GDP growth. However, there was shrinkage in personal consumption expenditures on goods, private domestic investment, and exports. This meant personal expenditures on services grew almost twice as much as GDP growth. Growth in spending on health services amounted to a little less than one fifth of growth in services spending. Nevertheless, the quarterly growth in spending on health services indicates health services continues to consume a disproportionate share of (low) growth (Table I).

20160428 GDP T1

The Obamacare Health Care Gold Rush is Bankrupting America


Our health care system is going to implode under its own weight. National Health Expenditures are approaching 20 percent of gross domestic product — a figure that is expected to about double over the next half century. Obamacare didn’t start the process, but it’s expediting the job started when Kaiser Shipyards requested permission during World War II to offer health coverage as a fringe benefit. This was further exacerbated in 1965 by the poorly-designed entitlement programs Medicare and Medicaid that are now draining the Treasury.

Happy World Intellectual Property Day!


World IP DayTuesday, April 26 is World Intellectual Property Day. Coordinated by the World Intellectual Property Organization (WIPO), World IP Day celebrates “the role that intellectual property rights (patents, trademarks, industrial designs, copyright) play in encouraging innovation and creativity.” This year, World IP Day focuses on “the future of culture in the digital age: how we create it, how we access it, how we finance it. We will look into how a flexible intellectual property system helps ensure that the artists and creative industries are properly paid for their work, so they can keep creating.”

In health policy, we are mostly concerned with patents, which protect investment in innovation in medical technology, especially drugs and biologics. In honor of World IP Day, here are some of the publications NCPA has produced to make the case for good patent policy:

Health Reform Through Tax Credits


health-care-costs(A version of this Health Alert was published by RealClearPolicy.)

Lost in the blur of the presidential campaign, the evidence indicates the Republican Obamacare replacement plan will include refundable tax credits. In its purest form, this means each person with employer-sponsored benefits, an individual health plan, or dependent on a welfare program like Medicaid or the Children’s Health Insurance Plan (CHIP) will start with a clean slate and a fixed sum of taxpayer-funded money to choose health care of his choice. The Republican proposal will not likely go that far, but it will go a long way to introducing fairness in the tax treatment of health benefits, which is currently broken.

Are Prescription Drug Prices Becoming As Meaningless As Hospital Charges?


Professor Jack Hoadley of Georgetown University recently gave an excellent presentation discussing prices of prescription drugs. Two slides stand out. First, a slide showing how much prescription spending is controlled by insurers and governments versus patients directly:

20160415 Rx Prices

As recently as 1990, patients controlled over half of drug spending. Today, it is under 20 percent. Has this cost shift made drugs more “affordable”? Obviously not: 8 percent of patients do not take medicines as prescribed, because of cost. Hillary Clinton promises to impose government price controls on drugs if she becomes president.

Administration Still Bailing Insurers Out of Obamacare Exchanges


money-rollsThe Obama Administration refuses to concede defeat in its struggle to save Obamacare’s exchanges. The exchanges lost one quarter of their members in 2015. The Blue Cross Blue Shield Association has reported its insurance plans have enrolled people significantly sicker (and more expensive) than anticipated. Finally, UnitedHealth Group, the nation’s largest insurer, will drop out of most of the exchanges in which it is participating.

Desperate to induce insurers to continue participating in exchanges, the Administration suggested it would make illegal payments from “risk corridors,” a risk-mitigation mechanism that moves money between insurers to stabilize their profits in Obamacare’s first three years. Republicans in Congress put a stop to that in 2014. So, the Administration proposes apparently illegal payments from another risk-mitigation fund, called “reinsurance.”

U.S. Health Spending Not An Economic Burden


HSA(A version of this Health Alert was published by Forbes.)

Health spending consumes a higher share of output in the United States than in other countries. In 2013, it accounted for 17 percent of Gross Domestic Product. The next highest country was France, where health spending accounted for 12 percent of GDP. Critics of U.S. health care claim this shows the system is too expensive and a burden on our economy, demanding even more government intervention. This conclusion is misleading and leads to poor policy recommendations, according to new research published by the National Center for Policy Analysis (U.S. Health Spending is Not A Burden on the Economy, NCPA Policy Report No. 383, April 2016).

Discussing health spending in dollars, rather than proportion of GDP, the report notes Americans spent $9,086 per capita on health care in 2013, versus only $6,325 in Switzerland, the runner-up. (These dollar figures are adjusted for purchasing power parity, which adjusts the exchange rates of currencies for differences in cost of living). This big difference certainly invites us to question whether we are getting our money’s worth. However, it is not clear that this spending is a burden on Americans, given our very high national income.

Some Pharmacies Charge More than Allowed


The Washington Post ran an article about a Medicare Part D drug plan enrollee. Her late father had been a pharmacist and owned a small drugstore while she was growing up. She thought it would be neat to patronize a small, independent drugstore to refill a prescription – and she found one in her preferred pharmacy network.  A 90-day prescription refill that should have cost her a $3 co-pay turned out to be $58. Whoa; what’s the deal she inquired?  On this particular prescription, the drugstore stood to lose some money so it claimed. Or, maybe its profit margin wasn’t as high as it thought it should be. It asked its customer to willingly throw in an extra $55 towards the cost of the prescription to pad its bottom line.  Of course, this violated the contract the drugstore had signed with the Medicare Part D plan.

As the article explained, when drug plans negotiate with drugstores, they often drive a hard bargain. But the carrot they dangle to drugstores is a lot of increased business. Profits per script may be low; but the number of scripts is far higher. While in the drugstore, there’s a good chance the patron will pick up a bottle of aspirin, maybe some bandages.

The author said many of the smaller drugstores claim they cannot make any money on the low reimbursements (known and maximum allowable cost) that drug plans pay. But they also aren’t willing to forgo all the potential customers, so they hope you don’t notice the prices are higher than what they agreed to in their contract. Basically, the store gets reimbursed its contractual amount and charges a co-pay far more than the customer was supposed to pay.

The author left without her prescription, which she bought elsewhere. The moral of the story: be on the lookout for price gouging. It may not be part of the contract, but some stores will try to charge higher prices rather than sell a particular drug cheaper than they feel it’s worth.

Oh by the way, lawmakers in Oklahoma are trying to make it easier for drugstores to engage in this behavior even if it violates their contract terms. Read my Health Alert, These Politicians Must be on Drugs (or Maybe They Should Be).

Obamacare’s Unintended Consequences: People Buy Short-Term Policies


woman-with-childObamacare has driven individual health insurance premiums up so high people are forgoing comprehensive coverage in favor of short-term policies:

Robin Herman, the 34-year-old owner of a marketing firm in San Francisco, bought a short-term policy in December. The monthly cost of her short-term coverage, plus conventional ACA-compliant plans for her two children, is roughly one-quarter of what she would have paid for conventional health plans covering all three of them, she says.

“This is saving me a ton of money for the year,” she said, despite the penalty. Plans that comply with the health law’s rules cost more than her old pre-ACA policy and are “just not affordable,” she said.

(Anna Wilde Mathews,” Sales of Short-Term Health Policies Surge,” Wall Street Journal, April 10, 2016.)

Sales of these policies have doubled or more since 2014, according to sources cited by Ms. Mathews. This surely feeds into the problem that Obamacare enrollees are sicker than expected: The healthy candidates are choosing these policies.