Health Spending Growth Moderate in Q2?

 

A recent report by actuaries working for the Centers for Medicare & Medicaid Services estimates that the rate of growth of health spending, subdued for many years, is picking up again: “The health share of US gross domestic product is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024.”

Readers of this blog’s discussion of regular releases of GDP estimates by the Bureau of Economic Analysis knew this was coming. This morning’s release of the advance estimate of second quarter GDP confirms health spending is chewing up more and more of a slow-growing economy.

Comparing Q2 2015 to Q2 2014, GDP increased by $570.5 billion, of which $106.7 billion was health services. That’s about one dollar in every five.

Comparing Q2 2015 to Q1 2015, health spending growth looks a lot tamer: $21.6 billion of $191.2 billion GDP growth. That is only one dollar in ten, about half of what it has been running at. However, the advance estimate is subject to significant revision. Last quarter’s slow growth of health spending may be idiosyncratic and/or inaccurate.

Only 20 – 40 Cents of Each Medicaid Dollar Benefits Recipients

 

(A version of this column was published by Inside Sources on July 29, 2015, and syndicated to other media.)

Medicaid is the largest means-tested welfare program in the United States. Jointly funded by state and federal governments, its spending grows relentlessly whether the economy is adding or shedding jobs. Its ostensible purpose is to ensure access to medical care for households without enough income to pay for it. Yet new research suggests that only 20-40 cents of each Medicaid dollar improves recipients’ welfare. On the other hand, 90 cents of every dollar spent on the Earned Income Tax Credit (EITC) does so.

Dr. Pharmacist Will See You Now

 

A recent article in the International Business Times outlines how pharmacists are pushing for a bigger role in health care. According to the article, Washington recently became the first state to recognize pharmacists as health care providers, and require that insurers reimburse them for consultations. Beginning next year pharmacists in Washington can bill insurers for appointments just like doctors and nurse practitioners.

Blurring Boundaries Between Biotech, Digital Health, Patient Care Show Need For Regulatory Reform

 

HSA(A version of this Health Alert was published by Forbes on July 29, 2015.)

When was the last time a billionaire entrepreneur en route to New York to raise a couple of hundred million dollars for biotech company stopped in Washington, DC to spend the afternoon in a panel discussion advocating the need for fundamental reform of the Food and Drug Administration?

Patrick Soon-Shiong, MD, founder of the NantWorks group pf companies, did just that on Monday afternoon. At the event, the Bipartisan Policy Center launched a report on advancing medical innovation in America. Written by a team led by former U.S. Senate Majority Leader Bill Frist, MD, and former Representative Bart Gordon, the report seeks support for a number of steps to reform regulatory processes and reduce the cost of medical innovation.

Medicaid’s Poverty Trap Illustrated

 

The tragic story of a disabled woman trapped in poverty by the hodge-podge of ways the U.S. finances health care illustrates why we need to sweep the whole thing away and give everyone a universal, refundable tax credit:

Regulating Genomic Research: Top-Down or Bottom-Up?

 

iStock_000012644846Small(A version of this Health Alert was published by Forbes on July 27, 2015.)

The next frontier in information technology is genomic sequencing, which will create the biggest of big data resources by 2025, according to experts in the field. It has been 15 years since President Clinton announced the first sequencing of the human genome; and it is now clear that researchers’ ability to free the unimaginable wealth of information locked inside our genomes is bumping up against constraints imposed largely by the federal government.

Investors Not Buying Anthem-Cigna Deal

 

Earlier this week, I wrote that merger arbitrage spreads indicated investors are not convinced the spate of recently announced takeovers among health insurers will close. Today’s news that Anthem (NYSE:ANTM) and Cigna (NYSE:CI) have agreed to takeover terms does not change that story.

Anthem’s original (hostile) bid was for $184 per share. Today’s is a minor bump, of $188 per share. The big difference is the mix of cash versus Anthem stock. The original bid was $126.22 in cash, versus only $103.40 today. Today’s bid includes 0.515 shares of Anthem stock, significantly higher than the previous bid.

The joint announcement claimed the new bid was at a premium of 38.4 percent of Cigna’s unaffected price. However, prices of both shares used for valuation in the announcement were May 28 closing prices.

Bush Scores on Medicare

 

Former Florida governor and presidential candidate Jeb Bush stepped outside the political comfort zone and endorsed dramatic reforms to Medicare:

Republican presidential candidate Jeb Bush said Wednesday that we ought to phase out Medicare, the federal program that provides health insurance to Americans once they’re 65.

“We need to make sure we fulfill the commitment to people that have already received the benefits, that are receiving the benefits,” Bush said. “But we need to figure out a way to phase out this program for others and move to a new system that allows them to have something, because they’re not going to have anything.”

Bush praised Rep. Paul Ryan (R-Wis.) for proposing to change Medicare to a system that gives seniors medical vouchers instead of paying their bills directly.

(Arthur Delaney & Jeffrey Young, “Jeb Bush says we should phase out Medicare,” HuffingtonPost, July 23, 2015)

That kind of straight talk deserves praise, especially as so many Americans have allowed a few years of Medicare Trustees’ reports, which show a trivial improvement in the program’s finances, to give them an excuse to dodge the need for reform.

2015 Medicare Trustees Report: No Pot O’ Gold in Medicare’s Future

 

The Trustees for Social Security and Medicare released their 2015 Trustees’ Report. Liberal stalwart, Mother Jones, proclaimed how wonderful it was. Political blogger Kevin Drum had an interesting argument showing how long-term medical cost projections were down from a decade ago. However, he also conceded that others think the current slowdown is temporary. Yet, if you look at the report itself the news isn’t very reassuring. In 2000, Medicare spending as a percentage of GDP was just above 2 percent. It’s now about 3.5 percent and will be four percent by 2023.

Will 11 Million Pay Obamacare’s Individual Mandate Penalty?

 

I recently took issue with lack of clarity in media coverage of a report by the IRS’ Taxpayer Advocate, which claimed 6.6 million paid Obamacare’s individual mandate penalty last year. I figured the total must be significantly higher, because each tax return would cover more than one individual.

In an e-mail to me dated July 21, 2015, Doug Badger, a longtime veteran of Republican administrations and whose Doug’s Briefcase blog is a must-read, pointed out that there can be more than one person in a household applying for Obamacare coverage:

….. a more accurate measure of household size could be obtained by dividing the number of people included in a completed applications by the number of applications.  That yields a factor of around 1.35, as opposed to 2.35.  I admit that is a rough approximation and there may be better ways of calculating the number of people affected by the tax on the uninsured.  In any event, your central point is exactly right: the number of people living in households that paid the tax is much greater than 6.6 million.