GDP: Health Services Grew Almost 12 Times Faster Than Non-Health GDP

 

BEAThe media noted today’s third estimate of second quarter Gross Domestic Product was revised upward from the second estimate. It was a sharply revised estimate of health spending that led to the higher overall estimate. While the estimate of GDP was revised up by $12.9 billion, the estimate of health services spending was revised up by $16.2 billion. Spending on services other than health services was revised down.

In real (inflation-adjusted) dollars, services grew 2.9 percent (annualized, seasonally adjusted) from the first quarter. As a large component of services, health services grew 7.1 percent.  While real GDP growth was 1.4 percent, once health services is stripped out, non-health GDP grew just 0.6 percent.

See Table I below the fold:

A Modest Proposal To Reduce The Price of EpiPens

 

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

Posturing politicians on Capitol Hill conducted a hearing a few days ago, in which they grilled Heather Bresch, CEO of Mylan. N.V., which makes EpiPens. Prices of EpiPens have skyrocketed in the last few years. According to Aaron E. Carroll, writing in the New York Times, the real (inflation-adjusted) price of EpiPens has risen 4.5 times since 2004.

The politicians were more interested in wagging their fingers and tut-tutting at Ms. Bresch for the amount of money she has made, than actually figuring out a way to lower the price of EpiPens. (By the way, Ms. Bresch testified she has no intention of reducing prices in response to their badgering.) 

Hillary’s Campaign to Lower Drug Costs is a Real Downer

 

captureSpending on prescription drugs has grown tremendously over the past few decades. This is mainly due to the increase in the number of diseases and conditions treated using drug therapy. The truth is: most drugs are dirt cheap! However, a small portion — maybe 1 or 2 percent — are rather costly. As a result of that small percentage, drug prices have become a campaign issue accompanied by plethora of bad ideas.

Early in his campaign, Donald Trump even came out with some doozies, such as having the government negotiate drug prices for Medicare and importing drugs from abroad (that is: importing other countries’ price controls). He has since ceded these populist talking points to Hillary in favor of free-market ideas. He now advocates getting government out of the way, allowing competition to flourish. He understands that bureaucratic red tape at the U.S. Food and Drug Administration often prevents competition from holding drug prices in check.

Hillary Clinton is another story.

Premiums For Employer-Based Family Health Insurance Up One Fifth Since Obamacare

 

The Kaiser Family Foundation/Health Research Educational Trust has released its 2016 Employer Health Benefits Survey. The survey covers almost 1,900 private and public (non-federal) employers. The results show Obamacare has not reduced premiums, which have increased by one fifth for family plans since 2011.

The good news is the proportion of beneficiaries with “High-Deductible Health Plans with a Savings Option” (HDHP/SOs) has increased from 20 percent to 29 percent in two years. Only four percent of covered worker were in such plans in 2006, and 17 percent in 2011. (In 2015, a HDHP had to have a minimum deductible of $1,300 for single coverage and $2,600 for family. The “Savings Option” would be a Health Savings Account or Health Reimbursement Arrangement.)

These plans were first available in 2005, and correspond with an immediate slowdown in the rate of growth of employer-based benefits. In real terms (adjusted for changes in the Consumer Price Index), dropped from double digits in the early 2000s to single digits after 2005 and bottoming out at an increase in premium of just two percent in 2009. There was an immediate jump of 11 percent in 2011, Obamacare’s first year. Since then, both High Deductible Health Plans and the burden of Obamacare have continued to grow. This struggle has resulted in mid-single digit premium growth.

See Figure I below the fold:

A Health Care Legacy Moonshot for Obama

 

vaccine-shot(A version of this Health Alert was published by Forbes.)

President Obama has an opportunity to win a positive legacy in health care. Although his attempt at payment reform, Obamacare, has failed in public opinion, he is also encouraging important initiatives in medical innovation. The Cancer Moonshot and Precision Medicine Initiative represent investments in innovation that can bring big payoffs. However, they will not succeed fully unless the Food and Drug Administration allows patients access to new therapies. Legislation modernizing the FDA, the 21st Century Cures Act, is being fumbled inches away from the Congressional end zone. Presidential leadership is needed.

More Than One In Five Americans “Churn” Through Health Coverage Within A Year

 

Census2The U.S. Census Bureau has just released the Current Population Report’s Health Insurance Coverage in The United States, 2015. This report sits alongside the Centers for Disease Control and Prevention’s National Health Interview Survey as a critical source of understanding changes in health insurance in recent years.

The report discusses coverage during the three years from 2013 through 2015, so it does not reveal the large increase in employer-based coverage since the great recession. During this shorter period, there was an insignificant gain in employer-based coverage, and a large increase in persons dependent on Medicaid, the joint state-federal welfare program that provides health benefits to low-income residents. The number of people dependent on Medicaid for at least part of the year increased from 55 million in 2013 to 62 million in 2015. (Almost the entire increase took place in 2014, Obamacare’s first year of implementation.)

Medicare Accountable Care Organizations Continue to Underwhelm

 

Confident DoctorsMedicare’s Accountable Care Organizations (ACOs), which launched in 2012, were supposed to introduce a significant shift away from paying for “volume” to paying for “value.” Critics of Fee-For-Service medicine claim this system causes physicians to do more to patients so they get paid more, notwithstanding benefits to patients. Those critics seldom identify the moral hazard associated with third-party payment (by insurers or governments) as a cause of too many medical tests or procedures.

So, they introduced ACOs, which would increase quality and cut costs by getting rid of straight Fee-For-Services and putting more financial risk on physician groups. If the physician groups pass certain thresholds of cost and quality, they can pocket some of the savings. The 2015 results for Medicare’s ACOs have been reported, and the results are underwhelming:

CPI: Medical Care Prices Rose 10 Times More Than Non-Medical Prices in August

 

BLSThe Consumer Price Index rose 0.2 percent in August. Medical prices, however, continued their upward march, increasing by one full percent – 10 times more than non-medical consumer goods and services. If prices for medical care had been flat, the CPI would have risen by just 0.1 percent. Hospital services, prescription drugs, and health insurance stand out even within medical care. Price increases for medical care have contributed 42 percent of the overall CPI increase.

Over the last twelve months, prices for medical care have increased seven times faster than prices for non-medical items in the CPI. Price increases for medical care have contributed 36 percent of the overall CPI increase.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is flat, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers are seeing no relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.

(See Figure I and Table I below the fold):

Consumer Driven Health Care Gets Messy: That’s the Good News

 

According to a new health benefits survey by the Kaiser Family Foundation, premiums for employer coverage rose only about 3% in 2016. The low increase was due to rising deductibles. A slight majority (51%) of workers have a deductible of $1,000 or more. Two-thirds of workers in small firms do, while slightly less than half of large firm workers (45%) are covered by $1,000 or higher deductible.  About 10 years ago, only 4% of workers were enrolled in a high-deductible plan with a savings component. Now, nearly one-third are. [See the figure.]

PPI: Health Prices Up Among Zero Overall Inflation

 

BLSAs with July’s Producer Price Index, health price inflation is no longer eye-popping, but still higher than overall PPI, which was flat in August. Hospital outpatient care stands out, with prices having risen 1.1 percent, monthly. Other price increases were moderate, but only prices of X-Ray machines and electromedical equipment declined.

This is also true over the last twelve months. Pharmaceutical prices especially stand out, even though they have risen moderately for a few months. It will take a while for the trend of high prices hikes from a few months ago to break down. Nursing homes, for which prices rose 3.0 percent, might replace drug makers as the whipping boy for high health prices, but they have a long way to go.

(See Table I below the fold.)