From all of us at the NCPA, we wish you and yours a happy and safe Thanksgiving!
Indeed, real GDP growth was revised upwards from 3.5 percent to 3.9 percent, but health spending was not really changed from the advanced estimate. In chained (2009) dollars, GDP grew by $153.7 billion in the 3rd quarter, but health care comprised only 8.6 billion of that growth (Table 3). If we go back before Obamacare kicked into high gear, the increase from the 3rd to 4th quarters in 2013 was $18.7 billion — more than twice as much, and both figures are seasonally adjusted.
The Commonwealth Fund has published another survey of health care across countries. The Commonwealth Fund’s widely reported surveys, while thorough, are frustrating because they invoke abstractions (for example “universal health insurance coverage“) to explain why the U.S. health system underperforms.
The latest survey should be able to get around this problem because it surveys only people aged 65 years and older in 11 developed countries. Because almost all American seniors are on Medicare — a single-payer, government-run program that is mostly funded by taxpayers — we might expect the Commonwealth Fund to find that the U.S performs about as well as other countries.
No such luck. Kaiser Health News featured the survey’s conclusions about the challenges American seniors have, relative to their peers in other countries, in getting access to care:
Americans older than 65 are more likely to have chronic illnesses and to say they struggle to afford health care — despite qualifying for the federal Medicare program — than are seniors in other industrialized countries, according to a study by the Commonwealth Fund published Wednesday in the journal Health Affairs.
The media often manage to pluck criticisms of U.S. health care out of the Commonwealth Fund surveys that are not quite as straightforward in the reports themselves as they appear in the stories about the reports. This case is no exception.
Consultants at Avalere have confirmed that which I previously suggested: Obamacare plans that won market share in 2014 are hiking their premiums significantly. Here’s a vignette:
In 2014, Jane enrolled in the lowest cost silver plan in her region with a $318 monthly premium. Jane earns approximately $17,500 a year (150 percent of the federal poverty level) and qualifies for a subsidy that caps her monthly premium at 4 percent of income. Because the plan she purchased was priced below the benchmark used to calculate subsidies, Jane pays only $18 a month for insurance in 2014.
In 2015, Jane does not go back to the exchange to re-enroll in coverage and instead is renewed automatically in her existing plan, which has a new premium of $380. While her premium has increased, Jane’s monthly subsidy will be the same as in 2014, $300. This means Jane will pay $80 a month for insurance, a nearly 400 percent increase over 2014. While Jane’s eligibility for premium tax credits will be reconciled when she files her tax returns in April 2016, Jane will experience higher monthly costs until she receives her refund.
It looks like I am zigging when the smart money is zagging. I’ve written that Obamacare will struggle to reach the Administration’s target of 9 million in 2015. At last week’s “Wall Street Comes to Washington” roundtable, sell-side analysts Carl McDonald of Citi and Ralph Giacobbe of Credit Suisse predicted that 2015 enrollment in Obamacare exchanges will reach 11 million:
But the analysts noted continuing challenges for insurers, from improving what McDonald called a “pretty poor” first-year effort to inform consumers about which doctors and hospitals are in their networks, to controlling spending as high-priced drugs hit the market.
Insurers are also projecting that this year’s enrollees will be younger and healthier than those who signed on in 2014, when the average age was 41, McDonald said. That was a problem for insurers who based this year’s premium rates on the expectation they would see younger customers, he said.
The media seems to think that Obamacare’s second open enrollment is going just swimmingly. (How could it be going worse than last year’s?)
Unfortunately, the Administration still isn’t counting last year’s sign-ups accurately. Jonathan Cohn of The New Republic has called the Administration’s over-counting of Obamacare sign-Ups “inexcusable“. And that’s from one of Obamacare’s biggest fans.
What happened is that the Administration counted 400,000 dental-only plans as Obamacare plans. On November 10, the Administration announced that 7.1 million people signed up for Obamacare as of the end of October, but that included the dental plans. The correct figure is only 6.7 million. And this figure was not disclosed by the Administration, but dug out by Republican Congressional staffers.
Last May, we discussed Priority Review Vouchers, a type of intellectual-property right whereby the inventor of a drug for a rare disease, which is unlikely to be profitable because very few patients suffer from it, earns a marketable voucher that it can sell to another drug-maker that it can cash in at the FDA for a priority review of another new drug.
In the previous case, Knight Pharmaceuticals figured it could sell the voucher for $125 million to $300 million. Well, the market is now proven to function. Gilead Sciences has paid Knight $125 million for the voucher.
Gilead is the firm criticized for the prices it charges for Hepatitis C drugs. It appears to be putting those revenues to good use. The NCPA believes that fundamental reforms to the FDA’s regulatory obstacles to innovation are necessary to speed up innovation and reduce the prices of drugs. Until them, the Priority Review Voucher is a valuable work-around.
An unprecedented number of employers stopped offering group health benefits this year, according to a recent survey of over 1,000 insurance brokers conducted by Benefitter. In 2014 alone, more than 3 out of 4 brokers had employer clients who dropped health coverage and instructed their employees to purchase their own insurance on the public exchange. Early signs indicate this trend may only accelerate in 2015, as 17% of brokers expect at least 25% of their clients to drop coverage in the coming year.
“As we enter open enrollment for the public market, it’s becoming more apparent that individual rates are often much more affordable than group rates. It’s no surprise that many business owners are responding to continued group rate increases with their feet,” says Benefitter CEO, Brian Poger.
However, I have seen no evidence that any manufacturer of an experimental drug is taking advantage of these laws to supply medicines to desperately ill patients in these states. This is understandable: Doling out the medicines to needy patients threatens the sanctity of clinical trials and, therefore, FDA approval.
Congress needs to reform the rules governing the FDA to make use of more real-world evidence in approving new medicines. This is statistically challenging and not to be undertaken lightly. Nevertheless, if more states pass “right to try” laws, I expect that Congress will see the necessity of action.
A version of this Health Alert appeared at Forbes.
Robert Pear of the New York Times recently described the “symbiotic” relationship between the Obama administration and health insurers. It was not always so:
But since the Affordable Care Act was enacted in 2010, the relationship between the Obama administration and insurers has evolved into a powerful, mutually beneficial partnership that has been a boon to the nation’s largest private health plans and led to a profitable surge in their Medicaid enrollment.
“Insurers and the government have developed a symbiotic relationship, nurtured by tens of billions of dollars that flow from the federal Treasury to insurers each year,” said Michael F. Cannon, director of health policy studies at the libertarian Cato Institute.
The entire article is a depressing read. And it is not just the fact that insurers are profiting from Obamacare. It’s that Obamacare is motivating health insurers to consider other harmful public policies. Most glaringly, health insurers appear to be inches away from endorsing price or profit controls on research-based pharmaceutical firms. (The pharmaceutical industry’s response to this threat is also somewhat short-sighted, but that is another story for another Health Alert.)
This poses quite a challenge for health reform after Obamacare is repealed by the next president in January 2017. Just as Ronald Reagan’s 1981 tax reforms did not drop out of the sky when he took office but had been developed in Congress for years by Jack Kemp and William V. Roth, the newly elected Congress has the opportunity and responsibility to pursue a consensus on post-Obamacare health reform that puts patients’ needs in front of politicians’ delusions, so the next president has something with which to replace Obamacare.