Regulating Mobile Health Apps under a 38-Year-Old Law: It’s Time for Congress to Act

 

A similar version of this Health Alert appeared at Forbes.

1976: The United States celebrated the bicentennial of our independence; Jimmy Carter was elected president; young men wore bell bottoms and middle-aged ones wore leisure suits; advertising encouraged women to smoke Kool cigarettes. And the Food and Drug Administration (FDA) first regulated medical devices.

Although we fantasized about having Captain Kirk’s communicator or Dr. McCoy’s tricorder, nobody would have known what to do with an actual smartphone or tablet, had they existed in those days. Today, increasing numbers of us use them to keep track of medical information, to remind us to take our meds or do countless other tasks important to our health. In 2013, the Apple app store had 97,000 mobile health apps, and over 60 percent of physicians were using tablets.

And yet, the FDA is still regulating these 21st century technologies under legislation passed when Wings’ Silly Love Songs topped the pop music charts. It’s past time for Congress to amend the Food, Drug and Cosmetic Act to clarify the FDA’s regulatory authority over these new tools for our health.

According to the 1976 amendments, a medical device is an “instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory…” [21 U.S.C. 321(h)]. That does not really give the FDA much direction with respect to apps, smartphones and tablets, does it?

Left to its own devices (excuse the pun), the FDA has actually done a very effective job of letting the industry and patients know how it intends to regulate these new technologies. Dr. Jeffrey Shuren, Director of the Center for Devices and Radiological Health, and Bakul Patel, who is responsible for writing the FDA’s final guidance, promised a light regulatory touch. The final guidance was published in September 2013, at which time the FDA noted, “The agency has cleared about 100 mobile medical applications over the past decade; about 40 of those were cleared in the past two years.”

CROmnibus and Cronyism for Blue Health Plans?

 

Despite the end of Obamacare’s “bailout” for health insurers, some of our friends who seek to repeal and replace Obamacare insist on finding a crony capitalist under every bed and in every closet.

Yuval Levin, at National Review Online, appears to have been the first to identify an adjustment to an insurance regulation, buried in the CROmnibus, as “cronysism” for non-profit Blue Cross and Blue Shield health plans. This has been picked up by Louise Radnofsky at the Wall Street Journal and Timothy P. Carney at the Washington Examiner.

Mr. Carney notes that there is “no clear right or wrong in this matter,” but criticizes the adjustment for “providing Obamacare relief for exactly one corporation.” However, the relief does not apply to “exactly one corporation.” It applies to all Blue Cross and Blue Shield plans.

Bye, Bye “Bailout”: CROmnibus Takes a Small but Important Bite out of Obamacare

 

The CROmnibus, with which the lame-duck Congress keeps the government open in 2015, takes small but important steps to repeal Obamacare. For the short term, the most important anti-Obamacare achievement is eliminating taxpayers’ liability for Obamacare’s risk corridors, often described as a “bailout,” to health insurers participating in Obamacare’s exchanges.

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In June, I testified before the House Oversight and Investigations Committee about this insurance “bailout.” In that testimony, I advised Congress to define a limited liability to the program. So, budget neutrality is a better result for taxpayers than I had expected. Also, the CROmnibus prevents any other funds controlled by the Centers for Medicare and Medicaid Services from being used to fund risk-corridor payouts. This is a significant win for taxpayers.

A year ago, I described how Obamacare’s risk corridors created an unlimited liability for taxpayers to compensate health insurers who lose money in Obamacare’s exchanges. Although risk corridors take money from unexpectedly profitable insurers and hand it over to insurers with unexpected losses, the program does not necessarily balance. That is, if there are more insurers that lose money than make money, the risk corridors look to taxpayers to make up the difference.

Hiring in Ambulatory Clinics Back on Track in November; Other Health Jobs Lagging

 

Last Friday’s employment report caused some joy in the land: 321,000 jobs were added in November. My Forbes colleague Bruce Japsen cheered an “Obamacare jobs bump” in health services. If true, this would be an example of Bastiat’s broken-window fallacy: Broken windows create employment for glaziers, so the government should encourage breaking windows.

Similarly, Obamacare “broke” health care. So, we cannot be sure if jobs added in health care are adding value to society, or just a response to Obamacare’s making health care even more inefficient than it was.

However, there was no Obamacare jobs boom in November. As shown in Table 1 and Table 2, jobs in health care increased by 0.19 percent from October. Non-health nonfarm civilian jobs increased 0.23 percent. So, healthcare jobs increased at a marginally slower rate than other jobs.

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How Obamacare Hurts Its Beneficiaries: Two Vignettes

 

This week, the mainstream media ran two stories about two Obamacare “beneficiaries” who were actually victims.

First, a woman whose husband is already extremely sick, and was subject to the risk of being unable to buy health insurance in the individual market if he lost his employer-based benefits. That was a legitimate problem before Obamacare. NCPA’s proposed solution is health-status insurance, or “insurance against becoming uninsurable”, a type of re-insurance. Obamacare’s solution is a federally regulated health-insurance bureaucracy:

The transition to Obamacare ― at least for a 59-year-old man and a 56-year-old woman in south Orange County ― wouldn’t be quite that bad. But it would be, in three big ways, far rougher and more frustrating than I’d ever dreamed.

  1. Obamacare brought us new health insurance options, but cost us our more affordable plans.
  2. We learned patients, but we couldn’t keep our doctors.
  3. The Affordable Care Act saved us money this year, but it didn’t alleviate our concerns about obtaining affordable medical care.

Expanding Medicaid Will Not Expand the Economy or Create Jobs

 

Hospitals, especially, but Obamacare supporters generally, have been championing the idea that Medicaid expansion creates jobs. Not true, according to new research by Robert Book of the American Action Forum:

Expanding Medicaid may have many effects; however, we find that increased employment and economic activity are not among them. Instead we find that Medicaid expansion, if adopted by all states, would result in a direct net loss of up to $174 billion in economic growth nationwide over ten years, and would result in the loss of over 206,000 full-year-equivalent jobs for the years 2014 to 2017.

Wait Times for Health Care in Canada Doubled Since 1993

 

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This blog has discussed the evidence that Obamacare is reducing access to medical care. For those interested in the future of American health care, a look north of the border may be in order.

How Can Digital Health Startups Work with Health Insurers and Big Pharma?

 

A similar version of this Health Alert appeared at Forbes.

A Health Alert published in October noted that risk capital is fleeing or stagnant in most of health care. The exception is digital health. StartUp Health, a New York investor in new healthcare ventures, reported that $5 billion was raised for new digital health businesses through the third quarter, versus $2.8 billion in all of 2013. 2014 Q3 alone saw $1.7 billion raised, versus $946 million in 2013 Q3.

A Health Alert published in October noted that risk capital is fleeing or stagnant in most of health care. The exception is digital health. StartUp Health, a New York investor in new healthcare ventures, reported that $5 billion was raised for new digital health businesses through the third quarter, versus $2.8 billion in all of 2013. 2014 Q3 alone saw $1.7 billion raised, versus $946 million in 2013 Q3.

Where is all this capital coming from? Since 2010, the three largest investors in digital health are Merck’s Global Health Innovation Fund, Blue Cross Blue Shield Venture Partners (founded by the Blue Cross Blue Shield Association) and Qualcomm Ventures.

It is remarkable to see the venture arms of a leading research-based drug company, the largest association of health insurers, and the company that invented mobile technology all dominate this space.

For a digital-health entrepreneur seeking investment, this poses an interesting choice. Assuming you do have a compelling story, what are the advantages and disadvantages of dealing with one or another of these types of investors, especially the first two? This was the topic of a panel discussion at this week’s mHealth Summit, which included Wendy Mayer, VP of Worldwide innovation at Pfizer; and Jess Jacobs, Director of Innovation at Aetna.

With respect to the research-based pharmaceutical industry’s approach to investing in digital technology, Merck and Pfizer are pretty much at opposite ends of the spectrum. Merck has its own venture-capital fund, which effectively treats the parent company as a limited partner. It invests with other venture capitalists, and looks at the value of deals notwithstanding the parent company’s business strategy.

The Circular Firing Squad in U.S. Health Care

 

Who is to blame for the U.S. healthcare crisis? JAMA has published an opinion piece by three physicians illustrating a fundamental difficulty in identifying the causes of the healthcare crisis. Individuals construct “casual stories” to assign blame. Subjective narratives gain momentum among researchers, policy makers, journalists, and the public:

  • Payers: Insurers create barriers to health care (high deductibles and gatekeepers) and excessive administrative waste (billing and coding).
  • Life Science Industry: Manufacturers saddle patients and payers with excessively high prices and underinvest in novel therapeutics.
  • Physicians and Hospitals: Financial incentives have led clinicians and health care organizations to focus on delivering volume over value. Hospitals overinvest in high margin services (cardiology and oncology) and underinvest in essential services (obstetrics and psychiatry).

National Health Spending Slowdown Underwhelms; Obamacare Hurting Middle Class

 

Last week, the media got more than usually excited about the latest National Health Expenditures (NHE) produced by actuaries at the Centers for Medicare and Medicaid Services (CMS). Modern Healthcare reported that “healthcare spending growth hit 53-year low in 2013,” noting that last year’s 3.6 percent growth was the lowest since 1960.

While it is literally true that last year’s increase was the lowest since 1960, growth in 2009 was only 3.8 percent, after 4.8 percent in 2008. You do not need a PhD in economics to conclude that the recession was likely the largest factor. It is hard to detect much more than noise in the annual changes since the recession hit. This is corroborated by the fact that 17.4 percent of Gross Domestic Product is accounted by health care ― exactly the same percentage as in 2009 and every year since.

Nevertheless, CMS’ actuaries allege that Obamacare’s provisions kept a lid on costs, citing:

  • productivity adjustments for Medicare fee-for-service payments;
  • reduced Medicare Advantage base payment rates;
  • increased Medicaid prescription drug rebates; and
  • the medical loss ratio requirement for private insurers.

Yes, Medicare spending dropped from 4.0 percent in 2012 to 3.4 percent in 2013. However, Medicare’s enrollment growth also slowed, and the Republican-driven sequestration also held back spending. Medicare spending per enrollee actually rose at the same rate as in 2012. It is hard to see Obamacare’s technocratic cost savings in these figures.