Category: Health Care Costs

Employer-Based Benefits: Health Spending Up 3.9 Percent in 2013

The Health Care Cost Institute, a collaboration of four major insurers, has published its 2013 Health Care Cost and Utilization Report and companion Out of Pocket Spending Trends 2013, which discusses cost trends for people with employer-sponsored insurance (ESI):

In 2013, health care spending for the national ESI population grew 3.9%. This growth rate was similar to the rates observed in 2011 (4.0%) and 2012 (3.7%). Spending growth for 2013 was driven mainly by rising prices rather than by utilization, as use of many services declined.

That is mixed news. Prices for outpatient services increased 5.8 percent and by 21.1 percent for brand-name drugs.

Per Patient Spending Higher in Hospital-Owned Physician Groups Than in Physician-Owned Groups

Hospitals and multihospital systems have been acquiring medical groups and physician practices at a rapid pace. One cause is the financial incentives provided by Obamacare for physicians to join hospital-affiliated accountable care organizations (ACOs).

Advocates claim that consolidation builds integrated delivery systems (professional, facility, laboratory, and pharmaceutical services) that lead to care that is better coordinated. This reduces duplication of tests and treatment and lowers total expenditures. Health economist James C. Robinson investigated the latter claim using data obtained on total expenditures for care provided to 4.5 million between 2009 and 2012. These patients were covered by commercial HMO insurance and excludes individuals covered by commercial PPO insurance, Medicare, or Medicaid.

The table below presents trends in total expenditures per patient between 2009 and 2012.

Obamacare Premiums Increased Dramatically for Every Age Group in 2014

HealthPocket, an online insurance broker, has measured the increase in premiums for every age group in Obamacare versus the pre-Obamacare individual market. Their conclusion: Premiums increased by double digits for every age group.

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Price Transparency: Organizations to Watch

George Washington University’s Master of Public Health program has complied a nice list of fourteen “organizations to watch” because they are moving the ball on price transparency. The woman who wrote the article, Emily Newhook, sent an email to NCPA bringing it to our attention. Unfortunately, we can hardly ever make time and space to profile lists compiled by other parties, but I decided to give this one a boost for a number of reasons.

First, it is exciting to see a school of public health get interested in this issue in a positive way. It was not too long ago that any proposal that included Health Savings Accounts or similar tools that removed healthcare dollars from insurers and returned them to patients brought forth wails of anguish from the public-health community about “barriers to care” and the like. Now, according to Ms. Newhook’s description: “This kind of price transparency empowers consumers to comparison shop for health care as they would a car, house or television, forcing higher priced providers to lower their prices to stay competitive.” This is unusual language for a school of public health, and is to be congratulated.

5 Myths about Cancer Care

PIC2In this month’s Health Affairs, leading health economists Dana P. Goldman and Tomas Philipson challenge five myths about cancer care. To the right we have an infographic that explains them very clearly.

The most economically interesting one is the fourth. This appears to challenge the notion that we should be skeptical about paying high prices for therapies that might buy only a short time of good life. (In health-economics, we use terms like Quality-Adjusted Life Year [QALY] and Disability-Adjusted Life Expectancy [DALE].)

The classic approach to these calculations was illustrated by Professor Christopher Conover in a recent article:

…[M]ost of the gains were concentrated in the 35-64 age group, which narrows the plausible range of what the average gain in life expectancy might be. Someone who is 60-64 is 7.3 times as likely to die in a given year as someone age 35-39. The reason this matters is that there are reasonably well-accepted rules of thumb about the value of what’s called a quality-adjusted life year (QALY).

Hospital Administrative Costs Higher In U.S. than Other Countries

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The Commonwealth Fund has sponsored yet another study that concludes that the U.S. health system is less efficient than others. This time, the measurement is specifically hospitals’ administrative costs. As always, it recommends single-payer, government monopoly as the solution. Readers of this blog know that I am not about to defend hospitals’ bloated administrative costs. However, the Commonwealth Fund’s scholars go way off-base when it comes to capital costs:

Lawmakers Should Ask the FDA, Not the Manufacturers, Why Generic Drug Prices are Skyrocketing

U.S. Representative Elijah Cummings and U.S. Senator Bernie Sanders have asked 14 manufacturers of generic drugs why prices for some of their products have multiplied hundreds or thousands of times in the last few years:

  • Albuterol Sulfate, used to treat asthma and other lung conditions, increased 4,014% for a bottle of 100 2 mg tablets.
  • Doxycycline Hyclate, an antibiotic used to treat a variety of infections, increased 8,281% for a bottle of 500 100 mg tablets.
  • Glycopyrrolate, used to prevent irregular heartbeats during surgery, increased 2,728% for a box of 10 0.2 mg/mL, 20 mL vials.

Administration Plans to Make Insurer “Bailout” Payments Illegally

Informed observers believe that the U.S. Department of Health & Human Services (HHS) will make “bailout” payments to health insurers under Obamacare’s risk-corridor program, despite a growing body of legal opinion that such payments would be illegal. As previously discussed at this blog, both the Government Accountability Office and the Congressional Research Service have held that the Administration needs Congress to appropriate funds in order to make risk-corridor payments.

For 2014, risk-corridor payments may have inadvertently been wrapped up in the general appropriation for HHS. However, House Republicans were not really on top of the issue back then. The Continuing Resolution for 2015 will likely contain language preventing risk-corridor payments. This is an issue on which NCPA has exerted significant influence. I testified to the House Committee on Oversight and Government Reform on June 18, and NCPA has published that testimony as an Issue Brief: Risky Business: Will Taxpayers Bail Out Health Insurers?

60 Percent of Commercial In-Network Payments are Value-Oriented. Does It Matter?

The Catalyst for Payment Reform has released this year’s Scorecard for Payment Reform, which reports a dramatic increase in employer-based provider contracts that are “value-oriented”. “The 2014 Scorecard shows a 29 percentage point increase over 2013, when just 11 percent of payments were value-oriented.” However, the details seem to deflate the potential for this transformation:

  • Many providers still don’t have financial “skin in the game.” Just over half (53 percent) of the payments that are value-oriented put providers at some financial risk if they fail to improve care or spend over budget; 47 percent do not put providers at financial risk.
  • Much of value-oriented payment is in “pay-for-performance” arrangements with providers, offering only potential financial reward and no financial risk.
  • A very small percentage of dollars flow through shared-risk arrangements and bundled payment (just 1 percent and .1 percent, respectively), despite the fact that these methods have strong potential to contain costs and improve care.

Federally Funded Rate Review Saved Less than One Percent of Premiums — At Most

The U.S. Department of Health & Human Services (HHS) has produced a report cheerleading the results, so far, of the $250 million it is giving to states to impose “rate review”. The results are underwhelming: $703 million dollars cut from $110.5 billion of premiums last year. Because it comes from a self-congratulatory press release, this reduction of less than one percent of premium must be the best estimate they could get, after strangling the data until it confessed to something.

Why so small? Rate review is the polite term for political inquisition of health insurance premium changes. The federal government did not used to get involved in this. Under Obamacare, HHS has decided to question premium hikes of 10 percent or more, and subsidize state insurance regulators who have the power to roll back premium hikes.