Why are Health Insurers Persecuting Innovative Drug-Makers, Instead of Bloated Hospitals?

 

One constant refrain heard in national health policy circles is the need for “integrated” or “coordinated” care. To be sure, I have never heard anyone speak favorably of “disintegrated” or “un-coordinated” care. While there are many good-faith practitioners who do want to integrate and coordinate care for patients, these terms are often used to camouflage a more straightforward way to raise prices. Here’s an example from Bloomberg BusinessWeek:

money-burdenFor the past four years, Pennsylvania insurance company Highmark has watched its bills for cancer care skyrocket. The increase wasn’t because of new drugs being prescribed or a spike in diagnoses. Instead, the culprit was a change that had nothing to do with care: Previously independent oncology clinics and private practices have been acquired by big hospital systems that charge higher rates, sometimes three times as much, for chemotherapy drugs. “The site of care and the type of service provided does not change at all,” says Tom Fitzpatrick, Highmark’s vice president of contracting. “The only significant difference that we primarily see is the [patient] gets a wristband placed on them.”

Obamacare Architect: No Tax Credits for Federal Exchanges

 

Halbig versus Burwell is the famous lawsuit that claims that Obamacare federal health insurance exchanges cannot pay tax credits to health insurers. The plain language of the law is that only state-based Obamacare health insurance exchanges can channel these tax credits. The real champions of this argument are Michael Cannon and Jonathan Adler of the Cato Institute, who recently encapsulated their argument in the Wall Street Journal.

The question is still unsettled. Last week, two different Circuit Appeals Court panels came to different conclusions: The DC Circuit agreed that the subsidies could only go to insurers in state exchanges; while the 4th Circuit ruled that they could go through federal exchanges too.

The Administration is horrified that the Supreme Court could decide that it is illegal to subsidize insurers in federal exchanges. Most states have declined to set up their own exchanges. Further, some of those that did are closing up shop.

Hits and Misses

 

Happy Older Couple in Beach Chairs

Heart attacks are down 20 percent among seniors. No changes for the middle aged.

Fist bumps and high fives are more hygienic than handshakes.

Doctors are almost twice as likely to be organ donors as general public is.

Google and Novartis ink deal to put smart sensors in contact lenses.

Patents for Apple’s iWatch laid open: It will integrate “plethora” of health apps.

CMS Views Medicare Solvency through Rose-Colored Glasses

 

The 2014 Trustees Report was released on Monday, July 28th. The Center for Medicare and Medicaid Services (CMS) press release paints a rosy picture, but fails to discuss the bad news that is hidden in plain sight.  According to the cheerleaders at CMS, the health of the Medicare Hospital Insurance Trust Fund has improved since last year. The Trust Fund purportedly will remain solvent until 2030 — four years longer than projected in the 2013 Trustees’ Report. The press release partially credits the 2010 landmark law, the Patient Protection and Affordable Care Act (ACA) with controlling the growth of Medicare spending.

The Trustees Report is supposed to project future Medicare spending based on current law. But, that also means the official projection includes provisions meant to slow spending growth that the Trustees know are unlikely to occur. In years past, the Trustees tended to ignore these uncomfortable facts. Around 2010 the Office of the Actuary at CMS took the unprecedented step of producing an Alternative Scenario report explaining that the assumptions in the Trustees Report were unrealistic, and the projection were most assuredly wrong. That raised eyebrows in the policy world. This year, the alternative scenarios (i.e. conditions that are more likely to occur) crept up from the appendix (at the back) and landed uncomfortable on page 2, with the authors explaining:

Should Politicians Fix the Price of Sovaldi?

 

A version of this Health Alert appeared at Forbes.

Gilead (NASDAQ: GILD) has become the whipping boy du jour for the forthcoming Obamacare-driven cost explosion in government and private health spending. Apparently, everything was going swimmingly until Gilead — right out the blue! — dropped a cure for Hepatitis C on the market and threw everyone’s spending projections into a tizzy.

Politicians and the health insurance industry have embarked on a high-profile campaign to shame Gilead for the price of its new wonder-drug, Sovaldi, which can add up to $84,000 for a course of treatment. If successful, this campaign will have terrible long-term consequences for medical innovation.

Thursday’s earnings report by Gilead confirms that Sovaldi is blowing the doors off. About 70,000 patients have already received treatment in the U.S., and a further 10,000 in Europe. Worldwide, sales for the first half have amounted to $5.75 billion, almost half the company’s revenue. That revenue comes from health insurers and governments, so it is not surprising that they are scrutinizing the issue.

Senators Wyden and Grassley have requested documents from Gilead respecting its acquisition of Pharmasset, the company which originally developed the medicine that was to become Sovaldi. This is a fishing expedition that purports to have the objective of determining exactly how much Pharmasset and Gilead spent on researching and developing Sovaldi. However, this question cannot be answered. Further, it is irrelevant to the value Sovaldi delivers.

Obamacare Enrollment is Out of Control

 

Obamacare supporters have cheered an article in the New England Journal of Medicine that purports to show that 10.3 million people obtained coverage through June 30 due to Obamacare. Wow! That’s, like, over two million more than the Administration reported after the end of open enrollment in April! The article is essentially a re-purposing of the Gallup-Healthways surveys of the uninsured (which I have criticized) for an academic audience.

Let’s accept that after open enrollment, over two million more people have signed up for taxpayer-subsidized Obamacare coverage, either via health-insurance exchanges or Medicaid. Consider:

  • The Government Accountability Office recently sent a dozen “secret shoppers” to Obamacare exchanges, armed with false information about their eligibility for enrolment. Eleven of them were approved and enrolled.
  • Weeks after the open enrollment closed, the “back end” of Obamacare’s information-technology infrastructure was yet unbuilt; and the Administration has declined to report on its progress so far.

Paging Dr. Google

 

Laptop and StethoscopeThe Wall Street Journal reports that Google has begun a project called the Baseline Study to collect individual health information and correlate this with diseases conditions over time. The Google project leader, Andrew Conrad, is best known for his work on quick, cheap HIV screening of blood donations. At Google, Conrad supervises a team of 70-to-100 people, made up of physiologists, biochemists, and experts in optics, imaging and molecular biology. The goal is to amass a behemoth database of hundreds of different sample observations from thousands of individuals, including biology, genetics, blood chemistry, etc. and analyze how it correlates to disease patterns. According to the Journal:

The study may, for instance, reveal a biomarker that helps some people break down fatty foods efficiently, helping them live a long time without high cholesterol and heart disease. Others may lack this trait and succumb to early heart attacks. Once Baseline has identified the biomarker, researchers could check if other people lack it and help them modify their behavior or develop a new treatment to help them break down fatty foods better…

Headlines I Wish I Hadn’t Seen

 

Abundance of Cookies18 percent of U.S. kids are obese, same as a decade ago.

This year’s fine for disobeying Obamacare’s individual mandate up to $12,240.

VA hospital waiting-list fix will cost $17.6 billion over three years.

Oregon Medicaid expansion caused months-long waits for care, emergency room surge.

Government Accountability Office stings Obamacare: 11 of 12 fake applications approved and enrolled.

Consumer-Driven Health Care Round Up

 

Lots going on in the Consumer-Driven space these days.

AHIP released its latest version of the annual HSA enrollment census. The results are impressive, though still understated since they only received responses from 71% of the companies. It finds enrollment growth of about 15% every year, now reaching 17.4 million. Perhaps the most interesting aspect is the state-by-state breakdown of market penetration. The old Red State/Blue State divide does not hold up when it comes to market behavior. Some of the states with low enrollment include Mississippi, Alabama, and South Carolina, while some of the highest enrollments are found in Minnesota, Illinois, and Maine.

AHIP also released, along with the American Bankers’ Association, a report on HSA account activity. One notable tidbit from this report is the size of the contributions, both personal and from employers. The average personal contribution in 2012 was $2,337, and the average employer contribution was $1,142. Also interesting is that only 19% of all the accounts had $0 balances at the end of the year, indicating that most people are retaining funds in their accounts at least for future use, if not for long-term savings.

Dr. Ben Carson has become a passionate advocate for HSAs, seeing them as a viable alternative to much of Obamacare. An op-ed he wrote has been widely circulated.

How Good is Obamacare for the Healthcare Industry?

 

Last Wednesday, NCPA hosted a briefing on Capitol Hill, where professors Tom Saving and Andy Rettenmaier discussed the findings of their latest issue brief on health spending and the Affordable Care Act. Part of their presentation was an analysis of the stock-market performance of companies in the health sector in the wake of Obamacare. As the chart below shows, the healthcare sector has outperformed the overall market on either side of the passage of Obamacare. Obamacare has not punished listed healthcare firms, and may well have boosted them.

qw