Congress’ Mental Health Mandate Debate is Voodoo Health Economics

 

Recent episodes of mass violence have raised awareness of severe mental illness. The perpetrators of these horrendous crimes were undoubtedly suffering from significant psychiatric problems. Policies that aim to prevent mass violence have found broad bipartisan support in Congress. During the month of August while Congress is in recess, some Member of Congress are hard at work crafting bills designed to reduce the likelihood of future violence.

Commonwealth Fund’s Red Herring on Obamacare Risk Selection

 

One of this blog’s consistent themes is that Obamacare encourages insurers to seek to enroll health people in exchanges, and shun sick people. A new study from the Commonwealth Fund insists that is not the case, concluding that “insurers aren’t seeking lower-risk customers outside the ACA exchanges as some feared,” and “the ACA’s insurance reforms are working in the individual market.”

I will share the study’s conclusion, then explain the red-herring hypothesis it is meant to test:

“Free” Canadian Health Care At $12,000 Per Family

 

The Fraser Institute has released a study estimating the costs of Canada’s government monopoly, a.k.a. single-payer health system. A typical Canadian family of four will pay $11,735 for public health care insurance in 2015. The study also tracks the cost of health care insurance over time: Between 2005 and 2015, the cost of health care for the average Canadian family (all family types) increased by 48.5 per cent, dwarfing increases in income (30.8 per cent), shelter (35.9 per cent) and food (18.2 per cent).

FI

Jindal’s Attack on Walker’s Health Plan is Off-Base

 

Yesterday, I addressed Governor Scott Walker’s health plan in largely positive terms. Governor Bobby Jindal, a competing Republican presidential contender, has launched a broadside against Walker’s plan, describing it as a “new federal entitlement.”

JW

The charge is way off-base. Governor Jindal proposed a health reform back in 2014, via his America Next policy shop. The point of contention is that Governor Jindal’s proposal would not offer everyone a refundable tax credit. Instead, it would eliminate the exclusion of employer-based health benefits from taxable income and replace it with a standard deduction.

I criticized the proposal when it was issued. True, it is an easier switch than a refundable tax credit. On the other hand, a deduction does nothing for low-income households – which means the welfare state continues to exist. Jindal himself proposed throwing $100 million more at states to fund their medical safety nets.

Bundled Payments, Barely Hatched, Go the Way of the Dodo

 

man-in-wheelchairLast month, I wrote about Accountable Care Organizations (ACOs), medical groups accountable to the federal government for management of healthy populations. Even Zeke Emanuel recognizes that they are failing. Dr. Emanuel advised Medicare should “lump together” all the services associated with a procedure, such as a hip replacement, and pay one fee for the entire services.

As I noted, Medicare already does this via its Bundled Payments for Care Initiative (BPCI) which launched in 2013. At the time, hospitals and other providers were offered voluntary participation. Just a few weeks ago, the Medicare decided to make bundled payments mandatory for some procedures in some areas. Now we know why: Providers are learning that the bundles don’t work.

Republican Presidential Candidates Roll on Health Reform

 

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

Republican presidential candidates are starting to roll on health reform. I mean that in a good way, like when the pilot accelerates down the runway and says “Let’s roll”. Governor Scott Walker (WI) just released his 15-page “Day One Patient Freedom Plan.” U.S. Senator Marco Rubio (FL) has written an op-ed in Politico that needs more detail, but contains a significant reform similar to Governor Walker’s.

Both Walker’s and Rubio’s proposals are very good. Let’s focus on private health insurance, leaving Medicare and Medicaid aside for now. Both offer refundable tax credits to people without employer-based health benefits. In Walker’s plan, these tax credits adjust with age (from $900 for a child to $3,000 for someone between 50 and 64 years old). Rubio does not specify whether his tax credits would adjust with age. For political purposes, it is likely better that they do (because older people vote).

The important thing is that the tax credits do not phase out as household incomes increase, which is the major problem with Obamacare’s tax credits. Millions of people have been wrangling with the IRS to figure out whether they received enough tax credits or have to pay some back. Even worse, the phasing out imposes extremely high effective marginal income tax rates on people at certain incomes. Obamacare punishes them for working and earning more. This is likely the main reason for the rise in part-time work in this weak recovery.

Victory for Free Speech in Medicine

 

Variety of Medicine in Pill BottlesJudges are chipping away at government censorship of communications about prescription drugs. The Food and Drug Administration exerts great power over a medicine’s label, which describes the medicine’s therapeutic claims. Drug makers and the FDA sometimes spend years negotiating a label.

The FDA regulates both safety and “efficacy.” So, a drug maker has to prove its medicine works to the FDA before marketing it to doctors. However, the cost of clinical trials to prove claims is monumentally high, so drug makers will not always invest in clinical trials for every indication. Once a drug is used, doctors will find that it is effective for more claims than indicated on the label. The new indications are often supported by peer-reviewed, published research. However, the drug makers have not yet invested the time and money to negotiate with the FDA to get the new claims onto the label. The FDA says drug makers can’t talk about these off-label uses. A federal judge just decided they can.

Zombies Stalk the Health Care Landscape!

 

Accenture, the management consulting firm, has concluded that the flood of venture capital into digital health startups is not only maturing, it has created a race of zombies that will be bought up on the cheap by established players. In language not usually employed by the elite ranks of sober-minded management consultants:Zombies

Accenture predicts that more than half of digital health start-ups funded between 2008 and 2013 are not likely to survive longer than 20 months. Some healthcare companies will look to buy these “zombie start-ups” to drive growth by infusing top talent, fueling innovation and bolstering existing solutions.

While digital health and healthcare IT start-up funding is accelerating, the reality is that few start-ups will stand out. Even fewer will survive. Of the nearly 900 digital health start-ups that Accenture studied, 51 percent are zombie start-ups, at risk to die. These are companies that each received less than $50 million in total funding between 2008 and 2013 and have not received funding in 20 months or more.

Elementary, My Dear Watson: IBM Enters Medical Image Storage

 

Doctors Examining X-Rays ca. 1980s-1990s(A version of this Health Alert was published by Forbes.)

IBM has suffered declining revenues for 13 consecutive quarters. Although (like many U.S. companies) it attributes its poor results to the strong dollar, its once-praised pivot from hardware to software has put in into some crowded and stagnant markets. Nevertheless, it remains a company with great ambitions, largely built around Watson, the supercomputer which famously beat human beings on the game show Jeopardy! In 2011.

IBM has always hoped Watson would transform health care. It launched Watson Health as a strategic business unit in April, since which it has announced three small but significant acquisitions. Last week, IBM announced the friendly takeover of Merge Healthcare for $1 billion.

Health-Related Producer Prices Tame in July

 

BLSThe Producer Price Index (PPI) for July increased more than expected, but was still benign. Health-related producer prices were tame last month.

Prices for pharmaceutical preparations, which have increased faster than other producer goods in the long term (rising 9.4 percent since July 2014), finally turned around and actually dropped 0.4 percent last month (See Table I). This was a bigger decline than prices for all final demand goods (-0.1 percent) or for all final demand (0.2 percent).