Adverse Selection Got Worse as Obamacare’s Open Enrollment Progressed


New data from Express Scripts, a leading pharmacy-benefits manager (PBM) indicates that adverse selection in Obamacare exchanges actually got worse as open enrollment reached its hard finish in mid-April. As a PBM, Express Scripts has the best data on beneficiaries’ medical costs. Pharmacy claims are adjudicated immediately, whereas other claims can take weeks or months to adjudicate. We previously discussed Express Scripts’ study of pharmacy claims for the exchanges’ early sign-ups. These beneficiaries had specialty pharma claims 47 percent higher than the commercially insured population, which led to the conclusion that they were much, much sicker than expected.

The new release covers data for everyone who has signed up for coverage in Obamacare’s exchanges. There has been a lot of happy talk in the media that the huge sales and marketing surge in March (funded by taxpayers) likely led more healthy people to sign up at the end of open enrollment. In the most general sense, this is what happened, according to the new data. The later sign-ups were younger and in better shape when we consider only the more common conditions that are increasingly affecting our society, as shown in the graph:


Ironies Abound: Walmart Associates Who Lose Their Benefits Can Buy Obamacare Policies at Walmart!


Walmart stands out as the poster child of Obamacare’s perverse consequences. Last week, the giant retailer announced that it is dropping benefits for workers who put in fewer than thirty hours per week, which is the definition of part-time according to Obamacare. This will affect about 30,000 U.S. workers. For the remaining “associates” still eligible for benefits, their premiums will jump 19 percent, from $18.40 to $21.90 per pay period. Project 2017′s Jeff Anderson has dug up an embarrassing letter published by Walmart in 2009, which championed Obamacare:

…touting “the promise of reduced health care cost increases” that would come from “health care reform.” Walmart and friends wrote, “We are for shared responsibility,” opined that “health care costs more because we don’t cover everyone,” and said that “losing coverage pushes people already dealing with financial hardship to the verge of financial collapse.”

The real reason Walmart was so eager to have Obamacare passed was so that it could socialize the health costs of part-time workers by dropping their benefits:

Think of the 36-year-old Walmart employee here in Washington, D.C. who works 29 hours per week at the company’s average wage of $12.73 per hour. She earns just about $19,000 annually if she works every week of the year.

If Walmart doesn’t offer her insurance, the Kaiser Family Foundation’s subsidy calculator shows that she qualifies for a $1,751 subsidy from the federal government to help buy coverage on the exchange. With that financial help, she can buy insurance for as little as $7 per month. As a low-wage worker, she gets some of the most generous financial help.

But if Walmart does offer her coverage, it becomes her only option. She doesn’t qualify for federal help and the $7 plan disappears. Walmart’s plan, meanwhile, is way more expensive. The average premium there works out to $111 per month. (Sarah Kliff, Vox)

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



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.

Obamacare’s War on Women Reduces Employment by 4 Million Full-Time Equivalent Workers


effCasey Mulligan of the University of Chicago has just released a study examining Obamacare’s impact on employment:

  • The ACA’s employment taxes create strong incentives to work less. The health subsidies’ structure will put millions in a position in which working part time (29 hours or fewer, as defined by the ACA) will yield more disposable income than working their normal full-time schedule.
  • The reduction in weekly employment due to these ACA disincentives is estimated to be about 3 percent, or about 4 million fewer full-time-equivalent workers. This is the aggregate result of the law’s employment disincentives, and is nearly double the impact most recently estimated by the Congressional Budget Office.
  • Nearly half of American workers will be affected by at least one of the ACA’s employment taxes — and this does not account for the indirect effect on others as the labor market adjusts.
  • The ACA will push more women than men into part-time work. Because a greater percentage of women work just above 30 hours per week, it is women who will be more likely to drop to part-time work as defined by the ACA.

Crowd-out Effect of CHIP Expansion 44 to 70 Percent


In 2009, Congress reauthorized the Children’s Health Insurance Program (CHIP), providing states added resources and options to insure children. About 15 states expanded CHIP eligibility to families with incomes up to 400 percent of the federal poverty level (an income of $94,000 for a family of four) with a median upper limit for coverage at 250 percent of poverty, the highest since CHIP’s inception in 1997. Federal CHIP funding is up for reauthorization in 2015 and some argue that CHIP is unnecessary because of Obamacare’s subsidies, which kicked in this year.


Source: “The Impact of Recent CHIP Eligibility Expansions on Children’s Insurance Coverage” from Health Affairs.

Hospitals Profit from Drug Discount Program for Poor Americans


A version of this Health Alert appeared at Forbes.

A new study by Drs. Rena M. Conti and Peter B. Bach makes a valuable contribution to the growing pile of evidence of the harm being done by a federal program that Congress designed to increase poor people’s access to prescription drugs, but which has been perverted by hospitals to pad their bottom line.

The 340B program was legislated in 1992. It gives the federal government the power to force drug-makers to offer deep discounts on medicines dispensed to outpatients. 340B was supposed to be a win for both poor people and taxpayers: By forcing drug-makers to discount prices, it would reduce poor people’s costs, and, therefore, reduce the demand for federal subsidies to safety-net facilities in those areas.

In August, I discussed evidence that the number of hospitals and other facilities taking advantage of 340B had doubled in ten years. The new study by Conti and Bach explain how, where, and why this is happening. The key is that, although hospitals get the discounts, there is no effective way to ensure that the discounts are passed on to poor people. Once the discounted drugs are inside the hospital system, they are just added to the rest of the inventory.

Conti and Bach review disturbing cases:

In 2012 one 340B entity, Duke University Hospital, reported five-year profits of $282 million accrued through its outpatient departments and affiliated clinics as a result of its participation in the 340B program. Another report suggested that profits generated through the prescribing of a single medical oncologist who practices at an outpatient clinic affiliated with a 340B hospital could reach $1 million per year, when the oncologist administered drugs obtained at 340B discounted prices to treat fully insured patients.

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?

“Open Payments” Website Missing $1 Billion


Just yesterday, we discussed the federal government’s intrusive and mischievous Open Payments website, where payments for consulting and similar services provided by doctors to pharmaceutical and medical-device makers are publicized.

If the people really demand this information, then I recommended that government payments be included at the same website. After all, if people suspect that companies paying experts for their services is inherently corrupt, then they should have the same suspicion of government payments.

The relevant industries, represented by their trade associations (PhRMA, AdvaMed, and BIO) have bought into the Sunshine Law which created the Open Payments database. However, the flawed roll out of the website led even them publicly to express “concern” with the database.