Bush Scores on Medicare

 

Former Florida governor and presidential candidate Jeb Bush stepped outside the political comfort zone and endorsed dramatic reforms to Medicare:

Republican presidential candidate Jeb Bush said Wednesday that we ought to phase out Medicare, the federal program that provides health insurance to Americans once they’re 65.

“We need to make sure we fulfill the commitment to people that have already received the benefits, that are receiving the benefits,” Bush said. “But we need to figure out a way to phase out this program for others and move to a new system that allows them to have something, because they’re not going to have anything.”

Bush praised Rep. Paul Ryan (R-Wis.) for proposing to change Medicare to a system that gives seniors medical vouchers instead of paying their bills directly.

(Arthur Delaney & Jeffrey Young, “Jeb Bush says we should phase out Medicare,” HuffingtonPost, July 23, 2015)

That kind of straight talk deserves praise, especially as so many Americans have allowed a few years of Medicare Trustees’ reports, which show a trivial improvement in the program’s finances, to give them an excuse to dodge the need for reform.

2015 Medicare Trustees Report: No Pot O’ Gold in Medicare’s Future

 

The Trustees for Social Security and Medicare released their 2015 Trustees’ Report. Liberal stalwart, Mother Jones, proclaimed how wonderful it was. Political blogger Kevin Drum had an interesting argument showing how long-term medical cost projections were down from a decade ago. However, he also conceded that others think the current slowdown is temporary. Yet, if you look at the report itself the news isn’t very reassuring. In 2000, Medicare spending as a percentage of GDP was just above 2 percent. It’s now about 3.5 percent and will be four percent by 2023.

Will 11 Million Pay Obamacare’s Individual Mandate Penalty?

 

I recently took issue with lack of clarity in media coverage of a report by the IRS’ Taxpayer Advocate, which claimed 6.6 million paid Obamacare’s individual mandate penalty last year. I figured the total must be significantly higher, because each tax return would cover more than one individual.

In an e-mail to me dated July 21, 2015, Doug Badger, a longtime veteran of Republican administrations and whose Doug’s Briefcase blog is a must-read, pointed out that there can be more than one person in a household applying for Obamacare coverage:

….. a more accurate measure of household size could be obtained by dividing the number of people included in a completed applications by the number of applications.  That yields a factor of around 1.35, as opposed to 2.35.  I admit that is a rough approximation and there may be better ways of calculating the number of people affected by the tax on the uninsured.  In any event, your central point is exactly right: the number of people living in households that paid the tax is much greater than 6.6 million.

Health Insurers’ Merger Mania On Hold?

 

(A version of this Health Alert was published by Forbes on July 22.)

Just a few weeks ago, it was declared that a great pent-up demand for mergers and acquisitions among health insurers would unleash itself as a result of Obamacare’s confirmation by the Supreme Court. And so it did, for a while at least.

Insurers

In 2011, two deals (Cigna’s acquisition of Health Spring and Aetna’s purchase of Coventry Health Care) were worth $9.5 billion. Today’s three pending deals are much larger, amounting to almost one hundred billion dollars. However. today’s consolidation seems less sure.

Private Cost of Public Queues for Health Care

 

Suppose you lived in an otherwise free country where you were forced to get medical care from a government-controlled monopoly funded by your taxes. Suppose that country made it almost impossible, by law and regulation, to get medical care outside that monopoly within its borders.

Because the government’s rationing of care would affect your ability to work or otherwise enjoy life, it would impose a private cost upon you greater than the tax burden. That country would be Canada, and the average cost imposed on patients by the government monopoly is $1,289, according to The Fraser Institute.

FI

Obamacare Exchange Plans Have 34 Percent Fewer Providers than Commercial Plans

 

Avalere Health has quantified how narrow networks are in Obamacare exchange plans, as shown in the figure below:

Avalere

According to Avalere CEO President Dan Mendelson: “Plans continue to test new benefit designs in the exchange market. Given the new requirements put in place by the ACA, network design is one way plans can drive value-based care and keep premiums low.” Well, that is one way to look at it and I hope Mr. Mendelson is right.

Medicaid Spending To Grow 6.2 Percent Annually For 10 Years

 

The Chief Actuary of the Centers for Medicare & Medicaid Services has published the sixth annual report on the welfare program’s financial outlook. Highlights include:

  • Over the next 10 years, expenditures are projected to increase at an average annual rate of 6.2 percent and to reach $835.0 billion by 2023.
  • Average enrollment is projected to increase at an average annual rate of 3.0 percent over the next 10 years and to reach 78.8 million in 2023.
  • Medicaid expenditures are estimated to have increased 9.4 percent to $498.9 billion in 2014, which includes the expenditures for newly eligible enrollees.
  • Average Medicaid enrollment is estimated to have increased 9.6 percent to 64.6 million people in 2014. Newly eligible adults are estimated to have accounted for 4.3 million of the 5.7-million enrollee increase from 2013 to 2014.

“Newly eligible” refers to those eligible as a result of Obamacare’s Medicaid expansion. What these figures show is that relatively healthy people signed up due to the expansion: The rate of spending increased slower than the increase in enrollment.

However in future, spending will increase exponentially while enrollment will increase on a flat trend line (as shown in Figures 2 and 3).

When Will We See Fiscally Responsible Health Reform from Congressional Republicans?

 

(A version of this Health Alert was published by RealClearPolicy on July 16, 2015.)

Just a few weeks ago, Republicans in Congress announced a oint budget resolution, which (if ever enacted) would repeal Obamacare and balance the budget in ten years. That is all well and good. Unfortunately, when they pass health care legislation that actually has a chance of becoming law, they fail to pay for their promises. How can they be trusted to repeal and replace Obamacare with fiscally responsible, patient-centered health reform?

The Congressional Budget Office (CBO) estimates repealing Obamacare would increase the deficit by $353 billion over ten years, before considering the economic growth that would result from repeal. Because repeal would grow the economy, federal tax revenues would increase by $216 billion, resulting in a net deficit of $137 billion. So, when Republicans actually repeal Obamacare, they will still have to cut $137 billion of spending elsewhere.

Yet, they cannot even identify miniscule spending cuts to pay for current health-related bills. The latest is repeal of the medical device excise tax. This is a 2.3 percent excise tax on medical devices – from pacemakers to MRI scanners – to help pay for Obamacare. On June 18, the House of Representatives voted to repeal the tax. Every Republican present voted for it, plus about one fifth of the Democrat members. With those 46 Democrats joining the majority, the votes in favor added up to 280, just eight short of the number needed to override the promised presidential veto. It awaits a vote in the Senate.

PwC: Medical Cost Trend 6.5 Percent In 2016; 4.5 Percent After Benefit Changes

 

PwC’s Health Research Institute has released its 10th annual report on Medical Cost Trend for the employer-based market, forecasting low growth in medical cost trend of 6.5 percent. However, after benefit changes such as higher deductibles and co-pays, PwC forecasts net growth rate of just 4.5 percent.  (The report also notes growth of 300 percent since 2009 in the number of employers offering high-deductible plans.)

PwC lists both “inflators” and “deflators” contributing to this growth. Deflators include:

  • The “Cadillac tax” on high cost benefit plans. Although not kicking in until 2018, it is already influencing plan design.
  • Virtual care. This encompasses telehealth and mobile health, which NCPA has endorsed.
  • New health advisers, who help patients make better choices.

Inflators include specialty drugs and cyber security. (This is the first I learned that security breaches were driving up costs. PwC estimates that the cost of a major data breach is $200 per patient record, versus $8 to prevent it.)

What is most unique about the PwC report is its conclusion that the rate of growth of health spending has been trending down since as far back as 1961 (although with a lot of variance, as shown in Figure 1.)

United Health Group’s Q2 Earnings: Steady Growth, Obamacare Results Unclear

 

UNHUnitedHealth Group (NYSE: UNH) reported its second quarter results yesterday. They show an enterprise that is firing steadily on all cylinders. UNH has two main businesses: UnitedHealthcare, the health insurer; and Optum, a portfolio of businesses that provide services crunching Big Data to customers that include other insurers.

From the press release:

  • Second quarter revenues grew 11% year-over-year to exceed $36 billion,
  • UnitedHealthcare grew to serve 1.6 million more people domestically in the past year, including 175,000 people in the second quarter
  • Optum revenues of $13.6 billion grew 16% year-over-year; operating earnings Increased 19%
  • Second quarter net earnings grew 15% year-over-year to $1.64 per share, with cash flows from operations of $1.2 billion.