EpiPen:  A Case Study In Health Insurance Failure


I recently wrote a post describing EpiPen as a “Case Study in Government Harm,” describing how the government had made it possible for the manufacturer to increase prices of the life-saving drug multiple times without fear of retaliation. It is also a case study in how health insurance distorts our choices and increases their cost. I learned this by following an Internet advertisement for EpiPen down its rabbit hole.

The ad induced me to download my “EpiPen Savings Card” which would ensure I paid nothing for my EpiPens (up to six, according to the ad):


However, I had to answer a skill testing question first: What was my insurance coverage? As you can see from the screenshot below, when I answered I had no insurance, the EpiPen savings card was figuratively ripped from my hand:

Do Transparency Tools Work in Health Care?


Laptop and Stethoscope --- Image by © Royalty-Free/Corbis

Laptop and Stethoscope — Image by © Royalty-Free/Corbis

A new report by economist Jon Gabel and his colleagues at NORC, a research center affiliated with the University of Chicago, looked at the use of transparency tools in an employer health plan. The analysis found the use of price transparency tools to be spotty. For instance, 75 percent of households either did not log into the transparency tool or did so only one time in the 18-month period of study. Fifteen percent did so twice; but only 1 percent logged in 6 times or more. The study concluded:

It could very well be that we are asking too much of a single tool, no matter how well-designed. Consumer information for other goods and services on price and quality are seldom dependent upon information gained mainly, if not solely, through a digital tool. Rather, information on relative value is spread far and wide through advertising and other kinds of promotion using conventional, digital, and social media communication channels.

Recent Rise In Health Coverage Due To Return of Jobs With Benefits


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

The best measurement of people who lack health insurance, the National Health Interview Survey published by the Centers for Disease Control and Prevention (CDC), has released early estimates of health insurance for all fifty states and the District of Columbia in the first quarter of 2016. There are three things to note.

First: 70.2 percent of residents, age 18 to through 64, had “private health insurance” (at the time of the interview) in the first quarter of this year, which is which is the same rate as persisted until 2006. Obamacare has not achieved a breakthrough in coverage. It has just restored us to where we were a decade ago. Further, the contribution of Obamacare’s exchanges to this is almost trivial, covering only four million people.

What has really happened is a restoration of employer-based benefits as we have slowly clawed our way out of recession: 61.2 million people had non-exchange private insurance in Q1 2010. This included both employer-based benefits and the pre-Obamacare market for individual health insurance. By Q1 2016, this had increased to 66 million. Because most in the pre-Obamacare individual market have shifted into Obamacare exchange coverage, the increase in employer-based coverage will have been close to eight or nine million.

QSS: Strong Health Services Revenue Growth in 2nd Quarter


Census2This morning’s Quarterly Services Survey showed strong revenue growth in health services. Overall, revenues grew 3.6 percent in Q2 versus Q1 and 6.7 percent versus Q2 2015. For the first half, revenues grew 5.9 percent versus H1 2015. Growth was positive in all sectors except specialty hospitals. Physicians’ offices led the growth, at 4.5 percent. This is a turnaround from Q1. Perhaps most surprising was medical and diagnostic labs, for which revenue grew 4.0 percent. Labs have shed jobs, so increasing revenue suggests productivity improvements.

See Table I below the fold:

EpiPen: A Case Study in what’s the Matter with Health Care


Americans throw away unused epinephrine auto-injectors worth more than $1 billion annually. Or maybe it would be more accurate to say that Americans waste more than $1 billion annually on $50 million worth of epinephrine auto-injectors that are discarded unused. The devices should only cost $20 a pair. So, why do they cost $608 instead? More on that below.

Significant Job Losses in Nursing Homes A Drag On Health Job Growth


BLSThis morning’s jobs report was somewhat weaker than expected, adding 151,000 jobs versus 180,000 expected. For the first time in many months, job growth in health services slightly lagged growth in non-health jobs (0.09 percent versus 0.11 percent).

However, there was a significant divergence within health services: Jobs in ambulatory care and hospitals jumped 0.16 percent and 0.21 percent, while nursing homes shed 7,000. That imposed a massive drag on health services overall, limiting growth to 14,000 jobs (Table I).

Significant Divergence in Private Vs. Public Health Facilities Construction in July


Census2The divergence between private and public health facilities construction continued in July. Overall, health facilities construction starts increased 0.3 percent in July, versus zero for other construction. However, there was a significant difference between the private and public segments.

Construction of private health facilities dropped 0.3 percent, versus an increase of 1.0 percent for other private construction. Construction of public health facilities increased a whopping 2.5 percent, versus a drop of 3.2 percent for other public construction (Table I).

Is this what they mean by “infrastructure” spending – broken bridges and roads, while more VA and county hospitals spring up?

EpiPen: A Case Study of Government Harm


EpipenMuch has been written about the dramatic price hikes for EpiPens, which inject a drug that counters severe allergic reactions (anaphylactic shock). According to Aaron E. Carroll, writing in the New York Times, the real (inflation-adjusted) price of EpiPens has risen 4.5 times since 2004.

Both Carroll and the Wall Street Journal have described how government has allowed EpiPen’’s manufacturer to hike prices so much. EpiPen is complicated, being both a drug and a device. The drug is very inexpensive, and not patented. The device is protected by patents issued in 2005, which expire in 2025.

First, the government made a couple of interventions in the market that allowed the manufacturer to raise prices above the free-market level. The federal government changed its guidelines such that the EpiPens have to be sold in packages of two (while customers might prefer just one, or at least an odd number). Also, the federal government gave public-emergency grants to states on condition they stockpile EpiPens.

GDP: Health Services Grow Over Five Times Faster Than “Sluggish” Non-Health GDP


BEAToday’s second estimate of second quarter Gross Domestic Product confirms spending on health services is dramatically outpacing other “sluggish” GDP growth. Fixed investment, durable goods, and inventories continued to collapse, while imports increased. Therefore, growth in services spending grew much faster than GDP. In real (inflation-adjusted) dollars, services grew 4.3 percent (annualized, seasonally adjusted). As a large component of services, health services grew 3.8 percent.  While real GDP growth was 1.1 percent, once health services is stripped out, non-health GDP grew just 0.7 percent (Table I).

(See Table I below the fold.)

Telehealth Opportunity or Telehealth “Parity”?


iStock_000005825665XSmall(A version of this Health Alert was published by Forbes.)

Telehealth provides a great opportunity to reduce costs and improve quality in U.S. health care. It uses information technology to eliminate distance within the system. A subset of telehealth is telemedicine, which allows physicians to consult patients over the phone, by text, or video.

Take a couple of obvious examples: Telepsychiatry, whereby a patient undergoing talk therapy has a session with his psychiatrist over the phone instead of having to go to the doctor’s office; or e-prescribing, whereby a patient can describe symptoms over the phone or send a photo (of, for example, a rash) and the doctor can prescribe immediately (if appropriate).

Most people tend to categorize these as “no-brainers.” If we paid for our own care directly, these and many other examples would have long since taken off. However, because payment for medical care is dominated by health insurers and government, these innovations have been stifled. Third-party payers impose obstacles because they fear paying fraudulent claims. Nevertheless, telemedicine is growing. There is one pure-play telemedicine provider listed on a U.S. stock exchange: Teladoc, Inc. (NYSE: TDOC).