CPI: Medical Prices Resume Upward March

 

BLSDue to vacation, I did not discuss June’s release of the Consumer Price Index for May, in which medical care prices were very moderate. This continued that which was observed in May (for the April CPI).

Unfortunately, prices for medical care resumed their upward march in the June CPI, released today. At 0.4 percent, prices for medical care increased twice as fast as the CPI for all items. Price changes for medical care contributed 16 percent of the price change for all items. Prescription drug prices, especially, resumed their increase. Prices for medical care services, on the other hand, were in line with the CPI for all items.

Over the last twelve months, prices for medical care have increased over four times faster than prices for all items other than medical care. Medical care price increases have contributed almost one third (29 percent) to the price increase of one percent for all items. Claims that consumers have experienced relief from medical prices are simply not grounded in data.

(See Table I below the fold.)

PPI: Health Prices Remain Tame

 

BLSAlthough I did not discuss June’s release of the Producer Price Index (PPI) for May at this blog (due to vacation), prices of pharmaceutical preparations did not increase at all. Similarly, they remained flat in today’s PPI release for June.

Prices for final demand goods (less food and energy), and prices for all final demand health services were either flat or down in June. Similarly, price changes of health services for final demand were all lower than price changes for final demand services overall. The same was true for both goods and services for intermediate demand.

For the last 12 months, prices of health goods and services (especially pharmaceutical preparations) have increased significantly more than prices of other goods and services, but the trend of disproportionately high health price increases might be breaking down.

(See Table I below the fold.)

A Bipartisan “Yes” On A Health Care Tax Credit

 

health-insurance(A version of this Health Alert was published by RealClearHealth.)

Ready for some good news on health reform? Both the presumptive Democratic candidate for President and the Republican majority in the U.S. House of Representatives agree people should be able to spend more money directly on medical care without insurance companies meddling.

Both sides would be shocked to have their respective health reforms described as sharing any common ground. However, identifying this common ground might be necessary if either side wants to fix the worst aspects of Obamacare.

If Republican politicians in Congress want to give people any relief from the burden of Obamacare, they need to be prepared for the possibility they will have to deal with Hillary Clinton’s White House next year.

Speaker Ryan’s recently released Better Way health reform plan would offer a refundable tax credit for health care, to anyone who does not have employer-based health benefits. This tax credit would increase with age, but be available regardless of income. It would be a fixed-dollar amount for each age bracket. This is superior to Obamacare for at least two reasons.

Should Dissent Be Allowed In Health Care?

 

Confident DoctorsAn eminent physician has tentatively proposed that published treatment guidelines be accompanied by dissenting expert opinions, much like the U.S. Supreme Court does. Daniel Musher, MD, of Baylor College of Medicine, served on the Advisory Committee on Immunization Practice of the Centers for Disease Control and Prevention, which considered guidelines for a dual vaccine approach for pneumococcal vaccination for adults.

He disagreed strongly with the published recommendation, but was prevented from publishing his opinion alongside the recommendation. Dr. Musher believes the publishing of dissenting opinions is very valuable to the progress of knowledge:

As citizens of the United States, we are as much bound by a 5-4 decision of the High Court as a 9-0 vote (although closely passed decisions are more likely to be overturned in future cases).1 Similarly, as practitioners of medicine, until new guidelines are written, we are seriously constrained by, if not actually bound by, existing ones, without regard to the unanimity of opinion in the recommending committee. Nevertheless, there is much to gain from studying dissenting opinions, as was famously shown by the writings of Justices Holmes and Brandeis, many of whose minority opinions, in time, became the law of the land.2 I propose that the failure to publish differing or dissenting views in medical guidelines presents our profession with an inappropriately monolithic view—one that is studied as gospel by physicians-in-training and forced on practitioners by incorporation into a variety of performance measures.

Health Services Jobs Still Dominate Employment Growth

 

BLSLast Friday’s thrilling jobs report, which drove the stock market to new highs, continued to be dominated by growth in health services jobs. Indeed, breathless media coverage disguised that monthly job growth followed a miserable May report (which was actually revised downward last Friday).

Health services added just 39,000 jobs in June, significantly fewer than July. Nevertheless, those comprised 13 percent of 287 thousand civilian non-health, non-farm jobs added (Table I). The warping of our economy towards the government-controlled health sector continues.

20160708 TI

Should Drug Investors Worry About Medicare Revenues?

 

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

The pharmaceutical sector has held up quite well in this aging bull market. Now, a new political risk is on the horizon: The Independent Payment Advisory Board (IPAB), which was instituted in the 2010 Affordable Care Act. Starting in 2015, the IPAB was empowered to cut Medicare spending if costs increased faster than a certain rate. It quickly faded into the background as the growth in Medicare spending moderated after President Obama signed the Affordable Care Act.

Those days are gone. The latest annual Medicare Trustees’ report, published on June 22, indicates Medicare spending will cross the threshold for IPAB to swing into action in 2017. The 2017 threshold is determined by a target rate of growth which is the average of the change in the Consumer Price Index (CPI) and the medical-care component of the CPI. Estimates of both actual Medicare spending per capita and the target rate are calculated as five-year averages.

Table I, extracted from a recent presentation by Medicare’s Chief Actuary, illustrates why investors are becoming concerned. Table I highlights this year’s Medicare spending per capita will increase 2.21 percent (averaged over the five years, 2014 through 2018). The target rate is 2.33 percent, higher than the estimated actual rate, so the threshold is not crossed. IPAB remains asleep.

20160708 Forbes IPAB TI

Is that Granola Bar Really Healthy? Nutritionists Say No!

 

Healthy eating and “eating clean” is all the rage among health conscious consumers. So-called Super Foods like blueberries, kale, Swiss chard and quinoa supposedly supercharge the body, cleans the colon and all around make people healthier. A recent New York Times article explores the misconceptions people have about healthy eating and how what constitutes healthy foods differs from nutritionist and the public.

More Evidence Against Health Insurance

 

doctor-mom-and-sonDavid Lazarus of the Los Angeles Times, whose columns on health policy tilt heavily towards single-payer advocacy, has done a great service to the cause of consumer-driven health care, describing how much more sense it makes to pay cash prices for health services than pay what your health insurer “negotiates.”

Five blood tests were performed in March at Torrance Memorial Medical Center. The hospital charged the patient’s insurer, Blue Shield of California, $408. The patient was responsible for paying $269.42.

Tests that were billed to Blue Shield at a rate of about $80 each carried a cash price of closer to $15 apiece.

This is one of the dirty little secrets of healthcare,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “If your insurance has a high deductible, you should always ask the cash price.”

Not all medical facilities will be open to sharing their cash prices with an insured person, Kominski said, but many will.

Appeals Court Ruling Saves Fixed Indemnity Health Coverage

 

The indemnity insurance model is alive and well thanks to a federal appeals court for the District of Columbia. So-called “fixed indemnity” insurance pays a fixed amount for a given claim – such as $500 per day for hospitalization or $50 for a doctor visit.  Often, fixed indemnity plans only cover specific conditions, such as cancer.

In 2014 the Obama Administration ruled that only individuals who already had comprehensive coverage could purchase fixed indemnity. The reason the administration did not want fixed indemnity coverage available was because it was trying to prop up Obamacare. The administration thought a cheaper option would undermine the goal of “maximizing the number of individuals who have comprehensive, major medical coverage.”

Under the administration ruling, individuals buying fixed indemnity coverage had to attest on their application they already had comprehensive coverage with minimal essential coverage. The plaintiffs argued the 2014 regulatory ruling essentially destroyed the market for their products. The federal court and the appeals court agreed, ruling that the administration had overstepped its regulatory power. Fixed indemnity insurance has been exempt from federal insurance standards for 20 years. The appeals court explained the Affordable Care Act did not change that nor was there evidence Congress planned for the ACA to change that fact. Unfortunately, people who buy fixed indemnity coverage still must buy Obamacare coverage to avoid getting fined. But they can now at least make the choice.

Is It Now Okay to Sell Your Kidney in the U.S.?

 

man-in-wheelchairThere is a global shortage of many organs for transplantation. How about just increasing the supply of organs through a free market? The idea of allowing people to sell their organs for personal gain grosses many of us out. Although, it is legal to sell our plasma, and many poor Americans find it profitable to do so.

The moral case for a market in organs has been made by Professors Kathryn Shelton and Richard B. McKenzie at the Library of Economics & Liberty. Yet, it is illegal to sell your organ for transplantation in the U.S. Or is it? A major insurer may have found a side door into this market, by offering up to $5,000 to kidney donors to cover their travel expenses. Clever, eh?