Tag: "consumer driven health care"

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.)

Physician Payments, Patient Out-of-Pocket Payments Up a Little in 2014

The Robert Wood Johnson Foundation and athenahealth (NASDAQ: ATHN) have released their analysis of physician payments in 2013 versus 2014. athenahealth is an extremely innovative provider of cloud-based electronic medical records (EMRs) to physicians, and has a very complete set of data on their clients payments from all payers.

The result? Not much change from 2013 to 2014, the first year of full-throttle Obamacare:

Primary payments—those made by insurance carriers—to office-based physicians rose moderately between 2013 and 2014. Payments declined for orthopedics and surgery while increasing for primary care and obstetrics-gynecology. Patients’ payment obligations rose for all specialties, and deductibles were the largest category of increased patient spending.

(K. Hempstead, et al., “Tracking Trends in Provider Reimbursements and Patient Obligations,” Health Affairs, vol. 3, no. 7, July 2015, pp. 1220-1224)

Direct-To-Consumer Lab Test Works Fine!

Fellow Forbes contributor and health care entrepreneur Dan Munro has taken advantage of Arizona’s new law allowing patients to buy lab tests directly without a physician’s order. It was a positive experience:

The Theranos process really has removed much of the friction I associate with blood tests I have taken in the past. Access is through a familiar retail facility with pharmacy hours. Billing is a typical retail transaction with credit, debit and HSA cards (or cash/check). The lowest price blood test is $2.70 (Glucose) and Theranos advertises that their pricing is at least 50% below Medicare reimbursement rates for all tests.

The highest price test on the Theranos order form was $59.95 ‒ a comprehensive test for Sexual Health. For comparison purposes, RequestATest (which appears to be an online, front-end for using LabCorp locations around the country), charges $199 for a comprehensive STD test and AnyLabTest Now (with 3 locations in the Phoenix metro) charges $229 for a comprehensive STD test.

Selling the Same Thing for a Different Price is Normal Market Behavior

Understanding the price of ketchup may go a long way towards explaining why mainstream health reformers give such bad reform advice.

Per capita health spending varies a great deal. It varies by geography, it varies by health status, it varies by demographics, and it varies by individual patient characteristics. Academics and government officials decry this variation. They think that health care spending and utilization should be the same everywhere. Despite ritual hand waving about the importance of clinical differences, their policy recommendations generally attribute variation to inefficiency, overuse, and waste.

Obamacare Beneficiaries Skip Care

Kaiser Health News covers an issue we’ve discussed:

A key goal of the Affordable Care Act is to help people get health insurance who may have not been able to pay for it before. But the most popular plans – those with low monthly premiums – also have high deductibles and copays. And that can leave medical care still out of reach for some.

Renee Mitchell of Stone Mountain, Georgia is…… generally pleased with her insurance — a silver-level Obamacare plan. It’s the most popular type of plan with consumers because of the benefits it provides for the money. But she still struggles to keep up with her part of the bills. She is not alone. (Jim Burress, “Some Insured Patients Still Skip Care Because of High Costs”, June 10, 2015).

Here’s something to think about: Every penny of the billions of dollars taxpayers are paying to underwrite Obamacare goes to health insurers, either as premium tax credits via exchanges or cost-sharing subsidies for low-income households. Not one penny goes to the beneficiaries directly, so they can decide themselves which health goods and services to pay for.

Still No Transparency in Medical Pricing

Entrepreneur David Williams has good insight into the limits of Health Savings Accounts as tools of consumer empowerment, discussing:

…… a consumer who did his darndest to find a good deal on a CT scan, finally settling on the $475.53 price at Coolidge Corner Imaging.

But the bill he got later was for $1,273.02 — more than twice as much — from a hospital he had no idea was connected to the imaging center.

“I was shocked,” said White, a doctor of physical therapy who thought he knew his way around the medical system. “If I get tripped up, the average consumer doesn’t have the slightest chance of effectively managing their health expenses.”

The patient wasted tons of time and effort trying to get the problem cleared up. He cared since he had a high deductible plan.

In my view, high deductible plans are a pretty crude instrument to encourage cost consciousness and price transparency. (David Williams, MedCityNews, June 2, 2015)

I agree. NCPA has long championed HSAs. However, stories like the one discussed here are too common. HSAs need to become more than a way to shift costs from premium to out of pocket. Health insurers need to get out of the business of fixing prices.

If we had not been distracted by Obamacare, we might be there by now. Hopefully, we’ll be back on track before too long. I have proposed a “common law” solution to the problem of price transparency. Read more about it here.

Republican Study Committee Reintroduces Health Reform Bill

The RSC has re-introduced its American Health Care Reform Act, previously introduced in September 2013.

Most importantly, it eliminates the current exclusion from taxable income of employer-based benefits as well as Obamacare’s tax credits paid through exchanges. Instead, it offers a standard deduction of $7,500 for individuals or $20,500 for a family that buys qualifying health insurance.

Hip Replacements in L.A.: $12,457 to $17,609

A short drive in the Los Angeles area can yield big differences in price for knee or hip replacement surgery.

New Medicare data show that Inglewood’s Centinela Hospital Medical Center billed the federal program $237,063, on average, for joint replacement surgery in 2013.

That was the highest charge nationwide. And it’s six times what Kaiser Permanente billed Medicare eight miles away at its West L.A. hospital. Kaiser billed $39,059, on average, and Medicare paid $12,457.

The federal program also paid a fraction of Centinela’s bill — an average of $17,609 for these procedures. (Chad Terhune & Sandra Poindexter, “Price of a common surgery varies from $39,000 to $237,000 in L.A.,” Los Angeles Times, June 2, 2015)

Okay, hospital bills are silly. We already know that. Let me point out two things.

Price’s Health Reform Hit From The Right

I recently discussed Rep. Tom Price, MD’s Empowering Patients First Act in quite positive terms. Not everyone is on board. My good friend Dean Clancy labels the bill Health Care Cronyism:

Section 401, for example, authorizes new federal “best practice” guidelines written by medical societies, designed to give physicians extra protections from malpractice lawsuits. These guidelines aren’t merely educational, though. They’re established as powerful litigation tools in state courts. If a physician can show he followed them, his accuser must meet a higher burden of proof to establish negligence. That may be a good idea, but it’s unconstitutional. The power to regulate civil justice is reserved to the states under our federal system. There’s neither a legal nor a practical justification for federal medical malpractice reform. States have this. They can reform their tort systems, and many have done so, with success.

Mr. Clancy and I are in complete agreement that Congress has no role meddling in medical malpractice. So, why did I ignore this part of Dr. Price’s bill and leave Mr. Clancy prime real estate in U.S. News & World Report to lay into it?

Price’s Empowering Patients First Act Gets Better with Age

220px-Tom_Price(A similar version of this Health Alert was published by Forbes.)

You’ve got to give credit to Congressman Tom Price, MD: He introduced his first post-Obamacare bill as early as 2009 and has reintroduced an updated version in every Congress since then. The latest Empowering Patients First Act (H.R. 2300), introduced this month, is the fourth iteration.

Many critics complain Republicans in Congress have taken too long to develop an alternative to Obamacare. However, President Obama is running the show until January 2017. It is responsible for Congressional Republicans to take all the time and space they need to develop their alternative for the next president’s consideration.

A fully baked repeal and replacement bill today would serve no purpose, while doing nothing until a president committed to patient-centered health reform takes office risks a confused mess of lobbyists’ priorities thrown together by politicians who barely know what they are doing – a Republican Obamacare, in other words.

The most important improvement is a universal tax credit, adjusted by age, to every American who chooses to buy individual health insurance: $1,200 for those aged 18 to 35, $2,100 for those between 35 and 50, $3,000 for those over 50 and $900 per child. Dr. Price’s previous bill had tax credits, which were not adjusted by age, but by income. Of course, Obamacare’s tax credits phase out by income, which causes very high effective marginal income tax rates at certain income thresholds.