Tag: "consumer driven health care"

Jindal’s Attack on Walker’s Health Plan is Off-Base

Yesterday, I addressed Governor Scott Walker’s health plan in largely positive terms. Governor Bobby Jindal, a competing Republican presidential contender, has launched a broadside against Walker’s plan, describing it as a “new federal entitlement.”

JW

The charge is way off-base. Governor Jindal proposed a health reform back in 2014, via his America Next policy shop. The point of contention is that Governor Jindal’s proposal would not offer everyone a refundable tax credit. Instead, it would eliminate the exclusion of employer-based health benefits from taxable income and replace it with a standard deduction.

I criticized the proposal when it was issued. True, it is an easier switch than a refundable tax credit. On the other hand, a deduction does nothing for low-income households – which means the welfare state continues to exist. Jindal himself proposed throwing $100 million more at states to fund their medical safety nets.

Price Transparency Laws Don’t Work

HSAIn a functioning market, you know what you owe before you buy a good or service. That is not the case in health care, as we know. Because of increasing deductibles, the failure of price transparency is becoming increasingly irritating to patients.

Some believe a solution can be legislated. This has occurred in New York and Massachusetts; and one of my favorite state legislators, Senator Nancy Barto, has tried to legislate it in Arizona.

Effective January 2014, Massachusetts law requires health providers to provide a maximum price for a procedure within 48-hours of a prospective patient asking. Well, it has not worked, according to a ”secret shopper” survey of professionals conducted by the Pioneer Institute:

The Cost of Over Insurance: National Health Expenditures Rising Again

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

Actuaries at the Centers for Medicare & Medicaid Services, the government agency that runs those programs, have released their estimates of national health spending for 2014 through 2024:

Health spending growth in the United States is projected to average 5.8 percent for 2014–24, reflecting the Affordable Care Act’s coverage expansions, faster economic growth, and population aging. Recent historically low growth rates in the use of medical goods and services, as well as medical prices, are expected to gradually increase.

The health share of US gross domestic product is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024.

It is a little too easy to say that this outbreak of higher health spending is just due to Obamacare. To be sure, Obamacare has increased health spending with only marginal improvement in access to care. However, the population is aging, too; and the actuaries also take account the positive relationship between economic growth and health spending. The actuaries expect the economy to be relatively strong over the next decade, and estimate the rate of growth of health spending will exceed the rate of growth of Gross Domestic Product by only 1.1 percent. This is less excessive than in most recent decades. Yet, it is still excessive, and a change for the worse.

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.