Tag: "Health Care Costs"

The Real Lesson of John Oliver’s Medical Debt Forgiveness Stunt

money-burdenLate-night TV host John Oliver recently caused a stir by attacking debt collectors in a clever way. He set up his own collection agency, bought $15 million of medical bad debt, and then forgave it all. This was all done on TV, to the cheers of his audience.

Oliver claimed to have outdone Oprah Winfrey, who once gave a car to each person in her studio audience. Oprah’s car give-away cost $8 million, just over half of Oliver’s. So, Oliver wins the charitable ego competition, right?

Nope. Oliver did not forgive $15 million of medical debt. That was the face amount of the accounts receivable. He bought them for about half a cent on the dollar, or about $60,000 total. The lesson of Oliver’s stunt is that medical accounts receivable are very hard to collect. That is why they trade so cheaply in the secondary debt market.

QSS: Strong But Inconsistent Health Services Revenue Growth

Census2This morning’s Quarterly Services Survey from the Census Department showed good growth in revenues for health services, but it was inconsistent within the industry. Overall, first quarter revenue grew 0.7 percent from the fourth quarter and 5.2 percent from the first quarter of 2015 (Table I).

20160608 TIA

Health Services 30 Percent of GDP Growth

BEAThis morning’s second estimate of GDP for the first quarter was a little stronger than last month’s advanced estimate, although much of the adjustment was a smaller decrease in inventories than initially estimated.

Spending on health services continue to dominate weak GDP growth. Health services spending of $19.2 billion (annualized) comprised 30 percent of GDP growth. However, there was shrinkage in personal consumption expenditures on goods, private domestic investment, and exports. This meant personal expenditures on services grew much more than GDP overall. Growth in spending on health services amounted to a little less than one fifth of growth in services spending. Nevertheless, the quarterly growth in spending on health services indicates health services continues to consume a disproportionate share of (low) growth (Table I).

20160527 TI

CPI: Medical Inflation Finally Under Control

BLSThe Consumer Price Index (CPI) for April confirmed medical inflation is matching the broad measure of price changes. For the second month, price changes for medical care (0.3 percent) were in line with all-items (0.4 percent). Although, it looks like a jump in energy prices drove the CPI up. If energy price increases moderate, we can expect prices for medical care to increase faster than CPI.

With respect to medical commodities, it prices of prescription drugs continued to increase faster than other medical commodities or commodities over all. Although, pharmaceutical price hikes in the CPI are not as big as in the Producer Price Index. Prices for many health goods and services actually dropped.

However, over the last twelve months, medical prices faced by consumers have grown much faster than non-health prices: 3.0 percent versus 1. percent. Prescription prices increased 4.0 percent, as did prices for inpatient hospital services. Health insurance increased 5.8 percent.

(See Table I below the fold.)

PPI: Pharma Price Hikes Continue To Stand Out

BLSThe Producer Price Index (PPI) for final demand goods grew 0.2 percent last month, or 0.3 percent less food and energy. Prices for pharmaceutical preparations and most medical devices grew significantly faster, at 1.0 percent and 0.5 percent, although prices for X-Ray and similar equipment were flat.

With respect to final demand services, for which prices rose 0.1 percent (or 0.3 percent, less trade, transportation, and warehousing), prices of medical services changed similarly. However, prices for health insurance jumped 0.8 percent.

With respect to goods for intermediate demand, which dropped 0.3 percent, price increases for biologics, including diagnostics, stood out at 2.5 percent. With respect to services for intermediate demand, which rose 0.1 percent, prices for health insurance jumped 0.8 percent

Looking back over the 12-month period, the price increase of 10.4 percent for pharmaceutical preparations continues to stand out like a sore thumb. Political agitation against drug prices is unlikely to go away soon. Health insurance, having risen 1.7 percent in a flat or negative inflationary environment, is also beginning to stand out. (See Table I below the fold.)

Federal Health Bureaucracy Growing? Don’t Blame (Just) Obamacare

Libertarians and conservatives and others have spent five years complaining about the increased bureaucratic burden of Obamacare. New research by Sam Batkins of the American Action Forum, while not letting Obamacare off the hook, shows the problem predates the current Administration. The following chart shows the burden of paperwork has increased linearly since at least 2005:

20160509 Batkins AAF

Flash GDP: Health Services Over One Third of GDP Growth

BEAThis morning’s advance (flash) estimate of GDP for the first quarter (usually subject to significant future revision) showed very weak growth dominated by spending on health services. Health services spending of $19.5 billion (annualized) comprised over one third of GDP growth. However, there was shrinkage in personal consumption expenditures on goods, private domestic investment, and exports. This meant personal expenditures on services grew almost twice as much as GDP growth. Growth in spending on health services amounted to a little less than one fifth of growth in services spending. Nevertheless, the quarterly growth in spending on health services indicates health services continues to consume a disproportionate share of (low) growth (Table I).

20160428 GDP T1

Are Prescription Drug Prices Becoming As Meaningless As Hospital Charges?

Professor Jack Hoadley of Georgetown University recently gave an excellent presentation discussing prices of prescription drugs. Two slides stand out. First, a slide showing how much prescription spending is controlled by insurers and governments versus patients directly:

20160415 Rx Prices

As recently as 1990, patients controlled over half of drug spending. Today, it is under 20 percent. Has this cost shift made drugs more “affordable”? Obviously not: 8 percent of patients do not take medicines as prescribed, because of cost. Hillary Clinton promises to impose government price controls on drugs if she becomes president.

U.S. Health Spending Not An Economic Burden

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

Health spending consumes a higher share of output in the United States than in other countries. In 2013, it accounted for 17 percent of Gross Domestic Product. The next highest country was France, where health spending accounted for 12 percent of GDP. Critics of U.S. health care claim this shows the system is too expensive and a burden on our economy, demanding even more government intervention. This conclusion is misleading and leads to poor policy recommendations, according to new research published by the National Center for Policy Analysis (U.S. Health Spending is Not A Burden on the Economy, NCPA Policy Report No. 383, April 2016).

Discussing health spending in dollars, rather than proportion of GDP, the report notes Americans spent $9,086 per capita on health care in 2013, versus only $6,325 in Switzerland, the runner-up. (These dollar figures are adjusted for purchasing power parity, which adjusts the exchange rates of currencies for differences in cost of living). This big difference certainly invites us to question whether we are getting our money’s worth. However, it is not clear that this spending is a burden on Americans, given our very high national income.

CPI: Most Medical Price Hikes Stall

BLSThe Consumer Price Index for March indicates that medical price inflation matched changes in other prices charged to consumers, with a slight uptick of 0.1 percent. Prescription drugs (0.5 percent increase), nursing homes and adult day care, eyeglasses, and health insurance (all with 0.4 percent increases) stood out as continuing to experience higher inflation than other items. Prices for many health goods and services actually dropped.

However, over the last twelve months, medical prices faced by consumers have grown much faster than non-health prices: 3.3 percent versus 0.6 percent. Prescription prices increased 3.4 percent. However, inpatient hospital services and health insurance prices increased much faster, by 5.9 percent and 6.0 percent.

When we compare the medical components of the CPI with those in the Producer Price Index, it appears that hospitals, not drug makers, are shifting more prices directly onto consumers.

(See Table I Below the fold.)