Tag: "Health Care Costs"

Chicken & Egg in Consumer-Driven Health Care

debtAn advocate of consumer-driven health care will often be challenged by this question: “So, when I am hit by a bus, or have a heart attack or stroke, or am suffering from dementia, you want me to go shopping around for medical care?”

Obviously not. Nevertheless, this is a serious challenge and invites the question: How much of our health spending can be meaningfully controlled by discriminating patients? Researchers at the Health Care Cost Institute (HCCI) recently addressed this. The HCCI has a unique advantage in producing such research, because has access to a database of claims for employer-based plans run by a number of insurers.

The research categorized “shoppable” versus “non-shoppable” services. It found:

  • At most, 43 percent of the $524.2 billion spent on health care by individuals with employer-sponsored insurance in 2011 was spent on shoppable services.
  • About 15 percent of total spending in 2011 was spent by consumers out-of-pocket.
  • $37.7 billion (7 percent of total spending) of the out-of-pocket spending in 2011 was on shoppable services.

So, it looks like only 7 percent of health spending is subject to price-conscious patients spending their dollars wisely. The researchers concluded that “Overall, the potential gains from the consumer price shopping aspect of price transparency efforts are modest.” That would be true if we were talking about just forcing price transparency on the current benefit design. However, that is a distraction.

Innovation and Self-Insured Employer Plans

About 175 million people are covered by an employee health plan through their job or the job of a loved one.  More than half of people in employee health plans work for an employer that is self-insured or partially self-insured.  Self-insured plans are ones that are subject to federal law rather than the patchwork of state regulations that insurers must follow.  When employers self-insure, they take on the risk of their employees medical needs and generally have stop loss coverage to guard against any one worker or dependent have exceptionally high medical bills. Whereas insurance is somewhat of a stodgy business, employers themselves are looking for solutions rather than premium hikes year-after-year.  Most of the innovation that occurs in health coverage are experiments being conducted by self-insured employers. These include decision-support tools to make enrollees more informed consumers of medical care. Employers are dumping a ton of money into employee Health & Wellness programs, health risk assessments and chronic disease management.  A few employer plans, like North Carolina-based like HSM Solutions, are outsourcing some medical care for high cost procedures to countries abroad.  CalPERS, the public employee union, has initiated experiments in reference pricing to provide beneficiaries an incentive to seek out lower-cost providers.  These are all examples of self-insured plans looking for solutions to the problem of high medical costs.

A ‘Free Health Clinic’ for Montana State Employees

Before he left office, then-Montana Gov. Brian Schweitzer decided Montana’s 11,000 state workers, retirees and their dependents needed an employee health clinic. Before leaving office he had one created without consulting the legislature. For those of you who have not heard of the concept, it’s sort of like the school nurse, except there are doctors and real medical equipment involved. At most employee health clinics, physician visits are either free or involve no cost-sharing. Montana employees aren’t required to use the clinic; they can continue to see their own doctors with the normal cost-sharing.

2015 GDP: Health Services Spending Grew More Than Twice As Fast as Non-Health GDP

BEALast Friday’s release of the third estimate of Q4 Gross Domestic Product and annual GDP confirmed spending on health services grew at more than twice the rate of growth in non-health GDP in 2015.

For Q4, the third estimate significantly reduced the share of GDP allocated to health services from the previous second estimate (Table I). At $18.7 billion (annualized), growth in health services spending accounted for almost one fifth of GDP growth. This was sa much faster rate of growth (3.6 percent) than for non-health GDP (2.1 percent). Almost all Q4 GDP growth was in services, not goods. Personal consumption expenditure on goods actually dropped.

2016 GDP TI

Americans Think Their Health Care Is Fine, But “American” Health Care Is Not

doctor-mom-and-sonNational Public Radio, the Robert Wood Johnson Foundation, and Harvard University’s T. H. Chan School of Public Health have released findings of a February survey, Patients’ Perspectives on Health Care in the United States:

Even though most (55%) Americans reflect positively on their state’s health care system, saying it is excellent or good, few give their state top marks. Just one in six (17%) say the health care system in their state is excellent, while more than two in five (42%) adults in the U.S. say it is fair or poor.

Americans are much more negative about the nation’s health care system than they are about the health care system in the state where they live. Only 38 percent of adults in the U.S. had positive things to say about the country’s health care system, and fewer than one in ten (9%) gave it top marks. In contrast, more than three in five (61%) U.S. adults say the nation’s health care system is fair or poor.

Almost half the people who believe their own state’s health care is excellent deny that it is excellent elsewhere!

When You Need Care Now But aren’t Likely to Die, Urgent Care is the Answer

According to a Wall Street Journal article, urgent care centers are becoming Americans medical home away from home – mainly evenings and weekends when their primary care providers are not available.  About two-thirds of patients at urgent care centers have a family physician.

There are an estimated 10,000 urgent care centers in the United States and another 1,400 are expected by 2020. Increasingly, traditional providers are getting in on the act. Hospitals are building, acquiring or partnering with urgent care providers. Walk-in patients are welcome, although many allow patients to make an appointment. Wait times are 30 minutes or less whereas a wait in the emergency room can run eight times that length. The average cost at an urgent care center is about $150, compared to $1,354 for an emergency room visit. Centers are usually open evenings and weekends when doctors’ offices are closed.

When a retail clinic won’t do, this sounds like a much better solution that non-emergent ER visits or waiting a week for a physician visit.  It would be even better if these facilities were integrated so you could choose the level of provider (and price level) you need. As one of the commenters said in the WSJ article, why doesn’t every hospital have one of these next to the emergency room?  I’d go even farther; why doesn’t every hospital have one of these with a retail clinic inside next to the ER?

Strange Bedfellows Defending Obamacare

The primary component of GOP presidential candidates’ health policy proposals is to repeal Obamacare. Once GOP frontrunner Trump released his plan, the Committee for a Responsible Federal Budget took notice and performed an analysis of the likely fiscal effects from Trump’s plan. Presumably, these fiscal effects would also apply to the other Republican candidates who support repealing Obamacare as well.

CPI: Health Insurance Premiums Jump Amid General Deflation

BLSThis morning’s Consumer Price Index corroborates yesterday’s Producer Price Index, which indicated health insurance and certain other health prices increased in a generally deflationary environment. While the CPI for all items dropped 0.2 percent in February, health insurance increased 1.3 percent. Over the last twelve months, CPI has increased just 1.0 percent, while health insurance has increased 6.0 percent.

Prescription drugs continue to stand out, as well, having increased 0.9 percent last month and 3.4 percent over twelve months. However, the increase in prescription prices alone cannot explain the health insurance premium hikes.

Inpatient hospitals services also stand out, having increased 0.6 percent last month and 4.8 percent in the last twelve months. Outpatient services are only slightly better.

February’s CPI confirms that, while nominal increases in health prices are moderate, real price increases are quite high, because we are in a generally deflationary environment.

(See Table I below the fold.)

Donald Trump on Drugs

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

In last Thursday’s Republican presidential primary debate in Florida, Donald Trump made the curious assertion that Medicare does not “bid out” prescription drugs, before moving on to a similar assertion about military procurement. As with all thing related to whatever “Trumpcare” would look like if he were President, this statement requires some effort to decipher.

Medicare’s prescription drugs are very well “bid out.” Indeed, they are “bid out” twice – both directly and indirectly. Doctors and hospitals are not “bid out” at all. Instead, they are subject to Soviet-style price fixing by a central government authority. This is changing quickly, but the alternative payment methods are at a very early and unproven stage. Further, these alternative payment methods are not subject to competitive bidding, but to quality measures dictated by the central government (as I described last week).

Medicare spending on durable medical equipment (for example, walkers or oxygen equipment), prosthetics, and other supplies (for example, diabetic test strips) has been competitively bid since 2011. However, those competitive bids are delivered to the central government. Medicare prescription drugs are doubly bid, because drug-makers do not negotiate prices with the central government. Instead, health insurers compete to provide Medicare Part D drug plans, and the winning insurers negotiate with drug-makers for medicines. Consumers of prescription drugs enjoy two levels of protection from political interference.

PPI: Health Insurance Jumps, Deflation Returns

BLSDeflation returned to the Producer Price Index (PPI) last month, as the PPI for final demand dropped 0.2 percent from January. Prices for final demand goods, less volatile food and energy, increased 0.1 percent. Most prices for health goods for final demand were flat. The exception – again – was pharmaceutical preparations, for which prices increased 1.2 percent.

With respect to final demand services, for which inflation was flat (or up 0.3 percent less trade, transportation, and warehousing), the increase in the price of health insurance stands out at 0.9 percent. This is the first jump in health insurance for a while. (Home health prices also increased 1 percent, but such increases have been common.)

With respect to goods for intermediate demand, prices for chemicals (which go into pharmaceutical preparations) decreased, but not by nearly as much as prices for other intermediate goods declined. With respect to services for intermediate demand, prices for health insurance increased by 0.9 percent, significantly more than prices for other intermediate services.

Looking back over the 12-month period, the price increase of 10.1 percent in pharmaceutical preparations continues to stand out like a sore thumb. However prices for services delivered in residential settings have also increased more than other services.

What is new for February is the increase in health insurance. Increasing health costs are finally being passed on through premiums. (See Table I below the fold.)