Friday, October 21, 2016

Everybody Gets A Medal: Performance “Incentives” In Medicare Reform

In April 2015, huge bipartisan majorities passed a milestone Medicare reform bill called MACRA, which imported all the worst elements of Obamacare into Medicare. At the time, I wrote an alternative proposal, and anticipated physicians would refuse to swallow the medicine MACRA prescribed.

The gist of MACRA is that Medicare will no longer pay for “volume” but “value” in a zero-sum game wherein physicians who do not satisfy the government’s requirements for “value” transfer income to those who do. Since the bill was signed, the details have percolated from the elite physician executives who run the medical societies which lobbied for the bill down to practicing physicians. There has been pushback.

Nervous that physicians will bail out of Medicare if the government squeezes them too hard, the Administration has backtracked on MACRA’s sticks and shifted towards carrots. Last April, the Administration published a proposed rule, 426 pages long. After a lengthy comment period, the final rule, which is 2,205 pages long (!), was published on October 14.

Thursday, October 20, 2016

What Holds Back Consumer-Driven Health Plans?

A previous entry discussed new evidence that so-called consumer-driven health plans (CDHPs) reduce health spending one eighth among employer-sponsored group plans run by national health plans.

CHDPs are defined as High-Deductible Health Plans coupled with Health Savings Accounts or Health Reimbursement Arrangements). These plans became available in 2005. However, they only appear to cover a little over one quarter of employed people or their dependents who are enrolled in their benefits.

The case for CDHPs is that consumers (patients) will spend their health dollars more prudently than insurers or employers will. So: How can such a small proportion of people be enrolled in CDHPs after over a decade of evidence supporting the case that they cut the rate of growth of health spending?

Wednesday, October 19, 2016

California’s Surprise Medical Bill Law Papers Over A Systemic Problem

(A version of this column was published by Fox & Hounds.)

Insured patients who go into hospital for scheduled surgery are often shocked to find they owe bills well beyond what they expected to pay, especially if they understood the hospital and surgeon to be in their health plan’s network. The problem usually occurs when an anesthesiologist or other specialist involved in the procedure is not in the insurer’s network. Until now, when it came to the amount the out-of-network specialist could charge, the sky was the limit. A recent Consumers Union survey found nearly one third of Americans who had hospital visits or surgery in the past two years were charged an out-of-network fee when they thought all care was in-network.

Tuesday, October 18, 2016

Medical Care Prices Rose Less Than Non-Medical Prices in September

The Consumer Price Index rose 0.3 percent in September. Remarkably, medical prices rose a smidgen less, at 0.2 percent. This is a big breather from August, when increases in medical prices were dramatic. Nevertheless, both prescription and non-prescription drugs increased prices by 0.8 percent. Prices for medical equipment and supplies dropped by almost as much, shrinking 0.7 percent.

Over the last 12 months, however, medical prices have increased four times faster than non-medical prices: 1.2 percent versus 4.9 percent. Price changes for medical care comprise 27 percent of the overall increase in CPI.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is flat, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers are seeing no relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.

(See Figure I and Table I below the fold).

Fifty Percent Increase in Share of Physicians Owned By Hospitals in Three Years

A new survey by the Physicians Advocacy Institute and Avalere Health, a consulting firm, shows a significant increase in the number of physicians leaving independent practice and joining hospital-based health systems:

·        From July 2012 to July 2015, the percent of hospital-employed physicians increased by almost 50 percent, with increases in each six-month period measured over these three years.
·        In 2012, one in four physicians was employed by a hospital.
·        By 2015, 38 percent of physicians were employed by hospitals.

Good or bad? Well, color me skeptical. This acquisition spree is driven by new payment models which seek to reward providers for “accountable” care (which I suppose is better than unaccountable care.) So far, the results of payment reform in Medicare have been trivial.

Monday, October 17, 2016

Mixed News on Generic Drug Approvals

A response to expensive patented medicines is generic competitors. The U.S. has struck a pretty good balance between innovation and low prices through the Hatch-Waxman (1984) Act, which specified patent terms for newly invented medicines, and a pathway for generic competitors to enter the market after a period.

One obstacle to generic entry in recent years was a very slow approval process at the Food and Drug Administration. This led to a backlog, which was unexpected because one important benefit of Hatch-Waxman was that generic competitors did not have to replicate the expensive clinical trials innovative drug-makers had to carry out to receive the FDA’s approval.

The FDA’s Office of Generic Drugs (OGD) considers approving generic copies of drugs upon receipt of an Abbreviated New Drug Application (ANDA) from the manufacturer. The system changed under a law passed in 2012, the Generic Drug User Fee Act (GDUFA). Recent data show improvement:

Friday, October 14, 2016

PPI: Health Prices (Except Pharmaceuticals) Stay Tame

September’s Producer Price Index rose 0.3 percent, a significant pick up. However, prices for most health goods and services grew slowly, if at all. Eleven of the 15 prices for health goods and services reported grew slower than the headline PPI. The major exception was prices for pharmaceutical preparations, which increased 1.2 percent, resuming a trend which I had hoped was breaking down. Further, prices of medicinal and botanical chemicals dropped 0.7 percent. So, price increases for pharmaceutical preparations are not coming from the ingredients.

However, over the last twelve months, prices of health goods and services have increased faster than overall PPI, which grew 0.7 percent. The tables are turned: 11 of 15 health categories experienced larger price increases than PPI did. Pharmaceutical preparations continue to stand out dramatically, having grown 8.1 percent. Nursing homes, for which prices rose 2.4 percent, might replace drug makers as the whipping boy for high health prices, but they have a long way to go.

See Table I below the fold: