Friday, July 31, 2015

New Evidence That Obamacare is Working?

Obamacare supporters are excited by a research article suggesting Obamacare is working to increase access to care. In an article published in JAMA: The Journal of the American Medical Association, researchers followed up respondents to the Gallup-Healthways Well-Being Index (which I’ve discussed previously.)

Yes, in an absolute sense, their access to care improved. According to the Huffington Post’s Jonathan Cohn, this means “Another Argument From Obamacare Critics Is Starting To Crumble.”

Oh dear. Even Citizen Cohn admits “The picture from the raw data is a little muddled” and “like all academic studies, this one will be subject to scrutiny that, over time, could call its findings into question.” Well, I won’t call them into question, just point out what is obvious from the abstract itself: Obamacare is dong a terrible job increasing access to care.

Thursday, July 30, 2015

Health Spending Growth Moderate in Second Quarter (Maybe)

A recent report by actuaries working for the Centers for Medicare & Medicaid Services estimates that the rate of growth of health spending, subdued for many years, is picking up again: “The health share of US gross domestic product is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024.”

Readers of this blog’s discussion of regular releases of GDP estimates by the Bureau of Economic Analysis knew this was coming. This morning’s release of the advance estimate of second quarter GDP confirms health spending is chewing up more and more of a slow-growing economy.

Comparing Q2 2015 to Q2 2014, GDP increased by $570.5 billion, of which $106.7 billion was health services. That’s about one dollar in every five.

Comparing Q2 2015 to Q1 2015, health spending growth looks a lot tamer: $21.6 billion of $191.2 billion GDP growth. That is only one dollar in ten, about half of what it has been running at. However, the advance estimate is subject to significant revision. Last quarter’s slow growth of health spending may be idiosyncratic and/or inaccurate.

Only 20-40 Cents of Each Medicaid Dollar Benefits Recipients

(A version of this column was published by Inside Sources on July 29, 2015, and syndicated to other media.)

Medicaid is the largest means-tested welfare program in the United States. Jointly funded by state and federal governments, its spending grows relentlessly whether the economy is adding or shedding jobs. Its ostensible purpose is to ensure access to medical care for households without enough income to pay for it. Yet new research suggests that only 20-40 cents of each Medicaid dollar improves recipients’ welfare. On the other hand, 90 cents of every dollar spent on the Earned Income Tax Credit (EITC) does so.

Wednesday, July 29, 2015

Blurring Boundaries Between Biotech, Digital Health, Patient Care Show Need For Regulatory Reform

When was the last time a billionaire entrepreneur en route to New York to raise a couple of hundred million dollars for biotech company stopped in Washington, DC to spend the afternoon in a panel discussion advocating the need for fundamental reform of the Food and Drug Administration?

Patrick Soon-Shiong, MD, founder of the NantWorks group pf companies, did just that on Monday afternoon. At the event, the Bipartisan Policy Center launched a report on advancing medical innovation in America. Written by a team led by former U.S. Senate Majority Leader Bill Frist, MD, and former Representative Bart Gordon, the report seeks support for a number of steps to reform regulatory processes and reduce the cost of medical innovation.

Read the entire column at Forbes.

Tuesday, July 28, 2015

Medicaid’s Poverty Trap Illustrated

The tragic story of a disabled woman trapped in poverty by the hodge-podge of ways the U.S. finances health care illustrates why we need to sweep the whole thing away and give everyone a universal, refundable tax credit:

Monday, July 27, 2015

Regulating Genomic Research: Top-Down or Bottom-Up?

The next frontier in information technology is genomic sequencing, which will create the biggest of big data resources by 2025, according to experts in the field. It has been 15 years since President Clinton announced the first sequencing of the human genome; and it is now clear that researchers’ ability to free the unimaginable wealth of information locked inside our genomes is bumping up against constraints imposed largely by the federal government.

Read the entire column at Forbes.

Friday, July 24, 2015

Investors Not Buying Anthem-Cigna Deal

Earlier this week, I wrote that merger arbitrage spreads indicated investors are not convinced the spate of recently announced takeovers among health insurers will close. Today’s news that Anthem (NYSE:ANTM) and Cigna (NYSE:CI) have agreed to takeover terms does not change that story.

Anthem’s original (hostile) bid was for $184 per share. Today’s is a minor bump, of $188 per share. The big difference is the mix of cash versus Anthem stock. The original bid was $126.22 in cash, versus only $103.40 today. Today’s bid includes 0.515 shares of Anthem stock, significantly higher than the previous bid.

The joint announcement claimed the new bid was at a premium of 38.4 percent of Cigna’s unaffected price. However, prices of both shares used for valuation in the announcement were May 28 closing prices.

Thursday, July 23, 2015

Bush Scores on Medicare

Former Florida governor and hopeful presidential candidate Jeb Bush stepped outside the political comfort zone and endorsed dramatic reforms to Medicare:
Republican presidential candidate Jeb Bush said Wednesday that we ought to phase out Medicare, the federal program that provides health insurance to Americans once they're 65.
"We need to make sure we fulfill the commitment to people that have already received the benefits, that are receiving the benefits," Bush said. "But we need to figure out a way to phase out this program for others and move to a new system that allows them to have something, because they're not going to have anything."
Bush praised Rep. Paul Ryan (R-Wis.) for proposing to change Medicare to a system that gives seniors medical vouchers instead of paying their bills directly.

(Arthur Delaney & Jeffrey Young, “Jeb Bush says we should phase out Medicare,” HuffingtonPost, July 23, 2015)
That kind of straight talk deserves praise, especially as so many have allowed a few years of Medicare Trustees’ reports, which show a trivial improvement in the program’s finances, to give them an excuse to dodge the need for reform.

Wednesday, July 22, 2015

Will 11 Million Pay Obamacare Mandate Penalty?

I recently took issue with lack of clarity in media coverage of a report by the IRS’ Taxpayer Advocate, which claimed 6.6 million paid Obamacare’s individual mandate penalty last year. I figured the total must be significantly higher, because each tax return would cover more than one individual.

In an e-mail to me dated July 21, 2015, Doug Badger, a longtime veteran of Republican administrations and whose Doug’s Briefcase blog is a must-read, pointed out that there can be more than one person in a household applying for Obamacare coverage:
….. a more accurate measure of household size could be obtained by dividing the number of people included in a completed applications by the number of applications.  That yields a factor of around 1.35, as opposed to 2.35.  I admit that is a rough approximation and there may be better ways of calculating the number of people affected by the tax on the uninsured.  In any event, your central point is exactly right: the number of people living in households that paid the tax is much greater than 6.6 million.

Health Insurers' Merger Mania on Hold?

Just a few weeks ago, it was declared that a great pent-up demand for mergers and acquisitions among health insurers would unleash itself as a result of Obamacare’s confirmation by the Supreme Court. And so it did, for a while at least. Today, the consolidation seems less sure.


In 2011, two deals, Cigna's acquisition of Health Spring and Aetna's purchase of Coventry Health Care, were worth $9.5 billion. Today’s three pending deals are much larger, amounting to almost one hundred billion dollars.

However, all three of the deals announced recently are looking a little shaky. Investors appear to have lost confidence that these combinations will take place.

Read the entire column at Forbes.

Monday, July 20, 2015

Private Cost of Public Queues for Health Care

Suppose you lived in an otherwise free country where you were forced to get medical care from a government-controlled monopoly funded by your taxes. Suppose that country made it almost impossible, by law and regulation, to get medical care outside that monopoly within its borders.

Because the government’s rationing of care would affect your ability to work or otherwise enjoy life, it would impose a private cost upon you greater than the tax burden. That country would be Canada, and the average cost imposed on patients by the government monopoly is $1,289, according to The Fraser Institute.


Obamacare Exchange Networks Have 34 Percent Fewer Providers Than Commercial Plans Do

Avalere Health has quantified how narrow networks are in Obamacare exchange plans, as shown in the figure below:

Medicaid Spending To Grow 6.2 Percent Annually For 10 Years

The Chief Actuary of the Centers for Medicare & Medicaid Services has published the sixth annual report on the welfare program’s financial outlook. Highlights include:
  • Over the next 10 years, expenditures are projected to increase at an average annual rate of 6.2 percent and to reach $835.0 billion by 2023.
  • Average enrollment is projected to increase at an average annual rate of 3.0 percent over the next 10 years and to reach 78.8 million in 2023.
  • Medicaid expenditures are estimated to have increased 9.4 percent to $498.9 billion in 2014, which includes the expenditures for newly eligible enrollees.
  • Average Medicaid enrollment is estimated to have increased 9.6 percent to 64.6 million people in 2014. Newly eligible adults are estimated to have accounted for 4.3 million of the 5.7-million enrollee increase from 2013 to 2014.

“Newly eligible” refers to those eligible as a result of Obamacare’s Medicaid expansion. What these figures show is that relatively healthy people signed up due to the expansion: The rate of spending increased slower than the increase in enrollment.

However in future, spending will increase exponentially while enrollment will increase on a flat trend line (as shown in Figures 2 and 3).

When Will We See Fiscally Responsible Health Reform From Congressional Republicans?

(A version of this column was published by RealClearPolicy on July 16, 2015.)

Just a few weeks ago, Republicans in Congress announced a oint budget resolution, which (if ever enacted) would repeal Obamacare and balance the budget in ten years. That is all well and good. Unfortunately, when they pass health care legislation that actually has a chance of becoming law, they fail to pay for their promises. How can they be trusted to repeal and replace Obamacare with fiscally responsible, patient-centered health reform?

The Congressional Budget Office (CBO) estimates repealing Obamacare would increase the deficit by $353 billion over ten years, before considering the economic growth that would result from repeal. Because repeal would grow the economy, federal tax revenues would increase by $216 billion, resulting in a net deficit of $137 billion. So, when Republicans actually repeal Obamacare, they will still have to cut $137 billion of spending elsewhere. Yet, they cannot even identify miniscule spending cuts to pay for current health-related bills.

Friday, July 17, 2015

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.

PwC forecasts 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 1061 (although with a lot of variance, as shown in Figure 1.)

United Health Group’s Q2 Earnings: Steady Growth, Obamacare Results Unclear


UnitedHealth Group (NYSE: UNH) reported its second quarter results yesterday. The results show an enterprise that is firing steadily on all cylinders. UNH has two main businesses: UnitedHealthcare, the health insurer; and Optum, a portfolio of businesses that provide services crunching Big Data to customers that include other insurers.

From the press release:
  • Second quarter revenues grew 11% year-over-year to exceed $36 billion,
  • UnitedHealthcare grew to serve 1.6 million more people domestically in the past year, including 175,000 people in the second quarter
  • Optum revenues of $13.6 billion grew 16% year-over-year; operating earnings Increased 19%
  • Second quarter net earnings grew 15% year-over-year to $1.64 per share, with cash flows from operations of $1.2 billion.

Thursday, July 16, 2015

Did 15 Million - Not 6.6 Million - Pay Obamacare’s Mandate Penalty?

The media have reported that 6.6 million “taxpayers” paid the Obamacare penalty (tax) for not obeying the individual mandate to buy federally qualified health insurance in 2014. However, the actual figure must be much larger.

However, the report by the Taxpayer Advocate discusses “returns,” not individual taxpayers. It reports that 2.6 million 2014 returns claimed Obamacare’s premium tax credits, totaling $7.7 billion paid out, and an average pay out of $3,000.

We know from other sources that about 6.14 million individuals claimed tax credits for Obamacare coverage last year (87 percent of 7.06 million individuals). (And that is only if we count people who signed up during open enrollment, which ended in March 2014. Because special enrollment continued throughout the year, most of those who signed up later would also have claimed tax credits.)

Government-Health Complex Continues to Congeal

The government-health insurance complex continues to congeal as AHIP, the health insurers’ main trade association, picked former Centers for Medicare & Medicaid Services (CMS) Administrator Marilyn Tavenner to lead it.

Although not confirmed as CMS Administrator until May 2013, she acted in that capacity since December 2011, after the administration fumbled the appointment of Dr. Donald Berwick to the position. In other words, she is the grande dame of Obamacare.

Wednesday, July 15, 2015

Producer Price Index: Pharma, Biologics Jump

The Producer Price Index (PPI) for June increased more than expected, as the effect of the drop in oil prices abated. As shown in Table I, producer price growth for health goods and services was in line with tame growth in overall PPI.

The exceptions were pharmaceutical preparations, which increased 2.5 percent on the month and are up 10.3 percent on the year; and biologic products (including diagnostics), which increased 3.1 percent month on month and 3.2 percent year on year.

Physician Payments and Patient Direct Pay 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 2014, pp. 1220-1224)

Tuesday, July 14, 2015

Directo-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.

Monday, July 13, 2015

Unbelievable! Congress Can't Find $30 Billion for Medical Device Excise Tax Repeal!

Congress may be on the verge of repealing Obamacare’s medical device excise tax. I am all for repealing it, which will reduce funding for Obamacare by $24 billion over ten years. Of course, that means it will increase the deficit by $24 billion, which means Congress has to offset repeal by cutting spending by the same amount.

Can’t be done, says Senator Orrin Hatch, Chairman of the Senate Finance Committee: “It’s pretty hard to come up with a $30 billion offset,” (as reported by the Wall Street Journal’s Isaac Stanley-Becker). I am not sure how Senator Hatch rounded the figure up to $30 billion, but that does not really matter. It should be as hard to find $24 billion or $30 billion of spending offsets as it is to find a cup of coffee at Starbucks.

Read the entire column at Forbes.

Friday, July 10, 2015

Goldman Sachs: $32.4 Billion Digital Health Market; Savings “Indefinitely Large”

Goldman Sachs analysts, covering medical technology, life sciences, capital goods, and healthcare supply chain and services, to produce a research report on the potential for the “Internet of Things” to disrupt health care.

The conclusion: The total addressable market is $32.4 billion, and the savings resulting from digitizing health care are “indefinitely large" (see Exhibit 2).


21st Century Cures Passes U.S. House

This morning, the U.S. House of Representatives passed (344-77) the 21st Century Cures Act. This is a monumental achievement, designed to fundamentally restructure the Food and Drug Administration and thereby reverse the staggering decline of productivity in medical research and development.

Read the entire entry at NCPA's Health Policy Blog.

Thursday, July 9, 2015

One Fifth of States Join Interstate Licensure Compact

Iowa has become the tenth state to enact the Interstate Medical Licensure Compact. This is a great achievement for the medical profession and state sovereignty. For almost a year now, I have been supporting this effort and I am glad to see it succeeding.

On June 24, I attended a briefing conducted in the wake of the compact hitting seven members. This started the wheels turning to establish a commission that will actually execute and administer the interstate licensing of physicians. At the meeting I learned a few things, a couple of which surprised me:

Wednesday, July 8, 2015

Zeke Emanuel Hammers Obamacare Again

Obamacare’s best frenemy, Dr. Ezekiel Emanuel, and his colleagues at the Center for American Progress, gave up on Obamacare last year. In yesterday’s Wall Street Journal, he and Topher Spiro emphasizes that Accountable Care Organizations, which Obamacare established to co-ordinate care and lower costs in Medicare, are failing to achieve either goal.

The only way to solve the problem they address is to let patients control the dollars and let providers experiment with collaborating on different bundles of care. That would mean turning Medicare into “some kind of voucher,” as President Obama has put it.

Read the entire entry at NCPA's Health Policy Blog.

21st Century Cures Act Has A Suspicious Payment Plan

The House of Representatives is scheduled this week to consider the 21st Century Cures Act (H.R. 6), a health policy bill designed to improve the economic incentives and streamline the process for inventing new medicines.

We applaud the act. It will go a long way to solving the crisis in pharmaceutical innovation. But we caution against the mandatory funding proposal in the bill and urge Congress to authorize and appropriate the funds instead of creating a new, mandatory spending program.

Read the entire Health Alert at NCPA's Health Policy Blog.

Rock Health: $2.1 Digital Health Funding in Q2

Rock Health has published its account of 2015 Q2 funding of digital health ventures. According to Rock Health, funding so far this year is keeping pace with 2014.


What is especially interesting about Rock Health’s report is that it compares venture funding of digital health to other areas and concludes that digital health is growing at a significantly faster rate than other areas, especially biotech and medical devices.


Digital Health Market is Maturing

StartUp Health has published its analysis of 2015 Q2 digital health funding. Covering a somewhat broader portfolio than Mercom Capital does, StartUp Health reports $1.7 billion in new funding.

By far the biggest deal discussed in the report was Zenefits’ $500 million raise. Zenefits, I get. The deal I don’t get is Oscar, which comes a distant second with $145 million raised. Oscar is the only health insurer in America that actually wants to enter Obamacare’s exchanges. What are they thinking? I can’t figure it out, but Goldman Sachs is an investor, and it’s not a good idea to bet against Goldman Sachs.

The report also notes that there have been some significant IPOs in digital health, providing liquidity and some transparency in valuations.

Tuesday, July 7, 2015

Telehealth Has Best Funding Quarter Ever

Venture funding of health IT deals in 2015 Q2 amounted to $1.2 billion in 138 global deals, according to Mercom Capital Group. This was smaller than 2014 Q2, which saw $1.7 billion raised in 159 deals.

However, telehealth and mobile health continue to blow the doors off.

Read the entire entry at NCPA's Health Policy Blog.

Obamacare Reduces Competition

Novel concepts—whether practice-management companies, home health care or the first for-profit HMO—almost always have come from entrepreneurial firms, often backed by venture capital.
That venture capital has been drying up since ObamaCare was passed. Instead, the biggest wagers in health-care services are being placed by private equity, which is chasing opportunities to roll up parts of the existing infrastructure. For instance, there were 95 hospital mergers in 2014, 98 in 2013, and 95 in 2012. Compare that with 50 mergers in 2005, and 54 in 2006. Cheap debt and ObamaCare’s regulatory framework almost guarantee more consolidation. That will mean less choice for consumers.
(Scott Gottlieb, “How the Affordable Care Act Is Reducing Competition,” Wall Street Journal, July 5, 2015."

Monday, July 6, 2015

Obamacare 2016 Rate Hikes Still Double Digits

When the first wave of Obamacare’s 2016 double-digit rate hit, defenders insisted that these were outliers. Well, those rate hikes keep coming, especially from insurers with large market share:

Read the entire entry at NCPA's Health Policy Blog.

Negotiate Your Doctors' Bills!

The idea that patients should take control of what they pay for medical care is taking hold among personal finance columnists. Noting “employer-provided health plan deductibles have risen 47 percent since 2009,” Mandi Woodruff of Yahoo! Finance has some good, common sense, advice on figuring out how much to pay for medical care.

The first tip is "figure out your medical billing code."

Read more at NCPA's Health Policy Blog.

One Year After Veterans Waiting List Scandal, Doctors Only 2,000 of 23,000 New VHA Hires

I hate to bring this up right after Independence Day, but the Veterans Health Administration appears to have evolved from an expensive and failing bureaucracy to an even more expensive and failing bureaucracy.

We have  already discussed that waiting lists have grown one year after the scandal broke. Now, see what they’ve done with the billions of dollars Congress handed them in the wake of the scandal.

Read the entire entry at NCPA's Health Policy Blog.

Thursday, July 2, 2015

Health Jobs Outpace Soft Employment Report

Health jobs keep growing faster than other civilian, nonfarm jobs. Health care added 40,000 jobs in June, almost one in five of the 223,000 jobs added. At a seasonally adjusted growth rate of 0.27 percent, health jobs continue to grow significantly faster than other jobs, which grew at 0.14 percent.

Read the entire entry at NCPA's Health Policy Blog.

Leaked: Obama's Trade Deal Includes Strong Intellectual Property Protections

I had been concerned that the Trade Promotion Authority, which Congress just granted the president, would be problematic because the president would not push for strong intellectual property protection in international trade agreements, especially the Trans Pacific Partnership.

I am glad to learn that I was wrong (or that the administration heeded my concerns).

Read the entire entry at NCPA's Health Policy Blog.

Oregon Health Plans Ordered To Raise Rates

All that complaining about double-digit Obamacare rate hikes for 2016? Well, at least one Insurance Commissioner thinks they’re not high enough. Plans in Oregon have lost so much money on Obamacare that the state’s Insurance Commissioner fears for their solvency unless they hike premiums more than they have asked for.

Read the entire entry at NCPA's Health Policy Blog.

Wednesday, July 1, 2015

Shrinking Health Construction Spending: Is Consolidation to Blame?

This morning’s release of construction spending from the U.S. Census Bureau indicates spending on health facilities actually shrank a little in May, a significant downturn from the previous release (see Table I, below the fold). Total construction spending amounted to about $1 trillion, of which $39 billion was health care. Health construction spending shrank 0.6 percent from April and grew only 3.1 percent year on year. Total construction spending, less health, grew 0.9 percent on the month, and 8.4 percent year on year.

We look at this because other economic data indicate that health spending is consuming more of our prosperity. Low, even shrinking, spending on construction of health facilities may represent the consolidation of hospitals that many fear will lead to increasing prices.

Read the entire entry at NCPA's Health Policy Blog.