Time Out From Writing and Speaking

It has been a great pleasure and privilege to participate in the discussion of U.S. health reform as an independent analyst. Due to other obligations, I will no longer be writing and speaking publicly in this capacity. Nor will I be responding to media inquiries.

This blog and other communications outlets are suspended indefinitely. 

Thank you for your support, readership, and input.

Best wishes.

Health Technology Forum: DC Meetup April 11 First Speaker Announced

Our next Meetup will be on April 11. We will discuss the promise of the recently passed 21st Century Cures Act (which was the last bill President Obama signed).

21st Century cures implemented a wide variety of provisions across drugs, devices, and other medical specialties aimed improving patient care through foster innovation.

Our first speaker is Diane Johnson of Johnson & Johnson. Ms Johnson currently serves as Senior Director, Strategic Regulatory, Medical Devices & Diagnostics. She will focus on combination products, accessories, class I and II exemptions, advisory panels, Humanitarian devices and clinical trials.

Third-Party Payment Is the Root Cause of Health System Dysfunction

(A version of this column was published by RealClearHealth.)

Largely absent from the vigorous debate over reforming the nation’s health care laws is the understanding that simply being covered by health insurance does not reduce health care costs.

Before the Affordable Care Act (ACA) passed in March 2010, President Obama repeatedly promised that the typical family’s health premiums would go down by (sometimes “up to” but frequently “on average”) $2,500. That decline did not occur because the ACA strengthened the control that insurance companies—as opposed to patients—have over health care spending. In fact, Americans’ increasing dependence on health insurance over the last seven decades has been a major contributor to exploding health costs.

The Unindicted Conspirator: High Healthcare Spending and the Rise of Third-Party Payment

The healthcare sector has come to be dominated by third-party payers. Insurance companies and government bureaucracies pay the bills for the medical care that Americans consume, and they have become an unquestioned fixture of the healthcare landscape. Meanwhile, the growth in third-party payment has coincided with a massive increase in healthcare costs and a decline in quality.

Read my new research paper, published by The Mercatus Institute at George Mason University, at this link.

Average Wait Time to See A Physician Up 30 Percent in Three Years

Merritt Hawkins, a physician-staffing firm has published its periodic survey of waiting times for appointments with physicians in 30 metropolitan markets. The results:

Average new patient physician appointment wait times have increased significantly. The average wait time for a physician appointment for the 15 large metro markets surveyed is 24.1 days, up 30% from 2014. 

Appointment wait times are longer in mid-sized metro markets than in large metro markets. The average wait time for a new patient physician appointment in all 15 mid-sized markets is 32 days, 32.8% higher than the average for large metro markets.

California Single-Payer Bill Looks Backward, Not Towards A New Era of Patient Choice

(A version of this Health Alert was published by the Orange County Register.)

Here we go again. The California state legislature is considering yet another bill to impose a so-called single-payer, government monopoly, health care system. This has long been an obsession of the militant California Nurses Union, because a health system under total government control would suit the narrow interests of union leaders. They would accrue power similar to that wielded by other public-sector unions and might even be able to negotiate contracts similar to those enjoyed by state and local employees, which are driving public finances across the state into the ditch.

Whither Goes Your Health Insurance Premium?

AHIP, the trade association for health insurers, has a nifty infographic answering the question: “Where does your premium dollar go?”

Obviously designed to defray accusations that health insurers earn too much profit, the infographic shows “net margin: of only three percent. A full 80 percent of our premium dollar goes to paying medical, hospital, and prescription claims.”

Fair enough. However, the elephant in the infographic is the 18 percent of premium that goes to “operating costs.” Lest you think that’s a synonym for “overhead” or “bureaucracy,” AHIP helpfully explains: “Operating costs include consumer-centric activities such as communicating with members, running customer service operations, quality reviews, and data analysis, among other activities.”

Well, readers have to judge how “consumer-centric” those operations are.

Veterans Health Administration Realizes It Should Buy, Not Build Software

Imagine if you learned a government agency built its own office furniture, HVAC, or telephones. Even if there were a massive amount of corruption in government purchasing, it would be remarkable if a bureaucracy could do a better job building than buying.

Yet, for decades, the Veterans Health Administration has tried to do that with its Electronic Health Record (EHR). I cannot think of another health system that has built its own EHR, rather than buy it from a vendor. It makes as little sense as a health system manufacturing its own MRI machines.

The Logic Defying CBO Obamacare Replacement Score Breaks Its Own Rules

(A version of this column was published by Forbes.com)

Dr. Tom Price, the U.S. Secretary of Health & Human Services has said the Congressional Budget Office’s recent “score” of the Republican Obamacare replacement bill defies logic. Even worse, it defies the very rules which govern the CBO.

The 2016 Budget Resolution, agreed by both the House and Senate in May 2015 directed the CBO to do so-called dynamic scoring of major legislation.  Dynamic scoring includes proposed laws’ macroeconomic effects. It is especially important when new laws cut taxes, as the American Health Care Act would do. Old fashioned, static analysis does not result in accurate estimates.

Health Technology Forum: DC April 11 - The Promise of 21st Century Cures

The next Health Technology Forum: DC Meetup will be on April 11 at 6 p.m. in Washington, DC.

The topic will be The Promise of 21st Century Cures. Last December, President Obama signed his last bill, the 21st Century Cures Act, which promises to significantly improve the pace of medical innovation.

Please learn more and RSVP at the Meetup group.

If you would like to nominate a speaker, please let me know.

Medical Price Hikes Match CPI

Both the Consumer Price Index and the price index for medical care rose just 0.1 percent in February. This is the sixth month in a row we have enjoyed medical price relief in the CPI. Even prices of prescription drugs dropped by 0.2 percent. Some components – medical equipment and supplies, outpatient hospital services, and health insurance jumped a bit, but not enough to drive overall medical prices higher. Medical price inflation contributed nine percent of CPI for all items.

Over the last 12 months, however, medical prices have increased much more than non-medical prices: 3.5 percent versus 2.7 percent. Price changes for medical care contributed 11 percent of the overall increase in CPI.

More than six years after the Affordable Care Act was passed, consumers have not seen relief from high medical prices, which have increased over twice as much as the CPI less medical care since Obamacare took effect.

See Figures I, II, and Table I Below the fold:

Is Health Insurance A Cause of Past-Due Debt?

A study of past-due medical debt by Michael Karpman and Kyle J. Kaswell of the Urban Institute demonstrates the expansion of coverage subsequent to the Affordable Care Act is associated with a reduction in the proportion of adults with past-due medical debt.

In 2012, 29.6 percent of U.S. adults had past-due medical debt, versus just 23.8 percent in 2015. The study does not define “past-due,” nor the average amount of medical debt that is past-due. However, it cites research that almost half of debt in collections is owed to hospitals and other providers.

Although health insurance is supposed to protect us from such a situation, it often does not. Among insured people, 26.6 percent had past-due medical debt in 2012, versus 22.8 percent in 2015. However, among uninsured people it declined more: 39.8 percent in 2012, versus 30.5 percent in 2015. What to make of this?

PPI: Health Prices Mixed, Inflation Low

February's Producer Price Index rose 0.3 percent. However, prices for many health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.* Prices for medical lab and diagnostic imaging actually deflated in absolute terms.

Even  pharmaceutical preparations for final demand, for which prices increased most relative to their benchmark, increased by just 0.4 percent. Although 0.3 percentage points higher than the price change for final demand goods less food and energy (0.1 percent), this is still tame relative to the trend of pharmaceutical prices. Among services for final demand, only price for health insurance and nursing homes rose higher than their benchmark.

With respect to diagnosing whether health prices are under control, the February PPI is about as mixed as January’s was.

See Table I below the fold:

Pharmaceutical Profits And Capital Markets

An interesting research article at the Health Affairs blog asserts there is no relationship between high U.S. prescription drug prices and drug companies’ research and development budgets. The point of the article is to debunk the argument that research-based drug companies must earn high profits if they are going to reinvest in R&D. While the data are correct, the article misunderstands the nature of capital markets.

Slow Growth, Downward Revisions in Health Jobs Continue

For the second month in a row, the Employment Situation Summary showed a slowing down in the growth of jobs in health services versus non-health jobs, relative to recent history. Further, revisions to data in this morning’s very strong jobs report indicate high job growth reported in health services for December and January were not correct.

Health jobs increased only 0.17 percent in this morning’s jobs report, versus 0.16 percent for non-health jobs. With 27,000 jobs added, health services accounted for 11 percent of new nonfarm civilian jobs.

This continues a welcome development. The previous disproportionately high share of job growth in health services was a deliberate outcome of Obamacare. If this trend persists, it will become increasingly hard to carry out reforms that will improve productivity in the delivery of care.

Ambulatory sites added jobs at a much faster rate than hospitals (0.25 percent versus 0.12 percent). This was concentrated in physicians’ offices and home health. This is a good sign because these are low-cost locations of care.

See Table I below the fold:

QSS: Good Growth in Health Services Revenue

This morning’s Quarterly Services Survey (QSS), published by the Census Bureau, showed good revenue growth across health services, except for specialty hospitals. 

Overall, revenue grew 4.2 percent in the fourth quarter. Further, growth versus Q4 2015 was a strong 6.9 percent and YTD growth is up 5.9 percent. Only specialty (except psychiatric and substance abuse) hospitals showed a decline. Revenue at outpatient care centers has grown 10.5 percent, Q4 2016 versus Q4 2015, a remarkable growth which hopefully reflects a change in location of care to lower cost settings versus hospitals. Although, hospitals’ revenues still grew a healthy 7.5 percent.

See Table I below the fold:

Every State Must Close Obamacare’s Special Enrollment Loopholes

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

So, the Republican Repeal-and-Replace Obamacare train has finally left the station. Although free-market health reformers are divided on the merits of the American Health Care Act, as introduced by the Energy & Commerce and Ways & Means Committees of the U.S. House of Representatives, no-one can deny the Republicans have kept their promise to take up health reform as their first order of legislative business.

However, new legislation takes a long time to get to the President’s desk. Meanwhile, the Trump Administration has the unenviable task of enforcing a law they know harms Americans. They are doing the best they can to offer relief through administrative rule-making.

On February 17, the Centers for Medicare & Medicaid Services proposed a new rule to address one reason why Obamacare premiums jumped 25 percent this year: The exchanges attract too many sick people and not enough healthy people. This is called a death spiral; and one reason it occurs is the Obama Administration allowed people to jump in and out of the exchanges too easily.

Replacing Obamacare with A Means-Tested Tax Credit

In his joint address to Congress last Tuesday, President Trump promoted the idea of a tax credit to support people’s purchase of health care. This is in line with the approach taken by Secretary Tom Price when he was in Congress, and that of the House Republican leadership.

Some self-styled conservatives oppose a refundable tax credit because it would cost taxpayers a lot of money. That which we currently understand to be the Republican replacement bill would offer a tax credit to individuals based on age but not on income, if they do not get employer-based health benefits.

That may be changing to a means-tested tax credit in order to win the support of conservative Republican lawmakers. “Oh, the irony,” exclaims one journalist: Don’t those Republicans know Obamacare contains means-tested tax credits? It’s still Obamacare-Lite!

No, it would not be.

Why Do Late Middle-Aged Women Allow Obamacare To Gouge Them?

In February, Professor Mark Pauly of the Wharton Business School wrote a short article proposing reforms to individual health insurance, in which he reminded us the biggest premium hike in the market for individual insurance consequent to Obamacare was among women in their 60s. The actual research was published in 2014, but I have wondered about it ever since.

Obamacare prevents insurers from charging premiums for 64-year olds that are more than three times those charged to 18-year olds. (A multiple of about five would be fairer, according to actuaries’ consensus.) Intuition tells us that should reduce premiums for older people. That intuition is wrong. Nevertheless, if politicians can convince people it is true, it makes political sense to impose the rule, because older people are much more likely to vote than younger people.

Health Construction Declined in January, Robust Year on Year

The construction market was weak overall in January, especially in health facilities, where construction starts declined 1.6 percent from December. Other construction starts declined only 1.0 percent. Health facilities construction accounted for just under six percent of the value of all new nonresidential construction (Table I).

Repealing Obamacare Will Create Jobs

(A version of this Health Alert was published by InsideSources.com and widely syndicated in local newspapers.)

Obamacare channeled billions of dollars out of the productive economy and diverted it towards a health-services sector that has become even more bloated than it was before 2010.

Last July, Dr. Bob Kocher, a venture capitalist who served as a special assistant to President Obama when the Affordable Care Act was created, noted that more than half of all health care workers today are administrators, up from just over a third before Obamacare became law.

These are paper pushers, not doctors and nurses—not the kind of jobs we should be bragging about.

GDP: Strong Health Spending in Weak Report

For those (like me) concerned about how much health spending continues to increase after Obamacare, today’s second report of fourth quarter Gross Domestic Product shows concern is still warranted. Because of revisions to the advance estimate, health spending accounted for a greater share of GDP than we had thought.

Overall, real GPD increased 1.8 percent on the quarter, while health services spending increased 5.6 percent, and contributed 36 percent of real GDP growth. Growth in health services spending was much higher than growth in non-health services spending (0.3 percent) and non-health personal consumption expenditures (2.4 percent). However, the implied annualized change in the health services price index increased by just 1.6 percent, lower than the price increase of 2.4 percent for non-health services, 2.0 percent for non-health PCE, and 2.1 percent for non-health GDP.

(See Table I below the fold.)

Employer-Based Coverage Does Not Equalize Workers’ Access to Health Care

One reason public policy favors employer-based health benefits instead of individually owned health insurance is the former is supposed to equalize access to health care among workers of all income levels. Insurers usually demand 75 percent of workers be covered, which leads to benefit design that attracts almost all workers to be covered.

Employers do this by charging the same premium for all workers but only having workers pay a small share of the premium through payroll deduction. Most is paid by the firm. Last year, the average total premium for a single worker in an employer-based plan was $6,435, but the worker only paid $1,129 directly while the employer paid $5,306.

Although this suppresses workers’ wages, workers cannot go to their employers and demand money instead of the employers’ share of premium. The tax code also encourages this, by exempting employer-based benefits from taxable income.

Does this equal access to care? No, according to new research:

Louisiana Shows Coverage Does Not Equal Access

Readers know I disagree with using measurements of “coverage” as proxies for access to medical care. New data from the Louisiana Department of Health, which cheers the expansion of Medicaid dependency in the state, shows (unwittingly) exactly why.

Healthy Louisiana’s Dashboard shows 402,557 adults became dependent on Medicaid as a result of Obamacare’s expansion. The Department notes benefits for some sick people. For example, screening resulted in 74 people being diagnosed with breast cancer and 64 diagnosed with colon cancer.

The Dashboard stops there, not telling us how those newly diagnosed were treated. (Medicaid patients often receive treatment later than privately insured do.) However, there is another, likely bigger problem.

Medicare, Medicaid, Veterans Health Administration At High Risk For Fraud, Waste, Abuse in Government Report

The Government Accountability Office (GAO) has published its biennial update of federal programs “that it identifies as high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement…” Healthcare programs feature high on the list. Medicare, the entitlement program for seniors, and Medicaid, the joint state federal welfare program for low-income households, are longstanding members of the list; and the GAO notes that legislation will be required to fix them:

We designated Medicare as a high-risk program in 1990 due to its size, complexity, and susceptibility to mismanagement and improper payments.

We designated Medicaid as a high-risk program in 2003 due to its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight.

So, that would be 27 years for Medicare and 14 years for Medicaid. Seen any progress?

This is the second time the Veterans Health Administration has made the list of high-risk programs:

Health Spending & Prices to Rise Through 2025

Before the Affordable Care Act passed in March 2010, President Obama repeatedly promised the typical family’s health premiums would go down by $2,500 after implementing the expansion of health insurance we label Obamacare.

Nothing of the sort has happened, of course. Actuaries at the Centers for Medicare & Medicaid Services, a government agency, have just updated their estimate of future health spending:

For 2018 and beyond, both Medicare and Medicaid expenditures are projected to grow faster than in the 2016–17 period, and more rapidly than private health insurance spending, for several reasons. First, growth in the use of Medicare services is expected to increase from its recent historical lows (though still remain below longer-term averages). Second, the Medicaid population mix is projected to trend more toward somewhat older, sicker, and therefore costlier beneficiaries. Third, baby boomers will continue to age into Medicare, with some of them dropping private health insurance as a result. And finally, growth in the demand for health care for those with private coverage is projected to slow as the relative price of health care—the difference between medical prices and economywide prices—is expected to begin gradually increasing in 2018 and as income growth slows in the later years of the projection period.

U.S. Patients Have Much Greater Access to New Cancer Drugs Than Others Do

New research by scholars at the University of Pittsburgh shows how much better access American patients have to new cancer medicines than their peers in other developed countries:

Of 45 anticancer drug indications approved in the United States between January 1, 2009, and December 31, 2013, 64% (29) were approved by the European Medicines Agency; 76% (34) were approved in Canada; and 71% (32) were approved in Australia between January 1, 2009, and June 30, 2014. The U.S. Medicare program covered all 45 drug indications; the United Kingdom covered 72% (21) of those approved in Europe— only 47% (21) of the drug indications covered by Medicare. Canada and France covered 33% (15) and 42% (19) of the drug indications covered by Medicare, respectively, and Australia was the most restrictive country, covering only 31% (14).

(Y. Zhang, et al., “Comparing the Approval and Coverage Decisions of New Oncology Drugs in the United States and Other Selected Countries,” Journal of Managed Care and Specialty Pharmacy, 2017 Feb;23(2):247-254.

Repealing Obamacare Will Help California Jobs

(A version of this column was published by the Orange County Register.)

Obamacare was a cash cow for providers, which now argue it was a program for jobs and economic growth. They now say that repealing Obamacare will kill California jobs. That grabs any politician’s attention, but it is not true.

According to a study by the UC Berkeley Labor Center, which is promoted by the California Hospital Association:

“The majority (135,000) of these lost jobs would be in the health care industry, including at hospitals, doctor offices, labs, outpatient and ambulatory care centers, nursing homes, dentist offices, other health care settings and insurers. But jobs would also be lost in other industries. Suppliers of the health care industry, such as food service, janitorial and accounting firms, would experience reduced demand, leading to job loss. The lost jobs also include those lost due to the ‘induced effect’ of health care workers spending less at restaurants, retail stores and other local businesses.”

Such research relies on the so-called “multiplier effect,” a politically seductive but misleading type of voodoo economics.

Health Prices Rose Two Thirds Less Than CPI

The Consumer Price Index rose 0.6 percent in January, while medical prices rose only 0.2 percent. This is the fifth month in a row we have enjoyed medical price relief in the CPI. Even prices of prescription drugs rose by only 0.3 percent. Prices of three components – medical equipment and supplies, dental services, and care of invalids and elderly at home even dropped. No category rose more than 0.1 percentage point more than all item CPI. Medical price inflation contributed only three percent of CPI for all items.

Over the last 12 months, however, medical prices have increased much more than non-medical prices: 3.9 percent versus 2.4 percent. Price changes for medical care contributed 13 percent of the overall increase in CPI.

See Figure I and Table I below the fold:

PPI: Mixed News on Health Prices

January’s Producer Price Index rose 0.6 percent. However, prices for many health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.* Prices for six of the categories of health goods and services deflated in absolute terms.

The outlier was pharmaceutical preparations for final demand, which increased by 1.1 percent (0.7 percentage points more than final demand services (less trade, transportation, and warehousing.) The largest decline (relative to its benchmark) was for prices of health and medical insurance for intermediate demand, which declined by 0.8 percentage points versus services for intermediate demand (less trade, transportation, and warehousing).

With respect to diagnosing whether health prices are under control, the January PPI is more mixed than December’s was. Nevertheless, although pharmaceutical prices stand out, most excess inflation is in health services, not goods.

See Table I below the fold:

Celebrity Apprentice And Medical Innovation Have Something Important in Common

(A version of this column was published by Forbes.)

A new report should help President Trump find his way out of the confusion suggested by his very mixed signals on the role of medical innovation to American prosperity and patients. Last month, he said research-based drug-makers’ practices were “disastrous,” the industry was “getting away with murder,” and suggested the federal government should dictate prices of medicines.

A couple of weeks later, he told pharmaceutical executives: “You folks have done a terrific job over the years … The U.S. drug companies have produced extraordinary results...” To cap it off, he promised to end “global freeloading.” “Foreign price controls reduce the resources of American drug companies to finance drug R&D and innovation.”

Republican Medicaid Reform Would Save $110 Billion to $150 Billion in 5 Years

Arguably more important than repealing and replacing Obamacare, a longstanding Republican proposal to change how Congress finances Medicaid would reduce the burden on taxpayers by $110 billion to $150 billion over five years, according to a new analysis by consultants at Avalere.

Currently, state spending on Medicaid is out of control because Medicaid’s traditional funding formula incentivizes the political class to overspend. For every dollar a state politician spends on Medicaid, the federal government pitches in at least one dollar via the Federal Medical Assistance Percentage (FMAP). This actually rewards states for making more residents dependent on Medicaid.

Fixed-Dollar Tax Credits Would Reduce Individual Health Insurance Premiums

Sonia Jaffe and Mark Shepard of the National Bureau of Economic Research (NBER) have written a new paper, which compares the effects of fixed-dollar subsidies for health insurance to subsidies that are linked to premiums. They conclude fixed-dollar subsidies reduce taxpayers’ costs and improve access. Unfortunately, the structure of subsidies in U.S. health insurance has moved in the other direction.

Tax credits that subsidize health insurance offered in Obamacare’s exchanges are based on the second-lower cost Silver-level plan in a region. Intuitively, this implies insurers will not compete too much because that would drive down subsidies. As long as subsidies chase insurance premiums, premiums will be higher than otherwise.

Jaffe and Shepard examine evidence from Massachusetts’ health reform (“Romneycare”), which dates to 2006. Its costs are still spiraling, and Jaffe estimates one factor is its design of subsidies, which is similar to Obamacare’s:

Slow Growth, Downward Revision in Health Jobs

Last month’s job report showed an explosion in health jobs versus non-health jobs. Revisions to previous data in this morning’s very strong jobs report indicate those data were not correct.

Health jobs increased only 0.12 percent in this morning’s jobs report, versus 0.16 percent for non-health jobs. With 18,000 jobs added, health services accounted for only eight percent of new nonfarm civilian jobs.

This is a welcome development. The previous disproportionately high share of job growth in health services was a deliberate outcome of Obamacare. If this trend persists, it will become increasingly hard to carry out reforms that will improve productivity in the delivery of care.

Ambulatory sites added jobs at a much faster rate than hospitals (0.41 percent versus 0.21 percent). This was concentrated in outpatient care centers and home health. This is a good sign because these are low-cost locations of care (Table I).

U.S. Health Insurance Is Upside Down

Writing in The Week, Ryan Cooper shares a chilling story about an Obamacare Gold-level health insurance policy that let its beneficiary down when he needed it most:

Stewart is 29 years old, and was pursuing his Ph.D in American history at Texas Christian University until ill health forced him to withdraw. He lives in Ft. Worth, Texas, with his wife of six years, who is a junior high school teacher in a low-income district. They own their home. Before he came down with complications from cirrhosis caused by autoimmune hepatitis, he says he led a scrupulously healthy lifestyle — he does not drink or do any other non-medical drugs, he says, and was a devoted hiker before disaster struck. And he was insured — indeed, he had a gold plan from the ObamaCare exchanges, the second-best level of plan that you can get.

But now he faces imminent bankruptcy and possibly death.

(Ryan Cooper, “This is How American Health Care Kills People,” The Week, January 14, 2017.)

This exactly the type of catastrophic illness for which insurance should pay. Why does it not?

Health Construction Picked Up in December

Health facilities construction turned around in December, growing 0.6 percent versus a decline of 0.3 percent in starts for other construction. Health facilities construction accounted for almost 6 percent of non-residential construction starts. However, the growth was all in private health facilities.

See Table I below the fold:

Private Sector Health Benefits Grew 17 Percent Faster Than Wages Last Year

Released yesterday, the Bureau of Labor Statistics quarterly Employment Cost Index showed private sector health benefits increased 2.7 percent in 2016, versus only 2.3 percent for wages.

Overall, private-sector benefits grew only 1.8 percent, indicating non-health benefits would have grown little if at all. State and local government workers’ benefits grew 3.1 percent, 72 percent faster than private-sector benefits!

Obamacare Is A Terrible Jobs Program

(A version of this column was published by American Thinker.)

As congressional Republicans embark on their promise to repeal and replace President Obama’s signature Affordable Care Act, they are being overwhelmed by claims that imply it’s a jobs program.  Scholars affiliated with the Milken Institute School of Public Health at George Washington University estimate Obamacare repeal would kill 2.6 million jobs by 2019.  Almost a million jobs would be lost from health services, while the balance would be lost in construction, real estate, retail, finance, and insurance.

Unfortunately, such research relies on the so-called “multiplier effect,” a politically seductive but misleading type of voodoo economics.  It goes like this: Obamacare throws money at hospitals, doctors’ offices, and other health services.  Those recipients build new facilities and hire more workers, who spend their paychecks in their communities.  It is the same kind of research that developers seeking taxpayer-subsidized stadiums commission – and it is meaningless.

GDP: Tame Health Spending in Weak Report

For those (like me) concerned about how much health spending continues to increase after Obamacare, today’s flash report of fourth quarter Gross Domestic Product confirmed good news.

Overall, real GPD increased 1.9 percent on the quarter, while health services spending increased only 1.6 percent, and contributed only 10 percent of real GDP growth. Growth in health services spending was somewhat higher than growth in non-health services spending (1.2 percent) but significantly lower than non-health personal consumption expenditures (2.7 percent). Further, the implied annualized change in the health services price index increased by just 1.5 percent, lower than the price increase of 2.4 percent for non-health services, 2.3 percent for non-health PCE, and 2.2 percent for non-health GDP.

(See Table I below the fold.)

JRG's Oral Testimony at House Ways & Means Committee 1/24/17

Highlight reel (2.44 minutes) of my testimony to U.S. House of Representatives Ways & Means Committee Oversight Subcommittee on Obamacare's individual mandate (1/24/17):



The full oral testimony is at this link and my written testimony is at this link.

Massachusetts Governor Hiking Taxes To Rescue Failed Health Reform

(A version of this column was published by Forbes.)

Governor Charlie Baker of Massachusetts has proposed a tax of $2,000 per worker on businesses which do not offer health coverage to employees who become dependent on Medicaid. This makes him the second Republican governor of Massachusetts to buy into the notion that imposing taxes (or fines or penalties or fees) on individuals and businesses can force them to accept responsibility for government failure at getting health spending under control.

Evidence from Massachusetts and the nation shows the opposite is true. Yesterday, I testified on the effect of Obamacare’s individual mandate before the Oversight Subcommittee of the U.S. House of Representatives’ Ways and Means Committee. (The video is at this link, and my written testimony is at this link.)

Obamacare’s Bureaucracy: The Amazing Rise in Health Insurance Jobs

As Congress and President Trump debate how to repeal and replace Obamacare, the obsession with health insurance, rather than actual access to health care, has dominated the debate. It invites the question: How have jobs in health insurance fared before and after Obamacare?

They have boomed, growing over one quarter since the January 20 employment pre-recession high-tater mark.

Feel The Bern! No Right to Health Care in Canada

On Wednesday, I watched the Senate’s Health, Education, Labor, & Pensions (HELP) Committee’s courtesy hearing for Dr. Tom Price, MD, whom President-elect Trump has nominated to be the next United States Secretary of Health & Human Services. As a game of “gotcha,” the hearing played out predictably.

However, Senator Bernie Sanders (I-VT) stood out for asking a pointless “question” (actually a statement), which was because it was based on an error. As he has many times, Senator Sanders made the false claim that health care is a right in Canada and other countries outside the United States. According to Mr. Sanders, this is a unique stain on the United States.With respect to Canada, it is simply and plainly not true that health care is a “right.”

CPI: Moderate Health Price Inflation

The Consumer Price Index rose 0.3 percent in December. Medical prices rose only 0.2 percent. This is the fourth month in a row we have enjoyed medical price relief. Even prices of prescription drugs rose by only 0.2 percent. Prices of health insurance even dropped a smidgeon!

Prices for medical care commodities rose the most, by 0.6 percent, followed closely hospital services (0.3) percent).

Over the last 12 months, however, medical prices have increased over twice as fast as non-medical prices: 1.9 percent versus 4.1 percent. Price changes for medical care contributed 16 percent of the overall increase in CPI.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is has been low until recently, 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 have not seen 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.)

Graham To Testify at House Ways & Means Oversight Subcommittee Hearing January 24

I will be testifying in person on Capitol Hill on January 24 at 2 p.m. EST. The topic will be Obamacare's individual mandate to buy health insurance.

Come in person or watch online: More details at this link.

Council of Economic Advisers' Bad Obamacare Economics

President Obama’s Council of Economic Advisers (CEA) has issued its valedictory report on the state of Obamacare. The gist of the argument is that Obamacare is doing fine, on the verge of overcoming its growing pains.

The CEA claims critics who suspect the 25 percent increase in premiums for 2017 are a problem are off-base. In a normal insurance market, this would indicate a “death spiral”: The sick enroll and the healthy stay away, causing next year’s premiums to increase. The cycle repeats itself until only the sickest enroll. The CEA asserts this cannot be occurring because 11.3 million people enrolled in Obamacare last December, which was 300,000 more than in December 2015. Further, insurers underpriced their policies in 2014 because the market was new. However, they have learned since then and are pricing policies more realistically.

While it is true enrollment in Obamacare’s market is a little higher than last year, it is still well below the Congressional Budget Office’s estimate of 21 million enrollees in 2016, which it made as recently as March 2015. Even in January 2016, it estimated 13 million would enroll last year, which was almost one fifth too high.

PPI: Pharmaceutical Prices Drop!

December’s Producer Price Index rose 0.3 percent. However, prices for most health goods and services grew slowly, if at all. Fifteen of the 16 price indices for health goods and services grew slower than their benchmarks.*

The outlier was health and medical insurance for final demand, which increased by 0.2 percent, the same rate as final demand services (less trade, transportation, and warehousing.) The largest decline (relative to its benchmark) was for prices of new health care building construction, which declined twice as fast as prices of overall building construction did.

Prices of hospital outpatient care and nursing home care declined versus their final demand services (less trade, transportation, and warehousing) and also absolutely. Pharmaceutical prices decreased 0.1 percent, a 0.4 percent drop versus the price increase for final demand goods less food and energy.

See Table I below the fold:

Veterans Deserve Better Health Care

(A version of this column was syndicated by the Tribune News Service.)

President-elect Trump has nominated David Shulkin, MD, to be the next Secretary of Veterans Affairs. In 2015, Doctor Shulkin was nominated by President Obama to be Under Secretary of Health in the VA (the position he currently holds). It is an interesting choice, not only because Mr. Trump is calling on an Obama appointee to take the top job in the VA, but also because it recognizes veterans’ health care is the major pain point in the department.

Can veterans hope for better reform than just more tinkering with the current bureaucracy? Or will they have the opportunity to liberate themselves from it? No other public servants, active or retired, are forced to go to government-owned hospitals for care. Why veterans?

Government Failure In Public Health: Zika

Other than anarcho-libertarians, most agree that government has a role to play in preventing and suppressing epidemics, a classic public-health problem. Viral or bacterial infections are not passed from animal to person, or person to person, by voluntary exchange. Instead, proximity to another’s infection can lead to an individual’s becoming infected, notwithstanding any market interaction.

So, even the most freedom-oriented individuals accept government spending and restrictions on individual choice when the threat of epidemic increases. In 2014, the arrival at Dallas-Fort Worth airport of a man carrying the Ebola virus caused some lawmakers to seek a ban on air travel from countries where Ebola had broken out.

Health Jobs Explode Versus Non-Health Jobs

Health jobs exploded in this morning’s jobs report, growing more than three times faster than non-health jobs (0.28 percent versus 0.09 percent). With 43,000 jobs added, health services accounted for over one quarter of 156,000 new nonfarm civilian jobs.

The disproportionately high share of job growth in health services is a deliberate outcome of Obamacare. While this trend persists, it will become increasingly hard to carry out reforms that will improve productivity in the delivery of care.

Ambulatory sites added jobs at a much faster rate than hospitals (0.41 percent versus 0.21 percent). This was concentrated in offices of physicians, which alone added. Ambulatory sites added 30,000 jobs, versus 11,000 in hospitals. This is a good sign because hospitals are high-cost locations of care versus doctors’ offices and other ambulatory sites.

See Table I below the fold:

Questions on Medicare For Dr. Tom Price, Our Next Health Secretary

(A version of this column was published by Forbes.)

It looks like Tom Price, MD, Donald Trump’s nominee for U.S Secretary of Health & Human Services will get his first Senate confirmation hearing on January 18. According to Morning Consult, Democratic Senators are planning to focus on Price’s support for turning Medicare into a system of “premium support.”

Fair enough: It will be a relief from all the arguments and counter-arguments about whether “repealing and replacing” Obamacare means “repeal and delay,” “repeal and de-regulate,” or “delay and delay” (as advocated by some who fear Republican politicians will repeal Obamacare immediately and never get around to a replacement bill.)

Why Did The FDA Approve 57 Percent Fewer New Medicines Last Year Than 2015?

The Food and Drug Administration has reported it approved only 19 innovative new medicines last year, versus 51 in 2015. To be sure, 2015 was a high-water mark. Nevertheless, such a dramatic drop signals a problem for patients eager for new treatments. These new drugs, though few, represent advances in the treatment of ovarian cancer, Hepatitis C, and multiple sclerosis, among other diseases.

The FDA excuses itself for the slowdown, claiming it is receiving fewer applications from drug makers. However, this is symptomatic of a vicious circle. The regulatory burden of approval has increased so much, it is contributing to a significant reduction in the rate of return on capital invested in pharmaceutical development.

Drop in Health Facilities Construction Continues in November

October’s construction trend continued in November. Overall, health facilities construction starts declined 0.1 percent, versus an increase of 0.9 percent for other construction. Health facilities construction accounted for almost 6 percent of non-residential construction starts. However, there was greater gap between health and non-health starts in private than public construction.

(See Table I below the fold.)

A Holiday Health Policy Vignette: Eye Surgery

If the Christmas dinner table has a cross-border contingent, different national characteristics are sure to come up for discussion. I enjoyed Christmas in Naples, Florida with a mixed group of Americans and Canadians. One couple consisted of a Canadian husband and an American wife. She insisted Canada’s single-payer health system was superior in every way (despite the couple’s living in Florida, not Canada).

I had sailed with her husband the day before, and he had invited me to pay tennis and golf, too. I was exhausted. How did he have so much energy? “Ever since I was five years old, I was blind as a bat, wearing Coke-bottle thick glasses. I could never play any sports. About seven years ago I had surgery to replace my lenses, and since then I play every sport I can. It has been a liberation.”