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.”