Reform Medicare Part D To Improve Access To Medicines

Specialty drugs are typically high-cost prescription drugs used to treat complex chronic and/or life threatening conditions. Many do not have substitutes available at lower costs.  Over the last decade, the Medicare Part D benefit has imposed high out-of-pocket costs as a way to control costs of specialty drugs. This is causing many patients not to fill prescriptions. Some patients may be adding costs to the system by getting drugs more expensively by injection in doctors’ offices, where they are covered by Medicare supplemental insurance.

Quarterly Services Survey: Strong, Inconsistent Growth in Health Services Revenue

This morning’s Quarterly Services Survey from the Census Department showed good growth in revenues for health services, but it was inconsistent within the industry. Overall, first quarter revenue grew 0.7 percent from the fourth quarter and 5.2 percent from the first quarter of 2015 (Table I).

Obamacare 2016 Premium Hike 8 Percent

We are already anticipating double-digit premium hikes for Obamacare plans in 2017, based on insurance filings in a sufficient number of states to show the trend.

Obamacare’s defenders point out two limits to these leading indicators. First, they are requested, not approved rate hikes. Second, Obamacare beneficiaries can trade down. A person whose plan hikes premiums double digits can switch to a plan with a lesser increase. Both criticisms are fair.

Nevertheless, now that the dust has settled on 2016, and all the data on this year’s enrollment analyzed, we can confirm from two pro-Obamacare sources that premiums in Obamacare’s exchange plans increased by an average of eight percent from 2015 to 2016. General measures of price changes, such as Consumer Price Inflation, were effectively flat over the period. That is, the eight percent Obamacare premium hike was a real, not nominal, price hike.

Eight Thousand Non-Health Jobs Lost in May

The true scope of this morning’s miserable jobs report is disguised by the headline figure of 38,000 jobs gained. In fact, health services added 46,000 jobs while civilian non-health, non-farm employment dropped eight thousand (Table I). The warping of our economy towards the government-controlled health sector has reached the tipping point I have suggested for months.

Misleading Rhetoric on Cancer Payment Reform

A few weeks ago, Medicare proposed a pilot program to test a new way to pay doctors who inject drugs. Cancer is the big kahuna, cost-wise, when it comes to injected drugs. Medicare payment policy leads to certain industry practices to profit from the status quo. When the status quo is threatened, the “preservatives” immediately form a defensive coalition to stop the change.

Although I do not endorse this precise reform, the campaign to roll it back has become irresponsible and misleading. Currently, physicians who inject drugs are paid by Medicare a margin of 6 percent on top of a reported price called the Average Sales Price (ASP). The concern is that the oncologists make more margin off an expensive drug than a less-expensive drug.

People who sell injection drugs to physicians sometimes refer to their sales technique as “selling the spread.” Physicians, especially oncologists, sometimes say they cannot earn a living off the fees Medicare pays them, so they need to earn the “spread,” too. I do not believe there is evidence “selling the spread” leads oncologists in general to prescribe inappropriately, but others do. Further, whether this reimbursement leads to artificially expensive drugs is a different issue than oncologists’ prescribing behavior.

The New Medicare Gold Rush

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

Over the next few years, Medicare will significantly change how it pays hospitals, physicians, and other providers. This is sparking a gold rush among investors. BDO, a leading management consulting firm, released a report last month describing significantly increased private equity investment in long-term care facilities, rehabilitation facilities and home health agencies. BDO reported 79 deals in 2015, in which private equity sponsors invested $5.92 billion, up from just $1.67 billion in 2014. The previous high-water mark was $3.58 billion in 2011.

Health Construction Boomlet Collapses in April

The boomlet in health construction from February and March lost its wind in April. While construction overall dropped at a seasonally adjusted annual rate of 1.8 percent, health construction dropped by 3.0 percent (Table I).