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.”

One difficulty with the President’s recent statement is that policies which allow American research-based drug-makers to succeed apply equally to foreign drug-makers which operate here. Any innovative drug-maker which wants to supply its therapies to American patients can apply for patents which assure its intellectual property will not be taken by copy-cats. While patents are issued by national governments, international agreements are necessary to ensure global benefits.

President Trump traduces international trade agreements, which have included protections for intellectual property since the United States and other countries signed the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994.

However, President Trump should be in a good position to understand how important global protection of intellectual property is. After all, he is a beneficiary.

The Apprentice, which launched in the United States in 2004, has been licensed in many other countries. Effective copyright protection is necessary to ensure President Trump and his business associates’ innovative model of reality entertainment can be enjoyed by global audiences. (The tiff between Mr. Trump and his American successor, Arnold Schwarzenegger, pales beside his 2012 Twitter battle with his British counterpart, Alan Sugar. When asked by Piers Morgan why he did not fire Lord Sugar, Mr. Trump replied “I easily could but as long as Sugar is making me money (it's my show) I won't.”)

Research just published by the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) measures the welfare benefits of protecting all types if intellectual property, from medical innovation to reality TV.

The Roots of Innovation is the fifth edition of the Chamber’s annual effort to rank countries by a number of indicators of strength of IP protection. The current edition ranks 45 countries representing about 90 percent of the world’s Gross Domestic Product. Countries are scored by 35 indicators within six categories of IP protection: Patents, copyrights, trademarks, trade secrets and market access, enforcement, and ratification of international treaties. The indicators measure both law and enforcement: Countries which do not enforce IP rights, despite the letter lf the law, are marked down. Most of the indicators are straight forward: Longer patent, copyright, or trademark terms are better; strong enforcement mechanisms are better; and treaty obligations protecting intellectual property invented in other countries is better.

The report does not attempt to determine causality between strong IP protection and social or economic outcomes. Indeed, 45 indicators is likely far too many to use for such an analysis. Nevertheless, it does determine a number of positive correlations between strong IP protection and other beneficial indicators. For example, the correlation between countries’ scores and

• access to venture capital is 0.77, and countries scoring above the median are 45 percent more likely to attract venture capital and private investment than those scoring below the median;
• Research & development spending is 0.70, and countries scoring above the median are over 40 percent likely to attract private investment in R&D.
• human capital is 0.82, and countries scoring above the median have six times more workers in R&D;
• Development of biological therapies is 0.70, and countries scoring above the median host nearly 15 times more clinical trials on innovative biologic medicines;
• Cutting edge clinical research is 0.73, and countries scoring above the median attract more than 20 times the number of early-phase clinical trials;
• Creative outputs is 0.86, and countries scoring above the median are 75 percent more likely to have larger and more dynamic content and media sectors;
• Access to licensed music outlets is 0.78, and countries scoring above the median have greater access to new, licensed music content with a wider array of choice over secure platforms;
• Greater consumption of new audiovisual content is 0.73, and countries scoring above the median are likely to see at least 3.5 times more theater screenings of feature films, and generate more tax revenue from ticket sales; and
• Wider and more convenient access to video content is 0.61, and countries scoring above the median have more than double the level of advanced and easy-access home entertainment.

Protecting intellectual property in medical innovation and entertainment go hand in hand. The Roots of Innovation shows there are no innovative and prosperous countries today that do not have strong IP protections across the board. As he develops policies that will determine whether patients will benefit from future medical innovation, let’s hope President Trump recognizes this in his own experience as a successful creator of intellectual property.