Monthly Archives: July 2018

Kavanaugh Supreme Court Fight Will Be All About Health Care

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https://www.thefiscaltimes.com/2018/07/10/Kavanaugh-Supreme-Court-Fight-Will-Be-All-About-Health-Care

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he fight over President Trump’s pick of Appeals Court Judge Brett Kavanaugh to the Supreme Court is on, with Democrats launching what The Washington Post called “an all-out blitz” to defeat the nomination.

So get ready to hear a lot about health care in the coming days.

The Washington Post’s Dana Milbank notes that former Republican senator Jon Kyl, now a lobbyist for the pharmaceuticals industry, has been tapped to guide Kavanaugh’s path through the Senate. Why? Because by picking Kavanaugh, “Trump has guaranteed that health care will be at the center of the confirmation fight,” Milbank says.

Democrats welcome that fight, even if they have little chance of actually blocking the nomination. “The liberal base is fired up about abortion rights, but Senate Democratic Leader Charles Schumer (N.Y.) will seek to emphasize access to affordable health care as much as Roe v. Wade in the battle over the Supreme Court,” The Hill’s Alexander Bolton reports.

Focusing on health care might make sense for Democrats in a number of ways:

  • It reinforces the party’s preferred midterm election messaging in an area where voters say they trust Democrats more than Republicans.
  • Framing women’s reproductive rights as a matter of access to health care will be less polarizing in red states where seats are at stake in November, Bolton writes.
  • Playing up access to affordable health care may also put more pressure on Republican Sens. Susan Collins of Maine and Lisa Murkowski of Alaska, both of whom voted against Obamacare repeal last year.

If confirmed, Kavanaugh may get to weigh in on any of a number of cases with the potential to reshape health policy well beyond abortion rights. Despite his long legal record, “many of his health-related decisions are open to parsing from either side of the aisle and don’t actually provide a clear insight into where he’d stand on the Supreme Court,” The Washington Post’s Colby Itkowitz says.

Here are some key issues and cases that could be decided by the Supreme Court and Kavanaugh:

Obamacare’s protections for people with pre-existing medical conditions: Americans overwhelmingly support keeping these protections in place, according to a Kaiser Family Foundation poll from last month, but Trump’s Justice Department has asked a federal court to rule that those provisions of Obamacare are invalid. The case will soon be heard in a district court in Texas and could make its way to the Supreme Court before long. Sen. Joe Manchin of West Virginia, one of the few Democrats who might back Kavanaugh, said in a statement that he wants to hear where the judge stands on the ACA protections for those with pre-existing conditions before deciding whether to confirm him.

Medicaid: A federal court late last month blocked Kentucky’s plan to introduce work requirements for Medicaid recipients. The Trump administration is likely to appeal the ruling. Other states are also implementing work requirements. “As more states experiment with these programs and the cases wind their way through the courts, the Supreme Court may weigh in and shape how low-income Americans access Medicaid across the country,” Arielle Kane, director of health care at the Progressive Policy Institute, writes at the New York Daily News. The high court could also be asked to consider whether private health care providers can sue over Medicaid reimbursement rates, a question that could open the door to state funding cuts.

Risk adjustment payments to insurers: The Trump administration just froze billions of dollars of payments to insurers who enroll costlier-than-expected patients. The payments come from money collected from other insurers in the individual market. Legal challenges involving these payments are making their way through the courts. In the meantime, “the insurers in the individual market must manage uncertainty and constant change — resulting in higher prices for health care consumers,” Kane writes.

Industry consolidation: “Last year, four of the largest insurers tried, and failed, to merge into two. This year, CVS has proposed merging with Aetna, Amazon has acquired PillPack, and Walmart is seeking to combine with Humana,” Kane writes. “This so called ‘vertical integration’ raises questions about monopolies, competition and health-care pricing. It is likely that at some point courts will weigh in.”

 

 

Maryland governor signs federal all-payer health contract

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https://www.myjournalcourier.com/news/medical/article/Maryland-governor-signs-federal-all-payer-health-13060454.php

Maryland Gov. Larry Hogan, center, signs a contract with the federal government for the state's unique all-payer health care model in Annapolis, Md., on Monday, July 9, 2018. Seema Verma, administrator of the federal Centers for Medicare and Medicaid Services, is on the right and Maryland Senate President Thomas V. Mike Miller is on the left. Robert Neall, Maryland's health secretary is standing behind the governor. Photo: Brian Witte, AP / AP

Maryland Gov. Larry Hogan signed a contract with the federal government on Monday to enact the state’s unique all-payer health care model, which he said will create incentives to improve care while saving money.

Hogan signed the five-year contract along with the administrator of the federal Centers for Medicare and Medicaid Services, Seema Verma.

“The Maryland Model provides incentives across the health system to provide greater coordinated care, expanded patient-care delivery and collaboration of chronic-disease management … all while improving the quality of care at lower cost to the consumer,” Hogan said.

He said the model emphasizes the quality of care over the quantity of care.

The Hogan administration said the new contract is expected to provide an additional $300 million in savings a year by 2023, totaling $1 billion in savings over five years.

Maryland is the only state that can set its own rates for hospital services, and all payers must charge the same rate for services at a given hospital. The policy has been in place since the 1970s, though Maryland modernized its one-of-a-kind Medicare waiver about four years ago to move away from reimbursing hospitals on a fee-for-service basis to a fixed budget.

Because that change focused on hospitals only, the federal government required the state to develop a new model that would provide comprehensive coordination across the entire health care system.

Under the agreement, Maryland will be relieved of federal restrictions and red tape that the other 49 states face in the Medicare program. However, the state will have to meet benchmarks of improving access to health care while improving quality and reducing costs.

Verma said the model is the first involving the Centers for Medicare and Medicaid Services that holds the state “fully at risk for total Medicare costs for all residents.”

“The state and CMS have agreed on the goals, and now our job is to get out of the way and give the state the maximum flexibility to achieve success.”

Maryland health secretary Robert Neall says if successful, the plan could be replicated around the country to address financial strain on Medicare. Neall described the model as being “less transactional and more just taking care of the total person.”

“The incentives are going to be aligned so that it’s right place, right time, right purpose, right price, instead of, ‘Come back and see me in two weeks, and we’ll run the same set of tests on you,'” Neall said.

 

 

The real driver of health care spending

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https://commonwealthmagazine.org/opinion/the-real-driver-of-health-care-spending/

An inefficiency gap is boosting costs — and profits

THE HEALTH CARE DEBATES that occurred in Washington over the past year were largely irrelevant to what’s happening in the health care marketplace. Republicans couldn’t repeal the Affordable Care Act but they made some changes that weakened it. Those changes will increase insurance premiums in the individual market but they do nothing to address the most significant trends that are evolving across the system. To understand the important trends, one must look elsewhere.

In March, three researchers from the Harvard T. H. Chan School of Public Health published a study in JAMA analyzing the well-known reality that the United States spends dramatically more on health care than other wealthy countries. They compared the US, where health care consumes 17.8 per cent of gross domestic product, to 10 comparable nations where the mean expenditure is 11.5 percent. Despite spending much less, the other countries provide health insurance to their entire populations and have outcomes equal to or better than ours. The researchers found that this inefficiency gap is primarily driven by two characteristics of the US system: the high cost of pharmaceuticals and inordinate administrative expenses.

The high administrative spending derives in large part from the fact that 55 percent of the people in the US are covered by private health insurers who embed their own billing requirements, expenses, and profit into the system. The next highest country in this regard is Germany, where 10.8 percent of the population is covered by private insurers. In many countries, there are no such middlemen.

Coincidentally, when the JAMA study was published, the large publicly traded health care companies that dominate the US market had just finished disclosing their 2017 financial results. Examining those results provides additional insight into the economic forces that make our system so expensive and inefficient. The scale of the money involved is sometimes hard to grasp. The largest health care corporations, those included in the S&P 500, had almost $2 trillion in revenue last year. (Table 1)

Most of these enormous companies are engaged in one of two businesses: they’re either selling drugs or they’re selling health insurance. The excess costs reported by the Harvard researchers serve mainly to support the revenue of the companies in those fields.

The 2017 reporting of corporate profits was complicated by the passage of the new tax bill. But most companies also reported “adjusted net income,” which shows their normalized profits after accounting for the one-time impact of the tax law. The chart below (Table 2) uses the adjusted numbers to show the largest annual profits among S&P health care companies.

Health insurers such as United Health and retailers such as CVS have enormous revenue and impressive profits but, when profit is measured as a percentage of revenue, they can’t compete with biotech and pharma. The highest relative profitability, using the same reported adjusted results, is in the chart below. (Table 3)

These profit margins show that there are many situations where between a third and a half of every dollar spent on a prescription drug falls to the bottom line of the of the company that made it. This profit derives in large part from the enormous difference in drug prices in the US versus other countries where such prices are more effectively controlled.

The high administrative cost of the US system stems from the large portion of the market dominated by insurance companies looking to maximize their profits.  Notwithstanding many news stories about turmoil in the insurance markets, 2017 was a banner year for the largest health insurers. The big players all had significant increases in annual profitability in 2017.

Note that Humana did not report “adjusted” numbers even though its profit was swollen by unusual events. A major distortion was a huge break-up fee the company received from a failed merger. That accounted for approximately $630 million in after-tax profit. Even discounting that, it was a very good year.

The revenue and profitability of these corporations support the proposition that high pharmaceutical prices and insurance-related administrative costs account for much of the extraordinary expense of our system. US health policy, or the absence thereof, has enabled these businesses annually to drive costs up for the benefit of their bottom line. That effect will continue. Not surprisingly, the big health care companies are developing new strategies to enhance their businesses and drive their profits going forward.

The term now heard often among health care giants is “vertical integration,” which means combining upstream suppliers with downstream buyers to control the flow of business. If this strategy persists, health care delivery will evolve significantly although it is unlikely to become less expensive. The most prominent current example of  vertical integration is the planned $68 billion acquisition of Aetna by CVS.

How would these companies work together? A Wall Street analyst recently described the vision as a way to “identify high risk patients and preemptively get them into a Minute Clinic.” Thus, your health insurer could send you to a local store for diagnosis, treatment, drugs, and anything else you might need from the shelves. This will keep even more of the health care dollar under their control.

Similarly, Cigna is in the process of acquiring Express Scripts, a huge pharmacy benefits manager, for $54 billion, another attempt to bring more services under one roof. The combined company would have annual revenue of $142 billion and, presumably, enough leverage with drug companies to improve profits although not necessarily to lower costs to patients. United Health, a leader of vertical integration, previously bought a pharmacy benefit manager but co-pays and deductibles for its patients have continued to climb. United has aggressively acquired physician practices in recent years and is now in the process of buying DaVita Medical Group, which operates nearly 300 clinics and outpatient surgical centers.

More striking are reports of a potential but unsigned merger of Walmart and Humana, a combined company that would have revenue of $550 billion. Walmart is a large operator of retail pharmacies inside its stores and the logic is similar to the Aetna-CVS deal. Humana, a huge insurer, is separately in the process of acquiring a large home health business from Kindred so this could represent yet another level of vertical integration.

If this course continues, the health care system will evolve quickly, giving fewer and larger companies even more market leverage. Integration of this kind benefits the large corporations that initiate it but there is no evidence it will lead to lower costs, improved access, or enhanced quality. These changes are driven by highly focused corporate financial interests and are occurring without reference to public policy. That’s because there is no coherent public policy to guide these changes.

On May 11, President Trump made a long-awaited speech to reveal what he described as “the most sweeping action in history to lower the price of prescription drugs for the American people.” His typically firebrand language struck at “drug makers, insurance companies, distributors, pharmacy benefit managers, and many others” who contributed to “this incredible abuse.” His attack seemed to target the large public companies that have benefited from the abuse. Unsurprisingly, his speech did not include specifics. His staff then released tepid policy details, which immediately generated a significant upward spike in the biotech stock index as well as the stock prices of other large health care companies. For all the presidential bombast, investors saw Trump’s policy for what it is: indifference to the current path and no threat to high prices.

It is not in the interest of huge profit-making corporations to restrain the overall cost of the US health care system. In fact, their interest is served by driving health care expenditures higher. When combined with the spending analysis provided by researchers, the financial data disclosed by public corporations point to a path that the country must follow to make our system more coherent and less costly. Any progress will require driving down pharmaceutical pricing and reducing administrative costs imposed by middlemen. We are not doing that yet but, ultimately, we must.