Monthly Archives: December 2019

Centene quietly lobbying Congress to let states partially expand Medicaid

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https://www.healthcaredive.com/news/centene-quietly-lobbying-congress-to-let-states-partially-expand-medicaid/568742/

Centene, the nation’s largest Medicaid managed care provider, wants Congress to change the eligibility requirements around Medicaid, the government-sponsored safety net program that covers one in five low-income Americans.

Its proposal would ultimately push more people onto the Affordable Care Act exchanges by allowing states to adopt a partial Medicaid expansion, an idea typically embraced by red states.

CEO Michael Neidorff told Healthcare Dive the company has been quietly talking to lawmakers on both sides of the aisle on Capitol Hill about the plan, though he emphasized nothing of substance will happen until after the 2020 election.  

Centene says its proposal is an attempt to strengthen the ACA markets by increasing the pool of people while enticing holdout states to partially expand their Medicaid programs.

“I think there’s a way to get it done,” Neidorff told Healthcare Dive. “We have a very powerful Washington office and they’ve been working with leadership and their staff.”

Centene filed lobbying forms totaling about $2 million in spending in the congressional lobbying database for 2019, as of Dec. 11. ​In 2018, the payer reported spending roughly $2.5 million. 

However, policy experts caution that it would result in increased spending for the federal government and fewer protections for those enrolled in Medicaid who are then pushed into the exchanges.

It’s unclear how receptive Congress will be, but experts were skeptical of any consensus on the polarizing health law.

“It would be a very major change. I certainly don’t see that happening. It’s opening up the ACA and as we know from past history, it’s a battle royale when you go into the ACA,” Joan Alker, executive director and co-founder of the Center for Children and Families at Georgetown University, told Healthcare Dive.

Centene’s proposal

Under the ACA, states can expand their Medicaid programs to cover all adults whose annual incomes does not exceed 138% of the federal poverty level, or $17,236 for an individual.

Centene’s proposal calls for lowering that income ceiling from 138% to 100%, or $12,490 for an individual.

That would shrink the pool of who is eligible for Medicaid and push those people into the exchanges. Neidorff said the move would grow the exchange pool and ultimately drive down prices. High costs have attracted criticism as they play a role in forcing those who are not subsidized to leave the market.

Credit: Samantha Liss/Healthcare Dive

For Centene, it would be a notable shift because its core business has long been in Medicaid. The insurance exchanges only became a viable business beginning in 2013 with the advent of the ACA. It’s a nod to how important the exchange business has become for the payer.

Centene arguably stands to benefit the most as the nation’s largest insurer on the exchanges in terms of enrollment, plus the exchanges generate higher profit margins than its Medicaid book of business.

“You move those lives into exchange and your profitability is higher,” David Windley, an analyst with Jefferies, told Healthcare Dive.​

In the states that have not expanded Medicaid, there are about 2 million people with incomes between 100% and 138% of the federal poverty level, according to the Kaiser Family Foundation.

Hospitals and providers are likely to favor the proposal because Medicaid plans tend to pay less than commercial ones. The idea could garner support from states with tight budgets as some, even Massachusetts, have already expressed a desire to adopt a partial expansion. (Both the Trump and Obama’s administrations have denied providing the enhanced match rate for states seeking partial expansions).

Who benefits the most?

Still, there are potential drawbacks, according to analysts and policy experts. For example, the plan could potentially cost taxpayers more if there is a greater shift to the exchanges away from Medicaid coverage.

“Medicaid is broadly accepted as the cheapest coverage vehicle in the country,” Windley said, noting that the exchanges are typically a more expensive insurance product than Medicaid coverage.

Plus, because of the way the ACA was written, the federal government would be forced to pick up the entire tab of the subsidies for those between 100% and 138% of FPL. 

“As a result, the states save money for every beneficiary whom they can move from Medicaid into their exchanges,” according to a previous paper in the New England Journal of Medicine.

However, policy experts warn the proposal may not be in the best interest of Medicaid members who would migrate to the exchanges.

These members are better off with Medicaid, Alker said.

“From a beneficiary perspective it’s problematic because there are no premiums in Medicaid for that group, 100-138 [FPL]. The cost sharing is very limited,” she said.

Plus, there are benefits in Medicaid members would no longer have access to if they move to the exchanges, Adrianna McIntyre, a health policy researcher at Harvard University, told Healthcare Dive, including non-emergency transportation and retroactive eligibility.

Centene argues many states have avoided expanding Medicaid because of cost concerns, which then leaves some residents without access to affordable care, particularly those in the coverage gap, or those with incomes below 100% of FPL.

Credit: Kaiser Family Foundation

If a partial option convinces some holdout states to expand “that’s a tradeoff some may be willing to make,” McIntyre said.

Some states that did expand are looking for ways to curb costs and have decided to implement work requirements, Neidorff noted. He believes the proposal is the answer to both these problems for states.

Centene’s plan comes as a slate of Democratic presidential contenders are calling for “Medicare for All,” a single-payer or public-option healthcare system.

Not surprisingly as such a plan would at a minimum sideline private plans and at the extreme eliminate private payers, Neidorff dismissed the idea.

He estimates his plan would cost $6 billion a year, which he characterized as “very affordable” when compared to a Medicare for All plan, which some studies estimate could cost as much as $32 trillion over 10 years.

Still, some policy experts say the change being proposed by Centene is a tall order.

Though the changes may seem small, the consequences of adopting a partial expansion are large, researchers wrote in a NEJM report: “The damage to Medicaid beneficiaries, the exchange population, and the federal budget could be serious.”

 

 

 

Provider of the Year: Providence St. Joseph Health

Posted on by • Posted in Branding, Credit Quality, Credit Ratings, Disruption, Electronic Health Record (EHR), Health System, Hospital, Hospital Industry, Integrated Delivery System, Market Consolidation, Market Power, Market Uncertainty, Operating Margin, Operating Performance, Population Health • Leave a comment

https://www.healthcaredive.com/news/provider-providence-st-joseph-health-dive-awards/566477/

The 51-hospital system, which traces its roots back to the 1850s,​ has maintained a stable ratings outlook amid industry headwinds and pursued tech partnerships this year to bolster its portfolio.

Providence St. Joseph Health, the fourth-largest U.S. nonprofit health system by number of hospitals, marked a busy 2019 with multiple efforts to dive into the tech sector and seek out partnerships to tackle the industry’s biggest challenges.

The Catholic system now operates 51 hospitals in eight states as the result of a July 2016 merger of Providence Health and Services and St. Joseph Health. While the organization is the dominant inpatient provider in all its markets, no single area accounts for more than 30% of its net operating revenue, showing good portfolio diversification, ratings agency have noted.

The system, which can trace its roots back to the 1850s when the Sisters of Providence set up hospitals, schools and orphanages throughout the Northwest, posted $24 billion in operating revenue last year. That metric has shown year-over-year increases since the $18 billion posted in 2014.

Providence CEO Rod Hochman told Healthcare Dive the health system hasn’t shied away from seeking partnerships as the industry swings toward value based care and other systemic changes.

“I think the message is: ‘You can’t do it alone,'” he said. “You can’t go out there and just do it yourself — you don’t have the scale to do it.”

In that vein, the system (which is formally rebranding to Providence over the next few years) was one of the founding members of generic drug company Civica Rx, which opened its headquarters and made its first delivery this year. That’s a coalition of hospitals working to make their own drugs, starting with antibiotics.

It’s also grouping up with One Medical to increase access to primary care and teaming with Cedars-Sinai to build a patient tower in southern California. And in February, the organization launched the population health management company Ayin Health Solutions to provide benefits management as well as risk evaluation and care coordination tools.

Providence has maintained a stable outlook from the three main ratings agencies even as other nonprofits struggled to stay above water. Kevin Holloran, senior director at Fitch Ratings, said the system has managed to think about margins the way a public company must while still adhering to the mission-driven thought process nonprofit organizations trumpet.

“Blending those two thoughts together sounds easy, but it’s not,” Holloran told Healthcare Dive. “It’s hard to do.”

Moody’s Investors Service issued a credit opinion recently on Providence, finding the system’s integrated structure that includes a health plan and 7,600 employed physicians creates “further cashflow diversification, and strengthens the organization’s competitive position.”

The analysts wrote they expect operating margins to continue to improve going into next year as it implements dozens of initiatives updating operating practices, cost structures and revenue systems. They note, however, the organization faces a challenge in transitioning disparate EHRs and its numerous joint ventures “may also entail a certain amount of execution and integration risk.”

Holloran pointed to two relatively recent hires as leading the way for Providence — both poaches from Microsoft. CFO Venkat Bhamidipati joined the organization two years ago and CIO B.J. Moore came on in January.

They migrated from the tech world to the traditionally loathe-to-change healthcare landscape, and have made a difference for Providence.

It puts the company in a strategic place for growth, Holloran said. “Now they’re sort of adding that missing piece, which is optimizing what they’ve got,” he said. “And a big piece of that is the technology, and they’re doing it in a unique and interesting way.”

This year, Providence acquired Lumedic, which uses blockchain tools for revenue cycle management, and Bluetree, an Epic consultancy. The health system also allows patients to schedule appointments through Amazon’s smart speaker Alexa.

In July, the health system announced an agreement with Microsoft to use the tech giant’s cloud and artificial intelligence tools in an effort to foster interoperability, improve outcomes and drive down costs.

The organization still has traditional struggles, however. Hochman, who is also the incoming chairman of the American Hospital Association, said the ongoing litigation surrounding the Affordable Care Act, coupled with payment changes and other CMS changes, creates a chaotic environment for providers.

“Every day they come up with something new, and it’s been the lack of predictability that’s been the biggest problem for us,” he said.

 

 

 

Health insurers stable, M&A seen diminishing in 2020: Fitch

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https://www.healthcaredive.com/news/health-insurers-stable-ma-seen-diminishing-in-2020-fitch/568859/

Dive Brief:

  • The outlook for the health insurance sector remains stable heading into 2020, Fitch Ratings reports.
  • The ratings agency maintains a stable outlook on the “vast majority” of the companies it rates within the U.S. health insurance industry, which includes UnitedHealth Group and Aetna.
  • The insurance sector continues to benefit from “low unemployment, manageable medical cost trend and solid growth in government-funded business,” Brad Ellis, senior director for Fitch, said in the report.

Dive Insight:

Even anticipating an increase in the growth of U.S. health expenditures, Fitch expects insurers to deliver solid operating results, including improved medical loss ratios, for 2020.

There is even a chance for insurers to garner positive ratings outlooks as many look to continue to execute on merger integration and deleveraging, according to Fitch.

Thanks in part to the return of the health insurance fee, Fitch expects medical loss ratios to drop to 82.5% in 2020. A decrease from the expected 83.9% for the full year of 2019 for the nation’s eight largest publicly traded insurers, which cover about 165 million people, according to Fitch.

MLR is an important measure, showing the amount an insurer spends on medical claims as a percentage of premiums. Lower MLRs leave more room for covering administration costs and garnering profit.

Even an upcoming election year and a slate of Democratic presidential hopefuls touting support to expand Medicare, the agency does not expect seismic changes to the system.

“Healthcare will certainly continue to be one of the most prevalent discussion topics among candidates for the U.S. presidency in 2020, but Fitch does not anticipate significant change in the structure of the U.S. healthcare system over the next couple of years,” the report said.

The agency also said it expects major mergers to slow significantly in 2020. The insurance sector has experienced significant M&A activity over the last few years, including CVS Health’s buy of Aetna and Cigna’s acquisition of Express Scripts. Centene is near closing on its purchase of rival WellCare.

Fitch expects consolidation activity next year to focus more on “modest build-out of care delivery opportunities in various regions or care management and technology initiatives.”

 

 

 

Nonprofit hospitals get bump in Moody’s ratings for 2020

Posted on by • Posted in ACA, Balance Sheet, Credit Quality, Credit Ratings, Health System, Hospital, Hospital Industry, Individual Mandate, Medicaid Disproportionate Share Reimbursement (DSH), Medicaid Expansion, Medicare, Medicare 340B Drug Discount Program, Price Transparency • Leave a comment

https://www.healthcaredive.com/news/nonprofit-hospitals-get-bump-in-moodys-ratings-for-2020/568739/

UPDATE: Dec. 11, 2019: Fitch Ratings also changed its sector outlook for the U.S. nonprofit health systems market to stable from negative for 2020 in a report released Tuesday.

Dive Brief:

  • Next year should be kinder to nonprofit hospitals and health systems, with Moody’s Investors Service forecasting a 2% to 3% growth in operating cash flow next year, driven by stronger provider revenue due to Medicare and commercial reimbursement raises and growth in patient volumes.
  • Moody’s revised its 2020 outlook for the not-for-profit provider sector from negative to stable as a result, and expects to see increased consolidation as hospitals bid to gain “negotiating leverage with commercial insurers, achieve savings through economies of scale, and ensure a foothold in emerging offerings such as urgent care and telemedicine,” analysts wrote.​
  • That’s not to say health systems won’t continue to contend with sharp industry headwinds like rising labor costs and the aging population, along with uncertainty from up-in-the-air legislation, regulation and lawsuits.

Dive Insight:

High Medicare reimbursement rates should, along with slightly more favorable commercial reimbursements, drive sector revenue to jump 4% to 5%, Moody’s predicts. Medicare payment rates in 2020 are the most industry-friendly in a while, analysts say, at 3.1% for overall inpatient rates and 2.6% for outpatient.

Fitch Ratings, which also revised its sector outlook from negative to stable, noted balance sheet measures for the providers are now at levels not seen since before the Great Recession in 2007.

Expense management is also forecast to improve cash flow, though provider shortages will cause labor costs to grow.

A growth in the number of uninsured is projected to curb some of the gains expected under this positive forecast, however. The uninsured rate reached 13.7% at the end of 2018, ticking up from 12.2% in 2017 and a low of 10.6% in 2016, according to Gallup. Policy experts blame the elimination of the Affordable Care Act’s individual mandate, along with other Trump administration policies destabilizing the market.

Other regulatory waves could also impact hospital margins next year.

Cuts to Medicaid disproportionate share payments are likely to be postponed until late 2020 at least, which will help hospitals serving a large number of low-income patients. The $4 billion payment reduction was supposed to go into effect in 2014, but lawmakers have delayed the unpopular cuts annually since.

On Nov. 21, the Senate approved a continuing resolution to fund the federal government through Dec. 20. The CR once again pushed back the trims to the Medicaid payments.

A Trump administration policy requiring payers and providers to post secret negotiated rates online could help some hospitals and hurt others, with some health experts arguing it would stimulate competition through transparency and others warning it could cause prices across the board to rise.

Hospital lobbies filed a lawsuit Dec. 4 to stop the rule, arguing it violates the First Amendment and would put overly onerous administrative burdens on providers.

Cuts to the 340B Drug Discount program, meant to prop up hospitals with a large amount of uncompensated care, could also hurt the sector. The program generated an average savings of almost $12 million across all U.S. hospitals last year.

In May, a federal judge struck down planned HHS cuts to 340B, arguing the change was outside of the agency’s authority. However, CMS has said it plans to go through with the payment reductions in the final outpatient rule for 2020.

On the legislative side, the Republican state-led initiative to find the Affordable Care Act unconstitutional would shear an estimated 20 million Americans from coverage and raise premiums on millions more, hitting both hospitals and the consumer hard. ​

“The fate of the ACA will likely again rest with the Supreme Court,” Moody’s analysts said. “An adverse ruling there would have painful implications for hospitals if millions of individuals lose insurance,” and “coverage gains from Medicaid expansion would likely be lost.”

 

 

 

Benefit design, higher deductibles will increase bad debt for hospitals

Posted on by • Posted in 2020 Election Issues, Bad Debt Expense, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Plan, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.healthcarefinancenews.com/node/139468

Legislative proposals could reduce bad debt, but would likely introduce additional complexity to billing processes.

Changes in insurance benefit design that shift greater financial responsibility to the patient, rising healthcare costs and confusing medical bills will continue to drive growth in bad debt — often faster than net patient revenue, according to a new report from Moody’s.

Legislative proposals to simplify billing have the potential to reduce bad debt, but the downside for hospitals is that they’ll likely introduce additional complexity to billing processes and complicate relationships with contracted physician groups. A recent accounting change will reduce transparency around reporting bad debt.

Higher cost sharing and rising deductibles are the main contributors to the trend of patients assuming greater financial responsibility, a trend that’s been occurring for more than a decade, and that will further increase the amount of uncollected payments. Hospitals and providers are responsible for collecting copays and deductibles from patients, which may not always be possible at the time of service; the longer the delay between providing service and collecting payment, the less likely a hospital is to collect payment.

On top of that, the higher an individual’s deductible is, the greater the share of reimbursement that a hospital has to collect. The prevalence of general deductibles increased to 85% of covered workers in 2018, up from 55% in 2006, and the amount of the annual deductible almost tripled in that time to an average of $1,573.

Multiple factors are driving the trend toward higher cost sharing, including a desire among employees and employers for stable premium growth despite steadily rising healthcare costs and the growing popularity of high deductible health plans.

WHAT’S THE IMPACT

Hospitals face an uphill battle when it comes to reducing bad debt. Strategies include point-of-service collections, enhanced technology to better estimate a patient’s responsibility for a medical bill, and offering low-cost financing or payment plans.

A common feature of these approaches is educating patients about what portion of a medical bill is their responsibility, after taking into account the specifics of their insurance plan. But hospitals often find it hard to provide reliable cost estimates for a given service, which can thwart efforts to provide patients with an accurate estimate of their financial responsibility.

One difficulty is that medical bills partly depend on the complexity of service and amount of resources consumed — which may not be known ahead of time. There’s also the need to incorporate specific benefits of the patient’s own insurance plan. A certain amount of bad debt is likely to arise from patients accessing emergency care given the insufficient time to determine insurance coverage.

Another difficulty in billing is surprise medical bills, received by insured patients who inadvertently receive care from providers outside their insurance networks, usually in emergency situations. While the term “surprise medical bills” refers to a specific, narrow slice of healthcare costs, they have become part of the broader debate about the affordability and accessibility of U.S. healthcare.

THE LARGER TREND

To minimize surprise bills, Congress is considering proposals to essentially “bundle” all of the services a patient receives in an emergency room into a single bill. Under a bundled billing approach, the hospital would negotiate a set charges for a single or “bundled” episode of care in the emergency room. The hospital would then allocate payments to the providers involved.

This approach, which major hospital and physician trade groups oppose, has the potential to significantly affect hospitals and disrupt the business models of physician staffing companies, according to Moody’s. Many hospitals outsource the operations and billing of their emergency rooms or other departments to staffing companies. Bundling services would require a change in the contractual relationship between hospitals and staffing companies.

Another recent proposal in Congress would require in-network hospitals to guarantee that all providers operating at their facilities are also in network. This approach adds significant complexity because many physicians and ancillary service providers are not employed or controlled by the hospitals where they work. Some hospitals would likely seek to employ more physicians, leading to increases in salaries, benefits and wages expense.

 

A stunning indictment of the U.S. health-care system, in one chart

Posted on by • Posted in 2020 Election Issues, Access, Access & Quality of Healthcare, Health Insurance Coverage Adequacy, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Out of Pocket Expenses, Underinsured, Uninsured • Leave a comment

https://www.washingtonpost.com/business/2019/12/10/stunning-indictment-us-health-care-system-one-chart/?fbclid=IwAR35UzHd8LQexhBxPukkwmBAmGGyxhagBfTR6CINomsJcSM-IkjiC26x10c

Americans are putting off medical treatment in record numbers because of cost, Gallup data shows

Image result for A stunning indictment of the U.S. health-care system, in one chart

One quarter of American adults say they or a family member has put off treatment for a serious medical condition because of cost, according to data released this week by Gallup. That number is the highest it’s been in nearly three decades of Gallup polling.

An additional 8 percent have made the same choice for less serious ailments, the survey showed. That means a collective 33 percent of those polled have prioritized financial considerations over their health, tying the high set in 2014.

The report also shows a growing income gap in cost-related delays. In 2016, for instance, one-fourth of U.S. households earning less than $40,000 a year reported cost-related delays, vs. 13 percent for households making more than $100,000. In 2019, the rate of cost-related delays among poorer households shot up to 36 percent, while the rate for the richer group remained at 13 percent.

Gallup cautions that the Trump presidency may be influencing these numbers on a partisan level: From 2018 to 2019, the share of Democrats reporting cost-related delays for serious conditions jumped from 22 percent to 34 percent. Among Republicans, the year-over-year increase was more subdued, from 12 percent to 15 percent.

Gallup data also show Democrats (31 percent) self-report higher rates of preexisting conditions than Republicans (22 percent).

“Whether these gaps are indicative of real differences in the severity of medical and financial problems faced by Democrats compared with Republicans or Democrats’ greater propensity to perceive problems in these areas isn’t entirely clear,” according to Gallup’s Lydia Saad. “But it’s notable that the partisan gap on putting off care for serious medical treatment is currently the widest it’s been in two decades.”

Data from the Kaiser Family Foundation’s Employer Health Survey underscores the severity of the health-care spending problem. In 2019, 82 percent of covered workers must meet a deductible before health-care coverage kicks in, up from 63 percent a decade ago. “The average single deductible now stands at $1,655 for workers who have one,” according to KFF, “similar to last year’s $1,573 average but up sharply from the $826 average of a decade ago.”

Deductibles have surged 162 percent since 2009, data show — more than six times the 26 percent climb in earnings over the same period.

There are many factors driving up the cost of care for most American families. Administrative costs are a big part of the issue: Health insurance is largely a for-profit industry, meaning insurance companies and their shareholders are reaping a percentage of your deductibles and co-pays as profit.

Many hospitals, too, are raking in profits. In recent years, surprise billing practices and outrageous markups for simple drugs and services have drawn the ire of lawmakers looking for ways to reduce health-care spending.

Physician pay is another significant expense. The Commonwealth Fund, a health-care research group, estimates American doctors earn “nearly double the average salary” of doctors in other wealthy nations. The American Medical Association, a trade group representing doctors, has a long history of opposing efforts to implement European-style single-payer health-care systems in the United States.

The American health-care system, in other words, works pretty well for the powerful players in the health-care industry. Hospitals and insurance companies are reaping significant profits. Doctors are earning high salaries. But what are the rest of us getting in return for our ever-growing co-pays and deductibles?

The national Centers for Disease Control and Prevention has an answer, and it’s an indictment of our health-care system: The United States is in the midst of the longest sustained drop in life expectancy in at least 100 years. Relative to other wealthy countries, lives in America are short and getting shorter.

The disparities domestically are perhaps even more shocking: In the nation’s wealthiest places, where the high cost of modern health care remains within relatively easy reach, life expectancies are literally decades longer than in America’s poorest places.

As health care becomes more expensive and economywide inequalities more pronounced, these disparities in life span are likely to get worse — and the share of Americans skipping out on much-needed medical care only likely to grow.

 

 

 

 

Elevator Pitch for Fixing U.S. Healthcare

Posted on by • Posted in 2020 Election Issues, Cost Management, Cost Reduction, Cost-Benefit Analysis, Health Policy, Imperfect Markets, Single Payer Health System, Single Payer Healthcare System • Leave a comment

Fixing U.S. Healthcare – Annual Review & Summary

2019.12.10 Clipboard_flat_3D

 

Fixing U.S. Healthcare blog’s two-year anniversary is a good time to take stock of what has changed in our approach to fixing U.S. healthcare.  And a good time to review highlights of the last year.

Elevator Pitch for Fixing U.S. Healthcare

Let’s start with an “elevator pitch” summary:

The U.S. healthcare system has outgrown itself, now comprising almost 20% of the gross domestic product and still rising. It delivers ever more treatments that have diminishing “marginal benefit.” It does so at a cost far beyond the treatments’ true value to either individuals or to society, in all too many cases. And at prices double those in other developed countries. Now these costs are biting into the average family’s wallets. In 1994, the Oregon Health Plan took control of healthcare and managed its costs for 8 years by combining cost-benefit analysis with well-cultivated public engagement.  This would be a good starting place for fixing U.S. healthcare. But 25 years later, this approach alone would not be sufficient.  Powerful interests have now rigged the healthcare system for profits, not health. I conclude that only a grassroots movement to harness the full political, social, legal, economic and ethical weight of the federal government can encircle these entrenched interests and rein them in. There are several models for U.S. healthcare reform that could fall squarely within American tradition and pragmatism.

 

Changes in this Blog’s Approach

Let’s look at how this blog’s messages have evolved this year.

  • Original message: Relentless increases in U.S. healthcare spending puts a drag on economic growth and household spending.

Updated message:  Relentless increases in U.S. spending on healthcare do indeed reduce individual households’ disposable income, especially as households pay ever more of the share of healthcare costs. Healthcare costs also do eat into corporate profits, and blunt international competitiveness. However, healthcare spending is not necessarily a drag on the economy. Rather, it is now a major component of our national economy, accounting for 18.3% of total gross domestic product. This is because the U.S. has evolved into a post-industrial services-oriented economy. There is nothing inherently problematic about healthcare services in this kind of economy. The problem, however, is that excessive healthcare spending is diverting human and financial resources away from other priorities, such as education, research, infrastructure, housing. Furthermore, the marginal benefit of more healthcare spending is dwindling, while the unrealized value of deferred investment in these other priorities is growing – mounting opportunity costs.

 

  • Original message: Relentless increases in U.S. healthcare spending will seriously weaken the nation over time.

Updated message:  Economist Larry Summers dismisses the idea of an impending fiscal calamity. He explains that the “real” interest rate (nominal minus inflation) has been at historic low levels for the last two decades, resulting in no increase on the actual proportionate amount paid to service the debt.  Nevertheless, he cautions federal budgeters not to deepen the debt any further, but rather pay as we go for any new programs. Thus, the reasons to fix U.S. healthcare are not to avoid national disaster, but rather to improve worker productivity, rebalance fiscal priorities, and promote societal cohesion and business climate.

 

  • Original message: Excessive healthcare spending is principally driven by low-marginal-benefit services and inefficient, overly complex administration.

Updated message:  Excessive healthcare spending is indeed driven by administrative complexity (estimated at $265.6 billion annually) and to a lesser degree by low-marginal-benefit treatments (estimated at $75.7 billion to $101.2 billion) (2012-2019 data). Other elements of non-costworthy, wasted spending are:

  • Failures of Care Delivery: $102.4 billion to $165.7 billion
  • Failures of Care Coordination: $27.2 billion to $78.2 billion
  • Fraud and abuse: $58.5 billion to $83.9 billion

But the other big driver of over-spending is pricing failure in imperfect markets, amounting to $230.7 billion to $240.5 billion.

 

  • Original message: Excessive healthcare spending was caused by health professionals who, in good faith, overvalued healthcare services and lost their perspective on their value relative to other societal priorities.

Updated message:  Given the prominence of market and pricing failures, this blog concludes that healthcare business interests, and their professional and political allies, have knowingly and willfully coopted healthcare for the purpose of profits. These interests have superseded the health of the public, often undermine patient-centered care, and, at times, result in actual harm.

 

  • Original message: Healthcare can be fixed by a common-sense, practical approach informed by cost-benefit analysis.

Updated message:  Since the system is rigged by powerful, well-financed interests, it can be fixed only by the full faith and clout of the federal government responding to an informed grassroots movement. The most likely format for healthcare reform would be gradual but deliberate transition to a single-payer system. This would then be followed by systematic remedies to the 6 categories of unjustified “wasteful” spending, including technology assessment using cost-benefit analysis.