Private insurance is health care’s pot of gold

https://www.axios.com/jp-morgan-2020-private-health-insurance-prices-costs-1e92f969-bffc-4584-a3c9-e8c4072b5144.html

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Private health insurance is a conduit for exploding health care spending, and there’s no end in sight.

The big picture: Most politicians defend this status quo, even though prices are soaring. And as the industry’s top executives and lobbyists gathered this week in San Francisco, some nodded to concerns over affordability — but then went on to tell investors how they plan to keep the money flowing.

 

Where it stands: More than 160 million Americans get private insurance through an employer or on their own, and per-person spending in that market rose by almost 7% in 2018, the highest annual growth rate in 14 years.

  • “Prices are definitely going up,” Owen Tripp, CEO of health tech startup Grand Rounds, told me this week during the annual J.P. Morgan Healthcare Conference.
  • His company’s vast amount of commercial health data shows big increases in what companies are spending on hospitals, doctors, specialty drugs, devices and out-of-network services.

 

What they’re saying: Many in the industry admit price inflation has been hammering the commercial markets for years.

  • “Cost per unit is the primary driver,” Cigna CEO David Cordani said. He did not mention the exploding costs of administering health insurance.
  • One hospital system at the conference acknowledged that “the number one cause of personal bankruptcy is our industry” — before going on to tell investors about the hospital’s strong margins.

 

Multiple hospital executives claimed they charge commercial plans higher prices to make up for the lower rates they get from Medicare and Medicaid.

  • “Every health system I know of loses money on every Medicaid and every Medicare patient,” Amy Compton-Phillips, a top clinical executive at Providence St. Joseph Health, told me.
  • But the evidence overwhelmingly shows that hospitals’ explanation doesn’t hold water.

 

Drug spending has risen at a slower rate than hospital and physician spending.

  • But in the commercial market, drug companies also have tripled their spending on programs that cover all or part of patients’ out-of-pocket costs, then bill insurers for the full freight.
  • “It’s an intriguing theory,” said Stephen Ubl, CEO of PhRMA, the pharmaceutical industry’s main lobbying group. “But I would be shocked if we were a significant contributor” to the increased private spending.

 

The bottom line: The private market is the main pot of money that everyone is chasing at the J.P. Morgan conference, and most in the industry don’t see the ballooning spending within that market as a problem.

 

 

 

 

The health care debate we ought to be having

https://www.axios.com/what-matters-2020-health-care-costs-7139f124-d4f7-44a1-afc2-6d653ceec77d.html

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Americans worry a lot about how to get and pay for good health care, but the 2020 presidential candidates are barely talking about what’s at the root of these problems: Almost every incentive in the U.S. health care system is broken.

Why it matters: President Trump and most of the Democratic field are minimizing the hard conversations with voters about why health care eats up so much of each paycheck and what it would really take to change things.

  • Instead, the public debate focuses on ideas like how best to cover the uninsured and the relative virtue of health care “choice.”

The U.S. spent $3.6 trillion on health care last year, and almost every part of the system is pushing its costs up, not down.

 

Hospitals collect the biggest piece of the health care pie, at about $1 trillion per year.

  • Their incentive is to fill beds — to send as many bills as possible, for as much as possible.
  • Big hospital systems are buying up smaller ones, as well as physician practices, to reduce competition and charge higher prices.
  • And hospitals have resisted efforts to shift toward a system that pays for quality, rather than volume.

 

Drug companies, meanwhile, are the most profitable part of the health care industry.

  • Small biotech companies usually shoulder the risk of developing new drugs.
  • Big Pharma companies then buy those products, market them aggressively and develop a fortress of patents to keep competition at bay as long as possible.

 

The money bonanza is enticing some nontraditional players into the health care world.

 

Insurers do want to keep costs down — but many of their methods are deeply unpopular.

  • Making us pay more out of pocket and putting tighter restrictions on which doctors we can see create real and immediate headaches for patients.
  • That makes insurers the most convenient punching bag for politicians.

 

The frustrating reality: Democrats’ plans are engaging in the debate about possible solutions more than the candidates themselves.

  • It’s a tacit acknowledgment of two realities: That controlling the cost of care is imperative, and that talking about taking money away from doctors and hospitals is a big political risk.

 

What they’re saying: The top 2020 Democrats have actually released “insanely aggressive” cost control ideas, says Larry Levitt, executive vice president at the Kaiser Family Foundation. “But they don’t talk about that a lot.”

  • Medicare for All, the plan endorsed by Sens. Bernie Sanders and Elizabeth Warren, would sharply reduce spending on doctors and hospitals by eliminating private insurance and paying rates closer to Medicare’s. Estimates range from about $380 billion to nearly $600 billion in savings each year.
  • Joe Biden and Pete Buttigieg have proposed an optional Medicare-like insurance plan, which anyone could buy into. It would pay providers less than private insurance, with the hopes of putting competitive pressure on private plans’ rates.
  • The savings there would be smaller than Medicare for All’s, but those plans are still significantly more ambitious than the Affordable Care Act or most of the proposals that came before it.

 

Yes, but: The health care industry has blanketed Iowa with ads, and is prepared to spend millions more, to defend the very profitable status quo.

  • The argument is simple: Reframe the big-picture debate about costs as a threat to your doctor or your hospital. It’s an easy playbook that both parties, and the industry, know well. And it usually works.

 

The bottom line: “Voters want their health care costs reduced, but that doesn’t mean they would necessarily support what it would take to make that happen,” Levitt said.

 

 

 

 

How the Health Insurance Industry (and I) Invented the ‘Choice’ Talking Point

It was always misleading. Now Democrats are repeating it.

There’s a dangerous talking point being repeated in the Democratic primary for president that could affect the survival of millions of people, and the finances of even more. This is partly my fault.

When the candidates discuss health care, you’re bound to hear some of them talk about consumer “choice.” If the nation adopts systemic health reform, this idea goes, it would restrict the ability of Americans to choose their plans or doctors, or have a say in their care.

It’s a good little talking point, in that it makes the idea of changing the current system sound scary and limiting. The problem? It’s a P.R. concoction. And right now, somewhere in their plush corporate offices, some health care industry executives are probably beside themselves with glee, drinking a toast to their public relations triumph.

I should know: I was one of them.

To my everlasting regret, I played a hand in devising this deceptive talking point about choice when I worked in various communications roles for a leading health insurer between 1993 and 2008, ultimately serving as vice president for corporate communications. Now I want to come clean by explaining its origin story, and why it’s both factually inaccurate and a political ploy.

Those of us in the insurance industry constantly hustled to prevent significant reforms because changes threatened to eat into our companies’ enormous profits. We were told by our opinion research firms and messaging consultants that when we promoted the purported benefits of the status quo that we should talk about the concept of “choice”: It polled well in focus groups of average Americans (and was encouraged by the work of Frank Luntz, the P.R. guru who literally wrote the book on how the Republican Party should communicate with Americans). As instructed, I used the word “choice” frequently when drafting talking points.

But those of us who held senior positions for the big insurers knew that one of the huge vulnerabilities of the system is its lack of choice. In the current system, Americans cannot, in fact, pick their own doctors, specialists or hospitals — at least, not without incurring huge “out of network” bills.

Not only does the current health care system deny you choice within the details of your plans, it also fails to provide many options for the plan itself. Most working Americans must select from a limited list made by their company’s chosen insurance provider (usually a high-deductible plan or a higher-deductible plan). What’s more, once that choice is made, there are many restrictions around keeping it. You can lose coverage if your company changes its plan, or if you change jobs, or if you turn 26 and leave your parents’ plan, among other scenarios.

This presented a real problem for us in the industry. Well aware that we were losing the “choice” argument, my industry colleagues spent millions on lobbying, advertising and spin doctors — all intended to muddy the issue so Americans might believe that reform would somehow provide “less choice.” Recently, the industry launched a campaign called “My Care, My Choice” aimed in part at convincing Americans that they have choice now — and that government reform would restrict their freedom. That group has been spending large sums on advertising in Iowa during this presidential race.

This isn’t the first time the industry has made “choice” a big talking point as it fights health reform. Soon after the Affordable Care Act was passed a decade ago, insurers formed the Choice and Competition Coalition and pushed states not to create insurance exchanges with better plans.

What’s different now is that it’s the Democrats parroting the misleading “choice” talking point — and even using it as a weapon against one another. Back in my days working in insurance P.R., this would have stunned me. It’s why I believe my former colleagues are celebrating today.

The truth, of course, is that Americans now have little “choice” when it comes to managing their health care. Most can’t choose their own plan or how long they retain it, or even use it to select the doctor or hospital they prefer. But some reforms being discussed this election, such as “Medicare for all,” would provide these basic freedoms to users. In other words, the proposed reforms offer more choice than the status quo, not less.

My advice to voters is that if politicians tell you they oppose reforming the health care system because they want to preserve your “choice” as a consumer, they don’t know what they’re talking about or they’re willfully ignoring the truth. Either way, the insurance industry is delighted.

I would know.

 

 

The most expensive health care option of all? Do nothing.

https://www.politico.com/news/2020/01/09/medicare-for-all-health-care-096367?utm_source=The+Fiscal+Times&utm_campaign=b67cf54986-EMAIL_CAMPAIGN_2020_01_09_10_31&utm_medium=email&utm_term=0_714147a9cf-b67cf54986-390702969

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‘Medicare for all’ debate sidesteps cost of current system.

The projected multitrillion-dollar cost of “Medicare for All” has pitted Democratic presidential candidates against each other as they argue about the feasibility of single-payer health care.

But the reality is the current health system may cost trillions more in the long run and be less effective in saving lives.

Spending on Medicare, Medicaid, private health insurance and out-of-pocket expenses is projected to hit $6 trillion a year — and $52 trillion over the next decade. At the same time, the number of people with insurance is dropping and Americans are dying younger.

Sen. Bernie Sanders and other single-payer advocates say Medicare for All would cost the government far less — between $20 trillion and $36 trillion over a decade — by slashing overhead, eliminating out-of-pocket costs and empowering federal officials to bargain directly with hospitals and drugmakers. But the streamlined system would have to care for millions of currently uninsured people at a significant cost to taxpayers, and experts disagree whether it would actually save money in the long run.

Centrist Democrats are pushing narrower plans that would, among other things, expand tax credits for people just above the Obamacare subsidy threshold. Virtually no one is arguing for maintaining the status quo, but that’s precisely what could happen given that congressional gridlock has stymied even popular, and bipartisan, causes like halting surprise medical bills.

“It’s really hard to see anything breaking through, especially when the industry interests and the money they’re willing to spend on lobbying and campaign contributions is just mind-boggling,” said Sabrina Corlette, a researcher at Georgetown University’s Center on Health Insurance Reforms. “And, without question, we are on an unsustainable trajectory.”

With Medicare for All and its price tag likely to come up in the next Democratic debate Jan. 14 in Iowa, here are five of the costliest consequences of inaction:

National health spending keeps rising

The Centers for Medicare and Medicaid Services estimates that nationwide health spending will hit $6 trillion a year by 2027 absent any changes in law. That would be nearly a fifth of the economy. In total, the United States is slated to spend about $52 trillion over the coming decade.

The cost drivers include hospitals, physician and clinical services and prescription drugs. Some local health systems have become monopolies that can largely set prices as they please — leading to higher premiums and more out-of-pocket spending for consumers.

“Even the biggest insurance plans are not big enough to bargain down the cost of services, and they don’t have an incentive to,” said Wendell Potter, a former Cigna executive-turned whistleblower and single-payer advocate.

An aging population is driving up Medicare spending, but the rising cost of private insurance is the biggest factor. A recent Kaiser Family Foundation analysis found per capita spending for private insurance grew by nearly 53 percent over the last decade, or more than double the hike in per capita Medicare spending.

More people will be uninsured

The Census Bureau reported in September that the number of Americans without insurance grew by 2 million people since 2017 — the first increase in nearly a decade. Even with a healthy economy and low unemployment, more than 27 million people weren’t covered at any point last year. That could grow to 35 million by 2029, per the Congressional Budget Office, under current law.

The number of people enrolling in the Obamacare marketplace has declined, and more people are dropping employer-sponsored insurance due to cost and other concerns.

Part of this is President Donald Trump’s doing — the administration has slashed efforts to push Obamacare enrollment and rolled back the massive marketing effort that the Obama administration rolled out for years.

There are also more than 400,000 additional uninsured children than just two years ago — and 4 million in all — and states that haven’t expanded Medicaid are seeing the biggest spikes.

“What we also miss in the debate is the number of people temporarily uninsured, who miss open enrollment, who are between jobs, who fall through the cracks,” said Adam Gaffney, a Harvard Medical School researcher and the president of Physicians for a National Health Program. “I see people all the time in my practice in that situation who don’t fill prescriptions and experience serious complications.”

Going without insurance hits patients and health care providers: Average hospital spending on care for the uninsured was $13 million in 2018 up roughly 3 percent annually since 2016.

Coverage will be skimpier

As the cost of health care has skyrocketed, insurance companies have squeezed patients, charging higher premiums, deductibles and co-pays, and creating narrow networks of providers and aggressively billing for out-of-network care.

Since 2009, the amount workers have had to pay for health insurance has increased 71 percent, while wages have only risen 26 percent over that time.

More than 80 percent of workers now have to pay a minimum amount out of pocket before insurance kicks in — and the amount of that deductible has doubled over the last 10 years, now standing at an average of $1,655, though many workers have to pay a lot more.

These costs are putting care out of reach for millions.

new Gallup poll found that a full quarter of adults have put off treatment for a serious medical condition due to the cost — the highest since Gallup began asking the question three decades ago. A full third say they’ve delayed or deferred some kind of health care service over the past year. Another Gallup and West Help survey found that 34 million people know at least one friend or family member who died over the past five years after skipping treatment due to costs.

 

Needed drugs will become more out of reach

U.S. patients pay vastly more for prescription drugs than people in other developed countries and the disparity is set to grow. The United States spent $1,443 per person on prescription drugs in 2018, while other developed countries fell somewhere between $466 and $939.

In just five years, national spending on prescription drugs increased 25 percent, according to the Government Accountability Office, and CMS expects that increase to “accelerate” over the next several years.

Increasingly, patients are responding by forgoing their medications. Gallup found in November that nearly 23 percent of adults — roughly 58 million people — said they haven’t been able to “pay for needed medicine or drugs that a doctor prescribed” over the past year.

This widespread inability to take needed medication, a government-funded study found last year, is responsible for as much as 10 percent of hospital admissions. And the Centers for Disease Control and Prevention estimates that medication nonadherence accounts for somewhere between $100 and $300 billion in national health spending every year.

 

Americans will continue to get sicker and die younger

The cost of maintaining the status quo is evident not only in dollars but in human lives.

Life expectancy in the United States has declined over the last three years, even as other developed countries around the world saw improvements.

Though the United States spends nearly twice as much on health care as other high-income countries, there’s been a stark increase in mortality between the ages of 19 and 64, with drug overdoses, alcohol abuse, suicide and organ diseases driving the trend. It’s cut across race and gender with the worst effects felt in rural areas.

The opioid epidemic only accounts for a fraction of the problem. The National Research Council found that the United States has higher mortality rates from most major causes of death than 16 other high-income countries.

Researchers at USC estimate that if these trends continue, it would take the United States more than a century to reach the average life expectancy levels other countries hit in 2016.

 

 

Every American family basically pays an $8,000 ‘poll tax’ under the U.S. health system, top economists say

https://www.washingtonpost.com/business/2020/01/07/every-american-family-basically-pays-an-poll-tax-under-us-health-system-top-economists-say/?utm_campaign=post_most&utm_medium=Email&utm_source=Newsletter&wpisrc=nl_most&wpmm=1

Princeton economist Anne Case speaks about “deaths of despair” in the United States at the American Economic Association's annual meeting in San Diego this past weekend. (Heather Long/The Washington Post)

America’s sky-high health-care costs are so far above what people pay in other countries that they are the equivalent of a hefty tax, Princeton University economists Anne Case and Angus Deaton say. They are surprised Americans aren’t revolting against these taxes.

“A few people are getting very rich at the expense of the rest of us,” Case said at conference in San Diego on Saturday. The U.S. health-care system is “like a tribute to a foreign power, but we’re doing it to ourselves.”

The U.S. health-care system is the most expensive in the world, costing about $1 trillion more per year than the next-most-expensive system — Switzerland’s. That means U.S. households pay an extra $8,000 per year, compared with what Swiss families pay. Case and Deaton view this extra cost as a “poll tax,” meaning it is levied on every individual regardless of their ability to pay. (Most Americans think of a poll tax as money people once had to pay to register to vote, but “polle” was an archaic German word for “head.” The idea behind a poll tax is that it falls on every head.)

Despite paying $8,000 more a year than anyone else, American families do not have better health outcomes, the economists argue. Life expectancy in the United States is lower than in Europe.

“We can brag we have the most expensive health care. We can also now brag that it delivers the worst health of any rich country,” Case said.

Case and Deaton, a Nobel Prize winner in economics, made the critical remarks about U.S. health care during a talk at the American Economic Association’s annual meeting, where thousands of economists gather to discuss the health of the U.S. economy and their latest research on what’s working and what’s not.

The two economists have risen to prominence in recent years for their work on America’s “deaths of despair.” They discovered Americans between the ages of 25 and 64 have been committing suicide, overdosing on opioids or dying from alcohol-related problems like liver disease at skyrocketing rates since 2000. These “deaths of despair” have been especially large among white Americans without college degrees as job options have rapidly declined for them.

Their forthcoming book, Deaths of Despair and the Future of Capitalism,” includes a scathing chapter examining how the U.S. health-care system has played a key role in these deaths. The authors call out pharmaceutical companies, hospitals, device manufacturers and doctors for their roles in driving up costs and creating the opioid epidemic.

In the research looking at the taxing nature of the U.S. health-care system compared with others, Deaton is especially critical of U.S. doctors, pointing out that 16 percent of people in the top 1 percent of income earners are physicians, according to research by Williams College professor Jon Bakija and others.

“We have half as many physicians per head as most European countries, yet they get paid two times as much, on average,” Deaton said in an interview on the sidelines of the AEA conference. “Physicians are a giant rent-seeking conspiracy that’s taking money away from the rest of us, and yet everybody loves physicians. You can’t touch them.”

As calls grow among the 2020 presidential candidates to overhaul America’s health-care system, Case and Deaton have been careful not to endorse a particular policy.

“It’s the waste that we would really like to see disappear,” Deaton said.

After looking at other health systems around the world that deliver better health outcomes, the academics say it’s clear that two things need to happen in the United States: Everyone needs to be in the health system (via insurance or a government-run system like Medicare-for-all), and there must be cost controls, including price caps on drugs and government decisions not to cover some procedures.

The economists say they understand it will be difficult to alter the health-care system, with so many powerful interests lobbying to keep it intact. They pointed to the practice of “surprise billing,” where someone is taken to a hospital — even an “in network” hospital covered by their insurance — but they end up getting a large bill because a doctor or specialist who sees them at the hospital might be considered out of network.

Surprise billing has been widely criticized by people across the political spectrum, yet a bipartisan push in Congress to curb it was killed at the end of last year after lobbying pressure.

“We believe in capitalism, and we think it needs to be put back on the rails,” Case said.

 

 

 

The Chart that Could Undo the US Healthcare System

https://fee.org/articles/the-chart-that-could-undo-the-us-healthcare-system/

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Skyrocketing costs are being driven by bureaucracy.

This chart looks remarkably similar to a chart that tracks the growth of the administrative class in higher education. And that’s no accident. As the physician who shared the chart writes:

[The chart] outlines the growth of administrators in healthcare compared to physicians over the last forty years. And, it includes an overlay of America’s healthcare spending over that same time. Take a look at the yellow color. A picture is worth a thousand words, isn’t it?

You see, when you have that much administration, what you really have is a bunch of meetings. Lots of folks carrying their coffee from place to place. They are meeting about more policies, more protocols to satisfy government-created nonsense. But, this type of thing in healthcare isn’t fixing things. It’s not moving the needle.

What moves things is innovation.

Innovation, indeed. But it’s not easy to innovate in stagnant, hyper-regulated, captured sectors.

In Tyler Cowen’s 2011 book the Great Stagnation, he argued that the areas that were stagnating the most are education, healthcare, and government. Writing about Cowen’s book in his Wall Street Journal blog, Kelly Evans says:

A particular challenge we confront is that our progress as a society — chiefly, in extending and improving lives — is now at a point in which it appears to be undercutting our potential for further advancement. Part of this, Mr. Cowen observes, stems from well-meaning efforts to do more with education, government, and health care that instead seem to have backfired and left us with noncompetitive institutions closer to failing us than to serving us well.

With respect to healthcare, this chart gives us an indication of why these efforts are backfiring: The more an industry becomes like a regulated utility, the more administrators are required to enforce the regulations and administer the programs. And they, as well as the programs they administer, are expensive. All manner of distortions follow, and the costs of healthcare go up proportionally.

There also seems to be perverse incentives associated with subsidy: The more resources you dump in, the more expensive that industry becomes. You might shift the costs around on unsuspecting groups (like taxpayers), but in almost every case we see premium hikes and tuition increases in both of these industries, despite (or rather because of) the truckloads of federal largesse.

But they will have to stop at some point — one way or the other.

The US healthcare system has become something of a Frankenstein monster, with pieces stitched together ad hoc by regulators and special interests. The ACA seems to have ignored most of what really needed fixing and doubled down on the worst aspects of our system. Price transparency, affordability, innovation and competitive entrepreneurship have all gotten worse, not better. And the beast has grown to take over more than 17 percent of GDP.

(And if you think 17 percent is about right, consider that in Singapore healthcare takes up less than 3 percent of GDP.)

The trouble with any further healthcare reform is that a massive coalition of special interests in multiple sectors has formed as a husk around the entire industry — a care-tel, if you will — and they will be very difficult to dislodge.