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Tag: Devon Herrick

The Lifecycle Theory of Saving For Healthcare Needs

Republicans are bickering over whether to repeal the more costly provisions of Obamacare and allow greater flexibility into the health insurance marketplace. Republican lawmakers were shocked… SHOCKED, to discover net beneficiaries of the Affordable Care Act (ACA) like receiving open-ended subsidies worth thousands of dollars – paid for by other people. Lost in the shuffle are the self-employed, small business owners and individuals whose premiums have skyrocketed – and are no longer affordable – so that others can get a sweet deal.

The status quo cannot go on, of course. Premiums are skyrocketing and insurers are pulling out of the market. HealthCare.gov plans are a bad deal for all except for those receiving subsidies and those with significant health problems. Only about 15 percent of exchange enrollees are those paying the entirety of their own premiums, suggesting consumers don’t consider plans a good value. 

In an ideal world, young people would save for retirement, have an emergency fund and save for future health care needs. A mandatory payroll tax dedicated to individuals’ own health care would be the ideal way to fund their future medical needs. Singapore has such a system, called MediSave accounts. Liberals consider personal accounts to be antisocial, since money in one account cannot be diverted to someone else’s medical bills. However, a dose of antisocial behavior would benefit our health care system.

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Is the ACA Merely a Step Towards Single-Payer “Medicare-for-All?”

A recent commentary in the Wall Street Journal announced, “Obamacare’s meltdown has arrived.” Over the years I’ve heard conspiracy theories that the Affordable Care Act was designed to fail, as a means to nudge a reluctant nation one step closer to a single-payer, Medicare-for-All health care system.

Bernie Sanders famously advocated for single-payer during his campaign.  In 2011, the Vermont legislature passed a bill to create a single-payer initiative. Green Mountain Care was abandoned in 2014 by Vermont’s governor — a Democrat — as being too costly. Despite an 11.5 percent payroll and a sliding-scale income tax of up to 9.5 percent, Green Mountain Care was projected to run deficits by 2020.   

A similar single-payer initiative is now taking place in Colorado. Amendment 69, known as ColoradoCare, would create a taxpayer-funded health insurer. ColoradoCare would be available to nearly all Colorado residents, including Medicaid enrollees. Federal programs, such as Medicare, TRICARE and the VA would remain in place, however.

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So, Do Transparency Tools Actually Work?

flying cadeuciiA new report by economist Jon Gabel and his colleagues at NORC, a research center affiliated with the University of Chicago, looked at the use of transparency tools in an employer health plan. The analysis found the use of price transparency tools to be spotty. For instance, 75 percent of households either did not log into the transparency tool or did so only one time in the 18-month period of study. Fifteen percent did so twice; but only 1 percent logged in 6 times or more. The authors concluded:

It could very well be that we are asking too much of a single tool, no matter how well-designed. Consumer information for other goods and services on price and quality are seldom dependent upon information gained mainly, if not solely, through a digital tool. Rather, information on relative value is spread far and wide through advertising and other kinds of promotion using conventional, digital, and social media communication channels.

An earlier Harvard study on transparency tools, published in JAMA, found patients do not tend to use the tools to comparison shop for lower prices (in fact, spending rose slightly). An NBER study concluded that when transparency tools do lower spending, it is because consumers used to tools to identify prices and use the information to decide whether they can afford the service and skip it if they cannot.

The transparency tool in the current study also emailed “Ways to Save” suggestions on how consumers could reduce medical spending. The authors made an important observation:

It is also possible that the message on the “Ways to Save” e-mail turned off many households. While the emails did highlight opportunities to save a specific amount of money, a vast majority of the savings were for the employer and a much smaller amount of savings applied to the employee. It is possible that many employees viewed the transparency initiative as simply a means for the employer to save money.

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Your Drugs Are About to Get More Expensive

The Washington Post recently ran an article by Marlene Cimons, a Medicare Part D drug plan enrollee. Her late father had been a pharmacist and he had owned a drugstore while she was growing up. She thought it would be nostalgic to patronize a neighborhood drugstore rather than a big chain pharmacy. She found a neighborhood drugstore in her preferred pharmacy network and had her prescription transfer there. She was stunned, however, when a 90-day prescription that should have required only a $3 co-pay turned out to be $58.

When she inquired the drugstore claimed it stood to lose money on her particular prescription. Who knows; maybe its profit margin wasn’t as high as the pharmacy thought it should be. In order to fill her prescription the drugstore basically required her to willingly pay an extra $55 more than its contractual agreement stipulated. Of course, that violated the contract the drugstore had signed with her Medicare Part D plan. The agreement the pharmacy had signed with her drug plan did not allow it to arbitrarily charge higher prices and Ms. Cimons left without her prescription.

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The Unaffordable Affordable Care Act Turns 6

This week marks the sixth anniversary of the Patient Protection and Affordable Care Act (ACA). But it’s hardly anything to celebrate. The ACA was intended to make health coverage affordable using an age-old strategy referred to as OPM (other peoples’ money). For instance, ACA regulations require insurers to accept all applicants — including unprofitable ones — at rates not adjusted for their health risk. Premiums can vary somewhat based on age, but not health status. A plethora of new taxes (mostly on medical care and health insurance) are supposed to somehow make coverage more affordable. Other funding mechanisms include draconian cuts to Medicare and higher deficits to expand Medicaid.

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Retail Clinics Raise Medical Spending: So What?

flying cadeuciiNew research published in Health Affairs finds that retail clinics don’t save money. Many health policy analysts had hoped that retail clinics would reduce medical spending by replacing more costly physician office visits. The article did confirm that retail clinics are less expensive than traditional physician visits for the same service. Yet retail clinic use was associated with an increase in medical spending of $14 per year by those who used them. The $14 per person-year increase was not a complete picture, however, because the study did not compare inpatient spending or prescription drug use.

The researchers looked at Aetna insurance claims for 11 low-acuity conditions to see if people were substituting cheaper retail clinic visits for more costly doctor visits. What they found was that patients tend to visit a retail clinic when they might otherwise forgo care. In other words, patients were adding visits for conditions that would have cleared up on their own rather than necessarily substituting cheaper visits for higher cost visits. Traffic at retail clinics tends to peak during off hours (evening and weekends) when physician offices are closed.

The research was reported by Kaiser Health News and also ran in MedCity News, where I found some of the comments especially interesting. One commenter asked if changing the term “utilization” to “engagement” might make a difference, as in:“clinics increase health ‘engagement’ to the tune of about $14/person.” Increasing patient engagement sounds like a positive benefit rather than the negative connotation of utilization.

As an economist, my knee jerk reaction is patients may want to visit a retail clinic when their traditional source of care is not available. They may be willing to spend a little extra in cost-sharing to take care of a medical need rather than suffer through it.

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The Unaffordable Care Act

Liberal public health advocates and left-of-center health policy wonks have long thought every American needs health insurance (they don’t, but that’s another discussion). Lefties assume health insurance is the only way Americans access medical care. After all, the purpose of the Affordable Care Act was to insulate Americans from the financial hardship of medical care they couldn’t afford to pay for out of pocket. Moreover, many pundits believe having to reach for one’s wallet during a medical encounter is unacceptable. So imagine my shock when I read a headline in  The New York Times claiming that Obamacare is no guarantee against crushing medical bills.

In a survey of non-seniors, the New York Times/Kaiser poll found about one-in-five people struggle with medical bills even though they have insurance. Among insured people who reported crushing medical debts, about three-quarters reported putting off vacations, major purchases and cutting back on household spending. Nearly two-thirds used up all or most of their savings. Far fewer had to resort to second jobs, take on more hours or ask family members for funds (42 percent to 37 percent).

Why are these insured Americans having to reduce their standard of living and, in fewer instances, having to resort to more drastic measures? Was it entirely because they’re sick? A common refrain among those struggling with medical bills was that money was tight prior to a family illness. This includes high-income households as well as low income households.

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How a Simple Little Pill Ended Up Costing 1000 Percent More Than Its Ingredients

Devon HerrickA recent New York Times article profiled a pair of ultra-expensive pain medications designed to go easy on the stomach. Common pain relievers, like aspirin, ibuprofen and naproxen are prone to irritate the stomach if taken repeatedly throughout the day. A newer class of pain medication, called cox-2 inhibitors, are the preferred pain relievers for those who cannot take nonsteroidal anti-inflammatory drugs (NSAIDs) on a long term basis. Celecoxib, the generic version of Celebrex, is now available at a cost of about $2 per tablet, but that can add up to about $700 to $1000 per year.

More than a decade ago researchers found that taking heartburn medications with common NSAIDs could mimic the benefits of the costly cox-2 inhibitors. However, the study found (at that time) combining heartburn medications and NSAIDS would not deliver any cost savings due to the high price of prescription heartburn treatments. A lot has changed in the years since the study. The costly proton pump inhibitors for heartburn are now available over the counter (OTC) for $0.31 cents to $0.60 cents apiece. The drugs mentioned in the Times article, Duexis and Vimovo, are based on the premise of combining NSAIDs with heartburn medications.

The catch? Each drug costs more than $1,500 for only a month’s supply. The cost per tablet is $17 and $25 respectively. Why so much? That’s a good question that doesn’t have a logical answer. Although nearly 90 percent of the drugs Americans take are inexpensive generics, a small segment – about 1 percent of all drugs prescribed – falls into a category known as “specialty drugs”. Continue reading…

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