No means No

Via Paul Krugman, a quick link and thought as I scramble elsewhere:

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The red line is Medicaid spending over the past decade.  Everything else is increasingly rapidly, while Medicaid spending stayed flat.  And it stayed flat because Medicaid says no.

Second thought from Time Magazine on Las Vegas hotel economic structures as an insight into hospital economic structures:

 Time Magazine in August had a good piece on Las Vegas’s hotel and gambling industry that has an interesting nugget of explanation for hospital pricing:

A 5,000-room casino hotel that runs 24/7 has high operating costs, and it’s the gambling action that has covered them. The magic of a casino hotel is that once the costs are covered, profit mounts prodigiously–in accounting jargon, this is a business with very high operating leverage.

Hospitals and most other medical practices are the same way. Just opening the doors is extremely expensive as the fixed costs are very high. However, the marginal cost of treating the next patient for most situations (high end drug treatments excluded) are not that high. Hospitals with high census or heads in beds counts are able to use the high usage of their facilities to cover fixed costs and then operating costs.








Same old Song and Dance

The House Republican Study Committee is offering a “repeal and replace” plan for Obamacare. If we assume that this is purely a marketing document aimed to fulfill the check box that there is a “plan” to “replace” Obamacare that can get 218 votes in the House, then this document aces that evaluation. However, my therapist asked me to try not to be a cynical bastard before my first cup of coffee every morning, so lets evaluate this plan on the following criteria:

  • Provides coverage for people with pre-exisiting conditions
  • Provides coverage for people who aren’t part of the Republican donor class
  • Attempts to bend the cost curve down
  • Covers neccessary medical processes

Before we evaluate, let’s go over the major policy planks.

  1. Repeal all of Obamacare including Medicaid expansion and the three legged stool of subsidies, community rating/guaranteed issue, and mandate.
  2. Give people a tax deduction of $7,500 for an individual and $20,000 for families
  3. Significant expansion of HSA tax advantages.
  4. $25 billion for state run high risk pools with premium support for any premiums that are over twice the state average for insurance.
  5. Coverage guarantee for pre-exisiting conditions only applies to people who maintain continuous coverage
  6. Allow insurance companies to sell a single product through a single state regulatory filing
  7. Allow small groups to pool together for better risk pool pricing.
  8. Improve pricing transparency
  9. Stop comparative effectiveness research
  10. Tort reform to cap damage limits
  11. Random anti-abortion plank

 The short version is MASSIVE FAIL

The long version is below the fold:

Read more



Good News, Everybody

Good news, there is no need this year for the Independent Payment Advisory Board to meet. IPAB is an entity created by Obamacare that is designated to make payment reforms to Medicare to bring down the rate of Medicare spending inflation to the general rate of growth in the economy. Congress can overrule IPAB’s recommendations if they come up with a seperate plan that saves as much or more than IPAB’s plan. 

However IPAB is not needed when medical inflation for Medicare is beneath the rate of economic growth. And that is what is happening.

The White House brags:

Prices for personal consumption expenditures (PCE) on health care goods and services rose just 1.1 percent over the twelve months ending in May 2013, the slowest rate of increase in nearly 50 years. The slowdown in PCE health care inflation has been widespread…

Data from the Bureau of Labor Statistics’ Employer Costs for Employee Compensation survey indicate that for private sector employers offering health insurance, the annualized growth rate of real (inflation-adjusted) costs for workers’ health insurance has slowed from 2.2 percent a year from 2006:Q4 to 2009:Q4 to 1.8 percent a year from 2009:Q4 to 2012:Q4

What this means, if it is a sustainable trend, is systemically, health care is going from a red alert, going to destroy the federal budget, apple pie and day/night doubleheaders to a medium size problem that needs consistent monitoring, tinkering and experimentation. CBO is figuring federal Medicare/Medicaid committments in 2020 are $200 billion less than what they projected a few years ago. As the saying goes, a few hundred billion here, a few hundred billion there, and sooner or later we’re talking about real money.



More special snowflakes….

As we discussed yesterday, the provider side of the equation for health care is consolidating.  Depending on how one wishes to analyze the payer side of the equation, one can strongly and correctly state that there is a massive fracturing of insurance market share and price making power.  One can also say that there will soon be a massive consolidation of payer power.

Both are all true if you slant your view.

The slant is the key of a potential major problem.  Read more








Size matters

Size, once past certain threshold values, may or may not matter during sex, there are too many interrelated variables to tease out a definitive statement.

However, size definitely matters in the ability of organizations to bear and spread risk.  Insurance companies when they are operating in a manner that benefits the public are supposed to be experts at identifying and spreading risk throughout a population.  The larger the population where risk can be spread, the closer the spread distribution of risk is to the absolute risk inherent in the population.  The less variance between the risk pool and the aggregate risk, the cheaper the cost of covering and insuring against that risk becomes.

Obamacare has encouraged a trend that exisisted before 2009, and that is provider consolidation.  Read more








Expand and loot

Good news (via Politico) for Pennsylvania:

Republican Pennsylvania Gov. Tom Corbett is planning a Monday press conference to throw his support behind a version of Obamacare’s Medicaid expansion, industry and legislative sources tell POLITICO.

Corbett’s eyeing versions of expansion that rely on private-sector health plans rather than adding to the public Medicaid rolls, similar to approaches being considered in Iowa and Arkansas, according to the sources. The approach would bring in billions of Obamacare dollars marked for states that back expansion and use them to buy private insurance for the state’s poorest residents.

Medicaid expansion is a good thing for the working poor in Pennsylvania.  The Oregon study strongly indicated that Medicaid significantly improves health and quality of life for its recipients.  Pennsylvania is one of the last Obama voting states that had been holding out  and it is a large hold-out.

The bad news on this probable announcment is that the expansion is being done in a cockamanie manner designed to prove that government can’t work.  Simply expanding state Medicaid elibigibility rules would be faster and cheaper (as Medicaid pays a low reimbursement rate) than sending people to exchanges for products that have yet to be designed.  Two steps forwards, one step back and then a piroutte towards social justice…..



Gini in a bottle

Let’s head to fantasy land — no you perverts, not that one… the one where Econ 101 is an accurate description of how the health service markets work.  In this world, information is widely disseminated, products and services are clearly differentiated, no single buyer or seller has enough market power to set or demand a price that differs from marginal cost, and all costs and benefits of a purchase/no purchase decision accrue to only the parties involved in a deal.

Yes, as I specified this is fantasy land.  It is also the model that fuels the belief that the free market will solve everything so that everyone including those without significant incomes or assets will be better off than today’s status. The model is neat, it is clean, and it is wrong.

Now let’s get down and dirty talking about payer-provider negotiations and agreement zones. Read more