This week, all eyes will be on the U.S. Congress as the clock ticks toward a potential government shutdown. Whether lawmakers reach agreement on a continuing resolution to extend funding for30 to 60 days or the government shuts down at midnight this Saturday, it will have direct negative impact on consumer activities and spending in healthcare.
Background:
A shutdown alone is not apocalyptic for consumers: they’ve weathered 20 shutdowns averaging 8 days each since 1976 and recovered productivity shortfalls within 3-6 months. What’s complicating and most problematic for healthcare is its concurrence with equally threatening events and trends inside and outside healthcare:
- The resumption of Student Loan debt payments starting in October 1 impacting 900,000 Americans– 90% say they can’t!
- The probability the Federal Reserve will increase its federal borrowing rate by 25 basis points to 5.50 thus increasing interest costs and consumer prices.
- The slowdown in GDP growth and increase in fuel costs projected by economists and regulators.
- Increased workforce-management tension resulting in strikes, walkouts and slowdowns in labor-intense settings like auto manufacturing, nursing homes and hospitals.
- Medical inflation: technological advancements, increased demand, rising drug prices, expensive medical equipment, and increased administrative costs are contributors. According to the U.S. Bureau of Labor Statistics, prices for medical care are 5,274.47% higher in 2023 vs. 1935 (a $52,744.67 difference in value). Between 1935 and 2023, medical care experienced an average inflation rate of 4.63% per year, but in that period, working-age consumers who are privately insured paid a disproportionate and growing share projected to exceed 10% in 2023.
The health system’s economics are partially protected from shutdowns since funding for the Medicare and Medicaid is somewhat protected. That’s the status quo. But the confluence of growing bipartisan Congressional antipathy toward the industry vis a vis regulatory reforms (i.e. price transparency, site neutral payments, DOJ-FTC consolidation constraints et al), high profile congressional investigations (i.e. PBMs and drug prices, role of private equity ownership), administrative orders from the White House and Governors (i.e.medical debt, value initiatives, organ procurement et al) and negative publicity challenging community benefits, CEO compensation and fraudulent activities erode the industry’s good will and expose it to unprecedented consumer risks.
Evidence in support of this assessment is substantial as illustrated in the sections that follow. There are no easy solutions. The U.S. health industry status quo is a B2B2P2C (business to business to physician to consumer) industry in which most decisions impacting what consumers ultimately spend for healthcare products and services are made for them, not by them. The direct costs associated with supply chain, technologies, facilities and R&D are closely guarded secrets. Indirect costs, administrative overhead, off balance sheet activities, partnerships and alliances even more.
What’s clear is that every sector in healthcare will be subject to scrutiny through an uncomfortable lens—the consumer. Prices matter. Service matters. Integrity matters. Transparency matters. Ownership matters. Purpose matters. And whether accurate or not, fair or not, comfortable or not, information accessible to consumers is readily accessible.
The shutdown over the debt limit might happen or be diverted. What will not be diverted is growing discontent with the medical system that the majority of consumers believe wasteful, expensive and self-serving. How the status quo is impacted is anyone’s guess, but it’s a good bet its future is not a cut-and-paste version of its past.
Paul
Quotable
Re: Economy, shutdown:” The U.S. economy has sailed through some rough currents this year but now faces a convergence of hazards that threaten to create more turbulence.
Among the possible challenges this fall: a broader auto workers strike, a lengthy government shutdown, the resumption of student loan payments and rising oil prices…Many analysts expect slower economic growth this fall but not a recession. Daco forecasts economic growth to slow sharply to a 0.6% annual rate in the fourth quarter from an expected 3.5% gain during the current quarter. Economists at Goldman Sachs expect growth to cool to a 1.3% rate next quarter, from a 3.1% gain in the third.
So far in 2023, robust consumer spending and historically low unemployment have supported solid U.S. economic activity, despite the Federal Reserve lifting interest rates to the highest level in 22 years to fight inflation by slowing growth. Growth in Europe and China, meanwhile, has slowed sharply.”
David Harrison “U.S. Economy Could Withstand One Shock, but Four at Once?” Wall Street Journal September 24, 2023 https://www.wsj.com/economy/u-s-economy-could-withstand-one-shock-but-four-at-once
Re: public mood: “Americans have long been critical of politicians and skeptical of the federal government. But today, Americans’ views of politics and elected officials are unrelentingly negative, with little hope of improvement on the horizon. Majorities say the political process is dominated by special interests, flooded with campaign cash and mired in partisan warfare. Elected officials are widely viewed as self-serving and ineffective.”
Americans’ Dismal Views of the Nation’s Politics Pew Research Center September 19, 2023 https://www.pewresearch.org/politics/2023/09/19/americans-dismal-views-of-the-nations-politics
Re: government shutdown: “As revenue has slipped and the cost of the federal debt has risen with interest rates, the deficit has, in effect, doubled in a year to $2trn, reaching its highest level as a percentage of GDP, 7.4%, in any fiscal year when the country was not facing some national emergency, such as a war or recession. The gross federal debt is above 120% of GDP and climbing. With pensioners multiplying relative to workers, the fund that tops up Social Security benefits is due to be depleted in ten years, which will mean mandated benefit cuts of 23-25%….
Since neither party wants to reduce money for defense or veterans either, the Committee for a Responsible Budget estimates that, to reach balance, spending on all other programmes would have to be cut by 85% from current levels over ten years.
If the budget community got its wish, responsible representatives would use their votes in this collision to insist on concessions, too. They would demand a commission of respectables to map all paths back to fiscal stability, with a plan due after the election. Much as the heart might sink at this hoary strategy, it is probably the only way for Washington to confront such hard choices. Lawmakers should also demand passage of a bipartisan Senate bill that, in a shutdown, would force members to stay in session seven days a week until they pass a budget. They owe the country at least that, and it might help them get back in practice. In the lulling era of low rates, austerity fell out of fashion. That is changing gradually, and, one of these days, may change very suddenly indeed.”
America’s dumbest, wildest budget fight yet The Economist September 21, 2023https://www.economist.com/united-states/2023
Re: physician burnout: “I have no doubt that a lot of physicians are burned out. So are a lot of nurses, teachers, journalists, IT people, assembly line workers, truck drivers, rideshare drivers, restaurant servers, fast food workers and pretty much anyone else who’s been asked by their bosses to “do more with less” or “work smarter not harder” as they adapt to the post-pandemic economy.
Doctors aren’t any different than anyone else in that regard. In fact, if you look beyond all the physician burnout rhetoric, you could argue that doctors, as a whole, aren’t as burned as everyone else or at least not as burned out as they say they are.
So, I’m calling for a burnout timeout. That’s one step below calling bull on physician burnout. I’m not there yet, but I’m open to the possibility.”
David Burda “Burda on Healthcare: Calling a Physician Burnout Timeout” 4Sight Health September 19, 2023 https://www.4sighthealth.com/burda-on-healthcare-calling-a-physician-burnout-timeout
Re:inflation and consumer spending: “Trying to catch a greased pig is an American tradition that has fallen out of fashion — so you’re forgiven if you don’t know the rules…. Since the pandemic, America has been living in an economic version of the greased-pig game — prices have been running free despite assurances from policymakers and economists that the pig (inflation) will be caught soon, which is to say, brought down to the Federal Reserve’s 2% target… But just as greased pigs are unpredictable, so is inflation. August’s CPI release showed that inflation increased 3.7% from the same time last year, higher than July’s print of 3.2% and a tick above analysts’ expectations of 3.6%. This increase was mostly due to rising energy prices, but even core inflation, which strips out volatile categories like energy and food, showed signs of heating back up. Core CPI registered 4.3% year-over-year — much improved from its peak of 6.6% in September 2022 — but it increased 0.3% on a month-to-month basis, higher than the Wall Street consensus. This pig doesn’t run in a straight line… Lest you forget why we’re chasing this pig in the first place, the US Census Bureau released data showing that inflation-adjusted median household income fell by $1,750 in 2022. Americans are poorer because of high inflation. Letting it run free is not an option. This isn’t horseshoes or hand grenades, it’s pig wrestling — close is not good enough.”
Linette Lopez “America is stuck in a greased-pig economy” Insider September 19, 2023 https://www.businessinsider.com/america-greased-pig-economy-higher-inflation-stock-market-crash-recession-2023
Re: economy, interest rates: “Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2%. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time…”
Federal Reserve issues FOMC statement September 20, 2023 https://www.federalreserve.gov/newsevents/pressreleases/monetary20230920a.htm
Re: PBMs: “I think we all have the goal of lowering the cost of prescription drugs for consumers, and that’s what PBMs were supposed to do, but we don’t believe that that is happening, When you have Republicans complaining about excessive profits, it’s pretty bad because most Republicans are for the free market. “I don’t think when PBMs were created, anyone ever envisioned the PBMs to become such massive, vertically integrated companies, and that is a problem. That’s a problem that I think there’s overwhelming bipartisan support to solve.”
Committee Chair Rep. James Comer (R-Ky) opened House Oversight Committee on PBMs Tuesday, September 19, 2023
Re: AI in diagnostics: “Currently, developers of LLMs (large language models) in health care primarily use them as digital assistants to streamline patient interactions. These tools collect data from patients and present clinicians with structured information. However, the functionality of current chatbots is deliberately constrained in that they do not offer diagnostic or treatment recommendations to patients because such actions would categorize them as regulated medical devices and subject them to FDA scrutiny. Many of these tools are not ready for such regulation, and few developers are inclined to undertake the process.
Although the current stage of development of LLMs does not enable clinicians to be removed from the decision-making process, these tools are poised to enhance medical care. In carefully chosen circumstances, they will oversee some routine aspects of health care, aiming to broaden the scope of patient engagement rather than replacing interactions with clinicians.”
Scott Gottlieb, MD1; Lauren Silvis, JD2 How to Safely Integrate Large Language Models Into Health Care JAMA Health Forum September 21., 2023;4(9):e233909. doi:10.1001/jamahealthforum.2023.3909
Polling
Pew: Public confidence in elections, political system at all-time low: Per the latest Pew Research Center polling conducted July 10-16, 2023, among 8,480 adults, with additional data from a survey conducted June 5-11, 2023, among 5,115 adults:
- 4% of U.S. adults say the political system is working extremely or very well; another 23% say it is working somewhat well. 63% express not too much or no confidence at all in the future of the U.S. political system.
- 16% say they trust the federal government always or most of the time– the lowest level in nearly seven decades. And more Americans have an unfavorable than favorable opinion of the Supreme Court – the first time that has occurred in polling going back to the late 1980s.
- 28% express unfavorable views of both parties, the highest share in three decades of polling. And a comparable share of adults (25%) does not feel well-represented by either
- 63% of Americans say they are dissatisfied with the candidates who have emerged so far. Just 26% rate the quality of political candidates as very or somewhat good, down about 20 percentage points since 2018.
- Majorities back age (79%) and term (86%) limits and eliminating the Electoral College
Americans’ Dismal Views of the Nation’s Politics Pew Research Center September 19, 2023 https://www.pewresearch.org/politics/2023/09/19/americans-dismal-views-of-the-nations-politics
Federal Reserve: Household wellbeing: Per the 10th annual Survey of Household Economics and Decision-making (SHED), conducted in October 2022:
“The 2022 survey found that self-reported financial well-being was among the lowest levels observed since 2016. It also shows that higher prices have negatively affected most households, though workers continued to experience a strong labor market. Key findings from the report about how people were faring financially in 2022 are below:
- Overall Financial Well-Being:73% of adults were doing at least okay financially in 2022, down 5% from 2021. The share of adults who said they were worse off financially than a year earlier rose to 35%, the highest level since the question was first asked in 2014.
- Income: 40% of adults said their family’s monthly spending increased in 2022 compared with the prior year, while 33% said their monthly income increased. While some adults saw both their spending and their income increase, 23% of adults said that their spending had increased but their income had not. The share of adults who said they spent less than their income in the month before the survey fell in 2022 to below the level it had been before the pandemic.
- Expenses Consistent with declines in overall financial well-being, 63% of adults said they would cover a hypothetical $400 emergency expense exclusively using cash or its equivalent, down from a high of 68% in 2021. When asked for the largest expense they could cover using only savings, rather than how they would pay a small emergency expense, 18% said the largest expense they could cover with savings was under $100 and an additional 14% said the largest expense they could cover was between $100 and $499.
Economic Well-Being of U.S. Households in 2022 https://www.federalreserve.gov/newsevents/pressreleases/files/other20230522a1.pdf
Care Management
Study: value-based incentives in mental health: Researchers analyzed the association between value-based payments and utilization of mental illness services among Medicaid enrollees in New York. Findings:
“…value-based payments were associated with a statistically significant increase in the number of yearly behavioral health visits for patients with depression (0.91 visits) and bipolar disorder (1.01 visits) and a statistically significant reduction in the number of yearly mental health emergency department visits for patients with depression (−0.01 visits), bipolar disorder (−0.02 visits), and schizophrenia (−0.04 visits)….Medicaid value-based payment reform was statistically significantly associated with an increase in behavioral health visits and a reduction in mental health emergency department visits for patients with mental illness. Medicaid value-based payment may be effective at altering health care utilization in patients with mental illness.”
Lewis er al “Medicaid Value-Based Payments and Health Care Use for Patients With Mental Illness” JAMA Health Forum January 22,2023. 2023;4(9):e233197. doi:10.1001/jamahealthforum.2023.3197
Hospitals
Study: hospital pricing: UTMB researchers compared 60 hospitals’ online cash prices for vaginal childbirth and brain magnetic resonance imaging (MRI) with prices offered to secret shopper callers requesting price estimates by telephone. Findings:
“Online prices and telephone prices for both procedures varied widely. For example, online prices for vaginal childbirth posted by top-ranked hospitals ranged from $0 to $55,221 (mean, $23,040), from $4,361 to $14, 377 (mean $10,925) for safety-net hospitals, and from $1,183 to $30,299 (mean $15,861) for non–top-ranked, non–safety-net hospitals. ,
- Among the 22 hospitals providing prices both online and by telephone for vaginal childbirth, prices were within 25% of each other for 45% (10) of hospitals, while 41% (9) of hospitals had differences of 50% or more.
- Among the 47 hospitals providing both online and phone prices for brain MRI, prices were within 25% of each other for 66% (31) of hospitals), while 26% (n = 12) had differences of 50% or more.
- Among hospitals that provided prices both online and via telephone, there was a complete match between the online and telephone prices for vaginal childbirth in 14% (3 of 22) of hospitals and for brain MRI in 19% (9 of 47) of hospitals.
…These results demonstrate hospitals’ continued problems in knowing and communicating their prices for specific services. The findings also highlight the continued challenges for uninsured patients and others who attempt to comparison shop for health care.”
Thomas et al “Comparison of Hospital Online Price and Telephone Price for Shoppable Services” JAMA Intern Medicine. September 18, 2023. doi:10.1001/jamainternmed.2023.4753
Consumers
Medical Debt Rates by Income and Region
| Region | Lower Income | Middle Income | Higher Income |
| Midwest | 24.8% | 24.6% | 13.5% |
| Northeast | 17.9% | 18.8% | 12.4% |
| South | 26.1% | 28.1% | 14.6% |
| West | 14.2% | 17.8% | 10.4% |
Note: A middle-class family of three makes between $50K and $100K
Source: Third Way, Medical Debt Hits the Heart of the Middle Class, August 2023
Study: D2C lab testing Baylor researchers assessed 18 types of health-related DTC tests from 21 companies in this study. Thyroid tests, diabetes and hemoglobin A1c tests, and panels of biomarker and hormone tests marketed for women’s and men’s health were most commonly offered. Also prevalent were tests to assess vitamin levels, sexually transmitted infections, fertility, heart health, inflammation, or cancer. Highlights:
- Of 21 U.S. companies that offered DTC lab tests, less than half declared compliance with the Health Insurance Portability and Accountability Act (HIPAA), and less than a quarter specified protections for biological samples.
- All companies provided disclaimers that test results did not constitute medical advice. About half (48%) clarified that their services did not establish a physician-patient relationship. Nearly all (95%) included disclaimers of warranty and limited liability about their services and website information.
- Most companies offered an option to follow up with a healthcare professional, saying the follow-up would be initiated by the healthcare professional — often a physician, but at times, a nurse, counselor, or health coach. Most companies didn’t clarify whether the consultation would be by phone, email, or video chat.
Note: The DTC laboratory testing market is projected to be worth $2 billion by 2025 and includes both start-ups as well as DTC arms of established corporations such as Labcorp and Quest Diagnostics.
Direct-to-Consumer Tests FDA https://www.fda.gov/medical-devices/in-vitro-diagnostics/direct-consumer-tests#:~:text=Direct-to-consumer
Study: cancer mortality rate trend: Results from the American Association for Cancer Research’s (AACR) annual Cancer Progress Report revealed that the age-adjusted overall cancer death rate in the U.S. fell by 33% between 1991 and 2020. The report also detailed FDA approvals related to anticancer therapeutics over the past year, the impact of immunotherapy on cancer care in the 21st century, and key challenges needed to overcome obstacles patients with cancer still face moving forward.
ASCO www.asco.org
Regulatory Announcements
CDC: Vaccines: On September 12, the US Centers for Disease Control and Prevention (CDC) recommended that everyone 6 months or older get a new COVID-19 monovalent vaccine targeting the Omicron subvariant XBB.1.5.
The CDC’s move came the day after the US Food and Drug Administration (FDA) approved Moderna’s and Pfizer-BioNTech’s updated COVID-19 messenger RNA (mRNA) vaccines for people 12 years or older and authorized the shots for emergency use in children 6 months through 11 years of age.
Note: COVID-19 deaths and hospitalizations have been on the rise in the U.S. as fall approaches. Nearly 845 coronavirus deaths were reported for the week ending August 19– up from 520 deaths a month prior. Meanwhile, COVID-19 hospitalizations have been increasing in the U.S. for nine weeks, reaching more than 20,500 new hospital admissions during the week ending Sept. 9—an increase of nearly 8% from the prior week.
“Updated COVID-19 Vaccine Now Available in US, Recommended for Everyone Older Than 6 Months” JAMA. Published online September 18, 2023. doi:10.1001/jama.2023.19759
CDC Obesity Prevalence: 22 states have an adult obesity prevalence at or above 35% in 2022: Alabama, Arkansas, Delaware, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, and Wisconsin. Three of these had an obesity (body mass index [BMI] 30+) prevalence of 40% or more: Louisiana (40.1%), Oklahoma (40%), and West Virginia (41%). Every U.S. state and territory had an obesity prevalence higher than 20% — accounting for more than one in five adults. Washington, D.C. had the lowest prevalence of adult obesity in 2022, at 24.3%, followed by Colorado (25%), and Hawaii (25.9%). Notably, just a decade prior, no state had an adult obesity prevalence at or above 35%.
White House: Medical debt: Last week, the White House announced a plan outlined by the Consumer Financial Protection Bureau (CFPB) to eliminate medical debt from credit reports. The move — which follows an earlier decision from the three main credit bureaus to eliminate paid medical debt, medical debt that’s less than a year old, and medical debt balances lower than $500 from credit reports — could affect the tens of millions in the U.S. who have unpaid medical bills.
FTC re: Competition and Private Equity Practice Ownership: Last week, the Federal Trade Commission sued U.S. Anesthesia Partners Inc., one of the country’s top anesthesia staffing companies, and its private-equity backer, Welsh, Carson, Anderson & Stowe, , accusing both entities of scheming over a decade to acquire anesthesia practices in Texas, monopolize the market, drive up prices for patients and generate profits…
U.S. Anesthesia Partners has 4,500 clinicians serving 2 million patients in nine states, including Colorado, Florida, Kansas and Tennessee. Anesthesiology practices have been focuses of many private-equity firms in recent years. A February 2020 study of private-equity buyouts of physician practices in the Journal of the American Medical Association Forum found that anesthesiology practices accounted for almost 20% of those buyouts, the highest percentage of deals involving a single specialty. Emergency medicine practices accounted for 12% of the takeovers.
Anesthesia costs rose even more after a private-equity takeover, a February 2022 study published by the medical journal JAMA Internal Medicine found. It analyzed more than 2 million anesthesia claims from 2012 through 2017 and found that patient costs rose 26% after anesthesiology practices were acquired
Senate HELP Committee: Thursday, the Senate Health, Education, Labor and Pensions Committee (HELP) advanced the Bipartisan Primary Care and Health Workforce Act of 2023 on a bipartisan 14 to 7 votes, despite objections from Sen. Dr. Bill Cassidy (La.), the panel’s top Republican. The measure would provide funding to support a variety of programs including federally qualified health centers, teaching hospitals, the National Health Service Corps, medical and nursing schools, and rural hospitals.
The Senate bill provides $5.8 billion for community centers, $950 million for the National Health Service Corps, $1.5 billion for the Teaching Health Center Graduate Medical Education program, $1.2 billion for nurse education at community colleges and $300 million to train primary care doctors.
House Oversight Committee on PBMs: Lawmakers are advancing bills that include PBM provisions requiring PBMs to provide employers with extensive data, ban spread pricing in Medicaid, and boost disclosures of fees and PBM compensation.
According to the Nephron report, rebates and price reductions would amount to an estimated 13% of PBM gross profits in 2023, while earnings from specialty pharmacies that they own would be 39%.
About 80% of the prescription market is controlled by three PBMs: CVS Caremark, Optum Rx, and Express Scripts.
Related: Not-for-profit PBMs form coalition: A group of six pharmacy benefit manager companies have established the lobbying coalition Transparency-Rx to advance legislation that would force PBMs to pass along drugmaker rebates to health insurance carriers, disclose their cost negotiations with pharmaceutical companies and end spread pricing, among other practices. Member PBMs use an administrative service fee charged to payers instead of the industry-standard rebate model to hold down drug costs and The six include SmithRx, Navitus Health Solutions, AffirmedRx, Liviniti, MedOne Pharmacy Benefit Solutions and RxPreferred Benefits. Absent from the Transparency-Rx coalition are larger PBMs like CVS Caremark, Express Scripts, OptumRx and Humana Pharmacy Solutions, which collectively control more than 80% of the market.
