Last week, Congress avoided a partial federal shutdown by passing a stop-gap spending bill and now faces March 8 and March 22 deadlines for authorizations including key healthcare programs.
This week, lawmakers’ political antenna will be directed at Super Tuesday GOP Presidential Primary results which prognosticators predict sets the stage for the Biden-Trump re-match in November. And President Biden will deliver his 3rd State of the Union Adress Thursday in which he is certain to tout the economy’s post-pandemic strength and recovery.
The common denominator of these activities in Congress is their short-term focus: a longer-term view about the direction of the country, its priorities and its funding is not on its radar anytime soon. The healthcare system, which is nation’s biggest employer and 17.3% of its GDP, suffers from neglect as a result of chronic near-sightedness by its elected officials. A retrospective about its funding should prompt Congress to prepare otherwise.
U.S. Healthcare Spending 2000-2022
Year-over-year changes in U.S. healthcare spending reflect shifting demand for services and their underlying costs, changes in the healthiness of the population and the regulatory framework in which the U.S. health system operates to receive payments. Fluctuations are apparent year-to-year, but a multiyear retrospective on health spending is necessary to a longer-term view of its future.
The period from 2000 to 2022 (the last year for which U.S. spending data is available) spans two economic downturns (2008–2010 and 2020–2021); four presidencies; shifts in the composition of Congress, the Supreme Court, state legislatures and governors’ offices; and the passage of two major healthcare laws (the Medicare Modernization Act of 2003 and the Affordable Care Act of 2010). During this span of time, there were notable changes in healthcare spending:
- In 2000, national health expenditures were $1.4 trillion (13.3% of gross domestic product); in 2022, they were $4.5 trillion (17.3% of the GDP)—a 4.1% increase overall, a 321% increase in nominal spending and a 30% increase in the relative percentage of the nation’s GDP devoted to healthcare. No other sector in the economy has increased as much.
- In the same period, the population increased 17% from 282 million to 333 million, per capita healthcare spending increased 178% from $4,845 to $13,493 due primarily to inflation-impacted higher unit costs for , facilities, technologies and specialty provider costs and increased utilization by consumers due to escalating chronic diseases.
- There were notable changes where dollars were spent: Hospitals remained relatively unchanged (from $415 billion/30.4% of total spending to $1.355 trillion/31.4%), physician services shrank (from $288.2 billion/21.1% to $884.8/19.6%) and prescription drugs were unchanged (from $122.3 billion/8.95% to $405.9 billion/9.0%).
- And significant changes in funding Out-of-pocket shrank from 14.2% ($193.6 billion in 2020) to (10.5% ($471 billion) in 2020, private insurance shrank from $441 billion/32.3% to $1.289 trillion/29%, Medicare spending grew from $224.8 billion/16.5% to $944.3billion/21%; Medicaid and the Children’s Health Insurance Program spending grew from $203.4 billion/14.9% to $7805.7billion/18%; and Department of Veterans Affairs healthcare spending grew from $19.1 billion/1.4% to $98 billion/2.2%.
Looking ahead (2022-2031), CMS forecasts average National Health Expenditures (NHE) will grow at 5.4% per year outpacing average GDP growth (4.6%) and resulting in an increase in the health spending share of Gross Domestic Product (GDP) from 17.3% in 2021 to 19.6% in 2031. The agency’s actuaries assume
“The insured share of the population is projected to reach a historic high of 92.3% in 2022… Medicaid enrollment will decline from its 2022 peak of 90.4M to 81.1M by 2025 as states disenroll beneficiaries no longer eligible for coverage. By 2031, the insured share of the population is projected to be 90.5 percent. The Inflation Reduction Act (IRA) is projected to result in lower out-of-pocket spending on prescription drugs for 2024 and beyond as Medicare beneficiaries incur savings associated with several provisions from the legislation including the $2,000 annual out-of-pocket spending cap and lower gross prices resulting from negotiations with manufacturers.”
My take:
The reality is this: no one knows for sure what the U.S. health economy will be in 2025 much less 2035 and beyond. There are too many moving parts, too much invested capital seeking near-term profits, too many compensation packages tied to near-term profits, too many unknowns like the impact of artificial intelligence and court decisions about consolidation and too much political risk for state and federal politicians to change anything.
One trend stands out in the data from 2000-2022: The healthcare economy is increasingly dependent on indirect funding by taxpayers and less dependent on direct payments by users. In the last 22 years, local, state and federal government programs like Medicare, Medicaid and others have become the major sources of funding to the system while direct payments by consumers and employers, vis-à-vis premium out-of-pocket costs, increased nominally but not at the same rate as government programs. And total spending has increased more than the overall economy (GDP), household wages and costs of living almost every year.
Thus, given the trends, five questions must be addressed in the context of the system’s long-term solvency and effectiveness looking to 2031 and beyond:
- Should its total spending and public funding be capped?
- Should the allocation of funds be better adapted to innovations in technology and clinical evidence?
- Should the financing and delivery of health services be integrated to enhance the effectiveness and efficiency of the system?
- Should its structure be a dual public-private system akin to public-private designations in education?
- Should consumers play a more direct role in its oversight and funding?
Answers will not be forthcoming in Campaign 2024 despite the growing significance of healthcare in the minds of voters. But they require attention now despite political neglect.
Paul
PS: The month of February might be remembered as the month two stalwarts in the industry faced troubles:
United HealthGroup, the biggest health insurer, saw fallout from a cyberattack against its recently acquired (2/22) insurance transaction processor by ALPHV/Blackcat, creating havoc for the 6000 hospitals, 1 million physicians, and 39,000 pharmacies seeking payments and/or authorizations. Then, news circulated about the DOJ’s investigation about its anti-competitive behavior with respect to the 90,000 physicians it employs. Its stock price ended the week at 489.53, down from 507.14 February 1.
And HCA, the biggest hospital operator, faced continued fallout from lawsuits for its handling of Mission Health (Asheville) where last Tuesday, a North Carolina federal court refused to dismiss a lawsuit accusing it of scheming to restrict competition and artificially drive-up costs for health plans. closed at 311.59 last week, down from 314.66 February 1.
Resources:
NHE www.cms.gov
Hacking at UnitedHealth Unit Cripples a Swath of the US Health System: What to Know – KFF Health News February 29, 2024
Change Healthcare cyberattack outage could last weeks (statnews.com) February 29, 2024
HCA, NC Attorney General Stein lawsuit: Disagreement over pacing (citizen-times.com)
Sections
- Quotables
- Hospitals
- Health Insurers
- Physicians
- Prescription drugs
Quotable.
Re: super Tuesday and political discourse: “You read the news. The US electorate is sharply polarized. Voters, like most sane people, “dread” this election and the vast majority feel “exhausted” when thinking about politics…
On any normal day, the delivery of care is an emotional, tension-filled enterprise. The stakes are always high. Life and death, relief and pain, celebration and disappointment – these are all workaday experiences within your walls.
As colleagues and patients alike bring outside tensions inside, your spaces built for healing can become a tinderbox. As tensions mount, healthcare providers risk “unhealthy conflict” among not only team members but also between patients and their family members. “Gotcha” media questions, attention-seeking legislation and partisan activists baiting you on pointedly divisive healthcare issues lob incendiaries onto the kindling.”
Three moves for weathering 2024’s political climate (hs-sites.com)
Re: Obesity rates worldwide: “It was not that long ago that more of the world’s people had too little to eat than ate too much. Now the scales have tipped. A study published on February 29th in the Lancet, a medical journal, shows that more than 1bn people were classified as obese in 2022, the latest year for which data are available. The researchers based their findings on the weight and height measurements of more than 220m people from roughly 190 countries. They found that obesity rates have doubled among adults since 1990 and quadrupled among children and adolescents. “
The obesity capitals of the world (economist.com)
Re: 2024 economy and consumer spending: “High interest rates are a drag on consumers, but long-term rates have come down over the past few months, and short-term rates should fall as the Fed cuts the fed funds rate later this year. Another drag on spending will come from households’ need to increase their saving. The personal saving rate, at below 4%, is well below the pre[1]pandemic rate of around 7%. This means that spending will need to increase more slowly than incomes in the near term. Consumer spending will continue to gradually increase over the course of 2024, although at a slower pace than in 2023 as job and wage gains soften. With consumer spending making up about two-thirds of the U.S. economy, the economic expansion should continue throughout this year and into next.”
PNC_EconomicUpdate_PersonalIncome_022924.pdf
Re: Covid-19 vaccine safety and media coverage: “The bottom line is that no medication or vaccine is 100% effective or 100% safe, and everything has risks and benefits. But any risks from medications and vaccines need to be balanced against the risks of the disease you are trying to prevent. For example, the risk of myocarditis/pericarditis from COVID-19 is 6-to-11 times higher and is associated with a more severe clinical presentation than the risk from the COVID-19 vaccine.
COVID-19 has killed over a million people in the U.S. and has led to permanent disability in many others. The vaccines are very safe overall, and the benefit of the vaccine still definitely outweighs the risks. Fear mongering headlines serve only to harm, not help, public health.”
The Misleading Headlines Behind the New COVID Vaccine Safety Study | MedPage Today
Re: Canadian health system and AI: “Integrating AI into Canadian healthcare could help simplify administrative work; improve system management, care quality, and patient and staff experience; and boost affordability via lower spending.
Canada spends about CA $330.00 billion (US $245.66 billion) each year on healthcare, equivalent to 12.2 percent of its 2022 GDP. Over the past ten years, Canada’s annual healthcare spending has increased, on average, by about one percentage point more than its GDP growth (excluding 2020) of about CA $7,500 per capita each year. This makes Canada one of the top ten healthcare spenders in the world. Despite this escalating spending, outcomes for Canadians are beginning to lag behind those of other countries. The Fraser Institute qualified Canada’s performance as “modest to poor,” ranking the country last or close to last on four indicators of timeliness of care, for example. An aging population, the increased prevalence of chronic conditions, and the rising costs of personalized healthcare and medications will perpetuate this trajectory unless healthcare systems take steps to transform…
According to McKinsey analysis, at full-scale deployment, efforts based on known AI applications could allow Canada to lower its net healthcare spending by about 4.5 to 8.0% per year, increasing affordability without negatively affecting outcomes and experience.”
The potential benefits of AI for healthcare in Canada | McKinsey
Re: Fentanyl impact: “It is testimony to the intractable nature of America’s fentanyl epidemic that officials measure progress not in falling numbers of deaths, but in a slowing rate of growth. After a decade of horrifying ascent, the administration of President Joe Biden points out, the yearly number of fatal overdoses appears at last to be slowing to a gentle climb (see chart 1). The figure for 2022 was just 5% higher than that of 2021. That still leaves fentanyl and other synthetic opioids like it killing some 75,000 people a year—more than double the figure of 2019. But in the fight against the deadliest narcotic in American history, that is what passes for success.
The meagre results are not for lack of effort. The federal government has been spending record sums trying to curb the epidemic…Since Mr. Biden became president, the federal government has, for the first time, devoted more money to treatment than to interdiction…
It is hard to overstate how much fentanyl has blighted the country and the speed with which it has done so. In 2013-22 it killed more than a third of a million Americans. Deaths shot up during the covid-19 pandemic and have not diminished since. One reason for its rapid spread is how cheap it is. “
America’s ten-year-old fentanyl epidemic is still getting worse (economist.com) February 29, 2024
Re: AI in patient care parity: “If an AI system designed to facilitate patient care encounters errors in processing language differences, this miscommunication between a patient with limited English proficiency, the pharmacy, and the healthcare system could delay a critical medication refill, leading to a potential AI-induced drug safety event…
This example serves as a snapshot of broader issues within healthcare technology, which often has greater consequences for minority groups, and underscores the critical need for more inclusive and equitable healthcare technologies.
In this context, the potential of AI in healthcare is tremendous, offering the possibility to predict patient complexity, enhance care appropriateness, streamline operations, boost patient satisfaction and outcomes, and level the playing field. However, without a thoughtful implementation strategy, AI risks exacerbating existing disparities.
AI in Healthcare: Navigating the Crossroads of Innovation and Equity | MedPage Today
Re: Berwick on Medicare Advantage: “Now rather than lower costs, MA has much higher costs — something to the tune of $80 billion a year. Other estimates are as high as $120 billion. For the most part, that money doesn’t represent the needs of the patient. In fact, we know that beneficiaries in MA are, on the whole, healthier than those in traditional Medicare, and ought to cost less, not more.
It’s just a transfer of money to the private sector. Most of that goes to profit for the plan, or for stock buybacks, high compensation for plan executives, and activities that don’t benefit beneficiaries, including, by the way, administrative costs that are much higher than on the traditional Medicare side. As you know, that’s now regulated to be no higher than 15% of the total. In traditional Medicare, administrative costs are much lower, more like 3% or 4% or 5% of the total. So, the extra administrative expenses in MA represent waste. I doubt it was ever the intent to allow so much money to leach into private hands.”
Obama CMS Chief: Medicare Advantage Plans Game the System | MedPage Today March 1, 2024
Health insurers
EBRI Survey: enrollee plan satisfaction: Per the 19th Annual Consumer Engagement in Health Care Survey of 2020 privately insured adults between 21-64 years of age conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Research conducted between Oct. 16 and Dec. 11, 2023:
- Most people with private health insurance reported getting their coverage through their own job (60 %) or through a spouse’s job (24%). Only 15% said they get it directly from a health insurance carrier (8 %) or from a government exchange (7%).
- HDHP enrollees were more likely to report receiving their coverage through their own job (72%) and less likely to say they got it directly from a health insurance carrier (3%) or government exchange (3%).
- At least one-half of enrollees were satisfied with various aspects of health plan selection during open enrollment. About 90% were either extremely or very satisfied (63%) or somewhat satisfied (2%) with the ease of selecting a plan and were either extremely or very satisfied (59 %) or somewhat satisfied (31%) with the information available to help understand health insurance plan choices.
Employee Benefit Research Institute (ebri.org)
Employer access to data: Employers are asking payers for cost data but are hearing crickets…In 2021 The Consolidated Appropriations Act (H.R. 133) required employer sponsored health plans and health insurance companies to affirm by the end of 2023 that their contracts don’t contain “gag clauses” that would restrict the handover of information about the cost or quality of medical services.
As employers begin to use hospital and health plan data to compare prices and create well-structured plans, some questions are rising, and payers aren’t answering. Much of the time, employers and plan sponsors say that insurers are refusing to hand over their claims data, leading to federal investigations.
Hand Over the Data! Why Employers Are Fed Up with Payers Hiding Costs | HealthLeaders Media February 26, 2024
Hospitals
Key Takeaways from KF’ Report on January hospital financial performance:
- ” Margins improved in January relative to previous years. While margins declined slightly from December, they were higher in January relative to the same periods in 2022 and 2021.
- Net revenue has not risen as fast as gross revenue. This might reflect payers negotiating more aggressively and a shift to value-based payment models.
- Total expenses on a volume-adjusted basis have improved. Though there’s been continued growth in drugs and supply expenses, labor expenses have improved.
Kaufman Hall | National Hospital Flash Report
Patient Rights Advocate: Hospital adherence to price transparency mandate: Per the Patient Rights Advocate’s sixth Semi-Annual Hospital Price Transparency Compliance Report:
- 5% of the 2,000 hospitals reviewed were in full compliance with the federal rule– unchanged from the 36% compliance found in PRA’s last reportreleased in July 2023.
- Despite stagnant compliance, the Centers for Medicare & Medicaid Services (CMS) has issued penalty notices to only 14 hospitals.
- 87 hospitals (4%) did not post any usable standard charges file and were in total noncompliance.
- Of the hospitals reviewed, none (0%) of those owned by the largest hospital systems were fully compliant (HCA Healthcare, Tenet Healthcare, Providence, Kaiser Permanente, Avera Health, UPMC, Baylor Scott& White Health, and Mercy).
Sixth Semi-Annual Hospital Price Transparency Report — PatientRightsAdvocate.org
Kodiak: Patient Debt collections: The Kodiak analysis is based on analysis of patient financial transactions from 1,850 hospitals and 350,000 physicians nationwide. Findings:
- The rate of patient collections fell from 54.8% in 2021 to 47.8% in 2022 and 2023.
- Patient financial responsibility accounted for roughly $1.1 billion of over $5 billion in total payments received.
- Providers collected about $500.5 million for services rendered in 2022 and 2023, which was less than half owed.
- There was a clear line between what patients were likely to pay and avoid paying: Patients were likely to pay outstanding medical bills of $500 or less and less likely to pay bills over $500.
- Patient collection rates decreased, but the claim dollar amount owed increased.
- Lower patient collection rates increased bad debt for providers, which amounted to over $17.4 billion of bad debts in 2023.
- Self-pay patients had the highest percentage of bad debt write-offs for providers.
- About 53% of total bad debt write-offs in 2023 came from patients with some form of insurance, including commercial plans, managed care plans and Medicare.
KPI Benchmarking Reports — Kodiak Solutions
Population Health
Study: dental care access among seniors: Mass General researchers analyzed annual dental visits and expenditures stratified by insurance type, adjusting to 2021 dollars. Findings:
“We found that MA and TM beneficiaries had similarly low rates of dental use. Lack of access to needed dental care may explain why adverse dental outcomes increase as individuals transition from private insurance to Medicare.
The majority of Medicare beneficiaries are now enrolled in MA, which costs 17% more per capita than TM due to favorable selection and intensive diagnostic coding. The MA plans justify this cost by offering benefits such as dental, but use management, limited networks, and high-cost sharing may restrict patients’ actual use of these benefits.
Our findings suggest that MA beneficiaries delay dental care due to cost at higher rates and do not have rates of preventive dental use, suggesting that low use may not be exclusively associated with restricting low-value services but with, eg, restrictive networks, high OOP costs, or lack of awareness of benefits.”
Prescription Drugs
GLP-1 drugs: “When people have obesity, many develop fatty liver disease, which can then progress into a severe form that is MASH. MASH causes liver scarring called fibrosis, which can then advance to even more serious scarring called cirrhosis, which then leads to liver cancer or the need for a liver transplant.
With the advent of GLP-1 weight loss drugs, researchers are now looking at the potential to treat the upstream obesity as a way of addressing MASH. A new update of the STAT Obesity Drug Tracker shows that at least 23 — about one-fifth — of the 105 obesity treatments in development or on the market are also being investigated for MASH.
The growing number of obesity treatments being studied for MASH shows the competitiveness of the obesity market — as well as the industry opportunity that drugmakers see in MASH, an increasingly common disease that doesn’t yet have any approved treatments. About 1.5% to 6.5% of U.S. adults are estimated to have MASH, and any drug that reaches even a fraction of those patients would likely be a multibillion-dollar product.”
Liver disease MASH is next target for obesity drugs in development
