As the Olympics premier in Tokyo Friday showcasing 11,000 elite athletes, much attention will be given to the potential threat of the Delta-variant-driven which looms as a major threat to unvaccinated populations and a major disruption to a return to normalcy in U.S. healthcare.
Getting less attention is growing concern about inflation in the U.S. Surveys by the New York Fed show consumer optimism about the economy increasing and their spending follows suit: in last week’s Consumer Price Index for June 2021, prices for goods and services, excluding food and energy, increased 0.9% in June on a month-over-month basis– up from May’s monthly change of 0.7% surprising economists who were expecting an increase of 0.4%. It represents a 5.4% increase over the last 12 months—a 13-year high. In response, Federal Reserve Chair Jerome Powell assured jittery markets that the price uptick was temporary and runaway inflation unlikely.
A closer look at this CPI report tells an important story for healthcare. In the last 12 months, as consumers adjusted to post-pandemic normalcy, prices for restaurants and other food venues increased 4.2%. Transportation prices increased 10.4% as airlines and highways became crowded. Apparel prices increased 4.9%, new vehicle prices increased 7.0%, fuel oil prices increased 44.5% and gas spiked to 45.1%. But necessities like food eaten at home (+0.9%), housing (+2.6%) and medical care (-1.0%) lagged other price increases. Presumably, one might conclude healthcare’s finances have been battered by the pandemic and price increases akin to other categories a key to financial recovery. But not so.
Without major price increases, healthcare profits have been strong. As of July 16, the Standard and Poor’s Health Index reached a 1499 and returned 23.16% to investors. Its annual performance has beaten the overall S&P 500 by 10% or more for more than a decade. 7 of the 10 Fortune 500 are healthcare companies or big retailers like Walmart building full scale healthcare capabilities. Thus, the healthcare economy does well when the rest of the economy isn’t, and better when the rest of the economy is doing well. Consumer prices per se are only a small piece of the industry’s financial puzzle.
MY TAKE
Out of pocket costs matter to consumers more than prices per se. That’s the premise on which hospitals, insurers and drug companies have fought federal price transparency mandates. But rising out of pocket costs are problematic: per the Commonwealth Fund’s analysis, medical debt is a problem in one-third of U.S. households. 35% of these used up all or most of their savings and took on credit card debt, 27% had been unable to pay for basic necessities like food or rent, and 23 % delayed education or career plans.
The big picture is this: healthcare spending is increasing at 5% per year in the aggregate. Its adverse impact on household finances hurts low-and-middle income working populations disproportionately including many hourly-wage healthcare workers. But since consumer out-of-pocket payments represent only 11% of the industry’s U.S. revenue, prices for consumers are a secondary concern to the industry’s insiders compared to negotiations between suppliers, providers and insurers where unit prices matter more.
That healthcare prices will increase across the board is certain. That per-household OOP expenses for healthcare will increase is also certain and as they do, unpaid medical bills in households will mount and calls for health reform will swell. But the stark reality is that increased demand for health services coupled with escalating prices for a day in the hospital, a drug or device, or an insurance premium drive spending more than changes in consumer prices. In fact, as a percentage of the industry’s total revenues, OOP has shrunk from a high of 33% in 1970. Go figure!
Thus, the CPI is a reminder of the relative modesty of consumer price increases for medical care compared to prices and costs in the industry’s $4 trillion annual spend. The deals between suppliers, providers and insurers are largely unknown to consumers and beneficial to insiders. They’re no less an issue, especially as healthcare voters react against their affordability concerns. Stay tuned.
Paul
RESOURCES
“12-month percentage change, Consumer Price Index, selected categories”; July 13, 2021; BLS
“Medium Term Consumer Expectations Hold at 3.6% in Fed Survey”; July 12th, 2021; Bloomberg
“Percentage of private industry workers with access to employer-provided benefits by work status”; March 2020; BLS
“As the Pandemic Eases, What Is the State of Health Care Coverage and Affordability in the U.S.?”; July 2021; Commonwealth Fund
“How sensitive are healthcare consumers to changes in price?”; February 26, 2020; IBM- Watson Health Perspectives
Dan Ly, Anupam Jena “Trends in Diversity and Representativeness of Health Care Workers in the United States, 2000 to 2019”; July 15, 2021; JAMA Network
CORONAVIRUS NEWS
Covid-19 facts (Johns Hopkins, WHO, CDC)
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Vaccinations: 338 million doses have been administered,
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U.S. Cases/day: 23,000 new cases a day, double the 7-day average of around 11,300 cases three weeks.
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U.S. Hospitalizations: the current 7-day average is 13, — up from a recent low of around 12,000 at the end of June. The current levels are far from the peak of the pandemic in January, when nearly 125,000 people were hospitalized.
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Delta variant: the Delta variant is thought to be about 50% more contagious than the Alpha variant that was first detected late last year in the U.K. and has been linked to a surge of infections in multiple countries including the UK, Japan, in U.S. states (Alabama, Arkansas, Louisiana, Oklahoma, Florida and Tennessee, and in cities such as Montgomery, Alabama; Shreveport, Louisiana; Amarillo, Texas; Los Angeles).
Polls: Vaccine Hesitancy Higher among Republicans
A Kaiser Family Foundation survey found a growing vaccination divide between Republicans and Democrats: 47% of people in counties won by President Biden are fully vaccinated vs. with 35 % in Trump counties. In a July 2 poll by the Washington Post-ABC News poll, 47% of Republicans said they weren’t likely to get vaccinated, compared with 6% of Democrats.
“The Red/Blue Divide in COVID-19 Vaccination Rates is Growing”; July 8, 2021; Kaiser Family Foundation
“Post-ABC poll: Biden earns high marks for handling the pandemic, but many Republicans resist vaccination”; July 2, 2021; Washington Post
INDUSTRY NEWS
Gallup, Morning Consult: Trust in U.S. Institutions Shrinks, Half Trust the Medical System
Overall trust in key U.S. institutions has dropped 10% in the past decade, according to Gallup, which began tracking the question during Watergate (1973). Key findings from Gallup survey:
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Small business (70%), the military (69%) and the police (51%) are the three institutions in which a majority of Americans express confidence.
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Congress, TV news, big business, the criminal justice system and newspapers — each with a confidence rating at or below 21%. Congress (12%) and big business (18%) have ranked at the bottom of the list since 2007.
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Confidence in the medical system was 44%
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Per Morning Consult’s latest survey July 8 – July 10, 2021, among 2,200 U.S. adults:
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The most trusted institutions are the military (74%), police (68%), the scientific community (68%), the healthcare system (62%), public education (54%), religious leaders (53%) and the criminal justice system (47%).
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Media: 37% of Americans trust the news media–the lowest share since Morning Consult began tracking in mid-October 2020. The news media is also the most polarizing institution: 57 % of Democrats say they trust the news media vs. 19% of Republicans.
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Government: After dipping as low as 39% in mid-January, trust in the U.S. government currently stands at 45%. Only 41% of Americans trust Congress.
“In U.S., Black Confidence in Police Recovers from 2020 Low”; July 14, 2021; Gallup
“Tracking Trust in U.S. Institutions”; July 15, 2021; Morning Consult
Telehealth update: FAIR Health, Trilliant, McKinsey, CB Insights Studies Show Use Down, Investments Up
Telehealth utilization fell nationally for the third straight month, according to FAIR Health’s Monthly Telehealth Regional Tracker.
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Telehealth claim lines dropped 12.5% nationally as a percentage of medical claim lines, decreasing from 5.6% of claim lines in March 2021 to 4.9% in April, the data shows.
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This was a greater decrease than the drop of 5.1% in March but not as steep as the decrease of almost 16% in February. Telehealth usage also declined in April in all four U.S. census regions, with the greatest decline in the South, where the decrease was 12.2%. The data represent the privately insured population, excluding Medicare and Medicaid.
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Mental health claims rose from 57% of overall telehealth claim lines in March 2021 to 58.6% in April.
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According to Trilliant, telehealth is declining as much as 37% from peak-pandemic highs in some states.
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A McKinsey study of telemedicine use in primary-care settings found use highest in practices that were reimbursed via advanced value-based payment models compared with those reimbursed via fee-for-service, though there was an overall decline. Overall telehealth use for office visits and outpatient care was 78 times higher in April 2020 than in February 2020, representing nearly one-third (32%) of office and outpatient visits for the month. After a spike at the onset of the coronavirus pandemic, telehealth use has stabilized at levels 38 times higher than before the pandemic.
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And CB Insights found in the first quarter of 2021, telehealth investment hit an all-time high of $4.2 billion in 139 deals, almost doubling the $2.2 billion raised in the same quarter in 2020.
Powers et al “Association Between Primary Care Payment Model and Telemedicine Use for Medicare Advantage Enrollees During the COVID-19 Pandemic”; July 16, 2021; JAMA Health Forum
“Telehealth: A quarter-trillion-dollar post-COVID-19 reality?” July 9, 2021; McKinsey
AFL-CIO study: CEO comp Averages 253 Times Higher than Average Worker
A CEO at an average S&P 500 company made 299 times the salary of their average worker, according to AFL-CIO’s annual executive compensation report.
On average, executives received $15.5 million in total compensation during 2020, an increase of $260,000 annually over the last decade. Simultaneously, the average worker made $43,512 in 2020, $957 more annually in the last decade. For healthcare, CEO pay to average worker pay was 253:1 in 2020 with HCA CEO Sam Hazen’s $30.3 million 2020 package topping the list at 556:1.
“The 7 highest-paid health system CEOs”; July 14, 2021; Becker’s
Hoover Study: Lowering Medicare Eligibility to 60 Adds to Federal Debt
If Medicare expands its eligibility to adults 60-64, Hoover Institute predicts…
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13.8 million 60- to 64-year-olds would enroll in Medicare Part A. Of this group, 8 million would enroll in Part B and 6.5 million would enroll in Part D.
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Gross Medicare expenditures would rise by $82.9 billion in 2022. Net Medicare outlays (after accounting for Part B and D premiums) would total $69.8 billion. These outlays would be partially offset by reductions in federal outlays for Medicaid, the Affordable Care Act, and military health care programs. In addition, tax revenue would rise due to reductions in ESI-related tax expenditures and reductions in ACA tax credits.
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Overall, the federal deficit would rise by $32.2 billion in 2022 and $393.9 billion over the next 10 years (2022 to 2031).
Note: this study was sponsored by the Partnership for America’s Healthcare Future, an industry sponsored advocacy organization opposed to Medicare for All.
Lanhee Chen, Tom Church, Daniel Heil ”The Fiscal Cost of Medicare at 60” June 23, 2021; America’s Healthcare Future
REGULATORY / POLITICAL NEWS
Unemployment Benefits Expire in September in States that Continued Program
In response to the pandemic, the federal government created programs in the past year that expanded the pool of unemployed workers eligible for benefits, extended the length of time Americans can receive payments and enhanced weekly payments, most recently by $300 a person through September.
Half of the states opted out of the program earlier: data show June unemployment rates in these states are lower in states that have opted out early. The national unemployment rate increased to 5.9% in June from 5.8% in May; the number of U.S. job openings rose to 9.2 million as of May, which was a new high in records dating back to 2000.
“Half of U.S. States Ended Federal Covid-Related Jobless Benefits Early. Here Is How They Compare with the Other Half”; July 16, 2021; Wall Street Journal
Senate Dems Agree on $3.5 trillion Infrastructure Bill, Floor Debate Starts Wednesday
Last Tuesday, Senate Majority Leader Chuck Schumer announced the outline of a $3.5 trillion “soft” infrastructure package featuring several health care related provisions, including a proposal to expand Medicare to offer dental, hearing and vision benefits to fill the distinguished gap in healthcare coverage. It is unclear how much additional spending the new benefits will add to the program. It next goes to House Democrats who are expected to add more provisions and then to the Senate Parliamentarian to determine how much can be passed via reconciliation.
“With a tax tweak, Democrats’ infrastructure bill shows promise, says GOP Sen. Portman”; July 18, 2021; Daily News
Study: Medication for Opioid Use Disorder Increasing
Pittsburgh researchers analyzed data from Opioid use disorder (OUD) treatment in Medicaid recipients from 2014 to 2018, data from 11 different states. Findings:
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The proportion of people with opioid use disorder who received buprenorphine (Buprenex), methadone, or naltrexone (Revia) increased from 47.8% to 57.1% across that period.
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Individual states varied widely in use of these medications, but the lower end of the range increased from 35.3% to 45.7% from 2014 to 2018 while the upper end stayed fairly steady at around 74%,
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Notably, the prevalence of opioid use disorder diagnoses among Medicaid enrollees increased from 3.3% in 2014 to 5% in 2018. Medicaid expansion accounted for a growing proportion of people with OUD in the cohort (27.3% in 2014 vs 50.7% in 2018).
“Use of Medications for Treatment of Opioid Use Disorder Among US Medicaid Enrollees in 11 States, 2014-2018”; July 13, 2021; JAMA Network
CDC: Overdose Deaths Up 30% in 2020
Drug-overdose deaths in the U.S. increased 30% in 2020 to 93,331 from 72,151 in 2019, the result of a deadlier supply of fentanyl and pandemic. An estimated 57,550 people died of overdoses from synthetic opioids, primarily fentanyl, an increase of more than 54% over 2019. Overdose deaths from opioids overall rose nearly 37%, according to the CDC data.
“U.S. Drug-Overdose Deaths Soared Nearly 30% in 2020, Driven by Synthetic Opioids”; July 14, 2021; Wall Street Journal
Medicare 2022 Physician Pay Update: Cut to Conversion Factor Draws Criticism from Physicians
Last Tuesday, CMS released a physician payment rule for 2022 that includes a 3.75% reduction in the physician fee schedule’s conversion factor, which is used to calculate physician payments, for next year. Due to budget neutrality changes required by law and the expiration of a 3.75% payment increase provided by Congress, the 2022 PFS conversion factor is $33.58, a decrease of $1.31 (3.75%) vs. the CY 2021 PFS conversion factor of $34.89 “The PFS conversion factor reflects the statutory update of 0.00% and the adjustment necessary to account for changes in relative value units and expenditures that would result from our proposed policies. “As a result, total provider payments won’t increase in 2022 unless Congress allocates additional money.
Last year, the initial CMS proposal included a pay increase for primary care providers by cutting payments to specialists. Congress intervened after a sustained lobbying effort that culminated in an across-the-board 3.75% pay raise for the 2021 calendar year, at a cost of $3 billion to taxpayers.
Michael Brady “Providers vow to fight Medicare pay freeze”; July 14, 2021; Modern Healthcare
“CMS Proposes Cut to ‘Conversion Factor’ in Medicare Physician Fee Schedule”; July 14, 2021; MedPage
Interoperability Update
Last Tuesday, the administration announced the Trusted Exchange Framework and Common Agreement (TEFCA), the federal government’s nationwide on-ramp to interoperability, will go live in early 2022 after a 3-year delay. TEFCA’s purpose is to create a floor of universal interoperability across the U.S. for these different networks to participate in, as mandated by the 21st Century Cures Act signed by President Obama in 2016.
“Long-awaited interoperability framework TEFCA to go live in 2022, ONC says”; July 14, 2021; Healthcare Dive
