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The Keckley Report

U.S. Healthcare and Inflation: A Tipping Point

By April 11, 2022March 1st, 2023No Comments

Inflation hit a 40-year high of 7.9% in the first quarter of 2022. Driven by higher gas and food prices, the average household’s expenses have increased $433/month this year and the end is not in sight.

It is taking its toll on consumers– disproportionately in lower income households, rural communities, the unhealthy and frail elderly and non-white populations. Recent polling underscores the gravity of the public mood:

·        In the latest Axios/Ipsos poll, 40% of consumers cited inflation as their biggest worry including 60% of Republicans. 40% said wages are rising faster than they have in more than a decade and 94% said their costs of food, gas and housing had gone up in 2021.

·        In an NBC News survey conducted March 18-22, 71% of U.S. adults said they felt the country is headed in the wrong direction vs. 22% who think it’s heading in the right direction. In the same survey, 83% were concerned their costs for goods and services like gas will increase as a result of the Ukraine conflict with Russia and 62% said they believe their family income is falling behind their costs of living.

·        In Kaiser Family Foundation’s March 2022 Tracking Poll, 55% of American said Inflation was their top concern; 71% say they are “very/somewhat worried” about being able to afford gasoline or other transportation costs followed by unexpected medical bills (58%), monthly utilities (50%), food (47%), long-term care services (45%), health insurance deductible (44%), rent/ mortgage (43%), prescription drugs (43%) and health insurance premiums (36%).

·        In the latest Consumers by the University of Michigan survey, 32% of surveyed adults anticipate their finances will worsen over the next 12 months–the largest recorded share since the survey started in the mid-1940s. Consumer sentiment sank to 59.4 from 62.8 in March– down from a year-ago reading of 84.9 and the most pessimistic sentiment in 11 years.

·        In its March analysis, Morning Consult reported that consumer confidence dropped 7% for those earning more than $100,000 — a much larger dip than for those earning less than $50,000.

Per the U.S. Bureau of Labor Statistics (BLS) latest Consumer Expenditures Survey, the Americans’ average pre-tax income increased by 1.8% YoY in 2020, while average household expenditures decreased by 2.7% YoY. Housing (25.4%/$1784 per month), transportation (11.6%/$819 per month), and food (8.7%/$610 per month) were the biggest allocations based on the average HH pre-tax income of $84,352 in 2020. Comparatively, medical services spending was $72/month—down 12.2% to less than 1% of HH spending. Thus, in the big scheme of inflation, sticker shock from healthcare prices is negligible unless it’s the result of a surprise hospital/medical bill or a high priced drug.  Other spending categories matter more. Simplistically, U.S. consumers navigate healthcare inflation experientially…

·        For households with income above $100,000 and without a major recurring health condition requiring expensive treatment, it’s irritating but manageable until a better alternative is available.

·        For households with income between $50,000 and $100,000, healthcare prices and out-of-pocket spending for healthcare services are concerning and delayed care/self-treatment/cheaper options considered.

·        For households below $50,000, it’s all over the place depending on circumstances, health conditions and abilities to navigate the public and private health matrix.

All agree affordability is an issue. All think the system is wasteful and often self-serving, but price inflation for other household items matters more today.

Like every industry, increased supply chain costs and wage escalation are problematic to operators. Government officials forecast healthcare spending will increase 4.6% annually through 2030 in tandem with household out-of-pocket spending that’s expected to climb at the same rate. These assume demand, pricing, costs and revenues are predictable—no black swan events like the pandemic, no major changes in how employer- sponsored health benefits, no alternative systems of health that deliver & finance services in unique models, no organized ‘occupy healthcare’ populist movement to redress the system’s inequity and lack of investment in public health, and others. Each of these is possible if not likely.

For the past two decades, annual medical price inflation ticked-up 3% per year regardless of geopolitical affairs, the dynamics of household spending and federal/state budgeting. Tomorrow morning, the Consumer Price Index (CPI), a key measure of inflation, will be released: it’s expected to show prices rose at an 8.3% over the past 12 months, up from February’s 40 year high. That makes inflation THE forcing factor in U.S. domestic policy for at least the next 2 years and necessitates a central role for the health system in slowing it to the Fed’s target of 2.4%. A relatively independent health economy will be forced into a bigger discussion about why it exists, where it falls short and why it costs much more than other systems with comparable result.

Inflation today is framed in energy and food price escalation; tomorrow it will be healthcare as consumer and employers force the issue. Inflation is the tipping point.



NBC News March Poll

March 2022 U.S. Consumer Spending Report. Morning Consult March 22, 2022

“Americans should budget an extra $5,200 this year to cover rising prices, Bloomberg economists estimate” Business Insider March 29, 2022

KFF Health Tracking Poll – March 2022: Economic Concerns and Health Policy, The ACA, and Views of Long-term Care Facilities KFF March 31, 2022

“Most Americans don’t like Biden’s Ukraine response and worry about inflation”  NPR March 24, 2022

National Health Expenditures 2022-2030 CMS March 28, 2022


PE funds create equity sharing NFP to increase ownership: A group of 19 private-equity firms has agreed to get stock into the hands of more employees at companies they own in an effort to address income inequality. Ownership Works, as the new organization is known, will help companies roll out share-ownership programs for employees from top executives to lower-level workers. It launches Tuesday with a goal of creating at least $20 billion in wealth for low- and middle-income employees over the next decade.

FYI: The wealthiest 10% of Americans held $36 trillion in stocks and mutual funds in 2021, an increase of more than 21 times since 1989, according to Federal Reserve data. That compares with $260 billion and an increase of about 12 times for the bottom 50%.

Private-Equity Giants Back New Nonprofit Promoting Employee Ownership Wall Street Journal April 5, 2022

Federal Policy

Biden Announces Fix to Affordable Care Act’s ‘Family Glitch: Last week, the Biden administration announced its proposal to add family eligibility for a premium tax credit if their employer coverage cost more than 10% of their income.  Previously, only the employee was eligible. “The ‘family glitch’ impacts about 5 million people. The proposed change would add coverage for 200,000 and 1 million Americans could see their premiums go down. The change is expected to take effect at the beginning of 2023.

FACT SHEET: Biden Harris Administration Proposes Rule to Fix “Family Glitch” and Lower Health Care Costs the White House April 05, 2022 www.

Politico Investigative report: The FDA has failed to regulate food and nutrition: Diet-related diseases are a major killer and driver of health care costs. The Politico investigations found dysfunction its Center for Food Safety and Applied Nutrition, which suffers from a “deep-seated culture of avoiding hard decisions and a near paralyzing fear of picking serious fights with the industry.” This was exacerbated by a change in the leadership structure that set up a power struggle between top officials. This has effectively stymied work since the Obama administration’s directive to prevent food borne illness (2011), closer baby food oversight (2017) and delay in establishing tighter control on salt consumption in foods.

The FDA’s Food Failure Politico April 8,


CDC: BA2 variant 72% of new cases: Per the CDC, last week the subvariant represented an estimated 72% of national cases and 84% in both New England and the New York- New Jersey area. Nationwide, the 7-day average for newly reported cases is about 26,000 a day, according to Johns Hopkins University, down from recent weeks where the average hovered closer to 30,000. National counts of newly admitted Covid-19 patients also recently fell to the lowest level after any surge. Related: 7.4 million Americans living with long-COVID, with approximately 2.2 million unable to return to work.


GAO: telehealth use in Medicaid up during pandemic but quality unknown: The U.S. Government Accountability Office (GAO) analysis found 32.5 million services were delivered via telehealth to 4.9 million Medicaid beneficiaries in five selected states from March 2020 through February 2021, compared with 2.1 million telehealth services delivered to about 455,000 beneficiaries in the 12 months prior to the pandemic. However, GAO acknowledged that the quality of information provided and impact of outcomes requires additional study.

Medicaid: CMS Should Assess Effect of Increased Telehealth Use on Beneficiaries’ Quality of Care GAO March 31, 2022

Study: healthcare workforce turnover: This was an observational cross-sectional study conducted among individuals employed full-time in health care jobs from 2019 to 2021 in the US. Finding:

“The findings of this observational cross-sectional study suggest that although much of the health care workforce is on track to recover to prepandemic turnover rates, these rates have been persistently high and slow to recover among long-term care workers, health aides and assistants, workers of minoritized racial and ethnic groups, and women with young children. “

Tracking Turnover Among Health Care Workers During the COVID-19 Pandemic A Cross-sectional Study JAMA April 8, 2022 2022;3(4):e220371. doi:10.1001/jamahealthforum.2022.0371

Health Economy

S&P: Healthcare defaults hit record high: According to S&P, the healthcare industry has the highest likelihood to default over the next year at a 4.4% median– up from 3.3% as of the end of last year and a traditional default rate of 1%.

Default risk rises across most US sectors in Q1 April 5, 2022 S&

SPAC Update: performance lagging

Per Dealogic, in the first 2 months of 2022, the average redemption rate for a SPAC merger reached 80% — meaning 4 out of 5 shares were redeemed before the target company was acquired — up from about 50% in 2021 and just 20% in 2020.

Per Pitchbook, “the initial slide in performance started much earlier in 2021. Our deSPAC Index has posted a decline of 47.8% since 2018, as well as a 35.6% drop since the beginning of 2022 relative to the S&P 500’s 59.4% gain since 2018 and 10.6% decline in YTD 2022…Only 30 deSPAC events closed during the first quarter of 2022, which also heavily correlates to the volatile public markets.

Per CB Insights, the number of SPAC mergers (including both announced and completed acquisitions of target companies) hit new records every quarter in 2021 to peak at 104 in Q4’21, although the pace slowed in 2022 so far. Despite the flood of SPACs, their market performance to date has lagged. The price of one exchange-traded fund (ETF) that tracks SPAC performance has sunk 37% in the last year (as of late March), while the S&P 500 has grown by nearly 18% during that time.; CB Insights; Q1 2022 SPAC Update and Performance Pitchbook April 7, 2022

Banks cautioning against recession: Last week, Deutsche Bank became the first bank to caution that the Fed is likely to hike the federal funds rate to around 2.6% this year– equivalent of at least 10 hikes of 25 basis points. “In 2023, we expect equity markets to hold up well through the summer before the US falls into recession and for equities to correct by a typical 20% as it begins, before bottoming half-way through and recovering prior levels,” Chadha and Thatte said. The two strategists are still bullish in the near-term, however, and still have a 2022 price target of 5,250 on the S&P 500. The index closed near 4,488 on Friday.

Wall Street just fired out its first official recession and stock market crash call for next year. Here’s what 4 major firms are saying — and the big risks they’re monitoring. Business Insider April 8, 2022

Related: overheating economy: Per the Economist, “the economy in the United States is overheating. The annual rate of consumer-price inflation is 7.9% and hourly wages are 5.6% higher than they were a year ago. America has nearly twice as many job openings as it does unemployed workers—the highest ratio in 70 years. For much of 2021 central bankers hoped that Americans who left the labour force after the pandemic struck would return, helping cool the labour market. In the past six months their prayers have been answered: more than half the missing workers of prime working age have returned. Yet wage growth has risen anyway, perhaps because workers are negotiating hard as rising prices erode living standards.

The Fed needs both wage and price growth to cool if it is to hit its 2% inflation target. It is expected to raise short-term interest rates, which started the year below 0.25%, to over 2.5% by December, and to continue to raise rates above 3% in 2023. …Hitting the monetary brakes, though necessary, endangers growth. History suggests that the Fed finds it difficult to cool the jobs market without eventually tipping the economy into recession.

A toxic mix of recession risks hangs over the world economy The Economist April 9, 2022

Headwinds Mounting for U.S. Economy Morning Consult  April 2022


InstaMed study: 87% of consumers surprised by a medical bill in 2021: Other findings:

·        56% got a bill for more than expected

·        50% received an unexpected bill

·        19% were sent to collections

Background: InstaMed is a J.P. Morgan company,” transforms healthcare payments by driving electronic transactions, processing payments and moving healthcare data seamlessly, and improving consumer satisfaction.“

Trends In Healthcare Payments Annual Report

Cerullo et al Financial Impacts And Operational Implications Of Private Equity Acquisition Of US Hospitals Health Affairs April 2022Full Access

Study: non-adherence to medication related to subsidies: Researchers estimated the proportion of Part D beneficiaries in fee-for-service Medicare, with and without a subsidy for new prescriptions issued between 2012 and 2018 for Part D beneficiaries. Findings:

·        Beneficiaries receiving subsidies were nearly twice as likely to obtain the prescribed drug within 90 days as those without subsidies.

·        Among beneficiaries without subsidies, non-initiation for 30% of prescriptions written for anticancer drugs, 22% for hepatitis C treatments, and more than 50% for disease-modifying therapies for either immune system disorders or hypercholesterolemia.

·        Based on non-initiation (that is, not filling the drug prescribed), non-initiation averaged 39.4% across all drugs studied:28.3% for cancer drugs, 20.9% for hepatitis C drugs, 54.2% for immune system drugs, and 66.8% for hypercholesterolemia drugs

Dusetzina et al Many Medicare Beneficiaries Do Not Fill High-Price Specialty Drug Prescriptions Health Affairs April 2022


Study: hospitals acquired by private equity increase charges, operating margin after deal: Researchers compared changes in the financial performance of 176 hospitals acquired during 2005–14 versus changes in matched control hospitals. Finding:

Acquisition by a private equity fund was associated with a $432 decrease in cost per adjusted discharge and a 1.78% increase in operating margin. The majority of acquisitions—134 members of the Hospital Corporation of America, acquired in 2006—were associated with a $559 decrease in cost per adjusted discharge but no change in operating margin. Conversely, non-HCA hospitals exhibited a 3.27% increase in operating margin without a concomitant change in cost per adjusted discharge.

Background: Private equity firms have increased their participation in the health care sector in recent years (to nearly $79 billion in 2019), with the provider subsector (physicians, hospitals, and laboratory facilities) accounting for the majority of deals.

Cerullo et al Financial Impacts and Operational Implications of Private Equity Acquisition of U.S. Hospitals Health Affairs April 2022

Study: drug spending up by 7.7% in 2021: Per the study released April 6 by the American Society of Health-System Pharmacists, total spending for prescription drugs increased to $576.9 billion. Hospitals accounted for $39.6 billion of that spending—up 8.4% from 2020; clinics accounted for $105 billion–7.7 % increase.

Gilead’s COVID-19 therapeutic remdesivir made up nearly 10 percent of what hospitals spent on drugs in 2021. Hospitals’ remdesivir spending outpaced the next 3 drugs combined.

National trends in prescription drug expenditures and projections for 2020 American Journal of Health-System Pharmacy, Volume 77, Issue 15, 1 August 2020, Pages 1213–1230,

Study: hospital prices vary widely by market: Researchers analyzed hospital charges relative to Medicare rates from 2012 to 2019. Findings: “Commercial health plans pay higher prices than public payers for hospital care, which accounting for more than 5% of US gross domestic product. We found that average commercial-to-Medicare price ratios were relatively stable, but trends varied substantially across HRRs. Among HRRs with high price ratios in 2012, ratios increased by 38% in regions in the top quartile of growth and decreased by 38% in regions in the bottom quartile. Our findings suggest that restraining the growth rate of HRR commercial hospital price ratios to the national average during our sample period would have reduced aggregate spending by $39 billion in 2019.

Levinson et al Trends In Hospital Prices Paid By Private Health Plans Varied Substantially Across The US Health Affairs :April 2022

PWC analysis: hospital deals down, physician groups up last year: Per PWC, there were 407 physician group deals from Nov. 15, 2020, to Nov. 15, 2021 vs. 200-250/yr. in the prior years. Multiples ended the year where they were at the close of 2020:  managed care (up 2.9 to 16.6x), skilled nursing facilities, (SNF), assisted living facilities (ALF) and long-term acute care hospitals (LTACH) (up 2.1 to 14.0x). Multiples have dropped: health and hospice were down 5.0, but at 21.0x is still by far the highest of the subsectors. Acute care, ambulatory care-rehab-dental, and labs-imaging-pharmacy were down between about 0.5 to 1.0x.

Health Services Deal Outlook PWC April

Kaufman Hall: fewer healthcare mergers and acquisitions in 1Q 2022: Per KH, the number of mergers and acquisitions was the lowest of any first quarter since Kaufman Hall started tracking the transactions in 2016: 1Q 2016- 25 transactions; 2017- 27; 2018- 30; 2019- 27; 2020- 29; and 2021-13.In previous years, the low number of transactions had been offset by more “mega” transactions — those that occurred when the seller had revenue greater than $1 billion — but there were no mega transactions in this quarter. In four of the transactions, the smaller party’s average revenue was less than $100 million.

Quarterly Mergers and Acquisitions Report for Q1 2022,


FDA finalizes Aduhelm coverage: Last Thursday, the FDA finalized its plan to restrict coverage for the Biogen’s Alzheimer’s drug Aduhelm to patients participating in clinical trials. Medicare isn’t explicitly requiring that patients be treated at hospital-based clinics like the initial proposal. The coverage decision is not specific to Aduhelm, and applies to all drugs in the class, including a forthcoming treatment that Eli Lilly has begun to submit for FDA approval. In a change from the initial proposal, Medicare officials created a sort of shortcut path for drugs that, unlike Aduhelm, demonstrate a clinical benefit for patients before they are approved. Medicare will cover those medicines for a broader group of patients based on “Coverage with Evidence Development” authorization.

Note: Adulhelm remains controversial due to its price tag (initially $56,000) and concern about its efficacy by notable critics. n November 2021, Medicare preemptively raised beneficiaries’ premiums by nearly 15%, citing Aduhelm’s budgetary impact. Biogen’s subsequent reduction of the drug’s annual price to $28,200 does not resolve Aduhelm’s potential financial strain, and the question of whether premiums would remain onerously increased depended heavily on Medicare’s final coverage decision.

Medicare finalizes its restrictions on new Alzheimer’s drug, despite pressure from drugmakers StatNews April 7, 2022

Medicare got it right: Unproven Alzheimer’s drug would have threatened the financial stability of 60 million Americans StatNews April 8, 2022

RWJF: premium tax credits expiration will increase uninsured by 3 million: The American Rescue Plan Act of 2021 (ARP) increased Premium Tax Credits (PTCs) for Marketplace insurance coverage and extended eligibility for PTCs to more individuals; they are set to expire after 2022. Per the RWJF analysis:

·        Non-Hispanic Black individuals, young adults, and people with incomes between 138 and 400 % of the federal poverty line (FPL) would experience the largest coverage losses.

·        People currently eligible for PTCs with incomes between 150 and 400% of the federal poverty level would pay over $1,000 more per person for a silver plan. People with incomes above 400 % of the FPL who lose eligibility would pay roughly $2,000 more per year.

·        Extending the enhanced PTCs will increase the federal deficit by $305 billion over 10 years.

What if the American Rescue Plan Act Premium Tax Credits Expire? RWJF April 7, 2022

Health Status

Study: life expectancy in US vs. 19 countries: This study estimated changes in life expectancy during 2019-2021 in the US population, in three US racial/ethnic groups, and in 19 peer countries. Findings:

·        US life expectancy decreased from 78.86 years in 2019 to 76.99 years in 2020 and 76.60 years in 2021, a net loss of 2.26 years. In contrast, peer countries averaged a smaller decrease in life expectancy between 2019 and 2020 (0.40 years) and a 0.28-year increase between 2020 and 2021, widening the gap in life expectancy between the United States and peer countries to more than five years.

·        The decrease in US life expectancy was highly racialized: whereas the largest decreases in 2020 occurred among Hispanic and non-Hispanic Black populations, in 2021 only the non-Hispanic White population experienced a decrease in life expectancy.

Changes in life expectancy between 2019 and 2021: united states and 19 peer countries doi:

Study: lifestyle, education associated with mortality rates: This nationwide, population-based cohort study used the cross-sectional US National Health Interview Survey linked to the National Death Index. Results:

“Low educational attainment (compared with high) was associated with 83.6 (men) and 54.8 (women) additional deaths per 10 000 person-years, of which 66% (men) and 80% (women) were explained by lifestyle factors. Inequalities in mortality were primarily a result of greater exposure and clustering of unhealthy lifestyle factors among low SES groups; with some exceptions among women, little evidence of differential vulnerability was identified.

Educational Attainment and Lifestyle Risk Factors Associated With All-Cause Mortality in the US JAMA Health Forum April 8,. 2022;3(4):e220401. doi:10.1001/jamahealthforum.2022.0401