I recently attended a roundtable discussion that included Human Resource (HR) executives, chief financial officers (CFOs), benefits brokers, consultants and providers who discussed ways self-insured employer plans can lower their health care costs. The meeting was hosted by a state-of-the-art hospital that is part of a small chain of medical facilities, including emergency rooms, imagine, clinics, orthopedic hospitals.
The Consumer Price Index rose 0.2 percent in November. Remarkably, medical prices were flat overall. This is the third month in a row we have enjoyed medical price relief. Prices of prescription drugs dropped by 0.6 percent. Even the prices of health insurance and hospitalization dropped a smidgeon!
Prices for physician services rose the most, by 0.6 percent, followed closely by other medical professionals (0.5 percent).
Over the last 12 months, however, medical prices have increased 2.7 times faster than non-medical prices: 1.5 percent versus 4.0 percent. Price changes for medical care contributed 20 percent (one fifth) of the overall increase in CPI.
Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is has been low until recently, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers have not seen relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.
(See Figure I and Table I below the fold.)
November’s Producer Price Index rose 0.4 percent. However, prices for most health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.*
The major exceptions were prices for pharmaceutical preparations, which increased 0.4 percentage points more than prices for final demand goods less food and energy; and nursing homes, for which prices increased 0.3 percentage points more than prices for final demand services less trade, transportation, and warehousing.
Prices of health goods for intermediate demand, were lower than their benchmark. Perhaps slow price increases for medicinal and botanical chemicals, and biological products will flow through to prices of pharmaceutical preparations but that has not previously been the case.
Over the last twelve months, prices of nine of the 16 health goods and services have increased slower than their benchmarks. Three stand out as having increased significantly more than their benchmarks: Pharmaceutical preparations (7.0 percentage points), biological products (1.8 percentage points), and dental care (1.7 percentage points).**
This morning’s Quarterly Services Survey (QSS), published by the Census Bureau, showed a decline in revenues for most health services. Overall, revenue shrank 1.5 percent in the third quarter. However, growth versus Q3 2015 was a strong 5.4 percent and YTD growth is up 5.7 percent.Only outpatient care centers, home health services, other ambulatory services, and specialty hospitals reported growth. Revenue at psychiatric hospitals has grown 16.3 percent, Q3 2016 versus Q3 2015, a remarkable growth which I cannot explain. General hospitals’ revenues have finally begun to shrunk, suggesting they have maximized their Obamacare business opportunities.
The U.S. Food and Drug Administration (FDA) just announced it is taking steps to make hearing aids available over the counter. The FDA plans to immediately stop enforcing a requirement that patients must have a medical evaluation prior to obtaining a hearing aid. The Agency also hopes its move will stimulate a new category of OTC hearing aid products that cost less. In this regard, hearing aids will function in a manner similar to reading glasses. The move was likely due to prodding by Senators Elizabeth Warren (D-MA) and Chuck Grassley (R-IA), who recently introduced legislation along these lines.
Near my old office just off U.S. Highway 75 in Dallas sits a hospital that was originally built by physicians. It is close to a hospital medical district, known as Medical City. Forest Park Medical Center was part of a small chain of investor-owned, for-profit hospitals. They are now bankrupt and have been sold off to bigger hospital systems.
The House has passed and the Senate is expected to pass the pork barrel-bloated, 21st Century Cures Act. Aside from $6 billion worth of pork, the Cures Act would reform the drug approval process at the U.S. Food and Drug Administration (FDA). A rational path to drug discovery is badly needed. Once a drug finally makes it through the regulatory process to approval, it is guaranteed years of monopoly pricing due to the plethora of regulatory barriers that inhibit competition.
For those (like me) concerned about how much health spending continues to increase after Obamacare, the second report of third quarter Gross Domestic Product confirmed good news. Although GDP growth was revised up $10 billion, only a scratch was due to health spending. It is good to have a breather from the second quarter, which was dominated by growth in health services spending.
Overall, real GPD increased 3.1 percent on the quarter, while health services spending increased only 2.3 percent, and contributed only 9 percent of real GDP growth. Growth in health services spending was also in line with other services spending and personal consumption expenditures (PCE). However, the annualized change in the health services price index increased by 1.7 percent, lower than the price increase of 1.3 percent in non-health GDP but less than the 2.8 percent price increase for non-health services.
The drug fentanyl — which is up to 50 times stronger than heroin — is available in generic form. It is also a highly addictive street drug, manufactured in back-alley labs and laced in heroin to boost its potency. Fentanyl is used to treat extreme chronic pain that is unresponsive to other opioid pain relievers, such as breakthrough pain cancer patients often suffer. A fentanyl transdermal patch costs from $5 to $12 depending on the dose per hour. A 12 micrograms (mcg) per hour patch retails for about $5 and offers 72 hours of pain relief, whereas the 100 microgram per hour patch is about $12 with GoodRx coupon. Sounds like a bargain; pain-free bliss for $2 to $4 a day. That works out to about $50 to $125 per month.
The Consumer Price Index rose 0.4 percent in October. Remarkably, medical prices were flat overall. This is the second month in a row we have enjoyed medical price relief. Even prescription drugs rose by only 0.2 percent, half the rate of headline CPI, while prices of non-prescription drugs dropped significantly. Even the price of health insurance dropped a smidgeon!
Prices for inpatient hospital services rose the most, by 0.6 percent. As noted in my discussion of the Producer Price Index, this bears closer watching as President-elect Trump promises more spending on infrastructure, including hospitals.
Over the last 12 months, however, medical prices have increased three times faster than non-medical prices: 1.4 percent versus 4.3 percent. Price changes for medical care contributed 22 percent of the overall increase in CPI.
Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is has been low until recently, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers have not seen relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.
(See Figure I and Table I below the fold.)
