Category Archives: Economics

Trump presidency hurts economic growth

I disagree with the general sentiment that the Trump Administration is good for economic growth. While certain economic policies might be mildly positive, these are overwhelmed by negative economic and social policies, and by Trump’s disdain for democracy.

The Wall Street Journal’s survey of economists neatly sums up the conventional wisdom, concluding that the long-term growth rate of the economy could increase modestly –from 2% to 2.3%– if all of Trump’s agenda were implemented. The policies they focus on include infrastructure spending, rollback of regulations, and tax cuts. Even if we accept that these are the right things to consider, there are problems with the analysis:

  • Infrastructure spending, which if done right could provide the biggest boost, is unlikely to be enacted
  • Rollback of regulations may speed growth, but eliminating environmental regulations –as Trump has done– causes negative impacts on the environment that GDP doesn’t measure

But beyond this, we need to consider a variety of growth killers:

  • Dismantling Obamacare’s progress on universal coverage leads us back to “job lock” –where employees fear leaving their positions to start new businesses because they are worried about whether they or their dependents will be able to get insurance coverage due to pre-existing conditions. I started my business in 2001, well before Obamacare. When prospective entrepreneurs called me for advice, the number one concern about getting started wasn’t about business plans, financing, or hiring, but rather health insurance.
  • I put healthcare first (this is the Health Business Blog after all) but reducing immigration is what could really kill the economy. Consider:
    • Population growth drives economic growth; reducing net immigration directly slows growth
    • Many of the big job creating companies –think Apple, Google, eBay — were founded by immigrants. But we see this on a smaller scale, too. Of the four, fast growing healthcare companies whose boards I serve on, three were founded by immigrants (from Finland, Russia and Tanzania). Immigrants have higher rates of labor force participation and are more likely to start small businesses, too.
  • Erecting trade barriers hurts growth. Trade wars have no winners
  • There are a variety of non-economic policies and actions taken by Trump that are likely to harm long-term growth. I can’t think of any that help it. For example:
    • Undermining the rule of law and attacking democratic institutions such as the courts and Congress, while praising dictators. The US has long been a safe haven in economic and political crises due to its justified reputation for being a nation of laws, not men. Trump is throwing that away and is being abetted by the Republican leadership in Congress
    • Adopting harsher policies on incarceration for non-violent drug offenders, which reduces the workforce
    • Creating uncertainty on policy by flip flopping dramatically on. It’s hard to plan and invest in those cases

I’m convinced Trump harms growth. If I turn out to be wrong I’ll be the first to admit it.

Urgent care clinics just for cancer patients

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It’s tough being a cancer patient. The illness is serious and sometimes fatal, treatments can have serious side effects, and the fatigue and stress can be overwhelming. It gets worse when patients end up in the emergency room where they are exposed to people who may be contagious and encounter medical staff who may not know how to address the special needs of an oncology patient.

So I was heartened to read about urgent care centers specifically for cancer patients. Centers like the one at University of Texas Southwestern Medical Center in Dallas cater to the requirements of cancer patients. They provide same-day appointments, are open early and late, and coordinate with the rest of the patient’s oncology care givers. It’s a good example of patient-centered care.

Of course there are some strong economic incentives as well (hospitals aren’t doing this for their health, so to speak). Cancer patients are lucrative for hospitals –that’s one reason you hear so much advertising for cancer care. And hospitals are wise to treat their best customers well to encourage loyalty. In the value-based care era, we can also expect pressure for hospitals to improve outcomes, control costs and improve the patient experience of care. Urgent care cancer centers contribute to addressing all these goals.

It does raise the question of why only cancer patients get their own urgent care while the rest of the population has to put up with all the challenges and downsides of the regular healthcare system. Perhaps other parts of the healthcare system can learn from these urgent care centers and emulate them more broadly.

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By healthcare business consultant David E. Williams, president of Health Business Group.

Are Massachusetts healthcare costs ok after all?

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The best defense is a good offense. I assume that’s what Partners HealthCare CEO David Torchiana had in mind when he penned First do no harm in the Boston Globe. In a nutshell, he argues that healthcare costs in Massachusetts are more affordable for businesses and individuals than elsewhere in the country, that they are becoming relatively more affordable, and that the state should resist the urge to impose further cost controls.

I’ve made similar arguments about affordability myself. See for example, Massachusetts: Land of affordable health insurance from back in 2011.

And yet…

While Massachusetts has retained its affordability relative to other states, healthcare is taking up a higher and higher percentage of families’ incomes, including in Massachusetts. Medicaid and other healthcare spending dominates the state government’s spending growth, squeezes out discretionary initiatives for priorities such as education, and necessitates the tough budget cuts Governor Charlie Baker is making.

I’m sure I’m not the only one whose eyebrows were raised by Torchiana’s sanguine perspective.

Partners also should not claim too much credit for the reasonableness of healthcare spending in Massachusetts, considering that its own costs are among the highest. Despite receiving substantially higher reimbursement from commercial payers than other providers and enjoying a richer payer mix, Partners recently reported a record loss of $108 million for the year. Meanwhile, its smaller rivals –including those who treat a higher proportion of Medicaid patients and receive lower commercial reimbursement rates– are reporting better financial results.

If Partners had remained just Massachusetts General Hospital and the Brigham & Women’s Hospital I don’t think its executives and lobbyists would have to expend so much effort fending off the state. Massachusetts residents are justifiably proud of the worldwide reputations of these hospitals, which draw tremendous research dollars from the NIH and elsewhere, attract patients from around the world, and are equipped with the medical expertise and equipment to treat the most complex conditions.

No, the issue is that over the years Partners has dramatically expanded its footprint throughout the region, buying up or partnering with community hospitals and physician practices, and expanding its own overheads as it grapples with the balance between central and devolved management. Partners is now in the business of providing routine care throughout the region, and that helps drive up costs and puts the company in the spotlight. As the state grapples with bringing costs in line with benchmarks, Partners cannot expect to be given a free pass.

So there are a couple of alternatives: #1: Partners can bring its own costs closer in line with rivals or #2 it can divest its community assets and focus on being a great academic medical center. From what I can see, Partners is pursuing a light version of #1 while simultaneously slowing its plans to further expand in the community and mounting a charm and lobbying offensive with the state and the public.

By healthcare business consultant David E. Williams, president of Health Business Group.

BIDMC and Lahey talk merger; I’m quoted

Beth Israel Deaconess Medical Center and Lahey Health are talking again about a merger. From the Boston Globe:

Top executives from the two hospital systems are discussing a possible merger, according to people with direct knowledge of the negotiations, the fourth time they have explored a deal in the past five years.

I’m quoted:

David E. Williams, president of Health Business Group, a Boston consulting firm, said Beth Israel Deaconess has been looking for ways to grow its network since its biggest rivals, Mass. General and Brig-ham, merged in 1994 to create Partners.

“Beth Israel Deaconess never got involved in the original Partners transaction, and ever since then they’ve been looking for a way to get bigger and be stronger like Partners,” he said. “Lahey is a strong, medium-sized player that’s come up time and again.”

From what I understand, this may actually be the fifth set of talks, not the fourth. Both players are high quality and relatively low cost, so a combination could create a strong, efficient alternative to Partners.

But mergers are complex and risky, so there are reasons not to move too fast. In particular, the board and management of each institution has to decide if the specific deal is good for their own organization. In the past that case hasn’t been made convincingly. It’s not clear that it will be any different this time.


By healthcare business consultant David E. Williams, president of Health Business Group.

PCSK9 experience shows drug market isn’t completely broken

 

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Why isn’t this thing growing?

Everyone knows that the market mechanisms that make most of the US economy efficient are lacking in healthcare. That’s especially true for pharmaceuticals, where drug companies can raise prices at will, and only the government can step in with price controls to put things right. At least that’s what we’ve been hearing in the press and on the campaign trail for the last year or more.

So I read with interest a recent STAT article These pricey cholesterol drugs aren’t selling. And that has the biotech industry sweating, about how the market is blocking high-priced drugs –and preventing pharma companies from doing all the things we’ve been told they can do at will.

No one disputes that the new drugs, Repatha and Praluent, are excellent at lowering bad cholesterol, or LDL. They often succeed where the traditional treatment — an inexpensive class of drugs called statins — fails. The problem boils down to doctors who are reluctant to write prescriptions, insurers who are unwilling to pay for them, and drug companies that have failed to understand a fast-changing marketplace.

The failures could send a chill through the still-booming biotech business, which relies on the idea that the risky, expensive process of developing new drugs can one day pay off big.

Contrary to the views expressed in the STAT article, I think the market is actually doing an ok job here. There are two main reasons why the drugs haven’t sold well:

  • First and foremost, while they are proven to lower cholesterol they are not proven to reduce heart attacks or strokes or to lower death rates
  • Second, most patients do just fine with generic statins, which are inexpensive and have a long track record, compared with the new drugs that have list prices of about $14,000 per year

The result is that doctors who want to prescribe the drugs have to jump through a lot of hoops to get insurance company approval. That’s a hassle and it’s expensive and time consuming, so I sympathize. But by the way, before we get mad at the PBMs and insurers, consider that the experience for prescribers might not be that different under a fully capitated payment model since health system administrators would still be worried about their budgets.

The companies that make these drugs are conducting studies of the impact on outcomes that people really care about: heart attack, stroke, death. If they demonstrate that the drugs are effective on these measures, they will have no problem generating prescriptions or charging premium prices –at least in the United States.

Image courtesy of iosphere at FreeDigitalPhotos.net

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By healthcare business consultant David E. Williams, president of Health Business Group.

 

 

 

Justifying EpiPen pricing, once again

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Back with more

I enjoyed Medical hackers create $30 DIY EpiPen in defiance of corporate greed over at inhabitat. The Four Thieves Vinegar collective cobbled together an “EpiPencil” from an auto injector for insulin, a hypodermic needle, and epinepherine. It’s a pretty cool trick but it proves nothing about EpiPen pricing nor does it help real patients.

Actually, it unwittingly reinforces the points I made in my very unpopular EpiPen may still be too cheap post, which is that the pricing of EpiPen has almost nothing to do with the cost of its parts.

Consider these caveats about the DIY EpiPencil from the inhabitat post:

However, it is worth mentioning that many experts have voiced concern about the EpiPencil and warned that it’s not advisable to try to create a piece of medical equipment at home – it can be difficult to ensure the correct dose is being administered, the epinephrine inside is delicate and might lose its effectiveness if stored this way, and of course, if someone were to create the device without paying close attention to hygiene, it could become contaminated. A miscalibration of the device could even cause the medicine to be injected into a vein, which can have dangerous side effects.

To recap, here’s what you’re paying for when you buy a real EpiPen:

  • The ability to send your kids to school, playdates, summer camp, hikes, and restaurants with reasonable confidence that they’ll survive an allergic reaction
  • An auto-injector that works. Remember, Twinject was rejected by the market for being clumsy, Auvi-Q was recalled because it could administer the wrong dose, and Teva’s autoinjector was rejected by FDA for “major deficiencies”
  • A device that many, many people know how to use: school nurses, babysitters, passers-by. That means someone is likely to be there to help you if you need it. Good luck with getting someone to learn how to use your EpiPencil in an emergency, even if somehow it worked as advertised

EpiPen’s maker, Mylan has done a lot of sleazy things, which I don’t defend, and as a result they may well deserve the opprobrium that is being directed at them. But I stand by my argument that EpiPen is not $2 of epinephrine and a syringe. Instead its a differentiated solution that provides plenty of value to users.

If someone can come up with something better and cheaper, please do!

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By healthcare business consultant David E. Williams, president of Health Business Group.

Surprise, surprise! Exchange customers are price sensitive

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Uh oh. Another big national health plan, Aetna has decided to pull back from the individual health insurance marketplaces (aka exchanges) deciding they can’t make money because customers are focusing on price, not brand name. The headlines give a sense of it:

Cost, Not Choice, Is Top Concern of Health Insurance CustomersNew York Times

Customers’ Laser-Like Focus on Plan Prices Is Causing Concerns in Health Insurance MarketKaiser Health News

The articles quote insurance executive and experts claiming that “price competition has turned out to be much more cutthroat than anyone expected” and that “people signing up for [broad network, big employer style coverage offered by the big name national health plans] are less healthy –and more expensive to treat– than anticipated.”

Hah!

As I have written before (Good riddance: United finally gives up on ACA marketplaces):

Health plans thinking of competing in the marketplaces should say this to themselves a few times before diving in: “Exchange business is price sensitive business. If we can’t compete on price we might as well stay home.”

The exchanges do have problems. For example, insurers are limited to charging older people 3x what they charge younger ones, whereas actuarially it should be more like 5x. The problems are eminently fixable, except that opponents of the law still want it to fail. As for Aetna, specifically, it seems they are retaliating against the feds after the government announced its opposition to Aetna’s merger plans.

Nonetheless, why would we measure the success of the exchanges by whether the big, fat brand name health insurers can make money? Exchanges allow customers to compare plans on an apples-to-apples basis and they are deciding that there’s no big reason to pay higher prices. Some health plans are thriving on the exchanges by negotiating hard with providers (Medicaid oriented plans like Centene and Molina) or by having local market knowledge and density (Blue Cross Blue Shield of Florida  –which has almost as many Obamacare customers in Florida as Aetna has in the whole country).

Here’s the real problem for health plans: they have largely failed to demonstrate that they add significant value. Aetna, United and their ilk don’t accomplish a lot compared with Joe’s health plan. And even when they do add value, they still add large administrative costs and inefficiencies to the system that may outweigh their benefits.

The Affordable Care Act has actually given health plans a new lease on life, by herding in new groups of individual customers and by imposing whole new sets of standards and rules. Health plans fear a so-called “public option” because it could reveal that commercial plans don’t bring much. And as unlikely as it seems now, it’s quite possible that the failure of commercial plans to demonstrate value could lead us eventually to a single-payer system.

Ideally, I’d rather not see single payer. If some of the plans were a little more ingenious and capable they could actually prosper in the exchange business, in ways that would boost their success in the commercial market as well. In particular, there are opportunities to better manage the way specialty care is delivered and paid for, by emulating the approaches used by the most efficient and innovative specialists. This would drive down the overall cost of insurance and improve care for patients.

Plans could also be more creative and resourceful in helping providers take risk or even full capitation.

Meanwhile, Aetna will struggle to grow. After all, the US is moving toward marketplaces and government coverage. Aetna, not Obamacare or the exchanges, may turn out to be the big loser here.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.