I sometimes feel like a broken record about entitlement programs. How many times, after all, can I point out that America is on a path to become a decrepit European-style welfare state because of a combination of demographic changes and poorly designed entitlement programs?
But I can't help myself. I feel like I'm watching a surreal version of Titanic where the captain and crew know in advance that the ship will hit the iceberg,
yet they're still allowing passengers to board and still planning the same route. And in this dystopian version of the movie, the tickets actually warn the passengers that tragedy will strike, but most of them don't bother to read the fine print because they are distracted by the promise of fancy buffets and free drinks.
We now have the book version of this grim movie. It's called The 2017 Long-Term Budget Outlook and it was just released today by the Congressional Budget Office.
If you're a fiscal policy wonk, it's an exciting publication. If you're a normal human being, it's a turgid collection of depressing data.
But maybe, just maybe, the data is so depressing that both the electorate and politicians will wake up and realize something needs to change.
I've selected six charts and images from the new CBO report, all of which highlight America's grim fiscal future.
The first chart simply shows where we are right now and where we will be in 30 years if policy is left on autopilot. The most important takeaway is that the burden of government spending is going to increase significantly.
In a recent working paper, economists Thomas Buchmueller and Colleen Cary find that one particular kind of restriction does reduce opioid misuse among Medicare beneficiaries:
The misuse of prescription opioids has become a serious epidemic in the US. In response, states have implemented Prescription Drug Monitoring Programs (PDMPs), which record a patient's opioid prescribing history. While few providers participated in early systems, states have recently begun to require providers to access the PDMP under certain circumstances. We find that "must access" PDMPs significantly reduce measures of misuse in Medicare Part D.
Yet, they also find
no statistically significant effect [of must access PDMP's] on a key medical outcome: opioid poisoning incidents.
How is this possible?Read the rest of this post »
The historic health reform law passed by Congress and signed by President Obama in March, 2010 was widely expected to catalyze a shift in healthcare payment from “volume to value” through multiple policy changes. The Affordable Care Act’s new health exchanges were going to double or triple the individual health insurance market, channeling tens of millions of new lives into new “narrow network” insurance products expected to evolve rapidly into full risk contracts.
In addition, the Medicare Accountable Care Organization (ACO) program created by ACA would succeed in reducing costs and quickly scale up to cover the entire non‐Medicare Advantage population of beneficiaries (currently about 70% of current enrollees) and transition provider payment from one‐sided to global/population based risk. Finally, seeking to avoid the looming “Cadillac tax” created by ACA, larger employers would convert their group health plans to defined contribution models to cap their health cost liability, and channel tens of millions of their employees into private exchanges which would, in turn, push them into at‐risk narrow networks organized around specific provider systems.
Three Surprising Developments
Well, guess what? It is entirely possible that none of these things may actually come to pass or at least not to the degree and pace predicted. At the end of 2015, a grand total of 8.8 million people had actually paid the premiums for public exchange products, far short of the expected 21 million lives for 2016. As few as half this number may have been previously uninsured. It remains to be seen how many of the 12.7 million who enrolled in 2016’s enrollment cycle will actually pay their premiums, but the likely answer is around ten million. Public exchange enrollment has been a disappointment thus far, largely because the plans have been unattractive to those not eligible for federal subsidy.
Moreover, even though insurers obtained deep discounts from frightened providers for the new narrow network exchange products (70% of exchange products were narrow networks), the discounts weren’t deep enough to cover the higher costs of the expensive new enrollees who signed up. Both newly launched CO-OP plans created by ACA and experienced large carriers like United and Anthem were swamped in poor insurance risks, and lost hundreds of millions on their exchange lives. As for the shifting of risk, it looks like 90% plus of these new contracts were one‐sided risk only, shadowing and paying providers on the basis of fee‐for‐service, with bonuses for those who cut costs below spending targets. Only 10% actually penalized providers for overspending their targets.
The Medicare Accountable Care Organization/Medicare Shared Savings Program, advertised as a bold departure from conventional Medicare payment policy, has been the biggest disappointment among the raft of CMS Innovation Center initiatives. ACO/MSSP enrollment appears to have topped out at 8.3 million of Medicare’s 55 million beneficiaries. The first wave, the Pioneer ACOs, lost three‐fourths of their 32 original participating organizations, including successful managed care players like HealthCare Partners, Sharp Healthcare, and Presbyterian Healthcare of New Mexico and others. The second, much larger wave of regular MSSP ACO participants lost one third of their renewal cohort. Only about one‐quarter of ACO/MSSP participants generated bonuses, and those bonuses were highly concentrated in a relative handful of successful participants.
Of the 477 Medicare ACO’s, a grand total of 52, or 11%, have downside risk, crudely analogous to capitation. As of last fall, CMS acknowledged that factoring in the 40% of ACO/MSSP members who exceeded their spending targets and the costs of the bonuses paid to the ACOs who met them, the ACO/MSSP programs have yet to generate black ink for the federal budget. And this does not count the billions care systems have spent in setting up and running their ACOs. It is extremely unlikely that the Medicare ACO program will be made mandatory, or voluntarily grow to replace DRGs and the Medicare Part B fee schedule.
And the Cadillac Tax, that 40% tax imposed by ACA on high cost employee benefit plans, a potentially transformative event in the large group health insurance market, which was scheduled to be levied in 2018, was “postponed” for two years (to 2020) by an overwhelming Congressional vote. In the Senate, a 90 – 10 bipartisan majority actually voted to kill the tax outright, strongly suggesting that strong opposition from unions and large employers will prevent the tax from ever being levied. Presumptive Democratic nominee Hillary Clinton has announced her support for killing the tax. So the expected transformative event in the large group market has proven too heavy a lift for the political system.
As a result, the enrollment of large group workers in private health exchanges, the intended off‐ramp for employers with Cadillac tax problems, has arrested at about 8 million, one‐fifth of a recent forecast of 40 million lives by 2018. Thus, the conversion of the enormous large group market members to narrow network products seems unlikely to happen. As a recent New York Times investigation revealed, the reports of the demise of traditional group health insurance coverage (based on broad network PPO models) have been greatly exaggerated.
Listening to Hillary Clinton put her big-government ideology before the needs of veterans (see below video) brings to mind an email exchange I had recently with a correspondent who had questions about privatizing Medicare, Medicaid, and the Veterans Health Administration.
The video is an interview with Libertarian presidential and vice presidential candidates Gary Johnson and Bill Weld into which MSNBC interjected a telephone interview with Democratic candidate Hillary Clinton. Clinton protests (starting at 4:20) that Congress should not privatize the VHA, while Bill Weld, a former two-term Republican governor of Massachusetts, gives one of the best explanations I've seen of why it should (10:00).
The email exchange follows the video.
- PHILADELPHIA, PA — JUNE 15: Dr. Ezekiel Emanuel speaks onstage at the Klick Health Ideas Exchange on June 15, 2015 in Philadelphia, Pennsylvania. (Photo by Neilson Barnard/Getty Images for Klick Health)
Ezekiel Emanuel notices that inflated demand for antibiotics has led to overuse, and that antibiotic‐resistant infections may be killing 23,000 Americans per year. He notices the pharmaceutical industry is focusing more on expensive non‐cures for cancer that only extend life by months than on new antibiotics. But he hasn’t noticed that government intervention is causing these problems, so he thinks the solution is — you guessed it — even more government.
Government Inflates Demand for Antibiotics
In the Washington Post, Emanuel warns that “high patient demand leads to overprescribing” of antibiotics, which “breeds resistance” and can lead to superbugs against which we humans have no defenses.
Yet the main reason patient demand is so high is that the federal government — through Medicare, Medicaid, the tax code, Emanuel’s beloved ObamaCare, and other measures — have anesthetized patients to the cost of antibiotics and everything else. We would have less antibiotic overuse and resistance if government just let people keep their own money to spend on health care.
Government Distorts Pharmaceutical Research
Emanuel then complains pharmaceutical manufacturers are spending far more money to research and develop cancer treatments that only add a few months to cancer patients’ lives (and cost more than $100,000 a pop) that they spend developing lower‐cost antibiotics.
If this state of affairs fails to reflect patients’ preferences, perhaps the reason is that Medicare offers to make drug companies and oncologists fantastically wealthy by paying for cancer treatments regardless of value.
Rather than admit that government can be incompetent to the point of contributing to the problems it is trying to solve — as his fellow Obama‐administration alumnus Larry Summers does—Emanuel doubles down on the Big Government ideology. He proposes requiring hospitals to track antibiotic (over)use as a condition of receiving Medicare subsidies.
Does it occur to Emanuel that a Medicare program stupid enough to subsidize five decades of antibiotic overuse might not be competent enough to track, much less solve that problem?
Next, Emanuel illustrates why the passive voice should be unconstitutional: “every antibiotic prescription should be electronically reviewed to be certain it meets national guidelines.” Like many devotees of the passive voice, Emanuel employs it to hide what he means, which is: “The federal government and its agents should review every antibiotic prescription you and your family receive, even when the government isn’t paying for it.”
What could possibly go wrong? I mean, can you imagine any reasons why people might want a little privacy when it comes to their use of antibiotics? Emanuel can’t — or he doesn’t care.
Finally, he proposes to have the federal government award $2 billion prizes to anyone who secures FDA approval for a new antibiotic. A system of prizes might actually do a better job than the federal government’s patent system of encouraging antibiotics R&D. But Emanuel does not address such thorny questions as who gets to define which new antibiotics will qualify; who sets the amount of the prize; what sort of complications financing the prizes would create; how this award would affect the FDA, and lobbying of the FDA; or whether the net effect of this system would be positive or negative.
Ezekiel Emanuel has no time for such trifles. He’s got himself a hammer, and by God he’s found a nail.
Government is like antibiotics. Some amount is necessary. But overprescribing it makes things a lot worse.
A good indication you’ve overdosed on the statist Kool‐Aid is when you make dismissive comments like this one Emanuel levels at current antibiotic‐tracking programs: “Unfortunately, they are voluntary.”
Last year, the Cato Institute held a forum on John Goodman’s latest book on health reform, A Better Choice: Healthcare Solutions for America (Independent Institute, 2015). Goodman founded and was the longtime president and CEO of the National Center for Policy Analysis. The Wall Street Journal calls him “the father of health savings accounts,” and he is currently president of the Goodman Institute for Public Policy Research and a senior fellow at the Independent Institute. Video of the book forum is available here.
I posted a lightly edited transcript of my interview of Goodman, which did a good job of highlighting the differences among ObamaCare opponents, in three parts:
- “Goodman, Part I: Repeal‐Obsessed Republicans Don’t Understand Obamacare Is Kind Of A Gift”
- “Goodman, Part II: Obamacare Exchanges, Medicaid Expansion Degrade Health Care Quality”
- “Goodman, Part III: Health‐Insurance Tax Credits Are ‘A Financial Mandate’ ”
For more on the three schools of ObamaCare opponents, see Cato’s previous book forum on Philip Klein’s Overcoming Obamacare: Three Approaches to Reversing the Government Takeover of Health Care (Washington Examiner, 2015).