Amazon, JPMorgan, Berkshire Hathaway team up to lower healthcare costs for their workers — and maybe everyone

From today’s LA Times:

Three of the nation’s most formidable companies — Amazon.com, Berkshire Hathaway Inc. and JPMorgan Chase & Co. — sent shock waves through the healthcare industry Tuesday by announcing a joint plan to reduce healthcare costs for their U.S. employees.

Although the companies said their focus mainly would be on providing improved healthcare for their own U.S. workers, which total nearly 1 million, the move immediately triggered speculation that any solutions they develop could spread throughout the industry.

That sent healthcare, drug and health-insurance stocks tumbling even though the three companies provided few initial details about their venture, with investors guessing that the trio’s initiative eventually could crimp sales growth and profits for others in the healthcare field.

Consumers might see a benefit if the companies could develop a blueprint for curbing the surge in healthcare and drug costs while maintaining or enhancing patient care, a scenario that government and the industry so far have struggled to achieve.

The speculation of a disruption to the industry was fueled by the stature of the three companies’ billionaire chief executives: Amazon’s Jeff Bezos, who already has radically changed the retail industry; Warren Buffett, the famed investor who also oversees dozens of companies under Berkshire’s umbrella; and Jamie Dimon, whose JPMorgan Chase is the nation’s largest bank with $2.5 trillion in assets.

Bezos and Buffett also are two of the nation’s richest people, with net worths of $119 billion and $92 billion, respectively, while Dimon’s net worth is just over $1 billion, according to Forbes.

The three said they would start “an independent company that is free from profit-making incentives and constraints” and that its early focus “will be on technology solutions” that would provide “simplified, high-quality and transparent healthcare at a reasonable cost.”

Read the complete article here.

Individual Mandate Now Gone, G.O.P. Targets the One for Employers

From the New York Times:

Having wiped out the requirement for people to have health insurance, Republicans in Congress are taking aim at a new target: the mandate in the Affordable Care Act that employers offer coverage to employees.

And many employers are cheering the effort.

While large companies have long offered health benefits, many have chafed at the detailed requirements under the health law, including its reporting rules, which they see as onerous and expensive. Now that relief has been extended to individuals, some companies believe they should be next in line.

The individual mandate and the employer mandate are “inextricably entwined,” said James A. Klein, the president of the American Benefits Council, an influential lobby for large companies like Dow Chemical, Microsoft and BP, the oil and gas producer.

“It is inequitable to leave the employer mandate in place when its purpose — to support the individual mandate — no longer exists,” Mr. Klein said. “We are urging Congress to repeal the employer mandate.”

Opposition to the employer mandate could increase as more employers are fined for not offering coverage or for not meeting federal standards for adequate, affordable coverage. Since October, the Internal Revenue Service has notified thousands of businesses that they owe money because they failed to offer coverage in 2015, when the mandate took effect.

Representatives Devin Nunes of California and Mike Kelly of Pennsylvania, both Republicans, recently introduced a bill, supported by party leaders, to suspend the mandate, canceling any penalties that would be imposed for any year from 2015 to 2018.

“The employer mandate is a job-killer, a wage-killer and a business-killer,” Mr. Kelly said.

But Tom Leibfried, a health care lobbyist at the A.F.L.-C.I.O., called the proposals to repeal or weaken the employer mandate “a very bad idea.”

“The Affordable Care Act was built on a framework of shared responsibility,” Mr. Leibfried said. “If you get rid of the employer mandate, you will see people lose coverage from their employers.”

Such a move could also increase costs for the federal government. Even though Congress has eliminated the penalties for people who go without insurance, millions of consumers are still eligible for financial aid in the form of tax credits to help them pay insurance premiums. These subsidies increase with the rapidly rising cost of insurance. If fewer people receive coverage from employers, more will qualify for subsidized coverage in the public marketplaces created by the Affordable Care Act.

“The employer mandate holds down the cost of premium tax credits for the federal government,” said Catherine E. Livingston, a tax lawyer at the law firm Jones Day who was the health care counsel at the I.R.S. from 2010 to 2013. “Any employee who receives an offer of affordable coverage from an employer is not eligible for the tax credit. And the employer mandate provides a strong incentive for employers to offer affordable coverage.”

Read the complete article here.

Why the U.S. Spends So Much More Than Other Nations on Health Care

From today’s New York Times:

The United States spends almost twice as much on health care, as a percentage of its economy, as other advanced industrialized countries — totaling $3.3 trillion, or 17.9 percent of gross domestic product in 2016.

But a few decades ago American health care spending was much closer to that of peer nations.

What happened?

A large part of the answer can be found in the title of a 2003 paper in Health Affairs by the Princeton University health economist Uwe Reinhardt: “It’s the prices, stupid.

The study, also written by Gerard Anderson, Peter Hussey and Varduhi Petrosyan, found that people in the United States typically use about the same amount of health care as people in other wealthy countries do, but pay a lot more for it.

Ashish Jha, a physician with the Harvard T.H. Chan School of Public Health and the director of the Harvard Global Health Institute, studies how health systems from various countries compare in terms of prices and health care use. “What was true in 2003 remains so today,” he said. “The U.S. just isn’t that different from other developed countries in how much health care we use. It is very different in how much we pay for it.”

A recent study in JAMA by scholars from the Institute for Health Metrics and Evaluation in Seattle and the U.C.L.A. David Geffen School of Medicine also points to prices as a likely culprit. Their study spanned 1996 to 2013 and analyzed U.S. personal health spending by the size of the population; its age; and the amount of disease present in it.

They also examined how much health care we use in terms of such things as doctor visits, days in the hospital and prescriptions. They looked at what happens during those visits and hospital stays (called care intensity), combined with the price of that care.

The researchers looked at the breakdown for 155 different health conditions separately. Since their data included only personal health care spending, it did not account for spending in the health sector not directly attributed to care of patients, like hospital construction and administrative costs connected to running Medicaid and Medicare.

Over all, the researchers found that American personal health spending grew by about $930 billion between 1996 and 2013, from $1.2 trillion to $2.1 trillion (amounts adjusted for inflation). This was a huge increase, far outpacing overall economic growth. The health sector grew at a 4 percent annual rate, while the overall economy grew at a 2.4 percent rate.

You’d expect some growth in health care spending over this span from the increase in population size and the aging of the population. But that explains less than half of the spending growth. After accounting for those kinds of demographic factors, which we can do very little about, health spending still grew by about $574 billion from 1996 to 2013.

Did the increasing sickness in the American population explain much of the rest of the growth in spending? Nope. Measured by how much we spend, we’ve actually gotten a bit healthier. Change in health status was associated with a decrease in health spending — 2.4 percent — not an increase. A great deal of this decrease can be attributed to factors related to cardiovascular diseases, which were associated with about a 20 percent reduction in spending.

Read the complete article here.

Does the Affordable Care Act create more part-time work? 2 perspectives

One of the objections to the Affordable Care Act is that it will encourages employers to cut employee hours to create more part time work in order to avoid the law’s requirement that it provide health insurance benefits for all full-time employees. This means that workers hours will be cut and as a result employees will find themselves without insurance and declining wages. Recently, two different economist have offered competing arguments for and against this objection.

Does the ACA’s requirement that employers provide insurance for all full-time employees create more part-time work?

The answer is yes according to Casey Mulligan, a professor of economics at University of Chicago. Read the full article here.

However, a recent analysis of the difference between predicted part-time work and actual part-time jobs created since the ACA went into effect shows that there is no evidence to support this objection. Jared Bernstein, a Senior Fellow at the Center for Budget Policy and Priorities, investigated the data and found no proof for this commonly made criticism of Obamacare. Read the full article here.

SCOTUS upholds ACA, including individual mandate for the uninsured

In a surprising ruling the Supreme Court today announced that the Americans With Care Act (ACA) is, in fact, constitutional according to the broad tax authority granted Congress by the Constitution.

Opponents of ACA were also dealt a stunning defeat in their argument that so-called “Obamacare” is unconstitutional because it permits the federal government to overreach its legitimate constitutional authority to regulate interstate business according to the Commerce Clause. The majority ruled that the ACA’s individual mandate is not an interstate commerce issue. Chief Justice John Roberts, writing for the majority in a stunning reversal of the swing vote normally reserved for Justice Anthony Kennedy, claimed the law allowed a choice to uninsured but penalized them with a tax if they chose not to get health insurance. That was the Obama administration’s back up argument, and the Supreme Court agreed.

The fact that Roberts sided with the majority and wrote the opinion underscores just how important this ruling is for non-partisan legitimacy of the new health care law. Although critics have scorned the law as “socialism” and derided it based on false assumptions and ignorance about the law’s many benefits, the ruling today represents a major victory for progress in developing a health care system that is both fair and just.

Some benefits of the Affordable Care Act:

  • Children will be able to stay on their parents health plans until age 26, an important benefit in an economy with high unemployment and shrinking benefits.
  • Insurers will no longer be able to discriminate against persons with prior medical conditions.
  • States must set up insurance exchanges so that market competition among firms will deliver low cost insurance to the uninsured.
  • Individuals who can afford insurance but lack it will be penalized by a “free-rider” tax, ensuring that their uninsured medical costs are not passed along to those persons with insurance in the form of higher premiums, more costly health care delivery, and higher taxes for public emergency rooms.