Thursday Tidbits

Following up on the President’s executive order issued following the failure of ACA repeal efforts in Congress last year, the Labor Department today released a proposed rule under ERISA that would permit small employers and sole proprietors to band together in small business health plans that could buy coverage in the large group market.  The rule is open for public comment for sixty days beginning tomorrow. Count the FEHBlog as a small business owner in favor of this change.

The FEHBlog noted yesterday that prescription drug manufacturer continue to issue periodic price increases for their products. The Wall Street Journal puts this benefit cost issue in perspective with an article reporting that

After years of surging U.S. drug prices, the two largest drugstore companies said some pricey prescription medicines are becoming more affordable. 

CVS Health Corp. and Walgreens Boots Alliance Inc.  said Thursday that their pharmacy revenues are taking a hit from an increase in generic alternatives, particularly for some expensive specialty drugs, along with slowing price inflation for name-brand medications. 

“You’re going to see continued dampening going forward as you think about the pipeline of generics coming into the markets,” said CVS finance chief Dave Denton, who didn’t discuss specific products. 

Lower prices will dent the company’s revenue, but ultimately could lead to increased profits because generics generally have a higher margin than name-brand drugs. “The introduction of generics can really dampen the top line but affect the bottom line in a positive way,” Mr. Denton said.

The Department of Health and Human Services recently issued a report on 2016 medical loss ratio results.  The ACA requires that health insurers spend at least 80% of premium dollars (85% in the large group market) on health care and quality costs. Insurers that fall below these thresholds must refund the difference to employers in the large and small group markets and consumers in the individual market. The medical loss ratio is calculated on a market basis per state. Insurers met the thresholds with respect about 95% of consumers in the employer markets and 90% in the individual market.  It’s an interesting report. The FEHBlog does think that the medical loss ratio has lead to CVS buying Aetna and not the other way around. Nevertheless, the FEHBlog is encouraged by this American Spectator piece on how the private sector can fix healthcare.

Finally Modern Healthcare reports that

Profits at the more than 4,800 U.S. community hospitals rose 3.8% in 2016, climbing to $76.1 billion, from $73.3 billion a year earlier. The trend follows years of steadily increasing profits.  

Total net revenue reached $979 billion in 2016—including nursing home results—and expenses were $903 billion, according to the 2018 edition of the American Hospital Association’s Hospital Statistics report aggregating hospital financial and utilization trends, which was released Thursday. The annual report includes data on all 4,840 registered community hospitals in the U.S.—159 fewer than in 2012.

The AHA data show community hospital profits have risen 15% since 2012, when they were $53.2 billion. 

The ACA imposes no profit limits on community hospitals. The FEHBlog is a fan of profit but not of price controls. 

Leave a Reply

Your email address will not be published.