Today’s newsletter deals with high hospital prices, excessive Medicaid improper payments, and new studies showing the significant overall societal harm from the COVID lockdowns and the robustness of natural immunity to COVID.
High Hospital Prices
Hospital prices are a primary driver of high health care spending. Between January 2001 and June 2021, hospital prices increased more than 200 percent—more than three times above inflation.
Government policies that restrict competition, such as certificate of need laws, are a significant part of the problem. For information on CON laws—see Matthew Mitchell’s excellent chapter, Welcome Competition: Scale Back Certificate of Need Laws, in Paragon’s state health reform book Don’t Wait for Washington: How States Can Reform Health Care Today.
Nonprofit hospitals do not pay federal, state, or local taxes, which forces more tax burden on the rest of us. Over the past few decades, high hospital prices have produced irresponsible cost structures, exorbitant executive salaries, and wasteful capital projects. In an op-ed that appeared in The Wall Street Journal on February 5, Paragon Public Advisor Al Hubbard and I discussed the role nonprofit hospitals play in driving up health care costs.
Hubbard and I relied on our work for Hoosiers for Affordable Healthcare and focused the op-ed on Indiana, where hospital prices are among the highest in the country. The high prices have produced exceptionally high margins for nonprofit hospitals in Indiana.
Higher hospital prices translate into higher premiums, which mean less take home pay for workers. If hospital prices in Indiana were at the national average, family income in Indiana could rise by as much as $2,500 per year.
Insurance companies are realizing significant profits as well with little incentive to reduce spending. One problem: an Obamacare provision intended to cap insurance profits created an incentive for higher spending. “Since the law caps profits and overhead as a percentage of premiums, insurers can make more money if they spend more.” Other government policies that increase reliance on third-party payers and make it easier for hospitals to buy out physician practices are harmful as well.
Indiana state lawmakers have given hospitals three months to present plans to align Indiana hospital prices with the national average within three years. Hubbard and I conclude that:
Indiana’s hospitals have a choice. They can reduce their margins, trim excessive reserves, and lower prices. Or they can fight to protect a status quo that produces unjustified profits. If they choose the latter, it’s only a matter of time before government steps in and controls prices.
Joe Biden was the only Democratic presidential candidate not to support a single-payer health system. Single payer would damage health care quality and destroy the hospital industry over the long term. If hospitals are prudent, they will take sensible steps now to prevent that from happening.
You can read our full commentary here.
Growing Medicaid Improper Payments
On February 3, The Wall Street Journal published my letter to the editor on Medicaid improper payments. My letter added additional information to the paper’s January 24 editorial—Build Back Better? Fix Medicaid First—on the growing misspending in the nation’s third largest program.
Annual improper federal payments, driven by inappropriate or nonexistent eligibility determinations and keeping ineligible people on the program, are estimated at $100 billion. A study I did with University of Kentucky economist Aaron Yelowitz found that 1 in 7 Californians with income above eligibility levels reported enrollment in Medicaid in 2017.
ObamaCare’s Medicaid expansion deserves much of the blame, since Washington pays nearly the entire cost of spending on expansion enrollees. A recent federal audit examined 2,301 files of people enrolled under ObamaCare’s expansion, and eligibility review errors occurred in 29% of them. About half were caseworker mistakes, about a quarter were “system failures,” and the rest couldn’t be determined.
Another resource on this problem is a recent Foundation for Government Accountability report, based on state-specific data released for the first time by the Centers for Medicare and Medicaid Services.
The report notes, “While the national improper payment rate for Medicaid is nearly 22 percent, in some states the situation is far more dire,” and “improper payment rates have reached as high as nearly 50 cents for every Medicaid dollar spent in some states.
“Equally concerning is that an overwhelming number of improper payments are due to eligibility errors, signaling that these are not simply administrative blunders—but rather serious situations of countless enrollees receiving resources for which they are not eligible.”
Ineffective COVID Lockdowns
A new, comprehensive Johns Hopkins University economics study shows that the overall effect of lockdowns has been catastrophic. Despite the massive disruptions and loss of work, schooling, and economic activity, the study found that lockdowns reduced COVID mortality by only 0.2 percent in the U.S. and Europe.
According to the report, “While this meta-analysis concludes that lockdowns have had little to no public health effects, they have imposed enormous economic and social costs where they have been adopted.” The report concluded:
[L]ockdowns during the initial phase of the COVID-19 pandemic have had devastating effects. They have contributed to reducing economic activity, raising unemployment, reducing schooling, causing political unrest, contributing to domestic violence, and undermining liberal democracy. These costs to society must be compared to the benefits of lockdowns, which our meta-analysis has shown are marginal at best. Such a standard benefit-cost calculation leads to a strong conclusion: lockdowns should be rejected out of hand as a pandemic policy instrument.
Calling his colleagues’ study “one of the biggest stories in the world today,” Paragon Public Advisor and Johns Hopkins professor Dr. Marty Makarycriticized the media for ignoring it. According to Dr. Makary, public health officials ignored evidence from the early days of the pandemic indicating that not everyone was at equal risk.
“And yet we continued to treat this as if everybody was at equal risk, and we continue to do that today,” said Dr. Makary. “In schools, where children bear the biggest burden of the restrictions in this country. So, I think the public is hungry for honesty and basic humility from public health officials.”
Paragon Director Dr. Joel Zinberg, who had called lockdowns “an expensive, unnecessary failure,” noted that Hopkins’ study coauthor, Danish economist Jonas Herby, “found that voluntary behavioral changes were ten times as important as mandatory measures in limiting the growth of the pandemic.”
Zinberg said that despite no public health benefits, lockdowns “imposed enormous economic and social costs. Job losses in March and April 2020 exceeded 22 million and have not yet been fully recovered. Children lost years of educational and social development that will affect them for the rest of their lives. Psychological problems have soared throughout society.
“It’s hard to disagree with the Hopkins’ researchers’ conclusion that lockdowns ‘should be rejected as a pandemic policy instrument,’” Zinberg said.
Robust Natural Immunity from COVID
Dr. Makary and several of his colleagues at Johns Hopkins recently released the findings of a study on the prevalence and durability of natural immunity from COVID.
“We found that among 295 unvaccinated people who previously had COVID, antibodies were present in 99% of them up to nearly two years after infection,” wrote Dr. Makary in the Wall Street Journal on January 26. “We also found that natural immunity developed from prior variants reduced the risk of infection with the Omicron variant.”
This study and others, said Dr. Makary, confirms “the immune system works. The largest of these studies, which came from Israel, found that natural immunity is 27 times as effective as vaccinated immunity in preventing symptomatic illness….
“Politicians and public-health officials owe an apology to Americans who lost their jobs on the false premises that only unvaccinated people could spread the virus and only vaccination could prevent its spread,” said Dr. Makary. “Soldiers who have been dishonorably discharged should be restored their rank. Teachers, first responders, and others who have been denied their livelihood should be reinstated. Everyone is essential.”
Unfortunately, all the matters highlighted in this newsletter demonstrate failed government policies. Paragon will remain vigilant in its evaluation of current programs as we also focus on developing better policies that Americans can trust to result in improved outcomes.
Paragon Health Institute