issue: Health Care

FDA Regulation in the Data-Driven Economy

Posted on by The Progressive Policy Institute

The shift to data-driven growth is one of the most important forces behind the strong performance of the U.S. economy in recent years. Online sales are up by 16% over the past year, and Americans are getting more and more of their information online. Indeed, data-related products and services account for roughly 30% of real personal consumption growth since 2007, second only to the 40% coming from the growth of healthcare-related goods and services.

Yet regulators are struggling to keep up with the digital age. The accumulation of regulations designed for a slower, information-poor age fail to take advantage of new opportunities to improve outcomes while still protecting consumers. The issue of how to regulate in the data-driven economy has been widely discussed, including in several policy papers by the Progressive Policy Institute. For example, our proposal for a Regulatory Improvement Commission, designed to relieve the build-up of outdated and duplicative regulations over time, has been written into legislation and introduced in both the House and Senate.

The Food and Drug Administration (FDA), in particular, is facing a variety of regulatory issues which involve the intersection between the data-driven economy and the more traditional world of health-related regulations. For example, the FDA took a carefully balanced approach in its rule making on mobile medical applications, choosing to exercise enforcement discretion, instead of regulating apps that do not track medical information, such as counting calories.

Download “2014.10-Carew_FDA-Regulation-in-the-Data-Driven-Economy“

Why Curing Cancer Will Boost Productivity

Posted on by The Progressive Policy Institute

An article in Forbes trumpets a new approach to actually curing cancer using the immune system.  The article itself, entitled “Is This How We’ll Cure Cancer?” is worth reading, though a healthy dose of skepticism is important.

However, from my perspective, what’s important are the  quotes about cost towards the bottom of the story

“You’re going to see these companies that are going to get crushed by this new environment, despite the fact that health care spending is going to almost double,” Jimenez says. He has a team actively exploring new ways of pricing cancer drugs, in which several medicines are sold for the price of one, or health systems or insurers pay based on how many patients are cured.

The real question is not cost, but productivity. And I don’t mean the productivity of cancer patients, but the productivity of the whole economy.

Right now we have a healthcare system where millions of person-hours, many of them highly skilled,  are thrown into treating and providing palliative care for cancer patients. These skilled person-hours are not available for production or research in other parts of the economy.

A drug that cures a major form of cancer will almost certainly boost what we call “gross medical productivity,” defined as the size of the population divided by the number of healthcare workers.  And rising gross medical productivity will free up skilled labor for other forms of non-healthcare production, which will in turn boost non-health GDP.

So even if a cure for a particular type of cancer seems expensive measured in dollars,  it may seem imminently reasonable when measured in terms of its impact on the nation’s productivity and total output.

 

 

Why Sovaldi Boosts Medical Productivity

Posted on by The Progressive Policy Institute

Insurers and politicians have been complaining that Sovaldi—Gilead’s new cure for hepatitis C—costs too much at $84,000 per treatment.

But that complaint, while accurately reflecting short-term financial incentives,  perversely misses the real point. In the long-term, the real budget-buster for the U.S. healthcare system is the cost of managing and treating chronic conditions such as diabetes, Alzheimer’s, and hepatitis C (which is the most common chronic bloodborne infection in the United States, according to the CDC). If pharma companies can produce straightforward cures for these chronic and costly syndromes, the long-term financial picture of the healthcare system looks much better.

Moreover, Sovaldi is almost certainly productivity-enhancing, substituting a one-time drug treatment for labor-intensive long-term medical management of a chronic disease.  As the illustrative calculation below shows, the productivity gains could be significant.

That’s a big deal. The U.S. healthcare system is on a long-term unsustainable path, gobbling up a larger and larger share of the nation’s skilled workforce to care for an aging population.  Policymakers should encourage and reward drug companies that come up with innovative and effective cures for chronic diseases, rather than punishing them.

Illustrative calculation: In earlier work, we have described a concept called gross medical productivity—that is, a measure of how many labor hours of health care workers are needed to produce the same clinical outcomes for a given population.  Over the past decade, the gross medical productivity of the health care system has fallen sharply, as the number of health care workers rose by 23%, much faster than the 9% increase in the size of the U.S. population over the same stretch.

Let’s do an illustrative calculation showing how drugs such as Sovaldi can help reverse the trend and boost gross medical productivity.  Assume that Americans infected with hepatitis C require 5 extra hours a year of medical attention, on average. That includes all the patients receiving liver transplants and medication, averaged against infected people who are receiving no care at all. With roughly 3 million Americans infected, that means an extra 15 million hours of work for healthcare workers.

So suppose that sustained treatment could reduce the number of infected hepatitis C patients from 3 million down to 1 million. That means 10 million fewer person-hours per year  (2 million x 5 person-hours per year), which translates into a corresponding increase in productivity. 

 

MSNBC: What’s Bill Clinton up to on Obamacare?

Posted on by The Progressive Policy Institute

MSNBC’s Zachary Roth recently quoted Will Marshall, PPI President, on Clinton’s recent push to modify the Affordable Healthcare Act (ACA) in Congress.  Marshall was asked to interpret Clinton’s support for a legislative fix.

“Not sure how helpful that was,” Will Marshall, the president of the Progressive Policy Institute, who worked closely with Clinton in the ‘80s and ‘90s to move the Democratic Party toward the center, told MSNBC.

“Practically speaking, it’s hard to see how to get a legislative fix through Congress,” Marshall said. “One has to think about the means not just the good ends of policy in this context. And I don’t know what [Clinton’]s theory for that is.”

Read the entire piece on MSNBC here.

 

FDA Finds the Right Note in Mobile Medical Apps

Posted on by The Progressive Policy Institute

I’ve been critical of the FDA in the past. But now that the FDA has released its long-awaited guidance for “Mobile Medical Applications,”  I’m pleasantly surprised at the stance the agency has taken. Basically, the FDA has done exactly what it should do–gotten out of the way of innovation, while reserving the right to jump back in if circumstances warrant.

To put it a different way,  rather than being annoyingly ambiguous, the FDA has marked a big section of the beach and said “go play in the water, kiddies! Have fun, and we’ll be watching to make sure that no one drowns.” This is the right approach to maximizing both progress and safety. In fact, other regulators should follow the same path.

The issue when it came to mobile medical apps was in some sense simple. Clearly some mobile apps worked just like regulated devices, and therefore needed to come under the same scrutiny. No one disagreed with that. But then there was a whole set of other apps–including ones that provide simple coaching and prompting to diabetics and other people who needed to follow regular schedules–which could have been regulated as medical devices under a strict interpretation of the rules.

But in the guidance, the FDA was extremely clear that it would exercise “enforcement discretion” for these sorts of medical apps. The agency was even kind enough to give a long list of such apps, opening up a clear pathway for innovators. Some examples:

  • “Apps that provide simple tools for patients with specific conditions or chronic disease (e.g., obesity, anorexia, arthritis, diabetes, heart disease) to log, track, or trend their events or measurements (e.g., blood pressure measurements, drug intake times, diet, daily routine or emotional state) and share this information with their health care provider as part of a disease-management plan.”
  • “Apps specifically intended for medical uses that utilize the mobile device’s builtin camera or a connected camera for purposes of documenting or transmitting pictures (e.g., photos of a patient’s skin lesions or wounds) to supplement or augment what would otherwise be a verbal description in a consultation between healthcare providers or between healthcare providers and patients/caregivers.”
  • “Mobile apps that help asthmatics track inhaler usage, asthma episodes experienced, location of user at the time of an attack, or environmental triggers of asthma attacks;”

And so forth and so on. You get the idea.

Other regulatory agencies should adopt the same tack. In a world of rapid innovation, regulators cannot and should not engage in pre-emptive regulation. Instead, they should stand back and watch closely, stepping in as necessary. That’s the best way to insure the

 

 

 

 

 

A Test of Republican Loyalties

Posted on by The Progressive Policy Institute

How much do congressional Republicans hate Obamacare? How determined are they to see it fail?

We may soon find out. For the first time, a constituency group to whom the GOP normally pays close attention—religious institutions—is asking for a legislative “fix” of the Affordable Care Act to make it work as intended. If the recent past is any indication, conservatives will resist any such effort on grounds that Obamacare must be repealed root and branch, not repaired or reformed.

Months of outreach to Republican Senate offices by religious leaders have yielded no official GOP support to an appeal from a broad coalition of religious denominations to ensure that church-sponsored health plans can participate in the ACA’s health insurance exchanges. Worse yet, from a partisan Republican point of view, two Democratic senators, Mark Pryor and Chris Coons, were the first responders to this call, introducing legislation late last week. Pryor is widely viewed as the GOP’s number one senatorial target in 2014.

Without the requested “fix,” as many as one million clergy members and church employees now enrolled in church-sponsored health plans could soon face the choice of leaving these plans (designed to meet their unique needs, such as the frequent reassignment of clergy across state lines) or losing access to the tax subsidies provided by the ACA to help lower-to-middle income Americans purchase insurance. Continue reading “A Test of Republican Loyalties” →

“Cut and Invest” vs. Austerity

Posted on by The Progressive Policy Institute

President Obama’s new budget attempts to define a progressive alternative to conservative demands for a politics of austerity. Having just returned from a gathering of center-left parties in Copenhagen, I can report that European progressives are wrestling with the same challenge, and are reaching similar conclusions.

There was wide agreement that the wrong answer is to revert to “borrow and spend” policies that have mired transatlantic economies in debt, while failing to stimulate sustained economic growth. The right answer is a “cut and invest” approach that shifts spending from programs that support consumption now to investments that will make our workers and companies more productive and competitive down the road.

“You can only have a Nordic model if you’re competitive,” declared conference host Helle Thorning-Schmidt, prime minister of Denmark. “In this country, we cannot tax more; it’s that simple,” she added. “If you like the welfare state, if you want to sustain it, you have to take the tough decisions.” Continue reading ““Cut and Invest” vs. Austerity” →

State of the Union 2013: Right Direction, Wrong Speed

Posted on by The Progressive Policy Institute

President Obama got off on the right foot in last night’s State of the Union address by putting America’s economic revival at the center of his second-term agenda. That was reassuring, since his second inaugural strangely neglected this crucial subject.

There’s no more urgent national challenge than building new economic foundations for shared prosperity. More than anything else, what happens to the U.S. economy over the next four years will decisively shape history’s judgment of Barack Obama’s presidency.

Last night, the president certainly got the goal right. But it’s fair to ask whether the modest means he proposed are adequate to the task.

On the plus side, the president’s endorsement of corporate tax reform was welcome. Eliminating tax loopholes and subsidies will make for better investment decisions, and bringing down the corporate rate will make doing business in the United States more attractive. We also need to overhaul a worldwide tax system that encourages companies to offshore activities and leaves profits stranded abroad.

Continue reading “State of the Union 2013: Right Direction, Wrong Speed” →

Tracking Healthcare Cost Growth Through a New Measure of Productivity

Posted on by The Progressive Policy Institute

This brief provides a new explanation for why healthcare cost growth is showing restraint. Specifically, we find evidence that the healthcare sector is finally managing to use its workers more productively.

In this policy brief we define a new measure of healthcare productivity, Gross Medical Productivity (GMP). We define GMP as the number of potential patients per healthcare worker, where the pool of potential patients is the entire population. GMP measures healthcare productivity by looking at how effectively the sector uses its workers. So, if the potential patient population grows faster than the number of healthcare workers, GMP rises.

We argue GMP is a reasonable proxy for healthcare productivity, and could be a leading indicator for trends in healthcare cost growth going forward. Research shows labor accounts for over half of total healthcare costs1, suggesting a strong relationship between labor productivity and cost growth. Indeed, historically GMP has been falling at a rapid rate, corresponding to rapid growth in healthcare costs. That suggests a rise in GMP, or a rise in the number of potential patients per worker, will place downward pressure on healthcare cost growth. And because we can see changes in GMP well before official healthcare cost data is available, we believe GMP can provide early insight on the direction of cost growth.

From this approach we find evidence to suggest healthcare cost growth continued to show restraint in 2012, especially for the elderly population. We found that GMP rose considerably in 2012 for the 65 and over population, one of the largest drivers of healthcare cost growth, as healthcare workers became more productive in treating older patients. However, we also note that GMP for the entire potential patient population continues to fall.

Download the policy brief.

Democrats Must Step Up on Entitlement Reform for Fiscal Cliff Deal

Posted on by The Progressive Policy Institute

PPI President Will Marshall speaks to The Daily Beast regarding the compromises needed from the left to avoid the fiscal cliff:

‘It appears President Obama is serious about slowing the growth of public health and retirement costs, which is the key to bending down the curve of federal spending,’ says Will Marshall, president and founder of the Progressive Policy Institute. ‘The big question now is whether leading Democrats in Congress will stand up to the Norquists of the left and put real entitlement reform on the table.’

That is the big question. Labor unions rightly believe that they were essential to the president’s winning coalition and ground-game effort in the November election. They and many liberal partisans will insist that now is not the time to make any concessions, especially on core philosophic policies like Social Security and Medicaid. They will find comfort in the arguments of some party activists and pundits who say there is no problem, that the fiscal cliff is a myth, and that current levels of deficits and debt are perfectly sustainable, especially if we just soak the rich. They are, like their conservative corollaries, embracing a feel-good reality distortion field.

Math isn’t partisan. The Congressional Budget Office has projected that because of our aging population, cumulative spending on Social Security, Medicare, Medicaid, and interest on the debt could gobble all federal revenues by the end of the next decade. The status quo is unsustainable. We cannot simply tax or spend or borrow our way out of this problem. Striking the right decisive balance is critical to our long-term economic strength as a nation.

Read the entire article at The Daily Beast.

The Real Meaning of Obamacare

Posted on by The Progressive Policy Institute

Back in 1996, I wrote a book called The High-Risk Society. The book was based on the vision that Americans had to embrace risk and innovation in order to achieve faster growth and long-term prosperity.

An essential part of that vision, however, is the creation of a much stronger safety net.  If we are going to ask Americans to take risks for growth, to accept disruption in return for innovation, they have to be protected from the worst consequences of failure.

In particular, it becomes much harder to take a chance on growth if it means you might lose your healthcare. That’s why Obamacare, despite being ungainly and awkward, is an essential step towards a high-growth economy. People who want to start a new company or join an innovative new enterprise shouldn’t have to worry about whether they will be able to get healthcare. People who want to work halftime and go back to school shouldn’t have to worry about whether a sudden medical problem will throw them in the poorhouse.

Obamacare is a step towards unleashing the creative juices of Americans.  There are lots of problems, of course. We need to ensure that the new Obamacare bureaucracies don’t strangle innovative company. But now that the basic mechanisms are in place, we can move onto the more important task of empowering innovative and hardworking Americans.

This piece was cross-posted from Innovation and Growth.

Why Romney’s Medicare Taxes Are So Low

Posted on by The Progressive Policy Institute

As the presidential candidates debate the fate of Medicare, it’s worth noting a very simple fact: Mitt Romney paid only 0.07% of his income in Medicare taxes in 2010. By comparison, the typical American worker paid 1.45% of his or her income in Medicare taxes plus an equal amount paid by the employer. In other words, Romney’s Medicare tax rate was about one-fortieth of the norm.

How did he manage this trick? The key is that investment income, which made up 97% of Romney’s total income in 2010, is not subject to payroll taxes that pay for Medicare or Social Security. That means he only paid Medicare taxes on his speaking and directing fees. If Romney had paid the full Medicare tax rate on all of his income, he would have paid about $628,000. Instead he paid $15,908.

Oddly enough, despite his relatively meager contribution, Mitt is also likely eligible for free Medicare coverage. Current Medicare rules stipulate that as long as he paid into the system for 10 years, he can still receive full coverage.

Because Romney is self-employed, he is paying both the employer and employee shares of the Medicare tax. We therefore compared his tax rate to the combined employer-employee rate for wage and salary workers (2.9% for Medicare taxes). And because he is self-employed Romney got to deduct a portion of his Medicare taxes to calculate his adjusted total income for tax purposes.

A new 3.8% Medicare tax on investment income for high income Americans, scheduled to go into effect in 2013 as part of healthcare reform, would dramatically boost the Medicare taxes paid by people with Romney-like returns. However, there are efforts underway in Congress to get it repealed.

GOP Guts Teen Pregnancy Prevention

Posted on by The Progressive Policy Institute

If U.S. conservatives have made any useful contribution to anti-poverty policy, it’s driving home this crucial point: family structure matters. The whole vicious cycle of intergenerational poverty usually begins with teen pregnancy and unwed births.

Yet House Republicans this week proposed to gut federal programs that aim at reducing teen pregnancies. How do conservatives square their antipathy to such programs with their understanding of the risks and disadvantages of growing up in poor families headed by unmarried mothers?

You might think the answer is obvious: Mistrustful of government in general, Republicans don’t believe it knows how to do anything as complicated as promoting responsible sexual behavior.  Ok, but the same Republicans who called for cutting spending on prevention programs also voted to boost spending on federal abstinence programs.

So let me get this straight: Republicans believe that Washington is hopelessly incompetent when it comes to encouraging young girls to take every precaution against an unwanted pregnancy, but masterful in persuading them not to have sex at all. There’s little evidence to support this view, but in the GOP of Norquist and Bachmann, facts are no match for dogma.

Continue reading “GOP Guts Teen Pregnancy Prevention” →

Prescription for Decline

Posted on by The Progressive Policy Institute

PPI President Will Marshall writes for Foreign Policy on the impact healthcare costs are having on the US economy and the “American decline.”

Lost in all the uproar over the U.S. Supreme Court’s June 28 “Obamacare” ruling was the crucial link between health-care reform and the issue voters care most about: the economy. America’s current health-care “system” isn’t just an ungainly, costly, and unjust mess. It also undercuts the United States’ ability to compete and win in world markets.

Amid the debate over “American decline,” this connection deserves a lot more attention than it’s getting. To revive U.S. international competitiveness, the country clearly needs to rein in runaway health-care costs. But it has to be done in the right way — not just by clamping down on spending, but also by boosting medical innovation and productivity.

Now that the court has upheld the individual mandate requiring most citizens to obtain health insurance, U.S. policymakers would ideally turn to the challenge of medical cost containment. This is unlikely to happen, however, because Republicans have vowed to make the repeal of the Affordable Care Act a centerpiece of their 2012 campaign message. Republican presidential candidate Mitt Romney dutifully promised Thursday to kill the “bad law,” even though it’s conceptually identical to the Massachusetts health plan he backed while governor of the state.

Read the entire article HERE

Election Watch: All Eyes on Supreme Court, Obama Pushes GOP on Immigration

Posted on by The Progressive Policy Institute
Ed Kilgore is a PPI senior fellow, as well as managing editor of The Democratic Strategist, an online

This week’s skirmishing in the presidential campaign revolved around the president’s immigration initiative and preparations for the Supreme Court’s decision on the Affordable Care Act, due to be handed down next week.

The executive order (technically issued by the Department of Homeland Security) offered the children of undocumented workers a two-year, renewable immunity from prosecution if they had entered the country prior to the age of 16 and are currently under 30; have a high-school diploma or GED or a record of military service; and have no serious criminal record. It’s basically a “Lite” version of the DREAM Act, which Obama also supports, in that it provides no path to citizenship. And most importantly, from a political point of view, the administration initiative is very close to what Sen. Marco Rubio (R-Fla.) has reportedly been working on in the form of legislation that could free Republicans (and the Republican presidential candidate in particular) from the taint of being hostile to any remedial action to help children here illegally.

Continue reading “Election Watch: All Eyes on Supreme Court, Obama Pushes GOP on Immigration” →

Keep Drug Bill Pro-Innovation

Posted on by The Progressive Policy Institute

PPI believes in the importance of smart regulation as part of a well-functioning economy. But we’ve also repeatedly advocated that regulation and legislation should aim to boost innovation, not get in its way.

Unfortunately, not all politicians in DC have gotten the message. Over the next couple of days Congress will be voting to reauthorize the Prescription Drug User Fee Act (PDUFA), which speeds up the process of reviewing new drugs by using fees collected from manufacturers.

On net, this is a pro-innovation bill which is strongly worth supporting. But it’s worth noting that one amendment, submitted by Senator Bernie Sanders (I-VT), would gratuitously undercut the incentives for innovation. The amendment, as I read it, would take away marketing exclusivity for a drug if a company was found guilty of any one of a long list of criminal or civil violations related to the drug, including illegal marketing.

Continue reading “Keep Drug Bill Pro-Innovation” →