Aug 15, 2018

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning ... Situational awareness: Oral arguments in Texas' big lawsuit over the Affordable Care Act — the one that argues the individual mandate has become unconstitutional, and in which the Trump administration has set its sights on the law's protections for people with pre-existing conditions — will be Sept. 10.

1 big thing: The catch in employers' latest plans for better care

Illustration: Rebecca Zisser/Axios

Employer-based insurance is the backbone of the U.S. health care system, and employers' satisfaction or dissatisfaction with that system is seen as one of the biggest determinants of how the system is likely to change.

But some of the biggest moves employers are making to their own benefits lately have limited impact to the system. And that includes tech big shots like Amazon, which has separately pledged to reform the larger health care market.

Driving the news: Amazon is looking to open primary care clinics at its Seattle headquarters, CNBC reported last week. Apple is staffing up similar clinics.

  • Also last week, General Motors announced that it's partnering directly with a Detroit-area hospital system (the Henry Ford Health System, ironically enough) for all of its salaried employees’ care.

The big picture: Direct purchasing and onsite clinics have been hailed as ways to improve quality and lower costs. And they are — for the large employers that use them.

  • But they don't use those employers' purchasing power to drive bigger structural changes.
  • Neither approach generates savings for anyone but the company and employees in question, and both are tools that only large employers can use — which means they'll be less useful overall as the gig economy grows.

“It is a trend. It’s not giving up on the health care system, but it’s saying, ‘We think there are some things we can better manage,'” says Jeff Dobro, who leads clinical services at Mercer, a consulting firm that works on employer health benefits.

Go deeper.

2. Startup Oscar reports first half profit

Photo: Oscar

Oscar, the health insurance startup that just raised $375 million in new funding from Google parent Alphabet, disclosed that it generated a $5 million profit on $363 million in revenue during the first half of 2018, Axios' Dan Primack reports this morning.

  • The company also reported that it had 231,000 members at the end of June, compared to just 85,000 one year earlier.
  • It still believes it will generate over $1 billion in gross premium revenue for 2018 and have a medical loss ratio in the mid-80s (it's currently at 74%, which is a 17 point year-over-year improvement).

The bottom line: The revenue figure is around 3 times what Oscar generated for the first half of 2016, although the profit is expected to disappear later this year as people spend through their deductibles.

Oscar announced just yesterday that it’s planning to start selling Medicare Advantage plans. And there’s a lot of money to be made there, eventually ...

3. The big business of government health care
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Adapted from Lane et al., 2018, "Best’s Market Segment Report: U.S. Government-Related Health Insurance Business Continues to Grow Despite Risks"; Chart: Axios Visuals

Health insurance companies used to collect a majority of their premium dollars from people who had coverage through their jobs. But their growing stake in running government health care programs has accounted for a larger share of premiums over the past decade, Bob reports.

The big picture: Don't expect this to slow down. More low-income people have gained private Medicaid coverage through the ACA, more states are privatizing their Medicaid programs, and more seniors are switching to privately run Medicare Advantage plans.

By the numbers, per data from credit ratings agency A.M. Best:

  • Managed Medicaid, in which states outsource their programs to health insurers, represented only 10% of insurer premiums in 2007. That ballooned to 27% as of last year.
  • Medicare Advantage rose from 17% of premiums in 2007 to almost 25% in 2017. Republicans and Democrats support the program, but it has been tied to waste and over-billing.
  • Commercial premiums have declined from 58% in 2007 to 38% last year.
  • The commercial portion includes the ACA's individual exchanges, where taxpayers cover the vast majority of enrollees' premiums.

The bottom line: Taxpayers are directly funding more of the operations of the health insurance industry.

Yes, but: A.M. Best says a larger share of government health care programs poses financial and political risks for insurers due to "a greater reliance on state and federal funding, as well as a growing dependence on federal rules and regulations."

Go deeper: The Des Moines Register has a devastating story about a widow who attributes her husband's death, at least in part, to Iowa's embrace of Medicaid managed care.

4. Ohio fires its PBMs

Ohio’s Medicaid program is firing its two pharmacy benefit managers, CVS Health and OptumRx, after deciding the companies were keeping excessive profits, the Columbus Dispatch reports.

What's next: The state wants its Medicaid health plans to hire new vendors that can move to a simpler “pass-through” model that doesn’t involve keeping “spreads” of different drug prices.

Why it matters: Ohio’s decision comes about a year after West Virginia’s Medicaid program kicked its PBMs to the curb. Axios’ Bob Herman is hearing other states also aren’t thrilled with their PBM arrangements, so this could turn into a bigger wave if more states aggressively audit their pharmacy benefits.

5. Was "sonic attack" actually mass hysteria?

For my money, the most under-the-radar fascinating story of 2017 was the apparent "sonic attack" against U.S. personnel stationed in Cuba.

But a handful of letters in the most recent Journal of the American Medical Association question whether that attack happened — or at least second-guess the level of academic rigor behind that diagnosis.

What they're saying: A total of 10 doctors, across four JAMA letters, second-guess the official conclusion of a sonic attack.

They say researchers — particularly via a study published in JAMA this past March — gave unduly short shrift to the possibility that embassy employees suffered instead from mass hysteria. From the letters:

"The key is whether the patients had knowledge that others were becoming ill or knew that there was a suspicion that sonic weapons were involved."
"Based on the evidence presented thus far, mass psychogenic illness cannot be discounted."
"Although diagnostic caution is warranted, functional neurological disorders are common genuine disorders that can affect anyone, including hardworking diplomatic staff."
"It is inappropriate to conclude without baseline data that any of the 6 patients presented were truly impaired."

The other side: The authors of the initial JAMA study — the one that supported the idea of a sonic attack — responded, saying they agree more research would be helpful but that some of the criticisms don't hold water.

  • One of the doctors who questioned their findings, for example, has previously identified "a preponderance of female participants" as a characteristic of mass hysteria. (Only about half of the Americans in Cuba were women.)
6. Seema Verma talks to Axios

CMS Administrator Seema Verma. Photo: Mandel Ngan/AFP/Getty Images

Centers for Medicare & Medicaid Services Administrator Seema Verma joined Dan yesterday on Axios' Pro Rata podcast, to talk about the future of electronic health records and whether it's awkward when her boss, the president, keeps beating up Amazon — one of the key partners in CMS' latest move on health records.

Listen here.

Subscribe to the Axios Pro Rata podcast.

Caitlin Owens

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