May 31, 2019
by Richard M. Scheffler
The purpose of this testimony is twofold. First, I will provide background information on the Medicare Part D stand-alone prescription drug plan (PDP) market and present recent market concentration trends. Second, I will demonstrate how Aetna’s proposed divestiture of its PDPs to WellCare would increase PDP market concentration.
*This paper was revised and reposted on June 17, 2019
An article published in the New York Times on May 9, 2019 cited a recent RAND study that found a glaring discrepancy between the cost of care for Medicare and private health insurance groups. On average, private insurance payed 2.4 times more than the federal program for the same hospital services. Given that nearly a third of healthcare spending can be attributed to hospital care, it stands to reason that aiming to reduce the cost of private care to at least the Medicare level is a compelling vision. Politically speaking, this finding brings merit to the Medicare-for-All vision for the future, notably touted by Senator Bernie Sanders.
Further, Dr. Scheffler was quoted in the article, commenting that “market forces are clearly not working,” identifying the hospital consolidation as a factor contributing to the divergence between public and private insurer hospital prices. Given the rapid consolidation of hospitals and physician groups, nationally and in California specifically, it remains apparent that antitrust enforcement has faltered. Moreover, it is largely agreed upon by health economists that consolidation contributes to higher insurance premiums and hospital prices, with little gains in efficiency or quality of care.
While these findings point to a larger inequity in price distribution and a lack of transparency for consumers, it is relevant that hospitals often note that Medicare payments are enough for the hospitals to keep their doors open. Thus, the extra costs for private insurance are not frivolous as they are necessary to pay the bills and keep doctors employed. Ultimately, this points to a larger picture of a nationally broken hospital system, illuminating the need for large-scale change in the near future.
To read the full article, click here.
Zarek Brot-Goldberg is the recipient of this year’s Richard M. Scheffler Prize in Health Economics. He is being recognized for his PhD thesis in health economics. During the 2019-2020 academic year, he will be a postdoctoral associate at the Tobin Center for Economic Policy at Yale. The following year, he will be an assistant professor at the Harris School of Public Policy at the University of Chicago.
Please consider making a tax-deductible contribution to the Scheffler Health Economics Award Fund, as this award will be a tribute to Dr. Scheffler for his many contributions to Berkeley and will enable the PhD program to highlight the research excellence in health economics and policy. If you are able to contribute to the dissertation award fund, please either mail a check to University of California, Berkeley Foundation and note “The Scheffler Health Economics Award Fund” or you can click here to be directed to the secure donation website.
A recent Petris Center study finding double the rate of anxiety in millennials since 2008 was featured in the Sacramento Bee on April 29th. This study has brought widespread attention to the growing mental health problem and will hopefully spark action within the university system.
To read the full article, click here
Professor Scheffler spoke about a recent study finding an increase in anxiety disorder among college students. He presented these findings as part of “A Generation Under Pressure: Talking Mental Health at UC Berkeley,” an event hosted by the Berkeley Institute for the Future of Young Americans as part of the Goldman School of Public Policy on April 18th.
On April 20th, Professor Scheffler was interviewed on KCBS Radio regarding a recent study describing the dramatic uptick in anxiety disorder among millennials. The study found the increase in anxiety disorder to be associated with financial strain and increased screen time on social networks.
To listen to the interview, click here
A study describing the rise of anxiety disorder in college students was highlighted in the San Francisco Chronicle on April 18th. The Petris Center study found that increasing rates of anxiety are correlated with increased tech and social media use, as well as financial struggles. Anxiety has grown faster than other mental health problems, such as depression. In 2016, 1 in 5 students on campus were diagnosed with anxiety disorder, with only 1 in 10 in 2008. This study points to an urgency to address anxiety in millennials, on campus and off.
To read the article, click here
Distinguished Professor Emeritus Richard Scheffler gave a presentation during the “Strategic Outlook on the Health Care Market” session as part of the UCI Health Care Forecast Conference on March 11, 2019. Scheffler focused on healthcare consolidation, mainly centered on current trends in hospital consolidation and the impact on prices in California. HHI (a measure of consolidation) and hospital prices demonstrate a positive correlation among California counties. Scheffler also touches on “large” vertical mergers including CVS-Aetna and Cigna-Express Scripts.
“
Consolidation in California’s Health Care Market 2010-2016:
Impact on Prices and ACA Premiums,” a paper published by the Petris Center in 2018 was featured in a CHCF Blog Post on March 1, 2019. The post, titled “The Price Isn’t Right,” included this report as evidence supporting consolidation leading to higher prices. The report found that 44 of California’s 58 counties have highly concentrated hospital markets and six others have moderately concentrated hospital markets. The Petris Center has continued to study consolidation and its impact on prices.
Read the full blog post here.
Read the report here.
Richard Scheffler and Steven Shortell’s letter-to-the-editor and paper “The Seven Percent Solution: Costing and Financing Universal Health Coverage in California” was featured in a February 24th opinion piece in the New York Times. The letter addresses the possibility to implement universal care in California via a public/private model. Given that Medicare-for-All will be in the spotlight during the 2020 election, it is important to consider alternatives to achieving universal coverage.
To see the full letter, click here
