Hong Hate Horoscope: Week of June 21, 2021
You know how I mentioned I’d be on hiatus this week? Well yeah…. I lied. Would you like to hear me rail on about the need for cost-effectiveness studies in the American health care system instead? (Well I guess not me, but you can read the articles)
The Lead
The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax
Nothing we don’t know, but always good to see the data behind the numbers. [ProPublica]
Good journalism/Cool shit
The new Alzheimer’s drug that could break Medicare
This is some honestly crazy stuff for a drug that never should have gotten approved at a wildly expensive price:
Medicare, the federal health insurance program that covers Americans over 65, is facing an impossible dilemma: Should it cover a new and expensive medication for Alzheimer’s disease, which afflicts 6 million Americans and for which there is no existing treatment, even though the drug might not actually work?
But the evidence on whether Biogen’s treatment, called aducanumab, is effective is, at best, mixed; the FDA approved it this week over the objections of its own advisory committee. And with a preliminary announced price of nearly $60,000 annually per patient, covering the treatment could cost upward of $100 billion a year, mostly to Medicare, which would almost double the program’s drug spending. Patients themselves could be on the hook for thousands of dollars in out-of-pocket costs.
Why there’s a deeply American problem of not being able to set prices:
When I asked Russ Paulsen, chief operating officer of UsAgainstAlzheimer’s, about Biogen’s list price, he responded with an audible sigh, saying: “It’s a big number.”
He continued: “We care a lot about making sure the people who are disproportionately affected by this disease, which includes poor people, have the ability to access this drug.”
Medicare’s inability to determine the price it pays for aducanumab is a uniquely American problem compared to health systems in the rest of the developed world. Countries like Australia and the United Kingdom have independent boards that evaluate a new drug’s effectiveness and set a price based on that estimated value. The US pharma industry says the US system is important for encouraging innovation, and companies have made amazing breakthroughs, such as the hepatitis-C drugs that effectively cure that disease.
All in all, a case for both price setting/caps, insurance not covering all drugs, and greater (or really any!) usage of cost-effectiveness in medicine (my pet issues). [Vox]
The Drug That Could Break American Health Care
And literally the same article from The Atlantic (almost the same title too!):
To put that figure in perspective, in 2020, Medicare spent about $90 billion on prescription drugs for 46 million Americans through the Part D program, which covers prescription medication that you pick up at your local pharmacy. We could wind up spending more than that for Aduhelm alone.
Most of the costs will be borne by taxpayers. But Medicare beneficiaries will take an additional hit. Because Aduhelm is an infusion drug that will be administered in doctors’ offices and clinics, not taken at home, it will be covered by Medicare Part B—not Part D. Under Part B, beneficiaries pay 20 percent of the costs of their care, which, for a single year of Aduhelm treatment, will be at least $11,200. Although most seniors have supplemental plans to cover these out-of-pocket expenses, prices for those plans are sure to spike, whether they’re on Aduhelm or not. That would be quite hard on seniors, many of whom live on fixed incomes.
On the Medicaid issue and state budgets:
That’s an especially big problem because, unlike the federal government, states aren’t allowed to run a budget deficit. To pay for Aduhelm, they’ll have to either raise taxes or (more likely, given today’s political environment) cut spending on education, infrastructure, and health care. That dynamic played out after the 2013 FDA approval of Sovaldi, a cure for people with chronic hepatitis C. Despite Sovaldi’s stunning efficacy, its price tag and the prevalence of hepatitis C in the Medicaid population posed severe budgetary challenges for states, many of which rationed access to the drug. The similarly priced Aduhelm is approved for an even larger patient population, but unlike Sovaldi, it’s not a cure. States could be stuck paying for a patient’s Aduhelm year after year, rather than simply once.
And on payment structures and incentives:
This situation underscores a big problem in how we pay for drugs in the United States. In theory, one regulator’s decision about whether to approve a drug for sale could be entirely separate from another regulator’s decision of whether to spend public resources on it—and if so, how much. That’s how most countries do it. Here in the United States, however, a mix of legal constraints and political obstacles leaves the government little choice about whether to cover approved drugs. FDA approval and payment policies are tightly linked.
The big question now is whether Aduhelm finally breaks that link.
The reasons for the linkage between FDA approval and government spending go back to 1965, when Congress created Medicare. To overcome political opposition, as the program’s chief architect later explained, supporters had to “promise” that “there would be no real controls over hospitals and physicians.” That kind of deal might have seemed reasonable at the time, when health-care spending amounted to about 5 percent of GDP. Today, however, that figure stands at 17.7 percent.
Formally, Medicare won’t pay for medical care that is “not reasonable and necessary for the diagnosis or treatment of illness or injury.” In line with the original deal, however, Medicare denies only about 3 percent of claims that hospitals and physicians submit to it.
And time to starting thinking about actual cost-effectiveness and payment structures (emphasis mine):
Medicare’s passive, cost-blind approach means that, under Part B, it pays for pretty much any approved drug that a physician prescribes. From an individual patient’s perspective, that’s comforting: No one likes the idea that Medicare might limit access to approved drugs. For society as a whole, however, it’s disconcerting. When Medicare pays for expensive drugs that don’t offer much clinical value, it both squanders taxpayer dollars that could be put to better use and increases costs for patients.
The way that Medicare pays for drugs exacerbates the problem. The program is not structured to negotiate with manufacturers, which spurs drug companies to set high prices. Worse still, Medicare also pays prescribing physicians 6 percent of a drug’s average sales price, a practice that encourages physicians to prescribe more expensive drugs. At an average price of $56,000 for Aduhelm, a physician stands to earn $3,360 for every annual prescription—which is likely to generate a lot of prescriptions. [The Atlantic]
And much more into the weeds (emphasis mine):
Medicare’s long-standing practice is to make coverage determinations without taking cost into consideration. While Medicare sets rates for hospitals and other providers, it does not set its own rates for drugs covered under Part B. Instead, Medicare reimburses providers 106% of the Average Sales Price (ASP), which is the average price to all non-federal purchasers in the U.S, inclusive of rebates. For drugs where no ASP is available, such as a new drug like Aduhelm, Medicare pays 103% of the wholesale acquisition cost (WAC) until ASP data are available. The WAC is equivalent to a list price and typically higher than ASP. Biogen has set the list price for Aduhelm at $56,000 for a year of treatment.
It is hard to know exactly how many Medicare beneficiaries will take Aduhelm, but even a conservative estimate would lead to a substantial increase in Medicare spending. In 2017, nearly 2 million Medicare beneficiaries used one or more of the currently-available Alzheimer’s treatments covered under Part D, based on our analysis of Medicare Part D claims data. If just one-quarter of these beneficiaries are prescribed Aduhelm, or 500,000 beneficiaries, and Medicare pays 103% of $56,000 in the near term, total spending for Aduhelm in one year alone would be nearly $29 billion, paid by Medicare and the patients who use this drug – an amount that far exceeds spending on any other drug covered under Medicare Part B or Part D, based on 2019 spending. To put this $29 billion amount in context, total Medicare spending for all Part B drugs was $37 billion in 2019.
We need to use cost-effectiveness in our treatments. This might sadly become the foremost example why. [KFF]
Wall Street isn’t to blame for the chaotic housing market
Love this:
It’s important to understand that institutional investors play a small role in the American housing market. While there are big firms for apartments and other multi-family housing units, there traditionally hasn’t been the same level of investment in single-family homes.Yield-chasing investors have turned to the real estate market because it has become a very profitable place to put your money. And the main reason it has become so profitable is the preexisting housing shortage created by local governments and certain homeowners seeking to block new homes from being built, leading to a nearly 4 million home shortage nationwide.
Investors go where the yield is. Theyare profit maximizers and face strong pressure to return large gains to shareholders. Want to stop them? Build more homes, ensure that they cannot have a large market share and engage in predatory behavior, and reduce the incentive for yield chasers to further commodify the market.
This real issue? Build more housing!
A lot of this discussion is happening because people don’t want to address the core reason the housing market is currently out of control: the marked undersupply of housing, which has made real estate such a compelling investment. Combating potential oligopolies, asymmetries of power between landlords and tenants, high rents, and overly high home prices begins with ensuring housing abundance. And there’s good evidence that institutional investors are drawn to markets where housing supply has been restricted. CoreLogic’s research found that investors are attracted to markets where rents are high and that in tighter markets, there were “larger increases in investor activity.”…
The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that are harder to combat. Housing undersupply is the result of decades of locals opposing new home building. It’s not something that can be blamed on Wall Street greed and the nefarious tinkering of a private equity firm. And that’s a much harder truth to stomach.
Some interesting passages aligning a few topics I feel strongly about and notes on artificial scarcity. On housing:
In fact, I see material scarcity in several important areas.
The first and most important of these is housing. From the 1950s through the early 2000s we built out the suburbs, sprawling out into open land. Big houses for everyone! Then that process reached its natural end, as people discovered that exurbs were just too far out. The era of housing abundance came tumbling down in the housing crash, and housing construction has never recovered. As rents have soared in desirable cities, NIMBYs have emerged all over the country with unparalleled ferocity to prevent new housing construction.
And this NIMBYism is very bipartisan. Liberals and leftists are just as enthusiastic about keeping newcomers out of their neighborhoods as the most conservative white-flight suburbs.
On education:
Another big fight is the battle over higher education. The news is filled with stories about corruption scandals at the Ivy League, racial discrimination at the Ivy League, legacy admissions at the Ivy League. Tuition at good schools has soared over the years, reflecting both the availability of subsidized student loans and an increased demand for top-college diplomas; this has led to bitter political battles over student loan forgiveness, free college plans, and so on.
But again, this scarcity crisis is entirely artificial! The number of Harvard diplomas is limited not because Harvard doesn’t know how to increase its enrollment or build a satellite campus; it’s because Harvard severely limits its number of students in order to pump up its prestige! Meanwhile, the schools that are actually providing good value for money to huge numbers of up-and-coming working-class and middle-class Americans are cheap state schools like CUNY and Cal State. (In a parallel trend at the K-12 level, Americans spend their time fighting bitterly over gifted classes and selective high schools, while largely ignoring the need to improve education for the average student.)
And immigration:
Another example of artificial scarcity is the anti-immigration movement, which has come to dominate the consciousness of the political Right. With America’s population set to stagnate, and immigrants providing huge economic value to our nation on a variety of fronts while integrating successfully into American culture and committing very little crime etc. etc., it seems like a no-brainer that we should be taking in a lot more foreigners. Remember, even with one billion Americans we’d only have the population density of France. And yet due to the dogged, bitter opposition of a now-dominant faction of the GOP, we’re unlikely to do that. We’re creating an artificial scarcity of talent and of young people.
And the kicker (emphasis mine this time):
I’m an optimist because I think America has a lot of advantages going for it — new technologies that promise a productivity boom, scientific and corporate institutions that proved their worth in the pandemic, an open society, and a general culture of hard work and honesty. But a land of plenty is only a land of plenty if we allow it to be. [Noahpinion]
America Has a Drinking Problem
Sometimes, I very much hate the people that come up with titles for pieces. This one in particular, is egregious—much of it is about a very interesting history of drinking and also that Americans are unique in drinking alone (which is the drinking problem as mentioned). But it’s not the main interest at all. Anyway, fascinating piece, terrible title. [The Atlantic]
Why Inflation Is Lower Than It Looks
My “not a macro guy” caveat applies, but this broadly tracks with my thinking too [NY Mag]
Farewell, Millennial Lifestyle Subsidy
I think this is all very interesting and from what I see, true, but y’all don’t need to be shaming millennials all the time, NY Times. [New York Times]
Sports hot takes
The Sixers Have a Ben Simmons Problem, and They Need a Solution Now
Simmons for McCollum, who says no? [The Ringer]
Health, politics, and academia
This article is only Fine, but these two paragraphs speak to me:
This is too bad, because when Uber first launched, I was optimistic that it and Zipcar would be complements to mass transit rather than substitutes for it. The basic logic is that while cars are expensive, once you own a car, it’s cheap to drive it. So once you decide that you want to own a car, it becomes very compelling to drive the car a lot. But suppose you don’t need a car for your daily commute or your most frequent errands. Well, then you still probably need a car just to get to people’s houses and to do some less frequent errands. But if an e-bike or an electric scooter expands your range of carelessness, and Uber and Car2Go mean a vehicle is available whenever you really need one, then maybe don’t need to buy a car.
The problem with this logic is that even though cars are expensive, they’re not that expensive relative to most people’s incomes in what is, after all, a pretty rich country. In at least some cases, what’s actually very expensive is the opportunity cost of using scarce land for car storage. I could save a bit of money by ditching my car. But the real upside would be reclaiming my parking space, either to make my house bigger or else to create a rental accommodation that would bring in a lot of income. And from the other perspective, for potential renters, the main saving of non-ownership of a car would be from the cheaper rent. That’s the kind of dynamic that would set off a flywheel of more people living in dense, transit-accessible neighborhoods and a smaller share of those people owning cars. [Slow Boring]
Medicaid is a hassle for doctors. That’s hurting patients.
On leading administrative issues to not accepting Medicaid:
The health care providers then must invest time and money to sort out any rejected or disputed claims. These researchers attempt to put a dollar figure on those costs — they call it “costs of incomplete payments,” or CIP — and find that Medicaid is more costly for providers than Medicare or private insurers. The average CIP for a Medicaid visit is $16, more than the $10 average for Medicare and private coverage.
And when you consider the disparity in the initial claims, with Medicaid already paying much less than Medicare or private insurance, these costs of incomplete payments eat up 16 percent of the value of a Medicaid visit for doctors, significantly more than the 7 percent for Medicare and 4 percent for private coverage.
What is the cost of these administrative burdens? Fewer providers take Medicaid patients.
“Doctors’ offices are businesses,” Larry Levitt, executive vice president at the Kaiser Family Foundation, told me, “and it’s not surprising that they would make participation decisions based not only on how much they get paid, but also on the hassle of doing business with different insurers.”
And how jacking up rates might not be the best solution:
Nevertheless, the study makes a strong case that solving access problems for Medicaid patients does not require jacking up the program’s payment rates, a difficult sell in a time of strained state budgets, in the country already with the world’s highest health care costs.
The researchers instead present this solution to the problem they identified: “To increase access to care, regulators could implement or require a simpler, cheaper administration of payment processes, without raising prices.”
So if we simply made it easier for doctors to receive payment for the services they provide, it could make a big difference for Medicaid patients. [Vox]
How America Fractured Into Four Parts
Do you badly want to read 20,000 words on why every single subgroup in America is bad? Do you want to be painfully owned and attacked? Boy, I’ve got the article for you! But seriously, lots of really great insights, but I feel like this would’ve been much better as a four part series than as the longest article ever.
Me, getting owned:
They’re at ease in the world that modernity created. They were early adopters of things that make the surface of contemporary life agreeable: HBO, Lipitor, MileagePlus Platinum, the MacBook Pro, grass-fed organic beef, cold-brewed coffee, Amazon Prime. They welcome novelty and relish diversity. They believe that the transnational flow of human beings, information, goods, and capital ultimately benefits most people around the world. You have a hard time telling what part of the country they come from, because their local identities are submerged in the homogenizing culture of top universities and elite professions. They believe in credentials and expertise—not just as tools for success, but as qualifications for class entry. They’re not nationalistic—quite the opposite—but they have a national narrative. Call it “Smart America.”
The cosmopolitan outlook of Smart America overlaps in some areas with the libertarian views of Free America. Each embraces capitalism and the principle of meritocracy: the belief that your talent and effort should determine your reward. But to the meritocrats of Smart America, some government interventions are necessary for everyone to have an equal chance to move up. The long history of racial injustice demands remedies such as affirmative action, diversity hiring, and maybe even reparations. The poor need a social safety net and a living wage; poor children deserve higher spending on education and health care. Workers dislocated by trade agreements, automation, and other blows of the global economy should be retrained for new kinds of jobs.
Still, there’s a limit to how much government the meritocrats will accept. Social liberalism comes easier to them than redistribution, especially as they accumulate wealth and look to their 401(k)s for long-term security. As for unions, they hardly exist in Smart America. They’re instruments of class solidarity, not individual advancement, and the individual is the unit of worth in Smart America as in Free America.
Me, at a computer screen, getting owned some more (no but actually why do people pay me for what I do?):
A common refrain, in places like southeastern Ohio and southern Virginia and central Pennsylvania, is that the middle class no longer exists. I once heard a woman in her 60s, a retired municipal employee in Tampa, Florida, who had made and then lost money in real estate, describe herself as a member of “the formerly middle class.” She meant that she no longer lived with any security. Her term could apply to a nonunion electrician making $52,000 a year and to a home health aide making $12 an hour. The first still belongs financially to the middle class, while the second is working-class—in fact, working-poor. What they share is a high-school degree and a precarious prospect. Neither of them can look with confidence on their future, less still on their children’s. The dream of leaving their children better educated and better off has lost its conviction, and therefore its inspiration. They can’t possibly attain the shiny, well-ordered lives they see in the houses of the elite professionals for whom they work. The espresso maker on the quartz countertop, the expensive art hanging on the living-room walls, the shelves of books lining the children’s bedrooms are glimpses of a foreign culture. What professionals actually do to earn the large incomes that pay for their nice things is a mystery. All those hours spent sitting at a computer screen—do they contribute something to society, to the family of an electrician or a home health aide (whose contributions are obvious)?
The youths, getting owned:
There are too many things that Just America can’t talk about for the narrative to get at the hardest problems. It can’t talk about the complex causes of poverty. Structural racism—ongoing disadvantages that Black people suffer as a result of policies and institutions over the centuries—is real. But so is individual agency, and in the Just America narrative, it doesn’t exist. The narrative can’t talk about the main source of violence in Black neighborhoods, which is young Black men, not police. The push to “defund the police” during the protests over George Floyd’s murder was resisted by many local Black citizens, who wanted better, not less, policing. Just America can’t deal with the stubborn divide between Black and white students in academic assessments. The mild phrase achievement gap has been banished, not only because it implies that Black parents and children have some responsibility, but also because, according to anti-racist ideology, any disparity is by definition racist. Get rid of assessments, and you’ll end the racism along with the gap.
Me, in a different category, getting owned:
But another way to understand Just America is in terms of class. Why does so much of its work take place in human-resources departments, reading lists, and awards ceremonies? In the summer of 2020, the protesters in the American streets were disproportionately Millennials with advanced degrees making more than $100,000 a year. Just America is a narrative of the young and well educated, which is why it continually misreads or ignores the Black and Latino working classes. The fate of this generation of young professionals has been cursed by economic stagnation and technological upheaval. The jobs their parents took for granted have become much harder to get, which makes the meritocratic rat race even more crushing. Law, medicine, academia, media—the most desirable professions—have all contracted. The result is a large population of overeducated, underemployed young people living in metropolitan areas…
But most Just Americans still belong to the meritocracy and have no desire to give up its advantages. They can’t escape its status anxieties—they’ve only transferred them to the new narrative. They want to be the first to adopt its expert terminology. In the summer of 2020, people suddenly began saying “BIPOC” as if they’d been doing it all their lives. (Black, Indigenous, and people of color was a way to uncouple groups that had been aggregated under people of color and give them their rightful place in the moral order, with people from Bogotá and Karachi and Seoul bringing up the rear.) The whole atmosphere of Just America at its most constricted—the fear of failing to say the right thing, the urge to level withering fire on minor faults—is a variation on the fierce competitive spirit of Smart America. Only the terms of accreditation have changed. And because achievement is a fragile basis for moral identity, when meritocrats are accused of racism, they have no solid faith in their own worth to stand on. [The Atlantic]
Hate reading
My Chipotle Bowl Just Got More Expensive, And It’s The Federal Government’s Fault
Ok honestly this one is just funny, just read it and laugh.
Protected Habitat, for a Population of One
No idea why the Times thinks this should be a feature with a profile about this guy, this might be the most Boomer profile ever. “Man buys piece of land, then argues that no one should live there other than him for environmental reasons” is not a good profile.
Et cetera
'I still drink it like water': The untold origin story of SF's love affair with Fernet-Branca
h/t Molly for this article on Fernat [SF Gate]