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Articles by John Hoff

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Obamacare: The Gazillion-Dollar Startup Machine April 6, 2016

By Jeff Bercovici.

San Francisco Bureau Chief, Inc.

Seth Sternberg was visiting his 65-year-old mother in Connecticut when he got the idea for his home-health-aide business, Honor. She’d picked him up at the airport, and he noticed that she was driving really slowly. He asked why. “And she was like, ‘Well, driving’s just harder than it used to be,’ ” he recalls. This got Sternberg’s mind working. What if his mother were 75 or 85, and tasks like driving or bathing were not just harder but impossible? Would she need to move into assisted living? “If I ever said to my mother, ‘You need to leave your house,’ she might kill me,” he says.

Sternberg, 37, had sold his previous company, the messaging service Meebo, to Google for a reported $100 million in 2012. He and Meebo co-founder Sandy Jen were looking for a new startup idea, together with two of their Stanford friends, Plaxo co-founder Cameron Ring and Monica Lo. They wanted their follow-up act to be something important, so they started researching the state of in-home senior care through interviews with geriatricians, private-duty caregivers, and senior-center administrators. They learned that it was ripe for improvement. It was hard to get a health aide for less than four hours, because agencies usually paid them minimum wage and they spurned jobs that would earn them just $20 or $30. Finding qualified aides involved hours of sifting through resumes and interviews–and was still a crapshoot. Records languished in spiral notebooks. Sternberg’s team realized an Uber-like logistics algorithm could match patients to local caregivers, making shorter visits cost effective. Digital records could reduce mistakes and ensure continuity of care. User ratings could make for easier vetting. On the strength of the idea and the co-founders’ track records, they raised $20 million from Andreessen Horowitz and others to launch Honor. They built two mobile apps–one for consumers, the other for caregivers–and a software back-end to connect them, then recruited care pros and seniors for a pilot program in Walnut Creek, California. Honor is now up and running in the Bay Area and parts of Los Angeles.

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Prescription drug price controls pose lethal problems March 28, 2016

By Thomas Peter Stossel.

Star-Telegram, 3/23/16

The Democratic primaries may be contentious, but both candidates agree on one point: government fiat must rein in prescription drug prices.

Hillary Clinton proposes caps on drug prices and a mandate that pharmaceutical companies spend a preset percentage of revenues on research and development. She’d confiscate any excess to subsidize public biomedical research institutions like the National Institutes of Health.

Bernie Sanders wants us to purchase drugs from single-payer government healthcare like that in Canada that sets drug prices, thereby importing our northern neighbor’s price-control policy.

The brains behind these proposals are misguided academics, including physicians.

Obamacare co-author bioethicist Ezekiel Emanuel has declared, “Nobody disputes” that prescription drug prices are “out of control.”

Arthur Caplan, another celebrity bioethicist, protested the “high cost of drugs” on a popular physicians’ website, lamenting that “we are paying three times as much as Britain, six times as much as Brazil, [and] almost 18 times as much as India.”

Here’s how these authorities rationalize price controls: drug companies spend more on marketing than on research, their “net profits” are excessive and — industry leaders’ claims notwithstanding — unnecessary for the research on new drugs.

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Selling Health Insurance Across State Lines––A Really Dumb Idea March 21, 2016

By Robert Laszewski.

Health Care Policy and Marketplace Review, 2/28/16

Any candidate that suggests such a scheme only shows how unsophisticated he and his advisers are when it comes to understanding how the insurance markets really work––or could work.

I gave a speech to 750 health insurance brokers and consultants in DC last week.

When selling health insurance across state lines, something Trump and a number of other Republican presidential candidates have been pushing, was mentioned the audience literally laughed. That’s what health insurance professionals who spend their days in the market think of it!

This is about as dumb an insurance “reform” idea as has ever been proposed.

This is nothing more than an attempt to take the market back to the days of cherry picking risk––figuring out how to sell policies to only the healthy people. If this were ever enacted it would only serve to shuffle the healthy people into one set of health insurance policies and the sick into another thereby driving down costs for the healthy and in return just driving costs up for the sick––and accomplishing nothing toward fundamentally making insurance cheaper.

People who promote the idea are targeting the many state benefit mandates that drive health insurance policy prices up. The idea is, after the federal Obamacare mandates are repealed, to allow the sale of cheaper policies from states with the fewest benefit mandates to be able to be sold in high mandate states––thereby encouraging the state with more mandates to curtail them.

But if their aim is to eliminate many of these “excessive” state benefit mandates with a federal law, why not just curtail these mandates in all of the states with a federal law? If they are going to stick their federal noses into some of the states that have traditionally regulated insurance, why not just go ahead and stick their noses in all of the states at once and create a level playing field while they are at it?

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UnitedHealthcare launches a smaller, ‘very, very different’ insurer March 14, 2016

By Christopher Snowbeck.

StarTribune, 3/12/16

UnitedHealthcare is facing competition this year in Atlanta and Chicago from a new name in health insurance — a carrier that’s actually one of its subsidiaries.

For the first time, individual shoppers are buying coverage from Harken Health, a company with about 100 employees based at an office on the UnitedHealthcare corporate campus in Minnetonka.

Harken is being run as an independent entity, executives said, with a distinct approach to selling coverage. Subscribers receive unlimited access to primary care, without copays, if they visit a health center owned by Harken Health.

“It’s like an automobile company that makes a brand of car, and then with better luck or worse luck they also make a Saturn,” said Roger Feldman, a health insurance expert at the University of Minnesota.

Traditionally, UnitedHealthcare has been a bigger player selling health insurance to large employer groups, Feldman said, rather than to individuals and small groups being courted by Harken. So, the new offering looks like an effort to “make some more headway into that market segment,” he said.

The market for individual policies is growing with the federal Affordable Care Act, which provides tax credits to those who buy private coverage through a government-run health insurance exchange. Harken Health is on the federal government’s exchange for Atlanta and Chicago, where UnitedHealthcare plans are offered to the same consumers.

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California’s Illegal Medicaid Tax March 7, 2016

Brian Blase, Forbes


California politicians and interest groups have been working overtime to figure out a way to fix an illegal Medicaid provider tax—the subject of my recent Mercatus Centerstudy. These taxes are problematic because they are generally accompanied with the guarantee of increased Medicaid payments to the providers paying the tax—payments largely financed with federal matching funds. As a result, provider taxes, which reek of government favoritism because of how the benefits often target select providers, raise Medicaid spending.

California’s tax is illegal under federal law because the state was holding numerous insurers harmless from the tax that should not have been. The state has recently come up with a revised tax plan that it is submitting for federal approval. California Governor Jerry Brown has called the new plan “extremely complex,” and suggested that he does not want to reveal the details, remarking that “very few people understand it, so I’m not going to try to explain it to you because I couldn’t explain it to you if I wanted to.” [emphasis added]

Root of the Problem: Open-Ended Federal Medicaid Reimbursement

The federal government provides states with what amounts to a blank check to cover state Medicaid spending. In 2015, the federal government spent $350 billion reimbursing state Medicaid expenditures—an amount roughly equal to 63% of total program spending.

The open-ended reimbursement causes states to spend more on Medicaid relative to other state priorities. For example, state Medicaid spending rose an inflation-adjusted 357% between 1990 and 2015, nearly five times more than the increase in state spending on education. The open-ended reimbursement also results in states developing ways to artificially inflate expenditures in order to secure additional federal funding. One such scheme is provider taxes.

 Illegal Taxes on Medicaid Managed Care Organizations

The federal government permits provider taxes within an extraordinarily complicated set of constraints. One is that the same tax rate apply to all providers in a given class, such as hospitals. This constraint aims to prevent states from only raising revenue from providers that will then benefit from the higher Medicaid payments. However, the federal government provides ineffective oversight of provider tax arrangements and states often use supplemental payments to target Medicaid funds to favored providers.

In July 2014, the Centers for Medicare and Medicaid Services (CMS) wrote a letter to states because of “confusion among states” about provider taxes. According to the letter, some states were violating a 2005 law that expressly prohibited states from taxing only Medicaid managed care organizations (MCOs) as opposed to all insurers. It is worth noting that Medicaid MCOs support these schemes since they generally recover at least as much money through higher payment rates as they pay in taxes.

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