Category: Government

Idaho Cut or Simplified 95% of Regulations by a “Sunset” Review

In my Openness book, I argue that government regulations bind entrepreneurs and reduce innovation. As part of an antidote, I suggest that “sunset laws,” where regulations automatically expire, if not renewed. Later, at a small conference on Adam Thierer’s latest book, I was discouraged to hear a couple of participants grant the plausibility of the “antidote,” but report that in actual practice it does not work because almost all old regulations get renewed. Some hope returned when I read a report from James Broughel of a successful sunset review process:

Idaho has proved deregulation is possible. The state repealed and revised its administrative rules code through a sunset review process in 2019. The results were dramatic. Since then, 95% of state regulations have been eliminated or simplified. The sky didn’t fall. Most regulations, when subject to genuine scrutiny, fail to justify their existence.

I will keep my eyes open on this issue, looking for more evidence.

James Broughel’s commentary is:

James Broughel. “Recipe for a Regulatory Spring Cleaning.” The Wall Street Journal (Tues., Nov. 26, 2024): A13.

(Note: the online version of the commentary has the date November 25, 2024, and has the same title as the print version.)

My book mentioned above is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Adam Thierer’s book mentioned above is:

Thierer, Adam. Evasive Entrepreneurs and the Future of Governance: How Innovation Improves Economies and Governments. Washington, D.C.: Cato Institute, 2020.

Off-Label Drug Use Shows F.D.A. Phase 3 Trials Could Be Dropped, Adding New Cures and Lowering Costs

The F.D.A. allows physicians to prescribe drugs for “off-label” use. These drugs were originally approved for a different “on-label” use. For that approval the drugs had to pass through Phase 1 and Phase 2 clinical trials, mainly to show safety, and massively expensive Phase 3 clinical trials to show efficacy for the on-label use.

When off-label use is allowed, that shows that the F.D.A. is accepting drugs for a use where efficacy has NOT been shown.

This is a proof of concept for my suggestion (that I originally heard from Nobel-Prize-winner Milton Friedman) that F.D.A. regulation should be pared back to just Phase 1 and Phase 2, for safety. Since the Phase 3 trials are usually far more expensive than the Phase 1 and Phase 2 combined, this would allow far more new drugs to be developed.

If the development of new drugs was cheaper, Fajgenbaum and others would not need to spend N.I.H.’s 48 millions of taxpayer dollars to comb through already-approved drugs to see if one can be jury-rigged as a therapy for a different disease.

(p. A6) [Dr. David Fajgenbaum, an immunologist at the University of Pennsylvania and . . . Castleman patient who studies the disease] . . . has matched rare-disease patients with drugs that are already in pharmacies for other conditions for over 10 years, starting with himself.

. . .

Every Cure, a nonprofit Fajgenbaum helped found in 2022, received funding on Wednesday [Feb. 28, 2024] that could surpass $48 million from the federal Advanced Research Projects Agency for Health. Fajgenbaum and his team will spend the money to build a drug-repurposing database and algorithms that patients, doctors and researchers can use to find drugs for untreated diseases.

There are over 10,000 known rare diseases and most don’t have a drug approved to treat them. The FDA said it has approved over 19,000 prescription drugs.

The notion of finding new uses for existing drugs has been around for a long time. Once the FDA approves a drug, doctors can prescribe it off-label to patients with other conditions they think it will help. Ozempic, originally approved for people with Type 2 diabetes, is now used by millions of people without the disease for weight loss.

The National Institutes of Health and research institutions have invested over the years in drug repurposing, hoping it would be faster and less costly to find new uses for drugs that have already made it to market, a process that can take more than a decade and cost $2 billion. But systematically matching approved treatments to unmet needs has been hard.

. . .

“Our end goal is not FDA approval. Our end goal is giving patients maximum access to medications,” said Tracey Sikora, co-founder of Every Cure.

For the full story see:

Amy Dockser Marcus. “Repurposed Drugs Give People With Rare Diseases New Hope.” The Wall Street Journal (Thursday, Feb. 29, 2024 [sic]): A6.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date February 28, 2024 [sic], and has the title “This Doctor Found His Own Miracle Drug. Now He Wants to Do It for Others.”)

For more on Fajgenbaum’s story, read his autobiographical account:

Fajgenbaum, David. Chasing My Cure: A Doctor’s Race to Turn Hope into Action; a Memoir. New York: Ballantine Books, 2019.

Feds Set Up Medicare “Advantage” So Insurance Firms Earn Higher Profit When They Deny Prior Authorization of Medically Beneficial Services

Medicare “Advantage” insurers earn higher profits when they refuse to pay for medical services, whether the services benefit patient health or not.
This is what is known as a perverse incentive. The firms often respond to such an incentive, especially when the services are expensive.

The federal designers of Medicare “Advantage” plans thought the plans would both save taxpayers money and provide more services to patients. Instead they have done the opposite. To taxpayers and patients, such a plan is a disadvantage. Only to insurance firms is such a plan an advantage, handed to them members of congress, some of whom receive benefits from lobbyists and some of whom are well-intentioned, but ignorant of the plans’ perverse incentives and unanticipated consequences.

[In the first paragraph below it is perhaps misleading to say that the federal funds per patient are “fixed.” It is true that they do not vary based on actual medical services the patient receives (as is the case with traditional Medicare). So in that sense they are “fixed.” But they do vary based on the diagnostic codes assigned to each patient. So in that sense they are not “fixed.” Congress set the plans up so that insurance firms can make more profits either by assigning more diagnostic codes to patients, or by providing patients with fewer services.]

(p. D3) Medicare Advantage plans are capitated, meaning they receive a fixed amount of public dollars per patient each month and can keep more of those dollars if prior authorization reduces expensive services. “Plans are making financial decisions rather than medical decisions,” Mr. Lipschutz said. (Medicare Advantage has never saved money for the Medicare program.)

Such criticisms have circulated for years, bolstered by two reports from the Office of Inspector General in the Department of Health and Human Services. In 2018, a report found “widespread and persistent” problems related to denials of prior authorization and payments to providers. It noted that Advantage plans overturned 75 percent of those denials when patients or providers appealed.

In 2022, a second inspector general’s report revealed that 13 percent of denied prior authorization requests met Medicare coverage rules and probably would have been approved by traditional Medicare.

By that point, a KFF analysis found, the proportion of prior authorization denials overturned on appeal had reached 82 percent, raising the possibility that many “should not have been denied in the first place,” Dr. Biniek said.

. . .

Responding to the inspector general reports, and to a rising tide of complaints, the federal Centers for Medicare and Medicaid Services has established two new rules to protect consumers and streamline prior authorization.

. . .

“Medicare Advantage makes us jump through so many hoops,” said Dr. Sandeep Singh, chief medical officer of the Good Shepherd Rehabilitation Network in Allentown, Pa. “It’s created such stress in the health care system.” A few years ago, his organization had one “insurance verification specialist” whose job was to handle prior authorization requests and appeals; now, it employs three.

. . .

Will Medicare’s new rules make a difference? So far at Good Shepherd, “we continue to see the same level of resistance” from Advantage plans, Dr. Singh said.

Mr. Lipschutz, of the Center for Medicare Advocacy, said, “It’s clear the intention is there, but the jury’s still out on whether this is working.”

“It comes down to enforcement,” he said.

For the full commentary, see:

Paula Span. “Some Insurers Erect Roadblocks.” The New York Times (Tuesday, May 28, 2024): D3.

(Note: ellipses added.)

(Note: the online version of the commentary has the date May 25, 2024, and has the title “When ‘Prior Authorization’ Becomes a Medical Roadblock.”)

The 2018 report mentioned above is:

Levinson, Daniel R. “Medicare Advantage Appeal Outcomes and Audit Findings Raise Concerns About Service and Payment Denials.” Office of Inspector General, 2018.

The 2022 report mentioned above is:

Grimm, Christi A. “Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care.” Office of Inspector General, 2022.

High Cost of Sickle Cell Cure, Slows Insurance Reimbursement, Delaying Surcease of Sorrow

The high-cost of innovative treatments for dire diseases is largely driven by the high cost of government=mandated Phase 3 clinical trials. For relatively rare diseases, these costs must be spread over fewer patients, making the cost per patient astronomical. If mandates were repealed costs would fall, insurance would be more likely to cover them, and more patients would be cured more quickly.

Note also that one of the pharma firms developing a cure for sickle cell disease is Vertex. Vertex was chronicled in two books by Barry Werth. In the first Vertex was a mission-oriented startup. In the second it was growing by adding marketers, investment experts, legal experts, and regulator-whisperers–seemingly headed toward losing their mission and their passion.

How much of the original spirit of Vertex has managed to survive?

(p. A1) An estimated 100,000 people in the United States, most of them Black, have sickle cell disease.

Gene therapy dangles the prospect of normalcy for the estimated 20,000 people in the United States with the most severe forms of the disease — lives without constant pain and continuing damage to organs and bones and joints.

But all is not well in the world of sickle cell gene therapy.

Last December [2023], the Food and Drug Administration gave approval to two companies, Bluebird Bio of Somerville, Mass., and Vertex Pharmaceuticals of Boston, to sell the first gene therapies approved for sickle cell disease. After nine months, Kendric remains the first Bluebird patient to progress this far, with at least a few others advancing toward his pace.

. . .

(p. A20) “We all expected it to be much faster,” said Dr. Leo Wang of City of Hope Children’s Cancer Center in Los Angeles, which has so far sent cells from one patient to Vertex for the treatment, and is in the final stages of getting authorization from Bluebird.

. . . The treatment is labor intensive, requiring patients to spend at least a month in the hospital. City of Hope can treat at least one patient a month, Dr. Wang said. Other large medical centers said they could treat only 10 or fewer per year, and some say they can treat just five or six.

Then there is insurance.  . . .

“Authorization and reimbursement are not the same thing,” said Dr. Stephan Grupp at Children’s Hospital of Philadelphia, which has not yet infused patients with treated cells.

The hospital, he says, has to buy the treatment for $2.2 million per patient from Vertex or $3.1 million from Bluebird. It is reimbursed after the therapy is delivered to the patient. Hospitals get nervous, Dr. Grupp said, because they have to lay out a lot of money. “They want to see that reimbursement happen,” he said.

Some hospitals decided to treat one patient at a time, limiting how much they commit up front.

Making the process even more cumbersome, a hospital has to negotiate separately with each patient’s insurer, said Dr. Julie Kanter of the University of Alabama at Birmingham. Her medical center has not yet started treating patients.

Most hospitals, she said, “don’t want to approve the treatment until they know what the payment plan looks like.”

For the full story see:

Gina Kolata. “Vanguard of Sickle Cell-Free Patients Finds a Long, Hard Road.” The New York Times (Tuesday, September 17, 2024): A1 & A20.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story was updated Sept. 20, 2024, and has the title “First Day of a ‘New Life’ for a Boy With Sickle Cell.”)

Werth’s account of the founding and early mission-orientation of Vertex is:

Werth, Barry. The Billion-Dollar Molecule: One Company’s Quest for the Perfect Drug. New York: Simon & Schuster, 1994.

Werth’s account the later growth and risk of loss of mission-orientation is:

Werth, Barry. The Antidote: Inside the World of New Pharma. New York: Simon & Schuster, 2014.

Feds Set Up Perverse Incentives for Health Insurance Firms that Offer Medicare “Advantage” Plans

In an earlier blog entry, I made the following comment that is also relevant to this entry:

Notice that the federal government has set up the incentives of the Medicare Advantage program so that insurers will receive benefits, but no costs, for diagnosing patients with certain conditions, that the patients have not asked them to treat. The nurse home visits aimed at harvesting diagnoses, do not benefit patients, but instead waste patients’ time and taxpayers’ money. Is UnitedHealth Group the most despicable organization for shamelessly exploiting the perverse incentives, or is the federal government the most despicable organization for creating the perverse incentives?

(p. A1) Private insurers involved in the government’s Medicare Advantage program made hundreds of thousands of questionable diagnoses that triggered extra taxpayer-funded payments from 2018 to 2021, including outright wrong ones . . ., a Wall Street Journal analysis of billions of Medicare records found.

The questionable diagnoses included some for potentially deadly illnesses, such as AIDS, for which patients received no subsequent care, and for conditions people couldn’t possibly have, the analysis showed. Often, neither the patients nor their doctors had any idea.

Medicare Advantage, the $450-billion-a-year system in which private insurers oversee Medicare benefits, grew out of the idea that the private sector could provide healthcare more economically. It has swelled over the last two decades to cover more than half of the 67 million seniors and disabled people on Medicare.

Instead of saving taxpayers money, Medicare Advantage has added tens of billions of dollars in costs, researchers and some government officials have said. One reason is that insurers can add diagnoses to ones that patients’ own doctors submit. Medicare gave insurers that option so they could catch conditions that doctors neglected to record. The Journal’s analysis, however, found many diagnoses were added for (p. A12) which patients received no treatment, or that contradicted their doctors’ views.

The insurers make new diagnoses after reviewing medical charts, sometimes using artificial intelligence, and sending nurses to visit patients in their homes. They pay doctors for access to patient records, and reward patients who agree to home visits with gift cards and other financial benefits.

. . .

The Journal consulted more than a dozen experts, including academics, actuaries and policy analysts, about its analysis of the Medicare data, who said the methodology was sound.

. . .

In the Medicare Advantage system—conceived as a lower-cost alternative to traditional Medicare—private insurers get paid a lump sum to provide health benefits to about half of the 67 million seniors and disabled people in the federal program. The payments go up when people have certain diseases, giving insurers an incentive to diagnose those conditions.

To find out how insurers use home visits to add diagnoses, the Journal interviewed nurses, patients, home-visit managers and industry executives and reviewed hundreds of pages of internal documents from home-visit companies. They described a system that used nurses, software and audits to generate diagnoses.

“They do the job with a purpose, and it pays off for the Medicare Advantage plans,” said Francois de Brantes, a former executive at Signify Health, a company that does home visits for insurers. “Identifying the diagnoses, that’s the job.”

. . .

The Journal reviewed the Medicare data under a research agreement with the federal government. The data doesn’t include patients’ names, but covers details of doctor visits, hospital stays, prescriptions and other care. The Journal identified the patients named in this article through their doctors.

Some diagnoses claimed by insurers were demonstrably false, the Journal found, because the conditions already had been cured. More than 66,000 Medicare Advantage patients were diagnosed with diabetic cataracts even though they already had gotten cataract surgery, which replaces the damaged lens of an eye with a plastic insert.

“It’s anatomically impossible,” said Dr. Hogan Knox, an eye specialist at University of Alabama at Birmingham. “Once a lens is removed, the cataract never comes back.”

Another 36,000 diabetic cataract patients didn’t receive any medical services or prescription drugs related to diabetes.

About 18,000 Medicare Advantage recipients had insurer-driven diagnoses of HIV, the virus that causes AIDS, but weren’t receiving treatment for the virus from doctors, between 2018 and 2021, the data showed. Each HIV diagnosis generates about $3,000 a year in added payments to insurers.

Everyone with HIV should be on antiretroviral drugs, the only effective treatment, and nearly all Medicare patients whose doctors diagnosed the virus took the drugs. Less than 17% of patients with insurer-driven HIV diagnoses were on them, the Journal found.

“It seems like almost all of those people don’t have HIV,” said Jennifer Kates, HIV policy director at KFF, a health-research nonprofit. “If they did, that would be substandard care at a pretty severe level,” she said.

. . .

When Congress conceived of the Medicare Advantage program decades ago, the hope was that insurers would make Medicare more efficient. In traditional Medicare, doctors and hospitals get paid for each service they provide, an incentive to provide more. The idea behind Medicare Advantage was to pay private insurers a lump sum to cover all services, giving them an incentive to keep patients healthier.

To protect insurers from the risk of winding up with sicker-than-average patients, the government allowed bigger payments for certain serious health conditions.

Partly because of that, Medicare Advantage has cost the government an extra $591 billion over the past 18 years, compared with what Medicare would have cost without the help of the private plans, according to a March report by the Medicare Payment Advisory Commission, or MedPAC, a nonpartisan agency that advises Congress. Adjusted for inflation, that amounts to $4,300 per U.S. tax filer.

Academic researchers and government investigators have raised questions about high rates of insurer-driven diagnoses in Medicare Advantage. In a 2021 report, the inspector general that oversees Medicare found the agency spent billions of dollars based on insurer-driven diagnoses for which patients received no care from doctors.

. . .

“Any time you base a system like this on diagnosis codes, there’s going to be rampant abuse of the system,” . . . [John Gorman, a former Medicare official and founder of two companies that review records and conduct home visits on behalf of Medicare insurers] said. Insurers “will find something else to make up the revenue.”

For the full story see:

Christopher Weaver, Tom McGinty, Anna Wilde Mathews and Mark Maremont. “Medicare Paid $50 Billion To Insurers for Untreated Ills.” The Wall Street Journal (Tuesday, July 9, 2024): A1 & A12.

(Note: ellipses, and bracketed words, added.)

(Note: the online version of the story was updated July 8, 2024, and has the title “Insurers Pocketed $50 Billion From Medicare for Diseases No Doctor Treated.” In the passages quoted above, I have omitted some subheadings that appear in the online and some, often different, subheadings that appear in the print, versions of the article.)

Disintermediate Healthcare

Many of the problems of our broken healthcare system could be fixed if insurers and healthcare providers were competing directly and transparently for the dollars of patients. But their are middlemen between patients and providers–mostly employers and governments. The goals and knowledge of the payers overlap, but are not the same. The payers may prioritize lowering their costs and may not care as much, or even know, the full costs to the patients.

The patients have a much better knowledge of the value of the healthcare or insurance that they are receiving, but they are very constrained in their ability to switch to insurers or healthcare providers who provide better services, or do so more efficiently. For many workers healthcare and health insurance are bundled with their work. They can leave their work, but other components of the bundle matter.

And nothing is transparent.

The fancy word for cutting out the middleman is “disintermediation.”

(p. 1) Weeks after undergoing heart surgery, Gail Lawson found herself back in an operating room. Her incision wasn’t healing, and an infection was spreading.

At a hospital in Ridgewood, N.J., Dr. Sidney Rabinowitz performed a complex, hourslong procedure to repair tissue and close the wound.

. . .

But the doctor was not in her insurance plan’s network of providers, leaving his bill open to negotiation by her insurer. Once back on her feet, Ms. Lawson received a letter from the insurer, UnitedHealthcare, advising that Dr. Rabinowitz would be paid $5,449.27 — a small fraction of what he had billed the insurance company. That left Ms. Lawson with a bill of more than $100,000.

“I’m thinking to myself, ‘But this is why I had insurance,’” said Ms. Lawson, who is fighting UnitedHealthcare over the balance. “They take out, what, $300 or $400 a month? Well, why aren’t you people paying these bills?”

The answer is a little-known data analytics firm called MultiPlan. It works with UnitedHealthcare, Cigna, Aetna and other big insurers to decide how much so-called out-of-network medical providers should be paid. It promises to help contain medical costs using fair and independent analysis.

But a New York Times investigation, based on interviews and confidential documents, shows that MultiPlan and the insurance companies have a large and mostly hidden financial incentive to cut those reimbursements as much as possible, even if it means saddling patients with large bills. The formula for MultiPlan and the insurance companies is simple: The smaller the reimbursement, the larger their fee.

Here’s how it works: The most common way Americans get health coverage is through employers that “self-fund,” meaning they pay for their workers’ medical care with their own money. The employers contract with insurance companies to administer the plans and process claims. Most medical visits are with providers in a plan’s network, with rates set in advance.

But when employees see a provider outside the network, as Ms. Lawson did, many insurance companies consult with MultiPlan, which typically recommends that the employer pay less than the provider billed. The difference between the bill and the sum actually paid amounts to a savings for the employer. But, The Times found, it means big money for MultiPlan and the insurer, since both companies often charge the employer a percentage of the savings as a processing fee.

In recent years, the nation’s largest insurer by revenue, UnitedHealthcare, has reaped an annual windfall of about $1 billion in fees from out-of-network savings programs, including its work with MultiPlan, according to testimony by two of its executives.

. . .

(p. 18) In some instances, the fees paid to an insurance company and MultiPlan for processing a claim far exceeded the amount paid to providers who treated the patient. Court records show, for example, that Cigna took in nearly $4.47 million from employers for processing claims from eight addiction treatment centers in California, while the centers received $2.56 million. MultiPlan pocketed $1.22 million.

. . .

In examining MultiPlan’s dominant role in this secretive world, The Times reviewed more than 50,000 pages of confidential corporate records, legal filings, claims information and other documents. The Times also interviewed more than 100 patients, doctors, billing specialists, advisers to employer health plans and former MultiPlan employees.

. . .

Mary Reinbold Jerome had been diagnosed with ovarian cancer at age 62 and received treatment at Memorial Sloan Kettering. Because the hospital was outside her plan’s network, she was billed tens of thousands of dollars.

. . .

She stood beside Andrew M. Cuomo, then the attorney general, as he announced his office’s blistering conclusions: A payment system riddled with conflicts of interest had been shortchanging patients, and at its core was a data company called Ingenix. Insurers used the company, a UnitedHealth subsidiary, to unfairly lower their payments and shift costs to patients, the probe found.

. . .

But amid the triumph, a key detail in the attorney general’s agreements with insurers largely escaped notice: The companies were required to use the nonprofit database for only five years.

When that term expired in 2014, MultiPlan was well positioned to capitalize.

For decades, the company, founded in 1980, offered a traditional approach to managing out-of-network claims by negotiating rates with doctors. Insurers got discounts and assurances that patients would not have to make up the difference.

But after MultiPlan’s founder sold it to private equity investors in 2006, the company pursued a more aggressive approach. It embraced pricing tools that used algorithms to recommend lower payments, and no longer protected patients from having to pay the difference, documents show.

Meanwhile, private equity ramped up investments in physician groups and hospitals and, in some instances, began billing for extraordinary sums. Once insurers were no longer obligated to use the nonprofit database, FAIR Health, they began looking for ways to combat that billing and other charges they considered egregious.

. . .

Internal documents show that UnitedHealthcare began a campaign to persuade employers to switch from FAIR Health. In a 2019 email, a UnitedHealthcare senior vice president emphasized creating a “sense of urgency” and helping companies still using FAIR Health “understand they don’t want to be on that program anymore.”

UnitedHealthcare had a big incentive to encourage this change. When it processed claims from employer plans using FAIR Health, the insurer collected no additional fee, according to legal testimony. But when it used MultiPlan, documents show, it typically charged employers 30 to 35 percent of the difference between the billed amount and the portion paid.

MultiPlan, too, charged a percentage of the savings, meaning it could make more by recommending lower payments. (FAIR Health charged a flat fee.)

. . .

(p. 19) Some providers said they had begun requiring payment upfront or stopped accepting patients with certain insurance plans because appealing for higher payments can be time-consuming, infuriating and futile. Others have tried to sue insurers or MultiPlan. Dr. Rabinowitz, who repaired Ms. Lawson’s incision, hopes to collect the remaining balance from UnitedHealthcare in an ongoing case.

Surprise bills for some types of care are no longer an issue, insurers said, thanks to the law that went into effect in 2022. Brittany Perritt didn’t realize the anesthesiologists at her 3-year-old’s brain tumor treatments in 2020 were out-of-network until the claims went to MultiPlan. If that care occurred today, she likely would be spared the calls from debt collectors, because she didn’t go out of network by choice.

But MultiPlan assured investors shortly before the law’s passage that it was likely to have “limited impact” on the company. In fact, MultiPlan said, 90 percent of its revenue involved out-of-network claims that wouldn’t be affected.

. . .

Even when patients figured out where to direct complaints — the Employee Benefits Security Administration — they described the process as draining and mostly fruitless.

. . .

Insurers can set negotiation parameters for MultiPlan, including not negotiating at all, records and interviews show. Multiple providers and billing specialists said that in recent years they had increasingly been told their claims weren’t eligible for negotiation.

“It wasn’t this bad before,” said Tiffany Letosky, who oversees a small practice specializing in surgeries for endometriosis and gynecologic cancers.

Former MultiPlan negotiators said their bonuses had been linked to their success at reducing payments, incentivizing a hard-line approach.

Ms. Young, the former negotiator critical of the process, said she had occasionally called a provider from a cellphone — knowing that her work line was recorded — and advised against accepting her own offer.

Another former negotiator said the pressure to get bigger discounts had made her physically ill. “It was just a game,” she said. “It’s sad.”

For the full story see:

Chris Hamby. “Patients Hit With Big Bills While Insurers Reap Fees.” The New York Times, First Section (Sunday, April 7, 2024): 1 & 18-19.

(Note: the online version of the story was updated April 9, 2024, and has the title “Insurers Reap Hidden Fees by Slashing Payments. You May Get the Bill.”)

S.B.A. “Forgives” Most Covid “Loans” Even Though at Least 17% Were Issued to Fraudsters

We used to handle suffering during crises by mutual aid societies or by giving philanthropy to those we know best–our friends and neighbors. The potential fraudster is less likely to defraud their brother or neighbor, than some unknown taxpayer in a distant state. And the local philanthropist is more likely to be able to judge which relative or neighbor will benefit from aid. Giving billions to fraudsters fueled the future inflation that ordinary decent citizens would latter struggle with.

If the federal government wanted to reduce the pain from the pandemic, the best way would have been to reduce the number, and shorten the length, of mandates. Handing so much money to fraudsters, with so little due diligence, is outrageous.

[Admission: I was the victim of identity theft when the S.B.A. gave a fraudster, using my name, tens of thousands of dollars for a potato farm supposedly run by me. Then the S.B.A. had the audacity to start sending me threatening letters about my alleged failure to pay back the loans they had given to the fraudster.]

(p. A1) When J. Bryan Quesenberry first learned that the federal government was sending out hundreds of billions of dollars to help businesses survive during the Covid-19 pandemic, he thought: “There’s going to be fraud here. There just has to be.”

A few months later, Mr. Quesenberry started sifting through a list of businesses that received Paycheck Protection Program loans, which were intended to help small businesses ravaged by the pandemic continue paying their employees. The Oregon lawyer said he knew businesses were not allowed to receive more than one loan during a single round, so he searched for “double dippers.”

He soon found dozens of businesses across the country that appeared to improperly obtain P.P.P. loans. During the summer of 2020, Mr. Quesenberry started suing those firms to try to help the government recover funds.

“It just blows my mind,” Mr. Quesenberry said. “That’s tax money that comes out of your pocket and that comes out of my pocket.”

As federal officials try to retrieve billions in stolen pandemic relief funds, private citizens are scouring public data, company websites and social media pages to help identify potential cases. Those who have filed suits say they are motivated by the desire to root out wrongdoers and expose corporate fraud.

But there is also a strong financial incentive. Under the False Claims Act, private citizens can file lawsuits on behalf of the federal government against those who may have defrauded the United States. If the government recovers funds, those citizens can typically earn between 15 and 30 percent of that amount.

. . .

(p. A15) The armchair sleuthing highlights how widespread pandemic fraud was and how federal investigators have struggled to keep up with it. In its haste to stave off an economic crisis and provide immediate aid to Americans, Washington distributed billions of dollars with few strings and little oversight. The Small Business Administration’s inspector general has estimated that more than $200 billion — or at least 17 percent of the pandemic loans the agency distributed — was awarded to “potentially fraudulent actors.” The majority of P.P.P. loans have been forgiven by the federal government.

While federal investigators have gone after some of the biggest perpetrators of fraud, limited resources have hindered their ability to go after the estimated thousands of people who improperly took government money.

. . .

Some private citizens said that it often took hours to investigate leads, and that they were unearthing cases that might otherwise slip through the cracks. Although Mr. Quesenberry said he relied primarily on information available on the internet to build cases, he said it was a time-intensive process that often required combing through government websites, Yelp pages, news articles and LinkedIn profiles. He said he thought he added value because he was pulling together evidence to “paint the picture of fraud.”

Mr. Quesenberry has earned more than $400,000 from 10 cases that have helped the federal government recover more than $3 million, according to a review of documents from U.S. attorney’s offices. Mr. Quesenberry said he had been investigating pandemic fraud for about four and a half years and was now working on his cases full time.

. . .

Hadar Susskind, the president and chief executive of Americans for Peace Now, said officials thought they had qualified for the loan because they did not consider the nonprofit to be a political organization. He said they had settled because it could have been costlier to go to court.

Mr. Susskind said he had never met Mr. Abrams, but he believed the complaint was “very much ideologically motivated” because of the nonprofit’s work to promote Israeli-Palestinian peace.

In an email, Mr. Abrams said: “In America these anti-Israel organizations have the right to spin, distort or even outright lie about Israel. However, they do not have the right to subsidize their activities with government monies for which they were not eligible.”

Mr. Abrams said he had long done other activist work, including recently representing a Jewish high school student who was the victim of antisemitic bullying. He said that he did not charge fees in those matters, and that the “whistle-blower cases do generate significant revenue so things more or less balance out.”

For the full story see:

Madeleine Ngo. “Fraud Hunters Earn Windfalls Tied to Covid.” The New York Times (Monday, November 25, 2024): A1 & A15.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Nov. 23, 2024, and has the title “They Investigated Pandemic Fraud, Then Earned Thousands.”)

Healthcare Innovations Can Be Effective AND Cheap

Many are resigned to accept our current mess of a healthcare system because they fear that if the system was changed into a fully free market system they would not be able to afford anything approaching their current level of healthcare. But they do not understand what would change. If patients paid for their own healthcare there would be competition to provide cheaper healthcare services to the many. Henry Ford got rich finding ways to make cars better and cheaper. Bill Gates got rich mainly by making adequate operating systems cheaper.

If we made healthcare a free market, then healthcare would find its Henry Ford and Bill Gates. If patients directly paid for healthcare, then healtcare services would be more consumer oriented–for instance the value of patients’ time would be respected. Medical entrepreneurs would compete to bring us more cures and cheaper cures.

The problem is not that we are “fixated on profits” as is suggested in the last paragraph quoted below. The problem is that our non-market healthcare system creates perverse incentives and perverse regulatory constraints, so that simple frugal innovations are not rewarded.

[Below I first quote a few passages from The New York Times obituary of Cash, and then from The Wall Street Journal obituary of Cash.]

(p. A21) Richard A. Cash, who as a young public-health researcher in South Asia in the late 1960s showed that a simple cocktail of salt, sugar and clean water could check the ravages of cholera and other diarrhea-inducing diseases, an innovation that has saved an estimated 50 million lives, died on Oct. 22 at his home in Cambridge, Mass. He was 83.

. . .

Dr. Cash, the son of a doctor, arrived in East Pakistan, today Bangladesh, in 1967 as part of a project through the U.S. Public Health Service. There he worked with another young American doctor, David Nalin, to respond to a cholera outbreak outside the capital, Dhaka.

The two had already been researching a simple oral rehydration therapy and knew of other, previous efforts, all of which had failed. But they believed that the therapy held promise, especially in the face of mounting deaths.

They realized that a main problem was volume: Past efforts had resulted in too little or too much hydration. Dr. Cash and Dr. Nalin conceived a trial in which they carefully measured the amount of liquid lost and replaced it with the same amount, mixed with salt and sugar to facilitate absorption.

They divided 29 patients into three groups, with one group receiving an IV drip, another an oral treatment through a tube, and the third an oral treatment by drinking from a cup.

Other doctors and nurses found their experiment bizarre and tried to stop them. But Dr. Cash and Dr. Nalin persisted, splitting the work between them in two 12-hour shifts, to ensure the integrity of the trial.

The results were definitive: Only three of the tubed patients — and only two who drank the solution — needed additional IV treatment.

. . .

“We’re enamored by high technology,” he said at the Council on Foreign Relations. “And we’re not in love with low-tech. Low-tech is always seen in our eyes as second-class. Why would you do this, when you could do that? And I would argue just the opposite.”

For the full obituary from The New York Times that is quoted above, see:

Clay Risen. “Richard A. Cash, 83, Who Saved Millions From Dehydration, Dies.” The New York Times (Monday, November 4, 2024): A21.

(Note: ellipses added.)

(Note: the online version of the obituary has the date Nov. 2, 2024, and has the title “Richard A. Cash, Who Saved Millions From Dehydration, Dies at 83.”)

(p. C6) Half a liter of water, plus a pinch of salt and a fistful of sugar. As scientific insights go, it can’t compare to the intricate equations developed to split the atom or map the planets’ paths. But its simplicity was crucial to its monumental impact.

That simple solution—the cornerstone of Oral Rehydration Therapy, or ORT—has proved extraordinary in staving off and reversing the devastating consequences of dehydration caused by cholera and other diarrheal diseases, saving tens of millions of lives since its development nearly six decades ago. In 1978, an editorial in the Lancet called ORT “potentially the most important medical advance of the century.”

. . .

Cash saw this ethos of simplicity and accessibility as instructive for a western medical system that’s infatuated with high-tech solutions, dismissive of low-tech ones and fixated on profits—and where, consequently, an overnight stay in the hospital for dehydration can result in a four-figure bill. “A solution that can’t be applied,” he told Harvard Magazine, “is really no solution at all.”

For the full obituary from The Wall Street Journal that is quoted immediately above, see:

Jon Mooallem. “A Doctor Whose Simple Treatment Prevented Millions Of Cholera Deaths.” The Wall Street Journal (Saturday, Nov. 9, 2024): C6.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date November 7, 2024, and has the title “Richard Cash, Whose Rehydration Therapy Saved Millions of Lives, Dies at 83.”)

Some Heavily Subsidized Hospitals File Liens Against Poor Patients, Rather Than Bill Medicaid

Laws that were once well-intentioned but are now outdated often remain on the books. The laws that allow hospitals to take out liens on the property of poor patients are an example. Some policy experts have proposed that each law or regulation should have a “sunset clause” that gives a date on which they expire unless they are passed again. Another solution to the lien practice would be if all hospitals were managed on the basis of ethical side-constraints. They would then not take advantage of the perverse incentives that the lien laws create.

Even without ethical side-constraints, exploiting the outdated lien laws would be harder if greater competition between hospitals created greater transparency about shady practices–the reputation of unethical hospitals would suffer, and they would lose patients.

(p. A1) When Monica Smith was badly hurt in a car accident, she assumed Medicaid would cover the medical bills. Ms. Smith, 45, made sure to show her insurance card after an ambulance took her to Parkview Regional Medical Center in Fort Wayne, Ind. She spent three days in the hospital and weeks in a neck brace.

But the hospital never sent her bills to Medicaid, which would have paid for the care in full, and the hospital refused requests to do so. Instead, it pursued an amount five times higher from Ms. Smith directly by placing a lien on her accident settlement.

Parkview is among scores of wealthy hospitals that have quietly used century-old hospital lien laws to increase revenue, often at the expense of low-income people like Ms. Smith. By using liens — a claim on an asset, such as a home or a settlement payment, to make sure someone repays a debt — hospitals can collect on money that otherwise would have gone to the patient to compensate for pain and suffering.

They can also ignore the steep discounts they are contractually required to offer to health insurers, and instead pursue their full charges.

The difference between the two prices can be staggering. In Ms. Smith’s case, the bills that Medicaid would have paid, $2,500, ballooned to $12,856 when the hospital pursued a lien.

“It’s astounding to think Medicaid patients would be charged the full-billed price,” said Christopher Whaley, a health economist at the (p. A19) RAND Corporation who studies hospital pricing. “It’s absolutely unbelievable.”

The practice of bypassing insurers to pursue full charges from accident victims’ settlements has become routine in major health systems across the country, court records and interviews show. It is most lucrative when used against low-income patients with Medicaid, which tends to pay lower reimbursement rates than private health plans.

. . .

Hospitals have come under scrutiny in recent years for increasingly turning to the courts to recover patients’ unpaid bills, even in the midst of the coronavirus pandemic. Hospitals, many of which received significant bailouts last year, have used these court rulings to garnish patients’ wages and take their homes.

But less attention has been paid to hospital lien laws, which many states passed in the early 20th century, when fewer than 10 percent of Americans had health coverage. The laws were meant to protect hospitals from the burden of caring for uninsured patients, and to give them an incentive to treat those who could not pay upfront.

. . .

When states have permissive hospital lien laws, some hospitals take advantage in ways that hurt patients. These hospitals tend to be wealthier, The New York Times found, and many of those that received hundreds of millions of dollars in federal bailout funding during the pandemic are among the most aggressive in pursuing payment through hospital liens.

Community Health Systems, which owns 86 hospitals across the country, received about a quarter-billion in federal funds during the pandemic, according to data compiled by Good Jobs First, which researches government subsidies of companies.

One of its hospitals in Tennessee refused to bill Medicare or the veterans health insurance of Jeremy Greenbaum after a car crash aggravated an old combat wound to his ankle. Instead, the hospital filed liens in 2019 for the full price of his care, records show.

For the full commentary, see:

Sarah Kliff and Jessica Silver-Greenberg. “The Upshot; Waiting for Insurance Payout? A Hospital May Collect It First.” The New York Times (Tuesday, February 2, 2021 [sic]): A1 & A19.

(Note: ellipses added.)

(Note: the online version of the commentary was updated Feb. 12, 2021 [sic], and has the title “The Upshot; How Rich Hospitals Profit From Patients in Car Crashes.”)

Warren Buffett Said Obamacare Is “Two Thousand Pages of Nonsense”

Our health system is a mess. The latest major effort to “fix” it was Obamacare (the so-called “Affordable Health Act”)–two thousand pages cobbled together by lobbyists, deep state staffers, and legislative log-rolling that resulted in high costs, opaque rules, perverse incentives, and unintended consequences.

(p. A15) Medicare doles out reimbursements for services that may or may not be real, helpful to the recipient, or reasonably priced. It’s very hard to know. Congress doesn’t want doctors and hospitals back home closely policed. Result: Medicare controls spending, perversely, with blanket low reimbursement rates for necessary and unnecessary services alike.

. . .

. . . government programs are born in chaos—with congressional horse trading and payoffs to appease interest groups. That’s why government programs make so little organizational sense. Remember when we had to pass Obamacare to find out what was in it? (“Two thousand pages of nonsense,” said Warren Buffett at the time. “The problem is incentives.”)

For the full commentary see:

Holman W. Jenkins, Jr. “Business World; Elon Musk’s Useful Experiment.” The Wall Street Journal (Wednesday, Feb. 12, 2025): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date February 11, 2025, and has the title “Business World; DOGE Is Elon Musk’s Useful Experiment.” In both the online and print versions, the phrase “born in chaos” appears in italics for emphasis.)

Obamacare (the So-Called “Affordable Care Act”) Has “A Complex, Often Byzantine, Eligibility and Enrollment System”

Obamacare, Medicare, and Medicaid are supposed to help the least-well-off. But the least-well-off are exactly those who are least able to navigate the red-tape of the bureaucracy. Signing up for Amazon Prime was far simpler than signing up for Medicare. (My source is personal experience.)

(p. A18) The Trump administration on Friday said that it would drastically cut annual spending on so-called navigator groups that help Americans enroll in Obamacare health insurance plans, from around $100 million to just $10 million.

. . .

The Trump administration on Friday [Feb. 14, 2025] noted that health insurance navigators enrolled only 92,000 people on the Affordable Care Act’s marketplaces last year, or less than 1 percent of plan participants, amounting to more than $1,000 per enrollment. During Mr. Trump’s first term, with funding levels similar to the one announced Friday, navigators enrolled people at “a far more efficient $211 per enrollment,” the Centers for Medicare and Medicaid Services said in its announcement.

. . .

“They are primarily there to help people navigate a complex, often byzantine, eligibility and enrollment system,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

For the full story see:

Noah Weiland. “Administration Will Cut Funds For Navigators Of Obamacare.” The New York Times (Saturday, February 15, 2025): A18.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Feb. 14, 2025, and has the title “Trump Shrinks Funds for Navigators Who Help Americans Enroll in Obamacare.”)