TGIF! Here's what's happening as we head into the weekend.
Biden Calls For More Drug Price Reductions
With the midterm elections looming and Medicare open enrollment kicking off this weekend, President Joe Biden on Friday highlighted some of the health care cost savings made available through the Inflation Reduction Act he signed into law in August, while calling on his administration to look for more ways to reduce the cost of subscription drugs.
The savings within the Medicare program cited by the White House include the ability to negotiate lower prices on a group of high-cost drugs; a $35 monthly cap on the cost of insulin starting in January for Medicare beneficiaries; free vaccines that are recommended by the CDC; and a plan to impose penalties on drug manufacturers that raise prices faster than the rate of inflation.
Biden also planned to sign an executive order directing the Department of Health and Human Services to look for ways to lower drug costs. HHS will have 90 days to submit a report to the White House analyzing “new health care payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs.”
The executive order does not, however, take any immediate steps to reduce drug prices. “This new executive order on drug prices from President Biden does not create any new authority and is light on details,” Larry Levitt of the Kaiser Family Foundation tweeted. “But, it does signal that the administration is looking to use what authority it has in Medicare and Medicaid to lower drug prices.”
The bottom line: With the economic outlook uncertain, Democrats are looking for ways to signal to voters that they are focused on the inflationary surge that is still causing headaches for consumers — and to highlight the steps they’ve taken so far to reduce health care prices.
Fed Official Sees Rates Going Higher for Longer
Esther George, president of the Kansas City Federal Reserve, said Friday that the central bank may have to raise interest rates higher than expected, given the pace and persistence of inflation.
“You may see the terminal fed funds rate higher and have to stay there longer,” George said in a virtual event held by S&P Global Ratings.
At the same time, George said the Fed should be “cautious” while moving slowly and deliberately to minimize uncertainty about future policy moves. “I have been in the camp of steadier and slower to begin to see how those effects from the lag will unfold,” she said. “The full effect on the real economy is likely still playing out.”
Saying that the economic data is “not cooperating,” San Francisco Fed President Mary Daly separately told Yahoo News that the central bank must press ahead in its tightening campaign. “There's literally no doubt in my mind that we need to put a more restrictive stance of policy in the economy to further get demand and supply in balance,” she said.
Analysts expect the Fed to enact another “jumbo” rate hike of 75 basis points at the next policy meeting on November 1-2, up from the current range between 3% and 3.25%. The terminal rate is now seen as closer to 5%, a result Daly says is “the most likely outcome.”
Some analysts think the Fed will have to press even harder, with rates rising close to 5.5%. “They’re going to have to go a lot higher,” Steven Blitz, chief US economist for TS Lombard, told The Wall Street Journal. “The trend that you see in terms of broad-based inflation is that it’s not decelerating.”
Seniors Got Lucky With Social Security Benefits Increase
We told you yesterday that Social Security beneficiaries are set to receive an 8.7% annual cost-of-living adjustment for 2023. That increase is based on a specific measure of inflation tracked by the Bureau of Labor Statistics called CPI-W. The Wall Street Journal’s Josh Zumbrun reports that, for the second year in a row, that measure of inflation has come in higher than another that was designed to better gauge the price increases that seniors face, known as CPI-E.
The W in CPI-W refers to “urban wage earners and clerical workers” while the E in CPI-E stands for elderly (those over 62). “The indexes are different because people 62 and older don’t spend the same way as everyone else: They devote more to medical care and housing and less to transportation,” Zumbrun explains. Some experts and advocates have long complained that the Social Security COLA fails to properly reflect the costs that seniors face — costs that CPI-E better captures.
“Be careful what you wish for,” Zumbrun says.
The 8.7% COLA for next year is larger than the 8% increase in CPI-E, continuing a trend from last year, when the 5.9% COLA exceeded the 4.8% rise in CPI-E.
Those results are unusual. CPI-E had tended to come in higher over the past 40 years because medical costs have tended to rise faster than other prices.
The bottom line: "Maybe seniors got a lucky break this year,” Zumbrun says. “Or perhaps as the spending patterns of the elderly and others converge, the CPI-E simply has outlived its original purpose.”
Massachusetts, California and New York Top List of States With Best Health Care
Massachusetts, California and New York top a recent ranking of the states with the best health care systems, while Alabama, Arkansas and Delaware are at the bottom of the list.
The Hill’s Alejandra O’Connell-Domenech reports that the rankings, created by a site called the Better Benefits Guide, considered factors including the number of hospitals per million residents, physicians per 10,000 residents and health care spending — a category that seemingly implies more spending is necessarily better.
“California is one of the states that spends the most on healthcare per capita, according to the analysis, shelling out on average of more than $9,800 per resident a year,” O’Connell-Domenech writes. “The state is also home to the second-highest number of hospitals, with 340, just behind Texas at 369.”
New York has 18 hospitals and spends an average of $9,851 on health care per inhabitant. Alabama, meanwhile, spends an average of $6,452 a year per resident, the lowest of any state.
Send your feedback to yrosenberg@thefiscaltimes.com. And please encourage your friends to sign up here for their own copy of this newsletter.
News
- Biden to Sign Order to Explore Ways to Lower Prescription Drug Costs – The Hill
- Senate NDAA Debate Could Have Something for Everyone – Roll Call
- Retirees Catch a Break With the Social Security COLA – Wall Street Journal
- IRS Warning Millions of Low Earners They're Missing Out on Covid-Era Payments – Politico
- Buchanan Touts Business Success in Bid for Ways and Means Slot – Roll Call
- Liz Truss Fires Finance Minister While Reversing Policies That Sank British Pound – Washington Post
- ‘There’s Not Just SpaceX’: Pentagon Looks Beyond Starlink After Musk Says He May End Services in Ukraine – Politico
- South Dakota Signals the End of an Era on Medicaid Expansion – Politico
- Which States Have the Most Long COVID Patients – Axios
Views and Analysis
- ‘Soft Landing’ or ‘Pain’?: Forecasting Economy’s Impact on Midterms Is Trickier Than the Weather – John T. Bennett, Roll Call
- Here’s Why Inflation Isn’t Slowing – Sylvan Lane, The Hill
- Liz Truss Was Defeated by the Bond Market. Investors Aren’t Satisfied Yet – Julia Horowitz, CNN
- Why Britain’s Economic Mess Matters Even if You’re Not British – Neil Irwin, Axios
- Slash Child Abuse With One Simple Trick: Cash – Calen Brennan, American Prospect
- Why Seniors May Struggle to Meet Budgets Even With a Social Security COLA Boost – Gianna Melillo, The Hill
- The Fed’s Next Crisis Is Brewing in US Treasuries – Robert Burgess, Bloomberg
- The Fed Will Continue to Raise Interest Rates: How High Could They Go? – John Diamond, The Hill
- In the Face of Inflation, Let’s Give Everyone a Lift – Peter Coy, New York Times
- Top Republicans Are Aiming at Brookings. Will It Backfire? – Michael Schaffer, Politico
- What Did Bank Earnings Tell Us About the Economy? – Matt Grossman, Wall Street Journal
- How to Make Experimental Treatment Less of a Gamble – Alison Bateman-House, New York Times
- The Government Still Calls Covid an Emergency – James Freeman, Wall Street Journal