Medicare’s ‘Astonishing Amount of Waste’ on Drugs

Medicare’s ‘Astonishing Amount of Waste’ on Drugs

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Plus, what the IRS did in 2019
Monday, January 6, 2020

IRS Looks Back at 2019, Gets Set for 2020

“The IRS touches more Americans than any other entity, public or private,” Internal Revenue Service Commissioner Chuck Rettig said in the agency’s annual report released Monday. The document provides a summary of IRS operations in the previous fiscal year and an update on the status of the agency’s long-term strategic plan. Ahead of this year's tax-filing season, which the agency just said will start January 27, here are some highlights from the new 41-page report:

  • The IRS processed 255 million tax returns and forms in fiscal year 2019.
  • Gross tax receipts came to roughly $3.6 trillion, about 96% of the country’s revenues.
  • The average refund was $2,800.
  • Enforcement revenue totaled $57.5 billion.
  • Employment at the IRS grew by 1,593 full-time positions, for a total of 78,004 in 2019 (that number includes 12,600 temporary and seasonal workers).
  • Over the last 10 years, however, the IRS has lost nearly 30,000 full-time positions — and those losses "directly correlate with a steady decline in the number of individual audits during the past nine years," the report says. The situation could get worse over the next five years as nearly 20,000 employees — 31% of the workforce — retire, “creating a significant risk of a large knowledge and experience gap for the nation’s tax agency.”
  • A separate IRS report says that the agency awarded more than $120 million to whistleblowers reporting tax evasion and collected almost $617 million as a result of those whistleblowers.

Another Look at Trump’s Tax Cuts

The Tax Cuts and Jobs Act has been on the books for two years now, prompting The Wall Street Journal’s Richard Rubin and Theo Francis over the weekend to review how the law has fared so far.

A few effects are clear, Rubin and Francis say: Most households and businesses are paying lower taxes; foreign subsidiaries have shifted more than $1 trillion to their U.S. corporate parents; federal revenue projections are lower than they would have been without the tax cuts (see the chart below); and the deficit has risen sharply, contrary to some Republicans’ claims that the cuts would pay for themselves.

In other respects, though, the picture is a lot “muddier.” While the economy is stronger today than it was projected to be back in 2017, it’s not obvious that the tax package deserves the credit. Economic indicators like employment and wages are up, but such “metrics were already on the rise before the tax law was signed by President Trump, and most economic numbers don’t show a sharp change that coincides with the tax law,” Rubin and Francis say. “Early growth in business investment seems to have faded; overall economic growth rose before pulling back again.”

The bottom line: Rubin and Francis say it “seems clear the tax cuts contributed to economic growth—but not enough to pay for themselves, as many backers promised. And even some of the intended beneficiaries say the gains haven’t been dramatic.”

Read their full analysis here (paywall).

Obamacare Market Holds Steady After Mandate Repeal

The Affordable Care Act’s individual mandate was effectively eliminated when the Tax Cuts and Jobs Act cut the penalty for failing to obtain health insurance to zero. Some experts feared the elimination of the penalty would send the Obamacare markets into a “death spiral” as healthier participants left, leaving only unhealthier, high-cost patients in the system.

But the markets have held up, Rachel Fehr and Cynthia Cox of the Kaiser Family Foundation said Monday:

“Results from the first nine months of 2019 suggest that the individual market remains profitable and stable despite the effective repeal of the individual mandate. Continued modest growth in claims costs and a decrease in hospitalizations through the third quarter of 2019 indicate that the repeal of the individual mandate penalty and expansion of short-term insurance plans did not leave the individual market significantly less healthy.”

Medicare Paid for $725 Million Worth of Drugs That Got Thrown Away

Medicare Part B in 2018 paid for $725 million worth of drugs that wound up being discarded, according to federal data highlighted by Axios’s Bob Herman.

The medications in question include expensive chemotherapy drugs and other treatments administered in outpatient settings by injection or infusion. “Drugs that are given intravenously and are based on someone's weight are more difficult to administer than pills, and some cannot be reused after the vials are opened — thus making them prone to some inevitable waste,” Herman explains. “But some pharmaceutical companies package drugs in oversized single-use vials, knowing a lot will get thrown out but will lead to more reorders and sales.”

The cost of the discarded portions of medication represents just over 2% of the nearly $35 billion that Medicare paid for the drugs. But Rena Conti, a health economist at Boston University, tells Axios that it still adds up to a "very astonishing amount of waste.” Just 10 drugs accounted for nearly two-thirds of the wasted cost.

Some experts caution that requiring manufacturers to adjust their vial or dose size may not reduce waste or lead to savings because of the pricing power drug companies have. In other words, monopolists are going to charge what they want, Herman says, and there’s not much consumers can do about it.

Interest Rates Could Still Head Lower, Senior Central Bankers Say

Three senior central bankers from the Unites States, Europe and England said Sunday that low interest rates across the industrial world could get even lower as the result of demographic pressures, Bloomberg’s Rich Miller and Christopher Condon report:

“Speaking at the American Economic Association’s annual meeting, Federal Reserve Bank of New York President John Williams, European Central Bank chief economist Philip Lane, and Bank of England Deputy Governor Ben Broadbent all saw a possibility that so-called R star -- the neutral level of interest rates that neither spurs nor restricts growth in their economies -- might drop in the future. …

“Estimates of R star vary widely. Fed policy makers generally peg it at about 2.5% for the short-term federal funds rate that the U.S. central bank targets. The neutral rate in the euro area and Japan is commonly thought to be lower.

“A variety of structural forces -- aging populations and sluggish productivity growth among them -- are reckoned to have been pushing down the neutral rate in industrial countries for years. That ‘doesn’t rule out a scenario where it gets even lower,’ Lane said.”

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