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Healthcare’s Dangerous Fee-For-Service Addiction

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https://www.forbes.com/sites/robertpearl/2017/09/25/fee-for-service-addiction/#49a2e221c8ad

For its many users, healthcare’s fee-for-service reimbursement methodology is like an addiction, similar to gambling, cigarette smoking and pain pill abuse. Doctors and hospitals in the clutches of this flawed payment model have grown dependent on providing more and more healthcare services, regardless of whether the additional care adds value.

I don’t use this metaphor lightly, nor wish to trivialize our nation’s growing problem with addiction. Rather, as a physician and former healthcare CEO, I am increasingly concerned with the impact this payment structure is having on American health. And I worry about whether providers are willing to “kick the habit” before it’s too late.

Addictive Qualities

The Affordable Care Act, signed into law March 2010, included several provisions encouraging doctors to focus on increasing value (instead of simply maximizing the volume) of healthcare services. And yet, seven years later, between 86% and 95% of U.S. healthcare providers are still paid for each individual test, procedure and treatment they provide, an arrangement that continues to drive up healthcare costs with little to show for it. According to the latest Commonwealth Fund report, the United States spends more on healthcare than any other industrialized country but ranks at or near the bottom in almost every measure of comparative quality.

As with any addiction, America’s dependence on fee-for-service has dire financial and health consequences. This year, the estimated cost of care for an insured family of four will reach nearly $27,000, paid for through a combination of employer health insurance ($15,259), payroll deductions ($7,151) and out-of-pocket expenses at the point of care ($4,534). Year over year, patients are on the hook for a higher percentage of their total healthcare costs, which rose 4.3% compared to just a 1.9% increase in the U.S. GDP last year. This is a major warning sign. If medical costs continue to surge 2% to 3% higher than our nation’s ability to pay, the healthcare system will soon reach a breaking point. Businesses, the government and insurers will have no choice but to ration care or slowly eliminate coverage for the nation’s poor, middle-class and elderly populations.

As with all addictions, the fee-for-service model has mind-altering effects, distorting the perceptions of its users in ways that make them unaware of their growing dependence. When providers are paid for doing more, that’s what they do: They increase utilization of services and ratchet up the cost of care without even realizing they’re part of the problem. According to one study, just 36% of practicing physicians were willing to accept “major” responsibility for reducing healthcare costs. Of course, the first step, as with other habits, is to recognize the problem. Only then can we explore treatment options.

Congress at crossroads after another GOP health care failure

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http://abcnews.go.com/Health/wireStory/congress-crossroads-gop-health-care-failure-50121420

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Congress is at a crossroads after Republicans’ stinging failure to repeal Barack Obama’s health care law. But what’s next — more partisan conflict or a pragmatic shift toward cooperation?

Unless Republicans and Democrats in Congress can work together, and bring along an often unpredictable President Donald Trump, political conflict over health care may spread. Bipartisan talks on legislation to stabilize shaky insurance markets are on again, but time is short and there’s no guarantee of success.

Congress also has yet to renew funding for programs that traditionally enjoy broad support, such as children’s health insurance and community health centers, despite approaching deadlines.

Feelings were raw Tuesday after Senate GOP leaders announced they would not take their latest “repeal and replace” bill to the floor for lack of support. Some lawmakers said it’s still possible to bridge the partisan gap on a limited set of priority issues.

Sen. Lamar Alexander, R-Tenn., said he would resume efforts to reach a bipartisan deal with Sen. Patty Murray, D-Wash., to stabilize markets for individual insurance policies that 18 million people rely on. More than half of those consumers are covered under the health law.

Alexander is chairman of the Senate Health, Education, Labor and Pensions Committee; Murray is the top Democrat on the committee. Alexander runs the risk of being accused by some fellow Republicans of trying to “bail out Obamacare.”

Murray is under pressure from fellow Democrats not to make concessions to Alexander, who is seeking changes that would make it easier for states to get waivers from some of the law’s requirements, potentially leading to plans with lower premiums.

“I’m still concerned about the next two years, and Congress has an opportunity to slow down premium increases in 2018, begin to lower them in 2019, and do our best to make sure there are no counties where people have zero options to buy health insurance,” Alexander said in a statement.

Sen. Ron Wyden, D-Ore., who has worked with Republicans on a range of health care issues, said cooperation is the only way to avoid creating needless problems for constituents.

“You recognize the opportunities that are in front of you,” said Wyden, the top Democrat on the Senate Finance Committee, which oversees health care funding. “My hope is we can come together.”

Wyden’s list includes renewing the Children’s Health Insurance Program for 9 million kids, whose funding expires this week, as well as short-term action to stabilize the Affordable Care Act’s insurance markets, by guaranteeing subsidies for copayments and deductibles. Experts say that could cut expected double-digit premium increases in many states by about half.

The missing ingredient seems to be leadership, say outside observers.

Neither Trump, nor House Speaker Paul Ryan nor Senate Majority Leader Mitch Connell has given clear approval for a bipartisan approach. Some governors have called for a health care reset that would involve both parties working together on a limited agenda, but their suggestion hasn’t been embraced in Washington.

“The question is whether you can you forge a coalition that doesn’t include either the hard right or the hard left,” said GOP health economist Gail Wilensky. “I have not been able to answer who would provide the leadership for such an effort. Neither the leadership in the House or the Senate has embraced the notion of trying to forge a bipartisan coalition, and it is very hard to move legislation without that.”

Rep. Richard Neal, D-Mass., said Trump at a meeting with lawmakers raised the possibility of seeking a deal with Democrats. There’s no hint what that might entail.

If anything, Democrats have been moving to the left after Sen. Bernie Sanders, I-Vt., relaunched his “Medicare for all” plan recently. Under Sanders’ plan, government would pay for medical services, replacing employers and insurers. Some liberal activists argue that support for “single-payer” should be a qualifying test for Democratic candidates in 2018 and beyond.

Other Democrats say single-payer would lead to political defeat, because of the massive tax increases required.

“It’s not going to happen,” said former Rep. Henry Waxman, D-Calif., one of the main authors of the Obama law. “You can talk about it, and plant a flag, and say that’s where you’d like to go, but in the meantime people need their insurance coverage.”

Wednesday is the deadline for insurers to sign contracts to offer policies for 2018 on the health law’s markets. Sign-up season starts Nov. 1. About half the 18 million Americans with individual policies get no subsidies under the health law. Without congressional action some are facing premiums that rival a mortgage payment.

Saturday is the deadline for Congress to act on children’s health insurance and community health center funding. Brief delays are not expected to cause disruptions, but a protracted holdup would.

 

Right After Trump Blamed High Drug Prices On Campaign Cash, Drugmakers Gave More

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Right After Trump Blamed High Drug Prices On Campaign Cash, Drugmakers Gave More

“The cost of medicine in this country is outrageous,” President Donald Trump said at a rally in Louisville, Ky., two months after his inauguration. He went on about how identical pills have vastly lower price tags in Europe.

“You know why?” the president asked, before spreading his hands wide. “Campaign contributions, who knows. But somebody is getting very rich.”

It was March 20, 2017.

The next day, drugmakers donated more money to political campaigns than they had on any other day in 2017 so far, according to a Kaiser Health News analysis of campaign spending in the first half of the year reported in Federal Election Commission filings.

Eight pharmaceutical political action committees made 134 contributions, spread over 77 politicians, on March 21. They spent $279,400 in all, showering Republicans and Democrats in both legislative bodies with campaign cash, according to FEC filings. The second-highest one-day contribution tally was $203,500, on June 20.

Brendan Fischer, who directs election reform programs at the Campaign Legal Center, said he found the timing of the contributions interesting: “I think it’s entirely possible that the drug companies sought to curry favor with members of Congress in order to head off any sort of potential attack on their industry by the press or by the federal government.”

During the Louisville rally, Trump also promised to lower drug prices, and pharmaceutical stocks tumbled afterward.

Although drug industry PACs have different structures and protocols, they are equipped to mobilize quickly to disperse funds to legislators.

“Writing a check doesn’t require much beyond putting pen to paper,” Fischer said.

FEC records show Merck’s PAC led the way that day, donating $148,000 to 60 candidates on March 21. House Speaker Paul Ryan (R-Wis.) received three maximum contributions to his various PACs from the drugmaker, totaling $15,000. Behind him with $7,500 was Sen. Tom Carper (D-Del.), who sits on the Senate Finance Committee.

Merck spokeswoman Claire Gillepsie said the contributions were “not tied to specific events.”

“Decisions on contributions are made at the beginning of a cycle and are approved by a contributions committee,” she said. A White House official referred requests for comment to the presidential campaign, which did not respond.

Companies may donate funds or lobby ahead of impending legislative issues and executive orders, or they may react to something a politician says.

“Presidents get a lot of attention to what they say,” said former congressman Lee Hamilton, who founded the Indiana University Center on Representative Government after three decades in the House of Representatives. “[Companies] have to react to that and defend the drug prices.”

Overall, FEC records show Merck spent $242,500 on campaign contributions and $3.7 million on lobbying in the first half of 2017.

The drugmaker, which makes diabetes pill Januvia, cancer drug Keytruda and shingles vaccine Zostavax, responded to outrage over drug prices earlier this year by revealing on its website that the average list prices of its drugs increased from 7.4 percent to 10.5 percent each year since 2010. Merck said discounts and rebates also increased, meaning it took home less money. But Thomson Reuters pointed out that the price increases outpaced inflation.

FEC records don’t indicate why a company donated to a politician or what that contribution led to, but when House Democrats accused Rep. Jason Chaffetz (R-Utah) of failing to schedule a hearing on prescription drug price hikes in 2015, The Intercept pointed out that the pharmaceutical industry had been among Chaffetz’s top campaign contributors.

Pharmaceutical lobbying dollars have also swelled in 2017, Kaiser Health News previously reported. In their disclosures, drug companies listed tax reform and drug pricing among issues on which they lobbied Congress.

March 21 was also the date of the National Republican Congressional Committee’s annual fundraising dinner, featuring Trump as keynote speaker. The event, which raises money for House Republicans, drew a record-breaking $30 million from a variety of industries, the NRCC reported.

But on that day, drugmakers also gave generously to Democrats and senators, according to FEC filings.

Pfizer and Novo Nordisk PACs donated $76,900 and $38,500 on March 21, respectively, to several dozen candidates on March 21, according to their filings. Five additional pharmaceutical PACs spent between $1,000 and $5,000 on contributions that day.

The companies say the timing was coincidental. A Novo Nordisk spokesman said the March 21 contributions from its PAC had been scheduled in advance “and in no way were tied to any specific statement.”

Pfizer spokeswoman Sharon Castillo said it takes three to four weeks to orchestrate and approve a PAC contribution.

“Pfizer’s political contributions to candidates and elected officials from both parties are led by two guiding principles — preserve and further the incentives for innovation, and protect and expand access to medicines and vaccines for the patients we serve,” Castillo said.

Pfizer’s PAC donated more than any pharmaceutical PAC in the first half of 2017, contributing $418,400 in all — nearly 70 percent more than the first six months of the 2015 election cycle, according to FEC records. In February of this year, the company’s CEO was among several executives from drugmaking firms and other global companies to pen a letter to Congress in support of tax reform. In December 2016, Pfizer received a letter from the Senate Special Committee on Aging, asking it to explain its price increases for the opioid overdose reversal drug, naloxone.

“Pfizer is committed to addressing the prevention, treatment and effective response to the growing opioid abuse in the United States,” Castillo said, adding that the company is donating up to 1 million naloxone doses and $1 million in grants toward opioid addiction awareness efforts.

Novo Nordisk has spent $178,000 on campaign contributions so far this year, or nearly four times more than it spent the first six months of 2015, according to its filings with the FEC. The company is one of the top three insulin makers, and in July, Sen. Amy Klobuchar (D-Minn.) sent the companies letters asking them to justify their price increases. In November, Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) asked the Justice Department and the Federal Trade Commission to investigate the insulin makers for possible price collusion. The companies have denied the allegations.

“We’re certainly aware of policymakers’ concerns about the price of insulin, and we’re committed to collaborate with all those involved in the healthcare supply chain to ensure patient access,” said Novo Nordisk spokesman Ken Inchausti.

“From the public record, you can’t tell for sure” what prompted the spike in political contributions from pharmaceutical companies, said Tony Raymond, a former analyst at the Federal Election Commission who founded Political Money Line to track campaign finance. The PACs could have been “killing two birds with one stone” by donating to legislators across the board on the night of the NRCC fundraiser, or they could have been responding to what Trump said.

“We’re talking about a couple phone calls and then they could courier a check over to someone,” he said.

Outcomes-Based Pharmaceutical Contracts: An Answer to High U.S. Drug Spending?

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http://www.commonwealthfund.org/publications/issue-briefs/2017/sep/outcomes-based-contracts-high-drug-spending

Abstract

  • Issue: Brand-name prescription drug prices are increasing in the United States, putting pressure on payers and patients. Some manufacturers have responded by offering outcomes-based contracts, in which rebate levels are tied to a specified outcome in the target population.
  • Goal: To assess the expected benefits and limitations of outcomes-based pharmaceutical contracts in the U.S., including their potential impact on prescription drug spending.
  • Methods: Semistructured interviews with payers, manufacturers, and policy experts.
  • Key Findings: Pharmaceutical manufacturers and some private payers are increasingly interested in outcomes-based contracts for high-cost brand-name drugs. But the power of these contracts to curb spending is questionable, largely because their applicability is restricted to a small subset of drugs and meaningful metrics to evaluate their impact are limited. There is no evidence that these contracts have resulted in less spending or better quality.
  • Conclusions: Outcomes-based contracts are intended to shift pharmaceutical spending toward more effective drugs, but their impact is unclear. Voluntary testing and rigorous evaluation of such contracts in the Medicare and Medicaid programs could increase understanding of this new model.

Background

In an era of rising health care spending and constrained budgets, U.S. policymakers and payers have tried to shift providers’ financial incentives from those that pay for greater volume of care to those that pay for high-value care. This move from volume to value is in its early stages, with most payment still based on old fee-for-service models.1

However, fueling the move to value-based purchasing are provisions in legislation such as the Affordable Care Act of 2010 and the Medicare Access and CHIP Reauthorization Act of 2015. These provisions encourage providers to participate in risk-bearing arrangements and institute programs that base Medicare reimbursement on patient clinical outcomes measures, such as hospital readmission rates. Private payers have initiated similar performance-based incentive programs and risk-sharing arrangements for hospitals and physicians.

In this vein, some pharmaceutical manufacturers and private payers are seeking to apply an outcomes-based pricing model to the prescription drug market. Prices for brand-name drugs have risen far above increases in the consumer price index.2 According to a Kaiser Health Tracking Poll, 77 percent of Americans consider prescription drug costs to be unreasonable.3 Prescription drug spending is mostly driven by high-price, brand-name drugs, which account for about 12 percent of prescriptions but 72 percent of total drug spending.4

One response to these high prices has been increased interest in outcomes-based contracts, which tie rebates and discounts for expensive pharmaceutical products to the outcomes observed in the patients who receive them. Outcomes-based contracts are touted as possible ways for purchasers — such as insurers and health care systems — to improve value. That is because under such contracts, purchasers pay more for a drug when it works and less when it does not. However, whether such arrangements can achieve this goal remains controversial.

To gain insight into the benefits and limitations of outcomes-based pharmaceutical contracts, we interviewed pharmaceutical economics experts and individuals involved in developing these contracts, including those affiliated with pharmaceutical benefits managers and health plans. In this issue brief, we review the main themes that emerged from these data and evaluate whether these arrangements can help improve the value of pharmaceutical spending.

What Republicans must answer about their next steps on health care

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https://www.brookings.edu/blog/fixgov/2017/09/26/what-republicans-must-answer-about-their-next-steps-on-health-care/?utm_campaign=Governance%20Studies&utm_source=hs_email&utm_medium=email&utm_content=56772969

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Congressional Republicans’ last-ditch efforts at repealing the Affordable Care Act using the budget reconciliation process appear to have failed. The procedural protections that prevent a filibuster of the current bill expire on September 30, when the government’s new fiscal year begins. But is the option of party-line legislating on health care really off the table for good? It depends, in large part, on Republicans’ answers to the following three questions:

1. Can Republicans agree to a new budget resolution?

To use the fast-track reconciliation process in a given fiscal year, Congress must first adopt a budget resolution that contains reconciliation instructions, or language outlining which congressional committees will develop reconciliation legislation. When the 115th Congress began in January, the plan was to use the process twice: once for health care (with instructions initiated by the fiscal year 2017 budget resolution) and then a second time for tax legislation (with instructions contained in the fiscal year 2018 budget resolution).

With the FY2017 health care attempt now exhausted, Republicans could write FY2018 instructions that allow them to tackle both policy goals. On one hand, this would not be that difficult. Two committees that have substantial jurisdiction over health legislation—House Ways and Means and Senate Finance—also are responsible for taxes, so will already be included. Other health-related committees (House Energy and Commerce and Senate Health, Education, Labor and Pensions) could be given relatively small deficit reduction instructions to cover all necessary bases.

On the other hand, however, Republicans have struggled to come to agreement on what a budget resolution with reconciliation instructions for 2018 would look like—and that’s without introducing health care into the fight. One of the challenges in reaching agreement on a 2018 budget has been House conservatives’ insistence that they need more details on a tax bill before they support the budget resolution that will initiate said legislation. Senator Lindsey Graham (R-S.C.) threatened over the weekend that he “will not vote for a budget resolution that doesn’t allow the healthcare debate to continue.” While it would be relatively easy to meet that demand in principle, might other Republicans insist on more details or other promises related to health care in exchange for their support of the budget resolution? In the Senate especially, the GOP can spare relatively few votes and still adopt the resolution needed to kick off the reconciliation process.

2. Should health care and taxes be tackled separately or together?

Under current interpretations of the reconciliation procedures in the Senate, there are limits on the number of reconciliation bills Congress can consider each fiscal year. Reconciliation measures may make three kinds of budgetary changes: changes in revenue, changes in spending, and changes to the debt limit. If one bill contains more than one kind of change, that counts as the Senate’s attempt at both categories.

This year’s attempts at rolling back the Affordable Care Act have included both spending and revenue provisions. If Republicans want to pass health care changes that follow the same general outline from earlier this year—that is, eliminate the ACA’s taxes and pay for it with cuts on the spending side—they would have two choices. One, they could put all the spending AND revenue provisions from both their health care AND tax proposals together in one bill. Or, they could cleave the spending-side provisions off into a separate piece of legislation from the revenue items and attempt two different bills. The last two times Congress used the reconciliation process to make major changes in spending and taxes in the same year—1997 and 2005—it was by using this two separate measures approach.

The first option has a number of challenges (see #3 below), but so does the second. First, there are some aspects of the ACA that touch both revenue and spending, which could make it difficult to actually separate the two halves. Second, only about a quarter of currently serving House Republicans and roughly half of currently serving Senate Republicans were in Congress the last time their party attempted such a move, so many members lack experience with the process. A health care spending-only bill would still have to meet the various requirements of the reconciliation process, including those imposed by the Byrd Rule, and much of the Republicans’ intra-party disagreement so far has been over the spending-side substance of the measure. Republicans would also have to choose which bill to tackle first: the health care measure that has been front and center all year, or the tax legislation widely believed to just as important to key parts of the Republican base. If whatever they choose first takes up significant time, the calendar might prevent action on the second—especially in an election year.

3. If the answer is “together,” how do Republicans get to “yes”?

Suppose Republicans decide they are willing to try to tackle health care and taxes in the same, filibuster-proof legislation—and can adopt a budget resolution that allows them to do so. So far, writing a health care bill with majority support in the House and Senate has proved elusive. The path to tax legislation hasn’t been much smoother. And while there are some situations where logrolling across multiple hard issues actually generates a bill that’s easier to pass; a former Representative Barney Frank (D-Mass.) once said, “the key to understanding deal making Congress is to remember that the ankle bone is connected to the shoulder bone. Anything can be the basis of a deal.” But this year has presented little evidence to suggest that putting tax legislation and health care together in one measure would be one of those situations. Given how much time and energy Republicans have spent thus far with nothing to show for it on health care, many may be reluctant to tie the fate of a tax bill to an issue where victory has been so difficult.

The fate of the Affordable Care Act specifically does not, of course, rest just with Republicans’ immediate choices about reconciliation legislation in fiscal year 2018. The Department of Health and Human Services, for example, is taking actions that many see as undermining the implementation of the law—decisions the Department can make and pursue without any congressional action whatsoever. But on the legislative front, while party-line legislating to rollback Obamacare remains possible, the political path to success is likely to get harder, not easier, in the short term.