Budget, White Paper Provide Insight Into Trump Administration’s Strategy On Drug Pricing


During his first year in office, President Donald Trump spoke often about the problem of high drug prices but took no action on the subject. President Trump’s new budget proposal and a newly released white paper from the White House Council of Economic Advisors (CEA) aim to change that by laying out a strategy for action moving forward. These documents are, of course, aspirational, but they do provide a window into the administration’s priorities, and they should be evaluated to consider whether the administration has a possibility of achieving its stated goals.

In this post, I review several of the key elements of those proposals, considering their impact on a range of relevant dimensions. I discuss what’s included in the proposals, and, as importantly, what’s left out.

Medicare Reforms

The bulk of the proposed reforms would act on the Medicare and Medicaid programs. For Medicare, the Trump administration’s proposals are largely targeted at 1) assisting beneficiaries with high out-of-pocket costs and 2) realigning incentives to alter prescribing and reimbursement practices.

First, the administration is advancing a set of proposals to assist Medicare Part D beneficiaries with high out-of-pocket costs. Both the white paper and budget proposal argue that plans should be required to share with beneficiaries at the point-of-sale some amount of the rebates the plan negotiates with drug manufacturers. In November, the Centers for Medicare and Medicaid Services (CMS) already requested public comments on the implementation of this proposal, and it seems as if the budget document’s inclusion of the proposal is evidence that the administration is hoping to move it forward.

However, like many of the other reforms in the budget proposal and white paper, there are few details proposed. In CMS’s November proposal, the agency modeled a set of scenarios in which insurers pass through 33 percent, 66 percent, 90 percent, or 100 percent of their negotiated rebates. Each scenario comes with a set of advantages for beneficiaries, but also costs for the federal government. That is, CMS anticipated that reducing cost-sharing for particular high-cost beneficiaries would increase premiums for all beneficiaries, and therefore increase CMS’ overall spending through premium subsidies. How much the proposal would increase overall spending depends on the amount of rebates being passed through.

The budget proposal simply says that sponsors must pass through “at least one-third” of total rebates, so it does not provide further clarity on this proposal. However, it states that this proposal will cost the government $42.2 billion over 10 years. That estimate lies between CMS’s November estimates for 33 percent ($27.3 billion in spending) and 66 percent ($55.1 billion in spending), so it is possible that the administration has in mind a pass-through provision at 50 percent or so.

Another proposal aimed at out-of-pocket costs would establish an out-of-pocket maximum for patients who enter the Medicare Part D catastrophic phase. Currently, patients who reach the catastrophic phase of the Part D benefit are responsible for 5 percent of the costs of their prescription drugs, with no upper limit. The budget proposal would reduce their payments to 0 percent, although it is light on the details as to how this would be accomplished. The Henry J. Kaiser Family Foundation estimated that just over one million Part D enrollees have out-of-pocket costs above this threshold, and those patients would likely be the primary beneficiaries of this proposal. At the same time, however, the budget proposes to exclude manufacturer discounts from patient out-of-pocket cost calculations, which would likely slow the rate at which patients move into the catastrophic phase.

Second, the Trump administration proposes a number of changes to drug classification and reimbursement that would both enable plan sponsors to negotiate more effectively and alter prescribing behavior. The budget proposal would change current Part D plan formulary rules, requiring sponsors to cover just one drug per class, rather than two. The proposal also mentions increased use of utilization management tools for the six protected classes of drugs, suggesting that the general coverage requirement for those classes would remain as-is. This proposal is projected to save $5.5 billion over ten years.

More interestingly, both the budget proposal and CEA white paper suggest the possibility of moving a set of Part B drugs (those administered in an outpatient setting) into Part D coverage. Medicare Part B does not presently have a number of the tools that enable Part D plan sponsors to negotiate discounts with drug manufacturers, and Secretary Alex Azar spoke during his confirmation hearing about the need to “take the learnings from Part D and apply them to Part B.” This proposal would accomplish that goal, just through the reverse mechanism: by shifting drugs from Part B into Part D. The budget proposal envisions giving the authority to do this to the Secretary, noting that “[t]he Secretary will exercise this authority when there are savings to be gained from price competition.” As such, it does not provide any particular budgetary impact.

The budget proposes two other changes to Part B reimbursement. At present, when a physician is reimbursed for providing a drug under Part B, she is reimbursed based on the Average Sales Price (ASP) of the drug plus 6 percent. There is widespread concern that this reimbursement system encourages physicians to prescribe and administer more expensive drugs than may be medically necessary. The Obama administration proposed a demonstration project that would have moved from the current ASP+6 percent system to a system of ASP+2.5 percent+a flat fee for prescribing the product. After extensive criticism from a range of stakeholders, the administration shelved the initiative. Now, the administration is proposing to reduce payment rates for new drugs (for which the ASP information is not yet available, and so for which the only price available is the Wholesale Acquisition Cost (WAC)). Instead of paying 106 percent for these new products, the administration would pay 103 percent of the WAC during the period before ASP information has yet to be provided. This proposal is quite narrow in its scope, applying only to new drugs and only during the brief period before ASP information is available; it is therefore unlikely to save much money.

The Trump administration is also proposing to establish an inflation limit for the reimbursement of Part B drugs more generally. Instead of continually updating the ASP+6 percent figure if the ASP increases, this proposal would limit the growth of the reimbursement to the Consumer Price Index for all Urban Consumers. CMS would therefore pay “pay the lesser of (1) the actual ASP +6 percent or (2) the inflation-adjusted ASP +6 percent.” At present, Medicaid is protected from price increases when the Average Manufacturer Price (AMP) for a drug increases faster than inflation. The Department of Health and Human Services Office of Inspector General has proposed that CMS and Congress consider extending this provision to Medicare Part D, but as yet Congress has not moved to do so. This budget proposal can be thought of as proposing a similar constraint on Part B pricing.

Medicaid Reforms

The Medicaid portion of the budget proposal puts forth an idea which is potentially ground-breaking, but which is also potentially a sign of the administration’s recalcitrance to move on drug pricing (depending on the details). Specifically, the administration is proposing “new statutory demonstration authority to allow up to five states more flexibility in negotiating prices with manufacturers, rather than participate in the Medicaid Drug Rebate Program, and to make drug coverage decisions that meet state needs.” The idea is something like this: at present, state Medicaid programs must cover essentially all drugs approved by the U.S. Food and Drug Administration (FDA), which limits their ability to extract discounts. To be sure, Medicaid programs are already entitled by statute to large discounts off of the AMP, and to the inflation clawback as noted above. But many state Medicaid programs are worried that pharmaceutical spending has become an unsustainable part of their budget and are seeking ways to control their costs in this area. This proposal might empower them to do so.

Here’s the thing: Massachusetts has already submitted an 1115 waiver to CMS along these lines. Massachusetts is seeking 1) to pay for a single drug in each therapeutic class (as noted above, this is a reform the administration is proposing to make to Medicare Part D), and 2) to exclude entirely from coverage drugs “with limited or inadequate evidence of clinical efficacy,” likely to be those approved through the FDA’s accelerated approval process. This budget proposal may be a sign that the administration is interested in approving Massachusetts’ waiver. However, the fact that the budget explicitly calls for new statutory authority to do so suggests that the administration may not think it has the legal authority to approve Massachusetts’ waiver, as is. And given Congress’ inability to act thus far on drug pricing, the administration may be seeking to hide behind Congress’ inaction here.

Yet the call for new statutory authority is puzzling. At present, pharmaceutical coverage is an optional benefit under the Medicaid program. States do not have to cover drugs and therefore are not required to participate in the Medicaid Drug Rebate Program, although all have chosen to do so, and choosing to do so comes with a set of requirements. But it is not clear to me why CMS could not conduct this demonstration at present, under the Center for Medicare and Medicaid Innovation’s (CMMI) existing authority.

A potential clue may lie in the administration’s statement that the demonstration would “exempt prices negotiated under the demonstration from best price reporting.” Having written recently on the topic of the Medicaid best-price rule and innovative contracting for pharmaceuticals, it is not clear to me exactly why this is a sticking point. The Medicaid best price rule entitles Medicaid to the “best price” available for a particular drug for a particular set of providers. The statute contains large carve-outs—for instance, discounts provided to the Department of Veterans Affairs or to Medicare Part D are exempt from the best-price calculation. But it is strange to talk about needing to exempt Medicaid programs from the best-price rule when the best-price rule was intended to benefit Medicaid itself. I imagine that the administration sees the 340B program as a potential concern here, but again it is not obvious why CMMI could not waive the best-price rule as part of its existing authority.

FDA Activities

As I have written here previously, FDA Commissioner Scott Gottlieb has been at the forefront of the Trump administration’s efforts on drug pricing. He has taken a number of actions to promote generic competition, and although it will take some time to observe their benefits, the FDA’s existing legal authority to address drug pricing issues is quite narrowly circumscribed. The CEA white paper and budget proposal largely acknowledge this point, with the white paper lauding the actions the FDA has taken thus far on expediting review of generic drug applications, providing guidance on the development of complex generics, and other similar activities.

President Trump’s budget proposal calls for Congress to give the FDA more power to promote generic competition, by “ensur[ing] that first-to-file generic applicants who have been awarded a 180-day exclusivity period do not unreasonably and indefinitely block subsequent generics from entering the market beyond the exclusivity period.” More specifically, the concern is that first-to-file generic applicants—perhaps those whose initial applications may be rejected—can unduly delay generic entry while they remedy the deficiencies in their application. The administration projects that this reform will save the government $1.8 billion in Medicare savings over 10 years.

Other pieces of legislation have called for reform of the 180-day exclusivity period in different ways. Last year, Democrats in both the House and Senate introduced the Improving Access to Affordable Prescription Drugs Act, which included provisions preventing generic entrants from receiving the statutory 180-day exclusivity benefit if they had engaged in pay-for-delay conduct (Sections 402 and 403). But the idea in the president’s budget proposal may dovetail nicely with the FDA’s efforts to improve first-cycle approval rates for abbreviated new drug application products, as well.

What’s Missing

Perhaps what’s most notable about the budget proposal and the CEA white paper is not what’s included, but rather what is missing. Gone are some of President Trump’s older arguments that Medicare should negotiate drug prices, or that drug importation should be permitted more widely. Some of the more significant cost-saving provisions from President Obama’s budget, like a reform that would have put low-income patients back on Medicaid prices, are also absent.

A key set of missing proposals are those which would directly assist privately insured patients. The budget’s focus on Medicare and Medicaid may well have a positive impact on the more than 100 million Americans enrolled in those programs. But for the roughly half of Americans (closer to 160 million) with employer-sponsored insurance, these reforms will provide no assistance. Growing numbers of Americans with employer-sponsored insurance are enrolled in high-deductible plans, and many of them may face the same affordability concerns that Medicare beneficiaries are facing.

You could imagine proposals that would address the drug pricing problem more broadly, rather than just within the publicly-insured population. The above-mentioned Improving Access to Affordable Prescription Drugs Act would have addressed the problem of drug pricing for a broader segment of the population. As I’ve explained here, the Act would have taxed companies which engage in large, year-over-year list price increases. It would also have capped patient out-of-pocket costs in Affordable Care Act-regulated plans, at $250 per month for an individual or $500 per month for a family.

More generally, even these proposals which would affect drug companies directly would have a minimal impact on their bottom lines. This set of proposals is largely very friendly to the pharmaceutical industry and is primarily aimed at curtailing patients’ financial burdens and tweaking incentives for stakeholders at the margin.

In this blog post, I have covered just a handful of the many different drug pricing-related proposals included in the new budget proposal and in the CEA white paper. As usual, observers should stay tuned to the actions CMS and the FDA take on this front, as they will show whether the administration is serious about these proposals or is merely posturing.


New bill would mean more flexibility for high-deductible health plans


Health insurance benefits form


A new bill aims to give health plans more flexibility to help enrollees treat and prevent chronic diseases.

The bill, called the Chronic Disease Management Act of 2018, would amend the IRS tax code so that high-deductible health plans paired with health savings accounts could cover chronic disease prevention and treatment on a pre-deductible basis.

Diane Black, R-Tenn., and Earl Blumenauer, D-Ore., introduced the bill in the House on Thursday, and John Thune, R-S.D., and Tom Carper, D-Del., did the same in the Senate, according to a release from the University of Michigan Center for Value-Based Insurance Design.

The existing IRS regulations, the center says in an accompanying fact sheet, permit a “safe harbor” that allows for the coverage of preventive services prior to satisfaction of the plan deductible. But that exception doesn’t include clinical services meant to treat an existing illness or condition, which narrows plan options and can stifle consumers’ ability to benefit from the financial advantages of a tax-free health savings account.

The new bill, on the other hand, would allow insurers to develop and implement “clinically nuanced” high-deductible health plans, the center says. The adoption of those type of policies, it adds, could make patients more likely to adhere to treatment plans, allow for lower premiums, enhance patient-centered outcomes and “substantially” reduce healthcare expenditures.

“This enhanced HDHP would provide millions of Americans a plan option that better meets their clinical and financial needs,” A. Mark Fendrick, M.D., the center’s director, said in a statement.

The idea of value-based insurance design (V-BID) has been gaining traction in recent years due to its potential to lower costs by allowing payers more leeway in how they design health plan benefits. Indeed, a 2016 study found that a VBID model tested in Connecticut was able to boost the use of preventive healthcare services among participants.

It’s also being tested in privatized Medicare. In fact, the Trump administration announced in November that it would expand the existing Medicare Advantage value-based insurance design model to an additional 15 states and broaden the options available for participants.


Under Obamacare, Out-Of-Pocket Costs Dropped But Premiums Rose, Study Finds


Isabel Diaz Tinoco (left) and Jose Luis Tinoco speak with Otto Hernandez, an insurance agent from Sunshine Life and Health Advisors, as they shop for insurance under the Affordable Care Act at a store setup in the Mall of Americas on Nov. 1, 2017 in Miami, Fla. The open enrollment period to sign up for a health plan under the Affordable Care Act runs until Dec. 15. (Joe Raedle/Getty Images)

Passing the Affordable Care Act was always much more about extending coverage than cutting costs. Still, as the landmark law faces one challenge after another, new data are giving a better picture of how the law has played out. That includes a new study that looks at how Obamacare affected household medical spending.

The short answer: On average, Obamacare did not affect household medical spending very much — but it definitely did cut costs for poorer people more than it did for people with more money. Here’s our discussion on Radio Boston, edited:

Host Meghna Chakrabarti: So what did this study find?

Carey Goldberg: The study was looking for how Obamacare was affecting our medical spending. As with everything with Obamacare, it’s complicated. But here we go: In a nationally representative sample of over 80,000 adults, overall, in the first couple of years after Obamacare really kicked in — 2014 and ’15 — out-of-pocket payments dropped by an average of $74.

And by out-of-pocket payments, you mean co-pays and payments you have to make because you haven’t hit your deductible yet.

Right, or procedures that aren’t covered. And meanwhile, the insurance premiums that households paid rose by an average of $232. So it’s a funny little coincidental parallel — out-of-pocket payments dropped by 12 percent, but premium payments rose by 12 percent.

But I’d imagine the effects really varied depending on a household’s income level?

They did. The ACA was meant mainly to help households with lower incomes, and it did. The study found that 6.5 percent of the population became newly insured after the ACA kicked in, and overall, the ACA predominantly helped lower-income people.

Here’s Dr. Anna Goldman, from Cambridge Health Alliance and Harvard Medical School, the lead author on the study: ‘The big picture is that the ACA did make real progress by reducing out-of-pocket spending, especially for poor and low-income households. But even in light of this progress, many American households still continue to face burdensome medical costs.’

On those ‘burdensome costs,’ this study also looked at what’s called ‘high-burden spending,’ which is defined as paying more than 5 or 10 percent of your income on out-of-pocket medical expenses. Premiums can be considered ‘high burden,’ too — that cut-off is if you’re paying more than 9.5 percent of your income.

So if I’m earning 20,000 a year, and I’m hit with out of pocket medical expenses of over $,1,000, that would be considered ‘high-burden’ or a premium that runs me close to $ 2,000 a year.

Right. So on these ‘high burden medical expenses, the good news is that out-of-pocket, high-burden spending fell by 20 percent overall — and it especially dropped for poor people. The not-so-good news for better-off folks is that among middle-income households, there was a 28 percent increase in high-burden spending on premiums.

Because premiums have been getting steeper and steeper. Does this study suggest the ACA is to blame?

No. Dr. Goldman says a better way to look at it is that while the ACA did help with out-of-pocket costs, it didn’t stem from the rise in premiums that was already underway.

I have to admit this is a little underwhelming. We have devoted so much attention and so much political wrangling to Obamacare over the last years, and this study is telling us that at least in the first couple of years, and in terms of household costs, it’s been something of a wash.

I feel the same way. What Dr. Goldman, the lead researcher, commented about that is, look, the ACA was the biggest reform of the health care system since 1965, and to get passed it had to involve a lot of political compromise:

‘It was nowhere near as radical as it could have been,’ she said. ‘I think that a single-payer plan, for example, which many Democrats on the more progressive side of the party were advocating for, would have been much more effective in reducing medical spending by all American households, certainly for people in poor and low-income households — no co-payments, no deductibles, no premiums.”

This isn’t news either, but a single-payer system apparently in this country has not been in the realm of the politically possible.

I would think the ACA as it is right now isn’t even within the realm of political possibility at the moment. The individual mandate is already out.

It’s on its way out. Although not here in Massachusetts, we should note. But what this study also tells us is that as the individual mandate and other aspects of the ACA get phased out, it will be largely the poorer people who will mostly lose out.

In the study’s conclusions the authors write that without the individual mandate, the numbers of people without insurance will go back up again, as will out-of-pocket costs, and premiums will likely rise, too, because healthier people won’t be buying insurance.

The final sentence of the paper says that international experience shows that a universal, comprehensive national health insurance program would be the most effective way to reduce household spending on medical expenses and the gaps between rich and poor.


No, Trump Hasn’t ‘Essentially Repealed Obamacare’


Image result for ACA

Killing the mandate doesn’t gut the health care law. Most likely, it will muddle along, because the rest of it is broadly popular.

In July and again in September, Republicans narrowly failed to repeal the Affordable Care Act. But their newly passed tax legislation included a provision getting rid of Obamacare’s mandate requiring Americans to buy insurance, and President Donald Trump immediately declared victory in the partisan health care wars. “When the individual mandate is being repealed, that means Obamacare is being repealed,” he crowed at a Cabinet meeting on Wednesday. “We have essentially repealed Obamacare.”

Well, no. The individual mandate is only part of Obamacare. It wasn’t even included in the original health care plan that Barack Obama unveiled during the 2008 campaign. The mandate did become an important element of Obamacare, and the only specific element that a majority of the public opposed. But the more generous elements of the program—like a major expansion of Medicaid, significant government subsidies for private insurance premiums, and strict protections for pre-existing conditions—are still popular, and still the law of the land.

“The death of Obamacare has been exaggerated,” says Larry Levitt, who oversees health reform studies at the Kaiser Family Foundation. “Eliminating the mandate creates uncertainty, but all the benefits for people remain in place.”

The Republican ecstasy and Democratic gloom over the death of the mandate reflects the most consistent misperception over the seven-plus years of Affordable Care Act debates, the incorrect assumption that the “Obamacare exchanges,” where Americans can buy private insurance, are synonymous with Obamacare. The vast majority of Americans who get their coverage through Medicare, Medicaid or their employers shouldn’t be affected. Yes, killing the mandate could cause problems for the remaining 6 percent of Americans who have to buy insurance on the open market, but nearly half will remain eligible for subsidies that would insulate them from any premium hikes.

Repealing the tax penalties for Americans who don’t buy insurance would not repeal Obamacare’s perks for Americans who do—like the ban on annual and lifetime caps that insurers previously used to cut off coverage for their sickest customers, or the provision allowing parents to keep their children on their plans until they turn 26. And it would not repeal Obamacare’s “delivery reforms” that are quietly transforming the financial incentives in the medical system, gradually shifting reimbursements to reward the quality rather than quantity of care. The growth of U.S. health care costs has slowed dramatically since the launch of Obamacare, and the elimination of the mandate should not significantly affect that trend.

In fact, during the 2008 campaign, Obama was the only Democratic candidate whose health plan did not include a mandate, because he was the only Democratic candidate who thought the main problem with health care was its cost. “It’s just too expensive,” he explained at an Iowa event in May 2007. Insurance premiums had almost doubled during the George W. Bush era, and Obama believed that was the reason so many Americans were uninsured. He doubted it would be worth the political heartburn to try to force people to buy insurance they couldn’t afford.

But Obama eventually embraced the argument that a mandate was necessary to ensure that young and healthy Americans bought insurance. The fear was that otherwise, insurance markets dominated by the old and sick (who would enjoy the law’s new protections for pre-existing conditions) would have produced even higher premiums, and might scare insurers away from serving Americans who don’t get coverage through their jobs or the government. Killing the mandate will be a step in that direction, boosting Trump’s heighten-the-contradictions effort to sabotage the functioning of Obamacare to build support for a more sweeping repeal.

That effort has already produced some damaging results for the exchanges. Insurers have increased their premiums for 2018, repeatedly citing uncertainty over Trump’s efforts to blow up Obamacare as well as his decision to cut off promised payments to insurers who cover lower-income families. Several insurers left the exchanges even before the elimination of the mandate, and others could follow.

But the widespread warnings that wide swaths of America would have no insurers on the exchanges were wrong; there are zero “bare counties” with no insurers for 2018. And a Kaiser review found the exchanges have gotten more profitable for insurers this year,despite Trump’s efforts to damage them. This year’s enrollment period appears to have gone fairly well even though the Trump administration shortened it by half and slashed its promotional budget.

The fear is that eliminating the mandate could produce a “death spiral” for the exchanges, where higher premiums scare away healthier customers, leading to even higher premiums and even sicker customers—until eventually,the insurers decide to bail. It could also encourage insurers to try to lure healthier customers with cheaper but skimpier plans that don’t provide protections for pre-existing conditions, since those customers would no longer have to pay a tax penalty.

But it is also possible that younger and healthier customers who initially bought insurance because they were required to do so will now buy insurance because they want to; surveys show that more than 75 five percent of Americans covered on the exchanges are happy with their coverage. And as a political matter, repealing the unpopular mandate could make it even harder for Republicans to pass legislation repealing insurance protections, Medicaid expansions and the rest of Obamacare, because the rest of Obamacare is popular. It’s not surprising that Republicans managed to kill the law’s vegetables, but it won’t be as easy to kill dessert.

Trump thinks congressional Democrats will soon be begging him to come up with a replacement for Obamacare, and even many Republicans who don’t embrace that fantasy believe the demise of the mandate will ratchet up pressure for a permanent solution to a seven-year political war. It could happen. But there hasn’t been a lot of bipartisanship in Washington lately, and after the Doug Jones upset in Alabama, it seems unlikely that a Senate with one fewer Republican will be more amenable to a Republican-only repeal bill.

The most likely outcome seems to be at least a few more years of Obamacare muddling through, and at least a few more years of Obamacare political warfare.


Illinois hospitals’ financial struggles likely to continue into 2018


Image result for Illinois hospitals' financial struggles likely to continue into 2018

he list reads like a who’s who of hospital systems in the Chicago area: Advocate Health Care, Edward-Elmhurst Health, Centegra Health System.

But it’s a list of hospitals systems that cut jobs this year to deal with financial pressures — not a list any hospital is eager to join.

Hospitals in Illinois and across the country faced financial stresses this year and are likely to continue feeling the squeeze into 2018 and beyond, experts say. Those pressures could fuel more cuts, consolidation and changes to patient care and services.

“We have many hospitals doing their best just to survive,” said A.J. Wilhelmi, president and CEO of the Illinois Health and Hospital Association.

Moody’s Investors Service recently downgraded its outlook for not-for-profit health care and public health care nationally from stable to negative, with the expectation that operating cash flow will fall by 2 percent to 4 percent over the next 12-18 months. About three-fourths of Illinois hospitals are not-for-profit.

“(For) almost every hospital and health system we talk to, (financial pressure) is at the top of their list in terms of ongoing issues,” said Michael Evangelides, a principal at Deloitte Consulting.

A number of factors are to blame.

Leaders of Illinois systems say reimbursements from government insurance programs, such as Medicaid and Medicare, don’t cover the full cost of care. And with baby boomers growing older, many hospitals’ Medicare populations are on the rise. It doesn’t help that payments to hospitals from the state were delayed amid Illinois’ recently resolved, two-year budget impasse, Wilhelmi said.

Unpaid medical bills, known as bad debt, are also increasing as more patients find themselves responsible for large deductibles. Payments from private insurers are no longer helping hospitals as much as they once did. Though those payments tend to be higher than reimbursements from Medicare and Medicaid, they’re not growing as fast as they used to, said Daniel Steingart, a vice president at Moody’s.

Growing expenses, such as for drugs and information technology services, also are driving hospitals’ financial woes. And hospitals are spending vast sums on electronic medical record systems and cybersecurity, Steingart said.

Many also expect that the new federal tax bill, passed Wednesday, may further strain hospital budgets in the future. That bill will do away with the penalty for not having health insurance, starting in 2019. Hospital leaders worry that change will lead to more uninsured people who have trouble paying hospital bills and wait until their conditions become dire and complex before seeking care.

With so much going on, it can be tough for hospitals to meet revenue goals.

“You’re talking about a phenomenon taking place across the country,” said Advocate President and CEO Jim Skogsbergh. Advocate announced in May that it planned to make $200 million in cuts after failing to meet revenue targets. In March, Advocate walked away from a planned merger with NorthShore University HealthSystem after a federal judge sided with the Federal Trade Commission, which had challenged the deal. Advocate is now hoping to merge with Wisconsin health care giant Aurora Health Care, although the hospital systems say financial issues aren’t driving the deal.

“Everybody is seeing declining revenues, and margins are being squeezed. It’s a very challenging time,” Skogsbergh said.

Hospitals in Illinois have responded to the pressures in a number of ways, including with job reductions. Advocate laid off about 75 workers in the fall; Centegra announced plans in September to eliminate 131 jobs and outsource another 230; and Edward-Elmhurst laid off 84 employees, eliminating 234 positions in all, mostly by not filling vacant spots.

Hospitals also are changing some of the services they offer patients and delaying technology improvements, said the Illinois hospital association’s Wilhelmi.

Centegra Hospital-Woodstock earlier this year stopped admitting most overnight patients, one of a number of changes meant to save money and increase efficiency. As a result, the system “achieved our goal of keeping much-needed services in our community,” spokeswoman Michelle Green said in a statement.

Many Illinois hospitals have also cut inpatient pediatric services, citing weak demand, and are instead investing in outpatient services.

The challenge is saving money while improving care and patient outcomes, said Evangelides of Deloitte. Hospitals are striving to do both at the same time.

Advocate, for example, opened its AdvocateCare Center in 2016 on the city’s South Side to treat Medicare patients with multiple chronic illnesses and conditions. The clinic offers doctors, pharmacists, physical therapists, social workers and exercise psychologists. It has helped reduce hospital admissions and visits among its patients, said Dr. Lee Sacks, Advocate executive vice president and chief medical officer.

Advocate didn’t open the clinic primarily to help its bottom line. The goal was to improve patient care while also potentially reducing some costs.

But such moves are becoming increasingly important to hospitals.

“It really does impact everyone,” Evangelides said of the financial pressures facing hospitals. “We all have a giant stake in helping and hoping that the systems across the country … can ultimately survive and thrive.”


AP-NORC Poll: Health Care Is the Issue That Won’t Go Away

Image result for AP-NORC Poll: Health Care Is the Issue That Won't Go Away

As President Donald Trump completes his first year in office, Americans are increasingly concerned about health care, and their faith that government can fix it has fallen.

A new poll by The Associated Press-NORC Center for Public Affairs Research finds that 48 percent named health care as a top problem for the government to focus on in the next year, up 17 points in the last two years.

The poll allows Americans to name up to five priorities and found a wide range of top concerns, including taxes, immigration and the environment. But aside from health care, no single issue was named by more than 31 percent.

And 7 in 10 of those who named health care as a top problem said they had little to no confidence that government can improve matters. The public was less pessimistic in last year’s edition of the poll, when just over half said they lacked confidence in the problem-solving ability of lawmakers and government institutions.

“We are way up there on the cost, and as far as giving good health care, we are way down,” said Rebekah Bustamante of San Antonio, a retired medical imaging technician. “Now in health care, you’re a number.”

Bustamante said she voted for Trump, but “he’s learning on the job, and he’s got a long way to go.”

Trump initially promised his own plan that would deliver “insurance for everybody” and “great” health care, “much less expensive and much better.” But the White House never released a health care proposal from the president.

GOP legislation to repeal and replace former President Barack Obama’s health care law failed in Congress, although the tax bill scraps the Obama requirement that most people get health insurance. Bloodied on both sides, Republicans and Democrats seem to have battled to an uneasy draw on health care.

Meanwhile, conflicting policy signals from Washington, including an abrupt White House decision to cancel insurer subsidies, roiled insurance markets. Premiums on health plans purchased by individuals jumped by double digits. Progress reducing the number of uninsured stalled, and one major survey found an uptick this year.

“There is zero bipartisanship, and it’s frustrating,” said Eric Staab, a high school teacher from Topeka, Kansas. “It seems like we have thrown everything at this dartboard, and nothing is improving the coverage.”

Rumblings of discontent have political repercussions for next year’s midterm elections and the presidential contest in 2020, said Robert Blendon, a professor at the Harvard T.H. Chan School of Public Health, who follows opinion trends on health care.

“It’s the issue that won’t go away,” said Blendon. “Given the news cycle, taxes should be first, the economy should be second, and this health care thing should be buried.”

Three in 10 Americans listed taxes among their top priorities, about double the percentage who said that last year. About a quarter mentioned immigration, and just under 2 in 10 mentioned environmental issues and education. Meanwhile, concerns about unemployment plunged to 14 percent, about half the mentions as last year.

Health care was by far the top issue mentioned by Democrats and independents. Republicans were about equally likely to mention immigration, health care and taxes.

Democrats were more likely than Republicans to say they have little to no confidence that the government will make progress on health care, 84 percent to 57 percent.

The reason health care doesn’t fade away is that costs aren’t getting any more manageable, said some people who took part in the AP-NORC survey.

Bustamante said she is planning a trip to Mexico for some dental work, because she can obtain quality service for much less there. “Thank God I live in Texas, where getting to Mexico isn’t that far away,” she said. “But everybody doesn’t have that option.”

ShyJuan Clemons of Merrillville, Indiana, said he’s currently uninsured because his previous health plan was costing too much money for the benefit he got from it. He faced his insurance plan’s annual deductible when he went to the doctor, so he’d wind up paying out-of-pocket for visits, on top of premiums.

“You are not constantly worried about taxes, but you are constantly worried about health care — be it major or minor,” said Clemons, a personal care attendant who works with disabled people. “You catch a cold, and you just think about it in passing — ‘I hope it doesn’t develop into a problem.'”

Clemons, a Democrat, said he’s disappointed that Trump and Republicans in Congress seem to be trying to tear down “Obamacare” instead of building on it. “I would like to see them make the thing run smoothly so we can do better, instead of just trying to cripple it,” he said.

The lack of confidence in the ability of government to find pragmatic solutions extended to other problems in the AP-NORC poll, including climate change, immigration, and terrorism.

Just 23 percent said that Trump has kept the promises he made while running for president, while 30 percent said he’s tried and failed, and 45 percent said he has not kept his promises at all.

Nearly 2 in 3 said they were pessimistic about the state of politics in the U.S. About half were downbeat about the nation’s system of government, and 55 percent said America’s best days are behind.


Consumer-directed health plans enrollment up but costs are not coming down, RAND finds



Even though high-deductible insurance options could save patients thousands of dollars every year, most people are not shopping around.

An increasingly popular form of health insurance touted for its money-saving potential has not reduced spending on unnecessary medical services, a new study shows.

Researchers from the USC Schaeffer Center for Health Policy and Economics and the RAND Corp. found that consumer-directed, high-deductible health plans have little or no effect on curbing spending on 26 services that medical professional and industry groups have deemed “low value.”

The researchers compared patient spending on unnecessary medical services, such as an MRI for lower back pain or imaging for an uncomplicated headache, before and after they switched from a traditional insurance plan to a consumer-directed health plan — a form of high-deductible insurance.

The study, published in The American Journal of Managed Care, is the latest of several to indicate that high-deductible plans are falling short of their promises of significant savings.
Recent work by researchers at USC Schaeffer Center, the USC Price School of Public Policy and the USC School of Pharmacy have found that most consumers on high-deductible plans are not comparing prices to find the best deals on services or on prescription drugs, even though the research indicates that some patients could potentially save hundreds or thousands of dollars per year.

Unnecessary services add up to an estimated $750 billion in wasteful healthcare spending each year, according to the National Academy of Sciences. Examples of the unnecessary services in the list of 26 that the researchers tracked were T3 testing for hypothyroidism, a spinal injection for low-back pain and stress testing for stable coronary artery disease.

Patients on consumer-directed health plans share more costs for their care than patients on traditional plans as they pay a higher deductible. With the high-deductible plan, a patient can open a pre-taxed healthcare savings account and use it to pay for out-of-pocket medical services. This type of plan is often pitched as way to give consumers more skin in the game, presuming they will shop and compare prices for services or skip unnecessary care and therefore spend less.

Enrollment in these plans has risen dramatically in the last decade, with a nearly seven-fold increase. Only about 4 percent of Americans with employer-sponsored insurance were on a consumer-directed health plan in 2005, compared to about 30 percent today. The vast majority of individuals who obtained insurance under the Affordable Care Act are on consumer-directed health plans.

Patients are reducing their spending overall, but not for low-value services in particular — and medical providers also often lack incentives to curb spending on these services, which are frequently ineffective.

The study focused on 26 common, low-value services from various sources, including the Choosing Wisely campaign, national guidelines, peer-reviewed literature and professional consensus. Launched in 2012 by the American Board of Internal Medicine Foundation to raise awareness about unnecessary services, the Choosing Wisely campaign has compiled recommendations from more than 70 medical professional and specialty societies identifying common and wasteful medical tests, treatments and procedures whose use should be questioned or avoided.

While spending on unnecessary services did not significantly change after a patient switched plans, the high-deductible plan did result in an average, annual $231 decrease on outpatient spending.