Tag Archives: Medicare

California Aims To Tackle Health Care Prices In Novel Rate-Setting Proposal

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California Aims To Tackle Health Care Prices In Novel Rate-Setting Proposal

Backed by labor and consumer groups, a California lawmaker unveiled a proposal Monday calling for the state to set health care prices in the commercial insurance market.

Supporters of the legislation, called the Health Care Price Relief Act, say California has made major strides in expanding health insurance coverage, but recent changes haven’t addressed the cost increases squeezing too many families.

To remedy this, Assembly Bill 3087 calls for an independent, nine-member state commission to set health care reimbursements for hospitals, doctors and other providers in the private-insurance market serving employers and individuals.

The bill faces formidable opposition from physician groups and hospitals.

“No state in America has ever attempted such an unproven policy of inflexible, government-managed price caps across every health care service,” Ted Mazer, president of the California Medical Association, said in a statement.

At a press conference Monday, Assembly member Ash Kalra (D-San Jose) and other sponsors of the bill said the commission would use Medicare reimbursements as a benchmark and then factor in providers’ operating costs, geography and a reasonable amount of profit to establish rates. More details on the legislation are expected during committee hearings.

Across the country, some employers have tried a similar approach by mostly sidestepping insurers and instead paying providers 125 to 150 percent of the Medicare price for any service. Proponents of this idea say it eliminates the worst abuses in billing, reduces administrative costs and promotes price transparency.

The California legislation envisions a system similar to the rate-setting done for public utilities.

The proposal also borrows from Maryland, which has set prices for hospital services since the 1970s.

“We have given free rein to medical monopolies — to insurers, doctors and hospitals — to charge out-of-control prices,” said Sara Flocks, policy coordinator at the California Labor Federation, which is co-sponsoring the bill, at the Monday news conference. “It’s not that we go to the doctor too much. It’s because the price is too much.”

Kalra, the assemblyman who introduced the bill, said consumers deserve relief now because soaring medical costs are eating up workers’ wages and contributing to income inequality.

“The status quo is unacceptable and unsustainable. Californians struggling to keep up demand action rather than politics as usual,” Kalra said at the news conference.

Health care providers immediately slammed the proposal, saying it would reduce patients’ access to care and drive medical providers out of the state.

Mazer countered that the bill would cause “an exodus of practicing physicians, which would exacerbate our physician shortage and make California unattractive to new physician recruits.”

Chad Terhune, a senior correspondent at California Healthline and Kaiser Health News, discussed the latest proposal and its future prospects with A Martinez, host of the “Take Two” show on Southern California Public Radio.

 

Five Worrisome Trends in Healthcare

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https://www.medpagetoday.com/publichealthpolicy/healthpolicy/72001?xid=fb_o_

healthcare; insurance; drugs; drug companies; Government-run Insurance Program Sure to Backfire | iHaveNet.com

A reckoning is coming, outgoing BlueCross executive says.

A reckoning is coming to American healthcare, said Chester Burrell, outgoing CEO of the CareFirst BlueCross BlueShield health plan, here at the annual meeting of the National Hispanic Medical Association.

Burrell, speaking on Friday, told the audience there are five things physicians should worry about, “because they worry me”:

1. The effects of the recently passed tax bill. “If the full effect of this tax cut is experienced, then the federal debt will go above 100% of GDP [gross domestic product] and will become the highest it’s been since World War II,” said Burrell. That may be OK while the economy is strong, “but we’ve got a huge problem if it ever turns and goes back into recession mode,” he said. “This will stimulate higher interest rates, and higher interest rates will crowd out funding in the federal government for initiatives that are needed,” including those in healthcare.

Burrell noted that 74 million people are currently covered by Medicaid, 60 million by Medicare, and 10 million by the Children’s Health Insurance Program (CHIP), while another 10 million people are getting federally subsidized health insurance through the Affordable Care Act’s (ACA’s) insurance exchanges. “What happens when interest’s demand on federal revenue starts to crowd out future investment in these government programs that provide healthcare for tens of millions of Americans?”

2. The increasing obesity problem. “Thirty percent of the U.S. population is obese; 70% of the total population are either obese or overweight,” said Burrell. “There is an epidemic of diabetes, heart disease, and coronary artery disease coming from those demographics, and Baby Boomers will see these things in full flower in the next 10 years as they move fully into Medicare.”

3. The “congealing” of the U.S. healthcare system. This is occurring in two ways, Burrell said. First, “you’ll see large integrated delivery systems [being] built around academic medical centers — very good quality care [but] 50%-100% more expensive than the community average.”

To see how this affects patients, take a family of four — a 40-year-old dad, 33-year-old mom, and two teenage kids — who are buying a health insurance policy from CareFirst via the ACA exchange, with no subsidy. “The cost for their premium and deductibles, copays, and coinsurance [would be] $33,000,” he said. But if all of the care were provided by academic medical centers? “$60,000,” he said. “What these big systems are doing is consolidating community hospitals and independent physician groups, and creating oligopolies.”

Another way the system is “congealing” is the emergence of specialty practices that are backed by private equity companies, said Burrell. “The largest urology group in our area was bought by a private equity firm. How do they make money? They increase fees. There is not an issue on quality but there is a profound issue on costs.”

4. The undermining of the private healthcare market. “Just recently, we have gotten rid of the individual mandate, and the [cost-sharing reduction] subsidies that were [expected to be] in the omnibus bill … were taken out of the bill,” he said. And state governments are now developing alternatives to the ACA such as short-term duration insurance policies — originally designed to last only 3 months but now being pushed up to a year, with the possibility of renewal — that don’t have to adhere to ACA coverage requirements, said Burrell.

5. The lackluster performance of new payment models. “Despite the innovation fostering under [Center for Medicare & Medicaid Innovation] programs — the whole idea was to create a series of initiatives that might show the wave of the future — ACOs [accountable care organizations] and the like don’t show the promise intended for them, and there is no new model one could say is demonstrably more successful,” he said.

“So beware — there’s a reckoning coming,” Burrell said. “Maybe change occurs only when there is a rip-roaring crisis; we’re coming to it.” Part of the issue is cost: “As carbon dioxide is to global warming, cost is to healthcare. We deal with it every day … We face a future where cutbacks in funding could dramatically affect accessibility of care.”

“Does that mean we move to move single-payer, some major repositioning?” he said. “I don’t know, but in 35 years in this field, I’ve never experienced a time quite like this … Be vigilant, be involved, be committed to serving these populations.”

Health Care and the 2018 Midterms, Attitudes Towards Proposed Changes to Medicaid

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Kaiser Health Tracking Poll – February 2018: Health Care and the 2018 Midterms, Attitudes Towards Proposed Changes to Medicaid

 

KEY FINDINGS:
  • Medicaid continues to be seen favorably by a majority of the public (74 percent) and about half (52 percent) believe the Medicaid program is working well for most low-income people covered by the program.
  • When asked about proposed changes to the Medicaid program, attitudes are largely driven by party identification. A large majority of Democrats (84 percent) and most independents (64 percent) oppose lifetime limits for Medicaid benefits, while Republicans are more divided in their views with half (51 percent) believing Medicaid should only be available for a limited amount of time.

    Poll: Public split on whether adding work requirements for Medicaid beneficiaries aims at reducing spending (41%) or lifting people out of poverty (33%) 

  • Party identification also drives views on what individuals believe is the main reason behind some states imposing Medicaid work requirements. A larger share of Democrats and independents believe the main reason for these work requirements is to reduce government spending (42 percent and 45 percent, respectively) than believe it is to help lift people out of poverty (26 percent and 31 percent). On the other hand, a similar share of Republicans say it is to reduce government spending (40 percent) as say it is to help lift people out of poverty (42 percent). Individuals living in states pursuing Medicaid work requirements are also divided on the main reason for these limits, even when controlling for party identification.

    54% of the public now holds favorable views of the Affordable Care Act – the highest share in more than 80 tracking polls 

  • The February Kaiser Health Tracking Poll finds a slight increase in the share of the public who say they have a favorable view of the Affordable Care Act (ACA), from 50 percent in January 2018 to 54 percent this month. This is the highest level of favorability of the ACA measured in more than 80 Kaiser Health Tracking Polls since 2010. This change is largely driven by independents, with more than half (55 percent) now saying they have a favorable opinion of the law compared to 48 percent last month. Large majorities (83 percent) of Democrats continue to view the law favorably (including six in ten who now say they hold a “very favorable” view, up from 48 percent last month) while nearly eight in ten Republicans (78 percent) view the law unfavorably (unchanged from last month).
  • The majority of the public are either unaware that the ACA’s individual mandate has been repealed (40 percent) or are aware that it has been repealed but incorrectly think the requirement is not in effect in 2018 (21 percent). Few (13 percent) are aware the requirement has been repealed but is still in effect for 2018.
  • More than twice as many voters mention health care costs (22 percent) as mention repealing/opposing the ACA (7 percent) as the top health care issue they most want to hear 2018 candidates discuss in their campaigns. Health care costs are the top issue mentioned by Democratic voters (16 percent) and independent voters (25 percent), as well as one of the top issues mentioned by Republican voters (22 percent), followed by repealing or opposing the ACA (17 percent).

2018 Midterm Elections

With still a few months until the midterm elections are in full swing, the latest Kaiser Health Tracking Poll finds health care costs as the top health care issue mentioned by voters when asked what they want to hear 2018 candidates discuss. When asked to say in their own words what health care issue they most want to hear the candidates talk about during their upcoming campaigns, one-fifth (22 percent) of registered voters mention health care costs. This is followed by a series of other health care issues, such as Medicare/senior concerns (8 percent), repealing or opposition to the Affordable Care Act (7 percent), improve how health care is delivered (7 percent), increasing access/decreasing the number of uninsured (6 percent), or a single-payer system (5 percent). Health care costs is the top issue mentioned by Democratic voters (16 percent) and independent voters (25 percent), as well as one of the top issues mentioned by Republican voters (22 percent), followed by repealing or opposing the ACA (17 percent).

Figure 1: Health Care Costs Are Top Health Care Issue Voters Want 2018 Candidates to Talk About During Their Campaigns

Battleground Voters

Health care costs are also the top issue mentioned by voters living where there are competitive House, Senate, or Governor races. One-fourth (23 percent) of voters in areas with competitive elections mention health care costs when asked what health care issue they most want to hear candidates talk about. Fewer mention other health care issues such as improve how health care is delivered (9 percent) or increasing access/decreasing the number of uninsured (6 percent).

2018 Midterm Election Analysis

As part of Kaiser Family Foundation’s effort to examine the role of health care in the 2018 midterm elections, throughout the year we will be tracking the views of voters – paying special attention to those living in states or congressional districts in which both parties have a viable path to win the election. This group, referred to in our analysis as “voters in battlegrounds” is defined by the 2018 Senate, House, and Governor ratings provided by The Cook Political Report. Congressional and Governor races categorized as “toss-up” were included in this group. A complete list of the states and congressional districts included in the comparison group is available in Appendix A.

The Affordable Care Act

This month’s Kaiser Health Tracking Poll finds a slight increase in the share of the public who say they have a favorable view of the 2010 Affordable Care Act (ACA). The share of the public who say they hold a favorable view of the law has increased to 54 percent (from 50 percent in January 2018) while 42 percent currently say they hold an unfavorable view. This is the highest level of favorability of the ACA measured in more than 80 Kaiser Health Tracking Polls since 2010.  This change is largely driven by independents, with more than half (55 percent) now saying they have a favorable opinion of the law compared to 48 percent last month. Large majorities (83 percent) of Democrats continue to view the law favorably (including six in ten who now say they hold a “very favorable” view, up from 48 percent last month) while nearly eight in ten Republicans (78 percent) view the law unfavorably (unchanged from last month).

Figure 2: More of the Public Hold a Favorable View of the ACA

Public Awareness of the Repeal of the ACA’s Individual Mandate

The February Kaiser Health Tracking Poll finds a slight uptick (from 36 percent in January 2018 to 41 percent this month) in the share of the public who are aware that the ACA’s requirement that nearly all individuals have health insurance or else pay a fine, known commonly as the individual mandate, has been repealed. Yet, misunderstandings persist. The majority of the public (61 percent) are either unaware that this requirement has been repealed (40 percent) or are aware that it has been repealed but incorrectly think the requirement is not in effect in 2018 (21 percent of total). Few (13 percent) are aware the requirement has been repealed but is still in effect for 2018.

Figure 3: Confusion Remains on the Status of the ACA’s Individual Mandate

Medicaid

In recent months, President Trump’s administration has supported state efforts to make changes to their Medicaid programs, the government health insurance and long-term care program for low-income adults and children. Seven in ten Americans say they have ever had a connection to the Medicaid program either directly through their own health insurance coverage (32 percent) or their child being covered by the program (9 percent), or indirectly through a friend or family member covered by the program (29 percent).

Figure 4: Seven in Ten Americans Say They Have Ever Had A Connection to Medicaid

Majority of the Public Holds Favorable Views of Medicaid and Thinks the Program is Working Well

Overall, the majority of the public (74 percent) holds favorable views of Medicaid, including four in ten who have a “very favorable” view. About one-fifth of the public (21 percent) hold unfavorable views of the program. Unlike attitudes towards the ACA, opinions towards Medicaid are not drastically different among partisans and majorities across parties report favorable views. However, a larger share of Republicans do hold unfavorable views (29 percent) compared to independents (21 percent) or Democrats (13 percent).

Figure 5: Large Shares Across Parties Say They Have a Favorable Opinion of Medicaid

In addition, more believe the program is working well than not working well for most low-income people covered by the program. This holds true across partisans with about half saying the Medicaid program is “working well” and about one-third saying it is “not working well.”

Figure 6: Larger Shares Say Medicaid Is Currently Working Well for Most Low-Income People Covered by the Program

Support for Medicaid Expansion in Non-Expansion States

One of the major changes brought on by the ACA was the option for states to expand Medicaid to cover more low-income people. As of February 2018, 18 states have not expanded their Medicaid programs.

Figure 7: Status of Medicaid Expansion Among States

Among individuals living in states that have not expanded their Medicaid programs, most (56 percent) say they think their state should expand Medicaid to cover more low-income uninsured people while four in ten (37 percent) say their state should keep Medicaid as it is today. Slightly more than half of Republicans living in non-expansion states say their state should keep Medicaid as it is today (54 percent) while four in ten (39 percent) say their state should expand their Medicaid program. Majorities of Democrats (75 percent) and independents (57 percent) say their state should expand their Medicaid program.

Figure 8: Democrats and Independents Are More Likely to Want Their State to Expand Medicaid Than Republicans

Proposed Changes to Medicaid

SECTION 1115 WORK REQUIREMENT WAIVERS

In January, the Centers for Medicare and Medicaid Services (CMS) provided new guidance for Section 1115 waivers, which would allow states to impose work requirements for individuals to be covered by Medicaid benefits. As of February 21, CMS has approved work requirement waivers in two states (KY and IN) and eight other states have pending requests.1 When asked what they think the reasoning is behind these proposed changes to Medicaid, a larger share of the public (41 percent) believe the main reason is to reduce government spending by limiting the number of people on the program than say the main reason is to help lift people out of poverty (33 percent). There are differences among demographic groups with a larger share of Democrats and independents believing the main reason is to reduce government spending, while Republicans are more divided with similar shares saying the main reason is to lift people out of poverty (42 percent) as reduce government spending (40 percent).

Figure 9: Republicans Are Divided on the Main Reason Behind the Trump Administration Permitting Work Requirements

There are also differences between individuals living in states that have either filed a Medicaid waiver for a work requirement or have had a waiver approved and those living in states that do not have Medicaid work requirement waivers pending or approved.2 Individuals living in states with pending or approved Medicaid work requirements are divided on whether the main reason for these limits is to lift people out of poverty (37 percent) or reduce government spending (36 percent). This holds true even when controlling for other demographic variables such as party identification and income that may influence beliefs.

Figure 10: Those in States with Medicaid Work Requirements Are Divided on the Main Reason Behind Them

SECTION 1115 LIFETIME LIMIT WAIVERS

In addition to work requirement waivers, five states are currently seeking waivers from the Trump administration to impose Medicaid coverage limits. These “lifetime limits” would cap Medicaid health care benefits for non-disabled adults. When asked how they think Medicaid should work, two-thirds of the public say Medicaid should be available to low-income people for as long as they qualify, without a time limit, while one-third say it should only be available to low-income people for a limited amount of time in order to provide temporary help. The vast majority of Democrats (84 percent) and most independents (64 percent) say Medicaid should be available without lifetime limits, while Republicans are divided with similar shares saying they favor time limits (51 percent) as saying they do not favor such limits (47 percent). Seven in ten (71 percent) of individuals who have ever had a connection to Medicaid say they do not support lifetime limits compared to three in ten (28 percent) who say it should only be available for a limited amount of time in order to provide temporary help.

Figure 11: Majorities of Democrats and Independents Say Medicaid Should Be Available Without a Time Limit; Republicans Are Divided

 

 

Traditional Medicare Doesn’t Cover Dental Care. That Can Be a Big Problem.

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Traditional Medicare Doesn’t Cover Dental Care. That Can Be a Big Problem.

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Many people view Medicare as the gold standard of United States health coverage, and any attempt to cut it incurs the wrath of older Americans, a politically powerful group.

But there are substantial coverage gaps in traditional Medicare. One of them is care for your teeth.

Almost one in five adults of Medicare eligibility age (65 years old and older) have untreated cavities. The same proportion have lost all their teeth. Half of Medicare beneficiaries have some periodontal disease, or infection of structures around teeth, including the gums.

Bacteria from such infections can circulate elsewhere in the body, contributing to other health problems such as heart disease and strokes.

And yet traditional Medicare does not cover routine dental care, like checkups, cleanings, fillings, dentures and tooth extraction.

After I wrote a recent article about the lack of coverage for dental care in many state Medicaid programs, I received a lot of feedback from readers saying Medicare was no better.

I have not had dental coverage since I retired 25 years ago. Any problems and I have to go to a foreign country to get treatment that I can afford. It is incredible that there is no coverage available in America for one of the most important aspects of health and wellness care for seniors. — Tom, La Jolla

Several of my elderly relatives have just let teeth fall out without being cared for or replaced because of expense. This is no way to care for our senior citizens. — Bronxbee, Bronx

Paying for dental care out of pocket is hard for many Medicare beneficiaries. Half have annual incomes below $23,000 per year. Those who have the means, but are looking for a deal, might travel abroad for cheaper dental care. Tens of thousands of Americans go to Mexico every year for dental work at lower prices. Many others travel the globe for care.

Although low-income Medicare beneficiaries can also qualify for Medicaid, that’s of little help for those living in states with gaps in Medicaid dental coverage.

According to a study published in Health Affairs, in a given year, three-quarters of low-income Medicare beneficiaries do not receive any dental care at all. Among higher-income beneficiaries, the figure is about one-quarter.

“The separation of coverage for dental care from the rest of our health care has had dramatic effects on both,” said Amber Willink, the lead author of the study and a researcher at Johns Hopkins Bloomberg School of Public Health. “As a consequence of avoidable dental problems, the Medicare program bears the cost of expensive emergency department visits and avoidable hospitalizations. It’s lose-lose.”

Traditional Medicare will cover dental procedures that are integral to other covered services. So if your Medicare-covered hospital procedure involved dental structures in some way, important related dental care would be covered. But paying for any other care is up to the patient.

Lack of dental coverage by Medicare is among the top concerns of beneficiaries. The program also lacks coverage for hearing, vision or long-term care services. However, many Medicare Advantage plans — private alternatives to the traditional program — cover these services.

For example, 58 percent of Medicare Advantage enrollees have coverage for dental exams. In receiving these benefits through private plans, enrollees are also subject to plans’ efforts to limit use by, for example, requiring prior authorization or offering narrow networks of providers. These restrictions can be problematic for some beneficiaries, and about two-thirds of Medicare beneficiaries opt for the traditional program, not a private plan.

Adding a dental benefit to Medicare is popular. A Families USA survey of likely voters found that the vast majority (86 percent) of likely voters support doing so. The survey also found that when people do not see a dentist, the top reason is cost.

Ms. Willink’s study estimated that a Medicare dental benefit that covered three-quarters of the cost of care would increase Medicare premiums by $7 per month, or about 5 percent. The rest would need to be financed by taxes.

The cost of such a benefit might be offset — or partly offset — by reductions in other health care spending, reflecting the fact that poor oral health contributes to other health problems.

Making a case for this in the political arena would not be easy, though. The initial cost would be an inviting target for politicians who express concern about fiscal prudence, regardless of any potential long-term gain. But expanding Medicare has been done before.

In 2006, a prescription drug benefit was added to the program. The law for that program was enacted in 2003, and in that same year, the surgeon general released a report calling for dental care to be treated and covered like other health care. Whether by Medicaid or Medicare, that wish is still unfulfilled.

 

Back to the Health Policy Drawing Board

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The Affordable Care Act needs help. After scores of failed repeal attempts, Congress enacted legislation late last year that eliminated one of the law’s central features, the mandate requiring people to buy insurance.

Obamacare, as the Affordable Care Act is widely known, isn’t in imminent danger of collapse, but the mandate’s repeal poses a serious long-term threat.

To understand that threat and how it might be parried, it’s helpful to consider why the United States has relied so heavily on employer-provided insurance — and why it has not yet adopted a form of the universal coverage seen in most other countries.

First, some basics on private insurance: It works well only when many people, each with a low risk of loss, buy in. Most homeowners buy fire insurance, for example, and only a small fraction file claims annually. A modest premium can therefore cover large losses sustained by a few.

But because of what economists call the adverse-selection problem, this model can easily break down for private health insurance. People typically know more about their own health risks than insurers do, making those most at risk more likely to purchase insurance.

This drives premiums up, making insurance still less attractive to the healthiest people. That, in turn, causes many to drop out, producing the fabled “death spiral” in which only the least healthy people remain insured. But at that point, private health insurance may no longer be viable, because annual treatment costs for serious illnesses often exceed several hundred thousand dollars.

Most nations have solved this problem by adopting universal coverage financed by taxes. The United States probably would have followed this approach except for a historical anomaly during World War II. Fearing runaway inflation in tight labor markets, the American government imposed a cap on wages.

But the cap didn’t apply to fringe benefits, which employers quickly exploited as a recruiting tool. Employer health plans proved particularly attractive, since their cost was a deductible expense and they were not taxed. Before the war started, only 9 percent of workers had employer-provided insurance, but 63 percent had it by 1953.

To be eligible for favorable tax treatment, companies were required to make their plans available to all employees, which mitigated the adverse-selection problem. People would lose insurance if they lost their jobs, which inhibited labor mobility, but since employment relationships were relatively durable in the postwar years, this arrangement worked well enough.

But after peaking at almost 70 percent in the 1990s, employer coverage began declining in the face of stagnating wages and rising insurance costs. By 2010, only 56 percent of the nonelderly American population still had workplace health plans.

Even so, because more than 100 million Americans still had such plans and were reasonably satisfied with them, the Obama administration opted to build health reform atop the existing system. In addition to allowing people to keep their existing employer coverage, Obamacare expanded eligibility for Medicaid and established exchanges in which people without employer plans could buy insurance.

At the outset, Obamacare had three central features:

• Insurers could not charge higher prices to people with pre-existing conditions.

• Those without coverage had to pay a penalty to the government (the “mandate”).

• Low-income people would be eligible for subsidies.

The first two provisions were necessary to prevent the death spiral, and government couldn’t mandate insurance purchases without adding subsidies for the poor.

Despite a bumpy rollout and some frustrations over shrinking choices and rising prices at health care exchanges, Obamacare was working remarkably well by most important metrics. Program costs were much lower than expected, and the uninsured rate among nonelderly Americans fell sharply — from 18.2 percent in 2010 to only 10.3 percent in 2018.

This progress is now imperiled.

The mandate — by far the program’s least popular provision — was repealed as part of tax legislation passed in December 2017. And because economists predict that its absence will slowly rekindle the insurance death spiral, we’re forced back to the policy drawing board.

The most common response has been to call for a variant of the single-payer systems employed by most other countries, which promise dramatic reductions in health costs.

The United States spends far more on health care than any other nation, yet gets worse outcomes on most measures. In part this is because administrative and marketing expenses are much lower under single-payer plans. But by far the most important source of savings is that governments are able to negotiate much more favorable terms with service providers. Virtually every procedure, test, and drug costs substantially more here than elsewhere.

An American hospital stay, for example, costs more than twelve times as much as one in the Netherlands. The single-payer approach also sidesteps the thorny mandate objection by covering everyone out of tax revenue.

A June 2017 poll showed that 60 percent of Americans said the government should provide universal coverage, and support for single-payer insurance rose more than one-third since 2014.

Yet a move to a single-payer system faces the same hurdle that shaped Obamacare: Millions of Americans would resist any attempt to take their employer-provided plans away. And although single-payer health care would be far less costly overall, it would be paid for by taxes — the most visible form of sacrifice — rather than by the implicit levies that underwrite employer coverage.

From a purely economic standpoint, the increased tax burden is irrelevant. It’s a truism that making the economic pie larger necessarily makes it possible for everyone to get a larger slice than before. And because the gains from single-payer insurance would be so large, there must be ways to make everyone come out ahead, even in the short run.

The Yale political scientist Jacob Hacker, for example, has proposed the introduction of Medicare Part E (Medicare for Everyone), which would allow anyone to buy into Medicare, regardless of age. The program’s budget would be supported in part by levies on employers that don’t offer insurance.

The cost savings inherent in this form of single-payer coverage would lead more and more firms to abandon their current plans voluntarily. Gradually, the age for standard Medicare eligibility also would fall until the entire population was covered by it. The Center for American Progress has now introduced a similar proposal.

It’s critical to realize that there are attractive paths forward. In no other wealthy country do we see people organize bake sales to help pay for a neighbor’s cancer care. We can avoid this national embarrassment without requiring painful sacrifices from anyone.

 

 

Big Pharma’s lobbyists are losing despite their ‘pass the buck’ campaigns

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http://thehill.com/opinion/healthcare/376699-big-pharmas-lobbyist-are-losing-despite-their-pass-the-buck-campaigns

Big Pharma's lobbyists are losing despite their 'pass the buck' campaigns

As policymakers and the administration focus on high drug prices, the brand drugmaker lobby has responded by unleashing millions of dollars in an attempt to shift blame.

They’ve blamed price gouging scandals on a “broken system” and claim to want to reform. They bankroll more than 1,400 lobbyists along with many “patient groups” and so-called “experts” to carry these messages to the media outlets and politicians on whom they lavish millions in advertising dollars and campaign contributions.

However, their polling numbers remain as low as before their advertising blitz began as Americans have overwhelmingly negative views of drugmakers and the pricing schemes of “Pharma Bro” Martin Shkreli and others who increased drug prices simply because they found that they could.

The response from the drugmaker lobby has been to rollout slick public relations slogans like “Share the Savings” and “Let’s Talk About Cost” that use fancy infographics in an attempt to move the conversation away from those setting the price of the drug (drug companies) to everyone else who uses or pays for their products, like employers, hospitals, pharmacy benefit managers, insurers, and others.

This isn’t surprising and certainly not unpredictable, but ignores the basic challenge facing drug companies: no amount of money can change the fact that Republicans and Democrats know the problem is high drug prices and that drugmakers alone set those prices.

So despite all this overwhelming lobbying and financial firepower, the question remains: Why are drugmakers losing?

In the recent budget bill, drugmakers were singled out by both parties to pay billions more in discounts to help seniors in the Medicare prescription drug benefit “donut hole.”

This comes as states across the country are taking a harder look at drugmaker pricing schemes and passing legislation in California and Nevada that faced significant pushback from drug companies (and their surrogates).

Like the emperor who wore no clothes, drugmakers have confused politician’s fear of speaking out against them with support for their pricing practices. It appears that most politicians will tolerate, but not believe in the drug lobby’s messages or goals.

Drug manufacturers have a number of options to alter public perception of their pricing strategies. They can assert that their products are a great value at any price but there is definitely a level where that argument fails. They can also compete on price and refrain from automatic pricing increases that obviously impact healthcare affordability.

Instead, they peddle distracting narratives and government mandates that undermine federal programs and result in huge industry profit windfalls. One recent example would be to prevent brand discounts and rebates from being used to lower premiums for seniors.

According to the White House’s budget proposal, this mandate alone would cost the government about more than $42 billion and lead to higher premiums for Medicare beneficiaries.

This is yet another distraction from the real problem of excessive drug pricing. If the drugmakers were truly concerned about affordability, the drug companies would simply reduce their prices. That would have a direct impact on the cost of health care to every American consumer.

Simply put, drugmakers have failed to give policymakers the one thing they need: real solutions that reduce costs. They’ve offered no solutions that score savings — in fact, they all raise costs.

Their relentless, ongoing PR blitz is simply an effort to pass the buck and direct attention away from their pricing strategies. The drug lobby has underestimated the one politician, with whom their money and power doesn’t carry much weight: President Trump. It was only last year that he said drugmakers were “getting away with murder.”

If the record is any indicator, he still thinks Big Pharma is one of the creatures lurking in the swamp he intends to drain.

 

 

U.S. Prescription Drug Costs Are a Crime

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https://www.bloomberg.com/view/articles/2018-02-27/prescription-drug-costs-in-the-u-s-are-a-crime

 

And just tweaking the system won’t solve the problem.

President Donald Trump has complained that U.S. drug companies are “getting away with murder.” For once the hyperbole is forgivable: It suggests he takes the problem of drug costs seriously and might be willing to do something about it. Unfortunately, his administration’s efforts up to now suggest the opposite.

The White House has proposed tweaks to government health-care programs. Some of these measures are worth trying — they could help at the margin — but tweaks aren’t enough. The underlying problem is drug prices that are indeed murderous: Americans and their insurers often pay many times what people in other developed countries pay for the same medicines. That’s what policy needs to confront.

The administration wants insurers participating in Medicare’s prescription-drug program, for instance, to share more directly with beneficiaries the discounts they arrange with drug companies. Out-of-pocket drug costs for some people on Medicare would be capped, and reimbursement for medicines administered by doctors would be trimmed. In Medicaid, a handful of states would be allowed to decline coverage for certain drugs, increasing their leverage in negotiating discounts.

Such changes could lower drug spending for some Medicare and Medicaid beneficiaries. But they miss the main point by shifting costs within the health-care system rather pressing down on the costs themselves. Unless this changes, the U.S. will continue to be overcharged for its drugs.

The companies often say that high U.S. prices pay for research into new lifesaving products. Leaving aside why U.S. patients should be asked to shoulder that burden for the entire world, the evidence shows that the argument is false: The premium companies collect in the U.S. market is substantially greater than the amount they spend on research and development.

State legislatures have aimed closer to the mark with efforts to expose the math behind price increases. Vermont, Nevada and California have new lawsrequiring that drug companies provide cost breakdowns to justify big price hikes on popular drugs (including, in Nevada’s case, drugs for diabetes). Several other states are considering doing the same.

Even if these laws stand — they’re being challenged in court — transparency gets you only so far. Pushing prices down will take stronger efforts from the federal government to increase competition.

One good way to do that is to speed the uptake of generics. Scott Gottlieb, commissioner of the Food and Drug Administration, has been pressuring drug makers to stop trying to extend the monopolies they’ve been granted (via FDA approval and patents) for brand-name drugs. But only Congress can forbid those practices, and it has yet to act on bipartisan legislation that would do the job. Trump could show he’s serious about lowering drug prices by urging Congress to pass the law.

Another way to boost competition would be to let people and pharmacies import some drugs from other countries with sound pharmaceutical regulation, such as Canada. Almost one in 10 Americans say they already do, despite the official prohibition.

The U.S. should also do what so many other countries do: negotiate. The Centers for Medicare and Medicaid Services ought to use its enormous purchasing power on behalf of the 42 million Americans in the Medicare drug-benefit program, ensuring that prices better reflect the drugs’ actual medical value. Again, for this to happen, Congress would need to change the law. Incredible as this will seem elsewhere in the world, the U.S. government has denied itself permission to apply pharmaceutical cost-benefit analysis and negotiate prices.

Trump is right to deplore the cost of drugs in the U.S. There’s no great mystery about the causes — and no doubt that much bolder measures than the administration has in mind will be needed to bring prices down.

California confronts the complexities of creating a single-payer healthcare system

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http://www.latimes.com/business/hiltzik/la-fi-hiltzik-singlepayer-20180209-story.html

California confronts the complexities of creating a single-payer healthcare system

California Assembly Speaker Anthony Rendon may have expected to torpedo the idea of a statewide single-payer healthcare system for the long term last June, when he blocked a Senate bill on the issue from even receiving a hearing in his house.

He was wrong, of course. His shelving of the Senate bill created a political uproar (including the threat of a recall effort), forcing him to create a special committee to examine the possibility of achieving universal health coverage in the state. On Monday and Wednesday, the Select Committee on Health Care Delivery Systems and Universal Coverage held its final hearings.

The panel ended up where it started, with the recognition that the project is hellishly complex and politically daunting but still worthwhile — yet can’t happen overnight. “I’m anxious to see what it is that we can actually be working on this year,” committee Co-Chair Jim Wood (D-Healdsburg) said toward the end of Wednesday’s seven-hour session. “Some of the logistics and the challenges we have to deal with are multiyear challenges.”

The No. 1 experience missing from the American healthcare system is peace of mind.

Little has changed since last year, when a measure sponsored by the California Nurses Assn., SB 562, passed the Senate in June and was killed by Rendon (D-Paramount) in the Assembly. The same bill, aimed at universal coverage for all residents of the state, including undocumented immigrants, is the subject of the select committee’s hearings and the template for statewide reform.

Backers of the Healthy California program envisioned by the bill feel as if they’re in a race with federal officials intent on dismantling healthcare reforms attained with the Affordable Care Act, and even those dating from the 1960s with enactment of Medicare and Medicaid.

In just the last few weeks, the U.S. Department of Health and Human Services has approved adding a work requirement to Medicaid in Kentucky and begun considering a plan to place lifetime limits on Medicaid benefits — profound changes in a program traditionally aimed at bringing healthcare to needy families.

The Republican-controlled Congress effectively repealed the individual mandate in the Affordable Care Act. That is likely to drive up premiums for unsubsidized middle-income insurance buyers and has prompted California and other states to consider implementing such a mandate on their own. (Idaho is moving distinctly in the opposite direction from California, proposing to allow “state-based health plans” that allow insurers to discriminate against applicants with pre-existing conditions.

Healthy California would be the most far-reaching single-state project for universal health coverage in the nation. That’s to be expected, since the state’s nation-leading population (39 million) and gross domestic product ($2.6 trillion) provide the impetus to solve big social and economic issues on its own.

The program would take over responsibility for almost all medical spending in the state, including federal programs such as Medicare and Medicaid, employer-sponsored health plans, and Affordable Care Act plans. It would relieve employers, their workers and buyers in the individual market of premiums, deductibles and co-pays, paying the costs out of a state fund.

All California residents would be eligible to obtain treatment from any licensed doctor in the state. Dental and vision care and prescription drugs would be included. Insurance companies would be barred from replicating any services offered by the program.

Doctors and hospitals would be paid rates roughly analogous to Medicare reimbursements, and the program would be expected to negotiate prices with providers and pharmaceutical companies, presumably by offering them access to more than 39 million potential patients.

Wood stressed that the goal of reform is to lower healthcare prices, or at least to slow the rate of growth. Yet that may mean focusing on the wrong challenge.

The mechanics of cost reduction aren’t much of a mystery. As several witnesses at the latest hearings observed, the key is reducing unit prices — lower prices per dose of drug, lower reimbursements for physicians and hospitals, all of which are higher in the U.S. than the average among industrialized countries. It will also help to remove insurance industry profit and overhead (an estimated 15% of healthcare spending), not to mention the expenses they impose on billing departments at medical offices and hospitals, from the system.

The real challenge, however, lies in the politics of transitioning to a new healthcare system. Advocates of reform often overlook an important aspect of how Americans view the existing system. Although it’s roundly cursed in the abstract, most people are reasonably satisfied with their coverage.

 

That’s because most people seldom or never experience difficult or costly interactions with the healthcare system. Horror stories of treatments denied and astronomical bills charged are legion. But the truth is that annual healthcare spending is very heavily concentrated among a small number of people.

The top 5% of spenders account for half of all spending, the top 20% of spenders for about 80%. According to the National Institute for Health Care Management, the bottom 50% of spenders account for only about 3% of all spending.

These are annual figures, so over a lifetime any person may have more contacts with the system. But that may explain why it’s hard to persuade Americans to abandon a system many consider to be just good enough for something entirely new, replete with possibilities that it could turn out to be worse.

The nurses association is pegging its reform campaign to the uncertainties built into the existing system. “The experience of most Americans is that they’re satisfied with what they’re getting, but there’s a great deal of anxiety,” says Michael Lighty, the group’s director of public policy. “The No. 1 experience missing from the American healthcare system is peace of mind. People are not afraid that what they have will be taken away, but that what they have will not be adequate for what they need.”

In terms of funding, the idea is for the state to take over the $370 billion to $400 billion a year already spent on healthcare in California. (The higher estimate is from the state Legislative Analyst’s Office, the lower from the nurses association.) That includes $200 billion in federal funds, chiefly Medicare, Medicaid, and Obamacare subsidies; and an additional $150 billion to $200 billion in premiums for employer insurance and private plans and out-of-pocket spending by families.

University of Massachusetts economist Robert Pollin, the nurses’ program consultant, estimates that the program will be about 18% cheaper than existing health plans, thanks to administrative savings, lower fees for drugs, physicians, and hospitals, and a step up in preventive services and a step down in unnecessary treatments.

That would leave about $106 billion a year, as of 2017, needed to replace the employer and private spending that would be eliminated. Pollin suggests doing so through an increase of 2.3% in the sales tax and the addition of a 2.3% gross receipts tax on businesses (or a 3.3% payroll tax, shared by employers and workers), instead of the gross receipts tax. Each levy would include exemptions for small businesses and low-income families.

Anyone with experience in California tax politics knows this is a potential brick wall. Taxes of this magnitude will generate intense opposition, despite the nurses’ argument that relief from premiums and other charges means that families and business will come out ahead.

But that’s not the only obstacle. A workaround would have to be found for California Constitution requirements that a portion of tax revenues be devoted to education. A California universal coverage plan would require “a high degree of collaboration between the federal government and the state,” Juliette Cubanski of the Kaiser Family Foundation told the committee Monday. Waivers from Medicare and Medicaid rules would have to be secured from the Department of Health and Human Services; redirecting Medicare funds to the state might require congressional approval.

A federal law that preempts state regulations of employee health benefits might limit how much California could do to force employer plans into a state system.

Obtaining the legal waivers needed from the federal government to give the state access to federal funds would take two to three years “with a friendly administration,” Wood said. “We don’t have a friendly administration now.”

Advocates of change are understandably impatient in the face of rising healthcare costs and the federal government’s hostility to reform. Shocked gasps went up from the hearing audience Wednesday when Wood casually remarked, “It is absolutely imperative that we slow this down.” Startled by the reaction, he quickly specified that he meant “slow the costs down.”

The desire to pursue the goal of universal coverage, whether through a single-payer model or a hybrid, plainly remains strong in Sacramento, in the face of the vacuum created by the Republican Congress and Trump White House.

As Betsy Estudillo, a senior policy manager for the California Immigrant Policy Center put it at Wednesday’s hearing, “The nation needs California’s leadership, now more than ever.”

 

Trump’s Budget Would Cut HHS Funding 21%; Azar Approves

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http://www.healthleadersmedia.com/leadership/trumps-budget-would-cut-hhs-funding-21-azar-approves?utm_source=edit&utm_medium=ENL&utm_campaign=HLM-Daily-SilverPop_02142018&spMailingID=12931448&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1341286596&spReportId=MTM0MTI4NjU5NgS2#

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The White House calls for an increase in funding for veterans healthcare services, while proposing cuts to HHS and a repeal of the Affordable Care Act.

President Donald Trump released his budget proposalMonday for fiscal year 2019. It includes overall reductions in nondefense spending while also increasing funding for veterans healthcare services.

The White House’s $4.4 trillion budget request to Congress comes days after a two-year, $300 billion bipartisan budget deal was signed into law following the second government shutdown in as many months.

Though Congress is unlikely to vote on a singular budget, the various provisions listed in the executive proposal outline the legislative agenda the Trump administration would like to pursue in 2018.

“I applaud President Trump for laying out his vision for the country in today’s budget request and welcome his partnership as the Energy and Commerce Committee works to tackle several shared priorities,” said Rep. Greg Walden, R-Ore., chairman of the House Committee on Energy and Commerce in a statement. “Many of the administration’s other proposals to lower health care costs complement our continued commitment to addressing the cost drivers across every facet of our nation’s health care system.”

Below is a breakdown of the proposals affecting the healthcare world, including cuts to the Department of Health and Human Services (HHS), Medicare, a repeal-and-replace plan for the Affordable Care Act (ACA), and more money for veterans healthcare.

Major cuts to HHS

The proposal features a $68.4 billion budgetary line for HHS, a 21% reduction in funding compared to FY 2017. The budget also proposes a $451 million cut to training programs for health professionals, arguing the initiatives “lack evidence that they significantly improve the nation’s health workforce.”

If adopted, the policies would extend Medicare’s solvency by eight years, according to the budget proposal. Current projections estimate Medicare will become insolvent by 2029. The Trump administration also proposed a limit on Medicaid reimbursements to federal providers at no more than the cost of providing services to beneficiaries.

“The President’s budget makes investments and reforms that are vital to making our health and human services programs work for Americans and to sustaining them for future generations,” said HHS Secretary Alex Azar in a statement. “In particular, it supports our four priorities here at HHS: addressing the opioid crisis, bringing down the high price of prescription drugs, increasing the affordability and accessibility of health insurance, and improving Medicare in ways that push our health system toward paying for value rather than volume.”

Bundled payments for community-based medication-assisted treatment would see an opportunity to expand through the budget proposal, with the White House highlighting a new Medicare reimbursement for methadone treatment.

Medicare beneficiaries would also be able to save for out-of-pocket costs by allowing tax deductible contributions to health savings accounts associated with high deductible health plans offered by employers or Medicare Advantage.

The budget proposes a ‘$5 returned for every $1 spent’ policy for the Medicare Health Care Fraud and Abuse Control, a $45 million increase compared to FY 2017 which totals $770 million,. The White House believes the additional funding will bolster the program’s efforts to “identify and prevent fraudulent or improper payments from being paid in the first place.”

Two-part ACA repeal

Arguing that “national healthcare spending trends are unsustainable,” the budget offers a solution in the form a two-part repeal of the Affordable Care Act.

Modeled on the Graham-Cassidy proposal, the first step would focus on providing block grants to states for healthcare spending plans.

The Market-Based Health Care Grant Program, the new block grant program, would offer states and consumers with options outside of the ACA’s “insurance rules and pricing restrictions.” The administration believes this will address high premium costs and rising deductibles.

The second part of the plan focuses on Medicaid reform, specifically the repeal of Medicaid expansion spurred on by the ACA, as well as reducing “state gimmicks” like provider taxes. This move would shift federal authority over healthcare access to states, which could in turn design individualized plans.

Major increase for veterans healthcare

Continuing with a campaign promise to address issues facing veterans, Trump’s budget proposal includes an increase in spending for veterans healthcare programs over the next three fiscal years.

For FY 2019, the Veterans Health Administration would receive $70.7 billion, a 9.6% increase compared to FY 2017. By 2020, that number rises to $75.6 billion in advance appropriations for VA medical care program costs.

This covers 9.3 million enrollees in the Veterans Affairs health system.

Additionally, the budget provides $8.6 billion for veterans mental health and suicide prevention programs, and $11.9 billion would be used to enhance and expand veterans’ access to high-quality community care.

The administration proposes the consolidation of the Veterans Choice Program and other community care programs into a new, unified program: the Veteran Coordinated Access & Rewarding Experiences program.

 

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

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https://www.healthaffairs.org/do/10.1377/hblog20180212.852840/full/

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.