Tag Archives: Medicare

Drug Rebates Reward Industry Players — And Often Hurt Patients

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http://khn.org/news/drug-rebates-reward-industry-players-and-often-hurt-patients/

Medicare and its beneficiaries aren’t the winners in the behind-the-scenes rebate game played by drugmakers, health insurers and pharmacy benefit managers, according to a paper published Tuesday in JAMA Internal Medicine.

The paper, which dives into the complex and opaque world of Medicare drug price negotiations, finds that rebates may actually drive up the amount Medicare and its beneficiaries pay for drugs — especially for increasingly common high-priced drugs — and it offers some systemic solutions.

“How these rebates and price concessions happen between the manufacturer of the drug and the PBMs [pharmacy benefit managers] and health plans can directly impact patient cost in a big way,” said the paper’s lead author, Stacie Dusetzina of the University of North Carolina-Chapel Hill’s pharmacy school.

The paper’s findings and proposed solutions come as President Donald Trump’s administration, Congress and state lawmakers grapple with ways to control drug prices and overall health spending. Trump’s administration has said it wants to lower drug prices and hinted at mandating rebates in Medicare. Leaders on Capitol Hill have called for Medicare price negotiations.

In the JAMA paper, Dusetzina cites the EpiPen as one example. Last year, executives at Mylan, the maker of the EpiPen, said the list price of the drug for life-threatening allergic reactions was $600, but the company earned $274 after rebates and other fees.

That savings, though, isn’t necessarily passed on to patients in Medicare’s system. Instead, the money tends to be swallowed up by health insurers and middlemen like pharmacy benefit managers.

And, even though patients don’t pay list prices for their drugs, those high prices (like $600 for the EpiPen) are used to calculate how much Medicare covers for any individual patient — and sometimes what patients pay out-of-pocket, Dusetzina said.

“We’ve heard over the years that the list price doesn’t really matter, that it’s not the real price,” Dusetzina said. “It matters.”

The way it matters is not easily apparent. Here’s what happens: When a Medicare patient picks up a prescription, what they pay toward it is generally based on that higher list price and not the price after rebates, so the amount the beneficiary pays is scaled upward as a result.

And Medicare uses that high-end list price to calculate how rapidly beneficiaries reach the dreaded doughnut hole, where patients pay a bigger share of the price of the drug after their spending hits $3,700, the 2017 benchmark. Once through the doughnut hole, Medicare picks up the bulk of the drug’s cost.

High list prices drive patients into and out of the doughnut hole faster, raising their out-of-pocket costs and Medicare expenditures.

Dusetzina and co-authors Rena Conti, assistant professor of health policy and economics at the University of Chicago, and Dr. Peter Bach, director of Memorial Sloan Kettering Cancer Center’s Center for Health Policy and Outcomes, propose solutions to this problem.

Bach called the current Medicare system “absolutely devastating for people on high-cost specialty drugs.”

Bach’s drug pricing lab at Memorial Sloan Kettering offers an interactive tool for comparing how dollars shift when using the list price and post-rebate price.

The authors recommend that patients should be charged flat-dollar copays rather than coinsurance charges, which are based on a percentage of the drug’s price. The copays could be tiered, depending on the cost of the drug, the paper suggested.

This solution comes, in part, because the number of Medicare enrollees paying coinsurance for their drug, rather than a flat fee, has increased to 58 percent last year from 35 percent in 2014, the paper notes.

Another tactic would be to address the underlying disconnect between rebate negotiations and savings for Medicare and beneficiaries. The authors suggest that incentives for health insurers need to change to require health plans to pay more of the drugs’ costs after beneficiaries pass through the doughnut hole.

In addition, Dusetzina said, using the post-rebate amount in Medicare’s calculations would allow Medicare beneficiaries to move through the doughnut hole more slowly. That would save both patients and Medicare money.

“It really just stops us from accelerating people through the benefit,” Dusetzina said.

Last month, the Pharmaceutical Research and Manufacturers of America, which represents the pharmaceutical and biotechnology industry, launched a “Share the Savings” advertising campaign calling for public education about how the savings from rebates don’t actually get passed on to commercial insurance patients.

In an email, PhRMA’s Holly Campbell said the group’s commissioned research has found that rebates and discounts have nearly doubled from 2013 to 2015. Campbell said PhRMA believes “insurance companies should share more of the rebates and discounts they receive with patients.”

America’s Health Insurance Plans, which represents the insurance industry, calls the assertion that rebates and other discounts aren’t passed along “absolutely inaccurate” and noted the “true issue” is that drug prices continue to skyrocket “with no clear explanation as to how prices are set.” Insurers pass the savings from rebates on in different ways, including lower monthly premiums and co-pays, said AHIP’s Cathryn Donaldson.

Dusetzina said there is one caveat to the Medicare study: It is unclear how many drugs get a rebate and for how much because there is lack of transparency when it comes to rebates.

The paper’s final suggestion is about transparency. It says that federal regulators should require rebate data to be reported for individual drugs and then use that information to change Medicare’s benefit design in a way that “would lead to savings” for Medicare and its enrollees.

Healthcare Triage News: The Advantages of Medicare Advantage

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Healthcare Triage News: The Advantages of Medicare Advantage

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Many studies have demonstrated what economics theory tells us must be true: When consumers have to pay more for their prescriptions, they take fewer drugs. That can be a big problem. This is Healthcare Triage News.

 

Trump’s $4.1 trillion budget: 9 healthcare takeaways

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http://www.beckershospitalreview.com/finance/trump-s-4-1-trillion-budget-9-healthcare-takeaways.html

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President Donald Trump’s first full budget proposal will include $3.6 trillion in spending cuts to balance the budget in the next decade.

Although the full $4.1 trillion budget plan, titled “A New Foundation for American Greatness,” will be released Tuesday, Office of Management and Budget Director Mick Mulvaney briefed White House reporters Monday on the budget.

Here are nine of the key proposals related to healthcare in President Trump’s budget proposal for fiscal year 2018, which begins Oct. 1.

1. Medicaid cuts. President Trump’s budget includes $610 billion in Medicaid cuts over 10 years. The reduction is in addition to the $839 billion pulled from Medicaid under the proposed American Health Care Act, the ACA repeal and replacement bill that phases out Medicaid expansion, according to The Hill.

2. Repeal and replace the ACA. The budget assumes passage of the AHCA. The Trump administration expects to save $250 billion over 10 years by repealing and replacing the ACA. These savings are in addition to the $610 billion in proposed Medicaid cuts in the budget, according to The New York Times.

3. Medicare unscathed. The budget makes no changes to the Medicare program or to core Social Security benefits, two programs President Trump vowed during his campaign to leave alone, according to The Hill.

4. Reduction in CHIP funding. Under the budget, $5.8 billion would be cut from the Children’s Health Insurance Program over 10 years, according to a budget document posted by The Washington Post.

5. NIH funding cut. Under the budget proposal, the National Institutes of Health budget would be reduced from $31.8 billion to $26 billion, according to The Washington Post.

6. Cuts to CDC funding. Several CDC programs would be hit with cuts under the budget proposal. One of the biggest cuts is to the agency’s chronic disease prevention programs, which would have funding reduced by $222 million, according to The Washington Post.

7. Veterans Choice Program extended. The budget calls for extension of the Veterans Choice Program, which allows veterans to go outside of the Veterans Affairs system for care. Under the budget, $29 billion more would be spent on this program over 10 years, according to The New York Times.

8. Medical malpractice limits. The budget includes medical malpractice reforms, such as capping awards for noneconomic damages, that are intended to reduce the practice of defensive medicine. The Trump administration expects these changes to save Medicare $31 billion over a decade, according to The New York Times.

9. Funds substance abuse treatment. The budget would allocate $500 million to expand access to treatments, including medication-assisted treatment, for those suffering from opioid addiction. The budget also includes $1.9 billion in block grants for states to use for substance abuse treatment and $25 million for the Substance Abuse and Mental Health Services Administration for expanding access to critical interventions. SAMHSA would also receive an additional $24 million to equip first responders with overdose reversing drugs.

Telehealth Parity Laws

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http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=162

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Ongoing reforms are expanding the landscape of telehealth in the US health care system, but challenges remain.

What’s the issue?

Despite the fact that no other developed country even comes close to the United States in annual spending on health care, 20 percent of Americans still live in areas where shortages of physicians and health care specialists exist, and the United States still ranks the lowest overall among eleven industrialized countries on measures of health system efficiency, access to care, equity, and healthy lives. Many believe that the answer to issues of cost and access in the US health system lies in telehealth, which increases access to care, alleviates travel costs and burdens, and allows more convenient treatment and chronic condition monitoring.

With the implementation of the Affordable Care Act (ACA), the federal government announced the move toward encouraging and including telehealth services in health care coverage. The ACA, however, only implemented telehealth at the federal level through Medicare, in selected circumstances; the power to determine which, if any, telehealth services is covered by Medicaid still remains largely within the powers of individual states. Also, states can govern private payer telehealth reimbursement policies. This means that telehealth implementation varies from state to state in terms of what services providers will be reimbursed for delivering, as well as what sort of “parity,” defined as “equivalent treatment of analogous services,” is expected between in-person health services reimbursements and telehealth reimbursements. This variation affects providers’ ability to implement telehealth options, thereby reducing the patients’ ability to use these services and become comfortable with the telehealth processes. Consequently, telehealth faces significant obstacles in becoming an accepted and used health care option for individuals, and states and the nation as a whole cannot fully realize the cost savings of telehealth.

Preserving The Bipartisan Commitment To Health Care Delivery System Reform

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http://healthaffairs.org/blog/2017/05/18/preserving-the-bipartisan-commitment-to-health-care-delivery-system-reform/

Bipartisan agreement between the republican and democrat organiization as a symbol for a two party system with a flag of the United States connecting two mountain cliffs shaped as an elephant and donkey.

Improving and reforming our health care delivery system is not a partisan issue. The need to improve health care delivery models, as a means for ensuring better patient outcomes and a more efficient health care system, enjoys broader consensus than elements surrounding health insurance coverage and financing. It is important for Congress, the Trump administration, and the health care industry to continue bipartisan efforts to shift our health care delivery system and provider payment models toward value-based care.

The Long History Of Bipartisanship In Medicare

For more than 30 years, Democrats and Republicans have worked together on incremental approaches to fostering smarter payment models in federal health programs, which seek to reward providers and health plans for delivering cost-efficient, high-quality care. In 1983, Democratic and Republican leaders of the Senate Finance Committee and House Ways and Means Committee agreed to modernize Medicare’s payment system for inpatient hospital stays, moving from cost-based reimbursement to a pre-set prospective payment for a duration of care for a specific condition.

In 2000 and again in 2003, Congress enacted bipartisan legislation to authorize Medicare payment demonstrations that laid the groundwork for the accountable care organization and bundled payment programs that are in operation today. Most recently, Democrats and Republicans worked together to pass the Medicare Access and CHIP Reauthorization Act of 2015, which reshaped Medicare’s payment system for physician and practitioner services to better link payment to quality performance and encourage clinician participation in alternative payment models. The passage of the 21st Century Cures Act last December was also bipartisan legislation. It created policies to address site-of-service payment differences in our health care delivery system, while improving interoperability of health information technology systems.

It is critical that we continue to build upon these delivery reform efforts, as shifting payment incentives for both providers and managed care plans represents our best chance to improve quality and control health care cost growth without limiting access to services or reducing the scope of covered benefits.

While many programs are still working through growing pains, we have some early evidence of success. Medicare’s voluntary bundled payment program for orthopedic surgery cases produced savings of $864 per 90-day episode of care, on average during 2014. Meanwhile, the Independence at Home Demonstration resulted in average annual savings of $3,070 per participating beneficiary in the demonstration’s first year of operation. Under this demonstration, primary care practices share in Medicare savings that result from care coordination and in-home visits tailored to chronically ill patients’ needs. Finally, a recent Medicare demonstration to address avoidable hospitalizations among nursing home residents showed significant reductions in avoidable hospital admissions, achieved through enhanced medication management and nurse-led care coordination across primary and specialty care.

In continuing implementation of delivery system reform, policy makers must work to develop payment models that avoid unneeded complexity. The new payment arrangements must be understandable to participating providers and patients, to achieve necessary engagement of both patients and providers in the care model.

The Broader Landscape For Delivery System Innovation

The delivery system innovation movement allows for the prospect of federal health programs building off of successful private-sector models, such as the Pacific Business Group on Health’s value-based payment programs for large employer-sponsored health plans. Such complementary efforts will help encourage the public and private sectors to coalesce around a unified long-term vision for delivery reform.

Delivery system reform efforts have most often focused on breaking down payment silos in fee-for-service medicine and providing incentives for care coordination. Although these steps are critical to improving quality and promoting efficiencies, delivery system reform also presents an opportunity to foster person-centered care, including through the provision of non-medical social supports, for high-need, high-cost chronically ill individuals. Heightened focus on the high-need, chronically ill population will be increasingly important for delivery system reform, as these individuals incur medical expenses that are more than four times the national average.

While Democrats and Republicans will continue to disagree on key aspects of health care policy, we firmly believe that the bipartisan work to enhance and improve the health care delivery system must continue unabated. In forthcoming publications through this series, our Bipartisan Policy Center colleagues and policy leaders from both sides of the aisle will present potential paths forward in the ongoing march toward a smarter, value-based health care delivery system.

AHCA Would Affect Medicare, Too

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http://www.commonwealthfund.org/publications/blog/2017/may/ahca-would-affect-medicare?omnicid=EALERT1211869&mid=henrykotula@yahoo.com

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“Don’t touch my Medicare” has been a rallying cry in recent years, first as Congress considered health reform and now as it debates the fate of the Affordable Care Act (ACA). While the bill that would repeal and replace the ACA—the American Health Care Act (AHCA)—does not include explicit changes to Medicare, the legislation could have a profound impact on the 11 million Medicare beneficiaries who also rely on Medicaid for key components of their care. Here’s a look at how the ACHA’s major changes in federal funding for Medicaid would affect low-income older adults and the Medicare program.

One-Third of All Medicaid Spending Is for People Covered by Medicare

Low-income Medicare beneficiaries who also are enrolled in Medicaid—often referred to as “dual eligibles”—could be disproportionately affected by congressional efforts to cut and cap federal Medicaid financing. Not only do these older adults account for one-third of all Medicaid spending, much of the Medicaid spending for low-income Medicare beneficiaries is “optional” for states.1

The nearly three-quarters (72%) of dual eligibles who receive full Medicaid benefits are most at risk under the AHCA’s funding caps.2  They tend to be in poorer health than other Medicare (and Medicaid) beneficiaries, and rely on Medicaid for high-cost services.3  While Medicare covers physician, hospital, and most other acute care, Medicaid covers some of dual eligibles’ behavioral health services as well as most of their long-term services and supports, such as nursing home and home and community-based services. Under federal law, many of these services are optional. Similarly, many low-income Medicare beneficiaries who qualify for Medicaid are “optional” beneficiaries who qualify only when they incur health and long-term care costs that are well in excess of their incomes. States can drop optional services and optional enrollees even without any new federal flexibility.

Post-acute care: Medicare Advantage vs. Traditional Medicare

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Post-acute care: Medicare Advantage vs. traditional Medicare

From a public spending point of view, post-acute care is particularly problematic. Most of Medicare’s geographic spending variation is due to this type of care. Part of the story is that Medicare pays for post-acute care in several different ways, with different implications for efficiency.

For example, traditional Medicare (TM) — which spends ten percent of its total on post-acute care — pays skilled nursing facilities per diem rates but inpatient rehabilitation facilities a single payment per discharge. Post-acute care is also available through Medicare Advantage (MA), which operates under a global, per-enrollee, payment. Unlike TM, MA plans establish networks, may require prior authorization for post-acute care, and can charge more in cost-sharing for post-acute care than TM does.

These different payment models offer different incentives that may affect who receives care, in what setting, and for how long. In Health Affairs, Peter Huckfeldt, José Escarce, Brendan Rabideau, Pinar Karaca-Mandic, and Neeraj Sood assessed some of the consequences of those incentives. Focusing on hospital discharges for lower extremity joint replacement, stroke, and heart failure patients between January 2011 and June 2013, they examined subsequent admissions to skilled nursing and inpatient rehabilitation facilities, comparing admission rates, lengths of stays, hospital readmission rates, time spent in the community, and mortality for MA and TM enrollees. To do so, they used CMS data on post-acute patient assessments for patients with discharges from hospitals that received disproportionate share or medical education payments from Medicare.

Medicare Didn’t Investigate Suspicious Reports Of Hospital Infections

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http://www.npr.org/sections/health-shots/2017/05/09/527432852/medicare-didnt-investigate-suspicious-reports-of-hospital-infections

Almost 100 hospitals reported suspicious data on dangerous infections to Centers for Medicare & Medicaid Services officials, but the agency did not follow up or examine any of the cases in depth, according to a report by the Health and Human Services inspector general’s office.

Most hospitals report how many infections strike patients during treatment, meaning the infections are likely contracted inside the facility. Each year, Medicare is supposed to review up to 200 cases in which hospitals report suspicious infection-tracking results.

The IG said Medicare should have done an in-depth review of 96 hospitals that submitted “aberrant data patterns” in 2013 and 2014. Such patterns could include a rapid change in results, improbably low infection rates or assertions that infections nearly always struck before patients arrived at the hospital.

The IG’s report, released Thursday, was designed to address concerns over whether hospitals are “gaming” a system in which it falls to the hospitals to report patient infection rates and, in turn, the facilities can see a bonus or a penalty worth millions of dollars.

The bonuses and penalties are part of Medicare’s Hospital Inpatient Quality Reporting program, which is meant to reward hospitals for low infection rates and give consumers access to the information at the agency’s Hospital Compare website.

A Medicare Drug Incentive That Leads to Greater Hospitalizations

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Many studies have demonstrated what economics theory tells us must be true: When consumers have to pay more for their prescriptions, they take fewer drugs. That can be a big problem.

For some conditions — diabetes and asthma, to name a few — certain drugs are necessary to avoid more costly care, like hospitalizations. This simple principle gives rise to a little-recognized problem with Medicare’s prescription drug benefit.

For sicker Medicare beneficiaries, the Harvard economist Amitabh Chandra and colleagues found, increased Medicare hospital spending exceeded any savings from reduced drug prescriptions and doctor’s visits. Consider patients who need a drug but skip it because they feel the co-payment is too high. This could increase hospitalizations and their costs, which would make them worse off than if they’d selected a higher-premium plan with a lower co-payment.

Though just a simplified example, this is analogous to what Medicare stand-alone prescription drug plans do. They achieve lower premiums by raising co-payments. This acts to discourage the use of drugs that would help protect against other, more disruptive and serious health care use, like hospitalization.

Studies show that insurers, many of which are for-profit companies after all, are using such incentives to dissuade high-cost patients from enrolling or using the benefit. There’s evidence this occurs for Medicare’s drug benefit, as well as in the Affordable Care Act’s marketplaces.

 The most popular type of Medicare drug coverage is through a stand-alone prescription drug plan. A stand-alone plan never has to pay for hospital or physician visits — those are covered by traditional Medicare. Another way to get drug benefits from Medicare is through a Medicare Advantage plan that also covers those other forms of health care and is subsidized by the government to do so.

Because of this difference, stand-alone drug plans are less invested than Medicare Advantage plans in keeping people healthy enough to avoid some hospital visits.

A study by the economists Kurt Lavetti, of Ohio State University, and Kosali Simon, of Indiana University, quantifies the cost. Compared with Medicare Advantage plans, stand-alone drug plans charge enrollees about 13 percent more in cost sharing for drugs that are highly likely to help patients avoid an adverse health event within two months. They charge up to 6 percent more for drugs that help avoid adverse health events within a year.

Of course, people have choices about plans. Those who have selected a stand-alone drug plan, as opposed to a Medicare Advantage plan, have done so voluntarily. Why do some make this choice?

One answer is that some people are not comfortable with the more narrow networks Medicare Advantage plans offer, with their fewer choices of doctors and hospitals. By choosing a stand-alone drug plan, they can remain in traditional Medicare, which has an open network.

In addition, consumers are generally more attracted to lower-premium plans than higher ones, even if the difference is exactly made up in co-payments. This may be because premiums are easier to understand than cost sharing. Moreover, premiums reflect a sure loss — you must pay the premium to remain in the plan. A higher co-payment, on the other hand, won’t necessarily lead to a loss because you may not use a service.

The appeal of lower premiums is an incentive for stand-alone drug plans to reduce them and increase co-payments. But that can dissuade those who need medications from filling prescriptions and taking them.

Part of the purpose of Medicare’s drug benefit is to encourage enrollees to take prescription drugs that can keep them out of the hospital. In July 2003, promoting the legislation that created Medicare’s drug benefit, President George W. Bush articulated this point. “Drug coverage under Medicare will allow seniors to replace more expensive surgeries and hospitalizations with less expensive prescription medicine,” he said.

But the design of Medicare’s drug benefit includes stand-alone plans that aren’t liable for hospital costs, so they don’t work as hard to avoid them. Encouraging more beneficiaries into comprehensive plans — through Medicare Advantage — or offering a drug plan as part of traditional Medicare itself would address this limitation.

 

 

The Future Of Delivery System Reform

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http://healthaffairs.org/blog/2017/04/20/the-future-of-delivery-system-reform/

Over the past several years, the federal government has put billions of dollars into a variety of programs aimed at improving the way health care is delivered. The Affordable Care Act (ACA) authorized a broad agenda of reform projects, including accountable care organizations (ACOs), bundled payments, value-based purchasing, primary care initiatives, and other payment and service delivery models. The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 established new ways of paying physicians intended to promote high-quality patient care.

What will happen to these initiatives under a Congress where Republicans are still seeking to enact major new health reforms and a president who could aggressively use authority granted by the ACA to make sweeping changes in Medicare and other health programs? Does this spell the end of delivery system reform, or could this be a new start with a greater potential to promote efficient and effective health care?

The prospect of ACA repeal has raised concerns among advocates, who argue that the enactment of Medicare-led efforts to promote higher-value care represents a real turning point in the battle to reduce waste and inefficiency. They fear that any reversal of the ACA framework would be a setback to the cause of lower costs and higher quality.

Those fears are overblown. There is bipartisan agreement on the goal of promoting more efficient and effective health care. MACRA, which is aimed at improving the value of physician services through payment changes, was enacted on a bipartisan basis. The debate is over the best way to accomplish the goal, not the goal itself.

We agree that it would be unwise to jettison entirely the delivery system reform provisions of the ACA, but their demise would not be the end of efforts to improve US health care. Rather, we see those provisions as far less consequential than their advocates claim, yet they can serve as departure points for putting in place more effective changes that provide room for private initiative and consumer preferences alongside changes in Medicare’s payment systems.

Summing Up

The cost of health care in the United States has grown rapidly for many years, typically well above growth in the overall economy. Those high costs have not guaranteed high-quality care or good patient outcomes, and our delivery system remains inefficient. What is needed is a process of continuous improvement in the efficiency and quality of the care delivered to patients. That is the core belief motivating the delivery system reform effort, which should be continued even as important features of the ACA come under review.

The key question is how best to pursue more cost-effective care delivery in the United States. At the moment, the federal government is trying to use its leverage to bring about greater efficiency, employing its regulatory powers under the Medicare program. That approach, while understandable, should be amended to make room for more private initiative and consumer incentives. Those are the driving forces for productivity improvement in other sectors of the national economy, and they should be harnessed to produce better outcomes in health care as well.