In recent days there has been a lot of action around CMS’ Comprehensive Primary Care Initiative (CPCI). First, the next phase of the program was announced, expanding the program in size and scope. Several days later, an evaluation of the first two years of the initiative was published in the New England Journal of Medicine.
The original CPCI demonstration began in October 2012 and included 502 practices in seven regions (states or smaller areas within states). The regions were determined largely by payer interest, as commercial and state health insurance plans are essential partners in this multi-payer model. The CPCI involves risk-stratified care management fees for participating practices and the possibility of sharing in net savings to Medicare (if any). In turn, the practices must invest in practice redesign around: access and continuity, chronic disease management, risk-stratified care management, patient and caregiver engagement, and care coordination across a patient’s providers, e.g., managing care transitions and ensuring close communication and collaboration.
Following months of news coverage highlighting how American drug prices are “out of control,” the Centers for Medicare and Medicaid Services (CMS) seems to have been spurred into action. Last week, CMS proposed a new reimbursement regime for drugs paid for by Medicare Part B (drugs administered on an outpatient basis).
Addressing the concerns that the existing reimbursement formula may encourage physicians to rely on more expensive drugs, the proposal calls for testing new payment models designed to save money. The most striking of these changes calls for altering the “average sales price plus 6 percent” reimbursement formula (the amount Medicare pays doctors to reimburse them for drugs) to a formula which would pay doctors the average sales price plus 2.5 percent, plus a fee of $16.80 per drug per day. Further, the proposal also calls for testing indications-based and reference pricing. If implemented, all of these tools would be likely to produce cost savings for Medicare Part B, which spends $20 billion annually on drugs.
According to the New York Times, the proposal “touched off a tempest,” as physicians, politicians, and drug manufacturers criticized the proposed changes. The American Society of Clinical Oncologists decried the “heavy-handed” government intervention that would adversely affect seniors’ quality of care. Senator Orrin G. Hatch (R-UT) implied that the change would allow “unelected bureaucrats” to usurp medical judgment, with negative effects on access to care. And a statement from the Pharmaceutical Research and Manufacturers of America (PhRMA) noted that the proposal “puts Medicare patients who rely on these medicines at risk.”
The notion that the American health care system should transition from paying for volume to paying for value has become nearly ubiquitous. There is a broad consensus that health care providers should be paid more if they deliver higher value care (i.e. care that results in substantial health gains per dollar spent).
These beliefs have led to a proliferation of value-based payment programs in both public and private sectors. For example, at the beginning of 2015, Sylvia Burwell announced the federal government’s commitment to tie 90 percent of fee-for-service Medicare payments to quality or value measures by 2018. In January of 2015, a newly formed alliance of health care providers, insurers, and employers called the Health Care Transformation Task Force committed to shifting 75 percent of their business to contracts that provide incentives for quality and efficiency by 2020.
The details of existing value or quality-based payment programs vary enormously and without regard to any conceptual framework. For example, they vary in the size of incentives and the measures used. They also vary in whether quality payments are contingent on financial savings and whether the value-based payment model is budget neutral. Even the term value is inconsistently defined. […]
Pharmaceutical companies are making breakthrough drugs to cure diseases, but no one knows how to pay for them. In 2013 and 2014, FDA approved Solvaldi and Harmoni, which can cure hepatitis C in more than 90% of patients. Solvaldi and Harmoni cost $84,000 and $95,000, respectively, for a standard course of treatment. Government payers and health plans, without a good solution for providing Solvaldi and Harmoni to patients who need them, have restricted coverage of the drug to only those patients with advanced hepatitis C. Last year, Germany approved Glybera, a gene therapy that enables patients with lipoprotein lipase deficiency to produce the deficient enzyme. Glybera is expected to cost $1 million, and it is doubtful whether any payer could shoulder such a price.
Last week, MIT professor Andrew Lo proposed a new way of paying for these high-priced therapies: securitized consumer healthcare loans (HCLs). HCLs would function as mortgages for large healthcare expenses. Because the benefits of some therapies occur upfront, HCLs would allow consumers to pay for the value of their therapies over time, instead of in one upfront payment. The paper proposed two frameworks to govern HCLs. The first is a consumer-funded loan, where the patient borrows a loan to pay the upfront costs of the drug, and pays back the loan over time. The second framework operates similarly to the consumer-funded loan, except that private payers and government agencies assume the debt. Under this model, insurance companies could take the debt associated with the patient’s treatment then shift the debt onto the next payer if the patient changes insurance companies. Continue reading →
By Cornelia Hall, Master of Public Policy Candidate, Harvard Kennedy School, Class of 2017
This is the third entry in a three-part series on the AcademyHealth National Health Policy Conference, held in Washington, DC, on February 1-2. Read the first entry here and the second entry here.
The national debt as a percentage of GDP has spiked in the last several years, rising from approximately 35% in 2007 to nearly 74% in 2015. Federal budget projections suggest that this trend will continue, with the debt nearly exceeding the size of the economy by 2040. Discussion about these predictions frequently returns to the topic of health care. Indeed, as the “baby boomer” generation retires and enrolls in Medicare, federal health care spending is expected to rise dramatically. In an NHPC plenary session, federal budget experts explored this topic and discussed possible methods of controlling the growth of health care spending in years to come. Continue reading →
Consolidation in the health care sector, particularly among providers and private insurers, has been rising since the Affordable Care Act passed in 2010. Major movement is currently underway among the “Big Five” private insurance companies: Humana, Cigna, UnitedHealthcare, Aetna, and Anthem. Two proposed “horizontal” mergers, currently under review by the Department of Justice Antitrust Division, would reduce these “Big Five” to the “Big Three.” In this context, NHPC panelists discussed private sector consolidation’s potential impact on the cost, quality, and coverage of health care. Several panelists expressed concern about the effects of consolidation on patients and the costs of services. They also indicated, however, that the health care system’s ongoing transition to more coordinated care could help to offset potentially negative consequences of consolidation.
As the Justice Department analyzes the proposed mergers, industry analysts on the NHPC panel suggested that insurer consolidation could negatively affect patient experiences in the health care system. Sarah Lueck of the Center on Budget and Policy Priorities noted that the Affordable Care Act was designed to improve market competition, but the proposed insurance mergers could increase enrollees’ premiums and harm transparency for consumers. She pointed out that this competition among providers also drives quality of care, which could suffer under consolidation. Continue reading →
At AcademyHealth’s 2016 National Health Policy Conference earlier this month, payment reform was a pervasive theme. Its prominence was not surprising. Indeed, in early 2015, HHS Secretary Sylvia Burwell announced the agency’s goal to have 30% of traditional, fee-for-service Medicare payments tied to quality or value through alternative payment models by the end of 2016, and 50% by the end of 2018. As the current sea change in health care moves the system towards these goals, the conference’s panelists explored various aspects of the transition to value-based payment. Speakers who discussed the issue included leaders in government, clinical practice, and private insurance. They sent an overarching message that payment reform efforts will continue to take a variety of forms — on parallel tracks with cross-cutting themes — rather than a single approach. Representatives from provider organizations particularly stressed the necessary groundwork for these efforts to be effective.
The Center for Medicare and Medicaid Innovation (CMMI) under the federal Centers for Medicare & Medicaid Services (CMS) is operating dozens of payment- and quality-focused models and demonstrations across the country. The breadth of payment models and their varying degrees of success represent different approaches to health care reform, such as population- and episode-based payment. On his panel, CMMI Deputy Director Dr. Rahul Rajkumar noted that this breadth is designed to appeal to diverse providers that differ in type and readiness for payment reform. Indeed, a health care system that has operated for decades with multiple payers, little care coordination, fragmented use of technology, and inconsistent definitions of quality care is undergoing monumental transformation. The transition from fee-for-service to value-based payment thus involves some experimentation to identify the most effective approach. Continue reading →
There has been an update to a story I recently blogged about here.
As announced by the Department of Justice (DOJ) on Wednesday, another 51 hospitals have settled allegations that the hospitals placed implantable cardioverter defibrillators (ICDs) in the chests of patients without complying with Medicare’s mandatory waiting periods. These 51 settlements amount to $23 million, meaning that the DOJ’s ICD review has now has resulted in settlements with more than 500 hospitals totaling more than $280 million.
According to the DOJ, this is the final stage of the investigation, concluding an initiative that has highlighted the tension that exists between fraud enforcement, medical necessity, and reimbursement standards (recent articles here, here, and here).
Addressing the high cost of drugs was at the top of President Obama’s list in his fiscal year 2017 budget, released last week. Many of his proposals were familiar. The President hoped to increase manufacturer contributions to prescription drug coverage under Medicare Part D and wanted to shorten the length of biologic market exclusivity from twelve to seven years. These proposals were also in the President’s fiscal year 2016 budget but were not put into place.
However, the budget also included a number of surprising, new proposals that underscore how post-market evidence might play an increasing role in controlling drug prices in coming years. Rachel Sachs has written about the role that the Centers for Medicare and Medicaid Services (CMS) can play in keeping down drug prices, and it seems like some of these ideas are gaining traction:
Modify reimbursement of Part B drugs. The White House estimates that changes to Medicare Part B payments could save the country $7.75 billion over ten years. Medicare Part B covers drugs and services dispensed in an outpatient setting. Many of the most expensive biologic drugs are currently covered under Medicare Part B. The budget proposal did not elaborate on how the White House hopes to change Part B payments, but the proposal likely refers to recommendations released by the Medicare Payment Advisory Commission (MedPAC) last June. MedPAC’s 2015 report recommended that Congress link Part B payments to clinical effectiveness evidence. For example, the government could group drugs with similar health effects and pay all drugs in each group the rate of least costly product in the group. This approach relies on having reliable clinical effectiveness data so that researchers can easily compare the relative effectiveness of two or more drugs. Continue reading →
The penalty for Bostonian jaywalkers can take dollars out of repeat offenders wallets. The $1 fine for jaywalking in the Massachusetts metropolis may be a ridiculous example of statutory dollar figures losing their significance, but the statutory dollar figures associated with Medicaid eligibility are anything but a laughing matter for millions of families.
The eligibility requirements around Medicaid expansion have ended the decades old practice of limiting assets for Medicaid coverage for children and parents. However, in order to qualify for many existing Medicaid programs, the elderly and people with disabilities in many states must still verify that their assets fall below a certain dollar figure. Oftentimes, this dollar figure is statutory and requires state legislatures to act in order to have the figure rise with inflation.
Asset tests were first incorporated into Medicaid law under the original legislation because welfare benefits required strict means and asset tests. These levels were determined at the state level. As eligibility was separated from welfare eligibility, specific dollar figures on assets were added to eligibility criteria and were meant to curb enrollment by “welfare queens” or people that qualify for social assistance fraudulently or with significant assets. President Reagan first campaigned on the concept of “welfare queens” in his failed 1976 bid for the presidency. But these fraudulent cases that the policy is meant to restrict are limited and more often the imposed asset tests prevent working-age adults from reducing dependency on social welfare programs.
A paper entitled “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured” has a number of health policy experts talking this week. Authors Zack Cooper, Stuart Craig, Martin Gaynor, and John Van Reenen—as part of the Health Care Pricing Project—present new findings demonstrating that geographic areas with low Medicare costs and geographic areas with low private insurance costs are nearly completely unrelated. That is, locales with comparatively low Medicare costs are not necessarily areas with comparatively low costs for care paid for by private insurers. Though stunning, this lack of relation between the two metrics does make sense; the report notes that Medicare’s costs are largely driven by the amount of provided care and services, whereas care paid for by private insurance is largely affected by the price at which the care is set by each hospital. (Kevin Quealy and Margot Sanger-Katz of the New York Times have a number of interesting graphs and charts that reflect the study’s findings here.)
Indeed, before the study, and because of a dearth of private insurance pricing data, many simply believed that locales that were cheaper for Medicare were cheaper for private insurance—that is, areas that were great stewards of Medicare funds were likely efficient for private insurers as well. But this new paper demonstrates that this is not true. The two metrics are completely separate.
At the risk of overstating it, this finding could drastically change the paradigm for controlling health care costs going forward. The paper got the attention of Atul Gawande, who noted its importance in an article for The New Yorker. There, Gawande revisits the story of McAllen, Texas, which focused on exploding Medicare costs largely driven by large volume. (I even look at the McAllen story in a forthcoming article here because of its fascinating impact on cost control for Medicare.)
Most readers of this blog will be familiar with the story of Sovaldi (sofosbuvir), a breakthrough treatment for Hepatitis C. Sovaldi is a transformative cure for a devastating disease, but priced at $84,000 per 12-week course, it has distressed insurance budgets (particularly Medicaid) and in many instances, led to rationing of access. As a result, there has been much debate about the appropriate price for such a valuable treatment.
Many have made the case that $84,000 is a pretty good value proposition compared with the ongoing expenses of living with Hepatitis C, or the cost of a liver transplant. Indeed, most of the people whose opinions I admire are willing to accept the $1,000 per-pill price tag (pills cost about $1/ea. to make) as a reward for innovation and incentive for R&D.
Even though I can accept the merits of these arguments, I find that I still cannot shake a visceral sense of injustice. I’m glad Sovaldi exists. I don’t mind that Gilead is making money. And yet, the situation feels profoundly unfair. It took me a long time to figure out why. Continue reading →
Following the Supreme Court’s decision in NFIB v. Sebelius, states have had the option whether to expand Medicaid or not. As of this writing, 30 states and the District of Columbia have expanded Medicaid. Kentucky was the only Southern state that decided to expand Medicaid and run their own exchange. The decision brought great success. Under Democratic Governor Steve Beshear, Kentucky saw their uninsured population drop by 10.6% from 2013 to 2014. As Governor Beshear put it, Kentucky was the “poster-child for the implementation of the ACA.”
Last month, Kentucky elected Matt Bevin governor. Mr. Bevin, a Republican, had promised to dismantle Medicaid and the insurance exchange. When asked about Medicaid early in his campaign, Mr. Bevin responded, “No question about it. I would reverse that immediately.” Many feared that Mr. Bevin’s election put Medicaid in critical condition. But since his election, Mr. Bevin has shifted his position.
Requiring Medicaid beneficiaries to pay premiums and other cost-sharing for medical services is not new to the Medicaid expansion debate. Premiums were introduced as part of the Tax Equity and Fiscal Responsibility Act of 1982. Previously, states were prohibited from imposing enrollment fees, premiums, or deductibles for any categorically eligible individual in the Medicaid program. This law allowed states to implement minimal cost-sharing for waiver demonstrations, but prohibited states from denying medical care due to an inability to pay.
Since this law was passed, the Centers for Medicare & Medicaid Services (CMS) has clarified that certain populations including pregnant women and children were exempt from most cost-sharing. Additionally, certain services are exempt from copayments and coinsurance entirely. The maximum amount that can be charged varies based on wage and type of service and where the beneficiary seeks treatment.
Prior to Indiana’s 1115, approved in 2014, CMS did not allow state waivers to charge premiums to individuals making under 50% of the federal poverty line (FPL). Indiana’s expansion plan is unlike any other state’s waiver plans. It requires individuals to pay a “monthly contribution” of $1 a month or 2% of a family’s income which ever is greater. When a beneficiary that has been paying these monthly contributions uses medical services, they are not required to pay co-payments. Previously, Indiana lowered the income eligibility for premiums during its 2013 waiver when it required premiums for individuals making between 50-100% of FPL. Arkansas and Iowa saw that precedent set by Indiana and lowered their cost sharing levels from 100% of FPL to 50%. Continue reading →
After more than four years of investigation, and 70 separate agreements, the Department of Justice (DOJ) announced news Friday of a massive $257 million settlement, covering a record-breaking 457 hospitals, for the alleged fraudulent placement of implantable cardioverter defibrillators (ICDs) between 2003-2010. I have previously written about the twists and turns of this particular nationwide investigation—the most prominent example of the medical necessity-based health care fraud investigations—here, here, and here.
Why ICDs initially caught the attention of the DOJ seemed to be the fact that ICDs are highly expensive—costing Medicare about $25,000 per implantation—and, following a whistleblower’s lawsuit in 2008, the DOJ commenced a review of “thousands” of ICD placements nationwide. As I have written about before, hospitals across the country—including renowned hospitals such as the Cleveland Clinic—were included in the initial review, but not all of ended up on the settlement list (a full list of settling hospitals is available here).
Although the full details of the settlement have not yet been made public, there seems to have been a difference between all of the hospitals that placed ICDs outside of Medicare’s timing guidelines and those that the DOJ felt were particularly egregious (apparently less than half of the hospitals on the original investigation list ended up as part of this settlement). This is important because it may indicate a difference—in the DOJ’s thinking—between Medicare’s coverage standard, and its “medical necessity” standard for purposes of fraud enforcement.
On Tuesday, details of the new Bipartisan Budget Bill, a bill negotiated between Congress and the White House, were released. This bill funds the government for two years and extends the debt ceiling, two important budgetary moves Speaker Boehner promised to leave his successor with a clean slate. Less reported is that this bill makes some small but important changes to our nation’s two largest budgetary social programs, Medicare and Social Security. But the changes made to Social Security Disability Insurance eligibility extend beyond that program and will be important for state Medicaid agencies and for low-income people with disabilities.
What is the Social Security Disability Trust Fund?
Not part of the original Social Security Act, the Disability Insurance (SSDI) benefit was added in 1957. As of 2014 there were 10.9 million Americans receiving this benefit totaling $141 billion or 4% of the federal budget. In the last Trustees report for the projected future cost of the SSDI program, the trustees projected the exhaustion of the trust fund in 2016. This would mean that the nearly 11 million beneficiaries would see their benefits cut by 19% next year because incoming tax revenue would only be able to cover about 80% of the benefits.
Dietary supplements are dominating headlines these days – and not in a good way. Last Wednesday, Nevada officials found basketball star Lamar Odom unconscious at a brothel after taking cocaine along with ten pills of Reload, a sexual enhancement dietary supplement. That same week, the New England Journal of Medicine released an article finding that dietary supplements lead to roughly 23,000 emergency visits a year. Following these events, some officials have called on the Food and Drug Administration (FDA) to take a stronger role in regulating the dietary supplement industry.
Dietary supplements have had a long and storied past. As early as 1973, FDA tried to regulate dietary supplements regarding vitamin and mineral potency. The dietary supplement industry responded by challenging FDA in court, and Congress subsequently enacted the Proxmire Amendment, limiting FDA’s authority to regulate dietary supplements. However, by the 1990s, as consumers increasingly began to rely on dietary supplements, Congress passed the Dietary Supplement Health and Education Act of 1994, expanding FDA’s authority to regulate supplements by enacting special rules related to dietary supplement labeling and manufacturing.
Currently, FDA regulates dietary supplements as a special category of foods. Unlike manufacturers of over-the-counter drugs, dietary supplement manufacturers do not need to be registered with FDA and do not need list possible adverse events on supplement labeling. As Joanna Sax points out, this is a major problem because not all dietary supplements are the same. For example, certain weight loss or sexual enhancement supplements often contain chemicals associated with potentially serious side effects while other supplements containing chemicals such as Vitamin C pose less serious safety concerns.
Over the last few weeks, health economists have been defending the often politically friendless “Cadillac Tax.” This policy, as part of the Affordable Care Act, will begin taxing certain generous health insurance plans starting in 2018. Since World War II, the IRS has held that employer-sponsored health insurance should not been taxed, costing the federal government $329 billion in lost federal revenue. But, the most pivotal decision in the tax exemption status of employer-sponsored health insurance took place in 1954, not during World War II.
In 1954, when Congress extended the World War II provisions into permanent tax law, Congress decided to do away with the limits imposed on the tax-free status of health insurance. In essence, Congress has already repealed the Cadillac tax back when you could buy a new Cadillac for $5,000.
The Introduction of the Tax:
As part of the World War II price and wage controls, President Roosevelt’s National War Labor Board first put limits on wage increases and would not allow wages to increase greater than 15 percent of 1941 rates. Enterprising employers began offering health insurance coverage to recruit workers, because enticing workers with higher wages was not permitted. This forced the hand of the Board to address the tax status of health insurance.
Drug prices have become a hot topic on the presidential campaign trail following recent stories such as the sudden spike in price from $13.50 to $750 for the parasitic infection treatment Daraprim. This story is the latest example of a growing number of complaints about steep increases and high prices for many drugs, including those used to treat multiple sclerosis and cancer, as well as commonly-used generic drugs used to treat everything from high cholesterol to bacterial infections.
In contrast with the Republican presidential candidates, who have generally not supported additional government regulation of drug pricing, Democratic presidential candidates responded to the Daraprim story by urging greater government action to lower drug costs.
Hillary Clinton cited Daraprim as an example when unveiling a proposal to cap drug costs to $250 per month, require pharmaceutical companies to spend a minimum amount on research and development, and allow Medicare to negotiate drug prices. She would also end tax credits for drug advertising to consumers and allow the importation of drugs from other countries.
The internet (not just the health policy part of the internet!) is fascinated by today’s New York Times story about dramatic recent increases in the costs of many decades-old drugs. The story focuses on the case of Daraprim, the standard of care for treating the parasitic infection toxoplasmosis. Daraprim was recently acquired by a start-up, which then raised the drug’s price from $13.50 a pill to $750 a pill. Daraprim has been around for decades, and as the story notes, it’s just one of many recent examples of dramatic price increases for generic drugs, often after their acquisition by other companies (as in this case).
The article raises an enormous number of issues of interest to intellectual property and health policy scholars, both explicitly and implicitly, and othercommentators have begun to canvass them. But I want to spend the rest of this blog post unpacking a single point made in the article, because it actually contains an enormous amount of complexity. As the author notes, “[the company’s] price increase could bring sales to tens or even hundreds of millions of dollars a year if use remains constant. Medicaid and certain hospitals will be able to get the drug inexpensively under federal rules for discounts and rebates. But private insurers, Medicare and hospitalized patients would have to pay an amount closer to the list price.”
The author is right that there’s one sense in which Medicaid and entities eligible for the 340B program (I assume this is what the author is referring to when he says “certain hospitals”) will be able to obtain this drug “inexpensively” – but there’s another sense in which they won’t be able to.