Why Asset Tests Need Reform

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.

Continue reading

Cost Control’s Growing Complexity

By Zack Buck

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.)

Continue reading

Why Sovaldi?

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

Kentucky Continues to Inform Health Policy

By Matt Ryan

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.

Continue reading

Premiums in Medicaid: The (not so) Recent Trend

By Emma Sandoe

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

The Record-Breaking Resolution of a Groundbreaking Fraud Investigation

By Zack Buck

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—herehere, 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.

Continue reading

How does the Bipartisan Budget Bill change Social Security Disability Benefits?

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.

Continue reading

Does FDA Need a Dietary Supplement User Fee Act?

By Elizabeth Guo

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.

Continue reading

The Once and Future Cadillac Tax

cadillacOver 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.

Continue reading

Presidential Campaigns Focus on Drug Costs

By Katherine Kwong

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.

Continue reading

Generic Drug Price Increases: Implications for Medicaid

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 other commentators 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.

Continue reading

A Circuit Split on Contraceptives Coverage

Perhaps foreshadowed by the dissent in the 10th Circuit that I wrote about here, the 8th Circuit has now officially launched a circuit split regarding the legal validity of the accommodation that allows modified compliance/objection to the contraceptives coverage mandate.  Unlike the seven other circuits to have considered the question since Hobby Lobby, the 8th Circuit yesterday issued opinions upholding preliminary injunctions in two cases (here and here), thereby preventing the mandate+accommodation from being enforced against the objecting non-profits.

First, the 8th Circuit determined that the accommodation still substantially burdens objectors’ religious beliefs because it imposes significant financial penalties if they refuse to comply with a requirement that they view as violative of those religious beliefs. As I explained previously, I do think the court was right to focus on the monetary consequences of objection, rather than assuming that merely filing the required paperwork for an accommodation does not or cannot actually make objectors complicit in the way they claim it does.

Like SCOTUS in Hobby Lobby, the 8th Circuit then went on to assume that the contraceptives coverage mandate advances a compelling government interest, which is the next step in the analysis under the Religious Freedom Restoration Act once the substantial burden test is met.  So far, so good.  But that’s the end of my agreement.

Continue reading

Fiduciary Duty and the Payer-Provider Relationship

By Zack Buck

Even though the Centers for Medicare and Medicaid Services (CMS) has set an ambitious goal to move the reimbursement paradigm away from a fee-for-service model for half of all Medicare services by 2018, incentives built into the delivery of American health care that encourage and result in overtreatment remain. One recent illustration of the reimbursement incentives facing physicians to administer either more care, or more expensive care, is the Lucentis-Avastin example I blogged about here earlier this year.

My newest article, forthcoming in the California Law Review in 2016, examines another legal tool that could be employed to recalibrate the incentives in Medicare: fiduciary duty. Others have characterized the patient-physician relationship as being fiduciary in nature; this piece advocates for the extension of the metaphor to the payer-physician relationship. This move would introduce much-needed pressures on providers to limit or avoid excessive or expensive care by placing a duty of loyalty on providers owed to the payers of Medicare’s services–American taxpayers. This move would respect provider autonomy but provide remedies for overtreatment without substantially growing the regulatory scheme or expanding oversight costs. The abstract is available here.

HHS’ Proposed Anti-Discrimination Regulations: Protective But Not Protective Enough

By Elizabeth Guo

Last week, the Department of Health and Human Services (HHS) Office of Civil Rights (OCR) released a proposed rule implementing section 1557 of the Affordable Care Act (ACA). Section 1557 applies the Rehabilitation Act of 1973 to the ACA so that a covered entity cannot discriminate against an individual on the basis of a disability in any health program or activity. The proposed rule clarified how OCR intended to enforce and interpret section 1557’s nondiscrimination provision.

As Timothy Jost and other commentators have noted, the government’s proposed interpretation of section 1557 significantly expands the number of health entities that need to meet the Rehabilitation Act’s nondiscrimination requirements. The regulation proposes to encompass all entities that operate a health program or activity, any part of which receives federal financial assistance. The regulation then broadly interprets “federal financial assistance” to include “subsidies and contracts of insurance.” Thus, an insurer receiving premium tax credits or cost-sharing reduction payments through participating in a health insurance Marketplace would need to ensure that all its health plans meet the Rehabilitation Act’s nondiscrimination requirements, regardless of whether the plans are sold through the Marketplace, outside the Marketplace, or through an employee benefit plan. This broad interpretation means that the Rehabilitation Act’s nondiscrimination provisions will now apply to a number of previously excluded plans.

Expanding the number of plans needing to meet section 1557’s nondiscrimination requirements will provide greater protection to more individuals with disabilities. In the United States, the Rehabilitation Act and the Americans with Disabilities Act (ADA) prohibit discrimination against individuals with disabilities. Both acts protect disabled individuals, but courts have consistently interpreted only the Rehabilitation Act as prohibiting insurers from designing their health plans to discriminate against individuals with disabilities. On the other hand, courts have held that the ADA provides a safe harbor for insurers when designing their benefit plans. Thus, some insurers under the ADA may be able to exclude all drugs treating HIV/AIDS from their formulary or place all drugs treating HIV/AIDS on the highest cost-sharing tier, benefit designs that the Rehabilitation Act would likely prohibit. See also Kelsey Berry’s post on this topic.  Continue reading

Doubling Down on Prosecutorial Discretion

By Zack Buck

Health care entities should be “on high alert” following the Southern District of New York’s decision in Kane v. Continuum Health Partners that I blogged about here earlier this month.

The case, which serves as the first and most consequential interpretation of when an overpayment is “identified” for purposes of False Claims Act (FCA) liability, provides a measure of much-needed guidance for attorneys and compliance officers in an area that is rife with confusion. But not too much.

Continue reading

Clarity for an “Unforgiving” and “Potentially Unworkable” Rule

By Zack Buck

In a case previously blogged about here, last week, the Southern District of New York denied Defendants’ motion to dismiss in U.S. ex rel. Kane v. Continuum Health Partners, No. 11-2325, in a major decision for health care entities unclear on the parameters of overpayment liability under the False Claims Act (FCA).

The case centers on Continuum Health Partners, Inc. (Continuum)—which operated three New York City area hospitals—and its erroneous receipt of overpayments from the New York Medicaid program based on a software glitch. The overpayments began in 2009; by September 2010, the New York State Comptroller had notified Continuum. Continuum tapped Robert Kane, an employee, to review the billing data and identify all claims that were incorrect. On February 4, 2011, Kane emailed a spreadsheet to superiors that contained 900 claims that may have been erroneously billed. The spreadsheet was “overly inclusive” and “approximately half of the claims listed therein were never actually overpaid.” On February 8, Kane was terminated.

Continue reading

Medical Device Tax: Back in the News Post-King

By Gregory Curfman

Just when the Affordable Care Act (ACA) has won a second major Supreme Court victory in King v. Burwell, conservative critics of the ACA are back on the attack, this time directing their ire towards the medical device tax. Having lost the battle on subsidies, they are now focusing on the device tax as the prime target in their attempt to overturn parts of the ACA. This 2.3% excise tax levied on the medical device industry is stipulated as one of the tax provisions in the ACA. The rationale is that since the ACA provides coverage for many more people, thus bringing more business to the industry, it is reasonable to ask the industry to pay something back to support the programmatic mission of the ACA.

From the beginning, the medical device industry has strongly objected to the excise tax, claiming it will stifle innovation by taking away funds that would otherwise be used for new product research and development. For example, Dr. Thomas Stossel of Harvard Medical School, a conservative voice on health issues, recently wrote: “A 2.3 percent tax on sales can easily mean the difference between commercial success and bankruptcy: borderline profits become losses and investors flee to less risky ventures. Brute force taxes destabilize the fragile innovation ecosystem.” Continue reading

Happy about the Supreme Court’s ACA decision? Thank a law professor

By Rachel Sachs

[Originally published on The Conversation].

The core of the Affordable Care Act (ACA) has now survived its second trip to the Supreme Court.

Chief Justice John Roberts wrote for the majority in King v Burwell, holding that the federal government may provide subsidies for citizens to purchase health insurance on exchanges that were established by the federal government, rather than by their own state.

A ruling for the challengers (the “King” in King v Burwell) would not only have stopped the flow of subsidies to 6.4 million people currently receiving them, but it would also have disrupted the functioning of the individual insurance markets in the 34 states that have not established their own exchanges. Continue reading

King v. Burwell And A Right To Health Care

Bill of Health contributor Gregory Curfman has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision in King v. Burwell in the broader context of Americans’ right to care. From the piece:

Do Americans have a fundamental right to health care? This oft-debated question is timely given the Supreme Court’s stunning ruling yesterday in King v. Burwell, in which health insurance subsidies on the federal exchange were upheld in a 6-3 decision.

Here I will place the King v. Burwell opinion in the larger context of to what extent Americans are provided a right to care. The Constitution itself does not stipulate a general right to health care, but a patchwork of rights to certain aspects of health care have emerged over time from both constitutional and statutory law.

Read the full piece at the Health Affairs Blog!

Affordable Care, the Supreme Court, and the Wisdom of Crowds

By David Orentlicher

[cross-posted at HealthLawProfs blog and orentlicher.tumblr.com]

How will the Supreme Court rule on the challenge to the Affordable Care Act’s subsidies that help millions of lower- and middle-income Americans afford their health care coverage? According to FantasySCOTUS’s court watchers, who have correctly predicted more than 70 percent of Supreme Court decisions so far this year, Obamacare should remain intact.

This result is not surprising. The arguments in favor of the government are much stronger than are those for the challenger. To be sure, the challengers cite to two lines in the Affordable Care Act (ACA) that authorize subsidies for insurance bought on state-operated health insurance exchanges, without mentioning federally-operated state exchanges. Hence, argue the challengers, subsidies should be provided only for insurance purchased on state-operated exchanges, which means in only about 1/3 of states. But other language in ACA indicates that the subsidies are available for insurance purchased on all exchanges. When a statute’s language is ambiguous and there are reasonable alternative interpretations, courts are supposed to defer to the executive branch’s interpretation, not substitute their own interpretation. Continue reading