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Paying For The ‘Doc Fix’


March 26th, 2015

For years now it has become apparent that the Sustainable Growth Rate (SGR) system is not sustainable.  However, fixing the SGR will require increases in budgeted costs, and so one of the major barriers to replacing the SGR is figuring out how to pay for the fix. Towards this end, it is important to understand the appropriate cost-comparison.

Federal scorekeepers (appropriately) assess the cost of the SGR fix relative to current law, which assumes that fees will follow a trajectory defined by current policy. But as near as I can tell, few advocate for that path or believe it will occur; rather the current system will continue to require regular “patches”.  Therefore, the appropriate measure of the cost of the doc fix is spending with the fix relative to spending without it.  The latter includes the costs of future “patches” necessary to ensure continued operation (as well as any savings that can be achieved because of continued SGR related negotiations).  Substituting this realistic alternative into the cost calculus likely substantially lowers the incremental cost of any SGR fix.

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Health Affairs Web First: Without CHIP, Sharply Higher Insurance Costs For Many Low-Income Families


March 26th, 2015

Funding for the Children’s Health Insurance Program (CHIP) is now set to expire after September 2015. A new study, being released by Health Affairs as a Web First, and also appearing in its April issue, examines the availability and cost of dependent coverage for children through employer-sponsored plans. Such plans would be the primary pathway to affordable coverage for more than half of all children losing CHIP eligibility, insofar as access to employer-sponsored coverage through their parents can bar children from receiving Marketplace subsidies.

According to the study, 96.9 percent of enrollees in employer-sponsored plans had access to dependent coverage. The additional cost would vary — as much as $7,252 per year for workers with one dependent child and $11,829 for those with two or more dependent children. The study also found that adding dependent coverage could cost many families more than 8.05 percent of their income, qualifying them for hardship exemptions from buying coverage.

As a result, many children once covered by CHIP would no longer be insured. This study is thought to provide the first estimates documenting variations across employers in the marginal costs to families adding children to employer-sponsored plans.

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Good And Bad News For Diabetes Prevention In The Community


March 25th, 2015

The findings from a recent synthesis of the literature about the effectiveness of prevention initiatives focused on reducing the risk of Type 2 diabetes among high-risk populations (people already obese or inactive or diagnosed as having prediabetes) are largely encouraging.

The synthesis includes a comprehensive and systematic review of the medical, diabetes, and public health literature for evaluation studies of interventions published between 2002 and 2013. The search was undertaken using medical subject headings and keywords related to diabetes and its risk factors.

A number of interventions—such as the National Institutes for Health’s Diabetes Prevention Program and the Group Lifestyle Balance Program—focused on helping people eat better and become more physically active are effective in reducing the risk of diabetes onset. Robust studies show that these interventions work even better than medication to prevent diabetes.

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Unpacking The Burr-Hatch-Upton Plan


March 24th, 2015

Anticipating the upcoming Supreme Court decision on King v. Burwell, which could halt health insurance subsidies available through the federal exchange, Republican Senators Richard Burr and Orrin Hatch joined with Representative Fred Upton to propose a comprehensive replacement for the Affordable Care Act (ACA). The Patient Choice, Affordability, Responsibility, and Empowerment Act, or Patient CARE Act, is modeled on a proposal of the same name offered last year by Senators Burr, Hatch, and Tom Coburn, who has retired from the Senate. The Burr-Hatch-Upton plan, like its predecessor, adopts consumer-based reforms of the insurance market, modernizes the Medicaid program, and makes other changes intended to lower cost and increase choices.

In an earlier post, we described in detail the provisions of the Burr-Coburn-Hatch bill. In this post, we discuss how the Burr-Hatch-Upton plan differs from the earlier proposal. We also discuss the impact of the new proposal on health insurance coverage, premiums, and the federal budget based on a new analysis from the Center for Health and Economy (H&E), a non-partisan think tank focused on producing informative analyses of trends in U.S. health care policy and reform ideas. We conclude by commenting on the direction Republicans are likely to take in reforming the health system in the aftermath of a Supreme Court decision in the King v. Burwell case.

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What Is Behind The Post-Recession Bend In The Health Care Cost Curve?


March 23rd, 2015

It has been a while since I last had the opportunity to analyze the slowdown in health spending and the extent to which it represents a lasting bend in the cost curve, as opposed to lingering effects of the “Great Recession or other temporary changes.” (See Note 1)

Distinguishing Health Care Cost Curves

When we discuss bending the health care cost curve, two questions arise: “Which curve?” and “Short run or long run?” In this post, I focus on the curve represented by the growth rate in national health expenditures (NHE) pre- and post-recession. Other curves of interest include “excess growth” (health spending growth in excess of gross domestic product [GDP] growth) and the closely related health spending share of GDP. For analysis of all three curves over the very long run, including a provocative “big bang” theory about the origins of excess growth, see Tom Getzen’s blog. A fourth curve that has gotten my attention, through the work of Gene Steuerle, is the health spending share of the growth in real per capita GDP. (See Note 2)

I now turn to the present topic, the record low growth in NHE that began in 2009 (the year in which the recession ended) and continued through 2013 (the most recent year for which we have official data). There has been extensive discussion about whether these low rates are the result of temporary cyclical factors, such as the recession, or more permanent structural factors. As detailed below, I conclude that, to a surprisingly large extent, the answer is neither: the bulk of the decline in the health care spending growth rate resulted from lower economy-wide price inflation and some temporary factors not tied to the recession.

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Health Affairs Web First: Assessing Efforts To ‘Solve The Sustainable Growth Rate Formula Conundrum’


March 11th, 2015

On April 1, unless Congress acts to prevent it, the current Sustainable Growth Rate (SGR) fee cut will take effect, dictating a 21.2 percent reduction in Medicare physician fees. A new commentary, released today by Health Affairs as a Web First, assesses last year’s bipartisan and bicameral legislative model for how to repeal the SGR, a model likely to be used in similar efforts this year.

The 2014 legislation contained many useful steps to replace the SGR but had a major omission, authors James Reschovsky, Larisa Converse, and Eugene Rich of Mathematica Policy Research argue: It did not adequately address overhauling the current Medicare fee schedule.

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Implementing Health Reform: Supreme Court Remands Contraceptive Case; ACA Cost Estimates Go Lower


March 10th, 2015

On March 9, 2015, the Supreme Court waded once again into the waters of the Affordable Care Act, or at least got its toes wet.  The Supreme Court granted certiorari in Notre Dame v. Burwell, vacated the decision of the federal Court of Appeals for the Seventh Circuit, and remanded the case for reconsideration in light of Hobby Lobby v. Burwell.  Both Hobby Lobby and Notre Dame, of course, involve the regulations that require health plans and insurers to provide contraceptive services to female employees and students.

Also on March 9, 2015, the Congressional Budget Office issued its March, 2015 baseline report.  The CBO and the Joint Committee on Taxation (JCT) now project that the major insurance provisions of the ACA will cost $1.2 trillion over the period 2016-2025, $144 billion less than it projected in January, 2015.  Current projections for the years 2015-2019 are over $200 billion less than costs projected in 2010 when the law was adopted, while projected costs for 2019 are $56 billion, or 33 percent, lower.  The CBO also projects, however, that the ACA will reduce the number of uninsured by 25 million by 2025 rather than the 27 million it had projected in January.

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Go Slow On Reference Pricing: Why The Federal Agencies Have It Wrong On Regulations


March 9th, 2015

Despite concerns outlined in our previous post on reference pricing, federal oversight agencies essentially have taken a hands-off approach. First, they announced that for large group and self-insured plans, the Affordable Care Act’s (ACA) annual maximum limits on out-of-pocket costs do not apply to charges above the reference price.

These limits are already high: $6,600 for an individual and $13,200 for family coverage in 2015. Without any discussion the agencies asserted that non-designated providers are out-of-network, and therefore cost sharing falls within the ACA’s exclusion of out-of-network cost from the maximum limits.

This ruling is inconsistent with the ACA and harmful to patients, effectively allowing plans to circumvent the Act’s crucial out-of-pocket cost limits. The ACA’s annual out-of-pocket maximums are meant to apply to in-network care. If plan members receive care inside this provider network, the Act mandates that they are to be protected by these maximums.

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Go Slow On Reference Pricing: Not Ready For Prime Time


March 9th, 2015

Editor’s note: This post is part one of two on reference pricing. 

The use of reference pricing by health insurers and employee health benefit plans stands high on the policy and regulatory agenda because it is gaining popularity, particularly now that federal agencies have blessed its use by large group insurers and self-insured plans, while imposing only relatively lax requirements. The purpose of reference pricing is to enable patients to “shop” for care and to spur provider competition by creating a group of “designated” in-network providers that agree to abide by the reference price while others do not (“non-designated providers”).

Patients who select more expensive non-designated providers must pay extra, letting them decide whether the extra out-of-pocket cost is worth it. Providers compete, either by agreeing to the reference price or by lowering their prices to approach it. Prices are driven downward.

Reference pricing is superficially appealing because it invokes powers that consumers exercise every day, as they weigh cost and value for items ranging from cold cereal to new cars. But it also raises significant issues regarding quality and access to care and has the potential to discriminate against sick and vulnerable patients. The strategy may also prove costly in relation to the benefits it confers. We urge a go-slow approach and more careful regulation.

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The Payment Reform Landscape: Everyone Has A Goal


March 6th, 2015

It seems these days everyone is setting ambitious goals for making changes to how we pay for health care, including my organization Catalyst for Payment Reform (CPR).

Initially, our goal at CPR was to ensure that 20 percent of health care payments be value-oriented (seeking to improve quality and reduce costs) by the year 2020. But to reflect our desire for greater assurance that good would come of it, we recently refined that goal.

It’s great that commercial health plans report a significant increase in value-oriented payments. But, to avoid wasting valuable time and resources, there needs to be quantifiable evidence that new payment methods actually lead to improved health care while containing costs. as we’ve emphasized in our posts here. The “proof is in the pudding” as they say.

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Health Affairs’ March Issue: The Benefits And Limitations Of Information


March 2nd, 2015

The March issue of Health Affairs contains papers focusing on the benefits—and the limitations—of information-gathering processes as a way to solve health system problems. Studies in this variety issue examine US hospital rating systems, disclaimers on dietary supplements, state prescription drug monitoring programs, the value of US versus Western European cancer care and other topics.

National hospital rating systems show little agreement — what’s a consumer to do?

Matt Austin of Johns Hopkins Medicine and coauthors compared four well-known national hospital rating systems designed for use by US consumers: U.S. News & World Report’s Best Hospitals; HealthGrades’ America’s 100 Best Hospitals; Leapfrog’s Hospital Safety Score; and Consumer Reports’ Health Safety Score. They analyzed ratings covering the time period from July 2012 to July 2013.

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Exhibit of the Month: Improving Pharmaceutical Innovation


February 27th, 2015

Editor’s note: This post is part of an ongoing “Exhibit of the Monthseries. Readers who’d like to highlight other noteworthy exhibits from the same issue are encouraged to make their pitch in the comments section below.

This month’s exhibits, published in the February issue of Health Affairs, illustrate annual new drug approvals by the Food and Drug Administration (FDA), industry spending on research and development, and more specifically, the number of drugs approved per $1 billion spent on research and development.

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Top 5 Health Care Trends to Watch in 2015


February 25th, 2015

With a new Congress, health care is once again an issue of tremendous scrutiny and debate. Many of the federal policy debates in 2015 will be largely symbolic, resulting in little more than tweaks to existing law.

However, health care policy is not just a matter for Congress to consider. A range of issues will play out in the states and the private sector, effectively shaping the future. Below are the top trends we’re watching this year.

The Year of Living Interoperably

From electronic health records (EHRs) to clinical measures and decision support tools, providers are inundated with new technologies that automate processes and capture new types of data. However, these systems are limited in their potential because they don’t all “talk” to one another. They’re locked away within proprietary technologies that render them the equivalent of an email account that only sends messages to people in your company, or a phone that only makes calls in your house.

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Implementing Health Reform: Beginning The Cadillac Tax Regulatory Conversation And Other ACA News (Updated)


February 24th, 2015

The Cadillac high-cost health plan excise tax, which goes into effect in 2018, is one of the last-to-be-implemented provisions of the Affordable Care Act (ACA). It was one of the most controversial provisions of the ACA, which contributed to its delayed effective date. But 2018 is now getting closer, and the Internal Revenue Services (IRS) is beginning a discussion about implementation of the Cadillac plan tax.

The Cadillac plan provision of the ACA will impose a 40 percent excise tax on the cost of employer-sponsored health plans when that cost exceeds certain thresholds. It is projected to be one of the biggest sources of revenue under the ACA; the Congressional Budget Office (CBO) in its 2015 Budget and Economic Outlook Report estimated that it would account for $149 billion in revenue between 2018 and 2225. Of this, however, only one quarter will come from the tax itself, while three quarters will come from increases in taxes on income as employers shift compensation from health benefits to taxable wages.

While the tax will affect few plans initially, it is likely to affect many more plans over time as the cost of health care continues to grow faster than inflation generally. The tax is expected to reduce health care expenditures by individuals, as it will drive employers to increase employee cost sharing as they cut the cost of coverage, and employees are likely to spend less on health care if they have to purchase it out-of-pocket rather than drawing on insurance coverage.

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How Open Data Can Reveal—And Correct—The Faults In Our Health System


February 18th, 2015

In April 2014, the Centers for Medicare and Medicaid (CMS) released millions of lines of Medicare Part B physician payment data, that led many researchers, analysts, journalists, and the general public to use the data to answer a number of pressing health care questions. And while the dataset does not include patient-level information, it does offer provider identifiers, which can facilitate data aggregation, highlight practice patterns, and cost trends (i.e. specialties with disproportionately higher payments and individual providers as “outliers”).

Our goal here, like many before us, is to highlight striking disparities in this dataset (despite its limitations); attempt to understand why they occur; and provide opportunities to address them.We examine three major issues: geographic variation; individual provider variation; and variation across care settings. Finally, we outline recommendations for future data releases to encourage more practical analyses.

Geographic Variation in Practice Patterns

A popular example highlighted by the CMS data was the rate of use of Lucentis — a drug prescribed for patients with age-related macular degeneration (AMD). Although a clinical study demonstrated similar outcomes for Lucentis ($2,000 per dose) versus Avastin ($50 per dose), the CMS data revealed total Lucentis spending of $1 billion.

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In The Debate About Cost And Efficacy, PCSK9 Inhibitors May Be The Biggest Challenge Yet


February 17th, 2015

The American health care system is far and away the most costly in the world. Health care reform is intended to lower costs, but they are still rising, albeit less steeply than in the past. Moderation is not however the case in the area of specialty pharmacy. The medications to treat Hepatitis C are the most cited examples of a general inflationary trend, but the pipeline of expensive medications is extensive.

Yet, policymakers and payers appear unwilling to undertake significant cost controls on medication pricing. Indeed the controversy over the $84,000 price tag for Sovaldi (sofosbuvir) has largely faded, suggesting a certain resiliency in our system’s ability to absorb costs.

We believe that resiliency is about to be challenged in a manner unlike we have seen in the past, at least in the area of pharmaceuticals. A number of pharmaceutical manufacturers are developing a new class of medication to manage high cholesterol — the PCSK9 (proprotein convertase subtilisin/kexin 9) enzyme inhibitors.

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Implementing Health Reform: Enrollment Figures, Tax Forms, And More


February 13th, 2015

We are rapidly reaching the end of the 2015 open enrollment period, and the pace of enrollment seems to be picking up a bit. On February 11, 2015, the Centers for Medicare and Medicaid Services (CMS) released their enrollment snapshot for week twelve, covering the federally facilitated marketplace from January 31 to February 6.

During that time period, 275,676 individuals selected plans, bringing of enrollees in the federal exchange up to 7,749,375. The Department of Health and Human Services (HHS) reportedly announced on a press call on February 11, however, that 200,000 individuals will be dropped from enrollment in February for failure to satisfactorily document compliance with citizenship or residency requirements.

Enrollment is expected to continue to pick up during the final ten days of open enrollment, as it did last year. CMS has said that if an individual cannot get through at the call center or online on February 15, CMS will make sure that he or she can apply for coverage, but the agency has not announced any further relief nor any new special enrollment periods for 2015. I continue to urge CMS to provide a special enrollment period for people who were subject to the individual responsibility penalty for 2014 to allow them to avoid the penalty for 2015.

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How To Restore The Innovation Ecosystem For Medical Technology


February 10th, 2015

The recent February issue of Health Affairswhich features a series of articles on innovation, provides us with an opportunity to examine the state of America’s innovation ecosystem for medical technology. This ecosystem has produced a myriad of medical advances, ranging from advanced imaging to molecular diagnostics, minimally invasive surgical tools, and incredibly sophisticated implants. These technologies have shortened hospital stays, reduced the economic burden of disease, and saved and improved millions of lives.

But the system is severely stressed. Policy improvements are essential if America is to remain a world leader in medical devices and diagnostics and fulfill its potential for medical progress in this century of the life sciences. In the following blog post, we will look at the current state of the medical technology industry and make some policy recommendations covering regulatory approval processes, payment and coverage policies, and tax policy.

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How Hepatitis C Is Shining A Light On Critical Gaps In Payment Reform


February 3rd, 2015

Since December 2013, regulatory approval of new treatments for hepatitis C have brought long simmering debates on drug pricing and value to full boil. The drugs—Gilead’s Sovaldi and successor combination treatment Harvoni, AbbVie’s Viekira Pak—represent significant steps forward for treatment in hepatitis C, demonstrating cure rates well above 90 percent in the clinical trial setting as well as greater tolerability for patients.

This unprecedented effectiveness, however, has come at a high cost, with treatment ranging from $63,000 for an eight-week course of Harvoni on the low end to above $150,000 for Sovaldi in combination with other products on the high end. This is likely to be representative of a wave of similar products coming through the drug development pipeline: highly targeted, highly effective, and highly priced.

Also indicative of things to come are the steps some groups are taking to blunt the impact of increased spending on hepatitis C treatments, such as formulary adjustments or prioritized coverage for particular subsets of the hepatitis C patient community. Days after the U.S. Food and Drug Administration (FDA) approved AbbVie’s Viekira Pak in December 2014, for example, the largest pharmacy benefit management company in the United States, Express Scripts, announced that the drug regimen would be the only hepatitis C treatment on its preferred list of covered drugs.

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Early Evidence On Medicare ACOs And Next Steps For The Medicare ACO Program (Updated)


January 22nd, 2015

Note: Pratyusha Katikaneni and Carmen Diaz also contributed to this post. They are both research assistants at the Engelberg Center for Health Care Reform, The Brookings Institution.

On December 1, CMS released a Notice of Proposed Rulemaking (NPRM) for the Medicare Shared Savings Program (MSSP), which requests feedback for changes CMS is considering for the Medicare accountable care organization (ACO) programs in 2016 and beyond. The proposal suggests significant potential alterations to the program, many of which we recently reviewed, that would address major issues that ACOs and others have raised: uncertainty and inexperience at transitioning to increasing levels of risk, lack of timely and accurate data, changes in attributed patient populations from year-to-year, and financial benchmarks that fail to account for regional variations and continue to reward high ACO performance over time.

The proposed rule raises more issues than it settles, but it clearly indicates that CMS is open to meaningful public comments and will make important revisions in the MSSP. However, the proposal also illustrates the challenges of resolving these issues in a way that both assures substantial ACO participation and improvement, as well as Medicare savings.

Ideally, big changes in key features in a major program like the MSSP would be based on extensive empirical evidence on what determines success in the program. Unfortunately, only limited evidence, including case studies and some comparative data, is available on the determinants of success for Medicare ACOs, and thus on the MSSP. Data released by CMS in September, which we previously reviewed, showed that the MSSP has generated over $700 million in savings to date relative to the spending benchmarks in the program. This is around 1 percent of the costs of care for beneficiaries affected by Medicare ACO initiatives.

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