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This Week in Health Care Reform: October 18th, 2019

Lawmakers focus their efforts on who’s to blame for surprise medical bills; a new report draws attention to price hikes for a handful of drugs without any added benefit; billing manipulation by hospitals leads to higher costs for patients; waste is found to account for one-quarter of total health spending; and, Medicare open enrollment begins.

Week in Review

Private Equity: At the heart of the debate surrounding surprise medical billing solutions is the question of whether a median negotiated rate or an arbitration-style model presents the most workable, most affordable path forward.  While there’s been near-universal agreement from the majority of health care stakeholders (including, employers, payers, unions, consumer groups, economists, and some lawmakers) that using the benchmark median negotiated rate would keep costs down and is in the best interest of patients, a small, but relentless, group has aggressively pushed for arbitration or independent dispute resolution (IDR).  Purportedly representing doctors and hospitals, it’s only recently come to light that the proponents of IDR really represent private equity interests – or, more pointedly, those firms who’ve invested heavily in building a profit-generating business model that thrives on surprise medical billing and, thereby, stand to lose the most under a median negotiated rate.  In fact, having drawn so much unwanted attention to themselves, private equity’s role in driving up health care costs now finds itself under the microscope.  As experts shine a light on how these firms have acted as a predatory consolidator of health care services (namely, through leveraged buyouts of medical facilities, where outcomes no longer take precedence and patients have no power to shop around), the business strategies they employ (prioritizing financial returns) have also come under increased scrutiny.


Rx Price Hikes: According to the Institute for Clinical and Economic Review (ICER), pharmaceutical manufacturers hiked the price on seven widely-used drugs in 2017 and 2018 despite there being no clinical evidence to justify the increases.  All told, those price increases led patients and insurers to spend an additional $5.1 billion over the two years.  The drugs ICER identified were used to treat a variety of conditions, including arthritis, seizures, hypertension, and cancer.  Drugmakers argue that a drug’s list price is often higher than what a patient actually pays.  But, the ICER study focused on total U.S. drug spending, rather than per-unit costs.  Stakeholders were quick to point out that this was just the pharmaceutical industry conducting business as usual, and only goes to show why they've earned their place at the bottom of Americans’ list of how the public views more than two dozen industries.


Billing Manipulation: A preliminary report from the Massachusetts Health Policy Commission (HPC) indicates that a combination of higher prices and hospital upcoding resulted in a significant increase in health care spending in the state.  The state’s health care watchdog presented their initial findings at a public meeting last month, reporting that between 2013 and 2018 commercial inpatient spending grew nearly 11 percent despite an almost 13 percent drop in volume.  Digging deeper, researchers at HPC found that increasing prices for a hospital stay, in addition to increasing acuity of those stays, were responsible for the growth in inpatient spending.  The preliminary findings only add to the mounting evidence which has shown that hospital price increases are largely to blame for greater health care spending.


Waste: A new study estimates that waste accounts for as much as one-quarter of overall health spending in this country.  Published last week in the Journal of the American Medical Association (JAMA), waste in the U.S. health care system ranges from $760 billion to $935 billion each year – more than total annual federal defense spending.  That figure notwithstanding, researchers felt compelled to ground their findings in historical context, pointing back to previous studies of waste in our system, such as those conducted in 2012, which had pegged that number at around one-third of total spending.  This latest JAMA study broke up waste into six separate categories: administrative complexity, pricing failure, failure of care delivery, overtreatment or low-value care, fraud and abuse, and lack of care coordination.


Medicare Open Enrollment: Open enrollment for Medicare began this past Monday and runs through December 7th.  During this period, eligible beneficiaries are able to select – or make changes to – their enrollment plans for 2020.  Experts have been offering their advice on things to consider during this year’s open enrollment period.  And, with so many now selecting Part D prescription drug plans or making the switch to Medicare Advantage, now’s the time for beneficiaries to make sure that whatever plans they choose meet their health needs and work for their budgets.

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