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This Week in Health Care Reform: February 8th, 2019

Hospital price growth is shown to drive health care spending; opposition mounts against proposed rules targeting drug rebates; Medicaid plans look to address social determinants of health; and, a growing share of health care delivery payments are tied to value.

Week in Review

Hospital Prices: While much of the blame for rising health care costs has justifiably been levelled at out-of-control prescription drug pricing, a new study points to hospital prices as bearing a large share of that responsibility.  According to new research published in Health Affairs, hospital prices for inpatient services grew at a substantially higher pace between 2007 and 2014 (42 percent) compared to that of physicians (18 percent).  Over that same period, hospital prices for outpatient services also outgrew physician prices by more than 4 times (25 percent to 6 percent).  As more attention is being paid to health systems’ role in driving up health care costs, data continues to make the case that this attention is long overdue.  For instance, recent comparative analysis of available data from the Centers for Medicare & Medicaid Services (CMS) showed that in 2018, the average US family paid more to hospitals than to the federal government in taxes.  Separately, new transparency rules requiring hospitals to post list prices for their medical services has exposed the wild fluctuations in these prices, such as in California where this extreme variability was uncovered – sometimes within miles of where the services were offered.  And, a new report in Colorado shines a light on hospitals’ practice of pushing costs onto privately insured patients.

Drug Rebate Rule: Last week, the Administration released new rules targeting drug rebates negotiated on behalf of consumers by pharmacy benefits managers (PBMs) in government programs, like Medicare Part D and Medicaid managed care plans.  The proposal, a long-awaited component of the Administration’s stated plan to combat high drug prices, was met with swift opposition from lawmakers and stakeholders, who contend that the rules would be devastating to the existing health care ecosystem, in which PBMs play a vital role in helping manage costs.  The recent attacks on PBMs are merely a distraction, experts point out, as the conversation really need go no further than holding pharmaceutical manufacturers accountable, as they’re the ones who ultimately decide what the prices are.

Medicaid & SDoH: A growing body of evidence attests to the value of Medicaid in the lives of beneficiaries.  As the program continues to establish inroads, connecting vulnerable populations with vital health care services, stakeholders have sought to amplify Medicaid’s impact by directing its focus towards addressing social determinants of health (SDoH) and the role that they play in our growing appreciation of whole-person health.  Examples include the increased utilization of care management and coordination to target better SDoH outcomes related to housing, behavioral and mental health, and nutrition.  However, despite these opportunities, barriers remain, such as financing and data-sharing, as Medicaid plans seek to better integrate SDoH into their benefits design

Value-Based Payments:
A new report estimates that value-based arrangements make up approximately 22 percent of all health care delivery payments.  A slight uptick from the 18 percent measured at the start of last year, the increase speaks to the growing influence that our shared focus on value has brought to, not just how care is delivered, but how it’s reimbursed, as well.  It also represents the further transition away from the traditional fee-for-service model and towards one that emphasizes clinical effectiveness and outcomes-based performance measurement.      

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As anticipated, last week, CMS released its annual proposed changes to the underlying funding structure for the popular Medicare Advantage program.  Ahead of that announcement, stakeholders and beneficiaries had rallied in support of Medicare Advantage, urging policymakers and regulators to protect the program from harmful cuts.  As analysis of how the proposed changes will impact beneficiaries continues, be sure to keep an eye on this space to learn more and to add your voice to the efforts to protect Medicare Advantage and the nearly 22 million American seniors and persons with disabilities enrolled in the program.

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