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This Week in Health Care Reform: July 12th, 2019

The ACA faces its latest legal challenge; specialty drug prices continue their steep ascent; a new study takes a look at how hospitals are contributing to spending growth; and, spending on low-value services slows down.

Week in Review

Legal Challenge: The Affordable Care Act (ACA) was back in court this week facing its latest legal challenge.  On Tuesday, the Fifth Circuit Court of Appeals heard oral arguments stemming from the 2018 decision by a lower court in which the ACA was ruled unconstitutional owing to Congress’ elimination of the individual mandate.  At issue is whether or not the law can stand on its own if, in fact, the individual mandate were declared unconstitutional.  Some legal observers don’t expect the court to toss out that lower decision, meaning the ACA could find itself back before the Supreme Court right as the 2020 campaign season heats up.

Specialty Rx Prices: According to the latest analysis from AARP, the average retail price for dozens of the most widely used specialty drugs went up 7 percent between 2016 and 2017, much higher than the general inflation rate, which was 2.1 percent over that same period.  Additionally, by 2017, the average annual cost of a single specialty prescription drug was more than $78,000 per yearnearly $20,000 more than the median US household income.  Specialty drugs now make up the most expensive class of prescriptions medicines and are expected to increasingly drive up spending as more of them make their way to market.

NIHCM Hospital Study: A new study from the National Institute for Health Care Management (NIHCM) Foundation examines what’s driving the growth in private insurers’ payments for hospital-based care.  While research has historically pointed to the role that rising provider prices play in this spending growth, little work had been done to better understand just how hospital versus physician price growth contributes to overall spending.  However, the just-released analysis from NIHCM focused specifically on this distinction.  Among their findings: between 2007 and 2014, hospital price growth significantly outpaced that of physicians.  For inpatient care, hospital prices grew 42 percent compared to 18 percent for physicians.  And, for outpatient care, the growth rates were 25 percent and 6 percent, respectively.  As a growing body of evidence has shown, hospital prices are growing more quickly and accounting for a larger share of total health care spending.  Pointedly, this sector is responsible for the vast majority of the growth observed in the total price of hospital-based care, ranging from 77 percent to as much as 97 percent of that growth.  What the research ultimately suggested was that efforts to curtail spending for the privately insured should focus more on rising hospital prices rather than physician prices.  Additionally, payers would do well to steer patients to more cost-efficient hospitals

Low-Value Spending:
Spending on a handful of low-value health care services went down from 2014 to 2016 according to a new report published recently by Altarum.  The analysis found that spending on five such services decreased on average by 1.7 percent annually over the two-year period.  By contrast, over that same time frame, total commercial insurance spending went up by 6.6 percent.  While encouraging, the decrease was less than expected, given the growing emphasis on value-based care.  Experts point to the cultural and behavioral norms of patients and providers as complicating the transition away from lower-value health care services.  Additionally, they argue, the current fee-for-service environment only encourages waste by incentivizing the quantity of services utilized rather than the quality of those services.      

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