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This Week in Health Care Reform: September 27th, 2019

House Democrats release a sweeping new bill aimed at curbing rising drug prices; a just-released analysis estimates that the inclusion of arbitration in proposals aimed at addressing surprise medical billing would result in billions of dollars in additional costs; an OIG report confirms that rebates help slow spending growth in Medicare Part D; and, calls to eliminate the health insurance tax continue.

Week in Review

Rx Price Proposal: Despite finding themselves the object of unrelenting scrutiny over the unsustainable trajectory of rising drug prices, the pharmaceutical industry continues to conduct business as usual.  It should come as no surprise then that they’ve now sunk to the bottom of U.S. industry rankings in the latest Gallup poll.  And, their immediate outlook doesn’t hold much promise either, as late last week, House Democrats unveiled their ambitious plan to address rising drug prices.  While the jury’s still out on whether or not the proposal will accomplish what’s steadily become a hot button issue on the campaign trail, it’s clear that, as constructed, the bill would mark a dramatic shift in how prescription drug prices are set in this country – specifically, by empowering the federal government to negotiate the prices of as many as 250 drugs annually.

CBO Score: The debate surrounding surprise medical billing legislation centers around the inclusion of an arbitration-style model to resolve the billing disputes that arise when patients receive care from out-of-network providers, often at in-network facilities.  These nefarious practices have only recently been discovered to largely be the work of private equity firms, who’ve identified – and, are working hard to protect – a lucrative profit center.  There’s been near-universal agreement from employers, insurers, economists, patient and consumer groups, and labor unions that adding arbitration to the process would only result in higher costs, decreased transparency, and increased administrative burdens.  Now, the just-released analysis from the nonpartisan Congressional Budget Office (CBO) has put a price tag on how much more arbitration would cost.  According to CBO, this approach, favored by doctors and hospital groups, would increase the deficit by “double digit billions” of dollars.  In contrast, the more favored approach, which focuses on the market-based, median negotiated rate in a geography for the same or similar medical services, would actually save more than $20 billion over ten years.  Stakeholders were quick to capitalize on the release of the CBO report, pointing out that arbitration represents another failed policy designed to maintain the status quo.

Rebates: A new report from the Office of the Inspector General (OIG) confirms what experts have been saying in regards to rebates’ ability to help keep drug costs down.  According to the OIG report, the rebates negotiated by health insurers and pharmacy benefit managers (PBMs) substantially slowed spending on brand-name drugs in Medicare’s Part D prescription drug program by 15 percent.  Performed by Congressional request, OIG examined more than 1,500 brand-name drugs with Part D reimbursement and rebates between 2011 and 2015.  Over that time, what they found was that total Part D reimbursement for brand-name drugs increased by 19 percent, compared to the 4 percent increase observed for rebate-adjusted drugs.  However, what analysts also discovered was that the increased use of rebates was not enough to offset major drug price spikes.  But, they went on to conclude that without rebates, prices would have risen much more

Stakeholders continue to voice their concern over the reimplementation of the health insurance tax (HIT), currently scheduled to return next year.  Building off of comments they’d made earlier in the summer, the Medicaid Health Plans of America (MHPA), the national association representing managed care plans in Medicaid, called on Congress to fully repeal or extend the delay of the HIT, which was suspended for 2019.  In a letter to lawmakers, MHPA called the HIT “a tax on a public health care program” serving the most vulnerable populations.  According to an earlier study, the average cost per Medicaid enrollee would increase, thereby increasing costs to states by over $13 billion and to the federal government by nearly $25 billion over ten years.      

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