Medicare buy-in is seen as a moderate proposal, but it would set off a domino effect of cost shifting that would leave few people untouched. It would mean that services for more people would be covered by insurance that reimburses providers at below-cost Medicare rates, placing more pressure on providers to negotiate higher rates with private insurers to offset the loss in income. Such a shift would place upward pressure on individual market premiums. Providers would also try to limit the number of Medicare patients they see, making it more difficult for today’s seniors as well as the buy-in populations to access care.
The Medicaid Drug Rebate Program (MDRP) was created by Congress nearly 30 years ago. It requires drug manufacturers to pay a rebate for all out-patient drugs dispensed to Medicaid beneficiaries. The percentage for this rebate varies by type of drug, with brand-name drugs requiring the greatest rebate and generics the least. In addition, the rebate must rise until it ensures that the net (of rebate) price of the drug matches the best price available to anyone in the private market. (MDRP is often referred to as the Medicaid “best price” policy.) Finally, there is an inflation penalty — an additional rebate equal to the amount by which the price increase exceeds the rate of inflation, measured by the Consumer Price Index for All Urban Consumers (CPI-U).
|Last week the Trump Administration rolled out a semiannual summation of all the administration’s regulatory activity. Noteworthy for health policy observers, the administration has pushed back to November finalization of the proposed rule on manufacturer rebates for drugs purchased through the Medicare Part D and Medicaid Managed Care program. Opposition to the proposed rule has focused on the potential increase in costs to the federal government. It is important, however, to recognize just how uncertain the myriad cost analyses of this proposed rule are. AAF recently reviewed six cost estimates in detail here, but the key takeaway is that the numbers produced by these estimates depend greatly on behavioral responses that are enormously hard to predict correctly.
Surprise billing is an unexpected event that requires significant financial resources. That’s hardly a unique economic phenomenon, and the usual solution is … insurance! The unique aspect of this event, however, is that it takes place in the context of an insurance contract. What could be modified? There are really two pieces: the surprise and the bill. The former can be ameliorated by giving patients clear, up-front knowledge that they will be treated by an out-of-network provider and perhaps providing an estimate of the likely charge. That would reduce the surprise element of the phenomenon.
This is a special time of year in health policy nerd world — the arrival of another year of data on National Health Expenditures (NHE) from the Centers for Medicare and Medicaid Services (CMS). The journal Health Affairs published a preview on Wednesday, which the authors summarized thusly: “National health expenditures are projected to grow at an average annual rate of 5.5 percent for 2018–27 and represent 19.4 percent of gross domestic product in 2027.
Medicare’s costs for outpatient prescription drugs are rising quickly, and there is a growing sense that part of the problem lies in the incentives structure that Medicare Part D creates. Last week, the Trump Administration announced plans for a new, voluntary Part D payment model intended to lower Medicare expenditures on prescription drugs. The model’s basic idea is to increase plans’ liability for the part of the program where costs are rising the most, changing their incentives. These changes are a move in the right direction, but any benefits will likely be limited. More sweeping changes to the program’s structure, such as what AAF’s Team Health has proposed in the past, are needed to contain costs.
The primary concerns with this model include:
Restricted access to existing medicines: The 14 countries that the Centers for Medicare & Medicaid Services (CMS) has proposed referencing in this IPI model, on average, have access to only 48 percent of the new drugs developed in the past eight years, and it took an average of 16 months after their initial global launch for those drugs to become available in those 14 countries. If the United States adopts the prices of those countries, American patients may very well face the same access restrictions as exist in those countries and lose access to existing treatment options.
Yesterday marked 100 days since President Trump announced his drug pricing blueprint, the basic goal of which is to “lower prices” somehow. How successful has it been?
In thinking about this question, it is useful to remind oneself that drug production and distribution is largely market-based, and the lesson of the market framework is that prices fall only if there is an increase in supply, a decrease in demand, or a reduction in taxes and other overhead-like costs.
One of the few major pieces of legislation moving this summer is the farm bill. Versions of the farm bill have passed both the House and the Senate, and a conference committee will begin the process of reconciling their differences shortly. Among the most striking and contentious differences are the House reforms to the Supplemental Nutrition Assistance Program (SNAP, or “food stamps”) that include work requirements. The Senate bill contains no work requirements.
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