4 Critical Regulatory and Reimbursement Trends to Watch

Here are four recent developments that you may have missed but will almost certainly affect your practice.

1. $12 Billion Fight Over ACA Payments Going to the Supreme Court

Is the U.S. government reneging on its Affordable Care Act (ACA) payments to insurers? Under the ORIGINAL ACA terms, the government was obligated to reimburse health insurers who perform critical services on behalf of the government. The program was called the risk-corridor program.

It was established as a safety net that would cover any losses and profits in the first three years of the health insurance exchanges. The whole idea was to keep prices affordable. So, if an insurer lost money covering higher risk patients, for the first three years the U.S. government would cover those losses.

Until it didn’t.

In 2014, Congress passed a provision requiring the risk-corridor program to be budget-neutral. Insurers that had higher-than-expected profits would pay into the program and insurers with higher-than-expected losses would get money from the program.

No surprise, massive shortfalls resulted.

So, a group of U.S. health insurers sued and claimed that they were owed $12 billion.

A U.S. Court of Appeals for the Federal Circuit on November 2018 gave the insurers the cold shoulder saying that the Feds didn’t owe them any money after all.

The Land of Lincoln Mutual Health insurer closed down.

Moda, Blue Cross and Blue Shield of North Carolina and Maine Community Health Options appealed to the U.S. Supreme Court.

And the Supremes have agreed to hear the case.

The key question is, are contracts with the U.S. government valid, enforceable if Congress decides to unilaterally back away?

2. Drug Pricing Plan Building Momentum

It’s a scramble for the drug high ground. Who will voters see as tackling the issue of high drug prices? Democrats or Republicans? It’s Washington’s blood sport but, maybe, on this issue bipartisan support may well emerge.

Front and center and moving through the legislative gauntlet is House Bill H.R.3, which empowers the Secretary of Health and Human Services (HHS) to negotiate prices directly with drug companies on the 250 most costly drugs in Medicare that lack any competition.

“Lacking competition” is defined as not facing two or more competitor drugs on the market. Most brand-name drugs get patent exclusivity for several years, and therefore have no competition, as well as no upper boundary on the prices they set.

These rules, however, would not apply to insulin. However, the draft bill does make insulin eligible for negotiation. Critics of the Democratically generated bill say that even multiple competitors in a drug does not guarantee downward pressure on prices. They point to studies that say that several generic competitors need to enter a market before patients see legitimate reductions in prices. The critics from the left argue that H.R.3 potentially leaves too many drugs outside its mandate, and at the whim of inadequate market forces.

The 250 drugs would be those with the highest cost to Medicare, rather than a public health standard that indicates the greatest need for patients. In addition, the cut-off at 250 drugs seems arbitrary, and even this has a hedge: At one point the summary says the HHS would have the power to “negotiate as many as possible” out of that 250. There’s no hard requirement to negotiate any drugs at all actually.

The bill also mandates that the government would use an international pricing index to ensure consumers pay no more than 1.2 times the average price in other countries. If manufacturers refuse to negotiate pricing, they would be fined 75% of the drug’s sales in the previous year.

Finally, the bill also requires drug makers to pay Medicare a rebate if their prices rise faster than the rate of inflation.

The bill is still in draft form and committees are still working through details.

But the pressure is clearly on both parties to grab the high ground on this issue in front of the silly season, otherwise known as the 2020 elections.

3. Federal Health R&D Budget Priorities Getting Set Now. SHOW US THE MONEY!

In 2018 R&D spending by the federal government rose 12/8%—the largest annual increase in recent memory—to $176.8 billion. That’s serious money.

For the next federal budget, will R&D spending continue its upward trajectory and where will the money be spent?

This past September 3, 2019, the White House’s Office of Management and Budget (OMB) and the Office of Science and Technology Policy (OSTP) answered the second of those questions releasing the Administration’s FY 2021 research and development budgetary priorities.

For medicine, here are the key priorities.

1. 1. Artificial Intelligence, Quantum Information Science, and Computing: Departments and agencies should prioritize basic and applied research investments that are consistent with the 2019 Executive Order on Maintaining American Leadership in Artificial Intelligence. In terms of computing, departments and agencies should work together to explore new applications in and support R&D for high performance future computing paradigms, fabrication, devices, and architectures.
   2. Biomedicine: Departments and agencies should prioritize R&D investments aimed at combatting the opioid crisis, rapid detection and containment of infectious diseases, anti-microbial resistance, chronic disease prevention and treatment, gene therapy, neuroscience, medical countermeasures and public health preparedness, eradicating HIV/AIDS once and for all, and enhancing the independence, safety, and wellness of aging Americans and individuals with disabilities.
   3. Bioeconomy: The American Bioeconomy represents the infrastructure, innovation, products, technology, and data derived from biologically related processes and science that drive economic growth, promote health, and increase public benefit. The increasing economic value and public benefits derived from the research, innovation, and applications in the biological and agricultural sciences need to be better measured, promoted, and safeguarded. Departments and agencies should prioritize evidence-based standards and research to rapidly establish microorganism, plant, and animal safety and efficacy for products developed using gene editing, to better accelerate biotechnology product adoption and socially responsible use.
   4. Advance Science and Technology and ensure maximum return on taxpayer investment in R&D, the laboratory, the factory, the field, and any other setting where R&D is performed must welcome all individuals without prejudice and enable them to work safely, efficiently, ethically, and with respect, consistent with the American values of free inquiry, competition, openness, and fairness. Four high-priority areas related to research environments require significant attention: • Reducing administrative burdens on federally funded research; 13 • Improving rigor and integrity in research; • Creating safe and inclusive research environments; and • Protecting American research assets.

4. CMS to Require All ACA Plans to Publish Their Star Ratings

On August 15, 2019, Centers for Medicare and Medicaid Services (CMS) announced that the Trump Administration will now require Affordable Care Act (ACA) plans offered through a Health Insurance Exchange to display their quality star ratings on gov and the state-based exchange (SBE) websites. The star ratings, which score plans on a scale of 1 to 5, are based on a series of 38 quality measures categorized into 3 buckets: medical care, member experience, and plan administration. This nationwide policy is set to go into effect during the 2020 open enrollment period, which begins on November 1, 2019.