News Connection

Supreme Court Refuses to Hear Latest ACA Challenge

The US Supreme Court recently declined to hear a lawsuit that argues against the constitutionality of the Patient Protection and Affordable Care Act (ACA). Sissel v US Department of Health & Human Services claims the health care law is invalid because it failed to originate in the US House of Representatives.

“In declining to hear that contention,” the publication Insurance Journal reported, “the high court all but ensured that the Affordable Care Act, or Obamacare, will remain intact through the November election.”

In the lawsuit, Iowa small business owner and artist Matt Sissel, backed by the advocacy group Pacific Legal Foundation, contends the ACA qualifies as revenue-raising legislation since it imposes a tax on residents who go without health insurance. And, according to an obscure constitutional provision, revenue-raising bills must originate in the House.

Lower courts, including a federal trial judge and a panel of 3 judges, rejected the argument, according to the article. The panel said the constitutional provision cited in the lawsuit only applies to legislation with a primary purpose of raising revenue. Although the ACA raises revenue, its primary purpose is to encourage health insurance coverage, according to the panel.

An 11-member appeals court also voted against considering the case. A Republican judge on that court, however, disagreed with the previous panel’s legal reasoning—pointing out that the law would raise hundreds of billions of dollars over a decade. Nevertheless, the law should be upheld, he reportedly said, because it actually did originate in the House.

“When the Senate took up the issue in 2009, it started with a House bill on an unrelated matter and substituted what became the core of Obamacare,” Insurance Journal explained. “The House then approved it, and Obama signed the measure into law.”—Jolynn Tumolo

Government Report Shows Increased Spending on Medicaid Managed Care

A report released by the Government Accountability Office in January 2016 revealed that federal spending on Medicaid managed care reached $107 billion in the 2014 fiscal year. That was the first year that the federal government, under the Affordable Care Act, fully funded the expansion of Medicaid at the state level. This funding will continue through 2016, after which the percentage will decrease incrementally to 90% in 2020.

Federal funding of managed care plans represented one-third of the total spending on Medicaid in 2014. This amounts to a 25% increase in spending on managed care since 2004 and speaks to how states are opting for managed care to ensure that they are providing low-income residents with high-quality coordinated care. To date, 39 states and the District of Columbia have taken advantage of this program and expanded their managed care organizations, though the percentage of residents enrolled in managed care plans varies.

According to a Bloomberg BNA article on the report, states have had few federal restraints on the development of the expansion of their Medicaid programs. This may change in 2016, when the Centers for Medicare & Medicaid Services will mandate that managed care organizations have an 85% minimum medical loss ratio (MLR). This will require that organizations allocate at least 85% of their funds to health care and use the remaining money to cover administrative and other costs. While this represents the first change to Medicaid managed care in 14 years, it is already the industry standard for large private insurance companies, as well as those on the exchange. Several states have also already adopted MLRs when they implemented managed care plans under their Medicaid expansion.—Katie Grosso

Resolutions in Drug Price War Proposed by NY Governor

Escalating drug prices have been a topic of controversial conversation for quite some time now. Governor Andrew Cuomo of New York has proposed a budget provision, titled “2016-2017 New York State Executive Budget, Health and Mental Hygiene Article VII Legislation.” According to a report in STAT, this “would effectively cap prices and require drug makers to provide a raft of information about their costs.”

A spokesperson for Governor Cuomo told STAT that the plan is projected to save $30 million in fiscal year 2016-2017. However, they also said that this is a “conservative estimate,” because “we’re talking about a limited number of drugs, and we cannot know for sure what blockbuster drugs will come on the market in the coming fiscal year.”

This $30 million estimate is made up of $24 million
from rebates that generic drug makers would be required to offer the state Medicaid program if prices of their medicines increase faster than inflation, and the remaining $6 million from price caps.

If approved by the state legislature, the “2016-2017 New York State Executive Budget, Health and Mental Hygiene Article VII Legislation” will require pharmaceutical companies to provide data about development, manufacturing, and marketing costs for drugs. 

In addition, drug makers will have to submit information about the prices charged other purchasers in the state and outside the US, any rebates offered customers, and profit margins, among other things.

The New York Health Plan Association, representing managed care insurers, is in favor of Governor Cuomo’s proposal. “With pharmacy costs as one of the biggest drivers of health care costs overall, consumers need and deserve basic pricing information,” the trade group said in a statement, according to STAT.—Alessia D’Anna

Anthem and Eli Lilly Team Up to Find Solution to High Drug Costs

Anthem Insurance Companies, Inc (Anthem) and Eli Lilly & Company (Lilly) announced a joint perspective that aims to drive policy changes that will facilitate an environment that allows health plans and manufacturers to enter into value-based agreements to promote access to high-value care. With value-based arrangements, both parties share the risk associated with individual patient outcomes and spending for a specific treatment. 

“Policymakers and industry are looking for opportunities to drive quality, create savings, and slow cost growth in the health care system,” the memorandum outlining the proposals read. 

Stakeholders believe a focus on value will do that. According to the paper, by 2018, the US Department of Health & Human Services plans to link 80% of Medicare payments to value and 50% to alternative payment models like bundled payments. However, prescription drug payment remains stuck in the past. 

“While the rest of the health care system is moving toward paying for value, payments for drugs largely continue to be stuck in a 20th century construct that focuses on price, regardless of the health outcomes of each patient,” the memorandum continued.

The partnership between Anthem and Lilly hopes to change that. 

“While there are no silver bullets, we believe it is possible to start breaking down some of the hurdles that stand in the way of a value-oriented system,” Sam Nussbaum, Anthem’s former chief medical officer and, currently, chair of an alternative payment model work group in the Centers for Medicare & Medicaid Services’ Health Care Payment Learning & Action Network, and David Ricks, Lilly’s senior vice president, wrote in a Health Affairs blog posting. “Anthem and Lilly are working together to help drive policy changes that will facilitate the transition.” 

Existing legislation and regulations, such as anti-kickback statutes and government pricing, remain barriers for the implementation of value-based contracts. 

“Anti-kickback statutes are in place to stem fraud and abuse by prohibiting arrangements where organizations or individuals could receive inappropriate incentives to use one product over another,” Nussbaum and Ricks wrote. “This is a well-intended protection, but in the case of value-based payment, such statutes might discourage drug developers and health plans from working together to create incentives structured around adherence to and efficacy of a drug in certain patient populations. We need to create a pathway that preserves these rules but allows for innovative arrangements that clearly benefit the health care system and patients.”

Similarly, current government pricing regulations—reporting pricing data to the federal government to determine Medicaid rebates; Medicare Part B payment rates; the 340B program ceiling price; and the maximum price that certain government agencies can be charged—are not compatible with value-based contracting, making it difficult for them to occur.  

“For example, a drug developer may have agreed to pay a rebate of 40% to a private health plan for every individual who does not respond to therapy, while charging full price for patients who did respond. That same drug company might then be required to offer certain government programs a 40% rebate across the board,” Nussbaum and Ricks explained. “This lack of flexibility makes it very difficult for drug developers to enter into more innovative partnerships focused on creating value.”

The memorandum argues that policymakers should implement new standards to accommodate value-based agreements at the risk of hindering innovation.  

Anthem and Lilly believe several strategic considerations need to be addressed to ensure the success of value-based contracts. 

1. Value-based contracts need to be defined through federal regulation. Core features to be eligible for legislative and regulatory carve-outs should be stated.

2. Current laws and regulations should be assessed and updated to reflect new innovations, including whether existing fraud, abuse, and monitoring models protect all stakeholders impacted by these new arrangements.

3. An environment in which value-based contracts are permitted as part of a larger health system transformation should be created. 

“These policy ideas are the beginning of a necessary partnership. Lilly and Anthem both want the same thing for patients—to have access to new, innovative medicines now and into the future. By bringing together best ideas from our organizations, we will be able to more successfully provide access to state-of-the-art treatments to improve health and cure illness,” Nussbaum and Ricks concluded.—Kelsey Moroz

6 Million Medicaid-eligible Americans Remain Unenrolled

Under the Affordable Care Act, the federal government incentivized states to expand their Medicaid coverage, a policy that has resulted in making Medicaid the largest source of health care in the country. However, despite the expansion and the inclusion of 13 million more enrollees since the law’s enactment, there are millions of Americans who qualify for Medicaid coverage but remain uninsured, a recent article in The Wall Street Journal reported. 

This is due in part to states that have elected not to expand their Medicaid programs, which has excluded 3 million people from coverage who would otherwise be insured. Congress is likely to be presented with proposals from federal officials to encourage the remaining 20 states that have not expanded coverage with further incentives to do so. However, outnumbering those who reside in states that have not expanded Medicaid are people who have both access to and eligibility for Medicaid benefits, but have chosen not to sign up. This presents a more challenging problem to solve, especially because so little is known about this population.

At first blush, these 6 million Americans seem to be the people most likely to enroll. Their
income level makes them eligible for nearly free health care services. They also do not face the restrictions that people buying insurance on the exchange face such as specific enrollment periods and fees for not obtaining coverage. In addition to this, the application process for Medicaid has been streamlined for ease and efficiency. 

In order to bring this population into the health care system, the Obama administration will sponsor grants focused on outreach. “Increasing how many Americans have health insurance is one of the central goals of the Affordable Care Act…we are making significant progress,” Lori Lodes, director of the office of communications at the Centers for Medicare & Medicaid Services, which administers the program, told The Wall Street Journal.

But $126 million has already been spent since 2010 on such endeavors and there still remains questions about what actually is the impediment to enrolling in Medicaid. 

Mike Perry, who conducts public opinion research at PerryUndem, told The Wall Street Journal that people don’t enroll because they assume their struggle is temporary. This
notion is echoed by Dejah Collier, a 24-year-old woman featured in the article, who is eligible for coverage but has let it lapse because her family is healthy and “it just became less
important.”—Katie Grosso