Health Care Law Blog

Top Health Care Trends in 2017-Part 1: Pricing and Reimbursement

For the past decade, health care has remained one of the most tumultuous and dynamic industries; uncertainty, along with opportunity, are likely to continue in 2017. This three-part series will discuss some of the most important health care trends. This section will focus on some of the largest factors affecting costs and reimbursement in health care: 1) MACRA Implementation; 2) Medicaid Reimbursement; 3) Shifting Payment Models; and 4) Drug Pricing.

MACRA Implementation. The Medicare Access and CHIP Reauthorization Act (MACRA) was enacted in 2015 to establish new methods for reimbursing providers for services provided to Medicare beneficiaries. MACRA is intended to shift the traditional Medicare payment system from a fee-for-service model to one based on value. MACRA established two different payment models – the Advanced Alternative Payment Models (AAPMs) and the Merit-Based Incentive Payment System (MIPS). Here is a link to our previous blog article summarizing the two payment models established by MACRA.

On October 16, 2016, the Centers for Medicare & Medicaid Services (CMS) released its Final Rule implementing provisions of MACRA, which went into effect on January 1, 2017.

In response to over 4,000 comments to its proposed rule, CMS:

• created four different reimbursement options for physicians in 2017;
• lowered the MIPS reporting requirements for clinicians in each of the four performance categories (Quality, Advancing Care Information, Clinical Improvement Activities, and Resource Use); and
• reduced downside risk requirements for qualifying as an AAPM.

Medicaid Reimbursement. Perhaps the largest potential change in the health care field is the potential rollback of the Medicaid expansion. Medicaid, the largest single health insurer in the country, covers nearly one fifth of all Americans. In 2016, Medicaid spending accounted for $368 billion out of $3.9 trillion in total federal spending, according to the Congressional Budget Office.

Prior to the enactment of the Affordable Care Act ("ACA"), Medicaid generally covered only certain categories of low-income individuals, such as children, pregnant women, the elderly, and individuals with disabilities (the "Traditional Categories"). The Affordable Care Act allowed states to expand Medicaid eligibility to all Americans earning up to 138 percent of the federal poverty level, including those individuals who do not qualify for one of the Traditional Categories (the "Expansion Group"). Within states that opted in to Medicaid expansion, the federal government funded 100 percent of the cost of coverage for the Expansion Group during the first three years of the expansion. The increased federal funding rates for Expansion Group would phase down to 90 percent by 2020, and would remain at 90 percent after 2020.

If passed, the proposed Senate bill to repeal and replace the ACA would completely phase out the increased federal funding rates for Expansion Group by 2024. Additionally, the bill would cap federal Medicaid funding based on a per capita amount. Beginning in 2025, the per capita amount would be tied to a lower inflation rate.

Shifting Payment Models. If the implementation of MACRA is any indication, the health care payment landscape continues to shift from a quantity-based, fee-for-service model to a value-based system that rewards providers for quality outcomes and reducing costs. In order to maximize reimbursement under these new value-based payment models, health care providers are increasingly moving towards clinical integration to create shared savings arrangements and lower administrative costs.

For example, many providers are forming accountable care organizations (ACOs), which generally are groups of doctors, hospitals, and other health care providers who join forces for the purpose of providing coordinated care to Medicare patients. ACOs were established as a means of coordinating care in order to ensure that patients receive effective care while avoiding unnecessary duplication of services and preventing medical errors. ACOs that achieve cost savings and meet certain quality benchmarks may be eligible to share in Medicare savings.

Drug Pricing. According to the U.S. Department of Health & Human Services, prescription medications currently consume an estimated 17 percent of total health care costs. Moreover, with recent high-profile cases involving alleged price-fixing, misbranding (i.e., labeling brand drugs as generics), and rapid price inflation, drug pricing is likely to remain a hotly contested topic in 2017. Pharmacies, hospitals, and perhaps most importantly, drug manufacturers can continue to expect pressure to reduce costs for consumers.

The Food & Drug Administration will face calls for reforms, such as reducing the cost and time required to bring a drug to market, as well as reducing or extending companies’ market exclusivity, even as the Trump administration hints at eliminating the prohibition on drug importation. How many of these will occur is unclear, as is much of the current state of health care reform.

We will continue to explore these topics in our blog and in conversations with our clients.

If you have any questions about how your organization is affected by these changes, please contact a Foster Swift health care attorney.

Categories: Medicare/Medicaid, Pharmacy, Providers