TRP Health Policy Report

October 13, 2014

The House and Senate are adjourned until after the November 4 elections. Following the midterms, members of the House and Senate are expected to return for two weeks before breaking for the Thanksgiving holiday. Congress should next be in session through December, when work will continue on appropriations, expired tax provisions and curbing corporate inversions. Other issues that could be considered during the lame-duck session include defense and intelligence operations reauthorizations, terrorism risk insurance (TRIA) reauthorization as well as bills related to commerce, sanctions and trade. Healthcare-related items could also theoretically be on the agenda, including a permanent fix of Medicare's sustainable growth-rate formula (SGR) and an extension of funding for the Children's Health Insurance Program (CHIP). 

Lawmakers Investigate Price Hikes for Generic Drugs
On October 2, Rep. Elijah Cummings (D-MD), the ranking member of the House Committee on Oversight Committee, and Senator Bernie Sanders (I-VT), chairman of the Senate Subcommittee on Primary Health and Aging, asked 14 drug manufacturers to provide data about what the lawmakers called the “escalating prices they have been charging” for generic medicines. In letters sent to the drug companies, the members cited recent analysis from the Healthcare Supply Chain Association which found that half of all generics sold through retailers became more expensive over the past 12 months. For example, they noted the price that hospitals and pharmacies pay for a bottle of 500 tablets of doxycycline, an antibiotic, rose to $1,849 in April, up from $20 in October 2013. Likewise, the price paid for a bottle of pravastatin, cholesterol-lowering medication, rose to $196 from $27 in that same timeframe.
The lawmakers also cited a study by the National Community Pharmacists Association, which found that prices paid by pharmacies more than doubled for one out of 11 generics. In some cases, price hikes exceeded 1,000%. The studies added to growing concern about the increasing cost of prescription drugs, which has largely been confined to brand-name drugs – such as expensive new treatments for cancer, hepatitis C and certain rare diseases. Earlier this year, for instance, controversy arose over the Sovaldi treatment for hepatitis C that is sold by Gilead Sciences and costs $1,000 a pill, or $84,000 for a 12-week regimen. Industry experts say prices for generic drugs are typically lower than their brand-name counterparts because manufacturers compete to sell medicines that are essentially interchangeable. Studies have shown that for competition to bring price down significantly, four or five companies usually need to be making a drug. Cummings and Sanders aid they may hold hearings depending on the response from the 14 companies, which is due by Oct. 23. Some manufacturers have already pledged to cooperate with the inquiry.
HHS Touts Updates to
Last Wednesday, federal health officials touted what they described as major improvements to the website ahead of the new enrollment period on Nov. 15. With less than six weeks before sign-ups begin, HHS representatives outlined a streamlined application process and predicted that signing up online would take most consumers less than half the time it took last year. Federal officials also said consumers returning to the site to renew their health coverage would have several options for doing so, including tools to help them bring up data about their current plans. Further, HHS said the site would not crash during the upcoming open enrollment period. However, officials did not share many operational details to support that claim.
Despite the improvements, analysts have pointed out several remaining flaws. For example, the website will not display insurance premiums until mid-November, when the Affordable Care Act's (ACA) second open enrollment period begins. In addition, incorrect translations can be found on the Spanish-language version of the federal exchange site. It is also unclear whether it will be easier for individuals to confirm their identities on the site, which proved difficult for some U.S. residents during the last enrollment period. HHS officials said they would be using the same data sources as they did last year to check users' identities. served 36 states last open enrollment season, while the remaining states ran their own insurance exchanges.
CMS Posts Performance Results for Pioneer ACOs
Last Thursday, CMS published performance results for Medicare's Pioneer accountable care organizations (ACOs). Under the Pioneer program, healthcare providers contract with CMS to meet quality targets and assume new risk when caring for a set population of Medicare beneficiaries. In exchange for adopting this risk, providers receive additional financial incentives.  The first year financial results show that health spending slowed by roughly 7% for some ACOs, while it increased by up to 5% for others. In the second year, health spending slowed as much as 5.4% among those that reduced patients' medical bills and grew as much as 5.6% where costs accelerated.
The agency also posted the ACOs' performance on quality measures. So far, 13 of the 32 original ACOs have dropped out of the program. The published performance for individual Pioneers was released nearly three years after their launch. Since that time, Medicare has added 340 ACOs to a smaller test of the incentives known as the Shared Savings Program. Policymakers in Congress hope the incentives for cost and quality will help to slow health spending, which has historically grown faster than the economy. In a statement accompanying the release, CMS said the agency “remains committed to leading delivery system reform, with an array of alternative payment models such as the Pioneer ACO model.”
CBO Says Federal Deficit at $486; Lowest Since 2008
Last Wednesday, the Congressional Budget Office (CBO) said the federal government ran an estimated budget deficit of $486 billion in fiscal year 2014 – $195 billion less than the shortfall recorded in fiscal year 2013, and the smallest deficit recorded since 2008. The fastest growth in spending was in Medicaid and subsidies for health insurance, which rose by $49 billion or 19 percent as a result of provisions of the Affordable Care Act that took effect in January 2014. Social Security spending rose by $37 billion or 5 percent.
However, the good news may be temporary. CBO and budget hawks warn that the retirement of the baby boom generation will dramatically increase deficits in coming years unless Washington can slow the growth of expensive programs like Medicare. While the deficit has fallen steadily since jumping to $1.4 trillion in 2009, the CBO projects it will begin rising again in 2016 and reach $960 billion in 2024.
House Speaker John Boehner (R-OH) criticized President Obama after the release of the CBO's estimate Wednesday, writing that "Medicare and Social Security are still scheduled to go bankrupt and the national debt stands at $17.8 trillion, an increase of $7.2 trillion under President Obama – who has still not proposed a credible plan to balance the budget." But Democrats cautiously praised the shrinking of the budget shortfall, noting that – relative to the size of the economy – the deficit was the smallest since fiscal 2007. Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee said that the most effective way to reduce the deficit is a “balanced approach” of spending cuts and closing special interest tax breaks to reduce long-term deficits.