This Week in Healthcare Reform: December 4th, 2020

Stakeholders continue to raise the alarm on the newly-finalized rule targeting drug rebates; out-of-network price-gouging for coronavirus testing worsens; meanwhile, another front opens up in the battle to combat surprise billing; and, state Medicaid programs grapple with rising enrollment.

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Week in Review

Rebate Rule: Just prior to Thanksgiving, the Department of Health & Human Services (HHS) finalized a rule that effectively ends protections that had allowed pharmacy benefit managers (PBMs) to utilize rebates in their negotiations with drug manufacturers in the Medicare Part D prescription drug program.  Known as the “rebate rule”, the final rule eliminates PBMs’ ability to negotiate these rebates, the savings from which get passed onto health plans, lowering costs for consumers.  The rule had originally been floated last year, before government and independent actuaries had determined that the rebate rule would actually increase costs for Medicare Part D beneficiaries, prompting HHS to withdraw the proposal.  Stakeholder reaction to the rule’s being finalized was swift and pretty unified, with multiple groups decrying the release as nothing more than a bailout for Big Pharma paid for by American seniors and taxpayers, while doing nothing to actually lower the cost of drugs for vulnerable populations.

OON Testing: The comprehensive response to the coronavirus health crisis depended on stakeholders from across the health care spectrum each doing their part to minimize barriers to diagnosis and treatment.  Lawmakers went so far as to enshrine that coordination in subsequent pieces of legislation, each designed to ensure that Americans would have access to that care without cost-sharing.  Unfortunately, a new study has brought to light how some providers have engaged in price-gouging for out-of-network COVID-19 tests.  In fact, according to the data, these out-of-network tests cost more than $185, compared to the average in-network cost of $130.  Further, as much as 16 percent of out-of-network coronavirus tests cost over $390, triple the average in-network cost.

Anesthesiologists: A recent report from the Government Accountability Office (GAO) shows that, in 2018, private insurance paid about 3.5 times more for certain anesthesia services than what Medicare paid.  That analysis actually indicates a worsening trend from what GAO had observed previously in 2007, when private insurance was paying around 3 times more than Medicare.  According to their research, this increase is the result of providers negotiating higher payments from private insurers, which they’re able to do as smaller physician practices continue to be consolidated into larger health systems, leading to fewer options in a given market and reducing competition.  Worryingly, they go on to point out, specialists – such as anesthesiologists – are able to extract higher in-network payment rates because they’re able to leave an insurers’ network with little risk of losing patients or revenue, the result being a dynamic that decreases providers’ incentives to participate in insurer networks, driving up costs for everyone.  In a separate study from earlier this year, researchers found that more than 20 percent of patients were hit with a surprise medical bill after an elective surgery, with anesthesiologists being one of the main culprits behind these excessive charges.

Medicaid Enrollment: New data shows an enrollment uptick in state Medicaid managed care plans coinciding with the start of the coronavirus pandemic in March.  As noted by experts, Medicaid has served as something of a first responder in regards to COVID-19, from both a health and economic perspective.  However, with less income tax and sales revenue coming in, in addition to unforeseen pandemic-related expenses, state budgets are beginning to buckle under the weight.  But, stakeholders are quick to point out the criticality of maintaining a financially stable Medicaid program, given the growing body of evidence showing how Medicaid expansion has improved access to care and population health.  And, with the coronavirus still raging across the country, now is when we should be looking to strengthen the program.


COVID-19 has expedited generational changes to our health care delivery model.  Against that backdrop, and as covered above, stakeholders urge decision-makers to remember the important role that critical safety net programs like Medicaid continue to play in the lives of millions of vulnerable Americans.

Stay safe and be well.

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