This Week in Healthcare Reform: March 5th, 2021

Stakeholders continue to focus on the harms of the rebate rule; provider consolidation goes under the microscope; hospital billing practices suggest Medicare upcoding; and, Medicaid can help better address social health drivers.

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Week in Review

Rebate Rule: In late January, the Administration announced it was delaying implementation of the harmful, pharma-backed proposal known as the “rebate rule”.  That proposal seeks to eliminate the only check against pharmaceutical manufacturers’ unfettered drug pricing power – namely, the rebates that pharmacy benefit managers (PBMs) extract in their negotiations with drugmakers on behalf of employers, health plans, and government programs.  Analysis after analysis has already shown that eliminating drug rebates only serves to raise costs and premiums for Medicare Part D beneficiaries, while increasing taxpayer spending, all while handing Big Pharma a huge financial windfall.  So, while initial reaction to the delay of the rebate rule was applauded, stakeholders continue to focus attention on the fact that implementation of the proposal – delay notwithstanding – is bad for patients and does nothing to address the true drivers of rising drug prices.

Provider Consolidation: Earlier this year, the Federal Trade Commission (FTC) announced that it was launching a probe into the impact of provider consolidation.  Specifically, the agency is examining claims from a handful of the nation’s largest health plans to see how physician practice mergers and hospital acquisitions of physician practices affect the marketplace.  The FTC probe comes at a time of heightened consolidation among healthcare providers, which a growing body of research shows only leads to price increases as these health systems gain market power at the expense of competition.  In announcing its investigation, the FTC made clear its focus on a larger initiative aimed at revamping its merger retrospective program, which enables the agency to gauge how a particular merger impacted the equilibrium of a given market.  The effort also reinforces the increased level of scrutiny that states will be applying to these deals going forward.

Hospital Upcoding: According to a new report, hospitals are increasingly billing Medicare for inpatient stays at the highest severity level, which also happens to be the most expensive.  In an analysis from the Department of Health & Human Services’ (HHS) Office of the Inspector General (OIG), the federal watchdog raised concerns that, as hospital stays get more expensive, so, too, does the likelihood of inappropriate billing practices, such as upcoding.  From 2014 to 2019, according to the OIG report, Medicare payments for stays at the highest severity level went up by 24 percent, or $10 billion.  Further, by the end of the fiscal 2019 year – which ended in October of that year, before the onset of the COVID-19 pandemic in 2020 – Medicare had spent close to $110 billion for 8.7 million inpatient stays, nearly half of which were billed at the highest severity level.  This latest analysis follows a previous HHS report from last summer in which OIG audited previous claims and found that hospitals had overbilled Medicare $1 billion by incorrectly assigning severe malnutrition diagnosis codes to inpatient hospital claims.

SDoH Recommendations: Our understanding of the role that social determinants of health (SDoH) play in an individual’s overall health and well-being has rapidly reshaped our expectations of our healthcare delivery system.  With some estimates of the impact that SDoH have on health outcomes being as high as 80 percent, it’s become increasingly clear that these non-medical, socio-economic factors – such as housing, transportation, food security, and job opportunities – are an integral component in one’s whole-person health – all the more so for those populations whose SDoH vulnerabilities leave them exposed to worsening health outcomes.  Given that Medicaid serves so many of these individuals and families (77 million low-income adults, children, pregnant women, the elderly, and persons with disabilities), the program is uniquely positioned to help address the social risk factors that so disproportionately impact this already vulnerable population.  With that in mind, Medicaid stakeholders have pulled together key policy recommendations that will enable the program to better target SDoH health disparities and inequities.


On Wednesday, the White House announced a new initiative, partnering with health insurers to boost vaccinations among vulnerable communities.  Dubbed the “Vaccine Community Connectors” program, the pilot involves more than a dozen health plans and aims to promote health equity by removing barriers and making it easier for seniors from underserved populations to get vaccinated. 

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