Talking Points: 14 August 2023

A quick roundup of the issues driving the healthcare reform conversation.

Item of the Week

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HEALTHCARE PRICES Premiums are expected to grow next year as a result of rising healthcare prices.

Quick takeaway: A detailed analysis of rate changes for Affordable Care Act (ACA) marketplace health plans shows a proposed median increase of 6 percent for 2024.

Further context: In examining the data, researchers determined, while rate increases were the product of a number of factors, including COVID, the end of the public health emergency, and the unwinding of Medicaid continuous enrollment, the significant driver was the rising cost of healthcare – primarily, medical price growth, which put upward pressure on premiums.

What it means: The projected increases serve as an important reminder of how exactly consumers’ healthcare dollar gets spent.

While prescription drugs account for a good portion of that total, the largest share overwhelmingly goes to hospitals and providers.

ER PRICES Price increases are driving up the cost of visits to the emergency room (ER).

Quick takeaway: A new study explains the significant increase in ER spending and found that rising prices, along with upcoding, is to blame.

Digging deeper: Rising ER prices contributed to at least half of the spending growth in four out of the five markets studied.

Upcoding (which occurs when providers submit diagnosis codes to health plans to make patients appear sicker than they actually are in order to receive higher reimbursement), comprised as much as 48.9 percent of spending increases in one of the five markets studied.

What it means: With health spending in the U.S. projected to reach 19.6 percent of GDP by the end of this decade, increased attention is being paid to what’s driving that spending.

A recent analysis determined that two-thirds of the increase in spending between 2015 and 2019 was due to a rise in the prices of provider services and drugs.  The percentage of overall health spending in the U.S. attributable to ERs also went up from 3.9 percent in 2006 to 5.0 percent in 2016.

NONPROFIT HOSPITALS Lawmakers focus on nonprofit hospitals’ tax breaks.

Quick takeaway: A group of bipartisan senators are ramping up scrutiny of nonprofit hospitals’ charity care spending.

Digging deeper: As previously highlighted, increased Congressional attention is being paid to whether these health systems are providing sufficient levels of charity care to justify their nonprofit tax status. 

Now, in a pair of letters sent to federal tax commissioners last week, federal lawmakers urged a careful review of charity tax regulations, arguing that current oversight has proven insufficient.

What it means: In exchange for their tax exemptions, nonprofit hospitals are required to aid their surrounding communities through public health programs and by providing free or heavily-discounted care to low-income individuals. 

However, public health advocates and patient groups argue that the tax code’s overly-generous definition of “community benefits” enables nonprofit hospitals to misclassify costs, such as training and research, to avoid providing direct assistance, such as health screenings and free clinics.

PRIOR AUTHORIZATION Prior authorization reduces spending in Medicare Part D.

Quick takeaway: A new study shows that prior authorization in the Medicare Part D prescription drug program reduced overall spending by 3 percent.

Digging deeper: Savings from prior authorization exceeded the overhead costs of its administration by a factor of about 10, leading researchers to argue for the value of prior authorization, pointing out the important effect it has on drug spending.

Rx TAX DODGE Big Pharma exploits tax loopholes to further line their pockets.

Quick takeaway: By reporting profits overseas, drugmakers avoid billions in domestic taxes.

Digging deeper: Essentially, pharmaceutical companies have perfected the art of legally shifting the profit on their U.S. sales out of the country to low-tax jurisdictions in other parts of the world.

What it means: These tax revenues, rather than being reinvested in new research here or creating new domestic jobs, are being paid abroad.

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The Health Action Network includes everyday Americans—families, workers, businesses, patients, providers, neighbors, and friends. We are working together because we support market-based solutions that offer better healthcare choices and help build a stronger economy. The Health Action Network is an Elevance Health, Inc., initiative.