Health Care Matters | December 6, 2024
Post Election Policy Pulse
Congress returned after the Thanksgiving holiday and faces a tight deadline to address government funding and other key legislation before the lame duck session ends on January 3. For insights into the packed Congressional agenda, read the following:
Watchful Waiting: Three Weeks Left in Lame Duck (McDermott+)
Lawmakers Prepare for Final Lame-Duck Sprint Before Making Way for Next Congress (AP News)
Senate minority leadership elections occurred on Tuesday. Read the results here:
Trump continues to announce cabinet and staff nominations. To monitor these announcements, we refer you to the following sources that are being updated on an ongoing basis:
Tracking Trump’s Cabinet and Staff Nominations (The New York Times)
Tracking Trump’s Cabinet Picks (Politico)
CMS Releases Medicare Advantage and Part D Technical Rule
The Centers for Medicare & Medicaid Services (CMS) released a proposed rule that would revise the Medicare Advantage (MA) Program, Medicare Prescription Drug Benefit Program (Part D), Medicare Cost Plan Program, Programs of All-Inclusive Care for the Elderly (PACE). Key provisions in the proposed rule include:
Coverage of anti-obesity medications under Part D and Medicaid when used to reduce excess body weight and maintain weight reduction long-term for individuals with obesity.
Strengthening prior authorization (PA) and utilization management guardrails. The rule includes multiple proposals informed by recent CMS audits and data. Policies include defining "internal coverage criteria," ensuring PA policies are publicly accessible, making enrollees aware of their appeals rights, and addressing after-the-fact overturns that can impact payment, including for rural hospitals.
Proposing guardrails for artificial intelligence to ensure that Medicare Advantage plans use AI and automated systems equitably. CMS is proposing new regulations that ensure these systems cannot be used to deny care solely based on automated decisions and CMS will be monitoring MA plans' use of AI and taking enforcement action if necessary.
Updating medical loss ratio reporting requirements to include stricter requirements for provider incentives, clearer guidelines for quality improvement spending, and increased oversight through audits and data collection.
The fact sheet is available here and the proposed rule is available here.
Why It Matters
These proposals on the whole aim to enhance health care access, transparency, and equity, particularly for vulnerable populations, while ensuring that Medicare programs are held accountable for delivering quality care efficiently and effectively. One proposal which will face additional scrutiny by the incoming Trump administration before being finalized is the coverage of anti-obesity medications under Part D and Medicaid as CMS estimates that over 10 years, this proposed change would increase costs to the federal government by $24.8 billion for Part D and $14.8 billion for Medicaid.
340B Drug Pricing Program Reports and Publications
The 340B Drug Pricing Program is a more than $66 billion federal initiative designed to support safety-net healthcare providers by allowing them to purchase outpatient drugs at discounted prices. Despite its size, the overall program lacks transparency. In 2023, Minnesota became the first state to legislate the collection and sharing of data on 304B providers and the Minnesota Department of Health (MDH) just released the 2024 340B Covered Entity Report. The report examines 340B revenue with breakdowns by entity type, payer type, and some drug-level reporting.
Minnesota’s 304B providers generated at least $630 million in net revenue from the program in 2023. The state’s largest 340B hospitals benefitted most from the program, accounting for only 13% of the reporting entities but representing approximately 80% of the statewide net 340B revenue while Safety-Net Federal Grantee clinics—which include Federally Qualified Health Centers (FQHCs), their lookalikes, and tribal health centers—generated the least net 340B revenue. External operational expenses, such as contract pharmacies and third-party administrators, totaled more than $120 million which translates to covered entities paying $16 out of every $100 of gross 340B revenue generated to external contractors for administration. The report highlights the need for greater transparency and improved data quality in the 340B program, with future reports expected to provide more comprehensive data and insights.
Read here..
Why It Matters
The 340B program, established to support hospitals serving vulnerable communities in the face of rising drug costs, is now one of the largest prescription drug programs in the US, second only to Medicare Part D and has experienced unprecedented growth since its inception in the 1990s. This is due to a myriad of factors including the increased number of acute care hospitals qualifying following Medicaid expansion, hospital consolidation, the proliferation of hospital-affiliated 340B sites, expansion of contract pharmacy arrangements, and the addition of new covered entity types by Congress. The program has its share of vocal critics, the loudest being the pharmaceutical industry for obvious reasons. Yet employers, purchasers, and people who receive their health coverage through their employers can also be affected through higher premiums due to some unintended consequences of the program's policies:
340B incentivizes health care consolidation. A NEJM article found that hospital eligibility for 340B was associated with 230% more hematologist–oncologists practicing in facilities owned by the hospital than expected in the absence of the program.
Covered entities tend to prescribe more expensive medications than their non-covered counterparts. A recent study found that hospitals eligible for 340B discounts marked up drug prices more than six times higher than independent physician practices. 340B hospitals retained 64.3% of insurer drug expenditures, compared to 44.8% at non-340B hospitals. A report from North Carolina highlighted that 340B hospitals charged the state's health plan much higher markups on oncology drugs, generating substantial profits. Another study found that 340B eligibility led to reduced adoption of biosimilars, as financial incentives made reference biologic drugs more profitable than biosimilars.
A combination of recent policies by drug manufacturers, state laws, court decisions and proposed legislation at the federal level has led to an environment of uncertainty around the 340B program. Efforts like Minnesota's 340B covered entity report continues the drum beat for Congress push forward with reform efforts. A bipartisan working group of Senators was planning to release a 340B reform bill this summer but it was held up due to disagreements between the parties. Incoming Senator Majority Leader John Thune has been particularly focused on changes to the 340B program and we should expect to see something coming out of the next Congress. Read here.
Where We Are Writing
Key Takeaways from the CY2025 Physician Fee Schedule Final Rule
Check out our blog with insights from the 2025 Medicare Physician Fee Schedule (PFS) final rule. This year’s final rule covers a lot of ground including phasing in additional quality measures for ACOs and introducing new payment codes for advanced primary care. Moreso than any one theme (such as advancing accountability for downside risk or health equity) — the rule has the look and feel of the last chance effort for the current administration to advance policies they’ve previously set in motion.
Where We Are Going
Accountable for Health In-Person Event
Accountable for Health is hosting an in-person event on December 12th from 11am – 2pm ET at the Kaiser Center for Total Health
(700 2nd St, NE, Washington, DC). This event will feature sessions on the 2025 accountable care agenda, including quality measurement, legislation impacting individuals dually eligible for Medicare and Medicaid, and the future of alternative payment models and the CMS Innovation Center.
Register here.
