White House eyes value-based payment models for drugs and devices

The Trump administration's ideal policymaking agenda would rely heavily on voluntary value-based purchasing for drugs and devices, work requirements to enroll in Medicaid and an end to the ban on using federal dollars to pay for inpatient mental health and substance abuse disorder treatment.

A purported list of policy goals for the Trump administration was leaked Friday by a media website founded by several former senior communications staffers for President Barack Obama. Most, but not all, of the health policy proposals would require legislation. Most of the CMS-related items would cut Medicare and Medicaid spending.

A White House spokesman did not return a request for comment on the list's accuracy.

But it wouldn't be surprising that President Donald Trump has identified drugs as a driver of healthcare costs. He talked about it on the campaign trail and has tweeted about the issue since taking office.

Medicare spent about $25.7 billion on drugs in 2015, an increase of 13.3% from 2014, according to The Medicare Payment Advisory Commission. Hospital spending on implantable devices for Medicare enrollees hovers around $14 billion every year.

"People who were worried that this administration was moving away from performance-based payments should cheer about that idea," said Joe Antos of the conservative American Enterprise Institute think tank.

But value-based proponents, including some health policy experts, say the devil is in the details and the leaked list of policies does not include many of them.

Jay Desai, who while working at the Center for Medicare & Medicaid Innovation at the CMS helped develop accountable care organization models, said in order to bend the cost curve, providers must be evaluated for total cost of care for a patient.

As things are now, spending on drugs and devices is not heavily weighted in any of the current pay models, so this new policy agenda could pose a new opportunity, said Desai, who now leads PatientPing, a care-management company.

The Health Care Transformation Task Force, which represents both hospitals and insurance companies and is an advocate for value-based care, supports the idea of accountability for drug and device spending but would like those metrics tied into models that evaluate the total cost of patient care, according to its executive director, Jeff Micklos.

The Trump administration also supports wide use of work requirements as a condition for Medicaid coverage. A Health Affairs analysis from earlier this year found that around 11 million Medicaid enrollees, including those already looking for work, would be at risk of losing coverage if these requirements were imposed nationwide.

Whether it's through individual state applications or a rulemaking, imposing work requirements will open the CMS to legal challenges, according to Eliot Fishman, who oversaw 1115 waiver demonstrations for the Obama administration and is now senior director of health policy at Families USA.

The CMS can only offer waivers in instances where a state wants to do an experiment that advances the objective of the Medicaid program, which is to ensure coverage for low income people.

This bar is likely the reason the Trump administration hasn't approved any of the pending work requirement waivers from Arkansas, Arizona, Indiana, Kentucky, Maine, New Hampshire, Utah and Wisconsin, Fishman said. To lessen the likelihood of litigation, Congress would have to pass new legislation that allowed Medicaid work requirements.

One surprise idea being considered by the Trump administration could increase Medicaid spending. The White House suggests ending the ban on Medicaid paying institutions for mental illness treatment. Since Medicaid's creation 50 years ago, the program has refused to pay for treatment at institutions for mental disease, or IMDs, which include most residential treatment facilities that have more than 16 beds dedicated to patients dealing with mental illness or substance use disorders.

Doing away with the ban would take a law and lots of additional funding. The Congressional Budget Office estimates covering the cost of that treatment would add up to $40 billion to $60 billion over a decade.

There appears to be political will in Congress to rethink the IMD exclusion. The last few bills proposing repeal of the Affordable Care Act included provisions that weakened the ban on reimbursement. Lawmakers believe paying for this care could be key to addressing the opioid epidemic gripping the nation.

"There is real momentum on this," said Mark Covall, president and CEO of the National Association of Psychiatric Health Systems, adding that he believes it could be cheaper than the CBO estimates.

Last year, the CMS finalized a policy allowing Medicaid managed-care plans to pay IMDs for short-term stays lasting 15 or fewer days in a month. Given that payment is already taking place for these services for some beneficiaries, a wide lift of the ban might be less expensive than previously thought, Covall said.