Bookended by Obamacare, 2018 was the year of policy change

With Congress' attempt to repeal the Affordable Care Act dead by the end of 2017, any relief the law's supporters felt were likely short-lived, as 2018 was the year the Trump administration began significantly remolding a law it fundamentally opposes.

Led by HHS Secretary Alex Azar, who took the reins of the $1.2 trillion department last January, the administration charted an overarching strategy to lower drug prices and reduce spending on hospital care. Moreover, by the end of 2018, the entire Affordable Care Act was back in legal peril when a federal judge in Texas struck it down and blocked immediate appeal.

Here's a look at the major healthcare political issues of 2018, a year when the public political drama slowed down, but activity aiming to overhaul the ACA sped up.

During Azar's confirmation hearing last January, he faced skeptical Senate Democrats who argued his tenure as a top executive with pharmaceutical giant Eli Lilly & Co. could blunt the Trump administration's promised plan to lower drug prices.

The skepticism didn't abate when White House in May unveiled its blueprint. But as the policy bones gained muscle, Azar's ideas have won over some doubters and drawn manufacturer ire.

“The biggest news item of the year is that the drug blueprint wasn't hot air and that they're really trying to do big things,” said Michael Adelberg, a healthcare consultant with the law firm Faegre Baker Daniels. “Like many others, I assumed it was mostly PR, but I think the administration deserves credit for taking this seriously.”

Among the most controversial policies: a mandatory international pricing index model for Part B physician-administered drugs to align prices with those in other countries.

Critics on the left who want Medicare to negotiate directly said the policy falls short. Investment analysts hope the proposal is a tactic to bring manufacturers to the negotiating table.

Critics on the right say it's price-fixing.

“Proposing to effectively accept the pricing decisions of other countries, while having the chutzpah to brand the policy 'market-based' is beyond disappointing,” said Benedic Ippolito of the American Enterprise Institute.

Last month the administration also proposed a significant change to Medicare Part D that sparked outcry: room for price negotiation for drugs in protected classes, where Medicare costs are exceptionally high. Patient groups are fighting back over concerns about access, but the administration says Part D has substantial patient protections in place, and the chronically ill will always be able to get critical medications.

HHS has also took action on site-neutral payments for Medicare, and despite pending litigation, analysts believe the political winds on the issue may have changed.

Last month the administration finalized a rule that will slash payments for office visits at hospital outpatient clinics to match the rate for independent physicians' offices. In response, two powerful industry groups sued.

But nonpartisan experts have wanted to see this policy move—not only to address rising Medicare expenses but also consolidation and the rising costs that stem from that trend. “In an era of growing consolidation of providers and increasing physician employment by hospitals, site-neutral payments are critical on all dimensions,” said Paul Ginsberg, director of the USC-Brookings Schaeffer Initiative for Health Policy at the Brookings Institution.

Hospitals will keep fighting hard against them, Ginsberg added. But from his vantage point, analysts' views on the issue have expanded to what's at stake for the entire healthcare system in terms of this policy, and they are increasingly bipartisan.

“I've had the sense that (the administration) has long seen the issue of healthcare competition as something they can work with Democrats on,” he added. “And I think Democrats are much more comfortable using competition than they have been historically. So that's a political dimension that makes it more promising that this policy could be sustained.”

The administration also trimmed reimbursement in the 340B drug discount program, which avoided congressional reforms despite Senate hearings and introduction of several House bills.

Hospitals had a key win late this year when HHS jumped ahead of its stated deadline and said it will start capping the prices manufacturers can charge providers for drugs. Regulation over ceiling prices for 340B has been delayed for years and early this fall hospitals sued over the latest postponement.

But litigation over the sweeping cuts to Part B drug reimbursements for 340B hospitals is still pending, and the administration has expanded those cuts to hospital systems' off-campus facilities.

A proposal to stabilize the individual market with a federal funding boost fell apart early in the year as a band of Republican-led states sued to overturn the law following the effective elimination of the individual mandate penalty for 2019.

Still, Obamacare may survive this attack. Sabrina Corlette, from Georgetown University's Center on Health Insurance Reforms, said that in 2018 the law proved the doubters wrong. “It revealed remarkable resilience in the face of some pretty dramatic attempts to roll back or undo the law,” she said.

The individual market remains in a holding pattern. Shortly before open enrollment started this year, CMS Administrator Seema Verma touted the fact that premiums dropped for the first time since the law was implemented.

The high cost of stabilization continues to trouble many. “ACA markets have stabilized at an unsatisfactory point,” said Douglas Holtz-Eakin, a conservative economist and former director of the Congressional Budget Office.

He said the deep cuts to marketing and other changes “all do matter at the margins” and that the slower enrollments noted this year have borne this out. “You have to decide what the administration's objective is politically,” he added. “They don't want to expand enrollment: they want it stabilizing,” but it's coming at a high cost.

Adelberg said while plans aren't “hemorrhaging money and going out of business” as they were in the early years, the exchange market still very much depends on subsidies and looks more like a tier of Medicaid.

“The exchange market is starting to look like Medicaid expansion-expansion,” he said.

The CMS has tweaked guidance for Section 1332 state innovation waivers, sparking criticism that the administration opened the door to trimming protections.

Potential actions from the administration take on extra weigh in light of the late-breaking court decision over Obamacare.

But even strong critics of the law doubt the administration would use the murky legal situation to cross statutory lines with waiver approvals in the meantime.

“No one wants to do anything in the interim, and both sides are waiting for the final, final decision,” said conservative policy analyst Chris Jacobs.

States this year started a serious push for their own form of the public option through Medicaid and some in Washington have started paying attention.

Minnesota, Nevada and New Mexico are some of the states that have forged ahead with studies on this policy. And with congressional activity on healthcare likely on hold until after the 2020 presidential election, advocates see this year's progress on the state level with this policy as significant—even if the industry is on the alert about potential revenue hits.

Adelberg said he is tracking the discussion closely and is particularly interested in the option if it's offered outside the Obamacare exchanges

RELATED YEAR IN REVIEW STORIES:

• Healthcare organizations turned to unexpected partners in 2018
• Dealmaking stayed hot in 2018, with a focus on physician practices
• Greater flexibility, new alliances define insurance industry in 2018
• Medicaid expansion battle shifted in 2018 to the executive branch and the states
• Absence of government action on public health issues pushed industry to act in 2018
• In 2018, interoperability remained just beyond the horizon
• CMS amps up value-based payments in 2018 as other quality issues fall by the wayside

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