On February 14, 2018, the Centers for Medicare & Medicaid Services (CMS) announced projections that national health care spending is expected to increase an average of 5.5% a year between 2017 – 2026 and will account for almost 20% of Gross Domestic Product by 2026. This announcement provides context for the continued focus on controlling and reducing health care spending in hearings held on Capitol Hill this week.
On February 14 – 15, Health and Human Services (HHS) Secretary Alex Azar testified before the House Ways and Means, Senate Finance, and House Energy and Commerce committees regarding President Trump’s Fiscal Year (FY) 2019 budget request. While the proposed budget is unlikely to be adopted, it serves as a roadmap for the administration’s priorities in 2019. The administration’s proposed budget includes cuts to the Centers for Disease Control and Prevention; increases funding to the National Institutes of Health and Food and Drug Administration; provides a slight increase in funding to combat the opioid crisis; and envisions significant changes to the Affordable Care Act, and the Medicare and Medicaid programs. The budget proposal also reiterates the administration’s support for work and community engagement requirements using 1115 demonstration programs. In his prepared testimony Secretary Azar stated that the President’s FY 2019 budget makes “thoughtful and strategic investments to protect the health and well-being of the American people” while also recognizing “the fiscal challenges our country faces today, and the need to focus our investments and update them to meet the needs of a rapidly changing world.” Secretary Azar endorsed repealing and replacing the Affordable Care Act with a law “modeled closely after the Graham-Cassidy-Heller-Johnson amendment” to the American Health Care Act of 2017.
Secretary Azar was also asked about Idaho’s recent announcement that the state will permit ACA non-compliant plans. While noting that Idaho has not yet approved any non-compliant plans, Secretary Azar indicated that “[t]here are rules and there’s a rule of law that we need to enforce.” If HHS does not take enforcement action against the state, the policy is likely to face a legal challenge and that will be closely watched by health policy experts, consumer advocates, and other states. It is also anticipated that without enforcement action other states will move to allow plans that fail to meet ACA requirements such as the provision of essential health benefits or the prohibition on annual or lifetime limits.
When asked about state 1115 demonstration requests that would permit lifetime limits on Medicaid coverage, Secretary Azar demurred and indicated that HHS has not formulated a position.
On February 14, the Committee on Energy and Commerce Subcommittee on Oversight and Investigations heard testimony regarding consolidation in the health care industry. The committee heard testimony from Dr. Leemore Dafny of Harvard Business School; Dr. Martin Gaynor of Carnegie Mellon University; and Dr. Kevin Schulman of Harvard Business School and the Duke Clinical Research Institute. In his prepared statement, Dr. Gaynor testified that less competition in the hospital, physician, and insurance markets translates into higher prices without concurrent gains in quality or efficiency. The subcommittee released a background memo that addressed trends in hospital, insurer, and pharmaceutical company consolidation. Consolidation in the health care industry is likely to remain a focus in Washington. Last October, President Trump issued an Executive Order stating that the administration would “continue to focus on promoting competition in healthcare markets and limiting excess consolidation throughout the healthcare industry.” President Trump ordered the Secretary of HHS, in consultation with the Secretaries of the Treasury, Labor, and the FTC, to issue a report within six months regarding consolidation in the healthcare industry.
Energy and Commerce Committee Chairman Walden took the opportunity to also address the committee’s work on the 340B drug pricing program. The committee is expected to soon release a legislative proposal to modify the 340B program. He noted the committee’s conclusion that the program has created an incentive for hospital acquisition of physician offices, particularly oncology practices, and referenced a report that found a 172% increases in community oncology practice consolidations since 2008.