2020 Health Care Regulatory Outlook

Over the past decade, health care regulations and the market have pushed health care payers and providers to look at the total cost of care through value-based payment arrangements, but they have largely left drugs out of the equation. With the growing understanding that a sizable proportion of overall health care costs are attributable to drugs, several forces are beginning to challenge the old paradigm that maintained a distance between drug pricing and other aspects of health care finance and delivery. Over the coming years, drug pricing is likely to undergo changes, along with a redistribution of risk that will have significant implications for health care payers and providers.

The administration has made a concerted effort during the past two years to address the growth of drug prices. For example, 2018 rulemaking granted new latitude for Medicare Part D plan sponsors to negotiate with drug manufacturers for formulary placement.

Other health care regulatory areas that are likely to change and have implications for stakeholders include:

• Reference pricing: The Centers for Medicare and Medicaid Services (CMS) issued an advanced notice of proposed rulemaking in 2019 that established a demonstration project to set an international pricing index (IPI) for Part B drugs across 50 percent of the country.

• Value-based contracting (VBC): Federal regulators are considering changes that would allow for broader implementation of VBC.

• Bundled payments: Regulators are focused on Part B drugs as a target for innovative payment methods.

Learn how VBC and bundled payments are creating dependencies among actors that have traditionally operated independently of, or even in competition with, one another.

The administration issued a final rule on health reimbursement arrangements in 2019, the last in a series of regulatory actions taken in response to an executive order signed by President Trump. The executive order directed federal agencies to revisit regulations on association health plans (AHPs), short-term limited duration insurance (STLDI), and health reimbursement arrangements (HRAs). The administration issued final rules on AHPs and STLDI in 2018, but some states have banned or otherwise limited access to these plans.

The departments of Health and Human Services, Treasury, and Labor issued a final rule in 2019 that expands the availability of HRAs through actions, including:

• Permitting HRAs to be used to purchase health insurance on the individual market

• Outlining conditions for employers to offer limited HRAs as excepted benefits alongside traditional employer-sponsored group coverage

Read about how health care regulatory actions will prompt health plans to evaluate their product offerings and providers to determine how growth in HRA enrollment might affect individuals’ out-of-pocket health care spending.

The 2015 Medicare Access and CHIP Reauthorization Act (MACRA) repealed the sustainable growth rate formula for updates to the Medicare Physician Fee Schedule and replaced it with a system that provides higher payment updates and bonus payments for clinicians who participate in advanced alternative payment models (AAPMs). Clinicians who do not participate sufficiently in AAPMs will have their Medicare Part B payments adjusted based on their performance in the Merit-based Incentive Payment System (MIPS).

Partly in an effort to continue to expand participation in AAPMs, CMS and Capability Maturity Model Integration (CMMI) put forward a number of new payment models in 2019, with a particular focus on conditions or areas of the health care system where costs are high or increasing faster than other parts of the health care system.

Here are highlights of select new payment models:

• Primary care transformation: CMMI released a series of payment models in 2019 that will enhance the role of primary care in managing Medicare fee for service (FFS), Medicare Advantage, and Medicaid beneficiaries.

• Bundled payments in radiation oncology: CMS proposed the radiation oncology model, under which prospective episode-based payments would be adjusted for achieving preset benchmarks.

• Kidney care: CMS also has sought to drive payment reform in kidney care with models designed to encourage greater use of home dialysis and kidney transplants for Medicare beneficiaries with end-stage renal disease.

• Alternative payments for drugs: Value-based and other payment alternatives for prescription drugs have become central themes of the administration's health care agenda. For example, in 2020, CMMI will begin a new Part D payment modernization model that draws from the lessons of medication therapy management and other models.

As health care regulatory issues continue to drive reimbursement away from the FFS system, private payers are making similar moves. This change will push providers, payers, and other health care stakeholders to invest in new capabilities and explore new business relationships and ways of working together.

The United States is in the grip of an opioid epidemic. In 2017 alone, opioid overdoses cost more than 47,000 lives. According to the US Centers for Disease Control and Prevention (CDC), 36 percent of those deaths involved prescribed opioid painkillers, despite the fact that opioid prescriptions have declined recently.

In the face of the nationwide epidemic, federal and state legislators are establishing new requirements for opioid pain medications. In addition, large industry players are making significant investments.

In the future, we can expect:

• Expanded use of data and analytics: Enforcement and litigation tactics are becoming more sophisticated, with state and federal governments increasingly looking to more efficiently and effectively collect and analyze data from stakeholders involved in the controlled-substance supply chain.

• Government funding for new treatment models: CMS recently announced the maternal opioid misuse (MOM) model, which addresses the need to better align and coordinate the care of pregnant and postpartum Medicaid beneficiaries with opioid use disorder through the state-driven transformation of the delivery system.

Find out more about these issues, as well as enacted legislation and areas of focus for large industry investors.

In recent years, hospital charges have been published on various social media platforms, heightening awareness and sensitivity about hospital price transparency. President Trump and Seema Verma, CMS administrator, have both been outspoken about controlling pricing and driving consumerism in the health care market.

The following health care regulatory activities are moving hospital pricing to the top of the agenda for today’s health care organizations:

• The 2019 Inpatient Prospective Payment System final rule provided guidance on making hospital charge description master files available online in an appropriate electronic format.

• The president signed an executive order in 2019 focused on health care price transparency and providing access to multiple areas of patient-required information, including further details on hospital listed prices and physician performance details.

• CMS proposed updates to the existing Hospital Price Transparency rules that provide further guidance on making standard charges more informative and meaningful to aid public understanding.

• CMS released the final Outpatient Prospective Payment System rule calling for calculation of negotiated rates, the publication of shoppable services, the development of new tools for patients, and monetary penalties for noncompliance.

Get more information about how health care laws and regulations are shaping tools, technologies, and guidance to enhance price transparency.