Health Care Policy Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

White House Releases Second “Health Care” Executive Order

As the Trump Administration closed out the health care policy priorities the White House announced back in October 2017 (after releasing final regulations expanding Association Health Plans, expanding Short-Term Health Plans, and most recently, expanding the use of Health Reimbursement Arrangements), the President is once again focusing on health care. On Monday, June 24^th, the White House released its second “health care” Executive Order (EO), directing the Departments of Health and Human Services (HHS), Treasury, and Labor to issue regulations intended to increase price and quality transparency and to lower costs for health care consumers.
- Analysis: In my opinion, this particular EO is much more far-reaching than the EO released in Oct. 2017 (the “Oct. 2017 EO”). For example, this second “health care” EO not only includes policy changes to increase the transparency of medical prices and quality measures (which we will talk more about below), it also includes a number of suggested changes that health care policy geeks like me have been waiting for the past 2 years (namely, allowing HDHPs to pay first-dollar for certain chronic care and primary care services while preserving an HDHP policyholder’s HSA eligibility). Also, in my opinion, this second “health care” EO is more controversial than the Oct. 2017 EO. Not so much from a “political” perspective, but rather, from an “industry” backlash perspective. I don’t think anyone would disagree with me when I say that the lawsuits filed against the AHP regs and the short-term health plan rules – which were a part of the Oct. 2017 EO – were politically motivated. Yes, there are some practical concerns about the “type” of coverage short-term health plans offer and how short-term health plans will impact the “individual” market, but – at least in my opinion – there is very little if any practical concerns about the “type” of coverage AHPs offer and how AHPs will impact both the “individual” and “small group” markets. Don’t take my word for it, the Congressional Budget Office (CBO) tells us that AHPs will lead to a “coverage gain,” and CBO also tells us that AHPs will NOT have a noticeable impact on the markets. Just sayin.’ Compare this to the opposition that is being raised against this second “health care” EO. Here, the opposition is NOT politically motivated, but rather, industry stakeholders want to protect their own business interests that they argue are being attacked by the Federal government. Specifically, the hospital community is coming out hard against the suggested transparency requirements, claiming that, for example, the disclosure of “negotiated prices” for medical services will actually raise health care costs. The insurance carriers are also knocking the suggested transparency requirements, arguing that the Federal government cannot tell 2 private parties how they should negotiate and contract with each other. I am NOT saying that these claims are wrong. BUT, something doesn’t feel right here. I mean look, everyone and their mother – including hospitals and insurance carriers – have been calling for some type of increased transparency of medical prices and quality measures for years. And now that we finally have some tangible proposals on how to actually effectuate this policy goal, stakeholders like the hospitals and insurance carriers are saying that these ideas are all wrong. Here is my reaction: If hospitals and insurance carriers think these ideas are wrong – yet they have been saying that they support increased transparency too – why don’t the hospitals and insurance carriers come out their own ideas that they think work? I am also NOT saying that the ideas set forth in the EO to increase transparency are the right ideas. I am just saying that if you don’t like these ideas, and you – like ALL Americans out there – think the opaque pricing in our health care system is a problem, release your own ideas. I suppose another way to look at the opposition to this second “health care” EO is this: If industry stakeholders like hospitals and insurance carriers are coming out against these suggested transparency requirements, doesn’t it mean that these ideas are the right ideas?

What’s This Proposal Requiring the Disclosure of “Negotiated Prices” All About?

The most notable – and controversial – policy change suggested in the EO is an attempt to require hospitals to disclose the “negotiated prices” (as opposed to simply the “chargemaster rates”) for certain medical services.
- Analysis: However, despite all of the grousing by industry stakeholders, it is unclear what “negotiated prices” must be actually be disclosed. For example, are the “negotiated prices” that must be disclosed the “average” negotiated price? Similar to the “surprise billing” proposals that call for a “benchmark” of the median negotiated price for a particular medical service in a geographic area? If this is indeed what “negotiated prices” will end up meaning, industry stakeholders can’t quite complain because it is not as if the Federal government is requiring a hospital and an insurance carrier (or self-insured plan) to disclose the negotiated prices specific to these private parties. In other words, it is not as if the Federal government is requiring the disclosure of privately negotiated rates, and therefore, it does NOT appear that this policy change would “undermine the competitive forces of private market dynamics, and result in increased prices,” as industry stakeholders are suggesting. But on the other hand, will disclosing the median negotiated price for a particular medical service in a geographic area be good enough to actually inform a health care consumer about the cost of a medical procedure prior to undergoing that medical procedure? That is the whole goal of requiring the disclosure of negotiated prices, right?!? BUT, if it ends up being the median negotiated price in a geographic area, I suppose that is at least something. And it is certainly better than the opaque pricing system that all Americans are currently struggling to understand. The next question is what “types” of medical services will be subject to this “negotiated price” disclosure requirement? Will it be ALL medical services? The EO references “common or shoppable items and services,” and the EO notes that 73% of the 100 highest-spending categories for inpatient care were shoppable, and also, that 90% of the 300 highest-spending categories for outpatient care were shoppable. While I haven’t taken a look at the studies that produced these statistics, I assume that these studies identify what inpatient and outpatient services are indeed “shoppable.” The EO did note that the ability to price-shop “imaging services” produced savings. Soooo, it would seem to me that any forthcoming regulations from HHS will require the disclosure of “negotiated prices” for imaging services. AND, HHS will likely rely on the above noted studies, which means, looking at these studies may give us an answer on the universe of medical services that may be subject to these new “negotiated price” disclosure requirements. Proposed regulations requiring the disclosure of “negotiated prices” are supposed to come out within the next 60 days. If past is prologue, it is unlikely that HHS will meet this 60-day deadline. However, as the Presidential election politics begin to heat up, I would expect we could see proposed regulations at least by the end of the year. This way, the President would have a tangible “transparency” proposal to point to on the campaign trail. As we all know, voters remain frustrated with the opaque pricing inherent in our health care system. Soooo, any policy proposal to “pull back the curtain on the evil hospitals and insurance carriers who are conspiring in a smoke-filled, back-room at 1 am to charge the American public exorbitant amounts for band-aids and other medical services” resonates with the voters.

What Else Is There on Transparency?

Disclosure of Out-of-Pocket Costs: The EO also directs HHS, Treasury, and Labor to issue a Request for Information (RFI) soliciting comments on a proposal to require providers, insurance carriers, and self-insured health plans to disclose information about out-of-pocket costs for certain medical services prior to a patient undergoing the medical procedure. Some insurance experts have argued that the push for greater transparency does not need to focus on “negotiated prices,” but rather, attention needs to be given to the disclosure of how much a patient is actually going to pay out of their own pocket for medical services. I can’t say I disagree with this point. After all, for most if not all Americans, they care most about their out-of-pocket spending (I know I do). So in response to what the American public appears to be clamoring for, the EO attempts to collect specific information on how to “require providers, insurance carriers, and self-insured health plans to provide or facilitate access to information about expected out-of-pocket costs for items or services to patients before they receive care.” This is good, right?!? Well, yes, yes it is. BUT, who knows when we will see this RFI soliciting comments on how to do this. Importantly – and unfortunately – an RFI is a step removed from the actual rulemaking process. That is, an RFI is released even before proposed regulations are released. In the case of an RFI, the Federal Departments will need time to review the comments before proposing regulations. Then, it will take time for the Federal Departments to review the public comments to the proposed regs before anything is finalized. That could take 2 years. If fast-tracked, the Departments could get it done in 1 year, but to me, that is unlikely. BUT, maybe we at least see proposed regulations in the Spring of 2020, which will allow President Trump to point to yet another “transparency” proposal on the campaign trail. Again, voters like transparency proposals, especially independent voters (are you seeing a trend here).

Uniform “Quality Measures” and Health Outcome Benchmarks: The EO also calls for the development of common “quality measures” and eliminating low-value, counterproductive health outcome measures in Medicare, Medicaid, CHIP, the ACA Exchange market, TRICARE, and the VA. Here, it appears that the White House realizes that it generally cannot mandate that private entities like hospitals and other providers adhere to Federally-developed “quality measures” and health outcome benchmarks. Soooo, the White House is doing what it can do, which is telling the Federal government – which by the way is the largest “payer” of health care (e.g., under Medicare, Medicaid, TRICARE, and the VA) – to develop a uniform set of “quality measures” and patient health outcome benchmarks within the government’s own health care programs. In my opinion, if these uniform standards are developed – and that is a big IF – they will then be extended to the private marketplace. One way to extend these uniform standards to the private marketplace is to require private hospitals and providers to adhere to these Federally-developed “quality measures” and health outcome benchmarks as a condition to contracting with one or more of the Federal health care programs (e.g., Medicare, Medicaid, TRICARE, and the VA). While, it is going to take a long time for this to happen too, the White House at least started the ball-rolling on this. We’ll just have to wait and see if the ball gets knocked off of its track between now and a couple of years from now.

All-Payer Claims Database: Lastly, the EO also directs the Federal Departments that are in charge of the Federal health care programs to share the “health claims” data with a central database so “researchers, innovators, and entrepreneurs” can develop “tools to empower patients to be better informed as they make decisions related to healthcare goods and services.” This central database is not too dissimilar from an “all-payer claims database” that we have seen States adopt. The problem with a State “all-payer claims database” is that it does not apply to self-insured employer plans. And, it does NOT seem like the White House is ready to create a national “all-payer claims database.” So instead, the White House is creating an “all-payer claims database” for all of the Federal health care programs, including the Federal Employees Health Benefits Program (FEHBP), which provides private health coverage to all of the government workers in the Executive Branch, and some still in the Legislative Branch (those Congressional employees who are NOT forced to find a health plan through the DC ACA Exchange). Again, because the Federal government is the largest health care “payer” out there, this type of “all-payer claims database” should provide useful data on health claim trends that can be used to increase transparency and also help improve health outcomes of the beneficiaries covered under these Federal health care programs. Then, once the Federal government figures out how to efficiently operate an “all-payer claims database” – which is NO guarantee – I would imagine this idea would be extended to the private marketplace so that in time, we would ultimately have a national “all-payer claims database.” Lofty thinking, eh!?! I am all for it though :]

Other Policy Priorities In the EO

For the past 2 years – if not longer – I have been a broken-record on the idea of (1) allowing a high-deductible health plan (HDHP) to pay for expenses associated with managing a chronic health condition before the deductible is met while also (2) allowing the HDHP policyholder to maintain their eligibility to contribute to an HSA. I have also argued that first-dollar coverage for tele-health services should also be permitted – and that employers should be able to partner with direct primary care physicians to provide primary care services for a negotiated fee – while also maintaining HSA eligibility for HDHP policyholders.
- Analysis: Here is what I said right after the Nov. 2018 elections:

- - What about HSA policy changes? There may be some bi-partisanship on some HSA policies. Once we get into next year, however, the only HSA provisions that I could see move is the ability to maintain HSA eligibility even if the HDHP makes first-dollar payments for certain chronic care services, tele-health services, and direct primary care access. You would think the change that would allow people on Medicare Part A to contribute to an HSA would move too, but I could see House Democrats thinking that HSAs are too private market-focused. And House Democrats already want to go in a totally different direction, especially when Medicare is involved (i.e., the continued pursuit of some form of “Medicare-for-All”).

On July 2^nd of the last year (1 year ago today), I said this:

- - Some are suggesting some form of a “single-payer” system, while others are suggesting that the HSA rules should be modified to make HDHPs more “consumer-friendly” for high-medical-utilizers. You know where I stand in this debate: I think Congress should fix the “eligibility rigidity” that exists under the current HSA rules so employers can develop innovative plan designs that can incorporate direct-primary care offerings and telemedicine services that provide more than “medical care” into the HDHP. I also think the “eligibility rigidity” should be fixed so HDHPs can make first-dollar payments for certain “medically necessary” services like chronic care services. These first-dollar payments would shield workers with chronic conditions from paying for these services out-of-their-own pocket (thus, saving them money).

And, here is how I framed the issue almost 2 years ago:

- - Under the current HSA rules, if an HDHP planholder is covered by another health care arrangement that pays for “medical care” before the HDHP’s deductible is met, the planholder is NOT eligible to contribute to an HSA. Also, if a planholder’s HDHP pays first-dollar coverage for certain medical services that are NOT considered “preventive care,” the planholder is NOT eligible to contribute to an HSA. This “eligibility rigidity” (as I refer to it) currently limits an employer’s ability to offer their employees benefits that pay for things like specified chronic care services – either through a separate plan or the HDHP itself – before the HDHP deductible is met. In addition, this rigidity prevents an employer from adopting value-based care strategies and other cost-containment benefit offerings that pay for “medical care” before the HDHP deductible is met (like telehealth or direct primary care services). The EO directs Treasury to issue proposed regulations on these policy changes within 120 days. We don’t know if Treasury will get something out by the end of Nov. 2019, but I do know that Treasury, HHS, and the White House have been working on this issue for about 2 years now, so one would think these proposed regs will come out on time. Stay tuned.

The EO and “Surprise Medical Billing”

The EO directed HHS to submit a report to the White House on additional steps the Administration may take to implement the recently released principles on “surprise medical billing,” which included, among other things, the development of a Federal “benchmark” for the excess amount of out-of-network charges an insurance carrier or a self-insured plan must pay to a provider.
- Analysis: As I mentioned in prior updates, the White House has already signaled its aversion to adopting arbitration as a method for determining the excess out-of-network charges due to a provider, which is consistent with both the Senate HELP Committee’s and the House Energy and Commerce (E&C) Committee’s current surprise billing proposals. In both of these instances, the proposed legislation requires the excess out-of-network charges to equal the median negotiated rate for insurers and self-insured plans for the relevant medical service in a geographic area. Why is this significant? Well for one, this is another signal to the provider community that a majority of the policymakers at the Federal level are not too keen on arbitration, rather, they prefer a Federally-developed “benchmark,” whatever that “benchmark” may be (e.g., the median negotiated rate in a geographic area). BUT, that could be changing… What I mean here is this: In a prior update, I told you that the “surprise medical billing” debate can be reduced to a fight over “Arbitration vs. a Federal Benchmark.” As I also told you, the insurance carriers and the employer community are dead-set against arbitration. They want a Federal “benchmark.” The providers, on the other hand, are dead-set against a Federal “benchmark.” They are want arbitration. To date, it appears that the insurance carriers and the employer community are winning, evidenced by the White House, the Senate HELP Committee, and the House E&C Committee all supporting a Federal “benchmark.” BUT, the provider community is coming out with guns-blazing, arguing that a Federal “benchmark” will increase costs by watering down the providers’ negotiating power, AND, that a Federal “benchmark” will allow insurance carriers to set their own rates to the detriment of the policyholders. Conservative groups are also turning up the volume on the price-setting argument (arguing that landing on a Federal “benchmark” to solve the “surprise medical billing” problem puts up one step closer to “single-payer”). Regardless of whether you agree or disagree with the above stated arguments, they are resonating with policymakers on Capitol Hill. So much so that, notwithstanding the fact that we have 2 legislative vehicles (e.g., the Senate HELP and House E&C Committee bills) that call for a Federal “benchmark,” the fight over “Arbitration or a Federal Benchmark” is faaarrr from over. In the end, I foresee a compromise where there is BOTH a Federal “benchmark” AND arbitration. In this case, medical bills below a certain dollar threshold (say $10,000) will be paid at the median negotiated rate in a geographic area, while medical bills over $10,000 go to baseball-style arbitration. Stay tuned.