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How GOP tax legislation would affect health policy

By JULIE ROVNER

Kaiser Health News

Having failed to repeal and replace the Affordable Care Act, Congress is now working on a tax overhaul. But it turns out the tax bills in the House and Senate also aim to reshape health care.

Here are five big ways the tax bill could affect health policy:

1. Repeal the requirement for most people to have health insurance or pay a tax penalty.

Republicans tried and failed to end the so-called individual mandate this year when they attempted to advance their health overhaul legislation. Now the idea is back, at least in the Senate’s version of the tax bill. The measure would not technically remove the requirement for people to have insurance, but it would eliminate the fine people would face if they choose to remain uninsured.

The Congressional Budget Office has estimated that dropping the requirement would result in 13 million fewer people having insurance over 10 years.

It also estimates that premiums would rise 10 percent more per year than they would without this change. That is because healthier people would be most likely to drop insurance in the absence of a fine, so insurers would have to raise premiums to compensate for a sicker group of customers. Those consumers, in turn, would be left with fewer affordable choices, according to the CBO.

State insurance officials are concerned that insurers will drop out of the individual market entirely if there is no requirement for healthy people to sign up, but they still have to sell to people who know they will need medical care.

Ironically, the states most likely to see this kind of insurance-market disruption are those that are reliably Republican. An analysis by the Los Angeles Times suggested that the states with the fewest insurers and the highest premiums — including Alaska, Iowa, Missouri, Nebraska, Nevada, and Wyoming — would be the ones left with either no coverage options or options too expensive for most consumers in the individual market.

2. Repeal the medical-expense deduction.

The House-passed tax bill, although not the Senate’s, would eliminate taxpayers’ ability to deduct medical expenses that exceed 10 percent of their adjusted gross income.

The medical expense deduction is not widely used — just under 9 million tax filers took it on their 2015 tax returns, according to the Internal Revenue Service. But those who do use it generally have very high medical expenses, often for a disabled child, a serious chronic illness or expensive long-term care not covered by health insurance.

Among those most vehemently against getting rid of the deduction is the senior advocacy group AARP. Eliminating the deduction, the group said in a statement, “amounts to a health tax on millions of Americans with high medical costs — especially middle income seniors.”

3. Trigger major cuts to the Medicare program.

The tax bills include no specific Medicare changes, but budget analysts point out that passing it in its current form would trigger another law to kick in. That measure requires cuts to federal programs if the federal budget deficit is increased.

Because the tax bills in both the House and Senate would add an additional $1.5 trillion to the deficit over the next 10 years, both would result in automatic cuts under the Statutory Pay-As-You-Go Act of 2010, known as PAYGO. According to the CBO, if Congress passes the tax bill and does not waive the PAYGO law, federal officials “would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending in fiscal year 2018 by the resultant total of $136 billion.”

Cuts to Medicare are limited under the PAYGO law, so the Medicare reduction would be limited to 4 percent of program spending, which is roughly $25 billion of that total. Cuts of a similar size would be required in future years. Most of that would likely come from payments to providers.

4. Change tax treatment for graduate students and those paying back student loans.

The House bill, though not the Senate’s, would for the first time require graduate students to pay tax on the value of tuition that universities do not require them to pay.

Currently, graduate students in many fields, including science, often are paid a small stipend for teaching while they pursue advanced degrees. Many are technically charged tuition, but it is “waived” as long as they are working for the university.

The House tax bill would eliminate that waiver and require them to pay taxes on the full value of the tuition they don’t have to pay, which would result in many students with fairly low incomes seeing very large tax bills.

At the same time, the House tax bill would eliminate the deduction for interest paid on student loans. This would disproportionately affect young doctors.

According to the Association of American Medical Colleges, 75 percent of the medical school class of 2017 graduated with student loan debt, with nearly half owing $200,000 or more.

5. Change or eliminate the tax credit that encourages pharmaceutical companies to develop drugs for rare diseases.

Congress created the so-called Orphan Drug Credit in 1983, as part of a package of incentives intended to entice drugmakers to study and develop drugs to treat rare diseases, defined as those affecting fewer than 200,000 people. With such a small potential market, it does not otherwise make financial sense for the companies to spend the millions of dollars necessary to develop treatments for such ailments.
To date, about 500 drugs have come to market using the incentives, although in some cases drugmakers have manipulated the credit for extra financial gain.

The House tax bill would eliminate the tax credit; the Senate bill would scale it back. Sen. Orrin Hatch (R-Utah), chairman of the tax-writing Finance Committee, is one of the original sponsors of the orphan drug law.

The drug industry has been relatively quiet about the potential loss of the credit, but the National Organization for Rare Disorders called the change “wholly unacceptable” and said it “would directly result in 33 percent fewer orphan drugs coming to market.“


CMS expanding program to help rural hospitals

The Centers for Medicare & Medicaid Services has announced that it is adding 13 more hospitals to its Rural Community Hospital  program, joining 17 other participating hospitals. The pilot program reimburses hospitals for the actual cost of inpatient care rather than the standard Medicare rate, which can be as low as 80 percent of real costs.

HealthcareDive reports that program requires that the participating hospitals have fewer than 51 acute-care beds, provide 24-hour emergency services and not be considered a critical-access institution.

The news service notes: “Rural hospitals have been especially hit hard in recent years because of dwindling reimbursements. Since 2010, 80 rural hospitals have closed and 673 are at risk of closing — 210 of which are at “extreme risk,” according to iVantage Health Analytics.

“In addition to lower reimbursements, patient admissions are also down as more patient care shifts to outpatient settings. Plus, President Donald Trump’s fiscal year 2018 budget proposal calls for $627 billion cuts from Medicaid over a decade. That could serve as a potential death knell for rural

Still, “{S}ome rural facilities are actually prospering through shifting to value-based care and aligning themselves with quality-driven, cost-conscious trends in healthcare.’’

To read more, please hit this link.


More states rescinding Medicaid ‘retroactive eligibility’

By MICHELLE ANDREWS

For Kaiser Health News

If you’re poor, uninsured and fall seriously ill, in most states if you qualify for Medicaid — but weren’t enrolled at the time — the program will pay your medical bills going back three months. It protects hospitals, too, from having to absorb the costs of caring for these patients.

But a growing number of states are rescinding this benefit known as “retroactive eligibility.” On Nov. 1, Iowa joined three states that have eliminated retroactive coverage for some groups of Medicaid patients since the Affordable Care Act passed. Each state had to secure approval by the federal government.

Retroactive eligibility has been a feature of Medicaid for decades, reflecting the program’s emphasis on providing a safety net for poor, disabled and other vulnerable people. In contrast to private insurance, determining Medicaid eligibility can be complex and the application process daunting, advocates say. A patient’s medical condition also may keep families from applying promptly for coverage.

All four states — Arkansas, Indiana and New Hampshire, in addition to Iowa — have expanded Medicaid under the health law, which allowed states to include adults with incomes up to 138 percent of the federal poverty level, or about $16,000 for one person. So, in theory, most adults are required to have insurance under the ACA. In practice, each state still has a significant number of uninsured, ranging from 5 to 8 percent of the population.

The retroactive coverage “can compensate for the sorts of errors and lapses that can so easily occur on the part of both the applicant and the government bureaucracy” that delay applications, said Gordon Bonnyman, staff attorney at the Tennessee Justice Center, a public interest law firm that represents low-income and uninsured residents.

State and federal officials say eliminating the retroactive coverage helps encourage people to sign up for and maintain coverage when they’re healthy rather than waiting until they’re sick to enroll. It also fits into federal officials’ efforts to make Medicaid, the federal-state program that provides health care for low-income adults and children, more like private insurance.

But consumer advocates and health care providers say the shift will saddle patients with hefty medical bills and leave hospitals to absorb more uncompensated care when patients can’t pay. Some worry this could be the start of a trend.

In Iowa, the change applies to just about anyone coming into Medicaid — except for pregnant women and children under age 1. The change will affect up to 40,000 residents annually and save the program more than $36 million a year.

“We’re making it a lot more likely that Medicaid-eligible members are going to incur significant medical debt,” said Mary Nelle Trefz, health policy associate at the Child & Family Policy Center, in Des Moines, whose organization opposed the change.

When someone has a traumatic health event, the initial focus is to get them stabilized, not figure out how to pay for it, said MaryBeth Musumeci, associate director of the Program on Medicaid and the Uninsured at the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

Patients may neglect to apply immediately for Medicaid, leaving them financially responsible for days or months of care they received before they got in their application, even though they may have been eligible for Medicaid all along.

That’s not the only issue, advocates say. Unlike the commercial insurance market where re-enrollment through someone’s employer is routine, Medicaid requires that beneficiaries’ eligibility be reassesed every year.

“People fall through the cracks,” said Andrea Callow, associate director of Medicaid initiatives at Families USA, a consumer advocacy group.

In addition, complications can arise for people who might need Medicaid coverage for long-term care services. “The criteria are complicated. For a layperson to find those criteria and figure out if they’re eligible” is challenging and they may need extra time, said Musumeci. Once patients have secured coverage, they may already have accrued hefty expenses.

Maybe so, but some people argue that a 90-day retroactive eligibility guarantee is counterproductive.

“We’re trying to get people to behave more responsibly, not less responsibly,” said Gail Wilensky, an economist who oversaw the Medicaid and Medicare programs in the early 1990s under President George H.W. Bush. “That is not the signal you’re sending” with three months of retroactive eligibility. A 30-day time frame is more reasonable, Wilensky said.

In contrast to Iowa, the waivers in Arkansas, Indiana and New Hamsphire generally apply only to adults who gained coverage under the law’s Medicaid expansion. (Indiana’s waiver also applies to other groups.)

Kentucky has a request pending that, like Iowa, would eliminate retroactive Medicaid eligibility except for pregnant women and children under 1, according to KFF.

Under federal law, officials can waive some Medicaid coverage rules to give states flexibility to experiment with different approaches to providing services. And retroactive eligibility waivers in Medicaid are hardly new. A few states like Tennessee have had them in place for years. Tennessee officials eliminated retroactive eligibility for all Medicaid beneficiaries in 1994 when the state significantly expanded coverage under TennCare, as Medicaid is known there. At the time, the state even allowed uninsured people to buy into the program who wouldn’t otherwise qualify based on income, said Bonnyman.

“There was no reason for anybody to be uninsured except undocumented immigrants,” said Bonnyman. “It didn’t seem to have the potential for harm.”

But state officials revamped that program after serious financial problems. Eligibility for TennCare has become more restrictive again.

Other states that waived retroactive coverage for at least some Medicaid groups include Delaware, Maryland, Massachusetts and Utah, according to the Kaiser Family Foundation.

Bonnyman said his group frequently works with Medicaid beneficiaries who have medical bills they can’t afford that accumulated during the months before they applied for Medicaid.

“If you’re a moderate- to low-income working family, one or two days in the hospital is enough to ruin you financially,” he said.

 


Nomination of Azar to run HHS is generally lauded

 

Despite his close past ties with the pharmaceutical industry, a  wide range of hospital executives and healthcare trade groups have come out in support of Alex Azar to be the next secretary of health and human services.

Mr. Azar, who ran Eli Lilly’s U.S. operations for five years until he stepped down from the position last January, was deputy secretary of HHS in  the George W. Bush administration.  Healthcare-sector officials generally lauded his mix of work experience in  the public and private sectors, and his understanding of the sprawling inner workings of HHS.

But some in Congress weren’t happy. Sen. Bernie Sanders (I-Vt.) said:

“We need an HHS secretary who is willing to take on the greed of the pharmaceutical industry and lower prescription drug prices not one who has financially benefited from this greed. I will vigorously oppose this nomination.”

Susan DeVore, CEO of Premier, an alliance of some 3,900 U.S. hospitals and health systems and about 150,000 other providers and organizations, told FierceHealthcare: “We know from that work he understands the need to move away from the perverse incentives in the Medicare fee-for-service payment system and to do so in a fashion that incents high-quality care. He also appreciates the need to have access to healthcare data and interoperability of health information systems.”

To read more, please hit this link.

 

 


Trump administration challenges consensus on how to curb healthcare costs

The New York Times reports:

“For several decades, a consensus has grown that reining in the United States’ $3.2 trillion annual medical bill begins with changing the way doctors are paid: Instead of compensating them for every appointment, service and procedure, they should be paid based on the quality of their care.

“The Obama administration used the authority of the Affordable Care Act to aggressively advance this idea, but many doctors chafed at the scope and speed of its experiments to change the way Medicare pays for everything from primary care to cancer treatment. Now, the Trump administration is siding with doctors — making a series of regulatory changes that slow or shrink some of these initiatives and let many doctors delay adopting the new system.

“The efforts to chip away at mandatory payment programs have attracted far less attention than attempts by President Trump and congressional Republicans to dismantle the Affordable Care Act, but they have the potential to affect far more people, because private insurers tend to follow what Medicare does. That in turn affects the country’s ability to deal with soaring healthcare costs that have pushed up insurance premiums and deductibles.”

To read the entire Times piece, please hit this link.


CMS calls pilot program to cut readmissions a success

The Centers for Medicare & Medicaid Services says that experiment seeking to cut  avoidable hospitalizations of elderly nursing-home residents has worked well,  generating nearly $50 million in savings. The three-year pilot program, called the Initiative to Reduce Avoidable Hospitalizations among Nursing Facility Residents, achieved a 17 percent relative reduction in potentially avoidable hospitalizations in participating facilities. CMS reported.

“These findings provide persuasive evidence of the initiative’s effectiveness in reducing hospital inpatient admissions, ED visits and hospitalization-related Medicare expenditures,” its  report said.

Modern Healthcare reported that under the model, “third-party organizations known as enhanced care and coordination providers, or ECCPs, hired nurses to provide education and clinical support to nursing home staff and help keep residents out of the hospital. All in all, 143 nursing homes in seven states as well as health systems, universities and consultants participated in the program, which ran from 2012 to 2016.”

“Health systems that participated in the experiment as ECCPs praised the initiative, even though it aimed to reduce inpatient traffic, which could affect their bottom line. The providers acknowledged that it can be better to keep patients in surroundings they know.”

“The experiment could lead to a sea change in how nursing homes care for patients, where the facilities catch ailments early and address them in-house rather than sending residents to the hospital, according to Tim Johnson, executive director of the Greater New York Hospital Association Foundation, which served as the ECCP for New York.”

“Most clinicians have been trained to believe that the hospital is the best place for anyone with an acute change of condition,” Mr.. Johnson told Modern Healthcare. “This belief can result in what turn out to be avoidable hospitalizations.”

“Initiative participants have moved on to the second phase of the model, which pays nursing homes at Medicare rates to treat patients with one of six specific ailments in their facilities and out of hospitals.

“The six conditions—pneumonia, dehydration, congestive heart failure, urinary tract infections, skin ulcers and asthma—are linked to approximately 80% of potentially avoidable hospitalizations among long term care facility residents, according to the CMS.”

To read more, please hit this link.


Chasing Medicaid dollars, hospitals rent or buy up nursing homes

By PHIL GALEWITZ

For Kaiser Health News

Westminster Village North, a nursing-home and retirement community in Indianapolis, recently added 25 beds and two kitchens to speed food delivery to residents. It also redesigned patient rooms to ease wheelchair use and added Wi-Fi and flat-screen televisions. This fall, it’s opening a new assisted-living unit.

“We have seen amazing changes and created a more home-like environment for our residents,” said Shelley Rauch, executive director of the home.

The nursing home can afford these multimillion-dollar improvements partly because it has, for the past five years, been collecting significantly higher reimbursement rates from Medicaid, the state-federal health insurance program for the poor. About half of its residents are covered by the program.

In 2012, the nursing facility was leased to Hancock Regional Hospital, a county-owned hospital 15 miles away. The lease lets it take advantage of a wrinkle in Medicaid’s complex funding formula that gives Indiana nursing homes owned or leased by city or county governments a funding boost. For Indiana, that translates to 30 percent more federal dollars per Medicaid resident. But that money is sent to the hospitals, which negotiate with the nursing homes on how to divide the funding.

Nearly 90 percent of the state’s 554 nursing homes have been leased or sold to county hospitals, state records show, bringing in hundreds of millions in extra federal payments to the state.

Even though Indiana’s nursing home population has remained steady at about 39,000 people over the past five years, Medicaid spending for the homes has increased by $900 million, in large part because of the extra federal dollars, according to state data. Total spending on Indiana nursing homes was $2.2 billion in 2016.

The funding enhancements were pioneered in Indiana, but hospitals in several other states, including Pennsylvania and Michigan, have also used the process. Advocates say it has been a key factor in helping to keep Indiana’s city and county hospitals economically vital at a time when many rural hospitals nationwide are facing serious financial difficulties.

Westminster Village North, a nursing home and retirement community in Indianapolis, recently redesigned patient rooms in the nursing home to ease wheelchair use. (Courtesy of Westminster Village North)

But critics argue that the money flow has not significantly improved nursing home quality and has slowed adoption of community and home health services.

More than two-thirds of Indiana’s Medicaid long-term-care dollars go to nursing homes, compared with the U.S. average of 47 percent.

Joe Moser, who until May was Indiana’s Medicaid director, said while in office that the hospital-nursing home marriages were partly responsible for keeping more people in nursing homes. “It is a factor that has contributed to our imbalance,” he said.

Daniel Hatcher, a law professor at the University of Baltimore and author of  the book The Poverty Industry, said this funding arrangement is a bad deal for the poor and undercuts the purpose of the Medicaid program. “The state is using an illusory practice and taking away money from low-income elderly individuals who are living in poor-performing nursing homes,” he said. He noted Indiana is ranked near the bottom of states for nursing home quality by several government and private reports.

But proponents of the practice say that even when hospitals get most of the money, it is well spent.

Marion County Hospital and Health Corp., the large safety-net hospital system in Indianapolis, owns or leases 78 nursing homes across the state, more than any other county hospital.

Sheila Guenin, vice president for long-term care there, said the hospital keeps 75 percent of the additional Medicaid dollars and the nursing homes get the rest. Still, the additional money has improved care. The transfer of the license to the hospital has kept several nursing homes from closing and increased staffing rates at many others, she said.

About 40 percent of the county hospital’s nursing homes have five-star ratings from the federal government, up substantially from 10 years ago, she said. Among the improvements at the nursing homes were the addition of electronic health records as well as high-capacity emergency generators to provide power in case of a natural disaster.

Still, some patient advocates said the extra funding is flowing to hospitals and nursing homes with little public accounting. Ron Flickinger, a regional long-term-care ombudsman in Indiana, said, “A lot of extra money is being spent here, but I’m not sure patients have seen it benefit them.”

A couple reads the paper in one of the common rooms at the Westminster Village North nursing home. (Courtesy of Westminster Village North)

Practice Dates To 2003

Medicaid, which typically covers about two-thirds of nursing-home residents, is jointly financed by the federal and state governments. States pay no more than half of the costs, although the federal match varies based on a state’s wealth. In Indiana the federal government covers about two-thirds of Medicaid costs.

The enhanced nursing-home payments began in 2003 when a financially strapped Indianapolis hospital owned by the county took advantage of the Medicaid funding provision to bolster its bottom line. In this case, the hospital purchased a nursing home, then provided the money for the state to increase what it spent on the home to the federally allowed maximum.

That increase, in turn, drew down more federal matching funds. Since the federal remittance is larger than the hospital contribution, the hospital got back its initial investment and divided the extra money with the nursing home.

Other county-owned hospitals in Indiana slowly followed suit.

Hatcher said Indiana government leaders embraced the funding arrangement because it let them avoid the politically difficult step of raising taxes to increase state funding to improve care at nursing homes. “It’s a revenue generator for the state and counties,” he said.

All the Medicaid funding for nursing homes should be going to those homes to care for the poor, not shared with hospitals to use as they choose, he added.

The strategy, promoted by consultants advising hospitals and nursing homes in Indiana, is used heavily there because of the plethora of county-owned hospitals. But the federal government is tightening the rules about such payments.

Texas has secured Medicaid approval for a similar strategy starting this month, but federal officials have made the extra funding dependent on nursing homes meeting quality measures, such as reducing falls. Oklahoma is seeking to get federal approval as well.

And in a rule released last year, the federal Centers for Medicare & Medicaid Services announced that it would gradually force states to shift to payment systems that tie such reimbursements to quality of care. Michael Grubbs, an Indiana health consultant, said that rule does not stop the Indiana hospital funding program, but it’s unclear that it will last.

Nursing-home operators in Indiana say the financing arrangement has helped them keep up with rising costs and improve care for residents.

Zach Cattell, president of the Indiana Health Care Association, a nursing-home trade group, noted the number of nursing homes in the state earning Medicare’s top, five-star rating has increased 9 percentage points since 2011. He said the percentage of high-risk residents with pressure ulcers and those physically restrained also dropped significantly.

An Opportunity Or A Loophole?

In Indiana, the small, county-run rural hospitals generally are not facing the financial threat that has become common elsewhere, in part because of the extra Medicaid funding gained from buying nursing homes, hospital officials say.

“The money has meant a great deal to us,” said Gregg Malot, director of business development at Pulaski Memorial Hospital in northern Indiana. “I don’t see this as a loophole but see it as an opportunity for small rural community hospitals to improve our quality and access to care.”

His hospital is the only one in Pulaski County. The extra Medicaid revenue from acquiring 10 nursing homes statewide — about $2 million a year — has helped finance the hospital’s obstetrics care and the purchase of the hospital’s first MRI, so doctors don’t have to rely on a mobile unit that used to come twice a week, he said. The hospital also spent some of the funding to add a centralized telemetry unit to monitor patients.

Steve Long, CEO of Hancock Regional Hospital, in Greenfield, Ind., said his hospital recently built two fitness centers in the county with help from its extra Medicaid dollars. “This would not be possible without the additional funding.”

He rejects the notion that additional Medicaid money reduces the hospital’s incentive to add home- and community-based care in the community. He said new Medicare financing arrangements, such as accountable care organizations, give the hospital motivation to find the most efficient ways to care for patients after they leave the hospital.

But he acknowledged the hospital benefits from seeing more patients go to nursing homes licensed under its name.

“Welcome to health care — it’s a complex and confusing environment where we have all different competing incentives,” Long said.


AHA again attacks HHS OIG compliance reviews

 

The American Hospital Association (AHA) has again complained to the Centers for Medicare & Medicaid Services about “serious problems’’ with the hospital-compliance reviews by the Office of the Inspector General (OIG) of the Department of Health & Human Services.

AHA complained last week that the audits routinely include “fundamental flaws and inaccuracies, both in the OIG’s understanding and application of Medicare payment rules and in the procedures the OIG uses to conduct the audits.” The hospital trade organization asserted that this causes very overstated repayment demands, undermines hospitals’ reputations and steals time and resources from patient care.

The association added that the audits can lead to uneven and unfair application of Medicare payment rules. It notes that some hospitals aren’t audited and the appeals process operates inconsistently

Healthcare Dive noted that: “This is not a new issue for hospitals. In a June 2014 letter to then-HHS Secretary Kathleen Sebelius, the AHA called for an immediate halt to the audits, saying the OIG’s findings and estimated payments were incorrect and ‘entirely redundant.’ A recent uptick in penalties for alleged reimbursement fraud and abuse has galvanized hospitals to again press for audit reforms.

“AHA says OIG’s tendency to extrapolate its findings to all claims in an audit period is aggravating the problem of overall flawed reports.’’

The news service speculated: “The AHA may be hoping HHS scales back the review process altogether, which would not be particularly surprising with the pressure in President Donald Trump’s administration to roll back regulatory burden. Recently, the CMS said it will take a more targeted approach in some areas to finding and investigating Medicare fraud and improper payments. It will focus on providers whose claim error rates or unusual billing practices stand out compared to similar providers.’’

“But while hospitals call for reforms in the OIG compliance reviews, a recent Wall Street Journal report raised serious concerns about hospital safety. Reviewing hundreds of Joint Commission inspection reports, the Journal found about 350 hospitals that maintained accreditation in 2014 despite Medicare violations. More than a third of those had additional deviations in 2015 and 2016.’’

To read more, please hit this link.

 

 


Rural hospitals struggle to stock costly drugs

 

By SARAH JANE TRIBBLE

Kaiser Health News

MOUNTAIN VIEW, Ark.

Hospital pharmacist Mandy Langston remembers when Lulabelle Berry arrived at Stone County Medical Center’s emergency department last year.

Berry couldn’t talk. Her face was drooping on one side. Her eyes couldn’t focus.

“She was basically unresponsive,” Langston recalls.

Berry, 78, was having a severe ischemic stroke. Each passing second made brain damage more likely. So, Langston reached for the clot-busting drug Activase, which must be given within a few hours to work.

“If we don’t keep this drug [in stock], people will die,” Langston said.

Berry survived. But Langston fears others could die because of an unintended bias against rural hospitals built into the U.S. health law. An obscure Obamacare provision forces rural hospitals like Langston’s to pay full price for drugs that many bigger hospitals buy at deeply discounted rates.

For example, Langston’s 25-bed hospital pays $8,010 for a single dose of Activase — up nearly 200 percent from $2,708 a decade ago. Yet, just 36 miles down the road, a bigger regional hospital gets an 80 percent discount on the same drug.

White River Medical Center, a 235-bed facility in Batesville, Ark., buys Activase for about $1,600 per dose. White River participates in a federal drug discount program Congress approved in the early 1990s. The program offers significant price breaks on thousands of drugs to hospitals that primarily serve low-income patients. One federal report found the average discount ranged from 20 to 50 percent, though as illustrated with Activase, it can be much higher.

Rural hospitals have long wanted to be part of the so-called 340B program, too, but were blocked from participating until the Affordable Care Act of 2010. That historic health law added rural hospitals to the overall program. But, unlike bigger hospitals, rural hospitals can’t get discounts on expensive drugs that treat rare diseases because of a last-minute exclusion written into the ACA.

That seemingly minor detail in the law has left rural hospital pharmacists and health care workers struggling to keep medicines in stock, and wondering if they will be able to adequately care for patients.

Arkansas, for example, is in the “stroke belt,” where medical staff depend on Activase to help them battle one of the highest rates of stroke deaths in the country. When Langston went to restock Activase this year, it was so expensive she left a reorder unfilled for more than week, anxiously keeping only one dose of the clot-busting drug on hand.

“Usually strokes come in clusters,” Langston said. “I didn’t want two people to come in and we were going to [have to] choose which one we were going to treat.”

In Atlantic, Iowa, pharmacy director Crystal Starlin sparingly stocks oncology drugs at Cass County Memorial Hospital. Newly diagnosed cancer patients might have to wait a couple of days to start treatment.

“We just can’t keep the extra [drugs] on hand,” Starlin said.

In Vermont, North Country Hospital closed its infusion center this spring due to the soaring cost of medicines.

“That was one area we could not afford to be in,” said chief executive Claudio Fort. North Country is the only hospital in a two-county region along the Canadian border and its roughly dozen active chemotherapy patients now must drive 45 minutes away for treatment.

The rare-disease exclusion was not publicly debated before being added into the ACA. Rather, it was tucked into the law at the very end of the process. How it wound up in the law is a bit of a mystery.

Former PhRMA chief executive Billy Tauzin said he doesn’t recall negotiating the exclusion. But, he said, the industry has consistently raised concerns about the drug discount program’s reach.

“It’s a question of how deeply you can afford to discount drugs that are expensive,” said Tauzin, who abruptly stepped down just before the ACA passed.

After the health law passed, PhRMA battled for years — in federal court — to keep rural hospitals from getting discounts on rare-disease drugs.

Congressman Peter Welch, a Democrat from Vermont who represents North Country, said it is clear whom the law hurts and helps.

“The pharma lobbyists pay attention, and their lawyers pay attention to the fine print,” Welch said. The pharmaceutical industry changes that fine print … [and] many legislators don’t even realize [that it] will have this adverse impact on hospitals in their communities.”

The rare-disease exclusion means that certain types of hospitals — including critical access, sole community and rural referral centers — cannot get discounts on rare-disease drugs, or on drugs that are “designated” to treat a rare disease. (Rare-disease drugs are also known as orphan drugs, which is a federally approved category of drugs that treat a disease affecting fewer than 200,000 people. Often, they carry price tags of up to $100,000 a year or more.)

The Food and Drug Administration gives the designation as a first step when it agrees with a drugmaker’s request to study whether a drug can be used to treat a specific rare disease. This can happen even if a drug is already FDA-approved and on the market for use in treating a common condition. The next step — the ability to market the medicine as an orphan drug — comes once research confirms that the drug is safe and effective in treating a specific, less common condition.

The popular clot-buster Activase has not won final approval to treat a rare disease but, on two separate occasions in 2003 and 2014, the FDA has given it the orphan designation while research is ongoing.

About 450 orphan drugs have been approved by the FDA. But thousands of drugs are “designated” and more are identified every week.

The list includes generic drugs such as the hormone melatonin and the autoimmune drug abatacept. In other words, medicines used to treat everything from sleep troubles to arthritis have ended up “designated.”

The small town of Mountain View, Ark., known for its crafts and music scene, is about two hours north of Little Rock and nestled in the rolling Ozarks. Arkansas’ mountainous terrain makes it essential for local hospitals to stock lifesaving stroke drugs. The state reports some of the nation’s highest rates of stroke deaths. (Sarah Jane Tribble/KHN)

Some drugmakers, such as Janssen Pharmaceuticals, have voluntarily offered discounts to rural hospitals on all of their orphan drugs including Remicade, whether they’re approved or designated. In contrast, drugmaker Genentech sent letters to rural hospitals on Jan. 1 listing dozens of drugs that would not qualify for discounts, including Activase and cancer drug Avastin.

Susan Willson, a Genentech spokeswoman, said the company is “deeply committed to ensuring that people have access to the medicines they need.” But, she added, the company believes the federal drug discount program has “grown well beyond its original intent.”

Several federal reports in recent years from the Medicare advisory board, as well as the Government Accountability Office and the Office of Inspector General, have evaluated the federal drug discount program’s growth. About 40 percent of U.S. hospitals now participate in the program and House Republicans held a hearing this summer questioning the program’s growth.

But for Dana Smith, director of pharmacy at Dallas County Medical Center in Fordyce, Ark., the discount program’s growth and problems are a separate issue.

“Basically, Genentech is saying to me that rural health care and the patients in rural America are not as important as patients in urban areas,” Smith said, adding the pharmaceutical industry “knows we have less manpower to fight them.”

Back at Stone County, emergency room medical director Dr. Barry Pierce paused one recent afternoon at the nursing station and recalled those tense days with just one dose of Activase. Stone County now keeps two doses of the stroke drug on hand.

Pierce noted that Stone County is at least 45 minutes away from the next nearest hospital and, echoing Langston’s concern, he said: “If we don’t have the drugs we need, people will die.”

 


University Hospitals, SummaCare to offer co-branded Medicare coverage

Lerner Tower, part of the University Hospitals complex in Cleveland.

University Hospitals, based in Cleveland, and SummaCare, an Akron, Ohio-based health insurer,  will offer co-branded Medicare coverage.

Called University Hospitals Medicare Advantage from SummaCare, the coverage will be available in markets with University Hospitals facilities. The partnership  says that the plan is to encourage more holistic, value-based care than fee-for-service care.

“We expect our members to achieve improved quality of care, better health outcomes and an overall outstanding patient experience,” Anne Armao, SummaCare vice president of marketing and consumer engagement, said.

UH will provide special care managers to help coordinate services with SummaCare.

To read more, please hit this link.


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