More Price Transparency Needed for Implantable Devices

More Price Transparency Needed for Implantable Devices



Implantable devices, such as hip replacements and heart valves, are a central part of medical treatment today. Americans receive about 370,000 cardiac pacemakers and about 1 million total hip and knee replacements per year. Despite how common the use of implantable devices is, little information is publicly available on the prices paid for these devices in the United States. Limited information about prices and performance of many implantable devices has raised concerns that providers, consumers and insurers may be paying too much for these devices.

 

Insight on an Important Issue

A recently published AARP Public Policy Institute Insight on the Issues examines the market for implantable devices. It looks at financial incentives for manufacturers, hospitals, physicians, and payers, and the impact of the current market structure—especially the lack of price transparency—on competition.

The report, “Understanding the Market for Implantable Devices,” finds that a dearth of relevant information makes it difficult for buyers to assess the value of many implantable devices. While hospitals are the primary direct purchasers of most high-cost implantable devices in the United States, consumers and insurers pay for these devices indirectly as part of the procedure to implant them and thus, are also concerned about the cost of these devices.

Lack of price transparency makes it difficult for buyers to get comparative data on prices and limits their leverage to negotiate lower prices. Through the use of restrictive contract provisions that act as “gag clauses,” manufacturers can obscure device prices.

Meanwhile, buyers are often unable to get data on quality and clinical outcomes associated with implantable devices. This means that hospitals, physicians, and patients are unable to compare the performance or value of comparable devices.

The issue is more complex than one might think. Some have suggested that mandatory public price disclosure would strengthen the bargaining position of buyers and help drive down the prices of implantable devices. Advocates argue that the public availability of real cost and quality information can affect the market, promoting competition that can lower costs and improve quality. Critics have suggested transparent pricing could result in higher device prices. Manufacturers, some experts say, could use publicly available price data to collaborate and raise prices, especially in highly concentrated markets for implantable devices. To address these concerns, approaches like restricting access to pricing data to buyers may prove more successful that full public disclosure. However, even restricted price data could leak out to manufacturers. In any case, without more information about prices and performance, buyers are likely to remain in the dark about the value of implantable devices.

Further, the incentives of hospitals and physicians often diverge, sometimes sharply. Although hospitals typically pay for implantable devices, the surgeons who insert them in patients typically make decisions about which devices to use. Physicians frequently have a close working relationship with a device manufacturer and may exhibit strong personal preferences for devices sold by the manufacturer.

Conflicts of interest can undermine competition in other areas as well. High-volume surgeons may receive payments from device manufacturers for activities, such as consulting and promotional speaking engagements. For instance, from August 2013 to December 2015, 10 larger implantable devices manufacturers and their subsidiaries paid over $1.3 billion to physicians and hospitals for consulting and research, promotional talks, and similar services according to federal government statistics. These financial relationships can cross the line to become illegal kickbacks to promote the use of a manufacturer’s device. While some industry trade groups have adopted a code of ethics that prohibits manufacturers from paying physicians for expenses that are unrelated to scientific and educational purposes, compliance is voluntary.

 

Toward Greater Competition

This PPI Insight on the Issues concludes that, for the benefit of consumers, buyers, and payers, policymakers should consider a number of options that would help strengthen competition in the market for implantable devices. Some policy options include:

  • Increasing device price transparency by restricting gag clauses and requiring manufacturers to disclose prices.
  • Improving availability of information on implantable device performance and clinical outcomes.
  • Requiring disclosure or imposing restrictions on abusive marketing practices.
  • Encouraging containment of device prices through payment and delivery reforms.
  • Increasing competition among device manufacturers.

 

No question, policymakers’ careful consideration of the topic is in order.

In another blog post, I discuss another Insight on the Issues that explores the FDA’s process for approval and oversight of implantable devices. That paper suggests policy options that could both strengthen and streamline the process to better protect public health and safety while also encouraging the development and marketing of devices that will benefit patients.

 

 

Keith Lind is a Senior Strategic Policy Adviser for the AARP Public Policy Institute, where he covers issues related to Medicare and medical devices. 

 

 

 



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The Senate Health Reform Bill Slashes Medicaid Severely

The Senate Health Reform Bill Slashes Medicaid Severely


The Better Care Reconciliation Act (BCRA) now under consideration in the Senate would drastically alter the Medicaid program. The proposed Senate bill would change the way the federal government currently funds Medicaid by limiting federal funding and shifting cost over time to both states and Medicaid enrollees. BCRA would subject older adults, adults with disabilities, and children to mandatory per enrollee caps beginning in 2020. State Medicaid programs would have the option to choose between block grants and per enrollee caps for non-elderly non-disabled non-expansion adults.

The Senate bill would start out using the medical care component of the Consumer Price Index (M-CPI)—a measure of the average out-of-pocket cost of medical care services used by an average consumer—as the growth rate for per enrollee caps.  However, beginning in 2025, it would slash the growth rate to the Consumer Price Index for all urban consumers (CPI-U)—a measure of general inflation that examines out-of-pocket household spending on goods and services used for everyday living. CPI-U does not tie closely to medical costs and will not reflect population growth or the impact of aging. To be clear, none of the proposed growth factors—M-CPI, M-CPI+1, and CPI-U— keep pace with the growth in Medicaid spending.

 

 

 

Although studies have examined the impact of Medicaid spending cuts in the House-passed healthcare bill over a 10 year period (e.g. [CBO] [CMS] [Urban Institute]) we know of none that examine the impacts over a longer time horizon. To fill this gap, the AARP Public Policy Institute has developed a model that looks out an additional decade to capture impacts on Medicaid spending between 2027 and 2036.

By dramatically reducing the per capita cap growth factor beginning in 2025, we project that the Senate bill would cut between $2.0 and $3.8 trillion from total (federal and state) Medicaid spending over the 20-year period between 2017 and 2036 for the four non-expansion Medicaid enrollment groups: older adults, adults with disabilities, children, and non-expansion adults (children with disabilities are excluded because BCRA does not subject them to capped funding). A cut of this magnitude threatens the viability of the program in unprecedented ways and will increase the number of people who no longer have access to essential healthcare services and critical supports.  The projections do not include the proposed cuts to the adult expansion population, which would also be considerable.

Previous analysis by the AARP Public Policy Institute discusses why capping Medicaid is flawed and would leave states and the poorest and sickest Americans holding the bag for the shortfalls that will most certainly occur.

Table 1 shows the cumulative 20-year cuts to Medicaid by eligibility group under the Senate health reform bill for three growth rate projections.  The bill would cap per enrollee cost growth using two measures of inflation (M-CPI and CPI-U), which are highly variable and uncertain, though well short of what is needed to maintain the integrity of the Medicaid program.  It is difficult to plan for such uncertain growth rates, and reasonable projections are far apart.

We present the high, middle, and low case for M-CPI/CPI-U growth rates based on the following:

  • Low Case. Based on historical growth rates. Over the last five years (2012-2016), the M-CPI growth rate has averaged 3.0% per year, and the CPI-U growth rate has averaged 1.32% per year.
  • Middle Case. Based on projections from the Congressional Budget Office. CBO projects M-CPI to grow by 3.7% per year, and CPI-U by 2.4% per year.
  • High Case. Based on projections from 2016 CMS Medicaid Actuarial Report.  From 2019 onward, this report projects M-CPI to grow by 4.2% per year, and CPI-U by 2.6% per year.

 

In short, the lower the cap growth rate, the more severe the Medicaid cuts will be.

 

The charts below demonstrate that for any projection of the bill’s cap growth rates, BCRA will lead to significant funding shortfalls for older adults, adults with disabilities, and non-disabled low-income children and adults. The end result is that states and beneficiaries will be left with severe funding shortages, and states will be forced to cut eligibility, provider rates, or covered services—or very likely all three.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Susan Reinhard is a senior vice president at AARP, directing its Public Policy Institute, the focal point for AARP’s public policy research and analysis. She also serves as the chief strategist for the Center to Champion Nursing in America, a resource center to ensure the nation has the nurses it needs.

 

 

 

 

Jean Accius is vice president of livable communities and long-term services and supports for the AARP Public Policy Institute. He works on Medicaid and long-term care issues.

 

 

 

 

Lynda Flowers is a Senior Strategic Policy Adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

 

 

 

Ari Houser is a Senior Methods Adviser at AARP Public Policy Institute. His work focuses on demographics, disability, family caregiving, and long-term services and supports (LTSS).

 

 

 



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The American Health Care Act Makes Unsustainable Cuts to Medicaid

The American Health Care Act Makes Unsustainable Cuts to Medicaid


Recent policy conversations related to the American Health Care Act (AHCA) have focused on  proposals that would eliminate the Affordable Care Act’s critical protection for people with preexisting conditions. This  controversial proposal has drawn  a lot of attention for good reason. Eliminating this important protection, which keeps insurance companies in the individual (non-group) market from considering health status when making coverage decisions, could hurt millions—especially older adults who tend to develop more health conditions as they age.

But the preexisting condition protection is not the only serious concern. The proposed legislation would also make huge cuts to Medicaid by taking almost $1 trillion (or 25 percent of all Medicaid dollars in 2016) out of the program by 2026. How?  By fundamentally changing the way the program is funded. Under the AHCA, Medicaid funding would move from a federal guarantee to match all legitimate state expenditures on health care and long-term services and supports (LTSS) for eligible beneficiaries, to a capped payment system that would give states a fixed dollar amount per enrolled beneficiary [i]. Although per enrollee caps respond to changes in enrollment, they do not respond to increases in health care costs attributable to medical or pharmaceutical innovation, nor do they respond to other changes in the health care environment that could affect per enrollee spending. Health care costs, we all know, are notorious for their rapid rise. The result: an ever-widening gap between cost and funding.

The impact of such a huge loss of federal Medicaid funds on people with disabilities and poor seniors will be devastating—especially for 11 million Medicare beneficiaries who are also eligible for Medicaid. These individuals—called dual eligibles, or duals—are the poorest and sickest of all Medicare beneficiaries and rely on Medicaid for critical LTSS services, like help with toileting, bathing, and eating.

Faced with major losses of federal funding for their Medicaid programs,  states would have limited options. They could plug the funding hole with state revenues, which is unlikely given competing demands on state budgets. States could also cut provider rates, which could lead to significant access problems for beneficiaires because many providers may choose not to serve the Medicaid population. States could also eliminate optional eligibility categories, including some that provide access to LTSS. Finally, states could reduce or eliminate access to optional services, including home and community-based LTSS. Limiting access to needed LTSS for dual eligibles will most surely result in increased use of emergency room and hospital services, ultimately shifting costs to the Medicare program—creating a “pay me now or pay me later” situation for the federal government.

Rather than take millions  of dollars out of Medicaid and shift significant costs to Medicare, it is time to have a reasoned conversation about how to improve the program in ways that don’t leave gaping holes in the health care safety net that millions of people  and their family caregivers rely on.

 

[i] States have the option of receiving block grant funding for children and non-elderly, non-disabled adults. Block grants are fixed amounts of money that do not respond to changes in enrollment or program costs.

 

 

Lynda Flowers is a Senior Strategic Policy Adviser with the AARP Public Policy Institute, specializing in Medicaid issues, health disparities and public health.

 

 



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