- Cadillac Tax Implementation Delayed for 2 More Years
- FDA Approved Record Number of Generic Drugs in 2017
- Medicare ACOs Increase to 561
- Senate Confirms Nominee to Take Over HHS
Cadillac Tax Implementation Delayed for 2 More Years
Congress postponed implementation of the tax on high-value employer-provided health insurance plans for two more years as part of the spending bill that ended the brief government shutdown.
The 2010 Patient Protection and Affordable Care Act included a provision to impose an excise tax – informally known as a “Cadillac tax” – of 40 percent on the cost of employer-provided insurance plans that exceed certain thresholds. The tax originally was to go into effect in 2018, but in December 2015, Congress postponed the effective date for two years. The baseline thresholds for the tax, which are subject to annual revision based on inflation, are $10,200 for employee-only coverage and $27,500 for family coverage. The tax is projected to raise $87 billion over the first 10 years, largely resulting from the presumption that employers will increase wages – which are taxable – to offset decreases in health benefits – which, apart from the new excise tax, are exempt from taxation.
Since Congress has not passed all of the annual spending bills for federal agencies for fiscal year 2018, the federal government has been operating under a series of “continuing resolutions” since the start of the fiscal year on Oct. 1. One such short-term bill ended on Jan. 19, at which point “nonessential” parts of the federal government shut down for three days. Lawmakers reached a deal to provide funding until Feb. 8, and that agreement included a provision postponing implementation of the Cadillac tax until 2022.
The Joint Committee on Taxation (JCT) estimated that the delay will reduce federal revenues by $14.8 billion over two years.
Business groups, labor organizations and others have aggressively advocated for repeal of the tax since the ACA was passed, arguing that it will drive up health care costs for both employers and employees and will limit coverage options.
“We applaud Congress for delaying the ‘Cadillac tax’ that is driving up health care costs for millions of Americans,” American Benefits Council President James Klein said on behalf of Alliance to Fight the 40, a coalition that is seeking repeal of the tax. “Employer-sponsored health coverage is efficient, effective and stable. Taxing health benefits would compel employers to stop offering wellness programs and on-site clinics and to reluctantly ask employees to bear higher out-of-pocket costs.”
The Public Sector HealthCare Roundtable supports repealing the tax.
The tax was included in the ACA not only to raise revenue but also to seek to address what critics say are the market-distorting effects of the tax exclusion for employer-provided health coverage. While the political backing for the tax has weakened – former President Barack Obama was one of its main champions – some economists continue to argue against repeal.
“I don’t know if, as economists, we’ve just fallen down and not done a particularly good job explaining this to policymakers and the general public or whether this is just very hard,” Martin Gaynor, a health economist at Carnegie Mellon University, told The New York Times. “The costs are obvious and immediate and benefits to this are indirect and diffuse and happen in the future, and that’s just a very heavy lift for policy.”
The short-term spending bill also extended until 2020 a moratorium on the ACA’s 2.3 percent medical device tax and suspended for one year the ACA’s tax on health insurance companies. Those provisions will reduce federal revenues by $3.8 billion and $12.7 billion, respectively, according to the JCT.
CMS FDA Approved Record Number of Generic Drugs in 2017
The Food and Drug Administration (FDA) approved more than 1,000 generic drugs in 2017, setting a record for the agency.
The approvals of 1,027 applications for generic drugs was up from 813 in 2016 and 726 in 2015. Both of those totals were records at the time.
FDA Commissioner Scott Gottlieb has focused on issues related to prescription drug pricing and access, particularly efforts to increase the availability of generic drugs.For example, he wrote in a June 2017 discussion of the FDA’s Generic Drug Action Plan that, “Too many patients are being priced out of the medicines they need. While FDA doesn’t have a direct role in drug pricing, we can take steps to help address this problem by facilitating increased competition in the market for prescription drugs through the approval of lower-cost, generic medicines.”
“Our goal is to broaden access to safe and effective generic drugs that can improve access to medicines and help consumers lower their health care costs,” Gottlieb wrote.
The record number of approvals was cited in the Department of Health and Human Services’ annual report.
Medicare ACOs Increase to 561
The number of accountable care organizations (ACOs) in the Medicare Shared Savings Program has grown to 561 this year, according to the Centers for Medicare & Medicaid Services (CMS).
Medicare ACOs, which were created by the 2010 Patient Protection and Affordable Care Act, are intended to encourage health care providers to coordinate care for patients in a way that improves quality, cuts costs and moves providers and patients away from the traditional fee-for-service payment model. As long as quality standards are met, ACOs and Medicare share the cost savings that result from coordinating care.
The number of ACOs has steadily risen from 220 during their first year of operation in 2012 to 480 last year to 561 now. The number of assigned beneficiaries is up to 10.5 million, an increase of one-sixth from the 2017 total.
The number of ACOs taking on two-sided financial risk has also increased this year. In 2017, 91 percent of ACOs faced no risk of financial penalties if their spending exceeded benchmarks, though they could still receive incentives for meeting financial goals. This year, though, that number is down to 82 percent, so nearly one out of five ACOs are assuming risk in exchange for receiving greater rewards if they are successful in containing costs.
In part, this growth in two-sided risk results from CMS’ creation of an additional ACO track (“Track 1+”) that exposes providers to a limited amount of increased risk and offers enhanced rewards. One-tenth of all ACOs are in Track 1+.
Senate Confirms Nominee to Take Over HHS
The Senate confirmed Alex Azar to be secretary of health and human services (HHS).
Azar, who previously worked in the pharmaceutical industry and the George W. Bush administration, was confirmed by a 55-43 vote. Six Democrats and one independent who caucuses with them voted for confirmation, while one Republican – Rand Paul of Kentucky – opposed it.
“I can think of very few others as qualified to take the helm of this very large ship,” Senate Finance Committee Chairman Orrin Hatch, R-Utah, said. “With experience both on the company side and the government side of health care, he is now only more experienced and knowledgeable.”
During his confirmation hearing, Azar identified four priorities for HHS: containing drug prices, revising insurance mandates to reduce the cost of premiums, moving toward value-based payment models, and addressing the opioid epidemic.
Some Democrats criticized Azar for his connections to the drug industry and his opposition to many parts of the ACA, but, so far at least, he does not appear to be as divisive as his predecessor, Tom Price.
Azar was nominated by President Donald Trump after Price resigned last year amid controversy regarding his use of private jets at government expense.