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Rising drug prices, changing health care pay models likely to dominate in 2018

Many of the biggest issues in health insurance in 2018 took root last year: Skyrocketing prescription drug prices. Big changes in the way we pay for health care. The fate of the Affordable Care Act.

Here is a breakdown of stories that are likely to develop throughout 2018:

Drug costs: Prescription drug prices continued surging in 2017. Spending by the pharmaceutical industry on lobbyists, patient groups and politicians significantly increased, too. There’s a connection, one we will likely be talking about again.

How to combat rising drug prices is not a mystery. Many experts over the years have offered recommendations, including a recent report from the National Academies of Sciences, Engineering, and Medicine, which advises Congress.

Among the ideas: limit direct-to-consumer advertising by drug makers, allow the federal government to negotiate drug prices for Medicare patients, get generics to market more quickly, provide greater transparency for consumers on drug pricing, and establish limits on the total annual out-of-pocket costs paid by enrollees in Medicare Part D plans that cover prescription drugs.

“Many medical conditions that were long deemed untreatable can now be cured or managed effectively. Yet this success has come at a cost: Spending on prescription drugs has been rising dramatically, to the point that many people have difficulty paying for the drugs that they or their family members need,” the report concluded.

The U.S. spends far more than any other nation on health care, and drugs are among the fast-growing costs. Yet studies indicate that many nations have healthier populations. This should be a national priority, right?

A big deal: CVS Health Corp. made a $69 billion bid for Aetna Inc., a merger that for the first time would combine a large pharmacy chain, which also runs 1,100 walk-in clinics elsewhere in New York State and the country, with a large health insurer. CVS operates 9,700 pharmacies, and Aetna insures 22 million people.

The proposed deal is unlikely to have a large impact in Western New York, at least for the time being, given that the insurance market here is dominated by other companies. But it could radically alter the health care market nationwide.

CVS Health President and Chief Executive Officer Larry J. Merlo characterized the merger as positioning the combined company as “America’s front door to quality health care,” integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies.

The prospect of a one-stop shop for insurance and medical care raises major questions. Among them:

Will such a combination offer patients cheaper prescription drugs? Will it improve access to less-expensive medical care for minor illnesses and injuries? Will it disrupt existing doctor-patient relationships? Does it foreshadow similar combinations, more consolidation in the health care industry, and less competition? What does it mean for hospitals and urgent-care centers?

Value-based care: A sea change is underway in how Americans pay for care.

New reimbursement arrangements for hospitals and doctors that focus on quality and value, some encouraged by the Affordable Care Act, are gaining momentum. Many of them are still works in progress, and questions remain about their ability to succeed long term.

But they all share one thing in common. Their goal is to reform the current costly fee-for-service system in which the financial incentive is to provide as much care as possible to patients – whether or not it is necessary.

Value-based reimbursement initiatives use bundled payments and bonuses to encourage physicians to coordinate care, improve quality and reduce avoidable hospitalizations and emergency room care. In some cases, doctors risk losing a portion of their payments if they don’t meet certain quality and cost goals.

The federal government has led the way in payment reform with projects in Medicare, the federal health plan for people 65 and older. The Affordable Care Act also encouraged payment experimentation.

The state, with Medicaid, and private insurers are also transitioning away from fee-for-service. In 2018, experts say, this era of payment experimentation will continue to expand, despite moves by the Trump administration to pull back on some federal efforts in this direction.

Obamacare: The Affordable Care Act will still exist in 2018, insuring millions of Americans, but without one of its most important yet unpopular elements – the individual mandate. Republicans repealed the mandate, starting in the 2019 coverage year, in their tax bill.

The individual mandate required people who did not receive health insurance from employers or elsewhere to purchase coverage or face a financial penalty.

It arose from a basic concept of insurance: include healthy and sick people in the pool of insured individuals to lower risks for health insurers and keep premiums affordable overall.

Under the Affordable Care Act, the uninsured rate among the non-elderly in the U.S. declined from a peak of 18.2 percent in 2010 to a historic low of 10.3 percent in 2016, according to the Kaiser Family Foundation.

The individual mandate was advocated by conservatives in response to President Bill Clinton’s 1994 health care plan, but its elimination became a central theme in the opposition to the Affordable Care Act.

The result: Without the individual mandate, fewer people will purchase health insurance on the exchanges, undermining the marketplace for insurance.

Experts expect premiums to rise for those who are left in the pool – mainly the sick and those eligible for generous subsidies. New York also risks losing $1 billion in federal funding for its Essential Plan, which offers coverage to lower-income people who earn too much to qualify for Medicaid.

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