In and Out: The New Legislation for Medicare Beneficiaries

The Inflation Reduction Act and the No Surprises Act both impact seniors.

Last week, both the House and the Senate passed the Inflation Reduction Act despite unified Republican opposition. President Biden signed the Act into law on Tuesday.

I’d like to talk about what is not in the act.

The act does allow the U.S. Department of Health and Human Services (HHS) to negotiate the prices of 10 of the most expensive prescription drugs purchased by Medicare, starting in 2026.

Initially, however, the act would have allowed commercial payers to negotiate drug pricing as well, but those provisions were ultimately taken out because they were not directly related to the government’s budget.

According to some employer health plans, the consequence may be that drug makers will shift costs onto commercial payers to make up for the revenue that would be lost through the Medicare negotiations, resulting in higher premiums for those commercial plans.

The act also put a cap on insulin costs at $35 for Medicare beneficiaries. What the final version of the Act did not do, however, was to expand that cap to members of commercial payers. The expansion of the price cap to commercial payers actually had some support by Republicans, but ultimately failed to make it into the final law by just three votes.

Side note, Americans are paying four times what patients in other high-income nations pay.

Now let’s check in on our old friend the No Surprises Act.

First, the industry is still waiting on a final rule on the methodology that arbitrators should use to decide reimbursement for the out-of-network claims that fall under the No Surprises Act. The administration had promised the rule would come out in “early summer” and, indeed, the rule has been with the Office of Management and Budget, the last step in regulatory review, since May.

Although what methodology an arbitrator might use may seem like a wonky, in-the-weeds detail in a law that only applies to about 30 percent of all out-of-network claims, we have seen already that the importance of a plan’s medium in-network rate in that methodology could have far-reaching repercussions in payer provider contract negotiations and in government rate-setting.

As we’ve talked about on this program, the administration is facing seven lawsuits on the arbitration methodology they proposed in an interim final rule last fall. An eighth lawsuit – which sought to overturn the entirety of the No Surprises Act – was dismissed by a judge last week.

Depending on what the final rule says, we could be in for months or years of future litigation about that arbitration methodology.

In a related issue, as of July 1, health plans are now required to upload all their reimbursement information, including negotiated rates with specific providers, on publicly available Machine Readable Files or MRFs.

Hospitals, of course, were to have their own MRFs posted since the compliance date of January 2021.

CMS has used a gradual enforcement framework on the hospitals, starting with written warnings to about 350 hospitals that didn’t have their information posted, followed by requests for Corrective Action Plans sent to about half those hospitals. Finally, at the beginning of this summer, a year and a half after the compliance date of the law, only two hospitals have actually been fined.

For the state of Colorado, CMS enforcement framework for the Transparency Rules was not rigid enough, and, so, the state has passed a law – effective this coming Wednesday – that prohibits hospitals from collecting patients’ medical debts if their websites don’t post those prices, as required by the Transparency rule.

Will other states pass similar laws? Watch this space.

Programming note: Listen to the Monitor Mondays Legislative Update with Matthew Albright, Mondays on Monitor Mondays at 10 Eastern and sponsored by Zelis.