Former federal healthcare policy leaders discussed advice on priorities for the new secretary of Health and Human Services.

Feb. 21—The ongoing partisan divide on how federal policymakers should respond to rising drug prices was on display this week in the form of a sharp disagreement between former leaders of the Centers for Medicare & Medicaid Services (CMS).

Despite recently co-founding the United States of Care, which is a not-for-profit that aims to find bipartisan health policy solutions, Andy Slavitt and Mark McClellan, both former CMS administrators, were unable to find common ground when discussing the best federal response to spiking drug prices. They addressed healthcare costs at a Feb. 21 meeting of the West Health Institute.

“When I was overseeing the Medicare program, I couldn't understand why the secretary of the VA [Department of Veterans Affairs] could buy drugs for veterans at prices way below what I could for the American taxpayers,” Slavitt said in reference to the VA’s authority to negotiate drug prices. “I understand it politically. That's how our system works, but it doesn't really make sense that the veterans can get a lower price than we can for seniors.”

McClellan noted that fundamental differences remain among Americans over the proper role for the federal government in controlling access to drugs.

“Remember, you get lower prices negotiated by restricting access more and by shifting drug use more, and there is not a high level of public trust in government actually doing that,” McClellan said.

McClellan noted that the three “giant” pharmacy benefit managers, which control 80 percent of the U.S. market, have failed to negotiate drug prices downward by much. Even so, the focus on government negotiation would create more pressure for further consolidation of drug makers to improve their negotiating position.

Instead, McClellan urged increasing patients’ choices.

“If you want to help people switch to lower-cost drugs, you can get there a lot faster by giving people the opportunity to save money when they use a less costly drug that meets their needs,” said McClellan, who was head of CMS for two years during the George W. Bush administration. “My experience has been if people have information, they can make the best decisions about how to get the care that they want. They will choose care that drives faster change in the healthcare system.”

Bipartisan compromise might be possible, McClellan said, in ways to encourage competition and savings from generic drugs.

Advice for Azar

McClellan noted that the four priorities that Alex Azar, the newly confirmed secretary of the U.S. Department of Health and Human Services, identified during his confirmation hearings are all about changing the way that health care is funded and delivered.

He also urged Azar to identify a cost-control niche that may be able to advance at the federal level, focus on that, and find ways to help states take it on.

Slavitt, who was CMS acting administrator during the final two years of the Obama administration, agreed and also urged Azar to “take the temperature down” around politics in health care.

“Your job as the cabinet secretary is to cut through that, and say, ‘You know what, I'm the secretary of health.’ And I think Alex has every opportunity to do that,” Slavitt said. Despite his advice, Slavitt has gained a national following on social media over the last year as a fierce partisan on healthcare and other issues.

Slavitt was optimistic that Azar will have a “Nixon in China opportunity” to implement steps to control prescription drug costs. “Many people think there are good ideas worth trying, that are tougher for Democratic administrations. I think because he comes from the pharmaceutical industry he has to care that people pay a lot of attention and focus on that. So he could target things more successfully and be more successful at them than others could.”

Hospital Costs

Slavitt also emphasized the need to find ways to inspire widespread cost-control efforts in other parts of health care. For instance, Slavitt said hospital and health system CEOs have consistently told him that if they were part of a fixed-revenue system, and fully capitated based on the number of patients coming into the system, they could take at least 15 percent—and as much as one-third—of costs out of the system.

“So, the question is what's going to generate the will, and of course, ‘Are all those costs fair to take out?’ is another question,” Slavitt said. “But at some level there has to be a question of not just taking the models we have in place today, which are very good teaching tools—value-based care, population health, all those sorts of things—but they're not a big capitation model, and you want to do it in more places around the country.”

Unfortunately, a potential national model for moving hospitals to global budgets was unable to reduce patient utilization—a key goal—during its first two years, according to recent research.

In the shorter term, Slavitt urged phasing out fee-for-service payments and moving more quickly toward value-based payments.

Slavitt also noted that the healthcare system will continue to change in different ways in different states.

“There are some really good opportunities now, unprecedented opportunities, to take these collaborative efforts around coverage and cost and move them forward at the state level,” Slavitt said. “States are going to end up probably headed in different places.”

Some states are headed towards some version of single payer, or at least “expanded public payment,” Slavitt said. Others, like his current home state of North Carolina, want to rely more on making markets work better and helping consumers get the health care they need at lower costs through a greater emphasis on transparency.

“And we have the opportunities right now in the short term to address rising costs and access [issues] through these efforts,” he said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Wednesday, February 21, 2018