On one hand, a busy week in the world of health policy. The quicksand of news in 2025 is real so I do my best to sidestep some news (MAHA report) to dive into the things that I think are important for my clients – including expected premium spikes, 340B rebate backlash and Medicare changes. If everything is important, nothing is…
But there seemed to be a common theme to all the stories this week – what is the goal? What’s the purpose of 340B? What do we want for R&D and innovation in the U.S.? What should Medicare look like? What are we aiming for? Without a goal, we’re going to miss it every time.
Caught My Eye
Accountability, Who Needs It? Members of Congress are asking the Department of Health and Human Services to get rid of the 340B rebate model pilot program. There are concerns about cash flow issues – mind you that if the claims are 340B eligible, they get paid quickly. Manufacturers are looking for accountability in a program that had about $80 billion in spending last year worth almost $150 billion, up from less than 1/10 that in 2010.
On one hand, I totally get it. It is a change that would be a PITA but if you want a discount, pony up the claims. Show the receipt, get the discount.
On the Topic. The National Pharmaceutical Council continues its hot streak with a study on how growth in the number of covered entities led to higher Affordable Care Act premiums. 340B is not a small program saving hospitals money, it comes at a real cost to everyone. And maybe we are totally cool with that, but maybe not. We really need to start having honest conversations about what the intent of the program is because it is huge.
Planning Ahead. Big story in the next two weeks will be the ACA subsidy extension. While the current rate of uninsured is 8%, expect that to go up by over 4 million if the subsidies don’t get passed. The likely vehicle would be the budget deal required by the end of the month to keep the government running but odds are not in favor of those getting the subsidies. More on the tax credit stats in an AARP report.
The news to keep an eye on will be premium increases in employer sponsored coverage for 2026 and the ACA plans.
Who’s on First? There is a connection between reimbursement and innovation and R&D. The NYT article (gift link) on a potential executive order limiting medicines from China is interesting. On one hand, U.S. supply of medicines and innovation is important and, on the other, we have cut federal research dollars, pulled science in America off track and then are surprised that China now has more industry-funded clinical trials of new drugs and is looking to be the new center of innovation.
A report from the UK shows that they are losing foreign investment in R&D because of the way that the National Health Service pays for drugs (or doesn’t pay?) and STAT news has a story about Merck pulling out of a London R&D location.
See what Sticks. The White House is, at minimum, pushing for more information in direct-to-consumer pharmaceutical ads and, at worst, trying to eliminate them.
Another MFP. Most Favored Patients?
Called It. In JAMA, research found that a lot of, but not all, Part D drugs are paying more under the Part D redesign’s manufacturer discount program compared to the coverage discount program.
Reviewing the Fundamentals – Medicare & Prior Authorization
Historically, Traditional Medicare (Parts A and B), also known as Original Medicare, has largely operated without prior authorization. This was a foundational part of the plan, intended to give beneficiaries direct access to any doctor or hospital that accepts Medicare, without a third-party gatekeeper. The program’s framework was built on the principle of paying claims for medically necessary services after they were delivered, with a focus on retrospective review to identify fraud or improper payments.
In contrast, Medicare Advantage (Part C) plans (which put together A & B and often D), have always used prior authorization as a central tool for managing costs and utilization. Managed care and prior authorization go hand in hand, and most enrollees must get prior authorization for a wide range of services, including hospital stays, skilled nursing care, and certain high-cost treatments.
And it isn’t 1965, times and treatments have changed – it makes sense that maybe prior authorization would change a little. Over time, the Centers for Medicare & Medicaid Services (CMS) has incrementally expanded the use of prior authorization in Traditional Medicare, but in limited and targeted ways like use of durable medical equipment or specific outpatient procedures. Even these were limited to certain surgeries and nerve stimulation procedures, where data suggested a high risk of waste or low-value care.
And then we got the Wasteful and Inappropriate Service Reduction (WISeR) Model. Slated to begin in six states in 2026, it is the most significant and controversial step yet to expand prior authorization in Traditional Medicare. While CMS describes the model as “voluntary,” it essentially makes prior authorization the only practical path for providers to get paid for a set of services. A path of administrative burden.
The model uses private technology companies that leverage artificial intelligence (AI) and machine learning (ML) to process claims. These companies will be paid based on the “savings” they generate from reducing “unnecessary” care, so their incentive is to deny claims – not pay them.
Bipartisan groups of lawmakers in Congress have sent letters to CMS, urging them to halt the implementation of the WISeR model. They have expressed concerns about the model’s legal authority, its potential to erode patient access, and the perverse incentives created by paying private contractors based on “savings.” Some lawmakers have even introduced legislation to block funding for the program.
The push to expand prior authorization in Traditional Medicare is seen as an attempt to introduce a managed care model – with private company incentives – into a program that has long been defined by its open-access, fee-for-service nature. And is it far that some people will have different access than others simply because of where they live?
For the Files
The Congressional Budget Office released this report on the 340B program. The info is a bit dated, but it gives a nice overview/reminder if you’re jumping in after some time away.
