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Goal 1: Reform, Strengthen, and Modernize the Nation’s Healthcare System

NHSC member Tracy Bowers, a Nurse Practitioner, with her coworkers at Downtown Health Plaza in Winston-Salem, North Carolina.
These National Health Service Corps personnel provide health care at a North Carolina health center.

HHS endeavors to improve the quality and reduce the cost of healthcare Americans receive through reforming the programs the department runs, advancing the direct care provided in our programs, and ensuring government incentives are not distorting ways that the market can work to improve the quality of care. Three of the four priorities Secretary Azar has laid down for the department fall under this strategic goal: lowering prescription drug prices, driving toward a value-based healthcare system, and reforming the individual market for health insurance.

In this page:

Lowering Drug Prices

In May 2018, President Trump and Secretary Azar published American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, which laid out dozens of possible ideas for accomplishing its goals. It laid out four strategies:

  • Boosting competition
  • Improving negotiation
  • Creating incentives for lower list prices
  • Lowering out-of-pocket costs

The blueprint also identified foreign freeriding off of American investment in innovation as a particular issue that can be tackled from a health-policy and trade perspective.

From the release of the blueprint through the end of 2018, more than a dozen drug companies cut drug prices, rolled back planned increases, or froze prices for the rest of 2018. During the same time period, companies took 57 percent fewer price increases than they did during the same period a year earlier. For the first time in almost 50 years, in 2018, the official federal measure of inflation for consumer drug costs was negative.

Boosting Competition

Record results on generic drugs: The Food and Drug Administration (FDA) set a record for total generic drug approvals in Fiscal Year 2018, surpassing the record it had set in 2017. In October 2018, FDA also set a record for the number of approvals. In total, more than 2,000 generic drugs have been approved under the Trump administration, which the Council of Economic Advisors found have saved consumers $26 billion already.

While managing this record workload, FDA exceeded the Generic Drug User Fee Amendments (GDUFA) performance goal of completing action on more than 90 percent of ANDAs, amendments and supplements.

Launching a Biosimilars Action Plan: In July 2018, FDA launched a plan to expand access to and use of biosimilars: more affordable alternatives to expensive biologic medicines, which represent almost 40 percent of all prescription drug spending. The plan aims to 1) improve the efficiency of the development and approval process; 2) maximize scientific and regulatory clarity for developers; 3) develop effective communications to improve understanding of biosimilars among patients, clinicians, and payers; and 4) support market competition by reducing gaming of FDA requirements or other attempts to unfairly delay competition.

Record novel drug approvals: In 2018, FDA approved 59 novel drugs and biological products, a calendar-year record. Some of these products are innovative new products that never before have been used in clinical practice. Others are the same as, or related to, previously approved products, and they will compete with those products in the marketplace.

Expanding access to nonprescription drugs: Nonprescription drugs can offer more affordable or convenient options for patients. In July 2018, FDA published a new draft guidance that applies to drugs that have not, historically, been available for use without a prescription, outlining two innovative approaches for demonstrating safety and effectiveness necessary for over-the-counter (OTC) approval. These approaches could involve the use of technology, such as mobile apps or other tools, reflecting FDA’s efforts to leveraging technology to promote public health and clinical care.

More FDA process advances: FDA also successfully implemented an unprecedented concept of operations that integrated facility inspections and evaluations, and implemented the GDUFA II transparency commitment one year early, by issuing 129 final facility classification letters prior to October 1, 2018.

Improving Negotiation

Bringing more negotiation to Medicare Part D: Since its passage in 2003, Medicare Part D has, in many ways, successfully held down costs and driven competition in drug markets. However, the program has not permitted plans to adopt the latest negotiating tools used by insurers in the commercial market to drive down drug costs. Since the launch of the blueprint, a number of steps have been taken to provide plans with new negotiating tools. For Plan Year 2020, for instance, the Center for Medicare & Medicaid Services (CMS) proposed giving plans access to tools to negotiate bigger discounts for some of the most expensive drugs in Part D, where private plans often obtain 20 to 30 percent discounts.

New negotiating tools for Medicare Advantage: In 2018, CMS gave Medicare Advantage plans new tools to negotiate lower prices for expensive Part B drugs, a $12 billion drug market. These same tools often generate savings of 15 to 20 percent in the private market, which could be passed on to the 20 million seniors enrolled in Medicare Advantage plans as soon as next year. Already for 2019, at least one major insurer is using these tools to have patients first use a much-lower-cost biosimilar, with lower out-of-pocket costs.

First-ever state plan amendments for state value-based purchasing arrangements: CMS approved first-ever, innovative state-plan amendments in Michigan and Oklahoma to allow their Medicaid programs to enter contracts involving value-based purchasing arrangements with drug companies, which can produce extra rebates for the states based on whether certain clinical outcomes occur.

President Donald J. Trump and Secretary Alex Azar unveil the “American Patients First” blueprint to lower drug prices and reduce out-of-pocket costs.
President Donald J. Trump and Secretary Alex Azar unveil the “American Patients First” blueprint to lower drug prices and reduce out-of-pocket costs.

Incentives for Lower List Prices

First ever proposal for requiring drug price transparency for consumers: In 2018, HHS proposed the first-ever requirement that the list price of a drug’s usual course of therapy or a 30-day supply be disclosed to patients in television advertising.

Providing this information will offer a historic step forward for drug-price transparency because many patients either pay list price or pay prices calculated based on list price: 47 percent of Americans have high-deductible health plans, under which they often pay based on the list price of a drug until their insurance kicks in, and all seniors on Medicare Part D face coinsurance, calculated as a share of list price, if they take certain expensive drugs. In total, according to one survey, almost half of patients’ out-of-pocket spending on drugs in employer insurance is attributable to coinsurance or deductible spending. The list prices of the most commonly advertised drugs are substantial: The ten most commonly advertised drugs have list prices ranging from $535 to $11,000 per month or usual course of therapy.

Providing real-time cost and price information: In a Part D proposed rule for Plan Year 2020, CMS proposed that all Part D plans be required to support tools that allow prescribers access to real-time prescription-benefit information within their existing electronic prescribing systems.

Prescribers and patients can use these tools to understand the prescription-drug options they may have, with information provided about the out-of-pocket cost the patient will face for a given drug. These options are available in the commercial-insurance market and represent a significant step toward helping patients understand how much a drug is going to cost them before it is prescribed to them.

New transparency around price increases: Within weeks after the blueprint’s release, CMS made significant changes to its Drug Pricing Dashboard, highlighting the individual drugs with the highest price increases in Medicaid, Medicare Part B, and Medicare Part D, and, for the first time, the manufacturers responsible.

Lowering Out-of-Pocket Costs

Realigning Medicare reimbursement to save for taxpayers and patients: CMS proposed or implemented a number of changes in 2018 to reduce what patients pay in out of cost for expensive drugs in Medicare Part B fee-for-service, including reductions to reimbursement for drugs under the 340B drug discount program, calculated to save patients $320 million in 2018 alone.

Banning “gag clauses”: According to one study, 23 percent of patients are paying more in co-pays at the pharmacy for drugs than they would if they paid in cash. Within a week of the blueprint’s release, CMS put Medicare Part D plans on notice that it was unacceptable to impose pharmacy “gag clauses,” which can prevent pharmacists from working with patients to identify the lowest-cost way to obtain their drugs. Then, in the fall of 2018, President Trump signed two pieces of legislation banning these gag clauses, ensuring pharmacists can always help Americans get the best deal on the drugs they need.

Reinforcing tools to encourage adoption of low-cost generics: CMS reminded Part D plans of tools they have to encourage patients to use low-cost generics, which carry lower out-of-pocket costs, instead of brand-drug alternatives. The design of Part D has allowed generic drugs to gain a more than 90 percent market share, which has helped hold down patient out-of-pocket costs, but plans have now been urged to use their existing tools to drive even more adoption of generics.

Addressing Foreign Freeriding

Put forth first-ever international reference-pricing model: In October, President Trump visited the HHS headquarters in Washington to announce that the administration was putting forth the first ever proposal to secure for Americans a share of discounts that other wealthy countries receive on some of the most costly drugs in Medicare. The model, the International Pricing Index, would take what Medicare pays for a set of drugs from 80 percent more than other countries pay to just 26 percent more over five years, saving patients and Medicare an estimated $17 billion. In addition, putting forth the model has changed the dynamics around other countries’ drug-pricing negotiations already, by setting out the principle that any discounts drug companies give to other countries may be reflected in the prices those companies receive in the United States as well.

Fought for drug affordability and innovation incentives in trade negotiations: Through the Office of Global Affairs, HHS contributed to the successful renegotiation of the United States-Mexico-Canada Agreement (USMCA), including through the strengthening of requirements for science-based and transparent policies, as well as increased protections for pharmaceutical innovations. HHS also influenced outcomes in global discussions on pharmaceutical drug pricing and innovation policies at multilateral institutions such as the OECD and the World Health Organization, and through bilateral outreach to key partners including India and the EU.

President Donald J. Trump displays his signature after signing S. 2553- the Know the Lowest Price Act and S.2554- the Patients Right to Know Act.
President Donald J. Trump displays his signature after signing S. 2553- the Know the Lowest Price Act and S.2554- the Patients Right to Know Act.

Driving Toward a Value-Based Healthcare System

In 2018, Secretary Azar chose as one of his four priorities the transformation of America’s healthcare system into one that pays for value. Secretary Azar and Adam Boehler, Director of the Center for Medicare and Medicaid Innovation (CMMI) and Senior Advisor for Value-based Transformation, have laid out a four-pronged vision for this transformation, relying on patients and individuals to drive value:

  • Patients as empowered consumers
  • Providers as accountable navigators
  • Paying for outcomes
  • Preventing disease before it occurs or progresses

Patients as Empowered Consumers

New transparency around hospital prices: For the first time ever, as of January 1, 2019, hospitals are required to post their standard set of charges online in a machine-readable format—a first step toward greater price transparency that one healthcare leader said “could be a game-changer for health care.”

Advancing health IT: In 2018, the Trump administration took a number of steps toward ensuring that patients have access to and control over their own health data and records.

  • The administration launched the government-wide MyHealthEData initiative, specifically focused on empowering consumers through control of their own health data.
  • CMS launched Blue Button 2.0, an update of a largely unused system that gives seniors access to their Medicare records. Blue Button 2.0 enables seniors to request disclosure of their Medicare information to application developers, so the information can be used to improve care and increase positive health outcomes. So far, over 1,300 developers are working on new apps to serve seniors.
  • The Office of the National Coordinator for Health IT (ONC) issued a draft of the Trusted Exchange Framework, which outlined a set of principles, terms, and conditions to support the development of a full Common Agreement that would enable the exchange of health IT data among disparate networks.
  • ONC issued the ONC Guide to Getting and Using your Health Records, which provides information to patients and consumers about how to get, check and use their health information, which supports the MyHealthEData initiative by helping patients access their own records.
  • The Health Resources and Services Administration (HRSA) piloted a modernized approach to Uniform Data System reporting capabilities with six health centers, which demonstrated an 88 percent reduction in administrative burden and will serve as a prototype for all health centers in 2019.

New benefits in Medicare Advantage: CMS provided Medicare Advantage plans with flexibility to pay for a greater array of benefits that can support health. These can include transportation, in-home health visits, home-delivered meals, home modifications, and more. Two of the largest insurance plans, in Florida and Texas, will pay for up to 42 hours of help from a home health aide for people who need help at home to provide their regular caregiver with a respite.

New shopping tools for seniors: To help determine whether Medicare Advantage may work for them, and which plans may be best, CMS improved the online Coverage Wizard to help seniors choose the plan that’s right for them, added a new cost estimator tool, and added webchat to help seniors find easier assistance.

Expanding use of telehealth: CMS expanded the reimbursement options for telehealth within Medicare and Medicare Advantage, while HRSA also enhanced technical and policy guidance to support health centers’ use of telehealth. In 2018, HRSA announced that, in the previous year, the number of health centers using telehealth to provide services had increased by 15 percent.

Improving reporting of patient-reported outcomes: The Agency for Health Research and Quality (AHRQ) launched the Step Up App Challenge, a three-phase competition to address the need for greater use of standardized patient-reported outcomes (PRO) data in clinical care and research. Some digital tools collect these data, but they are not widely used due to problems with integrating them in practice workflow and patients’ discomfort with using such tools. This competition will result in a user-friendly app that can improve collecting PRO data and, as a result, increase the patients’ voice in their care.

Making more health-quality data available: AHRQ’s Comparative Health Systems Performance (CHSP) Initiative released new data files in October 2018 with characteristics of 626 U.S. health systems. These files complement existing AHRQ databases and contribute to AHRQ’s effort to build a data insight platform that captures a 360-degree view of the U.S. healthcare delivery system, providing vital information to help inform public and private decision making.

Secretary Azar talks with CMMI Director and Senior Advisor for Value-based Transformation and innovation Adam Boehler.
Secretary Azar talks with CMMI Director and Senior Advisor for Value-based Transformation and innovation Adam Boehler.

Providers as Accountable Navigators

Addressing regulations impeding coordinated care: Deputy Secretary Eric Hargan launched a Regulatory Sprint to Coordinated Care, which is examining the burdens created by current regulations under HIPAA, Stark Law, Anti-Kickback Statute, and a substance-use-disorder information-confidentiality provision called 42 CFR Part 2. The goal is to identify how these regulations may impede care coordination and engage in rulemaking to empower clinicians and other providers to coordinate care and deliver value for patients.

Historic overhaul of physician paperwork requirements: CMS finalized major changes to the requirements in the Medicare Physician Fee Schedule for 2020 regarding “evaluation and management” visits, the first overhaul of this system in decades. The changes moved from five billing categories to three, and radically simplified requirements in order to remove excessive paperwork tied to outdated billing practices.

Paying for Outcomes

Expanding alternative payment models and outcomes-based payment: The share of Medicare beneficiaries covered by alternative payment models—i.e., not based on the traditional fee-for-service system—increased from 13 percent in 2017 to 17 percent in 2018.

Advancing innovative payment models: CMMI saved the federal government and beneficiaries significant amounts of money while maintaining quality through its models:

  • The Next Generation Accountable Care Organization model, which allows participants to share in savings through greater care coordination, showed Medicare savings of approximately $100 million in the first year evaluation.
  • The Maryland All-Payer model saved $679 million in total cost of care Medicare savings over the first three years of the model.
  • The Repetitive Scheduled Non-Emergent Ambulance Transport model, which aimed to improve use of non-emergency ambulance services in states with high use, reported net savings for the end-state-renal-disease population of $171 million in the first year of the model.

New opportunities for success from ACOs: In 2018, CMS redesigned the Medicare Shared Savings Program for Accountable Care Organizations, or ACOs, which are organizations formed by providers and suppliers that endeavor to improve care and lower costs through coordination. ACOs can be eligible to share in savings generated for Medicare, while eventually being expected to take on risk of sharing losses to the program.

Under the redesigned model, ACOs will have a shorter period to share in savings generated, before having to bear risk for any losses. The redesign of the program aims to improve patients’ engagement with their healthcare and give ACOs more opportunities, sooner, to generate savings while bearing risk for costs that exceed benchmarks.

Leveling the playing field for providing healthcare services: In 2018, CMS announced that it would begin paying the same rate for clinic visits whether they are at hospitals’ off-campus outpatient departments or at physicians’ offices, saving patients $150 million in out-of-pocket costs in 2019 and taking a historic step toward a long-desired goal of “site neutrality” in payment. CMS also finalized changes to allow 17 billing codes for procedures to be paid for by Medicare when they are performed in outpatient settings that may be less expensive and more convenient.

Preventing Disease Before It Occurs or Progresses

Sparking innovation in kidney disease treatment: HHS launched a $2.6 million “Redesign Dialysis” Prize, the first prize competition in the KidneyX initiative, focused on reimagining the current state of dialysis and spurring innovation to create alternative solutions. HHS also signed a memorandum of understanding for the KidneyX public-private partnership with the American Society of Nephrology, solidifying both parties commitment to the prevention, diagnosis, and treatment of chronic kidney disease.

Advancing primary care through Community Health Centers: In 2018, nationally 67 percent of patients at HRSA-funded community health centers controlled their blood sugar level, an 8 percent increase over the prior year, exceeding the national average of 57 percent. Sixty-three percent of hypertensive health center patients controlled their blood pressure, an increase of 9 percent over the prior year, exceeding the national average of 57 percent.

Tackling diabetes: CMMI’s Medicare Diabetes Prevention Program, which was based on the Center for Disease Control and Prevention (CDC)’s National Diabetes Prevention Program, achieved covered service status under Medicare in 2018, making it the first preventive service model from CMMI to become eligible for expansion and representing a landmark for public health. Twenty-three million American adults with prediabetes are 65 years or older and could directly benefit from this program, and enrollment in CDC’s program increased by 128 percent between July 2016 and July 2018.

Addressing social determinants of health to improve independence of older adults and people with disabilities: Older adults and people with disabilities can live in the community, at lower cost and often with better outcomes, if they have access to the right supports. In 2018, the Administration for Community Living (ACL) worked to improve collaboration between healthcare organizations and the aging and disability networks that provide these services and supports. In 2018, at least 74 organizations in ACL’s aging and disability networks entered new contracts with integrated care organizations.

Reforming the Individual Insurance Market

One of Secretary Azar’s top four priorities is expanding the array of ways Americans can pay for their healthcare, including by reforming and stabilizing the individual insurance market. Under the leadership of Secretary Azar and his senior advisor for health insurance reform, Jim Parker, in 2018 HHS worked with other departments to take significant steps to stabilize the Affordable Care Act exchanges, open up options for patients who cannot find Affordable Care Act (ACA) options that work for them, and expand new healthcare-financing choices that are fiscally sustainable, state-based, and private-sector-driven. Ultimately, empowering patients to finance their care in ways that work for them will support the goals outlined as part of the drive toward a value-based healthcare delivery system.

Historic stabilization of the Affordable Care Act exchanges: After substantial efforts to stabilize the individual market since President Trump took office, average premiums were down and insurer participation was up moving into 2019. In 2018, average benchmark premiums declined by 1.5 percent for plans sold on Healthcare.gov, the first reduction since the Exchange began operating. There are 23 more issuers for 2019 than 2018 and only five states will have one issuer, compared to ten states in 2018. This was the result of actions taken in 2017 and 2018 by the administration to stabilize the Affordable Care Act, including four new reinsurance waivers, all leading to lower premiums, ranging from 9 percent in Maine to 30 percent in Maryland, and resuming the risk adjustment program after a federal judge vacated the methodology from the previous administration.

New affordable options for individual patients HHS, the Department of Labor (DOL) and the Department of the Treasury finalized a rule to expand the availability of short-term, limited-duration insurance, which can be dramatically more affordable than the plans governed by the ACA—around 50 percent cheaper.

New options for employer insurance: HHS, DOL, and Treasury proposed a rule to allow employers to fund individual market premiums through Health Reimbursement Accounts, which can provide individuals broader access to tax-preferred employer funding. By one estimate, after final implementation of the proposal, 10 million Americans may have access to new insurance options through these arrangements.

Continued reforms of ACA regulations: Building on the Market Stabilization Rule issued in 2017, CMS finalized the 2019 Payment Notice rule that gives states new tools to stabilize their health insurance markets, including more state flexibility and control over essential health benefits, the medical loss ratio standard, network adequacy, risk adjustment, and rate review. CMS also encouraged issuers to sell plans off the exchange without an extra cost sharing reduction load to keep off-exchange premiums lower.

CMS also released new guidance expanding state flexibility to waive certain Affordable Care Act requirements to deliver real alternatives to the ACA that strengthen markets and improve affordability, and released four waiver concepts to illustrate how states can take advantage of this new flexibility.

Improved the consumer experience: CMS’s Center for Consumer Information and Insurance Oversight (CCIIO), which runs the federal Affordable Care Act exchange, took a number of steps to maintain or improve the experience for consumers purchasing ACA plans, including:

  • Enhancing direct enrollment to provide a new pathway for consumers to enroll in a plan directly through an approved issuer or web broker without needing to be redirected to visit HealthCare.gov, allowing the private sector to offer more user-friendly and seamless experiences for consumers.
  • Maintaining an all-time high 90 percent consumer satisfaction rate at the federal exchange call center through the 2019 Open Enrollment Period.
  • Investing in the exchange’s IT infrastructure resulting in substantially less down time during 2018 and 2019 Open Enrollment versus previous years.
  • Responding to agent and broker feedback, including by implementing 93 percent of recommendations to improve the online experience for the federal exchange.

In total, CMS found efficiencies that reduced CCIIO’s annual operating budget from $2 billion to $1.87 billion in Fiscal Year (FY) 2018, a 6.8 percent reduction.

New options for small businesses and the self-employed: HHS, DOL, and Treasury expanded the availability of association health plans, or AHPs, which can offer self-employed Americans and those who work for small employers access to plans similar to what larger employers offer.

Committing to High-Quality Care in the Indian Health Service

New accessible data on quality: In February 2018, the Indian Health Service (IHS) launched a new National Accountability Dashboard for Quality to monitor and report information from across IHS facilities, reporting on key performance data in a succinct and easily viewed display to allow fact-based decisions to ensure quality and safety of care.

A new strategic focus on quality: In December 2018, IHS announced a new Office of Quality that will be responsible for providing oversight for quality across the IHS health care system. The office will also support IHS hospitals and health centers by providing a system of quality assurance to attain and maintain compliance with CMS Conditions of Participation and accreditation standards.

A new partnership for quality: IHS began work with the Partnership to Advance Tribal Health (PATH), led by a quality-improvement organization selected by CMS, to identify areas of improvement and best practices across all IHS hospitals and improve quality by implementing best practices and identifying operational improvement needs. The aims of the partnership include improving safety and reducing risk by 50 percent across IHS by creating a harm‐free, high-reliability care environment and a learning culture through implementation of a comprehensive patient safety and risk management program by the end of 2022.

Modernizing IHS health IT: In September, IHS partnered with the HHS Office of the Chief Technology Officer (CTO) to lead a Health Information Technology modernization research project, a one-year effort to assess the current IHS health IT landscape and make recommendations on modernization.

Deputy Secretary Eric Hargan participates in a roundtable discussion with patient groups.
Deputy Secretary Eric Hargan participates in a roundtable discussion with patient groups.

Protecting Patient Privacy

A historic year for HIPAA enforcement: In 2018, the HHS Office for Civil Rights (OCR) had its biggest HIPAA enforcement year in history as its collections, settlements, and judgments totaled over $25.6 million. In October 2018, OCR settled with Anthem, Inc., the largest HIPAA/HITEC Act breach case in history, as measured by size of breach (almost 79 million records, three times the previous record), with the largest recovery in OCR history ($16 million).

Rolling out new Medicare cards: In 2018, CMS mailed out more than 50 million new Medicare cards to seniors, which will help fight fraud and abuse by removing Social Security numbers from their Medicare cards.

Reforms to Increase Accountability and Competition

Expanded competition and choice in Medicare: Changes CMS made to increase competition in both Medicare Advantage and Medicare Part D helped reduce Medicare Advantage premiums by 6 percent for 2019, add more than 600 new Medicare Advantage plan options, increase the number of Part D plans by 15 percent, and lower the average Part D premium for a second year in a row.

Improving payments for home health and skilled nursing facilities: CMS revised its Home Health and Skilled Nursing Payment Systems to reduce the burden imposed by the payment regulations on home-health agencies and nursing-home providers, while offering better incentives for quality services and a greater focus on patients.

Bringing real competition to competitive bidding: CMS overhauled the Competitive Bidding Program for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies to address longstanding concerns from some stakeholders that the program was not effectively harnessing market forces.

The first ever Medicaid and CHIP scorecards: CMS began publishing the first simple accountability scorecard regarding basic outcome measures of states’ Medicaid and Children’s Health Insurance Program (CHIP) programs, providing a new opportunity for understanding and assessing state innovations in healthcare.

CMS Administrator Seema Verma seated on a stage with Alex Azar
CMS Administrator Seema Verma speaks with Secretary Alex Azar.


Content created by Assistant Secretary for Public Affairs (ASPA)
Content last reviewed on February 22, 2019