Chart of the Week
Congress.
Medicaid Gap. The idea for including Medicaid gap coverage in reconciliation this summer/fall continues to get traction. People living in states that did not expand Medicaid are not eligible for tax credits to purchase health insurance on the ACA exchanges. The gap is a result of Congress’ presumption that is would be able to force states to expand, something the Supreme Court disputed. It will be expensive but it meets the ambitions of the Biden administration to increase the availability of inexpensive coverage.
CBO June Economic Update. The Congressional Budget Office released their June update on the economy, and it was not great news for deflation/things snap back to pre-COVID conditions, etc. They anticipate that Personal Consumption Expenditures will rise by 2.8% by 4Q 2021. PCE does not include Medicaid or Medicare Part A and given the PPI for treatment of cancer and the distressing delays in pediatric health care there is likely to be more dollars chasing health care services than is evident.
Expansion of Medicare. Progressives are beating the drum for expanding Medicare benefits to include dental, vision and hearing. Their advocacy may be a compromise of sorts as moderates of their own party and Republicans are not likely to go for an expansion of Medicare through a reduction in the eligibility age. Probably still a long shot due to cost ($233B for dental; $30B for hearing and $36B for vision) which will be compounded if Medicaid gap is filled. Could be a headwind for MA plans as these benefits are an attractive part of the benefit design, which is probably the point. (UNH, ALHC, CLOV, OSCR)
Hearings Next Week.
WFH week for Congress to celebrate the July 4th Holiday.
The White House.
Medicaid Benefit Expansion. The health policy glitterati have been speculating this week that the Medicaid rule pending at the White House may reverse Trump-era guidance on enrollment once Public Health Emergency ends. Their speculation is credible in that Medicaid enrollment/expansion has been the go-to answer to reducing the uninsured since the individual market never materialized as supporters of the ACA ha hoped. Some states are going to balk on principle but with $138B getting mailed out this year and next, the urgency for state budgets is not there. Put this together with the push to close the Medicaid gap and you have persistently high enrollment in Medicaid for the next year or two. (ANTM, CNC, MOH)
Medicare Rule-A-Rama. This week, CMS released:
CY 2022 Home Health annual payment update. The CY 2022 payment update will be 1.8%. The CY 2021 National Standardized 30-Day Period Payment will increase from $1,901.12 to $2,013.42. Under normal circumstances, this update would be standard. Unfortunately for home health providers, the average hourly rate for a home care worker has risen 4% in the last 12 months. For the public companies, AMED, LHCG, labor costs are probably a workable problem for now. It is the small providers - and most of home health is small providers – that will struggle and many are going to through in the towel which should lead to long overdue consolidation.
CY 2022 ESRD Payment Update. The base rate in CY 2022 will increase to $255.55 from $253.13. The administration is making a push to address discrimination in care delivery for renal disease. SecHHS Xavier Becerra, as the former California A.G. is acutely aware of many of the claims of predatory behavior leveled at the dialysis industry by the SEIU. It will probably be an uncomfortable conversation as African-Americans represent a disproportionate number of dialysis patients and are much more likely to be hospitalized as a result. Cue to ESG Gods.
Surprise Billing. The administration released their highly anticipated rule this week. The Interim Final Rule requires a health plan to cover Emergency Services without prior authorization and regardless of whether the provider is in-network. The rule also requires that cost sharing for emergency services and certain other provider types (anesthesiologists, radiologists, etc.) to be at in-network levels and count toward deductible and Out of Pocket maximums. In effect, the rule turns several provider types into de facto in network providers without the benefit of negotiations. Methinks the unintended consequences will be real although I have not thought them all through.
Still waiting on:
Physicians Fee Schedule for 2022 and “other revisions to Medicare Part B”
CY 2022 Hospital Outpatient annual payment update
Courts.
SCOTUS Will Hear Hospitals’ 340B Lawsuit. The case might be the Chevron Deference test everyone has been waiting for since the court took its conservative tilt. The Chevron Deference doctrine affords wide latitude to regulators and has been the source of much controversy as the administrative state has stepped further and further into more, how shall we say? creative approaches. The lawsuit challenges CMS’s authority to reduce outpatient reimbursement by 28% for Part B drugs in the 340B program and reallocate those monies to all hospitals, even those not eligible for 340B. No decision until next year but it will probably be an important case.
Other Stuff.
Employment. Health care continues its struggle to fill jobs, especially at lower paying providers. There are about 400k fewer people employed in health care than pre-pandemic. Unlike the great recession, health care does not seem to be playing much of a role in jobs recovery.
Insulin at WMT. While the Street continues to cast a hopeful glance at AMZN to disrupt health care, WMT continues its slow, but persistent march in the same direction without all the annoying Silicon Valley speak. WMT announced that it would sell a private label version of Novo Nordisk’s analog insulin. This sort of approach is exactly the disruption we had hoped would have emerged sooner. WMT has the scale to influence market dynamics and discourage any blowback from MA plan sponsors that sell through the retail giant’s insurance services subsidiary. Seems like it is only a matter of time when PhaRMA reaches similar agreements with any provider of size. Not good news for GDRX that has thrived on the opaqueness of the pharmaceutical market.
Rate Review. Premium rates are starting to come in and they do not bode well for the insurance consumer in 2022. According to press reports the medical cost trend will increase to 4-6%. These rates are consistent with reports that put the cost of delayed care at about 8% in 2022 from earlier in the month.
SPAC and S-1 Corner.
Interesting S-1s:
Elicio Therapeutics, Inc. (BTIG) “We are a clinical-stage biotechnology company developing a pipeline of novel immunotherapies for the treatment of cancer and other diseases. For therapies designed to engage the immune system to treat disease, it is critical to target activation at the unique location where adaptive immune responses are generated.”
ABSCI Corp. (JPM) “With our AI-powered Integrated Drug Creation Platform we enable the creation of novel biologics by unifying biologic drug discovery and cell line development into one simultaneous process.”
Healthcare Royalty, Inc. (GS) “We are the leading mid-market royalty acquisition company, based upon the number of transactions and aggregate value of capital deployed since 2016. We focus on growth assets and emerging companies driving innovation in the biopharmaceutical industry. We consider “mid-market” to comprise royalty acquisitions for transaction sizes between $20 million and $250 million.”
WCG Clinical, Inc. (GS) “We believe we are a leading provider of clinical trial solutions, focused on providing solutions that are designed to measurably improve the quality and efficiency of clinical research, stimulate growth and foster compliance. Our transformational solutions enable biopharmaceutical companies, contract research organizations (“CROs”), and institutions to accelerate the delivery of new treatments and therapies to patients, while maintaining the highest standards of human protection.”
Caribou Biosciences, Inc. (BoA) “We are a clinical-stage biopharmaceutical company dedicated to transforming the lives of patients with devastating diseases by applying our novel CRISPR platform, CRISPR hybrid RNA-DNA, or chRDNA, pronounced “chardonnay,” toward the development of next-generation, genome-edited cell therapies.”
SPAC Corner
There is still about $13B in dry power from closed SPACs hanging around looking for a dance partner. Another $14B are moving slowly through the registration process. DFPH and FSII found dance partners, SHCR started trading.
You can access the updated SPAC spreadsheet here.
If you are investing in SPACs but not super familiar with health care, hit and we can help.
Recent Events.
June 30th @ 2pm ET Health Policy Mid-Year Update: Labor Supply & Costs, Supply Shifts; and More with Tom Tobin, Health Care Sector Head
Upcoming Events.
July 14th @ 10am ET Brad Smith, former Director of the Innovation Center at CMS and I will be talking about the history and potential of direct contracting.
Have a safe and happy holiday weekend.
Emily Evans
Managing Director – Health Policy
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