Congress
Paying for Infrastructure. Against the odds, Congress and the White House have reached agreement on a bipartisan plan to pay for an $1.2T infrastructure bill, the text of which has yet be released. Health care represents such a large expenditure it was bound to get tapped for some offsets.
Fortunately for the sector, the pay-fors are gimmicky. In other words, they look good on paper but have little real, immediate effect. The agreement:
- Delays the Trump-era drug rebate rule which the courts have put on ice anyway but it still amounts to $49B in savings.
- Requires drug companies to refund Medicare for unused portions of vials containing Part B drugs, resulting in a $3B savings.
- Extends the sequester for $8.7B in savings.
Leadership had considered redeploying unused provider relief funds but changed its mind. As labor costs fail to revert to pre-pandemic levels these monies will no doubt be needed.
Reconciliation. A more pitched battle will be waged over budget reconciliation. Progressives want $3.5T in spending for a host of social programs including expanding the benefit design to include hearing, dental and vision. They also wish to extend the subsidies for those buying health insurance on the exchange and making more than 400% of the Federal Poverty Threshold. Finally, the wish list includes subsidies to close the gap between Medicaid coverage and exchange subsidies for people living in non-expansion states.
Much to the dismay of progressives in the House, Sen. Krysten Sinema announced she would not be voting for a $3.5T bill. She is no doubt joined by others who prefer to stay out of the limelight. That scrambles the math a bit and forces leadership to rethink some of the priorities. Top of that list will be extending the ACA subsidies, which is a White House priority. We will need to see how negotiations progress for the rest.
The White House.
Industrial Policy. In all the excitement over the spread of the Delta variant, lost was the White House’s release of a proposed rule that aims to repatriate parts of the critical supply chain including those for drugs and medial supplies. The proposal calls for 60% of an item to be labeled “Made in America” immediately and escalating to 75% by 2029.
The administration is considering payment incentives and subsidies to make those goals a reality which are almost mandatory, considering about a third of PPE is manufactured primarily in Asia.
Vaccination Mandates. The White House is getting squeezed by the spread of the Delta variant and a vaccine hesitant population. They, followed by a few Mayors and Governors, have issued mandates for vaccination to health care workers and state and federal employees. In lieu of vaccines, workers can submit to regular testing.
Things are unfolding as we suggested they might in our presentation on The Persistence of Testing. Fact is a 60% vaccination rate is a homerun, but it still won’t be enough for unions and other labor groups. Testing will continue for the rest of 2021 and into 2022, perhaps 2023 as COVID-19 becomes endemic.
Long COVID is now being considered as a cause for disability. Not a surprise given hearings earlier in the year that pointed to this direction.
Medicare Rule-A-Rama. This week, CMS released:
FY 2022 Skilled Nursing Facility PPS Final Rule. The final rule includes a $410M pay increase for FY 2022.
FY 2022 Inpatient Rehabilitation Facility PPS Final Rule. In total the sector will experience a 1.5% increase.
FY 2022 Inpatient Psychiatric Facilities PPS Final Rule. The payment increase for FY 2022 will be 2.1%,
FY 2022 Hospice Payment rate Update Final Rule. The final payment increase for hospice providers is 2% for FY 2022
Because of the lag associated with modeling the Prospective Payment Systems, the payment increases are not yet accounting for wage increases that have been demanded in a tight labor supply environment. For larger, capitalized providers, it probably will not be a problem, or at least not a serious problem. For everyone else….
Still waiting on:
Most Favored Nation Model (Part B drugs)
SPAC and S-1 Corner.
SPACs. The inquisition begins. The NKLA enforcement action is probably not going to be an isolated matter. Several companies have played a bit fast and loose with the disclosures. For us CLOV and ME are notable. Although it may never catch the attention of regulators, CLOV’s enrollment fall-off in 2021 and their projections in 2020 are a little eyebrow raising. ME seemed to want very forcefully to resist complete disclosure on their relationships with pharmaceutical companies. The bad news for the names that were more forthcoming is that they all get thrown into the same pool for now. It is going to be up to the good actors to separate themselves.
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.
Upcoming Events.
Note Date & Time Change: Aug. 5 @2pm ET, Brad Smith, former Director of the Innovation Center at CMS and I will be talking about the history and potential of direct contracting.
August 18 @2pm ET Venture View with Marcus Whitney of Jumpstart Health Investors. Look forward to a discussion about productivity solutions are emerging among legacy plays to address labor constraints.
August 25 @10am ET Policy Trends in Managed Care, Post-Earnings.
Sept. 7-10th What is Next for Health Care? Virtual Event with Matthew Holt of The Health Care Blog and Jess DaMassa, Host and Executive Producer of WTF Health. At this point, it looks like I will be sharing a panel with Matthew and Bill Taranto of MRK’s Global Health Innovation Fund, among others. The line-up is great if you are interested in innovation. Early Bird registration ends Aug. 13th. Sign up here.
Emily Evans
Managing Director – Health Policy
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