Chart of the Week
Congress
Paying for Infrastructure. The offsets are not going to be good enough for the CBO. Yesterday it informed Congress that the bill would increase the deficit by $256B. The shortfall in offsets may send Congress looking for more money and health care, by virtue of its size, is a good place to start. One possibility is the Provider Relief Funds that sit unused at HHS but are going to be needed to address wage inflation. Given the habit of viruses to move in waves, the money will eventually be spent for its intended purpose so providers are defending the piggy bank vigorously.
Paying for Reconciliation with MA Cuts. As we signaled a few weeks ago when the White House released its FY2022 budget, cuts to Medicare Advantage plans are definitely a possibility. Progressives hate the program because it is viewed as privatization of Medicare. Conservatives think it is a little too fat. Those left over are not excited about being known as a friend to the insurance industry. We are at the stage where the idea of using payments to MA plans to offset, for example, a permanent expansion of ACA exchange plan, is being “run up the flagpole.” Possible mechanisms include changes to the benchmarking process and regulating coding intensity/risk scores and probably something we have not thought about. MedPAC recently produced a relevant report that can guide Congress' decision making. (( - )HUM CI, ALHC, CLOV, OSH)
Paying for Reconciliation with Drug Price Policy. Democrats have been eager to bestow on Medicare – assuming here it would be for Part B drugs – the power to negotiate. They are also interested in setting an inflation-linked cap on drug prices. Another less controversial area is codifying value-based purchasing arrangements. Corporate America does not like any drug price plan that does not include employer sponsored insurance. They fear that any controls on Medicare prices will shift cost pressure onto ESI plans. Republicans are rumored to be trying to leverage this disagreement by arguing that including privately funded drugs will not save the government any money and therefore cannot be included in reconciliation. That move, if successful, would bring Chamber of Commerce, NFIB and other powerful parts of the business lobby into the fray in opposition.
Might work.
Countering Communist China. The House released a draft of their version of Sen. Chuck Schumer’s innovation initiative designed to limit the spread of Communist China’s influence around the world. As you can imagine, there are significant provisions meant to address the fragility of the supply chain for medical devices, pharmaceuticals and PPE. (PINC, ABC, MCK)
The White House.
Medicare Rule-A-Rama. No rules pending
Still waiting on:
Most Favored Nation Model (Part B drugs) This rule concluded review on Aug. 3 but has not yet been published in the Federal Register. Pharma lobby expects the Biden administration will kill it as international reference pricing is losing favor relative to some form of a domestic reference like inflation.
Vaccination Mandates. There is a growing number of states and public companies mandating vaccines for employees, including GEN. It is without a doubt good policy and good public health, but it may put additional pressure on labor supply as some people continue to refuse vaccinations.
Centers for Disease Control and Prevention Eviction Order. The CDC extended the current eviction moratorium until October despite a recent SCOTUS decision. This time they are limiting the order to areas of high transmission. The little known fact is that, as Bruce Quinn recently pointed out, High transmission is being redefined as cases per 100k per week, instead of per day.
High Transmission, then, is now a lower bar, thus allowing more jurisdictions to qualify for the order. Perhaps it is a coincidence relative to the eviction order, but it does help promote the notion, for those that were uncertain, the CDC has completely lost its mind.
This latest order is unlikely to last in the courts. When the order is lifted it is going to take some months to take effect as there is only so much capacity at the local Sheriff’s office.
Other Stuff
Employment. Total health care employment rose 37k, an increase of 0.23% MoM or 1.94% YoY. That increase is consistent with normal operations pre-COVID but not enough to address the high and growing needs of the health care system.
Ambulatory services are generally back to full capacity. Hospitals are still about 84k workers short of pre-COVID levels. Aggregate hours worked reaccelerated in June as you might expect with the latest wave of COVID cases among the unvaccinated.
Nursing facility employment represents the biggest headwind for health care employment with about 200k workers missing without a glance backward. Some share is being taken by home health but it looks like the nursing home business will never be the same again.
Inpatient Psychiatric facilities are clawing their way back but also still below 2020 levels,
SPAC and S-1 Corner.
IPOs.
TIVIC Health Systems. ($15M, ThinkEquity) Tivic Health Systems, Inc. is a commercial phase bioelectronic medicine company focused on inflammation.
RetinalGenix ($4.2) An ophthalmic research and development company focused on developing technologies to screen, monitor, diagnose and treat ocular, optical and sight-threatening disorders.
SPACs. No new health care SPACs as Mr. Palihapitiya’s (among others) influence continues to be a negative. A few in the pipeline made progress. CM Life Sciences is paring up with EQRx, a drug development company that touts former Food and Drug Administration leader, Amy Abernathy, appears to be trying to eliminate those pesky PBMs and other suppliers by reaching price agreements directly with providers and payers. Great story of true. And it might just be true.
Owlet, the baby monitor company is now out in the wild after de-SPACing.
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. Replay Brad Smith, former Director of the Innovation Center at CMS and I will be talking about the history and potential of direct contracting. He also provides a great explanation for why Medicare Advantage's benchmark system might need a shave and a haircut.
Upcoming Events.
Aug. 18 @2 p.m. 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.
Aug. 25 @10 a.m. 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. 13. Sign up here.
Emily Evans
Managing Director – Health Policy
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