New! As we mentioned last week, we have added an index of publication and events with links and tickers in searchable calendar format. In honor of earnings season, we are also adding policy notes from earnings releases which this week consists of UNH.
Chart of the Week
Congress
Reconciliation. Time is not on its side. As we get closer to the Nov. 2 election for Virginia governor; as redistricting is finalized in states across the U.S.; as retirements are announced in response, the political wind may move from gusty to straight line.
Given President Biden’s approvals/disapprovals, labor shortages and inflation the bill seems to fall out of sync with the economy and its pressing needs with each passing day. However, the aging leadership in the House and Senate know this bill represents their last, best hope to bring to fruition long standing ambitions for expanding federal health and social benefits; to finish what FDR and LBJ started. A not-quite-lost cause counts for something.
With Sen. Joe Manchin dug in (with company from several more camera-shy colleagues) House leadership finds itself trying to back into a compromise. Never a good place to be in politics.
The latest:
- Speaker Nancy Pelosi sent a letter Monday to members describing the consensus among members was to fund fewer programs for longer to achieve a lower price tag. This position implies that expansion of the Medicare’s scope of benefits to include dental, hearing and vision would probably be off the table.
- On Tuesday, Speak Pelosi indicated that the House would move toward a smaller package by funding all programs but for shorter periods of time. That position implies proposals such as a permanent extension of ACA subsidies for people making over 400% of the Federal Poverty Threshold would remain temporary. Other programs like the very expensive Medicare dental coverage would begin later in the 10-year budget window.
- Meanwhile, Budget Chairman Sen. Bernie Sanders says expansion of Medicare benefits is a “must have,” although that position is getting steadily eroded over on the House side.
- Leadership in the House and the Senate have also indicated support for home care workers is a “must have” as well
- Filling the Medicaid gap retains support as it meets Sen. Manchin’s demand that programs be means tested.
Hopes that this reconciliation bill will enjoy the legislative success of the ACA are slipping away and every constituency under the sun is trying to preserve their position. Patient groups like the Susan G. Komen Foundation are advocated for the ACA insurance premium subsidies. Employers are lobbying against drug price policies that do not include self-insured and Employer Sponsored Insurance.
Meanwhile, the Committee for a Responsible Federal Budget issued sketches of alternatives and is coaching centrist members of both parties toward a smaller package. In short, we appear to have gone back to the beginning, with momentum stalled and major policy provisions still up in the air.
State and Local Spending. Energy and Commerce Ranking Member, Michael Burgess has asked for a hearing on how state and local governments are spending relief monies. Reports suggest that less than 10% has been used to date, not all of it wisely.
A looming problem is what government people call “contracting capacity.” If every local government in each state or region wishes to install new HVAC systems in their schools, they will encounter limits on available contractors. To meet deadlines for spending the money, they will bid up supplies and labor, extending the current inflationary trends well into 2023.
Same analysis applies to certain pandemic response spending. If local governments have money to spend on testing (and boy, do they ever) they will use it, driving up costs for required skilled labor and materials.
All told, about $350B is slated for state and local governments over the next 18 months with some extensions possible.
The White House
Food & Drug Administration. Finally, the White House has named Robert Califf to run the Agency. For our purposes, it is an interesting choice because of Dr. Califf’s long standing interest in adopting digital technologies in clinical trials – something we discussed in our Venture’s View episode on Wednesday with Marcus Whitney of Jumpstart. Dr. Califf spent time at Verily and Google Health and may be uniquely qualified to move the FDA into a new age.
WTF Moderna? The White House’s disagreement with MRNA has spilled out into public view. If reports are to be believed, the White House was hoping MRNA would help them respond to pressure domestically from progressives and from global health and international trade organizations abroad.
Because MRNA relied on some upfront help to roll-out their COVID vaccine, the federal government may have some claim to the Intellectual Property and thus in a position to force technology transfer to manufacturers abroad. This move would assuage international critics with the most recent complaint about the U.S. – that we are not spreading the vaccine wealth.
Given the long-term implications of MRNA’s technology, it seems improbable they won’t put up a fight, almost ensuring any technology transfer by the U.S. will be met with stout legal action.
Medicare Rule-A-Rama.
Other Rules.
Appears the vaccination mandate rules will be rolling out soon.
COVID-19 Vaccination and Testing Emergency Temporary Standard Rulemaking (DOL)
Omnibus COVID-19 Health Care Staff Vaccination (CMS-3415)
Other Stuff
Inflation. CPI is not particularly interesting when it comes to health care. Providers only have control over their pricing about once a year as contracts with plans are re-negotiated/inflated by some pre-determined benchmark. However, CPI for pharmaceuticals rose on a MoM% and YoY% basis in September. Could be “transitory,” but in light of its steady path down and to the right over the last several years, worth keeping an eye on.
Policy-related Earnings Commentary
UNH reported this week. Notable policy takeaways from earnings call:
- About 2.2M of 50M lives are in fully accountable arrangements.
- Commercial lives are quicker to return to elective care, less true for public sector and government payers.
- Not seeing any unusual suppression of utilization or significant bounce-back. Believes pent-up demand cycles through in about 4-6 weeks.
- Telehealth is moving from a standalone offering to part of the infrastructure necessary for PCP to manage care; used in conjunction with monitoring technologies to reduce total cost of care
- MLR up to 83% from 81.9% last year.
Our Thought Bubble: The anomalous behavior for commercial insured may have something to do with how providers are managing patient flow. Providers have become adept over the years in pushing Medicare utilization into first quarter to make way for commercial patients who are at or near their deductible threshold. As the sickest patients are usually found in Medicare and Medicaid, the jury on utilization and acuity is probably still out, especially based on what we are hearing from providers.
The commentary on telehealth should weigh on the TDOC longs. As Tom Tobin has pointed out with his TDOC Best Idea Short, telehealth needs to recede from the front line to becoming part of the infrastructure of providing care.
SPAC and S-1 Corner
IPOs
Nothing of note.
SPACs
SPACs have been mostly left for dead by The Street yet a few more were added this week. In light of our work on Distributed Clinical Trials, Intelligent Medicine Acquisition Corp. is interesting. In other sectors, I have also noted SPACs to address the supply chain issues which is a reminder that SPACs are a worthy vehicle for businesses that find themselves in the middle of a land rush and need capital ASAP. Chamath notwithstanding, still worth trying to sort the wheat from the chaff
Updated SPAC List here with links.
Recent Events
Wednesday, October 13th
Upcoming Events
Wednesday, October 27th @ 2pm ET
Digital Health Investment Themes: An Update with Matthew Holt
Hedgeye Health Policy Publication/Event Calendar
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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