Politics. As far as Medicare goes, inflation is not, in fact, transitory. On Friday, CMS released the 2022 Part B premiums which, unlike most federal health programs, involves some analysis by the Office of the Actuary in rate setting.
For single tax return filers making less than 91k, the monthly premium will be $170, up 15% from 2021, the largest increase in 15 years. According to CMS, about half the increase is due to the creation of a contingency reserve in the event Aduhelm earns a National Coverage Determination. The other half is for “[r]ising prices and utilization across the health care system that drive higher premiums year-over-year alongside anticipated increases in the intensity of care provided” and Congress’ decision to limit premium increases for 2021.
Let’s call BS on the Aduhelm narrative.
The 2021 Medicare Trustees did not attempt to estimate the costs of covering Aduhelm citing too many “uncertainties.” (See Introduction, p. 4) In other words, if the Part B increase is due to anticipated costs associated with Aduhelm coverage, it isn’t based on the Office of the Actuary’s work.
And why would it be? Estimates of Aduhelm spending are a guess at this point but a low of $6B and a high of $29B are frequently cited. That amount would represent 1.4% to 6% of all Part B benefit payments at peak, which is not expected any time soon. Not insignificant numbers but also not likely to break the bank in 2022 or even 2023, maybe never.
This little bit of comms spin feeds the “drug prices need to be controlled” narrative that was immediately scooped up and repeated by the press. Members of Congress eager to pass proposed drug price legislation will point to the cost of Aduhelm as a cause for the misery of his/her senior constituents, many of whom will believe it even if it is wrong.
As an old bond salesman I know used to say, "If you are going to tell me a lie, tell me a good lie."
Policy. Blaming a yet-to-be-covered drug for premium increases has the added benefit of deflecting attention from the real problem: higher prices and more intense utilization. These trends are readily acknowledged by CMS but predictably buried when the news hit the press.
The Office of the Actuary has estimated the average per capital benefit expense for each of the five years beginning in 2022 will increase 6.4% versus 4.3% annually in each of the five years before the pandemic.
Annual growth before the pandemic was depressed somewhat by ACA payment reductions intended to offset costs of the Affordable Care Act. Assuming a 0.75% payment reduction on average, the difference between pre-COVID and post-COVD Part B spending will be about 1.35% annually, the largest portion of which will occur in 2023.
Implicit in the Actuary’s estimates are that higher costs, specifically for labor, won’t be fully baked into Part B reimbursement until 2023 which means it won’t work its way into MA for years afterward.
Congress could intervene, of course, especially if access becomes an issue. Payments to providers in traditional Medicare, especially physicians, would be most likely to get some relief. Hospital and other critical providers may also get some sympathy. MA plans?
Not so much.
Republicans think the program is too fat. Democrats hate its quasi-privatization.
No wonder UNH, ANTM and HUM just want to talk about their value-based (read: risk shifting) programs.
Power. The politics of health care is nothing new. The U.S. health insurance system exists largely because unions and demanded it and elected officials since President Harry Truman applied the idea to other populations like the poor and elderly.
Unlike that of trade or foreign policy, health care policy has almost exclusively found its home in the Democratic Party. There have been exceptions. The Medicare Part D benefit is one. Of course, that was back when the pharmaceutical industry was considered “Republican.”
Despite that history, health policy has historically been executed in a way that observes the policy priorities of the White House, regardless of party affiliation, while preserving the credibility and durability of the bureaucracy.
It is a matter of survival. Implementing a policy that goes too far astray can create problems when your boss may change every four to eight years. It is also a matter of law. Federal health policy is not implemented through a scientific or medical framework but a legal one.
Survival and durability seem no longer to matter. The Obama administration made no secret of bending the bureaucracy to its will. The Trump administration exploited the precedent with rules primarily related to drug pricing.
The Biden White House has taken it to another level.
Not by making rules that require one to squint hard at the law to clear their conscience, Biden’s HHS has reversed implemented policies like phasing out the Inpatient Only List and expanding the Covered Procedures List for Ambulatory Surgery Centers – hardly political hot buttons.
In so doing, the Biden White House has, inadvertently or not, deemed the most mundane activities of the health care bureaucracy to be worthy of political action. In the present case, the reason cited for reversal was concerns about patient harm. The subtext of that, of course, is something along the lines of “Trump policy = bad policy.”
Of course, that also means in a few years “Biden policy = bad policy.” It would not be a concern were it not for the fact that 15M jobs and 100M lives and a trillion dollar industry is now subject to political whims like never before.
If history is a guide, the industry will move on, solve its own problems and, save for a few lobbyists, forget Washington exists.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
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