Politics. To put it in macro terms, for the last 50 years the U.S. government has imposed a level of protectionism on health care that would be unacceptable if it was the automobile or textile industries. As is the case with these other types of protectionism, the designated loser is the consumer.
To avoid the reduction in Medicare reimbursement imposed by the Medicare Prospective Payment System in the late 1980s, small hospitals escaped the price pressure by getting federal designation as a Critical Access Hospital which are paid on a cost-plus basis. Of course, when one applies the Medicare copayment of 20% to a cost-plus bill, the beneficiary’s responsibility is higher than at a hospital under the PPS system.
Heavy restrictions on what services can be provided where, such as a hospital versus an ambulatory surgery center, have not only left U.S. Medical consumers paying more but have stifled innovations such as robotics and artificial intelligence. There is a good case to be made that the American home construction industry has been more creative in the last 20 years than health care.
As is the case with other industries, protectionism exists to save and create jobs. Viewed through that lens, the U.S. health system was an unqualified success. Post-COVID, however, it seems as if the U.S. worker could not care less about returning to health care. Employment may never again achieve the trajectory it was on in 2019. The formerly powerful nursing home industry is shuttering facilities in congressional districts everywhere and CAHs are watching their customers go elsewhere.
With that new paradigm comes a much-altered political dynamic. Despite the entreaties of aging lobbyists – it appears government relations is not on anyone’s hot job list either – Congress reinstated the sequester with a short delay until March after Republicans rejected a punt until 2023.
If the 2022 midterms are as bad as 1994 – or worse as some strategists have suggested – the domestic protectionism for health care may have to recede simply because no one cares anymore.
Policy. A sure path to reimbursement for innovative technologies may be another indication that the days of encasing health care in amber may be coming to an end. The Trump administration had proposed and finalized the Medicare Coverage for Innovative Technologies final rule that provided a clear path with time limits to Medicare reimbursement for new devices.
The Biden administration withdrew the rule, even though it was being implemented, citing “patient harms.” “Patient harms,” generally referred to in non-specific terms without any supporting data is the bureaucratic go to excuse when no one wants to mention the real reason. Members of Congress objected to the withdrawal, wrote a letter to CMS and last week the White House indicated they may reconsider.
In the Fall 2021 regulatory agenda is “Transitional Coverage for Emerging Technologies” which would “establish criteria for an expedited coverage pathway to provide Medicare beneficiaries with faster access to innovative and beneficial technologies.”
Sounds an awful lot like the MCIT rule that was withdrawn.
Power. According to Pink Sheet, a pharmaceutical trade publication, China plans to close or limit factory production, including that for drugs, between January and mid-March 2022. It isn’t a far-fetched idea. Beijing ordered something similar in 2008 to clear the air of pollutants ahead of the Olympics.
The difference between 2021 and 2008 is that the American drug industry is now more heavily dependent on China for the manufacture of drugs, especially generics and heavily used over-the-counter medications. For that reason, the 2019 tariffs imposed by the Trump administration excluded pharmaceuticals out of concern that retaliation would limit the availability of products like prednisone, heparin and others.
Of course, China is dependent on U.S. production of certain specialty drugs for cancer and other diseases. So, during the Trump administration a sort of détente was reached on the topic. The ongoing geopolitical tension between the two countries forces us to wonder, however, if factory closures aren’t also designed to remind Washington of China’s power in the drug supply chain.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
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