Top of the Funnel | Macro Data + Policy Position Monitor
On Thursday we reviewed the most recent data on the state of play for the U.S. Medical Economy. ((HCA (+), THC (+), DVA (-), AMED (-), CHE (-) UNH(-), HUM (-), ANTM (-))
Link to video. Link to audio
CONGRESS
ACA Tax Credit Extensions. (HCA (+), THC (+), ACHC (+)) Democrats are pushing hard to preserve the ACA tax credits that were expanded by the American Recovery Plan Act.
The challenge is to navigate a way through Joe Manchin’s demand that provisions be means tested – which would seem to rule ACA plan premium subsidies that wander too far from the 400% of the Federal Poverty Threshold. Manchin’s other requirement that half the spending bill be dedicated to deficit reduction will also likely clip the wings of more expansive aspirations.
It remains, however, a priority, particularly on the House side.
Payment mix has been a tailwind this year but 2023 depends on extension of the credits, especially in the face of employment stagnation.
Insulin & PBMs. ((LLY (+), UNH (-), CVS (-) CI (-)) The cost of insulin, driven largely by rebates and other hanky-panky in the rent-seeking corners of the drug supply chain, is getting renewed attention. The INSULIN Act, sponsored by Sen. Jeanne Shaheen and Sen. Susan Collins would:
- Prohibit PBMs from collecting rebates on sales of insulin by companies that limit their list price to 2021 levels in Medicare Part D.
- Cap beneficiaries’ monthly expense at $35 for low-priced insulin products and prohibit plans from blocking access to them.
- Require plan sponsors to waive deductibles and cap cost-sharing at $35 for each type and dosage level of insulin.
The Shaheen-Collins bill is another brick on the load of bad news for PBMs. Rent-seeking works well when money is free and policy lax. When things get tight, tolerance for non-productive activities, diminishes.
Prior Authorization Oversight. ((HUM (-), ANTM (-), UNH (-), (CLOV (-)) The hospital lobby has been beating the drum of aggressive and unnecessary prior authorizations required by Medicare Advantage plans since late last year. The Office of the Inspector General issued a report in the spring that concluded prior authorization may be restricting access to care.
Hospitals have a small victory with a House Energy and Commerce subcommittee scheduling a hearing to learn more next week. CMS Administrator, Chiquita Brooks-LaSure is scheduled to appear.
These are the opening shots of the insurance wars we have not seen since the late 1980s. Insurers are facing the twin challenges of a competitive market for members seeking low-cost plans and higher acuity and more complex patient care post-COVID. Commercial plans have similar problems but those are not likely to show themselves until late this year.
THE WHITE HOUSE.
Medicare Rule-a-Rama. Home Health, never the favorite of the CMS bureaucracy, was handed a proposed -4.2% payment update for 2023. The industry is threatening a lawsuit and perhaps they catch a break and get an injunction to save 2023. Perhaps they get a little relief from Congress. Either way the future will be cloudy until the end of the year and maybe not even then. ((AMED (-))
Meanwhile, CMS has proposed a 3.1% increase in payments to dialysis providers. It is an improvement over the 2.5% increase in 2022 but still a ways from covering the wage inflation that is plaguing the low wage health care workforce. ((DVA (-), FMS (+/-))
I covered the trap Medicare-centric providers are in on this call on Thursday. See link above.
FDA & Nicotine. The White House announced a push to limit nicotine in cigarettes. It is, as the Wall Street Journal put it, fighting the last war. While teen smoking has spiked a bit in recent years, overall cigarette use has declined.
A prohibition or significant limits on nicotine are likely to produce more black market activity. Social pressures, prohibitions on smoking in most public places and negative health effects suggest hold-out smokers are not easily convinced.
If not black market sales, perhaps everyone will turn to Nicotine Replacement Therapy. Given the pharmaceutical industry’s influence over the White House these days, it isn’t as crazy an idea as it once was.
SCOTUS
Roe v. Wade. Leaving aside the merits of the case and its adjudication, the outcome has significant implications for the state-federal dynamic. For at least the last 30 years of the 49 Roe v. Wade has been on the books, allegiance/rejection to/of Roe v. Wade has dominated presidential and senate politics, often to the exclusion of all else.
The abortion debate now moves to the states at just the moment when states, post-COVID, have begun to wonder if the federal government knows what it is doing. The varying personalities of each state, subsumed first by a need to cooperate with the federal government and then by a demand that they do so, are re-emerging. Their economies, too, are shifting as a tourism-dependent state like Florida becomes a financial hub.
Perhaps, as Jefferson Cowie suggests, the period from the New Deal, and especially the Great Society, to the present is anomalous. We should have a better sense of that in November.
Marietta Health Plan v. Davita. (DVA (-)) The Supreme Court ruled that a plan sponsor can structure its benefit design in such a way that it encourages dialysis patients to enroll in the Medicare benefit. Davita, as everyone knows, depends on a small minority of its patients for the majority of its EBITDA.
In effect the justices took a harpoon to DVA’s business model. The effects will not be apparent immediately as contracts must be renegotiated and renewed. However, when combined with excess mortality among diabetics, labor supply and cost headwinds, plus lease obligations and a high debt load, its future looks more like Chapter 11 than 1990.
I covered our view of the company on May 4. Link to broadcast here.
Other Stuff
The Wild West of Testing Gets Tamed. ((NTRA (-), NVTA (-), MYGN (-)) UNH (+)) As Congress considered regulation of Laboratory Developed Tests, UNH is taking things into their own hands - they are large enough to be their own government anyway. They announced this week their new proprietary Laboratory Benefits Manager. What makes this move more interesting than previous efforts is a. their incremental moves away from the insurance business and b. their development of a genomics unit to support development of new tests and pursuit of clinical and analytical validity of existing tests.
From the Department of Tone Deafness. The Commonwealth Fund released a report on Tuesday that proposes a national public health system housed at Health and Human Services.
So far gone is the Centers for Disease Control – an agency whose explicit mission is public health – that the Commonwealth Fund suggests HHS do the job for them. Of course, most governors, even the ones that might agree, are not likely to acquiesce to a federal authority on public health for which there is limited constitutional support.
Their constituents probably agree.
Recent Events
2Q 2022 Macro Update on U.S. Medical Economy; Employment, Inflation, Mortality & Insurance Risk.
Venture View with Marcus Whitney. If you need a quick primer on the state of venture investing and the coming mark downs, this video is for you.
Upcoming Events
PFE: Bad for America (joking, but only kind of). Tuesday July 13 @ 10am ET. Note: This event is being rescheduled from June 28th due to a delay in the roll-out of CDC new mortality dataset.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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