Note: Apologies for being a day late. Year-end Hedgeye festivities stole the week away.
CONGRESS.
The PHE Honey Pot. ANTM (-), HUM (-), CNC (-), MOH (-), UNH (-) As expected, relevant Congressional committees are taking a close look at ending the Public Health Emergency early so they can reap the delta between what the CBO says the PHE costs until July 2023 (their estimated end date) and what it will cost if it were terminated earlier.
What is valuable to know is that there is some agreement the PHE can/should end because the logjam is over how to spend the $10-$20B in “savings.” House Democrats would like to spend it on smoothing the off ramp for Medicaid’s Maintenance of Effort pandemic-era requirement.
Republicans would prefer the amount be applied to deficit reduction and/or providing an offset to year end extenders, delaying payment cuts to physicians, etc.
Al, Senator Warren on Line 2. PFE (-) Senators Elizabeth Warren and Peter Welch sent a letter to America’s favorite veterinarian, Albert Bourla, CEO at PFE telling him to back off the planned price increase for Covid vaccines to $130/dose.
I cannot believe it took so long. The price governments have paid for Covid vaccines is well known and Bourla’s argument that the technology was worth the premium fails in the face of limited efficacy especially as it relates to boosters.
And where Warren and Welch may not succeed insurers probably will.
Physician Pay Cut? CANO (-), CMAX (-), OSH (-) There is bipartisan agreement that the physicians should be spared the potpourri of pay cuts headed their way in 2023. There is less conviviality on how to do so.
To review, expected for 2023 are:
- A 4.5% reduction in the 2023 Physicians Fee Schedule Conversion Factor
- Cuts related to the PAYGO scorecard from the American Rescue Plan Act
- End of the 5% bonus in Alternative Pay Models
- The implemented and ongoing sequestration cuts.
Provider groups are predicting service line reductions and furloughs. We are dubious about the latter since the system is largely understaffed now. Access is and will continue to be an issue especially for low margin services and procedures.
Historically, Congress has avoided making these cuts. Historically, we have not had the inflation we have today, however, Nonetheless, we tend to think cuts are avoided for physicians but probably not for other groups lobby hard like hospitals, home health and dialysis providers.
The biggest danger remains for providers over-levered to the sclerotic Medicare system. It is manifest in the gridlock we see today but may soon become not so much a bug but a feature of the system. Government programs are littered with examples of how indifference can be the greatest force for change. See e.g., public housing,
The fine folks in Congress will be tackling the issue next week. Let’s see if the spirit of the season makes the difference.
Speaking of Cuts…. AMED, (-), ADUS (-) EHC (-), ENSG (-) Not that anyone reads MedPAC reports these days, but their recent draft recommendations do not provide much comfort or contra-argument for the not-so benign neglect Congress may adopt in 2024.
They are recommending a 3% payment cut to Skilled Nursing Facilities in 2024. It won’t happen, of course, but it supports an argument against any pay increases outside the normal statutorily required amounts.
MedPAC made note, importantly, of the excess Medicaid funds directed by states to nursing facilities from the 6.2% FMAP add-on made possible by the CARES Act. When the Public Health Emergency ends, so does that funding, calling into question the viability of a payment cut.
Other recommendations include:
- Calling Medicare margins absurdly high, the Commission recommended a 7% payment cut in 2024 for home health agencies. Yeah, right.
- While some members argued for a higher payment cut in 2024, MedPAC settled on a 3% reduction in 2024 for Inpatient Rehabilitation Facilities.
THE WHITE HOUSE.
Medicare Advantage 2024 Policy. CMS released its proposed policy changes for 2024. It is a robust list of proposals including:
- Requirement that in situations where there is no applicable Medicare coverage requirement, items and services must be covered, MCOs must include current evidence in widely used treatment guidelines or clinical literature made publicly available to CMS, beneficiaries and providers when creating internal clinical coverage criteria.
- Prior Authorization policies by requiring it apply and remain in place for the full course of treatment.
- Limits on marketing strategies by prohibiting generic television advertisement that fail to mention specific plans offered and/or use official Medicare logos and imagery; prohibiting sales presentations following educational events; limiting other sales activities and requiring reporting of bad actors.
- Requirement plans to provide culturally competent care including to people with limited English proficiency; ethnic, cultural, racial or religious minorities; disabilities; identify as gay, bisexual, or other diverse sexual orientations; live in rural areas; otherwise affected by persistent poverty or inequality.
- Strengthening of network adequacy requirements and reaffirm MCOs responsibilities to provide behavioral services.
ACA Exchange Policy for 2024. CMS issued a draft exchange rule that proposes to limit the number of non-standardized plans insurers can offer in each metal level on healthcare.gov. In the alternative, CMS would finalize a new standard ensuring plans are meaningfully different from one another.
High time. The complexity and number of plans offered on the ACA exchange defeats part of the intent of the program – to make health insurance accessible to lower income individuals.
Beneficiary advocates have long argued that the insurance industry’s favorite confounding tool produces huge numbers of rent seeking business models that do nothing more than explain things, sometimes not very objectively.
The Bad Side of Telehealth. To no surprise to a lot of frustrated parents, the Drug Enforcement Agency served on order on Truepill, Cerebral’s pharmacy over allegations of over-prescribing.
Recall the shortages of ADHD medicines a few months ago. It brings to light one of the more challenging aspects of the proliferation of telehealth services. A little consultation among friends or a quick internet search is all one needs to get their hands on a desired prescription, including ADHD meds.
In that environment, it is up to the telehealth company to police prescription practices. In this environment where profitability matters more than growth, well, that may be a tall order.
Other Stuff.
What’s Up With That? ABBV (-) ABBV has left the two major drug trade groups, PhaRMA and BIO. The company was a little bit of a turd in the drug lobbying punchbowl as its patent practices have made it a bit of a pariah, with the unwelcome attention of members of Congress.
Emerging as an issue, albeit in the fringe, is state scrutiny of what is known as “gender affirming” care which frequently includes the administration of ABBV’s Lupron and Endo Pharmaceuticals Supprelin.
It is an issue now largely confined to Republican dominated states like Texas and is usually interpreted as discriminatory. However, it is hard not to notice that “gender affirming” services are mostly administered at urban children’s’ hospitals and at academic medical centers.
Both entities are eligible for the 340B drug program and there is no one that plays the rebate game like ABBV.
Are the trade groups anticipating trouble? It is hard to see why ABBV, who is better off with organized advocacy than without it, departing willingly. Now that concerns are being raised, especially with respect to minors, by none other than Chris Cuomo (!), the possibility merits attention.
States Rights. PFE (-), MRNA (-), BNTX (-) In the absence of federal public health leadership, which looks a whole lot like misdirection or incompetency, states, beginning with Florida, have begun filling the void. Governor Ron DeSantis, a likely contender for president in 2024, announced a request to the Florida Supreme Court that it call the Grand Jury to investigate misleading comments from PFE, MRNA, BNTX on the efficacy of Covid vaccines.
About the same time, Gov. DeSantis announced the formation of a public health advisory group that could guide Public Health recommendations. One member of the group include Dr. Tracy Beth Hoeg who was nice enough to share some time with us a few months ago and discuss adverse vaccine events. Link here.
I suspect the problems of oversight of one of bio-pharma's big names are just beginning.
Upcoming Events
Venture View with Marcus Whitney: Markdowns, Exits & The State of Affairs in Venture Capital. Thursday December 22 @ 10 am (Add to Outlook Calendar)
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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