Top of the Funnel: Macro
Insured Medical Consumer. HUM (+), UNH (+) CMS released updated Medicare Advantage enrollment figures for June. A trend we are watching is the accelerated conversion of stand-alone PDP members to full Medicare Advantage customers. Since 2020, plan sponsors have recognized the need realize the higher margin of MA customers versus PDP members. However, the movement gained new urgency with the passage of the Inflation Reduction Act. The IRA adopted a new benefit design for Part D plans that, among other things, reduced the catastrophic phase threshold from $3,250 in 2024 to $2,000 in 2025. Additionally, the new benefit design requires Part D sponsors to pick up 60% of the cost of brand name drugs in the catastrophic phase, an increase from 20% in 2024. Those increases in liability are partially offset by a reduction in plan liability from 75% to 65% in the initial coverage phase.
The implications of these changes are that plan sponsors may find it difficult to manage their new, higher liability in the catastrophic phase without the insight provided by data on other services delivered such as Emergency Room Visits. Hence, the motivation to switch members into a Medicare Advantage plan.
I covered this trend in the recent Health Policy Macro 2Q Themes and a Black Book on Cigna.
CONGRESS.
Resource Allocation. ILMN (-), MYGN (-), NTRA (-) FLGT (-) It is often said that the most precious resource in Washington is Senate floor time. With only 16 days until August recess, the Senate HELP committee minority was more than a little annoyed at Chairman Bernie Sanders. Sen. Sanders has redirected the committee’s efforts away from a few health bills – some of which are time sensitive like reauthorization of Community Health Centers- toward some de novo labor legislation.
There are only 16 days until the August recess. Any work that does not get completed before then will have to be packed into the holiday-heavy period of September to December to meet year-end deadlines.
One of those bills, the Pandemic and All-Hazards Preparedness Act was supposed to be the vehicle for passage of the VALID Act which would expand the authority of the Food and Drug Administration to regulate Laboratory Developed Tests.
With prospects for passage of the VALID Act dimming, the FDA announced this week it would be moving ahead with a regulatory response. That is one long and contentious road, and it introduces a level of uncertainty that may slow test development. Another blow for Life Sciences.
House Health Bills. These bills do not have a prayer on the Senate side this term so consider votes on them to be an effort to advance the ball in preparation for a change in power in 2024. Nonetheless, the House approves legislation this week:
- The Custom Health Option and Individual Care Expense Arrangement Act codifies a Trump-era policy that would allow small employers to subsidize off-exchange purchases of individual health insurance premiums for their employees.
- The same bill would expand the use of Association Plans which permit a group of employers to band together to purchase group plans. It would also preempt state laws that prohibit small employers from purchasing stop-loss insurance in the event they self-insure.
It bears noting that Rep. Chip Roy, who hails from the more conservative but nonetheless influential ranks of the House, added a “sense of Congress” message which declares medical freedom as the future and urges Congress to restore free-market principles to health care.
I mention this now because the trend in the House is clearly towards deregulation of sorts. Whether the Senate ever gets there is the open question.
THE WHITE HOUSE.
Medicaid Unwinding. UNH (-), ELV (-) We expect the unwinding of the Public Health Emergency’s Medicaid continuous coverage to raise alarms among beneficiary rights groups and it has. This week the Kaiser Family Foundation reported that 1.2M people have left the rolls, mostly because of procedural reasons like a non-response from the beneficiary. Our examination reaches the same conclusion.
SecHHS Xavier Becerra responded with an “all-hands” campaign to educate enrollees about their options. Several organizations including the Cancer Action Network have been pushing the administration to require Corrective Action Plans from states that violate the procedures for redeterminations.
It is not clear if anyone has done anything wrong but the well-trod path is that disenrollment means loss of insurance coverage. Our data suggests that is not the case and that is supported by studies by the Assistant Secretary of Planning and Evaluation and the Congressional Budget Office.
However, the pressure on SecHHS is real and could interrupt the process. Not likely but also not zero.
Transitional Coverage for Emerging Technologies Finally. CMS released a “Notice with Comment Period” for a new reimbursement pathway for devices designated as Breakthrough Devices by the FDA. This policy replaces a Trump-era rule of the same intent. The administration is choosing to use a
Other Stuff.
Piling on. PhaRMA, together with the Global Colon Cancer Association and the National Infusion Center Association, filed its version of a challenge to the Inflation Reduction Act’s drug negotiation provisions. This lawsuit follows MRK’s initial challenge, another from the U.S. Chamber of Commerce and one from BMY.
At issue is the takings clause of the constitution which the plaintiffs claim is violated by the 95% excise tax imposed on any manufacturer that is unable to reach agreement on price with HHS. Sen. Ron Wyden and Rep. Frank Pallone, Chairman and Ranking Member of the Committees of Jurisdiction were quick with a response.
The plethora of cases is by design. A difference of opinion among appellate courts will smooth the way to the Supreme Court.
They may not win but they are sure to slow things down. We tend to favor winning.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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