Note: Dose will not publish next week due to the Thanksgiving holiday.
Top of the Funnel: Macro + Earnings
CPI. It was quite the drama on Tuesday when the CPI came in a bit under estimates due mostly to a change in methodology for calculating inflation for health insurance. Normally such a change would not matter because CPI for all health care lines have small weights. In this case, the BLS’s change in process cut the CPI for health insurance by 34%. Such a large move affected the headline number.
While we are here and for future reference, CPI for health insurance is calculated indirectly. That means, the BLS separates out of consumer premiums paid an estimate of benefit expense and then extrapolates, using retained earnings data, an inflation number they associate with the provision of health insurance (e.g., administration, legal, contract negotiations, etc.).
It is pretty unreliable and we have made that point repeatedly but for a brief moment it was, at least, interesting.
PPI. Produced inputs inflated markedly in health care as payment policies started to catch up. PPI for General Medical & Surgical Hospitals accelerated sequentially from 2.68% YoY to 3.39%. The health care components of PPI are not enough to move the topline number, but October’s print will be followed by another acceleration in January as other non-hospital related payment policies go into effect.
If prices in other sectors of the economy continue to erode, health care inflation as measured by CPI and PPI could affect the headline. Additionally, health care has a larger weight in Personal Consumption Expenditures. In other words, the inflation that every other part of the economy has experienced still needs to wash through health care.
Earnings Recap. On Wednesday, I reviewed some of the more salient topics on 3Q earnings including Medicaid redeterminations. Link here.
CONGRESS.
House. Unable to agree on funding for Health and Human Services, among other problems, the House passed a short-term Continuing Resolution and left town. The HHS appropriations is, not surprisingly, a battel ground. The underlying bill contains limits and prohibitions on things like funding labs in Russia or China, vaccine and mask mandates, flat and reduced funding for the Centers for Disease Control and the National Institutes of Health.
Amendments offered were took things to another level with efforts to reduce SecHHS Xavier Becerra’s salary to 1,
Probably best if everyone takes a break.
PBM Reform. Lest you think the People’s House (whose people is a very debatable point at this moment) is incapable of producing results, the Health Subcommittee of House Energy and Commerce reported to the full committee a slate of reforms for Pharmacy Benefit Managers.
I suspect these changes come too late as the industry has already moved to protect their business while meeting new regulatory demands. The relevant provisions:
- Limit PBM income to fixed dollar fees for services provided
- Establish standardized performance measures in Part D
- Allow health plans to change the formulary status of a biological if the plan sponsor adds the relevant biosimilar to a same or higher tier.
There is some overlap of these provisions with work that is proceeding on the Senate side. The vote was unanimous which augers well for ultimate passage.
Remote Monitoring. More controversial is a bill that MA plans to cover medical devices and technologies that are not under a benefit category or for uses not indicated by a coverage determination. Ranking member, Frank Pallone was no pleased suggesting it was a pander to the device industry. The future of this policy is uncertain, then, but an interesting move, nonetheless.
Breakthrough Devices. The Energy and Commerce Health subcommittee also reported out a fix for the Breakthrough Device Coverage brouhaha.
The backstory is that the Trump administration has implemented a rule that would provide assurance of five years of Medicare coverage for any device classified as “breakthrough” by the Food and Drug Administration. During the coverage period the manufacturer was expected to develop evidence for a formal coverage determination.
The Biden administration subsequently withdrew the final rule. In response to a good deal of bipartisan dismay, CMS promised its own version of a policy designed to close the persistent gap between FDA clearance and Medicare coverage. What was ultimately finalized was very similar to the Trump-era policy except it limited coverage to five devices a year.
The bill reported out would return policy to the Trump-era which, as you might guess, was not warmly received by the minority party. The future for this one also looks a little sketchy, for that reason.
WHITE HOUSE.
Nursing Home Ownership. CMS finalized a rule requiring nursing home operators to disclose details on ownership. CMS cannot regulate private equity owned nursing facilities any differently than it does non-profits. The rule would appear to be designed to better highlight the care quality differences among different ownership types. This scrutiny may, in town, discourage investors.
Have a great weekend.
