TOP OF THE FUNNEL, Earnings, Macro
UNH. Most of the focus was on the Change Healthcare cyberattack. That is going to get worked out but probably not well for the 8M people whose medical history is now on the dark web.
The company admits the picture is obscured by the immobilization of Change but what we think happened is that benefit trend reset higher in 2Q 2023 and continues its march upward. As we have noted, and we think HUM will have more to say about this, higher utilization trends appear to be concentrated in Medicare.
UNH reported gains in commercially insured, mainly through the ACA exchange. Like Medicaid, the premium/benefit dynamics are not consist with the historical pattern because of federal subsidies that put upward pressure on premiums and those can limit MLR growth.
ELV. In the case of ELV, a lot of attention was diverted to the recently announced partnership with Private Equity firm, Clayton, Dubilier and Rice. We agree, it is intriguing and probably a better route, politically, than through affiliation and acquisition a la UNH.
ELV’s earnings call always sound annoying like group therapy sessions but between the believing and expecting, it appears that they consider the 1Q utilization on trend.
CONGRESS.
Lame Duck. CVS (-), UNH (-), CI (-) TDOC (+) It is early, I know. At the end of next month Election 2024 ramps. That means even less than the usual will be accomplished during a Washington summer.
So, we set our sights on the lame duck session that will begin in November. There are a host of extenders and add-ons that must be approved. More interesting is Sen. John Thune’s claim that the lame duck session could include a doc fix that addresses problems with MACRA; PBM reform and an extension of telehealth flexibilities. Reforms to the 340B program are also in the mix.
Color me skeptical but I will concede that addressing physicians payments probably tops the list with telehealth coming in second followed by PBM reform.
Site Neutral Policies. UNH (+), ELV (+) Speaking of Lame Duck, at a hearing this week Rep. Michael Burgess suggested the site neutral policies for things like drug administration might be the solution to the physicians pay reform.
The currently contemplated site neutral policy that has received from bipartisan support is for drug administration. Physicians are paid less than hospitals. Equalizing those payments would benefit physicians practices while reducing revenue at hospitals.
It could help solve a big problem but not everyone will be happy.
Improper Payments. Remember those? The Energy and Commerce Committee is looking into ways in which CMS can curb improper payments in Medicare and Medicaid. Approaches include empowering state auditors to review Medicaid claims and deploying automated tools including AI powered ones.
Unfortunately for Congress, curbing fraud, waste and abuse is an executive function and the best Energy and Commerce can do is shame CMS into compliance. Perhaps, though, this time will be different.
WHITE HOUSE.
MA Reforms. UNH (-), ELV (-), HUM (-) CMS Administrator Chaquita Brooks-LaSure suggested this week that CMS planned to peer more deeply into use of Prior Authorization. As we have noted this way is primarily being fought over inpatient hospitalization where wage rates have driven capacity limitations for the lowest reimbursement, which now appears to be Medicare.
OTHER STUFF.
LLY lost a court fight over compounding of its GLP-1 drugs in Florida. LLY sued because it claimed the compounded drugs had not been properly tested and could violate the Food, Drug and Cosmetic Act.
The case was dismissed.
The FDA permits compounding of drugs in shortage which is the case for GLP-1 drugs. LLY and NVO can make more of their drugs and thus limit compounding but that might affect price, certainly in the cash pay market. Expanding production is especially fraught with payers quite hesitant to open the checkbook.
It is a pickle.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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