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Takeaway: Tough decisions to be made on early allocations while Governors leverage limits for political gain; meanwhile Dept of Energy steps in

Editor's Note: This is a complimentary research note published by Healthcare Policy analyst Emily Evans. CLICK HERE to get COVID-19 analysis and alerts from our research team and access our related webcasts

Vaccine Wars Take on New Meaning | Politics, Policy & Power - 11 30 2020 10 10 08 AM

Politics

We cannot credit President Trump for the demise the state-federal relationship known as cooperative federalism. That honor probably goes to President Barack Obama. We can say that President Trump gets credit for a few shovelfuls of dirt on the coffin.

The role of the federal government as a sometimes abusive sugar daddy to the states - offering loads of money in exchange for certain policies and behaviors preferred by Congress and/or the White House - began benignly with the Great Society programs of President Lyndon B. Johnson. For almost 50 years, most states accepted the carrot and stick approach to funding things like Medicaid, education, public safety and transportation.

In 1984, for example, Congress passed a minimum drinking age law. States that did not comply would pay a penalty in the form of a 10% reduction in federal highway funding. Louisiana did the math and quickly determined it had more alcohol tax revenues than highway dollars and left the 18 year old limit in place until 1987. Louisiana notwithstanding, the dynamic gave governors a pass on many tough decisions as they shifted blame to the overlords in Washington. It also kept governors in their place, hesitant to openly criticize the people with the biggest checkbook.

However, when President Obama tried the same approach with the expansion of Medicaid in the Affordable Care Act, the Supreme Court shot it down. The Supremes concluded that witholding all Medicaid federal matching money from states that did not expand eligibility amounted to putting a gun to their head.

The non-choice choice became voluntary and today 12 states still have not opted in. Somewhat incongruently, President Obama's Justice Department was supportive of policies that allowed state level deregulation of cannabis to flourish, contrary to federal law.

Throughout the COVID-19 outbreak, the White House has placed a good deal of the burden on states for developing systems to test, treat and diagnose patients. Each state, after all, has a pandemic response plan. Similarly, the federal government has asked each state to develop a COVID-19 vaccination plan, supported by existing immunization infrastructure. This new dynamic has and will continue to put the burden on governors to take responsibility for the COVID-19 battle within their state borders.

The new responsibility offers all sorts of political opportuntities for White House aspirants. As we have noted, Governors Cuomo of New York and Newsom of California have installed independent vaccine review committees. The Governors have promised these independent groups' review of the FDA's decision will not delay delivery of a vaccine. The states' involvement will merely assure constituents worried President Trump is out at FDA headquarters taking a red pen to vaccine Emergency Use Authorizations - or something. Fortunately, even Chelsea Clinton is "aghast" at the idea.

Over the last week Cuomo has doubled down on vaccine politics with complaints that the federal distribution plan is not equitable, ignoring traditionally underserved communities. Forget if you can that the plan is New York's plan submitted to the CDC at the end of October.

It generally follows the list of priorities and target populations articulated by the CDC's Advisory Committee on Immunization Procedures. It also relies on the existing infrastructure  of health clinics, pharmacies and other providers for administration of the vaccine. In short, it is pretty comprehensive and follows the contours of many other state plans as well as the CDC's current recommendations.

No matter how faux a controversy may be, it serves an important political purpose. The machinery of discord so well-oiled during the Trump administration will need new material. With more Americans able to name the governors of California and New York like never before, both Newsom and Cuomo are in ideal positions to continue exploiting the blame game with Washington.

After all, 2024 is just around the corner.

Vaccine Wars Take on New Meaning | Politics, Policy & Power - 20201129P3

Policy

On Tuesday the CDC's Advisory Committee on Immunization Procedures will meet for a vote on their non-binding recommendation for allocation of resources for Phase 1a of the distribution and administration of COVID-19 vaccinations.

Based on the meeting discussion on Nov. 23, there appears to be broad agreement that the 20 million U.S. health care workers should be immunized in the first wave.

There is less consensus about the immunization of residents of long-term care facilities which are also slotted for Phase 1a. COVID-19 deaths associated with LTCF have been quite high, a reflection of the disease's destructive effects on the elderly. The debate at the Nov. 23 meeting turned on concerns that, due to the age and fragility of long-term care facility residents, an untimely death may be improperly attributed to an immunization program. In normal times, such public perception might be overcome with solid outreach and education. In COVID times, with the fear industry running so wide open it seems poised to be assigned its own NAIC code, that result is less certain. 

Panelists have also raised equity issues. There are concerns that those that most need to go to work, and in many cases, have to go to work, will remain at risk for infection and disease.

Essential workers ex-health care, which include people employed in the transportation, education, food and agriculture and public safety industries, are slated to be immunized in the second wave of Phase 1 - probably around the first of the year. Workers in these industries also tend to be racially and ethinically more diverse relative to the economy as a whole. They are also younger and have not suffered the mortality COVID-19 visited on older cohorts.

There is an efficiency argument to be made in support of putting long-term care facility residents in the first immunization group. The workers at these facilities are certain to be immunized in Phase 1a. Proponents of extending the program to residents suggest it will be easier logistically. Moving from immunizing people around an institution, like a hospital or a nursing facility, to industry types is going to take a bit more organization. States are currently enrolling vaccination program providers but are focused primarily on health care workers in the initial phase as demonstrated by state plans submitted to the CDC.

At its core, the debate is going about the costs and benefits of extending life for a few versus a return to normal economic life for many. Never an easy choice.

Power  

In our quest to fully appreciate just how significant the American health care system will be transformed by COVID-19, we have spent a good bit of time looking at contracts and grants from the four pandemic relief bills.

That portion of the federal Treasury being disgorged and not otherwise occupied with direct relief to the unemployed and small businesses is flooding into health care.

Of course, a large chunk of that has gone to provider relief. Not terribly surprising too that several billion will land at NIH. What you may find interesting, at least we did, is that almost $100 billion represents contracts let by the Department of Energy.

The Department of Energy has a long history of dramatic innovation done under the deep cover of national security secrecy. The department owns and contracts operation of laboratories at research universities like Stanford and the University of California. It also operates national laboratories like Oak Ridge, home to the Manhattan Project during World War II.

We will be diving into this more as part of a year-end examination of the near cornucopia of themes that will fall out of the combined effects of COVID-19, deregulation and economic circumstances (contact sales@hedgeye.com if you need more information) but the DOE's involvement should tell you several things. First, the science necessary to support pandemic response is a national security issue. Second, the effort to develop diagnostics, therapies and vaccinations to respond to pandemic is a multi-year, generational effort. Third, while not abandoning global committments, the U.S. has moved national interests ahead of global health.

If history is any guide - the U.S.'s manufacturing mobilization during World War II, the space program - we could be standing at the edge of a new American century, led by unprecedented scientific discovery and innovation.

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We hope you and yours had a wonderful holiday, current circumstances allowing. Here at Hedgeye, we are grateful for your support, feedback and engagement all year long but these times of quiet reflection remind us to tell you so.