Politics. The SARS-CoV-2 virus is taking aim at its next political victim. Success of President Biden’s American Rescue Plan rests in part on a continuation of the pandemic crisis at levels necessary to justify not just the $1.9T cost but the permanent policy changes like a $15 minimum wage and increases in child care tax credit.
Unfortunately for the White House, the virus appears uninterested in cooperating with this agenda.
While the White House and surrogates continue to emphasize the crisis and failed vaccine deployment, the data is telling a different story. Confirmed positive tests have been falling since Jan. 11. Vaccine administration, despite the daunting logistical demands of cold storage and a two-shot regime, continues to accelerate.
Even if the White House is inclined to ignore the data along with others sympathetic to the plan, Mayors and Governors across the U.S. that shuttered their economies find that approach untenable, politically. Comparisons between the economies of states that adopted aggressive restrictions and those that used a lighter hand, are already raising uncomfortable questions in Sacramento and Albany.
Unlike late summer, these Mayors and Governors are taking the opening offered by declining cases and hospitalization and demanding in-person learning from their school districts. Bars are having hours extended. Restaurants are reopening or extending their capacity. Some post-COVID version of normalcy is returning in states like Illinois, New York, and California.
The pace at which the outbreak is receding, and vaccinations are accelerating leaves the White House in a difficult position. They can “go big or go fast” as Chris Jacobs put it in our talk Wednesday. Going fast requires bipartisan support which means a lower price tag. Going big can, at least in theory, be accomplished using reconciliation but that is a multistep process that can take several weeks.
As the legislative process grinds on, the virus recedes and the urgency, at least among moderates like Sen. Joe Manchin and Sen. Angus King may go with it. What is ultimately agreed to, however, is likely to include more money - around $150-$200 billion for health care for testing, genetic surveillance, diagnostics, therapeutics and vaccine distirbution.
Policy. Health care delivery in America is often – I would argue mostly – an unpleasant experience. We come by it honestly. The roots of the American health care system can be found in the U.S. military, an institution not known for its food or a highly rated employee experience.
Until the draft ended in 1973, physicians from all specialties and socio-economic backgrounds had some service, and often, training in the U.S. Armed Forces. President, and former general, Dwight Eisenhower, facing the specter of more war, promoted the construction of hundreds of hospitals under the Truman-era Hill-Burton Act.
The comfortable association of health care and combat readiness is an easy one as both are dedicated to matters of life and death. For good reason, then, the training of residents and interns, until recently, had all the physical and emotional demands of Navy SEAL training. Customers, or patients, are all expected to line up, await the calling of their name, then given instructions not designed to be questioned.
Today, military service is no longer the national shared experience it once was, making the vestiges of it that the live on in the health care system irrational and unacceptable to an increasingly large share of Americans.
Over the last few weeks, we have examined the Direct Contracting models, the Centers for Medicare and Medicaid launched late last year and are further advancing through the recently announced Geo model. (Tune in Feb. 17 at 10 a.m. ET for a deep dive into how they work.) Direct Contracting is a mechanism whereby a physicians’ practice, a clinic, a large employer and yes, an insurer, can receive a monthly payment from the federal government in return for assuming responsibility for a patient’s complete cost of care. These “Direct Contracting Entities” assume all or part of the risk that the care will cost more than the monthly payments. Risk corridors and stop-loss mechanisms apply.
To put it simply, the federal government has enabled more competition for traditional insurers by providing the vehicle for them to assume risk and manage care.
The advantage these nontraditional participants have is that their economic interests are aligned with that of their patients. A physician’s practice is not going to thrive if he cannot keep his patients healthy and happy. A health insurer, with its third-party payer status, has less accountability. Out of that alignment and the new competitive dynamic falls, if the recent market entrants are any indication, a health care experience that is pleasant, even highly valued.
$OSH and the soon-to-be-SPAC’s Cano place primary care at the center of the care paradigm with beautifully appointed offices and virtual tools. Both companies boast Net Promoter Scores of 90, a rarity in health care.
The idea, while promoted by the federal government, is not confined to Medicare beneficiaries. Tom Tobin’s best idea long, $ONEM does not use the Direct Contracting risk model but still aims to deliver a pleasant experience to “delight” the consumer, according to their S-1. Now armed with an insurance company, it will prove to be a very short walk from $WMT’s Health Clinics to direct contracting for its employees and customers.
Unrecognizable to General Eisenhower but probable a positive development for both cost and quality of health care.
Power. It is hard to believe there will be no political consequences for many of the state and local decisions made in response to the COVID-19 outbreak. The high degree of variability between states, and often the cities in them, of what is open, when and how; the limited correlation between those restrictions and disease spread; the bumpy vaccine roll-out; and the commensurate economic consequences all provide amble opportunity for the politically ambitious to get out the long knives.
Governor Gavin Newsom appears to be first in line for some retribution from his constituents. A foundering recall effort got new life in December and has now collected 1/3 of the signatures necessary with still six weeks before the Secretary of State’s deadline.
Recalls are rarely successful but even a credible attempt at one is considered a political humiliation and tend to modify behavior almost immediately. Last week, Newsom abruptly lifted ‘stay-at-home” orders and started pressuring school district to reopen to in-person learning.
His administration has artfully kept out of public hands that data on which he relied in making this decision, suggesting perhaps political survival is now his top priority.
Call with questions.
Emily Evans
Managing Director – Health Policy
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