A federal appeals court has reinstated in 26 states a Biden administration vaccination mandate for health workers at hospitals that receive federal funding.
A three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans ruled(PDF) that a lower court had the authority to block the mandate in only the 14 states that had sued and was wrong to impose a nationwide injunction.
It marks a modest win for the Biden administration’s pandemic strategy following a series of legal setbacks to the health worker vaccine mandate. Numerous lawsuits have been filed seeking to block vaccine mandates issued by governments and businesses as public health measures amid a pandemic that has killed more than 800,000 Americans.
The Centers for Medicare & Medicaid Services (CMS) announced in early November that it would be requiring applicable healthcare facilities to have a policy in place ensuring that eligible staff receive their first dose of a COVID-19 vaccine series by Dec. 5 and to have completed their series by Jan. 4, 2022. Failure to comply with the requirement, which covers 17 million healthcare workers, would place an organization’s Medicare funding in jeopardy.
But the mandate was blocked before the deadline and remains temporarily blocked in 24 states: the 14 states involved in the case reviewed by the New Orleans appeals court and 10 states where the mandate was blocked by a Nov. 29 ruling from a federal judge in St. Louis.
The 14 states that sued are Alabama, Arizona, Georgia, Idaho, Indiana, Kentucky, Louisiana, Mississippi, Montana, Ohio, Oklahoma, South Carolina, Utah and West Virginia.
In the lawsuits, states argued that CMS exceeded its authority with the rule and did not have good cause to forego the required notice and comment period. States that sued the Biden administration over the vaccine mandate also cited the ongoing workforce shortages affecting healthcare providers in their states.
In explaining its ruling, the 5th Circuit noted that the Louisiana-based federal judge had given “little justification for issuing an injunction outside the 14 states that brought this suit.”
As it stands, the vaccine requirement for Medicare and Medicaid providers is blocked by courts in about half of U.S. states but not in the other half, creating the potential for patchwork enforcement across the country.
However, the administration’s broader requirements have so far faced stiff competition from courts as well as right-leaning lawmakers and governors alike.
The Supreme Court this week also blocked a challenge to New York’s requirement that healthcare workers be vaccinated against COVID-19 even when they cite religious objections.
America was not prepared for COVID-19 when it arrived. It was not prepared for last winter’s surge. It was not prepared for Delta’s arrival in the summer or its current winter assault. More than 1,000 Americans are still dying of COVID every day, and more have died this year than last. Hospitalizations are rising in 42 states. The University of Nebraska Medical Center in Omaha, which entered the pandemic as arguably the best-prepared hospital in the country, recently went from 70 COVID patients to 110 in four days, leaving its staff “grasping for resolve,” the virologist John Lowe told me. And now comes Omicron.
Will the new and rapidly spreading variant overwhelm the U.S. health-care system? The question is moot because the system is already overwhelmed, in a way that is affecting all patients, COVID or otherwise. “The level of care that we’ve come to expect in our hospitals no longer exists,” Lowe said.
The real unknown is what an Omicron cross will do when it follows a Delta hook. Given what scientists have learned in the three weeks since Omicron’s discovery, “some of the absolute worst-case scenarios that were possible when we saw its genome are off the table, but so are some of the most hopeful scenarios,” Dylan Morris, an evolutionary biologist at UCLA, told me. In any case, America is not prepared for Omicron. The variant’s threat is far greater at the societal level than at the personal one, and policy makers have already cut themselves off from the tools needed to protect the populations they serve. Like the variants that preceded it, Omicron requires individuals to think and act for the collective good—which is to say, it poses a heightened version of the same challenge that the U.S. has failed for two straight years, in bipartisan fashion.
The coronavirus is a microscopic ball studded with specially shaped spikes that it uses to recognize and infect our cells. Antibodies can thwart such infections by glomming onto the spikes, like gum messing up a key. But Omicron has a crucial advantage: 30-plus mutations that change the shape of its spike and disable many antibodies that would have stuck to other variants. One early study suggests that antibodies in vaccinated people are about 40 times worse at neutralizing Omicron than the original virus, and the experts I talked with expect that, as more data arrive, that number will stay in the same range. The implications of that decline are still uncertain, but three simple principles should likely hold.
First, the bad news: In terms of catching the virus, everyone should assume that they are less protected than they were two months ago. As a crude shorthand, assume that Omicron negates one previous immunizing event—either an infection or a vaccine dose. Someone who considered themselves fully vaccinated in September would be just partially vaccinated now (and the official definition may change imminently). But someone who’s been boosted has the same ballpark level of protection against Omicron infection as a vaccinated-but-unboosted person did against Delta. The extra dose not only raises a recipient’s level of antibodies but also broadens their range, giving them better odds of recognizing the shape of even Omicron’s altered spike.In a small British study, a booster effectively doubled the level of protection that two Pfizer doses provided against Omicron infection.
Second, some worse news: Boosting isn’t a foolproof shield against Omicron. In South Africa, the variant managed to infect a cluster of seven people who were all boosted. And according to a CDC report, boosted Americans made up a third of the first known Omicron cases in the U.S. “People who thought that they wouldn’t have to worry about infection this winter if they had their booster do still have to worry about infection with Omicron,” Trevor Bedford, a virologist at Fred Hutchinson Cancer Research Center, told me. “I’ve been going to restaurants and movies, and now with Omicron, that will change.”
Third, some better news: Even if Omicron has an easier time infecting vaccinated individuals, it should still have more trouble causing severe disease. The vaccines were always intended to disconnect infection from dangerous illness, turning a life-threatening event into something closer to a cold. Whether they’ll fulfill that promise for Omicron is a major uncertainty, but we can reasonably expect that they will. The variant might sneak past the initial antibody blockade, but slower-acting branches of the immune system (such as T cells) should eventually mobilize to clear it before it wreaks too much havoc.
To see how these principles play out in practice, Dylan Morris suggests watching highly boosted places, such as Israel, and countries where severe epidemics and successful vaccination campaigns have given people layers of immunity, such as Brazil and Chile. In the meantime, it’s reasonable to treat Omicron as a setback but not a catastrophe for most vaccinated people. It will evade some of our hard-won immune defenses, without obliterating them entirely. “It was better than I expected, given the mutational profile,” Alex Sigal of the Africa Health Research Institute, who led the South African antibody study, told me. “It’s not going to be a common cold, but neither do I think it will be a tremendous monster.”
That’s for individuals, though. At a societal level, the outlook is bleaker.
Omicron’s main threat is its shocking speed, as my colleague Sarah Zhang has reported. In South Africa, every infected person has been passing the virus on to 3–3.5 other people—at least twice the pace at which Delta spread in the summer. Similarly, British data suggest that Omicron is twice as good at spreading within households as Delta. That might be because the new variant is inherently more transmissible than its predecessors, or because it is specifically better at moving through vaccinated populations. Either way, it has already overtaken Delta as the dominant variant in South Africa. Soon, it will likely do the same in Scotland and Denmark. Even the U.S., which has much poorer genomic surveillance than those other countries, has detected Omicron in 35 states. “I think that a large Omicron wave is baked in,” Bedford told me. “That’s going to happen.”
More positively, Omicron cases have thus far been relatively mild. This pattern has fueled the widespread claim that the variant might be less severe, or even that its rapid spread could be a welcome development. “People are saying ‘Let it rip’ and ‘It’ll help us build more immunity,’ that this is the exit wave and everything’s going to be fine and rosy after,” Richard Lessells, an infectious-disease physician at the University of KwaZulu-Natal, in South Africa, told me. “I have no confidence in that.”
To begin with, as he and others told me, that argument overlooks a key dynamic: Omicron might not actually be intrinsically milder. In South Africa and the United Kingdom, it has mostly infected younger people, whose bouts of COVID-19 tend to be less severe. And in places with lots of prior immunity, it might have caused few hospitalizations or deaths simply because it has mostly infected hosts with some protection, as Natalie Dean, a biostatistician at Emory University, explained in a Twitter thread. That pattern could change once it reaches more vulnerable communities. (The widespread notion that viruses naturally evolve to become less virulent is mistaken, as the virologist Andrew Pekosz of Johns Hopkins University clarified in The New York Times.) Also, deaths and hospitalizations are not the only fates that matter. Supposedly “mild” bouts of COVID-19 have led to cases of long COVID, in which people struggle with debilitating symptoms for months (or even years), while struggling to get care or disability benefits.
And even if Omicron is milder, greater transmissibility will likely trump that reduced virulence. Omicron is spreading so quickly that a small proportion of severe cases could still flood hospitals. To avert that scenario, the variant would need to be substantially milder than Delta—especially because hospitals are already at a breaking point. Two years of trauma have pushed droves of health-care workers, including many of the most experienced and committed, to quit their job. The remaining staff is ever more exhausted and demoralized, and “exceptionally high numbers” can’t work because they got breakthrough Delta infections and had to be separated from vulnerable patients, John Lowe told me. This pattern will only worsen as Omicron spreads, if the large clusters among South African health-care workers are any indication. “In the West, we’ve painted ourselves into a corner because most countries have huge Delta waves and most of them are stretched to the limit of their health-care systems,” Emma Hodcroft, an epidemiologist at the University of Bern, in Switzerland, told me. “What happens if those waves get even bigger with Omicron?”
The Omicron wave won’t completely topple America’s wall of immunity but will seep into its many cracks and weaknesses. It will find the 39 percent of Americans who are still not fully vaccinated (including 28 percent of adults and 13 percent of over-65s). It will find other biologically vulnerable people, including elderly and immunocompromised individuals whose immune systems weren’t sufficiently girded by the vaccines. It will find the socially vulnerable people who face repeated exposures, either because their “essential” jobs leave them with no choice or because they live in epidemic-prone settings, such as prisons and nursing homes. Omicron is poised to speedily recap all the inequities that the U.S. has experienced in the pandemic thus far.
Here, then, is the problem: People who are unlikely to be hospitalized by Omicron might still feel reasonably protected, but they can spread the virus to those who are more vulnerable, quickly enough to seriously batter an already collapsing health-care system that will then struggle to care for anyone—vaccinated, boosted, or otherwise. The collective threat is substantially greater than the individual one. And the U.S. is ill-poised to meet it.
America’s policy choices have left it with few tangible options for averting an Omicron wave. Boosters can still offer decent protection against infection, but just 17 percent of Americans have had those shots. Many are now struggling to make appointments, and people from rural, low-income, and minority communities will likely experience the greatest delays, “mirroring the inequities we saw with the first two shots,” Arrianna Marie Planey, a medical geographer at the University of North Carolina at Chapel Hill, told me. With a little time, the mRNA vaccines from Pfizer and Moderna could be updated, but “my suspicion is that once we have an Omicron-specific booster, the wave will be past,” Trevor Bedford, the virologist, said.
Two antiviral drugs now exist that could effectively keep people out of the hospital, but neither has been authorized and both are expensive. Both must also be administered within five days of the first symptoms, which means that people need to realize they’re sick and swiftly confirm as much with a test. But instead of distributing rapid tests en masse, the Biden administration opted to merely make them reimbursable through health insurance. “That doesn’t address the need where it is greatest,” Planey told me. Low-wage workers, who face high risk of infection, “are the least able to afford tests up front and the least likely to have insurance,” she said. And testing, rapid or otherwise, is about to get harder, as Omicron’s global spread strains both the supply of reagents and the capacity of laboratories.
Omicron may also be especially difficult to catch before it spreads to others, because its incubation period—the window between infection and symptoms—seems to be very short. At an Oslo Christmas party, almost three-quarters of attendees were infected even though all reported a negative test result one to three days before. That will make Omicron “harder to contain,” Lowe told me. “It’s really going to put a lot of pressure on the prevention measures that are still in place—or rather, the complete lack of prevention that’s still in place.”
The various measures that controlled the spread of other variants—masks, better ventilation, contact tracing, quarantine, and restrictions on gatherings—should all theoretically work for Omicron too. But the U.S. has either failed to invest in these tools or has actively made it harder to use them. Republican legislators in at least 26 states have passed laws that curtail the very possibility of quarantines and mask mandates. In September, Alexandra Phelan of Georgetown University told me that when the next variant comes, such measures could create “the worst of all worlds” by “removing emergency actions, without the preventive care that would allow people to protect their own health.” Omicron will test her prediction in the coming weeks.
The longer-term future is uncertain. After Delta’s emergence, it became clear that the coronavirus was too transmissible to fully eradicate. Omicron could potentially shunt us more quickly toward a different endgame—endemicity, the point when humanity has gained enough immunity to hold the virus in a tenuous stalemate—albeit at significant cost. But more complicated futures are also plausible. For example, if Omicron and Delta are so different that each can escape the immunity that the other induces, the two variants could co-circulate. (That’s what happened with the viruses behind polio and influenza B.)
Omicron also reminds us that more variants can still arise—and stranger ones than we might expect. Most scientists I talked with figured the next one to emerge would be a descendant of Delta, featuring a few more mutational bells and whistles. Omicron, however, is “dramatically different,” Shane Crotty, from the La Jolla Institute for Immunology, told me. “It showed a lot more evolutionary potential than I or others had hoped for.” It evolved not from Delta but from older lineages of SARS-CoV-2, and seems to have acquired its smorgasbord of mutations in some hidden setting: perhaps a part of the world that does very little sequencing, or an animal species that was infected by humans and then transmitted the virus back to us, or the body of an immunocompromised patient who was chronically infected with the virus. All of these options are possible, but the people I spoke with felt that the third—the chronically ill patient—was most likely. And if that’s the case, with millions of immunocompromised people in the U.S. alone, many of whom feel overlooked in the vaccine era, will more weird variants keep arising? Omicron “doesn’t look like the end of it,” Crotty told me. One cause for concern: For all the mutations in Omicron’s spike, it actually has fewer mutations in the rest of its proteins than Delta did. The virus might still have many new forms to take.
Vaccinating the world can curtail those possibilities, and is now an even greater matter of moral urgency, given Omicron’s speed. And yet, people in rich countries are getting their booster six times faster than those in low-income countries are getting their first shot. Unless the former seriously commits to vaccinating the world—not just donating doses, but allowing other countries to manufacture and disseminate their own supplies—“it’s going to be a very expensive wild-goose chase until the next variant,” Planey said.
Vaccines can’t be the only strategy, either. The rest of the pandemic playbook remains unchanged and necessary: paid sick leave and other policies that protect essential workers, better masks, improved ventilation, rapid tests, places where sick people can easily isolate, social distancing, a stronger public-health system, and ways of retaining the frayed health-care workforce. The U.S. has consistently dropped the ball on many of these, betting that vaccines alone could get us out of the pandemic. Rather than trying to beat the coronavirus one booster at a time, the country needs to do what it has always needed to do—build systems and enact policies that protect the health of entire communities, especially the most vulnerable ones.
Earlier this week, the American Hospital Association (AHA) made its case before the US Supreme Court, in opposition to Medicare reimbursement cuts to hospitals that participate in the 340B Drug Pricing Program. The program allows hospitals that serve low-income patients to purchase outpatient drugs at a discount.
In the graphic above, we look at what’s at stake for hospitals in the case. Beginning in 2018, Medicare cut reimbursement for 340B-eligible drugs purchased by most hospitals by 28.5 percentage points, amounting to roughly $1.6B annually—which was a significant hit to hospitals’ 340B revenue. As we recently discussed, that revenue has become essential for many hospitals’ financial sustainability. However, the true impact on hospital bottom lines is more nuanced, as the savings from 340B rate cuts are being redistributed to all hospitals that participate in the Outpatient Prospective Payment System (OPPS), regardless of their 340B status, via a 3.2 percent payment bump for non-drug Part B services.While the cut negatively impacts those with large 340B programs—generally larger hospitals located in urban areas—the resulting redistribution actually provides a net benefit to about four in five hospitals.
Although 340B program revenues are at stake, the broader legal question before the Court centers on the level of authority federal agencies like the Centers for Medicare & Medicaid Services (CMS) have to create regulations to interpret ambiguous laws. (If the justices rule against CMS, it will overturn a key legal doctrine known as the Chevron Defense, which compels courts to defer to an agency’s interpretation of unclear statutes.)
A ruling isn’t expected until next spring, but regardless of the outcome, the 340B program faces other threats, chiefly from several lawsuits involving large pharmaceutical manufacturers’ moves to restrict discounted product sales to contract pharmacies. Undoubtedly, the ongoing scrutiny of the 340B program will continue to raise questions about whether there are better ways to subsidize the operations of hospitals serving low-income patients and ensure that underserved patients have access to lifesaving treatments.
How much should we pay for drugs? That’s the question at the center of American Hospital Association v. Becerra, a sleeper of a case involving billions of dollars in federal spending and a chance to reshape two doctrines at the heart of administrative law.
Drugs, money, and the law: Sounds sexy, right? Still, you could be forgiven for never having heard of the case, which will be argued on Tuesday. It arises out of a technical dispute over how Medicare, the federal program that insures 63 million elderly and disabled people, pays for some of the drugs that hospitals dispense to patients in outpatient departments — in particular, chemotherapy drugs and other expensive anti-cancer medications.
The case centers on part of a 2003 law that gives Medicare two options for how to pay for those drugs. Under the first option, Medicare would survey hospitals about what it cost them to acquire the drugs. Medicare would then draw on the survey data and reimburse hospitals for their “average acquisition costs,” subject to variations for different types of hospitals. It’s a rough-cut way to make hospitals whole without requiring them to submit receipts for every drug purchase.
But Medicare immediately encountered a problem: It just wasn’t practical to survey hospitals about their acquisition costs. Fortunately, the law anticipated that possibility and gave Medicare a second option. In the absence of survey data, Medicare could pay the “average price” for the drug, “as calculated and adjusted by the Secretary [of Health and Human Services] as necessary for purposes of this [option].”
This approach turned out to be costly. A drug’s “average price” is fixed elsewhere in the Medicare statute, typically at 106% of the drug’s sale price. As a policy matter, this “average sales price plus 6%” approach is hard to defend. Because 6% of a large number is bigger than 6% of a small number, hospitals have an incentive to dispense more expensive drugs, even when there are cheaper and equally effective therapies.
Other developments soon made the payment policy look even more dubious. Back in 1992, Congress created something called the 340B program to support health-care providers that serve poor and disadvantaged communities. Eligible providers get steep discounts on the drugs that they purchase — anywhere between 20% and 50% of the normal price.
Initially, few hospitals qualified for the 340B program. Today, more than two-thirds of nonprofit hospitals participate. (For-profits are excluded from the program.) For years, Medicare kept paying those 340B hospitals 106% of the average sales price of their outpatient drugs. The upshot was that hospitals were buying highly discounted drugs and then charging the federal government full price. That heightened the incentive to prescribe very expensive medications — which is partly why Medicare spending on outpatient drugs has ballooned, growing an average of 8.1% per year from 2006 through 2017.
Federal regulators were troubled by the gap between hospital costs and Medicare payments. In their view, the point of the 2003 statute was to cover hospitals’ costs, not to subsidize 340B hospitals. That jibes with the Medicare statute more generally: Its “overriding purpose” is to provide “reasonable (not excessive or unwarranted) cost-based reimbursement.”
So Medicare adopted a rule that, starting in 2018, slashed the reimbursement rate for 340B hospitals’ outpatient drugs (or, more precisely, a subset of them) to 22.5% less than the average sales price. That was still generous, since on average the 340B discount is about one-third of a drug’s price. But it was much less generous than before, and Medicare estimated that the change would save taxpayers $1.6 billion every year.
The American Hospital Association, together with two hospital trade groups and three hospitals, filed suit. Had Medicare chosen option one, the plaintiffs argued, it could have focused on acquisition costs and even distinguished among hospital groups in setting payment rates. Instead, it chose option two, which says that Medicare must pay a drug’s “average price” — not its acquisition price — and doesn’t provide for discriminating between hospitals. While the plaintiffs acknowledged that Medicare could “adjust” the average price, they argued that a cut from 106% to 77.5% of the average sales price was not really an adjustment. It was a wholesale revision of the statutory scheme.
The plaintiffs encountered an obstacle right out of the gate. To prevent courts from second-guessing Medicare’s choices about how much to pay for outpatient care, the Medicare statute says that “[t]here shall be no administrative or judicial review” of those choices. In the government’s telling, Congress precluded review because Medicare has a fixed annual budget for outpatient care. Increasing payments for one type of care thus requires cutting payments for other types of care.
That linkage means that, if the plaintiffs win, it’s not just that they should have been paid more for certain drugs. It’s that all hospitals should have been paid less for other services. (That helps explains why coalitions representing rural and for-profit hospitals have filed amicus briefs in support of Medicare.) Unwinding that decision would be an administrative nightmare — which is why Congress precluded review in the first place.
As the plaintiffs see it, however, the government simply misreads the scope of the preclusion language. Though it generally precludes review of reimbursement decisions relating to outpatient care, it doesn’t cross-reference the subsection relating to outpatient drugs. Both the district court and the U.S. Court of Appeals for the District of Columbia Circuit agreed, invoking the strong presumption favoring judicial review of agency action.
On the merits, the plaintiffs fared less well. Though they won in the district court, the D.C. Circuit held that Medicare reasonably read the 2003 law to allow it to align hospital reimbursement with hospital acquisition costs. Medicare’s interpretation — and the scope of its authority to “adjust” payment rates — was thus owed deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, a 1984 decision holding that courts generally should defer to agencies’ reasonable interpretations of ambiguous statutes. Judge Cornelia Pillard dissented, arguing that the statute unambiguously foreclosed Medicare’s interpretation.
The plaintiffs asked the Supreme Court to review a single question: whether Medicare should receive Chevron deference for interpreting the 2003 law in the manner that it did. Tantalizingly, the plaintiffs noted that “[i]t is no secret that members of this Court have raised concerns about whether Chevron deference, particularly when applied as indiscriminately as it was in this case, violates the separation of powers.”
The Supreme Court bit. In its order granting certiorari, however, the court instructed the parties to brief an additional question: whether the Medicare statute precludes the lawsuit. What that means is that — in addition to resolving whether hospitals are entitled to billions of taxpayer dollars — the court will have the chance to address two foundational doctrines of administrative law: the presumption of reviewability and Chevron deference.
Arguably, AHA v. Becerraoffers an unusually vivid example of the costs of a strong presumption of reviewability. If the plaintiffs win, what’s the remedy? Is Medicare supposed to reopen every outpatient payment decision that it’s made since 2018, given that paying more for 340B drugs means it should have paid less for other services? The plaintiffs say no, arguing that Medicare wouldn’t be required to make any retroactive adjustments. But the government fears otherwise and the answer is not at all clear. Isn’t that the kind of mess that preclusion is meant to avoid?
I’ve called in my academic work for abandoning the presumption of reviewability precisely because it disrespects Congress’ reasonable desire to shield some administrative decisions from judicial review. In recent years, however, the Supreme Court has evinced no interest in doing so — the presumption of reviewability remains “strong.” We may soon find out just how strong it is.
But the big question about the case is whether the court will use it as a vehicle to reconsider Chevron deference. In the plaintiffs’ view, it is galling — “an affront to the separation of powers” — that the courts would defer when Medicare has exploited a purported ambiguity to sidestep Congress’ clear instructions about how much to pay hospitals. Several of the conservative justices, including in particular Justices Clarence Thomas and Neil Gorsuch, may be receptive to the argument. If so, the right wing of the court could use the case to narrow or even overturn Chevron, with potentially dramatic implications for the scope of executive-branch power.
Whether the court will do so is anyone’s guess. The justices could easily resolve the case on narrower grounds. Maybe the statute unambiguously forecloses Medicare’s interpretation of the law, as the plaintiffs argue. Or maybe, as the government claims, Medicare properly exercised its explicit authority to “adjust” prices for outpatient drugs.
Neither of those holdings would be the sexiest decision that the Supreme Court has ever issued. It would be technical, arcane — even boring. Given the financial stakes, however, it would be significant nonetheless.
The $1.7 trillion “social infrastructure” legislation passed by the House and now before the Senate would spur growth, expand employment and boost productivity with limited inflationary impact, according to Moody’s Investors Service.
The spending “would occur over 10 years, include significant revenue-raising offsets and would likely only start to flow into the economy later in 2022 at a time when inflationary pressures from disruptions to global supply chains and U.S. labor supply will likely have diminished,” Moody’s Vice President-Senior Analyst Rebecca Karnovitz said.
“Investments in childcare, education and workforce development have the potential to boost labor force participation and increase productivity over the medium and longer term,” she said. While the Senate will likely insist on amendments, the Build Back Better (BBB) bill currently would invest $555 billion in clean energy and “climate resilience” and $585 billion in childcare, universal prekindergarten and paid family leave.
Dive Insight:
CFOs concerned about rising prices and the risk of a wage-price spiral have found sympathy from some lawmakers who warn that the $5.7 trillion in spending Congress has already approved during the pandemic will further stoke inflation.
“Inflation is hammering working families across America,” Senate Minority Leader Mitch McConnell told the chamber last week. The Kentucky Republican called BBB a “socialist wish list” and an inflationary “taxing and spending spree.”
Some Democrats — including Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia — have cautioned that excessive spending could push up prices and worsen the fiscal outlook.
Sinema and Manchin have said that they want less costly legislation. With Democrats holding the smallest possible Senate majority, support from the two senators is essential for final passage of the bill.
“I have been concerned about high levels of spending that are not targeted or are not efficient and effective,” Sinema told the Washington Post on Nov. 18 while noting rising inflation.
“The threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin said on Twitter this month after the Labor Department reported that consumer prices rose 6.2% in October on an annual basis.
CFOs face even higher price gains for wholesale goods. The producer price index for final demand, a measure of what suppliers charge, soared 8.6% in October from the prior year, according to the Labor Department. That was a record jump in a series of data first published in 2010.
The Moody’s analysis suggests that concerns about the impact of BBB on inflation and the U.S. fiscal outlook may be overblown.
“We expect the spending package to have a limited impact on inflation,” Moody’s said.
Referring to the U.S. credit outlook, Moody’s said, “we expect the legislation to have only a small effect on the sovereign’s fiscal position, given that the spending would be spread over a decade and the revenue-raising measures would help offset the impact on federal budget deficits.”
The Congressional Budget Office estimates that the House version of BBB would push up fiscal deficits by $367 billion over a 10-year period.
Yet the estimate excludes about $200 billion in revenue that would come from a provision in the bill funding tougher tax enforcement and collection, Moody’s said.
“Estimates of the bill’s impact on the deficit are likely to shift in accordance with provisions that may be stripped from the Senate’s final version of the legislation,” according to Moody’s.
After months of negotiations, House Democrats on Friday passed their version of the Build Back Better bill—an expansive $1.7 trillion package that contains some of the largest health reforms since the Affordable Care Act’s passage in 2010.
While the overall scope of the bill is roughly half the size of President Biden’s original $3 trillion proposal, many of Democrats’ key health care provisions made it in, albeit with some modifications. What’s more, the Congressional Budget Office projected that while the overall bill would add $367 billion to the deficit over the 10 year period, the health care provisions would all be largely paid for by provisions aimed at lowering drug prices.
Below, I round up the five biggest health care changes included in the House bill.
The House bill leverages the ACA’s exchanges and federal tax credits to expand access to coverage in two ways. First, the bill would extend the American Rescue Plan’s enhanced ACA tax credits through 2025. The enhanced tax credits, which are currently slated to expire in 2023, fully subsidize coverage for people with annual incomes up to 150% of the federal poverty level (FPL) and have enabled people above 400% FPL to qualify for subsidies and capped their premium costs at 8.5% of their incomes.
While Democrats had originally proposed to permanently expand those subsidies, they ultimately had to scale back this—and other proposals—to ensure they could cover the costs. But as we’ve seen in the past, it is much harder to take away an existing benefit or subsidy than it is to create a new one—so while the current bill was able to cover the cost of the health care provisions by making them temporary, lawmakers will have to revisit the tax credits before 2025 and find new money to either further extend them or permanently authorize them. This is one of several health care provisions we could see the Senate take a closer week at in the coming weeks.
Second, the House bill takes aim at the so-called Medicaid coverage gap. The bill would enable residents below 138% FPL who live in states that have not expanded their Medicaid programs to qualify for fully subsidized exchange plans through 2025. While an earlier version of the House bill included language for a new federal Medicaid program covering those below 138% FPL who live in non-expansion states to begin in 2025, the final House bill contains no such program.
Instead, the bill aims to encourage non-expansion states to expand their Medicaid programs by reducing their Disproportionate Share Hospital (DSH) payments by 12.5% beginning in 2023—a significant cut that the American Hospital Association (AHA) estimates would reduce DSH payments in those states by $2.2 billion over five years and $4.7 billion over 10 years. At the same time, expansion states would see their federal match for spending on the Medicaid expansion population rise from 90% to 93% from 2023 through 2025.
While the AHA and others are pushing back against the proposed DSH payment cuts—the move addresses the moral hazard component that critics raised about earlier versions. It no longer rewards holdout states for not expanding their programs—effectively punishing those who did and are now on the hook for 10% of their expansion population’s costs. It’s a clever move, and one we’ll be watching to see if it survives the Senate.
2. New Medicare benefits.
The House bill adds a hearing benefit to Medicare beginning in 2023. The hearing benefits would cover hearing aids and aural rehabilitation, among other services. While this is certainly a win for many Medicare beneficiaries who do not have or cannot afford private Medicare Advantage plans, this is significantly scaled back from the original proposal to add hearing, as well as dental and vision benefits.
However, given that Sen. Bernie Sanders (I-Vt.) has named Medicare benefit expansions as one of his top priorities, it’s possible we could see this topic revisited in the Senate. But any meaningful change would mean Democrats need to find more money to cover the costs—and so far, that has proved challenging.
3. Medicaid home and community care.
The House bill allocates $150 billion for home- and community-based care. The funding would be used to help increase home care provider reimbursement rates and help states bolster home- and community-based care infrastructure.
While the funding is down from an original proposal of $400 billion, the Biden administration—and the Covid-19 pandemic—have made it clear that home-based health care will continue to grow and be a key player in the U.S. health care delivery system. Providers looking at their offerings should keep an eye on how states are investing these funds and building out home-based health care delivery in their areas.
4. Lowering the costs of prescription drugs.
Democrats scored a huge win in the House bill, and that is securing Medicare authority—albeit narrower authority than they sought—to negotiate prices for some of the highest-priced Part B or Part D drugs. Under the bill, HHS would be able to select 10 drugs to negotiation in 2025, up to 15 drugs in 2026 and 2027, and then up to 20 drugs per year in 2028. To be eligible for negotiation, a drug could no longer be subject to market exclusivity.
Drug manufacturers that do not negotiate eligible drug prices could be subject to an excise tax. This was perhaps one of the most contentious provisions debated in the health care portions of this bill. Democrats for years have been seeking to give Medicare drug pricing authority, but intense lobbying and Republican—and some Democrat—objections have kept this proposal on the shelf. While it’s not the first time the House has passed a bill with drug price negotiation—it is the first time we are in a place where the Senate could reasonably pass either this or a modified version of the proposal.
The bill also would redesign the Medicare Part D benefit to create an annual cap of $2,000 on seniors’ out-of-pocket drug costs, and impose an inflation rebate on drug manufacturers’ whose drug prices rise faster than inflation (based on 2021) in a given year.
5. Other notable provisions.
The House bill also includes provisions to permanently fund CHIP, bolster the country’s pandemic preparedness and response, and bolster the health care workforce through new training and workforce programs, the nation’s first permanent federal paid family and medical leave program, investments in childcare, and more.
What’s next?
While the health care provisions in the House bill are notable, it’s important to remember that this is not the end of the road. The House bill now goes to the Senate, where the Senate parliamentarian will check provisions against the Byrd rule—a Senate rule requiring reconciliation bills to meet certain budgetary requirements.
Democrats also will enter a new round of negotiations, and industry groups—including PhRMA and AHA—are expected to launch a new round of lobbying. PhRMA objects to the bill’s drug price negotiation provision and AHA is fighting the provision to reduce DSH payments in non-Medicaid expansion states by 12.5%. Any Senate-passed reconciliation bill will need to go back to the House for final approval before it can go to Biden’s desk.
But this is not the only thing on lawmakers’ plates in December. Members of Congress also face several other deadlines, including addressing looming physician payment cuts and passing end of the year spending bills. The short-version is, while there’s a lot to learn from the House-passed bill, it’s possible the Senate version could look very different—and it may take several weeks before we see that bill take shape.
Federal officials waited months before making all American adults eligible for a COVID-19 booster shot — meaning millions of Americans may not have the strongest possible protection as they head into holiday travel.
Why it matters: Critics say the confusing process undermined what has now become a critical effort to stave off another wave of the pandemic.
Most vaccinated people, even without a booster, still have very strong protection against serious illness or death. But a third shot drastically increases people’s defenses against even mild infections, which could in turn help reduce the virus’ spread.
And some vulnerable vaccinated adults are at risk of serious breakthrough cases.
What they’re saying: “We have a consensus. Boosters are very important in maintaining people’s defenses against COVID. We need to get as many people vaccinated and boosted [as possible] as the winter sets in,” David Kessler, the chief science officer of Biden’s COVID response, said in an interview.
Context: Preliminary data released months ago suggested a significant decline in the vaccines’ effectiveness at preventing infection, although they held up well against severe disease.
Based on that data, the Biden administration had hoped to begin allowing booster shots in September for any American adult who was at least eight months removed from their second dose.
The CDC and the FDA opted instead to only authorize boosters for seniors, people with high-risk medical conditions and people at high risk of infection, before opening them last week to everyone at least six months out from their initial shots.
In the meantime, red and blue states alike decided to ignore the CDC and open up booster eligibility on their own, and breakthrough infections have become increasingly common.
Millions of people who weren’t technically eligible for boosters got them anyway, and a large portion of the most vulnerable patients still haven’t gotten one.
Where it stands: Only 41% of vaccinated Americans 65 and older have received a booster shot, as have 20% of all vaccinated adults, per the CDC.
“Some of us were there several months ago. Some wanted more data. In the end, there’s a convergence of opinions. It’s the way an open scientific public health process should work,” Kessler said.
Between the lines: The U.S. drug approval process — with its insistence on high-quality data and careful expert reviews — is the world’s gold standard precisely because it moves deliberately. Regulators have been trying this whole time to figure out how to adapt that system to a fast-moving pandemic.
Some federal officials, as well as many outside experts, said there wasn’t enough data to make a broad booster recommendation earlier this fall.
Early on, many public health experts also argued that it was unethical to give Americans a third shot while much of the rest of the world awaited their first shots.
Israel embraced boosters before the U.S. beginning over the summer, and its emerging data has been key to making the case that boosters are needed and can help bring surges under control. However, experts still don’t know how long the enhanced protection they give will last.
What they’re saying: “Some argued early on that the primary series was good enough and we should conserve doses for the world. What’s emerging is that all people in the world are going to need to be boosted,” a senior administration official said.
“Everyone has a different threshold for how much data they need in making a decision,” the official added. “What made this different is that there’s a pandemic underway, and many saw we were heading into a winter surge.”
The 340B Drug Pricing Program, designed to increase access to specialty pharmaceuticals for low-income patients, is a perennial area of concern for health policy. The program has grown exponentially since its inception almost 30 years ago: 340B providers increased purchases of discounted drugs from $4B in 2009 to $38B in 2020, five times faster than the overall growth rate of US drug sales. Insurers and drug manufacturers are advocating for significant changes to the program, or even favor eliminating it entirely, claiming that 340B has grown beyond its original intent to help safety net facilities, and simply enriches providers without directly benefiting patients. Indeed, the profits from 340B have become essential for many hospitals’ sustainability; some systems tell us that 340B accounts for their entire margin.
In the graphic above, we outline the basics of revenue and product flow within this complex program. The 340B program is meant to allow hospitals that treat low-income, underserved patients to purchase drugs from manufacturers at a 25 to 50-plus percent discount, but still be reimbursed by payers at standard network rates. The discounts are intended to help hospitals overcome losses they incur in providing uncompensated care, but apply to drugs for all patients, regardless of income and insurance status. 340B providers often partner with independent pharmacies to dispense the drugs, and payers are billed the full list price for the medication. Thus, insured patients pay co-payments on the full price of drugs, leading to criticism that 340B savings are not passed on to patients. 340B providers share an estimated $40B in total annual profit with partner contract pharmacies.
The program has been targeted for overhaul by both the Trump and Biden administrations, and faces another threat later this month, when the US Supreme Court is set to hear a case between the hospital industry and the Department of Health and Human Services (HHS) to decide whether the Centers for Medicare & Medicaid Services (CMS) has the authority to enact payment cuts through rulemaking.
If the court rules in favor of the agency, 340B providers could see significant cuts in payment rates. In our next edition, we’ll dive deeper into the potential impact of that ruling on the industry.
Some 30% of U.S. healthcare workers employed at hospitals remained unvaccinated as of Sept. 15, according to an analysis of Centers for Disease Control and Prevention data published Thursday by the Association for Professionals in Infection Control and Epidemiology.
The findings include data from 3.3 million healthcare workers at more than 2,000 hospitals, collected between Jan. 20 and Sept. 15.
Healthcare personnel working in children’s hospitals had the highest vaccination rates, along with those working in metropolitan counties.
Dive Insight:
The vaccination rate for healthcare workers is roughly in line with that of the general population, though the risk of exposure and transmission can be higher in settings where infected COVID-19 patients are treated, Hannah Reses, CDC epidemiologist and lead author of the analysis, said.
When the shots were initially rolled out, vaccination rates climbed among healthcare workers, rising from 36% to 60% between January and April of 2021, the analysis found. But a major slowdown occurred shortly after.
From April to August, vaccination rates rose just 5%. They then rose 5% again in just one month — from August to September — likely due to the delta variant and more systems implementing their own mandates, the report said.
Researchers also found discrepancies in vaccination rates based on the type of hospitals and their geographic locations.
By September, workers at children’s hospitals had the highest vaccination rates (77%), followed by those at short-term acute care hospitals (70%), long-term care facilities (68.8%), and critical access hospitals (64%).
Among healthcare workers at facilities in metropolitan areas, about 71% were vaccinated by September, compared to 65% of workers at rural facilities.
The findings come as health systems work to comply with new vaccination mandates from the Biden administration.
Healthcare facilities must follow the CMS rule, which stipulates employees must be fully vaccinated by Jan. 4 or risk losing Medicare and Medicaid funding. Unlike the Occupational Safety and Health Administration’s rule that applies to businesses with 100 employees or more but excludes healthcare providers, the CMS rule does not allow for a testing exception.
Both agencies’ rules were met with pushback. The attorneys general of 10 mostly rural states — Missouri, Nebraska, Arkansas, Kansas, Iowa, Wyoming, Alaska, South Dakota, North Dakota and New Hampshire — filed a lawsuit on Oct. 10 against CMS for its rule and said the mandates would exacerbate existing staffing shortages.
“Requiring healthcare workers to get a vaccination or face termination is unconstitutional and unlawful, and could exacerbate healthcare staffing shortages to the point of collapse, especially in Missouri’s rural areas,” the state’s attorney general, Eric Schmitt, said in a statement.
But some regional systems that implemented their own mandates have seen positive results.
After UNC Health and Novant Health in North Carolina required the shots, staff vaccination rates rose to 97% and 99%, respectively, according to a White House report.
Among Novant Health’s 35,000 employees, about 375 were suspended for not complying, and about 200 of those suspended employees did end up getting vaccinated so they could return to work, according to the report.
And some major hospital chains across the country are joining suit with the looming deadline, including HCA with its 183 hospitals and more than 275,000 employees.
The chain is requiring employees be fully vaccinated by the CMS deadline on Jan. 4, a spokesperson said in an email statement.
At the same time, this year’s flu season is difficult to predict, though, “the number of influenza virus detection reported by public health labs has increased in recent weeks,” Reses said.
“The CDC is preparing for flu and COVID to circulate along with other respiratory viruses, and so flu vaccination therefore will be really important to reduce the risk of flu and potentially serious complications, particularly in combination with COVID-19 circulating,” Reses said.
From excessive waste to greenhouse gas emissions, healthcare organizations play a key role in contributing to climate change.
Research suggests the United States is the highest contributor to the global healthcare climate footprint. The healthcare industry accounts for 8.5 percent of all greenhouse gas emissions in the U.S.. Worldwide, the healthcare industry is responsible for 4.4 percent of net emissions, which is the equivalent of 514 coal-fired power plants, according to a 2019 report from Arup and Health Care Without Harm, a group dedicated to achieving more sustainable healthcare practices.
The medical supply chain accounts for 71 percent of healthcare’s carbon footprint. Excess waste is created from plastic gloves, surgical supplies, medicine containers and gowns, among other materials. If the American healthcare sector were its own country, it would be the 13th largest source of greenhouse gas emissions in the world, according to a column by Baltimore-based Johns Hopkins physicians.
A 2010 study estimated that each occupied U.S. hospital bed created 33.8 pounds of waste per day. Hospitals also dispose of 2 million pounds of supplies that have never been used, which costs them $15 million each year.
Other key contributors to healthcare’s carbon footprint are emissions from facilities, which account for 17 percent of its footprint, and indirect emissions from electricity, heating and cooling, which account for 12 percent, according to the Arup and Health Care Without Harm report.
A study by the National Health Service in England found that 2 to 3 percent of its carbon footprint is created by inhaled anesthetic gases. The drugs are vented through hospital rooftops and can be destructive to the ozone layer. Despite the potential consequences of releasing the gases into the atmosphere, the U.S. has no regulations on how to dispose them.
HENRY KOTULA 