The Medicare Payment Advisory Commission voted Jan. 14 to recommend a 2 percent raise in Medicare payments for hospitals next year.
The commission said it wants to give the payment boost to both acute-care and long-term care hospitals. The 2 percent payment increase will result in about a $750 million to $2 billion increase in acute-care hospital spending for Medicare and about $50 million for long-term care hospitals.
MedPAC also plans to recommend no change to the payment rate for physicians in 2022 and a 5 percent decrease for home health firms and inpatient rehabilitation centers.
Although MedPAC will recommend the payment boost, Congress is not required to implement the recommendation.
Their Senate majority will be slim as can be, and their margin for error in the House is also quite small. So it’s not going to be easy to get anything done. But it seems likely that the Biden White House and a Democratic Congress will try to pass legislation to expand health coverage.
Regarding what Democrats’ health care agenda would look like if the party enjoyed full control of Congress and the White House, a senior party official told reporters this fall: “If we don’t take full advantage of this moment, we’ll be making a huge mistake.”
The question is how big they will go. A lengthy health care section will likely be part of any new Covid-19 relief and recovery bill. But will that be the end of it, or do Democrats want to try to pass another health care plan through budget reconciliation? Given Senate rules, that process is probably their best chance of passing a major bill.
Taking a cue from my Future Perfect colleagues and their 21 predictions for 2021, I thought I would lay out some of my expectations for the coming two years of health policy. These projections are based on my own reporting, but they are not meant to be definitive — and nothing is 100 percent guaranteed. It’s more like a list of issues I’ll be watching.
Democrats will expand eligibility for Obamacare subsidies: 85 percent chance
Democrats could attempt to take two bites at the health care apple: first as part of a Covid-19 relief bill, and second in a budget reconciliation package that can pass with a bare majority. I think there is a very strong chance both attempts would end up with provisions expanding eligibility for insurance tax subsidies.
The $2.4 trillion HEROES Act passed by the House, a likely starting point for Covid-19 negotiations between the House and the Senate, would have made anybody currently on unemployment insurance eligible for premium tax credits. That would help people who have lost their employer-sponsored coverage afford a new health care plan. A provision like that is likely to become part of whatever Covid-19 bill Congress comes up with.
A reconciliation bill could make that change permanent and universal. Back in spring 2020, Senate Democrats released a list of their health care priorities in response in response to Covid-19. At the top was a plan to raise the current cutoff for Obamacare subsidies, which stands at 400 percent of the federal poverty level.
Under current law, anybody with an annual income above that threshold, which is about $51,000 for an individual or $87,000 for a family of three, is ineligible for any assistance. Democrats have introduced plans to expand eligibility, either by doubling the income cap to 800 percent of the federal poverty level (like in this bill from Sen. Jeanne Shaheen) or by eliminating it entirely so that nobody pays more than a fixed percentage of their income on health insurance (as President-elect Joe Biden proposed). Democrats could also try to make low-income people in states that have not expanded Medicaid eligible for tax credits to buy private coverage.
The people squeezed under Obamacare have been the ones ineligible for the law’s financial aid. Expanding eligibility could insure up to 4 million people, and it seems like the bare minimum Democrats would want to do on health care with their new power.
The public option won’t be part of a Democratic health care bill: 75 percent chance
Much like the 2009 debate over Obamacare, a new government insurance plan would probably be the most hotly debated proposal if Democrats try to approve a major health care bill. Biden embraced the public option in his campaign, but passing it won’t be easy — in fact, I think it’s more likely than not that it doesn’t happen.
One problem for a public option is budget reconciliation. Unless Democrats are willing to eliminate the 60-vote legislative filibuster, they’ll have to use this special procedural tool in order to pass a bill with just 51 votes.
But budget reconciliation comes with limits on what provisions can be included, narrowly targeted to federal spending, and creating this new program may not qualify. Capital Alpha, a health care policy analysis group, thinks there is “virtually zero chance” a public option like that proposed by Biden during his campaign would be enacted because it likely doesn’t satisfy the reconciliation rules.
Progressives will push Democratic leadership to be as aggressive in pursuing a public option as possible, including in how they handle those procedural limits. But the moderate Senate Democrats who will ultimately dictate what the final package will look like have sounded ambivalent about the public option, and Democrats are wary of the party getting dragged into a messy health care fight.
Support for a public option would be substantial — about 70 percent of Americans say they’re for it, polls show — but so would the opposition. The health care industry will surely mobilize against the plan if Democrats look serious about pursuing it.
I suspect that, either because the moderates rule it out from the start or Democratic leaders balk at a drawn-out health care debate, politics will take the policy off the table.
Democrats will approve Medicare negotiations for prescription drugs: 55 percent chance
Democrats have campaigned for several election cycles now on a promise to give Medicare more power to negotiate drug prices with pharma companies. This promise was a part of the drug pricing bill that House Democrats passed in the last Congress, a plan that was estimated to cut federal spending by $456 billion over 10 years.
Savings are the reason the policy could be handy for Democrats in crafting a budget reconciliation plan. Democrats will need to include provisions that save the government money to help pay for the new provisions that cost money, like expanding eligibility for tax subsidies.
“We have long believed that pharma faces the greatest risk of drug pricing reforms in conjunction with Democrats’ efforts to expand coverage,” Capital Alpha wrote in a recent analysis.
Those twin incentives — delivering on a campaign promise and finding offsets — could help overcome what would surely be fierce industry opposition.
But the politics of drug pricing have shifted during the Covid-19 pandemic, which is why I think there’s only a slightly better than even chance that Congress will approve Medicare negotiations. Pharma has delivered the Covid-19 vaccines in record time, improving the industry’s relationship with the public in the process. This, in turn, has lowered expectations among the experts for how aggressive Democrats will be on drug prices.
“I think now you don’t have all those stories about insulin and EpiPen, plus you have positive stories about vaccines and other drugs,” Walid Gellad, director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh, told me in December. “You don’t have as fertile an environment for more extreme drug measures.”
Thus, my feeling that the odds for Medicare negotiations are closer to 50/50.
CMS is giving hospitals facing a surge of COVID-19 patients expanded flexibility to care for Medicare patients in their homes, the department announced Nov. 25.
The new Acute Hospital Care At Home program will require in-person screening protocols to assess both medical and non-medical factors, including working utilities, before care can begin at home. Medicare patients will be admitted into the program from emergency departments and inpatient hospital beds.
Once at-home care begins, a registered nurse will evaluate each patient every day either in person or remotely, and either registered nurses or mobile integrated health paramedics will have two in-person visits daily based on the patient’s nursing plan and hospital policies.
CMS approved the following six health systems with extensive experience providing acute hospital care at home to immediately participate in the program:
A collection of provider and payer groups are imploring Congress to continue a moratorium on Medicare payment cuts instituted under the sequester.
The letter (PDF), sent Friday by more than 20 groups to congressional leaders, is concerned that the moratorium installed under the CARES Act expires on Jan. 1. The groups want the moratorium to extend through the COVID-19 public health emergency, which has been renewed by the federal government several times.
The groups said that the moratorium needs to be extended as healthcare facilities are under massive financial stress with new surges of COVID-19.
The surge has impacted the “financial health of medical professionals and facilities, including increased cost of labor to ensure adequate staffing, procurement of personal protective equipment, significant reductions in patient volume resulting from orders to cancel non-emergent procedures and the high cost of caring for COVID patients,” the letter said.
Some of the groups signing on to the letter include the American Medical Association, America’s Health Insurance Plans, Federation of American Hospitals and American College of Physicians.
The groups said that the moratorium on the sequester cuts installed as part of the CARES Act was an acknowledgment from Congress over the important role that Medicare reimbursement plays in “the financial well being of our healthcare system.”
The sequestration cut Medicare payments by 2% across the board to all Medicare providers back in 2013.
The letter comes as Congress is pondering another relief package for COVID-19 during the lame-duck period. Senate Majority Leader Mitch McConnell said after the presidential election that he was open to restarting talks on a new relief package and added that hospitals will need some additional relief.
But McConnell said earlier this week that the same issues that have held up a deal with House Speaker Nancy Pelosi are still there.
“I don’t think the current situation demands a multi-trillion dollar package,” McConnell told reporters. “I think it should be highly targeted.”
But Pelosi has endorsed a larger package. The House passed the HEROES Act, a $3 trillion relief bill, several months ago.
Of his many plans to expand insurance coverage, President-elect Joe Biden’s simplest strategy is lowering the eligibility age for Medicare from 65 to 60.
But the plan is sure to face long odds, even if the Democrats can snag control of the Senate in January by winning two runoff elections in Georgia.
Republicans, who fought the creation of Medicare in the 1960s and typically oppose expanding government entitlement programs, are not the biggest obstacle.Instead, the nation’s hospitals — a powerful political force — are poised to derail any effort. Hospitals fear adding millions of people to Medicare will cost them billions of dollars in revenue.
“Hospitals certainly are not going to be happy with it,” said Jonathan Oberlander, professor of health policy and management at the University of North Carolina at Chapel Hill.
Medicare reimbursement rates for patients admitted to hospitals are on average half what commercial or employer-sponsored insurance plans pay.
“It will be a huge lift [in Congress] as the realities of lower Medicare reimbursement rates will activate some powerful interests against this,” said Josh Archambault, a senior fellow with the conservative Foundation for Government Accountability.
Biden, who turns 78 this month, said his plan will help Americans who retire early and those who are unemployed or can’t find jobs with health benefits.
“It reflects the reality that, even after the current crisis ends, older Americans are likely to find it difficult to secure jobs,” Biden wrote in April.
Lowering the Medicare eligibility age is popular. About 85% of Democrats and 69% of Republicans favor allowing those as young as 50 to buy into Medicare, according to a Kaiser Family Foundation tracking poll from January 2019. (Kaiser Health News is an editorially independent program of the Kaiser Family Foundation.)
Although opposition from the hospital industry is expected to be fierce, it is not the only obstacle to Biden’s plan.
Critics, especially Republicans on Capitol Hill, will point to the nation’s $3 trillion budget deficit as well as the dim outlook for the Medicare Hospital Insurance Trust Fund. That fund is on track to reach insolvency in 2024. That means there won’t be enough money to pay hospitals and nursing homes fully for inpatient care for Medicare beneficiaries.
It’s also unclear whether expanding Medicare will fit on the Democrats’ crowded health agenda, which includes dealing with the COVID-19 pandemic, possibly rescuing the Affordable Care Act (if the Supreme Court strikes down part or all of the law in a current case), expanding Obamacare subsidies and lowering drug costs.
Biden’s proposal is a nod to the liberal wing of the Democratic Party, which has advocated for Sen. Bernie Sanders’ government-run “Medicare for All” health system that would provide universal coverage. Biden opposed that effort, saying the nation could not afford it. He wanted to retain the private health insurance system, which covers 180 million people.
To expand coverage, Biden has proposed two major initiatives. In addition to the Medicare eligibility change, he wants Congress to approve a government-run health plan that people could buy into instead of purchasing coverage from insurance companies on their own or through the Obamacare marketplaces. Insurers helped beat back this “public option” initiative in 2009 during the congressional debate over the ACA.
The appeal of lowering Medicare eligibility to help those without insurance lies with leveraging a popular government program that has low administrative costs.
“It is hard to find a reform idea that is more popular than opening up Medicare” to people as young as 60, Oberlander said. He said early retirees would like the concept, as would employers, who could save on their health costs as workers gravitate to Medicare.
The eligibility age has been set at 65 since Medicare was created in 1965 as part of President Lyndon Johnson’s Great Society reform package. It was designed to coincide with the age when people at that time qualified for Social Security. Today, people generally qualify for early, reduced Social Security benefits at age 62, but full benefits depend on the year you were born, ranging from age 66 to 67.
While people can qualify on the basis of other criteria, such as having a disability or end-stage renal disease, 85% of the 57 million Medicare enrollees are in the program simply because they’re old enough.
Lowering the age to 60 could add as many as 23 million people to Medicare, according to an analysis by the consulting firm Avalere Health. It’s unclear, however, if everyone who would be eligible would sign up or if Biden would limit the expansion to the 1.7 million people in that age range who are uninsured and the 3.2 million who buy coverage on their own.
Avalere says 3.2 million people in that age group buy coverage on the individual market.
While the 60-to-65 group has the lowest uninsured rate (8%) among adults, it has the highest health costs and pays the highest rates for individual coverage, said Cristina Boccuti, director of health policy at West Health, a nonpartisan research group.
About 13 million of those between 60 and 65 have coverage through their employer, according to Avalere. While they would not have to drop coverage to join Medicare, they could possibly opt to pay to join the federal program and use it as a wraparound for their existing coverage. Medicare might then pick up costs for some services that the consumers would have to shoulder out of pocket.
Some 4 million people between 60 and 65 are enrolled in Medicaid, the state-federal health insurance program for low-income people. Shifting them to Medicare would make that their primary health insurer, a move that would save states money since they split Medicaid costs with the federal government.
Chris Pope, a senior fellow with the conservative Manhattan Institute, said getting health industry support, particularly from hospitals, will be vital for any health coverage expansion. “Hospitals are very aware about generous commercial rates being replaced by lower Medicare rates,” he said.
“Members of Congress, a lot of them are close to their hospitals and do not want to see them with a revenue hole,” he said.
President Barack Obama made a deal with the industry on the way to passing the ACA. In exchange for gaining millions of paying customers and lowering their uncompensated care by billions of dollars, the hospital industry agreed to give up future Medicare funds designed to help them cope with the uninsured. Showing the industry’s prowess on Capitol Hill, Congress has delayed those funding cuts for more than six years.
Jacob Hacker, a Yale University political scientist, noted that expanding Medicare would reduce the number of Americans who rely on employer-sponsored coverage. The pitfalls of the employer system were highlighted in 2020 as millions lost their jobs and their workplace health coverage.
Even if they can win the two Georgia seats and take control of the Senate with the vice president breaking any ties, Democrats would be unlikely to pass major legislation without GOP support — unless they are willing to jettison the long-standing filibuster rule so they can pass most legislation with a simple 51-vote majority instead of 60 votes.
Hacker said that slim margin would make it difficult for Democrats to deal with many health issues all at once.
“Congress is not good at parallel processing,” Hacker said, referring to handling multiple priorities at the same time. “And the window is relatively short.”
President-elect Joe Biden’s healthcare agenda: building on the ACA, value-based care, and bringing down drug prices.
In many ways, Joe Biden is promising a return to the Obama administration’s approach to healthcare:
Building on the Affordable Care Act (ACA) through incremental expansions in government-subsidized coverage
Continuing CMS’ progress toward value-based care
Bringing down drug prices
Supporting modernization of the FDA
Bolder ideas, such as developing a public option, resolving “surprise billing,” allowing for negotiation of drug prices by Medicare, handing power to a third party to help set prices for some life sciences products, and raising the corporate tax rate, could be more challenging to achieve without overwhelming majorities in both the House and the Senate.
Biden is likely to mount an intensified federal response to the COVID-19 pandemic, enlisting the Defense Production Act to compel companies to produce large quantities of tests and personal protective equipment as well as supporting ongoing deregulation around telehealth. The Biden administration also will likely return to global partnerships and groups such as the World Health Organization, especially in the area of vaccine development, production and distribution.
What can health industry executives expect from Biden’s healthcare proposals?
Broadly, healthcare executives can expect an administration with an expansionary agenda, looking to patch gaps in coverage for Americans, scrutinize proposed healthcare mergers and acquisitions more aggressively and use more of the government’s power to address the pandemic. Executives also can expect, in the event the ACA is struck down, moves by the Biden administration and Democratic lawmakers to develop a replacement. Healthcare executives should scenario plan for this unlikely yet potentially highly disruptive event, and plan for an administration marked by more certainty and continuity with the Obama years.
All healthcare organizations should prepare for the possibility that millions more Americans could gain insurance under Biden. His proposals, if enacted, would mean coverage for 97% of Americans, according to his campaign website. This could mean millions of new ACA customers for payers selling plans on the exchanges, millions of new Medicaid beneficiaries for managed care organizations, millions of newly insured patients for providers, and millions of covered customers for pharmaceutical and life sciences companies. The surge in insured consumers could mirror the swift uptake in the years following the passage of the ACA.
Biden’s plan to address the COVID-19 pandemic
Biden is expected to draw on his experience from H1N1 and the Ebola outbreaks to address the COVID-19 pandemic with a more active role for the federal government, which many Americans support. These actions could shore up the nation’s response in which the federal government largely served in a support role to local, state and private efforts.
Three notable exceptions have been the substantial federal funding for development of vaccines against the SARS-CoV-2 virus, Congress’ aid packages and the rapid deregulatory actions taken by the FDA and CMS to clear a path for medical products to be enlisted for the pandemic and for providers, in particular, to be able to respond to it.
Implications of Biden’s 2020 health agenda on healthcare payers, providers and pharmaceutical and life sciences companies
The US health system has been slowly transforming for years into a New Health Economy that is more consumer-oriented, digital, virtual, open to new players from outside the industry and focused on wellness and prevention. The COVID-19 pandemic has accelerated some of those trends. Once the dust from the election settles, companies that have invested in capabilities for growth and are moving forcefully toward the New Health Economy stand to gain disproportionately.
Shortages of clinicians and foreign medical students may continue to be an issue for a while
The Trump administration made limiting the flow of immigrants to the US a priority. The associated policy changes have the potential to exacerbate shortages of physicians, nurses and other healthcare workers, including medical students. These consequences have been aggravated by the pandemic, which dramatically curtailed travel into the US.
Healthcare organizations, especially rural ones heavily dependent on foreign-born employees, may find themselves competing fiercely for workers, paying higher salaries and having to rethink the structure of their workforces.
Providers should consider reengineering primary care teams to reflect the patients’ health status and preferences, along with the realities of the workforce on the ground and new opportunities in remote care.
Focus on modernizing the supply chain
Biden and lawmakers from both parties have been raising questions about life sciences’ supply chains. This focus has only intensified because of the pandemic and resulting shortages of personal protective equipment (PPE), pharmaceuticals, diagnostic tests and other medical products.
Investment in advanced analytics and cybersecurity could allow manufacturers to avoid disruptive stockouts and shortages, and deliver on the promise of the right treatment to the right patient at the right time in the right place.
Drug pricing needs a long-term strategy
Presidents and lawmakers have been talking about drug prices for decades; few truly meaningful actions have been implemented. Biden has made drug pricing reform a priority.
Drug manufacturers may need to start looking past the next quarter to create a new pricing strategy that maximizes access in local markets through the use of data and analytics to engage in more value-based pricing arrangements.
New financing models may help patients get access to drugs, such as subscription models that provide unlimited access to a therapy at a flat rate.
Companies that prepare now to establish performance metrics and data analytics tools to track patient outcomes will be well prepared to offer payers more sustainable payment models, such as mortgage or payment over time contracts, avoiding the sticker shock that comes with these treatments and improving uptake at launch.
Pharmaceutical and life sciences companies will likely have to continue to offer tools for consumers like co-pay calculators and use the contracting process where possible to minimize out-of-pocket costs, which can improve adherence rates and health outcomes.
View interoperability as an opportunity to embrace, not a threat to avoid or ignore
While the pandemic delayed many of the federal interoperability rule deadlines, payers and providers should use the extra time to plan strategically for an interoperable future.
Payers should review business partnerships in this new regulatory environment.
Digital health companies and new entrants may help organizations take advantage of the opportunities that achieving interoperability may present.
Companies should consider the legal risks and take steps to protect their reputations and relationships with customers by thinking through issues of consent and data privacy.
Health organizations should review their policies and consider whether they offer protections for customers under the new processes and what data security risks may emerge. They should also consider whether business associate agreements are due in more situations.
Plan for revitalized ACA exchanges and a booming Medicare Advantage market
The pandemic has thrown millions out of work, generating many new customers for ACA plans just as the incoming Biden administration plans to enrich subsidies, making more generous plans within reach of more Americans.
Payers in this market should consider how and where to expand their membership and appeal to those newly eligible for Medicare. Payers not in this market should consider partnerships or acquisitions as a quick way to enter the market, with the creation of a new Medicare Advantage plan as a slower but possibly less capital-intensive entry into this market.
Payers and health systems should use this opportunity to design more tailored plan options and consumer experiences to enhance margins and improve health outcomes.
Payers with cash from deferred care and low utilization due to the pandemic could turn to vertical integration with providers as a means of investing that cash in a manner that helps struggling providers in the short term while positioning payers to improve care and reduce its cost in the long term.
Under the Trump administration, the FDA has approved historic numbers of generic drugs, with the aim of making more affordable pharmaceuticals available to consumers. Despite increased FDA generics approvals, generics dispensed remain high but flat, according to HRI analysis of FDA data.
Pharmaceutical company stocks, on average, have climbed under the Trump administration, with a few notable dips due to presidential speeches criticizing the industry and the pandemic.
Providers have faced some revenue cuts, particularly in the 340B program, and many entered the pandemic in a relatively weak liquidity position. The pandemic has led to layoffs, pay cuts and even closures. HRI expects consolidation as the pandemic continues to curb the flow of patients seeking care in emergency departments, orthopedic surgeons’ offices, dermatology suites and more.
Lawmakers and politicians often use bold language, and propose bold solutions to problems, but the government and the industry itself resists sudden, dramatic change, even in the face of sudden, dramatic events such as a global pandemic. One notable exception to this would be a decision by the US Supreme Court to strike down the ACA, an event that would generate a great deal of uncertainty and disruption for Americans, the US health industry and employers.