Bidencare Week One: What Have We Learned and What should We Expect?

Week one of the Biden-Harris administration offers clear signals to the healthcare industry about its plans and what’s ahead:

EXECUTIVE ORDERS AND DIRECTIVES

In the first 72 hours of the new administration, President Biden signed 29 Executive Orders and issued other directives targeted at the populations hardest hit by the COVID-19 economy. Among the directives were…

• Orders extending federal moratoriums on some foreclosures and evictions through the end of March.

• Suspension of student loan payments through the end of September

• Increased funds targeted for school lunch and food stamp programs to address a “growing hunger crisis facing 29 million adults and up to 12 million children.”

• A directive to the Treasury Department to expedite delivery of stimulus checks to 8 million eligible Americans still waiting.

• Groundwork to require a $15/hr. minimum wage.

Key takeaway: These orders signal the administration’s intent to prioritize working-class and low-income populations as it considers its health policies.

NOMINATIONS AND APPOINTMENTS

The Biden’s administration’s health policy center of gravity is center-left. It’s reflected in its proposed health team:

• HHS nominee Xavier Becerra, former Attorney General of CA and 12-term Congressman

• Assistant Secretary Rachel Levine, MD, a pediatrician and former Commissioner of the PA Department of Health

• Vivek Murthy, MD as Surgeon General; Rochelle Walensky, MD, as director of the Centers for Disease Control and Prevention

• Marcella Nunez-Smith, MD, as COVID-19 equity task force chair

• Anthony Fauci, MD, as White House Medical Director

• Neera Tanden as Director of the Office of Management and Budget and former President of the Center for American Progress, a DC think-tank that advocates for a universal coverage and a single payer system.

Key takeaway: While prosecuting the COVID-19 war, the Biden team will expand the Affordable Care Act’s provisions for affordable health insurance coverage, shift resources to preventive and public health and expand emphasis on science-based population health issues with a specific focus on social determinants of health and disenfranchised populations.

COVID-19 ECONOMIC RECOVERY

The facts are these:

• The economy lost 140,000 jobs in December, the first loss since April.

• 2020 closed with 9.8 million fewer jobs, 4 million fewer small businesses, unemployment at 6.7% and national debt at $27.8 trillion (127% of GDP vs. 62% average from 1940-2018).

• Given the likelihood that additional stimulus funding will pass Congress via reconciliation, the debt will increase even more.

• 4 of 10 households is behind on household bills, and 41 million Americans is food insecure.

Key takeaway: Economic growth alone will not restore the U.S. economy: increased taxes and cost cuts in healthcare and military spending are also likely. In healthcare, likely targets are hospitals, prescription drug manufacturers and distributors and Medicare Advantage plan sponsors. The bigger players in each of these subsectors is emerging from the-pandemic stronger: their opportunities to accelerate economic recovery will be significant even as regulators watch them more closely.

MY TAKE

In week one, little was said about the Biden campaign’s promise to build on the Affordable Care Act or expand access to affordable health insurance coverage. The pandemic is THE issue. In its first week, the administration announced its 5-part COVID-19 plan to vaccinate 100 million within 100 days and open the vaccine supply chain using the Defense Production Act.

But the healthcare policy agenda in the Biden administration’s first term will involve more than Covid-19. Three themes emerging from Week One of the Biden administration will be prominent:

1. Healthcare Workforce Diversity, Safety and Equity

Health care added 39,000 jobs in December to end the year at just over 16 million jobs– a year-over-year decline of 433,000 jobs, or 2.6%, compared to December 2019. But the healthcare workforce is in a state of despair: its lowest wage occupations (home health aides, occupational therapy assistants, and medical transcriptionists) earn 25% less than the U.S. median household income and most are unable to afford household necessities. Nurses are frustrated by staffing cuts and physicians worry about erosion of their clinical autonomy and the corporatization of the profession. And more than 1000 frontline providers have died treating COVID-19 patients. The healthcare workforce is unhealthy.

2. Employer Responsibility

The Biden administration is not inclined to “force” employer-sponsored health insurance coverage departing from the mandate in the Affordable Care Act. It is, by contrast, inclined to offer employees an alternative to employer benefits plans that are unaffordable to employees i.e., ’above 8.5% of household income’ as a means of building support for a public option. Expanding subsidies whereby the working-class can purchase coverage in tandem with cancellation of Medicaid work requirements and block grants to states will accelerate enrollment in government-sponsored coverage and set the stage for a fresh discussion about ‘Medicare for All’ in 2024. And, for employers that provide benefits, reference-based pricing for specified bundled services, on-site primary care and employee self-care tools will be central to cost-containment efforts.

3. Public Health

The administration will take a fresh look at industry consolidation among providers and its impact on the public’s health and wellbeing. Promises of savings for consumers resulting from hospital and physician consolidation will be scrutinized. Uncompensated care (3.9% of hospital revenues) will be assessed in the context of tax obligations and pre-pandemic operating margins of 7.6% for hospitals. The FTC is already examining the role of private equity in physician consolidation and state officials are looking closely at board diversity and community benefits in provider organizations. The public’s health and wellbeing, especially for its most at-risk populations, will be the yardstick by which major transactions between providers are evaluated by regulators forcing every healthcare organization to justify its governance, profitability, and social purpose as never before. Public health is underfunded in the U.S.: at a federal level, it’s less than 3% of total health spending. Countries with lower overall health costs and equivalent or better outcomes spend 2-3 times what the U.S. spends on public health programs. The signal from Biden’s first week is that public health impacts everyone, not just the poor.

President Biden spoke of unity and togetherness in his 2411 word, 21-minute 30-second inaugural address last Wednesday.

Americans are divided in their views about how to ‘fix’ the health system but united that it’s needed and where to start. What’s clear is that uncomfortable flaws in the status quo will be much more visible in the Biden administration and each organization—public programs and private operators—will be held to account.

Those are the signals from the Biden team’s first week.

Paul

RESOURCES

“Have Banks Now Got too much Cash?”; January 20, 2021; The Economist

“Biden nominates Dr. Rachel Levine as assistant secretary of health”; January 19, 2021; Healthcare IT News

“More than any president, Joe Biden emphasized unity at his inauguration”; January 21, 2021; The Economist

“Banks cash in as Wall Street blows out Main Street”; January 21, 2021; Axios

“ACO participation reaches new low as advocates press Biden for major changes”; January 21,2021; Fierce Healthcare

“ACO Participation Hit Low During Trump Administration”; January 21, 2021; National Association of ACOs

CORONAVIRUS NEWS

Key stats:

• The U.S. averaged roughly 198,000 new cases per day in the final week of the Trump administration — a 19% drop from the week before.

• New daily cases fell in 44 states, compared to the previous week. South Carolina and Virginia were the only states whose outbreaks got worse over the past week.

• The U.S. is now conducting almost 2 million tests a day, on average.

  • Hospitalizations are generally holding steady. Roughly 123,000 people are in the hospital today for COVID-19 infections.

• 20 of the 60 vaccines in development worldwide are in late-stage trials. To date, 41.4 million doses have been distributed and 20.5 million have been vaccinated.

U.S. Centers for Disease Control and Prevention www.cdc.gov

Survey: Anxiety about Physician Office Visits Remains High

According to a new national survey released last week by SCAI:

• 40% of Americans do not feel safe going to the doctor’s office while coronavirus (COVID-19) is still a risk.

• 25 % of African Americans adults and 29% of Latinx feel comfortable scheduling a medical procedure, compared to 48% of the general population.

• 51% do not feel comfortable scheduling a medical procedure during the COVID-19 pandemic.

“New Data Confirms Alarming Trend: COVID-19 Fears are Causing Americans to Avoid the Doctor’s Office and Delay Routine Care”; January 13, 2021; Society for Cardiovascular Angiography and Interventions

INDUSTRY NEWS

AHA: Hospital margins in 2019 up 23% prior to COVID-19

According to AHA’s latest Fact Book:

• U.S. hospitals together generated $100 billion in profit in 2019– 23% more than in 2018.

• Hospital operating margins were 8.8%, up from 7.6% in 2018.

• Investment gains (non-operating income) doubled to $21 billion in 2019 as hospitals invested funds in the stock market which had a banner year in 2019 (S&P 500 up 29% and the Nasdaq composite up 35%).

• Uncompensated care was 3.9% ($41.6 billion) of revenues, down from 4.1% (41.3%) in 2018.

Annual Survey Database; American Hospital Association

Studies: Use of Low Value Services, Exposure to Drug Company Inducements

Earlier research found that annual spending on low-value medical services in U.S. healthcare ranges from $75 billion to $100 billion. Researchers analyzed Medicare Part B claims from a 20% random sample of beneficiaries enrolled between 2007 and 2014. Results:

• For most PCPs, the medical services they performed or ordered accounted for less than 9% of their patients’ low-value spending, which represented less than 0.3% of their total Medicare Part B spending.

• For most PCPs, referrals accounted for less than 16% of their patients’ low-value spending, which represented less than 0.5% of their total Medicare Part B spending.

Related: researchers surveyed program directors of 628 family medicine residencies compared to their 2008 and 2013 survey results. Findings:

• 81% do not allow food or gifts, 86% do not allow drug samples, 84% do not allow direct industry contact with medical students or residents, and 81% do not allow industry-sponsored residency activities. These numbers were statistically significantly higher than both 2008 and 2013.

• In 2019, 151 responding programs (64%) were pharma-free, that is, they answered “No” to all 4 questions about interactions.

Baum et al “Primary Care Physicians and Spending on Low-Value Care”; January 19, 2021; Annals of Internal Medicine

Steven R. Brown, Adriane Fugh-Berman “Changing Pharmaceutical Industry Interaction in US Family Medicine Residencies: A CERA Study”; January 2021; The Journal of the American Board of Family Medicine

UnitedHealth Full Year Revenues Top $257 billion led by but Optum, Medicare Advantage Growth

UnitedHealth Group reported full year revenues of $257.1 billion for 2020 on the strength of 21% year-over-year growth from its subsidiary Optum. Highlights:

• For the final quarter of 2020, UnitedHealth recorded revenues of $65.5 billion, up more than $4 billion year-over-year, though earnings from operations were $3.5 billion, down $1.6 billion over the same period. Still, the company’s net margin for the full year was 6%, up from 5.7% for 2019.

• Cash flows from operations for the full year were $22.2 billion, up 20% growth from last year.

• Medicare Advantage and Medicaid plans saw 8% higher revenue and an additional 1.2 million people signing up for coverage ending the year with 26.2 million commercial members, a 5.5% decline from 2019.

• The company expects to add 1.5 million total members in 2021 including 900,000 in its Medicare Advantage business that has had a 13% CAGR over the last five years.

“UnitedHealth’s Profit Slips as Health-Care Visits Return”; January 20,2021; Wall Street Journal

Trade Group Blames CMS for Slowdown in ACO Growth

According to a report from CMS, the number of accountable care organizations participating in the Medicare Shared Savings Program this year shrank to 477, down from 561 in 2018. This year the 2021 ACOs will represent 10.7 million beneficiaries, with 41% of them in two-sided risk and 59% in the one-sided risk track.

In its statement January 21, the National Association of ACOs blamed Trump administration policies for the decline and pressed for the Biden administration to boost participation.

Note: Last week’s Keckley Report addressed the future for alternative payment models including ACOs. In the four performance years for ACOs, participation levels have remained fairly steady with annual churn at less than 20%. However, the methodology used to set savings benchmarks and assign risk scoring have been contentious.

Robert King “ACO Trade group pushes back against ACO participation reaches new low as advocates press Biden for major changes”; January 21,2021; Fierce Healthcare

“NAACOS Challenges Biden Administration to Rekindle Growth in Largest Value-Based Payment Program” January 21, 2021; National Association for ACO’s

GAO Report: Rural Hospital Closures Increase Distance to Care

From January 2013 through February 2020, 101 rural hospitals closed. GAO found that when rural hospitals closed, residents living in the closed hospitals’ service areas have to travel on average 20 miles further:

• Comparing median distances for 2012 to 2018, access general inpatient services (3.4 miles to 23.9 miles), for alcohol or drug abuse (5.5 miles to 44.6 miles), for emergency services 3.3 miles to 24.2 miles (and coronary treatment (4.5miles to 35.1 miles).

• Outpatient utilization rates decreased as hospitals closed and the number of physicians fell, dropping from a median of 71.2 per 100,000 residents in 2012 in counties with closures to 59.7 in 2017.

“Rural Hospital Closures Affected Residents Had Reduced Access to Health Care Services” GAO December 22, 2020; U.S. Government Accountability Office

CMS: Medicaid Enrollment Update

On January 15, CMS released September 2020 Medicaid & Children’s Health Insurance Program (CHIP) enrollment data through July 31, 2020. highlights:

• 77 million individuals were enrolled in Medicaid and CHIP in September, with over 70 million in Medicaid and about 6.7 million in CHIP.

• As of August 2020, 95.4 million Americans, including children, pregnant women, parents, seniors, and individuals with disabilities, were enrolled across each state’s Medicaid program or CHIP for at least one day. Between January and August 2020, Medicaid and CHIP covered nearly 41.5 million children; the programs cover three quarters of children living in poverty.

• In 2020, 733,746 beneficiaries were treated for COVID-19, with 79,305 hospitalizations.

September 2020 Medicaid & Children’s Health Insurance Program (CHIP) Highlights; Medicaid.gov

Drug prices: Hospital Mark-Up 250%, VA pays 54% less than Part D

An examination of newly released pricing data disclosed by 150 hospitals for 31 drugs in compliance with required disclosure of wholesale prices and what patients who pay with cash pay for prescription drugs showed the following:

• Hospitals markup drug prices on average 250%

• Administering treatments to commercially insured patients is 20 times more profitable than administering the same drugs to Medicare patients.

• 30% to 43% of hospitals do not stock biosimilars, which are cheaper than their branded specialty drugs, for four of the physician-administered drugs that were analyzed.

On January 14, the Government Accountability Office (GAO) released a report finding the Department of Veterans Affairs (VA) paid an average of 54% less than Medicare Part D for prescription drugs in 2017. The VA and Medicare covered prescription drugs for approximately 52 million people in 2017. The study evaluated 399 brand name and generic drugs paid for in 2017 and found 233 drugs were at least 50% cheaper for the VA, 106 drugs were at least 75% cheaper for the VA, and only 43 drugs were cheaper for Medicare.

“Department of Veterans Affairs Paid About Half as Much as Medicare Part D for Selected Drugs in 2017”; January 14, 2021; U.S. Government Accountability Office

Medicare Advantage Spending Increases Faster than Enrollment Growth

In CMS’ national healthcare expenditures report issued last week, total spending was up 4.6 % to just under $3.8 trillion in 2019 compared with a 4.7% increase to a little more than $3.6 trillion in 2018. Notably, Medicare spending jumped 6.7% to $799.4 billion in 2019– the highest annual increase in Medicare spending since 2009, when it rose 6.8% to $498.6 billion.

• Government spending on MA plans rose 14.5% in 2019 to $313.8 billion. In the same period, enrollment increased 7.8%.

• Over a five-year period, MA’s share of total Medicare spending has increased to 39.3% in 2019 from 31.6 % in 2015.

Related: The final estimate of the National Per Capita MA Growth Percentage for combined aged and disabled beneficiaries is 6.30%, and the final estimate of the FFS Growth Percentage is 5.47%. Medicare Advantage and Medicare Part D plan capitated rates for 2022 are expected to increase by 4.08%. Plans have until June 7, 2021, to submit bids for 2022.

“Announcement of Calendar Year (CY) 2022 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies”; January 15, 2021; CMS

Altarum January 2021 Report: Health Spending Slowed at end of FY 2020

Highlights of Altarum’s January Health Sector Economic Indicators:

• At $3.90 trillion (seasonally adjusted annual rate), national health spending in November 2020 was 0.8% higher than in November 2019.

• The November 2020 nominal gross domestic product (GDP) was 1.5% lower than in November 2019, and the resulting health-spending share of GDP was 18.2%, and 17.6% of potential GDP (PGDP).

• Comparing spending in November 2020 to November 2019, key sector changes: dental services, -13.6%, home health care +5.9%, hospital +3.7%, nursing home +3.6%, physician services+ 0.9% prescription drug -2.4%.

“January 2021 Health Sector Economic Indicators Briefs”; January 20, 2021; Altarum

Trump Pardons 18 Connected to Healthcare Misdeeds

President Trump (R) issued 74 pardons and 70 commutations just before his term concluded on Jan. 20. Among those pardoned were 18 individuals connected to healthcare fraud. Pardons and commutations brought the total for Trump’s term to 143 pardons and 94 commutations– the fewest pardons of any president since George H.W. Bush (R).

Basen, Ryan, “Healthcare Fraudsters Among those Pardoned by Trump”; January 21, 2021; MedPage Today