Friday, the Biden administration issued its $6 trillion FY 2022 budget promising to “reinvest in education, research, public health, and other foundations of our country’s strength.” It incorporates the administration’s eight-year, $2.3 trillion infrastructure proposal American Jobs Plan that’s being negotiated with Congress and its $1.8 trillion American Families Plan in addition to $1.5 trillion for annual operating appropriations. And its release was strategically timed before the Memorial Day long weekend to pre-empt the normal volume of partisan critics and adverse attention from media. Here’s a recap:
The Package Includes:
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$2.3 trillion for infrastructure, including $115 billion for roads and bridges, $174 billion for electric vehicles, $85 billion to modernize transit, $111 billion on drinking water infrastructure and $100 billion to expand high-speed broadband access.
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$1.8 trillion for the American Families Plan that includes $200 billion for universal free pre-K, $109 billion for free community college, $85 billion in Pell Grants, $225 billion for childcare and $225 billion for a national paid family medical leave program.
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$1.52 trillion in discretionary spending, including major increases for the Education Dept., Veterans Affairs, and Housing and Urban Development and Health and Human Services.
Key Assumptions Used by the Office of Management and Budget Include:
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The economy will grow by 5.2% this year (FY 2021) and 4.3% next year (FY 2022) before settling to about 2% growth through 2031.
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The FY 2022 deficit is projected to be $1.8 trillion and range between $1.5-$1.8 trillion per year through 2031.
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Federal debt will increase from $26.3 trillion (FY 2022) to $39.1 trillion (FY 2031).
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Funding for the plan assumes $3.6 trillion from tax increases for individuals (highest individual rate increase from 37% to 39.6%) and companies (corporate tax rates from 21% to 28%. The top capital-gains rate would increase to 43.4% from 23.8% and unrealized capital gains would be taxed at death with a $1 million per-person exemption.
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Annual federal spending would increase to $8.2 trillion by 2031 with average annual deficits of $ 1.3 trillion through 2031.
Healthcare figures prominently in this budget: Most of the budget items are included in the administration’s American Jobs Act and American Families Plan already announced in April. Most notably, the proposed budget for the Department of Health and Human Services is increased 23.7% (to $133.7 billion in FY 2022 vs. $108.4 billion in FY 2021) and the Veteran Affairs budget increase of 8.1% ($113.1 billion in FY 2022 vs. $104.6 billion in FY 2021). The narrative that accompanied the details of the budget re-affirm the administration’s intent to address drug prices, provider consolidation that reduces competition, mental health and other themes but details in the Budget Appendix do not indicate specific funding targets. And federal attention to equity, diversity, accessibility and affordability in healthcare, along with public health concerns, are prominent in the budget.
Adding Medicare ($766 billion in FY 2022) and Medicaid ($571 billion in FY 2021), federal healthcare expenditures will be 26% of the total and that doesn’t include the wide range of health programs in other departments like the Supplemental Nutrition Assistance, broadband to support telehealth, and many others.
MY TAKE
This budget is the strongest signal yet about the administration’s priorities for the healthcare system. There are three key takeaways from this budget:
1- There are Few Surprises in the President’s 63-page FY 2022 Budget
It is consistent with the administration’s previously announced “Build Back Better” agenda and a clear reflection of the administration’s attention to climate change, healthcare and education as their focus for policy changes. It also mirrors political reality: not included are items like the public option or lowering the age of Medicare eligibility to 60 that might add cost and become Campaign 2022 election issues.
2- The Price Tag is Controversial and Likely to Spark Partisan Brinksmanship
The budget’s FY 2022 $6.2 trillion price tag has been in the news cycle since early April. But Friday, before a long Memorial Day weekend, it became official putting the Administration’s opponents on the offensive to challenge its affordability, labeling it “socialism, wasteful…” and more. The reality is this: federal spending in FY 2020 ($6.55 trillion) and FY 2021 ($7.25 trillion) was higher, but the partisans on both sides of the aisle and on main street deemed those as necessary due to the pandemic. The FY 2022 the budget is considered “post-pandemic” prompting reactions by Progressives it doesn’t go far enough and by Budget Hawks it’s wasteful and unaffordable.
3- Long-term Federal Debt will be the Context for Public Debate about the Budget and Healthcare will be Thrust into the Spotlight
The Budget Appendix offered by the Office of Management and Budget paints a somewhat rosy picture of the economy: OMB forecasts the GDP to grow 41.5% from 2022 thru 2031 reaching $33.7 trillion while the total federal debt climbs 49.8% (from $26.3 trillion to $39.1 trillion). It assumes the Consumer Price Index stays at 2% or less facilitating consumption, the pandemic is in the rear-view mirror, the tax increases produce the bucks needed and the economy recovers. Since healthcare is 26% of federal spending, it will be scrutinized, especially Medicare and Medicaid that represent 5.9% of the U.S. GDP today and 6.1% by 2031. The Budget forecasts modest increases in outlays for these programs (less than 1% per year) –significantly less than medical inflation pegged at 2.5% per year, so something’s gotta’ give. The healthcare playing field, as a result, will likely face a shake-up as winners and losers posture: lower operating margins and growing pressure from employers and consumers will prompt a new round of consolidation and higher demand for capital from private sources (i.e. private equity, strategic investors).
The President’s budget is unlikely to pass in its current form which is problematic for most sectors in U.S. healthcare. But it’s certainly an important precursor for important discussions about its future. Stay tuned.
Paul
RESOURCES
“The President’s Budget for Fiscal Year 2022”; May 28, 2021; Office of Management and Budget
Jessie Hellmann “Biden proposes 23% funding increase for HHS”; May 29, 2021; Modern Healthcare
Richard Rubin “First Biden Budget Retains Trump-Era Business Tax Break”; May 29, 2021; Wall Street Journal
CORONAVIRUS NEWS
KFF: 27% of Medicare Beneficiaries have Used Telehealth during Pandemic
An analysis of the Medicare Current Beneficiary Survey (MCBS) Fall 2020 COVID-19 Supplement by the Kaiser Family Foundation:
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Among the vast majority of Medicare beneficiaries with a usual source of care (95%), such as a doctor or other health professional, or a clinic, nearly two-thirds (64% or 33.6 million) say that their provider currently offers telehealth appointments, up from 18% who said their provider offered telehealth before the pandemic. But nearly a quarter of Medicare beneficiaries (23%) say they don’t know if their provider offers telehealth appointments– larger among beneficiaries who live in rural areas (30%).
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Among the 33.6 million Medicare beneficiaries with a usual source of care who reported that their provider currently offers telehealth appointments, nearly half (45%) said they had a telehealth visit with a doctor or other health professional between the summer (July) and fall of 2020. This translates to just over 1 in 4 (27% or 15 million) of all community-dwelling beneficiaries in both traditional Medicare and Medicare Advantage using telehealth during this time period.
“Medicare and Telehealth: Coverage and Use During the COVID-19 Pandemic and Options for the Future “; May 19, 2021; Kaiser Family Foundation
Analysis: Telehealth Focus of the Majority of Regulatory Changes Made Permanent from Pandemic
Of the 244 COVID-19-related regulatory changes that were implemented through January 8, 2021:
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27 (11%) have been expanded or made permanent.
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2 have been terminated.
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12 affect payment systems and quality programs.
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5 relate to provider capacity and workforce.
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3 concern telehealth.
“Which Medicare Changes Should Continue Beyond the COVID-19 Pandemic? Four Questions for Policymakers”; May 25, 2021; Commonwealth Fund
INDUSTRY NEWS
Milliman Medical Index: Health Costs Decreased 4.2% for Family of Four
Based on restated claims data, healthcare costs for a hypothetical family of four in 2020 were $26,078, compared to $27,233 in 2019(-4.2%). The cost of healthcare this year for the MMI family of four is projected to be $28,256 and $6,516 for an average individual in 2021.
From 2019 to 2021, employees will see an estimated cumulative 4.0% increase in their total average costs (employee contributions, plus out-of-pocket expenses incurred at point of care), while employers will see a 4.2% bump in their portions of their employee benefit costs.
“Milliman Medical Index: Cost of healthcare for a family of four decreases for first time in report history, to $26,078 in 2020, but costs are projected to rebound in 2021”; May 27, 2021; Milliman
MGMA: Physician Comp Stable During Pandemic
Per the 2021 MGMA Provider Compensation and Production report released last week:
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Compensation for primary care physicians increased by 2.6% between 2019 and 2020, compared to the three- and five-year cumulative increases of 5.27% and 10.15% respectively.
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Surgical physicians saw a compensation drop of 0.89% in 2020. Nonsurgical specialists reported a drop of 1.29% despite contending with significant challenges.
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Advanced practice providers saw a slight bump in compensation in 2020.
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Physician compensation during the COVID-19 pandemic remained largely unchanged, even as just about everything else across the healthcare landscape shifted, a new report shows.
“2021 MGMA Provider Compensation and Production”; Medical Group Management Association
NCHS: 3.8% Birth Rate Decline in 2020
Per the National Center for Health Statistics, an estimated 3.61 million babies were born in 2020, a decrease of 140,000 or 3.8% less than in 2019. The number of births is at its lowest level since 1979.
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It was the sixth straight annual decline in the number of births. US births in 2020 were about 700,000 fewer than the 2007 peak of 4.3 million.
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The other two primary measures of births in the US, birth rate (births per 1,000 people) and fertility rate (births per 1,000 women aged 15 to 44) also declined for the sixth straight year.
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20 states had a drop in births greater than the national decline of 3.8%.
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In New Mexico, they decreased by 7.16%; in Wyoming, they fell by 6.81%, and Hawaii’s fell by 6.35%. New Hampshire had the smallest decline: 0.6%.
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Utah had the highest birth rate of all states in 2020: 14.1 births per 1,000 people. Vermont had the lowest rate at 8.2 births per 1,000 people.
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The share of births for women between 30 and 44 is up, while it’s down for teen mothers. The percentage of all births for people aged 15 to 19 has declined by more than half in the last 10 years.
“Births: Provisional Data for 2020”; May 2021; National Center for Health Statistics
Millman Medical Index: Forecast for 8.4% Increase in Healthcare Costs
Findings of the 2021 MMI:
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Healthcare costs decreased year over year with our restated 2020 MMI being 4.2% lower than the 2019 MMI value. Eliminated and deferred care has more than offset the cost of COVID-19 testing and treatments. All categories of healthcare costs except prescription drugs with and without rebates are lower in 2020 compared to 2019.
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Our 2020 MMI report suggested that COVID-19 testing and treatment costs “may be dwarfed by the spending reductions resulting from deferrals of care.”
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Digital health, telehealth, and mail-order pharmacy utilization increased as individuals accessed care in new ways. It is uncertain whether these new behaviors will persist, revert to pre-COVID-19 behaviors, or change in some new way when the public health emergency is over.
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Care management will be a key in controlling healthcare costs in 2021 and beyond, perhaps by leveraging the new care access habits formed by many individuals during the height of the pandemic.
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We project healthcare costs will grow by approximately 8.4% for the MMI family from 2020 to 2021. This rate, driven by a forecasted rebound in healthcare utilization, is higher than historical healthcare cost increases and gross domestic product (GDP) growth over the past five years.
“2021 Milliman Medical Index” May 27, 2021; Milliman
CDC: Suicide Rate Declined Prior to Pandemic
Per the US Centers for Disease Control and Prevention, the national suicide rate decreased from 14.2 per 100 000 individuals in 2018 to 13.9 per 100 000 individuals in 2019, representing 833 fewer suicides–first year-over-year decrease since 1999.
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The overall age-adjusted rates indicate a decrease in suicide rates between 2018 and 2019 for White and American Indian or Alaska Native individuals, reflecting the decrease in total deaths. The age-adjusted rate increased for Black and Asian or Pacific Islander individuals. The increasing trend for these groups began in 2014; between 2014 and 2019, the suicide rate increased by 30% for Black individuals (from 5.7 to 7.4 per 100 000 individuals) and 16% for Asian or Pacific Islander individuals (from 6.1 to 7.1 per 100 000 individuals).
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For both male and female youth aged 15 to 24 years, suicide rates were higher among American Indian or Alaskan Native youth (e.g., 2019 rate among female youth: 23.0 per 100 000 individuals) and White youth (6.1 per 100 000 individuals) relative to Black youth (4.3 per 100 000 individuals), Asian or Pacific Islander youth (5.1 per 100 000 individuals), and Hispanic youth (4.4 per 100 000 individuals) for all years.
Ramchand et al “Trends in Suicide Rates by Race and Ethnicity in the United States”; May 26, 2021; JAMA Network
REGULATORY / GOVERNMENT NEWS
Court Allows Purdue Settlement to be Put to a Vote
A federal bankruptcy judge in New York indicated Wednesday that he would permit Purdue Pharma’s proposal to reorganize as a nonprofit company to be put to a vote by thousands of plaintiffs, who have sued to compel the maker of OxyContin to help pay for the terrible costs of the opioid epidemic. The restructuring plan is at the centerpiece of an intensely negotiated blueprint for a collective settlement with more than 600,000 claimants who contend that for two decades the company falsely and aggressively marketed its prescription opioid OxyContin as a nonaddictive painkiller, and as a result contributed to hundreds of thousands of opioid-related overdoses and deaths. Besides protecting the company from further legal action over opioids, the plan includes a blanket release from civil lawsuits for Purdue’s owners, members of the billionaire Sackler family. In return, the Sacklers have agreed to relinquish ownership of Purdue and contribute $4.5 billion to the settlement, including $225 million to the federal government. The money would be paid in installments over nine or 10 years, most of it going to a national opioid abatement trust fund, which would then be disbursed to states and municipalities to support addiction prevention and treatment programs. It is estimated that 100,000 individual claimants, including relatives of people who died from prescription overdoses, will receive compensation ranging from $3,000 to $48,000 apiece — before lawyers’ fees and costs are deducted.
Jan Hoffman, Mary Williams Walsh “Judge Clears Purdue Pharma’s Restructuring Plan for Vote by Thousands of Claimants”; May 26, 2021; New York Times
Urban Institute: Marketplace Premiums Flat but Vary Widely Across States
UI researchers examined Affordable Care Act (ACA) Marketplace premiums at the state and 52 rating regions in 20 states, focusing on the changes between 2020 and 2021. Highlights:
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Marketplace premiums: In 2021, the ACA Marketplaces entered their eighth year of operation and premiums have stabilized. The national average benchmark premium fell 1.7% in 2021, following decreases in both 2019 and 2020. “This decline is remarkable because it contrasts with premium increases in the employer-sponsored insurance market over the same period (+4.0%). However, variation in premiums both across and within states is significant. Example: Iowa had a 31.3% drop, down from $689 a month in 2020 to $474 per month in 2021; Alabama saw a 0.2% increase, essentially unchanged at $550 a month and Minnesota had the lowest benchmark premium of $292 while Wyoming had the highest at $782.
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Medicaid expansion impacts marketplace premiums: The presence of a Medicaid insurer was associated with lower premiums. Similarly, regions in states that expanded Medicaid or established state-based Marketplaces had lower premiums than regions in states that had not enacted such policies.
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Participation by health insurers: Two large national insurers, Humana and Aetna, left the market in 2017. United Healthcare and Cigna have increased the number of regions in which they participate along with small increases in participation by Blue Cross and Blue Shield. Since 2017 Centene, a Medicaid insurer, has increased participation dramatically. Two new insurers, Oscar and Bright have also increased participation. Oscar was in three rating regions in 2017 and 21 in 2021. Bright was in no rating regions in 2017 and now participates in nine.
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The national average benchmark premium for a 40-year-old, non-smoker with an ACA-backed plan in 2021 was $443 a month, a decrease of 1.7% from 2020 vs. premium increases of 4% in 2019.
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In contrast, premiums for employer-sponsored insurance rose 4% in 2019 and 2020, with no data yet available for 2021.
“Marketplace Premiums and Participation 2021”; May 21, 2021; Urban Institute
