Healthcare Reform

Post-election Washington policy outlook on health policy priorities

January 22, 2021 12:48 am
  • HFMA’s Chad Mulvany says he believes there will be opportunities to get bills passed on narrowly focused bi-partisan issues despite the potential political divide between the House and the Senate.
  • The pandemic and the associated economic damage caused by the need to social distance will be the top priorities for the new administration.
  • Hospitals will need more PRF funding given the growing coronavirus caseloads that are taxing capacity in some markets.

I think at this point we have enough clarity to start to speculate on health policy priorities/changes in the next 24 months. Unpinning everything else that follows is the assumption that we’ll have divided government with the Democrats retaining the House, Republicans holding the Senate by winning at least one — if not both — of the Georgia runoffs and President-elect Biden’s campaign surviving the multitude of legal challenges President Trump is throwing at vote counts in various states. Obviously, if one of the three assumptions changes, all bets are off, and I’ll need to revisit this.

Divided government — it’s not so bad

If I’m a plan or provider in the current environment, divided government is probably my ideal situation. The likelihood of sweeping legislation in general is low (Assuming a Biden administration, sweeping legislation might expand coverage but would likely bring a public option and other pay-fors that would have a negative impact on payment rates and threaten plans. Conventional wisdom holds that cuts in payment rates as pay-fors would offset any gains in coverage, but the reality depends on the final legislative product). However, I do think there will be opportunities to get bills passed on narrowly focused bi-partisan issues, which we’ll talk about in a bit.

Specifically, what are the pros and cons over the next two years of divided government?

The pros are as follows:

  • The public option is off the table.
  • No decrease in the Medicare eligibility age, which could result in an acceleration in payer mix degradation if large numbers of employed, near-retirement-aged individuals opted into Medicare early.
  • Increased enrollment of the uninsured in Medicaid and the exchanges as a result of administrative changes.

The cons are as follows:

  • Smaller COVID-19 relief bill(s) than if there was a D sweep. With the change in administration, I think we will see Republicans revert to their traditional role as deficit hawks.
  • To the previous point about deficits, I would anticipate that anything the Biden administration wants to do in the healthcare space will require offsets. And my guess is those offsets will likely come from reductions to payments to other provider types as we saw under the Obama Administration. The “SGR fixes” are probably the easiest analog as the various offsets (e.g.,  decreasing the allowable reimbursement percentage for Medicare bad debt, the non-exempted HOPD policy) reallocated money from one group of providers to another.
  • Beyond moving legislation, Republican control of the Senate will likely pull Biden’s cabinet (and other sub-cabinet level appointees who require senate confirmation) back to the middle. It will inherently be harder, for example, to get a progressive who has been a strong advocate for ‘Medicare for All’ though the Senate to lead the U.S. Department of Health and Human Services or someone like Senator Warren confirmed as the treasury secretary.

The other thing to keep in mind, which will dictate how much Biden can accomplish of his healthcare agenda to expand coverage, is the overall environment. If there are other crises howling at the door, there’s less time and oxygen to focus on other issues.

Addressing immediate needs

 The pandemic and the associated economic damage caused by the need to social distance will be the top priorities for the new administration. While Speaker Pelosi and Senate Majority Leader McConnell have indicated they would like to pass the next round of COVID relief in the lame-duck Congress, that’s not assured, given how far apart they are on both price tag and priorities for funding.

What is painfully clear is that hospitals will need more PRF funding given growing caseloads that are taxing capacity in some markets. We’re seeing an increasing number of hospitals, which across the country, are voluntarily reducing or delaying non-emergent procedures to preserve capacity and ensure that not only can they provide care for COVID patients but help those who have accidents and heart attacks.

Time sensitive items to monitor

We’re now also seeing concerns that lab testing capacity is being taxed as well by the spike in new cases. Beyond additional PRF to compensate providers for the additional expenses attributable to COVID-19 and lost revenue related to COVID-19, there are two time- sensitive items that providers will want to monitor:

  1.  Extensions of the moratoriums on the Medicaid DSH cut, which expires Dec. 11
  2.  The Medicare sequester, which expires Dec. 31

If Speaker Pelosi and Majority Leader McConnell are unable to reach an agreement, the new administration will lose bandwidth and time here in having to push for a stimulus package immediately after inauguration. Same with a FY21 budget. The continuing resolution ends on December 10. While both sides are looking to move full-year packages, if they hit a stumbling block and punt another continuing resolution to later in the year, the new administration will need to pick that up too. And then there’s Texas v. California, which has been covered pretty exhaustively. While you could address some of the new administration’s broader healthcare priorities in either COVID-19 relief legislation or a budget bill, the risk is the more ancillary items you add to a bill the more complex and contentious the negotiations becomes..

The other problem confronting the American people and this administration that no one in D.C. or outside of D.C. is really talking about is the Part A trust fund. The Congressional Budget Office estimates that the hospital insurance trust fund will be insolvent sometime in 2024 (during the next presidential election year). And there are private sector economists who believe the expiration date could be as early as 2022. If Congress doesn’t prevent this, the health insurance trust fund would only be able to meet 83% of its projected obligations on a cash in/out basis.

Offsetting the cost of addressing this problem could lead Congress to revisit other reforms — like surprise billing and drug pricing proposals — as “pay-fors.”  You might also see the re-imposition of a “plug reduction” to market basket updates (e.g., the .3% in 2014 not related to productivity) that was included in the ACA for the first 10 years of the law to help pay for expanded coverage. I could also see a Part A payroll tax increase on high earners (.9% for individuals earning over $200k, families earning over $250k) similar to one of the tax pay-fors in the ACA. Both helped significantly extend the life of the trust fund back in 2010.

Given the pending insolvency, I anticipate the new administration will also continue the current administration’s s push to expand site-neutral payments. This may include an attempt to move legislation through Congress that creates a site-neutral payment system for certain PAC providers that has been recommended by MedPAC. Any efforts to develop site-neutral payments for common institutional PAC providers may have spill-over effects on providers ability to generate savings in APMs in the long-term.

Beyond sapping the administration’s and Congress’s time dealing with these issues, every dollar used to fight the pandemic or extend the life of the trust fund is one less dollar that can be used for other policy priorities.

In the healthcare space, this may negatively impact any prospects for legislative relief for specialists who will be negatively impacted if CMS finalizes the proposed increase in payments for E&M services that is offset — to meet statutory budget neutrality requirements — by an approximate 10% reduction in the conversion factor. It also leaves less money in the till to respond to pressure from stakeholders to fix the Quality Payment Program. Items on that wish list include extending the advanced alternative payment model bonus, providing additional funding for the MIPS exceptional performer bonus and addressing the 0% increase in the physician conversion factor through 2025.

Potential areas of bi-partisan consensus

So with the oxygen left in the room, where might there be areas of bi-partisan consensus where legislation might be moved, or administrative action might occur?

There are actually quite a few areas of concensus. They include surprise bills, price transparency, alternative payment models and telehealth.

Surprise bills: President-elect Biden, like everyone else in Washington, has said he’s committed to stopping surprise billing. And this is a bi-partisan issue on the surface if there ever was one. However, like a good politician, he has not released his plan for how to resolve the sticky wicket issue of what amount to pay out of network (OON) providers for their services. This remains a dispute between payers and providers that was the subject of an aggressive funding campaign on behalf of certain physician groups to push back against using a market average benchmark to determine the payment rate in these circumstances. Health plans favor using some form of market benchmark. This solution incorporated in at least one of the leading bills. Providers on the other side favor an arbitration model that might be conceptually similar to New York state’s method of resolving OON bills. It’s unclear at this juncture what will break this log jam given that Congress is caught between your average American, who wants this problem fixed, and several influential lobbies who have differing opinions on the solution.

Price transparency: Absent a court ruling overturning the hospital requirement to post prices for 300 shoppable services and machine-readable files, that policy will go forward. And I would assume the same for the recently finalized health plan price transparency rule (as of Nov. 17 I don’t know of any pending lawsuit challenging this rule, and there hasn’t been any strong indication from plans or their trade associations they intend on challenging this). There’s no one in Congress or the incoming Biden administration, that I’m aware of, that has publicly opposed the idea of healthcare price transparency. To help its members prepare for this requirement, HFMA is currently holding a virtual Price Transparency Workshop series.

On the purely speculative front, the Biden administration may revisit the requirement that hospitals report their median Medicare Advantage rates for cost reports filed after Jan. 1, 2021. The intent of that requirement is to use the data collected to calculate MS-DRG weights starting in FY2024. The theory is to replace the cost-based MS-DRG weights with weights that incorporate more market data. While the cost-based weights have plenty of issues that HFMA is working with CMS to try and address, using MA data to set weights doesn’t suddenly make fee-for-service (FFS) payments more market oriented or improve them in any appreciable way. The requirement increases hospital administrative burdens. Further, if CMS were to actually start calculating  MS-DRG payments using this data, it would further increase the inaccuracy of FFS payments. I such a reversal occurs, it will likely appear in the 2022 IPPS proposed rule that comes out in April  of  2021.

Telehealth: The COVID-19 public health emergency resulted in temporary expanded access to telehealth services that have generally been very popular and created interest in making many of these changes permanent. CMS has limited authority to continue changes on a permanent basis after the public health emergency (PHE) expires. The statute limits the provision of telehealth services to those that originate from healthcare sites in rural areas. In these situations, the statute requires that Medicare pay the healthcare site from where the telehealth service originates a facility fee.  Broadening the telehealth benefit to allow telehealth services to originate from non-rural areas or a patient’s home (other than where already allowed by statute) would require statutory change.

While I think that’s in the cards, the timing of it is uncertain. We may have to wait until the PHE is      winding down before Congress pivots their attention to it, given they generally need a pressing          deadline to act on anything and there are waivers in place that provide this flexibility today. Waiting to the last minute would also provide additional data that could be used to determine the cost impact of eliminating the current statutory barriers that prevent broad access to telehealth services for Medicare beneficiaries.

Alternative Payment Models: APMs in the Medicare program enjoy bi-partisan support. And I would expect to see that support continue under the new administration. It’s unclear whether the Trump administration’s recent focus on creating new and revising current models that would yield higher net savings for Medicare will be carried over to the Biden administration. Given the rapidly approaching insolvency of the Part A trust fund, I would anticipate that the need for savings may play more prominently in new models or tweaks to existing models. I would also anticipate that they will pick up the ball and develop mandatory bundles as CMMI Director Brad Smith suggested, especially if Congress doesn’t move on site-neutral PAC payments.

Beyond potentially changing the terms of models (or developing new models) to generate more savings to the program, I also anticipate that CMMI under the Biden administration will look for additional ways that providers participating in APMs can address social determinants of health and reduce disparities in health equity. This will likely mean both tweaks to existing programs (e.g., broader waivers) or possibly new models focused on addressing social determinants of health.

In terms of accelerating the transition, I don’t see this Congress or the administration doing anything overt outside of Medicare. And when I say overt, I’m thinking about changing the ERISA statute to encourage employers to use APMs or requiring carriers in the Federal Employees Health Benefits Program-use models, similar to those developed by CMS and CMMI,  to accelerate the adoption of value-based payments in the private sector. And I continue to believe this is a real miss.

Additionally, there may be some limited opportunity to address drug prices. I anticipate that the international pricing index (IPI) model for Part B drugs is proposed in some form by the Biden administration (if the current administration doesn’t release it on the way out the door). The Trump administration’s proposal on it has been stalled in review at the Office of Management and Budget since June of 2019.  

Even though the IPI is opposed by pharmaceutical manufactures, providers and Republicans in Congress, it’s conceptually similar at a high level to something the Obama administration issued a request for information (RFI) for but never proposed. There also is a bipartisan drug price bill in the Senate that would make changes to Medicare by adding an out-of-pocket maximum for beneficiaries and capping drug-price increases at the rate of inflation. At least 13 Republican senators supported the measure, but Senate Leader McConnell did not bring up for a vote.

Places where opportunities for compromise may not exist —coverage expansion

Coverage expansion is a key policy priority for the incoming administration. However, if the Republicans hold the senate as anticipated, making additional gains in this area will largely be limited to what can be done administratively in the exchanges and Medicaid program. And, as mentioned above, a public option or a decrease in the Medicare eligibility age are all but off the table for the next two years.

Exchanges: It’s likely that many of President-elect Biden’s early actions related to exchanges will be directed at overturning President Trump’s actions over the prior four years. These include:

  • Increasing funding for exchange outreach and enrollment
  • Extending the open enrollment period for the federal exchanges back to 90 days
  • Creating an additional enrollment period for federal marketplaces if we see another spike in unemployment claims for individuals to enroll (similar to what some demanded earlier thisyear during the first wave of COVID layoffs and furloughs)
  • Continuing to permit the practice of “silver-loading,” which actually increased the subsidies available to individuals

We may also see the new administration use the regulatory process to reintroduce limits on short-term and association plans. However, this is not a sure thing. President-elect Biden’s team will need to weigh the degree to which these plans accelerate adverse selection in the exchange markets versus the optics of taking coverage away from an estimated three million Americans who have purchased cheaper, non-ACA compliant products.

The other area we see the administration attempt to use its regulatory authority is a re-interpretation of the ACA to fix the “family glitch.” The current determination of whether an employed individual has access to ACA marketplace subsidies is based on whether or not the cost of insuring the employee is affordable, not the whole household. Reinterpreting the statute to base that calculation on the cost of covering the whole family would likely be subject to legal challenge. Given the impact on working families and the optics of the problem, this may be an area where  narrowly tailored legislation to fix this issue could garner the support of one or two Republican senators.

Beyond the family glitch, it’s highly unlikely we will see increased subsidies in the exchanges for those above 300% FPL, or any subsidy for those over 400% FPL as was outlined in the Biden campaign’s healthcare plan. Expanding subsidies would require legislation that would be difficult to get through what we presume will be a Republican-held Senate. Beyond that, there’s also the issue of how to pay for it.

Medicaid: In general, similar to what we saw over the summer with Missouri and Oklahoma, I suspect we will see a few more non-expansion states take the expansion dollars over the next two years. And similar to the two states that elected to expand in 2020, it will likely be driven by state ballot initiatives. Where possible, the Biden administration will try to provide waivers to make it easier for holdout states to expand.

Additionally, I think it’s a given the new administration will rescind guidance encouraging block grants and work requirements. Given that the work requirements policy has had a rough go of it in the courts, this will likely be relatively easy to unwind. Tennessee is the only state with a block grant proposal under consideration by CMS. The proposal has been under review since the fall of 2019. While the administration may approve the plan in its final days, the longer than anticipated review may indicate CMS has concerns about the plan

The new administration will also undertake the regulatory process necessary to return to the narrower definition of who is likely to be considered a “public charge” for immigration purposes that existed before the Trump administration finalized changes. These changes have been the subject of multiple lawsuits and are estimated to negatively impact Medicaid enrollment

Finally, there’s the Medicaid Fiscal Accountable Rule. While CMS Administrator Verma tweeted in September that CMS was withdrawing the rule, it’s still on the unified agenda. More concerning to states and providers, Administrator Verma recently hinted in comments to a National Association of Medicaid Directors meeting that the administration might still yet finalize the rule.

If finalized, the rule would have significant implications for the way states finance their Medicaid programs and pay for services, limiting their ability to make supplemental payments. The AHA estimates that “nationally, the Medicaid program could face total funding reductions between $37 billion and $49 billion annually, or 5.8% to 7.6% of total program spending. Hospitals specifically could experience reductions in Medicaid payments of $23 billion to $31 billion annually, representing 12.8% to 16.9% of total hospital program payments.” While the impact would vary based on a state’s use of supplemental payments, it would negatively impact both red and blue states. If the Trump administration chooses to finalize this rule, I suspect you would see the Biden Administration revisit it.

Public Option: With Republicans holding the Senate, I don’t see a public option happening in the next two years. And even if the Democrats sweep the Georgia runoffs, I still struggle to see it happening with a 50-50 split and VP-elect Harris breaking the tie.

I could see the progressive wing of the party making a strong push for it. This would put Democratic senators in purple states (Nevada, Colorado, Arizona) and House members in purple districts who are up in the 2022 cycle for re-election in a bit of a bind. If they vote for a public option, it will be held against them by their Republican opponent in the general election. However, if they don’t vote for it, they’re almost guaranteed to face a primary challenge from a more progressive candidate.

While I think this is off the table at the federal level, I do think it’s in the realm of possibility that another progressive state joins Washington and passes a public option. I suspect the Biden administration will signal an openness to public option proposals at the state level and work with states, providing waivers if they’re requested/needed, to test approaches that the incoming Congress may not be open to at the federal level.


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