By Anne Phelps, principal, US Health Care Regulatory leader, Deloitte & Touche LLP and Sarah Thomas, managing director, Deloitte Center for Health Solutions, Deloitte Services LP
On March 10, the House of Representatives approved nearly $1.9 trillion in new federal spending to address the nation’s ongoing public health and economic crisis. The American Rescue Plan Act of 2021, which now heads to the White House for President Biden’s signature, generally follows proposals the president outlined prior to his inauguration, especially around health care. This includes funds that will go directly to individuals through stimulus checks, an extension of pandemic unemployment benefit programs, and additional economic support.
How does the COVID relief bill address public health?
The new legislation includes funding to cover the costs of vaccination distribution and administration, as well as for public campaigns that encourage people to get vaccinated. Funds will also go to state and local jurisdictions to support testing and contact tracing, a need that will likely continue as the administration monitors the course of the pandemic and as more people become vaccinated. Funds are also available to support sequencing of the virus to monitor variants and mutations. Specific investments will be dedicated to:
- The US Department of Health and Human Services (HHS) to detect, diagnose, trace, and monitor COVID-19 infections, and to establish, expand, and sustain a public health workforce. HHS will also receive funding for the research, development, manufacturing, production, and purchase of vaccines and therapeutics. The agency will also receive funding for activities and workforce related to genomic sequencing, analytics, and disease surveillance.
- The Centers for Disease Control and Prevention (CDC) to distribute and administer COVID-19 vaccines and supplies. Funding will also be used to support states/localities, community vaccination centers, mobile vaccination units, IT and data enhancements, facility enhancements, and public communications. The CDC will also receive funding to build confidence and education around the vaccines.
- Community Health Centers to carry out COVID-19 vaccine-related activities.
Which provisions affect hospitals and health plans?
Some of the funding included in the legislation will be used to help people pay for health insurance in three main categories:
- People who have lost their jobs due to the pandemic and are paying premiums under a Consolidated Omnibus Budget Reconciliation Act (COBRA) policy.
- People who purchase individual coverage through a public health insurance exchange.
- People who qualify for Medicaid. The legislation includes a provision that would increase federal matching funds for states that expand Medicaid eligibility. It also includes general funds for states to help pay for other COVID-related expenses.
Support for coverage helps individuals access insurance and health care, but also could help reduce the number of people who are uninsured, which could benefit hospitals and health plans from a financial perspective. The coverage provisions are temporary and will end over the next year or two.
Unlike in earlier federal-relief packages, the new law has less direct funding for hospitals, despite lobbying by the hospital industry. We see no major regulatory changes, no significant Medicare policy or reimbursement changes, and nothing to extend the suspended 2% Medicare sequestration payment reduction, which is set to expire on April 1. This is likely because the reconciliation process does not allow for policy changes. However, the legislation does include additional funding for rural hospitals, which lawmakers added as the legislation worked its way through the Senate.
Which provisions affect the life sciences sector?
Expanding access to health coverage will likely help individuals pay for prescription drug coverage. Moreover, additional funding for testing and vaccinations is good news for vaccine and test manufacturers. One provision included in the legislation would eliminate rebate caps under Medicaid beginning in 2024. Medicaid rebate caps limit the rebates that Medicaid programs receive when pharmaceutical companies increase prices.
Policies on health equity
The American Rescue Plan includes a host of policies to improve economic and health equity for Black, Indigenous, and people of color. This includes funds to support historically Black colleges and universities, the Indian Health Services, and many other organizations. Deloitte’s Dr. Kulleni Gebreyes will take a closer look into the implications of those provisions in a future blog.
Here’s a look at three areas we are watching:
- Future Biden priorities could come into focus: Once this major piece of legislation is enacted, we expect the administration will take advantage of the momentum to address other priorities—such as climate change and infrastructure. We could start to see more examples of policies that have the potential to raise revenue to pay for other government priorities. The creation of a public option, for example, could save federal dollars by offering a government-backed health insurance alternative. During his State of the Union address, which has yet to be scheduled, the president could lay out some of those priorities as well as the federal budget proposal.
- More focus on Medicare: In the coming weeks, we expect the Medicare Trustees’ report will provide an update on the state of financing for this program. We also expect to see some cost estimates on the net effect the pandemic has had on Medicare spending to date, and projections for the future. We could see action if this report shows that funding for the Part A trust fund will be insufficient to pay for all the bills (inpatient hospital care is mostly funded through Part A), although the Congress has been slow to act on previous reports showing the potential for this problem. This could lead to some changes to Medicare financing or encourage efforts to find savings in the Part A program.
In the context of finding savings in Medicare, we could see broader dialog about drug pricing, although any savings in today’s Part D program wouldn’t address the Medicare Part A trust fund issue. In addition, the Medicare Payment Advisory Commission (MedPAC) last week recalculated the ratio of spending in the traditional program to Medicare Advantage (MA) spending. MedPAC concluded that the program could cut payments to MA to bring these two numbers more in line without beneficiaries losing access to coverage, though they would lose some access to benefits.
Both of these issues are likely to be contentious with stakeholders. Drug companies and health plans are likely to enlist beneficiaries and others in resisting payment cuts or other policies that would undermine the value they offer. It is unclear when or whether the Biden administration will move to expand Medicare coverage to people age 60 to 64. This idea, which was floated during the presidential campaign, certainly would have a negative budgetary impact in terms of federal spending.
- Additional regulatory activity: On the regulatory side, new leadership and priorities at health agencies are emerging. For example, new leadership at the US Centers for Medicare and Medicaid Services (CMS) is reviewing Center for Medicare & Medicaid Innovation (CMMI) payment models and putting some of the previous administration’s programs and regulations on hold or deferring them. We likely will see activity start to accelerate—not only in the usual regulations that come out each year, but also once new leadership decides on its priorities.
In addition to revisiting new payment models in CMMI, key areas we are keeping an eye on are:
- Decisions about which virtual health services Medicare will continue to cover
- Timeline and enforcement for price-transparency and interoperability requirements for health systems and health plans
- New policies (potentially including new payment models) aimed at increasing transparency around health equity and creating incentives for organization to make improvements in this area.
Looking at some of the key priorities that President Biden laid out when he assumed office gives us a good idea about the way the wind is likely to blow in the future. We anticipate that we will learn about the direction of any new legislation and regulations before they are finalized, so we can help readers understand the implications before they need to adapt to them. As each agency head assumes office, we expect we will begin to see more policy directions articulated in presentations at conferences and during hearings.