Perspectives

What might Donald Trump’s election mean for health care?

Health Care Current | November 10, 2016

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

Our Take

What might Donald Trump’s election mean for health care?

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 Tuesday, Donald Trump was elected the 45th president of the United States and the Republicans retained majorities in both the Senate and the House. What does this portend for our health care system? President-elect Trump ran on one main policy issue related to health care – to repeal the Affordable Care Act (ACA). Could he, together with a Republican-led Congress, do this? And what might his election mean more broadly for health insurance exchanges, value-based care initiatives, and consumers’ and employers’ desires for more affordable health care?

In short, the Trump administration and Republican-led Congress will have a great deal of control over both the legislative and regulatory process. This will give them the ability to make significant policy changes to the ACA and other health care laws and regulations. But, full repeal of the ACA will likely be difficult.

After being sworn in on January 20, a priority in the new administration will be to assemble the cabinet and guide the nominees through Senate confirmation. In the most recent elections, the secretary of the US Department of Health and Human Services (HHS) was confirmed in the first few months – Tommy Thompson was confirmed in January of 2001 under the Bush administration, and Kathleen Sebelius was confirmed in April of 2009 under the Obama administration.

An additional priority will be to produce the President’s budget, which is technically due to Congress on February 6, 2017. The first President’s budget is critical because it outlines the new administration’s policy priorities. Congressional Republicans are likely to want to move quickly to adopt a budget resolution and to allow for a budget reconciliation bill. This bill is the tool by which the Senate could pass significant revenue and spending measures, including changes to the ACA, because it only requires 51 votes. However, reaching agreement between the two chambers on a budget may not be easy, and budget rules are in place that limit their ability to fully repeal the ACA through this vehicle.

Further, the Republican Congress has said it would like to pair a “repeal” bill with a “replace” bill that deals with existing insurance reforms, the approximately 20 million individuals receiving coverage through the insurance exchanges and Medicaid, and a host of other delivery reforms and revenue provisions contained in the ACA that have been implemented over the past six years. While the House Republicans, under Speaker Ryan’s leadership, have detailed a plan, policy changes with the many moving parts and constituencies and associated budgetary costs will need shaping through a deliberative process. This will not be an easy problem to solve and will likely need to occur through the normal legislative process. It would also require Democratic support in the Senate to garner 60 votes to pass. Thus, a key challenge will be to forge compromise in the Congress on what is to replace the ACA.

What other policy action on health care needs to happen?

Some other issues to watch on the legislative and regulatory agenda include:

  • More authority given to states: The new Trump Administration may work closely with states, using their waiver authority under the ACA and Medicaid to increase flexibility regarding provisions and funding under these programs.
  • Expiring health care authorities: Action will be needed in 2017 on a host of expiring provisions, including Medicare extenders, funding for the Children’s Health Insurance Program (CHIP), and user fee agreements between the US Food and Drug Administration (FDA) and the pharmaceutical and device industries.
  • Discussions about repeal of the Cadillac tax: This policy was delayed until January 2020, but is still slated to happen. President-elect Trump and the House Republicans have said that they support repeal. However, repeal would require finding cost savings to make up for the lost revenue. Republicans have suggested replacing the lost revenue from the Cadillac tax by repealing or reducing the tax exclusion individuals receive for their employer provided benefits, but this too is not without controversy and may be difficult to pass.

What does the election mean for consumerism and delivery system reform?

Two trends of keen interest to our life sciences and health care clients have been purchasers’ increased emphasis on health care consumers and on initiatives like the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). These transformations could change the focus toward finding efficiencies and lowering costs in health care. Mr. Trump has not indicated any interest in unravelling payment reform or the focus on reducing cost and improving quality. MACRA was a bipartisan, bicameral agreement to address a long-standing problem from Congress and the medical profession’s perspective. MACRA is poised to transform our delivery system as it creates financial incentives for clinicians to move away from traditional volume-based services to new value-based and coordinated-care models. As the final rules on MACRA have been recently released, it is likely to move forward.

The increased emphasis on consumerism and affordability – including greater consumer responsibility for paying for health care – is likely to stay and perhaps even grow with President-elect Trump. Vice President-elect Pence is a strong promotor of adding greater financial responsibility in Medicaid programs. High deductibles, premiums, and drug prices are critical issues that are unlikely to go away. Other aspects of consumerism – having people more actively choose among health plans and providers, increasing transparency, and emphasis on patient experience in health care, and engagement with consumers through digital and social strategies–also are likely to continue.

Stakeholders in the health care world are adjusting to what few may have seen coming. It will be interesting to us policy watchers to follow the first months of the new administration – the announcements of the leadership, policy priorities, and first stakes in the ground. As the political reins and stewardship over our current health care laws are turned over, President-elect Trump will likely seek to make policy changes, particularly to the ACA. But, we need to balance Trump’s desire to make policy changes with the realities of the legislative process.

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Implementation & Adoption

President-elect Trump’s key policy positions

President-elect Donald Trump posted his policy positions on his website and regularly updated them throughout the campaign. We also include portions of the “A Better Way” platform from the House Republicans, as the Congress and President-elect Trump will likely work together on policy changes. Most of these policy changes would require changes to the law.

Policy area

Description     

Affordable Care Act (ACA)

President-elect Trump would:

  • Call for Congress to repeal the ACA immediately.

House Republicans would:

  • Repeal and replace some of the key provisions of the ACA. Notably, they would keep many of the basic protections included in the ACA intact, including not denying coverage based on pre-existing conditions and allowing people to stay on their parents’ coverage until age 26.

Exchanges

President-elect Trump would:

  • Allow individuals to fully deduct health insurance premium payments from their tax returns.
  • Modify existing law that inhibits the sale of health insurance across state lines.
  • Make contributions into health savings accounts (HSAs) tax-free and able to accumulate. These accounts would become part of the individual’s estate and could be passed on to heirs without estate tax.

House Republicans would:

  • Repeal the ACA exchanges.
  • Provide a tax credit in the form of a monthly payment to use toward purchasing health insurance coverage.
  • Expand use of HSAs and other consumer-oriented options for coverage.
  • Encourage expansion of private exchanges by allowing consumers to get tax credits through multiple portals.
  • Allow the purchase of plans across state lines.

Cadillac tax

House Republicans would:

  • Repeal the Cadillac tax and cap the tax break on employer-based premiums.

Medicare

President-elect Trump would:

  • Protect Medicare and preserve it for future generations.

House Republicans would:

  • Move to a premium support model that would use an income-adjusted contribution toward a beneficiary’s choice of plan.
  • Repeal the Medicare Advantage (MA) benchmark caps, coding payment adjustments, Independent Payment Advisory Board, and the US Centers for Medicare and Medicaid Services (CMS) Innovation Center.
  • Combine Medicare Parts A and B in the premium support program.
  • Create a Medicare Exchange, which would allow beneficiaries to shop for MA plans and traditional Medicare in one place.

Medicaid

President-elect Trump would:

  • Turn Medicaid into a block-grant program, providing states with an annual lump sum payment for their Medicaid programs.

House Republicans would create two options for states to fund Medicaid:

  • Per-capita allotment (would give states federal funds based on the four beneficiary categories [aged, blind and disabled, children, and adults]).
  • Block-grant funding.

Drug pricing

President-elect Trump would:

  • Remove barriers to drug providers that offer “safe, reliable, and cheaper products.”

Opioid abuse

President-elect Trump would:

  • Work with state and local governments to increase access to treatment through provisions similar to the bipartisan Comprehensive Addiction and Recovery Act.
  • Lift the cap on the number of patients a physician could treat for addiction.
  • Limit the number of schedule II opioids manufactured in the US.
  • Direct the White House to work with US Customs and Border Protection and Immigration Customs Enforcement to stop the flow of drugs from Mexico and China.

Veterans

President-elect Trump would:

  • Appoint a new Veterans Affairs (VA) secretary.
  • Discipline and remove high-level VA employees that have “violated the public’s trust.”
  • Pass legislation to allow the VA secretary to discipline or fire any employee that has put veterans’ health, safety, or well-being in jeopardy with their actions.
  • Allow veterans to seek care at a private organization rather than at VA, if they desire.


(Sources: Speaker of the House, Paul Ryan, "A Better Way: Health Care,” June 22, 2016, http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf; Donald Trump, “Healthcare Reform,” https://assets.donaldjtrump.com/Healthcare_Reform.pdf; Donald Trump, “Veterans Affairs Reform,” https://www.donaldjtrump.com/policies/veterans-affairs-reform; Donald Trump, “Donald Trump outlines plan to end opioid epidemic in America,” October 15, 2016, https://www.donaldjtrump.com/press-releases/donald-j.-trump-remarks-in-portsmouth-nh)

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On the Hill & In the Courts

Potential legislative priorities for Congress during the lame duck

Now that the election is over, Congress may turn its attention back to some of the major legislative issues that are still outstanding. Congress will be back in session starting Monday, November 14 and could convene through the middle of December to address pending legislative issues.

Funding the government: Congress passed a short-term spending bill, H.R.5325 - Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act, on September 28. The bill keeps the government funded through December 9, 2016. Now, with that deadline looming, lawmakers will need to address government funding before adjourning for the year.

21st Century Cures: Medical innovation has been a large focus of both chambers of Congress, as parallel bills have been working their way through the House and Senate. However, lawmakers have disagreed on how to pay for the provisions. Several Congressional leaders have indicated that passing this legislation could be a priority for the lame duck session.

Mental health: Earlier this summer, House lawmakers passed a bill to reform mental health care in the US. The bill would authorize grants to bolster mental health treatment, improve federal mental health programs, and create a new assistant secretary role to the HHS Secretary, who would supervise mental health and substance abuse programs. It would also focus efforts on suicide prevention and early prevention and diagnosis in children.

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Regulatory issues still pending under the Obama administration

340B Drug Discount Program: Final guidance on the 340B Drug Discount Program is under review at the White House as of September 1, 2016. The HHS Fall Regulatory Agenda indicates that the final guidance will be released by December 2016. The Health Resources and Services Administration (HRSA), the agency within HHS that oversees the 340B Drug Discount Program, released draft guidance in August 2015. Stakeholders are eagerly awaiting the final guidance to see what, if any, changes HRSA incorporates into the final guidance. Provisions in the proposed guidance make significant changes to which drugs the program applies to and which provider entities are eligible for the discounts.

User fee acts: The life sciences industry has reached agreements with the FDA that outline performance goals for the agency as part of the negotiations to reauthorize the Prescription Drug User Fee Act (PDUFA), the Medical Device User Fee Act (MDUFA), the Generic Drug User Fee Act (GDUFA), and the Biosimilars User Fee Act (BsUFA). The industry has voiced strong support for the agreements, which would continue many current programs and aim to expedite approval of products. Many in the industry hope to finalize the agreements and win congressional approval during this session of Congress, but the discussions may spill into the new Congress since they do not expire until September 30, 2017.

  • The draft MDUFA agreement states that FDA would collect $999.5 million in user fees plus adjustments for inflation over five years starting in October 2017, up from $595 million in user fees over the current five-year agreement.
  • The total dollar figures for the draft agreements on PDUFA, GDUFA, and BsUFA have not been announced.

Medicare Part B demonstration: In the coming months, CMS may publish a final rule on a pilot program to change the way Medicare pays for outpatient prescription drugs under Part B. The proposed rule – published in the Federal Register on March 11, 2016–outlined a five-year pilot program through the CMS Innovation Center. Life sciences companies oppose the proposed rule, and both Republican and Democratic members of Congress raised concerns with the CMS proposal.

2018 Notice of Benefit and Payment Parameters: On September 6, 2016, the administration published the annual proposed Notice of Benefit and Payment Parameters for the ACA’s health insurance exchanges. Proposed changes to the risk adjustment program and use of special enrollment periods are intended to help boost the stability of the exchanges. CMS also proposed to create a high-cost risk pool where health plans would only be responsible for 40 percent of beneficiaries’ costs above $2 million. The proposed notice followed announcements by several national insurers that they would exit the health insurance exchanges in a number of states. See the September 13, 2016 Health Care Current for more information.

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Potential consequences for the Supreme Court

With the new president comes the opportunity to appoint the ninth Supreme Court justice. In addition, the following health care-related cases are pending consideration by the US Supreme Court.

Biosimilars: Two different cases before the Court would affect provisions under the Biologics Price Competition and Innovation Act (BPCIA). The Court will discuss whether a biosimilar applicant is required to provide a copy of its application and other manufacturing related information to the reference product sponsor within twenty days of the FDA accepting the application. It will also decide whether a notice of commercial marketing before FDA approval is effective (i.e., was it sent prematurely). According to the BPCIA, a biosimilar applicant “shall provide” (the language in question in the first issue) a notice to the reference product sponsor no later than 180 days before the date of the first commercial marketing of the licensed biological product. The ruling would be deciding on whether to make notices a stand-alone requirement, which would delay biosimilars from entering the market until 180 days after approval by the FDA.

Abbreviated new drug applications (ANDAs): Under the Hatch-Waxman Act, before a generic drug manufacturer can market a generic version, it must file an ANDA. The application then serves as an act of patent infringement, which gives the manufacturer the right to sue a generic manufacturer for patent infringement. The Court will consider whether the filling of an abbreviated new drug application (ANDA) is sufficient to subject a manufacturer to personal jurisdiction in any state where it might someday market the drug. Personal jurisdiction is normally defined by actions taken by a company, such as being incorporated in a state or selling goods there.

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Around the Country

Potential impact of election results to the state Medicaid expansion landscape

Two-thirds of states and the District of Columbia have expanded Medicaid to date, either under the ACA by making changes to eligibility criteria or through an alternative method (e.g., a Medicaid demonstration waiver). The remaining 19 states, however, have decided not to pursue the option.

32 states and the District of Columbia are expanding Medicaid traditionally or through an alternative method

With President-elect Trump’s win on Tuesday, the future of Medicaid expansion may be uncertain. Should he move forward with his campaign platform of repealing the ACA and implementing a limited Medicaid block-grant program, states may no longer have the federal funding to support their expanded Medicaid programs.

Tuesday’s election affected the political power dynamic in states, which may affect Medicaid expansion. Of the 19 states that chose not to expand Medicaid, three elected a new governor on Tuesday: Missouri, North Carolina, and Utah. While the race is still undecided, should North Carolina change administrations, it may signal an opening for the state to pursue either the traditional or an alternative method to expanding Medicaid to low-income adults. The other nine gubernatorial elections took place in states that have decided to expand Medicaid, including Montana, New Hampshire and North Dakota. For New Hampshire and North Dakota, the shifts in administration may result in new conversations, ideas, and approaches to the existing Medicaid expansion programs in place in those states.

Background: Medicaid expansion has reduced the overall number of uninsured individuals by providing access to health care coverage. The ACA provision provides federal funding to states to expand Medicaid coverage to low-income adults earning less than 138 percent of the federal poverty level. 2016 is the last year the federal government will fund 100 percent of Medicaid expansion. The payment match begins to drop in 2017 and falls to 90 percent in 2020 and beyond.

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Outlook for states pursuing Section 1332 innovation waivers

Over the past several months, several states have begun exploring Section 1332 state innovation waivers. These states hope to have their programs in effect as soon as the provision allows (January 1, 2017).

Prior to President-elect Trump’s win on Tuesday, three states had submitted Section 1332 state innovation waiver applications to HHS for review and approval.

Six other states have either released draft applications for public comment, have established task forces, and/or have passed authorizing legislation to work toward an application.

Beginning in 2017, President-elect Trump and his administration will have authority over the direction of the ACA. For the states that have begun the Section 1332 state innovation waiver process but are not yet approved, future approvals may depend on the new administration’s goals. The new administration may open new conversations and negotiations between states and CMS.

Background: As Deloitte described in State health coverage innovation and Section 1332 waivers, these waivers allow states to pursue alternative and innovative strategies for ensuring that residents have access to high-quality, affordable health insurance as long as they meet certain requirements. Within the constraints of Section 1332, states have numerous options for revamping their current approaches to providing health coverage to individuals and families. When developing their alternative approaches to health care coverage, states must address certain requirements; specifically, that coverage:

  • Be at least as comprehensive and affordable as coverage provided without a waiver
  • Be held by a comparable number of the state’s residents as coverage provided without a waiver
  • Not increase the federal deficit

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Colorado’s Amendment 69 ballot initiative: Failed

Colorado’s Amendment 69 would have established a statewide, single-payer health care system called ColoradoCare. It would have provided universal health care coverage for all Colorado residents who opted-in. Federal programs (such as Medicaid and the Veterans Health Administration) would have remained unchanged, and individuals would still have been able to purchase private health plans. But, ColoradoCare was going to redirect funding for the state’s public health plan exchange to support the single-payer system. ColoradoCare would not have charged premiums and would have limit cost sharing. To pay for this more generous coverage, Amendment 69 included supplemental taxes: a 10 percent income tax (paid for 2:1 by employers and their employees) and a 10 percent tax on non-payroll income. Both were to begin in July 2017.

ColoradoCare would have been operated under a cooperative business model, meaning state residents would retain ownership of the ColoradoCare system and elect a Board of Trustees every two years. It was to be a political subdivision of the state, so not subject to the authority of the state legislature, the governor’s office, or any administrative agency.

ColoradoCare would have provided comprehensive benefits that meet or exceed Medicaid and ACA standards. Those include inpatient, outpatient, emergent and long term care, as well as pediatric and maternity care, mental health and substance abuse treatment, drugs, medical equipment, and laboratory services. According to supporters, ColoradoCare was expected to save beneficiaries $4.5 billion in out-of-pocket expenses by 2019, the first year of full operation for the system.

Opponents of the amendment, however, said that the tax increases would have been unsustainable. Further, transitioning to a new payment system could have reduced access to care, increased administrative burden, and slowed or halted the progress Colorado has made in reducing its uninsured rate – which fell from 14.3 percent in 2013 to 6.7 percent in 2015. Health systems and provider groups have said that a single-payer system would lead to lower payment rates and have unintended consequences on state-based programs that provide supplemental financial assistance to providers that furnish care to low-income residents.

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California’s Proposition 61 ballot initiative: Failed

California’s drug pricing initiative would have prohibited state agencies from paying a higher price for pharmaceuticals than the lowest price paid for the same drug – the price negotiated by VA. Also referred to as the “California Drug Price Relief Act”, Proposition 61 aimed to reduce the estimated $4 billion that California state agencies spend annually on prescription drugs. The law would have covered more than 4 million California residents, or 12 percent of the total population of California, including state employees and educators in public systems, as well as those in fee-for-service Medicaid. Beneficiaries in Medicaid managed care plans, which account for 75 percent of all California Medicaid beneficiaries, would have been excluded from the initiative.

VA drug discounts range from 24 to 40 percent. The law would have applied these discounts to drugs purchased by all state agencies, even if they are not the direct purchaser. Although experts from California’s Legislative Analyst’s Office said they were uncertain about the financial impact of the initiative, supporters said that Proposition 61 would save money for state purchasers and increase patient access. They also said that Proposition 61 could encourage other states to adopt similar price restrictions.

Opponents of the initiative claimed that by restricting costs for 12 percent of the state’s population, the act could have raised prices to others. Veterans advocacy groups have said that setting VA costs as the price ceiling could lead pharmaceutical companies to raise prices for the VA or restrict their interaction with Veteran’s Health Departments.

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Other state ballot initiatives that passed

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