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What does the election mean for health care and life sciences?
Health Care Current | November 8, 2018
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.
What does the election mean for health care and life sciences?
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
As many predicted, Tuesday’s 2018 mid-term elections followed the pattern of several mid-term elections past—with voters swinging away from the current party in power. While the Senate and administration remain Republican-led, the House of Representatives now has a Democratic majority, which means a divided government no longer controlled solely by Republicans.
Once again, as we have seen in so many recent elections, health care was a hot-button issue. Pollsters consistently received feedback that voters were focused on preexisting condition protections and health reform—whether for or against. These were prevalent themes in candidate debates and in media coverage.
Given the new split in leadership of the chambers, what can we expect from the new Congress? And what will the administration focus on during the next two years?
Health as an election issue
Two major health care issues dominated in the 2018 election—preexisting condition protections, and a possible broadening of the government’s role in health insurance coverage, including through Medicare expansion.
Why the focus on preexisting conditions? The Affordable Care Act (ACA) requires health plans to issue coverage regardless of preexisting conditions, and it prohibits them from charging higher premiums to people who have preexisting conditions.
Earlier this fall, in Texas v. Azar, a coalition of 20 Republican governors and attorneys general filed suit to invalidate the entire ACA, including the preexisting condition protections. Because the ACA’s individual mandate penalty was zeroed out in last year’s tax-reform law, the suit argues that the ACA can no longer stand. The plaintiffs’ argument is that the individual mandate is central to the ACA’s constitutionality since it had been upheld by the Supreme Court in 2012 as an exercise of federal taxing authority. We are still awaiting the judge’s ruling on this case.
Some Republicans in Congress offered legislation intended to protect people with preexisting conditions—political insurance in case the lawsuit finds for the attorneys general—but none of these passed this session.
Another major topic in some races was whether the US should adopt a single-payer “Medicare for all” system, which would expand the Medicare program to all Americans. Democrats in Congress have introduced several bills with different versions of this policy, which would transition the health care system to one that would likely have more government control than today. While not all Democratic candidates supported this idea, many current Democrats in the House have signed on to these bills. At the same time, Republican candidates, as well as the president, have featured their opposition to this type of program in advertisements and campaign speeches.
Industry observers noted that fewer Republican candidates called for repeal of the ACA during this election cycle. This likely indicates that the issue is no longer as important to voters as it used to be. However, a few weeks before the election, Senate Majority Leader Mitch McConnell (R-Ky.) floated interest in repealing the ACA—possibly to engage voters who feel strongly about this issue.
What will the Congress do?
Without a majority in the Senate—and the strong likelihood that the president would veto any Democratic-led policy—we might see little to no major health-reform legislation enacted during the next congressional session. While we could see the House pass legislation to deliver on campaign promises, we would not expect it to pass the Senate. Certain areas of health legislation have bipartisan support and might be able win support from the Senate and the president. But any such bills would likely be far narrower in scope than an overhaul of the health system. For example, there is considerable bipartisan interest in advancing legislation to bring down the costs of prescription drugs. Bills aimed at increasing market competitiveness for generics and biosimilar products have garnered broad-based support.
Aside from promoting new policy, we expect a Democratic-led House will use its authority to significantly ramp up oversight of all of the administration’s policies, including those related to health care. We would anticipate hearings on topics ranging from pharmaceutical drug costs (a potentially bipartisan issue), the performance of the ACA and insurance exchanges, and the impact of the many administrative actions that have been taken during the last two years.
We also anticipate oversight hearings on Medicaid, likely with a focus on the administration’s policies on work requirements for enrollees.
It’s reasonable to anticipate less scrutiny from House Democrats on Medicare, since the administration has taken a relatively lighter touch on polices for this program. However, there may well be Medicare hearings, given the program’s fiscal and political importance. Lawmakers might focus on the lower reimbursement from Medicare Part B for 340B drugs, the US Centers for Medicare and Medicaid Services’ (CMS) payment changes to hospitals based on site of service, and progress on implementation of the Medicare Access and CHIP Reauthorization Act (MACRA).
The administration’s regulatory agenda
In the run-up to the election, the administration was active on the health care regulatory front. It released policy proposals on prescription drug prices, state flexibility, price transparency (for drugs and hospital care), risk in alternative payment models, and variation for health insurance offerings.
US Department of Health and Human Services (HHS) Secretary Alex Azar and CMS Administrator Seema Verma have celebrated some of the positive findings from value-based care and delivery system initiatives, affirming a commitment to risk-based payment methods. A recent proposed change to the Medicare Shared Savings Program (MSSP) puts all Accountable Care Organizations (ACOs) on a “glidepath” to taking on downside risk in their payment arrangements within about two years. Existing laws allow bonus-only arrangements to continue for up to six years.
Burden reduction will likely remain a top priority. The administration is working to reduce the number of quality measures and wants to emphasize the importance of interoperability of electronic health systems, instead of just their adoption.
Other regulatory changes could mean that Medicare Advantage (MA) will further differentiate itself from traditional Medicare. Recent rulemaking allows MA plans to pay for non-medical items such as groceries and medical transportation as supplemental benefits if they promote the health of their members. Moreover, a recent proposed rule lets MA plans count many telehealth services under their standard bids to CMS. This could mean greater availability of telehealth services under MA, and a freeing-up of supplemental dollars for other purposes that would otherwise have been devoted to telehealth.
The administration continues to push the envelope in addressing the high price of prescription drugs. In July, US Food and Drug Administration (FDA) Administrator Scott Gottlieb said the agency’s goal is to reduce the time and cost of drug development, while also encouraging competition from biosimilars and generics and changing the approval process in ways called for by the 21st Century Cures Act.1
FDA has issued new guidance on moving some prescription drugs to over-the-counter status.2 CMS recently sought public comment on a demonstration aimed at reducing payments for Part B drugs, including by using an index of international prices to set rates for Part B drugs. The agency also has issued a draft regulation that would require drug manufacturers to include list prices in television advertisements in most instances.
Other notable recent actions from CMS include:
- A draft regulation that would allow employers to buy coverage in the individual market (both on and off the exchanges) for their employees (see the October 30, 2018 Health Care Current).
- A guidance document that would give states greater flexibility in designing alternatives to individual market reforms in the 1332 waivers (see the October 30, 2018 Health Care Current).
Other health agencies have made somewhat fewer headlines lately, but continue to work on the administration’s priorities. The US Department of Veterans Affairs (VA), for example, is preparing to implement major reform legislation, the VA MISSION Act, even though most of the funding for that law is still up in the air.
In the next two months, the current Congress will return for the lame duck period and will likely focus on “must do” items” before recessing in December. The focus between now and then will likely be on spending legislation and non-health care issues. In January, expect inside-the-beltway types to closely track major leadership positions, including House Speaker and committee chairs.
In the new Congress (outside of committee action to develop health legislation and hold hearings), the new House leadership is likely to use any opportunity to challenge the administration’s policies through its own bully pulpit. We also expect the administration to continue to move full steam ahead by implementing new policies through its regulatory agenda.
Our expectation is for a generally contentious 2019 with a new divided government, and one in which health care remains a central focus (e.g., coverage expansion, emerging payment policies, drug pricing, and public health issues). We are used to this in health care, but the ride is always bumpy. We are buckling up.
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1 FDA press release, July 18, 2018 (https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm613881.html)
2 FDA press release, July 17, 2018 (https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm613692.html)