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Transcription

Matt: Hello, and welcome to another episode in the Avalere Health Essential Voice Series focused on the 2020 election. In this series, we’ve been covering the current state of play in the election and the role of healthcare. My name is Matt Kazan, and I’m a Principal in our policy practice. Today I’m joined by Dan Mendelson, the founder of Avalere. Dan, thanks for joining us.

Dan: My pleasure. Always enjoy talking with you, Matt.

Matt: Likewise. At the beginning of this series, we talked about the potential impact that COVID may have on the election. The events on the ground force us to come back to that point. As we near election day, there has been a dramatic increase in the number of cases and the number of hospitalizations across the country, particularly in the Midwest, where there are so many battleground states. How do you think this change in COVID has altered the campaigns’ closing arguments to voters during the final two weeks?

Dan: Well, there was no question that Vice President Biden’s strategy was to keep the focus on COVID where he was maintaining a 20-point issue advantage. Over time, that advantage did not decline; it widened. Americans generally felt that he had a better approach to dealing with the pandemic and that the President’s approach was somewhat erratic. That was what the polling data said, and I think that his goal was to keep things focused. So the fact that you have a major uptick in the pandemic, and that in every battleground state, the rolling 7-day average is up significantly from where it was before, means that this accomplishes Vice President Biden’s objective of keeping the focus on the pandemic.

Now, that’s not the only thing that’s going to determine the election. So, for example, the pandemic does not determine turnout. It might make some voters more passionate, but Republican voters are not going to be motivated by that. They are going to be very motivated by other things that the President is focused on.

But with respect to healthcare, and with respect to COVID-19, that certainly did play into the issue advantage that Vice President Biden has maintained through election day.

Matt: Absolutely. On a parallel track from the campaign, we’ve had congressional debate, or at least some negotiations, related to a COVID relief package that has not advanced as far as some would have hoped. We often get the question, “What do you see in terms of a COVID relief package post-election, and in a lame duck Congress?”

Given my time on the Hill, I often refer folks to years in which an election caused a major change in parties in power. Those years tend to be the most active in terms of what gets done in a lame duck Congress, that period between election day and the new year.

To the extent that a big shift in power is possible because of this election, there is a chance that this could be an active session and that we could see a COVID relief package then. But if not, then I would expect Congress to revisit this issue in January and February. Would you agree with that?

Dan: I would. There’s no doubt that there is a lot of legislation coming after this election. The only reason we haven’t seen a COVID relief package is because both parties perceive that there is a benefit to waiting. Meanwhile, this surge in the pandemic is starting to cause substantial strain on hospitals, physician groups, and providers. It’s likely that we’re going to see, as we did during the last uptick, patients avoiding routine procedures and a reduction in that discretionary utilization. So there’s no doubt that there is a real need for legislation, whether it happens in lame duck, or whether it ends up happening in the beginning of next year. The likelihood is it will probably be both because the lame duck will be one balance, and then we’ll go into next year and there’ll be a new balance and we’ll probably see revisions of various things depending on the new composition of Congress.

Matt: Yeah, absolutely. In your first answer, you spoke to the dynamic that COVID has really overshadowed a lot of other campaign issues. One issue that has been overshadowed from a campaign perspective has been the President’s efforts related to drug pricing. There’s been a lot of regulatory action in this area, whether it’s executive orders or the Center for Medicare & Medicaid Innovation (CMMI) model on insulin announcements related to cost sharing relief for Part D. Looking forward, regardless of who wins the election, drug pricing is still on the agenda, but to what extent does the COVID issue overshadow or run in parallel to drug pricing? Why don’t you weigh in from an administration perspective, and I can take it from a congressional perspective?

Dan: There’s no question that whoever is elected on Tuesday, or sometime thereafter, is going to have to deal with the pandemic in a major way because it’s not going away; it’s getting worse. You can’t get the economy back on track until that happens. The performance of the stock market over the last week shows that there’s still a lot of antsiness from a business perspective as to where things are. Dealing with COVID is not only a public health issue; it’s an economic issue and it needs to be handled. In many ways, the healthcare agenda is parallel, but it’s different.

From an administrative perspective, the President is moving aggressively on these drug pricing issues. He hasn’t wasted a lot of time over the last few months. The one that you didn’t mention, which I think is really important, is the price transparency work that has been released over the last week. I think CMS is really taking the price transparency issue very seriously. So, if Trump is reelected, I do think that they will continue to press this agenda through administrative action. The fact is that drug pricing is a lot easier to address through administrative action than it is through legislation for all sorts of reasons, but from a legislative perspective, I do think COVID-19 is likely to get the attention first.

The third major issue on the health policy agenda is, of course, the Affordable Care Act, which we’ve spoken about on previous webcasts. In some ways, the likelihood that there’s legislation on this is quite high. Either the Supreme Court invalidates the law, and they have to figure out how to get insurance to 23 million people, or the Supreme Court doesn’t invalidate the law and there’s a coalescence around stabilizing the concept. Perhaps if there is a Republican majority in Congress, they might put a different stamp on it going forward in anticipation of wanting a stable resting place, so they don’t have to deal with this issue again.

So, from a prioritization standpoint, COVID is number one, two and three. Then, from an administration perspective, you’ve got the shift of value, the pharmaceutical issues, and the issues around coverage and affordability, with the exception being anything related to the ACA, which might require legislation.

Matt: Yeah, there are so many moving pieces and priorities. Thinking about it from a legislative perspective, we see them start to mesh. There is already this conversation about COVID vaccines and treatments and a discussion around cost sharing, out-of-pocket costs, and making sure they are affordable for patients. That clearly dovetails into the drug pricing debate, but also, as you said, the health coverage debate. So, I think it’s inevitable that these things start to collide.

One other potential nexus that is less immediate congressionally, but certainly could pick up into 2021, is this issue related to deficit reduction. The COVID pandemic and the economic fallout have caused the government to spend a lot of money. Tax receipts have gone down because of the economy and that’s put huge pressure on the federal deficit and the trust fund. Congress and the administration are inevitably going to have to tackle both of those. You can see a scenario in which Congress looks at drug pricing proposals in the context of deficit reduction, and that really has been exacerbated because of the COVID-19 pandemic.

Dan: On the issue of everything coming together, I agree that it is very often the case in legislation that things do come together. I think the COVID issues in lame duck are unlikely to have any major drug pricing provisions because they’re very controversial. There’s always going to be one person or a group of people who are going to object to that. From my standpoint, it’s unlikely that at the end of this year, we’re going to see that enter the discussion. Next year is a different story, and if there is an effort to expand coverage, I think that’s where you might see a focus around drug pricing.

I thought it was interesting that there was an announcement that the administration was going to make sure that Medicare beneficiaries were covered for the vaccine, but there was never any discussion about what price the federal government is going to pay for those vaccines. Remember that the federal government helped in the development of these vaccines, so it is quite likely that someone’s going to raise their hand and say, “Hey, the federal government helped to pay for their development. What price is the federal government is going to get? It should be a reasonable price.”

The last thing that I’ll say on this is that I think that going into next year, as things start to come together, you might see more linkage of these issues over time, but right now, moving aspects of the health policy agenda are going to be easier relative to administrative action. A major change in the composition of the Congress would change that, but we’ll see how that plays out in a few days.

Matt: I absolutely agree with you on the prospect of lame duck and major drug pricing changes being more appropriate for the following year.

Our listeners are mere hours away from returns starting to come in for the election. The natural question is going to be, “How do these results affect me?” So, let’s finish with some rapid-fire response looking at individual stakeholders. Let’s start with health plans.

Dan: Health plans are well-positioned during the pandemic, or as well-positioned as any healthcare industry can be in the context of reduced utilization. Reduced utilization is not a negative for health plans and they have been very proactive in ensuring that they’re focused on the needs and the issues of beneficiaries, as well as, in some cases, giving money back to states and other sponsors that are paying for the insurance.

If there is a change in government and a Blue Wave, or if Biden is elected with a narrow majority in Congress, I think it is quite likely that there’s an increase in coverage, which would help the industry. It is very unlikely that we’re going to see anything that would subvert the industry, such as Medicare for all. In some ways, a Blue Wave could be positive for the industry. If they do a major coverage expansion, it wouldn’t surprise me to see Congress reach in and start to make changes in the Medical Loss Ratio (MLR) to reduce profitability, or at least to attempt to do that relative to the industry’s profitability during COVID.

Matt: That’s interesting. I agree on the coverage front. Other pieces worth highlighting with respect to COVID are the shifts in coverage. What mitigation steps on the economy does Congress or an administration put in place to slow some of those shifts, either from the employer market to the exchange, or from the exchange to Medicaid or even the uninsured? That certainly has an impact on health insurers.

With respect to drug pricing, we often think about manufacturer impacts, but changes to the Part D benefit, for instance, have huge ramifications for health plans, and the election outcome can certainly impact the chances of those types of reforms.

Dan: The other thing that would be profoundly affected by a Blue Wave is Medicaid. Medicaid’s generosity and how long the administration chooses to maintain the state of emergency that has resulted in higher payments to Medicaid, is, in a lot of respects, an action that would be effective politically. It’s a choice that the administration has in terms of extending those dates. If there is a Blue Wave, it’s likely there is going to be more money going toward the states around Medicaid and Medicaid expansion.

Matt: Now let’s shift to life sciences companies.

Dan: This is a very important election for life sciences companies, but again, within margins. So, in the next 4 years, you will not see, no matter which candidate is elected, an aggressive government pricing regime. It’s just not going to happen. If there is a Blue Congress, it will be because members were elected from Iowa and North Carolina and they’re not going to go for that. It’s fair to say that what you would see in a Democratic administration is a lean into value, value-based contracting, the need to prove value as opposed to an aggressively regulatory regime. The exceptions to that could be around drugs where there was already a federal sponsorship, or a federal role in bringing the drug to market where Congress could potentially assert some authority.

There’s also an amazing proliferation of science around cellular and genetic therapies that no one knows how will get paid for. That’s a place where there’s a lot of nervousness, and a desire to come up with an alternative that would ultimately enable Medicaid to afford these products when they come to market.

Matt: Yeah, I think about the differences in the big choices that future policymakers are going to have to make around leveraging value or leveraging international prices when they’re setting some of these changes. We’ve seen President Trump talk about Most Favored Nation, which obviously links to international prices. We’ve seen HR3 from Speaker Pelosi taking a similar tactic. Then we see Vice President Biden talk about developing a value-based body within Health & Human Services (HHS). He spoke about the German system, which obviously leverages value. So, this is a first-level question for policymakers of which route to take. It’s a hugely important question for stakeholders, and one that needs to be answered relatively soon, before all the nitty gritty policy details start to be made.

Dan: I agree. This is a major area of focus, not only for the pharmaceutical industry, but also for the health plans because it affects plan premiums and it affects the stability of the benefit for individuals. This is one of those issues that is going to require a lot of coalescence and a lot of discussion between the two industries. If there’s one thing that that we’ve seen over the last 20 years, it’s when the 2 industries coalesce and start to articulate the same ideas that things happen.

The one other thing, which you pointed out, is that it’s amazing how much the parties have coalesced around the value story and international pricing comparison. In a normal election, when you would have people actually talking to each other and finding points of agreement and disagreement, they might have even come to the realization that their policies are relatively similar. Sometimes we’re asked, “If Biden is elected, would he throw out all of the President’s executive orders?” The answer is no. If an executive order moves the ball forward with respect to administration policy, and that’s where the new President wants to go, there’s no reason to retread that ground. So, I do think that some of these executive orders might serve as groundwork for future discussions around drug pricing, because they’ve outlined what is feasible within the limits of the law.

Matt: Right. Shifting from life sciences, let’s talk providers. What impact might this election have on them?

Dan: In a lot of ways, having Chuck Schumer as Majority Leader would be significant for hospitals. He’s one of the biggest champions for hospitals, which need more relief and need it soon. This surge in the pandemic is going to going to be very significant for hospitals. They rely on individuals having coverage, so if you believe that under a Biden administration there will be a coverage expansion, it will be a real positive for hospitals.

On the price transparency front, this is also likely to be a shared agenda. I don’t see any administration running away from that. Consumers need that information, so there must be a way to get the information back to them, and that’s something I would expect to continue.

Matt: I think about the conversation around deficit reduction in the Medicare trust fund when talking about providers. The Congressional Budget Office projected that the trust fund would go bankrupt in 2024, as opposed to 2026, which was their estimate prior to COVID, with shortfalls of the trust fund after that year totaling $80 billion a year.

The trust fund spending is on hospitals and post-acute care. Those two sectors have been hit by the pandemic, so there’s going to be a big question for Congress and to some extent, CMS, on how to address the impacts of COVID and the consequences of COVID on those sectors, but also the future of the program’s financial status. That’s a real challenge that they’re going to have to figure out.

Dan: You know, that’s the second time you’ve brought up deficit reduction, so I want to make a couple of comments on that. You came out of the Senate Finance Committee, while I came out of the Office of Management and Budget (OMB) from 1997 to 2000, when we actually had a balanced budget. Personally, I believe in this concept of balance, but that is not the season that we are in right now. I think that it’s amazing that no one is talking about deficit reduction because of the fear around the pandemic and the concern about getting the economy started again. It is unlikely that there’s going to be a drive for deficit reduction over the next year, year-and-a-half, 2 years. We’re going to continue to run up this debt, which could be very significant. We’re going to be paying it off for a really long time. It worries me, but I don’t think that Democrats are going to be any more likely to do serious deficit reduction than the Republicans have, and they haven’t done any deficit reduction of significance over the over the past 4 years.

I think many of us grew up in government at a time when we believed that things should be paid for, and that if you expand a program, you have to find a way to pay for it. I don’t see a lot of that mentality happening right now, from either party. You had said that the trust fund issues could be the wake-up call on that and that might be true, but the trust fund is also affected when people stop going to the doctor, which is happening right now because of COVID. So, there could actually be some extension in the life of the trust fund because of the volume reductions we’ve seen as a result of the pandemic.

Matt: That’s very true. You know me, Dan. I’ve always wanted to be a trendsetter. So maybe more people will talk about this.

You mentioned my time on the Hill and then your time at OMB. With deficit reductions, when there’s a Democrat in the White House, but Congress is split between the two parties, which is a likely or potential outcome for the election, I think back to 2012, 2013 when Vice President Biden’s role in those deficit reduction talks with Majority Leader McConnell led to the sequester and the super committee and all those deficit reduction conversations. He has history here, too. So, I think the combination of those two factors as well as the trust fund and the status of the federal deficit does force some sort of action. I think you’re right—not immediately because of COVID, but one of the consequences of the pandemic will be that deficit conversation.

Let’s close on a happier note. What do we think the impact of the election will be on patients? I think about things like out-of-pocket costs, sources of coverage, whether the Medicaid expansion will be impacted. In states that have not expanded Medicaid, will there be policies in place that ultimately do turn out to find those folks coverage? What are your thoughts there?

Dan: It’s really important for us to bring this discussion home with a conversation about how all of this affects patients, because that will be a motivator for either of these guys when they get elected. In some ways, the COVID experience is dominant in thinking about how patients are affected right now. Avalere research has shown that a lot of patients are foregoing the very important preventive services that they need to detect cancers and proactively manage their healthcare as well as ultimately make them better users of healthcare. It’s amazing. We’re seeing more emergency appendectomies because people don’t want to go into the emergency room when they have an initial issue with their appendix. That’s an indication of the fear and what really needs to be addressed in the context of messaging to consumers.

Over time, it’s also important to look carefully at benefit design, which is not serving patients very well. There’s the discrepancy between the benefit design in fee-for-service Medicare versus Medicare Advantage, with the Medicare Advantage benefits being much better, much more proactive in terms of managing patients’ health. We have really a long way to go right now. I do think that will be a focus, particularly if Vice President Biden is elected. There’s a lot of discussion about ensuring that the benefit design that consumers face is rational and serves their interests over the long term.

Matt: Agreed. Well, I think we’ll wrap it up there. Thank you, Dan. I think this has been a great discussion. Thank you all for tuning in to Avalere Health Essential Voice. Please stay tuned for more of our election coverage, including our post-election webinar on November 5. In the meantime, if you’d like to learn more, please visit us at Avalere.com/election-2020. Thanks a lot.