Leavitt Partners Future Frame Series: Political Checkpoint

While healthcare leaders seek to broaden and deepen their analysis of the implications of recent federal health policy changes, it is challenging to accurately determine where the industry might be headed in 2022 and beyond. On Tuesday, November 9, 2021, Leavitt Partners’ Senior Director of Health Policy Outreach, Jen Colamonico, moderated a Linkedin Live Political Checkpoint broadcast featuring Liz Wroe, Principal at Leavitt Partners Collaborative Associates, an HMA company; Kathleen Nolan, Regional Vice President at HMA; Kevin Kirby, Managing Director at The Moran Company, an HMA company; and Governor Mike Leavitt, HMA Co-Chairman and Leavitt Partners Chairman, Board of Managers. 

The group discussed the unfolding set of legislative and policy proposals moving through Congress, the political and procedural winds surrounding those actions, and the implications for local health care markets. Jen opened the conversation by highlighting the recent passage of the $1.2 trillion Bipartisan Infrastructure Framework (BIF) bill and acknowledged its relation to a second track of legislation to watch,  the “human infrastructure” agenda contained in the Build Back Better act. 

Build Back Better and Budget Reconciliation: Political and Budget Math

Liz Wroe provided a brief recap of the political rollercoaster that has led to the current state. The House of Representatives passed the BIF on the evening of Friday, November 5th. In addition to the direct outcomes, the BIFs   passing has been followed closely due to its tie to a second piece of legislation, the Build Back Better Act (BBB).  Immediately following the passage of the BIF bill, a rule was voted on allowing for passage of the (BBB) in the House the week of November 15th. The BBB was originally intended to pass on Friday, November 5th; however, this plan was halted due to demands for an economic analysis of the BBB’s long-term impacts on the budget deficit from the Congressional Budget Office (CBO), also known as a CBO score. Because of the procedural ups and downs in the passing of this legislation, it’s been challenging for healthcare stakeholders to analyze the rapid evolution of these health policies  and determine how to impact them proactively.  

With a new Administration, a new Congress, and an aggressive health policy agenda from the President’s desk, January 2021 brought a much more aggressive agenda than what is currently being considered. Today’s Democratic majority is not the same as it was in 2009, when the Affordable Care Act was passed. The dynamics of what Liz referred to as, “political math,” reveals that in 2009 the House Democrats had a significant majority, compared to today’s far slimmer version.  Factor in the looming 2022 mid-term elections, and one begins to recognize how inextricably linked healthcare policy and its ramifications are to the current political climate.   

To offer more clarity Liz applied what she referred to as, “budget math,” to evaluate the BBB and its legislative process.  What originated as a multitude of ambitious healthcare priorities has been pared down as this agenda goes, “through the woodchipper,” to ensure its passage. Furthermore, for Democrats to pass the BBB without Republican votes, the only course of action is through the Budget Reconciliation process.  Liz predicted that some segments of the agenda will remain relatively intact after this process such as Medicare Vision, a temporary extension of ACA subsidies, which will be particularly valuable to non-expansion states, and funding for home healthcare.  Conversely, questions remain regarding the Medicare drug negotiation agenda and the final tax package to pass budget reconciliation. Because we’re anticipating temporary provisions, due to insufficient savings to cover the cost of full expansion, many will be short term, ultimately leading us to a coverage or subsidy cliff in 2025.  Additionally, if legislation is passed, it will be imperative to monitor coverage migration, the net increase of people moving from uninsured to gaining healthcare coverage, and shifts in employer sponsored coverage.  This does, however, create an opportunity for stakeholders to plan accordingly and help drive future discussions. 

Budget Scoring Issues in Build Back Better Legislation

Jen transitioned the conversation by inquiring as to how the drug pricing piece in the BBB agenda is going to raise enough revenue to cover everything in the package.  Kevin Kirby, an expert in CBO scoring for major policy initiatives, elaborated on drug pricing as the mechanism to pay for many of these proposals to expand healthcare coverage.  He noted that in order to expand coverage, Congress will have to identify available options to cover those costs. One can analyze and manipulate drug pricing restrictions to reach different budgetary outcomes; however, CBO scoring is not equipped to accurately evaluate everything. Though this package is predicted to be budget neutral in the aggregate, there are concerns about the impact of individual elements. Budget reconciliation rules will only fuel the already complex nature of this process and questions remain unanswered.  As a result, spending becomes a bigger policy driver.   

A brief comparison between initial drug pricing anticipated savings, and current projected levels reveal that policymakers may have to curb their expectations and seek other avenues.  Kevin anticipates that drug pricing will be slower to materialize but remains cautiously optimistic. If the House and Senate reach agreement on the BBB, drug pricing and coverage proposals could change substantially.   

State Fiscal and Recovery Situation 

If the BBB bill passes, states will bear the responsibility of implementing many of these changes. More specifically, if the Medicaid portion is lighter than originally intended the state marketplaces will see more action. Kathleen Nolan offered noted dimensions to compartmentalize the impact of the BBB on states: 

  1. Medicaid Stimulus 
  2. Medicaid Funding and Redetermination Reset 
  3. Coverage in the Individual Market 

As state legislators convene to prepare the budgets for fiscal year 2022, they will have to prepare for multiple Medicaid stimulus scenarios, including the substantial scale back of additional federal funds. Kathleen advised healthcare stakeholders to be actively engaging with state lawmakers about the multiple scenarios at play in their respective state, and how each one will interact with Medicaid coverage.   

Currently, states have been receiving a temporary increase in federal funding for Medicaid costs, contingent on if states keep people enrolled in Medicaid through the duration of the COVID-19 pandemic. However, with the public health emergency slated to end December 2021, enhanced federal funding will cease and states will be expected to administer renewals for Medicaid eligibility. As eligibility is redetermined, a significant risk for coverage loss will be imminent. States will have discretion over how quickly they redetermine eligibility for Medicaid members and stakeholders are strongly encouraged to use this opportunity to discuss strategies that will help current beneficiaries stay enrolled.  

There are several indications that marketplaces will be a continued focus of this Administration and a growing portion of coverage, Kathleen notes. Providers, community-based organizations, and health plans have an opportunity to play a big role in helping states, who have an indirect fiscal interest in marketplace enrollment, get connected to subsidies.  

What Can We Expect?

Governor Michael Leavitt joined the discussion to share insights and the most important dynamics to watch in 2022-2024 and beyond. Within the next two years, the Governor cautioned, the political climate will be ripe with divided power. Yet, there are powerful forces whose impact is visible today that also have the potential to redefine the next decade and beyond. Driven by large scale, global changes we find ourselves on the cusp of a shift in healthcare, moving away from fee-for-service, asset-heavy payment models towards an asset-light, value-based payment structure. Kathleen encouraged the group to consider if today’s healthcare workforce is equipped to function in a future asset-light structure. Advances in telehealth and home healthcare have made notable strides in the shift in healthcare, but workforce limitations are just one of many factors that are restricting these changes from being widely adopted and implemented permanently.  

The Governor concluded the conversation by acknowledging that the healthcare industry’s attempt to leave the paradigm of the past for the paradigm of the future will be a function of how quickly the healthcare workforce can prepare and adapt.