|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Senate Democrats strike a $3.5T spending deal
Senate Democrats announced a compromise budget framework to fund President Biden’s social spending plans to the tune of $3.5T, including substantial money for some of the administration’s key healthcare priorities. The framework sends instructions to several Senate committees, including the Budget and Finance panels, to craft legislative language around the central components of the deal, with the goal of passing a spending package before next month’s recess. Many specifics remain to be ironed out in negotiations among the party’s progressive and moderate camps, but some of the main elements of the deal became clear this week. The plan includes extending the enhanced subsidies for purchasing individual coverage on the healthcare marketplaces, which were implemented earlier this year as part of the American Rescue Plan Act. It would also seek to close the so-called “Medicaid coverage gap”, by providing new coverage options for low-income adults in states that did not expand Medicaid under the Affordable Care Act (ACA). New investments would be made in home- and community-based services for long-term care, along the lines of the $400B proposed in President Biden’s American Families Plan. And the budget deal envisions expanding benefits in the Medicare program to include dental, vision, and hearing services. Given the budgetary concerns of moderate Democratic lawmakers like Sen. Joe Manchin (WV), one critical question will be how the $3.5T deal will be paid for. One likely source of funding for the deal will be reforming the way Medicare purchases prescription drugs, making that long-time Democratic policy objective a probable part of any final package.
Notably absent from the healthcare spending proposals: lowering the eligibility age for Medicare from 65 to 60. No final decision has been reached on whether to incorporate such a move; rather, the question will be sent to the Senate Finance Committee for consideration. Given the urgency of passing as much of the Biden administration’s legislative agenda as possible before the midterm campaign season begins in earnest, we think it’s unlikely that Democrats will be willing to cross the Rubicon of Medicare expansion at this point. The prospect of having to gain support from all 50 Democratic senators—as zero Republicans are expected to support the package—will likely temper any appetite for picking a fight with the influential hospital and physician industries, which have strongly opposed Medicare expansion (for more on why, see below). One longer-term implication of the apparent decision to favor expansion of Medicare benefits over lowering the Medicare eligibility age now: a richer package of services in traditional Medicare might make Medicare Advantage (MA) a less attractive alternative for potential enrollees and could undermine any future efforts to create an “MA buy-in” for coverage expansion. Expect lobbying and negotiations to reach a furious pace over the next several weeks, as lawmakers work out the final details of the $3.5T spending plan.
Aduhelm saga continues as health systems, CMS bring new scrutiny
This week the Centers for Medicare & Medicaid Services (CMS) kicked off a public review process to determine whether the agency would cover Aduhelm, Biogen’s costly and controversial Alzheimer’s treatment. The process will begin with a 30-day public comment period, and is expected to take nine months before reaching a decision on coverage and patient eligibility. Scientists and doctors, including many who worked on Aduhelm’s clinical trials as well as members of the Food and Drug Administration’s (FDA) own independent advisory panel, have pushed back against the FDA’s accelerated—and broad—approval decision, citing weak data to support the drug’s efficacy, and high rates of serious side effects. Biogen and the FDA have reined in prescribing guidelines for the drug, now recommending Aduhelm only be prescribed for patients with early-stage Alzheimer’s. The FDA’s approval process has also come under increased scrutiny, with reports surfacing of off-the-record meetings between Biogen representatives and the head of the FDA’s neurosciences division as far back as 2019, to discuss the agency’s support for the drug. Acting FDA commissioner Janet Woodcock asked the Office of Inspector General, who operates independently, to review whether the interactions were consistent with agency protocols.
Amid the mayhem, the New York Times reported that New York-based Mount Sinai Health System and the Cleveland Clinic both decided they would not administer Aduhelm to patients at their facilities. Cleveland Clinic’s internal review process determined that current data do not support the drug’s safety and efficacy; the head of Mount Sinai’s Center for Cognitive Health cited the need to affirm “the integrity of the FDA-Biogen relationship” amid calls for an investigation. With an annual cost of $56,000 per patient for the drug alone, the stakes of Aduhelm’s approval are high. It’s easy to imagine that scores of investors and entrepreneurial providers will enter the “memory clinic” business, looking to profit from the tens of thousands of dollars of additional spending on drug administration and patient monitoring. It’s fortunate that leading-name providers have moved quickly to demand additional evidence and scrutiny before the industry has the chance to launch another runaway profit train. As we saw with certain COVID therapies, when the politics and processes behind federal guidelines come under question, it’s the health systems and doctors who control drug administration on the front lines that will ultimately determine whether and how Aduhelm will reach patients.
Medicare preserves telemedicine payment through 2023
CMS announced that Medicare will continue paying for most telemedicine services through the end of 2023, as part of the 2022 Physician Fee Schedule Proposed Rule released this week. The agency hopes continued coverage will garner additional data on the efficacy and use rates of virtual and audio-only visits to help determine permanent policy. Congress has yet to act to make pandemic-driven telemedicine flexibilities and coverage permanent, despite the urging of many advocacy groups. In other highlights from the new rule, CMS is proposing to increase the threshold for doctors to earn quality bonuses under the Merit-Based Incentive Payment System, or MIPS. The program has been criticized for its lax quality targets, which allow the vast majority of doctors to earn bonuses, while providing paltry incentives to reward high-performing physicians.
Overall, doctors will see a pay cut if the rule is finalized in current form. The temporary, one-year pay bump physicians received as part of the coronavirus relief package is set to expire in 2022. Due to budget neutrality requirements, CMS is keeping rates flat, amounting to a 3.75 percent decrease to the conversion factor on which Medicare bases physician payment. This change is in addition to the 10 percent reduction in the conversion factor included in last year’s rule, which was put in place to balance an increase in payment for evaluation and management codes, and was intended to boost compensation for primary care. Survey data shows that 88 percent of health systems have yet to modify their physician contracts to reflect these changes, instead choosing to subsidize physicians and hold them harmless from Medicare payment cuts. Eventually, in our view, health systems will face a choice between aligning physician compensation with the actual economics of practice, or moving to a salaried model that decouples compensation from the reimbursement system altogether.