February 14, 2020

The Weekly Gist: The Roses are Red Edition

by Chas Roades and Lisa Bielamowicz MD

We spend way too much time on Twitter. Don’t get us wrong, it’s a great source of news and commentary. And we love interacting with the impressive community of health policy and industry experts who also use the platform. But every Valentine’s Day, we’re reminded that our little corner of healthcare Twitter most closely resembles that table we sat at in the middle school cafeteria, and we don’t mean the one with the cool kids. That’s because #healthpolicyvalentines has become a thing—with healthcare nerds trying to outdo each other with their clever rhymes. Guys, it’s embarrassing. Please stop.

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THIS WEEK IN HEALTHCARE

What happened in healthcare this week—and what we think about it.

President Trump releases his budget and suffers a loss in court

This week, the Trump administration unveiled its $4.8T federal budget for the upcoming fiscal year, including major cuts to spending on healthcare programs. Rather than proposing specific spending cuts, however, the President’s budget calls for Congress to put forward plans to “advance the President’s health reform vision”—which presumably includes the administration’s recent proposal to allow states to partially convert Medicaid to a block-grant structure—with promised savings of $844B over the coming decade. Coupled with additional proposals targeting specific changes to Medicaid reimbursement (including further implementation of work requirements for Medicaid enrollees) and reductions in subsidies for Affordable Care Act (ACA) marketplace consumers, the budget envisions a total of $1T in healthcare cuts over the next 10 years. Complicating the administration’s vision for Medicaid transformation, however, a federal appeals court on Friday unanimously ruled that the version of Medicaid work requirements proposed by Arkansas is unlawful, because it does not further the statutory purpose of the Medicaid program. Although the ruling does not impact work requirements programs elsewhere, it does cast a shadow over the administration’s larger attempt to encourage states to implement such policies. Like the broader fate of the ACA, the future of Medicaid work requirements will ultimately lie in the hands of the US Supreme Court. The President’s budget, however, will face immediate opposition in Congress, where House Speaker Nancy Pelosi (D-CA) called it “a complete reversal of the promises [President Trump] made in the campaign and a contradiction of the statements he made in the State of the Union.” As the general election approaches, voters will eventually have to choose between the conservative vision for healthcare underpinning the President’s budget, and progressive proposals being advanced by Democratic candidates. With healthcare being the number one issue on the mind of the electorate, that choice could not be more stark.

The Sanders campaign faces worrisome criticism on M4A

Newly minted Democratic frontrunner Sen. Bernie Sanders found himself crossways with a key constituency—organized labor—as the contest for the party’s nomination continued to evolve this week. The head of the influential Nevada Culinary Workers Union, a pivotal player in the upcoming Nevada caucuses and a major force in Democratic politics in the tourism-focused state, expressed concern that Sanders’ proposal for Medicare for All (M4A) could jeopardize the hard-won private health benefits that are a key component of the union’s value proposition to its members. The union sent out flyers to its 60,000 members this week claiming that the M4A proposal would “end culinary healthcare”, earning the swift approval of Sanders’ moderate rivals—particularly Minnesota Sen. Amy Klobuchar and former South Bend, IN mayor Pete Buttigieg, who have surged into the lead in the campaign’s “moderate lane” in the wake of this week’s New Hampshire primary. Meanwhile, a top Sanders surrogate admitted in an interview that his signature M4A proposal is unlikely to be implemented, given the political makeup of Congress. Rep. Alexandria Ocasio-Cortez (D-NY) told HuffPost that the “worst-case scenario” is that “we compromise deeply and we end up getting a public option. Is that a nightmare? I don’t think so.” That nod toward political reality was likely intended to broaden Sanders’ appeal with voters, who have turned increasingly negative on the idea of M4A, worried (like Nevada’s culinary workers) that it could mean losing their private insurance. But it could wind up alienating Sanders’ base; establishing a government-run “public option” as a fallback position was not a successful strategy for Sanders’ progressive rival Sen. Elizabeth Warren, who saw her poll numbers drop after attempting to pivot to the more moderate approach. The public option is supported by the rest of the Democratic field, however, and is increasingly popular among voters. It will be worth watching the results of next Saturday’s Nevada caucus, to see what the future holds for Sanders, and for the idea of Medicare for All.

Google’s plan to acquire Fitbit draws scrutiny of regulators

Antitrust officials across the globe are scrutinizing Google’s planned acquisition of Fitibit, Inc., with Bloomberg reporting that regulators in the US, Europe and Australia are concerned about the trove of consumer data the company is stockpiling, and the implications for consumer privacy. Google announced last November that it would acquire the fitness tracking company for $2.1B, which would put Google in direct competition with Apple, which controls over half of the smartphone market. Concerns center around the potential for Google to use Fitbit data for other business applications even though consumers have only consented to providing their data to Fitbit, as well as the possibility that Google will loosen Fitbit’s strong privacy protections over time in order to access more data—something that the company has done in previous acquisitions. According to antitrust experts, the deal could be a landmark test case of how regulators view Google’s use of acquired data to fortify their dominance in other market segments. Google has continued to move into the information layer of healthcare, striking partnerships with health system giants, including a relationship with Mayo Clinic to create artificial intelligence tools. Federal regulators are already investigating data privacy concerns in its work with Ascension Health. Google’s move into “healthcare-adjacent” businesses like Fitbit will augment their ability to establish a more complete health profile of individual patients beyond the clinical medical record. We are long overdue for a public discussion of how the technology and healthcare sectors intersect, how health information is used, and what patients are comfortable sharing with whom and for what purposes. 


GRAPHIC OF THE WEEK

A key insight or teaching point from our work with clients, illustrated in infographic form.

The attractive economics of Medicare Advantage

After years of subsidizing Medicare Advantage (MA) plans in an effort to attract more insurers and beneficiaries to the market, the government has succeeded in its goal: the average beneficiary can now choose from 28 plans in 2020, and recent studies have shown MA plans are outperforming fee-for-service (FFS) Medicare on several key quality measures. As shown below, this subsidy has decreased in recent years—as mandated by the Affordable Care Act—and per-beneficiary MA payments are roughly equal to those of FFS Medicare. (These numbers may be underreported, however, due to aggressive risk adjustment measures on the part of MA plans.) However, risk-adjusted average Medicare cost per MA beneficiary is actually 13 percent lower than per Medicare FFS beneficiary, due mainly to lower utilization of high-cost services and other efficiencies. Insurers offering MA plans are profiting from this lucrative “spread.” Growth in MA plans in recent years ensures that private insurers will continue to play an important role in the future of Medicare—the most recent projections estimate that 47 percent of Medicare beneficiaries will be in MA plans within a decade. But inefficiencies in traditional Medicare may not make it the best standard on which to base MA payments. And ultimately, relative MA payment rates will have to continue to drop for the program to sustainably manage the healthcare costs of the gigantic Baby Boom generation.


THIS WEEK AT GIST—ON THE ROAD

What we learned this week from our work in the real world.

Do employers want to buy “population health”?

Lisa:
I’ve had two conversations this week with health system leaders who have been struggling to navigate conversations about direct contracting with large employers in their market. A system chief innovation officer expressed frustration about the pace of discussions with a regional employer: “They’re clearly interested in our network, and we’ve been designing a program for them. They’ve seen our performance results from our accountable care organization (ACO) and the savings we generated. But even after a year of meetings, I’m not sure it’s going anywhere.” Direct-to-employer (DTE) contracting has proven much more difficult for health systems than anyone anticipated a decade ago, in the wake of highly publicized DTE contracts with Boeing and Intel. Most employers, even large ones, lack the sophistication and bandwidth to co-create DTE offerings with health systems.

But those two deals may have led health systems to mistake what employers are looking for in a relationship. Both Boeing and Intel keep their employees for decades, and are interested in solutions, like chronic disease management, that have a longer-term return on investment (think heart disease management for the 55-year-old engineer). The average employer, on the other hand, keeps a worker for just a few years. They don’t have a “population health” problem: from a healthcare cost perspective, they won’t see an ROI from management of chronic conditions. Their pressing healthcare cost problems result from high-cost events, like a premature baby in the NICU, an unexpected spine surgery or a new cancer diagnosis. Most health system ACOs have been designed to manage the cost of aging Medicare beneficiaries with multiple chronic diseases via enhanced primary care—and are a mismatch for delivering what the average employer needs the most: high-cost episode management, behavioral health support, and ready, available, guaranteed access. Striking successful DTE deals will require providers to augment their service offerings beyond traditional population health, and to demonstrate their success in managing the benefit costs of their own employees.

Learning to live on Medicare margins

Chas:
“If Democrats take back the Senate and win the White House, there’s a good chance they’ll implement some version of a public option or Medicare buy-in, and that would be devastating for the fragile economics of our health system.” That was the message delivered by the CEO of a system we were visiting recently, in her report to the board of directors. That kind of alarmist message might seem career-limiting, but given the way the politics of healthcare are playing out at both the national and state levels (see Colorado and Washington State), it’s past time for executives to get beyond the rhetoric and begin to prepare for the real financial consequences of public option proposals.

That’s what this CEO had done—what followed the dire warning was a detailed analysis (which we helped assemble) of what would happen in various scenarios—what if one percent of our revenue shifted from commercial rates (around 250 percent of Medicare) to possible public option rates (somewhere between 140 and 180 percent of Medicare)? That’s a knowable number, and you can begin to make assumptions about how much business would shift under different scenarios, and how quickly. The reality for health systems is that most of the margin comes from the 55-to-65-year-old population—who use more healthcare services but whose care is reimbursed at commercial rates. That cohort cross-subsidizes much of the rest of a typical hospital’s business. The presentation to the board laid those economic realities out in concise detail—and provided a bracing wake-up call that the system needs to be prepared to live on a different level of margin than they enjoyed in the past. That means radical cost controls, sharp reductions in “system bloat”, and a laser-like focus on shifting care to lower-cost settings. For years, hospital leaders have tossed around the notion that “we have to learn to live on Medicare margins”. Given the rising popularity of public option policies (67 percent of Americans support the idea according to a recent poll, as do 42 percent of Republicans), that lesson may need to be learned sooner rather than later.


THIS WEEK AT GIST—ON THE PODCAST

All the headlines in healthcare policy, business, and more, in ten minutes or less every weekday morning.

On last Monday’s episode we heard about the coming federal health information rules regarding interoperability and information blocking. Health policy veteran Julie Barnes, founder of Maverick Health Policy, told us that these regulations will be an unprecedented sea change for healthcare, forcing collaboration between industry players who have traditionally stayed in their lanes.

On next Tuesday’s episode, we’ll hear from Billy Wynne, founder of the Wynne Health Group and the newly established Public Option Institute. He’ll explain how his team is evaluating the implementation and impact of public option plans in Washington and Colorado. As the Democratic presidential candidates campaign on various versions of a public option, Wynne believes it will be important to see how these plans are unfolding at the state level to inform future policy. Make sure to tune in!

[Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.]


ON THE GIST TURNTABLE

Give this a spin—you might like it.

Just in time for the tenth anniversary the release of Gil Scott-Heron’s landmark I’m New Here—the last album made by the great jazz poet before his early death in 2011—comes an extraordinary reworking of the source material by the young Chicago drummer and jazz producer Makaya McCraven, We’re New Again. The original recording is as legendary as Scott-Heron himself, who was lured back to the studio by XL Records founder Richard Russell, after years spent spiraling through addiction, prison, and health problems. GSH is best remembered for the phrase “The Revolution Will Not Be Televised”, a track from his classic 1971 jazz-fusion record Pieces of a Man. He’s often referred to as the “godfather of rap”, blazing the trail for others to put spoken-word poetry over beats. 2010’s I’m New Here was a fascinating document—a mix of original work from Scott-Heron and covers including Bill Callahan’s title track to a version of the Robert Johnson blues number “Me and the Devil”. So well-regarded was Scott-Heron’s final album that it was remixed after his death by the electronica superstar Jamie XX, to wide acclaim. But McCraven has repatriated I’m New Here into a more fitting domain—the world of jazz-soul improvisation. The new reworkings sound utterly organic, as if Gil were still with us, laying down tracks with McCraven’s youthful band of Chicago jazz innovators. Spend some time listening to the original version, then the Jamie XX remix, and now the McCraven reimagining. It’s like watching a seedling grow into a tree—awe-inspiring to see Gil Scott-Heron’s work continue to bear rich fruit. Best tracks: “I’m New Here”; “Where Did the Night Go?”; “Me and the Devil”.


WHAT WE’RE READING

Stuff we read this week that made us think.

The number of nurse practitioners has doubled in seven years

Medical groups and health systems tell us they continue to have challenges filling open positions for advanced practice providers. Given sky-high demand, we were shocked to read that the US nurse practitioner (NP) workforce more than doubled from 2010 to 2017, according to an analysis in Health Affairs. Researchers found that the number of NPs grew from 91,000 to 190,000, largely driven by an explosion in training programs, with all areas of the country seeing growth. While this has boosted efforts to augment primary care, particularly in underserved rural areas, the growth has brought unexpected consequences. Growth in NPs may have exacerbated nursing shortages, with as many as 80,000 RNs leaving their jobs to enter NP training. Some experts are also concerned about the quality of NP training as programs rapidly expand. The first generation of NPs were long-tenured nurses who trained in person, in hands-on settings. Current growth is driven by millennials, with the largest group of NPs now aged 30 to 34, meaning that most younger NPs have just a few years of on-the-job experience. Nearly half of all NP training programs rely primarily on online coursework, and 14 percent are online-only, with no data to support whether distance learning provides equivalent training. Further growth in the NP workforce is likely needed, given the continued demand for expanded access and more primary care—but the recent rapid expansion highlights the need for better oversight of new training programs, and for a comprehensive workforce planning strategy that balances demand across all levels of licensure.

Utah sends its workers to Mexico for drugs

While stories of Americans crossing international borders in search of lower-cost prescription drugs are becoming commonplace, we were surprised to read that the state of Utah now sends some members of its state health benefits plan to Mexico to buy their medications. Utah’s Public Employees Health Program pays for quarterly transportation, plus a $500 per-trip bonus, for beneficiaries who use one of about a dozen high-cost drugs. The plan contracts with a specialty pharmacy company, Provide Rx, that works with one of Tijuana’s largest private hospital systems to administer the program, including tracking the medications from manufacturer to pharmacy to patient. The program has saved Utah about $225,000 in its first year across just ten participants, and recently expanded to Vancouver, Canada. Utah is not alone in experimenting with solutions to lower prescription drug costs— California is also planning to launch its own generic-drug label, and other states are looking to import drugs from Canada under a new Trump administration plan. Programs like Utah’s are symptomatic of the larger problem, not a scalable solution to rising prescription drug costs. Truly addressing the problem of rising drug costs will require national-level policy solutions that address the role of manufacturers and middlemen with the goal of protecting consumers.


That’s it for another week—Happy Valentine’s Day! We love writing the Weekly Gist, and we love hearing your feedback and comments (even more than getting candy and flowers). So let us hear from you! As a Valentine’s treat, please share this with a special friend or colleague and encourage them to subscribe (and listen to our podcast).

Most importantly, please let us know if there’s anything we can do to be of assistance in your work. You’re making healthcare better—we want to help!

Best regards,

Chas Roades
Co-Founder and CEO
chas@gisthealthcare.com

Lisa Bielamowicz, MD
Co-Founder and President
lisa@gisthealthcare.com