In this episode, Mike Merola, Founding Partner of Winning Strategies Washington, discusses healthcare initiatives in the first 100 days of the Trump administration and what the future may hold for healthcare policy.
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Mike Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast.
Today, I’m happy to be joined once again by Mike Merola, a founding partner of Winning Strategies Washington, a leading government relations firm based in Washington DC that specializes in hospital issues.
And today, Mike is going to provide us with some thoughts on healthcare in the first 100 days of the Trump administration and what might be coming next.
So, welcome to the show, Mike.
Mike Merola: Thanks, Mike! It’s great to be here with you and your audience.
Mike Passanante: So, Mike, let’s start at the beginning. Shortly after the inauguration, President Trump signed an executive order that set the wheels in motion for the repeal of the ACA. Can you talk to us about the provisions of that executive order and what that order has accomplished or not accomplished to date?
Mike Merola: Sure, Mike. And thanks again for having me. It’s great to spend some time with you and your audience.
Let me start by just distinguishing the difference between executive orders on the foreign policy side versus on the domestic side. As it relates to foreign policy, the President has very broad authority. And there, the executive orders can really address the minutia of our relationships with particular countries.
But on the domestic side (which is what your audience cares about) the President’s power is subject to a lot more constraints. And these types of orders are really used just to set broad policy directions.
I want to be real clear. They cannot be used to change laws or regulations. And they’re not even appropriate for establishing detailed guidance addressing specific issues.
So, as you mentioned, he did sign this order on his first day in office. And after reciting the administration’s commitment to seek repeal of the ACA, it directs the Department of Health and Human Services and other agencies involved in administering ObamaCare to the maximum extent permitted by law—that language is important—to minimize the economic burden of the ACA and its pending repeal.
So, it really directed the Secretary of Health and Human Services and other officials to 1) waive, defer, grant exemptions from or delay implementation of the law, so it doesn’t burden individuals’ families, hospitals, insurers and others; 2) to provide greater flexibility to states and cooperate with them in implementing healthcare programs; and 3) encourage the development of a free and open market and interstate commerce for the offering of healthcare services and insurance with the goal of achieving and preserving maximum options for patients and consumers.
So, immediately, the media in particular started to hyperventilate about this. I went back and looked at some of the headlines. The Washington Post said, “Signed order might start the gutting of the ACA mandate.” The New York Times said, “Trump issues executive order scaling back parts of ObamaCare” and CNN had breaking news, “Trump issues executive order to start rolling back ObamaCare.”
But despite all this hype, these headlines really seem to generate more heat than light. And there is a great, I thought, tweet from Sarah Kliff who is from Vox who basically said, “It’s akin to a political scream, but a policy whisper.”
And essentially, the executive order neither countermands any portion of the statute nor does away with any of the regulations that were promulgated by the Obama administration on the law.
So, contrary to the Washington Post headline, the order does not in any way modify the ACA’s individual mandate. This can only be changed by an act of Congress (which we’ve seen in the past couple of weeks how hard that is to do).
Second, it doesn’t eliminate or modify the tax credit premium subsidies that are crucial to making premiums affordable in a private marketplace nor does it authorize the new administration to eliminate the Medicaid expansion which is now helping millions of people in 31 states with their insurance.
Again, new legislation is required to modify either of those provisions. And it doesn’t impact any of the key rules that have been imposed on insurers as a result of ObamaCare.
Right now, we only have Secretary Price at HHS. We have Seema Verma at CMS. And I think the Senate just approved Price’s deputy at HHS. So, once the level of political leaders is in place, we may see some more action on this.
And the administration does have some other levers that they can pull in terms of impacting the law. And I think that’s an issue that you wanted to talk about later. So maybe we can set that aside and pick that up again in a few minutes.
Mike Passanante: That’s great! I appreciate that perspective. It really does I think level set where we’re at and where we’re going.
So Mike, as you intimated a second ago, the first pass of the Healthcare Reform repeal or new law did not get through Congress. On April 12th, the President re-affirmed his preference for healthcare reform to precede tax reform initiatives. And I suppose because that’s been moved around back and forth a little bit since then.
Can you briefly explain why the first bill did not pass the House and what might be coming up next?
Mike Merola: Sure! Let me start at a really high level first. And again, you know what side of the aisle I come down on. I’m a democrat.
I think the failure of the bill really highlighted the fissures that exist on the republican side of the aisle, in the parties that are at large on this issue.
I think half the party thinks healthcare is a commodity like any other (i.e. gasoline or private education) where you’re only entitled to the amount of it that you can afford. And the other half of the party thinks that in a nation as rich as ours, access to quality healthcare really approaches a fundamental right.
And so, that’s where the breakdown exists. They have not been able to bridge that divide so far on the policy.
I think the failure also demonstrates Paul Ryan’s really singular focus on tax reform. I think as folks who’ve got their head around the bill in DC, they realized that this was tax reform sort of masquerading as healthcare reform.
And from what I have learned I think from talking to folks close to the Speaker is that one of his guiding principles is that he wants to be the only Speaker since Tip O’Neill over 30 years ago to get tax reform done.
He really sees that as his legacy and the prism through which he is viewing all other issues.
And there was a great article in Politico Magazine last week that was titled Paul Ryan Failed Because His Bill Was a Dumpster Fire. The whole premise was that this was a failure of policy and legislative strategy, things that were really supposed to be in Paul Ryan’s wheelhouse. It wasn’t a failure of tactics.
In other words, even if President Trump was sort of this master negotiator that he claims to be, he probably couldn’t have even salvaged the effort.
This was Ryan’s bill. It was his plan. It’s his preferred timing. But he really produced one of the worst pieces of major legislation I think since I’ve been doing this in the mid-90s.
And it’s even more striking because he’s widely regarded as the Republican’s big brains on policy issues and a complete wonk. And I think a lot of people in town were really surprised that he didn’t lead an effort to craft a conservative, but more incremental bill that’s sort of consistent with President Trump’s economic populist agenda.
He could’ve come up with things like more modest cuts on the most needy, smaller tax breaks for the wealthiest Americans. And really try to accommodate the needs of Republican governors who were at the frontline on this issue.
But he didn’t do that. Instead, he crafted, really, what I thought was a radical bill that would drastically reduce support to low income Americans and those with serious health conditions (many of whom, by the way, voted for President Trump) while enacting big tax cuts for the wealthy.
There was a great data point in that Politico Magazine article that stated that the payout to the top 400 families alone was estimated to exceed the total ACA subsidies in 20 states and the District of Columbia. And so I think that’s why you saw that only 17% of the American public supported the bill.
And all of the key players in town, whether that’s the AARP, the docs, the hospitals, all the provider community came out against it. Every liberal and conservative think tank in town hated it (albeit for different reasons).
And when that CBO score came out that estimated that 64-year olds with $26,000 worth of annual income would see their average individual insurance premiums go from $1700 to $14,000 a year, the thing was just doomed.
That’s what was so hard for people to get their head around because Paul Ryan had to know that that was coming. Either he knew it was coming and chose to ignore it, or he didn’t know what was in his own bill.
So, someday, a book is going to be written about this whole process (and I can’t wait to read it). At the end of the day, this didn’t do anything to help the people who had put the Republicans in charge of Congress and Trump in the White House. And I think that’s, at the end of the day, what brought it down.
Mike Passanante: That’s some interesting perspective as always, Mike.
So, my next question for you, in the absence of this new legislation, what is the administration doing or what can they do at least in the interim regarding the ACA or anything around healthcare policy that they might chose to do.
Mike Merola: I think their first volley in this regard was CMS recently finalized its market stabilization rule which applies to the following areas:
It would loosen the minimum actuarial value by allowing plans to vary by 4% rather than 2%;
It would shorten the timeframe for open enrollment from November 1st of this year to December 15th of this year;
Pre-enrollment verification would be required for anyone signing up for coverage during a special enrollment period;
The rule also proposes to defer the state review of network adequacy in the states where they have the authority and the means to do so;
It would make adjustments to the range used for determining the level of coverage by providing greater flexibility to issuers of insurance;
It would allow insurance companies to collect premiums for prior unpaid coverage before enrolling a patient in the next year’s plan;
And it would provide insurers with additional time to implement the proposed changes that are finalized prior to the 2018 coverage year.
So, a lot of folks in town, that’s a big deal. And beyond this rule, there are a number of other areas where the administration has already begun to act unilaterally (or at least the authority to do so). You may remember that back in January, they pulled back the marketing campaign to promote the ACA and the open enrollment period.
As I’ve mentioned earlier, they can’t do anything on the individual mandate alone, but they can significantly weaken it by directing the IRS not to enforce the penalty for failing to purchase insurance. They haven’t done that yet, but that’s one of the arrows in their quiver.
They’ve also indicated their plans to continue the ACA’s cost sharing subsidies even though these are part of ongoing litigation.
Interestingly enough, a lot of Republicans who are opposed to ObamaCare—well, all of them are opposed to ObamaCare publicly. But you’ve got some Republicans saying that they’d be willing to fund the subsidies this year (which of course never would’ve happened if Obama was in the White House).
And on the central health benefits, Secretary Price could relax the definition of EHP and give states more flexibility to set their benchmark plan.
And then, finally, on Medicaid waivers, once both Secretary Price and Administrator Verma were in place, they sent a letter to every state governor basically encouraging greater flexibility in state Medicaid programs, pledging that they would fast-track approval of waivers and demonstration projects.
Politically, what I find most interesting about this is that, again, Republicans in Congress seem to be split on the role the administration should be playing. A number of prominent members including Congressman Mark Meadows—you’ve probably heard his name in the media a lot lately. He’s the head of the House Freedom Caucus, the ultra-right group that really brought down the American Healthcare Act. He basically said the executive branch shouldn’t do too much here, that Congress should really be directing Secretary Price and not the other way around.
So, we’ll have to see. It’s something we’re watching every day. It’s unfolding. And now that Congress is back in town from a two-week Easter recess, I imagine we’ll learn more about what the administration plans to do.
Mike Passanante: And Mike, let’s pivot and talk about provider compensation and how the administration looks at that. We know that CMS has delayed the start of their new mandatory bundled payment models. Can you tell us specifically what they did and why?
Mike Merola: Sure! Just to set the table a bit for the audience, as you indicated, in late March, the agency announced that they plan to delay by three months several mandatory bundled payment models that were supposed to take effect in July. It sounds like you’ve heard, as have we, a lot of industry experts now saying that this really raises questions about the future of mandatory payment models under President Trump.
For further context for the audience, under the interim rules, CMS is going to delay from July 1st to October 1st two bundled payment programs for heart attack treatment and bypass surgery billed through Medicare.
It’s also going to delay the Cardiac Rehab Incentive Payment Model which encourages providers in 90 US regions to use Cardiac Rehab. That will go from July 1 to October 1 of this year.
And it’ll postpone from July 1 to October 1 the expansion of the agency’s Comprehensive Care for Joint Replacement Model.
I think it’s also worth mentioning here that CMS said it would prefer to align the payment periods with the calendar year. And as such, they’re seeking comment on further delaying the start of the Cardiac Bundled Payment and the CJR expansion until January 1 of next year.
So, the official reason behind the delay is to give CMS more time to review the programs and also to give providers more time to prepare for the payment changes. Although it’s not lost on anybody in town at least that Secretary Price has been a staunch opponent of these programs from the very beginning which is probably why so many stakeholders both in town and beyond the beltway are saying that HHS’ decision to delay the payment models raises questions really about, fundamentally, how the Trump administration will approach them.
For example, Ashish Jha who’s a professor of health policy at the Harvard School of Public Health said that the delays might suggest CMS will make the programs voluntary which he said would affect the pool of participants and ultimately drive up cost.
There are a lot of other experts who are saying that voluntary bundled payment programs are more effective than mandatory programs.
And notably, the American Hospital Association has criticized the payment models for being too much too soon. The Federation of American Hospitals in a statement praised the decision to delay the bundled payment programs saying that the organization welcomes a fresh set of eyes on the policies.
And according to RevCycle Intelligence, CMS’ consideration of delaying the bundled payment models until 2018 also could have implications for whether providers could qualify for the higher incentives offered by the Advanced Alternative Payment Model track under MACRA’s Quality Payment Program.
So, I imagine our hospital clients will likely feel varying degrees of the impact of the implementation delay. Some I know that we work with are going to move forward with implementation of these models while others are really relieved because they’re not ready for them.
But one area of consensus is that the interim final rule on mandatory payment reforms is not the last that CMS will issue. We’ll just have to wait and see whether they’ll delay them again for October or transition them to voluntary programs.
Mike Passanante: So far, there has been no action to slow down the implementation of MACRA in contrast to the bundled payment programs we just talked about. Does that seem like something that will proceed in its current form?
Mike Merola: Sure! And just as a quick reminder, MACRA itself stands for The Medicare Access and CHIP Reauthorization Act. And CHIP of course is the Children’s Health Insurance Program. Just for further context, it was signed into law in April 16th 2015. It had overwhelming bipartisan support including from Sec. Price when he was still in Congress.
But I’m sure, as many members of your audience know, its pass would set into motion profound changes in the way the federal government is going to pay physicians moving forward.
So, it was put in place to repeal the sustainable growth rate which had been in place for almost 20 years (and that had required Congress to pass last minute patches every year to try to address the potential cuts that physicians would experience without congressional action). And it basically sets up a number of opportunities for physicians and hospitals to work together, to improve outcomes, while at the same time, it makes fee-for-service increasingly unattractive in order to encourage providers to develop and implement alternative payment models.
So, implementation started on January 1st of this year. And it includes two payment options.
The first is the Merit-Based Incentive Payment System or MIPS which is really a complex pay-for-performance system based on traditional fee-for-service.
And the other option, participation in an advanced APM (alternative payment model) is, in reality, not currently an option for the majority of providers.
So, the main issue currently confronting providers in MACRA is that despite considerable flexibility in 2017, when full implementation arrives, the MIPS will make fee-for-service untenable at a much faster pace than the development and implementation of viable alternative payment models.
So, this means that unless something changes, a large number of providers are going to be pushed out of fee-for-service and over the cliff before they really have a safe place to land.
So, there are essentially two ways to address the problem. Physician groups in DC had been urging Health and Human Services to take a step back and make some changes. The first is to make MIPS less onerous and the other is to greatly accelerate the development and implementation of viable alternative payment models.
So, given Sec. Price’s background and his experience as a physician and his delay for the bundled payment program, I think a lot of folks feel he will slow down implementation. I think that’s sort of a safe bet for now.
Unfortunately, just like a lot of other things in healthcare, we have to take a day-by-day approach to it. But I think that’s a safe bet.
Mike Passanante: So, we’ve reached the first hundred days. It’s a marker for really any type of administration at almost any level. But it really is just the beginning as we’ve talked about. The team really is getting in place in certain levels of the government to tackle some of these complex issues. So much more to come!
Over the next several weeks or months, Mike, what do you see happening? What do you think is next on the agenda for healthcare?
Mike Merola: Sure! Well, interestingly enough, President Trump last week, he had this tweet that no administration has accomplished more in the first 90 days than his has, which you won’t be surprised is not exactly true. If you look at especially FDR. He was the President who instituted this 100 day benchmark.
But there hasn’t been a major piece of legislation passed by Congress for the President as part of the President’s agenda.
So, I think the next 100 days are going to look a lot like the previous where he still has to get his team in place throughout the administration. I think they’re going to continue to struggle to get something passed on healthcare because I think the framework that they’re addressing it in, it’s going to make it impossible for the Republicans to come to agreement on their own.
I mean, we could see this. They could be debating healthcare through next year’s election I think conceivably.
At some point though, they are going to have to move on to tax reform. And I think if the President wanted to look at this in a more narrow way and just send up to Congress a corporate tax reform bill, sort of very narrow, he might be able to get that passed.
But I don’t think either he or Paul Ryan, as I’ve said earlier, want to think that small right now. They want to think big. So I don’t think that’s going to go anywhere either.
So, there’s likely to be some events overseas that will take up a lot of his time. But domestically, I think we’re still going to be talking about healthcare and tax reform at the end of the next 100 days.
Mike Passanante: Mike, it’s always great to have you on the show to provide your perspective and clarity around these issues. We appreciate it. I look forward to having you back on as things progress with healthcare in this new administration.
Mike Merola: Thanks so much!