Healthcare regulators will focus on consumer-friendly issues in 2020

Two things loom large over the Trump administration’s healthcare regulatory agenda in 2020: the presidential election and how the courts will decide the fate of the Affordable Care Act.

To a certain extent, nothing has changed over the uncertainty of the ACA. A federal appeals court last month declared the individual mandate unconstitutional, but it punted on what to do with the rest of law, sending it back to a lower court to make that decision. Ultimately, the case will land before the U.S. Supreme Court, but probably not until after the election. At deadline, Democratic state attorneys general were reportedly preparing to ask the high court for an expedited review.

While that process unfolds, the administration’s regulatory machine is likely to sharpen its focus on issues that officials claim benefit consumers, like price transparency, drug costs and affordability. The goal: Tie the regulatory agenda to the president’s political messaging.

“When you go into an electoral cycle like this, the agencies have to be completely in lockstep with the candidate,” said Dan Mendelson, founder of consulting firm Avalere Health and a former Clinton administration official.

With drug-pricing legislation stalled in Congress, HHS took a major step in mid-December aimed at alleviating the high costs consumers pay at the pharmacy. The Food and Drug Administration issued a proposed rule that would allow states to import drugs from Canada if they don’t pose any safety risks and would generate cost savings. The administration would also let pharmaceutical companies import the products they sell abroad and resell them in the U.S.—a policy that has support from drugmakers because it wouldn’t cut them out of the revenue stream.

“Importing efforts by states could cause unintended or unforeseen pricing impacts from a marketplace standpoint,” said Meena Datta, partner and co-leader of Sidley Austin’s healthcare practice and a member of its global life sciences team. Comments on the proposed rule are due March 7, and a final rule could be issued as soon as May.

The administration is also working on an international price index demonstration that would link Medicare Part B drug payments to the prices paid by other wealthy nations. The policy has been tied up at the White House Office of Management and Budget since last summer, but it has support from the president. It will likely remain a top priority, despite opposition from Big Pharma, which claims it will hurt the development of new treatments by cutting into their research and development budgets.

“Healthcare is going to be the No. 1 issue going into the election, so HHS will be focused on the prices that consumers pay for prescription drugs,” Mendelson said. “It’s first among equals.”

HHS will also continue its efforts to lift the veil on the secretive world of hospital and insurance charges. HHS Secretary Alex Azar and CMS Administrator Seema Verma spent much of 2019 touting price transparency as a way to reduce costs by improving market competition and helping consumers make better-informed decisions.

Topping the to-do list on this front will be defending and implementing its controversial rule that forces hospitals to disclose the rates they negotiate with payers, as well as finalizing a rule that would make health plans provide members with information about healthcare prices and their cost-sharing obligations before they receive medical treatment.

Hospitals are suing HHS over the negotiated price rule, arguing that the department doesn’t have the legal authority to mandate it. Hospital groups argue that consumers won’t benefit from the rule because it doesn’t provide patients with information about their out-of-pocket costs, which is what people care about. And they warn that it could raise healthcare prices by reducing competition among insurers and creating more paperwork for doctors and hospitals.

“This rule will lead to widespread confusion and even more consolidation in the commercial health insurance industry,” said Rick Pollack, CEO of the American Hospital Association.

Even as the administration is at odds with hospitals, it’s looking to pare down regulations that industry stakeholders say stand in the way of moving toward value-based care. Central to that effort is finalizing revisions to the Stark law and anti-kickback statutes. Provider groups have long said that the existing physician self-referral and anti-kickback rules make it difficult for doctors and hospitals to move to value-based payments because they’re worried about the government cracking down on them or getting sued.

But many experts think the impact of the rule changes will be minor because there are other factors at play, including the difficulty of compliance and the smaller financial rewards of alternative payment models.

The administration also hopes to accelerate the transition to value-based payments in physician settings through new alternative payment models such as Primary Care First and direct contracting. But the pace of bringing those to market could slow as HHS shifts its priorities to consumer-facing issues like lowering drug prices and cost-sharing, both of which could be political winners for the president.

HHS could focus on the growing the Medicare Advantage program and improving beneficiary design for high-need beneficiaries by expanding access to telehealth services. The agency may also look for ways to address social determinants of health, primarily through Advantage plans. These changes could disproportionately help the president’s core supporters, who tend to be older and more rural than the electorate overall.

A budding political liability for the president is the rise in the number of uninsured Americans, which climbed to 8.5% or 27.5 million in 2018. “We’ve seen a major deterioration in the number of people who are insured, and that will be an electoral issue,” Mendelson said.

Beyond the ACA, the courts will play a critical role in the Trump administration’s 2020 regulatory approach following several rulings against the administration last year. The CMS lost battles over site-neutral and 340B payment policies and suffered setbacks on Medicaid waivers.

The administration can move its regulatory agenda forward by pushing the envelope of the powers granted to it by Congress and marshaling the best arguments it can muster in court because “they have nothing to lose by appealing,” said Eric Zimmerman, partner and global head of McDermott, Will & Emery’s health practice. The Trump administration will ultimately have to live with how the courts interpret the law, but losing in court doesn’t mean that the administration needs to take an item off its agenda.

“You can have something tied up in court and still make good rhetoric around it,” Mendelson said.

If the administration continues to lose court battles, it could provide Congress with an opportunity to give the executive branch greater rulemaking authority on critical healthcare issues like drug pricing.

“I think they can successfully leverage losses in court,” Datta said. “They can use that as a strategy to take to Capitol Hill and say, ‘Look you’ve got to fix this because we can’t.’ ”

But the administration is likely to pursue alternative courses of action if it can’t win in the courts. The CMS asked states to submit waiver requests for Medicaid work requirements, but suffered multiple legal setbacks. Next spring, the agency will propose a new rule that would institute a more onerous Medicaid eligibility determination process to make sure that people aren’t improperly enrolling in the Medicaid program, even if they’re eligible for benefits.

Some industry stakeholders are likely to be disappointed in the administration’s regulatory targets because “everyone has an agenda about what they want to be discussed,” Mendelson said. But 2020 will be about what voters want.

“If it’s not going to help the president win re-election, why should they be prioritizing it?” Mendelson said.