David Nather
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Trump gets rid of surgeon general

AP file photo

President Trump dismissed Surgeon General Vivek Murthy Friday night, replacing him with the deputy surgeon general as he moves to name his own people to the administration.

What happened: Murthy "was asked to resign from his duties as Surgeon General after assisting in a smooth transition into the new Trump Administration," Health and Human Services spokeswoman Alleigh Marré said in a statement. "Secretary [Tom] Price thanks him for his dedicated service to the nation."

Who's in charge now: Rear Admiral Sylvia Trent-Adams is now the acting surgeon general.

Why: There was no official word, but Murthy, who released a report last year on the dangers of addiction, had made enemies because of his opposition to e-cigarettes.

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It's going to be Obamacare insurer payments vs. the wall

AP file photo

So here's where we're at on Obamacare insurer subsidy payments in the upcoming government funding bill:

  • Office of Management and Budget director Mick Mulvaney on Bloomberg TV: Trump administration is offering Democrats $1 in insurer subsidy payments in exchange for every $1 in funds they're willing to support to build the border wall.
  • "Complete non-starter," per Senate Minority Leader Chuck Schumer, via spokesman Matt House.
Bottom line: Yes, we're going to have to go through this. It's not going to be a no-drama solution.
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Trumpcare update: House is writing legislative language

Mel Evans / AP

The House Energy and Commerce Committee has written draft legislative language for the latest Trumpcare changes, and the Senate Budget Committee is reviewing them to see if they'd cause any problems with the budget reconciliation rules, according to three sources familiar with the discussions. The goal is to provide more details for the amendment negotiated by Rep. Tom MacArthur, a leader of the moderate Tuesday Group, and Freedom Caucus chairman Mark Meadows so Republican holdouts can decide whether the changes would earn their votes.

Timing: House Republicans are having a conference call tomorrow and the new health care proposal is sure to come up, but it's not clear that the language will be ready by then, according to one source familiar with the discussions. If the Senate Budget Committee finds that any of the changes would violate budget rules, the House will have to rework them.

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Insurers took a hit from Obamacare, but it's been getting better

The Kaiser Family Foundation has a good reality check this morning on the "exploding Obamacare" narrative. Yes, it found, most insurers' financial performance got worse in 2014 and 2015, the first two years Obamacare was in full effect. But the insurers were starting to recover in 2016 — a sign that the markets could be stabilizing.

The bottom line: The analysis suggests that the insurance market was starting to climb its way out of a hole, not falling apart — but it also says the market could still fall apart because of the uncertainty over what happens next.

Data: Kaiser Family Foundation analysis of data from Market Farrah Associates Health Coverage Portal; Chart: Andrew Witherspoon / Axios

What it found: The two measures Kaiser looked at:

  • Medical loss ratio: This is how much of the money they collected in premiums got paid out for medical care. The percentages rose a lot in 2014 and 2015 before dipping in 2016.
  • Gross margins per member: This measures how much more money insurers collected in premiums from each person than they spent on medical care. It dropped sharply in 2014, and insurers actually lost money on average in 2015, but they showed signs of recovery in 2016.
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One reason for the Trumpcare vote talk: Priebus wants it

AP file photo

Why is the White House pushing so hard for a vote on a revised Trumpcare bill next week when virtually no Republicans think it's ready? President Trump himself has a big role in that, of course, but the New York Times identifies another reason: White House chief of staff Reince Priebus really wants it. The Times reports that Priebus is feeling more pressure than most other White House officials, because he took the blame for the bill's initial failure.

Priebus has figured prominently in other accounts of the White House leaning on House GOP leaders to hurry up and vote, even though there's no indication that any of the recent changes have actually picked up any votes for the bill. The latest proposed amendment by Rep. Tom MacArthur, one of the leaders of the moderate Tuesday Group, exists only as a half-page outline and a Facebook post, so key Republican holdouts say they need more details.

What to watch: We probably won't know whether it has changed any votes until there's actual legislative language. The question is whether Priebus — or his boss — are willing to wait that long.

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Vitals

Good morning ... It's not that hard to solve the coming standoff over whether Congress should fund the Obamacare insurer payments, but that doesn't mean Congress won't make it hard. So — get the government shutdown clock ready, CNN!

And a quick reminder that Vitals is off tomorrow, then we'll return to our regular publishing schedule next week when Congress gets back.

Obamacare payments: Can't we just skip to the end?

Giphy

It's not that hard to figure out how the standoff over Obamacare payments to insurers is going to end: with a compromise. The betting in D.C. right now is something like this: Republicans agree to fund the payments for the Obamacare cost-sharing subsidies in the upcoming spending bill, but only for a year at a time, not permanently as Democrats want.

So why can't we just fast forward to that part now? I have a story up this morning about why we'll have to go through yet another government shutdown drama to get there. The gist: Democrats want it to be "mandatory" spending that goes out automatically, and that's politically impossible for Republicans — but Republicans are under a ton of pressure to fund the Obamacare payments so the markets don't collapse, and they need Democrats' help to pass the spending bill.

No, health care isn't like "The Art of the Deal"

In today's column, the Kaiser Family Foundation's Drew Altman looks at President Trump's threat to use the subsidies as leverage against Democrats, and explains why that isn't really the way health care dealmaking works. It's not like a real estate deal, he writes, where everything is negotiable. In health care, there are real, deeply felt policy differences, and everyone is so dug in that they're not willing to do a lot of horse trading.

That's why Trump hasn't been able to force a deal with the Freedom Caucus, he writes, and it's why the Democrats aren't any more likely to give in on the marketplace subsidies. Read the piece here.

Look, Tom Price is working on something besides Trumpcare

The Health and Human Services secretary is also working on the opioid crisis. That was the theme of his speech to the National Rx Drug Abuse and Heroin Summit in Atlanta yesterday, where Price announced $485 million in grants from the Substance Abuse and Mental Health Services Administration to help states pay for opioid abuse prevention and treatment. He said a similar amount will go out next year.

The other Trump administration initiative is to cut some of the rules on how doctors can treat patients fighting addiction, Newt Gingrich, who's now a paid spokesperson for Advocates for Opioid Recovery, told the summit. "Trump is trying to cut out things [that] are stupid," Gingrich said, per STAT.

Adeptus … or Adump-tus?

Bob Herman has been closely following the financial meltdown of Adeptus Health, the freestanding emergency room chain that used to be a darling on Wall Street with a $2.5 billion market cap. Well, Adeptus is really close to full-blown "dumpster fire" status.

What's happening: Last week, investment firm Wexford Capital bought more than 40 percent of Adeptus. Wexford, which specializes in troubled companies, said at the time that Adeptus may need to go through bankruptcy, but "the fundamentals of [Adeptus'] business appear to be sound." Fast forward to this week, and Wexford has bailed on every last share it bought. Those fundamentals don't seem so sound anymore.

The bottom line: Wexford didn't respond to questions from Axios. Adeptus has also been extremely tight-lipped and now will officially go through bankruptcy with hedge fund Deerfield Management. But the lesson remains the same: Adeptus' freestanding ER model has been too expensive to manage, and patients have been put off by surprisingly high facility charges.

A cybersecurity startup exposes a hospital's network

Pro tip: When you're a startup that specializes in cybersecurity, maybe don't show off a hospital's private network information. That's what Tanium Inc. did to El Camino Hospital in California, the Wall Street Journal reports in an amazing story that posted last night. Tanium makes software that maps computer networks and finds a company's vulnerabilities, so it presented demos that showed the software working in El Camino's system. But it never had permission to do that — so it ended up exposing the hospital's desktop and server management information to outsiders.

Why Verily has to do its big study of healthy people

There was a lot of discussion yesterday of Verily's Project Baseline, a study of 10,000 healthy people to see what happens to their health over time. The Verge makes an important point about why Verily — Alphabet Inc.'s rebranded version of Google Life Sciences — is funding the study, as opposed to the federal government. It's because government funding of science has been trailing off, to the point where another large-scale study — one in Framingham, Massachusetts, that looks at the causes of heart problems — lost 40 percent of its funding four years ago.

Don't forget the context: Imagine trying to launch a study of this scale now, when members of Congress are trying to keep the Trump administration from gutting the National Institutes of Health. Besides, as the Verge points out, a federally funded study like this would be a hard sell because "it's expensive and because it's hard to predict what studies like this will find."

What we're watching today: Minority Leader Nancy Pelosi and Rep. Lloyd Doggett hold a roundtable on health care in Austin, Texas, including musicians who say Obamacare saved their lives. Mostly watching to see if I still know any Austin musicians.

What we're watching next week: Senate HELP Committee vote on FDA commissioner nominee Scott Gottlieb, Wednesday; Trump press conference on veterans' health care, Thursday.

Thanks for reading, and let us know what's big on your health care agenda: david@axios.com.

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Obamacare payments: Can't we just skip to the end?

Giphy

It's not that hard to figure out how the standoff over Obamacare payments to insurers is going to end: with a compromise. The betting in DC right now is something like this: Republicans agree to fund the payments for the Obamacare cost-sharing subsidies in the upcoming spending bill, but only for a year at a time, not permanently as Democrats want.

So why can't we just fast forward to that part now? Here are the reasons we'll have to go through yet another government shutdown drama to get there.

  • The pressure is mounting on Republicans to fund the payments so the Obamacare insurance markets don't collapse, an event that would most likely be blamed on them.
  • Democratic leaders are pushing for the payments to be funded in the spending bill. And they want to be absolutely sure the payments go out. So they want them to be included as "mandatory" funding — meaning the spending happens automatically, and doesn't have to be approved each year.
  • Politically, there is no way Republican leaders will agree to that. Conservatives would accuse them of increasing entitlement spending, since that's also done through mandatory funding.
  • It will also be hard to convince conservative Republicans to vote for the payments under any circumstances, since the GOP just sued over them. It would still sound like "insurer bailouts."
  • But Republicans will need Democrats' help to pass the spending bill. House Speaker Paul Ryan will need Minority Leader Nancy Pelosi to deliver Democratic votes, because he can't count on the conservative Freedom Caucus. And Senate Majority Leader Mitch McConnell will need Minority Leader Chuck Schumer's help to get to 60 votes.
  • Democrats know this, which is why a senior leadership aide tells me they're sticking to the demand for insurer payments — as mandatory spending. They have no incentive to give that up now. They believe that if Republicans don't agree, and the government shuts down, the public will blame the GOP because they're in charge.
  • Insurance officials have been pushing for a quick resolution. They were joined yesterday by the National Association of Insurance Commissioners, which warned in a letter to House leaders that quick action is "critical to the viability and stability of the individual health insurance markets."
  • Republicans may not be able to add it as mandatory spending without a complete revolt from their members. But they might face less resistance if they do it as discretionary spending — meaning it's only good for a year, and then they'll have to fight the same battle with Democrats next year.

So far, the staff-level negotiations have been going well — Schumer told reporters earlier this week that he was "very hopeful we can come to an agreement that everyone can be proud of." But there's always the danger that Office of Management and Budget director Mick Mulvaney will try to blow it up with hard-line demands.

If that happens, look for GOP leaders to ignore him — because they want to move on to other issues, and they can't do it if the government is shut down.

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Gottlieb to get Senate committee vote Wednesday

J. Scott Applewhite / AP

The Senate HELP Committee will vote Wednesday on the confirmation of Scott Gottlieb to be the Food and Drug Administration's next commissioner. He's expected to be approved easily, despite some Democratic misgivings about his industry ties. Then he has to be confirmed by the Senate. That shouldn't be a problem either.

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How one startup is using artificial intelligence to search for new drugs

Gregory Bull / AP

Atomwise, a San Francisco-based biotech startup, is trying to use artificial intelligence to cut the development time for new drugs — and it's launching a new project today to help researchers do that. It's inviting scientists to apply for quick screenings using its AI technology. The company will test millions of molecules for up to 100 labs, find out which ones are most likely to work on a disease or protein, and then ship 72 customized compounds to each lab for testing.

What they're trying to solve: Drug companies often talk about the time and expense it takes to develop and win approval for a new drug — the commonly cited statistics are $2.6 billion and 15 years. Atomwise says it's trying to cut that time by using AI to speed up the beginning of the process. If it works, the time from the idea stage to clinical trials will be "significantly shorter" and "the success of the clinical trials will be greater," said Dr. Han Lim, who's in charge of academic partnerships for the startup.

How it works: The technology can screen millions of potential drug compounds, company officials say, by simulating different proteins associated with a disease and figuring out whether and where those compounds would attach to them — possibly preventing their role in triggering a disease. It will screen 10 million compounds for each lab, so by the end of the project, it will have analyzed up to 1 billion compounds, according to Alexander Levy, the company's co-founder and chief operating officer.

What they get out of it: The scientists will get the compounds for free, at a cost of up to $1 million for Atomwise. The company is paying for it out of its venture capital financing and corporate partnership revenues. They say they're doing it to support a good scientific cause, but there's a financial reward down the road: If their support helps lead to a new drug invention, they'll work with the researchers to patent it and bring it to market.

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Insurers won't give up on Obamacare payments

Andrew Harnik / AP

Health insurance officials gave Seema Verma, Centers for Medicare and Medicaid Services chief, an earful today about the biggest issue in their world: the need to know whether they're going to get paid for their Obamacare cost-sharing subsidies to low-income consumers.

The message was delivered by top insurance officials including Marilyn Tavenner, the head of the trade group America's Health Insurance Plans (who used to have Verma's job in the Obama administration).

What they said: "We are committed to working with Administrator Verma, the Administration and Congress to ensure [cost sharing reduction] funding is addressed quickly to provide clarity for consumers in 2017 and 2018," AHIP said in a statement.

Between the lines: Health insurers want to get the issue resolved as soon as possible, and Democrats are pushing to include the money in the upcoming bill to fund the government for the rest of the year. But Republicans haven't tipped their hand on what they're going to do.

The consequence: If they don't figure it out soon, insurers could either impose massive rate hikes for Obamacare next year or pull out altogether.