Jun 30, 2017

Axios Vitals

By Caitlin Owens
Caitlin Owens

Good morning ... Vitals is taking the July 4th week off! But we won't leave you in suspense — keep up with the latest news in the always-updated Axios health care news stream. Here's how to put us on your phone's home screen:

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Beauty, thy name is recess

Here's where things stand on the Senate's health care bill as we head into the sweet, sweet mercy of a weeklong recess:

  • GOP leaders plan to send at least an outline of a new version of the health care bill to the Congressional Budget Office by the end of the day, even if a deal hasn't been reached yet.
  • Senators were still all over the map yesterday on a handful of key provisions. The moderates are still worried about Medicaid and the conservatives are still angling for new regulatory carve-outs (more on that in a minute). So, whatever decisions leadership makes today probably won't fill in every detail.
  • But aides told Caitlin Owens they can send the broad strokes over to CBO now, and fill in the gaps later. They have to get the ball rolling today in order to have a score by the middle of July, and a vote before the August recess.
  • Per Jonathan Swan: The mood was somber at a Thursday afternoon meeting between HHS secretary Tom Price and senior White House officials, and significantly more negative than the day before, per a source familiar with the meeting.

In short: The moderate Republican senators aren't buying what Majority Leader Mitch McConnell is selling. At least not yet.

Here's what's on the table as leadership looks for a final deal:

  • As much as $45 billion to help fight the opioid crisis. But, for the most part, the senators clamoring for this funding are the same ones concerned about the bill's Medicaid cuts, and opioid funding alone might not be enough to win them over.
  • A new provision allowing people to use tax-preferred health savings accounts to pay their premiums.
  • A surprising number of Republicans seem totally cool with not repealing the Affordable Care Act's tax increase on wealthy people's investment income, and using the revenue to fund more generous premium subsidies in the ACA's exchanges. The "repeal" bill looks more like the ACA every day.
What drug companies really spend on research

The pharmaceutical industry has long argued that U.S. drug prices are high to help pay for the risky business of inventing and developing new medicines. So Bob Herman took a look at what eight major drug makers spend on research and development. Here's what he found:

  • R&D expenses for most companies hovered at or below 20% of their revenue since 2010. That's consistent with the historical trend.
  • It was common for net profits and marketing budgets to surpass drug company R&D spending.
  • How a company defines "research and development" also can be murky.

The takeaway: Developing drugs is an expensive process that costs billions of dollars and frequently ends in failure. But after drugs get federal approval, their prices often far exceed R&D costs, taking almost all of the risk out of the process.

What Ted Cruz wants

Here's the basic idea of his "Consumer Choice" proposal for the Senate health bill: He wants to allow any insurer that sells an ACA-compliant plan — one that meets all of the ACA's insurance regulations — to also sell plans that don't comply with those rules. That could mean they don't have to include the protections for people with pre-existing conditions.

What that would mean: Anyone who's healthy would choose the plans without the protections, because they don't need them (and the plans probably would be cheaper). Anyone who has health problems would be left in the ACA-compliant plans, and those plans would face even bigger premium hikes because the healthy people would be gone.

What Cruz believes: It's not that Cruz has never thought of this. He just thinks it's better to pay for the sick people through the premium subsidies that they'd get in the ACA exchanges, which would still exist in some form, rather than by keeping healthy people in the same group and making them pay for the sick people.

What Cruz says: Here's what he told reporters earlier this week: "If those with serious illnesses are going to be subsidized...I think far better for that to happen from direct tax revenue rather than forcing a bunch of other people to pay much higher premiums."

What others are saying:

  • Former health insurance CEO Mario Molina: Splitting the market would be a problem. Also, the ACA was supposed to make it easier to shop for health insurance, and "I worry that having two sets of benefit plans will be confusing for people shopping for coverage."
  • Larry Levitt of the Kaiser Family Foundation: "People with pre-existing conditions who aren't eligible for premium subsidies would be completely out of luck."
  • Heritage Action's Michael Needham, in Real Clear Politics: "Conservative demands for a 'freedom option' -- essentially allowing insurance companies to sell plans that do not comply with Obamacare so long as they sell plans that do comply -- have fallen on deaf ears thus far. That should change if leadership hopes to secure conservative votes."
White House strikes back at CBO

The Trump administration is trying hard to "change the narrative" about the health care bill. Now it's pushing back against the CBO estimate that the Senate bill would cover 22 million fewer people than the ACA. In fact, the White House thinks 1 to 2 million people could gain coverage next year.

In a conference call with reporters yesterday, senior administration officials got into super-wonky details about why they think CBO's estimate is inflated:

They say CBO was using a "baseline" that assumed 18 million people would be covered in the ACA exchanges next year if the law doesn't change — which is unlikely, since only 10.3 million are covered now.It assumes 4 million people would leave Medicaid next year because the ACA's individual mandate would be gone. One administration official called that "rather silly," since Medicaid is "free health care."

And why do they think 1 to 2 million people could actually gain coverage under the Senate bill? "Premiums are going to go down, and more people are going to have an opportunity to participate and get a tax credit and be a part of that market," said one official.

The bottom line: Some of CBO's estimates of the ACA were clearly off, and the Trump administration may be able to generate doubt about its future assumptions. But it's hard to win a political argument where the opponents have a clear and easy claim — "22 million uninsured" — and the Trump administration's best argument is, "Yes, but the 2016 baseline..."

CBO takes the long view on Medicaid cuts

As long as we're talking about CBO baselines, let's just stay down in these weeds for a minute. CBO released a new analysis of the Senate bill's Medicaid provisions yesterday, and one CBO nugget jumped out at us as particularly enlightening: In 2036, Medicaid would make up a smaller share of the overall economy under the Senate bill than it does today.

Why this matters: The whole debate about whether the Senate bill "cuts" Medicaid or "reduces the rate of growth" in Medicaid is, in large part, an argument about baselines.

  • The White House is saying: Each year's Medicaid spending will be more than the year before it. Not a cut!
  • But that's not the full picture of how CBO analyzes bills. It evaluates what would happen if a bill becomes law against what would happen under the status quo.

But if you look at CBO's estimates about Medicaid as a share of the economy, you'll see it's a cut either way — whether you compare it to CBO's projections of what would happen in 2036 without the Senate bill, or to the reality on the ground right now. Which makes sense. The whole point of these provisions is for the federal government to spend a lot less money on Medicaid. And they would accomplish that.

America's birth rate is at another historic low

Women in the United States continue to have fewer children, and when they do, they are usually in their 30s instead of their 20s. Bob Herman reports that new data from the Centers for Disease Control and Prevention show the U.S. fertility rate in 2016 was a historically low 62 births per 1,000 women, down from the 62.5 rate in 2015.

Telling stat: "Birth rates declined to record lows for women in all age groups under 30 years in 2016."

Why it matters: The CDC did not say why the birth rate is declining. But research and surveys have shown several reasons, including wider availability of birth control, personal economic instability from student loans or other debt, women focused on launching a career before starting a family, and a growing acceptance that not everyone wants to have children.

Read more here.

Caitlin Owens

What we're watching today: Same old.

We are always hungry for tips and feedback: david@axios.com, baker@axios.com.