Axios Vitals

A briefcase with a red cross on the front.
May 17, 2017

Good morning ... The latest idea for a Senate Republican Medicaid compromise looks like a nonstarter, and their main decision on how to stop an Affordable Care Act market collapse is that they really should do something about it.

Tomorrow is the launch of our new weekly newsletter, Axios Science, by my colleague Alison Snyder. Sign up here if you want to check it out. And the brand-new science news stream is already going — so take a look here.

Hey look, it's a Medicaid compromise and nope it's gone

Turns out Senate Republicans actually have been thinking about a way to solve the Medicaid disagreements between moderates and conservatives, Caitlin Owens reports this morning. The idea that has been floated is a trade: the moderates would get a slower phaseout of the Affordable Care Act's Medicaid expansion, while conservatives would get a slower growth rate for Medicaid spending.

But that idea didn't last long — moderates just aren't open to anything that would move to the right of the House-passed bill. And they're making that known.

Why it matters: We're in the phase of the Senate talks where every new development is going to seem incremental. Ideas will be floated and shot down, and it will be hard to keep track. That's a shame, but it all matters in the long run — because it ultimately makes the difference between a bill and no bill.

The slowest responders in the world

Senate Republicans talked a lot yesterday about how to keep the ACA insurance markets from falling apart in 2018, as Caitlin Owens and I reported. But they didn't make any actual decisions, which seems to be the general story of the health care working group.

They might do a short-term stabilization bill and then the rest of the ACA replacement, or maybe they'll just wait and try to do everything in one bill, if they can get an agreement on it:

  • "There was no decision made on that, but there is a need to make sure that whatever we do immediately helps to ensure that the insurance market doesn't collapse." — Sen. Rob Portman
  • "There is no conclusion … then we have to look at what the long term is. Can we do that all together? I don't know. I think time's certainly running out." — Sen. Ron Johnson

The problem: June 21 is the deadline for insurers to tell the federal government whether they're going to sell ACA insurance in states that don't have their own deadlines. That's in about five weeks. So if Senate Republicans don't want more insurers to drop out — and don't want them to propose crazy rate hikes because of all the ACA uncertainty — they don't have a lot of time to figure out a plan.

AHCA could hit 6 million with pre-existing conditions

The Kaiser Family Foundation took a crack at solving one big mystery of the House's American Health Care Act: How many people with pre-existing conditions might be vulnerable to higher premiums in states that get waivers from Affordable Care Act rules? The answer, in a report out this morning: 6.3 million people.

Here's how they figured it out:

  • States would be able to get waivers from the rules that prevent insurers from charging higher rates to sick people.
  • But people with pre-existing conditions would only be vulnerable if they had a lapse in coverage of 63 days or longer.
  • So Kaiser looked at all of the people who had a long break in coverage in 2015, using data from the National Health Interview Survey.
  • It found 27.4 million people with a lapse in coverage.
  • Of those. 6.3 million — 23 percent — had a pre-existing condition.

Why it matters: If that many people could be hit with higher rates, the $8 billion fund allocated in the AHCA to help cover their costs could be stretched pretty thin.

Yes, but: That's probably a ceiling for how many people could be affected. Not every state will apply for a waiver — in fact, there's no sure way to estimate how many will. And, as Kaiser noted, some people will have a stronger incentive to avoid a break in coverage, if they can.

Hospital finances are declining but aren't in the toilet

If you're anything like Bob Herman, you were tickled with joy to see Moody's Investors Service release its 2016 median financial data for not-for-profit hospitals. The ratings agency took a preliminary glance at the financial documents of 150 hospitals and health systems, and its data showed what Bob has also tracked from his own reporting:

Higher labor expenses and expensive drugs are sucking some life out of hospitals. The median operating margin was 2.7% in 2016, down from 3.4% in 2015, according to Moody's.The ACA expanded coverage, requiring more nurses and doctors and technicians to treat the newly insured, which resulted in hospitals spending more on salaries and benefits. And we all know what's been going on with drug prices.But the lower average margin doesn't spell doom. The median operating margin was worse in 2014 at 2.2%, and in 2012 at 2.5%.Smaller, rural hospitals are in the most immediate financial danger, and many have closed in recent years. But the dominant health systems and big-name academic hospitals are still doing rather well because they often dictate prices in their local markets.

The case for "me too" drugs

The conservative health care analyst Avik Roy is out with a report outlining a lot of market-based ways to bring down drug prices. One part that's a bit of a surprise: He makes the case that "me too" drugs, which do things that other drugs already do, ought to be encouraged, not discouraged.

That goes against the conventional wisdom in federal drug approvals: If you're inventing a new drug that doesn't really do anything new — it just treats the same condition as other approved drugs — why bother? Why not spend your time on something that actually addresses an unmet medical need? But no, Roy writes, you actually need lots of different drugs that treat the same thing — because that's the only way to have lots of choices, and therefore true price competition.

Amazon might get into the pharmacy business

Amazon may be getting serious about entering the multibillion-dollar pharmacy market, CNBC reports. It has talked internally about making the move for a while, but now it has hired a general manager for the effort, and it's talking with industry experts about how to make the initiative work.

  • Why it might not work: There are already so many established players in the pharmacy business.
  • Why it might: With so many high-deductible plans and consumers paying for medical expenses out of pocket, they might want the convenience of online shopping.

The old FDA commissioner might get a new job

Another intriguing CNBC report from last night: Former Food and Drug Administration commissioner Robert Califf is talking to Verily, the life sciences arm of Alphabet, about a possible high-ranking job there. If he takes the job, the last FDA chief under former President Barack Obama would arrive just as Verily is starting up its Project Baseline, a study of the health of 10,000 volunteers.

What we're watching today: Senate Republican luncheon (they'll keep talking about health care).

What we're watching this week: House Energy and Commerce Committee marks up its bill to reauthorize the FDA's user fees, Senate Finance Committee marks up the CHRONIC Care Act, and House Ways and Means health subcommittee holds hearing on Medicare payment policies, all Thursday.

What we're watching next week: The House files its status update on the ACA subsidies lawsuit with the U.S. Court of Appeals for the District of Columbia, May 22. The Congressional Budget Office says it will release the cost estimate for the House-passed version of the American Health Care Act "early in the week of May 22."

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