A Biden Administration Could Mean Change for Hospitals but Continuity on Many Issues

With Democratic presidential candidate Joe Biden now widely acknowledged as the president-elect of the United States, the nation’s attention has turned to the question of what to expect when the new president takes office in January. On healthcare issues, Biden’s agenda will be shaped by negotiations with Congress as well as the makeup of his administration, which will influence legislative and regulatory changes. At the federal level, there is likely to be a continued emphasis on regulatory changes to reduce healthcare costs along with a legislative push for increased insurance coverage and patient protections, although that agenda may get little traction in a Republican-controlled Senate. Gridlock in Washington DC as a result of divided government may encourage policy experimentation at the state level, especially in blue states interested in setting up a public option or single-payer model. And government officials at every level will have to grapple with the ongoing challenge of the COVID-19 pandemic, which is likely to worsen over the winter and could place increased burdens on hospitals.

  1. Background: Biden wins the presidency, but Democrats underperform
  2. On Saturday, November 7th, multiple news agencies reported that Joe Biden had taken an insurmountable lead in the state of Pennsylvania, clinching the state’s 20 electoral votes and putting him over the 270 electoral vote threshold needed to claim the presidency. Of course, ballots are still being counted and lawsuits have been filed in multiple states, and the outcome won’t be finalized until the electoral college meets on December 14th and its votes are certified by Congress on January 6th. Nonetheless, it seems safe at this point to conclude that Joe Biden will take the oath of office as the 46th President of the United States on Inauguration Day on January 20th, 2021.

    While Biden managed to defeat the incumbent president, Republican Donald Trump, projections of a “blue wave” that would sweep Democrats into office did not materialize. Democrats maintained control of the US House of Representatives, but with a diminished majority. While several races have not yet been called, and two races in Georgia will go to a runoff, the most likely outcome at this point appears to be a narrow Republican majority in the US Senate, meaning a continuation of divided government. Control of the Senate would give Republicans leverage over Biden’s legislative agenda as well as his appointments to high-ranking administration positions, including the Secretary of Health and Human Services (HHS) as well as the Administrator of the Centers for Medicare and Medicaid Services (CMS).

    While federal elections garnered the most attention, states also held gubernatorial and legislative elections last week. There was very little change: every incumbent governor on the ballot won re-election, while just 4 state legislative chambers changed hands. In contrast to divided government at the federal level, a large and growing number of states are under unified control, with a single party holding the governor’s mansion as well as both legislative chambers.

  3. Federal Outlook: Under a Biden administration, healthcare regulations likely to continue in the same direction as under Trump, while new legislation could shift course toward coverage and patient protection
  4. The 2020 election featured stark contrasts between the Democratic and Republican platforms on nearly every issue. Healthcare was no exception. Biden, who as Vice President under Barack Obama helped to ensure the passage of the 2010 Affordable Care Act (ACA), campaigned on protecting and building on that bill, including increasing premium subsidies and adding a public option, while promising to reduce health care costs by stopping the practice of “surprise billing” and tackling market concentration across the health care system. Trump, by contrast, celebrated his America First Healthcare Agenda, which included the successful repeal of the ACA’s individual mandate penalty, expansion of short-term insurance plans, and efforts to reduce costs through pricing transparency.

    It may come as a surprise, then, that the Biden administration is likely to continue several key initiatives of the Trump administration, at least at the regulatory level. In a podcast recorded before the outcome of the election was apparent, Rich Daly and Chad Mulvaney of the Healthcare Financial Management Association (HFMA) speculated that Biden’s administration would be likely to keep in place many of the regulations proposed or implemented by CMS under Trump appointee Seema Verma. These include rules that require hospitals and insurers to publicize their negotiated prices for healthcare services, expanded coverage for telehealth, site-neutral payments, the transition to value-based payment models, modifications to anti-kickback provisions and the Stark law to encourage coordination of care, and the International Pricing Index (IPI) for Medicare Part B prescription drugs. Some of these rules have met with opposition from provider advocates like the American Hospital Association (AHA), who argue that they impose significant compliance burdens on providers and have the potential to decrease hospital revenue and impact patient care. However, with bipartisan support for reducing healthcare costs, the rules are unlikely to be rescinded in a new administration.

    Another area in which President Biden’s appointees might continue in the same vein as Trump’s is hospital consolidation, which is the jurisdiction of the Federal Trade Commission (FTC). Republicans on the Commission have stated that they will closely scrutinize hospital mergers and acquisitions (M&A), including both prospective and retrospective reviews, which fits with Biden’s proposal to tackle market concentration as a way of holding down costs. At the same time, M&A is seen by hospitals as an opportunity to achieve economies of scale, especially as hospitals struggle financially due to the impact of the COVID-19 pandemic.

    On the other hand, the Biden administration might take a different approach on short-term insurance plans. A CMS rule issued under Administrator Verma allows the purchase of short-term insurance plans for a period of up to year, with the option to renew up to 36 months. Another rule expanded access to association health plans, although this rule ran into legal challenges. Trump promoted these plans as an alternative to the more expensive but more comprehensive plans offered under the ACA, which cover patients with pre-existing conditions and include a broad range of essential health benefits. Patients who purchase short-term and association plans may be surprised to find how little they cover, leaving patients under-insured. For this reason, providers may welcome a CMS rule that reimposes stricter limits on the purchase of these types of plans.

    While Biden and his administration will be able to push through regulatory changes on their own, they will need congressional support for more sweeping proposals like expanding subsidies for plans purchased on the ACA exchanges or lowering the Medicare eligibility age to 60, which could be a challenge in a Republican-controlled Senate. As HFMA’s Daly noted in a pre-election analysis, how these proposals would affect hospitals would depend on a number of different questions, including the reimbursement rates for the public option and whether a potential Medicare expansion would include Medicare Advantage plans. While policies that expand coverage to the uninsured and under-insured would improve hospitals’ balance sheets, a shift from private to government payers would hurt revenue since commercial plans tend to reimburse at much higher rates – 247% of Medicare on average, according to a study by the RAND Corporation, with wide variation by state (Maryland was excluded from the study because its rate-setting agreement means that Medicare, Medicaid, and private insurers all pay the same price).

    Daly and Mulvaney suggest that there may be more hope of bipartisan consensus on the issue of surprise billing, in which patients face bills from out-of-network providers; however, legislation may continue to be held up over the question of whether to determine out-of-network based on a market-based payment standard or an independent dispute resolution (IDR) process. If adopted, a benchmark rate could decrease reimbursement for providers and reduce the incentive for insurers to sign network agreements. An IDR, on the other hand, might give providers a better shot at a fair hearing, just as independent review organizations (IROs) have done for improper insurance denials.

  5. State Outlook: Like Trump, Biden could grant policy waivers to states that want to experiment with new healthcare policies, but with a focus on expanded insurance coverage rather than eligibility requirements
  6. The next few years are likely to see increased healthcare policymaking in the states, especially if federal action remains stalled by gridlock. CMS has the authority the issue State Innovation Waivers under Section 1332 of the ACA as well as Medicaid demonstration waivers under Section 1115 of the Social Security Act. Under Administrator Verma, CMS has issued waivers to allow states to fund reinsurance programs and impose work requirements for Medicaid eligibility. CMS has also granted states increased flexibility to set their own rules for Medicaid Managed Care Organizations (MCOs), which cover 83% of Medicaid beneficiaries across the nation in the 40 states that have them.

    Under a Biden appointee, Daly and Mulvaney suggest, CMS might be less receptive to Medicaid work requirements but more open to letting states experiment with a public option or single-payer model, which would be most likely to advance in the 15 states under unified Democratic control. Like the federal version, a state-level public option could have different impacts on hospitals depending on how its rates are set.

  7. COVID-19: Biden’s plan to prioritize fighting the virus over reopening the economy could be a double-edged sword for hospitals
  8. President-elect Biden has pledged to fight the coronavirus more aggressively than President Trump has, including making testing more widely available, increasing production of personal protective equipment (PPE), and imposing a nationwide mask mandate. Such measures could help hospitals overwhelmed by the predicted winter surge in cases. At the same time, if state and federal authorities reinstate the kinds of broad stay-at-home orders that came in the early stages of the pandemic, including mandatory bans on elective procedures, hospitals could once again see a significant drop in revenue. Additional aid to hospitals in a new COVID relief package, which could pass in a lame duck session of Congress before Inauguration Day, would help to plug the gap in revenue.

  9. Bottom Line: Some Biden policies could be good for hospitals, while others might lead to decreased revenue
  10. While much about the next presidential term remains uncertain, a few trends seem likely. The regulatory focus on reducing healthcare costs through competition, price transparency, site neutrality, and value-based payment, already underway, is likely to continue. Efforts to expand coverage, whether through Medicare, Medicaid, or the ACA exchanges, could advance, although they might meet resistance in Congress, especially if Republicans maintain control of the Senate. Under a Biden appointee, CMS might be more willing to endorse state-level policy experimentation on Democratic priorities like expanded coverage, rather than Republican initiatives like eligibility requirements. A renewed fight against the COVID-19 pandemic might include more hospital assistance as well as stronger restrictions on activities that contribute to the spread of the virus.

    How all of these trends affect hospitals depends in large part on the services that hospitals are able to provide and the rates that they are allowed to charge. If volumes increase and more patients move from self-pay due to expanded insurance coverage, hospitals will be able to recover some of the revenue that they lost during the pandemic. On the other hand, if volumes remain depressed, more patients shift from commercial to government payers, and federal regulators impose new restrictions on hospitals, revenue could decline further, potentially leading hospitals to reduce services or even close their doors.

    It is too soon to say definitively how President Biden will shape the healthcare sector, except to say that, like President Trump and President Obama before him, his administration is likely to bring continued change and disruption in the industry. Hospital leaders looking for clarify on the direction of the next four years should keep their eyes on Congress, CMS, and the FTC.

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