PharmExec Blog

With the Election Decided, It's Full Speed Ahead on ObamaCare

by Tom Norton

With the Presidential election decided and President Obama the clear winner, it’s time for Pharma to get down to business on the implementation of ObamaCare.  Here are some of the key actions to anticipate between now and January 1, 2013.

HHS Leadership

First and foremost, the leadership at HHS, including Secretary Kathleen Sebelius, are reportedly likely to stay in place.  This is the team that built the many bureaucratic machines that are designed to drive ObamaCare. These government programs, now unshackled from all the political considerations that retarded their full implementation over the last two years, are fully cleared to engage on everything.  This HHS team is dedicated to finishing their mission and getting all of ObamaCare up-and-running.

So look for the Independent Payment Advisory Board (IPAB), The Center for Consumer Information and Insurance Oversight (CCIIO), Center for Medicare & Medicaid Innovation (CMMI), The Medicare Integrity Program (MIP) and a whole host of other ObamaCare acronyms to become suddenly, publicly active.

Additionally, many others, like the Patient Centered Outcomes Research Institute (PCORI) & The Accountable Care Organizations (ACOs) are already quietly moving into their third year of ObamaCare activity and federal funding.  Now look for rapid, substantive output from “going concerns” like these.

In short, with the election settled, the low key, persistent planning of the last two years that has created this multitude of new ObamaCare agencies and “centers” is now set to pay off as HHS aims for full implementation of the law by January 2, 2014.

The States

The game is just about over for the states, as I see it.   Given the results of the election, it’s pretty simple at this point.  By November 16th, all states must report to HHS on how they plan to set up their State Health Exchanges — all of which must be in place by late 2013.  ObamaCare demands this because the states will be the backbone of the entire program and will be responsible for providing services to 30 million new Medicaid patients in 2014.

With the Supreme Court decision of this summer, the options for the states to either opt into ObamaCare, or stay out were limited.  Yes, the Court stated that the states cannot be “forced” into accepting the mandates of ObamaCare, and several states continue to fight various rear guard legal battles.  However, all in, you would have to say after Nov. 6th, it is now up to the states to figure out how to make the best of this and then embrace this massive new federal healthcare mandate that is rapidly running downhill onto them.

How will this go for the states?  Well, those states that say “no” could forfeit a decade of various federal supports — in addition to having to endure the presence of a “federally administered health exchange” operating in their state over which they would have no control; while those states that say “yes” will begin to immediately receive federal dollars to assist in supporting their newly expanded Medicaid programs.  Never mind how the providers and health care systems in those states will be able to service this new influx of millions of new patients.  Question like that aren’t on the table, now, and according to HHS won’t be critical for 10 years.  That said, HHS’s “10 year cost factor” is what’s keeping most every governor in the nation up at night.

And finally, for those many states that have stipulated that they believe they have some sort of leverage in obtaining a state exchange “deal” from HHS (block grants, private demonstration projects, etc.), I think yesterday pretty much slammed the door shut on that theory.  “Elections have consequences,” as President Obama has famously pointed out.  I suspect as a result of Nov. 6th one of those consequences is that the states are either going to be in — or out — of ObamaCare.   No middle ground.

Medicare Advantage

And what about those programs that ObamaCare initially designated for extinction, but have somehow survived since the law passed?  A prime example is Medicare Advantage.  This big Medicare program, currently provided by private insurance companies and costing $250 billion, serves over 13 million Medicare patients.  However, as directed by ObamaCare, MA was scheduled to be “deconstructed.” The bottom line: Everyone currently in Medicare Advantage was to be assigned to “original” Medicare service by January 2, 2014.

But this didn’t begin to happen as scheduled in 2010.  Why?  It’s simple.  People participating in MA programs really like them.  One of the reasons they prefer MA plans is that patients have access to a much broader array of Rx drugs versus those drugs offered in “original” Medicare.  Therefore, HHS realized that announcing the closing of these popular MA programs that provide enhanced services, including expanded Rx formularies, was not the thing to do.  Obviously, taking something like preferred drugs away from 13 million Medicare patients, just before a national election, is not politically prudent.  And so, MA has been allowed to meander along over the last two years.

Today, however, with Nov. 6 behind us, and with the above mentioned state Medicaid programs scheduled to go on line in 2014, these new services have to be paid for somehow.  So, the $250 billion that is currently being used to pay for the 13 million people on Medicare Advantage will shortly be “redirected” to pay for 30 million new Medicaid patients in ObamaCare.

Thus, despite its success and popularity, with Nov. 6 come and gone, I would expect that within the next few weeks we will be hearing directives from HHS announcing the imminent demise of Medicare Advantage by 2014.

HCRsmall

The payout under US health reform begins – Pharm Exec’s review of this year’s 10-k reports from seven big pharma companies highlights what’s ahead for the US industry as the revenue raising provisions of the Affordable Care Act fall into place and await the massive expansion of individual mandate coverage in 2014.

Pharma Impact

So, if you consider the likely concerted onset of all the broad aspects of ObamaCare; the prospect that the states may well decide to acquiesce and begin to carry the load for the implementation of ObamaCare; and the rapid demise of current programs, such as Medicare Advantage, that are currently supporting fairly broad access to Pharma brand name products, it is probably correct to say that the general outlook for industry after this election can be termed as ‘uncertain.’

Clearly, in this post November 6th world, pharma has to be vigilant as the final HHS rules and many regulations of the numerous ObamaCare bureaucracies surge forward.  This will be a time of clear challenge on numerous levels, and let’s face it – the folks at HHS will be in a hurry to get their work done.  For Pharma to not fully engage at this time is only to invite unfair decisions and rash actions by those in charge at HHS.

All of that said, from November 6, 2012 forward, I think it is fair to suggest that a broad swath of American healthcare has now been officially sanctioned and approved as “government run” and, as a result, will be heavily influenced by ObamaCare for the foreseeable future.   The implications of this for pharma are not small.

Concepts such as drug innovation, successful marketing and sales campaigns, and resulting profits – all elements that once made the American pharmaceutical industry one of the greatest in the world – will now have less importance in determining the future success of an Rx company.  Going forward, it unfortunately appears that “success” now, more than likely, will boil down to the various “consequences of elections” and who’s running the show in Washington.

Those are my thoughts on the Election of November 6th.  I would be interested in hearing your comments on the matter.

Tom Norton is Principal, NHD Smart Communications of Illinois, Inc. He can be reached at tnorton@nhdcomm.com

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3 Comments

  1. Victor Rossi
    Posted November 8, 2012 at 2:00 pm | Permalink

    Wasted Valuable Time

    So what was the delay until after the election?

    What information did the writer possess that gave any indication that Romney was going to have a chance at winning the POTUS contest, and in so doing derail the Affordable Health Care Initiative?

    Since time is of the essence, the industry should not delay in getting on board with this fair and innovative legislation.

  2. Fed up
    Posted November 15, 2012 at 10:56 am | Permalink

    Pay attention Victor – Did you actually read and comprehend the article at all? Or just here to spout your lib drivel?

    The delay was to not draw attention to the flawed (dare I say outright lies) democrats keep telling everyone about this new magical national health plan of theirs? Lower costs, not a tax, etc.

    I don’t even get why the “writer’s . . . indication of Romeny having a chance at winning” even factors into the point he was making. Did you miss the part of Romney’s campaign platform that indicated he would repeal ovomitcare?!

    We’ll somehow survive, but I hope I’m around when the crow is served to those that have fallen for this crap. Maybe by the time my grandkids are grown we’ll have had the time and sense to right this great ship called the US of A.

  3. Posted January 4, 2013 at 12:46 pm | Permalink

    The prevailing argument against most healthcare companies, including pharma, boils down to that of running a business versus focusing solely on healing people of their ailments, diseases, etc. I don’t think most people mind that companies make money off of what they do, but when you look at the health statistics in the United States (and, to be fair, most of the developed world) there clearly needs to be a 21st century breakthrough in terms of policy, culture, and approach to keeping people healthy.

    My view is that the things that we hear about on the news cycle are pushed out of a need for ratings, drama, and party politics, while the doctors, innovators, and other are on the sidelines forced to hear about ‘solutions’ that they may have no part in.

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