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Installing Updates Video Transcript

Patrick McGarrity:
We are going to hear from Bonnie Washington, Vice President of Public Policy at CVS Health. Bonnie was with us when we were in person a few years ago and then last year virtually. Since there’s a new administration, we thought it would be interesting to hear from Bonnie to give us her perspective.

Her session titled “Installing Updates” will give us a peek around the corner with the new administration’s healthcare legislation agenda.

Bonnie, welcome back. I think what they say in DC, if I’ve got this right, is the floor is yours.

Bonnie Washington: 
Hi. Thank you so much for inviting me here to speak to you today and I’m happy to follow Chris. So much of what we have been doing in government affairs relates to the work of Chris and his team in getting vaccines to people. So this presentation is a good follow-on to that although there’s, you know, a lot going on in DC.

So, you know, so much has happened since we had this meeting last year. You can go to the next slide. We can start there. That’s great.

We’re almost 100 days into the new Biden presidency and a Democratic-controlled Congress. And we have already had seen some major healthcare legislation at the end of last year and the beginning of this year, healthcare legislation that generally you often see only once a decade or once every five years and we’ve had many of these sort of large legislative packages at the federal level already.

So what I’m going to talk to you about today is what we expect to see at the federal level particularly over the next year both legislatively and regulatorily as we enter this new administration and new Congress. And I’m also going to touch on at the end what we’re seeing at the state legislature level this year already as many states are in session.

And as you know, the pandemic has really renewed focus on healthcare issues particularly access to care affordability and very importantly health disparities. So, you know, I think people are very seriously considering lots of substantive policies that would expand access and try to tackle disparities based on the experience that we’ve all had together over the last year.

So if you look at this slide, the major story about the 117th Congress is that we’ve got a unified Democratic Congress, which, you know, happens sometimes, but that has very narrow margins as a result of the Georgia runoff. We’ve got a 50-50 split in the Senate and just a four-vote margin in the House for Democrats.

And what we saw as a result of the American Rescue Plan Act, which is one of the major pieces of legislation that just passed that I’ll talk about in a minute, is that it doesn’t seem like we’re going to see a lot of compromise, bipartisan, moderate, centrist compromise that, you know, for that bill, all of the Republicans voted against the legislation and Democrats kind of moved forward without any bipartisan or Republican support.

And in order to do that, particularly in the Senate, we’ll talk about this a little bit later but Senate rules are typically that you need a 60 vote to pass legislation. However, there’s kind of a special thing called reconciliation for budget legislation where you can pass legislation with just a simple majority of 51.

So if you think about what that means today, that means that all of the Democratic senators need to vote for the legislation and then Vice President Harris needs to break the tie as the 51st vote.

So the reconciliation process was used to pass the previous bill that I’ll talk about on the next slide. And we anticipate that we will have this reconciliation process one or two more times this year. We’ll talk a little bit more about that later.

So if you think about what these narrow margins mean, particularly when you think just about Democrat passing legislation on their own, it means that you’ve got Senate moderates who have a lot of power because they really are the ones that need to buy in to what’s happening in order to keep those 50 votes together. So members like West Virginia Senator Joe Manchin and Arizona Senator Kyrsten Sinema will have a lot of power to determine the scope and the scale of the reconciliation language and weigh in on things like tax increases. So we’re seeing that play out already.

So when you – so that puts kind of the environment for Congress. And that environment of narrow margins, you know, not a lot of political cooperation is – will also leave the Biden administration to figure out what can they do administratively through regulations without Congress. This is something that we saw a lot in the Trump administration for similar reasons. You know, when you can’t get Congress to do something, you know, really exploring what powers the president and the agencies have to be able to do things through regulation without Congress needing to get involved.

So the president ordered right after inauguration he ordered the federal agencies to pause or delay their pending regulatory actions and their, like, immediate past regulatory actions from the Trump administration to give the administration time to review all of the regulatory activity that had happened in the past six months or so.

That is underway and we’ve seen the Biden administration roll back some things which I’ll talk about a little bit later. But we – I do expect that this year will be taken up with reviewing Trump-era regulations and executive orders and modifying them or rolling them back. And the process will speed up as we get the cabinet secretaries and the agency heads confirmed and in place.

And if you think about kind of the longer-term outlook, HHS Secretary Xavier Becerra is confirmed and in place and in his job and there are a few other officials at the Department of Health and Human Services, which is what we spend most of our time thinking about, who are also confirmed.

The other positions like the Head of the Centers for Medicare and Medicaid Services have not been confirmed yet. And when those nominees get in place, we expect to see the regulatory pace speed up.

So if you think about the longer-term outlook, a lot of the campaign was focused on, you know, kind of this Democratic debate about Medicare for All versus the public option versus, you know, expanding Medicare. And now President Biden had a relatively moderate position on Medicare for All. He wasn’t for it when he ran.

Secretary Becerra, you know, when he was in the House did support that Medicare for All legislation. But what we see happening is that there’s so much to do in terms of economic recovery and coronavirus release and incremental changes to healthcare that we don’t think that public options, like the one that Biden as a candidate proposed, are going to advance at the federal level in the next couple of years.

There’s lots of activity in the states that we’ll talk about in a minute but we don’t think that looking out longer term, you know, while the public option is something that’s important to think about and important to understand what the problem that it’s trying to solve is, we really are not viewing that as something that is likely to happen in the next couple of years. So when you look out longer.

And then finally on this slide, looking at a little bit longer term, we’ve got another ACA Supreme Court decision that’s pending. But again with the Biden presidency, the threat of that fully disrupting the ACA is less than it would have been if Trump had won re-election.

So with that, let’s go to the next slide please.

And I had talked a minute ago about the two recently enacted pieces of stimulus legislations. These were significant economically and very significant from a health perspective. So together, these two bills make up about $3 trillion in spending that the federal government has committed to, you know, over the past, you know, four months. We’ve spent – you know, committed to spend that much money. Really the bulk of the money is going to COVID-19 release vaccine effort, unemployment, stimulus checks to individuals and help for businesses.

But I thought I would talk for a minute about there were very important healthcare provisions that were in both of these bills that will play into a longer-term outlook.

So the first one I’ll talk about is to consolidate appropriations after 2021. This is a big bill that passed at the end of December. And at the time no one was really talking about it but included in that bill was a separate piece of legislation called the No Surprises Act. And this is something that advocates and members of Congress and industry have been working on for some time.

So the No Surprises Act banned the practice of surprise billing which is something that we have been advocating for, for a very long time. So it contains key protections that hold consumers harmless from the cost of unanticipated out-of-network medical bills.

So a surprise bill, as you all probably know, arises in emergencies. So you go to the emergency room because you’ve broken your leg and you wind up with a huge bill or multiple bills from that emergency facility because it wasn’t in your plan network and they also arise in non-emergencies where a patient might have done all of the right things to determine that, you know, the hospital that they were receiving their, you know, say, hip replacement was in network but one of the providers, like an – the anesthesiologist, does not participate in insurance and you thought you did all the right things and then you wind up as a consumer with thousands of dollars in bills from the anesthesiologist.

So the No Surprises Act basically stops that practice. It requires plan, private health plans and FEHBP, to cover surprise medical bills for both emergency services as well as services rendered in network hospitals and facilities like the anesthesiologist example.

The law requires insurers to cover these services without prior authorization and the insurer may only charge in-network cost sharing. And then they have a definition of “in-network cost sharing” which is basically the meaning in-network payment amount for similar services.

So there are requirements on insurers that this is what we must do and then there are requirements on providers. So out-of-network providers for emergency services as well as out-of-network providers in the facilities that are participating are prohibited from balance billing patients beyond the applicable network cost sharing amount that we just talked about.

So there is an exception. So if you, you know, really want to get your knee replaced at a facility that, you know, that doesn’t – whose anesthesiologists don’t participate with your insurance plan, you can do that and bill the patient but you have to receive written consent within 72 hours in advance.

But the law is very clear that it cannot send bills and it cannot hold patient liable – patients liable for any more than that amount. So this is a big step forward in consumer protection that we are very excited about and was – we’re very supportive of.

But like most legislation, there was general consensus about these consumer protections but there was a lot of disagreement between – with employers/insurers on one side and providers on another side about how to resolve the payment amount that an insurer would pay the facility for the surprise network medical bills.

So we and other insurers and employers wanted a benchmark payment so there was some certainty. And many of the providers wanted an independent dispute resolution where you would resolve kind of every bill on its own based on the undiscounted charge.

So what we wound up with is access to an independent dispute resolution for any surprise medical bill following a 30-day window where the insurer and the providers are, you know, are told to go work it out. And if after 30 days that failed, there is this so-called baseball style arbitration with an independent dispute resolution entity that’s currently being set up, you know, to determine what the payment amount is going to be.

So big changes and big improvements and this is one of the areas where the Department of Health and Human Services is implementing this and writing the regulations as we speak.

All of this goes into effect January 1, 2022. So it’s coming up, you know, coming up quickly.

In addition to banning surprise billing, there are also some other provisions that affect commercial insurance including additional transparency requirements that we’ll talk about a little better – a little bit later as well as increasing Medicare payments for physicians. So a lot to unpack in that piece of legislation and we’re currently very busy with the implementation of it.

And then you fast forward until March. And then we have another bill that was enacted that’s called the “American Rescue Plan.” So this is the bill that passed after Biden became president that was passed using reconciliation with those 51 Democratic votes in the Senate. And there were a few important things related to health benefits in that as well.

There is 100% subsidy for people who have COBRA who have lost their job because of the pandemic and there is now 100% federal subsidy for those COBRA costs for those individuals that exist, you know, from the time the bill was enacted through the end of September 2021. So kind of short-term help to help people afford their COBRA health insurance.

And in addition the bill increased both the amount and the eligibility of individuals for ACA premium tax credits in the exchanges. So these are in place temporarily for 2021 and 2022. But what they do is it lowers the affordability threshold so that at the moment if health benefits are more than 8.5% of a person’s income, they’re eligible for subsidies in the exchange.

And then additionally the subsidies are increased and people – the eligibility for those subsidies increase. Previously it was capped for, you know, it only went up to people at 400% of the federal poverty level and that the bill removes that cap so you can get some subsidies even if your income is above 400% of the federal poverty level.

Finally, there was a fairly significant amount of money in the bill that went to states to help out with Medicaid costs and a – and an important new expansion of eligibility in Medicaid for postpartum women. Most women lost their Medicaid eligibility a month or so after they gave birth and there is a new option that allows states to extend eligibility for Medicaid coverage for 12 months postpartum which we are hoping will have a significant positive impact on maternal health.

So like I said, there’s a lot of, you know, a lot of really good stuff in these bills, a lot of changes for commercial insurance, for employer insurance and also for Medicaid.

So we can go to the next slide please.

So, you know, if you remember, I guess “Schoolhouse Rock” didn’t cover what happens after the bill becomes a law. But after the bill becomes a law, the regulatory process takes over. And, you know, thinking about our experience at CVS Government Affairs, you know, the regulatory process is just as important in terms of our business and our customers as the legislative process. There are so many – you know, healthcare is so complex and there’s so many details that you really need to, you know, the regulatory process is really where how the legislation gets implemented. It’s hammered out.

And so like I said, the Biden administration is – has paused the Trump-era regulations and is currently reviewing them. So on this side, I’ve highlighted a few that are particularly important for us and our customers that I will just talk about for a minute.

The first one is the transparency and coverage requirement. And I think we probably talked about this last year as well. President Trump put out an executive order to improve transparency in healthcare, which provided – which required a number of rules, and the one that affects commercial insurance, employer-sponsored insurance is called the “Transparency in Coverage Rule.”

So this rule was finalized last year and is under review with the Biden administration but is set to go into effect as early as January 1, 2022 unless there are other changes. So the Transparency in Coverage Rule requires a couple of things.

It requires beginning in 2022 the provision insurers must provide a machine readable file for public use with all of the negotiated rates for every provider and service in the network and then kind of an equivalent amount for out-of-network services. So the technical term “gobs of data” regarding our negotiated rate on behalf of our customers.

So that’s scheduled to go into effect on January 1, 2022. We are currently working on implementation for that and we’re also working with the agencies to kind of clarify and modify those rules.

And then separately the rule requires a consumer-facing tool for cost sharing information which is similar to the ones that we have today, January 1, 2023. So the issues that we’re sorting out is that these final rules, the Transparency in Coverage final rule from the Trump administration and there are some new provisions in that No Surprises Act have kind of an overlapping and inconsistent set of requirements that we’re trying to sort out.

So the No Surprises Act requires the health plans to provide an advanced explanation of benefits with an estimated cost of the services. So beginning in 2022, customers can request information about how the services will be covered including a cost estimate for them. They’re also kind of duplicative requirements in terms of transparency of drug costs that goes – that go to the secretary.

So right now we know that the Department of Health and Human Services are hosting a bunch of listening sessions with various stakeholders and they’re kind of sorting through these different requirements and trying to determine what should happen then. I think everybody is in agreement that actionable transparency for consumers and getting them the information they need to make decisions and understand what they’re going to be liable for is super important. I think we are trying to kind of balance that with, you know, some concerns about disclosing sensitive price information and also frankly just kind of the operational difficulties of the rules as they are today.

So we and others in the industry are, you know, talking to the agency and trying to kind of sort this out. And we do expect HHS to have some additional information about the implementation of the new law and this reg in the coming months.

The next thing I’ll talk about what we just spent some time talking about is the implementation of that surprise billing legislation. HHS needs to stand up this negotiation and arbitration process, you know, very quickly and nail down all of those details. So we’re, you know, we are working very closely with our trade associations and again with HHS to provide them kind of technical support and recommendations about how to get this up and running smoothly for consumers. So we’re in the middle of that now.

Just a couple of other ones to talk about. The Trump administration had put in place a part – a Medicare Part D regulation which removed the existing regulatory safe harbor protection for manufacturer rebates in Medicare Part D, essentially requiring all rebates to be passed along to consumers at the point-of-sale and an increasing cost for both the Part D beneficiaries and for the government kind of at the same time.

We had kind of spoke out very strongly that this was not the right way to reduce drug cost and in fact had the opposite effect. And the courts delayed the effective date of this rule for one year to a start date of January 1, 2023. So we are working with others to support a full repeal of the rule which could take legislation and we could see in some of the packages that we expect to see this year.

And then finally, there was a rule at the very end, like, literally the last day of the Trump administration that made additional changes to interoperability and prior authorization for exchange plans and for Medicaid. The Biden administration has been kind of taken down all information about that rule. So we do expect that that rule is – I don’t know if it’s on permanent pause but it’s definitely not going to happen in the timeline that was originally outlined by the Trump administration. So a very aggressive regulatory agenda and one that, you know, is very important to get the details right so that, you know, the coverage that we provide and the benefits that we provide to our consumers, you know, work well, seamless and the consumer is not kind of in the middle of, you know, kind of conflicting and vague regulatory requirements.

So with that, if you could go to the next slide.

So I talked about this briefly. I’ll talk about it a little bit more again here. So, you know, the president and Congress have a very aggressive legislative agenda moving forward. And they are considering using that reconciliation procedure that I talked about two more times this year. The White House has already made recommendations to Congress on what they want to see on an infrastructure package and they are working on – it’s been called different things like “Human Infrastructure Package.” But they’re working on a second legislative proposal that would include a lot of investment in healthcare and social welfare.

The infrastructure package itself is like roads, bridges, broadband. There’s a little bit of funding proposed for state – for home and community-based services. And it’s funded – the White House is proposing to fund it by a change in the corporate tax rate.

The discussions – we don’t have details on the healthcare package at the moment. The discussions are about making permanent those kind of subsidy improvements that I talked about happened in the American Rescue Plan Act, additional funding for Medicaid and fixing things like, you know, what we call the “family glitch” which leaves certain families kind of out of subsidies who might otherwise deserve them based on their income.

So from a political perspective, there’s a lot going on in the Democratic Party about how to move these pieces of legislation, what’s the right way to do it, do we do one big bill, do we do two reconciliation bills, do we try to do a bipartisan bill on infrastructure spending? None of this has sorted itself out.

I think if you think about it from an elected official’s perspective, you know, if they’re – the Biden administration is talking about funding the infrastructure bill with corporate tax increases and they’re talking about funding the healthcare bill with taxes on kind of high earners.

So if you are running for Congress in any district or particularly in kind of a swing district, you don’t want to take two very controversial votes to increase taxes.

So I think the process in how they’re going to – what they’re going to do and how they’re going to do it is going to sort itself out over the next several months. But we expect to see Congress starting their official process on the next package, you know, starting now but really in earnest in July with the goal of passing the package by the end of September.

A couple other things on this side just to think about is in the package that they’re talking about in terms of healthcare, we could also see Congress considering proposals on drug pricing, additional investments in maternal health, additional investments in behavioral health and substance use and abuse given all of our experience in the pandemic and changes to telehealth.

You know, we have seen a lot of flexibilities and increased use of telehealth over the last year during the pandemic. And Congress is seriously considering what of those flexibilities should we make permanent to improve access to telehealth moving forward. So those are all very important issues that we’re watching on the federal level.

And then I will wrap it up by just talking for a minute about the state outlook.  So if you would go to the next slide, please.

So, you know, oftentimes the states tackle difficult issues first when it comes to healthcare. So I think over 20 states had surprise billing legislation on the book for their state regulated plans before the federal government started thinking about it. So states really are kind of laboratories of, you know, when it comes to healthcare legislation. And so there are few things that we are engaged in this year that are very important.

The first is that public option and affordability legislation. I said earlier I don’t think that’s going to happen at the federal level. But we do see some serious consideration by states, all of whom start with the letter “C,” Colorado, Connecticut and California, going on kind of as we speak to try to tackle affordability challenges and, you know, put in place some variation of a public option. A lot of these are being negotiated right now and we’re sort of seeing the move from a true public option like a government-sponsored insurance plan to what’s happening in Colorado is really negotiations about how the state government can intervene if private carriers do not achieve savings targets in the individual and small group market. So there’s a lot of variations about this and important precedent for federal legislation that we’re actively engaged in.

Another kind of perennial issue is utilization review. So, you know, doctors, groups, specialty societies and others, you know, feeling frustrated with the utilization, prior authorization in particular, and step therapy and formulary management provision of insurers or PBM and, you know, really seeing a lot of legislation at the state level that kind of tries to limit insurers’ use of those tools that we have.

And then, you know, last year there was a very important court decision called Rutledge versus PCMA where the Supreme Court said, you know, under some circumstances states actually do have the authority to regulate in this case PBMs even though they are subject to ERISA which is typically, as you know, been outside of state insurance – state legislation and state insurance control.

So as a result of this, we have seen, you know, a huge number of, you know, what we call anti-PBM bill, efforts to limit PBM’s ability to manage pharmacy network, manage its formularies, conduct utilization management. So this is obviously a big focus for us as an enterprise to try to continue to, you know, articulate the value of this model and the savings that we, you know, the savings and quality that we can provide consumers.

And then finally, you know, legislatures and governors are looking at their pandemic-related efforts and some of the flexibilities that they’ve provided in telehealth and in other areas and really thinking about, you know, moving forward how should we change our policy permanently to allow greater access to care in the home to kind of modernize telemedicine requirements, you know, some of which were in the 90s and we’ve, you know, kind of come so far from there.

So that’s just a quick picture of, you know, the hundreds of issues that we’re dealing with at the state level.

So I guess to wrap up, you know, we at CVS Health, you know, our mission is to improve access to care for consumers and improve the consumer experience. And, you know, we are actively engaged at both the federal and state level on, you know, legislative proposals to try to help us achieve that mission, you know, and in addition to supporting all of the work in terms of getting vaccines and testing for COVID to our patients and our members.

So there’s a lot going on.