Dr. Mehmet Oz’s confirmation hearing shows where the Trump administration is going on Medicare drug prices and Medicare Advantage (MA).
The confirmation hearing last week of Dr. Mehmet Oz, who is slated to be administrator of the Centers for Medicare and Medicaid Services (CMS) is a lesson in changing political dynamics. It also tells us that sometimes the people most supportive of a given program may be most apt to reform it.
Let’s break down what occurred at Oz’s confirmation hearing in front of the Senate Finance Committee. What is interesting is that many of the lawmakers on Finance are also members of the other healthcare committee of cognizance, the Health, Education, Labor, and Pensions (HELP) committee.
We cannot touch all of the ground covered at the hearing in this blog, but let’s hit the top issues and why in most cases Oz’s responses run contrary to what we may have thought. As important, Dr. Oz comported himself very well and came off as very knowledgeable on the healthcare system, Medicare, and Medicaid. This is juxtaposed with his future boss, Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr., who struggled to detail the basics of Medicare and Medicaid at his two confirmation hearings. There was also little mention in the Oz hearing of various conflicts of interest Democrats have levied against him. Opponents of Oz’s nomination will clearly lose and he will lead CMS.
The Exchanges and Medicaid cutbacks
Oz’s comments on the Exchanges and Medicaid were quite traditional and toed the Trump line. While Trump and some GOP lawmakers have said that the budget reconciliation act will not make fundamental coverage reductions to Medicaid, the House healthcare spending reduction target is sizeable. The big question is how will the GOP thread the needle to hit savings but not fundamentally impact coverage as promised. The GOP wants to focus on work requirements and fraud, waste, and abuse (FWA), but might have to go after other areas that may do more to impact coverage in the program. Leading contenders are reining in provider taxes as well as some changes to state reimbursement.
Last week the Trump administration also proposed some rather major reforms to the Exchange program, which will reduce coverage there. It also has largely remained silent on the extension of premium subsidy enhancements, which leads one to believe Trump wants the enhancements to lapse due to costs.
Oz was sensitive to the balancing act here and largely stayed away from controversy. He did not make commitments to protect Medicaid funding and refused to be baited by Democrats. He took the long view, which is generally smart. “I want to make sure that the patients today and in the future have resources to protect them if they get ill. … The way you protect Medicaid is by making sure that it’s viable at every level,” he said. He also focused on FWA, work requirements, and removing undocumented residents. He argued that the program is inefficient. He also called out poor reimbursement in Medicaid to many providers, which impacts access and quality. He refused to endorse the extension of enhanced premium subsidies in the Exchanges.
Medicare drug price negotiations
Popular wisdom during the campaign suggested that a Trump 47 administration would seek to either repeal or fundamentally change the Medicare drug price negotiation law. After all, passage was along party lines during the Biden administration, conservatives have been agitating for repeal, and the GOP appeared to be firmly in the pockets of Big Pharma.
But Trump has always had novel views on drug pricing given his populism. In Trump 45, he proposed negotiations for Part B drug pricing as an international reference pricing (IRP) scheme rolled out. Under IRP, drug prices are set in one country by taking into account what is paid in other similar countries. Trump actually wanted the most radical of approaches, where America would receive the lowest price of any other country, known as most favored nation (MFN) pricing. Trump said he wanted to extend the IRP program to the Part D retail program as well.
The program was adopted late in his first administration and was pulled back on by President Biden due to complexity and some challenges. During the campaign, Trump seemed to equivocate on the drug law, leading to rumors he would back repeal or substantial change.
Since returning to office, though, Trump’s CMS has announced it is proceeding with the second year of Medicare drug price negotiations and kept the fifteen drugs proposed by Biden. He kept Biden-era lawyers to defend the law in court. Trump appeared on Fox on Super Bowl Sunday to bemoan the high prices of weight-loss drugs and to declare the inequity compared with other countries.
At his hearing, Oz left little doubt that the Medicare drug law is here to stay. Again, confirmation hearing responses have been carefully scripted by the White House, so there is no doubt Oz is speaking from the Trump bible here. Oz said he would defend the drug law in court. Oz stated: “It’s the law. I’m going to defend it and use it.” He added: “We, I believe, in order to protect the American people, and President Trump’s been very clear on this, want to reduce the cost of medications to our government and to the American people. … That’s not happening right now. We can do better.”
He said he supports greater transparency in pharmacy benefit managers’ (PBM) pricing practices to help lower drug costs. He also noted that it is one of multiple approaches he would pursue to lower drug costs. And he signaled an openness to IRP.
Big Pharma had to have begun drinking early after Oz’s testimony. What has emerged on drug price reform is an odd coalition of progressive supporters who passed the Medicare drug price law and Trump populists that look ready to defend the law and perhaps further it given the huge price disparities between America and other developed countries. The drug price law taps into Trump’s views that American consumers are constantly being ripped off by the world and the free ride has to stop. His tariff plan also could increase prices for drugs and potentially lower sales and raise the temperature on the issue. As such, some major drug makers have begun making commitments to production in America and made soft commitments to lowering price.
This is not to say that there may not be tweaks to the drug price law. Trump seems sympathetic to exempting small molecule drugs from negotiation for a longer period of time and appears ready to bring stakeholders to the table on negotiations and pursue greater transparency.
MA cutbacks
In an op-ed in Forbes in 2020, Oz and a co-author said MA offers better care due to the competition in the program and endorsed expanding MA to all Americans who are not on Medicaid. But the MA proponent has signaled a clear understanding of the program and endorsed reform now.
During his confirmation hearing, Oz went out of his way to single out MA as one of the biggest sources of waste and abuse within the healthcare system. He clearly had read up on MA overpayments and other flash points in MA. He cited various reports showing spending on the private alternative is well above the traditional Medicare fee-for-service (FFS) program. He said things were “upside down.” In response to a question on whether he would rather cut waste, fraud, and abuse in MA or cut funding for Medicaid, Oz agreed that “the former sounds like a more rational way to do that.”
He singled out a few areas for reform in MA.
- Overpayments and risk adjustment reform
- Prior authorization and denials
- Supplemental benefit utilization
- Marketing and enrollment
Let’s take each of them in detail.
Now, I question some of the opponents’ reports of overpayments and the magnitude of them. But Oz clearly read them and is concerned. Oz spelled out the practice of “upcoding” within MA. He said: “A part of this is just recognizing there’s a new sheriff in town. We actually have to go after places and areas where we’re not managing the American people’s money well.”
On overpayments and risk adjustment upcoding, Oz was blunt, saying: “I think the upcoding in Medicare Advantage programs has become the best example of this out there, and is something that is addressable, and I pledge if confirmed we’ll go after it.”
Oz tied overpayments to the rebate plans receive to add to supplemental benefits and drive enrollment. He wonders if the rebates are too much and if more savings should go to the federal government rather than benefit additions. “We should examine whether some of that money should be reimbursed to the American people to ensure that Medicare Advantage does not cost more than fee-for-service Medicare,” Oz said.
On prior authorizations and denials, Oz criticized health insurance plans in general for overly liberal prior authorization policies, arguing care and treatment are being delayed. He defined it as “a pox on the system.”
Oz exhibited detailed knowledge in the area due to his being a provider in the healthcare system. He called out the following specific to MA and broke things down at a level never before seen on Capitol Hill. While I am a proponent of the correct use of PA in MA (after all it is managed care), Oz made some brilliant points that should be investigated.
- Medicare pays for about 15,000 services and procedures that could be subject to prior authorization.
- Plans use preauthorization for about 5,500 of those procedures.
- But not all insurance companies focus on the same things.
- Even within the same procedure, the criteria for authorizing a service are not the same.
- Because of this, it’s very difficult to automate PAs. Thus, they are misused and approvals are stalled – upfront and for claims payment.
- He would limit PAs to about 1,000 common services or procedures.
Oz argued for streamlining and standardizing the PA process and making it more transparent. As well, he would then use technology and appropriate AI to speed PAs, even making them real-time, for the more limited PAs he would allow. He stated: “We’re spending money, wasting money, trying to do a process that should be automated. I would argue we could limit the number of preauthorized procedures to a thousand.”
The Biden administration already has put sweeping restrictions on PA in MA, but we can expect more scrutiny and changes under Oz. It also appears that prominent conservatives and liberals in Congress favor additional changes here too. The provider lobby has done a profound job here and the plan lobby has absolutely no traction in defense of the reasonable use of PA. Oz’s points on standardization and streamlining are fair ones.
Oz expressed concerns about MA sales and brokers encouraging seniors to switch plans not because it is in their best interest but for the financial gain of brokers and agents. He suggested considering multi-year enrollment options. “There are ways for us to ensure that the marketing process works better for the folks involved,” he said. The Biden administration attempted reforms here on the agent and broker compensation front that were struck in court. It seems to me these would be good reforms too.
Again, popular wisdom suggests that the Trump administration is very pro-MA and health plans would have a free ride under Trump 47. Oz made clear that this is not the case. Oz, Trump healthcare policy advisers, liberal lawmakers, and anti-corporate-welfare GOP lawmakers have all set their gun sights on MA for different reasons. It is not to say that Trump might not offers some upfront concessions to help the struggling industry, but reforms and reductions will be made. As Oz stated: “If confirmed, this will be one of the topics that is relatively enjoyable to go after, because I think we have bipartisan support,” he said.
Other Healthcare Labyrinth blogs on the topic:
#oz #trump #rfkjr #cms #hhs #healthcare #coverage #medicaid #medicare #medicareadvantage #ira #drugpricing #pbms #branddrugmakers
— Marc S. Ryan
