What Does The Trump Pivot Mean For Healthcare?

By John McManus, president and founder, The McManus Group

Frustrated with congressional Republican inaction on major pieces of his agenda, President Trump cut deals with Democrats on a short-term increase in the debt ceiling and funding the government. Then, to the surprise and consternation of his base, in a dinner with Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA), Trump agreed to work on a deal to extend the Deferred Action for Childhood Arrivals (DACA), a Democratic priority.   

But what does Trump’s new interest in working with Democrats mean for healthcare policy making? That is not yet clear.

The final straw for Trump was failure of the Senate to repeal and replace Obamacare in August. Two days after Senator John McCain (R-AZ) — newly diagnosed with brain cancer — made a dramatic appearance on the Senate floor to vote for a motion to proceed on repealing and replacing Obamacare, he joined two other Republicans and a unified Democratic Senate to scuttle the bill Majority Leader Mitch McConnell (R-KY) had fashioned to repeal major elements of Obamacare.  To the shock of the GOP establishment, President Trump proceeded to ridicule the Republican leader in a tweet storm usually reserved for Democrats and political enemies.

The debt ceiling deal was made over objections of the bicameral Republican leadership. Speaker Paul Ryan (R-WI) had blasted the notion of a three-month extension as “ridiculous” just hours before the bicameral leadership meeting with the President, where Trump appeared to make the decision on the spot. In doing so, President Trump overruled his own Treasury Secretary’s position for a longer-term solution.

These moves show that President Trump will not be tethered to the Republican Party or even his own administration’s positions if he sees opportunities to make deals. That new reality has caused hand-wringing on two major issues that will dominate the rest of the year: tax reform and what to do about the imploding of Obamacare. Members of Congress and seasoned Washington veterans alike find themselves in unchartered territory, wondering how to deal with a President that now appears to have abandoned policy and political principles that have guided legislating for decades.   

Disposition of Obamacare Uncertain, But Action on Other Health Issues Progresses
Following the cataclysmic implosion of the Senate bill, the Senate Health Education Labor and Pensions (HELP) Committee held a series of hearings in an attempt to build bipartisan consensus primarily on shoring up the individual market. After the fourth hearing, Chairman Lamar Alexander (R-TN) said he thought there were three areas of consensus: Congress should approve temporary funding for cost-sharing reduction payments, allow those 30 and older to purchase catastrophic “copper” plans, and give states more flexibility regarding insurance plan design.  But Democrats have not signaled whether this will be enough to gain their support.  More importantly, such a deal skirts the thornier issues of ending the Medicaid expansion, repealing the individual mandate, and the slew of healthcare taxes that are a priority for most Republicans and outside the HELP jurisdiction.

Meanwhile, Senator Bill Cassidy (R-LA) — a former physician and energetic lawmaker in his freshman term — joined Senator Lindsay Graham (R-SC) to craft one last Republican attempt at repealing and replacing Obamacare. The bill would repeal the individual mandate and medical device tax but leave the pharmaceutical fee and many other Obamacare taxes in place.

The heart of the bill is a block grant formula that would give each state a set amount of money to spend on their own healthcare programs, based on how much they would receive under Obamacare. The states would be provided enormous discretion on how those funds would be spent and could decide to retain, modify, or repeal the Obamacare mandates.

That bill’s formula is complex, and white-shoe law firms are still unpacking the policy ramifications. But the overall result would be less federal spending than under Obamacare, with a redistribution of the funding from states that expanded Medicaid to states that chose not to. All funding would stop in 2026 and would require a subsequent act of Congress for continued flow of funds, raising the ire of Democrats.

It must be voted on before September 30 when the current budget resolution expires, and Cassidy believes he is within a vote or two from passage.  McCain, a close ally of Graham, could come on board, but apparently Senator Rand Paul (R-KY), with a libertarian view of healthcare, is unhappy with the product. Such a result would still leave them short of the 50 votes needed.

In any case, the HELP and Cassidy-Graham bills appear markedly different from the Republican repeal-and-replace bill passed by the House earlier this year.  Final resolution  of a bill getting to the President’s desk still looks like a long shot.

But beneath the partisan rancor and public scrutiny of Obamacare’s fate, the committees of jurisdiction are constructively advancing bipartisan legislation to fund and operate key healthcare programs:  

• In July, President Trump signed legislation to reauthorize the FDA and its manufacturer user fees for five years so that drug and device applications could be reviewed in a timely manner.  
• In September, Finance Committee Chairman Hatch (R-UT) and Ranking Member Wyden (R-OR) announced an agreement to fund the Children’s Health Insurance Program (CHIP) for five years.  That bill must still move through the legislative process, and the House seems focused on a two-year package, but the issues appear resolvable.
• The House Ways and Means and Energy & Commerce Committees are advancing a series of bipartisan, targeted Medicare bills dealing with everything from prostate cancer misdiagnosis and caps on therapy payments to ambulance payment reform.

The pharmaceutical industry is gearing up for an end-of-year deal on CHIP and these Medicare issues that could call for resources from the industry. The industry has been successful in recent years in blocking pharmaceutical-focused offsets. But that success has generated the irritation of congressional committees tasked with fashioning these packages and securing offsets from various industries.   

The committees are currently contemplating several measures that could negatively impact the pharmaceutical industry, including proposals:

• to encourage speedier generic entry by ending “pay-for-delay” and requiring manufacturers of products with Risk Evaluation Mitigation Strategies (REMs) designations from the FDA to share product for necessary bioequivalency testing
• to encourage greater generic substitution by low-income Medicare beneficiaries by raising brand-name copays and/or lowering generic copays
• to reduce payments for physician-administered Part B drugs
• to increase Medicaid rebates on certain “line extensions” of brand-name drugs.

The wild card in all of this is President Trump himself.  Was this a carefully calculated move to shake up the Republican establishment or another symptom of Trump’s erratic and impulsive approach? Only time will tell, but the playing field is now open for other deals, and everyone (Republican or Democrat) must proceed with caution lest they be caught unawares.

What will he demand?  Will he side with an emboldened Democratic minority on pharmaceutical pricing issues?  Good questions with no clear answers.

John McManus is president and founder of The McManus Group, a consulting firm specializing in strategic policy and political counsel and advocacy for healthcare clients with issues before Congress and the administration. Prior to founding his firm, McManus served Chairman Bill Thomas as the staff director of the Ways and Means Health Subcommittee, where he led the policy development, negotiations, and drafting of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Before working for Chairman Thomas, McManus worked for Eli Lilly & Company as a senior associate and for the Maryland House of Delegates as a research analyst. He earned his Master of Public Policy from Duke University and Bachelor of Arts from Washington and Lee University.