Healthcare Policy Update: Election Edition

A presidential race called by media outlets for former Vice President Joe Biden, coupled with a diminished Democratic majority in the U.S. House of Representatives and a narrowly divided Senate, translates into a federal healthcare policy environment characterized by potentially extensive regulatory and administrative changes as well as modest legislative deal-making opportunities.

Should Senate control remain in Republican hands following the U.S. Senate runoffs for Georgia's two seats in January 2021, there will continue to be divided control of the federal government. Should one or both of the Georgia seats go to the GOP, Senate Majority Leader Mitch McConnell (R-Ky.) would continue to control the floor agenda and maintain control of Senate committees by a single seat.

If the Democrats capture both U.S. Senate seats in Georgia's runoff elections in early January, however, they would control the Senate floor's legislative agenda by virtue of Vice President-Elect Kamala Harris' ability to cast tiebreaking votes. Still, they may lack effective control of the committee process. In such a scenario, many Democratic priorities would still face hurdles, with no room for defection. Regardless of Senate control, major legislative action, such as creating a "public option" under the Affordable Care Act (ACA), is highly unlikely. However, there are opportunities for bipartisan reform if policy proposals remain modest.

Consistent with the Biden campaign's major themes, its transition website has articulated four major priorities: COVID-19, economic recovery, racial equity and climate change – all of which have potential implications for healthcare policy changes.

Regulatory Outlook

Expect an early emphasis from the Biden transition team on the COVID-19 pandemic, as evidenced by the announcement of a new coronavirus task force. The 13-member task force is mainly composed of doctors and public health experts who will map out the public health and economic policies needed to restrain the virus. Look for a significantly more centralized approach to addressing the pandemic, including a strong block-and-tackle approach right out of the gate on strengthening testing, tracing and ensuring sufficient supply to battle the growing epidemic.

Significantly, anticipate an early and decisive approach to reverse or amend several administrative actions undertaken by the Trump Administration during the past four years on a variety of healthcare issues. New leaders at the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) would likely seek to rein in short-term and association health plans, roll back CMS approval on work requirements, advance funding for advertising and navigators for the exchanges, restore cost-sharing subsidies and reinstate Title X funding.

There are also several regulatory initiatives that would be expected to advance from the Trump Administration to a Biden Administration, including price transparency, site-neutrality initiatives and value-based care models. However, a Biden Administration might soften the Trump Administration's speed to transition and emphasis on risk-bearing. The incoming administration also would likely continue to work with states to address creative criteria to expand coverage. These concepts will likely impact not only provider payments but also drug pricing and reimbursement.

It is not anticipated that any of the current agency leaders at HHS, CMS, the U.S. Food and Drug Administration (FDA), and the Centers for Disease Control (CDC) would remain under a Biden Administration. Regarding new leadership at HHS, CMS and FDA, these positions would likely be filled with policy experts. A potential short list includes former U.S. Surgeon General Vivek Murthy (just appointed to Biden's COVID taskforce) to serve as HHS secretary and Mandy Cohen to lead CMS. Cohen served as secretary for North Carolina's Department of Health and Human Services and previously held several CMS roles under the Obama Administration. Dr. Anthony Fauci is also expected to play a substantial role. It is understood that the Biden Administration is looking at candidates with significant experience running large organizations to serve in prominent positions within the agencies. To that end, New Mexico Gov. Michelle Lujan Grisham and Michigan Gov. Gretchen Whitmer also are reported to be in the running for senior positions.

Legislative Outlook

It is not clear how much Congress may or may not accomplish during the lame-duck session in the short term.

• COVID-19 Legislation: COVID relief negotiations are likely to pick back up as well as conversations on maintaining a larger national stockpile of tests and supplies; however, it remains to be seen if a deal can be reached during the lame-duck session. If the Senate, House and White House can agree upon a final number for a pandemic relief package, many of the issues can be quickly resolved by Congress.
• Health Extenders: Several significant health extenders were continued through Dec. 11, 2020, including funding for community health centers and the National Health Service Corps, as well as the prevention of Medicaid disproportionate share cuts to hospitals. Congress will need to address these on a short- or long-term basis.
• Surprise Billing: It is possible that a deal could be reached on surprise billing, which could serve as a pay-for for the extenders mentioned above, and the outstanding disagreements are not partisan.
• Fiscal Year (FY) 2021 Appropriations: The Senate Appropriations Committee recently released its FY 2021 appropriations legislation, though it was not finalized with Democratic support. The Democrats have raised concerns and issues that they would like to see addressed as the Senate and House go to conference on the FY 2021 appropriations bills. Congress seems desirous of avoiding a large continuing resolution during the lame-duck session. Still, it is not certain that the finality of the FY 2021 appropriations will culminate in an omnibus appropriations bill this year. However, there could be a short-term continuing resolution into early 2021 as the new 117th Congress and administration are installed.

On a longer-term basis, anticipate that in a divided government scenario, the federal legislative healthcare agenda is likely to be dominated by addressing specific issues where there is bipartisan support such as the pandemic, drug pricing (changes in Medicare Part B physician-administered drugs), and shoring up the domestic supply chain, rather than major structural changes to the ACA, Medicare or Medicaid. Several other areas outside of the ACA that have bipartisan support include healthcare disparities, telehealth expansion, mental health, cancer research and maternal health.

There are ongoing negotiations between the drug and medical device industries and the FDA over the reauthorization of the various user fee programs regarding drug pricing. Congress is likely to join the debate as legislation needs to be enacted to implement the programs by Sept. 30, 2022. Although the issues will focus on the FDA's review and approval processes, the legislation also could become a vehicle for many other issues related to the industry.

In this environment, it seems that significant coverage changes, such as establishing a "public option" or lowering the eligibility age for Medicare, are unlikely. The House has already passed several legislation pieces intended to strengthen the ACA; however, the Senate has never taken up those bills. Budget reconciliation could be used for some ACA enhancement but not to adopt new substantive provisions. Senate Republicans may be open to negotiating some ACA provisions, as with the bipartisan market stabilization package negotiated by Senate Health, Education, Labor, and Pensions Committee leaders Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) in 2017 and 2018. Whether smaller changes to the ACA, such as revising the premium tax credits, can be accomplished will remain to be seen. If Republicans control the Senate, minimal legislative action on the ACA is expected.

It is important to note that Congress will need to address the federal budget. FY 2022 is the first year no longer operating under the 10-year budget agreement negotiated by former President Barack Obama and former House Speaker John Boehner. Agreement on a budget resolution may be challenging to achieve if the Congress has split party control, but it certainly shouldn't be ruled out. The use of budget reconciliation would be dependent upon bipartisan and bicameral agreement on a budget resolution. House Speaker Nancy Pelosi (D-Calif.) has already suggested that the House will use budget reconciliation procedures for ACA legislation and pandemic relief. Should the Democrats gain the two remaining Georgia seats and Vice President-Elect Harris provides a 51st vote, use of budget reconciliation as a tool for moving more comprehensively impactful legislation is more likely than if the Senate remains in Republican hands.

Judicial Outlook

Finally, this week, focus has turned to the U.S. Supreme Court as it hears oral arguments in a case challenging the constitutionality of the ACA's individual mandate. The Court may affirm that the individual mandate is unconstitutional without a corresponding tax consequence and can no longer be justified under taxing authority, though that outcome is not guaranteed. However, even if the Court were to determine that the individual mandate is no longer constitutional, the Court may elect to presume severability of that provision from the rest of the ACA or perhaps most of its unrelated provisions regardless of the lack of an actual severability clause in the law. The Court will not likely announce a decision on the case until June 2021, which would be well into the new administration and 117th Congress.

For questions or more information about how the transition could impact your organization, please feel free to follow up with authors Miranda Franco, Robert Bradner, Lisa Hawke, Michael Werner and Ethan Jorgensen-Earp or another member of Holland & Knight's Healthcare & Life Sciences Policy Team.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.

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