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  • Writer's pictureSeema Verma

Healthcare Summit 2017: Seema Verma Discusses The Plan For Medicare And Medicaid

I'm Vic Roy. I'm the opinion. Edward Forbes and of course this is Seema Verma. Thank you so much for joining us today. My pleasure. I first wrote about and profiled your work six, seven years ago. We were talking about it off stage when you were doing all this innovative work in the Indiana Medicaid program under then Governor Mitch Daniels. It must be an amazing opportunity for you to take those lessons from HSAs and consumer engaging the consumer in the Medicaid program in Indiana and trying to take that national. 


Yeah, so my experience before coming to CMS is I ran my own consulting company and in that capacity did a lot of different things, so worked with state governments, helping them design innovative programs. Also worked with the IT sector, worked on the front lines and hospitals, and so that's given me a lot of good experience. One of my jobs actually working with states was to be the negotiator to work with CMS. So worked with the agency almost on the other side of the table. So it's been interesting coming back. I was just telling Vic that the first time I went to CMS and I was negotiating a waiver, we were actually thrown out because we were pushing the staff too hard. So it's a full circle. 

And I have to ask you this because Alex Azar was of course just in Washington yesterday sharing his views on out reform. He's an Indianapolis guy, you're an Indianapolis G, you must've known each other well in those days. What are your thoughts about Alex and what he brings to the table? Give us some insights into his temperament, character management style. 


Well, we are very excited about the president's nomination of Alex Azar. I think he's going to be a tremendous asset if he's confirmed. What he brings to the table, first of all is just a lot of experience in terms of running the agency, massive agency. It's got CDC, the F-D-A-C-M-S, so he understands how to operate that agency. I think his experience in the pharmaceutical sector is actually going to be very valuable. The area of drug pricing is a top priority for the president, and he's going to understand the ins and outs of that, and I feel like we'll come out with something that is a balanced solution. So we're very excited and hopeful that everything will go well. I think it'll be a tremendous asset. 

Tell us a little bit more about your thoughts about drug pricing. What is the approach of the administration? What can you do at CMS to tackle the issue of drug pricing? 


So we're looking at this very closely. We started with just looking at the data. What does the data tell us? And if we look at it, so we've got within the Medicare and Medicaid program, so we've got part B, we've got part D, and then we also have the Medicaid program. So when we look at just starting with the Part D program, if you look at where we've been and people are talking about increases with drug prices, but if we look actually at the premiums in the Part D program, they've actually been level. So our Medicare beneficiaries have not been paying more for their medications in terms of premiums for Part D. And even just this last year the premiums went down. But if we sort of go in, look at the out-of-pocket expenses, even in out-of-pocket expenses, we show that it's a very small percentage of people that are seeing an escalation in prices where their out-of-pocket expenses are over $7,000 or over $10,000. 

And then even narrowing in there, I think where the issue is on drug pricing is where there are no competitors. So the market works very well when there are competitors and that's where drug prices are. We see a lot of, I think it's more controlled or more managed. The issue becomes when you have new drugs that come out on the market, high value, that's where I think it's problematic when there are no competitors. There's also plenty of examples of what I'd call bad actors or issues. I think we all remember the stories around EpiPen, but it's really around those new drugs that are coming out and those high cost drugs and those present challenges, not only in the part B program, part D, but also for our Medicaid programs where state budgets are just, they're not prepared when a new drug, and I think we saw this with the hepatitis C drugs that came out, new drugs coming out on the market very expensive and they're not prepared to pay for it because of the way their budgets work. 

So I think that that's where we have the challenge. We're looking at doing some things around value-based pricing. We put out an RFI recently with our centers for Medicare and Medicaid innovation, and we want to specifically look at some new ways potentially of paying for these new drugs that are coming out. I think the other challenges, some of these new drugs that are coming out, they're not necessarily for chronic disease. They are cures. They're one-time treatments. There's a lot of medications that are coming out for individuals that have only two or 300 people in the nation have these diseases. So I think we need to rethink how we are structured and how we're paying for these new drugs. I think that the Part B program in particular may not have contemplated these types of new drugs coming out on the market. So we're also looking at within the Part D program and how that's structured, what we know is that competition works. 

So we're trying to make the changes that we can do under our authority. We can't do everything under the existing regulations, but what we can do is try to make it more competitive. So we just released our C and D proposed rule in that rule. We even talked about potentially kind of exploring the idea of whether we should be passing on the manufacturer rebates on for patients. What we see there is our data shows us that would actually increase premiums, and so that would be a cost to the taxpayers. So we're exploring that idea. We put it out for comment, and we also propose some ideas about making generics more available or biosimilars. So there's a lot of things that we're trying to do within the Part D program to hopefully create more competition and hopefully lower drug prices for our beneficiaries. 

One of the things that's in the news this week is the Senate is moving forward, the tax bill. As Steve Forbes addressed earlier, as you know, the tax bill contains that the Senate version of the tax bill contains a repeal of the Affordable Care Act individual mandate. There's talk about having a separate stabilization package that would be paired with that, but we don't know if that would go through or not. That's still up in the air. If the individual mandate is repealed, what are the tools that CMS has to stabilize the market and make sure that people aren't dropping in and out of the market when they get sick? 


Well, first start by saying I'm not sure that the individual mandate has really been effective. If we look at what's gone on since Obamacare was implemented, we've seen rates go up by over a hundred percent, and in some areas of the country it's over 200%. And while prices have gone up, if we look at the types of plans that are being offered in many states right now, we have eight states that have only one insurance company. So that means that people may not have the choice of doctor. One third of our folks that are using the exchanges will only have one insurer. So our choices are going down. We're also hearing from people that the plans that are being offered in and of themselves are high deductible plans or they're narrow networks. And so folks are looking at this saying, it's very expensive. There's a high deductible, and I don't want this. 

I would rather pay the penalty. And if we look at the number of people that are paying the penalty, it's over 7 million people and out of that 7 million, 5.2 million are earning less than $50,000 a year. So this is really a tax on low income people, low income people that may not be able to afford coverage, and then on top of it, they're paying a penalty. So that's one area of the law. I don't think that that in and of itself is going to address the underlying issues. From our standpoint, we're trying to do what we can, making things more flexible, more market friendly, trying to create more choices, but ultimately there's only so much we can do. We need a congressional, comprehensive congressional solution that's not only going to provide flexibility for states and empower states, but it's going to address the underlying reasons of why costs are going up so much. 

You mentioned state flexibility. There's been a lot of talk in the health policy community about these. So-called 1332 waivers, which are a form of state flexibility. They're in the Affordable Care Act so that states could modulate the way their Medicaid and exchange, particularly the exchanges work. I've written that the flexibility isn't that strong. Maybe you feel differently. Do you feel that there are a lot of tools there in 1332 right now, even if there are no changes that you can grant waivers for and that states could take advantage of? 


No, no. I mean the 1332 waivers, the way the legislation is written is very restrictive, and we've had a hard time getting waivers through the door.

You've turned down a couple of waivers.


Right, because we did not have the authority. I think we worked with Iowa for a very long time. They actually modified their proposal several times, but ultimately we were not able to come to that agreement because of the way the law is structured. So there isn't that flexibility. I think the waivers that we've been able to get through the door, we've gotten one, which was the Alaska, and then that's been replicated by a few other states. So virtually, if you think about it, we only have one model that we have been able to approve. So I think that's again, an area that requires modification by Congress to make it more flexible. 

What was the thing that Iowa was trying to do that turned out that they couldn't do based on the statute?


I think what Iowa was trying to do was look at the tax credits and make sure that trying to extend them essentially, and so the issue became the way the law is written, it's very specific that you have to evaluate the waiver to say, is it going to be as comprehensive as it's going to be as affordable? So does that mean it's going to be as affordable for every single person? So those are the types of things that don't work. Now on the Medicaid side of the house with 1115 waivers, those waivers, I think there's a lot more flexibility and hopefully that will be looked at as a model as Congress contemplates how to give states more flexibility. 

One thing we talked about to lure you here up to New York is to say that this audience is very interested in your top priorities as CMS administrator. What are you trying to accomplish in this window? You obviously oversee this enormous agency with a lot of things going on all the time. How do you wrestle that to the ground and say, here are the things that I really want to accomplish in my time at CMS? 


What are they? I'm driving the staff crazy. There's so much that I want to do. I'm start with the concept of patient empowerment. Over the years, we've talked about all kinds of different things that we should do in the healthcare system. We talk about regulating our doctors and paying for quality pharmaceutical companies, but we very rarely hear about patient empowerment and giving patients the tools to navigate the healthcare system. So I don't like it as the CMS administrator when I'm presented with decisions, national coverage decisions, should we cover this? Should we be paying for that? I think decisions about healthcare should really be at the patient and doctor level, and we need to empower our patients with information so that they know when they're picking a provider. I mean, how many of us know when you go to the doctor, is this a high value doctor? What's the cost of the service and what are the outcomes? What's the value for it? And that's absent in our healthcare system. And so we want to move across all of our programs, Medicaid, Medicare, and our exchange programs, that concept of patient empowerment. So it's putting out more information for individuals and structuring the programs in a way that incent our beneficiaries to be active consumers of their healthcare. 

What would be an example of that? How would you incentivize the beneficiaries to be active consumers? 


So I think that some of the models, the way they're structured, if individuals have no skin in the game, for example, it doesn't matter where they go, it's going to get paid for. But I think until with that sort of presented to the individual where they're making the decisions, I can go to this provider or this setting and it's a lower cost setting and I'm going to get better care versus going to another place. So I think when patients are not in a situation where they're even incentivized to make those decisions, they're not making them. And we talk a lot about bundled payments and changing our payment models to focus more on quality and value. And that's great for CMS, great for the provider, but where's the patient in that whole conversation? Where are the incentives for them to pick high value providers? 

You're speaking, I believe tomorrow in New Jersey, or was it yesterday? Today on the substance abuse issue, opioids and broader set of issues. You want to talk about that? What's CMS able to do and what are you thinking about doing when it comes to the opioid crisis?


Well, we had the pleasure of going to the Integrity House with Governor Christie yesterday, and he's been a real leader on this issue. So one of the things that we've done, and this is in response to the president's request to have HHS declare the opioid epidemic a public health emergency. And because of that action, CMS was very quickly able to create a new type of waiver for states, and this allows them to increase access to treatment. There's a longstanding law in the books, it's called the IMD exclusions. So those are institutes for mental disease, and essentially they don't allow Medicaid recipients to receive treatment at these types of services or these types of facilities. And so we were able to create a waiver that would allow states to use these facilities. And so in that brief time that we've done this, we've already seen Utah and New Jersey have their waivers approved. 

And this is an example of our ability to make sure that people are getting treatment. We met with an individual, Vanessa yesterday, and she talked about how she was on Medicaid, wanted to get treatment, couldn't get treatment at one of these IMD facilities, and she went to jail. She ended up going to jail instead of being able to get treatment. So this new policy that we have in place will allow more states to come in and expand treatment out in Utah just a few weeks ago. And we actually got to visit a facility that is now expanding beds to be able to serve more people. So that's a direct result. That's just one thing that we're doing. Just yesterday, for example, we released a new website to provide more data about prescribing patterns so that state and local facilities can have a better sense of where problems may exist. So a number of things that we're working on, I think from a larger perspective with HHS, there's also coordination with the FDA and NIH as well. 

One thing you hear from physicians, a lot of physicians say, Hey, the CMS star ratings actually graded us on whether we were managing pain aggressively with our patients. And that sort of forced us to prescribe opioids when maybe we didn't feel it was clinically appropriate. 


Yeah, that is definitely an issue. We are one of the initiatives that we have in place at CMS. It's called Meaningful Measures, and it's part of our larger effort around burden reduction patients over paperwork. But as a of that, we are looking at all the quality measures across the agency, what we're hearing from providers, whether it be the ones on pain that we have so many quality measures that people are just completely overwhelmed. And so we're moving towards having more streamlined measures and focusing things that are about outcomes, not about process. And so as part of that effort, we will be looking at that issue as well. 

One of the things that came up in the executive order that came out a few weeks ago that wasn't covered as much in the press was the issue of hospital consolidation. We talked about a little off stage or market consolidation broadly of which hospital systems is a major part. What are some of the things that CMS can do to address market consolidation? Hospital consolidation in particular? 


Well, that's an issue that we're very concerned about. Even if you look at what's been going on under Obamacare, to some degree, it's consolidation when there's only one insurer in the state, if there's one insurer. What does that mean for providers when they have to negotiate with one insurance company? It's a virtual monopoly. So we're looking at our policies across the board in every aspect to make sure that CMS is not contributing to that, to contributing to consolidation. And some markets, it may or may not be appropriate, but we don't want to drive out smaller practices. So if we look at, for example, in CMMI, which is our innovation center, we're taking a hard look at ACOs, for example. Those have worked well in some communities, but we want to make sure that they're not driving out smaller practices. The other area, just looking at burden reduction, one of the things that we've done over the last few months is done a national listening tours. We've gone all over the country, we've gone to small communities, large communities, and we're hearing so much about how folks are completely overwhelmed by the amount of regulation. CMS puts out 11,000 pages of regulation every year, and who can stay up with that? And a lot of that regulation. 

Do you think that'll continue that pace of regulatory? 


Hopefully not. Under my watch, we have our large initiative patients over paperwork is aimed at reducing regulatory burden. So we really want to focus on making it easier for providers and when the burden is so significant, whether it's because of new requirements around reporting, quality measures, that type of thing can really drive out small practices where they just can't compete. There's so much regulation. Doctors want to focus on providing good quality patient care, and if they're having to worry about regulation, a lot of them are giving up. I've heard from a doctor in New Hampshire who said she'd been in private practice her entire career. She was in her sixties, and she said, I'm at the tail end and I've always been independent, but I can't keep up. I've had to have three electronic medical records in my practice. They haven't worked. I've had a turnover I can't afford it. Can't keep up with all the new requirements around reporting. That's what we want to make sure CMS is not contributing towards. So when we look at, I want to make sure that our policies are not actually forcing the market towards consolidation. 

Another aspect of the executive order that ties into something we talked about earlier as a priority of yours is stabilizing the individual market. One of the things in the executive order was to expand flexibility of the short-term limited duration plans. There are some who say, Hey, that's bad because then you're giving people an opt-out from Obamacare and the Obamacare exchanges, but others say, Hey, it's good because the people have low cost options. How do you make sure that that market works? That short-term limited duration market works in a way that still maintains the stability of the exchanges. 


I think it's important at this point to give people relief from Obamacare. I mean, at this point, without a comprehensive congressional solution, we are trying to do whatever we can. We listen to people that are saying, we can't afford this. We need insurance. I can't afford the double digit rate increase. If you're in Iowa, that means you have one insurance company and their rates went up by over 50%. So people need alternatives. So short-term, limited duration plans give that alternative if people are between jobs or they need some type of coverage. So at this point, in absence of a congressional solution, we are trying to provide as many options for Americans so that they have choices and those are affordable choices. 

Any last comments about your priorities that we didn't address? 


Well, we talked about regulatory burden. I think the other main area is really focusing on modernizing the programs. If you look at both Medicaid and Medicare, they were created over 50 years ago at a different time. You just look at the Medicare program, people are living longer. The types of diseases that we're facing are more chronic disease, rather more acute illnesses. So it's updating the program and looking at the program comprehensively in terms of if we look at all the new innovation and technology that's out there, making sure that the program can accommodate that. So for example, telehealth is an area that we're very interested in doing and making sure that we're leveraging all the new technology that's out there. We talked a little bit about drug pricing and how we need to change the structure of the program or to think about that as we have new types of treatments that are available. 

If we look at the Medicaid program, for example, the Medicaid program is being used as a vehicle now to cover able-bodied adults. Well, the Medicaid program was designed for age blind and disabled people. It was not designed for able-bodied adults. So we need to think about how we make that program more flexible so that we can accommodate the program to address the unique needs. So across the board, it's looking at modernizing the program, Medicaid, Medicare for technology, for drug pricing. Even if we look at a lot of the new therapies that are coming out the way Medicare pays for services, we have durable medical equipment and we have drugs, but there are new products that are coming out that are not drugs, and they're not durable medical equipment. 

A lot people in this room are pitching 


And we can't figure out how to pay for 'em because that's how the program isn't structured. So I think that when we look at the programs, they need to be changed and they need to be modernized to accommodate those things. 

Great. Seema, thank you so much for joining us today. 


Pleasure. Thank. Appreciate it very much. Thank you.

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