Welcome to this week’s Gist Weekly, back from our Thanksgiving break. However, before we begin, we must share our grief for the tragic death of UnitedHealthcare CEO Brian Thompson. Our hearts go out to his family, friends, and those who knew and worked with him, including any of our readers.
In the News
What happened in healthcare recently—and what we think about it.
- CMS proposes 2026 MA and Part D rule, adding weight-loss drug coverage. Last week, the Centers for Medicare & Medicaid Services (CMS) announced the proposed 2026 Medicare Advantage (MA) and Medicare Part D rule. Headlining the new rule is CMS’s reclassification of obesity as a chronic disease, which would allow Medicare to pay the coverage of weight-loss drugs, such as GLP-1s. CMS is also clarifying and strengthening MA utilization management regulations, including requiring approved inpatient authorizations to be final and better aligning MA and traditional Medicare coverage determinations. Additionally, the rule enhances regulations around the use of AI for prior authorization requests, CMS’s oversight of Medicare plan marketing, and the public provider network listings of MA plans.
- The Gist: With one of its final healthcare policy decisions, the Biden administration is attempting to significantly expand Medicare access to weight-loss drugs. Currently, Medicare beneficiaries can only receive GLP-1s for comorbid conditions such as cardiovascular disease or diabetes. However, the incoming Trump administration will have discretion on whether to finalize this rule, which is not a sure thing given the differing opinions of key healthcare nominees on the drugs. Public support for Medicare GLP-1 coverage is high—about 60% of Americans favor this expansion—but so too would be Medicare’s costs to cover the drugs—one government estimate put it at $35 billion over the first nine years. This figure could be reduced if any GLP-1s are selected for the next round of Medicare drug price negotiations, another signature Biden policy that Trump could choose to unwind.
- Trump fills out healthcare cabinet nominees. In the last few weeks, President-elect Donald Trump has announced nominations for several key healthcare roles in his next administration. Johns Hopkins surgeon Marty Makary, MD, was tapped to lead the Food and Drug Administration (FDA). Former Florida Congressman Dave Weldon, MD, is his choice for Centers for Disease Control and Prevention (CDC) Director. Jay Bhattacharya, MD, a health policy professor at Stanford, has been selected to head the National Institutes of Health (NIH). Finally, Janette Nesheiwat, MD, a regular Fox News contributor, is his pick to become the next surgeon general. All these nominees will need Senate confirmation, including CDC Director for the first time, as will previously announced healthcare nominees Robert F. Kennedy Jr. for Secretary of Health & Human Services (HHS) and Mehmet Oz, MD, for CMS Administrator.
- The Gist: The throughline between these nominees is that each one has demonstrated a willingness to buck the medical establishment’s consensus, such as by criticizing COVID lockdowns or questioning vaccine efficacy. Makary and Bhattacharya in particular have earned reputations as respected critics of the agencies they’re now set to lead. Although these selections could further undermine trust in the medical establishment, they can also be seen as a response to that trust’s erosion. Many Americans are frustrated with our healthcare system and find promises to “shake up healthcare” appealing. Providers do not deserve the blame for this systemic loss of faith, but they do share the burden of helping to restore it.
- Nearly 30% of retail pharmacies closed within a decade. A study, published in the December edition of Health Affairs, found that 29.4% of the 88,930 retail pharmacies in operation during 2010-2020 had closed by 2021. Independent retail pharmacies were at greater risk of closure, as well as pharmacies operating in predominantly Black and Hispanic/Latinx neighborhoods. Most of the closures were concentrated toward the end of the study period, as the net number of stores in operation increased from 2010-2017. The paper’s authors advocated for policy solutions such as raising public insurance network participation and reimbursement rates for independent pharmacies and others at high risk of closure.
- The Gist: Pharmacies are acritical spoke in the wheel of healthcare access, making this sharp decline a troubling trend. Independent pharmacies, on which rural and underserved communities are especially likely to rely, have struggled amid the rise of large chains and the increasing concentration of pharmacy benefit managers, which often direct patients toward their own pharmacies. However, the trend is not limited to independents, as many of the largest retail pharmacy chains have also announced mass closures in the period following this study. Some percentage of these closures can be attributed to the rise of mail-order pharmacies, but a net loss in pharmacy access is likely unless reimbursement structures or business practices change.
Plus—what we’ve been reading.
- A pandemic relic or the future of care? Published recently in the Washington Post, this piece dives into the state of hospital-at-home (HaH) programs. HaH adoption took off during the pandemic once the federal government introduced a waiver that made HaH programs more logistically and financially feasible for health systems. CMS approved programs at 373 facilities in 39 states, where patients who were subsequently treated at home had positive outcomes. However, the waiver is set to expire at the end of the year without congressional action, and stakeholders remain divided as ever. Some nursing unions fear HaH programs will “accelerate hospital closures and the loss of acute-care beds,” while health systems see this as a cost-effective solution to capacity constraints. As Congress determines the fate of HaH, programs that have become a “heaven” for some patients remain caught in the crosshairs.
- The Gist: Despite their quick growth, most HaH programs are not operating at scale nor have they met their full potential. The temporary nature of the waiver program has made investment riskier for many hospitals, keeping some from entering the market and limiting the resources committed by others. HaH programs also need buy-in from private payers to truly thrive, and they are naturally waiting to see how CMS plans to handle reimbursements first. Unfortunately, without a long-term extension, continued HaH growth will remain challenging, and questions regarding how to best leverage these programs may remain unanswered.
Graphic of the Week
A key insight illustrated in infographic form.
Declining MLRs only part of payers’ profitability challenges
Following the release of Q3 financial reports, this week’s graphic takes stock of large health insurance companies’ recent financial performances. Nearly all the major payers reported higher medical loss ratios (MLRs) in Q3 2024 compared to Q4 2022. The MLR refers to the percentage of premium dollars spent on medical claims and quality improvements and is an important metric payers use to evaluate their operations. This upward trend has affected some payers more than others, with CVS’s MLR rising by more than 9% compared to UnitedHealth Group’s (UHG) 2.4% increase in this time frame. The only payer to report a decreased MLR was Cigna, which appears to be benefitting from its continued pullback from the Medicare Advantage (MA) market. Notably, payers have often cited higher utilization among MA patients—their previous blueprint for growth—as the leading reason for these rising costs. Additionally, relying on the profitability of other business segments to fuel future strategic investments may not be a sustainable plan for the two largest vertically integrated payers. Despite directing substantial resources into their non-insurance segments, nearly all these companies’ other business units have also been less profitable through Q3 2024, compared to the same period last year. After riding high for several years, the payers are showing signs that, despite their size, they are running into many of the same challenges as providers: rising drug costs, an aging population, and higher labor costs.
The Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
The “Triple A” bond rating remains an elusive, if not mythical, rating for not-for-profit hospitals. The growing reliance on government payers for reimbursement and an uber-competitive operating environment will keep that rating far out of reach.
When it comes to growth strategies, however, there appears to be a new “Triple A” on the horizon. In her latest blog, Lisa Goldstein describes the potential upside of growth strategies focused on access, accretive opportunities, and ambulatory services.
On Our Podcast
The Gist Healthcare Podcast—all the headlines in healthcare policy, business, and more, in ten minutes or less every other weekday morning.
Last Monday, we heard the second half of JC's conversation with Kaufman Hall's Scott Christensen about the state of retail healthcare delivery and what we could see in the space next.
This Monday, JC is joined by Carol Skenes of the healthcare data platform Turquoise Health to discuss what we've seen on the market side since the Hospital Price Transparency Act went into effect in January 2021.
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Thanks for reading! We’ll see you next Friday with a new edition. In the meantime, check out our Gist Weekly archive if you’d like to peruse past editions. We also have all of our recent “Graphics of the Week” available here. As always, we appreciate your continued readership and invite you to forward this email to friends and colleagues—please encourage them to subscribe as well!
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The Gist Weekly team at Kaufman Hall
