HRI regulatory center

Regulatory and legislative updates and analysis

President Donald Trump: The latest healthcare developments

Healthcare, hurricanes and disaster response

Months and even years after the winds subside and the floodwaters recede, hospitals and health systems in regions battered by a hurricane will still be dealing with the financial, physical and reputational wreckage caused the storm. Hospitals face closure, chaotic revenue cycle operations, disrupted supply chains, possible credit downgrades, destroyed and damaged physical assets and displaced workforces and patients. Partner institutions, such as long-term care facilities and retail pharmacies, may temporarily, or permanently, operate at diminished capacities. To survive such an event, hospitals and health systems should plan for the complex challenges left in the wake of a hurricane or other natural disaster.

Read HRI 's report, Hospitals and health systems feel the impact of hurricanes long after the floodwaters recede

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Health reform 3.0: Thriving in a permanent state of policy disruption

The death of health reform has been greatly exaggerated. Though Congress was unable to pass a comprehensive national health reform bill in 2017, many other reforms are playing out in Congress, regulatory agencies and state capitals that could profoundly impact the healthcare landscape over the next year and beyond. 

These changes include efforts by Congress to reform the federal tax code; by HHS to reshape how the Affordable Care Act (ACA) is administered and how government pays for value over volume; and by states to control Medicaid and drug spending. These efforts make it clear that this is no time for companies to take a relaxed or reactive posture. On the contrary, they should act now to anticipate which changes are most likely to occur and how those changes might affect their business operations, then decide what they’re going to do about it. 

Payers, providers, life sciences companies and employers no longer have just one high-profile reform effort to monitor, but dozens. There are several that require their immediate attention. 

Read HRI and Strategy&'s report, Health reform 3.0: Thriving in a permanent state of policy disruption

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Weekly insights from Capitol Hill

Highlights – November 13, 2017

President Trump names pharma exec as HHS nominee

President Donald Trump this week announced his intent to nominate Alex M. Azar, a former HHS official and pharmaceutical executive, to serve as HHS secretary. Former HHS secretary Tom Price resigned in September. Azar served as a deputy secretary (2005-07) and general counsel (2001-05) of HHS under President George W. Bush. He was recently president of Eli Lilly’s US business unit (2012-17). As head of HHS, Azar would have authority over other healthcare agencies, including CMS, FDA and NIH. The nomination will be referred to the Senate Health, Education, Labor and Pensions Committee and the Senate Finance Committee before the full Senate votes on confirmation. Hearings are expected to be held in the next few weeks.

HRI impact analysis: If confirmed, Azar would join HHS as it begins to turn its vision for the government’s role in the industry into reality. In recent months HHS has slowed its push toward value-based care programs, instituted new policies to allow states to reduce Medicaid costs through work eligibility programs, and slowed implementation of the ACA or allowed new flexibility where possible. Azar also would join as HHS is under increasing pressure to address drug pricing, including from President Trump, who said Azar would work to lower drug prices.

Senate committee cuts ACA individual mandate penalty in tax bill

The Senate Finance Committee has added a key health reform provision—eliminating the Affordable Care Act’s individual mandate penalty—to its tax legislation. The Senate provision would reduce to $0 the ACA penalty on individuals who fail to obtain a baseline level of health coverage. The Senate tax bill provision would be effective Jan. 1, 2019. The House passed its version of the bill on Thursday without a provision targeting the individual mandate penalty. The Senate is aiming for a vote on its tax legislation after Thanksgiving. If legislation passes each chamber, it would go to a conference committee to reconcile the two versions and create one that both chambers could pass. Once both houses pass the legislation, it would go to President Trump for signing.

HRI impact analysis: An analysis by the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) concluded that zeroing out the ACA individual mandate penalty would reduce the federal deficit by $338 billion from 2018 to 2027 and increase the number of uninsured by 4 million people in 2019 and 13 million by 2027. Average nongroup market premiums would rise 10 percent a year from 2018 to 2027, the CBO and JCT estimated. Some of the uninsured would be people who choose not to obtain insurance thanks to the penalty’s elimination. Others would be people who want coverage but can’t afford it or those who, absent the prod of a penalty, fail to sign up for Medicaid. CBO estimates that 5 million of the 13 million additionally uninsured people by 2027 would come from reduced Medicaid rolls.

The potential impact of eliminating the mandate penalty on healthcare providers likely would be increased bad debt and uncompensated care as the number of uninsured rises. Shrinking Medicaid rolls could mean reduced state and federal spending on Medicaid overall; the CBO and JCT estimate that eliminating the penalty would reduce federal Medicaid spending by $179 billion from 2018 to 2027. For an examination of health reform’s future, please see HRI’s new spotlight, “Health reform 3.0: Thriving in a permanent state of policy disruption.”

Highlights – November 6, 2017

CMS proposes giving states more ACA choices

CMS has proposed a new rule that would give states more authority to regulate Affordable Care Act (ACA) benefits. The rule includes many consumer-facing and insurer-facing provisions, such as increasing the maximum annual out-of-pocket limit on cost-sharing by 7 percent, letting states extend their certification for qualified health plans, and changing various enrollment procedures. Such changes could affect out-of-pocket protections for some patients. Under the rule, states would have more say in which plans can be qualified health plans (QHPs), subsidized plans offered under the ACA exchanges. The rule also allows states to alter their essential health benefits (EHBs) and disregard a requirement that insurers spend 80 cents of every premium dollar on medical claims, two of the 2010 law’s key components. The rule is a direct response to President Donald Trump’s first executive order, signed hours after his inauguration, directing federal agencies to minimize implementation of any ACA provision that would impose an economic burden. The rule is open for public comment until Nov. 27, half the time usually allowed.

HRI impact analysis: The Trump administration said in a statement that the rule will “increase flexibility in the market, improve program integrity, and reduce regulatory burdens,” all goals laid out by the Jan. 20 executive order. Under the rule, plans would still be required to cover the ACA-mandated 10 essential health benefits categories, but states could opt to substitute benefits within and between categories, an approach that the Obama administration rejected. States also could select an EHB benchmark plan from another state. If the rule is enacted, several of its provisions could quickly come under legal threat. In drafting the rule, the Trump administration is using its authority to remake the ACA, something Congress has so far been unable to do through legislation. The administration also has cut the ACA’s open enrollment period in half, reduced its outreach budget by 90 percent and discontinued cost-sharing reduction (CSR) payments that subsidize care.

Orphan drug tax credit in danger

The House tax reform legislation unveiled last week could hurt the pharmaceutical and biotechnology sector because it proposes eliminating the orphan drug tax credit, an incentive designed to spur drug development for rare diseases. The tax credit is worth 50 percent of the “qualified clinical testing expenses” incurred by a company in a given taxable year, including staff salaries or the cost of clinical trials, as long as those expenses are primarily related to an eligible drug. A drug is eligible if the FDA designates it an orphan drug, defined as treating a condition affecting fewer than 200,000 US residents. The US Treasury Department estimates the tax credit cost the federal government $2.3 billion in 2017; that would be a total of $75 billion through 2027. As of Thursday afternoon, it remained unclear whether the Senate’s tax plan also would propose eliminating the tax credit.

HRI impact analysis: Orphan drug designations have been increasing steadily in recent years. From 2013 to Oct. 31, 2017, the FDA granted 1,656 orphan drug designations, compared with 932 from 2008 to 2012—a 78 percent increase, according to an HRI analysis. The FDA designated a record-setting 140 orphan drugs in the third quarter of this year, beating its previous record of 130, set in the second quarter. The FDA approved 647 of the 4,408 drugs it designated since 1983. Companies should consider whether the tax credit’s elimination would make developing drugs for rare diseases less viable. Small companies might be most affected, as the credit can be a lifeline for cash-strapped startups. 

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Payers: Trump administration briefs

As the debate over repealing and replacing the Affordable Care Act (ACA) moves to the US Senate, generating considerable uncertainty about the law’s future, health insurers face looming deadlines to participate in the ACA exchanges this fall. Several insurers already have announced they will drop or reduce participation, raising questions about the ACA nongroup market’s health as open enrollment begins Nov. 1.

Read HRI’s spotlight, Trump policy agenda – Exchange participation


After President Donald Trump and Republican leaders canceled a vote on the American Health Care Act (AHCA), the world became more complicated for health industry leaders and their consumers. Amid the multiple unknowns, health leaders may be tempted to wait for clarity. But in this atmosphere, it is even more important for organizations to lean into the unknowns and build resiliency. Healthcare companies can make some “no regrets” moves to build resilience amid periods of change and uncertainty.

Read HRI’s spotlight, What’s next for health reform?


As they mull the ACA’s fate, Republican lawmakers are weighing four options to replace the individual mandate. Any replacement to the mandate would need to accomplish two goals: encourage sign-ups by healthy enrollees, and discourage voluntary coverage gaps.

Read HRI’s spotlight, Replacing the individual mandate

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Providers: Trump administration briefs

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is transforming the way physicians are paid for Medicare services. But the law also could have profound effects on hospitals and health systems, potentially hitting their bottom lines, changing the way they evaluate consolidation and how they design provider networks. For hospitals and health systems, MACRA is a strategic puzzle to solve, requiring greater enterprise resilience in these times of change and uncertainty.

Read HRI’s spotlight, MACRA is a strategic puzzle that requires greater resilience (September 2017)

The American Health Care Act (AHCA) aims to partially repeal and replace the ACA, by phasing out the ACA’s Medicaid expansion and capping federal funding for the program, among other things. Under the AHCA’s Medicaid plans, healthcare providers could experience a gradual increase in uncompensated care, cuts in Medicaid reimbursement rates, or both.

Read HRI’s spotlight, Implications of phasing out Medicaid expansion (March 2017)

Republican lawmakers are promoting Medicaid block grants as a way to control federal healthcare spending. Providers can expect a shift from an entitlement to a free market Medicaid approach, along with a possible rise in the uninsured population or decrease in reimbursement.

Read HRI’s spotlight, Medicaid block grants and per capita funding (February 2017)

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Pharma and life sciences companies: Trump administration briefs

The pharmaceutical industry is facing a growing threat from safety data on the drugs it produces. The FDA has fostered unprecedented transparency on drug safety data, forcing companies to manage novel challenges from parties already busy mining those data: regulators, the public and data analytics firms. In this climate, pharmaceutical companies have the opportunity to find ways to mitigate risks, unlock savings, make new discoveries and create competitive advantages.

Read HRI’s spotlight: Pharmaceutical companies face the changing future of pharmacovigilance (September 2017)

The FDA’s new commissioner, Dr. Scott Gottlieb, has extensively argued that the agency is in need of regulatory reform meant to get critical medical products to patients more quickly and efficiently. Gottlieb’s previous statements signal a greater likelihood of significant change at the FDA, which has been given new authority – both statutory and executive – by legislators and President Donald Trump to streamline and accelerate the way it regulates. As change takes place, life science companies may benefit and find reasons to celebrate – but so, too, will their competitors. 

Read HRI's spotlight, The FDA leans forward: Dr. Scott Gottlieb’s opportunity to reshape the agency

As the US tax and trade reform debate continues, pharmaceutical and life sciences companies should waste no time in evaluating how different provisions would affect their business operations. Companies should model possible changes could affect manufacturing and supply chains, locations of intellectual property (IP) holdings, unremitted earnings held overseas and planned capital expenditures. Updated August 2017.

Read HRI’s spotlight, Creating a pharmaceutical supply chain and business strategy amid tax and trade reform uncertainties (Updated August 2017)

After President Donald Trump and Republican leaders canceled a vote on the American Health Care Act (AHCA), the world became more complicated for health industry leaders and their consumers. Amid the multiple unknowns, health leaders may be tempted to wait for clarity. But in this atmosphere, it is even more important for organizations to lean into the unknowns and build resiliency. Healthcare companies can make some “no regrets” moves to build resilience amid periods of change and uncertainty.

Read HRI’s spotlight, What’s next for health reform?

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Health industry strategy: Trump administration briefs

Healthcare reform efforts by Congress will create challenges and opportunities that may require changes in operating models across the US healthcare industry. As the legislation undergoes debate and negotiation in Congress, healthcare organizations face considerable uncertainty. Organizations that have developed enterprise resilience—the ability to adapt the business model to change, anticipate disruption and recognize opportunities to generate a competitive advantage—may be best positioned to survive and thrive in these conditions.

Read HRI’s spotlight, Developing enterprise resilience in the face of health reform


The inaugural festivities are over, the revelers have gone home, and President Donald Trump has moved into the White House. With so much change in the air, what actions can health organizations take today?

Read HRI's spotlight, (Some) change is coming to healthcare


As the American Health Care Act (AHCA) bill makes its way through the legislative process, the nation’s healthcare industry is left to contend with considerable uncertainty. However, there are concrete steps healthcare stakeholders can take in the whirl of uncertainty to help build resilience no matter what specific policy provisions are enacted.

Read Strategy&’s article, Why Healthcare Companies Need to Focus on Enterprise Resilience

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About the center

As the US healthcare system continues to undergo transformation, health industries are confronted with an evolving and complicated regulatory environment. With an eye towards how public policy impacts the business of healthcare, the HRI regulatory center serves as a vital resource for executive decision makers who must navigate the changes that lie ahead.

HRI's regulatory center is a group of seasoned professionals that analyze legislative and regulatory policy in Washington and in key states. The group, which focuses on all health sectors, publishes a weekly newsletter and more focused reports that detail the interconnection between Washington and healthcare. The HRI regulatory center calls upon key contacts in government and industry to develop a point of view that is both informative and actionable for health industry leaders.

Contact us

Benjamin Isgur
Health Research Institute leader
Tel: +1 (214) 754 5091

Trine K. Tsouderos
HRI Regulatory Center Leader
Tel: +1 (312) 241 3824

Alexander Gaffney
Senior Manager, PwC Health Research Institute
Tel: +1 (202) 414 4309

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