CareTalk Podcast – Mike Leavitt Value-Based Care or Bust

Former HHS Secretary and 14th Governor of Utah, Mike Leavitt, joins the show to discuss why value-based care is something that both the Dems and GOP can get behind.

David Williams:

John, you really outdid yourself last week bringing on a guest who ran all of Medicare and Medicaid. Is it all downhill from there?

John Driscoll:

Not at all. We have the former Secretary of HHS who ran all of healthcare, David.

David Williams:

Well, how about a Governor next time?

John Driscoll:

He did that too.

David Williams:

Welcome to Care Talk, America’s home for incisive debate about healthcare business and policy. I’m David Williams, President of Health Business Group.

John Driscoll:

And I’m John Driscoll, the CEO of CareCentrix.

David Williams:

Now, John, you brought on a real A-Lister today. Who have we got with us?

John Driscoll:

Governor Mike Leavitt, entrepreneur, Secretary of HHS, Head of EPA, a baseball fan, a great golfer and good friend of the Driscoll family. Welcome, Mike.

Mike Leavitt:

John, thank you. What a nice introduction. That was worth coming just to hear.

David Williams:

That was nice. Now, I was going to ask, which of those things doesn’t belong? But that’s very nice. Now, listen, I’ve been doing a little reading, and I saw at the beginning of the Trump administration, you were brave enough to make five predictions about healthcare policy at the outset. And I’m wondering how those turned out. I’m going to happily remind you of what they were or you can revise history if you prefer that.

Mike Leavitt:

Well, that would be a good idea because sometimes we forget our predictions, sometimes conveniently and other times just because we can’t remember. So I’d be happy to critique myself.

David Williams:

No problem.

Mike Leavitt:

If you can remind me.

David Williams:

Let me remind you. So they were, first of all, that the ACA will be repealed, although exactly how that’s going to be defined is to be determined. A few portions of the ACA are definitely going to be out, like the individual mandate, the replacement must be bipartisan, Medicaid’s going to change to give the states more flexibility, and value-based care is here to stay.

Mike Leavitt:

Let’s start with number one. Did you say I suggested it will not be repealed?

David Williams:

You said it would be repealed, but you left yourself a little wiggle room what that meant.

Mike Leavitt:

That one, I’m just going to claim I don’t remember because I never thought that they would actually get to repeal. I worried that they could never find a replacement, and that had been my experience for some time. So as I remember my point of view during that period, they matched it pretty well. They could repeal, but they could not replace in the Republican Party, and given the nature of the division of power, it didn’t happen.

John Driscoll:

Mike, one of the things that I’m always struck by is that when you talk to the senior people in healthcare, you’re obviously one of the great Republican leaders of your generation from a policy and political perspective, but whether you’re talking to Republicans or Democrats, they largely agree on some of the key elements of reform. Why couldn’t we get a version of the ACA that was bipartisan reform oriented if all the experts of the Democrats and Republicans agree?

Mike Leavitt:

Well, let’s just start with the fact that it’s hard and that’s the reason. If it were easy, it would have been done before, but it has not. And I think when you look at Barack Obama and his history, we will say that he did get something done and it started basically a movement toward reform. Reform takes a long time and the molecules needed to move. He got it started. It will iterate through the courts. It’ll iterate through one administration over another. It will list a little bit left and a little bit right, but he got it started with the ACA. And clearly, not all of that was from a Republican point of view bad, but it was because there was a not created here problem, which is very common in Washington, people were against key parts of it that candidly were consistent with Republican ideology.

Insurance exchanges, for example, that’s a Republican idea. It deals with market. It has a market ideology behind it, and yet, because it was proposed by a Democrat, they were uncomfortable with it and they opposed it. You can go on to other things like that, so I just think it’s partisanism and it’s part of the time in which we live. It’s a very real part of the human dynamic.

David Williams:

John, I’m getting confused. My American history isn’t that good, but I think we’re going to go backwards and forwards. So let’s talk about what actually happened during the Trump administration on the healthcare side, at least. There was a lot of noise and fury and so on, but what did the Trump administration get right and wrong on healthcare policy? What are we left at if we take away some of the bluster?

Mike Leavitt:

Well, truth is their primary objective was for three of a four years repeal and replace the Affordable Care Act, and they were unable to do that. They used administrative rule to change a lot of things. They diminished the insurance exchanges that I already have mentioned. They tried to deal with Medicaid expansion in a way that would make that difficult. They took away a lot of the various provisions of the ACA through either rule or guidance. We now see a new administration. All of that’s being reversed. The primary objective of the Biden administration is to restore the Affordable Care Act to its original intent, and I think that’s happening. So if you pull it all away in terms of the ACA on a horizon of eight years, there’ll be very little that occurred during the Trump administration.

Now, if you begin to look at other parts of policy, the Trump administration really was only able to deal with regulation. They did not get any significant health legislation through, at least that’s occurring to me right now. And as a result of that, things stayed pretty much the same that John, what’s your view on that?

John Driscoll:

Well, I think the most interesting thing during the Trump administration, Governor, happened at the state level where it turned out that Medicaid on the ballot was much more popular than I would have expected even in red states. And as as a three-time Governor of a red state, were you surprised by how popular the Medicaid expansion was once it was put on the ballot? Because, historically, that’s not been a winner politically and yet it was pretty resoundingly successful wherever it’s been put to a vote.

Mike Leavitt:

Well, I happen to live in a state and governed a state that was among those that passed Medicaid expansion at the ballot. Actually, what happened was they got it on the ballot and then there was essentially a negotiated arrangement with the proponents of the initiative and they agreed to not drive the initiative. It was done at the same time that there was another initiative for the legalization of medical marijuana, and a similar thing happened there. I think we are finding that one of the limitations of initiative rulemaking is that you take really complicated things and boil it down to a quite simple question, put it on the ballot, and things pass. And I think that’s being used in a lot of places around the country where that has been the case.

It turns out when they actually passed that getting them organized in a way that will not create lots of cascading consequences, it’s a blunt instrument, and I think it’s the reason legislators don’t like initiative lawmaking or voter initiative lawmaking.

John Driscoll:

And the other thing, Governor, where I think you got it right is I think the Trump administration and really not driven by the White House but by HHS really did keep trying to incrementally expand value-based care, and where I give them a C or D on a number of other public health issues, which we don’t need to get into, I actually think on the expansion of value-based care, CMMI and HHS really made some interesting steps forward to start to professionalize and modernize the way that Washington views engineering value-based care. Any comments on that?

Mike Leavitt:

Yes. I think that if you look at the rare number of things you can get Republicans and Democrats to agree upon, value-based care is one of them. They agree that coordinated care is better care than uncoordinated care. Republicans and Democrats agree that the fee for service system has been the enemy here and has created much of the dysfunction in our system. I think Republicans and Democrats agree that ultimately you have to find a way in which to bend the cost curve. All three of those things align in value-based care. Now, as it relates to the Trump administration, I think the first Secretary, my good friend, Tom Price, a physician, was highly skeptical of value-based care, and candidly his skepticism and the method in which he approached it set value-based care back substantially.

It took almost a year at the conclusion of his service under Secretary Azar for value-based care to regain its momentum. And so I do think that it made net progress. I think Alex Azar was very direct in his support of it, but it got off to a slow start and it was hurtful to the purpose of value-based care.

David Williams:

Governor, you’ve spoken about the importance of looking at Medicare sustainability on the longterm and how value-based care was going to be an important part of that. Are you seeing that as an opportunity as we look forward for bipartisan cooperation, and how will that tie in with all the other things going on with Medicare like the expansion of Medicare Advantage and discussion of Medicare-For-All? Can this all be tied together?

Mike Leavitt:

Well, we’re at a point now where healthcare is no longer just healthcare, it’s economic policy, and we’ve been through a period when you look at both changing demographics and now a pandemic we have added another almost $8 trillion of debt. We’re pushing up against $28, $29 trillion worth of debt, a lot of that new debt, and there’s little question in my mind that it’s going to have an impact. We’re going to see interest rates ultimately normalize, and when they do, it’s going to draw even more heavily on the revenues of the United States. And that is going to put more pressure on every component of the U.S. budget from defense to education, to other components of healthcare and research. This is a very profound new dimension.

And when that happens and the entitlement spending in Medicare and Medicaid continue to grow, those who are operating a program are going to have very few options, one of which is to continue to put downward pressure on fee for service payments. Or another might be to find ways of pushing more care into a value-based equation where those who are receiving lower payments in fee for service can make part of it up by being able to create savings. So I think the economic imperative that has been shaping this all along has just become substantially more acute as a result of the spending that we’ve been doing over the course of the last year and a half and look to be doing in the next couple of years. I think we’re in a race. We’re in a race to see if we can make value-based care work or are we going to have to dramatically cut payment rates and therefore struggle with quality?

John Driscoll:

So Governor, any thoughts or predictions on President Biden and his approach to healthcare?

David Williams:

John, I heard he just said he’s just going to hit the reset button. Boom. It’s back in 2011 all over again.

Mike Leavitt:

I actually think that the first year is going to be all about undoing what the Trump administration did. I think we will then have some discussion about access, meaning Medicare for more people in some form. And when that occurs, we’ll have a debate and the outcome will in fact be I think largely driven by the outcome of the 2022 election. As it currently stands with the margins as thin as they are, I don’t think you’ll see any major healthcare legislation pass at least through the midterm election. There’ll be a fair amount of legislating done, but it’ll all be done in the context of the reconciliation, and reconciliation is a complicated subject but it does allow particularly in healthcare for a lot of things to happen. And what those will be, I don’t know with certainty.

John Driscoll:

Well, David, I know you have a hard time math, but if you look at the math that we just laid out.

David Williams:

So does the whole country. Didn’t you hear about how much money we’ve been borrowing?

John Driscoll:

And you look at the sure on state budgets, we’ve got this short-term boom from all of the Cares Act and its support that in some cases I think the states are having a hard time finding ways to spend the money, but when those bills for just pure Medicaid and Medicare come due, I do think the Governor’s prediction that there will be a race and it will be fast, at a state level they can’t just print more money. Most states have true balanced budgets and I’m nervous if the coverage increases and we don’t have a better functioning market for value-based care and frankly insurance, what happens to those states? I don’t know, Mike, whether you’ve got a perspective on that, but we’re six to 12 months away.

Mike Leavitt:

I want to just say, first of all, I thought when the pandemic struck it was absolutely essential for the federal government to respond, and I thought they did respond and they kept the economy going and I think we all ought to be deeply appreciative of that. Beyond that, I have to say, I think we’ve lost our fiscal minds and all of this spending is going to have some impact. And there’s this new modern, monetary theory that it doesn’t matter. Well, if it doesn’t matter, we’re all going to find out that for the last 150 years, we’ve been thinking about this all wrong and that it’s just, okay, we can spend any amount of money we want. Just mark me down as skeptical. I think it’s going to have a profound effect and I think healthcare is going to feel it.

And it’s going to be just as John said, they’re going to feel it first by the exigency and the urgency that public payers begin to feel because of the amount of spending that’s going out. I think states are going to be right in the heart of it. They’re getting all this one-time money. It’s going to keep everybody very happy for a while and at some point we’re going to have to deal with the reality that it’s not real. And when it happens, there will be consequences and we’ll all be around to watch that I hope.

David Williams:

I don’t know where to go with that. It reminds me a little bit of the year 1999 or 2000 when you heard all of a sudden revenue doesn’t matter for a company, and then there was a bit of a crash after that happened. It’s the same thinking. This is a little higher stakes.

John Driscoll:

It was just an 80% decline in stock values, and we’ve been through this before with the Balanced Budget Act, when we really get serious. It’s this massive helicopter blade cost reduction across the board. Well, let’s move to something easy like drug pricing and drug pricing reform and taking a bite out of drug pricing, inflation. Governor, any thoughts? I’d particularly be interested in your thoughts from the perspective of a governor who actually ran healthcare nationally. I’ve talked to a lot of Democratic Governors and Republican Governors who are appalled at the prices they have to pay for drugs, but the solution really has to be a national one. Looking at the problem from a market-based perspective, do you see any solutions on the horizon to slow down the relentless march of prices up without killing the terrific innovation that frankly has helped us cap this pandemic?

Mike Leavitt:

Ultimately, the only solution here is for us to begin to use value-based principles in the pricing and the deployment of pharmaceutical innovation. We have to acknowledge the fact that it takes money to do it, but in order to recover, you’ve got to be able to demonstrate a value proposition that if you buy this drug it’s going to reduce spending otherwise or at least demonstrate real efficacy. There’s 1000 different ways people think about this. It all boils down to whether or not you have a government pricing model or whether you have a modified regulated market. I’m typically in the camp of the regulated marketplace. However, I think, like a lot of Americans, I think people, they’re getting tired of solutions just not working. And I think it is very possible we could see a Republican Congress who steps in and starts supporting proposals that look a lot like something that Bernie Sanders would have proposed a few years ago simply because they’re tired of solution’s not working well.

David Williams:

I think to tie this recent comment you just made with the earlier one about the overall insanity, this new drug that’s just been approved for Alzheimer’s, I saw a projection from the Kaiser Family Foundation that said that Medicare could end up spending $57 billion a year on the drug, which is more than the rest of Part B drugs combined, which is only 37 billion now. And I wonder whether this is actually something where you’ve got a drug that’s not that efficacious one way or the other, shouldn’t have such a broad label, and is this the one where you’ve got enough attention there could even be a bipartisan approach toward value-based pricing for it?

Mike Leavitt:

Actually, I think it’s a very good example of a situation that could drive change. There’s going to be a point where people are just tired of solutions not working. Members of Congress are just feeling, not just ignored, but inadequate in their ability to deal with it and people aren’t going to put up with it. So I think you could begin to see this drive political change.

David Williams:

Well, John, you told me we were going to solve if not world hunger at least the whole healthcare problem on this podcast with this guest, and I’m not saying I’m disappointed, but I won’t say we’ve done it. So, John, how are you going to tie this up in a nice knot?

John Driscoll:

Healthcare reform is a journey and no one knows that better than our old friend, Secretary of HHS, leader to the APA, and three-time Governor, and long time and still optimist, Governor Mike Leavitt. Thank you for joining us, Mike.

Mike Leavitt:

My pleasure. Good to be with both of you and I’m glad I didn’t have to referee any more than I did.

David Williams:

No kidding. Well, that’s it for another edition of Care Talk. I’m David Williams, President of Health Business Group.

John Driscoll:

And I’m John Driscoll, the CEO of CareCentrix. Thanks for joining us. If you like what you heard or didn’t, please leave us a comment, and remember to subscribe.