Which way HHS if Alex Azar is confirmed?

Washington Watch

In the nation’s capital, where politicians are always wearing partisan political jerseys, the nomination of Alex Azar to be the new Health and Human Services Secretary may offer the hope of a fresh start on health care issues.

President Trump’s recent nominee to run HHS, the largest agency in the federal government, has steadfastly opposed President Obama’s Affordable Care Act (ACA), which Azar often describes as “circling the drain.” So the 50-year-old Indiana native is not likely to get many Democrats on his side when the Senate votes on his nomination early next year. But Azar’s tenure at HHS, if he’s approved, will be a stunning departure from the tumult of former Secretary Tom Price’s bitter partisan confirmation fight and equally brief tenure and forced resignation.

Azar is expected to set a different tone, a more pragmatic and less ideological one than Price, who resigned in September under criticism for his use of private jets and military flights.

That’s because Azar brings an unusual combination of experience in government and industry to the job of running a cabinet department that spends more than a trillion dollars a year providing health insurance to more than 130 million Americans. HHS has jurisdiction over Medicare, Medicaid, and the Children’s Health Insurance Program as well as the health insurance marketplaces known as Obamacare. In addition, HHS hands out and administers more grant money than all other federal agencies combined.

But no one expects Azar to be bipartisan. He won’t be the centrist guiding consensus on policy issues and certainly won’t be able to unite the Democratic and Republican parties on different issues. His resume is studded with conservative credentials.

Republicans see Azar as the perfect contrast to the controversial Price – a competent manager who can get HHS back on track after the volatile Price tenure. Democrats see Azar as a pharmaceutical industry shill with a track record of raising drug prices, not lowering them. Azar spent 10 years at Eli Lilly and Co., the Indiana-based pharmaceutical giant, including five years running their U.S. operations.

But since his nomination, most Democrats have held off condemning his nomination in the hopes that his HHS tenure could restore professionalism to the job. Some Democrats – Sens. Bernie Sanders, D-Vt., and Elizabeth Warren, D-Mass, among them – question Azar’s neutrality on drug pricing issues as a former Eli Lilly executive. But others think his experience in the George W. Bush administration, where he served as both general counsel starting in 2001 and became deputy secretary at HHS four years later, working for secretaries Tommy Thompson and Mike Leavitt, could be an asset in working through complicated health policy issues.

While at HHS under Bush, Azar is credited for helping devise the legal rationale for a complicated compromise on the emotional issue of federal funding for embryonic stem cell research. He also was instrumental in carrying out the 2003 law that added a prescription drug benefit to Medicare, one of the most significant changes in the history of the program.

That work on Medicare was a formative experience Azar says, citing the drug benefit delivered entirely by private companies under contract with the government as a model. The cost to Medicare beneficiaries and to taxpayers has been substantially less than originally projected, he noted.

Azar is the first person nominated to the health secretary post with such a direct path from industry. Every other top health official to hold the spot in the last 30 years had gubernatorial experience, served in Congress, or helmed another agency. Only Donna Shalala, President Clinton’s pick for health secretary, and Louis Sullivan, President George H. W. Bush’s pick, did not – but both came from academia, not from industry.

At a recent Senate Health, Education, Labor and Pensions (HELP) Committee hearing, Azar said he would focus on four critical areas if he became HHS Secretary: lowering out-of-pocket drug costs for patients; making health care more affordable and available; a shift to preventive (not reactive) public health; and addressing the opioid epidemic.

The insulin battle

Patients and members of Congress criticized increases in list prices for insulin while Mr. Azar was the president of Lilly USA. During that time, the company was caught up in a lawsuit over the price of its insulin products. One product, Humalong, has risen by 345 percent, according to the consumer watchdog group Public Citizen. In addition, Eli Lilly and other insulin makers have been hit with state investigations and a class action lawsuit filed by patients with diabetes who claim that unaffordable prices endanger their health.

During Congressional hearings, Sen. Tammy Baldwin, D-Wi., asked Azar what he would tell one of her constituents who is paying more than $1,000 a month for insulin about the Lilly price increase. Azar replied, “It’s the system.” He explained that although pharmaceutical companies bear some of the responsibility for rising prices, drug wholesalers, pharmacies, pharmacy benefit managers and even the government is also culpable. “Everyone owns a piece of this,” he said.

What was refreshing about Azar’s testimony was that he pointed the finger at all the players and his understanding that the current system isn’t working for patients struggling with high out-of-pocket costs.

Drug prices

Under intense questioning, Azar discussed ways to lower drug prices, which Trump promised to do when he ran for president but so far has not offered any concrete policy proposals. Increasing competition is one solution. “More drugs on the market will bring down costs,” Azar said.

But the only specifics he offered were a pledge to open the market to more generic drugs by preventing manufacturers of brand-name drugs from extending patent protection through legal ruses. Azar said that during his time as HHS general counsel, he helped end one particular abuse of patent law that saved consumers $34 billion in drug costs over 10 years. “We have to fight gaming in the system by patents and exclusivity agreements.”


Sen. Warren and other Democrats also said they worried Azar will continue the administration’s efforts to “sabotage” the Obama-era ACA, only do so with a polite smile instead of Trump’s hard-edged rhetoric.

Azar confirmed he’s no fan of the ACA, but refrained from calling it “Obamacare,” a now widely used term coined by Republicans as a pejorative. He said he disagrees with the law’s penalties on people who don’t get health insurance. He asserted that the government should act to help consumers who don’t qualify for health law subsidies but face its high premiums. He said he supports bipartisan legislation to stabilize insurance markets – something he may find himself in conflict with among other Trump administration officials. “If it remains the law, my goal is to implement it in a way that leads to affordable insurance,” said Azar. But Democrats dismissed that as coded language for undermining consumer protections such as minimum benefits.


Replying to Sen. Rand Paul, R-Ky., Azar said his unique background of both industry and government experience would uniquely qualify him to find solutions to difficult issues. But that didn’t fly with Paul when it came to the issue of reimportation of drugs – an issue of vital importance to seniors.

The fight is over allowing prescriptions drugs made in the United States that are then exported to places such as Canada and Europe to be reimported at lower, foreign-market prices. During the presidential campaign, Trump and Paul both strongly supported the idea. Azar’s view is that the federal government can not ensure the safety of American drugs when they are in other countries, even if they originated in the United States.

Since the Clinton administration in the 1990s, lawmakers have tried to open up this option as a way to save consumers lots of money. But like Clinton, George W. Bush and Barack Obama, once they became president and were responsible for the safety of Americans and the entire drug supply, their positions changed.


Azar may find himself on the opposite side of President Trump on what direction to push Medicare. Azar said he favors continuing an Obama administration push to shift Medicare toward creating incentives for good health outcomes rather than the volume of medical care. He’s a fan of paying doctors and hospitals in new and possibly more efficient ways through experimental payment programs set up under the Obamacare law.

But under Price’s HHS, Medicare, run by Seema Verma who would report directly to Azar if he’s confirmed, recently killed off three experimental payment programs. Sylvia Mathews Burwell ran Health and Human Services under Obama and spearheaded ACA programs that changed how Medicare pays for services, focusing on quality of care versus the traditional fee-for-service model. These have been controversial but profound changes to the roughly 58 million seniors and disabled Americans that Medicare covers.

Among the changes, the ACA mandates what are known as bundled payments for some episodes of care, like heart attacks or hip fractures. Before this policy change, Medicare typically paid for individual procedures, which critics say drives up costs by giving doctors or hospitals incentives to provide more services. Bundling creates a single payment for an entire course of treatment, giving doctors an incentive to be more efficient.

In April 2016, Medicare began an experiment to save money on the half-million hip and knee replacement it pays for each year. In 67 cities, Medicare capped the payments it makes to hospitals for joint surgeries and the many months of follow-up care they require. By paying a fixed amount for the operation and recovery, the government wanted to encourage doctors and hospitals to reduce unnecessary care, things like long stays in a rehab facility when physical therapy at home would work just as well.

The program, which was run out of an office created in 2010 called the Innovation Center, was an important part of the Affordable Care Act’s goal of shifting the health care system away from the fee-for-service model toward one that rewards positive outcomes. Some 800 hospitals were required to participate during the program’s first year of operation, which aimed to cut Medicare’s joint replacement costs by 3 percent. But last August, CMS, which houses the Innovation Center, made the program optional for hospitals in half of the cities where it previously was mandatory. That change will increase Medicare costs by $90 million over the next three years, CMS said.

The agency also cancelled two other programs planned to roll out in 2018 that were designed to cap Medicare payments for cardiac care and rehab. Then in September, shortly before Price was forced to resign after the private plane controversy, CMS announced it was seeking a “new direction” for the Innovation Center and suggested it would take a more free market approach.

“We will move away from the assumption that Washington can engineer a more efficient health care system from afar,” CMS administrator Verma wrote in a Wall Street Journal op-ed.

While she acknowledged the need to change the fee-for-service system, she didn’t spell out what this new direction would look like, other than saying that CMS would loosen requirements for doctors and hospitals to encourage market competition “that drives innovation in other industries.”

In December, CMS said it will shift to voluntary participation for the hip and cardiac programs and shrink a third program for other joint replacements while also making it voluntary in many parts of the country.

Verma’s actions to cancel some of the programs is a sharp shift away from Burwell’s approach as head of HHS in the Obama administration, which tried to use a combination of incentives and mandatory changes to transform how medical care is paid for and delivered. Under Price’s HHS, and Verma’s leadership at Medicare, the agency has been more reluctant to push doctors into payment arrangements that could lower their reimbursements.

Price’s philosophy was based on his experience as a doctor and also his strict conservative political views. Price objected while he was in Congress to the idea of mandatory capped payments. But an early experiment in Baptist Health System in San Antonio found that capping payments for joint replacements could lower costs by more than 20 percent, or $5,577 per patient, according to an evaluation published in JAMA Internal Medicine. Most of the savings came from using less expensive implants and shorter stays in rehab.

Now, Verma will find herself reporting to Azar if he’s confirmed, and they appear to have conflicting views about the merits of bundled payments and other major structural changes toward quality of care.

Also contributing to this story were: Bloomberg, Politico, AP, Stat, New York Times, Medscape and Medcitynews.

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