New York, NY – Every month, Integrity Research Associates publishes a report called ResearchInsight, which features the research written by one of the 2,700 innovative alternative research providers we track on a regular basis. This research report is distributed to Integrity’s buy-side clients and prospects – some of whom find the research relevant enough to establish direct commercial arrangements with the featured research providers. The following is an excerpt from the November issue of ResearchInsight, which provides the analysis and insight of three of the top U.S. Healthcare policy research firms in the US — Dr. Richard Evans of Sector & Sovereign, Ira Loss of Washington Analysis Corporation, and Ipsita Smolinski of Capitol Street Research.
Anyone who would like a copy of the full November ResearchInsight report, or who would like to be considered as a featured research provider in a future ResearchInsight report, please contact Nathan Bragg at 646-786-6854 or Nathan.Bragg@integrity-research.com.
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On November 17th, 2009, Integrity Research and Bloomberg Tradebook hosted a well-attended luncheon to discuss the impact of governmental policy in the healthcare industry. The luncheon was moderated by Mike Mayhew, Founder and Chairman of Integrity Research, and consisted of a panel of three experts in the policy research industry. Dr. Richard Evans of Sector & Sovereign has previously been named a #1 ranked analyst by both Bloomberg and Institutional Investor for his U.S. pharmaceuticals coverage, and is the author of ‘Health and Capital’. Ira Loss was a founder of Washington Analysis Corporation in 1973, and is currently the senior health care analyst at the company. Ipsita Smolinski is the President of Capitol Street Research and has over fifteen years of healthcare experience, much of it as a research analyst for various Wall Street investment banks.
The luncheon started with Mike Mayhew asking the panelists a few questions concerning the healthcare reform bill and quickly led to more questions from the audience on a wide range of related topics. The report below is a summary of the questions and answers provided at the luncheon.
As the state of the reform bill is constantly changing, it is entirely possible (and almost inevitable) that new viewpoints and recommendations have arisen since the publication of this report. With that in mind, Integrity tried to accurately report the stance of the panelists at the time of the luncheon. Contact information for each of the panelists has been provided with their bios at the end of this report, enabling readers to get an updated perspective if they wish.
Q: In your opinion what is the probability that a healthcare bill will be passed into law this calendar year? If not this year, then when do you think a bill will be passed?
Dr. Richard Evans stated his view that he no longer expects Congress to “pass impactful health reform legislation this year, or even in this political cycle.” Evans believed that voter attitudes are changing and moving away from the Democrats and their agenda. Evans also alleged that the issues of abortion and immigration will cause enough commotion within the Democratic Party to effectively stall the legislation. Dr. Evans pointed to the fact that “20 pro-life House Dems have put the issue ahead of health reform, refusing to support legislation that does not completely bar abortion coverage in plans that receive Federal funding” as support for his viewpoint. Another big issue is that the financing approaches taken by the House and Senate versions are so antithetical as to be irreconcilable in committee. Evans believed that with the holidays coming up, the clock is running out on the calendar year, and that returning to the topic in 2010 is made more difficult by pending elections. Dr. Evans felt that the reform will come about in the next decade and that the reason for reform will likely stem from dire economic necessity.
Ipsita Smolinski on the other hand was more optimistic about passage of a healthcare bill. Her position had been that there is an 80% probability that the reform bill would pass this year. That position is now looking aggressive. Passage this year depends on the Congressional Budget Office (CBO) scores which are due to be released on November 18th and the degree of debate the bill encounters on the Senate floor. She stated that if the debate on the Senate floor gets out of control then this entire bill could fall apart, with nothing happening or a smaller bill with low-hanging fruit e.g., Medicaid expansion, prevention and wellness, etc. If, on the other hand the House and Senate bills pass before Christmas, then this comprehensive reform bill could pass in early 2010.
Ira Loss believed that the window for healthcare reform is open until the end of the first quarter of 2010. He also believed that a bill will be passed – though primarily for political reasons. Loss judged that healthcare reform is critical to the credibility of the Obama administration’s domestic agenda, and as such, the administration will find a way to get this legislation passed. Loss countered Richard Evans saying that he does not think abortion or immigration will be allowed to interfere with the Democrats’ plan of moving the healthcare reform bill forward.
Q: Now that the House has passed its Healthcare reform bill, what happens next?
Ipsita Smolinski stated that the next step starts with the CBO scores which she has heard will be released on November 18th. Smolinski believed that once the CBO scores are released, Senate Majority Leader Harry Reid (D, Nevada) will introduce a Senate bill for which there must be unanimous consent to proceed. Although the actual form of this bill has been kept under wraps, Smolinski presumed the final bill would ultimately resemble the Senate finance bill with some minor changes. She thinks the Republicans will probably use a delaying tactic which will force the bill to be read aloud in the Senate, and would mean that the debate could start in earnest on November 30th, after the Senators return from Thanksgiving. Debate on the legislation could take anywhere from 2-4 weeks with the holiday calendar making it difficult to pass anything before early January.
Richard Evans mentioned the high probability that there will be a filibuster at some point in the process. He saw it as very unlikely that anything comes out of the Senate this year and that the conference committee will ultimately run out the clock. Speaking of delays, Evans also pointed to the fact that the longer the bill takes to pass, “the more susceptible members’ votes are lost, and the less likely reform legislation is to pass.”
Smolinski agreed that the conference’s debate will be interesting and that there is some talk that the bill might ping-pong back and forth between the Senate and the House but that ultimately she does not feel that this will be allowed to happen.
Richard Evans revisited the abortion issue, which he felt “cannot be put back in the bottle”. He felt that the Pro-Life advocates have a good argument in that the reform bill will ultimately end up subsidizing abortions unless they are explicitly counted out. Pro-Choice advocates on the other hand feel that if abortions are not covered by the plans in the healthcare reform bill then effectively you will be taking away choice. Without getting into the morals of the different positions, Richard Evans felt that both sides have valid arguments to their cases and that this will ultimately cause deep, divisive obstacles to passing the legislation. Progressive Democrats will ultimately be faced with a very difficult choice and Richard Evans bets that some of these Democrats will put their interest in this issue ahead of their interest in seeing the healthcare reform bill passed, particularly if key healthcare provisions are watered down in the final legislation.
Ira Loss reasoned that it is precisely for issues like this that President Obama appointed Rahm Emanuel as the White House Chief of Staff in the Obama Administration. Obama believed that the past two Democratic administrations have been undermined by the progressive wing of the Democratic Party and Rahm was brought in specifically to keep the progressives in line. The Obama administration will thus try to sell the progressives on how the healthcare reform bill is in the best interests of the country overall. The progressives will have to give something to get something on this and Loss believed that they will understand and accept this.
Q: How do you think the House and Senate will close their differences in financing healthcare reform? What sectors will this hurt most?
Ira Loss presumed that some of the financing for the healthcare reform bill will ultimately come from drug companies. He also assumed that Congress will partially finance the bill with discounts from Medicaid, excise taxes on insurance companies and medical device companies, with the balance unclear. He understands that most of the details in financing have not been worked out yet.
Ipsita Smolinski added that we could see some new taxes being passed in a similar vein to the “Botax” which places a tax on cosmetic surgery procedures.
Richard Evens agreed that extending the Medicare tax would provide some funding but ultimately felt that going after industry will be the easiest. Richard Evans also pointed out that we currently have an exceedingly compliant CBO and that the Congress will try to defer healthcare insurance payments until later (2013 or later) while implementing new taxes early on which would help the financial scoring of the bill. Previously, Richard Evans has stated his belief that the issue of financing will significantly reduce the odds of impactful health legislation being passed, stating that, “the Senate bill relies on taxes placed on high-cost health plans, which unions strongly oppose, and unions hold considerable sway in the House. The House bill relies on taxing the wealthy, which the Senate generally opposes.”
The full ResearchInsight report covers these three experts’ views on a number of additional topics, including their assessment of which sectors likely to benefit most if the current healthcare bill is passed by the U.S. congress and signed into law by President Obama.