President Donald Trump’s Day One executive order rescinding Biden-era Medicare and Medicaid price innovation programs signals sweeping changes to the drug and treatment pricing agency within the Centers for Medicare and Medicaid Services and perhaps a substantive shake-up in two of the largest federal social welfare programs.
As part of his first-day executive actions, Trump rescinded a 2022 executive order from former President Joe Biden that instructed the Department of Health and Human Services to consider “new healthcare payment and delivery models that would lower drug costs for Medicare and Medicaid beneficiaries.”
In doing so, Trump pulled the plug on three drug pricing test models that respectively would have lowered the costs of gene and cell therapies for Medicaid patients, capped certain generic drug prices for Medicare beneficiaries to $2 monthly out of pocket, and accelerated the Food and Drug Administration approval process for drugs designed to address unmet medical needs.
These models, or voluntary pilot programs to test whether they reduced costs and improved quality for patients, were launched in 2023 but have not yet taken effect.
The programs were developed and would have been administered by the Center for Medicare and Medicaid Innovation, an office under CMS, the agency that will be run by Trump’s nominee, celebrity doctor Mehmet Oz, should he be confirmed by the Senate in the coming weeks.
The fact that Trump took aim at fledgling CMMI programs during his jam-packed first day could highlight that reforming the agency, along with Medicare and Medicaid spending overall, will be a top priority for the first 100 days of his administration.
Reforms to innovation within CMS
CMMI, established in 2010 by Obamacare, is expected to get an overhaul under the leadership of Trump’s likely pick for its director, Abe Sutton.
Sutton, a former White House domestic policy aide, was a Medicare pricing adviser to Trump’s former HHS secretary, Alex Azar. He left the administration in August 2019 to study at Harvard Law School.
But before he left, Sutton was heavily involved behind the scenes in Trump’s 2019 executive order reforming Medicare and Medicaid coverage of at-home dialysis treatment for kidney disease and incentivizing more kidney transplants.
Sutton specializes in value-based reforms to healthcare policy, an approach aimed at improving quality while reducing overall costs. Two sources reported earlier this month to STAT healthcare news that Trump was likely to tap Sutton to run CMMI, indicating a new direction for the little-publicized branch within CMS.
The CMMI came under sharp Republican criticism last year following a September 2023 Congressional Budget Office report that found that CMMI increased federal spending in its first decade by about $5.4 billion, or about 0.1% of Medicare spending.
When Obamacare was enacted, the CBO estimated that CMMI activities would reduce Medicare spending within the decade by $2.8 billion, or 0.05%, of net Medicare spending.
Also according to the CBO report, only six of the 50 pilot models tested by CMMI have generated statistically significant savings, and only four programs have been expanded beyond the trial period.
Elizabeth Fowler, head of the CMMI under the Biden administration, testified before the House Energy and Commerce Committee last year that the agency has learned from all of its test programs, even the ones that did not save taxpayer money.
Reconciliation bill reforms
House Republicans have been making plans this month to include up to $2.3 trillion in Medicaid cuts over the next 10 years in the upcoming fiscal bill to be passed through reconciliation, a budget process that allows bills to bypass the filibuster and pass with only a simple Senate majority.
Plans to repeal Medicare drug pricing provisions of Biden’s Inflation Reduction Act are also mentioned in budget reconciliation planning documents being circulated within House GOP circles.
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The 50-page planning document notes the focus of the House Energy and Commerce Committee in the drug pricing arena will be to mitigate the “worst of innovation killing parts of IRA.”
The committee has also proposed in the budget process to reform the CMMI, but it did not elucidate how and to what cost.