By EMILY EVANS

Emily Evans is the health policy guru at equity research company HedgeEye. She sends out these reports in emails to her clients regularly but (since I asked nicely) she allowed me to publish this one from late last week on THCB. You can catch Emily in person on the “How Much Are These Companies Really Worth? The IPO & SPAC Panel” at Policies|Techies|VCs–What’s Next for Health Care, the conference Jess Damassa & I are chairing on September 7-8-9-10 — Matthew Holt

Politics. President Biden is going to have more important things to do this week than worry about the mask/vaccine wars. At some point though, probably soon, Biden will need a scapegoat at the CDC. Several reversals on guidance around masks for the vaccinated and the unvaccinated have left local governments confused and people, most notably, parents of school age children, angry. The spread of the Delta variant isn’t helping matters.

While there may be political motivations for some of CDC Director, Dr. Rochelle Walensky’s guidance. A better approach, this last week anyway, would be never assign to cunning that which can be explained by incompetence.

Bringing a large, sprawling bureaucracy into line after a decade or more of being considered irrelevant is not a simple matter. It is made particularly difficult by the agency’s remote location in Atlanta to which Dr. Walensky commutes. 

For the time being eclipsed by a messy exit in Afghanistan, the CDC’s failures are still being noted by longstanding supporters of the agency like former Food and Drug Commissioner, Scott Gottlieb. As the Delta variant follows the same summer path as Alpha from south to north and break-through infections become identified as more common than previously thought (though mild for the vaccinated), the pressure to get the CDC reorganized will grow.

The good news, notwithstanding the vitriol over mask wearing and vaccine mandates, is the assumption underlying the CDC’s guidance on masks/vaccines is that children will be going to school and college students to class. It is, we can all hope, the first step in recognizing that there is no Zero-COVID; no magic bullet; just adaptation and adjustment, something at which humans excel.

Policy. Last week, the Department of Labor simultaneously filed and settled a lawsuit against UNH for violations under the Mental Health Parity and Addiction Equity Act of 2008. The dollar value of the settlement was immaterial but United HealthGroup (UNH) agreed to take corrective action which will be substantive.

We have known for decades insurers rarely reimburse mental health providers at rates that render in-network status viable. As a result, non-physician mental health practitioners like psychologists and counselors largely operate out-of-network.

The lawsuit alleges that UNH reduced reimbursement to out-of-network non-physician mental health providers more than it did for medical/surgical providers. Using the Department of Labor’s example, a psychologist may bill $110 for a 45-minute session. However, UNH would use the Medicare fee schedule to determine the baseline rate of $106.00. Due to the provider’s OON status, that rate would be reduced by 25% to $79.00 UNH would pay $79.00 and the plan’s beneficiary would be liable for the balance of $31.00

Had UNH applied the approach to reimbursement as it does for out-of-network medical/surgical services like those provided by a psychiatrist – a minimal reduction of the baseline fee – the plan’s beneficiary would have been responsible for $4.00.

As part of the settlement, UNH has committed to cease the violation and communicate to plan sponsors and beneficiaries more clearly.

It is about time. The federal government’s longstanding tendency to turn a blind eye to insurer practices has been egregious. The industry has so flaunted the requirements of MHPAEA that even ACA plans have failed to meet the parity standard. 

Power. The long-standing bias against reimbursing for mental health services has deep roots. For decades, mental health care was delivered by the state or local government in an inpatient setting. When that system was dissolved in the 1960s after numerous scandals and reports of abuse at state hospitals, it was meant to be replaced by outpatient community services. That replacement never materialized.

What developed since has been a system of triage. Common mental health conditions like anxiety, depression and their traveling partner, substance abuse, are not addressed due to stigma. Improper education of caregivers, educators and employers to recognize signs and symptoms have complicated conditions. Additionally, insufficient access to care contributed greatly to arriving at the place the mental health system finds itself; many of the sick are treated only after crashing into an emergency room.

While we must acknowledge that the collective mental health of Americans was in decline before the COVID-19 pandemic, reducing social interactions to zoom calls and scaring the daylights out people, particularly the young, has and will continue to take its toll.

That leaves employers and other plan sponsors between a rock and a hard place. The mental health workforce has operated outside the insurance system, making their revenue model less certain, and resulting in fewer practitioners. Yet, all major MCOs are reporting during earnings calls that mental health solutions are the most requested change to benefit design. The Department of Labor’s settlement with UNH is only going to move this priority further up the chain of command.

The truly exciting thing about redesigning mental health services in the face of overwhelming demand and limited supply is the opportunity it presents for operating mental health service lines efficiently. The sad truth is that inpatient mental health services are the most common referral out of an ER and they have a very poor track record.

Quickly emerging are hybrid models and digital solutions that can make the workforce more productive until enough practitioners recognize the new paradigm can support the investment in education and training. Most are private but growing fast like PursueCare, Soundermind and Lyra and all are going to leave Universal Health Services (UHS) and Acadia Healthcare ACHC in the dust.

A long time coming but welcome nonetheless.

Emily Evans is a Managing Director at equity research company HedgeEye

Episode 57 of “The THCB Gang” will be live on Thursday, June 10, 1pm PT 4pm ET. Matthew Holt (@boltyboy) will joined by regulars: medical historian Mike Magee (@drmikemagee), THCB regular writer Kim Bellard (@kimbbellard) and futurist Ian Morrison (@seccurve). And we have a special guest, health care equity analyst at Hedgeye, Emily Evans (@HedgeyeEEvans)

You might guess that the latest meme stock Clover Health (CLOV) might make an appearance! But that won’t be all!

The video is below. If you’d rather listen, the audio is preserved as a weekly podcast available on Fridays on our iTunes  & Spotify channels