THE PROGNOSIS

Expect 2018 to be a year of fraught face-offs between the Trump administration and Obamacare insurers, as insurers try to hunt down billions of dollars they’ve been promised for participating in the Affordable Care Act's marketplaces.

The legal battles revolve around two hefty pots of money Republicans have essentially termed “bailouts” for insurance companies, but which are provided under the 2010 health-care law to help those insurers manage risk, provide extra discounts to the lowest-income Americans — and basically aid in stabilizing the Obamacare marketplaces, which have turned out to need more help than expected.

In a rather unusual anti-industry move, the GOP-led administration and Congress are essentially refusing to make these dual payments as Republicans continue their offensive against President Barack Obama’s health-care law. The broadside is now prompting a host of lawsuits from marketplace insurers who cover around 10 million Americans in a rare political battle between erstwhile allies -- Republicans and the insurance industry.

This morning, a three-judge panel at the U.S. Court of Appeals for the Federal Circuit is set to hear cases brought by two insurers — Land of Lincoln Mutual Health and Moda Health Plan — who are seeking billions in so-called "risk-corridor payments,". The appeals court is expected to give a definitive ruling on both cases, over which lower courts have split.

And a co-op in Maine recently became the first of probably many insurers to sue the federal government for halting “cost- sharing reduction” payments, which reimburse companies for discounting extra costs that come with the plans purchased by the lowest-income marketplace consumers.

Big legal questions are at stake: whether the federal government has a responsibility to pay insurers the money they’re owed, and whether the money can be provided without an appropriation by Congress. A lot of cash is in play, too: about $12.3 billion in unpaid dollars for the risk-corridor program and about $2 billion for “cost-sharing reduction” (CSR) payments.

All things considered, the cases could comprise some of the biggest civil lawsuits in U.S. history — and even have a chance of ending up at the Supreme Court in yet potentially another landmark case sparked by the ACA.

“I can’t think of civil litigation that is larger in sheer dollar amounts than what we’re talking about here,” Nicholas Bagley, a health law professor at University of Michigan Law School, told me.

Insurers have a somewhat easier case to make for why they should get CSR dollars. The Trump administration continued paying the subsidies on a monthly basis in its first eight months, but then abruptly halted the payments in October, pointing to a previous court ruling saying Congress and not the executive branch needed to provide the money.

Insurers trying to secure risk-corridor funding could face a bigger challenge because Congress passed a measure by Sen. Marco Rubio (R-Fla.) in 2014 essentially requiring the Centers for Medicare and Medicaid Services to pay out only what it takes in from health plans. (The risk-corridor program tries to stabilize the ACA marketplaces by collecting funds from profitable companies and redistributing them to plans with losses that exceed a certain amount.)

The move led to severe funding shortfalls for the risk-corridor program. In 2015, CMS paid just 12.6 percent of insurers’ funding requests, and the gap has grown even wider since then.

As a result, some health plans tanked. Shaun Greene, former chief executive of the Utah-based co-op Arches Health Plan, said his organization closed in 2016 specifically because the federal government reneged on what was supposed to be an $11 million payment.

“It was an obligation the federal government had,” Greene told me. “Part of the deal is they would put in the safety net of the risk corridors, so we priced our plans accordingly. When they defaulted, it decimated our balance sheet.”

Republicans’ position in all this is a bit counterintuitive. Typically suspicious of the government and friendly to industry, Trump and GOP lawmakers are rallying against health insurers that took the risk of participating in the new Obamacare marketplaces and want the government to hold up its end of the bargain.

You must understand the GOP’s long history of fighting the ACA to understand the party's position. Back in 2014, the House sued the Obama administration for paying the CSRs without congressional appropriation, partly because lawmakers wanted to make a point about their power of the purse but also because they wanted a legal way to telegraph displeasure with the health-care law.

In a similar vein, many Republicans in Congress adopted “bailout” messaging against the risk-corridor payments, trying to argue that the federal government was unlawfully propping up unsuccessful insurance companies.

But skeptics of that messaging argue the payments are no more a bailout for insurance companies than footing the bill for food at a restaurant — particularly in regard to the CSRs, which simply reimburse insurers for discounts the government mandates they provide.

“If you go to Burger King today and pay them for a Whopper, that’s a bailout by the same argument,” said Mike Adelberg, a former CMS official under Obama and now a principal at Faegre Baker Daniels consulting.

The Trump administration may have a stronger argument when it comes to risk-corridor payments by arguing the text of the ACA isn’t entirely clear on whether the program should be revenue neutral, thus discouraging insurers from relying on it. In 2016, a federal court ruled in favor of the government in the case brought by Land of Lincoln.

But if the courts ultimately allow the federal government to permanently halt payments, that could undermine insurers’ willingness to participate in the ACA marketplaces — and have a broader, chilling effect on the willingness of private industry to partner with the government. This may be Republicans' wish when it comes to the ACA but may just hurt their case when it comes to other policy priorities like the infrastucture push involving public-private partnerships.

“It’s remarkably shortsighted for Republicans to be playing games with the full faith and credit of the U.S.,” Bagley said.

HEALTH ON THE HILL

— At his Senate confirmation hearing yesterday, Alex Azar weathered Democrats' broadsides against his pharmaceutical industry ties and accusations that the nominee's recent history as a top executive of Eli Lilly renders him ill-equipped to lead the Department of Health and Human Services, The Washington Post's Amy Goldstein and Juliet Eilperin report. Azar agreed that prescription drugs cost too much — but wouldn't endorse broad government regulation to rein in prices, saying that allowing the government to directly negotiate prices with pharmaceutical manufactures for drugs covered by Medicare, for example, would not save money and could restrict access to some medication.

“The same Donald Trump who said almost exactly one year ago that price-hiking drug companies were ‘getting away with murder’ has nominated a drug company executive with a documented history of raising prescription drug prices to captain the administration’s health care team,” said the panel's top Democrat, Sen. Ron Wyden of Oregon.

Still, “the minority party’s efforts during the Senate Finance Committee hearing did not appear to halt [Azar's] path toward joining the president’s Cabinet,” Amy and Juliet write. “Republicans lauded superlatives on Azar and highlighted his senior roles in the Health and Human Service Department for a half-dozen years in the early 2000s. And during nearly 2 1/2 hours of questioning, the nominee delivered a polished, informed performance in the witness chair, assuring senators, who have at times felt slighted by administration officials, that he is eager to work with them."

Azar clung to Republican orthodoxy on several key issues, suggesting he favors converting Medicaid from an entitlement program open to anyone who is eligible into a system of block grants with more freedom for states to set the rules. Azar also didn't distance himself from the idea being pursued by HHS of requiring able-bodied adults to work or otherwise prepare for jobs to qualify for Medicaid. And he subtly endorsed a Trump executive order and a recent Labor Department proposal that would make it easier for individuals and small businesses to buy association health plans.

Azar cited drug prices as among four issues he would prioritize as HHS priorities if confirmed, Juliet and Amy report. Reiterating that “drug prices are too high,” he said he favors fostering different incentives for pharmaceutical companies in setting list prices, along with greater competition from generic drugs and biosimilars. But Azar also said “there is not one action that all of a sudden fixes this.”

Here are some responses to Azar's testimony from lawmakers and activists. From abortion-rights group NARAL:

From the Planned Parenthood Action Fund:

Sen. Chuck Grassley (R-Iowa):

Sen. Tammy Baldwin (D-Wis.):

Sen. Patty Murray (D-Wash.): 

AHH: Senate Democrats are seeking an extra $25 billion to combat the opioid epidemic to be included in any final spending agreement to keep the government open after next week, the Hill reports. Yesterday, Sens. Jeanne Shaheen and Maggie Hassan -- a pair of New Hampshire Democrats who are leading the push -- said they're pressuring congressional leaders to include more funding for the crisis because the federal response has been insufficient.

“Make no mistake: This is a national public health emergency, and we still don’t see a robust federal response,” Shaheen said. “The current federal budget negotiations give us an opportunity to right this wrong.”

Top Democrats urged extra opioid funding during the last round of budget negotiations in December but it was never included. Now lawmakers are trying to forge a spending agreement to keep the government open beyond Jan. 19, and questions around immigration are taking center stage at the moment. But Democrats say Republicans are overlooking the opioid epidemic when they should be making it a top priority.

“It’s important that as we budget for the defense of this nation, we don’t short shrift our domestic needs, particularly something of the magnitude of this opioid epidemic,” Shaheen said.

OOF: The Centers for Disease Control and Prevention denies reports that it banned the use of any words in official agency documents, as The Post reported several weeks ago. In a letter to Sen. Brian Schatz (D-Hawaii) last week, CDC director Brenda Fitzgerald wrote the agency “has not banned, prohibited, or forbidden employees from using any words,” per USA Today’s Jessica Estepa

“Recent media reports have mischaracterized staff discussions regarding the annual budget formulation process,the letter continued. “The CDC used a Congressional Justification guidance resource, which is an internal, technical document distributed to budget staff in each of the operating divisions to help those participating in the budget formulation process….Those are merely suggestions of what terms to use and what often overused words should be avoided.”

Our colleagues Lena H. Sun and Juliet Eilperin reported last month that the CDC had prohibited officials from using a list of seven word or phrases, including “fetus” and “transgender” in official budget-related documents. “Policy analysts at the Centers for Disease Control and Prevention in Atlanta were told of the list of forbidden words at a meeting Thursday with senior CDC officials who oversee the budget,” they wrote at the time. “The forbidden words are ‘vulnerable,’ ‘entitlement,’ ‘diversity,’ ‘transgender,’ ‘fetus,’ ‘evidence-based’ and ‘science-based.’”

In a statement responding to the CDC’s letter, Schatz signaled the agency's response didn't assuage Democrats' concerns.

“This is Orwellian anti-science partisanship that has no place in a government agency,” he said. “HHS and the CDC have an obligation to carry out the law and protect public health. They should not be engaging in partisan politics that undermine scientific progress and public faith in our government.”

OUCH: Three American Indian tribes in South Dakota have sued top opioid manufacturers and distributors, accusing them of concealing and minimizing the addiction risk in tribal communities that have been devastated by opioid abuse, The Post's Sari Horwitz reports.

Three tribes — Rosebud Sioux Tribe, Flandreau Santee Sioux Tribe and the Sisseton Wahpeton Oyate — sued 24 manufacturers and distributors, including Purdue Pharma, Teva Pharmaceuticals, Allergan PLC, McKesson Corp., Cardinal Health and AmerisourceBergen Corp., Sari reports. But the attorneys allege the opioid epidemic has wreaked havoc on all of South Dakota’s nine tribes.

"The complaint alleges the opioid industry failed to comply with federal prescription-drug laws intended to prevent the diversion of prescription opioids and prevent their abuse," Sari writes. "The lawsuit accuses the companies of violating federal Racketeer Influenced and Corrupt Organizations (RICO) laws, deceptive trade practices, and fraudulent and negligent conduct."

The national opioid epidemic has hit Indian reservations particularly hard, with Native Americans suffering the highest per capita rate of opioid overdoses. One in 10 American Indian youths age 12 or older used prescription opioids for nonmedical purposes in 2012 -- double the rate for white youths.

“The effect of opioids on South Dakota Tribes has been horrific,” Brendan Johnson, the former U.S. Attorney for South Dakota who filed the lawsuit, told Sari. “This epidemic has overwhelmed our public health and law enforcement services, drained resources for addiction therapy and sent the cost of caring for children of opioid-addicted parents skyrocketing.”

INDUSTRY RX

--The GOP tax overhaul Trump recently signed into law is getting two thumbs up from the health-care industry. Health-care executives gathered at the J.P. Morgan Healthcare Conference in San Francisco this week boasted about the billions in tax savings they are expecting.

Allergan CEO Brent Saunders predicted the lower tax rates will expedite the consolidation of big companies, Reuters reports. “I think the industry ultimately consolidates,” Saunders said in an interview at the conference. “I have a sense, though, in terms of a bigger wave of (mergers), it will either happen in the back half of 2018 or in 2019.” He said Allergan would focus first on cutting costs, and move toward smaller deals later in the year.

While the merger of pharmaceutical companies is relatively common, deals have been trending down in the last two years. In 2017, there was $52 billion worth of pharma and biotech deals, compared with $54 billion in 2016 and $212 billion in 2015. "Large-scale deals – like Merck’s $41.1-billion acquisition of Schering Plough in 2009, or Pfizer Inc’s $68-billion purchase of Wyeth – have dried up," Reuters writes.

Here’s how Express Scripts CEO Tim Wenworth talked about the expected tax savings: “We will not be sitting on that cash, I can promise you that.”

"Companies plan on using that money to pay down debt, buy back stock or acquire competitors — not to funnel higher wages back to workers," Axios’s Bob Herman writes.

-- A few more good reads from The Post and beyond:

TRUMP TEMPERATURE
Checkpoint
The federal government estimates that 20 veterans per day commit suicide.
Dan Lamothe
The president called on participants by name and addressed specifics in a seeming rebuke to his characterization in a new book as a man in decline.
Politico
CHART CHECKER
Wonkblog
Most of our drug laws were written a half-century ago. Things have changed a lot since then.
Christopher Ingraham
MEDICAL MISSIVES
Wonkblog
The U.S. is failing at a “basic moral responsibility of our society,” study finds
Christopher Ingraham
An ongoing shortage of fluids used to deliver medicine and treat dehydrated patients has hospital workers scrambling in the midst of a nasty flu season and supplies from factories in storm-ravaged Puerto Rico have been slow to rebound.
Associated Press
STATE SCAN
California Governor Jerry Brown will propose his final state budget on Wednesday, setting out a spending blueprint that last year topped $125 billion and marking the first time the state's coffers will be bolstered from sales taxes on marijuana.
Reuters
DAYBOOK

Today

  • The House Veterans’ Affairs Subcommittee on Economic Opportunity holds a hearing on "Home Loan Churning Practices and How Veteran Homebuyers are Being Affected.”

Coming Up

  • The National Academy of Sciences holds a workshop on "The Promise of Genome Editing Tools to Advance Environmental Health Research” on Wednesday and Thursday.
  • MedPAC holds a public meeting on Thursday and Friday.
  • The Bipartisan Policy Center holds a discussion on “Reinventing Rural Health Care: A Case Study of Seven Upper Midwest States” on Jan. 17.
  • The House Veterans’ Affairs Subcommittees on Health and on Economic Opportunity hold a joint hearing on addressing veteran homelessness on Jan. 18.
  • Kaiser Health News holds an event on what’s in store for health care in 2018 on Jan. 18. 
SUGAR RUSH

Psychiatrists are supposed to steer clear of diagnosing politicians. Here's why:

President Trump signed an executive order to explore ways to improve mental health support for veterans:

Here are some political beliefs Oprah Winfrey has expressed over the years:

The Daily Show's Trevor Noah questions the president's frustrations with Attorney General Jeff Sessions and the Justice Department: