Running CMS During COVID and Drug Pricing: In Conversation with Seema Verma

I recently had an interesting discussion with former Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma about her reflections on her time at CMS including running the agency during COVID, her take on the recent drug pricing legislation, and what in digital health has her most excited.

You can listen to our conversation on Spotify or Apple Podcasts.We also dug into Seema’s reflections on the current state of her price transparency and interoperability work, how she thought about managing CMMI and what’s next for her.

Check out a full transcript of our conversation below:

To kick things off, I'd love to start with a bit of background on you and how you made your way into the healthcare world and CMS.

I started out like many kids thinking that I wanted to go to medical school, and on the side I was involved with student government and got an introduction to government and policy. And I recognized early on that a lot of what goes on in healthcare is outside of the doctor's office and that there's more issues and topics at play that make a difference in people's lives. So kind of did a detour and instead finished up doing a degree in health policy and management and public health.

That story feels very common in our industry, starting out on the pre-med side and having an internship, job or experience that generates excitement around policy. Was there a moment or experience for you that crystallized that that's where you wanted to spend a lot of your time?

The neat thing about healthcare is that it's never boring. There's always so much to learn. There is not a single day that I am not learning about healthcare. And I started my career very early working on HIV and AIDS policy, and it's kind of interesting. It seems sort of niche, but actually it was a great microcosm of some of the bigger issues in healthcare. That's where I learned about the social determinants of health. That's kind of a hot topic now, but many, many years ago, some of those issues were still at the forefront. So started out there, worked on maternal and child health — big issue now with maternal mortality — same issues that we're still struggling with so many years later. But really, every place that I've been able to focus on and work, there's a whole set of issues, a whole set of topics, and it's like the gift that keeps on giving. I'm intellectually curious and I love learning, and I feel like healthcare constantly gives you that.

Switching over to the policy side. You did a ton while you were at CMS - what are you proudest of that you did there? 

Yeah, that's always the “asking me to pick my favorite child,” but I think our time at CMS was very unique. If I look at it and compare it to some of the other administrations, most administrations have a major piece of policy that they are implementing, whether it was Part D for the Bush administration, or for the Obama administration, it was obviously the Affordable Care Act. Now, the Biden team is going to be implementing some of the drug pricing. And for us, because we tried that and it didn't work, we really had the opportunity to look across the entire healthcare system and say, “What's working, what's not working,” and take a stab at addressing a whole host of issues. And from my perspective, it was hard to be there. My family was in Indianapolis, so I'm commuting back and forth, and I kept telling the team, "Look, we don't want to get distracted. When we leave, we want to be able to say, 'These are the things that we got done. These are the things that we accomplished.'"

There was a ton of stuff that we got done in that whole time that we were there. Every time I go through this exercise, somebody will say, "Well, what about this one? You forgot this one. You forgot that one." Some of the things I think that are going to have a major impact, that are already having that impact, or some of the regulations that we did around interoperability — typically the Office of the National Coordinator has that responsibility and they were implementing a lot of the changes in the Cures Act. What people don't realize is that CMS really didn't have a directive. We had no role in the Cures Act, but we went through looking at our authority and pushed through a lot of areas around interoperability.

So now when you get on a patient portal and you get your electronic health record and you can see what happened, that's a lot of the work that we did. And I think it ended up being a hammer to a lot of the work that ONC was doing. So I think that's going to have a tremendous impact. I don't think people were fully realizing it. It's going to take a few years, but I think that's going to have a big impact. Surprise billing, price transparency — there's a lot of discussion about drug pricing and insulin. I don't think people realize that we did $35 insulin three years ago, and I think that actually became the basis for a lot of the changes that actually got done with Congress.

We did work on what we called Patients Over Paperwork, which was reducing regulatory burden. Rural health — we paid the primary care doctors more. There was a multitude of issues, and I'm sure I'm forgetting some of the big ones, but those are the ones that stand out in my mind.

It's an interesting set of things and a lot to dig into. Just starting with the first one you mentioned on the interoperability side — where are we today in terms of the vision that you and the team had? 

We're not there yet. I think it's great that as patients, we have some better access to our medical records. I don't know about you, but now I have four patient portals on my phone, and I forgot the password, so I can't get into this one and that one.

Glad I'm not the only one.

Right. It's actually a little bit more chaotic, and it's not exactly what we'd envisioned. Our vision was that you would be able to have your entire healthcare record on your phone and you would be able to share it with whoever you wanted to.

What is the big barrier to that?

On the payer side, the mandate has been that you have to give claims data. There were some delays because of COVID and the administration, and I think the Biden team as well, wanted to give people a little bit more time given that. But those things are all going to now come into effect. They're starting to come into effect. I hope that people are leveraging those things. It's not just, "Okay, you put the claims data out there,” but who's going to be that innovator that pulls all of the data together, all the claims data, all the medical record data? I still think that there's a lot of territorial issues. People make money off of the data that they have, and if we make it easy for patients to have it and we start unleashing it, then your revenue model may go away. I think there's a little bit of that going on.

And I think there's privacy issues. I don't think that we have the authority to do it, but as a patient you can say, "I want my data and here's my password." But what’s more difficult is if it's your health plan or your doctor's office requesting that data, there's really no roles in place that say, “Yes, you have to share it with them, and how do we make sure that it is you asking for that data — that you have given that permission?” I think all of that's still pretty ambiguous and it hasn't really taken hold, so we have a long way to go.

I was really encouraged when I saw the presentation by Oracle Cerner and some of the vision that they laid out. That was consistent with where we want to go. I think this is one of the most important parts of our healthcare system and has the potential for great innovation if we can pull this off. It's not entirely clear to me where the barriers are, whether this is all an industry thing or there's still more regulations that need to happen. And at this point we're probably letting these new regulations play out, and my guess is there will probably need to be another round. 

That's interesting — the idea that there both will need to be some regulatory clarity around when and how this information gets shared when it's not directly the patient requesting. And also finding a way to work with people who benefit in the current system and incentivize them, or provider, a hammer, to get them to share data. Another area that you’ve got people to cooperate on in a pretty interesting way is on the price transparency side. I feel like for a while, people have been talking about that, but there's obviously interest to not share some of that data. I’ve been really impressed by how much of that data is being made available from the outside on the payer and system side. With price transparency, where are we today versus the vision you had when writing and implementing the policy? 

We had a lot of internal decisions to make, and the idea was, “We're going to go big on this.” And we were very lucky that the court supported us. This was about as far as we could go in terms of the amount of information that we wanted to have out there. You have a lot of health systems and most of them have cooperated. I know the media likes to say that they're not cooperating, but they are, and I think that's going to continue to evolve and develop. And my guess is the administration, at some point, is going to be going after those players that are not. And I think on the insurer's side, they had just recently had to comply with the requirement to post all of their negotiated prices. That being said, the patient pieces don't really come into play until January of next year, and I think that's going to be really exciting.

I think that's when we're all going to feel it. The reality is, most of us now are not going to go onto some website and go through complicated spreadsheets to try to figure out the price, but going forward, we're going to have that right at our fingertips where we can say, "I need this procedure," and your plan is going to be required to give you that information. I think that's very exciting. I'm hopeful that the industry and the innovators out there are taking that data. Some great companies out there — Turquoise, for example — they looked at the regulations, they see all the data that's out there, and they're trying to build a business model around all of this new information. I'm excited about the folks that are trying to figure out how this data can be useful.

I think it's going to be interesting in terms of negotiations, but the data is very complex. There's a lot of it so it's not that easy. You have so much of it, but somebody's got to translate it for you. There's still work to be done, but we've laid a foundation for price transparency and what's going to come of that. And what's going to come of that is hopefully a new era of consumerism for patients, and I think it's going to strengthen negotiations, whether it's payers or providers or employers. I’m excited to see where that's going to take us.

One thing I've heard you talk about before is this idea of the government setting policies and laying some of the groundwork and then companies and the private sector building businesses around that. I think the Turquoise example is a really good one of taking this price transparency data that's now available, but making that actually consumable and actionable at the end. Across all the many policies that you both implemented and were part of, are there any that you think, "I really wish there were more private sector companies focused on building in this space," or areas that you think are pretty ripe for more startups?

It's kind of interesting about how you think about the role of government. I think some people have the idea that government should be doing everything. Even now in these conversations about price transparency, I keep hearing people say, "Well, let's have the government aggregate all of these websites so that there's one place to go." And I always cringe at that. To me, it's, “No, we want the government to do as little as possible. We want the government to really reduce its role and only do what the government can do.” And the government is the one to be the regulator, to require certain things, to create that competition. But to me, it's always more exciting when you have companies that take advantage of that. That's what Turquoise is doing. It's going to be interesting looking at some of the changes in the drug law or in drug policy around Part D reforms.

I think Part D has been an extraordinary program and hats off to the creators of that. They did a fantastic job. But they've actually held premiums pretty low for many, many years, and now they're going to have an opportunity to have better negotiations with the redesign around some of the more expensive drugs. It'll be exciting to see how that happens. But I think those are examples. When the government gets it right, they're not doing things, they're creating a market so that innovators in the private industry can compete to bring better quality and lower prices.

It makes sense. You mentioned the recent drug pricing legislation. Obviously, I think there's a lot of things in there around negotiating prices, the out-of-pocket limits, limiting price increases from drug companies, the insulin caps. Curious about your reaction to that legislation.

I always start with the good, which is, the Part D redesign was something that's been talked about for a long time and it had support from both sides. If you look at the bill that Senator Grassley was trying to advance some very similar things there. In the beginning, when Part D was originally formed, there were a lot of questions, so we had the government taking more responsibility for those — that catastrophic phase. And I think that's actually contributed to some of the higher prices that we've had. Redesigning that to put more on the private health plans — I think that's a win. It's a win for patients to limit the out-of-pocket spend. I think that part was really good. I think it's important to say it is not a negotiation. It's a nice tagline, but the reality is, it's government price setting.

Now we're going into an era where we used to say, “We got Part D plans. We're just having the government come in and set your price for certain classes of drugs.” If we look at Medicare's historical role in price setting, where are we as a country? How has price setting worked? If we look at the growth in healthcare costs, it's always grown more than the GDP. So I'm not a big fan of government price setting, only because we've had history to tell us that hasn't actually worked well. And I think that the manufacturers — there are going to be all kinds of ways that they're going to figure out how to maneuver. In the short term, it'll really save us some money. In the long term, what I fear is that it's going to actually increase launch prices, because the way to deal with this is, if your launch price is really high, you're not worried about the inflationary rebates. I think there's some problems there.

There hasn’t been much in the media about the impact that it's going to have on physicians. I think that's going to be a significant impact, especially the providers that do a lot of Part B prescribing and physician administered drugs. We need to be looking at that because physician reimbursement — there's also a lot of problems with that right now. Then you couple this on top of it. I was disappointed that they didn't address Part B and how physicians are reimbursed. I think that was a big miss. It's almost like they've put a band-aid on it or they're treating symptoms, but they actually haven't gotten to some of the underlying problems that are driving prices up. Some of the PBMs — I think there's two ways to look at it.

In some ways they've done a great job in keeping the premiums low. On the other hand, they are doing very well; their margins are really high relative to the other parts of the industry and I think there are some reforms there. You can have biologics that come to market, but you know what? They can't make it on the formulary. So, I'm not sure that we've solved problems. We've put band-aids on problems. We haven't gotten to some of the underlying issues. And I'm very worried about, like I said, launch prices. I'm worried about innovation. I'm worried about small molecule drugs, so we'll see what happens. And like anything else in government policy, it'll continue to be tweaked along the way. 

If you had a magic wand and could have gotten any bill through Congress, what are some of the things you might have done on the Part B side or some of the other areas that you mentioned?

For Part B, the way we reimburse physicians, to me, is just flawed. We basically say it's ASP plus 6%. With the sequester, it's been a little bit lower. Whether doctors are doing this or not, there is an inherent incentive there to have a higher price because doctors are going to get paid more. We can figure out a different way to do it. Doesn't mean that we need to cut reimbursement to providers, which I think is going to happen under this bill, but I think that some of the proposals that we were looking at that we never launched, were around, "Let's just play a flat rate to physicians." And I don't want to see anyone get cut, so we may need to reimburse the total reimbursement, but at least we're removing the incentive.

I think there's a couple of areas that we need to accelerate. One, are the pieces on interoperability. I think that's going to offer the whole system a level of efficiency that we don't have today, and it'll reduce a lot of the issues that we have in coordination of care, and I think it'll make for a better patient experience.

The second area is value-based care. I think by now, we know. We've been at this for many years. The data shows us that when providers are at risk, you're getting better results. You're getting lower costs, you're getting better quality, better outcomes, and the incentives are in the right place. The other piece of that is that going to value-based care isn't just changing the financial incentives. It actually creates a paradigm where you're solving other issues. Let's take regulation and paperwork — we don't really need to drive somebody crazy with doing a bunch of prior authorization, utilization management.

If the provider is at risk, then you know what? They'll figure it out. Or things like telehealth — we're sitting here debating: “Should we do telehealth? Should we not do telehealth? If we do telehealth, do you have to have an in-person visit?” If the provider is at risk and they want to do telehealth then so be it. They're incentivized to deliver outcomes and whether it's telehealth or in-person, they will figure it out. Pushing value-based care at a national level and being more aggressive about it — to me, that's something that needs to get done.

What does being more aggressive on value-based care look like? We had Brad Smith on the podcast a few weeks ago, and he's been critical of some of these CMMI models in the past. What’s your assessment of CMMI to date?

For four years I got to work with Patrick Conway, Adam Boehler, and Brad Smith. I had all of them and I probably gave them different tasks and different assignments. Patrick was already on board when I came on board, but a lot of the models were already developed, and they were in flight, and I didn't feel like it was appropriate to pull the rug out from under most of those models. We kept them going because I wanted to at least make sure they're working great. If they're not working, we'll deal with it. We pulled a couple of them that I thought were sort of egregious, but for the most part, we let them run the cycle.

Then Adam Boehler came on board and said, "All right. Well, look. These other models are running. We don't really know what the results are going to look like, but we need to start launching our own models." My task to Adam was to put together the Trump administration models. You saw models on primary care, kidney care, direct contracting, and he did a great job. His focus was, “We're going to launch a new set of models.” Those models were intended to build off the lessons learned — previous issues that we've had in the past — and bring the best of breed together. Adam did a great job.

By the time Brad came — kind of the last year of the administration — by that time, people are coming in and I'm getting briefed on models and I hear the same thing: "This one's losing money, this one's not really achieving anything." And my head is spinning because there's 50 some models. And I'm like, "Okay, what's going on here?" When Brad came on board, there were two things that I wanted him to do: One, was I wanted him to land the planes. Adam had created a bunch of models and we needed to get those actually operational. The second piece was, "I want you to go back and do this comprehensive analysis and figure out what's going on with these models." Brad came back very quickly, looked at all the models and his analysis — which I think he published in the New England Journal of Medicine — and said, "Look, most of these models are not working. By and large, they're losing money, they're not actually improving quality. And we have four or five that have done well."

It's a new thing. These are models, so there were a lot of lessons learned across the board. One I think was, providers need to take risk. They do better when they're taking risks. I think easing folks into it — fine. You had to do that initially, but at some point if you want to do this, you're getting the advantage of having all these waivers, so take on the risk. We felt like with a lot of the models, people are just sitting there. They're appreciating all of the waivers that they're getting. In some cases, CMS was paying for the investment. And you can call it different things, but we were actually paying people to bring on care coordinators or whatever.

I think when CMS was making that additional investment, that also made a lot of the models not come out well. Then a lot of the areas with mandatory models… the reality is there was selection bias and people said, "Okay. Well, here's the target and guess what? My spending is already below that. I will sign up for this model and do absolutely nothing and I'm going to make money." We didn't have other people reduce their costs, so these models generally then came out as not saving any money for the federal government. I think going forward, value-based care — especially in the health system — somebody needs to take total risk. Whether it's a primary care practice, whether it's a hospital system — to me, that's where we need to go.

We're moving to an era of, “How much more time do we need?” That being said, there's a few areas where I feel like we need to develop this before we can go full-on with value-based care. I think we need to make sure there's some protection for providers. People are taking risk. That's incredibly scary, so there's got to be some sort of floor. We don't want to see people completely lose their shirts. Then the second area, CMS, I think needs to do a better job around benchmarking and the methodology, even in the direct contracting model. Even while I was there, there's just a lot of fluctuations. “Today we're doing this, this is what the benchmark is. Tomorrow we're doing that.” That type of ups and downs, from an industry perspective, is a big turnoff.

Who wants to get involved with something where you think you're going in and then they drop the prices, they drop the benchmark? We've got to figure out how to create a more stable environment and we've got to figure out how to make sure that the benchmarking is accurate. That may take us a few years, but at that point, I think some of the value-based care is going to need to be a requirement. I think we're getting to the point where these models shouldn't be optional anymore.

It's interesting because you've lived both the policy and political realities of a lot of this. Do you think it's realistic that we'll get some more teeth behind some of these models?

It's so nice to be on the outside and you don't have to think about the political reality, you can just talk about what needs to happen. I think politically, obviously that's going to be really hard. I don't see Congress doing anything big and sweeping, but if I had my magic wand, that's what I would do. That being said, it's likely very unrealistic, and I think there's a lot of questions about CMMI and the way that they have operated — stopping models, reforming models — a lot of questions about them. To the extent that they're doing more mandatory models, they're making more people mad and there's going to be more questions.

That being said, when we talk about what's important to our healthcare system, what's important to making it sustainable over the long term, these are the kinds of things that are going to help. We're getting to that tipping point. Unfortunately, because so many seniors passed away from COVID — it's a terrible thing — but that gave the trust fund a couple more years. This was projected to run out of money by 2026. Now you've got a couple more years. At some point, what are we going to do? Are we going to put more taxpayer money into it? That's certainly an option, but where's that money coming from? Are we going to continue to increase the deficits in this country or are we going to start having a better healthcare system that delivers better results and it's more efficient and it's lower cost? Value-based care is about that. Solving that problem.

Switching gears for a second. I'd love to briefly touch on COVID. I imagine it must have been a wild experience running CMS in the early days of COVID. You and your team made a series of fast decisions to make care more flexible. What was that like and how did that all work in those first few weeks of COVID?

The first few weeks were incredibly chaotic. Just like the rest of the country, as an agency, we went from being in-person and then going all virtual and literally our team had to... In a matter of days, we're going all virtual and at the same time, not only are we expected to do our jobs, but now it's very heightened. I can't say enough about the team at CMS. They performed at a level that was extraordinary. The amount of rulemaking, the amount of waivers that were done in a matter of weeks, and we continued to refine those over time. That type of work would take years for the agency to do.

It was an around-the-clock effort. I still remember getting out of the shower and the first conference call is starting, and you're getting dressed, and it literally was like, your first call is at 7:00, 8:00 in the morning and your last meeting is at 10:00 at night and you go to bed, and it was like, repeat every single day. There were no breaks, there were no weekends. Everything just kind of blurred together. But like I said, I'm proud of the agency.

The other part that I thought was sort of historic for CMS was that we really were listening to the industry. My requirement for the team was, “Get on the phone with the nursing homes, get on the phone with the hospitals.” We were constantly talking to them and they were saying, "This is what we need." We envisioned the MASH unit. I'm dating myself, but I remember watching MASH episodes as a kid and it was like, "Okay. This is what it's going to look like, and how do we make sure that we can allow them to do this?" Like you said, there were over 100 and some waivers, Hospital Without Walls, Hospital at Home, telehealth. All of these things were like… We're just stripping away regulations so that the industry can be free to just help people in this time of crisis.

There were a lot of interesting changes that were made: telehealth, provider licensing and a whole host of other things. As you look back on those changes, how do you think about evaluating which might make sense to keep long term and which might not?

Every time I made one of those decisions — and I made that decision fast. It was like, "Okay, waivers." We would go through the lists and everybody was on the phone. We had program integrity people, so these were quick decisions. It was like, “Speak now or forever hold your peace.” But it was like everybody in the agency was there. "Are we going to waive this?" There were a lot that gave me pause, that I hesitated on. What we decided to do, even at that point, was we were going to evaluate them right away. From the outset, the program integrity team was there. They were like, "Okay, you guys are getting rid of this. We're going to look for this in terms of fraud and abuse. But I don't know if the agency continued with this, so we're going to bring in a vendor to evaluate all of it.”

I think the evaluation is going to be critical and important to inform us about whether some of these regulations are really needed. I think there was one that we did. It's the three-day rule, where you have to be in the hospital for a few days before you can go to the nursing home. We waived that one and that's something the industry had been pushing us on for years and years and years so everybody was like, "Great, you got rid of this one." It'll be interesting to see what the data looks like because, by the time I left, we could see that some of the costs were increasing. Maybe that whole net held or it didn't, but I think it'll be important. Most regulations are in place to prevent fraud and abuse. They're around protecting the patient in some way or there's a cost issue. We now have a historic opportunity to evaluate these regulations and their importance or whether some of them need to go away permanently.

Where do you see the telehealth regulations headed?

Telehealth was something that we worked on from the outset. By the time COVID came around, it wasn't new to the agency. We were always trying to push telehealth and it's kind of that old adage: “Don't let a good crisis go to waste.” It was like, "Okay, here we go. We're really opening the doors on this and letting the genie out of the bottle." I don't think there's any going back now. Telehealth isn't going to replace in-person care, right? You're going to need to see the patient. You're going to need to see them with your own eyes, lay hands on them. But it does address some access issues. It's worked extraordinarily well in mental health. Across the system, some people will like it, some people won't. There'll be a place for it, but it's a tool in the toolbox. When we're struggling with providers and access and rural health and shortages, I think it's an incredible tool that we should try to leverage as much as possible.

In those early rapid decisions, what was one of the hardest to make? I imagine there were so many quick tradeoffs you had to make.

The hardest one for me was around the nursing homes and some of the visitation policies. It just killed me. I remember my next-door neighbor. Her house is right there, and I see her a lot when I'm getting the mail or the newspaper. Her mother is in a nursing home and she would always go visit her mom. "What are you doing today?" "I went to visit my mom." To say, "We can't have visitation." That was really tough and it was something that I struggled with from day one until the end.

In between we were trying to ease up the regulations and trying to figure out how it could work, but I think the people in the nursing home really suffered by not being able to have some of that interaction. And not just with their family and loved ones outside, but even inside the nursing homes, there were a lot of restrictions. They weren't able to do a lot of those group activities, so that's one that I think was particularly hard.

What's next for you?

I'm having a blast at this phase. When I was at CMS, I was very focused on doing the task at hand. When you're a regulator, it's important to have a little bit of distance from the industry so you can be clearheaded about making decisions. It's been a great opportunity to be on the other side of it, looking at the inner workings of all these different companies. I'm excited that I've been able to work with different types of companies. WellSky is focused on post-acute and interoperability and electronic medical records. Lumeris is a Medicare Advantage plan. They're working with health systems around value-based care.

There's Monogram that's doing kidney care. LifeStance — that's mental health. There’s all of these different types of providers, and it's helpful to see the challenges that they face and where government is helpful and where government gets in the way. I continue to evaluate options. This is still a transition time for me, but I've been consulting with a lot of companies and I'm having a great time just learning and seeing different stages from startups to Fortune 500 companies. I'm doing the whole gamut of it and it's been exciting, and I'm excited that there are so many innovators and companies out there that are really trying to move the ball forward and maybe in a better, faster way than government ever has and ever will.

Do you think you might return to the policy world at some point?

It's great being a spectator. It's nice to sit in the peanut gallery and say whatever you want to say. So yeah, I don't know. We'll see.

​