Five Ways the Government Shutdown Will Affect Healthcare

January 23, 2019

While the government shutdown doesn’t directly affect HHS, the shutdown is having profound and long-lasting effects on the U.S. healthcare system.

While the government shut down does not directly affect the Department of Health and Human Services (HHS), so that the Medicare and Medicaid programs are funded, the shutdown is having profound and long-lasting effects on the U.S. healthcare system. 

Here are five ways the government shutdown will affect healthcare:

1. It affects marketplace enrollment and carrier rate setting. Approximately 50% of the IRS’s work force remains furloughed, according to Elizabeth Mann, health care partner at Mayer Brown, a global law firm. “The working staff is focused on processing tax returns and refunds,” Mann says. “Many are concerned, including leading members of the House and Senate, that the IRS does not have sufficient staff to verify taxpayer income statements that are necessary to determine individual and family advance premium tax credits (APTCs).”

APTCs determine federal premium subsidies and impact cost sharing obligations, according to Mann. “Without a timely ATPC determination, taxpayers could face an unplanned premium increase, which could readily cause a discontinuation in coverage,” she says.  

Similarly, the IRS issues reports and analytics to state regulators that are critical to the state’s rate setting process for marketplace carriers issuing qualified health plans. “These analytics are essential for the state regulators to assess carrier premium increase requests, which impact federal APTC obligations,” Mann says. “The rate setting process is time consuming, and without full IRS staffing, the regulators and carriers may be unable to determine 2020 premiums, resulting in serious marketplace disruption and potential carrier exits.” 

2. It impacts emotional health and well being. Stress, anxiety, and depression are no doubt growing not just among the 800,000 federal workers who are on furlough; but, also, among populations who are directly affected by the agencies that are shuttered, according to Dr. Michael Cantor, MD, chief medical officer, CareCentrix, Inc., a Stamford, Connecticut-based provider of value-based home care with home health management solutions and services that support improved outcomes and efficient care delivery.

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“As we’ve discussed recently, stress, anxiety, and depression are among the key factors affecting social determinants of health, and behavioral and mental health is quickly becoming one of the critical global health issues of our time,” Cantor says. “The emotional weight of this shutdown will no doubt manifest in clinical, social, and financial ways, the impact of which we may not fully realize for some time.”

3. It impacts the delay in determination of whether the ACA statue is legal. In December, a federal judge in Texas found the ACA to be unconstitutional as a result of recent legislation invalidating the individual mandate. “The court issued a nationwide injunction, but stayed the injunction pending appellate review,” Mann says. “Not surprisingly, this decision has created turmoil in the healthcare markets, given the ACA’s substantial impact on the finance and delivery of healthcare services. A number of states appealed this decision to the Fifth Circuit Court of Appeal. However, as a result of the government shutdown, the Department of Justice asked the Fifth Circuit to stay the appeal, pending funding of the DOJ. The Fifth Circuit granted the stay request, leaving the future of the ACA and the related market uncertainty, unabated.” 

4. It impacts the FDA’s ability to properly, effectively, and efficiently execute on its mission. The shutdown has forced the FDA to furlough a number of employees. “Standard FDA compliance and regulatory review activities have been substantially affected, from drug reviews and approvals to food safety activities,” Cantor says. “The National Law Review reported that FDA is not currently accepting new medical product applications that require fee payment, nor reviewing drug applications that are not user funded. FDA has also halted the 30-day waiting period before sponsors of investigational new drugs can proceed with clinical trials. There is a substantial ripple effect that FDA’s current status vis-à-vis the shutdown will have on the approval process for some time, even beyond any end to the shutdown itself.”

Mann agrees. “While most of the work stoppage concerns food inspections, there is significant impact on drug development,” she says. “The FDA’s drug reviews are funded by user fees under the 2018 Prescription Drug User Fee Act. While the FDA is continuing to carry out reviews funded by fiscal year 2018 fees, the FDA is not accepting FY 2019 user fees during the shutdown.  And, the FDA reports that its existing user funds will run out on February 8, 2019. According to the FDA, its 2,000 employees who review new drug and medical device applications will have to be furloughed. This will have an immediate impact on the approval of life-saving drugs. For example, new drugs with agency decision dates for February include drugs to treat cancer and multiple sclerosis.” 

Further, the FDA has suspended reviews of existing Investigational New Drug (IND) and Biologics License Application (BLA) applications not covered by user fees. The agency is also not reviewing applications for new drugs and biologics submitted during the shutdown period, except for emergency INDs and BLAs, according to Mann.

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“The FDA is also not reviewing medical device applications submitted during the lapse period,” she says. “It is not able to accept abbreviated new drug applications for generic drugs as well as 351(k) applications for biosimilars. Finally, the FDA is curtailing work on regulatory guidance documents pertaining to medical devices, drugs, and biologics.”

5. Health organizations are hurt in more subtle waysAlliance for Better Health, for example, has created an Independent Provider Association (IPA) to serve the needs of the underserved in its community, according to CEO Jacob Reider, MD. “While we have full approval from New York State and have created a legal entity, we can’t open a bank account because the IRS website isn’t functional: it won’t give us a tax ID number,” he says. “No tax ID number, no bank account. For some reason, the insurance companies don’t want to transact our contracts with bitcoin!”