Layoffs, layoffs, layoffs

Lost lives; ruined careers; rising unemployment. The deliberate crippling of government health-related agencies will hammer the broader economy.

As the news about the Trump regime’s purge at every HHS agency poured in yesterday, it dawned on me that this could be the beginning of next great recession.

Beyond the massive cuts already underway, there is more to come in Medicaid and possibly even Medicare as the GOP advances legislation to extend corporate tax breaks. This will lead to a sharp reduction in household spending, which drives the economy. Health care represents 18% of that economy.

I have consistently advocated for reducing the medical industrial complex’s draw on national income. But this isn’t the way to do it. Cutting Medicaid and premium support for individual insurance plans will undermine public health, make America sicker and increase demand for ameliorative care, which will increasingly be provided free of charge as the ranks of the uninsured swell. That will force those still insured to pay higher rates, which in turn will exacerbate the decline in consumer spending as households prioritize basics like food, housing, heat and health care over discretionary spending.

This is in addition to the havoc raised by the president’s broad and irrational tariffs announced yesterday. Unless every economist except those working for Trump is wrong, this will drive prices for every imported good higher: from food and clothes to cars and computers.

The ostensible goal — bringing manufacturing jobs home — is a decades-long project. Those who honestly believe Hamiltonian-style protectionism can work in the 21st century understand that industrial policy must be 1) strategically targeted; and 2) accompanied by policies that promote the protected industries. That’s exactly what President Biden included in his Build Back Better program, partially enacted in the Inflation Control Act. The Trump regime is eliminating many of those provisions.

Is it safe? Will it be there?

The press did an admirable job over the past two days cataloging the effects of HHS Secretary Robert F. Kennedy, Jr.’s purge of 10,000 HHS workers (on top of the 10,000 who jumped ship during the earlier buyouts). Here are some of the more pernicious cuts:

• The Food and Drug Administration eliminated 170 staff from its inspections department. Most were support staff for the people who visit facilities in the U.S. and around the world to ensure there are no impurities in drugs and no bacteria in food. The backlog of uninspected facilities will grow as “front-line investigators will now be spending significant time processing their own travel and related administrative requirements,” rather than spending that time inspecting firms to ensure the American consumer is protected, one FDA official told CBS News.

The staff cuts at FDA included veterinarians monitoring the bird flu outbreak, which has led to egg shortages and emboldened producers to price gouge. The laid off scientists included vets who designed studies showing pasteurization killed viruses found in milk, according to the Washington Post. Drinking raw milk is among the many quackeries embraced by RFK Jr.

Image of laid off worker by Adobe Firefly

• The vaccine advisory panel at FDA lost the four staffers who run the meetings and monitor conflicts of interest, according to Bloomberg News. Meanwhile, Politico reports Sara Brenner, the FDA’s principal deputy commissioner, has asked for more data about the Novovax vaccine for Covid-19, the only non-mRNA vaccine on the market. Its approval was expected by April 1.

• The HHS layoffs announced Tuesday included more than half of the 150 staff at the Office of the Assistant Secretary for Planning and Evaluation, which evaluates policy alternatives for the HHS secretary. More than third of the 300 staffers at the Agency for Healthcare Research and Quality received pink slips this week, according to Stat. AHRQ conducts or supports most of the research aimed at improving patient safety at the nations hospitals, where drug-resistant infections remain a major threat.

• About two-thirds of the 1,200 people working at the National Institute for Occupational Safety and Health are being laid off, according to CBS News. They include the entire staff at the National Personal Protective Technology Laboratory, which is responsible for ensuring respirators and other personal protective equipment work properly.

This will effect not just hospital and medical personnel but mineworkers, construction workers and others routinely exposed to dangerous air, chemicals and other hazards at work. The layoffs will take effect on June 30, American Federation of Government Employees union representatives told Modern Healthcare. "Everybody in NPPTL is being RIF'ed," said Brendan Demich, chief steward of the AFGE Local 1916.

• It is unlikely the public will get many details about the effects of the personnel cuts. Most staff in the offices that respond to Freedom of Information Act requests at HHS have been put on administrative leave. Those offices at the CDC, NIH and the FDA were entirely eliminated. Journalists, lawyers and patient advocacy groups depend on FOIA requests to gain insight into internal deliberations and lobbyist interactions behind government decions.

An HHS spokesman told NPR that “the FOIA offices throughout the Department were previously siloed, and did not communicate with one another. Under Secretary Kennedy's vision for a more efficient HHS, these offices will be streamlined, and the work will continue.” Only there will be fewer people, longer delays and centralized control over what gets released.

A better way to cut spending

Here’s another news story that caught my eye this week. Employment at the nation’s largest health insurance companies dipped 4.6% in the fourth quarter of last year, according to a review of SEC filings by Modern Healthcare reporters. Even if one excludes UnitedHealth Group’s overseas divestitures, the seven largest insurers cut 1.4% of their workers at a time when total jobs in the economy grew by 1.2%.

Slower spending growth by both Medicare and Medicaid is shrinking insurer margins. Seniors opting for private Medicare Advantage plans, which now cover more than half of beneficiaries, is slowing dramatically, up just 3.1% to 34.4 million people this year, according to a STAT report in late February. Medicare pays MA plans about 22% more on average than those beneficiaries would cost if they had remained in the traditional program.

Why? Medicare pays insurers a risk-adjusted monthly premium to cover seniors who choose an MA plan. The “risk” is determined by how sick people are, which insurers can game by coding for illnesses they never treat. The Medicare Payment Advisory Commission estimates Medicare loses over $80 billion a year from insurer upcoding — and that’s after slapping an across-the-board 5.9% reduction in payments to insurers.

Increase that reduction to 20% — making MA reimbursement about equal to FFS Medicare — would save Medicare $1.0 trillion over the next decade. This could lead to higher cost sharing, higher premiums and fewer supplemental benefits for MA enrollees (so those plans looked more like traditional Medicare). Or MA insurers could take a profit haircut. But it would also eliminate any need to cut Medicaid to pay for tax breaks.

Here’s the popular slogan I offered last month: Don’t throw people off Medicaid to pay for your tax breaks for big corporations and the wealthy. Stop private insurers from ripping off Medicare.