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- [00:00]
Joe Matthew
These days, AI can help you adopt.
- [00:02]
Tyler Kendall
Better time management, but it can't stop.
- [00:04]
Joe Matthew
Colleagues booking meetings during lunch. But how about being able to easily adopt industrial AI to streamline your business? Siemens Xcelerator helps you find the right.
- [00:14]
Tyler Kendall
AI providers and easily understand what they.
- [00:17]
Joe Matthew
Offer so you can use modular solutions to quickly scale up and grow your business. That's AI for real. From the global market leader in industrial AI, Siemens. Learn more on USA.siemens.com AI.
- [00:33]
Bloomberg Announcer
Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:55]
Joe Matthew
Thank you for being with us on Bloomb TV and radio. Connecting the dots between Washington and Wall street frequently. Our job today and there's been a lot of news specifically coming out of the White House that has investors attention. We're going to start talking in a moment with Mike Shepard about a potential tick tock deal. But it's in fact the corporate reporting structure Creedy that has people's attention today. Donald Trump on Truth Social suggesting that companies should only have to report twice a year instead of four.
- [01:25]
Joe Creedy
I mean this truly is a blast from the past. I think. I was listening to you in your last hour. This is a law 1934 where tariffs were very much in the picture except going in the opposite direction. So I'm curious what prompted this latest move?
- [01:38]
Joe Matthew
The idea of course, transparency. Investors want to have as much information as as they can. But of course in other cases companies might have a different feel for that. But yes, it goes back to a law 1934 and it's something that Donald Trump already suggested doing in 2018. The SEC began a review on this that brought us to this point now. And Tyler Kendall is watching this for us live from the North Lawn of the White House with the latest on everything coming out of the administration today. Tyler, what do we know?
- [02:06]
Tyler Kendall
Yeah, hey Joe. Well you hit it. Really the big headline today coming from this post earlier this morning amid a slew of posts on Truth Social. But the one that caught our attention is President Trump saying that companies shouldn't be forced to deliver these earning reports on a quarterly basis, saying he prefers a six month schedule. Now this proposal from the President isn't necessarily new. He did float it during his first term in 2018. At the time there actually was a public comment period put forth by the sec and our analysts point out that market participants actually said that they prefer the status quo. And ultimately any potential change didn't come to fruition. Our analysts at Bloomberg Intelligence, including our very own Nathan Dean, say that this does have a likelihood, though, and potentially could hit the books by 2027. Just looking at past views from the SEC chair, Paul Atkins, this does appear to be something that they could be open to, but any change wouldn't be immediate. And they're sort of two ways that they could go about this. One would it could require Congress. But the other and probably more logistically feasible option would be that the SEC would have to approve this. They currently, Republicans currently hold a 3 to 1 majority there. But this isn't something that President Trump could do unilaterally. But I will point out one really important part of this post from President Trump. And I know you're going to dive into all the developments today later this hour, but President Trump tied this to our competition with China. And I think perhaps there could be a little bit of a timeline question here. Of course, President Trump's post coming as those negotiators are in Madrid and it's clearly been on the president's mind. Joe and Creedy, of course, another big headline today from those Truth Social posts. President Trump announcing that he's going to own a phone call with Chinese President Xi Jinping on Friday.
- [03:47]
Joe Matthew
Great to know, Tyler. Thank you so much. Bloomberg's Tyler Kendall, our Washington correspondent at the White House, where we're just starting to see some leaves start to fall. I'm Joe Matthew alongside Kriti Gupta in Washington. Keeping China in mind. We've seen a lot of headlines about TikTok. The president himself taking to Truth Social to talk about what could be the framework for a deal here, one that he was just talking about a short time ago, but it was the treasury secretary who actually hammered out this framework. He's overseas for talks. Let's listen to what Scott Bessen said this morning. We have a framework for a TikTok deal. The two leaders, President Trump and party chair she will speak on Friday to complete the deal. But we do have a framework for a deal with TikTok. Of course, the framework is not a deal. And we try to figure out where we should, how we should define this and how we should frame this with the help of Michael Shepherd. He's with us in Washington as well. Bloomberg senior editor for technology and Strategic Industries. Shep, what do we make of this? That's something we haven't talked about in a while. How would this be valued? And presumably the Chinese government would approve of this?
- [05:00]
Mike Shepard
Well, they would have to approve the technology that ByteDance has developed and owned. That is the algorithm software that drives the recommendations to users that have made the app so appealing and so valuable. That's considered critical technology. And leadership in Beijing would have to sign off on any such deal. And ByteDance is also viewed as one of the national champions of China's tech economy. And so therefore any big transaction involving that company and that sensitive technology would need to be blessed at a pretty senior level. And it is clearly going all the way up to Xi Jinping with the final details on this framework to be ironed out by the two leaders on Friday.
- [05:45]
Joe Creedy
Let's talk about one of the national champions right here stateside, and that's in video because on the one hand we're getting this olive branch it feels like, or perhaps progress on the relationship between the United States and China. On the other hand, an antitrust probe on Nvidia. What do we make of that?
- [05:59]
Mike Shepard
Well, that is a big to be sure in this broader conversation about trade and the relationship between the US And China that on the one hand, while President Donald Trump is getting his wish for an agreement that would allow TikTok to continue operating within the US and comply with the 2024 law that required to ByteDance to divest itself of those US operations. On the other hand, we also have this Ant Trust probe of Nvidia. It's unclear what the consequences of that will be. China has not spelled out what the penalties could be for Nvidia, what it means in terms of Nvidia's ambitions to start selling I guess a China specific model of its advanced Blackwell AI chip. Remember the US had paused sales of the H20 from Nvidia. This is the chip that was tailor made to complain comply with previous US Restrictions on the sales of AI chips to China that have been paused by Trump. It more recently was allowed to resume and yet now China has also expressed concerns about that accelerator and whether it could be sold in the market. So there is a lot of uncertainty surrounding Nvidia's re entry into sales of its AI products in the China market right now. And that is going to be another, another factor in the talks between Xi and the president on Friday.
- [07:26]
Joe Matthew
You tend to think investors have high hopes for that meeting right now. And video is down 49 cents. It's been down fractionally all day. You'd think maybe that might have a slightly more meaningful move. We saw bigger losses in the pre market. Mike Shepard, thank you so much. Shep. As always. For the update here as we seek insights from Henrietta Levin, the senior fellow with the Freeman Chair in China Studies at the center for Strategic and International Studies. CSIS is with us right now on Bloomberg TV and Radio. Henrietta, thanks for joining us. As we look back at Donald Trump's post on Truth Social about China, he says the big trade meeting in Europe between the US And China has gone very well. He talks about the TikTok deal in here without actually mentioning the company, says a company young people in our country will very much want to save. And he says the relationship between the US And China remains a very strong one. Is that how you see it?
- [08:22]
Henrietta Levin
I may see a little more, let's say, dynamism in the US China relationship over strength, but thank you so much for having me. I think it is interesting, I mean, even when we think about how Secretary Bessant described exactly those trade talks, he seemed to say they didn't talk much about trade, that this was mostly about this TikTok framework deal. And even, even that alone speaks to, I think, some of the significant obstacles that stand in the way of a more stable US China relationship.
- [08:55]
Joe Creedy
Henrietta Xin y a Chinese newspaper had put out the idea that part of those trade negotiations was bringing down barriers of investment to Chinese investors. Is the United States ready for more Chinese investment when it's been such a sticking point up till now?
- [09:11]
Henrietta Levin
Well, President Trump has expressed strong opposition and support for Chinese investment in the United States, at some times seeming to encourage Chinese investment and at other times describing it as a national security risk. And so I think that's part of why we're all watching so closely what this call between President Xi and President Trump that Secretary Besant promised on Friday. If it happens, the Chinese have not confirmed it, but if it happens, that will be a very significant moment in the relationship because clearly Trump's mood, his perspective on his personal relationship with Xi, can make a big difference in which direction he chooses to go. Among these somewhat conflicting China strategies that he seems to be pursuing sometimes at the same time.
- [10:00]
Joe Matthew
Well, I'm confused, Henrietta, because there was another truth post from just two days ago in which the president of the United States called on European nations to speak stop buying oil from Russia. He says he's going to hold off on secondary sanctions until then. And in that same post, he says, I believe this/naito as a group placing 50 to 100% tariffs on China to be fully withdrawn after the war with Russia and Ukraine is ended, will also be a great help in ending this deadly but ridiculous War. He goes on to say China has strong control, even grip, over Russia, and these powerful tariffs will break that grip. Which side of his mouth is he talking out of here when he prepares to talk with President Xi on Friday? You can't have both, can you?
- [10:48]
Henrietta Levin
It's a very difficult needle to thread. It is good to hear President Trump raising concerns about China's decisive role in Russia's ability to continue fighting the war in Ukraine. China's systematic support for, for Russia in terms of financial support, evading US Sanctions, economic support, its support for the Russian military as well. I mean, this is what Putin needs to continue replenishing his forces when he takes battlefield losses. And so it's an important issue. It's hard to know whether President Trump is making a serious push in the G7 on this. I tend to think if he was serious, he'd be talking about financial sanctions, especially on Chinese banks measures. The Europeans have already started to move ahead with those banks that are responsible for actually processing the transactions that allow Chinese goods to get to the Russian military. I think that would be a really important step. I worry that this talk about tariffs may not be serious. It may be intended more as short term leverage in Trump's effort to get a better deal with China. On unrelated issues, we've seen the US Is unable to sustain, sustain very high levels of tariffs on China, in part because China has so effectively retaliated with the choke points on rare earth exports. And so it's difficult to see how this would play out differently now that we're having the conversation in a G7 context.
- [12:17]
Joe Creedy
Henrietta, I love that you hit that because it feels like one of the big narratives as well, swirling around is that China has been preparing for this reality for months, years, if not decades of kind of weaning themselves off economically of the American consumer. Ultimately, is China in a position where they can digest and continue to operate with 100% tariffs placed on them by President Trump?
- [12:42]
Henrietta Levin
I think that China is making the bet they may be right, that they can last longer if, if Trump moves ahead with 100% tariffs, China retaliates with its own equal tariff rate as well as we have to assume another round of restrictions on the export of rare earth magnets, earth materials. China thinks that they will. They will hurt, they will take economic losses, but they'll take less than the US and they think that politically they can absorb those losses longer and better than America can. And so they feel like they have the upper hand in any of these conversations around tariffs.
- [13:18]
Joe Matthew
Assuming this meeting takes place on Friday. How low should our expectations be?
- [13:24]
Henrietta Levin
Always low. But. But it's still important. Whenever the leader of the United States and China speak, that's an important moment in the relationship, especially now that President Trump has taken such a personalized approach to US China relations. And of course, President Xi, for his part, has assumed an unprecedented degree of power within the Chinese political system. So it's important that they talk. Looking at, it'll also be interesting to see how they both describe what was discussed. We remember the last time Trump and Xi spoke, the readouts from the two sides looked like they were referring to totally different conversations. And so that said to me that even though, you know, it's good that they're talking, if they don't agree what they're talking about, that itself can become a point of tension down the line in the relationship.
- [14:14]
Joe Matthew
Really great to have you with us. Henrietta Levin, Senior Fellow, Freeman Chair in China Studies at CSIS don't be a stranger. We appreciate your view. I'm Joe Matthew alongside Kriti Gupta in Washington as we unpack the weekend and a very busy morning for the President on social media. Much more to follow with our political panel. Stay with us on Balance of Power. We'll have much more coming up after this.
- [14:41]
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- [15:19]
Bloomberg Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [15:35]
Joe Matthew
We keep our attention focused on the great city of New York, where Charlie Pellet is and we'll get back to Charlie around one o'.
- [15:41]
Paul Markovich
Clock.
- [15:41]
Joe Matthew
Top of the hour here for another update on Wall Street. New York politics have captivated Washington. The President talks about it just about every day, the mayoral race specifically referencing the communist, as he likes to say, who could become the next mayor of New York. That's why Donald Trump has become personally involved in the race, according to reports urging a couple of candidates, including the Republican Curtis Sliwa, to drop out so Andrew Cuomo can have a better chance. And polling data would suggest that he's right would have a better chance than a one on one against Zoran Mamdani. That job may have just become more difficult with two pretty important endorsements. Of course, Mamdani is a Democratic socialist, not a communist, and he could be a little more mainstream by the end of the day here when everybody hears about this, the governor of New York has jumped off the fence. Yes. Kathy Hochul endorsing Mr. Mamdani for mayor of New York City. Following months of questioning on this and op ed, here it is right in front of me here in the New York Times, a guest essay, I should call it. Kathy Hochul, why I am Endorsing Zoran Mamdani. In the past few months, she says, I've had frank conversations with him. We've had our disagreements, but in our conversations I've heard a leader who shares my commitment to a New York where children can grow up safe in their neighborhoods and where opportunity is within reach for every family. I heard a leader, she says, who is focused on making New York City affordable, a goal I enthusiastically support. This piece of writing. This important endorsement follows some pretty tough talk and an endorsement as well from Senator Chris Van Hollen, the Democrat from Maryland. You've heard from him on this program before speaking at a Democratic fundraiser in Iowa on Saturday night. Let's listen to Mr. Van Hollen. It means supporting our Democratic nominee in.
- [17:44]
Paul Markovich
New York City's mayoral race, Zoran Mandami. He is focused on ensuring that people can afford to live in the place that they work.
- [17:57]
Joe Matthew
Donald Trump and New York's financial elites.
- [18:00]
Paul Markovich
See that as a threat. Yet many Democratic members of the Senate and House representing New York have stayed on the sidelines.
- [18:10]
Joe Matthew
That kind of spineless politics is what people are sick of.
- [18:15]
Paul Markovich
They need to get behind him and.
- [18:16]
Joe Matthew
Get behind him now. Spineless politics. Did he talk to Hakeem Jeffries before that speech? Maybe got a phone call from him after. He says the Democratic Party is not going to fix itself and to shape its future need to start winning races like this one. That's where we start with our political panel. Jeannie Shanzano is with us. I'm sure Jeannie has thoughts. Bloomberg Politics Contributor Our Democratic analyst and Democracy visiting fellow at Harvard Kennedy School, Ash Center. Maura Gillespie is with us, too. Republican strategist, founder of Bluestack Strategies, and a veteran of John Boehner's Speaker's office. Great to see you both here. Jeannie, is is Chris Van Hollen right. Forget the Democratic Party isn't going to fix itself. Is this spineless politics, People waiting around on Mamdani?
- [19:09]
Jeannie Shanzano
Yeah, and you saw Jeffries hit him back by saying New Yorkers are asking Chris Van who, which is probably not fair either. All the while Donald Trump calling Mandani little communist. Which Joe, I was going to ask you about because it's not little. It's little with two Ds. And it confused me enormously as I'm not a great interpreter of his truth post. But you know, there is a huge divide obviously in the Democratic Party. This huge primary win by Zorhan Mandani in New York has really exacerbated that. This is all happening. While we've got Joe Manchin and Kamala Harris out with two books, we've got the progressives meeting in Annapolis. The Democrats are trying to figure out who they are going to be be going forward into this midterm. And Chris Van Hollen is out in Iowa. I think he thinks maybe the caucus will happen again out there because he has been very clear that he has, you know, a, maybe an interest in pursuing higher office or certainly having a role in that. And he is staking his claim as, you know, a traditional moderate on the fact that Democrats need to wake up and recognize that all of the energy in the Democratic Party right now is on the progressive side. And of course, Kathy Hochul has woken up to that as well. You know, coming in at this last moment, not particular explaining why she waited so long, but saying, you know what, this guy is going to win. You know, just like Donald Trump. These folks can read the polls and the polls say if this is a four man race going forward, Mamdani is going to sweep it. I mean, he even won Jeffrey's district by like 12 points. So they can read the tea leave. They know that they should push forward on this. At this point, I think the question is, does it really make it difficult now for Jeffrey Schumer and other leading New Yorkers on the Democratic side who have not endorsed, to Van Hollen's point.
- [21:03]
Joe Matthew
Donald Trump on truth social. To Jeanne's point, Governor Kathy Hochul of New York has endorsed the little communist LI ddle apostrophe. I didn't get the apostrophe. Zoran Mamdani running for mayor of New York. This is a rather shocking development, he says, and a very bad one for New York City. How can such a thing happen? Washington will be watching this situation very closely. No reason to be sending good money after bad, I guess. Implying that federal funding for New York City or for the state might be at risk. Maura, how are you reading this? Because Donald Trump I still have a hard time thinking that Donald Trump wouldn't love Zorhan Mamdani to be the mayor of New York. It would be a guaranteed foil for the rest of his term.
- [21:52]
Maura Gillespie
It's a little surprising, given the fact that I equate what's happening in the Democratic Party under this Zoran Mandami to be what happened to the Republicans when Donald Trump entered the race, when he decided to enter Republican politics. Right. I mean, it's a real shakeup, and it's a decision for members to take a look and say, do I want to align myself with the unknown of Mondami and with questionable things that he has said and done and things that, you know, he hasn't really defended very well, but do I see that as my political future? Kathy Hochul certainly does. Chris Van Hollen certainly does, and they've decided to double down with him. Kathy Hochul is looking at her own reelection, and even though just a matter of weeks ago, maybe even less, she said that it didn't really, you know, when asked about giving an endorsement, she says, well, it doesn't, you know, I represent all of New York. You know, I'm not even voting in that one, referring to the mayoral race in New York City. So she brushed it off. Pretty saying pretty. You know, clearly brushed it off. But now here she is with this piece coming out because she realizes it's tied to her own reelection, especially if Adams is out and Trump puts his ammo behind Cuomo. So it's just very telling to me about how Democrats decide to either take the case of what happened with Republicans under Trump, you know, as a cost shary tail, or if they're going to if they're going to dive in and double down with him.
- [23:08]
Joe Matthew
What are you thinking about this? JEANNIE that's really interesting. Maura, and not the comparison I would have expected today. You pointed out the statement from Hakeem Jeffries spokesman Justin Termal. Leader Jeffries will have more to say, he says, about the general election well in advance of November 4th. Meanwhile, confused new Yorkers are asking themselves this question. CHRIS VAN who is is this an inflection point for the Democratic Party? JEANNIE the way Maura is describing it.
- [23:41]
Jeannie Shanzano
Yeah, ouch, that was tough. You know, I think she's I agree with Maura. I would go back even further at the national level and say it's a bit like the choice Democrats had between Hillary Clinton and Barack Obama when the establishment was much more behind Hillary Clinton in oh, and Barack Obama seemed to come out of nowhere to many people and had a lot of energy. And whether you like Mamdani or not, he is a fabulous communicator. He's young, he's energetic. He really has his finger on the pulse, to Morrow's point, of what particularly new progressive New Yorkers and progressive Democrats, I should say, around the country feel. And he communicates in a way that, you know, Andrew Cuomo doesn't and never would. And so, you know, there's a lot of reasons, I think, Donald Trump, not to mention the fact he has a long relationship with Cuomo, but he really may be looking at Mamdani as something of a threat in a different way. You know, I'm not sure this is going to be the be all or end all of the Democratic Party where they choose who they line up with. But, of course, this is the largest city in the country by far. It is a hugely, I think, one of the best cities in the country. And I'm, of course, biased. And we always watch this election to see what it portends for going forward in the midterm and the national cycle. And Democrats have to figure out how they are going to confront this very aggressive Republican Party. And after what's happened with Charlie Kirk, I think this is coming to be even more important. And, and you know, I'm not saying Hochul's endorsement was tied to the Kirk issue, but so many Democrats are asking now, where do we go from here? And I think people do feel like they have to choose a direction, and Mamdani is offering a new direction, and that's very attractive to people focused primarily, by the way, on economic issues, which is a huge concern.
- [25:45]
Joe Matthew
Maura, you worked for a speaker of the House at a very different time, and of course, a different, different party. You worked for Republican Speaker John Boehner. But what do you make of this reaction from the man who wants to be speaker, Hakeem Jeffries, being called out by a senator like this? Is this par for the course? You know, you kind of thumb your nose at somebody from the upper chamber, or should should Jeffries reconsider the state of the national Democratic Party here? And be careful with his words.
- [26:15]
Maura Gillespie
I think it's a little poor form. You know, I think I would hope that Chris Van Hollen would have had a conversation with Hakeem Jeffries, but. But it doesn't seem as though that happened. I think that obviously, with my experience with working for John Boehner, the best approach is to handle things in house and to deal with it internally. With the Godfather rule, you keep it in the family. And so I always think that's a better policy to go by because it just makes everyone look bad and look disorganized and then creates a story that doesn't need to be a story. And so I think Donald Trump's going to just pounce on that. And I think for Hakeem Jeffries, he's trying to be the leader. He's also hoping to turn the 26 midterms into a gavel for himself. And so when you do that, you're, you're a leader of the whole institution. You're not just the leader of the party. And I think he's taking that role and trying to rise above the fray of different things. And Chris Van Hollen is looking to run and galvanize more support and name recognition before a 28 run.
- [27:17]
Joe Matthew
Just a minute left, Jeannie. How about the Godfather rule? Would it behoove Hakeem Jeffries to pour a glass of wine, maybe not the cigarette and sit down with Mamdani?
- [27:27]
Jeannie Shanzano
Yeah, yeah, I like that. The Godfather role. Yeah. I think he absolutely should. I would be surprised if he hasn't already. The reality is, you know, he has to try to win the House for the Democrats. That means big fundraisers need to contribute to the Democratic Party. So his base is very different from Downey's. But they have a lot in common that they agree on and particularly beating Donald Trump. And so I do think they should, I don't know, have a beer together or what do godfathers drink, Joe? I have no idea. You'd know better.
- [27:57]
Joe Matthew
But I think it's, well, I think it's would go a long way here. Really interesting conversation with Jeannie Shan Zaino and Maura Gillespie. We thank you both for a great panel. Bloomberg Politics contributor Jeannie Shanzano Mora Gillespie, be at bluestack Strategies. We thank you as always for the insights. We'll have another panel for you tomorrow. Stay with us On Balance of Power. We'll have much more coming up after this.
- [28:22]
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- [28:58]
Bloomberg Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple Car Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.
- [29:17]
Joe Matthew
Joe Matthew alongside Kriti Gupta, who's in for Kailey Leinz today in Washington. Kristie, we've spent a lot of time talking about health care coming out of the debate surrounding the president's big beautiful bill, the debate around even how to frame changes to Medicare that some call cuts and others call efficiencies. And we've got another big moment coming up here at the end of the year with the expiration of Obamacare or Affordable Care act subsidies expiring that could in fact, provide a path I know I'm reaching a little bit further here, but a path to a deal and I that to fund the government. We've asked a lot of lawmakers about this over the past couple of weeks and we wake up this morning and read the tip sheets and people seem to think that we're going to have a shutdown. But if there is some common ground found following the rescissions and all the rest of the things that might in fact be the subsidies for Obamacare.
- [30:10]
Joe Creedy
Yeah, the extensions there. But is it enough to have an extension beyond even just the winter, that which is what we're eyeing here, sprinkled on top of all of that, is just where we get our health care guidance from.
- [30:20]
Joe Matthew
Well, that's for sure. And recalling the testimony from RFK Jr recently, that was a big part of the conversation here in Washington, which is why it's a pleasure to introduce you to Paul Markovich. It's a conversation that we've been looking forward to here on balance of power. He's the chief executive officer, president of Ascendian, which just announced the its formation as the parent company for Blue Shield of California. Paul, it's great to see you in our studio. Thank you for coming in.
- [30:45]
Paul Markovich
Joe Creedy, thanks so much for having me.
- [30:47]
Joe Matthew
Well, there's a lot that we could talk about here and I'd like to just start broadly with your your parent company here now aiming to cut bureaucracy and cover more people. Is that in line with the goals of this Department of Health and Human Services?
- [31:03]
Paul Markovich
I think that it is. I mean, I think what what I see from this group, I give them high marks for urgency and ambition, particularly with when it comes to technology, we're seeing a lot of initiatives coming out of that agency trying to drive the adoption of technology. And I think with that has the opportunity to reduce a lot of the administrative bureaucracy and burdens that we face day to day and to help us save some money.
- [31:29]
Joe Creedy
In the last, I want to say, month or so, we heard about the formation of the West coast alliance, several states that are talking about providing health care policy as a, as a alternative to what we're hearing out of Health and Human Services Services here in Washington. Is that where you're deriving your health care policy from?
- [31:47]
Paul Markovich
Well, when it comes to things like vaccines, which is what they're focused on right now, Blue Shield of nonprofit Blue Shield of California is going to follow state law. And state law right now is really clear that there's a whole series of vaccines that are covered and that will include Covid when the governor signs a bill that just passed the legislature on that front. So I think irrespective of that coalition, California has been pretty clear, at least when it comes to vaccines, on what health plans need to cover and don't. And we will do and we will always follow the law, both federal and state law. It'll be interesting to see how this coalition evolves and the other kinds of issues that may come up along the way. It's a little hard to predict, but right now it's really focused on vaccines.
- [32:29]
Joe Matthew
I mentioned the expiration of Obamacare subsidies, your largest business business, Blue Shield of California, as we mentioned, sign on with a group, keep Americans covered. And you were out with a letter, in fact, in August warning of the health care cliff, as some are now calling it, if Affordable Care act credits are not extended. Where's your head on this right now? The debate is underway as we speak. Do you think they will be what would happen if they were not? Well, I would love to have a.
- [32:57]
Paul Markovich
Crystal ball and be able to predict what's going to happen. I think I don't know what's going to happen. I think there's enough. There's a really intense dialogue, I think, going on on both sides of that question from our vantage point, like we're a nonprofit, mission driven organization, we would like to see everyone covered. We talk about creating a healthcare system that's worthy of our family and friends and sustainably affordable for everyone. And so anytime I think you're reducing the amount of subsidies that anyone receives to help pay for health care, particularly those of lower income, you're going to end up losing people from coverage if you do. And there's just no getting around that equation. The problem right now is health care is just too damn expensive. I mean, it costs so much money that the average American simply cannot afford the average premium without a subsidy. And we need to address that. I mean, let's just be clear, like, we can't keep going the way that we're going to. And so I think for those that are concerned about subsidies, I understand the argument, which is to say that we really are bankrupting this country with the way health care costs have been, where they are now, and where they're growing. So we do need to address that. But I don't think the way to address that is to, is to take people off the rolls. I think the way to address that is to get to some of the administrative efficiencies and improvements in care that will help make it more affordable over time.
- [34:20]
Joe Creedy
Can you get to that end goal without doing the intermediate step of not extending some of that coverage? Is it possible to find the kind of best case scenario and the cheaper health care alternative without pulling back on some of those costs first?
- [34:36]
Paul Markovich
Well, I think, look, health care's got a productivity problem. We just keep throwing more resources into it and we're not getting a better product out of it. Like, at the macro level level, there's some brilliant things that happen on the ground with any particular patient at any particular time. But when you look at the Macro, the last 20 years, wages have gone up about 3% a year. Healthcare costs have averaged 6 to 8% a year. That's just not something you can continue forever. And so, and a lot of it has to do with we just keep throwing more resources at things. And like, we still use fax machines. Like when you go get your MRI or test, they'll hand you a CD rom. I mean, there's a reason this administration has a kill the clipboard initiative, because we're still using clipboards to fill out information. How many times when you go to the hospital, as I do with my son who was in the emergency room a few months ago with appendicitis, get asked the same question six or seven times. And so a lot of this is just, it's not necessarily even about the clinical care. We're massively inefficient from an administrative standpoint. And there's no reason, Creedy, to your, your question, that we can't pass a law that says every American ought to have access to a comprehensive real time digital health record on their phone or their Favorite tablet. They do it in every other aspect of their life. That can lead to huge efficiencies administratively, not to mention a way better experience for the average American.
- [35:59]
Joe Matthew
Interesting. As a parent who's brought a child to the ER with appendicitis, I see you and I hope everybody's okay. I just. You've said a couple of things, including healthcare bankrupting America as we know it at some point here in the future. And it brings me to the fireside chat that we saw you deliver at the America's Health Insurance Plans lobbying group here. You talked about a cliff separate from the Obamacare cliff that people have established at the end of the year. You said, we don't know how far away it is. We just don't know when we're going to fall over the edge. Let me put it another way. Your business in healthcare is not sustainable if the industry is not sustainable. If that's your perspective, who's to blame and how do you fix that? Is it possible to avert the cliff?
- [36:45]
Paul Markovich
It is possible to avert the cliff. I think everybody is a part of the problem and everybody's a part of the solution. Health plans, hospitals, physicians, pharmaceutical companies, everyone in the industry right now are not doing all the things that they should be doing. And yet they're also doing some things that are really contributing positively. At the end of the day, this system is fundamentally flawed. We pay by the volume and we pay for volume. If you're going to get paid as a physician, you have to see people and have office visits or you need to do surgeries. If you're a hospital, you need to keep people in the hospital or have them. You use the different services. If you're a pharmaceutical company, you need to get like everything's about volume. And so we churn out is more volume, but not necessarily better outcomes. So that system needs to shift. There's three things that need to happen. We need to pay people differently so that we're paying for outcomes. Better healthcare, not more health care. We need to make it digital and simple, like I mentioned before, and take a lot of administrative cost out of the system. And then finally we need to truly personalize it. And I do think that there's both technology and other processes that can help us do that.
- [37:51]
Joe Creedy
Today you mentioned some of the pharmacies as perhaps one component of the issue has been brought to our attention that you have recently cut CVS Caremark from your business and are purchasing directly from drug manufacturers. Can you just explain the logic of that move and why more of Your peers in the space aren't doing the same.
- [38:08]
Paul Markovich
Well, this space is the classic example of more is better as opposed to better is better because you have a situation where there's multiple players in the distribution system between the pharmacy, manufacturer and the patient, and they all get paid more money when we sell or administer a higher volume of more expensive drugs. So guess what we do? We sell a higher volume of more expensive drugs. Great example. Humira is an injectable drug that's used for things like rheumatoid arthritis. It is the single drug in 2024 that Blue Shield of California spent the most money on. It lost its market exclusivity in early 2023, which meant that companies could offer what are called biosimilars that could effectively do the same thing because there was no longer a patent exclusivity on that drug and potentially introduce competition, which they did. We ended up, as a result of this model that you mentioned, contracting directly to get the drug. So Humira, in 2024, the list price was around $7,000 per month. The net price was around $2,100 a month, which means when you take all the rebates and fees out that were going through all these intermediaries, the actual reimbursement to the manufacturer was around $2,100. We negotiated a deal for 500, 145 bucks.
- [39:33]
Joe Matthew
Wow.
- [39:34]
Paul Markovich
And so that's the kind of thing that's going on. But at the same time, in 2024, despite the fact that these deals were out there, Humira had more than 90% market share for that drug. And that's because, amazing, all the players were getting rewarded for selling and administering a more expensive drug when there were less expensive options available.
- [39:53]
Joe Matthew
What do you do with GLP1s a month for Zepbound? This. If this drug class is truly about to go mainstream, does. Does this break the back in a similar way?
- [40:05]
Paul Markovich
Well, it's just too expensive right now. I mean, it's. When you think about it, and I was talking to a group of drug manufacturers recently about this. The average total insurance premium per person that Blue Shield collected for people that get their insurance through their employer in 2024 was around $330 a month. This drug is being priced at more than that per month for one patient. So there's simply no way economically that you can cover the drug at that price for all the people that would like to get access to it and keep it economically sustainable. But to me, this is an opportunity. This is an example of an opportunity to say, well, let's think about a different payment model. If we were to think about a way to pay the manufacturer to actually help people lose weight and get healthier and get their cost down, as opposed to every time you sell a pill or an injectable, you get more money, then there's a way for them to get rewarded financially for helping. But only when they help people actually get healthier, when they help them lose weight. Because one of the challenges we've seen with these drugs, it's not just their total cost, but there's a lot of people that start on the drug and then come off and then they don't get the benefits of it. So you get the cost up front, you really don't get the benefits of it in the system. And ultimately what you're looking for is these drugs have, they're incredible innovations. They have a tremendous potential, positive impact on health care for people. We want people in the right circumstances to access them, but we want them to get the benefit of it.
- [41:44]
Joe Matthew
Really interesting. This is a story that's not going away, Paul, and we'd love to stay in touch with you on this. Thank you for coming to visit us. Paul Markovich, the company is ascending. He is president and CEO and we learned a lot today when it comes to all of these issues. We still have to figure out this Obamacare expiration at the end of the year. It's as Paul mentioned in the throes of debate on Capitol Hill right now.
- [42:04]
Joe Creedy
Not to mention that plus there's always a tariff question. A lot of these drugs that Paul is talking about, they come from Europe, they come from Switzerland, they come from India, they come from Denmark.
- [42:12]
Joe Matthew
The President still promising pharma tariffs? We haven't gotten there quite yet. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington D.C. at noontime eastern@bloomberg.com.
- [42:29]
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