Weekly Washington Healthcare Update

September 28, 2012

Pardon Our Dust

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This Week:

1. Congress

House of Representatives


2. Administration

Health and Human Services (HHS)

Centers for Medicare and Medicaid Services (CMS)

3. State Activities

4. Regulations Open for Comment

5. Reports

General Accountability Office (GAO)

National Research Council


Health Care Cost Institute

Aon Hewitt

6. Op-Ed

7. Medicaid and CHIP Payment and Access Commission (MACPAC)

1. Congress

House of Representatives

Ways and Means Explores Medicare Advantage (MA)

House Ways and Means Health Subcommittee Chairman Herger (R-CA) held a hearing last Friday to explore the current status of the MA program, including Special Needs Plans (SNPs) and Medicare Cost Plans. In noticing the hearing, Chairman Herger stated:

“More than one in four Medicare beneficiaries have chosen to receive their Medicare benefits through a private Medicare plan. Since 2003, enrollment in the Medicare Advantage program has tripled, which is a clear indication that many beneficiaries enjoy the additional benefits that are often provided by these private health plans. Unfortunately, the Democrats’ health law slashed payments to the Medicare Advantage program by more than $300 billion over the next 10 years to fund ObamaCare. These cuts will significantly alter the program and jeopardize seniors’ access to the health plans they rely on. Understanding the successful structure of the current MA program, and the challenges the program will face because of the Democrats’ health law, is key to ensuring Medicare meets the needs of seniors now and into the future.”

Witness List:

James Cosgrove
Director, Health Care, U.S. Government Accountability Office

James Capretta
Fellow, Ethics and Public Policy Center

Karen Ignagni
President and Chief Executive Officer, America’s Health Insurance Plans

Tim Schwab, M.D.
Chief Medical Officer, SCAN Health Plan

John Tallent
Chief Executive Officer, Medical Associates Clinic & Health Plans

Marsha Gold
Senior Fellow, Mathematica Policy Research

The hearing focused on the impact that reductions in payments to MA plans called for under the ACA, and a recent finding by the Government Accountability Office (GAO) that an $8.35 billion MA bonus payment demonstration project operated by HHS contained significant shortcomings and should be canceled. Republicans seized the opportunity to highlight the potential negative impact on seniors who like their current MA plans and who could lose access should the reimbursement reductions be too steep. However, Democrats countered with a recent report from CMS estimating that enrollment in MA plans will actually increase by 11 percent next year.

On a related note, Oversight and Government Reform Committee Chairman Issa (R-CA) and Rep. Lankford (R-OK) have sent a letter to HHS Secretary Kathleen Sebelius demanding documents related to the $8.3 billion demonstration project to reward high-performing MA plans. A release says the demonstration funds were spent “outside of the department’s lawful authority to temporarily offset Obamacare’s controversial cuts to the Medicare Advantage program.”

New Legislation to Alter Budget Assessment of Preventive Care

Reps. Burgess (R-TX) and Christensen (D-VI) have introduced legislation (H.R. 6482) to amend the way in which the Congressional Budget Office (CBO) scores preventive health measures. Recognizing that prevention activities can take time to demonstrate savings, the bill would let the CBO take into account projected savings outside of the customary 10-year window in developing its “scores” for bills pertaining to preventive health care. Though it’s unlikely the bill will become law soon, it will certainly play into larger health care discussions, and the role of preventive care in overall health spending.


Senate Republicans Report on Premium Support

On Wednesday, Senate Finance Committee Republicans issued a report outlining what they view as a bipartisan way to address the growth in Medicare spending. At a national level, the idea of “premium support” has become a partisan matter, with vice presidential candidate Rep. Ryan (R-WI) presenting the reform as central to Medicare preservation and the Obama campaign accusing the GOP ticket of “ending” the program as we know it. However, in the report, Senate Republicans focused on framing the issue as bipartisan, saying, “One of the reforms that has been long discussed by both Democrats and Republicans is that of competitive bidding — similar to the hugely popular Medicare prescription drug benefit.”

Sen. Hatch Still Seeking Answers on Exchange

According to Sen. Hatch (R-UT), the Administration has not met its charge of informing states of critical details as to the structure of federally run health insurance exchanges. In a letter to Secretary Sebelius this week, the ranking member of the Senate Finance Committee said, “Without specific details provided through the rulemaking process with cost estimates and a clear understanding of the roles and responsibilities of the states and the federal government, states are not in a position to make an informed decision.” The criticism is nothing new, and is an issue that has received substantial attention in various committees in the Republican-controlled House. Nonetheless, expect the looming Nov. 16 deadline for state decisions regarding their health insurance exchanges to continue to draw attention from state and federal policymakers.

2. Administration


Warning to Providers: “Upcoding” is Unacceptable, Fraud

This week saw an interesting and inconclusive exchange between HHS and hospitals over how providers label the services provided to Medicare beneficiaries for purposes of reimbursement from the Centers for Medicare and Medicaid Services (CMS). On Monday, HHS and the Department of Justice (DOJ) sent a letter to five major hospital groups warning them not to use electronic health records (EHRs) to “game the system” and boost their revenues. Though EHRs are purported to bring increased efficiency and coordination to the delivery of health care, concerns have been raised that they may also make it easier for providers to “upcode” their services, or inaccurately bill the program for the services they provide. In response, the hospitals were quick to return blame to the Administration for what they claim is a lack of clarity in billing practices, a problem that, they claim, is exacerbated by the expansion of EHRs.

Health Care Law Increases Number of Mental and Behavioral Health Providers

On Tuesday, HHS Secretary Kathleen Sebelius announced the release of $9.8 million under the Mental and Behavioral Health Education and Training grant program, which was contained in the ACA. Awardees, consisting of 24 graduate social work and psychology schools and programs, will receive three-year grants focused on increasing the number of social workers and psychologists who work with Americans in rural areas, military personnel, veterans and their families.

“Plain English” Provisions Take Effect

A provision touted as one of several consumer protection measures contained in the ACA takes effect this week, with insurers now being required to disclose plan benefits in a plain language Summary of Benefits and Coverage (SBC). The change is also purported to assist consumers by bringing more uniformity to what are generally complicated benefit explanations.

New Round of Exchange Grants

HHS Secretary Kathleen Sebelius announced this week that a new round of Affordable Insurance Exchange Establishment Grants would be awarded to Arkansas, Colorado, Kentucky, Massachusetts, Minnesota and the District of Columbia. Arkansas, Colorado, Kentucky, Massachusetts and Minnesota received awards for Level One Exchange Establishment Grants, one-year grants awarded to states to build exchanges. The District of Columbia received a Level Two Exchange Establishment Grant, a multiyear grant awarded to states further along in building their exchanges. A total of 49 states, the District of Columbia and four territories have received grants to begin planning their exchanges, and 34 states and the District of Columbia have received grants to begin building their exchanges. States may apply for grants through the end of 2014 and may use funds through the initial startup year. For more information, please visit the CMS Newsroom.


CMS Announces Nursing Home Quality Initiative

CMS announced Thursday a partnership with nearly 150 nursing homes, spanning seven states, that aims to test models for reducing avoidable hospitalizations among nursing home residents, a costly population that’s often enrolled in both Medicare and Medicaid. 

3. State Activities

South Dakota Opts for Federally Run Exchange

Republican South Dakota Gov. Dennis Daugaard announced Wednesday that a state-run exchange would not be feasible, according to the Yankton Daily Press & Dakotan. Daugaard said the exchange would cost $6.3 million to $7.7 million per year. “The federal law requires exchanges to be self-sustaining by 2015, which means we would either have to charge a fee to South Dakota citizens using the exchange, or increase taxes, neither of which I am willing to do,” Daugaard said.

Republican Governors Reiterate Request for Details from HHS

The Republican Governors Association released a new letter on Thursday reiterating the need for additional guidance on the Medicaid and Health Insurance Exchanges provisions in the ACA. “Thirty months have passed since the President signed Obamacare into law, and it ought to be alarming that the Democrats who wrote the legislation are still trying to figure out what’s in it,” said RGA Chairman Bob McDonnell. “Unfortunately, this ill-conceived law has serious consequences for patients and doctors as well as taxpayers and state governments.” To view the letter, please visit: http://rgppc.com/rga-letter-pressing-hhs-for-answers/

Similarly, Pennsylvania Insurance Commissioner Michael Consedine wrote to Secretary Sebelius this week asking for clarification of the deadline for states to submit an essential health benefits benchmark plan.

4. Regulations Open for Comment

HHS Releases Electronic Funds Transfer (EFT) Rule

HHS released an interim final rule with comment period offering guidance on the operation of electronic health care transactions under HIPAA. The rule implements portions of Sec. 1104 of the Affordable Care Act (ACA), and it is expected to save $9 billion over the next 10 years “by reducing inefficient manual administrative processes for physician practices, hospitals, and health plans,” HHS said. Comments on the rule, which is scheduled to be published in the Aug. 10 Federal Register, are due Oct. 9.

FDA Proposes Unique Device Identifier (UDI) Rule

The FDA will accept comments on the proposed rule to implement a Unique Device Identifier system for medical devices distributed in the United States. Comments on the proposed rule will be accepted either electronically or written until Nov. 7, 2012.

5. Reports


Defense Health Care: Additional Cost-Benefits Analysis of Potential Governance Needed

Section 716 of the National Defense Authorization Act for Fiscal Year 2012 required the Department of Defense (DOD) to submit a report analyzing potential Military Health System (MHS) governance options under consideration, and also required GAO to submit an analysis of these options. On Wednesday, GAO issued a report determining the extent to which DOD’s assessment provides complete information on cost implications and the strengths and weaknesses of potential MHS governance options. As part of the report, GAO recommended that DOD develop a comprehensive cost analysis for its potential MHS governance options.

Medical Devices: FDA Should Expand Its Consideration of Information Security for Certain Types of Devices

The Food and Drug Administration (FDA), an agency within the Department of Health and Human Services (HHS), is responsible for ensuring the safety and effectiveness of medical devices in the United States. FDA reviews manufacturers’ applications to market medical devices during its premarket review process and monitors devices, once it has approved them, through its postmarket efforts. However, certain medical devices have become increasingly complex, and the growing use of wireless technology in these devices has raised concerns about how protected they are against information security risks that could affect their safety and effectiveness. In a recent report, GAO recommended that FDA develop and implement a plan expanding its focus on information security risks. In comments on a draft of this report, HHS concurred with GAO’s recommendation and described relevant efforts FDA has initiated.

National Research Council

Report: Aging U.S. Population Comes With Economic Risks

In a report released Tuesday, the National Research Council found that the ACA could have significant effects on older workers’ retirement decisions and on labor force participation decisions, as two-thirds of the elderly population will be relying on Social Security and Medicare in the next 40 years. According to the study, Aging and the Macroeconomy: Long-Term Implications of an Older Population, “On the one hand, the ACA will make it easier and less expensive for workers who retire early to purchase health insurance on their own and might thereby encourage more early retirement. On the other hand, it is possible that some potential workers currently remain out of the labor force in order to be eligible for Medicaid or Medicare” through the Social Security disability program. The report cites individual saving by current workers, higher taxes on the workforce, longer working lives and reduced benefits for older people that line up with current rates of taxation as four ways to prepare for a bigger population of older individuals.

Health Care Cost Institute

Health Spending Rises, Prescription Spending Flat

According to a Health Care Cost Institute (HCCI) report issued this week, health care spending for individuals with employer-sponsored insurance increased 4.6 percent from 2010 to 2011 while total spending among this population increased from $680.7 billion to $709.2 billion. During the same time period, prescription drug costs remained steady. For the report, HCCI categorized health care services as inpatient, outpatient (visits and other), professional procedures and prescriptions. Despite some increases in utilization, HCCI found spending growth was driven primarily by increases in the prices paid as growth in the average prices of these service categories outpaced changes in utilization.

Aon Hewitt

Employers Planning for Operational Exchanges

A study released this week by Aon Hewitt found that employers are interested in finding ways of adapting their current retiree health plans to permit access to state exchanges. Under the ACA, employer-sponsored plans that cover both actives and retirees are subject to new group insurance market reforms, such as the extension of dependent coverage to age 26 and no lifetime dollar limits on essential health benefits. In addition, about half of plan sponsors surveyed have stand-alone retiree health care plans and can avoid the new group insurance market reforms for their retiree populations. Going forward, more plan sponsors may choose to split their plans in order to exempt retiree-only plans from any new group insurance market requirements that may be introduced in the future.

Avalere Health

Significant Fluctuations in Medicare Prescription Drug Plan Premiums for 2013

In an analysis of the Medicare Part D prescription drug program released this week, Avalere Health found that beneficiaries may want to shop around if they want to avoid double-digit premium increases in 2013. The study found increases as high as 23 percent for certain plans and overall, seven of the current top 10 prescription drug plans have double-digit increases in premiums. “Seniors need to carefully assess their options going into this open season to ensure that they have a plan that meets their needs,” said Bonnie Washington, senior vice president of Avalere Health.

6. Op-Ed

Former Senator Evan Bayh on Medical Device Tax

Today, the Wall Street Journal ran a column penned by former Senator and current Partner at the Washington, D.C., law offices of McGuireWoods LLP, Evan Bayh, regarding the 2.3 percent excise on medical devices that was included as a revenue provision in the ACA…. A 2.3% tax on medical-device sales, not profits, was imposed under the theory that sales to medical-device companies would surge after all the patients newly insured by the Affordable Care Act poured into the system …. That calculation ignored the fact that the vast majority of medical-device consumers already are covered by Medicare, Medicaid or private insurance. So there will be little or no increase in sales volume to offset the added cost of $30 billion — according to the Congressional Budget Office — to the industry.” 

7. Medicaid and CHIP Payment and Access Commission (MACPAC)

September Meeting to Discuss Emergency Department, Enrollment Data

Last week, the Medicaid and Children’s Health Insurance Plan Payment Advisory Commission (MACPAC), the body charged with reviewing state and federal Medicaid and CHIP access and payment policies and making recommendations to Congress, the Secretary of Health and Human Services (HHS) and the states on a wide range of issues affecting Medicaid and CHIP populations, met to discuss issues including emergency department utilization and enrollment data. Summaries of select portions of the discussion can be found here as they become available. The meeting agenda and associated documents will be available at the MACPAC website. A summary by McGuireWoods Consulting is now online.

If you have any questions, please contact Stephanie Kennan, Senior Vice President, or Brian Looser, Assistant Vice President, at McGuireWoods Consulting.

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal‘s “The Influence 50,” an annual report of the top public affairs firms in Washington, D.C.

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