Weekly Washington Healthcare Update

November 11, 2013

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1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

Dept. of Health and Human Services — Office of the Inspector General (HHS-OIG)

1. Congress


Upcoming Health Subcommittee Hearing to Continue ACA Launch Examination

Energy and Commerce Health Subcommittee Chairman Pitts (R-PA) has announced he will hold a hearing entitled “Obamacare Implementation Problems: More than Just a Broken Website.” The hearing will take place on Thursday, Nov. 14, 2013, at 10:00 a.m. in room 2322 Rayburn House Office Building. In addition to further exploring issues associated with the lackluster launch of the ACA’s health insurance marketplaces, the hearing will allow lawmakers to discuss H.R. 3362, a bill to require transparency in the operation of American Health Benefit Exchanges. Witnesses have not yet been announced.

Upcoming Energy and Commerce Hearing on FDA Improvements Law Implementation

Energy and Commerce Health Subcommittee Chairman Pitts (R-PA) has announced he will hold a hearing entitled “Reviewing FDA’s Implementation of FDASIA.” The hearing will take place on Friday, Nov. 15, 2013, at 10:00 a.m. in Room 2322 Rayburn House Office Building. The hearing will focus on issues associated with the implementation of the Food and Drug Administration Safety and Innovation Act (FDASIA), signed into law in July 2012. FDASIA included numerous provisions to bring predictability, consistency and transparency to FDA’s regulation of drugs and devices.


Janet Woodcock, M.D.
Center for Drug Evaluation and Research
Food and Drug Administration

Jeffrey E. Shuren, M.D., J.D.
Center for Devices and Radiological Health
Food and Drug Administration

For more information, or to view the hearing, please visit:energycommerce.house.gov


Finance Committee Hearing Examines Troubled Launch of ACA

On Nov. 6, Finance Committee Chairman Baucus (D-MT) held a hearing entitled “Health Insurance Exchanges: An Update from the Administration,” with the sole witness being HHS Secretary Kathleen Sebelius. The hearing focused on the recent troubles associated with the launch of the ACA’s health insurance marketplaces, with specific attention paid toHealthcare.gov, the federal website through which individuals in states with federally facilitated exchanges access their coverage options. Sebelius’s testimony centered on the need for, and achievable nature of, fixing the glitches in the website. Republicans also questioned the security of the website, and threats to individuals’ identity and private information.


The Honorable Kathleen Sebelius
United States Department of Health and Human Services

For more information, or to view the hearing, please visit:www.finance.senate.gov

HELP Committee Hearing With CMS Administrator Tavenner on ACA Launch

On Nov. 5, the HELP Committee held a hearing entitled “The Online Federal Health Insurance Marketplace: Enrollment Challenges and the Path Forward.” At issue were the ongoing problems associated with the Oct. 1 launch of the federal health insurance marketplaces created under the ACA. Tavenner testified that CMS’s target enrollment for October and November would be about 800,000, though actual enrollment numbers would be made available by her agency during the week of Nov. 11. Republicans also pressed Tavenner on reports of insurance policy cancellations, which they said run contrary to promises made during enactment of the health reform law. Tavenner pointed to “grandfathering” provisions within the ACA that allows insurers to maintain plans in existence prior to passage of the ACA, intended to mitigate the impact of the law’s sweeping reforms on existing health plans.


Marilyn Tavenner
Centers for Medicare & Medicaid Services (CMS)

For more information, or to view the hearing, please visit:www.help.senate.gov

2. Administration

300 DME Suppliers Win Contracts in Nine Competitive Bidding Areas

CMS has announced that it granted 283 contracts to durable medical equipment suppliers as part of the agency’s DME competitive bidding program. The contracts will begin on Jan. 1, 2014, and will expire after three years. Specifically, CMS awarded 997 contracts to suppliers that have 620 locations in the nine competitive bidding areas. CMS said that 97 percent of the winners are established in the competitive bidding area, the product category or both. The DME competitive bidding program aims to lower the amounts that have been paid for DME under the agency’s fee schedule by forcing suppliers to compete for Medicare contracts. However, many in the industry find the program controversial. Tom Ryan, president of the American Association for Homecare, said that many suppliers “have lost the opportunity to do business with Medicare and to help Medicare patients” as a result of the program.

CMS “Discourages” Provider Premium Assistance Payments for ACA Exchange Plans

HHS has issued explicit guidance discouraging providers from subsidizing patient premiums on health exchanges and encouraging issuers to reject such payments. In an FAQ, HHS says it has significant concerns about third parties supporting premium payments or cost-sharing obligations, due to potential adverse selection in the exchange risk pool. However, the new document seems to contradict a letter from HHS Secretary Sebelius to Rep. McDermott (D-WA) in which she stated that QHPs were not considered “federal health care programs” for purposes of the anti-kickback law. In a Nov. 7 letter, Sen. Charles E. Grassley (R-Iowa) requested a full accounting of the review and decision-making process behind the departments of Health and Human Services’s and Justice’s determination that qualified health plans (QHPs) on the Affordable Care Act exchanges won’t be subject to the anti-kickback law.

CMS Will Give Hospitals More Time to Comply With “Two-Midnight Rule”

CMS delayed the implementation of the “two-midnight” policy for inpatient admissions. Hospitals will now have six months, rather than three months, to comply with the policy. The “two-midnight” policy states that hospital stays spanning two or more midnights after the beneficiary is formally admitted as an inpatient will be presumed to be “reasonable and necessary for inpatient status” as long as their stay is medically necessary. The policy aims to improve Medicare payment integrity and provide clarity on when a doctor should order hospital admission for a patient. However, hospitals say the policy enforcement needs to be further delayed. According to the American Hospital Association, hospitals do not have enough time to operationalize the two-midnight policy, and the organization will continue to pursue delayed enforcement of the two-midnight policy until October 1, 2014 and see additional clarifications from CMS.

$150 Million Awarded for New Community Health Centers

The Department of Health and Human Services (HHS)announced Nov. 7 that it was awarding $150 million for the Affordable Care Act for the establishment of 236 new community health centers in various parts of the country. “We are committed to providing more people across the country with the quality patient-centered care they deserve. Health centers are key partners in improving access to quality, affordable health care services for those who need it most,” Secretary Kathleen Sebelius said in a press release. HHS estimates that these new community health centers will provide care for 1.25 million additional patients while simultaneously helping these communities with historically high uninsurance rates enroll in the health exchanges established under the Affordable Care Act.

Mental Health Parity Law Final Implementation

Last week, the Administrationreleased final rules implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, which requires parity between mental health or substance use disorder benefits and medical/surgical benefits with respect to financial requirements and treatment limitations under group health plans and group and individual health insurance coverage. The rule also contains a technical amendment relating to external review with respect to the multistate plan program administered by the Office of Personnel Management. The final rule becomes effective in Jan. 2014.

3. State Activities

Maryland SHOP Exchange Delayed Again

Maryland officials have announced a second delay in the launch of their state’s small business health insurance exchange, in order to focus on improving user experience, eligibility determination and the ability to transfer enrollment information to insurance carriers. Small businesses were originally supposed to begin enrolling in insurance policies through the exchange in October, when the marketplace opened to individuals. However, that initial delay, which had the exchange set to launch in January, has now been pushed back to April. Under the new timeline, coverage would take effect in June or July.

4. Regulations Open for Comment

Basic Health Plan Proposed Rule

On Sept. 20, CMS issued aproposed rule to guide the introduction of Basic Health Plans, as required by Section 1331 of the Affordable Care Act. The Basic Health Program provides states the flexibility to establish a health benefits coverage program for low-income individuals who would otherwise be eligible to purchase coverage through the state’s Affordable Insurance Exchange (Exchange, also called a Health Insurance Marketplace). The Basic Health Program would complement and coordinate with enrollment in a Qualified Health Plan (QHP) through the Exchange, as well as with enrollment in Medicaid and the Children’s Health Insurance Program (CHIP). This proposed rule sets forth a framework for Basic Health Program eligibility and enrollment, benefits, delivery of health care services, transfer of funds to participating states and federal oversight. Additionally, this rule would amend other rules issued by the Secretary of the Department of Health and Human Services (Secretary) in order to clarify the applicability of those rules to the Basic Health Program. Comments are due by Nov. 25, 2013.

CMS Proposed Rule for Federally Qualified Health Center Payments

On Sept. 18, CMS released aproposed rule that establishes a new Prospective Payment System (PPS) and increases Medicare reimbursement payments for federally qualified health centers (FQHC). In the rule, Medicare payments would increase 30 percent for FQHC services provided to beneficiaries in medically underserved areas. Under the PPS, Medicare would pay the FQHCs a single encounter-based rate per beneficiary per day for all services provided. The proposed rate would be calculated based on an average cost per encounter, which is estimated to be $155.90, adjusted for geographic variation, with additional consideration given to new Medicare beneficiaries.

“These health centers serve some of our most vulnerable populations,” HRSA Administrator Mary Wakefield said in a Sept. 18 statement. “We are excited about our collaboration with CMS to create a payment system that enables these vital health centers to keep doing such important work.” CMS estimates that during the first five years of implementation, the annual Medicare spending for the FQHCs would be $33 million in 2014, increasing to at least $200 million every year afterward until 2018. Comments on the proposed rule are due on Nov. 18, 2013.

IRS Proposed Rule — ACA Employer Information Reporting Mandates

On Sept. 5, the IRS issuedproposed regulations providing guidance to employers that are subject to the information reporting requirements under Section 6056 of the Internal Revenue Code (Code), enacted by the Affordable Care Act. Section 6056 requires those employers to report to the IRS information about their compliance with the employer shared responsibility provisions of Section 4980H of the Code and about the health care coverage they have offered employees. Section 6056 also requires those employers to furnish related statements to employees so that employees may use the statements to help determine whether, for each month of the calendar year, they can claim on their tax returns a premium tax credit under Section 36B of the Code (premium tax credit). In addition, that information will be used to administer and ensure compliance with the eligibility requirements for the employer shared responsibility provisions and the premium tax credit. The proposed regulations affect applicable large employers (generally meaning employers with 50 or more full-time employees, including full-time equivalent employees, in the prior year), employees and other individuals.

IRS will accept comments on specific aspects of the proposed rule, such as whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility, and how the quality, utility and clarity of the information to be collected may be enhanced. A public hearing will be held at 10 a.m. on Nov. 18.

IRS Proposed Rule — Reporting On ACA Minimum Essential Coverage

On Sept. 5, the IRS issuedproposed regulations providing guidance to providers of minimum essential health coverage that are subject to the information reporting requirements of Section 6055 of the Internal Revenue Code (Code), enacted by the Affordable Care Act. Health insurance issuers, certain employers and others that provide minimum essential coverage to individuals must report to the IRS information about the type and period of coverage and furnish related statements to covered individuals. These proposed regulations affect health insurance issuers, employers, governments and other persons that provide minimum essential coverage to individuals. Under the proposed rules, health insurance issuers are not required to submit Section 6055 information returns on minimum essential coverage they provide in the individual market through the ACA health insurance exchanges, or marketplaces; however, sponsors of self-insured group health plans are required to report minimum essential coverage under the proposed rule. In addition, self-insured group health plans or arrangements covering employees of related corporations are treated as sponsored by more than one employer and each employer must report for its employees.

IRS will accept comments on specific aspects of the proposed rule, such as whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, whether the information will have practical utility, and how the quality, utility and clarity of the information to be collected may be enhanced. A public hearing will be held at 10 a.m. on Nov. 19.

IRS Proposed Rule — ACA Small Business Tax Credit

The IRS has issuedproposed rules on the ACA’s small-business tax credit, available only to certain businesses with 25 or fewer full-time employees purchasing health coverage through a SHOP exchange. Under the proposed rule, for taxable years beginning during or after 2014, the maximum credit for an eligible small employer other than a tax-exempt eligible small employer is 50 percent of the eligible small employer’s premium payments made on behalf of its employees under a qualifying arrangement for QHPs offered through a SHOP exchange. For a tax-exempt eligible small employer for those years, the maximum credit is 35 percent. The employer’s tax credit is subject to several adjustments and limitations as set forth in this preamble.

In addition, all employees (determined under the common law standard) who perform services for the employer during the taxable year are taken into account in determining FTEs and average annual wages, including those who are not performing services in the employer’s trade or business. An employee’s hours of service for a year include hours for which the employee is paid, or entitled to payment, for the performance of duties for the employer during the employer’s taxable year. Hours of service also include hours for which the employee is paid for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Hours of service do not include the hours of seasonal employees who work for 120 or fewer days during the taxable year, nor do they include hours worked for a year in excess of 2,080 for a single employee.

Comments are due Nov. 21, 2013.

5. Reports


$29 Million in Part D Costs Paid for Individuals Living in U.S. Illegally

In areport released Oct. 31 by the Department of Health and Human Services Office of the Inspector General (OIG), OIG officials disclosed that Centers for Medicare and Medicaid Services (CMS) had improperly accepted 279,000 prescription drugs events (PDEs) submitted by Medicare Part D plan sponsors for 4,000 “unlawfully present beneficiaries” from 2009 to 2011. For these PDEs, CMS paid $29 million in gross drug costs. As it stands, “CMS did not have a policy for addressing payments for unlawfully present beneficiaries under Medicare Part D that was equivalent to the existing policy that covers payments for these beneficiaries under Parts A and B,” OIG said in its report. To address these payment issues and block any PDEs linked to illegal persons, OIG recommended that CMS create and implement internal controls to prevent unlawfully present individuals from enrolling in Medicare Part D and to create and implement internal controls to remove any unlawfully present individuals currently enrolled in the program from collecting future reimbursements. With regard to resolving past payments to unlawfully present persons in this two-year time period, CMS disagreed with OIG’s recommendation that recovery of those payments was possible before implementing appropriate policies and procedures to remedy the existing problem.

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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