Weekly Washington Healthcare Update

January 13, 2014

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1. Congress

House of Representatives


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2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

CMS Office of the Actuary



1. Congress


House Passes Bill Aimed at ACA Health Exchange Data Security

Last week, the House passed legislation focused on the data security and privacy of HealthCare.gov, the website for all federally facilitated exchanges (FFEs). The bill, H.R. 3811, would require HHS to notify an individual within two business days after discovery of any breach of security of any system maintained by an American Health Benefit Exchange established under the ACA. Sixty-seven Democrats joined a united Republican conference in supporting the bill as it passed by a vote of 291-122.

Health Subcommittee Continues Work on Medicare Payments, SGR Repeal

On Jan. 9, the Energy and Commerce Subcommittee on Health held a hearing entitled “The Extenders Policies: What Are They and How Should They Continue Under a Permanent SGR Repeal Landscape?” The hearing focused on expiring health-related provisions that are typically considered together with the annual Medicare physician payment formula update.


Glenn M. Hackbarth, J.D.
Medicare Payment Advisory Commission (MedPAC)

Diane Rowland, Sc.D.
Medicaid and CHIP Payment and Access Commission (MACPAC)

Michael Lu, M.D., M.S., M.P.H.
Associate Administrator
Maternal and Child Health Bureau
Health Resources and Services Administration (HRSA)

Naomi Goldstein
Office of Planning, Research, and Evaluation
Administration for Children and Families (ACF)

For more information, or to view the hearing, please visitenergycommerce.house.gov.



2. Administration

New Staff in Place at CMS After Troubled ACA Rollout

CMS has announced new staff appointments to replace two top officials who left in the aftermath of the disastrous ACA rollout. Tim Love, who has been with CMS for over two decades, will serve as chief operating officer (COO), replacing Michelle Snyder, who retired in late 2013. Snyder was in charge of managing all contracts at CMS, including those at the heart of the problems with the federal Obamacare portal. In addition, Dave Nelson will serve as chief information officer (CIO), replacing Tony Trenkle, who left CMS in November of last year. Trenkle was the supervisor of Deputy CIO Henry Chao, who had a leading role in managing the development of HealthCare.gov.

3. State Activities

Maryland Partners with CMS to Improve Hospital Payments

On Jan. 10, CMS and the state of Maryland jointly announced a new initiative to reform Maryland’s all-payer rate-setting system for hospital services that will improve patient health and reduce costs. Currently, Maryland operates the nation’s only all-payer hospital rate regulation system. This system is made possible, in part, by a 36-year-old Medicare waiver (codified in Section 1814(b) of the Social Security Act) that exempts Maryland from the Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) and allows Maryland to set rates for these services. Under the waiver, all third-party purchasers pay the same rate. Maryland’s all-payer rate setting system for hospital services presents an opportunity for Maryland and CMS to test a unique model that has the potential to inform CMS and other states. As part of the agreement, Maryland will agree to permanently shift away from its current statutory waiver, which is based on Medicare payment per inpatient admission, in exchange for the new Innovation Center model based on Medicare per capita total hospital cost growth. For more information on the partnership, please visitwww.cms.gov.

4. Regulations Open for Comment

Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule and the National Instant Criminal Background Check System (NICS)

On Jan. 7, HHS issued a notice ofproposed rulemaking to modify the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule to expressly permit certain HIPAA-covered entities to disclose to the National Instant Criminal Background Check System (NICS) the identities of individuals who are subject to a Federal “mental health prohibitor” that disqualifies them from shipping, transporting, possessing or receiving a firearm. The NICS is a national system maintained by the Federal Bureau of Investigation (FBI) to conduct background checks on persons who may be disqualified from receiving firearms based on federally prohibited categories or State law. Among the persons subject to the Federal mental health prohibitor are individuals who have been involuntarily committed to a mental institution; found incompetent to stand trial or not guilty by reason of insanity; or otherwise have been determined by a court, board, commission or other lawful authority to be a danger to themselves or others or to lack the mental capacity to contract or manage their own affairs, as a result of marked subnormal intelligence or mental illness, incompetency, condition or disease. Under this proposal, only covered entities with lawful authority to make adjudication or commitment decisions that make individuals subject to the Federal mental health prohibitor, or that serve as repositories of information for NICS reporting purposes, would be permitted to disclose the information needed for these purposes. Comments are due March 10, 2014.

Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs

On Jan. 6, CMS released aproposed rule that would revise the Medicare Advantage (MA) program (Part C) regulations and prescription drug benefit program (Part D) regulations to implement statutory requirements; strengthen beneficiary protections; exclude plans that perform poorly; improve program efficiencies; and clarify program requirements. Specifically, the proposal includes a requirement establishing U.S. citizenship and lawful presence as eligibility requirements for enrollment in MA and Part D plans. In addition, the proposed rule would modify the administration of payments to agents and brokers who assist Medicare beneficiaries in selecting plans to discourage beneficiaries from enrolling in plans without regard to ensuring plan benefits would meet the beneficiaries’ health care needs. Comments are due March 7, 2014.

Basic Health Program: Proposed Funding Methodology for Program Year 2015

On Dec. 18, HHSreleased a document providing the methodology and data sources necessary to determine federal payment amounts made to states that elect to establish a Basic Health Program (BHP) as provided for under Section 1331 of the ACA, to offer health benefits coverage to low-income individuals otherwise eligible to purchase coverage through Affordable Insurance Exchanges. The BHP will make affordable health benefits coverage available for individuals under age 65 with household incomes between 133 percent and 200 percent of the federal poverty level (FPL) who are not otherwise eligible for Medicaid, the Children’s Health Insurance Program (CHIP) or affordable employer-sponsored coverage. Specifically, under the proposed methodology, the total federal BHP payment amount would be based on multiple “rate cells” in each state. Each “rate cell” would represent a unique combination of age range, geographic area, coverage category (for example, self-only or two-adult coverage through BHP), household size and income range as a percentage of FPL. Thus, in each coverage category and within a particular age range there would be distinct rate cells for individuals who reside in a specific geographic rating area and are in households of the same size and income range. Comments are due Jan. 22.

IRS, HHS, Labor Proposed Rule Defines “Exempted Benefits”

On Dec. 20, the Internal Revenue Service, the Department of Health and Human Services and the Department of Laborproposed rules that would amend the regulations regarding excepted benefits under the Employee Retirement Income Security Act of 1974, the Internal Revenue Code and the Public Health Service Act. Excepted benefits are generally exempt from the health reform requirements that were added to those laws by the Health Insurance Portability and Accountability Act (HIPAA) and the ACA. Specifically, the rules amend the limited excepted benefits category of excepted benefits, which may include limited scope vision or dental benefits, and benefits for long-term care, nursing home care, home health care or community-based care. For an individual to be excepted under this second category, the statute provides that limited benefits must either: (1) be provided under a separate policy, certificate or contract of insurance; or (2) otherwise not be an integral part of a group health plan, whether insured or self-insured. The proposed regulations would eliminate the requirement under the HIPAA regulations that participants pay an additional premium or contribution for limited scope vision or dental benefits to qualify as benefits that are not an integral part of a plan (and therefore as excepted benefits). The Departments invite comments on this approach. Comments are due Feb. 21.

CMS Proposal on Use of Civil Monetary Penalties in Medicare Secondary Payer Program

CMS has issuedadvance notice of proposed rulemaking regarding civil monetary penalties and the Medicare Secondary Payer system. Under the Medicare law, as enacted in 1965, Medicare was the primary payer for certain designated health care services except those covered by workers’ compensation. In 1980, Congress added Section 1862(b) of the Act, which defined when Medicare is the secondary payer to certain primary plans. These provisions are known as the Medicare Secondary Payer (MSP) provisions. Section 1862(b) of the Act prohibits Medicare from making payment if payment has been made or can reasonably be expected to be made by the following primary plans when certain conditions are satisfied: Group health plans; workers’ compensation plans; liability insurance (including self-insurance); or no-fault insurance. CMS is seeking public comment and proposals on mechanisms and criteria that they would employ to evaluate whether and when the agency would impose civil monetary penalties CMPs. CMS is specifically soliciting comments and proposals from insurers, third-party administrators for GHPs, other applicable plans and the public. Comments are due Feb. 10.

CMS Requests Comments on Quality Measures for Plans on Exchanges

In a notice set to be published in the Nov. 19 Federal Register, the Centers for Medicare and Medicare Services is soliciting comments on quality measures for the health plans offered through the insurance exchange. The list of proposed quality rating system (QRS) quality measures has 42 measures for family/adult and 25 measures for child-only. CMS is also soliciting comments on the “hierarchical structure of the measure sets,” the elements of the QRS methodology and the integrity of the QRS ratings. CMS also said it would provide “future technical guidance” for the quality health plan issuers and exchanges related to QRS measure specifications, detailed rating methodology guidelines and data reporting and procedures. CMS previously issued rules in the March 27, 2012, Federal Register directing the exchanges to oversee the ratings. Comments on the QRS quality measures are due Jan. 21, 2014.

5. Reports

CMS Office of the Actuary

National Health Expenditures 2012 Highlights

In Jan. 7, the CMS Office of the Actuaryissued a report finding national health expenditures grew at an annual rate of 3.7 percent, totaling $2.8 trillion, or $8,915 per person, in 2012, making it the fourth consecutive year of below-average spending growth. According to the report, the share of the economy devoted to health spending decreased from 17.3 percent in 2011 to 17.2 percent in 2012, as the Gross Domestic Product increased nearly one percentage point faster than health care spending at 4.6 percent. The report also found that hospital spending increased 4.9 percent to $882.3 billion in 2012 compared to 3.5 percent growth in 2011, due to growth in both price and non-price factors, which include the use and intensity of services. In addition, spending on physician and clinical services increased 4.6 percent in 2012 to $565.0 billion, from 4.1 percent growth in 2011. Growth in spending from private health insurance and Medicare, the two largest payers of physician and clinical services, experienced diverging trends in 2012, with private insurance spending for physician and clinical services growing at a faster pace, while Medicare spending decelerated slightly in 2012.


Hospital Medical Record Fraud Safeguards Yet to be Implemented

According to a report by the HHS-OIG, nearly all hospitals with EHR technology had RTI-recommended audit functions in place, but they may not be using them to their full extent. In addition, all hospitals employed a variety of RTI-recommended user authorization and access controls. Nearly all hospitals were using RTI-recommended data transfer safeguards. Almost half of the hospitals had begun implementing RTI-recommended tools to include patient involvement in anti-fraud efforts. Finally, only about one quarter of the hospitals had policies regarding the use of the copy-paste feature in EHR technology, which, if used improperly, could pose a fraud vulnerability. CMS recommends that audit logs be operational whenever EHR technology is available for updates or viewing. CMS also recommends that ONC and CMS strengthen their collaborative efforts to develop a comprehensive plan to address fraud vulnerabilities in EHRs. CMS’s final recommendation is for CMS to develop guidance on the use of the copy-paste feature in EHR technology. CMS and ONC concurred with all of the recommendations.


Medicaid: Use of Claims Data for Analysis of Provider Payment Rates

On Jan. 6, GAOissued a report finding that among the nine states and 35 services examined, all states varied Medicaid payments for at least some services. However, the states differed in the number of services for which they varied payments, in the factors that accounted for variation and in the magnitude of the variation. Many of the states varied payment rates by at least one of the factors GAO was able to explore in detail: provider type, service setting and/or patient age. Some states also varied their payment rates for other reasons, such as by geographic region or by physician specialty. GAO also found that most of the median Medicaid payment rates calculated from claims data generally confirmed payment rates published in studies of fee schedules conducted by the American Academy of Pediatrics and the Urban Institute; however, some of the published fee schedule rates were rarely used in practice. Collectively, GAO’s findings demonstrate that Medicaid fee-for-service claims data can be a useful source of information for analyzing provider payments. These data have the potential to provide a more complete representation of provider payment than do fee schedules, as claims data can capture both the distribution and frequency of actual payments to providers.

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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