Washington Healthcare Update

February 10, 2014

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1. Congress

House of Representatives

Senate

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

Congressional Budget Office (CBO)

Congressional Research Service (CRS)

Government Accountability Office (GAO)

1. Congress

House

Budget Committee Hearing on CBO Budget Outlook Report

On Feb. 5, 2014, the House Budget Committee held a hearing to examine CBO’s recently released report, “Budget and Economic Outlook: 2014 to 2024.” CBO Director Elmendorf explained CBO’s newest baseline projections of what federal spending, revenues and deficits would look like over the next 10 years if current laws governing federal taxes and spending generally remained unchanged. Chairman Ryan (R-WI) said the report showed that ineffective government policies, namely the ACA, were responsible for “making the poverty trap that much worse,” while Ranking Member Van Hollen (D-MD) said the report underscored the need for additional investments in education, infrastructure and research and development, including raising the minimum wage.

Witness:

Douglas W. Elmendorf
Director
Congressional Budget Office

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

Ways and Means Committee Approves Bills Amending ACA “Full-Time Employee” Provisions

On Feb. 4, theWays and Means Committee passed both H.R. 2575, a bill that would increase the threshold of what constitutes a “full-time employee (FTE)” under the ACA from 30 hours per week to 40 hours, and H.R. 3979, which would exempt volunteer emergency services workers from the ACA’s FTE requirements altogether. H.R. 3979 passed with unanimous support, while H.R. 2575 passed by a party line vote of 23-14. In addition, H.R. 3979 resembles a proposal outlined in a January Treasury Department blog post explaining that the agency wouldn’t treat volunteer emergency personnel as full-time employees and that the issue would be addressed in forthcoming final regulations. As for H.R. 2575, Sen. Collins (R-ME) has introduced a companion bill, S. 1188, that has not yet been taken up by the Senate Finance Committee.

Senate

Bipartisan, Bicameral Medicare Physician Payment Reform Measure

On Feb. 6, House and Senate negotiatorsreached agreement on a policy that would repeal the Sustainable Growth Rate (SGR) physician reimbursement calculation, which has consistently threatened unpopular cuts to doctor payments, forcing Congress to implement repeated “fixes” to keep the payments roughly consistent. Under the new plan – a product of negotiations between the Senate Finance Committee, House Energy and Commerce Committee and House Ways and Means Committee – Medicare physicians would receive annual payment rate updates of 0.5 percent between 2014 and 2018, followed by a flat update for years 2019 through 2023. The proposal would reform the fee-for-service reimbursement system to reward providers who meet performance thresholds, would introduce physician-developed clinical care guidelines and would require the development of quality measures. The bill, despite being expected to cost at least $150 billion, which is not yet paid for, marks the most significant progress to date in the effort to eliminate the SGR.

2. Administration

CMS Final Rule Allows Expanded Access to Lab Results

CMS released afinal rule, published in the Federal Register on Feb. 6, that will allow patients and their designated representatives direct access to their laboratory test results. The rule, which will go into effect April 7, amends two statutes, the Clinical Laboratory Improvement Amendments (CLIA) of 1988 and the Health Insurance Portability and Accountability Act (HIPAA) of 1996. “The right to access personal health information is a cornerstone of the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule. Information like lab results can empower patients to track their health progress, make decisions with their health care professionals, and adhere to important treatment plans,” Health and Human Services Secretary (HHS) Kathleen Sebelius said in a statement. Previously, 26 states lacked laws allowing direct disclosure of test results to patients and 13 states directly prohibited disclosure. Previous concerns over disclosure had been the consequences of giving patients access to direct lab data without any professional interpretation of the results. HHS estimates the cost of direct patient disclosure of lab results would have cost anywhere from $3 million to $63 million in 2013.

Letter to Issuers in the Federally-facilitated Marketplace (FFM) Outlines Network Adequacy Standards for 2015

On Feb. 4, CMS released a draftLetter to Issuers in the Federally-facilitated Marketplaces (Letter). The Letter provides issuers seeking to offer Qualified Health Plans (QHPs) — including stand-alone dental plans (SADPs), in a Federally-facilitated Marketplace (FFM) and/or Federally-facilitated Small Business Health Options Program (FF-SHOP) — with operational and technical guidance to help them successfully participate in the Marketplaces. Along with establishing new patient safety and drug coverage standards, health plans sold in ACA federal marketplaces would have to include at least 30 percent of available essential community providers in each plan’s service area.

Patient-Centered Outcomes Research Institute (PCORI) Offers $206 Million in Research Support

On Feb. 6, the Patient-Centered Outcomes Research Institute (PCORI) issued eight newPCORI Funding Announcements (PFAs) that offer up to a total of $206 million in support for a range of patient-centered comparative effectiveness research (CER) projects. The funding opportunities include the latest two to focus on specific high-impact topics and PCORI’s first call for proposals through its new Pragmatic Clinical Studies Initiative. This initiative will fund large, patient-centered pragmatic clinical studies, or large simple trials, that compare two or more interventions in real-world settings in an effort to more rapidly and efficiently produce evidence that is generally applicable to a wide spectrum of patients’ needs and clinical care settings.

Six-Month Moratorium on “Two-Midnight Rule” Enforcement

On Jan. 31, 2014,CMS announced an additional six-month extension of the enforcement moratorium on its “two-midnight rule,” through Sept. 30, 2014. According to the announcement, Medicare Administrative Contractors (MACs) will continue to select claims for review with dates of admission between March 31, 2014, and Sept. 30, 2014. MACs will continue to review and deny claims found not in compliance with CMS-1599-F (commonly known as the “2-Midnight Rule”). In addition, MACs will continue to hold educational sessions with hospitals through Sept. 30, 2014. Generally, Recovery Auditors and other Medicare review contractors will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission on or after Oct. 1, 2013, through Oct. 1, 2014.

3. State Activities

New Hampshire Close to Expanding Medicaid Program

Following an agreement by state Senate leaders, New Hampshire is on the verge ofexpanding Medicaid as provided for under the ACA, pursuing a private-sector-based alternative approach that would extend Medicaid coverage to an estimated 50,000 low-income state residents. The plan, supported by Gov. Hassan, was unveiled during a committee meeting Thursday. The plan would phase in the expansion over the next year and a half, first steering newly eligible residents to an existing state premium assistance program. Legislative language is expected to be filed next week.

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.

IRS, HHS, Labor Proposed Rule Defines “Excepted 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.

5. Reports

CBO

CBO Budget and Economic Outlook: 2014 to 2024

On Feb. 4, CBO issued its report, “The Budget and Economic Outlook: 2014 to 2024,” in which the agency estimates that the ACA creates incentives for individuals to work fewer hours, amounting to 2 million fewer full-time equivalents (FTEs) in 2017, and 2.5 million fewer in 2024. In addition, six million individuals are now expected to obtain coverage under the ACA in 2014, which is about 1 million fewer than estimated last spring, due to problems launching the insurance exchanges. CBO also projects that payments and collections for risk adjustment, reinsurance and risk corridors — risk management programs for insurers — in the ACA will save the federal government $8 billion over the 2015-2024 period.

CRS

Legislative Efforts to Defund, Delay ACA

On Feb. 5, the CRSreleased a report describing legislative activities related to defunding and delaying the ACA. According to the report, the legislation includes stand-alone bills as well as provisions in broader, often unrelated measures that would (1) repeal the ACA in its entirety and, in some cases, replace it with new law; (2) repeal, or by amendment restrict or otherwise limit, specific provisions in the ACA; (3) eliminate appropriations provided by the ACA and rescind all unobligated funds; (4) replace the mandatory appropriations for one or more ACA programs with authorizations of (discretionary) appropriations, and rescind all unobligated funds; and (5) block or otherwise delay implementation of specific ACA provisions. A few bills containing provisions to amend the ACA that have attracted sufficiently broad and bipartisan support have been approved in both the House and the Senate and signed into law.

Funding of Risk Corridor Payments Under ACA

CRS hasreleased a document responding to questions from lawmakers regarding funding for the risk corridor program established by the ACA. The risk corridor program directs payments to be made by the Secretary of HHS to certain insurers that have underestimated their premiums for a given plan year through 2016. However, statutory and constitutional provisions prohibit federal agencies from making payments in the absence of a valid appropriation. According to CRS, under longstanding GAO interpretations, an appropriation must consist of both a direction to pay and a specified source of funds. While the language of ACA establishes a directive to the Secretary to make such payments, it does not specify a source from which those payments are to be made and, therefore, would not appear to constitute an appropriation of funds for the purposes of risk corridor payments under that section.

GAO

Private Health Insurance: The Range of Base Premiums for Individuals Age 19 and 64 in the Individual Market by State in January 2013

According to arecent GAO report, the range of base premiums prior to underwriting for individual market health insurance plans as displayed on the HealthCare.gov Plan Finder in January 2013 for individuals aged 19 and 64 in each of the 50 states and the District of Columbia represented the lowest premium amounts that would have been available to different categories of individuals at that time; however, actual premium amounts paid by consumers could have been higher, since they would have been determined after more complete underwriting for health conditions and other factors, and some individuals could have been denied coverage. GAO also reported on base premiums prior to underwriting for an urban and a rural Zip Code in four select states, one from each census region. The states included Illinois, Nevada, Pennsylvania and Texas.

IRS Report: Upcoming Budget Cuts May Impact IRS Customer Service for ACA Queries

In an audit report released Feb. 3 by the Treasury Inspector General for Tax Administration (TIGTA), officials found that further budget cuts to the Internal Revenue Service (IRS) customer service in FY2014 might make it difficult to respond to the public concerning the expected 11.4 million inquiries from individuals with questions regarding ACA tax provisions. The recent FY2014 appropriations billed signed by President Obama on Jan. 17 reduces IRS funding to $11.3 billion, a 4.4 percent cut from FY2013. The IRS TIGTA, J. Russell George, said, “Our audit found that the IRS has sufficient plans to provide customer service to taxpayers concerning the tax implications under the Affordable Care Act… [however], the IRS will need to re-examine its plans and consider cutbacks in the services it can provide or reduce staffing in other programs” if more cuts continue in FY 2014. The Affordable Care Act (ACA) added or modified about 50 tax provisions in the IRS tax code, representing the largest change to the tax code since 1986. Further complications for the agency include continual changes to the implementation to the health care law, including the July 2 delay for the large employer mandate. Currently, public inquiries are being directed toward the Department of Health and Human Services (HHS), but as FY2014 individual tax returns are filed, the primary responsibility of customer service will transition to the IRS in 2015.

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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