Washington Healthcare Update

February 17, 2014

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1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

Government Accountability Office (GAO)

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

1. Congress


Energy and Commerce Hearing Examines Drug Shortage Issues

On Feb. 10, the Energy and Commerce Subcommittee on Health held a hearing entitled “Examining Drug Shortages and Recent Efforts to Address Them,” in which members of the committee heard expert testimony from the Government Accountability Office (GAO) and the Food and Drug Administration (FDA) regarding the ongoing threat of drug shortages and what steps have been taken by FDA to address this issue, particularly after the enactment of the bipartisan Food and Drug Administration Safety and Innovation Act (FDASIA). FDASIA provided FDA with additional authorities to regulate drug manufacturing, and placed on drug manufacturers new requirements intended to help prevent and mitigate drug shortages. FDASIA also required GAO to compile a report on drug shortages and the role of FDA in resolving them.


Marcia Crosse, Ph.D.
Director, Health Care
U.S. Government Accountability Office

Douglas Throckmorton, M.D.
Deputy Director of Regulatory Programs
U.S. Food and Drug Administration

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

Congress Approves SGR “Transitional Fund”

Last week, both the House and Senateapproved legislation that would, in addition to insulating certain members of the military from a reduced annual cost-of-living adjustment as required by the Bipartisan Budget Act of 2013, create a $2.3 billion “transitional fund for sustainable growth rate reform.” Under the legislation, the Secretary of HHS is to establish such a transition fund “to provide funds to pay for physicians’ services under part B to supplement the conversion factor under section 1848(d) for 2017 if the conversion factor for 2017 is less than conversion factor for 2013.” The bill passed the House by a vote of 326-90 on Feb. 11, and it passed the Senate the following day by a vote of 95-3.


Budget Committee Examines CBO Economic Outlook: 2014 to 2024

On Feb. 11, the Senate Budget Committee held a hearing entitled “CBO Budget and Economic Outlook,” in which members of the committee heard testimony from Congressional Budget Office (CBO) Director Doug Elmendorf regarding CBO’s report “The Budget and Economic Outlook: 2014 to 2024.” The report represents CBO’s 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.

Dr. Douglas W. Elmendorf
Congressional Budget Office (CBO)

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

2. Administration

IRS Adds Delays to Employer Mandate Requirements

On Feb. 10, the IRSfurther amended its current delay of penalties associated with a failure of certain employers to provide qualified health coverage to its employees. Currently, any employer with 50 or more full-time employees or full-time equivalents (FTEs) must provide comprehensive health care coverage to full-time workers, or pay a tax penalty if any workers enroll in tax-subsidized health care coverage on the Health Insurance Exchanges (HIEs) established under the ACA. However, under the newly released rule, businesses with 50 to 99 employees would be exempted from these requirements for an additional year, until 2016. In addition, for 2015, employers with more than 100 employees will be required to offer qualifying coverage to at least 70 percent of its full-time employees in order to avoid paying a penalty. Such employers will not be required to offer coverage to 95 percent of its employees, as was previously required, until 2016.

3.3 Million Now Enrolled in Health Insurance Via ACA

On Feb. 12, HHS releasedupdated ACA enrollment figures, finding that more than 1.1 million people signed up for coverage through state and federal health exchanges in January, which represents over one-third of the nearly 3.3 million people who have selected a plan through the ACA’s health insurance exchanges. According to HHS, about 25 percent of people signing up for coverage through January were between the ages of 18 and 34 in the 36 states served by the federal marketplace — up from 24 percent in last month’s enrollment report. However, officials noted that the rate of signups among young people grew by 65 percent in January, compared to 55 percent for all other age groups combined.

Office of Medicare Hearings and Appeals (OMHA) Appellant Forum

On Feb. 12, the HHS Office of Medicare Hearings and Appeals held aMedicare Appellant Forum to provide updates to OMHA appellants on the status of OMHA operations, relay information on a number of OMHA initiatives designed to mitigate a growing backlog in the processing of Medicare appeals at the OMHA-level of the administrative appeals process, and provide information on measures that appellants can take to make the administrative appeals process work more efficiently at the OMHA-level. Of particular note, OMHA staff discussed a recent decision by OMHA Chief Administrative Law Judge (ALJ) Nancy J. Griswold to defer assignment of appeal requests until the ALJ docket can adequately accommodate such requests, which could add an estimated 28 months to the average adjudication time. Beneficiary-initiated appeals are not subject to the new deferral process.

FDA Final Rule Medical Device Reporting: Electronic Submission Requirements

The FDA hasissued a final rule revising its postmarket medical device reporting regulation and making technical corrections. This final rule requires device manufacturers and importers to submit mandatory reports of individual medical device adverse events, also known as medical device reports (MDRs), to the Agency in an electronic format that FDA can process, review and archive. Mandatory electronic reporting will improve the Agency’s process for collecting and analyzing postmarket medical device adverse event information. Electronic reporting is also available to user facilities, but this rule permits user facilities to continue to submit written reports to FDA. This final rule also identifies changes to the content of required MDRs to reflect reprocessor information collected on the Form FDA 3500A as required by the Medical Device User Fee and Modernization Act of 2002 (MDUFMA). The final rule is effective Aug. 14, 2015.

Guidance Bulletins Outline Consumer Health Insurance Enrollment Policies

On Feb. 6, CMS issued fiveguidance bulletins concerning its enrollment and termination policies and its special enrollment period. In the fifth bulletin, titled “Flexibility during the Initial Open Enrollment Period to Change Plans Offered by the Same Issuer at the Same Metal Level,” consumers in the federally operated Affordable Care Act (ACA) health insurance marketplaces who have paid their first month’s premiums and whose coverage is already effective may change their plans to one with more inclusive provider networks. In order for them to make another plan selection, four criteria must be met, which include: 1) the new plan will maintain the same issuer, 2) the new plan will keep the same actuarial “metal” level and cost-sharing reduction level, 3) the change is to a more inclusive provider network or for other isolated circumstances at the discretion of CMS and 4) the change is being requested within initial open enrollment. Also mentioned, because eligibility isn’t being re-determined for enrollees, payment of the advance premium tax credit subsidies won’t change. Advance cost-sharing reductions will change, however, because cost-sharing reductions are specific to qualified health plans. Open enrollment for federally operated ACA exchanges ends on March 31.

3. State Activities

Illinois Releases Five-Year Medicaid Restructuring Plan

Illinois Governor Pat Quinn released a five-year Medicaid restructuring plan to secure $5.2 billion from the Federal government. The plan, “The Path to Transformation,” expands mental health and addiction treatment services and home and community-based care for the disabled. A spokesman for the Governor said that “by restructuring and streamlining, we can bend the cost curve and spend less in the long run on community care while also provid[ing] better treatment for folks across the board.” The proposal must be approved by regulators in order to receive federal funding. Two public hearings on the plan will be held in the next month.

New York Medicaid Waiver Approved by HHS

New York Governor Andrew Cuomo announced Feb. 13 thatan agreement has been reached “in principle” with Health and Human Services (HHS) on an $8 billion Medicaid waiver. The waiver is $2 billion less than the state originally sought, but will be necessary to assist “struggling hospitals” that may otherwise have shut down. CMS officials warned that the waiver had not yet been approved, saying the agreement is an important step in that process, which would be finalized in the next few weeks. The state will have to achieve specific benchmarks in order to collect the funding over the five-year period.

Massachusetts Exchange Has New Deadline

On Feb. 13, HHS granted Massachusetts athree-month extension, through June 30, to fix its broken website and get customers enrolled. While CMS has not “formally” granted the extension to the state, officials said CMS will aid the state’s efforts to ensure their citizens will be able to enroll in “quality, affordable health coverage.” The state had requested a six-month extension from several of the ACA’s requirements with which the state has had difficulty complying. Massachusetts, which had already had an instituted exchange-based health care system prior to enactment of the ACA, is often cited as the model on which the ACA was based.

4. Regulations Open for Comment

Children’s Hospital Graduate Medical Education (CHGME) Information Collection

The Health Resources and Services Administration (HRSA) hasannounced plans to submit an Information Collection Request (ICR) to the Office of Management and Budget (OMB) in which data will be collected on the number of full-time equivalent residents in applicant children’s hospitals’ training programs to determine the amount of direct and indirect medical education payments to be distributed to participating children’s hospitals. Assessment of the hospital data ensures that appropriate CMS regulations and Children’s Hospitals Graduate Medical Education (CHGME) program guidelines are followed in determining which residents are eligible to be claimed for funding. The audit results impact final payments made by the CHGME Payment Program to all eligible children’s hospitals. Indirect medical education payments will also be derived from a formula that requires the reporting of discharges, beds and case mix index information from participating children’s hospitals. The CHGME Payment Program was enacted to provide federal support for graduate medical education (GME) to freestanding children’s hospitals. This program attempts to provide support for GME comparable to the level of Medicare GME support received by other, non-children’s hospitals. Comments are due April 11, 2014.

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.

5. Reports


Drug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability

On Feb. 10, GAO released a report entitled “Public Health Threat Continues Despite Efforts to Help Ensure Product Availability,” in which the oversight agency identified, as an immediate case of drug shortages, supply disruptions arising from slower drug production by manufacturers focused on resolving problems related to drug safety and quality. In order for the FDA to enhance its oversight of drug shortages, particularly as the agency fine-tunes the manner in which it gathers data on shortages and transitions from its database to a more robust system, GAO recommends that the Commissioner of FDA develop policies and procedures for the use of the existing drug shortages database to ensure staff enter information into the database in a consistent manner and to ensure the accuracy of the information in the database. In addition, GAO recommends that FDA conduct periodic analyses using the existing drug shortages database (and, eventually, the new drug shortages information system) to routinely and systematically assess drug shortage information, and use this information proactively to identify risk factors for potential drug shortages early, thereby potentially helping FDA to recognize trends, clarify causes and resolve problems before drugs go into short supply.


Medicare Improperly Paid Millions of Dollars for Prescription Drugs Provided to Incarcerated Beneficiaries During 2006 Through 2010

In areport released Feb. 10 by the Department of Health and Human Services (HHS) Office of the Inspector General (OIG), between 2006 and 2010 the Centers for Medicare and Medicaid Services (CMS) made almost $12 million in improper payments to Medicare Part D plan sponsors due to deficient internal controls. As it stands, the Medicare Prescription Drug Benefit Manual prohibits Part D coverage for prisoners. Once incarcerated status has been verified, Plan D plan sponsors are supposed to unenroll prisoners from the Part D program. Using a random sampling of 100 incarcerated Medicare beneficiaries, OIG found that CMS accepted 1,298 PDEs submitted by plan sponsors on behalf of 49 inmates, totaling $326,000 in gross drug costs. Citing lack of internal controls to account for its issuance of improper PDEs, OIG found that many plan sponsors had not had in place procedures/policies to handle prescription drug situations for inmates until at least 2010, four years after the Part D program was instituted. OIG recommended that final payment determinations be reopened between 2006 and 2010 to resolve the $326,000 in improper payments cited in the report and reevaluate additional final payment determinations from 2006-2010 before the newly enhanced policies and procedures were implemented by Part D plan sponsors.

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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