Washington Healthcare Update

January 20, 2015

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This Week: Upcoming E&C Health Subcommittee Hearing on Permanent SGRFix…Administrator Tavenner to Leave CMS Next Month…CA Exchange Board ImplementsAdjustments for New Insurance Market Entrants

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Upcoming E&C Health Subcommittee Hearing on Permanent SGR Fix

On Jan. 14, House Energy and Commerce Health Subcommittee Chairman Joe Pittsannouncedan upcoming two-day hearing to give subcommittee members a chance to discuss how to enact Sustainable Growth Rate (SGR) reform before the current patchexpires at the end of March 2015. The current SGR formula, which has been delayed annually since 2010, limits growth in spending for physicians’ servicesby linking updates to target rates of spending growth. The hearing, entitled “A Permanent Solution to the SGR: The Time Is Now,” will be held Wednesday,Jan. 21, 2015, at 10:15 a.m. in 2322 Rayburn House Office Building; it is anticipated that the hearing will recess Wednesday, Jan. 21, and will reconveneon Thursday, Jan. 22, at 10:15 a.m. in 2322 Rayburn House Office Building. Last year, the House of Representatives approved bipartisan H.R. 4302, theProtecting Access to Medicare Act, authored by Chairman Pitts. Despite the agreement on policy in the 113th Congress, H.R. 4302, the Protecting Access toMedicare Act, Republicans and Democrats could not agree on how, or even whether, to pay for replacing the formula, which is estimated to cost about $120billion over a decade. “For too long, the specter of uncertainty has threatened seniors’ access to their trusted doctor. Last year we came closer than everto finally solving SGR — we even passed a bipartisan bill out of committee 51 to zero. In the coming months, we have an opportunity to build upon thatmomentum in finding a fiscally responsible path to keep the promise to our seniors and put this issue to bed once and for all,” commented full committeeChairman Fred Upton (R-MI).

The hearing webcast and witness list will be available atenergycommerce.house.gov.

Bipartisan DME Bidding Legislation Introduced in House and Senate; OIG to Perform Study on Effect of DME Competitive Bidding on Patient Access

On Jan. 13, Representatives Pat Tiberi (R-OH) and John Larson (D-CT) and Senators Portman (R-OH) and Ben Cardin (D-MD) introduced bicameral, bipartisanlegislation that would help end the speculative bidding that has plagued the Medicare competitive bidding program for durable medical equipment,prosthetics, orthotics and supplies (DMEPOS). The Medicare Competitive Bidding Improvement Act (MCBIA),S.148/H.R. 284, would ensure a faircompetitive bidding program by disallowing intentional low-ball bidding for Centers for Medicare and Medicaid Services (CMS) contracts. The respectivebills would make all bids binding and require proof of licensure for the next rounds of bidding. “Right now, suicide bids have plagued the DME bid process.These are bids some suppliers propose without the capability to actually supply the products if offered a contract. These bids contribute to unsustainablelower overall rates calculated to reimburse those suppliers who do provide products … [R]equiring binding bids would insert accountability into the bidprocess, help seniors access high-quality equipment and services, and improve health outcomes,” said Rep. Tiberi.

As it stands, officials from CMS does not have the statutory authority to require binding bids, and Congress must authorize CMS to require binding bids.

Also worth noting, the Department of Health and Human Services Office of Inspector General (OIG) announced in aDec. 22 letter to Rep. Tom Price (R-GA) that the agency plans to lookinto whether Medicare beneficiaries’ access to durable medical equipment has been hurt by the competitive bidding program; Rep. Tom Price (R-GA) and 137House members wrote aletter in July 2014 askingthe agency to review the matter. “We plan to review documents from providers and Medicare claims data for a nationally representative sample ofbeneficiaries to determine and compare the rates at which beneficiaries successfully obtained needed items subject to competitive bidding,” the OIG letterto Price says. If beneficiaries have not received DME they need, the OIG says it will look for the reason behind that, as well. The study will look at boththe first and second round of the program.

A press release on the legislation can be foundhere.

Legislation to Exempt Emergency Volunteers From Employer Mandate Advances

On Jan. 12, the House passed, by a vote of 401-0,legislation that excludes emergency-service volunteers from being considered full-time employees underthe ACA employer mandate. According to the bill’s author, Rep. Barletta (R-PA), under the ACA, employers with 50 or more employees must provide healthinsurance or pay penalties. If volunteers were ever considered employees, fire companies could exceed the 50 employee threshold in several different ways:a volunteer department by itself based on size; by being part of a combined, paid-volunteer firefighter department; or by being part of a municipality thathas 50 or more public employees in total. Barletta authored the samelegislation in the 113th Congress when it passed the U.S. House ofRepresentatives on March 11, 2014, by another unanimous vote of 410-to-0.


Bipartisan Legislation Introduced in the Senate to Allow Importation of Rx Drugs from Canada

On Jan. 8, Senators John McCain (R-AZ) and Amy Klobuchar (D-MN) reintroducedbipartisan legislation, the Safe and Affordable Drugs from Canada Act, which would allow individuals to safely import prescription drugs from Canada. S.122 is a measure theyhope will create savings for consumers and bring greater competition into the pharmaceutical market. “Minnesotans know that, just on the other side of theborder, Canadians often pay much less for the exact same prescription drugs. These cheaper alternatives come with the same safety standards and are thesame dosages sold in the United States, but current law prevents Americans from importing them and benefitting from the savings. That just doesn’t makesense. This bipartisan bill would allow for the safe import of these drugs from Canada, let competition in from over the border, and bring down costs forAmerican families,” Sen. Klobuchar said in apress release. Under the legislation,imported prescription drugs would have to be purchased from an approved Canadian pharmacy and dispensed by a licensed pharmacist. Drugs imported under thisbill would be the same dosage, form and potency as drugs in the U.S., but at a significant savings to U.S. consumers. The U.S. spent a total of more than$271 billion on prescription drugs in 2013 alone, and we spend an average of almost $1,000 per person per year on pharmaceuticals — roughly 40 percent morethan the next highest country. Senators McCain and Klobuchar first introduced this bill in July 2014.

Senator Grassley Sends Letter to CMS Concerning Failing Iowa Insurance Co-Op

Sen. Grassley (R-IA) sent aletter to the Centers forMedicare & Medicaid Services (CMS) Administrator Marilyn Tavenner on Jan. 13 inquiring about the role of CMS in the financial collapse of CoOportunityHealth, a co-op in Iowa and Nebraska formed through the implementation of the Affordable Care Act (ACA). As it stands, the co-op enrolled over 100,000members and charged premiums that proved to be too low to support the co-op’s operations. Iowa insurance regulators took over control of the co-op afterCMS refused to meet its request for more funding in order to continue to offer coverage. New beneficiary enrollments were stopped, and members wereinstructed to find insurance elsewhere. “While CoOportunity was facing financial challenges, if CMS had informed it earlier that it would not receiveadditional funds it could have taken steps to potentially avoid failure,” Grassley wrote in the letter. He asked several questions of CMS to explain howthe agency made its loan decisions for co-ops and requested all communications between the agency and the co-op concerning the amount of funding that wouldbe available. In a response letter from CMS, the agency said the co-op’s last request for funding was greater than all of the resources CMS had availableto loan to co-ops. CoOpportunity was one of 23 health insurance co-ops set up nationally under the Affordable Care Act, and which was set up to bring newchoices in areas, such as Iowa, where there was little competition in the insurance market.

2. Administration

Administrator Tavenner to Leave CMS Next Month

On Jan. 16, CMS AdministratorMarilyn Tavenner announced that she will step down from her post at the end of February. Tavenner had served as actingadministrator since 2011, but with strong bipartisan relationships in Congress, she became the first Senate-confirmed CMS Administrator in almost six yearsin May 2013 by a vote of 91-7. Despite her working relationship with Capitol Hill, Tavenner oversaw the rocky rollout of HealthCare.gov, the federal healthinsurance marketplace created by the ACA, and had recently drawn negative attention for over-reporting the number of individuals enrolled in ACA insuranceplans. According to HHS Secretary Burwell, CMS principal deputy administrator Andy Slavittwill become acting administrator of CMS.

OMB Reviewing CMS Rule on Mental and Behavioral Health Parity for Medicaid, CHIP and Expanded Medicaid Populations

The White House Office of Management and Budget (OMB) is currentlyreviewing a proposed Department of Health and Human Services(HHS) rule, released in November 2013, that addresses the requirements under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction EquityAct of 2008 (MHPAEA) and applies them to Medicaid Alternative Benefit Plans (ABPs), Children’s Health Insurance Program (CHIP) and Medicaid managed careorganizations (MCOs) related to beneficiary expansion through measures within the Affordable Care Act. The final rule defines intermediate service andcreates an intersection between medical care and behavioral health services, requiring that they be handled in a “comparable fashion” relative to costsharing/duration limits. While the rule doesn’t require that residential services be covered, it says that if MCOs or health insurers offer “post-acutecare services,” then they must cover residential treatment and other intermediate services on the behavioral health side. CMS finished a rule in November2013 that applies the mental health parity to commercial plans and plans covered by the Employee Retirement Income Security Act. That rule, which HHS wrotewith the Department of Labor and the Department of Treasury, did not apply to plans in Medicaid managed care, CHIP or Medicaid-expansion plans.

HHS Reports 6.8 Million Enrolled in ACA Health Plans

On Jan. 14,HHS announced, in the first weekly snapshot that provides an estimate of plan selections for each state in the federally facilitatedmarketplace (FFM), that since Open Enrollment began on Nov. 15, nearly 6.8 million consumers selected a plan or were automatically re-enrolled in the FFM.“Nearly 6.8 million Americans have access to quality, affordable health coverage for 2015 through the Federally Facilitated Health Insurance Marketplace,”HHS Secretary Sylvia Burwell said. “There are just over four weeks before the Feb. 15 deadline and the end of Open Enrollment. For those who are thinkingabout getting health coverage, take a look at your options on HealthCare.govor contact the call center. If you don’t enroll by Feb. 15, then you mayhave to wait until next year to sign up for affordable coverage. In thefirst month, 87 percent of consumers got financial assistance to help lowerthe cost of premiums.” The Open Enrollment snapshots for the FederallyFacilitated Marketplace provide point-in-time estimates for weekly data.These are preliminary numbers and could fluctuate based on consumers’changing or canceling plans or having a change in status such as new job ormarriage. The snapshots also include totals from the beginning of the 2015Open Enrollment period, which started Nov. 15, 2014. Note that datarevisions may mean that the weekly totals do not sum to the cumulativenumbers.

POTUS Expands Parental Leave for Federal Workers

In afact sheetpublished Jan. 15, President Barack Obama announced anew executive action, entitled “Modernizing Federal Leave Policies for Childbirth, Adoption and Foster Care to Recruit and Retain Talent and Improve Productivity,” that givesfederal employees up to six weeks of paid family leave after the birth, adoption or foster placement of a new child, even if they have not accrued thatmuch time off yet; the measure would also grant federal employees an additional six weeks of unpaid administrative leave for the same purposes. TheAdministration will also propose using more than $2 billion in new funds to encourage states to develop paid family and medical leave programs as part ofits upcoming budget; moreover, the Administration announced that the Department of Labor will use $1 million in existing funds to help state and localgovernments conduct feasibility studies on the issue. In addition, the President called on Congress to expand these medical leave benefits further bypassing the Healthy Families Act, which would grant Americans seven days a year of paid sick time. “The fact is this is not a partisan issue. It’s a familyissue, and it’s an economic issue,” said Valerie Jarrett, Senior Advisor to the President. “Adopting policies that are good for working families is bothgood for business and good for workers.” Under the Family and Medical Leave Act (FMLA), many workers may take up to 12 weeks of unpaid time off withoutlosing their job to care for a new child, recover from a serious illness or care for an ill family member (roughly 60 percent of workers are eligible forthe law’s protections). However, employers are not required to provide paid leave for these purposes and often choose to make it unpaid.

FDA 2015 Regulatory Agenda Released

On Jan. 6 the Food and Drug Administration (FDA) released its list of 90 guidance documents the drug center plans to publish in 2015. Theagenda list, “Guidance Agenda: New &Revised Draft Guidances CDER is Planning to Publish During Calendar Year 2015,” is published annually by FDA and is meant to outline FDA’s regulatoryitinerary as it relates to pharmaceutical and biological products. The latest Guidance Agenda contains several guidances of particular note, including fourbiosimilar guidance documents, including how biosimilar products should be labeled. With regard to marketing guidance FDA expects to finalize sixadvertising guidance documents, including one on the use of health care economic information, and another one on how companies can use third-party links onsocial media. Other topics with high priority include manufacturing, with planned guidances on how to “modernize the pharmaceutical manufacturing base”using emerging technologies, another on “quality metrics and risk-based inspections,” and another one focused on data integrity — a particular issue forforeign-based inspections. Guidance on several congressional priorities include six guidance documents on track and trace as part of the Drug Supply ChainSecurity Act (DSCSA) and new guidance on the Sunscreen Innovation Act (SIA), a law passed in late 2014 that aims to speed up the pace at which newsunscreen ingredients can come to market. Unexpectedly off the list was FDA’s anticipated final guidance on evaluation and labeling of abuse-deterrentopioids, particularly noteworthy as Congress’ FY 2016 budget withheld $20 million in salaries and expenses for the FDA commissioner’s office pendingfinalization of the guidance.

CMS Allows Medicaid Reimbursement for Schools for Some Free Health Services

In aletterto state Medicaid directors, the Centers for Medicare & Medicaid Services (CMS) announced a change in its “free care rule,” which bars Medicaid fromreimbursing schools for health services offered to students for free. Many advocacy groups asked CMS to change its 17-year-old rule because it discouragedschools from providing health services such as vaccinations, health screenings and asthma care. The previous rule included two exemptions: Servicesprovided to students as part of their individual plans created under the Individuals with Disabilities Education Act and services provided under theMaternal and Child Health Services Block Grant. School eligibility for the updated federal financing program (FFP) policy requires that the student is aMedicaid beneficiary, that the service is covered by Medicaid including the Periodic Early and Periodic Screening Diagnostic and Treatment (EPSDT) benefitand that third-party liability (TPL) requirements are met, among others. CMS issued the guidance after several school districts, including San FranciscoUnified, successfully challenged their state programs in court to not provide Medicaid payment under the previous rule and utilizing CMS’ administrativeappeals process.

3. State Activities

CA Exchange Board Implements Adjustments for New Insurance Market Entrants

The Covered California board of directors adopted a new policy Jan. 15 that will allow more health insurance carriers to sell in areas of the state wherepatients have few options for coverage. Previously, the exchange had instated a rule not to allow new insurers into the market until 2017, barring a fewexceptions. The new policy will allow health insurance companies that are already established in the state to apply to sell individual coverage inunderserved areas, which includes Northern California, the Central Coast, the Central Valley and Mono and Inyo counties. As it stands, almost 30,000covered California subscribers in more than 22 counties have only one insurer option in the state exchange. Worth noting, the state-based exchange willstill be giving priority to the existing 2015 insurers to expand coverage into those regions. Covered California Executive Director Peter Lee said large,well-established insurers should not be able to enter the individual exchange immediately because otherwise they would undercut competitors who joined thestate exchange when it first opened. However, California Insurance Commissioner Dave Jones (D) criticized the board’s new policy, saying it favors theexchange’s existing insurers and limits coverage options for beneficiaries. Both UnitedHealthcare and Oscar Insurance Corporationpushed back onthe decision in hopes they could offer plans for the first time in 2016.

4. Regulations Open for Comment

Medicare and Medicaid Program;Revisions to Certain Patient’s Rights Conditions of Participation andConditions for Coverage Overview

On Dec. 11, the Centers for Medicare & Medicaid Services (CMS) issued aproposed rule to revise selected conditions of participation (CoPs) forproviders, conditions for coverage (CfCs) for suppliers, and requirementsfor long-term care facilities, by proposing to clarify that where state lawor facility policy provides or allows certain rights or privileges to apatient’s opposite-sex spouse under certain provisions, a patient’s same-sexspouse must be afforded equal treatment if the marriage is valid in thejurisdiction in which it was celebrated. The proposal was made in responseto a Supreme Court decision, United States v. Windsor, which held thatSection 3 of the Defense of Marriage Act (DOMA) is unconstitutional becauseit violates the Fifth Amendment. Section 3 of DOMA provided that indetermining the meaning of any Act of the Congress, or of any ruling,regulation or interpretation of the various administrative bureaus andagencies of the United States, the word “marriage” meant only a legal unionbetween one man and one woman as husband and wife, and the word “spouse”could refer only to a person of the opposite sex who was a husband or awife. To be assured consideration, comments must be received no later than 5p.m. on Feb. 10, 2015.

CMS Releases Proposed Rule Aimed to Strengthen ACOs

In aDec. 1 press release, the Centers for Medicare & Medicaid Services (CMS)announced a newproposed rule looking to improve the Shared Savings Program (SSP) forAccountable Care Organizations (ACOs) through a greater emphasis on primarycare services and promoting transitions to performance-based riskarrangements. Through the Affordable Care Act (ACA), ACOs encourage doctors,hospitals and other health care providers to work together to bettercoordinate care when people are sick and keep people healthy, which helps toreduce growth in health care costs and improve outcomes. CMS AdministratorMarilyn Tavenner said, “This proposed rule is part of our continuedcommitment to rewarding value and care coordination — rather than volumeand care duplication. We look forward to partnering with providers andstakeholders to continuously refine and improve the Medicare Shared Savingsprogram.” Other goals of the rule include providing more flexibility forACOs seeking to renew their participation in the program, encouraging ACOsto take on greater performance-based risk and reward, creating alternativemethodologies for benchmarks, and streamlining data sharing and reducingadministrative burden. The SSSP now includes more than 330 ACOs in 47states, providing care to more than 4.9 million beneficiaries in Medicarefee for service. Recently, CMS announced first-year SSP results, findingthat 58 SSP ACOs held spending below their benchmarks by a total of $705million and earned shared savings payments of more than $315 million, andthat another 60 ACOs had expenditures below their benchmark, but not by asufficient amount to earn shared savings. Comments on the proposed rule aredue by Feb. 6. A fact sheet accompanying the proposed rule can be found here.

5. Reports

MedPAC January 2015 Public Meeting

On Jan. 15-16, the Medicare Payment Advisory Commission (MedPAC) met to discuss Medicare payment policy issues, including upcoming recommendations thecommission will issue to Congress in March. Specifically, MedPAC Commissioners voted unanimously to approve site-neutral payments for inpatientrehabilitation facilities (IRFs) and skilled nursing facilities (SNFs) for selected conditions, consistent with previous recommendations to Congress.Commissioners also voted on a recommendation to replace the existing bonus for primary care doctors with a per-beneficiary payment method. A full list oftopics covered includes:

  • Per-beneficiary payment for primary care
  • Post-acute care: Trends in Medicare’s payments across sectors and ways to rationalize payments
  • Assessing payment adequacy and updating payments: Ambulatory surgical centers, dialysis facilities, hospice, inpatient rehabilitation facilities and long-term care hospitals
  • The relative cost of Medicare Advantage, Accountable Care Organizations and fee-for-service Medicare
  • Status report on Part D
  • Hospital short stay policy issues
  • Next steps in measuring quality of care in Medicare

For more information, please visitwww.medpac.gov.

OIG: Medicare Hospices Have Financial Incentives to Provide Care in Assisted Living Facilities

According to arecent report issued by the HHS Office of the Inspector General (OIG), Medicare payments for hospice care in Assisted Living Facilities(ALFs) more than doubled in five years, totaling $2.1 billion in 2012. Hospices provided care much longer and received much higher Medicare payments forbeneficiaries in ALFs than for beneficiaries in other settings. In addition, hospice beneficiaries in ALFs often had diagnoses that usually require lesscomplex care. OIG found that hospices typically provided fewer than five hours of visits and were paid about $1,100 per week for each beneficiary receivingroutine home care in ALFs. Also, for-profit hospices received much higher Medicare payments per beneficiary than nonprofit hospices. This report raisesconcerns about the financial incentives created by the current payment system and the potential for hospices to target beneficiaries in ALFs because theymay offer the hospices the greatest financial gain. Together, the findings in this and previous OIG reports show that payment reform and moreaccountability are needed to reduce incentives for hospices to focus solely on certain types of diagnoses or settings. OIG based its study on an analysisof all Medicare hospice claims from 2007 through 2012. OIG usedCertification and Survey Provider Enhanced Reports data and Healthcare CostReport Information System reports for information on hospicecharacteristics.

If you have any questions, contact the following individuals atMcGuireWoods Consulting:

StephanieKennan, Senior Vice President
Charlyn Iovino, VicePresident
BrianLooser, Assistant Vice President
Amanda Anderson,Research Assistant