Washington Healthcare Update

March 30, 2015

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This Week: House Approves FY 2016 Budget Proposal… House PassesPermanent SGR Reform and Two-Year CHIP Reauthorization… Senate Passes FY 2016Budget Plan… HHS Report: ACA Led to $7.4 Billion Decline in UncompensatedHospital Care Costs… New Hampshire Legislature Moves to End Medicaid Expansionin 2016

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


House Approves FY 2016 Budget Proposal

On March 25, the House passed its FY 2016 budget resolution, a blueprint Chairman Price (R-GA) calls “A Balanced Budget for a Stronger America,” by a partyline vote of 228-199, with all Democrats and 17 Republicans opposing the measure. The budget resolution is a blueprint for Congress on spending priorities.It is not signed by the president and therefore is not a law. However, at times the budget resolution can include reconciliation instructions, which aredirected to authorizing committees usually to reduce spending in specific programmatic areas like Medicare and Medicaid. The budget proposal impacts thehealth sector in a number of areas:

  • Uses reconciliation to overturn the Affordable Care Act (ACA): The House Budget would use the reconciliation process to repeal the ACA “in its entirety” and would shift some savings to Medicare’s solvency.
  • Reverses the $700 billion taken from Medicare as part of the enactment of the ACA. The budget would put these savings toward Medicare solvency.
  • Repeals the Independent Payment Advisory Board (IPAB), which was to advise Congress on Medicare cuts but never has been staffed.
  • Repeals the ACA’s funding for expansion of Medicaid. Instead, the resolution provides for new State Flexibility Funds that we believe will operate much like block grants.
  • Reforms Medicare by changing the program to a premium support model, starting for beneficiaries in 2024, and combining Parts A and B so there would be a single premium for seniors. The budget also appears to call for some risk adjustment of premiums. It also provides a catastrophic cap on annual out-of-pocket expenses for Medicare beneficiaries.
  • Unifies Medicaid and the State Children’s Health Insurance Program (SCHIP) into a single program, while providing funds to extend SCHIP.
  • Provides for medical liability reform.

For more information, please visitbudget.house.gov.

House Passes Permanent SGR Reform and Two-Year CHIP Reauthorization

On March 26, the House of Representatives passed H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015; the legislation creates a permanent fixto the Sustained Growth Rate (SGR) formula, the payment rate at which providers are reimbursed through Medicare, and includes a number of other importanthealth-related policies, including funding for the Children’s Health Insurance Program (CHIP), provisions known as “extenders,” the Protecting theIntegrity of Medicare Act and an extension of the Secure Rural Schools and Community Self-Determination Act of 2000. In a historic display ofbipartisanship, the legislation passed by a vote of 392-37, with 212 Republicans and 180 Democrats supporting the proposal. The Balanced Budget Act of 1997established the SGR formula to control Medicare spending for physicians’ services; the formula set an overall target of how much that spending should beand measured spending on both annual and cumulative bases. Since 2002, the formula triggered reductions in physician payment and only the continuedintervention of the U.S. Congress has prevented these cuts from being implemented. To avert these cuts, Congress has “patched” the problem, as determininghow to pay for a permanent fix was a stumbling block. H.R. 2 only partially pays for the cost of the package, relying in part on the upcoming Congressionalbudget resolution to accommodate funding. However, part of the funding in the legislation comes from beneficiaries themselves. The Senate did not act onthe House-passed SGR deal before it adjourned for a two-week recess, but Senate Majority Leader Mitch McConnell (R-KY) did promise the chamber would takeup the measure “very quickly” when it returned; he and Senate Minority Leader Harry Reid will work together to schedule the vote on the bill. One potentialpoint of contention: Senate Democrats have been very vocal on pushing for four years of funding for CHIP reauthorization; funding for the program runs outat the end of September 2015. The current SGR patch expires March 31, thereby mandating that the Centers for Medicare and Medicaid Services (CMS) holdclaims until Congress does act, as the agency has done in the past.

The Congressional Research Service (CRS), which provides exclusive policy and legal analysis to committees and Members of both the House and Senate,released aMarch 26report that provides a brief summary of each provision of H.R. 2, the Medicare Access and CHIPReauthorization Act of 2015 as well as a brief description of how each provision impacts the current law.

Clickhere for a more detailed summary ofthe legislation.

Ways and Means Hearing Examines the Use of Data to Stop Medicare Fraud

On March 24, House Committee on Ways and Means Subcommittee on Oversight held a hearing on the federal government’s use of data analysis—particularly theCenters for Medicare and Medicaid Services’ Fraud Prevention System (FPS)—to identify emerging trends and stop Medicare fraud. This hearing allowed theCommittee to hear testimony from both government and non-governmental witnesses on the progress that the FPS has made and what continued efforts are underway to use data analysis in identifying and stopping fraud and waste within Medicare.

Witness List

Dr. Shantanu Agrawal
Deputy Administrator and Director, Center for Program Integrity, Centers for Medicare & Medicaid Services

Mr. Gary Cantrell
Deputy Inspector General for Investigations, Office of Inspector General, U.S. Department of Health and Human Services

Ms. Charlene Frizzera
President and CEO, CF Health Advisors

Mr. Kirk Ogrosky
Partner, Arnold & Porter LLP

Mr. Mark Nelsen
Senior VP for Risk Products and Business Intelligence, Visa Inc.

Mr. Louis Saccoccio
Executive Director, National Health Care Anti-Fraud Association

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

Bicameral Legislation Introduced to Eliminate Restrictions on HSAs and FSAs

On March 23, Republican Rep. Erik Paulsen (MN-03) and U.S. Senator John Barrasso (WY-R) introduced twinlegislation in the House and Senate respectively repealingcertain Affordable Care Act (ACA) restrictions on health savings accounts (HSAs) and flexible spending accounts (FSAs). The Family Health Care FlexibilityAct, H.R. 1547 repeals Section 9005 of the ACA that sets a $2,500 FSA contribution cap and prohibits HSA and FSA participants from using their own accountdollars to purchase over-the-counter medicines without a prescription. “Health savings and flexible spending accounts put power in the hands of patients byletting them make their own decisions when it comes to their care,” said Congressman Paulsen in apress release. “It makes no sense thatthe President’s health care law prohibits a parent from using these accounts to purchase over-the-counter allergy treatment or cold medicine for theirchild without a doctor’s prescription. As health care costs continue to rise, Washington should allow more choices in health care, not fewer options.”Previously, individuals could receive reimbursement for all medications through these accounts, including over-the-counter drugs that were not prescribedby a medical provider; FSAs had no contribution limit and could be used to pay for routine medical expenses including vision and dental care. Sens. KellyAyotte (R-NH), Richard Burr (R-NC), Mike Crapo (R-ID), Johnny Isakson (R-GA), Jim Risch (R-ID), Pat Roberts (R-KS) and Roger Wicker (R-MS) alsoco-sponsored the bill.


Senate Passes FY 2016 Budget Plan

On March 27, the Senate approved the Republican-ledbudget resolutionthat established the budget outline for fiscal year 2016. In a 52-46 vote, with Republicans Ted Cruz (R-TX) and Rand Paul (R-KY) opposing and DemocratsDianne Feinstein (D-CA) and Barbara Mikulski (D-MD) abstaining, the budget proposal was passed along party lines. With the plan, Senate Republicansanticipate saving $2.1 trillion by eliminating the coverage provisions of the Affordable Care Act (ACA), including repealing the law’s expansion ofMedicaid eligibility to households with incomes up to 138 percent of the federal poverty level and eliminating the subsidies available to low- andmiddle-income households to buy private plans through state and federal exchanges. The approved Senate budget also includes an additional $400 billion inreductions to Medicaid spending over a decade and $430 billion in savings from changes to Medicare benefits. The average annual growth in spending onMedicare slows from 6.4 percent under current law to 5.5 percent under the GOP proposal, with those increases largely driven by an aging population; theRepublican budget also drops average yearly increases in Medicaid spending from 5.6 percent to 4.2. Worth noting, the Senate proposal differs from theHouse’s approved version in that it stops short of moving Medicare to a premium support model, and vows to extend the solvency of the Medicare trust fundby five years (leaving the details for achieving that goal up to legislative committees). The budget also promises to “modernize Medicaid based on thesuccessful model of the Children’s Health Insurance Program,” while simultaneously pledging more flexibility for states. The chamber also voted 56-44 toapprove an amendment offered by Sen. Tim Scott (R-SC) to create a deficit-neutral fund that would increase awareness of all ACA-related taxes included inmonthly health insurance premiums. Altogether, the Senate budget would cut $4.3 trillion in mandatory spending over the next 10 years and $97 billion fromdiscretionary programs. In its next steps, both the House and Senate now have to form a conference committee to resolve their budget differences after theEaster recess.

Senators Send Bipartisan Letter to CMS Asking Agency to Reverse Its Decision on MA Risk Adjustment Rate

Fourteen bipartisan senators, led by Johnny Isakson (R-GA), Michael Bennet (D-CO),sent aletter to CMS March 23 imploring theagency to cease moving forward on a Medicare Advantage risk-adjustment model, CY 2016 45 Day Notice for Medicare Advantage, that it announced in its latestcall letter. They believe the CMS-proposed rule will create further disruptions to MA beneficiaries in 2016 due to proposed payment cuts in the rule. Inlieu of this payment model change, they ask the agency to use the risk adjustment scheme it released in 2013, saying it would give plans “greater certaintyand less volatility.” The letter says that fully implementing the revised health-status risk-adjustment model will decrease payments by 1.7 percent nextyear. The Medicare Payment Advisory Commission (MedPAC) reported in 2014 that the model tends to overpay for low-cost enrollees and underpay for veryhigh-cost enrollees.

Senate Aging Committee Hearing and Bicameral Legislation Highlight Need for Increased Alzheimer’s Research Funding

The Senate Aging Committee held a hearing March 25 in order to investigate whether the U.S. is properly funding Alzheimer’s research in order to find acure for the disease by 2025. The hearing focused on the financial, economic and emotional challenges facing those with Alzheimer’s disease and theindividuals and families who care for them. Approximately $600 million, or less than three-tenths of 1 percent of the $226 billion spent to care forAmericans suffering with the disease, is spent on researching a cure for the disease. “Alzheimer’s receives funding that is clearly disproportionately lowcompared to its human and economic toll,” said Chair Susan Collins (R-ME) in her opening statement. Moreover, Ranking Member Claire McCaskill (D-MO)discussed the critical importance of both investing in medical research to combat Alzheimer’s and the importance of funding and expanding Medicaid programsfor long-term care. As the most expensive disease in the nation, Alzheimer’s will cost $226 billion in 2015 with projections to reach $1.1 trillion by2050. Also introduced this week in both chambers, the bipartisanHOPE for Alzheimer’s Act (H.R. 1559/S. 857) aims to ensure that newly diagnosedMedicare beneficiaries and their caregivers receive comprehensive care planning services and mandates their diagnosis to be documented in their medicalrecord; it will also help inform health care providers about what steps should be taken following a diagnosis, which will enhance assistance for peoplewith Alzheimer’s and their caregivers.

Witness List

B Smith
and her husband, Dan Gasby
Former model, Restaurateur, Retailer, Author and Actor who has been diagnosed with early-onset Alzheimer’s disease

Richard J. Hodes, M.D.
Director, National Institute on Aging at the National Institutes of Health

Ronald Petersen, Ph.D., M.D.
Professor of Neurology, Director and Chair, Cora Kanow Professor of Alzheimer’s Disease Research, Mayo Clinic Alzheimer’s Disease Research Center andAdvisory Council on Alzheimer’s Research, Care, and Services

Kimberly Stemley
Caregiver and Chief Financial Officer, Rx Outreach

Heidi R. Weirman, M.D.
Division Director of Geriatrics and Medical Director, Maine Medical Center and Elder Care Services, MaineHealth

For more information or to watch the hearing, please visitaging senate.gov.

2. Administration

HHS Announces Health Care Payment Learning and Action Network

On March 25, HHS Secretary Burwellannounced new engagement with public and private health care payers, purchasers, providers, consumers and statesdesigned to develop successful payment models that improve health care quality. According to Burwell, the new initiative, known as The Health Care PaymentLearning and Action Network, is being established to provide a forum for public-private partnerships to help the U.S. health care payment system meet orexceed recently established Medicare goals for value-based payments and alternative payment models. These goals are to move 30 percent of Medicare paymentsinto alternative payment models by the end of 2016 and 50 percent into alternative payment models by the end of 2018. Alternative payment models includemodels such as Accountable Care Organizations (ACOs), bundled payments andadvanced primary care medical homes. The Network will serve as a forum wherepayers, providers, employers, purchasers, states, consumer groups,individual consumers and others can discuss, track and share best practiceson how to transition towards alternative payment models that emphasizevalue. The Network will be supported by an independent contractor that willact as a convener and facilitator.

FDA: An Interactive Discussion on the Clinical Considerations of Risk in the Postmarket Environment

On March 19, the FDA is announcing a public workshop entitled “Clinical Considerations of Risk in the Postmarket Environment.” The purpose of this workshopis to provide a forum for an interactive discussion on assessing changes in medical device risk as quality and safety situations arise in the postmarketsetting when a patient, operator or member of the public uses the device. FDA is interested in obtaining input from stakeholders about assessing riskpostmarket when new hazards develop in the postmarket setting that were not present or not known at the time of approval, or hazards were anticipated, butharm occurs at an unexpected rate or in unexpected populations or use environments. Comments and suggestions generated through this workshop willfacilitate the assessment of risk in postmarket quality and safety situations. The public workshop will be held on April 21, 2015, from 8:30 a.m. to 5 p.m.This public workshop will be webcast. Persons interested in viewing the webcastmust register online by 4 p.m., April 13, 2015. In addition, the workshopwill include a public comment session and topic-focused sessions.

HHS Report: ACA Led to $7.4 Billion Decline in Uncompensated Hospital Care Costs

The Department of Health and Human Services (HHS)released a report March 23 finding that hospitals spent approximately$7.4 billion less in uncompensated care in 2014 than they would have, had coverage remained at its 2013 level — at $27.3 billion versus $34.7 billion. Thefigures represent a 21 percent reduction in uncompensated care spending. Uncompensated care is the unreimbursed cost of the care provided by hospitals topeople who are uninsured or underinsured. In order to develop its findings, HHS’s Assistant Secretary for Planning and Evaluation (ASPE) analyzed hospitalfinancial reporting and found that member surveys from hospital associations indicate that through 2014 the payor mix shifted in ways that will likelyreduce hospital uncompensated care costs in the future. Also worth noting, the agency concluded that $5.0 billion of this uncompensated cost reductioncomes from the 28 Medicaid expansion states plus Washington, D.C., representing a 26 percent reduction in uncompensated care spending and 68 percent oftotal savings. The remaining $2.4 billion comes from the 22 Medicaid non-expansion states, representing a 16 percent reduction in uncompensated carespending and 32 percent of total savings. Alluding to possible further savings, HHS said if non-expansion states had proportionately as large increases inMedicaid coverage as did expansion states, their uncompensated care costs would have declined by an additional $1.4 billion. In 2013, hospitals providedover $50 billion in uncompensated care in the United States.

3. State Activities

New Hampshire Legislature Moves to End Medicaid Expansion in 2016

During a budget review session on March 15, Republican members of the New Hampshire House Finance Committee, Division III, approved by 6-3 party line voteto eliminate a provision in the budget that would have provided for the state’s expanded Medicaid program to continue beyond its current sunset date ofDec. 31, 2016. According to the National Association of State Budget Officers’ annual report, in New Hampshire Medicaid grew from 24 percent of the overallstate budget in 2012 to 27 percent in 2014, with roughly 34,000 residents having signed up for the state’s expansion program, which provides coverage forindividuals with incomes that fall within 138 percent of the federal poverty level. The budget must pass the full House and Senate before being sent toGov. Hassan for her signature. While Hassan opposes the committee’s decisionto end the expansion, and has included an extension into 2017 of theexisting expansion, she has not indicated whether the absence of anextension would compel her to veto the budget. For more information, pleasevisitwww.unionleader.com.

Right to Try Laws Signed in Three States

This week, three more governors signed into law “Right to Try” legislation, which would nullify in practice some Food and Drug Administration (FDA) rulesthat prevent still experimental drugs and treatments from being used by terminally ill patients. On March 26 Gov. Terry McAuliffe (D-VA) signedHB1750, the Virginia Right to Try Act, and on March 24 Gov. Gary Herbert (UT-R) and Gov. Mike Pence(R-IN) signed into lawHB94, the Utah Right to Try Act, and HB1065, the Right to Try Act, respectively. Under current federalregulations, a patient with a serious or life-threatening condition has two options for accessing drugs and therapies not already approved and in themarketplace. The easiest way to do so is by enrolling in a clinical trial for the drug. Unfortunately, there are a number of factors that may prohibit apatient’s participating in a clinical trial, such as a preexisting medical condition, age and geographic location. As it stands, patients can also attemptto gain access to an experimental therapy by applying directly to the FDA through their “compassionate use” program. In the last four years, the FDA hasreceived close to 6,000 applications from patients hoping to gain access to unapproved but potentially lifesaving therapies; FDA says it has denied only 33requests in that time period. Thus far eight other states have enacted “Right to Try” laws, and similar legislation is on the desks of Mississippi’s andMontana’s governors and in various phases of consideration in 20 other states.

4. Regulations Open for Comment

FDA Assessing theCenter of Drug Evaluation and Research’s Safety-Related Regulatory ScienceNeeds and Identifying Priorities

On March 19, the Food and Drug Administration (FDA) announced theavailability of a report entitled “AssessingCDER’s Drug Safety-Related Regulatory Science Needs and IdentifyingPriorities.” This report identifies drug safety-related regulatoryscience needs and priorities related to the mission of FDA’s Center for DrugEvaluation and Research (CDER) that would benefit from externalcollaborations and resources. FDA hopes to foster collaborations withexternal partners and stakeholders to help address these needs andpriorities. This notice asks stakeholders conducting research related tothese needs to describe that research and indicate their interest incollaborating with FDA to address safety-related research priorities. Sincepublication of the 2011 ‘‘Identifying CDER’s Science and Research Needs’’report, FDA has been engaged in efforts to further assess and prioritize theneeds articulated therein. As part of these efforts, CDER’s Safety ResearchInterest Group (SRIG), a subcommittee of the Science Prioritization andReview Committee, assessed CDER’s overall drug safety-related regulatoryscience needs in view of FDA’s ongoing research efforts and highlightedareas that would benefit from additional resources and collaboration. Publiccomments will be accepted at any time. However, the public is encouraged tosubmit comments by May 18, 2015, to ensure FDA consideration.

National Coverage Determinations Proposed for Removal

On Aug. 7, 2013, the Centers for Medicare & Medicaid Services (CMS) published a Federal Register notice (78 FR 48164-69), updating the process used foropening, deciding or reconsidering national coverage determinations (NCDs) under the Social Security Act (the Act). The notice replaced the Sept. 26, 2003,Federal Register notice (68 FR 55634) and further outlined an expedited administrative process, using specific criteria, to remove certain NCDs older than10 years since their most recent review. On March 18, CMS announced its list of NCDs proposed for removal, along with the relevant portion of the FederalRegister notice containing the CMS criteria. CMS is soliciting public comment through April 17 on whether any or all of these NCDs should be removed orretained. CMS expects to publish a finalized list by fall 2015. Local Medicare Administrative Contractors (MACs) will be able to determine coverage foritems and services that were previously determined by removed NCDs. View theproposed rule:www.cms.gov.

HHS Releases Proposed Rules on EHR Incentive Programs and Health IT Certification Criteria

The U.S. Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS) and Office of the National Coordinator forHealth Information Technology (ONC)announced March 20 the release of the Stage 3notice of proposed rulemaking for the Medicare and Medicaid Electronic Health Records (EHRs) Incentive Programs and 2015 Edition Health IT CertificationCriteria to improve the way electronic health information is shared and ultimately improve the way care is delivered and experienced. The proposed rulesaim to give providers additional flexibility, make the program simpler, drive interoperability among electronic health records and increase the focus onpatient outcomes to improve care.

Specifically, the Meaningful Use Stage 3 proposed rule issued by CMS specifies new criteria that eligible professionals, eligible hospitals and criticalaccess hospitals must meet to qualify for Medicaid EHR incentive payments; the rule also proposes criteria that providers must meet to avoid Medicarepayment adjustments (Medicaid has no payment adjustme