Washington Healthcare Update

June 8, 2015

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This Week: House Ways & Means Committee Holds Markup; MakesSignificant Legislative Changes to Health Care Bills… Senate Finance CommitteeHolds Markup on Medicare Appeals Process Bill… CMS Issues Final Rule onAccountable Care Organizations… CMS Posts Proposed Health Insurance RateIncreases for 2016

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


House Ways & Means Committee Holds Markup; Makes Significant Legislative Changes to Health Care Bills

On June 2, 2015, the House Ways and Means Committee held a markup on ten health care bills, during which two sections of the Affordable Care Act (ACA) wererepealed: the medical device excise tax and the Independent Payment Advisory Board (IPAB). During the markup, committee members cited how theimplementation of the medical device tax has caused companies to shift operations overseas and lay off employees due to the tariff’s tax on revenues ratherthan profits. Likewise, IPAB was repealed due to lawmakers’ concerns that rulemaking and Congressional authority would be transferred into the hands ofunelected bureaucrats who have the ability to control and alter Medicare spending. The committee also unanimously passed a Long-Term Care Hospital billthat approved a specific number of long-term care hospitals to expand their operations or to open. Five bills were passed concerning the Medicare Advantageprograms, including ones that delayed CMS ability to terminate contracts because of low star ratings, stronger CMS data reporting guidelines and expandedthe timetable for seniors to switch plans. The two other small bills that moved out of committee include the Steve Gleason Act, named after the former NFLfootball player who was diagnosed with ALS, which requires Medicare to cover specific eye-tracking and gaze-interaction devices for qualified individuals,and a bill that expands the Medicare Independence at Home Medical Practice Demonstration program for two years.

More information on the markup can be found here.

House E&C Committee Held Hearing to Reduce Medicaid Fraud

On June 2, House Energy and Commerce Oversight and Investigations Chairman Tim Murphy held a hearing titled “Medicaid Program Integrity: Screening OutErrors, Fraud, and Abuse.” The hearing focused on reducing wasteful spending in the Medicaid program, through reducing improper or fraudulent payments tobeneficiaries and providers. Evidence from the Government Accountability Office and the Office of Management and Budget indicates the numerous errors instate programs, such as the ability for providers to continue to bill Medicaid state programs despite exclusion from the program. Gaps remain in theCenters for Medicare & Medicaid’s attempts to screen the eligibility of providers and beneficiaries, according to a GAO study. The witnesses gave the committee insight on current federal oversight of the program andthe fraud issues that exist at the state level.

Witness List

Seto J. Bagdoyan
Director, Audit Services
Forensic Audits and Investigative Service
U.S. Government Accountability Office

Shantanu Agrawal, M.D.
Deputy Administrator and Director
Center for Program Integrity
Centers for Medicare and Medicaid Services
U.S. Department of Health and Human Services

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


Senate Judiciary Approves Patent Reform Legislation

On June 4, 2015, the Senate Judiciary Committee favorably reported S. 1137, the PATENT Act, out of committee by a 16-4vote after a brief markup. The bill, which was introduced by Chairman of the committee Chuck Grassley (R-IA) and Ranking Member Patrick Leahy (D-VT), aimsto curb lawsuits brought by “patent trolls” by setting a national standard for what is considered a deceptive patent demand letter. The legislation alsogives the Federal Communications Commission expanded enforcement authority. The measures in the bill do not go as far as Pharma would like, but theindustry agrees that the changes make it easier for patent holders facing an IPR challenge. “Abusive patent litigation is a threat to our economy and costsconsumers and businesses billions of dollars each year. Too often, small business owners are being targeted for doing nothing more than using off-the-shelfproducts. These types of frivolous lawsuits cost them millions of dollars and force them to settle despite having a strong defense,” Chairman Grassley saidin a press release. Worth noting, thelegislation is still a work-in-progress, as in the Manager’s Amendment there is placeholder language for amending claims in the Patent and TrademarkOffice’s proceedings. Negotiations are ongoing regarding this provision. Another issue concerns a proposal by the life sciences community about theapplicability of the Patent and Trademark Office’s post-grant proceedings to patents that are subject to the Hatch-Waxman Act and Biologics PriceCompetition and Innovation Act processes. The co-sponsors have agreed to work on these issues as the bill proceeds to the Senate floor.

Senators Reintroduce Bipartisan Bill Aimed at Increasing and Improving Opioid Addiction Treatment

Sens. Rand Paul (R-KY) and Edward Markey (D-MA.) reintroduced the Recovery Enhancement for Addiction Treatment Act (TREAT Act) onMay 28, to expand specialized treatment for prescription drug and heroin addiction. Specifically, the legislation would expand the ability of addictionmedical specialists and other trained medical professionals to provide lifesaving medication-assisted therapies such as buprenorphine (also called Suboxone®) for patients battling heroin and prescription drug addiction. Unfortunately, due in part to federal restrictions, of the approximately 2.4 millionpeople dealing with prescription drug and heroin dependency in 2013, only half received specialty treatment for their condition. “Heroin addiction is onthe rise in Kentucky and throughout the country, and government’s solution of locking up people with addiction is not solving the problem. The TREAT Actwill remove a roadblock to getting people the help they need to break the cycle of addiction and get on a path to recovery,” said Sen. Paul in apress release. The TREAT Act also calls for the creation of “Qualified Practice Settings,” which are clinical settings that meet certain standards andqualification and mandates that the Government Accountability Office (GAO) look into potential alterations for a myriad of different aspects of currentaddiction treatment practices and policies. In 2013, 44,000 people died in the United States because of drug overdoses. As that number has risen in thepast decade, States and Health care providers have attempted to adapt and keep up with the increased demand for overdose and addiction treatment.

Bipartisan Bill to Improve Rural Health Care Introduced

Sens. Maria Cantwell and Patty Murray, both Washington Democrats, and Sen. John Thune (R-SD) introduced a new bipartisan bill, the Rural ACO Improvement Act, aimed at improving care in rural areas throughMedicare Accountable Care Organizations (ACOs). S.1456 instructs Medicare to provide care in an ACO to beneficiaries who receive primary care services fromnurse practitioners, physician assistants, rural health clinics or federally qualified health centers, specifically because these patients live in ruralcommunities where primary care doctors are in short supply. Rural Health Clinics are included as well. Under current law, patients who see only nursepractitioners, physicians’ assistants and clinical nurses are not eligible to be counted toward shared savings. These changes will also ensure that healthcare providers attain enough ACO participants to maintain the model. “This bipartisan legislation takes several common-sense steps that would not only helprural ACOs get off the ground, but would also result in more coordinated access to value-based rural health care for Medicare beneficiaries across thecountry,” said Sen. Thune in a press release. In ACOs,health care providers are responsible for effectively managing the health and wellness of patients: when an ACO delivers high-quality care at a lower costthan traditional fee-for-service spending, the ACO recoups part of the savings. Created by Congress in 2010, the Medicare Shared Savings Program is avoluntary program enabling health care providers to share savings with Medicare if they beat cost targets and achieve specified quality measures.

Senate Finance Committee Holds Markup on Medicare Appeals Process Bill

The Senate Finance Committee held a markup June 3 to finalizethe Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act, following several committee hearings to investigate ways to streamline the appeals and audit process and clear the 870,000 pending appeals in backlog.The far-ranging appeals reform legislation, which includes many measures originally proposed in the President’s FY 2016 Budget, would instruct auditors tosend claims back to the first level of appeals when new evidence is submitted later in the appeals process and create an exemption for beneficiaries, theCenters for Medicare and Medicaid Services (CMS) and contractors if they submit new information after the first level of appeals. Others appealing areexempted from the process if introducing new information is justified because those handling the lower levels of appeals inadvertently left information outof the record, a lower level of appeals made a decision on different grounds than the initial decision or other circumstances determined by Department ofHealth and Human Services (HHS) come into play. The AFIRM Act also would create a Medicare Magistrates division to handle smaller appeals amounting to lessthan $1,460, or the amount required to take a claim to a federal court. “Increased Medicare payment appeals from a range of Medicare providers andsuppliers has resulted in a substantial backlog, causing financial and administrative problems that sometimes last years,” Sens. Hatch and Wyden said in a statement. “This legislation is designed toimprove the appeals process at HHS while upholding the integrity of the audit process so that providers and beneficiaries are not indefinitely left inlimbo.” Other provisions included in legislation include the creations of an independent Ombudsman for Medicare Reviews and Appeals to help peopleconsidering appeals and additional funding for CMS to hire more contractors to help slog through the existing appeals backlog. The committee voted thelegislation out of committee by voice vote.

For more information, or to watch the markup, please visit finance.senate.gov.

2. Administration

CMS Releases New Medicare Data on Hospital and Physician Utilization

On June 1, 2015, the Centers for Medicare and Medicaid Services (CMS) released Medicare Part A hospital utilization and payment data aswell as Medicare Part Bphysician and other supplier utilization data for FY 2013 as a means to increase the transparency over hospital and physician utilization respectively. The Medicare Part A data provides insight into the averagecosts of the 100 most common Medicare procedures, both inpatient and outpatient services, as well as information on services and procedures provided toMedicare beneficiaries by physicians or other health care professionals. According to the hospital data, the most frequently occurring hospital dischargesare for major joint replacements, followed by sepsis, digestive disorders, heart failure and pneumonia. Moreover, hematology, oncology, rheumatology anddermatology have the highest average Part B costs per provider. The released data shows what different hospitals and physicians in all 50 states andWashington, D.C., charge for similar services.

CMS Posts Proposed Health Insurance Rate Increases for 2016

In a June 1 press release, theCenters for Medicare and Medicaid Services (CMS) posted proposed health insurance rate increases of 10 percent or more for the 2016 coverage year onratereview.health.gov. In an attempt to increase transparency and oversight, CMS rate review processallows for officials, experts and the public to examine and question why a particular health insurance plan’s yearly increase in its premium is high (10percent or great) before it is finalized. The rates will be finalized by October. The rate review process is designed to improve the accountability andtransparency of the process by which insurance companies set premiums. Final rates for all states will be published no later than Nov. 1, 2015.

CMS Announces New Policy to Allow Entrepreneurs and Innovators to Have Access to Medicare Data

Centers for Medicare and Medicaid Services (CMS) Administrator Andy Slavitt announced a new policy June 2 thatallows innovators and entrepreneurs to access CMS data, such as Medicare claims data. Under the new guidelines, innovators and entrepreneurs can conductapproved research that will improve care and provide better tools that should benefit health care consumers. “Data is the essential ingredient to buildinga better, smarter, healthier system. Today’s announcement is aimed directly at shaking up health care innovation and setting a new standard for datatransparency,” said Administrator Slavitt. “We expect a stream of new tools for beneficiaries and care providers that improve care and personalizedecision-making.” Innovators and entrepreneurs will be able to peruse data via the CMS Virtual Research Data Center (VRDC), which provides access togranular CMS program information, including Medicare fee-for-service claims statistics, in an efficient and cost-effective manner. Researchers working inthe CMS VRDC have direct access to approved privacy-protected data files and are able to conduct their analysis within a secure CMS environment.Researchers will be able to access data on a quarterly basis. CMS will begin accepting innovator research requests in September 2015.

CMS Releases First Quarter Effectuated Enrollment Numbers

On June 2, 2015, CMS released updated enrollment figures that show thatabout 11.7 million Americans selected plans through Affordable Care Act (ACA) health insurance marketplaces as of Feb. 22, the end of the “in-line” specialenrollment period for individual market coverage. On March 31, 2015, about 10.2 million consumers had “effectuated” coverage, which means those individualspaid for Marketplace coverage and still have an active policy in the applicable month. These numbers are consistent with the Department of Health and HumanServices (HHS) effectuated target for the end of 2015. Of the 10.2 million effectuated consumers, 85 percent have received an advanced premium tax credit,averaging about $272 per month, to make their premiums more affordable. Effectuated enrollment for the 34 states that are part of the federally facilitatedMarketplaces was 7.3 million, and for state-based Marketplaces effectuated enrollment was 2.9 million. CMS plans to release Marketplaces’ state-by-stateeffectuated enrollment overviews on a quarterly basis.

CMS Issues Final Rule on Accountable Care Organizations

The Centers for Medicare & Medicaid Services (CMS) has issued a final rule, on June 4, relating to its Medicare Shared SavingsProgram, a voluntary program to improve the quality and coordination of care for beneficiaries through accountable care organizations (ACOs) whilesimultaneously trying to reduce health care costs. The rule is an effort to increase the efficiency of and the participation in the program by providergroups and hospitals and will both enhance the focus on primary care services and provide additional flexibility in the program. “Accountable CareOrganizations have shown early but exciting progress in improving quality of care, while providing more patient-centered care at a lower cost,” said CMSActing Administrator Andy Slavitt. “The ACO rule strengthens our ability to reward better care and lay the groundwork for more providers to becomesuccessful ACOs.” The rule modifies the program in numerous areas including:

  • ACOs will be able to choose from three tracks with the addition of a new Track 3. This model includes higher rates of shared savings, the prospective assignment of beneficiaries and the opportunity to use new care coordination tools.
  • Data sharing between CMS and participating ACOs will be streamlined, in order to give ACOs access to patient data in a more secure manner. This will greatly improve the quality of care and care coordination for beneficiaries.
  • A waiver of the three-day stay Skilled Nursing Facility (SNF) rule will be available to beneficiaries who are assigned to Track 3 ACOs.
  • The rule refines policies for resetting benchmarks to incentivize ACOs to continually improve patient care and generate cost savings. CMS also intends to propose further improvements to benchmarks later this year.

These reforms are a result of growth in the ACO program; over 400 ACOs are currently participating in the Medicare Shared Savings Program, serving over 7million beneficiaries. Earlier this year, the Obama Administration announced its goal of tying 30 percent of Medicare payments through ACOs and otheralternative payment models by 2016. The final rule will be published in the Federal Register and will be available online on Tuesday, June 9. For more information, please visitcms.gov.

FDA Guidance Clarifies Interchangeability Determinations in 351(k) Application

The Food and Drug Administration (FDA) clarified in a recent draft guidance document thatinterchangeability determinations can be made in an original 351(k) biosimilar application, but warns that it would be very difficult for biosimilar drugresearchers to do so. The draft guidance also covers additional questions and answers regarding implementation of the biosimilar pathway, including how tomeet the mandated provisions under the Pediatric Research Equity Act (PREA) by taking information from the reference product. A biosimilar product is abiological product that is approved based on a showing that it is highly similar to an FDA-approved biological product, known as a reference product, andhas no clinically meaningful differences in terms of safety and effectiveness from the reference product. Among the questions addressed in the recent draftguidance is whether FDA can determine interchangeability in an original biosimilar application. The agency says it can determine statutoryinterchangeability in a biosimilar application or any supplement application, but notes that “at this time, it would be difficult as a scientific matterfor a prospective biosimilar applicant to establish interchangeability in an original 351(k) application given the statutory standard forinterchangeability and the sequential nature of that assessment. FDA is continuing to consider the type of information sufficient to enable FDA todetermine that a biological product is interchangeable with the reference product.” The Affordable Care Act amends the Public Health Service Act (PHS Act)to create an abbreviated licensure pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensedbiological product. This pathway is provided in the part of the law known as the Biologics Price Competition and Innovation Act (BPCI Act).

FDA Deadline Extended for Electronic Submission of Drug and Biologic Safety Reports

The Food and Drug Administration (FDA)announcedMay 26 that it is delaying the compliance date for the final rule for the electronic submission of postmarketing safety reports from June 10 to Sept. 8 forhuman drugs and biological products. Previously mandated in June 2014, the original Safety Reporting rule modifies FDA’s postmarketing safety reportingregulations for human drugs and biological products in order to demand that persons subject to mandatory reporting requirements submit safety reports in anelectronic format that FDA can process, review and archive. FDA’s announcement simultaneously broadcasts the availability of the Safety Reporting Portal(SRP), an online electronic submission system, for the electronic submission of postmarketing individual case safety reports (ICSRs) of adverse events forhuman drug and nonvaccine biological products. The decision was made in order for those required to submit the reports to register and test the agency’snew Safety Reporting Portal (SRP). The agency says those mandated to submit the postmarket safety reports—which include manufacturers, packers,distributors and applicants with approved new drug applications, abbreviated new drug applications and biologics license applications—can continue to sendFDA paper submissions until the new deadline.

3. State Activities

Pennsylvania Announces First ACA Contingency Plan for Subsidies

In a statement June 2, Democratic Gov. Tom Wolf (PA) announced his administration’s backup plan to save Pennsylvanians Affordable Care Act (ACA) subsidies,should the Supreme Court rule against the federal government in King v. Burwell. In a press release, Gov. Wolf announced that the PennsylvaniaDepartment of Insurance submitted an application to the federal government June 1 to set up a state-based Marketplace for nearly 350,000 people in thestate on the federal exchange, which he called “the responsible thing to do.” “I am committed to protecting hardworking Pennsylvanians from losing theassistance they rely on to purchase health care coverage,” Gov. Wolf said. Gov. Wolf is just one of a few governors who have been public about their plansfor the ruling. Worth noting, more than a dozen states quietly met last month to discuss contingency plans for the looming Supreme Court case involvingbillions of dollars in ACA subsidies.

Connecticut Exchange Approves FY 2016 Self-Sustaining Budget

In meeting materials released last month, the Board of Directors of the ConnecticutExchange, Access Health CT (AHCT), approved a self-sustaining budget for FY 2016. The new budget contains $25.7 million of the $82 million budget to bepaid for through carrier assessments, while outstanding federal grants will contribute $7 million, and Connecticut’s Department of Social Services, whichmanages the state’s Medicaid program, will underwrite $43 million. The 2016 AHCT budget is $5.3 million, or 15.1 percent less than the 2015 forecast of$35.0 million, while on a gross expense basis, 2016 is $81.7 million , which is $26.9 million or 24.8 percent less than the 2015 forecast of $108.6million. Also worth noting, the board voted to increase exchange user fees from 1.35 percent to 1.65 percent. Exchange CEO Jim Wadleigh said in astatement, “For the typical consumer, this increase amounts to about six cents per day, but ultimately our goal is to become completely self-sustaining,without any carrier assessments.” Access Health CT was created by the Connecticut Legislature in 2011 and established to satisfy the requirements of theAffordable Care Act (ACA).

4. Regulations Open for Comment

CMS Released Proposed Rule Concerning Medicaid and CHIP Plans

On May 26, CMS posted a proposed rule to modernize the Medicaidand Children’s Health Insurance Program (CHIP) managed care regulations. The proposed rule is the first major update to Medicaid and CHIP managed careregulations in more than a decade. The proposal is