Washington Healthcare Update

September 8, 2015

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This Week: Centers for Medicare and Medicaid Services (CMS)Releases 2017 State Essential Health Benefit Plans… Health Resources andServices Administration (HRSA) Releases Draft Guidance on 340B DrugProgram… Internal Revenue Service (IRS) Proposed Rule Mandates EmployerHealth Plans Offer Hospital and Physician Services

1. Congress

House of Representatives

District Work Period: Aug. 3–Sept. 7


District Work Period: Aug. 5–Sept. 7

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


District Work Period: Aug. 3–Sept. 7


District Work Period: Aug. 5–Sept. 7

2. Administration

Food and Drug Administration (FDA) Releases Draft Guidance on Orphan Drug Development

To assist companies that make drugs intended to treat or prevent rare diseases, the FDA releaseddraft guidance in conducting moreefficient and successful development programs.

Specifically, the guidance addresses the important aspects of rare disease drug development, including: adequate description and understanding of thedisease’s natural history; adequate understanding of the pathophysiology of the disease and the drug’s proposed mechanism of action; nonclinicalpharmacotoxicology considerations to support the proposed clinical investigation or investigations; reliable endpoints and outcome assessment standard ofevidence to establish safety and effectiveness; and drug manufacturing considerations during drug development. FDA notes in the draft that all drugsponsors face similar issues in the drug development space, but given the limited medical experience with rare diseases, these challenges are difficult toaddress in the orphan drug space. FDA will accept public comments on the draft guidance document until Oct. 16, 2015.

Food and Drug Administration (FDA)Draft Guidance on Biosimilar Naming

FDA releaseddraft guidance on Aug. 27 entitled “Nonproprietary Naming of Biological Products” that proposes to add FDA-designated four-lettersuffixes to the names of both biosimilars and the brand biologics they reference.

How biosimilars will be named has been a contentious issue. Proponents of biosimilars, pharmacy benefit managers and insurers want the biosimilar productsto have the same nonpropriety name as their branded counterparts. However brand biologic companies say different names are necessary to track safety issueswith biosimilars.

The FDA says that while shared nonproprietary names are not appropriate for all biological products, there is a need to clearly identify biologicalproducts to improve pharmacovigilance, and to clearly differentiate among biological products that have not been determined to be interchangeable.

The agency is asking for comments on whether interchangeable biosimilars should share the same suffix as their reference products or have their ownseparate suffixes. FDA is also looking for feedback from stakeholders concerning the following scenario: Should the World Health Organization (WHO) adopt abiological qualifier proposal, how should drugs be considered in the determination of FDA-designated proper names. In addition to the draft guidance, theFDA suggested there might be a new rule to rename six biologic products to be in line with the naming scheme outlined in the draft guidance. This wouldinclude Sandoz’s filgrastim-sndz, the first approved biosimilar in the U.S.

Health Resources and Services Administration (HRSA) Releases Draft Guidance on 340B Drug Program

HRSA published proposed draft guidance on the 340B drug discount program in theAug. 28 Federal Register. That program provides drugs to qualified entities at a discount. HRSA stated that the goal of the guidance is tostrengthen program integrity while 340B providers could remain able to carry out the intent of the program. In the guidance, HRSA proposes a number ofclarifications including the definition of a 340B patient, contract pharmacy arrangements, audit procedures and other provisions.

The proposed guidance follows a Government Accountability Office recommendation to provide a clear patient definition. Under the definition, the number ofdrugs that would qualify for 340B could decrease because the guidance says patients must be outpatients while receiving care. That means dischargeprescriptions provided after an inpatient hospital stay may not be eligible for the 340B program. The guidance also states that the individual will not beconsidered a patient of the covered entity if the only health care delivered to the individual is the infusion of a drug or the dispensing of a drug. Thiswould reduce inappropriate 340B drug use during referrals, but may hurt community health centers where much of the specialty care is provided on a referralbasis. In addition, the guidance stated that the 340B program should not serve as a general pharmacy benefit for 340B providers.

Many stakeholders had disagreed on fines and how to treat entities that had violated the 340B program rules. Under the proposed guidance, a provider thatis removed from the program because it failed to retain records could re-enroll in the program during the next regular registration period after theprovider demonstrates that it can comply with the program’s requirements. The guidance also proposes a notice and hearing process for 340B providers torespond to audits that could lead to the loss of program eligibility.

The comment period will be open for public comment through Oct. 27, 2015.

Centers for Medicare and Medicaid Services (CMS) Releases 2017 State Essential Health Benefit Plans

On Aug. 28, CMS released essential health benefit (EHB) benchmark plans for all 50 states and the District of Columbia. The list of each state’s requiredbenefits has been compiled to help states and issuers determine which state-required benefits must be included in plan designs. The Affordable Care Act(ACA) requires nongrandfathered health plans in the individual and small group markets to cover essential health benefits (EHB), which include items andservices in the following 10 benefit categories: (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborncare; (5) mental health and substance use disorder services including behavioral health treatment; (6) prescription drugs; (7) rehabilitative andhabilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatricservices, including oral and vision care. For plan year 2017 and beyond, the EHB benchmark plan is a plan that was sold in 2014.

States’ EHB benchmark plans, plan summaries and prescription drug coverage requirements can be found here.

Centers for Medicare and Medicaid Services (CMS) Solicits More Information from Insurers for Risk Corridors Program

CMS published a Federal Register notice Aug. 27 asking insurers foradditional data to help calculate payouts for the Affordable Care Act’s (ACA) insurer risk corridors program. While conducting program integrity reviews ofsubmitted data, CMS identified a number of significant discrepancies in the 2014 benefit year submissions that issuers made for medical loss ratio (MLR)and risk corridors in July 2015. The agency is asking qualified health plans (QHP) that have risk corridor data discrepancies, when compared to otherrisk-mitigation program sources, to fill out a “Risk Corridor Discrepancy Worksheet” to explain the differences and to provide CMS with supportingdocumentation.

CMS has also asked the White House Office of Management and Budget (OMB) for authorization to make an emergency alteration to risk corridor collectionrequirements in order to accelerate the review and payment process. The insurer risk corridors program is one of Obamacare’s three risk mitigationmechanisms, and aims to limit issuers’ earnings or losses and protect both health plans and the federal government against uncertainty in pricing duringthe first few years of the ACA’s market reforms. CMS intended to release aggregate risk corridor calculations on Aug. 14, but sent out a delay notice toinsurers after finding significant inconsistencies in the data.

Centers for Medicare and Medicaid Services (CMS) Announces New Payment Model for Initiative to Improve Care for Nursing Facility Residents

On Aug. 27, CMS announced it isextending for four years its initiative to reduce the number of hospitalizations from nursing homes. The new payment model is available to providersalready participating in an initiative to improve care, and it takes effect October 2016. The model funds high-intensity interventions in nursingfacilities. The model also includes payments to practitioners, including physicians, nurse practitioners and physician assistants, that are similar to thepayments they would receive for treating beneficiaries in a hospital. Practitioners would also receive new payments for “multidisciplinary care planningactivities.” The program targets long-term stay nursing home residents who receive Medicare and Medicaid coverage (dual eligible).

Centers for Medicare and Medicaid Services (CMS) Issues Results Showing ACOs Continue to Improve Quality of Care

On Aug. 25, the CMS released2014 quality and financial performance resultsfor Medicare Accountable Care Organizations (ACOs). Authorized by the Affordable Care Act (ACA), ACOs are groups of doctors, hospitals and other healthcare providers, who come together voluntarily to provide coordinated care with improved outcomes to the Medicare patients. The 20 ACOs in the Pioneer ACOModel and 333 Medicare Shared Savings Program ACOs generated more than $411 million in total savings in 2014, which includes all ACOs’ savings and losses.

At the same time, 97 ACOs qualified for shared savings payments of more than $422 million by meeting quality standards and their savings threshold. In thethird year of operation, Pioneer ACOs showed improvements in 28 of 33 quality measures and experienced average improvements of 3.6 percent across allquality measures. Additionally, Shared Savings Program ACOs that reported quality measures in 2013 and 2014 improved on 27 of 33 quality measures. Theseresults show that ACOs with more experience in the program tend to perform better over time. Since the ACA, more than 420 Medicare ACOs have beenestablished, serving more than 7.8 million Americans with traditional Medicare as of Jan. 1, 2015.

Centers for Medicare and Medicaid Services (CMS) Announces Medicare Advantage Value-Based Insurance Design Model

On Sept. 1, CMS announced that theMedicare Advantage Value-Based Insurance Design Model (MA-VBID) to determine whether giving Medicare Advantage (MA) plans more flexibility to offertargeted extra supplemental benefits or reduced cost sharing to enrollees who have specified chronic conditions can lead to higher-quality and morecost-efficient care. Examples of what could be permitted are the elimination of copays for eye exams for beneficiaries with diabetes or extra tobaccocessation assistance for enrollees with COPD. The value-based insurance design model will focus on Medicare Advantage enrollees with the chronic conditionsof diabetes, congestive heart failure, chronic obstructive pulmonary disease (COPD), past stroke, hypertension, coronary artery disease, mood disorders andcombinations of these categories. It will begin Jan. 1, 2017, and is authorized for five years. Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvaniaand Tennessee were selected as the areas to test the model. CMS will also hold a webinar introducing the model on Sept. 24, 2015.

Centers for Medicare and Medicaid Services (CMS) Creating Dental Plan Workaround

Because Healthcare.gov is currently unable to allow an individual to terminate coverage of a qualified dental plan (QDP) without also ending his or herqualified health plan coverage, the Centers for Medicare and Medicaid Services (CMS) is creating a workaround until the system can be fixed. Until thesystem can permit the terminations to happen separately, CMS is instructing the dental plans to end coverage when requested by the enrollee. Terminationsshould be included in subsequent reconciliation files. CMS said enrollees can request terminations in three ways: directly through the issuer; through theHealthcare.gov call center (which will send a ticket to the issuer); or through regional case workers.

Centers for Medicare and Medicaid Services (CMS) Letter: States Can Continue to Use SNAP Eligibility Data to Fast Track Medicaid/CHIP Enrollment

CMS sent a letter to state Medicaid directors on Aug. 31 stating thatthe agency is making permanent a fast-track enrollment process for Medicaid and the Children’s Health Insurance Program (CHIP) that utilizes income datafrom the Supplemental Nutrition Assistance Program (SNAP), the federal program that provides food assistance for low-income Americans.

Using SNAP data, states can more easily identify low-income individuals who are eligible but not yet enrolled in Medicaid. Once these individuals giveconsent and their eligibly is confirmed, they can be enrolled in Medicaid without completing a full Medicaid application or undergoing a separateeligibility determination. The SNAP pathway, which was supposed to conclude at the end of 2015, was first offered in a 2013 letter to Medicaid directorsprior to the beginning of the first open enrollment period under Obamacare. CMS expected a potential backlog of program enrollment processing on the statelevel due to Medicaid expansion.

3. State Activities

Louisiana Department of Insurance to Take Control of ACA Insurance CO-OP

The Louisiana Department of Insurance announcedthat a court has granted an order of rehabilitation and injunctive relief that permits that state’s Insurance Commissioner, Jim Donelon, to take charge ofthe Louisiana Health Cooperative (LAHC). LAHC announced in July it would discontinue all policies for 2016’s open enrollment period. Insurance CommissionerDonelon noted that LAHC should still be able to pay claims as promised. “We are convinced that the CO-OP, with the support of (CMS), will have the abilityto pay claims owed to health care providers and I am confident that we can more efficiently and successfully wind down affairs in a timely and equitablefashion,” he said. LAHC is a health maintenance organization (HMO) formed under the provisions of the Affordable Care Act as a non-profit health insurancecompany and was developed using $56 million in Department of Health and Human Services (HHS) loans. Enrollment in LAHC in 2014 was less than half of whatit planned — 13,000 at mid-year in 2014 compared with the 28,100 people it projected. By December 2014, those numbers fell 23 percent. The Nevada HealthCO-OP announced the shuttering of its business last week, and CoOportunity Health, which sold plans in Iowa and Nebraska, also closed earlier this year.LAHC’s closure leaves just 20 of the original ACA CO-OPs standing.

Alaska Supreme Court Rejects State Legislators’ Request to Halt Medicaid Expansion

Alaska’s highest court announced Aug. 31 that it will reject GOP state legislators’ plea to provisionally halt state Medicaid expansion while a lawsuitproceeds over the legality of expanding the program without legislative approval. Gov. Bill Walker (I) announced an executive action July 16 to acceptfederal funds to unilaterally expand Medicaid without the approval of the Republican-controlled legislature, prompting state lawmakers to bring a lawsuitto request a temporary halt to the program. “The Alaska Supreme Court’s ruling today brings final assurance that thousands of working Alaskans will haveaccess to health care tomorrow,” said Gov. Walker in a prepared statement. “Medicaid expansion will save the state more than$100 million in its first six years, and save Alaskan lives.” Alaska is the 30th state to expand Medicaid under the Affordable Care Act (ACA). Theexpansion is projected to cover an additional 20,000 low-income state residents with earnings at or below 138 percent of the federal poverty line.

Arizona Court Upholds Medicaid Expansion Offset

On Aug. 26, a county superior court judge upheld former Arizona Gov. Jan Brewer’s (R) 2013 Medicaid expansion offset plan, ruling that a hospitalassessment that funds the expansion is not subject to a provision in the Arizona Constitution that requires a super-majority vote in the state legislaturefor a tax increase. Thirty-six Republican lawmakers sued the state after Medicaid expansion funding did not get a two-thirds yes vote in thelegislature, arguing the tax should be considered a tax because the Department of Health and Human Services (HHS) secretary looks upon assessments in thatmanner. The court’s decision comes more than two years after the expansion took effect and protects funding for health insurance coverage for over 350,000low-income Arizonans. A legal appeal by the state legislators is almost certain.

4. Regulations Open for Comment

Department of Health and Human Services (HHS) Proposes Updates to “the Common Rule”

HHS and 15 other agencies released a notice of proposed rulemaking Sept. 2 for the Common Rule, theexisting regulatory framework to transparency and oversight for scientific research involving human subjects. The proposed changes are to address thesubstantial changes that have occurred within scientific research. Current regulations have been in place since 1991 and are followed by 18 federalagencies. Proposed updates to the rule include:

  • Strengthened informed consent provisions
  • Requirements for administrative or IRB review that would align better with the risks of the proposed research
  • New data security and information protection standards
  • Requirements for written consent for use of an individual’s biological samples, for example, blood or urine, for research with the option to consent to their future use for unspecified studies
  • Requirement, in most cases, to use a single institutional review board for multisite research studies
  • Application of rule to clinical trials, regardless of funding source, if they are conducted in a U.S. institution that receives funding from a Common Rule agency for research involving human participants.

In July 2011, HHS issued an Advance Notice of Proposed Rulemaking to seek the public’s input on updating the Common Rule. The proposed rule issued reflectsinput and requests comments for HHS to consider as it drafts the final rule. HHS will take public comment on the proposed rule until Dec. 7.

For a press release detailing changes to the rule visit hhs.gov.

Department of Health and Human Services (HHS) Releases Proposed Rule on Health Equity

On Sept. 3, HHS issued a proposed rule, Nondiscrimination inHealth Programs and Activities, to advance health equity and reduce disparities in health care. The proposed rule establishes that the prohibition on sexdiscrimination includes discrimination based on gender identity. It also includes requirements for effective communication for individuals withdisabilities and enhanced language assistance for people with limited English proficiency. The proposed rule applies to Health Insurance Marketplaces, anyhealth program that HHS itself administers, and any health program or activity any part of which receives funding from HHS, such as hospitals that acceptMedicare patients or doctors who treat Medicaid patients. Finally, the proposed rule extends these nondiscrimination protections to individuals enrolled inplans offered by issuers participating in the Health Insurance Marketplaces and explicitly bars any marketing practices or benefit designs thatdiscriminate on the basis of race, color, national origin, sex, age or disability. Section 1557 of the Affordable Care Act (ACA) extended civil rightsprotections banning sex discrimination to health programs and activities. Previously, civil rights laws enforced by HHS’s Office for Civil Rights (OCR)barred discrimination based only on race, color, national origin, disability or age. The rule will be published in the Federal Register on Sept. 8,and is open for public comment through Nov. 6, 2015.

For more information, including a fact sheet and Frequently Asked Questions, visit hhs.gov.

Internal Revenue Service (IRS) Proposed Rule Mandates Employer Health Plans Offer Hospital and Physician Services

The IRS released a proposed rule Aug. 31 that would require employer healthplans to offer substantial coverage for inpatient hospital services and physician services. The Affordable Care Act requires employer health plans to be atleast 60 percent of the minimum value standard. News reports uncovered the fact that employer plans could do so without providing hospital or physiciancoverage.

The preamble of the proposal points out that while large group plans are not required to cover the ACA’s Essential Health Benefit, a plan that does notcover hospital and physician services “does not meet a universally accepted minimum standards of value expected from and inherent in any arrangement thatcan reasonably be called a health plan and that is intended to provide the primary health coverage for employees.”

Under the proposed rule, an employer group health plan must, to meet the minimum value standard (MSV) and avoid a penalty, meet or exceed an actuarialvalue standard of at least 60 percent coverage including substantial coverage for doctor and hospital services. The proposed rule provides a transitionperiod for employers that have previously offered non-compliant coverage prior to Nov. 4, 2014. The proposal aligns IRS and Department of Health and HumanServices (HHS) policies. The ACA compels employers who do not meet the affordability and MSV thresholds to pay a penalty of $3,000 for each worker thatreceives a tax credit. The IRS proposed rule, published in the Federal Register Sept. 1, also says that any employee offered a non-compliant planwould not be prevented from receiving premium tax credits. IRS is taking comments on the proposed rule until Nov. 2, 2015.

Centers for Medicare and Medicaid Services (CMS) Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes

CMS issued a final rule on July 31, 2015, to update fiscal year(FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) ProspectivePayment System (PPS).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use ofcertified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percentadjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable CareAct and further adjusted by – 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourthreduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic healthrecords will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, acontinued -1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonusesand penalties for hospital valued-based purchasing.

Medicare Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments inFY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be publishedin theFederal Registeron Aug. 17, 2015. Comments may be made on the final rule and are due to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

Centers for Medicare and Medicaid Services (CMS) Releases Proposed Physician Payment Rule That Replaces SGR Formula

The Centers for Medicare and Medicaid Services (CMS) released a proposed updat