Washington Healthcare Update

October 19, 2015

Pardon Our Dust

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This Week: While Congress is on recess, the debt ceiling limit was moved up to Nov. 3, two more co-ops announced they would close, and Rep. John Boehner is still Speaker of the House of Representatives.

1. Congress

House of Representatives

Congress is on recess for Columbus Day Work Period


The Senate is on recess for the Columbus Day Work Period

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Bicameral Bill Introduced to Provide HHS Authority to Reject Proposed Insurance Rates

Before Congress left for its Columbus Day recess, Rep. Jan Schakowsky (D-IL) and Sen. Diane Feinstein (D-CA) introduced the Health Insurance Rate Review Act of 2015 in the House and Senate. This legislation would permit the U.S. Department of Health and Human Services the authority to block or modify health insurance premium increases in states where insurance regulators lack the authority to do so.

House Members Ask for Review of the Use of Buprenorphine

Twelve members of the House of Representatives sent aletter to HHS Secretary Sylvia Mathews Burwell on Oct. 14 calling for a review of the use of buprenorphine — a synthetic opioid used to treat heroin addiction. The request comes after HHS signaled that it will increase the current prescribing cap of 100 patients per physician under the federal government’s medication-assisted treatment program (DATA 2000).

House Energy and Commerce Committee Asks More Questions Concerning Exchange and Federal Grants

House Energy and Commerce Chair Fred Upton (R-MI), Oversight and Investigations Chair Tim Murphy (R-PA) and Health Subcommittee Chair Joe Pitts (R-PA) sent letters to states concerning how states have used federal grants. This comes after a September hearing in which six states with state-based exchanges testified.

The letters ask the states to provide exchange development documents dating from June 2010, and also request information on meetings between state officials and CMS that related or referred to the state-based exchanges.

They also ask for an explanation of any unused federal establishment grant funds, and how the state plans to use that money. The states have until Oct. 28 to respond.


18 Senators Send Letter Asking CMS Not to Finalize Biosimilar Policy

A group of 18 bipartisan senators sent aletter to the Centers for Medicare and Medicaid Services (CMS) that asked CMS not to finalize a proposal that would pay competing biosimilars at the same level. The senators state CMS should wait “until the FDA finishes its regulations for the new biosimilars approval pathway. ‘We urge you to allow the biosimilar pipeline and market to stand up and continue to develop before implementing a final’ payment policy, they wrote to CMS Acting Administrator Andy Slavitt on Wednesday. The letter follows a recent statement of support for the proposal by Sen. Ron Wyden, but a number of House lawmakers have also registered objections.”

Senate Bill to Add Nurses and Physician Assistants to CMS Database

Bipartisan legislation introduced Oct. 7 would add nurses and physician assistants to the Centers for Medicare and Medicaid Services (CMS) database on drug and medical device company payments to doctors and hospitals. The database was created by what is known as the “Sunshine Act.” S. 2153 was introduced by Sens. Charles Grassley (R-IA) and Richard Blumenthal (D-CT). According to the Pew Charitable Trusts, nurses and physician assistants prescribe 15 percent of all prescriptions. The Sunshine Act requires disclosure of payments made by drug and device companies to providers.

2. Administration

Trans-Pacific Partnership and Market Protections for Biologics Continue to Cause Controversy

On Friday, Oct. 9, WikiLeaks published a version of the TPP deal. The leaked document made clear that the 12 TPP countries have two options concerning preserving data protection as it relates to biologics. The agreement provides for eight years of data protection or five years as long as the measures or market circumstances “deliver a comparable outcome.” Some have interpreted this to mean there are five years of data protection and nothing more because of the vagueness of the language. Therefore, drug manufacturers are trying to determine what the next step is going forward.

Sen. Orrin Hatch (R-UT), Chairman of the U.S. Senate Finance Committee, expressed his concern early on but is waiting to read the full text of the agreement. Hatch was a strong supporter of trade promotion authority to streamline congressional approval. Under these streamlined rules, there is only a straight up or down vote. No amendments are able to be considered and there can be no filibuster used to delay or hold up the vote. It is unclear when Congress will take up the deal, but some observers think it could happen as late as a lame-duck session in 2016, after the November elections.

Medicare Open Enrollment Started Oct. 15

The Centers for Medicare and Medicaid Services (CMS) announced the beginning of the Medicare Open Enrollment period that people with Medicare can shop for a Medicare Advantage (MA) or Prescription Drug Plan (PDP) for 2016. The Medicare Open Enrollment period happens every year from Oct. 15 through Dec. 7.

For 2016, Medicare beneficiaries will have access to even more plans with high-star quality ratings at stable or lower costs. The average basic Medicare PDP premium in 2016 will remain stable at $32.50 per month while the average MA premium will decrease by an average of $32.91. In addition, approximately 49 percent of 2016 MA plans and 41 percent of PDPs earned 4 stars or higher in their 2016 overall star rating.

If Medicare beneficiaries are satisfied with their current coverage and feel it will meet their needs for 2016, they do not need to do anything.

HHS Sends First Annual Report on Transparency and the Review and Approval Process for Section 1115 Demonstrations (Medicaid Waivers)

Thisreport responds to Congress’ request for the Department of Health and Human Services (HHS) to report on actions taken with respect to section 1115(a) Medicaid and Children’s Health Insurance Program (CHIP) demonstration projects. Section 10201 of the Affordable Care Act amended section 1115 of the Social Security Act (the Act) to enhance public transparency, at both the state and federal level, in developing and considering applications to implement new or to extend section 1115 demonstration projects that affect Medicaid or CHIP. Specifically, the Secretary of HHS was required to develop regulations to provide for a state and federal public notice and comment process for state applications for new section 1115 demonstration projects or to extend existing demonstrations, and also to report to Congress on actions taken with respect to section 1115 demonstrations. Thereby, this report to Congress highlights HHS’ activities since the enactment of the Affordable Care Act that have increased the opportunities for the public to not only learn about proposed section 1115 demonstrations but also to provide meaningful input on demonstration applications and extension requests submitted for HHS consideration.

Administration Projects Low Enrollment Through Health Exchanges

As the third enrollment season opens under the Affordable Care Act (ACA) on Nov. 1, the administration projects low enrollment growth — a goal of 10 million people covered through the health law’s exchanges at the end of 2016. The enrollment goal is an acknowledgment that the next sign-up season will be challenging.

The administration expects low enrollment growth even though the fine for not having coverage in 2016 increases to $695 per person, up from $325 or 2.5 percent of household income, whichever is higher. This goal falls below previous estimates by the Congressional Budget Office, which had projected and estimated 21 million people would be signed up through the exchanges in 2016. The Administration said that the CBO projections are not on target because CBO’s analysis predicted more workers would drop job-based coverage.

The press release can be foundhere.

Debt Ceiling Date Moves Up

On Oct. 15, U.S. Treasury Secretary Jack Lew told Congress that the U.S. debt limit will be exhausted Nov. 3, two days before previously estimated. “At that point, we expect Treasury would be left with less than $30 billion to meet all of the nation’s commitments — an amount far short of net expenditures on certain days, which can be as high as $60 billion,” Lew said in a letter.

“Operating the United States government with no borrowing authority, and with only the cash on hand on a given day, would be profoundly irresponsible. As I wrote previously, we anticipate that a remaining cash balance of less than $30 billion would be depleted quickly,” he said.

Speaker John Boehner would like to resolve the issue before a new speaker is sworn in. The speaker and Senate leadership are in discussions with the White House over a budget package that could include raising the debt ceiling but it is unclear that those talks will result in an agreed-upon package. Thus the House may have to move a stand-alone bill raising the debt ceiling. The speaker had announced his retirement, but stated he would stay until a new speaker is sworn in; however that timing is also unclear.

HRSA 340B Orphan Drug Policy Struck Down by Courts for a Second Time

The Health Resource and Services Administration’s (HRSA) 340B orphan drug policy that required drug manufacturers to provide drug discounts when orphan drugs were used either off-label or to treat common conditions was struck down by a Federal court for the second time on Oct. 14.

The Affordable Care Act (ACA) expanded the 340B program to cancer centers, critical access hospitals, rural referral centers and sole community hospitals for outpatient drugs, but the law excluded orphan drugs from the discount program for those groups. PHARMA, the trade association for drug manufacturers, first brought suit against a rule promulgated by HRSA, but the suit only looked at whether HRSA had the authority to promulgate the rule. Following the first lawsuit, HRSA released an interpretive rule essentially restating the same orphan drug policy from the original rule. The second suit brought by PHARMA questioned the merits of the rule. The U.S. Department of Health and Human Services argued that discounts are only barred when orphan drugs are actually used for rare diseases, but Judge Contreras found that discounts are barred even when orphan drugs are used for common diseases. Judge Rudolph Contreras granted PHARMA’s motion for summary judgment, ruling that the interpretive rule was arbitrary and capricious.

3. State Activities

Blue Shield of California Gets State Approval for Acquisition of Care1st

On Oct. 8, Blue Shield of California received approval from state regulators on their acquisition of Care1st for $1.2 billion. Care1st is a Medicaid-managed plan that covers 500,000 people. To finalize the deal, regulators required Blue Shield to permanently surrender its state tax exemption and to spend $200 million over the next 10 years to improve care. Several consumer advocacy groups have expressed displeasure with the deal, citing a lack of conditions placed on the company by the state. Those groups include Health Access California and Consumer Watchdog in Santa Monica.

Washington Insurance Commissioner to Keep Small Group Market at 50 Workers

Commissioner Mike Kreidler has said he will keep Washington’s small group market at 50 people. Kreidler is a critic of recently passed legislation that allows states to avoid the Affordable Care Act’s (ACA) mandatory expansion of the size of a small employer by 2016. He will possibly permit a one-time quarterly update of rates, as a result of the group market’s remaining at just 50 employees.

Read the statementhere.

Wellmark Blue Cross Blue Shield to Join the Public Exchange in Iowa, 2017

On Oct. 5 Wellmark Blue Cross Blue Shield announced that residents of Iowa will have access to their health insurance plans on the state’s public exchange starting in 2017. Wellmark Chairman and CEO John Forsyth stated that improvements within the public exchange were what drove the company to begin participating. Those improvements include an increased reliability of the online system and the confirmation of the legality of federal subsidies inKing v. Burwell.

Co-ops in Kentucky, Tennessee, Colorado and Oregon Fold

Kentucky Health Cooperative became the fifth co-op to announce that it will close at the end of the year. Following that announcement Tennessee’s Community Health Alliance (CHA) also announced that it would close, becoming the sixth co-op created by the Affordable Care Act to cease operations at the end of this year.

Kentucky Health Cooperative based its decision to close on the fact that it would not be receiving the full risk corridor payment it had requested from CMS. CMS recently announced that plans would receive just 12.6 percent of what insurers had requested — meaning $9.7 million for Kentucky’s co-op, instead of the $77 million it wanted. The co-op serves about 51,000 individuals.

Community Health Alliance (CHA) was concerned about the customers it was drawing in, and it stopped enrollment halfway through the enrollment period in 2015. When the next enrollment period starts on Nov. 1, approximately 27,000 people will need to find new coverage. CHA also lost $22 million in its first year — an early sign that the insurer was struggling. CMS’s recent announcement that plans would receive just 12.6 percent of what insurers had requested has put pressure on many of these startup plans.

On the heels of those two announcements, on Oct. 16, Colorado HealthOp announced that it would be closed by state regulators. It cited the shortfall in risk corridor payments as the primary cause of its financial issues. In addition, Health Republic Insurance of Oregon announced that it too would close by the end of the year. These co-ops became the seventh and eighth co-ops started under the Affordable Care Act to announce that they were closing. Health Republic also cited the risk corridor funding shortfall as a reason for its difficult financial position.

Kansas Will Not See the Expansion of Medicaid; Governor’s Office Explains the Decision

Governor Sam Brownback’s office recently defended their decision against expanding Medicaid, stating that “this Obamacare ruse funnels money to big city hospitals, creates a new entitlement class, and fails to rightly prioritize service for disabled citizens.” The governor’s deputy director of communications, Melika Willoughby, wrote in an email to supporters of the expansion that it would not save Mercy Hospital in Independence, Kansas, from closing. The email also points to the issue that a large number of disabled people on Medicaid have not been taken off the waiting list for care. The administration has said it will not expand the program until those people are off of that list and given the necessary services.

Utah Republicans Say No to Medicaid Expansion

In a straw poll on Oct. 13, only seven members of the Utah House supported the latest proposal to expand Medicaid, effectively killing it. The plan, drafted by legislative leaders with Republican Gov. Gary Herbert, would have expanded coverage to 100,000 Utahans and would have used a variety of tax and fee increases on health care providers to pay for the proposal. Gov. Herbert said in a statement late Tuesday that he stands by his original plan. The legislature defeated that plan earlier this year.

California Governor Signs Drug Co-pay Cap and Biosimilar Bills

California Gov. Jerry Brown signed a law capping out-of-pocket spending for most individuals’ prescription drugs at $250 per month. This follows a move by the exchange to impose similar restrictions on plans sold on the state’s exchange. Over objections from insurers, the cap will take effect next year for the largest insurance market in the country. Hillary Clinton has proposed a similar cap as part of her approach to bring down prescription drug costs, although critics say it does nothing to address the underlying high prices of medicines.Governor Brown also signed off on legislation providing for the generic-like pharmacy substitution of interchangeable biosimilars for the biologics that they are copying. Eleven states and Puerto Rico have now passed similar legislation, although only one biosimilar has yet to reach the U.S. market, and it has not been deemed “interchangeable.”

4. Regulations Open for Comment

Centers for Medicare and Medicaid Services (CMS) Issues Proposed Rule to Begin Data Collection for New Fee Schedule for Medicare Clinical Diagnostic Laboratory Tests

CMS released aproposed rule Sept. 25 that initiates the agency’s next step in implementing the Protecting Access to Medicare Act of 2014 (PAMA), a bill that requires clinical laboratories to report on private insurance payment amounts and volumes for lab tests. Under the proposed rule, certain laboratories would be required to report private payor rate and volume data if they receive at least $50,000 in Medicare revenues from laboratory services and more than 50 percent of their Medicare revenues from laboratory and physician services. Laboratories would collect private payor data from July 1, 2015, through Dec. 31, 2015, and report it to CMS by March 31, 2016. CMS will post the new Medicare rates by Nov. 1, 2016; these rates will be effective on Jan. 1, 2017. Tests that meet the criteria for being considered new advanced diagnostic laboratory tests (ADLTs) will be paid at actual list charge for a minimum of three quarters. ADLTs are tests offered under Medicare Part B and are furnished by only one laboratory and that either include a unique algorithm and are at a minimum an analysis of RNA or DNA, or are cleared or approved by the U.S. Food and Drug Administration (FDA). Under PAMA, the Medicare payment amount for any test cannot be reduced by more than 10 percent compared to the prior year’s amount during the first three years of implementation (2017-2019) and cannot be reduced by more than 15 percent in the following three years (2020-2022).

Medicare’s current fee schedule for lab tests was first adopted in 1984 and has remained relatively unchanged except to establish payments for new tests or implement across-the-board statutory payment updates. Medicare pays approximately $8 billion a year for clinical diagnostic laboratory tests. The new system will be updated every three years for clinical diagnostic laboratory tests (CDLTs) and every year for ADLTs to reflect market rates paid by private payors. One hot-button issue in the proposed rule is the definition of “applicable laboratory.” PAMA defined an applicable laboratory as one that receives a majority of its Medicare revenues under the MCLFS or the Medicare Physician Fee Schedule (MPFS). In afact sheet summarizing the proposed rule, CMS said it does not expect any hospital laboratory to meet the definition of “applicable laboratory” and that more than 50 percent of independent laboratories and more than 90 percent of physician offices would likely be excluded based on the $50,000 threshold. The proposed rule was published in the Federal Register on Oct. 2. CMS will solicit comments until Nov. 24, 2015.

The Centers for Medicare and Medicaid Services (CMS) Offers Request for Information (RFI) to Solicit Answers to Physician Pay Formula Questions

On Sept. 28, CMS released anRFI to seek public comment related to new provisions in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA): Merit-based Incentive Payment System (MIPS), Alternative Payment Models (APMs) and a physician-focused payment model (PFPMs). Rather than offering much insight on how it plans to implement the physician pay formula (SGR), the “request for information” asks about 150 questions. In April 2015, Congress voted to repeal and substitute the SGR with a reimbursement system that aims to pay providers contingent on the value of care they provide.

The SGR legislation creates a payment system that encourages physicians to participate in alternative value-based pay models. Beginning in 2026, the physician reimbursement rate will rise 0.75 percent annually for providers who utilize alternative pay models. Alternatively, physicians who do not enroll in alternative pay models will see only a 0.25 percent pay raise each year. For providers who receive a substantial part of their revenue from alternative pay models, they will get an additional 5 percent bonus from 2019 to 2024, in combination with the shared savings bonuses or fees they might collect for participating in those models. Worth noting, providers do not have to participate in alternative pay models to get value-based care bonuses. The Doc Fix law also consolidates Medicare’s three existing quality programs into the MIPS, which begins in 2019. Sans this overarching payment structure, the Doc Fix law leaves much of this new pay system to CMS’s discretion; CMS now requests provider feedback on the most efficient way to accomplish the savings and enhanced care goals of the new law. Public comments for the RFI are due on Nov. 2, 2015.

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, the existing regulatory framework to transparency and oversight for scientific research involving human subjects. The proposed changes are to address the substantial changes that have occurred within scientific research. Current regulations have been in place since 1991 and are followed by 18 federal agencies. 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 reflects input 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 visithhs.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 phys