Washington Healthcare Update

November 23, 2015

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This Week: Congress tries to put together a tax extender package,which may provide an opportunity for some Affordable Care Act changes… HHSreleases final rule on bundled payment for Joint Replacement Comprehensive CareProgram and releases proposed rule for benefits and marketplace standards….Congress and the Administration continue focus on drug pricing.

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Rep. Cummings Writes Letter to Valeant Pharmaceuticals Regarding Drug Pricing

House Oversight Committee ranking member Elijah Cummings (D-MD) wrote aletterto Valeant Pharmaceuticals requesting interviews with employees regarding Valeant’s relationship with Philidor Rx Services – a specialty pharmacy. Valeantallegedly used this pharmacy “to mask its price increases and circumvent the traditional insurance reimbursement process.” Valeant bought an option topurchase Philidor for $100 million last year, but recently announced that it ended its relationship with the pharmacy – apparently due to recent pressreports that Valeant employees were telling the pharmacy to alter prescriptions for generic drugs to more expensive Valeant alternatives.

Bipartisan Letter Asks Appropriations Committee for Increased NIH Funding

A bipartisan group of over 100 House Representatives led by Rep. Suzan DelBene (D-WA) wrote a letter to House Appropriations Committee leaders asking themto provide $32 billion to the National Institutes of Health (NIH) in any new funding legislation. This request is almost $2 billion more than 2015 levels.The letter stressed that increased funding is essential for increasing the speed with which new cures, treatments and vaccines are developed.

House Energy and Commerce Committee Reports Health-Related Bills Out of Committee

On Nov. 18, the House Energy and Commerce Committee reported two bills concerning Medicaid. Both bills passed by a voice vote and with bipartisan support.

H.R. 3716, the Ensuring Terminated Providers are Removed from Medicaid and CHIP Act, would increase the oversight of and state reporting requirements fortermination of Medicaid providers. The bill is intended to ensure that if a provider is terminated from one state’s Medicaid program, that the provider isterminated from all other states as well. The US Health and Human Services (HHS) Office of Inspector General (OIG) had identified the lack of informationabout provider terminations as a problem.

H.R. 3821, the Medicaid Directory of Caregivers Act, would require the publication of a provider director in states that provide medical assistance through afee-for-service basis or a primary care case management system.

Other bills considered and reported out of the committee on Nov. 18 included:

  • HR 2017, the Common Sense Nutrition Disclosure Act of 2015, which would amend disclosure requirements for restaurants and retail food establishments.
  • H.R. 3014, The Medical Controlled Substances Transportation Act. This legislation amends the Controlled Substances Act to allow a physician to transport controlled substances to another practice setting or disaster area if the physician is registered to dispense or conduct research with controlled substances.


Senator Hatch Tells CMS His Concerns About New RAC Limitations

On Nov. 12, Senate Finance Committee Chairman Orrin Hatch (R-UT) wrote aletter to the Centers for Medicare and Medicaid Services (CMS)expressing concern about its new rule that would limit the power of the Recovery Audit Contractors (RACs) to monitor Medicare claims. The 0.5 limit onrecord requests is significantly lower than in the past and curbs the ability of the RACs to operate as Congress intended them to, Hatch said. He isespecially concerned about the increased rates of fraud in the program, and is asking for a review of the new changes to the RAC program as well as CMS’starget for how much money it should recover in the future.

Bipartisan, Bicameral Letter Asks to Meet with POTUS Regarding Cadillac Tax

A bipartisan, bicameral group of lawmakers – Sens. Dean Heller (R-NV), Sherrod Brown (D-OH), Martin Heinrich (D-NM) and Reps. Joe Courtney (D-CT) and FrankGuinta (R-NH) – sent a letter toPresident Obama requesting a meeting to discuss their plan to repeal the Cadillac tax, a tax on insurers that has not yet gone into effect. These lawmakershave all sponsored legislation to repeal the tax.

Senator Wyden Asks HHS to Implement “1332 Waivers”

The ranking Democrat of the Senate Finance Committee, Senator Ron Wyden (D-OR), wrote to US Secretary of Health and Human Services Sylvia Burwell to stresshis interest in the department’s implementing the Affordable Care Act’s (ACA) State Innovation Waivers, also known as a 1332 waiver. The lack ofregulations concerns ACA supporters because the lack of guidance could be a backdoor method to undermine the ACA should a Republican win the presidency in2016. The program, which is to start in 2017, permits states to opt out of major ACA provisions with some safeguards. The waivers are not designed tochange Medicaid or the Children’s Health Insurance Program, but would work with those programs.

As the author of the provision, Wyden stressed the need to allow pioneeringstates to be able to decide how to tailor health coverage to theirresidents, and the waiver should be viewed as a tool to assist states. Inhisletter, Wyden asks four questions, including what precautions thedepartment envisions putting in place to ensure consumers are protected in states that want to use a waiver.

2. Administration

FDA Recalls Custom Ultrasonics’ Automated Endoscope Reprocessors (AERs)

On Nov. 13, the US Food and Drug Administration (FDA) ordered CustomUltrasonics to recall all of its scope cleaning devices, otherwise known as automated endoscope reprocessors (AERs). FDA indicated that the identifiedviolations resulted in some deadly infections that might have been prevented if the company had complied with a 2012 recall. AERs have been used at healthcare facilities to reprocess scopes linked to the spread of antibiotic-resistant infections. The agency cited continual violations of federal law and aconsent decree entered into with the company in 2007. The safety communication issued by FDA recommends that health care facilities using these AERstransition away from their use.

To read FDA’s safety communication, clickhere.

FDA Approves Narcan Nasal Spray for Opioid Overdoses

On Nov. 18, the US Food and Drug Administration (FDA) approved thenaloxone nasal spray Narcan, a lifesaving medication that can stop or reverse the effects of an opioid overdose. The medication was previously approvedonly in injectable forms; the nasal spray should be an easy-to-use solution for nonmedical professionals in an emergency. The spray also eliminates therisk of a contaminated needle stick. The National Institute on Drug Abuse conducted clinical trials on the spray in a public-private partnership with FDA.Narcan will be distributed by Adapt Pharma, Inc.

FDA, CMS Appear in Energy and Commerce Hearings on Lab-Developed Tests (LDTs)

On Nov. 17, FDA’s device center chief, Jeffrey Shuren, told the House Energy and Commerce Committee that FDA guidance on lab-developed tests (LDTs) willlikely come by early next year. At the hearing, Republican members of the committee expressed concern about potential agency overreach in the sector. Somemembers questioned whether LDTs posed enough concern to require more regulation. In response to these concerns, Shuren pointed to a report issued by FDA on Nov. 16 that showed 20 case studies of faultyLDTs that posed a risk to patients.

In a hearing on Nov. 18, deputy administrator Patrick Conway at the Centers for Medicare and Medicaid Services (CMS) told the House Energy and CommerceCommittee that the agency doesn’t have the skill to conduct premarket reviews of LDTs and that FDA is better suited to do so. These remarks, combined withcomments from FDA, make it more difficult for stakeholders that are attempting to limit FDA oversight and have CMS take it over. Conway stressed that CMSis more focused on postmarket review. Also, Jeff Shuren warned that a combined FDA-CMS oversight structure would cause gaps, duplication and lead to highercosts.

Food and Drug Administration (FDA) Holds More Device User Fee Discussions

On Nov. 18, a closed-door meeting was held to jump-start preliminary discussions on reauthorization of the user fee agreement set to expire in 2017. It isexpected that negotiations will focus on US Food and Drug Administration (FDA) processes, including ways to improve consistency in the premarket reviewphase and create a more streamlined approach for those types of reviews that take the longest. FDA is pushing for additional funding for postmarket reviewand updates to the Device Center’s IT system. So far FDA has held two other meetings with the medical device industry concerning reauthorization of theMedical Device User Fee amendments.

CMS Announces Delayed Start Date for Bundled Payment Program

On Nov. 16, the Centers for Medicare and Medicaid Services (CMS) announced it will delay thestart of the Comprehensive Care for Joint Replacement (CJF) model – amandatory program to bundle Medicare payments for hip and knee surgeries – until April 1. Hospital groups, insurers and beneficiary groups asked for thedelay, which CMS published in a final rule that is over 1,000 pages. The program was originally scheduled to begin Jan. 1. The final rule decreased thenumber of regions that will participate in the model from the proposed 75 to 67 geographic areas (with 800 hospitals total). CMS also is allowing a moregradual transition to downside risk and a lower stop-loss limit to give hospitals more time to gain experience under the model, as well as putting limitson how much hospitals can gain from the program.

CMS Changing Duals’ Risk Adjustment for 2016, Proposes Changes for 2017

In a Nov. 12memo, the Centers for Medicare and Medicaid Services (CMS) recently informed plans participating in the duals demo under a capitated alignment model that “forCY 2016, payments to MMPs (Medicare-Medicaid Plans) will continue to be based on the same CMS-HCC risk adjustment model as used in Medicare Advantage.However, Medicare A/B payment rates will be adjusted to better align with FFS costs for full benefit dual eligible beneficiaries.”

On Oct. 28, CMS asked for feedback on a new risk adjustment model in the works for 2017 – the agency said this model would improve on accounting for thecost of different types of beneficiaries. CMS said the current risk adjustment model it uses to adjust capitated payment rates paid plans too much forpartial-benefit duals and not enough for full-benefit duals.

CMS is accepting comments on its revised risk adjustment modelthrough Nov. 25.

Insurer Rebates Will Total $470 Million

Approximately 5.5 million individuals will receive refunds totaling $470 million because insurers failed to spend enough of their premiums payments onmedical costs in 2014, the Obama administration announced Nov. 19.

Under the Affordable Care Act (ACA), insurers in the individual and small group markets are required to spend at least 80 percent of premiums on medicalclaims. In the large group market that threshold is 85 percent. When insurers fail to meet the medical loss ratio requirement, they need to refund thefunds or reduce future premiums. Since the ACA has been implemented, the number of insurers required to refund payments has decreased. Last year, fewerthan 15 percent of individuals were in plans that failed to hit the 80 percent threshold.

Providers Outline Desired Principles for MACRA

In a letter led by the American Medical Association (AMA) to the Centers for Medicare and Medicaid Services (CMS), providers outlined principles they wantthe agency to follow as it implements the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The providers told CMS to get rid of restraints onphysicians attempting to provide care under alternative payment models (APMs) and to make sure that providers are able to choose from a range of APMs. Theyalso asked that quality-reporting requirements be streamlined and that administrative burdens be reduced on a broader level.

Goodrich Becomes Director of CMS’s CCSQ

Kate Goodrich, the head of the Centers for Medicare and Medicaid Services’ (CMS) quality measurement and value-based incentives group, has been promoted todirector of the Center for Clinical Standards and Quality (CCSQ). CCSQ handles quality, clinical, certification and medical science issues for CMS.

Public Health Groups Ask Obama Administration to Publish Dietary Guidelines

Public health groups are asking the Obama administration to publish new dietary recommendations before the passage of new spending legislation that couldpossibly get rid of advice opposed by the food industry. The American Heart Association in particular has asked the administration to require the USDepartment of Agriculture and the US Department of Health and Human Services (HHS) to release updated Dietary Guidelines before Dec. 11, which is whenCongress will need to pass the new spending legislation.

These groups want to avoid riders in appropriation bills that would limit dietary guidelines. The recommendations are under attack by the meat industry inparticular because a 15-person advisory panel recently recommended that consumers scale back the amount of red and processed meats they eat. Opposinglawmakers put a rider into an agriculture appropriations bill that would remove a great deal of nutrition science from consideration.

Fifty public health, medical and nutrition groups are preparing their own letter to lawmakers asking them to get rid of the rider.

Justice Department Announces Charges Against Dietary Supplement Makers

The Department of Justice (DoJ) is filing criminal charges against USPlabs LLC as part of a sweep against dietary supplement makers. On Nov. 17, DoJ announced theindictment of USPlabs and four of its corporate officers for selling products including Jack3d and OxyElite Pro. Principal Deputy Assistant AttorneyGeneral Benjamin Mizer said many of the allegations against the company come from its claims that it used natural plant extracts in products – calledJack3d and OxyElite Pro – when in fact it was using synthetic chemicals manufactured in China, including those that are toxic to the liver. Some peopleexperienced jaundice from taking these products, several of whom need transplants to survive.

ONDCP Publishes Updated Drug Control Strategy

On Nov. 17, the White House Office of National Drug Control Policy (ONDCP) released the2015 National Drug Control Strategy, and is asking Congress to give Medicare the authority to restrict at-risk patients to one primary care doctor and pharmacy to prescribe theirmedications. Medicare has what is called an Opioid Overutilizer program, which permits Part D plans to reach out to doctors if they think a patient is atrisk of getting drugs from too many providers. However, Part D currently can’t restrict patients to one provider or pharmacy – Congress needs to give thatauthority.

Enrollment 2016 Snapshot: Second Week of Enrollment and Over 1 Million Have Enrolled

In the second week of Obamacare’s open enrollment, 534,777 people signed up for health care plans through Healthcare.gov. Of those, 187,172 people selectedplans for the first time in the marketplace, and another 347,605 existing customers selected 2016 plans through re-enrollment. This increases the number of2016 signups to over 1 million thus far, according to the US Department of Health and Human Services (HHS). HHS predicts that this open enrollment seasonwill create an increase of 1 million people, putting the total number of people insured through the health exchanges to 10 million by the end of 2016.

Model Law on Network Adequacy Expected to be Approved

On Nov. 19, the National Association of Insurance Commissioners opened its national meeting to discuss approval of the model state law on network adequacy,among other things. Most parties involved are happy with the end product of the proposal. Consumer advocates didn’t manage to get quantitative measures putin for assessing the adequacy of provider networks, and the American Medical Association (AMA) failed to eliminate language that curbs surprise medicalbills. However, the model law is expected to sail through a vote on Sunday (Nov. 22).

The National PACE Association Asks CMS to Update Regulations

The National PACE Association wrote a letter asking the US Department of Health and Human Services (HHS) to provide a regulatory update to the PACE program– a program that provides preventive, primary, acute and long-term care services to Medicare and Medicaid populations. The letter indicates that theregulations haven’t been updated in nine years, even though in 2012 HHS signaled that something was in the works. Advocates argue that Medicaid ManagedLong-Term Services and Supports (LTSS) programs and Medicare Advantage programs have fewer regulatory burdens, which diminishes PACE’s competitiveness. Inthe letter, advocates say that the Centers for Medicare and Medicaid Services (CMS) has left outdated regulations in place that are limiting PACE’s abilityto grow and that they need to be updated.

Medicaid Best-Price Policy Makes Outcomes-Based Contracts Difficult

According to Medicaid Health Plans of America President and CEO Jeff Myers, Medicaid’s best-price policy makes it difficult for health plans and drugmanufacturers to use outcomes-based contracts. In an effort to give state Medicaid agencies access to the lowest prices in the market, the Centers forMedicare and Medicaid Services (CMS) asked hepatitis C drug manufacturers about the challenges they face when offering value-based arrangements to stateMedicaid agencies.

The letters ask the hepatitis C drug manufacturers a series of questions, including the following: What challenges they face in offering discounted pricearrangements to Medicaid beneficiaries, what arrangements they offer commercial or government-sponsored health insurance plans, and if these arrangementsare offered to state Medicaid programs. CMS also asked how the arrangements are structured, what challenges drug manufacturers face when offering theprograms to states, any ideas manufacturers have to help states in the affordability of new drugs, and the monetary value of the arrangements to Medicaid.

AHA Lobbying for Exemption of Off-Campus Outpatient Facilities from Budget Cuts

On Nov. 16, the American Hospital Association (AHA) asked its members to lobby Congress to exempt outpatient facilities under development from the Medicarepay cuts in the budget deal passed last month. Hospitals oppose the measure in the budget deal, but primary physicians and independent cancer centerssupport it. AHA is lobbying for a policy that exempts all off-campus outpatient facilities under development – including physician practices and ambulatorysurgical centers that hospitals are currently buying – from any pay cuts. AHA created a proposal that defines the projects that would be exempt from cutsand is asking legislators to include it as an amendment to any upcoming legislation.

3. State Activities

Alabama: Governor Bentley Moves Toward Expansion

Alabama Gov. Robert Bentley’s task force recently approved a recommendation for the state to expand health insurance to uninsured residents. Therecommendation doesn’t actually tell the state to expand Medicaid under the Affordable Care Act (ACA). However, it details some similar benefits that theexpansion would provide.

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 DiagnosticLaboratory Tests

CMS released a proposed rule Sept. 25 that initiates the agency’s next step inimplementing the Protecting Access to Medicare Act of 2014 (PAMA), a bill that requires clinical laboratories to report on private insurance paymentamounts and volumes for lab tests. Under the proposed rule, certain laboratories would be required to report private payor rate and volume data if theyreceive at least $50,000 in Medicare revenues from laboratory services and more than 50 percent of their Medicare revenues from laboratory and physicianservices. 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 thenew Medicare rates by Nov. 1, 2016; these rates will be effective on Jan. 1, 2017. Tests that meet the criteria for being considered new advanceddiagnostic laboratory tests (ADLTs) will be paid at actual list charge for a minimum of three quarters. ADLTs are tests offered under Medicare Part B andare 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 approvedby 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 tothe 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