Washington Healthcare Update

February 15, 2016

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This Week:The president’s proposed budget for fiscal year 2017 came out Tuesday… the House and Senate Budget Committees broke with tradition and did not hold hearingson the proposed budget… Please see the special Budget Section for more detail… CMS released a final rule on provider reporting and returningoverpayments…the proposed rule was made in 2012.

1. The President’s Fiscal Year 2017 Proposed Budget

The budget saves roughly $376 billion from health care programs. This includes new ways to reduce drug prices, and changes in Medicare.

  • Medicare
  • Medicaid
  • Cadillac Tax
  • Cancer Moonshot
  • National Institutes of Health
  • Food and Drug Administration
  • Opioid Epidemic
  • Mental Health

To see the budget, clickhere. Visit page 109 to see the list of the White House’s proposed cuts, consolidations andsavings—the list targets 117 items, with projected savings of $14 billion in discretionary and mandatory spending in fiscal year 2017.

2. Congress

House of Representatives

Senate

3. Administration

4. Regulations Open for Comment

5. Reports


1. The President’s Fiscal Year 2017 Proposed Budget

The budget saves roughly $376 billion from health care programs. This includes new ways to reduce drug prices, and changes in Medicare.

Medicare:The budget, once again, proposed to strengthen the Independent Payment Advisory Board (IPAB), the ACA-created body whose purpose was to tell Congress howto reduce Medicare spending. IPAB has never been funded or staffed.

In addition to proposing more alternative payment methods as a way to save Medicare dollars, the budget also contains competitive bidding for MedicareAdvantage plans. Under this proposal, payment rates would be based on plans’ bids. The budget says the bidding program would reward plans for loweringtheir bids by allowing them to keep 100 percent of the difference between their bid and the benchmark. The budget also calls for standardizing qualitybonus payments across counties by removing the doubling of the quality bonus payment that is available only in certain areas and by lifting the cap onbenchmarks for plans that are entitled to receive a quality bonus payment.

Medicaid:The president’s budget continues to push for Medicaid expansion by proposing to offer three years of full federal funding for newly eligible beneficiariesto states that have not yet expanded, and extends funding for the Children’s Health Insurance Program (CHIP) through fiscal year 2019.

A surprise proposal was a joint federal-state negotiating pool to reduce the cost of drugs. Currently states are allowed to negotiate supplemental drugrebates, but CMS is not allowed to facilitate negotiations with drugmakers. The proposal would allow CMS and state Medicaid programs to partner withprivate sector contractors to negotiate supplemental rebates. The budget also proposes that CMS collect wholesale acquisition costs for Medicaid-covereddrugs to ensure accurate reporting of average manufacturer prices.

Cadillac Tax:The President is also suggesting some changes in the Affordable Care Act’s “Cadillac tax,” a 40 percent excise tax on employer-sponsored health insurancebenefits over a certain threshold. Congress last year decided to delay implementation of the tax to 2020. The budget proposes that in any state where thepremium for a gold plan on an exchange would be above the Cadillac tax’s current threshold, the threshold would rise to the amount of the average goldplan’s premium.

Cancer Moonshot:The budget seeks $755 billion in new minority funds for cancer-related activities at the National Institutes of Health and the Food and DrugAdministration. The initiative also includes $195 million in immediate funding for the NIH for FY 2016.

National Institutes of Health:The budget takes $1 billion from NIH’s discretionary budget and replaces it with $1.8 billion in mandatory funding. This has researchers worried that theagency’s funding base would be weakened over the long term.

Food and Drug Administration:The FDA received a small boost in funding overall in the budget, disappointing advocates concerned about FDA’s role in food and drug safety.

Opioid Epidemic:The budget contains $1.1 billion to address the national opioid epidemic. This includes $1 billion in mandatory funding over two years to expand access totreatment. Of this, $920 million will be given to states to expand medication-assisted treatment for opioid use disorders.

Mental Health:The budget proposes $500 million in mandatory spending to increase access to mental health treatment. The proposal says the additional funding would beused to help engage individuals with serious mental illness by improving access to care through increasing service capacity.

To see the budget, click here. Visit page 109 to see the list of the White House’s proposed cuts, consolidations andsavings—the list targets 117 items, with projected savings of $14 billion in discretionary and mandatory spending in fiscal year 2017.

2. Congress

House of Representatives

Energy and Commerce Committee Holds Hearing on Medicaid and CHIP’s FMAP

On Feb. 10, the House Energy and Commerce Subcommittee on Health held a hearing on Medicaid and CHIP’s Federal Medical Assistance Percentage. The federalgovernment’s share of most Medicaid expenditures is determined by the Federal Medical Assistance Percentage (FMAP) rate. The FMAP varies by state and isdetermined by a formula set in statute that compares each state’s per capita income to the U.S. per capita income. At this hearing, members discussed howthe FMAP operates; the variety of FMAPs, incentives and disincentives the FMAP creates for states; and how modifications to the FMAP could improve Medicaidspending predictability, accountability, sustainability, equity or efficiency.

Witnesses:

John Hagg
Director of Medicaid Audits
Office of Inspector General
Department of Health and Human Services

Alison Mitchell
Health Care Financing Analyst
Congressional Research Service

Anne Schwartz, Ph.D.
Executive Director
Medicaid and CHIP Payment and Access Commission

Carolyn Yocom
Director, Health Care
Government Accountability Office

For more information or to view the hearing, clickhere.

House Ways and Means Committee Holds Hearing on HHS FY 2017 Budget Request

On Feb. 10, the House Ways and Means Committee held a hearing on the U.S. Department of Health and Human Services’ (HHS) FY 2017 budget request. HHSSecretary Burwell discussed the details of the president’s proposals involving HHS that are within the committee’s jurisdiction, including Medicare, healthcare programs under the Affordable Care Act (ACA), Child Support Enforcement, Temporary Assistance for Needy Families and numerous child welfare programs.

For more information or to view the hearing, clickhere.

Senate

Senate HELP Committee Holds First Markup on its Counterpart to House Cures Legislation

On Feb. 9, the Senate Health, Education, Labor and Pensions (HELP) Committee held the first installment of a markup on its counterpart to the House-passedCures legislation. The lineup included a revised bill to improve electronic health records, and bipartisan bills to streamline the U.S. Food and DrugAdministration’s (FDA) review of innovative medical devices, require enhanced FDA oversight of reusable devices, speed up the approval process ofgenetically targeted drugs and report on and remove barriers for the next generation of researchers, among other topics.

The bills considered are as follows:

  • S. 2030, The Advancing Targeted Therapies for Rare Diseases Act of 2015, introduced by Sen. Michael Bennet (D-CO)
  • S. 1622, The FDA Device Accountability Act of 2015, introduced by Sen. Richard Burr (R-NC)
  • S. 2014, Next Generation Researchers Act, introduced by Sen. Tammy Baldwin (D-WI)
  • S. 800, The Enhancing the Stature and Visibility of Medical Rehabilitation Research at NIH Act, introduced by Sen. Mark Steven Kirk (R-IL)
  • S. 849, Advancing Research for Neurological Diseases Act of 2015, introduced by Sen. Johnny Isakson (R-GA)
  • S. 2503, Preventing Superbugs and Protecting Patients Act, introduced by Sen. Patty Murray (D-WA)
  • S. 2511, Improving Health Information Technology, introduced by Sen. Lamar Alexander (R-TN)

Before the markup, the committee revised pieces of the Improving Health Information Technology bill. The updated draft dropped a proposal to combine theHealth IT Standards and Policy committees into one body—the HIT Advisory Committee. A provision was also eliminated that would have had the Office of theNational Coordinator for Health Information Technology and the Advisory Committee create data standards. Additionally, the revised version took out finesunder the decertification subsection. The Electronic Health Record Association had questioned the necessity of decertification and fines based on the newratings system in the legislation.

To view the markup, click here.

Senate Judiciary Committee Hearing on Mental Health and Criminal Justice Reform

On Feb. 10, the Senate Judiciary Committee held a hearing on mental health and criminal justice reform. The committee looked at how improvements can bemade to the various parts of the system to better respond to crises, identify people with dangerous mental illness, provide necessary treatment and enhancethe background check system. Chairman Chuck Grassley noted that the committee’s job is to 1) break the current mental health/criminal justice cycle and 2)provide for public safety.

The Mental Health and Safe Communities Act, authored by Senator John Cornyn, served as the basis for discussion at the hearing. The bill:

  • Reauthorizes and strengthens the National Instant Criminal Background Check System. It allows state and local governments to create pretrial screening and assessment programs to identify offenders with mental illness.
  • Requires the attorney general to direct federal judges to operate mental health court pilot programs.
  • Requires state and local governments to use drug and mental health court funding to develop specialized programs for those with co-occurring mental health and substance abuse problems.
  • Mandates specialized training and the use of new technology to ensure that those who work in the criminal justice system are properly equipped to respond to individuals with mental illness and mental illness crises.

During the hearing, Democrats raised concerns over NRA-backed gun language included in Cornyn’s bill that allows some people with serious mental illness toget their gun rights restored—the provision allows mentally ill people deemed competent to have their record removed from the National Instant CriminalBackground Check System. Opposition to this measure from Democrats and gun control groups could threaten bipartisan progress toward a mental health deal inthe Senate this year. Cornyn argued that nothing in the legislation makes it easier for mentally ill people to get a firearm. The bill is expected to beput into a larger mental health bill with legislation from the HELP and Finance committees.

Witnesses:

Pete Earley
Author
Mental Health Advocate

Dr. Fred Osher
Director of Health Systems and Services Policy
Council of State Governments Justice Center

Sheriff Susan Pamerleau
Sheriff
Bexar County

William Ward
State Public Defender
State of Minnesota Board of Public Defense

W. David Guice
Commissioner
Division of Adult Correction and Juvenile Justice | North Carolina Department of Public Safety

To view the hearing, click here.

Senate Finance Committee Holds Hearing on HHS Budget Request for FY 2017

On Feb. 11, the Senate Finance Committee held a hearing to examine the U.S. Department of Health and Human Services (HHS) FY 2017 budget. Committee membersfocused on the policies in the budget that would continue to bolster the Affordable Care Act (ACA). Chairman Hatch expressed his disapproval, and listedthree examples to demonstrate his point: 1) the vast majority of newly insured people have gained coverage under Medicaid, not through the health insuranceexchanges; 2) the state exchanges are not working; and 3) premiums are going up—HHS recently announced that premiums for benchmark plans will rise by anaverage of over 7 percent nationwide. The committee also grilled HHS Secretary Sylvia Burwell on the president’s request for nearly $30 billion in Medicaidfunds for Puerto Rico to avert a coming cliff in the island’s program funding. Other topics included the budget proposal for steps to address the appealsbacklog in the Medicare claims payment system and the proposal for additional spending to combat opioid abuse.

For more information or to view the hearing, click here.

Senate Judiciary Committee Holds Markup of Comprehensive Addiction and Recovery Act

On Feb. 11, the Senate Judiciary Committee held a markup of the Comprehensive Addiction and Recovery Act (CARA)—a bill aimed at addressing the epidemics ofprescription opioid abuse and heroin use. The bill has bipartisan support in the committee and companion legislation in the House. It would authorize theObama administration to use funds already in the budget to give states and organizations grants for opioid education, treatment and abuse prevention.Projects funded by CARA include:

  • $5 million to address abuse by pregnant or parenting females;
  • $15 million in incentive grants for states to create comprehensive opioid abuse response planning and implementation grants;
  • $5 million for government agencies to create treatment alternatives to incarceration;
  • $12 million for demonstration grants allowing programs to expand medication-assisted treatment;
  • $3 million per year for youth recovery services;
  • $5.7 million per year for organizations to raise awareness of treatment and support; and
  • $5 million a year for $75,000 grant to communities to address local drug crisis in the area.

Democrats are now insisting that Republicans fund the measure instead of redirecting existing funding. This effort is part of Democrats’ message thatRepublicans are not doing enough to address national crises. But lawmakers in both parties are trying to be ahead of the crisis by offering their ownlegislation, sending letters to the Obama administration and even blocking the FDA nominee.

Senate Majority Leader Mitch McConnell indicated that the bill could go to the Senate floor after this week’s recess. Sen. Jeanne Shaheen has alreadyproposed a bill that would add funding to the legislation. Nearly every state has seen an increase in opioid-related deaths, most prominently in theBoston-New Hampshire area, where residents have raised the problem with presidential candidates.

For more information or to view the markup, click here.

Sen. Murkowski Lifts Hold on Califf’s FDA Nomination and Vote to Occur

Sen. Lisa Murkowski (R-AK) is lifting her hold on the nomination of Robert Califf for commissioner of the U.S. Food and Drug Administration (FDA); however,three other senators still have holds on his nomination. In a statement on Feb. 11, Murkowski said she has received assurances that the FDA is addressingher concerns regarding the labeling of genetically engineered salmon. She also said the FDA has helped her draft legislative language that would mandatethe labeling.

Sens. Joe Manchin (D-WV), Bernie Sanders (D-VT) and Ed Markey (D-MA) all have holds in place on Califf’s nomination due to his ties to the pharmaceuticalindustry and FDA’s role in the opioid epidemic. Califf’s nomination passed the Senate HELP Committee in January.

Senate Majority Leader Mitch McConnell (R-KY) on Thursday (Feb. 11) filed cloture for a vote on Califf’s nomination, which means that the vote on hisnomination could occur after 5:30 p.m. on Feb. 22, when the Senate returns from the Presidents’ Day recess.

3. Administration

Medicare Beneficiaries Continue to Save on Prescription Drugs

On Feb. 8, the U.S. Department of Health and Human Services (HHS) released information showing that almost 10.7 million Medicare beneficiaries havereceived discounts of more than $20.8 billion on prescription drugs—an average of $1,945 per beneficiary—since the Affordable Care Act (ACA) was enacted.In 2015, 5.2 million seniors and people with disabilities received discounts of more than $5.4 billion ($1,054 per beneficiary), whereas in 2014, 5.1million people received discounts of $4.8 billion ($941 per beneficiary).

Beneficiaries also are utilizing various recommended preventive services with no coinsurance:

  • 39.2 million people with Medicare (including Medicare Advantage) used at least one preventive service with no copays or deductibles in 2015, slightly more than in 2014.
  • Almost 9 million beneficiaries (including those in Medicare Advantage) used an Annual Wellness Visit in 2015.

The ACA provided certain recommended preventive services at no cost sharing and closed the Medicare Part D “donut hole.”

For more information about Medicare prescription drug benefits, click here.

To see a list of Medicare preventive services, click here.

CMS Releases Notice of Part B Drug Demo

The Centers for Medicare and Medicaid Services (CMS) is looking to test new payment methods for Medicare Part B drugs beginning this summer. Anagencynotice (CMS agency notice.pdf) was sent to Medicare contractors Feb. 5 and subsequently withdrawn. Some lobbyists thought the demonstration would beincluded in the president’s proposed budget because of rumors that the president would use the budget to advance drug price-control measures—however, a CMSspokesperson said it isn’t a part of the budget and that the transmittal was accidentally posted. The budget includes a proposal to change Part B drugreimbursement, but that is a separate policy.

Medicare currently pays for most Part B drugs at a rate of the average sales price (ASP) plus 6 percent. This current payment methodology gives providersincentives to use higher-priced drugs, thus turning a higher profit. CMS wants to experiment with different versions of the add-on percentage to see theeffects it would have on spending and prescribing patterns. For example, it wants to see if any changes would affect the incentive for physicians toprescribe higher-priced drugs with no additional clinical value. CMS is planning to test the formulas based on ZIP Codes in all Part B drug settings andparticipation would be mandatory.

The agency is also developing methods to test the impact of new payment proposals for individual Part B drugs apart from changes to the ASP-based payment.These payments may differ across a different set of ZIP Codes, and some Part B drugs might be excluded from either approach, according to the notice.

If CMS follows through with the demonstration, it will go through notice and comment rule making first. The notice to Medicare contractors was intended togive them an advance notice.

CMS Releases Final Rule on Reporting and Returning of Overpayments

On Feb. 11, the Centers for Medicare and Medicaid Services (CMS) published a final rule thatrequires Medicare Parts A and B health care providers and suppliers to report and return overpayments by the later of the date that is 60 days after thedate an overpayment was identified, or the due date of any corresponding cost report, if applicable.

Health care providers and suppliers will remain subject to the statutory requirements found in Section 1128J(d) of the Social Security Act and could facepotential False Claims Act (FCA) liability, Civil Monetary Penalties Law (CMPL) liability and exclusion from federal health care programs for failure toreport and return an overpayment. Providers and suppliers will also continue to be required to comply with current CMS procedures when it determines anoverpayment exists and issues a demand letter.

The major provisions of the final rule:

  • Require providers to report and return Medicare overpayments no more than 60 days after identifying them. Overpayments could be the result of coding or reporting errors, duplicate payments or other mistakes, and providers can face penalties under the False Claims Act for failing to comply.
  • Limit how far back providers must go through claims for overpayments. The “lookback period” is now six years, down from 10 years in the proposed rule.
  • Provide a standard for when a provider has “identified” an overpayment that is less strict than in the proposed rule and takes into account providers’ varying compliance programs.
  • Allow providers to take up to six months to investigate possible errors in some cases, which is a more specific time frame than provided in the proposed rule.
  • Expand the way providers can return overpayments to include processes like claims adjustment or credit balance reporting.

The proposed rule was first proposed in February 2012. For more information, click here.

CMS Sends Letter to States Concerning Implementation of the Covered Outpatient Drug Final Rule

On Feb. 11, the Centers for Medicare and Medicaid Services (CMS) issued a letter to states providing guidance concerning implementation of the CoveredOutpatient Drug final rule with comment (CMS-2345-FC) (81 FR 5170) published on Feb. 1, 2016, as it relates to the Medicaid program. The letter outlineskey changes that states need to address when determining their reimbursement methodologies, including the revised requirement in 42 CFR §447.512(b) forstates to reimburse at an aggregate upper limit based on actual acquisition cost (AAC) plus a professional dispensing fee established by the agency; theimplementation of the Affordable Care Act federal upper limit (FUL); and requirements for the 340B entities, 340B contract pharmacies, Indian HealthService (IHS), Tribal, and Urban Indian Organization (I/T/U) pharmacies.

The letter is available online on Medicaid.gov.

4. Regulations Open for Comment

Food and Drug Administration (FDA) Issues Final Rule to Phase Out Trans Fats

FDA issued a final rule June 16that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products frommicrowave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat inprocessed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fatcontent information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat infoods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

CMS Soliciting Comments on Episode Groups as Required by MACRA

The Centers for Medicare and Medicaid Services (CMS) is solicitingcommentson episode groups and on specific clinical criteria and patient characteristics to classify patients into care episode and patient condition groups asrequired by Section 101(f) of the Medicare Access and C