Washington Healthcare Update

April 18, 2016

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This Week:Congress fails to move on a budget…Ways and Means holds a hearing on tax treatment of health care…Zika virus, Ebola and Cures bill subjects ofappropriations talks.

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress

House of Representatives

House Ways and Means Committee Holds Hearing on the Tax Treatment of Health Care

The House Ways and Means Committee held a hearing on April14 to examine the tax code and its effect on our existing health care system. Members and witnesses discussed the challenges with outdated, inefficient andunfair provisions in the tax code and explored opportunities to reform those provisions to increase access to the high-quality, affordable, portable healthcare options Americans deserve. Members and witnesses talked about the largest health tax expenditure, which affects more than 150 million Americansinsured through employer-sponsored health plans. Known as the employer exclusion, this tax incentive subsidizes the cost of health insurance bought througha job.

Concluding the hearing, Chairman Kevin Brady (R-TX) said, “I cannot emphasize enough: the employer-sponsored health insurance market is a vital one. Thequestion we must wrestle with is how we can sustain this option while advancing reforms that make the tax code fairer and health care moreaffordable for all Americans. This Committee will continue to protect and expand opportunities for Americans who want to take control of theirhealth care dollars.”

To see a blog post about the hearing, click here.

House Education and Workforce Subcommittee Examined Solutions for a Healthy Workforce

On April 14, the House Education and the Workforce Committee Subcommittee on Health, Employment, Labor, and Pensions held a hearing to examine solutions for a healthy workforce. The hearingexplored innovations employers are implementing to control costs and provide higher-quality coverage to their employees. Members examined and discussed thefuture of employer-sponsored wellness programs, private exchanges and other creative benefit strategies aimed at improving access to affordable care forAmerica’s workers. The hearing was part of the ongoing work by the Task Force on Health Care Reform to develop reforms that will expandaccess to affordable coverage and lead to a more patient-centered health care system.

To see a related press release, click here.

House Energy and Commerce Committee Holds Hearing on Obamacare Reinsurance Payments

On April 15, the House Energy and Commerce Oversight Subcommittee held a hearingentitled “Unlawful Reinsurance Payments: CMS Diverting $3.5 Billion from Taxpayers to Pay Insurance Companies.” Despite the clear language of the statute,the Centers for Medicare and Medicaid Services (CMS) is continuing to divert funds intended for the U.S. Treasury to insurance companies as reinsurancepayments. Over the last two benefit years, CMS has illegally paid out $3.5 billion in reinsurance payments. At the hearing, subcommittee members asked CMSActing Administrator Andy Slavitt, the hearing’s sole witness, about the program.

To see a related press release, click here.

House Appropriation Bill Would Change FDA Drug Labeling Rule

FDA would be prohibited from finalizing a proposed rule that outlineshow drugmakers can update their labeling unless it consents to provisions outlined by Congress, under the House’s FY 2017 appropriation bill released thisafternoon.

Under the House’s FY 2017 appropriation bill released April12, the U.S. Food and Drug Administration (FDA), unless it agrees to provisions outlined by Congress, would be prohibited from finalizing aproposed rulethat outlines how drugmakers can update their labeling. The language reflects industry requests and says that FDA could finalized the proposal only if itis altered to put FDA in charge of approving safety updates to generic or biosimilar labels. FDA would also have to require the same changes to originaland generic versions of the product.

Current FDA regulation prevents generic drugmakers from updating their products with new safety information unless the new labels are the same as those ofthe branded drug. This is a problem when generic companies notice safety issues before the original companies take action. The Supreme Court ruling in Mutual v. Bartlett says that patients cannot sue a generic company when they do not warn of a safety issue. After this ruling, FDA proposed to letgeneric drug companies update their safety labeling without agency approval—this could create periods where generic and branded products would havedifferent labels.

Brand and generic lobbies submitted comments onthe proposed rule urging FDA to adopt the alternative proposal known as the Expedited Agency Review (EAR), which would put the burden of updating safetyinformation on FDA. They argued that the proposal would increase their legal costs, increase drug costs and cause confusion for consumers.

FDA says it plans to finalize the rule in July.

House Appropriations Committee Proposes $10 Million for Zika and Ebola

On April 12, the House Appropriations Committee unveiled a spending bill that includes $10million in new FDA funding to combat Zika and Ebola. The funding will go toward ongoing response activities and the development of a vaccine to fight theviruses. This proposal is far from the White House’s $1.9 billion request, which administration officials argue is necessary to sufficiently respond toZika and Ebola. The White House recently agreed to redirect almost $600 million in Ebola funds to fight the Zika virus, but officials say that money needsto be replenished in order to continue to fight Ebola in West Africa.

House Appropriations Committee Chairman Hal Rogers (R-KY) said his staff is working on a supplemental bill to get additional funding to fight Zika. Thecommittee is waiting on the administration to give details about what exactly it needs to combat the virus.

Committee Democrats offered an amendment to fully fund the administration’s $1.9 billion request—Rogers offered a substitute amendment to that. Hisamendment would give the administration authority to use all unobligated Ebola money. He said the White House’s Zika request was basically a slush fundthat did not include sufficient detail on where the money would go.

To see details about the spending bill, click here.

House Passes Zika Voucher Bill

On April 12, the House passed legislation to add the Zika virus to the list of tropical diseases under the FDA’s priority review voucher program, whichexpedites new drugs to market. A corresponding bill passed in the Senate in March. The bill now goes to the President. It is expected to be signed intolaw.

Cures Provisions Included in Appropriations Bill

The House Appropriations spending bill approved on April 12 would enact into law three sections of Title II of the 21st Century Cures Act, including onethat would allow companies to get a new indication approved for a cancer drug or biologic based on data summaries, instead of the bigger amount of datausually required.

To see a detailed description of the bill, click here.


Bipartisan Group of Senators Asks CMS to Delay Hospital Compare Star Ratings

A bipartisan group of 60 senators is asking the Centers for Medicare and Medicaid Services (CMS) to delay publishing Hospital Compare Star Ratings that areexpected to be out April 21—a similar letter from House lawmakers is in the works. Led by Sens. Rob Portman (R-OH) and Bob Casey (D-PA), the senators arguethe star rating system could be misleading to consumers since it does not account for poor or complex patients. They also argue CMS has not given enoughinformation to hospitals about how it came up with the ratings.

“We respectfully request that you delay release of the star ratings to provide the necessary time to more closely examine the star rating methodology,analyze its impact on different types of hospitals, and provide more transparent information regarding the calculation of the ratings to determineaccuracy,” the lawmakers say in the April 11 letter.

The letter also says prominent hospitals with top quality ratings in other reports could receive one or two stars out of five in this system, which causesconcern that the measures underpinning the rating system are flawed. Congress’s Medicare pay advisers and others have said the measures used for thehospital compare program are not appropriately adjusted for socioeconomic status nor do they account for beneficiaries with multiple chronic conditions.

The American Hospital Association (AHA) says that Reps. Jim Renacci (R-OH) and Bill Pascrell (D-NJ) collected signatures for a similar House letter throughApril 13.

2. Administration

CMS Launches Initiative to Improve Primary Care Delivery

On April 11, the Centers for Medicare and Medicaid Services (CMS) announced its initiative to reform primary care delivery in its largest multipayerinitiative yet. The Comprehensive Primary Care Plus (CPC+) model will be implemented in up to 20 regions and can accommodate up to 5,000 practices, whichwould encompass more than 20,000 doctors and clinicians and the 25 million people they serve. The initiative is designed to provide doctors the freedom tocare for their patients the way they think will deliver the best outcomes and to pay them for achieving results and improving care. It is set to begin inJanuary.

Final numbers, however, will depend on whether the agency has high levels of buy-in from commercial insurers and states, as well as physicians. Based onCMS’s request for applications, the 25 million figure could include the assumption that3.5 million fee-for-service Medicare enrollees would be involved—no breakdown was given for Medicare Advantage, Medicaid and the commercially insured.

Building on theComprehensive Primary Care initiative launched in late 2012, the five-year CPC+ model will benefit patients by helping primary care practices:

  • Support patients with serious or chronic diseases to achieve their health goals
  • Give patients 24-hour access to care and health information
  • Deliver preventive care
  • Engage patients and their families in their own care
  • Work together with hospitals and other clinicians, including specialists, to provide better coordinated care

CPC Plus contains two tracks that can each accommodate up to 2,500 practices. Both tracks will require practices to perform the functions and meet thecriteria listed above, but practices in Track 2 will also provide more comprehensive services for patients with complex medical and behavioral healthneeds, including, as appropriate, a systematic assessment of their psychosocial needs and an inventory of resources and supports to meet those needs. Theagency estimates that Track 1 will be budget-neutral, and Track 2 will save $2 billion over the five-year period. JAMA has a table comparing models here.

CMS will select regions for CPC+ where there is sufficient interest from multiple payers to support practices’ participation in the initiative. CMS willenter into a Memorandum of Understanding (MOU) with selected payer partners to document a shared commitment to align on payment, data sharing and qualitymetrics in CPC+.

CMS will accept payer proposals to partner in CPC+ from April 15 through June 1, 2016. CMS will accept practice applications in the determined regions fromJuly 15 through Sept. 1, 2016.

For more information about the CPC+ model, including a fact sheet, click here.

CMS Releases New FAQs for Home and Community-Based Services

On April 12, the Centers for Medicare and Medicaid Services (CMS) released additional Frequently Asked Questions on implementation activities associatedwith the home and community-based services final regulation. Specifically, guidance is provided on how CMS will review requests to build new settings incategories that are presumed to be institutional in nature. The guidance also identifies the components of person-centered planning regulatory requirementsthat are in effect now and those that are part of the home and community-based settings transition period in effect through March 2019. The information ispart of CMS’s effort to assist states in meeting regulatory requirements for residential and non-residential home and community-based settings.

The full Home and Community-Based Services toolkit, including the updated portions, is available here.

Officials Find Greater Risks Due to Zika Virus

During an April 11 White House briefing, top U.S. health officials said mosquitoes that can carry Zika have spread much faster in the country and the virushas bigger health impacts than originally thought. Officials now believe mosquitoes with the virus could be in 30 states—up from 12. They are also linkingthe virus to pregnancy complications beyond microcephaly, the neurological condition in which babies are born with abnormally small heads.

The Centers for Disease Control and Prevention (CDC) learned that Zika could be problematic throughout the entire pregnancy and that premature birth andeye problems in babies born to mothers infected with Zika may be due to the virus. Zika may also be associated with acute disseminated encephalomyelitis,the neurological condition that affects the brain in a way similar to multiple sclerosis.

Anthony Fauci, director of the NIH National Institute of Allergy and Infectious Diseases, said there is progress on getting a potential vaccine into aclinical trial—the agency hopes to begin this in September. NIH has also screened 62 drugs and identified 15 that could be useful for treating Zika.

Officials still stress the need for additional funding to combat the virus. They argued that the $600 million in Ebola funds would not be enough and thatNIH will need to dip into other accounts when that money runs out. The White House has asked for $1.9 billion in new funding for Zika.

Officials Say CMS Is Considering Excluding Oncology Care Model Practices From Part B Demo

On April 11, two officials from the Centers for Medicare and Medicaid Services (CMS) said they are considering excluding doctor practices that are part ofthe Oncology Care Model from the controversial Part B drug-price demonstration. The proposal to test changes to the physician pay formula in Medicare PartB has been the subject of many public meetings, including two on April 11.

Speaking at Pew Charitable Trusts, CMS Principal Deputy Administrator Patrick Conway stressed the possibility of excluding Oncology Care Model Practices.He also said including those practices would make it more difficult to determine whether the Part B demo is successful. At an event sponsored by thePharmaceutical Care Management Association, CMS Deputy Administrator and Medicare Director Sean Cavanaugh also said CMS is considering excluding theaforementioned practices.

Part B currently pays doctors a drug’s average sales price (ASP) plus 6 percent. The first stage of the demonstration would cut that to 102.5 percent ofthe ASP, plus a flat fee of $16.80 per drug per day. The second stage of the demonstration would test approaches to paying for drugs based on their value.That phase is less defined and there are many options that CMS could explore. Oncologists and drugmakers generally support the idea of paying for value,but it is not clear that they will support whatever CMS ends up testing in the second phase.

An Avalere Health study foundthat the demonstration would reduce payments to hospitals and some specialists, while increasing payments to primary care providers. The study shows thatseven of the 10 drugs that constitute the largest reduction in reimbursement are used to treat cancer.

Optometrists Files Claim With FDA Against Online Vision Test

On April 4, the American Optometric Association (AOA) filed a claim with FDA against an online vision test marketed by Opternative Inc. that allowspatients to get prescriptions for glasses and contact lenses online. AOA claims the product has not received the premarket approval necessary for a newmedical device and asks that the product be pulled from the market and undergo FDA review. The claim comes as FDA and lawmakers attempt to define the murkywaters of what types of health care software requires agency oversight.

Opternative’s product offers patients an “online refractive exam that provides a prescription for glasses and contacts,” according to the company’swebsite. That includes diagnosing the level of a patient’s nearsightedness (myopia), farsightedness (hyperopia) and whether a patient has astigmatism andthe degree of astigmatism. A patient takes the test online and then is sent a prescription from an ophthalmologist registered in the patient’s state thatthey can use to get glasses or contacts.

AOA’s claim alleges Opternative’s diagnosis has a significant potential for yielding an inaccurate prescription; is not adequate to yield a safe contactlens prescription; and carries a significant risk of missing diagnoses of serious eye and other conditions like glaucoma, diabetes, hypertension, cataractsand macular degeneration.

AOA says while it believes Opternative’s product meets the definition of a device, it finds no record of a cleared 510(k) premarket notification or anapproved premarket approval application. AOA notes that Opternative is simply registered as a specification developer for a visual acuity chart,color vision tester and a medical device system, and devices covered by those classifications are exempt from the 510(k) requirements.

Last year, the agency issued final guidance stating that it would not regulate low-risk medical device data systems intended to transfer, store or displaymedical device data without controlling or altering the functions of any connected devices. FDA has said it will also not regulate low-risk personaldevices like wearables that monitor things like a person’s heart rate and other vital signs. Instead, FDA said it would focus on higher-risk software andapps that actually make a diagnosis or recommend treatments, but has yet to publicly make clear how it will regulate these devices.

The House passed the 21st Century Cures Act that would remove low-risk software from FDA regulation. These provisions were scaled back from earlierlanguage that aimed to more clearly define “medical” software subject to agency oversight.

CMS Plans Alternative Payment Models in Medicare Advantage

In its Call Letter for Medicare Advantage programs, CMS is laying the groundwork for alternative payment models in the Medicare Advantage program nextyear. CMS says that as a result of the high level of interest in the use of alternative payment models and the administration’s long-term goal oftying more Medicare fee-for-service payments to alternative payment models, CMS added questions to Medicare Advantage reporting requirements on how plansuse these models. Specifically, CMS asks MA plans to report on the proportion of provider payments that are fee-for-service with no link to quality;fee-for-service with a link to quality; alternative models built on fee-for-service architecture; and population-based.

“CMS has designed the policies contained in this Call Letter to improve the overall management of the Medicare Advantage and Prescription Drug programswith four major outcomes in mind. These outcomes are: 1) improvement in quality of care for individuals, 2) promotion of alternative payment models, 3)program integrity and beneficiary/tax-payer value, and 4) improvement in beneficiary experience,” CMS said in the call letter.

CMS had also asked in the draft call letter for stakeholders to lay out the challenges and concerns associated with the use of APMs in MA. Lawmakers tookCMS’s request that Medicare Advantage plans report on provider-pay models as implicit recognition that MA plans could qualify as alternative pay models,although the agency has yet to say which APMs will count toward physician bonuses under the new physician payment system.

CMS did not respond to lawmakers’ comments in the final rule, and now lawmakers are waiting to see what the final rule on the new physician payment systemsays before drawing conclusions. That proposed rule is under review by the White House Office of Management and Budget.

State-based Exchanges Look at Next Steps for Small Business Health Option Program (SHOP)

State-based exchanges are exploring next steps for Small Business Health Option Program (SHOP) marketplaces that are not delivering much return oninvestment as they enter their third year. If enrollment does not increase in the next few years, more states will look for alternatives. CMS has notreleased small group enrollment numbers since last July, when the first and only figure revealed only 85,000 or so workers covered through around 10,700small employers nationwide as of May 2015. Under the final 2017 Notice of Benefit and Payment Parameters finalized last month, employers in FFM and“supported” exchange states can opt to offer all plans across all actuarial value levels from one issuer—known as “vertical choice”—for plan yearsbeginning on or after Jan. 1, 2017. All SHOPs will still be required to let employers offer all qualified health plans at a single actuarial value level ofcoverage, CMS said.

Twenty-one states will do so starting in 2017,CMS said Friday, April 8. States that run their own exchanges make that decision themselves.

3. State Activities

Alabama: Possible Cuts to Alabama’s Medicaid Agency

On April 6, Alabama Gov. Robert Bentley said the state’s Medicaid Agency would try program cuts before he considers calling a special session on the statebudget. Bentley suggested that one option would be to eliminate Medicaid prescription drug coverage for adults, which would save an estimated $50 to $60million in state dollars. This is one of several cuts the governor is considering after the state legislature did not provide the funding herequested—Bentley wanted a $100 million increase for the Medicaid program, but lawmakers approved only a $15 million boost.

Arkansas: Arkansas Senate Fails to Pass Medicaid Expansion Funding

On April 14, Arkansas Senate Republicans blocked funding for the state’s hybrid Medicaid expansion. Lawmakers had previously approved the framework of thegovernor’s Arkansas Works proposal to extend Medicaid expansion. However, the measure fell two votes short of the 27 majority—75 percent—needed to pass it,with the vote coming in at 25-10 in favor of it. Legislatures will reconvene in Little Rock on April 19 to once again take up the Arkansas Works proposal.Over 250,000 Arkansas residents depend on the private option for health insurance.

California: Senate Health Committee Approves Drug Transparency Bill

On April 13, the California Senate Health Committee approved a drug transparency bill, S.B. 1010, which would require drug manufacturers tonotify California health care purchasers and other health insurers if they increase the price of a drug by more than 10 percent duri