Washington Healthcare Update

June 13, 2016

Pardon Our Dust

We recently launched this new site and are still in the process of updating some of our archived content. Some details of this article may be incomplete, links may be broken, and other elements may not display properly yet. We appreciate your patience and understanding.

This Week:Appropriations bills begin to move…Energy and Commerce works on mental health bill…Concern remains over Part B drug demo.

1. Courts

2. Congress

House of Representatives


3. Administration

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Courts

Supreme Court Asks Department of Justice to Weigh In on Pay-For-Delay Case

The Supreme Court asked the solicitor general to weigh in on King Drug Company v. SmithKline Beecham Corp., a sign that the Court isconsidering taking up a case that could broaden what kinds of brand-generic patient agreements count as pay-for-delay. In 2013, the Court ruled that if abranded drug company pays a generic drugmaker cash in order to delay the introduction of a cheaper rival product as part of patent settlement litigation, acourt could strike the deal as anticompetitive. (FTC v. Actavis)

In King, the 3rd U.S. Circuit Court of Appeals ruled that an agreement by GlaxoSmithKline not to launch an authorized generic to compete with aforthcoming generic competitor made by Teva amounted to a “reverse payment”—or a pay for delay deal. That decision was appealed to the Supreme Court.


House of Representatives

House Energy and Commerce Committee Releases Draft Mental Health Reform Bill

On June 3, the House Energy and Commerce Committee circulated adraft mental health bill as a manager’s amendment to Rep. TimMurphy’s (R-PA) reform legislation.

Murphy’s bill was approved by a subcommittee on mostly partisan lines. However, disagreements over funding and provisions related to patient privacy rightsslowed progress.

The draft manager’s amendment does not include a provision that would have fully repealed the Institutes for Mental Disease (IMD) exclusion, a Medicaidrule that prohibits reimbursements to mental hospitals with more than 16 psychiatric beds. Advocates for repeal say the law is a barrier to care, but thecost of repealing it would make passage more difficult. Instead, the draft codifies a rule recently issued by CMS that alleviates restrictions on Medicaidreimbursements for mental health facilities.

The committee will hold a markup on the bill within the month and is accepting feedback from lawmakers and stakeholders in the meantime.

Energy and Commerce Hearing on Patient Solutions for Lower Costs, Better Care

On June 10, the House Energy and Commerce Committee Subcommittee on Health held a hearing entitled “Advancing Patient Solutions for Lower Costs and BetterCare.” The hearing can be viewed along with the webcast of the hearing here. Witnesses were:Grace-Marie Turner, Founder, President and Trustee, Galen Institute, Inc.; Doug Holtz-Eakin, President, American Action Forum; and Sara Collins, VicePresident of Health Coverage and Access, Commonwealth Fund.

The legislation discussed included:

  • Discussion Draft of H.R. ____, To amend title XXVII of the Public Health Service Act to change the permissible age variation in health insurance premium rates
  • Discussion Draft of HR____, To amend the Patient Protection and Affordable Care Act to better align the grace period required for non-payment of premiums before discontinuing coverage under qualified health plans with such grace periods provided for under State law
  • Discussion Draft of H.R. ____, To amend Title I of the Patient Protection and Affordable Care Act to require verification for eligibility for enrollment during special enrollment period in PPACA insurance plans, and for other purposes
  • H.R. 3463, Aligning Children’s Dental Coverage Act
  • H.R. 4262, Transparency and Accountability of Failed Exchanges Act

To see text of the legislation discussed, click here.

House Extends Grandfathered Status for Certain Outpatient Facilities Under Construction

On June 7, the House passed legislation by voice vote extending the timeline for hospitals to receive grandfathered status excluding them from new“site-neutral” payment rules.

Last year’s budget deal eliminated the Medicare policy that paid higher rates for services that could be provided in outpatient settings. Supporters of thelegislation argued that the existing system created irrational financial incentives for hospitals to acquire physician groups in order to qualify for thehigher payment. However, hospitals complained that the legislation unfairly punished those that had facilities under construction.

The House passed legislation allows facilities that were under construction on Nov. 2, 2015, to qualify for the higher reimbursements. Construction needsto be completed by the end of this year in order to qualify, however. The legislation also exempts PPS Exempt Hospitals from the site-neutral paymentscompletely.

The bipartisan measure was sponsored by Reps. Pat Tiberi (R-OH) and Jim McDermott (D-WA).

According to an analysis by the Congressional Budget Office (CBO), if the bill becomes law, it will allow about 100 additional facilities to qualify forgrandfathered status. It will cost $760 million over 10 years, but will be almost completely offset by other cuts in Medicare reimbursements that start in2018. The analysis finds that the legislation would decrease spending by $14 million over 10 years.

The legislation contains other minor provisions. It extends the timeline to 2020 for when CMS can eliminate poorly performing Medicare Advantage plans.Under current law, starting next year CMS can eliminate plans that received under three stars on its quality rating system for three consecutive years.

The bill also extends the Rural Community Hospital Demonstration Program for an additional five years. The program aims to prevent hospital closures byproviding higher reimbursement rates for qualifying facilities.

There is no companion bill in the Senate.

Reps. Upton, Pallone Introduce Bill to Promote Collaboration at FDA

On June 8, House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Ranking Member Frank Pallone (D-NJ) introduced legislation to encouragecollaboration at the U.S. Food and Drug Administration (FDA). The bill—the FDA Cross-Center Collaboration Act of 2016—calls on FDA to establishdisease-specific intercenter institutes to help streamline the review of drugs and devices for major disease areas across product centers.

The bill would require FDA to establish at least one intercenter institute focused on a major disease area and work across FDA’s Center for Drug Evaluationand Research (CDER), Center for Biologic Evaluation and Research (CBER) and Center for Devices and Radiological Health (CDRH).

FDA would have one year after enactment of the measure to establish at least one institute, and would be required to take public comments on the proposedinstitute before it is established. Also, FDA could shut down a disease-specific institute if it determines the institute no longer benefits the publichealth.

The bill mirrors provisions of an FDA and National Institutes of Health workforce bill passed by the Senate Health, Education, Labor, and Pensions (HELP)Committee as part of its parallel legislation to the House-passed 21st Century Cures Act.

On June 6, Friends of Cancer Research joined 27 other cancer patient advocacy groups in a letter calling for an Oncology Center of Excellence at FDAdesigned to bring together cancer experts from CDER, CBER and CDRH into their own center to regulate oncology products.

The Obama administration’s Cancer Moonshot Initiative led by Vice President Joe Biden calls for a Virtual Oncology Center of Excellence at FDA to workacross its drug, biologic and device centers. The president’s 2017 budget request allocates $75 million to set up the virtual center.


Senate Dems Ask Defense, State Departments How They Are Preparing for Zika Virus

On June 7, Senate Democrats sent aletter to the Defense and State departments asking for more information on how they arepreparing for the threat of the Zika virus. Both departments have developed policy guidance to potentially relocate pregnant service members and dependentsfrom locations where the virus is being actively transmitted. The Pentagon recently reported that 11 active troops have been infected with Zika this year,in addition to four dependents and two retired members.

The letter was sent by Sen. Patty Murray and signed by 21 other Democrats. Murray has been the lead negotiator for the Democrats on the Senate’s $1.1billion Zika funding package, which is awaiting conference with the House’s $622 million package. Democrats argue the House package is insufficient tocombat the virus.

Senate Finance Committee Expected to Hold Medicare Part B Hearing

The Senate Finance Committee may hold a hearing on June 28 to address the Obama administration’s Medicare Part B drug proposal. The proposal has sparkedcriticism from congressional Republicans and some Democrats, who say it is too expensive. The Office of Management and Budget set 2019 as the time to takefinal action as part of OMB’s regulatory agenda. However, the Centers for Medicare and Medicaid Services says they have not yet delayed the demonstration.

Senate Finance Committee Approves Social Security and Medicare Trust Fund Nominees

On June 8, the Senate Finance Committee approved the re-nominations of Charles P. Blahous III and Robert D. Reischauer on 14-12 party-line votes to bepublic trustees of the Social Security and Medicare trust funds.

Democrats opposed Blahous—a researcher at the conservative Mercatus Center and Hoover Institution—saying he has undermined Social Security as a member ofits board of trustees and as a George W. Bush administration official working to partially privatize the program.

Democrats also argued that no one should have a second term as a public trustee, in order to promote new thinking. The law requires that one trustee comefrom each party, and the nominations have typically not fueled major fights. However, the Democratic party has been increasingly fighting for a moreprogressive stance on the issue.

Senate Appropriations Committee Clears Labor-HHS Appropriations Bill for Senate Consideration

On June 9, the Senate Appropriations Committee cleared the Labor-HHS Appropriations bill for consideration by the Senate. The agreement funds the U.S.Department of Health and Human Services (HHS) at $76.9 billion, a $1.4 billion increase above FY 2016, including cap adjustments. The only amendment votedon was a Durbin–Feinstein amendment that would prevent federal authorities from interfering with a provider’s ability to prescribe medical marijuana whereit is legal. The amendment was approved 18-11.

The breakdown of funding for health care:

National Institutes of Health (NIH)– $34 billion, an increase of $2 billion above FY 2016. The bill includes:

  • $300 million for the Precision Medicine Initiative, an increase of $100 million;
  • $1.39 billion for Alzheimer’s disease research, an increase of $400 million;
  • $250 million, an increase of $100 million, for the BRAIN Initiative to map the human brain;
  • $333.4 million, an increase of $12.5 million, for the Institutional Development Award;
  • $463 million, an increase of $50 million, to Combat Antibiotic Resistant Bacteria;
  • $12.6 million for the Gabriella Miller Kids First Research Act;
  • Increases to every institute and center to continue investments in innovative research that will advance fundamental knowledge and speed the development of new therapies, diagnostics and preventive measures to improve the health of all Americans.

Fighting Opioid Abuse– $261 million, an increase of $126 million or 93 percent, for Centers for Disease Control and Prevention (CDC), Substance Abuse and Mental Health ServicesAdministration (SAMHSA) and Health Resources and Services Administration programs targeted to combat opioid abuse. According to CDC, sales fromprescription opioids nearly quadrupled between 1999 and 2014. There has been a corresponding increase in deaths from prescription opioids, claiming morethan 165,000 lives.

Specifically, the bill provides a $28 million increase for CDC Prescription Drug Overdose program; a $49 million increase to SAMHSA for treatment,prevention and overdose reversal; and $50 million for Community Health Center treatment and prevention. Further, the bill continues to provide $1.9 billionfor the Substance Abuse Prevention and Treatment Block Grant, $94 million in mandatory funds to Community Health Centers and an additional $52.5 million tothe National Institute on Drug Abuse at the NIH.

Community Health Centers (CHCs)– $1.49 billion, level with FY 2016. There are more than 9,000 health centers nationally, serving 22.9 million patients per year. Health centers advancethe preventive and primary care model of coordinated and comprehensive care, coordinating a wide range of medical, dental, behavioral and social servicesin communities.

Obamacare– The bill does not provide new funding for the Affordable Care Act (ACA), or Obamacare. In addition, several oversight provisions are included in theagreement:

  • Risk Corridor – The bill continues to include a provision requiring the administration to operate the Risk Corridor program in a budget-neutral manner by prohibiting any funds from the Labor-HHS Appropriations Bill to be used as payments for the Risk Corridor program. Last year, insurers paid $362 million into the Risk Corridor program while submitting $2.87 billion in claims for Risk Corridor payments. Because of this provision in the FY 2016 bill, the subcommittee was able to save over $2.5 billion from potentially being transferred out of priority discretionary HHS programs in the Labor-HHS Appropriations Bill to bail out the Risk Corridor program established by the ACA.
  • ACA Congressional Notification – The agreement directs the Centers for Medicare & Medicaid Services to notify the appropriate congressional committees two business days before any ACA-related data or grant opportunities are released to the public.
  • Health Exchange Transparency – Bill language is included requiring the administration to publish ACA-related spending by category since its inception.
  • ACA Personnel – Bill language is included requiring the administration to publish information on the number of employees, contractors and activities involved in implementing, administering or enforcing provisions of the ACA.

Independent Payment Advisory Board (IPAB)– Funding for IPAB is eliminated. IPAB is a 15-member board of unelected bureaucrats created by the ACA to achieve a reduction in Medicare spending throughthe only means they have: rationing care.

Rural Health Care– $152.6 million, an increase of $3 million above FY 2016, for rural health programs. The obstacles faced by patients and providers in rural communitiesare unique and often significantly different than those in urban areas. Therefore, the bill focuses resources toward efforts and programs to help ruralcommunities, such as telehealth.

Cancer Prevention and Control– $356.2 million, level with FY 2016. This includes funding for breast, cervical, colorectal and prostate cancer screening programs, which theadministration proposed to cut by more than $54 million.

Immunization Program– $610.8 million, level with FY 2016. The administration proposed to cut this program by $50.3 million. Vaccines remain one of the most important andsuccessful public health breakthroughs to prevent death and disability, and this program serves as a safety-net for the uninsured and underinsuredpopulations.

Children’s Hospitals Graduate Medical Education (CHGME)– $300 million, an increase of $5 million above FY 2016. The CHGME program protects children’s access to high-quality medical care by providingfreestanding children’s hospitals with funding to support the training of pediatric providers.

Preventive Health and Health Services Block Grant (Prevent Block Grant)– $160 million, level with FY 2016. The administration proposed to eliminate this program. The Prevent Block Grant provides flexible funding for states toimplement prevention activities according to local health needs.

Medicare Appeals Process– $112.4 million, an increase of $5 million above FY 2016, for the Office of Medicare Hearings and Appeals (OMHA). The number of cases appealed to OMHA hasincreased 1,000 percent over the past six years. As of the end of 2015, OMHA takes nearly 700 days to close out an existing appeal. A significant portionof this backlog has been driven by appeals related to Recovery Audit Contractors.

Polio Eradication– $174 million, an increase of $5 million above FY 2016. Polio is currently endemic in only three countries: Nigeria, Afghanistan and Pakistan. Nigeria hasnot reported a case since August 2014 and will be declared polio-free if no cases are reported by August 2017.

Mental Health– $80 million increase above FY 2016. The bill provides $541.5 million, an increase of $30 million above FY 2016, for the Mental Health Block Grant andcontinues the set-aside for serious mental illness activities at 10 percent. The Block Grants represent the primary sources of mental health funding forstate programs. The bill also provides $50 million within the funding for CHCs to provide mental health services at health centers across the country.

Child Care and Development Block Grant (CCDBG)– $2.8 billion, an increase of $25 million above FY 2016. This funding builds on the consistent funding increases in recent years to help states implementkey quality improvement reforms in the CCDBG Act of 2014. These reforms are intended to improve child care health and safety standards, and otherwiseimprove working families’ access to quality child care.

Head Start– $9.2 billion, an increase of $35 million above FY 2016, to help all Head Start programs keep up with costs, recruit and retain highly qualified staff,maintain enrollment and provide high-quality early childhood service for children and families.

Low Income Home Energy Assistance Program (LIHEAP)– $3.39 billion, level with FY 2016. LIHEAP provides home heating and cooling assistance for low-income households.

Public Health Preparedness and Response– The bill does not include the president’s cuts to critical preparedness and response activities and maintains FY 2016 levels for these activities:

  • Biomedical Advanced Research and Development Authority (BARDA) – $511.7 million. BARDA is responsible for advanced research and development of medical countermeasures for national preparedness efforts.
  • Project BioShield – $510 million, $160 million above the president’s request, to enhance national preparedness activities by procuring medical countermeasures against chemical, biological, radiological and nuclear threats.
  • Public Health Emergency Preparedness (PHEP) – $660 million. PHEP funds allow states to prepare, respond and recover from emerging threats such as natural disasters, disease outbreaks and chemical, biological, radiological and nuclear threats.
  • Strategic National Stockpile (SNS) – $575 million. CDC maintains and replenishes expiring medical countermeasures in the SNS for national preparedness efforts.

For more information, click here.

3. Administration

HHS Takes Action to Improve Marketplace Risk Pool

On June 8, the U.S. Health and Human Services Department (HHS) announced a series of actions tostrengthen the Obamacare marketplace risk pool in hopes of boosting enrollment and reinforcing stability.

Starting June 17, HHS will require individuals signing up outside the standard enrollment period to provide documentation showing they are eligible.Insurers have complained that some Obamacare customers are exploiting loose rules and waiting until they get sick to sign up for coverage. HHS previouslyeliminated seven reasons that individuals could use to sign up outside the standard period.

HHS is also proposing changes to the risk adjustment program, which subsidizes insurers that attract a disproportionately sick, costly clientele. Thechanges aim to ensure that the program works as intended for issuers with higher-risk enrollees so they can sustainably serve all types of consumers.

Starting in 2017, the risk adjustment formula will be adjusted to account for partial-year enrollees. The next year, prescription drug data will beincorporated into the formula.

HHS is curbing abuses of short-term health insurance policies, which some insurers are marketing to consumers as cheaper alternatives to Obamacare plans.Those plans are not required to meet the Affordable Care Act’s (ACA) coverage requirements and insurers can turn away customers who are likely to be moreexpensive. HHS proposed to limit those plans to three months and not allow renewals. The administration also plans to require insurers to notify customerswho purchase short-term plans that they do not satisfy Obamacare’s individual mandate and the customers may still face a penalty.

GAO Announces Appointment of New MedPAC Members

The Government Accountability Office (GAO) announced the appointment of five new members to the Medicare Payment Advisory Commission (MedPAC), as well asthe reappointment of MedPAC’s vice chair. The new members are as follows:

  • Amy Bricker – Vice President of Supply Chain Strategy for Express Scripts
  • Brian DeBusk – Chief Executive Officer for DeRoyal Industries
  • Paul Ginsburg – Leonard Schaeffer chair in Health Policy Studies at the Brookings Institution
  • Bruce Pyenson – Principal and Consulting Actuary at Milliman
  • Pat Wang – Chief Executive Officer at Healthfirst

Their terms will end in April 2019. MedPAC Vice Chair Jon Christianson—professor of health policy and management at the University of Minnesota’s School ofPublic Health—will also serve until 2019.

CMS Releases Medicare Shared Savings Program Final Rule

On June 6, the Centers for Medicare and Medicaid Services (CMS) released a final rule to improve how Medicare pays Accountable Care Organizations (ACOs) inthe Medicare Shared Savings Program (SharedSavings Program) for delivering better patient care.

Medicare bases ACOs’ payments on a variety of factors, including whether the ACO can deliver high-quality care at a reasonable cost. The final ruleincorporates regional fee-for-service (FFS) expenditures into the methodology for establishing, adjusting and updating the benchmarks of ACOs that continuetheir participation in the Shared Savings Program after an initial three-year agreement period. It also adds a participation option to encourage ACOs totransition to performance-based risk arrangements and provides greater administrative finality around the program’s financial calculations. CMS is makingthese changes to strengthen incentives under the program after receiving comments on issues specified in the 2016 notice of proposed rulemaking.

The Shared Savings Program currently includes over 430 ACOs in 49 states and the District of Columbia, serving over 7.7 million Medicare beneficiaries.This final rule changes how Medicare pays ACOs by basing one of the payment factors on whether the ACO is able to deliver high-quality care at a lower costcompared to other providers in their region. In addition, the rule provides quicker transition to the more advanced tracks for certain ACOs by allowing anextra year under their first agreement before the organization takes on financial risk.

The early results of the Shared Savings Program and the Pioneer Accountable Care Organization Model show that in 2014, ACOs had a combined total netprogram savings of $411 million.

In March 2016, the administration estimated that it met its goal—11months ahead of schedule—of tying 30 percent of Medicare payments to quality and value through alternative payment models by 2016. The administration’snext goal is tying 50 percent of Medicare payments to alternative payment models by 2018.

To see the final rule, click here.

To see a fact sheet with more information about the final rule, click here.

CMS: No Adverse Health Outcomes From New DME Fee Schedule

Earlier this year, CMS phased in the adjusted durable medical equipment (DME) fee schedule rates in non-competitive bidding areas. CMS says data showssuppliers continue to accept the new payments and the amount of supplies and services has remained steady—additionally CMS has seen no adverse healthoutcomes due to the new fee schedule.

CMS was required to adjust fee schedule amounts for non-competitive bid areas by Jan. 1. The agency decided to phase in changes to the DME fee schedulerates during the first half of 2016 so that the rates in all areas would be based on a 50/50 blend of current rates and adjusted rates. Another round ofcuts is scheduled to go into effect July 1, b