Washington Healthcare Update

June 20, 2016

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This Week:Zika funding flounders…Mental health legislation starts to move forward…CMS proposes changes in conditions of participation to improve quality of careparticularly related to antibiotics…Philadelphia puts a soda tax in place.

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports


House of Representatives

House Energy and Commerce Committee Approves Mental Health Reform Bill

On June 15, the House Energy and Commerce Committee unanimously approved a mental healthreform bill, first introduced as Congress’s response to gun violence following the 2012 Sandy Hook Elementary School shooting. The bill stalled over costdisagreements and controversial provisions, but has been considerably rewritten.

The Helping Families in Mental Health Crisis Act, introduced by Rep. Tim Murphy (R-PA), is more modest and budget-neutral than when it was introduced. It creates a new leadership position to overseemental health and substance abuse programs and reauthorizes existing treatment and prevention programs. It also authorizes new programs, but does notguarantee funding, including one to train clinicians how to better share information under HIPAA.

Several of the most controversial provisions were taken out, including one to allow Medicaid to pay for more care at mental health facilities. It also wasstripped of reforms to HIPAA because of disagreement from committee members.

Democrats noted that more funding is necessary to truly address the problem. Murphy said he is working with House appropriators to include more money formental health in the future.

House Speaker Paul Ryan has vowed to bring the bill to a vote by the full House before the August recess. The Senate has not yet acted on its version ofmental health legislation.

To watch the hearing,click here.

Ways and Means Advances Seven Bills to Improve Access to Health Care, Provide Targeted Relief from Obamacare

On June 15, the House Ways and Means Committee passed seven bills aimed at increasing health care flexibility and choice for individuals.

Committee Chairman Kevin Brady (R-TX) said the measures would “provide Americans more access, better choices, and greater flexibility in health care.”

The first four health bills would expand access to consumer-driven health care options, such as Health Reimbursement Arrangements or Health SavingsAccounts (HSAs). The bills include:

  • The Small Business Health Care Relief Act (H.R. 5447), sponsored by Reps. Charles Boustany (R-LA) and Mike Thompson (D-CA), which allows employers to provide employer payment arrangements;
  • The Veterans TRICARE Choice Act (H.R. 5458), sponsored by Rep. Chris Stewart (R-UT), which provides more options for those eligible for TRICARE;
  • The Native Americans Health Savings Improvement Act (H.R. 5452), sponsored by Rep. John Moolenaar (R-MI), which improves access to Health Savings Accounts for those who receive services at Indian Health Service facilities; and
  • The Health Care Security Act of 2016 (H.R. 5445), sponsored by Rep. Erik Paulsen (R-MN), which makes several reforms to expand access to HSAs, including increasing the annual contribution limits, allowing for catch-up contributions to the same account and allowing for more flexibility between incurring expenses and actually setting up an account.

The other three pieces of legislation repeal specific Affordable Care Act (ACA) provisions that hold down job growth and increase taxes. The bills include:

  • The Tribal Employment and Jobs Protection Act (H.R. 3080), sponsored by Rep. Kristi Noem (R-SD), which eliminates the ACA’s employer mandate for tribally owned businesses;
  • The Student Worker Exemption Act of 2015 (H.R. 210), sponsored by Rep. Mark Meadows (R-NC), which provides universities relief from the employer mandate for hours worked by student workers; and
  • The Halt Tax Increases on the Middle Class and Seniors Act (H.R. 3590), sponsored by Martha McSally (R-AZ), which repeals a provision of the ACA that makes it harder to deduct high-cost medical expenses.

For more information about the markup, click here.


Senate Bill Targets Brand Drugmakers’ Efforts to Stall Generics

Senate Judiciary Chairman Chuck Grassley (R-IA) is pushing bipartisan legislation designed to stop brand drugmakers from using restrictive safetydesignations, known as Risk Evaluation and Mitigation Strategies (REMS), to delay generic drug entry to market.

The Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act— S. 3056—is sponsored by Sens. Grassley, Patrick Leahy (D-VT), Amy Klobuchar (D-MN) and Mike Lee (R-UT). Lee, who chairs the Senate Judiciary’s AntitrustSubcommittee, scheduleda hearingon the CREATES Act for June 21.

Under the CREATES Act, a generic manufacturer can take a brand manufacturer to court 31 days after it makes a request to buy samples from the branddrugmaker or 120 days after the generic manufacturer initiated an attempt to negotiate a shared safety protocol in order to get relief. The genericmanufacturer can also receive a “monetary amount sufficient to deter” the brand manufacturer from engaging in stalling tactics.

The Generic Pharmaceutical Association (GPHA) applauded the bill in a June 14 statement, calling Leahy’s bill a “common sense solution that will preventsuch abuses, and further patient access to safe, effective, and affordable medications.” The American Hospital Association (AHA) also supports the bill.

A similar effort to stop REMS abuse is underway in the House. Last year Reps. Steve Stivers (R-OH) and Peter Welch (D-VT) reintroduced the Fair Access for Safe and Timely (FAST) Generics Act. That bill has beenreferred to the House Energy and Commerce health subcommittee, but has seen no action beyond that.

Senate, House Discuss Emergency Zika Funding

Senate and House appropriators met on June 15 to discuss emergency Zika funding. The House is proposing a fully offset $622 million and the Senate has a$1.1 billion proposal. However, the group adjourned in five minutes with no sign of closing the gap. House Appropriations Chairman Hal Rogers (R-KY) toldreporters afterwards that any deal must be fully offset “no matter what”.

Meanwhile, in a new letter, Texas Governor Greg Abbott formally invitedthe Centers for Disease Control and Prevention (CDC) to visit Texas to review the state’s Zika response plan. He also clarified that he’s asking the agencyfor $11 million to help fund three key areas:

  • $9.2 million to strengthen epidemiology and laboratory capacity and improve health information systems;
  • $1.5 million to support Zika preparedness and response efforts; and
  • $360,000 to support Zika-related birth outcomes surveillance.

Abbott’s letter followed his conference call with the White House, CDC director Tom Frieden and other governors last week, during which Frieden encouragedstate leaders to get specific about their funding requests.

2. Administration

White House Announces Actions to Reduce Organ Wait List

On June 13, the White House announced new public andprivate actions to reduce the organ transplant waiting list. The new actions announced are:

  • Facilitating breakthrough research and development with almost $200 million in investments.
  • Closing the gap between 95 percent of Americans who support organ donation and the 50 percent who are actually registered organ donors. Facebook, Tinder and Twitter are helping develop tools and create advocacy campaigns to make it easier for people to register as organ donors.
  • Investing in clinical research and innovation that could potentially increase the number of transplants by almost 2,000 each year and improve outcomes for patients.

The transplant waiting list currently stands at 120,000 people.

The Department of Defense (DOD) will dedicate the bulk of the research funding—$160 million—toward a public-private investment in manufacturing techniquesthat can be used to repair and replace cells and tissues that may one day lead to organ replacement. DOD is also giving $7 million to small businessesworking to advance the science and technology of organ and tissue preservation.

NIH will work with Johns Hopkins University to study organ donations among HIV-positive donors and recipients—this could lead to as many as 1,000 moretransplants every year.

Patients waiting for organ transplants place a substantial financial burden on the health care system—for example, Medicare pays more than $34 billion peryear to care for patients with end-stage kidney failure. The government could save $60,000 a year for each one of these patients who receives a kidneytransplant rather than continue to receive dialysis, according to a 2013 Economic Report of the President.

CMS Says Drugmakers Liable for Past Gap Discounts to EGWPs

A CMS memo to drugmakers states that, due to CMS miscalculations, drugmakers will most likely have to pay some employer-sponsored plans for past discountsintended to help retired beneficiaries in the coverage gap. However, industry consultants say the retired beneficiaries covered by the plans usually do nothave coverage gaps in their drug coverage.

The issue here is Part D plans called Employee Group Waiver Plans (EGWPs), which are increasingly offered by employers exclusively to their retirees whoare eligible for Medicare. Drug lobbyists say that taxpayer liability could also increase due to the coverage shift.

An agency spokesperson said CMS oversight of the gap discount process does not need to be improved. “CMS has extensive processes in place to monitor thereporting of coverage gap discount amounts in the invoicing process,” the spokesperson said by email.

The April 11 memo to Part D sponsors suggests CMS incorrectly rejected claims from EGWPs for gap discounts going back to Jan. 1, 2014. More specifically,CMS rejected Prescription Drug Events, which contain drug cost and payment data on which CMS bases payments to plans. The memo notifies EGWPs that they mayresubmit those Prescription Drug Events to be reviewed again. If CMS finds that Medicare should have paid those gap discounts, drug companies will beliable for those gap discounts back through 2014.

However, drug companies’ primary complaint is that CMS in recent years began making them pay discounts on drugs for beneficiaries who don’t need thediscounts because their employer insurance doesn’t include coverage gaps.

The Medicare Coverage Gap Discount Program, created by the Affordable Care Act (ACA), makes manufacturers offer discounts on Part D drugs for Medicarebeneficiaries who fall in the coverage gap. Part D plans cover the discounts upfront for beneficiaries and are reimbursed later by drugmakers.

Before EGWPs became popular, many retirees were covered by the Retiree Drug Subsidy, which gives employers a subsidy equal to 28 percent of coveredprescription drug costs employers paid for their retirees. Employers also could deduct their retiree health coverage costs without netting out Retiree DrugSubsidies for income tax purposes. The law that created the Part D program included the subsidy to encourage employers to continue offering drug coverageafter Part D took effect.

However, given that EGWPs are Part D plans, the government is on the hook for 80 percent of catastrophic costs, which may end up costing taxpayers muchmore than the straight subsidy of 28 percent that the Retiree Drug Subsidy pays.

CMS Announces $22 Million in ACA Funding for State Insurance Departments

On June 15, the Centers for Medicare and Medicaid Services (CMS) announced the availability of $22 million in funding to state insurance regulators to usefor issuer compliance with Affordable Care Act (ACA) key consumer protections. This award opportunity enables states to seek funding for activities relatedto planning and implementing select federal market reforms and consumer protections including: essential health benefits, preventive services, parity inmental health and substance use disorder benefits, appeals processes and bringing down the cost of health care coverage (also known as medical loss ratioprovision).

As state commissioners of insurance review proposed rates, they will have a number of important factors to consider. These include medical trends, the endof the temporary reinsurance program, the one-time 2017 moratorium on the Health Insurance Provider Fee, and recent data and policy information that may beaccounted for through supplemental filings by issuers. The report on risk adjustment and reinsurance for 2015, which will be issued on June 30, may alsoaffect rates.

The Department of Health and Human Services (HHS) will make three announcements in June regarding ongoing efforts to: strengthen the risk pool, work withissuers and state insurance regulators and step up Marketplace outreach, especially to young adults in advance of Open Enrollment 4. CMS also announced aseriesof actions to strengthen the risk pool, including curbing abuses of short-term insurance plans, improving the risk adjustment program and beginning the implementation of the special enrollmentconfirmation process, among other announcements. And HHS hosted an Issuer Innovation Summit to highlight best practices of issuers in attracting andretaining consumers and improving their health.

The funding is part of the $250 million in state rate review grants the ACA provided to improve the process for how states review proposed health insurancerate increases and hold insurance companies accountable for unjustified hikes. The funds are unobligated rate review grant funding from prior years. In2015, rate review led to an estimated $1.5 billion in savings for consumers. Rate review grant funds not obligated by the end of FY 2014 are available toHHS to issue grants to states for planning and implementing the insurance market reforms and consumer protections.

Medicare Will Use Private Payor Prices to Set Payment Rates for Clinical Diagnostic Laboratory Tests Starting in 2018

On June 17, the Centers for Medicare and Medicaid Services (CMS) released a final rule implementing Section 216(a) of the Protecting Access to Medicare Actof 2014 (PAMA), requiring laboratories performing clinical diagnostic laboratory tests to report the amounts paid by private insurers for laboratory tests.Medicare will use these private insurer rates to calculate Medicare payment rates for laboratory tests paid under the Clinical Laboratory Fee Schedule(CLFS) beginning Jan. 1, 2018. The final rule includes provisions to ease administrative burdens for physician office laboratories and smaller independentlaboratories.

In response to public comments, CMS moved implementation of the new payment system from Jan. 1, 2017, to Jan. 1, 2018, to allow laboratories sufficienttime to develop the information systems necessary to collect, review and verify data before reporting applicable information to CMS. This will also allowtime for CMS to perform independent validation and testing of the CMS system through which laboratories will report applicable information, and allowlaboratories to perform end-to-end testing of their systems with CMS’s system.

The final rule will generally require reporting entities to report private payor rates and test volumes for laboratory tests if an applicable laboratoryreceives at least $12,500 in Medicare revenues from laboratory services paid under the CLFS and more than 50 percent of its Medicare revenues fromlaboratory and/or physician services. This means that approximately 95 percent of all physician office laboratories and about half of independentlaboratories will not fall under these requirements, easing administrative burdens for physician office labs and smaller independent labs while stillcapturing most of the CLFS spending on physician office and independent laboratories.

For the system’s first year, laboratories will collect private payor data from Jan. 1, 2016, through June 30, 2016, and report it to CMS between Jan. 1,2017, and March 31, 2017. CMS will calculate and post the new Medicare rates (equal to the weighted median of private payor rates for each test) by earlyNovember 2017. These rates will take effect on Jan. 1, 2018.

The final rule will be published on June 23 and can be found here.

For a link to a fact sheet on the final rule, click here.

HHS Releases Report on Minnesota Senior Health Options Program

On June 16, the Department of Health and Human Services (HHS) published a report about the Minnesota Senior Health Options (MSHO) program. CMS and theState of Minnesota started MSHO as a pilot in 1997 to better serve dually eligible beneficiaries age 65 and older. MSHO plans coordinate all the Medicareand Medicaid benefits their members receive, including Medicare coverage of acute medical care and Medicaid coverage of long-term services and supports.

The new report gives us insight into MSHO’s effectiveness. The HHS Assistant Secretary for Planning and Evaluation contracted with RTI International toevaluate MSHO’s outcomes from 2010 to 2012. RTI compared the experiences of similar beneficiaries inside and outside of MSHO and found that MSHO enrolleeswere:

  • 48 percent less likely to have a hospital stay, and those who were hospitalized had 26 percent fewer stays;
  • 6 percent less likely to have an outpatient emergency department visit, and those who did visit an emergency department had 38 percent fewer visits; and
  • 13 percent more likely to receive home and community-based long term care services.

In 2013, CMS made investments to further strengthen the existing MSHO program through increased alignment of Medicare and Medicaid program administration,federal-state data sharing and beneficiary materials. CMS is also partnering with 12 other states to implement and evaluate new models of integrated caresimilar to MSHO through theFinancial Alignment Initiative. From 2011 to 2015, the number of dually eligible beneficiaries served in integrated care programs across the country rose from approximately 162,000 tomore than 650,000.

To see the report, click here.

3. State Activities

California: Gov. Brown Signs Undocumented Immigrant Coverage Bill

On June 10, California Gov. Jerry Brown signed legislation that could make California the first state to allow undocumented immigrants to purchaseObamacare coverage. The bill authorizes California to negotiate a waiver with the federal government to expand coverage to a population that wasintentionally excluded in Obamacare. If approved, the waiver would allow an undocumented immigrant to purchase exchange plans but not to receive the law’sinsurance subsidies. Advocates hope the state will submit the request this year, avoiding any uncertainty coming with a new president in 2017.

However, Obama administration officials have not stated their position on the proposal. Presumptive Democratic presidential nominee Hillary Clinton saidshe supports it. But the idea could largely end up being null, because many individuals would struggle to afford Obamacare plans without the help ofsubsidies. Anti-immigration groups have also taken notice and could reignite a fierce health reform controversy in the Obama administration’s last months.

California: Insurance Commissioner Calls for Rejection of Anthem-Cigna Megamerger

On June 16, the California Insurance Department recommended that the Justice Department block the proposed Anthem-Cigna megamerger. Insurance CommissionerDave Jones—who made the recommendation—argued the $52 billion deal would be anti-competitive because there is substantial consolidation already acrossinsurance markets in the state.

Consumer advocates have exerted pressure on California regulators to heavily scrutinize proposed insurance deals, including Aetna’s plan to acquire Humanafor $37 billion. Jones said his department would also be issuing recommendations on that proposed deal in the near future.

Connecticut: Insurance Department Licenses New Captive Insurer

On June 9, Connecticut Insurance Commissioner Katharine L. Wade announced that the state Insurance Department has licensed a non-profit captive insurancecooperative comprising several Connecticut municipalities and school districts, which regulators say will give communities greater control of healthinsurance costs. According to the National Association of Insurance Commissioners, captive insurers are a type of self-insured plan where the insurer isfully owned by the insured. The new cooperative—CT Prime—will be managed by the Capitol Region Education Council (CREC) and is the 11th captive insurancecompany licensed by the department during Democratic Gov. Dannel Malloy’s tenure.

Delaware: Delaware to Treat All Medicaid Patients With Hepatitis C

The state of Delaware is going to phase in a new policy to treat all hepatitis C patients in its Medicaid program. Phase-in will begin as early as nextmonth and all hepatitis C-infected Medicaid patients will be automatically eligible for treatment starting in 2018. Delaware currently requires evidence ofsignificant liver damage or cirrhosis before approving the treatments, but by July 1 the severe restrictions will be dropped along with a requirement thatpatients not be abusing drugs. The state had been threatened with a class action lawsuit from Harvard Law School’s Center for Health Law & PolicyInnovation.

CMS also had issued guidance in November telling states that it suspects they are unreasonably restricting coverage of hepatitis C drugs and separatelyasked the manufacturers of those drugs how to make their products more affordable.

Louisiana: 197,000 Enroll in Louisiana’s Medicaid Expansion

According to the Louisiana Department of Health, more than 197,000 people signed up for coverage through Louisiana’s Medicaid expansion program in thefirst week that enrollment was open. Nearly 187,000 were automatically signed up because they already receive limited health services from the state. Theremaining individuals signed up on their own or were deemed eligible because they were food stamp recipients. Expansion benefits start July 1.

Michigan: Gov. Snyder Drops Mental Health Services Budget Provision

Michigan Gov. Rick Snyder recently tossed out a provision of his 2017 budget that mental health advocates argued would have privatized the state’s mentalhealth services. A new version of thebudget section addressing mental health calls on the Michigan health department to convene a workgroup to make recommendations regarding a finance modeland policies to improve the coordination of state behavioral and physical health services.

Missouri: Gov. Nixon Signs Law Increasing Asset Limit to Qualify for Medicaid

Missouri Gov. Jay Nixon signed a measure into law that allows Medicaid beneficiaries to keep more in savings and still qualify for their benefits. The newlaw increases the asset limit to qualify for Medicaid coverage for the aged, blind and disabled. Advocates had argued that the current asset limit preventspeople from preparing for emergencies—Missouri’s current asset limit is $1,000 for individuals and $2,000 for married couples living together. The newlaw—taking effect next July—will increase the limit to $2,000 for individuals and $4,000 for married couples. It would also increase every year until 2020,and after that grow with cost-of-living adjustments.

Pennsylvania: Philadelphia City Council Approves Soda Tax

On June 16, the Philadelphia city council approved a soda tax by a 13-4 vote. This final vote makes Philadelphia the largest U.S. city to impose a sin taxon soft drinks—a move that health advocates hope will motivate other cities to follow suit. The