Washington Healthcare Update

October 17, 2016

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This Week: Congress remains on recess…CMS released Final MACRA rule and 2017 Medicare Advantage Star Ratings…Zika and Mylan’s EpiPen still raise issues.

1. Congress


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


FDA Supports Expanded Authority Over Cosmetics

In an Oct. 5 letter to Senator Dianne Feinstein (D-CA), the Food and Drug Administration (FDA) says its current legal authority over cosmetics is limitedand expressed appreciation for a Senate effort to increase the agency’s regulatory power over the cosmetic industry, including recall authority for suchproducts.

Senator Feinstein along with Senator Susan Collins (R-ME) introduced the Personal Care Products Safety Act to protect consumers and streamline industrycompliance by strengthening the FDA’s authority to regulate the ingredients in personal care products.

“The Administration recognizes the need to strengthen FDA’s regulatory program for cosmetics, and the President’s budget in the past few years hasrequested authority to require cosmetic firms to register their establishments and products with FDA and to pay a user fee,” FDA states. “We appreciateyour leadership in sponsoring legislation to provide these authorities as well as others to address limitations in FDA’s ability to oversee the safety ofcosmetic products.”

The agency explains that all reporting of adverse events by companies for cosmetic products is voluntary, unlike the case for other FDA-regulated products.FDA asserts the lack of reliable information makes it difficult to assess problems with cosmetics and can delay efforts to respond to the complaint.

A systematic review process called for by the Senate bill would allow FDA to restrict harmful ingredients under a more consumer-protective safety standard,the agency says. Under the legislation, FDA says it would be able to restrict the use of a cosmetic ingredient if there is not enough information to ensurethere would not be harm.

FDA’s authority is additionally limited by the lack of legal requirements to make cosmetic companies report to the agency about their products and safetydata, or the location of their manufacturing facilities. The president’s budget also requested mandatory registration and reporting, the agency says, whichwould allow FDA to know what cosmetics are on the market and what ingredients they include.

The agency also criticizes the industry-funded panel of medical and scientific experts, the Cosmetic Ingredient Review, that assesses the safety ofcosmetic ingredients based on the data in the published literature and information that is voluntarily provided by the cosmetic industry.

FDA clarifies that it does not have the authority to require a recall of cosmetics that are in violation of the Food, Drug, and Cosmetic Act. Rather, theagency currently has to go through the Department of Justice to pursue seizure of adulterated or misbranded products and injunctions against firms thatviolate the law.

The Senate bill would require FDA to evaluate a minimum of five cosmetic ingredients per year for safety and appropriate use. The bill would also provideFDA recall authority for cosmetics; require adverse event reporting to the agency within 15 days; require annual manufacturer registration; direct FDA toissue guidance on good manufacturing practices for cosmetics; and authorize the agency to collect user fees from cosmetic manufacturers.

Senate Finance Democrats Release Report on Opioid Addiction and Treatment Shortfalls

On Oct. 10, Senate Finance Committee Democrats released a report on opioid addiction andtreatment shortfalls in the United States. The authors criticize Republicans for blocking Democrat-sponsored amendments to provide CARA funding—oneallocating the full $920 million requested, and one providing $600 million—as evidence of Republicans’ resistance to funding the program. Democrats alsohold up what they view as the inadequacy of the $7.1 million in funding for CARA passed as part of the continuing resolution.

Medicaid policies are also put under the spotlight in the report. Democrats say access to residential care has been limited by an interpretation of theMedicaid Institutions for Mental Diseases (IMD) exclusion that prohibits the use of federal Medicaid matching funds for payments to residential treatmentfacilities.

The report asks for Congress to authorize the $920 million in mandatory funds proposed in President Obama’s budget request for the Substance Abuse andMental Health Services Administration (SAMHSA). The $920 million would be used to fund two-year State Targeted Response Cooperative Agreements.

Under the agreements, states would be eligible for grants based on need and strength of strategies in addressing the opioid crisis, including: addressingbarriers to treatment; training and approving treatment providers; supporting Medication-Assisted Treatment; eliminating costs of under- and uninsuredpatients; providing treatment and coverage for those leaving prison or other rehabilitative settings; enhancing prevention through evidence-based methods;supporting telehealth in rural areas; and integrating health IT to support identification of patients with opioid use disorders.

Senate Judiciary Committee Chairman Questions Mylan Settlement Details

Sen. Chuck Grassley (R-IA), chairman of the Senate Judiciary Committee is requesting more information about the unreleased $465 million settlement betweenthe Justice Department and Mylan over EpiPen Medicaid rebates. Grassley wants to know how much states are supposed to receive from Mylan’s reportedsettlement, and he wants to know when and how CMS warned Mylan that it misclassified EpiPen as a generic. Grassley questions whether the reported dealfairly treats states. Mylan may have failed to pay more than $700 million to state Medicaid programs over the past five years, he said, much more than the$465 million for which Mylan said the Justice Department settled.

Mylan announced the $465 million settlement on its website Oct. 7, but the Justice Department released no information. According to Mylan’s statement, thecompany admits no wrongdoing and is negotiating a so-called corporate integrity agreement with the HHS Inspector General Office. Also, the Securities andExchange Commission seeks “communications with the CMS and documents concerning Mylan products sold and related to the Medicaid Drug Rebate Program,”according to an SEC filing.

Mylan says the settlement resolved all potential rebate liability claims by government agencies over the classification of EpiPen as a generic. Drugmakerspay 13 percent rebates on the average manufacturer price of generics in the Medicaid Drug Rebate Program. For brand and single-source drugs, companies paya 23.1 percent rebate or the difference between average manufacturer price and a drug’s best price, increased by an additional rebate when a drug’s pricerises faster than inflation. Those additional price concessions for brand drugs, which do not apply to generics, are important in the case of EpiPenbecause the product’s price has risen more than 400 percent since 2007. Also, Mylan has given significant discounts to state education programs. Mylan saysits EpiPen4Schools program gave schools more than 700,000 free epinephrine auto-injectors since 2012. The SEC filing states that EpiPen will be categorizedas a generic until next April.

2. Administration

CDC Announces Another Zika Zone Detected in Miami Area

On Oct. 13, the CDC announced it is working with Florida health officials to investigate at least five new cases of locally transmitted Zika virusinfection in Miami-Dade County. Florida officials announced a new area of active Zika transmission, which is about one square mile. Three of the casesinvolve people who live there; the other two work or have visited there. State health officials say this new neighborhood and the previously identifiedsection of Miami Beach are the only known areas of active transmission.

CDC recommends that pregnant women avoid travel to both of the active transmission areas.

HHS Finalizes the New Medicare Quality Payment Program

On Oct. 14, HHSfinalizedits policy implementing the Merit-based Incentive Payment System (MIPS) and the Advanced Alternative Payment Model (APM) incentive payment provisions inthe Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), collectively referred to as the Quality Payment Program. The new Quality Payment Programwill gradually transform Medicare payments for more than 600,000 clinicians across the country.

The final rule with comment period offers a fresh start for Medicare by centering payments around the care that is best for the patients, providing moreoptions to clinicians for innovative care and payment approaches, and reducing administrative burden to give clinicians more time to spend with theirpatients, instead of on paperwork.

For more information, click here.

CMS Announces New Initiative to Increase Clinician Engagement

On Oct. 13, CMS announced a new initiative to improve the clinician experience with the Medicare program. This new long-term effort aims to reshape thephysician experience by reviewing regulations and policies to minimize administrative tasks and seek other input to improve clinician satisfaction. Theinitiative will be led by senior physicians within CMS who will report to the Office of the Administrator.

Acting Administrator Andy Slavitt appointed Dr. Shantanu Agrawal to lead the development of the function and implementation, which will cover documentationrequirements and existing physician interactions with CMS, among other aspects of provider experiences. To ensure CMS is hearing from physicians on theground, each of the 10 CMS regional offices will oversee local meetings to take input from physician practices within the next six months and regularmeetings thereafter. CMS will then release a report with targeted recommendations to the CMS Administrator in 2017. Three of CMS’s regional Chief MedicalOfficers—Dr. Barbara Connors in Philadelphia, Dr. Ashby Wolfe in San Francisco and Dr. Richard Wild in Atlanta—will serve as regional champions of theinitiative.

The first action is the launch of an 18-month pilot program to reduce medical review for certain physicians while continuing to protect program integrity.Under the program, providers practicing within specified Advanced Alternative Payment Models (APMs) will be relieved of some scrutiny under certain medicalreview programs. CMS identified Advanced APMs as a potential opportunity for this pilot because participating clinicians share financial risk with theMedicare program. After the results of the pilot are analyzed, CMS will consider expansion along various dimensions including additional Advanced APMs,specialties and provider types.

For more information, click here.

CMS Releases 2017 Medicare Star Ratings

According to CMS, nearly 70 percent of Medicare Advantage enrollees will be in plans that receive at least four stars for quality in 2017.

Just over half of private Medicare customers signed up for plans that received at least four stars in 2014. But the new figure decreased slightly from thisyear, when just over 70 percent of the 17 million-plus Medicare Advantage customers enrolled in the high-quality plans.

Medicare Advantage plans that receive at least four stars for quality are eligible for bonus payments, while those that consistently receive less thanthree stars can be eliminated from the program. Just two plans—operated by Tenet Healthcare Corporation and Health Care Service Corporation—are in dangerof having their contracts terminated at the end of 2017 for poor performance, according to CMS.

There has been similar improvement in quality ratings for prescription drug plans. Just over 40 percent of Medicare beneficiaries who enroll in stand-aloneprescription drug plans are expected to be in plans with at least four stars next year. This is up from just 9 percent who were enrolled in suchhigh-performing plans in 2014.

There are expected to be 18.5 million individuals enrolled in private Medicare plans next year, representing about one-third of all beneficiaries. Medicareopen enrollment starts on Oct. 15 and runs through Dec. 7.

For more information, click here.

3. State Activities

Massachusetts: Health Care Spending Was Worse Than Initially Reported

Health care spending in Massachusetts last year was worse than initially reported. The state’s health care spending increased 4.1 percent for last year, upfrom the 3.9 percent that was initially reported. This is also more than the 3.6 percent growth target set by a 2012 cost containment law. Massachusettsrevised the rate after Harvard Pilgrim Health Care found errors in reporting it had earlier submitted that omitted $117 million in spending. The newfigures suggest the state has not made much improvement in controlling health spending. Massachusetts spent $57.4 billion on health care in 2015 and hasone of the highest medical costs in the country.

Minnesota: House Republicans Propose Response to Premium Increases

Minnesota House Republicans are proposing a new plan to respond to individual market premium increases for 2017 that will range from 50 to 67 percent onaverage. State lawmakers say they should use roughly $35 million that is left over from Minnesota’s high-risk pool to insulate consumers from the ratehikes, and they argue that the tax currently funding the state-based exchange should be cut by half, saving $22 million over three years.

Nebraska: Federal Officials Approve Plan to Manage Medicaid Services

Federal officials have approved a plan to expand Medicaid managed care in Nebraska. Under Heritage Health, starting in 2017 almost all Medicaid and CHIPenrollees will receive behavioral health, physical health and pharmacy services under a statewide managed care program. Nebraska awarded contracts to threeinsurers as part of the initiative: United Healthcare, Centene and WellCare. Nursing home and other long-term care will not be included in the program.

New York: Health Department Proposes Medicaid Coverage for Transgender Youths

The New York State Health Department issued a proposed rule that would allow Medicaid to cover youth transgender health treatment. Under the proposal,Medicaid would cover hormone therapy for minors with gender dysphoria. Last year, New York began covering hormone treatments for adults. However, Medicaidcoverage for those treatments is currently prohibited for minors.

Washington: CMS Agrees to Five-Year Waiver to Reform Care Delivery in Medicaid

CMS and Washington state have agreed to a new five-year waiver to reform care delivery in Medicaid. According to the state, the 1115 demonstration willallow for up to $1.5 billion in federal funding over the five-year period, most of which will be provided through a Delivery System Reform IncentivePayment program. The waiver’s three main initiatives seek to change the Medicaid delivery system through an existing community health collaboration, expandcare options for beneficiaries receiving long-term services and supports, and address housing and employment needs for vulnerable populations. CMS sent a letter to the state announcing the agreement butdetails are still being finalized.

4. Regulations Open for Comment

IRS, Treasury Release Proposed Rule on QHP Benchmarks

The IRS and Treasury Department, in a proposed rule released July 6, proposed toalter how qualified health plan (QHP) benchmarks are determined so that theyaccount for the costs of pediatric dental benefits. If finalized, the rule wouldgo into effect for the 2019 plan year.

Although pediatric dental care is one of the 10 “essential health benefits” thatplans are required to cover under the Affordable Care Act (ACA), several plansdo not include such coverage, and consumers instead buy stand-alone dentalproducts. Meanwhile, the marketplace determines the amount of tax credits afamily can receive to cover the cost of coverage based on the second-cheapestsilver-level plan.

However, as the proposed rule said, “because qualified health plans that do notoffer pediatric dental benefits tend to be cheaper than qualified health plansthat cover all ten essential health benefits, the second lowest-cost silver plan(and therefore the premium tax credit) for taxpayers purchasing coverage througha Marketplace in which stand-alone dental plans are offered is likely to notaccount for the cost of obtaining pediatric dental coverage.”

Treasury and IRS added that the existing rules “frustrate” the goal of makingall essential health benefits affordable to those receiving premium tax credits,so the administration wants to update its interpretation to ensure all 10services are addressed.

“Consistent with this interpretation, the proposed regulations provide that fortaxable years beginning after December 31, 2018, if an Exchange offers one ormore silver-level qualified health plans that do not cover pediatric dentalbenefits, the applicable benchmark plan is determined by ranking (1) thepremiums for the silver-level qualified health plans that include pediatricdental benefits offered by the Exchange and (2) the aggregate of the premiumsfor the silver-level qualified health plans offered by the Exchange that do notinclude pediatric dental benefits plus the portion of the premium allocable topediatric dental benefits for stand-alone dental plans offered by the Exchange,”the proposal said.

The rule aims to create the ranking by adding the premium for the lowest-costsilver plan that does not include a pediatric dental benefit to the premium forthe cheapest stand-alone dental plan, and the premium for the second-cheapestsilver plan without pediatric dental benefits to that of the second-loweststand-alone dental plan. The second-cheapest amount from this combined rankingwould be the taxpayer’s applicable benchmark plan premium, the rule said.

HHS Proposes Updates to Title X Rules

On Sept. 2, HHSproposed to preclude Title X grant recipients from using criteria intheir selection of family planning providers that are unrelated to theability to deliver services effectively.

Since 2011, 13 states have attempted to restrict participation by familyplanning providers in Title X based on factors unrelated to their ability toprovide services. The Title X program provides funding for certain familyplanning services, including STD screening and treatment, but funding is notused to pay for abortions. Although Planned Parenthood is not mentioned byname in the proposed rule, it has often been the subject of defundingactions by states and Congress.

In the proposed rule, HHS said the effects already felt by the restrictionsin many states justify the department’s rulemaking. HHS said grantrecipients that do not provide services directly would also be required tofollow the updated standards when choosing subrecipients.

HHS also proposed that a tiered structure governing how funds aredistributed would not be allowed unless it can be proven that aprovider in a top tier delivers Title X services more effectively than alower-tier provider. According to the Guttmacher Institute, a researchorganization that supports reproductive rights, four states have a prioritysystem for distributing family planning funds, which often disadvantagesfamily planning centers.

CMS Proposes Changes to Risk Adjustment in 2018 Marketplace Rules

On Aug. 29, CMS issued the proposed annual Notice of Benefit and PaymentParameters for 2018, which outlines additional steps to strengthen theHealth Insurance Marketplace. CMS is issuing this rule earlier in thecalendar year in order to provide more certainty to the Marketplace as itcontinues to mature.

Beginning in 2017, the proposed policies will take steps to strengthen therisk adjustment program. First, the rule proposes updates beginning in 2017to better reflect the risk associated with enrollees who are not enrolledfor a full 12 months. Second, beginning in 2018, the rule proposes to useprescription drug utilization data to improve the predictive ability ofCMS’s risk adjustment models. Third, also beginning in 2018, the ruleproposes to establish transfers that will help to better spread the risk ofhigh-cost enrollees, a change that would improve the risk-sharing benefitsof the program.

In addition to the improvements to risk adjustment, the proposed rulecontains other provisions to improve the Marketplace consumer experience andstrengthen the individual and small group markets as a whole. The proposedrule would give consumers additional tools for assessing the networks ofcompeting plans; broaden availability of this year’s new standardized planoptions by accommodating state cost-sharing rules; and create consumerprotections for consumers enrolling through the direct enrollment channel.The proposed rule would also create multiple child age bands that addressinstances in which consumers could face large premium changes after turningage 21; amend the guaranteed renewability regulations to provide additionalflexibility for issuers to remain in an insurance market in certainsituations; and codify several special enrollment periods that are alreadyavailable to consumers in order to ensure the rules are clear and to limitabuse. It also seeks information on a number of suggestions offered byissuers, consumers, providers and others on further improving the risk pool,such as additional changes to special enrollment period policies oroutreach; clarifying coordination of benefit rules between Medicare,Medicaid and the Marketplace; and providing greater certainty on the amountof user fee revenue spent on education and outreach.

To see the proposed rule, click here.

5. Reports

GAO Releases Report on Aligning Health Quality Measures

On Oct. 13, GAO released a report on the hurdles to measuring and rewarding quality health care. GAO found that while HHS is working to better align itshealth care quality measures across programs and private payers, it needs to set key priorities for those efforts and develop more meaningful measures.More specifically, GAO recommends that HHS 1) prioritize its development of electronic quality measures and related data elements for the core measures itand private payers have agreed to use, and 2) comprehensively plan, including setting timelines for, its efforts to develop more meaningful qualitymeasures.

To see the report, click here.

Kaiser Report Finds Medicaid Spending Growth Slowed Down in 2016

According to a Kaiser Family Foundation Survey released Oct. 13, spending under the Medicaid program grew much more slowly in fiscal year 2016 as theinitial effects of the ACA’s coverage expansion began to wear off. Total Medicaid spending by the federal and state governments grew at a rate of 10.5percent in fiscal year 2015 as Obamacare led to a surge in enrollment. In fiscal year 2016, spending growth declined to under 6 percent. Officials projectthat fiscal year 2017 spending will grow even more slowly, at a rate of 4.5 percent.

In future years, researchers wrote, trends in Medicaid are more likely to be influenced by the economy, cost pressures from rising prescription drug pricesand state policies, rather than Obamacare coverage expansion. However, the cost burden of Medicaid coverage is shifting toward the states because of theACA requirement they pick up 5 percent of expansion costs starting in 2017.

Though total Medicaid spending growth is on the decline, states’ spending on the program is projected to climb by 4.4 percent on average in fiscal year2017, up from 2.9 percent the previous year.

Thirty-one states and the District of Columbia have expanded their programs to cover people with incomes up to 138 percent of the federal poverty level, ascalled for under the Affordable Care Act. Expansion states eventually have to cover 10 percent of the costs. Many states—Arizona, Arkansas, Colorado,Illinois, Indiana, Louisiana, New Hampshire and Ohio—are relying on provider taxes to cover all or parts of their share.

The survey also examined how states are using Medicaid managed care, managing prescription drug costs, addressing opioid abuse and implementing deliverysystem reforms.

To see the survey, click here.

Report Looks at Trends in Hospital Inpatient Drug Costs

According to an industry-funded report, hospital spending on drugs for inpatients increased by more than 23 percent from 2013 to 2015, and more than 90percent of hospitals said price increases are straining their budgets. The report, commissioned by the American Hospital Association (AHA) and theFederation of American Hospitals, found that hospitals’ drug spending far exceeded the 9.9 percent growth in retail pharmacy spending over the same time.

American Hospital Association CEO Rick Pollack and Federation of American Hospitals CEO Chip Kahn called on drug companies to restrain the price increasesand highlighted proposals to boost pricing transparency and improve generic competition.

The report looked at responses from more than 700 hospitals. It also examined data from two group-purchasing organizations on 28 drugs chosen eitherbecause they had huge price increases or they were high-spending products for hospitals.

Most of those drugs were older off-patent products routinely used at hospitals, as opposed to costly new cancer treatments, for instance, which aretypically administered to outpatients. About half of the 28 had no active generic competition, giving the drugmakers an effective monopoly.

To see the report,click here.

Deloitte Releases Report Examining Consumer Priorities in Health Care

Deloitte recently released its2016 surveyexamining consumer priorities in health care. The survey of about 1,800 people found that the importance of relationships with health care providersremains the top priority for consumers. Moreover, respondents generally said they did not use or understand health care digital tools that were availableto them. “Given the investment in digital resources and the experiences consumers are having with digital capabilities outside of health care, it mightseem like digital tools are an essential part of individual health care management (scheduling, billing, disease management, etc.). We found that thisisn’t necessarily the case today,” Deloitte wrote in an accompanying analysis.

Study Shows How Soda Companies Fund National Health Groups

A study examining how the Coca-Cola Company and PepsiCo have tried to block efforts to reduce soda consumption finds that they lobbied against 29 publichealth bills from 2011 to 2015 and financially sponsored 96 national health organizations, many of which are tasked with fighting the country’s obesityepidemic. The entities includ