Washington Healthcare Update

November 14, 2016

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This Week: Congress returns for a lame-duck session, but it is still unclear what they will do — they must fund the government beyond Dec. 9 when current funding runsout…Trump arrives and begins transition…EpiPens still make the news.

1. What the Trump Administration Means for Health Care

2. Congress


3. Administration

4. Courts

5. State Activities

6. Regulations Open for Comment

7. Reports

1. What the Trump Administration Means for Health Care

What the Election Means for Health-Related Committees in Congress

Even though Republicans remain in control of the House and Senate there could be some changes in leadership on health-related committees:

Senate Health, Education, Labor and Pensions Committee.Chairman Lamar Alexander (R-TN) is expected to continue in that position, overseeing FDA user fee reauthorization bills next year that must be passedbefore the agreements expire in late 2017.

Sen. Patty Murray (D-WA) is considering a run for the position of Democratic Whip but could also move to be the ranking member of the Senate AppropriationsCommittee, or she could remain as the ranking member of the HELP committee. If Murray moves to the Whip position or becomes the top Democrat onAppropriations, there are rumors that Sen. Bernie Sanders (I-VT) is interested in the top Democratic position on the HELP committee. If Murray becomes theDemocratic Whip and Sanders remains ranking member on the Budget Committee, Sens. Bob Casey (D-PA) and Al Franken (D-MN) are next in seniority for thehealth committee.

Senate Appropriations Committee. Sen. Thad Cochran (R-MS) is expected to stay on as chairman of the Appropriations Committee.

The Democratic leadership of the committee is less clear, because current ranking Democrat Barbara Mikulski (MD) is retiring. A number of senior Democratscould take the ranking position on the committee, including Sens. Patrick Leahy (VT), Diane Feinstein (CA), Dick Durbin (IL) and Patty Murray (WA).

Sen. Patrick Leahy of Vermont has the seniority. However, it is assumed that he would prefer to retain his position as the top Democrat on the SenateJudiciary Committee.

Senate Finance Committee.All Finance Committee Republicans who were up for re-election won their races, though committee member Sen. Dan Coats (R-IN) is retiring. Sen. Orrin Hatch(R-UT) is expected to stay chairman of the committee. Sen. Ron Wyden (D-OR) is expected to remain as the ranking Democrat on the committee.

House Energy & Commerce Committee.Current Chairman Fred Upton (R-MI) is term limited, opening the position to other members. Two members who have expressed interest in being chairman areReps. John Shimkus (R-IL) and Greg Walden (R-OR). Shimkus has seniority and has a long history of voting with GOP leadership. Walden was chair of theNational Republican Congressional Committee.

House Ways & Means Committee.Chairman Kevin Brady (R-TX) just started his term this year and will stay on. Sander Levin (D-MI) is expected to remain as the ranking Democrat on thecommittee.

Repealing the Affordable Care Act

President-elect Donald Trump promised to repeal the Affordable Care Act (ACA). His public statements and campaign website left little detail other thanthat he would replace the ACA with

  1. expanding health savings accounts;
  2. allowing people to deduct the cost of premiums; and
  3. allowing policies to be sold across state lines.

His transition website added the following:

To maximize choice and create a dynamic market for health insurance, across state lines. The Administration will work with both Congress and the States tore-establish high-risk pools – a proven approach to ensuring access to health insurance coverage for individuals who have significant medical expenses andwho have not maintained continuous coverage.

He has not suggested doing away with the more popular parts of the ACA like the protections against being denied coverage because of pre-existingconditions, or allowing children to stay on the parents’ plan until the children are 26. Nor has Trump discussed dismantling the exchanges, but he has notproposed a mechanism for individuals to know what plans are available.

The House Republican Plan: “A Better Way”

Because Trump has not provided detail, some have suggested that he might rely on Paul Ryan’s plan, which outlines the same principles but in more detail.

That plan would:

  • Allow health care to be portable—meaning you could take it from job to job
  • Expand the use of health savings accounts
  • Cap open-ended tax break on employer-based premiums—to replace the Cadillac tax
  • Allow policy sales across state lines
  • Allow small businesses and individuals to band together to create new pooling mechanisms
  • Remove the individual and employer mandates
  • Reform medical liability

In addition, expanding the availability of catastrophic health policies is being considered.

In 2015, a reconciliation bill was passed—but vetoed by Obama—that included language to repeal the individual mandate, ax the ACA’s premium subsidies,strip the HHS secretary of the authority to run a federal health insurance marketplace starting in 2018, end the three risk mitigation programs, stopMedicaid expansion and scrap the law’s major taxes. It is highly likely this could serve as the basis of legislation to repeal the ACA.

The question remains of whether the Trump administration would seek to work with any Democrats on this. Democrats have wanted to make changes in the ACAbut have not wanted to provide opportunities for a full repeal. For example, many Democrats want to repeal the Cadillac tax and the device tax repealeffort also had bipartisan support.

However, the regulatory process could be used to loosen some requirements, for example to exempt more people from the individual mandate.


In addition, Trump has supported block granting Medicaid, a proposal Republicans have supported for years. State budgets could get much tighter if a Trumpadministration follows through on converting Medicaid into a block-grant program. Federal Medicaid funds accounted for roughly 15 percent of total stateexpenditures in 2014, the National Association of State Budget Officers calculates.

The best way to accomplish repeal would be through the budget reconciliation process because reconciliation needs only a simple majority, not the usual 60votes in the Senate.

2. Congress


Inspector General Asked to Provide Records, Testify Over EpiPen Misclassification

According to a Nov. 8 letter by Sen.Chuck Grassley (R-IA) to HHS Inspector General Daniel Levinson, CMS knew in 2009 that Mylan’s EpiPen was misclassified as a generic drug. However, it isstill unclear whether CMS did anything to address the issue before the EpiPen pricing controversy became public this year.

In a July 2009 report, the HHS Inspector General informed CMS that eight drugs were misclassified for the purposes of setting rebates in Medicaid, whichare larger for brand-name drugs. “With respect to those eight, your staff has stated that the EpiPen was one of those drugs and that your office reportedthe misclassification to CMS in 2009,” Sen. Grassley wrote in his letter.

Sen. Grassley asked why no one has done anything about the misclassification when CMS knew of the problem for years. In October, Mylan announced a $465million settlement with the Justice Department to settle claims over the issue, but DOJ has not confirmed the settlement.

The Senate Judiciary Committee will hold a hearing Nov. 30 on the reported settlement. Grassley’s letter directed Inspector General Levinson to provide allrecords of OIG’s notifications to CMS about the misclassification of EpiPen.

Bipartisan Letter Asks Mylan to Reimburse DOD for EpiPen Payments

Sens. Chuck Grassley (R-IA), Amy Klobuchar (D-MN) and Richard Blumenthal (D-CT) asked Mylan to explain its plans to reimburse the Defense Department forEpiPens due to the drug’s misclassification as a generic drug.

“If Mylan’s intention is to ‘move forward and bring resolution to all EpiPen Auto-Injector related matters,’ it is imperative that you quickly resolve thisadditional discrepancy and take steps to refund our military for past overpayments,” the lawmakers wrote in a Nov. 7 letterto the company. They asked for a response by Nov. 18.

Sen. Grassley, the chairman of the Senate Judiciary Committee, and Ranking Member Patrick Leahy (D-VT) also called on the Federal Trade Commission toreview Mylan’s EpiPen contracts with schools for possible antitrust behavior. Mylan reportedly was offering free or low-cost EpiPens to many schools inreturn for the schools’ agreement not to purchase competitors’ products.Click hereto see that letter.

3. Administration

CMS Announces $66.1 Million to Support Zika Prevention & Treatment Services  

On Nov. 9, CMS announced a funding opportunity providing up to $66.1 million available to support prevention activities and treatment services for healthconditions related to the Zika virus. Congress authorized this funding in the Continuing Appropriations and Military Construction, Veterans Affairs, andRelated Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act.

In accordance with the Zika Response and Preparedness Act, entities eligible to apply for this funding opportunity include states, territories, tribes ortribal organizations with active or local transmission of the Zika virus, as confirmed by the Centers for Disease Control and Prevention (CDC). The CDC hasdesignated American Samoa, Puerto Rico, the U.S. Virgin Islands and Florida as areas with laboratory-confirmed active or local Zika virus transmission. Assuch, this emergency funding opportunity is currently available to the territorial and state health departments in these areas.

Through this funding opportunity, up to $66.1 million is available, with $60.6 million directed to Puerto Rico, which has a high incidence of local Zikacases. Allocations are based on the percentage of active and local Zika cases reported by the CDC and the size of the populations in these areas. Fundingin Puerto Rico will significantly increase the resources and capacity needed to prevent transmission of the virus and provide critical diagnostic,screening and treatment for pregnant women, newborns and others.

In order to receive funding, applicants must demonstrate their ability to quickly and efficiently expand existing Zika response efforts and furtherdetermine the most effective use and dissemination of funds in their respective jurisdictions. Funds will be available for health care services related tofamily planning, diagnostic testing, screening and counseling, medical care, case management and treatment, and improving provider capacity and capability.

CMS Hosting a Quality Payment Program Final Rule Call

CMS is hosting a MLN Connects® Call on Nov. 15 at 1:30 p.m. ET on the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)final rule.

CMS will provide an overview of the Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Model (APM) incentive payment provisionsunder MACRA, collectively referred to as the Quality Payment Program. Anyone can join the call, and participants may include Medicare Part BFee-For-Service clinicians, office managers and administrators, state and national associations that represent health care providers, and otherstakeholders.

To register for the call, click here. Registration will close at 12p.m. ET on the day of the call or when available space has been filled.

Center for Medicaid and CHIP Services Now on Twitter

Follow CMCS athttps://twitter.com/MedicaidGov. CMCS also created a blog.

President Obama Signs Executive Order Advancing the Global Health Security Agenda

On Nov. 4, President Barack Obama signed anexecutive order building upon the Global Health Security Agenda (GHSA) that focuseson combating infectious disease threats like Zika and Ebola.

The president is directing executive departments and agencies to coordinate with other governments, financial institutions andnongovernmental stakeholders to implement international health regulations and meet the goals of the GHSA, which was launched in 2014.

“Already, we’ve seen historic success: Working with partners in Guinea, Liberia, Sierra Leone, and from around the world, we led the way in ending theEbola epidemic in West Africa — and we are leading the way on the Zika response here at home,” National Security Advisor Susan Rice said in a statement.“The executive order signed today builds on this progress by establishing long-term policy objectives and memorializing a comprehensive framework for theUnited States to continue, strengthen, and institutionalize our achievements and use common targets to measure progress.”

The executive order requires the National Security Council to convene an interagency review council to provide guidance to participating agencies,facilitate and provide a forum to resolve interagency disagreements, and review progress on the work of the GHSA. 

4. Courts

Judge Rules House Cannot Participate in Risk-Corridor Lawsuit

On Nov. 7, a federal judge denied the House of Representative’s requests to weigh in on one of the lawsuits over Obamacare’s risk-corridor program. TheHouse had asked the judge to allow it to argue on behalf of the Obama administration, which is trying to throw out a case brought by Health Republic overmissing risk-corridor payments. The House wanted to tell the court that Congress intentionally limited the payments.

But Judge Margaret M. Sweeney denied the request, saying that the rules of the U.S. Court of Federal Claims do not allow outside parties to weigh in. Whileshe could have waived the rule, she was swayed by the insurance company’s argument that the court should not allow any new arguments.

Judge Temporarily Halts CMS Rule Banning Mandatory Arbitration

On Nov. 7, a U.S. district court halted implementation of the new policy cracking down on nursing homes’ use of mandatory arbitration agreements. In hisruling, Judge Michael Mills questioned CMS’s authority to place the sweeping restriction on facilities that receive federal funds, saying it raises“serious legal questions” about the power that federal agencies hold. He granted a preliminary injunction preventing the arbitration ban from taking effectuntil a broader lawsuit against the rule is resolved.

CMS had originally planned to implement the rule on Nov. 28. The American Health Care Association, Community Care of Vicksburg, Great Oaks Rehabilitation,the Mississippi Health Care Association and Mansfield Long Term Care are suing CMS over the rule. They had requested the injunction, arguing that theprohibition is unlawful and exceeds the agency’s authority.

The judge did express sympathy for CMS’s intentions, writing that the arbitration ban appears to be good public policy. Yet he remained unconvinced thatCMS had the authority to write the rule in the first place.

SCOTUS Will Not Review Pay-for-delay Case

On Nov. 7, the Supreme Court said it will not review an appeals courtdecision that took a broader view of what may qualify as an anti-competitive “pay-for-delay” agreement between brand and generic drug companies.

The court’s refusal to hear the case leaves in place a 3rd Circuit Court of Appeals rulingfrom June 2015 finding that drug patent settlements involving a non-cash transfer of value are subject to antitrust scrutiny.

Pay-for-delay agreements typically involve brand drug makers’ paying generic companies to delay introduction of a cheaper generic. However, in this case, SmithKline Beecham Corp. v. King Drug Co. of Florence, the brand drug maker relinquished its right to produce its own “authorized generic” duringthe 180-day marketing exclusivity period typically awarded to the first generic company to challenge the brand drug’s patent. In return, the genericcompany delayed entry of its product. The lawsuit was brought by drug purchasers who argued they were paying higher prices because of the settlement.

The decision is a win for the FTC, which has been trying to clamp down on non-cash forms of pharma patent settlements it considers anti-competitive. It isa loss for both brand and generic drug companies, which argue these deals provide leverage to avoid costly and lengthy patent fights.

The appellate court’s decision was based on the Supreme Court’s 2012 decision in FTC v. Actavis. In that landmark case, the Supreme Court ruled thatunexplained large payments from a brand drug maker to a generic company to settle litigation can sometimes violate antitrust laws.

The Solicitor General said theSupreme Court should let the lower court ruling stand, arguing that the court’s decision in Actavis was not limited to cash payments.

5. State Activities

California: Women Still Struggle to Obtain Birth Control Directly From Pharmacists

In California, women are still struggling to find pharmacists that will dispense birth control without a doctor’s prescription even though legislation waspassed three years ago permitting it. There is no comprehensive list outlining how many of California’s 6,500 pharmacies are participating in the program.However, some pharmacists say they are reluctant to do so in part because it could take up to an hour to complete the process of filling a prescription forone patient. This is due to required blood work and having to administer a questionnaire about health issues. California is one of three states wherepharmacists can prescribe birth control.

California: Prescription Drug Pricing Measure Defeated

California’s Proposition 61 was defeated by a 54-46 margin on the November ballot. Proposition 61 sought to lower prescription drug prices by requiringthat state agencies pay no more for medicines than the federal Department of Veterans Affairs. Drug companies led the campaign opposing the proposition,raising $109 million to defeat the measure.

Opponents of the proposition included drug makers, the California Medical Association and veterans’ groups. They argued the initiative could lead to higherdrug prices for veterans and seniors if the pharmaceutical industry refused to sell the state medicines at lower prices.

Colorado: Measure to Create Universal Health Care System Fails

On Nov. 8, Coloradans voted against creating a universal health care system for the state by a large margin, with about 80 percent voting against themeasure despite support for it from Sen. Bernie Sanders (I-VT) who advocated for a single-payer system during the presidential campaign.

The measure would have covered all residents in Colorado. Those in Medicaid or the Children’s Health Insurance Program would have received benefitsrequired by federal law as well as ColoradoCare standard benefits. Beneficiaries would not have had any deductibles, and preventive and primary careservices would not have had copayments. The provision would have been funded by a 10 percent payroll tax funded two-thirds by employers and a third byemployees. There would also have been a 10 percent tax of all non-payroll income.

Colorado Democratic Sen. Michael Bennet came out against the proposal, as did Gov. John Hickenlooper (D). Bennet raised concerns with putting an overhaulof the state’s health care system and a tax increase into the state’s constitution.

ColoradoCare Yes, which had pushed for the bill, spent more than $850,000, but the group was outspent by Coloradans for Coloradans, which spent almost $4million to defeat the proposition. Anthem spent about a million to defeat the bill, UnitedHealth spent $450,000 and Centura Health spend $250,000.

Connecticut: Hospitals Allege the State Is Illegally Administering Medicaid Program

Connecticut hospitals have filed a petition toCMS alleging that the state is “illegally administering” its Medicaid program by paying inadequate rates for treatment and imposing a $556 million tax onproviders. “Connecticut’s Medicaid payment system has degraded to a point where provider payments are no longer sufficient to assure efficiency, economy,quality of care, and adequate access to care for Medicaid beneficiaries,” the petition says. The state’s hospital association and 20 hospitals alsoappealed a state court’s ruling on the tax to a state Superior Court. The group’s claim against the tax was denied by two state agencies last month.

Iowa: State Will Pay Medicaid Insurers Additional $33 Million

Several months after a statewide managed care program began, Iowa is increasing the amount of money it pays three private insurers administering Medicaid.The Iowa Department of Human Services will pay an extra $33.2 million to the health plan, and the federal government will pay an additional $94.5 millionfor the increased rates. Gov. Terry Branstad, who has vocally defended the move to statewide managed care as necessary to save taxpayer funds and eliminatefraud, insists Iowa is still expected to save more than $100 million this year. The savings, he asserts, will result from fewer people enrolled inhigher-cost programs. The state launched the new Medicaid delivery system in April. It pays the insurers per member each month.

Louisiana: Medicaid Expansion Projected to Cost $376 Million More Than Budgeted

In Louisiana, Medicaid expansion is projected to cost $376 million more than expected this year, based on new spending figures from the state’s healthagency. The total estimated cost of expansion is $2.3 billion this fiscal year as a result of the increase in spending. But all of it will be picked up bythe federal government, officials said, because of the ACA’s enhanced match rate for states. There are two main drivers of the higher cost: Louisiana nowprojects to enroll 402,000 people in the first year of expansion, up from an earlier estimate of 375,000. And the individuals signing up are older thanexpected. As of Oct. 20, 326,000 people had enrolled in expanded coverage that began on July 1.

Massachusetts: CMS Approves State’s 1115 Waiver

On Nov. 4, Massachusetts received CMS approval for anew, five-year 1115 waiver that will restructure Medicaid payment and delivery systems for nearly 2 million enrollees. The $52.4 billion waiver, which goesinto effect in July 2017, will transition the state’s mostly fee-for-service model to one of provider-led ACOs and managed care. CMS wrote toMassachusetts that the waiver authorizes $1.8 billion in new Delivery System Reform Incentive payments over five years, as well as $4.8 billion insupplemental safety net payments to hospitals and other providers. CMS also granted MassHealth approval to launch an ACO pilot program in December.

Vermont: Medicaid Dollars Being Transferred to Primary Care

Vermont has begun reallocating $4 million Medicaid dollars from academic medical centers to primary care doctors under a larger spending bill approvedearlier this year. The state reduced the University of Vermont Medical Center payments by $2.9 million and the Dartmouth-Hitchcock Medical Center by $1million, as well as $100,000 for out-of-state academic medical centers. With the shift in payments, primary care providers will get $48.9 million—an 8.9percent increase.

6. 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 tope