Washington Healthcare Update

January 30, 2017

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: The first full week of the Trump administration saw executive orders, freeze on regulations, cabinet confirmation hearings and more…Congressional Republicans met in Philadelphia to discuss their agenda and timetable for accomplishing goals.

Health Reform Takeaway

  • “Repeal and Replace” Takes Hold: Goal at this point is to pass both a repeal and a replacement of ACA by the end of March in the House of Representatives.
  • House and Senate Begin Drafting Repeal and Replace Bill: The House Ways & Means and Energy & Commerce Committees and the Senate Finance and Health, Education, Labor and Pensions (HELP) Committees are currently examining specific proposals to repeal and replace the Affordable Care Act through this reconciliation legislative vehicle. Individual groups of senators are also beginning to introduce different versions of replacement legislation. The earliest the congressional committees could report ACA repeal and replacement proposals was Jan. 27, but indications are that these committees will bring forward public proposals in February or March. In addition, many want to get the administration’s input and that means waiting until Rep. Price is confirmed as Secretary of HHS.
  • Obamacare Ads Stopped: Trump administration has pulled the plug on Obamacare ads and outreach, saying it’s a $5 million savings. The deadline for enrollment is Tuesday. The last five days of the open enrollment season are seen as critical because many individuals procrastinate and then make a last-minute decision to sign up. That is particularly true for the young and healthier customers.

1. Congress



2. Administration

3. Courts

4. State Activities

5. Other

6. Regulations Open for Comment

7. Reports

1. Congress


House Passes Ban on Federal Funding of Abortion

On Jan. 24, the House passed legislation that would ban federal fundingfrom going toward abortion coverage, including qualified health plans soldin the exchanges. The move came one day after President Trump signed anexecutive order reinstating the so-called “Mexico City” policy banningforeign aid from going to entities that provide abortion services, and justdays after millions of Americans protested anti-women policies.

The legislation would make the Hyde Amendment and other prohibitions onfederal funding for abortions permanent and government-wide; ensure thatthe ACA, until it is repealed, conforms to Hyde; and until the new planyear begins, require that QHPs fully disclose the extent to which anyhealth insurance product sold on the exchange funds abortion coverage. Italso would ban small businesses from using tax credits to buy plans withabortion coverage.

Two Subcommittees of the House Energy and Commerce Committee to Hold Three Hearings

The Subcommittee on Oversight and Investigations, chaired by Rep. TimMurphy (R-PA),announceda hearing for Jan. 31 at 10 a.m. in Room 2123 of the Rayburn House OfficeBuilding. The hearing is entitled “Medicaid Oversight: Existing Problemsand Ways to Strengthen the Program.” This hearing will aim to troubleshootexisting problems with the implementation of the Medicaid program andidentify ways to strengthen the program.

The Subcommittee on Health, chaired by Rep. Michael C. Burgess, M.D.(R-TX), announced two hearings: (1) Feb. 1 at 10 a.m. in Room 2123 of theRayburn House Office Building, entitled “Strengthening Medicaid andPrioritizing the Most Vulnerable”; and (2) Feb. 2 at 10:30 a.m. in Room2123 of the Rayburn House Office Building, entitled “Patient Relief fromCollapsing Health Markets.”

Thehearing on Feb. 1will examine discussion drafts of three Medicaid bills. Similar legislationwas introduced by committee members last Congress. These bills include:ending Medicaid benefits for lottery jackpot winners, closing a loopholethat lets married couples shelter assets to qualify for Medicaid andhelping states that are forced to provide temporary Medicaid coverage forindividuals who are unlawfully present. A portion of the savings from thelegislation would be directed to reduce waiting lists for the mostvulnerable in the Medicaid program, like those with disabilities.

Thehearing on Feb. 2will examine four bills to give patients cost relief from Obamacare,tighten enrollment gaps and protect taxpayers. Specifically, the bills aimto help bring younger and healthier patients into the insurance system byloosening age rating bands, ensure patients with pre-existing conditionsare not denied coverage or care, require verification before a patientsigns up for a plan outside of the standard open enrollment period, end thegaming of health insurance rules by minimizing the grace periods that haveled to risk imbalance and potential misuse, and protect patients frompremium increases if they maintain coverage.

House Energy and Commerce Committee Chair Works on ACA Replacement Bill

Chairman Greg Walden (R-OR) will introduce a bill next week with arequirement that health plans cover people with pre-existing conditions.


Senate Finance Committee to Vote on Price Nomination

Chairman Orrin Hatch (R-UT) announced that the Senate Finance Committeewill vote on the nomination of Rep. Tom Price (R-GA) to be Secretary of theU.S. Department of Health and Human Services on Jan. 31 at 10 a.m.

Democratic Senators Seek SEC Probe of Price’s Stock Trades

Eight Democratic senators, led by Sen. Patty Murray (D-WA), are asking theSEC to investigate Rep. Tom Price’s stock trades, citing “potential STOCKAct violations, illegal insider trading and other conflicts of interest.”Price has been accused of buying stock in several health care companiesshortly before introducing legislation that could benefit them. He hasdenied using nonpublic information before purchasing a stock and deniedtrying to help the companies.

This request came just a day prior to Price’s going before the SenateFinance Committee for a confirmation hearing. He appeared before the SenateHELP Committee last week and was challenged by Democrats to explain why hetraded health care stocks worth more than $300,000 over the last fouryears, as well as his purchase of biotech company stock at discountedprices.

Senators Introduce Bills on ACA Replacement

On Jan. 23, Sen. Bill Cassidy (R-LA), joined by Sens. Susan Collins (R-ME),Johnny Isakson (R-GA) and Shelly Moore Capito (R-WV), introduced thePatient Freedom Act of 2017 (PFA). The legislation for partially repealingand replacing the Affordable Care Act (ACA) combines features of theHealthcare Accessibility, Empowerment, and Liberty Act, which Sen. Cassidyintroduced into Congress with Congressman Pete Sessions (R-TX) in 2016, andearlier Patient Freedom Acts, which Sen. Cassidy introduced as potentialresponses, had the Supreme Court held in King v. Burwell that thefederal marketplace could not issue premium tax credits.

Following are thepress release,one-page descriptionandsection-by-section summary.

Sens. Cassidy and Collins state that the PFA would grant to the statespower to “increase access to health insurance and improve patient choice,while preserving important consumer protections” from the ACA. The PFA doesthis by selectively—rather than entirely—repealing ACA provisions, and bygiving the states three choices. Under the PFA, states could 1) keep theACA (more or less); 2) adopt a different approach based on subsidized “RothHSAs” (explained below); or 3) reject reform altogether. The hope is thatthe legislation will appeal to both supporters of the ACA and those whodemand a less regulatory, more market-oriented and more state-centeredapproach.

Sen. Rand Paul (R-Ky.) also introduced legislation: “Obamacare ReplacementAct” (S. 222). Among its key provisions:

  • Provides a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage.
  • Restores HIPAA pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of pre-existing conditions.
  • Replaces the existing open-ended tax exclusion for employer-provided health insurance with a universal deduction on both income and payroll taxes that would provide the same level of benefit regardless of how an individual obtains their health insurance.

The bill will also give “individuals the option of a tax credit of up to$5,000 per taxpayer for contributions to an HSA … Removes the maximumallowable annual contribution, so that individuals may make unlimitedcontributions to an HSA … [and] Eliminates the requirement that aparticipant in an HSA be enrolled in a high deductible health care plan.”

For more information,click here.

CBO Lowers ACA Enrollment Projections

On Jan. 24, the Congressional Budget Office (CBO) lowered its previousprojections for enrollment in the ACA marketplaces, but maintained that theindividual insurance market remains on a steady trajectory.

CBO and the Joint Committee on Taxation, in the official2017 to 2027 Budget and Economic Outlook, project that about 10 million people will get health insurance throughthe marketplaces established under the ACA in 2017, down from an earlierprojection of 15 million. Also revised down was the number of peopleexpected to buy health insurance through the marketplaces in 2027—frombetween 18 and 19 million in last year’s projection to 13 million.

Still, CBO and JCT project that the number of people with nongroup healthinsurance coverage will remain steady at about 18 million people in 2017,and about 20 million in 2027.

Under current law, the CBO also estimates that in 2027 as many as 28million people under the age of 65 will remain uninsured. These projectionscome as President Donald Trump and Republican lawmakers move to repealmajor pieces of Obamacare.

2. Administration

Regulatory Freeze Instituted by New Administration

The Trump administration instituted aregulatory freezeon Jan. 20 that requires federal agencies to not issue any new regulationsor guidance documents, pull back any regulations or guidance under reviewby the Office of the Federal Register, and temporarily postpone regulationsand guidance that have been published but have yet to take effect. It iscommon for a new president to impose an executive branchwide freeze onregulations under development, but it is not certain whether anotice-and-comment process is necessary to delay final regulations that arenot yet in effect.

The White House’s Jan. 20 memo asks the heads of executive departments andagencies to take a number of steps to freeze regulations and guidance sothat the new president’s appointees or designees have the chance to reviewthem. Regulations and guidance subject to statutory or judicial deadlinesshould be excluded from the regulatory freeze, the memo says. One of thosesteps includes not sending any new regulation to the Office of the FederalRegister until a department or agency head appointed by the presidentreviews and approves the regulation. The exception to this is if aregulation or guidance touches on “emergency situations or other urgentcircumstances relating to health, safety, financial or national securitymatters.” Regulations that have been sent to the Office of the FederalRegister but not published should be immediately withdrawn and reviewed bythe administration. Additionally, final rules that had been published bythe Office of the Federal Register but have yet to take effect will betemporarily postponed.

“With respect to regulations that have been published in the OFR but havenot taken effect, as permitted by applicable law, temporarily postponetheir effective date for 60 days from the date of this memorandum, subjectto the exceptions described in paragraph 1, for the purpose of reviewingquestions of fact, law and policy they raise,” the memo says. “Whereappropriate and as permitted by applicable law, you should considerproposing for notice and comment a rule to delay the effective date forregulations beyond that 60-day period.”

In cases where the effective date of a rule has been delayed to reviewquestions of fact, law or policy, agencies must now consider proposingnotice-and-comment rulemaking. If regulations raise substantial questions,the memo says agencies should notify the OMB director and “take furtherappropriate action.”

However, the Congressional Research Service in a legal memo notes that itis not clear whether an agency like CMS would need to go through thenotice-and-comment process before delaying the effective date of a rulethat has been finalized but not yet implemented. CMS had three outstandingrules under review by the Office of Management and Budget a few days afterthe White House memo was released, according to OMB’s website. These are: aproposed rule on Medicaid Supplemental Payment and Accountability, a finalrule on program integrity enhancements to the provider enrollment process,and an interim final rule on pre-existing condition insurance plan programupdates. The pre-existing condition insurance plan program rule has beenunder review by OMB since February 2015. The 340B so-called “mega-guidance”was also listed as under OMB review. CMS final rules that have been in theFederal Register but not yet implemented include rules on the use of new orincreased pass-through payments in Medicaid, conditions of participationfor home health agencies and pay bundles for cardiac care and jointreplacement, as well as an HHS rule on Medicare appeals.

Doctors’ Group Protests Exclusive Zika Vaccine License to Sanofi

On Jan. 23, Doctors Without Borders asked the Pentagon to reverse adecision to grant an exclusive license to the pharmaceutical company Sanofifor patents on a promising Zika vaccine candidate, saying it could sabotageefforts to get the vaccine to those who need it most.

The humanitarian group said the U.S Army Medical Research and MaterielCommand, which helped create the Zika vaccine, should instead grant anonexclusive patent license that would enable other companies or nonprofitsto advance the vaccine.

While applauding the U.S. government for its funding and leadership of Zikaresearch, the group said an exclusive license could hinder innovation andrestrict access to the promising vaccine. Sanofi might not develop thevaccine if it saw no profit in it, the group said, or it might develop thevaccine but charge too much for poor people in tropical areas to receiveit.

The group noted that Sanofi had received $40 million in HHS funding todevelop the vaccine and that other sources, including FDA fast-trackprograms, would be available to further Sanofi’s work.

“The licensing of this technology should ensure full public return on thepublic investment that U.S. taxpayers have made and are continuing tomake,” according to the release.

Apublic noticeabout the military’s license of the vaccine was published Dec. 9, withcomment due Jan. 23.

CMS to Host Webinar on Advancing Care Coordination Through Episode Payment Models

The CMS Innovation Center will hosta webinarto discuss various aspects of the Advancing Care Coordination throughEpisode Payment Models (EPMs); Cardiac Incentive Payment Model; and Changesto the Comprehensive Care for Joint Replacement Model final rule on Feb. 9,from 12 p.m.–1 p.m. EDT. The final rule was displayed at the FederalRegister on Dec. 20 and is effective on Feb. 8.

Registration for this webinar is now open. For additional information aboutEpisode Payment Models,click here.

3. Courts

Federal Judge Blocks HHS Rule on Third-Party Payments

On Jan. 25, a federal judgeblockedtheimplementation of an HHS rule on third-party insurance payments that wasfinalized by the Obama administration in December.

U.S. District Judge Amos Mazzant in Sherman, Texas, granted a temporaryrestraining order that prevents the rule from taking effect. He found thatHHS failed to follow proper rulemaking procedures. He had issued anemergency stay on the rule earlier this month.

Three dialysis companies, Fresenius Medical Care, DaVita and U.S. RenalCare, filed a lawsuit to block the rule, saying it would harm patient care.The Obama administration issued the rule after insurers complained thatkidney care providers are steering patients who are eligible for Medicareor Medicaid into private plans in order to reap higher payments.

The rule was scheduled to take effect Jan 13.

FTC Refiles Suits Against Generic Defendants

On Jan. 23, the FTCrefiled chargesagainst Watson Laboratories and its former parent company Allergan forillegally blocking the entry of a lower-cost generic version of a drug intothe U.S. market.

The agency charges that Watson struck a “pay-for-delay” agreement with EndoPharmaceuticals to keep a cheaper version of Endo’s pain medicine Lidodermfrom consumers. Watson had filed for FDA approval to make a genericLidoderm patch, then agreed not to make the treatment in exchange for ashare of Endo’s extended monopoly profits, according to the FTC. Thelawsuit was filed in the U.S. District Court for the Northern District ofCalifornia.

FTC also entered into a settlement agreement with Endo today for its rolein the matter, as well as accusations that the company violated antitrustlaws by using pay-for-delay settlements to block access to cheaper versionsof its opioid Opana ER. The settlement bars Endo from entering into suchpay-for-delay arrangements with generic drugmakers in the future.

The FTC additionally filed an administrative complaint against ImpaxLaboratories, charging that the company agreed with Endo to delay making ageneric version of Opana until January 2013, in exchange for $112 million.The administrative trial against Impact is set to begin Sept. 19.

The FTC originally brought the charges as a single action in March 2016,then voluntarily dismissed its complaint in November after the courtgranted defendants’ severance motion.

Judge Blocks Aetna-Humana Merger

A federal judge blocked Aetna’s merger with Humana after finding that thehealth insurers’ $37 billion deal would leave seniors with fewer andcostlier options for private Medicare coverage.

The merger risked irreparably harming competition within the MedicareAdvantage market, and would hand Aetna and Humana a near monopoly acrossthe nation, wrote U.S. District Court Judge John D. Bates in averdictissued Jan. 23.

The ruling represents a major victory for the Justice Department,which sued to halt the merger over concerns that it would furtherconsolidate an already-concentrated private Medicare landscape. BetweenAetna and Humana, the companies serve 4.5 million of the nearly 17 millionseniors enrolled in Medicare Advantage. The DOJ also raised concerns thatthe deal would hurt competition on the Obamacare insurance exchanges.

Aetna and Humana could still appeal the ruling. It is unclear if PresidentDonald Trump’s Justice Department will take a friendlier view of themerger.

The companies had argued that their merger could not be anticompetitivebecause they would still have robust competition from a government-runMedicare program that serves two-thirds of eligible seniors.

But Bates rejected that argument, along with Aetna and Humana’s plan toalleviate antitrust concerns by selling 290,000 Medicare Advantagecustomers to Molina Healthcare.

“The companies’ rebuttal arguments are unpersuasive,” Bates wrote. “Federalregulation would likely be insufficient to prevent the merged firm fromraising prices or reducing benefits, and neither entry by new competitorsnor the proposed divestiture to Molina would suffice to replace competitioneliminated by the merger.”

4. State Activities

California: Covered California’s Outreach Plan to Continue

Covered California officials said the state-based exchange’s $100 millionmarketing and outreach plan will continue as planned, unaffected by theTrump administration’s move to halt HealthCare.gov advertising and otherenrollment outreach. Roughly 1.3 million people have renewed coverage, and327,000 residents have signed for the first time since Nov. 1. The exchangecommissioned a report that found eliminating cost-sharing reductions andrequiring health plans to build the costs into 2018 premiums would increasefederal expenses by $221 million, or 29 percent. That is because theresulting advance premium tax credits would be worth more than what thegovernment now pays directly in cost-sharing. The UCLA professors whoauthored the paper determined eliminating the subsidy funding would raisepremiums for Silver plan consumers by 16.6 percent next year.

Indiana: Bill Allowing Needle Exchange Programs Gaining Traction in Legislature

A bill allowing counties and municipalities to set up their own needleexchange programs is gaining traction in the Indiana Legislature as thestate continues to deal with an HIV outbreak. Under current law, the statehealth commissioner must declare a public health emergency before countiescan set up an exchange. The bill cleared the House Public Health Committeeand has support from Gov. Eric Holcomb. The legislation comes about twoyears after former Gov. Mike Pence lifted a ban on needle exchanges torespond to the HIV outbreak in Scott County. Patient advocates say theprevious law created barriers that were difficult and time-consuming forcounties.

Massachusetts: Gov. Baker Wants to Revive State Employer Mandate Proposal

Massachusetts Gov. Charlie Baker wants to revive a state employer mandatethat changed after Obamacare went into effect, leading to an increase inpeople covered by Medicaid and CHIP rather than job-based coverage. Thenumber of enrollees in MassHealth who are working full-time has nearlytripled since 2011, putting a strain on the state budget. MassHealthaccounts for 40 percent of the governor’s budget, up from roughly 30percent seven years ago. The proposal, which would need legislativeapproval, would include requiring employers to contribute a minimum of$4,950 for employees working 35 hours, as well as a five-year moratorium onnew coverage mandates.

Michigan: HMO’s Want to Set Up Pilot Programs for Behavioral Health

HMO’s are urging the Michigan Legislature to allow them to set up pilotprograms focused on integrating behavioral health with physical health carethat go beyond what the governor’s mental health task force hasrecommended. The state panel earlier this month recommended that HMOs beallowed to set up pilot programs to play a role in the state’s behavioralhealth system, but it doesn’t offer guidelines on how to move forward withintegration. The Michigan Association of Health Plans wants the StateLegislature to provide clearer details about the pilot programs includingalternative financing models. In a statement, the group said the panel’srecommendation “does not address the administrative or financial solutionsneeded to move toward an integrated system.” The state has been locked in abattle over how to reform its behavioral health system after Gov. RickSnyder last year proposed letting HMOs manage behavioral health services.The proposal drew criticism from mental health groups and Snyder insteadformed a task force, which made the recommendations.

Minnesota: Gov. Dayton Signs Legislation Creating State-Funded Subsidies

On Jan. 26, Minnesota Gov. Mark Dayton signed legislation creatingstate-funded subsidies for roughly 125,000 residents to reduce theirindividual market premiums. The subsidies will cut premiums by 25 percent,according to state officials. Dayton — who caused significant controversylast year when he said Obamacare was “no longer affordable” for many — hadpushed the proposal for months after the near-collapse of the state’sindividual market.

5. Other

National Governors Association Urges Congress Against Shifting HealthCosts to States

The National Governors Association told House Republicans Jan. 24 that itis “critical” that Congress does not shift more health care costs to statesas lawmakers weigh changes to Medicaid financing.

As Republicans in Congress work to replace Obamacare, they are weighingbroader Medicaid changes that would limit federal spending through blockgrants or per capita caps. Thegovernors’ letter did not specifically name either proposal, but it stressed thatproviding health care to vulnerable populations is a shared responsibilitybetween the federal government and the states.

“In considering changes to Medicaid