Washington Healthcare Update

February 20, 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: Price sworn in, meets with Senate Republicans…Congress recesses for Presidents’ Day…Report shows health spending slowed under the Obama administration.

Health Reform Takeaways

  • House leadership sent a reconciliation package to CBO to be scored. Markups to follow, possibly the week of Feb. 28.
  • Humana pulls out of the marketplace for 2018.
  • Molina warns it may pull out because there are too many unknowns.
  • Aetna CEO says markets are in a death spiral.
  • HHS issues its first rule related to the marketplace since Price became secretary.
  • 91 percent of population is insured, an all-time high, and health spending grew more slowly during the Obama years than under other two-term presidents.

1. Congress



2. Administration

3. Courts

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress


Republican Policy Brief Outlines New ACA Replacement Plan

In anew brief from the House Ways &Means and Energy & Commerce Committees, Republicans outline a plan topull back Medicaid expansion and convert Medicaid into a per-person paysystem.

The brief, which closely resembles the “A Better Way” plan by House SpeakerPaul Ryan (R-WI), does not go into detail about how lawmakers willdetermine the baseline for setting per-capita allotments, nor does itspecify how long states that expanded Medicaid would continue to receivethe enhanced federal match promised by the Affordable Care Act for thatpopulation.

The brief says that Medicaid programs would move to a per-capita allotmentsystem, although states could opt for a block grant. Congress would set thefederal Medicaid payment to states by multiplying the state’s per-capitacosts for major beneficiary groups—including the aged, blind and disabled;children; and adults—by the number of enrollees in each group. The states’per-capita costs for the groups would be based on each state’s averageMedicaid spending in a base year. Payments would grow based on aninflationary index, though the paper does not specify which one.

The brief does not define a base year, nor does it say whether the baseyear would be different for a non-expansion state than for a state thatchose to expand Medicaid. It also says federal funding would be availableto states based on their current federal match percentage, which variesstate to state.

Some payments, including disproportionate share hospital (DSH) payments andadministrative spending, would not be counted toward a per-capita payment.

Should states choose a block grant, the federal government would also set abase year to decide the grant amount with the assumption that states wouldpull coverage of expansion beneficiaries. The only federal mandate onstates would be that they cover “the most vulnerable elderly and disabledindividuals who are mandatory populations under current law.”

The Republican policy brief says states that expanded Medicaid would beable to keep their enhanced payments for beneficiaries that are currentlypart of the expansion population for an unspecified “limited amount oftime.” After that, states could continue enrolling new beneficiaries withincomes up to 138 percent of the poverty level, but states would bereimbursed according to the federal match rate for their traditionalMedicaid programs.

Expanded Use of HSAs Considered

AHIP, the health insurance lobby, and congressional Republicans are backinga policy proposal that would allow consumers to deposit any excess premiumtax credits into a health savings account.

AHIP’s annual survey data shows that enrollment in HSAs linked tohigh-deductible health plans has grown steadily since being established in2005 and HSAs are now in use by more than 20 million people.

According to the GOP policy brief, the reconciliation bill now beingdeveloped would replace existing premium-based subsidies with age-adjustedtax credits, and allow them to be used to purchase any insurance approvedby a state and sold in the individual market, including catastrophiccoverage. Subsidies could also be used for any unsubsidized COBRA plans.“If the individual does not use the full value of the credit, he or she candeposit the excess amount into a health savings account,” the plan says.

The GOP policy brief also proposes increasing the maximum contributionlimits, and notes that the Better Way plan would align limits with maximumout-of-pocket spending limits. The plan would also allow spouses tocontribute “catch up” amounts, and allow HSAs to be used for expensesincurred 60 days prior to establishing the account.

Sens. Orrin Hatch (R-UT) and Marco Rubio (R-FL) and Rep. Erik Paulsen(R-MN) introduced legislation that would make even more changes to HSApolicy. The Hatch-Rubio-Paulsen bill would allow spouses to make catch-upcontributions; let Medicare Part A enrollees aged 65 or over, peopleeligible for Indian Health Services and members of health care ministriescontribute to HSAs; and also allow HSA contributions to be used for directprimary care service arrangements. It would further let consumers use theirHSA funds for prescriptions and over-the-counter drugs, and for purchasinghealth coverage.

House Approves Bill Overturning Protections for Planned Parenthood

On Feb. 16, the House approved a bill to negate an Obama administrationrule and allow states to restrict family planning grants to PlannedParenthood and other abortion providers.

The measure passed 230-188, largely along party lines, and marksRepublicans’ first attempt this year to target Planned Parenthood funding.

The legislation would set up a process for Republicans controlling bothchambers to use the Congressional Review Act to strike the Obamaadministration rule, issued in mid-December, with simple majority votes.

The regulation bans states from blocking Title X family planning grants toPlanned Parenthood and other health care providers that offer abortion.Title X funding covers services such as contraception, STD screenings andtreatments but cannot be used to pay for abortion services.

House Republicans argued that the measure upholds states’ rights and is notan attack on Planned Parenthood. Democrats branded the legislation anattack on women’s health.

Thirteen states have restricted Title X grants, a move abortion rightsadvocates say has reduced access to care.

House Freedom Caucus Endorses Sen. Rand Paul’s Obamacare ReplacementPlan

On Feb. 15, the House Freedom Caucus officially endorsed Sen. Rand Paul’s(R-KY) Obamacare replacement plan, further signaling the divide amongRepublicans on Capitol Hill over how to overhaul the health care law.

House Freedom Caucus Chairman Rep. Mark Meadows (R-NC) said that the groupsupports immediately repealing Obamacare with the 2015 reconciliation bill,and replacing it with Paul’s bill. Rep. Mark Sanford (R-SC) has introducedits companion measure in the House. That legislation expands health savingsaccounts and would allow individuals and small businesses to create theirown markets. The bill does not address the ACA’s Medicaid expansion.However, Meadows said the HFC supports its repeal.

Additionally, the Freedom Caucus chair said he does not support the newlyunveiled plan to simultaneously repeal and replace the ACA. The caucus hassaid the ACA should be repealed in the next two to three months using the2015 reconciliation package and then the law should be replaced on the sameday. The chair of the House Freedom Caucus said he opposes the leadershipplan because it does not address costs, he prefers a tax deduction over acredit, and he is against a refundable, advanceable tax credit.

House Oversight Committee Votes to Kill D.C.’s “Right to Die” Law

On Feb. 13, the House Oversight Committee approved a resolution to kill theDistrict of Columbia’s “right to die” law for terminally ill patients.

In a vote of 22 to 14 along party lines, the committee moved to nullify theD.C. law, which allows patients with less than six months to live to obtainlife-ending medication from a doctor. Congress can prevent the law fromtaking effect if it passes a disapproval resolution and President DonaldTrump signs it within 30 legislative days of Jan. 6, the date it receivedthe bill.

The resolution now moves on to the full House.

Six states have similar laws: California, Colorado, Montana, Oregon,Vermont and Washington.


Senate Confirms OMB Director Mulvaney

Rep. Mick Mulvaney (R-SC) was confirmed as director of the Office ofManagement and Budget (OMB) on Feb 16. Sen. John McCain (R-AZ) crossedparty lines to vote against Mulvaney’s confirmation. For the new OMBdirector, there is a lot to catch up on. OMB has to help translate each ofTrump’s executive orders into budget policy—something career staff arelikely reticent to do. Mulvaney also will now have to fill key spots suchas deputy directors, associate directors and communications staff to helpcarry out Trump’s policies. Since day one, OMB has been without a directline to the Trump administration, leaving the 500-person office in aholding pattern.

Senate Confirms Shulkin as VASecretary

On Feb. 13, the Senate unanimously confirmed President Donald Trump’snominee David Shulkin for Veterans Affairs secretary.

The vote was 100-0 for Shulkin, a holdover from the Obama administrationwho has served as VA undersecretary of health since 2015. A physician andformer health care executive, Shulkin will be the first VA secretary in thedepartment’s history never to have served in the military.

The Senate set aside just 10 minutes for debate on his nomination. TheSenate Veterans’ Affairs Committee had already unanimously approvedShulkin’s nomination, and he earned the support of all Senate Democratsdespite concerns over whether Trump might move to privatize the VA.

During his Feb. 1 confirmation hearing, Shulkin allayed Senate Democrats’concerns that the VA system would be privatized. Shulkin’s confirmationdrew mostly praise from veterans service organizations.

Bipartisan Group of Senators Asks Price to Permit Drug Imports

Sens. Chuck Grassley (R-IA), John McCain (R-AZ) and Amy Klobuchar (D-MN)wrote a letterto HHS Secretary Tom Price asking him to use existing authority to fasttrack the importation of prescription drugs from Canada to help remedydrastic drug price increases in the United States.

The senators say Price should use this authority only when a drug is offpatent or no longer marketed in the U.S. by the original manufacturer; hashad a significant, unexplained price increase; has no direct competitionand a competitor drug would help consumers; and the imported product ismade by companies with a reputable record.

They say the policy should be limited so “it does not negatively affectinnovator companies that invested in the development of the drug.”

2. Administration

CMS Awards Funds to Help Small Practices in the Quality Payment Program

On Feb. 17, CMS awarded approximately $20 million to 11 organizations forthe first year of a five-year program to provide on-the-ground training andeducation about the Quality Payment Program for clinicians in individual orsmall group practices of 15 clinicians or fewer. CMS intends to invest upto an additional $80 million over the remaining four years.

CMS Delays Medicare Bundled Payments Rule

CMS isdelaying implementationof new Medicare bundled payment models, citing a “regulatory freeze” thatwas imposed following President Donald Trump’s election.

CMS said it will push the effective date for the rule’s first elements toMarch 21, roughly a month later than initially planned. The models overhaulprovider Medicare payments for cardiac rehabilitation treatments, as partof a broader shift toward compensating hospitals and doctors based on carequality, rather than the amount of care they provide.

The announcement also delays planned changes to Medicare’s payment modelfor hip and knee replacement surgeries until March 21.

CMS OACT Releases Projections of National Health Expenditures Data

According to a Feb. 15 report published by Health Affairs, nationalhealth expenditure growth is expected to average 5.6 percent annually over2016-2025. These projections are constructed using a current-law frameworkand do not assume potential legislative changes over the projection period.

The report, authored by the CMS Office of the Actuary (OACT), projectsnational health spending growth to outpace projected growth in GrossDomestic Product (GDP) by 1.2 percentage points. As a result, the reportalso projects the health share of the GDP to rise from 17.8 percent in 2015to 19.9 percent by 2025. Growth in national health expenditures over thisperiod is largely influenced by projected faster growth in medical pricescompared to recent historically slow growth. This faster expected growth inprices is projected to be partially offset by slowing growth in the use andintensity of medical goods and services.

According to the report, for 2016, total health spending is projected tohave reached nearly $3.4 trillion, a 4.8 percent increase from 2015. Thereport also found that by 2025, federal, state and local governments areprojected to finance 47 percent of national health spending, a slightincrease from 46 percent in 2015.

Additional findings from the report:

  • Total national health spending growth: Growth is projected to have been 4.8 percent in 2016, slower than the 5.8 percent growth in 2015, as a result of slower Medicaid and prescription drug spending growth. In 2017, total health spending is projected to grow by 5.4 percent, led by increases in private health insurance spending. National health expenditure growth is projected to be faster and average 5.8 percent for 2018-2025, largely due to expected faster spending growth in both Medicare and Medicaid.
  • Medicare: Medicare spending growth is projected to have been 5.0 percent in 2016 and is expected to average 7.1 percent over the full projection period 2016-2025. Faster expected growth after 2016 primarily reflects utilization of Medicare covered services increasing to approach rates closer to Medicare’s longer historical experience. This results in Medicare spending per beneficiary growth of 4.1 percent over 2016-2025 (compared to 1.6 percent growth for 2010-2015).
  • Private health insurance: Spending growth is projected to have slowed from 7.2 percent in 2015 to 5.9 percent in 2016, a trend that is related to slower growth in private health insurance enrollment. Spending growth is projected to increase to 6.5 percent in 2017, due in part to faster premium growth in marketplace plans related to previous underpricing of premiums and the end of the temporary risk corridors.
  • Medicaid: Projected spending growth slowed significantly in 2016 to 3.7 percent, down from 9.7 percent in 2015, largely reflecting slower growth in Medicaid enrollment. Spending growth is expected to accelerate and average 5.7 percent for 2017-2025 as projected per-enrollee spending growth rises over that timeframe. Underlying the faster per enrollee growth is the increasingly larger share of the Medicaid population who are aged and disabled and who tend to use more intensive services.
  • Medical price inflation: Medical prices are expected to increase more rapidly after historically low growth in 2015 of 0.8 percent to nearly 3 percent by 2025. This faster projected growth in prices is influenced by an acceleration in both economy-wide prices and medical specific prices and is projected to be partially offset by slowing growth in the use and intensity of medical goods and services.
  • Prescription drug spending: Drug spending growth is projected to have been 5.0 percent in 2016, following growth of 9.0 percent in 2015, mainly due to slowing use of expensive drugs that treat hepatitis C. Growth is projected to average 6.4 percent per year for 2017-2025, influenced by higher spending on expensive specialty drugs.
  • Insured Share of the Population: The proportion of the population with health insurance is projected to increase from 90.9 percent in 2015 to 91.5 percent in 2025.

To see the report,click here.

3. Courts

Anthem Files Lawsuit to Preserve Cigna Deal, After Cigna Files Suit

Anthemis suingto block Cigna from terminating its merger agreement. The insurance giantannounced Feb. 15 that it filed a lawsuit seeking to keep alive what hasbecome essentially a $54 billion hostile takeover of Cigna.

Cignafiled a lawsuiton Feb. 14 seeking to terminate the deal and asking for $13 billion indamages, in addition to a $1.85 billion breakup fee.

Anthem argues that Cigna has aggressively worked to derail the dealthroughout the integration efforts and during the Justice Department’ssuccessful effort to block the deal on antitrust grounds.

“Cigna’s lawsuit and purported termination is the next step in Cigna’scampaign to sabotage the merger and to try to deflect attention from itsrepeated willful breaches of the Merger Agreement in support of sucheffort,” Anthem said in a statement.

Aetna’s proposed $37 billion acquisition of Humana has also been blocked bya federal judge. On Feb. 14, the parties mutually announced that they werecalling off the merger.

4. State Activities

California Lawmakers Introduce Single-payer Legislation

California lawmakers introduced legislation Feb. 17 to create asingle-payer health care system in the state as a way of retaining thegains made under Obamacare and to further expand insurance coverage to allresidents, including those living here illegally.

The bill, titled Californians for a Healthy California Act andauthored by state Sen. Ricardo Lara, would create a health caresystem administered by the state that would allow patients to choose theirown doctors and hospitals. The current version of the bill does not detailhow such a system would be funded. Lara said the financing piece will comelater and will rely on pooling the resources the state currently spends onhealth care.

California and other states—most recently Vermont and Colorado—have madeprevious unsuccessful attempts to enact or pass a single payer healthsystem. But Lara said that with congressional Republicans set to dismantlethe ACA, this time is different.

Florida: Gov. Scott Proposal Reduces Hospital Charity Funding

Florida Hospital and Orlando Regional Medical Center—the hospitals thattreated the Pulse Nightclub shooting victims last summer—do not provideenough charity care to keep additional Medicaid dollars under the budgetspending proposal being pushed by Gov. Rick Scott.

Scott wants to reduce Orlando Regional Medical Center’s Medicaid charityfunding by nearly $38 million. Florida Hospital would lose just under $50million, according to a spreadsheet shared by the agency. No hospital wouldexperience bigger reductions in charity care than the two medicalfacilities.

In all, Scott’s budget reduces hospital funding by about $930 million inthe upcoming fiscal year, which begins July 1. About $300 million comesfrom eliminating additional Medicaid payments sent to hospitals forproviding charity care. Scott’s proposal would eliminate the additionalcharity payments to any facility with less than a 67 percent ratio ofcharity care to operating margin—the average margin at for-profitfacilities.

Louisiana: Health Department Releases State’s Medicaid Expansion Figures

An estimated 400,635 people have received coverage under Louisiana’sexpanded Medicaid program, according to new figures from the state’s healthdepartment. Since expansion, the rate of uninsured dipped to 12.5 percentin 2016 from 21.7 percent in 2013.

New Jersey: Gov. Christie Makes Progress on Drug Addiction Reform Plan

New Jersey Gov. Chris Christie signed the centerpiece of his new drugaddiction reform plan into law, which will limit initial opioidprescriptions to a five-day supply and mandate insurance coverage forinpatient drug treatment. New Jersey will now have the most stringent lawon limiting opioid prescriptions. Several other states, includingMassachusetts and New York, have adopted a seven-day limit. The governoralso suggested he plans to attack drug addiction on a much larger scale,saying he discussed the legislation with President Donald Trump at a lunchrecently.

Pennsylvania: Gov. Wolf Stresses Importance of Expansion on Substance Abuse Treatment

Pennsylvania Gov. Tom Wolf, in a letter to Senate Finance CommitteeDemocrats, stressed the importance of maintaining coverage levels andaccess to substance abuse treatment in any ACA replacement plan. Wolf’sletter emphasizes the importance the ACA and Medicaid expansion has had inaddressing the opioid abuse epidemic in his state by dramatically expandingaccess to substance abuse treatment. He noted that Pennsylvania is facing a$3 billion deficit and said if the federal funding match from Medicaidexpansion goes away, it could “quite literally devastate our state from afinancial perspective or force our state to make impossible decisions aboutwhich Pennsylvanians are entitled to quality health care.”

5. Regulations Open for Comment

CMS Proposes Rule for Prosthetics and Orthotics Suppliers

On Jan. 11, CMS issued a proposed rule that would implement statutoryrequirements and specify: the qualifications needed for practitioners tofurnish and fabricate prosthetics and custom-fabricated orthotics, and forqualified suppliers to fabricate prosthetics and custom-fabricatedorthotics; accreditation requirements that qualified suppliers must meet inorder to bill for prosthetics and custom‑fabricated orthotics; requirementsthat an organization must meet in order to accredit qualified suppliers tobill for prosthetics and custom-fabricated orthotics; and a timeframe bywhich qualified practitioners and qualified suppliers must meet theapplicable licensure, certification and accreditation requirements. Thisrule would also remove the exemption from quality standards andaccreditation that is currently in place in accordance with Section1834(a)(20) of the Act for certain practitioners and suppliers who furnishor fabricate prosthetics and custom‑fabricated orthotics. In addition, thisrule also includes authority for the Centers for Medicare & MedicaidServices (CMS) to revoke the Medicare enrollment of Durable MedicalEquipment, Prosthetics, Orthotics and Supplies (DMEPOS) suppliers that submit claims for items that donot meet the requirements of the statute and this proposed rule.

Only qualified practitioners who furnish or fabricate prosthetics andcustom‑fabricated orthotics and qualified suppliers that fabricate or billfor prosthetics and custom‑fabricated orthotics would be subject to theserequirements.

CMS will accept comments on the proposed rule until March 13, 2017, andwill respond to comments in a final rule.

To see the proposed rule,click here.

FDA Releases Draft Guidance for Interchangeable Biosimilars

On Jan. 17, FDA outlined the criteria companies must meet to get a copycatbiologic deemed interchangeable with its branded counterpart, acertification that paves the way for the cheaper products to beautomatically substituted at the pharmacy level under state laws.

To get this designation, a biosimilar sponsor must show that its productcan be expected to produce the same clinical result as the branded biologicin any given patient, for all of the drug’s approved uses, and that thereare no risks if a patient is switched back and forth between theinterchangeable biosimilar and the branded biologic,per draft guidancereleased by FDA.

Interchangeable biosimilars are expected to offer greater savings to thehealth system than biosimilars that lack this designation. Without theinterchangeability designation a doctor must proactively write aprescription for the biosimilar.

The guidance outlines the types of studies and scientific data thatcompanies will need to submit to FDA to get an interchangeable designation.When companies seek that designation, FDA recommends they seek approval forall of the branded biologic approved uses.

FDA is requesting comments on the draft guidance as well as a number ofquestions outlined in aFederal Register notice. FDA wants to know how it should regulate manufacturing changes ofinterchangeable products that occur after approval. The agency also wantsto know how it should handle interchangeable designations if a brandedbiologic gets another use approved for the drug, after the interchangeablebiosimilar is cleared by FDA.

FDA Releases Draft Guidance on Off-Label Drug Communication

On Jan. 17, FDAissued draft guidancethat gives drug and device companies more flexibility to communicateoff-label information about their products and avoid charges ofmisbranding. The new policy allows companies to promote a drug or devicewith information not on the agency-approved label as long as thatinformation is truthful and non-misleading and is consistent withFDA-approved labeling.

Companies have asked FDA for clarity on marketing policies after a 2012U.S. Court of Appeals decision ruled that under the First Amendment thegovernment could not pr