Washington Healthcare Update

May 8, 2017

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This Week: House passes Repeal/Replace bill…Senate says it will do its own bill…Congress passes spending bill to fund the rest of the fiscal year.

1. Congress



2. Administration

3. Other

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress


House, Senate Pass $1 Trillion Spending Bill to Avoid Government Shutdown

Last week, the House and Senate passed a $1 trillion omnibus spending billthat would keep the government running until September. The bill passed theHouse in a 309-118 vote, with four members abstaining and passed the Senatewith a vote of 79-18. It will now head to President Trump’s desk. Congresswas supposed to have finished its spending work for the fiscal year sevenmonths ago.

Lawmakers on both sides of the aisle are celebrating the deal, which wouldachieve a more sweeping update of federal funding levels than they hadpreviously anticipated possible. The compromise struck over the weekendprovides $2 billion in new spending for the National Institutes of Healthand permanently extends expiring health insurance benefits to retired coalminers.

A majority of Republicans ultimately agreed to support the bill and lookahead to the fiscal 2018 appropriations process, which the White House hassaid would be more GOP-driven.

What ACA Provisions Are Inside Congress’ $1 Trillion Spending Bill

The fiscal 2017 spending deal contains several provisions related to theAffordable Care Act. First, it continues to block Congress from using CMS’sprogram money to fund the Affordable Care Act’s risk corridor program.Several insurers have sued over the situation, and plans that are stillowed money from HHS have until May 12 to join Health Republic’s classaction against the government.

The funding agreement also does not provide money for the ACA’scost-sharing reductions (CSRs) despite urging from wide-rangingstakeholders. The White House has said the administration will continuemaking the CSR payments on a monthly basis, indefinitely.

The spending bill also includes several other oversight demands related tothe ACA. For example the bill requires CMS notify Congress two businessdays before it releases grants opportunities; requires the administrationdetail all ACA-related spending; and requires publication of the number ofemployees and contractors related to administering the ACA.

Lawmakers released explanatory language weighing in on several CMS issues,including calling for a full audit of air emergency transport, mitigationof the reduced rates for critical access hospitals and a loosening ofagency policy on hospitals that did not get their fair share of incentivepayments through the Medicare Electronic Health Records Incentive Program.

The following concerns were highlighted over CMS policies:

GAO audit of air ambulance systems: The bill mandates detailed analysis by the GAO on all emergency airtransport services and costs and payment systems. Lawmakers say the auditshould cover reimbursements and reimbursement rates for private insurers,Medicare, Medicaid and other government-sponsored programs. GAO, which isalready working on a report on air ambulance services and payments, shouldmerge both reports and work with the appropriations committees in House andSenate to decide on the methods and scope of the required analysis,appropriators say.

Mitigate new payment reductions to critical access hospitals:Congressional appropriators address industry worries about the proposedrevocation of “critical access hospital” classification from any hospitallocated less than 10 miles from another hospital and the reducedreimbursement rate for CAHs from 101 percent to 100 percent. Lawmakersinstruct CMS to mitigate losses from the proposed rate cut.

Meaningful use and Medicare incentive payments: CMS should reconsider letting hospitals appeal federal decisions not to payMedicare incentive payments if these hospitals were eligible for theincentive payments. The legislation notes that CMS blocked or adjusted thepayments due to eligible hospitals—after the hospitals proved they had metCMS requirements—through administrative errors and said hospitals should beallowed to appeal the decisions.

Build out telehealth options for diabetic Medicare beneficiaries:CMS should expand the Medicare Diabetes Prevention Program beginning inJanuary 2018, and needs to encourage use of telehealth services for theprogram in future rules.

Severe wounds:CMS needs to backdate the implementation of the “severe wounds” provisionof the Consolidated Appropriations Act of 2016 to an effective date of Dec.18, 2015.

340B drug program:The Health Resources and Services Administration must update its websitefor the 340B drug program and notify the House and Senate appropriationscommittees on its status within 90 days.

New grants for rural health: The spending deal would appropriate $65.6 million in grants for the RuralHealth Outreach Program, and $2 million for HRSA to develop a pilot programwith the Delta Regional Authority to support small rural hospitals. HRSAalso would get $2 million to disburse in grants to critical accesshospitals in rural communities with high poverty, unemployment and drugabuse.

Telehealth:Lawmakers earmark $1.5 million for telehealth, and instruct HHS to set up atest site for telehealth—preferably a public medical university that issuccessful, provides a high volume of telehealth services every year andreaches out through telehealth to medically underserved areas with highrates of chronic illness and poverty. HHS should make sure the medicalcenter chosen has a financially self-sustaining telehealth system as well.The bill also sets up “not less than” $7.3 million for the TelehealthNetwork Grant Program, with HRSA instructed to give preference to smallhospitals in poor communities with high rates of unemployment and drug use.

For more information, clickhere.

Omnibus Spending Bill Guarantees Medicare Cuts Left to Administration If IPAB Triggered

The fiscal 2017 spending bill guarantees the Trump administration would bein control of Medicare cuts if the Independent Payment Advisory Board(IPAB) is triggered this year, because it defunds IPAB. Drugmakers and drugplans would be especially exposed to IPAB-driven pay cuts, but lobbyistsand analysts say they do not know what the administration would do if giventhe power to make major changes to Medicare drug reimbursement policy.

As in past spending legislation, the 2017 omnibus spending bill eliminatesfunding for IPAB. The difference this year is that there is a chance theboard will be triggered in 2017. The CMS actuary was supposed to determineby April 30 whether IPAB is triggered, but that determination is notexpected until this summer. The actuaries’ determination coincides with theMedicare Trustees’ annual report on the state of the program, which hasbeen released over the summer for the past three years.

Under the law, IPAB recommendations, which would be unusually difficult forCongress to block, may not ration care, raise premiums, increase costsharing for beneficiaries or restrict benefits or eligibility. Also,hospitals and hospices are exempted from cost-cutting proposals until 2020.That leaves a big target on Medicare Advantage and Part D, and the law evensingles out those programs.


Senate Finance Committee Delays CHIP Hearing

The Senate Finance Committee is going to delay this week’sscheduled hearingon reauthorizing the Children’s Health Insurance Program (CHIP) in light ofthe chamber’s work on Obamacare repeal. The hearing was set for Tuesdaymorning.

The Finance Committee will also push back its work on legislation changingthe way Medicare handles chronic disease (S. 870).

Sens. Grassley, Casey Introduce Bill to Expand Off-Label Coverage of Part D Drugs

On May 3, Sens. Charles Grassley (R-IA) and Bob Casey (D-PA) introducedlegislation to expand off-label coverage of drugs in Medicare Part D.

Off-label is an FDA term that Medicare law does not use. Instead, Medicarecovers “medically accepted indications” according to Medicare Rights CenterSenior Counsel for Education & Federal Policy Casey Schwarz.

Medicare defines medically accepted indications more narrowly in Part Dthan in Part B. Medicare considers FDA-approved indications to be medicallyaccepted across all its programs. In addition to the FDA label, Part Drelies on three compendia for determining which drugs the federalgovernment will cover and reimburse. In contrast, the federal governmentuses more than three compendia for off-label drug indications for Part B.However, their bill does not deal with peer-reviewed medical literature.Part B lets beneficiaries cite medical journals as evidence of medicallyaccepted indications for all drugs, while journals are available forevidence in Part D only for chemotherapies.

“The body of knowledge available to prescribers currently is limited bylaw,” Grassley said. “Our bill updates the available information for thebenefit of doctors and patients who should have access to the most completemedical literature available.”

Although the senators do not mention broader coverage, the goal of the billseems to be to make it easier for patients to get insurance companies tocover drugs taken for conditions for which they have not been approved.

For more information,click here.

Senate HELP Committee to Mark Up FDA User Fee Bill

The Senate HELP committee plans to mark up the FDA user fee reauthorizationon May 10. The date is tentative because an official markup has not beennoticed.

Congress must reauthorize FDA’s user fee programs for brand and genericdrugs, biosimilars and medical devices by the end of September. FDA getsnearly half of its annual funding from these programs, which help it reviewand approve drugs and medical devices faster.

2. Administration

HHS Task Force Finds FDA Cybersecurity Oversight Is Limited

Health care providers complain that device manufacturers treatcybersecurity as an “afterthought,” according to a draft report sent toCapitol Hill on May 3. The report also says that FDA’s device cybersecurityoversight continues to be limited to patient safety and does not extend toprivacy and security issues.

The HHS Health Care Industry Cybersecurity Task Force report lays out howfederal agencies, including FDA, and device manufacturers can monitor andmake improvements to device cybersecurity risk management. The reportpushes for more transparency between manufacturers and device users,recommends manufacturers consider cyber risks throughout a product’slifecycle and proposes establishing a device-specific Medical ComputerEmergency Readiness Team (MedCERT).

The report—a result of discussions between industry and governmentrepresentatives—cites research company KLAS’s February survey in whichhealth care providers reported that “many device manufacturers treatsecurity as either an afterthought or that the attention is woefullyinadequate.”

The task force said while FDA took steps to address device cybersecurity bypublishing a December 2016 final guidance on postmarket management ofmedical device cybersecurity, the agency’s oversight remains limited topatient safety.

One solution to varying regulations and oversight would be harmonization ofcybersecurity frameworks, which the task force says would help industrywith compliance.

The task force calls for manufacturers and developers to create what itcalls a bill of materials, which would describe a device’s equipment,software, open source and materials along with known risks associated withthose components. It also insists industry actively participate ininformation-sharing programs, and adopt and engage in coordinatedvulnerability disclosure that is consistent with recognized standards.

The challenge of ensuring the security of medical devices and health caredata will only grow as the health care industry’s reliance on the Internetof Things (IoT)—which includes nonregulated devices such as wearables—aswell as precision medicine increases, the report states.

HHS Secretary Price Meets With Groups on Drug Pricing

On May 1, HHS Secretary Tom Price met with patient and disease advocacygroups in the first of a series of meetings on drug prices.

Price is expected to meet with additional groups focused on drugprices. He is soon expected to hold a meeting with PhRMA on patientassistance programs that help consumers afford medicines not fully coveredby their insurer.

Groups attending the meeting included the National Health Council, whoseCEO, Marc Boutin, presented the group’s recently releasedproposalson how to reduce health care costs. Other groups in attendance includedFriends of Cancer Research, the Multiple Sclerosis Coalition, the NationalAlliance on Mental Illness, the Cystic Fibrosis Foundation, JDRF, theAmerican Diabetes Association and the Alzheimer’s Association.

OMB Reviews Proposed Rule for Long-Term Care Facilities

The White House Office of Management and Budget is reviewing a CMS proposedrule to revise a highly contentious provision on arbitration contracts thatwas included in updated requirements for long-term care facilities—mainlynursing homes—to participate in Medicare. It is unclear how CMS’s proposal,sent to OMB for review on April 26, would revamp the requirements, whichbanned predispute arbitration contracts.

The ban on predispute arbitration contracts, finalized in late September,was backed by consumers but opposed by nursing homes. The final rule on theupdated requirements for long-term care facilities stated that, as of Nov.28, 2016, long-term care facilities could not require residents to signpredispute arbitration agreements as a condition of admission to thefacility. CMS officials at the time said the change was important tostrengthen the rights of residents and their families. But the nursing homelobby said CMS stepped beyond its authority.

The American Health Care Association sued CMS over the provision lastOctober, and asked for an injunction to keep the agency from enforcing theban when the rule went into effect on Nov. 28. The court granted thatrequest. The case was put on hold earlier this year.

3. Other

FDA May Need to Weigh In to Solve Biosimilar Dispute, Supreme Court Justices Say

Aetna shed more than 70 percent of its individual market customers in thefirst quarter of this year after largely abandoning Obamacare exchanges,but the company still expects to lose money on the remaining members.

The insurer had 255,000 individual market customers at the end of the firstquarter, down from nearly 1 million at the close of last year. However,Aetna officials said the remaining members are more expensive thananticipated, and the company is setting aside $110 million to guard againstanticipated losses on that business this year.

Aetna pulled out of all but four state exchanges this year. The insureralready said it will pull out of Iowa for 2018, but has yet to announceplans for other markets. Aetna CEO Mark Bertolini said the decision to cutback has been ratified by market developments.

While Aetna has turned on the Obamacare markets, its other lines ofgovernment business continue to boom. The first quarter of this year markedthe first time that government premiums—primarily Medicare andMedicaid—exceeded commercial revenues. The government share of premiums isup from 38 percent prior to full enactment of the Affordable Care Act in2014.

Eli Lilly Investigated by State Attorneys General Over Insulin Pricing

Attorneys general in Washington state and New Mexico are investigating EliLilly over the pricing of its insulin products, the company disclosed in anSEC filingMay 1.

The Washington state investigation is also focused on the company’srelationships with pharmacy benefits managers.

The disclosure follows news in January of a class-action lawsuit thataccuses Lilly, along with Sanofi and Novo Nordisk, of conspiring to driveup the cost of insulin. The suit said the companies raised the list pricesof their products by more than 150 percent in lockstep in order to offerlarger rebates to PBMs as a quid pro quo for patient business. As a resultneither drugmakers nor PBMs have to lower the net cost of the product.

Three additional class action lawsuits have since been filed against thedrug companies and PBMs making similar accusations. Lilly said it believesthe lawsuits and claims are without merit and will defend them vigorously.

4. State Activities

Arkansas: Arkansas Legislature Signs Off on Medicaid Expansion Changes

The Arkansas legislature has approved a bill paving the way for the stateto institute several changes to its Medicaid expansion, including adding awork requirement.

Lawmakers in the state House and Senate took final votes May 3 to pass thelegislation, which also seeks to cap expansion eligibility at the federal poverty lineinstead of 138 percent FPL, and change how the state determines whethersomeone is eligible for the program.

The revisions are expected to move roughly 60,000 people off expandedMedicaid rolls. More than 300,000 state residents were covered through theprogram as of March.

Gov. Asa Hutchinson’s administration still needs to receive permission fromCMS to make the revisions. Several other states are seeking to impose workrequirements, including Arizona, Kentucky and Wisconsin.

Indiana: Indiana Medicaid Expansion Blocks Out Thousands

Tens of thousands of low-income adults in Indiana who tried to sign up forthe state’s Medicaid expansion program were never enrolled or were kickedoff benefits for failing to make a monthly payment, according to a newindependent study commissioned by state officials.

Between February 2015 and November 2016, more than 46,000 applicantsearning above the poverty line were never enrolled because they didnot make their first payment. Another 13,000 Indiana beneficiaries weredisenrolled from the Indiana program after failing to pay.

Thereport from the Lewin Group specificallyexamines the HSA-like accounts that are a central component of theexpansion program Vice President Mike Pence implemented as Indiana governorthat could become a national model.

The Indiana program sets different rules for people above and below thepoverty line. People earning above that threshold are refused coverage ordisenrolled from the program for failing to contribute toward their HSAaccounts each month. People below the poverty line who fail to pay premiumsare moved into a less generous benefits package.

Monthly payment amounts range from $1 to $100 per person depending onincome and household size. Once enrolled, benefits could be cut off forfailing to pay after a 60-day grace period.

The HSA idea has been eyed by other Republican governors who are trying toincorporate more conservative elements into their Medicaid expansionprograms. But Democrats have criticized the model as unnecessarilycomplicated for low-income people that ultimately makes it harder to accessmedical care.

The Indiana report found 22 percent of individuals who never enrolled inexpansion because they did not make the first month’s payment citedaffordability concerns, and 22 percent said they were confused about thepayment process. Of those beneficiaries who were disenrolled after failingto make a monthly payment, 44 percent said they could not afford it.

More than 590,000 expansion enrollees were eligible to make monthlypayments during the two-year study period. Of those, 55 percent did notmake a contribution at some point during their enrollment.

5. Regulations Open for Comment

FDA Considers Establishing New Office of Patient Affairs

The FDA is considering establishing a new Office of Patient Affairs thatwould centralize its work on patient involvement in the review and approvalof drugs and medical devices, according to aMarch 14 noticein the Federal Register.

Comments on the new office are due by June 12, 2017.

FDA Proposes 1,000 Medical Devices to Exempt From PremarketNotification

On March 14, FDA took one of its first actions to begin implementing the21st Century Cures Act, byproposingmore than 1,000 medical devices it will exempt or partially exempt from thepremarket review process. The devices on the list are sufficiently wellunderstood and do not present risks that require premarket notification toprovide a reasonable assurance of safety and effectiveness, FDA said. Theagency will finalize the list after a 60-day public comment period.Comments are due by May 15, 2017.

FDA Extends Comment Period on Biosimilar Interchangeability Guidance

FDA is extending the public comment period for itsdraft guidanceoutlining how biosimilar sponsors can demonstrate that their products areinterchangeable with other biologics, following extension requests from toptrade associations.

The agency laid out in a January 2017 draft guidance its first attempt atcodifying the requirements that sponsors must satisfy to demonstrateinterchangeability. The agency said it would make case-by-casedeterminations of interchangeability, but indicated it would requirestudies measuring the impact of switching on clinical pharmacokinetics andpharmacodynamics.

The Biotechnology Innovation Organization (BIO), Pharmaceutical Researchand Manufacturers of America and Covington & Burling all requestedcomment period extensions, according to documents posted onRegulations.gov.

The comment period, which was set to close on March 20, will be extended 60days until May 19.

FDA Submits Interim Final Rule on Long-Delayed Menu Labeling Rule

On April 27, FDA submitted aninterim final ruleto the White House Office of Management and Budget concerning along-delayed menu labeling rule. By submitting an interim final rule to OMBthey are delaying its existing final rule, slated to take effect May 5. Theapparent change in course follows arecent petitionby the National Association of Convenience Stores and the National GrocersAssociation asking FDA to push back the final rule’s effective date.

The move to submit the interim final rule follows years of controversy anddebate about the menu labeling requirements, which stem from alittle-noticed provision in the Affordable Care Act that calls formandatory calorie disclosure on menus at chains that have 20 or morelocations.

The agency’s notice to OMB offers no detail about whether it is seekingother changes to the rule, but says FDA will be taking comments.

CMS Releases Proposed Hospital Pay Rule

In a new proposed2018 Medicare payment rule, CMSsays it will look to cut hospital industry regulations and streamlineoversight, and it’s asking hospitals themselves for help. The agency issoliciting ideas for changes to rules and procedures governing acute-careand long-term care hospitals. The initiative aims to “relieve regulatoryburdens for providers,” as well as promote flexibility and innovation, CMSsaid in a statement.

The new proposed rule would suspend for one year a provision penalizinglong-term care hospitals that receive more than 25 percent of patients froma single acute-care hospital. It would also reduce certain qualityreporting requirements for hospitals that have implemented electronichealth records.

CMS projects the rule would increase Medicare spending on inpatienthospital services by $3.1 billion in 2018, with operating payments tohospitals increasing 2.9 percent. Long-term care hospitals’ Medicarepayments are projected to decrease by $173 million, or 3.75 percent, overthe same period.

Comments on the rule must be submitted no later than 5 p.m. EDT on June 13,2017.

CMS Proposes 2018 Payment and Policy Updates for Medicare HospitalAdmissions

CMS is offering hospitals a 90-day meaningful use reporting period in 2018,according to aproposed payment rulereleased April 14.

The first major payment regulation released under HHS Secretary Tom Pricemarks a change from the back-and-forth over electronic health recordsmeaningful use requirements seen under the Obama White House. The previousadministration would typically propose a yearlong reporting period, thenscale it back at the last minute after intense lobbying pressure. As aRepublican congressman from Georgia, Price often pushed the Obamaadministration hard for 90-day meaningful use reporting periods.

In connection with the 21st Century Cures Act, CMS also isproposingto remove from meaningful use clinicians who see most of their patients atambulatory surgery centers.

Price and CMS are also changing previously finalized requirements fromelectronic clinical quality measures. Under the proposed rule, hospitalscan select six measures and report on them for the first three quarters of2018.

For more information,click here.

CMS is Accepting Measure Submissions for the Advancing Care InformationPerformance Category until June 30

CMS is still accepting measures for the Advancing Care Informationperformanc