Washington Healthcare Update

May 22, 2017

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This Week: Chronic care gets attention…FDA user fee legislation continues to move toward reauthorization…more on repeal and replace.

1. Congress



2. Administration

3. Other

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress


House Energy and Commerce Subcommittee Advances FDA User Fee Bill

On May 18, the House Energy and Commerce Health Subcommittee moved forward,on a voice vote, abillreauthorizing FDA user fee programs for drugs and medical devices.

The subcommittee approved four bipartisan amendments, includingonedesigned to increase generic drug competition to address price hikes ofolder drugs like Mylan’s EpiPen. Among other things, the amendment wouldreward new generic competitors with 180 days of marketing exclusivity.

The panel also approved anamendmentthat would increase penalties for selling or distributing counterfeit drugsand anamendmentthat would update FDA’s medical device inspection process to a risk-basedprogram.

Finally, lawmakers approved anamendmentthat would establish a category of FDA-approved over-the-counter hearingaids. The idea is to increase access to and affordability of hearing aidsfor those with mild to moderate hearing loss.

Days before the House marked up the FDA user fee reauthorization bill, HHSSecretary Tom Price was pushing lawmakers to increase the fees paid byindustry to cover 100 percent of medical product reviews, as proposed inPresident Donald Trump’s skinny budget. In the Senate, where the committeehas already moved on legislation, the reaction was that the proposal wastoo late. The Senate HELP Committee marked up its version of the user feepackage to the Senate floor, 21-2, on May 11. Riders attached to the Senateversion of the bill address drug importation and counterfeiting,over-the-counter hearing aids, risk-based device inspections, real-worldevidence and pediatric drug development, among other things. User feesaccount for about half of the FDA’s annual budget.

The subcommittee also advanced on a voice voteH.R. 1222, a bill that would enhance research and surveillance at CDC for congenitalheart disease and award grants for further study on the condition. And itadvancedH.R. 2410, which would increase research, surveillance and prevention for sicklecell disease.

Director Collins Urges Congress to Continue Stable Funding for NIH

In testimony before the House Appropriations Subcommittee on Health on May17, NIH Director Francis Collins said that stable funding for his agency isessential to continue vital research, hinting that looming cuts in theTrump administration’s budget could create a roller coaster effect.Collins’ remarks came a month after President Donald Trump proposedslashing spending on the agency by $5.8 billion.

Rep. Tom Cole, chairman of the House appropriations subcommittee thatoversees the NIH budget, reiterated his opposition to the proposedcuts—calling them “penny wise and pound foolish.” Cole said they wouldstall progress on recent investments and could potentially discouragepromising scientists from entering or remaining in biomedical research.


Senate Finance Committee Approves the CHRONIC Care Act

On May 18, the Senate Finance Committee unanimously approved a bipartisanbill that would alter the way Medicare treats chronic illnesses.

The CHRONIC Care Act (S. 870) provides more home care options by extending Medicare’s Independence atHome program, enhances team-based care by making changes to accountablecare organizations and allows greater flexibility for Medicare and MedicareAdvantage plans to pay for telemedicine services, including stroke care.

The legislation, more than two years in the making, allows Medicare to payfor remote stroke diagnosis and treatment, accountable care organizationsto provide telemedicine and Medicare Advantage plans to offer telemedicineas a supplemental benefit, as well as pays for dialysis treatment at homethrough telemedicine.

The measure would allow patients to be assigned to ACOs at the beginning ofa year and let providers pay patients $20 to receive certain primary careservices with them.

The four telemedicine-related sections of the bill would increase Medicarespending by $150 million over a decade, according to a preliminaryCBO estimate. In the past, high CBO scores prevented similar efforts from advancing.

It is unclear when the bill will be considered on the Senate floor or howthe House will address the matter.

Sens. Isakson, Casey Propose Sweeping Changes to OTC Drug Regulation

Sens. Johnny Isakson (R-GA) and Bob Casey (D-PA) are circulating a draftbipartisan plan that proposes the most sweeping changes in more than fourdecades to the FDA’s process for regulating over-the-counter drugs.

FDA, industry groups and health experts say the current regulatory regimeis out of date. Under thenew proposal, productapprovals would be streamlined so FDA would no longer be required to dorulemaking for each therapeutic class. Instead, the HHS secretary couldadministratively establish standards for each OTC drug type.

The change is expected to not only speed up the process for creating OTCdrug standards but could improve the safety of products already beingmarketed. Under the current rulemaking approach, it may take FDA severalyears to update standards or labeling of an OTC drug even if the agencyidentifies a safety or efficacy problem or pulls medicines off the market.

The bill would also create a new user fee program for OTC drugs, whichwould be analogous to the fees used to help fund prescription drugapprovals. The new fees would help FDA cut down on a backlog of reviews ithas to perform on ingredients in products that have been on the market fordecades.

House Energy and Commerce Committee members have also been working onsimilar legislation.

Senators Propose Expansion of Substance Abuse Care

On May 17, senators unveiled bipartisan legislation that would easelongstanding federal restrictions on Medicaid reimbursement for substanceabuse treatment centers in an effort to expand access to care amid anationwide opioid epidemic. The bill, the Medicaid Coverage for AddictionRecovery Expansion (CARE) Act, was introduced by Sens. Rob Portman (R-OH),Shelley Moore Capito (R-WV) and Dick Durbin (D-IL), among others.

The proposal would allow substance abuse treatment centers with up to 40beds to be reimbursed by Medicaid for up to 60 consecutive days. Theproposal would roll back a law prohibiting Medicaid from paying for patientcare at facilities with more than 16 beds. That law, known as theInstitutes for Mental Diseases exclusion, was originally meant todiscourage institutionalization, but health experts say it has created amajor barrier to care and a severe nationwide shortage of psychiatric beds.Under the bill, Medicaid would reimburse these facilities only for patientsbeing treated specifically for substance abuse at credentialed residentialaddiction treatment facilities.

Lawmakers Reintroduce the Fair Drug Pricing Act

Sen. Tammy Baldwin (D-WI), Sen. John McCain (R-AZ) and Rep. Jan Schakowsky(D-IL) are resurrecting the Fair Drug Pricing Act, which would require drugmakers to submit a report 30 days before they raise the prices, by morethan 10 percent in one year or 25 percent in three years, of certain drugsthat cost at least $100; and to disclose manufacturing, R&D andmarketing costs, as well as net profits associated with the drugs.

The legislation includes new requirements to target loopholes. Forinstance, some drug makers have openly discussed plans to keep price hikesjust below 10 percent to avoid triggering similar thresholds—hence thethree-year window.

U.S. prescription drug spending reached a record high of $425 billion in2015, accounting for almost 16.7 percent of all U.S. health care spending,with expectations that spending will surpass $600 billion by 2020.

For more information,click here.

Senate Health Care Working Group Focusing on Ways to Stabilize Individual Marketplace

On May 16, Sen. Ron Johnson (R-WI) said that the Senate’s health careworking group is focusing on ways to immediately stabilize the individualmarketplace, such as continuing the ACA’s cost-sharing reduction (CSR)payments, in advance of a long-term solution to replace the Affordable CareAct.

The Trump administration has not committed to making the CSR paymentsbeyond this month, and many insurers have threatened to exit the exchangesin 2018 if the CSRs are not guaranteed.

Johnson said the working group is zoning in on a short-term solutionbecause insurers need to file rates soon for 2018.

In addition to demanding continued funding of the CSRs, health plans havealso called for an extension of the ACA’s reinsurance program, which endedin 2016; payment by the federal government of the risk corridor money owedto insurers; and changes to the risk adjustment program, including allowingstates to calculate payments by region rather than statewide. Insurers havealso lobbied Congress to permanently repeal the health insurance tax, andto revise or repeal the so-called Cadillac tax on high-cost plans.

Sen. John Thune (R-SD) said a health bill will not pass the Senate unlessthe tax credits in the House version are redesigned to help lower-incomeand older individuals. Thune said senators have discussed designing taxcredits that are geographically adjusted in addition to being age andincome adjusted, a policy called for by various stakeholders, includingAARP, multiple insurance plan lobbies and the American Medical Association.

Thune said Republicans are waiting on an updated Congressional BudgetOffice score of the House-passed American Health Care Act to drive theirchanges to the tax credits. He said individuals need more choices for usingtheir tax credit than what the ACA subsidy allows and tying the credits toage or income is a better way to design them.

Senators Urge OMB to Take Action on Drug Importation

In a May 15letter to OMB Director Mick Mulvaney, a bipartisan group of senators encouraged executive oradministrative action to reduce the financial burden of prescription drugs.

Sens. Chuck Grassley, Amy Klobuchar and John McCain said the administrationcan make use of a 2003 law that allows the FDA to green light importationof less costly medications from Canada if the HHS secretary certifies thepractice would not pose added public health risks while resulting in asignificant reduction in costs.

The lawmakers said Mulvaney should work with HHS Secretary Tom Price toimmediately begin allowing importation of prescription drugs from Canada ininstances in which a drug is off patent or no longer marketed in the UnitedStates by the innovator company, has undergone a significant andunexplained price increase, has no direct competitor on the market and isproduced abroad by a brand-name company that developed the drug or by awell-known generic company that commonly sells pharmaceuticals in theUnited States.

The lawmakers said the policy could be limited so it does not hurtcompanies that developed the new medications. They also urged Mulvaney toexplore other options for executive actions on drug pricing.

The letter came after the OMB director suggested that the government shouldlook at increasing the levels of discounts drug companies provide topatients in Medicare Part D to make those rebates more on par with thoseprovided to Medicaid.

2. Administration

HHS Further Delays Medicare Bundled Payments, 340B Drug Program Changes

HHS is postponing a pair of Medicare bundled payment programs for thesecond time, according to afinal ruleposted May 18.

The notice delays the start of payment models for knee and hip replacementsand cardiac care until Jan. 1, and hints at the possibility of making morepolicy changes to the efforts.

HHS initially delayed the bundled payments in March, citing the Trumpadministration’s freeze on pending Obama-era rules and regulations. Thisadditional delay gives providers more time to prepare and allows the agencyto consider any final tweaks. HHS Secretary Tom Price has in the pastcriticized mandatory demonstration projects like bundled payments for hipand knee replacements.

In a separatefinal rule, HHS also postponed changes to the 340B Drug Program. The newparameters—which were tentatively scheduled to take effect on May 22—set aceiling price for participating drug companies and clarified how civilmonetary penalties would be imposed. Those policies will now start on Oct.1.

CMS Releases Federal Funding Methodology for Basic Health Program

On May 17, CMS released an informational bulletin to states providing moreinformation specifying the final values for the factors needed to calculatethe federal BHP payment rates for 2018 that were not included in the 2017and 2018 BHP Payment Notice. It does not alter the payment methodology ordefinitions of any of the factors. In addition, the bulletin reminds statesoperating a BHP for 2018 of the need to make two decisions: (1) whether todevelop a retrospective population health factor (PHF) adjustmentmethodology; and (2) whether to use the 2017 or 2018 qualified health plan(QHP) premiums as the basis for calculating the 2018 BHP federal payments.

The informational bulletin can be accessed onMedicaid.gov.

For more information on BHP,click here.

CMS Announces Regions for CPC+ Round 2

Strengthening primary care is critical to promoting high-quality,patient-centered care and reducing overall health care costs in the U.S.TheComprehensive Primary Care Plus(CPC+) model is an advanced primary care medical home model that rewardsvalue and quality by offering an innovative payment structure to supportprimary care practices to improve quality, access and efficiency. The modeloffers two tracks with different care delivery requirements and paymentmethodologies to meet the diverse needs of primary care practices.

On May 17, CMS announced the four regions it has selected for theComprehensive Primary Care Plus (CPC+) Round 2 and the health insurancecompanies that will participate. They join the 54 payers in 14 regions thatwere selected for Round 1 last year. The goal with the payment design modelis to improve health outcomes while lowering costs.

Following payer applications and selections, the following four regionswere selected for CPC+ Round 2:

  1. Louisiana: Statewide
  2. Nebraska: Statewide
  3. North Dakota: Statewide
  4. New York: Greater Buffalo Region (Erie and Niagara Counties)

Eligible practices located in these regions may apply from May 18, 2017, toJuly 13, 2017, to participate in CPC+ Round 2.

For more information,click here.

CMS Announces Streamlined Direct Enrollment Process for Consumers Seeking Exchange Coverage

On May 17, CMS announced a new streamlined and simplified direct enrollmentprocess for consumers signing up for individual market coverage throughexchanges that use HealthCare.gov. Consumers applying for individual marketcoverage during the upcoming open enrollment period through directenrollment partners will now be able to complete their application usingone website. This reduces needless regulatory burden for businesses thatprovide direct enrollment services and offers consumers easier access tohealth care comparisons and shopping experiences for coverage offeredthrough HealthCare.gov.

In prior years, consumers who signed up for health coverage using athird-party website were redirected to HealthCare.gov to complete theirapplication. Consumer feedback showed that the process was confusing andmade it harder to finish the application. The new process allows consumersto start and finish their application through the third-party website ofdirect enrollment partners approved to use the proxy direct enrollmentpathway.

For more information,click here.

CMS Offering New Health Coverage Enrollment Option for Small Businesses

On May 15, CMS announced a plan to change the way that small businessesenroll in insurance coverage through the federal exchanges, offeringemployers the help they need to find affordable insurance for theiremployees.

The Federally-Facilitated Small Business Health Options Program (FF-SHOP)was mandated under the ACA but failed to sign up significant numbers ofsmall employers. Out of the nearly 30 million small businesses in thecountry, less than 8,000, just 0.1 percent, of small businesses currentlyparticipate in the FF-SHOPs in 33 states, which cover less than 40,000individuals nationwide. SHOP programs are now defunct and do not provideneeded insurance coverage for small businesses.

As part of the changes CMS intends to propose, employers would still obtaina determination of SHOP eligibility through HealthCare.gov. The move wouldreduce the federal government’s role in health care coverage decisions andmake it easier for issuers to use their own enrollment systems for SHOPplans. Online enrollment would be removed from HealthCare.gov and smallemployers would access coverage through an agent or broker, or an issuer oftheir choice, for plan years beginning on or after Jan. 1, 2018.

The FF-SHOPs exist in states where the SHOP program is operated by thefederal government. Small businesses with SHOP coverage that took effect in2017 would be able to continue using HealthCare.gov for enrollment andpremium payment until their current plan year ends. Some employers thatpurchase SHOP coverage are also able to access the Small Business HealthCare Tax Credit. This option will still be available to small employers whopurchase coverage under the new enrollment approach.

Under the intended approach, state-based SHOPs not using HealthCare.govcould continue to operate as they have previously.

For more information,click here.

3. Other

States File a Motion to Intervene in Obamacare Subsidy Lawsuit

More than a dozen states are trying to intervene in a lawsuit to save a keypiece of Obamacare—cost-sharing subsidies that insurers receive to reducecosts for their customers. The states argue that the Trump administrationis no longer representing their interests in the case, because thepresident has repeatedly threatened to kill the subsidies.

“Immediate loss of CSR funding, with any future funding subject to themyriad uncertainties of the appropriations process, would harm millions ofstate residents and the States themselves,” the states’ motion contends.

The effort is led by New York Attorney General Eric Schneiderman andCalifornia Attorney General Xavier Becerra. All of the states seeking tointervene are led by Democratic attorneys general.

House Republicans sued last year to block funding for the subsidies,arguing that it amounted to an illegal appropriation. They prevailed at thelower court level, but the Obama administration appealed that decision.

The Trump administration has given mixed signals about how it intends toproceed. The White House faces a May 22 deadline to tell the court if theadministration will press forward with the appeal.

If the appeal is dropped, it’s anticipated that the subsidies would go awayimmediately. That could cause insurers to drop out of the Obamacareexchange markets, wreaking havoc for individuals who get coverage throughthe marketplaces.

To read the motion to intervene, clickhere.

Insurance Commissioners Urge Funding for Obamacare Subsidies

State insurance commissioners are urging the White House and Congress tofund Obamacare’s cost-sharing subsidies ahead of a May 22 legal deadlinefor how to proceed on the issue.

The National Association of Insurance Commissioners sentletters to OMB Director Mick Mulvaney and Senate leaders warningthat the Obamacare markets could collapse if the government doesn’t keepmaking the payments and provide stable funding to help cover the healthlaw’s low-income customers.

“Your immediate action is critical to the viability of the individualhealth insurance markets in a significant number of states across thecountry,” reads the letter to Senate leaders.

Last year, House Republicans successfully challenged the legality offunding. The lower-court decision was appealed by the Obama administration.A judge has set a deadline of May 22 for the parties to decide how toproceed in the House lawsuit. If the Trump administration decides to dropthe appeal, it’s expected that the payments to insurers would ceaseimmediately.

Insurance commissioners are also calling on the Senate to provide fundingto help stabilize the individual market. They’re seeking funds that statescan use to create either reinsurance programs or high-risk pools to protectinsurers from the costs of particularly expensive customers.

Earlier this month, the House passed the American Health Care Act, whichincludes $138 billion over a decade in part to help states take care ofresidents with chronic, costly medical needs. The Senate is in the processof drafting its own bill.

Coalition Unveils Package of Proposals to Lower Drug Prices

On May 16, a coalition of insurers, drug makers and pharmacy benefitmanagers unveiled a package of proposals that they say will lower drugprices. Some of the proposals include: pushing FDA to issue guidelines onpreapproval communication between industry and payers; creating a priorityreview voucher for certain generics coupled with expedited FDA review ofthese drugs; exempting value-based arrangements from price reportingrequirements; shielding value-based arrangements from anti-kickback andStark laws; and encouraging data sharing.

The reforms would save taxpayers between $2.6 and $5.6 billion over 10years, while reducing national health expenditures by as much as $36-71billion by 2026, according to the Council for Affordable Health Coverage.

Among those in the coalition are the Biotechnology Innovation Organization,Sanofi and GlaxoSmithKline; PBM interests including the Pharmaceutical CareManagement Association, Express Scripts and CVS Health; insurers Aetna andCigna; and business groups including the U.S. Chamber of Commerce.

The group’s white paper “Prescriptions for Competition, Value, andInnovation: Positive Reforms to Increase Access and Affordability forPrescription Drugs” describes their recommendations.

4. State Activities

California: Covered California to Hold Three-Month Open Enrollment Period

Covered California is preparing for a three-month open enrollment periodthis fall. The open enrollment period for 2018 coverage will run from Nov.15, 2017, to Jan. 31, 2018—the same as last year—despite the federalgovernment’s plans to shorten HealthCare.gov’s enrollment period to sixweeks, Peter Lee, the exchange’s executive director, said at a recentboard meeting.

“Thestabilization rulesvery clearly provide that the state-based marketplaces will be givendiscretion to do what’s right in their states,” Lee said, adding that hisplan to extend California’s enrollment period has received support from CMSofficials.

Covered California officials presented the board with a proposed $314million2017-18 budgetthat includes $105 million for marketing and outreach, as well as nearly$86 million to run the exchange’s service center. The plan also providesfor an 11-month operating reserve of $289 million, which would allow forsome flexibility given the uncertain political climate.

Covered California’s operation is funded primarily by charging health plansa 4 percent assessment on premiums for the 1.4 million people covered inthe exchange. The exchange relies on no state or federal money, other thanthe federal subsidies.

Covered California recently released a paper outlining thekey ingredientsfor its success. A day earlier, the exchange released