Washington Healthcare Update

October 23, 2017

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This Week: Chip funding negotiations fail in the House and continue in the Senate …Deal for market stabilization has no clear path forward … Drug rebatesquestioned and HHS asked to cut waste

1. Congress



2. Administration

3. Reports

1. Congress


Bipartisan CHIP Funding Talks Fail to Reach Agreement

House Republicans and Democrats have failed to agree on how to pay for afive-year funding extension of the Children’s Health Insurance Program(CHIP). Some believe this means the House will likely have to accept thepackage negotiated by Senate Republicans and Democrats.

The Energy and Commerce markup was contentious because Democrats did notsupport the Republican plan for paying for the five-year CHIP legislation.Republicans delayed a floor vote last week to try to negotiate a bipartisancompromise on CHIP offsets. However, both sides say they haven’t reached anagreement. Energy and Commerce Committee Chair Greg Walden (R-OR) saidpreviously that, if the two parties couldn’t agree by Oct. 13, Republicanswould drop the efforts and vote on the CHIP funding bill when they returnnext week.

Senators are keeping CHIP-offset negotiations private and it is not clearhow close they are to a deal or what policies they’re considering to paythe $8.2 billion price of funding CHIP another five years.

States are increasing the pressure on Congress to renew the CHIP programbecause it expired on Sept. 30. While CMS is redistributing unspent fundsto states, states are concerned about running out of money by the end ofthe year.

Energy and Commerce Committee to Hold Hearing on Opioid Epidemic Oct.25

The Committee on Energy and Commerce will hold a hearing on Wednesday, Oct.25, 2017, at 10 a.m. in 2123 Rayburn House Office Building. The hearing isentitled “Federal Efforts to Combat the Opioid Crisis: A Status Update onCARA and Other Initiatives.” Witnesses will be announced and are byinvitation only. The hearing webcast will be available athttp://energycommerce.house.gov/.

Witnesses will include Nora Volkow, director of the National Institute onDrug Abuse; Elinore McCance-Katz, assistant secretary for Mental Health andSubstance Abuse at the Substance Abuse and Mental Health ServicesAdministration; Anne Schuchat, principal deputy director of the Centers forDisease Control and Prevention; Neil Doherty, deputy assistantadministrator of the Office of Diversion Control at the Drug EnforcementAdministration; and Scott Gottlieb, FDA commissioner.

For more information click herehttps://energycommerce.house.gov/hearings/federal-efforts-combat-opioid-crisis-status-update-cara-initiatives.

Energy and Commerce Chair Wants HHS to Cut Waste

House Energy & Commerce Chair Greg Walden (R-OR) in an Oct. 18 letterasked HHS Acting Secretary Eric Hargan to look at how the EnvironmentalProtection Agency and the departments of Commerce and Energy are working tocut down on administrative waste. HHS had told the committee back in Julythat it would cut back on administrative waste by “reimagining” thedepartment and working with the Office of Inspector General and GovernmentAccountability Office to end improper use of taxpayer dollars.

HHS’s draft strategic plan for fiscal 2018-2022, which was released lastmonth, says that as part of the department’s goal to promote effective andefficient management and stewardship, the agency seeks to preserve theMedicare Trust Fund through prevention and detection of waste, fraud andabuse, as well as improper payments, through program integrity tools.

HHS had also asked Energy and Commerce staff to discuss ways the departmentand Congress could work together to “root out waste within HHS.”


Bipartisan Deal on Market Stabilization Issues Has Rough Road toPassage

Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) reached a deal tostabilize health insurance markets for two years; however its road topassage is unclear. Their market stabilization bill, which funds thecost-sharing reduction payments for two years, would amend the 1332 statuteto fast-track the waiver process, broaden the budget neutralityrequirements and set up the pass-through funding structure Alaska recentlyused for its reinsurance waiver.

In addition to the CSR funding, the agreement reallocates some of the moneyrecently cut by HHS from open enrollment outreach and marketing throughexchange user-fee funds; allows expansion of catastrophic or “copper” plansales to anyone; and gives explicit instruction to HHS to write guidancefor 1333 waivers—that allow interstate compacts for the sale of insuranceacross state lines—in consultation with the National Association ofInsurance Commissioners.

Alexander and Murray added language that clarifies states can usepass-through funding for Basic Health Programs—a nod to Minnesota, whichruns a substantial Basic Health Program and in its 1332 reinsurance waiverapplication wanted a full pass-through of BHP funding for MinnesotaCare.CMS approved the waiver and pass-through funding for the state’s exchanges,but not for the Basic Health Plan.

The bill also tweaks the budget neutrality provisions by letting statesestimate financial impacts over the full life of the waiver, instead of onan annual basis.

In the Senate, the chairman of the Finance Committee, Orin Hatch, said heopposed the deal. The president has sent mixed signals, raising concernsabout the CRS payments going to insurers. In the House, Speaker Ryan hasannounced his opposition; the bipartisan Problem Solvers Caucus backs thedeal; and the powerful, conservative House Freedom Caucus thinks more workneeds to be done.

The deal as of this writing has 22 cosponsors, including 12 SenateRepublicans but faces steep challenges in the Senate, House and WhiteHouse.

Sen. Johnson Calls for Alternative on Market Stabilization

Sen. Ron Johnson (R-WI), a supporter of the Graham-Cassidy reform proposal,is working on an alternative fix to the Affordable Care Act. Johnson callsfor reform that focuses on five principles:

Improved price transparency. Specifically, he wants to require CMS topublicize pricing and cost information received by providers in a way thatis “appropriate and useful” to consumers.

Expanded insurance options. The bill would allow all people—not just thoseunder 30—to purchase catastrophic coverage and would roll back the 90-daylimit on short-term plans while also deeming they satisfy the individualmandate under Obamacare.

Strengthened consumer-directed plans. The bill would support the use ofconsumer-directed accounts, such as health savings arrangements andflexible spending accounts, to purchase expanded insurance options, andwould expand tax-free contributions.

Reduced mandates. The bill would delay enforcement of the employer mandatethrough 2019 to “prevent 90,000 businesses from being assessed $5 billionin fines due to Obamacare’s mandates on employers.”

Lower premiums. The proposal would do this by requiring issuers to rollback any premium increases that were justified by the CSR payments.

HELP Committee Holds Hearing on Drug Prices

Senate Health, Education, Labor and Pensions Committee Chair LamarAlexander (R-TN) questioned the merit of drug rebates at a hearing Oct. 17on drug prices. The hearing also included questions to other sectors of thedrug supply chain, including the distributors that previously were all butabsent in the debate over prices.

Alexander asked representatives of each sector to say whether they thinkrebates should be eliminated. Pharmacy benefit managers and drugdistributors both were the focus of the hearing, in part because of arecent Washington Post article on that sector’s role in weakeningthe Drug Enforcement Agency’s ability to stop shipments of opioids that DEAsuspects are destined to be abused as street drugs.

PhRMA also received several questions about drug prices, including a lineof inquiry about insulin prices from Sen. Bill Cassidy (R-LA).

To watch the hearing:https://www.help.senate.gov/hearings/the-cost-of-prescription-drugs-how-the-drug-delivery-system-affects-what-patients-pay-part-ii.

Murray Objects to FDA Delay in Updated Nutrition Fact Rule

The ranking Democrat on the Senate Health, Education, Labor and PensionsCommittee on Oct. 16 objected to FDA Commissioner Scott Gottlieb’s proposalto delay implementation of the updated Nutrition Facts rule, saying themove is detrimental to public health and creates uncertainty for industryand consumers.

The FDA proposed Sept. 29 to extend the compliance dates for its NutritionFacts and Supplement Facts label final rule from July 26, 2018, to Jan. 1,2020, for manufacturers with $10 million or more in annual food sales, anduntil Jan. 1, 2021, for manufacturers with less than $10 million in annualfood sales.

Sen. Patty Murray (D-WA) wrote Gottlieb to urge him to speed the issuanceof key guidances that industry has argued are necessary to comply with thefinal rule, and implement the Nutrition Facts Panel regulations on aquicker timeline. Senator Murray says the delay hurts public health andsuggested that the FDA can issue guidance and implement the final rule on afaster timeline.

Sen. Schumer Asks FDA to Enforce Tobacco Deeming Rule

Sen. Chuck Schumer (D-NY) called on FDA Commissioner Scott Gottlieb toreverse the agency’s decision to delay enforcement of the tobacco deemingrule, which would set in motion the agency’s regulation of e-cigarettes.Schumer criticized the FDA’s move to delay regulation of products that arepopular among teens, pointing specifically to the JUUL e-cigarette.

The FDA announced in May that it was delaying by three months enforcementof the deeming rule, which extends FDA’s regulatory authority to electronicnicotine delivery systems (ENDS), hookah, pipe tobacco and cigars. Then, inJuly, the commissioner announced the agency would further extend compliancedeadlines.

2. Administration

Democratic Attorneys General Sue Over CSR Payments

A coalition of Democratic attorneys general is seeking a temporaryrestraining order that would force the administration to continue payingout the cost-sharing reduction payments. The coalition filed in a federalcourt in Northern California after the administration said it would end thepayments.

The attorneys general argue that the injunction would actually save thefederal government money, since the Congressional Budget Office estimatedthat pulling CSR funding would cost the federal government $194 billionover 10 years.

IRS to Reject Tax Returns Without Health Insurance Confirmation

On Oct. 18, the IRS announced that it will reject 2017 electronic taxreturns filed without confirmation of whether the filers had healthinsurance. Paper filings that don’t include coverage status may also besuspended and refunds delayed.

“The 2018 filing season will be the first time the IRS will not accept taxreturns that omit this information,” the IRS statement said. “After areview of our process and discussions with the National Taxpayer Advocate,the IRS has determined that ‎it is more burdensome for taxpayers to allowthem to file an incomplete tax return and then have to manage follow-upletters and potentially amend their return. Identifying omissions andrequiring taxpayers to provide health coverage information at the point offiling makes it easier for the taxpayer to successfully file a tax returnand minimizes related refund delays.”

Under the Obama administration, the IRS intended to start this policy inthe 2017 filing year for 2016 returns. However, after President DonaldTrump took office, he issued an executive order that instructed all theagencies to relieve people of “burdens” imposed by the ACA. The IRSreverted to the previous year’s policies of accepting tax returnsregardless of whether the coverage status was included.

ACOs Saved Medicare Over $70 Million in 2016

The Centers for Medicare and Medicaid Services (CMS) posted performanceresults for ACOs in the three ACO demonstrations: the Next Generationmodel, Comprehensive ESRD Care model and the Pioneer model.

Following are the results of gross and net savings from the demos and theshared savings program:

  • Next Generation demo: $48 million (gross) / $63 million (net)—The net is higher than the gross due to how CMS accounts for saving accrued through the discount. The $48 million figure reflects savings generated by the ACOs, minus losses. The $63 million figure includes recuperated losses and adds savings through the discount.
  • Pioneer demo: $61 million (gross) / $23 million (net).
  • Comprehensive ESRD Care demo: $75 million (gross) / $23.9 million (net).
  • Shared Savings Program: $652 million (gross) / -$39.3 million (net)—The net figure is negative because CMS spent more on bonuses than the ACOs collectively reduced Medicare spending. This also happened in the second year of the results, when Medicare spent $683 million in ACO bonuses for $466 million savings.

Collectively according to CMS, ACOs in the Medicare Shared Savings Programand the three demonstrations saved Medicare $70.6 million in 2016 aftertaking into account ACO bonus payments.

Although CMS disclosed the overall amount that ACOs saved Medicare acrossthe different initiatives, results for individual ACOs in the sharedsavings program will be posted later this month. ACOs in the shared savingsprogram had until Oct. 13 to provide their results.

FDA Announces Expedited Reviews of Alternatives Due to Hurricane

FDA announced Oct. 13 that it is expediting reviews and approvals ofalternative dosage forms and generic versions of multiple critical drugsfacing shortages following the hurricane in Puerto Rico.

Expedited review may be granted to “submissions that could help mitigate orresolve a drug shortage and prevent future shortages, including submissionsrelated to products that are listed on FDA’s Current Drug Shortages Indexat the time of the submission,” according to FDA’s June “Prioritization ofthe Review of Original ANDAs, Amendments, and Supplements” Manual ofPolicies and Procedures.

3. Reports

The Government Accountability Office (GAO): Veterans HealthAdministration: Better Data and Evaluation Could Help Improve PhysicianStaffing, Recruitment and Retention Strategies GAO-18-124

The GAO found the Veterans Health Administration (VHA), within the U.S.Department of Veterans Affairs (VA), has opportunities to improve staffing,recruitment and retention strategies for physicians that it identified as apriority for staffing, or mission-critical. Specifically, GAO identifiedthe following issues:

  1. Incomplete information on number of physicians. VHA is unable to accurately count the total number of physicians who provide care in its VA medical centers (VAMC). VHA has data on the number of mission-critical physicians it employs (more than 11,000) and that provide services on a fee-basis (about 2,800). However, VHA lacks data on the number of contract physicians and physician trainees. Five of the six VAMCs in GAO’s review used contract physicians or physician trainees to meet their staffing needs, but VHA has no information on the extent to which VAMCs nationwide use these arrangements.
  2. VAMCs’ Use of contract physicians, fee-basis physicians and physician trainees for mission-critical physician occupations at the Six VAMCs reviewed, as of March 31, 2017 had inconsistent productivity data. VHA measures productivity for some mission-critical physician occupations; however, mental health departments receive conflicting sets of productivity metrics from two VHA offices—the Office of Productivity, Efficiency, and Staffing and the Office of Mental Health Operations. VHA officials told the GAO the two offices use differing data to serve different purposes, and acknowledged that while information on how to interpret the two sets of productivity data is available, VAMC officials may find the data confusing.
  3. Lack of a comprehensive evaluation of its recruitment and retention strategies. VHA has not evaluated the effectiveness of its physician recruitment and retention strategies. One such strategy—hiring physician trainees—is weakened by ineffectual hiring practices, such as delaying employment offers until graduation. VHA’s strategies could be strengthened by comprehensively evaluating the causes of recruitment and retention.

If you have any questions, contact the following individuals atMcGuireWoods Consulting:

StephanieKennan, Senior Vice President
Anne Starke, Research Associate

Founded in 1998,McGuireWoods Consulting LLC(MWC) is a full-service public affairs firm offering infrastructure andeconomic development, strategic communications & grassroots, and governmentrelations services. McGuireWoods Consulting is a subsidiary of theMcGuireWoods LLPlaw firm and has been named in The National Law Journal’s special annualreport, “The Influence 50,” for the past several years. In the most recentreport, McGuireWoods Consulting was ranked 15th of the 1,900 governmentrelations firms in Washington, D.C.

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