Washington Healthcare Update

November 6, 2017

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This Week: CHIP hits the House floor; payment rules for 2018 finalized; administrationproposes loosening EHBs; opioid commission releases final report.

1. Congress



2. Administration

3. Reports

1. Congress


House Considers CHIP Legislation

On Nov. 3, the House passed legislation to renew the Children’s HospitalInsurance Program, 242-174. Only 15 Democrats voted for the proposal. Ofconcern to Democrats were the funding provisions that include substantiallycutting the Prevention and Public Health Fund as well as shortening theAffordable Care Act’s grace period for missed premium payments beforeenrollees lose their insurance. They also protested an offset to boostcosts for wealthier seniors on Medicare.

The legislation retained the ACA’s increase in the federal match rate forCHIP for two years, before it begins to wind down in 2020. Republicans alsovoted to delay cuts until 2020 to Medicaid disproportionate share hospitalpayments included in Obamacare, and included roughly $1 billion in Medicaidfunds for Puerto Rico.

Although the Senate Finance Committee has marked up its CHIP proposal, theSenate is still negotiating how they will pay for their proposal. Thismeans that although the CHIP program expired Sept. 30, Congress is notlikely to pass a proposal to renew it until the end of the year.

House Members Ask HHS Not to Finalize Medicare Home HealthReimbursement Cuts

Led by Reps. Ralph Abraham (R-LA) and Terri Sewell (D-AL), 174 members ofthe House asked HHS Acting Secretary Eric Hargan and CMS AdministratorSeema Verma not to include 2019 cuts that rely on a new home health groupmodel in the final Medicare Home Health rule. Instead, the members haveasked the department and CMS to work with stakeholders to develop andimplement other pay reforms.

The proposed rule would cut almost $1 billion from Medicare reimbursementfor home health services in 2019 by changing the unit of payment for homehealth episodes from 60 days of care to 30 days.

The members say that while the new model would make Medicare moreefficient, changes must be done in a manner that does not compromise accessto care. The proposed changes are not budget neutral and would reducereimbursements for home health programs by as much as $950 million—4.3percent—in 2019 alone.

The letter follows a Sept. 26 letter from a group of 49 bipartisan senatorsasking then-HHS Secretary Tom Price and Verma not to move forward with thecuts until the impact of the proposed changes could be fully understood.

Senate Finance Committee Chair Orrin Hatch (R-UT) also sent a letter to CMSin September asking that the proposed changes not be finalized.

Tax Bill Hits Medical Deduction

The GOP tax reform bill unveiled on Nov. 2 would not repeal any major partof Affordable Care Act, but would eliminate the itemized deduction formedical expenses, a hit to those with significant health care costs. Itwould take effect next year.

The Tax Cuts and Jobs Act would also eliminate the deductibility ofcontributions to Archer medical savings accounts, and would repeal thecredit drug makers can claim for clinical testing expenses for certaindrugs. Further, it would take away the orphan drug tax credit forpharmaceutical companies. The credit allows companies to claim a creditequal to 50 percent of their clinical testing expenses when researchingmedicines for diseases that affect fewer than 200,000 Americans. The creditwas one element of the Hatch-Waxman legislation passed in 1983, which hasbeen credited with spurring development of rare disease treatments.


HELP Committee Hearing Focuses on Electronic Health Record Issues

At a hearing held by the Senate Health, Education, Labor and PensionsCommittee on Oct. 31, senators urged an HHS health IT official to set atimeline for writing a rule on electronic health records that lays out whatactivities are exempt from information blocking prohibitions laid out inthe 21st Century Cures Act. Committee Chair Lamar Alexander (R-TN) alsoasked HHS officials to consider how much time doctors should spend ondocumentation and to set an achievable goal for lowering the burden of EHRuse.

Alexander said the hearing is the first in a series on the implementationof the 21st Century Cures Act, which Congress passed a year ago. Hearingsin December will focus on the law’s treatment of research and developmentof drugs and medical devices as well as mental health policy reforms.

Sen. Todd Young (R-IN) asked Deputy National Coordinator for Health IT JonWhite when ONC expects to publish a rule on information blocking.

That rule will guide the HHS Office of Inspector General’s enforcement andinvestigation of information blocking. James Cannatti, senior counselor forhealth information technology at the Office of Inspector General, said theOIG doesn’t anticipate enforcing the information blocking provisions untilafter the ONC publishes that rule.

To view the hearing,click here.

2. Administration

President’s Opioid Commission Releases Final Report

The President’s Commission on Combating Drug Addiction and the OpioidCrisis released its final report and recommendations on Nov. 1. The morethan 50 recommendations include requiring doctors and other prescribers ofopioids to show they have received training in the safe provision of thosedrugs before they can renew their licenses to handle controlled substances.The report places an emphasis on mandating that providers checkprescription drug monitoring databases and determine ways to make treatmentmore accessible. Other recommendations include streamlining federal fundingso states can focus more on implementing programs and less on paperwork;opening drug courts in all federal jurisdictions; stopping evaluatingphysicians based on pain scores; allowing more emergency responders todeploy naloxone; administering tougher prison sentences for fentanyltrafficking; and launching a federally funded media campaign on addictionstigma and the dangers of opioids

To read the report,click here.

CMS Finalizes ESRD Rule

On Oct. 27, CMS finalized a 0.5 percent pay increase for dialysisfacilities in 2018 as part of the 2018 end-stage renal disease (ESRD) payrule. This amount is a slight decrease from what was proposed.Hospital-based facilities are projected to receive slightly more, a 0.7percent increase, while freestanding facilities are projected to see a 0.5percent increase next year.

The 2018 base pay rate is $232.37, which is an increase of $0.82 from thecurrent base rate.

CMS also updated the outlier services fixed-dollar loss amounts for bothadults and pediatric patients, as well as the Medicare allowable paymentamounts for adult patients based on 2016 data.

CMS finalized updates to the extraordinary circumstances exception (ECE)policy in the ESRD Quality Incentive Program to better align with theextraordinary circumstances policies for other CMS Medicare qualityprograms. The rule requires that facilities submit their ECE request formswithin 90 days of an extraordinary event, and CMS is expanding the reasonsfor which an ECE can be requested.

The rule also finalizes the replacement of some existing ESRD QualityIncentive Program measures with measures that the agency says have beenimproved.

Medicare Payment Rules for OPPS and Home Health Finalized

On Nov. 1, the Centers for Medicare & Medicaid Services (CMS) finalizedtwo Medicare payment rules: the Hospital Outpatient Payment System (OPPS)rule and the Home Health payment rule.

Home health agencies will face a 0.4 percent reduction in reimbursement for2018. This is approximately $80 million overall. This cut incorporates thephase-out of an add-on payment slated to expire at the end of the yearworth roughly $100 million in total for rural facilities.

CMS is not finalizing the Home Health Groupings Model and will takeadditional time to further engage with stakeholders to move toward a systemthat shifts the focus from volume of services to a more patient-centeredmodel.

In the OPPS final rule, CMS is reallocating 340B program savings equally toall hospitals paid under the OPPS. Children’s hospitals, certain cancerhospitals and rural sole community hospitals will be accepted from thesedrug payment reductions for 2018. Additionally, the OPPS final ruleincludes a provision that would alleviate some of the burdens ruralhospitals experience by placing a two-year moratorium on the directphysician supervision requirements for rural hospitals and critical accesshospitals.

The agency finalized a rate increase projected to increase providerreimbursement by 1.4 percent in 2018. That’s slightly lower than the 2.0percent overall impact on reimbursement CMS proposed in July, and shouldtranslate to roughly $690 million in additional Medicare spending comparedwith the prior year.

CMS is also permitting knee replacement surgeries to be done in outpatientsettings, finalizing a proposal that would remove the procedure from its“inpatient only” list. In its final rule, CMS argued that it should be leftto physicians to decide where to perform each knee replacement surgery.

For a fact sheet on the OPPS final rule with comment period,click here.

For a fact sheet on the Home Health final rule,click here.

Medicare Reduction of 340B Reimbursements Remains Controversial

Because the final rule for the OPPS payment rule will dramatically cut whatit pays for certain physician-administered drugs at a rate that is 22.5percent less than the average sales price, rather than the 6 percentdiscount currently applied starting next year, hospitals are looking atlegal options.

“We strongly urge CMS to abandon its misguided 340B rule, and instead takedirect action to halt the unchecked, unsustainable increases in the cost ofdrugs,” American Hospital Association Executive Vice President Tom Nickelssaid in response to the 2018 outpatient pay rule that CMS publishedWednesday (Nov. 1). “In the meantime, the AHA will work with Congress toaddress this issue. In addition, the AHA will be joining the Association ofAmerican Medical Colleges, America’s Essential Hospitals and our members topursue litigation to prevent these significant cuts to payments for 340Bdrugs from moving forward.”

Separately, 340B Health President and CEO Ted Slafsky said his group isexamining its legal options. Slafsky said CMS doesn’t have the authority totarget 340B hospitals for reduced payments. However CMS says there isnothing in Medicare law or the Public Health Service Act that prohibits thepay cuts.

CMS may revisit the policy in 2019. “[W]e remain interested in exploringways to better target the offsetting amount to those hospitals that servelow-income and uninsured patients, as measured by uncompensated care,” therule states.

Utah Gets Waiver for Medicaid Expansion

On Nov. 1, the Centers for Medicare and Medicaid Services approved Utah’srequest for a waiver for a limited Medicaid expansion that will providecoverage to the neediest low-income adults without children. The stateestimates that as many as 6,000 adults with incomes up to 5 percent of thefederal poverty line who are chronically homeless or suffer from substanceuse issues would gain coverage under Utah’s plan, according to stateestimates.

State officials submitted the plan to the federal government after repeatedfailed attempts to expand Medicaid under the Affordable Care Act, but thestate legislators did not support such efforts. Utah is one of several redstates that submitted Medicaid waiver requests to the Trump administrationin hopes that GOP officials would approve a spate of new restrictions thatwere shunned by the Obama administration.

Utah was also granted the authority to receive federal funds to provideshort-term residential substance abuse treatment services to all Medicaidenrollees.

Utah’s coverage expansion would be financed with the state’s regularMedicaid match—the federal government covers roughly 70 percent of Utah’scosts—rather than the enhanced funding that states receive for expandingMedicaid up to 138 percent of the federal poverty line under Obamacare.Earlier this year, CMS also gave Utah approval to expand Medicaid coverageto about 4,000 parents with incomes up to 60 percent of the federal povertyline.

HHS Report Says Premiums Subsidies Will Rise Almost 50 Percent inExchanges Next Year

Premium subsidies for exchange customers will rise by nearly 50 percentnext year because of huge rate hikes, according to an analysis by the U.S.Department of Health and Human Services of rate filings in the 39 statesthat rely on HealthCare.gov for enrollments.

The average monthly federal subsidy will be $555 in 2018, compared to $382this year. Premium subsidies are expected to be more than twice as high asthey were in 2016.

Premiums are increasing because of the administration’s decision to haltcost-sharing-reduction (CSR) payments. Insurers use those payments to lowerthe out-of-pocket costs for low-income exchange customers. The rate hikesin most states are being loaded onto silver plans, which are the only onesthat qualify for cost-sharing-reduction payments, in order to blunt thefinancial pain on Obamacare customers who don’t qualify for subsidies.

The monthly premium for the second-most-expensive silver plan—which is usedto determine subsidy levels—will increase by an average of 37 percent—from$300 to $411—for a 27-year-old enrollee.

To read the report, click here.

Marketplace Proposed Rule Released

CMS on Oct. 27 took a major step toward administratively overhauling theAffordable Care Act’s health insurance exchanges in line with key GOPhealth reforms that have failed to pass Congress. The administrationproposed to give states new flexibility to set essential health benefits,loosen requirements for small business exchanges, increase the thresholdfor rate review and eliminate standardized plan options and the “meaningfuldifference” standard, and more.

CMS will take comments through Nov. 27.

In the 365-page proposed rule, CMS would provide new flexibility for howstates select so-called benchmark plans that determine the scope ofessential health benefits. The ACA’s 10 categories of essential benefitswould still be required, but states would have more freedom to choosebenchmark plans with different standards for those benefits.

If finalized, states would have three options for revising the EHBbenchmarks. The rule would let states choose from 50 benchmark plans in anystate, replace one or more essential categories with one adopted by anotherstate, or otherwise select a set of benefits as long as they are equal tothose offered by a typical employer plan per the ACA requirements. The rulewould also give states a yearly opportunity to tweak the EHB package. CMSseeks comments on the idea, and specifically asks whether the agency shouldmove forward with the change in 2019 or hold off until 2020.

CMS plans to continue ceding review authority to states in general,including on accreditation, compliance and quality improvement strategyreporting, and seeks comments on additional areas that would beappropriate.

States using the FFE would still be required to pay a user fee equal to 3.5percent of premiums, while the fee for SBE-FPs would increase from 2percent to 3 percent of premiums.

The agency also proposes to eliminate the “meaningful difference” reviewrequirement for qualified health plans (QHPs). CMS originally implementedthe standard to avoid consumer confusion and the potential for competitionto be stifled by an issuer that takes up too much virtual shelf space byoffering a large number of similar plans. “However,” CMS says in the factsheet, “with fewer issuers participating in the Exchange, and fewer plansfor consumers to choose from, we propose to remove these standards, as weno longer believe the requirement is necessary.”

CMS also seeks a new income “check” for consumers who attest to incomewithin the tax credit eligibility range, yet for whom data indicates theyearn below 100 percent of the federal poverty level, and thus are noteligible for assistance.

Plus, the agency proposes several tweaks to the rate review program,including exempting student health plans, allowing rolling deadlines andhiking the default rate increases for which plans are subject to reviewfrom 10 percent to 15 percent.

Other proposed changes include:

  • Eliminate the actuarial value standard for stand-alone dental plans.
  • Remove requirement that each exchange must have at least two navigator entities, and that an entity must maintain a presence in the exchange service areas.
  • Align many of the exchange special enrollment periods with off-exchange SEPs. Allow an SEP for pregnant women on CHIP who lose coverage following childbirth.

Friday’s rule solicited extensive feedback on the new definition of“typical employer plan.” Among other things, it asked whetherstate-specific factors should be taken into account in determining whethera plan is really typical. The rule also asked if EHB changes should bepushed back to 2020 instead of taking effect in 2019.

Notably, CMS also suggested that some new limits on state flexibility mayeventually be enacted. Specifically, the agency said it’s looking atcreating a national benchmark standard for prescription drugs to “provide aconsistent prescription drug default standard across states.”

CMS Releases New Policy for Demos to Increase Treatment for Opioid UseDisorder

On Nov. 1 the Centers for Medicare & Medicaid Services (CMS) announceda new policy to allow states to design demonstration projects that increaseaccess to treatment for opioid use disorder (OUD) and other substance usedisorders (SUD). CMS’s new demonstration policy responds to the president’sdirective and provides states with greater flexibility to design programsthat improve access to high-quality, clinically appropriate treatment. Inaddition, CMS is announcing the immediate approval of both New Jersey’s andUtah’s demonstration waivers under the new policy.

Through this updated policy, states will be able to pay for a fullercontinuum of care to treat SUD, including critical treatment in residentialtreatment facilities that Medicaid is unable to pay for without a waiver.

Previously, states had been required to build out their entire deliverysystem for SUD treatment while also meeting rigid CMS standards beforeMedicaid demonstration approvals could be granted. The new policy willallow states to provide greater treatment options while improving theircontinuum of care over time.

Under the new CMS demonstration policy, New Jersey will provide acomprehensive and coordinated SUD benefit to adults and children while alsoallowing for the continuum of SUD services provided to Medicaidbeneficiaries who reside in residential treatment facilities. The servicescovered as part of the SUD benefit will include residential treatment,withdrawal management, medication-assisted treatment, peer supports andtargeted case management.

Utah’s program is part of a broader delivery system reform effort toaddress the needs of individuals with SUD, individuals who are chronicallyhomeless and individuals within the justice system. The demonstration willalso expand access to SUD treatment to a more complete continuum ofservices, including previously excluded residential treatment sites.

The new policy also enhances the ability for CMS to evaluate howeffectively the demonstration programs are working through the collectionof information and data that can be used to inform CMS on best practicesand methods to specifically combat the opioid epidemic, increasing theagency’s capacity to learn what treatment delivery methods are the mosteffective in addressing our nation’s public health emergency.

To view a copy of the SMD # 17-003 letter to state Medicaid directors,click here.

FDA Proposes Rule to Revoke Health Claim of Soy Protein

In a proposed rule published on Oct. 30, the Food and Drug Administration(FDA) moved to revoke an FDA-authorized health claim rule linkingconsumption of soy protein to lower risk of heart disease.

In an extensive review, the FDA found that current evidence does not meetthe robust level needed to maintain an authorized health claim. Should therule be finalized, the FDA will allow the use of a qualified health claim.Manufacturers of soy protein products will be allowed to continue using theauthorized claim until at least the end of 2019.

A qualified health claim, which requires a lower scientific standard ofevidence than an authorized health claim, would allow industry to usequalifying language that explains the limited evidence linking consumptionof soy protein with heart disease risk reduction.

FDA estimates that relabeling the estimated 200-300 products currentlybearing the authorized health claim would cost between $370,000 and$860,000. FDA could not quantify the increased benefit to consumers.

FDA Will Recognize Drug Plant Inspections by Eight European Authorities

On Nov. 1, the FDA said it will recognize drug regulatory agencies in eightEU countries as meeting its standards for inspecting manufacturingfacilities. The regulatory authorities are in Austria, Croatia, France,Italy, Malta, Spain, Sweden and the United Kingdom. The agreementofficially launches on Wednesday.

The amended Pharmaceutical Annex to the 1998 U.S.-European Union MutualRecognition Agreement lets regulators from the U.S. and EU use each other’sinspections. In June, the European Union determined the FDA was capable ofcarrying out inspections that met EU standards. The FDA has a goal ofcompleting 28 capability assessments in the EU by July 2019.

3. Reports

GAO: Opioid Use Disorders: HHS Needs Measures to Assess theEffectiveness of Efforts to Expand Access to Medication-AssistedTreatment

The GAO was asked to review HHS and other efforts related tomedication-assisted treatment (MAT) for opioid use disorders. The GAOrecommends that HHS take two actions: (1) establish performance measureswith targets related to expanding access to MAT and (2) establishtimeframes for its evaluation of its efforts to expand access to MAT. HHSconcurred with both recommendations.

To view the report,click here.

To view highlights of the report,click here.

GAOPhysician Workforce: Expansion of the Children’s Hospitals GraduateMedical Education Payment Program

The majority of federal payments to support GME training are provided tohospitals by the Medicare program. These payments are based, in part, onthe number of Medicare patients treated by a hospital. Because Medicareprimarily covers individuals aged 65 and older, children’s hospitalsgenerally treat very few Medicare patients and consequently receive few GMEpayments from Medicare. Instead, many children’s hospitals receive paymentsto support GME training through the CHGME program, which is administered bythe Health Resources and Services Administration (HRSA) within theDepartment of Health and Human Services. Prior to 2014, eligibility for theCHGME program was generally restricted to children’s hospitals that werefreestanding as of Dec. 31, 1996. Starting in 2014, CHGME programeligibility was expanded to additional types of freestandinghospitals—referred to as newly qualified hospitals.

The Protecting Access to Medicare Act of 2014 includes a provision for GAOto examine payments to and characteristics of hospitals that participatedin the CHGME program under the expanded eligibility criteria.

The GAO looked at the four hospitals that became eligible and found thatthey individually received about $320,000 to $1.6 million in 2016 from theprogram. The hospitals use the program to address gaps in medical care,including by training residents in medical specialties with physicianshortages, such as child and adolescent psychiatry.

To view the link,click here.

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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