Washington Healthcare Update

May 14, 2018

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This Week: Opioids moving on… Rescission package unveiled… MACPAC appoints new members… Senators talk to CMS about how to avoid premium increases… Administration wants to lower drug prices. 

1. Congress



2. Administration

3. Reports

1. Congress


Rescission Package Released

The House announced its rescission package following a “message” from the White House about what programs it wanted to cut. Initially, President Trump wanted to send Congress a package of about $60 billion in cuts. However, after pushback from Congress, the package has been reduced to $15 billion. While $7 billion in cuts in the Children’s Health Insurance Program (CHIP) raised concerns, the Congressional Budget Office confirmed that the cuts involve money that has technically expired and no spending cuts or coverage reductions will occur. However controversy over the inclusion of CHIP funding continues.     

The White House turned to using a rescission package as a mechanism to claw some of the spending back from the omnibus spending package recently passed by Congress. The process avoids a Senate filibuster. It was announced on May 9 that the package will skip the House Appropriations Committee and be sent directly to the House floor, by passing the Appropriations Committee. Senate GOP leaders have said they will consider the bill if and when it passes the House.

A rescission is a decision by the president to not spend appropriated money. President Nixon started using rescissions to thwart policy goals of Congress. Congress then passed the Impoundment Control Act of 1974 (ICA) to clarify the process by which a president may rescind funds. 

The CHIP portion of the rescission package continues to be problematic. CHIP is technically mandatory spending and Democrats are arguing that having CHIP in the package means that it is not subject to special budget powers—meaning it can be filibustered. The GAO is providing a legal opinion on this issue later in the month.

House leadership says they expect a vote before Memorial Day. The bill needs to get through both bodies before the 45-day window ends for “special budget powers.”

Energy and Commerce Moves Opioid Bills Forward

The House Energy and Commerce Committee approved 25 largely bipartisan opioid-related bills May 9. 

Democrats, however, maintain that the proposals don’t provide new money for states and just nibble around the edges. The proposals touched on different parts of the health care system. Some measures focused on prevention, while others would make it easier for emergency room doctors to access patients’ health records and refer patients to follow-up care after an overdose.

This week the full committee is scheduled to mark up more opioid bills including legislation by the chairman to lift the restrictions in Medicaid on payment for some inpatient treatment. Democrats have objected to the proposal because of concerns of institutionalizing behavioral treatment.

In March, Congress appropriated $4 billion to combat opioid abuse as part of the massive omnibus spending bill. It is unclear whether Congress will appropriate more to address the crisis this year. Proposals under consideration by the Energy and Commerce Committee focus on policy changes and do not add resources.

Energy and Commerce Subcommittee on Health Holds Hearing on Privacy Issues in SUD Treatment

The subcommittee on health held a hearing on May 8, 2018, entitled “Improving the Coordination and Quality of Substance Use Disorder Treatment.” The hearing addressed the differences between the Privacy Rule and 42 CFR Part 2, which is more narrow and protects substance use disorder patients’ medical records. Draft legislation by Rep. Mullin (R-OK) and Rep. Earl Blumenauer (D-OR) was also released. View the hearing and access witness statements and draft legislation.  

Appropriations Subcommittee Increases FDA Funding

The FDA would receive a $308 million funding increase in fiscal year 2019, under a bill approved by a House Appropriations subcommittee today. It is $64 million short of the administration’s request.

The FDA’s budget would increase to $3.1 billion, a nearly 10 percent increase when not factoring the substantial user fees the agency collects from health companies. The FY 2018 funding was $2.9 billion.

The fiscal 2019 bill includes $30 million to fight opioid abuse, $38.5 million to advance modern drug and biologics manufacturing, $27 million for generic drug development and review and $5 million for the new Oncology Center of Excellence. The bill also grants $70 million for medical product development as authorized in the 21st Century Cures Act. 

Controversial language that would exempt e-cigarette products made before August 2017 from FDA regulation was not included in the bill. A full committee markup has not yet been scheduled.


Senators Talk to CMS About How to Mitigate Premium Increases

Because hope for market stabilization legislation has dimmed, Sens. Lamar Alexander (R-TN) and Susan Collins (R-ME) are now talking with CMS Administrator Seema Verma about administrative solutions to mitigate Affordable Care Act insurance premium increases—including possible agency action to let states easily replicate already-approved 1332 waivers, speed up the waiver approval processes and facilitate the creation of invisible high-risk pools.

Sen. Alexander on May 7 sent a letter to stakeholders largely blaming Democrats for the failure to agree to a package to stabilize the individual health insurance market. 

HHS has told states that it will work to quickly approve their requests for reinsurance waivers before rate filing deadlines, but Alexander said that additional reforms are necessary.

States are currently not allowed to receive immediate approval for a waiver if they copy another state’s already-approved 1332 waiver, and must go through the same process as if their submission was a completely new waiver. Several states have argued that this process could be simplified. States also have called for CMS to expedite the waiver approval process, especially as numerous states attempt to receive waiver approval before 2019 individual market rates are set.

Another issue being discussed is how to boost invisible high-risk pools. Sen. Collins said she spoke with Verma on May 8 to discuss reforms to the ACA markets, including funding for invisible high-risk pools.

GAO Announces MACPAC New Appointees

On May 10, Gene L. Dodaro, comptroller general of the United States and head of the U.S. Government Accountability Office (GAO), announced the appointment of two new members to the Medicaid and CHIP Payment and Access Commission (MACPAC). He also named the commission’s vice chair.

The Children’s Health Insurance Program Reauthorization Act of 2009 established MACPAC to review Medicaid and CHIP access and payment policies and to advise Congress on issues affecting Medicaid and CHIP. The act directs the comptroller general to appoint MACPAC’s members.

The newly appointed members are Melanie Bella and Katherine Weno. Current member Stacey Lampkin has been named the commission’s vice chair. Brief biographies of the new commission members and the commission vice chair follow:

New Commission Members:

  • Melanie Bella, MBA, is chief of New Business and Policy at Cityblock Health, which facilitates health care delivery for low-income urban populations, particularly Medicaid beneficiaries and those dually eligible for Medicaid and Medicare. Previously, she served as the founding director of the Medicare-Medicaid Coordination Office at the Centers for Medicare & Medicaid Services, where she designed and launched payment and delivery system demonstrations to improve quality and reduce costs. Ms. Bella also was the director of the Indiana Medicaid Program, where she oversaw CHIP and the state’s long-term care insurance program. Ms. Bella received her Master of Business Administration from Harvard University.
  • Katherine Weno, DDS, JD, is an independent public health consultant. Previously, she held positions at the Centers for Disease Control and Prevention, including senior advisor for the National Center for Chronic Disease Prevention and Health Promotion and director of the Division of Oral Health. Dr. Weno also served as the director of the Bureau of Oral Health in the Kansas Department of Health and Environment. Previously, she was the CHIP Advocacy Project director at Legal Aid of Western Missouri and was an associate attorney at Brown, Winick, Graves, Gross, Baskerville and Schoenebaum in Des Moines, Iowa. Dr. Weno started her career as a dentist in Iowa and Wisconsin. She earned degrees in dentistry and law from the University of Iowa.

Commission Vice Chair:

  • Current MACPAC commissioner Stacey Lampkin, FSA, MAAA, MPA, is an actuary and principal with Mercer Government Human Services Consulting in Phoenix, Arizona, where she has led actuarial work for several state Medicaid programs. She previously served as actuary and assistant deputy secretary for Medicaid Finance and Analytics at Florida’s Agency for Health Care Administration, and as an actuary at Milliman. Ms. Lampkin is a fellow in the Society of Actuaries and a member of the American Academy of Actuaries. She received her Master of Public Administration from Florida State University.

Read more of the announcement.

2. Administration

Trump’s Plan for Lowering Drug Costs

The president’s plan for lowering drug costs includes four strategies that senior administration officials say can be done without Congress: (1) stop drug makers from gaming rules to thwart generic and biosimilar competition; (2) remove government rules that prevent health plans from negotiating better deals, especially on expensive drugs; (3) create incentives to lower drug list prices; and (4) lower beneficiaries’ out-of-pocket spending.

Although administration officials blamed foreign governments for “freeloading” on American investments as one of the primary aspects contributing to high prices, none of the four strategies seem aimed at either getting other countries to pay more for drugs or linking U.S. prices to lower prices in other countries.

The most surprising concept put forth centered on forcing manufacturers to disclose list prices in ads, like they list side effects now.

The plan calls for Medicare Part D contracts that would ban the so-called pharmacist gag rule, which some pharmacy benefit managers use to prevent pharmacists from telling patients when they could pay less out-of-pocket by not using their insurance.

— Medicare should develop a drug-pricing dashboard to make list prices more transparent and make known when there is generic competitions.

— The plan also calls for changes that might make what are known as value-based drug payments more effective. It says that anti-kickback laws that prevent drugmakers and health plans from sharing certain information, should be reexamined. Although the concept of paying for drugs based on how patients respond to them isn’t new, HHS raises several questions about how such a plan might be pursued. Among them: whether payment calculations should be based on approved indications, and whether payments might be higher for treating conditions in which drugs are critical.

— The plan also says HHS should require Part D plans to include information on negotiated prices in year-end explanation of benefits.

HHS Secretary Alex Azar tried to temper expectations. “This is out today. We’re going to seek comment and we’re going to learn. And were going to move forward if it makes sense,” the secretary said told reporters. 

The document suggests other areas where future action might be taken as well, without outlining specific policy changes.

The Trump administration’s blueprint suggests that Obamacare’s taxes and changes to the Medicaid drug rebate program may have caused prices to spike in the commercial market. Specifically, it notes that drug companies were forced to pay the government $4.1 billion this year because of an Affordable Care Act tax on branded prescription drugs and also increased how much they must pay in mandatory rebates to Medicaid managed care companies.

States to Decide if Native Americans Have to Meet Work Requirements in Medicaid

HHS wants states to settle the question of whether Native Americans should get jobs in order to keep their health care. The tribes had requested to be exempted from new Medicaid work rules being introduced in several states, citing their sovereign status. The Trump administration rejected the request, saying in January it amounted to an illegal racial preference.

CMS’s position that tribes are a racial group and not separate governments has raised concerns in Congress and alarmed the tribes, who say it reverses centuries of protections enshrined in the Constitution and upheld by the Supreme Court.

HHS Secretary Alex Azar told tribal leaders at a meeting May 10 that state Medicaid administrators will be able to work with tribal governments on designing any employment requirements.

“This vision is best implemented locally, where governments know the needs of the people best,” Azar said, according to remarks provided by HHS. “We are glad to have reached a resolution on this issue, and we’ve reminded states that they are expected to consult with the tribal governments within their borders in crafting community engagement requirements.”

“I think you’re wrong,” Sen. Jerry Moran (R-KS) told Azar in a congressional hearing May 9. “I think tribes deserve the sovereignty they’re entitled to by our constitution and longstanding understanding that tribes are governmental and not racial.”

Rep. Tom Cole (R-OK), a member of the Chickasaw Nation and the chairman of the House Appropriations Subcommittee that holds the purse strings for HHS, similarly has warned the agency to reverse course.

HHS political leaders have tried to avoid the controversy by suggesting the matter is a local issue that could be resolved as the federal government and states negotiate the parameters of their proposals.

HHS is facing multiple lawsuits that raise relevant issues. One case involves the Rosebud Sioux Tribe, which sued the federal government over allegations that the United States violated treaties and federal obligations by failing to appropriately fund the Indian Health Service. Another case involves Kentucky, where several advocacy groups have sued to block a work requirement slated to go into effect in July. Some CMS officials have speculated that granting an exemption for Native Americans might weaken the United States’ defense in this case.

The collision of Native American rights and entitlement reform has hemmed in some Hill Republicans, who believe that tribes should have sovereignty but also favor Medicaid work requirements.

Azar to Ask IG to Investigate Price Concessions PBMs Charge Retroactively

At a Senate Appropriations Committee hearing on May 10, HHS Secretary Alex Azar said he plans to ask the department’s inspector general to investigate price concessions that pharmacy benefit managers retroactively charge pharmacies. PBMs have already been concerned that the Trump administration might target rebates in his plan to contain drug costs, and an HHS Office of Inspector General investigation could separately lead to restrictions on so-called direct and indirect remuneration, or DIR fees.

“Are these DIR fees essentially taxes imposed differentially and unpredictably on those independent pharmacies in a way that puts them at a competitive disadvantage from the owned ones?” Azar asked during testimony before the Senate Appropriations HHS subcommittee, referring to PBM-owned pharmacies. “I think this is an important issue worthy of study because as you said there should be a level playing field and there should be good competition so I’m going to ask the IG at HHS to look into this issue.”

Azar’s statement was in response to questions from Sen. James Lankford (R-OK). Lankford asked how CMS is protecting small independent pharmacies, especially those in rural areas. He said many of his constituents prefer buying their medications in person so they can ask questions, but he fears price concessions are a tool to run independent pharmacies out of business.

In January 2017, CMS published a paper that concluded it isn’t clear whether drug rebates and pharmacy price concessions lower overall costs for beneficiaries or Medicare, even though they lower premiums.

340B Guidance Part of Unified Agenda and Then It Wasn’t

The spring 2018 Unified Agenda, released May 9, said that the Health Resources and Services Administration is working on a final version of a wide-ranging “mega-guidance” on the 340B drug discount program that the administration had pulled shortly after coming into office. “This final guidance addresses key policy issues raised by stakeholders for which HHS does not have statutory rulemaking authority,” the agenda said.

And then … it mysteriously was pulled from the Unified Agenda on May 10. HRSA said the initial posting was in error.

The Trump administration pulled the Obama administration’s 340B guidance shortly after coming into office.

The House Energy & Commerce Committee has held numerous hearings on the program, and the Senate HELP Committee has a second hearing on the program planned for May 15.

CMS Safeguards Patient Access to Certain Medical Equipment and Services in Rural and Other Non-contiguous Communities

The Centers for Medicare and Medicaid Services (CMS) issued an interim final rule with comment period (IFC) to increase the fee schedule rates from June 1, 2018, through Dec. 31, 2018, for certain durable medical equipment (DME) items and services and enteral nutrition furnished in rural and non-contiguous areas (Alaska, Hawaii and U.S. territories) of the country not subject to the Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program (CBP). 

The proposal’s goal is to protect access to needed durable medical equipment in rural and non-contiguous areas that are not subject to the DMEPOS CBP. Stakeholders have raised concerns about significant financial challenges the current adjusted DME fee schedule rates pose for suppliers, including many small businesses, and that the number of suppliers in certain areas continues to decline.

In 2016 and 2017, information from the DMEPOS CBP was used to adjust Medicare payments for certain DME and enteral nutrition in certain areas of the county where the CBP did not occur (“non-bid areas”). The CBP has not been implemented in rural areas comprising about half the volume of items and services furnished in non-bid areas subject to the adjustments. Beginning Jan. 1, 2017, the fully adjusted fee schedule rates were on average 50 percent lower than the unadjusted rates in these non-bid areas based on the average reduction in payment for all of the items and services subject to the adjustments, weighted by volume. 

In 2016, prior to the fully adjusted fee schedule rates going into effect, blended rates of 50 percent of the amount based on the competitive bid rates and 50 percent of the traditional fee schedule amounts were implemented for the transitional year period. This action resumes these blended rates from June 1, 2018, to Dec. 31, 2018, in rural and non-contiguous areas not subject to the CBP.

CMS is continuing to engage with stakeholders regarding the CBP, including the national mail-order program, and payment for items and services furnished in non-bid areas. Going forward, CMS will continue to review data and information about rates for DMEPOS items and services, as required under Section 16008 of the 21st Century Cures Act. CMS intends to undertake subsequent notice-and-comment rulemaking to address the rates for durable medical equipment and enteral nutrition furnished in 2019 and beyond.

For more information on Durable Medical Equipment Fee Schedule, Adjustments to Resume the Transitional 50/50 Blended Rates to Provide Relief in Rural Areas and Non-Contiguous Areas (CMS-1687-IFC) rel=”noopener noreferrer” or to submit a comment on or before July 9, 2018, please visit the regulations website

FDA Takes Action Against Stem Cell Clinics

The Food and Drug Administration filed complaints in federal courts against one stem cell clinic in California and one in Florida, which are accused of peddling unapproved stem cell treatments that the agency says have caused patients “serious and permanent harm.” The FDA is seeking permanent injunctions to stop U.S. Stem Cell Clinic in Florida and the Cell Surgical Network in California from operating. FDA Commissioner Scott Gottlieb said he hopes the actions “send a stronger deterrent message” that the agency will not tolerate such practices from stem cell clinics, hundreds of which have popped up in recent years.

3. Reports

Commonwealth Fund Survey Says Fewer Americans Confident They Can Afford Health Care

A Commonwealth Fund survey released May 10, says 62.4 percent of respondents feel they could afford health care if they fell seriously ill—down from 69 percent in 2015. About 46 percent of those surveyed said they rel=”noopener noreferrer” wouldn’t be able to pay a surprise $1,000 medical bill within 30 days. Read the survey.

GAO-18-322 April 3: Department of Health and Human Services: Office of Inspector General’s Use of Agreements to Protect the Integrity of Federal Health Care Programs

To help improve adherence to federal health care program requirements by entities that have allegedly engaged in certain acts, such as submitting false or fraudulent claims, the Department of Health and Human Services’ Office of Inspector General (HHS-OIG) entered into 652 agreements with those entities from July 2005 to July 2017. Since 2010, two types of agreements have been used: Corporate Integrity Agreements (CIA) and Integrity Agreements (IA). The more commonly used CIAs apply to larger entities, compared to IAs, which apply to individual practitioners or small businesses. From July 2005 through July 2017, about half of all agreements were with three types of entities—individual or small group practices, hospitals and skilled nursing facilities.

For new agreements since July 2005, the most common initial allegations that led to an entity entering into an agreement included billing for services not provided and providing medically unnecessary services. When negotiating agreements, HHS-OIG uses one of six templates that address the different types of entities or conduct involved. Across agreements the provisions are generally similar—for example, requirements to provide training on specified topics or to hire a compliance officer.

HHS-OIG uses multiple strategies to oversee agreements, such as requiring periodic reports from the entities that demonstrate compliance and assigning a monitor to review these reports and conduct site visits. HHS-OIG can also take certain actions to address noncompliance. For example, for new agreements from July 2005 through July 2017, HHS-OIG imposed monetary penalties 41 times, ranging from $1,000 to more than $3 million (median rel=”noopener noreferrer” of $18,000), and excluded four entities from participation in federal health care programs.

See the report.

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

StephanieKennan, rel=”noopener noreferrer” Senior Vice President

Founded in 1998,McGuireWoods Consulting LLC(MWC) is a full-service public affairs firm offering infrastructure rel=”noopener noreferrer” 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 rel=”noopener noreferrer” Consulting was ranked 15th of the 1,900 governmentrelations firms in Washington, D.C.

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