Washington Healthcare Update

July 30, 2018

Pardon Our Dust

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This Week: CMS releases proposed rules; House passes legislation concerning ACA taxes and broader use of HSAs; Opioid legislation waits in the Senate.

1. Congress



2. Administration

3. Courts

1. Congress


House Passes Bills Related to ACA Taxes and HSAs

On July 25, the House passed bills that would end or delay ACA taxes, expand health saving accounts and let all consumers sign up for catastrophic-level health coverage, among other measures, and called on Congress to address the Cadillac tax by the end of the year.

The House passed 277-142, H.R. 6311, which includes a two-year delay of the health insurance tax, allows all consumers to sign up for catastrophic health coverage and increases the maximum contribution for health savings accounts to align with the maximum out-of-pocket spending as well as several other HSA changes. CBO did not score 6311, but did score several of the stand-alone bills that were included in the package, the cost of which totals about $33 billion, although that does not include the two-year delay of the health insurance tax.

Also passing the House, by a vote of 242-176, was H.R. 6199, which reverses the ACA’s ban on using tax-favored accounts for over-the-counter medicine, allows people to use HSAs for direct primary care arrangements, provides a tax break for certain exercise and equipment purchases and allows HSA enrollees to use up to $250 in first-dollar coverage.

The Congressional Budget Office Tuesday said H.R. 6199 would cost $6.7 billion over 10 years.


HELP Committee Passes Collin’s Pharmacy Gag Rule and Scott Sickle Cell Research Bill

The Senate HELP Committee passed S. 2554, the so-called pharmacy gag rule, by voice vote. The legislation, sponsored by Susan Collins (R-ME), would ban PBM contracts that restrict pharmacists from telling consumers if they could save money by buying a drug directly rather than using their insurance copay.

The PBM lobby Pharmaceutical Care Management Association came out in support of the bill a day ahead of the vote, saying in a statement that it aligns with PBMs’ standard practices in the market.

The committee also passed Sen. Scott’s (R-SC) legislation (S. 2465) to support sickle cell disease research. However, along a party line vote, the committee rejected an amendment to Sen. Scott’s bill to authorize additional appropriations for critical populations.

2. Administration

HHS to Continue to Support Work Requirements in Medicaid

On July 26, HHS Secretary Alex Azar spoke to a conservative audience at the Heritage Foundation and stated that the administration will continue to approve state requests to add work requirements to their Medicaid programs despite HHS’s recent judicial setback in the Kentucky Medicaid case. Azar also spent much of his speech advocating for changes to the Affordable Care Act, such as replacing the subsidy structure with block grants and changing the age-rating structure to incentivize more young people to join the markets.

He said the Trump administration is rethinking how Medicaid provides coverage for able-bodied adults and that he wants the program to serve as “a pathway out of poverty.”

“To the extent that the ACA does cover more Americans, it is mostly due to the expansion of this taxpayer-funded program,” Azar said of Medicaid expansion. The HHS secretary also touted the proposal in President Donald Trump’s 2019 budget to replace the entirety of the ACA subsidy structure and Medicaid expansion with block grants.

Proposed Payment Changes for Docs

The Centers for Medicare and Medicaid Services proposed expanding its site-neutral payment policy to clinic visits, which CMS estimates could save $610 million for Medicare and $150 million for patients through lower copayments for checkups at off-campus hospital outpatient departments. The proposed rule would affect about 40 percent of the payments physicians receive from Medicare. 

CMS says the proposal is an effort to reduce paperwork and improve patient care. The CMS plan is open for public comment until early September. It would combine four levels of paperwork required for reimbursement, and four levels of payments, into one form and one flat fee for each doctor’s appointment (although there would still be separate filing systems for new and established patients).

Many doctors predict that the proposed payment changes would establish a financial incentive to see fewer Medicare patients. Goodrich disagrees.

Under the proposed system, doctors who need more time with patients could file for an “add-on” payment of $67 per appointment. That would require a small amount of additional documentation, but would still reduce a doctor’s keyboard time, according to CMS estimates.

CMS hopes to enact any changes to Medicare fee schedules on Jan. 1, 2019.

The main challenge remains convincing patients and physicians that the changes are worth doing in the first place.

CMS Considers How to Test a Competitive Acquisition Program for Part B Drugs

Medicare is seeking public comment on this idea before moving forward with a formal proposal. The request for comment came in a proposed rule for hospital outpatient departments and ambulatory surgical centers. The proposed rule for 2019 also includes a series of changes to drug and device payments.

CMMI is thinking about testing improvements to the competitive acquisition program, or CAP, which was put in place through the 2003 Medicare Modernization Act. The idea is that third parties would negotiate drug prices for physician-administered drugs covered by Medicare Part B, then sell them to doctors. The program was shelved following a two-year run, after only one vendor opted to negotiate with drug companies and few doctors decided to participate.

Drug makers currently set the prices for medicines purchased by doctors. CMS then reimburses doctors based on a formula that leaves little incentive for doctors to consider the cost or for drug makers to keep prices low.

CMS is looking to improve the original CAP idea, by, for example, requiring private sector vendors to enter into value-based arrangements with manufacturers. It is considering requiring vendors to use payment strategies like outcome-based drug purchasing agreements, where drug payments are based on how well the products perform, or indication-based pricing, where payments for a drug vary based on the patient’s disease.

CMS said it’s also looking at letting vendors pay for a drug over a period of time, instead of upfront payments, or tying payments to the drug’s impact on total cost of the patient’s care, as well as reduced beneficiary cost-sharing.

CMS is considering whether the CAP model could include Medicare Advantage organizations, state Medicaid agencies and Medicaid managed care organizations.

It says the model could start with a subset of therapies, adding more drugs over time.

Medicare proposed dozens of specific questions on how a CAP demonstration should be structured. CMS wants feedback on which providers, suppliers, drugs and beneficiary populations should be included in such a pilot.

Since certain physician specialties receive a substantial amount of revenue from Medicare Part B, CMS wants to know if the model should address a potential reduction in payments for these doctors.

It also wants feedback on factors like how CMS should select the vendors that would participate in a CAP and how it should balance the need for the vendors to have significant negotiating power on drugs with the need to create competition among vendors.

The 2019 hospital outpatient rule also includes a change that should boost payments for biosimilar drugs. CMS is proposing reimbursing biosimilars purchased by 340B facilities at a rate equal to the average sales price minus 22.5 percent of the biosimilar’s average sales price. Previously CMS was reimbursing at average sales price minus 22.5 percent of the reference branded biologic’s ASP.

The proposal will also modify payments for device-intensive procedures to include a wider array of medical devices—including some that don’t remain in the patient’s body after a procedure. It’s also changing the threshold for what qualifies as a device-intensive procedure. CMS is proposing a device-intensive procedure be defined as when the device cost exceeds 30 percent of the total cost of the procedure. The current policy is 40 percent.

Medicare Rule Hikes Payment for Non-opioid Painkillers

In the recently released proposed hospital outpatient departments rule, CMS is proposing to pay more for non-opioid management drugs used in surgical procedures at ambulatory surgery centers. Instead of putting these drugs in a bundled payment for surgical supplies, CMS proposes reimbursing for the medicines at their average sales price plus 6 percent. Currently the only drug this would apply to is Pacira’s Exparel, according to the proposed rule. The change will not apply to hospital outpatient departments.

The agency is also seeking comment on whether other non-opioid alternatives for acute or chronic pain may warrant separate payments because they could reduce opioid prescribing and addiction.

CMS also plans to remove three questions about pain asked in hospital surveys of patients, effective for 2022 discharges. The survey questions cover if the patient had any pain during the hospital stay, how often hospital staff discussed pain with the patient and how often staff discussed how to treat the patient’s pain. The questions were put in place in 2018, after concerns were raised that older queries about pain could potentially increase opioid prescribing.

CMS Proposes More Cuts to 340B Providers

The number of hospitals and other facilities in the 340B federal drug discount program affected by payment cuts for physician-administered drugs would grow. The proposed 2019 Outpatient Prospective Payment System rule would slash by nearly 30 percent Medicare Part B drug payments to off-campus hospital outpatient facilities covered by the 340B program. CMS said the proposal could save Medicare and its beneficiaries $48.5 million.

This proposal is being promoted as part of the administration’s effort to lower drug costs.

In last year’s 2018 hospital outpatient pay rule, CMS cut hospitals’ Medicare pay for 340B drugs by almost 30 percent, but hospital off-campus facilities that were paid under the Medicare physician fee schedule, due to a site neutrality provision in the Bipartisan Budget Act of 2015, were exempted from the cut. Some stakeholders complained, but CMS did not change the policy last year.

The proposed 2019 hospital outpatient pay rule would apply those cuts to off-campus departments of hospitals that are paid under the Medicare physician fee schedule.

The administration has estimated the rule change that took effect in January would save Medicare beneficiaries about $320 million on drug copayments this year because patients’ out-of-pocket costs are tied to what Medicare is billed for the drugs.

The administration maintained that the lower reimbursement rate is closer to what hospitals actually pay for the drugs. Hospitals in the program say 340B was specifically intended to pay more because of the challenges their caseloads pose.

3. Courts

Attorneys General File Suit Against Association Health Plans

Eleven states and the District of Columbia filed a lawsuit against the Trump administration over a rule that expands access to association health plans, which don’t comply with the Affordable Care Act’s coverage requirements. The lawsuit, led by New York Attorney General Barbara Underwood (D) and Massachusetts Attorney General Maura Healey (D), contends that the rule by the Labor Department would increase “the risk of fraud and harm to consumers.”

In announcing the rules last month, the administration said it would make it easier for small businesses to purchase less expensive health insurance by forming associations. The lawsuit filed by the attorneys general says that association health plans would harm consumer protections enacted in the Affordable Care Act and that the Department of Labor violated the Administrative Procedures Act by redefining the term employer in a way that conflicts with health care.

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

Stephanie Kennan, Senior Vice President

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