Washington Healthcare Update

September 10, 2018

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This Week: House and Senate Work to Avoid Government Shutdown; Legislation on Gag Clauses Moving; Oral Arguments on ACA Individual Mandate Court Case Held

1. Congress



2. Administration

3. Courts

1. Congress


House Ways and Means Passes Bipartisan Health Bills

On Sept. 6, the House Ways and Means Committee reported to the House four health care bills: 

H.R. 6690, the Fighting Fraud to Protect Care for Seniors Act, would create a three-year pilot project in which beneficiaries’ traditional Medicare cards would be replaced with machine-readable, tamper-resistant smart cards. The goal of the project would be to test the use of smart-card technology in Medicare. The bill is sponsored by health subcommittee Chair Peter Roskam (R-IL) and Earl Blumenauer (D-OR). The legislation passed on a voice vote but concerns were raised that a pilot may not be the best way to combat fraud, based on a Government Accountability Office report.

H.R. 6662, the Empowering Seniors’ Enrollment Decision Act, was passed by voice vote, which would codify a regulation allowing beneficiaries in a Medicare Cost Plan not tied to a Medicare Advantage plan more time to change their coverage. It is sponsored by Reps. Erik Paulsen (R-MN) and Ron Kind (D-WI).

H.R. 6561, the Comprehensive Care for Seniors Act would direct HHS to issue final regulations for the Programs of All-Inclusive Care for the Elderly (PACE) based on CMS’s 2016 proposal. The bill is sponsored by Reps. Jackie Walorski (R-IN), Lynn Jenkins (R-KS), Judy Chu (D-CA) and Earl Blumenauer, and endorsed by the National PACE Association.

H.R. 3635, the Local Coverage Determination Clarification Act, would clarify the LCD process and make it more transparent. Chairman Brady said the original bill had a provision that would have required each Medicare Administrative Contractor (MAC) to independently evaluate another MAC’s scientific evidence for a coverage decision before implementing it for their region, but the language was removed from the original bill to move the legislation forward. However, Kind raised concerns that allowing one MAC to adopt another’s coverage policy without a separate evaluation essentially allows LCDs to become national coverage policy. Kind said he hopes the bill can be improved before a floor vote.

Energy and Commerce Committee Asks MedPAC to Look at Hospital Consolidation

Republican leaders of the House Energy and Commerce Committee have asked the Medicare Payment Advisory Commission to investigate the effects of hospital consolidation on rising Medicare costs.

“The Committee wishes to determine the impact consolidation has on patients, and if patients end up paying higher prices due to consolidation for no identifiable benefit to the beneficiary,” the letter sent to MedPAC on Aug. 30 said. The letter was signed by committee Chair Greg Walden (R-OR), health subcommittee Chair Michael Burgess (R-TX) and oversight subcommittee Chair Gregg Harper (R-MS).

The members ask MedPAC to study five issues:

  • Recent trends in hospital consolidation and whether federal policies contribute to those trends.
  • Effects of consolidation on costs for hospitals and patients.
  • Whether markets with higher levels of hospital consolidation tend to have higher commercial prices or higher costs for Medicare beneficiaries.
  • Effects of mergers between physicians and hospitals on Medicare payments for doctors’ services.
  • How the 340B drug discount program might drive hospitals to acquire physician practices, designate them as 340B sites and then prescribe more expensive drugs for Medicare beneficiaries.

The letter also acknowledges that MedPAC has studied consolidation previously. Most recently, MedPAC’s 2017 report to Congress, for instance, said that both horizontal and vertical mergers within the hospital industry can increase Medicare costs.

More study is still needed, Walden, Burgess and Harper say.

House Energy and Commerce Subcommittee on Oversight and Investigation Holds Nursing Home Quality Hearing

On Sept. 6, the House Energy and Commerce Subcommittee on Oversight and Investigation held a hearing on nursing home quality. Testifying at the hearing were representatives of the Government Accountability Office, the Office of the Inspector General for HHS and CMS’s chief medical officer.

GAO’s October 2015 report found mixed results in nursing home quality based on its analysis of trends reflected in key sources of quality data that the Centers for Medicare & Medicaid Services (CMS) collects.

  • An increase in reported consumer complaints suggested that consumers’ concerns about nursing home quality increased.
  • In contrast, trends in care deficiencies, nurse staffing levels and clinical quality measures indicated potential improvement in nursing home quality.

GAO also found that data issues complicated CMS’s ability to assess nursing home quality trends. For example:

  • CMS allowed states to use different survey methodologies to measure deficiencies in nursing home care, which complicates the ability to make comparisons nationwide. GAO recommended that CMS implement a standardized survey methodology across states, and in November 2017 CMS completed national implementation.
  • CMS did not regularly audit selected quality data including nurse staffing and clinical data (for example, on residents with pressure ulcers) to ensure their accuracy. GAO recommended CMS implement a plan for ongoing auditing of quality data. The agency concurred with this recommendation and has been conducting regular audits of nurse staffing data but does not have a plan to audit other quality data on a continuing basis. GAO continues to believe that regular audits are needed to ensure the accuracy and comparability of nursing home quality data. 

House Energy and Commerce Subcommittee Holds Markup

The Energy and Commerce health subcommittee marked up several bills on Sept. 7. Included in the markup was a proposal that will give the Medicare Payment Advisory Commission access to drug pricing and rebate data, to help Congress understand the costs of prescription drugs.


Senate Passes Gag Clause Legislation

On Sept. 5, the Senate approved by unanimous consent a bipartisan bill which prohibits gag clauses that prevent pharmacists from telling customers that they could save money by paying cash out-of-pocket rather than using their insurance benefit. 

The Know the Lowest Price Act (S. 2553) applies to patients in Medicare Advantage and Medicare Part D plans and is sponsored by Democrats Debbie Stabenow (MI), Ron Wyden (OR) and Claire McCaskill (MO) and Republicans Susan Collins (ME), Bill Cassidy (LA) and John Barrasso (WY).

Another bill, S. 2554, introduced by Sens. Collins and Stabenow that would apply to patients on Obamacare exchanges and in private health plans was reported out of the Health, Education, Labor and Pensions Committee and is likely to be voted on by the full Senate next week.

On Sept. 7, the House Energy and Commerce Health Subcommittee approved by voice vote a similar proposal introduced by Rep. Buddy Carter (R-GA). That legislation applies both to Medicare and the private health insurance market.

The Trump administration has called for the elimination of gag clauses. 

Senate Set to Consider Opioid Package

The Senate is expected to vote next week on a bipartisan package to address the opioid crisis. Two provisions that have passed the House but will not be in the Senate package require Medicaid to cover treatment at more inpatient facilities and loosen privacy restrictions for substance abuse patients’ medical records.

The Senate package otherwise largely matches what the House package (H.R. 6) passed earlier this summer. The Senate package includes legislation reported out of the Health, Education, Labor and Pensions Committee as well as the Judiciary, Finance and Commerce committees.

The bill would require HHS and DOJ to conduct a study on the effect that federal and state opioid prescribing limits have had on patients—and specifically whether such limits are associated with higher rates of suicide.

The Senate package would also promote the use of telemedicine for substance use disorder by waiving the restrictions that typically prevent reimbursement beyond rural and disadvantaged areas. Other technologies receiving a boost from the deal: e-prescriptions for controlled substances; electronic prior authorization; and incentive payments to speed adoption of electronic health records in behavioral health.

2. Administration

FDA Announces Initiatives to Speed Decisions on Low-risk Devices

The FDA on Sept. 5 issued draft guidance that Commissioner Scott Gottlieb said will boost the transparency of the agency’s decisions on medical devices.

Gottlieb also announced initiatives to speed decisions on low-risk devices and recommended cybersecurity efforts for device makers as he spoke at the Medical Device Innovation Consortium’s public forum.

The agency launched a “Quik Review” pilot that could reduce review time up to 30 percent for certain well-understood and lower-risk devices submitted through the 510(k) pathway.

Under 501(k) regulation, developers need only show that their product is substantially equivalent to a similar product already on the market.

The guidance issued describes factors for evaluating uncertainty when assessing medical devices, including whether alternative treatments are available, what the public health need is, and if trial sponsors can address lingering questions after approval.

The FDA already has a three-tiered framework for its reviews, but in 2015 launched an expedited access program for devices that address unmet needs in life-threatening or debilitating conditions. Some critics have challenged the FDA, saying not all 501(k)-approved devices receive adequate review. 

FDA Issues New Draft Memorandum of Understandings on Compounding

The FDA on Sept. 7, issued a new draft memorandum of understanding on drug compounding that will guide how the federal government and states share oversight of compounded medicines.

Compounders in states that agree to the MOU would be able to distribute more of their products out of state. The updated agreement requires states to identify compounders that distribute more than half of their total prescription orders across state lines. States must then report certain information to FDA, like the specific volume of drugs distributed interstate and the number of states in which a compounder is licensed.

Unlike the 2015 MOU, the revised MOU no longer requires states to take action. Instead, they are directed to consider whether action is needed, using a risk-based approach. It also mandates that states investigate complaints associated with compounded products distributed out of state but gives them the flexibility to determine how to conduct those investigations.

If a state chooses not to enter in the MOU, compounders there can only distribute 5 percent of their total prescriptions outside the state.

The agency is accepting comments on the draft for 90 days. See the draft.

3. Courts

FDA Told to Finish Graphic Warning Labels of Tobacco’s Health Consequences

A federal judge in Massachusetts ordered the FDA on Wednesday to finish designing full-color graphic warning labels that were due seven years ago under a law mandating imagery of tobacco’s health consequences be placed on cigarette packs and advertisements.

U.S. District Judge Indira Talwani ruled the agency has illegally avoided a mandatory duty imposed by Congress to give teeth to the Family Smoking Prevention and Tobacco Control Act of 2009. The judge gave the FDA three weeks, through Sept. 26, to develop a calendar mapping dates it will complete outstanding studies, hear and review public comments, and issue a final regulation.

The American Lung Association, the American Cancer Society, American Heart Association, American Academy of Pediatrics, Campaign for Tobacco Free Kids, Truth Initiative and three physicians sued the FDA in 2016 alleging that the FDA was neglecting its fundamental duties and putting the public health at risk. 

The case is American Academy of Pediatrics, et al. v. U.S. Food and Drug Administration, case number 1:16-cv-11985, in the U.S. District Court for the District of Massachusetts.

Montana Health Co-op Entitled to Cost-sharing Payments

The federal government owes a nonprofit health insurance cooperative, Montana Health Co-op,  $5.3 million in Affordable Care Act cost-sharing reduction payments, the Court of Federal Claims has ruled, finding that the payments are mandatory under the ACA despite Congress’s failing to appropriate specific funding.

The judge found Montana Health Co-op was entitled to cost-sharing payments for the last quarter of 2017 because the ACA created a mandatory obligation for the government to pay insurers who implement cost-sharing reductions under the ACA.

The government had argued that the cooperative had no claim to those cost-sharing payments because Congress did not appropriate any specific funding for the payments, reflecting that lawmakers never intended to create an enforceable obligation.

The arguments in the case had come down to the central question of whether the government was statutorily obligated to provide the disputed cost-sharing reduction payments, and the ACA’s language “clearly and unambiguously” imposes that obligation, pointing to a clause noting that HHS “shall make periodic and timely payments.”

Oral Arguments Held in ACA Case

Three hours of oral arguments were held on Sept. 5 in a case brought by 20 GOP-led states that are requesting to stop enforcement of the entire Affordable Care Act, as well as the Trump administration’s request to deem the individual mandate unconstitutional.   

At issue is whether the ACA’s individual mandate should be invalidated since the Supreme Court only held the provision constitutional due to Congress’ power of taxation, and Congress has since zeroed out the penalty for failing to comply effective Jan. 1.

The Democratic attorneys general defending the ACA argue the tax is still on the books and is expected to generate revenue at least through 2020, so the provision is still constitutional. Additionally, they say, if the judge finds the provision is not constitutional, he should only sever the now toothless mandate from law since that is what Congress did after a yearlong debate over the ACA. The Department of Justice and the plaintiff states believe the court should look instead to the enacting Congress of 2010, which had determined guarantee issue and community rating were inextricably linked to the mandate.

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

Stephanie Kennan, Senior Vice President

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