Apr 27, 2015

Washington Healthcare Update

This Week: CMS Releases Proposed Rule on FY 2016 Medicare Payments for Inpatient Rehab Facilities... Commerce Subcommittee Hearing Finds Medicare Reimbursement for Telehealth Needs Improvement... Upcoming: Energy and Commerce Legislative Hearing on 21st Century Cures

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Energy and Commerce Hearing Examines Opioid Abuse Epidemic

On April 23, the Energy and Commerce Subcommittee on Oversight and Investigations held a hearing entitled “Combatting the Opioid Abuse Epidemic: Professional and Academic Perspectives.” The purpose of the hearing was to solicit insights and findings, drawn from clinical practice and research — as well as constructive policy recommendations — from some of the nation’s foremost professional and academic experts on opioid abuse. Subcommittee members heard testimony on treatment options currently available as well as new and emerging evidence-based practices supporting individuals living with opioid abuse and addiction.


Robert L. DuPont, M.D.
Institute For Behavior and Health

Marvin D. Seppala, M.D.
Chief Medical Officer
Hazelden Betty Ford Foundation

Laurence M. Westreich, M.D.
American Academy of Addiction Psychiatry

Anna Lembke, M.D.
Assistant Professor of Psychiatry and Behavioral Sciences
Stanford University Medical Center Psychiatry Department

Adam Bisaga, M.D.
Columbia University Medical Center
NYS Psychiatric Institute

Patrice Harris, M.D.
American Medical Association

For more information, or to view the hearing, please visit

Upcoming: Energy and Commerce Legislative Hearing on 21st Century Cures

On April 30, the Energy and Commerce Health Subcommittee will hold a hearing entitled “Legislative Hearing on 21st Century Cures.” The committee has held eight hearings and issued several white papers on the 21st Century Cures initiative since its launch last year, but this hearing will mark the first committee activity focused on legislative language. Committee members, both in Washington, D.C., and across the country, have also hosted more than two dozen roundtables to generate ideas for this initiative. Staff continues to work together around the clock as they have for the past several months and legislative text will be made available in the coming days.

Dr. Kathy Hudson, Deputy Director for Science, Outreach, and Policy at the National Institutes of Health; Dr. Janet Woodcock, Director of the Center for Drug Evaluation and Research at the Food and Drug Administration; and Dr. Jeff Shuren, Director of the Center for Devices and Radiological Health at the FDA will testify. The Majority Memorandum, legislative text and witness testimony will be available here as they are posted.


Commerce Subcommittee Hearing Finds Medicare Reimbursement for Telehealth Needs Improvement

The Senate Commerce Subcommittee on Communications, Technology, Innovation, and the Internet held a hearing April 21 entitled “Advancing Telehealth Through Connectivity.” Subcommittee Chair Roger Wicker (R-MS) and other members of the subcommittee heard testimony from witnesses that Medicare’s limited reimbursement for telehealth services needs to be improved to better address a rapidly evolving electronic health care delivery infrastructure. The hearing also examined the progress made by the private sector and government entities to expand the benefits of telehealth nationwide, particularly in rural areas, and ways to solve connectivity challenges facing many health care providers and patients attempting to take advantage of innovative telehealth applications. Several federal entities have a jurisdictional role in supporting the deployment of telehealth technologies, including the Federal Communications Commission, the U.S. Department of Agriculture, the U.S. Department of Health and Human Services and the Federal Trade Commission. Also at the hearing, Chair Wicker announced that he and Sen. Thad Cochran intend to re-introduce the Telehealth Enhancement Act later this year.

Witness List

Dr. Kristi Henderson
Chief Telehealth and Innovation Officer
University of Mississippi Medical Center

Mr. Jonathan D. Linkous
Chief Executive Officer
American Telemedicine Association

Dr. M. Chris Gibbons
Distinguished Scholar in Residence
Connect2HealthFCC Task Force
Federal Communications Commission

Mr. Todd Rytting
Chief Technology Officer
Panasonic Corporation of North America

For more information or to watch the hearing, please visit

Upcoming: Senate HELP Committee to Hold Hearing on Future Medical Innovation

On April 28, the Senate Committee on Health, Education, Labor, and Pensions (HELP) will hold a hearing entitled “Continuing America’s Leadership: The Future of Medical Innovation for Patients.” Members will be given the opportunity to question witnesses about future technological breakthroughs currently in the pipeline to enhance health care delivery for patients and the types of health research currently underway at the National Institutes of Health and the Food and Drug Administration. The hearing will be held at 10:00 a.m. in 430 Dirksen Senate Office Building.

Witness List

Roderic I. Pettigrew, Ph.D., M.D.
Director, National Institute of Biomedical Imaging and Bioengineering

National Institutes of Health, Bethesda, MD

Christopher P. Austin, M.D.
Director, National Center for Advancing Translational Sciences
National Institutes of Health

Janet Woodcock, M.D.
Director, Center for Drug Evaluation and Research
Food and Drug Administration

Jeffrey E. Shuren, M.D., J.D.
Director, Center for Devices and Radiological Health
Food and Drug Administration

For more information or to watch the hearing, please visit

GOP Senators Introduce Legislation to Sustain Subsidies Through August 2017 Should SCOTUS Find IRS Tax Credits Inapplicable to Federal Exchange

On April 20, Sen. Ron Johnson and 29 other Republican cosponsors introduced S.B. 1016, The Preserving Access to Healthcare Act, legislation that allows beneficiaries enrolled on the federal exchange or states using the platform to maintain their subsidies through August 2017 should the U.S. Supreme Court (SCOTUS) decide in King v. Burwell that advanced premium tax credits cannot run through the states. Moreover, the legislation allows consumers to keep their previous insurance plans regardless of its ability to meet the Affordable Care Act’s (ACA) essential health benefit mandate and puts an end to both the employer and individual mandates. Justices of the U.S. Supreme Court heard oral arguments in King v. Burwell on March 4, and a final decision in the case is expected by the end of June 2015.

Senators Introduce Bipartisan Legislation to Strengthen Personal Care Product Oversight

On April 21, Dianne Feinstein (D-CA) and Susan Collins (R-ME) introduced the Personal Care Products Safety Act, S.1014, to protect consumers and streamline industry compliance by strengthening the Food and Drug Administration’s (FDA) authority to regulate the ingredients in personal care products. While the personal care products industry is projected to exceed $60 billion in U.S. revenue this year, federal regulations on these products have not been updated in 75 years. As it stands, the legislation is the result of numerous discussions with stakeholders and extensive consultation with FDA. The legislation, as written, requires FDA to evaluate five ingredients per year to determine their safety and appropriate use and mandates the agency provide streamlined federal standards so that the personal care products industry knows what to expect and companies can plan for the future with certainty; moreover, FDA would be required to consider whether consumer warnings are needed for chemical ingredients used in personal care products. The first chemicals slated for review under the bill include: diazolidinyl urea (used in several products including deodorant, shampoo and conditioner); lead acetate (used as a color additive in hair dyes); methylene glycol/formaldehyde (used in hair treatments); propylparaben (used as a preservative in shampoo, conditioner and lotion); and quaternium-15 (used as a preservative in a wide range of products including shampoo, shaving cream, skin creams and cleansers). Worth noting, to fund these new oversight activities, the bill would authorize the FDA to collect user-fees from personal care products manufacturers similar to what is done for medications and medical devices.

A press announcement on the legislation can be found here.

2. Administration

Guidance on 2016 Exchange Eligibility Redeterminations, Re-enrollments

On April 22, 2015, the Centers for Medicare and Medicaid Services (CMS) released a guidance document on procedures for eligibility redetermination and re-enrollments for Marketplace Coverage for 2016 on the federally facilitated exchanges and any other marketplace that opts to use it. Under CMS rules, marketplaces have three options for eligibility redeterminations. The document also contains clarifications from the agency that if a person did not file a tax return and reconcile his or her tax credits for 2014, the individual will not get advanced premium tax credits or cost-sharing reductions when re-enrollment takes place for the 2016 plan year. Also worth noting, insurers will be required to send separate notices to 2015 enrollees informing them whether the insurer will be offering a crosswalk option for 2016 similar to their 2015 plan and inform them of the advanced premium tax credits that will be provided if the consumer is re-enrolled when the information becomes available.

CMS Reveals Plan for Federal Small Business Exchange

On April 21, 2015, Centers for Medicare and Medicaid (CMS) revealed on its REGTAP website the agency’s SHOP Development plan for 2016. According to a CMS webinar, the development plan for 2016 involves three phases or “sprints.” In the first phase, the FF-SHOP will update maximum dependent age and aging off rules, and in the second phase, the FF-SHOP will update plan selection options to allow employees to choose dental or health coverage or both while also updating the employee user interface and creating a series of new FF-SHOP notices. In the final phase FF-SHOP functionality will be updated to allow multiple plan years of data to be stored and to allow employers to renew FF-SHOP coverage. 2016 marks the first year employees will be allowed employee choice of plans in all FF-SHOPs. Issuer testing of the FF-SHOP will begin prior to Nov. 1 and is expected to last about three weeks.

FDA: Pilot Program for Center for Devices and Radiological Health Electronic Submission for Home Use Device Labeling

On April 20, the Food and Drug Administration (FDA) Center for Devices and Radiological Health (CDRH) announced the availability of a CDRH electronic submissions Pilot Program database to house labeling for home use devices. Participation in the pilot is open to applicants who label their device(s) for home use. Participation in the pilot project is voluntary. Participants will be asked to navigate through the electronic submissions system and practice submitting labels and package inserts. The pilot project is intended to provide industry and CDRH staff the opportunity to evaluate the submissions process and system and to receive comments from industry participants. FDA will accept applications for participation in the voluntary electronic submissions CDRH Home Use Device Labeling Pilot Program from May 1, 2015, through May 31, 2015. For more information, please visit

FDA: Generic Drug User Fees; Public Meeting; Request for Comments

On April 21, FDA announced a public meeting on the Generic Drug User Fee Amendments of 2012 (GDUFA). The legislative authority for GDUFA expires at the end of September 2017. At that time, new legislation will be required for FDA to continue to collect generic drug user fees for future fiscal years. As required by the Federal Food, Drug, and Cosmetic Act (the FD&C Act), FDA has published a notice in the Federal Register requesting public input on the reauthorization; will hold a public meeting at which the public may present its views on the reauthorization, including specific suggestions for changes to the goals referred to in the Generic Drug User Fee Act Program Performance Goals and Procedures (i.e., the Commitment Letter); will provide a period of 30 days after the public meeting to obtain written comments from the public; and will publish the comments on FDA’s website. FDA invites public comment on the GDUFA program and suggestions regarding the features FDA should propose for the next GDUFA program. The public meeting will be held on June 15, 2015, from 9:00 a.m. to 5:00 p.m. The public meeting may be extended or may end early depending on the level of public participation.

3. State Activities

Puerto Rico Coalition Calls on Feds for Health System Reforms

Puerto Rico’s Gov. Alejandro Garcia Padilla and a new coalition of the territory’s physicians, insurance companies and hospitals are demanding that the federal government take steps to prevent the collapse of the health care system on the island. Rather than experiencing a 3 percent increase in its 2016 average Medicare Advantage (MA) benchmarks like the U.S. national average, Puerto Rico’s MA reimbursement rates will decrease approximately 11 percent compared to 2015 funding levels, an action that was announced on the Centers for Medicare and Medicaid Services’ most recent call letter. Puerto Rico’s funding now stands as the lowest of any U.S. jurisdiction, 38 percent below the U.S. national average. “Puerto Rico can no longer bear the burden of inequality from unconscionable federal cuts to essential services,” said Congresswoman Nydia Velazquez (D-NY). “Access to quality healthcare is not a privilege; it is a right for every American. Puerto Rico is simply asking to be treated with the fairness and dignity that all Americans deserve.” The Coalition intends to engage in a robust campaign to convince the federal government to act, which will include lobbying, public relations, paid media and grass roots mobilizations. Without help from the government, the MA program is likely to begin to shut down on June 1, 2015. As it stands, 60 percent of Puerto Rico’s population, approximately 2 million patients, receives medical care through Medicare, Medicare Advantage (MA) or Medicaid.

4. Regulations Open for Comment

Proposed FY 2016 Medicare Payment and Policy Changes for Inpatient Psychiatric Facilities

On April 24, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed fiscal year (FY) 2016 Medicare payment policies and rates for the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS). The proposed rule also updates the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program, which requires participating facilities to report on quality measures or incur a reduction in their annual payment update. This proposed rule would expand the measure sets in future fiscal years and change certain data reporting requirements for these measures. CMS is proposing to update the estimated payments to IPFs in FY 2016 relative to estimated payments in FY 2015 by 1.6 percent (or $80 million). This amount reflects 2.7 percent IPF-specific market basket estimate less the productivity adjustment of 0.6 percentage point and less the 0.2 percentage point reduction required by law, for a net update of 1.9 percent. Estimated payments to IPFs are reduced by 0.3 percent due to updating the outlier fixed-dollar loss threshold amount. CMS will accept comments on the proposed rule until June 23, 2015.

CMS Releases Proposed Rule on FY 2016 Medicare Payments for Inpatient Rehab Facilities

On April 23, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule outlining proposed FY 2016 Medicare payment policies and rates for the Inpatient Rehabilitation Facility (IRF) Prospective Payment System and the IRF Quality Reporting Program. Specifically, CMS is proposing to increase payments to inpatient rehabilitation hospitals in 2016 by approximately $130 million, or 1.7 percent when compared to 2015. This agency also proposes new quality reporting requirements to adopt measures that satisfy three of the quality domains required by the IMPACT Act in FY 2016: skin integrity and changes in skin integrity; functional status, cognitive function and changes in function and cognitive function; and incidence of major falls; IRFs that fail to submit the required quality data to CMS will be subject to a 2 percentage point reduction to their applicable FY annual increase factor, and the expected cost of the implementation of these new quality reporting requirements is approximately $24 million to hospitals. Worth noting, the payment increase is significantly smaller than the 2.4 percent raise they received in fiscal 2015. The agency proposes to begin collecting IRF quality reporting data by fall 2016. The proposed rule will be published in the Federal Register on April 27, and the agency will accept comments from stakeholders until June 22, 2015.

USPSTF Upholds Recommendations on Mammography for Women Under 50

In a draft recommendation released April 20, the U.S. Preventive Services Task Force (USPSTF) upheld its 2009 recommendation that women under 50 wait to start getting mammograms. Specifically, the task force downgraded mammography coverage for women ages 40-49 from “B” to “C” status, meaning insurers would no longer have to cover screenings without a co-pay. The decision comes after more evidence has shown the negative effects associated with mammograms, including false positives and overdiagnosis. In a letter to the Department of Health and Human Services opposed to the decision, Sen. Barbara Mikulski said, “Should the draft recommendation be finalized, I will actively and aggressively pursue all legislative options available to ensure that women aged 40 and older are able to continue receiving free annual mammogram.” The task force reports that women aged 60-69 are most likely to avoid a breast cancer death due to a mammography. “Screening mammography in women ages 40 to 49 years may reduce the risk of dying of breast cancer, but the number of deaths averted is much smaller than in older women and the number of false-positive tests and unnecessary biopsies are larger. All women undergoing regular screening mammography are at risk for the diagnosis and treatment of noninvasive and invasive breast cancer that would otherwise not have become a threat to her health, or even apparent, during her lifetime. Public comment on the draft recommendations must be submitted by May 18, 2015, at 8:00 PM EST.

Fiscal Year 2016 Proposed Inpatient and Long-term Care Hospital Policy and Payment Changes

On April 17, 2015, CMS issued a proposed rule to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS). The proposed rule, which would apply to approximately 3,400 acute care hospitals and approximately 435 LTCHs, would affect discharges occurring on or after Oct. 1, 2015. The IPPS pays hospitals for services provided to Medicare beneficiaries using a national base payment rate, adjusted for a number of factors that affect hospitals’ costs, including the patient’s condition and market conditions in the hospital’s geographic area.

The rule proposes policies that continue a commitment to increasingly shift Medicare payments from volume to value. CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS and long-term care hospitals under the LTCH PPS. Under these two payment systems, CMS generally sets payment rates prospectively for inpatient stays based on the patient’s diagnosis and severity of illness. A hospital receives a single payment for the case based on the payment classification — MS-DRGs under the IPPS and MS-LTC-DRGs under the LTCH PPS — assigned at discharge.

By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the costs of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital “market basket.” LTCHs are paid according to a separate market basket based on LTCH-specific goods and services. CMS will accept comments on the proposed rule until June 16, 2015.

Proposed FY 2016 Payment and Policy Changes for Medicare Skilled Nursing Facilities (SNF)

On April 15, 2015, CMS issued a proposed rule [CMS-1622-P] outlining proposed Fiscal Year (FY) 2016 Medicare payment rates for skilled nursing facilities (SNFs). This proposed rule would update the payment rates used under the prospective payment system (PPS) for skilled nursing facilities (SNFs) for fiscal year (FY) 2016. In addition, it includes a proposal to specify a SNF all-cause all-condition hospital readmission measure, as well as a proposal to adopt that measure for a new SNF Value-Based Purchasing (VBP) Program and a discussion of SNF VBP Program policies being considered for future rulemaking to promote higher quality and more efficient health care for Medicare beneficiaries. Additionally, this proposed rule would implement a new quality reporting program for SNFs as specified in the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act). It also would amend the requirements that a long-term care (LTC) facility must meet to qualify to participate as a skilled nursing facility (SNF) in the Medicare program, or a nursing facility (NF) in the Medicaid program. These requirements implement the provision in the Affordable Care Act regarding the submission of staffing information based on payroll data. To be assured consideration, comments must be received no later than 5 p.m. on June 19, 2015.

CMS Proposes Mental Health Parity for Medicaid and CHIP in New Rule

The Centers for Medicare & Medicaid Services (CMS) announced April 6 a new proposed rule to align mental health and substance use disorder benefits for low-income Americans with benefits required of private health plans and insurance. Specifically, the proposal applies certain provisions of the Mental Health Parity and Addiction Equity Act of 2008 to Medicaid and the Children’s Health Insurance Program (CHIP) by mandating that mental health and substance use disorder benefits are no more restrictive than medical and surgical services. As it is currently written, the proposed rule ensures that all beneficiaries who receive services through managed care organizations or under alternative benefit plans have access to mental health and substance use disorder benefits regardless of whether services are provided through the managed care organization or another service delivery system, and the full scope of the proposed rule applies to CHIP, regardless of whether care is provided through fee-for-service or managed care. Currently, states have flexibility to provide services through a managed care delivery mechanism using entities other than Medicaid managed care organizations, such as prepaid inpatient health plans or prepaid ambulatory health plans; in the new rule, states will be required to include contract provisions requiring compliance with parity requirements in all applicable contracts for these Medicaid managed care arrangements. The proposed rule was published in the Federal Register on April 10 with comments due to the agency by June 9, 2015.

FDA Assessing the Center of Drug Evaluation and Research’s Safety-Related Regulatory Science Needs and Identifying Priorities

On March 19, the Food and Drug Administration (FDA) announced the availability of a report entitled "Assessing CDER’s Drug Safety-Related Regulatory Science Needs and Identifying Priorities." This report identifies drug safety-related regulatory science needs and priorities related to the mission of FDA’s Center for Drug Evaluation and Research (CDER) that would benefit from external collaborations and resources. FDA hopes to foster collaborations with external partners and stakeholders to help address these needs and priorities. This notice asks stakeholders conducting research related to these needs to describe that research and indicate their interest in collaborating with FDA to address safety-related research priorities. Since publication of the 2011 "Identifying CDER’s Science and Research Needs" report, FDA has been engaged in efforts to further assess and prioritize the needs articulated therein. As part of these efforts, CDER’s Safety Research Interest Group (SRIG), a subcommittee of the Science Prioritization and Review Committee, assessed CDER’s overall drug safety-related regulatory science needs in view of FDA’s ongoing research efforts and highlighted areas that would benefit from additional resources and collaboration. Public comments will be accepted at any time. However, the public is encouraged to submit comments by May 18, 2015, to ensure FDA consideration.

HHS Releases Proposed Rules on EHR Incentive Programs and Health IT Certification Criteria

The U.S. Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC) announced March 20 the release of the Stage 3 notice of proposed rulemaking for the Medicare and Medicaid Electronic Health Records (EHRs) Incentive Programs and 2015 Edition Health IT Certification Criteria to improve the way electronic health information is shared and ultimately improve the way care is delivered and experienced. The proposed rules aim to give providers additional flexibility, make the program simpler, drive interoperability among electronic health records and increase the focus on patient outcomes to improve care.

Specifically, the Meaningful Use Stage 3 proposed rule issued by CMS specifies new criteria that eligible professionals, eligible hospitals and critical access hospitals must meet to qualify for Medicaid EHR incentive payments; the rule also proposes criteria that providers must meet to avoid Medicare payment adjustments (Medicaid has no payment adjustments) based on program performance beginning in payment year 2018. Moreover, the 2015 Edition Health IT Certification Criteria proposed rule aligns with the path toward interoperability — the secure, efficient and effective sharing and use of health information — identified in ONC’s draft shared Nationwide Interoperability Roadmap. The proposed rule also builds on past editions of adopted health IT certification criteria, and includes new and updated IT functionality and provisions that support the EHR Incentive Programs’ care improvement, cost reduction and patient safety across the health system.

Under the Health Information Technology for Economic and Clinical Health Act, doctors, health care professionals and hospitals, including critical access hospitals, can qualify for Medicare and Medicaid incentive payments when they adopt and meaningfully use health IT technology certified by ONC. The Stage 3 proposed rule may be viewed here, and the comment period ends on May 29, 2015. The 2015 Edition proposed rule may be viewed here and the comment period ends on May 29, 2015. The Draft 2015 Edition Certification Test Procedures may be viewed at, and the comment period ends on June 30, 2015.

Use of an Electronic Informed Consent in Clinical Investigations: Questions and Answers; Draft Guidance for Industry, Clinical Investigators and Institutional Review Boards

The Food and Drug Administration (FDA or the Agency) is announcing the availability of draft guidance for industry, clinical investigators and institutional review boards, entitled “Use of Electronic Informed Consent in Clinical Investigations: Questions and Answers.” The guidance provides recommendations for clinical investigators, sponsors and institutional review boards (IRBs) on the use of electronic media and processes to obtain informed consent for FDA-regulated clinical investigations of medical products, including human drug and biological products, medical devices and combinations thereof. Although public comments will be accepted any time, to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance, submit either electronic or written comments on the draft guidance by May 8, 2015.

5. Reports

HHS-OIG: Practical Guidance for Health Care Governing Boards on Compliance Oversight

On April 20, the Department of Health and Human Services Office of the Inspector General (OIG) issued guidance aimed at the governing boards of health care entities. The guidance — issued in conjunction with associations of health care auditors, attorneys and compliance professionals — aims to inform health care boards regarding their oversight duties. Although the guidance is written at a relatively high level, it contains numerous statements and recommendations that will be of interest to any board concerned with health care compliance. In the guidance, OIG states that boards have a duty to act reasonably in ensuring that a corporate information and reporting system exists and that the reporting system is adequate to provide the board with appropriate information relating to compliance. OIG recommends that boards consult OIG’s own compliance guidance and also the Federal Sentencing Guidelines and Corporate Integrity Agreements (CIAs) as benchmarks for the board’s compliance efforts. CIAs are imposed on organizations that have been investigated by the OIG because of fraud allegations and contain structural and reporting requirements, while the Sentencing Guidelines consider compliance activity in mitigation of criminal fines and sentences.

HHS-OIG: Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a Substantial Margin

According to a recent report issued by the HHS-OIG, total rebates under Medicaid were substantially higher than total rebates under Medicare Part D. Also, Medicaid’s net unit costs (i.e., the pharmacy reimbursement amounts minus rebates) were much lower than net unit costs under Part D in 2012 for the 200 selected brand-name drugs, and the statutorily defined Medicaid rebates exceeded Part D rebates by a substantial margin. Further, more than half of Medicaid rebates owed by manufacturers for selected brand-name drugs were attributed to the inflation-based add-on rebates. This is the second OIG evaluation examining the prices and rebates under Medicaid and Medicare Part D. Both evaluations demonstrate the substantial difference in rebates collected under Medicaid and Part D. The report encourages CMS and Congress to explore the costs and benefits of obtaining additional rebates under Part D. Some options include an examination of the impact of “dual-eligible” beneficiaries (i.e., beneficiaries eligible for both Medicare and Medicaid) on each program’s rebate totals and an analysis of methods to protect Part D from significant increases in drug prices.

HHS-OIG Finds CMS Overspent by $251 Million on DME Infusion Drugs

In a report released April 22 by the Department of Health and Human Services Office of the Inspector General (OIG), the oversight agency found that the Centers for Medicare and Medicaid Services could have reduced Medicare expenditures for DME infusion drugs (administrated through implantable pumps) by $251 million in an 18-month period had the average sales price-based payment (ASP) methodology previously recommended by OIG been implemented in April 2013. As it stands, OIG reported in February 2013 that Medicare pay for DME infusion drugs substantially exceeded estimated acquisition costs and that calculating provider reimbursement using the ASPs rather than average wholesale prices would have substantially reduced Medicare spending. To support its claim, the latest report determined that between the second quarter of 2013 and the third quarter of 2014, at least 42 percent of DME infusion drugs had Medicare payment amounts that were more than twice their estimated acquisition costs; in contrast, approximately one-quarter of these drugs had payment amounts that were below costs. To address the issue, OIG had previously recommended that CMS either seek a legislative solution from Congress to pay for DME infusion drugs using the ASP-based methodology or include DME infusion drugs in the bidding program already established for durable medical equipment. As it stands, infusion drugs are covered through durable medical equipment benefit because infusion therapy often is provided in the home, rather than facilities; worth noting, OIG’s recommendations do not apply to the reimbursement-setting methodology used for injected drugs administered in physician offices.

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

Stephanie Kennan, Senior Vice President
Charlyn Iovino, Vice President
Brian Looser, Vice President
Amanda Anderson, Research Assistant

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal's "The Influence 50," an annual report of the top public affairs firms in Washington, D.C.

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