CONSISTENTLY DELIVERS

Jun 29, 2015

Washington Healthcare Update

This Week: Federal Subsidies Upheld by SCOTUS in King v. Burwell... How to Pay for 21st Century Cures Bill Discussions Continue... Senate Appropriations Committee Approves HHS FY 2016 Budget... How to Pay for 21st Century Cures Bill Discussions Continue... CMS Releases Proposed 2016 Medicare Dialysis Pay Rule 

1. U.S. Supreme Court – King v. Burwell

2. Congress

House of Representatives

Senate

3. Administration

4. State Activities

5. Regulations Open for Comment

6. Reports

7. Other News


1. U.S. Supreme Court – King v. Burwell

Federal Subsidies Upheld by SCOTUS in King v. Burwell

In a 6-3 decision, the Supreme Court upheld that the Affordable Care Act’s (ACA) premium tax credits are indeed available to individuals in states that are serviced by federal exchanges. In his opinion for the majority, Chief Justice Roberts wrote that the ACA adopted reforms that are closely intertwined: guarantee issue and community rating, requiring coverage or payment to the Internal Revenue Service, and affordability. The tax credits make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty level. The court found that pulling out the tax credit provision would create a “death spiral,” because if people did not have subsidies they would be exempt from coverage. As it stands, 16 states and the District of Columbia have created their own state-based exchanges, and 37 states rely to varying degrees on the federal exchange via healthcare.gov. A more detailed summary of the decision and its implications can be found here.

2. Congress

House

How to Pay for 21st Century Cures Bill Discussions Continue

In a report released June 23, the Congressional Budget Office (CBO) estimated that implementing H.R. 6, 21st Century Cures Act, would cost $106.4 billion from 2016-2020 while simultaneously reducing direct government spending by $11.9 billion over the 2016-2025 period. CBO says the bill, which unanimously passed out of the House Energy and Commerce Committee on May 21, includes specific department/agency costs of: $105.0 billion (National Institutes of Health), $872 million (Food and Drug Administration), $35 million (Centers for Disease Control), $427 million (Department of Health and Human Services (HHS) programs and $21 million (for other Departments and agencies) for years 2016-2020.

While there will not be a vote until later this summer, House leadership has begun to have conversations with congressional offices about the bill and circulate a list of potential policies that would pay for the proposal. On the list to pay for the proposal are the following policies:

  • Accelerating the modernization of X-ray imaging
  • Part D provider and patient assignment
  • Limit federal Medicaid matching funds for DME reimbursement to Medicare rates
  • Selling off excess capacity in the Strategic Petroleum Reserve

A policy considered controversial related to Medicare Part D reinsurance has been dropped because of concerns raised by Ways and Means Committee members. The House Energy and Commerce Committee chairman continues to seek pay-fors for the bill.

House E&C Health Subcommittee Holds Hearing on Medicaid Section 1115 Demonstration Projects

The Energy and Commerce Subcommittee on Health held a hearing on June 24, 2015, entitled “Examining the Administration’s Approval of Medicaid Demonstration Projects.” Medicaid Section 1115 demonstrations projects have been used by some states to expand Medicaid up to 138 percent of the federal poverty limit, as outlined under the Patient Protection and Affordable Care Act (PPACA). The hearing centered on an April Government Accountability Office (GAO) report that determined that Centers for Medicare and Medicaid Services (CMS) Medicaid Section 1115 demonstration projects have duplicated other federal programs. The GAO also found that other demonstration projects helped middle-income Americans rather than the low-income beneficiaries. At the hearing, members questioned the GAO whether CMS may be trying to pressure states into expanding Medicaid when those states look for Medicaid 1115 waiver approval; others questioned witnesses about the transparency, predictability and budget neutrality of the waivers. The witness testimony of the second panel, however, asked lawmakers for added flexibility in the program itself. According to the GAO, in FY 2014, Section 1115 demonstrations accounted for close to one-third of total Medicaid expenditures. The agency recommended in May that CMS issue criteria for whether 1115 expenditures are likely to promote Medicaid objectives and ensure that application of those criteria is documented in the Department of Health and Human Service’s approvals of 1115 waivers.

Witness List

Panel 1

Katherine Iritani
Director
Health Care
Government Accountability Office

Panel 2

Haley Barbour
former Governor of Mississippi and Founding Partner
BGR Group

Matt Salo
Executive Director
National Association of Medicaid Directors

Joan Alker
Executive Director
Georgetown University Center for Children and Families

For more information or to view the hearing, visit energycommerce.house.gov.

House E&C Health Subcommittee Holds Hearing on Public Health Bills

The House Energy and Commerce Subcommittee on Health held a hearing on June 25 entitled “Examining Public Health Legislation: H.R. 2820, H.R. 1344, and H.R. 1462.” Subcommittee members discussed the three bipartisan bills related to health care for newborns, infants and children.

Members discussed and sought witness testimony on the following bipartisan bills:

  • H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act, introduced by Reps. Chris Smith (R-NJ) and Doris Matsui (D-CA), reauthorizes the Stem Cell Therapeutic and Research Act of 2005, which provides federal support for cord blood donation and research to increase patient access to transplants.
  • H.R. 1462, the Protecting Our Infants Act of 2015, introduced by Reps. Katherine Clark (D-MA) and Steve Stivers (R-OH), would mandate that HHS develop a study and subsequent recommendations for preventing and treating prenatal opioid abuse and neonatal abstinence syndrome; review existing programs and develop a more coordinated strategy; and provide additional technical assistance to states to improve the availability and quality of data collection and surveillance activities regarding neonatal abstinence syndrome.
  • H.R. 1344, the Early Hearing Detection and Intervention Act of 2015, authored by Health Subcommittee Vice Chairman Brett Guthrie (R-KY) and Rep. Lois Capps (D-CA), to reauthorize a program for early detection, diagnosis and treatment of deaf and hard-of-hearing newborns, infants and young children in the Public Health Service Act.

Witness List

Joanne Kurtzberg, M.D.
President
Cord Blood Association

Jeff Chell, M.D.
Chief Executive Officer
National Marrow Donor Program

Patti Freemyer Martin, Ph.D.
Director of Audiology and Speech Language Pathology
Arkansas Children’s Hospital

Stephen W. Patrick, M.D., M.P.H., M.S.
Assistant Professor of Pediatrics and Health Policy
Department of Pediatrics
Vanderbilt University School of Medicine

Mishka Terplan, M.D., M.P.H., FACOG
Medical Director
Behavior Health System Baltimore

For more information or to view the hearing, visit energycommerce.house.gov.

Bicameral Democratic Health Committee Leaders Send Letter to HHS Concerning Unfinished Final Medicaid Equal Access Rule

On June 22, Democratic committee leaders in both the House and Senate sent a letter to U.S. Department of Health and Human Services (HHS) Secretary Sylvia Burwell urging the agency to finalize a regulation proposed by the Centers for Medicare and Medicaid Services (CMS) in 2011 that would better enforce Medicaid’s equal access provision. Safety net hospitals earlier this year, however, expressed concerns about how effective the proposed rule would be. The letter comes following a March 2015 Supreme Court decision in Armstrong v. Exceptional Child that providers cannot bring a claim against states for paying illegally low rates and must rely on HHS to take administrative action instead. The lawmakers urged, “CMS must provide firm and immediate oversight to ensure that states are setting and maintaining their Medicaid rate structures as Congress intends in section 1902(a)(30)(A) of the Medicaid Act—consistent with efficiency, economy and quality of care and at levels sufficient to ensure that care and services are available to Medicaid enrollees at least to the extent they are available to the general population in the geographic area.” The letter was sent by House Energy and Commerce Committee Ranking Member Frank Pallone, Jr. (D-NJ), Senate Finance Committee Ranking Member Ron Wyden (D-OR), Senate Finance Health Care Subcommittee Ranking Member Debbie Stabenow (D-MI), House Energy and Commerce Health Subcommittee Ranking Member Gene Green (D-TX), House Ways and Means Committee Ranking Member Sander Levin (D-MI) and House Ways and Means Health Subcommittee Ranking Member Jim McDermott (D-WA).

A copy of the proposed rule can be found here.

House W&M Oversight Subcommittee Holds Hearing on Rising ACA Premiums

House Committee on Ways and Means Subcommittee on Oversight Chairman Peter Roskam (R-IL) held a hearing June 24 to discuss the effects of the Affordable Care Act (ACA) on health insurance premiums. He called the hearing after some states published high rate increase requests by several big health insurers, including increases of 51.6 percent in New Mexico, 36.3 percent in Tennessee and 30.4 percent in Maryland. At the hearing, which was largely partisan in nature, Chair Roskam said, “Now, for the first time since the ACA became law, insurers are able to look at a full year’s worth of claims data to calculate premium prices for the year ahead. The proposed premium hikes tell us a lot about how much health care cost last year and what insurers calculate health care will cost this next year. On June 1, CMS made public proposed premium hikes of 10 percent or more for the 2016 plan year, and many of the proposed increases are eye-poppingly huge.” Minority witnesses responding to ACA attacks, stressing that premiums were rising in double digits prior to the enactment of the law and have slowed over the past several years.

Witness List

Seth Chandler
Insurance Law Professor at the University of Houston

Julie McPeak
Commissioner of the Tennessee Department of Commerce & Insurance

Al Redmer, Jr.
Commissioner of the Maryland Insurance Administration

Mike Kreidler
Washington State Insurance Commissioner

For more information or to watch the hearing, visit waysandmeans.gov.

Mental Health Parity and Behavioral Health Clarification

Former Congressmen Patrick Kennedy (D-RI) and Jim Ramstad (R-MN) sent a letter to Reps. Ted Deutch (D-FL) and Ileana Ros-Lehtinen (R-FL) on June 22 that clarifies the intent of their 2008 mental health parity legislation ( Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 , H.R. 6983) to mandate that health plans cover behavioral health just as they are required to cover medical and surgical procedures. Specifically they say their bill was meant to also address the issue of eating disorders and residential treatment for those diseases. In the 114th Congress, Reps. Deutch and Ros-Lehtinen have introduced legislation, H.R. 2515, to codify this clarification. Fourteen million Americans have eating disorders, which have the highest mortality rate of any mental illness.

House Votes to Repeal ACA’s IPAB

On June 23, the House of Representatives voted 244-154 on H.R.1190, a bill that would repeal the Independent Payment Advisory Board (IPAB), with 11 Democrats voting support of the Republican measure. IPAB, intended as a Medicare spending control measure founded within the Affordable Care Act (ACA), consists of a panel of 15 appointed members who would make decisions on ways to control the rate of Medicare growth and to help the program come up with savings, should projected Medicare spending exceed a certain target rate. Under the ACA, future IPAB proposals would go into effect automatically unless Congress enacts alternative legislation achieving required savings levels. Thus far, however, program spending has not risen fast enough to trigger the appointment and convening of IPAB. The Obama Administration has already threatened to veto the legislation, and more Democrats likely would have voted in support of the legislation if the bill was not offset by cuts to the ACA Prevention and Public Health Fund.

Health IT Groups Send Letter to House E&C Committee in Support of Interoperability Provisions within 21st Century Cures Bill

On June 23, a coalition of 30 Healthcare Technology and IT groups sent a letter to the House Energy & Commerce Committee leadership in support of the interoperability provisions proposed within the 21st Century Cures bill. These provisions, they say, allow health care information to flow more freely and become more accessible by stakeholders within the health care industry. Within H.R. 6, the groups applauded the introduction of an increased focus on integrating already established high industry information standards, and more open application programming interfaces (APIs). Moreover, the coalition is calling for more attention and stauncher penalties for those health care groups that engage in “information blocking,” which is a frustrating practice in the current competitive business environment for many of these health care IT groups. The penalties proposed included both monetary and certification consequences. Of note, there has been opposition to the interoperability provisions from some notable health IT groups, and also from the American Hospital Association. Opposition groups claim the new language lacks specificity and may have unintended consequences on the certification process in the health care IT industry. Notable names within the 30 organizations that sent the letter include: Health IT Now, athenahealth, Intel, Oracle, Samsung and Verizon.

House Appropriations Committee Advances Labor-HHS-Ed Appropriations Bill

The House Appropriations Committee on June 24 approved the FY 2016 Labor, Health and Human Services (LHHS) funding bill by a vote of 30-21. The legislation includes funding for programs within the Department of Labor, the Department of Health and Human Services, the Department of Education and other related agencies. The bill includes a total of $71.3 billion for the Department of Health and Human Services (HHS), an increase of $298 million above last year’s level and $3.9 billion below the President’s budget request. However, the bill does not include additional funding to implement certain Affordable Care Act (ACA) programs, and prohibits funds for the new “Center for Consumer Information and Insurance Oversight” and “Navigators” programs. Unlike the Senate version, the funding bill would also eliminate the Agency for Healthcare and Research Quality (AHRQ). It also cuts funding for the management of the Centers for Medicare and Medicaid Services (CMS) by $344 million ($3.3 billion for FY 2016) and $919 million below the President’s budget request.

It provides a total $31.2 billion for the National Institutes of Health (NIH), $1.1 billion above the fiscal year 2015 enacted level and $100 million above the President’s budget request. Unlike the Senate version, the funding bill would also eliminate the Agency for Healthcare and Research Quality (AHRQ). The 21st Century Cures legislation drafted in the Energy and Commerce Committee would add another $10 billion of NIH funding over five years, but this issue has not yet been reflected in either chamber’s current appropriations proposals. Office of Management and Budget (OMB) Director Shaun Donovan in response to the appropriation bill’s passage out of subcommittee this week sent a letter to Appropriations Committee Chairman Hal Rogers to express the Administration’s concerns about the deep cuts to the Affordable Care Act program. The Senate Appropriations Committee also reported out its HHS-Labor funding bill on June 25; the two chambers will need to confer later this year to negotiate existing funding discrepancies.

Senate

Senate Appropriations Committee Approves HHS FY 2016 Budget

On June 25, the Senate Appropriations Committee reported out of committee its FY 2016 Labor, Health and Human Services, Education, and Related Agencies appropriations bill by a 16-14 vote. As written, the measure would appropriate $70.4 billion to the Department of Health and Human Services (HHS), or approximately $646 million less than in FY 2015. The bill makes several cuts to current health care programs, overall resulting in a $3.6 billion decrease from this year’s enacted level and $14.6 billion below the White House’s request. The National Institutes of Health (NIH) is slotted to receive $32 billion, an increase of $2 billion above FY 2015, while the Centers for Disease Control (CDC) funding was cut by $251 million, or 4 percent from FY 2015 levels. Only one amendment by Sen. Tom Udall (D-NM) was made from the subcommittee’s version, approved on June 23. That change would divert some public health funds to a preventive medicine residency program.

Several programs received an increase in funding, including rural health care efforts ($150.6 million, an increase of $3.1 million above FY 2015), Precision Medicine ($200 million) and combating opioid abuse ($67 million, an increase of $35 million). The bill also has significant implications for Affordable Care Act (ACA) funding: Republicans included language to prohibit spending on insurer risk corridor payments and to block funding for state-based health exchanges, to eliminate funding for the Independent Physician Advisory Board (IPAB) and to cut operational funding for Centers for Medicare and Medicaid Services. In an effort to increase transparency, the bill requires the Obama Administration to publish ACA-related spending data, as well as information on employees, contractors and other personnel who implement, administer or enforce ACA provisions.

Unlike the House, the Senate has not suggested cutting the Agency for Healthcare Research and Quality (AHRQ).

A more detailed breakdown of departmental, agency and program funding can be found here.

Senate Finance Committee Marks Up 12 Bipartisan Health Care Bills

The Senate Finance Committee held a markup June 24 on 12 bills affecting a variety of health care issues including Medicare and Medicaid antifraud, waste and abuse, hospital observation status notification, rural health care access and other hospital-related bills. The following bills were voted out of committee on a voice vote:

  • S. 607 – The Rural Community Hospital Demonstration Extension Act of 2015: Extends the period of the rural community hospital demonstration program from five to 10 years.
  • S. 1349 – The Notice of Observation, Treatment and Implication for Care Eligibility (NOTICE) Act of 2015: Requires hospitals to notify Medicare beneficiaries of their outpatient observation status within 36 hours after the time of their classification.
  • S. 1461 – A One Year Extension of the Enforcement Instructions on Supervision Requirements of Outpatient Therapeutic Services in Critical Access Hospitals (CAHs) and Small Rural Hospitals: Requires the Department of Health and Human Services to continue to instruct Medicare contractors not to enforce requirements for direct physician supervision of outpatient therapeutic services in critical access and small rural hospitals through 2015.
  • S. 313 – Prevent Interruptions in Physical Therapy Act of 2015: Requires physical therapists furnishing outpatient physical therapy services to use specified locum tenens arrangements for payment purposes in the same manner as such arrangements are used to apply to physicians’ furnishing substitute physician’s services for other physicians.
  • S. 1253 – Patient Access to Disposable Medical Technology Act of 2015: Requires Medicare to cover substitute disposable medical technology as durable medical equipment, subject it to a special payment rule and exempt it from competitive acquisition.
  • S. 1347 – Electronic Health Fairness Act of 2015: Prohibit any patient encounter of an eligible professional occurring at an ambulatory surgical center from being treated as such an encounter in determining whether an eligible professional qualifies as a meaningful electronic health record (EHR) user.
  • S. 704 – The Community Based Independence for Seniors Act: Directs the Department of Health and Human Services to establish a Community-Based Institutional Special Needs Plan demonstration program to target home- and community-based care to eligible Medicare beneficiaries.
  • S. 1362 – The PACE Innovation Act of 2015: Allows PACE to participate in demonstration programs under Section 1115 Research & Demonstration Projects and the Center for Medicare and Medicaid Innovation (CMMI). The bill allows the CMMI to test and improve the PACE program’s ability to reduce hospitalizations and emergency room use, manage chronic illness and improve functioning and quality of life; and also encourages the Centers for Medicare and Medicaid Services to increase operational flexibility and reduce administrative barriers that hinder PACE enrollment.
  • S. 861Preventing and Reducing Improper Medicare and Medicaid Expenditures Act of 2015: Directs the Secretary of Health and Human Services (HHS) to prohibit sponsors of prescription drug plans from paying claims for prescription drugs that do not include the valid National Provider Identifier for the drug’s prescriber; establishes stronger fraud and waste prevention strategies within Medicare and Medicaid to help phase out the practice of “pay and chase”; takes steps to help states identify and prevent Medicaid overpayments; and improves the sharing of fraud data across state and federal agencies and programs.
  • S. 349 – Special Needs Trust Fairness Act of 2015: Extends the supplemental needs trust exemption from treatment of a trust as resources available to the individual to supplemental needs trusts for Medicaid beneficiaries established by those beneficiaries.
  • S. 466 – Quality Care for Moms and Babies Act: Develops maternity care quality measures and supporting maternity care quality collaborative within Medicaid and CHIP programs.
  • S. 599 – Improving Access to Emergency Psychiatric Care Act of 2015: Extends the Medicaid Emergency Psychiatric Demonstration Project through FY 2016, with the possibility for a permanent extension (and potential nationwide expansion) through FY 2019 should HHS deem it appropriate.

The Chairman’s mark of each bill can be found here.

Not included in the markup were four bills that have bipartisan support but the Congressional Budget Office found would increase spending. The Committee is working to find ways to lower their cost. The four bills not included in the markup are:

  • S. 488, a bill that permits physician assistants, nurse practitioners and clinical nurse specialists to supervise cardiac, intensive cardiac and pulmonary rehabilitation programs;
  • S. 629, a bill that permits nursing schools to keep federal funding following changes in accrediting rules;
  • S. 1354, a bill that permits physician assistants to provide hospice care; and
  • S. 1456, a bill that permits nurse practitioners’ patients to be counted in the shared savings calculations of accountable care organizations.

In addition, Chairman Hatch (R-UT) said he would work with Senator Cornyn (R-TX) on legislation to end the “96-hour rule” for critical access hospitals even though the bill was not on the list of bills the committee had planned to mark up. This issue is important to critical access hospitals that in response to CMS actions have been requiring surgeons to certify whether patients will be discharged or transferred within 96 hours.

Senate Passes TPA Legislation Paving Way for Fight on IP Protections for Pharmaceuticals

The Senate passed trade promotion authority legislation 60-38 on June 23 to give the president added authority to send a negotiated trade agreement to Congress for just simply a yay or nay vote. Noteworthy provisions for healthcare revolve around intellectual property protections for pharmaceuticals. This becomes particularly important as the U.S. wraps up its Trans-Pacific Partnership negotiations in the coming weeks. In that agreement, the U.S. pharmaceutical industry is pushing to lengthen the exclusivity time that manufacturers can control drug data, which other trade partners argue limits their citizens’ access to life-saving prescription drugs. What’s more, U.S. drug companies are also pushing to extend monopoly pricing for biologics. Anti-tobacco groups in the U.S. also desire added measures to allow private companies the ability to challenge countries’ public health measures in international courts.

3. Administration

FDA Releases Final Guidance Urging Manufacturers to Make Generic Drugs Mimic Physical Characteristics of Branded Equivalents

In final guidance released June 18 by the Food and Drug Administration (FDA), the agency recommends that generic pharmaceutical companies make their drugs similar in physical appearance to their branded reference listed drugs (RLD). The guidance asks that generic tablets closely resemble the products they reference in size. For RLDs equal to or greater than 17 mm, generics should not be larger than 17 mm in largest dimension or no more than 40 percent larger than the volume of the RLD; moreover, for RLDs smaller than 17 mm generics should be “no more than 20% larger than the [reference listed drug] in any single dimension.” The agency also recommends an overarching size boundary for a drug of no more than 22 mm in any dimension. Likewise, FDA urges that products should also be of a similar shape to the RLD and contain similar features that make it easier to swallow, such as a product’s weight, surface area, tablet coating and disintegration time. The guidance is applicable only to new generic drug products offered via an abbreviated new drug application (ANDA) and does not apply to approved ANDAs (generic drugs) already on the market.

OSHA to Crack Down on Hazards Not Protected by Formal Rules in Health Care Settings

On June 25, the Occupational Safety and Health Administration (OSHA) announced in a memorandum that it would crack down on hospitals and nursing homes for workplace hazards that aren’t protected by formal rules. OSHA said that inspections of hospitals and nursing homes should include potential hazards related to musculoskeletal disorders caused by patient handling, in addition to dangers from blood-borne pathogens, workplace violence, tuberculosis and slips, trips and falls. Violations would likely be cited with the general duty clause of the OSHA act. That allows the agency to penalize employers for failing to implement industry-recognized safeguards for which there are no official standards or rules. OSHA has provided the health care industry with resource materials to help educate employers concerning the dangers of lifting without the assistance of a patient-handling device like a mobile or overhead lift. An OSHA official told NPR on Thursday that a typical penalty would likely be $7,000 per hospital, but could be as high as $70,000 if they could prove administrators deliberately ignored the problem.

CMS Makes Changes to Rural-Focused ACO Investment Model to Encourage Participation

On June 25, Patrick Conway, Deputy Administrator for Innovation and Quality and Chief Medical Officer, Centers for Medicare & Medicaid Services (CMS), announced two modifications to the design of the ACO Investment Model, which are intended to increase participation by existing or future accountable care organizations (ACOs) in rural areas or from small group practices. ACOs, a model developed and implemented through the Affordable Care Act (ACA), are groups of providers who come together voluntarily to coordinate the care of Medicare patients in an attempt to lower health care costs while allowing providers to share in the savings. CMS will begin awarding payments of shared savings in both upfront and ongoing amounts to allow designated ACOs to invest in care coordination, health information technology, population health platforms and other infrastructure-related projects. The agency says it will let ACOs formed in 2015 or that plan to join in 2016 apply to join the upgraded model. Simultaneously, the new program will remove the 10,000 or fewer assigned beneficiary eligibility criteria for rural ACOs that started in the Medicare Shared Savings Program in 2015 (or will start in 2016). These two changes reflect suggestions given by stakeholders and reflect CMS’s mission to ensure that ACO demonstration participation is widespread, including among rural providers and smaller physician groups. In 2016, the ACO Investment Model is expected to provide a total of $114 million in upfront investments to up to 75 ACOs across the country. The application for the second round of the ACO Investment Model is due on July 1, 2015.

4. State Activities

State Audit Report Finds That Inaccurate Provider Directories Limit Access for California Medicaid Beneficiaries

Low-income residents in California may lack access to their state’s health program, Medi-Cal, according to a state audit report released June 16. Complaints from Medi-Cal patients about inaccuracies in the program’s provider directory, as well as a request from state Senator Ricardo Lara (D), prompted the state auditor to evaluate the Medi-Cal managed-care programs, which are health plans that contract with the state to coordinate and provide care to patients at lower costs. The auditor found that California’s Department of Health Care Services neither confirmed the accuracy of their provider directors nor verified provider network data, thus greatly limiting access for Medicaid beneficiaries. Further, the oversight agency found that the provider directories contained inaccurate information for 3 percent to 23 percent of providers. Without verifying the data from the health plan networks, the state could not properly ensure that the plans were meeting patients’ needs. Due to the Medicaid expansion provision’s being more easily promulgated under the Affordable Care Act (ACA), one in three California residents, or 12.2 million people, receive coverage through Medi-Cal.

California Legislature Moves to Close the State’s Vaccination Exemption Loophole

Despite opposition from religious freedom advocates, on June 25, the California Assembly approved a controversial measure by a 40-36 vote to require all children enrolled in public school to be vaccinated. Though the bill passed both chambers of the state’s legislature, it still must go back to the Senate for approval of several Assembly amendments. If the measure is enacted, all unvaccinated students would have to be homeschooled, and only children with serious medical issues would qualify for exemptions. This issue resurfaced in December after a measles outbreak that began in Disneyland spread to the community. Governor Jerry Brown has not yet made his views known on the proposal. If it is signed into law, California would be the 33rd state to end exemptions from state immunization laws based on personal or moral beliefs, but only the third to deny exemptions grounded in religious beliefs.

A legislative summary of the bill can be found here.

Massachusetts Failed Exchange Website Launch Cost State $658 Million for Temporary Medicaid Coverage

According to the Massachusetts Executive Office of Health and Human Services, the cost for enrolling people in temporary Medicaid coverage last year due to Massachusetts’ failed Health Connector website was approximately $658 million. That total includes $138 million in FY 2014 and $520 million in FY 2015. Agency officials said the figure was based on claims processed as of May 31 for the approximately 321,000 people who were enrolled in temporary Medicaid coverage through the end of February. After a technical failure prevented beneficiary enrollment on the state’s health insurance exchange website—Health Connector—in 2013, the state’s health insurance applicants were given temporary Medicaid coverage in order to conform with the federal Affordable Care Act. About 50 percent of the cost is expected to be funded by the U.S. Department of Health and Human Services; however, a final federal reimbursement determination has yet to be announced. The state also revealed that it has spent $281 million so far on the health insurance exchange website, including the cost for developing and trying to fix the website last year, and the cost of the state’s purchase of new software. The state had estimated that the website cost would be $174 million.

5. Regulations Open for Comment

CMS Releases Proposed 2016 Medicare Dialysis Pay Rule

The Centers for Medicare and Medicaid Services (CMS) released a proposed 2016 Medicare Dialysis pay rule June 26 which includes several technical changes including a new drug designation process, a new rural pay adjuster, and updates to the end-stage renal disease Quality Incentive Program- the base pay rate for services and the adjusters to that base rate. Specifically, CMS proposes reducing the base pay rate by $9.23, from $239.43 in 2015 to $230.20 in 2016. Other pay changes include updates to the low-volume payment adjustment and a new payment adjustment for rural ESRD facilities. Further, the proposed rule would revise the geographic proximity eligibility criterion for the low-volume payment adjustment from (25 road miles to 5 road miles) and would eliminate grandfathering from the criteria for the adjustment. CMS also suggests reducing the fixed-dollar loss amount for pediatric beneficiaries from $54.35 to $49.99 and the Medicare Allowable Payments for pediatric patients from $43.57 to $37.82. For adults, the fixed-dollar loss amount would decrease from $86.19 to $85.66 and the Medicare Allowable Payments amount would decrease from $51.29 to $48.15.

Other specific changes include:

  • A process for understanding when an oral-only drug is no longer considered an oral-only drug
  • A process for including new injectable and intravenous products into the ESRD bundled payment
  • Changes to quality measures and implementation of payment reductions for low preforming facilities

CMS expects that combined these updates would increase the total payments to all dialysis facilities by 0.3 percent with Hospital-based facilities receiving an increase in total payments of 0.5 percent, and freestanding facilities receiving a 0.2 percent increase. The proposed rule will be published the Federal Register on July 1. Comments on the proposed rule are due August 25, 2015.

FDA Issues Final Rule to Phase Out Trans Fats

The Food and Drug Administration (FDA) issued a final rule June 16 that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products from microwave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat in processed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fat content information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78 percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat in foods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

CMS Released Proposed Rule Concerning Medicaid and CHIP Plans

On May 26, CMS posted a proposed rule to modernize the Medicaid and Children’s Health Insurance Program (CHIP) managed care regulations. The proposed rule is the first major update to Medicaid and CHIP managed care regulations in more than a decade. The proposal is sweeping in that it touches many areas, including network adequacy, quality measures, enrollment and best practices, and aligns many policies to be similar to those for Medicare Advantage and the private market. The rule will be published in the Federal Register on June 1, and the deadline to submit comments is July 27, 2015, at 5 p.m. EST.

More information on the rule can be found at federal registar.gov.

FDA Releases Draft Guidance on Use Adaptive Trial Designs for Medical Devices

On May 18, the Food and Drug Administration (FDA) released draft guidance in hopes of clarifying ways in which adaptive clinical trial designs can be used for medical devices. Specifically, the draft guidance lays out 11 types of adaptive trial designs the agency feels can be successfully used for devices: group sequential design; sample size adaptation; Bayesian sample size adaptation; group sequential designs with sample size reassessment; dropping a treatment arm; changing the randomization ratio; changing the hypothesis (claim); adaptive enrichment; planning to adapt based on the total information; adaptation of the device or endpoint; and seamless studies. The draft document also makes clear that the adaptive trial designs discussed apply to premarket approval applications, 510(k) submissions, de novo submissions, humanitarian device exemptions and investigational device exception, and do not apply to clinical studies of combination products or codevelopment of a pharmaceutical product with an unapproved diagnostic test. Worth noting, FDA says there are possible limitations to using adaptive trial designs, including requiring more effort at the design stage—leading to study designs that are overly complicated and cost more and to the introduction of bias into the study; implementing changes to the study due to an adaptation can “confound interpretation of the study results.” FDA says in the guidance that to ensure that adaptive trial designs are scientifically valid, studies should be prospectively planned for in consultation with FDA prior to the initiation of any study, and the agency lays out two approaches that can help evaluate the operating characteristics of adaptive study designs—analytical methods and simulation studies.

FDA Releases Guidance on Standardizing Study Data for Drug Makers

In the Federal Register May 18, the Food and Drug Administration (FDA) announced the availability of draft recommendations for preparing a Study Data Standardization Plan. FDA’s guidance recommends that, for both clinical and nonclinical studies, sponsors include a plan that describes the submission of standardized study data to FDA. The draft recommendations describe the information that should be included in the Standardization Plan, which includes but is not limited to, general sponsor information, product information, a list of completed studies and standards, and a list of planned studies and standards. The draft recommendations for creating a Standardization Plan are posted here. The agency is soliciting feedback on the plan, with comments due by July 2.

FDA: Guidance Released on Investigational New Drug Applications

The Food and Drug Administration (FDA) released draft guidance to assist sponsor-investigators in preparing and submitting complete investigational new drug applications (INDs)—an application used by FDA to approve the start of a new trial—to the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER). The guidance is intended to act as a basic overview of the IND process, with an eye on individual researchers who are investigating new uses for either an approved or investigational drug. FDA’s guidance goes on to explain the basics of 21 CFR 312—the federal regulation governing IND submissions—providing an overview of the essential elements of an IND submission, including information about the sponsor, a summary of the investigational drug product and its risks, the clinical trial protocol and a summary of previous clinical trial results involving the drug. Worth noting, the guidance, FDA notes, is not intended for use by sponsors or investigators “seeking to evaluate a drug for commercial purposes (i.e. seeking market approval or licensure) and thus does not focus on certain regulatory requirements that involve exchange of information or materials between a sponsor and investigator.” The proposed guidance was published in the Federal Register May 15, and comments on the proposed draft guidance are due July 14, 2015.

CMS Updates Wage Index and Payment Rates for the Medicare Hospice Benefit

On April 30, 2015, CMS issued a proposed rule (CMS-1629-P) that would update fiscal year (FY) 2016 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries. The proposed hospice payment rule reflects the ongoing efforts of CMS to support beneficiary access to hospice care. As proposed, hospices would see an estimated 1.3 percent ($200 million) increase in their payments for FY 2016. The $200 million increase in estimated payments for FY 2016 reflects the distributional effects of the 1.8 percent proposed FY 2016 hospice payment update percentage ($290 million increase); the use of updated wage index data and the phaseout of the wage index budget neutrality adjustment factor (-0.7 percent/$120 million decrease); and the proposed implementation of the new Office of Management and Budget (OMB) Core Based Statistical Areas (CBSA) delineations for the FY 2016 hospice wage index with a one-year transition (0.2 percent/$30 million increase). The elimination of the wage index budget neutrality adjustment factor (BNAF) was part of a seven-year phaseout that was finalized in the “Medicare Program; Hospice Wage Index for Fiscal Year 2010” final rule (74 FR 39384, Aug. 6, 2009) and is not a policy change.

6. Reports

OIG Releases Research Portfolio of Oversight Agency’s Medicare Part D Efforts

On June 23, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) released a research portfolio that presents an overview of OIG’s investigations, audits, evaluations and legal guidance related to Medicare Part D. Moreover, the portfolio synthesizes numerous OIG reports that have identified weaknesses in Part D program integrity, and provides updates on HHS efforts to address these weaknesses. In particular, OIG has identified weaknesses in the use of data to identify vulnerabilities, as well as in the oversight by all parties responsible for protecting Part D: Part D plan sponsors, the Medicare Drug Integrity Contractor and the Centers for Medicare & Medicaid Services (CMS). The report notes that the underlying vulnerabilities in Part D center on two main issues: (1) the need to more effectively collect and analyze program data to proactively identify and resolve program vulnerabilities, and to prevent fraud, waste and abuse before it occurs; and (2) the need to more fully implement robust oversight to ensure appropriate payments, prevent fraud and protect beneficiaries. To address its findings, OIG recommends that the Centers for Medicare and Medicaid Services (CMS) should: require plan sponsors to report all potential fraud and abuse and report data on the inquiries and corrective actions they take in response to fraud and abuse; expand drug utilization review programs; implement an edit to reject prescriptions written by excluded providers; exclude Schedule II drug refills when calculating final payments to plan sponsors; and seek authority to restrict certain beneficiaries to a limited number of pharmacies or prescribers, among others. Approximately 39 million beneficiaries receive Medicare Part D benefits through more than 2,000 plans sponsored by private companies.

CDC Report Estimates That 11.5 Percent of U.S. Citizens Were Uninsured in 2014

In a report released June 23, the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS) published selected estimates for health insurance coverage for the civilian U.S. population based on data from the 2014 National Health Interview Survey (NHIS), along with comparable estimates from the 2009-2013 NHIS. According to the report, in 2014, 36.0 million persons of all ages (11.5 percent) were uninsured, 51.6 million (16.5 percent) had been uninsured for at least part of the year and 26.3 million (8.4 percent) had been uninsured for more than a year. CDC also reported that about 2.2 percent of the 170.4 million people with private health insurance in 2014 were covered through the Affordable Care Act (ACA) health insurance exchanges. With regard to regional differences, West Virginia saw the largest drop in its uninsured rate (14.8 percentage points), trailed by Arkansas (8.5 percentage points), Washington state (7.4 percentage points) and Nevada (7.2 percentage points). Estimates for the 2014 data are based on interviews with 111,682 persons nationwide.

7. Other News

UnitedHealth Group to Depart from AHIP

On June 22 UnitedHealth Group, America’s largest health insurance company, announced that on June 30 it will no longer be a member of the health industry’s trade association, America’s Health Insurance Plans (AHIP). “UnitedHealth Group believes the interest of our company and the customers we serve are no longer best represented by AHIP.... AHIP has set forth a strategy and direction it feels best serves a membership profile and need that does not fit UnitedHealth Group and our diversified portfolio,” said company spokesman Matt Stearns. The separation decision comes amid ongoing concerns from large for-profit health insurers that AHIP had not paid attention to insurer top agenda items by widening its government affairs focus to areas such as disability and long-term-care insurance. UnitedHealth insures approximately 85 million people through all of its programs.

Oncology Physicians Group Develops New Efficacy Formula for Cancer Drugs

The American Society of Clinical Oncology (ASCO) published a new framework to assist doctors and patients in better evaluating different drug treatment options based on factors such as clinical efficacy, negative side effects and cost. The framework follows the recent rollout of similar tools to assess cancer-drug value by Memorial Sloan Kettering and the European Society of Medical Oncology. ASCO’s framework’s eventual goal is to create a software application that will assist physicians to more clearly demonstrate the pros and cons of alternative drug treatments to patients. The organization’s new framework tabulates the pros of one drug treatment over another, based on published results of clinical trials. For patients with later stages of cancers, benefit is assessed in the average number of years that life is increased, or in how long a drug delays the progression of cancer. This calculation also factors in treatment side effects that can impact quality of life, and “bonus points” are awarded for treatments that alleviate secondary symptoms such as shortness of breath or pain not directly related to survival. For cost, the formula awards a score of 1-100 or 1-130, depending on the type of cancer, alongside the total cost of a drug and the out-of-pocket portion of that total. The researchers emphasized that the new formula is not intended to be utilized as a rank-in-file system for individual drugs, but really more as a means to factually compare treatments. ASCO will accept comments on its draft framework for the next 60 days.


Author’s Note: There will not be a Weekly Washington Update circulated Monday July 6 due to the July 4th Congressional Recess next week. We will resume our regular weekly schedule on Monday July 14.

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

Stephanie Kennan, Senior Vice President
Charlyn Iovino, 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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