Jul 27, 2015

Washington Healthcare Update

This Week: CMS Releases Guidance on Fast Track Process for 1115 Waivers for Medicaid and CHIP... CEO Sends Letter to State Insurance Commissioners Concerning 2016 Premium Decisions... Medicare Board of Trustees Releases Annual Financial Report Finding Trust Fund Insolvency by 2030; Predict Part B Premiums Up 52 Percent Due to Outpatient Services Shift

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


The House Energy and Commerce (E&C) Subcommittee on Health held a markup July 23, 2015, to examine and vote out of subcommittee four bipartisan public health bills. The following bills were all approved by voice vote:

  • H.R. 1344, the Early Hearing Detection and Intervention Act : authored by Health Subcommittee Vice Chairman Brett Guthrie (R-KY) and Rep. Lois Capps (D-CA), the bill amends the Public Health Service Act to reauthorize a program for early detection, diagnosis and treatment regarding deaf and hard-of-hearing newborns, infants and young children.
  • H.R. 1462, the Protecting Our Infants Act: authored by Reps. Katherine Clark (D-MA) and Steve Stivers (R-OH), the bill requires the Agency for Healthcare Research and Quality to study and release a report on prenatal opioid abuse and neonatal abstinence syndrome ; mandates that the Department of Health and Human Services develop a strategy to address gaps in research and programs; and instructs the Centers for Disease Control and Prevention to provide technical assistance to states to improve neonatal abstinence syndrome surveillance.
  • H.R. 1725, the National All Schedules Prescription Electronic Reporting Reauthorization Act (NASPER) : authored by Rep. Ed Whitfield (R-KY) and Rep. Joseph Kennedy (D-MA), the bill would reauthorize the NASPER program to support state prescription drug monitoring programs.
  • H.R. 2820, the Stem Cell Therapeutic and Research Reauthorization Act : authored by Reps. Chris Smith (R-NJ) and Doris Matsui (D-CA), the bill would reauthorize the Stem Cell Therapeutic and Research Act. The bill provides federal support for cord blood donation, a national bone marrow registry and research essential to increasing patient access to transplants.

An electronic copy of the legislation, background memo, amendments and votes can be found at

House Ways and Means Health Subcommittee Hosts MedPAC Director to Hear Testimony on Site-Neutral Payment Reforms and Rural Health

The House Ways and Means Health Subcommittee held a hearing on July 22 with Medicare Payment Advisory Commission Executive Director Mark Miller to discuss hospital payment issues (including site-neutral payment reforms, DSH payments), rural health issues and beneficiary access. Dr. Miller testified that site-neutral payment reforms — particularly between inpatient and outpatient settings — are complex but possible (given clinical overview of the system and a public rulemaking process), and reaffirmed that low-volume rural hospitals that are not the sole providers in their communities should not be eligible for special payment adjustments from Medicare. Chairman Brady drew attention to the need for additional oversight and targeting on indirect medical education payments and Disproportionate Share Hospital payments. He expressed concern that indirect medical education payments and DSH payments are connected only to inpatient admissions, which means they can get caught up in a “financial numbers game” and aren’t protected. He noted that replacing the Sustainable Growth Rate was a first step toward payment reform, but Congress’s next step should be to address needed changes in acute-care payment systems.

Witness List

Mark Miller
Executive Director
Medicare Payment Advisory Commission

For more information or to view the hearing visit

Bipartisan House Cures Authors to Meet with Senate Health, Education, Labor & Pensions Committee Leadership on Drafting of Senate Counterpart

On July 21 at an Alzheimer’s Association event, House Energy and Commerce Committee Chair Fred Upton (R-MI) said that he and Rep. Diana DeGette (D-CO) will meet with Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) this week to discuss the House’s recently passed 21st Century Cures legislation and encourage their committee to follow suit “so they don’t feel like we jammed them up.” His ask of the senators will be to craft their own legislation on policy areas applicable to the Cures provisions that can then be inserted into their bill during conference committee (not all policy areas within the Cures bill, such as CMS provisions, and funding pay-fors, such as the Strategic Petroleum Reserve, fall under the jurisdiction of the HELP Committee). Best estimates guess that a Senate version of the bill is still months away; however, Chair Upton hopes to get a finalized bill to the president’s desk by the end of 2015 to avoid potential political delays stemming from the 2016 presidential election.

Upcoming: House Education and Workforce Committee Holds Hearing on HHS Priorities

The House Education and Workforce Committee, chaired by Rep. John Kline (R-MN), will hold a hearing on July 28 entitled “Reviewing the Policies and Priorities of the U.S. Department of Health and Human Services” that will feature testimony from Secretary Sylvia Burwell on HHS programs within the committee’s jurisdiction. The hearing will be held at 10 a.m. in 2175 Rayburn House Office Building.

Witness List

The Honorable Sylvia Matthews Burwell
Department of Health and Human Services (HHS)

For more information or to view the hearing visit


Senate Finance Committee Holds Tax Extenders Markup

On July 21, the Senate Finance Committee held a markup for its tax extenders bill, which passed by a 23-3 vote. The two-year package would extend more than 50 currently expired tax breaks for individuals and businesses for the 2015 and 2016 tax years. This includes a two-year extension of the research and development credit, which totals at $22.1 billion. Though some of the amendments offered sought to make the R&D credit, as well as other provisions, permanent, Chairman Orrin Hatch (R-UT) announced at the beginning of the markup that any proposals relating to permanence would be deferred to a later time and were considered non-germane. Therefore, the markup was very brief — most of the 105 amendments, including a repeal of the medical device tax, were discussed and then withdrawn in order to quickly pass the bill. It is unclear whether the full Senate will follow the House’s preferred method of permanently extending some of the provisions.

For more information on the markup, please visit

Senate Health, Education, Labor & Pensions Committee Examines Information Blocking as an Obstacle to Interoperability

On July 21, the Senate Committee on Health, Education, Labor & Pensions (HELP) held a hearing entitled “Achieving the Promise of Health Information Technology: Information Blocking and Potential Solutions.” This is the HELP Committee’s fourth hearing on improving electronic health records (EHR), and it focused on the intentional interruption or prevention of interoperability for patients perpetrated by both providers and vendors. Chairman Lamar Alexander (R-TN) expressed his frustrations with the adoption of EHR and suggested that the Administration slow down the implementation of Stage 3 Meaningful Use — some of the witnesses agreed. Dr. David Kendrick, chair of the Department of Medical Informatics at the University of Oklahoma and CEO of MyHealth Access Network in Tulsa, blamed EHR vendors for information blocking, often through high prices charged by vendors to maintain interfaces. The other witnesses were divided on the issue, with some pointing the finger at providers and inefficient business models. Paul Black, president and CEO of EHR vendor AllScripts, and Dr. David Kibbe, president and CEO of DirectTrust, emphasized the importance of the government in encouraging and incentivizing interoperable health exchanges. The HELP Committee will be holding two additional hearings on health information technology, in September and in October, in hopes that they will be able to introduce medical innovation legislation by the end of the year.

Witness List

David C. Kendrick, M.D., M.P.H.
Chair, Department of Medical Informatics, University of Oklahoma
CEO, MyHealth Access Network

Michael J. Mirro, M.D., FACC, FAHA, FACP
Past Chair, Medical Informatics Committee, American College of Cardiology
Chief Academic / Research Officer, Parkview Mirro Center for Research and Innovation

David C. Kibbe, M.D., M.B.A.
President and CEO, DirectTrust
Senior Advisor, American Academy of Family Physicians

Paul M. Black, M.B.A.
President, Chief Executive Officer and Director

For more information or to view the hearing, please visit

Senator Introduces Legislation to Allow Former Foster Children to Stay on Medicaid till Age 26

On July 23, Senator Bob Casey (D-PA) introduced legislation, the Health Insurance for Former Foster Youth Act, S.1852, which would fix an unintended glitch in the current health care system that could kick former foster youth off Medicaid if they move to a different state. Sen. Casey’s bill would extend Medicaid coverage to age 26 for all former foster youth who were in foster care on their 18th birthday and were already enrolled in Medicaid, no matter what state they live in. The Health Insurance for Former Foster Youth Act clarifies that the intent of the original provision in the Affordable Care Act was to ensure that all former foster youth who were enrolled in Medicaid when they aged out can maintain that coverage until they turn 26. “A former foster youth’s ability to access healthcare coverage shouldn’t depend on their zip code,” Senator Casey said in a press release. “This is a commonsense fix so that former foster youth have the same ability to access health coverage as other young Americans.” Research indicates that nearly 60 percent of children in foster care experience a chronic medical condition.

2. Administration

CMS Releases Guidance on Fast Track Process for 1115 Waivers for Medicaid and CHIP

In a July 24 guidance document, the Centers for Medicare & Medicaid Services (CMS) announced that the agency is establishing a new “fast track” process for reviewing proposals from states to extend established Medicaid and Children’s Health Insurance Program (CHIP) Section 1115 demonstrations that reauthorize longstanding policies with proven program outcomes. CMS says the new process is intended to facilitate faster review of and federal decisions regarding state requests to extend established 1115 demonstrations, reducing administrative burden on states and the federal government. This approach streamlines the extension process for those states with established demonstrations that are working successfully and who are not proposing to make major or complex policy changes to the demonstration. Timeframes for these reviews will be comparable to those CMS uses to make decisions on Medicaid Section 1915 waivers or state plan amendments.

The fast track extension process is available for states that meet the following four criteria:

  1. Have established demonstration programs with at least one full extension cycle without substantial program changes;
  2. Have demonstrations in compliance with reporting deliverables and that have positive monitoring and evaluation results that indicate that the objectives of the demonstration and of the Medicaid/CHIP program have been achieved;
  3. Are not proposing major or complex changes; and
  4. Use the streamlined extension application templates.

CMS will offer states eligible for 1115 waiver fast track review a five-year extension period. Currently, a minority of demonstrations, such as those that include dual eligible beneficiaries, are extended for more than three years at a time. CMS will reach out to states 18 months prior to the expiration of their current demonstration with a fast track extension packet to assist the state in considering use of the new fast track process.

CMS Releases New Hospice Care Delivery Model for Medicare and Dually Eligible Beneficiaries

On July 20, the Centers for Medicare and Medicaid Services (CMS) released a new hospice care model, the Medicare Care Choice Model, designed to evaluate whether Medicare and dually eligible beneficiaries would elect to receive supportive care services typically provided by hospice if they could also continue to receive curative services. The model also focuses on quality of care and patient and family satisfaction. Under the model, participating hospices will provide services that are currently available under the Medicare hospice benefit for routine home care and respite levels of care, but cannot be separately billed under Medicare Parts A, B and D. These services include nursing, social work, hospice aide, hospice homemaker, volunteer, chaplain, bereavement support, nutritional support and respite care. Services under this model will be available to Medicare beneficiaries who elect to participate in the model, around the clock, 365 calendar days per year, and CMS will pay a per beneficiary per month fee ranging from $200 to $400 to participating hospices when delivering these services under the model. Providers and suppliers furnishing curative services will bill Medicare for the reasonable and necessary services furnished to beneficiaries who elect to participate in the model. These services include physical or occupational therapy, speech language pathology services, drugs for the management of pain or other symptoms from the terminal illness or related conditions, medical equipment and supplies, any other service that is specified in the patient’s plan of care for which payment may otherwise be made under Medicare (for example, ambulance transports), short-term inpatient care for pain or symptom management that cannot be managed in the home environment and physician services.

CMS originally anticipated selecting at least 30 Medicare-certified hospices to participate in the model and enrolling up to 30,000 beneficiaries throughout a three-year period. Due to robust interest, CMS has invited over 140 Medicare-certified hospices to participate in the model and expanded the duration of the model to five years. This will enable up to 150,000 eligible Medicare and dually eligible beneficiaries to participate. Delivery of services under the model will be phased-in over two years. Approximately half of the participating hospices will begin providing services under the model on Jan. 1, 2016. The remaining participant hospices will provide services under the model starting Jan. 1, 2018. This model is slated to end on Dec. 31, 2020. Hospices participating in the model will be randomly assigned to Phase 1 or Phase 2.

For more information on the model, visit

To read a fact sheet about the model, including a list of participants visit

Preliminary IRS Data Shows $1.5 Billion in Fines Paid by 7.5 Billion Uninsured Americans

In a letter from Internal Revenue Service (IRS) Commissioner John Koskinen to Congress, the agency relayed preliminary results from the 2015 tax filing season related to Affordable Care Act (ACA) individual shared responsibility and premium tax credit provisions. The agency found that approximately 7.5 million taxpayers reported a total of $1.5 billion in individual shared responsibility payments. By contrast, about 12 million taxpayers claimed a health care coverage exemption. Payments were generally relatively small, with the average payment around $200. About 40 percent of these payments were $100 or less and about 95 percent of these payments were $500 or less. The vast majority — 85 percent — of taxpayers reporting a shared responsibility payment still reported a refund. Data from the letter also shows that IRS projects that about 4.8 million taxpayers need to file a return to claim premium tax credit or reconcile advanced premium tax credit. So far, approximately 3.2 million taxpayers have filed Form 8962, Premium Tax Credit, 3 million of whom reported advanced premium tax credit. These taxpayers reported a total of approximately $10 billion in advanced premium tax credit of the approximately $15.5 billion the Marketplaces paid out in 2014. About 2.7 million taxpayers claimed approximately $9 billion in premium tax credits, reporting an average credit of $3,400. About 40 percent claimed less than $2,000, 40 percent claimed $2,000 to $5,000 and 20 percent claimed $5,000 or more. 2015 is the first year that taxpayers saw changes to their income tax returns related to the individual shared responsibility provision and the premium tax credit provision of the Affordable Care Act (ACA).

CMS Releases Guidance on How State Health and Human Services Programs Can Pay for Medicaid Upgrades

The Centers for Medicare and Medicaid Services (CMS) issued a guidance letter July 20 to states that clarifies that their health and human services agencies and programs (such as the Supplemental Nutrition Assistance Program or the Temporary Assistance for Needy Families) can continue through 2018 to benefit from investments in the design and development of state eligibility-determination systems for state-operated Marketplaces, Medicaid and the Children’s Health Insurance Program (CHIP), thereby clarifying that these programs do not need to split costs related to upgrading health IT enrollment systems. This guidance letter provides a one-time extension of that timeline for an additional three years, and provides additional guidance on how states may take advantage of the exception and the extended timeframe to leverage these investments to better serve consumers’ multiple programs and needs. The document reiterated an October 2011 Administration decision that creates an exception to certain Office of Management and Budget (OMB) requirements, so that states can create new IT systems that mutually assist Medicaid and other human services programs. This fall CMS announced that the Medicaid cost-allocation waiver would be extended through 2018, and in April issued a proposed rule that would make permanent the 90-10 Medicaid matching funds rate for states looking to update their eligibility and enrollment systems. The Administration hopes that guidance will enable states experiencing unanticipated delays with the development of the Medicaid Modified Adjusted Gross Income (MAGI) functionality in their eligibility systems, procurement challenges and other unforeseen barriers to complete that work and then effectively use the waiver extension to streamline their eligibility systems, improve access to health and human services programs and maximize efficiency.

CMS Releases New Guidance on State Innovation Waivers Allowing States to Opt Out of Portions of the ACA

The Centers for Medicare and Medicaid Services (CMS) released new guidance July 22 on state innovation waivers, waivers affecting Section 1332 of the Affordable Care Act (ACA). States would apply for these waivers and starting Jan. 1, 2017, waivers could be utilized to cancel out ACA-mandated provisions, including qualified health plan requirements such as essential health benefits and actuarial values; consumer choice and competition provisions within the exchanges; premium tax credits and cost-sharing reductions for federal exchange plans; and the individual and employer mandates. The guidance outlines that when crafting an application, states need to delineate the specific provisions they want waived; relevant data, stated assumptions, goals, actuarial analyses of coverage; a 10-year budget projection; the effects of the waiver on health insurance coverage; state legislation concerning the waiver; an implementation plan and timeline; and/or other information that justify their concepts. Within 45 days after submittal, the Department of Health and Human Services (HHS) and Treasury Department secretaries will make an initial decision on whether the application is complete, and a final decision on the waiver itself will be made by six months after that. All submitted applications will be publicly posted on the HHS website and require a federal public comment period. The guidance leaves several unanswered questions about how the Centers for Medicare and Medicaid Services (CMS) will calculate budget and enrollment neutrality for the changes states propose in their waiver applications. Thus far, both Minnesota and New York have publicly expressed their intention to submit 1,332 waivers. Other states, such as Rhode Island, California, Hawaii, New Mexico and Arkansas, have authorized budgets, legislation or committees to investigate the implications of such a waiver for their exchanges; Vermont and North Dakota are also considering the idea. CEO Sends Letter to State Insurance Commissioners Concerning 2016 Premium Decisions

Chief Executive Officer, Health Insurance Marketplace, Kevin Counihan sent a letter to state insurance commissioners July 21, laying out several findings that the officials should weigh when making final 2016 rate decisions. He noted the availability of new Marketplace utilization experience data and the implementation of the reinsurance, risk adjustment and risk corridor premium stabilization programs as new information to help insurance commissions in reviewing insurer rate proposals in 2016. In urging insurance commissioners to use careful discretion and keep rates affordable, he noted in the letter that recent claims data show healthier consumers and less insurer service utilization, a continued moderate medical cost trend, and the Centers for Medicare and Medicaid Services’ (CMS) commitment to utilize a 100 percent coinsurance rate for the 2014 reinsurance program. Lastly, the letter encourages as much public input as possible, such as public hearings, to help the public evaluate and scrutinize rate changes.

CMS Postpones Risk Adjustment Data Validation Program until 2016, Forgoing One Year of Preliminary Testing

In a July 16 announcement, the Centers for Medicare and Medicaid Services (CMS) revealed that the agency will not be performing validation tests on insurers’ 2014 risk adjustment data (as previously announced in an HHS Notice of Benefit and Payment Parameters for 2014), and will instead run only one year of preliminary testing — in 2016, using 2015 collected data. Issuers and auditors will have one preliminary testing year instead of two in which to implement and test the risk adjustment data validation (RADV) program and modify their audit procedures in response. Previously, CMS explained that issuers and auditors would have two preliminary years in which to implement the program. The agency said it still intends to commence the RADV program and adjust risk adjustment payments and charges in 2018 based on data collected during the 2016 benefit year, keeping with the original program implementation schedule. While CMS previously announced in April that it would put on hold its RADV program with further guidance to be released to clarify future program procedures, the bulletin does clarify that HHS would not have the program up and running for 2014 data, so insurers can delay contracting with their auditor.

A revised timeline for risk adjustment data validation for 2015 benefit year data is included below:

  • Fall 2015 – RADV training to begin
  • Winter 2016 – Issuers select initial validation auditors
  • Spring 2016 – Issuers submit initial validation auditors to CMS for approval
  • Summer through Fall 2016 – Initial validation audit is conducted
  • Fall 2016 through Winter 2017 – Second validation audit is conducted
  • Winter 2017 – Preliminary RADV data released

FDA Approves New Class of Cholesterol-lowering Drugs with High Price Tag

The Food and Drug Administration (FDA) officially approved a new class of cholesterol-lowering drugs, Praluent, created by Sanofi and Regeneron, Inc., following a previous 13-3 decision by an advisory panel recommending the product in mid-June. Known as a PSCK9 inhibitor, Praluent, in trials, has shown the injected biologic drug to provide additional cholesterol-lowering benefits over the widely prescribed statin drugs, as the PSCK9 inhibitor’s antibodies deactivate a specific protein in the liver, which subsequently reduces levels of cholesterol in the bloodstream. FDA’s approval notes that Praluent can be prescribed only for people with a rare genetic condition (heterozygous familial hypercholesterolemia [HeFH]) or for patients with heart disease and cholesterol levels that have not been controlled by existing statin medicines, and will not be prescribed for patients who are so-called “statin intolerant.” The agency’s decision will limit the widespread use of the drug and quells concerns among insurers and state health departments about high drug prices. The drug comes at a high price tag, expected to cost $14,600 a year per patient. A similar drug developed by Amgen awaits potential FDA approval in late August, and the availability of both drugs may also affect price negotiations.

3. State Activities

Utah Governor and Legislature Make Unexpected Deal on Medicaid Expansion

In a last minute agreement reached July 17, the state’s so-called Gang of Six — Gov. Gary Herbert, Lt. Gov. Spencer Cox, Senate President Wayne Niederhauser, House Speaker Greg Hughes, House Majority Leader Jim Dunnigan and Sen. Brian Shiozawa — reached a final deal on a conceptual framework for long-supported Medicaid expansion. Republicans in the state agreed on a proposal that includes two key elements: 1) coverage for all income-eligible (those making under 138 percent of the federal poverty line) and 2) taxing hospitals and other health care organizations to pay for the state’s share of the program’s cost. Even with the support of the House Majority Leader, opposition is still expected in the House, where the Governor’s last expansion proposal failed. Governor Herbert mentioned in a press release July 24 that he thinks there’s at least a 50-50 chance to get the Medicaid expansion alternative through the House. The state leaders have continued to meet since the end of the 2015 General Legislative Session and will identify specific dates for public hearings through legislative committees and a special legislative session. A formal draft outlining details of the plan will be released in the coming weeks.

Texas Solicits Comments on Draft Waiver to Expand Its Prepaid Medicaid Managed Care Program

The Texas Health and Human Services Commission (HHSC) held a meeting July 16 to solicit public comments on a draft extension of its Section 1115 Medicaid Transformation Waiver, which is due Sept. 30, 2015. Originally instituted in 2011, the previously enacted five-year waiver allowed the state to expand its Medicaid managed care program by developing a funding pool to offset uncompensated care while simultaneously creating an incentive structure for hospitals and other providers to develop a care delivery system infrastructure. At the meeting, several commenters noted that Florida, which like Texas has not implemented Medicaid expansion, submitted a 1115 waiver comparable to Texas’ draft request. The Center for Medicare and Medicaid Services’ (CMS) unwillingness to approve Florida’s waiver on the grounds that waiver funds are not intended to compensate for care provided to patients who would be eligible for Medicaid if Medicaid coverage were expanded does not bode well for Texas’ extension request. Comments on the draft HHSC waiver extension can be submitted to HHSC through Aug. 5, 2015, at . According to the draft extension, Texas is requesting that CMS provide $3.1 billion annually for five years. The state is also asking for $5.8 billion for fiscal 2017, $6.6 billion for fiscal 2018 and $7.4 billion per year between fiscal 2019 and 2021 for its uncompensated care pool.

4. Regulations Open for Comment

CMS Releases CY 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Rule and Changes to the Two-Midnight Rule

On July 1, the Centers for Medicare & Medicaid Services (CMS) announced the release of the Calendar Year 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions and payment rates proposed rule. The CY 2016 OPPS/ASC proposed rule recommends updates to Medicare payment policies and rates for hospital outpatient departments (HOPDs), ASCs and partial hospitalization services provided by community mental health centers (CMHCs), and refinements to programs that encourage high-quality care in these outpatient settings. CMS suggested a decrease of 0.1% for outpatient payment rates. Moreover, it suggested an additional 2 percentage point adjustment to be included to account for inflation in OPPS payments to an increase in payments for laboratory tests. Approximately 3,800 hospitals and 60 CMHCs are paid under the OPPS, while approximately 5,300 ASCs are paid under the ASC payment system. The OPPS provides payment for most HOPD services, including partial hospitalization services furnished by HOPDs and CMHCs. OPPS payment amounts vary according to the Ambulatory Payment Classification (APC) group to which a service or procedure is assigned. This proposed rule also includes suggested changes to the Two Midnight Rule for CY 2016. The proposal was published in the July 8, 2015, Federal Register online. Comments on the proposed rule are due on Sept. 4, 2015.

A fact sheet on the proposed changes to the Two Midnight Rule for CY 2016 can be found here.

CMS Releases Proposed CY 2016 Home Health Prospective Pay Rule

On July 6, the Centers for Medicare & Medicaid Services (CMS) announced proposed changes to the Medicare home health prospective payment system (HH PPS) for calendar year (CY) 2016, including updating requirements for home health agencies under the Medicare program and moving forward to implement the third year of the four-year phase-in of the rebasing adjustments to the HH PPS. Finalized in the CY 14 final rule, the CY 16 downward adjustment is $80.95. Home health agencies (HHA) are paid a national standardized 60-day episode payment for all covered home health services, adjusted for case-mix and area wage differences. CMS proposes to decrease the national, standardized 60-day episode payment amount by 1.72 percent in each of CY 2016 and CY 2017. CMS will also be updating the HH PPS payment rates by the home health payment update percentage, 2.3 percent in CY 16. The Affordable Care Act (ACA) directs CMS to apply an adjustment to the national, standardized 60-day episode rate and other applicable amounts that reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode and other relevant factors.

Also in the proposed rule, CMS included further implementation of provisions within the IMPACT Act, including one standardized cross-setting measure for CY 2016 under the skin integrity and changes to skin integrity domain. Measures for the other domains will be addressed through future rulemaking, although CMS is seeking feedback on four future, cross-setting measure constructs to potentially meet requirements of the IMPACT Act domains of:

  • All-condition risk-adjusted potentially preventable hospital readmission rates;
  • Resource use, including total estimated Medicare spending per beneficiary;
  • Discharge to the community; and
  • Medication reconciliation

CMS also announced the launch of a new initiative designed to support greater quality and efficiency of care among Medicare-certified HHAs across the nation. Authorized by the ACA and implemented by the Centers for Medicare & Medicaid Innovation, the HHVBP model draws upon the lessons learned from other value-based purchasing programs and demonstrations — including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performance and Nursing Home Value-Based Purchasing Demonstrations — to shift to a model that promotes the delivery of higher-quality care to Medicare beneficiaries. CMS proposes to launch the HHVBP model among all HHAs in nine states representing each geographic area in the nation. HHAs in the nine states (Massachusetts, Maryland, North Carolina, Florida, Washington, Arizona, Iowa, Nebraska and Tennessee) would have their payments adjusted by 5 percent in each of the first two payment adjustment years, 6 percent in the third payment adjustment year and 8 percent in the final two payment adjustment years based on their performance across a series of quality metrics. CMS estimates approximately 3.5 million beneficiaries receive home health services from approximately 11,850 HHAs, costing Medicare approximately $17.9 billion.

Published in the Federal Register July 8, the proposed rule can be found here. CMS will solicit public comments on the proposed rule until Sept. 4, 2015.

CMS Releases Proposed Physician Payment Rule That Replaces SGR Formula

The Centers for Medicare and Medicaid Services (CMS) released a proposed update to the physician payment schedule since the repeal of the Sustainable Growth Rate (SGR) through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposal includes a number of provisions focused on person-centered care, and continues the Administration’s intention to transition the Medicare program to a system based on quality and healthy outcomes. In the proposed CY 2016 Physician Fee Schedule rule, CMS is also seeking comment from the public on implementation of certain provisions of the MACRA, including the new Merit-based Incentive Payment System (MIPS). The proposed rule includes updates to payment policies (increases physician pay by 0.5 percent); proposals to implement statutory adjustments to physician payments based on misvalued codes; updates to the Physician Quality Reporting System, which measures the quality performance of physicians participating in Medicare; and updates to the Physician Value-Based Payment Modifier, which ties a portion of physician payments to performance on measures of quality and cost.

Other issues addressed include changes to biosimilar reimbursement; expanded reporting of the Consumer Assessment of Healthcare Providers and Systems survey to group practices of 25 or more eligible professionals; and application of the value-based payment modifier to groups of only physician assistants and other non-physicians. In the proposed rule, CMS is additionally seeking comment on the potential expansion of the Comprehensive Primary Care Initiative, a CMS Innovation Center initiative designed to improve the coordination of care for Medicare beneficiaries. Other items included in the proposed rule include an initiative that supports patient- and family-centered care for seniors and other Medicare beneficiaries by enabling them to discuss advance care planning with their providers.

For a fact sheet on the proposed rule, please see here. For further information, please see the rule on display here. CMS is accepting public comments on the CY 2016 PFS proposed rule until Sept. 8, 2015. The proposed rule will be published in the Federal Register on July 15, 2015, and CMS will issue the final rule by Nov. 1.

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

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.

5. Reports

Medicare Board of Trustees Releases Annual Financial Report Finding Trust Fund Insolvency By 2030; Predict Part B Premiums Up 52 Percent Due to Outpatient Services Shift

The Medicare Board of Trustees released its annual financial report July 22, predicting that the Medicare Trust Fund, which covers only costs for Part A, will become financially insolvent by 2030 — pushing back the timeline 13 years from last year’s report. While the trustees note only marginal increases in Medicare costs, 0.3 percent in 2012 and 0.1 percent in 2013, a much higher per-beneficiary cost in 2014 (2.3 percent), was driven by a 10.9 percent spike in the cost of Part D drug coverage attributed primarily to the expense of new treatments for hepatitis C since last year. The trustees project that per-beneficiary spending increases will dip back to 1 percent in 2015, and they anticipate a cost climb for four straight years, peaking with a 5.3 percent increase in 2019. The Trust Fund’s revenue comes from a payroll tax, with revenues falling short of projections since 2008, as the gap hit the $8 billion mark in 2014.

With regard to Part B (which had per beneficiary spending up 4.5 percent in 2014), the Medicare Trustees’ annual report asserts that premiums are slated to increase 52 percent from $104.90 to $159.30, with only about 30 percent of beneficiaries paying higher premiums. The Department of Health and Human Services (HHS) is looking to find a way to limit that projection by October of this year and, by law, the cost of higher Medicare Part B premiums can’t be passed on to most Medicare beneficiaries when they don’t get a Social Security raise. The Part B premium increase, which also impacts state budgets due to their obligations to cover premiums for dually eligible individuals, can be attributed to CMS’ efforts to shift care away from hospitalization and into outpatient services. Trustees anticipate a Part B growth rate of 6.7 percent, and a Part D estimated average annual increase of drug expenditures of 10.9 percent, over the next five years respectively.

The share of Medicare beneficiaries in private plans, Medicare Advantage, has skyrocketed in recent years. Just over 30 percent of beneficiaries opted for Medicare Advantage plans in 2014, up from 12.8 percent a decade earlier. The trustees expect that figure to reach 35 percent in 2022. The Affordable Care Act reduced payments to private Medicare plans significantly, but those cuts have not slowed the growth in uptake as anticipated.

The new spending projections don’t take into account changes in payment models being introduced and implemented by HHS that are designed to improve patient outcomes and reduce costs. The Obama administration has set a goal of having 50 percent of Medicare payments tied to improving outcomes by 2018. In 2014, Medicare provided coverage for 53.8 million Americans at a cost of $613.3 billion. The Medicare Trustees include Health and Human Services Secretary Sylvia M. Burwell, Treasury Secretary and Managing Trustee Jacob Lew, Labor Secretary Thomas Perez and Acting Social Security Commissioner Carolyn Colvin. Two other members, who are public representatives appointed by the President, are Charles Blahous III and Robert Reischauer. CMS Acting Administrator Slavitt is designated as secretary of the board.

A press release on the report can be found here.

GAO Releases Report on Adult Behavioral Health Conditions in Medicaid

The Government Accountability Office (GAO) released a report July 20 that estimates that nationwide, approximately 17 percent of low-income, uninsured adults (3 million) had a behavioral health condition, defined as a serious mental illness, a substance use condition or both (estimates using 2008-2013 data). Underlying these national estimates, GAO found considerable variation at the state level in the six states selected for the study; moreover, the estimated number of low-income, uninsured adults with behavioral health conditions was divided evenly between states that did and did not subsequently expand Medicaid under the Patient Protection and Affordable Care Act (PPACA). Behavioral health agencies (BHA) in four selected non-expansion states offered various treatment options for low-income, uninsured adults, focusing care primarily on those with the most serious behavioral health needs. To do so, BHAs in all four selected states established priority populations of those with the most serious behavioral health needs. Also, BHAs in three of the four states maintained waiting lists for adults with less serious behavioral health needs.

Six selected states that expanded Medicaid generally managed behavioral health and physical health benefits separately for newly eligible enrollees, and state officials reported increased availability of behavioral health treatment, although some access concerns continue. Four of the six selected states explicitly chose separate contractual arrangements for behavioral health and physical benefits. Officials from all six selected states said that enrollment in Medicaid increased the availability of behavioral health treatment for newly eligible enrollees.

GAO Report Finds Additional Actions Needed to Improve Eligibility Verification of Providers and Suppliers

In a report released July 22 by the Government Accountability Office (GAO), the oversight agency examined the implementation of four enrollment screening procedures that the Centers for Medicare & Medicaid Services (CMS) uses to prevent and detect ineligible or potentially fraudulent providers and suppliers from enrolling into its Provider Enrollment, Chain and Ownership System (PECOS). GAO’s examination of 2013 data found that about 23,400 of 105,234 (22 percent) of practice location addresses are potentially ineligible; and that computer software CMS uses as a method to validate applicants’ addresses does not flag potentially ineligible addresses, such as those that are of a Commercial Mail Receiving Agency (such as a UPS store mailbox), vacant or invalid addresses. The audit also found 460 providers in the database were deceased, with 38 of them receiving Medicare payments for services performed after their deaths. Other GAO findings include 147 out of about 1.3 million physicians with active PECOS profiles had received a final adverse action from a state medical board (prohibiting them from participating in the Medicare program), as of March 2013. In response to the report, CMS says it has greatly improved its screening programs through changes implemented in the Affordable Care Act (ACA), and stressed that the agency has cleared 34,000 providers and 540,000 invalid addresses from PECOS. On July 22, the Senate Special Committee on Aging held a hearing on the issue entitled “The Doctor’s Not In: Combating Medicare Provider Enrollment Fraud” with witnesses testifying from GAO, the Centers for Medicare and Medicaid Services (CMS) and Center for Program Integrity (CPI), and CareSource Management Group.

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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