CONSISTENTLY DELIVERS

Aug 10, 2015

Washington Healthcare Update

This Week: Bipartisan Senate Letter Questions HHS and CMS on Details of State ACA Waivers...OMB Is Reviewing Final Medicaid-Covered Outpatient Drug Rule...Delaware Forgoes Transition to State-Based Exchange

AUTHOR'S NOTE: Due to the Congressional recess, the Weekly Washington Healthcare Update will be distributed on a biweekly basis until after the Labor Day holiday. New editions will be released on Aug. 24 and Sept. 4, after which we will resume our regular weekly distribution schedule.

1. Congress

House of Representatives

District Work Period: Aug. 3–Sept. 7

Senate

District Work Period: Aug. 5–Sept. 7

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports


1. Congress

House

District Work Period: Aug. 3–Sept. 7

House Energy and Commerce Leaders Send Letters to FDA and NIH on Policies Regarding NIH Investigational Drug Center Closure

The House Energy and Commerce Committee leadership sent letters to National Institutes of Health (NIH) Director Francis Collins and Food and Drug Administration (FDA) Commissioner Stephen Ostroff concerning federal oversight of manufacturing practices and contamination issues that have led to the June 4 closure of NIH’s Pharmaceutical Development Section (PDS), a facility that oversees investigational drugs. The letters’ authors — Committee Chair Fred Upton (R-MI) and Ranking Member Frank Pallone (D-NJ), and Oversight Subcommittee Chair Tim Murphy (R-PA) and Ranking Member Diana DeGette (D-CO) — also questioned the FDA on its procedures of not regularly performing good manufacturing practices inspections at sites that use these research drugs on patients in human trials. “The severity of the deficiencies, the disruption of ongoing studies, and the resulting suspensions of PDS operations raise serious questions about the management of the NIH PDS for the last several years,” the letter said. In comments, FDA officials have said a current Good Manufacturing Practices inspection was not required for the division because the agency does not routinely inspect facilities that utilize drugs solely for research purposes.

The letter to NIH Director Collins can be found here.

The letter to FDA Commissioner Ostroff can be found here.

Illinois Democrats Introduce Bicameral Legislation to Create Government Part D Plan(s) Allowing CMS to Negotiate Drug Prices

Rep. Jan Schakowsky (D-IL) and Sen. Dick Durbin (D-IL) recently introduced identical legislation, The Medicare Prescription Drug Savings and Choice Act (H.R.3261, S.1884), into their respective chambers that would create one or more Medicare-administered prescription drug plans to compete with privately administered prescription drug plans currently offered under Medicare Part D. The bill would also require the Secretary of Health and Human Services to negotiate lower drug prices, and would use incentives (such as lower copayments) to encourage Medicare beneficiaries to choose the drug with the lowest negotiated price. Administered by Medicare with a uniform monthly premium, the prescription plan(s) would not eliminate the private plans that are currently offered, but, by providing competition, would aim to put downward pressure on the drug costs in private plans as well. The Agency for Healthcare Research and Quality would assess the clinical effectiveness and safety of drugs, and recommend drugs that should be included on the formulary. An Advisory Committee would also review petitions and make recommendations on whether to add drugs to the formulary. The bill is co-sponsored in the House of Representatives by Reps. Jim McDermott (D-WA), Sam Farr (D-CA), Raul Grijalva (D-AZ), Yvette Clarke (D-NY), Diana DeGette (D-CO), Rosa DeLauro (D-CT) and Chellie Pingree (D-ME). In the Senate, the legislation is co-sponsored by Sens. Sheldon Whitehouse (D-RI), Jack Reed (D-RI), Sherrod Brown (D-OH), Angus King (I-ME), Tammy Baldwin (D-WI) and Mazie Hirono (D-HI).

A press release on the legislation can be found here.

Bipartisan House Members Send Letter to CMS Requesting the Agency to Forgo the Creation of Single Billing Codes in Biosimilar Reimbursement Proposal

On Aug. 4, thirty-three bipartisan House members sent a letter to the Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt asking the agency to abandon its proposed plan to group all biosimilars of the same reference biologic into one payment code, claiming that each product deserves its own unique billing code. The proposed 2016 Physician Fee Schedule, released July 8, calculates reimbursement for billing codes via the average sales price of all biosimilars that reference a common biologics license application, which in essence decreases reimbursement rates for biosimilars. In their letter, the authors stress that biosimilars are inherently complex and difficult to develop, so biosimilars should not be treated as generics. Reps. Anna Eshoo (D-CA) and Joe Barton (R-TX), key co-authors of the legislation that created the regulatory pathway for biosimilars, are leaders on the letter.

Senate

District Work Period: Aug. 5–Sept. 7

GOP Senators Send Letter to Acting CMS Administrator Slavitt on Recouping Lost State-Based Exchange Funding

On Aug. 3, Republican senators Orrin Hatch (UT), Chuck Grassley (IA) and John Barrasso (WY) sent a letter to Centers for Medicare and Medicaid Services (CMS) Acting Administrator Andy Slavitt outlining their concern about the lack of oversight for more than $1 billion in federal grants given to state exchanges. They also inquired whether CMS would seek repayment from contractors for these mishandled federal funds. The senators said that while they agreed with the Secretary confirmation hearing statement that the federal government was responsible for recapturing mishandled funds, they note that the Administration has not followed thorough. Members cited the example of unrecouped funds from several states, including Maryland, Massachusetts, Nevada and Oregon. These states received grant funding from the federal government to create state exchanges, but eventually abandoned their original exchanges for federal exchange or using technology from other states.

Senate Hearing for DeSalvo, Nominee for HHS Assistant Secretary for Health, Postponed

An early start to August Congressional recess prevented the Senate Health, Education, Labor, and Pensions (HELP) Committee from obtaining a necessary quorum to vote on President Obama’s nominee for Department of Health and Human Services (HHS) Assistant Secretary for Health, Karen DeSalvo, at the Aug. 6 committee hearing. The committee will postpone the hearing on the nomination, the consideration of drug abuse legislation (S. 481) and a mental health bill (S.1893) until after Sept. 8.

Bipartisan Bill Introduced to Make FDA’s Pediatric Priority Review Voucher Program Permanent

Sens. Bob Casey (D-PA) and Johnny Isakson (R-GA) introduced legislation, the Advancing Hope Act (S. 1878), that would make permanent a Food and Drug Administration (FDA) pilot program, established by the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA), that incentivizes drug companies to research treatments for rare, life-altering diseases that impact pediatric patients. The incentive in this program is a special voucher that allows its owner to have any experimental drug the company owns (i.e., one that would not otherwise qualify for priority review) reviewed by the FDA under its Priority Review pathway, resulting in a review time of six months instead of the usual 10 months. This program expanded the existing Tropical Disease Priority Review Voucher Program. The senators’ bill would also alter the definition of “rare pediatric disease” and extend program eligibility to all pediatric cancers and any form of sickle cell disease. Currently, the priority review voucher program is slated to sunset in March 2016. Rep. G.K. Butterfield (D-NC) introduced a similar bill in March, but his version differs by excluding for two years foreign-approved drugs for tropical disease indications. The 21st Century Cures Act, passed by the House in July, contains its own reauthorizing language but would sunset the program at the end of 2018.

A press release on the legislation can be found here.

Bipartisan Senate Letter Questions HHS and CMS on Details of State ACA Waivers

Sens. Tom Cotton (R-AR), Al Franken (D-MN) and John Boozman (R-AR) sent a letter to Secretary of the Department of Health and Human Services (HHS) Sylvia Burwell and Acting Centers for Medicare and Medicaid Services (CMS) Administrator Andy Slavitt seeking specific details on how states can qualify for Affordable Care Act (ACA) Section 1332 waivers, which begin in 2017. Section 1332 waivers allow states to modify ACA mandates concerning covered benefits, subsidies, insurance marketplaces and individual and employer mandates so long as beneficiary coverage will remain accessible, comprehensive and affordable (as before the waiver), and that the changes will not add to the federal deficit. With Section 1332 waivers, states may propose broad alternatives or targeted fixes so long as the number of insurers and eligible residents remains comparable. “We ask you provide clear guidelines and thresholds so that our states can credibly meet the requirements to receive a Sec. 1332 waiver,” they wrote, referencing four specific clarification points. Several states are exploring 1332 waivers, including Arkansas and Minnesota. The members ask for response by Sept. 1, 2015, so governors and state legislatures have adequate time to incorporate the clarifications into their waiver applications. Waiver applications are due by Dec. 2015 for a Jan. 2017 implementation date.

2. Administration

HHS Proposes Plan for Fast-Moving Investigational Drug Studies During Public Health Emergencies

The Department of Health and Human Services (HHS) officials released a proposed plan that would allow medical researchers to rapidly study investigational therapies during disease outbreak emergencies; the goal of the new process would be to get new remedies to patients as quickly as they are developed. The department’s new paradigm is based on previously established clinical trial designs developed during tests to find potential treatments for Ebola. HHS’ proposal allows scientists to evaluate multiple treatments concurrently against a shared control patient group, despite differences in the treatments’ stages of development. The control group would receive the best known form of care for the respective disease, until any of the experimental therapies demonstrate improved outcomes. “Once a drug is proven effective, it is incorporated into the supportive care that all trial patients receive, and the study may continue in order to evaluate the added benefit of other investigational drugs .... The first drug being evaluated under this protocol, ZMapp, advanced more rapidly than usual to a clinical trial designed to assess both safety and efficacy (typically, efficacy trials occur much later in development),” the researchers wrote. HHS’ new model was published in the New England Journal of Medicine on Aug. 5.

The published article describing the new model can be found here.

OMB is Reviewing Final Medicaid-Covered Outpatient Drug Rule

The White House’s Office of Management and Budget (OMB) is in the process of reviewing the Centers for Medicare and Medicaid Services’ (CMS) final Medicaid-covered outpatient drug rule for federal reimbursement levels for multiple-source drugs. The unexpected schedule modification follows a June 2014 CMS announcement that the agency anticipated releasing final Medicaid Average Manufacturer Price-based Federal Upper Limits (FULs) and guidance on how states can implement FULs as mandated by the Affordable Care Act (ACA). CMS is required by the ACA to recalculate the FUL amounts, as they occasionally top out the market prices for multiple-source drugs. Released in 2012, the proposed FULs rule includes a plan to pay pharmacists according to the actual acquisition cost of a drug rather than estimated acquisition cost for brand drugs and some generics. CMS’ proposal also includes definitions of a retail community pharmacy and wholesaler, as well as the determination of the average manufacturer price (AMP). CMS originally intended to finalize the Medicaid and ACA FULs in July 2014; however the rule was shelved after a November 2013 announcement that the final FULs and ACA-mandated FULs guidance would come out jointly. A 2013 Department of Health and Human Services Office of Inspector General report found FUL amounts prior to the enactment of the ACA were nearly double, on average, of the State Maximum Allowable Cost (MAC) programs, while the post-ACA FUL amounts reviewed by the OIG were lower, on average, than the MAC prices.

3. State Activities

Delaware Forgoes Transition to State-Based Exchange

Delaware’s Health and Social Services Secretary Rita Landgraf announced on Aug. 6 that the state will no longer be pursuing development of its own state-based health insurance exchange, instead opting to keep its current state-federal partnership model that relies on the HealthCare.gov platform for enrollment. In June, Delaware was granted nonbinding approval by the Centers for Medicare and Medicaid Services (CMS) to develop a supported state-based health insurance marketplace for enrollment in 2016. The state decided to submit a conditional approval waiver amid uncertainty over whether the Supreme Court would uphold government insurance subsidies in King v. Burwell. Following the court’s decision, Delaware said it would make a final decision on its exchange format by the end of July.

Washington State Exchange CEO Resigning

In an Aug. 6 announcement, Richard Onizuka, Washington Health Benefit Exchange CEO, revealed that he will leave his position at the end of August. He has led the state’s insurance marketplace since May 2012 and was the manager during the original launch. “My goal from day one was to ensure that we establish a health insurance marketplace that best served the people of Washington. With the foundation now laid I feel it is the right time to step aside,” Onizuka said in a statement. “It is a difficult decision, especially given my affinity for this work and the people associated with it.” The announcement follows the state legislature’s vote on a two-year, $110 million budget for the exchange, a budget that is significantly less than what CEO Onizuka requested for the exchange’s continued operations. While Medicaid enrollment in the state has been on the rise since 2014, enrollment goals for its private plan offerings on the exchange were not met in 2015. CEO Onizuka’s Chief of Staff since August 2012, Pam MacEwan, will lead as interim CEO following his departure.

4. Regulations Open for Comment

CMS Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes

The Centers for Medicare and Medicaid Services (CMS) issued a final rule on July 31, 2015, to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percent adjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable Care Act and further adjusted by - 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic health records will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, a continued - 1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonuses and penalties for hospital valued-based purchasing.

Medicare Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments in FY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be published in the Federal Register on Aug. 17, 2015. Comments may be made on the final rule and are due to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

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.

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

CMS Actuary Expenditures Report Finds Drug Spending Increased 12.6 Percent in 2014

On July 28, the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary released its National Health Expenditures Report that outlines estimates for national health care spending for 2014 through 2024. The agency produces short-term (11-year) projections of health care spending for categories in the National Health Expenditure Accounts (NHEA) on an annual basis. The agency highlighted a 12.6 percent increase in drug spending in 2014, the steepest growth in drug costs since 2002, attributed to increased costs of expensive new hepatitis C treatments. The agency’s actuaries note, however, that drug spending is expected to increase by only 7.6 percent this year, eventually slowing to 5.5 percent by 2018, or about even with other health care spending trends. CMS projects U.S. health care spending growth to average 5.8 percent for 2014–24, which the agency attributes to effects of the Affordable Care Act’s insurance coverage expansions, faster economic growth and aging demographics. The report found that the health expenditure share of U.S. GDP is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024. Also, out-of-pocket spending as a share of personal health care (net of retail sales) dropped from 18 percent in 2007 to 16 percent in 2014, and will continue to fall to 14 percent by 2024. The administrative burden of overinsurance is also expected to increase, as the net cost of health insurance rose from 18 percent of insurers’ payments to providers in 2007 to 20 percent in 2014, and will rise to 22 percent in 2024.

Joint Committee on Taxation Releases New Dynamic Scoring of 2015 Tax Extenders

On Aug. 6, the Joint Committee on Taxation (JCT) released its analysis of 50 expired tax provisions approved last month by the Senate Finance Committee in its 2015 tax extenders legislation. Using new budgeting rules established by the Republican majority that mandate that the Congressional Budget Office (CBO) include changes to macroeconomic indicators such as economic output, employment and capital stock that result from the effects of the legislation, the report estimates the extenders’ cost at $86.5 billion, down from what would have been $96.9 billion under conventional budgeting techniques. As such, JCT estimated the addition of about $10 billion in new revenue that can be attributed to increased economic growth, which does not cover the cost of the bill (only approximately 11 percent). JCT said revenue can mostly be attributed to business-related tax provisions, with little to no economic increase coming from extended individual provisions. In the health care space, the most important provision extended was the sunset of the research and development tax credit, which will cost the federal government $8.47 billion in 2016 and approximately $22.62 billion over 10 years.

HHS OIG Report Finds Providers Terminated from One State Medicaid Program Continued Participating in Other States

The Department of Health and Human Services (HHS) Office of the Inspector General (OIG) released a report Aug. 5 that found that despite the Affordable Care Act’s (ACA) requirement that states terminate any providers already terminated for cause in another state, continued participation from such providers in other states’ Medicaid programs still occurred. Specifically, OIG’s analysis found that 12 percent (295 of 2,539) of providers terminated for cause in 2011 continued participating in other states’ Medicaid programs as late as January 2014. These Medicaid programs paid $7.4 million to 94 providers for services performed after each provider’s termination for cause by the initial state. In a similar 2014 OIG report, the oversight agency concluded that states that intend to meet the ACA requirement do not have a comprehensive data source for identifying all terminations for cause and difficulty differentiating these terminations from other administrative actions that a state reports. Further complicating a state’s ability to terminate providers, OIG said, is the challenge created by those states that do not enroll providers participating in its Medicaid managed care organizations (MCO). To address the remaining issues identified by OIG, CMS was encouraged to (1) work with states to develop uniform terminology to clearly denote for-cause terminations; (2) require that state Medicaid programs enroll all providers participating in Medicaid managed care; and (3) furnish guidance to state agencies to clarify that termination is not contingent upon the provider’s active licensure status. CMS concurred with the agency’s recommendations.


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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