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Apr 10, 2017

Washington Healthcare Update

This Week: More skirmishes over repeal and replace… MedPAC makes recommendations on Part B drug payment… Congress goes home for two weeks.

1. Congress



2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


House Rules Committee Approves Risk Stabilization Amendment to AHCA

On April 6, House Republicans attached an amendment to the American Health Care Act that would allocate $15 billion from the Patient and State Stability Fund between 2018 and 2026 to create a federal “invisible risk sharing program.” The House Rules Committee approved the amendment 9-2 along party lines.

The amendment was drafted by House Freedom Caucus members Rep. Gary Palmer (R-AL) and Rep. David Schweikert (R-AZ). Under the program, applicants fill out a health history and those with certain conditions found to drive health claims would be automatically placed in the pool. The program also allows issuers to voluntarily put consumers likely to have high claims into the pool.

In the GOP amendment, HHS would establish the fund after consultation with health care consumers, issuers, commissioners and other stakeholders and after taking into consideration high-cost health conditions. HHS would run it through 2020, after which the states would take over. HHS would define parameters including eligible individuals, health status statements, automatic qualities, voluntary qualities, the percent of insurance premiums that would be applied to the pool, and the attachment point and payout proportion.

Rep. Schweikert said it would not resolve everyone’s concerns, but it does address one of the main ones from the Freedom Caucus—that the AHCA did nothing to lower premiums. He said there are still questions over what flexibility in Medicaid expansion means and how states could be more creative without HHS interference.

House Majority Leader Kevin McCarthy (R-CA) wrote a memo in support of the amendment wherein he stressed the importance of repealing and replacing Obamacare.

Members were told that there would be more discussions during the two-week break, and should progress be made, they may be called back early to consider legislation.

House Approves VA Choice Extension, Sends to President Trump

On April 5, the House approved and sent to President Donald Trump legislation that would extend the Veterans’ Choice Program past its expected August expiration. The bill was passed by a voice vote, following similar approval in the Senate.

If signed by the president, as expected, the legislation would eliminate the August sunset date for the program and allow the VA to spend the nearly $1 billion left from an initial $10 billion in emergency funding dedicated to the Choice Program.

The program, created to subsidize non-VA care for veterans who face long wait times for medical appointments or live long distances from a VA medical facility, is set to expire three years after its creation or when it runs out of money, whichever comes first.

The Choice Program was created as a temporary program to cut waits for medical appointments at the height of the VA’s 2014 wait times scandal. However, lawmakers from both parties and VA officials have since argued the program’s rollout was deeply flawed and requires reform.

House Veterans’ Affairs Chairman Phil Roe (R-TN) said on the House floor that his goal is to secure passage of a broader rewrite of the Choice Program later this year, but the legislation considered now would give lawmakers time to negotiate a broader deal.

The legislation is sponsored by 20 senators from both parties, including Senate Veterans’ Affairs Chairman Johnny Isakson (R-GA) and the committee’s ranking Democrat, Sen. Jon Tester of Montana, as well as Senate Armed Services Chairman John McCain (R-AZ). On the Senate floor, the bill’s backers characterized the legislation as a first step in improving the program.


Senators Urge AG to Continue Appeal of ACA Cost-Sharing Reduction Lawsuit

On April 4, nine senators urged Attorney General Jeff Sessions to continue the prior administration’s appeal of a lower court decision in the House GOP lawsuit over the ACA’s cost-sharing reductions. The letter was signed by Democrats Mark Warner (VA), Michael Bennet (CO), Tom Carper (DE), Chris Coons (DE), Maggie Hassan (NH), Tim Kaine (VA), Bill Nelson (FL) and Jeanne Shaheen (D-NH), along with Independent Angus King (ME).

In their letter to Sessions, the senators argue that “the immediate threat posed by the mixed messages coming from the Administration,” in addition to uncertainty created by a wide range of actions from the administration and the GOP-led Congress, could lead to fewer choices, less access and higher premiums. “Until those who initiated the lawsuit, the House Republican Conference, develop a practical resolution to prevent millions of Americans from experiencing higher out of pocket costs, we urge you to provide predictability for the American people by continuing to appeal the decision and reimbursing insurers to cost-sharing payments,” the letter says.

Earlier this week, Speaker Paul Ryan (R-WI) stated the House does not intend to drop the suit because of the separation of powers issues involved. An administration official said April 3 that HHS would follow precedent by allowing the CSRs to be paid out as long as the case is in litigation, but did not say whether the administration intended to defend the case, House v. Price.

House Republicans won in a lower court last year and the decision is now on appeal. President Donald Trump’s statement that the White House would be willing to watch the exchanges “explode” following the collapse of the GOP’s health reform effort has led to confusion over whether the administration will continue the appeal.

Senate HELP Committee Holds Hearing on FDA User Fees

On April 4, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on FDA user fee agreements. During the hearing, Committee Chairman Lamar Alexander (R-TN) said he hopes to move quickly to reauthorize the user fee agreements negotiated by FDA and industry so that the agency will not be forced to send layoff notices to employees at the end of July. “After reviewing the recommendations from industry and the FDA, I believe these are good agreements for patients,” Alexander said, signaling he will not accept President Donald Trump’s request in his “skinny” fiscal 2018 budget to double the fees and lower appropriations.

Committee ranking Democrat Patty Murray (WA) called Trump’s request that industry pay double in exchange for regulatory reforms a dangerous proposal. Sen. Elizabeth Warren (D-MA) also said that Trump’s proposal to shift funding to increased reliance on user fees would keep the agency from completing activities that do not receive funding from user fees, endangering public health.

Kay Holcombe, senior vice president of science policy at the Biotechnology Innovation Organization, noted the president’s hiring freeze has a direct impact on user fees. “If FDA is unable to make these hires, user fees cannot be spent. This is a situation that is not good for fee payers, for FDA, or for patients who are waiting for approved therapies,” Holcombe said.

For more information on the hearing, click here.

Medicare Advisers Recommend Drug Payment Reforms

On April 6, a congressional Medicare advisory panel unanimously supported recommendations that would fundamentally restructure how the program pays for physician-administered drugs, ending more than two years of discussion on the topic.

Medicare Part B now reimburses doctors for these drugs based on a formula—average sales price plus 6 percent—that critics say incentivizes doctors to prescribe high-cost treatments when cheaper alternatives would suffice. The advisory panel, MedPAC, agreed that drug companies should pay a rebate when the average sales price of their products increases faster than an inflation benchmark.

MedPAC also supported a new “drug value program,” which would create a negotiation system for physician-administered drugs, similar to what is used in Medicare Part D for pharmacy prescriptions. Under this system, a limited number of vendors would negotiate drug prices, and participating providers would buy those medicines at prices that would not be made public.

The group suggested creating a voluntary program that would be phased in by 2022 at the earliest. To encourage participation, however, they suggest gradually reducing the ASP add-on percentage.

PhRMA and some doctors groups, like the Community Oncology Alliance, oppose these changes. These groups were instrumental in killing an Obama administration proposal to test new ways of paying for Part B drugs.

But some MedPAC recommendations might find a receptive audience in the new White House, given President Donald Trump’s support for negotiating drug prices. MedPAC also said HHS should use the same billing code for a reference biologic and biosimilar, which would incentivize doctors to use the cheaper copycats of branded biologics.

The panel estimated its package of recommendations would save between $1 billion and $5 billion over five years.

2. Administration

CMS Announces Participants for the Assistance and Alignment Tracks of the Accountable Health Communities Model

On April 6, CMS announced the participants for the Assistance and Alignment Tracks of the Accountable Health Communities (AHC) Model. By addressing critical drivers of poor health and high health care costs, the model aims to reduce avoidable health care utilization, impact the cost of health care and improve health and quality of care for Medicare and Medicaid beneficiaries. The organizations in the Accountable Health Communities Model Assistance Track will provide person-centered community service navigation services to assist high-risk beneficiaries with accessing needed services. The organizations will also provide community service navigation services, as well as encourage community-level partner alignment to ensure that needed services and supports are available and responsive to the needs of beneficiaries.

The Assistance and Alignment Tracks of the Accountable Health Communities Model will begin on May 1, 2017, with a five-year performance period.

To view a list of the Assistance and Alignment Tracks bridge organizations, visit the Accountable Health Communities Model web page.

CMS Releases Interim Report on Risk Adjustment

On March 31, CMS released an interim report on 2016 risk adjustment calculations for all but two states, and stressed that the figures are only preliminary and liable to change once the final numbers are out in June.

The ACA’s risk adjustment program is designed to protect issuers from adverse selection by requiring plans with healthier risk pools to pay into a fund so that payments can be transferred to issuers that ended up with a sicker population. While CMS has determined the program works as intended, issuers have consistently argued the program design is problematic and should be overhauled.

Issuers also asked CMS to provide interim calculations after issuers large and small were caught off-guard by the results of the 2014 RA program. CMS agreed, and began doing so last year. As in 2015, the agency only provides the numbers for states in which each credible issuer (meaning an issuer with at least 0.5 percent of market share) submitted at least 90 percent of enrollment data and claims for the first three-quarters of the benefit years and there were no data outliers.

Only 21 states met that criteria in 2015, but in 2016 all states in which the federal government runs risk adjustment were included except for Hawaii, which had two plans unable to pass the thresholds. Massachusetts administered its own RA program for 2016 and so it is also excluded. The new figures published on March 31 also include a brief analysis of how the numbers changed from interim to final status in 2016.

The agency reports that the risk adjustment transfers reversed for 10.5 percent of issuers in individual markets, and 15.3 percent of issuers in the small group market.

For the 190 individual market plans that received the estimates, about 5.8 percent of those who had been expected to see a charge ended up getting a payment, and 4.7 percent changed from an interim payment to a charge. For the small group market, 10 percent went from a charge to a final payment and 5.2 percent went from a payment to a charge.

CMS Announces Medicare Advantage Payment Boost for 2018

Medicare Advantage plans will receive a 0.45 percent increase in funding for 2018, CMS announced April 3. That is slightly more than the 0.25 percent bump the Trump administration proposed in February.

Insurers also received news on how CMS will evaluate “encounter data.” The Trump administration will base 15 percent of the Medicare Advantage funding formula on encounter data, down from 25 percent as it initially proposed. Insurers have complained that the data—essentially their paid claims—is not reliable and should be scrapped entirely.

Otherwise, the final rate notice is largely unchanged from what the Trump administration proposed in February. This is not surprising given that the Trump administration has yet to appoint many key officials within the agency.

The stakes are huge for health plans: Medicare Advantage is a roughly $200 billion per year business and covers about a third of all Medicare beneficiaries.

Insurers had been lobbying for the Trump administration to fix what they see as a glitch in the funding formula that prevents some plans from getting their full quality bonus payments. However the administration did not alter the policy.

CMS also decided not to move forward with changes to the funding model for employer-based plans that the Obama administration had proposed. Insurers believe the change would have resulted in lower payments. Instead the administration will stick with the same formula as 2017.

CMS also issued a request for information about ways to improve the private Medicare program. The agency asks for ideas on regulatory, sub-regulatory, policy, practice and procedural changes to improve the programs, and suggests that ideas could include recommendations on benefit design, operational or network flexibility, “supporting the doctor-patient relationship in care delivery” and ways to promote individual preferences.

For example, CMS suggests stakeholders could come up with recommendations on changes to the way plans are paid, monitored and measured as well as changes to the star rating quality program. The agency also suggests that stakeholders could provide feedback on “when and how CMS issues regulations and policies and how CMS can simplify rules and policies for beneficiaries, providers and plans.”

Comments are due April 24.

For more information, click here.

FDA Approves Direct-to-Consumer Marketing for 23andMe

On April 6, FDA announced that it will allow 23andMe to do direct-to-consumer marketing of tests that indicate inherited predispositions for 10 diseases including Parkinson’s and late-onset Alzheimer’s, in a major victory for the startup and the emerging consumer genomics market.

Positive reactions were swift in the patient advocacy world. “The decision today can help inform patients’ behaviors and medical decisions,” said Edward Abrahams, president of the Personalized Medicine Coalition.

The agency used a so-called “de novo pathway,” which allows relatively quick approval of moderate-risk medical devices. An agency spokeswoman said future approvals would be premised on the regulated companies’ accepting “special controls” and submitting to a streamlined 510(k) pathway.

Further details on the special controls, which can include things like performance standards, postmarket surveillance, patient registries and labeling requirements, will be available when the agency releases its summary of the approval decision in a few weeks, she said.

The Mountain View startup ran into trouble with the FDA in 2013, when the agency ordered 23andMe to withdraw from the market genome tests that included broad claims about the patient’s disease risks.

Since then FDA has approved various narrower pre-diagnostics, such as a 2015 approval for a test of genetic links for diseases like Bloom’s Syndrome.

While the latest approval did not cover 23andMe’s original tests, it signaled FDA’s comfort with direct-to-consumer tests that point to predispositions for certain disease conditions that can be modified by lifestyle changes such as additional exercise or healthier eating.

3. State Activities

Florida: New Bill Imposes Conservative Changes to Medicaid Program

On April 6, the Florida House Health and Human Services Committee approved a bill that would impose several conservative changes to the Medicaid program. It would implement cost-sharing and work requirements and ban enrollees for up to one year for failing to pay premiums. Premiums would be set at $10 per month for people earning as little as 50 percent of the federal poverty level, while enrollees earning above the poverty line would pay $15 per month. The bill establishes a 60-day grace period for any missed premium payment.

Indiana: Gov. Holcomb to Sign Needle-Exchange Program Bill

Indiana Gov. Eric Holcomb is expected to sign a bill allowing counties and municipalities to set up their own needle-exchange programs to help curtail the spread of HIV. Former Indiana Gov. Mike Pence in 2015 lifted the state’s ban on needle exchanges as a response to a deadly HIV outbreak in Scott County. Under the bill, counties would no longer need state approval to set up a program.

Kansas: Kansas House Fails to Override Veto of Medicaid Expansion

On April 3, the Kansas House came short of overriding Gov. Sam Brownback’s veto of Medicaid expansion, ending the deep-red state’s surprising push to join the Obamacare program.

The House voted 81-44, needing three more votes to override Brownback’s veto. In his veto message, Brownback said the expansion would burden the state’s budget with “unrestrainable entitlement costs.” He argued that Kansas should not expand its program when the Republican-controlled Congress is working to repeal Obamacare and overhaul Medicaid.

The expansion bill was originally approved by the House and Senate with major bipartisan support, though it lacked veto-proof majorities in both chambers. Kansas remains one of 19 states that have not expanded Medicaid.

New Mexico: New Mexico Requiring Police to Carry Overdose Reversal Drugs

New Mexico Gov. Susana Martinez signed legislation last week making New Mexico the first state to require all local and state police to carry overdose reversal drugs to combat opioid and heroin overdoses. The money for the naloxone kits will come from a state fund for officers that goes toward training, equipment and supplies.

The new law also requires federally certified addiction treatment centers to give patients two doses of naloxone and a prescription for the reversal drug, as well as education on how to use it. Prisons and jails will be required to give at-risk inmates naloxone when they are released if supplies is available.

New York: Rep. Faso Introduces Property Tax Reduction Act

New York Rep. John Faso recently introduced the Property Tax Reduction Act, which would effectively prohibit the state from having local governments contribute toward Medicaid. The 57 counties outside of New York City contribute $2.3 billion toward the state’s Medicaid program—money that would have to be made up from elsewhere in the state budget. The legislation is identical to an amendment that was attached to the stalled GOP Obamacare repeal bill last month, sparking a debate between Gov. Andrew Cuomo and several congressional Republicans.

Oklahoma: Oklahoma Considering 1332 Waivers

Oklahoma, a state that did not expand Medicaid and reports low participation in the insurance exchanges, is proposing 1332 waivers to restructure Affordable Care Act coverage for people earning up to 300 percent of poverty, according to a paper from the state’s Department of Health and Human Services.

The analysis asks for greater state authority over the exchanges that would include control of cost-sharing reductions, advanced premium tax credits, calculating subsidy amounts for eligible people, and setting the essential health benefits for plans.

The state wants to redesign financing and eligibility for the exchanges to try to close the coverage gap—the so-called “Medicaid gap”—caused by Oklahoma’s refusal to expand Medicaid after Congress passed the ACA. Thirty-nine percent of Oklahoma’s uninsured fall below the federal poverty level, so they cannot receive federal subsidies to purchase coverage on the exchanges. The state can only offer subsidies to people between 100 percent and 400 percent of poverty under current law.

Oklahoma’s proposal would shape an exchange market similar to what Arkansas engineered through Medicaid expansion and Medicaid 1115 waivers. That program lets childless adults who earn up to 138 percent of poverty buy into the exchanges with additional benefits traditionally included under Medicaid provided as wraparound coverage.

Oklahoma’s HHS task force says that with new policies in place Medicaid managed care providers may be able to assume coverage for some traditional Medicaid beneficiaries—including the aged, blind and disabled—while bringing other Medicaid beneficiaries into the exchanges.

Virginia: Virginia House Rejects Medicaid Expansion

On April 5, Virginia’s Republican-controlled House rejected a proposal to expand the state’s Medicaid program, citing budgetary concerns.

Delegates rejected an amendment to the budget that would have allowed Democratic Gov. Terry McAuliffe to grow the health entitlement under Obamacare. McAuliffe made the latest in a series of attempts to expand the program last month, after congressional Republicans dropped their Obamacare repeal bill. Republicans in Virginia’s legislature have rejected expansion for the past four years.

A total of 19 states have not expanded their Medicaid programs.

4. Regulations Open for Comment

FDA Considers Establishing New Office of Patient Affairs

The FDA is considering establishing a new Office of Patient Affairs that would centralize its work on patient involvement in the review and approval of drugs and medical devices, according to a March 14 notice in the Federal Register.

Comments on the new office are due by June 12, 2017.

FDA Proposes 1,000 Medical Devices to Exempt From Premarket Notification

On March 14, FDA took one of its first actions to begin implementing the 21st Century Cures Act, by proposing more than 1,000 medical devices it will exempt or partially exempt from the premarket review process. The devices on the list are sufficiently well understood and do not present risks that require premarket notification to provide a reasonable assurance of safety and effectiveness, FDA said. The agency will finalize the list after a 60-day public comment period. Comments are due by May 15, 2017.

FDA Extends Comment Period on Biosimilar Interchangeability Guidance

FDA is extending the public comment period for its draft guidance outlining how biosimilar sponsors can demonstrate that their products are interchangeable with other biologics, following extension requests from top trade associations.

The agency laid out in a January 2017 draft guidance its first attempt at codifying the requirements that sponsors must satisfy to demonstrate interchangeability. The agency said it would make case-by-case determinations of interchangeability, but indicated it would require studies measuring the impact of switching on clinical pharmacokinetics and pharmacodynamics.

The Biotechnology Innovation Organization (BIO), Pharmaceutical Research and Manufacturers of America and Covington & Burling all requested comment period extensions, according to documents posted on

The comment period, which was set to close on March 20, will be extended 60 days until May 19.

5. Reports

CDC Report Evaluates U.S. Infants Exposed to Zika

According to a new CDC report, roughly one in 10 U.S. women with a confirmed Zika infection during a pregnancy last year had a baby with a virus-related brain defect.

The chances of birth defects were even higher among babies whose mothers were infected with Zika during the first trimester of their pregnancies. Among this group, about 15 percent reported birth defects.

The CDC also found roughly 5 percent of the 972 women who had possible evidence of Zika—but not confirmed cases—had fetuses or babies with virus-related defects. Of these 51 women, 45 had live births and six had pregnancy losses.

Although attention to Zika has decreased since last year’s outbreak, the CDC is warning that the threat of Zika will remain high as the weather gets warmer and mosquito season approaches.

Acting CDC Director Anne Schuchat said the agency is still seeing new cases of the mosquito-borne virus in the United States every month, mostly related to travel. There are currently more than 5,000 Zika cases nationwide and 1,600 potential cases of Zika in pregnant women.

Schuchat also said the number of pregnant women with Zika in the country could be even higher because only 25 percent of infants included in the study had undergone brain scans to detect the virus. She encouraged clinicians to use brain imaging in any potential cases of Zika.

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

Stephanie Kennan, Senior Vice President
Charlie Iovino, Vice President
Caroline Perrin, Research Assistant

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering infrastructure and economic development, strategic communications & grassroots, and government relations services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and has been named in The National Law Journal's special annual report, "The Influence 50," for the past several years. In the most recent report, McGuireWoods Consulting was ranked 15th of the 1,900 government relations firms in Washington, D.C.

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