On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):Continue Reading...
A number of Congressional committees have held hearings recently to address various health policy issues, including the following:
- The House Energy and Commerce Committee conducted hearings on Medicare Part D drug policy, the role CMS contractors play in management of the Medicare program, and the public health threat of counterfeit drugs;
- The House Education and the Workforce Committee held a hearing on "Providing Access to Affordable, Flexible Health Plans through Self-Insurance";
- A House Oversight and Government Reform Committee hearing examined the rights of FDA whistleblowers; and
- A Senate Health, Education, Labor and Pensions Committee hearing focused on mental health treatment options and trends.
The bipartisan leadership of the House Energy and Commerce Committee, House Ways & Means Committee, and Senate Finance Committee have released a consensus Medicare physician fee schedule reform bill expected to be considered by Congress before the latest temporary payment patch expires at the end of March. Highlights of H.R. 4015, the SGR Repeal and Medicare Provider Payment Modernization Act, include the following:
- The bill would repeal the statutory “Sustainable Growth Rate” (SGR) provision, which has called for deep cuts in Medicare rates in recent years. Congress has routinely stepped in to override the full application of the formula – most recently replacing a 20.1% cut scheduled to go into effect January 1, 2014 with a 0.5% update for the first three months of 2014 – but H.R. 4015 would offer a permanent fix.
- For five years (2014-2018) the bill would provide annual Medicare physician fee schedule updates of 0.5% during a transition period to a new quality-based system (thus for 2014, the temporary 0.5% update in place through March would be extended for the full year).
- Three current physician quality programs would be consolidated into a single value-based program called the “Merit-Based Incentive Payment System,” which starting in 2018 would tie payment to performance in four categories: quality; resource use; electronic health record meaningful use; and clinical practice improvement activities. Quality measures will be developed and updated in consultation with physicians and other stakeholders.
- The bill would provide bonus payments to providers who receive a significant portion of their revenue from an alternative payment model (APM) or patient centered medical home (PCMH); the threshold would begin at 25% in 2018 and increase over time.
- The measure includes a number of other provisions designed to improve payment accuracy for individual provider services, promote appropriate use criteria for certain advanced diagnostic imaging services, expand care coordination for individuals with chronic care, and expand the use of Medicare data for transparency and quality improvement.
A formal budget estimate for the package has not yet been released, although earlier versions of the plans have had 10-year costs of more than $121 billion over 10 years. The Committees have not yet identified what “offsets” would be used to pay for the package, but cuts impacting a broad range of health care provider types, health plans, and drug manufacturers have all been unofficially floated as options.
On February 10, the House Energy and Commerce Subcommittee on Health held a hearing entitled “Examining Drug Shortages and Recent Efforts to Address Them.” In connection with the hearing, the Government Accountability Office (GAO) released a report that concluded that the number of shortages remains high, even though the FDA has taken steps to prevent and mitigate shortages (e.g., expediting application reviews and inspections, exercising enforcement discretion in appropriate cases, and helping manufacturers respond to quality problems). Some of the causes of shortages are beyond the agency’s authority, however, since the FDA “does not have control over private companies’ business decisions,” and cannot, for example, require manufacturers to start producing or continue producing drugs, or to build redundant manufacturing capacity. Nevertheless, the GAO called on the FDA to strengthen its internal controls over its drug shortage data, conduct periodic analyses to routinely and systematically assess drug shortage information, and use this information to proactively identify drug shortage risk factors.
On February 11, 2014, Congress approved a one-year extension of Medicare sequestration cuts as part of a bill (an amendment to S. 25) to restore certain military retiree pension benefits. Under the legislation, current 2% across-the-board cuts to Medicare provider payments would be extended through 2024 (instead of 2023). While the savings from the sequestration extension would primarily be used to finance the military pension benefits, $2.3 billion would be set aside to help finance pending Medicare physician fee schedule reform legislation (a fraction of the estimated cost of reform). The measure now awaits the President’s signature.
There is obviously hope that Congress will reach an alternative budget solution in the intervening years before the sequestration extension would be imposed. Nevertheless, this is the second time in two months that Congress has turned to an extension of Medicare sequestration as a funding mechanism -- a troubling new trend for Medicare providers.
President Obama has signed into law the Consolidated Appropriations Act of 2014, which provides $1.012 trillion in discretionary funding for the operations of the federal government through September 30, 2014. In addition to setting overall funding levels for HHS agencies, the law specifies funding for numerous HHS policies and initiatives, such as additional funding for program integrity effort involving the 340B drug pricing program and research on the impact of health information technology on patient safety, and reduced funding for the IPAB and certain other ACA activities. The agreement also includes directives for HHS to improve fraud and abuse efforts, including using the latest technology to ensure only valid beneficiaries and valid providers receive benefits (although on the other hand, the agreement raises concerns that the Recovery Audit Contractor program includes incentives “to take overly aggressive actions”). In addition, the agreement highlights more Congressional interest in more narrow HHS policies, such as objections to the criteria CMS uses to package drug costs under the hospital outpatient prospective payment system, and concerns that rural patients maintain access to needed health services if CMS proceeds with a proposal to remove critical access hospital status from certain facilities.
Recent Congressional hearings have addressed a number of health policy issues, including the following:
- House Science, Space, and Technology Committee hearing entitled “Healthcare.gov: Consequences of Stolen Identity”;
- A House Energy and Commerce Oversight Subcommittee hearing on implementation of the ACA, including a discussion of insurance exchange issues;
- Two House Oversight and Government Reform Committee hearings on HealthCare.gov information security issues;
- A Senate Aging Committee hearing on “Medicare Advantage: Changing Networks and Effects on Consumers”; and
- A House Ways and Means Committee hearing on the impact of the ACA’s employer insurance mandate’s definition of full-time employee on jobs.
The Congressional Budget Office (CBO) has raised the specter that pending legislation to reform the Medicare physician fee schedule statutory update formula could increase the likelihood that the Affordable Care Act’s (ACA) Independent Payment Advisory Board (IPAB) mechanism would be triggered – potentially resulting in as much as $0.6 billion in Medicare provider cuts during the 2015-2023 period.
As previously reported, House and Senate panels are proceeding with plans to reform the unpopular “sustainable growth rate” (SGR) formula – the statutory provision that outlines how Medicare physician fee schedule rates are updated annually. In recent years, the formula has called for deep cuts in Medicare rates – although Congress has routinely stepped in with temporary patches to avert the full application of the formula. Most recently, the SGR contributed to a 20.1% cut in the Medicare physician fee schedule update for 2014 – but Congress approved the Bipartisan Budget Act of 2013 in December to replace that cut with a 0.5% increase for services provided only during the first three months of 2014. The temporary patch is intended to give lawmakers time to finalize pending bipartisan proposals to permanently repeal the SGR policy and replace it with a period of stable payment followed by reimbursement linked to quality of care.
Congressional panels tasked with drafting the SGR legislation have not yet revealed how they intend to pay for the costs of their bills. In the absence of such offsets, the CBO has estimated that the version of the legislation approved by the House Ways and Means Committee in December (H.R. 2810) would increase spending by about $121 billion over the 2014-2023 period, while the Senate Finance Committee package (S. 1871) would increase direct spending by $150.4 billion during that period. According to the CBO, such spending increases would result in the IPAB mechanism being triggered.
By way of background, under the ACA, the IPAB is charged with submitting detailed proposals to Congress and the President to reduce Medicare per-capita spending if projected spending growth exceeds a specified target based on inflation and growth in the economy, beginning in 2015. IPAB’s proposals will go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions). The IPAB is barred from submitting proposals that reduce Medicare payments prior to 2020 for providers that had reimbursement cuts under the ACA beyond a productivity adjustment (such as acute care hospitals, long-term care hospitals, inpatient rehabilitation facilities, and outpatient hospital services, among others), thereby potentially increasing the impact of the IPAB cuts on physicians and Medicare Advantage and Part D plan sponsors. Note that none of the 15 members of the IPAB have actually been nominated yet, so the panel currently exists in name only (but failure to appoint a panel would not forestall the cuts – if IPAB does not submit a plan, the responsibility falls to the HHS Secretary).
Last May, the CBO had projected that Medicare per-beneficiary spending would be below the IPAB triggers for fiscal years 2015 through 2023. In budget estimates released last week, however, the CBO estimates that under the House SGR reform bill, the IPAB mechanism would be required to produce a $0.5 billion reduction in Medicare spending over the 2015-2023 period. The Senate Finance SGR package would require even higher IPAB savings -- $0.6 billion over the same period.
Congressional negotiators finalizing the SGR package are expected to eventually identify their own spending offsets, which could impact spending on a potentially broader range of health care provider types, health plans, and drug manufacturers, but minimize the potential that the IPAB makes those decisions. The question now – if SGR reform actually proceeds -- is whether it will be Congress or the IPAB panel that identifies the offsetting savings. Either way, however, it appears that SGR reform could be a good news/bad news proposition, with long-overdue SGR reforms adopted, but at a currently-unknown price.
On January 9, 2014, the House Energy and Commerce Health Subcommittee is holding a hearing on “The Extenders Policies: What Are They and How Should They Continue Under a Permanent SGR (Sustainable Growth Rate) Repeal Landscape?” The so-called extenders are measures that secure the continuation of various temporary Medicare payment and policy revisions impacting hospitals, physicians, therapy providers, and certain other provider types that are routinely extended by Congress (most recently as part of the Pathway for SGR Reform Act).
President Signs 2-Year Funding Bill with Medicare SGR Patch, Sequestration Extension for Medicare Providers
On December 26, 2013, President Obama signed into law H.J. Res. 59, the Bipartisan Budget Act of 2013, which includes the Pathway for SGR Reform Act of 2013 (“the Act”). In addition to establishing federal budget targets for fiscal years (FYs) 2014 and 2015, the Act includes a number of provisions impacting the Medicare and Medicaid programs. Most notably, the Act provides a short-term reprieve from a looming Medicare physician fee schedule cut while lawmakers work to finalize a longer-term solution. It also extends Medicare provider payment cuts under existing sequestration authority for two years and makes a variety of other policy changes. The Act’s major Medicare and Medicaid provisions are summarized below.Continue Reading...
This post was written by Kevin Madagan.
On November 27, 2013, President Obama signed into law H.R. 3204, the “Drug Quality and Security Act” (the “Act”), bipartisan drug distribution security legislation. Among other things, the sweeping measure: clarifies current federal law and regulatory oversight regarding pharmacy compounding; establishes a uniform, national drug tracking and tracing framework; mandates national licensure standards for wholesale distributors and third-party logistics providers; and preempts state product tracing requirements. The following is an overview of the Act and highlights of initial FDA implementation guidance.Continue Reading...
On December 12, 2013, the Senate Finance Committee is scheduled to take up legislation to repeal the Medicare PFS sustainable growth rate formula and extend certain expiring health care provisions. While the current Congressional calendar leaves little time to address the latest round of SGR cuts before they take effect on January 1, 2014 (as discussed above), Congress may provide a short-term patch to provide additional time to consider more sweeping overhaul legislation. This situation is still very fluid, however, and the timing and scope of ultimate legislative action is still uncertain.
Recent Congressional hearings on health policy issues have included the following, among others:
- A House Small Business Committee hearing focused on the ACA’s Small Business Health Options Program.
- A House Ways and Means Health Subcommittee hearing reviewed “the Challenges of the Affordable Care Act,” focusing on “immediate and long-term challenges Americans face in finding affordable, quality health coverage as a result of the ACA.”
- A December 11 House Energy and Commerce Health Subcommittee hearing is entitled “PPACA (Patient Protection and Affordable Care Act) Implementation Failures: What's Next?”
- A House Oversight and Government Reform Committee hearing was entitled “Roll Out of HealthCare.gov: The Limitations of Big Government,” while a December 12 hearing will focus on “ObamaCare’s Impact on Premiums and Provider Networks.”
- Earlier this month, a House Energy and Commerce Committee hearing reviewed the impact of the ACA on the Medicare Advantage program.
President Obama recently signed into law S. 330, the HIV Organ Policy Equity Act, which eliminates the restriction on acquiring HIV-positive organs in order to permit research on transplants involving HIV-positive individuals. In addition, the President has signed S. 252, the "Prematurity Research Expansion and Education for Mothers who deliver Infants Early Reauthorization Act" which reauthorizes and expands preterm labor and delivery programs.
On November 15, 2013, the House of Representatives voted 261 to 157 to approve H.R. 3350, the “Keep Your Health Plan Act,” which would allow health plans available on the individual market as of January 1, 2013 to continue in 2014 without meeting new ACA plan standards. Continued enrollment in such a grandfathered policy would be considered to satisfy the ACA’s minimum essential coverage requirement, exempting the enrollee from the “shared responsibility” penalty under the ACA. . The Obama Administration has stated that the president would veto H.R. 3350 because it “rolls back the progress made by allowing insurers to continue to sell new plans that deploy practices such as not offering coverage for people with pre-existing conditions, charging women more than men, and continuing yearly caps on the amount of care that enrollees receive.” As previously reported, the Obama Administration has announced an alternative transition policy that would allow insurance issuers, subject to state insurance commissioners’ approval, to continue coverage that would otherwise be terminated or cancelled, and affected individuals and small businesses may choose to re-enroll in such coverage if the coverage was in effect on October 1, 2013 and the insurer meets certain conditions.
Congressional Panels Continue Focus on ACA Insurance Enrollment, Security, and Cost Issues, and Other Health Policy Topics
Congress continues to examine issues associated with enrollment in qualified health plans under Healthcare.gov. For instance:
- The House Science, Space, and Technology Committee held a hearing entitled “Is My Data on Healthcare.gov Secure?” (see).
- The Senate Small Business and Entrepreneurship Committee focused on “Affordable Care Act Implementation: Examining How to Achieve a Successful Rollout of the Small Business Exchanges”; and
- The House Oversight and Government Reform Committee has held hearings entitled “ObamaCare Implementation: Sticker Shock of Increased Premiums for Healthcare Coverage,” and “ObamaCare Implementation: High Costs, Few Choices for Rural America,” while on December 6 the panel has scheduled a hearing entitled “ObamaCare Implementation, The Broken Promise: If You Like Your Current Plan You Can Keep It.”
In other policy areas, the Senate Special Committee on Aging has scheduled a December 11 hearing on “Protecting Seniors From Medication Labeling Mistakes,” along with a December 18 hearing entitled “The Future of Long-Term Care Policy: Continuing the Conversation.” In addition, on November 20, the House Energy and Commerce Subcommittee on Health held a hearing on public health legislation. Specifically, the Subcommittee is considering the following bills: H.R.610, to provide for the establishment of the Tick-Borne Diseases Advisory Committee; H.R.669, to enhance awareness about unexpected sudden death in early life; H.R. 1098, to reauthorize certain traumatic brain injury and trauma research programs; H.R.2703, to provide liability protections for volunteer practitioners at community health centers; H.R.1281, to reauthorize newborn screening programs; draft legislation to reauthorize the poison center national toll-free number, national media campaign, and grant program; and draft legislation to reauthorize a controlled substance monitoring program.
The House of Representatives is scheduled to take up legislation on November 15, 2013 that responds to growing attention to policy cancellations in the individual health insurance market linked to more stringent coverage requirements going into effect in 2014 under the ACA. Specifically, the House will consider H.R. 3350, the “Keep Your Health Plan Act,” which would allow health plans available on the individual market as of January 1, 2013 to continue in 2014 without meeting new plan standards. Continued enrollment in such a grandfathered policy would be considered to satisfy the ACA’s minimum essential coverage requirement, exempting the enrollee from the “shared responsibility” penalty under the ACA.
11/15 update: The House has approved H.R. 3350 by a vote of 261 to 157.
On November 13, 2013, the Congressional Budget Office (CBO) issued a report entitled “Options for Reducing the Deficit: 2014 to 2023,” which includes more than 100 policy options that would decrease federal spending or increase federal revenues over the next decade. The following is a listing of the CBO’s health policy options, many of which have been considered previously, including the estimated 10-year savings potential:
• Impose Caps on Federal Spending for Medicaid ($105 billion to $606 billion)
• Add a “Public Plan” to the Health Insurance Exchanges ($37 billion)
• Eliminate Exchange Subsidies for People with Income Over 300 Percent of the Federal Poverty Guidelines ($173 billion)
• Limit Medical Malpractice Torts ($57 billion)
• Introduce Minimum Out-of-Pocket Requirements under TRICARE ($31 billion)
• Convert Medicare to a Premium Support System ($22 billion to $275 billion)
• Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance ($52 billion to $114 billion)
• Raise the Age of Eligibility for Medicare to 67 ($23 billion)
• Increase Premiums for Parts B and D of Medicare ($20 billion to $ 287 billion)
• Bundle Medicare’s Payments to Health Care Providers ($17 billion to $47 billion)
• Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries ($123 billion)
• Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees ($20 billion to $71 billion)
• Reduce or Constrain Funding for the National Institutes of Health ($13 billion to $28 billion)
• End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8 ($48 billion)
• Reduce Tax Preferences for Employment-Based Health Insurance ($266 billion to $613 billion)
• Increase the Excise Tax on Cigarettes by 50 Cents per Pack ($37 billion).
Congressional committees continue to focus on the experience of consumers and insurers since the HealthCare.gov insurance portal launched on October 1, along with potential issues related to the security of personal data transmitted through the site. For instance, House hearings this week include an Oversight and Government Reform Committee hearing on “ObamaCare Implementation: The Rollout of HealthCare.gov”; a Homeland Security Committee on “Cyber Side-Effects: How Secure is the Personal Information Entered into the Flawed Healthcare.gov?"; and an Energy and Commerce Committee hearing titled “Obamacare Implementation Problems: More than Just a Broken Website.” Next week, the Energy and Commerce Committee also will examine the security of the HealthCare.gov site.
In other policy areas, on November 14, the House Small Business Committee is holding a hearing on “Self-Insurance and Health Benefits: An Affordable Option for Small Business.” On November 15, the Energy and Commerce Subcommittee on Health will review the FDA’s implementation of the Food and Drug Administration Safety and Innovation Act, and on November 19 the panel will focus on federal regulation of mobile medical apps and other health software.
On November 12, 2013, the House of Representatives approved S. 330, the HIV Organ Policy Equity Act, which would eliminate the restriction on acquiring HIV-positive organs in order to permit research on transplants involving HIV-positive individuals (the Senate approved the bill in June). The House also passed S. 252, the Prematurity Research Expansion and Education for Mothers who deliver Infants Early (PREEMIE) Reauthorization Act, which is intended to prevent preterm labor and delivery, reduce infant mortality caused by prematurity, and create a National Pediatric Research Network to boost research related to rare and genetic pediatric diseases. Also on November 12, the Senate approved S. 1557, the Children's Hospital GME [Graduate Medical Education] Support Reauthorization Act of 2013, which provides support to children’s hospitals for pediatric medical residency programs. The House approved its version of the bill in February 2013.