Health Industry Washington Watch : Washington DC Healthcare Industry Law Firm : Reed Smith : Health Industry Washington Watch : Regulations, Medicare/Medicaid, Governmental Organizations

Yesterday President Obama convened a health reform summit in an effort to bring together key members of Congress and administration personnel to discuss ways to move forward on health reform. After a long day of policy debate, however, the summit failed to result in a bipartisan breakthrough on reform legislation.   While isolated areas of agreement were indentified, such as in the area of fraud and abuse efforts and certain aspects of insurance market reforms, the meeting largely highlighted the divisions between the two parties on fundamental aspects of reform. In particular, Democrats and Republicans at the meeting were far apart on such basic questions about how large a role the federal government should play in establishing insurance market rules, whether insurance coverage should be mandated, and how to achieve cost-savings in the health care system, among others. The summit is widely viewed as laying the groundwork for Democratic leaders to forge ahead with comprehensive health reform without Republican support -- if compromise can be reached among Democrats. In particular, Democrats appear to be ready to use a Senate parliamentary procedure known as “budget reconciliation” that would require only 51 Senate votes for passage in order to enact a bill in the coming weeks.   Additional background information on current health reform legislative efforts is available here.  
 

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Today the Obama Administration released an 11-page summary of its health reform proposal in preparation for a bipartisan health reform summit scheduled for February 25, 2010. Among other things, the proposal includes a relatively-detailed discussion how the Administration would promote access to affordable insurance, address health care fraud and abuse proposals, and bridge the differences between the House and Senate reform proposals in other key areas. Items of note include the following:

• Access to Health Insurance – The Administration proposes expanding access to affordable insurance through a series of insurance market reforms, including an insurance purchasing pool; federal premium subsidies; a requirement that individuals buy insurance or pay a penalty (with exceptions); a requirement that employers defray costs employees receiving federal subsidies (with exceptions); expansion of Medicaid; and a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other insurance industry practices. There is no mention of establishing a public health insurance plan to compete with private insurers.
• Waste, Fraud and Abuse – The Presidential proposal includes a variety of program integrity provisions, which include: a comprehensive sanctions database; registration and background checks of billing agencies and individuals; expanded access to the Healthcare Integrity and Protection Data Bank; liability of Medicare administrative contractors for claims submitted by excluded providers; strengthened standards for facilities that seek reimbursement as community mental health centers; limiting debt discharge in bankruptcies of fraudulent health care providers or suppliers; expanded use of technology for real-time data review; sanctions for illegal distribution of a Medicare or Medicaid beneficiary identification or billing privileges; a study of universal product numbers/claims forms for selected items and services under the Medicare program; a state Medicaid prescription drug profiling requirement; extrapolation of Medicare Advantage risk adjustment errors to contract payment for a given year; modification of certain Medicare medical review limitations; establishment of a CMS-IRS data match to identify fraudulent providers; and prevention of delays in access to generic drugs.
• Cost-Containment Provisions – While the summary document does not include a detailed discussion of Medicare provider rate changes, it does include a limited number of cost containment/fiscal sustainability provisions, including: an adjustment in Medicare Advantage payments to reflect “unjustified coding patterns”; an excise tax on the most expensive health plans ($27,500 for a family plan) beginning in 2018 for all plans; and new Medicare Hospital Insurance taxes on high-income taxpayers.
• Industry Fees -- The President proposes a $33 billion fee on brand name pharmaceutical manufacturers over 10 years (up $10 billion from Senate plan), beginning in 2011; a $67 billion assessment on health insurers over 10 years beginning in 2014 (with certain exceptions); and an excise tax (rather than fee) on medical device manufacturers, raising $20 billion over 10 years, starting in 2013.
• Quality of Care – Although not discussed in the summary document, a separate description on the White House web site states the President’s plan would provide “incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections.” The plan also includes “innovative payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments.” Likewise, it would reward greater coordination of care between primary care providers and specialists.
• Part D Coverage Gap – The President’s proposal fills the Medicare Part D prescription drug "doughnut hole" by providing a $250 rebate to Medicare beneficiaries who reach the coverage gap in 2010, and then phasing down the coinsurance requirement so it is the standard 25 percent by 2020 throughout the coverage gap.
• Medicaid Matching Funds – The President would eliminate the Senate’s proposed enhanced Medicaid matching provision for Nebraska and instead provide additional federal financing for all states to support the expansion of Medicaid.
• CLASS Act – The White House endorses the Community Living Assistance Services and Supports (CLASS) Program, a voluntary, privately-funded long-term services insurance program, but makes a series of changes designed to “improve the CLASS program’s financial stability and ensure its long-run solvency.”

The Administration also has released a variety of background and summary documents on the White House Health Care Meeting website.

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In an effort to jump-start progress on stalled health reform legislation, President Obama has invited Democratic and Republican lawmakers to a half-day, televised health reform summit on February 25, 2010. The event, announced by the President during a press interview on February 7, is billed as an opportunity for members of both parties to “put the best ideas on the table.”   Republican Congressional leaders have been reluctant to commit to participating in the meeting, however, unless the Democrats set aside the bills approved by the House and Senate in late 2009. In the meantime, Democratic leaders continue to work to resolve differences between the House and Senate approaches to the legislation. Our previous reports on health reform legislative efforts are available here.  

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The Obama Administration has released its proposed federal budget for fiscal year (FY) 2011. In its budget documents, the Administration reaffirms its commitment to enacting health reform legislation, and it assumes $150 billion in federal savings attributable to health reform over the 2011-2020 period. The document states that the budget “supports health insurance reform” by expanding patient-centered health research on treatment effectiveness; increasing investment in health information technology, prevention, and wellness activities; and initiating Medicare payment reform demonstrations. Nevertheless, the budget does not outline comprehensive reform plans, nor does it repeat the sweeping Medicare and Medicaid budget savings proposals included in the Administration’s proposed FY 2010 budget. In other health policy areas, the budget would: expand funding for biomedical research, health centers for the medically underserved, and HIV/AIDS prevention and treatment; provide a six-month, $25.5 billion extension of the American Recovery and Reinvestment Act (ARRA) temporary increase in federal Medicaid matching funds; expand Medicare and Medicaid anti-fraud efforts; address high-risk billing activity associated with the Medicaid drug benefit; expand Food and Drug Administration (FDA) user fees; and fund an FDA to “provide regulatory pathways for new technologies such as biosimilars.”  A separate FDA press release on the budget proposal announces that the Administration is seeking $4.03 billion for the FDA in FY 2011, which is a 23% increase over the agency’s current $3.28 billion budget.  The following initiatives are the major components of the FDA's FY 2011 budget increase:  transforming food safety ($318.3 million); Protecting Patients Initiative ($100.8 million); advancing regulatory science ($25.0 million); and tobacco-related initiatives ($215.0 million).  Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, Congress is holding a series of hearings on the proposal, including Senate Finance and House Energy and Commerce Committee hearings focusing on the health policy provisions of the budget. Several other budget hearings scheduled for the week of February 8 were postponed due to extreme weather conditions in the Washington, D.C. area.

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On January 27, 2010, President Obama delivered his State of the Union address to Congress. While the economy was the overwhelming focus of the address, President Obama reaffirmed his commitment to health insurance reform. Acknowledging setbacks on this issue, he nevertheless implored Congress to “not walk away from reform.” He asked Congress to “take another look at the plan we've proposed,” calling it a “vast improvement over the status quo.” He offered to work with members of either party on refinements that “bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses.”

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On February 1, 2010, President Obama is scheduled to deliver his proposed federal budget for fiscal year 2011, which is likely to again include provisions that would, if adopted, significantly impact federal health care policies. Congressional panels already have scheduled hearings on the upcoming proposal, including Senate Finance Committee and House and Senate Budget Committee hearings set for February 2, 2010 and House Ways and Means Committee hearings on February 3.  In addition, the Senate Finance Committee is holding a hearing on February 3 to discuss the health policy provisions of the budget proposal with Department of Health and Human Services (HHS) Secretary Kathleen Sebelius.

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The White House has proposed $313 billion in new Medicare and Medicaid cuts over 10 years, in addition to the provisions included in the Administration's proposed FY 2010 budget. Among other things, the Administration is endorsing: incorporating productivity adjustments into Medicare payment updates; reducing hospital subsidies for treating the uninsured as coverage increases; paying "better" prices for Medicare Part D drugs (including reducing reimbursement for beneficiaries dually eligible for Medicare and Medicaid); increasing the equipment utilization factor for advanced imaging from 50 percent to 95 percent; adopting MedPAC’s recommendations for 2010 payments to skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals; and cutting waste, fraud, and abuse (including prepayment review for physicians in high-risk areas or those that order a high volume of high-risk services such as durable medical equipment, home health, and home infusion services).

The following chart summarizes the Obama Administration's health reform financing proposals released to date:

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On May 11, 2009, HHS Secretary Kathleen Sebelius announced the establishment of the HHS  Office of Health Reform, which is charged with leading the Department's efforts to pass health reform legislation and coordinating with the White House Office of Health Reform.  Jeanne Lambrew, PhD, has been named Director of the HHS Office of Health Reform.   The complete announcement with staff biographies is reprinted after the jump.

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On April 29, 2009, the Obama Administration released a report on HHS progress over the first 100 days of the Obama Administration. The report addresses implementation of the American Recovery and Reinvestment Act of 2009, efforts to promote health reform, regulatory review initiatives, and release of the President's proposed budget, among other things.

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On April 28, 2009, the Senate voted to confirm Governor Kathleen Sebelius as Health and Human Services Secretary.  The vote was 65 to 31.  HHS Deputy Secretary Bill Corr was unanimously confirmed by the Senate on May 6. 
 

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Dr. Joshua M. Sharfstein has been appointed by President Obama to be the FDA principal deputy commissioner. On March 30, 2009, Dr. Sharfstein began serving as Acting Commissioner for Food and Drugs, replacing previous Acting Commissioner Frank Torti, until the U.S. Senate confirms a new Commissioner of Food and Drugs (President Obama’s nominee for that post is Dr. Margaret Hamburg).
 

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On March 19, 2009, HHS announced the members of the Federal Coordinating Council for Comparative Effectiveness Research. The Council was authorized by the American Recovery and Reinvestment Act (ARRA) as part of a major expansion of federal efforts to compare the effectiveness of different medical treatments, including both infrastructure changes and an infusion of $1 billion in funding for comparative effectiveness research. The Council is charged with helping to coordinate and guide investments in comparative effectiveness research, advising the President and Congress on federal comparative effectiveness research infrastructure needs, and reviewing federal agency organizational expenditures for comparative effectiveness research. The Council must report to the President and Congress by June 30, 2009 on current federal comparative effectiveness research and recommendations for research conducted under ARRA funding. The members of the Council are as follows:

• Anne Haddix, chief policy officer, Office of Strategy and Innovation, Centers for Disease Control and Prevention;
• Thomas Valuck, Medical Officer and Senior Adviser, CMS Center for Medicare Management;
• Peter Delany, Director, Office of Applied Studies, Substance Abuse and Mental Health Services Administration;
• Carolyn Clancy, Director, Agency for Healthcare Research and Quality;
• Deborah Parham Hopson, Associate Administrator, HIV/AIDS Bureau, Health Resources and Services Administration;
• David Hunt, Chief Medical Officer, Office of the National Coordinator for Health Information Technology;
• James Scanlon, Acting Assistant Secretary for Planning and Evaluation, HHS;
• Elizabeth Nabel, Director, National Heart, Lung, and Blood Institute, National Institutes of Health;
• Garth Graham, Deputy Assistant Secretary for Minority Health, Office of Minority Health, HHS;
• Jesse Goodman, Acting Chief Medical Officer, Food and Drug Administration, and Director, FDA Center for Biologics Evaluation and Research;
• Michael Marge, Acting Director, Office on Disability, HHS;
• Neera Tanden, Counselor, Office of the Secretary, HHS;
• Joel Kupersmith, Chief Research and Development Officer, Department of Veterans Affairs;
• Michael Kilpatrick, Director of Strategic Communications for the Military Health System, Department of Defense; and
• Ezekiel Emanuel, Special Advisor for Health Policy, Office of Management and Budget

In a related development, the Institute of Medicine is accepting public comments on priorities for comparative effectiveness research under the ARRA.  Stakeholders can submit answers to a questionnaire through March 27, 2009.

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On March 20, 2009, HHS announced the selection of David Blumenthal, M.D., M.P.P. as the Obama Administration's choice for National Coordinator for Health Information Technology. As the National Coordinator, Dr. Blumenthal will lead the implementation of a nationwide interoperable, privacy-protected health information technology infrastructure, as called for in the American Recovery and Reinvestment Act. Dr. Blumenthal most recently served as a physician and director of the Institute for Health Policy at the Massachusetts General Hospital/Partners HealthCare System in Boston.

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On March 9, 2009, President Obama signed an Executive Order lifting the ban on federal funding for embryonic stem cell research. The document provides that the HHS Secretary, through the Director of NIH, “may support and conduct responsible, scientifically worthy human stem cell research, including human embryonic stem cell research, to the extent permitted by law.” The NIH Director must issue guidance on appropriate human stem cell research within 120 days of the order. In addition, Obama signed a Presidential Memorandum directing the head of the White House Office of Science and Technology Policy to develop recommendations to “guarantee scientific integrity throughout the executive branch,” including providing that:

• The selection of scientists and technology professionals for science and technology positions in the executive branch is based on those individuals’ scientific and technological knowledge, credentials, and experience;
• Agencies make available to the public the scientific or technological findings considered or relied upon in policy decisions;
• Agencies use scientific and technological information that has been subject to well-established scientific processes, such as peer review; and
• Agencies have appropriate rules and procedures to ensure the integrity of the scientific process within the agency, including whistleblower protection.

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On March 14, 2009, President Obama named Dr. Margaret Hamburg as Commissioner of the Food and Drug Administration, and Dr. Joshua Sharfstein as the Principal Deputy Commissioner.  The following profiles were supplied by the White House:

Margaret "Peggy" Hamburg
Dr. Hamburg is a nationally and internationally recognized leader in public health and medicine, and an authority on global health, public health systems, infectious disease, bioterrorism and emergency preparedness. She served as the Nuclear Threat Initiative's founding Vice President for the Biological Program. Before joining NTI, she was the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services. Prior to this, she served for six years as the Commissioner of Health for the City of New York and as the Assistant Director of the National Institute of Allergy and Infectious Diseases of the National Institutes of Health.

Joshua "Josh" Sharfstein
Dr. Joshua M. Sharfstein is Commissioner of Health for the City of Baltimore. He also serves as chair of the board of four affiliated nonprofit agencies. He has been recognized as a national leader for his efforts to protect children from unsafe jewelry and over-the-counter medication, and ensuring Americans with disabilities have access to prescription drugs. He is a member of the Board on Population Health and Public Health Practice of the Institute of Medicine.
 

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On February 26, 2009, the Obama Administration released its proposed federal budget for fiscal year (FY) 2010. Most significantly in terms of health policy, the proposal would establish a reserve fund of $633.8 billion over 10 years to finance health reform. While half of the reserve funds would come from tax increases on higher-income individuals, the rest would come from health system savings impacting a wide range of providers, health plans, and manufacturers. While additional details are expected to be released in the coming weeks, the following are highlights of the information released to date: 

• Medicare Advantage (MA) Payments. The budget would replace the current mechanism for establishing MA rates with a competitive system in which Medicare payments would be based upon an average of plans’ bids. The Administration estimates a savings of more than $175 billion over 10 years from this provision – approximately half of the health care savings in the budget proposal.
• Reducing Drug Prices. The Administration proposes establishing a regulatory pathway for approval of follow-on biologicals. Additionally, brand biologic manufacturers would be prohibited from reformulating existing products into new products to restart the exclusivity process. The Administration also would prevent drug companies from blocking generic drugs from consumers by prohibiting anticompetitive agreements between brand name and generic drug manufacturers intended to keep generic drugs off the market. The budget also would increase the Medicaid drug rebate for brand-name drugs from 15.1% to 22.1% of the average manufacturer price (AMP), apply the additional rebate to new drug formulations, and allow states to collect rebates on drugs provided through Medicaid managed care organizations. The budget also supports the Food and Drug Administration’s (FDA) efforts to allow Americans to buy drugs from other countries.
• Medicare and Medicaid Payment Accuracy/Program Integrity. The budget would expand CMS’s capacity to identify excessive payments and correct problems, such as through use of National Correct Coding Initiative edits for Medicaid claims. The budget also proposes to dedicate additional resources for oversight and program integrity activities related to the Medicare prescription drug program, MA, and Medicaid.
• Hospital/Post-Acute Care Bundling, Reduced Hospital Readmission Rates. The budget calls for bundling payments to hospitals and certain post-acute providers for services provided within 30 days after discharge from the hospital. In addition, hospitals with high rates of readmission would be paid less if patients are re-admitted to the hospital within the same 30-day period.
• Hospital Quality Improvement. The budget would link a portion of Medicare payments for acute inpatient hospital services to hospital performance on specific quality measures.
• Physician Payment System Reforms. The Administration supports “comprehensive, but fiscally responsible” reforms to the physician fee schedule formula.
• Cancer Research.  The budget includes over $6 billion in funding for the National Institutes of Health (NIH) to support cancer research.

Other Medicare/Medicaid health policy line-items identified in the budget charts include the following, among others: 

• Establishing survey and certification revisit and recertification user fees;
• Enabling physicians to form voluntary groups that coordinate care for Medicare beneficiaries and to receive performance-based payments for coordinated care;
• Addressing financial conflicts of interest in physician-owned specialty hospitals;
• Requiring the use of radiology benefit managers for Medicare imaging services;
• Aligning Medicare home health payments with costs; and
• Imposing higher Medicare drug benefit premiums on certain higher-income beneficiaries.

Note that many provisions of the proposed budget would require Congressional approval to implement. To that end, a number of Congressional committees have scheduled hearings on the budget proposal, including a March 10 Senate Finance Committee hearing focusing on the budget’s health care provisions.

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On February 26, 2009, the Office of Management and Budget (OMB) published a notice announcing that it is developing a set of recommendations to the President for a new Executive Order on Federal Regulatory Review. The recommendations are expected to address:

• The relationship between the White House Office of Information and Regulatory Affairs and the agencies;
• Disclosure and transparency;
• Encouraging public participation in agency regulatory processes;
• The role of cost-benefit analysis;
• The role of distributional considerations, fairness, and concern for the interests of future generations;
• Methods of ensuring that regulatory review does not produce undue delay;
• The role of the behavioral sciences in formulating regulatory policy; and
• The best tools for achieving public goals through the regulatory process.

OMB invites public comments on how to improve the process and principles governing regulatory review; comments will be accepted until March 16, 2009.  

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On March 5, 2009, HHS released a report entitled “Americans Speak on Health Reform: Report on Health Care Community Discussions.” The report summarizes comments from thousands of Americans who participated in health reform discussions this winter. The report was issued to coincide with a White House Health Reform Summit on March 5. The report and related information have been posted on a new Obama Administration internet site dedicated to health reform.

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This post was written by Karl A. Thallner, Jr., Carol C. Loepere, Debra A. McCurdy, Brad M. Rostolsky, Jacqueline B. Penrod, and Amie E. Schaadt.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”). The sweeping $790 billion economic stimulus package includes a number of health care policy provisions. Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.

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The White House has officially announced that Kansas Governor Kathleen Sebelius is the President's choice for Secretary of Health and Human Services. In addition, Nancy Ann DeParle, former director of the Health Care Financing Administration, has been chosen to be Director of the White House Office for Health Reform.

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On February 24, 2009, President Obama is addressing a joint session of Congress (in lieu of a formal state of the union address). While the economy can be expected to dominate his presentation, he also is likely to address health reform.

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On February 3, 2009, President Obama announced he has accepted former Senator Tom Daschle’s request to withdraw his nomination for Secretary of Health and Human Services (HHS). The Administration has not yet named a replacement nominee for HHS Secretary, nor has it announced its candidates for CMS administrator or Food and Drug Administration (FDA) commissioner.

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On January 20, 2009, Rahm Emanuel, Assistant to the President and Chief of Staff, sent a memo to all federal department and agency heads announcing that all regulations approved or pending at the end of the Bush Administration must be reviewed by the Obama Administration before being implemented. Specifically, except in cases of emergency situations, such as urgent health, safety, environmental, financial, or national security matters, no proposed or final regulation should be sent to the Office of the Federal Register for publication unless reviewed and approved by an department or agency head appointed or designated by President Obama, and pending Bush Administration regulations not yet published in the Federal Register must be withdrawn for review. Moreover, agencies are directed to consider extending for 60 days the effective date of Bush Administration rules that have been published but not yet taken effect, with a reopening of the public comment period. Although the Administration has not released a complete listing of regulations subject to this review, the Centers for Medicare & Medicaid Services (CMS) published a notice January 27, 2009 delaying for 60 days the effective date of a November 25, 2008 final rule designed to provide state Medicaid agencies with increased flexibility to impose premium and cost sharing requirements on certain Medicaid recipients. The new effective date is March 27, 2009, and the comment period has been reopened until February 26, 2009. Additional Department of Health and Human Services (HHS) rules also may be affected by the regulatory review.

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On December 11, 2008, President-elect Barack Obama officially nominated former Senator Tom Daschle as Secretary of Health and Human Services. He also named Senator Daschle as the Director of a new White House Office on Health Care Reform. Dr. Jeanne Lambrew, who authored a book about health care reform with Senator Daschle, will serve as Deputy Director of the White House Office of Health Reform. In other personnel news, President-elect Obama has named Eric Holder as his Attorney General. Mr. Holder has held a number of prominent positions in government, including United States Attorney for the District of Columbia and Deputy Attorney General. 

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President-elect Obama’s transition team is calling on individuals across the country to hold “Health Care Community Discussions” to make recommendations on health care policy. The transition team hopes that feedback from the session will give Obama’s health policy advisers “fresh ideas about the best ways to promote the President-elect and Vice President-elect’s vision of quality affordable health care for all Americans.” Individuals interested in hosting a health care community discussion between December 15 and 31, 2008 are asked to sign up for a moderators kit, feedback forms, and other materials.   

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