House GOP Moving Ahead on Controversial ACA Repeal & Replace Bill; First of Three Planned Phases of Health Reform

The House of Representatives is moving ahead on the Republican plan -– the American Health Care Act (AHCA) – that would repeal and replace major provisions of the Affordable Care Act (ACA). On March 16, 2017, the House Budget Committee approved sending the bill to the full House as part of fiscal year 2017 budget reconciliation bill, and a vote is expected later this week. The fate of the bill is uncertain in the face of united Democratic opposition to the plan and the objections of various ideological and regional factions within the Republican party. The political challenge has been complicated by a Congressional Budget Office (CBO)/Joint Committee on Taxation (JCT) estimate that the AHCA would result in 14 million more uninsured individuals in 2018, rising to 24 million by 2026. The CBO and JCT project that more of half of the coverage loss would be a result of the steep –$880 billion – proposed cut in federal Medicaid outlays, which would result in 14 million fewer Medicaid enrollees by 2026. And yet one of the fundamental disputes among Republican lawmakers is whether the ACA’s Medicaid expansion should be phased out sooner than the legislation now contemplates (2020), or whether additional protections should be provided in Medicaid expansion states.

Due to complex budget reconciliation rules, the AHCA concentrates on tax and Medicaid spending provisions. The AHCA would repeal the tax penalties enforcing the ACA mandates that most individuals obtain health insurance coverage and that certain employers offer employees coverage meeting minimum essential coverage standards, retroactive to those impacted by the penalty in 2016. Instead, to encourage healthier people to purchase insurance, the AHCA would require insurers to impose a 30% premium penalty for individuals who have not maintained continuous insurance coverage. Insurers also generally would be permitted to charge older individuals five times more than younger individuals (instead of the current 3 to 1 cap), beginning in 2018. Furthermore, the AHCA also would replace ACA insurance premium subsidies with refundable tax credits beginning in 2020 and establish a Patient and State Stability Fund intended to lower patient costs and stabilize state markets. The CBO/JCT estimate that, by 2026, the average subsidy under the AHCA would be about half of the average subsidy under current law. As noted, the AHCA also includes significant Medicaid cuts in the form of reduced enhanced federal matching and limits on growth in per-enrollee payments starting in 2020. In light of the expected decrease in the number of individuals with Medicaid coverage, the AHCA would eliminate cuts in disproportionate share hospital spending imposed under the ACA, and thus increase outlays by $31 billion. The AHCA also would repeal various ACA taxes, including the medical device tax, the prescription drug manufacturers’ tax, the health insurance provider fee, and the surtax on high-income taxpayer’s net investment income. Overall, CBO/JCT estimate that the AHCA would decrease federal spending by $1.2 trillion and reduce federal revenues by $883 billion, resulting in a $337 billion reduction to federal deficits, over the 2017-2026 period.

House GOP leaders concede that changes to the bill will likely be necessary to win approval. In fact, House leaders released proposed amendments late on March 20 that would modify the bill’s Medicaid provisions, including establishing an optional block grant program as an alternative to the bill’s per enrollee allotment, and giving states the option of instituting a work requirement for nondisabled, nonelderly, non-pregnant adults as a condition of receiving Medicaid coverage. The amendments also would accelerate the repeal of various ACA taxes.

Republican leadership and President Trump are also emphasizing that the AHCA is only the first of three planned phases of health reform. As set forth in a March 10, 2017 White House statement and echoed by House GOP leadership, ACA repeal and replace will be followed by administrative actions to “stabilize health insurance markets.” The White House promises regulatory reforms including: promoting insurance portability and purchasing across state lines; loosening restrictions on the financial structure of plans offered on insurance exchanges to provide access to lower-premium options; curbing insurance enrollment abuses and encouraging full-year enrollment; and giving states more flexibility in spending Medicaid funds and regulating insurance markets.

After that, the third phase of reform contemplates additional legislative action, including steps to expand the use of health savings accounts to pay for health care costs; streamline FDA processes (e.g., speeding generic drug approvals); establish association health plans for small businesses; reform medical malpractice laws; and make additional statutory changes to enable states to set insurance market and Medicaid program parameters.

Before tackling these additional reforms, however, House Republicans will need to run the political gauntlet associated with fulfilling their longstanding promise to repeal and replace the ACA. Whether Senate Republicans will respond favorably to this measure is still unclear.

Price, Verma Taking a Fresh Look at Obama Administration’s EPM/CJR Final Rule; Changes Pushed Back to at Least October 1, 2017

HHS Secretary Thomas Price and CMS Administrator Seema Verma have signaled that the Trump Administration is eyeing changes to one of the last major Medicare policies issued by the Obama Administration.  Specifically, CMS is delaying a January 3, 2017 final rule that established mandatory Medicare episode payment models (EPM) for acute myocardial infarction, coronary artery bypass graft, and surgical hip/femur fracture treatment procedures furnished in designated geographic areas. The rule also made conforming changes to the Comprehensive Care for Joint Replacement (CJR) program.  The rule was originally scheduled to go into effect February 18, 2017, but major provisions (including the EPM start date and CJR changes) were not scheduled to be implemented until July 1, 2017.  Last month, the Trump Administration published a notice pushing the effective date to March 21, but it did not impact the July 1, 2017 implementation date.

In an interim final rule with comment period published today, CMS is making the following changes to the EPM/CJR timeline: Continue Reading

Congressional Panels Examining Pharmaceutical Distribution Systems, FDA Drug User Fees

Two Congressional committees are holding hearings this week on FDA user fees: a March 21 Senate Health, Education, Labor, and Pensions Committee hearing and a March 22 Energy and Commerce Subcommittee on Health hearing. In addition, on March 22, 2017, the House Oversight Subcommittee on Health Care is holding a hearing on “Examining the Impact of Voluntary Restricted Distribution Systems in the Pharmaceutical Supply Chain.”

340B Ceiling Price/CMP Rule Effective Date Pushed Back to May 22, 2017 — “At the Earliest”

The Health Resources and Services Administration (HRSA) is delaying the effective date of its January 5, 2017 final rule on the calculation of the ceiling price and application of civil monetary penalties (CMPs) under the 340B drug pricing program until May 22, 2017 – with a longer delay being contemplated.  The January 5, 2017 final rule was scheduled to be effective  March 21, 2017 and enforced beginning April 1, 2017, pursuant to a March 6, 2017 notice conforming to the Trump Administration’s regulatory review policy.  However, a rule to be published March 20, 2017 further delays the effective date to May 22, 2017 – “at the earliest.”  Given that the agency previously expressed a preference for enforcing the new requirements at the start of a quarter, the latest change to the effective date is likely to push the actual enforcement date to at least July 1, 2017.

Furthermore, HRSA is soliciting comments for 30 days on whether a longer delay of the effective date — until October 1, 2017 — would be more appropriate.  The March 20 rule states that “after further consideration and to provide affected parties sufficient time to make needed changes to facilitate compliance, and because there are substantive questions raised, we intend to engage in longer rulemaking.”  HHS wants to ensure that the rulemaking “is coordinated with and takes into consideration overall 340B Program implementation.”  Furthermore, HHS will “consider questions of fact, law, and policy raised in the rule, consistent with the “Regulatory Freeze Pending Review” memorandum.”

Trump Administration Proposes 17.9% Cut to HHS Programs, Doubling of FDA User Fees

The Trump Administration is calling for deep cuts to Department of Health and Human Services (HHS) funding for fiscal year (FY) 2018 along with a $1 billion hike in Food and Drug Administration (FDA) user fees in its “budget blueprint,” dubbed “America First: A Budget Blueprint to Make America Great Again.”  The blueprint — which addresses only discretionary spending — seeks a 17.9% reduction in funding for HHS programs in FY 2018 (with certain spending outside these caps, including specific 21st Century Cures Act funding).  HHS cuts identified in the blueprint include:

  • A $5.8 billion reduction in the National Institutes of Health (NIH) budget and a reorganization to eliminate the Fogarty International Center and consolidate the Agency for Healthcare Research and Quality within NIH, among other changes.
  • A $403 million cut to in health professions and nursing training programs.
  • Elimination of Office of Community Services discretionary programs, including the Low Income Home Energy Assistance Program and the Community Services Block Grant, saving $4.2 billion.

On the other hand, the President proposes to increase funding in several areas, including:  the Health Care Fraud and Abuse Control (HCFAC) program ($70 million increase); Substance Abuse and Mental Health Services Administration opioid abuse prevention and treatment activities ($500 million increase); and a new $500 million Centers for Disease Control and Prevention state block grant to help states respond to public health challenges.  Other HHS programs are discussed in general terms without specific estimates of budget impact.

The President also proposes to increase FDA medical product user fees by about $1 billion to over $2 billion in 2018, asserting that “in a constrained budget environment, industries that benefit from FDA’s approval can and should pay for their share.”  The Administration would accompany the user fee increase with “a package of administrative actions designed to achieve regulatory efficiency and speed the development of safe and effective medical products.”

Note that this budget blueprint is not a traditional full federal budget and does not substantively address entitlement programs.  The Trump Administration is releasing the budget “sequentially” this year; the Administration asserts that a full budget will be released later this spring including “specific mandatory and tax proposals, as well as a full fiscal path.”  Various aspects of the budget blueprint have already come under fire by various lawmakers, who will ultimately craft the spending package.

Post-Acute Care Providers Targeted for Cuts in MedPAC’s Latest Report to Congress

The Medicare Payment Advisory Commission (MedPAC) has released recommendations to Congress regarding how Medicare fee-for-service payment system rates should be adjusted in 2018. One of the focus areas for MedPAC is post-acute care (PAC), which includes skilled nursing facility (SNF), home health agency (HHA), inpatient rehabilitation facility (IRF), and long-term care hospital (LTCH) services.  According to MedPAC, the “unnecessarily high level of spending and the inequity of payments across different types of patients” necessitate changes to both payment levels and overall system design.  MedPAC therefore reiterates its previous recommendation for a uniform Medicare PAC prospective payment system (PPS) that bases payments on patient characteristics; MedPAC believes that transition to the PAC PPS could begin as early as 2021. In the meantime, MedPAC recommends that Congress: Continue Reading

Trump Administration Signals More Administrative Flexibility for State Medicaid Programs, with Emphasis on “Most Vulnerable Populations”

In her first act as CMS Administrator, Seema Verma joined HHS Secretary Tom Price in writing to the nation’s Governors to urge collaboration on improving the Medicaid program, with an emphasis on services for “truly vulnerable” populations. Price and Verma contend that the “expansion of Medicaid through the Affordable Care Act (ACA) to non-disabled, working-age adults without dependent children was a clear departure from the core, historical mission of the program.”  Thus, they announced their intention to use existing Section 1115 authority to approve state innovations that “build on the human dignity that comes with training, employment and independence.”  They also encouraged states to align their Medicaid benefit designs for non-disabled adults with various commercial health insurance policy features (e.g., health savings accounts and premium/contribution requirements) “to help working age, nonpregnant, non-disabled adults prepare for private coverage.”  Furthermore, CMS committed to working with states to make the state plan amendment and waiver review processes more transparent and efficient.  On the regulatory front, CMS intends “to conduct a full review of managed care regulations in order to prioritize beneficiary outcomes and state priorities” and to give states additional time to comply with a 2014 Home and Community-Based Services (HCBS) rule. Finally, the letter outlines ways HHS is seeking to give states more tools to address the opioid epidemic.

Senate Confirms Verma as CMS Administrator; Trump Nominates Gottlieb for FDA, Hargan as Deputy HHS Secretary

The Senate has approved the nomination of Seema Verma to be CMS Administrator on a vote of 55 to 43. In other nomination news, President Trump has nominated Scott Gottlieb to be Commissioner of Food and Drugs. Dr. Gottlieb is a physician, resident fellow at the American Enterprise Institute, and venture capital firm partner who previously served as Deputy Commissioner for Medical and Scientific Affairs at the FDA. The President has also named Eric D. Hargan to serve as Deputy Secretary of Health and Human Services. Mr. Hargan previously served in various posts at HHS, including Deputy General Counsel and Acting Deputy Secretary, and currently is an attorney in private practice.


Regulatory “Freeze” Thaws for HHS: Medicare FY 2018 IPPS/LTCH Rulemaking Process Gets Underway

The Centers for Medicare & Medicaid Services (CMS) is moving ahead on its annual Medicare hospital payment update rule – and it actually is ahead of last year’s pace.  Specifically, on March 8, 2017 CMS sent to Office of Management and Budget (OMB) for regulatory clearance its proposed rule updating the Medicare hospital inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS) for fiscal year 2018.  Presumably the Trump Administration’s regulatory freeze no longer applies to CMS since Health and Human Services Secretary Thomas Price is in place to review the regulations on behalf of the Administration.   

The proposed rule reached OMB almost two weeks earlier than during last year’s rulemaking cycle.  OMB staff should have plenty of time to review the CMS regulation, since it is the only rulemaking government-wide that currently is pending at OMB.  The text of the proposed rule is not available until it is sent to the Federal Register (which last year was on April 18).

Cuts to Medicare DMEPOS Payment Based on Competitive Bidding Prices – Opportunity to Comment

CMS is seeking input from stakeholders on how it should use data from the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) competitive bidding program to adjust (cut) Medicare DMEPOS fee schedule amounts outside of bidding areas (CBAs), as required by the 21st Century Cures Act. The Cures Act mandates that CMS take such stakeholder feedback into account for fee schedule adjustments in non-CBAs beginning in 2019. CMS also must consider the highest amount bid by a winning supplier in a CBA, along with relative travel distances and costs, volumes of items and services, and number of suppliers in CBAs and non-CBAs.

CMS is hosting a call on March 23, 2017 to discuss these provisions; CMS also will accept comments until March 30, 2017. In addition, CMS published an educational article on how it is implementing a related Cures Act provision revising the schedule for phase-in adjustments to non-CBA DMEPOS rates based on competitive bidding.

OIG Tallies Medicaid Fraud Control Unit Achievements in FY 2016

The OIG has released national and state-by-state data quantifying State Medicaid Fraud Control Unit (MFCUs) accomplishments in fiscal year 2016. During this period MFCUs were credited with a total of:

  • 1,721 indictments (1,249 involving fraud and 472 involving abuse or neglect);
  • 1,564 convictions (1,160 involving fraud and 404 involving abuse or neglect);
  • 998 civil settlements and judgments; and
  • $1.88 billion in recoveries ($368 million of which were criminal recoveries).

MFCU expenditures totaled almost $259 million during this period, and Medicaid expenditures exceeded $571 million (state and federal expenditures).

OIG Warns Public: Do Not Fall for “OIG Hotline” Scammers

The HHS Office of Inspector General (OIG) is warning the public that scammers are spoofing the OIG’s hotline telephone number to obtain personal information from individuals that then can be used to steal money from the victim’s bank account or other fraudulent activity. The OIG stresses that it does not use the HHS OIG Hotline telephone number (1-800-HHS-TIPS/1-800-447-8477) to make outgoing calls and individuals should not answer calls from this number.

CMS Exploring Pediatric Alternative Payment Model Concepts

CMS is seeking public input on ways to improve the quality and reduce the cost of care for children and youth enrolled in Medicaid and the Children’s Health Insurance Program (CHIP). In particular, CMS is interested in comments on topics such as:

  • The potential to include the pediatric population in integrated service model concepts like accountable care organizations;
  • Flexibilities and supports states and providers may need to offer such care models; and
  • Approaches for states and providers to coordinate Medicaid and CHIP benefits and waivers with other health-related social services for this population.

CMS will accept related comments until March 28, 2017.

2018 “Next Generation” Accountable Care Organization (ACO) Models

CMS is soliciting applications for 2018 Next Generation ACOs, an Innovation Center initiative intended to promote Medicare quality improvement and care coordination. Letters of intent are due May 4, 2017. CMS is holding a series of calls to discuss the model and the application process, including the following:

House Judiciary Committee Advances Medical Liability, Insurance Antitrust Reform Bills

The House Judiciary Committee has approved HR 1215, the “Protecting Access to Care Act of 2017.” The bill includes a variety of medical liability reforms, including a $250,000 cap on noneconomic damages, limits on contingency fees, and allocation of damages in direct proportion to fault. The provisions would apply only to claims concerning the provision of goods or services for which coverage is provided in whole or in part via a federal program, subsidy, or tax benefit. The legislation would not preempt state laws that specify a particular monetary amount of economic or noneconomic damages, or that offer other specific types of protections. The panel also approved HR 372, the “Competitive Health Insurance Reform Act of 2017,″ which would repeal the antitrust exemption for health insurance companies provided under the McCarran-Ferguson Act.

The Fine Print of the Trump Administration “2-for-1” Regulatory Reduction Executive Order

President Trump has signed an executive order entitled “Reducing Regulation and Controlling Regulatory Costs,” also known informally as the “2-for-1 Order,” that directs agencies to take a number of actions aimed at deregulating a variety of industries.  The Order is considerably vague, relying instead on the Office of Management and Budget (OMB) to issue additional implementation guidance.  As a result, it remains unclear how this new regulatory approach will operate in practice.

2-for-1 Regulatory Identification Process

The Executive Order, signed January 30, 2017, directs each department or agency to identify two regulations to be repealed any time it proposes or finalizes a new regulation. It is worth noting that the Executive Order never expressly requires these regulations to actually be repealed; rather, merely identified.  Importantly, the Order provides that this 2-for-1 regulatory identification process need only be followed if it is permitted by law.  That is, Congress often passes laws that require certain administrative agencies to promulgate implementing regulations.  To this end, the Order cannot and does not block regulations required by statute.  Instead, only discretionary regulations would be eligible for elimination.

Critics of the Executive Order view this 2-for-1 regulatory identification process as an illogical approach to industry deregulation, arguing that this approach demonstrates a dearth of understanding about how and why regulations are actually issued. For example, in its examination of costs, the Executive Order ignores expected long-term cost savings, and only focuses on annualized regulatory costs.  Accordingly, agencies might be required to eliminate regulations whose benefits greatly outweigh their regulatory costs, simply to meet this arbitrary regulatory standard.  Supporters contend, however, that a requirement to eliminate regulations in order to promulgate new ones forces agencies to review and update existing regulations.  This perceived lack of periodic of review and update is something that has long troubled many in regulated industries. Continue Reading

Medicare & Medicaid Remain Vulnerable to Fraud and Abuse, GAO Warns

The Government Accountability Office (GAO) is out with the latest installment of its “High-Risk Series,” which identifies federal programs “that are especially vulnerable to waste, fraud, abuse, and mismanagement, or that need transformative change.” Once again, GAO flags Medicare and Medicaid as high-risk programs.

With regard to Medicare, GAO notes that while Congress, HHS, and CMS have taken steps to improve the fiscal integrity of Medicare over the years, “continued federal improvements to the oversight of Medicare are warranted given the size and complexity of the program as well as the number and scope of ongoing changes to the program.” Specific Medicare program integrity recommendations for Congress include:

  • Directing the HHS Secretary to require providers who self-refer intensity-modulated radiation therapy services to disclose to their patients that they have a financial interest in the service.
  • Paying for cancer hospitals exempt from the inpatient prospective payment system (PPS) on the same basis as teaching hospitals or otherwise modifying how Medicare pays these providers.
  • Directing the HHS Secretary to equalize payment rates for evaluation and management visits between physician office and hospital outpatient settings.
  • Requiring all Part B drug manufacturers paid at average sales price (ASP) to submit data to CMS and authorizing CMS to collect data from drug manufacturers on coupon discounts for Part B drugs paid based on ASP.
  • Increasing cost-sharing for services that are not recommended by the US Preventive Task Force..

GAO also offers Medicare program management recommendations to CMS and HHS, including:

  • Establishing a self-referral flag for advanced imaging services claims and reducing payments for self-referred advanced imaging services.
  • Improving Medicare Advantage (MA) data review and adjustments for differences in diagnostic coding practices between MA and Medicare fee-for-services.
  • Reforming dialysis facility low-volume payment adjustment policies.

In terms of Medicaid, the GAO identified as an “overarching challenge” CMS’s lack of accurate and timely data to oversee diverse and complex state Medicaid programs. To that end, GAO recommends that HHS take steps to improve reporting and oversight of supplemental payments, Section 1115 Medicaid demonstrations, and personal care services programs. GAO also recommends that CMS establishing criteria for determining when provider payments are “economical and efficient,” along with a process for identifying and reviewing payments to individual providers to determine if they meet that standard. Finally, to ensure “federal funding efficiently and effectively responds to the countercyclical nature of the Medicaid program,” Congress should consider federal matching formula changes to target variable state Medicaid needs and provide temporary increased federal assistance in response to national economic downturns.

CMS Schedules 2017 Meetings to Consider HCPCS Code Applications

CMS has just announced the dates for its annual meetings to discuss pending applications for new and revised HCPCS codes:

May 16 – 18, 2017: Drugs/Biologicals/Radiopharmaceuticals/Radiologic Imaging Agents

June 7 – 8, 2017: Durable Medical Equipment and Accessories/Orthotics and Prosthetics/Supplies/Other

Deadlines and instructions for speaker and general registration and submission of comments are set forth in a February 24 Federal Register notice. Additional information, include preliminary coding determinations, will be posted at least four weeks before each meeting at the CMS HCPCS website.

CMS Proposes Changes to Stabilize ACA Health Insurance Markets

At the same time Republican Congressional leaders are attempting to develop legislation to repeal and replace the Affordable Care Act (ACA), CMS has published a proposed rule that is intended to help stabilize the Affordable Insurance Exchanges for 2018. According to CMS, “[t]he health and competitiveness of the Exchanges, as well as the individual and small group markets in general, have recently been threatened by issuer exit and increasing rates in many geographic areas.” CMS notes that some issuers cite difficulties in “attracting and retaining healthy consumers necessary to provide for a stable risk pool that will support stable rates.” To help improve the risk pool and stabilize the individual and small group markets, CMS is proposing to: expand pre-enrollment verification of eligibility for individual market special enrollment periods; allow issuers to collect unpaid premiums prior to reenrolling an individual in the next year’s plan; increase the de minimis variation in the actuarial values used to determine metal levels of coverage; and shorten the 2018 open enrollment period for the individual market to end December 15, 2017 (instead of January 31, 2018) to require individuals to enroll in coverage prior to the beginning of the plan year. Furthermore, CMS proposes changes in network adequacy standards that are “are intended to affirm the traditional role of States in overseeing their health insurance markets while reducing the regulatory burden of participating in Exchanges for issuers.” The comment deadline is March 7, 2017.

CMS Teleconference to Discuss SNF Value-Based Purchasing Program (March 15)

On March 15, 2017, CMS is hosting a call to discuss the Skilled Nursing Facility (SNF) Value-Based Purchasing (VBP) Program, which is scheduled to begin in fiscal year 2019.  The call will focus on confidential quarterly feedback reports and implementation guidance.  Registration is required to participate in the call.