After a long line of opinions scrutinizing the use of rewards programs offered by providers, the Department of Health and Human Services’ Office of Inspector General (“OIG”) issued Advisory Opinion 22-16 on August 19, 2022– a favorable opinion for the provision of gift cards to Medicare Advantage (“MA’) plan enrollees who complete educational modules as part of an online surgical treatment learning tool.

The opinion adds flexibility to existing opinions on gift cards and patient engagement programs and, while binding only on the requestor, provides insight into the OIG’s evolving view of these programs.

Continue Reading OIG Approves Rewards Program for Medicare Advantage Organizations

The Centers for Medicare and Medicaid Services has published a final rule that governed the way that Medicare Advantage and Medicare Part D plans interact with third-party marketing organizations. The rule, which goes into effect on June 28, 2022, will have a wide ranging impact on the insurers who run these plans.

Scot Hasselman

In November 2020, four months after the Trump Administration issued a series of Executive Orders reiterating its policy goals on reducing the costs to consumers for prescription drugs and directing the Department of Health and Human Services, Office of Inspector General (“HHS-OIG”) to implement those policy objectives, HHS-OIG issued a Final Rule to amend certain provisions in the safe harbor regulations under the Federal Anti-Kickback Statute (“AKS”). The Final Rule included three key provisions:

  1. Elimination of discount safe harbor protection for manufacturer rebates paid directly, or indirectly through a pharmacy benefit manager (“PBM”) to Medicare Part D or Medicare Advantage plans (the “Rebate Rule”);
  2. Creation of a new safe harbor to protect point-of-sale (“POS”) price reductions paid by manufacturers to Medicare Part D plans, Medicare Advantage plans, and Medicaid managed care organizations (“MCOs”); and
  3. Creation of a new safe harbor to protect fair-market-value (FMV) service fees paid to PBMs by manufacturers.

The Final Rule imposed a January 1, 2022, effective date for the Rebate Rule. However, in January 2021, two months after issuance of the Final Rule and in connection to a lawsuit brought by the Pharmaceutical Care Management Association challenging the Rebate Rule, the Biden Administration agreed to delay the Rebate Rule’s effective date to January 1, 2023, as reflected in an Order by the United States District Court for the District of Columbia.

In the intervening time though, Congress passed the Infrastructure Investment and Jobs Act (the “Infrastructure Act”). That law, signed by President Biden on November 15, 2021, further delayed implementation of the Rebate Rule to January 2026. Thus the rule, which many thought would be eliminated as part of paying for the cost of the infrastructure bill, was still alive, if only delayed until the middle of the next presidential term.

Continue Reading Future of discount safe harbor for prescription drugs remains uncertain

Earlier this month and with little fanfare, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would invoke CMS’s rarely used retroactive-rulemaking authority to essentially ensure that, despite the Supreme Court’s adverse rulemaking decision in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019), CMS will apply the same Medicare payment methodology found procedurally improper in Allina. CMS’s invocation of its retroactive-rulemaking authority to effectively circumvent Allina sets a potentially dangerous precedent that should not go unnoticed by all Medicare stakeholders.
Continue Reading “Contrary to the Public Interest”: CMS invokes retroactive-rulemaking authority to escape consequences of Allina

The Centers for Medicare and Medicaid Services (CMS) has announced a new voluntary Part D Senior Savings Model (the Model) intended to reduce Medicare beneficiary cost sharing for insulin.  Under the Model, participating insulin manufacturers and participating sponsors of Medicare Part D prescription drug plans (PDPs) and Medicare Advantage Part D plans (MA-PDs) will make available 30-day supplies of insulin to beneficiaries of certain “enhanced benefit” PDPs and MA-PDs, with cost-sharing capped at no more than $35 during all phases of the Part D benefit, other than the catastrophic benefit.

The Model appears to reflect a balancing of plan and manufacturer concerns.  If there is significant participation by Part D sponsors, the Model could provide meaningful relief to beneficiaries facing high out-of-pocket costs for insulin under Part D.  As of the writing of this post, three of the largest insulin manufacturers – Eli Lilly, Novo Nordisk and Sanofi Aventis –have announced their intention to participate.

The Model, which was announced March 11, 2019, will be a five-year program, beginning in plan year 2021.  CMS is offering the Model through the Center for Medicare and Medicaid Innovation (CMMI) pursuant to authority under section 1115A of the Social Security Act (added by the Affordable Care Act).  The following is a summary of the new Model, along with our initial observations regarding some of its implications.

Continue Reading CMS Rolls Out New Medicare Part D “Senior Savings Model” Designed to Drive Down Insulin Copayments

The Trump Administration’s proposed fiscal year (FY) 2021 budget calls for significant cuts to federal health spending, including a 10% decrease in Department of Health and Human Services (HHS) discretionary spending in FY 2021 and a $1.6 trillion net reduction in health entitlements over the next decade.  House Budget Committee leaders have blasted the HHS provisions, and the package as a whole is unlikely to be advanced by Congress.  Nevertheless, the document reflects the Administration’s current Medicare and Medicaid priorities, some of which are administrative and could be advanced without Congress.  Furthermore, Medicare provider/supplier cost-saving recommendations could be incorporated into future budget agreements or potentially other entitlement reform efforts down the road.

Highlights of the Trump Administration’s major Medicare and Medicaid budget proposals are presented below.

Medicare Payment Policies

The Administration estimates that its proposed Medicare legislative package would result in $756 billion in Medicare Trust Fund savings over 10 years (net impact after offsets of $450 billion/10 years).  Many of the legislative recommendations have been made in previous budget proposals.  Budget provisions that would result in significant net Medicare savings include the following (net savings figures are over the 10-year period of FYs 2021-2030):  

  • Elimination of the Medicare Advantage (MA) benchmark cap and quality “double bonus” for plans in eligible counties [$1.2 billion].
  • Reform of hospital uncompensated care payments, including basing payments on a hospital’s share of charity care and non-Medicare bad debt [$87.9 billion].
  • Establishment of site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits) [$2 billion] and payment for all off-campus hospital outpatient departments under the physician fee schedule [$47.2 billion].
  • Adoption of a unified post-acute care system for skilled nursing facilities (SNFs), home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in FY 2026, with reduced annual Medicare payment updates from FYs 2021-2025 [$101.5 billion].
  • Elimination of Medicare reimbursement for disproportionate share hospital (DSH) bad debt, with an exemption for rural hospitals [$33.6 billion].
  • Reduced Medicare payment for hospice services under the SNF routine home care level of care. [$4.5 billion].
  • An increase in the intensive care unit minimum stay threshold from three days to eight days to qualify for LTCH prospective payment system payment [$9.4 billion].
  • Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies competitive bidding program to all geographic areas and to inhalation drugs, payment of contract suppliers based on their own bids, and elimination of the surety bid bond requirement [$7.73 billion Medicare savings, $435 million in Medicaid savings]. Separate from the bidding program, the Centers for Medicare & Medicaid Services (CMS) would be authorized to update DME rates based on retail prices through rulemaking, without using the inherent reasonableness process [$1.6 billion Medicare savings, $85 million in Medicaid savings].

Other legislative proposals are intended to promote value-based care; in some cases, these proposals also would result in cost savings.  For instance, the budget proposes the following:

  • Basing Medicare beneficiary accountable care organization assignment on a broader set of non-physician primary care providers [$80 million].
  • Consolidation of the four Medicare inpatient hospital quality programs into a single hospital quality payment program [budget neutral].
  • Implementation of hospital outpatient department and ambulatory surgical center (ASC) value-based programs, with 2% of payments linked to quality/outcomes performance. Payment would be risk adjusted based on patient diagnosis severity to promote site neutrality [budget neutral].
  • Creation of a risk-adjusted monthly Medicare Priority Care payment for providers eligible to bill for evaluation and management (E/M) services who provide ongoing primary care to beneficiaries. The payment would be funded by a 5% annual cut in valuations of non-E/M services [budget neutral].

Medicare Transparency, Quality, Coverage, and Benefits

The budget includes a series of proposals intended to increase access to price and quality information and/or clarify Medicare coverage and payment processes.  For instance, the budget would:
Continue Reading Medicare/Medicaid Policy Provisions in Trump Administration’s FY 2021 Budget Proposal

CMS has put on display a proposed rule that would update Medicare Advantage (MA) and Medicare Part D prescription drug benefit policies for contract year 2021 and 2022.  CMS projects that its proposed policies would decrease federal spending by $4.4 billion over 10 years, primarily as a result of a proposal to remove outliers prior

President Donald Trump has signed an executive order that commits the Department of Health and Human Services (HHS) to taking a series of regulatory and subregulatory actions intended to enhance the fiscal sustainability of the Medicare program, reduce regulatory burdens on providers, and increase beneficiary choice.  The planned initiatives, which would require further policy development

The Centers for Medicare & Medicaid Services (CMS) has announced a new Medicare Part D Payment Modernization Model (Part D Model), which will be tested by the CMS Center for Medicare and Medicaid Innovation.  CMS unveiled the Part D Model on January 18, 2019, at the same time the agency released details on extensive revisions to its current Medicare Advantage Value-Based Insurance Design (VBID) model. On January 31, 2019, CMS provided additional detail on the new Part D Model during a webinar (the webinar will be repeated on February 6, 2019).

The Part D Model is a voluntary, five-year (CY 2020-2024) model open to standalone prescription drug plans (PDPs) and Medicare Advantage Prescription Drug Plans (MA-PDs), on a nationwide basis.  As discussed below, the model is intended to decrease Part D program spending by:  (i) introducing two-sided risk to participating plans for spending in the catastrophic portion of the Part D benefit, and (2) enhancing plan flexibilities to propose clinically-based drug utilization management techniques, including through rewards and incentives programs for plan beneficiaries.

Two-sided risk for the catastrophic portion of the Part D benefit. 

For plans accepted into the program, CMS will retrospectively (after the plan year has been completed) establish a target benchmark representing the federal catastrophic reinsurance subsidy amount (80% of Part D catastrophic phase costs after manufacturer rebates and other Direct and Indirect Remuneration) that would have been paid to participating organizations if they were not participating in the model.  The benchmark will be calculated after adjustment for certain factors, such as enrollee health and low-income subsidy status, and separate benchmarks will be calculated for participating PDPs and MA-PDs.  If the reinsurance subsidy amount (after adjustment) for the organization’s participating PDPs or MA-PDs (as applicable), calculated at the parent organization level, is lower than the applicable target benchmark, the organization will receive a portion of the difference (referred to by CMS as “savings”), and if it is higher than the benchmark, the organization must pay to CMS a portion of the difference (referred to by CMS as “losses”).  Specifically:
Continue Reading CMS Launches New Medicare Part D Payment Modernization Model

The Centers for Medicare & Medicaid Services (CMS) is making extensive revisions to its Medicare Advantage (MA) Value-Based Insurance Design model in order “to contribute to the modernization of Medicare Advantage through increasing choice, lowering cost, and improving the quality of care for Medicare beneficiaries.”

By way of background, the VBID innovation model was launched

CMS is planning a new “Medicare Advantage Qualifying Payment Arrangement Incentive (MAQI) Demonstration” that would allow clinicians who participate in certain Medicare Advantage (MA) plans that involve taking on risk to be treated as Advanced Alternative Payment Model (Advanced APM) participants under the Medicare physician fee schedule. By way of background, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) established two tracks for Medicare physician fee schedule/Quality Payment Program updates:

  1. The Merit-based Incentive Payment System (MIPS), which adjusts Medicare payments based on performance on quality, cost, improvement activities, and advancing care information measures, or
  2. Advanced APMs, under which eligible clinicians may earn incentive payments for sufficient participation in certain payment arrangements that coordinate care, improve quality, and reduce costs.


Continue Reading CMS Considering New Medicare Advantage Payment Arrangement Incentive (MAQI) Demonstration

In addition to the numerous hearings and markups on the opioid crisis discussed in a separate post, Congressional committees are examining the following health policy topics:

  • The Senate Committee on Health, Education, Labor and Pensions (HELP) held a hearing to review HHS Office of Inspector General and Government Accountability Office oversight reports regarding the

CMS has announced final Medicare Advantage (MA) and Part D plan policies and rates for 2019. The final 2019 rule, published on April 16, 2018, implements a Comprehensive Addiction and Recovery Act (CARA) provision that allows Part D plan sponsors to establish drug management programs. Under this policy, plan sponsors may limit at-risk beneficiaries’ access to coverage of “frequently abused drugs” (opioids and benzodiazepines) to selected prescribers and/or network pharmacies, and they may use of point-of-sale claim edits, subject to various conditions.

Other policies adopted in the final rule include the following:
Continue Reading 2019 Medicare Advantage/Part D Policies Finalized, Including Comprehensive Addition and Recovery Act Drug Management Requirements

The Medicare Payment Advisory Commission (MedPAC) has issued its annual recommendations to Congress on updates to Medicare fee-for-service payment system rates, many of which overlap recommendations made in previous years. For instance, MedPAC continues to call for implementation of a unified prospective payment system (PPS) for post-acute care (PAC) providers, including skilled nursing facilities (SNFs), home health agencies (HHAs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs), to be implemented beginning in 2021.  In the latest report, MedPAC recommends that Congress direct the Secretary of Health and Human Services to begin blending the relative weights of the setting-specific payment systems and the unified PAC PPS in 2019.  At the same time, MedPAC recommends that Congress modify the updates for the individual PAC systems by:

  • Reducing home health payment rates by 5% in 2019, rebasing payments beginning in 2020, and eliminating the use of the number of HHA therapy visits as a factor in payment determinations.
  • Reducing Medicare IRF PPS rates by 5% for FY 2019.
  • Eliminating the LTCH PPS update for FY 2019.
  • Eliminating SNF PPS market basket increases for fiscal years (FYs) 2019 and 2020, and implementing previous recommendations to reform SNF PPS payments in a way that shifts payments to medically-complex stays. MedPAC notes that it has endorsed SNF PPS reforms since 2008, and it “has grown increasingly frustrated with the lack of statutory and regulatory actions to lower the level of payments and implement a revised payment system.”

MedPAC also includes detailed discussions of Medicare payment for physician and other health professional services. MedPAC recommends increasing physician fee schedule rates in 2019 by the amount specified in current law (0.25%). MedPAC also offers extensive recommendations for revising the framework for updating Medicare physician payments established by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Most notably, MedPAC recommends eliminating the Merit-based Incentive Payment System (MIPS) and adopting a new voluntary value program under which: (1) clinicians can elect to be measured as part of a voluntary group; and (2) clinicians in voluntary groups can qualify for a value payment based on their group’s performance on a set of population-based measures. Additionally, MedPAC presents the findings of its Congressionally-mandated report on coverage of telehealth services.

With regard to other Medicare fee-for-service payment systems, MedPAC recommends:
Continue Reading MedPAC Calls for Medicare Post-Acute Care and Physician Payment Reforms, Recommends Medicare Payment Updates

CMS is seeking comments on its proposed updates to the methodologies used to pay Medicare Advantage (MA) and Part D plan sponsors for 2019.  This year CMS released its 2019 Advance Notice and Draft Call Letter in two parts.  In late 2017, CMS released proposed changes to the Part C risk adjustment model (Part I of the Advance Notice) to comply with new 21st Century Cures Act requirements.  Part II of the Advance Notice and Call Letter, released earlier this month, includes proposed rate updates and various policy provisions.  According to a CMS fact sheet, the update would increase plan payments by 1.84% relative to 2018, without taking into account an adjustment for underlying coding trend, which CMS expects to increase risk scores by 3.1% on average. 
Continue Reading CMS Releases Proposed 2019 Medicare Advantage/Part D Reimbursement Methodologies and Policies

CMS has issued a proposed rule to update the Medicare Advantage (MA) program and Part D prescription drug benefit rules for contract year 2019.  The proposed rule would, among many other things:

  • Implement a Comprehensive Addiction and Recovery Act (CARA) provision that allows Part D plan sponsors to establish drug management programs that limit at-risk

The House Energy and Commerce Subcommittee on Health has approved the following seven bipartisan bills addressing the Medicare Part B program:

  • HR 3245, which would significantly increase various Medicare civil and criminal penalties under sections 1128A and 1128B of the Social Security Act, which sponsors note have not been updated in 20 years. Maximum penalties would at least double under the bill. For instance, CMPs that are now $10,000 would be increased to $20,000, while criminal fines that are now a maximum of $25,000 would increase to $100,000. Maximum sentences also would be doubled, from five years to 10 years.
  • HR 1148, the Furthering Access to Stroke Telemedicine Act, to provide for Medicare reimbursement of neurological consults via telemedicine for beneficiaries presenting at hospitals or mobile stroke units.
  • HR 2465, the Steve Gleason Enduring Voices Act, to make permanent the current Medicare coverage of speech generating devices under the “routinely purchased” durable medical equipment payment category.
  • HR 2557, the Prostate Cancer Misdiagnosis Elimination Act, to provide coverage of DNA Specimen Provenance Assay (DPSA) testing for prostate cancer.
  • HR 3120, to amend the Health Information Technology for Economic and Clinical Health (HITECH) Act to remove the mandate that meaningful use standards become more stringent over time.
  • HR 3263, to extend the Medicare Independence at Home Medical Practice Demonstration Program.
  • HR 3271, to revise Medicare competitive bidding rules pertaining to diabetes test strips (DTS), including stronger enforcement of requirement that bidders cover at least 50 percent of the types of diabetes test strips on the market.


Continue Reading House Panels Advance Medicare Policy Bills, including Hike in Civil/Criminal Penalties

Recent House of Representatives committee hearings have focused on a variety of health care policy issues, including the following:

  • Energy and Commerce Committee hearings on: the growth and oversight of the 340B drug discount program; drug and device company communications, including clinical/economic data; state efforts to address the opioid crisis; and extension of safety net

House and Senate committees have held a number of hearings recently to focus on health policy topics, including the following:

  • A Senate Health, Education, Labor & Pensions Committee hearing on “The Cost of Prescription Drugs: How the Drug Delivery System Affects What Patients Pay,” the first of three planned hearings on prescription drug costs.
  •  A House Ways and Means Committee hearing on Medicare Advantage and coordinated care models such as the Program for All-Inclusive Care.
  • Senate Finance Committee and House Ways and Means Committee hearings examining the Trump Administration’s proposed FY 2018 HHS budget request.
  • House Energy and Commerce Committee hearings on the HHS response to cybersecurity vulnerabilities and the U.S. public health response to the Zika Virus. A planned June 14 hearing on extension of safety net health programs (the Children’s Health Insurance Program, Federally Qualified Health Centers, and the Community Health Center Fund) has been postponed.


Continue Reading Congressional Hearings, Markups Focus on Chronic Care, Drug Pricing, HHS Budget, Other Health Programs