Health Policy Report (1/13)

The Week in Review

Lawmakers kicked off the second session of the 116th Congress last week. In the lower chamber, the House passed a measure that seeks to address controversial “forever chemicals.” The legislation, among other things, would: (1) require the Environmental Protection Agency (EPA) to designate PFOA and PFOS as hazardous substances (but not the entire class of PFAS chemicals); (2) establish a grant program to award funding to communities with water supplies that have been contaminated; and (3) promulgate national primary drinking water regulations for these chemicals under the Safe Drinking Water Act. Despite bipartisan support for action on these hazardous chemicals, the lower chamber’s bill faces a difficult path forward after the Trump administration issued a veto threat earlier last week. 

Additionally, the House cleared a “War Powers” resolution that seeks to limit U.S. military action against Iran. Designed as a rebuke of the drone strike that killed Iranian General Qassem Soleimani, the measure would limit President Donald Trump’s authority to take further military action against Iran absent a new Authorization for Use of Military Force (AUMF) from Congress. A similar effort has been introduced by Democrats in the Senate and will likely be considered this week. 

In the upper chamber, the Senate continued to work through pending presidential nominations. Notable confirmation votes from last week include: (1) Paul Ray to be Administrator of the Office of Information and Regulatory Affairs (OIRA); (2) Jovita Carranza to be Administrator of the Small Business Administration; and (3) Matthew Solomson and Eleni Maria Roumel to be judges on the United States Court of Federal Claims.

The Week Ahead

Lawmakers will resume legislative business later this afternoon as the Senate gears up for the next phase of the impeachment process. In a Dear Colleague letter to lawmakers, Speaker Nancy Pelosi (D-CA) announced that the House will take up a resolution to appoint managers and transmit the articles of impeachment against President Donald Trump to the Senate. Senators are expected to swiftly begin the impeachment trial process upon disposition of the resolution.

Also on the floor this week, the House will take up a bill that would amend the Age Discrimination in Employment Act to bolster federal age-discrimination protections in the workplace. House lawmakers will also consider a Congressional Review Act resolution that would overturn a Department of Education Rule relating to “Borrower Defense Institutional Accountability.” Meanwhile, Senators will take up the nomination of Peter Gaynor to be Administrator of the Federal Emergency Management Agency (FEMA).

MACPAC Releases Report on IMD Oversight

Last Monday, the Medicaid and CHIP Payment and Access Commission (MACPAC) released a new report to Congress on the oversight of institutions for mental diseases (IMDs). MACPAC Chair Melanie Bella reported in an accompanying press release that despite a statute that largely prohibits federal Medicaid payments to IMDs, states can and do legitimately pay for mental health or substance use disorder (SUD) services in such facilities. The results of the congressionally-mandated report are “especially valuable” as the federal government examines how best to direct mental health and SUD treatment resources to people in need, she said. The report examines facilities and policies in seven selected states: California, Colorado, Florida, Massachusetts, New Jersey, Ohio, and Texas.

The report notes that facilities that are considered IMDs by the federal government include a variety of residential and inpatient facilities providing SUD and mental health services that are regulated under a range of federal and state rules. As many of these facilities are primarily regulated by states, oversight is often fragmented across state agencies, and there is considerable variation across states in how they are regulated — making it difficult to make broad conclusions about IMDs as a group. The IMD exclusion is one of the few instances in Medicaid where federal funding is not available for covered services based on the setting in which they are provided, and MACPAC notes that, despite this longstanding payment exclusion, there are several other Medicaid authorities that states use to make Medicaid payments for services provided in IMDs. These include demonstration waivers under Section 1115 of the Social Security Act and in-lieu-of services in managed care, as well as statutory exceptions to the exclusion for services provided to adults age 65 and older and children and youth under age 21. Most recently, a temporary provision of the SUPPORT Act allows states to make payments to IMDs that treat individuals with a substance abuse disorder under the state plan.

The report also found that state licensing agencies, accrediting bodies, and other payers do not have standards specific to IMDs, given that the designation is unique to Medicaid. States regulate inpatient and residential treatment facilities separately and standards vary according to whether a facility provides SUD treatment or mental health care. Federal standards for IMDs are largely determined by whether or not facilities are Medicare providers, but because Medicare does not pay for SUD treatment services in most freestanding facilities, there is no federal certification process for these providers. The report explains that identifying IMDs is challenging because the IMD exclusion encompasses multiple types of facilities, and 2015 guidance from the Centers for Medicare & Medicaid Services (CMS) indicates that an IMD could be any institution that meets certain criteria. Other barriers to identification listed by the report included the ability for a facility’s designation as an IMD to change over time based on its patient mix, and treatment offerings varying by state.

CMS Releases Part I of 2021 MA, Part D Changes

The Centers for Medicare and Medicaid Services (CMS) released Part I of its annual Advance Notice of Methodological Changes last Monday. The proposed updates, which would take effect for calendar year 2021, address changes to CMS’ Hierarchical Condition Category (HCC) risk adjustment model, which allows Medicare Advantage (MA) plans to command higher payments for individuals who have chronic or serious illnesses. Notably, the Advance Notice would modify the model such that data collected from encounters with providers would account for 75 percent of the calculated risk score. Currently, those data account for 50 percent of the risk score. Plan data account for the rest of the calculation. Additional updates to the MA and Medicare Part D programs will be announced later this quarter.

For 2020, CMS gave encounter data and plan data equal weighting in calculating final risk scores under the model. The proposed change will give encounter data greater weight. However, CMS says it anticipates that there will be no difference between the risk scores calculated using plan data and those calculated using encounter data. Still, plans are expected to fight the change, with a spokesperson from America’s Health Insurance Plans (AHIP) asserting that the proposal does not address “persistent operational challenges” with encounter data. Last month, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) issued a report raising concerns with provider-generated data, noting that chart reviews conducted to create the data generally only add diagnoses and rarely result in removing them. This would indicate that the change could result in lower risk scores and, accordingly, lower payments to plans.

CMS Issues Guidance on Duplicate Discounts on 340B Drugs

Last Wednesday, the Centers for Medicare and Medicaid Services (CMS) released an informational bulletin (CIB) outlining state-based best practices for avoiding duplicate discounts on 340B drugs in Medicaid. CMS writes that states have found it more difficult recently to distinguish between claims filled with 340B drugs and non-340B drugs, leading the agency to release the guidance. The increasing number of managed care contracts and 340B eligible entities have contributed to that complexity, CMS says. Solutions to minimize duplicate discounts have been under discussion across the Department of Health and Human Services and with states for some time. The release of a “best practices” document may reflect difficulties in advancing specific regulatory or process changes.

CMS listed a variety of best practices to avoid billing drug manufacturers under the MDRP for drugs acquired at a 340B price. They include: (1) using the 340B Medicaid Exclusion File, which identifies entities that dispense 340B drugs by National Provider Identification (NPI) and Medicaid billing number and is limited to Medicaid fee-for-service arrangements; (2) use contract pharmacy agreements to identify and prevent duplicate discounts; (3) use the state plan amendment (SPA) process to define which entities and contract pharmacies may dispense 340B drugs to beneficiaries; (4) implement the use of identifiers on claims to designate 340B drugs; (5) place specific parameters in managed care contracts to ensure that 340B drugs are not included in files that are ultimately sent to manufacturers in the MDRP; (6) provide claims-level data to manufacturers for their review; and (7) include specific bank identification number and processor control number information on managed care identification cards to differentiate between plan sponsors’ Medicaid plans and other plans.

Appeals Court will not Lift Injunction on Public Charge Rule

A federal appeals court refused the Trump Administration’s request to set aside an injunction blocking their public charge rule. The ruling by the U.S. Court of Appeals for the 2nd Circuit keeps in place a nationwide halt on President Trump’s “public charge” rule that links immigrants’ legal status to their use of public benefits. The order from Judges Amalya L. Kearse, Guido Calabresi, and Susan L. Carney comes after the administration sought to implement the program while it appealed a U.S.-wide injunction entered by a federal district judge in New York, although two similar injunctions were lifted last month by the Richmond, Va.-based fourth Circuit and the San Francisco-based ninth Circuit.

The public charge rule, released last August, would expand the definition of “public charges” to include the use of public benefits such as Medicaid and examine the likelihood of an immigrant using such benefits in the future. Once labeled a “public charge,” immigrants could be denied green cards, visas, and other forms of legal immigration status. The policy was quickly challenged in court over the administration’s authority to expand the public charge definition. It would otherwise have gone into effect last October.

California to Launch Generic Drug Label 

Gov. Gavin Newsom announced last Thursday that California will create a state generic drug label as part of a series of proposals aimed at lowering the cost of health care. The plan, part of the state’s 2020-2021 budget, would involve contracting with one or more generic manufacturers and selling the medicines under the state’s own label in order to increase competition. Additionally, the Governor is proposing to create a single market for drug pricing within the state, meaning that all participating payers — private or public — would receive the same price for the same drug. California would invoke a “most favored nation” clause in the marketplace, and manufacturers would be required to sell drugs at the lowest cost offered in other countries. Presidential candidate Sen. Elizabeth warren has proposed a similar plan at the federal level, and the proposal is similar to an initiative —CivicaRx — begun by several large hospital systems and three philanthropies that contracts with private manufacturers to produce generic drugs.