Health Policy Report

The Week in Review

Both chambers were in recess this week in celebration of Independence Day. For the White House, the main action came on Thursday, as tariffs went into effect against $34 billion worth of Chinese imports. Despite world markets’ concerns over the looming trade war, President Trump has continued to insist that the new charges are necessary in order to improve the trade balance between the world’s two largest economies.

The Week Ahead

Both chambers are back in session as Congress hopes to clear the decks ahead of the August recess. The Senate — whose August recess is expected to be shortened — will return today to begin consideration of three nominations, namely Mark Bennett to join the 9th Circuit Court of Appeals, Brian Benczkowski to be Assistant Attorney General for the Justice Department’s Criminal Division, and Paul Ney to be General Counsel for the Department of Defense. All three are expected to be confirmed.

The House is due back on Tuesday, where they are scheduled to begin consideration of another appropriations minibus (H.R. 6147) and a reauthorization bill (H.R. 6237) for the intelligence community. The minibus includes the traditional Interior-Environment and Financial Services-General Government appropriations bills, with the latter including a change to the Consumer Financial Protection Bureau’s (CFPB) funding process that Democrats oppose. The intelligence authorization would cover both the 2018 and 2019 fiscal years, and was approved out of the House Intelligence Committee by unanimous voice vote.

President Trump will start another high-profile foreign trip on Wednesday by traveling to Brussels, Belgium for the 29th North Atlantic Treaty Organization (NATO) Summit. The President has frequently criticized the longstanding alliance between Western nations over concerns that the United States bears too much of the cost of collective defense. The President’s trip will also include a visit to Helsinki, Finland for a highly-anticipated bilateral meeting with Russian President Vladimir Putin. 

CMS Freezes Billions in Risk Adjustment Payments

The Centers for Medicare and Medicaid Servcies (CMS) indicated over the weekend that they will freeze billions of dollars Affordable Care Act (ACA) risk adjustment payments, citing a federal court ruling that the formula for determining the payouts is based on the flawed assumption that the program must be budget neutral. The $10.4 billion risk adjustment program takes payments from insurers with healthier customers and redistributes that money to companies with sicker enrollees. The idea behind the program is to remove the financial incentive for insurers to "cherry pick" healthier customers and was one of three tools established under the ACA to reduce risk for insurers entering the Exchanges. The other two programs expired after three years, but the risk adjustment program is permanent.

The move could add to anticipated premium increases next year, and has been widely panned by leading insurance stakeholders. America's Health Insurance Plans said in a statement that it is "very discouraged" by the Trump administration's decision to freeze payments, adding that "Costs for taxpayers will rise as the federal government spends more on premium subsidies.” The Blue Cross Blue Shield Association noted in a statement that the payments are required by law and suggested that the administration has the legal authority to continue making them despite the court cases.

CMS has said they are appealing the New Mexico federal court decision, but that its hands were tied by conflicting court rulings in New Mexico and Massachusetts. The administration "has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets," CMS Administrator Seema Verma said in a statement.

Federal Judge Blocks Kentucky Work Requirements Waiver Program

U.S. District Judge James Boasberg blocked Kentucky’s Section 1115 waiver program that would subject Medicaid beneficiaries to work requirements (decision). The court ruled that the Centers for Medicare and Medicaid Services (CMS) had not properly considered whether the initiative would violate Medicaid’s central objective of providing medical assistance to the state’s citizens. Kentucky’s program had been scheduled to take effect on July 1, but that has now been put on hold as the Department of Health and Human Services (HHS) is required to reevaluate Kentucky’s waiver approval based on the “administrative record” that would include additional consideration of the impact of coverage losses, among other issues. 

While Judge Boasberg’s ruling applies only to Kentucky, his reasoning easily extends to the other states that have implemented work requirement programs — namely, Arkansas, Indiana, and New Hampshire — and seven other states whose applications are currently being reviewed by HHS. Notable health law commentator Tim Jost said that the decision’s reasoning means “it’s pretty hard to envision any argument that would justify any work requirement program,” while Matt Salo, executive director of the National Association of Medicaid Directors, said the ruling is a “big roadblock for the four states looking to implement these already approved waivers.” The decision also sets an important precedent by finding Medicaid to be a health insurance program that provides equal treatment of all groups covered by its statute, which could have significant consequences in future legal disputes related to issues beyond Section 1115 waiver programs.

HHS officials are reportedly evaluating whether they will seek an appeal to the Court of Appeals for the D.C. Circuit, which will need to be filed in the next 60 days. Should either party be dissatisfied by the appellate ruling, it is possible that the case will eventually end up before the U.S. Supreme Court. As a result, HHS may hold off on announcing any additional approvals — and states may wait to submit them — before this legal battle reaches its conclusion. In the meantime, Kentucky Gov. Matt Bevin (R) has responded to the ruling by canceling Medicaid vision and dental benefits included in Kentucky HEALTH, and has threatened to reverse the state’s Medicaid expansion.

CMS Releases 2017 Open Payments Data

The Centers for Medicare and Medicaid Services (CMS) has released the 2017 Open Payments data, detailing 8.4 billion in payments from pharmaceutical and medical device manufacturers to physicians and teaching hospitals. As mandated by the Physician Payment Sunshine Act provisions in the Affordable Care Act (ACA), CMS has published this data in every year since 2014. This year’s data details ‘transfers of value’ from more than 1,500 drug and device companies to over 628,000 physicians and 1,150 teaching hospitals.

Among the top-line findings from the data, payments to doctors were slightly less in 2017 than the $8.81 billion they paid in 2016. Half of these payments, approximately $4.66 billion, went to research, while $2.82 billion of “general” payments were dedicated to consulting, speaking fees, travel and lodging, royalty and licensing fees, and gifts and entertainment. Physicians with ownership or investment interest in a drug or device company received the remaining $927 million. In addition, the decrease in overall payment was reflected in the decrease in disputed payments, with 1,018 disputed payments reported in 2017 compared to 1,435 in 2016. 

As CMS releases its fourth year of physician payment data, several transparency-minded lawmakers are pushing for legislation that could significantly expand the scope of data included in the system — potentially to capture drug company contributions to patient advocacy organizations and co-pay assistance organizations or nurse practitioners and physician assistants. For example, Sens. Chuck Grassley (R-IA), Sherrod Brown (D-OH), and Richard Blumenthal (D-CT) recently introduced legislation that would expand Open Payments reporting to include nurse practitioners and physician assistants — an effort they are attempting to wrap into broader opioid legislation. Separately, Sen. Claire McCaskill (D-MO) has released a bill that would expand the list of “covered recipients” to include patient advocacy organizations, providers of continuing education, clinical trial organizations, co-pay assistance organizations, and others. Similar efforts in the past have been opposed by key committee leaders in the House.

CMS Reports Cite Exchange Affordability Problems

The Centers for Medicare and Medicaid Services (CMS) released a package of three reports providing snapshots and trend information about the performance of Federal and State-based Exchanges and individual health markets in the states. In a statement accompanying the reports, CMS Administrator Seema Verma stated, “These reports show that the high price plans on the individual market are unaffordable and forcing unsubsidized middle-class consumers to drop coverage.” CMS’ statement concludes that, taken together, the reports demonstrate the need for alternatives that are less costly than the Affordable Care Act-compliant plans, including short-term limited duration (STLD) options and association health plans (AHP).

Last October, President Trump issued Executive Order 13813, “Promoting Healthcare Choice and Competition Across the United States,” which calls on the agencies of the executive branch to prioritize policies that will improve the affordability of the health insurance. In October, the Administration also announced it was discontinuing cost-sharing reduction (CSR) payments based on a legal opinion from the Attorney General and limiting funding for certain activities related to exchanges. While not cited in the reports, some experts have suggested the Administration’s actions contributed to the decline in enrollment among the non-subsidized population as reported by CMS. The reports are also consistent with the Congressional Budget Office’s (CBO) prediction that CMS’s decision to stop CSRs would lead to higher premiums and subsidies. 

Throughout the reports, CMS identifies areas where it believes the “lack of affordability continues to be a driving factor that determines whether currently uninsured consumers choose to buy health coverage through the Exchanges using the Federal platform.”

GAO Concludes 340B Hospitals, Contract Pharmacies Need More Oversight

The Government Accountability Office (GAO) released a report on its review of the Health Resources and Services Administration’s (HRSA) practices for overseeing 340B entities that dispense drugs using a contracted pharmacy. Among their findings, GAO concluded that HRSA’s audits do not properly examine compliance with a program requirement that there cannot be duplicate discounts for drugs prescribed to Medicaid recipients. The oversight agency made seven recommendations to address weaknesses it identified in HRSA’s practices.

Among the key findings of GAO’s report were that: (1) HRSA audits do not assess compliance with the 340B program on discounts for drugs proscribed to Medicaid beneficiaries since manufactures cannot be required to provide both a 340B discount and a rebate through the Medicaid Drug Rebate Program; (2) HRSA does not know the extent of the noncompliance issues of covered entities found during the audit process, as the agency does not require covered entities to identify the extent of noncompliance; and (3) covered entities are not required to provide evidence of compliance with the 340B program requirements, so HRSA must rely on the covered entities to self-report their compliance with 340B Program requirements before closing the audit.

Following the release of the report, the House Energy and Commerce Subcommittee on Health announced they will hold a hearing this Wednesday to discuss more than a dozen bills that would modify the 340B program. Some are more likely to be favored by 340B health clinics than the drug industry — like a proposal from Reps. Peter Welch (D-VT) and Gregg Harper (R-MS), which would remove a loophole excluding rare disease drugs from discounts. Other bills will likely be opposed by 340B health clinics but embraced by the pharmaceutical industry — among them a proposal by Chris Collins (R-NY) to limit patient eligibility, and another, by Reps. Larry Bucshon (R-IN) and Scott Peters (D-CA), to place a moratorium on the registration of certain new 340B hospitals. Despite Congress' increased attention to 340B this year, time is running short for any legislation to come to fruition before mid-term election campaigning begins in earnest.