Health Policy Report

The Week in Review

A busy week in Washington was highlighted by the release of the House Republicans’ plan to overhaul the nation’s tax code (detailed below), the naming of the next chair of the Federal Reserve, and the indictment of President Trump’s former campaign chair as part of Robert Mueller’s investigation into Russia’s interference in the 2016 election.

Indictments for former Trump campaign chair Paul Manafort and his business associate Rick Gates were issue on Monday on charges of money laundering, failing to register foreign lobbying work on behalf of Ukraine, and making false statements to federal investigators. Importantly, the current charges do not appear to be based on any accusations of ‘collusion’ between the Trump campaign and the Russian government. The White House has been quick to distance itself from the accusations, although Mueller’s probe is expected to issue additional charges in the coming weeks.

President Trump announced officially on Thursday that he would nominate current Federal Reserve Bank Governor Jerome Powell to replace Janet Yellen as Fed Chair when her term expires in February. The central bank post is generally considered one of the most important economic policy jobs in the world and Powell will be entering the chairmanship as the Fed unwinds from its unprecedented low interest rates policy following the 2008 financial crisis. President Trump is breaking from historic tradition in failing to re-nominate Yellen, but market observers are generally relieved that her post will be filled by Powell, an experienced Fed Governor and former Treasury official.

In floor action this week, the Senate confirmed a set of four high-level judicial nominees for various circuit courts across the country. Most Democrats opposed the nominees, both on ideological grounds and in retaliation for Leader McConnell’s failure to bring up Obama Administration nominees for some of the same posts last year.

In the House, lawmakers approved a bill (H.R. 849) repealing an element of the Affordable Care Act (ACA) known as the Independent Payment Advisory Board (IPAB) and a bill (H.R. 3922) to reauthorize the Children’s Health Insurance Program, which are both detailed in the roundup below.

The Week Ahead

The tax reform push will be in full swing this week when the House Ways and Means Committee commences its markup of the bill at noon today. Despite a relatively smooth rollout last week, the bill will likely see some changes in committee as Republican leaders seek to craft a bargain that will avoid as many Republican defections as possible. The markup will have additional importance after the announcement from the Committee’s Chair, Kevin Brady (R-TX), that House leadership is not anticipating allowing any amendments to be offered when the legislation reaches the chamber floor. Watch for the Senate to release their own version of tax reform legislation this week as Republicans strive to meet the aggressive timeline of advancing the package to the president’s desk before the end of the calendar year.

In floor action, the Senate will begin considering a set of less contentious nominees this week for the Departments of Justice, Labor, Transportation, and Defense. Meanwhile, the House has a set of regulatory reform bills on its floor agenda. That set includes measures to modernize hydropower policy (H.R. 3043), streamline registration requirements for micro-offerings (H.R. 2201), and clarify the treatment of joint employers under the Fair Labor Standards Act (H.R. 3441).

Political observers will be tuned into gubernatorial elections in New Jersey and Virginia tomorrow, with the latter race between Democrat Ralph Northam and Republican Ed Gillespie expected to be close. While the consequences of the races for governorship are significant on their own, the elections will also serve as a barometer for the mood of the electorate ahead of next year’s midterm races. 

House GOP Releases Text of Tax Overhaul Legislation; Several Health Policies Implicated

Following days of around-the-clock negotiations and speculation, House Ways and Means Chairman Kevin Brady (R-TX) released the legislative text for H.R. 1 ­– The Tax Cuts and Jobs Act (TCJA) (text; section-by-section), signaling a significant step forward in the GOP’s push for a major overhaul of the nation’s tax code. Contrary to early rumors, limits on pre-tax contributions to 401(k) plans and the repeal of the Affordable Care Act’s individual mandate were not included in the final text. However, the bill does contain politically sensitive provisions that could complicate final passage, most notably the repeal of the state and local tax deduction (SALT), a cap on the property tax deduction, eliminations of popular itemized deductions for medical expenses and student loan interest, and abolishing the alternative minimum tax (AMT). According to Chairman Brady, TCJA adds an additional $1.51 trillion in deficit spending over the next ten years, which is in line with the 2018 fiscal year budget passed by both chambers late last month. GOP lawmakers have said that they plan to pay for the cut in tax revenue in the future by cutting spending by $5 trillion over the next decade. 

Health industry leaders are closely monitoring the tax bill as it evolves. The originally released bill notably lacked a repeal of the health insurance individual mandate, which would face a serious uphill political battle. Inclusion of the mandate’s repeal was tempting to some Republicans, however, because it offered another $400 billion in savings due to projections that millions fewer people signing up for insurance and using government subsidies.  Chairman Brady said he expects to release another version of the bill early this week with substantial changes, and the authors of the bill have reportedly asked congressional scorekeepers for an updated cost estimate of the provision.

The addition of a repeal of another popular healthcare policy, the orphan drug tax credit, was slammed by advocates for rare diseases. Starting in 2018, the repeal would get rid of a tax credit meant to spur research spending on treatments for rare diseases. Additionally, the tax bill would repeal the medical expense deduction, which is used most often by patients, spouses, or children who have high medical expenses or face long-term care. Under current law, individuals can deduct the amount of total medical expenses that exceed 10 percent of their gross adjusted income.

The bill now heads for the legislative process, with Chairman Brady aiming to start a markup of the package in the House Ways and Means Committee at noon today. GOP leaders are aiming for the measure to pass the House by Thanksgiving – a breakneck pace that is likely to test party unity. Following the markup, leadership is hopeful that the bill will be considered on the House floor the week of Nov. 13. At such time, a proposal from the Senate Finance Committee is also expected to be unveiled and marked up, which could put some of the contentious changes proposed by the House GOP in flux.

House Passes Bill Extending Funding for CHIP, Community Health Centers, Public Health Programs

Friday morning, the House of Representatives voted 242 to 174 to pass H.R. 3922, the CHAMPIONING HEALTHY KIDS Act, which renews funding for the Children’s Health Insurance Program (CHIP), Community Health Centers (CHCs), and additional public health programs, and eliminates Medicaid Disproportionate Share Hospital (DSH) cuts in fiscal year (FY) 2018 and FY 2019. The bill also contains $1 billion to address Medicaid shortfalls in Puerto Rico and the Virgin Islands.

Despite partisan disagreement on the proposed offsets in the bill, 15 Democrats voted yes with Republicans: Representatives Ami Bera (CA), Salud Carbajal (CA), Lou Correa (CA), Jim Costa (CA), Henry Cuellar (TX), Ron Kind (WI), Dan Lipinski (IL), Dave Loebsack (IA), Stephanie Murphy (FL), Tom O'Halleran (AZ), Collin Peterson (MN), Jacky Rosen (NV), Brad Schneider (IL), Kurt Schrader (OR), and Kyrsten Sinema (AZ). Three Republicans voted no: Reps. Justin Amash (MI), Thomas Massie (KY), and Andy Biggs (AZ).

The offsets objected to by most Democrats include provisions that would reduce federal subsidies for seniors on Medicare earning more than $500,000 per year, roll back the ACA’s grace period requirement for late payment of premiums, and make cuts to the Affordable Care Act’s Prevention and Public Health Fund. The Senate has yet to adopt offsets for its bipartisan CHIP renewal bill. Because negotiations on the House side to amend the offsets yielded no agreement, it is looking more likely that a final package may not advance until December.

CMS Releases Revised Medicaid Demo Policy Removing 'IMD Exclusion'; WH Opioid Commission Issues Final Report

The Centers for Medicare and Medicaid Services (CMS) announced an updated policy intended to improve Medicaid beneficiaries’ access to treatment for opioid use disorder (OUD) and other substance use disorders (SUD) under existing section 1115 waiver authority. A copy of the letter sent to state Medicaid directors (SMDs), outlining ways to address the opioid epidemic, is available here. With this announcement, CMS announced the approval of demonstrations in New Jersey and Utah, leveraging this expanded authority. Under the revised Medicaid policy, the administration seeks to provide states greater flexibility to serve Medicaid beneficiaries with OUD and SUD, including to Medicaid enrollees in residential treatment facilities, thus removing the decades-old “IMD exclusion,” which previously precluded federal Medicaid payments for inpatient psychiatric care to institutions of mental disease (IMD) with more than 16 beds.

To leverage the revised Medicaid waiver authority, CMS notes that “states should indicate how inpatient and residential care will supplement and coordinate with community-based care in a robust continuum of care in the state.” States will still be subject to existing budget neutrality requirements pursuant to section 1115 waiver authority. Toward that end, CMS encourages states to “maintain their current funding levels for a continuum of services,” and that the new policy is not intended to “reduce or divert state spending on mental health and addiction treatment services as a result of available federal funding for services in IMDs.” Additionally, CMS reiterated its desire to help states streamline the waiver process and will continue to provide support to states, via the Medicaid Innovation Accelerator Program (IAP), to design their treatment delivery systems.

Further, CMS’ announcement parallels the final report released by the President’s Opioid Commission last week and follows the declaration by the President that the opioid epidemic be considered a nationwide public health emergency (details). The Commission, Chaired by Republican Governor Chris Christie (R-NJ) (members), outlined a set of 56 recommendations in the areas of federal funding; prevention; treatment, overdose reversal, and recovery; and research and development (R&D). Specific policies included increased use of drug courts, enhanced training for doctors, a national media campaign, and penalties for insurers who resist offering coverage for addiction treatment, although they notably lacked a specific request for additional funding. Instead, the commission asked that Congress allocate “sufficient funds” and encouraged the White House drug czar’s office to review federal funding on the issue.

Hatch, Brady Release Text of Temporary CSR Agreement

Following the announcement of a bicameral Republican proposal to address uncertainty in the Affordable Care Act (ACA) marketplaces, Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Ways & Means (W&M) Chairman Kevin Brady (R-TX) released legislation (S. 2052/H.R.4200) encompassing these provisions last week. As previously announced, the Healthcare Market Certainty and Mandate Relief Act would provide federal funding for the ACA cost-sharing reduction (CSR) subsidies through 2019 coupled with structural reforms to the ACA. Consistent with the parameters of the initial agreement, the legislation stipulates that CSR payments to issuers would be precluded if the issuer of the qualified health plan (QHP) includes abortion coverage, except in certain recognized cases – clearly a non-starter among Congressional Democrats. Additionally, the legislation delays implementation of the ACA individual mandate until 2021 and provides retroactive relief from the employer mandate (from 2015-2017). The legislation also expands health savings accounts (HSAs) by increasing the maximum contribution limit.

In releasing the legislation, Chairmen Hatch alluded to the stalled bipartisan Alexander-Murray discussions, noting that “[r]ecent proposals to address the individual markets do not have the support needed to clear both chambers of Congress and become law.” However, Hatch contended that his bill provides a “bicameral approach” that “should be considered in ongoing discussions about how to come together to replace our nation’s flawed health law.”

House Approves Bill to Repeal IPAB, 307-111

On Thursday, House lawmakers approved a bill (H.R. 849) that would repeal the Independent Payment Advisory Board (IPAB) on a bipartisan 307-111 vote. The IPAB was established as a cost cutting mechanism embedded in the Affordable Care Act that was required to submit Medicare spending plans to Congress if projected spending growth were to exceed specified targets. While the IPAB’s members have never been appointed because the spending threshold that would trigger its activity has not been crossed, repeal of IPAB has long been a Republican goal. The bill faces an uphill battle in the Senate, where it will need eight Democratic votes in order to avoid a filibuster.