Health Policy Report

The Week in Review

The House and Senate both adjourned for the year after passing a four-week stopgap spending bill that will keep the government open until Jan. 19 and prevent $136 billion in automatic under congressional PAYGO rules. The Senate overwhelmingly rejected a proposal from Sen. Rand Paul (R-KY) on PAYGO to strip the language avoiding a potential sequestration, which would have been triggered in 2019 if President Trump were to sign the tax bill in January. Just eight Senate Republicans voted to enforce the PAYGO cuts, while every Democrat agreed to waive the pending sequestration. Although Congress was able to avoid a government shutdown, they failed to complete work on an $81-billion disaster aid package to help California, Gulf Coast states and Puerto Rico recover from wildfires and hurricanes, as lawmakers scrambled Thursday to wrap up business before a Christmas break.

The House and Senate both approved the Tax Cuts and Jobs Act (TCJA) last week, by votes of 227-203 and 51-48 respectively. President Trump signed the bill into law Friday after criticism from the press following reports he would sign the law after the holidays.

The Week Ahead

Following the passage of the short-term funding bill, the House and Senate have convened for the holidays. The Senate is scheduled to return on Wednesday January 3 and the House recently pushed back its start date to January 8. Key policy decisions will come to a head again in January, as lawmakers return to looming deadlines over: (1) disaster relief; (2) immigration reform and Dreamers; (3) government surveillance; (4) flood insurance; (5) children’s health insurance; (6) safety-net hospital and health center funding; (7) health care ‘extenders’, (8) Affordable Care Act (ACA) marketplace stabilization; and (9) ACA taxes. While lawmakers will be working toward an omnibus ahead of the Jan. 22 funding deadline, several health care programs will now expire at the end of March — setting up a second cliff that may serve as a vehicle for other legislative priorities.

Congress Approves Continuing Resolution Including PAYGO Waiver

Both chambers of Congress voted to approve a four-week stopgap spending bill last Thursday, sending a measure to the President’s desk that will keep the government open until Jan. 19 and prevent $136 billion in automatic under congressional PAYGO rules. The bill included a $2.85 billion short-term Children's Health Insurance Program (CHIP) extension through March 2018, as well as short term funding for other high priority health programs.

The bill also included short term funding (through the first two quarters of FY 2018) for certain high priority extenders, including: $550 million for Community Health Centers, $15 million for teaching health centers, and $75 million for the diabetes program.  The bill is offset through $750 million in cuts to the ACA’s Prevention and Public Health Fund. Additionally, a pair of bills intended to stabilize the Affordable Care Act’s (ACA) individual market, were not included for fear disagreement over the policies would lead to government shutdown.

The Tax Cuts and Jobs Act Signed into Law, ACA Individual Mandate Repealed

President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), a sweeping overhaul of the nation’s business and individual tax regime. Most of the changes in the law will impact tax filings for the 2018 calendar year. Both the House (224-201) and Senate (51-48) passed the final version of The Tax Cuts and Jobs Act (TCJA) last Tuesday. The final version the bill adheres more closely to the language initially passed by the Senate, but the conference agreement also incorporates key House provisions and makes several changes not in either bill.

Most notably, the TCJA included a repeal of the Affordable Care Act’s individual mandate beginning in 2019. Trump noted that the government had ““essentially repealed ObamaCare and promised Congress and the Administration would “come up with something much better.” Without the mandate, the nonpartisan Congressional Budget Office (CBO) estimated that 13 million fewer Americans will have health insurance in 2027 and premiums will rise 10 percent, but it also predicted individual insurance markets will remain stable “in almost all areas of the country throughout the coming decade.”

The bill also retained the Medical Expense Deduction at 7.5 percent of income for two years, to be increased to 10 percent of income beginning in 2020, and scales back the tax credit for orphan drugs. Additionally, the tax bill triggers across-the-board cuts to Medicare and other government programs, to at least partially offset the bill's increase in the deficit per PAYGO rules. The President had initially planned to sign the bill in January, which would have given Congress until the end of 2018 to avoid $136 billion in cuts under congressional PAYGO rules. But after lawmakers agreed to waive the application of PAYGO sequestration, President Trump agreed to sign the bill before his holiday trip to Mar-a-Lago.

Proposed Settlement Reached in Original CSR Payment Case

Recently, the Trump Administration, House of Representatives, and Democratic attorneys general from 17 states and the District of Columbia filed a proposed settlement agreement with the U.S. Court of Appeals for the District of Columbia Circuit in the case regarding the legality of the Affordable Care Act’s (ACA) cost-sharing reduction (CSR) payments. 

As background, the case began in 2014 when the House of Representatives sued the Obama Administration asserting that it was unconstitutional for the White House to fund CSR payments without an appropriation from Congress.  A federal District Court judge originally ruled in favor of the House of Representatives and the Obama administration appealed.  When President Trump took office, his administration placed the appeal on hold and subsequently ceased to fund the CSR payments.  In August, the U.S. Court of Appeals for the District of Columbia Circuit granted a motion by Democratic attorneys general in 17 states and D.C. to intervene in the case. 

The settlement proposes to vacate the previous ruling by the District Court and also would allow a separate lawsuit against the Trump Administration that was filed in October in California federal court to proceed.  That lawsuit, brought by 19 Democratic attorneys general, sought to compel the Administration to continue making the CSR payments.  In that case, the states’ request for a temporary injunction was denied. The settlement has no immediate impact on what will happen to the CSR program; that will be decided by the pending lawsuit in California and/or by Congressional action that could come as early as this week if CSR funding is addressed as part of the Continuing Resolution process.

Surge of Sign-Ups in Final Week of Open Enrollment Nearly Double Total Plan Selections for 2018, But Fall Short of Previous Year

The Centers for Medicare & Medicaid Services (CMS) has released a snapshot from the seventh and final week of 2018 Marketplace Open Enrollment in the 39 states using the federal Healthcare.gov platform. The snapshot reflects a surge of over 4.1 million plan selections between December 10 and December 15 alone, bringing the cumulative plan selections in Healthcare.gov states to more than 8.8 million – nearly double the cumulative 4.6 million selections totaled at the end of Week Six.

Despite the surge in the final week, 2018 plan selections fell about 400,000 short of the 9.2 million seen for 2017, in part due to this year’s abbreviated open enrollment period and significantly reduced federal funding for outreach and assistance; both of which were purposeful decisions made by the Trump administration. In the press release, CMS Administrator Seema Verma said that these changes were made to bring the open enrollment marketing budget “to a level similar to what has proven to be effective for other major programs, like Medicare,” and realigned the Marketplace with “standard employer and Medicare open enrollment periods and with the calendar year,” by offering a single effective date for coverage—January 1, 2018. Administrator Verma also applauded the smooth enrollment experience provided for customers, noting that the agency did not need to employ an online waiting room despite higher volume in the final days.

CMS noted that the plan selections reported in the Week Seven snapshot are not final, as they do not include sign-ups for consumers who enrolled in coverage through 3:00AM on December 16, or those who left their contact information at the call center due to high volume. The agency plans to release a detailed 2018 final enrollment report in March, including final plan selection data from State-based Exchanges that do not use the HealthCare.gov platform.

OIG Report Reveals 10 Misclassified Generics May Have Accounted for $1.3 Billion Lost in Medicaid Rebates

A report released last week by the Department of Health and Human Services (HHS) Office of Inspector General (OIG) found that manufacturers may have misclassified as many as 885 drugs in the Medicaid rebate program in 2016. Although this number only accounts for three percent of the approximately 30,000 drugs within the program, ten misclassified drugs could have resulted in up to $1.3 billion lost in base and inflation-adjusted rebates for Medicaid over the last four years. The highest total reimbursement came in 2016 from these drugs. Congress had originally asked the Office of the Inspector General (OIG) to look into drug misclassifications within the Medicaid rebate program due to outcry over rising EpiPen prices. Mylan had classified the drug and device as a generic under the program since 1997.

The Centers for Medicare & Medicaid Services (CMS) does not have the explicit legal authority to require manufacturers to change their classification, and instead must ask manufacturers to change their own data when they determine it may be incorrect. Additionally, CMS does not track or maintain a central database of potential errors or their resolutions. The report concluded that investigators had no way to determine which drugs CMS had identified as potentially-misclassified or what steps were taken to address the potential errors in data. By classifying their drug as a generic, manufacturers are able to obtain a lower base rebate and are not subject to penalties if their drug’s price increases faster than inflation.

A majority of the identified misclassifications were labeled as Generics under Medicaid, yet classified as brand-name drugs by the Food and Drug Administration (FDA). The report found that 54 manufacturers may have potential misclassifications, but four companies alone were responsible for up to 54 percent of the errors in classification. The report recommended that CMS follow up with identified manufacturers to determine the proper classification to be used, improve its Drug Data Reporting for Medicaid system to better track potential error, and pursue a means to compel manufacturers to correct inaccurate classification data.