Health Policy Report

The Week in Review

The Senate’s version of a health care overhaul was released with a great deal of fanfare last week as supporters and detractors quickly tried to establish their positions on the bill. Four conservative Republican senators — Sens. Rand Paul (R-KY), Ron Johnson (R-WI), Ted Cruz (R-TX), and Mike Lee (R-UT) — announced that they are opposed to the bill in its current form; although they were sure to add the caveat that they are “open to negotiation and obtaining more information before it is brought to the floor.” Moderates have yet to commit to either supporting or opposing the bill, but several said they had concerns with the discussion draft, primarily related to its cuts to Medicaid. Sen. Dean Heller (R-NV) was the first moderate Republican last week to say he would not vote for the bill in its current form. A full roundup of the health care debate is included below.

Floor action this week was relatively muted, with the Senate clearing its nomination queue to prepare for possible consideration of the Republican health bill this week. Among the nominees confirmed were Brock Long to be Administrator of the Federal Emergency Management Agency (FEMA), Sigel Mandelker to be Under Secretary of Treasury for Terrorism and Financial Crimes, and Marshall Billingslea to be Assistant Secretary of Treasury for Terrorist Financing.

In the House, lawmakers passed a pair of measures designed to ease the construction of infrastructure. One measure (H.R. 1654) — passed 233-180 with only five Democratic votes —aims to streamline the permitting process for new water reservoirs and encourage federal agencies to improve coordination on water projects. The other environment bill (H.R. 1873) — passed on a relatively bipartisan vote of 300-118 — will streamline the processes for the removal of overgrowth near power lines on federal lands, ostensibly to improve grid reliability. The chamber also passed a series of suspension measures related to workforce development in coordination with the White House’s focus on apprenticeship and technical training. 

The Week Ahead

This week has the potential to be the most important of the year in healthcare, as the Senate could vote as early as Thursday evening on their version of a bill to repeal and replace major provisions of the Affordable Care Act (ACA). The accelerated timeframe may prevent opposition from coalescing and Republican Leadership may be encouraged by the flexibility inferred from the comments of concerned senators on both sides of the Republican spectrum. Leader Majority Leader Mitch McConnell (R-KY) will likely bring the bill to the floor soon after the release of the Congressional Budget Office’s (CBO) score, which is expected early this week. If Republicans can successfully get 50 votes — which is highly unknown at this stage — passage will likely send the bill back to the House, who could approve the Senate’s changes and get the legislation to the president’s desk before the August recess.

The House, on the other hand, will wade into the immigration debate this week with a pair of measures designed to help fulfill President Trump’s campaign promise of stricter immigration rules. One bill (H.R. 3003) — dubbed “Kate’s Law” in honor of a victim of a crime perpetrated by an undocumented immigrant — would enhance the punishment for immigrants that try to re-enter the United States after being deported. Another bill (H.R. 3004) would target sanctuary cities by requiring local officials to comply with federal orders and bar Homeland Security and Justice Department grants from cities that hesitate to cooperate with federal immigration officials. Both bills are highly partisan and were brought to the House floor without consideration in the House Judiciary Committee.  

Senate Republicans May Vote This Week on Newly-Released ACA Replacement

Senate Republicans unveiled their revisions to a House-passed health bill last Thursday, putting forward a draft that would phase out Medicaid expansion more slowly than the rival measure while imposing deeper cuts in future years for the program. The Senate version also calls for continuing the ACA’s insurance subsidies that help consumers with out-of-pocket costs through 2019 and creating a new approach for health care tax credits by 2020. It also would eliminate Planned Parenthood's Medicaid funding for one year and prevent some insurance plans from covering abortion. Leader McConnell appears intent on bringing the 142-page bill — known as the Better Care Reconciliation Act of 2017 — to the floor as early as this week, as the Congressional Budget Office (CBO) plans to deliver an estimate of the bill’s effects early this week.

The draft bill drew a lukewarm response from influential conservatives, while inflaming the concerns of major medical and consumer groups. Sens. Ted Cruz (R-TX), Ron Johnson (R-WI), Mike Lee (R-UT) and Rand Paul (R-KY) said in a joint statement they are not yet ready to vote for their chamber's bill — although they made it clear they remain open to negotiations. More moderate Republican senators also have qualms about the bill, which would considerably shrink the federal commitment to Medicaid. Those moderates who have been most vocal in their concerns include Sens. Susan Collins (R-ME), Lisa Murkowski (R-AK), Shelley Moore Capito (R-WV), Rob Portman (R-OH), and Dean Heller (R-NV). Leader McConnell's challenge will be to maintain the support of 50 of the Senate’s 52 Republicans to pass this bill under reconciliation.

Majority Whip John Cornyn (R-TX) said last week he expects negotiations to continue on the Senate draft until around Tuesday. Leader McConnell will then have to file the bill, setting it up for a series of votes Thursday, known as a vote-a-rama, and passage late Thursday evening or early Friday morning. Major hospital, physician, patient, and consumer groups oppose the bill, and have suggested that a range of patients could suffer from the bill's impact. Still, the White House will pressure reluctant Republicans to back the bill. Vice President Pence promised last week that congressional Republicans will, before they leave for their August break, pass a final version of a bill that would repeal and replace the 2010 health law.

Senate Bill Includes Changes to Insurance Reforms, Subsidies

The Senate health care bill released last week would take a more moderate approach on marketplace insurance than the House version, but is less generous than the current system. The Senate measure would adjust health insurance tax credits for income and geography beginning in 2020, in an approach similar to the ACA, which the House bill would not do. The Senate credits would be available for people with income of up to 350 percent of the federal poverty level, compared to 400 percent of the poverty level under current law. The Senate version also would allow marketplace insurers to cover fewer medical costs for consumers than under the health care law under proposed changes to the actuarial value (AV) requirements.

The bill also would create a long-term state innovation fund, providing $62 billion over eight years for states to help people pay for health insurance. The draft bill would provide $50 billion between 2018 and 2021 for a short-term fund to help stabilize marketplace insurance. That includes $15 billion in 2018 and 2019 and another $10 billion in 2020 and 2021 for the Centers for Medicare and Medicaid Services administrator to fund arrangements with insurers and states. Both the short-term and long-term funds would be drafted through the Children’s Health Insurance Program in order to carry Hyde Amendment protections that ban the use of federal funds for abortion except in rare instances. The bill also includes $2 billion in 2018 to support mental health and drug treatment — far below the $45 billion over 10 years that moderates are seeking.

The Senate draft does not include any provisions requiring individuals to maintain continuous coverage, as the House bill would, and Republican staffers have said they are still consulting with CBO and the parliamentarian about whether such a provision could be included under Senate rules. The House bill would require that individuals maintain insurance coverage or else they could be charged a higher premium. That would serve as an alternative to the current health care law’s mandate that most individuals buy insurance, which the bill would repeal. If the Senate bill is not changed to add a continuous coverage provision but the health law’s individual mandate is repealed, there are concerns that not enough healthy people will purchase insurance on the individual insurance market and that many will forego buying insurance until they absolutely need it.

Like the House proposal, the Senate draft would allow states to change the health law’s health benefit requirements. However, instead of creating a new waiver as the House measure would do through an amendment written by Tom MacArthur (R-NJ), the Senate bill would rely on the ACA’s existing Section 1332 waivers. Under the 1332 waiver in current law, states could not waive requirements requiring insurers to cover anyone who applied and charge sick people the same premiums as healthy people. The measure also would expand tax-preferred health savings accounts and repeal many of the taxes that helped pay for the ACA, including levies on medical devices, insurers, pharmaceutical companies, and capital gains for high-income earners.

Senate GOP Considers Slower Medicaid Expansion Phase-Out, Deeper Future Cuts

The Senate health care would also take a different approach to Medicaid than the House bill. CBO estimated the House version would lower Medicaid funding by $834 billion over a decade compared to current law, with these savings offsetting the cost of tax repeals. The Senate bill would start phasing out higher payments for the Medicaid expansion under the 2010 law in 2021. The phaseout would be complete by 2024 so that by then, states would receive the same lower federal matching rate for all consumers. The House bill aims, instead, to draw down the expansion population by 2020 by ending the enhanced federal funding for this group.

The House bill calls on the federal Medicaid program to look at spending for five groups, the elderly, disabled people, children, newly eligible adults and all other adults, and then use a measure of inflation known as CPI-M to set contributions. Under the Senate bill, the growth rate of the Medicaid per capita caps would be calculated similarly to what’s proposed in the House measure. But in 2025, the growth rate would slow to the consumer price index for urban areas — a proposal that would significantly curtail growth in federal spending, and could pinch state budgets, in those future years. Senate Republicans would let states choose an eight-quarter period between 2014 and September 2017 for calculations to base for future Medicaid payments, which gives states some flexibility in influencing their baseline. In contracts, the House bill sets 2016 as the benchmark. States also would have the option of seeking Medicaid block grants in a provision similar to the House bill.

The Senate draft also endorses states' options to impose a work requirement on adults who are considered able to work. CMS officials already are moving toward allowing such a work requirement through administrative action, even without a change in federal law.

CMS Proposes 'Slow Ramp-Up' In Year Two of MACRA Implementation

The Centers for Medicare and Medicaid Services (CMS) released a proposal last week to exempt more doctors from the performance measures of Medicare's new physician pay rule, delay measuring doctor performance on cost, allow doctors in small and rural practices to form “virtual groups,” award bonus points to the performance scores of doctors in small practice, and delay a required upgrade to physicians' electronic health record systems. CMS estimates about 94 percent of doctors will avoid penalties from the Merit-Based Incentive Payment System (MIPS) during the program's second year. “In this proposed rule, we continue the slow ramp-up of the Quality Payment Program by establishing special policies for Program Year 2 aimed at encouraging successful participation in the program while reducing burden, reducing the number of clinicians required to participate, and preparing clinicians for the CY 2019 performance period (CY 2021 payment year),” the rule says.

This is the first year that providers must report to the Quality Payment Program. CMS will base payment in 2019 on this year's performance. The changes CMS proposed Tuesday apply to next year, which will be the basis of pay adjustments in 2020. CMS includes several measures aimed at helping doctors in small- and medium-sized practices avoid penalties. CMS already exempted from MIPS doctors who either bill Medicare no more than $30,000 a year or see fewer than 100 Medicare beneficiaries, but providers say that low-volume threshold should be higher. Next year, CMS proposes increasing that threshold to $90,000 in Medicare charges or 200 Medicare beneficiaries.

Doctors in small practices also could seek exemptions from electronic health record requirements. Additionally, the agency proposes delaying a requirement to upgrade electronic health records for practices of all sizes, and the proposed rule calls for encouraging providers to upgrade to 2015 certified electronic health record technology by offering bonus points on performance scores of those that make the switch.

Providers in “advanced” alternative pay models (APMs) aren't subject to MIPS, though those models must include performance measures comparable to MIPS. Providers in alternative pay models receive a 5 percent bonus, and CMS said recently that it expects all providers in advanced alternative pay models to receive that bonus in the first year. CMS estimates it will dock fewer than 20 percent of practices with fewer than 16 physicians for poor performance — nearly all large practices are expected to avoid negative pay adjustments.

FDA Announces Plans to Address Drug Approvals, ‘Gaming’ by Drugmakers

The Food and Drug Administration (FDA) will create a “Medical Innovation Development Plan” aimed at lowering health care costs by facilitating development of drugs to treat costly rare diseases through improved adaptive trial designs and statistical tools, Commissioner Scott Gottlieb announced last week. At a hearing of the Senate Appropriations Committee, Commissioner Gottlieb offered insight into how the agency plans to continue operate under the President’s proposed Fiscal Year (FY) 2018 budget — which cut funding by $855 million — as well as addressing the opioid epidemic and prescription drug pricing. For example, he said within six months FDA will issue guidance on how the development of targeted drugs for rare disease can be simplified. Commissioner Gottlieb also said FDA will issue guidance on making clinical trials more efficient, and pledged to eliminate FDA’s backlog of treatments seeking orphan drug status.

Separately, the FDA announced it will hold a public meeting next month to investigate ways that federal regulations can be manipulated by brand-name drugmakers to impede generic competition from entering the market. The hearing, scheduled for July 18, is the latest step taken by Gottlieb to have the agency take a more active role in policing drug prices. “We know that sometimes our regulatory rules might be ‘gamed’ in ways that may delay generic drug approvals beyond the time frame the law intended, in order to reduce competition,” Gottlieb wrote in a blog post last week. He went on to raise concerns about how a branded drugmaker can take advantage of limited distribution networks or use the FDA’s Risk Evaluation and Mitigation Strategy to make it difficult for a generic drugmaker to access test samples they need to develop a copycat version of a branded treatment.