Health Policy Report

The Week in Review

Last week, Senators failed to advance a sweeping supplemental disaster aid relief bill for states impacted by recent natural disasters amid a fight between Democrats and President Donald Trump over relief aid for Puerto Rico. Congressional Democrats have argued that the funding included for Puerto Rico's nutritional assistance program is inadequate in the Senate GOP’s measure, while the president has opposed sending any additional aid to the island, claiming, without evidence, that previous federal assistance to the island had been badly mismanaged. Negotiations on the disaster aid package will continue behind the scenes, however, it remains to be seen if lawmakers can reach a compromise.

Additionally, Senate Republicans advanced a rule change that effectively speeds up the presidential nominee confirmation process. Senate Majority Leader Mitch McConnell (R-KY) invoked the so-called “nuclear option” — a procedural move that allows certain measures to pass with a simple majority rather than a 60 vote threshold — to limit the post-cloture debate time from 30 hours to two for executive branch nominees and District Court judges. Democrats in the upper chamber vociferously opposed the rule change, criticizing Leader McConnell for eroding Senate norms and further polarizing the legislative process.

In the House, lawmakers passed a bill (H.R. 1585) that would reauthorize the Violence Against Women Act (VAWA). The lower chamber also passed a Democratic messaging resolution (H.Res. 271) opposing recent legal steps by the Trump administration to invalidate the Affordable Care Act (ACA).

The Week Ahead

Both chambers will reconvene for legislative business today prior to leaving for a two-week recess. In the House, Democratic leadership has teed up a bill (H.R. 1644) that would undo the Federal Communications Commission’s (FCC) repeal of the 2015 Open Internet Order. The bill — which cleared the Energy and Commerce Committee on a party-line vote following a contentious markup — is expected to pass the lower chamber but is considered dead on arrival in the GOP-controlled Senate.

Elsewhere on the House floor next week, lawmakers will consider the House Democrats' proposal to raise discretionary spending caps. The legislation provides for a $17 billion increase above FY 2019 budget caps for defense spending and a $34 billion bump above that level for non-defense. Consideration of the proposed budget caps deal comes in lieu of a budget resolution, which House Democrats have abandoned due to intraparty schisms over progressive priorities such as the Green New Deal and “Medicare for All.” 

In the upper chamber, Senators are expected to focus primarily on clearing the queue of presidential nominations, starting with consideration of Daniel Desmond Domenico to be a District Judge for the District Court of Colorado. A full list of the nominations up for consideration this week can be accessed here

Fight Over Health Care Pushed Past 2020

Last week, President Trump backed off his push for a GOP health care alternative to the Affordable Care Act (ACA) and stated a new health care law wouldn’t be priority before the 2020 elections. He tweeted that a vote will be taken right after the election, “when Republicans hold the Senate & win back the House,” and clarified that Republicans will always support coverage for people with pre-exiting conditions. Senate Majority Leader Mitch McConnell (R-KY) reportedly rejected a request from President Trump to have GOP lawmakers draft a comprehensive health care package during a phone conversation last Monday, and told colleagues he would prefer to play “defense” against Democratic proposals for “Medicare for All” than promote a new plan. Senate Republicans reiterated last week they will focus on legislation to lower prescription drug costs and promote association health plans in this Congress.

Adding to the lack of support for a new health care law, the House passed a resolution last Wednesday condemning the Department of Justice’s reversal of its stance on invalidating the ACA. Eight Republicans joined all but one Democrat in support of the measure. Republican Representatives voting for the measure included: Elise Stefanik (NY), John Katko (NY), Chris Smith (NJ), Tom Reed (NY), Brian Fitzpatrick (PA), Fred Upton (MI), Pete Stauber (MN) and Denver Riggleman (VA). Rep. Anthony Gonzalez (R-OH) voted present, and Democratic Rep. Collin Peterson (MN) voted with most Republicans against the resolution.

CMS’ Guidance Signals Intent to Launch Drug Rebate Proposal as Two-Year Demo

Just days before a comment period closed on a proposed rule to overhaul the prescription drug rebate system in the Medicare and Medicaid programs, the Centers for Medicare and Medicaid Services (CMS) issued new guidance to Medicare Part D plans outlining the agency’s nascent plan to launch a voluntary demonstration in calendar years (CY) 2020 and 2021. While the guidance from CMS is preliminary — stipulating that a demonstration will occur “if there is a change in the safe harbor rules effective in 2020” — it still sent a strong signal that CMS intends to finalize major elements of the proposed rule later this year. The demonstration could also have the effect of allowing insurers to keep premiums artificially low as the administration rolls out the rebate overhaul: the guidance indicates that taxpayers will cover the majority of the cost of premiums that are set too low for the first two years.

By way of background, the Trump Administration released a proposed rule in January to remove safe harbor protection under the Anti-Kickback Statute for manufacturer rebates on prescriptions drugs for pharmacy benefit managers (PBMs), Part D plans, and Medicaid managed care organizations. The proposal would instead create a new safe harbor protecting discounts offered to patients at the pharmacy counter — point-of-sale discounts — and establish new safe harbor protection for flat fees paid by drug companies directly to PBMs for their services.

Without the newly planned demonstration, the upcoming rebate rule would likely cause premiums to rise right before the 2020 presidential election — as traditional rebates have been used to keep premiums low. To offset that concern, CMS indicates they will help make sure insurers don’t raise premiums by letting them volunteer to participate in a pilot that narrows risk corridors from 5% to 0.5%. Plans currently get to keep up to 5 percent of revenue from bids that end up being higher than the cost of claims; conversely, they must eat up to 5 percent of the cost of setting bids too low. The demonstration would lower that risk corridor to 0.5 percent. Although that means insurers would have to return nearly all revenues from setting bids high, plans are much more worried about setting premiums too low if the administration follows through on the rebate rule.

Senate Passes House Medicaid Extenders, Reforms Bill

The Senate cleared a House-passed bill to extend popular Medicaid programs and put in place new reforms last Tuesday. The Medicaid Services Investment and Accountability Act of 2019 (H.R. 1839) passed the Senate by unanimous consent and is now headed to the President’s desk for his signature. The bill extends Medicaid’s rules allowing married couples to exclude certain income and assets from Medicaid eligibility requirements when receiving home- and community-based services, puts in place reforms on the Medicaid drug rebate system, and creates a new state option for health homes for children with complex medical conditions.

The legislation is very similar to a bill introduced late last year, the IMPROVE Act (H.R. 7217, 115th Congress), to extend several popular Medicaid programs and make other reforms. When the Senate failed to take up the House-passed bill, lawmakers introduced and passed a stripped-down version (H.R. 259) that extended the Money Follows the Person (MFP) demonstration through fiscal year (FY) 2021 and the spousal impoverishment rules through March 31, 2019. Spousal impoverishment rules have expired, but by passing this legislation in a timely fashion, Congress has prevented deleterious impacts to state Medicaid programs and their beneficiaries.

Included in the passed package of bills, the so-called Right Rebate Act expands Medicaid’s authority to penalize drug manufacturers suspected of misclassifying brand-name drugs as generics. HHS does not currently have the explicit authority to demand manufacturers reclassify their drugs or impose civil monetary penalties when caught with improper classification. The legislation would give states and HHS the power to impose capped civil monetary penalties for misclassification in the Medicaid drug rebate program, and recouped rebates would be used “to improve drug data reporting systems and oversight of manufacturer compliance.” Additionally, HHS will be given the power to correct misclassification if a manufacturer does not correct the issue itself within a timely manner of being notified. The legislation also requires that Congress receive a public report annually identifying misclassified drugs and the actions taken to correct each situation. In its report accompanying this legislation, the CBO estimated that the Right Rebate Act will save the federal government $77 million over ten years.

CMS Releases 2020 MA, Part D Rates and Call Letter

Last Monday, the Centers for Medicare and Medicaid Services (CMS) released its Medicare Advantage Rate Announcement and Call Letter for 2020. CMS is giving Medicare Advantage (MA) plans additional flexibility to provide supplemental, non-medical benefits to chronically ill beneficiaries. Furthermore, the agency is encouraging plans to increase beneficiary access to substance use disorder-related treatment, including lower cost-sharing for naloxone and co-prescription of naloxone. While CMS sought comment on prohibiting the inclusion of both generic and brand-name drugs on the same Part D formulary tier, it took no action but noted that it would continue to evaluate options for the future.

Each year, CMS releases policy and payment updates to Medicare Parts C and D through its Rate Announcement and Call Letter. CMS posted an Advance Notice of its rate announcement in two parts, the first in December 2018 and the second concurrently with a draft Call Letter in January 2019. Last week’s Rate Announcement and Call Letter are final for rate year 2020 and have incorporated comments collected on the Advance Notices and draft Call Letter. In its Advance Notice for plan year 2020, CMS had projected an average change in revenue of 1.59 percent for MA plans. Last Monday, it revised that estimate upward by nearly a full percentage point to 2.53 percent. This is a result of the projected growth percentages being revised upwards.