Health Policy Report (10/17)

October 17, 2022

Both chambers of Congress will return to Washington after the November 8 midterm elections. The next votes in the House and Senate are scheduled to occur during the week of November 14.

HHS Extends COVID-19 PHE for Another 90 Days

On Thursday, Department of Health and Human Services (HHS) Secretary Xavier Becerraannounced an extension of the COVID-19 public health emergency (PHE) for an additional 90 days. Effective October 13, 2022, this extension marks the continuation of several temporary authorities afforded under the PHE, including continuous enrollment requirements, waivers of telehealth restrictions, and additional federal medical assistance percentage (FMAP) increases, among other items.

Former HHS Secretary Alex Azar issued a PHE declaration on January 27, 2020, for COVID-19 and renewed it four times until the administration changed. Secretary Xavier Becerra has renewed the PHE an additional seven times, including last week’s announcement. For more detail about Medicare- and Medicaid-specific flexibilities afforded under the COVID-19 PHE, read TRP’s Special Report outlining these provisions.

CMS Announces Medicare Drug Rebate and Negotiations Group

Last week, the Centers for Medicare and Medicaid Services (CMS)announced (TRP analysis) the reorganization of the Center for Medicare to establish a new Medicare Drug Rebate and Negotiations Group. This new group will run point on implementing several key policy provisions in the Inflation Reduction Act (IRA), including the Drug Price Negotiation Program and the Medicare Parts B and D Inflation Rebate Program. According to the notice, the group will be responsible for negotiating drug prices with manufacturers each year by identifying eligible drugs for negotiation.

This effort will require the group to create processes for: (1) entering into agreements with manufacturers; (2) collecting data; (3) calculating fair prices and ceilings; and (4) renegotiating prices. Regarding CMS’ inflationary rebate responsibilities, the Medicare Drug Rebate and Negotiations Group is instructed to “identify the universe of rebatable drugs,” identify drug prices rising faster than inflation, and track and invoice manufacturers’ rebates. More guidance and opportunities for stakeholder engagement regarding implementation are expected to be released in the coming weeks and months.

Biden Calls on CMMI to Lower Drug Prices, Explore Value-Based Care

On Friday, President Biden issued an Executive Order (EO) to “complement” health care policies in the Inflation Reduction Act (IRA). The EO directs the Department of Health and Human Services (HHS) to consider testing new health care payment and delivery models within the Center for Medicare and Medicaid Services (CMS) innovation center (CMMI). Specifically, HHS is tasked with identifying potential CMMI models that would lower the cost of prescription drugs and improve access to “innovative drug therapies.” President Biden’s EO also instructs HHS to examine the merit of models that would reduce beneficiary cost-sharing for drugs with high utilization and models that would support value-based payment (VBP) arrangements to improve the quality of care.

Some Democrats worry that manufacturers and other drug industry stakeholders may find pathways around IRA regulations, and the EO assuages those concerns by signaling the Biden administration’s commitment to keeping costs at bay through its executive power. Last year, CMMI Director Liz Fowler said that CMS would wait to act on new payment models until Congress passed its drug pricing package. Since the legislative package has a comparatively limited effect on Medicare Part B, some insiders suggest that Part B payment structure would be an obvious area for CMMI to address. The agency may also consider applying the $35 insulin cap to other drugs that treat chronic conditions. HHS has until December 12, 2022, to craft a report for the Assistant to the President for Domestic Policy in response to the EO.

Treasury, IRS Fix ACA “Family Glitch” to Improve Health Care Coverage Access, Affordability

Just after the Columbus Day/Indigenous Peoples Day break, the Treasury Department and the Internal Revenue Service (IRS) issued a final rule (TRP analysis; press release) that expands eligibility for premium tax credits (PTC) to assist individuals and their families in purchasing health insurance coverage through the Affordable Care Act (ACA) Marketplace. The “family glitch” refers to an interpretation of the ACA in which eligibility for PTCs to purchase market-based coverage is determined by the cost for the individual employee, not the employee’s family.

In addition to the standard comment collection process, the agencies held a public hearing to garner feedback on the proposed rule. In response to public input, the agencies finalized the family glitch regulations as proposed. Department of Health and Human Services (HHS) Secretary Xavier Becerra predicted that this regulatory change will improve health plan access and affordability for about one million U.S. residents. HHS is also considering targeted outreach to consumers ahead of the 2023 plan year.

CMS Previews Forthcoming Expedited Coverage Pathway for Medical Devices

Anarticle in the Journal of the American Medical Association (JAMA) last week outlined the Centers for Medicare and Medicaid Services’ (CMS) intentions to publish a rule in the next few months. The rule would stand up a voluntary coverage pathway for new medical devices as a means to expand upon the concept of “coverage with evidence development.” Industry stakeholders consider this forthcoming rule to be a long time in the making and are applauding the news. However, they emphasize that “the devil will be in the details” of the rule, and CMS officials have been making an effort to meet with medical device manufacturers and other industry stakeholders to craft the rule.

A previous Trump-era rule would have provided a medical device accelerated approval pathway, though the Biden administration pulled the rule due to safety concerns. CMS says that a new rule will center around some specific parameters: (1) manufacturer participation will be voluntary; (2) the rule will apply to devices specific to the Medicare population; (3) CMS will be allowed to conduct early evidence reviews, if requested by a manufacturer, before the Food and Drug Administration (FDA) authorizes a product; and (4) CMS can begin the coverage process before a product is FDA-approved. Notably, the JAMA article notes that CMS will work with manufacturers to determine the best coverage path for their product.

Economists Warn of Looming Health Care Inflation

As a result of rising inflation, some industry experts and economists warn of a potential spike in health care costs. They predict that pandemic-induced labor shortages and supply chain concerns may soon be reflected in health care costs for businesses, government, and consumers. Notably, the Federal Reserve Bank of Dallas recently estimated that health care inflation will double through mid-2023. While inflation in the health care sector has been relatively mild compared to other industries, economists explain that it can take a year or more for insurance plans to reflect rising costs. As labor costs rise, insurers are expected to factor these costs into their rates. The Committee on Responsible Federal Budget (CRFB) is concerned that the Inflation Reduction Act (IRA) — with drug pricing provisions intended to decrease consumer healthcare spending — may not be enough to cool costs.

Notably, the Consumer Pricing Index (CPI) is projected to show declines in health care spending over the next few months. If these economic projections come to fruition, rising health care costs could pose a threat to Democrats’ political goals. Some Washington-based think tanks expect employer-sponsored plans to become out of reach for employees, and some businesses may implement higher deductibles and cost-sharing requirements. Health care consumer advocates are also growing anxious about the perceived trend of rising costs, especially in the wake of the American Federation of Government Employees boosting premiums by 8.7 percent for their members in 2023. White House officials acknowledge the potential for a cost surge, but President Biden’s Council of Economic Advisers (CEA) says that even if a spike does occur, it will not last long.