Health Policy Report (10/25)

Capitol Hill Update

Negotiations on floor action for both the bipartisan infrastructure deal and the Build Back Better Act (BBBA) are expected to continue throughout this week as Democratic leadership looks to broker a path forward on President Joe Biden’s legislative agenda. The White House is pushing an ambitious goal of floor consideration for both of these items at some point prior to the end of the week — especially given the looming October 31 deadline for federal surface transportation funding. While both moderates and progressives agree with leadership’s sentiment that they must act fast, it remains to be seen whether the two sides can resolve their differences ahead of this key deadline.

On the floor this week, House lawmakers are scheduled to consider a pair of measures that would: (1) reauthorize the Family Violence and Prevention Services program (H.R. 2119), and (2) address age discrimination in the job application process (H.R. 3992). However, additional legislative items could be taken up next week, according to Majority Leader Steny Hoyer (D-MD). Votes on the bipartisan infrastructure deal, BBBA, debt ceiling reform, and a short-term surface transportation funding measure stand out as key possibilities. In the upper chamber, Senators will continue their push to clear the queue of President Biden’s pending presidential nominations, starting with Douglas Parker’s nomination to be Assistant Secretary of Labor.

Reconciliation Framework Projected to be Released This Week

Stakeholders continue to wait with anticipation as Democrats deliberate a reconciliation compromise. After a whirlwind of White House meetings with lawmakers last week, the party inched closer to reaching an agreement priced at roughly $2 trillion, cutting $1.5 billion from the House Democrats’ $3.5 trillion package passed last month. A vortex of rumors are actively circling Capitol Hill as a slightly clearer picture begins to emerge. As of now, funding boosts for Affordable Care Act (ACA) subsidies, filling the Medicaid gap in non-expansion states, and home and community-based services (HCBS) are still included in the package.

Reports are also keenly focused on the debate over including vision, dental, and hearing benefits that are estimated to comprise a large portion of reconciliation spending in their current form. To ease the cost of dental coverage, President Biden has reportedly suggested the idea of a voucher-based benefit when he met with progressives last week. Specifically, he floated the idea of a program similar to flexible savings accounts (FSAs) that would provide $800 vouchers. Biden has also suggested that the Food and Drug Administration’s (FDA’s) newly proposed over-the-counter (OTC) hearing aid rule could negate the need for a comprehensive Medicare hearing aid benefit in the reconciliation package.

In an effort to squeeze ACA expansion into a new $2 trillion package, lawmakers are considering a three-year extension of American Rescue Plan Act (ARPA) tax credits as opposed the $3.5 trillion package’s proposed permanent extension. Democrats are still negotiating HCBS, which are currently funding at $190 billion and significantly shy of Biden’s original $400 billion proposal. Some sources are suggesting the HCBS funding could get a boost as negotiations continue, and Biden is relatively confident that the bill’s final language will eliminate the 800,000-person waiting list for HCBS, as well as increase workers’ wages and educational opportunities.

FDA Proposes Rule to Establish New Category of OTC Hearing Aids

On Tuesday, the Food and Drug Administration (FDA) issued a proposed rule (press release; TRP analysis) to establish a regulatory category for over-the-counter (OTC) hearing aids, allowing hearing aids within this category to be sold directly to consumers in stores or online without a medical exam or a fitting by an audiologist. The proposed rule implements a key provision of the OTC Hearing Aid Act, as enacted in the FDA Reauthorization Act of 2017 (FDARA), and proposes general controls and definitions for OTC hearing aids consistent with this statute. Specifically, the proposed rule would: (1) amend existing rules that apply to hearing aids for consistency with the new OTC category; (2) repeal the conditions for sale for hearing aids; and (3) set forth provisions surrounding state regulation of hearing aids. The Food, Drug, and Cosmetic (FD&C) Act, as amended by the FDARA, specifies that OTC and air-conduction hearing aids operate using the same technology and, in accordance with this fundamental similarity, the proposed rule would realign the existing classification regulations for hearing aids by sound conduction technology to meet the new proposed regulations. However, despite this change, the realignment would not affect the device class or premarket notification exemption status of any existing device. 

The proposed rule stipulates that the OTC category applies to certain air-conduction hearing aids intended for adults, aged 18 and older, who have perceived mild to moderate hearing loss. Alternatively, hearing aids for users younger than age 18, or those who experience severe hearing loss, would be classified as prescription devices, and will therefore be unavailable OTC. Additionally, the proposed rule includes certain device performance and design requirements and specifies labeling requirements for OTC hearing aids. Alongside the OTC category, the proposed rule offers related changes to the overall regulatory framework for hearing aids to harmonize existing rules with the proposed OTC category.   

FDA aims for this proposed rule, once finalized, to generate cost savings for consumers and ease their access to these products. FDA also assumes that the rule will increase costs for hearing aid manufacturers. In balancing the costs and benefits of the rule, FDA estimates roughly $62 million in savings per year regardless of the device’s discount rate.  In accordance with FDARA requirements, FDA also released updated draft guidance on Tuesday that will be updated to align with changes to the corresponding proposed rule. The guidance clarifies the differences between personal sound amplification products (PSAPs) and hearing aids — as well as their respective regulatory requirements — to alleviate stakeholder and consumer uncertainty. Specifically, it clarifies that hearing aids include air-conduction and bone-conduction devices and their various modalities. It also notes that hearing aids do not include cochlear implants or implantable middle ear hearing devices. Electronic products for non-hearing-impaired consumers are PSAPs and thus subject to different regulations, according to the proposed rule.  

The proposed rule is expected to generate opposition from a variety of stakeholders including audiologists, however, since FDA is proposing to use standards established by the consumer electronics industry to set the limits of OTC hearing aids. Specifically, in its proposed rule, the FDA is proposing a maximum output of 120 dB SPL without any gain limitations. These standards were designed for PSAPs and other consumer electronics for use by people with normal hearing, not hearing aids intended for patients with mild-to-moderate hearing loss.

Senators Push for Rural Health Funding Accountability

Lawmakers on both sides of the aisle are unhappy with how the Biden administration is distributing $8.5 billion in American Rescue Plan Act (ARPA) funding for rural providers. The ARPA language directs payments to providers based on the share of patients who live in rural areas, as opposed to the rurality of the provider. In a letter to Health and Human Services (HHS) Secretary Xavier Becerra last Wednesday, a bipartisan group of senators expressed concern that the rural health funding was being misdirected to large, city hospitals.

Specifically, the letter points out that ARPA directs HHS to dole out the money to providers in areas with a population of less than 500,000. They allege that the purpose of this wording allows the administration to ensure that small metropolitan areas serving large percentages of rural residents would be accounted for, not to provide funds for large hospital systems. Lawmakers pointed out that “Of the $178 billion in the PRF, just over 6% has been allocated directly for rural providers… far below their need, and the 20% of Americans they serve.” Large hospital systems — some of which bring in over $30 billion in revenue per year — plan to apply for funding from the $8.5 billion fund, while the recent letter to HHS notes that over 19 rural hospitals were forced to close in 2020.

HHS’ Health Resources Administration (HRSA), which is responsible for allocating the $8.5 billion, explained that the 500,000-population benchmark is not a requirement. A spokesperson for HRSA added that the legislation considers a provider to be a rural provider if it serves rural patients, regardless of the provider’s geographical location. The HRSA website outlines eligibility for the fund, which explains that eligible applicants, or at least one of its subsidiaries, must be located in a rural area or be within certain counties and take in public health care beneficiaries.

Lawmakers Express Concerns Over Surprise Billing Implementation

The Biden administration’s surprise billing rule is set to go into effect on January 1, 2022. However, some lawmakers are arguing that the interim final rule’s (IFR’s) dispute resolution process (TRP analysis) does not adhere to the No Surprises Act — the legislation instructing the Centers for Medicare and Medicaid Services (CMS) to draft the regulation. While some members are touting the rule as a key way to shave down health care costs for consumers, others are voicing concerns about the intent of the law compared to how CMS is executing their instructions. A rush of lawsuits is expected to flood the courts once the rule takes effect.

The No Surprises Act directs the arbiter of a medical bill to consider a range of factors when deliberating a final payment amount. However, the IFR instructs resolution entities to operate under the assumption that the qualified payment amount (QPA) — the plan or issuer’s in-network rate for the service — is the most accurate payment rate for the beneficiary. The onus is then on the biller to prove that the beneficiary should pay a higher cost. House Energy and Commerce Chair Rep. Frank Pallone (D-NJ) and Senate Health, Education, Labor, and Pension (HELP) Chair Patty Murray (D-WA) were happy with the arbitration rules outlined in the IFR, though HELP Ranking Member Bill Cassidy (R-LA), House Ways and Means Chair Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) want CMS to reconsider its position. The Ways and Means legislators are concerned that relying on in-network rates would mean that an arbitrator would automatically favor the insurer and could have ripple effects on insurers’ rate-setting indicators.

Furthermore, Ways and Means members Reps. Brad Wenstrup (R-OH) and Tom Suozzi (D-NY) are sending a private letter to the Department of Health and Human Services (HHS), the Department of Labor (DoL), and the Department of Treasury to advance their fellow committee members’ position that the agencies of jurisdiction should revise the rule to direct arbiters to consider all factors outlined in the No Surprises Act. Stakeholders — including hospitals and physician groups — are echoing these calls, with some urging the Biden administration to delay implementing the rule. Experts are wary that a lawsuit would be effective, though the IFR requested comment on many of the regulation’s components so a final rule could include changes. The final rule could be issued by the end of this calendar year.

Risk Adjustment Practices Scrutinized as MA Enrollment Opens

As Medicare Advantage (MA) plan enrollment continues to grow and accept new enrollees, criticism aimed at insurers had resurfaced. As more insurers enter the MA marketplace, private plans are being watched for their risk adjustment and diagnostic coding practices. MA beneficiary populations have doubled over the past decade, resulting in Medicare spending $7 billion more on MA compared to traditional Medicare. Some plans have been accused of leveraging coding practices to receive higher risk adjustment scores, in order to secure more generous Medicare subsidies and lower premiums for beneficiaries. Insurers have been pushing back on this narrative, however, highlighting the claim that MA plans offer a higher quality of care. Insurance stakeholders also point out that the improper payment rate in the MA program was found to be only 0.55 percent in 2020, which is one-tenth the improper payment rate in traditional Medicare.