Health Policy Report

July 31, 2017

The Week in Review

There was no shortage of drama on Capitol Hill last week as the Republican plan to repeal and replace the Affordable Care Act (ACA) suffered another setback in a failed overnight vote on the Senate floor. Three Republicans joined all Democrats in voting down the so-called “skinny” repeal” that was designed to represent a least common denominator between the moderate and conservative wings of the Republican caucus. While the 49-51 defeat was a major blow for Senate Majority Leader Mitch McConnell (R-KY), it is unclear whether the majority party will be abandoning their tumultuous effort to reshape the nation’s healthcare system. A full breakdown on last week’s events is provided in the roundup below.

House lawmakers also had a busy week with approvals of a resolution to disapprove a recently finalized rule from the Consumer Financial Protection Bureau (CFPB), a national security “minibus” that marks the first foray into the fiscal 2018 appropriations process., and a renewed sanctions bill that targets North Korea, Iran, and Russia. The first of these measures (H.J. Res. 111), which would block the CFPB’s rule on mandatory arbitration clauses in consumer contracts, was passed on a near party-line vote 231-190. The second (H.R. 3219) — a bill that combines the traditional defense, legislative branch, military-construction, and energy and water appropriations bills into a single package — was also approved on near party lines due to Democrat objections over the inclusion of funding for a border wall between the United States and Mexico.

Finally, the Senate-passed sanctions measure (H.R. 3364) was approved by a near unanimous majority, despite some reservations from the White House over the restrictions the bill would place on President Trump to lift sanctions unilaterally. President Trump is expected to sign the measure into law.   

The Week Ahead

The Senate’s high-profile failure to pass a bill to repeal and replace the Affordable Care Act (ACA) will not change the chamber’s plans to stay in session for two weeks into its traditional August recess. On the floor, the Senate is expected to continue confirming presidential nominations, starting with a cloture vote on the nomination of Kevin Newsom to be a judge for the Eleventh Circuit Court of Appeals. Other legislative work possible in the Senate includes consideration of the Food and Drug Administration (FDA) reauthorization bill.

The House will be out to start the August recess with lawmakers expected to return after Labor Day on Sep. 5.

Committee action for the Senate will include a Senate Health, Education, Labor, and Pensions (HELP) Committee hearing on Department and Health and Human Services (HHS) nominations, including for the Assistant Secretary for Health, Assistant Secretary for Preparedness and Response, Assistant Secretary for Mental Health and Substance Abuse, Assistant Secretary for Aging, and the Surgeon General.

'Skinny' ACA Repeal Bill Fails 49-51

Senate Republicans failed to advance (49-51) The Health Care Freedom Act, their “skinny” Affordable Care Act (ACA) repeal bill, as a substitute to effectively replace the underlying health care legislation. Three Republicans — Sens. Susan Collins (R-ME), Lisa Murkowski (R-AK), and John McCain (R-AZ) — joined all 48 Democrats in opposing the amendment. The stunning defeat of the skinny repeal deals a major blow to GOP leadership’s efforts to repeal parts of the ACA. The measure was intended to reflect the consensus position among Republicans after it became clear that the GOP could not reach agreement on a comprehensive “repeal and replace” plan. Earlier last week, the Senate failed to advance respective bills to repeal and replace the ACA (the BCRA) and to repeal portions of the ACA after a two-year delay without any replacement (the ORRA).

Senate Republicans released the text of their “skinny” repeal bill, a substitute amendment known as The Health Care Freedom Act, just hours before the vote last Thursday night. Republican leadership framed the vote on the bill as an essentially procedural one – intended merely to move the process ahead to a House-Senate conference where, presumably, a more complete compromise would be hammered out. Indeed, to head off Senate speculation that the House might instead simply take up the Senate-passed bill and run with it, House Speaker Paul Ryan (R-WI) provided public assurances that the House would go to conference committee.

Major provisions of the Senate bill included: (1) permanent repeal of the individual mandate; (2) an eight-year repeal of the employer mandate; (3) enhanced state authority under 1332 waivers to opt out of key ACA regulations; (4) a three year delay on the medical device tax; (5) increased contribution limits to Health Savings Accounts (HSAs); (6) a one-year moratorium on Medicaid funding for Planned Parenthood; (7) cutting the Prevention and Public Health Fund; and (8) enhanced funding for community health centers. The Congressional Budget Office (CBO) estimated the bill would have produced $135.6 billion in budget savings, which met the targets under the rules of reconciliation.

Immediate next steps remain unclear, as it appears certain that Senate Republicans don’t have the 50 votes necessary to pass anything. Nonetheless, the White House and congressional Republican leaders may continue to seek a path forward to notch an elusive political win on health care reform.

Lawmakers Scramble on Health Care Amid Failure of 'Skinny' Repeal

While many lawmakers responded to the failure of the “skinny” ACA repeal bill with a renewed call for bipartisanship, key conservatives continue to seek a path forward through reconciliation. Shortly after Thursday’s late-night vote, Majority Leader Mitch McConnell (R-KY) returned the GOP health care bill to Senate calendar — a procedural maneuver to put the bill on hold — and opened up a call for ideas from Senate Democrats on how to move forward. “It'll be interesting to see what [Democrats] suggest as the way forward,” he said. Minority Leader Charles Schumer (D-NY), for his part, offered a conciliatory tone, calling for regular order and bipartisan work to repair the ACA.

A group of about 40 House members of the bipartisan Problem Solvers Caucus — most of which represent competitive House districts — is planning to release a plan today focused on stabilizing the insurance market and enacting ACA changes that have received bipartisan backing in the past. The Caucus, led by Reps. Tom Reed (R-NY) and Josh Gottheimer (D-NJ), is about evenly split between Republican and Democratic lawmakers. Among the proposals that are expected to be included in the plan: (1) funding for the ACA’s cost-sharing reduction (CSR) payments to insurers; (2) changing the employer mandate to apply to companies with more than 500 workers, rather than 50; (3) create a federal stability fund that states could use to reduce premiums; (4) repeal the medical device tax; and (5) additional guidance on how states can seek waivers from the ACA’s coverage rules.

Meanwhile, the White House has expressed some interest in a plan from Sens. Lindsey Graham (R-SC) and Bill Cassidy (R-LA) that would block grant federal health care funding to the states, keep much of the ACA’s tax regime, and reduce federal insurance regulations (while allowing states to keep the ACA’s rules if they prefer). President Trump met with Sens. Cassidy, Graham, and Dean Heller (R-NV) on Friday to discuss the proposal. Trump also reportedly held a meeting with House Freedom Caucus chairman Mark Meadows (R-NC), who said there are also discussions underway on incorporating respective proposals from Sen. Ted Cruz (R-TX) and Rob Portman (R-OH) in the plan.

Democrats Release Drug Pricing Plan 

Democrats released a three-part plan to lower the cost of prescription drugs in the United States last week.  The plan, called “A Better Deal,” will “crack down on the companies that excessively raise prices on American customers without justification.”  The plan notes that while examples of price increases have garnered recent press scrutiny, “they are illustrative of a concerning trend in the pharmaceutical industry.” The three initiatives are discussed below.

The plan would create an independent, Senate-confirmed “price gouging enforcer” who will be charged with investigating drug manufacturers who engage in “unconscionable price increases.”  The price gouging enforcer would be the Director of a new agency that would identify drugs that have “unconscionable” price increases and impose fines on the manufacturer “proportional to the size of the price hike.”  The money from these fines would be invested into the National Institutes of Health (NIH) for new cures research and development. The plan also would remove Medicare Part D’s statutory “non-interference” provision and allow the federal government to negotiate with prescription drug manufacturers in the Medicare Part D program.

Additionally, drug manufacturers would be required to submit to the Department of Health and Human Services (HHS) a justification for a “significant” price increase at least 30 days prior to the price increase taking effect.  The justification, which would be made public, would include individual factors that contributed to the price increase, as well as other factors such as the percent of total expenditures on research and development that came from federal funds and the total cost of marketing and advertising related to the specific drug.  A significant price increase for a drug would be defined as: A drug that is at least $10 and had a price increase of at least 300 percent over five years or 100 percent over one year; or a drug that falls within the top 50th percentile of drug spending in Medicare or Medicaid and had a price increase of at least 50 percent over five years or 15 percent over one year.

CMS Proposed Rule Outlines Medicaid DSH Allocation Methodology for FY 2018-2025

Last week, The Centers for Medicare & Medicaid Services (CMS) released a proposed rule delineating a methodology to implement the annual reductions to state Medicaid Disproportionate Share Hospitals (DSH) as required by the Affordable Care Act (ACA). The ACA set forth aggregate reductions to state Medicaid DSH allotments annually from fiscal year (FY) 2014 through FY 2020, and subsequent legislation delayed the start of these reductions until FY 2018. Under current law, these reductions will run through FY 2025.

During negotiations over the ACA, hospital lobby groups acquiesced to the cuts under the assumption that expanded coverage from the healthcare reform law would reduce the need for the funding, and cuts were originally delayed after hospitals complained that increased patient traffic wasn’t outpacing uncompensated-care costs as predicted. Last Thursday’s announcement sent shudders through the hospital sector since the industry feels the Medicaid DSH program provides essential financial assistance to the hospitals that care for the nation's most vulnerable populations. Aiming to lessen some of the blow, CMS said the formula used for the cuts is intended to ensure that DSH funds reach those providers with the greatest need for financial support.

Among other things, the rule would impose a smaller cut in low DSH states while larger cuts would be felt in states that have the lowest percentage of uninsured, states that do not target DSH payments for hospitals with high Medicaid volumes, and states that do not target DSH payments on hospitals with high levels of uncompensated care. Last April, the Medicaid and CHIP Payment and Access Commission (MACPAC) found that although uncompensated care costs have dropped by billions of dollars in recent years, hospitals serving uninsured and Medicaid beneficiaries still desperately need federal funding that's slated to be cut.