Health Policy Report

September 11, 2017

Last Week in Review

The natural disaster in southeast Texas, and preparations for the now-arrived storm in Florida, forced a busy week from Congress in its return from the August recess as the body was forced to reckon with government funding and the debt ceiling weeks ahead of previously anticipated deadlines at the end of September. Surprisingly, this action took the form of a snap deal between President Trump and Democrat congressional Minority Leaders Nancy Pelosi (D-CA) and Chuck Schumer (D-NY) on a legislative package (a sweeping amendment to H.R. 601) providing a $15 billion down payment on Texas disaster relief and pushing back key deadlines for government funding, the debt ceiling, and the National Flood Insurance Program (NFIP) from the end of September to Dec. 8. The Senate passed the package on Thursday 80-17, with the House doing the same on Friday on a 316-90 vote.

Some conservatives opposed the deal as a concession to Democrats on funding negotiations, which will now likely take place early in the holiday season. Given that Democratic votes will be needed to approve any long-term debt ceiling or fiscal 2018 government funding bill, Republicans will be required to negotiate on contentious issues such as providing funds to continue implementing the Affordable Care Act (ACA), finding a permanent solution for illegal immigrants covered by the deferred action for childhood arrivals (DACA) program, and an inevitable second round of disaster relief funding. For this reason, even party leaders Senate Majority Leader Mitch McConnell (R-KY) and House Speaker Paul Ryan (R-WI) were reportedly frustrated with the President for signing on to the deal with little negotiation. While some hopeful political commentators have likely overplayed the deal’s predictive power for the President’s style of governance, his apparent newfound willingness to negotiate with Democrats — possibly including on ending the debt ceiling altogether — is sure to add another wrinkle to political considerations in the months to come.

The other major news of the week came on Tuesday, when Attorney General Jeff Sessions announced the Trump Administration’s decision to end the DACA program pending a six-month delay. The program has been attacked by some conservatives as an overreach of the executive branch’s “prosecutorial discretion,” but it has also received vigorous Democratic support as well as considerable backing from many in the Republican establishment, including Speaker Ryan who has said that “this is something that Congress has to fix.” Given that some Republicans support the program, the White House intentionally left a six-month window for lawmakers to create a legislative solution that may be able to protect the program in some form. Some observers are prognosticating that an immigration deal around the DACA program and funding for a border wall may be possible, but it would require the cooperation of Democrats who are wary of ceding any leeway to President Trump on immigration issues and viscerally oppose the notion of a border wall.

The Week Ahead

After striking a deal to avoid its biggest deadlines on government spending, the debt limit, and Hurricane Harvey relief, Congress should return to more typical business this week – although Hurricane Irma could present unexpected challenges. The Senate is due to consider the 2018 National Defense Authorization Act (NDAA) (H.R. 2810) setting the Pentagon’s funding and policy for the upcoming year. The bill — whose consideration was originally delayed due to Sen. John McCain’s (R-AZ) treatment for brain cancer — is set for a cloture vote this afternoon. As currently drafted, the NDAA exceeds the statutory budget caps instituted by the 2011 Budget Control Act (BCA), meaning that lawmakers must either strike a deal to repeal the BCA or increase the budget caps before the bill can become law. Democrats are likely to demand equal spending increases for nondefense programs in order to approve of either of those changes.

In the House, lawmakers are set to consider a series of immigration and homeland security related measures. One measure (H.R. 3697) that will be considered pursuant to a rule would amend the Immigration and Nationality Act making it easier for law enforcement officials to detain and deport illegal immigrants suspected of gang activity. After the DACA announcement last week, the immigration-related legislation is sure to cause some partisan controversy. The House may also continue its work on an eight-bill appropriations “minibus” (H.R. 3354) for fiscal 2018, although with an agreement to extend government funding until December now in place, the legislation will mostly serve as a partisan messaging exercise that can offer a few hints to what the bigger spending fight will look like in the months to come. 

Finally, in non-legislative news, the corruption trial for Sen. Robert Menendez (D-NJ) will continue in New Jersey as the two-term senator fends off allegations that he provided favors to a Florida ophthalmologist in return for political favors. The trial could dramatically reshape the political landscape in Washington if Sen. Menendez is found guilty as New Jersey’s current Republican governor, Chris Christie, would be able to name a Republican to the body. Given that significant legislation — such as the Republican plan to repeal and replace the ACA — has come down to the wire, even a single vote shift in the Senate’s composition could have significant consequences in terms of policy and politics before the 2018 midterm elections.  

Senate HELP Committee Holds First Two Hearings on Marketplace Stabilization

The Senate Health, Education, Labor and Pensions Committee (HELP) committee held two hearings last week on stabilizing the insurance marketplaces created under the Affordable Care Act (ACA) — the opening salvo in an effort that Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) leaders optimistically hope will result in a narrow package of legislation passing by the end of this month. At the second of the two hearings, governors from five states — Charlie Baker (R-MA), Steve Bullock (D-MT), Bill Haslam (R-TN), Gary Herbert (R-UT), and John Hickenlooper (D-CO) — testified before the Senate panel, calling on Congress to move quickly to stabilize the individual health insurance market and then embark on a serious effort to deal with skyrocketing health care costs. A key issue is the future of federal cost-sharing reduction (CSR) payments to health plans, which are used to help the insurers provide affordable coverage for low- and moderate-income families.

At Wednesday's hearing, Sen. Alexander laid out elements of a potential compromise. Under his proposal, Republicans would agree to continuing the CSR payments, while Democrats would agree to give states greater freedom to relax some ACA insurance requirements. Senior Republican aides said the subsidies could be funded for two years, in exchange for adding a less comprehensive "copper" plan option for people older than 30. Democrats have shown little interest in allowing states the flexibility, which could allow them to chip away at guaranteed essential health benefits — a key demand among Republican negotiators. Two +more HELP Committee hearings are set for this week — the first with health care experts and the second with a panel including doctors and patient advocates.

While Committee leaders are eager to strike a compromise that can move quickly through Congress, these challenging policy details and their short timeline portend an uphill battle in the weeks ahead. Further, GOP leadership aides signaled last week that a stabilization bill was unlikely to hit the floor this month, and conservatives in the House have been far less receptive than their counterparts in the upper chamber.

As Reconciliation Deadline Looms, GOP Senators Eye Final Push for ACA Repeal

Last Friday, the Senate parliamentarian ruled that Republicans face a September 30 deadline to repeal or overhaul the Affordable Care Act if they hope to rely on a fast-track budget measure known as “reconciliation” that requires only a simple majority in the Senate. The “repeal” effort has languished since July, despite President Trump’s call for Senators to keep trying. The parliamentarian ruled that the budget measure expires at the end of the month when fiscal 2017 ends, meaning any repeal effort beyond that date would need 60 votes to overcome a Democratic filibuster. Senate Republicans hold a Senate 52-48 majority and were using the special filibuster-proof process to overcome unified Democratic opposition. Now, if GOP lawmakers can’t revive the repeal measure in the next three weeks, they will be forced to work with Democrats to change it. It wasn’t immediately clear whether the parliamentarian’s announcement might prompt Republicans to make one final, desperate push on health care.

Attention may shift to a plan by Sens. Lindsey Graham (R-SC) and Bill Cassidy (R-LA) to block-grant federal health care funding to the states and keep many of ACA's taxes. That effort faces major obstacles, however: the bill isn't finished yet, there is no CBO score, and some Republicans are working with Democrats on a bipartisan plan to shore up insurance markets (see previous story).

Meanwhile, Congress returned to Washington last week to face a packed agenda including Hurricane Harvey aid, a temporary government-wide funding bill, and the need to raise the government’s debt-ceiling to prevent a default on U.S. payments and obligations. Plus, a package for Hurricane Irma relief looms on the horizon. Many in the administration and Congress are also eager to turn the focus to overhauling the tax code. Indeed, the GOP’s response to the parliamentarian's ruling was rather muted, adding to the sense that ‘repeal and replace’ is increasingly unlikely to pass in the foreseeable future. 

Hatch, Wyden Discuss CHIP Reauthorization at Senate Hearing

Republican and Democratic Senators agreed last week about the need to extend funding for Children's Health Insurance Program (CHIP), which covers roughly 9 million low- and moderate-income children. But a Senate Finance Committee hearing saw little discussion on how to resolve partisan disagreements about the program's details or how long to extend federal funding, which ends Sept. 30. States have repeatedly warned lawmakers that they may have to freeze enrollment or send termination notices to enrollees if funding is not renewed by the end of this month. Republican and Democratic committee aides say Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) want to move quickly on legislation, and Democrats made it clear that they want a multi-year funding extension. But partisan differences over the details and duration of funding could delay Congressional action to keep dollars flowing to the states for the popular $15 billion program. That could force some states, which soon will exhaust their federal allotments, to start winding down the program in the coming weeks and months.

The federal government covers the bulk of the costs for CHIP in each state. Since October 2015, the Affordable Care Act boosted the amount of federal funding states receive for CHIP by 23 percentage points. As a result, roughly a dozen states' costs are fully covered by the federal government. Witnesses at the Senate hearing stressed that states need assurances that federal funding won't lapse, including representatives from the Medicaid and CHIP Payment and Access Commission (MacPAC). Democrats want to continue enhanced federal CHIP contributions to the states authorized by the ACA. That increased federal matching rates by 23% through September 2019. But some Republicans want to end the enhanced federal match and the state maintenance-of-effort provisions. While many Republicans would like to restructure the CHIP program under a longer-term reauthorization, they face a more immediate political imperative to quickly renew funding. Senior aides say that may prompt GOP lawmakers to push for a reauthorization lasting just a year or two, rather than the five years recommended by MacPAC and other stakeholder organizations.

FDA Seeks Public Comments to Overhaul Agency Regulations

The Food and Drug Administration issued seven federal register notices Thursday, opening the door for regulated industries and interest groups to weigh in on a wide array of rules for prescription drugs, medical devices and biologics, among others. They issued four notices asking the public to identify regulations it could modify, repeal, or replace in response to President Trump’s push to cut federal regulations across the board. The FDA asked for input via individual notices for its drug, medical device and biologics offices, and issued another one for the rest of the agency. The FDA is seeking feedback from patients, consumers, healthcare providers, and the public, private, and nonprofit sectors.

The agency's actions could have significant ramifications for companies in the pharmaceutical, medical device, and biologics industries, since the comments will guide the agency in deciding which regulations to change or cancel and which to keep. FDA commissioner Scott Gottlieb said Thursday that he wants the agency to focus on updating regulations to help patients get quicker access to innovative products. Gottlieb said the FDA must also do more to monitor drug and device safety once they have been approved. The commissioner plans to provide more details about the FDA plans to make product development more efficient during a speech this week before the Regulatory Affairs Professionals Society and later this month at the National Press Club.