Health Policy Report (11/15)

November 15, 2021

Capitol Hill Update

Congress will resume legislative business this week as House Democrats anxiously await the Congressional Budget Office’s (CBO) score on the $1.75 trillion reconciliation package. While analyses for certain parts of the Build Back Better Act (BBBA) — including the ScienceHomeland SecuritySmall Business, and Veterans’ Affairs Committee Titles — were released late last week, CBO cautioned lawmakers that a full score of the measure “will take longer.” As such, it remains to be seen whether the nonpartisan budget analysts will complete their work in time for a vote this week in the House, as centrist Democrats have expressed uneasiness about moving forward absent time to digest a full cost estimate.

Meanwhile, the Senate will meet this week to kick off consideration of the fiscal year (FY) 2022 National Defense Authorization Act (NDAA) as Congress works through its lengthy to-do list of year-end priorities. In a “Dear Colleague” letter to Senators over the weekend, Majority Leader Chuck Schumer (D-NY) stated that the Senate could tack on the U.S. Innovation and Competition Act (USICA) as an amendment to the annual defense policy bill. The bipartisan legislation — which would provide roughly $250 billion for technology research and innovation programs at the Department of Energy and National Science Foundation (NSF) — has been on ice since its passage [68-32] in the upper chamber earlier this year due to disagreements in the House. Additionally, the Senate will resume its work clearing President Joe Biden’s pending nominees, starting with Graham Steele’s nomination to be Assistant Secretary of Treasury.

Califf Tapped to Head FDA

Janet Woodcock has been the acting commissioner of the Food and Drug Administration (FDA) for over eight months, leaving the FDA without a permanent leader. As the November deadline approaches to tap a permanent head of the agency, President Biden has officially selected Robert Califf to serve as the agency’s chief. Califf is a cardiologist who served as FDA commissioner for less than a year towards the end of Barack Obama’s presidency and served as deputy commissioner of the FDA’s Office of Medical Products and Tobacco. Since leaving the public sector, Califf has advised Google’s Verily Life Sciences and is focused on combatting chronic disease. Over this past summer, he also pressured the Biden administration to increase its participation in the global vaccine response due to public health impacts on the U.S. public health. Califf’s supporters tout his experience with clinical trials and note that he would speed up the authorization of new COVID testing, shots, and other supplies and treatments. 

While the administration has officially chosen Califf to lead the agency, his nomination is not guaranteed. During his confirmation process under the Obama administration, lawmakers including Sens. Joe Manchin (D-WV) and Bernie Sanders (I-VT) voted against his nomination due to Califf’s purported ties to pharmaceutical companies. Many stakeholders agree that Califf’s corporate relationships are an issue, arguing that many other highly qualified physicians without controversial relationships are readily available. However, the White House is hoping to counter marginal resistance among Democrats with Republican votes, many of whom see Califf as an experienced, level-headed choice.

CMS Repeals Trump-Era Innovative Technology Rule

On Friday, the Centers for Medicare and Medicaid Services (CMS) repealed a Trump-era final rule (rulepress release) that would have granted Medicare coverage for all medical devices designated by the Food and Drug Administration (FDA) as “breakthrough” technology. Under the previous rule finalized in January 2021, qualifying devices would have been covered under a new coverage pathway for four years to build evidence of their value, after which manufacturers would seek local coverage determinations (LCD) or a national coverage determination (NCD) for qualifying devices. However, the Biden administration rescinded the rule last week due to concerns that FDA market authorization studies would not consider nuances within the Medicare population. Notably, the final rule clarifies that, despite the finalized repeal of the Medicare Coverage of Innovative Technology (MCIT) and “reasonable and necessary” (R&N) rule, coverage of breakthrough devices is not prohibited.

The Trump-era rule also clarified the definition of “reasonable and necessary” under Medicare Parts A and B to determine coverage of services necessary to diagnose or treat injuries. While the rule had maintained the R&N definition in CMS’s Program Integrity Manuel, it expanded the definition to consider commercial insurers. The Biden administration’s repeal of the rule also includes a repeal of the R&N definition due to concerns that the updated definition would create persistent implementation and appeals process hurdles. While the Trump-era final rule was originally set to be effective on May 15, 2021, President Biden then issued a regulatory freeze to review several Trump-era rules, spurring the decision to reconsider the rule and delay it until December 25, 2021. This new action fully repeals the changes to the R&N definition made by the prior final rule.

FDA’s Breakthrough Devices Program expedites the development of medical devices that: (1) provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions; and (2) represent breakthrough technology, offer significant advantages over alternatives, whose availability is “in the best interest of patients,” or have no alternatives. CMS proposed and finalized this rule to comply with President Trump’s October 2019 Executive Order, which called for making coverage of breakthrough medical devices widely available.

While CMS finalized its repeal of the January 2021 final rule, the agency is considering future policies and potential rulemaking to provide improved access to innovative technologies. The agency specified that it plans to initiate several coverage process improvements either via future rulemaking and/ or sub-regulatory guidance. CMS stated that this would include a partnership with the FDA’s Agency for Research and Quality (AHRQ) to: (1) consider updating the Coverage with Evidence Development (CED) paradigm study criteria and (2) explore options of expediting the NCD process.

In response to a request for information (RFI) included in the proposed rule, commenters suggested that CMS consider several items as it develops an alternative expedited coverage pathway (AECP). In the final rule, the agency stated its intention to address this issue in future rulemaking, adding that it intends to hold two stakeholder public meetings, at the minimum, in calendar year (CY) 2022 to inform future policymaking in this space. This final rule is set to take effect on December 15, 2021.

Stakeholders Push to Bolster Pandemic Preparedness in Reconciliation

As the Democrats’ ambitious social spending bill is pared back, lawmakers and industry leaders are pushing for more support to facilitate pandemic preparedness efforts. The White House initially requested $30 billion to support such efforts, though Democrats’ initial package from September was cut down to $15 billion in immediate funding, with a goal of spending $65 billion over the next several years. However, this funding was again subject to cuts in the most recent rendition of the package, and advocates are voicing their frustration that the new bill’s inclusion of $10 billion for pandemic preparedness in wholly insufficient to confront future threats. The $10 billion funding tranche includes $7 billion for general public health funding to address local health department resources and provide the Centers for Disease Control (CDC) with resources to update their technology systems and hire more staff. 

Health policy groups and cabinet officials are specifically disappointed with the remining $3 billion, which is intended for lab upgrades and working on vaccine development. Of that $3 billion, $1.3 billion can be allocated for the Biomedical Advanced Research and Development Authority (BARDA), a subagency within the Department for Health and Human Services (HHS) that specializes in vaccines, testing, and treatment. Stakeholders are arguing that research and development (R&D) to deploy vaccines, manufacturing personal protective equipment (PPE), and tracking efforts to detect emerging threats will be depleted. Several groups are calling for Congress to tack on an addition couple billion for BARDA.

Joining the call to increase funding is Rep. Ritchie Torres (D-NY) who has been a long-standing proponent of pandemic preparedness provisions in the Build Back Better Act, and Pandemic Preparedness co-chairs Reps. Lori Trahan (D-MA) and David McKinley (R-WV) recently introduced their Bolstering Infectious Outbreaks (BIO) Preparedness Workforce Act (H.R. 5602) to address workforce issues. Senate Health, Education, Labor, and Pensions (HELP) Chair Patty Murray (D-WA) assured concerned parties that there are additional paths to obtain more preparedness funding, including the appropriations process and new legislation that she is working on with Sen. Richard Burr (R-NC), which is rumored to be released before Christmas.

New Report Shows Skyrocketing MA Costs

A recent report has uncovered that Medicare Advantage (MA) paid plans an additional $106 billion from 2010 through 2019 due to inflated risk adjustments. Roughly $34 billion of that spending is from 2018 and 2019, according to the Centers for Medicare and Medicaid Services’ (CMS) public data. MA plans are a rapidly growing share of the Medicare population in which the plans are primary run by insurance companies. As the fastest growing Medicare alternative, the plans have nearly 27 million members, totaling 45 percent of the Medicare-eligible population. The industry asserts that MA plans offer additional benefits — including dental and vision coverage — to Medicare plans, hence to higher price tag. As such, stakeholders also note that beneficiaries are highly satisfied with their plans.

However, Democrats and policy analysts are skeptical of the cost burden on taxpayers, and the industry has received flak from several government agencies, including the Department of Justice (DOJ). Payment issues have been catching the attention of Democrats as some consider plans’ advertising efforts to attract more members. Critics worry that spending will continue to increase rapidly absent CMS action. Despite these concerns, any cuts to MA are destined to face strong opposition. Last month, 13 Senators, including centrist lawmaker Sen. Kyrsten Sinema (D-AZ) sent a letter to CMS urging the agency not to reduce any MA payment. The letter argues that reducing payments to plans will lead insurers to boost premiums and costs for services.

The deeper debate centers around complex payment methods used to calculate MA payments. Unlike traditional Medicare, MA plans use a risk score that pays out higher rates for sicker patients. Beneficiaries with more serious conditions equates more money for plans, with what some argue is insufficient oversight from CMS on the validity of the claims. In 2005, Congress directed CMS to adjust its risk score calculations to better align payments with traditional Medicare payments, and CMS set its adjustment at the statutory minimum in 2018. However, some stakeholders say that the adjustment is too low, pushing plans to innovate new ways to increase enrollees’ risk scores. Some coding strategies have triggered lawsuits against plans, and some warn that MA spending will increase by $600 billion from 2023 through 2031.

Reconciliation May Offset Hospital Losses in Medicaid Gap States

Bipartisan think tanks are arguing that the Build Back Better Act’s proposal to boost Medicaid funding in non-expansion states would benefit hospitals. The policy would increase subsidies to extend coverage, especially for the 12 states that have not expanded Medicaid for residents below the federal poverty level (FPL). If the bill passes, a new analysis estimates that hospitals in non-expansion states would receive over $6.8 billion in new funding for 2022, which is about 15 times larger than the bill’s $444 million in Medicaid disproportionate share hospital (DSH) allotment reductions. Net gains and losses would vary from state to state, ranging from Florida’s projected $1.6 billion increase to $750 million in Georgia.

Despite overall gains from the legislation, some hospitals and populations will not see benefits from the bill. Hospitals serving high numbers of undocumented immigrants could see larger cuts, and low-income enrollees in the marketplace will have to pay higher cost sharing rates. Additionally, state aggregate gains do not consider that subsidies will not inherently go to the hospitals with the largest cuts. Timelines for the provisions are also key to understand the bill’s impact. Notably, enhanced subsidies are set to expire after a few years, but proposed cuts would be permanent. However, combining the subsidies and cuts would increase the overall number of people covered by marketplace plans.

States Inquire About PHE Timeline

States are looking to prepare for a slew of policy changes that will take place upon termination of the COVID-19 public health emergency (PHE). Coalitions of state health officials sent a letter to HHS and Congress several weeks ago suggesting methods to taper the PHE, and Congress is working on a request to phase out enhanced federal medical assistance percentages (FMAP) funding via the Build Back Better Act. If states keep Medicaid beneficiaries continuously enrolled throughout the PHE, they receive a 6.2 percent FMAP boost. When the PHE ends, states will have 12 months to readjust their Medicaid enrollment, and the enhanced FMAP will expire at the end of the quarter in which the PHE is terminated. As such, many Medicaid directors are asking for the PHE to end on the first day of the quarter as to provide as much time as possible to transition off the enhanced FMAP.

The PHE was last renewed on October 15 and can be extended in 90-day increments. The Biden administration told states that the PHE would last through 2021, though the Congressional Budget Office (CBO) indicated that it will last through July 2022. State Medicaid directors are looking for HHS assurance that the PHE is highly unlikely to end before July 1, 2022, and they want states to have 90 days’ notice of termination, as opposed to the current 60-notice. Stakeholders note that without a reliable timeline, states will have a more difficult time planning for a transition back to regular operations, including staff trainings, rolling out information technology (IT) systems, and providing adequate assistance to beneficiaries about the changing rules. In another letter, many of the same state health advocacy groups are asking Congress to sever the FMAP termination for the PHE extension in order to provide the enhanced FMAP for an additional year following the end of the PHE.

MedPAC Holds November Meeting

On November 8-9, the Medicare Payment Advisory Commission (MedPAC) convened for its monthly public meeting (TRP summary). Commissioners discussed the downsides of the current methodology for how benchmark incentives for accountable care organizations are set. While they discussed alternative methods for updating these benchmarks, no consensus on an alternative was made. In a session on safety-net providers, commissioners generally supported the notion of redefining “safety-net providers” by using the populations being served as a factor in the definition. However, some Commissioners argued that a more accurate way of defining “safety-net providers” was to focus on uncompensated care.

Regarding telehealth, commissioners agreed with staff recommendations that more data on audio-only telehealth visits and utilization is needed. Commissioners also discussed areas of equity for telehealth, including: (1) ensuring equity between audio-only and audio-visual telehealth payments and (2) examining the in-person visit requirements for use of telehealth for treatment of behavioral health issues. In discussing payment rates across ambulatory settings, the Commission broadly supported the creation of acuity adjusted ambulatory payment classifications to set payments rather than by focusing on the ambulatory setting itself. Additionally, commissioners expressed interest in continuing to investigate ambulatory site-specific neutrality. In their last session for the month on Part D residents in long-term care (LTC) facilities, commissioners expressed their concerns over the quality of dispensing and medication management in Medicare Part D in both nursing homes and assisted living facilities. They suggested that certain medication management practices have been found to be inadequate in these facilities.