Health Policy Report

February 20, 2018

The Week in Review

A week that started with policy developments on immigration, the White House’s budget priorities, and infrastructure ended with a renewed push for gun control legislation and indictments in the Russia probe after a whirlwind news cycle in Washington. The response to the tragic school shooting in Parkland, Florida that claimed the lives of 17 students and staff on Wednesday continued through the weekend as gun control advocates hope that the most recent episode of gun violence will force Congress to take up the issue. While a few prominent Republicans — namely Senate Majority Whip John Cornyn (R-TX) and Finance Committee Chair Orrin Hatch (R-UT) — have offered some openness on the issue, it does not appear to be on the immediate agenda for lawmakers.

The most significant legislative action last week featured the promised floor time for immigration proposals after the issue led to a brief government shutdown last month. The quartet of plans all failed on the Senate floor on Thursday, sending Congress back to square one in negotiating a compromise to establish permanent legal status for the Dreamers in exchange for border security measures. The bipartisan plan pushed by Senate Minority Leader Chuck Schumer, Sen. Mike Rounds (R-SD), and Sen. Susan Collins (R-ME) came the closest to reaching sixty votes — falling six short on a 54-45 vote — while the President’s plan received far less support, failing 39-60. While the deferred action for childhood arrivals (DACA) program is set to expire Mar. 5, a nationwide injunction will bar the Trump Administration from immediately deporting individuals covered by the program.

The President’s budget was the initial focus at the beginning of the week as the White House laid out its priorities for the 2019 fiscal year.  Entitled “Efficient, Effective, Accountable: An American Budget,” the proposal calls for $4.4 trillion in topline spending and sticks to the Trump Administration’s other priorities by bumping defense spending to $716 billion in FY19, adding the $200 billion in infrastructure pitched by the White House, and including $18 billion between FY18 and FY19 for the construction of a border wall. While Presidents’ budgets are traditionally dead on arrival when they arrive at Capitol Hill, this year’s proposal is considered especially insignificant from a fiscal perspective as the budget deal that Congress passed only a few days before the release effectively mooted many of the budget’s topline figures.

Finally, the legal probe led by former FBI Director Robert Mueller into the Russian influence on the 2016 election indicted 13 Russian nationals as well as three Russian companies for engaging in a plot to disrupt the presidential election. Specifically, the charged individuals and companies are accused of running a sophisticated social media campaign to discredit Hillary Clinton to the benefit of then-candidate Donald Trump and Democratic primary challenger Bernie Sanders. However, as stressed by Deputy Attorney General Rod Rosenstein in a press conference on Friday, the indictment did not accuse of any Russian operatives for cooperating with officials in the Trump campaign. President Trump sent out a series of tweets over the weekend once again professing his innocence and the lack of any ‘collusion’ between the Russian effort and the Trump campaign.

The Week Ahead

Congress will be in recess this week in honor of the Presidents Day holiday yesterday. Both chambers return on Feb. 26, with four weeks to hammer out an omnibus funding bill before the next government funding deadline on Mar. 23.

White House Releases HHS' FY19 Budget Request

The White House has released their sprawling fiscal year (FY) 2019 budget request for the Department of Health and Human Services (HHS), detailing their legislative and regulatory priorities for next year. The 138-page document endorses the Graham-Cassidy “repeal and replace” bill, boosts spending to combat opioid abuse, and offers several proposals designed to reduce the cost of prescription drugs, among other major policy priorities. The President’s budget request is effectively a wish list of the White House’s policy agenda. While the Trump administration does have the latitude to enact certain reforms under their regulatory authority, the document will largely serve as a marker for partisan fights in Congress over various health care policy and funding priorities.

The budget proposal assumes the GOP will finally succeed in repealing the ACA, despite tepid interest from Republicans in Congress for taking another shot at the health care law. The 2019 budget proposal anticipates replacing the ACA with a plan similar to the one co-authored by Sens. Bill Cassidy (R-LA) and Lindsey Graham (R-SC), which relies on a system of state block grants. The plan would save the federal government approximately $680 billion over the next decade, the White House projects.

Closely tracking the proposals laid out last week by the White House Council of Economic Advisors, the budget proposal also outlines a package of drug pricing ideas that would save the government $5.72 billion over a decade —  a relatively modest sum — according to estimates by the Office of Management and Budget (OMB). While some of the ideas would save the government tens of billions of dollars, others would drive up spending, resulting in limited overall savings for taxpayers.

Additionally, the budget proposes billions of dollars in savings through changes to Medicare and Medicaid. The budget proposal would expand Medicare’s policy on site-neutral payments, in which providers are paid the same regardless of where they deliver care, saving taxpayers as much as $80 billion over a decade. Paying hospital-owned doctor practices the same as independent practices would save another $34 billion. The Trump administration also wants to “modify hospital payments for uncompensated care,” which it projects would save just under $70 billion. It also calls for changes in how Medicare covers bad debt, saving another $37 billion.

Additional details on the HHS budget request are outlined in the Department’s budget-in-brief document.

White House Budget Includes $10 Billion for Opioid Crisis

The White House’s FY 2019 budget proposal includes $10 billion in discretionary funding for HHS to fight the opioid crisis and outlines a number of policy changes in Medicare and Medicaid aimed at curbing drug abuse — part of a larger investment across government agencies to prevent and treat drug abuse. As detailed in the proposal, some of these funds would go toward a new grant program for Certified Community Behavioral Health Clinics (CCBHCs) to care for people with serious mental illness. The budget also includes proposes allowing Medicare to provide comprehensive coverage for substance abuse treatment and requiring Medicaid to cover all three FDA-approved medication assisted treatment options including methadone, buprenorphine and Vivitrol.

With respect to enforcement, the budget proposes to establish HHS reciprocity with the Drug Enforcement Administration (DEA) to terminate provider prescribing authority for doctors who improperly prescribe addictive painkillers. The budget calls for cracking down on high opioid prescribers and utilizers in Medicaid and would also require plans to participate in a program to prevent prescription drug abuse in Medicare Part D. Finally, the budget calls for all-but-eliminating the White House Office of National Drug Control Policy and shifting its key grant programs to different agencies. The proposal requests $17 million for the drug office, down from $368.6 million last year. Most of that drop would come from moving the High Intensity Drug Trafficking Areas grant to the Justice Department, and the Drug Free Communities Act to HHS.

Although many are applauding the inclusion of extra funding for the crisis by the administration, many have criticized its pairing with cuts in funding and services for the Medicaid program. They argue that the federal program is the major supplier of opioid abuse treatment, and cutting expansion and funding will inhibit any additional effort by the administration to fight the epidemic.

House and Senate Committees Question Azar on HHS Budget

This week the House Ways and Means Committee, House Energy and Commerce Subcommittee on Health, and Senate Finance Committee held a series of hearings to examine HHS’ budget request for FY 2019, featuring testimony from recently-confirmed Secretary Alex Azar. The wide-ranging hearings provided an opportunity for the Secretary to defend the Administration’s budget request, and for Members to highlight their pet priorities in the health care space — from ACA implementation, to prescription drug pricing, to entitlement reform.

In his prepared remarks, Secretary Azar outlined a Department-wide initiative, labeled ReImagine HHS, aimed at reforming HHS policies to make the Administration “more cost-effective and efficient” in delivering quality care and assistance to the American people. Further, the Secretary focused on how the budget would advance policies in addressing the opioid crisis, promoting patient-centered health care, strengthening services for American Indians and Alaska Natives, encouraging innovation in America’s health care future, addressing high drug prices, reforming the Department’s regulations, and generally focusing resources toward proven and effective initiatives.

Members’ questions covered a variety of health issues, often focusing on issues significant to their specific congressional district or even relating to individual constituents. Congressional Democrats expressed concern that the President’s proposed budget cuts essential health care programs while also adding to the deficit. Sec. Azar explained to several members how the budget would push health care reform through increased state flexibility in developing health insurance exchanges, and explained how policies from the Graham-Cassidy ‘repeal and replace’ bill could be incorporated. He also clarified that while the Medicare and Medicaid programs would receive some cuts in funding, the reforms included in the plan would ensure the programs remain “strong and stable” for future generations. Rural health care was also a common concern, particularly among Republicans, and Sec. Azar promised to work with members to explore how to better assist rural hospitals and health care providers.

Prescription drug pricing was also a hot topic as Sec. Azar took to the Hill last week, as several Democrats focused their questions on how the administration would follow up on promises made by President Trump. Members from all three committees questioned how changes to Medicare and Medicaid would incentivize drug manufacturers to bring prices down, and asked that the Administration do more to bring down list prices that impact spending for both public and private payers. Furthermore, Members questioned why Medicare price negotiation had not been included in the budget plan despite previous support from President Trump. Both Democratic and Republican members also asked what action would be taken against drug manufacturers or over-prescribing doctors “responsible” for the opioid crisis, as well as how the administration would incentivize non-opioid pain management therapies and practices.

Idaho Insurance Plan Would Skirt ACA Rules, Raising Legal Questions

Idaho Gov. Butch Otter (R) recently signed an executive order allowing insurers to sell plans on the individual market that don't comply with certain ACA consumer protections, raising questions from legal experts and drawing backlash from Democrats who say he is simply ignoring federal law. Blue Cross of Idaho became the first insurer to apply to file its plans under the controversial executive order, a move that could prompt legal challenges. The insurer submitted five ACA noncompliant health plans to Idaho insurance regulators that would impose a $1 million limit on claims per year and vary premiums based on a person’s health status.

Idaho's plan will serve an early test for how newly-minted HHS Secretary Alex Azar will enforce a federal law that he opposes. Pressed by Democrats on the Senate Finance Committee, Azar vowed to closely scrutinize Idaho’s plan, but he said it is too early to determine what action he might take. “There are rules, and there's a rule of law that we need to enforce,” Azar said in response to a question last week. Meanwhile, officials from the Idaho Department of Insurance indicated earlier this month that they had talked with Azar’s predecessor about their plans and have been in communication with agencies within HHS. They answered questions and received no pushback from the federal regulators so far, they said.

U.S. Spending on Health Care Estimated to Grow to $5.7T by 2026

A report from the HHS actuaries last week found that health care spending in the U.S. is projected to grow faster than the overall economy to $5.7 trillion in the next eight years. Spending is expected to increase 5.5 percent annually, one percent more than the projected growth of the overall economy, through 2026. Health care spending will make up 19.7 percent of all spending in the country, compared to 17.9 percent in 2016.

The HHS actuaries attributed the increase in spending to increases in cost for medical good and services for aging baby boomers. Pharmaceuticals are also expected to see the fastest growth, and will see an increase in spending by 6.3 percent annually. In the same report, HHS reported that the uninsured rate would increase due to the repeal of the Affordable Care Act’s individual mandate. The actuaries found that by 2026, 3.3 million Americans could become uninsured and assume that younger, healthier individuals will be the most likely to drop their coverage in 2019 when the repeal takes effect. CBO had projected 13 million additional people would be uninsured by 2026.