Health Policy Report

June 11, 2018

The Week in Review

A busy week in Washington came to a close as the House wrapped up its work last Friday on an appropriations “minibus” (H.R. 5895) that would authorize FY 2019 funding for Energy and Water Development, Military Construction-Veterans Affairs, and Legislative Branch (MilCon-VA) appropriations. House GOP leadership also worked to move forward with a White House plan to cut roughly $15 billion in leftover spending from the massive $1.3 trillion omnibus spending bill passed earlier this year. Prior to its submission, the rescissions package (H.R. 3) was revised by the administration to withdraw proposed cuts from Federal Highway Administration, the Environmental Protection Agency (EPA), and the United States Agency for International Development (USAID), while maintaining a $7 billion cut to leftover funding from the Children’s Health Insurance Program (CHIP). The measure cleared the lower chamber, however, the package faces long odds of approval in the Senate as Majority Leader Mitch McConnell (R-KY) has signaled little interest in moving the Trump-backed proposal.

Meanwhile, the Senate continued its work on the National Defense Authorization Act (NDAA) amid pushback from two conservative lawmakers on issues related to financial services and trade. Sen. Pat Toomey (R-PA) objected to starting debate on the bill (H.R. 5515) because he wants a vote on his amendment that would give the Committee on Foreign Investment in the United States (CFIUS) more power to clamp down on foreign investment in the U.S. by China and others that could pose national security risks. Further complicating matters in the upper chamber is a push from a bipartisan group of lawmakers — led by Sen. Bob Corker (R-TN) — for a vote on an amendment to the massive defense authorization bill that would block President Trump’s tariffs on allies. The result of these schisms is to postpone final passage of the NDAA to this week as lawmakers look to reconcile these issues. Prior to its work on the NDAA, the Senate will hold a confirmation vote on Kenneth Marcus to be Assistant Secretary for Civil Rights at the Department of Education.

The Week Ahead

When the lower chamber returns to work today, the focus will shift toward legislation aimed at combating the opioid epidemic. House Majority Leader Kevin McCarthy (R-CA) indicated that the chamber is set to vote on a series of bills over the course of the next two weeks that seek to address the epidemic in a variety of ways. The House currently has two opioid-focused bills listed for consideration this week, including: (1) a bill (H.R. 2851) that would amend the Controlled Substances Act to clarify how controlled substance analogues are regulated; and (2) a bill (H.R. 5735) that would facilitate more section 8 housing vouchers for supportive and transitional housing for individuals recovering from opioid use disorders.

The House is also poised to contend with a contentious immigration debate after Speaker Paul Ryan (R-WI) was able to temporarily quell an intraparty insurrection on the issue. Speaker Ryan vowed last week in a closed-door meeting with members to put pen to paper on a compromise bill that would seek to appease centrists pushing for a solution to the Deferred Action for Childhood Arrivals (DACA) program, and conservative hardliners who want increased funding for border security and reforms to existing statutes on family migration and the visa lottery. Under the obscure rules of the immigration discharge petition, the centrist group has until June 12 to gather the 218 signatures needed to force the issue to the floor. Leadership is currently operating under the petition’s June 12 deadline to present a deal to members.

Meanwhile, the Senate stands adjourned until 3:00 pm today. When it returns, the upper chamber will look to move to full consideration of the National Defense Authorization Act (NDAA) (H.R. 5515) by voting on a procedural motion that would end debate on the motion to proceed. The Senate is expected to spend the lion’s share of its work week ironing out the details of the massive defense authorization bill, including possible consideration of amendments that would: (1) give the Committee on Foreign Investment in the United States (CFIUS) more power to clamp down on foreign investment in the U.S. by China and others that could pose national security risks; (2) restore the Commerce Department’s penalties on the Chinese telecommunications firm ZTE for violating U.S. sanctions against Iran and North Korea; and (3) reign in tariffs implemented by President Trump on U.S. allies.

DOJ Refuses to Defend ACA in Lawsuit from 20 GOP-Led States

The Department of Justice (DOJ) has declined to defend the Affordable Care Act (ACA) from a challenge by 20 GOP-led states, and instead asked a Texas court to invalidate many of the law’s key insurance reforms, including its prohibition against discriminating against persons with pre-existing conditions.. Experts suggest that the case does not put the ACA in significant jeopardy, but have emphasized that the decision raises significant questions about the integrity and politicization of the Justice Department. A brief released last week by DOJ argues that the individual mandate will be unconstitutional once the GOP’s tax bill — which zeroes out the penalty for not having insurance — goes into effect, and that the mandate cannot be severed from the ACA’s provisions requiring coverage of individuals with pre-existing conditions and the ban on health insurance underwriting. Meanwhile, 17 Democratic attorneys general have been granted permission to intervene as defendants in the case, and argue in a separate brief that the removal of the penalty does not invalidate the tax authority, and even if it did, the remaining law is severable.

In the case, the 20 GOP officials argued that the Supreme Court’s decision to uphold the individual mandate relied on Chief Justice John Roberts’ belief that it was constitutional under Congress’ taxing authority. Therefore, they argue, since Congress removed the penalty for failing to get coverage, there is no longer a tax so the mandate is unconstitutional. Additionally, they argue the mandate cannot be severed from the other parts of the law and therefore the whole ACA should be thrown out. Notably, the Justice Department reasoned that only the law’s key insurance reforms are inseverable from the individual mandate. While most legal analysts suggest that the decision does not pose an immediate threat to the ACA, the decision will inevitably create additional uncertainty for the insurance industry as they prepare their 2019 Exchange offerings. “Of all the things [the administration has] done to destabilize the market, this may be the worst,” said health law scholar Tim Jost. The case does have the potential to reach the Supreme Court, where top legal analysts suggest that the ACA’s critics present a flimsy case. Still, Texas has filed the lawsuit in a very conservative federal district court, and lawsuits challenging the ACA have found purchase with conservative jurists in the past.

The legal arguments underpinning the case will test the legal concept of “severability”: If one provision in a law is invalidated by a court, can the rest of it stand without it? Texas is arguing that the individual mandate is so central to the ACA that, if it is unconstitutional, then the rest of the law is too. Courts usually decide that question by looking at Congress’s intent — and legal scholars suggest that this is where DOJ’s position falls apart. In fact, Congress passed the tax legislation repealing the individual mandate and leaving the insurance protections in place. So, as legal scholars have emphasized, Congress intended in the tax bill to eliminate the mandate penalty while keeping the ACA’s insurance reforms. In reacting to the decision, stakeholders have largely been shocked while legal scholars have resoundingly criticized the Justice Department for failing uphold their constitutional responsibility to ensure that laws are faithfully executed. The Justice Department almost always defends federal laws when they’re challenged in court. Its departure from that norm in this case is a major development — to the point that three career DOJ lawyers removed themselves from the case as the Department announced this shift in its position.

Schumer Urges Republicans to Embrace Bipartisan Health Reform During August Work Period

Senate Minority Leader Chuck Schumer (D-NY) sent a letter last week to Senate Majority Leader Mitch McConnell (R-KY) Wednesday pushing Republicans to use its cancelled August recess to focus on health care reform ahead of the November midterms. Sen. McConnell announced earlier in the week that in lieu of the traditional August recess the Senate would have one week in the districts followed by a three-week session in Washington. Sen. Schumer did not criticize the move to cancel recess, but instead urged the majority party to put the time “to good use” by considering Democrat-backed bills aimed at lowering health care costs. In contrast, Majority Leader McConnell has indicated Republicans plan to use the extra time to continue confirming Trump’s judicial and executive-level nominees and aims to pass as many appropriations bills as possible before the fiscal year ends at the end of September.

Ahead of the midterms, both parties are jockeying to amplify their respective messages. Democrats appear increasingly confident that their message on health care will resonate with voters, while Republicans are hedging that they will benefit from more time getting things done in D.C. Schumer’s letter signals Senate Democrats are prepared to focus on health care issues, whether they are physically in D.C. or in their home states during the month of August. Sen. Schumer listed the following initiatives included in Democratic bills as goals for Congress to enact during the August work period:

  1. Provide the Federal government with more tools to address the high and increasing cost of prescription drugs, including Medicare to negotiate the best possible deal on drug prices, creating a drug czar to stop outrageous price increases, implementing transparency requirements for manufacturers that raise prices, and ensuring that lower-cost generics are brought to market more fairly.
  2. Enhance subsidies — including tax credits and cost-sharing reduction (CSR) payments — to reduce what Americans pay for health insurance in the individual markets.
  3. Implement a national reinsurance program to lower individual market premiums across the board.
  4. Allow more people to access Medicare before they reach 65 years of age, while also strengthening and securing the program for current seniors.
  5. Incentivize the remaining 17 states to expand Medicaid and provide high quality, affordable coverage to more Americans.

CBO Issues Analyses of House E&C Opioid Legislation

The Congressional Budget Office (CBO) published a document estimating the impact of each of the 59 bills addressing the opioid crisis that were reported out of the House Energy and Commerce Committee on May 9 and May 17. CBO noted that its estimates reflect the “middle of a range of likely budgetary outcomes” and do not include the effects of interactions among the bills. The agency believes there would have been minimal impact on the estimates had they analyzed the proposals as a single piece of legislation. CBO further caveated its analyses by saying, “Because data on the utilization of mental health and substance abuse treatment under Medicaid and Medicare is scarce, CBO cannot precisely predict how patients or providers would respond to some policy changes or what budgetary effects would result.” In addition, several of the bills “would give the Department of Health and Human Services (HHS) considerable latitude in designing and implementing policies.” CBOs’ estimates come at a critical point as the House leadership works towards finalizing its strategy for the chamber to vote on opioid legislation this month. House leaders are solidifying which bills could be scheduled on the suspension calendar and how the remaining bills will be presented for consideration by members. In summary CBO’s analysis found that:

  • 20 of the bills would affect direct spending, making them subject to pay-as-you-go procedures.
  • 2 of the bills would affect revenues, making them subject to pay-as-you-go procedures.
  • Enacting H.R. 4998, the Health Insurance for Former Foster Youth Act, would increase net direct spending by more than $2.5 billion and on-budget deficits by more than $5 billion in at least one of the four consecutive 10-year periods beginning in 2029.
  • None of the remaining 58 bills included in the estimate would increase net direct spending by more than $2.5 billion or on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods beginning in 2029.
  • Ten bills would authorize specified amounts to be appropriated over the 2019-2023 period. Spending from those authorized amounts would be subject to appropriation.

Medicare Trust Fund Expected to Be Exhausted by 2026

The Medicare Board of Trustees released their annual report for Medicare’s two separate trust funds — the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund. According to the report, Medicare’s trust fund will be depleted in 2026, three years earlier than previously expected. The report cited that the Trust fund has not met the Trustee’s “formal test of short-range financial adequacy since 2003,” and recommended that “Congress and the executive branch work with a sense of urgency” to address the depletion of the fund. Additionally, Trustees asserted that reforms should occur in the near future as “the early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries and taxpayers — to adjust their expectations and behavior.”   

The report cited the repeal of enforcement for the Affordable Care Act’s individual insurance mandate in the GOP tax law as a contributing factor to the fund’s early depletion, as the move will lead to a greater amount of uninsured individuals and higher payments to hospitals and Medicare Advantage plans. According to the report, lower payroll taxes and less revenue from taxing Social Security benefits, are also factors.       

The trust fund covers costs in Medicare Part A, which pays for inpatient, nursing care and hospital costs, and is mainly subsidized through payroll taxes. Other portions of Medicare such as Part B, physician services, Advantage plans, and prescription drug plans have a separate source of funding collected through premiums and general taxpayer revenue. Members of Congress offered somewhat muted responses to the report from trustees relative to previous reports that spurred conversations around overhauling the program. Instead, GOP members issued general calls for reform to sustain the program. Trump administration officials pointed to policy initiatives they were already pursuing to address sustainability issues, including those proposed in the President’s budget and through various Medicare policy changes.

CMS Releases First Medicaid and CHIP Scorecard Comparing State Performance

The Centers for Medicare & Medicaid Services (CMS) released its inaugural Medicaid and Children’s Health Insurance Program (CHIP) Scorecard, which the agency designed to bring greater transparency and accountability to the programs. The administration published voluntarily-reported state Medicaid and CHIP quality measures along with federally reported measures for the first time, which include data on state and federal timeliness of managed care capitation rate reviews, time from submission to approval for Section 1115 demonstrations, and state and federal state plan amendment processing times. CMS Administrator Seema Verma indicated the scorecard will complement the administration’s push for state flexibility, primarily by helping to inform discussions on key issues regarding the scope of Medicaid and CHIP and providing additional transparency on enrollment and annual expenditures. The agency also intends for the scorecard’s web-based dashboard to be used to track and display state performance on key indicators so others can learn from high performing states.

Administrator Verma first previewed the scorecard concept during her remarks on the new vision for Medicaid and CHIP last fall at the National Association of Medicaid Directors’ (NAMD) annual meeting. At that time she discussed the scorecard was necessary to hold states accountable, particularly given the enhanced flexibility the administration is providing to states. Following the release of the scorecard, some stakeholders, including the National Association of Medicaid Directors (NAMD), urged caution about drawing conclusions based on the scorecard and pledged to continue working with CMS on this initiative.

CMS has said the data will be updated annually, will allow year-to-year comparisons to identify trends, and may include new metrics each year, for example opioid-specific measures or data on Medicaid home and community-based services. The scorecard is a notable development with respect to reporting on Medicaid and CHIP programs, which has long been fraught with challenges due to the complexity, state-specific nature, and politics of the program at the federal level and in individual states. CMS did not offer a concrete plan as to how else the agency might to use this information, with Ms. Verma saying, “Where this goes and what it becomes is up for discussion.” Still, with the first scorecard published, CMS has opened the door to debate on how the data could inform a range of federal policies at some future point, including critical questions on whether and how this information could be tied to federal funding. Additionally, the scorecard information could shape discussions about funding and priorities on a state by state basis.