Health Policy Report

July 30, 2018

The Week in Review

The White House rode a wave of positive economic news last week as President Trump touted his tax and regulatory policies as drivers of the best economic growth in nearly four years. The U.S. economy expanded at a 4.1 percent rate in the April-to-June quarter, the highest level since growth hit 5.2 percent in the third quarter of 2014, the Commerce Department reported. Republicans are hoping that a string of good economic news will bolster their hopes in the November midterm elections, and President Trump recently indicated he plans to take an active role in bringing that message to voters — the President told Fox News' Sean Hannity on Friday "I will go six or seven days a week when we're 60 days out and I will be campaigning for all of these great people that do have a difficult race." While President Trump has proven his power to sway GOP primaries, it remains to be seen how voters will react to his midterm message, particularly in swing districts that will determine which party has control of the House.

While Congress worked through a packed legislative agenda last week, buzz in Washington centered around the assertion from President Donald Trump's former longtime personal attorney Michael Cohen that the President knew in advance about the June 2016 Trump Tower meeting where Russians were expected to offer his campaign information about Hillary Clinton. Mr. Cohen is reportedly willing to testify to special counsel Robert Mueller on the issue, offering a claim that would contradict the President and other officials who have said Trump did not know about the meeting until reporters approached him in July 2017.

On the Hill, the House completed their legislative sprint ahead of the August recess by passing three major health care bills (details below), the FY19 National Defense Authorization Act (NDAA) conference report, and a short-term flood insurance reauthorization. Meanwhile, House Speaker Paul Ryan (R-OH) spoke out in opposition of an efforts from conservative lawmakers — led by House Freedom Caucus Chairman Mark Meadows (R-NC) and Rep. Jim Jordan (R-OH) — to advance a resolution calling for the impeachment of Deputy Attorney General Rod Rosenstein, who oversees the special counsel's investigation into Russian interference in the 2016 election.

In the Senate, lawmakers voted overwhelmingly (86-9) to confirm Robert Wilkie, an under secretary of defense, as secretary of the Department of Veterans Affairs. Several possible Democratic 2020 presidential candidates — including Sens. Bernie Sanders (I-VT), Kirsten Gillibrand (D-NY), Kamala Harris (D-CA), Cory Booker (D-NJ), and Elizabeth Warren (D-MA) — were among the 9 Democrats to vote no. Separately, the Senate unanimously passed legislation that would cut or eliminate tariffs on hundreds of items made in China amid rising trade tensions between Washington and Beijing. A similar measure has passed the House, but the two chambers must resolve small differences before sending legislation to the White House.

The Week Ahead

While House lawmakers are home for their month-long August recess, the Senate returns for another week of legislative work as it seeks to check off a series of legislative priorities before adjourning. The upper chamber plans to vote this week on its four-bill appropriations minibus (H.R. 6147) containing the Transportation-Housing and Urban Development, Agriculture, Interior, and Financial Services appropriations packages. The Senate will then turn its attention to two items passed by the House this week, including: (1) a short-term funding reauthorization for the National Flood Insurance Program (NFIP); and (2) approving the FY19 National Defense Authorization Act (NDAA) conference report (H.R. 5515). Lawmakers are also expected to continue their push to clear the presidential nominations queue, with a vote on the nomination of Britt Cagle Grant to be United States Circuit Judge for the Eleventh Circuit.

CMS Proposal on Site-Neutral Payments Portends Major Cuts to Outpatient Clinics

The Centers for Medicare and Medicaid Services (CMS) is proposing to cut Medicare payments for clinic visits provided at hospital off-campus provider-based departments in what would be a major expansion of the agency’s push for so-called site-neutral payment policies. The CMS proposal would reduce payments for doctor visits at hospital-owned outpatient clinics to bring them in line with the lower reimbursement rate that Medicare pays physicians’ offices —about 40 percent of what CMS currently pays under the Outpatient Prospective Payment System (OPPS). Hospital groups immediately blasted the policy, which is contained in the proposed 2019 outpatient hospital rule released last week. CMS said the change would save the federal government $610 million in 2019 and would save Medicare beneficiaries $150 million through reduced copayments.

Clinic visits are the most common service billed under the outpatient payment system. Under existing payment rules, the average Medicare payment for a clinic visit at an off-campus department is $116, with $23 being paid by the beneficiary through a copayment, CMS said. The proposed rule would reduce the average payment to $46, with a $9 beneficiary copayment. Under a site-neutrality provision in the Bipartisan Budget Act of 2015, new provider-based departments became subject to reduced payment rates, but existing departments were grandfathered in and were not subject to the cuts. The policy CMS proposed Wednesday appears to effectively eliminate that grandfather provision.

The proposed rule also contains several significant changes affecting ambulatory surgical centers. It would expand the number of procedures that Medicare would pay for when performed at ambulatory surgery centers, and it would reduce payment disparities between ASC payment rates and hospital outpatient payment rates. CMS also seeks comments on ways to improve price transparency and increase sharing of electronic health records through two requests for information in the proposed rule.

Hospital Payment Rule Includes Provisions on 340B, Biosimilars, WAC

The Center for Medicare and Medicaid Services (CMS) hospital outpatient pay rule includes several policies impacting pharmaceutical reimbursement, including a proposal to expand Medicare reimbursement cuts for drugs purchased through the 340B discount program to certain hospital off-campus facilities — a move that was praised by the pharmaceutical industry but reviled by hospital stakeholders. In the 2018 hospital outpatient payment proposal, CMS cut hospitals' Medicare pay for 340B drugs by almost 30 percent, but hospital off-campus facilities that were paid under the Medicare physician fee schedule were exempted from the cut. The proposed 2019 payment rule would extend those cuts to off-campus departments of hospitals that are paid under the Medicare physician fee schedule. While 340B hospitals argue that the change would drain vitally needed support from hospitals that operate with thin margins, PhRMA argued that the change “highlights the role outpatient facilities play in driving growth in the program and higher costs for patients and our health care system as a whole.”

Among other provisions that have caught the attention of the pharmaceutical industry, CMS proposes to pay for biosimilars that don't have pass-through status but are purchased under 340B at the average sales price minus 22.5 percent of the biosimilar's own ASP, rather than the ASP of the reference product. The proposed rule would also cut in half the current 6 percent add-on payment for drugs paid under the wholesale acquisition cost (WAC) — instead moving to WAC+3 percent.

House Votes to Repeal Medical Device Tax, Expand HSAs and ‘Copper’ Plans, Delay Insurance Tax

The House held a series of health care votes last week, including legislation that would permanently repeal the Affordable Care Act’s (ACA) medical device tax, expand access to health savings accounts (HSAs), and delay the ACA’s health insurance tax. With respect to the ACA’s 2.3 percent tax on medical devices, the House approved the measure on Tuesday by a vote of 283-132 — a showing of bipartisan support that the bill’s proponents hope will help spur passage in the upper chamber. The tax has already been delayed several times by Congress, including a two-year delay that was included in a January continuing resolution (CR), which prevents the tax from kicking in until January 2020.

On Wednesday, the House passed a pair of health care bills that, collectively, would expand the use of tax-advantaged health savings accounts (HSAs), provide for a two-year delay of the Affordable Care Act’s health insurance tax, and expand access to so-called “copper” health plans to all consumers on the Exchanges. The two measures (H.R. 6199; H.R. 6311) combine provisions from the 11 bills passed by the House Ways and Means Committee a few weeks ago. While the both bills passed with support from some Democrats, many in the minority voted ‘no’ after raising concerns about the cost of the legislation.

CMS Restores ACA Risk Adjustment Payments

The Centers for Medicare and Medicaid Services (CMS) issued a final rule last week to resume the Affordable Care Act (ACA) risk adjustment program — just weeks after stating that the agency would freeze billions of dollars in payments to private insurers. The risk adjustment program, which takes payments from insurers with healthier customers and redistributes that money to companies with sicker enrollees, has been criticized by companies that allege the program penalizes smaller health plans. A federal judge partially agreed with this sentiment during a February ruling in a New Mexico federal court, saying that HHS was misguided in requiring that the program be budget neutral. 

CMS claimed that immediate action was necessary to maintain the “stability and predictability” in the individual and small group health insurance markets, and maintained that the final ruling will “preserve the significant investment made by states, issuers, and the federal government to stand up the program.” CMS Administrator Seema Verma stated the rule will “restore operation of the risk adjustment program, and mitigate some of the uncertainty caused by the New Mexico litigation,” but also continued to criticize the ACA for making coverage less affordable. 

Senate HELP Committee Votes to Ban Pharmacy 'Gag Clauses'

The Senate Health, Education, Labor and Pensions (HELP) Committee approved a series of health care bills at a markup last week, including bipartisan legislation that would ban so-called ‘gag clauses’ that prohibit pharmacies from proactively telling customers they could save money on a prescription if they paid out of pocket instead of through insurance. The Committee also passed legislation that would reauthorize a treatment and prevention program for sickle cell disease, create a grant program to states to improve dental health, and reauthorize the National Congenital Heart Disease Surveillance System, which examines and researches congenital heart disease. Each of the bills passed via voice vote on a bipartisan basis.

While contracts between pharmacists and pharmacy benefit managers (PBMs) are confidential, there have been allegations that they sometimes contain ‘gag clauses’ preventing pharmacists from telling consumers that paying cash for a prescription might cost less than their health insurance copayment. And pharmacists can face significant penalties if they disclose the difference. The leading PBM trade association, PCMA, recently said that none of their members use gag orders, and others say the practice is confined to the commercial market, where the orders are rarely used. Still, eliminating gag clauses has been a popular sentiment across the political spectrum, with President Trump citing the policy in his drug pricing blueprint and CMS recently reminding Part D that they must require pharmacies in their networks to notify customers of the cheapest option for buying drugs