Health Policy Report

October 29, 2018

The Week in Review

House and Senate lawmakers have left Washington to hit the campaign trail.

The Week Ahead

Both chambers are scheduled to resume legislative business one week after the midterms on Tuesday, November 13th. While the House’s schedule has yet to be announced, Senators are slated to take up the legislative vehicle (S.140) for Coast Guard reauthorization and consider the nomination Michelle Bowman to be a member of the Board of Governors of the Federal Reserve.

Trump Announces Part B Drug Payment Reforms Based on International 'Target Price'

Last Thursday, the Department of Health and Human Services (HHS) announced through a new Advance Notice of Proposed Rulemaking (ANPRM) that they are developing a new model that would reduce payments for Part B drugs to a level more closely aligned with prices in other countries. The so-called “International Pricing Index” (IPI) payment model — which would be implemented as a pilot program through the Center for Medicare and Medicaid Innovation (CMMI) — would be phased in over a five-year period, apply to a randomized 50 percent of the country, and start with single-source drugs and biologics in the first two years before expanding in the third year and beyond. The proposal caught many stakeholders by surprise, particularly since the administration’s earlier-released drug pricing “blueprint” dismissed international reference pricing, suggesting that “such price controls… prevent drug companies from charging market rates for their products, while delaying the availability of new cures.”

Under the model, instead of the current percentage-based add-on payment, providers would receive a set payment amount for storing and handling drugs that would not be tied to drug prices. The agency is considering several alternatives to the current Average Sales Prices (ASP) +6% add-on payment (4.3 percent under sequestration), which they intend to tie to pre-sequestration reimbursement levels. That nuance may translate to an increase in reimbursement compared to current law, which could potentially blunt opposition from key provider groups (ex. oncologists and rheumatologists) who played a key role in blocking the Obama Administration’s Part B drug demonstration.   

The IPI model would also create a system based on the defunct Competitive Acquisition Program (CAP) in which private vendors procure drugs, distribute them to physicians and hospitals, and take on the responsibility of billing Medicare. Vendors would aggregate purchasing, seek volume-based discounts, and compete for providers’ business, thereby creating competition where none exists today. Medicare payment for the drugs themselves would be to the model vendors; model participants would no longer “buy and bill” Medicare for included Part B drugs administered to included beneficiaries. Meanwhile, providers in the non-model areas would continue to use the “buy and bill system” to administer Part B drugs to their patients and to be paid under the current Medicare payment policy.

The proposal will be available for public comment for 60 days, with comments due on December 31, 2018. Beyond that, CMS is considering issuing a proposed rule in the spring of 2019 on the potential IPI Model, which would start in spring 2020 and operate for five years, concluding in the spring of 2025. At that point, CMMI has the authority to evaluate the success of the model, and if specific benchmarks are met, make the IPI a national policy.

Trump Administration Releases Proposal to Allow HRAs as Employer-Sponsored Coverage

Last Tuesday, the Trump Administration released a proposal to increase flexibility for employers seeking to comply with the employer responsibility mandate under the Affordable Care Act (ACA) by loosening regulations on the use of health reimbursement arrangements (HRAs). This notice of proposed rulemaking (NPRM) is the latest in a string of regulatory actions furthering the goals outlined in President Trump’s Executive Order (13813), “Promoting Healthcare Choice and Competition Across the United States.” The Executive Order directed the agencies to prioritize improving association health plans (AHPs), short-term limited duration insurance (STLDI), and HRAs.

The proposed rule from the Departments of Health and Human Services (HHS), the Treasury, and Labor would allow employers to provide an HRA to employees that could be used to purchase insurance in the individual market, fulfilling the employer’s obligation to provide health coverage under the ACA. In a press release, administration officials said that the regulation would provide more options to employers and individuals, would help increase competition in the individual markets, and would provide a lower-cost, lower-risk option that could encourage more employers to provide health benefits. The NPRM would encourage employers to distribute funds that are tax-advantaged in the same way as employer-sponsored health insurance to employees for the purpose of purchasing coverage in the individual market.

The administration anticipates that 10.7 million more individuals would be covered with HRAs in the individual health insurance market under the proposed changes, while group plan enrollment would drop by 6.8 million. Including the number of people who would be covered by an HRA who would have previously claimed the premium tax credit, the administration anticipates that approximately 800,000 fewer Americans would be uninsured by 2028. The departments are seeking comment on all aspects of the proposal and have specifically solicited comment on whether the HRAs should also be able to be used to pay premiums on STLDI, on which the Administration loosened requirements earlier this year.

Trump Administration Loosens Requirements for ACA 1332 Waivers

Last Monday, the Departments of Health and Human Services (HHS) and Treasury issued new guidance to states that would relax requirements around 1332 waivers, the Affordable Care Act’s (ACA) vehicle for states to make changes to their insurance markets. The guidance tracks closely with the administration’s stated goal of providing flexibility for states to offer cheaper insurance options outside of the ACA marketplaces.

The framework for waiver approvals outlined in the guidance — which the administration has dubbed “State Relief and Empowerment Waivers” — reflects a standard that holds that as long as ACA-compliant coverage is available for those who want it, states can encourage less comprehensive coverage options alongside it. By counting Association Health Plans (AHP) and short-term, limited-duration insurance (STLDI) towards the tally of insured individuals, the Trump administration is encouraging states to pursue these alternatives that skirt the ACA’s insurance guardrails. The guidance also circumvents the requirement that states must pass legislation to enact waivers, reverses a requirement that waivers may not harm specific sub-populations, and could make it more difficult for states to advance single payer or Medicaid buy-in proposals.

This guidance is intended to supplement implementing regulations finalized by the Departments on February 27, 2012, and supersedes guidance published the Obama administration on December 16, 2015. The guidance addresses: (1) requirements that must be met for the approval of a State Innovation Waiver, (2) the Secretaries’ application review procedures, (3) the calculation of pass-through funding, (4) certain analytical requirements, and (5) operational considerations. In addition to this guidance, CMS announced they are preparing to release waiver concepts “to help spur conversations and ideas with states.”

President Trump Signs ‘Landmark’ Opioid Package into Law

Last Wednesday, President Trump signed into law the bipartisan SUPPORT for Patients and Communities Act (H.R. 6) passed earlier this month. The President applauded the “landmark legislation” for providing those fighting the opioid crisis with the resources they desperately need and outlined the administration’s ongoing work to fight the epidemic. The sweeping bill included proposals from dozens of members representing both parties and chambers, although was a compromise from original drafts of the legislation. The bill passed with broad bipartisan majorities in both chambers, despite several Democrats wishing the legislation had gone further.

At the bill signing, Department of Health and Human Services (HHS) Secretary Alex Azar announced that the most recent data from the Centers for Disease Control and Prevention — March 2018 — show that the number of fatal drug overdoses have fallen for six months in a row and are down 2.8 percent from their peak. Although experts note that it’s too early to determine whether overdoses will continue to fall, many have said they hope that recent policy changes and initiatives that aimed to expand addiction treatment, reduce new incidents of substance use disorders, and prevent fatal overdoses are having an impact. Others have pointed to previous slowdowns in overdose deaths that were only temporary as caution against early celebration. The administration also released a new Medicaid model aimed at reducing the number of babies born addicted to opioids. The Center for Medicare & Medicaid Innovation will award $64.6 million in grants to up to 12 states to test the “M-O-M or Maternal Opioid Misuses” model with one or more provider organizations in their communities for five years.

The upcoming midterm elections will determine whether Congress attempts to advance another opioids package next year. If Democrats gain control of the House, party leaders have already signaled they would pursue a more aggressive, treatment-focused package requiring additional federal funding. Any forthcoming opioid legislation would raise questions over whether to devote more attention to illicit fentanyl, as many policymakers have already expressed growing concern over synthetic drugs’ role in driving the nation’s overdose death rate.