Health Policy Report

October 13, 2015

The Week in Review 

Legislative action in Congress last week was overshadowed by the surprising announcement from Majority Leader Kevin McCarthy (R-CA) that he would no longer seek to be Speaker of the House John Boehner’s (R-OH) successor. While McCarthy’s decision caught most observers by surprise, it can be, at least partially, explained by to two key factors. First, the Republican Conference was voting on a rules change that would force candidates for leadership positions within the party to give up their previously held position, meaning that if McCarthy pursued the Speakership, he would be forced out as Majority Leader. Second, even if McCarthy won the majority of votes from the Republican Conference, it is unlikely that he would have secured the 218 votes necessary to be elected as Speaker on the House floor in a vote due later this month – Democratic abstention and opposition from the more conservative members of the Republican caucus would prevent him from reaching the necessary majority on the House floor. 

The Majority Leader’s exit from the race has left the Republican Party in a scramble to find a leader who can successfully unite mainstream Republicans with their more conservative colleagues. Reps. Dan Webster (R-FL), Jason Chaffetz (R-UT), and Lynn Westmoreland (R-GA) have all formally announced they will seek the Speaker’s seat, but the most prominent candidate, House Ways and Means Chairman Paul Ryan (R-WI), is also proving the most reluctant to run. Speaker Boehner and other high-ranking Republicans are actively recruiting Ryan for the job, and we’re hearing that he is likely to accept the position, despite both family considerations and the potential long-term impacts on his political future.

Aside from the chaos in the Republican Party, Congress advanced a few important measures, most notably the conference report to H.R. 1735, the 2016 National Defense Authorization Act (NDAA), which passed the Senate by a veto-proof majority of 71-27. The bill’s passage sets up a showdown with President Obama, who has issued a veto threat on the measure because of its use of dedicated war funds to pay for other Pentagon projects, circumventing existing budget caps. In the House, a measure (H.R. 702) that would lift a decades-long ban on American crude oil exports passed 261-159, but it too has been threatened with a veto by the White House. 

The Week Ahead

The House and Senate are in a week-long recess for the Columbus Day holiday. Both chambers are due to return on Tuesday, October 20, with the reauthorization of highway funding and a raising of the debt ceiling among the big-ticket issues that Members will need to consider over the next few weeks.

Part B Premium Increases Prompts Democratic Response

House and Senate Democrats are uniting to stop a severe increase in 2016 Medicare Part B premiums, which pays for doctor office visits, preventive services, drugs, and other care delivered outside a hospital – and requires beneficiaries to pay a portion of the cost. This increase, which would affect more than 15 million beneficiaries, comes as the health program for the elderly and disabled struggles with rising costs of outpatient care and prescription drugs. Sen. Ron Wyden (D-OR), the top Democrat on the Senate Finance Committee, has introduced legislation said to block the projected 52 percent increase in monthly premiums for roughly 30 percent of Medicare beneficiaries. Sen. Wyden said his measure would keep monthly premiums for higher-income seniors, new Medicare enrollees, and those who don't collect Social Security benefit at 2015 levels of $104.90 and deductibles for all beneficiaries at the current threshold of $147.

Most Medicare beneficiaries are protected from sharp cost increases by a "hold harmless" provision that guarantees the dollar increase in the Part B premium cannot exceed the increase in a beneficiary's monthly Social Security benefit. However, Social Security's cost-of-living adjustment is expected to be zero next year as a result of the low inflation rate, which could potentially shift all cost increases onto those Medicare beneficiaries not covered by the hold harmless language. This could also affect states, which are responsible for picking up any premium hikes for their Medicaid beneficiaries, and could reportedly be forced to scale back services as a result. Democrats hope that by campaigning for a change, they may gain more support from politically active seniors. However, some budget hawks have argued that if Congress acts to block the proposed rate increases, lawmakers should find an offset so the costs do not add to the deficit. 

NIH Funding Complicates Senate ‘Innovation’ Initiative

Tensions between Senate Health, Education, Labor and Pensions (HELP) Chairman Lamar Alexander, (R-TN) and ranking member Patty Murray (D-WA) is threatening to cause major problems for the Committee’s ‘Innovation Initiative – the Senate counterpart to the House-passed 21st Century Cures Act. Last July, the House version—negotiated by Reps. Fred Upton and Diana DeGette (D-CO)—passed through the lower chamber with overwhelming bipartisan support, including an additional $1.75 billion in NIH funding in each of the fiscal years between 2016 and 2020.

During prepared remarks at a hearing last Wednesday, Sen. Murray stated that her support for the Senate version depends on the measure increasing funds for NIH and FDA. Sen. Alexander on the other hand, appears highly dubious of providing mandatory funding to the NIH, citing broader budget concerns and the need for oversight. As of yet, Sen. Alexander has not ruled out the approach and has asked NIH Director Francis S. Collins to report back to him on how NIH would use the mandatory funding. Meanwhile, the the House Labor-HHS Appropriations Chairman Tom Cole (R-OK) has warned that the dedicated research funding could cause a “pitfall” for appropriators in creating a fiscal 2021 budget. He explained that the NIH could suddenly lose the extra mandatory funding, leaving lawmakers struggling to find a new source of funds for an agency that enjoys virtually universal support in Congress.

Trade Deal Stokes Concerns in Among Drug Industry

Last week, negotiators from the United States, Canada and 10 other Pacific-Rim nations announced that they have reached an agreement on the Trans-Pacific Partnership (TPP)—the most significant trade deal in recent history—setting the stage for a vote in Congress early next year. The landmark free-trade agreement was reached in Atlanta following nine days of talks that went through the night Saturday as trade officials broke a deadlock over the length of protections for breakthrough pharmaceuticals. The pact, which has been more than five years in the making, is designed to reduce barriers to trade and raise labor and environmental standards among a 12 nation group that produces an estimated 40 percent of global economic output – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.  Now that the US has reached an agreement with the other nations’ trade ministers, the deal must be approved by Congress in an up-or-down vote, as well as by the governments of the 11 other countries.

Among the final topics settled in the marathon talks were an exclusivity period for biologic drugs and patent protection for pharmaceuticals – provisions that have already stimulated concerns among the pharmaceutical industry.  Under the terms of the deal, pharmaceutical companies will get at least five years of exclusivity before they have to share drug data with competitors seeking to produce generic versions of their products. Current law stipulates that companies are permitted to hold on to that data for 12 years, and the industry had been pushing for a similar period for America’s trade partners.  While the pact wouldn’t change the 12-year protection that companies get in the United States, it could put pressure on lawmakers to bring the country in line with other nations with shorter exclusivity periods. Already, President Obama has asked Congress to lower the term to seven years, a change that has also garnered the support of Democratic presidential candidate Hillary Clinton.  The leading trade groups representing the drug industry—the Biotechnology Industry Organization (BIO) and Pharmaceutical Research and Manufacturers of America (PhRMA)—released respective statements in opposition of the deal. “Twelve years of data exclusivity is a prerequisite to attract the investment required to continue medical innovation and develop new biological cures and therapies,” said BIO’s CEO Jim Greenwood.

MedPAC Examines Drug Pricing Policies

 At a Medicare Payment Advisory Commission (MedPAC) meeting last week, the Congressional advisers engaged in a broad preliminary discussion of potential approaches to managing to future cost of buying drugs for Medicare beneficiaries.  MedPAC is only in the early stages of considering what themes and specific advice it will provide to Congress next year in its influential reports. The panel is not close yet to settling on any formal recommendations regarding drugs.  Still, there appeared to be broad consensus about a need to make Medicare, the nation's single biggest purchaser of health care, a much more demanding customer when it comes to drugs for the more than 50 million people for whom it provides health care.  Among the policy levers discussed during last week’s meeting, Commissioners examined ‘least costly alternative’ policies, policies that tie payment to value, and those that encourage provider behavior to reduce drug costs. Also discussed were issues surrounding direct to consumer advertising practices.

Commissioners especially recognized problems with reimbursement for Part B drugs, which are administered in doctors' offices and clinics.  Last year, commissioners conversed about the possibility of merging payment codes for Part B drugs. By combining codes, Medicare would pay a flat fee to physicians for managing Part B medications and bundling options. This was reportedly based on a pilot run by UnitedHealthcare in its private insurance plans in lieu of CMS' current average sales price plus 6 percent policy. MedPAC Chairman Jay Crosson was careful to point out that the recent increase in attention to drug prices would not influence how the commission handles drug-reimbursement recommendations, and that the controversial least costly alternative approach is similar to other policies that the commission has been advocating for years. Chairman Crosson also reported that he would consider putting drug prices on a schedule instead of paying the average sales price.

Study: U.S. Spends More on Healthcare with Worse Outcomes

According to a new report from the Commonwealth Fund, the United States spends significantly more per person on healthcare than any other wealthy country, but often has worse health outcomes. According to the study, the U.S. spent $9,086 per person on healthcare in 2013 while countries like the United Kingdom, Canada and France, spent significantly less – the next closest country being Switzerland, which spends about $6,325 per person. When measured as a share of the economy, the study also found that the U.S. healthcare system spends a much larger portion of their GDP than any of their wealthy counterparts.  Life expectancy in the U.S. is a few years lower than that of all 12 other countries cited in the study, leading to the idea that extra healthcare spending does not necessarily lead to better results. The data was collected before the major provisions of the Affordable Care Act (ACA) took effect.