Health Policy Report

October 11, 2016

The Week in Review  

In a presidential debate on Sunday night that focused on personality more than policy, both Hillary Clinton and Donald Trump briefly addressed their competing healthcare proposals in response to a question on the Affordable Care Act (ACA). Clinton said she would take steps to build on the ACA, and urged against repealing the law in order to maintain its popular protections, such as barring insurers from not offering coverage to people with pre-existing health conditions and allowing young adults to remain on their parents’ health plans until 26.

Trump, on the other hand, put a focus on premium hikes, and pointed to them as evidence of the need to repeal the law which he called a “disaster.” He said he would allow insurance companies to sell policies across state lines, suggesting it would ensure that people with pre-existing conditions would be able to access coverage. On the other hand, policy experts have said that allowing insurance to be sold across state lines isn't a viable solution for health care reform, and such a policy could give insurers an opportunity to undermine state insurance regulations. Trump also touched briefly in Medicaid in his remarks Sunday night, saying that he would block-grant the program, meaning that federal money would be limited and states would get more leeway on how to spend their allotment.

The Week Ahead

With exactly four weeks until Election Day, Congress remains in recess as Members hit the campaign trail. The third and final presidential debate is scheduled for next week, on Wednesday, October 19, in Las Vegas, Nevada.

CBO Estimates Blocking Part B Demo Will Cost Only $395 Million

On Tuesday, the Congressional Budget Office (CBO) released a report that estimated it would cost the U.S. Government $395 million over a decade should Congress act to block the Obama administration’s plan to test an alternate approach to the current Medicare drug payment system, the so-called CMMI Part B Drug Demo.

The CBO estimate examined the proposal laid out by bill H.R. 5122, introduced by Representative Larry Bucshon (R-IN). CBO stated that prohibiting the demonstration from taking place would result in lost savings of $1.1 billion in the next fiscal year alone, between fiscal year 2016 and 2017, but that about $750 million of the missed savings would be made up through other allowable cost saving proposals from the Center for Medicare and Medicaid Innovation (CMMI). The net result of $395 million would be subject to Congressional pay-as-you-go procedures, the CBO stated, and lawmakers would likely seek offsets to make up for the estimated cost of the bill. Rep. Buschon’s bill is backed by 20 Republican co-sponsors and two Democrats, including the House Budget Chairman Tom Price (R-GA). While it is unlikely H.R. 5122 will be enacted on its own, supporters are pushing to try to add it to another legislative vehicle by the end of the 114th Congress.

The Centers for Medicare and Medicaid Services (CMS) has not responded as to when it will release the final version of the Part B drug demo model, but a draft proposal released in March called for starting with a five-year test of different payments for drugs administered in doctors’ offices. Many physicians have contested the proposal, arguing they will lose money under the new reimbursement plan and would be forced to refer patients elsewhere for treatment. In response, even Congressional Democrats, including those who serve on the Senate Finance Committee, have asked the administration to scale back the proposal. CMS officials have said they expect to alter the proposed rule in response to many of the comments they received without specifying how.

MedPAC Debates Proposals to Cut Drug Spending

The Medicare Payment Advisory Commission (MedPAC), an influential federal advisory panel, announced their latest views on slowing the rate of Medicare’s pharmaceutical spending on Thursday. MedPAC’s broad aim is to curb rising spending, while maintaining appropriate access to treatment. The Commission reported Thursday that Part B pharmaceutical spending doubled to $22 billion between 2007 and 2015, including copays from Medicare beneficiaries.

MedPAC is considering several options related to Part B drug reimbursement, including reducing Medicare’s 6 percent addition to the average sales price (ASP) reimbursement to 3 ½ percent for medicines provided in office, adding a flat fee of $5 per script, and limiting future increases to an inflation benchmark.  The Commission also suggested driving down group costs by grouping similar drugs under a common billing code in order to generate more competition between manufacturers of name-brands and generics. All recommendations will be released next fall in a formal report to Congress and the Centers for Medicare and Medicaid Services (CMS) on drug spending, but they must first pass through several more meetings before being refined and finalized.

Commission members broadly supported the themes of the proposal, but differed in opinion on topics such as whether consolidated billing codes would result in greater use of biosimilar and generic drugs. Commissioner Amy Bricker warned that “copycat” biotech drugs could disrupt the market at a time of transition for many manufacturers. Many doctors have already objected to a similar drug reimbursement plan laid out by Medicare, stating that they would lose money if the growth in prices should exceed an inflation benchmark. The proposal will be further discussed at the January MedPAC meeting (January 12/13).

GOP Lawmakers Explore Options to Block Obamacare Settlements

GOP lawmakers are looking at a “dozen” options in an attempt to block the White House from paying insurance companies hundreds of millions of dollars to settle ten lawsuits brought by the insurance industry. Republicans are labeling the lawsuits as a “bailout” of Obamacare that “circumvents the will of Congress,” but insurance providers claim they are just seeking reparation for the revenue they’ve lost as a consequence of participation in the Obamacare health exchanges. Massive settlements from the lawsuits could deplete the obscure “Judgment Fund” within the Treasury Department that is typically used to close out federal legal disputes. And whether federal officials will actually pursue the settlements remains a mystery, but lawyers for the House Energy and Commerce Committee are exploring whether insurer settlements would comply with current law and what legislation could be passed to block them. Sen. John Barrasso (R-WY) was quoted stating his party’s intent to insert prohibitive language into the end-of-year spending bill.

An Obamacare provision establishing risk corridors was originally designed to cushion insurers against heavy losses by shifting money from those faring better to those faring worse, but nowhere near enough money has come in to cover the payouts, meaning insurers have been left with major gaps in their balance sheets. The $363 million insurers paid into the program the first year was far short of the $2.87 billion they were promised. And although The Department of Justice dismissed two of the insurer lawsuits last month citing recent legislation by Congress to limit the funds as reason, a memo from the Centers of Medicare and Medicaid Services (CMS) alarmed Republicans with language that suggested the administration was open to settling the lawsuits. Last month, 46 House Republicans wrote to HHS Secretary Sylvia Mathews Burwell saying they are committed to “exhausting all legislative and judicial options” to prevent such an outcome.