Health Policy Report (8/10)

August 10, 2020

Capitol Hill Update

With negotiations on the next round of COVID-19 relief legislation at a standstill, President Donald Trump issued a series of executive orders on pandemic-related priorities over the weekend. The orders seek to the restore the enhanced federal unemployment benefits at a rate lower than the CARES Act allocation, defer payroll taxes until early 2021, renew the moratorium on evictions, and continue deferring student loan payments and accrued interest under the CARES Act Statute.

The orders come as Congress and the White House remain gridlocked on the next round of pandemic relief aid, with no plans to resume the negotiations as of now. The two sides are very far apart on several provisions pertaining to the size and scope of the overall package, with the enhanced unemployment insurance benefits and additional aid for state and local governments standing out as the two most contentious issues at play. However, the president’s ability to allocate and manage funding for COVID-19 relief efforts is complicated due to Article I, Section 9 of the Constitution, which gives Congress the “power of the purse.” As such, the effectiveness and standing of these executive orders is precarious as future legal action against the administration is expected.

Details on the orders include:

  • Unemployment Insurance. This order seeks to extend the pandemic unemployment assistance (PUA) established by the CARES Act, lowering the weekly bonus from $600 to $400. To fund the program, the administration calls on states to front 25 percent of the cost — equivalent to $100 toward the weekly benefit — with the federal government covering the remaining 75 percent. To fund the revamped PUA, the White House outlined hundreds of billions in federal funding that the administration plans to “reprogram” in a manner similar to the way it has diverted Pentagon funding for wall construction on the U.S.-Mexico border. The president says he will will tap into roughly $80 billion in unallocated money from the CARES Act State, Local, and Tribal Coronavirus Relief Fund, as well as more than $40 billion from the Federal Emergency Management’s (FEMA) Disaster Relief Fund, to fund these efforts.
  • Payroll Tax. This order directs the Treasury Department to allow employers to defer payment of employee-side Social Security payroll taxes through the end of 2020 for employees earning less than about $100,000 annually. While the text of the EO states that the intended deferral period would start Sept. 1, President Trump suggested that it could be retroactive to Aug. 1, saying that he hopes to forgive the deferred payroll taxes and make permanent payroll tax cuts if he is reelected in November. While the tax code does give the Treasury secretary authority to delay tax filing and collection amid presidentially-declared disasters, it remains to be seen whether employers will stop withholding payroll taxes given the risk of future liability. Critics of this particular order have also expressed concerns about the impact this action could have on both the short and long-term solvency of the Social Security and Medicare trust funds.
  • Housing. This EO outlines potential policy actions that federal agencies could take to address housing evictions during the balance of the pandemic, but does not offer an explicit pause on evictions. Specifically, the order instructs agencies to: (1) consider whether halting evictions will help stem the spread of COVID-19 across state lines; (2) identify available funds available to provide temporary financial assistance to renters and homeowners; (3) promote the ability of renters and homeowners to avoid eviction or foreclosure by encouraging and providing assistance to public housing authorities, affordable housing owners, landlords, and recipients of Federal grant funds in minimizing evictions and foreclosures; and (4) review all existing authorities and resources that may be used to prevent evictions and foreclosures for renters and homeowners. Congressional Democrats reportedly agree that the president does have the authority to address housing evictions via executive order, but are unlikely to be satisfied with what they would consider to be the administration’s watered-down approach in this executive action.
  • Student Loans. This order directs the Department of Education to take the necessary steps to continue the CARES Act policy that temporarily pauses payments and waives interest on student loans held by the Department until Dec. 31. The EO does not, however, specifically reference student loan debt collection or counting non-payments toward public service loan forgiveness, both of which were included in the CARES Act. Additionally, the EO does not offer coverage for federal student loan borrowers whose debt is held by private lenders or their colleges — a priority that Congressional Democrats have sought in the COVID-19 relief talks.

President Trump Signs EO to ‘Strengthen’ Domestic Medical Supply Chain

Last Thursday, President Trump signed an executive order (EO) aimed at increasing domestic manufacturing and onshoring supply chains for pharmaceuticals and medical supplies to decrease the likelihood of shortages. The “Combating Public Health Emergency and Strengthening National Security by Ensuring Essential Medicines, Medical Countermeasures and Critical Inputs are Made in the United States” EO will require federal agencies to purchase “essential” pharmaceuticals and medical supplies from domestic manufacturers and directs the Food and Drug Administration (FDA) to speed domestic approvals of essential medical products, identify supply chain vulnerability, and target counterfeit drug and medical supply imports. It also directs the Environmental Protection Agency (EPA) to streamline requirements surrounding continuous manufacturing and speed siting and permitting approvals. Peter Navarro, Director of the Office of Trade and Manufacturing Policy, explained that the COVID-19 pandemic had revealed the country was “dangerously overdependent on foreign nations for our essential medicines, medical supplies, and medical equipment.”

The EO will direct government agencies — including the Department of Health and Human Services (HHS), Veterans Affairs and the Defense Department — to buy “essential drugs and medical supplies” solely from American manufacturers, but does not specify what drugs or supplies will be deemed essential. The FDA will be tasked with creating a list of pharmaceuticals subject to the new requirement, as well as certain medical supplies. The order also appears to allow for broad exemptions based on cost, availability and “public interest.” White House officials did not indicate that the administration would make new investments or push for additional tax incentives to encourage onshoring of the medical supply chain and clarified that the EO “is not an appropriations bill.” They noted that the EO is intended to establish government demand for domestically made products and serve as a catalyst for innovative manufacturing technologies needed to keep drug prices low. Additionally, the EO will ease EPA and FDA regulation to speed development of domestic advance manufacturing for products needed for rapid response to pandemic and chemical, biological, radiological and nuclear defense threats, as well as direct the agencies to identify supply chain weaknesses and prevent the trafficking of counterfeit medicines from third-party online sellers involved in the government procurement process.

Both Democrats and Republicans have recently proposed legislation aiming to re-center the supply chain domestically, although no proposal has been as sweeping as the EO. The president’s proposal is likely to draw concern from the pharmaceutical industry, as tensions are already high due to backlash from President Trump’s EOs targeting drug prices released two weeks ago. Drug manufacturers, business groups, economists, and other stakeholders have recently publicly spoken out against the possibility of a “Buy American” policy proposal, noting it could raise U.S. drug prices, particularly for generics, as manufacturing domestically is more expensive, and the EO will require many companies to revamp their supply chains. Mr. Navarro insisted that deregulation of the industry and incentives for continuous manufacturing included in the EO would ensure pharmaceutical prices do not rise. 

President Trump Signs Executive Order to Expand Telehealth

Last Monday evening, President Trump signed a new Executive Order (EO) (executive order, fact sheet) calling on federal agencies to further expand access to telehealth services beyond the COVID-19 public health emergency, with a focus on rural communities. Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma praised the EO, stating that “the Trump Administration’s unprecedented expansion of telemedicine during the pandemic represents a revolution in healthcare delivery, one to which the healthcare system has adapted quickly and effectively. Never one merely to tinker around the edges when it comes to patient-centered care, President Trump will not let this opportunity slip through our fingers.” Among the details, the EO requires:

  1. the Department of Health and Human Services (HHS) to announce a new payment model, testing innovations that empower rural providers to transform healthcare on a much broader scale;
  2. HHS to submit a report to the President on how to increase access to health care in rural areas by reducing regulatory and disease burdens and improve maternal and mental health in rural areas;
  3. the federal government to launch a joint initiative in 30 days to improve healthcare communication infrastructure and expand rural services; and
  4. the HHS Secretary to look to review and extend, as appropriate, the current waivers put in place during the COVID-19 public health emergency.

The EO states that the expansion of telehealth services is likely to be a more permanent feature of the healthcare delivery system, beyond the current COVID-19 public health emergency (PHE). Accordingly, the EO is intended to “increase access to, improve the quality of, and improve the financial economics of rural healthcare, including by increasing access to high-quality care through telehealth.” In remarks during the unveiling of the EO, CMS Administrator Verma stated the Administration is currently focused on expanding the services that are being provided through telehealth and is not changing reimbursement. She also outlined the areas that would require congressional action. HHS Secretary Azar went on to state that allowing telehealth during the pandemic will provide an evidence base to challenge some of the assumptions about the cost of telehealth and over utilization that have been barriers to congressional efforts to expand telehealth. 

CMS Releases Proposed Updates to Physician Fee Schedule, Quality Payment Program for FY 2021

The Centers for Medicare and Medicaid Services (CMS) last Monday released its proposed fiscal year (FY) 2021 updates for the Medicare Physician Fee Schedule and Quality Payment Program (proposed rule, Physician Fee Schedule fact sheet; Quality Payment Program fact sheet; Medicare Diabetes Prevention Program fact sheet), including several policies to permanently expand telehealth services. The rule, released concurrently with the President’s Executive Order (EO) to expand rural telehealth access, seeks to advance efforts to improve access and convenience of care for Medicare beneficiaries through telehealth, particularly for those living in rural areas. Other major changes in this year’s proposed rule include: (1) redistributing physician pay as result of the budget neutrality requirements linked to an increase in pay for evaluation and management (E/M) visits; (2) implementing President Trump’s EO on Protecting and Improving Medicare for our Nation’s Seniors and aims to ensure sustainability of the Medicare program; and (3) strongly encouraging adoption of electronic prescribing of controlled substances (EPCS). Comments on the proposed rules are due by October 5, 2020.

As directed by President Trump’s Executive Order on Improving Rural and Telehealth Access, CMS will take steps through the proposed rule to extend the availability of certain telemedicine services after the public health emergency (PHE) ends. During the public health emergency, CMS has added 135 services such as emergency department visits, initial inpatient and nursing facility visits, and discharge day management services, that could be paid when delivered by telehealth. CMS is proposing to permanently incorporate some of the PHE expanded telehealth services, including home visits for the evaluation and management of a patient (in the case where the law allows telehealth services in the patient’s home), and certain types of visits for patients with cognitive impairments. CMS is seeking public input on other services to permanently add to the telehealth list beyond the PHE in order to give clinicians and patients time as they get ready to provide in-person care again. CMS is also proposing to temporarily extend payment for other telehealth services — such as emergency department visits — through the calendar year in which the PHE ends in order to allow the community time to consider whether these services should be delivered permanently through telehealth outside of the PHE.

Under the Patients Over Paperwork initiative, the administration has increased payment for evaluation and management (E/M) visits — which make up 20 percent of the spending under the Physician Fee Schedule — while reducing pay for other services due to budget neutrality requirements. CMS noted that the administration collaborated with the American Medical Association to simplify the coding and billing requirements, and reported it is expected to save clinicians 2.3 million hours per year once it goes into effect January 1, 2021. Although some specialties saw increases in reimbursement in this year’s proposed physician fee schedule, many others fell victim to large cuts due to the “redistributive effects” of CMS’s E/M policy. The administration explained that the changes are averages, and “may not necessarily be representative of what is happening to the particular services furnished by a single practitioner within any given specialty.” The substantial changes in reimbursement are likely to renew calls from stakeholders for Congress to waive budget neutrality requirements, as many argue that they lead to significant disparities in impact among physician subspecialties — as seen in this chart included in the proposed rule. Additionally, advocates have warned that many of the specialties impacted are providing critical care during the pandemic and the decrease in reimbursement will limit patient access. Under the proposed rule, radiologists faced the largest cuts, as well as physical and occupational therapy, pathology, anesthesiology, and critical care, among others.

CMS Releases CY21 HOPPS, ASC Proposed Rule

Last Tuesday, the Centers for Medicare and Medicaid Services (CMS) released its proposed updates for the Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System for 2021 (proposed rule, fact sheet). Among notable changes in the rule, the proposal would deepen cuts to Part B pay for 340B drugs by an additional six percent, less than a week after the U.S. Court of Appeals for the District of Columbia Circuit backed the agency’s pay cuts for 2018 and 2019. In releasing the rule, the administration explained that its proposed policies are consistent with the directive in President Trump’s “Protecting and Improving Medicare for Our Nation’s Seniors” executive order (EO), and aims to “increase choice, lower out-of-pocket cost, empower patients, and protect taxpayer dollars.” CMS Administrator Seema Verma stated that following through on the EO entailed “loosening the stranglehold of government control that has accumulated over decades,” and clarified that the proposed changes would “help put patients and doctors back in the driver’s seat and in a position to make decisions about their own care.” Comments on the proposed rule are due by October 5, 2020, and the rule will be finalized later this year.

CMS noted that the proposed changes would build on previous efforts to increase patient choice by expanding Medicare reimbursement for services in different sites of care, and reduce provider burden to allow hospitals and ambulatory centers to operate with increased flexibility. The proposed rule included a 2.6 percent pay raise for Medicare outpatient services, and total payments to providers are projected to increase by $7.5 billion to nearly $84 billion. Urban hospitals would get a wage index boost of about 0.2 percent, while rural hospitals would get a raise of about 0.4 percent. CMS also plans to streamline the overall hospital star rating system beginning in 2021, including how it calculates ratings, decrease the number of measure groups, and stratify the readmission measure group based on the proportion of dual-eligible patients. Furthermore, the administration proposed to cover 11 additional procedures in ambulatory surgical centers, suggested changes to the way procedures are added to the ASC covered procedure list, and phase out the inpatient-only list over three years.

With respect to 340B, CMS proposed a cut to reimbursement for 340B program-acquired drugs by more than six percent, although the administration may decide to extend the current payment policy of Average Sales Price (ASP) minus 22.5 percent for 340B-acquired drugs if it doesn’t move forward with more cuts. Last Friday, an appeals court upheld the administration’s previous 340B drug payment cuts. Hospital groups criticized the cuts, noting they were based on the results of a “flawed acquisition cost survey that the agency launched suddenly amid the COVID-19 pandemic,” and asked that the results be thrown out for failing to meet the basic requirements of federal statute.