Health Policy Report (8/15)

August 15, 2022

Congress is set to break for the balance of the month and will return to action in September with a lengthy legislative to-do list. This includes, among other things: (1) government funding and the National Defense Authorization Act (NDAA) for FY 2023; (2) Food and Drug Administration (FDA) user fee agreements; and (3) the National Flood Insurance Program (NFIP), along with several other programs that are set to expire on September 30. Additionally, Democratic lawmakers will be scrambling to finalize other last-minute legislative wins — including permitting reform, tax extenders, retirement savings, water resources development projects, and more — before the conclusion of the 117th Congress.

However, it remains to be seen how passage of the IRA impacts the prospects of bipartisan deal making going forward, especially with the 2022 midterm elections looming. While some congressional Republicans, namely Sen. Lindsey Graham (R-SC), have started to sour on the prospects of a larger year-end package, others within the Senate — including Sens. Lisa Murkowski (R-AK), John Kennedy (R-LA), Debbie Stabenow (D-MI), and Chris Coons (D-DE) — brushed off the notion that the reconciliation bill will have a meaningful impact on future bipartisan legislative efforts, according comments they offered to the National Journal.

Congress Passes Reconciliation Package

On Friday, the House of Representatives passed the Inflation Reduction Act (IRA) on a party-line vote [220-207], delivering a long-sought legislative victory for President Joe Biden ahead of November’s midterm elections. The President’s signature will mark the end of the marathon budget reconciliation process for fiscal year (FY) 2022 that featured various intraparty squabbles, blown-up bills and agendas, as well as surprise, last-minute negotiations that ultimately clinched an historic deal. While the IRA represents a more scaled-back version of the original “Build Back Better” agenda, Senate Majority Leader Chuck Schumer (D-NY) and Speaker Nancy Pelosi (D-CA) were able to successfully navigate a delicate policy and political tightrope to coalesce support within the caucus to advance various aspects of President Biden’s economic agenda. Notably, the legislation includes provisions that will: (1) allow Medicare to negotiate drug prices; (2) redesign the Medicare Part D benefit to lower out-of-pocket costs for beneficiaries; (3) cap the monthly out-of-pocket cost of insulin to $35 for Medicare beneficiaries; and (4) extend the Affordable Care Act (ACA) subsidies for households with income exceeding 400 percent of the federal poverty level until 2025.

A key policy would allow Medicare to negotiate drug prices under Medicare Parts B and D. Under the bill, the initial negotiated prices would be applicable starting in 2026 with negotiations for eligible drugs beginning in 2023. Part D drugs are eligible for negotiation beginning in 2026, while Part B drugs will not be eligible until 2028. For the purposes of negotiation, insulin is no longer treated as a separate class as it was in the prior iteration of the provision. In addition to these policies, the legislation caps Medicare Part D beneficiary catastrophic spending starting 2024, delays implementation of the Trump-era rebate rule until January 1, 2032, and implements inflationary rebates in Medicare for manufacturers who raise the price of drugs faster than inflation. For more information on health provisions in the IRA, please see Thorn Run Partners’ detailed summary of health provisions, implementation timeline for drug provisions, and chart outlining the Part D benefit redesign

Providers Ramp Up Pressure to Stave Off Pay Cuts

As Congressional staff begin stitching together an end-of-year spending package, provider groups are asking for policies that would negate Medicare pay cuts for 2023. The Centers for Medicare and Medicaid Services (CMS) has proposed a series of annual payment rules that would impose Medicare fee schedule cuts, docked pay for home health providers, and decreased rates for physical therapy assistants. Nursing home provider advocates were able to encourage CMS to reverse course on proposed cuts to nursing home pay, and the agency finalized higher rates for inpatient hospitals than initially proposed. However, the inpatient rule includes pay increases for Medicare-Dependent Hospitals (MDH) and low volume hospitals (LVH) that will expire in fiscal year (FY) 2023. Some health policy insiders speculate that CMS cannot exercise discretion over changes to the Physician Fee Schedule (PFS) in the same way that it can tweak other payment rules due to evaluation and management (E/M) changes that predate the proposed rules.

The American Hospital Association (AHA) is vigorously lobbying to ensure that LVH and MDH programs do not lapse, and over 100 provider groups are urging House and Senate committees of jurisdiction to step in and stave off cuts. While providers are looking for longer-term solutions to the payment cliffs — a cause that the American Medical Association is pushing — imminent relief from looming 2023 cuts is of paramount concern. While CMS seems to recognize that pay cuts are partly driving hospital and practice consolidation, policies aimed at mitigating the impending clinical labor cuts would likely need to come from Congress, according to some health policy insiders. For example, the American Physical Therapy Association (APTA) is promoting the Stabilizing Medicare Access to Rehabilitation and Therapy (SMART) Act (H.R. 5536), which would exempt rural and underserved areas from pay cuts.

CMS Lifts Prior Authorization for Ortho Devices

On Tuesday, the Centers for Medicare and Medicaid Services (CMS) ruled that urgent spine and knee procedures will no longer require prior authorization. This regulation follows the agency’s January announcement that it would update the list of mandatory durable medical equipment (DME) requiring prior authorization more frequently. Specifically, CMS aims to remove prior authorization requirements for treatments that incur low costs, low risks, and high value, while adding procedures that experience irregular billing, have been previously flagged in government reports, or have a high cost with low value.

Prior authorization policies have proven to be controversial for time, acting as a point of contention between providers and payers. Insurers generally assert that utilization management procedures prevent waste, fraud, and abuse, but health care providers contend that such policies harm patient care and hikes administrative costs. Stakeholder groups are waiting to see if CMS will address prior authorization more broadly within Medicare Part B. Last month, the House of Representatives advanced the Improving Seniors’ Timely Access to Care Act of 2022 (H.R. 8487), which would streamline prior authorization requirements in Medicare Advantage (MA) plans and institute real-time benefit tools (RTBT) on many health care items.

Federal Agencies Reportedly Allow Private Entities to Use COVID IP Without Permission

Knowledge Economy International recently found that federal agencies have signed several contracts with private organizations, allowing them to use protected intellectual property (IP) without consent from the IP owners. These contracts were let by the Department of Health and Human Services (HHS) as well as the U.S. Army, and the federal government took responsibility for compensating IP holders who objected to more broadly sharing their patents. The violations concerned patents held by large pharmaceutical companies, small firms, and universities. Specifically, 62 government contracts included language regarding federal authorization to use patented inventions without permission, 54 of which provided a private entity with permission to use patented information. Of these 54 contracts, five gave permission to use IP that is not commercially available. While the U.S. can legally grant permissions for use of patented products, IP holders can sue the U.S. government for compensation if the U.S. leverages such permissions