TRP Health Policy Report

April 20, 2015

After a two-week break, Congress returned to confront an expired deadline on Medicare payments to doctors and other unfinished business. On Wednesday, the Senate passed a bill (H.R. 2) to prevent a 21 percent cut in Medicare payments set to begin on April 1 and extended the Children’s Health Insurance Program (CHIP) through 2017.  The legislation, which passed by a vote of 92-2, was signed by President Obama last Thursday. Elsewhere, Senators provided the framework for a budget conference committee on Wednesday, using procedural votes to highlight various policy priorities. In the House, members considered several bills to mark the April 15 tax-return filing deadline, including legislation that would repeal the federal estate tax (H.R. 1105) and a bill to make permanent the state and local sales tax deduction (H.R. 622). Members approved the tax measures last Thursday, by a vote of 240-179 and 272-152 respectively.  The chamber also passed a bill to amend the qualified mortgage definition (H.R. 685) by a vote of 286-140, as well as legislation designed to assist consumers seeking loans to buy manufactured homes (H.R. 650) by a vote of 263-162.  

The Week Ahead

This week, the House plans to consider a pair of bills that would encourage the sharing of information between the private sector and government (H.R. 1560 and H.R. 1731).  The House cybersecurity legislation will share the stage next week with bicameral budget negotiations and the Senate Finance Committee’s consideration of a fast-track trade measure. The bicameral budget negotiations are set to begin on April 20 as both chambers discuss long-term spending parameters for defense, changes to Medicare, and the scope of so-called budget reconciliation instructions.  The Senate also looks to break an impasse over abortion funding that has delayed completion of a human trafficking bill (S. 178) and a vote on Attorney General nominee Loretta Lynch.  After those votes, Senate Majority Leader Mitch McConnell (R-KY) said he intends to bring to the floor legislation that would require Congressional review of any nuclear deal with Iran before lifting sanctions (H.R. 1191). House leaders are also preparing legislation to establish three new advisory boards within the Consumer Financial Protection Bureau, as well as limiting the amount of money the bureau could request from the Federal Reserve (H.R. 1195).
Congress Repeals the ‘Doc Fix’
Last week, President Obama signed into law bipartisan legislation (H.R. 2) that permanently replaces the Sustainable Growth Rate (SGR) formula for calculating Medicare physician payments. The bill prevents a 21 percent cut in Medicare payments that was due to take effect this month. It replaces the current SGR formula with new value-based systems for establishing the annual updates to payment rates for physician services in Medicare. The law also extends funding for CHIP through 2017, as well as a variety of expiring provisions related to Medicare, Medicaid and certain grant programs. Overall, the legislation will cost approximately $210 billion over 10 years. According to CBO estimates, $70 billion will be offset and an addition $140 billion will be added to the federal deficit. The offsets include almost $35 billion in increased Medicare premiums for higher-income beneficiaries, which will not take effect until 2018. In addition, the bill includes payment cuts to home health agencies, hospitals and nursing homes.
President Obama applauded the House and Senate for its bipartisan effort to repeal SGR during a White House Rose Garden Ceremony last Thursday. The President expressed his hope that the recently found bipartisan mood would continue to other policy areas. Still, passage of the bill drew criticism from fiscal conservatives, most notably Presidential hopefuls, Sens. Ted Cruz (R-TX) and Marco Rubio (R-FL). Influential conservative groups including the Heritage Action Foundation and Club for Growth also fiercely opposed the legislation, which they claimed violated the GOP’s promise to reduce the deficit. As a result, lawmakers are already looking toward future battles over funding for health programs that were not addressed in the bill. For example, the legislation did not include a permanent repeal of caps on Medicare spending for certain therapy services. Another issue lawmakers already are considering is future extensions of CHIP funding. While the law extends CHIP funding for an additional two years, Democrats favored a four-year extension.
Lastly, two rejected amendments offered by Sen. Patty Murray (D-WA) hinted at future battles over funding for primary care physicians. One amendment sought to extend an expired Affordable Care Act (ACA) provision that provided elevated reimbursement rates for primary care physicians participating in Medicaid, while the other would have extended a funding program for community health centers that expires in 2017. Congress will have to address these issues in the future.
Potential Bipartisan Reform on ACA Employer Requirements
Last Tuesday, the House Committee on Ways and Means Health Subcommittee Ranking Member Rep. Jim McDermott (D-WA) requested a hearing to discuss revising the reporting requirements for employers who offer coverage to their employees. Currently, Rep. Diane Black (R-TN) is formulating legislation that would ease the reporting requirements for employers and create a system that will prevent some people who are not eligible for subsidies – such as workers whose companies offer coverage – from receiving subsidy payments. Under the legislation, companies would report to the federal government at the beginning of the year whether or not they offer coverage. If a worker signs up for individual coverage in the new healthcare marketplace, the individual would receive an alert that the employer offers health insurance. Rep. Black hopes to introduce the legislation within the next two months. Rep. McDermott, who has been critical of efforts to repeal the ACA, voiced his support for Rep. Black’s efforts to ease reporting requirements. According to senior aides, the issue may eventually become one of only a handful related to the ACA that could attract bipartisan support.
New Poll Finds the Uninsured Rate Reaches Record Low
According to a recent Gallup and Healthways survey, the U.S. uninsured rate declined to 11.9 percent in the first quarter of 2015, down one percentage point from the fourth quarter of 2014. It was the lowest rate since Gallup began tracking the uninsured rate in 2008 and a sharp decrease from a high of 18 percent before the implementation of ACA in the fall of 2013. Since then, an estimated 14.75 million U.S. residents have gained coverage, which has dropped the national uninsured rate to 10.1 percent. Among the recently insured, the greatest coverage gains have been among Hispanics. Specifically, the uninsured rate has fallen by roughly eight percentage points among Hispanics since the end of 2013.
Separately, a new report from the Urban Institute’s Health Reform Monitoring Survey found that the uninsured rate fell by half in states that expanded under Medicaid. Expansion states reported an average of 7.5 percent of individuals without insurance, a decline of 52.5 percent since September 2013. Non-expansion states saw a decrease of 30.6 percent among uninsured individuals, but their uninsured rate remained approximately double that of expansion states. Further, 93 percent of people have insurance in the 29 states that have expanded Medicaid eligibility. That compares to roughly 86 percent of people with insurance in states that have refused Medicaid expansion.
Study: 2014 Rx Spending Hit Highest Single-Year Increase in 13 Years 
A study released last Tuesday found that prescription drug spending increased by 13 percent from 2013 to 2014, totaling $374 billion. The figures mark the largest single-year increase since 2001. According to the study by IMS Health, more than $11 billion was related to new hepatitis C treatments. Researchers also noted several other factors that have contributed to increased costs. Among them: demand for newer cancer and multiple sclerosis treatments; price hikes on branded drugs; and the introduction of relatively few new generics for top-selling branded medications. The study stated that although new generics decreased spending by $12 billion last year, new generics helped bring down spending by $20 billion in 2013 and $29 billion in 2012. Elsewhere, the study found that Medicaid beneficiaries helped drive an overall increase in prescription drug use, while people with private coverage filled fewer prescriptions. The percentage increase in the number of prescriptions filled by Medicaid beneficiaries was 25.4 percent in states that expanded Medicaid under the ACA and 2.8 percent in states that did not. According to several experts, this can be attributed to greater access to the healthcare system in states that expanded Medicaid.
Florida to Sue the Federal Government over ACA Dispute
Last Thursday, Florida Gov. Rick Scott (R-FL) announced that his administration will file a lawsuit against the federal government for threatening to withhold more than $1 billion in funding for hospitals if the state fails to expand Medicaid. Gov. Scott objected to the federal government linking the extension of separate federal money to assist hospitals in the state care for the uninsured, known as the Low Income Pool (LIP), to the state’s decision on whether to expand Medicaid. CMS stated that the future of the program is "linked" to the decision to expand Medicaid. Currently Florida has one of the highest uninsured rates in the nation, with about a quarter of its non-Medicare-eligible population lacking coverage.
Florida receives hospital funds through a pilot program that was negotiated under former Gov. Jeb Bush (R-FL). Federal health officials have warned states for more than a year the program would end in June since the ACA seeks to expand access to insurance for Americans through Medicaid. According to senior aides, CMS has broad discretion on whether to grant pilot projects like the one in Florida. CMS argues that the LIP program is optional. Gov. Scott contends that other states have expanded their Medicaid programs, yet still receive supplemental federal funding to help pay for uncompensated care. This is the latest debate between federal officials and the state of Florida over the expansion of Medicaid under the ACA.