A While House policy “wish-list,” reportedly leaked on October 19 (Policy Document), identifies what appear to be the Trump Administration’s policy goals for various government programs, including Medicaid, the 340B Drug Pricing Program, and the Center for Medicare & Medicaid Innovation’s (CMMI) initiatives. The bullet points in the document that relate to these programs prescribe “serious 340B reform,” ending the Medicaid Institutions for Mental Diseases (IMD) exclusion, allowing States to use work requirements as a condition of Medicaid eligibility, ending CMMI’s mandatory demonstration programs, and starting demonstrations on value-based drugs and devices. While most of the goals listed in the Policy Document have been previously publicly promoted by the White House, the leaked document appears to highlight the most important priorities with respect to each agency and program listed.

340B Program: “Serious Reform”

With respect to the 340B drug discount program, the Policy Document indicates “serious 340B reform” is among the Trump Administration’s policy goals. Under the 340B program, drug manufacturers provide outpatient drugs to covered entities, such as safety-net hospitals, at significantly reduced prices. While no additional details are provided in the Policy Document, the Administration’s past actions with respect to the 340B Program suggest that such reform would focus on covered entities’ compliance and spending of revenues associated with 340B-discounted drugs.

The 340B Program has been under close scrutiny from the Trump Administration since January 2017. Shortly after President Trump’s inauguration, the Health Resources and Services Administration (HRSA) withdrew its proposed “omnibus guidelines,” drafted during the Obama Administration, which would have provided a comprehensive update to HRSA’s 340B Program guidance. (See February 6, 2017 issue of Health Headlines.)  In June 2017, a reportedly leaked draft of an executive order surfaced in the media, setting forth certain policies to reduce the cost of drugs. The draft executive order instructed HRSA to ensure that the revenue generated by the 340B Program for covered entities is used to benefit lower-income and vulnerable populations, including by rescinding or revising regulations and guidance. In July 2017, CMS proposed to slash Medicare Part B reimbursement for 340B-discounted drugs to hospitals participating in the 340B Program. (See July 17, 2017 Client Alert.)  Additionally, this year, HRSA postponed four times the effective date of a rule establishing the calculation of a drug’s ceiling price and civil monetary penalties for manufacturers in the 340B Program. (See August 21, 2017 issue of Health Headlines.)  Together, the actions taken and statements made by the Trump Administration suggest that the primary concern with respect to the 340B Program is compliance and spending by covered entities, and therefore, any planned reform would focus on these areas.

Center for Medicare & Medicaid Innovation: End Mandatory Initiatives and Start Value-Based Payment Initiatives for Drugs and Devices

While there is no explicit mention of Medicare in the Policy Document, the document addresses CMMI, stating “CMMI: end mandatory demos. Start some demos on VBP for drugs and devices.”  Republican lawmakers have long been critical of CMMI’s mandatory initiatives, arguing that such initiatives overstep CMMI’s authority. The Trump Administration has already taken action to curtail the mandatory initiatives: on August 15, 2017, CMS announced a proposed rule to cancel the mandatory Episode Payment Models and Cardiac Rehabilitation incentive models scheduled to begin January 1, 2018 and to cut the number of Metropolitan Statistical Areas required to participate in the Comprehensive Care for Joint Replacement model, the only remaining mandatory payment demonstration. (See August 21, 2017 issue of Health Headlines.)  It appears that, under the Trump Administration, CMMI may turn to value-based payment demonstrations for drugs and devices instead.

Medicaid: Ending the IMD Exclusion and Permitting Work Requirements

With respect to Medicaid, the Policy Document states: “Medicaid: end the IMD exclusion. 1115s that increase work requirements.”  The “IMD exclusion” is set forth in the Medicaid statute, which excludes “payments with respect to care or services for any individual who has not attained 65 years of age and who is a patient in an institution for mental illness.”  42 U.S.C. § 1396d(a)(29)(B). Since its inception in 1965, the IMD exclusion was modified to exempt children under age 21 and to permit coverage for small (16 beds or fewer) mental health institutions. The Affordable Care Act established a limited demonstration project that permitted Medicaid to pay for certain care in an IMD. Most recently, in April 2016, CMS finalized a rule that permitted Medicaid managed care organizations to pay for members’ short-term stay in an IMD for up to 15 days per month. Thus, over time, the IMD exclusion has been narrowed by both Congress and CMS. However, since the exclusion is statutory, the White House cannot unilaterally “end” it without an amendment by Congress.

The item “1115s that increase work requirements” appears to refer to work requirements as a condition of Medicaid eligibility as part of Section 1115 waivers to States.  In the past year, a number of States have proposed mandatory or voluntary work programs as part of their Section 1115 Medicaid expansion waiver applications. CMS has yet to approve any State’s request to require that Medicaid beneficiaries work as a condition of eligibility. However, on March 14, 2017, CMS sent a letter to State governors, stating, “[i]t is our intent to use existing Section 1115 demonstration authority to review and approve meritorious innovations that build on the human dignity that comes with training, employment and independence.”  Under the current statutory language, there are four general criteria for CMS to consider in reviewing Section 1115 waiver proposals. These criteria pertain to increasing coverage for low-income individuals, increasing access to providers, improving health outcomes, and increasing efficiency. It is not clear which of these criteria a work requirement would fall under. Therefore, if CMS approves a Section 1115 Medicaid expansion waiver application with a work requirement without further statutory change, it may draw a legal challenge by opponents of the policy.

The Policy Document is available here.