Manatt on Health Reform: Weekly Highlights - November 2016 #3

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

In a special “Manatt on Health Reform” feature, we track Governors’ and state healthcare officials’ reactions to the Presidential election; HHS plans investigations into rising drug costs; and Colorado voters reject a single-payer proposal.


In Alabama, Governor Robert Bentley (R), who called for Medicaid block grants in 2014, praised the potential for more state control over Medicaid spending.

Governor Asa Hutchinson (R) in Arkansas said in the short term he anticipated greater flexibility to implement changes through the State’s 1115 waivers. “It’s going to take some time,” Governor Hutchinson said, “but I expect fairly significant and dramatic changes in reference to health care policy and its relationship to states in the future.” The Governor would not speculate on whether Medicaid expansion should remain in effect if the ACA were repealed.

Peter Lee, the executive director of California’s State-based Marketplace, highlighted that the Marketplace is “open for business” while the State’s Insurance Commissioner, Dave Jones, issued a warning about the negative impact of ACA repeal.

In Connecticut, Governor Dannel Malloy (D) encouraged State residents to continue enrolling in coverage on Access Health CT, the State-based Marketplace. Access Health CEO Jim Wadleigh said the Marketplace is “trying to make sure that our customers understand that the Affordable Care Act is still the law and they have to enroll during open enrollment.”

Florida Governor Rick Scott (R), a former hospital executive, took a strong stance, saying, “We must repeal Obamacare” and that the country “cannot afford to ‘TWEAK’ Obamacare.”

Georgia’s State House Speaker David Ralston (R) said that it no longer makes sense to consider Medicaid expansion. “I would not think it’s the thing for us to do to jump on a sinking ship,” Ralston said. “We will look at what steps we need to move forward to give people a realistic health care policy rather than an empty promise which is what this entire experiment has been.”

In Kentucky, where the previous Governor expanded Medicaid and current Governor Matt Bevin (R) is awaiting CMS’s response on a waiver request, Governor Bevin said the day that the ACA is “gone” will be “a good day.” However, Governor Bevin’s Administration said it will continue negotiations with the Obama Administration over its pending Medicaid expansion waiver request.

Louisiana Governor Jon Bel Edwards (D) said he was optimistic the State’s Medicaid expansion program would remain in place. "I just don't believe at the end of the day that the new President or Congress will cause all these people around the country to lose their coverage," he said.

Massachusetts Governor Charlie Baker (R) and insurance leaders emphasized that near-universal coverage in their State will likely insulate it against any upcoming changes. Universal healthcare coverage, he said, “is a policy statement...that’s held in very high regard here in the Commonwealth, and we’ll do what we need to do to make sure that we continue to be a national leader on this.”

Governor Rick Snyder (R) of Michigan indicated he will seek to sustain the State’s Medicaid expansion next year. A spokesperson for the Governor said, “Going forward we will work closely with the federal government to convey the successes of Healthy Michigan and the 600,000-plus Michiganders it is serving."

Mississippi Insurance Commissioner Mike Chaney, long-active in conversations about establishing a State-based Marketplace in Mississippi, said he supports changes to the ACA and predicted better access to coverage for veterans. "I see a leveling out of [the] cost of healthcare. I think you're going to see pharmaceutical companies held more responsible and held liable for some of their overpriced products," said Chaney.

Governor Tom Wolf (D) of Pennsylvania said he wants to defend access to healthcare. "We have almost 700,000 people who are taking advantage of the Affordable Care Act, who now have health insurance, and I hate to think what might happen if they lose that health insurance."

South Dakota Governor Dennis Daugaard (R), whose administration had worked to expand Medicaid, said he will no longer pursue Medicaid expansion in his State after a discussion with Vice President-elect Mike Pence. He said his Administration intends to work with President-elect Donald Trump and the State’s congressional delegation to leverage the federal policy change and prospect of reforming the Medicaid program.

Representative Cameron Sexton (R), chairman of a Tennessee health reform legislative task force that had been crafting an alternative Medicaid expansion proposal, said the new Administration will likely provide Tennessee more flexibility in making changes to its Medicaid program. “We think under the new administration we will be better able to create a better Tennessee solution to the health care issue,” said Sexton.

Lawrence Miller, chief of healthcare reform for current Vermont Governor Peter Shumlin (D), expressed concern that some of the progress made in the State would be undone, but also said he was hopeful that the State’s recently approved all-payer ACO model would go forward. “I do think there’s a lot of compelling aspects of the model, regardless of where you are on the political spectrum,” Miller said. Vermont’s Governor-elect Phil Scott (R) has voiced skepticism about the all-payer model.

Washington Governor Jay Inslee (D) indicated he will seek to finalize approval of the State’s $2.3 billion Medicaid waiver prior to the new Administration. The waiver, which has already received preliminary CMS authorization, is designed to transform the State’s Medicaid delivery system, including through creation of nine regional Accountable Communities of Health.

FEDERAL MARKETPLACE ACTIVITY: Has Its Largest Single Day of 2017 Sign-Ups Following the Election

More than 100,000 people selected plans on the day after the Presidential election, making it the strongest day of enrollment since 2017 open enrollment began on November 1. The current Administration continues to encourage consumers to sign up for coverage through despite President-elect Donald Trump's campaign promise to repeal and replace the ACA.

CMS Releases Proposed 2018 Marketplace Guidelines

CMS published proposed 2018 operational and technical guidance for individual, group and dental plan issuers on the Federally-facilitated Marketplace (FFM), including guidance on plan certification processes and standards, use of consumer support tools, and plan performance and oversight. The guidelines note that CMS will begin conducting ongoing assessments of issuer data to ensure compliance with non-discrimination standards, in addition to collecting attestations from issuers that they do not discriminate against enrollees on the basis of health status, race, national origin, disability, age, sex, gender identity or sexual orientation. States leveraging the FFM solely for plan management have the flexibility to operate outside of the proposed guidelines. The federal comment period is open through the end of November.


HHS OIG Will Investigate Rising Drug Costs

HHS’s Office of Inspector General (OIG) is planning several audits and investigations into rising prescription drug costs according to its 2017 work plan, and an OIG spokesperson has described prescription drug oversight as a “top priority” for the organization. The OIG plans to launch investigations into drug claims by managed care organizations and to continue investigating specialty drug pricing and reimbursements. It also is planning several new Medicare projects, including an evaluation of drug waste in single-use vial drugs, potential savings from inflation-based rebates in Medicare Part B, and questionable billing for compounded topical drugs in Medicare Part D. Part D spending for compounded topical drugs increased by more than 3,400% between 2006 and 2015.

Colorado: Voters Reject Single-Payer Initiative

A ballot measure to replace Connect for Health Colorado, the State-based Marketplace, with ColoradoCare, a universal healthcare coverage initiative, failed on Tuesday, with nearly 80% of voters rejecting the measure. An August Colorado Health Institute report projected that ColoradoCare could have faced revenue shortfalls of $253 million in its first year and $7.8 billion over 10 years as healthcare costs outpaced program revenue generated by a 10% payroll tax increase.

Oregon: State Regulators to Propose Legislative Measures to Stabilize Individual Insurance Market

The Oregon Department of Consumer and Business Services (DCBS) will submit a package of proposals during the upcoming legislative session in February 2017 aimed at stabilizing the State's individual insurance market, according to media reports. It will include several measures to spread risk (such as re-establishing and expanding the expiring State reinsurance program or creating an additional insurance option for consumers in areas of the State with limited choice), compel more uniform pricing for certain procedures and encourage wider market participation by insurers. In addition, DCBS seeks to reduce the grace period on late premium payments from 90 to 30 days, set uniform agent commissions, and create a defined contribution mechanism for employers to buy individual plans.


CMS Publishes FAQ on Medicaid Managed Care Final Rule

CMS provided answers to frequently asked questions regarding the Medicaid managed care rule that was finalized earlier this year, including identifying circumstances under which states can claim the enhanced federal match for external quality review (EQR) activities. EQR-related questions were spurred by the June release of an informational bulletin that announced a reduced federal matching rate for EQR. Other topics addressed in the FAQ document include plan appeals, rate setting, and the process by which Medicaid managed care enrollees can file complaints on benefits or services. This is the first in what is expected to be a continuing series of FAQs on the implementation of the Medicaid managed care final rule.

California: Voters Reject Measure Requiring the State Purchase Drugs at VA Prices

A measure that would have required the State to purchase prescription drugs at no more than the lowest price paid by the U.S. Department of Veterans Affairs (VA) was voted down in Tuesday’s election, garnering 46% of the vote. The measure would have only impacted the State’s purchase of drugs for 12% of the State’s population, including State employees and retirees, inmates, and Medi-Cal fee-for-service beneficiaries. Medi-Cal managed care, which accounts for over 75% of the Medi-Cal population, was exempt from the measure. Pharmaceutical companies opposed the measure, as did veterans’ groups who feared approval would result in drug companies raising the price of drugs for the VA.

California: Residents Vote to Protect Source of Medicaid Funding

Nearly 70% of residents voted to indefinitely extend the State’s existing statute that imposes fees on private hospitals to help finance Medi-Cal, California’s Medicaid program. The measure also requires voter approval to use any of the funds for purposes other than Medi-Cal, a response to lawmakers diverting program funds during the recession in 2012. The measure had bipartisan support and faced no organized opposition.

Florida: State to Seek Extension of Medicaid Managed Care Waiver, Amendment for Pilot Program on “Flexible Services”

The Agency for Health Care Administration (AHCA), which oversees Florida's Medicaid program, is seeking federal approval to extend by three years its 1115 waiver, which allows for a statewide Medicaid managed care program that provides primary care, acute medical care, dental care and behavioral healthcare to Medicaid recipients. AHCA noted in its submission that it is not making any requests related to its Low Income Pool based on CMS’s June 2015 notification that the authority for the pool would not extend past June 30, 2017, when the current waiver expires. The State also submitted a waiver amendment seeking federal approval for a pilot program that would reimburse managed care plans for “flexible services” for individuals with severe mental illness or substance use disorders, including temporary housing assistance.

Minnesota: Task Force Recommends Improvements to State's Mental Healthcare Delivery System

Governor Mark Dayton’s (D) Task Force on Mental Health released a report recommending a series of initiatives and funding structures to improve Minnesota’s mental healthcare system, including pursuing Medicaid funding for housing support for individuals with disabilities and mental illnesses and establishing more urgent care centers for mental health settings. The task force also recommended greater integration of physical and behavioral health, including through behavioral health homes. Finally, the Task Force encouraged State legislators to expand the Department of Commerce and Health's capacity to enforce mental health parity laws and to require private insurers to cover the same mental health benefits as the State’s Medicaid program. Governor Dayton established the task force in June 2016 to identify gaps in the State’s mental health system and provide recommendations.

New Hampshire: CMS Rejects Waiver Request for Work Requirements, Additional Eligibility Verification

CMS turned down New Hampshire's request to amend its 1115 waiver to include a requirement that unemployed, newly eligible able-bodied adults without children “engag[e] in at least 30 hours per week…of employment and training activities.” CMS also rejected the State's request to require newly eligible adults to verify U.S. citizenship with two forms of identification and prove New Hampshire residency, as well as to require hospitals that serve newly-eligible Medicaid beneficiaries to also provide medical services to beneficiaries of veteran health programs.


Ohio: State Medicaid Director Resigns

Ohio State Medicaid Director John McCarthy will resign in December after five years in his role, during which time McCarthy oversaw Ohio's Medicaid expansion, increased utilization of managed care, and implemented home and community-based services throughout the State. Governor John Kasich (R) has named Barbara Sears, the current assistant director of Ohio's Office of Health Transformation, as McCarthy's replacement.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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