Washington Healthcare Update

by McGuireWoods LLP

This Week: Upcoming Hearing: HHS Sec. Burwell Appearing Before E&C Committee on FY2016 Budget... CMS Issues 2016 Payment and Policy Updates for Medicare Health and Drug Plans... CMS Releases Improved Rating System for Nursing Home Compare.

1. Congress


Upcoming: HHS Sec. Burwell Appearing Before E&C Committee on FY2016 Budget

The Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), has scheduled a hearing for Thursday, Feb. 26 at 10 a.m. in room 2123 of the Rayburn House Office Building. The hearing is entitled “Examining the FY 2016 HHS Budget.” Health and Human Services Secretary Sylvia Burwell will be the sole witness. Subcommittee members will question Secretary Burwell regarding the Health and Human Services budget, the second open enrollment period for the president’s health care law, the status of the backend of the exchanges and the administration’s planning for the upcoming Supreme Court decision in the case of King v. Burwell. Last week marked the deadline for HHS to respond to a recent letter from Energy and Commerce Committee leaders seeking information about the administration’s contingency planning for the upcoming Supreme Court decision in the case of King v. Burwell. The administration has so far failed to respond to the committee’s questions, including, “What actions, analysis and/or contingency planning has HHS undertaken in advance of the Supreme Court’s King v. Burwell decision?” For more information, please visit energycommerce.house.gov.


53 Senators Send Bipartisan Letter to CMS to Prevent Medicare Advantage Cuts in 2016

A bipartisan group of 53 senators recently sent a letter to the Centers for Medicare and Medicaid Services (CMS) Administrator Marilynn Tavenner, urging the agency to minimize disruptions for beneficiaries enrolled in the Medicare Advantage (MA) program by maintaining payment levels and providing a stable policy environment for 2016. The new letter, spearheaded by Senators Charles Schumer (D-NY) and Mike Crapo (R-ID), said, “Regulatory policy changes that affect the program’s funding, year after year, are creating disruption and confusion among beneficiaries who are looking for consistency and predictability and can damage a program that offers value for beneficiaries.” The letter comes in advance of the CY2016 45-Day Notice for Medicare Advantage (MA) to be released by CMS later this year. In the past, the MA rate-setting cycle has followed a similar pattern: CMS proposes cuts, the industry and members of Congress push back, and then CMS backpedals on some of the reductions. The letter adds many new members in support of protecting MA rates, including Sens. Susan Collins (R-ME), Mark Kirk (R-IL), Rand Paul (R-KY), Angus King (I-ME) and Jon Tester (D-MT). More than 16 million seniors and individuals with disabilities — accounting for approximately 30 percent of all Medicare beneficiaries — are currently enrolled in MA plans, which typically offer a range of innovative services and coordinated benefits.

2. Administration

Many Deadlines Extended for Purchasing ACA Plans Directly From Insurers

U.S. consumers who failed to enroll in health insurance coverage by the Feb. 15 deadline but still want coverage starting March 1 have the option of purchasing health insurance plans directly from insurers. As it stands, insurers in at least 28 states are still accepting applications for health insurance plans beyond Sunday’s deadline, many until the end of February; however, income-based subsidies are not available off the exchanges. The states with extended deadlines include both federal and state-run exchanges, and include: Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Missouri, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin. Worth noting, every consumer who created a Healthcare.gov Marketplace account but did not finish the enrollment process had until Feb. 22 to complete their enrollment.

Information on deadlines by state can be found here.

CMS Issues 2016 Payment and Policy Updates for Medicare Health and Drug Plans

On Feb. 20, CMS released proposed updates to the Medicare Advantage and Part D programs through the 2016 Advance Notice and Draft Call Letter. Through the 2016 Advance Notice, CMS is proposing updates to the methodologies used to pay MA plans and Part D sponsors. The 2016 Draft Call Letter includes a number of updates to the star rating system used to assess the performance of plans in providing enrollees with high quality care, including policies intended to improve the accuracy of the evaluation system, as well as to improve incentives for plans to provide care for dual eligible or low-income beneficiaries. In addition, the letter proposes to improve the information available to beneficiaries regarding plan networks, including an emphasis on requirements for plans to maintain accurate provider directories for beneficiaries. The letter also announces CMS’s intention to work with plans to collect information on the adoption of valued-based payment models among health plans. Comments on the proposed Advance Notice and Draft Call Letter are invited from the industry and the public and must be submitted by March 6, 2015. The 2016 Final Rate Announcement and Call Letter will be published on Monday, April 6, 2015.

Final HHS Notice of Benefit and Payment Parameters for 2016

On Feb. 20, CMS issued the Final HHS Notice of Benefit and Payment Parameters for 2016. The Final Notice includes payment parameters applicable to the 2016 benefit year, and proposes new standards intended to improve consumers’ experience and ensure coverage is affordable and accessible, and generally addresses coverage that will be available to consumers in 2016. For 2016, CMS set the open enrollment period for non-grandfathered policies in the individual market, inside and outside the Marketplace, for the 2016 benefit year to run from November 1, 2015 through January 31, 2016. The final rule also clarifies that that Federal and State employment taxes should not be excluded from premium in the Medical Loss Ratio (MLR) and rebate calculations. In addition, the rule would permit SHOPs to assist employers in the administration of continuation coverage (COBRA) enrolled in through a SHOP, and permit a SHOP to elect to renew an employer’s offer of coverage where the employer remains eligible to participate in the SHOP, and has taken no action to modify its offer of coverage or withdraw from the SHOP during its annual election period, so long as the offered coverage remains available through the SHOP.

CMS Releases Improved Rating System for Nursing Home Compare

On Feb. 20, the Centers for Medicare & Medicaid Services (CMS) debuted Nursing Home Compare (NHC) 3.0, an expanded and strengthened NHC 5-Star Quality Rating System for Nursing Homes, on the CMS Nursing Home Compare website. The new website contains two additional quality measures that address antipsychotic medication use, higher performance standards and more accurate calculations of staffing levels, among other changes. Nursing Home Compare was launched in 1998, and the website gets more than 1.4 million visitors per year. Moreover, the latest round of updates mark the third major revision to the website, with a fourth major improvement scheduled for 2016. The 5-Star Quality Rating System offers the most comprehensive overview of nursing home quality in the U.S.

A fact sheet detailing the changes can be found here.

IRS Announces Delay in HRA Employer Penalties

The IRS has announced it will delay imposing excise taxes on small businesses that reimburse employees for purchasing individual health insurance policies. Employers’ reimbursing employees for buying individual plans is an arrangement that does not comply with the market reforms in the Patient Protection and Affordable Care Act. Therefore, employers that offer health reimbursement arrangements could face excise taxes of $100 a day per employee, according to the report. However, businesses with less than 50 employees with HRAs will avoid the excise taxes until July 1. An employer payment plan as described in Notice 2013-54 refers to a group health plan under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy or directly pays a premium for an individual health insurance policy covering the employee, such as arrangements described in Revenue Ruling 61-146, 1961-2 C.B. 25. The United States Department of Labor (DOL) and the United States Department of Health and Human Services (HHS) (collectively with the Treasury Department and the IRS, the Departments) have reviewed this notice and have advised the Treasury Department and the IRS that they agree with the guidance provided in this notice. The Treasury Department and the IRS anticipate that clarifications regarding other aspects of employer payment plans and HRAs will be provided in the near future.

Basic Health Program Funding Methodology Final Notice

On Feb. 19, CMS issued a final notice establishing the methodology for determining federal funding for the Basic Health Program in program year 2016. The Basic Health Program provides states with the option to establish a health benefits coverage program for lower-income individuals as an alternative to Health Insurance Marketplace coverage under the Affordable Care Act. This voluntary program enables states to create a health benefits program for residents with incomes that are too high to qualify for Medicaid through Medicaid expansion in the ACA, but are in the lower income bracket to be eligible to purchase coverage through the Marketplace. This final notice is substantially the same as the final notice for program year 2015. Benefits include at least the 10 essential health benefits specified in the ACA; states can add benefits at their option. The monthly premium and cost sharing charged to eligible individuals will not exceed what an eligible individual would have paid if he or she were to receive coverage from a qualified health plan through the Marketplace, including cost-sharing reductions and advance premium tax credits; a state can lower premiums and other out-of-pocket costs at its option. A state that operates a Basic Health Program will receive federal funding equal to 95 percent of the amount of the premium tax credit and the cost-sharing reductions that would have otherwise been provided to (or on behalf of) eligible individuals if these individuals enrolled in qualified health plans through the Marketplace.

CMS Announces 2014 Plan Year Cost-Sharing Reduction Reconciliation

On Feb. 13, CMS announced it will reconcile 2014 benefit year cost-sharing reductions for all issuers in April 2016, rather than in April 2015, in an attempt to enhance the accuracy of reconciliation of cost-sharing reduction payments to issuers, and to fully reimburse issuers for reductions in out-of-pocket expenses provided to eligible low- and moderate-income enrollees and American Indian/Alaska Native enrollees in 2014. The ACA requires issuers of qualified health plans (QHPs) to provide cost-sharing reductions to eligible enrollees in such plans, and provides for issuers to be reimbursed for the value of those cost-sharing reductions. Under implementing regulations, monthly advance cost-sharing reduction payments to issuers were authorized starting in 2014, and a process was provided for issuers to reconcile these advance payments to actual cost-sharing reductions provided to these enrollees. The process for reconciling advanced payments for cost-sharing reductions is detailed at 45 CFR 156.430. Under CMS regulations, as a transitional measure, issuers were permitted to elect either to calculate cost sharing that an enrollee would have paid under the standard plan using the standard methodology — the most accurate approach — or to estimate that cost sharing using a simplified methodology based on actuarial estimates of certain key cost-sharing parameters.

ACA Enrollment Reaches 11.4 Million As Open Enrollment Ends

On Feb. 15, the second year of Open Enrollment came to a close with about 11.4 million consumers selecting plans or being automatically re-enrolled through the HealthCare.gov platform or State-Based Marketplaces, exceeding the Administration’s goal of 11.2 million. This week’s snapshot extends through midnight EST on Sunday, Feb. 15 to capture those consumers who signed up for affordable coverage in the final nine days. Of the 11.4 million, 8.6 million consumers selected a plan or were automatically re-enrolled in the 37 states that use the HealthCare.gov platform. In addition, preliminary analyses of data provided by State-Based Marketplaces show that about 2.8 million consumers selected plans or were automatically re-enrolled between Nov. 15 and Feb. 15 in those states. Further details about plan selections from State-Based Marketplaces may be announced by the states and will be included within the upcoming monthly enrollment report. For more information, please visit www.hhs.gov.

3. State Activities

Kansas Legislators Introduce Medicaid Expansion Legislation

Lawmakers in Kansas have introduced legislation to expand the state’s Medicaid program, as provided under the ACA, while attempting to attract Republican support through provisions such as a potential work requirement for enrollees, and a provider fee designed to offset the state’s portion of the expansion cost. The Kansas Hospital Association is reviewing the legislation, which would extend Medicaid coverage to between 140,000 and 170,000 Kansans, and also implement data analysis of how Medicaid expansion affects the Kansas economy and the health outcomes of Kansans. Under the ACA, Medicaid eligibility is extended to Americans who earn up to 138 percent of the federal poverty level — annually $16,105 for an individual and $32,913 for a family of four. The federal government would pay 100 percent of Medicaid expansion costs through 2016, at which point the cost sharing will begin dropping to a 90-10 federal-state split.

Kentucky Governor Releases Study Assessing Impacts of Medicaid Expansion

In a report released Feb. 12 by Gov. Steve Beshear (D), the governor’s office found that Medicaid expansion in Kentucky will create an additional 40,000 jobs and $30 billion to the state’s economy through 2021. “The combined effects of these added jobs will have a significant effect on our families and communities all across Kentucky.… If we had not expanded Medicaid, Kentucky would still have incurred about $100 million in additional cost out of general funds — not to mention the millions of dollars that would have hit Kentucky employers,” said Gov. Beshear at a press conference. The expansion also increases revenue for medical providers and reduces uncompensated care charges for hospitals as providers received an additional $1.16 billion in revenue and hospitals saw uncompensated care costs decrease by $1.15 billion in 2014. As of Feb. 5, the state said 46,422 individuals had enrolled in Medicaid coverage. Thus far, 28 states and the District of Columbia have agreed to expand Medicaid under the ACA since the U.S. Supreme Court ruled in 2012 that the decision was up to states and not mandatory.

Tennessee Lawmakers Attempt to Revive Medicaid Expansion Debate

Despite the uphill nature of their cause, as evidenced by the recent defeat of a similar legislative attempt, Democrats in the Tennessee state House and Senate have introduced legislation that would revive Gov. Bill Haslam’s Insure Tennessee plan or allow the state to push forward with traditional Medicaid expansion. The governor’s plan would have used federal dollars made available through the ACA to provide health care options for anyone earning up to 138 percent of the federal poverty line. The state estimated 280,000 of the roughly 470,000 eligible for the plan would sign up in the first year. Lt. Gov. Ron Ramsey, R-Blountville, said only nine of the 33 members in the state Senate supported the plan during the special session, and doesn’t think much has changed.

4. Regulations Open for Comment

FDA Reopens Comment Period for Generic Drug Labeling Rule

In an announcement Feb. 17, the Food and Drug Administration (FDA) revealed that it has formally re-opened the comment period for a controversial generic drug labeling proposed rule and will hold a public meeting next month to address concerns with the rule and possible alternatives. The rule, which FDA proposed in 2013, would allow generic drugmakers to unilaterally update safety information and would require generic drugmakers to modify their labels independently of their brand-name counterparts, something that only brand-name drugmakers can currently do before receiving agency permission. The FDA proposed the rule in response to a 2011 U.S. Supreme Court decision that federal law does not permit generic drugmakers to make such changes independently and, therefore, they should not be held accountable for a failure to warn against a risk. Stakeholders will have until April 27 to comment on the proposed rule; the agency’s public hearing to receive more input from stakeholders will be held on March 27 from 8 a.m. to 5 p.m. at FDA’s White Oak campus.

FDA Releases Five Draft Guidance Documents on Drug Compounding

On Feb. 13, U.S. Food and Drug Administration (FDA) issued five draft guidance documents related to drug compounding and repackaging that will help entities comply with important public health provisions; guidance will be applicable to pharmacies, federal facilities, outsourcing facilities and physicians and comes as an outcrop of the Drug Quality and Security Act (DQSA), enacted by Congress in November 2013, in response to a deadly fungal meningitis outbreak that was linked to contaminated sterile compounded drug products. Specifically, the documents include potential direction on outsourcing facility registration, outsourcing facility adverse event reporting, drug repackaging, mixing, diluting and repackaging biological products, and a draft Memorandum of Understanding (MOU) with the states. The draft guidance documents are available for public comment until May 14, while draft comment for the draft MOU is open until June 13.

FDA Releases Draft to Streamline Experimental Drug Applications

On Feb. 4, the Food and Drug Administration (FDA) released draft guidance, entitled Individual Patient Expanded Access Applications: Form 3926, for a new, shorter application for patient access to experimental drugs. The draft comes in response to concerns that the existing process for “compassionate use” for experimental drug applications was too arduous. In the guidance, FDA says the newly proposed form would take doctors 45 minutes to complete whereas the existing form is estimated to take 100 minutes. Under the old system, FDA required that a “cover sheet” be included with any IND submission, known as Form 1571. However, that form was originally intended to be used by companies involved in drug development, not physicians, who submit the vast majority of expanded access requests. FDA said it was “concerned” that some physicians might not understand how to complete that cover sheet “and associated documents because it is not tailored to requests for individual patient expanded access.” Peter Laurie, FDA’s associate commissioner for public health strategy and analysis, said the changes would greatly simplify the compassionate use process. The old form “called for 26 separate types of information and seven attachments,” he noted. “The new form calls for a small fraction of that. The new draft form, when finalized, will require only eight elements of information and a single attachment.” The changes announced by the agency are expected to affect a significant number of patients each year; in 2014, FDA processed 1,758 single patient investigational new drug applications and emergency investigational new drug applications—97 percent of all expanded access requests. Comments and suggestions for the draft document should be submitted by April 13, 2015.

FDA Reopens Comment Period for Certain Provisions within Generic Drug User Fee Amendments

On Feb. 6, the Food and Drug Administration (FDA) posted a Federal Register notice reopening the public docket to solicit comments on certain topics related to Generic Drug User Fee Amendments of 2012 (GDUFA) implementation and the GDUFA Commitment Letter that accompanies the legislation. FDA will reopen the comment period to the public docket associated with the Sept. 17, 2014, GDUFA Public Hearing on Policy Development for an additional 30 days. Specifically, the agency has requested public input on the five draft guidance documents that were issued to facilitate implementation of GDUFA and on future policy priorities including recommendations for additional guidance topics to facilitate GDUFA implementation. FDA also requested feedback on issues that may arise in consideration of 180-day exclusivity provided for by paragraph IV patent certifications. Finally, FDA requested feedback on the specific criteria FDA should apply to identify an abbreviated new drug application (ANDA) as a first generic eligible for expedited ANDA review. FDA will take the information presented at the public hearing and in comments to the docket into account when developing the fiscal year 2015 GDUFA priorities. Interested persons may submit either electronic comments regarding this document to www.regulations.gov or written comments to the Division of Dockets Management by close of business March 9.

5. Reports

OIG: CMS Made Payments Associated with Individual Physicians After Referring Their Medicare Debts to the Department of the Treasury for Collection

According to a report from the Dept. of Health and Human Services Office of the Inspector General (HHS-OIG), CMS made Medicare and Medicaid payments associated with 23 of 82 individual physicians with delinquent debts after CMS had referred their Medicare debts to Treasury or collection. Specifically, CMS directly paid five individual physicians after having referred their Medicare debts to Treasury, and 21 individual physicians provided services for an entity that received Federal reimbursement. We found that the 23 individual physicians, who collectively owed CMS a total of $8,844,782 ($8,802,701 owed by 21 individual physicians who performed services for entities and $42,081 owed by two individual physicians who received only direct payments), were paid a total of $10,734,926 ($317,134 in direct payments to five individual physicians and $10,417,792 in payments to entities for services performed by the 21 individual physicians). In addition, 13 of the 23 individual physicians whose debts were referred to Treasury had ownership interest and/or managing control of 15 Medicare Part B entities that received Medicare reimbursement from CMS after CMS referred the individual physicians’ debts to Treasury. Although these individual physicians are not precluded from indirectly receiving Medicare Part B payments through an entity, we noted that CMS published a proposed rule in April 2013 that, if finalized, may deny an entity’s enrollment due to Medicare debt owed by an owner.

CBO Offers Suggestions for Cutting Health Care Spending Growth

In a presentation given Feb. 18 to the Organisation for Economic Co-operation and Development in Paris by the Congressional Budget Office’s (CBO) Deputy Assistant Director for Health, Jessica Banthin, the non-partisan agency offered general options for curbing health care spending growth, including cutting federal subsidies for health insurance for low-income populations. Also suggested were removing tax preferences for employment-based health insurance, paying Medicare providers differently, making structural changes to health care programs, and improving the overall health of the U.S. population. The presentation notes that by 2024, CBO estimates that 43 percent of the growth in federal spending will be due to the aging population and 44 percent of the growth will be due to expanding federal health care programs, and the increase in spending per person is expected to account for 13 percent of that growth. By 2039, CBO believes cost factors will change significantly, with the aging population accounting for 55 percent of spending growth, program expansion accounting for 21 percent of growth, and an increase in per-person costs being responsible for 24 percent.

Progress With Electronic Health Record Adoption Among Emergency and Outpatient Departments: United States, 2006–2011

The Centers for Disease Control and Prevention has issued the results of a survey it conducted regarding the adoption of electronic health records (EHRs) in hospital emergency departments (EDs) and outpatient departments (OPDs) from 2006 through 2011 using the National Hospital Ambulatory Medical Care Survey (NHAMCS). Among the survey’s findings, in 2011, 84 percent of hospital emergency departments (EDs) used an EHR system, and adoption of a basic EHR system with a specific set of functionalities by EDs increased from 19 percent in 2007 to 54 percent in 2011. In addition, in 2011, 73 percent of hospital OPDs used an EHR system, up from 29 percent in 2006, and adoption of a basic EHR system with a specific set of functionalities by OPDs increased from 9 percent in 2007 to 57 percent in 2011. The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 provides incentive payments to eligible hospitals and providers that demonstrate the meaningful use of a certified electronic health record (EHR) system.

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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