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Vol. 18, No. 5 - February 5, 2015
President’s Budget
Tracks With House
Push For Pharmacy
Lock-In Polices
Falling in line with the House
Energy & Commerce Committee’s
21st Century Cures draft, President
Barack Obama’s fiscal 2016 budget
for the first time includes a proposal
to lock Medicare beneficiaries at high
risk of substance abuse into certain
pharmacies or prescribers to cut down
on drug abuse, and some following the
issue say given the bipartisan and
administrative support the issue is not
expected to go away any time soon.
Beneficiary lock-in programs are
used in commercial and Medicaid
plans, and Cindy Reilly, director of
PEW Charitable Trusts’ prescription
drug abuse project, says the group is
pleased there is interest in expanding
these programs to Medicare Part D.
Lock-in programs, or “safe pharmacy
networks,” allow for plans to restrict
beneficiaries deemed high risk to a
certain pharmacy or pharmacies and
to one or more prescribers for drugs
that could be abused, like opioids.
HHS’ budget-in-brief says that
while HHS already requires Part D
sponsors to conduct drug utilization
reviews and see which prescriptions
are filled by certain beneficiaries,
there isn’t much the agency can do
on a preventative basis with that
information.
“These efforts can identify
overutilization that results from
inappropriate or even illegal activity
by an enrollee, prescriber, or pharmacy. HHS’s statutory authorities to
continued on page 10
W&M GOP Plans To Extend Sequestration, DSH
Cut To Offset SGR Patch
House Ways & Means Republicans plan to patch the Medicare Sustainable Growth Rate physician payment formula by the end of March, as opposed
to replacing the SGR, and pay for it by extending for one year both sequestration on mandatory programs and Disproportionate Share Hospital pay cuts,
provider lobbyists say. Also, on the day that President Barack Obama proposed his fiscal 2016 budget, the Congressional Budget Office increased the
price of last year’s bipartisan SGR bill from $144 billion to $177.4 billion.
The House Ways & Means and Energy & Commerce committees and the
Senate Finance Committee last year agreed on a policy to replace the SGR,
and lawmakers said this year they would rely largely on that deal and instead
continued on page 12
Obama’s Budget Adds ACO Patient-Engagement,
Ambulatory Site-Neutral Pay, SGR Bill
President Obama proposes new ACO patient-engagement tools and siteneutral pay policies for ambulatory services in his fiscal 2016 budget request,
but otherwise he generally carries over health care savings measures from last
year’s request. The White House estimates the budget would reduce health
care spending by $423.1 billion, which includes the cost of last year’s bipartisan bill to replace the Sustainable Growth Rate (SGR) formula, other so-called
Medicare extenders, Medicare-appeal reforms and a pilot program to help
states provide long-term care services. However, the Committee for a Responsible Federal Budget estimates net health care savings at $290 billion.
The three measures on accountable care organizations, which the White
continued on page 13
HHS Looks To Reform Medicare Appeals
Through President’s 2016 Budget
HHS says recent efforts by the Office of Medicare Hearings and Appeals
to address the backlog at the third level of appeals are insufficient to handle
the situation, and the agency’s budget lays out a broad set of proposals to
address the large number of appeals entering the system, including imposing a
refundable filing fee and making those filing an appeal go back to the beginning of the process if new evidence is introduced. The agency’s fiscal 2016
budget also suggests using a portion of recovery auditors’ collections to help
fund related appeals at the OMHA and the Departmental Appeals Board, and
indicates that OMHA could hire more staff to help unclog the backlog.
OMHA is supposed to hear Medicare appeals within 90 days, but it takes
continued on page 14
Hospitals Oppose Site-Neutral Outpatient Pay Proposal In Obama’s Budget
Hospital groups oppose a measure in the president’s budget that would lower Medicare pay rates hospitals receive
for outpatient care to the rates paid for providing those same services at doctors’ offices.
The budget proposes site-neutral pay between hospitals and ambulatory surgical centers, which are typically doctors
offices that do same-day minor surgery or diagnostic procedures. Although the fee schedule varies based on the procedure, ambulatory surgical centers typically are paid less. According to President Obama’s fiscal 2016 budget, the siteneutral pay measure would save nearly $30 billion over 10 years. The measure would be phased in over four years
starting in 2017.
Hospital groups say the measure would limit hospitals’ ability to provide a wide range of services 24 hours a day—
something that should remain a factor in how they are paid.
Erik Rasmussen, vice president of legislative affairs for the American Hospital Association, said hospitals are paid
differently from their outpatient counterparts, with hospital pay rates currently based on the cost data they submit to
Medicare and with doctors offices largely paid based on physician work and overhead costs.
“The overhead costs of a hospital are so big compared to a doctor’s office,” Rasmussen said.
A large part of those overhead costs, he said, are for “all the reasons you run to a hospital in an emergency”—
emergency rooms, ambulances, surgery, and 24/7 access to care.
America’s Essential Hospitals, which represents hospitals that largely serve low-income and uninsured populations,
is also opposed to the cost-saving measure.
“Essential hospitals, which already operate at a loss on average, cannot withstand more reductions in federal spending. These proposed cuts would jeopardize access to care for low-income patients, as well as trauma care and other vital
services to entire communities,” a statement from the group said.
This idea was opposed by hospitals late last year when a similar concept was proposed to the Medicare Payment
Advisory Commission. That site-neutral recommendation targeted 66 hospital services that would begin receiving the
lower outpatient rates. MedPAC staff estimated this would reduce hospital pay by 0.9 percent and leave them with a
negative 9 percent profit margin, which they did not believe would affect hospitals’ willingness to treat Medicare patients.
The concept would also work toward eliminating hospitals’ financial incentive to buy outpatient doctors offices and
incorporate them into their services.
The Ambulatory Surgery Center Association declined to comment on the budget until more details of the proposal
are released. —Rebecca Beitsch
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Alexander Launches Senate Version Of Cures Initiative
Oversight Members Ask IRS For Details On ACA Implementation, Suggest Advising Taxpayers Of
Potential King Consequences
Former Treasury, HHS, OMB Officials File Amicus Brief In King/Burwell
ONC Releases Interoperability Roadmap
White House Unveils More Details On Precision Medicine Initiative
NQF Submits Quality Measure Recommendations To HHS
Administration Releases 2016 Budget
OIG’s 2016 Budget Justification Document
American College Of Physicians Joins Campaign For Sustainable Rx Pricing
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INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
Grassley-Schumer Bill Protects Low-Volume, Medicare-Dependent Extenders
A new bill from Sens. Chuck Grassley (R-IA) and Chuck Schumer (D-NY) would make permanent the low-volume
and Medicare-dependent hospital extenders that typically ride with patches to the Sustainable Growth Rate formula that
sets physician pay. The measures expire April 1, the same time that the SGR pay patch runs out.
The Rural Hospital Access Act (S. 332/H.R. 663) would continue the two programs that have been close to the
chopping block in previous years as Congress looked to cut costs. The Congressional Budget Office has not yet scored
the bill.
The Medicare dependent hospital portion of the bill deals with roughly 200 smaller hospitals that have a more than
60 percent Medicare patient load and receive Medicare reimbursement rates enhanced by about 10 percent.
Maggie Elehwany, of the National Rural Health Association, said Medicare beneficiaries account for 70 percent to
80 percent of the patients that many rural hospitals care for, so they cannot rely on payments for privately-insured patients
to make up what they would lose from Medicare.
“If they were to lose that they would have to try to get 20 percent more from private payers, and we know that’s not
going to happen,” Elehwany said, “There are just not the people out there.”
The low volume hospital extender currently reimburses rural hospitals with a low patient load at higher rates to help
offset the costs of services these facilities are required to provide.
A statement from Grassley’s office said the low volume extender “recognizes the fixed costs of treating these patients
relative to the prospective payment system that favors high beneficiary volume. This funding is critical to the survival of
these programs because they are frequently under financial stress due to their low volume in comparison to their urban
counterparts.”
The American Hospital Association also supports the legislation, saying in a letter to Congress that “these
providers would once again be at a disadvantage and have severe challenges serving their communities” if the extenders
were not passed.
Elehwany said she is hopeful these extenders could pass as stand-alone legislation and become permanent funding
sources for hospitals, something she said is partially owed to the strength of their two Senate champions. She also
believes there is enough pressure on Congress to pass SGR funding and temporarily renew the rural extenders by the
March 31 deadline.—Rebecca Beitsch
Obama’s Budget Invests In Interoperability As ONC Drafts Roadmap
President Barack Obama includes $5 million in his 2016 budget request to support the Office of the National
Coordinator for Health Information Technology’s efforts around interoperability while the ONC unveiled a draft roadmap
including a goal of allowing individuals and providers to send, receive, find and use a common set of electronic clinical
information nationally by the end of 2017.
As the administration and the private sector accelerate efforts to move providers to alternative payment models, the
ONC’s draft roadmap also notes that “current fee-for-service payment policies often deter the exchange of electronic
health information, even when it is technically feasible” and says payers need to “evolve policy and funding levers” to
help create the economic incentives for interoperable health IT.
In a fact sheet on Obama’s Precision Medicine Initiative, the administration pledges to include $5 million in the
upcoming budget “to support the development of interoperability standards and requirements that address privacy and
enable secure exchange of data across systems.” The fact sheet notes this is one of the key investments for launching the
Precision Medicine Initiative, and one ONC official on a press call said interoperability is critical to that effort and to
taking advantage of technology that can target treatment to a person. The draft roadmap includes work around standards,
data privacy and security that the official said feed into the president’s initiative and will help support that work.
The draft roadmap lays out markers for what interoperability efforts could look like in three years, six years,
and ultimately reaching interoperability in 10 years. One health IT lobbyist following the issue said a focus on nearterm goals, and what can be done in the near term to reap long-term benefits, is the right approach for ONC to take.
“Consumers are increasingly expecting their electronic health data to be available when and where it matters to them,
just as their data is in other sectors,” National Coordinator for HIT and Acting Assistant Secretary for Health Karen
DeSalvo says in the ONC’s draft roadmap. “And new technology is allowing for a more accessible, affordable and
innovative approach. However, barriers remain to the seamless sharing and use of electronic health information.”
The draft says barriers include: electronic health information that is not sufficiently structured or standardized, and is
not fully usable when shared among different systems; a lack of financial motives and misinterpretation of existing laws
around health information sharing; differences in relevant statutes, regulations and organizational policies that can hinder
electronic information sharing; a lack of a reliable and systematic method to establish and scale trust across different
networks.
“In a country as large and heterogeneous as the U.S., it is not realistic to suggest that all health information needs will
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
3
be met with a single electronic health information sharing approach. However, the health IT ecosystem must evolve to
address each of these barriers in a lasting and meaningful way to achieve a learning health system that protects the health
of all Americans and provides essential human services to all,” the draft roadmap says.
In the near term, the ONC says the most important actions for public and private sector stakeholders to move toward
national interoperability of electronic health information are establishing a coordinated governance framework and
process for national health IT interoperability; improving the technical standards and implementation guidance for
sharing and using a common clinical data set; enhancing incentives for sharing information electronically according to
common technical standards; and clarifying privacy and security requirements.
To move toward a common data set, ONC says there first needs to be agreement on the policies, operations and
technical standards. In order to reach that goal, ONC says it will make sure there is a governance framework “with
overarching rules of the road for interoperability of health IT,” as well as a public-private process for addressing implementation or operational-level issues and a method for holding organizations accountable for complying with these rules.
The ONC on Friday also released a draft 2015 Interoperability Standards Advisory with the best available
interoperability standards as of December 2014 and that it said was intended to “prompt focused industry dialogue on
areas where disagreement exists regarding the best available standards as well as greater certainty and clarity on areas
where widespread consensus exists.” The ONC emphasized that the advisory is a draft, and encouraged stakeholders to
comment and discuss what standards are included.
“This is a much-needed playbook for each and every health IT professional,” said College of Healthcare Information
Management Executives President and CEO Russell P. Branzell. “Now, healthcare providers and health IT developers
have a single source of truth, with an extensible process to align clinical standards towards improved interoperability,
efficiency and patient safety.”
ONC’s draft roadmap also says that Medicare and Medicaid electronic health record incentive programs, like the
meaningful use of electronic health records programs, have been a primary motivator for providers to adopt and use
health IT, but added “these programs alone are insufficient to create economic incentives that lead to interoperability
across the care continuum and, over time, a learning health system.” The draft roadmap also says fee-for-service payments can hinder interoperability. To ensure interoperability, federal, state and commercial payers need to “evolve policy
and funding levers,” the document says.
Value-based payment programs under the Affordable Care Act have already started to create the right incentives for
interoperability, the draft roadmap says, pointing to Accountable Care Organizations and the Comprehensive Primary
Care Initiative.
“These [value-based pay] models, in addition to existing efforts to increasingly tie fee-for-service payment to quality
and value, present a natural pathway to ensure that incentives for interoperability gradually reach larger populations of
patients and providers,” the draft roadmap says. HHS recently set a goal of having 30 percent of Medicare health reimbursements through alternative, value-based payment models by the end of 2016 and 50 percent by the end of 2018.
The draft also says that many organizations have misinterpreted HIPAA rules and other regulations around sharing
health information, and in order to achieve national interoperability all stakeholders need to understand HIPAA the same
way and how it enables interoperability.
ONC asks stakeholders for feedback on the draft, and comments are due April 3. Comments on the draft 2015
Interoperability Standards Advisory are due in May. — Michelle M. Stein
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INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
Stakeholders Pleased With Meaningful Use Changes Considered By CMS
CMS is considering shortening the so-called meaningful use of electronic health record reporting period for 2015,
alongside other changes to the program, in a planned proposed rule to update Medicare and Medicaid meaningful use, the
agency announced in a blog Thursday (Jan. 29).
The College of Health Information Management Executives, Medical Group Management Association, American
Medical Association, American Hospital Association and Federation of American Hospitals have called the move to
reduce the 2015 reporting period from a full year to 90 days a positive step for the program. Robert Tennant, senior
policy adviser with the Medical Group Management Association, says the move shows CMS’ recognition of significant
problems with the program, and one health IT lobbyist said CMS is essentially correcting a mistake around the length of
the reporting period with this announcement. Stakeholders have been urging CMS to shorten the 2015 reporting period
from a full year to 90 days, but in an August final rule the agency said doing so would hurt the meaningful use program’s
momentum.
In a blog post, CMS Deputy Administrator for Innovation and Quality and Chief Medical Officer Patrick Conway
said that the agency is also considering proposals to move the hospital reporting period to a calendar year cycle, as well
as other modifications.
Conway told IHP these potential changes come in part as a response to stakeholder concerns. A Capitol Hill notice
from CMS says the agency “is working on multiple rulemaking tracks right now to realign the EHR Incentive Programs to
reflect the progress toward program goals and be responsive to stakeholder input.”
Inside Health Policy has learned that a coalition of stakeholders plans to meet with the White House Office of
Management and Budget on meaningful use issues Jan. 29. OMB is currently reviewing CMS’ rule setting up the third
Stage of Meaningful use.
“Stage 3 will also propose changes to the reporting period, timelines, and structure of the program, including
providing a single definition of meaningful use. These changes will provide a flexible, yet, clearer framework to ensure
future sustainability of the EHR program and reduce confusion stemming from multiple stage requirements,” the OMB
notice says.
CMS’ blog and the Capitol Hill notice, however, note that changes to the program will come in a new rule
separate from the one setting up meaningful use Stage 3. The rule on the third stage of meaningful use will be limited to
the scope of Stage 3 requirements and criteria for meaningful use in 2017 and after, the blog says. The Stage 3 proposed
rule is expected to be released in early March, CMS says. The other rule will focus on updates to the program and adding
flexibility to meaningful use.
“The new rule, expected this spring, would be intended to be responsive to provider concerns about software
implementation, information exchange readiness, and other related concerns in 2015. It would also be intended to
propose changes reflective of developments in the industry and progress toward program goals achieved since the
program began in 2011,” the blog says.
CMS says it is considering proposals to realign the hospital reporting period, which is currently set on the fiscal year,
to the calendar year so that hospitals have more time to incorporate the 2014 updated EHRs into their work flow. The
agency previously said 2014 certified EHRs would be required for the 2014 reporting year, but pushed back that requirement to 2015 in a rule last year.
Since a spring proposed rule won’t be finalized until much later in the year, some following the program say realigning the hospitals’ reporting year could help build in a buffer between when the final version of the rule comes out
and when it needs to be implemented. Last year, CMS released a final rule adding flexibility to the meaningful use
program at the end of August with only a few weeks before the hospitals’ new reporting year started.
The agency also says it plans to “[m]odify other aspects of the program to match long-term goals, reduce complexity,
and lessen providers’ reporting burdens,” though it does not provide any other details on what those modifications could
look like.
To “accommodate these changes,” CMS says it will shorten the EHR reporting period for 2015 to 90 days.
The health IT lobbyist said CMS’ announcement might be a way to provide some clarity around the Stage 3 rule so
that stakeholders are not upset when the Stage 3 comes out and doesn’t touch on program design. It also pares down
expectations for the Stage 3 rule, the lobbyist added.
Tennant says he hopes that with the changes to the program decoupled from the rule setting up the third stage of
meaningful use the flexibility rule could be accelerated.
Rep. Renee Ellmers (R-NC) and Ron Kind (D-WI) had introduced the “Flex-IT” Act to shorten the EHR
reporting period for 2015 to 90 days, and Ellmers commended CMS on its intention to implement the shortened
reporting period.
“I am relieved to see CMS addressing the need for a 90-day reporting period in 2015. The additional time and
flexibility afforded by these modifications will help hundreds of thousands of providers meet Stage 2 requirements in an
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
5
effective and safe manner,” Ellmers says in a statement.
Anders Gilberg, MGMA senior vice president for government affairs, said in a statement that the 90-day reporting
provision should be expedited to “give physician practices the confidence they need to continue participating in this
program.” The AHA says in a blog that as fiscal 2015 is well under way, CMS needs to release the final rule as quickly as
possible. The AMA also says it is eager to see the proposed rule.
Tennant said an interim final rule, rather than a proposed rule, would help give providers the confidence to plan for
the 90-day reporting period.
Samantha Burch, vice president for legislation and health information technology for the Federation of American
Hospitals, says that CMS has previously taken an approach where it indicates plans before a proposed and final rule are
released, and the agency has followed through. Based on previous experience, Burch said she would anticipate the 90-day
provision would be finalized. But an interim final rule may give providers more certainty, she said.
The health IT lobbyist said that while an interim final rule could be helpful, it’s more likely that the rule will come
out as a notice of proposed rule making. — Michelle M. Stein
Obama Budget Includes Measures To Boost ACO Participation
The three new measures on Accountable Care Organizations in the president’s budget would save $140 million over
a decade, according to White House estimates, and they align with changes that providers seek in rulemaking for the
second round of ACO contracts in the Medicare Shared Savings Program. The budget calls for allowing ACOs to cover
cost sharing for primary care visits to providers who are in-network, assigning beneficiaries to federally qualified health
centers and rural health clinics, and counting nurse practitioners, physician assistants and clinical nurse specialists as
ACO providers.
“The budget includes several proposals related to Accountable Care Organizations (ACOs) that would give the
Administration increased flexibility in implementation of the ACO program,” according to a Premier Health release.
The budget says 7.8 million Medicare fee-for-service beneficiaries are in ACOs, including the Pioneer ACO demonstration, and HHS Secretary Sylvia Burwell recently announced plans for an aggressive expansion of ACOs and other
alternative Medicare pay models and value-based payment schemes. The budget reinforces the administration’s goal of
ensuring that 30 percent of Medicare payments are made through alternative payment models by 2016 and 50 percent by
2018.
CMS also is working on a regulation for the second round of ACO contracts that providers hope will include significant changes that would encourage more of them to participate in ACOs. They believe the proposed version of that rule is
too restrictive.
Providers want to be allowed to cover cost sharing to steer beneficiaries to providers in ACO networks because ACO
providers worry about being penalized for providers outside the network driving up Medicare spending. The budget says
the approach would not save money; Medicare would not cover the cost, so the measure would not increase spending. But
providers say it would reduce spending by steering patients to providers with an incentive to not provide unneeded
services.
The budget would only allow ACOs that accept two-sided risk to cover cost sharing. ACOs could cover all cost
sharing for beneficiaries with no supplemental insurance, and beneficiaries with supplemental insurance could receive a
payment from ACOs. ACOs would pay to cover cost sharing out of their own pocket so Medicare would not spending
would not increase.
The proposed rule that CMS released in December would let ACOs to get waivers from HHS to cover cost sharing.
The president’s budget does not explain whether CMS would give ACOs more flexibility than what is called for in the
proposed rule. However, the White House Office of Management and Budget approves waivers so the budget is at least
an indication that OMB would favorably view waiver requests.
Clif Gaus, president and CEO of the National Association of ACOs, said he was surprised and pleased by the
proposal.
“We need more details, but it appears to be same as our proposed co-pay waiver for primary care,” he said.
In addition, the budget includes two proposals that would boost the number of patients attributed to ACOs. Those
proposals are in line with what ACOs support, Gaus said.
The budget would allow CMS to assign beneficiaries to federally qualified health centers and rural health clinics that
participate in the Medicare Shared Savings Program, which the White House estimates would reduce spending by $80
million over a decade. Federally qualified health centers and rural health clinics provide primary care and are part of the
safety net, the budget says. Counting those facilities as ACO participants would help ACOs get more patients attributed to
their system.
“This proposal could result in assignment of a greater number of Medicare fee-for-service beneficiaries to
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INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
Accountable Care Organizations and would stimulate greater interest in the program by Federally Qualified Health
Centers and Rural Health Clinics and support the program’s goals to improve quality of care for Medicare fee-for-service
beneficiaries while reducing overall growth in costs,” the budget in brief says.
Lynn Barr, founder of the National Rural Accountable Care Consortium, said only 36 percent of Medicare beneficiaries are assigned to rural ACOs, compared to an assignment rate of 50 percent to 60 percent at urban ACOs.
“I don’t know the details, but anything would help,” she said.
Similarly, the other ACO measure would count nurse practitioners, physician assistants and clinical nurse
specialists as ACO participants, for a savings of $60 million. This measure also would result in more beneficiaries
being attributed to ACOs because the law requires that attribution of beneficiaries to ACOs be based on their use of
primary care services provided by physicians.
“Expanding the assignment of beneficiaries to nurse practitioners, physician assistants and clinical nurse specialists,
in addition to physicians, could broaden the scope of Accountable Care Organizations to better reflect the types of
professionals that deliver primary care services to fee-for-service beneficiaries,” the budget in brief says. “Further, it
could result in a greater number of Medicare fee-for-service beneficiaries being assigned to Accountable Care Organizations that rely on non-physician practitioners for a majority of primary care services, such as those in rural or underserved
areas.” — John Wilkerson
Bill For Medically Complex Kids Raises Questions From Medicaid Directors
Now approaching its second run through Congress, the ACE Kids Act seeks to expand treatment options for sick
Medicaid and CHIP kids, but the bill sparked concern from some Medicaid directors who argue they are already doing
much of what the bill seeks to promote.
The ACE Kids bill, HR 546, which is also part of the House 21st Century Cures draft bill, makes it easier for
children with medically complex conditions to receive care across state lines and participate in care coordination from
their closest children’s hospital, and for states and hospitals to compile data on care outcomes for treating these conditions.
Jim Kaufman, vice president of public policy for the Children’s Hospital Association, said the bill would create a
number of networks that would coordinate care for the children, whether that be in the home, with a local provider, or at
the nearest children’s hospital that specializes in their needed treatment. He said the state would then pay the network
their existing rate for the services, whether they were provided in that state or another.
The bill would affect about 2 million kids, and Kaufman said with the variety of conditions spread out across the
United States, it may not be easy for families to find a pediatric specialist nearby—especially in cases where the child is
one of two or three in the state with a condition. Kaufman said the national data collection part of the bill is important as
it would allow researchers to conduct studies dealing with these unique populations and illnesses.
The bill has been changed since last year’s version to make it more palatable to state Medicaid directors. Kaufman
said the previous version of the bill didn’t make it clear that the federal government wouldn’t have control over reimbursement rates. He said this year’s version makes it clear that states would pay the networks the same rate they pay instate providers. The entire bill would be opt-in for states, but Kaufman said changes were also made to make it clear that
the care-coordination and other aspects of the bill were optional for families as well. Families could keep their doctor and
also would not have to start the 1115 waiver process again.
However, these changes have not won over Medicaid directors, who still have concerns over the bill and see
some of the provisions as unnecessary legislation covering things states already do.
“The things they want are the things we want,” said Matt Salo, president of the National Association of Medicaid
Directors, adding that while appreciative of the changes, he doesn’t think the bill is necessary.
Salo said state Medicaid programs are making a concerted effort to get kids the least costly care in the most appropriate setting.
“This may be, but is not necessarily, a children’s hospital,” he said, adding that states are moving away from hospitalbased networks.
Salo said many states are already doing data collection on those who are part of their government health programs,
but they are focusing on all groups rather than one.
“States don’t have the bandwidth to do it for just kids with special needs, then adults with special needs, and then
duals,” he said.
Kaufman said currently his group only has access to data from 12 states but would like to expand that number. He
said the care coordination component would require some funding, though he did not have an estimate on the cost of the
bill. He said his group’s research on the bill shows the care coordination would ultimately save $13 billion over 10 years.
With co-sponsors on both sides of the aisle, he believes the bill has a good shot at passing this year. —Rebecca Beitsch
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
7
Gilfillan-Led Private Sector Coalition Recommends ACO Policy Changes
A private sector coalition spearheaded by CMS’ first innovation center head recommends a long list of changes to the
accountable care organization program, including calls for new financial models, quality metrics based exclusively on
patient outcomes, and automatic assignment of patients to ACOs in advance — with the chance to opt out — so ACO
providers know who to manage.
The Health Care Transformation Task Force made the recommendations public on the same day that it announced the
group’s launch. Former CMS innovation center head Richard Gilfillan, now CEO of Trinity Health, chairs the task force.
CMS recently proposed changes to the ACO program, called the Medicare Shared Savings Program, and the task force
will outline its recommendations in an upcoming comment letter to CMS on those proposed changes. But the group says
its proposals also apply to ACOs in the private sector.
Payers should offer two financial models, one that judges performance against historical claims, the other based on
community ratings with health-status adjustments, the task force says.
Comparing performance to past performance helps providers with historically high spending but it penalizes providers in regions that already have low spending, such as in the north Midwest.
The second model is designed for providers that already are doing a good job of controlling costs. The recommendations call for setting prospective targets and using industry standard risk adjustment models such as the Hierarchical
Conditions Categories. Also, CMS and commercial plans should not use methodologies that eliminate past improvements
from the baseline, the task force argues. Financial models should use simple, open-source methods and codes that are
replicable. CMS and plans also should include as many services as possible to encourage comprehensive accountability,
the group adds. For ACOs that reduce spending, but not by enough to hit the minimum savings needed to get bonuses,
calculations from across the program years should be pooled to recalculate an adjusted minimum savings rate, according
to the group.
The task force is big on encouraging two-sided risk models, which most ACOs have hesitated to commit to, but it
also believes CMS should do away with the minimum savings rate so that providers may share in savings whether they
save a lot or a little. Also, ACOs that increasingly accept financial risk and demonstrate high-quality care should be
allowed to market preferred treatment options and settings to beneficiaries to steer them in the right direction, the task
force says.
ACOs are built on the fee-for-service system, and the task force believes Medicare and plans should consider
changes to that underlying payment approach, including changes in bundled payments, prepayment and capitation.
On the subject of measuring clinical performance, the task force recommends all measures that directly affect
payments be exclusively based on outcomes and be uniform across public and private payers and all patient populations
so efforts to improve health care outcomes become an integral part of providers’ work flow. Electronically reporting
quality measures to all major payers is also an important part of establishing this industry standard, the task force says.
The task force also believes measures should be designed to help consumers choose the best providers.
— John Wilkerson
GOP To Reintroduce Last Year’s SGR Bill Soon
House Republicans plan to reintroduce last year’s Sustainable Growth Rate replacement bill soon, and the House
Office of Legislative Counsel is reviewing the bill, Rep. Michael Burgess (R-TX) said Wednesday (Jan. 28) at a
Brookings Institution event. Burgess, who was the lead on the bill last year for the House Energy & Commerce Committee, did not say whether offsets will be included in the bill upon introduction, even though Republicans insist Congress
pay for replacing the SGR formula.
The bipartisan SGR replacement plan that both chambers agreed to last year is expected to remain the same, he said,
other than technical updates, such as changing dates and the section on misvalued codes, which must be updated to jibe
with changes made last year in legislation that temporarily overrode the SGR formula to avoid steep pay cuts to physicians. However, lobbyists wonder why it’s taking so long to introduce a bill that is identical to last year’s agreement,
especially given that Congress made most of the needed technical updates to the bill late last year, when lawmakers tried
to pass the SGR bill during the lame duck session.
The current pay patch runs through March, and Burgess said the bill must be introduced in time to pass it before that
patch runs out. However, many physician lobbyists expect that Congress will patch SGR again, then try to replace it by
the end of the year in budget reconciliation.
House Ways & Means Committee Republicans plan to discuss how to pay for the bill at their committee retreat, then
regroup with Republicans on Energy & Commerce and Senate Finance to go over offsets.
Some physician lobbyists say the two parties are still far apart on how to pay for the bill. However, one physician
lobbyist said it is doubtful that lawmakers have had the conversations yet that are necessary to begin negotiating offsets.
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Last week, Republicans on Energy & Commerce said during a two-day SGR hearing that they are looking for offsets that
would avoid a presidential veto. It is not clear whether that is probable, but Republicans steered clear of arguing for
offsets that would repeal key parts of the president’s signature health care law. — John Wilkerson
Med Groups Oppose Budget’s GME Cuts, Push For More Residency Slots
The Association of American Medical Colleges opposes the graduate medical education cuts in the president’s fiscal
2016 budget. The budget proposes to cut $16 billion over 10 years from what Medicare pays hospitals to offset the costs
of training resident physicians.
Atul Grover, chief public policy officer for the Association of American Medical Colleges, said Medicare already
only covers $40,000 of the roughly $150,000 it takes to train the average medical student annually. While the funds help
cover such costs as residents’ stipends and faculty time, they also contribute to hospital services that aren’t always
available at smaller hospitals, including burn and psychiatric units. Grover said these extra services help prepare doctors
for a broad range of practices.
A similar measure was included in the president’s past budget. The Medicare Payment Advisory Commission also has
recommended changes to graduate medical education funding, but instead of cutting funding, MedPAC recommended
restructuring the payment pool, using the existing formula to allocate half of the money and making teaching hospitals
compete for the other 50 percent, Grover said.
Grover said that approach would be too unstable for medical schools, making it too risky to invest long-term in
certain programs.
“You can’t commit to an eight-year neurosurgery program,” Grover said, without being sure resources would be
available for the duration of the residency.
Grover said teaching hospitals are willing to restructure GME, but they propose keeping the existing Medicare GME
pool, distributing 98 percent using the existing formula and making teaching hospitals compete for the other 2 percent.
The American Hospital Association (AHA) is also opposed to the cuts. The group called the measure troubling and
short-sighted.
“These hospitals train future physicians who will care for our nation’s growing number of seniors. Students don’t
become physicians overnight, and we need to invest today to be well-prepared for tomorrow,” the group said in a statement.
AHA suggested in a letter to House Energy and Commerce health subcommittee Chair Joseph Pitts (R-PA) that all
private and public sector payers contribute to GME financing.
The committee asked groups to submit feedback and said in a recent letter they will be considering the Institute of
Medicine’s “recommendations for sweeping changes” to GME. That IOM report, from July 2014, suggested a portion of
GME funding be used to test a performance-based system that could eventually replace the current system. The report
also suggested that CMS directly pay organizations that sponsor physician-training programs and replace the current
payment methodology with a single, national per-resident amount. A new council would be formed within CMS to
oversee the funding distribution.
Both groups are also pushing to end the 18-year freeze on the number of residency slots. Currently, new medical
schools may start residency programs, but they only have five years before the number of slots is capped.
Grover said the policy has led to the current physician shortage, while lots of non-teaching hospitals could be making
partnerships with universities to train medical students.
The two groups are supportive of a bill introduced two years ago, the Resident Physician Shortage Reduction
Act, that would increase the number of resident slots by 3,000 for five years. Rather than the current 27,000 available
residencies, 30,000 slots would be available throughout the five years.—Rebecca Beitsch
Payers, PBMs May Hold Key To Biosimilar Market Access
A Health Affairs journal article published Monday (Feb. 2) says payers and pharmacy benefit managers (PBMs) will
need to make biosimilars part of tiered formularies and use step therapies in order for biosimilars to successfully break
into the U.S. market and lower drug costs relative to biologics. The authors contend that differences between the HatchWaxman Act and the Biologics Price Competition and Innovation Act (BPCIA) and lack of FDA guidance will make it
more difficult for biosimilars to gain a foothold in the market once the agency approves the first biosimilars this year —
with all signs pointing to approval of Sandoz’s filgrastim biosimilar of Amgen’s Neupogen coming in March.
“By establishing abbreviated pathways for follow-on biologics, the Biologics Price Competition and Innovation Act
has the potential to deliver significant savings to patients while preserving innovation. However, competition may not
resemble that posed by small-molecule generics under the Hatch-Waxman Act, in part because of legislative choices that
dampen the desirability of the abbreviated pathway,” write the authors, Benjamin Falit, Surya Singh and Troyen Brennan.
The authors say that the strictness of the 1984 Hatch-Waxman Act, which mandated FDA issue legally binding
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
9
regulations as to what is needed for an abbreviated pathway for bringing generic drugs to market, made it easier for
generics to grow from 20 percent of the market when the act was passed to 80 percent of the market today.
In contrast, they say, 2010’s BPCIA does not require the agency to issue binding regulations or even guidances
in regard to the abbreviated biosimilar pathway. The authors note that FDA has issued five draft guidances on the
biosimilar pathway that mostly detail what data is needed to show biosimilarity to the biologic reference product, but has
yet to issue any guidance, and is not obligated to, on important topics such as interchangeability.
Under the BPCIA there are two types of approval designations a biosimilar can receive — biosimilarity and interchangeability. With interchangeability a biosimilar could replace its reference biologic in the same way a generic is
substitutable for a brand-name drug.
Although, the authors note, automatic substitution for biosimilars is subject to state law and five states have already
passed legislation at the behest of the brand-name pharmaceutical lobby that would require various types of provider and
patient notification and approval before a biosimilar could be substituted for its reference biologic. In December the
generic drug lobby and the biotechnology and pharmaceutical lobbies agreed to compromise language making substitution of biosimilars easier, as more states look to pass legislation on the issue.
With the BPCIA lacking statutory requirements comparable to those in the Hatch-Waxman Act, FDA has said it will
look at what is required of biosimilar applicants on a case-by-case basis. FDA reiterated this stance at a recent advisory
committee meeting that recommended the agency approve Sandoz’s filgrastim as a biosimilar of Neupogen. Sandoz did
not apply for interchangeability for its filgrastim product.
The authors contend that a lack of guidance from FDA and the case-by-case policy may make obtaining an interchangeable designation from the agency nearly as expensive as gaining approval for an originator biologic. This combined with what may be a series of strict substitution laws on the state level and a lack of exclusivity or other incentives
may discourage companies from seeking interchangeable status for their biosimilar products, they say.
“[G]iven the hurdles associated with securing an interchangeable designation, such a promise of market
exclusivity is unlikely to have the same impact as its Hatch-Waxman counterpart. Importantly, for a given brandname product, the first FDA-designated biosimilar to market receives no favorable treatment under the law. To the extent
that the differences between follow-on biologics and their reference products are inconsequential, formulary management
and step therapy could be viable strategies for these products as well,” the authors write.
In order to spur widespread adoption of biosimilar use among providers and patients, along with realizing the
promise of the savings potential of biosimilars, the authors say payers and PBMs will be key in establishing the market.
They suggest payers and PBMs rely on the experience they gained with generics following passage of Hatch-Waxman to
set up tiered formularies with step therapy provisions for biosimilars.
Under this system, the authors say, payers and PBMs can exclude more expensive products from their formularies and require providers and patients to try a less-expensive biosimilar first. Under this system, if the patient doesn’t
respond well to the biosimilar, then the originator biologic could be tried. The authors also suggest grandfathering in a
biologic if that is the product a patient began using before a biosimilar was available.
“To prevent patients from receiving an initial dose of the innovator product, payers and pharmacy benefit managers must
ensure rigid, upfront implementation of prior authorization and other management tools, without exceptions,” the authors write.
They also say that PBMs and payers should leverage their relationships with providers to help biosimilar manufacturers with direct-to-physician marketing. — Todd Allen Wilson
Pharmacy Lock-In Policy Has House, Obama Support . . . begins on page one
take preventive measures in response to this information is limited,” HHS’ budget brief says.
HHS’ budget-in-brief says its proposal would be similar to many state Medicaid programs and would make sure
beneficiaries have access to quality services.
Former CMS Medicare chief Jon Blum also expressed interest in a beneficiary lock-in policy a few years ago,
but this is the first time such a policy has been included in the president’s budget, one beneficiary advocate noted. The
proposal is not expected to cost anything over the next 10 years.
The president’s proposal follows the inclusion of a similar lock-in proposal in House Ways & Means health subcommittee Chair Kevin Brady’s (R-TX) Medicare program integrity bill introduced late last session. Ways & Means ranking
Democrat Jim McDermott (WA), who sponsored the bill despite reservations, said the legislation would serve as a
platform for further work this Congress.
Another beneficiary lock-in proposal was included in House Energy & Commerce Chair Fred Upton’s (R-MI)
recently released 21st Century Cures draft.
The Pharmaceutical Care Management Association said last month that enacting these beneficiary lock-in programs
in Medicare is a priority for pharmacy benefit managers in 2015, and the group says it is encouraging that support for a
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INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
beneficiary lock-in policy is increasing.
Reilly said PEW, which recently asked Congress’ Medicare payment advisers to consider recommending such a
policy, is also encouraged by the support in the president’s budget. She added that PEW is still evaluating Brady’s bill and
the 21st Century Cures draft for the best way to balance reducing drug abuse by high-risk beneficiaries and beneficiaries
access to these medications for legitimate purposes. But Stacy Sanders, federal policy director at the Medicare Rights
Center, says Brady’s bill includes more developed beneficiary protections than the 21st Century Cures draft. She said
Brady’s bill also gives clearer direction to the agency regarding stakeholder involvement.
Beneficiary advocates expressed some concerns over the draft of Brady’s bill, and the version introduced in December was a significant improvement over the draft bill, one beneficiary advocate said.
Sanders said lock-in policies are only one of many solutions around Medicare beneficiary abuse of prescription drugs
that should be considered. The Medicare Drug Integrity Contractor should also be strengthened, and there needs to be
more communication between the pharmacies and the MEDICs, Sanders said, as well as enhanced data sharing to help
combat the problem. — Michelle M. Stein
CMS Pegs Extra Grant Money That Can Be Used For Exchange Transitions
The Obama administration lists $380 million in left-over health insurance exchange grants in its fiscal 2016 budget
and signals states may put some of that money toward a move from one type of marketplace to another, while being
unclear about how exactly those funds may be used.
“CMS will continue to support transitions that may occur over the next year and the support needed thereafter” in
changing from a state partnership marketplace to a state-based exchange, or from using the federally-operated marketplace to a partnership, according to the CMS budget justification released Monday night (Feb. 2).
The funds would come at a crucial time for states that may need to scramble to create their own marketplace if
the U.S. Supreme Court rules against the administration in King v. Burwell, effectively disallowing premium tax
credits from being distributed to low-income Americans in states that offer health care plans through the federal
exchange.
Though the justification adds that grants will not be awarded after Dec. 31, 2014, the document says that CMS
requires “administrative resources for continued activities” in fiscal 2016. Some states will still be in the development
stage of establishment and will need further technical assistance, the document says, as well as improving functions of
renewals, privacy and security, and calculating and reporting advance payments for premium tax credits.
“Funding will also be used for contracts to provide States with instruction on establishment of Marketplace business
functions (e.g., eligibility, plan management) and to help States use their grant funding to implement programmatic
components that are in line with Federal policy,” the budget justification says.
The ACA appropriated funding as needed to help states stand up their exchanges, but required the marketplaces to be
self-sustaining as of Jan.1, 2015. However, CMS has said states can continue using the grant money for certain functions.
“States may use Establishment grants to fund their start-up costs, whether for State-based or State Partnership
Marketplace function, or to support the Federally-facilitated Marketplaces, but ongoing operations are self-funded
through user fees or other funding,” the HHS budget brief said. It is unclear whether the description referred to those
grants paid out before the end of 2014 or the money that may be available in fiscal 2016.
The money will also support an estimated 66 full-time equivalent staff members who work as project officers, grants
management staff, technical help teams and managers to oversee state progress in their cooperative agreements.
More than $5.5 billion was allocated to 37 states and Washington, DC to establish and build their own exchanges
since 2011, including $2.1 billion in fiscal 2015.
States may continue to spend grant money in 2015 and beyond, CMS said. — Rachel S. Karas
Oversight Republicans Seek King Contingency Details From IRS
A trio of House oversight Republicans on Thursday (Jan. 29) asked the IRS to provide details on ACA implementation and its expected impact on taxpayers, and also inquired how the agency intends to respond should the Supreme Court
rule that credits cannot flow through the federally facilitated exchanges in the highly watched King. v. Burwell case.
The Republican members say they are concerned IRS has not informed taxpayers of possible consequences of the
case. “The IRS could prevent confusion and uncertainty by preparing revisions to the Healthcare Premium Tax rule,
providing taxpayer guidance on the implications of a ruling adverse to the IRS, and informing Congress of possible
contingency plans,” wrote committee chair Jason Chaffetz (R-UT) along with Reps. Mark Meadows (R-NC) and Jim
Jordan (R-OH).
The lawmakers say in their Jan. 29 letter that many Americans will be facing additional paperwork during this year’s
tax filing season, and many are also expected to see lower tax refunds or will owe the IRS following the premium tax
credit reconciliation process. Additionally, they note, the administration has said up to 6 million people would be subject
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
11
to fines for not having coverage.
The House Republicans ask IRS to provide data on the number of people whose tax bills may increase or decrease
due to the reconciliation process, and all documents and communications related to taxpayer messaging on responsibilities related to the ACA. They also request all documents and communications regarding any contingency planning on
King v. Burwell. — Amy Lotven
Boustany To Reintroduce Tweaked Small Business Healthcare Act
Rep. Charles Boustany (R-LA), chairman of House Ways and Means oversight subcommittee, aims to introduce a
tweaked version of his bill amending the Internal Revenue Code to treat employer payments for employee health care
premiums and amounts paid to health reimbursement arrangements for their employees as medical expenses under
accident or health plans, excluding them from gross income for tax purposes.
Boustany’s senior health adviser, Melissa Gierach, said she is reviewing the bill introduced in December to potentially tweak details that could make the legislation more functional and targeted to achieve its goal, but nothing that would
change its overall intent. The congressman hopes to get the bill reintroduced as quickly as possible this Congress,
hopefully in the next two weeks before recess begins Feb. 16, she said.
A potential Senate partner on the bill might be Sen. Chuck Grassley (R-IA), who on Jan. 28 offered an amendment to
the Hire More Heroes bill that would allow small business owners to offer their employees financial help to buy health
insurance on a pre-tax basis. He based his amendment on the Boustany bill, Gierach said.
Grassley did not ask for a vote on the amendment while the Finance Committee marked up the “Heroes” bill, which
would exempt veterans from the employer mandate’s employee count caps. He said he hopes to work with Finance
Chairman Sen. Orrin Hatch (R-UT) to later address the issue.
Katie Mahoney, executive director of health policy at the U.S. Chamber of Commerce, said the business lobby
had a few concerns with the first iteration of Boustany’s bill but declined to elaborate on what future fixes might be.
She said the ACA’s provisions that block employers from providing HRAs to their employees are problematic, and the
Chamber would like to see more flexibility for employers.
“We look forward to working with Boustany to achieve this goal and view it as an important tool for employers … as
a defined contribution system emerges,” she said Thursday (Jan. 29).
The Chamber has not formally come out in support of the bill but does view it as tackling a significant issue. In the
meantime, Mahoney said, employers are exploring ways to move to a defined contribution system like using private
exchanges, while being mindful of competing tax implications due to possible “double-dipping” with premium tax
credits.
Boustany’s proposal last year had a few pieces that the Chamber sought to revise, but Mahoney would not elaborate
on what changes might be made. She was unaware of Grassley’s amendment last week but called it very interesting and
said she would look into it.
Last week, Boustany also introduced a bill to repeal part of the ACA and amend the Public Health Service Act to
allow cooperative governing of individual health insurance coverage offered in multi-state businesses. Neither bill has
been scheduled for a vote. — Rachel S. Karas
W&M GOP Plan To Patch SGR . . . begins on page one
focus on how to pay for the policy. Rep. Michael Burgess (R-TX) said House Republicans planned to reintroduce the
legislation, but some lobbyists wonder why it is taking so long to introduce a bill that is identical to last year’s agreement.
Lobbyists say it’s likely that Congress will patch the SGR formula until the end of the year so they can negotiate
Medicare reforms that would pay for the SGR replacement legislation during budget reconciliation. The news of patch
offsets, which Ways & Means Republicans discussed at their retreat over the weekend, reinforces that assumption;
lobbyists say committee Republicans did not talk about how they would pay to replace the formula. Ways & Means
members are expected to regroup with Republicans on Energy & Commerce and Senate Finance to go over offsets for
temporarily overriding scheduled pay cuts, although it’s not clear for how long Republicans plan to patch SGR.
CBO recently estimated that the 10-year cost to override pay cuts through 2015 is $12 billion, but that doesn’t include
other so-called Medicare extenders that often get thrown in with SGR.
Sequestration began with automatic, across-the-board cuts that took effect in January 2013 and were originally
scheduled to run through 2021. These budget cuts are broken into two categories: discretionary spending, which includes
defense and non-defense programs, and mandatory programs, such as Medicare. Ways & Means Republicans in the past
have expanded sequestration on mandatory programs to help pay to patch the SGR formula because they oppose using
savings from outside Medicare to pay for increased spending in the program.
Congress extended sequestration on mandatory programs through 2023 when it restored military pensions in early
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INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
2014. There was $2.3 billion left over from that sequester offset, and Congress put that money in a fund to cover part of
the SGR patch last March. At the same time, lawmakers extended sequestration through 2024 to help cover the patch,
although they had to use a budget gimmick to pull it off. Other offsets from the latest patch include a nursing home
readmissions program and pay cuts to laboratories, dialysis facilities, radiology and physician-billing codes.
Now, Ways & Means members plan to extend sequestration through 2025, provider lobbyists say. It’s unclear how much
money that gives Congress, but it’s expected to amount to much of what lawmakers need for an SGR patch that runs until
the end of the year.
Another offset under consideration is extending by one year, to 2025, Obamacare’s cuts to the Medicaid
Disproportionate Share Hospital program. Congress extended these cuts last time it patched SGR, too. Provider
lobbyists say no one expected the DSH pay cuts to end after 10 years so they consider it a budget gimmick, and for the
same reason the measure doesn’t concern providers. — John Wilkerson
President’s Budget Lays Out Medicare Reforms . . . begins on page one
House estimates would save $140 million over a decade, align with regulatory changes sought by providers for the
second round of ACO contracts in the Medicare Shared Savings Program.
The budget calls for allowing ACOs to cover cost sharing for primary care visits of patients who are innetwork, which the White House Office of Management and Budget says wouldn’t reduce Medicare spending but
providers argue would. The proposed budget also would let CMS assign beneficiaries to federally qualified health centers
and rural health clinics that participate in the Medicare Shared Savings Program, a measure estimated to save $80 million
over 10 years. The third ACO patient-engagement measure would count nurse practitioners, physician assistants and
clinical nurse specialists as ACO providers, which would lead to more beneficiaries being assigned to ACOs. OMB
estimates savings from that measure at $60 million.
The budget also calls for Congress to pass the bipartisan, bicameral agreement from last year on a replacement to the
Medicare SGR formula that determines physician pay. Past budgets called for merely freezing physician pay as a placeholder
for SGR legislation; the SGR deal was still being negotiated last year when the White House wrote its 2015 budget.
The White House counts the SGR measure as costing only $44 billion, even though the Committee for a Responsible
Federal Budget says the measure costs closer to $155 billion. Loren Adler, a research director at the nonpartisan think
tank, said the president’s budget adjusts baseline spending, which accounts for the large discrepancy. Last year, the
Congressional Budget Office scored the SGR bill in the neighborhood of CRFB’s estimate. The difference in baseline
also accounts for the difference between the White House’s calculation of $423.1 billion in health care spending reductions and the $290 billion number that Adler estimates.
In addition to being new, the site neutral provision is estimated to be among the biggest savers. The White
House estimates it could reduce Medicare spending by $29.5 billion by reducing pay to off-campus hospital outpatient
departments to either the rate set by the Medicare Physician Fee Schedule or the rate for surgical procedures covered
under the ambulatory surgical center payment system.
Another set of new proposals aim to reduce the backlog of provider and other appeals over claims that Medicare
denies. Most of those measures are budget-neutral, but the proposal to use some of the money that Recovery Audit
Contractors collect to help manage appeals would cost Medicare $1.3 billion, according to the budget.
The biggest Medicare savers in the budget are prescription-drug rebates ($116.1 billion), pay cuts to postacute care providers ($102.1 billion) and increased Medicare means-testing ($66.4 billion).
Brand drug lobbyists say Democrats are all-talk on prescription-drug rebates because the Republican-led Congress
will not let that proposal pass. Drug makers pay rebates for drugs that Medicaid buys, and the proposal calls for requiring
those rebates for beneficiaries covered by the Medicare Part D Low-Income Subsidy. The budget also calls for letting
Medicare negotiate drug prices, which the budget says is budget-neutral. CBO projected previously that price negotiations would not save money, according to Premier Health. Also, the budget calls for cutting the exclusivity period for
biopharmaceuticals from 12 years to seven years.
The post-acute care pay measure in the budget would reduce market-basket updates for inpatient rehabilitation
facilities, long-term care hospitals and home health facilities by 1.1 percentage points, each year, from 2016 to 2025.
The means-testing measure calls for making wealthier beneficiaries pay five percentage points more on their premiums for
Part B and Part D and creating new income tiers every 12.5 percentage points until capping the highest tier at 90 percent.
The budget includes dozens of additional Medicare measures. Other big-ticket savers include: increasing the
minimum Medicare Advantage coding intensity adjustment ($36.2 billion); banning so-called pay-for-delay deals between
brand and generic drug makers ($10.1 billion); cutting graduate medical education pay to hospitals ($16.3 billion);
lowering the threshold for Independent Payment Advisory Board to kick in ($20.9 billion); and reducing Medicare
coverage of hospital bad debt ($31.1 billion). — John Wilkerson
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
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Budget Looks To Fix Medicare Appeals Backlog . . . begins on page one
closer to 400 days for the agency to hear an appeal and make a decision, HHS notes in its budget brief. The American
Hospital Association has estimated it could take a hospital as long as five years to get through the entire process.
HHS says in its budget-in-brief that with the amount of money the agency is currently working with, the backlog will
reach about 1,000,000 claims by the end of fiscal 2016. OMHA started some pilot programs to help mitigate the situation,
among other administrative actions, but HHS says that “[w]hile helpful, these steps taken alone are insufficient to keep up
with the dramatic growth in claims.”
HHS asks for $53 million more for OMHA in fiscal 2016, as well as as an additional $125 million from Recovery
Audit Contractor collections and another $5 million from a proposed refundable filing fee, which is part of HHS’ “comprehensive legislative package aimed at both helping HHS process a greater number of appeals and reducing the number
of appeals filed.”
That would give the agency around $270 million to work with, which HHS says would be used to open new field
offices and hire more staff. OMHA recently opened an office in Kansas City with seven new ALJ teams, but lawmakers
have previously said OMHA would need to add more than 400 judges to work through the backlog in one year.
The refundable filing fee would create a per-claim-fee at each level of the appeals process for providers, suppliers
and others appealing a claim denial.
“This filing fee would allow HHS to invest in the appeals system to improve responsiveness and efficiency,” the
budget brief says. “Fees will be returned to appellants who receive a fully favorable appeal determination.”The HHS
Office of Inspector General has previously recommended filing fees for “frequent filers” of appeals to discourage
providers and others from appealing every claim denial.
HHS’ budget also proposes to use sampling and extrapolation to handle appeals. One of OMHA’s pilots
included statistical sampling, but as of the end of October no one was participating in the effort. However, HHS’ proposal
would be broader, consolidating appeals across all levels of the appeals process.
Under HHS’ proposals, providers and others appealing a decision would be sent back to the first level of appeals
when new evidence is submitted later in the process. There are exceptions, such as when information was mistakenly left
out by someone processing the appeal, the budget brief says. But overall, HHS says, “[t]his proposal incentivizes appellants to include all evidence early in the appeals process and ensures the same record is reviewed and considered at
subsequent levels of appeal.”
HHS also plans to increase the minimum amount that must be in question for providers and others to appeal to an
ALJ in order to “better align with the amount spent to adjudicate the claim.” HHS would allow attorneys at OMHA to
handle the less-expensive cases that don’t meet that minimum. This reserves the ALJs for the more complex appeals over
higher amounts, the budget brief says.
OMHA also would be able to issue decisions without holding a hearing on cases where the facts are not in dispute.
The American Coalition for Healthcare has previously said that RACs lose overwhelmingly when ALJs review cases “on
the record” without holding hearings, and have asked for those decisions to be restricted.
Aside from using RAC collections to help fund OMHA, which is estimated to cost $1.3 billion over 10 years, HHS’
other appeals proposals are estimated to have no effect on the budget over the next 10 years. However, HHS’ programs
operations request for 2016 includes $159 million “to enhance the processing of provider and beneficiary claim appeals,”
including $36 million the budget says will be used to “engage with providers to resolve disputes” and “improve the
efficiency of the Medicare appeals process at the first two levels and limit appeals that escalate to the Office of Medicare
Hearings and Appeals.” — Michelle M. Stein
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Excerpts of Inside Health Policy Blogs
Rural Health Lobbyists Look To Stave Off Cuts,
Expand Access
Lawmakers and lobbyists speaking at the National Rural
Health Association conference Tuesday (Feb. 3) expressed
concern over provisions in the president’s budget they say
could be damaging to rural health providers.
Maggie Elehwany, vice president of government affairs
for the National Rural Health Association, said the group is
opposed to measures in the president’s budget that would cut
Medicare reimbursement rates for critical access hospitals by
1 percent and another that would eliminate the critical access
hospital designation for centers that are located within 10
miles of another hospital.
Elehwany said this year the group is focusing on issues
that are contributing to the closure of rural hospitals, including cuts to Medicare and Medicaid, Disproportionate Share
Hospital payments, and the payments hospitals receive for
giving care to the uninsured. Elehwany said the ACA hasn’t
solved all payment problems: Although more people are now
insured, many can’t afford to pay pre-deductable costs, she
said. States that haven’t expanded Medicaid have put their
rural hospitals at even greater financial risk, she added.
Lawmakers at the conference spoke to attendees about
their own legislation and policy ideas.
Sen. Pat Roberts (R-KS) said he was looking for ways to
get a permanent Sustainable Growth Rate fix passed before
the “11th hour and 59th minute,” and talked about his own
bill that would end requirements that critical access hospitals
discharge and transfer patients within 96 hours.
Sen. Al Franken (D-MN) said the government should use
student loan forgiveness to incentivize doctors to practice in
rural areas but also as a tool to recruit rural residents into the
field as they would be more likely to return to rural areas
during their career.
He also pushed for adoption of electronic medical
records.
“I guess the whole EMR thing is just working out
wonderfully,” Franken said to laughs, but added that despite
the expense and difficulty, he believes they are important to a
functioning rural health care system that can also work
seamlessly with telemedicine.
Franken also wants to do more to expand home health
and will push the R-HoPE bill from last year, which “makes
Medicare reimbursements more equitable and doesn’t short
change rural providers.” — Rebecca Beitsch
Major Physician Group Joins Group Seeking Drug
Price Cuts
The American College of Physicians announced Tuesday
(Feb. 3) that it has joined the Campaign for Sustainable Rx
Pricing, a group of insurers, consumer advocates and other
stakeholders whose goal is to lower drug prices. The announcement came a day after the Obama administration
unveiled a 2016 budget request that repeats its prior calls for
policies to lower drug prices, including a Medicare drug
rebate plan that would reduce health care spending by more
than any other of the president’s health care proposals.
ACP says it is the largest medical-specialty organization
and second-largest physician group in the United States, but
the largest physician organization, the American Medical
Association, is not part of the Campaign for Sustainable Rx
Pricing.
American College of Physicians President David
Fleming said specialty drugs accounted for less than 1 percent
of prescriptions in 2013 and more than 25 percent of Medicare prescription spending. By the end of the decade,
specialty drugs will account for about half of Medicare drug
spending, according to CVS Health, yet only 2 percent to 3
percent of prescriptions will be written for specialty drugs.
Pharmaceutical makers say the drugs reduce health care
spending by avoiding more expensive hospitalizations and
life-long management of chronic disease, noting that expensive new hepatitis C drugs cure nearly everyone.
However, Democrats in particular criticize the high price
of specialty drugs that treat common conditions. Lawmakers
typically don’t complain about expensive drugs that treat rare
diseases. The Obama Administration has included drugsavings measures in previous budget requests, but this year’s
budget includes stronger language.
“The Administration is deeply concerned with the rapidly
growing prices of specialty and brand name drugs,” states the
HHS budget in brief. —John Wilkerson
Senate Pushes Its ‘Cures’ Plan With Bipartisan
Staff Workgroup, March Hearings
The Senate health committee’s top Republican and
Democrat on Tuesday (Feb. 3) announced they will tap a
bipartisan staff working group next week and hold hearings in
March to advance a medical innovation effort that complements the House’s 21st Century Cures Initiative. The hearings
will examine the respective roles of FDA and the National
Institutes of Health in getting safe treatments, devices and
cures to patients, committee chair Lamar Alexander (R-TN)
and ranking Democrat Patty Murray (WA) suggested in a joint
press release.
Murray lent her name to the initiative on the heels of a
massive report released last week by Alexander and committee member Richard Burr (R-NC) outlining ways FDA could
streamline its processes to get products to market.
Murray said she hopes to continue working with
Alexander to ensure safety is not compromised, a concern
also raised by consumer safety advocates when House Energy
and Commerce Committee chair Fred Upton (R-MI) unveiled
his 21st Cures Initiative white paper last month without
Democratic backing. FDA officials likewise have warned
lawmakers against proposing any dramatic changes to
longstanding clinical trial design.
Murray said: “I’m looking forward to a bipartisan effort
to strengthen our country’s leadership in developing lifesaving, world-changing cures and treatments. As we look for
ways to advance innovation for patients and families, I will
keep working with Chairman Alexander and all of my
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
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colleagues to ensure that we maintain the highest standards of
patient and consumer protection, so that patients continue to
have complete confidence in the safety and effectiveness of
the medicine their government has approved.”
Alexander signaled his committee, like the House, will
look for ways to reform the development and approval
processes, but he also hinted he may address funding for the
National Institute of Health. Upton’s decision not to include
an NIH funding increase in his white paper is viewed as a
reason Democrats didn’t sign endorse the paper.
“We want to modernize the way drugs and medical
devices are discovered, developed, and approved. We will
examine the work of the National Institutes of Health, which
funds and enables much of the research that leads to medical
breakthroughs, and the Food and Drug Administration, which
regulates all the medical products we come in contact with,”
Alexander said. —Donna Haseley and David Hood
Study Offers Ways To Boost Brokers’ Role In
Marketplace Enrollment
Despite facing certain obstacles at the beginning of the
open enrollment process, insurance agents and brokers were
instrumental in driving enrollment in many states and will
continue to be as funding for other assisters falls, according
to a brief by Georgetown University and the Urban Institute.
The report, based on interviews with brokers in 21 states and
the District of Columbia, pinpoints several changes that
would help agents and brokers enroll more people in the
coming years.
“As the federal government and states direct less funding
to navigators, a real opportunity exists for brokers to play a
major role in enrollment in marketplaces,” said Kathy
Hempstead, who directs coverage issues at the Robert Wood
Johnson Foundation. “Brokers have a unique skill set, and the
non-group market is a growing opportunity. With better
supports and incentives, brokers could be even more effective
in enrolling low-income consumers.”
Lack of experience with the low-income community was
one of the many challenges faced by brokers, the report says.
Brokers and agents also had issues with the exchange site
technology and overburdened marketplace calls centers that
were staffed by people who did not have the proper expertise,
according to several people interviewed in the survey.
The report offers six changes that would help brokers
with enrollment nationwide. These include: easy-to-use
directories to help people identify a nearby broker for
enrollment assistance; improved, hands-on broker training;
improved IT systems that speed marketplace enrollment;
compensation for enrolling low-income individuals and
families in Medicaid; marketplace customer support tailored
for the broker community; and ongoing monitoring of brokerassisted enrollment to identify problems or barriers more
quickly.
Jessica Waltman of the National Association Health
Underwriters, which represents brokers and agents, in
response to the report stressed that licensed, professionally
trained health insurance brokers “have been an important
source of coverage help for individual health insurance
consumers in both state exchanges and the federal exchange
from day one.”
“Despite many challenges with the exchanges last year,
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they helped millions of people obtain coverage and have
serviced their clients’ exchange-based coverage throughout
the coverage year and this current open enrollment season,”
she said. She also notes that NAHU has called for many of
the changes in the report for more than a year. “Increased
tools for brokers to help people get covered and stay covered
are particularly important since a broker works with their
client year-round to ensure that the client has coverage that
fits their specific needs and can utilize it effectively,” she
says.—Amy Lotven
Medicaid, CHIP Enrollment Now 10.1M Above
Baseline
Nearly 69 million Americans were enrolled in Medicaid
or CHIP in November 2014 — a 17.5 percent increase, or
about 10.1 million people, over the July-September 2013
baseline, CMS announced Monday (Feb. 2). The data also
show a 25.5 percent increase in enrollment in states that
expanded Medicaid and a 7 percent increase in those that did
not, CMS acting Medicaid and CHIP director Vikki Wachino
wrote in a blog post.
Wachino also touted the recent news that Indiana will be
expand access to Medicaid, becoming the 28th state — plus
the District of Columbia — to do so.
“We are encouraged by interest from governors from all
across the country who understand both the economic
benefits of Medicaid expansion and the health and financial
security it brings to many individuals. We remain committed
in working together toward the larger goals of high quality,
affordable health coverage for all Americans,” Wachino said.
Under the ACA, the federal government pays 10 percent
of the costs for states to expand Medicaid to all people
earning up to 138 percent of the federal poverty level through
2016, after which federal funding dips to 90 percent.
HHS recently released data showing that 3.2 million
adults had enrolled in Medicaid by March 2014, the first
quarter following the expansion.—Amy Lotven
BIO, PhRMA Slam Warren’s Bill Fining Industry To
Boost NIH Funding
Sen. Elizabeth Warren (D-MA) introduced her promised
bill to divert money from pharmaceutical companies to boost
NIH funding, drawing fire from pharmaceutical groups who
maintained the measure would result in fewer medicines and
“lost jobs.”
Warren’s bill would require pharmaceutical companies
that enter into settlement agreements with the government to
avoid a trial for violating federal anti-fraud laws to pay a
portion of their profits to help fund research at NIH and FDA.
The Pharmaceutical Research and Manufacturers of America
took a shot at the legislation when Warren proposed it in a
speech at recent Families USA conference. The group said the
bill is “misguided” and would “siphon funding from the
groundbreaking medical research happening in the
biopharmaceutical industry (and) will have devastating
consequences for patients and society.”
The Biotechnology Industry Organization locked in step,
saying the legislation has the right idea of finding ways to
improve NIH funding, but misses the mark by fining companies. BIO argued that settlements do not necessarily mean
that companies did anything illegal or “operated in bad faith,”
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
and would therefore be wrong for the government to impose a
fine or fee for settling.
“The legislation seeks to impose an ‘innovation fee’ on
drug developers that enter into settlement agreements with
the government,” said BIO in a statement. “In actuality, this
legislation would impose a tax on innovation, which would
inhibit and delay medical innovation and, in effect, harm
those patients waiting for cures.”
Warren said that under her plan, NIH could receive up to
$6 billion more a year without raising new taxes, raising
funding for the agency about 20 percent. The senator
compared her bill to a swear jar, saying “whenever a huge
drug company that is generating enormous profits as a result
of federal research investments gets caught breaking the
law—and wants off the hook—it has to put some money in
the jar to help fund the next generation of medical research.”
Meanwhile, almost 40,000 people signed a MoveOn.org
petition supporting Warren’s bill as of Friday. — David Hood
Oversight Republicans Seek ACA Implementation,
King Contingency Details From IRS
A trio of House oversight Republicans on Thursday (Jan.
29) asked the IRS to provide details on ACA implementation
and its expected impact on taxpayers, and also inquired how
the agency intends to respond should the Supreme Court rule
that credits cannot flow through the federally facilitated
exchanges in the highly watched King. v. Burwell case.
The Republican members say they are concerned IRS has
not informed taxpayers of possible consequences of the case.
“The IRS could prevent confusion and uncertainty by
preparing revisions to the Healthcare Premium Tax rule,
providing taxpayer guidance on the implications of a ruling
adverse to the IRS, and informing Congress of possible
contingency plans,” wrote committee chair Jason Chaffetz
(R-UT) along with Reps. Mark Meadows (R-NC) and Jim
Jordan (R-OH).
The lawmakers say in their Jan. 29 letter that many
Americans will be facing additional paperwork during this
year’s tax filing season, and many are also expected to see
lower tax refunds or will owe the IRS following the premium
tax credit reconciliation process. Additionally, they note, the
administration has said up to 6 million people would be
subject to fines for not having coverage.
The House Republicans ask IRS to provide data on the
number of people whose tax bills may increase or decrease
due to the reconciliation process, and all documents and
communications related to taxpayer messaging on responsibilities related to the ACA. They also request all documents
and communications regarding any contingency planning on
King v. Burwell.—Amy Lotven
CA Renewals Show Consumers Mainly Sticking
With Original Plan
California health plans are touting a new report from
Covered California that shows consumers are generally
choosing to stick with exchange plans purchased during the
first enrollment period, with the state’s issuers retaining about
90 percent of their consumers.
“With 90 percent of enrollees sticking with their existing
health plan, it is clear that there is stability in the market and
people are pleased with their coverage,” Charles Bacchi,
president and CEO of the California Association of Health
Plans (CAHP), said of the news.
California had about 1.1 million exchange enrollees
eligible for renewal, according to the exchange. However,
during the renewal process, the exchange found that about
85,000 of those were eligible for Medi-Cal.
The exchange forwarded the names of the 944,000 of
the remaining consumers to their chosen health plans, and is
still working to renew another 80,000 enrollees who were
unable to be auto-enrolled or did not select another plan.
More than 60 percent of the 944,000 — about 576,000
individuals — took no action and were therefore automatically renewed into their existing plan. Another 368,000
explored other options and of those about 54,000 opted to
switch plans.
The exchange also released a table breaking down each
issuer’s enrollment gains and losses and rates of retention.
While every plan retained at least 90 percent of its consumers, one plan — Kaiser Permanente — had a 99 percent
retention rate.
Of the other large California exchange carriers, Anthem
had a 93.6 percent rate while Blue Shield held onto 94.7
percent of its consumers.—Amy Lotven
Senators Introduce Companion Bill Recognizing
Pharmacists As Providers
A bipartisan group of senators introduced a bill to
recognize pharmacists in medically underserved areas as
Medicare providers under Part B who can be reimbursed for
certain services a day after House lawmakers introduced
companion legislation. Pharmacists are pleased both houses
have introduced such a bill.
Sens. Chuck Grassley (R-IA), Sherrod Brown (D-OH),
Mark Kirk (R-IL) and Bob Casey (D-PA) introduced the bill
Thursday (Jan. 29) to the delight of pharmacists.
“Through the introduction of this legislation, Senators
Grassley, Brown, Kirk and Casey have demonstrated tremendous commitment to improved healthcare access and outcomes for underserved Medicare patients,” National Association of Chain Drug Stores President and CEO Steven
Anderson says in a statement.—Michelle M. Stein
HHS: Nearly 7.3M Enrollees In FFM
Through Jan. 23
Almost 7.3 million people chose a health insurance plan
or were automatically re-enrolled in their existing plan
through Healthcare.gov from Nov. 15 through Jan. 23, HHS
announced in its weekly snapshot Wednesday (Jan. 28). That
number includes enrollees in the federally facilitated marketplace, state-federal partnership marketplaces and supported
state-based marketplaces.
Week nine saw 137,298 plan selections, bringing the
total to 7,293,989 since 2015 open enrollment began. That
also marks a drop of nearly 300,000 sign-ups from the
previous week, though officials expect to see a large uptick in
enrollments as the period closes next month. More than 9.7
million applications were submitted as of Jan. 23, the report said.
For the second week, HHS also released a breakdown
of enrollment numbers by state: Alabama: 137,941;
Alaska: 17,051; Arizona: 171,723; Arkansas: 55,853;
Delaware: 20,776; Florida: 1,301,745; Georgia: 435,523;
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Illinois: 290,791; Indiana: 189,220; Iowa: 37,338; Kansas:
81,205; Louisiana: 142,192; Maine: 62,983; Michigan:
301,646; Mississippi: 84,101; Missouri: 213,514; Montana: 47,701; Nebraska: 62,458; Nevada: 54,101; New
Hampshire: 47,042; New Jersey: 213,573; New Mexico:
43,651; North Carolina: 467,560; North Dakota: 15,756;
Ohio: 198,608; Oklahoma: 103,001; Oregon: 92,059;
Pennsylvania: 425,854; South Carolina: 166,159; South
Dakota: 18,248; Tennessee: 188,276; Texas: 940,707;
Utah: 118,064; Virginia: 321,982; West Virginia: 27,849;
Wisconsin: 179,626; and Wyoming: 18,112.
Numbers included in the snapshot do not reflect effectuated enrollments, or those for which the first month’s
premium has been paid. Open enrollment closes Feb. 15, by
which many believe the administration will hit its target of
9.1 million FFM enrollees.—Rachel S. Karas
CAP: $340 Billion Cost Would Limit Congressional Response To King
The Center for American Progress (CAP) on Thursday (Jan. 29) threw cold water on the idea that Congress would
take legislative action if the Supreme Court rules against the administration in King v. Burwell, noting that the Congressional Budget Office would have to score the impact of a decision invalidating federal subsides accessed through
Healthcare.gov. The Urban Institute has already run an estimate and found that it would cost $340 billion over 10 years,
which CAP views as an insurmountable cost in this economic and political environment, to reinstate the subsidies to the
federally facilitated states, CAP’s Topher Spiro writes in the brief.
Therefore, the report concludes, “the Supreme Court cannot rely on congressional Republicans who have voted many times
to repeal the Affordable Care Act’s coverage to save it from the consequences of a ruling that would unravel that expansion.”
The brief illustrates the difficulty Congress would face following a ruling for the plaintiffs, noting that Congress has
long been unable to pay for a permanent reform of Medicare payments to physicians—which would cost $144 billion
over 10 years—despite strong bipartisan support. “If Congress cannot come up with even that amount of money for a
bipartisan reform, it would be a miracle for it to find more than two times that amount for a contentious reform,” Spiro writes.
Since the Court decided to take up the case Nov. 7, health experts have debating how easily or difficult it
would be for various contingencies. Initially many believed that states would be pressured to act or that the administration could make it easier for states to set up their own exchanges. However, since then, many experts have backtracked
and acknowledged that various factors — including ideological opposition, prohibitive costs and timing — would likely
make it difficult for most states to take action.
The CAP brief notes that CBO would take all of those factors into account for its assumption. “Putting together all of
these legal, practical, and political constraints, CBO would likely assume that not many—if any—additional states would
set up their own marketplace to qualify for tax credits or otherwise be able to access equivalent funding. As a result, the
Urban Institute’s estimate of a $340 billion reduction in federal spending is a reasonable approximation of how CBO
would update its baseline,” Spiro says.
CAP also argues that the state innovation waivers, which allow states to get exemptions from certain ACA
policies in order to examine alternative reforms, are not a feasible solution to a ruling in favor of King.
“The Affordable Care Act does not authorize state innovation waivers until 2017,” the brief argues. “More importantly, state innovation waivers only provide states with federal funding equal to the amount of tax credits that they would
otherwise receive.”
“Because a Supreme Court decision against the Affordable Care Act would eliminate tax credits in states that do not
run their own marketplace, such states would not be entitled to any federal funding under a state innovation waiver,”
Spiro says. — Amy Lotven
House E&C Asks HHS For Details On Post-King Contingency Plans
House Energy and Commerce Republicans on Wednesday (Jan. 28) asked HHS to hand over any communications
and documents related to potential contingency plans should the Supreme Court rule against the administration in King v.
Burwell, a decision that would eliminate subsidies for those who enrolled via Healthcare.gov. The letter comes the same
day that those supporting the administration’s position must file their friend-of-court briefs with the high court.
“While the Supreme Court has yet to rule, it is clear that the court’s decision could have a profound impact on the
operation of the (Affordable Care Act), says the Jan. 28 letter.
“Given HHS’ responsibilities, we believe it is prudent that the department plan for the full range of potential outcomes and consequences of the court’s decision,” adds the letter, which was signed by Energy and Commerce Chairman
Fred Upton (R-MI), Vice Chairman Marsha Blackburn (R-TN), Chairman Emeritus Joe Barton (R-TX), Oversight and
Investigations Subcommittee Chairman Tim Murphy (R-PA), and Health Subcommittee Chairman Joe Pitts (R-PA).
The members ask HHS to describe all scenarios that have been considered and any options that have been rejected,
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approved or are under discussion, and to provide the federal authority related to those potential contingencies.
HHS revealed Tuesday (Jan. 27) that 7.1 million out of the 9.5 million total people who have selected plans came in
through the federally-facilitated insurance marketplace, and that 87 percent of those consumers were eligible for subsidies.
The high court is slated to hear oral arguments in King on March 4, and a decision is expected in late June.
The administration has consistently expressed confidence that the court will rule in its favor and that no contingencies are
needed. Sources believe that the administration is eying plans but will not reveal them prior to the ruling. — Amy Lotven
Obama’s Budget Outlines $2.2B Needed To Fully Fund ACA Implementation
Health insurance exchanges are estimated to cost the federal government $2.2 billion in fiscal 2016, according to
President Obama’s fiscal 2016 budget request that fully funds Affordable Care Act implementation.
Across all accounts, the administration is requesting $639 million for marketplace operations, $808 million for
consumer information and outreach, $657 million for marketplace information technology and $85 million for federal
administration. The $2.2 billion total includes $1.56 billion in user fees and $629 million in requested budget authority
that would fund CMS activities and administrative expenses toward the exchanges as well as cover $544 million to
support the growth and operations of exchange activities like eligibility, plan management and quality improvement.
HHS Secretary Sylvia Burwell said at a press briefing Monday (Feb. 2) that when this budget request is combined
with proposed legislation, the United States would save a net estimate of $250 billion in the next decade, slow Medicare
spending growth, and generate $223 billion in net savings through building a better health delivery system.
Ellen Murray, HHS assistant secretary for financial resources, said that as in most years, the CMS Program Management account would be used to fund the exchanges.
HHS expects to bring in more income from user fees in 2016 than in 2015, and other funding options include
secretary transfer and the non-recurring expense fund. As time goes on, the exchanges will be almost exclusively funded
by the fees, Murray said. The user fee is currently 3.5 percent of premiums for issuers selling products through the federal
exchange.
CMS Acting Administrator Andy Slavitt said the agency’s requests for major expense items like information technology are lower than in past years and should continue to drop. He reiterated that user fees will create a sustainable path for
exchange funding going forward.
The HHS appropriations agreement last year included bill language “to prevent the CMS Program Management
appropriation account from being used to support risk corridors payments,” yet risk corridor funding was still listed under
that account in the fiscal 2016 request.
The Program Management account also lists $340 million for non-marketplace information technology systems and
other support to allow CMS staff and stakeholders to access secure data through the IT shared services initiative.
This year’s request cuts $1.76 billion in insurance exchange grants from $2.1 billion to $380 million, after the
final round of grants to plan and establish their own marketplaces ended in December.
HHS has provided $5.5 billion to states to build and establish exchanges since 2011, the budget says.
The administration further says that states can use establishment grants to fund start-up costs of state-based or
partnership marketplaces, or to support the Federally Facilitated Marketplace. Daily operations, however, are funded
through local user fees or other revenue sources, the budget says.
The budget request also expects to bring in nearly $4 billion less in transitional reinsurance program receipts than it
did in fiscal 2015 at around $6 billion in 2016.
The budget proposal lists a nearly $2 billion increase in risk adjustment receipts, up to $5.6 billion in fiscal 2016,
and $940 million more through the risk corridor program for a total of nearly $6.4 billion.
The administration also proposes spending $30 million on a new project that would examine how changes to
health insurance benefit packages would affect health care use, costs and outcomes. Its findings would shape the
creation of health care models that better serve families and providers.
The project would use the “gold standard” randomized controlled trial study design along with the Health Insurance
Experiment that began in the 1970s, the HHS budget-in-brief said.
“A new effort is needed to rigorously examine how modern health insurance plans can be redesigned to maximize
health status and quality, and minimize unnecessary costs,” the brief said. “The requested funds will enable HHS to plan
and initiate the study using state-of-the-art evaluation methods to answer critical research questions that cannot be
directly addressed through other means.”
The Obama administration estimates that it will find $38.4 billion in savings to insurance marketplace
subsidies in the next 10 years, budget documents said.
In total, the fiscal 2016 budget proposal asks for $83.8 billion in discretionary budget authority for HHS, $4.8 billion
more than the agency received last fiscal year.— Rachel S. Karas
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Lawmakers, Families USA Defend ACA Subsidies Amid New Amicus Briefs
Two current and former congressmen said Wednesday (Jan. 28) that a U.S. Supreme Court ruling to make subsidies
unavailable through the federal health insurance exchange in King v. Burwell would go against the way they wrote the law
and their intent to provide health insurance to all Americans.
The idea that congressmen who had spent their careers in public service campaigning for universal health care would
then draft a law narrowing the pool based on where people live rather than their health status is a fallacy, former Rep.
George Miller (D-CA), who retired last year, said. He added that no one thought the text of the law, which says subsidies
are available in exchanges “established by the State,” was inconsistent with the idea of universally available tax credits.
“It was never debated … that somehow this is the wrong thing to do,” Miller said at a Families USA press conference
to debut consumer advocates’ amicus brief filed Wednesday in support of the administration.
Rep. Sandy Levin (D-MI) called the plaintiff’s interpretation that subsidies can only be received by consumers whose
states run their own exchanges, rather than using the Healthcare.gov platform, a figment of their imaginations.
The law’s writers “didn’t have to be a legislative genius” to know many of the states would not create their own
exchanges, Levin said. He added that there is “zero evidence” that subsidy conditionality was intended in the law’s
drafting.
Families USA Executive Director Ron Pollack said advocates never thought King v. Burwell was a serious legal
challenge. But because the court did not follow its traditional guidelines for choosing to hear a case, he said, they have to
take it seriously. Pollack believes there is no constitutional issue at hand and no conflict between the circuit courts of
appeals that have heard the case and similar lawsuits.
Pollack and the congressmen agreed that there was no discussion at a state level to indicate that states saw
any threat to the subsidies if they opted to join the federal exchange. Not a single governor understood that the law’s
language had implications in terms of receiving subsidies, Pollack said.
Families’ amicus brief contends that affordable health coverage was intended for legal residents in all states, regardless of whether that state runs its own marketplace or the federal government facilitates it for the state. The plaintiffs are
quarantining six words from a subsection that deals with the formula for calculating subsidy amounts rather than eligibility for those tax credits, the brief said.
Wednesday was the deadline for friend-of-court briefs in support of the administration. Pollack said Tuesday (Jan.
27) that he expected at least two dozen amicus briefs to be filed this week. More than 20 friend-of-court briefs were filed
by Dec. 29 in support of the plaintiffs. Oral arguments are set for March 4. — Rachel S. Karas
Insurers, Hospitals Unite With Dem Lawmakers Against King Plaintiffs
Insurance advocates, hospital groups, unions, public health experts and others on Wednesday (Jan. 28) filed friendof-court briefs defending premium tax credits in the federally-operated marketplace, joining consumer advocates and
lawmakers who crafted versions of the Affordable Care Act in opposition to the plaintiffs in King v. Burwell ahead of oral
arguments at the U.S. Supreme Court in March.
Amicus briefs supporting the Obama administration were due this week, while those in favor of the plaintiffs were
due Dec. 29. Families USA Executive Director Ron Pollack told Inside Health Policy Tuesday (Jan. 27) that he expected
around two dozen friend-of-court briefs to be filed in support of the administration Wednesday (Jan. 28).
The case threatens to pull health insurance subsidies from nearly 10 million Americans who enrolled in coverage
through the federal exchange and partnership marketplaces. America’s Health Insurance Plans (AHIP), the American
Hospital Association and others argued that offering tax credits to low-income people who qualify for assistance only in
states that run their own exchanges would not only be a disaster for families and individuals who cannot otherwise afford
coverage, but would also destroy the health care system as it now stands under the ACA.
“We will not mince words: Petitioners’ position, if accepted, would be a disaster for millions of lower and middleincome Americans. The ACA’s subsidies have made it possible for more than 9 million men, women, and children to have
health care coverage — some for the first time in years; some, no doubt, for the first time in their lives. That coverage
allows them to go to the doctor when they are sick, and to do so without fear that the resulting bill could leave them in
financial distress,” the American Hospital Association, Federation of American Hospitals, Association of American
Medical Colleges and America’s Essential Hospitals wrote in their brief filed Wednesday.
“If Petitioners’ interpretation is accepted, however, that salutary development will be reversed. The ranks of the
uninsured will swell again, with all that portends in the way of untreated illness and overwhelming debt.”
An ACA without subsidies would leave hospitals unable to make up funds that were cut when the law was
passed — with the expectation that new patients using their new tax credits would replenish the deficit, the AHA wrote.
“That could imperil some hospitals, and will make it more difficult for others to carry out their missions, including
effectively serving their communities.”
AHIP said in its own brief filed this week that pulling subsidies would create substantially dysfunctional insurance
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markets and far higher costs than if the ACA had not been enacted. Premium tax credits and shared responsibility payments are essential to an actuarially viable marketplace because they are key to ACA market reforms, the insurers said.
A brief filed by 131 current and former members of Congress and state legislators, including the House and
Senate leaders who crafted the bill, said that limiting subsidies to state-based exchanges was never their intent and
doing so would contradict their longtime goal of providing universal health care.
“If, as Petitioners argue, the threat of cutting off access to insurance for upwards of 80% of the individuals expected
to gain access through the Exchanges was a ‘stick’ to encourage state officials to establish state Exchanges, Congress
surely would have communicated to the States that the availability of the tax credit turned on the establishment of a state
Exchange, and the States would have understood that message. Neither event happened,” the lawmakers wrote.
The hospitals agreed that creating such a narrow definition was not what Congress meant to do and not what lawmakers wrote.
“One clause of Section 36B might support Petitioners’ position when read in total isolation. But when read in light of
the ACA’s definitions of the word “Exchange” and the rest of the Act’s text and structure — as it must be — the clause
does not. It instead extends subsidies to residents across the country. This Court should so hold. And it should reject
Petitioners’ contrary interpretation, which creates absurdities across the statute that Petitioners cannot explain.”
But friends of the petitioners did try to explain their position, in 21 briefs filed last month. Fifteen Republican
Congressional leaders wrote a brief alleging that the plain text of the law is indeed grounds for conditionality and that the
IRS should not be allowed to give subsidies for health plans through its faulty decision-making that violates separation of
powers.
Similarly, the libertarian Cato Institute and constitutional law professor Josh Blackman pushed back against
Obama for what they view as circumventing Congress’ power to make law.
Another brief filed on behalf of Oklahoma, Alabama, Georgia, Nebraska, South Carolina and West Virginia said that
a move by Congress to make the availability of tax credits conditional is consistent with its longstanding practice of
conditioning federal funds on state implementation of federal programs. — Rachel S. Karas
HHS OIG Seeks Additional Funding To Expand ACA Oversight
The HHS Office of Inspector General requested $417 million for fiscal 2016, including an $83 million increase and
38 additional full-time employees for oversight and investigations related to the health insurance marketplaces. OIG also
seeks an increases of $70 million and 192 employees for Medicaid and Medicare oversight.
OIG says that it will initiate at least five to 10 ACA-related reviews in addition to the ones outlined in its 2015 work
plan released in November. “These reviews could focus on emerging Marketplace issues, including, for example, vulnerabilities that may arise in connection with the second open enrollment period; implementation of additional Marketplace
functionality, such as the redetermination process; or the premium stabilization programs. They could also focus on other
ACA areas, including Medicaid expansion, new Medicare payment and delivery models, or new grant programs.
The ACA marketplaces add a substantial new dimension to HHS’ landscape, OIG says in its budget justification,
noting the exchanges must implement and successfully operate complex program requirements. OIG’s oversight of the
marketplaces focuses on payments, eligibility, management and administration, and security. By focusing on these key
areas, OIG hopes to ensure that taxpayer dollars are spent for their intended purposes in a system that operates efficiently
and is secure, the department says.
OIG’s budget justification document also responds to several requests Congress had included in the omnibus
spending bill enacted in December.
The omnibus agreement provided an additional $24 million to OIG for ACA oversight activities. OIG says an
advisory team has already met and the department is on schedule to provide Congress with a plan in mid-February for
how it will use that funding. Congress also expected OIG to ensure that full oversight of ACA activities are in the 2015
work plan. The plan was released in November, and OIG says it is planning a mid-year update to keep Congress informed.
OIG is prioritizing three areas: health insurance marketplaces, including the payments for financial assistance,
Medicare and Medicaid reforms, and grant expenditures.
The department is also preparing a report to the HHS secretary and congressional appropriators with the top 25
unimplemented recommendations that the OIG believes should be prioritized and has committed to make the report
“more targeted” than in prior years. That report is slated to be out prior to 90 days after the enactment of the spending bill
signed Dec. 16.
OIG had been asked to provide no later than June 1 a report to Congress assessing the IRS procedures to reconcile
the tax credits and to look at how HHS uses IRS information to reduce fraud and overpayments. OIG says it is working
closely with the Treasury Inspector General for Tax Administration (TIGTA) on that report, and also says it expects that
between itself and the TIGTA “a range” of reports related to the APTCs will be issued. — Amy Lotven
INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015
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Hatch Says CMS Should Break From HHS
Senate Finance Committee Chair Orrin Hatch (R-UT) called for CMS to be set up as an independent agency as
lawmakers questioned HHS Secretary Sylvia Burwell Wednesday (Feb. 4) on a wide range of policies both in the
president’s budget and outside it. He suggested that like the Social Security Administration, which was separated from
HHS in 1994, CMS should become its own independent agency, and said he intends to introduce legislation to that effect.
“For some time now, I have been concerned about the amount of influence HHS and the administration has over the
operations and policies impacting the entitlement programs run by CMS,” Hatch said. He noted that HHS’ budget request
for 2016 totals just over a trillion dollars, and CMS accounts for 85 percent of that. “In fact, the expression ‘too big to
fail’ does not really apply here as the HHS budget is so big one could argue that it is destined to fail,” Hatch said.
Hatch also said that the president’s proposed $250 billion in health care savings over the next decade equates to only
3.8 percent of total Medicare and Medicaid spending. Later in the hearing, Burwell said the budget is part of the
administration’s broader approach to addressing long-term entitlement spending, but if lawmakers have ideas that are
better than the administration’s she looks forward to working with them.
Burwell also noted that the president’s budget included lawmakers’ bicameral, bipartisan replacement for the
Sustainable Growth Rate Formula, and said the administration supports those efforts. Burwell told lawmakers she is
hopeful a permanent SGR replacement will be passed this year.
Some lawmakers on the committee also praised Burwell’s recent announcements around moving away from fee-forservice and increasing alternative pay models in Medicare, as well as the president’s new Precision Medicine Initiative.
Sen. Maria Cantwell (D-WA) said moving toward alternative payment models is a terrific goal and “music to our
ears.” But she said any movement toward alternative models needs to include incentives that are big enough to really
reward good behavior. Without big incentives in the alternative pay models, providers will continue to be rewarded for
bad behavior, and efficient providers will continue to be punished, Cantwell said.
Committee ranking Democrat Ron Wyden (D-OR) said that if the potential of precision medicine can be tapped, big
payers — including Medicare and Medicaid — will have to cover the new products. Wyden asked Burwell what work is
occurring around setting up that payment system.
Burwell said that precision medicine will likely be part of the move toward alternative pay models.
When asked about ways to make progress on telehealth, Burwell also said delivery system reforms can help.
Burwell said there are a number of ways to get to the administration’s goal of tying 30 percent of Medicare
payments to quality or value through alternative payment models by 2016 and 50 percent by 2018, but said HHS may
need additional flexibility as it finds out how people react to different incentives.
Lawmakers, including Sens. Wyden, Sherrod Brown (D-OH), Bob Casey (D-PA), and Bob Menendez (D-NJ),
thanked Burwell for including funding for the Children’s Health Insurance Program in the the budget, and Brown noted
that many governors have written to lawmakers asking for funding to be extended. Burwell said that it is very difficult to
manage a program like CHIP with a lack of predictability when there are contractors and providers that need to paid.
Sen. Chuck Schumer (D-NY) also praised much of the president’s budget, but said he vehemently opposed the
administration’s plan to revamp graduate medical education. Schumer said it seems counterproductive to try to train more
physicians, which the budget notes are necessary, but try to cut the hospitals that are training them. The budget cuts
graduate medical education $16 billion over 10 years.
Schumer said that rather than cutting GME, the number of residency slots should be increased and half of those new
slots should go to training primary care physicians.
Sen. Pat Roberts (R-KS) wondered how Burwell could say she is hopeful the Independent Payment Advisory Board
is never triggered while also strengthening IPAB in the HHS budget. The president’s budget saves about $20.1 billion
over the next decade through strengthening IPAB.
Roberts said he is concerned IPAB, the Patient-Centered Outcomes Research Institute, the CMS innovation center
and the U.S. Preventive Services Task Force — which he dubbed the “four horsemen of the regulatory apocalypse” —
could lead to rationing of care. — Michelle M. Stein
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INSIDE CMS — www.InsideHealthPolicy.com — February 5, 2015