1. Congress

House of Representatives

Ways and Means, Oversight Committees Ask IRS About Exchange Subsidies

Continuing what has become one of the most prominent arguments against the Affordable Care Act (ACA), the Ways and Means and Oversight and Government Reform Committees last week wrote a letter to acting Treasury Secretary Neal Wolin and acting IRS Commissioner Steve Miller expressing disappointment in their respective agencies' responses to requests for information regarding an IRS rule issued last year. In question is the eligibility of individuals to receive tax subsidies for the purchase of health insurance in a state with a federally facilitated health insurance exchange. Some ACA opponents contend that the law makes such subsidies available only through exchanges established solely by a state. In response, IRS issued an interpretation of the statute that would make subsidies available to all individuals, regardless of the structure of their state's exchange. "Our staffs have attempted to work with Treasury in a cooperative manner regarding our request and they have tried repeatedly to accommodate Treasury's concerns about producing the documents, but Treasury refuses to be forthcoming with the committees," said the letter, signed by Ways and Means Committee Chairman Camp (R-MI) and Oversight and Government Reform Committee Chairman Issa (R-CA). The letter further threatened the use of a compulsory process should an acceptable response not be provided by Feb. 5.

Democrats Express Concerns Over Wellness Program Regs

Last week, six prominent Democrats filed comments in response to new proposed regulations on employee wellness programs, highlighting the need for "additional structural safeguards" to ensure appropriate access to coverage. Reps. Waxman (D-CA), Levin (D-MI), Miller (D-CA), Pallone (D-NJ), McDermott (D-WA) and Andrews (D-NJ) cited the ACA's intent to eliminate discrimination in the health insurance market as justification that the proposed regulations require further refinement to ensure that the same protections afforded to individuals in the health insurance market are effectively mirrored when it comes to nondiscrimination in wellness programs offered by group health plans.

Small Business Committee Chair Fears ACA Regs Too Burdensome

Responding to a Jan. 2 proposed rule regarding which employers could be penalized for not providing minimum coverage, Small Business Committee Chairman Graves (R-MO) last week expressed concerns to Treasury Secretary Geithner that complying with the proposed regulatory structure governing the "employer mandate" represents "a full-time job" for small business owners. Graves' transmission included commentary his committee has received through its website from small business owners stating their frustration over "the deleterious effect of the health care law generally, and the employer mandate specifically."

Energy and Commerce Requests Meningitis Records from FDA

On Friday, Energy and Commerce Committee Republicans sent a letter to FDA Commissioner Margaret Hamburg requesting records related to last year's meningitis outbreak, with a specific eye on any records from 2002 to 2006, during which time the FDA conducted three inspections of the New England Compounding Center (NECC) facility and documented concerns, but did not pursue further enforcement. The letter asks that information be reported no later than Feb. 25, at which point the committee "will move forward to a business meeting to compel their production," according to its authors, Reps. Upton (R-MI), Barton (R-TX), Blackburn (R-TN), Murphy (R-PA) and Burgess (R-TX).


HELP Subcommittee Examines Status of Primary Care Delivery

Last week, the HELP Primary Health and Aging Subcommittee held a hearing titled "30 Million New Patients and 11 Months to Go: Who Will Provide Their Primary Care?" in which Chairman Sanders (I-VT) highlighted what he considers to be "a major crisis in primary health care access," as roughly 30 million Americans are expected to acquire health coverage beginning in 2014 as a result of the ACA, namely through state-based health insurance exchanges and an expanded Medicaid program. While the overall shortage of physicians could create problems related to access, Sanders also noted that the existing mix of specialists and primary care doctors -- 70 percent and 30 percent, respectively -- is also inconsistent with patient need.


Fitzhugh Mullan, MD
Murdock Head Professor of Medicine and Health Policy
George Washington University School of Public Health
Professor of Pediatrics
George Washington University School of Medicine

Tess Stack Kuenning, CNS, MS, RN
Executive Director
Bi-State Primary Care Association

Toni Decklever, MA, RN
Government Affairs
Wyoming Nurses Association

Andrew Wilper, MD, MPH
Acting Chief of Medicine
VA Medical Center, Boise, ID

Uwe Reinhardt, PhD
James Madison Professor of Political Economy and Professor of Economics and Public Affairs
Princeton University

Claudia Fegan, MD
Chief Medical Officer
John H. Stroger Jr. Hospital of Cook County, Chicago, IL

For more information, or to view the hearing, please visit www.help.senate.gov.

Harkin Will Not Seek Reelection in 2014

Sen. Harkin (D-IA), current HELP Committee Chairman, announced Jan. 26 that he will not run for reelection in 2014. "When the current Congress is over, I will have served in the United States House of Representatives and the U.S. Senate for a total of 40 years," Harkin said in a statement. "After 40 years, I just feel it's somebody else's turn." Harkin's work in Congress began with five terms in the House of Representatives after which he was elected to the Senate in 1984. Among Democrats who could succeed Harkin, Sen. Mikulski of Maryland holds the most seniority on the committee. Potential candidates for his open seat in 2014 include Reps. Braley (D-IA), Latham (R-IA) and King (R-IA).

Bipartisan Bill to Curb Mass. Hospital Payments Introduced

Last week, Sens. Coburn (R-OK) and McCaskill (D-MO) introduced legislation that would repeal a provision in the ACA that many have accused as having allowed Massachusetts hospitals to receive additional Medicare dollars at the expense of other states' hospitals. The bill was prompted by a group of 21 hospital associations' recent plea to the White House that a section of the ACA allowing states to set a floor for Medicare hospital payments at the rate of its rural hospitals be corrected to account for an abnormally expensive hospital on Massachusetts' Nantucket Island. "If left uncorrected, hospitals in 49 states will experience reduced funding of more than $3.5 billion over the next 10 years as a direct result of this manipulation," the hospital associations, as well as the National Rural Health Association, wrote in their letter to the White House. The bill, S. 183, has also garnered the support of Senate Minority Leader McConnell (R-KY).

Finance Committee Proposes Waste, Fraud and Abuse Deterrents

A bipartisan group of Senate Finance Committee members, led by Chairman Baucus (D-MT) and ranking member Hatch (R-UT),released a report last week outlining recommendations from more than 160 stakeholders in the health care community on ways to improve federal efforts to combat waste, fraud and abuse in the Medicare and Medicaid programs. "Medicare and Medicaid fraud is a serious problem, costing taxpayers tens of billions of dollars every year. It must be stopped," Baucus said in a Jan. 31 statement. "This report will be a valuable tool in our continuing efforts to combat waste, fraud and abuse in America's health care system." Baucus and Hatch were joined by Sens. Wyden (D-OR), Carper (D-DE), Grassley (R-IA) and Coburn (R-OK). The senators indicated that their staff will work with relevant congressional committees, GAO, the HHS Office of Inspector General and others to develop the proposals into specific legislation.

2. Administration

Centers for Medicare and Medicaid Services (CMS)

Bundled Payment Pilot Program Underway

Last week,CMS announced that more than 500 health care organizations have been selected to participate in the Bundled Payments for Care Improvement initiative, which aims to provide more coordinated care and reduce costs by paying providers a lump sum for a patient's entire episode of care. According to CMS, "The Bundled Payments initiative is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Model 1 includes an episode of care focused on the acute care inpatient hospitalization. Awardees agree to provide a standard discount to Medicare from the usual Part A hospital inpatient payments. Models 2 and 3 involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. Model 4 involves a prospective bundled payment arrangement, where a lump sum payment is made to a provider for the entire episode of care." CMS indicated it will soon announce another opportunity for providers to participate in the Retrospective Acute Care Hospital Stay Only model, with an anticipated start date of early 2014.

Round Two Competitive Bidding Rates Much Lower Than Round One

On Wednesday, CMS announced results from Round Two competitions in the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program. The Round Two expansion covers 91 major metropolitan areas, including cities such as New York, Chicago and Los Angeles, in addition to the nine competitive bidding areas included in Round One competitions. It also includes a diabetic testing supplies national mail-order competition throughout the United States. According to CMS Office of the Actuary estimates, the program will save the Medicare Part B Trust Fund $25.7 billion and beneficiaries $17.1 billion between 2013 and 2022. CMS will announce winning suppliers in spring, and full implementation will begin July 1.
A full list of the new prices and the 91 areas where the program is expanding are available at http://www.dmecompetitivebid.com/.

Physician Payment Sunshine Act Final Rule Released

On Friday, CMS announced it had published a final rule intended to increase public awareness of financial relationships between drug and device manufacturers and certain health care providers, pursuant to a provision contained in the ACA, more commonly known as the "Physician Payment Sunshine Act." The rule finalizes provisions requiring manufacturers of drugs, devices, biologicals and medical supplies covered by Medicare, Medicaid or the Children's Health Insurance Program (CHIP) to report to CMS data related to payments or other transfers of value they make to physicians and teaching hospitals. The final rule also requires manufacturers and group purchasing organizations (GPOs) to disclose to CMS physician ownership or investment interests. Data collection from applicable manufacturers and GPOs will begin on Aug. 1, 2013. Applicable manufacturers and applicable GPOs will be required to report the data for August through December of 2013 to CMS by March 31, 2014, and CMS will release the data on a public website by Sept. 30, 2014.

3. State Activities

Tennessee, Florida Govs Remain Noncommittal on Medicaid Expansion

Last week, Republican Tennessee Gov. Haslam and Florida Gov. Scott assumed similar, noncommittal positions in referencing their intentions as to whether or not they will expand their states' Medicaid programs, as allowed under the ACA. ". . . I am hesitant to commit additional dollars to Medicaid when it's already eating up so much of our budget. . . . I also understand that the decision isn't just as easy as standing here today and saying, 'We're not going to expand Medicaid,' " Haslam said. For his part, Gov. Scott simply said, "Today is not the day for that decision." He did note that Florida is currently awaiting a decision by HHS on two pending Medicaid waiver applications that he says will impact his decision on expanding the program.

Missouri Gov. Asks for Medicaid Expansion With Contingency

In his State of the State speech last week, Missouri Gov. Nixon, a Democrat, urged legislators to join him in support of an expansion of their state's Medicaid program to take advantage of generous federal support payments for newly enrolled individuals. However, he noted that he would also support a caveat allowing the state to reconsider its decision should the federal government not keep its end of the bargain. "Strengthening Medicaid will strengthen our economy," he said. "Without question, it's the smart thing to do."

Idaho Governor Introduces Health Insurance Exchange Legislation

In what he referred to as an effort to, among other things, retain control over their state's health care, Idaho Gov. Butch Otter introduced a bill last week to establish a state-run health insurance exchange bill. The bill calls for creating a 16-member board to oversee the marketplace. The board, with members appointed by the governor and subject to Senate confirmation, would include consumer advocates, insurance officials, small business representatives and health care providers. David Hensley, Otter's chief of staff, told lawmakers a state-built exchange is the best way to preserve Idaho's own decision-making authority. "This is a state's rights issue," Hensley told the committee. "We are exercising our state sovereignty and maintaining as much decision making authority as possible."

Georgia Law Restores Child-Only Insurance Policies

After every insurer in Georgia stopped selling child-only policies a few years ago as a result of the ACA's ban on discriminating against preexisting conditions for kids-only coverage, up to 10,000 Georgia children may once again have access to child-only health insurance policies as a result of legislation passed last year, which gave Georgia parents and legal guardians the option of signing their children up for private insurance policies through Jan. 31 of this year. Seven insurance companies are offering the child-only health insurance policies -- Aetna, Blue Cross Blue Shield, Cigna, Coventry, Humana, Kaiser Permanente and United Healthcare. The legislation expires in 2014 when the ACA's major coverage expansion provisions take effect.

4. Regulations Open for Comment

NEW - CMS, IRS Propose Rules Individual Mandate Exemptions

On Jan. 30, CMS and IRS issued proposed rules outlining exemptions from the individual mandate requirement of the Affordable Care Act. The proposed rules will "help to ensure that the [individual mandate penalty] applies only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage," according to a joint CMS-IRS fact sheet. Specifically, the proposed rule would allow exemptions from the penalty for nine categories of individuals, including those who would have been eligible for Medicaid under the expansion allowed by the ACA, but live in a state that opts to not expand.

Other notable provisions include:

Religious Conscience: Under the proposed rule, the religious conscience exemption would apply to members of religious sects that are recognized as conscientiously opposed to accepting insurance benefits. The Social Security Administration currently administers the process for recognizing the groups under the law.

Self-Funded Student Plans: HHS said self-funded student health plans satisfy the ACA's minimum coverage requirements, though the proposed rule could allow the self-funded plans to set caps on certain benefits.

Family Subsidies: The proposed IRS rule states that the agency will consider individual coverage affordable if there is an offer for insurance where the premiums are 9.5 percent of household income or less, and assumes that the spouse or children of the individual would have affordable coverage as well. Family premium subsidies will not be available to the families of workers who can afford individual insurance through their employers.

Comments are due March 18 for the HHS proposed rule and May 2 for the IRS proposed rule. IRS has scheduled a public hearing May 29.

HHS Issues Medicaid, CHIP, Exchange Eligibility Rule

On Jan. 1, HHS posted a proposed rule to implement provisions of the ACA and the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA). Notable provisions include:

Eligibility Appeals Process
The rule proposes a coordinated Exchange and Medicaid appeals process such that enrollees will first have the opportunity for a preliminary case review by appeals staff, referred to as "informal resolution." State-based Exchanges would have the flexibility to implement their own appeals processes in accordance with the NPRM's standards, with individuals retaining the right to a federal appeal at HHS after exhausting the state-based appeals process.

The rule proposes that notices to applicants and beneficiaries would include combined, clear and accurate information about eligibility for all insurance affordability programs, including Medicaid, CHIP, advance payments of the premium tax credit and cost-sharing reductions, as well as eligibility to enroll in a qualified health plan through the Exchange. This coordinated process would not be required to be in place until Jan. 1, 2015, or, optionally, at an earlier date if all relevant agencies have the necessary systems in place.

Medicaid Benefits
The proposed rule modifies existing "benchmark" regulations applicable to Medicaid programs, as previously described in a letter to state health officials, to implement the benefit options available to low-income adults beginning Jan. 1, 2014.

Verification of Employer-sponsored Coverage
The proposed rule includes detail on the procedures for the Exchange to verify access to employer-sponsored coverage. It also proposes that an Exchange may opt to fulfill the employer-sponsored coverage verification process by relying on HHS.

Comments must be received no later than Feb. 13, 2013.

A fact sheet is available from www.cms.gov.

Employer Health Care Coverage of Dependents Under ACA

Treasury and IRS released a notice of proposed rules (REG-138006-12) Dec. 28 on employer-provided health care coverage related to ACA's employer "shared responsibility" provisions, which were added to the tax code under Section 4980H. Starting in 2014, employers with at least 50 full-time and/or full-time equivalent employees (FTEs) will be required to offer affordable health care coverage that provides a minimum level of coverage or pay a penalty. These proposed regulations would affect only employers that meet the definition of "applicable large employer" as described in these proposed regulations. As discussed in section X of this preamble, employers may rely on these proposed regulations for guidance pending the issuance of final regulations or other applicable guidance. This document also provides notice of a public hearing on these proposed regulations.

Comments on the proposed rule must be received by March 18, 2013.

Guidance for Industry Abuse-Deterrent Opioids -- Evaluation and Labeling

The FDA has issued guidance intended to assist sponsors who wish to develop formulations of opioid drug products with potentially abuse-deterrent properties (abuse-deterrent formulations). Specifically, the guidance explains FDA's current thinking about the studies that should be conducted to demonstrate that a given formulation has abuse-deterrent properties, how those studies will be evaluated, and what labeling claims may be approved based on the results of those studies. FDA will accept comments on the guidance received by March 11, 2013. See FDA's press release.

Food and Drug Administration (FDA) Proposes New Food Safety Rules

The FDA has proposed new rules on food safety, including regulations on good manufacturing practices standards for growing, handling and packaging produce. Specifically, to minimize the risk of serious adverse health consequences or death from consumption of contaminated produce, the FDA is proposing to establish science-based minimum standards for the safe growing, harvesting, packing and holding of produce, meaning fruits and vegetables grown for human consumption. FDA is proposing these standards as part of its implementation of the FDA Food Safety Modernization Act (FSMA). These standards would not apply to produce that is rarely consumed raw, produce for personal or on-farm consumption, or produce that is not a raw agricultural commodity. The proposed rule would also set forth procedures, processes and practices that minimize the risk of serious adverse health consequences or death, including those reasonably necessary to prevent the introduction of known or reasonably foreseeable biological hazards into or onto produce and to provide reasonable assurances that the produce is not adulterated on account of such hazards.

Another proposed rule would amend FDA's current regulation for Current Good Manufacturing Practice In Manufacturing, Packing, or Holding Human Food (CGMPs), which requires domestic and foreign facilities that are required to register under the Federal Food, Drug, and Cosmetic Act (FD&C Act) to establish and implement hazard analysis and risk-based preventive controls for human food. FDA also is proposing to revise certain definitions in FDA's current regulation for Registration of Food Facilities to clarify the scope of the exemption from registration requirements provided by the FD&C Act for "farms."

Comments on both proposed rules are due by May 16, 2013.

Additional "Meaningful Use" Guidance Issued

HHS has issued an interim final rule with comment period revising the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs, updating a few technical specifications for EHR systems participating in the meaningful use program, in addition to adjusting some elements for hospital Stage 2 reporting requirements. The rule also provides notice of CMS's intention to issue technical corrections to the electronic specifications for clinical quality measures (CQMs) released on Oct. 25, 2012. A 60-day public comment period will expire Feb. 4, 2013.

Additional Medicare Tax for Wealthy Beneficiaries

This proposed regulation addresses issues relating to Additional Hospital Insurance Tax on income above threshold amounts ("Additional Medicare Tax"), as added by the Affordable Care Act. Specifically, the proposed regulation provides guidance for employers and individuals relating to the implementation of Additional Medicare Tax. This document also contains proposed regulations relating to the requirement to file a return reporting Additional Medicare Tax, the employer process for making adjustments of underpayments and overpayments of Additional Medicare Tax, and the employer and employee processes for filing a claim for refund for an overpayment of Additional Medicare Tax. The document also provides notice of a public hearing scheduled for April 4, 2013, on these proposed rules. The deadline for submitting comments on the proposed regulation is March 1, 2013.

5. Reports

Government Accountability Office (GAO)

Private Health Insurance: Expiration of the Health Coverage Tax Credit Will Affect Participants' Costs and Coverage Choices as Health Reform Provisions Are Implemented

GAO has released a report that finds that when the Health Coverage Tax Credit (HCTC) for certain displaced workers expires at the end of 2013, most recipients will not be able to claim a similar credit offered through the federal health care reform law. The HCTC, which covers 72.5 percent of health plan premiums, is available to taxpayers who lost their jobs due to foreign competition, through the Trade Adjustment Act, as well as to certain retirees age 55 and older whose pensions from a former employer were terminated and are now paid by the Pension Benefit Guaranty Corporation. However, the report also noted, "that at least 23 percent [of current HCTC participants] will likely be eligible for PPACA premium tax credits more generous than the HCTC. In addition to the PPACA premium tax credit, up to 28 percent of all HCTC participants will likely be eligible for PPACA cost-sharing subsidies -- subsidies that will help them pay for deductibles and copays -- depending in part on whether or not their state expands Medicaid under PPACA."

The Kaiser Family Foundation

Outline of Medicare Spending Proposals

Last week, the Kaiser Family Foundation published a report outlining a wide range of policy options to control Medicare spending, including raising the eligibility age, implementing delivery system reforms and using a premium support model. Acknowledging that the Medicare population is expected to swell from 50 million today to 90 million by 2040, a demographic shift to which CBO attributes 60 percent of the growth in Federal health spending over the next 25 years, KFF "spent several months in 2012 consulting some of the nation's top experts in Medicare and health care policy, including individuals with a wide variety of perspectives who have served in senior positions on Capitol Hill and in the Executive Branch, academia, and the health care industry" in order to produce the report.

National Institute for Health Care Reform

Few Americans Switch Employer Health Plans for Better Quality, Lower Costs

According to a recent study by the National Institute for Health Care Reform, few Americans are switching their employer health plans in order to save money and/or get better care. The report finds that "[a]bout one in eight (12.8%) nonelderly Americans with employer coverage switched health plans in 2010 -- down from one in six (17.2%) in 2003." The authors conclude that, "consumer choice plays a relatively small role in health plan switching, with most changes resulting from job changes or changes in employers' plan offerings."

Employee Benefit Research Institute

Growth in Flexible Health Spending

According to a recent report by the Employee Benefit Research Institute, assets contained in health savings accounts (HSAs) and health reimbursement arrangements (HRAs) have begun to rise over the last two years, after average account balances of HRAs and HSAs flattened in 2008 and 2009 and dropped in 2010. Specifically, in 2012, there was $17.8 billion in HSAs and HRAs, spread across 11.6 million accounts. This was up from 2006, when there were 1.3 million accounts with $873.4 million in assets, and 2011, when 8.5 million accounts held $12.4 billion in assets.

Trust for America's Health

Strategies to Move from Sick Care to Health Care in Four Years

Trust for America's Health is out with a new report providing recommendations to prioritize prevention and improve the health of Americans. "The Healthier America report outlines top policy approaches to respond to studies that show 1) more than half of Americans are living with one or more serious, chronic diseases, a majority of which could have been prevented, and 2) that today's children could be on track to be the first in U.S. history to live shorter, less healthy lives than their parents." Among its recommendations, the report cites a need to restructure federal public health programs to ensure sufficient, sustained funding, and encouraging insurance providers to reimburse for effective individual preventive health approaches. "Prevention delivers real value as a cost-effective way to keep Americans healthy and improve their quality of life," said Jeffrey Levi, PhD, executive director of TFAH.

Pharmaceutical Care Management Association

Potential Savings from Restricting Pharmacy Networks

Last week, the Pharmaceutical Care Management Association released a report by Visante that estimates narrowing pharmacy networks would save $115 billion in prescription drug spending over 10 years. Specifically the report recommends:

  • Greater use of preferred pharmacy networks could save Medicare and its beneficiaries up to $35 billion over the next 10 years.
  • State Medicaid programs and the federal government could save up to $26 billion over the next 10 years if Medicaid adopted limited pharmacy networks for all enrollees.
  • Employers, unions and other commercial sector payers and their enrollees could save up to $54 billion over the next 10 years by using preferred pharmacy networks that meet Medicare's pharmacy access standards.