This Week: House Ways and Means Committee Releases Draft Legislation to Reform Hospital Payment System... Senate HELP Committee Examines Generic Drug Prices... Congressional Budget Office Updates Cost Estimate of Physician Payment Fix

NOVEMBER 24, 2014   

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Bipartisan Letter Asks CMS to Adjust MA Funding to Consider Plans with Duals

A bipartisan group of 34 House members sent a letter to CMS Administrator Marilyn Tavenner recommending that CMS ensure that Medicare Advantage plans that cover beneficiaries eligible for both Medicare and Medicaid are not hurt by its payment system. Rep. Diane Black (R-TN) and Earl Blumenauer (D-OR) spearheaded the letter. "The current MA payment system -- specifically the risk adjustment payment model and the star ratings and quality bonus program -- does not adequately recognize the types of high-cost interventions and care management required to provide high-quality care to the unique and specific needs of dually-eligible beneficiaries," the letter said. In September, CMS requested information on whether plans that manage large numbers of poorer beneficiaries have more problems than others in achieving high star ratings. The group called the request for information "an important first step in examining this issue."

Energy and Commerce Hearing Updates U.S. Public Health Response to the Ebola Outbreak

On Nov. 18, the Energy and Commerce Subcommittee on Oversight and Investigations held a hearing entitled "Update on the U.S. Public Health Response to the Ebola Outbreak." This hearing focused on the U.S. domestic and international response to the ebola outbreak. Members heard testimony from Federal witnesses and others involved in coordinating the U.S. response and operating at the front lines of the epidemic, both at home and abroad.


Panel I

Dr. Thomas R. Frieden 
Centers for Disease Control and Prevention

Dr. Nicole Lurie 
Assistant Secretary 
Preparedness and Response 
U.S. Department of Health and Human Services

Rear Admiral Boris Lushniak, M.D. 
Acting Surgeon General 
U.S. Department of Health and Human Services

Panel II

Mr. Ken Isaacs 
Vice President 
Programs and Government Relations 
Samaritan's Purse

Dr. Jeffrey Gold 
University of Nebraska Medical Center

Dr. David Lakey 
Texas Department of State Health Services

For more information, or to view the hearing, please visit

Energy and Commerce Hearing Examines Medical Product Development

On Nov. 19, the Energy and Commerce Subcommittee on Health held a hearing entitled "Examining Medical Product Development in the Wake of the Ebola Epidemic." The hearing focused on medical product development, including treatments, vaccines and diagnostics, relating to the ebola epidemic. In his opening statement, Chairman Pitts (R-PA) stated, "Questions are also being asked about the Administration's recent $6.18 billion emergency appropriations request, including how much of the request is for development of medical products, and how previous funding requests have been allocated and spent."


Dr. Robin Robinson 
Director, BARDA 
Office of the Assistant Secretary for Preparedness and Response

Dr. Luciana Borio 
Assistant Commissioner 
Counterterrorism Policy 
U.S. Food and Drug Administration

Rear Admiral Steve Redd 
Senior Advisor for Ebola Response 
U.S. Centers for Disease Control and Prevention

Dr. Anthony Fauci 
National Institute for Allergy and Infectious Diseases 
National Institutes of Health

Witness Testimony (Truth in Testimony and CV)

Witness Slides

For more information, or to view the hearing, please visit

Ways and Means Health Subcommittee Chairman Releases Discussion Draft of Hospital Payment Reform Legislation

On Nov. 19, Ways and Means Subcommittee on Health Chairman Kevin Brady (R-TX) released the Hospitals Improvements for Payment (HIP) Act of 2014 discussion draft as part of the Committee's broader effort on comprehensive Medicare reform, focusing on the problems associated with Medicare's two-midnights policy, short inpatient stays, outpatient observation stays, auditing and appeals. Title I of the HIP discussion draft includes detailed solutions to these problems; Title II includes 19 different policies introduced by various members of the Ways and Means Committee that pertain to hospital reform. Brady unveiled the draft legislative language with a specific request -- that all stakeholders provide comment and add their voices to the legislative process. In response to the release of the discussion draft, Brady stated, "The complex challenges facing hospitals require a comprehensive solution. This draft legislation retains the needed oversight of auditors while offering reforms to the RAC process and appeals, and an additional option to the CMS settlement proposal. It also includes a number of proposed health care policies developed by both Republican and Democrat members of Congress." For more information, please visit


HELP Subcommittee Examines Generic Drug Prices

On Nov. 20, the HELP Subcommittee on Primary Health and Aging held a hearing entitled "Why Are Some Generic Drugs Skyrocketing in Price?" The hearing built on a recent set of inquiries made by Chairman Sanders (D-VT) and House Oversight and Investigations Committee Ranking Member Cummings (D-MD) to manufacturers of certain generic drugs that have been the subject of unusually high prices in recent years, with some increasing by over 1,000 percent.


Panel I

The Honorable Elijah E. Cummings 
Ranking Member 
House Committee on Oversight and Government Reform

Panel II

Stephen W. Schondelmeyer, PharmD, PhD 
Professor and Director, PRIME Institute 
University of Minnesota College of Pharmacy

Robert Frankil, RPh 
Sellersville Pharmacy, Inc.

Erez Vigodman 
President and Chief Executive Officer 
Teva Pharmaceutical Industries Ltd.

Arthur P. Bedrosian, JD 
President and Chief Executive Officer 
Lannett Company, Inc.

Jeffrey S. Aronin 
Chairman and Chief Executive Officer 
Marathon Pharmaceuticals, LLC

Carol Ann Riha 
West Des Moines, IA 
Scott Gottlieb, MD

Resident Fellow 
American Enterprise Institute

Aaron S. Kesselheim, MD, JD, MPH 
Associate Professor of Medicine 
Brigham and Women's Hospital and Harvard Medical School

For more information, or to view the hearing, please visit

2. Administration

HHS Says ACA Numbers Erroneously Inflated by Dental Plans

Health and Human Services Secretary Sylvia Mathews Burwell confirmed on Nov. 20 that the Administration erroneously calculated the number of people enrolled under the Affordable Care Act. On Nov. 10, Burwell announced that coverage exceeded 7 million, but HHS incorrectly included 380,000 dental subscribers in that number. The accurate number of subscribers of health care plans is 6.7 million. This number puts the enrollment below the 2013 estimate by the Congressional Budget Office of 7 million enrollees, which the Administration adopted as their goal. Chairman of the House Oversight Committee said the Administration "engaged in a concerted effort to obscure" the numbers. Burwell announced via Twitter that the mistake was "unacceptable."

CMS Names First-Ever Chief Data Officer, Promises Data Transparency Improvements

In an effort to make Centers for Medicare and Medicaid Services (CMS) more transparent, the agency hired its first-ever chief data officer, Niall Brennan. Brennan will be responsible for overseeing the Office of Enterprise Data and Analytics. The CMS said it formed the new office to manage data collected from Medicare, Medicaid and the Children's Health Insurance Program. The announcement follows a GAO report that found that five CMS-run websites, which were intended to provide consumers pertinent information about costs and quality of care, lacked the necessary data. In a press release announcing the hire , the CMS Principal Deputy Administrator Andy Slavitt said, "This appointment signals to the industry that there is no turning back from the health care data agenda ...  Niall Brennan will help make sure CMS leads the way."

CMS Looks to Award Two New RAC Contracts Before 2015

In a Nov. 4 procurement update , the Centers for Medicare and Medicaid Services (CMS) announced it would award two new Recovery Audit Contractors (RAC) contracts before the end of the year. The CMS said it will continue the procurement process for RAC Region 3, which covers AL, FL, GA, NC, SC, VA and WV, and RAC Region 5, which covers durable medical equipment, prosthetics, orthotics, and supplies and home health and hospice claim reviews, despite the pending court cases preventing it from awarding contracts in RAC Regions 1, 2 and 4. CMS does not expect the courts to resolve the pending legal matter until late summer 2015. Several stakeholders, including hospital associations and the Medicare Payment Advisory Commission, which advices Congress on Medicare payment issues, have called for CMS to make reforms to the RAC program. The hospital associations argue that contractors wrongfully deny too many high-dollar inpatient hospital claims.

ACA Premiums Climb 3 Percent on Average as 2015 Shopping Begins

On Nov. 14, CMS released the data on 2015 premiums in 34 states covered by the federal enrollment system. The data shows a 3 percent increase on average for Affordable Care Act premiums. While the premium changes vary widely by state, the overall average increase is historically low; however the cost of coverage under the ACA is generally higher than health plans in place before the law. About 85 percent of customers qualified for tax credits to help with the cost of coverage. Alaska, which has the highest premiums in the country, had the highest increase, 28 percent, this year. The lowest premiums are in Oklahoma. The state saw an 11 percent increase in 2015; it will cost a 50-year-old $213 per month in premiums in 2014. CMS Administrator Marilyn Tavenner said in a statement that "many consumers will have even more affordable choices for renewing their coverage and signing up for the first time through the health insurance marketplace."

3. State Activities

Medicaid Expansion Plans Get More Complicated

Maine -- Republican Gov. Paul LePage is not accepting a recent decision by the U.S. Court of Appeals for the 1st Circuit which rejected LePage's claim that ACA maintenance of effort rules had violated Maine's right to equal sovereignty. LePage told the Maine Public Broadcasting Network he hopes the Supreme Court will hear the case, saying the state is now "just going through the process."

Montana -- Gov. Steve Bullock released an alternative Medicaid expansion plan, called the "Healthy Montana Plan," which would extend program eligibility to an additional 70,000 residents in his biennial budget. The overall the budget proposal, which would increase state spending by 5.5 percent in fiscal year 2016 and 2.83 percent in 2017, must go before the Republican-controlled legislature where many believe Bullock's ideas would lead to increased government.

New Hampshire -- The Granite State already expanded Medicaid, but its current waiver was always supposed to be just a bridge to a true alternative. On Nov. 20, New Hampshire formally submitted its application for a private option-style expansion similar to the Arkansas model, offering premium assistance for marketplace plans to 24,000 beneficiaries. If CMS approves the premium assistance waiver on or before March 31, 2015, the Voluntary Bridge to Marketplace Program -- the current expansion program -- will continue through the end of the year.

Indiana -- The State of Indiana announced that the Centers for Medicaid and Medicare Services (CMS) have approved renewal of the Healthy Indiana Plan (HIP). The State continues to await a decision by the federal government on covering 350,000 more uninsured Hoosiers through HIP 2.0, which was submitted for approval in July of 2014 and has been the subject of ongoing discussions between state and federal officials. "This decision by the federal government to renew our current Healthy Indiana Plan is welcome news and will bring certainty to the more than 60,000 Hoosiers who currently enjoy the benefits of this proven health care program," said Governor Mike Pence.

Pennsylvania -- Gov.-elect Tom Wolf has reached out to former public welfare secretary Estelle Richman to serve as an adviser while he works with CMS to change the terms of the existing Medicaid waiver, negotiated by outgoing Gov. Corbett. Corbett's waiver includes conditions of participation, such as a work requirement, that Wolf opposes. Wolf favors a more traditional Medicaid expansion whereby all individuals earning below 138% of the poverty line are eligible. More information:

4. Regulations Open for Comment

Basic Health Program; Federal Funding Methodology for Program Year 2016

On Oct. 21, CMS issued a proposed rule outlining the agency's methodology for determining federal payment amounts to states that establish a Basic Health Program (BHP) for 2016. Under the proposed methodology, in determining the federal BHP payment amount, CMS will take into account the age and income of the enrollee, whether the enrollment is for self-only or family coverage, geographic differences in average spending for health care across rating areas, the health status of the enrollee for purposes of determining risk adjustment payments and reinsurance payments that would have been made if the enrollee had enrolled in a qualified health plan through an Exchange, and whether any reconciliation of the credit or cost-sharing reductions would have occurred if the enrollee had been so enrolled. The proposed payment methodology takes each of these factors into account. In addition, the proposed methodology that is the same as the 2015 payment methodology, with updated values but no changes in methods. States that elect to operate a BHP will make affordable health benefits coverage available for individuals under age 65 with household incomes between 133 percent and 200 percent of the FPL who are not otherwise eligible for Medicaid, the Children's Health Insurance Program (CHIP) or affordable employer-sponsored coverage. Comments are due Nov. 24. CMS plans to issue a final notice by February.

CMS Releases Proposed Rule on Revised Conditions of Participation for Home Health Agencies

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule on Oct. 6 revising and modernizing the current conditions of participation for home health care agencies that want to take part in the Medicare and Medicaid programs. The CMS rule, published in the Federal Register on Oct. 7, "reflects the most current home health agency practices by focusing on the care provided to patients and the impact of that care on patient outcomes. This proposed regulation focuses on assuring the protection and promotion of patient rights; enhances the process for care planning, delivery, and coordination of services; streamlines regulatory requirements; and builds a foundation for ongoing, data-driven, agency-wide quality improvement." Specific new provisions in the proposed rule include patients' rights measures, coordination of services and quality of care measures utilizing an interdisciplinary team approach, quality assessment and performance improvement (QAPI) measures, and infection prevention and control measures, among others. Comments on the proposed rule are due to CMS by Dec. 8, 2014.

OIG Proposed Rule Would Expand Medicare Anti-Kickback Statute Safe Harbors

The Department of Health and Human Services Office of the Inspector General (OIG) released a proposed rule (RIN 0936-AA06) on Oct. 2 that would add new safe harbors to the anti-kickback statute covering some Medicare Part D activities and expand the list of conduct exempted from civil monetary penalties (CMPs). The proposed rule would cover a variety of behaviors, including: pharmacy cost-sharing waivers for impoverished Medicare Part D beneficiaries; cost-sharing waivers for emergency ambulance services offered by state or municipal-owned organizations; manufacturer discounts for drugs provided through the Medicare Coverage Gap Discount Program; and certain interactions between Medicare Advantage plans and federally qualified health centers (FQHCs). Lewis Morris, former chief counsel to the OIG, said the rule illustrates that the "inspector general is really working hard to find ways to promote quality of care in an integrated delivery system while still protecting the integrity of the program and its beneficiaries." Comments on the proposed rule are due Dec. 2.

CMS Releases Final Rule for Medicare Program: Physician Fee Schedule OPPS, ASC Payments, End-Stage Renal Disease

On Oct. 31, the Centers for Medicare and Medicaid Services (CMS) released its final rule for CY 2015 Medicare reimbursement payments to physicians and non-physician practitioners, hospital outpatient departments (OPPS), ambulatory surgical centers (ASCs), and home health agencies and dialysis facilities that treat patients with end-stage renal disease. Specifically, the CY 2015 OPPS/ASC final rule with comment period updates Medicare payment policies and rates for hospital outpatient department and ASC services and partial hospitalization services provided by community mental health centers (CMHCs), and refines programs that encourage high-quality care in these outpatient settings. In CY 2015, CMS is implementing a policy finalized last year regarding comprehensive Ambulatory Payment Classifications (C-APCs), with some refinements and updates.


Overall OPPS payments are expected to increase by 2.3 percent for CY 2015. Also noteworthy in the rule, CMS has finalized a proposal to package prosthetic supplies as it does implantable prosthetic devices, and all other supplies in the OPPS when used in conjunction with a surgical or other procedure. Other significant OPPS payment modifications addressed in the statute include reimbursements for skin substitutes, off-campus provider-based departments, hospital outpatient outlier payments, community mental health center outlier payments, ancillary services and Part B drugs in the outpatient department.

ASC Payment Updates

For CY 2015, ASC payments will increase by 1.4 percent, accounting for the MFP-adjusted CPI-U update factor, which accounts for inflation.

Partial Hospitalization Program (PHP) Rates

CMS will update the two payment rates for CMHCs and the two payment rates for hospital-based PHPs. For community health centers the final CY 2015 APC geometric mean per diem cost will be $100.15 for Level I (three services) and $118.54 for Level II (four or more services). For hospital-based PHPs, the final CY 2015 APC geometric mean per diem cost will be $185.87 for Level I and $203.01 for Level II.

End-Stage Renal Disease

The finalized provisions in End-Stage Renal Disease (ESRD) Prospective Payment System rule introduce new quality and performance measures for outpatient dialysis facilities; moreover, the rule incorporates in 2017 a Standardized Readmission Ratio, which assesses the rate at which ESRD dialysis patients return to an acute care hospital within 30 days of discharge from an acute care hospital.

Other Policy Changes

CMS has finalized an internal process, to be used in limited circumstances, that will allow CMS to recover overpayments from erroneous payments made by Medicare Advantage (MA) organizations or Part D prescription drug plan sponsors; CMS has also finalized an appeals process for MA organizations and Part D sponsors to seek review of CMS' determination that the payment data are erroneous. The appeals process will have three levels of review that would include reconsideration, an informal hearing and an Administrator review.

CMS also finalized a proposal that requires the physician certification only for outlier cases and long-stay cases of 20 days or more. A hospital admission order will continue to be required for all inpatient admissions when a patient has been formally admitted as an inpatient of the hospital.

The final rule is slated to be published in the Federal Register on Nov. 6. The provisions in the rule will generally take effect on Jan. 1, 2015, and the public comment period will close on Dec. 30, 2014.

More information on the rule can be found in a CMS factsheet that accompanies the rule's release.

5. Reports

Medicare's Payment to Physicians: the Budgetary Impact of Alternative Policies Relative to CBO's April 2014 Baseline Updated for Final Physician Fee Schedule Rule

On Nov. 14, the Congressional Budget Office (CBO) released an updated estimate of the cost to replace the flawed Sustainable Growth Rate (SGR) formula. The revision was made in response to an Oct. 31 final rule in which CMS announced the update to the conversion factor update for the Physician Fee Schedule (PFS) under Medicare will be a reduction of 21.2 percent for services furnished during calendar year 2015. The estimate includes an updated estimate for H.R. 4015 and S. 2000, the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, which are identical bills introduced on Feb. 6, 2014. This updates the CBO cost estimate of that legislation for the April 2014 baseline -- which incorporates H.R. 4302, the Protecting Access to Medicare Act of 2014 (Public Law 113-93), enacted on April 1, 2014 -- and the final physician fee schedule rule. Senate Finance Committee Chairman Wyden said the updated score highlights the need for Congress to act quickly on a permanent SGR replacement. "If the Congress doesn't act now, you go into early next year with this flawed reimbursement system, and once again the Congress is faced with 'well, should seniors be cut? well, should providers be cut?' rather than getting to the heart of the problem, which is [that] Medicare doesn't focus on value as the primary priority for reimbursement," Wyden said.

OIG: 2014 Top Management and Performance Challenges

Annually, the Office of Inspector General (OIG) prepares a summary of the most significant management and performance challenges facing the Department of Health and Human Services (HHS), called the Top Management Challenges (TMC). These challenges reflect continuing vulnerabilities that OIG has identified for HHS over recent years as well as new and emerging issues that HHS will face in the coming year. The summary fulfills OIG's requirement under theReports Consolidation Act of 2000, Public Law 106-531 to identify these management challenges, assess the Department's progress in addressing each challenge and submit this statement to the Department annually. According to the report, in 2015, CMS and the Health Insurance Marketplaces face new and ongoing challenges including, for example, ensuring accurate eligibility determinations; processing enrollments, re-enrollments and qualifying life change events; and communicating timely and accurate information to health insurance issuers issuers and consumers.

Small Business Health Insurance Exchanges: Low Initial Enrollment Likely due to Multiple, Evolving Factors

According to a report released Nov. 13 by GAO, though all of the Small Business Health Options Programs (SHOPs) required by the ACA were operational, many features were not yet available and enrollment was low as of June 2014. According to the Centers for Medicare & Medicaid Services (CMS), the agency that oversees the SHOPs, all 33 of the SHOPs run by CMS (federally facilitated, or FF-SHOPs) and 14 of the 18 SHOPs run by states (state-based, or SB-SHOPs) were accepting enrollment applications as of the Oct. 1, 2013, deadline. The remaining 4 SB-SHOPs became operational by the following May. Websites where employers could review plan information such as premiums and benefits were available on Oct. 1, 2013, for all FF-SHOPs and most SB-SHOPs. Other key SHOP features -- online enrollment and employee choice, the ability for employees to choose among multiple plans -- were delayed for all FF-SHOPs, but available for most of the SB-SHOPs.

Health Care Transparency: Actions Needed to Improve Cost and Quality Information for Consumers

According to a report released by GAO on Nov. 18, results obtained from two selected private consumer transparency tools GAO reviewed -- websites with health cost or quality information comparing different health care providers -- show that some providers are paid thousands of dollars more than others for the same service in the same geographic area, regardless of the quality of such services. For example, the cost for maternity care at selected acute care hospitals in Boston, all of which rated highly on several quality indicators, ranged between $6,834 and $21,554 in July 2014. GAO recommends that HHS's CMS take steps to improve the information in its transparency tools and develop procedures and metrics to ensure that tools address consumers' needs. HHS concurred with the recommendations and provided technical comments that were incorporated as appropriate.