This Week: The president’s proposed budget for fiscal year 2017 came out Tuesday... the House and Senate Budget Committees broke with tradition and did not hold hearings on the proposed budget... Please see the special Budget Section for more detail... CMS released a final rule on provider reporting and returning overpayments...the proposed rule was made in 2012.

  1. The President’s Fiscal Year 2017 Proposed Budget

The budget saves roughly $376 billion from health care programs. This includes new ways to reduce drug prices, and changes in Medicare.

  • Medicare
  • Medicaid
  • Cadillac Tax
  • Cancer Moonshot
  • National Institutes of Health
  • Food and Drug Administration
  • Opioid Epidemic
  • Mental Health

To see the budget, click here. Visit page 109 to see the list of the White House’s proposed cuts, consolidations and savings—the list targets 117 items, with projected savings of $14 billion in discretionary and mandatory spending in fiscal year 2017.

  1. Congress

House of Representatives


  1. Administration
  1. Regulations Open for Comment
  1. Reports
  1. The President’s Fiscal Year 2017 Proposed Budget

The budget saves roughly $376 billion from health care programs. This includes new ways to reduce drug prices, and changes in Medicare.

Medicare: The budget, once again, proposed to strengthen the Independent Payment Advisory Board (IPAB), the ACA-created body whose purpose was to tell Congress how to reduce Medicare spending. IPAB has never been funded or staffed.

In addition to proposing more alternative payment methods as a way to save Medicare dollars, the budget also contains competitive bidding for Medicare Advantage plans. Under this proposal, payment rates would be based on plans’ bids. The budget says the bidding program would reward plans for lowering their bids by allowing them to keep 100 percent of the difference between their bid and the benchmark. The budget also calls for standardizing quality bonus payments across counties by removing the doubling of the quality bonus payment that is available only in certain areas and by lifting the cap on benchmarks for plans that are entitled to receive a quality bonus payment.

Medicaid: The president’s budget continues to push for Medicaid expansion by proposing to offer three years of full federal funding for newly eligible beneficiaries to states that have not yet expanded, and extends funding for the Children’s Health Insurance Program (CHIP) through fiscal year 2019.

A surprise proposal was a joint federal-state negotiating pool to reduce the cost of drugs. Currently states are allowed to negotiate supplemental drug rebates, but CMS is not allowed to facilitate negotiations with drugmakers. The proposal would allow CMS and state Medicaid programs to partner with private sector contractors to negotiate supplemental rebates. The budget also proposes that CMS collect wholesale acquisition costs for Medicaid-covered drugs to ensure accurate reporting of average manufacturer prices.

Cadillac Tax: The President is also suggesting some changes in the Affordable Care Act’s “Cadillac tax,” a 40 percent excise tax on employer-sponsored health insurance benefits over a certain threshold. Congress last year decided to delay implementation of the tax to 2020. The budget proposes that in any state where the premium for a gold plan on an exchange would be above the Cadillac tax’s current threshold, the threshold would rise to the amount of the average gold plan’s premium.

Cancer Moonshot: The budget seeks $755 billion in new minority funds for cancer-related activities at the National Institutes of Health and the Food and Drug Administration. The initiative also includes $195 million in immediate funding for the NIH for FY 2016.

National Institutes of Health: The budget takes $1 billion from NIH’s discretionary budget and replaces it with $1.8 billion in mandatory funding. This has researchers worried that the agency’s funding base would be weakened over the long term.

Food and Drug Administration: The FDA received a small boost in funding overall in the budget, disappointing advocates concerned about FDA’s role in food and drug safety.

Opioid Epidemic: The budget contains $1.1 billion to address the national opioid epidemic. This includes $1 billion in mandatory funding over two years to expand access to treatment. Of this, $920 million will be given to states to expand medication-assisted treatment for opioid use disorders.

Mental Health: The budget proposes $500 million in mandatory spending to increase access to mental health treatment. The proposal says the additional funding would be used to help engage individuals with serious mental illness by improving access to care through increasing service capacity.

To see the budget, click here (President’s FY 2017 Budget.pdf). Visit page 109 to see the list of the White House’s proposed cuts, consolidations and savings—the list targets 117 items, with projected savings of $14 billion in discretionary and mandatory spending in fiscal year 2017.

  1. Congress

House of Representatives

Energy and Commerce Committee Holds Hearing on Medicaid and CHIP’s FMAP

On Feb. 10, the House Energy and Commerce Subcommittee on Health held a hearing on Medicaid and CHIP’s Federal Medical Assistance Percentage. The federal government’s share of most Medicaid expenditures is determined by the Federal Medical Assistance Percentage (FMAP) rate. The FMAP varies by state and is determined by a formula set in statute that compares each state’s per capita income to the U.S. per capita income. At this hearing, members discussed how the FMAP operates; the variety of FMAPs, incentives and disincentives the FMAP creates for states; and how modifications to the FMAP could improve Medicaid spending predictability, accountability, sustainability, equity or efficiency.


John Hagg 

Director of Medicaid Audits 

Office of Inspector General 

Department of Health and Human Services

Alison Mitchell 

Health Care Financing Analyst 

Congressional Research Service

Anne Schwartz, Ph.D. 

Executive Director 

Medicaid and CHIP Payment and Access Commission

Carolyn Yocom 

Director, Health Care 

Government Accountability Office

For more information or to view the hearing, click here.

House Ways and Means Committee Holds Hearing on HHS FY 2017 Budget Request

On Feb. 10, the House Ways and Means Committee held a hearing on the U.S. Department of Health and Human Services’ (HHS) FY 2017 budget request. HHS Secretary Burwell discussed the details of the president’s proposals involving HHS that are within the committee’s jurisdiction, including Medicare, health care programs under the Affordable Care Act (ACA), Child Support Enforcement, Temporary Assistance for Needy Families and numerous child welfare programs.

For more information or to view the hearing, click here.


Senate HELP Committee Holds First Markup on its Counterpart to House Cures Legislation

On Feb. 9, the Senate Health, Education, Labor and Pensions (HELP) Committee held the first installment of a markup on its counterpart to the House-passed Cures legislation. The lineup included a revised bill to improve electronic health records, and bipartisan bills to streamline the U.S. Food and Drug Administration’s (FDA) review of innovative medical devices, require enhanced FDA oversight of reusable devices, speed up the approval process of genetically targeted drugs and report on and remove barriers for the next generation of researchers, among other topics.

The bills considered are as follows:

  • S. 2030, The Advancing Targeted Therapies for Rare Diseases Act of 2015, introduced by Sen. Michael Bennet (D-CO)
  • S. 1622, The FDA Device Accountability Act of 2015, introduced by Sen. Richard Burr (R-NC)
  • S. 2014, Next Generation Researchers Act, introduced by Sen. Tammy Baldwin (D-WI)
  • S. 800, The Enhancing the Stature and Visibility of Medical Rehabilitation Research at NIH Act, introduced by Sen. Mark Steven Kirk (R-IL)
  • S. 849, Advancing Research for Neurological Diseases Act of 2015, introduced by Sen. Johnny Isakson (R-GA)
  • S. 2503, Preventing Superbugs and Protecting Patients Act, introduced by Sen. Patty Murray (D-WA)
  • S. 2511, Improving Health Information Technology, introduced by Sen. Lamar Alexander (R-TN)

Before the markup, the committee revised pieces of the Improving Health Information Technology bill. The updated draft dropped a proposal to combine the Health IT Standards and Policy committees into one body—the HIT Advisory Committee. A provision was also eliminated that would have had the Office of the National Coordinator for Health Information Technology and the Advisory Committee create data standards. Additionally, the revised version took out fines under the decertification subsection. The Electronic Health Record Association had questioned the necessity of decertification and fines based on the new ratings system in the legislation.

To view the markup, click here.

Senate Judiciary Committee Hearing on Mental Health and Criminal Justice Reform

On Feb. 10, the Senate Judiciary Committee held a hearing on mental health and criminal justice reform. The committee looked at how improvements can be made to the various parts of the system to better respond to crises, identify people with dangerous mental illness, provide necessary treatment and enhance the background check system. Chairman Chuck Grassley noted that the committee’s job is to 1) break the current mental health/criminal justice cycle and 2) provide for public safety.

The Mental Health and Safe Communities Act, authored by Senator John Cornyn, served as the basis for discussion at the hearing. The bill:

  • Reauthorizes and strengthens the National Instant Criminal Background Check System. It allows state and local governments to create pretrial screening and assessment programs to identify offenders with mental illness.
  • Requires the attorney general to direct federal judges to operate mental health court pilot programs.
  • Requires state and local governments to use drug and mental health court funding to develop specialized programs for those with co-occurring mental health and substance abuse problems.
  • Mandates specialized training and the use of new technology to ensure that those who work in the criminal justice system are properly equipped to respond to individuals with mental illness and mental illness crises.

During the hearing, Democrats raised concerns over NRA-backed gun language included in Cornyn’s bill that allows some people with serious mental illness to get their gun rights restored—the provision allows mentally ill people deemed competent to have their record removed from the National Instant Criminal Background Check System. Opposition to this measure from Democrats and gun control groups could threaten bipartisan progress toward a mental health deal in the Senate this year. Cornyn argued that nothing in the legislation makes it easier for mentally ill people to get a firearm. The bill is expected to be put into a larger mental health bill with legislation from the HELP and Finance committees.


Pete Earley 


Mental Health Advocate

Dr. Fred Osher 

Director of Health Systems and Services Policy 

Council of State Governments Justice Center

Sheriff Susan Pamerleau 


Bexar County

William Ward 

State Public Defender 

State of Minnesota Board of Public Defense

W. David Guice 


Division of Adult Correction and Juvenile Justice | North Carolina Department of Public Safety

To view the hearing, click here.

Senate Finance Committee Holds Hearing on HHS Budget Request for FY 2017

On Feb. 11, the Senate Finance Committee held a hearing to examine the U.S. Department of Health and Human Services (HHS) FY 2017 budget. Committee members focused on the policies in the budget that would continue to bolster the Affordable Care Act (ACA). Chairman Hatch expressed his disapproval, and listed three examples to demonstrate his point: 1) the vast majority of newly insured people have gained coverage under Medicaid, not through the health insurance exchanges; 2) the state exchanges are not working; and 3) premiums are going up—HHS recently announced that premiums for benchmark plans will rise by an average of over 7 percent nationwide. The committee also grilled HHS Secretary Sylvia Burwell on the president’s request for nearly $30 billion in Medicaid funds for Puerto Rico to avert a coming cliff in the island’s program funding. Other topics included the budget proposal for steps to address the appeals backlog in the Medicare claims payment system and the proposal for additional spending to combat opioid abuse.

For more information or to view the hearing, click here.

Senate Judiciary Committee Holds Markup of Comprehensive Addiction and Recovery Act

On Feb. 11, the Senate Judiciary Committee held a markup of the Comprehensive Addiction and Recovery Act (CARA)—a bill aimed at addressing the epidemics of prescription opioid abuse and heroin use. The bill has bipartisan support in the committee and companion legislation in the House. It would authorize the Obama administration to use funds already in the budget to give states and organizations grants for opioid education, treatment and abuse prevention. Projects funded by CARA include:

  • $5 million to address abuse by pregnant or parenting females;
  • $15 million in incentive grants for states to create comprehensive opioid abuse response planning and implementation grants;
  • $5 million for government agencies to create treatment alternatives to incarceration;
  • $12 million for demonstration grants allowing programs to expand medication-assisted treatment;
  • $3 million per year for youth recovery services;
  • $5.7 million per year for organizations to raise awareness of treatment and support; and
  • $5 million a year for $75,000 grant to communities to address local drug crisis in the area.

Democrats are now insisting that Republicans fund the measure instead of redirecting existing funding. This effort is part of Democrats’ message that Republicans are not doing enough to address national crises. But lawmakers in both parties are trying to be ahead of the crisis by offering their own legislation, sending letters to the Obama administration and even blocking the FDA nominee.

Senate Majority Leader Mitch McConnell indicated that the bill could go to the Senate floor after this week’s recess. Sen. Jeanne Shaheen has already proposed a bill that would add funding to the legislation. Nearly every state has seen an increase in opioid-related deaths, most prominently in the Boston-New Hampshire area, where residents have raised the problem with presidential candidates.

For more information or to view the markup, click here.

Sen. Murkowski Lifts Hold on Califf’s FDA Nomination and Vote to Occur

Sen. Lisa Murkowski (R-AK) is lifting her hold on the nomination of Robert Califf for commissioner of the U.S. Food and Drug Administration (FDA); however, three other senators still have holds on his nomination. In a statement on Feb. 11, Murkowski said she has received assurances that the FDA is addressing her concerns regarding the labeling of genetically engineered salmon. She also said the FDA has helped her draft legislative language that would mandate the labeling.

Sens. Joe Manchin (D-WV), Bernie Sanders (D-VT) and Ed Markey (D-MA) all have holds in place on Califf’s nomination due to his ties to the pharmaceutical industry and FDA’s role in the opioid epidemic. Califf’s nomination passed the Senate HELP Committee in January.

Senate Majority Leader Mitch McConnell (R-KY) on Thursday (Feb. 11) filed cloture for a vote on Califf’s nomination, which means that the vote on his nomination could occur after 5:30 p.m. on Feb. 22, when the Senate returns from the Presidents’ Day recess.

  1. Administration

Medicare Beneficiaries Continue to Save on Prescription Drugs

On Feb. 8, the U.S. Department of Health and Human Services (HHS) released information showing that almost 10.7 million Medicare beneficiaries have received discounts of more than $20.8 billion on prescription drugs—an average of $1,945 per beneficiary—since the Affordable Care Act (ACA) was enacted. In 2015, 5.2 million seniors and people with disabilities received discounts of more than $5.4 billion ($1,054 per beneficiary), whereas in 2014, 5.1 million people received discounts of $4.8 billion ($941 per beneficiary).

Beneficiaries also are utilizing various recommended preventive services with no coinsurance:

  • 39.2 million people with Medicare (including Medicare Advantage) used at least one preventive service with no copays or deductibles in 2015, slightly more than in 2014.
  • Almost 9 million beneficiaries (including those in Medicare Advantage) used an Annual Wellness Visit in 2015.

The ACA provided certain recommended preventive services at no cost sharing and closed the Medicare Part D “donut hole.”

For more information about Medicare prescription drug benefits, click here.

To see a list of Medicare preventive services, click here.

CMS Releases Notice of Part B Drug Demo

The Centers for Medicare and Medicaid Services (CMS) is looking to test new payment methods for Medicare Part B drugs beginning this summer. An agency notice (CMS agency notice.pdf) was sent to Medicare contractors Feb. 5 and subsequently withdrawn. Some lobbyists thought the demonstration would be included in the president’s proposed budget because of rumors that the president would use the budget to advance drug price-control measures—however, a CMS spokesperson said it isn’t a part of the budget and that the transmittal was accidentally posted. The budget includes a proposal to change Part B drug reimbursement, but that is a separate policy.

Medicare currently pays for most Part B drugs at a rate of the average sales price (ASP) plus 6 percent. This current payment methodology gives providers incentives to use higher-priced drugs, thus turning a higher profit. CMS wants to experiment with different versions of the add-on percentage to see the effects it would have on spending and prescribing patterns. For example, it wants to see if any changes would affect the incentive for physicians to prescribe higher-priced drugs with no additional clinical value. CMS is planning to test the formulas based on ZIP Codes in all Part B drug settings and participation would be mandatory.

The agency is also developing methods to test the impact of new payment proposals for individual Part B drugs apart from changes to the ASP-based payment. These payments may differ across a different set of ZIP Codes, and some Part B drugs might be excluded from either approach, according to the notice.

If CMS follows through with the demonstration, it will go through notice and comment rule making first. The notice to Medicare contractors was intended to give them an advance notice.

CMS Releases Final Rule on Reporting and Returning of Overpayments

On Feb. 11, the Centers for Medicare and Medicaid Services (CMS) published a final rule that requires Medicare Parts A and B health care providers and suppliers to report and return overpayments by the later of the date that is 60 days after the date an overpayment was identified, or the due date of any corresponding cost report, if applicable.

Health care providers and suppliers will remain subject to the statutory requirements found in Section 1128J(d) of the Social Security Act and could face potential False Claims Act (FCA) liability, Civil Monetary Penalties Law (CMPL) liability and exclusion from federal health care programs for failure to report and return an overpayment. Providers and suppliers will also continue to be required to comply with current CMS procedures when it determines an overpayment exists and issues a demand letter.

The major provisions of the final rule:

  • Require providers to report and return Medicare overpayments no more than 60 days after identifying them. Overpayments could be the result of coding or reporting errors, duplicate payments or other mistakes, and providers can face penalties under the False Claims Act for failing to comply.
  • Limit how far back providers must go through claims for overpayments. The “lookback period” is now six years, down from 10 years in the proposed rule.
  • Provide a standard for when a provider has “identified” an overpayment that is less strict than in the proposed rule and takes into account providers’ varying compliance programs.
  • Allow providers to take up to six months to investigate possible errors in some cases, which is a more specific time frame than provided in the proposed rule.
  • Expand the way providers can return overpayments to include processes like claims adjustment or credit balance reporting.

The proposed rule was first proposed in February 2012. For more information, click here.

CMS Sends Letter to States Concerning Implementation of the Covered Outpatient Drug Final Rule

On Feb. 11, the Centers for Medicare and Medicaid Services (CMS) issued a letter to states providing guidance concerning implementation of the Covered Outpatient Drug final rule with comment (CMS-2345-FC) (81 FR 5170) published on Feb. 1, 2016, as it relates to the Medicaid program. The letter outlines key changes that states need to address when determining their reimbursement methodologies, including the revised requirement in 42 CFR §447.512(b) for states to reimburse at an aggregate upper limit based on actual acquisition cost (AAC) plus a professional dispensing fee established by the agency; the implementation of the Affordable Care Act federal upper limit (FUL); and requirements for the 340B entities, 340B contract pharmacies, Indian Health Service (IHS), Tribal, and Urban Indian Organization (I/T/U) pharmacies.

The letter is available online on

  1. Regulations Open for Comment

Food and Drug Administration (FDA) Issues Final Rule to Phase Out Trans Fats

FDA issued a final rule June 16 that gives the food manufacturers three years to phase out partially hydrogenated oils (PHOs), which are still used in a wide variety of food products from microwave popcorn to cake frosting. The decision finalizes an agency determination that PHOs, the primary dietary source of artificial trans fat in processed foods, are not “generally recognized as safe” or GRAS for use in human food. Since 2006, manufacturers have been required to include trans fat content information on the Nutrition Facts label of foods. Between 2003 and 2012, the FDA estimates that consumer trans fat consumption decreased about 78 percent and that the labeling rule and industry reformulation of foods were key factors in informing healthier consumer choices and reducing trans fat in foods. Comments on the final rule are due by June 18, 2018.

More information on FDA’s decision can be found in the agency’s press release.

CMS Soliciting Comments on Episode Groups as Required by MACRA

The Centers for Medicare and Medicaid Services (CMS) is soliciting comments on episode groups and on specific clinical criteria and patient characteristics to classify patients into care episode and patient condition groups as required by Section 101(f) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), enacted April 16, 2015. The purpose of this commentary is to provide background and context to solicit stakeholder input on the episode groups that CMS has developed pursuant to Section 3003 of the Affordable Care Act (ACA). CMS is also seeking stakeholder input on the future role of episode groups in resource use measurement.

Comments should be sent to by 11:59 p.m. EST on Feb. 15, 2016.

HHS Posts Guidance for State Innovation Waivers

On Dec. 11, the Department of Health and Human Services (HHS) posted guidance for states interested in seeking a State Innovation Waiver under Section 1332 of the Affordable Care Act (ACA). State Innovation Waivers allow states to receive federal funding to implement alternative models of health care coverage that provide affordable coverage to their residents. The notice clarifies that the minimum length of public notice and comment periods for waiver applications is 30 days.

To see the guidance, click here.

CMS Issues Proposed Rule Expanding Access to Medicare Claims Data

The Centers for Medicare and Medicaid Services (CMS) issued a proposed rule entitled “Medicare Program: Expanding Uses of Medicare Data by Qualified Entities.” The rule would expand access to Medicare information by permitting certain organizations to buy and share claims data. Created under Obamacare, Medicare’s qualified entity program allows providers, employers and others access to Medicare data to analyze the performance of providers and suppliers. The rule aims to help qualified entities make business decisions that reduce costs and improve quality of care. These changes were mandated in the Medicare Access and CHIP Reauthorization Act and CMS thinks the expansion of data sharing will stir more interest in the program. If the proposal is finalized, CMS estimates the number of qualified entities will go from 13 to 20. Comments will be accepted on the proposed rule until 5 p.m. on March 29, 2016.

CMS and ONC Release RFI on Requirements for the Reporting of Quality Measures

On Feb. 1, the Centers for Medicare and Medicaid Services (CMS) extended the comment period for the Request for Information: Certification Frequency and Requirements for the Reporting of Quality Measures under CMS Programs that was released on Dec. 31, 2015. Now, the RFI has a 45-day comment period with comments due by Feb. 16, 2016. CMS and the Office of the National Coordinator for Health Information Technology (ONC) are seeking public input on a few items related to the certification of health information technology (IT), including electronic health record (EHR) products used for reporting to the: 1) EHR Incentive Programs and 2) certain CMS quality reporting programs.

CMS and ONC ask for feedback on how often to require recertification, the number of CQMs a certified Health IT Module should be required to certify to and ways to improve testing of the modules.

  1. Reports

Health Affairs Study Cites Low Prices as the Cause for Vaccine Shortages

A new Health Affairs study concludes that the government should consider paying more for some vaccines—including older vaccines whose prices have been subject to congressional price caps—to help reduce shortages. The authors of the study analyzed data on vaccine sales and shortages from 2004 to 2013 and found that low prices for vaccines were associated with vaccine shortages. $25 vaccines were associated with a 19 percent probability of a shortage the next year, while 10 percent of $75 vaccines experienced a shortage the next year.

According to the study, older vaccines have recuperated innovation costs and companies can supposedly produce them at low costs—however, even old vaccines require high manufacturing standards and producers should get higher prices to encourage investment in improved, more reliable processes. The researchers cited manufacturing problems as the main cause of 13 of the 24 shortages from 2004 to 2013.

The U.S. Food and Drug Administration (FDA) says the cause of shortages is vaccine quality, according to Erin Fox, director of the Drug Information Service at the University of Utah. She, however, didn’t think the data supports the need for additional reimbursement. She said it is not known whether Merck, GSK and Sanofi—companies that make most U.S. vaccines—charge higher prices for new vaccines to make up for losses on older ones.

The study analyzed data on vaccine sales and shortages reported by practitioners and patients to the FDA and the American Society of Health-System Pharmacists from 2004 to 2013.