1. Congress 

The Senate has adjourned for the holidays.

2. Administration

President Obama Signs ECHO Act Into Law

Last week, President Obama signed into law the Expanding Capacity for Health Outcomes (ECHO) Act. The legislation aims to expand the Project ECHO telemedicine program, which would educate and support rural health care providers on disease management and rural behavioral health treatment as well as bolster health interventions.

CMS to Phase in Prior Authorization for Two Types of Power Wheelchairs

On Dec. 20, CMS announced plans to implement prior authorization starting in March for two kinds of power wheelchairs not previously included in a similar demonstration. CMS will phase in the new prior authorization program before going nationwide.

Late last year, CMS finalized a prior authorization process to cover durable medical equipment that CMS said was frequently subject to unnecessary use. CMS released a list of equipment that could fall under the process. CMS said at the time it would give 60 days’ notice before putting the process in place for specific types of DME.

Stakeholders at the time raised concerns that 60 days might not be enough time for Medicare contractors to implement the new prior authorization procedures. As a result, CMS has chosen to provide 90 days’ notice.

CMS plans to start prior authorization on two types of power wheelchairs not included in the Prior Authorization of Power Mobility Devices Demonstration. Despite initial industry concerns, both CMS and some DME suppliers have characterized that demonstration as a success.

The prior authorization requirements will be phased in starting March 20 in one state in each of the DME Medicare Administrative Contractors’ jurisdictions—Illinois, Missouri, New York and West Virginia. The program is set to go nationwide July 17, but CMS says it can suspend the program at any time if prior authorization creates barriers to care.

CMS plans to issue specific prior authorization guidance and include final timelines for prior authorization requests. Those timelines will be customized for each DME item, the agency notes.

CMS Announces New Payment Models to Improve Cardiac and Joint Care

On Dec. 20, CMS finalized new Medicare alternative payment models for cardiac and orthopedic care that were opposed by Donald Trump’s choice for HHS secretary. The new bundled payment models would go into effect in July in 98 metropolitan areas, providing Medicare bonuses to clinicians who coordinate care and rehabilitation for patients receiving treatment for hip surgery, heart attacks, coronary bypass surgery and cardiac rehabilitation.

Rep. Tom Price, who has been nominated to be Secretary of HHS, opposed the mandatory cardiac model, calling it a government overreach. Should Rep. Price become Secretary, he might seek to quash the alternative payment model or substantially change it.

Another part of the proposal would expand accountable care organizations to smaller physician practices and hospitals with lower financial risks than previous ACO models. Some 70,000 clinicians could qualify for the program in 2018, joining 70,000-125,000 expected in alternative payment models next year, Conway said.

The cardiac model is aimed at improving care for the estimated 200,000 Medicare beneficiaries hospitalized for heart attack or bypass surgery annually, whose treatment cost Medicare over $6 billion. The costs and outcomes of the patients vary widely, and only 15 percent of heart attack patients receive cardiac rehabilitation.

For more information, click here.

New CMS FAQs Provide More Information About Changes to the EHR Incentive Programs

CMS recently added two new FAQs providing more information on changes to the EHR Incentive Programs as a result of the CY 2017 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) final rule. The new questions are:

  1. Are new participants who attest only to the Medicaid EHR Incentive Program in 2017 required to attest to Modified Stage 2?
  2. What is the policy for measure calculation for actions outside the EHR reporting period for the Medicare and Medicaid EHR Incentive Programs beginning in 2017?

To view CMS’s FAQ page, click here.

FDA Orders Drug Companies to Pull Misleading TV Ads

FDA told two drug makers, Celgene and Sanofi, to pull their TV ads because they are in violation of the Food, Drug & Cosmetic Act. Both companies got in trouble for juxtaposing fun, fast-paced scenes with the serious risk information associated with the medicines.

Celgene Corporation’s television ad for its plaque psoriasis treatment, Otezla, discusses the risks of the drug while also showing scenes of people relaxed and having fun at parties and shopping with friends. FDA noted that an instrumental version of the song “Walking on Sunshine” plays in the background throughout the entire ad, with the music’s volume loud enough to drown out the audio disclosure of risk information.

Sanofi was reprimanded for juxtaposing risk information in a similar way in its ad for Toujeo, an insulin product. The on-screen text, along with the ad’s narrator, conveys the drug’s serious risks while viewers watch fast-paced visuals that feature a man dancing.

FDA Announces Delay on Off-Label Promotion

FDA recently announced it will extend until April 10 the public comment period for feedback on how it should regulate drug and medical device company communications about unapproved uses of their products. That means people who have been waiting about four years for the FDA to issue new guidance on the matter may have to wait even longer. FDA policies prohibit companies from talking about off-label uses in most circumstances, but courts have held the position that this can be a First Amendment violation.

FDA DATA Shows Decrease in Drugs Approved But Also Shows Other Progress

On Dec. 9 at an FDA/CMS Summit, the FDA said they approved 19 out of 36 novel drug applications in 2016. That is a decrease from 2015 approvals and the lowest number of novel approvals since 2007. Part of the reason for the decrease was because in 2015 the FDA got ahead of itself and approved a handful of drugs with 2016 review deadlines. Also, there were fewer applications overall to review. However, the FDA handed out more rejection letters this year, many due to manufacturing problems rather than to the drugs’ safety or efficacy. It approved more than 90 percent of novel new drug or biological applications in 2015, but just over 60 percent in 2016.

While the overall number of novel treatments approved dropped, the FDA sped up its process in deciding on them. In 2016, the median time to approval was 7.8 months compared to 10.9 months last year. That is record-breaking speed for the agency. Most of the drugs were part of its expedited review programs.

All but one of the 19 new drugs approved this year made it through the agency on its first review cycle, and 16 were approved in the U.S. before anywhere else in the world. Seven drugs are used to treat rare diseases. The FDA also met its user fee deadline for all but one drug—the now infamous Sarepta Duchenne drug Exondys 51.

For more information, click here.

The House Freedom Caucus Releases Health Agenda

The House Freedom Caucus issued a 23-page list identifying 200 rules they want to see gutted under the Trump administration, including an HHS rule that expanded the number of patients providers could treat with medications that help combat opioid addiction from 100 to 275. That move could impede the nation’s effort to deal with the prescription drug abuse epidemic.

The Caucus also wants to get rid of a rule released this fall that will require drug companies and research institutions to publicly report more clinical trial data, including results that show their products or experiments failed. The list also includes a proposed rule that would modernize the “Common Rule,” the massive regulation designed to protect the safety of patients who participate in clinical trials and other studies.

Other items on the list: Medicare’s recent update to how it pays for clinical diagnostic laboratory tests and an FDA rule that was designed to ensure that drug companies do not abuse the Citizen Petition process to keep cheaper generic versions of their products off the market. In addition, the Caucus wants to nix the FDA’s authority to regulate tobacco products under the Food, Drug and Cosmetic Act.

For the full list, click here.

3. Courts

ACA CSR Recipients File Motion to Intervene in House v. Burwell Case

Two recipients of the ACA’s cost-sharing reduction (CSR) payments have filed a motion to intervene in House GOP’s case against HHS out of concern the incoming president might not defend the Obama administration’s position in support of the payments. This could leave around 6 million Americans unable to afford coverage.

The motion, filed on behalf of Gustavo Parker and La Trina Patton, argues that Parker and Patton—and the other 5.9 million Americans receiving CSRs—would be harmed should the incoming administration and the House allow the lower court’s ruling to stand.

Earlier this year, a federal judge ruled that the administration violated its authority by sending the CSR payments to issuers without a formal congressional appropriation, but the judge allowed the money to continue to flow until the case was fully settled. The administration appealed the ruling, and it had been expected to go to court in the spring. However, at the House’s request, the case briefings have been delayed until Feb. 21 to provide the new administration time to consider its strategy.

The motion argues that until recently, Parker and Patton’s interests had been represented by the administration, which advocated for the continued payments.

4. State Activities

Maine: Over 65,000 Mainers Sign on for Health Care Referendum

Supporters of expanding Medicaid in Maine under the ACA say they have enough signatures to put a referendum on the ballot as early as next year, despite the uncertainty surrounding the future of the health care law. Maine Equal Justice Partners said it collected more than 65,000 signatures to get the issue on the ballot—more than the required 61,123—although the state still needs to certify them. In order to get the referendum on the November 2017 ballot, the signatures must be filed by Jan. 26. Medicaid expansion has repeatedly received legislative approval in Maine, only to be vetoed by Republican Gov. Paul LePage.

Maryland: Maryland Had the Highest Rate of Opioid-Related Hospitalizations in 2014

Maryland had the highest rate of opioid-related hospitalizations in 2014, according to new Agency for Healthcare Research and Quality statistics. Maryland’s hospitalization rate was 362.1 stays for every 100,000 people, while the District of Columbia and New York closely followed at 339 and 335.3 stays, respectively. States with the lowest hospitalization rates were Iowa (44.2), Nebraska (46.1) and Texas (70.9).

The state-by-state breakdown, the first that AHRQ has released, also documented which states saw the largest increases in opioid-related inpatient stays and the highest rates of opioid-related emergency room visits. Nationwide, the rate of hospitalizations related to opioid misuse and addiction nearly doubled between 2000 and 2012, AHRQ said.

Michigan: Report Recommends Changes to Mental Health Services

A new draft report commissioned by Michigan Gov. Rick Snyder recommends that the state create pilot projects to test the coordination of physical and behavioral health services, while also maintaining current funding levels for Medicaid through HMOs. The report comes after the governor caused a stir among mental health providers and advocates when his budget recommended handing the state’s mental health services over to Medicaid HMOs. The governor retracted that plan and ordered a working group to offer alternative recommendations. The 77-page draft report contained 69 policy recommendations ranging from care coordination to access to services and quality measures, among other things.

Tennessee: CMS Extends TennCare 1115 Waiver

Tennessee secured a five-year extension of its TennCare 1115 waiver, which includes changes to Medicaid uncompensated care funding for hospitals, among other revisions. As it has in other states, CMS is reducing the amount of funding available to providers to offset uncompensated care costs. Starting in July, Tennessee will receive up to $709 million in uncompensated care funding (down from $880 million). That amount reduces further to $627 million in July 2018. The waiver is in effect through June 2021.

Washington, D.C.: D.C. Mayor Signs “Right to Die” Bill

District of Columbia Mayor Muriel Bowser has signed legislation that will let terminally ill patients end their lives with medication prescribed by a doctor. Bowser’s decision to approve the so-called “right to die” bill makes D.C. the seventh jurisdiction to authorize the practice—unless Congress moves to block it. The D.C. Council overwhelmingly approved the legislation last month and Bowser signed it Dec. 19.

Similar to existing laws in several states, the D.C. legislation would require terminally ill patients with less than six months to live who wish to obtain life-ending medication to get consent from two physicians. A patient must make two verbal requests as well as one request in writing. The written request must be made with two witnesses present who can verify the patient is acting voluntarily. The legislation also outlines reporting requirements for physicians and the D.C. health department.

But Congress can still prevent the bill from becoming law. Once the bill is transmitted, lawmakers have 30 days to review it and could try to halt it by passing a joint resolution of disapproval. If that resolution is not approved by the president within that 30-day period, the bill would become law.

5. Regulations Open for Comment

CMS Releases Proposed Rule on Fire Safety Requirements for Dialysis Facilities

On Nov. 3, CMS announced a proposed rule to update Medicare fire protection guidelines for certain dialysis facilities to ensure that patients are protected from fire while receiving treatment in those facilities.

The new proposed guidelines apply to all dialysis facilities that do not provide one or more exits at grade level from the treatment area level. CMS previously updated the requirements to include dialysis facilities located adjacent to industrial high-hazard occupancies; however, as dialysis facilities are not permitted to be located in such areas, the requirement specific to such geographically located facilities will be removed.

The rule adopts, for certain dialysis facilities, updated provisions of the National Fire Protection Association’s (NFPA) 2012 edition of the Life Safety Code (LSC), as well as provisions of the NFPA’s 2012 edition of the Health Care Facilities Code in order to bring CMS’s requirements more up to date with current fire safety standards. The LSC is a compilation of fire safety requirements for new and existing buildings, and is updated every three years.

The proposed rule addresses construction, protection and operational features of dialysis facilities to provide safety for Medicare beneficiaries from fire and smoke. Some of the main requirements laid out in the rule include:

  • Doors to hazardous areas must be self-closing or must close automatically.
  • Alcohol-based hand rub dispensers now may be placed in corridors to allow for easier access.
  • A fire watch or building evacuation is required if the sprinkler system is out of service for more than 10 hours.

Currently, CMS is using the 2000 edition of the LSC to survey dialysis facilities for health and safety compliance. With this proposed rule, CMS is adopting provisions of the 2012 edition of the LSC and provisions of the 2012 edition of the Health Care Facilities Code, to bring CMS’s requirements more up to date, and align dialysis facility fire safety requirements with the codes CMS uses to survey other healthcare facilities.

CMS Releases Proposed Notice With Changes to Medicaid National Drug Rebate Agreement

On Nov. 7, CMS issued a proposed notice announcing changes that would be made to the Medicaid National Drug Rebate Agreement (NDRA) for use by the Secretary of the Department of Health and Human Services and manufacturers under the Medicaid Drug Rebate Program. The NDRA is being updated to incorporate legislative and regulatory changes that have occurred since the agreement was published in February 1991, as well as to make editorial and structural revisions, such as references to the updated Office of Management and Budget (OMB)-approved data collection forms and electronic data reporting. There is a 90-day comment period for this proposed notice that will end on Feb. 7, 2017.

For more information, click here.

Comments Due on IMPACT Act Cross-Setting Quality Measure

On Nov. 4, CMS announced that public comments are due Nov. 17 on a cross-setting post-acute care measure under the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) to further develop and refine the percentage of residents or patients with pressure ulcers that are new or worsened and language modifications being explored with the term “Pressure Injury.” CMS seeks feedback on potential updates to measure specifications and items used to calculate the quality measure. Visit the Public Comment webpage for more information.

CMS Issues Interim Final Rule to Delay Inclusion of U.S. Territories in Definitions of States and United States

CMS published the Covered Outpatient Drug Final Rule with Comment Period in the Federal Register on Feb. 1, 2016. As part of that final rule with comment, CMS amended the regulatory definitions of “States” and “United States” to include the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands) beginning April 1, 2017. However, the agency said those territories could not be ready to implement the program by this date.

Therefore, CMS issued an Interim Final Rule with comment period that delays the inclusion of the territories in the definitions of “States” and “United States” from April 1, 2017, until April 1, 2020, which is effective on Nov. 15, 2016. There is a 60-day comment period that will end on Jan. 17, 2017.

For more information visit theCovered Outpatient Drugs Policy page on Medicaid.gov.

CMS Issues Proposed Rule for Medicaid Managed Care Plans

CMS has issued a new proposed rule detailing regulations for pass-through payments to providers from Medicaid managed care plans. The guidance builds on the Medicaid managed care rule finalized by the Obama administration in May.

Read the proposed rule here .

6. 2017 and Health Care

Looking Ahead: Repealing the Affordable Care Act

It is widely understood that Congress will repeal part of the Affordable Care Act (ACA) next year. While Congress will repeal the insurance requirement portion of the ACA, it is likely that the health care delivery changes required by the Medicare portion of the ACA will be kept in place. In the budget context this means repealing benefits and some of the financing and keeping in place the cuts made in Medicare. In addition, Medicaid reform is likely to be part of this effort. The overall thrust of the incoming administration and Republican-controlled Congress appears to be to return health care to the states to provide them with the flexibility to create what they believe best provides coverage for their residents.

While there is a general understanding of how Congress will proceed, there are still many substantive issues that need to be answered.

Congress is expected to pass a “budget reconciliation” bill that repeals many ACA provisions. All indications are that the likely starting point for this measure will be the budget reconciliation bill Congress passed in December 2015, which was vetoed by President Obama. (Please see special budget reconciliation process section for more detail.) The 2015 legislation did keep the Medicare cuts and health care delivery changes in place.

The 2015 vetoed bill, had it become law, would have struck from the Internal Revenue Code many ACA tax provisions (e.g., the Cadillac tax, medical device tax, insurer premium tax, the “pharma brand name fee,” etc.). Although it has been widely reported that the bill also “repealed the employer mandate,” it did not eliminate the ACA’s employer responsibility provision, Internal Revenue Code (IRC) Section 4980H. Instead, the bill changed the penalties to “zero dollars,” but otherwise left the provision unchanged. Likewise, the individual mandate also amended the tax code to make the penalty for failure to obtain required health coverage “zero dollars.” Most likely this awkward construct was because of rules particular to budget reconciliation.

The information reporting provisions to enforce the mandates (through the filing of IRS Form 1095-B or Form 1095-C) was not amended at all by the reconciliation measure, but remained in place.

The 2015 legislation is likely to be the starting point, but there may have to be some changes. For example, discussions on the Hill have begun to focus on a transition period. A range of time periods have been given for a transition period—from 6 months to 4 years. Presumably, that transition period would require some financing. Therefore, it cannot be assumed that all the taxes in the ACA would be immediately struck.

Medicaid is another area that raises questions about what Congress will decide to do. While most Republicans support block granting Medicaid, what happens to the expansion population is an important question. Would it be left up to the states to determine how to cover that population; would they be phased out or would Congress decide to take a portion of the federal savings from block granting and provide a tax credit for the expansion population so they may purchase private coverage in a Medicaid managed care plan? Block granting would have significant ramifications for state budgets and how they manage their Medicaid populations, should it occur.

Since last year’s bill is expected to be the template for the forthcoming ACA repeal measure, there will be implications if Congress “zeroes” the penalties, but retains the existing employer information reporting requirements. Presumably, financial penalties for non-reporting would still apply, even where the employer mandate penalties, themselves, are amended to make them zero dollars.

This would be highly frustrating for employer plan sponsors given the cost and ongoing challenge of Form 1095-B/Form1095-C and related reporting. Since the effective date of repealing the exchange subsidies and Medicaid expansion will likely be delayed for some period, reporting obligations would also likely continue during the transition period in order to determine eligibility for individuals’ premium tax credits.

There is an additional reason Congress might retain a version of the employer information reporting requirements. The House of Representatives’ GOP blueprint for replacing the ACA (“A Better Way”) envisions the imposition of a cap on the employee tax exclusion for employer-sponsored health coverage, coupled with the establishment of a new tax credit that could be used to purchase health coverage in the individual market. This is described as a “refundable tax credit for individuals and families...who do not have access to job-based coverage, Medicare, or Medicaid.” There are currently very few details available as to whether or how “job-based coverage” might be defined.

Consequently, some advocates of the tax credit concept believe that continued employer information reporting is needed to determine eligibility for this new tax credit.

Last, most states made changes to their insurance laws and regulations to be consistent with the ACA. Replacing the ACA will mean that states will have to assess the changes and determine what other changes they will need to make. That too will take time.

Transition and Replace: The Ryan and Price Plans

Both Speaker Ryan and Health and Human Services Secretary-nominee Price have health plans. Speaker Ryan’s plan has not been drafted in legislation while Secretary-nominee Price has drafted his proposal into legislation. Both plans seek to provide more choice in plans and are similar in the principles they embody, but do have different approaches. For example, both would create high-risk pools at the state level, but the Ryan plan would provide more funding for the pools. Both plans would limit the amount employers could deduct for providing health insurance and would expand the use of Health Savings Accounts. Price would provide everyone with an age-adjusted refundable tax credit for purchasing coverage. Ryan expands the use of Health Reimbursement Accounts (HRAs). Price would permit association health plans to develop and Ryan’s plans would permit the selling of plans across state lines. The goal of both plans is to allow more choice in plans offered in the individual market and small business market.

For a summary of the Price “Empowering Patients First Act,” click here .

For a summary of the Ryan “Better Way” proposal, click here.

So How Fast Can This All Happen: Budget Reconciliation

It would be faster for Congress to simply repeal the ACA outright. However, that would need 60 votes in the Senate to defend the legislation from Democrats’ tactics to change or delay. Republicans will have only 52 members in the next Congress. Therefore they need to use the budget reconciliation process, which will allow them to pass legislation by a simple majority.

However, the rules of reconciliation do not let Congress repeal the entire law. They can repeal only those parts that directly impact federal spending.

Reconciliation refers to the process by which congressional committees that control permanent spending programs such as Medicare and Medicaid, as well as tax policy, take action to reconcile that spending with the terms of the annual budget resolution.

That means the first action must be to pass a budget resolution. The budget resolution is a blue print for spending and taxes for the coming fiscal year. It is not a law and therefore does not need the president’s signature. It does have to be passed by both the House and Senate in the same form. The budget resolution also may not be filibustered in the Senate, but senators have up to 50 hours to debate it and unlimited time to vote on proposed amendments, which in practice can take up to another full day. When 50 hours of time has expired, the process by which the Senate votes on amendments without debate is known as “vote-a-rama.”

The budget resolution often contains instructions to the authorizing committees, so once the resolution has been passed, the attention turns back to congressional committees. The committees receive the budget instruction and determine policy changes that meet the requirements for increasing or reducing spending in the budget resolution. That process triggers the reconciliation bill that goes to the president.

Legislative changes need to be written, voted on by the committee and reported back to the House or Senate budget committees, which then forward them to the House or Senate floor for votes. Because the changes from a variety of committees are often packaged together, sometimes the bill is referred to as an omnibus. Senate debate time for reconciliation is limited to 20 hours, with unlimited additional voting on amendments. House and Senate negotiators then take the two versions of reconciliation and meet to develop a compromise, pass it again in the full House and Senate and send it to the president.

The last budget reconciliation was done for the purposes of repealing the ACA, even though the Republican-controlled Congress knew the president would veto it. The budget resolution passed at the end of April 2015. The resulting reconciliation bill was sent to President Obama, who vetoed it on Jan. 26, 2016.

However, rather than putting together a package that is destined to be vetoed, the Congress must put together a package that addresses issues like a transition to a new system and they have the opportunity to now also address changes in Medicaid. However, Medicaid too raises new issues that they must address. One key issue is, does Congress need to also put in place a replacement plan or can they do that after repeal? A replacement bill will be harder and take longer to hammer out.

While calls for reconciliation to be completed by Inauguration Day, Jan. 20, might not be feasible, how fast Congress can process policy for a reconciliation bill depends on how fast Republicans can reach a consensus, whether they decide to include Democrats in the process and whether they feel the need to have a replacement bill on hand as well. It is always possible to repeal parts of the ACA and build a transition in, and then come back to what the replacement should be in the course of the transition. Last, in creating the House of Representatives and the Senate, the Founding Fathers intended to have the Senate be the “cooling saucer” in the legislative process. While the Senate can act quickly, it does not have to do so. So the natural deliberative pace of the Senate may in fact slow down the process even with the use of reconciliation.

For more information on the reconciliation process please see the Q and A below.

A Primer: The Budget Reconciliation Process

With a new administration and new Congress beginning in 2017, many have focused on the “reconciliation process” to repeal the Affordable Care Act and to accomplish other legislative goals like tax reform. This article provides the reader with the basics of the reconciliation process.

Reconciliation was created by the Congressional Budget Act of 1974 and allows for expedited consideration of certain tax, spending and debt limit legislation. In the Senate, reconciliation bills are not subject to filibuster and the scope of amendments is limited, giving the process advantages for enacting controversial budget and tax measures. For example, welfare reform in 1996 and the Bush tax cuts in 2001 and 2003 were accomplished through the budget reconciliation process.

How does Reconciliation Begin?

There are two main parts to the reconciliation process, which begins with the budget resolution.

A budget resolution must be passed directing the committees to develop legislation achieving budgetary goals. The resultant legislation is to enact policies that reflect those increase or decrease in spending goals.

A budget resolution is developed by the House and Senate Budget Committees and is not signed by the president. Therefore, the resolution is not a law, but provides a blueprint for Congress to follow to develop policies and enact legislation to achieve budgetary goals. The resolution divides the government’s spending into budget functions and can instruct committees of jurisdiction to prepare legislation to meet certain spending targets. Not all committees have to receive instructions, but a committee must receive instructions to have its legislation considered part of reconciliation.

By the timetable used since FY 1987 the budget resolution is scheduled for final adoption by the House and Senate by April 15. However, this deadline is often missed.

What are Reconciliation Instructions?

Reconciliation instructions tell the committee of jurisdiction to prepare legislation and report it by a certain date that does one or more of the following:

  • Increases or decreases spending (outlays) by specified amounts over a specified time;
  • Increases or decreases revenues by specified amounts over a specified time; or
  • Raises or lowers the public debt limit by a specified amount.

For example, if the budget resolution called for a reduction in Medicare spending by $1.1 billion over five years, the House Ways and Means Committee, the House Energy and Commerce Committee and the Senate Finance Committee would receive instructions to develop policies and enact legislation to reduce spending over that time period, because those committees have jurisdiction over Medicare.

How do the Committees Proceed?

The reconciliation legislation goes through the normal committee process, with the committee voting to report out legislation. Should a committee fall short of its target or not act at all, there are procedures for offering amendments to fill the gap when the bill goes to the full House and Senate.

If multiple committees receive an instruction, they send the legislation they have reported out to the House or Senate Budget Committees, which assemble them into an omnibus bill for consideration by the full House or Senate. The budget committees cannot make substantive changes in the bills. Whether the committees’ legislation is assembled into one or multiple bills depends on the instructions in the budget resolution.

How Many Reconciliation Bills may Congress Consider Each Year?

In the Senate, the interpretations of the Congressional Budget Act allow the Senate to consider the three basic subjects of reconciliation—spending, revenues and debt limit in a single bill or multiple bills. Usually there is only one budget resolution per fiscal year. However, there is nothing to prevent Congress from considering more than one budget resolution in a year.

The rule that allows the Senate to consider up to three bills in response to a resolution is most significant if the first reconciliation bill the Senate takes up affects both spending and revenues. Even if that bill is overwhelmingly devoted to only one of those subjects, no subsequent reconciliation bill can affect revenues or spending because the first bill already addressed them. In addition, policies that are budget neutral are not eligible to be part of a reconciliation bill that affects spending or revenues because budget neutrality does not impact spending or revenues.

Can Amendments Be Offered?

When the full House or Senate considers a reconciliation bill, amendments may be offered. However, the Congressional Budget Act generally prohibits consideration of any amendment that would cost money—i.e., raise spending or cut taxes without fully offsetting the cost. An exception is in the Senate where an amendment that solely strikes a provision is permissible even when that provision’s removal costs money. In the Senate, amendments must also comply with other rules and with budget points of order established under the Congressional Budget Act or by the budget resolution itself.

In the House, regular order is to adopt a “rule” that specifies how the reconciliation legislation will be considered, including what amendments may be offered.

Why is Reconciliation Special When It Comes to Senate Procedure?

The Senate can consider and pass reconciliation legislation with only a simple majority rather than the 60 votes often needed for legislation. For a reconciliation bill, the Congressional Budget Act limits Senate debate on the bill to 20 hours and limits debate on the subsequent compromise between the two houses to 10 hours.

One important note, however, is that the process does not limit the number of amendments that can be offered in the Senate, despite the time limit. When the 20-hour time limit expires, remaining amendments can be considered with little or no debate—a process that has become known as “vote-a-rama.”

What is the Byrd Rule and Why is It Important?

The Byrd rule, named for the late Senator Robert Byrd of West Virginia, allows senators to block provisions of reconciliation bills that are “extraneous” to reconciliation’s basic purpose of implementing budget changes. Otherwise committees could add a wide range of provisions unrelated to the goals of the budget process, including those policies that might have a hard time passing under regular procedures. The Byrd Rule applies only to the Senate.

Examples of extraneous provisions under the Byrd Rule are those that do not change the level of spending or revenues (budget-neutral items) or those in which the change in spending or revenues is merely incidental. The Byrd Rule provides six definitions of what constitutes extraneous matter for purposes of the rule (and several exceptions thereto), but the term is generally described as covering provisions unrelated to achieving the goals of the reconciliation instructions.

A provision is considered to be extraneous if it falls under one or more of the following six definitions:

  • It does not produce a change in outlays or revenues;
  • It produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions;
  • It is outside the jurisdiction of the committee that submitted the provision for inclusion in reconciliation;
  • It produces a change in outlays or revenues that is merely incidental to the non-budgetary components of the provision;
  • It would increase the deficit for a fiscal year beyond the “budget window” covered by the reconciliation measure; or
  • It recommends a changes in Social Security.

The Byrd Rule is enforced only through points of order raised by members during debate. If no senator raises a point of order the provision is not struck. This is how Congress has enacted budget process changes such as pay-as-you-go rules through reconciliation, even though they are considered extraneous under the Byrd Rule because they don’t directly change spending or revenue levels.

What Happens After Each Chamber Adopts a Reconciliation Bill?

Once the House and Senate adopt different versions of a reconciliation bill, the House and Senate appoint members from each body to participate in “conference committee.” The conference committee works out differences between the two versions and reports back to the two bodies a “conference report.”

What Does This Mean for the Repeal of the Affordable Care Act and Tax Legislation?

In December 2015, the House and Senate passed a reconciliation package to repeal broad parts of the Affordable Care Act. The legislation was vetoed by President Obama and there were not enough votes to override the veto. That reconciliation bill would have repealed the mandates, most of the taxes imposed by the ACA and the Medicaid expansions, as well as stripping the Secretary of Health and Human Services of authority to operate the exchange after 2018.

Because the reconciliation process would allow Republicans to pass a bill with only a majority vote and not allow opponents to use a filibuster to stop the bill, it is logical for them to turn to the reconciliation process once more. However because the rules require that reconciliation directly affect the federal budget, that means they can repeal through this process only parts of the law that have a fiscal impact. Granted, the process would allow for large swaths of the law to be repealed.

A Word about Medicare

As previously mentioned, repeal of the ACA does not mean repeal of the Medicare delivery changes and cuts in reimbursement. However, there is discussion that Medicare “reform” could be part of an ACA repeal/replacement effort. One such reform is a discussion of moving Medicare to a premium support system.

Premium support is a general term used to describe an approach to reform Medicare that aims to reduce the growth in Medicare spending by increasing competition among health plans and providing a stronger incentive for beneficiaries to be cost-conscious in their plan selection. On June 22, 2016, the House Republicans included in their health care reform plan a proposal to gradually transform Medicare into a system of premium supports, building on proposals of the Speaker of the House, Paul Ryan, when he was Chair of the House Committee on Budget, as well as the proposals of many other policymakers. Under a premium support system, the federal government would provide a payment on behalf of each Medicare beneficiary toward the purchase of a health insurance plan—either a private plan, similar to a Medicare Advantage plan, or traditional Medicare. This approach is sometimes called a defined contribution or voucher approach. Under a premium support system, health plans would compete for enrollees and people on Medicare would choose among plans for their coverage—an approach that sounds similar to the current system, but is not the same. A key difference is that payments for services provided to beneficiaries in traditional Medicare would be capitated rather than the current approach that generally ties payments to the specific services that beneficiaries use.

Stay tuned to see if Medicare reform is included in the effort to repeal and replace the ACA.

The Health Care Players

While many of the individuals involved in health care in Congress have played a significant role in health policy for a number of years, there are new players as well as those who will be joining the new administration.

House Republican Leadership in Health Care

Speaker Paul Ryan (R-WI) Majority Leader Kevin McCarthy (R-CA) Ways and Means Committee Chair: Kevin Brady (R-TX) Energy and Commerce Committee Chair: Walden (R-OR)* Education and Workforce Committee Chair: Virginia Foxx (R-NC)*

House Democratic Leadership in Health Care

Minority Leader Nancy Pelosi (D-CA) Minority Whip Steny Hoyer (D-MD) Ways and Means Ranking Member: Richard Neal (D-MA)* Energy and Commerce Ranking Member: Frank Pallone (D-NJ) Education and Workforce Committee Ranking Member: Bobby Scott (D-VA)

Senate Republican Leadership in Health Care

Majority Leader Mitch McConnell (R-KY) Finance Committee Chair: Senator Orin Hatch (R-UT) Health, Education, Labor and Pensions Committee Chair: Lamar Alexander (R-TN)

Senate Democratic Leadership in Health Care

Minority Leader Chuck Schumer* (D-NY) Senate Finance Ranking Member: Ron Wyden (D-OR) Health, Education, Labor and Pensions Committee Ranking Member: Patty Murray (D-WA)

Administration

HHS Secretary-nominee: Rep. Tom Price (R-GA)* CMS nominee: Seema Varma* OMB Director-nominee: Rep. Mick Mulvaney (R-SC)*

*denotes new to that position in the next Congress or new administration

If you have any questions, contact the following individuals at McGuireWoods Consulting:

 

Stephanie Kennan, Senior Vice President Charlie Iovino, Vice President Caroline Perrin, Research Assistant

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering infrastructure and economic development, strategic communications & grassroots, and government relations services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and has been named in The National Law Journal's special annual report, "The Influence 50," for the past several years. In the most recent report, McGuireWoods Consulting was ranked 15th of the 1,900 government relations firms in Washington, D.C.

 

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