The House and Senate each unveiled their respective FY2014 budgets, while also working to find agreement on a Continuing Resolution (CR) to keep the government funded beyond the March 27 expiration of the current CR. Meanwhile the Administration continues to work with states to implement the Affordable Care Act (ACA).

1. Congress

House of Representatives

Chairman Ryan Releases FY2014 Budget Proposal

On Tuesday, Budget Committee Chairman Paul Ryan (R-WI) releases a fiscal 2014 budget plan Republicans claim would reduce the deficit by $4.6 trillion over the next 10 years and, among other things, transition Medicare into a premium support system and convert Medicaid into a block grant program. Under the proposal, which is similar to Ryan's previous budget proposals, Medicare would provide beneficiaries a choice of private health insurance plans that would compete with traditional fee-for-service Medicare on a new Medicare Exchange, similar to the health insurance exchanges established under the health care reform law. Regarding Medicaid, the plan would combine Medicaid and the Children's Health Insurance Program (CHIP), converting the existing program into a single block grant that Ryan says will give states more flexibility to address their own unique needs. The budget would reduce spending on Medicaid by $756 billion over the next 10 years.

W&M Health Subcommittee Holds Hearing on MedPAC's Annual March Report to the Congress

The House Ways and Means Health Subcommittee held a hearing on Friday to discuss MedPAC's annual March Report to the Congress in which details were given highlighting the Commission's recommendations for updating Medicare payment policies. MedPAC advises Congress on Medicare payment policy. In its March Report to the Congress, MedPAC is required to review and make recommendations on payment policies for specific provider groups, including hospitals, skilled nursing facilities, physicians, home health and Medicare Advantage plans. In the hearing, both Democrats and Republicans on the Committee agreed that the Medicare system needs to be reformed, particularly given that Medicare is at the center of the federal budget debate. Members posed several questions regarding fraud, cost-saving measures and the quality of care vs. quantity of care characterized within the FFS provider payment model. Chairman Hackbarth noted MedPAC's recommendations that Congress enact no update in 2014 for five fee-for-service payment systems, enact a 1 percent update for the hospital inpatient and outpatient payment systems and eliminate the SGR payment model.

Witness List

Glen M. Hackbarth


Medicare Payment Advisory Commission

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

The full MedPAC report can be found here:

Health Subcommittee Investigates ACA's Effect on the Job Market

The House Energy and Commerce Health Subcommittee on Wednesday held a hearing titled "Obamacare's Impact on Jobs" to explore how the federally mandated employer- health insurance coverage within the health care law would affect employer-sponsored health coverage and job availability, particularly within the small business jobs market. Members in both parties asked questions in particular about the potential negative economic effects and any forecasted consequences on workers' hours and overall compensation. Witnesses addressed questions regarding the mandate's potential to raise the cost of employer-sponsored health insurance and impart disincentives for employers to grow their workforce, encourage replacing full-time employees with part-time workers or contract out to other businesses. Suggestions proposed by witnesses included raising the full-time employment designation from 30 to 40 hours per week to more adequately reflect most U.S. industries' business models, providing a longer and more broad transition period for employers acting in good faith who are trying to comply with the law and eliminating the confusing duplicative automatic enrollment provision.

Witness List

Diana Furchtgott-Roth

Senior Fellow

Manhattan Institute


Tom Boucher

Owner and Chief Executive Officer

Great New Hampshire Restaurants, Inc.

Testifying on behalf of the National Restaurant Association


Linda J. Blumberg

Senior Fellow

The Urban Institute

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

Health Subcommittee Hearing on the Impact of ACA on American Health Insurance Premiums

The House Energy and Commerce Subcommittee on Health on Friday held a hearing, "Unaffordable: Impact of Obamacare on Americans' Health Insurance Premiums," which discussed the potential effects of the 2010 health care law on individual markets, small group markets and newly formed state exchanges. The hearing echoed continuing partisan trends, with Republicans repeatedly claiming that mandates within the ACA including the individual mandate, essential health benefits, guaranteed coverage and the medical device tax will have a significant impact on increasing premiums, while Democrats countered that studies show that the vast majority of premiums will stay stable or decrease in 2014. Areas of particular interest to members on both sides of the aisle were the effects on premiums for young single adults in certain income brackets, since many in this bracket may choose to pay the less costly tax penalty instead of paying high premium rates. Witnesses, including Christopher Carlson, whose firm, Oliver Wyman, published a study earlier this year that has been widely cited by Republicans, reported that while premiums will go up for some age groups due to ACA's age rating restrictions, most people will see a decrease in the amount of premiums they pay as a result of offered subsidies within the law's framework. Of the other witnesses, Doug Holtz-Eakin of the CBO predicted a rise in overall premiums and Wendell Potter of The Center for Public Integrity predicted the premium rates to remain largely the same for most purchasers.


Douglas Holtz-Eakin

Former Director

Congressional Budget Office


Christopher Carlson

Actuarial Principal

Oliver Wyman


Wendell Potter

Senior Analyst

The Center for Public Integrity

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

Mental Health on Campus Legislation Introduced

Last week, Rep. Schakowsky introduced a bill that would commit funding to mental health services on college campuses, and would direct the Substance Abuse and Mental Health Services Administration (SAMHSA) and the Centers for Disease Control and Prevention (CDC) to establish a public awareness campaign focused on reducing the stigma associated with mental illness among students. Under the legislation, those agencies would also launch a federal working group to streamline the activities of agencies charged with addressing mental health issues.

Bill Would Require ACA Insurance Cost Consumer Disclosure

Rep. Walden (R-OR) has introduced legislation that would itemize in annual coverage summaries the impact of health law provisions, including an annual fee on health insurers, fees to fund the Patient-Centered Outcomes Research Institute, reinsurance contributions, proposed fees on insurance exchange users, risk corridor payments and risk-adjustment charges. It would also ask GAO to examine the impact of the law's guaranteed issue and community rating, age rating, women's preventive services and essential health benefits.


Murray Releases FY2014 Budget Proposal

Similar to the House Republicans' budget, Sen. Murray's budget proposal assumes a permanent fix to Medicare's physician payment system. As for other Medicare provisions, the Senate plan said its Medicare savings come on top of the $500 billion in lower Medicare spending CBO now expects through 2020 compared to their estimates in 2010, which according to the budget document can be attributed to passage of the ACA. In addition to those activities, the Murray budget intends to achieve additional savings through "further realigning incentives throughout the system, cutting waste and fraud, and seeking greater engagement across the health care system." According to the budget document, practices such as introducing bundled payments more broadly or other pay-for-performance programs, such as hospital readmissions and value-based purchasing, and reevaluating whether current payment policies continue to appropriately reflect the services provided and outcomes achieved will garner the desired target savings.

Senate Action on Continuing Resolution (CR)...Continues

Last week, the Senate took up its version of a continuing resolution (CR) offered by Senate Appropriations Committee Chairman Mikulski (D-MD) and Ranking Member Shelby (R-AL) in an effort to keep the federal government funded beyond the March 27 expiration of the current CR. However, political differences as policymakers examine ways to reconcile differences with Republicans, combined with a full slate of amendments, prolonged Senate consideration, though a final bill is expected to pass early this week. Notably, an amendment offered by Sen. Harkin that would have provided, among other things, an additional $140 million to the National Institutes of Health, $57 million for the Child Care and Development Block Grant and $29 million to an AIDS drug assistance program, failed by a vote of 54-45, along party lines.

Top Finance Committee Senators Concerned About Medicare Advantage Rules

On Friday, Finance Committee Chairman Baucus (D-MT) and Ranking Member Hatch (R-UT) sent a letter to CMS Acting Administrator Marilyn Tavenner expressing concern over proposed rules regarding MA rates. Specifically, the letter criticizes the way in which CMS notified insurers of proposed changes to the calculation methodology employed to determine the plans' ratings within MA's five-star quality system. "The lack of transparency surrounding this proposal is troubling," Baucus and Hatch wrote, asking that CMS delay implementing any changes until they can be vetted by stakeholders. The letter also asks that the final rule assume the SGR cut set to take effect in January 2014 will not be implemented.

2. Administration

White House

White House Rounds Out Long-Term Care Commission Appointees

Last week, the White House completed the roster of members named to the Commission on Long-Term Care, established as part of the fiscal cliff law passed early this year. President Obama named to the panel Henry Claypool, executive vice president of the American Association of People with Disabilities and former HHS official; Julian Harris, the Massachusetts Medicaid director and a physician; and Carol Raphael, vice chair of the American Association of Retired Persons (AARP) Board of Directors and former president and CEO of Visiting Nurse Service of New York.

Centers for Medicare and Medicaid Services (CMS)

National Stakeholder Health Exchange Call Scheduled

CMS has announced its plans to hold a call on March 18 with agency officials to discuss plans for implementation of health insurance exchanges and to receive feedback from stakeholders. According to CMS, "[i]ndividuals and organizations that will interact with and utilize the Marketplace are encouraged to join this call. We will provide an update on the implementation of the Marketplace and listen to feedback as we continue to develop and refine the Marketplace."

Internal Revenue Service (IRS)

IRS Issues Correction to Medical Device Tax Final Rule

On Wednesday the IRS issued a correcting amendment and correction to final regulations (T.D. 9604) on the 2.3 percent medical excise tax imposed with the sale of certain medical devices, as established by the ACA. The correcting amendment applies to Part 48 of the guidance on manufacturers' and retailers' excise taxes and revises several sentences. The correction affects the preamble and also includes some language changes.

3. State Activities

North Dakota Has No Problem With Medicaid Expansion

Though most Republican governors have struggled with the question of whether to accept federal dollars in exchange for a voluntary expansion of their state's Medicaid program, North Dakota Gov. Dalrymple has embraced the expansion, and his Republican-led legislature seems willing to accept it. Dalrymple stands out as an exception to the general rule that GOP governors have opposed such an expansion, and the combination of an agreeable Republican legislature makes North Dakota all the more unique.

4. Regulations Open for Comment

NEW - Proposed Rule for Part A Payment Appeals

On March 13, CMS issued a proposed rule that would allow CMS to pay for additional hospital inpatient services under Medicare Part B after it was denied under Part A because the beneficiary should have been treated as an outpatient. According to CMS, the rule would result in a $4.8 billion decrease in Medicare program expenditures over five years. The proposed rule will be published in the March 18 Federal Register, and comments are due May 17. Additionally, CMS Administrator Marilyn Tavenner issued an Administrator's Ruling to address the number of appeals of Part A hospital inpatient reasonable and necessary denials. The ruling sets a standard process for pending appeals and billing for the additional Part B inpatient services while the proposed rule is vetted.

CMS Request for Information (RFI) on Health Information Technology

CMS and the Office of the National Coordinator for Health Information Technology released a request for information last week on a number of options to further push the exchange of health information. Suggested options include requiring or encouraging Medicare ACOs to include health information exchange components, requiring health information exchange components in care models for dual eligibles and promoting the use of "Blue Button," which is a way for consumers to securely access their health information.

FDA Draft of Risk-Benefit Plan Published

Last week, the FDA filed a draft of its five-year plan for developing and implementing a benefit-risk framework that will guide its review of drugs. The notice was provided for in last year's prescription drug user fee agreement. Drug companies and some patient advocates have argued that FDA is overly concerned with risks that the market is willing to bear. FDA agreed to go through a public process of developing a framework that would factor those concerns into its review process.

HHS Proposed Rule for Small Business Health Options Program (SHOP)

This proposed rule would implement provisions of the ACA related to the Small Business Health Options Program (SHOP). Specifically, this proposed rule would amend existing regulations regarding triggering events and special enrollment periods for qualified employees and their dependents and would implement a transitional policy regarding employees' choice of qualified health plans (QHPs) in the SHOP. Notably, in the proposed rule, HHS stated that SHOP exchanges do not have to offer the employee choice model, which would give employees greater freedom to enroll with the insurer and plan of their choice, and premium aggregation until Jan. 1, 2015. State-based exchanges have the option to offer those programs in 2014, but federal-run SHOP exchanges will have a one-year delay. Comments are due by March 31, 2013.

HHS Interim Final Rule -- 2014 Notice of Benefit and Payment Parameters

HHS has issued an interim final rule with comment that builds upon standards set forth in the HHS Notice of Benefit and Payment Parameters for 2014. The interim final rule will adjust risk corridors calculations that would align the calculations with the single risk pool provision, and set standards permitting issuers of qualified health plans the option of using an alternate methodology for calculating the value of cost-sharing reductions provided for the purpose of reconciliation of advance payments of cost-sharing reductions. Comments are due by May 1, which is also when the rule becomes effective.

ACA's "Whistleblower" Protection Rule Proposed

On Friday, DOL published an interim final rule that would implement the employee protection (whistleblower) provision of Section 1558 of the Affordable Care Act, to provide protections to employees of health insurance issuers or other employers who may have been subject to retaliation for reporting potential violations of the law's consumer protections (e.g., the prohibition on denials of insurance due to pre-existing conditions) or affordability assistance provisions (e.g., access to health insurance premium tax credits). The interim rule also establishes procedures and time frames for the handling of retaliation complaints, including procedures and time frames for employee complaints to the Occupational Safety and Health Administration (OSHA), investigations by OSHA, appeals of OSHA determinations to an administrative law judge (ALJ) for a hearing de novo, hearings by ALJs, review of ALJ decisions by the Administrative Review Board (ARB) (acting on behalf of the Secretary of Labor) and judicial review of the Secretary's final decision. Comments will be received until April 23, 2013.

DOL's press release

View the rule

CMS Seeks Information on Brokers and Agents

CMS has announced it will collect licensing and other identifying information to register health insurance brokers and agents for federal health insurance exchanges. According to a notice published Feb. 7, health insurance brokers and agents would submit "basic identifying information on the exchange portal during the initial registration phase." When registration is completed, brokers and agents would be routed to CMS's Learning Management System "to access and complete required training and exams." User names and ZIP Codes for the brokers and agents would then be used to record training history and to communicate the results with the federally facilitated exchange (FFE). Comments are due by April 8.

Medicare Part C and Part D Payment Policy Guidance Released

On Friday, CMS announced proposed payment and policy guidance for Medicare Advantage (Part C) and Medicare prescription drug (Part D) plans for 2014. In its 2014 Advance Notice and draft Call Letter, CMS noted that in addition to reductions in Medicare Advantage premiums extending through 2013, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013. The standard Part D deductible will be $310, down from $325 in 2013, and cost-sharing amounts will also be lower. Comments on the proposed Advance Notice and draft Call Letter must be submitted by March 1, 2013. The final 2014 Rate Announcement and Call Letter, including the final MA and FFS growth percentage and final benchmarks, will be published on Monday, April 1, 2013. For more information, please visit:

CMS also announced a proposed rule implementing the Affordable Care Act's medical loss ratio requirements for Part C and Part D plans. Specifically, Medicare health and drug plans will be required to meet a minimum medical loss ratio of at least 85 percent of revenue on clinical services, prescription drugs, quality improvements and/or direct benefits to beneficiaries in the form of reduced Medicare premiums beginning in 2014.

Comments on the proposed rule must be received by April 16. To view the proposed Medical Loss Ratio Requirements for MA and Part D go to

Clinical Laboratory Rule

CMS has issued a proposed rule that would change existing regulations governing the proficiency testing (PT) process mandated by the Clinical Laboratory Improvement Amendments of 1988 (CLIA). As currently written, regulations dictate that any laboratory that intentionally refers a PT sample to another laboratory for analysis will automatically lose its CLIA certificate for at least one year. The proposed rule would reform Medicare regulations that CMS has identified as unnecessary, obsolete or excessively burdensome on health care providers and suppliers, as well as certain regulations under CLIA. This proposed rule would increase the ability of health care professionals to devote resources to improving patient care, by eliminating or reducing requirements that impede quality patient care or that divert resources away from providing high-quality patient care.

The proposed rule includes a related provision to existing regulations that would implement the recently enacted Taking Essential Steps for Testing Act of 2012 (TEST Act), which gives CMS the express authority to impose alternative sanctions in the event of a PT referral.

Comments will be accepted until April 8, 2013.

FDA Seeks Comments on Rx Drug Labeling Initiative, Proposed Pilot Project

The U.S. Food and Drug Administration (FDA) has issued final regulations amending the content and format of prescribing information for human drug and biologic products. According to the agency, the goal of the regulation "is to provide more informative and accessible prescribing information, resulting in a better risk communication and management tool." Among other provisions, the final rule would revise current regulations to require that the prescribing information of new and recently approved products include highlights of the prescribing information (Highlights) and a table of contents (Contents) for the full prescribing information (FPI). Comments must be submitted by March 8.

Draft Guidance for Alzheimer's Drug Development

As part of the National Plan to Address Alzheimer's Disease, the FDA has issued draft guidance to help drugmakers develop treatments for Alzheimer's disease before dementia sets in. "The purpose of this guidance is to assist sponsors in the clinical development of drugs for the treatment of various stages of Alzheimer's disease (AD) that occur before the onset of overt dementia. Specifically, this guidance addresses the FDA's current thinking regarding the selection of patients with early AD, or patients who are determined to be at risk of developing AD, for enrollment in clinical trials." Comments will be accepted until April 8.

CMS, IRS Propose Rules Individual Mandate Exemptions

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

Other notable provisions include:

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

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

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

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

Employer Health Care Coverage of Dependents Under ACA

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

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

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

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

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

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

5. Reports

General Accountability Office (GAO)

Medicaid: Additional Enrollment and Expenditure Data for the Transitional Medical Assistance Program

GAO updated a December 2012 report on states' Transitional Medical Assistance (TMA) program policies, enrollment and expenditures since 2006. Arkansas and North Dakota provided TMA expenditure data, and Virginia and Washington provided TMA enrollment and expenditure data. With this additional information, GAO was able to update the report and found that TMA enrollment in 2011 totaled more than 3.7 million in the 43 states that provided enrollment data. TMA expenditures in 2011 totaled about $4.1 billion in the 36 states that provided data. This figure is $241 million higher than GAO originally reported.

Medicare Payment Advisory Commission (MedPAC)

March 2013 Report to Congress Issued

Last week, the Medicare Payment Advisory Commission (MedPAC) released its March 2013 Report to the Congress: Medicare Payment Policy. The report includes the Commission's analyses of payment adequacy in fee-for-service (FFS) Medicare; Medicare Advantage (MA), including MA special needs plans; and Part D. Specifically, MedPAC recommends that Congress enact no update in 2014 for five fee-for-service payment systems, enact a 1 percent update for the hospital inpatient and outpatient payment systems and eliminate the SGR payment model.

Medicaid and CHIP Payment and Access Commission

March 2013 Report to Congress Issued

As part of its statutory charge, each March the Medicaid and CHIP Payment and Access Commission (MACPAC) reports on significant issues affecting Medicaid and the State Children's Health Insurance Program (CHIP), two federal-state programs that play significant and growing roles in the nation's health care system. In fiscal year (FY) 2012, Medicaid financed care for an estimated 72.6 million people, more than a fifth of the U.S. population, at a cost of $435.5 billion. CHIP served 8.4 million children in FY 2012, with spending of $12.2 billion. Last week, MACPAC released its March 2013 Report to the Congress on Medicaid and CHIP. The report focuses on several congressional priorities, including Medicaid and CHIP eligibility policies, produced in light of the interactions between those programs and provisions established under the ACA. Specifically, MACPAC recommends:

  • "In order to ensure that current eligibility options remain available to states in 2014, the Congress should, parallel to the existing Medicaid 12-month continuous eligibility option for children, create a similar statutory option for children enrolled in CHIP and adults enrolled in Medicaid."
  • "The Congress should permanently fund current Transitional Medical Assistance (TMA) (required for six months, with state option for 12 months), while allowing states to opt out of TMA if they expand to the new adult group added under the Patient Protection and Affordable Care Act."

For more information, including the full report, please visit