1. Congress

House of Representatives

House Passes Package of Health Bills

Last week, the House passed three separate pieces of legislation aimed at improving specific areas of our nation's health care system. S. 1440, the Prematurity Research Expansion and Education for Mothers who deliver Infants Early Reauthorization (PREEMIE) Act, would promote research to prevent premature births, and establish as many as eight pediatric research networks around the country. The bill would also reauthorize the Children's Hospital Graduate Medical Education (GME) program to train pediatric medical residents. H.R. 1845, the Medicare IVIG Access Act, would study access to IVIG treatment for Medicare beneficiaries and would initiate a demonstration project to cover and use the treatment in the home. Finally, H.R. 6672, the Pandemic and All-Hazards Preparedness Reauthorization Act of 2012, would improve the nation's preparedness infrastructure, fostering the development of medical countermeasures to better respond to terrorist attacks. All three measures await subsequent consideration by the Senate.

Boustany Has Concerns About Administration's Use of Instant Messaging

On Tuesday, Dec. 18, House Ways and Means Oversight Subcommittee Chairman Boustany (R-LA) wrote a letter asking HHS Secretary Sebelius for information regarding the department's guidelines on the archiving of instant messaging and, specifically, how political appointees are supposed to use such means of communication. According to Boustany, "Recently, whistle-blowers have alleged that political appointees within HHS have been using instant messaging software to communicate with career employees, ostensibly in an effort to circumvent federal law."

Some Democrats Want More Rx Options in Essential Health Benefits (EHB)

In response to HHS's recently proposed rule on essential health benefits (EHBs), which requires health plans to cover the greater of one drug in every category and class or the same number of drugs in each category and class as the state's EHB benchmark plan, a group of House Democrats recently sent a letter to Secretary Sebelius asking for a more robust set of requirements for prescription drugs. While the authors note the current policy is an improvement over the department's original proposal of one drug per class, they requested in their letter that the EHB final rule should replicate Medicare Part D's "all or substantially all" policy for six classes of drugs, including antidepressants, antipsychotics, anticonvulsants, antiretrovirals, antineoplastics and immunosuppressants.

GOP Congressmen Demand Unedited Memos on IRS Rule for Tax Credits on Exchanges

In letter dated Dec. 13 to Treasury Secretary David Geithner, Reps. Darrell Issa (R-CA), Chairman of the House Oversight and Government Reform Committee; David Camp (R-MI), Chairman of the Ways Committee; and Charles Boustany Jr. (R-LA), Chairman of the Ways and Means Subcommittee on Oversight demanded that the Treasury Department release unredacted portions of documents related to an IRS final rule on the implementation of Section 1311 of the ACA by Jan. 4, 2013. The rule in controversy, issued May 18, extends tax credits not only to exchanges established by a state, but also to those established by the federal government. The letter reaffirms that both the Ways and Means and Oversight Committees "have sought the documentation in an effort to better understand why the IRS extended these credits beyond the initial parameters of the law." Earlier attempts to obtain these same internal documents were sent in October 2012, and Treasury staff gave no explanation as to why portions of these documents were withheld. Specifically, lawmakers are looking for the full versions of the following memoranda: Document dated Aug. 5, 2011, from the Proposed Regulation Clearance Package; two documents dated May 16, 2011, under the Final Regulation Clearance Package titled "Final Regulations on the Premium Tax Credit Enacted under ACA"; and other documents that contain the background information from the Final Regulation Clearance Package. Earlier attempts to obtain these same documents were sent in October 2012 and Treasury staff gave no explanation as to why portions of these documents were withheld.


Mikulski Takes Over Reins on Appropriations Committee

Following the death of longtime Appropriations Committee Chairman Inouye (D-HI), and after decisions by Sens. Leahy (D-VT) and Harkin (D-IA) to remain at their respective chairman perches at the Judiciary and HELP Committees, Sen. Mikulski (D-MD) will take over the reins of the powerful spending committee. Given high-profile negotiations over federal spending and a health reform law largely reliant on annual appropriations, Mikulski will play an important role in major policy decisions to come.

Rep. Tim Scott Tapped to Replace Resigning Sen. DeMint

In the wake of Sen. DeMint's (R-SC) announcement that he intends to resign from the Senate to take over as president of the conservative Heritage Foundation, South Carolina Gov. Nikki Haley appointed Rep. Tim Scott to fill the vacated Senate seat. Scott will serve his appointment until 2014, when he will have to run in his own Senate special election. Under South Carolina election laws, a special election to fill the House seat vacated by Scott will be held 11 weeks after DeMint officially resigns, an action expected to occur on Jan. 2.

2. Administration

Health and Human Services (HHS)

HHS Approves Delaware Partnership, Rhode Island, Minnesota, Exchange Plans

Proposals submitted for state-run exchanges in Rhode Island and Minnesota as well as a state-federal partnership in Delaware were granted "conditional approval" by HHS on Dec. 20. These states will join eight other states -- Colorado, Connecticut, Kentucky, Massachusetts, Maryland, New York, Oregon and the District of Columbia -- which have already received conditional approval for their plans in the past 10 days. As it stands, currently eight other states have their proposals pending with HHS. The deadline for new submitted state exchange plans was Dec. 14, and HHS will likely make approval decisions for other submitted state exchange plans by Jan. 1. For more information, please see McGuireWoods'client alert for December 21, 2012.

Centers for Medicare and Medicaid Services (CMS)

Children's Health Insurance Program Bonus Payments to States

On Dec. 19, 2012, the Centers for Medicare and Medicaid Services awarded a total of $306 million to 23 states for implementing strategies that helped improve and expand access to health coverage for low-income children in 2012. In order to qualify for these performance bonuses, states needed to actively employ specific methods and procedures that help better streamline CHIP processes to make it easier and more accessible for families to apply to the program. Cindy Mann, CMS director of Medicaid and CHIP Services, noted that "the number of eligible children enrolled in CHIP has steadily increased in recent years, with current CHIP enrollment at 86% of eligible children." This bonus program was authorized under the CHIP Reauthorization Act of 2009.

Predictive Modeling Program Helped Prevent or Identify $115 Million in Fraud for CMS in 2012

The Centers for Medicare and Medicaid Services (CMS) Fraud Prevention System (FPS), which launched in July of 2011, is reported to have saved American taxpayers $115 million in fraudulent payments within the Medicare program in fiscal year 2012. CMS concluded the FPS's return on investment was roughly $1.30 on each of the $35 million invested in the program during its first year. Specifically, the report attributes 536 investigations conducted by CMS program integrity contractors to the use of predictive modeling and data analytics to review all fee-for-service claims for Medicare. CMS's assessment of FPS, however, stands in contrast to an Office of the Inspector General (OIG) report released Dec. 17, which found return on investment included in the Fraud Prevention System report was not accurate because it was based on questionable actual and projected savings and did not take into account all the FPS program costs. In response to the criticism from OIG findings, CMS said it agreed with the findings and will take steps in 2013 to attempt to further improve its methods used to estimate actual, projected savings and will try to expand predictive modeling to include Medicaid and CHIP.

Doctors Notified of Pending SGR Cuts

Last week, CMS relayed its lack of confidence in lawmakers' ability to avert a scheduled 27 percent reduction in physician reimbursements called for under the sustainable growth rate (SGR) formula in a notice to physicians, saying, "We continue to urge Congress to take action to ensure these cuts do not take effect. Given the current progress with the legislation, CMS must take steps to implement the negative update." The SGR cuts have been routinely addressed by Congress, but there is concern that the current focus on fiscal cliff negotiations put physicians at risk of exposure to the reductions.

Patient-Centered Outcomes and Research Institute (PCORI)

$40 Million in Research Grants Awarded

On Dec. 18, the Patient-Centered Outcomes and Research Institute (PCORI) announced it had approved 25 new grants totaling more than $40 million to receive funding over three years to perform comparative effectiveness research. The awards were part of the first cycle of primary research funding and selected from nearly 500 completed applications submitted this year. "The projects approved for funding include those that will study ways to improve care for people with such health problems as bacterial and viral infections, cardiovascular disease and stroke, certain cancers, chronic kidney disease, chronic pain, depression and other serious mental illness, and pediatric diabetes, as well cross-cutting proposals investigating how to improve care for people with multiple conditions," according to a PCORI release.

Centers for Disease Control and Prevention (CDC)

New HIV Statistics Released

Last week, the CDC released new data on HIV infections, finding that while overall new infections in 2010 remained stable, there has been a drop in new infections among African American women, but a rise among young gay and bisexual men.

3. State Activities

Connecticut Staffs Co-Op Plan

The Board of Directors of HealthyCT, Connecticut's new Consumer-Operated and Oriented Plan (CO-OP) for health insurance, has selected Ken Lalime, a career health care executive and lifelong Connecticut resident, to serve as its first chief executive officer, effective Jan. 1, 2013. In June, the Center for Consumer Information and Insurance Oversight (CCIIO) awarded HealthyCT $75.8 million in loans to finance the CO-OP.

4. Regulations Open for Comment

Final Hospital Outpatient Department and Ambulatory Surgical Centers Rule Issued with Comment Period

The Centers for Medicare & Medicaid Services (CMS) issued two final regulations updating Medicare payment rates and policies in calendar year (CY) 2013 for services furnished by physicians and other practitioners, as well as the rule for hospital outpatient departments and ambulatory surgical centers. Both rules were issued as final rules with a comment period until Dec. 31, 2012. The rules will take effect Jan. 1, 2013.

To read the final CY 2013 Medicare Physician Fee Schedule (MPFS) rule with comment period, please visit the Office of the Federal Register website.

To read the final CY 2013 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) rule with comment period, please visit the Office of the Federal Register website.

OPM Releases Multi-State Plan Proposal

OPM issued a proposed rule to implement the Multi-State Plan Program (MSPP). Through contracts with OPM, health insurance issuers will offer at least two multi-State plans (MSPs) on each of the Affordable Insurance Exchanges (Exchanges). Under the law, an MSPP issuer may phase in the States in which it offers coverage over four years, but it must offer MSPs on Exchanges in all States and the District of Columbia by the fourth year in which the MSPP issuer participates in the MSPP. OPM aims to administer the MSPP in a manner that is consistent with State insurance laws and that is informed by input from a broad array of stakeholders. The deadline for submitting comments on the proposed regulation is Dec. 30, 2012. OPM will review the comments and issue a final regulation next year. A fact sheet is available online.

Additional Medicare Tax for Wealthy Beneficiaries

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

HHS Issues Notice of Benefit and Payment Parameters for 2014

HHS released a Notice of Benefit and Payment Parameters proposed rule that would expand upon standards set forth in the Premium Stabilization Rule (77 FR 17220) and the Establishment of Exchanges and Qualified Health Plans Final Rule (77 FR 18310) released earlier this year. The proposed rule issued today includes additional guidance on risk adjustment methodology, reinsurance, risk corridors, affordability, Exchange user fees and Medical Loss Ratio. Comments on draft Notice of Benefit and Payment Parameters are invited from the general public, consumers, states, industry and other stakeholders and must be submitted by Dec. 31, 2012.

CMS Requests Information on Health Plan Quality

CMS has issued a request for information to seek public comments regarding health plan quality management in Affordable Insurance Exchanges. While new quality reporting standards for exchanges are on hold until 2016, in the meantime, HHS is asking for feedback on a number of topics, including: improvement strategies used by health plans, how exchanges could further National Quality Strategy goals, the exchange health plan rating system and calculating health plan value. Public comments are due by Dec. 27, 2012.

Essential Health Benefits (EHBs), Wellness Program, Health Insurance Market Regulations Open for Comment

CMS has published three proposed rules to implement several provisions of the Affordable Care Act (ACA) that, among other things,disallow the discrimination of patients based on preexisting conditions, help consumers shop for and compare non-grandfathered private health insurance options in the individual and small group markets by promoting consistency across plans, and encourage consumer-protective wellness programs in group health coverage. Comments are due by Dec. 26, 2012.

Additional "Meaningful Use" Guidance Issued

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

5. Reports

General Accountability Office (GAO)

Center for Medicare and Medicaid Innovation (CMMI) Duplicating Efforts

According to a report released last week by the GAO, certain activities being conducted by the Center for Medicare and Medicaid Innovation (CMMI), an agency created under the ACA, share similar goals, engage in similar activities or strategies to achieve these goals, or target similar populations. "Our review... suggests that while the Innovation Center has taken steps to coordinate with other offices, it still has work to do in making this coordination more systematic," GAO wrote. To remedy any unnecessary overlap of activities, GAO recommends the Administrator of CMS direct the Innovation Center to expeditiously complete implementation of its process to review and eliminate any areas of unnecessary duplication in the services being provided by Hospital Engagement Networks (HENs) and Quality Improvement Organizations (QIOs) in hospitals. Full report:

More Transparency of and Accountability for Supplemental Payments Are Needed

In 2011, states reported making $43 billion in Medicaid supplemental payments -- payments above regular payments for Medicaid services -- to certain providers, mainly hospitals. The federal government shares in the cost of these payments. By law, states make certain supplemental payments, known as disproportionate share hospital (DSH) payments, for uncompensated care costs experienced by hospitals serving large numbers of low-income and Medicaid patients. In addition, recently implemented policies require States to submit audits and reports to CMS as a condition for receiving federal funds for their DSH payments. GAO analysis of the 2010 DSH audits found that 39 states made non-DSH payments to 505 DSH hospitals that, along with their regular Medicaid payments, exceeded those hospitals' total costs of providing Medicaid care by a total of about $2.7 billion. The full report is available online.

Considerations for Express Lane Eligibility

The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) provided states with new incentives and tools to simplify eligibility determinations and increase the enrollment and retention of children in Medicaid and CHIP. One of these tools is Express Lane Eligibility (ELE), which allows states to determine eligibility for children in Medicaid or CHIP by using certain information, such as information from other public-assistance programs that enroll children. However, because CHIPRA's authorization for ELE is scheduled to expire on Sept. 30, 2013,GAO released a report earlier this month outlining four key considerations for Congress. The points include (1) the potential for administrative savings; (2) effects on enrollment of eligible, but not enrolled, children; (3) states' level of interest in using ELE particularly for implementing PPACA; and (4) uncertainty regarding the potential for erroneous excess payments for children enrolled through ELE.

National Institute of Health Care Reform

Fewer Employers Expected to "Dump" Employees into Exchanges

Last week, the National Institute of Health Care Reform released a study finding that more than 80 percent of individuals currently receiving health benefits through their employer will continue do so after health insurance exchanges become operational in 2014, as a result of the financial advantages employers receive for offering health insurance to employees. According to the study's authors, "the law seeks to maintain the primacy of employer-sponsored insurance by including provisions to encourage employers to offer and workers to accept an offer of affordable coverage. Under the law, all employers with 50 or more full-time-equivalent workers will face an annual penalty regardless of whether they offer coverage if one of their full-time employees obtains subsidized coverage in a health insurance exchange." However, the study also found that other employers, such as those with less than 50 employees who are exempt from employer mandate penalties "will no longer have as strong an economic incentive to offer coverage."


Medical Device Tax Will Cost Jobs

According to a survey recently conducted by AdvaMed, roughly 62 percent of medical device companies expect to either lay off employees or reduce hiring as a result of the 2.3 percent medical device excise tax (MDET) scheduled to take effect Jan. 1, 2013. The survey also indicated that aggregate industry implementation costs for MDET, which was enacted as a revenue provision in the ACA, are estimated to be between $400 million and $667 million, with only 7.9 percent of survey respondents labeling their current technology as "completely prepared" to handle the new tax, while 15.8 percent said they had no existing technology to implement the tax.

Alliance for Quality Nursing Home Care

Skilled Nursing Facilities Offer Reform Model

Saying that it is "poised to be central to a transformative health policy model that benefits patients, optimizes efficiency, protects taxpayers and strengthens our healthcare system for decades to come," the Alliance for Quality Nursing Home Care isout with a paper laying out three goals for reforming the way post-acute care is delivered. According to the authors, the "Three Pillars of Post-Acute Reform" center on focusing payment reform on patient needs, more closely tying payments to improved quality performance metrics, and ensuring providers are reimbursed at levels necessary to meet growing patient needs.