This Week: President Obama Nominates Food and Drug Administration (FDA) Deputy Commissioner Robert Califf to Head the Agency… Congressional Budget Office (CBO) Estimate Says Eliminating the Affordable Care Act’s (ACA) Individual Mandate Would Reduce Budget Deficit by $305 Billion by 2025… Montana Submits Formal Medicaid Expansion Waiver to Centers for Medicare and Medicaid Services (CMS)

1. Congress

House of Representatives

District Work Period: Sept. 21–Sept. 25


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

6. Other

1. Congress


District Work Period: Sept. 21–Sept. 25

House Ways and Means Committee Marks Up and Approves Seven Health, Tax-Related Bills; Approves Two Small Affordable Care Act (ACA) Adjustments

The House Ways and Means Committee held a hearing Sept. 17 to mark up seven bills, two of which are related to health care. The two bills, approved and reported out of the committee, were:

H.R. 2061, Equitable Access to Care and Health “EACH Act” : Sponsored by Rep. Rodney Davis (R-IL), the bipartisan bill would expand the religious liberty exemption to the individual mandate in the ACA. Sen. Kelly Ayotte (R-NH) has introduced an identical Senate version with 30 cosponsors.

H.R. 1270, “Restoring Access to Medication Act of 2015” : Sponsored by Rep. Lynn Jenkins (R-KS), the bill would allow people to use their health savings accounts (HSAs), flexible spending accounts (FSAs) and other similar accounts to buy over-the-counter medications. Sen. Pat Roberts (R-KS) introduced a Senate version of the bill, also with bipartisan cosponsors.

For more information or to view the hearing, visit

House Energy and Commerce Health Subcommittee Holds Hearing on Medicaid Legislation

The House Energy and Commerce Subcommittee on Health held a hearing Sept. 18 entitled “Improving the Medicaid Program for Beneficiaries” to hear testimony from disease groups and researchers on four legislative proposals to update programs within Medicaid. The subcommittee last week discussed six additional Medicaid bills in its ongoing effort to strengthen Medicaid.

The bills discussed at the hearing include:

H.R. 209, the Ensuring Access to Clinical Trials Act of 2015 : Sponsored by Rep. Lloyd Doggett (R-TX), the bill would allow individuals to participate in clinical trials for rare diseases and conditions without counting the income earned from these trials against their eligibility for Medicaid and Supplemental Security Income.

H.R. 670, the Special Needs Trust Fairness Act of 2015 : Sponsored by Rep. Glenn Thompson (R-PA) and Committee Ranking Member Frank Pallone (D-NJ), the bill would extend the special needs trust exception to allow nonelderly individuals with disabilities to establish a special needs trust on their own behalf.

H.R. 3243, to amend title XI of the Social Security Act to clarify waiver authority regarding programs of all-inclusive care for the elderly (PACE programs) : Sponsored by Rep. Chris Smith (R-NJ), the bill would allow CMS to expand the PACE demonstration model to new populations such as younger people with disabilities, individuals at-risk for needing nursing home care and others.

The Medicaid DOC Act : Sponsored by Rep. Chris Collins (R-NY), the bill would require state Medicaid programs that operate fee-for-service and/or primary care case management programs to include a directory of physicians who served Medicaid patients in the prior six months on the Medicaid program’s website.

Witness List

Michael Boyle, M.D. 

Vice President of Therapeutics Development 

The Cystic Fibrosis Foundation

Tim Clontz 

Senior Vice President for Health Services 

Cone Health

Richard Courtney 


Special Needs Alliance

For more information or to view the hearing, visit

Conservative Republican Study Committee Releases Their Desired Budget

On Sept. 15, Chair of the Republican Study Committee Bill Flores (R-TX) offered his caucus’s government funding proposal, the Responsible Spending and Accountability Act (RSAA) of 2015 , which is similar to the budget passed by the House and Senate. The RSAA would adopt the FY 2016 appropriations package, including the six appropriation bills passed by the House earlier this year. It would also include several conservative policy priorities, including measures to defund all abortion providers, ban the sale of fetal tissues, defund the Affordable Care Act (ACA) and limit executive authority over immigration amnesty and the Iran nuclear agreements.

In addition to 12 appropriations bills, the RSAA includes more than 180 amendments adopted on the House floor from 107 Members of Congress, which include bolstering funding for national security, decreasing bureaucratic authority at the Internal Revenue Service (IRS) and the Environmental Protection Agency (EPA), and reduce taxes and restrictions on businesses and investors. The plan intends to pressure on Republican leadership, who is trying to prevent a government shutdown over Planned Parenthood funding.


Bipartisan Cadillac Tax Repeal Legislation Introduced in the Senate

On Sept. 18 Sens. Dean Heller (R-NV) and Martin Heinrich (D-NM) introduced a bill to repeal the Affordable Care Act’s (ACA) Cadillac tax. The Cadillac tax is a 40 percent excise tax on high-cost health insurance plans that begins in 2018. The tax was designed to put downward pressure on health costs and payroll taxation. The tax applies to family health care coverage exceeding $27,500 and individual coverage exceeding $10,200, with low inflation adjustments intended to capture more taxpayers over time. The biggest obstacle to the bill, aside from President Obama’s veto, is the cost of repealing the tax. The Congressional Budget Office (CBO) projects the tax will generate $87 billion for the government over the next decade. The bill is a Senate companion to U.S. Congressman Joe Courtney’s (D-CT) House legislation. There are two bills in the House of Representatives on this issue, which combined have 288 cosponsors.

A joint press release on the legislation can be found here.

Senate Judiciary Antitrust Subcommittee to Hold Hearing on Consumer Impact of Health Insurance Industry Consolidation

The Senate Committee on Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights has scheduled a hearing entitled “Examining Consolidation in the Health Insurance Industry and its Impact on Consumers” on Tuesday, Sept. 22, 2015, at 10 a.m., in Room 226 of the Dirksen Senate Office Building. Members will question witnesses on the consumer impacts of the proposed insurance industry mergers of Anthem and Cigna and of United and Humana that were announced earlier this year. The impending mergers involving these four major providers have raised concerns about antitrust issues as well as patient choice.

Witness List

Mr. Mark T. Bertolini 

Chairman and Chief Executive Officer 

Aetna, Inc.

Mr. Joseph R. Swedish 

President and Chief Executive Officer 

Anthem, Inc.

Dr. Paul Ginsburg 

Norman Topping Chair in Medicine and Public Policy 

University of Southern California

Dr. Leemore S. Dafny 


Kellogg School of Management, Northwestern University

Mr. Richard J. Pollack 

President and Chief Executive Officer 

American Hospitals Association

Mr. George Slover 

Senior Policy Counsel 

Consumer Union

For more information or to view the hearing, visit

Senate Health, Education, Labor and Pensions (HELP) Subcommittee Holds Hearing on the Food and Drug Administration’s (FDA) Progress on Biosimilars Implementation

The Senate HELP Subcommittee on Primary Health and Retirement Security held a hearing Sept. 17 in which FDA’s Director of the Center for Drug Evaluation and Research, Jane Woodcock, testified that should the Centers for Medicare and Medicaid Services (CMS) proceed with its proposal to put biosimilars that reference the same brand biologic into single billing codes, the FDA would collaborate with CMS to develop a method to use some codes, or “coding modifiers,” to track which patients received which medications.

The hearing gave committee members an opportunity to receive a status report on the progress FDA has made on implementing legislation that created a pathway for biosimilars to be approved. Director Woodcock asked legislators for additional financial resources for educational campaigns for target stakeholder groups around biosimilars. At the hearing, Sen. Christopher Murphy (D-CT) questioned Director Woodcock on how CMS’s biosimilar billing proposal would affect her agency’s use of the codes for safety purposes, and Sens. Tim Scott (R-SC) and Elizabeth Warren (D-MA) probed Director Woodcock about the agency’s delay in releasing guidance documents on biosimilar labeling and interchangeability. The FDA intends to release that guidance later this year. In August the FDA released a naming guidance document that proposed adding non-meaningful, four-letter suffixes to the nonproprietary names of biologics and biosimilars.

Witness List

Janet Woodcock, M.D. 


Center for Drug Evaluation and Research, Food and Drug Administration

For more information or to view the hearing, visit

Senate Health, Education, Labor and Pensions (HELP) Committee Holds Hearing on Electronic Health Records; Chair Calls for Delay of Stage 3 of Meaningful Use Rules Until 2017

Senate HELP Committee Chair Lamar Alexander (R-TN) held a hearing Sept. 16 to discuss ways to improve care through increasing patients’ accessibility to their own health records. At the hearing, Chair Alexander called on the Department of Health and Human Services (HHS) to delay the agency’s final rule for the third stage of meaningful use of the electronic health records program until 2017 and to phase-in the last stage of the program’s requirements based on how successfully it is implemented. Provider groups have voiced similar concerns and have asked the agency to hold off on the changes to Stage 2 and delay finalizing the third stage of the meaningful use program. The White House Office of Management and Budget is reviewing both the modifications to the second stage of the program and the foundational plans for the third stage of the program. Witnesses at the hearing testified about the need to involve patients in their own care and the challenges surrounding that task. Chair Alexander indicated that he and committee staffs are crafting a handful of legislative changes to improve the meaningful use program.

Witness List

Raj Ratwani, Ph.D. 

Scientific Director, National Center for Human Factors in Healthcare, MedStar Health 

Assistant Professor of Emergency Medicine, Georgetown University School of Medicine

Kathy Giusti, MBA 

Founder and Executive Chairman 

Multiple Myeloma Research Foundation

Eric Dishman 

Intel Fellow, General Manager for Health and Life Sciences 

Intel Corporation

For more information or to view the hearing, visit

Democratic, Bicameral Legislation Proposed to Allow the Government to Negotiate Prescription Drug Prices

Sen. Bernie Sanders (I-VT) and House Oversight and Government Reform Committee Ranking Member Elijah Cummings (D-MD) recently introduced legislation to address rising prescription drug prices. The Prescription Drug Affordability Act of 2015 (S.2023 and H.R.3513) authorizes the Secretary of the Department Health and Human Services (HHS) to negotiate drug prices with pharmaceutical companies for the Medicare program. The bill also includes tougher penalties for drug companies that commit fraud, and bans the practice of brand-name drugmakers’ paying competitors to keep lower-priced generic substitutes off the market. The bill also lowers barriers to the importation of lower-cost drugs from Canada. The legislation is cosponsored by Democrats including Sen. Al Franken (MN) and Reps. Keith Ellison (MN), Eleanor Holmes Norton (D-DC) and John Sarbanes (MD). Data from the Centers for Medicare and Medicaid Services show that drug prices rose more than 12 percent last year, a gain that is more than double the rise in overall medical costs. The Congressional Budget Office historically has said that government negotiations for drugs in the Medicare program would not save the program money.

A fact sheet on the bill can be found here.

A press release on the legislation can be found here.

2. Administration

Federal Judge Issues Injunction Against Centers for Medicare and Medicaid Services’ Fixed Indemnity Rule

On Sept. 11, Federal Judge Royce Lambert issued a permanent injunction in Central United Life v. Burwell that bars the Obama Administration from enforcing a 2014 rule to restrict the sale of stand-alone “fixed indemnity” insurance plans unless they include coverage that meets the Affordable Care Act’s (ACA) individual mandate requirements. These plans are sometimes called “skimpy plans.” In the rule, CMS allows for the continued marketing of per-service indemnity policies, but only if certain requirements are met.

Central United Life Insurance Company, which offers fixed indemnity plans, brought the lawsuit against the Department of Health and Human Services (HHS) on grounds that the rule violated previous federal law allowing fixed indemnity plans. Pre-ACA regulations had provided that fixed indemnity coverage had to pay benefits on a per-period basis, for example, $100 per day of hospitalization. In the new regulation, an insurer could pay either a service-based benefit or a time-based benefit, but, once an insured had a triggering event, such as a diagnosis of cancer, the carrier would have to pay a set benefit and not an “excepted benefit.” CMS’s rule applies to individual hospital indemnity insurance, individual critical illness insurance and other individual supplemental health insurance products. Companies that violated that rule would be subject to fines of up to $100 per day per customer.

Food and Drug Administration (FDA) Releases Final Rule on Drug Destruction Authority at the U.S. Border

FDA finalized without changes a final rule that implements Section 708 of the Food and Drug Administration Safety and Innovation Act (FDASIA), which allows the agency to destroy personally imported drugs valued at or below $2,500 that have been refused at the U.S. border. The rule is designed to prevent successive attempts at importation. The rule also requires FDA to provide written notice to owners or consignees of the drugs of the agency’s plan to destroy the drugs and gives the owner of the drugs the option to present testimony prior to the destruction of the drugs. A group of bipartisan senators sent a letter to FDA in June 2014 concerning the proposed regulation, arguing that it “constitutes a potential health threat to hundreds of thousands of Americans who receive their affordable drugs from safe, licensed and legal pharmacies in Canada.” In the letter, they requested “the final regulation contain a requirement that patients be notified that their drugs could be destroyed at least six months in advance of their medication being denied to them.” The rule becomes effective Oct. 15, 2015.

The Food and Drug Administration (FDA) Declines Request for Special Flexibility for Orphan Drug Applications

On Sept. 17, the Food and Drug Administration declined a request from the National Organization for Rare Disorders (NORD) to officially provide “special flexibility” as the agency undergoes its review process for applications for orphan drugs. In the decision, FDA rationalized that such a policy could imply an abdication of safety and effectiveness standards. FDA noted that orphan drugs have been aided by a number of actions, including having official consent to perform only one trial and having smaller clinical trial populations (sometimes with fewer than 20 participants). FDA’s action came in response to a 2011 citizen petition submitted by NORD to formalize the leniency that regulators have historically given to orphan drugs. Studies are more difficult to conduct because, by definition, the diseases are rare and the number of individuals available for clinical trials is smaller. The citizen petition also sought a formal acknowledgement from FDA that orphan drug clinical trials and application reviews are “qualitatively and quantitatively different” from those encompassing standard prescription drugs.

President Obama Nominates Food and Drug Administration (FDA) Deputy Commissioner Robert Califf to Head the Agency

On Sept. 15, President Obama announced the nomination of FDA Deputy Commissioner Robert Califf, a cardiologist and a former Duke professor, to serve as Administrator to the Food and Drug Administration. Since February 2015, Dr. Califf has been serving as deputy commissioner for medical products and tobacco and managing FDA’s Office of Special Medical Programs. Dr. Califf additionally served on the Institute of Medicine committees that recommended Medicare coverage of clinical trials and the removal of ephedra from the market. In his current role, he directs FDA efforts covering precision medicine, combination products, orphan drugs, pediatric therapeutics and the advisory committee system.

Federal Exchange CEO Sends Letter to Insurers to Reaffirm Centers for Medicare and Medicaid Services’s (CMS) Dedication to Its Out-of-Pocket Caps Calculation

The Obama Administration sent a letter to a trade association representing larger employer employee benefit and compensation insurers, the ERISA Industry Committee, reaffirming the Administration’s controversial change to the method for calculating 2016 out-of-pocket caps. On Nov. 26, 2014, the Department of Health and Human Services (HHS) published a notice of proposed rulemaking to clarify that “the annual limitation on cost sharing for self-only coverage be applied to all individuals regardless of whether the individual is covered by a self-only plan or is covered by a plan that is other than self-only.”

In the letter from CEO Kevin Counihan, he stated, “We believe that applying the individual $6,850 maximum annual limitation on cost sharing to individuals covered by a plan that is other than self-only helps remedy the difficulty a consumer could face in paying up to $13,700 out-of-pocket for certain covered medical care under the plan because he or she purchased family coverage instead of self-only coverage.” The new policy is meant to protect consumers enrolled in family coverage from running up medical bills of more than $6,850 per year and the policy applies to all non-grandfathered small and large group health plans including self-insured plans.

Bureau of Labor Statistics (BLS) Releases Data Hinting at Potential for Higher Medicare Part B Premiums in 2016 for Some Beneficiaries

BLS released data Sept. 16 that means it is likely that Social Security recipients will not receive a cost of living adjustment (COLA). Medicare beneficiaries who pay the lowest Part B premium directly to Social Security — about 70 percent of all beneficiaries — can’t be required to pay any premium increases at all next year. Medicare Trustees reported in July that they anticipated Medicare part B premiums to rise because of Medicare policies that have been successful in pushing more care to the outpatient setting. By law Medicare Part B premiums from beneficiaries are to cover 25 percent of Part B’s overall cost. Because 70 percent of Medicare beneficiaries are held harmless in instances in which there is no COLA and premiums increase, Medicare has to collect more from a smaller pool of beneficiaries.

On Oct. 15, the Bureau of Labor Statistics will release the final data needed to officially calculate the cost-of-living adjustment; at that time, SSA will announce a cost-of-living adjustment for 2016.

3. State Activities

Montana Submits Formal Medicaid Expansion Waiver to Centers for Medicare and Medicaid Services (CMS)

On Sept. 16, Montana submitted a Medicaid expansion waiver to CMS, which would require income-eligible Montanans to pay monthly premiums equal to 2 percent of household income as well as the maximum copay permitted. The state has asked CMS to approve the waiver by Nov. 1, so coverage can start in January with health insurance exchange open enrollment. Under the Affordable Care Act, the federal government will fund 100 percent of the expansion through 2016, which will gradually decline to 90 percent by 2020.

Montana will be the first state in the nation to use a private company to administer Medicaid expansion under the Affordable Care Act (ACA), if CMS approves the waiver. The state legislature approved the expansion this spring, making Montana the 29th state to expand Medicaid under the ACA. The expansion is expected to provide additional coverage to an estimated 70,000 Montanan residents who make between 100 and 138 percent of the federal poverty line. CMS has expressed some concern over the waiver, due to its cost-sharing provisions on low-income residents. CMS will be taking public comment on the state’s proposal through Oct. 15.

Virginia Hospitals Launches Campaign Against Falling Medicare and Medicaid Reimbursements

The Virginia Hospital and Healthcare Association has initiated a grassroots movement called “Hospitals: Our Lifeline” to raise statewide awareness highlighting financial challenges to the industry, which include declining Medicare and Medicaid reimbursements. The effort includes TV, digital, billboards and radio ads that will aim to highlight the impact hospitals in the state have on job growth, economic activity and access to care.

California State Legislature Passes Legislation to Cap Copays for Medically Necessary Prescription Drugs

The California state legislature passed a bill, AB 339, on Sept. 11 that implements a cost cap on copays and coinsurance for a single 30-day prescription at $250, or $500 for people on bronze-level plans. The legislation, sponsored by Assemblyman Rich Gordon (D-Menlo Park), mirrors a copay prescription cost mandate put in place on the state’s exchange plans this spring. The legislation now heads to Democratic Gov. Jerry Brown for a signature.

4. Regulations Open for Comment

The Centers for Medicare and Medicaid Services (CMS) Offers Long-term Care Reform Proposed Rule

In conjunction with the White House Conference on Aging, the Centers for Medicare and Medicaid Services released a long-term care reform proposed rule July 16. The rule concerns reducing unnecessary hospital readmissions and infections, and strengthening safety measures for the nearly 1.5 million residents in the more than 15,000 long-term care facilities or nursing homes that participate in the Medicare and Medicaid programs. The proposed changes include:

  • Ensuring nursing home staff is properly trained on caring for residents with dementia and in preventing elder abuse.
  • Ensuring that staff members have the right skill sets and competencies to provide person-centered care to residents.
  • Improving care planning, including discharge planning for all residents with involvement of the facility’s interdisciplinary team and consideration of the caregiver’s capacity, giving residents information they need for follow-up, and ensuring that instructions are transmitted to any receiving facilities or services.
  • Allowing dietitians and therapy providers the authority to write orders in their areas of expertise when a physician delegates the responsibility and state licensing laws allow.
  • Updating the nursing home’s infection prevention and control program, including requiring an infection prevention and control officer and an antibiotic stewardship program.

Many of the proposals in the draft rule build on improvements that nursing homes have already made since 1991, the last time these conditions of participation were comprehensively updated. The recommended reforms were published in a proposed rule in the July 16, 2015, Federal Register. The comment period for the proposed rule ended on Sept. 14, 2015, and was reopened until Oct. 15, 2015.

Department of Health and Human Services (HHS) Proposes Updates to “the Common Rule”

HHS and 15 other agencies released a notice of proposed rulemaking Sept. 2 for the Common Rule, the existing regulatory framework to transparency and oversight for scientific research involving human subjects. The proposed changes are to address the substantial changes that have occurred within scientific research. Current regulations have been in place since 1991 and are followed by 18 federal agencies. Proposed updates to the rule include:

  • Strengthened informed consent provisions
  • Requirements for administrative or IRB review that would align better with the risks of the proposed research
  • New data security and information protection standards
  • Requirements for written consent for use of an individual’s biological samples, for example, blood or urine, for research with the option to consent to their future use for unspecified studies
  • Requirement, in most cases, to use a single institutional review board for multisite research studies
  • Application of rule to clinical trials, regardless of funding source, if they are conducted in a U.S. institution that receives funding from a Common Rule agency for research involving human participants.

In July 2011, HHS issued an Advance Notice of Proposed Rulemaking to seek the public’s input on updating the Common Rule. The proposed rule issued reflects input and requests comments for HHS to consider as it drafts the final rule. HHS will take public comment on the proposed rule until Dec. 7.

For a press release detailing changes to the rule visit

Department of Health and Human Services (HHS) Releases Proposed Rule on Health Equity

On Sept. 3, HHS issued a proposed rule, Nondiscrimination in Health Programs and Activities, to advance health equity and reduce disparities in health care. The proposed rule establishes that the prohibition on sex discrimination includes discrimination based on gender identity. It also includes requirements for effective communication for individuals with disabilities and enhanced language assistance for people with limited English proficiency. The proposed rule applies to Health Insurance Marketplaces, any health program that HHS itself administers, and any health program or activity any part of which receives funding from HHS, such as hospitals that accept Medicare patients or doctors who treat Medicaid patients. Finally, the proposed rule extends these nondiscrimination protections to individuals enrolled in plans offered by issuers participating in the Health Insurance Marketplaces and explicitly bars any marketing practices or benefit designs that discriminate on the basis of race, color, national origin, sex, age or disability. Section 1557 of the Affordable Care Act (ACA) extended civil rights protections banning sex discrimination to health programs and activities. Previously, civil rights laws enforced by HHS’s Office for Civil Rights (OCR) barred discrimination based only on race, color, national origin, disability or age. The rule will be published in the Federal Register on Sept. 8, and is open for public comment through Nov. 6, 2015.

For more information, including a fact sheet and Frequently Asked Questions, visit

Internal Revenue Service (IRS) Proposed Rule Mandates Employer Health Plans Offer Hospital and Physician Services

The IRS released a proposed rule Aug. 31 that would require employer health plans to offer substantial coverage for inpatient hospital services and physician services. The Affordable Care Act requires employer health plans to be at least 60 percent of the minimum value standard. News reports uncovered the fact that employer plans could do so without providing hospital or physician coverage.

The preamble of the proposal points out that while large group plans are not required to cover the ACA’s Essential Health Benefit, a plan that does not cover hospital and physician services “does not meet a universally accepted minimum standards of value expected from and inherent in any arrangement that can reasonably be called a health plan and that is intended to provide the primary health coverage for employees.”

Under the proposed rule, an employer group health plan must, to meet the minimum value standard (MSV) and avoid a penalty, meet or exceed an actuarial value standard of at least 60 percent coverage including substantial coverage for doctor and hospital services. The proposed rule provides a transition period for employers that have previously offered non-compliant coverage prior to Nov. 4, 2014. The proposal aligns IRS and Department of Health and Human Services (HHS) policies. The ACA compels employers who do not meet the affordability and MSV thresholds to pay a penalty of $3,000 for each worker that receives a tax credit. The IRS proposed rule, published in the Federal Register Sept. 1, also says that any employee offered a non-compliant plan would not be prevented from receiving premium tax credits. IRS is taking comments on the proposed rule until Nov. 2, 2015.

Centers for Medicare and Medicaid Services (CMS) Issues FY 2016 Final Inpatient and Long-Term Care Hospital Policy and Payment Changes

CMS issued a final rule on July 31, 2015, to update fiscal year (FY) 2016 Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).

For hospitals paid under the IPPS that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and demonstrate meaningful use of certified electronic health record technology, the increase in rates is 0.9 percent. This is calculated from a hospital market basket update of 2.4 percent adjusted by -0.5 percent for multi-factor productivity and an additional adjustment of -0.2 percent in accordance with requirements of the Affordable Care Act and further adjusted by - 0.8 percent for a documentation coding recoupment adjustment required by the American Taxpayer Relief Act of 2012.

Hospitals that do not successfully participate in the Hospital IQR program and do not submit the required quality data will be subject to a one-fourth reduction of the market basket update. In addition the law required that the update for any hospital that is not a meaningful user of electronic health records will be reduced by one-half of the market basket update in FY 2016. Other payment adjustments will include continued penalties for readmissions, a continued -1 percent penalty for hospitals in the worst-performing quartile under the hospital acquired condition reduction program and continued bonuses and penalties for hospital valued-based purchasing.

Medicare Disproportionate Share Hospital (DSH) payments will also change. CMS is distributing an estimated $6.4 billion in uncompensated care payments in FY 2016, a decrease from FY 2015, which is attributable to the continued declines in the number of uninsured.

The rule contains a number of other policy changes. A fact sheet on the final rule can be found here. The final rule will be published in the Federal Register on Aug. 17, 2015. Comments may be made on the final rule and are due to CMS by Sept. 29, 2015, and the rule is effective Oct. 1, 2015.

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

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

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

5. Reports

Government Accountability Office (GAO) Releases Report on CMS Oversight of State Health Insurance Exchange Technology Projects

GAO released a report Sept. 16 detailing inefficient CMS oversight of state health insurance exchange technology projects. GAO studied how states have used federal funds for IT projects to support their marketplaces, delineated CMS’s and states’ roles in overseeing these projects, and identified IT challenges states have encountered and lessons learned. States identified a number of challenges in establishing their IT systems to support their marketplaces, including project management and oversight, system design and development, resource allocation and distribution, and marketplace implementation and operation. States also identified lessons learned from dealing with such challenges, including the need for strong project management and clear requirements development.

GAO found that as of March 2015, states spent about $1.45 billion in federal marketplace grant funding on information technology (IT) projects supporting health insurance marketplaces; the majority of this spending was for state-based marketplaces. These marketplaces reported spending nearly 89 percent of the funds on IT contracts, and CMS has ongoing efforts to track states’ IT spending in more detailed categories.

In its recommendations, GAO advised that CMS define and communicate its oversight roles and responsibilities, ensure senior executives are involved in funding decisions for state IT projects and ensure states complete testing of their systems before they are put into operation.

The Center for American Progress (CAP) Unveils New Proposals for Addressing High Prescription Drug Costs

CAP released a report on Sept. 18 detailing a series of proposals to address the rising costs of prescription drugs. CAPs suggestions include limiting patient out-of-pocket cost sharing for drugs by insurers, requiring companies to participate in a star ratings system of comparative effectiveness in drug labeling and marketing, and implementing cost transparency requirements for drug manufacturers. CAP also offered the idea of authorizing objective third-party groups to evaluate drugs’ effectiveness and offer appropriate payment ranges; should the negotiated price of drugs lie outside the third-party’s recommended pay range, then federally funded drug patents for those drugs would be licensed to competitors.

The Congressional Budget Office (CBO) Releases Estimate on Employer Small Group Market Delay

CBO and the Joint Committee on Tax (JCT) released a preliminary cost estimate of H.R. 1624, Protecting Affordable Coverage for Employees Act, a bill that would recognize firms with 50 or fewer employees as “small employers” unless their state decides to expand the small group market to 100 employees in 2016. CBO and JCT expect that most states will not elect to expand the definition; therefore, most firms with between 51 and 100 employees will no longer be subject to certain requirements established by the Affordable Care Act or be able to offer coverage through a SHOP exchange. In their analysis, CBO and JCT estimated that the small group market delay would increase federal revenues by $400 million from 2015 to 2025. CBO and JCT estimate that H.R. 1624 would result in a net reduction in premiums for health insurance purchased by some firms with between 51 and 100 employees. Premiums would be lower, at least in the near term, because some firms would choose to offer insurance that does not meet the standards required under current law.

Congressional Budget Office (CBO) Estimate Says Eliminating the Affordable Care Act’s (ACA) Individual Mandate Reduces Budget Deficit by $305 Billion by 2025

CBO and the Joint Committee on Tax (JCT) released a preliminary estimate of the budget impact of eliminating the ACA individual health insurance mandate and associated penalties and determined that eliminating that requirement would reduce the deficit by about $305 billion between the 2015 and 2025 period. That figure, when broken down, consists of a $311 billion decrease in direct spending, which would be partially offset by a $6 billion decrease in revenues. Most spending reductions would be due to $110 billion less in outlays for exchange subsidies and $200 billion less for Medicaid and the Children’s Health Insurance Program, or CHIP, the report said.

The report comes with a caveat. CBO and JCT also concluded that eliminating the individual mandate would increase the number of people without health insurance coverage in 2025 by about 14 million people, resulting in 41 million uninsured in that year. CBO and JCT also noted that the elimination of the individual mandate would increase individual premium prices by roughly 20 percent in all years between 2017 and 2025.

Harvard Study Finds Medicare’s 30-Day Readmission Policy Penalizes Hospitals with Sickest, Poorest Patient Populations

In a study released Sept. 14 by JAMA Internal Medicine, Harvard researchers found that Medicare unfairly penalizes hospitals with higher than expected readmission rates by up to 3 percent of annual inpatient payments, largely based on the characteristics of the patient populations the hospitals serve. The researchers found that nearly two dozen variables, such as patients’ income, level of education and ability to bathe, dress and feed themselves, attributed to about 48 percent of the difference in 30-day readmission rates between the best- and worst-performing hospitals. Patient characteristics are not included in Medicare’s current risk-adjustment methods. Researchers contend that this could explain much of the difference in readmission risk between patients admitted to hospitals with higher versus lower readmission rates.

Department of Health and Human Services (HHS) Office of the Inspector General (OIG) Report Details Centers for Medicare and Medicaid Services Mismanagement of Private Contractors

OIG released a detailed audit report on Sept. 15 that found that CMS’s contracting personnel did not properly manage and oversee private contractor performance. OIG reviewed 20 of 62 contracts awarded by HHS to private contractors in conjunction with the construction of the federal health insurance exchange website, which was inundated with technical glitches in the first several months of the Affordable Care Act’s (ACA) exchange rollout. Because CMS did not always provide adequate contract management and oversight for Federal marketplace contracts, contractor delays and performance issues, OIG found, were not always identified; a contractor incurred unauthorized costs that increased the cost of the contract; contracting officers in all government agencies did not have access to contractor past-performance evaluations when making contract awards; and critical deliverables and management decisions were not properly documented. OIG issued a number of personnel and contracting-related recommendations to CMS, which the agency agreed to in addition to written corrective actions it had taken or planned to take to address them.

6. Other

Hospital Trade Association Comments Urge the Centers for Medicare and Medicaid Services (CMS) to Waive Penalties for Proposed Joint Replacement Pay Bundle Till Year Three of the Demonstration

The American Hospital Association (AHA) submitted comments to CMS on Sept. 8 asking the agency to waive several regulations in its five-year Comprehensive Care for Joint Replacement (CCJR) payment model that CMS proposed in July. In this model, hospitals where hip or knee replacement take place would be held accountable by CMS for the quality and cost of care from the time of surgery through 90 days after discharge; hospitals would then be eligible to receive an additional bonus payment or be required to repay Medicare for a portion of care costs, depending on the quality of care the hospital provides and its cost performance. AHA, which represents the long-term care hospitals that could be negatively impacted by the proposed pilot project, generally supports the pay demo, but does not wish to see it expanded.

AHA’s comments called for additional protections for provider organizations, including waiving several key components of the demo: the physician self-referral law, the anti-kickback statute waiver, discharge-planning requirements that disallow hospitals from influencing beneficiaries’ choice of post-acute care providers, the requirement that patients be admitted as inpatients for three days before Medicare pays for nursing home services, and the “60 percent rule” that determines whether inpatient rehab facilities are compensated at higher rates than hospitals. AHA also recommends delaying by six months the demonstration start date (till July 1, 2016), postponing until the third year penalties for hospitals that don’t meet spending goals of demo implementation, restricting enrollment in the CCJR program to voluntary hip and knee replacement episodes, and incorporating a risk-adjustment approach for hospitals. The way CMS pays for hip and knee replacement procedures in this demo will likely be an archetype for alternative payment models that CMS plans to use for many other procedures and conditions. The proposed CCJR start date is Jan. 1, 2016.