1. Congress

House of Representatives

Continuing Resolution Passes House

On Wednesday, the House passed a stopgap bill that would continue funding the federal government beyond the March 27 expiration of current funding. The House-passed continuing resolution (CR) denies funding for many federal activities central to implementation of the ACA, including health insurance exchanges and tax provisions. Notably, the Food and Drug Administration (FDA) would gain access to medical device user fees collected this year, correcting an error in the previous funding law that prevented the agency from accessing nearly $40 million in collected fees. The bill also increased funding, by $233 million, for health programs for the military, including combat-related medical research, for example on brain trauma, psychological health, spinal injuries and prosthetics.

House GOP Concerned about Pre-Existing Conditions

Last week, top House Republicans wrote a letter to President Obama expressing their concerns over the Administration's decision to halt enrollment in the ACA's pre-existing condition insurance program (PCIP), a move the Administration attributed to funding issues. House Speaker John Boehner, Majority Leader Eric Cantor, Whip Kevin McCarthy, Conference Chairwoman Cathy McMorris Rodgers, Energy and Commerce Chairman Fred Upton and Reps. Joe Pitts and Michael Burgess reasserted, in the letter, their support for high-risk pools and reinsurance programs, noting that a Republican alternative to the President's health reform law would have dedicated $25 billion to such programs, while the ACA funded PCIP at $5 billion. The lawmakers proposed shifting funds from other ACA programs, such as the Prevention and Public Health Fund, in order to sustain PCIP.

Small Business Committee Chair Concerned About ACA Nondiscrimination Rules

On Tuesday, Small Business Committee Chairman Sam Graves (R-MO) wrote to Treasury Secretary Jacob J. Lew and Internal Revenue Service Acting Commissioner Steven Miller expressing his concerns over pending nondiscrimination rules under the ACA. Graves said his committee "has heard from associations representing small employers who are very concerned that unless existing fully insured group plans are grandfathered, the operation of the new non-discrimination provisions may result in a small business's health plan being found to be discriminatory and the business to incur substantial penalties." Specifically, Graves argued that some small businesses need to be able to offer health plans to their officers that, in some cases, ask for lower premiums than they do from other employees, but the Administration's nondiscrimination rule prohibits executives from being offered more generous health benefits than their employees. View the letter.

Ways and Means Schedules MedPAC Hearing

The House Ways and Means Health Subcommittee will hold a hearing Friday, March 15 at 9:30 a.m. with MedPAC Chairman Glenn Hackbarth to review the commission's annual March report to Congress.


Republicans Report Impact of ACA on Health Insurance Premiums

Last week, House and Senate GOP lawmakers from the Energy and Commerce and HELP Committees issued a report analyzing various studies regarding the cost of health insurance, ultimately concluding that the ACA will cause a surge in the price of health insurance premiums. The report predicts that health insurance premiums will increase in every state except New York and Vermont, states the authors say already "hyper-regulate" their insurance markets.

Bill to Fund Disability Information Centers Introduced

Sen. Menendez (D-NJ) and Rep. Pallone (D-NJ) have introduced legislation to continue funding for facilities aimed at steering disabled Americans to the right health care resources and services. The "Family 2 Family Information Centers," as they're known, were funded through this year in the fiscal cliff deal, and Pallone and Menendez would like to fund them through 2016.

Bipartisan Group Has Questions Regarding Drug Abuse Strategy

A bipartisan group of eight senators recently wrote the GAO asking for a report on coordination problems among the countless agencies tasked with confronting prescription drug abuse. Four Democrats (Sens. Barbara Boxer, Dianne Feinstein, Tom Harkin and Jay Rockefeller) and four Republicans (Tom Coburn, Lamar Alexander, Richard Burr and Michael Enzi) sent a letter to the comptroller general asking for a report on the way the agencies talk to each other and interact with public health groups. Among the stakeholders the senators want surveyed: HHS, the FDA, the Drug Enforcement Agency, the Office of National Drug Control Policy, patient groups, pharmacists, behavioral health providers, wholesale drug distributors, experts, state attorneys general and law enforcement officials. View the letter.

2. Administration

Health and Human Services (HHS)

Four New Partnership Exchanges Conditionally Approved

Last week, HHS granted initial approval to Iowa, Michigan, New Hampshire and West Virginia to run partnership exchanges. Under partnership arrangements, states share responsibility for exchange establishment and operation with HHS. HHS has already awarded conditional certification to partnership exchanges in Arkansas, Illinois and Delaware.

Centers for Medicare and Medicaid Services (CMS)

Changes to Medicare Hospital Payments Mandated by "Fiscal Cliff" Law Outlined

CMS has released a notice outlining payment adjustment changes for low-volume hospitals and Medicare-dependent hospitals under the hospital inpatient prospective payment systems for fiscal year 2013, as mandated by the so-called fiscal cliff law. CMS said the American Taxpayer Relief Act of 2012 extended the payment adjustment for low-volume hospitals for an additional year, through fiscal 2013. The law also extended the Medicare-dependent hospital program for an additional year, through fiscal 2013.  

3. State Activities

DC Exchange Transition Plan Released

Under recommendations filed by exchange Executive Director Mila Kofman last week, small businesses already providing coverage in the District would have a two-year transition period before having to join D.C.'s health exchange. Individuals and new entrants to the small group market would still have to enter the exchange in 2014 without a transition period. However, small businesses say the actual transition would be much shorter than two years for small group plans beginning on or after Feb. 1, 2015. "We support the District's efforts to implement a successful and robust state-based exchange but continue to have serious concerns about making the HBX the sole marketplace for individuals and small employers to purchase health insurance," wrote Hannah Turner, a spokeswoman for the small business coalition raising concerns over the exchange consolidation plan.

North Carolina Governor Says "No" to Medicaid Expansion For Now

Last week, North Carolina Gov. Pat McCrory signed a bill to prohibit an expansion of his state's Medicaid program, as provided for under the ACA. The decision would prevent the addition of roughly 500,000 residents from becoming eligible for the program. The new Republican governor said he could reconsider the expansion later, but only after a major overhaul of the current program.

4. Regulations Open for Comment

NEW -- 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.

NEW -- 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 www.ofr.gov.

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.

Guidance for Industry Abuse-Deterrent Opioids -- Evaluation and Labeling

The FDA has issued guidance intended to assist sponsors who wish to develop formulations of opioid drug products with potentially abuse-deterrent properties (abuse-deterrent formulations). Specifically, the guidance explains FDA's current thinking about the studies that should be conducted to demonstrate that a given formulation has abuse-deterrent properties, how those studies will be evaluated, and what labeling claims may be approved based on the results of those studies. FDA will accept comments on the guidance received by March 11, 2013. See FDA's press release.

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)

Medicare Advantage: Substantial Excess Payments Underscore Need for CMS to Improve Accuracy of Risk Score Adjustments

The Government Accountability Office released a report on the need for CMS to improve the accuracy of its risk score adjustments. CMS calculates a risk score to determine the relative measure of expected health care for each beneficiary under Medicare Advantage. The GAO found the risk scores for 2010 through 2012 were too low, resulting in $3.2 billion in excess payments to MA plans. GAO estimated that the risk scores were 4.2 percent higher than they should have been. The report stated, "GAO's findings underscore the importance for CMS to implement the recommendation from GAO's January 2012 report that the agency improve the accuracy of its MA risk score adjustments by taking steps such as using the most current data available and incorporating adjustments for additional beneficiary characteristics." CMS had no comment on the report.


MedPAC Examines Possible Refinements to Hospital Readmission Reduction Program

In its March meeting, the Medicare Payment Advisory Commission (MedPAC) recently explored four refinements to CMS's hospital readmission reduction program the commission believes could help improve program performance. The four areas in need of policy refinements are:

  • difficulty distinguishing between random variation and true readmission reduction among smaller hospitals, resulting in higher reimbursement penalties;
  • a penalty calculation that does not change, even when the overall industry improves in reducing readmissions;
  • reimbursement penalties that are higher for hospitals that treat low-income patients; and
  • an inverse relationship between mortality rates and readmission rates.

Federal Reserve

"Unknown Effects" of ACA Cited in Fed Labor Report

The Federal Reserve reported that labor market conditions have improved, but some Districts are still seeing restrained hiring. According to the report, employers in several Districts were planning layoffs or were reluctant to hire as a result of the "unknown effects of the Affordable Care Act ...."