Congress heads into a two-week state/district work period after both the House and Senate came to an agreement on a continuing resolution to keep the government funded until the end of the fiscal year. Also, each chamber completed work on their respective budget resolutions, with the Senate passing its version early Saturday morning.

1. Congress

House of Representatives

House Passes Budget Blueprint

Last week, the House passed, by a vote of 221-207, its fiscal year 2014 budget resolution, introduced by Budget Committee Chairman Ryan (R-WI), which, among other provisions, calls for transitioning Medicare into a premium support system, while reducing federal spending by $4.6 trillion over 10 years to produce a balanced budget. In addition, the House proposal would reduce Medicaid spending by $810 billion over 10 years, converting the program to a block-grant system, and would repeal large parts of the Affordable Care Act (ACA). It would keep the taxes associated with the health care reform law, however, as well as the $716 billion in Medicare cuts it contains. Ten Republicans joined a united Democrat caucus in opposing the measure. House Democrats' alternative budget, offered by Budget Committee Ranking Member Van Hollen (D-MD) was rejected by a vote of 165-253.

Energy and Commerce Republicans Outline Medicaid Concerns

House Energy and Commerce Committee Republicans have released a 10-page report -- "The Medicaid Check Up: Reasons for Reform" -- outlining their concerns over the current status of the Medicaid program. Top among their stated concerns is the fiscal sustainability of the program, which, according to the report, costs states more than K-12 education programs. The report also criticizes the quality of care received by Medicaid patients and the program's susceptibility to fraud and abuse, problems that are likely to be compounded by the ACA's expansion of Medicaid. "The program needs true reform, and we can no longer simply tinker around the edges with policies that add on to the bureaucratic layers that decrease access, prohibit innovation, and fail to provide better health care for the poor," the report concluded.

Health Subcommittee Life Sciences Agenda Released

On Thursday, Energy and Commerce Chairman Upton (R-MI), Health Subcommittee Chairman Pitts (R-PA) and Health Subcommittee Vice-Chairman Burgess (R-TX) released an outline of an agenda they say will "breathe new life" into America's life sciences sector. Items on the agenda include allowing off-label and other treatments for the sickest patients, thereby incentivizing the development of new antibiotics; creating an FDA "board of directors" with an emphasis on making innovation a central part of the FDA; and strengthening the security of the nation's drug supply chain. The committee expects the plan to underpin potential legislative activity in the 113th Congress.

Boustany Asks IRS to Explain ACA

Last week, Ways and Means Oversight Subcommittee Chairman Boustany (R-LA) wrote to Internal Revenue Service (IRS) Acting Commissioner Steven Miller inquiring as to the cost of implementing the ACA, and the extent to which such activities are impacting the agency's central role of tax collection. The IRS previously estimated that it would need to dedicate nearly 1,300 full-time employees to the effort by Sept. 30, 2012, and another 895 by the end of fiscal year 2013. Boustany cites a recent GAO report as cause for his concern that the IRS does not have adequate processes in place to accurately review and account for the taxpayer dollars the IRS is spending to implement the law.

Immunosuppressive Medication Legislation Introduced

On Thursday, Reps. Burgess (R-TX) and Kind (D-WI) introduced legislation that would require Medicare to continue covering "immunosuppressive" medication used by kidney transplant recipients. Specifically, the bill, HR 1325 -- the Immunosuppressive Drug Coverage for Kidney Transplant Patients Act -- would allow individuals who are eligible for immunosuppressive drugs under Medicare Part B to continue to receive their vital treatment past the current 36-month cutoff. Companion legislation was introduced in the Senate by Sens. Durbin (D-IL) and Cochran (R-MS).


Budget Narrowly Passes

Early Saturday morning, the Senate passed its first budget in the last four years, following the introduction of hundreds of amendments and a marathon 13 hours of continual voting. The nonbinding resolution outlining the chamber's spending priorities was authored by Budget Committee Chair Murray (D-WA) and would reduce the federal deficit by $1.85 trillion. The Senate plan says its overall Medicare savings come on top of the $500 billion in lower Medicare spending CBO now expects through 2020, which Senate Democrats attribute to enactment 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.

Medical Device Tax Budget Amendment Receives Broad Support

Notably, during consideration of the budget resolution, an amendment offered by Sens. Hatch (R-UT) and Klobuchar (D-MN) in support of repealing the 2.3 percent excise tax on medical devices established by the ACA passed with broad, bipartisan support. Though the amendment and budget resolution do not carry the weight of law, they signal support for an actual repeal of the provision. The amendment was adopted 79-20, with 33 Democrats and one Independent voting in favor.

Senate Democrats Want Better Pediatric Dental Coverage

A group of nine Senate Democrats wrote CMS Acting Administrator Marilyn Tavenner asking that a proposed regulation governing pediatric dental benefits be revised to reflect what the authors claim to be Congress's desire to provide affordable health care to families. Specifically, the letter takes issue with CMS's final rule for essential health benefits, in which the agency would allow for a separate out-of-pocket (OOP) limit for pediatric dental benefits provided through stand-alone dental plans, in addition to the OOP limit established for essential health benefits under the ACA. The authors contend this policy conflicts with the ACA's theme of tying the cost of health care to the ability of individuals and families to pay. "We are concerned by the failure of CMS to carry out the intentions of the Affordable Care Act and ensure that pediatric dental services, a specified essential benefit, are affordable and available to families," the Senators wrote.  

2. Administration

Health and Human Services (HHS)

HHS Says ACA Expanded Access to Preventative Care

According to a report issued by HHS Secretary Sebelius, the ACA helped nearly 105 million Americans access preventive health care services, such as flu shots, mammograms or diabetes screenings, in 2011 and 2012 without being charged any out-of-pocket cost. That number includes about 71 million Americans with private insurance and 34 million Medicare recipients. The report, which cited data from the 2012 Kaiser Family Foundation's Employer Health Benefits Survey, also estimated how the 71 million people receiving expanded coverage are distributed among states and across age and ethnic groups. "No longer do Americans have to choose between paying for preventive care and groceries," Sebelius said.

3. State Activities

Michigan Transitions Blue Cross to Nonprofit Mutual Company

Last week, Michigan Gov. Rick Snyder signed legislation allowing Blue Cross Blue Shield (BCBS) of Michigan to transition to a nonprofit mutual insurance company from a tax-exempt entity required to serve all Michigan residents. Under the law, the company will pay state and local taxes and will contribute $1.6 billion over 18 years to a health endowment fund to promote access to health care and improve public health. It also requires BCBS to provide $120 million to subsidize Medigap coverage between 2016, when a rate freeze expires, and 2021. The transition still needs approval from the BCBS board of directors, expected this summer, and the director of the Michigan Department of Insurance and Financial Services.

Arkansas Expects Medicaid Waiver Proposal Submission Soon

Arkansas health officials say they expect to submit a proposal to CMS soon detailing their vision of an expanded Medicaid program, pursuant to the ACA, in which Medicaid enrollees would purchase private health insurance on the state's new health insurance exchange, using federal dollars. Arkansas currently has about 650,000 people enrolled in its Medicaid program, which provides coverage only to those with incomes up to 17 percent of the federal poverty level. Under Arkansas's proposal, the state would be able to provide Medicaid coverage to about 250,000 adults under age 65 who currently lack coverage in the state. While details of the proposal are still being worked out, should Arkansas's request be granted, it is likely other states will look at similar ways to leverage generous federal funding intended to encourage states to expand their Medicaid programs, a previously mandatory provision in the health law that was effectively made optional by last year's Supreme Court ruling.

Virginia Law Would Restrict Biosimilar Substitution

Last week, Virginia became the first state to enact legislation to restrict the substitution of biosimilar drugs for more expensive biologics. The law, to which the Biotechnology Industry Association has lent strong support, attempts to protect biotech companies with innovative biologic drugs from competition by follow-on biologics, by blocking pharmacists from automatically substituting the cheaper follow-on products without consent of both the doctor and patient.

4. Regulations Open for Comment

NEW - IRS, HHS, DOL Issue Proposed Health Coverage Waiting Periods Rules

Under proposed rules issued jointly by the Internal Revenue Service, the Department of Labor's Employee Benefits Security Administration and the Department of Health and Human Services, no group health plan or group health insurance issuer could impose a waiting period that exceeds 90 days after employment. The rules also would amend regulations to conform to ACA provisions already in effect, as well as those that will become effective beginning in 2014, barring discrimination against people with pre-existing medical conditions. Comments are due by May 20.

NEW - FDA Proposed Rule on Defibrillator Premarket Approval Applications

On Friday, the FDA filed notice of of a proposed rule to require the filing of a premarket approval application (PMA) or a notice of completion of a product development protocol (PDP) for the following class III preamendment devices: automated external defibrillators systems (AEDs), which include the AED device and its accessories (i.e., pad electrodes, batteries and adapters). The Agency is also summarizing its proposed findings regarding the degree of risk of illness or injury designed to be eliminated or reduced by requiring this device to meet the statute's premarket approval requirements and the benefits to the public from the use of the device. In addition, FDA is announcing the opportunity for interested persons to request that the Agency change the classification of the AED based on new information. This action implements certain statutory requirements. Comments will be accepted until June 20.

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.

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.

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

Congressional Budget Office (CBO)

Cost of ACA Coverage Provisions Has "Changed Little"

CBO and the Joint Committee on Taxation (JCT) have updated their analysis of the provisions of the Affordable Care Act (ACA) related to health insurance coverage, and have found the net budgetary impact of the ACA's insurance coverage provisions has changed little since August 2012 and, indeed, has changed little, for any given year, since the legislation was being considered in March 2010. CBO and the JCT now estimate that the coverage expansions will cost $1.165 trillion over the 2013-2022 budget window -- within $1 billion of their August 2012 estimate.

HHS Office of the Inspector General (HHS-OIG)

HHS Not Fully Compliant With Improper Payments Act

According to a report issued by the HHS Office of the Inspector General (HHS-OIG), several programs within the Department of Health and Human Services were not fully compliant with the Improper Payments Information Act (IPIA) during fiscal year 2012. Specifically, three out of nine HHS programs deemed to be at high risk of improper payments (Medicare fee-for-service, Medicare Advantage and Foster Care) failed to meet their improper payment rate targets for FY 2012, one of the requirements of the IPIA. In addition to reviewing HHS compliance with IPIA, OIG also examined data from the agency's FY 2012 Agency Financial Report and found several inconsistencies. For example, HHS reported incorrect information on the amount of improper payments recovered for Medicare fee-for-service and Medicare Advantage.  

Institute of Medicine

Geographic Payment Adjustments Ineffective

Last week, the Institute of Medicine (IOM) released a preliminary report on Medicare's geographic payment variations, which found paying Medicare doctors and hospitals based on their region wouldn't prompt them to deliver more efficient care. Though the brief interim report was issued to meet a firm Congressional deadline and doesn't represent a final conclusion on the part of IOM, it does cast doubt on proposals by lawmakers to address regional payment disparities by pegging rates to a geographic index. Under such an arrangement, providers working in areas with overall better medical care would be rewarded with higher reimbursements. However, instead, the proposal could reward some underperforming doctors and penalize others who overperform relative to their area, according to IOM.