1. Congress

House of Representatives

"Track and Trace" Drug Security Bill Passes by Voice Vote

On Monday, the House by voice vote passed its version of legislation that would implement tighter regulations for the handling of prescription pharmaceutical drugs. The bill, H.R. 1919, which is sponsored by Reps. Latta (R-OH) and Matheson (D-UT), would require entities that manufacture, distribute and dispense prescription medication to pass along information detailing the product's dosage and transaction history in an effort to help federal officials combat drug counterfeiting and assist in locating contaminated drugs in instances of recall. The Senate HELP Committee recently marked up its version of the bill, S. 957, though it has not received consideration by the full Senate. Both versions of the bill would move toward creation of an interoperable, unit-level tracking system, though some have criticized the speed in which the House bill would achieve such a system. Others have noted concerns that the bills would preempt existing state laws, which, in some cases, are more stringent than those at the federal level.

Bipartisan Letter Asks for Competitive Bidding Delay

Last week, a group of 143 members of the House sent a letter to CMS asking that Round 2 of the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) competitive bidding program be delayed through the remainder of 2013 over concerns that the program would award contracts to companies lacking proper credentials to furnish medical devices to Medicare beneficiaries. Moreover, the lawmakers are concerned that the bids offered by the unqualified suppliers would create artificially low reimbursements, putting small and local providers at a disadvantage. Created in the Medicare Modernization Act of 2003, the program has the goal of improving quality of service and eliminating excess costs within Medicare. However, suppliers of medical devices have long criticized the structure of the program, claiming it will lead to reduced access for Medicare beneficiaries. CMS has noted that the first two rounds of bids, now phased in to include roughly 90 metropolitan areas, have demonstrated significant savings to the program, and to beneficiaries through lower premiums, without jeopardizing access.

Energy and Commerce Hearing on Physician Payment Reform

On Wednesday, the Energy and Commerce Health Subcommittee held a hearing to examine draft legislation to overhaul the Medicare physician payment system. The legislation would permanently replace the sustainable growth rate (SGR) formula using a three-phase process in which physicians would receive a flat reimbursement for the first several years, as opposed to the dramatic reductions called for under the SGR. After this initial period, the legislation would call for payment reforms aimed at rewarding quality care. The third phase of the plan would parallel the first two phases concurrently, allowing physicians to opt out of the existing fee-for-service (FFS) payment model, and instead participate in an alternative model. Democrats criticized the draft because it would fail to adequately transition from FFS to a system that incentivizes quality.  

Witnesses:

Panel I

Cheryl L. Damberg, Ph.D.

Senior Policy Researcher; Professor

Pardee RAND Graduate School

William Kramer

Executive Director for National Health Policy

Pacific Business Group on Health

Jeffrey B. Rich, M.D.

Immediate Past President of the Society of Thoracic Surgeons

Director at Large, Virginia Cardiac Surgery Quality Initiative

Thomas J. Foels, M.D., M.M.M.

Executive Vice President, Chief Medical Officer

Independent Health

For more information, or to view the hearing, please visit: http://energycommerce.house.gov

Upcoming Energy and Commerce Hearing on Medicaid Reform

Energy and Commerce Health Subcommittee Chairman Pitts (R-PA) has scheduled a hearing for Wednesday, June 12, 2013, in order to explore the issue of Medicaid reform. The hearing, titled "The Need for Medicaid Reform: A State Perspective," will be held in 2322 Rayburn House Office Building, beginning at 10 a.m.

Upcoming Ways and Means Hearing on Medicare Postacute Payments

Ways and Means Health Subcommittee Chairman Kevin Brady (R-TX) has announced a hearing to explore Medicare reform proposals, including those contained in President Obama's fiscal year (FY) 2014 budget. The hearing will take place on Friday, June 14, 2013, in 1100 Longworth House Office Building, beginning at 9:30 a.m. This, the fourth such hearing of this Congress, will focus on review of proposals to reform postacute care under the Medicare program.

Senate

Wyden, Grassley Seek Additional Price Transparency From CMS

Last week, Sens. Wyden (D-OR) and Grassley (R-IA) announced their intentions to introduce legislation, the Medicare Data Access for Transparency and Accountability Act (Medicare DATA Act), which would require the Secretary of Health and Human Services to issue regulations to make available a searchable Medicare payment database that the public can access at no cost. The bill also clarifies that data on Medicare payments to physicians and suppliers do not fall under a Freedom of Information Act (FOIA) exemption. The announcement coincided with the release by CMS of additional price data on common medical procedures.

Hatch Seeks More Information on ACA Premium Subsidies

Last week, Sen. Hatch (R-UT) wrote a letter to Treasury Secretary Lew and HHS Secretary Sebelius seeking information on what he calls "the increasingly growing cost of the Refundable Premium Assistance Tax Credit, also known as the Advance Premium Tax Credit (APTC)," created under the ACA. "Since the APTC is determined based on income and the price of the second lowest cost silver plan, then the increases can only be attributable to more people accessing insurance through exchanges than was previously estimated or to higher health insurance premiums," Hatch wrote. Specifically, he's requesting information including why the cost of the subsidies has increased since the president's FY2012 budget request, and how such an increase could be related to increasing premiums.

  1. Administration

HHS

Continued Development of Medical Error Reporting System

Last week, the Obama Administration announced plans to move forward with the establishment of a pilot program aimed at increasing consumers' ability to report medical errors. The program, developed by HHS's Agency for Healthcare Research and Quality (AHRQ), would allow consumers to report "medical errors" and care that "resulted in harm or injury," both by phone and online. According to the AHRQ, "such information is necessary for research on how to improve the quality of health care, promote patient safety, and reduce medical errors." A number of physician and provider groups are skeptical of the program, including the Greater New York Hospital Association (which represents close to 250 hospitals and continuing care facilities in the New York area), which warns that "the inability of consumers to distinguish preventable error from unavoidable complications of care ... will result in additional unwarranted and costly litigation." The pilot program awaits final approval from the Office of Management and Budget. Public comments on the proposed program are due by July 7.

HHS Makes Efforts Toward Greater Transparency

On June 3, the Department of Health and Human Services (HHS) began releasing new data sets with county-level Medicare spending and utilization information, as well as hospital outpatient costs. Secretary of the Department of Health and Human Services Kathleen Sebelius made the announcement at the recent national Health Datapalooza conference on health data transparency. She stated, "A more driven and transparent health care marketplace can help consumers and their families make important decisions about their care." The new data sets are going to be available to researchers and consumers through an easy-to-use, state-level dashboard format. In addition to the new announcement, HHS also launched an app challenge that will award $25,000 to developers who create an app utilizing the new Medicare data.

CMS

CMS Hopes Redesigned Medicare Summary Notice Will Reduce Fraud

This week, the Centers for Medicare & Medicaid Services (CMS) announced that they have redesigned the Medicare Summary Notice (MSN) and will begin using the new notices this summer. The redesigned MSN, which Medicare beneficiaries receive in the mail every three months and which details all services provided to the individual, is part of a larger effort by the CMS to cut down on health care fraud. The new MSN features a section educating recipients on how to look for fraud and is written in clearer language and a larger font. CMS also announced that they have revoked Medicare billing privileges for 15,000 providers and suppliers over the past two years, a number that represents a 150 percent increase from the previous period.

IRS

Updated 720 Tax Form Comes With New Fees

On June 3, the Internal Revenue Service posted an updated Quarterly Federal Excise Tax Return (Form 720). The new form will require some self-insured health plan sponsors and issuers to report and pay a fee under the Affordable Care Act. The fee will be used to fund the Patient-Centered Outcomes Research Trust Fund, a nonprofit research institute that will research benefits of medical treatments, procedures, services and drugs to help patients, purchasers, clinicians and policymakers make educated health decisions. The fee will be imposed on the issuers and sponsors of applicable plans that end on or after Oct. 1, 2012, but before October 2019. The fee is calculated by multiplying $1 by the average number of lives covered under the policy.

NIH

Explanation of Sequester Impact on Federal Health Research

NIH has issued a fact sheet detailing the impact of sequestration budget cuts on its ability to conduct research. According to NIH, the $1.5 billion cut will result in 700 fewer grants for competitive research projects, about 750 fewer new patients admitted to the NIH Clinical Center and delays to medical research in 2013. "On March 1, 2013, as required by statute, President Obama signed an order initiating sequestration. The sequestration requires NIH to cut 5 percent or $1.55 billion of its fiscal year (FY) 2013 budget. NIH must apply the cut evenly across all programs, projects, and activities (PPAs), which are primarily NIH institutes and centers. This means every area of medical research will be affected," the fact sheet notes.

  1. State Activities

Update on Insurance Companies Applying for ACA Role

Several states and the District of Columbia have announced that they have received additional interest from insurance companies looking to play their role in providing coverage to a portion of the population expected to receive coverage under provisions established by the ACA, including new opportunities in Medicaid.

District of Columbia: Aetna, CareFirst BlueCross BlueShield, Kaiser Permanente and United HealthCare have submitted proposed rates for nearly 300 plans they want to sell on the D.C. insurance exchange.

Alaska: According to Alaska Insurance Director Brett Kolb, Premera Blue Cross and Moda Health constitute the only two insurers to have applied to sell on the state's exchange, which will be a federally facilitated exchange.

A more comprehensive list of state applications to serve federally facilitated exchanges is available online.

Connecticut Moves Toward Increased Negotiating Posture with Insurers

The Connecticut State Senate has advanced legislation that would direct the Connecticut Health Insurance Exchange to actively negotiate, on behalf of consumers, health insurance premiums with insurers for qualified health plans offered through the exchange. Connecticut is already an "active purchaser" state, but the exchange said it wouldn't use its authority in 2014 to negotiate with insurers.

Vermont CO-OP Appeals License Denial

The Vermont Health CO-OP is appealing a rejection by the Department of Financial Regulation of its license application to operate in the state. The CO-OP received $33 million in federal loans to get off the ground, and $7 million of that has been spent in startup costs.

Illinois General Assembly Adjourns Without Passing Exchange Legislation

Despite Gov. Quinn's desire to establish a state-run exchange by 2015, the Illinois Legislature adjourned without taking action on an exchange bill. State senators approved the bill along party lines, but the full House never voted on it before last Friday's adjournment. The development means the state could find itself with a federally facilitated exchange for at least a year longer than Quinn had hoped.

  1. Regulations Open for Comment

Pre-Existing Condition Insurance Plan (PCIP) Interim Final Rule

CMS has issued an interim final rule with comment period sets the payment rates for covered services furnished to individuals enrolled in the Pre-Existing Condition Insurance Plan (PCIP) program administered directly by HHS beginning with covered services furnished on June 15, 2013. The rule sets most reimbursement rates in federally administered PCIPs at Medicare levels. This interim final rule also prohibits facilities and providers who, with respect to dates of service beginning on June 15, 2013, accept payment for most covered services furnished to an enrollee in the federally-administered PCIP from charging the enrollee an amount greater than the enrollee's out-of-pocket cost for the covered service as calculated by the plan. The rule also bans ''balance billing'' enrollees of the federal-run PCIPs to protect them ''from having to potentially shoulder significant costs that could be shifted to them as a result of this new payment policy.'' Comments will be accepted through July 19.

Disproportionate Share Hospital Proposed Rule

CMS has issued a proposed rule on Disproportionate Share Hospital (DSH) payment reductions required by the ACA, applying a methodology that would not distinguish between states that have chosen to expand their Medicaid programs, pursuant to the ACA. According to the proposed rule, data reflecting the effects of the decision to implement the new coverage group may not be available to consider the impact of a state's decision to expand or not until 2016. Once finalized, this rule will go into effect on Oct. 1, unless Congress enacts the president's budget proposal to begin the Medicaid DSH allotment reductions in fiscal year 2015 instead of FY 2014, while retaining the same total amount of reductions through 2020. The Affordable Care Act requires aggregate reductions to state Medicaid DSH allotments annually from FY 2014 through FY 2020. Comments on the proposed rule are due July 12.

Tanning Bed Warning Label Proposal

The FDA issued a proposal that would elevate tanning beds from a low-risk to high-risk medical device and would add a warning label to them. If the order is finalized, manufacturers would have to submit a pre-market notification (510(k)) to the FDA for these devices, which are currently exempt from any pre-market review. Manufacturers would have to show that their products have met certain performance testing requirements, address certain product design characteristics and provide comprehensive labeling that presents consumers with clear information on the risks of use. The order proposes to include a contraindication against use on people under 18 years old, and the labeling would have to include a warning that frequent users of sunlamp products should be regularly screened for skin cancer.

The FDA will take comments on the proposed order until Aug. 7.

Skilled Nursing Facility FY 2014 Payment Rule

CMS has issued a proposed rule that would raise payments to skilled nursing facilities (SNF) by $500 million or 1.4 percent in fiscal year 2014. The rate reflects an estimated increase of 2.3 percent market basket increase, reduced by a 0.5 percentage point forecast error correction and further reduced by a 0.4 percentage point productivity adjustment required by law. CMS said the proposal would both revise and rebase the payment by requiring the establishment of an updated SNF marketplace index that would reflect changes over time in the prices of an appropriate bundle of goods and services for covered SNF services within the Medicare system. The proposed changes to the SNF market basket would reflect FY 2010 allowable Medicare total cost data (routine, ancillary and capital-related), shifting from FY 2004 base year, as it is the most recent year for which relatively complete Medicare cost report data is available. Other significant changes within the rule would establish a Minimum Data Set (MDS) to record the number of distinct calendar days of therapy for all rehabilitation disciplines to be linked to each beneficiary; such a proposal would clarify the qualifying conditions for "Medium Rehab Category" and "Low Rehab Category" to five and three distinct calendar days respectively. Comments are due by July 1, 2013.

Hospice Payment Rule Proposed

CMS issued a proposed rule addressing hospice payment rates and the wage index for fiscal year (FY) 2014. The proposed rule would increase Medicare payments to hospices by an estimated 1.1 percent for FY 2014, amend hospice quality reporting requirements, clarify coding requirements and update stakeholders on hospice payment reform. As proposed, hospice providers would receive an estimated 1.1 percent increase in their payments for FY 2014, a net result of a proposed hospice payment update to the hospice per diem rates of 1.8 percent (a "hospital market basket" increase of 2.5 percent minus 0.7 percentage point for reductions mandated by the Affordable Care Act), and a 0.7 percent decrease in payments to hospices due to updated wage data and the fifth year of CMS's seven-year phaseout of its wage index budget neutrality adjustment factor. CMS will accept comments on the proposed rule until June 28, 2013.

IRS Proposed Rule -- Employer-Sponsored Plan Value

The Internal Revenue Service has published a proposed rule on the minimum required value of employer-sponsored coverage that won't trigger the employer mandate penalty and other provisions involving the premium tax credits on the exchanges. The proposed regulations affect individuals who enroll in qualified health plans through Affordable Insurance Exchanges (Exchanges) and claim the premium tax credit, and Exchanges that make qualified health plans available to individuals and employers. These proposed regulations also provide guidance on determining whether health coverage under an eligible employer-sponsored plan provides minimum value and affects employers that offer health coverage and their employees. Comments will be accepted until July 1, 2013.

Inpatient Rehabilitation Facility Prospective Payment Proposed Rule

CMS has announced proposed changes to update the Medicare Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) rates for fiscal year (FY) 2014. CMS proposes to increase Medicare payments to IRFs in FY 2014 by 2.0 percent, or $150 million. This proposed increase reflects the combined effects of a 2.5 percent market basket increase factor, a 0.4 percent reduction due to the multifactor productivity adjustment and an additional 0.3 percent reduction as required under the Affordable Care Act. CMS is proposing an update to the outlier threshold, which would increase IRF payments by an estimated 0.2 percent.

CMS is also proposing to update the presumptive methodology used in determining whether an IRF has met the requirements of the "60-percent rule" by removing a number of codes from the presumptive compliance list. This revised list is meant to reflect only those codes that can be identified presumptively as both representing one of 13 conditions and requiring intensive rehabilitation. The proposed revisions fall in the following categories: nonspecific diagnosis codes, arthritis diagnosis codes, unilateral upper extremity diagnosis codes, some congenital anomalies diagnosis codes and other miscellaneous diagnosis codes. Public comments on the proposals will be accepted until July 1, 2013.

Inpatient Prospective Payment System (IPPS) Proposed Rule

CMS has issued a proposed rule to revise the Medicare hospital inpatient prospective payment systems (IPPS) for operating and capital-related costs of acute care hospitals to implement changes arising from continuing experience with these systems. These proposed changes would be applicable to discharges occurring on or after Oct. 1, 2013, unless otherwise specified in this proposed rule. The proposed rule includes an update to the rate-of-increase on limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. The proposed updated rate-of-increase limits would be effective for cost reporting periods beginning on or after Oct. 1, 2013. In addition, the proposed rule includes a number of changes relating to direct graduate medical education (GME) and indirect medical education (IME) payments. Specifically, CMS proposes to establish new requirements or revised requirements for quality reporting by specific providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs and inpatient psychiatric facilities (IPFs) that are participating in Medicare. Lastly, the proposed rule includes updated policies relating to the Hospital Value-Based Purchasing (VBP) Program and the Hospital Readmissions Reduction Program. Rates for inpatient stays at hospitals that participate in the quality reporting system would increase by 0.8 percent in 2014 under the proposed Prospective Payment System rule. Rates at long-term care hospitals would go up by 1.1 percent. The proposed IPPS rule also clarifies that a hospital inpatient admission spanning two midnights -- more than one Medicare utilization day -- would be paid for under Part A. Comments must be submitted by 5 p.m. on June 25, 2013.

Medicare Fraud Tip Proposed Rule Would Increase Financial Reward

CMS has issued a proposed rule that would revise the Medicare Incentive Reward Program (IRP) to increase the potential financial reward for successful Medicare fraud tips to $9.9 million, up from $1,000 or 10 percent of recovered amount, whichever is less. The new standard would apply a formula of up to 15 percent of the first $66 million recovered. The Medicare Incentive Reward Program was created under the Health Insurance Portability and Accountability Act (HIPAA), which stated the HHS Secretary should implement a program to reward individuals who report potential Medicare fraud. Comments are due no later than 5 p.m. on June 28.

Charitable Hospital Rule

CMS has announced a proposed rule providing guidance to charitable hospital organizations on the community health needs assessment (CHNA) requirements, and related excise tax and reporting obligations enacted as part of the Patient Protection and Affordable Care Act of 2010. The proposed regulation also clarifies the consequences for failing to meet these and other requirements for charitable hospital organizations. These regulations will affect charitable hospital organizations.

Comments and requests for a public hearing must be received by July 1.

FDA Proposed Rule on Defibrillator Premarket Approval Applications

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.

  1. Reports

OIG

Average Medicare Part D Plan Covers 96 Percent of Commonly Used Drugs

According to a report released this week by the HHS Office of Inspector General (OIG), the average Medicare Part D prescription drug formulary covers 96 percent of the 195 drugs in highest demand by dual-eligible beneficiaries (those eligible for both Medicare and Medicaid). The report found that of the 9.5 million dual-enrollment beneficiaries -- who are often of worse health and on shakier financial footing than recipients of Medicare solely-- 99 percent are enrolled in a plan that covers at least 90 percent of the most commonly used drugs. The report also looked at the rate that utilization management strategies (a means for formularies to control access to drugs) were applied to dual-eligible drugs, finding that 28 percent of drugs, on average, were affected (up from 24 percent in 2012). OIG concludes that in the face of varying coverage rates and utilization management strategies, "some dual-eligibles may need to use alternative methods to access the drugs they take."

CRS

Affordable Care Act Will Limit False Claims Act Dismissals

Before the passage of the Affordable Care Act (ACA), cases based on publically disclosed information involving the False Claims Act (FCA) were not under the jurisdiction of the courts. Under the ACA, this will no longer be the case; the federal government will have the ability to contest the dismissal of FCA cases involving publically disclosed information. According to a report by the Congressional Research Service, this will allow whistleblowers and relators to bring to court FCA cases that include publically disclosed information, though it is not specified whether the federal government will have the ability to require courts to hear these cases. In addition, ACA will also expand the meaning of an "original source" under the public disclosure bar, allowing for more cases to be brought to court.

CBO

CBO Report Looks at Changing Care, Financing Environment for Dual-Eligibles

As a result of federal and state governments' efforts to tame the high costs of dual-eligible beneficiaries (recipients of both Medicare and Medicaid), these beneficiaries are seeing their care and financing options change quickly. This is according to a report published by the CBO stating that "governments are trying a variety of approaches, including establishing multi-payer programs, requiring Medicare's special-needs plans for dual-eligible beneficiaries to have contracts with state Medicaid agencies, integrating behavioral and physical health care, offering managed long-term services and supports, and taking part in financial alignment demonstration projects." These actions stem from the government's desire to help offset the cost of dual-eligible beneficiaries, which is higher than Medicare-only recipients (in 2009, for example, federal and state spending averaged $33,300 per individual). Policymakers hope that these approaches will result in increased quality and coordination of care for dual-eligible recipients.

Avalere

Rate Shock Concerns Addressed by Subsidies

According to a report written by Avalere Health, claims that the ACA will lead to "rate shock" or higher insurance premiums are not necessarily reasons for worry. Provisions in the new health law that require insurers to cover people with pre-existing conditions are putting increased pressure on insurance companies that could lead to higher premiums. Avalere Health acknowledges this, but contends that most people who will encounter rate increases will be eligible for large subsidies to assist in paying their coverage. They concluded that "[e]ffective outreach and marketing efforts by the exchanges, health plans, consumer groups, and others will be key to educating this population about the availability of subsidized coverage and mitigating the 'rate shock' headlines." According to the new law, two-thirds of uninsured adults or those subscribed to an individual insurance plan that are under 30 would be eligible for premium subsidies.

RAND

Study Shows That Not Joining Medicaid Expansion Could Cost States

When the Affordable Care Act was signed in 2012, states were given the option to expand Medicaid. As of now, only 24 states and the District of Columbia seem likely to expand Medicaid, but for those that opt out, they could stand to lose money. According to a study released June 3 by the RAND Corporation, states that participate in Medicaid expansion will see their overall costs lowered, while those that opt out may overspend by more than $1 billion in addition to losing out on billions in federal Medicaid payments available under the expansion. Currently, the federal government has agreed to cover 100 percent of state Medicaid expansion cost from 2014 through 2016, after which state costs for the expansion will increase gradually. Study author Carter Price points out that states that do not expand Medicaid "will still be subject to the taxes, fees and other revenue provisions of the Affordable Care Act without reaping the benefit of additional federal spending."