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Vol. 18, No. 6 - February 12, 2015
HRSA Says 13 Drug
Makers Still Not
Providing 340B
Discounts
Many brand drug makers still
aren’t giving 340B discounts on
orphan drugs used for other indications even though last year the Health
Resources and Services Administration directed drug makers to give
those discounts, and a HRSA official
said those drug companies likely will
not discount their drugs while
industry’s lawsuit against the agency
is pending. Instead of making drug
companies give the 340B discount,
HRSA suggested Thursday (Feb. 5)
that states get separate Medicaid
rebates for the drugs, and it released a
list of 13 companies that aren’t
offering the 340B discount so states
know which drug makers to collect
Medicaid rebates from.
Last year, the Pharmaceutical
Research and Manufacturers of
America sued HRSA over the orphan
drug rule, which requires manufacturers to provide 340B drug discounts on
orphan drugs used off-label or to treat
common conditions. A federal district
court ruled that HRSA overstepped its
authority with the rule. The agency
then released an interpretive rule
reiterating its stance in the earlier rule,
and PhRMA again sued over that
interpretation.
Hospitals complained that some
drug companies weren’t giving 340B
discounts so HRSA sent a letter to
more than 50 drug manufacturers in
October telling them to “notify HRSA
of plans to repay affected covered
continued on page 10
CMS Expected To Recalculate Nursing Home Star
Ratings
CMS officials are expected to tell nursing homes Thursday (Feb. 12)
about plans to recalculate star rating scores, a move that industry worries
could lead to lower ratings for many nursing homes even though quality of
care at those facilities hasn’t gotten worse. Although CMS designed star
ratings to help consumers choose facilities, managed care plans also base
reimbursement on the scores so a lower rating might mean lower pay.
The agenda for CMS’ open door forum includes Nursing Home Compare,
which is a website that lists nursing home scores of between one and five
stars. A CMS spokesperson declined to say what agency officials will discuss
at the meeting, but industry worries CMS will go over changes to calculations
continued on page 14
CMS Tells Aetna To Fix 2015 Pharmacy
Contracting Problems
CMS recently told Aetna to fix some pharmacy contracting issues after the
insurer attempted to use narrower networks in its pharmacy plans for 2015.
Aetna Chairman and CEO Mark Bertolini downplayed concerns plan in a
recent investor call, saying the problems with Aetna’s pharmacy networks for
2015 were “under control” and blaming pharmacies for creating “noise in the
system.”
“This is a little bit the trouble with some innovation. We innovated with
narrower networks to provide better pricing for enrollees and we’ve got some
pushback from the pharmacy side, particularly independent pharmacists in
talking to those enrollees, which created noise in the system,” Bertolini said,
continued on page 16
Home Health Groups Say New Face-To-Face
Form Won’t Solve Problems
A new proposed guidance from CMS is designed to ease the confusion
over the face-to-face standards, replacing the narrative from doctors with a
standardized form. However, home health groups are not sure the optional
form will make much difference or change the three-year trend of the increase
in payment denials since the requirement began.
The face-to-face requirement began in 2011 as part of the Affordable Care
Act. The measure aims to stop fraud by requiring Medicare patients who want
to receive care in their homes to first visit their primary doctors, who must
write narratives of office visits to document the need for home care.
Molly Smith, a lobbyist for the Visiting Nurse Associations of America,
continued on page 18
Energy & Commerce Split Over ICD-10 Implementation
Members of the House Energy & Commerce health subcommittee were split during a hearing Wednesday (Feb. 11)
over ICD-10, with some lawmakers pushing to implement the new code set without any more delays while others registered concerns. The split isn’t along party lines.
William Terry, of the Mobile Urology Group, testified that no matter how may times the move to ICD-10 is delayed,
physicians will never be ready because CMS’ plan to implement the new billing codes all at once with no transition is
flawed. Terry said CMS should allow a transition to lower the risk of payment denials over improper coding. He also said
Congress should appoint a commission to look into the costs and benefits of ICD-10.
“You can delay, delay, delay, but whatever that [implementation] date is we aren’t going to be ready because
it’s a flawed implementation,” Terry told lawmakers.
CMS says in its Frequently Asked Questions that dual coding will not be allowed. If patients are treated before Oct.
1, 2015, then the old coding set must be used even if claims are submitted after the new system is implemented. But for
claims after Oct. 1, ICD-10 codes must be used.
Members of both parties, including subcommittee Chair Joe Pitts (R-PA) and subcommittee ranking Democrat Gene
Green (TX), oppose further delay.
The move to ICD-10 was most recently delayed by lawmakers as part of the last patch to the Medicare physician pay
formula. Rep. Kathy Castor (D-FL) urged leadership not to attach another ICD-10 delay to must-pass legislation like a
patch the Sustainable Growth Rate formula again as lawmakers look to avert the next round of SGR cuts.
Others, including Doctors Caucus members Reps. Mike Burgess (R-TX), Larry Bucshon (R-IN) and Renee Ellmers
(R-NC), expressed some concerns.
Burgess, pointing to Healthcare.gov, said CMS has had trouble with technology that involves the transfer of data. But
Rich Averill, the director of public policy for 3M Health Information Systems, said CMS has extensive experience
updating it’s claims processing system and for the agency moving to the ICD-10 code set is a relatively routine update to
their system. CMS had some difficulties with consumer websites, but this is their core competency, Averill said.
Burgess also questioned whether CMS has a contingency plan for the move to ICD-10. CMS told the Government
Accountability Office that it has a contingency plan, but much of that plan will not be made public.
Averill and Kristi Matus, chief financial and administrative officer at athenahealth, said repeated delays make it
easier for vendors and other in the industry not to prepare for ICD-10. Averill said the biggest challenge to implementing
ICD-10 is not knowing when it takes effect. Edwin Burke, a physician with Beyer Medical Group, said his small practice
transitioned successfully to ICD-10 and he doesn’t believe another delay is merited.
Senate Finance Committee Chair Orrin Hatch (R-UT) recently indicated there is no reason to delay ICD-10 beyond
October. — Michelle M. Stein
Hot Documents Now Available on InsideHealthPolicy.com
The following new documents are available on InsideHealthPolicy.com, our new online health news service. Subscribers
to InsideHealthPolicy.com also have access to hundreds of other health-related documents, daily news updates, and a
searchable archive of back issues.
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Hatch, Burr, Upton Unveil Obamacare Replacement Plan
Bipartisan Bill Would End Cap On Outpatient Therapy Services
American Cancer Society Praises CMS Decision To Cover Lung Cancer Screening
Stakeholders Comment On Medicare ACO Program
NAIC Issues Consumer Alert On Anthem Data Security Breach
CMS’ Final MA, Prescription Drug Benefit Programs Rule
Wyoming Legislature Joins Tennessee In Rejecting Medicaid Expansion
40 Senators Say Star Ratings Penalize MA Plans That Serve Poor
AdvaMed Unveils Innovation Agenda
Avalere Study Shows Some Exchange Plans Placing All Drugs For Certain Conditions On Specialty
Tiers
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INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
Groups Look To Secure Extenders As Part Of SGR Or Standalone Bills
As Congress considers patching or fixing the Sustainable Growth Rate formula, trade groups are looking at different
ways to continue the extenders that typically ride with SGR.
Some of the extenders already have stand alone bills to continue the programs. Sens. Chuck Grassley (R-IA) and
Chuck Schumer (D-NY) introduced a bill (S. 332) that would continue the low volume hospital adjustment and Medicaredependent hospital programs that many rural hospitals depend on. Another bill, the Medicare Access to Rehabilitation
Act, sponsored by Rep. Charles Boustany (R-LA), would repeal the cap on therapy benefits for Medicare patients.
However, there are many extenders that do not have stand-alone legislation to replace their pay system.
Stacy Sanders, federal policy director for the Medicare Rights Center, is largely focused on continuing the extenders
dealing with therapy caps, Medicare outreach and enrollment, and continuing the qualifying individual program, which
allows Medicaid to pay Medicare Part B premiums for those who earn between 120 percent and 135 percent of the
federal poverty level.
She is unsure what Congress will ultimately do but wants extenders to be a part of the picture either way. If Congress
passes a permanent fix, they’re asking for permanent continuation of the programs. If Congress settles on a patch, she
hopes they will continue the programs with the same expiration date as the patch.
Maggie Elehwany, vice president of government affairs for the National Rural Health Association, said she’s heard of
varying SGR solutions ranging from a short-term patch of less than a year to a three-year fix that would hand off the
problem to the next administration.
While some extenders dealing with rural health care issues now have their own bills, she is still looking out for
extenders dealing with the Geographic Practice Cost Index, which determines with how much providers are reimbursed,
and another increasing how much Medicare reimburses rural ambulance services. Like Sanders, Elehwany said one of
their biggest goals in the SGR confusion is to make sure extenders are not left behind.
Some of the extenders would likely not fare well on their own, but bundling them all together apart from SGR could
also be tricky. David Lipschutz, senior policy attorney for the Center for Medicare Advocacy, said funding would be an
issue.
“If they’re not treated as more of a package, and payfors are sought for just the extenders, I think a lot of people
would say, ‘Let’s just not do the extenders.’ And consumer groups won’t want costs shifted onto the beneficiaries,”
Lipschutz said.
The transitional medical assistance program, which temporarily extends Medicaid for adults who have lost eligibility
after beginning a job, is an extender many people didn’t think would be necessary after the Affordable Care Act, said
Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities.
“I don’t think this itself is going to raise a lot of conversation,” Solomon said, but with some states choosing not to
expand Medicaid, the program is important.
The transitional medical assistance program, like others, would have a relatively small budget score, and lobbyists
don’t think it makes sense to introduce the ideas on their own.
Funding for the National Quality Forum, $30 million a year, is also an extender, but Ann Greiner, vice president for
public affairs with the organization, hopes support for their work from both sides of the aisle will continue regardless of
how Congress addresses SGR.
Lobbying groups have been making the rounds on the hill and sending out letters to congressmen.
“We want to keep the drumbeat of attention on the extenders and not having beneficiaries pay more for their health
care,” Sanders said. —Rebecca Beitsch
Patient Group Advocates Policies To Help People Avoid Medical Debt
Although more people have health insurance under the Affordable Care Act, medical care is still too expensive for
many, according to the National Patient Advocate Foundation, which has a long list of recommendations on ways legislators and policymakers could help people avoid medical debt and deal with high drug costs. Alan Balch, the organization’s
CEO, said he also expects the organization to spend a lot of time fighting against Medicaid cuts on the state level.
The group calls for lowering the cost of intravenous drugs, treating medical debt differently than other debt, letting
Medicare beneficiaries appeal specialty drug prices and reducing specialty drug cost sharing, among other proposals
aimed at minimizing patients’ costs.
Many of the organization’s efforts focus on state legislation. In addition to wanting Medicaid expansion and worrying
about tight state budgets, much of the group’s work involves state laws, such as lobbying for laws that allow patients to
receive oral and intravenous cancer drugs for the same cost, Balch said. Intravenous medication often costs patients more
due to higher out-of-pocket costs.
A significant portion of Americans who declare bankruptcy do so because of medical bills, Balch said, and one of the
priorities for the group is to get Congress to treat medical debt differently than other forms of debt. For instance, the
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
3
organization supports a bill that would remove medical debt from credit reports a short time after debt is paid off.
Specialty drug tiers are one of the big reasons that low-income patients with chronic and debilitating diseases
go into bankruptcy, Balch said. His group recommends that Medicare let beneficiaries appeal when their medications
are placed in tiers that make them prohibitively expensive. A report by Milliman on Part D found that plans could shift all
covered specialty tier drugs to other branded drug tiers and increase cost-sharing for those tiers only modestly, according
to the National Patient Advocate Foundation. A similar actuarial value could be achieved with $7 increase for nonpreferred brand prescriptions, a $1 increase in preferred brand prescriptions and a $5 increase deductibles, the group
says. Further, the report found that if Medicare Part D plans eliminated specialty tiers in this manner, federal reinsurance
payments would decrease by 1 percent to 2 percent because fewer patients would reach the catastrophic level.
The group supports Patients’ Access to Treatment Act (H.R. 460), introduced in the past legislative session by Rep.
David McKinley (R-WV), to require commercial health plans to limit cost-sharing requirements for specialty drug tiers to
the level of cost-sharing required for non-preferred brand drug tiers. It also would limit the difference in cost for drugs on
tiers to no more than 10 percent.
The group also opposes letting external reviewers, accountable to employers and insurers, influence drug use
reviews. The practice involves reviewing patients’ prescription data to ensure appropriate medication selection and
positive patient outcomes. External reviewers may be involved in discussions about whether a service is needed, how
treatment will be provided and where care will occur. Not only is the process intrusive, it can also lead to higher costs, the
group says. The National Patient Advocate Foundation recommends that patients whose conditions are well managed on a
given therapy be protected from unreasonable cost-sharing.
Among a number of recommendations related to patient access, the National Patient Advocate Foundation primarily
aims to combat inadequate transportation, especially when it occurs in traditionally underserved rural areas.—John Wilkerson
Hospitals Concerned Medicaid Expansion Vulnerable To Future Elections
Hospitals in states that have expanded Medicaid are beginning to plan for the possibility that the state programs
could easily unravel if future elections lessen support for the expansion efforts, an official with America’s Essential
Hospitals said Tuesday (Feb. 10). Former Congressional Budget Office Director Alice Rivlin, however, believes more
states will take up a modified version of Medicaid expansion down the line.
Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, said at an
AcademyHealth conference that a relatively new issue for hospitals to consider is that states’ choices around Medicaid
expansion could shift depending on who wins elections — particularly if a Democratic governor who expands Medicaid
is replaced in a red state by a Republican governor.
She noted the Arkansas legislature’s debate over whether to renew it’s first-of-a-kind private option, though Feldpush
could not say if that debate was directly responsible for hospitals’ concerns. The measure was controversial, and the
lawmakers approved it for a year alongside a task force to look for alternative ways to cover the 213,000 people now in
the program.
In Pennsylvania, Democratic Governor Tom Wolf opted to dismantle the state’s Healthy PA plan the previous
Republican governor worked on with CMS in favor of traditional Medicaid expansion. The Healthy PA website says that
traditional Medicaid expansion “will increase continuity of care and reduce unnecessary processes to make individuals
eligible for uncomplicated health care coverage faster.”
Feldpush said the uncertainty makes it hard for hospitals to plan for the future; she also noted that Medicaid
Disproportionate Share Payments to hospitals are set to essentially be cut in half over the course of a few years when they
are implemented in 2017.
States won’t necessarily have trouble taking benefits away from residents, Feldpush said, as states have previously
proven willing to cut back on Medicaid eligibility at different times.
Rivlin, however, said she believes states are gradually realizing they are missing an opportunity to take funds from
the federal government and re-shape their Medicaid programs their own way. That opportunity will be dramatically
bigger in 2017 when the states are allowed more freedom to shape Medicaid how they choose, she added. HHS has
previously said that states could seek a waiver in 2017 for partial expansion.
Wyoming and Tennessee both recently decided against expanding Medicaid.
White House senior advisor Valerie Jarrett told NPR that President Barack Obama recently met with the Executive
Committee of the National Governors Association and encouraged states to work with HHS on Medicaid expansion. She
said the administration is “working aggressively to see what we can do with the remaining states to encourage them to
expand.”
Rivlin said the Affordable Care Act is an experiment with federalism, and states will look very different depending on
how they handle Medicaid. How the ACA works will depend on how it is implemented on the ground and in the states,
Rivlin said. — Michelle M. Stein
4
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
Duals Demonstrations Face Challenges In Organization, Data Collection
Panelists at the AcademyHealth National Health Policy Conference said Tuesday (Feb. 10) that pilot programs for
people dually eligible for Medicare and Medicaid are in the early stages of simplifying complexities between the two
programs, but the group disagreed over what to do with all the data being collected.
CMS operates two demonstrations for the duals population. The capitated model is a partnership between the agency,
states, and health plans to coordinate care between beneficiaries. The managed fee-for-service model allows states to
benefit from savings resulting from their initiatives that reduce costs in both Medicare and Medicaid. There are 11 states
participating in the two demonstrations, with Minnesota operating an additional alternative demonstration program.
Edo Banach, deputy director for CMS’ Medicare-Medicaid Coordination Office, said there are 10.7 million people
enrolled in both demonstrations, and that number is expected to grow. While that population tends to be more costly than
the average Medicaid or Medicare beneficiary, they also require more coordination between the state and federal government for their benefits.
Banach said they are looking to streamline the experience for dual eligibles and reduce costs by providing care
coordination, ensuring an appropriate number of providers, giving a single identification card for all benefits, and getting
patients appointments quickly and close to home, among others. Meanwhile, CMS would evaluate data on access,
outcomes, and beneficiary experience.
Designing plans that meet those standards fall mainly on the states, however, and some states have had some difficulty meeting those objectives.
“How closely does the day-to-day delivery of this new model match the vision and the conversations that have
happened in DC, and in state capitals, and in high level meetings? How much is the high level vision, which people seem
to agree now is the right vision, is that matching what is happening for people on the ground?” asked Kevin Prindiville,
executive director of the National Senior Citizens Law Center, which advocates for low income seniors.
William Hazel, secretary of Health and Human Resources for Virginia, which is participating in the demonstrations,
said the state has had some challenges getting the program underway, with only 27,000 enrollees of the 70,000 they were
expecting, issues with patients canceling and then re-enrolling, and issues getting doctors to participate.
“It’s been hard to contract with plans and then to get plans to contract with providers,” Hazel said.
Edith Walsh, a director with RTI International, which is responsible for evaluation of the demonstrations, said the
framework may be federal, but actually organizing the plan falls mainly on the states.
“We’re looking a lot at the components of the demonstration design on the state level and how things are going on
the demonstration level but less detail about what’s going on with the individual,” Walsh said.
Hazel said participating in the demonstration only adds to the amount of reporting required from them.
“As a practical matter, we need to think about what we’re doing with all this data we’re having people collect,” he
said, adding that it was sometimes unclear how the data would be organized. He said he’d like to see more companies and
researchers have access to the data, and he wants to see states working with the federal government achieve that goal.
“We’re still happy we’re doing this,” Hazel said of the demonstration. “There are things between Medicaid and
Medicare that need to be aligned to make things easier.”
Banach said CMS is banking on the pilots and the subsequent data they provide to show areas for improvement in
services for dual eligibles and “could inform what we do in other parts of Medicare.” —Rebecca Beitsch
CMS Bans Prorated Pharmacy Dispensing Fees In Final Rule On Part D, MA
In a win for pharmacies that service nursing home residents, CMS prohibited prorated dispensing fees in a final rule
on Medicare Advantage and drug plans issued late Friday (Feb. 6).
The Senior Care Pharmacy Coalition praised CMS for prohibiting what it says are pay arrangements that penalize
efficient dispensing techniques. Long-term care pharmacies are angry that some pharmacy benefit managers have started
prorating dispensing fees. Pharmacy benefit managers typically have paid pharmacies a flat fee to cover the cost of
dispensing drugs. The Affordable Care Act requires that pharmacies dispense certain Part D drugs to nursing home
residents in amounts no greater than two week supplies. Some pharmacy benefit managers have started paying pharmacies for only a portion of the dispensing fee when patients stop taking medications before the end of the two-week cycle.
However, the rule holds off on a separate long-term pharmacy measure proposal to waive short-cycle dispensing requirements for pharmacies using restock and reuse methodologies.
Another key provision of the rule requires Medicare Advantage plans and Part D sponsors to have business continuity plans that restore essential operations within 72 hours of failures, rather than within 24 hours, as CMS proposed. CMS
did not finish its proposal to require Medicare Advantage plans to have a plan to restore claims and appeals processing
within 72 hours.
The final rule also includes changes to audit and inspection authority. It lets CMS make Medicare Advantage and drugs plans hire independent auditors to validate that plans have corrected problems found during CMS
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
5
audits. Although CMS may require independent auditors case by case to validate corrections, the regulation does not
finish a proposal to require that plans hire independent auditors to conduct full or partial program audits.
The rule requires that people be citizens or lawfully in the country to enroll in Medicare plans, and it requires plans
to disenroll individuals when they lose that status.
This is the second final rule CMS has put out on requirements for Medicare Advantage and drug plans. CMS
proposed the rule in January 2014, but backed off the most controversial aspects of that rule several months ago when it
published the first final rule, and this final rule follows through on the rest of the regulation. The provisions that CMS
dropped in March included measures aimed at reducing the number of Medicare protected drug classes, opening up
preferred pharmacy networks, limiting the number of Part D plans insurers could offer and clarifying the “non-interference” clause, which blocks the government from negotiating drug prices with manufacturers.
Some lobbyists worried that CMS would revisit those proposals, but former CMS Administrator Marilyn Tavenner
told Congress last year that CMS was “not interested in bringing back the pieces that we pulled.”
“The final regulation reflects consideration of public comments to a proposed rule that was published on January 10,
2014,” CMS says. “This February rule finalizes many, but not all, of the provisions that were proposed in the January
2014 proposed rule but not finalized in a final rule published on May 23, 2014.”—John Wilkerson
AHCA: Target Therapy Reviews As A Bridge To Therapy Pay Reform
The American Health Care Association is urging lawmakers to use its expected move to avert physician cuts from the
flawed Sustainable Growth Rate formula to modify the therapy manual medical review process so that providers with
high error rates are targeted more than others. As the MMR processes starts back up after a pause caused by a protracted
Recovery Auditor contracting process, AHCA says the 100 percent review of all claims over the $3,700 threshold was
never meant to be a permanent program and needs to be changed.
“Rather than extend the existing claims review program, which expires March 31, 2015, Congress should instead
move the manual therapy review program from a broad data gathering exercise into a targeted, anti-fraud program until
larger reforms, like those reported out by the Senate Finance Committee in the 113th Congress,” are put into place,
AHCA says in a fact-sheet on its proposal.
The Senate Finance Committee in 2013 proposed to repeal Medicare therapy caps, set for 2015 at $1,940 for
physical therapy and speech therapy and $1,940 for occupational therapy, and institute a new medical review process.
Stakeholders have previously supported the proposal, and continued to push for a permanent therapy cap repeal.
A House version of legislation to repeal therapy caps was introduced by Reps. Charles Boustany (R-LA), Xavier
Becerra (D-CA), Marsha Blackburn (R-TN) and Lois Capps (D-CA) last week. A Senate version is expected within the
next few weeks, according to the Therapy Cap Coalition. Stakeholders say they hope a permanent therapy cap fix will
ride alongside a permanent SGR fix. Lobbyists say lawmakers will likely patch the SGR until the end of the year so they
can negotiate Medicare reforms to pay for the SGR replacement bill during budget reconciliation.
An exceptions process to the therapy caps has historically passed alongside patches to the SGR, and in 2012 Congress included a manual medical review process for claims sent to CMS beyond the cap that exceeded $3,700 per
beneficiary. CMS says the manual medical review process requires the agency to review all claims over the $3,700
therapy threshold, but AHCA says this type of review was not intended to be permanent. The Recovery Audit Contractors
have been responsible for carrying out pre-payment and post-payment reviews, but at the end of last February the
contractors were paused in order to prepare for new RAC contracts. However, protests have extended the contracting
process and CMS only restarted the MMR process in January.
Stakeholders have been concerned that this pause would cause a backlog of claims. In a document obtained by Inside
Health Policy, CMS says it will look chronologically at outpatient therapy claims above the $3,700 threshold between
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March 1 and Dec. 31, 2014 based on the month in which they were paid. The agency plans to use five rounds of document requests to review all of those claims. The first additional document request (ADR) will be sent for only one claim.
The contractors can request providers send up to 10 percent of the total number of claims that are subject to manual
medical review in the second document request and up to 25 percent of the remaining claims during the third. During the
fourth round, RACs can request up to half of the remaining claims, and the rest of the claims can be audited during the last
round of ADR requests. In a Frequently Asked Questions document, CMS says there will still be 45 days between ADR letters.
CMS say in its FAQ that it does not plan to post any additional information about the reviews. One industry expert
said CMS’ effort to try to make the MMR process less overwhelming while working through the backlog is appreciated,
but there are still a lot of unanswered questions. At the least, providers should know how many claims they have that will
be subject to review and how many claims will be subject to review across the system, the industry expert said.
The agency also says it has not yet finalized a plan for 2015 claims.
AHCA says the rationale behind these manual medical reviews was to force CMS into collecting data so that
policymakers could work to replace the therapy cap system. The House Ways & Means section-by-section description
of the February 2012 Sustainable Growth Rate patch says that the law will provide “a manual review of all claims for
high cost beneficiaries to ensure that only medically necessary services are being provided.” HHS is also required under
the law to collect data to help with reforming the therapy payment system, the section-by-section fact sheet says.
CMS has enough data at this point, and doesn’t need additional information, AHCA says, so a full review of every
claim shouldn’t be required anymore.
“Congress should permit the HHS Secretary the flexibility to target therapy manual medical review (MMR) and
education efforts to providers most likely to be billing improperly or providing unnecessary services,” AHCA’s fact sheet
says. “Congress should make this change retroactive March 1, 2014 in order to help alleviate the therapy MMR backlog
that has built up since the Recovery Audit Contractor (RAC) ‘pause’ was initiated.”
AHCA says the proposal shouldn’t increase spending, as the Congressional Budget Office doesn’t attribute savings to
the 100 percent manual medical review process. — Michelle M. Stein
Panel Looks For GME Alternatives, Ways To Treat Under-Served
Stakeholders in medical education debated changes to residency programs and how to fund them Monday (Feb. 9) at
the AcademyHealth National Health Policy Conference, with one Institute of Medicine partner calling for more alternatives to their controversial graduate medical education report.
Physician residencies are partially paid for by Medicare, and the government is considering changing how it reimburses graduate medical education. The Medicare Payment Advisory Commission considered changes, the Institute of
Medicine (IOM) issued a report and President Obama proposed graduate medical education cuts in his budget.
The president proposed a $16 billion cut in GME funding over 10 years. The IOM report suggested continuing the
current level of funding but diverting part of those funds—as much as 35 percent—into a transformation pool. Those
funds would be distributed differently, giving the government a mechanism to do more research and development and
steer more money toward certain types of residencies, such as primary care doctors and physicians serving rural areas.
While many panelists at the conference bemoaned the organization of the GME program, Fitzhugh Mullan, a
professor at George Washington University who helped write the IOM report, said those critiques have not turned into
proposals for how to solve the problem.
Mullan said IOM was tasked with scrutinizing and fixing the GME system “without incurring major interruption.”
He said those changes and the prospect of interruption have been met with some resistance or even rejection, though
he asked people to “offer your own plan or critique ours.”
Atul Grover, chief public policy officer for the Association of American Medical Colleges, said AAMC proposed
changes to the GME system based on the IOM report, although AAMC recommended just 2 percent go into a competitive
transitional fund.
The panelists also discussed residency programs’ role in getting doctors into under-served parts of the country and
areas of medicine.
Susan Kirk, the associate dean for GME at the University of Virginia, said no one wants to be accused of influencing
how students rank their residency preferences by telling them what sort of debt repayment options might be available
based on the field of medicine they choose.
“Not being able to talk to students about loan repayment is a huge obstacle,” she said, particularly before students
choose their area of medicine. The result is more students chose higher-paying specialties.
Kirk questioned the role of the government in funding GME, saying insurance companies and device manufacturers
could share in the financial burden. However, that idea comes with its own caveats, as device manufacturers are already
eager to send some types of medical students to their conferences.
“No one is doing this for child and adolescent psychologists” or other lower-paying sub-specialties, she said.
Mullan said doctors who do residencies at hospitals tend to go into high-paying specialties, so if the government
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wants to encourage doctors to go into primary care or practice in rural and poor areas, it should rely on teaching health
centers. The Affordable Care Act created the Teaching Health Center Graduate Medical Education Program to fund
residency training at teaching health centers, and about 100 physicians have gone through health center residencies. The
program, which is housed at the Health Resources and Services Administration and is separate from CMS’ Graduate
Medical Education Program, is close to running out of money. Sen. Patty Murray (D-WA) introduced a bill last
legislative session to move the health center residency funding program to CMS and extend funding for the program
until 2019.—Rebecca Beitsch
Day after Gilead details unexpectedly big rebates
Obamacare Panel Announces Funding To Compare Hep C Rx, Diagnostics
A day after Gilead Sciences executives projected larger than expected discounts on hepatitis C medications,
Obamacare’s comparative-effectiveness research panel on Wednesday (Feb. 4) offered $50 million to compare diagnostics and drugs for hepatitis C, according to a release from the Patient-Centered Outcomes Research Institute.
The hepatitis C funding is part of $138 million worth of research grants. The other $88 million funds a range of
projects, $12 million of which is for rare diseases research.
Hepatitis C drugs sparked a debate over specialty drug pricing last year. Gilead’s Harvoni, a once-a-day drug that
cures nearly everyone who takes it, costs $94,500 for a 12-week regimen. Harvoni’s precursor, Sovaldi, has a similar cure
rate, but it is approved to be taken with other drugs and costs $84,000 for a 12-week regimen.
However, when FDA later approved AbbVie’s hepatitis C drug Viekira Pak, which sells for $83,320, the two companies began offering rebates, and investors found out this week that Gilead is discounting its drugs more than they thought.
Paul Carter, Gilead’s executive vice president of commercial operations, told investors on Tuesday that last year the
average discount on its drugs was 22 percent. Carter projected Gilead will discount the drugs 46 percent on average this
year, which includes discounts of more than 50 percent to Medicaid and Veterans Affairs. Gilead Executive Vice President and Chief Financial Officer Robin Washington said public insurers account for a larger share of the payer mix than
the company anticipated.
Carter said pharmacy benefit managers are lifting restrictions on the drugs in return for rebates, and he even
expects professional societies to change guidelines that call for only giving the drugs to the sickest patients. However, the
rebates do not always mean that everyone infected with the virus gets the drugs, and patient advocates are still up in arms
over restrictions.
Carter said he expects sales of Gilead’s hepatitis C drugs, Harvoni and Sovaldi, to increase significantly because of
the discounts.
“This increase is the result of the recent and ongoing round of negotiations with payors and PBMs and includes the
shift towards a higher proportion of public payors and high prescribing of Harvoni amongst those payors with rebates to
payors such as the Medicaid and the VA exceeding 50 percent,” he said. “Again these higher levels of rebates are tied
directly to opening up access and streamlining the process of starting a patient on therapy.”
Gilead’s stock prices dropped about 10 percent the morning following the investor call, which indicates that investors
didn’t expect rebates to be so high. However, those fighting for lower drug prices did not declare victory. John Rother,
who leads the Coalition for Sustainable Rx Prices, said in addition to advocating for lower prices, his group is advocating
for a reimbursement system that bases drug prices on their value to the health care system. Gilead executives say its drugs
will save the health care system money in the long run by curing people of an expensive chronic disease.
“Discounts off an exorbitant initial price represent positive movement, but even with the discounts the cost of
therapy for over 3m Americans with HepC is unsustainable,” Rother wrote in an email. — John Wilkerson
Hatch: No Reason To Delay ICD-10 Beyond October
Senate Finance Chair Orrin Hatch (R-UT) and ranking Democrat Ron Wyden (OR) said a recent Government
Accountability Office report indicates that CMS will be ready to transition to the ICD-10 code set in October, and Hatch
said he sees no reason to further delay the newest version of billing codes.
The House Energy & Commerce Committee held a hearing on industry readiness to implement the new codes on
Wednesday (Feb. 11). Robert Tennant, senior policy adviser for the Medical Group Management Association, said just
because CMS is ready for the move to ICD-10 doesn’t mean industry is ready, and health subcommittee Chair Joe Pitts
(R-PA) said the hearing is an opportunity to discuss the state of preparedness of all involved in the move.
The move to ICD-10 has been repeatedly delayed, most recently by Congress in the latest patch to the Medicare
physician payment formula last year. GAO says the delay cost companies that were prepared last year a substantial
amount of money, but others needed more time. The report also says CMS has undertaken numerous efforts to prepare for
the move to ICD-10, and a health IT lobbyist said it’s good to know that CMS is in a position to implement ICD-10. The
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lobbyist also said the report is a positive development for ICD-10 advocates.
GAO’s report says CMS completed all ICD-10 changes to its Medicare fee-for-service systems, though it notes that
“[a]t this time, it is not known what, if any, changes might be necessary based upon the agency’s ongoing external testing
activities.”
CMS has completed two rounds of acknowledgment testing, which allows providers and others to send claims to
Medicare and the system will confirm that the claims were received, but it won’t tell providers how those claims will be
processed. The agency also recently finished one round of end-to-end testing, which allows participants to see how CMS
processes claims, and it planned two more weeks of testing in April and July.
Hatch and Wyden said they will continue to monitor testing that CMS planned leading up to the Oct. 1 deadline, and
they asked GAO to continue monitoring ICD-10 preparations and testing as well.
The results of the January end-to-end testing could come out in March, according to some following the issue, and
Tennant said if it takes that long for results to be turned around from the July testing, then there might not be enough time
for the industry to act if the testing raises questions or concerns.
The report also notes that as of October 2014 all states reported they would be able to “perform all of the activities
that CMS has identified as critical to preparing for the ICD-10 transition by the deadline,” including accepting electronic
ICD-10 claims, processing claims, paying providers, coordinating benefits with other insurers and creating and sending
Medicaid system reports to CMS. All Medicaid agencies are expected to test each critical factor and report back to CMS
by the end of June, the report says.
As of late November, two states completed internal and external testing of their Medicaid systems with regard to
ICD-10, nine states and the District of Columbia started internal testing and 16 states started external testing. The rest —
23 states — were still in the process of updating their systems and policies before starting testing, CMS told the GAO.
“Therefore, Medicaid agencies may need to make system changes if testing identifies issues,” the report says.
GAO also says CMS has a contingency plan to address certain issues that could affect the Medicare transition to
ICD-10.
“Officials indicated that they do not intend to make the contingency plan public because the information relevant to
providers — that is, claims submission alternatives — has already been made available in an [Medicare Learning Network] article,” the report says.
CMS says its contingency plan covers if those in the industry can’t submit ICD-10 codes, if they are submitting
incorrect ICD-10 codes and if CMS’ Medicare fee-for-service claims processing systems are unable to accept and
correctly process claims. — Michelle M. Stein
Former Hill Staffers: Tax Reform Key To Entitlement Reform
Entitlement reform will need to be part of a larger package that could include a mix of Medicare structural reform,
provider reimbursement cuts and money in savings from the Affordable Care Act, former House Ways and Means health
subcommittee majority staff director Dan Elling said Tuesday (Feb. 10) at the AcademyHealth National Health Policy
Conference. He added that reaching a deal on tax reform may be the key to passing entitlement reform, and also said
there is much interest in moving from fee-for-service to value-based care.
“If they can come up with a tax reform plan that increases revenue through growth, through better economic growth
by reducing some of the inefficiencies in the tax code and try(ing) to get this economy going again, I think there are some
opportunities to help cobble together a big package that will include both tax reform and entitlement reform,” Elling said
at a panel of former Hill staffers.
However, Elling believes all roads are leading toward a new six- to nine-month patch for the Medicare
Sustainable Growth Rate physician payment formula. A six-month fix would put the SGR in the middle of a “perfect
storm” of legislation deadlines, including the Children’s Health Insurance Program reauthorization, a new debt ceiling
agreement, funding bill and reconciliation.
“I think we are headed to a fall collision over spending, over the debt ceiling, over doc fix,” Erik Fatemi, a former
Senate Appropriations health subcommittee clerk under Sen. Tom Harkin (D-IA), agreed at the panel. “I think it will be a
… tumultuous year … at least we have a chance.”
Congress must pass a doc fix bill by the end of March to prevent physician pay from dropping more than 20 percent
on April 1. Elling said committees are diligently working and meeting multiple times a week to try to find a solution.
The toughest hurdle is figuring out how to pay for a permanent SGR replacement, as the cost of freezing pay rates
over the next 10 years is in the neighborhood of $150 billion to $180 billion, according to expert and lawmaker estimates
and the Congressional Budget Office score.
Some Republicans prefer structural reforms or ACA savings to pay for the fix, while Democrats are leaning toward
provider cuts, Elling said, adding that it’s “just a matter of members willing to kind of storm the Hill together.”
Cheryl Jaeger, previously a staffer for former House majority leader Eric Cantor (R-VA), argued that GOP leadership
will make their health care policy decisions based on how they feel they can best represent their constituents. Health care
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
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remains one of the top issues that drive Republican voters to the polls and their opposition to the reform law has not
changed, she said.
Jaeger also predicted that the Senate will hold more votes on bills that would tweak the ACA to make the
opinions of new congressmen known in both chambers, since the Senate has not debated and voted on ACA repeal like
the House did last week.
She added that both chambers need to be prepared with a solution if the U.S. Supreme Court rules against the Obama
administration in King v. Burwell this summer and pulls premium subsidies for qualifying low-income Americans from
the federally facilitated exchange.
But changing the ACA should come through multiple bills unlike the massive health law, she said, adding: “Those
types of policies should not be one bill.”
GOP congressmen are focused on bills intended to provide relief for certain less-popular provisions of the law, such
as changing the definition of a full-time worker by exempting certain veterans from employee counts, allowing employers
to give financial help to workers purchasing on-exchange plans, and more.
Those smaller fixes could more easily get the president’s seal of approval despite his threats to veto any legislation that would fundamentally change his signature achievement, Jaeger said.
History may be the largest indicator of potential avenues to change, Jaeger said. She echoed past speculation that
GOP leaders will try to push ACA fixes through using budget reconciliation.
“Democrats did set precedent with de minimus instructions in their budgets that pave the way for budget reconciliation process to be a process where you can make changes,” she said. “I can see the Republican leadership looking at a
tactic like that to provide them opportunities to respond depending on how the Supreme Court rules.” — Rachel S. Karas
Obama Budget Aims To Increase CMS’ Oversight Of State Exchanges
President Obama’s proposed fiscal 2016 budget would help CMS develop a strategy for overseeing and monitoring
state-based exchanges by bolstering current grant oversight requirements, according to the agency’s budget justification.
The plan comes as several GOP members press HHS on its oversight of the exchanges and on federal actions to recoup
funding that supported failed state-based exchanges.
States will be required to send operations reports to CMS to show that, at a minimum, they are working to “ensure
efficient and non-discriminatory administration, prevent fraud and abuse, streamline eligibility and enrollment, minimize
acquisition expenses, promote financial integrity and public accountability, inform consumer choice, and prohibit
conflicts of interest,” the budget document says.
CMS will be responsible for reviewing the reports and working with state exchanges “as necessary to improve
performance,” including site visits. The agency will also have similar but more limited oversight of partnership exchange
states.
Last week, HHS Secretary Sylvia Burwell told Senate Finance members that HHS has not recovered any funds that
were misspent by states in starting up locally based exchanges. “Our grant-making to the states is the part we have control
over. As part of that, though, a number of the states actually are taking action, both in Oregon as well as in Maryland,
efforts are being made in terms of the follow-up,” she said.
Despite receiving millions in federal dollars, Oregon’s state-based exchange failed to launch in 2014, and the state
ended up reverting to the federal exchange for 2015. Nevada made a similar decision after a troubled roll-out, while
Maryland purchased new technology from Connecticut.
Burwell said during the hearing that the question of what funds the federal government can get back is about
whether things were done during the grant-making process that were not in line with the terms of the grant. The
HHS inspector general is looking into places where that might have happened, Burwell said.
Senate Finance Chair Orrin Hatch (R-UT) last year introduced legislation that would require states with failed
exchanges to repay the federal government. His office did not respond by press time on whether the State Exchange
Accountability Act would be reintroduced this session. — Rachel S. Karas
HRSA Urges Medicaid Rebate In Lieu Of 340B . . . begins on page one
entities and to institute the offer of the discounted price in the future.”
In December, HRSA said several brand drug makers planned to retroactively offer the discounts.
A HRSA official told Inside Health Policy 13 manufacturers are refusing to give the discount while the lawsuit is
pending. IHP previously reported that some manufacturers were likely waiting for the outcome of PhRMA’s lawsuit
against HRSA and could refuse to provide discounts until the suit is decided. A drug lawyer said it’s likely that other
manufacturers will likely continue providing the 340B discounts.
Following is a list of the 13 drug makers refusing to offer the discounts: AuroMedics Pharma, Baxter International,
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Bayer AG, Eisai Co., Eli Lilly and Company, Genentech, GlaxoSmithKline, Ipsen, Novartis International, Pfizer, Roche,
Salix Pharmaceuticals and Virtus Pharmaceuticals.
States can’t collect Medicaid rebates on drugs that are subject to the 340B discounts, which are paid to
hospitals, so HRSA suggested states get the Medicaid rebates in the meantime. A HRSA official said the suggestion
that states get Medicaid rebates on those drugs is a temporary situation.
“As 340B discounts are not being provided on these drugs, there is no risk of 340B duplicate discounts. Therefore,
States may utilize this information to obtain Medicaid rebates for such drugs,” HRSA’s website says.
A spokesperson for Safety Net Hospitals for Pharmaceutical Access said HRSA’s interpretive rule clearly says 340B
providers should get discounts when drugs are used for non-orphan conditions and these companies aren’t complying. But
the 340B hospitals also said it is fully appropriate for HRSA to post the list of those that aren’t following the orphan drug
rule so that states can move forward on collecting Medicaid rebates.
The drug lawyer said states might benefit from the situation.
A Medicaid source said states have had a difficult time determining which drug companies to collect the Medicaid
rebates from, and the list that HRSA posted will likely be helpful.
PhRMA declined to comment. — Michelle M. Stein
Experts Debate ACA Fix ‘Wish Lists’
A panel of health experts from both sides of the political spectrum offered a wide range of recommendations that
they say could help improve the Affordable Care Act, including fixing the glitch that blocks some families from
accessing subsidies, axing the provision that extends small-group plans to employers with 100 workers, and boosting tools so that consumers are able to make better coverage choices. One expert, Jon Kingsdale, the founding
executive director of the Massachusetts Health Connector, suggested scrapping the unpopular individual mandate in
favor of a premium surcharge.
The experts also discussed how the forthcoming state innovation waivers could play a key role in helping to improve
the law. The waivers, which are slated to go into effect in 2017, allow states to request exemptions from certain parts of
the ACA as long as they are able to show that local reforms would provide coverage equal to the law.
State governments can use the aggregate amount of premium tax credits, cost-sharing reductions, and small business
tax credits to pay for their reforms instead of doling them out to residents and businesses. Those federal payments for
alternative paths to coverage can reach billions of dollars depending on the state’s size.
Sabrina Corlette, a senior research fellow and project director at the Georgetown University Center on
Health Insurance Reforms, said their researchers have already seen around half a dozen states introduce legislation that
would start the planning process of applying for innovation waivers, though the analysts found that states that are the
farthest ahead in the process are those that already have strong health care programs. All but one are traditionally progressive and liberal, Corlette said. To complicate matters, if the U.S. Supreme Court rules in favor of the plaintiff in King v.
Burwell in June, eliminating subsidies from the federally facilitated exchange, those 34 states that rely on Healthcare.gov
as their marketplace would lose their funding source for insurance reforms.
Judy Solomon, vice president of health policy at the Center on Budget and Policy Priorities, said that while there are
very clear standards that whatever plans are devised have to be comprehensive and as close to budget-neutral as possible
for the federal government, there is an opportunity to improve back-end eligibility and enrollment functions to lessen
consumers’ worries about payment, tax credits and plan options.
The waivers could also be used to help states that are thinking about eliminating “churning,” or the process in
which millions of people move between the health exchanges and Medicaid as income fluctuates throughout the year,
Solomon said. Insurance churn can be costly for states and insurers, and can lead to coverage gaps or force patients to
switch health plans or providers — so any way to eliminate complexity and keep coverage continuous could have a big
impact, Solomon said.
Solomon also cited the “family glitch” as a piece of the law that needs to be fixed. The glitch blocks family
members of an employee from access to subsidies if the self-only coverage offered by an employer is deemed
affordable, regardless of whether the family coverage is affordable. Advocates have long argued that the policy
should be changed.
Solomon also supports improving information technology and fixing other administrative errors that could
result in many Americans having to pay back tax credits. She noted that if the IT is fixed, the call center would need
fewer staffers. But, now the large numbers are necessary because there are “still a lot of places where people are asking
for more verification of their income and it’s really confusing as to what’s needed,” Solomon said.
“What we really need to do is have some aid, some help, some prompts and some better information available …
subsidies are based on what people say checked against electronic data,” she said, adding that that data based on past tax
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and income information is stale.
Washington and Lee University law professor Timothy Jost added that officials need to think about alternatives that might work better than the ACA, and whether there is a way to fix what currently exists without creating more
problems.
“I think there are a lot of people who look at (the ACA) and say, ‘Eh, it’s not that great a deal,’” and choose to spend
money on other more immediate services like child care, Jost said.
Other panelists said that improving consumer assistance and encouraging more states to take up the Medicaid
expansion are key to growing the number of newly insured Americans under the health reform law.
Kingsdale, now of the Wakely Consulting Group, said his top five priorities fall under the umbrella of
“simplify, simplify, simplify.”
He suggested that changing the tax credit system to one with a few progressively graduated, fixed tax credits could
help the law. He also supports eliminating extra plans that largely confuse customers, using a national IT platform for
exchanges, and changing the IRS’ definition of a household so that it aligns with the definition used for Medicaid and
CHIP.
Kingsdale also said that instead of the individual mandate, which remains unpopular, lawmakers should
consider placing a surcharge on premiums when a customer tries to get coverage after choosing to remain uninsured for
a certain time.
Georgetown University’s Corlette said that she would eliminate the ACA provision that allows the definition of
“small group” plans to include businesses with up to 100 employees instead of 50 starting in 2016.
Most in the room agreed with Corlette that changing small group plans to include more employees is a bad idea in
large part because the medium group plans are not currently posing any problems and are not used to the same regulatory
environment as small group employers.
Joe Antos of the American Enterprise Institute said that the subsidies should be fixed so that consumers can better
understand what they will actually pay for the insurance. He also says that because states are more used to providing
assistance, any additional subsidies for low-income people could be locally administered. Those who are at higher risk —
like the elderly — should receive higher subsidies, he said.
Antos also looks to eliminate ACA mandates and replace the “Cadillac tax” with a capped tax exclusion for
employer-sponsored coverage. He favors creating and funding high-risk pools to help cover the sickest patients, an idea
that others on the panel disagreed with, pointing to research that found such pools are unsustainable. A Commonwealth
Fund report in December found that “insurance works best when risk is evenly spread across a broad population” and that
high-risk pools are expensive for both enrollees and administrators.
As far as the congressional wish list, Antos says he doesn’t support changing the ACA’s definition of a full-time
employee from someone working 30 hours a week to someone working 40 hours a week, because that’s “just playing with
the details.”
But he does hope to see a solution to the King v. Burwell come from Congress. GOP lawmakers have suggested that
should the court rule against the administration, thus eliminating the subsidies, that they would support a short-term fix.
Democrats have said, however, that a GOP Congress that is focused on repeal cannot be relied on to save the
subsidies. — Rachel S. Karas
Ed Groups: Bill Exempting Schools From Employer Mandate Unnecessary
Several education groups tell Inside Health Policy that Indiana Republican Rep. Luke Messer’s bill that would
exempt schools, colleges and universities from the Affordable Care Act’s employer mandate is not needed because most
schools provide the benefits and the IRS has already spoken to the issue.
Messer says the bill, introduced Thursday (Feb. 5), would prevent schools from shrinking hours and wages for
teachers and reducing student services in order to comply with the mandate. The Safeguarding Classrooms Hurt by
ObamaCare’s Obligatory Levies, or SCHOOL Act, would also require the Education secretary to evaluate the bill’s
impact on schools’ ability to meet the educational needs of low-income students and their ability to keep their current
academic opportunities.
But some education associations say the legislation would have little impact on their member institutions, either
because they have long offered health care benefits to their workers, or because of a Treasury Department regulation
issued in February that dictates how colleges should calculate adjunct professors’ and student employees’ hours to
determine if they work more than 30 hours a week.
Treasury and the IRS decided that adjunct instructors should be credited with 1.25 hours of preparation time for each
hour they spend in the classroom, and recognized for any time they spend in office hours or other required meetings. The
IRS also chose to exclude work-study employment from work hour counts, but the administration did not entirely exempt
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student workers from the mandate. Schools were told to provide health coverage to teaching and research assistants who
work more than 30 hours a week. Any employee who falls short of 30 hours would not be required to have an offer of
job-based coverage under the ACA, prompting fears that many schools would cut hours and pay to avoid extra health care
costs.
Those who may be at greater risk include substitute teachers and other part-time employees in public school systems,
some of whom have seen their hours capped under the 30-hour mark and denied insurance coverage.
Last year, Indiana’s Ivy Tech Community College cut hours for some workers in order to avoid the penalties, shortly
after the college’s president testified before Congress on the impacts of the provision. (President Obama visited Ivy Tech
Friday to promote his new proposal to provide free community college tuition to certain students, but did not mention —
or receive questions on — the health care law).
“We shouldn’t be taxing schools to pay for the president’s health care law,” Messer said in a press release Thursday
(Feb. 5). “And, if we care about our kids, we will do something about it. The SCHOOL Act will stop the ObamaCare tax
on school districts, save jobs, and help ensure more money is left in cash-strapped school budgets for teacher development and student learning.”
Barmak Nassirian, director of federal policy analysis at the American Association of State Colleges and Universities,
told Inside Health Policy Friday that the group isn’t particularly focused on the bill because it is unlikely to become law.
Transitioning to the ACA did have a couple of unique complications, particularly for the collegiate sector, he said, but
generally it has worked well. The notion of excluding institutions from the employer mandate is not a useful next step, he
said.
“(T)here were challenges regarding the mandate vis-a-vis adjuncts and student workers,” Nassirian said later Friday
(Feb. 6) in an email. “(T)he issue was resolved without a categorical exclusion of either group. The coverage mandate
certainly applies to these groups if they meet the threshold under the regs. This is obviously an additional cost in those
cases where individuals did not previously receive have insurance benefits, but that (cost) has brought about benefits that
would be problematic to take away now.”
Steven Bloom, federal relations director at the American Council on Education, said the vast majority of higher
education institutions are large employers who already provided health plans to workers. He and David Baime, senior
vice president for government relations and research at the American Association of Community Colleges, agreed that
they are comfortable with the IRS regulations, and Bloom added the SCHOOL bill was not anything his group had
discussed with lawmakers or anything they had asked for.
Bloom said there is a possibility that Treasury will issue more regulatory guidance to help schools manage problematic details of the ACA and federal financial aid. ACE has also endorsed a bill that would exempt students who work fulltime on campus from the employer mandate.
Nassirian added that he is curious about the federal costs of retracting the mandate, since the Congressional Budget
Office scored ACA as a net federal cost saver. Exempting various sectors would cost money and would presumably
trigger mandatory paygo offsets, he said.
It is unclear if CBO has scored Messer’s bill. CBO said that legislation that would exempt veterans with other
coverage from counting toward the mandate would cost about $858 million, and scored legislation that would alter
the workweek threshold from 30 hours to 40 hours as costing about $53.2 billion over 10 years. CBO most recently
estimated that the employer mandate would bring in $164 billion from 2015 through 2025, so a repeal would be
extremely costly. — Rachel S. Karas
Committees Grill Burwell, Lew On ACA Subsidies, Implementation
HHS Secretary Sylvia Burwell and Treasury Secretary Jack Lew this week again dodged questions from congressional leaders on the Obama administration’s contingency plan for the possibility the Supreme Court will rule against
allowing health insurance subsidies on the federal exchange. The officials told the Senate Finance and House Ways and
Means committees that they continue to focus on implementing the law in its current form, while declining to give a yesor-no answer to frustrated lawmakers who asked repeatedly if the administration would ask Congress for a legislative fix
or try to enact an administrative solution.
“The position that we hold … is the correct position and we believe that in the spirit of the law and the intent of
Congress and the letter of the law,” Burwell told Senate Finance Chairman Orrin Hatch (R-UT) at a hearing on HHS’
fiscal 2016 budget proposal Wednesday (Feb. 4). The secretary has used that line for months now, adding that she is
focused on finishing the 2015 open enrollment period in less than two weeks.
“We are now at a stage where even oral arguments have not been made,” Burwell later told Sen. John Cornyn (RTX), referring to the King v. Burwell case. “With regard to things that will improve the act, we’re open.” The high court
will begin oral arguments March 4.
But that response didn’t satisfy Cornyn, who told Burwell she was contemptuous of Congress’ oversight responsibilities. When asked whether HHS has taken steps to inform all current federal exchange enrollees of the effects a ruling in
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
13
favor of King would have on their health coverage, Burwell said the department has not.
“We believe that we are implementing the law as it is intended to be implemented and as we do that, that is what we
are talking about with the consumers that are entering into the marketplace,” Burwell said.
She also told the committee that HHS has not recovered any funds that were misspent by states in starting up
locally based exchanges. “Our grant-making to the states is the part we have control over. As part of that, though, a
number of the states actually are taking action, both in Oregon as well as in Maryland, efforts are being made in
terms of the follow-up.”
Burwell added that the question of what funds the federal government can get back is about whether things
were done during the grant-making process that were not in line with the terms of the grant. The HHS inspector
general is looking into places where that might have happened, Burwell said.
Ohio Republican Sen. Rob Portman expressed concerns that HHS is insincere about addressing ballooning
federal deficits and debt driven by health care costs, particularly through entitlement programs like Medicare and
Medicaid.
“Congress is hesitant to take on some of these issues because they’re controversial, politically difficult,” Portman
said. “We’re still seeing under your budget a doubling of health care costs, driven by a lot of things but one is Obamacare
… I hope we’ll get serious about addressing them.”
Burwell attributed the growth to the baby boomer generation, which is putting more Americans into the Medicare
system, and reminded Portman that health care cost growth has been nearly flat in recent years.
Senate Finance questioned IRS Commissioner John Koskinen at a budget hearing Tuesday (Feb. 3), the same day
that House Ways and Means pressed Lew on the same contingency planning question.
Though Koskinen did not offer thoughts on post-Supreme Court contingency plans as Hatch requested in his opening
remarks, the commissioner told the committee that there were significant challenges and extra work to get ready for ACArelated tax changes.
Burwell said the following day that in working with the IRS, officials “have a sense” that over three-quarters of
people will just check a box on their tax returns because they did not enroll in a new health plan through the exchanges.
She told Wyden that because this is the first year that exchange subsidies have affected tax season, the administration
doesn’t know how many people might need to pay more in taxes or expect a larger refund because they received too many
or too few tax credits last enrollment period.
When appearing before House Ways and Means, Lew said eliminating federal health insurance subsidies would
be a serious disruption to health care markets. When asked about a back-up plan if Healthcare.gov subsidies and, in
effect, the individual mandate are gutted, Lew did not directly answer the question but said, “We obviously will
look at what proposals are made (by Congress and the administration) but I’m not going to prejudge what the court
does.”
Rep. Charles Boustany (R-LA) later questioned Lew on a “draconian” part of the ACA that restricts employers from
giving their workers financial help to purchase coverage on the individual market. Boustany plans to re-introduce
legislation shortly that would allow small employers to provide their workers with pre-tax health reimbursement arrangement funds that could be used for premiums.
Lew responded that Treasury is working hard to make sure small businesses can take advantage of the ACA’s
benefits and for workers to participate, but agreed that what Boustany described did not further that goal.
“The objective of the Affordable Care Act is to make sure that affordable health care is available to all and I believe
that the provisions that you are referring to are not consistent with that,” Lew said. “I would be happy to follow up with
you.”
Senate Finance plans to question Lew at a third budget hearing Thursday (Feb. 5). — Rachel S. Karas
Nursing Homes Fear Star Ratings Adjustment . . . begins on page one
of star ratings.
Greg Crist, spokesperson for the American Health Care Association, said changing scores overnight would
confuse the very consumers that star ratings are supposed to help. Crist also said nursing homes have improved
quality of care. The National Partnership to Improve Dementia Care in Nursing Homes, which is a public-private coalition under the direction of CMS, recently reported that long-stay nursing home residents are receiving fewer
antipsychotics over the past three years. In 2011, 23.9 percent of long-stay nursing home residents were receiving
antipsychotic medication, and by 2014 that number dropped to 19.2 percent. Also, the Medicare Payment Advisory
Commission last year reported a slight drop in rehospitalizations from nursing homes.
“Rebasing 5-star would be so confusing for families and residents,” Crist said. “Moving the goal posts on these
important quality indicators helps no one. And this announcement would come at a terrible time — signaling to the public
that quality is on the decline, when in fact, it has improved in a meaningful way.”—John Wilkerson
14
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
CMS: Exchanges Cost Federal Government $6.2B Since Implementation
The federal government has spent $4.1 billion to implement health insurance exchanges created under the Affordable
Care Act from fiscal 2010 through 2014, and is expected to spend a total $6.2 billion through fiscal 2015, according to an
Inside Health Policy analysis of numbers released Monday (Feb. 2) by the CMS in its fiscal 2016 budget justification.
That total is expected to rise to $8.4 billion if President Obama’s fiscal 2016 request is fulfilled.
The overall number includes $71 million in obligations from fiscal 2010 and 2011, before CMS took over responsibility for oversight of the health insurance exchanges. Fiscal years 2010 through 2014 include obligations as of Sept. 30,
2014, and the fiscal 2015 spending plan estimate is still under development and subject to change.
Money for the exchanges totaled nearly 230 times as much in fiscal 2015 as it did in fiscal 2010. However, it has
slowed in recent years, growing from around $9 million in fiscal 2010 to more than $2 billion in fiscal 2014 before
remaining stable around $2 billion from fiscal 2014 to 2016. Data show a $157 million increase over those years.
Marketplace information technology and consumer information and outreach activities historically cost the most at
$846.3 million and $741.8 million in fiscal 2015, respectively. IT was the only budgetary area to list a decrease in the
fiscal 2016 request, dropping nearly $200 million to $656.8 million.
Marketplace quality review showed the least funding — excepting the category for various other expenses — at
$14.7 million in fiscal 2015. That marks a nearly $3 million reduction from the previous fiscal year.
CMS was asked in the fiscal 2015 Labor/HHS appropriations agreement to provide cost information since the ACA
was passed. The agency was asked to provide data on federal payroll and other administrative costs; marketplace IT; nonIT programs including health plan benefit and rate review, marketplace oversight, payment and financial management,
eligibility and enrollment; consumer information and outreach, including the call center, navigator grants, and consumer
education and outreach; marketplace quality review; the Small Business Health Options Program and employer activities;
and other marketplace work.
The CMS budget justification also showed that 660 full-time equivalent positions were funded in fiscal 2015. The
administration hopes to grow that to 761 in fiscal 2016.
Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities, said Wednesday (Feb.
4) that she can’t judge whether the numbers are high or low, but that the areas of most spending aren’t likely to change.
“Where I think we could see some reductions over time is in the marketplace-related IT,” Solomon said in an email.
“Right now as I understand it there is still significant and extremely important work being done to improve the system
both at the front end (for consumers applying, etc.) and at the back end (connecting and paying insurers, etc.) Over time
these costs should go down.”
She added that improving the system could eventually lower costs for the call center, eligibility contractor and others
who serve a large number of people. “This year has definitely been smoother but there is still work to do to get to the
seamless, streamlined system envisioned in the ACA,” Solomon wrote.
CMS is aware that it can budget and contract for services more efficiently, following an HHS Office of
Inspector General report criticizing the agency for failing to follow standard contracting processes. The changes made
from that report were reflected in the budget justification as well.
CMS said it has been working closely with the inspector general on a study of the agency’s FFM contract
planning and procurement efforts. “CMS has moved aggressively to implement extensive contracting reforms, bring
in new leadership to oversee Marketplace operations, hire a systems integrator, and move to a new type of Health
Insurance Exchange contract that rewards performance and reduces risk to the federal government,” it wrote. “CMS
is working to ensure effective management of the Marketplace with a focus on clear lines of authority, prioritization
of requirements and deliverables, and metric-driven quality reviews for its Healthcare.gov contracts and for contracts across the agency.”
The justification said a task force was appointed to develop a program-wide view of the cost of the Marketplace in
order to strategically manage Marketplace acquisitions. CMS is similarly enforcing a strict governance structure for
contracts and is training a stronger acquisition workforce.
The agency wrote in its budget justification that it continues to pursue strategies to identify and prevent improper
payments.
A new HHS initiative seeks to create a partnership with the private sector and other government agencies to
curb fraud across the health care system, bringing together the HHS inspector general, Justice Department, FBI,
insurers and other health care and anti-fraud groups in the Healthcare Fraud Prevention Partnership, which aims to
“exchange data and information between partners to help improve capabilities to detect and combat fraud, waste
and abuse.” Those data and information exchanges would take the form of targeted data exchange studies, according
to the justification.
After being criticized in the appropriations agreement for failing to communicate with staff regarding certain policy
and other announcements related to the ACA, the CMS justification also assures Congress that “HHS is happy to work
with the Committees to provide notification on issues of importance.” — Rachel S. Karas
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
15
HHS: 87 Percent Enrolled Through Healthcare.gov Eligible For Tax Credits
HHS issued a report Monday (Feb. 9) finding that 6.5 million people, or 87 percent, who signed up for coverage
through Healthcare.gov as of Jan. 30 were eligible for the tax credits. The report also found that that the average tax
credit for those enrolled through the Healthcare.gov platform equaled about $268 per month and reduced the cost of
premiums by an average 72 percent.
The average cost of premiums in the 37 states using Healthcare.gov was $374, but average costs after tax credits
were applied equaled $105.
Additionally, the report found that eight out of 10 individuals had access to a plan with a premium of $100 or less
after the credits were applied.
Mississippi had the largest chuck of residents eligible for subsidies — 94 percent — followed by Florida (93
percent), North Carolina (92 percent) and Wyoming (91 percent), while New Hampshire had the lowest, with 70 percent
of residents eligible for credits.
“With just six days left before the February 15 deadline and the end of this year’s Open Enrollment, millions of
Americans already are counting on the financial assistance the Affordable Care Act provides to put quality, affordable
health insurance coverage within reach,” HHS Secretary Sylvia Burwell said.
The report was based on plan selections that took place from Nov. 15 through Jan. 30. — Amy Lotven
CMS Requests Corrective Action Plan From Aetna . . . begins on page one
according to a transcript from Seeking Alpha.
About 400,000 enrollees may have been affected by inaccurate pharmacy network information posted on Aetna’s
website and Medicare Plan Finder, the National Community Pharmacists Association notes. The information was not
corrected until after Medicare’s annual open enrollment closed. CMS previously told Inside Health Policy it would
require insurers to notify pharmacies of the situation as part of a mediation plan and a Special Enrollment Period to be
offered on a case-by-case basis if beneficiaries call 1-800-Medicare. CMS also said that Aetna has temporarily expanded
its pharmacy networks at least through the end of this month.
NCPA called the situation a “bait-and-switch” on beneficiaries.
CMS late last month (Jan. 28) asked the insurer to implement a corrective action plan “in response to its failure
to comply with the Part D program requirement that Part D sponsors permit the participation in their plan networks of any
pharmacy that meets the plan’s standard terms and conditions for participation.”
The agency currently requires plans to invite and allow any pharmacy willing to participate in an insurer’s standard
pharmacy network to do so. The agency also considered opening up preferred pharmacy networks to any pharmacy
willing to agree to provide comparable discounts in a controversial proposed rule, but later pulled back.
CMS said that when making its 2015 pharmacy network, Aetna didn’t agree to include all pharmacies in its standard
network that were willing to accept the insurer’s terms and conditions.
The corrective action plan needs to include at least a set of standard network pharmacy terms and conditions for all
of Aetna’s 2015 plans, which should let pharmacies know which of Aetna’s plans those terms conditions apply to. It
should also contain language that obligates Aetna to include pharmacies in the plans they select. Aetna should make sure
its 2016 pharmacy contracting plan complies with the any willing pharmacy requirement, as well, CMS says.
“CMS will continue to monitor Aetna’s performance and will consider the CAP closed when it is demonstrated that
the organization has come into compliance with the identified program requirement,” the agency says. “Should Aetna fail
to come into compliance in a timely manner, CMS may consider taking enforcement actions in the form of the imposition
of intermediate sanctions (e.g., the suspension of marketing and enrollment activities) or civil money penalties or the
issuance of a contract termination notice.”
NCPA says the CAP is an important step, but CMS should go further by issuing new guidance to all Part D
plans to prevent a repeat of this problem in 2016. NCPA has previously called for a hearing around Aetna’s 2015 pharmacy issues.
NCPA is recommending that CMS use guidance or regulation to make sure that the information on Medicare
Plan Finder is accurate at least 15 days before open enrollment begins, and that pharmacies are notified if they are
out-of-network for the upcoming year. Plans should also be required to document that they are complying with
CMS’ any willing pharmacy provision, and there should be a specific date by which plans need to offer pharmacies
their standard terms and conditions, NCPA says. NCPA also asks that CMS ensure the terminology describing
pharmacy networks is consistent across plans, as it says the “perplexing naming convention tactics” add to pharmacy and beneficiary confusion.
Bertolini said on the investor call that he expects the issues with Aetna’s 2015 pharmacy networks will have a
“marginal impact on our star ratings overall” and the impact financially is manageable. — Michelle M. Stein
16
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
HHS Preps For Surge, Will Allow Those ‘In Line’ By Feb. 15 To Enroll
HHS officials on Wednesday (Feb. 4) affirmed that Healthcare.gov will once again allow consumers that are “in line”
to purchase coverage by the Feb. 15 deadline to complete the process after that date, and revealed that there are now 9.9
million consumers signed up for coverage via the state or federal exchanges. Officials said they are laser-focused on the
next 11 days as they prepare for the expected surge prior to the deadline, and note that by Monday the federal call center
will be fully staffed with 14,000 representatives trained to answer questions related to enrollment and taxes.
In a call with reporters — and earlier in a Senate Finance hearing — HHS Secretary Sylvia Burwell reported that 7.5
million people have selected plans through Healthcare.gov, and at least another 2.4 million have chosen a plan through a
state-based exchange. HHS also for the first time put out enrollment figures for Metropolitan Statistical Areas (MSAs) in
which at least one county uses the federal exchange.
Miami tops the list with more than 637,000 enrollees, followed by Atlanta ( 297,000), Dallas (277,000), Houston
(257,000) and Chicago (244,00).
There are two things that HHS is trying to impress upon Americans right now, CMS Deputy Administrator Andy
Slavitt said. The first is that the Feb. 15 deadline will be the last chance to enroll, and the second is that there are tax
implications for those who can afford to enroll yet choose not to.
Slavitt also said that about 99 percent of the 1095-A tax forms have been sent to consumers either from
Healthcare.gov or from state-based exchanges.
Officials said that there have been increased questions to the call center regarding tax implications but did not
provide specifics on the types of questions received. Officials have previously said that Americans who have questions
about their 1095-As, including potential errors, should bring their questions to the attention of the call center.
HHS staff also were unable to answer a question on whether a person in a non-Medicaid expansion state who had
estimated their income would be at the threshold to receive a tax credit, yet whose actual income came in lower than 100
percent of the federal poverty level, would still be required to pay back the credits. A spokesperson suggested that IRS
had issued guidance on the issue, but the IRS did not respond to a query by press time.
Officials also warned that the call center wait time is a few minutes now, but that is bound to increase along with demand in
the coming days. There has already been a ramp up in calls that could take some pressure off of the deadline, but officials are
still expecting a rush. Slavitt said that the site was able to handle 125,000 simultaneous users in December and can still
handle that — and more. “We have the teams and the infrastructure prepared for the surge,” he said. — Amy Lotven
Families USA: HHS Loss In King Would Create ‘Chaos’
Families USA Executive Director Ron Pollack said Wednesday (Feb. 4) that a GOP Congress still “hellbent” on
repealing the ACA could not be expected to quickly fix a Supreme Court decision that subsidies aren’t available through
the federal exchange, so the likely result of such a ruling would be utter chaos with millions of people returning to the
ranks of the uninsured. Pollack made the remarks during a conference call with several officials and stakeholders representing states using the federally facilitated marketplace, including Virginia’s HHS secretary, who said the state is looking
to the federal government for guidance on post-King scenarios, and a Missouri advocate who hoped Congress would
intervene if the administration loses the case.
Virginia HHS Secretary Bill Hazel said state officials want to know whether the state could rent federal
technology and the governor could act unilaterally to set up a state exchange. Those are the big questions we’re
wrestling with right now, he said.
How Virginia reacts to a potential King ruling against the administration also could depend on the nature of the
ruling. For example, he asked: Would the court rule that the credits must stop flowing immediately, or would there be a
chance to wean away from the subsidies?
Assuming the “worst” and that the subsides would stop immediately, the question becomes how quickly would the
states be able to get something up and running that would qualify as a state-based exchange, so Virginia is working with
the federal government to get guidance, he said.
Another big question is what type of technology would be available going into the next open enrollment
period. It seems unwise for states to take on the task of building something that already exists, he says. So, state officials
would like to know if they would have access to the federal technology on a rental basis. We also want to know who has
the authority to create the exchange, and if the governor would be able to move absent action from the legislature, he
said.
Hazel also said that the reaction to a King decision “is not strictly a party line issue.” There are GOP governors that
expanded Medicaid, and it seems unlikely that those officials who went out of their way to expand coverage would just
let it disappear, he said. Some governors will be taking a practical look at what can be done, he said.
In Virginia, Gov. Terry McAuliffe (D) is interested in seeing as many residents covered as possible, and so we will do
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
17
what we can, he said. Hazel noted that the assembly is in session now, and members have a question on a state-based
exchange before them, but his guess is that it is unlikely that lawmakers will want to “take a shot” at it because it is an
election year. However, if the court rules in June after the primaries are over, there may be a different answer, Hazel said.
Following Hazel, Ryan Barker of the Missouri Foundation for Health questioned if there would be a congressional
response since the ruling could impact millions of Americans. Stakeholders are wondering what the administration could
do, but haven’t heard much and “it’s hard to speculate,” Barker said. Considering Missouri politics, it’s very doubtful that
there would be action to create a state-based exchange, he said, noting that is “very disconcerting” since about 88 percent
of enrollees in the state are receiving subsidies.
Pollack said he thinks anyone who believes that there is going to be an effective, quick response from Congress
is chasing “fool’s gold.” Just looking at Tuesday’s repeal vote shows that this is a Congress that still seems “hellbent” on
repealing the ACA and cannot be relied upon to fix it. If the Supreme Court rules that the subsidies are not allowable,
Pollack says, “I think we’re going to see chaos and millions join the ranks of the uninsured.”
The administration has consistently said that it has confidence the court will rule in its favor, and rather than discuss
contingencies officials have been focusing on getting as many people enrolled by the Feb. 15 deadline. — Amy Lotven
Home Health Complains About Face-To-Face Forms . . . begins on page one
said the requirement has a huge financial impact on home health providers. CMS noted that inadequate documentation
supporting the face-to-face requirement was responsible for nearly 90 percent of the payment errors they reviewed. Smith
said home health agencies in the Northeast were hit particularly hard, as Medicare administrative contractors there were
more aggressive about issuing payment denials based on doctors’ narratives. A VNAA survey found different agencies in
that region were being denied claims 75 percent to 100 percent of the time.
Based on complaints from home health agencies, HHS changed the requirements at the first of the year, instead
saying that MACs could review doctors’ records to determine whether patients need home care.
That change did not deal with the three years worth of claim denials. Although appeals worked through the administrative law system have largely been overturned, Smith said there is a two-year backlog in the system.
Smith said in many ways the new requirements are more confusing, with no training provided to doctors and with
home health agencies having little control over how doctors compile their records.
“I think this might be worse actually,” Smith said. “There’s complete confusion over what physicians need to put in
their records and how home health agencies would monitor this.”
Smith said VNAA sent a letter in November 2014 asking HHS to make a standardized form, and the agency
recently answered that call, giving groups until the end of March to submit feedback. Smith said the agency
repeatedly opposed the idea of a form, so she was excited until she got a chance to look it over.
“Unfortunately, the form isn’t workable,” Smith said, mainly because it’s five pages, voluntary and still requires a
doctor narrative, albeit a short one. She hopes CMS creates a shorter, mandatory form that only requires doctors check off
boxes.
“We want a mandatory, streamlined form with significant education of home health agencies, doctors, and MACs,”
she said.
Bill Dombi, vice president for law for the National Association of Homecare and Hospice, said his members share
the same concerns.
“So far our membership feels it needs to be improved from top to bottom, starting with the length,” he said, adding
they’d also like guidance on how much they can help doctors complete the form, beyond just writing in the patient’s
name.
He is also concerned about the narrative portions that accompany the check boxes.
“Given the years of difficulty with the narrative, why would they make the form a narrative?” he said.
Dombi said they will submit comments on the form and participate in a Feb. 11 call the agency scheduled.
Both groups are still trying to get their members paid for the numerous claim denials, although they are taking
different approaches.
VNAA is primarily working with Congress, hoping they can force CMS to review the claim denials from 2011-2014.
“We want for CMS to have a process for settling or processing all the payment errors for that time period,” she said.
Dombi is leading a lawsuit against HHS, and the agency has until April to submit their first brief to the U.S. District
Court for the District of Columbia.
“We’re also talking to CMS about a middle ground settlement. I can’t say we’ve made a lot of progress, but I can’t
say we’ve made no progress in that dialogue,” he said.
Dombi said he would like to come up with a process for reviewing the denied claims, using a standard that would be
“more reasonable than a narrative.”
He said there are $250 to $400 million in denied claims that are still awaiting review that could also be decided
based on the new standards. —Rebecca Beitsch
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INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
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Excerpts of Inside Health Policy Blogs
CMS Surveying Issuers On QHP Application
Process
CMS would like to learn more about issuers’ experience
with the 2015 Qualified Health Plan (QHP) application
process, and is conducting an anonymous online survey that
will be used to inform improvements in future years, the
agency says in its most recent Issuer Insights newsletter.
Plans are not required to take the survey, but those who
choose to do so must complete it by Friday (Feb. 13).
The survey asks plans to offer feedback on various
pieces of the application process, including overall satisfaction, usefulness of resources and ways to improve future
application cycles.
CMS proposed setting the next QHP application cycle
from March 16 through April 15 in its draft letter to issuers
seeking to participate in the FFM. However, issuers say the
proposed window does not provide enough time to adequately develop rates and design products, and want the
dates pushed back. America’s Health Insurance Plans (AHIP)
says the submission window should be May 1 through June 1,
while the Blue Cross Blue Shield Association says plans
should be able to submit applications at least through May
15. The final letter to issuers has not yet been released. —
Amy Lotven
NCPA Praises, PBMs Blast Bill Opening Some
Preferred Pharmacy Networks
Community pharmacists again praised legislation by
Reps. Morgan Griffith (R-VA) and Peter Welch (D-VT) to
open preferred pharmacy networks to any pharmacy in a
medically underserved area willing to provide the necessary
discounts while pharmacy benefit managers slammed the bill
for undermining plans that use these networks.
Griffith and Welch re-introduced the Ensuring Seniors
Access to Local Pharmacies Act (H.R. 793) Monday (Feb. 9).
The bill says that any pharmacy in a medically underserved
area willing to accept a Part D plan’s preferred pharmacy
network terms and conditions — like pricing — should be
allowed to join.
Pharmaceutical Care Management Association, which
represents PBMs, says that a study from the Moran Company
indicates about 95 percent of all Part D enrollees live in
counties meeting at least one of the underserved area criteria
in the legislation, so the bill would not really be limited in
scope. The same study, which looked at a previous version of
the bill introduced last year, alleged the measure would cost
$21 billion over 10 years, though the National Community
Pharmacists Association points to an analysis by David
Eisenstadt that says last year’s bill could increase competition
and save money.
“Currently, many Medicare beneficiaries are effectively
told by insurance middlemen (pharmacy benefit managers or
PBMs) which pharmacy to use based on exclusionary
arrangements between PBMs and, for the most part, Big Box
pharmacies,” NCPA says in a statement.
But PCMA President and CEO Mark Merritt says plans
with these preferred pharmacy networks “have become the
very foundation of Medicare Part D” and it doesn’t make
sense to put them at risk by opening up the preferred pharmacy networks.—Michelle M. Stein
Survey Found Many Interested In Enrollment
Unaware Of Deadline
A recent analysis of data pulled from the December 2014
Health Reform Monitoring Survey (HRMS) found that while
there is broad awareness of the exchanges among the
uninsured, many Americans continue to be confused over the
accompanying deadlines. The analysis showed that 70 percent
of uninsured adults were aware of the exchanges and 35
percent were interested in enrolling in coverage, however
only 12 percent of those individuals knew they must do so in
February
Many uninsured adults report that they are aware of the
marketplaces and are planning to enroll, but unfortunately
many do not seem to know that the deadline is fast approaching,” said Kathy Hempstead of Robert Wood Johnson
Foundation. “With the end of open enrollment coming on
February 15th, the time to act is now,” she says.
Frederic Blavin, one of the authors of the analysis, says
that because the survey was conducted in December it is fair
to say that the share of individuals who do not know of the
Feb. 15 deadline will decline as the deadline gets closer and
more outreach is done. He also said while it would be
interesting to be able to measure whether that population’s
awareness of the deadline has increased since December, the
next survey will not be done until March, or after open
enrollment ends, so that research is not in the cards.
At this point, however, the study provides a lesson for
future enrollment, he said. Namely, that there is still widespread confusion and so it is crucial to continue to offer
targeted outreach and education to that population.
He also noted that awareness is likely to increase as the
exchanges become more and more entrenched and as more
people become enrolled. Having a set open enrollment date
will also help, he said.
CMS has proposed setting the permanent open enrollment period from Oct. 1 to Dec. 15. Stakeholders generally
support a uniform open enrollment date, but some have
argued that it would be better to align the sign-up period with
the tax-filing season since health care and taxes are now
interrelated. The final rule that includes that proposal — the
HHS Notice of Benefit Payment Parameters for 2016 — is
currently under review at the Office of Management Budget
and is expected out shortly. —Amy Lotven
Wyoming Rejects Medicaid Expansion
The Wyoming Senate rejected a bill that would have
expanded the state’s Medicaid program under the Affordable
Care Act. The Republican-controlled senate voted down the
bill in a 19-11 vote, and a similar bill in the state house was
pulled out of committee.
Republican Gov. Matt Mead was initially against
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
19
expanding Medicaid but later changed his mind, saying the
funds could be used to offset hospital losses for treating
uninsured patients.
“The fact is today we are left with working poor without
coverage. We are left with Wyoming taxpayer dollars funding
health care of other states. We are left without a solution for
$200 million of uncompensated care that our hospitals must
absorb and pass on to the rest of our citizens, and we are
rejecting $120 million dollars meant for Wyoming,” Mead
said in a statement.
Mead said Wyoming fought against the ACA and lost,
and he said he was supportive of the SHARE plan the state’s
Department of Health has proposed. —Rebecca Beitsch
Arkansas Renews Private Option Medicaid Plan
The Arkansas state legislature has voted to continue the
state’s unique Medicaid expansion plan, a Republican-led
first-of-a-kind effort to secure a waiver from CMS to use
Medicaid-expansion funds to defray the cost of private health
coverage bought in the state’s exchange.
Arkansas was the first to use a private option, and
Republican governors in some other states have followed suit
or are considering doing so.
The measure has been controversial in Arkansas, where
many Republicans had campaigned on working against
implementation of the Affordable Care Act. While it has been
approved for another year, the state will now also form a task
force to look for alternative ways to cover the 213,000 people
now in the program.
The state legislature will review the plan on an annual
basis, and its passage in the future may be less likely as the
state approaches the 2017 deadline that will require it cover 5
percent of the cost of the program.
That state contribution jumps to 10 percent by 2020,
when the state would be on the hook for $222 million,
according to the Associated Press.—Rebecca Beitsch
CMS Approves Coverage Of Lung Cancer
Screening
CMS approved Thursday (Feb. 5) Medicare coverage of
lung cancer screening with low-dose computed tomography
for current and former heavy smokers, which brings Medicare
coverage of the technology in line with private insurance. A
large bipartisan group of lawmakers pressured CMS to cover
the screening, also recommended by the U.S. Preventive Task
Force, which requires private insurers to cover the exams
starting this year. CMS’ coverage decision takes effect
immediately.
Other than increasing the upper eligibility age limit from
75 to 77, the final decision is the same as the policy CMS
proposed in November. The policy covers people aged 55 to
77 who have smoked a pack a day for at least 30 years and
who either still smoke or quit less than 15 years ago.
Although the U.S. Preventive Task Force recommended
covering the screening, Medicare coverage advisers did not
support paying for the scans.
Cancer patient advocates and professional societies
praised the decision, including the American Cancer Society,
American College of Radiology, American Thoracic Society,
and American College of Chest Physicians.
— John Wilkerson
20
Senate Health Committee Launches Initiative On
Health Sector Cybersecurity
The Senate Health, Education, Labor and Pensions
Committee has launched a bipartisan initiative to identify
steps Congress can take to help address cyber threats in the
health sector.
Work on the initiative kicked off in January, but it was
first publicly announced on Friday in the aftermath of a
massive breach at the Anthem health insurance company,
which sparked calls for action in Congress, the administration, and industry.
Chairman Lamar Alexander (R-TN) and ranking member
Patty Murray (D-WA) announced that the committee would
look into security of health IT and preparedness for cyber
threats.
“Patients, hospitals, insurers — and all Americans who
value the safety and privacy of their sensitive personal
information — have a right to be alarmed by reports that their
electronic records might be vulnerable to a cyber attack,”
Alexander said in a statement. “I look forward to working
with Sen. Murray as we take a serious look at how these types
of attacks may be prevented and examine whether Congress
can help.”
The goal, according to the committee’s announcement, is
to determine whether congressional action can ensure safety
of health IT, including digital health records, healthcare
networks, insurance records, and medical devices.
Meetings about the initiative will include government
oversight agencies, cybersecurity professionals, health
industry leaders, and others, according to the announcement.
— InsideCyberSecurity
FDA Reopens Comment Period For GDUFA
Implementation
Following a Sept. 17 public meeting on policy developments for the Generic Drug User Fee Amendments, FDA
reopened the docket to gather more industry feedback on five
draft guidance documents. FDA reopened the docket at
stakeholders’ request.
In a statement, FDA expressed it would take into account
all the comments it received from the September meeting and
the new comments it receives to develop the FY 2015
GDUFA priorities.
The agency had earlier asked for feedback on the 180day exclusivity and the prioritization of abbreviated new drug
applications as “first generic” for expedited review as well as
five draft guidance documents. FDA closed the comment
period for the ANDA prioritization criteria but is still
soliciting comments for the five draft guidance documents as
well as issues arising from the 180-day exclusivity provision.
FDA is giving stakeholders 30 days to comment.
—David Hood
Report Finds Health Sector Most Vulnerable To
Cyber Attacks
Physician-owned medical malpractice insurer The
Doctors Company has issued a report finding the health
sector faces significantly more cyber attacks than other
industries.
The report, released Thursday, comes on the heels of a
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
major data breach at the Anthem health insurance company.
The report states that healthcare entities are most
vulnerable to cyber attacks, claiming 51 percent of total data
breaches occur to healthcare entities, outpacing corporate
entities that receive 23 percent of total breaches.
The report recommends that healthcare entities identify
areas of cyber vulnerability, encrypt all digital personal health
information, and train staff on protecting health data.
In addition, it said healthcare entities should audit and
test their security policies regularly and insure their businesses in order to comply with healthcare requirements for
security and privacy established under the Health Insurance
Portability and Accountability Act.
The report states that $25 million in HIPAA fines have
been leveled on covered entities to date over insecure
personal health information, with the largest individual fine
reaching $4.8 million. — InsideCyberSecurity
Tennessee Medicaid Plan Dies In State Legislature
Tennessee GOP Gov. Bill Haslam’s alternative Medicaid
expansion plan failed to move out of a state senate committee
on Wednesday despite a strong push from the governor this
week. Haslam had also failed to gain enough votes in the
state assembly to move the plan, a source says.
The governor’s Medicaid expansion approach,
announced Dec. 15, would have let residents enrolled in
the program choose from two options: the Volunteer Plan,
which would provide vouchers to help residents afford
employer-sponsored coverage, including premiums and costsharing; and the Healthy Incentives Tennessee plan, which
would allow residents to enroll in the state’s Medicaid
program (TennCare) but also create HIT accounts — modeled
after Health Reimbursement Accounts (HRAs), that could be
used to cover other out-of-pocket costs.
The plan would have also required the state’s hospitals to
support the program once the federal contribution dipped
from 100 percent to 90 percent of the costs — an idea that the
Tennessee Hospital Association (THA) endorsed.
“For the past two years, THA’s number one priority has
been securing Medicaid expansion in our state and today
marks the beginning of this goal becoming a reality,” THA
President Craig Becker said at the time. “I also believe Insure
Tennessee helps provide a solution to the financial challenges
hospitals across Tennessee have faced for the last several
years as a result of extreme cuts in healthcare reimbursement,” Becker said.
Becker told Inside Health Policy in December that it was
too early to know for certain how much state hospitals would
need to contribute to the expansion, but estimates ranged
from $30 million in 2017 to $200 million in 2022. Hospitals
believe that a 9-to-1 return on investment is a good deal, Becker
said at the time of the agreement. He also said that the hospitals’
share of the funding would be funneled to the state through an
assessment on providers. There is already a 4.5 percent provider
tax, and that amount would be increased to the appropriate
levels to cover the needed funds, he said. —Amy Lotven
Dem Lobbyist Notes GOP’s Bill Borrows Key Parts Of ACA
As key Democrats and patient advocates blast the GOP’s Obamacare alternative, a Democratic lobbyist and former
Senate staffer who helped craft the health law says the Republican plan is so much like the ACA that Congress’ time
would be better spent figuring out substantive ways to improve the system rather than repealing and replacing it with
similar policies. The sponsors of the GOP bill introduced Wednesday (Feb. 4) also signaled ideas from the measure could
be adapted to provide a path forward should the Supreme Court rule that subsidies aren’t available in federally facilitated
exchanges.
The GOP alternative includes many of the concepts included in the ACA but attempts to get people insured without a
direct mandate. The bill would provide tax credits to help Americans purchase health insurance coverage, require issuers
to guarantee coverage renewal, and allow states to place residents not buying coverage into a “default” state plan while
also granting people the option of switching plans or going without insurance. The plan would also cap the tax exclusion
for health benefits at $12,000 for an individual plan, require more price transparency and promote other long-standing
GOP ideals such as purchasing coverage across state lines and supporting more health reimbursement arrangements.
Billy Wynne, a Democratic lobbyist with Thorn Run Partners who worked for former Senate Finance Chair Max
Baucus (D-MT) when the law was drafted, says he is very skeptical that the combination of policies would be able to
adequately replace the effect of the individual mandate, but adds that if there is indeed a way to achieve the same result
then policymakers might go along with it.
“No one actually likes the individual mandate for its own sake; it was deemed necessary— after extensive inquiry —
to stabilize markets as the new consumer protections were introduced,” Wynne says. “If there is a creative way to achieve
the same result as the individual mandate, including robust enrollment, I don’t see why any policymaker would oppose that.”
We really need a Congressional Budget Office score or some other independent analysis of the cost and
coverage effects to have a sensible view of it,” he adds.
Wynne also notes that is unclear if the GOP’s plans would allow issuers to vary premiums based on health status or
not. The proposal only says that those with pre-existing conditions are guaranteed coverage, and does not specifically say
that underwriting based on health status is banned.
Still, Wynne says, in sum “there are so many similarities between this proposal and the ACA that it seems way too
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disruptive to go through the repeal process just to re-impose so many comparable reforms, recognizing that some would
prefer this decided tilt toward less coverage and less mandates.”
“There are also hundreds of generally well-liked policies in the ACA that are not addressed here. It’s unclear what
would happen to those. The dirty secret — ignored on the right and vilified on the left — is that the ACA is actually a
fairly conservative approach to national health reform. It’s basically tax cuts for the purchase of private insurance. The far
better outcome would be to move past the tit-for-tat approach to health policy and figure out substantive ways to take a
step beyond the ACA to expand coverage, improve quality and reduce costs,” he said.
In introducing the plan, Sens. Orrin Hatch (R-UT) and Richard Burr (R-NC) and Rep. Fred Upton (R-MI)
said that should the Supreme Court invalidate the federal subsidies “we believe modifying and adopting some of the
ideas outlined in our proposal could provide a path toward minimizing the disruption experienced by consumers.”
“Over the longer term, the Patient CARE proposal offers a credible path to reform and strengthen our health care
system. We believe there’s a better prescription for helping Americans with per-existing conditions and making coverage
affordable,” they wrote in a op-ed published in USA Today.
Rather than fully banning insurers from rejecting members based on pre-existing conditions, the GOP plan
would require “continuous coverage.” This means a person moving from one health plan to another could not be
underwritten or denied a plan if that person has been insured, including holding catastrophic coverage, for at least 18
months without a significant break. The plan envisions a one-time open enrollment period that allows all people to
purchase coverage without underwriting based on health status or per-existing conditions. Those choosing not to do so
during the open enrollment period, could still sign up during annual enrollment, but would lose the pre-existing condition
protections.
“Unlike the individual mandate, which unfairly forces American to buy insurance or face finance penalties, these
alternative provisions strike the right balance between strongly encouraging individuals to become insured, while ensuring greater regulatory predictability and market stability which in turn keeps costs down,” the 9-page proposal says.
The proposal would also alter the market reforms by allowing plans to charge older members up to five times more
than younger members, rather than the 3 to 1 ratio in the ACA — and also allows state to opt to lower or increase the agerating ratio. Plans would also be required to offer plans to children up to 26 years of age — but states could opt out of the
provision.
The proposal would grant people working at businesses with fewer than 100 employees, or people who do not work
at such businesses and do not have a coverage offer, a tax credit that could be used to buy health care. Credits would be
available to people earning up to 300 percent of poverty. The value of the credit would decrease as a person’s income
increases, but the plan envisions that 18-to-34 year-olds earning 200 percent of poverty would receive a credit of $1,970,
those aged 35-49 would get $3,190 and those 50-64 would be eligible for $4,690.
The proposal would create a new “health financing office” at Treasury tasked with administering those credits.
Instead of a mandate, the proposal would allow states to enroll those who have a tax credit but do not buy
coverage within a specific time-frame into a “default” product. States could create a default option with premiums
equal to the tax credit so that the individual would not be charged an additional premiums, the proposal says. “However,
under our plan, every American will be able to access a health plan, but no American is forced to have health insurance
they do not want. So, if an individual did not like the initial default plan selected for them, they would be able to switch
plans or opt-out of coverage altogether,” the plan says.
States would also be able to leverage federal funding for high-risk pools to help with costs for the sickest
patients. States would work with insurers to help identify the individuals with the highest health care costs among a
state’s insured population and establish strong disincentives for excessive referrals to the high-risk pool, such as penalizing insurers seeking subsidization for individuals who are found to be unqualified for the pool, the proposal says.
The plan envisions paying for the reforms by altering the tax treatment of health benefits, which many economists say
drives health spending, the GOP authors write. Under the proposal, the the current unlimited tax deduction for employersponsored health benefits would be capped at $12,000 for individuals and $30,000 for family plans. Unlike the ACA’s 40
percent tax on “Cadillac plans,” the employee benefits above the threshold would be treated like regular income, the
congressmen say. “Therefore middle-class families with employer-sponsored coverage would fare better under our
proposal than Obamacare,” they write.
The proposal would also transition Medicaid into a capped grant program based on the previous year costs for
covering people earning at or below 100 percent of the federal poverty level. The capped allotment would grow over time
at the consumer price index (CPI) plus 1.
The proposal would also address medical malpractice, allow individuals to purchase coverage across state lines, and
“guarantee federal protections for small business wishing to offer a group health plan using stop-loss insurance.”
The plan also aims to improve transparency in health care, and would require issuers to disclose information on
covered items, drug and services as well as plan restrictions and limitations. It would also require hospitals participating
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in Medicare to provide consumers with average prices paid by insured and uninsured patients for the most common
inpatient outpatient procedures, and to post information on charity care.
Key Democratic lawmakers and stakeholders panned the GOP proposal.
“The new plan, although with vague details, is a huge step backwards,” says Ron Pollack of the advocacy group
Families USA. “This proposal is bad medicine for America’s consumers, and is not a credible substitute for the ACA that
is successfully expanding health coverage and making such coverage more affordable across the country.”
“While this proposal was unveiled with great fanfare, it’s little more than a lethargic rehash of last year’s unworkable
ideas,” Senate Finance ranking Democrat Ron Wyden (OR) said in a statement. “Just like last year, this ‘new’ proposal
falls woefully short. It effectively raises taxes on the middle class, removes bedrock protections for consumers and chips
away at key coverage benefits that Americans rely on. In short: nothing in this white paper achieves what millions of
Americans have today thanks to the Affordable Care Act — quality, affordable, health care,” he said.
“Finally, it’s important to remember that what Republicans have offered are concepts, not formal legislation. If
Republicans were as good at writing actual legislation as they are promoting lofty but empty rhetoric, we could have a
serious debate. We’re still waiting,” he added.
Senate health ranking Democrat Patty Murray (WA) had a similar reaction.“It’s deeply disappointing that once again,
Republicans are trying to put politics first, put power back in the hands of insurance companies rather than patients, and
undo the progress we’ve made toward a health care system that works better for families across the country,” added
Senate health ranking member Patty Murray (D-WA). “Our constituents want patients and working families, not politics,
to come first as we look for way to build on this law. That’s what I’ll be focused on, and I hope my Republican colleagues
will reconsider their partisan approach and work with Democrats to move our health care system forward, not backward,
for the families and communities we serve,” she said. — Amy Lotven
Anthem Hack Spurs Calls For Action By Congress, FTC And Industry
Lawmakers said the data breach revealed by the nation’s second-largest health insurance provider underscores the
need for cyber information sharing legislation, while a consumer group is urging the Federal Trade Commission to swing
into action.
After health insurance provider Anthem announced late Wednesday (Feb. 4) that cyber attackers had gained access to
the personal information of potentially 80 million customers, stakeholders also began sorting through how existing laws
and potential data-breach legislation might address such incidents.
Anthem in a statement said there is no evidence that credit card or medical information has been compromised, but
that client names, birth dates, addresses, Social Security numbers, employment information, and email addresses were
compromised.
“Anthem was the target of a very sophisticated external cyber attack,” Joseph Swedish, president and CEO of
Anthem, said in a statement. “Once the attack was discovered, Anthem immediately made every effort to close the
security vulnerability, contacted the FBI, and began fully cooperating with their investigation.”
The policy implications of the breach permeated a Senate Commerce subcommittee hearing Thursday on establishing
a national data-breach notification standard.
Illinois Attorney General Lisa Madigan testified that the breach, based on early information, probably would not
have triggered Health Insurance Portability and Accountability Act-based notification requirements and instead would
have been covered under state laws.
Covered entities in the health sector must comply with cybersecurity and breach notification standards under HIPAA,
when private health information is involved in a breach.
Madigan added, “It seems unusual and helpful” that Anthem notified consumers as quickly as it did, apparently
within a week of the breach.
Commerce Committee members, and other lawmakers, are grappling with the question of how prescriptive a federal
law should be on timely notification.
Jack Santos, a research vice president at IT research company Gartner, said “time will tell” whether the revealed data
is covered by HIPAA and Department of Health and Human Services regulations.
If health data is contained, it could be the “single largest healthcare breach ever,” Santos said in a blog post.
Possible FTC, Legislative Responses
The National Consumers League on Thursday called on the Federal Trade Commission to organize a data security
workshop to address data breaches.
“The goal of such a workshop should be to create a record that the Commission can use to understand how well
existing voluntary guidelines, self-regulatory regimes and cybersecurity technologies are working to protect consumer
data,” Sally Greenberg, executive director of the NCL, wrote in a letter to the FTC.
Lawmakers, meanwhile, called for bipartisan legislation promoting sharing of cyber threat information between
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government and industry.
“We’ve seen time and again that businesses and other private entities are vulnerable to cyber attacks by criminals,
terrorists, and foreign governments,” said House Intelligence Chairman Devin Nunes (R-CA). “This situation is untenable
— that’s why a top priority of the House Intelligence Committee is to develop a strong cyber bill that encourages private
companies to share information about attacks on their systems.”
Senate Intelligence Committee member Dan Coats (R-IN) said info-sharing legislation is “imperative” to aid government action on cyber threats.
“Neither industry nor government alone can broadly improve our nation’s cybersecurity, and Congress must renew its
commitment to address the wide range of issues posed by cyber threats through targeted legislation,” Coats said.
“This attack is another reminder of the persistent threats we face and the need for Congress to take aggressive action
to remove legal barriers for sharing cyber threat information,” said House Homeland Security Chairman Michael McCaul
(R-TX). “I will lead this effort with other committees in the House and Senate to ensure we move forward with greatly
needed cybersecurity legislation as soon as possible.”
House Homeland Security ranking member Bennie Thompson (D-MS) called for action on the cybersecurity legislative proposal that President Obama announced during the State of the Union address. That proposal urged a three-tier
approach to cybersecurity, dealing with information sharing, cyber crime response, and data-breach notification standards.
“President Obama, with his recently announced cybersecurity legislative proposals, has taken on the challenge of
tacking this evolving and multifaceted threat to our nation, economy, and citizens,” Thompson said in a statement. “As we
examine legislative proposals in the months ahead, it is important to not lose sight of a simple truth — to truly protect
ourselves, it will take vigilance, collaboration, and a shared commitment to deal with this ever evolving threat.”
Industry representatives also discussed the breach and steps companies can take during a panel discussion on
cybersecurity hosted by the Internet Security Alliance and law firm DLA Piper
“It’s inevitable that you’re going to have a problem like this,” said Jim Halpert co-chair of cybersecurity practice at
DLA Piper. He urged companies to have an incident response plan in place, securing roles for not only IT departments,
but also communications, legal, human resources, and marketing departments to prepare for and respond to breaches.
Stasia Kelly, co-chair of global governance and compliance at DLA Piper, said companies need a crisis management
plan in place to address data breaches.
Internet Security Alliance president and CEO Larry Clinton said info-sharing legislation is one piece of the
cybersecurity puzzle. “It’s a tool in the toolbox,” Clinton said.
Though Clinton said passing info-sharing legislation with liability protections is critical, he added that he hopes to
see broader efforts on cybersecurity, though he did not elaborate on what such broad policy movement would look like.
— Joshua Higgins
DeGette Says Obama Wants To Engage On Cures Initiative
Rep. Diana DeGette (D-CO) said Monday (Feb. 9) that President Barack Obama personally told her at his State of
the Union address that he hopes to works with lawmakers on the 21st Century Cures Initiative. DeGette, who has spearheaded the Cures Initiative with House Energy and Commerce Committee Chair Fred Upton (R-MI), said she didn’t
endorse draft legislation Upton released because she felt it wasn’t complete, but added she fully stands behind the work
done so far while noting there are some differences of opinion on issues like exclusivity that will have to be worked out.
Upton, who with DeGette spoke about the Cures Initiative at the Biotechnology Industry Organization’s CEO and
Investors Conference in New York Monday, said he plans to release a second draft of the legislation, which included a
number of placeholders, in the next couple of weeks.
Ahead of the president’s State of the Union speech, Upton encouraged Obama to sign on to the Cures Initiative. In
his annual address to Congress Obama announced his Precision Medicines Initiative that shares goals with the 21st
Century Cures Initiative. Upton said following the State of the Union that he felt this showed the president’s support.
On Monday, DeGette said Obama personally told her at the State of the Union that “he was looking forward to
working with us on our bill.”
“So even the president, it’s on his radar screen,” she added.
DeGette said she and Upton hope to incorporate a large portion of Obama’s Precision Medicine Initiative into
the 21st Century Cures bill.
When Upton released the Cures draft measure on Jan. 27, DeGette issued a statement saying: “While I don’t endorse
the draft document, I know that with continued engagement, we can reach a bipartisan consensus to help advance biomedical research and cures.” DeGette did not elaborate on what problems she had with the draft legislation.
On Monday DeGette said she didn’t sign on to the draft because she felt it was “still a work in progress,” and she just
wanted a “complete draft.” She reiterated that she fully supports the Cures Initiative and said her and Upton’s staffs have
been working feverishly on completing formal legislation. The Cures draft included a number of placeholders for mea24
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sures including laboratory-developed tests, precision medicine, device coverage and increased funding for the National
Institutes of Health.
Upton said Monday that he would unveil a second draft of the Cures Initiative in the next couple of weeks, with plans
to file formal legislation soon after.
“I’m putting out what I call the 2.0 version coming out in a couple weeks before we introduce the bill itself,”
Upton said.
Upton and DeGette said their goal is to get stakeholders together to hammer out the final product they hope to have
to the president’s desk by the end of the year.
The Generic Pharmaceutical Association (GPhA) has expressed serious concerns with provisions in the draft bill that
would increase exclusivity for a number of different drugs, saying the proposals would keep generics from the market and
increase drug costs.
But DeGette said provisions to expedite clinical trials and streamline the drug and device approval process in
the bill would lower costs for drug companies, thereby lowering drug costs.
“We are going to have some issues like exclusivity and other issues that we have some differences of opinion,”
DeGette said. “We’re just going to have to sit down and work it out. We’re committed to doing that.”
GPhA initially panned the Cures draft bill, calling out the exclusivity provisions specifically. But last week GPhA
President and CEO Ralph Neas sent an apology letter to Upton saying he regretted the tone of the organization’s response. Neas has consistently said GPhA is willing to work with Upton and DeGette on the Cures Initiative.
“We look forward to working with the Committee to improve select provisions in the discussion draft, so that the
final 21st Century Cures document reflects the important role that competition plays in spurring innovation and ensuring
access to affordable medicines,” Neas said to Inside Health Policy Friday (Feb. 6). — Todd Allen Wilson
Study: Expand Expedited Approvals To Spur Early-Stage Rx Investment
Policy makers need to offer incentives for early stage investment so that innovation isn’t stymied, according to a
Health Affairs journal article published Monday (Feb. 2) that points to trends showing a drop in venture capital investments in the early stages of drug and device development. The study’s author says policy makers can renew investment in
“critically needed early-stage products” by increasing funding for Small Business Innovation Research; expanding
regulatory pathways that enable early testing of experimental compounds; and giving economic incentives to investors
and developers.
The study says early-stage investors are putting their money toward products that qualify for FDA’s expedited drug
approval pathways, including fast track, breakthrough therapies and accelerated approval, and recommends the agency
extend those programs to novel therapies.
“Policy makers have already demonstrated the effectiveness of actions that increase investment in such areas as rare
and orphan diseases; vaccine development and manufacture; and, more recently, antibiotics. Similar actions should be
considered to encourage seed and early-stage investment into novel therapies for such areas as neurodegenerative disease,
mental health, and diabetes,” writes study author Jonathon Fleming, president and treasurer for Network for Excellence in
Health Innovation.
“Reducing the time, cost, and uncertainty for early-stage venture capitalists to bring life science innovations to
market should be a priority for policy makers. Some of society’s greatest medical needs will be left unmet unless additional attention is given to these policies and reimbursement issues. It is no exaggeration to say that the health of our
nation may depend on it,” Fleming writes.
Early investments refer to the “seed” money venture capitalists invest in a new project or company in order to help
get the company or product off the ground. Fleming found that while venture capital investments across all industries rose
sharply over the last five years, investments in the early stages of health care products dropped from 62 percent to 45
percent of the total invested those products — from $323 million in 2009 to $47.8 million in 2014.
Fleming says that early stage investments are critical for new products to fund development to the point that later
stage investors will jump in with the money necessary to move the product through the regulatory process and bring it to
market.
“Early-stage investors are gambling that their capital will produce results that will increase the value of the project
prior to the next round of financing,” Fleming writes.
Regulatory uncertainty — whether FDA will eventually approve a product and whether Medicare and
Medicaid will pay for it — make that gamble too big for early-stage investors, Fleming says. Consequently, he
writes, early-stage investors are flocking to more stable industries. Policy makers hold the key to providing stability and
more certainty to the drug and medical device markets that will bring these investors back, he says.
The regulatory schemes of federal agencies do not always present obstacles to early investing, Fleming notes,
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grams are the areas drug and device manufactures are pursuing, and where early-stage investors are putting their money.
Fleming offers five policy actions that may entice early-stage investors into the drug and device market,
thereby spurring innovation:
First, Fleming says, Small Business Innovation Research funding should be increased for targeted areas of Interest.
“SBIR funding is a key source of funds for the experiments needed to justify larger investments from venture capitalists,”
Fleming writes.
Second, Fleming says, policy makers need to work to increase public support for expensive clinical trials in targeted
areas of interest, noting that the National Cancer Institute has been “especially proactive in working with developers of
innovative new products to assist in the funding of clinical trials in priority areas.”
Third, Fleming says, special regulatory pathways need to be established that allows for early testing of experimental
compounds in small populations to give early signals of the efficacy of those products “that could justify larger investments into the programs.”
Fourth, Fleming says, policy makers can offer economic incentives in designated areas — similar to the 2012
Generating Antibiotics Incentives Now (GAIN) Act that offers five years of additional market exclusivity for antibiotics
that target qualified pathogens — so that “investors and developers of novel and breakthrough products have more clarity
and certainty about the pricing of their product.”
Finally, Fleming says, policy makers need to establish a national prize for a breakthrough in Alzheimer’s disease
“that inspires entrepreneurs and early-stage investors to enter the field. Fleming the prize could be cash or a tax holiday
for a defined period of time.
The Network for Excellence in Health Innovation, headed by Fleming, includes members from nearly 100 health care
organizations, including patient groups, health plans, providers, employers, universities, hospitals, business organizations,
and the pharmaceutical, biotechnology and medical device industries.
The study comes as House Energy and Commerce Committee lawmakers are exploring ways to extend existing
expedited approval policies and economic market incentives to a broader range of products. — Todd Allen Wilson
GPhA President Apologizes For Response To 21st Century Cures Draft
Generic Pharmaceutical Association President and CEO Ralph Neas expressed “deep regret” to House Energy and
Commerce Chairman Fred Upton (R-MI) over the organization’s statement to the press in which it said the group was
“deeply disappointed” in the 21st Century Cures draft legislation, apologizing to Upton in a letter sent Tuesday (Feb. 3).
In the letter Neas said the press statement issued on Jan. 27, just hours after the draft legislation was released, did not
reflect the “collective view” of GPhA’s membership. Inside Health Policy obtained the Feb. 3 letter from a veteran
Capitol Hill insider, who said GPhA’s press statement on the Cures draft was sent without consultation of the
organization’s Board of Directors, which is made up of generic drug industry executives.
“Our release should not have implied that we are disappointed in the entire discussion draft,” wrote Neas, who is
stepping down as head of GPhA in the fall. “Indeed, GPhA strongly believes that the earlier new treatments can be
approved, the earlier patients can access new generic medicines. We share the Committee’s goals of ensuring that our
nation’s drug and device discovery, development and approval infrastructure and process are structured to find the cures
we need, encourage innovation and deliver treatments to patients. Rather, our press release was intended to reflect our
desire to improve select provisions, so that a final 21st Century Cures document best reflects the important role that
competition plays in spurring innovation and ensuring access to affordable medicines.”
In a statement to Inside Health Policy Friday (Feb. 6), Neas reiterated GPhA’s shared goals with Upton concerning
the draft bill and the organization’s desire to work with the committee on the final version of the 21st century Cures bill.
Upton’s staff did not respond to a request for comment on Neas’ letter.
Neas does not lay out in the letter to Upton what “select provisions” GPhA wants to improve, but in the group’s
earlier press statement he focused on measures designed to increase exclusivity for a variety of drugs.
The 21st Century Cures draft legislation would give 15 years of exclusivity from the time of FDA approval to drugs
for dormant therapies; a five-year “wild-card” exclusivity extension to drugs intended to treat a serious life-threatening
disease or condition; a six-month extension to orphan drugs approved for a new indication of a rare disease; and two
years additional exclusivity for new drug applications and abbreviated new drug applications for products that promote
greater patient adherence to “an approved treatment regime” relative to “previously approved formulations or designs of
the drug.”
The draft legislation also offered an undetermined exclusivity extension for generic drugs as long as they are manufactured in the United States, but GPhA has not commented on that provision of the discussion measure.
In the Jan. 27 press statement Neas said while there are “positive proposals” in the draft, the exclusivity provisions
threaten to “turn back the clock more than 30 years” to the time before the 1984 Hatch-Waxman Act expanded generic
drug access in the marketplace.
“[T]he Dormant Therapies provision of the bill would potentially grant brand drug companies an unprecedented
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increase in exclusivity for a curiously broad category of new drugs, delaying the competition from generic drugs and
biosimilars that promotes beneficial innovations in treatments,” Neas said in the Jan. 27 press statement.
The GPhA press statement added the organization was willing to work with Upton to “explore a more sensible
holistic approach to systemwide changes that encourage the development of new medicines.”
“Together, we can identify a way forward that incentivizes innovation appropriately, doing more for the entire
healthcare system than just providing a windfall of billions of dollars to brand manufacturers at the expense of patients
and taxpayers,” Neas added in the statement.
Neas’ Feb. 3 letter to Upton struck an even more conciliatory tone, praising Upton’s leadership.
“We applaud your leadership and the tremendous effort put forward by members of your Committee and your
dedicated and valued staff over these many months to collect feedback from various stakeholders,” Neas wrote. “We have
been privileged to have your support in protecting the important role generics and biosimilar industries play in our
nation’s health care system as we have faced many recent challenges. Your actions and leadership have helped to ensure
that millions of Americans have access to safe, effective and affordable medicines.”
The Washington insider who gave Inside Health Policy a copy of the Feb. 3 letter said the Jan. 27 press statement on
the draft bill was sent out before the GPhA board was consulted on the matter, and the insider characterized the Feb. 3
letter as an apology for an unwise political decision on Neas’ part.
In Friday’s statement to Inside Health Policy Neas said: “We applaud Chairman Upton and Congresswoman
DeGette’s leadership 21st Century Cures initiative. We share their goal to improve our regulatory framework to find the
cures we need, encourage innovation, spur competition and quickly deliver safe and effective treatments to patients.
GPhA strongly believes that the earlier new treatments can be approved, the earlier patients can access new generic
medicines. We look forward to working with the Committee to improve select provisions in the discussion draft, so that the final
21st Century Cures document reflects the important role that competition plays in spurring innovation and ensuring access to
affordable medicines. We, like many other organizations, are carefully reviewing the complete 393 page document.”
Upton has been clear that the provisions of the draft bill are open for further discussion, but he wants to move quickly to
file formal legislation with the hopes of having the measure to the president’s desk by the end of the year. — Todd Allen Wilson
FDA Asks Advisers To Weigh Second Biosimilar
FDA revealed Monday (Feb. 9) that it has asked advisors to review a second biosimilar, Celltrion, Inc.’s application
for a biosimilar of Janssen Biotech Inc.’s Remicade, in a March 17 meeting that is expected to focus heavily on data
issues since Celltrion’s product to treat severely active Crohn’s Disease product is more complex than Sandoz’ product
taken up by a separate advisory panel in January.
Agency advisors last month unanimously recommended FDA approve Sandoz’s filgrastim biosimilar, but that review
shed little light on data requirements for more complex products. An industry expert said there will be an extensive
conversation around Celltrion’s data because the company’s biosimilar product is a much more complex molecule than
Sandoz’s filgrastim and with which there is considerably less European marketing experience prior to being submitted to
FDA for approval.
Sandoz’s drug was approved for use in Europe in 2009, while Celltrion’s drug was approved in September 2013.
Despite having less European marketing experience, Celltrion filed its infliximab biosimilar application with FDA last
August after already marketing its product in more than 50 countries under the brand name Remsima and used global data
to support its application. According to a company press release, the drug remains the world’s first and only biosimilar for
monoclonal antibodies (mAbs).
To make a point about the complex nature of Celltrion’s product, the expert referred to an editorial by the head of the
Medicines Licensing and Availability in the Danish Health and Medicines Authority about the review of mAbs biosimilars
in rheumatology, just months before Europe’s approval of Remsima. The report states that the review process for a
biosimilar is as critical as for an originator biological product, saying the median overall number of questions asked for
currently authorized biosimilars was 119, compared with 121 for biological mAbs drugs used in rheumatology.
“Certainly the aforementioned figures suffer from the low number of procedures (11 biologics authorized in
rheumatological indications and seven distinct biosimilar molecules), and it is scientifically not absolutely correct to
compare the currently licensed biosimilars to mAbs/cepts as the biosimilars authorized to date are less complex biologics
(e.g, growth hormone, filgrastim, or erythopoietins),” says Christian Schneider in the article “However, upcoming
biosimilar mAb/cept applications may not be expected to have fewer questions as these are more complex molecules, and
so the conclusion that regulatory review is as critical as for originator mAbs/cepts will very likely remain valid.”
Proposed indications for Celltrion’s product include reducing signs and symptoms and inducing clinical remission in
adult and pediatric patients with moderately to severely active Crohn’s disease who have had an inadequate response to
conventional therapy.
The industry expert also noted that Celltrion’s Remsima product will be reviewed by the Arthritis Advisory
INSIDE CMS — www.InsideHealthPolicy.com — February 12, 2015
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Committee, which is a different panel from the one that discussed Sandoz’ application, so the panel will be starting more
from scratch on biosimilar issues.
FDA’s Oncologic Drugs Advisory Committee (ODAC) unanimously recommended approval of Sandoz’ filgrastim
biosimilar last month, and also proposed the product be approved for all five indications on the label for Amgen’s
Neupogen, based on Sandoz’ clinical trial on only one of those indications. The latter proposal drew frustration from
some who oppose the extrapolation policy (see FDA Week, Jan. 8).
A representative for Momenta Pharmaceuticals supported extrapolation during the public comment session at the
meeting, but other commenters, like senior citizen advocacy group RetireSafe, insisted that clinical trials should be
required for every indication as a patient safety issue.
But FDA, in asking that the data be extrapolated to cover all five indications, told the advisory committee that
filgrastim was not a very complex molecule, which made extrapolation easier.
FDA associate director for biologics Leah Christl also made clear at last month’s meeting that there is no “one size
fits all” approval process for biosimilars and data needed to get the green light from the agency will be made on a caseby-case basis. — Erin Durkin
FDA Releases Rule Aimed At Reducing Delays In Approving Generic Drugs
FDA released long-awaited proposed regulations Friday (Feb. 6) to formally implement portions of the Medicare
Prescription Drug, Improvement, Modernization Act of 2003 regarding limits on 30-month stays of approval for
505(b)(2) and generic drug applications, as well as clarify and update other requirements around these types of drug
applications. This includes clarifying requirements around patented method of use so that overbroad use codes cannot
delay generic drug approvals.
The agency said in a Federal Register notice that the regulations implement portions of the MMA, along with
revising and clarifying FDA regulations relating to 505(b)(2) applications and abbreviated new drug applications
(ANDAs) to reduce unnecessary litigation, reduce delays in approving 505(b)(2) applications and ANDAs, and provide
certainty to both brand and generic drug manufacturers.
FDA said that the rule will implement portions of Title XI of the MMA, which addresses concerns identified in a
Federal Trade Commission (FTC) report on anticompetitive strategies. The statute limits the availability of 30-month
stays of approval on 505(b)(2) applications and ANDAs, and establishes conditions under which a first applicant would
forfeit the 180-day exclusivity period so that other ANDAs would no longer be blocked.
“FDA has been implementing the MMA directly from the statute for several years,” states the agency. “Based
on this experience, FDA is proposing to amend its regulations to implement portions of the MMA that pertain to 30month stays and other matters not related to 180-day exclusivity.”
The agency further says it is proposing to clarify and update regulations regarding 505(b)(2) applications and
ANDAs based on recent court decisions and the agency’s “practical experience implementing provisions related to the
approval of 505(b)(2) applications and ANDAs.”
As an example, FDA is proposing to clarify requirements for a new drug application (NDA) holder’s description of
the patented method of use required for publication in FDA’s Orange Book to avoid overbroad use codes that could delay
approval of generic drugs. The agency referred to the U.S. Supreme Court decision in Caraco Pharm. Laboratories, Ltd.
v. Novo Nordisk A/S, which states: “An overbroad use code…throws a wrench into the FDA’s ability to approve generic
drugs as the statute contemplates.”
FDA also says it is updating the regulations to codify FDA’s current practice and policy. — Erin Durkin
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