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The Medliminal Washington Report 4.16.18

April 16, 2018

Lincoln Memorial statue at night, Washington, DC

The U.S. House and Senate returned from the Easter recess on April 9 with the focus expected to be on the nation’s opioid epidemic. While there were a number of committee hearings on both sides of Capitol Hill, any legislative news of the week was surpassed by the announcement by House Speaker Paul Ryan that he would not seek another term in November. The release of the Benefit and Payment Parameters rule for 2019 was also significant, and shows again the direction the president is moving health care reform. New studies show increasing health care prices, and the potential impact of pending regulations allowing expanded limited duration health plans. States are considering their own approaches to health reform, with California considering a bill that would allow the state to set health care prices, and New Jersey lawmakers sending bills to the governor establishing an individual insurance mandate and reinsurance pool.


We break it all down in our weekly health care review.


House Speaker Paul Ryan Announces Retirement

On April 11, House Speaker Paul Ryan surprised (but not shocked) members of Congress and Capitol Hill watchers by announcing that he would not seek re-election in November, dealing a blow to congressional Republicans already facing a possible Democratic takeover of the House and setting off a month-long GOP leadership battle. “I will be retiring in January, leaving this majority in good hands with what I believe is a very bright future,” Ryan said at a news conference. “I think we have achieved a heck of a lot.”

His retirement had been rumored for months, and he was largely coy, offering only vague answers when asked about his future plans. He praised the president in his press conference for “giving us the opportunity to do great things,” including Ryan’s signature tax legislation last year.

Ryan’s departure sets up a battle to succeed him as speaker should Republicans retain their House majority. Among likely contenders are Majority Leader Kevin McCarthy (R-CA) and Majority Whip Steve Scalise (R-LA), the No. 2 and No. 3 GOP leaders in the House. Rep. Jim Jordan (R-OH), a member of the conservative House Freedom Caucus, has also expressed interest in the race.

With the speaker’s announcement, more than 40 House Republicans have either resigned this year or announced that they will not seek re-election in November. Democrats need a net gain of 23 seats to take the majority. Historically, the party in the White House loses congressional seats in midterm elections. On average, the president’s party has lost 27 House seats in midterms since 1934 (25 in a president’s first midterm), and only three times in the last 84 years has the president’s party gained seats in the House. When the president’s approval rating is below 50 percent (the average of national polls puts the president’s approval rating at 42.8 percent), it’s even worse. When that’s the case, on average, the president’s party loses 34 House seats, or 41 in his first midterm. Combine that with special elections that secured Democrats an Alabama Senate seat and a House seat in Pennsylvania hint at a building anti-GOP wave that may overturn the party’s House majority.

House and Senate Democrats Urge HHS to Drop Proposed Short-Term Plan Rules

Key House and Senate Democrats – ranking members of the House and Senate committees with primary jurisdiction over health insurance/benefits – called on the Trump administration to withdraw its proposed rule on short-term health plans, saying the plans, which are less expensive than ACA-compliant ones, are “deceptive” and would undermine consumer protections.

In an April 12 letter to Treasury Secretary Steve Mnuchin, HHS Secretary Alex Azar and Labor Secretary Alexander Acosta, U.S. Representatives Frank Pallone (NJ), Richard Neal (MA) and Bobby Scott (VA) and Senators Ron Wyden (OR) and Patty Murray (WA) warned that, if adopted as currently drafted, the rule would “encourage the sale of junk health plans that will undermine consumer protections, sabotage the Affordable Care Act (ACA) exchanges, and expose consumers to great financial risk.”

On February 28, the Departments of Health and Human Services (HHS), Labor and the Treasury released a proposed rule that would increase the length of coverage for short-term health insurance plans from three months to 364 days. They proposed this rule in response to an executive order President Trump issued in October 2017 telling these departments to propose regulations or guidance that would make this type of insurance more available in order to encourage consumer choice and provider competition in the health insurance market. In October 2016, the Obama administration capped the duration of these plans at three months because of concerns that the plans were allowing people to skirt the healthcare law and keeping healthier people off the exchanges.

Public comments on the proposed rules can be submitted through April 23.

The Administration

CMS Releases Final 2019 ACA Regulations

On April 9 the Centers for Medicare and Medicaid Services (CMS) finalized the Benefit and Payment Parameters rule for 2019. CMS also released the final 2019 letter to issuers in the federally facilitated exchanges and extended the previous policy for “grandmothered” or “transitional” policies for another year. Accompanying the rule and letter, CMS released a press release, fact sheet, and additional documents, including new guidance on hardship exemptions from the ACA’s individual mandate penalty and guidance for states on requesting an adjustment to the medical loss ratio.

“Until the law changes, we won’t stand idly by as American suffer,” CMS Administrator Seema Verma, said on a conference call with reporters. “Today’s announcement will offer some relief to Americans who have seen higher premiums and fewer choices since Obamacare was implemented.”

Here are five key provisions in the final rule:

·       The rule would allow states to more easily modify the 80 percent medical-loss ratio (MLR) standard required by the ACA. If a state can argue a lower standard would help “stabilize the individual market,” then the change would be allowed.

·       The rule gives states more leeway on how they cover the ACA’s 10 essential health benefits, or EHBs: outpatient care, emergency services, hospitalization, maternity care, mental health, prescription drugs, rehabilitation, laboratory services, preventive care and pediatric services. Beginning in 2020 (not 2019, as originally proposed) states would be able to use EHB benchmark plans which other states had used in the 2017 plan year, but all ACA exchange plans would still be required to cover those benefits. “Essentially what this does is it allows states some more flexibility in establishing the EHBs, but the 10 essential benefits still remain,” Verma said.

·       The first open enrollment period under the Trump administration halved the time customers had to pick a plan. The 2019 open enrollment period will remain the same length—45 days—beginning November 1, with tighter restrictions on special enrollment periods where customers could be allowed to select plans mid-year. The rule also further extends transitional, pre-ACA policies through 2019, which have been allowed to continue since 2013.

·       The final rule adds a number of “hardship exemptions” which could allow more customers to avoid the penalty this year and retroactively for the past two years. Consumers could claim an exemption if they live in a county where only one insurer is offering exchange coverage – there were 1,478 such counties in 2018. In a more controversial move, people could claim an exemption if the plans available on the exchanges cover abortion.

·       The final rule adopts new requirements for entities participating in direct enrollment. These standards replace those laid out in the 2018 payment rule, and are extended to QHP issuers, agents, and brokers doing direct enrollment. Under the final rule, these entities will be able to select their own third-party entities to conduct annual reviews and audits to demonstrate operational readiness. This is a shift from previous policy under which CMS was planning to create a process for evaluating and developing a list of approved third-party auditors.

President Issues Executive Order to Review Public Health and Assistance Programs

On April 10, President Trump signed the Reducing Poverty in America by Promoting Opportunity and Economic Mobility Executive Order, ordering cabinet secretaries across the federal government to review their welfare programs – from food stamps to Medicaid to housing programs – and propose new regulations, like work requirements.

“Since its inception, the welfare system has grown into a large bureaucracy that might be susceptible to measuring success by how many people are enrolled in a program rather than by how many have moved from poverty into financial independence,” the executive order reads.

The order calls on the Departments of Agriculture, Commerce, Education, HHS, Housing and Urban Development, Labor, Transportation and Treasury to submit a report with their recommended policies to the White House within 90 days. Agencies are ordered to follow nine “Principles of Economic Mobility” to guide their proposed policy changes, including adding work requirements, giving states more flexibility (likely in the form of block grants), consolidating duplicative programs, and encouraging involvement from the private sector.

The order doesn’t by itself any new policy, but the result could be recommendations that propose drastic changes to programs like Medicaid and other public assistance programs.

Health Policy

Health Care Prices Rising at Fastest Level in 6 Years

According to new data released by the consulting firm Altarum, health care prices rose 2.2 percent year-over-year in March 2018, the highest annual growth rate since January 2012. The price growth was again driven largely by growth in hospital prices. Year-over-year growth was 3.7 percent, down slightly from February’s 3.8 percent, which had marked the highest growth rate since November 2009.

At $3.6 trillion, national health spending in February 2018 was 4.9 percent higher than February 2017. Rapid price growth wasn’t consistent across all categories; physician and clinical services price growth rose to a still low 0.6 percent, while drug price growth fell to 1.9 percent in March.

Since the start of the recession in December 2007, healthcare prices have risen by 21.6 percent, above economy-wide price growth of 17.2 percent. The report said low inflation, policy uncertainty and “value-oriented health sector changes” put downward pressure on prices in mid-2017, but those factors have changed markedly.

Report: Short-term Plan Expansion will Hike Individual Market Premiums, Lower Enrollment

According to a new Wakely Consulting Group report, the Trump administration’s proposed rules to expand short-term limited duration insurance (STLDI) plans will cause higher individual insurance premiums as healthy people flee exchanges for the lower-cost short-term plans.

The report concludes that the proposed rules have “the potential to increase market instability, market segmentation and adverse selection in the ACA-compliant individual market because a substantial number of healthy members will likely migrate to STLDI plans.” Specifically, the report estimates that STLDI plan expansion will increase premiums in the individual market by 0.7 percent to 1.4 percent and decrease enrollment by 2.7 percent to 5.4 percent in the first year.

Wakely projects that enrollment in ACA-compliant individual plans will decrease by 396,000 to 826,000 individuals in 2019 if the administration’s proposal is finalized, potentially four times greater than the administration’s projected losses of 100,000 to 200,000 individuals. The study authors suggest the difference is due to the fact that the government failed to account for the five million people who purchase ACA-compliant plans off the exchange, such as directly from plans or brokers.

The study also found that proposed rule could increase premiums for those remaining in the individual market by anywhere from 2.2 percent to 6.6 percent, and enrollment will drop by 8.2 percent to 15 percent. Combining the expansion of the short-term market with the individual mandate penalty repeal, Wakely predicted higher premiums in the individual market of between 10.8 percent and 12.8 percent, and decreased enrollment from 20.9 percent to 26.3 percent in the near term.

The report was funded by the Association for Community Affiliated Plans (ACAP), the national trade association representing not-for-profit Safety Net Health Plans that provide coverage in the individual market, Medicare and Medicaid.

Industry News

CVS Health Reveals Pharmacy Price Transparency Tool

On April 11, CVS Health and its PBM CVS Caremark announced the launch of a new tool to enable its 30,000 retail pharmacists to quickly find prescription savings at the point of sale, including medications that are available for zero copay. Dubbed “Rx Savings Finder,” the tool will allow pharmacists to search for lower-cost options under a patient’s insurance plan, including therapeutic alternatives and generic drugs. It will also provide prescribers with access to lower-cost medications through their electronic health record (EHR) system and to CVS Caremark members through the member portal and updated app.

Patients are increasingly feeling the cost burden of high drug prices, 83 percent of patients surveyed by CVS said they were concerned about increasing medication costs across the country. While it’s still early, initial data released by CVS shows that prescribers who accessed the real-time information switched to a drug covered under the patients plan 85 percent of the time. Prescribers using the tools switched patients to a lower cost alternative 30 percent of the time, saving an average of $75 for each prescription.

“Our direct experience is that patients who are confronted with high out-of-pocket costs at the pharmacy counter are less likely to pick up their prescriptions and are less likely to be adherent to their prescribed therapy,” said Kevin Hourican, head of retail pharmacy at CVS Pharmacy, in a statement.

As CVS eyes a controversial deal with Aetna, it has touted efforts to bring down drug costs using analytics and digital tools. Last year, the company announced a partnership with six HER vendors to build drug pricing into patient records.

In The States

California Bill That Would Create Healthcare Price Controls is Heard in Committee

A bill introduced in California in February that would give the state government power to set price controls on hospital stays, doctor visits and other medical services was amended in the Assembly Health Committee on April 10.  The bill (AB 3087) would authorize an independent commission to set prices on private health plans – based on what Medicare pays for the same services – including those offered by employers and purchased individually. The nine-member price-setting commission would be comprised of political appointees with no requirement for experience in healthcare delivery. In fact, the measure prohibits healthcare professionals from participating on the commission.

The bill will next be heard in committee on April 24, but faces an uphill fight. It is backed by labor unions and consumer groups, but opposed by physicians and hospitals, setting the stage for a brawl between some of the biggest lobbying heavyweights. Proposition 45, a 2014 ballot initiative that would have given the state insurance commissioner power to block rate hikes that were deemed excessive, was soundly defeated by a 59-41 percent vote. The bill also faces skepticism from single payer advocates, who mounted a vigorous effort to push universal state-financed healthcare last year. That bill passed the Senate, but ultimately died in the Assembly.

New Jersey Legislature Passes Bills to Impose Individual Mandate and Establish Reinsurance Pool

New Jersey state legislators have sent two bills to the desk of Governor Phil Murphy – SB 1877, the New Jersey Health Insurance Market Preservation Act, and SB 1878, New Jersey Health Insurance Premium Security Act. Murphy, a Democrat who took office in January, has not commented directly on the two bills, but is expected to sign them

If signed, the state would become the first since federal tax reform legislation gutted the ACA’s individual mandate penalty to impose a coverage mandate. Another eight states have considered similar legislation this year.  SB 1877 would re-impose the same mandate penalties that had existed at the federal level before they were zeroed out –$695 fine or 2.5 percent of household income, whichever is greater – for any individual who doesn’t have insurance or doesn’t qualify for any exemptions.

SB 1878 would require the state insurance commissioner to apply to CMS for a 1332 state innovation waiver to help support the reinsurance program, which would also be funded in part by the state mandate penalty. In 2015, roughly 190,000 state residents were subject to the ACA mandate penalty and paid $93 million, according to IRS data included in an Office of Legislative Services fiscal note on the measure. If enacted, New Jersey would join Maryland and Wisconsin as states that have established reinsurance pools in 2018. Three states (Colorado, Hawaii, and Louisiana) are actively considering bills to authorize similar waivers for the 2019 open enrollment season.

Three states (Alaska, Minnesota and Oregon) secured HHS approval for 1332 reinsurance waivers last year. The three states received federal matching funds of 50 percent to 98 percent and reduced individual market premiums by 7 percent to 20 percent. Similar results are projected for the 2019 waivers, with most states targeting 10 percent to 20 percent rate cuts. More than a dozen other states have explored reinsurance waivers and are likely to give them another look for 2020, particularly if new state waivers prove as successful as the three waivers already in operation.

The Week Ahead

The U.S. House of Representatives and Senate will be in session the week of April 16-20.

April 19: Senate Finance Committee will hold a hearing titled, “Tackling Opioid and Substance Use Disorders in Medicare, Medicaid, and Human Services Programs

April 19-20: The Medicaid and CHIP Payment and Access Commission (MACPAC) will hold its April Public Meeting