Health Policy Report

The Week in Review

A whirlwind week in Washington saw Congress take a significant step towards tax reform, the President declare a public health emergency for the opioid epidemic, and a staunch conservative senator announce that he will not seek re-election due to irreconcilable differences with President Trump and the Republican Party. 

On the legislative front, the biggest news came out of the House, where lawmakers approved a budget resolution (H. Con. Res. 71) for the 2018 fiscal year in a narrow 216-212 vote. The budget resolution — which now heads to President Trump’s desk — marks a key step forward in the Republican effort to unilaterally reform the nation’s tax code by providing reconciliation instructions for a legislative package that will allow Republicans to circumvent a potential Democratic filibuster in the Senate. The vote last week survived a late threat from House Republicans in high taxing states who may be negatively affected by the tax reform package’s proposed elimination of the state and local tax (SALT) deduction.

Senate legislative work included approval of a House-passed disaster relief package (H.R. 2266) and a Congressional Review Act (CRA) resolution (H.J. Res. 111) disapproving of the Consumer Financial Protection Bureau’s (CFPB) rule banning arbitration clauses in certain kinds of consumer contracts. Both measures now head to the president’s desk to be signed into law.

In a remarkable speech on the Senate floor on Tuesday, Sen. Jeff Flake (R-AZ) announced that he would not be seeking re-election in 2018 due to differences with President Trump and the Republican Party. Sen. Flake said that his beliefs in limited government, free trade, and immigration reform presented a “narrower and narrower path to nomination in the Republican Party” and criticized the party for failing to speak out against the President’s “reckless, outrageous, and undignified behavior.” The  announcement brings new uncertainty to the Arizona senate race, which is seen as a key contest in next year’s midterm elections.

The Week Ahead

Washington will be waiting with bated breath this week for the release of legislative text for the Republican tax package now that both chambers have successfully passed a budget resolution for the 2018 fiscal year. In order to maintain their timeline for enacting legislation before the end of the year, Congress would likely need to release its bill this week, with markups starting next week. Despite the imminent release, the Republican caucus is still navigating policy divides, most notably the SALT deduction, which caused 20 House Republicans to vote “no” on the budget resolution last week, and a proposed reduction the 401k deductibility. Watch for an intense lobbying effort to begin soon as Republican leadership and the White House move closer to finalizing a package.

In floor action, Senate Majority Leader Mitch McConnell (R-KY) is preparing a “judicial confirmation frenzy” with votes teed up to confirm four nominees to the federal courts of appeals, the second highest judicial circuit in the country behind the Supreme Court. Meanwhile, the House has lined up two pieces of legislation for floor consideration this week, namely a bill (H.R. 2936) that would change the federal approach to fighting wildfires and attempt to improve the resiliency of the nation’s forests, and a measure (H.R. 849) to repeal an element of the Affordable Care Act (ACA) known as the Independent Payment Advisory Board (IPAB).

President Trump is expected to make his own headlines this week with the anticipated announcement of the next leader of the Federal Reserve. In an Instagram video on Friday, the President said that he intends to publicize his decision this week and has “somebody very specific in mind.” The frontrunners for the position are understood to be Stanford economist John Taylor and Fed Governor Jerome Powell, with current Fed Chair Janet Yellen reportedly now out of the running to be re-appointed for a second term.

HHS Declares Nationwide Public Health Emergency on Opioids at President Trump's Direction

Thursday, President Trump announced that he is directing the Department of Health and Human Services (HHS) to declare a nationwide public health emergency on the opioid epidemic. Acting HHS Secretary Eric Hargan promptly issued such a declaration. It lasts for 90 days and can be extended.  

A public health emergency is short of a national emergency under the Stafford Act, which would have involved potentially billions in FEMA resources. It instead relies on more targeted authority under Public Health Service Act. The preliminary report from the President’s Opioid Commission, led by Gov. Chris Christie (R-NJ), recommended that one of these two authorities be used. A final report from the Commission is expected on Wednesday, Nov. 1. Among other steps, Thursday’s PHE on the opioid epidemic allows for:

• Expanding telemedicine services, such as remote prescribing of medication-assisted treatment;
• Reducing delays in HHS hiring, including “quickly [making] temporary assignments” needed to respond;
• Issuing dislocated worker grants through the Department of Labor to workers displaced because of opioid abuse, subject to current funding levels;
• Shifting HIV/AIDS resources to those in need of substance abuse treatment, which the Administration says is needed “given the connection between HIV transmission and substance abuse”; and  
• Accessing appropriated PHE Fund, although this largely falls to Congress to appropriate as limited funding currently is available.

While not mentioned in the Administration’s announcement, a PHE also could allow for certain changes to Medicare Part B reimbursement for drugs and biologics affected by the emergency (e.g., substituting the Average Sales Price (ASP) with Wholesale Acquisition Cost or “another reasonable measure” until the price stabilizes and is reflected in ASP). This can be done without rulemaking. In remarks at the White House, President Trump highlighted a several planned steps to address opioid abuse, including: modifying the Medicaid Institutions for Mental Disease (IMD) exclusion policy; requiring federally employed prescribers to receive opioid prescribing training; and soon launching an HHS task force to update pain management best practices across the federal government.

President Trump noted a number of efforts currently underway, including a CDC Prescription Awareness Campaign on addiction and recovery. He lauded CVS Caremark for limiting first-time opioid prescriptions to seven-day fills. The President said the Food and Drug Administration (FDA) has requested that a specific opioid be removed from the market, saying the drug is “truly evil.” He added that the FDA is requiring manufacturers to provide more training to prescribers. He stated that the federal government would be looking at “bringing major lawsuits against people and against companies” who are “bad actors.”

He cited the National Institutes of Health’s public-private partnerships on developing non-addictive pain treatments and new treatments for overdose, adding “I will be pushing concept of non-addictive painkillers very, very hard.” He said there will be a “massive advertising campaign” raising awareness on drug abuse, including urging children not to start. He urged a focus on preventing alcohol and drug abuse, citing his brother Fred’s experience. President Trump noted the Administration has distributed $1 billion in opioid-related grants, including $50 million to law enforcement and prison-focused initiatives and $81 million for pain management for veterans. He said the Administration would focus on making treatment available to those in prison, preventing addiction in first place, and reducing demand for “dangerous narcotics.”

U.S. District Court Denies Request From States to Force Administration to Continue CSRs

United States District Court Judge Vince Chhabria denied a request by California joined by 17 states and the District of Columbia to compel the Trump administration to continue making Cost-Sharing Reduction (CSR) payments pursuant to the Affordable Care Act. After the administration terminated the payments earlier this month, the states sued and requested an emergency ruling requiring the Trump Administration to continue making the payments while an ongoing lawsuit about the decision to cut off funding is pending.

Judge Chhabria denied the request because he said it initially appeared that the Trump administration has the stronger legal argument for cutting off the payments. More importantly, Judge Chhabria wrote, “the emergency relief sought by the states would be counterproductive” as “most state regulators have devised responses that give millions of lower-income people better health coverage options than they would otherwise have had.”

In the opinion, Judge Chhabria indicated that he would likely reach a final decision in the case in early 2018. The parties will hold a teleconference on Nov. 21, 2017 to set a schedule for the full adjudication of the case.

CBO Reports Alexander-Murray Bill Could Reduce Deficit by $3.8 Billion, Stabilize Premiums for 2019

Wednesday, the Congressional Budget Office (CBO) released its score of the bipartisan health care deal proposed by Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA), detailing a possible $3.8 billion in federal savings by 2027, no projected impact on insurance premiums for 2018, and no substantial change in the number of insured individuals. Although it is already too late to reduce or stabilize premiums for 2018, the office did note that the legislation could help to keep premiums steady in 2019.

Today’s report also predicts that if the legislation passes and insurance companies raise rates to compensate for the loss of cost sharing reduction (CSR) payments in 2018, insurers will pay back $3.1 billion in rebates to individuals and the government to account for the premium hikes originally designed to cover those costs. In explaining the cost of the bill, CBO stated that the Alexander-Murray bill achieves $3.8 billion in federal savings in part by allowing states to offer “copper plans,” or lower cost policies that appeal to healthier enrollees in the Affordable Care Act (ACA) markets. The analysis was unsure of the impact of the state waiver flexibility offered by Alexander-Murray, saying that it’s unclear how states may use those provisions. The report’s savings figures come in contrast to an August analysis from CBO that predicted that eliminating the CSRs, as the President has subsequently directed, could increase the federal deficit by $194 billion through 2026 and increase premiums purchased through ACA marketplaces by 25 percent by 2020.

The CBO incorporated the cost of the CSR program into its baseline of what the federal government spends each year, but it wasn’t immediately clear whether this assumption would change once CSR payments ceased under President Trump’s direction. If CBO had reflected the loss of the payments from the baseline, the bipartisan bill could have increased the federal deficit by more than $20 billion. CBO clarified that it hadn’t adjusted its baseline estimates around the President’s announcement, and continues to account for the program as it did before. The analysis therefore assigns Alexander-Murray a price tag of $0.

The bill — which has significant bipartisan support in the Senate — still faces opposition from House Republican leaders and the President, whose support is likely tied to a more conservative, Republican-only effort introduced recently by Sen. Orrin Hatch (R-OR) and Rep. Kevin Brady (R-TX). (Please see next article for more details). In terms of process, the Alexander-Murray legislation is likely stalled for the moment as Senate Majority Leader Mitch McConnell (R-KY) has said he won’t bring the measure to the Senate floor unless it receives a stamp of approval from the White House.

Republican SFC, W&M Leaders Propose Temporary CSR Funding Extension, Coupled with ACA Structural Reforms

Republican leaders of the Senate Finance Committee (SFC) and House Ways & Means (W&M) Committee announced a bicameral proposal to provide federal funding for the Affordable Care Act (ACA) cost-sharing reduction (CSR) subsidies through 2019 – but only if paired with structural reforms to the ACA, including a delay of the individual mandate (from 2017-2021) and retroactive relief from the employer mandate (from 2015-2017). In addition to the requisite ACA structural reforms, the joint proposal, brokered by SFC Chairman Orrin Hatch (R-UT) and W&M Chairman Kevin Brady (R-TX), includes contentious pro-life protections – provisions that may ultimately have enough support to pass the House but are political non-starters for Democrats in the Senate, where a 60-vote threshold will have to be met. The Hatch-Brady proposal also includes policies consistent with prior GOP health reform frameworks that seek to expand health savings accounts (HSAs).

There is no legislative text available at this time – though it is expected to be available “in [the] coming days” and the immediate impact of this proposal on the evolving Alexander-Murray bipartisan market stabilization deliberations remains unclear. The Hatch-Brady proposal follows the Administration’s recent announcement that it would no longer pay for these subsidies and came with just a week to spare before the start of the 2018 Marketplace open enrollment period. While there are few details at this time, the Hatch-Brady proposal will include (as per the committee’s press release):

• Funding for CSRs through 2019, with pro-life protections. For 2018, carriers must meet certain conditions to receive CSRs. These conditions would be determined in consultation with the Secretaries of Treasury and Health and Human Services (HHS) to prevent “double dipping.”
• Relief from the individual mandate from 2017-2021. This time frame should produce enough savings to cover the cost of providing relief from the employer mandate and the HSA expansion policy.
• Relief from the employer mandate from 2015-2017. Employers would be exempt from penalties if they did not provide coverage based on requirements of the mandate.
• Expansion of HSAs to increase the maximum contribution limit.

Sanders, Cummings Introduce Medicare Drug Price Negotiation Bill

Last Wednesday, Sen. Bernie Sanders (I-VT) and Rep. Elijah Cummings (D-MD) introduced a bill (press release) in their respective chambers to allow the Department of Health and Human Services (HHS) to negotiate drug prices under the Medicare Part D program. The Congressmen, in coordination with co-sponsors Reps. Lloyd Doggett (D-TX) and Peter Welch (D-VT), have called on President Trump to follow through on campaign promises to address pharmaceutical costs. Specifically, the bill strikes the non-interference provision of current law that prohibits the Secretary of HHS from negotiating drug prices and would allow HHS to prioritize negotiation of: high-cost drugs; drugs with “significant price increase,” drugs that “drive up Medicare Part D spending,” and single-source drugs and biologics that also meet another criterion.

HHS would have to issue public guidance on criteria to consider in negotiation, such as a drug’s budgetary impact on Medicare and its comparative and cost effectiveness. The bill would direct HHS to either establish one national drug formulary for use by all prescription drug plan sponsors or direct plan sponsors to make certain changes to their own formularies for drugs that are under price negotiation. The changes would apply beginning in plan year 2019. The bill also establishes fallback prices that are automatically adopted if negotiations between the Secretary and a drug manufacturer are not successful after one year. The fallback prices are the lowest of: the Federal Ceiling Price; the lowest price charged by 10 OECD countries with similar GDPs during the most recent 12-month period; and Medicaid best price for the most recent rebate period. Additionally, the bill would require the use of rebates for brand-name and generic drugs for low-income subsidy recipients as in Medicaid, and CBO predicted this could save Medicare $145 billion over the next 10 years.

The President indicated in January 2016 that he favored the policy of price negotiation, and stated it could “save billions.” Reps. Cummings and Welch met with the President in March to give him draft language of the bill and reportedly sent Trump two unanswered letters on the matter in follow-up. Records from the White House meeting only state that the President “expressed his desire to work” with Rep. Cummings to make drug prices more affordable. The Pharmaceutical Research and Manufacturers of America (PhRMA) has already announced its opposition to the bill, stating it would allow the government to decide what drugs patients have access to, undermine competition, and lead to price controls.