Health Policy Report

The Week in Review

Voters across the country went to the polls last Tuesday to cast their ballots in an historic midterm election. Riding a wave of unprecedented enthusiasm for a midterm, Democrats regained control of the House of Representatives for the first time since 2010. The 2018 midterms will send one of the largest classes of freshman Members to Washington in recent history — replacing a cadre of centrist, suburban Republicans with largely establishment-backed Democrats that could grow the party’s moderate wing. Meanwhile, an upstart group of unabashedly progressive candidates will be sworn in alongside as many as 15 new members of the GOP’s hardline Freedom Caucus, further fueling a dynamic that has sewn internal fissures into each of the major parties. The 2018 midterms mark the fourth straight midterm election (2006, 2010, 2014, 2018) with at least one chamber of Congress flipping.

In the Senate, Republicans have extended their majority thanks to an advantageous map that saw Democrats defending 26 seats to the GOP’s 8. Republicans flipped vulnerable Democratic seats in Missouri, North Dakota, and Indiana. The GOP is also well-positioned in Florida, however, the race is still too close to call as the final margins are within the state-mandated recount threshold. While Sens. Heidi Heitkamp (D-ND), Claire McCaskill (D-MO) and Joe Donnelly (D-IN) will be leaving Washington, Sens. Jon Tester (D-MT) and Joe Manchin (D-WV) were able to hold onto their seats and Rep. Kyrsten Sinema (D-AZ) defeated Rep. Martha McSally (R-AZ) in the race to replace outgoing Sen. Jeff Flake (R-AZ). Democrats also picked one up in Nevada, where Rep. Jacky Rosen defeated sitting Senator Dean Heller, while in Mississippi, no candidate managed 50%, meaning an upcoming runoff in which current Senator Cindy Hyde-Smith (R) will be favored to beat Democrat Mike Espy. When the dust settles, Senate Republicans will continue to enjoy a narrow majority in the upper chamber.

The Week Ahead

House and Senate lawmakers will return to Washington on Tuesday, November 13^th for a “lame duck” session of Congress. With seven outstanding appropriation bills as the most pressing priority, Congress will return to Washington facing the distinct possibility of a post-election showdown over border wall funding. Ultimately, another continuing resolution (CR) will likely be required to fund the government into early next year. Meanwhile, other items on the lame duck agenda include a farm bill and flood insurance package — both of which are set to expire before the end of the year — along with more targeted action to address issues including criminal justice reform or the Medicare prescription drug “donut hole” reimbursement issue.

In notable floor activity for this week, Senators are currently slated to take up the legislative vehicle (S.140) for Coast Guard reauthorization and consider the nomination of Michelle Bowman to be a member of the Board of Governors of the Federal Reserve. In the House, lawmakers have teed up a list of 15 bills under suspension of the rules, as well as a bill (H.R. 6784) that would remove the gray wolf from the List of Endangered and Threatened Wildlife published under the Endangered Species Act of 1973.

How the Midterm Elections Could Impact Health Care

The upcoming lame duck session could turn out to be a potentially unpredictable five-week work period framed by a changing balance of power, an outgoing Speaker of the House, and an impulsive President who may be motivated to action by the unfavorable election outcome. With seven outstanding appropriation bills as the most pressing lame duck priority, Congress will return to Washington facing the distinct possibility of a post-election showdown over the border wall. Ultimately, another continuing resolution (CR) will likely be required to fund the government into early next year. Meanwhile, other items on the lame duck agenda include the Medicare prescription drug “donut hole.” With respect to the legislative agenda in the 116th Congress, we anticipate a handful of targeted “vehicles” as the major opportunities to make legislative changes. Respective packages on appropriations, infrastructure, taxes, and health care could all serve as opportunities for bipartisan policies to come to fruition. But with a divided Congress paving the way towards an inevitably combative 2020 presidential election, partisan political posturing will be likely prioritized over pragmatic coalition building.

As Democrats wield the gavels in House committees next year, their oversight and subpoena power will take center stage — both in examining controversial policies implemented by the Trump administration, and scoring political points by taking on consumer-friendly policy priorities. With respect to the key health care committees, Reps. Frank Pallone (D-NJ) and Richard Neal (D-MA) are likely to take control of the two most influential panels: Energy & Commerce and Ways & Means, respectively. In addition to likely Oversight Committee Chairman Elijah Cummings (D-MD), the trio will have an outsized role in determining Democrats’ positioning on key health care issues next year. It’s anticipated that drug pricing issues will be among the top priorities for each of the three committees, along with the Trump administration’s implementation of the Affordable Care Act (ACA) and Medicaid waivers.

On the topic of drug pricing, we’re skeptical of the prospects that President Trump and Democrats might end up working ‘hand in glove.’ While certain elements of President Trump’s drug pricing blueprint could attract bipartisan support, it’s more likely that Democrats will be interested in staking out their position in high-profile hearings and progressive policy alternatives than working with the GOP to get legislation signed into law. Instead, expect for Democrats to use hearings and legislation to draw contrast — not identify common ground — in their agenda on prescription drug pricing.

Finally, on the ACA, it’s unlikely that Congress will make any legislative progress on the law next year. The Trump administration is already well on their way toward allowing states to skirt many of the law’s insurance requirements — a dynamic that will limit the potential for Democrats to encourage the GOP to the negotiating table on things like cost-sharing reduction (CSR) payments and reinsurance funding. While bipartisan talks could materialize around ideas like “copper” insurance plans and enhanced 1332 waivers, it’s unlikely that a compromise package could actually pass both chambers without a true crisis looming.

With a divided Congress and polarized electorate, the prospect for major legislation in the 116th Congress is somewhat limited. Contentious showdowns over must pass legislation — such as appropriations and the debt ceiling — will be particularly likely as each party focuses on mobilizing their base. Meanwhile, political jockeying for the 2020 presidential elections will begin in earnest early next year, providing yet another distraction that will make major legislating all the more difficult. Nonetheless, health care will continue to be front and center next year — in the minds of both politicians and voters — which will present a myriad of threats and opportunities for stakeholders across the spectrum.

CMS Issues Long Awaited Update to Medicaid Managed Care Rules

Last Thursday, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule intended to impart additional flexibility and shore up program integrity in state Medicaid and Children’s Health Insurance Program (CHIP) managed care programs. In particular, the rule would allow states more flexibility in setting their managed care rates and tailoring their network adequacy standards to their communities, while also proposing stricter parameters for state risk-sharing arrangements, clarifying policies for directed payments, and revising certain policies pertaining to beneficiary communications. The rule is scheduled to be published in the Federal Register on November 14, 2018.

In the agency’s release accompanying the rule, CMS Administrator Seema Verma stated, “Today’s action fulfills one of my earliest commitments to reset and restore the federal-state relationship, while at the same time modernizing the program to deliver better outcomes for the people we serve.” Reflecting this renewed relationship, the agency’s release also included a quote from the Board President of the National Association of Medicaid Directors (NAMD), Judy Mohr Peterson, who offered that, “Targeted improvements to the managed care rule have been a top priority for Medicaid Directors."

Publication of the rule came just days before CMS is scheduled to meet with state officials during the annual meeting of the state Medicaid directors. Many of the proposed changes address concerns that the states raised following the 2016 rule, and they will likely embrace these while still continuing to push for more flexibility around rate setting and financing issues. Notably, CMS is not proposing changes to the current payment policy applicable to Institutions for Mental Disease or IMDs. Instead, the agency encouraged states to provide additional data to help inform the agency’s future thinking while also referring states to the existing section 1115 demonstration program guidance. Going forward, stakeholders, including Medicaid health plans will likely focus their attention on achieving greater transparency and standards around state rate submissions as well as changes that could be viewed as weakening protections for enrollees. According to CMS the new flexibilities are intended to allow states to more efficiently run their existing programs and support states choosing to transition new populations into managed care programs while also maintaining critical beneficiary protections, ensuring fiscal integrity, and improving the quality of care for Medicaid beneficiaries. Formal comments on the proposed rule are due January 14, 2019.

HHS Secretary Azar Reverses Department’s Stance on Mandatory Payment Models

Department of Health and Human Services (HHS) Secretary Alex Azar delivered a speech last Thursday outlining HHS’ strategies for driving toward value, including pursuing mandatory demonstration models. Addressing the Patient-Centered Primary Care Collaborative conference, Sec. Azar acknowledged that of his four main priorities, looking at how to deliver better value from our entire healthcare system may be the most ambitious and requires significant collaboration with the entities that need to transform. The remarks by Sec. Azar reinforce HHS’ commitment to pursuing a range of strategies for moving towards value-based care. Last year, the Centers for Medicare and Medicaid Services (CMS) canceled the Episode Payment Models and the Cardiac Rehabilitation Incentive pay model while also paring back the mandatory Comprehensive Care for Joint Replacement demonstration. The impetus behind the 2017 change in direction appears to have come in large part from the views of former HHS Secretary Tom Price, who opposed the mandatory demonstrations.

The remarks by Sec. Azar offer some of the most direct comments on HHS’ plans for driving towards value-based care in recent months. Notably, Sec. Azar stated that HHS “knows we ought to collaborate with the private sector and look outside the four walls of government for solutions.” In response to concerns about the disruptive nature of some of the changes the department is pursuing, he emphasized his intent to pursue these thoughtfully and with consideration of everyone’s perspectives, which appears designed to further cement the buy-in and engagement of patients, providers, and private sector innovators alike. Sec. Azar also took the opportunity to interject comments on the department’s recent drug pricing proposals, namely the International Price Indexing (IPI) model for Medicare Part B and the price disclosure proposal. He cited these as the examples of the types of models that are necessary to address cost concerns and to support competition.

MACPAC Asks HHS to Halt Medicaid Work Requirement Waiver Approvals

Last week, the Medicaid and CHIP Payment and Access Commission (MACPAC) formally requested that the Department of Health and Human Services (HHS) cease approvals of work requirement waivers for the state Medicaid programs, and allow for states to make program adjustments to promote awareness, reporting, and compliance. The Commission noted in their letter that concern stems from the disenrollment of, and subsequent lockout, of 8,462 individuals who did not report work and community engagement activities in Arkansas — the first state to gain work requirements for Medicaid — and explained that the low level of reporting is a “strong warning signal” that the current process many not be structured in a way that provides individuals an opportunity to succeed. Additionally, the short implementation timeframe and lack of evaluation framework was cited as cause for concern.

The letter called for HHS to establish mechanisms for effective evaluation and monitoring, and to ensure adequate lead time for implementation before approving other states’ work requirement waivers. The Commission offered several recommendations to HHS to consider before proceeding with additional work requirement approvals: (1) reconsider heavy reliance on online reporting, as many beneficiaries have limited access to the internet; (2) education campaigns better tailored to the difficult-to-reach Medicaid population; and (3) implementation of work supports to help beneficiaries succeed.

Last month, CMS Administrator Seema Verma published a blog post noting the administration “will not retreat from this position” after announcing the health agency had approved Wisconsin’s request to implement Medicaid work requirements. She explained that community engagement requirements in Medicaid are not a “blunt instrument,” and declared that HHS had set “high expectations” for an independent evaluation to determine if the demonstration is delivering the results for which it was designed. The administrator stated CMS won’t rush to rash conclusions based on early findings, but “will use those to discern best practices and inform our evaluative work.”