Health Policy Report

The Week in Review

Both chambers of Congress were out of town for a district work period.

The Week Ahead

House and Senate lawmakers will return from their two-week district work period this afternoon to begin four weeks of legislative business. In the House, Democratic leadership plans to queue up votes on key policy priorities pertaining to drug pricing, the Affordable Care Act (ACA), climate change, and equal rights. Lawmakers are also expected to consider a host of financial services-related measures, including: (1) legislation (H.R. 1994) intended to incentivize retirement savings; (2) a bill reauthorizing the National Flood Insurance Program (NFIP); and (3) a measure (H.R. 1500) that would reverse several actions taken by former Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney.

In the upper chamber, Senators will resume consideration of pending presidential nominees, starting with the nomination of William Cooper to be General Counsel of the Department of Energy. A full list of nominations up for consideration can be accessed here.

Behind the scenes, lawmakers in both chambers will resume negotiations on a deal to raise budgetary spending caps. Senate Majority Leader Mitch McConnell (R-KY) and House Speaker Nancy Pelosi (D-CA) have each stressed the bipartisan desire to skirt the $126 billion in automatic budget cuts set to go into effect on Oct. 1 if Congress fails to raise the mandatory and discretionary spending caps, as well as avoiding another stopgap spending measure. Despite this early camaraderie, it remains to be seen whether the two sides can navigate contentious political landmines — such as border security, “Medicare for All,” and the Green New Deal — to reach a compromise.

Medicare Trustees Report: Hospital Insurance Trust Fund to be Depleted by 2026

Last Monday, the Medicare Board of Trustees released their annual report for Medicare’s two separate trust funds — the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund. The HI Trust Fund will be depleted by 2026 according to the report — the same timeline predicted by the Trustees last year. The report noted that Medicare’s costs are expected to continue to rise sharply over the next several decades, from 3.7 percent of the U.S. economy to 5.9 percent in 2038. The Trustees expect the Hospital Insurance trust fund to only be able to cover 89 percent of costs by the time the Trust is depleted in 2026 and called on lawmakers to “address these financial challenges as soon as possible.”

The Report points to steadily rising health care costs as one of the reasons for the Fund’s depletion, as well as the retirement of the baby boomer generation and an increase in the volume of services rendered. Revenue from payroll taxes are projected to fall far short of the Program’s total expense, and the report explains even a significant increase in premium payments from Medicare enrollees would not meet the Trust’s need. The Trustees note that the Fund could be made solvent by a large increase in payroll tax — anywhere from 2.90 to 3.81 percent — but at the cost of potentially harming business development and growth. Alternatively, the Trustees suggest funding the Trust with a 19 percent cut in Program spending, which could shift costs on elderly patients and reduce the generosity of benefit payments.

The Trump Administration and Congressional conservatives used the report to challenge Democrats’ support for “Medicare For All.” Health and Human Services Secretary Alex Azar argued that the government needed to “fulfill Medicare’s promise to our seniors” rather that attempt to expand Medicare into a “universal entitlement.” He also touted the Administration’s budget proposals to lower prescription drug costs and “pay for value” as avenues in which the Trust could be extended an additional eight years, while Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma called the report a “dose of reality.” On the Hill, House Ways and Means Committee Chairman Richard Neal (D-MA) blamed “years of Republicans’ harmful policies” for the depletion of the Fund, although the Committee’s Ranking Member Kevin Brady (R-TX) responded that the parties should work together to reform Medicare. Echoing the Trustees, the non-partisan Committee for a Responsible Federal Budget urged Congress to pass reforms soon, suggesting it would only be more difficult to implement as time went on. Additionally, they sided with Republicans in asking Democrats to focus on “saving” Medicare before attempting to expand the program. 

CBO Report on Single-Payer Health Care to be Released Next Week

Last Thursday, the Congressional Budget Office (CBO) announced it would be releasing a report on single-payer health care on May 1. Although the report will not be a formal score of Medicare for All legislation, it is sure to draw scrutiny from both parties as health care is anticipated to be a major election issue. The report was completed in response to a request from House Budget Committee Chairman John Yarmuth (D-KY), and will address “design consideration” around single-payer health care. The Committee plans to hold a hearing on the report in May, and the House Rules Committee will address the Medicare for All Act next Tuesday. Although Republicans have asked CBO to provide cost analyses for several existing single-payer policy proposals, the Office has not yet indicated they plan to do so.

CMS Announces New Integrated Care Demonstration Opportunities

Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma sent a letter to state Medicaid directors on Wednesday outlining new opportunities for integrated care for dually-eligible beneficiaries. This announcement continues CMS’s emphasis on improving care through more effective care coordination for dually-eligible beneficiaries, and follows a letter that CMS sent to state Medicaid directors in December 2018 emphasizing the existing avenues for improving care for dually-eligible beneficiaries. CMS invited participation in two Financial Alignment Initiative programs, namely, capitated financial alignment models and managed fee-for-service, praising the evidence generated by current demonstrations of the programs. Its third opportunity is open-ended, calling for states to develop new, state-specific integrated care models that “promote empowerment and independence” for beneficiaries, improve quality, and lower costs.

In a Health Affairs blog post rolled out alongside the letter, Administrator Verma highlighted the new demonstration opportunities, saying that fewer than 10 percent of dually-eligible beneficiaries are enrolled in an integrated care program. Through the new opportunities, CMS hopes to expand integrated care through the Financial Alignment Initiative and new, state-driven programs. She also discussed the technical challenges of Medicare-Medicaid integration, pointing to CMS’s recently-proposed interoperability rule which will require daily exchanges of information on dually-eligible beneficiaries between the states and CMS.

CMS Releases FY 2020 IPPS and LTCH Prospective Payment System Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) released the Fiscal Year (FY) 2020 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Prospective Payment System proposed rule on Tuesday. The annual rule updating Medicare payment policies and rates includes changes the agency states will focus on the singular objective of “transforming the health care delivery system through competition and innovation to provide patients with better value and results.” The rule overall is expected to increase total Medicare spending on inpatient hospital services, including capital, by $4.7 billion in FY 2020, and long-term acute care payments are projected to increase by approximately $37 million.

This payment rule is consistent with CMS’s current focus on sustainability issues in rural areas, including its proposal to reduce the disparity in pay between rural and urban hospitals. CMS proposed to increase payment rates for hospitals in the bottom 25 percent of the wage index and decrease reimbursement for those above the 75th percentile of the wage index. Decreases would be capped at 5 percent for FY 2020 to mitigate their impact, and the proposal would be in effect for at least four years beginning in FY 2020.

The proposed rule also addresses payment policies for innovative devices and therapies coming to market and makes updates to CMS’s hospital quality incentive programs, including adding reporting for electronic clinical quality measures on interoperability and opioid use. The proposed rule included a raise for the add-on pay for new technology, as well as an alternative add-on payment pathway for Breakthrough Devices approved by the Food & Drug Administration (FDA). The rule also increases Medicare reimbursement for hospitals administering CAR-T cancer drugs, although it does not yet create a billing code for the therapies. Additionally, CMS proposed removing the Verify Opioid Treatment Agreement due to its inability to further interoperability and implementing two new opioid-related reporting requirements in its place. CMS further identified several areas where it is specifically seeking comment in order to operationalize its proposals, and asked stakeholders to submit comments by June 24, 2019.

Key House Democrats to Discuss Drug Pricing Solutions with Progressive Members

The Chairmen of the powerful House Energy & Commerce Committee and House Ways & Means Committee will meet with members of the Congressional Progressive Caucus this week to discuss Medicare drug price negotiation policies and potential legislation. Energy & Commerce Chairman Frank Pallone (D-NJ) and Ways & Means Chairman Richard Neal (D-MA) will use the opportunity to discuss current divisions among members on which drug pricing bill to champion and will reportedly be listening to gather input from lawmakers rather than presenting a plan on how to draft legislation allowing Medicare to negotiate pharmaceutical prices.

Many Progressive Caucus lawmakers currently support Rep. Lloyd Doggett’s (D-TX) bill for Medicare price negotiation, which would strip a drug company of its patent if it refused to acquiesce to the government on the drug’s price. A competing bill from Speaker Nancy Pelosi’s (D-CA) office — deemed too weak by some progressive members — would instead rely on an outside arbitrator to set prices if negotiations failed. Speaker Pelosi is also currently in talks with the President on how to lower drug prices, although members have expressed skepticism over the likelihood of a deal being reached.

New CMMI Models Seek to Promote Population-Based Primary Care

In a push towards adopting payment models that are better aligned with patient needs and agency goals to increase value-driven care, the Centers for Medicare and Medicaid Services (CMS) last Monday announced new demonstrations through the Center for Medicare and Medicaid Innovation (CMMI) for alternative reimbursement structures centered on primary care and population-based payment (PBP). Under the umbrella of the Primary Cares Initiative, the new initiative offers five-year models under two distinct pathways, the Primary Care First (PCF) track and the Director Contracting (DC) track. CMS projects that one in four primary care providers could choose to participate in one of the five new payment model options offered under the two distinct pathways, which could in turn cover a quarter of Medicare’s fee-for-service enrollees.

The initiative combats criticism that CMMI has not sufficiently invested in primary care. It also seeks to ease the transition to risk-based payment by offering options based on the primary care provider’s level of experience with alternative reimbursement approaches. HHS expects its population health focus combined with risk-sharing arrangements will be attractive to state Medicaid programs as well as private employers. In turn, officials anticipate this could significantly accelerate an outcomes-based approach to service and reimbursement in the health care system more broadly.