Health Policy Report

The Week in Review 

While the House enjoyed a week-long recess, the Senate was in session for Monday and Tuesday before heading home early after passing a pair of defense bills and naming highway bill conferees. On Tuesday, the Senate overwhelmingly approved (91-3) a revised defense authorization bill (S. 1356), clearing it for President Barack Obama’s signature. The House passed the same bill on November 5, which reflects the budget deal that increased fiscal year (FY) 2016 spending caps for defense and non-defense activities by $25 billion each. The revised measure authorizes about $5 billion less than original defense policy bill (H.R. 1735) that President Obama vetoed because it sidestepped budget caps. President Obama is expected to sign the revised measure despite opposition to some provisions in the bill, which continues prohibition on closing the military prison at Guantanamo Bay and on transferring detainees to the United States. 

Also on the defense front, the Senate easily passed (93-0) the Military Construction-Veterans Affairs appropriations bill (H.R. 2029), which will likely become the legislative vehicle for the catch-all spending measure that’s being negotiated by House and Senate appropriators to fund the government for the balance of FY 2016. House leaders have decided against bringing up a free-standing Financial Services appropriations bill because rank-and-file members don’t support it at this time. That measure and other remaining spending bills are likely to be folded into the eventual omnibus package. 

Off the floor, the Senate named its conferees to reconcile House and Senate versions of a six-year transportation funding measure which must be passed by Congress before a stopgap funding measure expires on November 20. The negotiation of the transportation package is likely to dominate discourse on the Hill next week.

The Week Ahead

With the current stop-gap authorization for highway funding expiring on Friday, it is now crunch time for the surface transportation bill.  House-Senate conferees will try to quickly iron out differences on H.R. 22 and enact the first multi-year highway authorization law since 2012. The transportation policy bill would renew highway and surface transportation programs for six years while paying for just three years. The House has expressed concerns over some of the pay-fors used to finance the Senate version of the bill, however. Further complicating matters is the recent passage of the Budget Agreement, effectively taking some of those offsets off the table. This will be the key area of negotiation in the conference committee and the result could be a much narrower bill that only extends funding into 2017 but requires Congress to revisit funding under a new President. If that happens, Congress will likely return its focus to repatriation and other tax measures to then fund a longer transportation measure.  While lawmakers are hopeful to complete a deal by the November 20 deadline, another short-term patch may be necessary to ensure that highway funding does not lapse during the negotiation of a long-term package.

The end-of-the-year spending battles will continue to take shape, as behind-the-scenes talks on a catch-all spending bill are set to accelerate due to a December 11 deadline looming for passing the next appropriations package. Also increasing the likelihood of an omnibus package is the failure of individual appropriations bills in both chambers; a Financial Services bill never made it to the House floor because of rank-and-file opposition, and in the Senate, Democratic objection to Environmental Protection Agency (EPA) policy riders has prevented consideration of the Transportation-HUD spending bill. With the appropriations bill route off the table, Senate Majority Leader Mitch McConnell (R-KY) probably will turn to resolutions of disapproval that would overturn EPA regulations on power-plant emissions. Look for those measures, and other remaining spending bills, to be folded into the omnibus.

On the floor next week, the House could take up two bills that would relax lending rules set by the Consumer Financial Protection Board (CFPB) created under the Dodd-Frank law. One measure (H.R. 1737) would nullify CFPB guidance on indirect auto lender compliance with fair lending requirements. Other bills that could come on the floor include a measure (H.R. 1210) to provide liability protection to mortgage lenders that hold loans in their own portfolios, and a bill (H.R. 3189) to make changes to the Federal Reserve’s operations, including by requiring audits of more Fed activities and placing restrictions on its emergency lending powers.

 The House also may take up Senate-passed legislation (S. 2036) that would scale back the multi-million dollar pay raises for the chief executive officers of mortgage giants Fannie Mae and Freddie Mac. According to the provisions of the bill, executive pay would be capped at $600,000, the level before plans were approved in July restoring compensation to about $4 million each. The Senate bill, which passed by unanimous consent in September, was co-sponsored by Sens. David Vitter (R-LA) and Elizabeth Warren (D-MA).  Another possibility for the House agenda is a Senate-passed commercial space bill (H.R. 2262), which would give more certainty to SpaceX, Boeing Co. and other companies vying for contracts to carry cargo or U.S. astronauts to the International Space Station.

In the upper chamber, senators will start their week on Monday by considering the nomination of LaShann Moutique DeArcy Hall (Executive Calendar #141) to be US District Judge for the Eastern District of New York.  The Senate has yet to announce their plans for the balance of the week.

Senate Parliamentarian Says Individual and Employer Mandate Repeals Violate Byrd Rule

The House-passed reconciliation bill, which would repeal a slate of major Affordable Care Act (ACA) provisions, ran into new obstacles last week when Senate Parliamentarian Elizabeth MacDonough told lawmakers that two major provisions in bill—the proposed repeals of the individual and employer mandates—violate the Senate’s Byrd rule governing the reconciliation process. While MacDonough said that the bill could move through the expedited reconciliation process, she also stated that repealing the mandates would be subject to a Byrd rule challenge. This means that Democrats in the Senate could attempt to strike the repeals through a Senate point of order process, which would then require 60 votes to waive – a threshold that Republicans are unlikely to meet. The parliamentarian’s decision raises questions as to whether the House’s reconciliation package will ultimately succeed, particularly given the opinions of some conservative Republican senators, who suggest that the House didn’t go far enough in their efforts to repeal the president’s signature health care law. However, Senate Republicans are confident that they can preserve the bill by making the necessary adjustments in a substitute amendment.

Even beyond its procedural challenges, the reconciliation bill passage remains uncertain due to opposition from some Senate Republicans. Passing a bill through the reconciliation process—which is the only filibuster-proof option available to Senate Republicans who control the chamber with 54 votes—depends on the votes of a handful of skeptical senators, including presidential candidates Sens. Ted Cruz (R-TX) and Marco Rubio (R-FL), as well as Utah Senator Mike Lee (R-UT). All three have officially stated that they “cannot support” a bill that does not “fully repeal” the healthcare law – meaning that they will only accept a complete repeal of the law’s root and branch, which is impossible in this package due to the parliamentary constraints of reconciliation.  

Taking advantage of the recent struggles with the bill, Senate Minority Leader Harry Reid (D-NV) urged Republicans on Thursday to give up on their hopes of passing the ACA repeal, citing the ruling of the Senate Parliamentarian. Sen. Reid argued that the Senate reconciliation bill “will have to be more supportive of Obamacare's mandates than the House-passed bill.” Instead, Senate Republicans plan to make language tweaks in a substitute amendment—which would only require a simple majority—that address the parliamentary challenges and also preserve the mandate repeals. The bill is likely to receive a vote on the Senate floor in the week of November 30. 

User Fee Talks, Drug Pricing Politics Threaten Senate ‘Innovation’ Bill

Given the uncertainty around the Senate’s yet-to-be-released draft of a medical innovation bill, the drug and medical device industry are looking to next year’s must-pass user fee reauthorization measure as a vehicle for policy changes to the Food and Drug Administration (FDA). Although Senate HELP Committee Chairman Lamar Alexander (R-TN) previously stated that the innovation bill would be taken to the Senate floor by the end of the year, it will most likely be tabled until after Christmas break due to larger budget issues faced by Congress. Observers believe that key provisions of the chamber's FDA reform initiative are likely to be rolled into the ongoing negotiations on reauthorization of FDA user fees including the Medical Device User Fee Amendments (MDUFA), the Prescription Drug User Fee Act (PDUFA) and the Generic Drug User Fee Amendments (GDUFA). These user fees may prove to be a better vehicle for drug and device companies to attach their key priorities.

Additionally, Democrats have increasingly pressured the committee to add drug-pricing related provisions into the innovation package, a controversial move that could bring the entire prospect of the bill into question. Proponents of the industry fear that the medical innovation bill could include drug price controls, which would mostly likely cause them to abandon the bill. Although the House-version of a medical innovation bill (H.R. 6), known as ‘21^st Century Cures,’ swiftly passed through the House with bipartisan agreement, it failed to address some controversial issues—such as the regulation of laboratory developed tests (LDTs)—that are likely to be considered in the Senate iteration and could produce a partisan divide. While it remains a hot-button issue, consideration of a Senate medical innovation bill will likely slide into next year as Congress must first navigate two pressing deadlines on highway funding and the funding of the government before they break for the holidays on December 18.

AMA Urges DOJ to Block Insurance Mergers

In a letter made public Wednesday, the American Medical Association (AMA), the country’s largest association of physicians, urged the Justice Department to block the mergers that Anthem and Aetna intend to complete with Cigna and Humana, respectively. The association argued that merely forcing the companies to sell off assets would not prevent price increases and suggested that the government should not settle for divestitures. They warned the Justice Department that the mega-mergers would give both insurers too much power in the marketplace and added that the moves would most likely cause physicians to be poorly reimbursed. Moreover, they said that the merger would hinder physicians’ ability to invest in new equipment, technology, training, staff, and other practice infrastructure that could improve the access to, and quality of, patient care. The CEOs of both companies have already testified in front of Congress to defend the deals, but it remains unclear what action the Antitrust Division of the Justice Department may take.

Supreme Court to Again Rule on ACA Contraception Mandate

Friday, the Supreme Court once again agreed to interpret the contraception mandate in the ACA, this time involving a group of seven cases from the Little Sisters of the Poor and other religious nonprofit groups. The groups argue that the mandate violates the Religious Freedom Restoration Act, which prohibits the government from substantially burdening the free exercise of religion. At the center of their case is the ACA's requirement that groups self-certify their status as a religious employer and cite religious objections to providing some contraceptives to their employees. The religious groups argue that they can face millions of dollars in fines per year for failing to comply with the mandate, but the Obama administration has maintained that it has provided organizations an easy way to opt-out of the legal requirement.

Appellate courts around the country have typically ruled against the religious nonprofit groups, but that streak was broken in September when the U.S. Court of Appeals for the 8^th Circuit, based in St. Louis, Missouri, ruled against the government. The Supreme Court temporarily blocked the federal appeals court rulings while the justices decided whether to hear the cases. Last Monday, the Supreme Court narrowed the cases down to seven and told the attorneys involved that arguments were set to be in March and a decision would be reached before the end of June. Regardless of its outcome, the decision is expected to be controversial and will most likely inject health care, religious freedom, and contraception issues into the 2016 presidential campaign.