Health Policy Report

The Week in Review

In the presidential race, Hillary Clinton opened a significant lead in the latest polls following the Democratic National Convention and a series of controversies involving her opponent, Donald Trump. With just under 100 days until the election, Clinton has approached a double digit lead nationally and carries an advantage beyond the margin of error in most of the critical swing states across the country. However, it remains to be seen whether this is a temporary boost in support – a so-called “convention bounce” – or whether recent polls reflect a more lasting trend going forward.

With lawmakers campaigning in their districts during recess, developments in the campaign could have an impact on the work that Congress is able to complete in their September session. Most notably, recent shifts in the election dynamic could impact fiscal negotiations as lawmakers work on a continuing resolution (CR) to fund the government beyond the end of the fiscal year on September 30. Rumors also abound that Senate and House leadership may be closing in on an agreement to pass compromise language that bridges the House’s 21^st Century Cures bill and the Senate’s so-called “Innovation” package. Both chambers of Congress are due back on Tuesday, September 6.

The Week Ahead

Despite calls from some lawmakers to reconvene for a special session to approve funding to fight the Zika virus, Congress is expected to remain in its August recess.

White House Tries to Spark Senate Interest ‘Cures’ Bill

Last week, the Obama Administration began negotiations with lawmakers on a deal to bring the House-passed “21^st Century Cures” package to the Senate floor in September, including pressing lawmakers to provide funding for the so-called cancer moonshot initiative and the opioid abuse epidemic. Notably, the White House’s involvement near the fall elections underscores how serious policymakers are about moving a legislative vehicle this year. It also marks for the first time that the “cures” bill has been discussed as a potential vehicle for funding to address prescription drug abuse.

The White House’s call for funding is a significant development as congressional Democrats’ push for increased funding has otherwise been largely ignored. Neither the House nor the Senate included funding for the cancer moonshot in their respective appropriations measures, and Republicans rejected a Democratic amendment that would have tapped into budgetary offsets in the Cures package to include funding in the opioid bill. Instead, Republicans have looked to provide opioid funding through the annual appropriations process. One source suggested last week that the White House would not rule out using funds from the public health and prevention fund authorized by the Affordable Care Act (ACA) to pay for the overall package if it included some of the administration's other priorities. However, Democrats are likely to push back on the idea as they have opposed numerous attempts by Republicans to tap the fund in the past.  Furthermore, the White House has threatened to veto several bills that would have relied on the public health and prevention fund to support these initiatives.

Meanwhile, recess negotiations will also focus on finding offsets to include a request by Democrats to include mandatory funding for the National Institutes of Health (NIH), a controversial issue that has since caused the bill to stall. Among those involved in the discussions include staff from House Energy and Commerce Committee Chairman Fred Upton (R-MI), ranking Democrat Frank Pallone Jr. (D-NJ), Senate HELP Committee Chairman Lamar Alexander (R-TN), and Ranking Member Patty Murray (D-WA).

Clinton Adviser: Health Plans ‘Intrigued’ By Medicare Buy-In Idea

According to Chris Jennings – a top advisor to Democratic presidential nominee Hillary Clinton – healthcare issuers are interested in a proposal that would allow Americans age 55 and older to “buy into” Medicare. At a panel during the Democratic National Convention, Jennings announced that allowing people to buy into the program would provide new options in areas with limited offerings and stressed that members of Congress in both parties whose constituents have few insurance choices should respond thoughtfully. In his remarks, he noted that the buy-in appeals to issuers because those who make a higher income, just over the cutoff point for receiving tax subsidies of 400 percent of the federal poverty level, may otherwise have only one or two choices. Furthermore, Jennings noted that the buy-in could help with exchange risk pools, and would not be lowering traditional Medicare down to age 55. This new cohort of purchasers would comprise a separate pool as older populations are generally sicker and cost more than the younger risk pools. Jennings added that it is an alternative that should be considered if the exchanges are not providing enough options for consumers and that he believes it would also send a message to insurers not to pull out of the Affordable Care Act (ACA) federal marketplace exchanges.

Jennings did not elaborate on how the buy-in may be designed, including whether the government-backed plan would also participate in the ACA’s risk adjustment program. However, another member of the panel, former Senate Majority Leader Tom Daschle (D-SD) said the buy-in pool would likely be part of risk adjustment to stabilize the market, while noting that it may be too early to predict exactly how the campaign intends to structure its proposal. Meanwhile, Jennings said Clinton has long argued that more competition is needed to provide more choices and to help constrain costs, and that, as an example, she chose to back related legislation in 2001 when she was Senator of New York.  Additionally, he noted that Clinton cosponsored the “Medicare Early Access and Tax Credit Act,” introduced by Sen. Jay Rockefeller (D-WV), which would have allowed Americans from age 55 to 64 to purchase Medicare, created a separate trust for the early buy-in pool, and granted tax credits to certain enrollees.

Insurers are still in the process of outweighing the proposal, as they have not seen further details from the Clinton campaign in terms of how the policy would be implemented or the potential interactions between Medicare, Medicare Advantage and Part D and the impact on the exchanges.

CMS Finalizes Controversial Hospital Overpayment Cut

In a final rule released Tuesday, the Centers for Medicare and Medicaid Services (CMS) announced that it will keep a controversial 1.5 percent cut to hospital reimbursement, much to the dismay of industry stakeholders who have rallied against the move which aims to recoup a total of $11 billion in overpayments. Hospitals had expected the cut to remain at 0.8 percent – as it has been every year since 2014, two years after Congress mandated CMS to recover funds allegedly lost as a result of incorrect coding on inpatient hospital stays. Industry leaders quickly came out against the rule, arguing that the agency is undermining Congress’ intent by imposing a cut that is nearly two times what Congress specified. CMS, however, estimated that another 0.8 percent reduction would have left the government $5 billion short of recouping the overpayments by its deadline of 2017 and said changing economic and healthcare trends upended its earlier projections and made it necessary to increase the cut.

Meanwhile, CMS also announced Tuesday that it will delay changes to the way it distributes disproportionate-share payments (DSH) to safety-net hospitals, a policy that industry is likely to agree with. The new formula would have relied mostly on the amounts of uncompensated care and charitable care each hospital claims on its Medicare cost report. Previously, it relied mostly on the number of Medicaid, dual-eligible and disabled patients each hospital served. The agency proposed making the change starting in fiscal year 2018; however, industry stakeholders said the formula was inaccurate and claimed it would favor hospitals that see large numbers of uninsured patients. As a result, the agency said it was not finalizing this proposal and that it hopes to use a version of the formula by fiscal year 2021.

Furthermore, CMS announced that it will distribute almost $6 billion in uncompensated care payments next year – a drop of approximately $400 million from last fiscal year. Overall, hospitals will still receive $746 million more under the 2017 Inpatient Prospective Payment System than they did in fiscal 2016 as a result of several changes, including the reversal of the 0.2 percent payment reduction under the two-midnight rule and a one-time increase to offset the two-midnight cut applied in fiscal 2014-2016. Finally, the agency announced long-term-care hospitals will see rates fall by 7.1 percent or approximately $363 million in 2017 because of a new site-neutral policy that states off-campus hospital outpatient departments will be paid under Medicare Part B systems instead of outpatient prospective payment systems. It is set to go into effect January 2017.

Study: Prescription Drugs Aren’t the Largest Driver of Premium Increases

According to a study conducted by Avalere Health, outpatient spending is expected to be the largest driver of premium increases in 2017, despite growing public concern for the cost of prescription drugs as a driver of premium increases. Specifically, the study found that outpatient spending accounts for 29.9 percent of rate increases and makes up 27.4 percent of insurance plans’ spending. Contrary to recent headlines and claims from insurers that prescription drugs are to blame for rising insurance costs, the analysis found that prescription drug spending represents a smaller portion of rate increases. Notably, the research found that prescription drugs will account for 14.3 percent of premium growth in 2017, lower than the 17.7 percent of total spending that went towards drugs in 2015.

Prescription drug spending has become a prominent topic both on the campaign trail and among stakeholders. When discussing premium increases in 2017, both insurers and experts alike have pointed to growth in drug spending as a potential reason for the premium rate spikes. While prescription drug spending skyrocketed after the introduction of new drugs to the market in 2014 and 2015, particularly hepatitis C drugs, the Avalere study reflected that spending is not expected to maintain the same level of growth going forward. Meanwhile, the analysis also found that costs for inpatient care also appear to be leveling off as it reported that they contributed 19.6 percent to overall health spending in 2015, but they are only expected to contribute 15.4 percent of 2017 rate increases.