Health Policy Report

The Week in Review
 
Two high-profile issues dominated discussion in Congress last week, namely a conclusion to the highway funding debate—for now—and the ongoing controversy over the actions of Planned Parenthood. With the highway funding deadline looming, the Senate and House reached a short-term agreement to keep money flowing for highway construction until October 29, 2015. However, both chambers remain committed to their competing proposals for a long-term fix; the Senate prefers a six-year measure that includes three years of various offsets and a renewal of the Export-Import Bank (Ex-Im), while the House wants a measure that prevents the Ex-Im bank from reopening and relies heavily on repatriation revenue from businesses operating overseas. Finding a long-term compromise will be near the top of the Congressional agenda when they return from the August recess.

The hidden videos showing Planned Parenthood operatives discussing the sale of fetal body parts sparked a firestorm among conservatives last week and the controversy has now become a budgetary issue. On Thursday, 18 House Republicans announced that they will refuse to pass any funding measures that include financial support of Planned Parenthood and many other Republicans are reportedly considering similar positions. The Senate has already introduced legislation (S.1881) that would defund the organization, but united Democratic opposition is likely to prevent the measure from breaking the 60-vote threshold necessary to pass cloture.
 
Before leaving for recess on Wednesday, the House passed a veterans related bill (H.R. 1994) 256-170 that would authorize the VA to fire or demote employees based on poor performance or misconduct. Finally, last week also witnessed the House passing a measure (H.R. 427) 243-165 that would force any major regulation—defined as one that has an economic impact of over $100 million—to be approved by Congress before it is implemented.
 
The Week Ahead
 
This is due to be the last legislative week before the August recess, and with the House having already left Washington, the spotlight will be on the Senate. First up will be a cloture vote on moving legislation that would prevent Planned Parenthood from receiving federal dollars. Democrats are expected to successfully block the bill, but the fight over the womens’ health organization is likely to continue into the fall. Also on the Senate’s agenda is cybersecurity legislation (S.754) that would give liability protection to companies that voluntarily share information on cyber threats with the government. The measure has been criticized by Finance Committee ranking member Ron Wyden (D-OR), who may propose amendments to make the bill a wide-ranging vehicle for cybersecurity policy proposals.
 
Planned Parenthood Fight Complicates Budget Deal
 
A few short video clips have thrown the entire government funding debate into question as Republicans have threatened to block any legislation that maintains financial support for the reproductive health organization known as Planned Parenthood. Current federal funding for the organization is only directed to its women’s health initiatives—providing such services as mammograms and cancer screenings—but conservatives have seized on the conversations of some of its operatives suggesting that it sells fetal organs across state lines. The controversy has quickly spiraled into a fight over abortion, leading both parties to draw firm red lines ahead of a must-pass spending measure prior to a government funding deadline of September 30.
 
Already, 18 House Republicans and some conservative Senators, such as presidential candidate Ted Cruz (R-TX), have vowed to strip the organization of its support, and late last week, centrist Republicans such as Sen. John McCain (R-AZ) took up the fight. Senate Majority Leader Mitch McConnell (R-KY) will hold a cloture vote on a stand-alone bill to defund the organization this week, but it’s expected to be well short of the 60-vote threshold necessary to pass the chamber. Sen. Chuck Schumer (D-NY) has already declared that if Republicans follow through on their promise to link a defunding of Planned Parenthood to a broader continuing resolution, Democrats are willing to send the government into a shutdown. While bombast on both sides is heating up, the likelihood of a shutdown remains low as both sides fear the political fallout it could bring ahead of the 2016 election.
 
Health Spending Growth Accelerates; Feds Say More Growth to Come
 
After a six-year slowdown, national health spending rose by 5.5 percent in 2014, compared to 3.6 percent growth in the year prior. Experts have attributed the growth to an aging population, a stronger economy, and a rise in the number of Americans with health insurance, thanks to the provisions of the Affordable Care Act (ACA). Prescription drug spending has led the way, with an increase of 12.6 percent last year, driven in part by a slew of expensive new drugs used to treat hepatitis C. An overall growth rate of between 5 and 6 percent will likely be the new normal, with CMS economists predicting an average annual gain in health spending of 5.8 percent over the next decade, peaking at 6.2 percent in 2024. However, even this higher rate is significantly below the 9 percent growth that was witnessed consistently in the three decades prior to the most recent recession.
 
Meanwhile, Medicare is expected to grow by an average of 5.8 percent over the next decade, although Medicare actuaries expect a slight drop this year to 4.7 percent. This includes a significant jump in spending from the Medicare Part D program, which was up 17.3 percent last year – the biggest growth rate in the history of the drug benefit portion of the program. While the growth was higher than experts anticipated, CMS also announced last week that it expects the average premium for Part D to be stable at $32.50 a month.
 
Finally, Medicaid spending also remains high, but is predicted to drop in 2015 to 8.2 percent growth from 12 percent in 2014 due to the halt of state expansion of the program. Both Congress and health insurers have taken action in an attempt to stem the runaway growth of spending on health care, but the industry is still set to represent 19.6 percent of the nation’s GDP by 2024, a figure much higher than other industrialized countries.
 
Hospital-Related Medicare Bills Introduced, W&M Prepares for Fall Consideration
 
Last week saw the introduction of three bills that would make changes to Medicare’s relationship with hospitals, and the House Ways and Means Committee has already started holding meetings to hammer out details before its consideration after the August recess. The bills are based largely on a draft bill that was circulated to the Committee in November 2014, and Health Subcommittee Chairman Kevin Brady (R-TX) is hoping to negotiate all of the issues into a broad hospital bill this fall. Specifically, the bills would increase overall Medicare Disproportionate Share Hospital (DSH) spending to $3.3 billion (H.R. 3288), require the Centers for the Medicare and Medicaid Services (CMS) to link payment rates between inpatient and outpatient services for surgeries in 10 diagnosis-related groups (H.R. 3291), and change the payment system for hospital indirect medical education from one based on the number of discharges to a bi-monthly lump sum (H.R. 3292).
 
These bills have been viewed as setting the framework for Brady’s larger effort this fall, which is likely to also include reforms to graduate medical education and rural healthcare access issues. Also potentially on the horizon would be an addition of a value-based measure to the Medicare payment mechanism, an initiative strongly backed by Brady, but that will likely face resistance from providers.  Many lawmakers are hoping to capitalize on the momentum from the sustainable growth rate (SGR) repeal in April to make further reforms to the Medicare program, which celebrated its 50-year anniversary last week. 
 
GAO: ACA Holding Back Small-to Medium-Sized Device Makers
 
A report released by the Government Accountability Office (GAO) last week indicated that small-sized medical device companies have taken a net loss over the past decade, despite an industry-wide jump in profits. Across the entire industry, sales increased 43 percent between 2005 and 2014, but that growth was solely attributed to increased sales from large companies. Among the 102 companies studied by the GAO, the biggest 30 were responsible for over 95 percent of annual sales.
 
Medical device makers large and small have opposed the medical device tax implemented as part of the ACA in 2014. Despite strong opposition from the White House, a repeal of the tax has received bipartisan support – a bill (H.R. 160) repealing the tax attracted 46 Democrats when it passed the House last month. Opponents have argued that the 2.3 percent excise tax puts a burden on smaller companies, an argument that is corroborated by the GAO’s report. And even while reporting industry-wide profits, the GAO declined to say that the medical device tax was having little effect on medical device manufacturers, instead insisting that profits could be due to “mergers and acquisitions, the introduction of new products, and product recalls.”
 
Wyden Seeks to Limit Drug Costs Through Value-Based Purchasing; Burwell Seeks Part D Price Negotiation           
 
Last Tuesday at an event hosted by the National Journal, Senate Finance Committee ranking member Ron Wyden (D-OR) argued that Medicare and Medicaid need to shift to a system where drugs are purchased on value. In the wake of the SGR repeal, Wyden believes that the two parties could come to a compromise on a value-based purchasing system, but admitted that he does not see a vehicle for such legislation in the near future. The Oregon Senator did not offer specifics, but huge growth in drug prices in recent years has attracted the attention of lawmakers on both sides of the aisle and is likely to be the subject of additional scrutiny in the months and years to come.
 
In a congressional hearing earlier last week, Department of Health and Human Services (HHS) Secretary Sylvia Mathews Burwell testified that she would support a proposal to allow CMS to negotiate drug prices for Medicare Part D with pharmaceutical companies. The Secretary conceded, however, that it would take action from Congress to bring such policy into reality as the agency currently does not have the statutory authority to negotiate with the drug industry.