By Kerry Young, CQ Roll Call

August 20, 2015 -- Congress' top advisers on Medicare gave their backing this week to plans to force hospitals and home health agencies to participate in pilot payment programs that carry financial risk, a move that could help shield the big government health program from provider backlash.

The Medicare Payment Advisory Commission (MedPAC) said it supports a proposed program that would test bundled payments on hospitals that perform hip and knee replacements in 75 selected regions of the country. MedPAC also offered largely positive views for a plan to force home health agencies in nine states to participate in a test where reimbursements might be raised or cut based on performance. The observations were made in separate comments submitted to the Centers for Medicare and Medicaid Services (CMS) about two proposed rules. 

MedPAC "supports the planned program" for testing an alternative payment model for hip-and-knee replacements, wrote Francis J. Crosson, the chairman of the panel, in an Aug. 19 letter to CMS. Medicare's Innovation Center "was created to test exactly this kind of alternative payment model."

On the home health model, MedPAC noted that the Affordable Care Act directed CMS to create such a program for testing alternative payments. Administrators proposed applying the test to agencies in nine states: Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee, and Washington.

"The compulsory nature of the model addresses a major limitation of past demonstrations," MedPAC's Crosson wrote in an Aug. 18 letter to CMS. "The experience of the past indicates that agencies avoid demonstrations that present financial risk, resulting in relatively low provider participation."

In general, the home health test, known as a value-based purchasing model, "has many desirable features, and could be improved with several refinements," Crosson said.

The efforts are part of a broader shift to move Medicare's more than $600 billion in annual spending away a pattern of paying for services provided and toward pegging reimbursements to the quality of care delivered. The pilots both could put providers at risk for losing money and are expected to draw protests. Health care interest groups will make their objections known to lawmakers, who might then question CMS' approach.

Lawmakers in both parties, though, rely on MedPAC in evaluating CMS' actions. Its support for the the test programs "is a big deal for CMS," said Dan Mendelson, chief executive of Avalere Health, and a former associate director for health at the White House Office of Management and Budget.

"It gives CMS a wider operating berth from which to promulgate these kinds of policies," Mendelson said in a Thursday interview.

CMS has issued a special proposed rule to create the test program for hip-and-knee replacements, for which comments are due by Sept. 8. The home health test program would be created as part of the annual CMS payment rule for these services, for which comments are due by Sept.4.

MedPAC's more detailed suggestions for payment changes are important in providing insight into other revisions that the agency might make, said Joseph Antos, a researcher at the American Enterprise Institute. CMS appears set on making the participation mandatory for the home-health test, Antos wrote in an email to CQ HealthBeat. These may be some room for revisions in other aspects, which would be welcomed by many organizations.

"CMS has not been flexible enough in the early design stages and has not been eager to incorporate suggestions—it has been much more a top-down approach when some collaboration with the providers might produce a better final design," Antos said.

Gail Wilensky, a former chair of MedPAC who also directed Medicare and Medicaid from 1990 to 1992, had a similar objection to the design of the hip-and-knee replacement test program, saying she was "a little disappointed" with the proposal.

"CMS specified that the hospitals should get the payment as opposed to leaving it open" to the possibility of physician groups seeking to direct the care, she said. "It's one of these overspecified models."

The model proposed by CMS would hold the hospitals in which a hip or knee replacement takes place accountable for the costs and quality of care from the time of the surgery through the 90 days following it, considering this an "episode" of care. Hospitals could get extra money or be forced to repay Medicare depending on how their care was judged and the costs incurred for each case. Hip and knee replacements are the most common surgery Medicare pays for on an inpatient basis, as opposed to paying under the generally less generous outpatient system. In 2013, there were more than 400,000 inpatient primary procedures costing more than $7 billion for hospitalization alone. 

Wilensky agreed that getting MedPAC's support for this payment model test is a help for CMS, but noted that lawmakers often ignore the counsel of its advisory group when it runs counter to their own plans. She recalled a discussion she had as MedPAC chair with former House Ways and Means Chairman Bill Thomas, R-Calif., during which he told her that "when MedPAC makes recommendations we like, we like it. But when they make recommendations we don't like, we don't like it."

By Marissa Evans, CQ Roll Call

August 20, 2015 -- Republican Arkansas Gov. Asa Hutchinson said Wednesday that he's open to continuing the state's Medicaid expansion program, which serves 220,000 low-income residents, beyond its 2016 expiration if the state can make some sweeping changes that would be a tough sell to the Obama administration.

In a presentation to his state's Healthcare Legislative Task Force, created earlier this year to consider changes to the program, Hutchinson outlined a seven-point proposal emphasizing cost-cutting and encouraging beneficiaries to work.

"As governor I will accept the continued expansion dollars from the federal government if we can achieve the...waivers that are needed," Hutchinson said.

Under the 2010 health care overhaul, state Medicaid programs could be expanded to enrollees with incomes up to 138 percent of the federal poverty line. The cost is 100 percent covered by the federal government until 2020, when states that expanded will be responsible for chipping in 10 percent. Twenty-eight states and the District of Columbia are participating in the expansion already. Alaska and Montana are joining them soon. Arkansas is one of only 12 Republican-controlled states to undertake an expansion.

The healthcare task force is working to overhaul the state's Medicaid program. Under its current program, Arkansas buys private health insurance for residents who qualified for Medicaid when the state expanded it in 2014. The program ends in December 2016.

Hutchinson's ideas for continuing the program past 2016 included eliminating non-emergency coverage, requiring beneficiaries to be referred to job-training programs, saving $50 million and strengthening audit requirements. However, three of his ideas will need waivers from the Centers for Medicare and Medicaid Services. The so-called 1115 waivers allow state governments more flexibility in how they run their Medicaid programs.

His proposals also would require people who qualify for Medicaid to enroll in employer-sponsored health coverage if it's available, while the state would cover their deductibles and copayments. He also would require beneficiaries who earn above 100 percent of the poverty line to pay partial premiums.

Hutchinson also said he wants to limit access to the private option, in which the state buys private insurance for beneficiaries, so that only working individuals, those in work training programs or school could qualify.

Hutchinson's presentation comes as the state works to re-verify that the 250,000 people using the private option are eligible. He said that the verification process would reduce the number eligible to 220,000, saving the state $180 million per year.

"I believe program integrity is important," Hutchinson said. "I believe that those who are on the program need to qualify based upon income guidelines."

Hutchinson noted to the committee that a change in administration could also determine how much or how little flexibility the state would have with the 1115 waivers.

"Elections do make a difference so timing of when we get these waivers and when we approach those is important," Hutchinson said. "We're going to do it now but you can have a permanent solution or a sunsetted solution so that we have two opportunities to seek the waivers and flexibility that we need."

By Marissa Evans, CQ Roll Call

August 18, 2015 --The 19 states that have chosen not to expand Medicaid under the health care law could be hindering their abilities to care for those living with mental illnesses, according to a Psychiatric Services in Advance report.

If all the states undertook an expansion by 2020, health centers would have nearly $230 million in additional revenue, according to the report. On top of that, the study found nationwide expansion could provide an estimated $11.3 million for mental health services and $1.6 million for substance abuse services that year.

The report focuses on community health centers that have become increasingly important for low-income and uninsured populations to go to for care. More than four in five health centers offer on-site mental health services, and half offer substance abuse treatment services on site, according to the report. Medicaid is the jointly administered federal–state health program for the poor.

If all the states haven't expanded Medicaid by 2020, 29 percent of patients will be uninsured. However, the study found that if the holdouts were to open up their roils, almost half of each health center's patients will be covered by Medicaid  and the uninsured rate could drop to 21.5 percent.

For behavioral health issues, aside from allowing more patients to be in Medicaid, more of them could be treated. The study notes that an estimated 59,214 more mental health encounters and 11,480 encounters with substance abuse treatment specialists might occur in health centers in those states.

By Keith P. White, CQ Roll Call

August 17, 2015 -- Fewer employees worked for a firm that offers health insurance in 2014, according to an annual report from the Agency for Healthcare Research and Quality.

"Continuing a trend that began in 2008, the percentage of employees working in an establishment where insurance was offered fell from 84.9 percent in 2013 to 83.2 percent in 2014, a decline of 1.7 percentage points," said the report, the agency's annual insurance component of its Medicare Expenditure Panel. Results are based on responses from 39,000 firms nationwide.

The biggest drop in coverage offered occurred among small firms, those with fewer than 50 employees, where the percentage of workers with health insurance dropped to 49.8 percent last year from 53.1 percent in 2013. The percentage for those workers in medium-sized firms (50 to 99 employees) fell to 83 percent from 87 percent in 2013, while those working in large firms (100 employees or more) dropped to 97.3 percent from 98 percent.

For small firms, there were variations among states. In Hawaii, for example, 93.1 percent of workers in those firms said health insurance was offered to them, while in Massachusetts it was 68.1 percent. South Carolina had the lowest offer rate at 33.2 percent of employees of small firms.

Despite the decline in the percentage of workers offered health insurance, the percentage of those who actually enrolled in employer-based plans did not change significantly, the report said, although it declined to 57.8 percent in 2014 from 58.2 percent in 2013.

But one improvement in the numbers showed that more employees last year had a greater choice of plans, with 67 percent being offered a choice between two or more plans, while in 2013, just 59.7 percent had such choices.

Premiums increased slightly, with the national average for single coverage rising 4.7 percent to $5,832 in 2015, for employee-plus-one coverage rising 4.7 percent to $11,504 and for family covering rising 3.9 percent to $16,655.

Those increases followed now well established trends. Since 2003, when the study was begun, to 2014 all premiums have increased substantially, the report said, with single coverage jumping 67.5 percent during that time, employee-plus-one coverage increasing 73 percent and family coverage up by 80 percent.

Finally, in 2014 employees who were enrolled in company health plans paid 21.2 percent of total premiums for single coverage, 26.9 percent for employee-plus-one coverage and 27.1 percent for family coverage. "From 2003 to 2013, employee contributions increased more rapidly than employer contributions," the report noted.

The drop-off in employer-sponsored coverage came as government studies show more Americans are benefiting from the 2010 health care law's coverage expansion. The Centers for Disease Control and Prevention reported last week the number of Americans without health coverage fell by one-third, or 15.8 million people, since 2013, based on a survey of 26,121 people from the first quarter of this year.

By Melissa Attias, CQ Roll Call

August 19, 2015 -- Republican efforts to use reconciliation to repeal parts of the health care law may be limited by requirements built into the budgetary maneuver that could block scrapping such high-profile targets as the law's requirement that most individuals buy health coverage or pay a penalty.

The so-called Byrd rule—named for the late Sen. Robert C. Byrd, D-W.Va.—will largely determine whether or not a health law provision can be repealed through reconciliation with a simple majority. If any senator raises a point of order that a provision violates its complex requirements, it would take 60 votes to overcome the objection. 

The rule not only generally limits the use of reconciliation to those provisions that change spending or revenues but stipulates that lawmakers cannot use those changes as justification to target policies and regulations that have marginal budgetary effects. That aspect, which former Senate Parliamentarian Alan Frumin said is subjective and the most difficult for parliamentarians and congressional staff to apply, could complicate GOP efforts to undermine the Affordable Care Act.

Frumin said repealing the individual mandate and a similar requirement that employers provide coverage or pay penalties, as well as the law's requirements for the insurance markets, do not belong in a reconciliation bill. At the same time, he noted that all of those provisions have some budgetary effects and were addressed through reconciliation when the health care law was enacted, which could leave room for maneuvering.

"I'm skeptical about flat-out repeals of the substantive structure of these aspects of the law, but the reconciliation door is most likely open to some extent to weaken the budgetary muscle of these aspects of 'Obamacare,'" Frumin said in an email.

Rather than a clear green light for repealing those provisions, "perhaps there's a light here with some shade of green," he suggested.

Elizabeth MacDonough, who succeeded Frumin in 2012 and became the first woman to hold the Senate parliamentarian's post, will play a crucial role determining which provisions are suitable for reconciliation after reviewing cost estimates from the Congressional Budget Office and materials presented by congressional staff in closed-door sessions.

Senate Majority Leader Mitch McConnell of Kentucky said earlier this month that Republicans think they can repeal much, but not all, of the overhaul through reconciliation based on discussions with MacDonough. While repeal legislation would be largely a messaging exercise as long as President Barack Obama is in office and capable of wielding a veto pen, it could set precedents for reconciliation maneuvers if Republicans win the White House in 2016 and retain their congressional majorities.

Budget Factor

Frumin said he repeatedly heard "strong arguments" in 2009 and 2010 that most of the components of what would become the health care law, including the individual mandate, did not belong in a reconciliation bill. The reasoning was that all of the proposals were largely policy-driven—essentially aimed at providing health care for the masses—and had nothing to do with the government's coffers.

"I have no recollection of having heard any of those arguments from any Democrat," he said.

Frumin also said he recalls warning that insurance market provisions, such as covering people with preexisting conditions, could be vulnerable to a Byrd rule challenge.

In the end, Democrats in both chambers advanced the bulk of the health care overhaul in a 900-plus page bill and followed up with a 55-page reconciliation measure that made adjustments and included some education provisions.

Ed Lorenzen, who served as senior policy adviser for then-House Majority Leader Steny H. Hoyer of Maryland during the debate, said there were many changes that Democrats thought had enough of a budgetary effect to survive the Byrd rule but were dropped after meetings with the parliamentarian. That suggests there are a number of items Republicans assume can be repealed through reconciliation that would be tripped up by the Byrd rule, he said, noting that many precedents from the 2010 process would still apply.

Lorenzen–now a senior adviser at the Committee for a Responsible Federal Budget–said changing or repealing the penalty for not having individual coverage should be allowed because it has a direct budgetary effect. The mandate may not necessarily qualify for reconciliation, but he said its accompanying penalty for failure to comply could be removed.

Other budget experts think the mandates could be repealed but differ on whether the insurance market requirements could be undone through reconciliation. 

G. William Hoagland, a senior vice president at the Bipartisan Policy Center, said he thinks those provisions are a "close call" that will largely depend on the scoring of each provision. But Edwin Park, vice president for health policy at the left-leaning Center on Budget and Policy Priorities, said everything from a ban on health plans limiting the dollar amount of annual coverage to restrictions on charging more based on age would not survive the Byrd rule.

The law's subsides to help individuals purchase health coverage, meanwhile, are widely expected to be eligible for repeal through reconciliation.

Experts also pushed back against a proposal promoted by the conservative group Heritage Action for America that assumes a one-provision bill repealing the entire law, as opposed to striking individual provisions, could move through the reconciliation process. Frumin said he thinks the notion is a "nonstarter" and seems like it would fall on a Byrd rule point of order. 

Dan Holler, communications director for Heritage Action, defended the one-provision reconciliation bill, saying previous efforts to scrap the law were a "very simple straightforward approach." He added that Heritage Action has vetted its approach with its own authorities on the budget. The group circulated a memo in late July laying out its position.

Beyond finding a way to achieve deficit reduction in the 10-year budget window, Lorenzen pointed to the way the Byrd rule bars provisions from boosting the deficit beyond that timeframe. In the second decade, he said, repealing the law is expected to raise the deficit by $3 trillion to $4 trillion.

Lorenzen said maintaining the law's Medicare savings and other spending reductions could provide a way to solve the 10-year deficit problem. It could in the longer run, too, though it would create a political problem for Republicans who campaigned against the law's Medicare cuts.

By Kerry Young, CQ Roll Call

August 18, 2015 -- With biotechnology drugs generating an estimated $60 billion in annual sales set to lose patent protection by the end of next year, Medicare's plans to buy lower-cost, copycat versions of the medicines are becoming a hot topic for patient advocacy groups and some in Congress.

Administrators of the big health program are in the midst of staking out reimbursement policies for so-called biosimilars, with a 2016 payment rule for physicians serving as one of the chief vehicles. The Food and Drug Administration (FDA) in March approved the first such product for sale in the United States: a Novartis AG copy of Amgen Inc.'s Neupogen, for helping people on chemotherapy fight infections.

At issue is a Medicare plan to use a single payment calculation for biosimilars aimed at the same medical condition, instead of treating each drug as a distinct product. The plan, if finalized, could create confusion and lessen incentives for drug companies to expand the range of copycats, Paul Gileno, president and founder of the U.S. Pain Foundation, wrote in comments to the Centers for Medicare and Medicaid Services (CMS).

Smaller health organizations may hesitate to use the newer copies of biotech drugs if the government's reimbursement scheme is seen as in any way ambiguous, as there could be a potential for Medicare's administrative contractors to reject claims. The National Renal Administration Association told CMS that "a 'one-size-fits-all' approach to reimbursement is not appropriate," and asked for more clarity through distinct billing codes.

"Assigning biosimilars a unique and permanent J-Code will allow for proper reimbursement, competition, and investment, ultimately leading to sufficient access to biosimilars for patients in a range of therapeutic areas," wrote Debbie Cote, president of the renal administrators' group, in a comment to CMS.

Most biotech drugs are supposed to be administered in the offices of doctors or in clinics, which purchase and manage supplies of the medicines. Medicare pays doctors a premium above the average sales price, to compensate them for their time. The sum is intended to be a 6 percent bump, but recent congressional budget deals have sliced the premium to more than 4 percent. CMS is accepting comments on the payment rule through Sept. 8.

There are significant hurdles to enter the U.S. biosimilar market. Switzerland's Novartis had had to fight legal battles with Thousand Oaks, California-based Amgen, as well as make the investments in finance and scientific resources needed to develop the product in the first place. 

Amgen won FDA approval in 1991 of Neupogen, which is a near copy of a human protein that aids in the production of infection-fighting white-blood cells. In both cases, the protein is grown in colonies of altered E. coli. The FDA uses identical language in the prescribing labels for both products, Neupogen and Novartis' Zarxio, saying the copycat has a nearly identical genetic sequence, based on DNA analysis. 

Novartis had won approvals for its version of Neupogen in about 60 countries before securing the FDA approval. The United States has lagged in the field amid prolonged debate on how well companies can copy biotech drugs, which must be grown in living cells. Many lawmakers are intent on maintaining distinctions between original products and copies. The term biosimilars was used in the 2010 health care law that helped break the regulatory logjam and set the stage for March approval of Novartis' Zarxio.

Reps. Joe L. Barton, R-Texas, and Anna G. Eshoo, D-Calif., who had a hand in shaping the FDA's approval process, also have objections to the CMS payment plan that they outlined with more than 30 House colleagues in an Aug. 4 letter to acting CMS Administrator Andy Slavitt. 

CMS is accepting comments through Sept. 8 on the physician payment rule, which it's then expected to finalize in October. There's growing urgency because Amgen is working to develop its own biosimilars while facing potential competition from Hospira Inc., which is working on a competing version of Amgen's Epogen anemia-fighting drug.