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January 25, 2016

Washington Health Policy Week in Review Archive 5a1dd588-4379-4a49-b2fd-685ebc3b3113

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CMS Plans to Help Health Insurance CO-OPs Attract Investment

By Kerry Young, CQ Roll Call

January 21, 2016 – Centers for Medicare and Medicaid Services (CMS) officials intend to make it easier for private firms to invest in the survivors among two dozen insurance cooperatives (CO-OPs) created through the Affordable Care Act. But a leader in the fledgling industry argues changing rules on a federal program that shifts funds among insurers would be more help.

About half of the new CO-OPs have failed. Many Republicans say that Congress never should have authorized the Centers for Medicare and Medicaid Services to spend $2.4 billion in taxpayer-funded loans to try to bring competition to the insurance industry. In defending the CO-OPs, Democrats point to federal rules that put the start-ups at a disadvantage, such as limits on marketing.

CMS, looking to shore up the CO-OPs, is responding to complaints about the hurdles in securing additional funds for the startups. The agency plans to issue guidance soon to address financing for the CO-OPs, according to acting CMS Administrator Andy Slavitt, a former banker, entrepreneur, and insurance executive.

"We need to make it easier for CO-OPs to attract outside capital or a merger partner if the board chooses," Slavitt told the Senate Finance Committee at a Thursday hearing.  "We need to level the playing field and lengthen the runway for these small businesses."

Slavitt didn't provide further detail on what steps CMS might take, and stressed that the agency is seeking to maintain close oversight of the CO-OPs.

The initiative that offered federal loans to start CO-OPs was in the health overhaul as a concession to Democrats, many of whom were dismayed when plans for a public coverage option were dropped from the measure. The nonprofit CO-OPs were meant to spark new competition in the insurance marketplace, incentivizing established firms to lower their prices. Many consumers were attracted by the chance to work with an insurer that was designed to use any excess profit from health insurance payments to benefit their customers.

On Thursday, Slavitt stressed that the success of the CO-OPs will depend on whether their managers adapt rapidly to the competitive market.

"As small companies, they need to rapidly mature the fundamentals of their operations, and in particular, their financial systems, which are vital to the ability of any insurance company to predict, manage, and control costs," he said.

CMS so far hasn't addressed what the CO-OPs see as their most pressing need, which are changes in the risk adjustment program that was in the law, said Peter L. Beilenson, chief executive of Evergreen Health, the Maryland CO-OP, in an interview after the hearing. This is one of three programs-risk adjustment, risk corridors and reinsurance- designed to aid both established insurers and the CO-OPs in the early days of the new federal and state health marketplaces.

The risk corridor and risk adjustment programs are intended to balance out funds among insurers, helping those whose members' medical care proved more costly by taking from those whose members' treatments were less of a financial burden.

The risk adjustment program also deeply affects the CO-OPs. The industry asked CMS last year to consider exempting new and fast-growing insurance plans with relatively healthy customers for three to five years from having to pay into the risk adjustment program.

Beilenson on Thursday said CMS also could help by capping payments from the CO-OPs into the risk-adjustment program at 2 percent of premium revenues. Under current rules, the startup CO-OPs may have to pay 15 percent or more of their premiums into the risk adjustment program, with the money often flowing to larger competitors, he said.

The current rules for the risk adjustment program favor more established insurers who often have more knowledge about their customers and thus can take more advantage of assistance to plans that insure people with serious medical conditions, Beilenson said.  Newly founded CO-OPs may not be getting full credit yet for covering people with serious diseases, and thus would benefit from a "circuit breaker," or a pause or limit to the CO-OPs' participation, in risk adjustment, he said.

"It will be much harder to get capital coming in unless we fix the risk adjustment," Beilenson said. "The reasons why it is skewed toward the large carriers are very significant."

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Supreme Court Declines to Take Obamacare Challenge

By Todd Ruger, CQ Roll Call

January 19, 2016 -- The Supreme Court declined Tuesday to hear another legal challenge to the 2010 health care overhaul that focused on a procedure Congress sometimes uses to pass legislation.

The lawsuit claimed that the Senate failed in the health care law to comply with the constitutional requirement that revenue bills start in the House.

Tuesday's decision leaves in place the July 2014 ruling of a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit that allowed a procedure to sidestep that requirement. Even though the bill raises revenue, the law's "primary purpose" was to improve health care and heath insurance coverage, the D.C. Circuit ruled.

The bill that became the health care law started as a House measure waiving the repayment requirement for some military personnel of the first-time home-buyer tax credit. The Senate substituted that text for its version of the health care overhaul. Lawmakers from both parties have used similar moves to try to avoid a "blue slip" procedure to quash tax-raising bills that start in the Senate.

Republican lawmakers had urged the court to decide the issue, arguing in amicus briefs that it raised a constitutional issue of "exceptional importance" about separation of powers.

The case is Sissel v. Department of Health and Human Services, Docket No. 15-543.


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Senate HELP Scraps House Approach on Medical Innovation

By Andrew Siddons, CQ Roll Call

January 20, 2016 -- Instead of following the House's lead and advancing a comprehensive bill designed to spur medical innovation, the Senate Health, Education, Labor, and Pensions (HELP) Committee will consider a set of narrower bills with the same goal in mind, the panel's chairman said on Tuesday.

Following last summer's House passage of the so-called 21st Century Cures Initiative (HR 6), Sen. Lamar Alexander, R-Tenn., maintained that his goal was to have a Senate companion measure marked up by the end of 2015.

On Tuesday, it became clear that the committee was unable to come to a bipartisan agreement on a comprehensive package.

Instead, the committee will hold three markups in the coming months to consider targeted legislation that would tweak the Food and Drug Administration's (FDA) approval processes for drugs and medical devices and strengthen the research muscle of the National Institutes of Health (NIH).

"Senators and staff on our committee have been working together throughout 2015 to produce a number of bipartisan pieces of legislation that are ready for the full committee to consider," Alexander said.

The HELP panel's top Democrat, Patty Murray of Washington, said she was pleased the committee will hold the markups. But a Democratic aide said there is no agreement on the path forward beyond the first markup, and Murray's statement hinted at the areas where the parties couldn't see eye to eye.

"I've made clear I believe this progress should include addressing the burden that high drug costs impose on patients, as well as critical mandatory investments in research and development at NIH and the FDA," Murray said.

The first markup will be held on Feb. 9, during which lawmakers will take up at least seven bipartisan bills.

A draft of one of the measures that would address electronic medical records will be released later this week, Alexander said. The bill would aim to decrease unnecessary documentation and increase access to health records by medical professionals and patients.

The other bills under consideration include one (S 2030) that would make it easier for companies working on treatments for rare diseases to win FDA approval, a measure (S 1622) that would seek less burdensome FDA reviews of medical devices and a bill (S 2014) that aims to enhance the abilities of younger researchers at the NIH.

A second markup to be held March 9 will focus on legislation that Alexander said would support President Barack Obama's precision medicine initiative. A third markup will be held April 6.

Even though the Senate is taking a different path than the House did, the members behind 21st Century Cures, Reps. Fred Upton, R-Mich., and Diana DeGette, D-Co., appeared to view Alexander's announcement as good news.

"The Senate announcement is just the latest positive milestone in the effort to give patients and their loved ones more hope," the lawmakers said in a joint statement. "But we have much work left to do to make 21st Century Cures a reality. The vice president is working on a 'moon shot' to cure cancer, and we've got a rocket ship ready to go."

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Big Insurer Portrays Obamacare Markets as a Drag on Profits

By Kerry Young, CQ Roll Call

January 19, 2016 -- UnitedHealth Group, the nation's biggest health insurer, said it stepped up investment in Medicare products even as its recent profit was eroded by the costs of participating in the insurance exchanges created under the 2010 health law.

Earnings from the operations of UnitedHealth's core insurance businesses plunged by almost half in the last three months of 2015, dropping to $949 million from $1.73 billion in the year-earlier period. The company on Tuesday blamed spending to make its Medicare plans more attractive by securing higher grades in the so-called Stars rating system and the poor financial performance of plans that comply with the requirements of the federal health exchanges.

On a call with analysts, UnitedHealth reiterated that it's considering whether to continue to participate in the health exchanges in 2017, with a final decision expected in mid-2016. The Minnetonka, Minnesota–based company had first announced this plan in November.  A withdrawal by UnitedHealth would be seen as a major setback for the political prospects for the health exchanges, a centerpiece of the health overhaul.

The company described participation in the new market as a significant drag on its profit. UnitedHealth claims $720 million in 2015 losses related to "individual exchange-compliant insurance business," including a $245 million hit in the fourth quarter for advance recognition of expected 2016 losses. As a result, earnings from the operations for its traditional insurance business in total fell $238 million to $6.8 billion last year from about $7.0 billion in the previous year. In contrast, earnings from the operations of United Health's Optum health services unit rose almost $1 billion, or 30 percent, year-over-year to $4.3 billion.

UnitedHealth has about 700,000 customers whom it acquired through public exchanges, a figure that it expects to decline over the course of the year.

"We will not pursue membership growth and have taken a comprehensive set of actions to contain membership and sharpen performance over the balance of 2016," said David S. Wichmann, UnitedHealth Group president and chief financial officer. "We have withdrawn platinum products, increased prices and eliminated marketing and commissions."

UnitedHealth expects significant gains in Medicare Advantage enrollment, expecting to add about 300,00 new customers in the first three months of this year, according to Wichmann. UnitedHealth shares rose $3.70 to $112.90 in midday trading, besting the small gains seen in major stock indexes.

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Cigna Stumbles on Medicare Program That Helped Draw Anthem Bid

By Kerry Young, CQ Roll Call


January 22, 2016 -- Cigna Corp. on Friday said Medicare suspended the firm's enrollment and marketing for new customers for its health insurance plans and stand-alone drug plans for seniors due to flaws in the administration of its pharmaceutical benefits and in its appeals programs, which consumers use to complain about problems such as denials of care.

The suspension doesn't affect the benefits or plans of Cigna's current Medicare customers, the Bloomfield, Connecticut–based company said in a regulatory filing. Cigna said the company is working with the Centers for Medicare and Medicaid Services (CMS) to resolve the issues as quickly as possible. Neither Cigna nor the Centers for Medicare and Medicaid Services (CMS) released specifics about Cigna's shortcomings.

Under Medicare Advantage plans, Cigna and other insurers are paid to manage health care for people in the federal program for seniors and people with disabilities. About 30 percent of the people enrolled in Medicare are now served by the Advantage plans run by Cigna and its competitors. Health insurers see the expected continued growth in the field as a lucrative opportunity to expand their business. Nearly 503,000 people were in Cigna's Medicare Advantage plan last year, representing about 3 percent of the program's population. The developments also affect Cigna's Medicare Part D drug program plans.

Investors appeared to take the news of Cigna's setback at least initially in stride. Cigna's shares slipped $1.87, or 1.3 percent, to $138.26, in mid-morning trading, contrary to small gains in major stock indexes. Shares of Anthem Inc., which is acquiring Cigna, rose by $2.35, or 1.7 percent, to $141.15. A spokeswoman for Indianapolis-based Anthem confirmed Friday that the insurance giant remains committed to the transaction.

Cigna's participation in Medicare is one of the attractions for Anthem, which last year said it expected to complete its purchase in the second half of 2016 after securing needed approvals. The transaction was valued at $54 billion at the time of the initial July 2015 announcement. Anthem's plan sparked concern about consolidation in the health insurance industry. Aetna Inc. also last year announced plans to buy another larger firm, Humana Inc., in a transaction initially valued at about $37 billion.

Anthem Chief Executive Joseph Swedish argued in testimony to Congress that the Cigna acquisition would create a combined company better equipped to function in a market where Medicare will become a more demanding customer.

In prepared remarks for the House Judiciary Committee, Swedish noted the ambitious goal set by the Department of Health and Human Services to shift 50 percent of Medicare payments from the traditional fee-for-service approach to one in which payments will be tied to measures of the quality of care provided.Making this transition will require major changes in how care is provided and funded.

"This challenge is equally recognized, and is being prioritized, by health insurers, providers, the administration, and Congress," Swedish said in remarks prepared for a House Judiciary panel in September.

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Merritt: The Man with a Plan on High Drug Prices

By Andrew Siddons, CQ Roll Call

January 21, 2016 -- Amid outrage over high drug prices, lawmakers' appetite for action is growing, even as a partisan split largely remains.

Mark Merritt, president of the Pharmaceutical Care Management Association, might have a solution that can appeal to both sides.

"Government has a real important role here," Merritt testified last month at a Senate Special Committee on Aging hearing. "We think the role is more ensuring competition."

Merritt's organization represents pharmacy benefit managers, companies that work with insurers on prescription drug plans. While the industry might be obscure, it manages prescriptions for around 250 million Americans and helps insurers control spending, putting the group in a good position to weigh into the drug price debate.

Instead of suggesting a broad overhaul of the system, Merritt found the sweet spot between lawmakers who want more aggressive government involvement and those who think the market should work itself out.

"I think there's a bipartisan demand for real answers on controlling drug prices, and they're looking for things that actually work," Merritt said in an interview. "A lot of the so-called solutions on drug pricing, like price controls or more pricing transparency, are kind of shallow solutions."

Merritt offers two specific fixes. Last year, Turing Pharmaceuticals suddenly increased the price of a parasite infection drug from $13.50 to $750 per pill, and was able to do that because the drug no longer had patent protection and faced no competition. The federal government, Merritt says, should keep a list of similar drugs that are at risk of having their prices raised.

"The hedge fund vultures already have those lists, why shouldn't Congress?" he says.

Additionally, he says, lawmakers should explore ways to encourage competition for those drugs, for instance by creating a new, accelerated pathway for the review of those products at the Food and Drug Administration. The FDA could use the list of at-risk drugs to determine which ones qualify for priority review.

Senators on both sides of the aisle found Merritt's proposals attractive.

"If these companies knew that a generic could get approved within six months, that gives them a very small window to skim the cream, so to speak, and rip people off," Sen. Claire McCaskill of Missouri, the Aging Committee's top Democrat, said at the hearing.

Maine Republican Susan Collins, the panel's chairwoman, said after the hearing that she would push to get both ideas into the Senate's version of 21st Century Cures, a bill (HR 6) passed in the House last summer that would overhaul the FDA's application process to help spur innovative medicine.

Merritt has been invited to testify once more on Tuesday, Jan. 26, when the House Committee on Oversight and Government Reform holds a hearing on drug prices that will also feature Martin Shkreli, the infamous former head of Turing.

Merritt joined the group as its president in 2003, around the same time that Congress approved Medicare Part D, the taxpayer-supported prescription drug benefit. Since Part D went into effect in 2006, the industry has grown dramatically.

A Washington veteran of 25 years, Merritt previously was a lobbyist for America's Health Insurance Plans and the Pharmaceutical Research and Manufacturers of America.

He also worked on the GOP presidential campaigns of former Sen. Bob Dole of Kansas and Sen. Lamar Alexander of Tennessee.

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