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July 28, 2014

Washington Health Policy Week in Review Archive 2961d46b-a61d-4152-ae23-cda139ad3d48

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Split Rulings on Health Law Shroud Subsidies in Uncertainty

By John Reichard, CQ HealthBeat Editor

July 22, 2014 -- Pretty much the best chance of getting a case to the Supreme Court is if two or more federal appeals courts split over the matter at hand.

The absence of a split doesn't rule it out. But legal analysts say it makes convincing the justices to take on a case much harder.

Tuesday started out as a banner day for the libertarian Cato Institute in a challenge it inspired to a health law provision critical to enrolling the uninsured.

Plaintiffs assisted by Cato in Halbig v Burwell argued that Congress intended that health law (PL 111-148, PL 111-152) only provide subsidies to buy health coverage in the relatively small number of states that set up their own insurance exchange.

Two judges on a three-judge panel of the U.S. Court of Appeals for the District of Columbia agreed, giving Cato at least a fighting chance of getting a circuit split.

The 2-1 ruling struck down an Internal Revenue Service (IRS) rule that authorized the subsidies in all states, including the 34 that don't have their own exchanges. It marked the first time a federal judge had sided with Cato on the matter. Two U.S. District Court judges had issued rulings rejecting the argument, one in Halbig, another in a similar case.

But later that day, another three-judge panel for the Fourth U.S. Court of Appeals in Richmond, Va., upheld subsidies in all 50 states plus the District of Columbia.

The question now is did that create enough of a split to persuade the Supreme Court to get involved.

Cato still faces long odds despite its dramatic victory.

The Obama administration is expected to request en banc review by the full panel of 11 active judges on the D.C . Circuit Court. Those eleven, if they grant the review and take up the case, are expected to overrule the three judge panel and essentially arrive at the same conclusion as the 4th Circuit.

But other circuit courts could yet weigh in on the subsidy issue, analysts say. In Pruitt v Sebelius, Oklahoma Attorney General Scott Pruitt amended a previous challenge to the overhaul in the U.S. District Court for the Eastern District of Oklahoma. The court has yet to rule.

Another challenge, Indiana v IRS, has been filed in the U.S. District Court for the Southern District of Indiana.

Cato's case could be bolstered if those cases reach the federal appellate court level because these circuits involved are more conservative, the observers say.

Defenders of the health law were shrugging off that assessment Tuesday.

"I don't think we're going to see a split in the circuits by the time the Supreme Court decides whether it wants to take up" any appeal of a full en banc D.C. Circuit ruling against the Halbig plaintiffs, said Families USA Executive Director Ron Pollack. "The other two cases, one in Oklahoma, and the other in Indiana, we haven't yet received decisions from the federal district courts in those two cases. "

The Supreme Court still could deny review but then decide to hear the case if either of the two other circuits eventually rule in favor of Cato's arguments. And plaintiffs in the 4th Circuit case could request en banc review there, potentially overturning the ruling backing subsidies.

All of which means subsidies and health exchanges will be shrouded in many more months if not years of legal uncertainty.

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Court Ruling Strikes a Blow at Health Care Law Subsidies

By John Reichard, CQ Roll Call

July 22, 2014 -- In a decision certain to energize opponents of the health law and launch a new wave of election-year attacks on its legality, a federal appeals court panel ruled 2-1 that subsidies to buy health insurance are only permissible in states that have set up their own insurance marketplaces.

Almost 5 million people use subsidies through the federal insurance site, The ruling in Halbig v. Burwell, if upheld, means the assistance would no longer be available in the 34 states served by the federal insurance exchange unless those states set up their own marketplaces.

The decision could be appealed by the Obama administration to a full panel of appeals court judges and ultimately may be decided by the Supreme Court.

Separately that same day, a three-judge panel of the 4th U.S. Circuit Court of Appeals in Richmond, Va., ruled in a similar case upholding the legality of subsidies in all 50 states plus the District of Columbia.

Sixteen states and the District of Columbia had their own marketplaces this year, according to a tally by the Kaiser Family Foundation.  

The 16 states are California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington.  

Some of those states, including Oregon, Maryland, and Massachusetts, may rely on the federal website for 2015 coverage while retaining other exchange operations such as marketing and consumer assistance at the state level.

Rep. Diane Black, R-Tenn., said the decision casts further doubt on the legality of the law (PL 111-148, PL 111-152) at a time when the government has struggled to verify the eligibility of some subsidy recipients.

"Consider that over a million taxpayers could already be on the hook for improper subsidy payments due to an inability of the federal government to verify income eligibility," Black said in a statement. "Now, anyone who has received a subsidy at all on the federal exchange could potentially be faced with having to make back payments."

White House press secretary Josh Earnest said the administration is confident it will prevail, despite the ruling. "The ruling does not have any practical impact ... right now," Earnest said. He anticipated the White House will request a review by the full panel of 11 judges on the D.C. federal appeals court, most of whom are Democratic appointees.

The White House later released a statement hailing the 4th Circuit's unanimous decision in the case King v. Burwell. "Another partisan attempt to harm the Affordable Care Act failed today. This latest attempt was undermined by a unanimous judicial panel in the 4th Circuit. The law was designed to make health care affordable through tax credits—and it is working," read the statement by Earnest.

The case was brought by individuals and businesses backed by the libertarian Cato Institute who contend that the wording of the health law only permits the subsidies to be distributed in states with their own marketplaces. Without access to subsidies, millions of people wouldn't have access to affordable insurance benefits within the meaning of the health law and would be exempt from paying the increasingly stiff fines for not getting insurance, Cato has argued.

Ron Pollack, executive director of the advocacy group Families USA, said the decision marked "the high water mark" for opponents of the law, known as the Affordable Care Act (ACA). 

"Those waters are likely to recede very quickly," Pollack said. He predicted the full appeals court will overrule the three-judge panel and issue an order staying the ruling.

With the 4th Circuit decision and no conflict between the circuit courts, the Supreme Court won't take up the case, Pollack said.

Washington and Lee University Law School professor Timothy Jost agreed with that assessment.

"This decision is an unfortunate aberration that potentially threatens the health care of millions of Americans, but it will not stand," Jost said.

Experts are divided on what effect the ruling would have on states, if it is upheld. Cato analyst Michael Cannon has predicted that employers would lobby against having the exchanges because the mandate requiring employer coverage under the health law couldn't be enforced in states without the marketplaces. That's because penalties against employers for not covering workers are only assessed if the workers can go to exchanges to get subsidies and buy policies.

Opponents of the individual mandate also might rise up against states having their own exchanges, because penalties on individuals for not having insurance can only be assessed if affordable coverage is available and they refuse to buy it.

Backers of the law had predicted public confusion if the three-judge panel ruled for the plaintiffs in the case. The ruling could interfere with this fall's health law open enrollment campaign if there is enough confusion over the availability of subsidies.

Cannon did not shrink from the potential consequences of the ruling he had played a major role in bringing about.

"If people lose their subsidies, it is because the courts ruled those subsidies are and always have been unlawful," Cannon said. "If that causes dislocation, if that causes disruption, I think the responsibility lies with the IRS and the administration."

The ruling threw out a U.S. District Court decision on Jan. 15 stating that the text of the health law makes clear that Congress intended to make premium tax credits available on both state-run exchanges and the federal exchange.

The specific provision under review in the case was section 36 B of the Internal Revenue Service making premium tax credits available in all of the states and the District of Columbia. But Jacqueline Halbig and the other plaintiffs in the case challenged the legality of the IRS regulation.

"Because we conclude that the ACA unambiguously restricts the section 36 B subsidy to insurance purchased on exchanges 'established by the state' we reverse the district court and vacate the IRS's regulation," wrote Judge Thomas B. Griffith, who authored the opinion, who was appointed in 2005 by President George W. Bush. Judge A. Raymond Randolph, who was appointed to the federal bench in 1990 by President George H.W. Bush, concurred while Harry T. Edwards, appointed by President Jimmy Carter in 1980, issued a scorching dissent.

"It is quite clear that the statute does not reveal the plain meaning that appellants would like to find," Edwards wrote.

Edwards continued to say that the claim that Congress sought to tie subsidies only to states with their own marketplaces "is nonsense, made up out of whole cloth. There is no credible evidence in the record that Congress intended to condition subsidies on whether a state, as opposed to Health and Human Services, established the Exchange."

He wrote the majority opinion "portends disastrous consequences." 

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Uninsured Rate Fell After Health Law Open Enrollment, Study Finds

By Melissa Attias, CQ Roll Call

July 23, 2014 -- The Obama administration touted the results of a new study last week that estimated that the uninsured rate for non-elderly adults fell by 5.2 percentage points after the close of the first open enrollment period under the health care law.

That drop translates to 10.3 million adults ages 18 to 64 gaining coverage, according to the study published in the New England Journal of Medicine. The authors noted, however, that different models and confidence intervals mean the figure could range from 7.3 to 17.2 million adults.

The initial open enrollment period ran from October 2013 through March 2014, and the study compared the uninsured rate from before it kicked off to after it ended. After the close of the enrollment period, the uninsured rate stayed stable through June 2014.

"We are committed to providing every American with access to quality, affordable health services and this study reaffirms that the Affordable Care Act has set us on a path toward achieving that goal," Health and Human Services Secretary Sylvia Mathews Burwell said in a release.

The administration also emphasized that states that expanded Medicaid under the 2010 overhaul (PL 111-148, PL 111-152) saw larger gains than those that did not. About half of states have decided to expand their programs and Burwell said her department is still hopeful others will follow.

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Businesses Brace for Health Law Mandate After IRS Notice

By Melissa Attias, CQ Roll Call

July 25, 2014 -- The health care law's employer mandate—which is at the center of Speaker John A. Boehner's effort to sue President Barack Obama—may finally be on the path to implementation based on the administration's decision to release draft forms late last week.

The Internal Revenue Service (IRS) posted drafts of documents that businesses are supposed to use to report on the health coverage they offer their employees and would be used to enforce provisions in the law (PL 111-148, PL 111-152) that generally require employers with 50 or more full-time workers to offer insurance or pay a penalty. The drafts are intended to help employers, tax professionals and software providers "prepare for these new reporting provisions and to invite comments from them," according to a statement on the IRS website.

To business groups, the move is a signal that federal officials are preparing to push ahead with the twice-delayed requirements.

Michelle Neblett, the National Restaurant Association's director of labor and workforce policy, said she thinks it "clearly indicates to employers that they're moving ahead and that employers have to rush to get ready for Jan. 1." And Neil Trautwein, vice president and employee benefits policy counsel at the National Retail Federation, said his thinking was that the administration would rather "crawl over broken glass" than put the mandate off again, and that this move illustrates its determination.

"I don't anticipate a further delay," he said.

Although Trautwein's group favors scrapping the employer mandate entirely, he said the release of the forms will help retailers prepare to collect the coverage information next year. He said his understanding is that employers will collect data in 2015, report it in 2016 and pay any penalties that year.

The retailers trade group will scrub the forms and comment on them, Trautwein added, but he doesn't think it's too late for his industry to get the proper systems in place. In the notice on its website, the IRS said it expects to post the draft instructions that go with the forms in August, and that both the forms and instructions will be finalized this year.

"It's a bit awkward, but I think there is time for my members to prepare," Trautwein said, while noting that he has heard frustration over implementation and shared some of it. "I don't blame anybody for being mad at the delays."

Neblett said there is not much to the forms but that employers need technical instructions and specifications to get the system set up and understand how the information needs to be delivered. Beginning in January, she said, employers should be tracking the coverage information on a monthly basis and even the largest companies who hired additional programmers are not going to be ready by then.

"Our systems are not set up to track on a monthly basis," said Neblett, whose group also supported repeal of the mandate. "I know Treasury and IRS will say, 'Oh we're giving them 18 months.' Not really, they're giving us five months. That's when the tracking and the data collection has to start."

A Treasury spokesperson noted in an email that 96 percent of employers do not have to comply with the reporting requirements or the mandate because they have less than 50 employees. For the rest, the mandate requirements begin phasing in starting in 2015, but employers do not have file forms until 2016.

The spokesperson also said that reporting regulations announced in February significantly streamlined and simplified the process, particularly for employers that offer coverage that is very affordable. The simplifications include a single form for information reporting and an simplified option for employers, the official said.

The administration in February announced that employers with fewer than 100 workers will have an extra year—until 2016—to comply with the mandate. The rules change also said that employers will need to cover 70 percent of their full-time employees in 2015 and 95 percent of workers in 2016 and beyond.

The announcement came after the administration's initial delay in July 2013, when it announced that it would not enforce the penalties until 2015.

Beyond the regulatory process, a set of cases moving through federal courts could complicate the issue. Two federal appeals court panels released conflicting rulings this week about whether the health care law's subsidies to help people purchase coverage should be available on the federal insurance exchange. Since the employer mandate is linked to people receiving those subsidies, it could be affected.

Trautwein said those cases raise some questions about whether the administration might have to wait out the rulings. But it's still not certain there will be a conflict between the circuits, he said, or whether the Supreme Court would take up a review before next year.

Both Trautwein and Neblett also said they continue to be concerned about aspects of the employer mandate, including how seasonal employees are defined. They're expecting legislation to be introduced in the House next week to further clarify that issue.

The House Rules Committee is scheduled to meet this week to pave the way for floor consideration of a resolution (H Res 676) that would allow Boehner, R-Ohio, to sue the administration for not implementing the health law.

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Gilead Reports $5.8 Billion in Sales of Sovaldi Drug Amid Pricing Flap

By Kerry Young, CQ HealthBeat Associate Editor

July 23, 2014 -- In a report certain to stir further debate on the cost of prescription drugs, Gilead Sciences Inc. recently said its profit for the first half of 2014 rose to $5.9 billion over $1.5 billion for the same period a year ago, fueled largely sales of the Sovaldi hepatitis C drug.

Gilead said that it had $5.75 billion in sales of Sovaldi, a drug with a wholesale cost of about $1,000 a pill. It has been prescribed for more than 80,000 people in the United States and Europe so far, the Foster City, California-based company said.

Gilead is seeking to make the most of a pill considered highly effective in fighting a virus that can damage and even destroy the liver. Competitors are working on rival pills with somewhat similar approaches to fighting the virus, and introductions of new medicines could potentially result in greater pressure on Gilead to lower its price.

The cost of Sovaldi has already sparked a backlash. Pharmacy benefit manager Express Scripts has estimated that states through their Medicaid and prison programs could spend a combined $55 billion on the drug, if all patients were given the therapy. The costs could strain budgets covering education, transportation and other needs.

The costs of treating hepatitis C are expanding at a rate that "is simply not sustainable," said Jeff Myers, president and chief executive of Medicaid Health Plans of America, a trade group representing insurers that participate in the state-federal program for the poor and less affluent Americans.

"The current treatments, along with the all-oral medication coming in October, threaten to drive the price to a point at which the states unfortunately will be forced to make tradeoffs to manage the very large population that is infected with this life-threatening disease," he said.

The price of Sovaldi also has caught the attention of prominent lawmakers such as Henry Waxman of California, the ranking Democrat on the House Energy and Commerce Committee, and Senate Finance Committee Chairman Ron Wyden and Sen. Charles E. Grassley, R-Iowa.

Waxman has questioned why health plans administering Medicare's Part D prescription drug benefit are unable to effectively negotiate lower prices for the treatment despite the fact that Sovaldi is available in other countries, as well as to Medicaid and the Veterans Administration at a lower cost.

The trade group America's Health Insurance Plans said Gilead should lower the drug's price.

"Gilead has delivered a tremendous breakthrough in medicine, and it should be rewarded for its investment," said spokesman Brendan Buck in a statement. "But the current price cannot be justified by development costs; it's purely a reflection of Gilead believing that it has a blank check."

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Steady Funding for Health Care Law in Senate Labor-HHS Bill

By Emily Ethridge and Kerry Young, CQ Roll Call

July 25, 2014 -- Senate appropriators would provide steady funding in a draft spending bill for the 2010 health care law and a public health fund, both prime GOP targets and priorities of outgoing subcommittee chairman Tom Harkin.

Harkin, chairman of the Senate Appropriations Subcommittee on Labor, Health and Human Services (HHS), and Education, included the prevention and public health fund in the law (PL 111-148, PL 111-152) and has fought to defend its funding against repeated GOP attacks. 

The Iowa Democrat is retiring after this year, and the draft of his fiscal 2015 Labor-HHS-Education bill would provide $156.8 billion overall and fund several of his favorite programs. The Appropriations Committee has released a draft fiscal 2015 bill text and a report, more than a month after the subcommittee approved the measure by voice vote. 

With the appropriations process slowing, it looks likely that lawmakers will negotiate an omnibus or short-term continuing resolution to move into fiscal 2015—and the draft bill language could lay a placeholder for future conference negotiations. The House has yet to unveil a draft of its fiscal 2015 Labor-HHS-Education bill.

In the Senate bill, the Centers for Medicare and Medicaid Services (CMS), which oversees the health insurance exchanges, would receive $3 billion for program operations. The committee summary says the bill would provide funding equal to fiscal 2014 levels to implement the health care law. 

But with that steady funding comes more demands for transparency and information sharing. The lawmakers noted that the CMS has failed to promptly notify Congress about important issues such as exchange enrollment figures and innovation grants awarded under the law. In some cases, the CMS has notified other organizations before telling the committee—or without telling the committee at all, they said. 

The bill would direct the CMS to notify the committee no less than one business day before data and grant opportunities related to the law are released. It also would require the CMS to provide information on the cost of several parts of the law, including marketplace IT, consumer information and outreach, navigator grants, and the small business health insurance exchange—along with estimated costs for fiscal 2016.  

The Prevention and Public Health Fund would have $927 million for fiscal 2015, after accounting for cuts under sequestration. Of that, $887 million will go to the Centers for Disease Control and Prevention (CDC), including $121 million for tobacco prevention activities, $160.3 million for the National Center for Immunization and Respiratory Diseases, and $104 million for cancer prevention and control. 

Overall, the CDC would get $7.1 billion under the Senate bill, which is more than the president's request of $6.7 billion and its fiscal 2014 funding of $6.9 billion. 

Another relative winner is the National Institutes of Health (NIH), which would receive $30.5 billion under the proposal, an increase of $605.7 million. According to the report, that bump, along with an increase provided for fiscal 2014, would bring the NIH's budget back to roughly what appropriators intended to provide in fiscal 2013 before the sequester kicked in.

But they also noted that the NIH's budget is lagging the rate of growth of the costs of health research.

Just keeping up with the reported biomedical inflation rate would have put the NIH appropriation at $37 billion for fiscal 2013, instead of the $28.9 billion that was enacted, the appropriators said in their report. This amounts to a loss of $8.1 billion in their estimation.

"Due to the impact of inflation, restraining growth in the discretionary spending caps is tantamount to a cut," the report said.

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