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October 11, 2016

Washington Health Policy Week in Review Archive 45d5eba3-3d76-4a39-aef8-97b229f0a7dc

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Churn Lower Than Expected but Still Problematic On Exchanges

By Erin Mershon, CQ Roll Call

October 4, 2016 -- Low-income adults aren't experiencing as much so-called "churn" in and out of the new health insurance marketplaces as expected, according to a new study from Harvard researchers.

About 25 percent of low-income adults had changed coverage in the 12 months prior to a survey by researchers at the Harvard T.H. Chan School of Public Health, according to a study published in the journal Health Affairs Tuesday. Churn can occur because consumers change jobs, lose their Medicaid eligibility, lose their exchange subsidy eligibility, or switch health plans because of other life changes that qualify them for so-called special enrollment periods.

Movement in and out of the exchanges remains a major complaint for insurance companies who participate in the marketplaces, who say that the ease with which people jump into and out of a plan, willingly or unwillingly, makes it difficult to plan for their health care costs. Insurers have also accused some consumers of gaming the system to get coverage when they need to pay for a pricey procedure, only to drop it soon after they've recovered. Both contribute to increasing insurance premiums, the companies say--which remains a major challenge for the 2010 health law (PL 111-148, PL 111-152).

Churn can also present problems for the consumers who shift plans. In the Harvard study, people who lost or gained marketplace or Medicaid coverage had disruptions in physician care and medication adherence, increased emergency room use and worse self-reported health status.

Before the 2010 health law passed, "churn" rates for people with nongroup private insurance were about 58 percent. The rate for Medicaid enrollees was 43 percent, and for those with employer-sponsored insurance, the rate was 12 percent.

The survey, which polled low-income adults in Kentucky, Arkansas and Texas, also found no discernable difference in churn rates between states that had expanded Medicaid and those that did not.

"Churning rates in the three states we studied do not appear to be as high as initially feared before implementation of the ACA's major coverage expansions," the researchers write. "[But] patients report that these changes in coverage reduce access to care and harm the continuity and quality of care. ... Policy makers and researchers will need to ensure that the ACA's impressive insurance gains are not compromised for many Americans by gaps in coverage and disruptions in care over time."

Several other studies also published Tuesday in Health Affairs examined marketplace enrollment. One, from two researchers at the Agency for Healthcare Research and Quality, showed that individuals who gained health insurance through the marketplace in 2014 were far more likely than those that did not to find a doctor or other provider and receive preventive care services.

Another, by Urban Institute researchers, showed that fewer marketplace consumers reported affordability issues in 2015 than in 2014. In 2015, the researchers found, enrollees living in states that chose not to expand Medicaid had more trouble paying family medical bills than those that lived in expansion states.

A third study addressed the affordability of the plans available on the exchanges--a key focus for both insurers and policymakers, as a number of companies have requested premium hikes that are soaring past 20 percent and 30 percent for 2017. The study, from researchers at the University of Pennsylvania, found that plans with especially narrow networks were 6.7 percent less expensive than plans with large networks.

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Congress Likely to Take Only Small Steps on Drug Prices

By Kerry Young, CQ Roll Call

October 5, 2016 -- Federal lawmakers will continue to rail against the high cost of prescription drugs in the next few years, but their most likely actions will be limited to relatively small steps such as the enactment of measures intended to approve more generics.

"There is not going to be a magic bullet," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office (CBO) who now leads the conservative American Action Forum. "There are a bunch of little levers they can pull."

Net spending on prescription medicines in the United States rose by 8.5 percent last year to $309.5 billion from the previous year and could hit as much as $400 billion by 2020, according to consulting firm IMS Health.  

One of the most promising bills addressing drug costs might save the federal government $3 billion over a decade, a fraction of those national costs. This measure (S 2019) by Sen. Amy Klobuchar, D-Minn., and Sen. Charles E. Grassley, R-Iowa, would direct the Federal Trade Commission to intervene when makers of branded drugs pay other companies to delay generic competition for their products. Similar bills dating from 2005 have called for the Federal Trade Commission to actively pursue these cases. 

What could propel lawmakers to act next year is a need for budget offsets at a time when Congress faces deadlines on significant health legislation, Klobuchar said. Next year, lawmakers will need to reauthorize the Children's Health Insurance Program and user fees for the Food and Drug Administration. A version of Klobuchar's bill could be tucked into one of those measures. The same could be true for a bipartisan bill (S 3056) from Sen. Patrick J. Leahy, D-Vt., that seeks to remove obstacles to the introduction of generic drugs. CBO has estimated that it, too, could save about $3 billion over a decade.

"I do think we have the best chance ever in the coming year" for enacting legislation on generic medicines, said Klobuchar, who also cosponsored Leahy's bill.

So far, lawmakers have done little on the issue of drug costs beyond echo consumers' concerns, particularly about spikes in the prices of older medicines. They held hearings on Turing Pharmaceutical's decision to raise the price of a pill used to fight infections in people such as AIDS patients to $750 from $13 and the $600 tab for two-shot EpiPen packages. Both treatments involve decades-old drugs.

The prices of other drugs such as insulin could give lawmakers further ammunition, said Topher Spiro, vice president for health policy for the liberal Center for American Progress. The mean price of insulin rose from $4.34 per milliliter in 2002 to $12.92 in 2013, according to research published in the Journal of the American Medical Association in April. Insulin has been available since 1923, first as a product derived from animal pancreases and since the 1980s as a biotech product. 

"There will be another EpiPen-like episode," Spiro said. "The conditions are ripe for reform. You have got public outrage at its peak."

The question remains what Congress will do to respond to this anger. The influential Medicare Payment Advisory Commission will on Thursday and Friday discuss options that could cool the rising growth of pharmaceutical costs for the giant federal health program. Medicare's annual pharmacy bill already tops $100 billion. The advisers are slated to consider, for example, ways to increase use of cheaper copycat versions of costly biotech drugs.

Saying No

Lawmakers in Washington could face pressure to act on pharmaceutical costs if Californians in November approve a ballot initiative on drug pricing. It calls for using the generally lower federal Department of Veteran Affairs prices as a benchmark for health programs funded in part by the state such as Medicaid, which serves low-income people. The Los Angeles Times last month reported that two-thirds of registered voters who were polled said they support the measure. Yet ballot initiatives often face steep odds. This one is opposed by influential veterans' groups, who argue that the plan could raise prices for the VA. 

The VA's lower drug costs remain a model for many seeking to lower Medicare's pharmaceutical spending. A 2015 analysis co-authored by the advocacy group Public Citizen said Medicare's Part D pharmacy plans could save $16 billion a year if they secured the same discounts as the VA.

But health policy analysts note that Congress is unlikely to give the Medicare program the same key tool--a formulary list- that VA uses to lower its drug costs. The VA can decline to cover certain drugs in an effort to drive better bargains. CBO has said savings would be negligible if Medicare were directed to negotiate drug prices unless Medicare officials used tools that insurers use, such as threatening to exclude drugs from coverage.

Lawmakers are unlikely to allow Medicare to exclude drugs from coverage nationwide. Republicans favor sticking with the original design of the Part D drug program, which allows individual insurers that run the drug plans to use their own fairly generous formularies to bargain for lower prices. Individual insurers have less leverage than the entire Medicare program. Five of seven current Democratic-supported bills allowing Medicare to negotiate on drug prices specifically rule out the creation of a formulary (S 2023 and companion HR 3513; S 31 and companion HR 3061; and HR 4207). Some Democrats have considered trying to use arbitration in Part D bargaining, although it's not clear how well that would work.

It would be a "political poison pill" for lawmakers to limit which medicines senior citizens can take, said Joseph Antos, a researcher with the American Enterprise Institute and former Department of Health and Human Services official.

"If you can't say no, then you effectively can't force the price down," Antos said. "You have to be able to say no and Congress is great at trying to get someone else to say no."


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Medicare Advisers Debate Proposals to Slow Rising Drug Costs

By Kerry Young, CQ Roll Call

October 6, 2016 -- An influential federal advisory panel on Thursday unveiled its latest views on slowing the rate of growth of Medicare's pharmaceutical spending.

The Medicare Payment Advisory Commission (MedPAC) is considering several options on drug reimbursement. These include reducing the roughly 4 percent premium that the giant federal health program pays for medicines provided in doctors' offices and then adding a flat fee to compensation. MedPAC also is looking at limiting future increases to an inflation rate for payments for these drugs, which are covered by Medicare's Part B outpatient care program.

Another option would be to drive down costs by grouping drugs with similar health effects in a common billing code. This might generate more competition for prices than maintaining separate codes for branded drugs and copycat versions of them, MedPAC staff said in a briefing document.

MedPAC will spend months refining its suggestions before releasing them next year as formal recommendations to Congress and the Centers for Medicare and Medicaid Services on drug spending. The panel on Thursday focused on Part B pharmaceutical spending, which doubled to $22 billion between 2007 and 2015, including copays from people enrolled in Medicare. MedPAC's aim is to curb rising spending, while maintaining people's access to chemotherapy and other drugs given in doctors' offices. 

"This set of tools has the potential to meet those goals," said Jack Hoadley, a MedPAC commissioner and researcher with the Health Policy Institute of Georgetown University, of the options discussed Thursday.

The cost of medicines is nearly certain to hold lawmakers' attention next year. Democratic presidential candidate Hillary Clinton already has presented several ideas for reining in price increases, including allowing Medicare to negotiate prices directly. Clinton and Republican candidate Donald J. Trump both call for allowing imports of cheaper drugs from abroad. 

MedPAC members on Thursday offered objections and tweaks to the commission's staff proposals, while broadly supporting their themes. The topic will be debated publicly again in January. Members differed, for example, on whether a consolidated billing code would result in greater use of copycat versions of costly biotech drugs.

Amy Bricker, a MedPAC member who also is vice president of supply chain strategy with Express Scripts, Inc., noted that brand-name companies are making generic versions of other companies' drugs. 

The Food and Drug Administration last month, for example, approved Amgen Inc.'s copy of AbbVie's blockbuster Humira rheumatoid arthritis drug. The FDA's first approval of a so-called biosimilar drug happened last year when it cleared a Novartis AG version of an Amgen drug.

Grouping branded and copycat biotech drugs for Medicare payment could disrupt the market at a time when the companies are in a transition to dual roles, Bricker said. They are trying to continuing to generate new medicines while building new businesses with copycat drugs.

"We are all anticipating a robust biosimilar category, but we're still not there," Bricker said. "In my opinion, it's just too soon."

Paul Ginsburg, a MedPAC member who is a researcher at the Brookings Institution and professor of health policy at the University of Southern California, disagreed. He said consolidated codes could actually encourage use of the copycat biotech drugs known as biosimilars.

"It seems to me that this is going to be a boon for biosimilars," Ginsburg said.

MedPAC on Thursday also discussed options for changing the premium paid to doctors on Part B drugs. The premium is designed to be a 6 percent premium to the reported average sales prices. The federal budget sequester cuts lowered this to about 4 percent. MedPAC suggested several options, including changing from the original 6 percent premium to a pre-sequester premium of 3.5 percent, plus a payment of $5 per drug per day.

Medicare already proposed a similar approach. Medicare's proposed model would switch some doctors from an actual premium of about 4 percent to less than 1 percent plus a payment of more than $16. Many doctors object, saying that they would lose money in the lower payment system and would need to refer patients elsewhere for treatment.

Another approach MedPAC considered Thursday would limit the growth of the current Part B drug payments to inflation. Drugmakers would have to rebate money if growth in prices exceeded an inflation benchmark, MedPAC suggested.

MedPAC will continue its discussion of drug pricing on Friday. It is slated to look at the use of copycat biotech drugs in the insurer-run Medicare Part D pharmacy plans.

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HHS to Pilot Additional Changes to Improve Exchanges

By Erin Mershon, CQ Roll Call

October 5, 2016 -- The Obama administration plans to pilot further efforts to improve the struggling public exchanges in its final three months, Health and Human Services (HHS) Secretary Sylvia Mathews Burwell signaled Wednesday at a forum with insurance industry executives.

The forum gave the administration a chance to highlight the rosiest picture of the exchange experience. 

Executives from several of the companies that have enjoyed the greatest success on the marketplaces established by the 2010 health overhaul (PL 111-148, PL 111-152) highlighted the success they had in enrolling new consumers and improving their outreach to customers through in-person meetings and phone calls.

The glowing reviews contrast with the last six months of discussion about the health care marketplaces. Absent from the stage were the many insurers who have struggled on the public exchanges. Major insurance companies like Aetna Inc. and UnitedHealth Group Inc. have announced massive withdrawals from the markets in which they were participating, citing unsustainable financial losses. Smaller insurers, too, have been abandoning or scaling back their exchange products. Others filed for double-digit rate increases in hopes of staving off their own losses.

Burwell acknowledged again that the coming open enrollment period, which begins Nov. 1, will not be easy.

"This is a transition year, and transitions always present challenges, but they also present opportunities," she said.

After listing the efforts the administration has made in recent months to improve the so-called risk pool—which combines the costs of healthier and sicker consumers among insurance customers—Burwell said the administration was "planning to pilot additional changes" in the coming months.

The administration has "heard your concerns about potential threats to the ACA risk pool," she said, referring to the acronym for the health law.

An HHS spokesman did not comment further on the potential additional changes.

Burwell said that the coming open enrollment would be the best opportunity for insurers to improve the risk pool by signing up more healthy patients. She called on insurers to listen to their competitors' advice at the Wednesday meeting.

Much of the forum focused on strategies to improve customer enrollment and retention. Pat Geraghty, chief executive officer of Blue Cross Blue Shield of Florida, highlighted his company's work in retaining consumers by offering face-to-face assistance in retail clinics across the state, some of which also offer primary care facilities. He said the company worked to improve its information and interactions with customers on a daily and weekly, not quarterly, basis.

In a second panel focused on so-called effectuation—the point at which a customer actually pays his or her premium after selecting a plan—CMS Chief Marketing Officer Josh Peck highlighted the strategies used by insurers with the best rates of completed purchases. He said the strongest strategy—and the closest thing to a "silver bullet"—was engaging potential customers with a live phone call or in-person meeting. Actually talking to customers about the plan, how to use the insurance, and how to finish the sign-up process was the best way to get people to complete enrollment and pay, he said.

Insurance executives promoted changes that they felt would improve the marketplaces. Geraghty wants the removal of remove restrictions in the law that limit the differences in the prices that insurers can charge younger adults and older adults to a ratio of 3 to 1. Insurers—and many Republican lawmakers—have called for that ratio to be expanded to 5 to 1, in part to help lower costs for younger customers. 

Democrats have balked, saying the idea would increase prices and potentially limit access to care for older Americans.

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CMS Chief Defends Innovation Center

By Kerry Young and Erin Mershon, CQ Roll Call

October 7, 2016 -- A top federal official defended the Center for Medicare and Medicaid Innovation, which tests new approaches to health care, as a "national treasure." Andy Slavitt, the Centers for Medicare and Medicaid Services (CMS) acting administrator, says the Congressional Budget Office (CBO) signaled its confidence in the center's work while examining a bill to stop one of its major projects.

Slavitt was referring to CBO's estimate that blocking a five-year test of alternative Medicare payments for drugs—as a bill (HR 5122) by Rep. Larry Bucshon, R-Ind., proposes—would cost about $1.15 billion in lost savings over a decade. 

"To me, it's the ultimate compliment," Slavitt told reporters at a Thursday evening gathering of the Association of Health Care Journalists (AHCJ).

The center's planned test of drug payments, which has angered drugmakers and many doctors. CBO said blocking the drug payment test would free up the center to pursue other projects. The budget office projected $750 million in savings over a decade from these potential projects, resulting in a net $395 million cost to the bill.

The center, a part of CMS that is also called the Innovation Center, was created by the 2010 health law, which is likely to be revisited in the next session of Congress. House Republicans want to kill the center, while many Democrats defend its work as a key part of overhauling the practice of medicine.

Legislative Agenda

At a separate panel at the AHCJ event, policy experts delved into changes that Congress might make in the 2010 law in the next few years. Neera Tanden, president of the left-leaning Center for American Progress, and G. William Hoagland, senior vice president of the Bipartisan Policy Center and a former Republican congressional staffer, both expressed optimism that the next Congress might move past efforts to repeal the 2010 health law and consider fixes to the law.

"Now, you can be a Republican and face your constituents and actually think about fixing something because it has not been in live debate either in the primary or the general election," Tanden said. 

Hoagland agreed on this point, and the duo also predicted lawmakers will consider ways to rein in rising drug costs. Tanden credited Republicans in both chambers for holding hearings on the issue this year.

"It is a testament of the bipartisan nature of this that you see a number of Republicans who are concerned," she said. "It's a test of Democrats, whether they will truly take action on this. It's a quintessential issue in which people see special interests controlling Washington, and it's up to Democrats to show that they can be different."

Hoagland said that while there were some fixes to the health care law Republicans might be able to stomach, any proposal to add a federally run public option would "blow the whole thing up."

But in cases where only one insurer is participating in a state exchange—which for 2017, will be true in at least five states—Hoagland said he would "soften his opposition to the public option."

"I do think competition is good," he said.

Others in his party might have a harder time with the idea, however.

"It's the nose of the camel under the tent for moving to just universal health care. And there will be some on my side of the aisle who will say, 'This is what they wanted all along. They wanted the ACA to fail so that they could say, 'The only way to do this now is to come in with the public option.'' There is that cynicism out there," he said.

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DOJ Strengthens Legal Arguments Against Risk Corridor Payments

By Erin Mershon, CQ Roll Call

October 4, 2016 -- The Department of Justice (DOJ) is more aggressively rebuffing insurance company lawsuits seeking funds from a premium stabilization program of the 2010 health law—a move that could be a response to recent Republican opposition to the program.

In three filings this month, DOJ officials clearly stated that the federal government does not have a contractual obligation to pay insurers the money they expected to receive under the so-called risk corridors program that was part of the 2010 health law, which was intended to redistribute funds from plans with relatively healthy enrollees to those with relatively sicker ones. DOJ's arguments were more forceful than its previous responses to similar lawsuits.

At least a dozen insurers have filed lawsuits this year claiming they are owed money under the program, which in its first year paid plans just 12.6 percent of what they expected to receive. That shortfall is in part because the program brought in far less than originally expected. Legislative riders on the 2015 and 2016 spending packages (PL 113-235, PL 114-113) further restricted funds for the program. In the last week alone, New Mexico Health Connections and Blue Cross Blue Shield of Minnesota filed new cases, seeking $23 million and $6 million in unpaid funds, respectively.

The DOJ's position in the latest briefs is somewhat at odds with recent statements from officials at the Centers for Medicare and Medicaid Services (CMS). CMS said it was open to discussions about settling the suits in a Sept. 9 bulletin to insurance companies, which congressional Republicans interpreted as acknowledgement the agency owed insurers at least some money.

"What we've always said is the risk corridor payments are an obligation of the federal government," Acting Administrator Andy Slavitt said in a Sept. 14 hearing.

The agency expressed similar thoughts in its bulletin.

"HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers," CMS officials wrote. "HHS will record risk corridors payments due as an obligation of the United States Government for which full payment is required."

But DOJ's briefs say expressly that even if federal health officials have said they had an obligation to pay back the expected funds, there's still no legal obligation to do so. DOJ makes the arguments in motions to dismiss cases from the Land of Lincoln Mutual Health Insurance Company, an Illinois nonprofit plan that folded, as well as Blue Cross Blue Shield of North Carolina and Moda Health Plan.

"Under [the insurer's] interpretation, HHS would be the uncapped insurer of the insurance industry itself, under criteria—the ratio of a plan's allowable costs to its aggregate premiums—which are wholly dependent upon issuers' business judgment. Congress did not intend that result," DOJ writes in the three briefs.

Evolving Argument

In an earlier motion to dismiss in similar cases against the insurer Health Republic, DOJ merely contested the insurer's arguments that the claims were ripe for consideration. DOJ said in that case that because the risk corridor program was ongoing and further payments could be made, litigation was premature.

The first motion that relies on the more vigorous defense was filed Sept. 23, the deadline for plans' decisions to commit to participating in the public exchanges. The other two were filed Friday.

"In the first case that came up for briefing—they simply made a jurisdictional argument and said the payments are not yet due," said Tim Jost, an emeritus professor at the Washington and Lee University School of Law. "Now they're saying the payments are not yet due and will never be due. They said they would vigorously defend these cases, and now they're vigorously defending them."

Lawyers and experts familiar with the briefs suggested several different reasons for the more assertive position from DOJ in the recent cases. Several said it could be an attempt to better position the agency as it begins settlement talks with some of the insurers who have sued, as CMS signaled it was willing to do.

"They didn't have to delve into the merits as much as they did. They didn't really have to go there but they chose to go there," said Nicole Elliott, a partner at Holland Knight and a former DOJ attorney. "I don't know DOJ's litigation strategy, but they could be coming out swinging in hopes of negotiating better deals."

Neither HHS or DOJ commented on the filings.

Attorneys also suggested the discrepancies reflected internal administration disagreements about how best to proceed.

"CMS—they're coming at it from an administrative, agency implementation perspective, rather than a legal argument perspective," Deborah Dorman-Rodriguez, an partner at Freeborn & Peters LLP and a former insurance company executive, said. "The DOJ is not going to concede in a brief that payments are owed, just because of the nature of litigation. They need to put forth a party's best argument."

The new position could also be a response to increasing political backlash from Republicans on the Hill, who in recent weeks questioned the administration about its plans to settle and sent multiple letters to both DOJ and HHS asking for more information about settlement talks and the authority to use an obscure fund to pay out any settlements. On Tuesday, Energy and Commerce Chairman Fred Upton sent a new round of letters to insurance companies asking for more information about the settlement talks.

This month, "there has been even more pressure from those factions in Congress that are opposed to the Affordable Care Act, that are opposed to funding the risk corridors program beyond what it takes in," said Sandra Durkin, an associate at the Butler Rubin law firm. "There's been sustained political pressure that's been going on consistently and maybe even has stepped up from that time."

No matter the strategy, the filings are problematic for insurance companies.

"It is a little unclear what the administration's overall game plan is," Elliott said. "But insurers should definitely be worried about the mixed messages they seem to be getting."

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