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Washington Outlook

May 13, 2011

Congress remains focused first and foremost on fiscal challenges facing the government.  Debate is still underway on raising the $14.3 trillion debt ceiling, which must be done before August 8. Republicans are calling for major entitlement spending reductions as a condition for raising the debt limit. Both Senate Minority Leader Mitch McConnell (R-KY) and House Speak John Boehner (R-OH) said that Medicare and Medicaid spending caps or cuts must be part of the negotiations.The announcement today by the Social Security and Medicare boards of trustees that Medicare's trust fund will be insolvent in 2024—five years sooner than predicted in 2010—will undoubtedly fuel this debate.

While details are not yet available, Senate Budget Committee Chairman Kent Conrad (D-ND) has developed a new budget blueprint that would raise taxes by approximately $2 trillion over 10 years and cut spending by roughly $1.5 trillion. He is expected to include his plan in a fiscal year (FY) 2012 budget resolution that he hopes to release prior to a scheduled markup next week in his committee.  Conrad is a member of the “Gang of Six,” which is also working on a deficit-reduction plan, although when the group’s plan will be released is uncertain. The president has conceded the need for slowing the growth in healthcare spending and is pushing for spending reduction targets that would trigger tax increases or spending cuts if not met.

While lawmakers spent the last two weeks debating budget issues, healthcare was not ignored. The House last week pressed ahead with a series of votes on legislation to repeal pieces of the healthcare reform law, despite House Republican health committee leaders acknowledging that the repeal effort is essentially “dead,” given the Senate will not approve legislation. By a vote of 238-183 the House passed on May 3 H.R. 1213, legislation that would repeal the section of the Affordable Care Act (ACA) which provides mandatory funding for the establishment of the health insurance exchanges. An analysis from the Congressional Budget Office (CBO) found that enactment of H.R. 1213 would reduce the federal budget deficit by $14 billion over the 2012-2022 period. The House also passed measures to eliminate health law funding for school-based health centers (H.R. 1214) and to bar federal funds and tax benefits for abortion services (H.R. 3).  The Senate is unlikely to consider these measures and the president has threatened to veto them if they reach his desk.

The House Energy and Commerce Committee had an ambitious agenda, with the full panel approving a medical liability overhaul bill and the Health Subcommittee advancing a bill that would remove the requirement for states to maintain Medicaid eligibility levels, which is a major issue for the hospital community. The House Ways and Means Subcommittee on Health held the first of what Chairman Wally Herger (R-CA) said will be a series of hearings on reforming how Medicare pays physicians.

The House is in recess next week, but the Senate remains in session.  

Energy and Commerce Health Subcommittee approves repeal of Medicaid maintenance of effort requirements

The House Energy and Commerce Subcommittee on Health voted May 12 to approve a bill that would repeal the Medicaid maintenance of effort (MOE) requirements under the Affordable Care Act (ACA) and the Stimulus Act (ARRA).  Senator Orrin Hatch (R-UT) and Representatives Phil Gingrey (R-GA) and Cathy McMorris Rodgers (R-WA) introduced the bill, the State Flexibility Act (S. 868, H.R. 1683) last week. The subcommittee approved it by a party-line vote of 14-9 after rejecting three Democratic amendments aimed at preserving the MOE requirement for specific populations.

The full committee is expected to take up the measure after the House returns from next week’s recess.

The MOE requirement in ACA mandates that states maintain the Medicaid eligibility standards that were in effect when the law was enacted. This applies for adults until the new health insurance state has an operational insurance exchange and for children younger than 19 until 2019.

According to preliminary Congressional Budget Office (CBO) estimates, the State Flexibility Act would save the federal government $2.8 billion over the first five years and $2.1 billion over 10 years.  CBO also estimates the bill would increase the number of uninsured by as many as 300,000 in certain years. Additional information about the bill is available on the House Energy and Commerce Committee Website.

Meanwhile, the state Medicaid directors are seeking guidance from the Centers for Medicare & Medicaid Services (CMS) on the extent to which their states can change Medicaid’s eligibility policies under the MOE rules. In a letter to Cindy Mann, the Deputy Administrator and Director of CMS’ Center for Medicaid, CHIP and Survey & Certification, the state Medicaid directors asked that CMS confirm that states can change certain eligibility methods for program integrity efforts, create an approved template for states seeking an MOE waiver, allow states to change eligibility determination for services within Medicaid, and exempt reasonable changes in premiums from the MOE. 

The House passed a fiscal year (FY) 2012 spending bill last month authored by House Budget Committee Paul Ryan (R-WI) that would convert Medicaid into a block grant and eliminate the planned expansion of the program. The Kaiser Commission on Medicaid and the Uninsured released a state-by-state analysis of the proposal that found that by 2021, states would receive approximately $241 billion less annually in federal Medicaid money between 31 million and 44 million fewer people nationally would have Medicaid coverage than they would under current law.

CMS issues proposed rule on Medicaid rate-setting by states

The Centers for Medicare & Medicaid Services (CMS) issued on April 29 a proposed rule on Medicaid rate-setting by the states, clarifying several issues that have been the subject of legal action the past few years.

Under the proposed rule, before cutting Medicaid payment rates to providers, states must demonstrate that beneficiaries will continue to have “sufficient access to care.” The proposed data review process is based on a framework previously recommended by the Medicaid and Children’s Health Insurance Program Payment and Access Commission.

Additionally, the rule requires states to report every five years on access to covered benefits and to compare Medicaid payment rates with those of Medicare or private insurers, and with providers’ customary charges.

CMS is accepting comments on the proposed rule until July 5.

The proposed rule would create a consistent national approach to analyze and document Medicaid service access, especially in conjunction with State proposed changes to payment rates or methods. States would formulate their own processes, metrics, and approaches in light of the range of local factors and circumstances that influence access in their state. The proposed changes are intended to better inform states and CMS on beneficiary access as states develop their service delivery and payment policies and potentially implement initiatives to address access issues. 

A detailed summary of the proposed rule is available on Premier’s website.

Energy and Commerce Committee approves medical liability bill that caps economic damages

The House Energy and Commerce Committee on May 11 approved legislation to reform the medical liability system, after rejecting all but one Democratic amendments offered during the markup.  The House Judiciary Committee approved the bill on February 16.

In his opening remarks, Committee Chairman Fred Upton (R-MI) said the effort was part of Republicans’ “repeal and replace” effort.

H.R. 5, The Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act, which Premier has supported along with other organizations in the hospital and physician community, would place a $250,000 cap on subjective, noneconomic damages.  The bill is modeled after the California law that was enacted in 1970. The bill would also establish a fee schedule for attorney contingency fees to ensure victims of negligence receive the funds they need, allow periodic payments of future damages and establish a reasonable statute of limitations.  

H.R. 5 also includes measures that are aimed at protecting effective state medical liability reform laws, including stipulating that the bill would not preempt any state law that specifies a particular monetary amount of compensatory or punitive damages that can be awarded in a healthcare lawsuit, or any state or federal law that imposes greater procedural or substantive protections for healthcare providers and healthcare organizations from liability, loss, or damages.

The Congressional Budget Office (CBO) estimated that the HEALTH Act would reduce the federal deficit by roughly $40 billion over 10 years.

A number of committee members—both Democrats and Republicans—echoed concerns raised during the House Judiciary Committee markup that the bill would usurp states’ rights. Ranking Member Henry Waxman (D-CA) questioned how the Republicans on the committee could support a bill that nullifies states’ rights when they champion states’ rights on all other legislation. The bill’s sponsor, Phil Gingrey (R-GA) responded that his measure would only impose limits in states that lack liability laws, but would not supersede existing state laws.  

Reflecting the long-held positions of Democrats and Republicans, the cap on non-economic damages that the legislation would impose emerged as another major area of contention during the markup. The committee rejected an amendment by Frank Pallone (D-NJ) to raise the cap to $1 million.   

Out of the 14 amendments offered, the one amendment that the committee accepted would allow unlimited damages to be imposed on defendants who caused a medical product that harms a patient to be misbranded or adulterated. After debate over amendments, the committee approved H.R. 5 by a vote of 30-20.   

While the bill is likely to pass the Republican-controlled House, it faces an uphill battle in the Senate, where similar measures have been rejected over the last decade, and is unlikely to get the presidential green light. President Obama has expressed concern that caps on non-economic damages are unfair to those who have been wronged and has instead proposed awarding grants to help states deal with the medical liability crisis. The Affordable Care Act included $50 million in grants to states to explore different ways to settle healthcare lawsuits.

Ways and Means Health Subcommittee examines options for Medicare physician payment fix

The House Ways and Means Subcommittee on Health took its turn this week examining options for reforming the Medicare physician sustainable growth rate (SGR) payment formula, hearing from witnesses on various alternatives. 

Committee members expressed bi-partisan agreement on the shortcomings of the current payment system and the growing importance of moving to payment models that incentivize patient-centered, high-quality, and outcomes-oriented care.  Witnesses said that the current fee-for-service payment system for physicians is detrimental to primary care, encouraged volume over value and is unpredictable.  

The hearing was dominated by Massachusetts Blue Cross Blue Shield’s Alternative Quality Contract (ACQ) approach to physician payment which has the dual aim of improving outcomes and quality and slowing the rate of cost growth. The AQC uses a five-year, per-patient global budget for a predetermined patient population, with the rate of inflation negotiated upfront in the global budget. Financial incentives provided to physicians are based on 64 quality measures.  Other witnesses suggested a capitation model under which providers get a fixed per-patient sum over a certain period of time. 

Subcommittee Chairman Wally Herger (R-CA) indicated that this was a first in a series of hearings his panel will hold to examine alternatives to the SGR.

The Energy and Commerce Committee heard from physician groups and other healthcare experts during a May 5 hearing on a range of possible long-term solutions to the growing payment problem.  Over 30 organizations, including a large number of physician organizations, as well as the American Hospital Association and the Association of American Medical Colleges, responded to the Energy and Commerce panel’s solicitation for ideas to address the physician payment issues. 

Congress will have to act before December 31, 2011 to avoid the 29.4 percent cut to physician payment required by the SGR under current law. With fewer than eight months to go and no fiscal year 2012 budget in place, this will be a challenge given the enormous cost associated with a fix.

GAO tasked with drug shortage study

Senators Bob Casey (D-PA), Tom Harkin (D-IA) and Richard Blumenthal (D-CT) last week asked the Government Accountability Office (GAO) to look into the causes of drug shortages and to suggest possible solutions to remedy the growing problem.

In a May 4 letter to the GAO, the three senators highlighted data that show hospitals are increasingly experiencing shortages of life-saving drugs. “The difficulty that hospitals encounter in securing an adequate supply of critical drugs forces doctors to ration their supply of medication, delay medical procedures, and use alternative products that may carry with them unwanted side effects or be unfamiliar to the physicians prescribing them,” said the senators.

The senators asked the GAO to examine how the Food and Drug Administration (FDA) currently identifies and responds to drug shortages, what causes drug shortages, the effectiveness of communication between the industry, providers and the FDA, and what steps FDA could take under its current authority to better identify and ameliorate drug shortages.

In February, Senator Amy Klobuchar (D- MN) introduced a Premier-supported bill to address drug shortages, the Preserving Access to Life-Saving Medications Act (S. 296). The bill would expand the requirement that manufacturers notify FDA of drug shortages to all prescription drugs, rather than limit it to “life saving products,” and would require manufacturers to not only notify the FDA when it has withdrawn from the market, but also when the manufacturing process is interrupted.

A Premier survey of 311 hospital pharmacy experts representing 228 hospitals, as well as infusion, oncology and surgery centers, outpatient and retail pharmacies, and long-term care facilities, revealed that nearly 90 percent experienced a drug shortage over a six-month period in 2010 (July-December), which may have caused a medication safety issue that could have affected patient care. More than half stated they experienced six or more shortages. Additional information on Premier’s analysis is available on Premier’s website.

Weekly legislative and regulatory round-up

The round-up for the week of May 13, 2011 is available here.

The round-up for the week of April 29, 2011 is available here.