Washington Watch for January 2020

Federal Government Funded through the End of September 2020

Congress successfully passed and the President signed legislation to fund the federal government until October 1, 2020. The 12-fiscal year (FY) 2020 spending measures totaling $1.4 trillion were combined into two minibus packages for passage. The legislation increases spending by $49 billion across the entirety of the federal government.

The Labor, Health and Human Services, and Education; Agriculture; State and Foreign Operations; Military Construction and Veterans Affairs; Transportation and Housing and Urban Development; Energy and Water; Interior and Environment; and Legislative Branch package (H.R. 1865) contained $534.4 billion in discretionary spending. The Labor-HHS-Education portion of the bill totaled $184.9 billion in discretionary appropriations, an increase of $4.9 billion above fiscal 2019.

The legislation included repeal of the Affordable Care Act’s (ACA) 40 percent “Cadillac tax” on high-cost health plans, 2.3 percent medical device excise tax, and the annual fee on health insurers – all of which have been repeatedly suspended. Repeal of the taxes is not offset in the bill; the Congressional Budget Office (CBO) estimates that these provisions will cost the federal government $377 billion in lost revenue over the next decade. The minibus to fund non- defense agencies will also prevent the administration from ending automatic re-enrollment in ACA plans and health insurer silver loading.

Extenders contained in the funding package include community health centers; National Health Service Corps; Teaching Health Center Graduate Medical Education Program; Special Diabetes Program and Special Diabetes Program for Indians; Work Geographic Price Cost Index; State Health Insurance Assistance Programs; Area Agencies on Aging; Aging and Disability Resource Centers; Certified Community Behavioral Health Clinic demonstration, Money Follows the Person demo, and Health Profession Opportunity Grants. The bill would extend Medicaid funding for U.S. territories for an additional two years. The Patient-Centered Outcomes Research Trust Fund would be extended for 10 years and is directed to prioritize research in the areas of maternal mortality and intellectual and developmental disabilities.

The bill also appropriates funding for opioid treatment, prevention, and research, including $1.5 billion for state opioid response grants, $475.6 million for opioid overdose prevention and surveillance through the CDC, and $89 million for medication-assisted treatment (MAT) programs. The Substance Abuse and Mental Health Services Administration (SAMHSA) would receive $19 million for the Suicide Prevention Lifeline, an increase of $7 million over last year. An additional $7 million increase is provided for the Zero Suicide Program, which provides tools, training, and outreach to health care systems to adopt effective suicide prevention strategies.

The eight-bill minibus was passed by the House by a vote of 297-120 and by the Senate on Thursday by a vote of 71-23. Opposition came from lawmakers concerned about increasing the deficit. The bill was signed into law by the President.

The House of Representatives adjourned for the year and will reconvene for the second session of the 116th Congress on January 7. The Senate will reconvene on January 3, but no roll call votes are scheduled until January 6.

Lawmakers Expand Surprise Billing Probe

House and Senate lawmakers are requesting more information from physician-staffing companies and insurers regarding their billing policies and practices as a part of an ongoing investigation into surprise insurance gaps. The letters, which were sent to Envision Healthcare, TeamHealth, Anthem, Cigna, CVS Health, Health Care Service Corporation, Highmark, and UnitedHealth Group, were signed by House Energy and Commerce Committee leadership Frank Pallone (D-N.J.) and Greg Walden (R-Ore.), and Senate Health, Education, Labor, and Pensions (HELP) Committee leadership Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.). The lawmakers request details about “why surprise billing occurs, the policies and practices that help protect individuals from surprise billing, and the current incentives behind the negotiations between providers and insurers.” They request a response from the companies by January 9.

Individual Mandate Struck Down by Federal Appeals Court

A federal appeals court has struck down the ACA’s individual mandate while skirting the question of the law’s overall constitutionality in a 2-1 ruling. The decision narrows a previous ruling from Texas District Judge Reed O’Connor declaring the entire law invalid because Congress eliminated the financial penalty for not having health insurance. The 5th Circuit Court of Appeals Texas v. Azar decision keeps the 2010 health care law in effect for the time being, while remanding the case back to the federal judge in Texas to determine how much of the rest of the ACA, if any, is also unconstitutional. The appeals court directed O’Connor “to employ a finer-toothed comb on remand the conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate.”

Lawmakers Question CMS Administrator’s Use of PR Consultants

Democratic House and Senate committee leaders have written to HHS Secretary Alex Azar to reiterate a previous request for information regarding Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma’s use of taxpayer funds for private public relations consultants. The lawmakers first asked for documents relevant to the administrator’s awarding of such private contracts in March. They argue that “these contracts appear to be a highly problematic use of federal funds,” and “call into question the Trump administration’s commitment to transparency, ethics, and responsible stewardship of taxpayer dollars.” If the administration fails to provide the requested information and documents by January 9, the letter states that the lawmakers may use alternative methods to obtain the information about the awarding of these contracts.

State of the Union Address Scheduled for February 4

House Speaker Nancy Pelosi (D-Calif.) has invited President Trump to deliver his annual State of the Union address on February 4. The White House stated that the President has accepted the invitation.

Senate Finance Request Report on U.S. Organ Procurement

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and committee member Todd Young (R Ind.) have written to HHS Acting Inspector General Joanne Chiedi to request that she examine the adequacy of the organ procurement and transplantation system in the U.S. The lawmakers praise a recent executive order that would overhaul organ donations, but state that there is “no question that more can be done right now to improve a system that is mired by inefficiency, waste, and a serious lack of accountability.”

CMS has proposed a regulation to improve the measures used to assess organ procurement organization (OPO) performance, while a proposed rule from HRSA would remove financial barriers to living organ donation. The senators ask for details about the extent of HHS oversight of OPOs and previous relevant information gathered by the Office of the Inspector General (OIG).

Surprise Billing to Take Center Stage in 2020

Despite a deal being reached on bipartisan, bicameral legislation, Congress may delay consideration of a measure to protect patients from surprise medical bills until 2020. The House Energy and Commerce Committee (E&C) and the Senate Health, Education, Labor, and Pensions (HELP) Committee recently announced that an agreement had been reached to resolve out-of- network billing disputes between providers and insurance companies. The agreement was the culmination of months of negotiations. It would automatically pay for out-of-network care at the median price of in-network providers in the geographic area. The measure would also lower the threshold for doctors to dispute payments from insurers from $1,250, as outlined in Energy and Commerce’s original bill, to $750. The original Senate HELP legislation had not included an independent dispute resolution (IDR) process. The latest bill includes provisions to raise the tobacco purchasing age to 21 and extend funding for federal health programs like community health centers. Despite an endorsement from the White House, however, the No Surprises Act did not expect to pass in 2019. Sponsors of the bill had been pushing for its inclusion in a year-end government funding package expected to pass by the December 20 deadline. A rival proposal released by the House Ways and Means Committee is cited for the delay.

Leadership of the House Ways and Means Committee released a one-page outline of the panel’s own surprise billing fix. Their proposal would set patient cost- sharing for out-of-network bills at the in-network rate for a geographic area. It would allow providers and payers to address billing disputes themselves but would provide for an outside mediation process if the two parties cannot reach an agreement. The losing party would be responsible for paying a reconciliation process fee. The solution also preserves existing state laws on surprise billing and would set timely billing requirements. It remains unknown when the bill text will be released or when the committee will mark up the legislation.

Members of the House Education and Labor Committee have indicated that they want more time to vet the bicameral surprising billing agreement as well. House Education and Labor Committee Democrats Donna Shalala (D-Fla.) and Joe Morelle (D-N.Y.) are circulating a Dear Colleague letter on the issue of surprise insurance gaps exclusively through an independent dispute resolution (IDR) process in the case of out-of-network billing disputes between providers and payers. The IDR process would have no dollar threshold and would allow an arbiter to consider median in-network payment rates. Rep. Morelle has said that he estimates the proposal would save $15 billion over the next decade.

House Passes Pelosi’s Lower Drug Costs Now Act

The House of Representatives passed Speaker Nancy Pelosi’s Lower Drug Costs Now Act (H.R. 3) last week. The bill passed along a largely party-line vote of 230-192. The legislation aims to reduce the cost of prescription drugs by allowing the Secretary of the U.S. Department of Health and Human Services (HHS) to negotiate the price of certain treatments and capping annual out-of-pocket costs for Medicare beneficiaries at $2,000. The Secretary would be required to negotiate lower prices for a minimum of 50 drugs per year, up to a maximum of 250 drugs, capping a drug’s price at 120 percent of their cost in certain other wealthy nations. Progressive Democrats reached a deal with the Speaker’s office to increase the minimum number of drugs to be subject to negotiation from 35 to 50 shortly before passage of the bill. Lower prices would apply to both the Medicare program and private insurance. If a manufacturer refuses to negotiate, the company would be penalized with a tax up to 95 percent of their drug’s revenue. Republicans argue that such a steep penalty would effectively result in a government mandated price.

The Congressional Budget Office (CBO) estimates that the legislation would lower the prices of drugs subject to negotiation by 50 percent and save $456 billion over the next decade. Savings would be used to expand the Medicare benefit to include hearing, dental, and vision care. CBO expects the bill to raise wages for people with employer-sponsored health insurance by $116 billion over the same time period. CBO also predicts, however, that the bill would result in the development of eight fewer drugs over the next 10 years because manufacturers would cut back on research and development due to reductions in revenues as a result of the bill. CBO estimates that approximately 30 fewer drugs would be introduced over the subsequent decade.

The White House has issued a veto threat for H.R. 3, arguing that the bill would impose price controls on the industry and ultimately harm individuals in need of innovative new treatments. The administration is instead urging Congress to take up the bipartisan drug pricing legislation advanced out of the Senate Finance Committee. The Prescription Drug Pricing Reduction Act (S. 2543) would lower Medicare enrollee’s out-of-pocket expenses in the initial phase of a prescription drug plan from 25 percent to 20 percent and would allow beneficiaries the option to more evenly divide what they pay each month for their medications, capping out-of-pocket costs at $3,100 per year. It would also require drug companies to pay rebates to Medicare if they raise the price of their product more than inflation. Majority Leader Mitch McConnell (R-Ky.) has said that he will not bring H.R. 3 up for a vote, and it remains unclear if he will allow for consideration of the Finance package.

Bipartisan Lawmakers Raise Concerns with Medicare Plan Finder

Bipartisan committee leaders in the House have written to the Centers for Medicare and Medicaid Services (CMS) to express concerns about the accuracy of the Medicare Plan Finder. The letter was sent following reports from consumer advocates, volunteers, and other Medicare counselors that the tool was confusing, provided incorrect results, and led beneficiaries to choose plans with lower premiums but higher overall costs. The letter was signed by E&C Chairman Frank Pallone (D-N.J.), Ranking Member Greg Walden (R-Ore.), Ways and Means Chairman Richard Neal (D-Mass.), and Ranking Member Kevin Brady (R-Texas). The lawmakers urge CMS Administrator Seema Verma to evaluate and correct errors with the Plan Finder as necessary. Because Medicare open enrollment has closed, the letter also requests that beneficiaries who used Plan Finder be included in a special enrollment period to allow them to make changes to their plan selection.

Finance Drug Packaged Stalled by Senate Leadership

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released an updated version of their bipartisan health care package last week. The second draft of the Prescription Drug Pricing Reduction Act would lower Medicare enrollee’s out-of-pocket expenses in the initial phase of a prescription drug plan from 25 percent to 20 percent and would allow beneficiaries the option to more evenly divide what they pay each month for their medications, capping out-of-pocket costs at $3,100 per year. The latest version of the bill also includes several health care extenders, which would be paid for with the drug pricing provisions of the legislation. The Committee did not provide any new savings estimates. While the package has the support of President Trump, who praised the new version of the bill and urged its passage this year, it remains stalled by Majority Leader Mitch McConnell’s (R-Ky.) reluctance to bring it up for a vote on the Senate floor.

McConnell has reportedly expressed thoughts in private conversations that the bill is bad policy and is hesitant to hold votes that could divide Republicans. Nine GOP Finance panel members voted against the measure in Committee, specifically objecting to a provision that would require manufacturers to pay rebates to the Medicare program if their prices rise faster than inflation – a policy the lawmakers argue is akin to a government price control. Such GOP objections make it unlikely that the bill will be attached to must-past, end-of the-year legislation. McConnell has instead focused the chamber’s time on confirming the President’s judicial nominations; according the Senate Finance Committee Chairman Chuck Grassley (R-Iowa), a vote on the drug pricing bill “would be dependent upon the White House asking him to do it at this point.”

Energy and Commerce Chairman Releases Draft Bill to Modernize Cosmetics Regulations

House Energy and Commerce Committee Chairman Frank Pallone (D-N.J.) released a draft proposal to modernize the Food and Drug Administration’s (FDA) ability to regulate cosmetics ahead of a hearing in his panel’s Health Subcommittee on the same subject. The Cosmetic Safety Enhancement Act of 2019 would give the agency the authority to recall cosmetics and require cosmetics companies to report adverse events. Federal cosmetics regulations have not been updated in 80 years and concerns were raised during the hearing regarding the patchwork of state laws that have arisen to regulate cosmetic products. Chairman Pallone’s legislation would not preempt state laws regarding civil or criminal action against cosmetic manufacturers, but the Chairman stated that he was still open to making revisions to the bill.

Hospitals Sue HHS Over Price Transparency Rule

The hospital industry is suing the Trump administration to block a regulation that would require them to publish the rates they negotiate with insurers. The lawsuit argues that requiring the disclosure of negotiated payment rates violates the First Amendment, the Affordable Care Act (ACA), and the Administrative Procedures Act. The hospitals believe that regulation would undermine competition, confuse patients, and impose a massive financial and time-consuming burden on hospitals. The final rule, which was issued on November 15, is scheduled to take effect January 1, 2021. The lawsuit was filed in federal district court by the American Hospital Association, the Association of American Medical Colleges, the Federation of American Hospitals, the National Association of Children’s Hospitals, and three individual hospitals. The hospitals seek expedited review of the case because of the extensive steps they believe will be required to comply with the rule.

FDA Takes Steps to Reduce Use of EtO in Device Sterilization

The Food and Drug Administration (FDA) outlined new steps the agency is taking to advance innovation in ethylene oxide (EtO) medical device sterilization. The FDA has selected 11 applications for its two new innovation challenges, which aim to identify new sterilization methods and technologies that are alternatives to those that use EtO, and to identify strategies or technologies that can significantly reduce the amount of EtO used to sterilize devices. The FDA is also moving forward on recommendations stemming from a related public advisory committee meeting, encouraging device manufacturers to begin, as soon as possible, to reduce the amount of paper that is included in a sterile device package, and to move to electronic materials where feasible and safe for device users. This will lessen the amount of EtO required for effective sterilization.

In an effort to mitigate device shortages and expedite approvals of changes to EtO sterilization methods, processes, and facilities, the FDA will launch an EtO Sterilization Master File Pilot Program. Under this voluntary program, facilities that sterilize single-use devices using fixed chamber processes will submit a master file to the FDA when making changes to the location of the sterilization facilities or processes that utilize reduced EtO concentrations. This submission could then be used in support of subsequent premarket submissions. Manufacturers and sponsors of class III devices could also participate in the pilot program by referencing the master file submitted by their sterilization provider in a post approval report rather than a premarket approval (PMA) supplement.

FDA Issues Warning Letters on CBD Marketing

The Food and Drug Administration has issued 15 warning letters to various companies that are marketing untested cannabidiol (CBD) products intended for children and infants. The agency has only approved one drug containing CBD and is still working to determine how to safely regulate the compound contained in marijuana. FDA Principal Deputy Commissioner Amy Abernethy recognized the knowledge gaps surrounding the science, safety, and quality of these products, stating that the agency will continue to monitor the marketplace, take action against companies as needed, and work together with stakeholders given the significant public interest in CBD.