United States: Washington Healthcare Update: March 3, 2014

Last Updated: March 13 2014
Article by Stephanie A. Kennan and Brian J. Looser

This Week: Chairman Camp releases tax reform proposal... CMS issues guidance on "two-midnight" rule... CBO updated score of SGR replacement proposal.



Chairman Camp Unveils Tax Overhaul Plan

House Ways and Means Chairman Camp (R-MI) has released a discussion draft of proposed sweeping tax reform legislation. Specifically, the proposal would collapse the existing tax bracket structure into two brackets of 10 and 25 percent for virtually all taxable income, ensuring that over 99 percent of all taxpayers face maximum rates of 25 percent or less. The plan also reduces the corporate rate to 25 percent. While the plan generally leaves the ACA untouched, the legislation would repeal the medical device tax and the medicine cabinet tax, which prohibits use of funds from tax-free accounts to purchase over-the-counter medication without first obtaining a prescription. The Ways and Means Committee is seeking input and feedback on technical and policy issues raised by the draft. The Committee also invites input on the accompanying technical explanation prepared by the JCT staff, a document that could serve as the basis for similar legislative history on any future tax reform legislation that may be considered by the Committee.

Energy and Commerce Hearing Explores Counterfeit Drug Threat

On Feb. 27, the Energy and Commerce Subcommittee on Oversight and Investigations held a hearing entitled "Counterfeit Drugs: Fighting Illegal Supply Chains." The purpose of the hearing was to explore the public health threat of counterfeit drugs, and to build on the recent enactment of the Drug Quality and Security Act (DQSA) to identify other areas to strengthen U.S. efforts to combat the growing threat of counterfeit drugs to U.S. patients. Witnesses offered testimony addressing issues such as FDA inspections of international drug manufacturing facilities and efforts to combat introduction of illicit drugs into the secure drug supply chain established by DQSA.


Panel I
Howard Sklamberg, J.D.
Deputy Commissioner for Global Regulatory Operations and Policy
Food and Drug Administration (FDA)

Lev Kubiak
Director, National Intellectual Property Rights Coordination Center
Department of Homeland Security, Immigration and Customs Enforcement (ICE)

Panel II
Marcia Crosse, Ph.D.
Director, Health Care
U.S. Government Accountability Office

Prashant Yadav, Ph.D., M.B.A.
Director of Health Care Research Initiative, Director of the William Davidson Institute University of Michigan

John P. Clark
Vice President and Chief Security Officer, Global Security, Compliance Division
Pfizer Inc.

Jean-Luc Moreau
Global Head of Product Security
Novartis Corporation

Bruce Longbottom, J.D.
Assistant General Counsel
Eli Lilly and Company

Elizabeth Jungman, J.D., M.P.H.
Director, Drug Safety and Innovation
Pew Charitable Trusts

For more information, or to view the hearing, please visit energycommerce.house.gov.

Energy and Commerce Hearing on Proposed Part D Regulations

On Feb. 26, the Energy and Commerce Health Subcommittee held a hearing entitled "Messing with Success: How CMS' Attack on the Part D Program Will Increase Costs and Reduce Choices for Seniors." The hearing focused on a Jan. 6, 2014, CMS proposed rule that would, among other things, establish new criteria for identifying protected classes of drugs, and revise the regulatory definition of negotiated prices. Republicans claim the changes undermine the competitive structure of a successful program, while CMS insists the changes improve health quality and lower beneficiary costs.


Panel I
Jonathan Blum
Principal Deputy Administrator
Centers for Medicare & Medicaid Services

Panel II
Douglas Holtz-Eakin
American Action Forum

Carl Schmid
Deputy Executive Director
The AIDS Institute

Joe Baker
Medicare Rights Center

For more information, or to view the hearing, please visit energycommerce.house.gov.

GOP Letter to CMS Requests Improved Provider Fraud Screening

In a letter dated Feb. 26, three high-ranking Republican members of the House Energy and Commerce Committee -- Committee Chairman Fred Upton (R-MI), Chairman Emeritus Joe Barton (R-TX) and Rep. Michael Burgess (R-TX) -- sent letters to the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) urging stronger screening measures for health care providers receiving economic stimulus funds such as electronic health records (EHR) incentive payments. The letter comes in response to reports of a Texas rural hospital chain, the recipient of $18 million in incentive payments for EHR, despite being at the centers of warnings from several agencies of patient-care threats and allegations of fraud. "Given these reports, we have every reason to be concerned about how facilities are being screened and what processes the administration has to detect and prevent fraud," Rep. Burgess said in a statement. The letter to CMS called for a briefing by the Agency on its current screening procedures and the steps it was taking to coordinate its efforts with the General Services Administration and the Food and Drug Administration. Moreover, the letter to HHS Office of the Inspector General (OIG) also requested a briefing and the list of recommendations OIG had given CMS on ways to improve provider screening, including a list of databases that can assist in the provider screening process. According to the letter, briefings and information must be provided before March 12, 2014.

Health Subcommittee Advances Four Health-Related Bills

On Feb. 27, the Energy and Commerce Health Subcommittee held a markup of four bipartisan health-related measures aimed at addressing issues facing newborn babies, trauma patients and veterinarians. Specifically, the bills were:

  • H.R. 3548, Improving Trauma Care Act of 2013 - The bill would amend the Public Health Service Act to amend the definition of trauma by including injuries caused by thermal, electrical, chemical or radioactive force. These are injuries commonly treated by burn centers.
  • H.R. 4080, Trauma Systems and Regionalization of Emergency Care Reauthorization Act - The bill would reauthorize Trauma Care Systems Planning grants, which support state and rural development of trauma systems. It also would reauthorize pilot projects to implement and assess regionalized emergency care models.
  • H.R. 1281, Newborn Screening Saves Lives Reauthorization Act of 2013 - The bill would reauthorize the Newborn Screening Saves Lives Act of 2008 to continue Federal activities that assist states in improving their newborn screening programs, supporting parent and provider newborn screening education, and ensuring laboratory quality and surveillance. In addition, the bill would continue research at the National Institutes of Health on newborn screening.
  • H.R. 1528, Veterinary Medicine Mobility Act of 2013 - The bill would amend the Controlled Substances Act to clarify that a veterinarian who has registered with the Drug Enforcement Administration may transport, administer and dispense controlled substances, in the regular course of veterinary practice, without having to obtain separate registrations for each activity.

For more information, please visit energycommerce.house.gov.

Upcoming Hearing to Focus on FDA Generic Drug Labeling

On March 3, Energy and Commerce Health Subcommittee Chairman Pitts (R-PA) will hold a hearing entitled "Examining Concerns Regarding FDA's Proposed Changes to Generic Drug Labeling." The hearing will focus on a proposed rule issued by the Food and Drug Administration (FDA) on Nov. 13, 2013, that would amend existing policy regarding generic drug labeling changes under the 1984 Hatch-Waxman amendments to the Food, Drug, and Cosmetic Act (FDCA). The hearing will take place at 2 p.m. in 2123 Rayburn House Office Building.


Panel I
Janet Woodcock, M.D.
Center for Drug Evaluation and Research, U.S. Food and Drug Administration

Panel II
Michael D. Shumsky
Kirkland & Ellis LLP

Ralph G. Neas
President and CEO
Generic Pharmaceutical Association

Allison M. Zieve
General Counsel
Public Citizen

For more information, or to view the hearing, please visit energycommerce.house.gov.

Upcoming Hearing to Examine CMS Management of Medicare Contractors

On March 4, Energy and Commerce Health Subcommittee Chairman Pitts (R-PA) will hold a hearing entitled "Keeping the Promise: How Better Managing Medicare Can Protect Seniors' Benefits and Save Them Money," in which members of the subcommittee will hear testimony from GAO and the HHS-OIG regarding the challenges CMS faces in successfully managing the contractors who are assisting in paying for, delivering or protecting seniors' benefits. The hearing will take place at 10 a.m. in Room 2123 Rayburn House Office Building.


Kathleen King
Director, Health Care
Government Accountability Office

James Cosgrove
Director, Health Care
Government Accountability Office

Robert Vito
Regional Inspector General
Department of Health and Human Services, Office of Inspector General

For more information, or to view the hearing, please visit energycommerce.house.gov.

CMS Says ICD-10 Will Be Ready for Oct. 1 Launch

During a speaking engagement last week at an annual conference hosted by the Healthcare Information and Management Systems Society (HIMSS), CMS Administrator Tavenner said her agency has no intention of extending the current Oct. 1 deadline for implementation of the ICD-10 (International Classification of Diseases, 10th Revision). However, the switch has been criticized by some provider groups as too burdensome and costly. According to American Medical Association President Ardis Dee Hoven, delays in software upgrades, for example, are to blame for putting providers behind on ICD-10 testing efforts, which could disrupt Medicare claims processing.


HELP Committee Hearing on Access to Mental Health Services

On Feb. 25, the Senate HELP Committee held a hearing to examine the current state of treatment options and trends for mental health conditions. In his opening statement, Chairman Harkin (D-IA) praised what he called a step forward in coverage by requiring treatment of mental health and substance use disorders as one of the ten Essential Health Benefits under the ACA.


William O. Cooper, M.D., M.P.H.
Professor of Pediatrics
Vanderbilt University Medical School, Nashville, TN

Benjamin S. Fernandez, M.S. Ed.
School Psychologist
Loudoun County Public Schools, Ashburn, VA

John K. Arch, FACHE
Executive Vice President of Health Care and Director
Boys Town National Research Hospital and Clinics, Omaha, NE

Tiffany Martinez
University of Southern Maine, Portland, ME

For more information, or to view the hearing, please visit www.help.senate.gov.


Updated Exchange Data Shows 8.9 Million New Medicaid and CHIP Enrollees

According to a new CMS report released today, between October and January, more than 8.9 million individuals were determined eligible for Medicaid or CHIP through state agencies and through state-based Marketplaces. More than 2 million people were informed in January that they are eligible for Medicaid and the Children's Health Insurance Program (CHIP); more of those individuals are in states that have chosen to expand Medicaid coverage to more of their residents. These numbers include both Medicaid and CHIP new eligibility determinations in states that expanded coverage; determinations made based on laws that predate the Affordable Care Act and for groups not affected by the health care law; and in some states, Medicaid renewals. These numbers do not include Medicaid eligibility determinations made through the Federally-Facilitated Marketplaces (HealthCare.gov).

CMS: Guidance Issued for MACs Two-Midnight Audits

On Feb. 24, 2014, CMS posted an update clarifying specifics of its "probe and educate" period with regard to its two-midnight policy reimbursements. The two-midnight policy states that hospital stays lasting two or more midnights after patient admittance formally changes their reimbursement status to inpatient for as long as the hospital stay is medically necessary. As part of the two-midnight policy, MACs are conducting prepayment reviews of a small sample of Medicare Part A inpatient hospital claims. The process is supposed to educate both MACs and providers about how to process claims submitted for review under the two-midnight policy. The process, updated Jan. 30, extends the review period for Medicare Administrative Contractors (MACs) for claims data for an additional six months. In the guidance issued, denials under the "probe and educate" process that occurred on or before Jan. 30, for which an appeal has been filed, also will be subject to re-review. In order to afford providers ample opportunity to file a timely appeal on a denied claim, CMS "will waive the 120 day timeframe for filing redetermination requests received before September 20, 2014 for claims denials under the Probe & Educate process that occurred on or before January 30, 2014." According to CMS, as of Feb. 7, MACs have requested more than 29,000 medical records from providers and have received slightly more than 18,000.

HHS Guidance on Application of HIPAA Privacy Controls to Mental Health Records

The HHS Office for Civil Rights has issued guidance on how the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule applies to mental health records, outlining when the Privacy Rule allows health care providers to release a patient's mental health records to individuals including family members and law enforcement. In addition, the guidance provides relevant reminders about related issues, such as the heightened protections afforded to psychotherapy notes by the Privacy Rule, a parent's right to access the protected health information of a minor child as the child's personal representative, the potential applicability of Federal alcohol and drug abuse confidentiality regulations or state laws that may provide more stringent protections for the information than HIPAA, and the intersection of HIPAA and FERPA in a school setting.


North Carolina Proposes New Health Network for Medicaid Patients

North Carolina Gov. McCrory has released a plan to overhaul the state's Medicaid system, in which health providers would coordinate services through what are called accountable care organizations, rather than through managed care companies, as state officials had previously proposed. The plan would allow health care providers to keep savings they would generate while meeting goals, but they would share losses if costs were to get too high. An advisory group is evaluating the plan. State legislators are expected to consider a proposal in May.


NEW - HHS Proposes Health Information Technology Certification Requirements

On Feb. 26, HHS published a notice of proposed rulemaking to introduce the beginning of the Office of National Coordinator for Health Information Technology's (ONC's) more frequent approach to health information technology certification regulations. Under this approach ONC intends to update certification criteria editions every 12 to 18 months in order to provide smaller, more incremental regulatory changes and policy proposals. The 2015 Edition EHR certification criteria proposed in this rule would be voluntary. No EHR technology developer who has certified its EHR technology to the 2014 Edition would need to recertify to the 2015 Edition in order for its customers to participate in the Medicare and Medicaid EHR Incentive Programs (EHR Incentive Programs). Furthermore, eligible professionals, eligible hospitals and critical access hospitals that participate in the EHR Incentive Programs would not need to "upgrade" to EHR technology certified to the 2015 Edition in order to have EHR technology that meets the Certified EHR Technology (CEHRT) definition. Instead, the 2015 Edition EHR certification criteria would accomplish three policy objectives: 1) They would enable a more efficient and effective response to stakeholder feedback; 2) they would incorporate "bug fixes" to improve on 2014 Edition EHR certification criteria in ways designed to make rules clearer and easier to implement; and 3) they reference newer standards and implementation specifications consistent with promoting innovation and enhancing interoperability.

Comments must be received by April 28, 2014.

NEW - CMS Seeks Comment on Expansion of Competitive Bidding Program

On Feb. 24, CMS announced that it will seek public comment as it moves toward nationwide implementation of the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program. The Competitive Bidding Program, established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act or MMA), has saved more than $400 million for beneficiaries and taxpayers in its first two years of operation and is projected to save an additional $17.2 billion for beneficiaries and $25.8 billion for the Medicare program over the next 10 years.

Currently, competitive bidding is in effect for a national mail order program for diabetic testing supplies and for additional items in 100 areas across the country. By 2016, Medicare must implement competitive bidding or competitive bidding pricing for included items to non-competitive bidding areas. CMS is soliciting public comment on the methodology it would use to comply with the statute when using competitive bidding pricing information to adjust payment amounts in non-competitive bidding areas. In addition, CMS is requesting comments regarding ideas for potentially simplifying the payment rules and enhancing beneficiary access to items and services under the competitive bidding programs for certain durable medical equipment (DME) and enteral nutrition.

Comments are due March 28.

FDA Public Docket for Interoperable Rx Tracking System

FDA has established a public docket to receive information and comments on standards for the interoperable exchange of information associated with transactions involving human prescription drugs in a finished dosage form (prescription drugs) to comply with new requirements in the Drug Supply Chain Security Act (DSCSA). FDA is seeking information from drug manufacturers, repackagers, wholesale distributors, dispensers (primarily pharmacies) and other drug supply chain stakeholders and interested parties, including standards organizations, State and Federal agencies, and solution providers. In particular, stakeholders and other interested parties are requested to comment about the interoperable exchange of transaction information, transaction history and transaction statements, in paper or electronic format, for each transfer of product in which a change of ownership occurs. This action is related to FDA's implementation of the DSCSA. Comments are due April 21, 2014.

IRS, HHS, DOL: Guidance Issued with Final Proposed Rules on 90-Day Waiting Periods Under ACA

On Feb. 20, the Internal Revenue Service (IRS), Department of Health and Human Services (HHS) and Department of Labor (DOL) released their final proposed rule clarifying the relationship between a plan's eligibility criteria and the 90-day waiting period limitation. In order to be in compliance with the Affordable Care Act (ACA), in the rule, insurers offering group health insurance coverage cannot institute a waiting period that surpasses 90 days. The final rule, which goes into effect on April 25, applies to plan years starting Jan. 1, 2015, or after. "This is a common sense measure that helps workers access employer-sponsored health insurance while providing employers flexibility," said DOL's Assistant Secretary of Employee Benefits Security Administration Phyllis C. Borzi. Also of note, the rule limits the maximum allowed length for the employment-based orientation period to no more than one month. Comments on the proposed rules are due by April 25, and the rule is expected to be published in the Federal Register on Feb. 24.

Children's Hospital Graduate Medical Education (CHGME) Information Collection

The Health Resources and Services Administration (HRSA) has announced plans to submit an Information Collection Request (ICR) to the Office of Management and Budget (OMB) in which data will be collected on the number of full-time equivalent residents in applicant children's hospitals' training programs to determine the amount of direct and indirect medical education payments to be distributed to participating children's hospitals. Assessment of the hospital data ensures that appropriate CMS regulations and Children's Hospitals Graduate Medical Education (CHGME) program guidelines are followed in determining which residents are eligible to be claimed for funding. The audit results impact final payments made by the CHGME Payment Program to all eligible children's hospitals. Indirect medical education payments will also be derived from a formula that requires the reporting of discharges, beds and case mix index information from participating children's hospitals. The CHGME Payment Program was enacted to provide federal support for graduate medical education (GME) to freestanding children's hospitals. This program attempts to provide support for GME comparable to the level of Medicare GME support received by other, non-children's hospitals. Comments are due April 11, 2014.

Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule and the National Instant Criminal Background Check System (NICS)

On Jan. 7, HHS issued a notice of proposed rulemaking to modify the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule to expressly permit certain HIPAA-covered entities to disclose to the National Instant Criminal Background Check System (NICS) the identities of individuals who are subject to a Federal "mental health prohibitor" that disqualifies them from shipping, transporting, possessing or receiving a firearm. The NICS is a national system maintained by the Federal Bureau of Investigation (FBI) to conduct background checks on persons who may be disqualified from receiving firearms based on federally prohibited categories or State law. Among the persons subject to the Federal mental health prohibitor are individuals who have been involuntarily committed to a mental institution; found incompetent to stand trial or not guilty by reason of insanity; or otherwise have been determined by a court, board, commission or other lawful authority to be a danger to themselves or others or to lack the mental capacity to contract or manage their own affairs, as a result of marked subnormal intelligence or mental illness, incompetency, condition or disease. Under this proposal, only covered entities with lawful authority to make adjudication or commitment decisions that make individuals subject to the Federal mental health prohibitor, or that serve as repositories of information for NICS reporting purposes, would be permitted to disclose the information needed for these purposes. Comments are due March 10, 2014.

Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs

On Jan. 6, CMS released a proposed rule that would revise the Medicare Advantage (MA) program (Part C) regulations and prescription drug benefit program (Part D) regulations to implement statutory requirements; strengthen beneficiary protections; exclude plans that perform poorly; improve program efficiencies; and clarify program requirements. Specifically, the proposal includes a requirement establishing U.S. citizenship and lawful presence as eligibility requirements for enrollment in MA and Part D plans. In addition, the proposed rule would modify the administration of payments to agents and brokers who assist Medicare beneficiaries in selecting plans to discourage beneficiaries from enrolling in plans without regard to ensuring plan benefits would meet the beneficiaries' health care needs. Comments are due March 7, 2014.



Cost Estimate of S. 2000, SGR Repeal and Medicare Provider Payment Modernization Act of 2014

S. 2000 would replace the Sustainable Growth Rate (SGR) formula, which determines the annual updates to payment rates for physicians' services in Medicare, with new systems for establishing those payment rates. CBO estimates that enacting S. 2000 would increase direct spending by about $138 billion over the 2014-2024 period. This estimate is relative to the CBO's February 2014 baseline projections of spending under current law. (The legislation would not affect federal revenues or spending subject to appropriation.) The costs of this legislation fall within budget functions 570 (Medicare) and 550 (health). The current "patch" protecting physicians from the scheduled payment reductions called for under the SGR expires at the end of March. House and Senate negotiators have found agreement on the policy to replace the SGR; however, the funds necessary to offset the cost of repeal have eluded lawmakers.


Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2013

According to a report issued by HHS and DOJ, during Fiscal Year (FY) 2013, the Federal government won or negotiated over $2.6 billion in health care fraud judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. As a result of these efforts, as well as those of preceding years, in FY 2013 approximately $4.3 billion was deposited with the Department of the Treasury and the Centers for Medicare & Medicaid Services (CMS), transferred to other Federal agencies administering health care programs or paid to private persons. Of this $4.3 billion, the Medicare Trust Funds received transfers of approximately $2.85 billion during this period, and over $576 million in Federal Medicaid money was similarly transferred separately to the Treasury. The HCFAC account has returned over $25.9 billion to the Medicare Trust Funds since the inception of the Program in 1997.

CMS Office of the Actuary

ACA Provisions Raise Premiums for 11 Million Individuals, Reduce for 6 Million

The ACA requires all non-grandfathered health insurance coverage in the individual and group markets to be guaranteed issue and guaranteed renewable. In addition, all non-grandfathered insurance plans and policies in the individual and group markets can vary premium rates based only on age, family status, geography and tobacco use, and the variation in the age and tobacco use factors is limited. This new premium rating requirement will impact the premiums paid by individuals and families working for small employers who offer health insurance. Specifically, the CMS Actuary estimates that the premium rates for roughly 11 million people will increase and about 6 million people are expected to experience a premium rate reduction due to Sections 2701 through 2703 of the PHS Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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