McDermottPlus Check-Up: May 3, 2019 - McDermott+Consulting

McDermottPlus Check-Up: May 3, 2019

This Week’s Dose: Lots of activity surrounding single-payer this week with a hearing, the introduction of two Medicare expansion bills and a report from the Congressional Budget Office (CBO). Hearings and markups of drug pricing bills continue as well. This legislative session is off to a busy start.


A Busy Week for Medicare Expansion. The House held a hearing on the Medicare for All Act, Democrats introduced two new Medicare expansion bills, and CBO released a report on single-payer health systems.

  • The House Rules Committee held the first ever congressional hearing on Medicare for All (R. 1384). Read our full summary here. Overall, the tone was more collegial than expected, especially compared to some of the Affordable Care Act (ACA) hearings we saw earlier this year. Witnesses, including well-known patient advocate Ady Barkan, made strong emotional appeals in favor of Medicare for All. Going forward, the question will be whether the emotional arguments for a revolutionized health system overcome the substantive policy disagreements. The debate is sure to get more heated in the hearings to come.
  • Representatives Rosa DeLauro (D-CT) and Jan Schakowsky (D-IL) reintroduced the Medicare for America Act, which would expand covered benefits and services under Medicare and Medicaid to include prescription drugs, dental, vision and hearing services, as well as long-term supports and services for seniors and Americans living with disabilities. Unlike the recently introduced Medicare for All Act, the bill preserves employer-sponsored insurance. Americans who are uninsured or lack employer-sponsored insurance—including those currently on the individual market—would be auto-enrolled in Medicare for America.
  • Senators Jeff Merkley (D-OR), Chris Murphy (D-CT) and Dianne Feinstein (D-CA) introduced the Choose Medicare Act, which would give every individual who is not already eligible for Medicaid or Medicare the opportunity to enroll in Medicare. It would also give employers the ability to purchase Medicare.
  • CBO released a report on policy considerations for a single-payer health program. The report lays out factors for lawmakers to weigh when designing legislation. Though CBO concludes that moving to a single-payer health care system could significantly affect the entire economy, the agency did not provide a cost estimate or make any specific recommendations. Notably, the report did not score a specific proposal, and rather provided each side with additional talking points. The report will be the basis of a not-yet-scheduled House Budget Committee hearing on single-payer.

Congressional Scrutiny of Drug Pricing Continues. Another hearing and markup took place this week as lawmakers develop a drug pricing package.

  • The House Energy and Commerce Health Subcommittee held a hearing entitled “Prescription Drug Coverage in the Medicare Program.” Read our full summary here. The conversation was largely technical, focusing on the ways Medicare Parts B and D deliver drug benefits and the factors influencing cost. Members discussed some recommendations for lowering drug costs in Medicare, including developing and encouraging clinicians to use an alternative to “buy and bill;” shifting more liability for costs in the catastrophic phase of Part D coverage to plans in exchange for more tools and flexibility to manage utilization; and eliminating beneficiary cost-sharing in the catastrophic phase. A few Democratic members of the committee also suggested allowing Medicare to negotiate prices. The Medicare drug benefit is likely to remain a key element of the drug pricing discussion. Though a full legislative package has yet to come together, Democrats and Republicans have made it clear that both sides of the aisle are committed to acting on this issue. To date, 10 prescription drug pricing related bills – mostly focusing on transparency, reporting and access to generics – have advanced through House Committees. It is likely that a drug pricing package including these bills will be on the President’s desk this year.
  • The House Judiciary Committee held a markup of four drug pricing bills: R. 965, the CREATES Act of 2019, H.R. 2375, the Preserve Access to Affordable Generics and Biosimilars Act, H.R. 2374, the Stop STALLING Act, and H.R. 2376, the Prescription Pricing for People Act of 2019. All four were reported favorably to the full House by a voice vote. Drug pricing continues to be a rare area of bipartisan compromise. House leadership has indicated intent to bring these bills to the floor by the end of the month. Will the Senate act on these or attempt a bigger bite at the apple?

House Appropriations Approved Funding Bill for HHS. The House Appropriations Labor, Health and Human Services, Education and Related Agencies Subcommittee held a markup of a funding bill that includes nearly $200 billion in funding for the Department of Health and Human Services (HHS), including Democratic priorities like gun violence research and teen pregnancy prevention. The bill also includes $2 billion in additional funding for the National Institutes of Health, $2.4 billion for Alzheimer’s disease research and $8.3 billion for the Centers for Disease Control and Prevention. The bill was reported favorably to the full committee by a voice vote. We will wait and see which Democratic priorities remain in the bill as it heads to the full committee, the full House and then to the Republican Senate.

Senators Reintroduce Bill to Cut Costs at HHS. Senators Bill Cassidy (R-LA) and Tina Smith (D-MN) reintroduced the Reducing Administrative Costs and Burdens in Health Care Act (S. 1260). The bill would require the HHS to cut unnecessary costs and administrative burdens by 50 percent over 10 years. The bill also helps states with $250 million in grants for state-based initiatives to bring down administrative costs, encourage the adoption of electronic health record-keeping, streamline administrative processes and reduce administrative waste. The bill highlights physician and hospital credentialing, data use and exchange, and compliance measures as potential areas for reducing burden and cost. The bill reintroduction comes as the Senate Health, Education, Labor and Pensions Committee (of which Senators Cassidy and Smith are members) is actively working on a larger legislative package to reduce health care costs.

Senate Finance Committee Released Supplemental Payment Report. The Senate Finance Committee majority staff released a report on Medicaid supplemental payment transparency. The report provides a general overview of supplemental payments (disproportionate share hospital payments, upper payment limits, etc.) and calls for greater reporting and transparency. Specifically, it recommends gathering provider level data. The report also highlights Medicaid managed care pass-through payments and suggests that more information is needed on how these payments are distributed to providers. The report is further evidence that Chairman Chuck Grassley (R-IA) is making his case for potential changes to hospital transparency and payment policies.


Trump Administration Will Appeal Court Ruling on AHPs. The Trump Administration said it will appeal a judge’s ruling that struck down much of the rule expanding association health plans (AHPs). The Administration’s rule allowed an association of employers to establish a single employee health plan regulated under the Employee Retirement Income Security Act (ERISA). Eleven states and the District of Columbia filed a lawsuit saying that the definition of “employer” in ERISA was not reasonable. A federal district court agreed and set aside regulations for qualifying associations, saying that the Labor Department failed to put a limit on the types of associations that can qualify to sponsor an AHP. Republicans in the House have introduced legislation to amend the law to accommodate the effort to expand AHPs, while Democrats argue that AHPs are low-quality and should not be promoted.

CMS Innovation Center Released Its 2018 Report. The Centers for Medicare and Medicaid Services (CMS) Innovation Center released its 2018 Report to Congress. The report provides an overview of 36 models and initiatives that ran between October 1, 2016 and September 30, 2018.  The report includes links to model materials and evaluations, as well as information about forthcoming Innovation Center work. The report comes as the Innovation Center is rolling out new model ideas to add to its portfolio and attempting to shift additional financial risk onto providers and other entities.

CMS and Treasury Issued an RFI on Section 1332 Waivers. CMS and the Department of the Treasury issued a Request for Information (RFI) asking for more ideas on innovative programs and waiver concepts that states could consider in developing a State Relief and Empowerment Waiver plan (also referred to as “Section 1332 waiver” or “State Innovation Waiver”). The RFI comes after CMS and the Treasury issued guidance in October 2018 outlining how the Trump Administration interprets the 1332 waiver guardrails in the ACA. The Trump Administration’s interpretation differed from that of the Obama Administration’s in several ways: focusing on the availability of coverage rather than the number of individuals covered; concentrating on the aggregate effects of a waiver rather than the effect on a population; and expanding the definition of coverage to include short-term, limited duration insurance plans and AHPs. At the same time, CMS released four waiver concepts to illustrate how states might take advantage of this flexibility. Since the October 2018 guidance and concepts were issued, few states have taken advantage of the relaxed guardrails. CMS has stated that the goal of the new RFI is to develop additional concepts that will allow states to take advantage of Section 1332 waivers. Comments for the RFI are due by July 2, 2019.


Washington State Advanced a Public Option Bill. The Washington state legislature passed a bill to create a public option for health care coverage, available through Washington’s Health Benefit Exchange. The plan would be known as Cascade Care, and would be the first public health insurance option in the nation. Specifically, the bill would require the state insurance authority to contract with at least one insurance carrier to offer a Bronze, Silver and Gold standard plan in at least one county, with the goal of ensuring at least one state-contracted plan options is available in each county in 2021. While these plans must meet all requirements of other exchange plans, the bill holds them to a much higher standard, including a robust contracting process that will include direct negotiation with the Health Care Authority, and higher standards of transparency, reducing administrative burden and aligning with state value-based purchasing programs. Governor Jay Inslee (D), a Democratic presidential candidate, is expected to sign the bill.


CBO Released Its Updated Baseline. CBO released updated budget projections for 2019 to 2029. According to CBO, the federal budget deficit is projected to be $896 billion in 2019, and will exceed $1 trillion each year beginning in 2022. CBO also released two health care reports.

  • The first report assessed the effects of the proposed rule on Safe Harbors for Pharmaceutical Rebates, which would eliminate the existing safe harbor for rebates paid by pharmaceutical manufacturers to health plans and pharmacy benefit managers in Medicare Part D and Medicaid managed care beginning January 1, 2020. CBO estimates that this proposed rule would increase federal spending by $177 billion from 2020 to 2029. (It is worth pointing out that repealing this proposed rule would then theoretically save $177 billion over 10 years, which is significant for those looking for pay-fors.)
  • Additionally, CBO released the Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2019 to 2029 report. This report estimates that the number of people without health insurance is projected to rise from 30 million in 2019 to 35 million in 2029. Net federal subsidies for health insurance coverage for people under age 65 are projected to total $737 billion in 2019 and $1.3 trillion in 2029.

Next Week’s Diagnosis: The work continues next with hearings on the Medicare Access and CHIP Reauthorization Act, health IT and drug patent reform. The Energy and Commerce Health Subcommittee will also hold a hearing on the drug supply chain.


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