Perspectives

The American Health Care Act has failed: What happens now?

Health Care Current | March 28, 2017

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

My Take

The American Health Care Act has failed: What happens now?

By Anne Phelps, Principal, US Health Care Regulatory Leader, Deloitte & Touche LLP

On Friday, March 24, the House Speaker Paul Ryan cancelled the planned vote on the American Health Care Act (AHCA), a bill the House Republicans introduced on March 6, 2017 that they hoped to send to President Trump for signature in a few short weeks. The bill would have repealed and replaced key provisions of the Affordable Care Act (ACA) and made significant changes to federal funding for Medicaid.

After weeks of discussion amongst Republicans, with many moderate and more conservative blocs of the party in disagreement about how to proceed, the most recent concessions added in over the last days of debate were unable to bring the two factions together for the final vote. The amendments that House leadership added last minute would have moved more power to the states to decide the essential health benefits package that worked best for their markets. It also would have allowed states to accept block grant or per-capita-cap funding for their Medicaid programs. Finally, it would have given additional funding to support mental health, maternity, newborn, and substance abuse coverage. The Congressional Budget Office (CBO) projected that the AHCA, as amended, would have reduced the federal deficit by $150 billion and increased the number of uninsured by 24 million by 2026.

Since the passage of the ACA in 2010, many Congressional Republicans have been promising to repeal the law, and President Trump said the day he was sworn into office that repealing and replacing the ACA would be one of his administration’s main priorities. Now that the AHCA has failed, much of official Washington spent the past weekend engaged in the blame game or in post-mortem analysis asking, “What happened?”

But many across the country and in the health care sectors are asking, “What happens now?”

At a health care presentation last week, I heard a commentator remark, “I am concerned if the repeal bill passes. But I am equally concerned if it does not.” That comment has stayed with me over the past few days. Why? Because the health care community is currently operating under the ACA and needs to understand what, if any, changes are to be expected. Stakeholders need to prepare for 2018 enrollment in relatively short order, and they are grappling with finding ways to keep individuals insured, boost the insurance markets, control premium growth, and continue their investments to improve the quality of care for their patients.

No one knows yet what, if any, agreements or changes to the ACA might emerge in the coming weeks with President Trump and Congress.

For now, the ACA is the law of the land with pressing annual deadlines. And other looming health issues will require attention by Congress and the regulators this year. Recent actions by President Trump, Secretary of the US Department of Health and Human Services (HHS) Tom Price, and recently confirmed Administrator of the US Centers for Medicare and Medicaid Services (CMS) Seema Verma may give us an idea of what the administration might do next.

For one, HHS could use its administrative powers to “reduce the burden” of the ACA on health care stakeholders. As one of the first moves after Secretary Tom Price was confirmed, HHS on February 15, 2017 released a proposed rule intended to provide health insurers greater certainty about the individual and small group markets in the 2018 benefit year under the ACA. Days later, a CMS division proposed providing plans with more time to file products for the federally-facilitated Exchanges in order to allow time to modify products in response to the proposed changes (see the February 20, 2017 Reg Pulse Blog). We may see additional rules issued in the coming weeks.

Secretary Price and Administrator Verma have also recently highlighted levers that states have to stabilize their markets. Earlier this month, they both sent a letter to governors saying they promise to remove barriers and give states more flexibility in the design of their Medicaid programs. They also said that HHS will conduct a full review of Medicaid managed care regulations (see the May 3, 2016 Health Care Current) and will delay enforcement of the Home and Community-Based Services rule. They said that CMS recommends states use Section 1115 waivers to encourage non-disabled adults to obtain and keep employment. For individual and small-group plans, HHS Secretary Tom Price sent a letter to governors saying they should use Section 1332 State Innovation waivers to slow premium growth and stabilize the markets. He held out as an example Alaska’s 1332 waiver request to fund a state-operated high-risk pool and reinsurance program.

Several pieces of “must pass” legislation are up this year, and they may be used as vehicles to pass additional changes to the ACA, especially if the repeal effort remains stalled. The Continuing Resolution passed by Congress in December 2016 expires on April 28, 2017. Congress will need to make critical decisions about federal funding for agencies and programs. One issue many health plans are keenly watching is whether Congress will step in and appropriate funds for the cost-sharing reduction subsidies for low-income individuals under the ACA, an issue that has been in debate in the courts. Congress will need to address reauthorization and funding for the Children’s Health Insurance Program (CHIP), which is set to expire in September this year. This program provides critical funding to the states for children’s health programs alongside Medicaid. Many state governors and providers are eager to see the program funded as soon as possible before September to assist them in their annual planning. For life sciences companies, the reauthorization of industry “user fees” to assist the approval processes at the US Food and Drug Administration (FDA) are also set to expire in September.

The administration and Congress have a lengthy list of health care issues that are still a priority. For one, we are nearly four months into the first performance year for the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Health care leaders should not mistake the federal government’s attention on repeal and replace as a sign that it is neglecting its efforts to move toward value-based care across the system. Moreover, throughout the debate of AHCA, several lawmakers called for a bipartisan effort to tackle one of the biggest spending drivers in our system today: health care costs. And if Congress decides to move forward with tax reform next, health care stakeholders may be wise to watch for tax changes to many health care related provisions such as premium assistance tax credits, health savings accounts, or the tax-favored treatment of employer-sponsored health care.

In the end, the legislative process to repeal and replace the ACA may be stalled, but the work of health care is never done. In many travels around the country, I have been encouraged by how many in the health care community remain resilient and operate with resolve in the midst of uncertainty. It is a good reminder of how much of our community’s and our own health care is still within our hands while we continue to watch Washington for what’s next.

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Implementation & Adoption

CMS delays mandatory bundles programs

Last Monday, CMS issued an interim final rule that delays by three months implementation and expansion of several cardiac and orthopedic bundled payment initiatives. Originally slated to begin in July, the interim rule pushes the effective date of these initiatives to October 1, 2017. CMS said it is delaying the initiatives to ensure all stakeholder input and comments can be addressed, that participants have a clear understanding of the program rules, and that the agency is adequately prepared to administer the programs.

The payment model demonstrations, piloted through the Center for Medicare and Medicaid Innovation, would have been mandatory for hospitals and health systems in some parts of the country.

The new rule delays the start dates for:

  • Two new mandatory episode-based bundled payment demonstrations for cardiac episodes (bypasses and heart attacks) and one demonstration for orthopedic episodes (hip or femur fractures)
  • A program that provides incentives for cardiac rehabilitation services
  • Expansion of the Comprehensive Care for Joint Replacement Model to include a surgical hip and femur treatment bundle (see the January 10, 2017 Health Care Current)

CMS also requests comments on whether the delay is sufficient or if the demonstrations should be further delayed to January 2018.

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HHS’s new deputy for technology could impact MACRA implementation

Former Congressman John Fleming, MD accepted a new role in the Administration as the first deputy assistant secretary for health technology at HHS. In the newly created role, Dr. Fleming will report directly to HHS Secretary Tom Price and will work on health care and technology issues and regulations. The head of the Office of the National Coordinator for Health Information Technology is still vacant.It is unclear how the two positions will share jurisdiction of these issues.

Fleming previously was US Representative to Louisiana’s fourth congressional district. While in office, he voted for the passage of MACRA. However, then co-chair of the GOP Doctors Caucus, Dr. Fleming said he had concerns about how MACRA was being implemented. He said MACRA’s reporting requirements would deter physicians from accepting Medicare patients and that the law’s Quality Payment Program’s (QPP) performance measures and reporting periods were unrealistic.

The HHS Office of Inspector General flagged two areas for attention in the QPP – physician support and development of HIT systems – although it generally found in December 2016 that CMS was on track. The report said that CMS should provide more guidance and technical assistance to help prepare clinicians for MACRA implementation and that it needs to develop the proper IT systems to allow clinicians to report data accurately and allow CMS to validate that data, provide useful performance feedback, and properly adjust Part B payments to clinicians.

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Study: Among MA plans, provider-sponsored plans have highest quality

A recent study published in Health Affairs found that provider-sponsored Medicare Advantage (MA) plans have higher overall quality ratings compared to other types of plans. These MA plans perform better in seven of nine MA quality domains:

  • Screenings, tests, vaccines
  • Managing chronic conditions
  • Responsiveness and care
  • Complaints and appeals
  • Complaints and audit findings
  • Experience with plans
  • Drug pricing and patient safety

These plans did not score higher in customer service or telephone customer service.

More hospitals and health systems are offering their own insurance products. According to the study, the percentage of MA plans that were offered by providers increased from 20.1 percent in 2011 to 22.5 percent in 2015. However, the percentage of MA beneficiaries enrolled in these plans declined during the same time period (from 24.4 percent in 2011 to 22.0 percent in 2015). The average number of enrollees in provider-sponsored MA plans was similar to that in other plans.

Typically, provider-sponsored MA plans are in denser population and urban areas in the northeast and west. Counties with higher enrollment in these plans tend to have residents with higher median household income and a lower poverty rate. In addition, counties with provider-sponsored MA plans have slightly more competitive MA markets.

Deloitte’s analysis of provider-sponsored health plans found MA-focused provider-sponsored plans performed well financially in 2012 and 2013. Additionally, the study found that PSPs that performed best tended to be focused on Medicaid in 2014. In 2014, five of the top ten financially performing provider-sponsored plans were Medicaid plans.

(Source: Johnson et al. “Provider-offered MA plans: Recent growth and care quality,” Health Affairs, March 2017)

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On the Hill & In the Courts

Senate HELP and House E&C committees hold hearing on PDUFA reauthorization

Last week, the Senate Committee on Health, Education, Labor and Pensions (HELP) and the House Committee on Energy and Commerce (E&C)’s Subcommittee on Health held hearings on the upcoming reauthorization of the Prescription Drug User Fee Act (PDUFA). Witnesses included the Center for Drug Evaluation and Research (CDER) Director Dr. Janet Woodcock, as well as leaders from the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Innovation Organization (BIO).

Witnesses and lawmakers discussed:

  • How to encourage manufacturers to make opioid treatments less susceptible to abuse: One way the FDA encourages manufacturers to innovate new treatments is by granting market exclusivity to new products. However, lawmakers and witnesses said that awarding market exclusivity for new opioids could reduce competition and patient access.
  • Conducting patient-centered clinical trials: Dr. Woodcock testified that volunteer retention is a major hurdle to conducting timely clinical trials. Lawmakers and Dr. Woodcock said that the FDA should reorganize clinical trial pathways around the needs and priorities of the patients. This could include focusing treatment targets on patient-reported burdens of particular diseases.
  • Coordinating review of combination products: Combination products, which pair a pharmaceutical or biologic agent with a medical device (e.g., a surgical tool with antibiotic coating), are approved through CDER and the Center for Devices and Radiological Health (CDRH) using funds from PDUFA and the Medical Device User Fee Amendments (MDUFA). While FDA experts testified that there is a process for reviewing combination products, several speakers said there are additional opportunities to streamline the review of combination products.
  • Investing in modernization: Several witnesses and lawmakers supported using PDUFA funds to modernize FDA infrastructure and support a highly technical workforce familiar with the most recent innovations in medical technology.
  • Incorporating real-world evidence (RWE) into regulatory decision-making: While the FDA does not today accept RWE as a part of the product approval process, the 21st Century Cures Act directs the agency to explore how RWE could be used in the future (see the Deloitte analysis, "Getting real with real-world evidence").

PDUFA is up for reauthorization in September 2017. PDUFA authorizes the FDA to collect user fees from manufacturers to fund the drug approval process. In exchange, the agency agrees to provide industry with technical support and a clear, timely pathway through the regulatory approval process. Industry stakeholders, the FDA, and Congress began negotiations in the summer of 2016 (see the August 23, 2016 Health Care Current).

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MGMA asks CMS to release 2017 MIPS eligibility information

In a letter to CMS Administrator Seema Verma, the Medical Group Management Association (MGMA) asked CMS to release immediately requirements for clinicians reporting under the Merit-based Incentive Payment System (MIPS). MGMA says that CMS has not released critical provisions related to reporting for 2017. Transitioning to MIPS will likely involve upgrading electronic health record (EHR) software, overhauling clinical workflows, contracting with data registries, and training staff.

The letter asks CMS to:

  • Notify clinicians if they qualify for the low-volume threshold exemption: Clinicians fall under the low-volume threshold exemption if they bill Medicare less than $30,000 or provide care to fewer than 101 Medicare beneficiaries. Since CMS previously estimated that 32.5 percent of Medicare providers would be exempt from MIPS in 2017, the lack of guidance has left many Medicare providers unsure about whether or not they must report under MIPS this year.
  • Notify clinicians if they qualify for the hospital-based and non-patient facing exemption: These clinicians have additional flexibility under MIPS.
  • Release eligible vendor information: CMS has not published the final list of approved qualified registries and qualified clinical data registries. Without this information, contracts might be delayed or begun without a guarantee that CMS will approve.

MGMA represents more than 33,000 medical practice administrators and executives across 18,000 health care organizations where 385,000 physicians practice.

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HRSA delays implementation of 340B rule

Earlier this month, the Health Resources and Services Administration (HRSA) issued an interim final rule delaying – for the second time – updates to the 340B drug pricing program until May 22, 2017. The agency also requested comments on whether the delay is sufficient or whether an effective date of October 1, 2017 would be preferable.

The 340B program requires drug manufacturers to provide certain outpatient drugs to covered entities (primarily hospitals serving low income patients) at reduced prices as a condition of participation in Medicaid. HHS includes the manufacturers’ drugs in the program in exchange for the manufacturers providing 20 to 50 percent discounts to the eligible health care organizations.

The delayed rule would alter the formula that manufacturers use to calculate the maximum price they can charge, or ceiling price, for 340B covered drugs. Some stakeholders have said that drug manufacturers are deliberately overcharging providers. Manufacturers would have to update the ceiling price every quarter. The rule also authorizes HHS to fine manufacturers who “knowingly and intentionally” charge a covered entity more than the ceiling price.

HRSA said that it delayed implementation because drug manufacturers need time to adjust systems and update their policies. Because manufacturers may face financial penalties, the agency said it is committed to providing sufficient time to make changes to support compliance. HRSA is accepting public comment until April 10, 2017.

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Around the Country

Higher premiums lead to decline in Arizona exchange enrollment

Exchange enrollment in Arizona declined 3.3 percent to roughly 196,000 people in 2017. According to a recent analysis, much of the decline is due to the fact that premiums doubled from 2016 to 2017.

Twenty-three percent fewer people who do not qualify for tax credits (people with incomes greater than $47,550 for an individual or $97,200 for a family of four) signed up for exchange coverage during the most recent open enrollment. Meanwhile, 3 percent more people who do qualify for tax credits enrolled. On average, premiums in Arizona increased from $324 per month in 2016 to $611 per month in 2017.

Arizonans who are eligible for subsidies have to pay slightly less, on average, than last year. Nearly 80 percent of individuals who enrolled through the exchange in Arizona received some level of subsidy, paying an average of $104 per month, $16 less than last year’s $120 monthly average premium.

Nationally, approximately 4 percent fewer people enrolled during the open enrollment period this year compared with 2016 (see the March 21, 2017 Health Care Current).

(Source: Bob Christie, “Higher premiums trigger decline in Arizona insurance signups,” Associated Press, March 20, 2017)

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Breaking Boundaries

Connected Patient Challenge highlights innovative ideas in data analytics, artificial intelligence, and patient-engagement technologies

Boston Scientific hosted a Connected Patient Challenge earlier this month, challenging companies to compete for funding to develop their products or systems and advance their ideas with Boston Scientific and Google. The challenge attracted 46 submissions, and six finalists got to present their work at the event. Online voters narrowed down the finalists, and the finalists then presented to a panel of judges made up of chief innovation officers and digital health leaders from a variety of technology companies.

The winners included:

  • Medumo: This team won first prize for their work on an automated patient engagement platform. The problem Medumo aims to solve is the lack of guidance patients typically receive before medical procedures. The goal was to develop a solution to allow physicians to have automatic touch points with patients before a procedure in a way that is affordable, effective, and efficient. Medumo’s tool gives physicians customizable automated messages to send to users via text or email to instruct them and check in before procedures. The team focused on colonoscopies – a procedure that requires patients to prepare in advance of the procedure.
  • Pillo: This company makes a robot for the home to target medication adherence and won first runner up. The robot stores patients’ medications and reminds them to take their medication. It can answer health-related questions and connect patients with their care teams. The robot may help aging and isolated patients feel more connected at home.
  • Dive Health: This company is developing analytical tools to support chronic disease management. Its platform uses data from claims and electronic health records to identify which patients are at high-risk for chronic conditions. The interactive reports could be used to triage patients and refer them to specialists. Dive Health presented early results from a pilot.
  • Tueo: “Tueo” is the Latin word for “to care for or to protect,” and this company focuses on children with asthma. The team developed a sensor that attaches to children’s beds; the sensor passively monitors their heartbeat and respiratory rate and sends data to a mobile app. It alerts them when they should use an inhaler to prevent an episode. The app also features targeted guidance and education.
  • Tufts University and Heartbeats: This team presented their work on analysis of electrocardiogram signals. While prior work with electrocardiograms have documented the rhythm and variation in the time between successive beats, this team plans to look at the shape of each beat using statistical analysis to map beats use the information for clinical decision support.
  • Multisensor Diagnostics: This team’s device, Mouthlab, was compared to Star Trek’s “Tricorder” because of its ability to assess the overall health of a patient. The device goes into a patient’s mouth for one minute to measure breathing rate and pattern, blood pressure, temperature, pulse rate, blood oxygen saturation, electrocardiogram trace, and spirometric lung function. The data goes to the cloud and provides a comprehensive, real-time overview of how a patient with a chronic condition, such as congestive heart failure, is doing. If the device detects abnormalities in the biometric data it collects, it sends an alert to the patient’s caregiver.

Analysis: Competitions and challenges that crowdsource ideas can be a great way to generate new, creative solutions to pressing problems. For example, hackathons have become a popular strategy in recent years to generate innovative ideas to help solve complex problems using limited resources. The Boston Scientific competition likely garnered so many good ideas because the focus called for companies to come up with solutions to specific problems. While cash prizes are one incentive, so is the opportunity to work with leaders in the field.

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