Hart Health Strategies provides a comprehensive policy briefing on a weekly basis. This in-depth health policy briefing is sent out at the beginning of each week. The health policy briefing recaps the previous week and previews the week ahead. It alerts clients to upcoming congressional hearings, newly introduced bills, regulatory announcements, and implementation activity related to the Patient Protection and Affordable Care Act (PPACA) and other health laws.


HHS Announces Overhaul of Part B Drug Reimbursement

President Trump joined U.S. Secretary of Health and Human Services (HHS) Alex Azar last week to deliver remarks on the cost of prescription drugs and to announce significant changes to the reimbursement of drugs in Medicare Part B. HHS released a corresponding report on Thursday examining drug prices that are charged to wholesalers and distributors in the United States compared to those charged abroad.

HHS’ Advance Notice of Proposed Rulemaking (ANPRM) proposes a payment plan for doctor-administered drugs in an effort to shift prices to a level more in line with prices in other countries and reduce what Americans pay for some treatments. The proposal from the Centers for Medicare and Medicaid Services (CMS) would establish an international pricing index to be used as a reference in setting reimbursement for drugs paid for through Medicare Part B. The new model will encompass 50% of Part B drug expenditures and initially target drugs made by a single manufacturer. Over time, the goal of the model is to reduce the cost of those medications by 30 percent. The administration projects that this proposal would save $17.2 billion over the next five years.

The President also announced plans to change the way physicians are paid under Part B. Under the proposal, physicians participating in the demo would be paid a flat fee instead of a percentage add-on to the average sales price (ASP) and third party vendors would assume the financial risk physicians currently assume in today’s buy-and-bill system. The administration plans to issue an official proposed rule in the spring of 2019, with the five-year demo beginning in the spring of 2020. Secretary Azar stressed that the actions announced on Thursday are just a part of a series of steps the administration plans to take to lower drug costs.

CMS Loosens 1332 Waiver Rules

CMS issued new guidance last week to reform 1332 state innovation waivers. 1332 waivers were created by the Affordable Care Act (ACA) and serve as a vehicle to allow states to waive some of the law’s coverage requirements and consumer protections and make changes to state health insurance markets. CMS Administrator Seema Verma has characterized the current waiver process as too restrictive, and the latest guidance aims to increase flexibility for states. Under the 2010 health care law, waiver programs must provide coverage that is equally comprehensive and must cover a comparable number of people. The agency’s new policy, however, focuses on access to coverage rather than level of coverage. It will allow states to count people with short-term insurance as having coverage, even though such plans do not cover all of the essential health benefits included in Obamacare-compliant plans. This change paves the way for states to use ACA subsidies, previously reserved for Obamacare plans, to pay for short-term and association health plan coverage. The administration recently issued regulations expanding the availability of such plans, which are cheaper than ACA plans but offer less comprehensive coverage options and fewer of the law’s consumer protections. The new guidance also overhauls the current waiver process, allowing governors to take action on waiver plans, which previously had to be approved by state legislatures. Both changes are in response to an October 2017 executive order instructing federal agencies to loosen restrictions around coverage options.

The administration argues that these recent moves will increase competition, expand consumer choice, and lower costs for individuals who have been priced out of the ACA market. Democrats, however, warn that the changes will lead to higher health care costs, particularly for those with preexisting conditions, and result in many Americans purchasing inadequate ‘junk’ insurance plans. There are also concerns that the change in regulations will destabilize the individual health insurance market and lead to parallel systems – one for healthy people seeking cheaper plans, and another for sick patients who remain in ACA coverage but face rising premiums.

The 1332 guidance takes effect immediately but will not be used until 2020. ACA premiums and plans have already been set for 2019; enrollment opens on November 1. CMS plans to publish a list of potential waiver applications in the coming weeks.

October 29, 2018: | Page 1 Page 2



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