OMB Details Sequester Cuts, Pioneer ACOs In Trouble, More ACA Regs Out

Posted: March 4, 2013

With the sequester officially in place, the White House is telling Congress that grants for states to build health insurance exchanges are being cut by $44 million, other health care state grants and demonstration money are being reduced by $27 million and the agency's health care fraud and abuse control account is being cut by $57 million in fiscal 2013 unless the automatic cuts are turned off. A contingency fund for the health law's Consumer Operated and Oriented Plans, for which funding was slashed in the “fiscal cliff” legislation at the start of this year, is having its balance sheet reduced by $13 million, and the ACA's Prevention and Public Health Fund is being cut by $51 million, the Office of Management and Budget says in a sequestration report sent to Congress Friday (March 1).

Insiders believe the cuts will remain in effect for at least one month as lawmakers work toward a solution, and various groups as well as agency officials continue to sound alarm bells about the reductions. For example, CMS' top fraud official recently told members of Congress that the cuts to anti-fraud and abuse activities will have a multiplying effect by reducing the amount of money that is returned to the Medicare trust fund.

HHS officials have said an alternative way to reduce federal health care spending is for stakeholders to more quickly embrace new delivery system reforms spurred by the health reform law, but that pitch also appears to be in trouble. Most of the providers involved in CMS' high-profile Pioneer accountable care organization demonstration are threatening to pull out unless the agency makes key changes, according to a letter obtained by IHP.

The week is also off to a busy start after three federal agencies – HHS, IRS and OPM – on Friday opened the health reform regulatory floodgates by releasing several rules on ACA provisions that kick in next year. As IHP has already reported, HHS is seeking to delay requiring employee choice for all SHOP exchanges until 2015, and OPM in its final rule on multi-state plans revealed that it would not specify the initial states in which those plans must offer coverage. Stay tuned for more detailed coverage from IHP this week on the newly unveiled rules.

ACA Regs And Upcoming Milestones

CMS' insurance oversight shop plans to complete its health reform rulemaking in April, according to an implementation timeline the agency provided to the Senate Finance Committee Tuesday (Feb. 26). The document indicates that a Medicaid federal matching fund rule will be issued in March, followed by April issuance of a final ACA eligibility rule that also addresses marketplace and Medicaid/CHIP appeals issues.

Senate Finance Committee Chairman Max Baucus (D-MT) had requested the timeline during a recent hearing on the progress of health insurance exchanges. The timeline is divided into four distinct categories -- policy, operations and information technology, issuers & states, and consumer assistance. The abbreviated schedule started in February, and ends with the Oct. 1 open enrollment date.

Meanwhile, in other recent guidance CCIIO revealed that a state can evaluate whether health plans meet qualified health plan certification standards and do other specified plan management activities without submitting an exchange “blueprint” to be approved by the agency.

Previously, HHS required that states planning to completely run their exchanges in 2014 submit a “blueprint” by December, and states planning to have a “partnership” model had to submit a blueprint by Feb. 15. The Feb. 20 guidance indicates that HHS wants to share some exchange plan management responsibilities with states that plan to have federal exchanges next year.

Ohio and Virginia, for example, both have indicated they want to perform QHP certifications and plan management activities, according to Avalere Health. Yet HHS has not formally declared that those states are pursuing an exchange partnership model or officially classified those states as having partnership exchanges, according to HHS' web site. An industry source says the new CCIIO guidance still allows HHS to retain enforcement authority if necessary -- whereas formal partnership exchanges have memoranda of understanding that commit states to enforcement. It appears that some states are informally partnering with HHS on exchange duties without saying so and without an agreement, the source said.

Pioneer ACO Woes

One of CMS' highest profile health care delivery reform initiatives is on rocky ground as most of the Pioneer ACOs say they will drop out of the demonstration if CMS makes them start meeting quality measures instead of merely requiring that they report the measures, according to a letter obtained by IHP. The accountable care organizations say the quality metrics are a poor measure of performance, and their complaint could have implications for all Medicare pay systems because CMS is more broadly moving toward basing pay on how providers perform. The Pioneer ACOs were supposed to be the few shining examples of organizations that could handle outcomes-based pay.

“Pioneers need to know before April 2, 2013, if you accept our recommendations, so that we can make informed decisions regarding our ongoing participation,” the ACOs state.

The Pioneer ACOs account for a little more than 30 of the some 250 ACOs in Medicare, and the Pioneers are supposed to be the most advanced, integrated systems of them all. If CMS decides to get rid of many of the measures and let Pioneers remain in the reporting mode, the other ACOs will surely demand the same, lobbyists say. But beyond ACOs, the Medicare program is moving toward outcomes-based pay in other areas, including the replacement for the Sustainable Growth Rate formula that determines physician pay. As a result, consultants say the problems encountered by CMS with the Pioneers could affect those efforts, too.

On the SGR front, IHP's John Wilkerson also reports that House Ways and Means Chair Dave Camp (R-MI) is not optimistic about passing SGR repeal legislation as a stand-alone bill, and he also believes that a grand bargain on deficit reduction will likely have to wait until the next Congress.

Sequestration

The Obama administration has asked appropriators to include in upcoming funding legislation a provision allowing FDA to fully collect user fees associated with medical devices, generic drugs, biosimilars, animal drugs and tobacco products, according to a document that lists “anomalies” the White House Office of Management and Budget recently sent to lawmakers. The Advanced Medical Technology Association said this week that it is focused on ensuring FDA can collect the higher device user fee amounts authorized by the FDA Safety and Innovation Act and is “cautiously optimistic” that the provision will be included in an upcoming appropriations measure.

However, FDA Commissioner Margaret Hamburg recently acknowledged that implementation of the new generic drug user fee act is complicated by uncertainty over the budget and sequester. Hamburg said FDA was off to a slow start in reducing the backlog of abbreviated new drug applications. Meanwhile, FDA does not currently anticipate having to furlough employees if the cuts mandated by sequestration go into effect, but will likely reduce travel and training, and curtail contracts and outside collaborations.

In the days leading up to sequestration, stakeholder conversations have turned toward the extent of flexibility allowed in making the cuts. For example, the Advanced Medical Technology Association said FDA's device center will have some discretion in how the cuts will be distributed within the center.

As sequestration kicks in, prior planning by some hospital systems will save many in the sector from cuts they hoped would never come to pass, industry sources say. But, despite such prior planning, stakeholders still predict dire consequences across the health care industry due to the automatic cuts and worry about potentially larger future cuts as lawmakers work in the weeks ahead to stop the sequester, address an expiring continuing resolution and raise the debt limit.

One hospital lobbyist said most hospitals budgeted for the 2 percent Medicare provider cut as sequestration lingered on the horizon, while also hoping they were wrong and the policy would not be enacted.

New Medicare Reforms Coming From Brookings

Former CMS Administrator Mark McClellan said the Brookings Institution will soon release a set of updated Medicare reform proposals and indicated they would outline a broader reform strategy that chiefly focuses on lowering beneficiary costs and improving individual health outcomes. Speaking at a National Journal forum on Medicare, McClellan said legislative reforms to Medicare must stress individualized, prevention-oriented care under an approach in which beneficiaries could share in savings when they make decisions that result in lower costs and care being used more effectively.

While delivery reforms such as ACOs, patient-centered medical homes and bundled payments are being instituted or piloted for the Medicare program, McClellan said Tuesday (Feb. 26) that Congress hasn't gotten to the point of crafting a systematic-level strategy for reforming Medicare that is primarily about getting better health and lower costs for beneficiaries.

“All these things...are not happening routinely under Medicare's payment system today. It's not just about the long-term sustainability of the program, essential as that is. It's really also about getting better health for each individual beneficiary in the program,” McClellan said.

Separately, Brookings' Hamilton Project that focuses on reducing the federal budget deficit pitched cost-savers recently that included reforming Medicare cost-sharing, limiting the use of supplemental insurance and accelerating bundled pay in Medicare.

Home Health Pay Models

Industry officials are urging CMS to create interim pay models focused on home health until other, value-based approaches catch on, saying that Medicare often isn't paying for home health services because there are not enough pay models that include home health.

IHP's Michelle Stein reports that home health representatives lamented the lack of payment models for home care services that they said can significantly cut down on costs and hospital readmissions, speaking at a Tuesday (Feb. 26) panel sponsored by the Alliance for Home Health Quality and Innovation.

Eiran Gorodeski, who runs a care transitional home care model for cardiac patients out of the Cleveland Clinic, said “one big challenge we have and all hospitals in the United States have when we try and do these kinds of things is we have one foot in the fee-for-service world and one foot in the value-based world.” The result, Gorodeski said, is that the programs have no payer, Medicare or otherwise. As a result “we pay for these ourselves.”

GOP Slams Proposed MA Cuts

Senate Finance Ranking Member Orrin Hatch (R-UT) and two key House Republicans are raising issues with proposed reductions to 2014 Medicare Advantage rates CMS outlined in its advanced notice and draft call letter, saying the cuts combined with ACA reductions and sequestration will reduce beneficiary access and slash the program's total enrollment.

Among the lawmakers' concerns -- and ones that have been echoed by America's Health Insurance Plans and others -- are that CMS develops MA rates on the assumption that Medicare physician payment cuts dictated by the Sustainable Growth Rate formula will go into effect, even though Congress has repeatedly prevented such cuts. Hatch during a Thursday (Feb. 28) Senate Finance Committee hearing queried CMS Medicare chief Jonathan Blum about the MA reductions and SGR, to which Blum said that if SGR is replaced then CMS would no longer have to factor in those cuts when developing MA rates.

Blum added that the MA pay cuts proposed by the agency should not hurt plans that earn 4- or 5-star quality ratings because the bonuses and increased business that plans get as a result of the high ratings will offset the cuts. Blum told the Senate Finance panel the proposed cuts are designed in part to encourage plans with poor ratings to improve and to weed out those that do not.

CMS proposed a 2.3 percent reduction to MA rates in the draft call letter, but AHIP says that in total MA plans will face reductions of at least 8 percent next year because of other cuts. Comments on the advanced notice were due to CMS on Friday (March 1).

Other Headlines

Personnel

Dennis Smith, who most recently was Wisconsin's Secretary of the Department of Health Services under Gov. Scott Walker (R), on March 1 joined McKenna Long & Aldridge as a managing director in the firm's health policy practice.

Doug Nemecek, chief medical officer for Cigna's behavioral health business, has been appointed to serve on the board of directors for the Association of Behavioral Health and Wellness.

Victor Campbell has been elected chairman of the Federation of American Hospitals.

Calendar

Monday

Federation of American Hospitals 2013 Public Policy Conference.

National Commission on Physician Payment Reform releases its recommendations.

Tuesday

FAH conference continues.

10 a.m. House Appropriations Labor-HHS subcommittee oversight hearing on various HHS agencies, including AHRQ and CMMI.

10:15 a.m. House Energy and Commerce oversight and investigations subcommittee hearing on mental illness.

11 a.m. House Ways and Means oversight subcommittee hearing on the ACA's tax provisions.

Wednesday

10:15 a.m. House Energy and Commerce health subcommittee hearing on the sustainability of entitlements.

Thursday

10 a.m. Day 1 of MedPAC's March meeting.

10 a.m. House Energy and Commerce health subcommittee hearing on the ACA and its impact on health insurance premiums.

12 p.m. Heritage Foundation event titled, “Healthcare at a Turning Point: A Roadmap for Change.”

Friday

8:30 a.m. MedPAC's March meeting continues.

– Rachana Dixit (This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

Health Insider -- March 4, 2013