Countdown To Sequester; SGR Repeal Proposal, Draft Federal Exchange Guidance In Spotlight

Posted: February 25, 2013

Health care insiders that got a sneak peak at draft federal exchange guidance from CMS' insurance oversight office last week are slated to offer their confidential feedback and potentially meet with CCIIO officials on the document this week. The internal draft, obtained by IHP's Amy Lotven, spells out the specific benefits on which CMS will focus when reviewing EHB coverage to ensure it is non-discriminatory, and also says HHS will be the enforcer of the law's market reform requirements if the state has not passed conforming legislation.

Those who were given the document were asked to provide written “high-level” comments directly on the draft by early this week and to treat the document as “strictly confidential” by not sharing it with others in their organizations or with their members. CMS told the stakeholders it plans to formally publish the guidance within the next few weeks.

Stakeholder groups also have been going through new final rules on the ACA's market reforms and essential health benefits, plus a memorandum of understanding between CMS and Illinois on that state's duals demonstration, the fourth state duals MOU to be released.

Plus, physician organizations and other providers will be submitting comments by the end of the day Monday on the joint Sustainable Growth Rate repeal proposal being pushed by the House Ways & Means and Energy & Commerce Committees. As IHP has previously reported, House Republicans hope to bring an SGR repeal bill to the floor by the first week of August. Internists have already said they believe a new physician pay system should allow doctors to spend more time with patients, get rid of some of the administrative reviews and simplify quality reporting requirements that include bigger bonuses for meeting quality goals.

And, with $85 billion in cuts to federal spending slated to go into effect on Friday, all eyes are on Congress to see if sequestration will be averted. The co-chairmen of the White House's 2010 deficit reduction panel have released a new framework for deficit reduction, and the pair – former Wyoming Republican senator Alan Simpson and former Clinton White House chief of staff Erskine Bowles – say a specific plan with more details will be outlined in the coming weeks. Yet Washington insiders believe that the sequester's cuts to defense and non-defense spending are likely to occur at least temporarily.

Federal Exchange Guidance Imminent

CMS' Center for Consumer Information and Insurance Oversight in pre-published draft guidance sent to select stakeholders reveals that the agency plans to perform an “outlier analysis” of qualified health plans' (QHP) cost-sharing as part of the certification process and will ask plans to modify the structure of their benefits if needed. The draft states that such analyses should help prevent adverse selection.

Plans with “outlier benefits” may be asked to modify their structure if benefits “have the effect of discouraging the enrollment of individuals with significant health needs,” the draft document states.

The analysis will compare the benefits packages with comparable cost-sharing (including co-pays and co-insurance) with specific benefits, such as inpatient hospital stays, inpatient mental/behavioral health stays, specialist visits, pregnancy and newborn care, and specific conditions including behavioral health conditions such as mental health disorders and substance abuse.

The draft expands on information included in a final essential benefits rule issued Wednesday, including providing an advanced estimate of yet-to-be set IRS maximum out-of-pocket spending thresholds for 2014, suggesting they will be $6,400 for self-only and $12,800 for family coverage.

Insurers Protest Proposed MA Rates

America's Health Insurance Plans wants CMS as it develops payment rates for Medicare Advantage to assume that the Medicare physician pay cuts mandated by the Sustainable Growth Rate won't go into effect, saying that doing so would “restore MA rates by 4.5 percent to 5 percent next year.” CMS last week proposed MA rate cuts based on the assumption that the scheduled Medicare physician pay reductions will go into effect even though Congress repeatedly has prevented such reductions from taking place in the past.

AHIP believes CMS should assume flat physician pay when it crafts MA rates. The insurance industry since Friday (Feb. 15) has been protesting the proposed MA payment reductions for 2014 that CMS outlined in its advanced notice and draft call letter. The advanced notice proposed a 2.2 percent rate decrease -- CMS wants to align MA payments with Part A and B and says the decrease is attributable to historically-low growth in Medicare spending that is tied in part to value-based pay and fraud-fighting initiatives -- but the insurance industry argues that the true level of reductions to MA plans in 2014 is much larger because of cuts in the health reform law and due to sequestration.

Meanwhile, IHP's John Wilkerson reports that Republicans are using the proposed MA cuts to attack 11 vulnerable Democrats who supported the ACA – which greatly reduced MA payments but didn't call for the 2.2 percent rate decrease in the draft call letter. Although the rates are being protested, an industry consultant notes that CMS has indicated some flexibility because the agency has asked plans to comment on the magnitude of the proposed rate cuts. Dan Mendelson, CEO of Avalere Health, says if sequestration happens, CMS has left an opening to moderate the proposed cuts, based on industry input. Comments on the draft notice are due Friday (March 1).

Oral-Only ESRD Drugs In Spotlight

The Congressional Budget Office has found that repealing the controversial “fiscal cliff” provision delaying inclusion of oral-only dialysis-related drugs into the Medicare end-stage renal disease prospective payment system for two years would save $100 million, yet permanently excluding oral-only ESRD-related drugs from the payment bundle would save roughly $2 billion to $4 billion over the next 10 years, according to a memo written by Senate Republican aides that was obtained by IHP.

“Significant uptake of generic competitors” for oral-only ESRD-related drugs in the near term will lower the costs of the drugs overall and result in savings to Medicare, Republican staff said in the memo that was circulated on Thursday (Feb. 21). After the New York Times reported that a two-year delay in putting oral-only drugs into the ESRD bundle would cost Medicare $500 million and benefit drug maker Amgen, Senate GOP staff asked CBO to estimate the budgetary impact of several scenarios related to the oral drug policy, including extending the delay, permanently removing the drugs from the ESRD bundle and repealing the delay.

“CBO estimated that the continuation of the current policy (excluding the Part D drugs from the bundled price) would yield an additional savings in the range of approximately $2 to $4 billion over the next ten years,” the memo states. According to the memo, CBO has estimated extending the existing two-year delay to 2017 would save $500 million, “thanks to the competitive Part D market dynamic coupled with more intensive generic erosion.” If the delay were extended to 2018 -- an additional two years on top of the current two-year delay -- it would save $1.3 billion, GOP aides say.

CMS Halts PCIP Enrollment

CMS has stopped enrollment for the health law's Pre-Existing Condition Insurance Plan program to ensure that funding is available through this year to keep coverage for those already enrolled, and the agency in January quietly instituted changes in the benefits offered to enrollees in the high-risk pools run by the federal government that result in less generous coverage, according to a Feb. 15 memo that CMS sent to state-based PCIP contractors.

CMS reveals that, in order to control program costs, benefits for federally-run PCIP programs were changed so that the coverage is less generous. Even though states that run their own PCIP programs can offer a different level of coverage, the memo says, CMS is evaluating how much money could be saved if state-run PCIPs were to make the same changes. According to the program's web site, 23 states and the District of Columbia have federally-run PCIPs, and 27 states run their own programs.

CMS is asking state-based PCIP contractors to determine the feasibility of changing state PCIP benefits to be consistent with the new, less-generous federal PCIP coverage, with dates of service beginning as early as April 1. Changes that CMS made for the federal PCIPs include consolidating three benefit options into one plan with a $2,000 deductible for in-network medical services and a $500 deductible for formulary prescription drugs; reducing the amount that the plan pays after the enrollee reaches the deductible by having the federal PCIP provide coverage at 70 percent, rather than 80 percent, of allowed charges, with a 30 percent co-insurance instead of 20 percent; and changing the out-of-pocket maximums from $4,000 to $6,250 for in-network services and from $7,000 to $10,000 for out-of-network services.

More Concerns About Proposed SHOP Requirements

A coalition of health plans, employers, providers, brokers and manufacturers is asking CMS to drop its proposal to generally require a health plan seeking to participate in a federally-facilitated individual health insurance exchange to also sell in the federally-run small group market exchange (FF-SHOP), saying that the requirement could limit the number of plans willing to work in either market. CMS included the requirement in its proposed Notice of Benefit and Payment Parameters issued in late November, and insurance giant Humana has already suggested that the policy has caused the insurer to “rethink” its exchange strategy.

The final Notice of Benefit and Payment Parameters is being reviewed by the Office of Management and Budget, which received the final rule on Feb. 8. Additionally, on Feb. 21 OMB received an interim final rule on amendments to that notice, as well as a proposed rule on SHOP exchanges.

CMS' Notice of Benefit and Payment Parameters, issued in November, says that to leverage issuers' participation in the federally-facilitated exchange (FFE) to ensure participation in federally-facilitated SHOP, the FFE may only certify a plan in the individual market if the qualified health plan meets one of three conditions: 1. the issuer offers at least one silver level group plan in the SHOP exchange; 2. the QHP issuer does not offer small group plans in that state, but another issuer in the state does offer a silver level and gold level plan; or 3. neither the issuer nor any other issuer offers a small group product in the state.

The coalition had expressed its concerns in formal comments on the notice, but said that given recent reports regarding the potential market response by carriers to compelled federal SHOP participation “we believe it is important to reemphasize the long-held coalition principle...that exchange or SHOP participation be voluntary.

“Linking participation in the federal SHOP as a condition of participation in the individual exchange would very likely have the unintended effect of driving carriers out of both, leaving consumers with fewer choices,” the coalition adds.

HHS Reg-a-palooza

HHS finalized two crucial health reform regulations last week – one on essential health benefits, actuarial value and accreditation, and another on the market reforms that go into effect next year. Stakeholders said the final EHB rule closely resembled the earlier proposal. For example, on the controversial issue of how many drugs plans will have to cover to meet essential health benefit requirements, HHS maintained its approach that individual and small group plans for 2014 and 2015 must cover at least one drug in every U.S. Pharmacopeia category and class or the same number of prescription drugs in each category and class as a state's EHB benchmark plan, whichever is greater.

HHS says it reviewed the prescription drug coverage in the EHB benchmark plans from states “and found that the majority of the benchmark plans already meet the EHB standard or would only have to cover one or two additional drugs to meet the standard.”

“Therefore, we believe that, given current coverage under benchmark plans, the policy of requiring at least one drug per category and class reflects drug coverage in a typical employer plan and will have a negligible effect on premiums,” the department wrote.

In its final rule on the law’s market reforms, HHS asserts the department lacks legal authority to delay or phase-in the law's “age-rating” requirement per the insurance industry's request. As a result, issuers will not be able to charge older consumers premiums more than three times the rate for younger people starting in January 2014.

America's Health Insurance Plans says the new requirement, along with the health reform law's premium tax and other mandates related to benefits, will cause rates for younger people to skyrocket “overnight.” But AARP, which had championed the age-rating provision, called HHS' decision to fully implement the policy an important step forward in making insurance affordable for all Americans.

CMS insurance oversight chief Gary Cohen had recently indicated that the administration was unlikely to phase in certain market reforms in order to mitigate potential “rate shock” for younger, healthier consumers, noting that young adults could stay on their parents’ plans and may also be eligible to purchase catastrophic coverage.

CMMI Moves On States' Multi-Payer Reforms

CMS has awarded six states -- Arkansas, Maine, Massachusetts, Minnesota, Oregon and Vermont -- over $250 million in innovation grants to implement a wide range of state-wide, multi-payer delivery system projects that HHS Secretary Kathleen Sebelius says let states take delivery reforms to the next level through coordination among private and public payers. CMS will watch to see if these models -- which include some approaches already being undertaken by CMS -- produce greater results when implemented broadly and combined with state-wide reforms, the agency says.

States will receive anywhere from $33 million to more than $45 million to implement the different proposals, which range from Massachusetts' work to transform primary care practices to patient-centered medical homes to Arkansas' work with bundling. The grant funding will be available to states for three-and-a-half years. CMS' Center for Medicare & Medicaid Innovation announced the model testing awards, as well as awards to further develop such proposals, on Thursday (Feb. 21).

CMMI Director Rick Gilfillan said the center is watching the Arkansas bundling project with great interest. CMMI recently unveiled a bundling demonstration for certain Medicare populations, and Gilfillan said the center will be watching to see how the bundling project might fit with other work CMMI is doing, and what each bundling project could learn from the other.

Other Headlines

Personnel

Effective at the end of February, CMS' Dianne Heffron, who worked on Medicaid state plan amendment and waiver requests among other duties, will be leaving the agency. Heffron was most recently director of the financial management group within CMS' Center for Medicaid and CHIP Services. CMS Medicaid chief Cindy Mann said in an internal memo that Kristin Fan will be acting director of the financial management group after Heffron's departure.

The Medicaid and CHIP Payment and Access Commission has named Anne Schwartz as its executive director. Schwartz was most recently the deputy editor of Health Affairs.

Bob Katter and Charles Tuchinda have been named executive vice presidents of First Databank.

Sen. Joe Manchin (D-WV) has named Hayden Rogers as his new chief of staff.

Calendar

Monday

Wrap up of the National Governors Association winter meeting.

Start of the National Association of Health Underwriters' annual DC conference.

Tuesday

Day 2 of NAHU’s DC conference.

10:30 a.m. House Ways and Means Health Subcommittee hearing on Medicare benefit redesign.

10:30 a.m. Senate Budget Committee hearing on the impact of federal investment on economic growth.

1:45 p.m. National Journal and Partnership for the Future of Medicare forum titled, “Moving Healthcare Forward: Shifting from Budget to Structure.”

Wednesday

Day 3 of NAHU's DC conference.

10:15 a.m. House Energy and Commerce Health Subcommittee hearing on health care fraud and abuse.

2:30 p.m. Senate Commerce Committee hearing on giving consumers information to purchase health insurance.

Thursday

10:30 a.m. Senate Finance Committee hearing on Medicare and Medicaid delivery system reforms.

Friday

12:15 p.m. Alliance for Health Reform briefing on Medicaid policy.

-– Rachana Dixit

Health Insider -- February 25, 2013