By Kerry Young, CQ Roll Call

June 15, 2016 -- Medicare should seek proof that doctors who get incentive payments under a new reimbursement plan actually provide more value to the federal health system, an advisory panel said. Failing to do so could enshrine policies that reward physicians for merely being willing to participate in alternative payment models, said the Medicare Payment Advisory Commission (MedPAC).

MedPAC commissioners called for tougher standards for alternative reimbursement programs for doctors as part of its annual June report to Congress released on Wednesday. This year's report reflects a broad drive to move toward more competitive payment models for the approximately $600-billion-a-year program for seniors and people with disabilities. MedPAC offered specific suggestions for initiatives already underway and ideas for possible future changes to Medicare, such as putting the traditional fee-for-service and insurer-run Advantage plans into direct competition with each other for customers.

While not always heeded, MedPAC's work is closely studied by lawmakers and Centers for Medicare and Medicaid Services officials. In the report, the panel stressed the potential long-term effects of missteps in implementing the overhaul of doctors' pay (PL 114-10) enacted last year. Medicare officials are in the midst of deciding which existing test programs may qualify as so-called eligible alternative payment entities (EAPEs). MedPAC urged an emphasis on linking the incentive pay for these EAPEs to proof that they either improved the quality of care or reduced costs or both. They should not be allowed to gain additional revenue from a mere willingness to participate in a program such as an advanced model of an accountable care organization, according to MedPAC.

"If the defining criteria for EAPEs are broad and do not require improved performance, it might be very difficult to roll them back if they are unsuccessful—with consequences for the sustainability of the Medicare trust funds," MedPAC said.

MedPAC acknowledged that its view departs from the overhaul law, which allows for incentive pay irrespective of performance.

MedPAC aids Congress and lawmakers in the myriad policy decisions involved in carrying out even broadly supported mandates, such as the drive to link doctors' pay to judgments about the quality of care provided.

In the June report, the panel also confirmed that it would be possible to move toward a more unified approach to paying for post-acute care after a hospital stay, a roughly $60 billion annual expense for Medicare. This complies with a mandate set in a law known as the IMPACT Act (PL 113-185), which had House Ways and Means Chairman Kevin Brady, R-Texas, among its chief backers. Lawmakers want to be able to compare the quality of service provided in four settings: skilled nursing homes, inpatient rehabilitation facilities, long-term care hospitals and services provided in patients' homes. The information could underpin a future payment overhaul.

MedPAC also floated ideas for giving people enrolled in Medicare a stake in selecting whether to choose the traditional fee-for-service version of the program or opt for an insurer-run Advantage plan.

"Currently, beneficiaries do not have a strong incentive to make this choice based on which model provides the highest value in their market," MedPAC said. "Medicare could seek to encourage beneficiaries to choose the more efficient (high quality, low cost) model, thereby reinforcing incentives that encourage providers and plans to provide care more efficiently."

One suggested approach would be to have people pay some of the cost if they pick the approach deemed more expensive in their region, whether that's the fee-for-service option or an Advantage plan.

"By having all systems compete, beneficiaries in each market can choose which system provides them the best value," MedPAC said. "However, some beneficiaries would likely have to pay more than they do now for their existing coverage."

The report also offered suggestions for preserving access to emergency care in rural areas. These include giving isolated rural hospitals the option of converting to an outpatient-only mode, which would aid those with declining numbers of inpatient admissions. And it looked broadly at how Medicare could expand use of telehealth services in the future. But the group suggested that until more is known about the efficacy and costs of telehealth, other payment models that shift some of the risks of covering patients onto insurers or medical providers may be more appropriate programs to expand. Those models include Medicare Advantage, bundled payments, and accountable care organizations.

By Kerry Young, CQ Roll Call

June 15, 2016 -- A federal advisory panel on Wednesday urged lawmakers and Medicare officials to consider a number of approaches for reining in the growth of the program's spending on drugs, including a set of recommendations for the Part D pharmacy plans that might save roughly $10 billion over five years.

In an annual report to Congress, the Medicare Payment Advisory Commission took a comprehensive look at how the nation's single biggest purchaser of health care can manage its prescription drug costs. Francis J. Crosson, who became MedPAC's chairman last year, has highlighted this work as a priority for the panel. Medicare spent $112 billion in 2013 for prescription drugs, accounting for about a third of pharmaceutical sales in the United States.

"Because the Medicare program accounts for such a large share of overall drug spending, program payment policies can have a significant financial effect on health care providers and other parts of the industry, including pharmaceutical manufacturers, drug supply chains, pharmacies, pharmacy benefit managers, and insurers," the commission wrote in its report.

MedPAC suggested steps for sharpening both the negotiations that insurers handle for the Part D program and Medicare's approach to paying through the Part B program for drugs administered in doctors' offices. The Part D guidance was within a set of formal recommendations, while MedPAC's suggestions for addressing the prices of Part B drugs are not yet as developed.

MedPAC said the Congressional Budget Office estimated about $10 billion in potential savings over five years for its package of Part D changes. This could catch the eye of lawmakers looking for ways to offset the costs of future legislation, although changes to Part D would draw opposition from pharmaceutical and hospital trade associations. MedPAC suggested having Medicare remove two kinds of drugs, antidepressants and immunosupressants used by transplant patients, from the classes of medicines that are required to be broadly covered, which limits insurers' ability to drive bargains.

MedPAC also suggested making a Part D reinsurance program that shields insurance companies from steep losses less generous to insurers. Reinsurance provides funding to insurers when a customer of the Part D plans has pharmacy bills that top $7,517 a year, a threshold known as the catastrophic spending level. The reinsurance program accounted for about 38 percent of the $73.3 million Medicare spent for the Part D program in 2014, up from 17 percent of $46 billion in 2007, MedPAC said.

MedPAC recommended Medicare significantly lower the reinsurance payment to insurers to 20 percent of the costs above the catastrophic spending level, down from the current 80 percent of costs. Insurers thus would have more at stake in their negotiations over drug prices, MedPAC said.

"Assuming greater risk for high-spending enrollees would likely require plans to reevaluate their overall bidding and operational strategy," MedPAC said. "For example, plan sponsors might bargain more aggressively with drug manufacturers over rebates and prices."

In the report, MedPAC didn't specifically address a controversial Medicare proposal regarding the payment for Part B drugs administered in doctors' offices. Drugmakers and Republicans in Congress are pushing for Medicare to withdraw the plan, first released in March. Medicare has not given a timeline for when it will release a revised final version of the plan.

The new report from MedPAC indicates a broader concern with the rising costs of drugs, beyond the relatively small initial step proposed in the Part B model. The proposal would switch some doctors away from the current reimbursement in which a premium of about 4.3 percent is added to the reported average sales price for medicine. They would instead get a premium of less than 1 percent with an added fee of $16.80 for administering drugs.

"If policymakers wish to influence Part B drug payments to a larger degree than possible through add-on payments, they could consider Medicare payment policies that create more incentives for price competition among drugs or that put downward pressure" on the average sales price, MedPAC wrote.

Among the approaches MedPAC suggested is combining certain similar drugs into a single billing code, thus creating price competition. Drugmakers complain that this approach would erode the high prices, and thus profits, that manufacturers say they need to fund their research. MedPAC noted there's not enough information for outside groups to assess how much money pharmaceutical companies require for these efforts, echoing a complaint that's been raised by critics of the industry.

"Currently, there is insufficient objective, transparent data available on the research and development costs of new drugs," MedPAC said.

By Erin Mershon, CQ Roll Call

June 15, 2016 -- Health plans that follow new federal standards next year may pay for more care without increasing consumers' out-of-pocket costs, according to a Wednesday report sponsored by the Families USA consumer advocacy group.

Federal standard plans likely to be offered on the health exchanges will cover more outpatient care before deductible costs are applied without significantly higher premiums than silver-level plans in Virginia, Pennsylvania, and North Carolina, the analysis by the actuarial firm Milliman found. The Centers for Medicare and Medicaid Services this spring outlined expectations for the plans.

The study offers a potential partial answer to a major challenge for supporters of the 2010 health law: improving affordability. While the law has improved access to coverage for millions of Americans, majorities of enrollees say they struggle to pay rising premiums or cover the cost of care before their high deductibles are met.

"These new plans ... will help make health care more affordable by helping to cover the costs of basic outpatient care before people pay off their deductible, instead of saddling patients with the entire cost before they reach their deductible," Sen. Sherrod Brown, D-Ohio, said on a call with reporters. "We have much to do to bring down costs, which is why we need to support innovative improvements like this one."

The federal standard plans, finalized in a March regulation, will cover certain services like primary care office visits, prescription drugs, and mental health visits before consumers have to meet the deductible, with only a small co-pay required. Most silver plans currently on the exchanges, including the three comparison plans in this report, do not cover any such services before consumers must pay the deductible.

Average premiums for the new federal standardized plans in the silver metal level would be within a range of 5 percent above or below the average premiums of the 2016 silver plans in the three states Milliman examined. The plan's deductible of $3,500 was less than two of the three comparison plans, the analysis showed.

"The Pennsylvania plan that we used for comparison does not help cover the cost of any doctor visits or medications until a consumer pays a $2,100 deductible. In contrast, the federal standardized silver plans help pay for primary and specialty care and all prescription drugs before the deductible—and at a somewhat lower premium," the report outlines.

Insurers aren't required to offer standardized plans. It's unclear how many will do so or what the actual premiums will be. Based on its findings, Families USA said it wants the government to require insurers to offer the plans in the future.

By Erin Mershon, CQ Roll Call

June 16, 2014 -- California's insurance commissioner is urging the Department of Justice to block a pending $54.2 billion merger between the insurance companies Anthem and Cigna.

The recommendation is a rebuke of one of two mega-mergers for the industry. It is the first opposition from any state regulator, and comes from the commissioner for the nation's largest insurance market. The federal Justice Department and several states are still examining both the Anthem and Cigna merger as well as Aetna's separate efforts to acquire Humana.

California's insurance commissioner does not have approval authority over the Anthem-Cigna merger, unlike state regulators in 23 other states. A separate regulatory body, the California Department of Managed Health Care, is overseeing the transaction in that state and could impose conditions on the transaction.

But despite his agency's inability to block the deal, Insurance Commissioner Dave Jones can draw attention to concerns. The agency Jones oversees held a March hearing on the merger at which Anthem executives testified.

"The enhanced market power of the merged companies will permit them to increase premiums, decrease the quality of care provided to their California members in a number of the state's regions, and reduce access to crucially needed insurance markets," Jones wrote in the statement released Thursday. "The Anthem and Cigna merger will harm Californians, California's businesses and our health insurance market."

Jones charged that the companies failed to fully explain how the proposed merger would result in $2 billion in efficiencies, as they have claimed. Anthem's justifications were "vague, speculative and impossible-to-verify assertions," he wrote in a press release.

Jones also takes pains to highlight the considerable overlap the two insurers share in many of the state's insurance markets.

Anthem has a 19 percent market share statewide in California; Cigna has a 3.6 percent. The National Association of Insurance Commissioners recommendations for mergers suggest that if a larger company has a market share above 15 percent, the smaller company's market share should not exceed 1 percent.

The state's administrative services market is more extreme. Anthem has 37 percent of the market share; Cigna has 24 percent. The next largest competitor has 13 percent.

An Anthem spokeswoman said the company has been working with the state's Department of Managed Health Care for more than 10 months.

"Expanding access to affordable health coverage is the foundation of our combination with Cigna and will remain Anthem's top priority," the company said in a statement. "We do not believe that the California Department of Insurance's opinion is based on the true merits of this transaction. We are confident that the highly complementary nature and limited overlap of our organizations that will benefit the complex and competitive health insurance markets will be reviewed on the facts by the DOJ and appropriate state authorities."

By Kerry Young, CQ Roll Call

June 13, 2016 -- Lawmakers last week considered policy changes for Medicare, but they may struggle to find paths to quickly clear even those proposals that have strong bipartisan support.

Senate appropriators offered several suggestions for the federal health program for the elderly and disabled in the report accompanying their draft fiscal 2017 Labor-Health and Human Services-Education bill (S 3040). The previous day, Rep. Pat Tiberi, R-Ohio, chairman of the House Ways and Means Health Subcommittee, heard from more than 20 colleagues at a bipartisan June 8 hearing on Medicare.

The appropriators' directions to Congress are likely to take effect eventually, with lawmakers expected to complete fiscal 2017 appropriations either later this year or early next year. Less certain is the outcome for bills from Ways and Means. The committee easily moved a package (HR 5273) of Medicare hospital and insurance policy changes through the House by voice vote on June 7, but the Senate Finance Committee has not yet made plans to consider it.

Lawmakers lack a pathway to scrutinize Medicare in the way they use an annual authorization bill to oversee the Pentagon, which now spends roughly as much as Medicare each year. The Senate likely will soon pass the fiscal 2017 defense authorization bill (S 2943), a more than 1,600-page measure that gives lawmakers an annual vehicle for altering Pentagon polices. Through both the defense authorization and appropriations bills, Congress takes a close look at the Defense Department, which will spend about $576 billion in fiscal 2016, according to White House budget figures.

Medicare will pay out about $589 billion this year to doctors, hospitals and other providers of health care, as well as insurers. The program is funded largely through mandatory funding, which continues running largely without annual actions by Congress. In recent years, lawmakers tucked Medicare fixes into the so-called "doc fix" bills that were repeatedly passed to block slated pay cuts. The enactment of a physician reimbursement overhaul (PL 114-10) last year brought an end to these vehicles. Without an urgent deadline, lawmakers have less incentive to act on Medicare.

Still, Tiberi and colleagues are building the case for changes to the program, one of the major long-term liabilities for the federal budget. Medicare spending may rise by 26 percent to $743 billion in 2021, while the Pentagon's budget may rise less than a percent to $582 billion, according to the administration. Aging of the baby boomers will increase the financial burden of Medicare in the years ahead.

Rep. Peter Roskam, R-Ill., argued at the Ways and Means hearing for using so-called smart cards for Medicare beneficiaries as ways to cut down on fraud. Roskam last year introduced a bill (HR 3220) to establish a pilot program to test such electronically readable cards, similar to credit cards, for use by people enrolled in Medicare. Recent estimates pegged Medicare's rate of improper payments at 12 percent to nearly 13 percent, including waste, fraud, abuse and reimbursements made in error. In February, the Government Accountability Office said its research indicated use of electronically readable smart cards might have stopped 22 percent of fraud cases studied.

"Marinate on that for a second, when we are running around here, grubbing around, looking for nickels and dimes" in terms of budget savings, Roskam said.

Roskam asked that the committee move on his bill, which has six Democratic cosponsors and 13 Republicans.

Directions to the Centers for Medicare and Medicaid Services on Medicare in the Appropriations report also can be considered bipartisan. The panel on Thursday passed the underlying Labor-HHS-Education bill, 29-1.

In a report accompanying the bill, the appropriators backed the idea of using more smart cards for Medicare. They also suggested CMS consider a demonstration project on support services available for people caring for family members with Alzheimer's disease. Counseling and support for these caregivers may help those with the debilitating disease reside in their homes longer, which reduces federal medical expenses, the appropriators said in the report.

Some of the Medicare proposals reviewed this week would challenge the Obama administration. Rep. Robert J, Dold, R-Ill., presented to the Ways and Means Committee a bill (HR 5122) to block Medicare's plans to test an alternative form of payment for drugs administered in doctors' offices. Another sponsor, Rep. Tom Price, R-Ga., on Friday released a statement criticizing CMS' response to concerns that he and colleagues raised about the plan.

Price on June 8 presented a bill (HR 4848) before the Ways and Means Committee that challenges a different Obama administration Medicare payment demonstration. Price, an orthopedic surgeon, is seeking to change a CMS program that rewards or docks hospitals' reimbursement based on how well people fare after knee and hip replacements. Although this project began in April, the Price bill would delay the full implementation of the program until January 2018 to give doctors time to adjust and avoid penalties next year.

The test, known as Comprehensive Care for Joint Replacement Model, is talking place in 67 selected regions of the country. Past CMS tests were voluntary. In the hip-and-knee test, hospitals in the selected zones are been compelled to participate, an approach with which Price disagrees.

"How it can be a demonstration project and be mandatory is beyond me," he said at the Wednesday hearing.

By Kerry Young, CQ Roll Call

June 14, 2016 -- Senate appropriators have renewed their bid to create a small fee for the so-called 340B drug discount program, in keeping with President Obama's budget request. House appropriators have been less enthusiastic about this proposal in the past and a hospital lobbying group opposes it.

The draft fiscal 2017 Labor-Health and Human Services-Education Appropriations bill (S 3040) calls for creating a fee of 0.1 percent on purchases made through the discount drug program. The Senate Appropriations Committee on June 9 approved the draft bipartisan bill.

The 340B program stems from a workaround in 1992 to preserve a path for low-cost pharmaceutical donations that wouldn't interfere with Medicaid drug rebates. Its name refers to the section of the public law under which it was created.

The 2010 health law opened up the eligibility rules for the 340B program. About 2,140 hospital organizations participated in 2014, up from 583 in 2010, according to the Medicare Payment Advisory Commission.

The Obama administration has requested the creation of a fee for 340B program in several annual budget proposals, seeking funds to offset the costs of running the recently expanded program.

This proposed fee appeared in past Senate appropriations draft measures, including Blunt's fiscal 2016 draft, but was dropped in subsequent negotiations. The House Appropriations Committee has not yet announced a date for a markup of its version of the Labor-HHS-Education bill. Rep. Mike Simpson of Idaho, the No. 2 Republican on the Labor-HHS Appropriations panel, last week told CQ HealthBeat that he was confident that the subcommittee would mark up its own fiscal 2017 measure.

Under the 340B program, certain nonprofit hospitals and clinics can purchase steeply discounted medicines, and then are expected to apply these savings toward expanding services for their customers. A new fee would reduce the funds available for these services, according to the American Hospital Association, which urged Congress to drop it.

"Imposing a user fee on entities eligible for the 340B program would lessen the benefit these safety-net providers receive from the program," said Aimee Kuhlman, senior associate director for federal relations at the AHA.

Separately, federal officials are moving slowly on a proposed set of rules for the 340B program, which lobbyists call "the mega guidance." A timeline posted by the White House's budget office indicates that the final version of this proposal is due to be released in December. If that timeline slips, this work could be left for the next presidential administration to address. A main point of contention over this draft proposal is how the 340B discount can be applied to prescriptions taken after patients leave the hospital.