Health care looms over final months of 2017 legislative, regulatory agenda; Latest executive order could kick off period of heavy regulatory activity

Repeal and replace of the Affordable Care Act (ACA) has dominated the headlines for much of 2017, but the expiration of the fiscal year 2017 budget resolution on September 30, 2017, has functionally moved that effort off the top-tier of near-term legislative priorities. That said, health care legislation remains on the congressional agenda this year, and a host of regulations are due to be released before December 31, 2017.

These legislative and regulatory developments will have a significant impact on the health care industry and should be taken into account by health care providers, health plans, health information technology firms, investors and other industry stakeholders as they evaluate their strategies and plan for 2018 and the years ahead.

Below are select highlights of the health care legislative and regulatory agenda for the remainder of 2017.

Department of Health and Human Services

President Trump is expected to put forward a nominee for Secretary of the Department of Health and Human Services (HHS) following the resignation of Secretary Tom Price on September 29, 2017. The nominee would have to be confirmed by the Senate.

Eric Hargan currently is serving as acting secretary of HHS. The Senate confirmed Hargan as deputy secretary of HHS on October 4, 2017.

Legislative

The FY 2018 budget process and tax reform

Republican congressional leaders have indicated that although repealing and replacing the ACA remains a legislative priority, the fiscal year (FY) 2018 budget process will focus principally on tax reform. That said, the legislative debate over tax reform could address some health care-related tax provisions, such as the medical device excise tax, the ACA’s excise tax on high cost employer-sponsored coverage (Cadillac tax), and contribution limits to health savings accounts (HSAs).

The House of Representatives on September 29, 2017, approved a FY 2018 budget resolution that includes reconciliation instructions for revenue-neutral tax reform, meaning that any reductions in federal revenue resulting from lower tax rates would need to be offset through a combination of economic growth, the elimination of tax expenditures, or other reductions to projected federal spending.

The Senate is expected to vote on its FY 2018 budget resolution the week of October 16, 2017. The vote follows the Senate Budget Committee’s approval earlier in October of a resolution that would allow a $1.5 trillion loss of revenue to the federal government as a result of tax reform.

The House and Senate are expected to convene a conference committee that would lay the groundwork for the House Ways and Means Committee and the Senate Finance Committee to proceed with legislative efforts on tax reform. Administration officials and some Republicans leaders have expressed a goal of passing tax reform by the end of 2017. This will be a challenging legislative undertaking.

December legislative package

A number of legislative provisions expired at the end of FY 2017 (September 30, 2017) and others are due to expire on December 31, 2017, setting the stage for what is expected to be a legislative package focused on health care in December. Notably, a number of the elements of the expected package have strong bipartisan, bicameral support, boosting the prospects for passage of the legislation. Elements of the expected package could present unique opportunities and strategic considerations for plans, providers, and other health care stakeholders.

Reauthorization of the Children’s Health Insurance Program (CHIP) (expired September 30, 2017) is expected to be a central element of the legislative package. The Senate Finance Committee and the House Energy and Commerce Committee have reported bills that are generally consistent and, among other provisions, would:

  • Extend federal funding for CHIP for five years, through FY 2022
  • Maintain the enhanced federal matching rate of 23% for CHIP for FYs 2018 and 2019, before reducing it to 11.5% for FY 2020 and eliminating it for FYs 2021 and 2022
  • Keep in place maintenance of effort requirements for states for children from households with annual incomes that do not exceed 300% of the federal poverty level

The bill reported by the House Energy and Commerce Committee also would provide emergency Medicaid funding for Puerto Rico and would eliminate $2 billion in Medicaid disproportionate share hospital (DSH) payment reductions for FY 2018 while adding $8 billion in Medicaid DSH payment reductions in FY 2026 and FY 2027 (currently set to expire in 2025).

The House Energy and Commerce Committee also has reported legislation that would reauthorize federal funding for community health centers (CHCs) and the National Health Service Corps for two years through FY 2019. Funding for both programs expired September 30, 2017.

In addition to reauthorization of federal funding for CHIP and CHCs, the expected December legislative package also could include provisions that would reauthorize special needs plans (SNPs) under Medicare Advantage, potentially on a permanent basis. The Senate has unanimously approved such legislation, which also would make specific policy changes to the SNP program, provide more flexibility to allow supplemental benefits in MA plans, and expand the Center for Medicare and Medicaid Innovation (CMMI) Medicare Advantage Value-Based Insurance Design (VBID) Model to all 50 states.

In addition, the Senate legislation includes provisions that would expand reimbursement for telemedicine services through Medicare Advantage and the Medicare Shared Savings Program. Health care providers and telemedicine stakeholders have long advocated for expanded Medicare funding.

Health care stakeholders also are watching to see if any bipartisan agreement is reached on any potential changes to the ACA or if any funds are provided to help stabilize the nongroup insurance markets. It is also important to note that Congress likely will seek offsets for any additional funding included in the expected December legislative package and for the public health, CHIP and Medicare extender provisions. The spending offsets are still under discussion in Congress and have not yet been released or agreed upon.

Regulatory

Executive order affecting small group and individual health insurance markets

President Trump on October 12, 2017, signed an executive order directing the Departments of Health and Human Services (HHS), the Treasury and Labor to consider easing certain regulations affecting the small and individual health insurance markets in an effort the White House says is intended to expand consumer choices and drive greater competition among health insurers.

First, the executive order directs the Departments of Labor, HHS and the Treasury within 60 days to consider revisiting existing regulations with a goal of making association health plans (AHPs) more widely available. The executive order could lay the groundwork for small employers and potentially individuals in multiple states to join together to purchase health insurance for employees that would not be subject to the ACA’s essential health benefits (EHB) requirement and other ACA provisions. That said, the agencies would have to work through the regulatory process to promulgate new rules to make the changes, likely including at least one public comment period. Thus, the changes related to AHPs will take some time to move forward, potentially delaying their availability to at least some time in 2018.

In addition, the executive order directs the departments of Labor, the Treasury and HHS within 60 days to consider updating regulations or guidance to make it easier for individuals to enroll in short-term limited-duration insurance policies that last more than 90 days.

The executive order further directs the departments of Labor, the Treasury and HHS within 120 days to consider revisiting regulations or guidance that limits the use of health reimbursement arrangements (HRAs) in some cases. One possible option for revising the guidance related to HRAs could make it easier for employers to contribute to employee HRAs and let them purchase health coverage in the nongroup market.

Medicare Access and CHIP Reauthorization Act (MACRA)

The final rule for the 2018 performance period under MACRA’s Quality Payment Program (QPP) is required to be released by November 1, 2017. In a proposed rule published in the Federal Register on June 30, 2017, the Centers for Medicare and Medicaid Services (CMS), proposed maintaining a number of the transition policies that CMS employed for the 2017 performance period, including keeping at 0% the weight of the Cost performance category under the QPP’s Merit-based Incentive Payment System (MIPS). The proposed rule also provided timelines for state Medicaid programs, Medicare Advantage plans, and payers participating in certain CMS multi-payer initiatives to be certified as Other Payer Advanced Alternative Payment Models under MACRA’s All-Payer Combination Option.

Providers, plans and other stakeholders are eagerly awaiting the final rule as they evaluate their MACRA strategies for the 2018 performance year and subsequent years.

CMMI Request for Information

On September 20, 2017, CMS issued a Request for Information (RFI) on a new direction to promote patient-centered care. A press release said that CMS is seeking to use CMMI to test market-driven reform models in the following eight focus areas:

  • Increased participation in Advanced Alternative Payment Models (APMs)
  • Consumer-directed care and market-based innovation models
  • Physician specialty models
  • Prescription drug models
  • MA innovation models
  • State-based and local innovation, including Medicaid-focused models
  • Mental and behavioral health models
  • Program integrity

Comments are due by November 20, 2017.

Medicare Advantage and Part D plans

The White House is currently reviewing a proposed rule that would make policy and technical changes to the Medicare Advantage and Medicare Prescription Drug program for the 2019 benefit year. HHS is seeking to engage with stakeholders ahead of the 2019 call letter process.

Episodic payment models (bundled payments)

CMS has proposed reducing the number of geographic areas where participation in the Comprehensive Care for Joint Replacement (CJR) bundled payment model would be mandatory. Under the proposed rule, CMS would reduce the number of MSAs where hospitals would be required to participate in the model to the 34 MSAs with the highest average wage-adjusted payments for lower extremity joint replacements. In addition, CMS is proposing to remove rural hospitals from the CJR model in the 34 MSAs where participation would continue to be required, effective February 1, 2018.

Hospitals in the 33 MSAs where participation in the CJR model would no longer be required and rural hospitals in the 34 MSAs where participation would continue to be required would be able to opt in to continue to participate in the model.

The proposed rule also called for canceling other orthopedic and cardiac bundled payment models that were due to begin January 1, 2018.

Comments are due October 16, 2017.

Notice of Benefit and Payment Parameters for Benefit Year 2019

The White House currently is reviewing the proposed rule for the Notice of Benefit and Payment Parameters for the 2019 benefit year for ACA health insurance Exchanges. The proposed rule will be the first promulgated by the Trump Administration and will demonstrate what approach the Administration will take to the federally-facilitated Exchanges and in states who run their own Exchanges but use the HealthCare.gov platform.

The Obama Administration historically released the proposed rule on the Notice of Benefit and Payment Parameters in late November.

Interoperability

The Office of the National Coordinator for Health Information Technology (ONC) is charged with issuing rules updating the certification criteria for electronic health record technology to include requirements that prohibit information blocking and promote interoperability. The criteria put forward by ONC will be critically important for the health care sector, especially health IT organizations and providers that may have to consider product updates, vendor relationships and cybersecurity implications.

A regulation is required by December 13, 2017, the one-year anniversary of the enactment of the 21st Century Cures Act. Congress delegated authority to ONC related to information blocking and standards for interoperability to help achieve the December 31, 2018, national goal for widespread interoperability of EHRs that was enacted under MACRA.

340B drug discount program

The proposed rule for the 2018 hospital outpatient prospective payment system included proposed changes to payment policy under the 340B drug discount program for hospitals. Under the proposed changes, the payment policy for Medicare Part B drugs purchased through the 340B Program would change from average sales prices (ASP) plus 6 percent to ASP minus 22.5 percent. If implemented as proposed, CMS would apply the new payment policy effective January 1, 2018 to all separately payable, non-pass-through drugs (other than vaccines) that a hospital identifies as being purchased within the 340B program.

The proposed policy change could represent a significant reduction to how much Medicare pays 340B hospitals for Part B drugs under OPPS.

A final rule is due by November 1, 2017.

Contacts

Anne Phelps
Principal | Deloitte Risk and Financial Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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