Medicare, Medicaid and Commercial Coverage & Reimbursement

With the recent scoop from Politico that the Trump Administration is considering giving states the ability to implement Medicaid block grants, there has been considerable speculation on what the Administration is planning. Although we don’t know exactly what the Administration has in mind, there increasing skepticism on the legality of this move. So we are laying out the fundamentals and past history as we await the final guidance.

While Congress and the Administration are dug in entering the third week of a partial government shutdown, both branches of government are looking to shape other policy areas in 2019. The Administration is reportedly looking at reforming the Medicaid program and Congress is ramping up its oversight of prescription drug prices.

We cover this and what it will mean for this Congress in this week's preview.

On January 15, 2019, the U.S. Supreme Court will hear arguments in a hotly-contested case involving a challenge by hospitals over when Medicare’s instructions to its contractors impact a “substantive legal standard” and thus must be issued through formal rulemaking.  In Azar v. Allina Health Services, the Court will review the U.S. Court of Appeals for the D.C. Circuit’s decision that threw out a new Medicare rate calculation methodology for Disproportionate Share Payments (DSH) to hospitals adopted by the U.S. Department of Health and Human Services (HHS) because the agency promulgated it through “interpretative guidance” but failed to undergo notice-and-comment rulemaking. The Supreme Court is now tasked with answering a broader question: what is the legal standard for when HHS must use formal rulemaking and not “interpretative” instructions to its contractors in the administration of the Medicare program?

The Federal Courts gave the America Hospital Association and 340B covered entities a late Christmas present and in doing so may have dealt a blow to the Trump Administration’s initiatives aimed at controlling or reducing drug prices.


On December 27, 2018, Judge Rudolph Contreras granted the American Hospital Association’s Motion for a Permanent Injunction over CMS’ Medicare Part B reimbursement cut for 340B hospitals. As I have previously written, the vehicle for that reimbursement cut was the 2018 Outpatient Prospective Payment System (OPPS) rule, and CMS’ existing authority to adjust OPPS drug reimbursement.

As of December 2018, 37 states (including D.C.) have adopted Medicaid expansion. Of the remaining 14 states, some are considering expanding Medicaid. States with recent activity relating to Medicaid expansion include: Florida, Idaho, Maine, Missouri, Nebraska, New Hampshire, North Carolina, and Utah. States continue to explore different opportunities as it relates to Medicaid expansion. 

On November 26, 2018 the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule, Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses. This proposed rule is the Trump Administration’s latest action to curb prescription drug prices. The proposed rule outlines a number of provisions to for lowering drug prices and reducing out-of-pocket costs in the Part D program that build off the Administration’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.

On November 20, 2018, Virginia submitted an application to CMS for a Section 1115 demonstration program entitled Virginia COMPASS (Creating Opportunities for Medicaid Participants to Achieve Self-Sufficiency). The application comes after Virginia voted in June 2018 to expand its Medicaid program to cover newly eligible non-disabled, non-pregnant adults ages 19 to 64 with income up to 138 percent of the federal poverty level (FPL), on the condition that the expansion include a work requirement and other measures. This waivers implements work requirements and other provisions linked to the state’s Medicaid expansion.

In its favorable Advisory Opinion 18-11, the OIG explains how a managed care organization’s proposed incentive program to pay network providers to increase the amount of Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services provided to Medicaid beneficiaries would not violate the Anti-Kickback Statute (AKS).  What is interesting about this Advisory Opinion is that the OIG finds that the health plan’s proposed arrangement would be protected by the managed care safe harbor for eligible managed care organizations (ECMOs), and there are not many opinions addressing this safe harbor.

Open Enrollment is fast approaching and the landscape with be notably different than in years past. From the introduction of short-term plans and association health plans to proposals to allow for greater use of health reimbursement arrangements, the strength of the Marketplace will be tested and will inform future policy considerations. We cover this and more in this week's health care preview.

On October 17th, the Administration released its semiannual forecast of the rules that the Department of Health and Human Services (HHS) will be churning out over the next year. The list includes nearly 200 rules, 23 of which are already posted on the Office of Information and Regulatory Affairs (OIRA) dashboard. The bulk of the rules on the Agency Rule List for Fall are under the purview of CMS or the FDA (63 and 77 rules, respectively). Also, earlier in October, FDA’s device center released a list of draft and final guidance documents it plans to publish in FY 2019. Many of these rules or guidance documents touch on issues top of mind and we expect that the administration will be moving forward with many of these priorities in the coming months. 

The Trump Administration is moving full speed ahead with its proposals under the Blueprint to Lower Drug Prices (the “Blueprint”). Earlier this week, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule that would require pharmaceutical manufacturers to disclose the list price of their pharmaceutical products in direct-to-consumer (“DTC”) television ads (the “Proposed Rule”).

Congress has left town until after the midterm elections, but the Administration is continuing to advance its priorities in the regulatory arena. This week, the Administration is expected to publish the proposed rule, "Medicare and Medicaid Programs; Regulation to Require Drug Pricing Transparency." We cover this and the political implications in this week's health care preview.

While the House is out on recess, the Senate continues to be in session. This week the Senate has some non-health care related hearings scheduled as well as nomination hearings. We are looking for signals for a deal to finish work and send vulnerable Senators home to campaign. However, while legislative action may begin to cool down, regulatory activity at OIRA could be heating up.

The final bipartisan opioid package, which passed in the Senate this week and is expected to be signed into law, includes a significant revision from the original House bill that could lead to an increase in treatment options for Medicaid beneficiaries suffering from substance use disorder (“SUD”). The final version of the “SUPPORT for Patients and Communities Act” will provide state Medicaid programs with the option to cover SUD treatment in certain Institutions for Mental Diseases (“IMD”) for Medicaid beneficiaries between the ages of 21 and 64.

On September 25, 2018, House and Senate negotiators agreed on a final legislative package to address the opioid crisis. Following this agreement, the House passed the opioid package on September 28, 2018. The Senate is expected to pass the package in the weeks ahead, and the President is expected to sign the package into law. ML Strategies has created a chart tracking the provision of the final opioid package.

You might have missed it but Congress averted a government shutdown last week. While several appropriations bills passed on time for the first time in years, several agencies, including the FDA, were funded on a continuing resolution (CR). The CR provides funding until December 7th and will need to be addressed again by that time. However, the House is now in recess and won’t be back in town until after the midterm elections. So the lame duck session will have a few ‘must dos’ on the list.

This week, Congress and the White House need to finalize a government spending bill in order to avoid a shutdown. While all signs point to a deal being reached, it is widely expected that several agencies will be operating on a continuing resolution for the first couple months of fiscal year 2019. While the Departments of Labor, HHS, and Education are expected to receive a full appropriation prior to September 30th, the FDA, which is funded through the Department of Agriculture, is expected to be funded through the continuing resolution, which will go through December 7th.

In May, the Trump Administration announced its Blueprint to Lower Drug Prices and HHS Secretary Azar issued a Request for Information seeking comments from interested parties “to help shape future policy development and agency action” related to drug pricing issues.

Earlier this month, CMS proposed changes to the Medicare Physician Fee Schedule and Quality Payment Program with the goal of “modernizing Medicare and restoring the doctor-patient relationship.”