2.12.18 – 2.16.18 HEALTH WRAP UP

Please find below a summary of the latest major health policy developments in Washington this week. Please let us know if you have any questions.

Scheduling note: the House and Senate are on recess next week.  Unless activity warrants, we will send the next wrap up on March 2nd.


With limits on discretionary spending in place as a result of the new bipartisan budget deal signed into law last week, appropriators are waiting to receive allocations for each of the 12 subcommittees in order to move forward with an omnibus spending bill for FY18. Allocations are expected at any point, but may not be made public until a package is finalized. In regards to the Labor HHS Subcommittee allocation, Subcommittee Chairman Rep. Tom Cole (R-OK) said he expects his subcommittee to receive a "substantial" increase above the $156 billion he had to work with before passage of the bipartisan deal allowing greater spending. He also said that House appropriators have been asked to finish up their bills by roughly March 14 to provide over a week to get an omnibus passed prior to the March 23 expiration of the CR.

In the meantime, the House Appropriations Committee has given lawmakers deadlines for submitting requests for FY19. The subcommittee deadlines for members to make specific proposals are:

  • March 16: Agriculture; Commerce-Justice-Science; Energy and Water; Interior-Environment; Legislative Branch; Military Construction-VA; State and Foreign Ops
  • March 19: Defense; Financial Services; Homeland Security; Labor-HHS-Education; Transportation-HUD

In addition, this week the administration provided appropriators with a list of add-on discretionary items for FY18 (attached), based on $88 billion in additional funds made available through last week’s budget agreement. Health and Human Services agencies are the largest recipient of the suggested funding. The final decision on how to allocate that funding will be made by Congress.


On February 12th, the Administration released its Fiscal Year 2019 budget request to Congress.  Along with the budget, OMB Director Mick Mulvaney issued a budget addendum to account for the new discretionary spending caps recently enacted as part of the Bipartisan Budget Act of 2018.  A budget is only an outline of the Administration’s priorities; regulatory and/or legislative action will be required to actually make any of these proposed changes.

The President’s Budget Request would cut the budget for the Department of Health and Human Services by $17.9 billion, a 21 percent reduction in spending compared with FY2017. The budget request also endorses a plan for overhauling Obamacare by Senators Bill Cassidy (R-LA) and Lindsey Graham (R-SC) that would effectively replace the health law's insurance subsidies and Medicaid expansion funds with block grant programs run by the states. In addition, the budget includes several goals for reducing the cost of prescription drugs, including modifying 340B payments in Medicare and requiring a minimum level of charity care for hospitals to receive payment adjustments related to uncompensated care.

Many agencies, including CDC, NIH and SAMHSA, have not yet released their justification documents providing program-level details on how the agency would spend their budget, but some of the key components of the budget request are highlighted below.

Health Resources and Services Administration (HRSA)

The $10.5 billion Health Resources and Services Administration would get $550 million more for opioids, but would see a $744 million cut to health workforce training programs.  HRSA has not yet released the details of their budget request.

Centers for Disease Control and Prevention

The request includes $10.9 billion for CDC, a cut of more than $1 billion from FY2017. The CDC budget chart and a two-page budget request overview can be found here.

National Institutes of Health

The budget materials indicate that the administration originally planned to propose a steep cut to NIH in FY19, however, the budget addendum issued in conjunction with the president’s proposal to account for new discretionary spending caps provided an additional $9.167 billion to the NIH over the original FY 19 proposal for restoring the agency topline to the 2017 enacted level.

  • Total Fiscal 2019 Program level for NIH is $34.767 billion, which according to the President’s budget documents, represents a $699 million over NIH’s FY17 program level of $34.229 billion.
    • This total includes $711 million in resources made available through the 21st Century Cures Act and $180 million in mandatory resources.
  • The President’s budget includes an additional $750 million for NIH to spend on research to combat the opioid epidemic and serious mental illness. With the addition of the opioid-specific funding, NIH’s FY19 budget increases to $35.517 billion, which represents a $1.449 billion increase over NIH’s FY17 Total Program Level.
  • The President’s Budget recommends $5.626 billion for the National Cancer Institute, which would be a $24 million reduction from NCI’s FY17 level.
  • For the National Institute on Drug Abuse, the President recommends $1.137 billion, which is a $54 million increase over the FY17 level.
  • As part of its overall budget, the President proposes incorporating three new agencies into the NIH’s budget:
    • National Institute for Research on Safety and Quality (formerly Agency for Healthcare Research and Quality) at a funding level of $380 million.
    • National Institute for Occupational Health and Safety at a funding level of $200 million. NIOSH is currently located within the Centers for Disease Control and Prevention.
    • National Institute on Disability, Independent Living, and Rehabilitation Research at $95 million.  NIDR is currently located at the Department of Health and Human Services Administration for Community Living.


Funds to Address the Opioid Misuse and Overdose Epidemic

In the addendum released with the budget, the Administration is requesting an additional $10 billion in discretionary funding to address the opioid misuse and overdose epidemic.  A White House fact sheet on the requested funds is attached and a breakdown of how the White House would allocate the funds is below:

  • From the new $10 billion in discretionary funding, $3 billion for the initial allocation across HHS:
    • $1.2 billion to the Substance Abuse and Mental Health Services Administration (SAMHSA)
      • $1 billion to State Targeted Response to the Opioid Crisis Grants, an increase of $503 million over current funding
      • “New funding for reducing injection drug use, purchasing naloxone for first responders, drug courts, and services for pregnant and post-partum women”
    • $750 million to the National Institutes of Health (NIH)
      • $400 million of the 500 million dedicated to supporting a public-private partnership with the pharmaceutical industry to develop prevention and treatments for addiction, overdose-reversal, and non-addictive therapies for pain will be earmarked from the $10 billion funds
      • $350 million for serious mental illness and pain-related research
    • $550 million to the Health Resources Services Administration (HRSA)
      • $150 million to “address substance abuse, including opioid abuse, and the overdose crisis in highest risk rural communities. This funding will allow communities to develop plans to address local needs. Additionally, this funding will provide additional loan repayment awards through the National Health Service Corps to support the recruitment and retention of health professionals needed in rural areas to provide evidence-based substance abuse treatment and prevent overdose deaths”
      • $400 million for community health centers
      • $200 million of which is set aside for quality improvement incentive payments to “community health centers that implement evidence-based models to address behavioral health, including opioid addiction, issues to meet the health needs of the population served by the health center”
    • $150 million to the Indian Health Service (IHS) “to provide multi-year competitive grants based on need for opioid abuse prevention, treatment, and recovery support in Indian Country”
    • $175 million to the Centers for Disease Control and Prevention (CDC) to “provide additional funding to states to support overdose prevention activities, including a focus on safe prescribing practices through improved use of state-based Prescription Drug Monitoring Programs; provide additional funding to states to support enhanced surveillance efforts; and working with states to support improved timeliness of morbidity and mortality data through efforts such as improving laboratory capacity”
    • $10 million to the Food and Drug Administration (FDA) to “complement ongoing activities to support health professionals in more optimally delivering MATs, and to accelerate the development of generic versions of opioid drug products with abuse deterrent formulas”
    • $7 billion will be available for transfer across the Department to “support additional work to address the opioid crisis and serious mental illness, including establishing a new grant program for Certified Community Behavioral Health Clinics that provide services to individuals suffering from serious mentally illness”
    • Office of the Secretary
      • $100 million for a media campaign
      • $25 million to “support a robust evaluation to strengthen the evidence of the impact of Medication-Assisted Treatment on reducing overdose deaths”


Changes to Entitlement Programs

The budget request included several proposed changes to entitlement programs, which are summarized from the HHS budget below.  As referenced above, all of these changes would require changes via legislation and/or regulation to become policy.

  • Salary Support.  The budget proposes to reduce the HHS salary cap for NIH-funded researchers from Executive Level II ($189,600 in 2018)) to Executive Level V ($153,800 in 2018).  The President’s budget would also cap the percentage of investigator salary that can be paid with grant funds to 90 percent of total salary.
  • Elimination of Exclusions for Hospital-Owned Physician Offices Located Off Campus at the Physician Office Rate. The proposed budget would eliminate all exceptions to the site neutral payment policy, including grandfathered, “mid-build” hospital outpatient departments, emergency departments and cancer hospitals. (Estimated cut of $34 billion over 10 years)
  • NIH Support for Facilities and Administrative Expenses.  HHS in its 2019 Budget-In-Brief acknowledges that Congress prohibited NIH from implementing the Administration’s proposal to cap F&A expenses in FY2018, and further acknowledges that Congress “prohibited any further study or exploration of indirect cost rate reforms at NIH.”
  • Changes to Medicaid Financing. The budget proposes to fundamentally change Medicaid financing by moving to a per capita cap or a block grant.
  • 340B Drug Pricing Program. The budget proposes several changes to the 340B program:
    • Beginning in CY 2019, the Administration would redistribute the savings from the Medicare cuts in the OPPS Final Rule (from ASP plus 6% to ASP minus 22.5%). Savings generated by 340B hospitals that provide uncompensated care equal to at least 1% of their patient care costs would be redistributed to these hospitals based on their share of aggregate uncompensated care.
    • The administration proposes to give the Health Resources and Services Administration (HRSA) broad regulatory authority to set enforceable standards of program participation and “ensure that the benefits derived from participation in the program are used to benefit patients, especially low-income and uninsured individuals.”
    • The budget would require all covered entities to report on their use of 340B savings.
    • The budget would implement a new user fee on drug purchases made by covered entities. This would create $16 million in additional funding to “help improve the program’s operations and oversight.” (Budget impact not available)
  • Post-Acute Care Unified PaymentsFor FY 2019 to FY 2023, the four primary post-acute care settings, including skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals, will receive a lower annual Medicare payment update. Beginning in FY 2024, the budget proposes to implements a unified post-acute care payment system that spans these settings, with payments based on episodes of care and patient characteristics rather than the site of service. Rates for the provider types included in this proposal are updated on a fiscal year basis, including those whose payment systems are currently updated on a calendar year basis. The first year of implementation is required to be budget neutral relative to estimated payments that would otherwise have been paid in FY 2024 absent this change. Payment rates are set prospectively on an annual basis, with episode grouping and pricing based on the average cost for providing post-acute care services for a diagnosis, similar to the Diagnosis-Related Group methodology under the Inpatient Prospective Payment System. Payments are to be risk-adjusted. The Secretary has the authority to adjust payments based on quality of care, geographic differences in labor and other costs, and other factors as deemed appropriate. Beneficiary coinsurance amounts are equal to those under current law. For example, to the extent a beneficiary uses a provider’s services, they are responsible for the current law copayment rate. ($80.2 billion in savings over 10 years)
  • Uncompensated Care. Effective FY 2020, the budget proposal removes uncompensated care payments from the Inpatient Prospective Payment System (IPPS) and establishes a new process to distribute uncompensated care payments to hospitals based on share of charity care and non-Medicare bad debt, as reported on Worksheet S-10 of the cost report.  Under this proposal, empirically justified Disproportionate Share Hospital (DSH) payments are not changed.  The total amount of available uncompensated care is equal to FY 2018 funding levels, grown annually by the Consumer Price Index for all Urban Consumers.  Uncompensated care payments will be funded from the general fund of the Treasury.  This budget proposal states that this change would more closely aligns Medicare payment policy with private insurers, who do not typically cover uncompensated care. ($138.4 billion in Medicare savings over 10 years; this proposal would increase spending from general revenues by $68.9 billion over 10 years, for a net savings to the Federal Government of $69.5 billion over 10 years)
  • Consolidation of GME. The budget proposes consolidating Medicare, Medicaid and CHGME spending into a single grant program for teaching hospitals. Payments would be directed towards physician specialty and geographic shortages. The budget states, “Total funds available for distribution in FY 2019 would equal the sum of Medicare and Medicaid’s 2016 payments for graduate medical education, plus 2016 spending on Children’s Hospitals Graduate Medical Education, adjusted for inflation. This amount would then grow at the Consumer Price Index for all Urban Consumers minus one percentage point each year. Payments would be distributed to hospitals based on the number of residents at a hospital (up to its existing cap) and the portion of the hospital’s inpatient days accounted for by Medicare and Medicaid patients.” The Secretary would have discretion to modify the amounts distributed based on several factors, including the proportion of residents training in priority specialties or programs, health care professional shortages and educational priorities. (Estimated cut of $48.1 billion over 10 years)
  • Bad Debt. Effective FY 2019, the budget would reduce Medicare reimbursement of bad debt from 65 percent to 25 percent over three years. Rural hospitals with fewer than 50 beds, Critical Access Hospitals, Rural Health Clinics, and Federally Qualified Health Centers would be exempt from the reduction. This budget states this proposal will more closely align Medicare policy with private payers, who do not typically reimburse for bad debt. ($37.0 billion in savings over 10 years)
  • Medical Liability. The president’s budget includes a number of provisions related to reforming medical liability, including:
    • Capping awards for noneconomic damages at $250,000 indexed to inflation;
    • Providing safe harbors for providers based on clinical standards;
    • Authorizing the Secretary to provide guidance to states to create expert panels and administrative health care tribunals;
    • Allowing evidence of a claimant’s income from other sources such as workers’ compensation and auto insurance to be introduced at trial;
    • Providing for a three-year statute of limitations;
    • Allowing courts to modify attorney’s fee arrangements;
    • Establishing a fair-share rule to replace the current rule of joint and several liability;
    • Excluding provider expressions of regret or apology from evidence; and
    • Requiring courts to honor a request by either party to pay damages in periodic payments for any award equaling or exceeding $50,000. ($30.8 billion in savings to HHS programs and $52.1 billion in government-wide net deficit reduction over 10 years)
  • Repeal of the Affordable Care Act. budget proposes to repeal the Affordable Care Act and replace it with an approach modeled closely after the Graham-Cassidy legislation introduced last summer

Department of Defense Health Programs

The Pentagon released its budget materials, including its justification for health related programs and medical research. The proposal provides $44.8 billion for total Defense healthcare costs for delivery, research, and other clinical services. Here are some program details:

  • $710 million for Defense-Wide medical research activities
  • $109 million for Defense Healthcare System Modernization
  • $50 million for Military Health System’s “Virtual Health”, which is DOD’s telehealth platform.
  • $506 million cut to TRICARE Managed Care System
  • $40 million Guidance for Development of the Force battlefield injury capability gaps.

As is the case most years, Pentagon budget writers submit their budget with the expectation that Congress will add roughly $1 billion in the Congressionally Directed Medical Research Program, which focuses on specialized fields of medicine.


Azar Testimony

HHS Secretary Azar testified on the Administration’s budget request at the House Ways and Means Committee, Senate Finance Committee and House Energy and Commerce Committee Health Subcommittee this week.

Similar issues were raised at all three hearings and some of the key topics are summarized below.  Of note, at the Energy and Commerce Committee Health Subcommittee hearing Subcommittee Chair Burgess (R-TX) laid out his priorities for upcoming Committee action. Burgess stated, “The Health Subcommittee still has an extensive list of items to finish before the end of this year. These include holding hearings on legislative policies and developing a package of proposals to blunt the opioid epidemic, reauthorizing the Pandemic and All Hazards Preparedness Act and Animal Drug User Fee, and examining the cost drivers of the nation’s health care infrastructure and offering solutions, and/or improvements, to programs like 340B drug discount under the Health Resources and Services Administration and Consumer eHealth at the Office of National Coordinator for Health IT.”

The Opioid Misuse and Overdose Epidemic

At all the hearings, Members on both sides of the aisle raised the opioid misuse and overdose epidemic as one of their top concerns.  At the Energy and Commerce Committee hearing, full Committee Chairman Walden (R-OR) stated,

“I see a great opportunity to for us to work together to combat the opioid crisis, a top priority for me and for this committee. We need to build upon E&C’s previous legislative efforts, namely the Comprehensive Addiction Recovery Act (CARA) and the funding provided in the 21st Century Cures Act.

While these laws resulted in record amounts of federal resources being devoted to this fight, more is needed to address this growing crisis. In last week’s budget bill, we were able to deliver headroom to provide new resources to combat the opioid crisis for the rest of FY 2018 and FY 2019.  We look forward to working with our friends at the Appropriations Committee on this point.

Last year, we held a Member Day to solicit solutions to help combat the opioid crisis – hearing directly from members both on and off this committee, Republican and Democrat.  Later this month, this subcommittee will launch its review of targeted solutions to help combat the opioid crisis.  This work will be done in tandem with our Oversight and Investigations Subcommittee work led by Chairman Harper.

Given that addressing the opioid epidemic has bipartisan interest and with President Trump’s leadership and commitment to this issue, it is my hope and belief that this committee will deliver additional legislative solutions that we can move to the full House later this year.”

Affordable Care Act

Several Democratic Members questioned Mr. Azar about the Affordable Care Act (ACA).  In particular, Senate Finance Committee Ranking Member Wyden (D-OR) and House Energy and Commerce Committee Ranking Member Pallone (D-NJ) pressed Azar about reports from Idaho where the state is moving ahead with offering plans that do not meet the ACA’s requirements.  Wyden said he was concerned the Administration was allowing the sale of “junk” health care plans.  Azar responded that they had not received a “waiver” request and he could not comment on press reports.  Azar said that they would review anything that the state submits and hold it up against the standards of the law.  Azar also said that actions such as Idaho’s may be a “cry for help” due to the high prices of marketplace health plans. Wyden responded that Idaho is not applying for a waiver – they’re just “doing it.”

Additionally, at the Senate Finance Committee hearing Sen. Stabenow (D-MI) asked Mr. Azar about ensuring that coverage for essential health benefits (EHB) package, including coverage for mental health and addiction, is included in all plans sold as intended by the ACA.  Azar responded that he was not worried about mental health and addiction benefits not being covered because parity protections would still apply.  Sen. Stabenow said to Azar that she offered an amendment at the Finance Committee markup of the ACA on this issue because parity alone did not ensure coverage.

Entitlement Programs

In his opening remarks at the Senate Finance Committee hearing, Chairman Hatch (R-UT) applauded recent developments such as the repeal of the Independent Payment Advisory Board (IPAB) and said “we need to start getting serious about Medicare and Medicaid reforms.”

Several Members questioned Azar about the changes to Graduate Medical Education (GME) proposed in the budget.  Azar responded that their intent is to modernize GME reimbursement and blend the funding streams.

The 340B program was also discussed during the hearings. Energy and Commerce Committee Chair Walden noted in his opening remarks that the Committee would be continuing oversight over the program. Walden stated, “The Health Subcommittee also plans to build upon the work of our Oversight and Investigations work regarding the 340B program.  This important program designed to serve low-income individuals has essentially not been modernized in more than two decades.  It is my belief that reforms are necessary to strengthen and secure the program so it can best serve low-income populations access affordable medications. We look forward to working with HHS and stakeholders to make sure we get the job done right.”

Rep. Bucshon (R-IN) also asked Azar about the 340B program and if there is a connection to consolidation in the health care marketplace.  Azar responded that is “undeniable” that 340B has led to consolidation, especially in oncology.  Bucshon said he supports the program, hospital need it, but he also supports more oversight.

There was also debate over changes to the Medicaid program.  While Democrats voiced their opposition to proposed changes to the Medicaid program, Sen. Toomey (R-PA) voiced his support for a per-capita funding structure for Medicaid and stated that current spending is unsustainable.

Gun violence research

At the House Energy and Commerce Committee hearing, which was a day after the school shooting in Florida, Members asked Azar about the prohibition on gun violence research.  In response to a question from Rep. Castor (D-FL) on this issue, Azar said that research is not limited.

Castor asked Health Subcommittee Chair Burgess for a hearing on gun violence.  Burgess was non-committal, stating that he is open to all suggestions for hearing topics.

Drug pricing

Partisan differences of opinion were evident at the hearings in the area of prescription drug pricing. For example, while Finance Committee Chairman Hatch said that some member have made a “crusade” out “scapegoating” pharmaceutical manufacturers, some Democratic Members such as Senators Wyden and Brown (D-OH) and Rep. Schakowsky (D-IL) in particular, pushed Azar on this issue.  Wyden stated to Azar that the problem cannot be solved, “if you let manufacturers off the hook.”

Both Brown and Schakowsky asked about reducing list prices.  Azar responded that in the budget, there are changes to Part D catastrophic coverage that would shift the cost burden to insurers versus the federal government and he thinks this pressure would bring down list prices.

Infrastructure Proposal

A key element of the White House budget this week was the proposed infrastructure package.  The proposal would use roughly $200 billion in federal investment into projects which they claim will incentivize matching funds of over $1 trillion from state and local government, as well as private investment.  Much of the legislation involved permitting reforms to expedite the construction and completion of projects.  Critics have called the plan a shell game which does not invest new federal resources into the system, and as such, does not result in better infrastructure.  Though hospitals and the healthcare industrial base are considered critical infrastructure by the Department of Homeland Security, nothing in the White House infrastructure plan directly assists in the construction of new hospitals or clinics. However, the White House believes that by deploying rural broadband under the proposal, the foundation will be laid for greater utilization of telehealth services by providers.  As Congress holds hearings on the plan, some members will push to expand the eligibility requirements to include sectors not include in the original proposal, like hospitals.



House Education and Workforce Hearing

On February 15th, the House Education and Workforce Subcommittee on Health, Employment, Labor and Pensions and Subcommittee on Workforce Protections held a joint hearing entitled, “The Opioids Epidemic: Implications for America's Workplaces.”  A summary of the hearing is attached.


CARA 2.0

Looking forward, as referenced above, the House Energy and Commerce Committee is expected to soon begin holding hearings on legislative proposals, the “CARA 2.0” package, to address the opioid misuse and overdose epidemic.  The specific date(s) for the hearings and witnesses have not been released but Chairman Walden had previously said the hearings would start the last week in February.

The Senate Health, Education, Labor and Pensions (HELP) Committee is also developing a legislative package and Chairman Alexander (R-TN) said last week that they could begin marking up as soon as March.


Last Friday, the White House announced the President’s intention to nominate James Carroll to lead the White House Office of National Drug Control Policy (ONDCP). Most recently, Mr. Carroll has served in the White House as Assistant to the President and Deputy Chief of Staff.

His bio, as provided by the White House when he was appointed to his current position, stated:

Most recently, Mr. Carroll served as Washington Counsel to the Ford Motor Company. Prior to Ford, Mr. Carroll served as Deputy General Counsel and Acting General Counsel to the U.S. Department of the Treasury. Earlier in his career, Mr. Carroll served in the White House as Assistant Ethics Counsel and Special Assistant and Associate Counsel to the President during President George W. Bush’s Administration. Mr. Carroll also served the U.S. Department of Justice as Attorney Advisor, and later as Legal Counsel. Mr. Carroll earned his bachelor’s degree from the University of Virginia and his J.D. from the George Mason University School of Law.

Katie Weyforth Vanlandingham

Van Scoyoc Associates

800 Maine Ave SW

Suite 800

Washington, DC  20024