Medicaid waiver applications test new administration’s policies

If CMS approves Maine and Wisconsin’s proposed Section 1115 Medicaid waivers, it will be marking a departure from the Obama Administration’s stance against work requirements and other previously unapproved proposals. The Kaiser Family Foundation (KFF) examined provisions of state waivers that are unrelated to Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) Medicaid expansion, and opined that the Maine and Wisconsin proposals could result in a loss of coverage and higher costs for consumers. Both states’ proposals are open for public comment in the month of May; if approved, implementation could take place within six months.

Work requirements

The Obama Administration opposed the imposition of work requirements as a condition of the Medicaid program, finding that it did not promote health and access to care. However, HHS Secretary Price and CMS Administrator Varma recently issued a letter to state governors, stating, “The best way to improve the long-term health of low-income Americans is to empower them with skills and employment.” Verma also said that CMS would review Section 1115 waiver requests with an eye to encouraging “meritorious innovations that build on the human dignity that comes with training, employment and independence” (see Did CMS just sound the death knell for Medicaid expansion?, March 15, 2017).

Wisconsin’s plan would require childless adults ages 19 to 49 to work or participate in job training for 80 hours per month, but would allow exemptions for mental illness, receipt of Social Security Disability, and several other categories. Maine’s proposal would require traditional adults ages 19 to 64 to participate in paid employment or approved job training for 20 hours per week, volunteer 24 hours per month, enroll at least half-time at an academic institution, participate in combined work and education for 20 hours per week, receive unemployment benefits, or provide caregiver services for a non-dependent disabled person, but only if they are planning a career in that area. If approved, they would be the first approved work requirements in the nation. Wisconsin has also proposed drug screening, while Maine has proposed premiums higher than 2 percent of income in some cases. Both states proposed eligibility time limits. No such proposals have been approved in the past.

KFF concerned

KFF expressed concern that both states admitted that coverage would decrease as a result of the waivers and that costs would increase. It noted that CMS has traditionally required Section 1115 waivers to be budget neutral, resulting in post-waiver federal costs that do not exceed pre-waiver federal costs. It is also concerned that proposals that have been tested in other states, including health behavior programs, are overly complex, and that other provisions, such as a requirement that individuals pay a premium before coverage being, create barriers to access or result in loss of coverage.

Gottlieb confirmed as FDA Commissioner

The U.S. Senate confirmed Scott Gottlieb, M.D., as FDA Commissioner on May 9, 2017 in a 57 to 42 vote, with all voting Republicans and five Democrats voting for confirmation, and all remaining Democrats voting against confirmation. Gottlieb’s ties to the investment company, New Enterprise Associates (NEA), were discussed at length during contentious confirmation hearing; nevertheless, he was easily confirmed. Sen. Lamar Alexander (R-Tenn), who chaired Gottlieb’s confirmation hearing, opined that new Commissioner “will help American families benefit from the promise of 21st Century Cures.”

Gottlieb most recently served as a resident fellow at the conservative American Enterprise Institute (AEI), clinical assistant professor at New York University School of Medicine, and a member of the HHS Federal Health IT Policy Committee. He served as Deputy FDA Commissioner in the George W. Bush administration from 2005 to 2007.He is known for encouraging a quicker FDA approval process for new drugs, with a focus for shortening wait times on large, clinical trials (see Trump nominates Gottlieb for FDA Commissioner, Health Law Daily, March 13, 2017). During his April 5, 2017 confirmation hearing, Democratic senators expressed concern about his financial ties to pharmaceutical and medical device companies (see Gottlieb’s ‘financial entanglements’ troubling or heartening, depending on the senator, Health Law Daily, April 5, 2017). Gottlieb acknowledged the importance of impartiality and told Senators, “I want to earn and keep the public’s trust.”

U.S. intervenes in UnitedHealth billing scheme suit

The federal government intervened in a qui tam lawsuit alleging that UnitedHealth Group entities (UnitedHealth) and Medicare Advantage organizations (MAOs) with which it contracted, including HealthCare Partners, deliberately concealed from the Medicare Part C program that they had submitted bills not supported by medical documentation, resulting in inflated risk adjustment payments that were never repaid to CMS. The U.S.’s intervention in this False Claims Act (FCA) (31 U.S.C. § 3729, et seq.), U.S. ex rel. Swoben v. Secure Horizons, is emblematic of its “commitment to ensure the integrity of the Medicare Part C program.” It is expected to file a complaint in another risk-adjustment-related FCA case, U.S. ex rel. Poehling v. UnitedHealth Group. Inc., no later than May 16, 2017.

MAOs must submit diagnosis codes for each enrollee for a particular calendar year to CMS (42 U.S.C. § 1395w-23(a)(3)). CMS uses the codes to create Hierarchical Condition Category (HCC) risk scores to adjust the capitated payment rates it pays to each MAO, increasing payment rates to MAOs with patient populations with more severe illnesses and decreasing payments to MAOs with patient populations with less severe illnesses. MAOs typically submit data to CMS and then perform a retrospective review of medical charts to ensure that the charts support the claims submitted. If an MAO discovers a diagnosis code for a patient that was not already submitted, it may do so at that time. However, MAOs are also required to withdraw previously submitted codes that they determine were not supported by medical documentation.

A former employee of Senior Care Action Network (SCAN) Health Plan and a consultant to the risk adjustment industry filed the qui tam suit and the government filed an intervening complaint, alleging that UnitedHealth, HealthCare Partners, and other defendants knowingly concealed the fact that previously submitted codes were not supported by medical documentation, resulting in higher risk adjustment payments. Specifically, the defendants hired coders to perform retrospective reviews, but knowingly concealed information about previously submitted codes so that the coders would not be able to identify codes that were not supported by medical documentation. In addition, certain employees created spreadsheets that did not permit the entry of previously submitted codes that should be withdrawn, as required by CMS.

Highlight on Alaska: FTC, DOJ back Alaska Senate’s move to eliminate certificates of need

Citing “considerable competitive concerns” raised by certificate of need (CON) laws, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued a joint statement in support of Alaska Senate Bill 62 (SB 62), which would repeal Alaska’s CON program effective July 1, 2019. CON programs generally require firms to demonstrate an unmet need for services to the state before being permitted to enter the health care market, for example, by building a new hospital. Sen. David Wilson (R-Wasilla), who submitted the bill, applauded the statement, noting, “As government officials, we should not lose sight of a basic truth that competition improves the quality and lowers the costs of services; it’s what drives innovation and ultimately leads to the delivery of better healthcare.”

CON laws were enacted to reduce costs and improve access to care, based on the assumption that the existence of too many health care facilities in the same area could lead to inflated pricing for services. However, the FTC and DOJ opined that the laws create barriers to entry and expansion, allow entities to abuse the process to delay or halt competitors’ entry or expansion, and deny consumers effective remedies from anticompetitive mergers.

Alaska’s program requires parties wishing to spend at least $1.5 million on health care facility construction, alter an existing facility’s bed capacity, or add a category of health services provided to an existing facility to secure a CON after demonstrating that the quality, availability, or accessibility of existing health care resources is less than necessary “to maintain the good health of citizens of [the] state.” Specifically, it requires parties to submit an application with a fee ranging from $2,500 to $75,000.  The Department of Health and Social Services holds a public meeting and solicits comments and then submits a recommendation to the Commissioner of Health and Social Services, who makes the ultimate decision. Members of the public substantially impacted by the CON may initiate administrative proceedings and eventually seek judicial review.

The agencies stated that the existing state law raises both the monetary and time-based costs of entry and expansion, eliminates or reduces competitive pressure that normally incentivizes firms “to innovate, improve existing services, introduce new ones, or moderate prices,” and, in the event of denials, prohibits entry or expansion.  Furthermore, the law allows incumbent firms to drag out the CON application process by filing challenges or comments in order to delay competitors’ entry into the market. It also provides a platform that allows firms to form anticompetitive agreements–for example, two firms could agree to file CON applications for separate services to avoid a lengthy application process and potential challenges from one another. Finally, the existing law could impede antitrust remedies. As an example, the joint statement cited to the case of FTC v. Phoebe Putney.  Although the Supreme Court eventually ruled that an anticompetitive merger was subject to antitrust scrutiny, the entities involved had already merged and the applicable state’s CON laws made divestiture “virtually impossible.”