The Supreme Court on Friday (July 2) agreed to hear arguments on hospitals’ lawsuit over cuts to Medicare reimbursement for 340B drugs — but on top of the question that hospitals asked it to look at, the court also wants to hear arguments on whether the issue is one that the judges could review or if such review is precluded by statute.

CMS cut Medicare pay for 340B drugs by almost 30% starting in 2018, but the district court had said the agency lacked authority to do so. The government appealed that ruling and the appeals court upheld the cuts last summer. Hospitals in February asked the high court to take up the case, along with a case on site-neutral pay cuts. The providers said the appeals court gave too much weight to HHS’ interpretation of the statute in each situation. As both cases are based on the so-called Chevron defense, which addresses how much flexibility agencies have to interpret laws, the American Hospital Association said the cases are complementary.

The Association of American Medical Colleges also asked the Supreme Court to look at both lawsuits, and America’s Essential Hospitals joined AHA and AAMC in asking the Supreme Court to take up the lawsuit over 340B drug pay cuts in Medicare.

The Supreme Court declined to hear the site-neutral pay cuts lawsuit, but on Friday agreed to hear the lawsuit over the 340B drug reimbursement cuts. AHA and AAMC were both pleased with the high court’s decision to take up the case.

340B Health also said it was pleased that the Supreme Court would take up the case, but the group also urged the Biden administration to abandon the cuts in 2022 and beyond.

But in addition to the question that hospitals put before the court on CMS’ authority, the Supreme Court wants to hear arguments on whether the case is precluded by judicial review. The statute says that certain aspects of the hospital outpatient payment system are not subject to review by the courts, and the court points to that section of statute in its order list.

There are many aspects of Medicare payment and policy that aren’t subject to judicial review, and there’s a whole separate body of case law surrounding those provisions and the circumstances where such prohibitions may apply, noted Emily Cook, a partner with McDermott Will & Emery. The district and appeals courts also looked at the judicial review aspect of these cases. However, Cook said it appears this is an issue that the Supreme Court wants to revisit.

A hospital stakeholder involved with the case said the issue of judicial review had been part of the government’s argument from the beginning, and since it affects the court’s ability to hear the case, it’s of interest to someone to have the issue fully briefed. As such, the Supreme Court’s request isn’t surprising.

Cook said it will be interesting to see who files amicus curiae briefs in this case, particularly as the cuts were made on a budget neutral basis so hospitals that don’t participate in 340B — as well as some that did — benefited from the redistribution of funds. The Federation of American Hospitals had asked lower courts not to take funds away from their hospitals, which didn’t participate in 340B, even if the courts ultimately sided with the providers that brought the suit. — Michelle M. Stein (mstein@iwpnews.com)© 2021 BGOV LLCAll Rights Reserved.

The American Hospital Association (AHA) and the Association of American Medical Colleges (AAMC), which filed the petition to the high court with various hospital and health systems, argued HHS unlawfully slashed nearly 30% in Medicare reimbursement rates for specified covered outpatient drugs paid to hospitals participating in a drug discount, or 340B, program.

Under the 340B program, drug manufacturers must provide participating hospitals substantial discounts on prescription drugs in order to have their products covered by Medicaid, the low-income federal insurance plan. The discounts help these hospitals stretch scarce resources.

The HHS didn’t use the proper data required by the Medicare Prescription Drug, Improvement, and Modernization Act to pay hospitals based on the average acquisition cost for drugs and to vary those rates by hospital group, AHA, AAMC and the health systems argued.

A federal district court agreed the cuts were unlawful, but that decision was overturned by the U.S. Court of Appeals for the District of Columbia. The appeals court upheld the rate cut. Citing Chevron, a Supreme Court precedent that directs courts to defer to an agency’s interpretation when laws are unclear, the court found HHS had reasonably interpreted the statute as allowing the agency to make adjustments to avoid reimbursing those hospitals at much higher levels than their actual costs to acquire the drugs.

In their appeal to the Supreme Court, the AHA, AAMC, and health systems argue the court of appeals wrongly relied on Chevron to conclude the agency could decide for itself whether or not to adhere to the law’s stringent requirements for setting cost-based rates.

The case “raises questions of fundamental importance regarding the limits of federal agency interpretive authority,” they said.

HHS counters, “the court of appeals correctly found that, faced with that disparity between 340B hospitals’ acquisition costs and the Medicare payment amounts that they and other providers received,” HHS was authorized adjust its payments.

As for the $1.6 billion the agency saved by the cuts, the HHS said it redistributed that money to all providers as additional reimbursement payments for other services. 

In a friend-of-the-court brief, however, 36 nonprofit state and regional hospital associations said the rule drastically raised drug prices for safety-net hospitals. 

“If the new rule is allowed to stand, safety-net providers will be forced to eliminate or dramatically curtail crucial programs that treat a wide range of medical conditions—from cancer to mental health disorders to diabetes to opioid addiction,” the groups said.

The case is Am. Hospital Ass’n v. Becerra, U.S., No. 20-1114, 6/21/21.

The case is Becerra v. Empire Health Found., U.S., No. 20-1312, review granted 7/2/21.

One payment revision in the proposed rule would save an estimated $4.1 billion over 10 years and help cut wasteful and duplicative program spending—sometimes for organs not used by Medicare beneficiaries. It would reimburse only for “organs transplanted into Medicare beneficiaries so that Medicare more accurately records and pays its share of organ acquisition costs,’’ the proposal said.

This change and others sought by the Centers for Medicare & Medicaid Services would “provide clarity and allow providers and stakeholders to more easily locate and understand organ acquisition payment policy, resulting in more accurate payment based on reasonable cost principles,” the proposal states.

Transplant hospitals, doctors, and organ procurement organizations (OPOs) say the proposals would hurt the acquisition of organs from deceased donors—and access to those organs—while increasing the number of patients who die while awaiting a transplant. 

That’s partly because the proposal specifies that an organ wouldn’t be eligible for reimbursement as a “Medicare usable organ or a total usable organ” if it’s found “upon initial inspection or after removal” to not be “viable” or “medically suitable for transplant” and “is determined to be unusable and discarded.”

That provision could make transplant centers and OPOs “risk averse” when acquiring organs, said Jerry McCauley, vice president of the board of directors at the United Network for Organ Sharing. If procured organs are “not clearly transplantable, then you may want to skip them for financial reasons. And that would reduce the number of transplants we’re doing,” McCauley said in an interview. 

That could slow the growth of procuring organs from marginal and less-than-perfect donors, like older people and those with hepatitis C, said McCauley, a nephrologist in Philadelphia. Previously these kinds of donors would have been rejected for transplants, but medical advances have allowed less-than-perfect organs to be transplanted in certain patients.

Effort to Increase Donations, Transplants

Those medical advances helped fuel a Trump administration push to increase organ donations and transplants by harvesting more suboptimal organs. But the new proposed rule could make that effort more difficult, according to groups like UNOS, the American Medical Association, the American Society of Transplant Surgeons, and the American Association of Kidney Patients.

In a joint public comment letter, these groups, hospitals and other organizations expressed their frustration.

“We are puzzled that these proposals have been put forward at a time when CMS has clearly acknowledged that transplantation is generally the best and most cost-effective treatment option for those with end-stage renal disease and is undertaking numerous initiatives focused on increasing the availability of kidney transplantation,” the letter said.

What’s equally troubling, the groups say: The proposed rules don’t consider the potential increased costs that Medicare would incur, like additional dialysis treatments, if access to transplants are reduced under the measure.

“For these reasons, we strongly urge CMS not to move forward with the proposed transplant-related proposals in the IPPS Proposed Rule prior to completion of a comprehensive study of the potential impact,” the letter states. If finalized, the payment rule would take effect in October 2021.

The proposed payment rules comes amid heightened scrutiny of the nation’s 57 nonprofit OPOs. The groups, which connect organ donors with recipients, have faced criticism for questionable spending practices, poor performance, and not making enough organs available for transplant. The Senate Finance Committee and the House Committee on Oversight Reform are conducting separate investigations into their operations.

Medicare has always paid all organ acquisition-related costs incurred by OPOs “because we assumed that all kidneys procured were for Medicare beneficiaries,” the proposed rule said. “However, we now realize that this assumption is incorrect and that technology has allowed a significant number of kidneys to be shipped overseas. Since the Medicare program has been paying the cost of procuring kidneys shipped overseas or transplanted into non-Medicare beneficiaries, we believe that some action needs to be taken.”

‘Aggressive Oversight’ Sought

Greg Segal, CEO of Organize, a nonprofit patient advocacy organization, said he supports the proposal’s enhanced financial oversight of the organ procurement process.

“The current OPO financial reimbursement structure is in direct tension with the goals of maximizing organ recovery and maintaining Medicare program integrity,” Segal said in a statement. “Given the equity implications of OPO reform as well as research showing that COVID-19 increases the need for organ transplants, it’s critical that the Administration and Congress provide aggressive oversight.”

But the proposed changes would come at a price. Currently “organs that are procured at a Transplant Center hospital and transplanted at another Transplant Center are ‘counted’ as Medicare organs for the purpose of determining Medicare’s portion of organ acquisition costs,” the industry groups said in their letter.

This feature provides a “strong incentive for Transplant Center hospitals to establish effective programs for the identification of potential deceased organ donors,” the letter added. “The incentive has worked: Transplant Centers constitute only 4% of Medicare certified hospitals but retrieve 36% of deceased donor organs.”

The “precipitous elimination” of that feature under the proposed rule “has the potential to significantly reduce the deceased donor organs available for transplantation, reduce access to transplantation, and increase the number of patients who die while waiting for a transplant,” the letter said.

HHS lawyers withdrew the advisory opinion after the same judge in Delaware rejected the Biden administration’s previous requestto dismiss AstraZeneca’s lawsuit. In that ruling, the judge said the law is vague and HHS’ advisory opinion was a departure from previous policy. But when HHS withdrew the advisory opinion days later, it said HRSA will still fine drug companies that restrict 340B discounts for drugs dispensed by multiple contract pharmacies.

House Budget Committee Chair John Yarmuth (D-Ky.) told reporters he isn’t sure there’s widespread support in his own party for lowering the age to qualify for Medicare, the federal health insurance program for the disabled and those aged 65 years or older. Democrats are considering that provision as part of major legislation designed to ride on a budget bill this year.

“That has about 75% support in the caucus,” Yarmuth said, adding he’s readying a budget reconciliation package for coming weeks. 

Democratic leaders are eyeing the budget bill as a vehicle to pass their party’s major priorities without depending on support from Republicans. Failing to find agreement on health priorities could leave Democrats without major wins to bring to their constituents ahead of next year’s midterms.

House Energy and Commerce Committee Chair Frank Pallone (D-N.J.) said his panel is crafting a bill aimed at extending “guaranteed coverage” to people in the 12 states that haven’t elected to expand their Medicaid programs under the Affordable Care Act.

“I want to provide coverage for those people that are in red states that have not expanded,” Pallone said about coverage for Medicaid, the federal health insurance for low-income people.

Pallone declined to offer details. Some Democrats in the 12 holdout states are proposing a new tier of the ACA marketplace plan, or government-run insurance, available to people who make too much to qualify for Medicaid—but too little to qualify for subsidies for private insurance.

Others are suggesting allowing counties or cities to expand access within their boundaries, a move that could help major population centers.

Obamacare Ruling Leaves Parties Searching for 2022 Pitches

Getting ‘Creative’

One major concern with using the budget process to extend insurance to those in this “Medicaid gap” is a potential limit on how long the coverage would last, Rep. Colin Allred (D-Texas) said.

“I don’t know how we could get something long-term, but we’re trying to get creative,” he said. “This pandemic has highlighted the need to give people coverage.”

Progressives in the House have pushed to include Medicare expansion–both lowering the age and adding dental, vision and hearing coverage—but not closing the Medicaid gap. Rep. Mark Pocan (D-Wis.), whose home state hasn’t expanded its Medicaid program, said the issue is most pressing for only a minority of Democrats.

“Lets face it: most of these states don’t have a lot of Democratic members of Congress,” he said.

Top Democrats to Craft Bill on Public Health Insurance Option

Pocan said expanding Medicare to more Americans and bolstering its benefits would help people in every state, making it an easier sell for the caucus.

Moderate Democrats have championed Medicaid expansion over growing Medicare. Members of the centrist New Democrat Coalition have been advocating for new incentives to encourage states to take the added federal dollars to extend their public health insurance, a congressional aide familiar with their discussions said.

In the Senate, progressives are also pushing to expand Medicare.

Sen. Bernie Sanders (I-Vt.), chairman of the Senate Budget Committee, has been rallying Democratic senators around adding benefits to Medicare this year.

The reporting section of the portal went live after weeks of lobbying by hospitals, providers and lawmakers asking HHS to extend the provider relief spending deadline beyond Wednesday (June 30). HHS told Inside Health Policy it would not grant another extension, arguing its four payments periods and deadlines announced June 11 are fair.

Provider relief reporting has also had a complicated history as Congress had to step in late last year to clear up the definition of lost revenue to mean revenue providers lost due to the pandemic. HHS’ initial interpretation had been much different, asking providers to compare how much they earned in 2019 to 2020. This sparked concern that certain providers, including those who reduced operating costs during 2020 so they could make up for the loss in revenue, might have to return the relief.

Because of Congress’ changes to the definition, HHS removed the first financial reporting deadline of Feb. 15 but encouraged providers on Jan. 15 to begin signing up for the reporting portal, even though the details and form were not yet available.

The big day for providers who received $10,000 or more in provider relief before June 30, 2020 came after the first spending deadline Wednesday (June 30) and reporting portal resources went live. The next spending deadline is Dec. 31 and it applies to providers who received relief July 1, 2020 to Dec. 31, 2020. Providers will have 90 days to submit their information after the spending deadline.

Richard Kes, health care industry senior analyst at the audit, tax and consulting firm RSM, said the new guidance is welcome news as it says providers can calculate lost revenue on a quarter-by-quarter basis versus the whole year that some advocates expected.

This means providers don’t have to worry about quarters where they were more profitable — likely the last quarter of 2020 and early 2021 — offsetting the severe losses they experienced in other quarters. The new HHS guidance also says providers can use their relief received in one quarter retroactively to pay for expenses incurred in previous quarters, though it’s ambiguous on whether that applies to lost revenue too.

“So you can use expenditures in 2020 to apply towards [provider relief] funding received in period four, if you will, or period three, which I think it makes sense to me. It’s all one pandemic, you know, maybe we received cash in one period, but we experienced some expenses in a prior period,” Kes said.

Though one downside for providers is the administrative burden of the other requirements that ask them to report their full-time staff and how many beds their facility has, Kes said.

“If this is what it takes to get that funding, I think they’re[clients] willing to do the work. It just seems like a lot of informational requests that are outside of the specific kind of terms and conditions around you need to use this to offset expenses or lost revenue,” Kes said.

Meanwhile, Kes said he wasn’t surprised that HHS’ site experienced an outage on its first day, estimating there were probably thousands of providers bombarding the site for details on the reporting requirements.

“For good, bad or otherwise, the provider relief fund has been almost 95% of the conversations I’ve had with my clients over the last — you know, probably since March of 2020. I mean, it’s been a very significant area of discussion,” Kes said. 

• HHS Press Release
• Fact sheets on this interim final rule can be found here and here
• The interim final rule with comment period

After 25 years of inaction, Congress finally increased the number of Medicare-supported GME slots to address the nation’s growing doctor shortage in its December spending bill. The Association of American Medical Colleges estimates the U.S. will need 37,800 to 124,000 more physicians by 2034 to keep up with demand, so the additional capacity is necessary given how long it takes to train doctors.

Under the law, CMS is supposed to distribute 200 GME slots each year for five years, starting in 2023. It also requires the agency to distribute at least 10% of the slots across four categories: rural hospitals; hospitals training over their Medicare cap; hospitals in a state with a new medical school or branch campus; and hospitals in health professional shortage areas.

CMS came up with two options for distributing those additional slots, pitting rural hospitals against the rest of providers. Under the first option, CMS would hand out GME slots based on a hospital’s health professional shortage area score for all five years of the allocation period. Under the second option, the agency would prioritize GME slots based on how many of the congressionally approved categories hospitals meet.

“Hospitals that qualify under all four categories would receive top priority, hospitals that qualify under any three of the four categories would receive the next highest priority, then any two of the four categories, and finally hospitals that qualify under only one category,” the proposed rule said.

But the second option would only apply in 2023.

“That would allow additional time to work with stakeholders to develop a more refined approach for future years,” the proposed rule said.

Likewise, both options would award a maximum of one full-time equivalent residency slot per hospital each year, even though Congress said CMS could allocate up to 25 FTEs per hospital per year. The agency decided to lower the cap in anticipation of high, pent-up demand for additional GME slots. 

Rural providers strongly supported the first option, arguing that allocating GME slots based on a hospital’s health professional shortage area score would improve health equity and access to care for people in rural areas.

“This proposal will help to address the maldistribution of physicians over time,” the National Rural Health Association wrote in a comment letter. “Prioritizing geographic and population HPSAs and using HPSA scores would ensure residency slots are awarded to those programs serving high proportions of underserved patients.”

But the American Hospital Association and a coalition led by the AAMC disagreed, hinting they could sue CMS if it goes with the first option.

“CMS’ proposal to prioritize slot distribution by health professional shortage area (HPSA) scores reflects neither statutory intent nor the reality of teaching hospital service areas,” the AHA wrote in a comment letter.

Both the AHA and the AAMC-led coalition supported CMS’ proposed alternative to allocate GME slots based solely on the four categories described in December’s spending bill. But the AAMC noted in a separate letter that it only supported the measure as a stopgap solution.

“Finalizing a methodology for only one year will also provide an opportunity to evaluate how the process operates and provide real-time information about how the methodology works,” the AAMC wrote.

But states without new medical schools or branch campuses might not get any more GME slots if CMS goes with the second option, according to the NRHA.

“Since graduates of new medical schools are 40% less likely to become primary care physicians, we are concerned that CMS could inadvertently reduce the primary care pipeline and worsen physician shortages in rural and underserved areas by favoring states with new medical schools,” the NRHA wrote.

CMS’ proposed cap of one FTE residency slot per hospital also drew the ire of major provider groups who said it was unworkable because each additional resident would take up space for three to five years. They urged CMS to increase the number of GME slots available per hospital.

“This would mean that a hospital would need to apply and obtain a slot every year for three consecutive years in order to fully sustain a stable internal medicine residency program and for four or five consecutive years for other specialties. While obtaining a slot every year is possible, it certainly is not guaranteed. And, such a limitation would make recruitment difficult and would not advance toward building sustainable training programs,” the AHA wrote.

Hospitals also signaled that they want Congress to increase the number of Medicare-funded GME slots further to help meet the growing demand for physicians and avoid a Hunger Games-like competition for more residents.

U.S. Rep. Brad Schneider (D-Ill.) and David McKinley (R-W.Va.) introduced a bill in February that aims to address personal protective equipment and testing kit shortages. Earlier this month, Sen. Bill Cassidy (R-La.), Sen. Maggie Hassan (D-N.H.) and Rep. Elissa Slotkin (D-Mich.) introduced legislation with the goal of reducing dependency on foreign materials and boosting domestic manufacturing of medical supplies.

“The medical supply chain is a very complex global system of which the Strategic National Stockpile is a tiny little part,” said Tara O’Toole, a former homeland security official in the Obama administration. “The stockpile cannot possibly in a real world universe keep enough stuff on hand to be able to supply the country’s needs for all hazards.”

The federal government created the stockpile, originally the National Pharmaceutical Stockpile, in 1999 to counter potential biological, disease and chemical threats to civilian populations. It was eventually renamed the Strategic National Stockpile in 2003, and the Department of Defense was given a role in its management alongside HHS. The stockpile was designed as a stopgap that would allow the federal government to surge supplies to specific areas experiencing disasters or threats, supplementing local procurement efforts. It was not meant to be the sole source for private and public institutions to obtain medical supplies in emergency settings.

Hospitals, public health departments and other health care facilities are supposed to maintain their own stocks of masks, gowns, drugs and ventilators. But during the first months of the Covid-19 pandemic in 2020, they ran out of those basic supplies. The overwhelming number of Covid-19 patients forced both private and public institutions to search for personal protective equipment and therapeutics on the open market.

“The supply chain conversations — I was having those in January, but we were flying blind,” Dean said. “The preparations we should have made in January and February weren’t made until early to mid March. By that point, the U.S. was behind the curve in accessing critical supply chains.”

The federal government activated the stockpile to help fill the states’ gaps in Covid-19 medical supplies and materials. But it did not have enough supply to meet the strong demand, and federal officials faced obstacles in quickly obtaining more materials on the open market. There were not enough masks, gowns, ventilators and drugs to go around. The companies who manufactured things like gowns and N95 masks did not have the manufacturing capacity to quickly produce the amount of product needed.

A year and a half into the pandemic, the U.S. still does not have a good way to quickly scale production of drugs and medical supplies needed to help supplement the strategic national stockpile, in part because manufacturers operate on just-in-time principals. Those standards are supposed to minimize inventory and maximize efficiency, but struggle to account for swings in demand.

“Everybody — shippers, hospitals, pharmacy chains — no one wants to hold inventory. Who is going to pay for those expensive medicines sitting there month after month?” O’Toole said. “This is why hospital stockpiles have dwindled.”

The federal government is beginning to work with the private sector to ensure manufacturers have the ability to scale production quickly during large-scale disease outbreaks.

The Biomedical Advanced Research and Development Authority (BARDA) is working with its parent, HHS, to find companies willing to alter their standard manufacturing practices to scale up production of therapeutics and other medical supplies to better prepare for the next pandemic. But expanding manufacturing capacity in the U.S. is not easy, one former Trump administration official who worked with BARDA told POLITICO. It will take years to build facilities, manufacturing lines and hire staff to oversee production, the former official said.

Because 57 percent of adult Americans are fully vaccinated and Covid-19 case rates have fallen drastically in recent months, the federal government believes it currently has enough supply in the Strategic National Stockpile to handle small state requests and to handle a moderate increase in cases due to the Delta variant. But, officials said, if another nationwide surge occurs, the stockpile will only be able to supplement state supplies, not fill the caches completely.

But the Biden administration is also trying to help countries across the globe battling sharp spikes in Covid-19 cases and deaths, and it is struggling to procure and ship supplies overseas. Beyond calls for vaccines, the administration has received urgent requests for oxygen and oxygen components such as cylinders from countries in Africa, the Middle East and Asia.

The U.S. obligated about $18 million in November 2020 to bolster supplies of medical oxygen across 11 countries. But oxygen concentrators — machines that filter oxygen from the air — procured through this funding have only been delivered to Honduras, Guatemala and Haiti. Beginning this month, the U.S. Agency for International Development has provided emergency medical oxygen supplies to Nepal, Bangladesh, India, Maldives, Pakistan, and Sri Lanka. Dozens of other countries are seeking the same assistance from the U.S.

“Under normal circumstances, even before the pandemic, oxygen access was a challenge … for a lot of countries at the time. There just hasn’t been enough attention and investment on the issue,” said Robert Matiru, a director at Unitaid, a health initiative that works with the World Health Organization. “Many health systems from multiple countries have been challenged not by the fact that they didn’t have a baseline capacity but then the surge capacity just overwhelmed them. The demand for oxygen is almost double, triple, quadruple what is normally required.”

The new momentum is driven by the way Americans quickly embraced remote care during lockdowns, helping cement a permanent role for what had largely been a niche industry. A Senate plan, S. 1512 (117), by Brian Schatz (D-Hawaii) that would permanently enshrine many of the Trump Medicare coverage and payment rules has attracted 59 co-sponsors. Many private insurers have already moved to offer or broaden coverage of virtual visits.

“We’ve gone from the point where if I talked about telehealth to someone their eyes would start to glaze over,” Schatz said. “Now when I start to talk about telehealth, their head nods vigorously up and down.”

But skeptics warn a rapid expansion of telehealth could trigger a surge of new health spending, The Congressional Budget Office has long balked at plans to increase payment for the technology, warning of the financial burden it could put on payors. The Medicare advisory committee MedPAC has recommended a cautious approach that would temporarily cover some telehealth services for all beneficiaries but revert to lower reimbursement rates post-crisis for virtual appointments compared to in-person. There’s also concern a rapid expansion could prompt more fraudulent billings: The HHS Office of Inspector General estimates $4.5 billion of telehealth-related fraud last year.

Government Accountability Office health officials warned the Senate Finance Committee last month of potential fraud and higher spending, adding it’s unclear how extending the policies would affect quality of care. The Congressional Budget Office last year found a plan that would end Medicare geographic restrictions for mental health care via telehealth would add $1.65 billion in spending between 2021 and 2030.

The CBO found last year that a previous bill, H.R. 5201 (116), that would end Medicare geographic restrictions for mental health care via telehealth would add $1.65 billion in spending between 2021 and 2030.

“We’re still in an uphill battle with [congressional scorekeepers],” said Tom Leary, senior vice president of government relations for the Healthcare Information and Management Systems Society. “The question of potential overutilization is the biggest issue.”

The Schatz plan would end all location-based restrictions on telehealth for Medicare recipients, allow patients to originate care from home and let rural health clinics and health centers that provide care in underserved areas to use telehealth permanently. Before the pandemic, Medicare only covered telehealth in certain rural areas and required patients to travel to eligible health care facilities to access telehealth services.

It would also allow the Secretary of Health and Human Services to lift telehealth restrictions permanently and mandate a study on telehealth usage during the Covid-19 pandemic. HHS Secretary Xavier Becerra has signaled support for lifting the curbs.

More than half of states have permanently loosened restrictions on telehealth this year, with others considering legislation to expand access. Several other proposals on telehealth have been introduced in Congress as well.

Advocates have said the legislation would be a win for patient access and medical care and point to support from numerous provider groups such as the American Medical Association.

“It avoids what we call the telehealth cliff,” said Kyle Zebley, director of public policy at the American Telemedicine Association. “If Congress doesn’t act and the public health emergency is declared over sometime in the not-too-distant future, then all of these regulatory flexibilities that have made telehealth accessible to all Medicare beneficiaries will go away.”

Backers of the legislation are confident they’ll write at least an extension of telehealth flexibilities into law this year, to avoid a potential rollback in access. HHS has said in a letter to governors that the public health emergency declaration lifting telehealth restrictions will likely remain through the end of 2021. 

Schatz is looking to attach the legislation to a must-pass bill, which could include a year-end spending deal. If that falls through, lawmakers could opt for a temporary extension that buys time to collect more data on virtual care coming out of the pandemic. This would track with MedPAC’s recommendations, which call for a one- or two-year extension after the public health emergency ends. 

Among the influential lawmakers who haven’t signed on are Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means health subcommittee chair Lloyd Doggett (D-Texas), whose tax-writing panels have jurisdiction over Medicare. Doggett — who’s expressed concerns over a permanent telehealth scale up before there’s more study— has said he would introduce legislation to extend waivers for telehealth to gather more data.

But some telehealth advocates say there’s already enough data showing fewer no-shows for appointments and certain virtual services being just as efficient as in-person care.

“Congress will always ask for more data,” said Sarah-Lloyd Stevenson of Faegre Drinker. “My fear is even if we do a two-year extension, they’re going to keep asking for more data.”

Employers increasingly have been open to government involvement in the health-care system out of frustration for high costs that they have been largely unable to rein in. But they fear plans being put in place by states could result in higher taxes on them or hurt their own plans by peeling off young, healthier workers.

“It will affect our risk pools,” said James Gelfand, senior vice president of health policy for the ERISA Industry Committee. “We need not only as many people as we can get in those pools, but we especially need young, healthy people, and it’s generally predicted that when other options are put on the table, the people who are most likely to take other options tend to be the healthy people.”

Employers worry they will be left with a “sicker, older group of people, and once you cross a certain line there, the employer plans just won’t be viable anymore,” Gelfand said. His group represents companies that provide benefits such as health plans.

Employers pay more for health care than any other payers. Since 2010, average family premiums have increased 55%—at least twice as fast as wages (27%) and inflation (19%)—and hitting over $21,000 in 2020, according to the Kaiser Family Foundation, which tracks the cost of employer coverage.

A public option, which would allow consumers to buy Medicare-like plans in the Affordable Care Act exchanges, was embraced by President Joe Biden in his 2020 campaign platform. However, he didn’t include one in his fiscal 2022 budget. He did express support for the idea of providing premium-free, Medicaid-like coverage through a federal public option plan in states that haven’t expanded Medicaid.

In the absence of federal action, a number of states are taking the lead in setting up their own public option plans, and Washington state is expanding the program it already has in place.

Concern Over Increased Costs

In Washington state, which started the first state public option program in 2021, businesses fear it will lead to higher costs. The program was not as successful as Democratic proponents had hoped it would be at reducing premiums.

Gov. Jay Inslee (D) signed legislation (S.B. 5377) in May that would increase state-financed subsidies in 2022 for ACA exchange enrollees earning up to 500% of the federal poverty level, or $132,500 for a family of four. The law will also expand the public option in 2023 to require hospitals to contract with at least one public option carrier in every county in order to participate in public programs like Medicaid if public option programs aren’t available.

“It’s going to increase the cost of employer-sponsored insurance” to pay for the public option and subsidy programs, Amy Anderson, government affairs director for health care and federal issues of the 7,000-member Association of Washington Business, said.

“There was a premium tax that was proposed this session,” she said. That didn’t pass, but “the concern is as you start to provide more on the public option, increase the subsidy, the state will start taxing the premiums” on each person covered, she said.

But state Sen. David Frockt (D), sponsor of S.B. 5377, said in an email that the premium assessment was intended to fund an expansion of the state’s public health program rather than other programs covered by the law.

“Preliminarily we are seeing public option plans now being proposed to be offered in six additional counties, bringing the total to 25 of our 39 counties, from 19,” Frockt said. “But it’s pretty clear we are not going to see them offered in every county next year, which is the trigger,” so the requirement is likely to kick in, he said. 

New Plans for Nevada, Colorado

Nevada and Colorado are the latest states to enact their own plans that are similar to public options.

The Vegas Chamber, Nevada’s largest employer group, opposed the state’s legislation (S.B. 420) because of “unintended consequences that we saw,” Paul Moradkhan, senior vice president of government affairs, said.

Under the Nevada law, signed June 9 by Gov. Steve Sisolak (D), individuals and small businesses will initially be allowed to buy plans on and off the state exchange by 2026. Insurance companies that want to bid as Medicaid providers in the state would have to offer a public option plan for the individual market at premiums that are at least 5% lower than average benchmark ACA premiums in the same area, and 15% lower than average benchmark premiums in the state. Benchmark premiums are for plans on which ACA subsidies are based.

An actuarial study is required before the public option can go into effect, and the bill requires there be no disruption to the market, Nevada attorney James Wadhams, who lobbied for state hospitals and the Vegas Chamber, said in an email.

Nevada businesses fear that costs for people who choose public option plans would be shifted to the private sector, and they worry about the impact it could have on small business plans, Moradkhan said. Many chambers in the state offer association health plans, which cover about 10,000 people, and they fear the costs of those plans would rise, he said.

“Someone’s got to make up for that cost” to cover the 5% reduction for public option plans, he said.

Support From Small Business

Not all businesses oppose public option plans. Small Business Majority (SBM), which has a network of more than 85,000 small business members, has supported the ACA as well as a public option.

Sarita Parikh, co-founder of glow + gather, a four-person family-owned and operated manufacturer of self-care and home goods based in Castle Rock, Colo., is an SBM member who supports Colorado’s law (H.B. 21-1232) signed June 16 by Gov. Jared Polis (D). The law isn’t a full-scale public option, but it requires insurers in the state’s individual and small group markets to offer plans in 2023 at premiums 15% below 2021 rates on an inflation-adjusted basis.

Parikh, who also has her own physical therapy practice, has continued to buy her own UnitedHealthcare Golden Rule Insurance Co. plan that she’s had since before the ACA was enacted in 2010. She said she hasn’t been able to find an ACA exchange plan that matches her need to keep her long-term neurologist to treat her epilepsy and that would save her money.

Parikh sees a public option as “necessary.” 

“I think that we have such limited resources as small businesses for what our options are in health care,” she said. “For small businesses to be competitive and to be able to grow and also attract quality employees, we have to be able to provide health-care, and we don’t have those options and resources.”

She said she hopes the law also will live up to its goal of offering higher-quality plans than those currently on the state exchange.

A one-time infusion of cash for state home health programs will fund worker bonuses and training without meeting the Biden administration’s goal of bolstering wages and benefits in the industry, proposals in six states show. 

President Joe Biden has proposed injecting the home and community-based services industry with $400 billion, mostly through Medicaid. Biden wants to boost wages for home health workers—who currently make about $13 per hour, often without benefits—and cut down years-long wait lists for in-home care for the elderly and people with disabilities.

Democrats Seek to Advance Biden Home-Care Plan Via Medicaid Cash

Congress put a down payment on that plan earlier this year by offering states a one-year increase in the federal share of Medicaid dollars to expand their home care offerings under a February Covid-19 relief law (Public Law 117-2).

The plans outlined by six states — California, Colorado, Maine, Pennsylvania, Vermont, and Washington — show how state governments want to tap into the billions of federal dollars available to expand their Medicaid home and community-based care services but are limited by the temporary nature of the funding. The money could briefly help more Americans get home care, but won’t reach Biden’s larger goals for the industry.

“You balance a budget on things that are real, not on things that might happen,” Matt Salo, executive director of the National Association of Medicaid Directors, said. “You make plans for what’s real now.”

Groups that advise states on matters such as elder care say they expect almost every state to seek some of these funds this year. For lasting change, the plans suggest the larger home health package that Democrats aim to enact later this year must provide assurances to states that the money is permanent. 

Bonuses, Training

California is proposing one of the largest expansions in the nation — which it estimates would bring about $3 billion in new federal funds to the state. It wants to create a pilot program to train workers to serve people with Alzheimer’s disease and related dementia, as well as send a one-time $500 check to home-care workers who served patients for any three-month period in March to December of 2020, when Covid-19 cases rose significantly in the state.

California has been trying to expand training stipends for home-care workers as well, in hopes of countering what the plan calls “high turnover and staffing shortages” created by limited training and low compensation.

“We don’t have enough direct care professionals because people leave the field looking for a career ladder,” said Martha Roherty, executive director of the National Association of States United for Action in Aging and Disabilities, a coalition of state agencies that serve the elderly and people with disabilities. “With some training, you can look at the field as a place to make a career.”

Colorado plans to “supercharge” its existing home and community-based services by expanding eligibility. The state looks to take on projects such as short-term grants for behavioral health crises and transition services for people moving from institutions to their homes.

Pennsylvania is seeking $1.2 billion from the federal government to increase payment rates for some direct-care providers and to protect workers by purchasing personal protective equipment.

Washington plans to use the funds to improve access to home and community-based health services, Vermont wants to increase payment rates for some health-care providers, and Maine aims to put much of the new money into workforce stabilization. Those plans would all be in effect for one or two years.

Top Senator Wants Democrats United on Expanding Home Health Care

Long-Term Plans

Sen. Bob Casey (D-Pa.) introduced a bill recently to bridge these short-term funds with Biden’s pledged influx of a larger, longer federal investment.

Casey said he’s hoping states will lay some of the groundwork for his bill and, hopefully, generate support for the legislation.

“We’re already seeing enthusiasm for this,” Casey said.

Democrats will likely include the bill in a legislative package they plan to advance later this year using reconciliation, a procedure that requires only a simple majority in the Senate. All but 10 senators who caucus with Democrats support Casey’s bill, according to Casey’s office.

Click here to view funding for New Jersey-based projects that would be provided by the INVEST Act.