July 26, 2013—The Institute of Medicine (IOM) committee established to study geographic variation in health care spending and utilization July 24 released a final report titled Variation in Health Care Spending: Target Decision Making, Not Geography. The IOM report was commissioned as part of a written agreement between the administration and congressional members of the Quality Care Coalition and included in the Affordable Care Act (ACA, P.L. 111-142 and P.L. 111-152) [see Washington Highlights, Jan. 28, 2011].
The report confirms the existence and persistence of geographic variation in health care spending and utilization, but finds it is difficult to explain the variation even after proper risk adjustment. The committee also concludes that the spending variation is not related to quality of care, but that “variation in total Medicare spending across geographic areas is driven largely by variation in the utilization of post-acute care services, and to a lesser extent by variation in the utilization of acute care services.”
The report states that if there were no variation in post-acute care spending in hospital referral regions (HRRs), “variation in total Medicare spending across HRRs would fall by 73 percent.”
Addressing the question of whether Medicare payments for physician and hospital services should incorporate a value index that would modify the payments based on geographic area performance, the committee notes that “health care decision making generally occurs at the level of the individual practitioner or organization (e.g., hospital or physician group), not at the level of a geographic region. Therefore, a geographically based value index is unlikely to promote more efficient behaviors among individual providers and thus is unlikely to improve the overall value of health care.”
On the potential value index, the committee ultimately recommends, “Congress should not adopt a geographically based value index for Medicare. Because geographic units are not where most health care decisions are made, a geographic value index would be a poorly targeted mechanism for encouraging value improvement. Adjusting payments geographically, based on any aggregate or composite measure of spending or quality, would unfairly reward low-value providers in high value regions and punish high-value providers in low-value regions.”
Director, Government Relations
July 26, 2013—The House Energy and Commerce Health Subcommittee held a July 22-23 markup of draft legislation that would reform Medicare physician payment, repeal the sustainable growth rate (SGR) formula, and establish an enhanced fee-for-service model with payments based on quality and innovation [see Washington Highlights, July 12]. Only one technical corrections amendment was offered prior to the subcommittee approving the legislation by voice vote.
While expressing his support for the SGR repeal effort, Rep. Eliot Engel (D-N.Y.) echoed AAMC’s concerns regarding the need to ensure adequate risk adjustment as part of determining physician quality saying, “I think all of my constituents deserve to have access to high quality health care. Therefore, I want to assure proper risk adjustment is done within both the quality update incentive program and alternative payment models to help account for the impact of socio-economic factors in determining physician reimbursement in these programs.”
In his opening statement, Health Subcommittee Chair Joe Pitts (R-Pa.) said, “The time of temporary fixes, and kicking the can down the road has ended. The bipartisan committee draft before us today permanently repeals the SGR and places us on a path to paying for innovation and quality, not volume of services, and puts doctors, not bureaucrats, back in charge of medicine.”
Chairman Pitts acknowledged the collective effort to repeal the SGR, stating that the “draft before us today incorporates ideas and principles from the provider and patient communities, from Republicans and Democrats on the committee, and from our physician colleagues in the Doctor Caucus.”
Energy and Commerce Committee Chair Fred Upton (R-Mich.) highlighted the necessity of SGR repeal, stating, “This legislation is over 15 years in the making as the highly flawed SGR has frustrated patients, doctors, and lawmakers alike since its first passage back in 1997. It modernizes the payment system by actually listening to the medical community’s best practices and ensuring that the care patients receive is based off those best practices.”
Ranking Member Henry Waxman (D-Calif.) reminded his colleagues that this is the beginning of the process, saying, “This is the first step, and an important one, but this is a process that has to start, we can’t accept the current system any longer. We have bipartisan agreement on that.” Continuing to highlight the bipartisan collaboration, he said, “We share the priorities of wanting to move our payment system from one that rewards volume to one that aligns incentives and rewards quality, efficiency and improved patient outcomes.”
Subcommittee Vice Chair Michael Burgess (R-Texas) and Ranking Member Frank Pallone (D-N.J.) offered one technical amendment that would clarify intent but offer “no substantive changes.” The subcommittee adopted the amendment by voice vote and the full committee is expected to consider the legislation on July 31.
Director, Government Relations
July 26, 2013—The Senate July 24 passed an amended Smarter Solutions for Students Act (H.R. 1911) that would establish a market-based student loan interest rate, similar to the Bipartisan Student Loan Certainty Act (S. 1241) and the President’s Budget. The measure is designed as a compromise between previous market-based proposals to reverse the July 1 doubling of subsidized Stafford loan interest rates for undergraduates.
Senators Joe Manchin (D-W.V.), Richard Burr (R-N.C.), Tom Coburn (R-Okla.), Lamar Alexander (R-Tenn.), Angus King (I-Maine), and Tom Carper (D-Del.) June 27 first introduced S. 1241 [see Washington Highlights, June 28].
Similar to the House Republican’s and the president’s proposals, the compromise sets interest rates each academic year based on the U.S. Treasury 10-year borrowing rate plus 2.05 percentage points for subsidized and unsubsidized undergraduate Stafford loans, plus 3.6 percentage points for graduate Stafford loans, and plus 4.6 percentage points for PLUS loans (including GradPLUS). The interest rate would be capped at 8.25 percent, 9.5 percent, and 10 percent, respectively, and fixed over the life of the loan.
Based on current 10-year Treasury rates, the proposal would reduce unsubsidized Stafford loan interest rates for medical students from 6.8 percent to 5.41 percent. Likewise, it would reduce GradPLUS interest rates from 7.9 percent to 6.41 percent. However, the Congressional Budget Office (CBO) anticipates that interest rates will eventually rise above current levels.
After opposing the measure in favor of an extension of current rates, Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Tom Harkin (D-Iowa) voted in favor of the bill and indicated he intends to revisit the issue in the upcoming reauthorization of the Higher Education Act (HEA).
The House is expected to approve the measure for the president's signature.
Matthew Shick, J.D.
Senior Legislative Analyst, Government Relations
Telephone: (202) 862-6116
July 26, 2013—The House Labor-HHS Appropriations Subcommittee July 24 postponed the markup of its FY 2014 spending bill that had been scheduled for the following day. Although the official reason given for the postponement was a scheduling conflict with other spending bills being considered on the House floor, Congressional Quarterly reported, “The postponement also came amid new reports about the specific reductions that would be needed to get the Labor-HHS-Education bill to $122 billion in discretionary spending, down 23 percent from the $157 billion enacted level for this fiscal year…. Committee aides confirmed that the plan the panel would consider would cut education grants for low-income students 16 percent and reduce spending at the Labor Department by 13 percent. It would eliminate funding for the Corporation for Public Broadcasting and use the savings to maintain backing for Head Start, special education and the National Institutes of Health.”
Senior Director, Government Relations
July 26, 2013—President Obama took to the road July 24 for the first in a series of speeches to outline his economic agenda for the remainder of his second term while House Speaker John Boehner (R-Ohio) was quick to charge the president is merely setting up a showdown over the budget in the fall that could result in a government shutdown.
Speaking July 24 at Knox College in Galesburg, Ill., where eight years earlier he gave his first economic speech as a senator, the president criticized the current environment in Congress, "But with this endless parade of distractions and political posturing and phony scandals, Washington has taken its eye off the ball."
He said, "[T]he key is to break through the tendency in Washington to just bounce from crisis to crisis. What we need is not a three-month plan, or even a three-year plan; we need a long-term American strategy, based on steady, persistent effort, to reverse the forces that have conspired against the middle class for decades.”
The president challenged Democrats “to question some of our old assumptions,” adding, “We’ve got to be willing to redesign or get rid of programs that don't work as well as they should.”
And he called on Republicans in Congress “to set aside short-term politics and work with me to find common ground…. So it’s not enough for you just to oppose me. You got to be for something…. Repealing Obamacare and cutting spending is not an economic plan.”
At a July 23 press conference of House Republican leaders, Speaker Boehner criticized the president, saying “This is all about a big set up that’s coming in this speech. The president wants to raise taxes so he can do more ‘stimulus’ spending. And the fact is, it’s his sequester and if we’re going to get rid of his sequester, we’re going to have to look for smarter spending cuts in order to do that.”
The speaker again called for “significant cuts in spending if we’re going to replace the sequester and extend the debt limit” adding that he believes the so-called Boehner rule – requiring spending cuts to equal any increase in the debt ceiling – “is the right formula for getting that done.”
Later the same day, White House press secretary Jay Carney responded that the president “will not negotiate over Congress’s responsibility to pay the bills that Congress racked up. It is highly irresponsible to even flirt with that prospect.”
The White House has issued repeated threats to veto FY 2014 spending bills that cut domestic programs more deeply than sequestration [see Washington Highlights, June 7]. Congressional leaders from both parties have acknowledged the need for a continuing resolution (CR) to keep the government running after the Oct. 1 start of the fiscal year. House Republicans reportedly are still considering whether to advance a straight forward CR extending the FY 2013 level of $988 billion for discretionary programs or to push for the lower $967 billion specific by current budget law.
July 26, 2013—Senate Judiciary Committee Chair Patrick Leahy (D-Vt.) July 12 requested that the National Institutes of Health (NIH) exercise government “march-in” rights under the 1980 Bayh-Dole Act to permit women better access to testing for BRCA1 and BRCA2 genes linked to breast and ovarian cancer. In a July 12 letter to NIH Director Francis Collins, M.D., Ph.D., Sen. Leahy notes that, while several patents on the BRCA genes were recently ruled invalid by the U.S. Supreme Court [See Washington Highlights, June 21], other gene patents owned or licensed to Myriad Genetics were not directly challenged in that case.
The Supreme Court’s unanimous decision does allow claims on certain types of DNA sequences that do not occur naturally, such as complimentary DNA (cDNA), which some of Myriad’s other patents include. Myriad and two universities have subsequently alleged patent infringement and sued firms that began offering competitive BRCA genes tests in the wake of the Supreme Court’s decision.
Sen. Leahy notes that since some of the BRCA patents still controlled by Myriad derive from federally supported research, provisions of the Bayh-Dole Act permit funding agencies to march-in and reassign licensing rights under certain circumstances. In fact, the government has never exercised federal march-in rights under the Bayh Dole Act, and questions about pricing and wider availability—two of the issues raised by Sen. Leahy—have been insufficient to trigger a march in.
Meanwhile, legal observers expect Myriad’s new litigation will determine whether its other patents remain valid, if competitive BRCA tests infringe those patents, or if a negotiated settlement will be reached on the conduct of gene-based diagnostic tests.
To date, there has been no public response from NIH on the request.
Director, Science Policy
Heather Pierce, J.D., M.P.H.
Sr. Director, Science Policy & Regulatory Counsel
July 29: PCORI Webinar on CER Findings
9 a.m.; Webinar
The Patient-Centered Outcomes Research Institute (PCORI) will host a webinar on the dissemination and implementation of the comparative clinical effectiveness research (CER) findings.
July 30: Senate Budget Committee Hearing on Health Care Costs
10:30 a.m.; 608 Dirksen Senate Office Building, Washington, D.C.
The Senate Budget Committee will hold a hearing on recent progress and remaining challenges to contain health care costs.
July 31: House Committee to Mark Up SGR Bill
Time: TBA; Location: TBA
The House Energy and Commerce Committee is expected to mark up draft legislation to reform the sustainable growth rate (SGR).
Aug. 1: House Energy and Commerce Hearing on ACA
Time: TBA; Location TBA
The House Energy and Commerce Committee is expected to hold a hearing on the implementation of the Affordable Care Act (ACA).