GOP tax plan would trigger $150 billion in mandatory spending cuts to Medicare and other programs

At the agencies

A Congressional Budget Office (CBO) report released last week found that the GOP’s tax plan would trigger $150 billion in mandatory spending cuts under the “pay-as-you-go,” or PAYGO, rule, including a $25 billion per year cut to Medicare. In order to avoid the automatic spending cuts to programs such as Medicare, student loans, crop subsidies, the hospital insurance trust fund, wetlands conservation and Customs and Border Protection, a PAYGO waiver would need to be enacted by the end of the year.

The Centers for Medicare and Medicaid Services (CMS) is being sued by the American Hospital Association, Association of American Medical Colleges, America’s Essential Hospitals and three health systems over its plan to cut reimbursements to hospitals for 340B drugs. The 340B program allows hospitals that serve a disproportionate share of low-income and uninsured patients to buy drugs at highly discounted rates without being required to pass those savings on to patients. The hospitals, which want CMS to stop, or at least delay, the cuts, argue that CMS does not have the authority to implement the cuts and that they will undermine the 340B program. The hospitals argue that CMS’s authority to change pay rates for drugs does not allow such large adjustments, rather, the agency’s discretion is restricted to fine-tuning pay rates. Hospitals further claim that CMS is undermining the 340B program by taking away resources that Congress intended for them.

Alex Azar was nominated by President Trump to be the next Secretary of Health and Human Services (HHS), replacing former Secretary Tom Price. Azar previously worked as the agency’s deputy secretary and general counsel under the George W. Bush administration. He then spent almost 10 years with the pharmaceutical company Eli Lilly, eventually becoming president of U.S. operations. If confirmed, Azar will play an important role in the administration’s goals of dismantling the Affordable Care Act.

CMS announced in a bulletin to Children’s Health Insurance Program (CHIP) directors that the first state, which remained unnamed, will run out of CHIP funds this month despite carryover funding and redistribution payments. CMS predicted that without congressional intervention, every state would run out of funding at some point during fiscal year (FY) 2018, the majority doing so by March 2018. Lawmakers claim they will renew the program, which expired Oct. 1, by the end of the year. Some states are already beginning to wind down the program. Currently, states are funding CHIP through unused CHIP grants from FY 2017 and leftover CMS money from 2016, a fund which only has $3 billion remaining.

The White House Office of Management and Budget (OMB) is reviewing a rule related to President Trump’s Oct. 12 executive order on associated health plans (AHPs), short-term plans and health reimbursement arrangements. Specifically, the regulation now being reviewed would expand the definition of “employer” under the Employee Retirement Income Security Act (ERISA) to allow more employers to form AHPs. The regulation also asks the Secretary of Labor to promote AHPs based on common geography or industry.

On the Hill

Representatives David McKinley (R-WV) and Mike Thompson (D-CA) introduced legislation that would stop CMS’s $1.6 billion cuts to hospitals’ reimbursements for 340B drugs in 2018. While hospital lobbyists want to include legislation to delay cuts to reimbursements, some believe that it would be too difficult to get a bill through both chambers before the cuts go into effect. CMS finalized a proposal to cut reimbursement by more than 27 percent for Medicare Part B drugs that hospitals buy through 340B. The money saved through the cuts will be distributed evenly among hospitals, including those that do not qualify for 340B for other services. Some worry that others, including Medicare Advantage plans and commercial payers, could also cut hospital reimbursements for 340B drugs, which could undermine the drug discount program and lead to different reimbursement policies for 340B and non-340B providers.

The possibility of including a repeal of the individual mandate in the Senate tax reform bill has raised the possibility of taking up the bipartisan Alexander-Murray bill to fund cost-sharing reductions. News of the mandate repeal sparked outrage among Democrats in the Senate Finance Committee markup. Other health-related tax proposals include an amendment by three democrats to repeal the Cadillac tax and one by Representative Kevin Brady (R-TX) to delay the medical device tax and health insurance tax. These, however, are unlikely to pass before the end of the year. According to a CBO estimate, a repeal of the individual mandate would save $338 billion over 10 years but would result in 13 million fewer Americans being insured.

From the administration:

The Trump administration is backing away from demands that the Republican tax reform bill include a repeal of the ACA’s individual mandate. The version passed by the House does not include a repeal, while the version put forward by the Senate Finance Committee, which is set to be voted on after Thanksgiving. While the president still supports the individual mandate repeal, members of his administration have signaled that he does not want it to impede the bill’s success.


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