Medicare, Medicaid and Commercial Coverage & Reimbursement

In an unexpected turn of events, the Trump administration has apparently reversed course and has withdrawn the proposed rule that would have amended the discount safe harbor under the Anti-Kickback Statute to eliminate protections for certain drug rebates paid by pharmaceutical manufacturers. “Based on careful analysis and thorough consideration, the president has decided to withdraw the rebate rule. The Trump administration is encouraged by continuing bipartisan conversations about legislation to reduce outrageous drug costs imposed on the American people, and President Trump will consider using any and all tools to ensure that prescription drug costs will continue to decline," White House Deputy Press Secretary Judd Deere said in a statement.

On June 3, 2019, the U.S. Supreme Court issued a decision in Azar v. Allina Health Services. The case involved a challenge by hospitals over whether the Department of Health and Human Services (“HHS”) was required to proceed through notice-and-comment rulemaking before promulgating a retroactive Medicare rate calculation methodology for Disproportionate Share (DSH) payments to hospitals. In a 7-1 decision by Justice Gorsuch, the Court ruled in favor of the hospitals, holding that the new rate calculation established a substantive legal standard, and therefore notice-and-comment was required under the Medicare Act.

In recent months, we’ve highlighted several changes that CMS is implementing to combat opioid misuse. In this post, we focus on CMS’s new Medicare Part D Opioid Overutilization Policies.


Last year, CMS published a road map outlining the agency’s approach to addressing the nation’s opioid epidemic. CMS’s strategy has three prongs: (1) prevent new cases of opioid use disorder (OUD); (2) expand treatment for individuals with OUDs; and (3) leverage data to improve the agency’s prevention and treatment options.


In line with that strategy, the agency published an article detailing its Medicare Part D Opioid Overutilization Policies for 2019. The policies focus on improving communication between and among Part D plans (PDPs) and providers to better coordinate efforts to prevent opioid misuse. As CMS points out, “Providers are in the best position to identify and manage potential opioid overutilization in the Medicare Part D population. Medicare prescription drug plans can assist providers by alerting them about unusual utilization patterns in prescription claims.”

Last month, we highlighted a few of the changes CMS proposes in Parts I and II of the Advance Notice and Draft Call Letter. Here, we take a look at CMS’s next steps to combat opioid misuse. CMS is rolling out several new initiatives in this space this year and next.

As of January 30, 2019, CMS lifted its temporary provider enrollment moratoria for home health agencies in Florida, Illinois, Michigan and Texas. The Enrollment Moratorium had prevented new home health agencies in these states from enrolling in Medicare and Medicaid.

CMS recently proposed several important changes for the Medicare Advantage (MA) program that relate to payment, benefit design, and new actions to combat the opioid crisis. Here, we take a look at the proposed changes to risk adjustment payments, supplemental benefits, and a value-based insurance design model; all working toward CMS’s goal of maximizing coverage and competition. In a prior post we discussed CMS’s Part D Payment Modernization Model and stay tuned for our upcoming discussion of CMS’s next steps to combat opioid misuse.

On January 15, 2019, the Supreme Court heard oral arguments in Azar v. Allina Health Services, a prominent case involving a challenge by hospitals over when Medicare’s instructions to its contractors impact a “substantive legal standard” and thus must be issued through formal rulemaking. As discussed in our prior post, the Court is reviewing the U.S. Court of Appeals for the D.C. Circuit’s decision that threw out a Medicare rate calculation methodology for Disproportionate Share Payments (DSH) to hospitals adopted by the U.S. Department of Health and Human Services (HHS) for its failure to undergo notice and comment rulemaking. During oral arguments, the Court grappled with a broader question: what is the legal standard for when HHS must use formal rulemaking and not “interpretative” instructions to its contractors in the administration of the Medicare program?

On January 31, 2019, the U.S. Department of Health & Human Services (HHS) issued a proposed rule that would amend the discount safe harbor under the Anti-Kickback Statute (AKS) to eliminate protection for certain drug discounts paid by manufacturers to plan sponsors or their pharmacy benefit managers (PBMs) under Medicare Part D, and Medicaid managed care organizations (MCOs). Additionally, the proposed rule would create two new safe harbors to protect: (i) certain point-of-sale discounts on prescription pharmaceutical products; and (ii) certain fixed fee service arrangements between manufacturers and PBMs.

On January 18, 2019, CMS announced the Part D Payment Modernization Model, aimed at incentivizing Part D sponsors to reduce catastrophic phase federal reinsurance subsidy spending.  The model, which will begin January 2020, is a voluntary, five-year model open to eligible standalone Prescription Drug Plans (PDPs) and Medicare Advantage-Prescription Drug Plans (MA-PDs) that are approved to participate. 

In 2014, Arizona expanded Medicaid to the new adult group. Following the expansion, Arizona submitted, and CMS approved, an 1115 waiver extension to create the Choice, Accountability, Responsibility, Engagement (CARE) program. CARE adds premiums and cost sharing, healthy behavior incentive programs, and flexible spending accounts, called CARE Accounts, for certain adults in the expansion population. The program is approved to run through September 30, 2021.

In an Advisory Opinion posted earlier this week, the OIG gave the green light to a charitable pediatric clinic’s routine waiver of patient cost-sharing amounts on the basis.  The OIG’s analysis hinged on several factors that, taken together, led the OIG to refrain from exercising its enforcement discretion.

Over the last few weeks, we published a number of posts examining important developments and trends in 2018 as well as what we expect to see in 2019. Our posts cover a range of topics, including enforcement and litigation, HIPAA and the FDA. In case you missed one, below are links to all of our Year In Review posts.

With the recent scoop from Politico that the Trump Administration is considering giving states the ability to implement Medicaid block grants, there has been considerable speculation on what the Administration is planning. Although we don’t know exactly what the Administration has in mind, there increasing skepticism on the legality of this move. So we are laying out the fundamentals and past history as we await the final guidance.

While Congress and the Administration are dug in entering the third week of a partial government shutdown, both branches of government are looking to shape other policy areas in 2019. The Administration is reportedly looking at reforming the Medicaid program and Congress is ramping up its oversight of prescription drug prices.

We cover this and what it will mean for this Congress in this week's preview.

On January 15, 2019, the U.S. Supreme Court will hear arguments in a hotly-contested case involving a challenge by hospitals over when Medicare’s instructions to its contractors impact a “substantive legal standard” and thus must be issued through formal rulemaking.  In Azar v. Allina Health Services, the Court will review the U.S. Court of Appeals for the D.C. Circuit’s decision that threw out a new Medicare rate calculation methodology for Disproportionate Share Payments (DSH) to hospitals adopted by the U.S. Department of Health and Human Services (HHS) because the agency promulgated it through “interpretative guidance” but failed to undergo notice-and-comment rulemaking. The Supreme Court is now tasked with answering a broader question: what is the legal standard for when HHS must use formal rulemaking and not “interpretative” instructions to its contractors in the administration of the Medicare program?

The Federal Courts gave the America Hospital Association and 340B covered entities a late Christmas present and in doing so may have dealt a blow to the Trump Administration’s initiatives aimed at controlling or reducing drug prices.


On December 27, 2018, Judge Rudolph Contreras granted the American Hospital Association’s Motion for a Permanent Injunction over CMS’ Medicare Part B reimbursement cut for 340B hospitals. As I have previously written, the vehicle for that reimbursement cut was the 2018 Outpatient Prospective Payment System (OPPS) rule, and CMS’ existing authority to adjust OPPS drug reimbursement.

As of December 2018, 37 states (including D.C.) have adopted Medicaid expansion. Of the remaining 14 states, some are considering expanding Medicaid. States with recent activity relating to Medicaid expansion include: Florida, Idaho, Maine, Missouri, Nebraska, New Hampshire, North Carolina, and Utah. States continue to explore different opportunities as it relates to Medicaid expansion. 

On November 26, 2018 the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule, Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses. This proposed rule is the Trump Administration’s latest action to curb prescription drug prices. The proposed rule outlines a number of provisions to for lowering drug prices and reducing out-of-pocket costs in the Part D program that build off the Administration’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.

On November 20, 2018, Virginia submitted an application to CMS for a Section 1115 demonstration program entitled Virginia COMPASS (Creating Opportunities for Medicaid Participants to Achieve Self-Sufficiency). The application comes after Virginia voted in June 2018 to expand its Medicaid program to cover newly eligible non-disabled, non-pregnant adults ages 19 to 64 with income up to 138 percent of the federal poverty level (FPL), on the condition that the expansion include a work requirement and other measures. This waivers implements work requirements and other provisions linked to the state’s Medicaid expansion.

In its favorable Advisory Opinion 18-11, the OIG explains how a managed care organization’s proposed incentive program to pay network providers to increase the amount of Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services provided to Medicaid beneficiaries would not violate the Anti-Kickback Statute (AKS).  What is interesting about this Advisory Opinion is that the OIG finds that the health plan’s proposed arrangement would be protected by the managed care safe harbor for eligible managed care organizations (ECMOs), and there are not many opinions addressing this safe harbor.