Verma takes questions on Medicaid block grants, Medicare premium support, MACRA payment changes, prescription drug costs, market stabilization rule

On February 17, the Senate Finance Committee held a hearing on the nomination of Seema Verma to be administrator of the Centers for Medicare and Medicaid Services (CMS). Verma, who is the founder and CEO of the health policy consulting firm SVC, Inc., was the only witness. Testimony from the hearing is posted here and also attached with this alert.

In his opening statement, Chairman Orrin Hatch (R-UT) said that over the past six years, "The system created under Obamacare has led to increased costs, higher taxes, fewer choices, reduced competition, and more strains on our economy." He said that under the Affordable Care Act (ACA), health insurance premiums have increased an average of 25% this year alone; Americans have been hit with $1 trillion in new taxes; and major insurers are no longer offering coverage on the exchanges. Hatch said that while he applauded a rule proposed by HHS this week to help stabilize the individual insurance markets, "there is much more work to be done."

Turning to Medicaid, Hatch said he is committed to working with states and other stakeholders to improve the quality and longevity of the Medicaid program. "But we must also acknowledge that the Medicaid program is three times larger — both in terms of enrollment and expenditures — than it was just 20 years ago." He added that because the ACA's expansion of Medicaid has "exacerbated" pressures on the program, "we have a responsibility to consider alternative funding arrangements that could help to preserve this important program," as well as "reform proposals that can improve the way Medicaid operates." Hatch said the Medicare trust fund will also be pressured by the forthcoming retirements of the Baby Boom generation. Hatch praised Verma's work with the Healthy Indiana program, which "provides access and quality health care to its enrollees, while ensuring that they are engaged in their care decisions."

In his statement, Ranking Member Ron Wyden (D-OR) said CMS needs a "strong and experienced authority on policy at a time when many in the administration, as well as some of my colleagues on Capitol Hill, are pushing to make radical changes to America's health care system" that would "take the country back to the days when health care was mostly for the healthy and the wealthy." Wyden said that updating Medicare means addressing the high and rising cost of prescription drugs, and making the program work better for people who have multiple chronic diseases like heart disease, cancer, diabetes and stroke. He said the CMS administrator must implement last year's bipartisan Medicare physician payment reforms "as Congress intended," as the US health care system shifts from "paying for volume to paying for value."

Addressing CMS's "market stabilization rule" for the ACA exchanges, Wyden said, "the message from that rule is clear: insurance companies are back in charge, and patients are taking a back seat. The open enrollment period was cut in half, from three months to six weeks. If someone dropped coverage during the year for any reason, insurance companies could collect back premiums before an individual is able to get health insurance again. And insurance companies will have free rein to offer less generous coverage at the same or higher costs." Wyden also criticized the president's executive order on the ACA for "creating market uncertainty and anxiety. You don't need to look further than Humana's recent decision to leave the market to see that confidence in the President's promise is low."

Turning to the Healthy Indiana Medicaid expansion that Verma helped to oversee, Wyden said, "I'm particularly concerned about the possibility that someone making barely $12,000 dollars a year would get locked out of health coverage for no less than six months because they couldn't pay for health care due to an upcoming rent check." He said an independent evaluation had found that "more than 2,500 people were bumped from coverage due to a situation like this," and 20,000 more were "pushed onto a more expensive, less comprehensive Medicaid plans because they couldn't pay or navigate the complicated system Ms. Verma put in place." Wyden said he was also concerned that Verma's firm had been awarded $8.3 million in contracts to manage Indiana's health care programs while also working for other companies that had state contracts, such as Hewlett Packard, Milliken, Maximus, Health Management Associates and Roche Diagnostics. He said Verma "is on both sides of the deal, helping manage the state's health programs while being paid by vendors to those same programs." Wyden said Verma will need to recuse herself "from decisions that affect the companies who were her clients."

Questions

Medicare solvency

Noting the passage of the MACRA bill last year that repealed Medicare's sustainable growth rate (SGR) requirement, Chairman Hatch asked how to engage stakeholders and arrive at the best policy for Medicare and other CMS programs. Verma said the most important thing CMS can do is "engage with stakeholders quickly on the front end and understand their perspective … and have open communication."

Medicare premium support "vouchers"

Bill Nelson (D-FL) asked if Verma supported proposals to convert Medicare into a "premium support" voucher system. "I don't support that," Verma said. "I do support giving choices to seniors and making sure that program is in place." When Nelson noted that HHS Secretary Tom Price had supported the idea as a member of Congress, Verma said, "Let me back up … In terms of different options for Medicare, those are borne from individuals who want to make sure that program is around … I'm not supportive of [premium support], but it's important to look for ways to make sure the program is sustainable for the future." When Nelson asked if she supports raising the retirement age from 65 to 67, Verma said, "Which direction we go is up to Congress. I would hope we work toward making the program more sustainable."

Medicare 'extenders'

Sen. Menendez asked Verma what her top priorities were among the group of expiring Medicare "extender" provisions that in previous years were usually renewed in the "doc fix" SGR bills. Verma said she would "be happy to review that list if I am confirmed and work with you on that." Menendez was surprised by her answer, saying, "I would have thought that you would be familiar with these extenders — it is the heart of giving us a sense of what you would advocate as it relates to Medicare … Your role as an administrator is more than just simply executing the laws; it is also a policy development-heavy position that the president and the HHS secretary rely on when drafting laws. But you have no idea which is most significant?" Verma said, "I would want to review that before giving you my opinion."

Medicare advantage

Chairman Hatch noted that 32% of all Medicare beneficiaries signed up for a Medicare Advantage plan this year. "They generally offer extra benefits like dental, vision, hearing and wellness, or require smaller deductibles. Sometimes seniors pay higher premium for extra benefits," Hatch said. "People who don't have retiree coverage or can't afford Medigap insurance find that Medicare Advantage plans offer extras benefits that protect them from higher out-of-pocket spending. Will you commit to working with us to preserve and strengthen Medicare Advantage?" Verma told him, "Medicare Part C, or Medicare Advantage, has been a great program. It offers choices for seniors for what plan works best for them. The opportunity to have additional benefits is very important. I'm happy to work with you on that."

Medicaid reforms

Hatch noted the impending retirement of a generation of baby boomers, and asked which changes in Medicaid should be made to meet expected increases in demand while remaining fiscally sustainable. "I think we can do better," Verma said. "We have the challenge of ensuring we provide better care, but [Medicaid] isn't working as well as it can — it's intractable, inflexible, states have to go back and forth doing reams of paperwork for the federal government — are we achieving the outcomes we want?"

Later, in questions from Maria Cantwell (D-WA), Verma said, "We have a very inflexible system. I support the program working better, whether it's a block grant or per-capita cap, there are many ways we can get there … Anything we can do to help improve health outcomes and create a level of accountability for states, I think we should explore all of those options." Cantwell said, "By capitating, you would cut many thousands of people off in a 35% reduction. It would be like cutting a million people in Ohio off Medicaid unless the state comes up with more money. I hope you will be an advocate for innovation in Medicaid instead of nickel-and-diming poor people. I have grave, grave concerns about this notion of block-granting or capitation." Verma said the Medicaid system "is set up so states have to go to the federal government for any routine changes — it can take years to get a waiver done — we need a Medicaid program that allows state to be creative."

Dean Heller (R-NV) noted that after Nevada's expansion of Medicaid under the ACA, the state's Medicaid enrollment went from 350,000 to over 600,000. He said he was concerned about proposals to shift the program into a block grant to the states, which he said would be inadequate to cover that many people and would overwhelm the staff assigned to implement such a change. Verma said she has worked with states for almost 20 years and understands their concerns. "But what we have today [in Medicaid] doesn't work well. The outcomes aren't great … I don't want to be about hurting states. Some of the one-size-fits-all approach from Washington doesn't work. This is an opportunity to create flexibility so they don't have to go to the federal government every time they want to make a routine change. When times are tough, states cut provider rates. That impacts access to care." When Heller asked if that meant that block grants are "on the table" for her, Verma said, "anything should be on the table for improving outcomes — block grants, per capita caps, anything we can do to improve accountability."

Chairman Hatch noted that many states are moving to a managed-care delivery system for Medicaid, and asked what changes are important to federal and state oversight of managed care. Verma said the managed-care model in Medicaid has "given us an opportunity to determine goals and outcomes. In terms of the regulatory framework, we probably need to move to an era where we hold states accountable for outcomes." She questioned how effective it is for health outcomes to make states "go through pages of regulation."

Health Savings Accounts (HSAs) in Medicaid

Bill Cassidy (R-LA) said that according to data from MIT and the National Bureau of Economic Research, the ACA's Medicaid expansion "really didn't do much for outcomes," but the Healthy Indiana program seemed to improve outcomes. He asked how Indiana's approach with HSAs had given beneficiaries "a stake in outcomes." Verma said that Indiana enrolled Medicaid recipients in HSAs even at the lowest incomes. "Just because individuals are poor doesn't mean they're not capable of making decisions," she said, adding that individuals who are "engaged in making contributions to HSAs had better preventative care, lower emergency room use, were more satisfied with their care and had better adherence to drug regimens." Verma said people who had contributed to HSAs "were actually sicker individuals. And they had better health outcomes than people who were healthier to start with. They got more primary care and preventative care. These were not small margins, they were 20% margins."

CMS market stabilization rule

Ranking Member Wyden said the CMS market stabilization rule announced this week "meant less coverage, higher premiums and more out-of-pocket costs for working families — how would you square what [President Trump] said in the campaign with what CMS did yesterday?" But Verma said she had not been involved in developing the rule: "I have not been to CMS and cannot speak to that. But I am committed to coverage and will continue to do that … I want to make sure all Americans have access to quality affordable health care." Wyden said that what troubled him about the rule is that "insurance companies are coming first." When he asked for an example of one specific thing that Verma would do to "put patients first," Verma declined, simply saying that patients should have access to quality coverage and should be able to make decisions about their health care. The answer did not satisfy Wyden, who said he wanted a response in writing.

Prescription drug costs

When Ranking Member Wyden asked for an example of one specific change Verma would make to bring down the high cost of prescription drugs in Medicare, Verma praised Medicare Part D and said she would support "policies that continue to put seniors in charge of their health care." That answer again did not satisfy Wyden, and he asked for a more specific response in writing.

Debbie Stabenow (D-MI) asked if Medicare should negotiate drug prices for seniors with pharmaceutical companies the way the Veterans Administration does. "We need to do everything we can to make drugs more affordable for seniors," Verma said. "I'm glad we have PBMs performing that negotiation … I think competition is the best way … it's not a simple yes or no answer … If we look at how PBMs have negotiated, we know the price goes down with competition." Stabenow then said repeal of the ACA would cause seniors to pay more for coverage, because the "doughnut hole" gap in coverage for seniors who use a lot of medicines would open again, and asked if Verma supported that part of the repeal effort. Verma simply said she supports seniors' having access to affordable medication. Later on, when Bill Nelson (D-FL) also asked about the "doughnut hole" gap in coverage, Verma said, "I support efforts to make medicine affordable and accessible to seniors … What happens with the doughnut hole is really up to Congress. My job is to implement policies set by Congress."

New drug therapies

Pat Roberts (R-KS) said there's often a disconnect between new drug therapies approved by the FDA and CMS reimbursements, and that the FDA had approved only one "biosimilar" last year. He said CMS had finalized a payment policy that could stifle innovation in this area, and asked how to ensure the best payment policies for taxpayers. Verma said the answer is "collaboration and coordination … Being on the front end and discussing their intentions with them, what's coming down the pipeline, and making sure CMS is coordinating with any FDA efforts."

Drug rebates for dual eligibles

Sen. Nelson said the federal government gets a discount from pharmaceutical firms for people who are eligible for both Medicaid and Medicare until they turn 65, "and then they get drugs from Medicare with no discount. Should rebates be paid in Medicare for dual eligibles?" Verma said, "This is an issue we're all concerned about," and said she would work with Congress on strategies to make medicines more affordable and accessible. Her answers on this and other questions left Nelson dissatisfied. "I'm sorry you have constraints put on you so that you can't answer these questions forthrightly," Nelson said. "If you had approached this as candidate Trump had, by saying he would protect Medicare and Medicaid from cuts, your answers would be clear — but you have chosen to go the route you have."

Fraud in drug rebate program

Charles Grassley (R-IA) said CMS has told him it has little authority over frauds committed against its programs, "even if they are a clear violation of the laws." He said that in a January 28 letter to him on the Medicare drug rebate program, CMS had said it could tell a manufacturer when a drug is misclassified and then try to reach an agreement, "after the fraud has already happened." Grassley said the Justice Department has used the False Claims Act to recover $33 billion "just from health care fraud … It seems to me like CMS could have picked up the phone and given them a heads-up when manufacturers refused to cooperate." He asked if Verma would "pro-actively cooperate with the Justice Department to combat fraud"; Verma said she would, and applauded Grassley's work on the False Claims Act.

Mylan / EpiPen

Sen. Grassley asked Verma if she would give a more complete response than the one he got from CMS in response to his oversight letter requesting records of the agency's communications with Mylan about the misclassification of its EpiPen. He said the federal government and the states are owed "hundreds of millions of dollars" from Mylan. Verma said she would comply with his request. "What happened with EpiPen was very disturbing," she said. "I would like to review the processes in place there in terms of brand and generic classifications to ensure it doesn't happen again."

ACA 'essential benefits'

Sen. Stabenow said the ACA includes important patient protections, such as the definition of an essential set of basic health care services, including maternity care and mental health services. When she asked if Verma supported repealing those provisions, Verma said, "I support Americans being in charge of their health care, being able to decide what benefit package works best for them. What works for one person might not work for another." When Stabenow asked if that meant women should have to pay more for prenatal and maternity care as a rider on their policy, Verma said, "Women should be able to make the decision that works best for them." Stabenow appeared frustrated by the answer, saying, "But how do we make that decision if insurers are doing it? Insurance companies treated being a woman as a pre-existing condition. Now there are basic services covered."

Standard benefits for autistic children under ACA

Robert Menendez (D-NJ) noted that the ACA had established a standard benefit package for insurers on the exchanges, including benefits for behavioral health services. He said he had heard from families who were concerned that repeal of the ACA would mean "losing access to autism services through a change that will allow insurers to not include coverage." He asked if Verma agreed that "a child's access to autism coverage should not depend on what state they're in." Verma said she had been advised by the Office of Government Ethics "not to participate on issues regarding to mental health services, because my husband is a psychiatrist" who treats children.

MACRA

Ranking Member Wyden said he is often asked about two elements of the Medicare payment system: (1) virtual groups and (2) the definition of "more than nominal risk" — both major issues for rural physicians. He asked how Verma would structure virtual groups. Verma said MACRA will be a challenge for small and rural providers. "In terms of providers taking risks, that is a larger mountain to climb — they will be reluctant to take risks. They don't have large financial reserves like bigger health systems. In terms of being accountable for outcomes, a lot of that depends on patients — how do we engage patients to be part of that equation?" On what constitutes "nominal risk," Verma said getting rural providers to work on risk will be a "formidable challenge … we don't know that they want to take risks at all. We need to keep in mind their specific needs." But when Wyden said it sounded like Verma supported keeping fee-for-service arrangements, Verma said she had concerns that fee-for-service "rewards volume over quality of service — I support efforts to increase coordination of care and hold providers accountable for outcomes, but it's another thing altogether to have them accepting risk." Wyden asked her to respond to the question in writing with "just one specific example."

Mandatory payment demonstrations

Chairman Hatch noted that some providers want to do new demonstration projects for alternative payment arrangements through the Center for Medicare & Medicaid Innovation and Accountable Care Organizations (ACOs). He asked for Verma's view on "testing different Medicare payment approaches and how to assess them." Verma said, "As we look at testing new ideas, we need to make sure we are not forcing, not mandating individuals to participate in an experiment or some type of a trial that there is not consent around." She said the evaluation component needs to be set up "on the front end," and the results need to be shared with stakeholders before it becomes formal policy. She said that in looking at some ACO models, "we know that very few providers — even large health systems — have been comfortable taking on risk, so I think this is going to be a challenge for the smaller providers. Some of them may not want to do that."

Backlog of appeals by audited contractors

Chairman Hatch said there was a backlog of appeals by contractors who had been audited by CMS. "How do we deal with the accuracy of claims and ensuring timely payment to providers?" Verma told him that fraud and abuse will be a top priority for her; "that should be low-hanging fruit … We should not do pay-and-chase but address fraud on the front end. The issue of the backlog and the burden on providers concerns me. I want to make sure we aren't preventing providers from being active in the program … We must focus our penalty efforts on the bad players without penalizing the good providers."

CHIP

In his questions, Sherrod Brown (D-OH) noted that at his own confirmation hearing, HHS Secretary Price had expressed support for an eight-year extension of the Children's Health Insurance Program (CHIP), and he asked if Verma would also support such an extension. Verma said, "I support reauthorization of CHIP and agree with Secretary Price that we should do it to the longest extent possible."

IMPACT Act

Chairman Hatch noted that he and Wyden had worked together to pass the 2014 IMPACT Act for improving post-acute care in Medicare, which requires collection of standardized data to help improve quality in post-acute settings. He said he wanted to ensure that beneficiaries "get services in the right setting at the right time." Hatch asked if Verma would commit to working with Congress and providers to implement the act. Verma said it would be "my pleasure to make that program a success."

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ATTACHMENTS

Seema Verma Statement

Wyden Statement

Hatch Statement