Sellers Dorsey Digest

Federal Updates

News

Public Programs Had Lower Improper Payments in FY2024

• Improper payments in Medicare and Medicaid during FY2024 remained consistent with or lower than FY2023, despite tens of billions of dollars in disbursements. CMS noted, not all improper payments are considered fraudulent and may result from administrative errors made by states, contractors, or providers during the billing process. Medicare fee-for-service had the largest rate of improper payments in FY2024, with a rate of 7.4%, or $31.2B, which is in line with the FY2023 rate of 7.5%. The second highest rate was found in the Medicaid Program at 5.1% and $31.1B. This is significantly lower than FY2023, which had an 8.6% rate of improper payments. According to CMS, nearly 80% of the Medicaid payments identified were related to insufficient documentation and did not indicate any fraud involvement. Medicare Advantage had the lowest rate of improper payments at 5.6% in FY2024, totaling $19.1B. This is slightly lower than the FY2023 rate of 6%. Part D improper payments were 3.7% or $3.6B in FY2024. Changes to the payment methodologies in the last year prevent a comparison for Part D payments to FY2023. The Children’s Health Insurance Program (CHIP) saw the largest decrease in improper payments between fiscal years. CHIP had a rate of 6.1%, in FY2024 compared to 12.8% in FY2023. Improper payments totaled $562.9M for advanced premium tax credits, or just over 1%, for the 2022 plan year which is higher than the 0.6% rate from the 2021 plan year (Health Payer Specialist, November 20).

President-elect Trump’s Nominee for HHS Secretary, RFK Jr. Considers Changes to Medicare Physician Payments

• The Washington Post reports that RFK Jr. is assessing a major change to Medicare’s payment formula, including a possible shift to Medicare incentive payments towards primary care and disease prevention. While nothing has been finalized, and the HHS position requires confirmation from the Senate, the plan is said to include the review of thousands of billing codes (MSN, November 21).

Trump Names Additional Nominees for Senior Federal Leadership Positions

• On November 22, President-elect Donald Trump nominated Janette Nesheiwat, MD, as surgeon general and announced several other appointments to senior staff roles. Nesheiwat is medical director at CityMD, a network of New York and New Jersey urgent care clinics. The Office of the Surgeon General is responsible for providing citizens with scientific information on healthcare options and options on risk reduction for illness. The President-elect also announced Dave Weldon, MD, to serve as the Director of the Centers for Disease Control and Prevention and Marty Makary, MD as the head of the U.S. Food and Drug Administration; (Modern Healthcare, November 22).

Telehealth Extension Likely to Be Short-Term as Congress Plans Budget Adjustments

• Despite a push from lobbyists for a two-year telehealth extension in the year-end budget package, it is increasingly likely that the next extension will be for a 90-day period or possibly one year due to House Speaker Mike Johnson’s (R-LA) plan for a three-month continuing resolution (CR) in mid-December, followed by a reconciliation package early next year. With Republicans set to control the White House, House of Representatives, and Senate in 2025, they are preparing to push for a short-term CR while crafting a budget that reflects their policy priorities. While lobbyists have long advocated for a permanent solution to telehealth provisions, some have suggested a one-year extension as a more cost-effective alternative to the two-year plan (Inside Health Policy, November 21).

CMS Expands Residency Program to Combat Physician Shortage

• Effective July 2025, the Centers for Medicare and Medicaid Services (CMS) will release 200 new graduate medical education (GME) residency slots, expanding across 33 states and approximately 109 teaching hospitals. Approximately 70% of the new slots will be dedicated to primary care and psychiatry, aiming to address physician shortages by providing more opportunities for medical students in underserved areas. The Association of American Colleges (AAMC) estimates that the U.S. physician shortage could reach up to 86,000 by 2036. Medicare, the largest funding source for residency programs, allocated $16.2B for the slots in 2020, though hospitals and groups like the AAMC and the American Medical Association (AMA) have voiced concerns about insufficient number of slots and outdated payment formulas. To qualify for a new slot, hospitals must meet one of the following four criteria: located in a rural area, training several residents that exceed their current GME slots, located in a state with new medical schools or branch campuses, or located in a Health Professional Shortage Area. For the latest slots, New York received the most with 16, followed by Illinois and Arizona which received 9 new slots each. AMA and AMC continue to urge Congress to provide additional funding and pass legislation like the Resident Physician Shortage Reduction Act of 2023, which proposes adding 14,000 more residency slots over seven years. Advocates argue that boosting funding and residency opportunities is critical to keeping up the growing health care demands of an aging U.S. population and addressing gaps in primary care access (Modern Healthcare, November 22).

Federal Legislation

Extensive Nonprofit Bill Passes the House, Moves to Senate

• On November 21, the U.S. House of Representatives passed a bill which allows a sitting president to eradicate the tax-exempt status of a non-profit organization if the organization is deemed as terrorist-supporting. Non-profit organizations like Planned Parenthood and the American Civil Liberties Union opposed the bill and some Democratic lawmakers voiced frustration that the bill did not include sufficient due process protections and wanted an American hostage protection provision addressed separately. The bill now goes to the Senate for consideration (Fierce Healthcare, November 21).

Federal Regulation and Guidance

Biden Administration Releases New Rule That Proposes Coverage for Anti-Obesity Medications in Medicare and Medicaid, Includes Modifications to MLR Reporting

• On November 26, the Biden administration proposed a new rule that aims to update regulations for Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicaid, Medicare Cost Plans, and Programs of All-Inclusive Care for the Elderly (PACE). It outlines changes related to Star Ratings, marketing and communications, agent/broker compensation, health equity, drug coverage, dual eligible special needs plans (D-SNPs), utilization management, network adequacy, and other program areas, including the Medicare Drug Price Negotiation Program. The proposed rule also includes recommendations to formalize existing subregulatory guidance in the Part C and Part D programs and intends to significantly broaden access to anti-obesity medications for individuals enrolled in Medicare and Medicaid. Approximately 42% of the U.S. population is affected by obesity, now recognized as a chronic condition, that continues to be associated with a higher risk of all-cause mortality and several related health issues, including diabetes, cardiovascular disease, stroke, and certain cancers. Another significant update included in the proposed rule relates to how payers calculate and report their medical loss ratio (MLR). Under the proposed rule, healthcare plans will be required to provide more detailed information on the allocation of their medical expenditures. Additionally, new safeguards will be implemented to ensure that administrative costs are excluded from the MLR calculation. The proposed rule is scheduled to be published in the Federal Register on December 10, 2024, and will be out for public comment for 60 days, until January 27, 2025 (The White House, November 26; Federal Register, November 26; Health Payer Specialist, November 26).

State Updates

News

Blue Cross of Idaho Continues to Contest Loss of State Employees’ Contract

• On November 7, Blue Cross of Idaho (Blue Cross) filed an appeal with the Idaho Supreme Court to reverse the lower court’s decision to dismiss its lawsuit against the Idaho Department of Administration and state contracting officials regarding the award of a contract. Earlier this year, Regence BlueShield of Idaho was awarded a $1.1B contract to cover state employees over Blue Cross prompting the company to file the lawsuit in March. Prior to this, Blue Cross had held the contract since 2004 and alleges that the state “disregarded the results and changed the rules” of the procurement process (Health Payer Specialist, November 20).

Five Insurers Sue Oregon to Prevent Public Release of Behavioral Health Rate and Reimbursement Data

• UnitedHealth Group, CVS/Aetna, Cigna, Kaiser Permanente, and BCBS-affiliate Cambia Health Solutions have filed lawsuits to stop Oregon healthcare regulators from disclosing mental health claims and reimbursement data to Willamette Week, a Portland-based newspaper. Willamette Week submitted a public records request asking state regulators to release the data, which is collected by the state to monitor insurers’ adherence to mental health parity laws. Upon notifying insurers of the request, the insurers filed lawsuits, arguing that disclosing the data would expose trade secrets in violation of state law. They have asked a state judge to block the release of the information. Willamette Week stated that regulators have already sent a partial dataset, but the outstanding data release is contingent upon the outcome of the pending litigation (Health Payer Specialist, November 22).

California’s OHCA Sets New Primary Care Spending Target

• The California Office of Health Care Affordability (OHCA) has increased the amount of spending health insurers in the state are required to direct towards primary care through 2034, from 7% to 15%. OHCA hopes the decision will expand the primary care workforce and allow for the hiring of professionals to boost health management, disease prevention and increase patient access to cost-effective preventative care. With this new measure, OHCA expects health insurers to increase their annual primary care spending by 0.5 to 1%. However, the proposal may clash with a regulatory 3.5% annual healthcare spending cap which was introduced six months prior, as state health insurers are worried about potentially being pressured from both sides. While OHCA lacks the authority to enforce this new policy, they may use financial incentives to try and drive payer interest, as well as allowing participating plans to exceed the 3.5% cap if they are boosting primary care spending (Health Payer Specialist, November 22; KFF, November 21).

New Mexico Health Secretary Resigns, Governor Appoints Interim Successor

• On November 20, New Mexico Health Secretary Patrick Allen resigned, effective immediately. Governor Michelle Lujan Grisham announced that Allen’s replacement will be Gina DeBlassie, who currently serves as the governor’s health policy advisor. DeBlassie will take over as the Interim Cabinet Secretary for the State Department of Health (MSN, November 21).

NAIC Calls for Immediate Action on AI in health Insurance

• The National Association of Insurance (NAIC) is urging states to take swift action on the use of artificial intelligence (AI) in health insurance, particularly in prior authorization decisions by Medicare Advantage plans. Consumer representatives from the NAIC raised concerns over the lack of regulatory safeguards around AI, calling for more transparency and oversight. As AI tools such as natural language processing and machine learning become more common in healthcare, NAIC highlights potential risks such as biased data, misaligned algorithms, and processes from machine learning systems developing without regulatory oversight. Some states, including Colorado, California, and Utah, have implemented laws to address these issues, but federal regulations are still delayed. The NAIC report emphasizes the need for more accountability from insurers using AI, suggesting that regulations should ensure the AI tools are subject to audits and that health plans disclose how these tools are used. The report also emphasizes that AI should prioritize patient care quality over cost savings (Inside Health Policy, November 21).

SPA and Waiver Approvals

Waivers

• 1115(a)
  • Maryland
    • On November 14, the Maryland Department of Health submitted an amendment to its 1115 demonstration titled, “Maryland HealthChoice.” The state seeks approval to authorize: an expansion of the Assistance in Community Integration Services pilot program to update existing payment methodologies and increase participant spaces to support state wide expansion of housing and tenancy-based case management of services to individuals who are or at risk of homelessness; an expansion of Express Lane Eligibility (ELE) for non-MAGI adults; and coverage of fertility preservation services for individuals with, or at risk for iatrogenic infertility. The federal public comment period is open from November 25, 2024, through December 25, 2024.

SPAs

• Services
  • Colorado (CO-24-0040, effective July 1, 2024): Updates maximum daily coverage limits for long-term home health and acute home health services, to account for a 2% rate increase.
  • Minnesota (MN-24-0035, effective October 1, 2024): Assures that data from behavioral health home providers will be included in mandatory core set measure reporting.
  • Nevada (NV-24-0003, effective January 1, 2024): Establishes regulatory provisions for Rural Emergency Hospitals (REHs).
  • New York (NY-24-0073, effective August 1, 2024): Authorizes the coverage of medically necessary prescribed drugs, including drugs authorized for import by the FDA during drug shortages.
  • Puerto Rico (PR-24-0008, effective July 1, 2024): Adds coverage of select medically necessary weight loss drugs as identified on Puerto Rico’s Medicaid website.
  • Puerto Rico (PR-24-0010, effective July 1, 2024): Adds coverage of Non-Emergency Medical Transportation (NEMT) services.
  • South Carolina (SC-24-0013, effective July 1, 2024): Updates the Rehabilitative Services benefit to add Intensive In-Home Services Homebuilders.
  • Texas (TX-24-0006, effective September 1, 2024): Adds doulas and community health workers as provider types for children and pregnant women (CPW) case management services and provides for 12 months of extended postpartum coverage to individuals who were eligible and enrolled under the Medicaid state plan during their pregnancies (including during a period of retroactive eligibility).
  • Washington (WA-24-0013, effective January 1, 2025): Adds certified behavioral health support specialists to the list of other practitioner service providers.
• Payment
  • Colorado (CO-24-0003, effective January 1, 2024): Authorizes Health First Colorado to receive reimbursement for Partial Hospitalization services, aligning with the American Society of Addiction Medicine’s (ASAM) 2.5 standards.
  • North Carolina (NC-24-0016, effective August 1, 2024): Updates payment methodology for Substance Abuse Comprehensive Outpatient Treatment (SACOT).
  • North Carolina (NC-24-0035, effective October 1, 2024): Updates payment methodology for Ambulatory Withdrawal Management.

Private Sector Updates

News

The Commonwealth Fund Releases Survey on Health Insurance Coverage in the U.S.

• On November 21, the Commonwealth Fund released a new survey on the state of health insurance coverage in the U.S. Nearly 6,500 adults between the ages of 19 and 64 were surveyed between March 18 and June 24, 2024, and are included in the analysis. According to the survey, nearly one in four adults who had coverage for the past twelve months are considered underinsured. Among those who were underinsured, 66% had employer-sponsored coverage; 16% had Medicare or Medicaid; and 14% were enrolled in the marketplaces or individual market. Over half of these adults said that they had avoided getting medical care due to cost, resulting in worsening health for some adults. The Commonwealth Fund cited increasing deductibles and out-of-pocket costs as driving forces behind underinsurance. Up to one third of people with chronic conditions like heart disease or diabetes say they skip medication doses or do not fill prescriptions due to cost. According to the survey, nearly 3 in 10 adults are paying medical or dental debt, particularly those who are underinsured (Commonwealth Fund, November 21; Health Payer Specialist, November 22).

Hard-Hit North Carolina Baxter International Facility Releases First IV Solutions Since Hurricane Helene

• Baxter International announced the release of its first product manufactured at its North Cove, North Carolina facility since the devastating impact of Hurricane Helene, a 1-liter IV solution. On October 31, Baxter confirmed the restart of its highest-throughput intravenous solutions manufacturing line at the site. The company has made significant progress with the resumption of two manufacturing lines that account for approximately 50% of the site’s total pre-hurricane production, including about 85% of its 1-liter IV solutions. Baxter expects the restart of its peritoneal dialysis (PD) solutions and irrigation production lines by early December. The company expects to reach 100% allocation across several IV product categories by year-end, with phased increases in allocation planned for late November, mid-December, and the end of the year. To further boost inventory of IV solutions, Baxter activated nine plants across its global network. Additionally, the company received FDA authorization to extend the expiration dates of over 50 IV and irrigation products, allowing for up to 12 additional months of use (Fierce Healthcare, November 21).

CMS Ordered to Recalculate UnitedHealthcare’s Star Rating

• Following a lawsuit against CMS by UnitedHealthcare over its star rating in September, Judge Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas ruled that CMS violated the Administrative Procedure Act of 1946 (APA), which governs how federal agencies can propose and establish regulations, by improperly reviewing the payer’s subsidiary foreign language call center services during a secret shopper session. As a result, the Judge ordered CMS to recalculate UnitedHealthcare’s 2025 plan year rating and re-publish the updated score on Medicare Plan Finder (Modern Healthcare, November 22).

Sellers Dorsey Updates

Q&A Video with Managing Director, Karen Brach, on Adopting her Children From Foster Care and the Importance of Healthcare for Children and Families

• For Sellers Dorsey Managing Director, Karen Brach, child and family well-being work has been a professional priority, but it’s also a very personal one. Karen is the proud mom of two teenagers adopted out of foster care. Katie Renner Olse, Sellers Dorsey Senior Director for Child and Family Well-Being, recently asked Karen about what adoption means to her and the importance of ensuring children and families have access to quality healthcare. Watch our Q&A video to hear Karen’s story and glean valuable insights for children in foster care, and their families brought together through adoption.
  Click here to view the video.