In this update:
- Legislative Updates
- Bipartisan House Letter Seeks to Avert Medicare Physician Payment Cuts
- CBO Issues Cost Estimate for Medicare Coverage of Obesity Medications
- Federal Agencies
- CMS Issues Final Rule on Medicare Patient Status Appeals Process
- FTC Issues Final Rule on Pre-Merger Notification
- Other Updates
- CDC Data Shows Drop in Overdose Deaths
- MedPAC Holds October Meeting
- SVB Report Shows New York Surpassing West Coast as Digital Health Hub
- New York State Updates
- DFS Issues New Guidance for Regulated Entities Regarding AI Cybersecurity Risks
Legislative Updates
Bipartisan House Letter Seeks to Avert Medicare Physician Payment Cuts
On October 10th, a bipartisan group of over 200 members of the House of Representatives sent a letter to House Speaker Mike Johnson and Minority Leader Hakeem Jeffries urging them to pass legislation to avoid cuts in Medicare Physician Fee Schedule (PFS) payments. Overall changes to Medicare physician payments are stipulated in statute. Without new legislation, physicians are scheduled to receive a 2.8% pay cut on January 1, 2025 as a result of the expiration of a temporary Covid-era enhancement that have been extended over the past several years. The letter argues that Medicare payment rates have fallen by 29% over the last two decades “when adjusted for the costs of running a practice” and that Congress must enact targeted reforms, including a “permanent, annual inflationary update” using the Medicare Economic Index (MEI).
The letter is available here.
CBO Issues Cost Estimate for Medicare Coverage of Obesity Medications
On October 8th, the Congressional Budget Office (CBO) released a report detailing the budgetary impact of broader Medicare coverage of anti-obesity medications (AOMs), such as glucagon-like peptide 1 (GLP-1) receptor agonists. Currently Medicare only covers GLP-1 products for the indications of diabetes and cardiovascular disease, not weight loss alone. If Medicare were to cover these produces for weight loss alone, up to 12.5 million beneficiaries might be eligible.
CBO acknowledges that the budgetary effect of coverage would be “highly uncertain.”
However, CBO estimated that such a policy change would increase federal spending by about $35 billion from 2026 to 2034. Conversely, federal savings based on improved health would be small, ranging from less than $50 million in 2026 to $1 billion in 2034. CBO makes this estimate based on evidence from observational studies on the effect of bariatric surgery on spending and on two microsimulation studies that have linked BMI and health care spending. The microsimulation studies were performed by the Institute for Clinical and Economic Review (ICER), which found that semaglutide use increased overall health care spending on net, compared with lifestyle modifications, and the University of Southern California Schaeffer Center, which found that AOMs could generate $175 billion in savings over 10 years if the entire indicated population maintained perfect compliance over their lifetime.
The report is available here.
Federal Agencies
CMS Issues Final Rule on Medicare Patient Status Appeals Process
On October 11th, the Centers for Medicare and Medicaid Services (CMS) issued a final rule establishing an appeals process for Medicare fee-for-service (FFS) beneficiaries regarding their patient status. This rule responds to a ruling in the case Alexander v. Azar, which found no general right for Medicare beneficiaries classified as outpatients receiving observation services to make an appeal, but did require CMS to create such a process for individuals who are admitted as hospital inpatients but are subsequently reclassified as outpatients receiving observation services. The rationale was that the transition between inpatient and outpatient and the rendering of observation services can have a considerable impact on Part A and Part B Medicare spending.
The final rule establishes three types of appeals processes (expedited, standard, and retrospective). Expedited appeals are available to beneficiaries who disagree with a hospital’s decision to reclassify their status, prior to their release from the hospital. Standard appeals will be available to beneficiaries who do not file expedited appeals within the required timeframe. Finally, a retrospective review process will be available for certain beneficiaries to appeal denials of Part A coverage of hospital services for specified admissions from the past, back to January 2009. These processes will likely be operational in early 2025.
The announcement is available here, and the rule is available here.
FTC Issues Final Rule on Pre-Merger Notification
On October 10th, the Federal Trade Commission (FTC) issued a final rule regarding pre-merger notification. The final rule requires additional information on pre-merger notification forms to fill information gaps for the FTC and Department of Justice (DOJ) in their review of deals and consideration of antitrust investigations. This is the first time the FTC has updated this notification process in 45 years, citing the changing nature of businesses and complexity of deals. The FTC has acknowledged that this change will, according to its estimate, quadruple the average time a firm spends filing pre-merger notifications (from 37 hours to 144 hours).
The American Hospital Association (AHA) has actively opposed this policy, arguing that these requirements would function as a “tax on mergers” and divert time and resources away from patient care without adding valuable information. The final rule will take effect 90 days after it is published in the Federal Register.
The announcement is available here, and the rule is available here.
Other Updates
CDC Data Shows Drop in Overdose Deaths
On October 16th, the Centers for Disease Control and Prevention (CDC) released provisional data showing that nationally, 94,758 individuals died of drug overdoses in the 12-month period ending May 2024. This represents a 15% drop in overdose deaths compared to the previous 12-month period, though the CDC estimates that when finalized, the change will decrease to a 12.7% drop. Most drug overdose deaths involved synthetic opioids like fentanyl. North Carolina experienced the largest drop in overdose deaths (48.8%), while Delaware, Michigan, Nebraska, New Jersey, Ohio, Oklahoma, Pennsylvania, and Virginia experienced at least a 21% drop. Alaska experienced the largest increase (36.1%) followed by Oregon, Nevada, Utah, and Washington, which all experienced at least 5% increases.
The CDC data is available here.
MedPAC Holds October Meeting
On October 11th and 12th, the Medicare Payment Advisory Commission (MedPAC) convened for its October meeting. The Commissioners discussed various topics, including:
- Improvements in nursing home care for Medicare beneficiaries. MedPAC specifically discussed the need to analyze institutionalized special needs plans (I-SNPs) and examine quality of care for beneficiaries in I-SNPs. Commissioners also discussed better understanding the impacts of geography, income, and race/ethnicity in health disparities.
- Findings from MedPAC’s annual beneficiary and provider focus group. The survey highlighted suggestions to, among other items:
- Improve understanding of and reduce reliance on brokers;
- Underutilization of the role of State Health Insurance Assistance programs;
- The need for separate surveys of Accountable Care Organization (ACO) beneficiaries); and
- The need for better information around wait times.
- Home health services, including initial findings from the first combined study of Medicare Advantage (MA) home health data and Outcomes and Assessment Information Set (OASIS) data, and a workplan for MedPAC’s mandatory final report on the impact of changes to the Home Health PPS in fee-for-service.
- Information on MA supplemental benefits. In this meeting, MedPAC focused on financing. Commissioners expressed concerns about having insufficient transparency to understand the value of MA supplemental benefits and whether enrollees are being misled into choosing MA due to benefits they may not receive. A second meeting in spring 2025 will continue the discussion on this topic.
The next MedPAC meeting will take place on November 7th and 8th. Slides from this meeting are available here.
SVB Report Shows New York Surpassing West Coast as Digital Health Hub
On October 16th, Silicon Valley Bank (SVB) released a fifth edition of their “Future of Healthtech” report. The report finds that health technology investments are beginning to stabilize following the pandemic, with AI driving new growth. For 2024, health technology investments are on a positive trajectory (between $4.0 billion and $4.5 billion) and are exceeding pre-pandemic level. Overall, New York City-area companies received the most funding, at $2.3 billion total, followed by San Francisco ($2.1 billion), Massachusetts ($898 million), Austin ($281 million), Nashville ($234 million), and Chicago ($114 million).
Thus far in 2024, 42% of all investment rounds were seed rounds. The median deal size is $3.8 million. There has been a considerable focus on AI-enabled health technology, with an emphasis on administrative technology, relative to clinical and R&D.
The report is available here.
New York State Updates
DFS Issues New Guidance for Regulated Entities Regarding AI Cybersecurity Risks
On October 16th, the New York State (NYS) Department of Financial Services (DFS) issued new guidance for regulated entities (including certain insurance plans) that addresses cybersecurity risks arising from artificial intelligence (AI). The guidance does not impose any new requirements beyond those codified in DFS’s cybersecurity regulation (23 NYCRR Part 500), but instead aims to explain how regulated entities should use the framework set forth in Part 500 to assess and address AI-related cybersecurity risks.
The guidance highlights certain risks of AI specific to cybersecurity, including AI-enabled social engineering, AI-enhanced cybersecurity attacks, exposure or theft of nonpublic information, and supply chain vulnerabilities. The guidance suggests the following controls and measures to mitigate AI-related threats:
- Establishing risk assessments and risk-based programs, policies, procedures, and plans;
- Maintaining appropriate policies and procedures for third-party service providers and vendors with access to information systems and/or nonpublic information;
- Implementing robust access controls, including multi-factor authentication;
- Providing cybersecurity training for all personnel, including senior executives and senior governing body members.
- Developing monitoring processes to promptly identify security vulnerabilities, including from the use of AI-enabled products or services; and
- Implementing appropriate data management practices, including identifying all information systems that use or rely on AI.
DFS notes that, in addition to assessing the AI-related risks to cybersecurity, organizations should also “explore the substantial cybersecurity benefits that can be gained by integrating AI into cybersecurity tools, controls, and strategies.”
The DFS press release is available here. The guidance is available here.