Kathleen Sebelius Resigns; Fields Last Question on Sunshine Act

Health and Human Services Secretary Kathleen Sebelius, the public face of Affordable Care Act’s rocky rollout, will step down. Her resignation comes just over a week after sign-ups closed for the first year of insurance coverage under the Affordable Care Act, March 31. While ACA just hit 7.5 million sign-ups, the Obama administration seems ready to move beyond its early troubles in carrying out the law.

The New York Times reports that President Obama will nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace her. Wall Street Journal reports that Burwell has a low public profile, but is one of the most experienced officials in the Obama White House. After graduating from Harvard and Oxford, she worked in the Clinton administration, on the National Economic Council and in the Treasury Department, before becoming deputy director of the Office of Management and Budget. “She was a confidante and protégé of Clinton Treasury Secretary Robert Rubin,” the Journal states. Before Washington, she was president of the Walmart Foundation and previously the president of the Global Development Program of the Bill and Melinda Gates Foundation.

According to Politico, Burwell will use her budget work and management expertise to ensure the ACA rollout continues its current momentum. “She is also expected to use the genial charm that helped shepherd through the recent bipartisan budget bill to deprive Republicans of an easy target to fire at over Obamacare problems,” Politico notes. “The theory among senior Democrats is that Burwell will be both hard for Republicans in the Senate to reject — they confirmed her unanimously for OMB just a year ago — and hard for them to demonize once she’s in the job.”

Sunshine Act

A few hours before Sebelius’ resignation hit the news, she fielded a question on the Sunshine Act from Senator Charles Grassley (R-IA) at the United States Committee on Finance: Hearing on the President’s Budget for Fiscal Year 2015.

Senator Grassley co-authored the Sunshine Act and has been active in transparency efforts across the healthcare industry. Before asking Sebelius about Sunshine, Grassley stated his position on the recent release of Medicare payment data. “No one should be afraid of this data coming out. No one should be afraid of explaining their payments or defending the existent payment structure.” Grassley noted: “I believe transparency works and with transparency you get accountability, and I hope people will now accept that and work to improve the system rather than fighting it.”

“But context is critical,” Grassley stated.

Like the Medicare payment disclosure, the Sunshine Act is also a form of payment transparency. Grassley stated that he remains “concerned that the database, collected by CGI, provides appropriate context.”

Grassley noted that many providers have raised concerns about journal article reprints being reportable. He specifically wanted to know if the database will make clear to the readers what specifically a provider accepts is reportable. Grassley asked Sebelius to assure providers that they “can have confidence that the data made publicly available through the Sunshine Act will have explicit context providing details about items accepted and not just dollar amounts.”

Sebelius noted that she could not answer that specifically, and would check on the answer and get back to him. She stated: “We are on track to have publication this fall. We are doing data collection as first aggregate data, and secondly with more granularity.”

Sebellius agreed with Grassley that “[p]eople should be able to put it [the payments] in context.” Sebelius mentioned that she would be interested in briefing Grassley’s staff on “what’s being collected now, and what the second phase looks like, and what the displays” will look like.

“The worst of all worlds,” Sebelius stated, would be “to put data out that is inaccurate or interpreted inaccurately.”

Seeming not to appreciate the magnitude and complexity of the Sunshine Act’s reporting requirements, Grassley noted: “I don’t think it would be inaccurate, but I think the latter part is possible.”

For open payments reporting, it is important that companies use the “education” category to classify reprints and textbooks and not the “gift or meal” categories. The concern is that CMS has provided no guidance to companies as there is no “journal reprint and text book” category.

Anti Kickback Regulations and Exchange Plans

Senator Grassley also pressed Secretary Sebelius on three specific “hypotheticals” involving the permissibility of third-party payments to Qualified Health Plans (QHPs): (1) Whether a hospital or other third party could pay premiums without the payment being considered a kickback; (2) Whether a hospital or other third party could pay QHP co-pays or deductibles; and (3) Whether a drug company could offer direct discounts to a patient for them to use in purchasing prescriptions.

Sebelius said she did not “want to try to give a legal answer – because I’m not a lawyer – to the three very specific” queries he raised. Sebelius cited agency guidance, noting a “not-for-profit plan, a Ryan White plan could help purchase insurance coverage,” saying this has “gone on for years and will continue to go on.” She added that “in terms of the hospital situation, “we have weighed in and said they would not be able to do that.” She added that a kickback determination is made by the Department of Justice. Sebelius said the agency previously had stated QHPs are not Federal healthcare programs to “make clear it was a private market.” She added that “having said that, we note it’s important that we look at the entire fraud statute,” stating that QHPs are “not immune from that in any way shape or form” and that “in fact, we have asked the Inspector General and others to look at the false claims and applicable statute so that we make sure that we hold them equally accountable.”

Sen Grassley noted that even with the release of an interim final rule on third-party payments to QHPs, “it’s very unclear to [him] what the Federal policy is regarding the anti-fraud provisions available in statute and whether they would prevent false claims and kickbacks in Qualified Health Plans,” noting he hopes to have continued discussion with HHS.

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It will be interesting to follow how Burwell handles the first critical year of the Sunshine Act. As we have seen, the law itself seems simple on paper, but the devil is in the details. The law remains unclear in several crucial categories, and unlike Senator Grassley, we aren’t entirely convinced that companies’ reporting data will be correct. The 2014 dispute resolution process and public release of data will shed light on how the government will handle the Sunshine Act down the road.