The Department of Health and Human Services (HHS) is the Federal Government's principal agency for protecting the health of all Americans and for providing essential human services, especially to those least able to help themselves.
The Department manages more than 300 programs, including some of the largest in the Federal Government such as Medicare and Medicaid, and some of the smallest. These programs range from efforts to improve infant health to programs providing home-delivered meals for the elderly; from the collecting of basic national health statistics to the providing of front-line clinical services; from the conduct of cutting-edge biomedical research to the ensuring of the safety of the Nation's food and drug products--25 percent of the Nation's GNP. HHS is of course heavily involved in assisting the States in the historic effort to help all former welfare recipients who can work to go to work.
For the foreseeable future, the Department's regulatory priorities, as presented in the individual plan entries that follow, reflect primarily the imperatives for Medicare restructuring mandated by numerous provisions of the Balanced Budget Act of 1997; the streamlining of programs and practices within the Food and Drug Administration (FDA) resulting from 1997's FDA Modernization Act; and implementation of welfare reform.
In addition, the Health Insurance Portability and Accountability Act of 1996 gave the Department major new responsibilities concerning health data standards and health record privacy; HHS has issued four notices of proposed rulemaking relating to the standards to be adopted. An additional NPRM and a Notice of Intent are under development.
Underlying our efforts to move forward in these areas in FY 1999 and beyond, there remains the new focus and discipline in regulatory policy established by the President's September 30, 1993, issuance of Executive Order 12866 ``Regulatory Planning and Review.'' Under the principles enunciated in this Order and through the Administration's subsequent regulatory reform initiatives, the Department assures that its rules:
¤ Emphasize performance standards and market incentives over prescriptive, command-and-control requirements;
¤ Regularly use benefit-cost analysis to achieve policy objectives in the most efficient manner;
¤ Are developed in consultation with those most affected, especially our partners in the Federal system at the State and local levels; and
¤ Focus specifically on clearly identified problems and avoid overly broad, one-size-fits-all approaches to these problems.
Efforts to comply with these principles have been a continuing HHS priority since 1993. The resulting changes in our rulemaking approaches are leading to reduced burden, better communication with our customers, solid consensus building, and a less adversarial environment, while maintaining the stewardships that the Department is statutorily obligated to provide.
A few recent illustrative examples of such regulatory actions include:
¤ A final rule published on July 24, 1998, after consulting widely with grantees and other affected organizations, to clarify, streamline, simplify, and unify the Federal child care and development block grant program. Under this rule, the Department revised existing regulations in light of the child care amendments contained in the welfare reform legislation, thus assuring the health and safety of children in child care, achieving a balance between program flexibility and accountability, and recognizing that child care is a key support for work as envisioned in the Temporary Assistance for Needy Families program.
¤ A regulation implementing the new Medicare+Choice program, published on June 26, 1998, under which, starting January 1999, a broader array of health plans will join Medicare, including preferred provider organizations, provider-sponsored organizations, private fee-for-service plans, and a Medical Savings Account demonstration project. These expanded health plan choices, known as Medicare+Choice, will provide Medicare beneficiaries with expanded opportunities to tailor their choice of health care plan to their own needs.
¤ A proposal published on May 7, 1998, to streamline the processing of health care claims and reduce the amount of paperwork in the U.S. health care system. Under the proposal, hospitals, doctors, nursing homes, and other providers would use a unique alpha-numeric identifier when filing claims for reimbursement. In addition, a standard format for the electronic filing of these claims was proposed. It is estimated that these measures will lead to savings of at least $1.5 billion over the first 5 years they are in effect.
¤ A final rule published on October 15, 1997, pertaining to biologics establishments. Under preexisting regulations, biological product manufacturers had to name a ``responsible head'' who would exercise control of the manufacturing establishment in all matters and would represent the manufacturer in all pertinent matters with the Food and Drug Administration. However, because biological product manufacturing encompasses a range of complex functions, each with its own specific expertise, it became impractical to expect manufacturers to find a ``responsibile head.'' Thus, to reduce unnecessary regulatory burdens on the biologics industry, the requirement was eliminated.
The bulk of HHS's regulatory activity emanates from programs of the Food and Drug Administration, the Health Care Financing Administration, and the Administration for Children and Families. There follow statements of regulatory priorities pertaining to these three HHS components, followed by their regulatory plan entries.
Food and Drug Administration
The Food and Drug Administration's regulatory strategy involves three main goals: (1) To reflect new technologies or programs that will benefit the public, affected industries, and the Agency or further protect the public health; (2) to provide more information to consumers so that they may use FDA-regulated products more safely or effectively; and (3) to eliminate unnecessary burdens on industry.
For example, on February 2, 1998, FDA issued regulations requiring the sponsor of any drug, including a biological product, or device marketing application (applicant), to submit certain information concerning the compensation to, and financial interests of, any clinical investigator conducting certain clinical studies. This requirement will apply to any covered clinical study of a drug or device submitted in a marketing application that the applicant or FDA relies on to establish that the product is effective, including studies that show equivalence to an effective product, or that make significant contribution to the demonstration of safety. This final rule requires applicants to certify to the absence of certain financial interests of clinical investigators and/or disclose those financial interests, as required, when covered clinical studies are submitted to FDA in support of product marketing. This regulation is intended to ensure that financial interests and arrangements of clinical investigators that could affect reliability of data submitted to FDA in support of product marketing are identified and disclosed by the sponsor of any application.
On October 28, 1997, FDA published final Mammography Quality Standards Act (MQSA) regulations in the Federal Register. Most of these regulations will take effect on April 28, 1999, while some (equipment, quality control tests) will be phased in from a period of 18 months to 5 years. The purpose of the regulations is to ensure high quality mammography for early breast cancer detection. The final regulations fulfill FDA's responsibility under MQSA to establish national quality standards for mammography services. All mammography facilities, except those of the Veterans Administration (VA), must meet these requirements. Facilities that do only interventional mammography are exempt at this time. The regulations establish criteria designed to enhance the quality of mammography services in a manner that is reasonably achievable by mammography facilities. The regulations substantially raise the standards for mammography personnel, equipment, quality assurance and control, patient notification of results, the mammography medical report, and performance of the accreditation body.
Better consumer information was the goal of the Juice Labeling final rule, which appeared in the Federal Register on July 8, 1998 (63 FR 37029). In this rule, FDA is revising its food labeling regulations to require a warning statement on fruit and vegetable juice products that have not been processed to prevent, reduce, or eliminate pathogenic microorganisms that may be present. FDA is taking this action to inform consumers, particularly those at greatest risk, of the hazard posed by such juice products. FDA expects that providing this information to consumers will allow them to make informed decisions on whether to purchase and consume such juice products, thereby reducing the incidence of foodborne illness and deaths caused by the consumption of these products.
In addition to the relief provided to the biologics industry in the rulemaking on a ``responsible head'' of biologics establishments noted above, FDA proposed to reduce unnecessary burden on the device industry as well. On March 5, 1998, FDA proposed to reclassify over-the-counter (OTC) test sample collection systems for drugs of abuse testing from class III (premarket approval) into class I (general controls) and to exempt them from the premarket notification (501(k)) and current good manufacturing practice (CGMP) requirements. FDA also proposed to designate OTC test sample collection systems for drugs of abuse testing as restricted devices under the Federal Food, Drug, and Cosmetic Act (the Act) and to establish restrictions intended to assure consumers that: The underlying laboratory test(s) are accurate and reliable; the laboratory performing the test(s) has adequate expertise and competency; and the product has adequate labeling and methods of communicating test results to consumers. Finally, FDA proposed a conforming amendment to the existing classification regulation for specimen transport and storage containers to clarify that it does not apply to specimen transport and storage containers that are part of an OTC test sample collection system for the purpose of testing for the presence of drugs of abuse or their metabolites in a laboratory.
Plan Entries
FDA's plan continues to reflect the Agency's goals of using new programs to benefit the public and affected industries and protecting the public, providing more information to consumers so that they may use FDA-regulated products more safely or effectively, and eliminating unnecessary burdens on the industry.
The plan includes a final rule that would establish requirements for a comprehensive food safety assurance program for domestically produced and imported juices based on Hazard Analysis Critical Control Points (HACCP) principles. This initiative is a response to several outbreaks of illness associated with juice products. FDA's current view is that a HACCP system of preventative controls would be an effective and efficient way to ensure that these products are safe.
Another final rule would require manufacturers of human cellular and tissue-based products to register with FDA and to submit a list of all products. The rule is designed to provide a rational, comprehensive, and clear framework for a rapidly growing industry that produces human cellular and tissue-based products.
A third final rule would establish procedures and requirements pertaining to the dissemination of information on unapproved uses (also referred to as ``new uses'' and ``off-label uses'') for marketed drugs, including biologics, and devices. The final rule would include requirements concerning submissions to the Food and Drug Administration, requests to extend the time period for completing studies needed to submit a supplemental application for a new use, applications for an exemption from the requirement to conduct studies, recordkeeping, and reporting. The final rule would also cover Agency actions on such submissions, requests, and applications, as well as orders to cease or to terminate dissemination of information.
Also included in the plan is a proposal that would amend the regulation for hearing aids. Current regulations require consumers to be examined by a physician before they purchase a hearing aid but also allow for a waiver. Because this waiver provision may be misused, FDA is considering whether to eliminate the waiver provision and instead require a medical evaluation when certain previously undiagnosed conditions are found or when the prospective hearing aid user is under 18 years of age. Additionally, the proposal would restrict the dispensing of a hearing aid to patients who have undergone a comprehensive hearing assessment within the past 12 months. This proposal reflects changes in the nature of hearing aids because, in the past, hearing loss often was caused by medically treatable conditions. Due to advances in health care, such cases of hearing loss are less common today, so there may be less need for a medical examination. However, advances in hearing aid technology necessitate proper testing in order for a hearing aid to be effective.
In multiple rulemakings, the Food and Drug Administration is proposing to amend the biologics regulations by removing, revising, or updating specific regulations applicable to blood derivative products to be more consistent with current practices and to remove unnecessary or outdated requirements. This initiative is based on a comprehensive review of the regulations that has been performed. A key action is the ``Lookback'' requirements for hepatitis C virus (HCV). In this rulemaking, FDA will propose to amend the biolgics regulations to require that blood establishments prepare and follow written procedures for appropriate action when it is determined that blood and blood components at increased risk for transmitting HCV infection have been collected from a donor who, at a later date, tested repeatedly reactive for evidence of HCV. For a complete listing of the rulemakings associated with the Blood Initative, see the Unified Agenda section. These actions are intended to help ensure the continued safety of the Nation's blood supply.
Another FDA final rule would create a standardized format and content requirements for over-the-counter (OTC) drug product labeling. As health costs increase and OTC drugs--including some drugs that were once available only by prescription--become increasingly available, consumers are engaging in self-medication. Consequently, it is increasingly important that consumers read and understand OTC drug product labeling, and so FDA's rule is intended to enable consumers to better read and understand OTC drug product labeling and to apply this information so they can use OTC drug products safely and effectively.
Lastly, a proposed rule highlighted in the Plan would amend the regulations governing the format and content of professional labeling for human prescription drug and biologic products. The proposal would also eliminate certain unnecessary statements that are currently required to appear on prescription drug labels and move certain information to patient labeling.
Administration for Children and Families
The Administration for Children and Families (ACF) continues to pursue regulatory reform as an integral part of the Agency's mission to improve the lives of children and families. With the passage of major welfare reform legislation in August 1996 (the Personal Responsibility and Work Opportunity Reconciliation Act of 1996), ACF is committed to meeting its responsibilties to implement this comprehensive law in ways that reflect both the letter and spirit of the President's Regulatory Reinvention Initiative.
For example, in developing proposed and final regulations on the Temporary Assistance for Needy Families (TANF) program, as well as on child care program, the child support enforcement program, and other welfare reform-related provisions, ACF conducted extensive consultations with hundreds of State and local government officials, advocates, labor organizations, academics, researchers, and technical experts. ACF also met with other Federal agencies and held a series of policy discussions within the Department. These productive consultations have informed our work through the regulatory development process. Once the proposed regulations were published, ACF considered carefully all the public comments received in developing final regulations. As a result, the proposed and final welfare reform regulations published to date have benefited from the broad input we received.
The following plan entry describes a final rule that will govern key provisions of the new welfare block grant program known as the Temporary Assistance for Needy Famililes--or TANF--program. The regulation addresses the work, accountability, 5-year time limit, and data collection and reporting provisions of the TANF program. It provides States with a basic set of rules which will assist them in implementing welfare reform; emphasizes the importance of work participation and the potential impact of TANF on needy children and families; demonstrates our good faith in implementing the law and assuming our new Federal role; and encourages and supports States' flexibility, innovation, and creativity.
ACF is committed to continuing this important process of consultation as we work with our partners in the coming year to develop and publish final regulations to implement the welfare reform law.
Health Care Financing Administration
The Balanced Budget Act
The short timeframe between the enactment of the Balanced Budget Act of 1997 (BBA) on August 5, 1997, and the effective date of the legislation, October 1, 1997, required HCFA and other offices of the Department to work at a furious pace to put forth the necessary guidance and regulations to implement the provisions of the Act.
Children's Health Insurance Program
As part of the BBA, the Children's Health Insurance Program (CHIP) provided for an optional program to allow States to initiate and expand child health assistance to uninsured, low-income children. Regulations to implement these provisions (HCFA-2114, State Child Health Initiative: State Allotments and Payments) will be published in the near future.
However, it is noteworthy that all of the guidance related to the Children's Health Insurance Program (CHIP), as authorized in the BBA, has been developed in less than a year's time and in the absence of formal regulations. Due to these extensive and continuing efforts, CHIP is now in operation prior to the completion of regulations.
While implementation of the new program involves a crosscutting effort throughout the Department, HCFA's Center for Medicaid and State Operations is administering the program. To assist States with developing their plans, a model application template was furnished that provides information on the requirements and options under the law. HCFA has developed and implemented a budget and expenditure reporting system and associated report forms for States to submit CHIP financial and statistical information. HCFA and the Department have also issued procedures for plan submittal and approval and for ensuring coordination with Medicaid programs.
To ensure clarity of program requirements and to foster enhanced State understanding of the complexity of statutory provisions, HCFA and the Department have worked with States as they develop their plans in accordance with the new law. HCFA sponsored nine regional conferences to help inform States of all the options available to cover children under CHIP. HCFA has also conducted onsite training for States in all 10 HCFA Regional Offices on the CHIP allotment and payment processes, the CHIP-related budget and expenditure system, and State financial and statistical reporting requirements. In addition, HCFA and the Department have been soliciting input and feedback from interested consumer and advocacy groups, the National Governors' Association and other State and local government groups, as well as individual States, throughout the process. This input and feedback has been sought to continuously improve HCFA processes and to be responsive to State needs. Indicative of HCFA's goal to approve CHIP plans expeditiously, plans have been approved for 22 States or territories as of June 29, 1998. Amendments have been approved for 2 States, and 19 States have submitted plans that are under review.
Medicare+Choice
Another significant program mandated by the BBA is the Medicare+ Choice program. HCFA published an interim final regulation implementing the new Medicare+Choice program on June 26, 1998. Starting in January 1999, in addition to original fee-for-service Medicare and health maintenance organizations, a broader array of health plans will join Medicare, including preferred provider organizations, provider-sponsored organizations, private fee-for-service plans, and a Medical Savings Account demonstration project. Recognizing the myriad of health care delivery options that are emerging, Medicare+Choice provides Medicare beneficiaries with expanded opportunities to tailor their choice of health care plans to their own needs. The regulation established policies and standards for health plans and organizations to participate in the Medicare+Choice program. The standards cover enrollment, benefits, access and beneficiary protections, quality assurance, provider protections, payments, premiums, and sanctions. Access to Medicare+Choice options will depend on where the beneficiary lives and what types of plans are available in that community.
Given the array of new options that Medicare beneficiaries will soon have available to them, we are strongly committed to providing beneficiaries all the information they need to make the best possible decision about their health care. In the BBA, Congress directed us to embark on a broad educational effort, which we have named the National Medicare Education Campaign. This Campaign is designed to ensure that beneficiaries receive accurate and unbiased information about their benefits, rights, and health care options. This is the largest, most complex, and ambitious educational effort in the history of Medicare. We are committed to working with beneficiaries and their families, members of Congress, aging advocacy organziations, providers, and other experts to ensure that our educational program is the best that it can be.
This National Medicare Educational Program includes the mailing of the Medicare handbook ``Medicare & You'' and the establishment of a national 1-800 toll-free telephone number, which is being tested this year in five States and will be operating nationally by October 1999. In addition, a consumer-friendly Internet site, www.Medicare.gov, is already in place. This web-site offers information called Medicare Compare, which enables beneficiaries or those who assist them to compare health plans' benefits, out-of-pocket costs, and other important features.
PSO Solvency Standards
As part of its general implementation of the BBA, HCFA published three rules in 1998 concerning Provider-Sponsored Organizations (``PSOs''), a form of managed care entity that can now contract directly with Medicare. The BBA authorizes certain specifically defined types of PSOs to serve Medicare enrollees for up to 3 years without a State license as a risk-bearing entity. Under the terms of the exemption from State licensure (the ``Waiver''), HCFA assumes the responsibility for monitoring the financial solvency and other factors that affect the quality of care provided to Medicare enrollees.
On April 14, 1998, HCFA issued an interim final rule with comment period that established the definition requirements that PSOs must meet to obtain a Waiver.
On May 7, 1998, HCFA published an interim final rule with comment period that establish the Waiver application process and the solvency standards that entities must meet to obtain a Waiver. This rule was developed through the negotiated rulemaking process. Over 50 individuals, representing over 25 different associations, coalitions, or companies were interviewed in order to identify relevant issues and to establish the negotiated rulemaking committee. The committee then met seven times from October 1997 to March 1998 to deliberate on relevant issues.
As mentioned earlier, HCFA published an interim final rule with comment period regarding the Medicare+Choice program on June 26, 1998. This rule, which enumerated the comprehensive provisions of the Medicare+Choice program, also defined the minimum enrollment requirements for PSOs and slightly modified the April and May rules mentioned previously.
HCFA anticipates signficiant implementation-related activity in fiscal year 1999. Such activity would include: Conducting beneficiary and provider information campaigns to clarify uncertainties about PSOs; developing administrative and operational policy; and communicating that policy via further regulation, policy statements, opinion letters, and statements of operating procedures. Note also that allowing certain PSOs to operate under a Federal Waiver without a State license will change the traditional model of shared Federal-State oversight and accountability for managed care organizations to a model of prinicipally Federal oversight and accountability. This change also represents a major increase in HCFA's responsibility.
Skilled Nursing Facilities
On May 12, 1998, HCFA published an interim final rule with a comment period (63 FR 26252) to implement changes made by section 4432 of the BBA with regard to skilled nursing facility (SNF) services. The rule establishes an SNF Prospective Payment System (PPS) for Part A stays, which makes a global per diem payment that is case-mix adjusted. The rule also describes the resident assessment procedures used in determining the appropriate classification for each resident. In addition, it establishes a consolidated billing requirement for SNFs under which almost all of the services that an SNF resident receives are billed to Medicare by the SNF itself, rather than by an outside supplier.
Other Current BBA Priorities
In addition to these efforts, HCFA currently has a number of other regulations under development to implement other provisions of the BBA.
One such regulation expands Medicare coverage for diabetes outpatient self-management training services. More than 16 million Americans have diabetes and nearly 75,000 new cases are reported every year. Newly expanded benefits will help provide people with the skills and resources that most diabetics need to control their diabetes.
Other BBA-related HCFA regulations included in the Department priorities include regulations to implement the Prospective Payment System (PPS) for Hospital Outpatient Services and for Home Health Agencies and regulations establishing rules related to quality of care and services under Medicaid managed care programs.
Additional Regulations
In addition to the activities related to the BBA, HCFA has also continued to work towards agency objectives such as increasing organ donations and combating fraud and abuse.
Organ Procurement
On June 22, 1998, HCFA-3005-F, Hospital Conditions of Participation; Identification of Potential Organ, Tissue, and Eye Donors and Transplant Hospitals Provision of Transplant-Related Data, was published in the Federal Register. This regulation is designed to increase organ donation and thus, lifesaving transplants, for individuals who need them. More than 10 individuals in the United States die every day while waiting for a transplant.
The provisions of the regulations are based on State ``routine referral'' laws, which have increased organ donations significantly in the States in which such laws have been enacted. It is expected that the regulation will increase the Nation's organ donation and transplantation rates 20 percent in the 2 years following the effective date of the rule.
Fraud and Abuse
On March 20, 1998, HCFA published its proposed rule to implement the Medicare Integrity Program. Under this rule, HCFA will contract with eligible entities who meet certain requirements and comply with conflict of interest standards. Medicare Integrity Program contractors will perform program integrity functions including medical review; fraud and utilization review; cost report audits; Medicare secondary payor activities; education of providers, suppliers, and beneficiaries regarding integrity and developing a list of durable medical equipment subject to prior authorization.
In addition, on July 8, 1998, HCFA published HCFA-6144-C Medicare Program; Incentive Programs-Fraud and Abuse. This regulation establishes a program to encourage individuals to report information on individuals and entities that are engaged in or have engaged in acts or omissions that constitute grounds for the imposition of a sanction or who have otherwise engaged in sanctionable fraud and abuse against the Medicare program. By increasing the incentives for concerned citizens to report evidence of suspected fraudulent behavior, Congress hopes to protect beneficiaries and the Medicare Trust Funds. It is specified that a monetary reward can be made only for information that leads to a minimum recovery of $100 of Medicare funds.