By Ruth Carol, contributing writer

While the Trump administration has raced to eliminate the Affordable Care Act (ACA), it has put the brakes on other health care policy while contemplating how best to move forward. That pause may prove advantageous for dermatology…only time will tell.

Affordable Care Act

“Overall, the Trump administration has paused the Obama administration’s major health care initiatives and has been taking the time to dig deeply to see if the previous administration’s constructs work, given the current administration’s perspectives,” noted Leslie Stein Lloyd, JD, director of regulatory and payment policy for the American Academy of Dermatology Association. Within the first five months of Donald Trump taking office, the administration withdrew or delayed more than 850 proposed regulations, according to the Associated Press.

While pausing on some regulation, President Trump has forged ahead with his efforts to push Congress to dismantle the ACA. Most notable is the repeal of the individual mandate in December 2017 as part of the Tax Cuts and Jobs Act. That was followed in February by the repeal of the Independent Payment Advisory Board (IPAB), which was a provision under the ACA that created the potential to impose indiscriminate new payment cuts on physicians without congressional input.

Since then, the Trump administration continues to roll out new rules that further unravel the ACA. New rules proposed in January make it easier for small businesses and self-employed individuals to buy association health plans, which will no longer have to offer ACA-compliant health benefits. While association plans could charge consumers different prices based on their age, gender, and location, they can’t charge certain customers more based on their health status or refuse to cover people with conditions that are expensive to treat. The rules allow these plans to be sold across state lines.

All of these alternative plan options would further destabilize the ACA marketplace. They would create parallel insurance markets with varying and more limited consumer protections, but also lower premiums. These plans are targeting relatively healthier people who would leave the insurance risk pool of the ACA marketplace, raising the premiums for the sicker enrollees left behind.

“The Trump administration is trying to deconstruct the ACA any way it can,” said Michelle Mathy, the AADA’s assistant director of political and congressional affairs. “The individual mandate repeal, passed as part of the tax reform, was a big hit to the ACA.”

It’s too soon to tell what impact, if any, the repeal of the individual mandate will have on dermatologists, Mathy said, because the majority of Americans still get their insurance either from their employers or Medicare. It’s believed that the people who would stop buying insurance on the open market are young, healthy individuals who typically don’t access the health care system often. “If young, healthy people leave the insurance marketplace in droves and it crumbles that could impact dermatologists, depending on how many of their patients are covered,” she said. “It could have a ripple effect, but not a direct impact.”

The IPAB repeal has no direct impact on dermatology today, because it was never funded, Mathy added, but protects against future Medicare cuts. The IPAB was supposed to cut Medicare payments if a certain spending growth threshold was reached, but it never was. Repealing IPAB basically returns Medicare payment authority to Congress. While it’s helpful to have the IPAB repealed, said Bruce Brod, MD, vice chair of the AADA’s Council on Government Affairs and Health Policy, it’s important to remember that the 2% Medicare sequester payment reduction was extended another two years through 2027. That translates to approximately $40 billion, according to the Center on Budget and Policy Priorities.

All of the new proposed rules will likely result in more coverage options, but some of them may offer bare-bones coverage with exclusions of pre-existing conditions, noted Dr. Brod. “The current administration is certainly creating an environment that is moving away from one-size-fits-all type of plans. There may be advantages to that, but also disadvantages,” he said. “We will have to closely monitor that. The Academy always supports access to care for everybody.”

The proposed rule changes are vulnerable to court challenges and could get struck down or countered by state governments, Mathy said. Congressional Democrats are already raising questions about whether the Department of Labor has the authority to redefine the eligibility for association health plans proposed by the Trump administration.

Looking ahead, it’s unlikely that Congress will make additional changes to health care this year, she said, as many members will be in full campaign mode this fall. “A lot of the air has left the room,” Mathy noted. Depending on how open enrollment goes this fall and what the marketplace predictions are for next year, there may be last-minute attempts toward market stabilization, but they will have to be truly bipartisan efforts to get enough votes to pass. It also depends on what happens with the November elections and whether House Speaker Paul Ryan pushes for entitlement reform for health care before he leaves office. “If anything big will be done on the ACA, it would be done at the end of this year after the November elections,” she predicted.

Drug approvals, compounding

Access to new drugs took a positive turn in 2017 with the U.S. Food and Drug Administration (FDA) approving 46 novel medicines, a 21-year record high. Within dermatology, two new drugs were approved to treat psoriasis and one was approved for treating atopic dermatitis. In 2018, two new drugs were approved to treat plaque psoriasis. Since his appointment, FDA Commissioner Scott Gottlieb, MD, has focused heavily on increasing competition in drug markets, said Josephine Nguyen, MD, chair of the AADA’s Regulatory Policy Committee. Jeremy Kahn, MA, trade press officer for the FDA’s Center for Drug Evaluation & Research (CDER), attributes the increased drug approvals to a variety of expedited review and approval tools. “From 2011 through 2017, about 60% of our novel drug approvals were approved using one or more expedited review tool,” he said.

Regarding FDA approval processes, the Academy believes that a primary driver of pharmaceutical costs is the reduced level of competition for a variety of generic and branded drugs and biologics, Dr. Nguyen said. To that end, the AADA has been supportive of legislative efforts that would provide the FDA with added authority and resources needed to expedite the review process and get additional drugs and biologics to market, which hopefully will lower the price.

In 2018, the FDA is expected to publish revised draft guidelines for Insanitary Conditions at Compounding Facilities for physicians who compound drugs in their offices. “The Academy has been working on its own and with the American Medical Association to maintain access to in-office compounding, which has been done safely for many years,” Dr. Brod said.

“The FDA is considering comments submitted by some providers who compound small quantities of drugs in their offices for patient use and as part of their routine clinical practice, including in the setting of dermatologic procedures,” Kahn noted. “The FDA plans to better define the circumstances under which we believe drugs are being mixed and applied in a manner that creates negligible patient risk, and therefore wouldn’t be subject to the same compliance policy under the agency’s risk-based approach to implementing these requirements.”

Dr. Brod added, “Commissioner Gottlieb has intimated that there may be exceptions for specialties, such as dermatology. We’re hoping for a favorable interpretation that will allow dermatologists to compound in their offices without too much burden, such as requiring hoods and gowns, because that’s not workable for a dermatology office.”

The Academy is also engaged with the U.S. Pharmacopeia, which is revising its chapter about compounded sterile preparations. A revised second draft is expected in late July. The goal is to have reasonable guidelines that promote safety without onerous requirements, said Dr. Brod.

Public health issues

In 2017, the FDA failed to finalize its proposed rule to restrict the use of tanning beds to individuals under the age of 18. Meanwhile, the House of Representatives’ Freedom Caucus flagged the under-18 ban for congressional review. “The Academy is cognizant of the current political climate of de-regulation,” Dr. Brod said. “We pulled back on pushing for this regulation because we would risk Congress revoking the FDA’s authority to make this rule.” Once lost, regaining the FDA’s authority is a difficult process and could set this regulation back several years.

The proposed rule, however, remained in the Semiannual Regulatory Agenda published this spring. “The Trump administration has pulled other rules from other agencies, so the fact that the proposed rule has not been pulled is positive,” stated Natasha Pattanshetti, JD, MPH, the AADA’s manager of regulatory policy. There is no timeline for when a final rule would be published, but the Academy continues to advocate for that to happen, she added.

On the state and local levels, the AADA continues to advocate for under-18 indoor tanning bans, Pattanshetti said. At last count, 18 states and the District of Columbia have indoor tanning bans for minors who are 18 years of age and younger. To date, 45 states and the District of Columbia regulate the use of indoor tanning for minors. These restrictions include a ban on minors under a specified age or parental accompaniment or consent. The topic recently gained national attention when the wife of Surgeon General Jerome Adams, MD, MPH, was treated for metastatic melanoma. Dr. Adams highlighted her story to raise awareness about the risk factors for skin cancer as his wife was a frequent tanner.

Also in the Semiannual Regulatory Agenda is the FDA’s proposed rule to address the safety and effectiveness of 16 sunscreen ingredients and describe data gaps that the agency believes must be addressed to allow these ingredients to remain on the market without requiring new drug applications. The FDA also expects to address sunscreen dosage forms and maximum SPF values of current sunscreens on the market. This rule has an action date of August.

In April, the FDA requested quotes for absorption testing of current sunscreen formulations, according to Sabra Sullivan, MD, PhD, chair of the AADA’s Council on Government Affairs and Health Policy. She is optimistic that this action will speed up the sunscreen investigation. “I’ve been doing this for 25 years and I’ve never seen this issue go forward,” Dr. Sullivan said. “Right now, children can’t go to school and use sunscreen when they go out for recess because it’s regulated as an over-the-counter drug here,” she said. “This testing will establish objective guidelines for the use of sunscreens.” The FDA is looking at the safety of sunscreens because there is public concern that some ingredients could be absorbed in the bloodstream and disrupt the hormone system, Dr. Brod explained. “It looks like the FDA is going to follow standard protocol for testing,” he said, “which the Academy will monitor.”

The FDA is not only concerned about new sunscreen ingredients, but also ingredients in formulations that are currently on the market, Pattanshetti noted. Many of the new ingredients are used in sunscreens marketed in Europe, but there they are regulated as a cosmetic. It seems unlikely that the FDA will lessen the safety standards finalized in its 2016 guidance for adding sunscreen ingredients to the over-the-counter sunscreen monograph, she said. However, the FDA has stated that it is willing to work with ingredient sponsors. During the Obama administration, the AAD’s Immediate Past President Henry Lim, MD, and AAD staff met with the FDA, which was very forthcoming with its safety requirements and willingness to work with stakeholders. “The FDA is asking for more data to prove that sunscreens are safe and not causing adverse effects for consumers,” Pattanshetti added.

The other issue is effectiveness, which addresses when sunscreen should be applied, how often it should be re-applied, and how much should be used. The FDA may be addressing this issue by ruling on its proposed SPF cap of 50+ in the fall, she noted. In 2011, the FDA proposed the limit unless the agency receives data demonstrating additional clinical benefit for SPFs above 50, Dr. Nguyen explained. The AADA also believes that manufacturers should be allowed to market 50+ SPFs if there is research showing the effectiveness at these levels. Depending on how this proposed rule is finalized, she said, sunscreens with SPFs above 50 may or may not be able to continue on the market. Fortunately, these data may be available in the nick of time. Results of a recent randomized, double-blind, split-face trial indicate that SPF 100+ sunscreen was more protective against sunburn from natural sunlight exposure than SPF 50 (J Am Acad Dermatol. May 2018: 78(5), 902–910). It remains to be seen whether these data or future studies will affect the tilt of the finalized rule.

Value-based payment

The question is not whether value-based based payment is moving forward, but how. “There is certainly bipartisan agreement in Congress to pursue policies of value-based care as evidenced by the Medicare Access and CHIP Reauthorization Act of 2015,” Dr. Brod said. Government payers are looking to link physician payment to improved care as are private insurers. The Trump administration, however, has paused to figure out the how. “The train isn’t stopping, it’s just slowing down and recalibrating at this time,” Dr. Brod said.

As an example, the Center for Medicare and Medicaid Innovation (CMMI) has put on hold all Advanced Alternative Payment Model (APM) development. This pause also gives the CMMI time to re-staff as it has lost some key leaders in the past year, Lloyd noted. “Now we’re seeing new medical directors at CMMI who have a fresh perspective and enthusiasm, which is fantastic.” Another tell-tale sign is the Centers for Medicare & Medicaid Services’ (CMS) announcement in February that participation in its Bundled Payments for Care Improvement-Advanced Model will be voluntary instead of mandatory. That shift will slow the progress, but that’s not a bad thing considering it’s such a large-scale shift in payment policy, Lloyd said. Dr. Brod noted that there aren’t any bundled episodes of care a dermatologist could participate in except perhaps cellulitis.

Even if there were, would they save money? Several studies published within the past year have not shown a significant cost savings through APMs. These studies also highlighted the costs of, and barriers to, participating in APMs for physicians, including dermatologists, she added. The AADA has used this time-out as an opportunity to convey to the administration the difficulty for dermatologists in small and/or solo practices to meaningfully participate in APMs. “Fewer than 20% of physicians will be able to meet the definition for an Advanced APM qualifying participant, Dr. Brod said. “That is reflective of the fact that CMS was pretty aggressive in setting the metrics for engagement in Advanced APMs. This is a good time for there to be continued dialogue on how to make engagement in value-based payment more accessible to dermatologists,” he added.

The Academy’s Workgroup on Innovation in Payment and Delivery has spent five years trying to figure out how to create an APM that dermatologists can participate in, Dr. Sullivan said. “But the way the rules and regulations were constructed, it’s nearly impossible for any specialists to fit into an APM. Despite our best and brightest thinkers in the medical community, APM models are just not ready. Regardless of who won the election, we were coming to the point where we couldn’t move forward without slowing down and figuring out how to implement value-based payment without harming our patients. So the Trump administration is taking a step back to look at what we can realistically do. I think that it’s wise to step back and look.”

This pause also means that it’s unlikely that CMS will follow the Obama administration’s timeline to move 50% of Medicare provider payments from fee-for-service to APMs by 2018. Only 29% of total U.S. health care payments were tied to APMs in 2016, according to a report issued by the Health Care Payment Learning & Action Network — a public-private partnership launched in 2015 to drive adoption and alignment of APMs —while 43% were still tied to traditional fee-for-service or other payments not linked to quality. Even if someone else had won the election, APMs wouldn’t have met that timeline this year, Dr. Sullivan said, adding, “Congress makes the laws, but then they hand it to the federal agencies to interpret and enforce the laws.”

Tax reform law

On the tax front, the newly enacted tax reform law includes numerous provisions that may affect physicians. One such provision is a new tax deduction for “pass-through entities,” which include businesses set up as subchapter S corporations, partnerships, or businesses organized as LLCs at the state level that elect to file as partnerships for federal income tax purposes. Unlike C corporations, which are taxed at the entity level, the business income of such pass-through businesses is taxed on the personal tax returns of the individual owners or partners of the business. The 20% deduction is effective beginning in 2018 and is scheduled to expire after 2025.

The deduction, however, is limited by formula in the case of taxpayers with taxable incomes over certain threshold amounts, Mathy explained. For 2018, those amounts are set at $157,500 for single filers and $315,000 for joint returns; these thresholds are indexed for inflation in future years. For taxpayers with taxable incomes greater than $207,500 for single filers and $415,000 for joint returns in 2018, the deduction is phased out entirely and the taxpayer’s business income is instead taxed at the applicable ordinary income rate.

While many dermatology practices are set up as pass-through entities, especially small and solo practices, whether a practice qualifies for the deduction will depend on the owners’ or partners’ personal facts and circumstances, Mathy said. The Academy recommends that dermatologists talk to their accountant and/or tax attorney to determine whether they may claim this deduction in 2018 and beyond. Initially, there wasn’t going to be any tax break, Dr. Sullivan said. The 20% deduction was a modification, and she expects there will be more changes to the provision.

Practices that are set up as corporations may benefit from the tax reform bill that cut the corporate tax rate to 25%, Mathy stated. “If you were paying 40% in taxes and that goes down to 25%, that’s a big deal,” Dr. Sullivan said.

The tax reform law has the potential to impact certain corporate structures both positively and negatively, Dr. Brod added. “The best advice is since this was a sweeping tax bill that was passed, it’s very important for dermatologists to discuss potential opportunities and pitfalls with their financial consultant.

“In the current political climate, as in all political climates, there are opportunities and hazards,” Dr. Brod concluded. “The key is that the AADA remains very engaged on all fronts.” Dr. Sullivan is cautiously optimistic. “I’m beginning to see bipartisanship on issues,” she said. “I’m seeing things moving forward in ways that I never thought they would.” Part of that is due to physicians reaching out to their congressional representatives to discuss issues of importance to the medical community. “Each year, physician voices are getting louder,” Dr. Sullivan said. “It’s a different time and we are impacting what’s going on in our world and in health care, and we need to keep doing it for the patients and physicians.”