Health Care Reform Implementation Update - April 21, 2014

by Cozen O'Connor
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On April 14, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) reported their findings that show a smaller rise in insurance premium costs under the Affordable Care Act (ACA) than previously expected. The CBO also released findings on the same day that show a rise in the cost estimate for permanent repeal of the sustainable growth rate formula (SGR), which is the Medicare formula used to determine physician payments. On April 15, the Census Bureau announced that it may be difficult to measure the impact of the ACA on the number of uninsured individuals in the United States because of changes in the methodology it uses to track the number of people without health insurance. On the same date, the extended ACA open-enrollment period on HealthCare.gov ended. Also on April 15, Gallup released a new poll that finds that states that have created their own exchanges and have expanded their Medicaid programs under the ACA are seeing their uninsured rates drop faster than those states that have not implemented those reforms. On April 17, President Obama announced that 8 million people have enrolled in ACA exchanges.

ON THE HILL

On April 14, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) reported their findings that show a smaller rise in insurance premium costs under the ACA than previously expected. According to these new estimates, premiums will rise less than 3 percent in 2015 and will cost the federal government nearly $5 billion less than expected over the course of this year. The CBO and JCT also found that the ACA’s coverage costs over the next 10 years are $104 billion less than expected. These findings showed that the risk corridor program, a provision of the law that is intended to assist health plans with the financial cost of the transition under the ACA, will now be budget neutral as opposed to the prior expectation that it would result in $8 billion in savings.

The CBO also released findings on April 14 that show a rise in the cost estimate for permanent repeal of the sustainable growth rate formula (SGR), which is the Medicare formula used to determine physician payments. This formula has prompted Congress to pass a temporary fix 17 times, also known as a “doc-fix,” in order to avoid steep Medicare payment cuts to physicians every year. Although there is widespread support for a permanent repeal that would avoid the annual doc fix scramble, there is little agreement on how to pay for the cost of the repeal. These new findings from CBO estimate an $8 billion increase in the cost of permanent repeal, and this cost increase will make developing a final agreement more difficult.

Although no official hearing dates have been announced, members of the Senate committees that will conduct Sylvia Burwell’s nomination hearings for Secretary of Health and Human Services have already begun crafting their questions. Senator Tim Scott (R-S.C.) reported to a news outlet that the hearing will give him an opportunity to gather more information on the ACA and is quoted as saying “The question is will the next secretary put the interests of Americans first, or the policies of the president.” On the Democrat side, Senator Sheldon Whitehouse (D-R.I.) told news sources that the hearings will be another venue in which to highlight ACA successes. It is expected that Burwell will be confirmed since only 51 votes are needed, and there are 55 Democrats in the Senate.

The Medicaid and CHIP Payment and Access Commission (MACPAC) met on April 10 to discuss long-term care issues and its plans to review how states are using home and community based service waivers. The long-term care discussion focused on how MACPAC intends to study why certain states have begun implementing long-term care services plans and other states have not. MACPAC plans to make its first statement on long-term care in its June 2014 report, but will not provide specific recommendations.

AT THE AGENCIES

In comments during a Senate Finance Committee hearing on April 10, outgoing Health and Human Services (HHS) Secretary Sebelius indicated that states that do not quickly enroll Medicaid beneficiaries deemed eligible for Medicaid by the HealthCare.gov website could see reductions in their federal Medicaid matching funds. Several states, including New Jersey and Illinois, are behind in processing Medicaid enrollments for individuals who signed up for Medicaid coverage through HealthCare.gov. Currently, the federal exchange system only determines whether an individual is eligible for Medicaid coverage and then transmits the information to the appropriate state so that the state itself can enroll the individual into Medicaid. However, the process was not fully functional at the beginning of the 2014 open enrollment period, which created a backlog for some states. State officials have asked HHS to clarify Sebelius’ comments because they did not think that the federal system is currently fully functional.

On April 11, the Center for Consumer Information and Insurance Oversight (CCIIO) within the Centers for Medicare and Medicaid Services (CMS) released frequently asked questions (FAQ) regarding the ACA risk corridors program, which is in effect from 2014 through 2016. The program is one of several created by the ACA to assist insurers with the financial risks they face under the law and provides payments to insurers that have allowable costs greater than 103 percent of a target amount. The program is funded through risk corridor collections. In the FAQ, CCIIO states that if, for a given year, the risk corridor collections are less than the payments that must be made under the program, then all risk corridor payments for the year will be pro-rata reduced and collections from the next year will be used to make up the deficiencies from the previous year.

On April 15, the Census Bureau announced that it may be difficult to measure the impact of the ACA on the number of uninsured individuals in the United States because of changes in the methodology it uses to track the number of people without health insurance. The Census Bureau says that the changes, which were first announced in September of 2013, were needed to improve the accuracy of the survey. The new methodology is expected to produce an uninsured rate that is lower than what would have been calculated under the previous methodology. Some conservative lawmakers are questioning the timing of the methodology change and believe the new methodology will be exploited to make it appear that the ACA is more successful than it would have appeared to be without the change. However, on April 16, the Census Bureau released a statement noting that the changes had been discussed for 14 years and will instead allow for a more accurate baseline assessment of changes in insurance coverage as a result of the ACA.

On April 15, CMS reopened the End Stage Renal Disease Seamless Care Organization demonstration. On that date, it issued a revised Request for Applications for the demonstration program. The agency had been planning to reopen the application process as far back as October of 2013, when it said that it would do so to increase participation and to address feedback from the kidney industry.

AT THE WHITE HOUSE

The ACA open-enrollment period on HealthCare.gov ended on April 15 at midnight. Although the open-enrollment period was supposed to have ended March 31, the Obama administration extended this deadline another two weeks. The extension was intended to give those individuals who had begun an application but could not complete it before the March 31 deadline extra time to complete the entire process. The administration has said that no other extension will be granted but did not definitively give any determination on whether they would extend the enrollment for individuals that face “special circumstances,” such as a medical condition or a natural disaster. In her Senate hearing testimony on April 10, a day before her official resignation, Secretary Sebelius reported that 400,000 more people had enrolled in the extended two-week period.

In a press conference on April 17, President Obama announced that more than 8 million people have signed up under ACA exchanges. He also reported that 35 percent of those enrollees are under the age of 35. President Obama expressed his frustration toward continued Republican opposition to the ACA and claimed that states that have not signed up for Medicaid expansion are doing so “for no other reason than political spite” adding that an additional 5 million would have been covered if the Medicaid expansion had occurred in full. A press release issued by the White House put the figure at 5.7 million.

On April 17, President Obama and Vice-President Joe Biden hosted a group of insurance commissioners at the White House to discuss overall ACA issues and the 2014 enrollment period. Discussions included topics such as ACA exchange premium increases for 2015, health plan demographics, consumer understanding of their health care options, and expanding doctor networks for individuals enrolled in exchanges.

IN THE STATES

In Pennsylvania, the public comment period on Governor Corbett’s Medicaid waiver request ended on April 11. Governor Corbett submitted the waiver to CMS in February. Under the waiver proposal, the state would use federal Medicaid funds to subsidize private insurance premiums for uninsured residents. The state would also require monthly premium payments and work search requirements for some Medicaid recipients in 2016. If approved by CMS, Pennsylvania would be the only state to alter Medicaid benefits for current enrollees. If the waiver request is granted it is expected that governors of other states such as Utah, New Hampshire and Tennessee will submit similar requests.

Gallup released a new poll this week that finds that states that have created their own exchanges and have expanded their Medicaid programs under the ACA are seeing their uninsured rates drop faster than those states that have not implemented those reforms. The survey showed a 2.5 percent drop in the uninsured in 2013 in those states that have implemented these ACA reforms. States that have implemented only one or neither of these reforms saw only a 0.8 percent drop in their uninsured rates, according to the survey.

The District of Columbia is extending the open enrollment period for their ACA exchange to April 30 for those individuals that had started an application before the end of March.

After three months of negotiations, the federal government approved $8 billion in funding forNew York state’s Medicaid program. This funding was generated by Medicaid reforms that New York state had implemented years ago, but details on which entities would receive the funding had to be worked out between the state and the U.S. Department of Health and Human Services. The money will reportedly be used to overhaul hospitals and expand primary medical care.

IN THIRD PARTIES

Spending on health care services and prescription drugs increased in 2013, according to an analysis released by IMS Holdings Inc. Spending on prescription drugs increased by 3.2 percent in 2013, to a total of $329.2 billion. The increase in spending on health care services was driven in part from increases in the number of doctor visits, particularly to see specialists, and hospitalizations. The increase in prescription drug spending was driven in part by fewer expirations in patents, increases in the prices for existing drugs, new expensive drugs entering the market and greater utilization of prescription drugs in general.

IN THE COURTS

The American Hospital Association (AHA), on April 14, filed two related lawsuits in the U.S. District Court for the District of Columbia challenging HHS’s “two midnight rule” for inpatient hospital admissions. Under the rule, CMS will only pay the higher Medicaid inpatient rate if a physician expects that a patient will be hospitalized for more than two midnights. Otherwise, hospital stays for less than two midnights will be reimbursed at the lower Medicare hospital outpatient rate. The two midnight rule was to take effect on October 1, 2013, but enforcement has been delayed until March 2015. In the first suit, the AHA and others contend that the rule is arbitrary and capricious, contrary to law, and undermines medical judgment. In the second suit, the AHA and others challenge CMS’ decision to reduce payments to hospitals by 0.2 percent based on CMS’ claim that the two midnight rule and other related policy changes would increase the number of hospital stays that the Medicare program covers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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