Health Care Reform Implementation Update - June 4, 2013

by Cozen O'Connor

Medicare Trustees released their annual report finding that the Medicare trust fund will be exhausted in 2026, two years later than was predicted last year; over the past two weeks, as Washington has investigated the Internal Revenue Service’s (IRS) use of targeting, lawmakers have been working to ensure similar targeting cannot occur at the agencies implementing the Affordable Care Act (ACA); with bipartisan support Marilyn Tavenner became the first confirmed Centers for Medicare and Medicaid Services (CMS) Administrator in almost seven years; the House of Representatives voted to repeal the ACA for the 37th time; 17 of the 27 states running their own Preexisting Condition Insurance Plans (PCIPs) decided to let the federal government take control and responsibility; and the Center for Medicare & Medicaid Innovation (CMMI) is starting to accept letters of intent from parties interested in its second round of innovation grants.


After a Treasury Department audit found that the IRS had singled out conservative groups for special scrutiny, some lawmakers have been tying the targeting to Affordable Care Act implementation. The House GOP campaign committee launched ads in some districts where Democrats are vulnerable in midterm elections claiming Democrats are planning to “Put the IRS in charge of your healthcare.” The IRS is, in fact, responsible for implementing major pieces of health reform – at least 40 provisions in the ACA add or amend provisions of the tax code. The IRS’s tasks include collecting information on who has insurance from employers and insurers, determining who qualifies for subsidies or Medicaid, and figuring out who must pay a penalty. Notwithstanding the large role the IRS will play in implementing the ACA, the Department of Health and Human Services (HHS) responded to these suggestions saying that “The Affordable Care Act maintains strict privacy controls to safeguard personal information. The IRS will not have access to personal health information.”

Sen. John Thune (R-S.D.) sent a letter to Attorney General Eric Holder and Treasury Secretary Jack Lew requesting they disclose whether Sarah Hall Ingram, the former commissioner of the office responsible for tax-exempt organizations between 2009 and 2013 had “inexplicably been promoted to oversee the IRS’ Affordable Care Act office.” Thune goes on to request that the IRS stop enforcing regulations drafted under Ingram’s supervision and that the IRS cease working on health care law regulations until the Department of Justice confirms that Ingram is not being investigated.

House Ways and Means Oversight Subcommittee Chairman Charles Boustany (R-La.), Rep. Diane Black (R-Tenn.), Rep. Ralph Hall (R-Texas) and Rep. Mike Kelly (R-Pa.) introduced the Stopping Government Abuse of Taxpayer Information Act “to protect Americans from political targeting at all government agencies charged with the implementation and enforcement of the Patient Protection and Affordable Care Act.”

On May 14, the Congressional Budget Office (CBO) released the news that the cost of repealing the sustainable growth rate (SGR) would not be as high as once expected, indicating to many that the momentum behind achieving repeal is likely to continue this year. The Medicare Payment Advisory Committee’s (MedPAC’s) Executive Director said to the Senate Finance Committee that CBO’s reduced cost estimate of repealing the SGR may alter recommendations it has previously made to Congress for transitioning the Medicare payment system. At the time MedPAC made its initial recommendations the estimated cost was $300 billion over 100 years, but the CBO has revised this estimate to $138 billion over 10 years.

The House Ways and Means Subcommittee on Health held a hearing on May 21, in which there was discussion of three ways to utilize beneficiary cost sharing in Medicare in anticipation of a deficit reduction package. The three areas identified as targets for cost sharing were increasing income related premiums for Medicare Parts B and D, increasing the annual Medicare Part B deductible, and establishing a home health copay.

The House of Representatives voted 229 to 195, largely along partisan lines, to repeal the Affordable Care Act for the 37th time. The vote gave some freshmen congressmen their first opportunity to vote for repeal, which will give them the ability to campaign on these grounds as midterm elections near.

Ways and Means Health Subcommittee Chair Kevin Brady (R-Texas) and Ways and Means Oversight Subcommittee Chair Charles Boustany (R-La.) wrote a letter to HHS Sec. Sebelius expressing concern over the potential for privacy violations by health insurance exchange navigators and non-navigator assisters. In the letter, they request further detail on what information these entities will be able to access.

At a House Oversight hearing on May 21, Center for Consumer Information and Insurance Oversight (CCIIO) Director Gary Cohen said he was confident that HHS has authority, despite lack of explicit statutory instructions, to set up navigator and assister programs to help with enrollment in state-based exchanges.


On May 31, the Medicare Trustees released their 2013 report, projecting that the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2026, which is two years beyond what was projected in last year’s report. The improved outlook can be attributed to lower-than-expected Part A spending in 2012 and lower projected Medicare Advantage program costs. At this juncture it does not appear that action will be triggered from the Independent Payment Advisory Board (IPAB). This report is likely to influence upcoming congressional debates over the debt ceiling, proposals to reduce the deficit and the future of entitlement programs.

On May 31, CMS released a final rule on Small Business Health Options Program (SHOP) exchanges along with an application that provides small employers with easy-to-understand access to health insurance options for their employees.

HHS announced a second round of Center for Medicare & Medicaid Innovation (CMMI) innovation awards, through which up to $1 billion are now available for payment and delivery system models that improve care and lower costs. Specifically, CMMI is seeking proposals in the following categories: Models that are designed to rapidly reduce Medicare, Medicaid and/or CHIP costs in outpatient and/or post-acute settings; models that improve care for populations with specialized needs; and models that improve the health of specific populations through activities focused on engaging beneficiaries, such as prevention, wellness, and comprehensive care that extend beyond the clinical service delivery setting.

On May 15, the Senate approved President Obama’s nominee to run CMS, Marilyn Tavenner. Tavenner is the first confirmed CMS administrator since 2006.

On May 29, implementing a component of the ACA, HHS finalized rules for wellness programs offered through employer health care plans. The final rule closely mirrored the proposed rule. Under the rules, employer health plans may offer rewards to workers who satisfy certain fitness goals. The rule increases the maximum possible reward for successful completion of a health-contingent wellness program from 20 percent to 30 percent of an employee’s premiums.

The Office of Management and Budget (OMB) has begun reviewing final rules on Medicaid, Exchanges, and Children’s Health Insurance Programs; Conditions of Participation for Community Mental Health Centers; Exchange Functions: Eligibility for Exemptions and Miscellaneous Minimum Essential Coverage Provisions; Inpatient Psychiatric Facility Prospective System; and Home Health Prospective Payment System Rate.

The Medicare Fraud Strike Force has found $223 million of alleged Medicare fraud, charging 89 individuals in eight cities , according to the Department of Health and Human Services.


The ACA established the Preexisting Condition Insurance Plan (PCIP) to provide health insurance coverage for Americans whose preexisting conditions made them uninsurable in the private market until 2014, when insurance that does not underwrite based on health status will become available. In February of 2013, due to the quick consumption of the program budget, HHS increased cost sharing under the program and suspended new enrollments in the federal program. Last week, HHS informed states that they would have to renegotiate their PCIP contracts and accept limited funding to continue their programs. Concerned that they would get stuck with the tab if they operated these plans themselves, 17 states opted to discontinue their programs and turn their enrollees over to the federal program, while 10 will continue to administer the PCIP in their states.

Two states that had planned to run their own state health exchanges have appealed to the federal government for help. The health insurance board chairmen in Idaho and New Mexico said they could not prepare the computer systems by October 1, 2013 and would need help from the federal government. Thirty-six states’ exchanges will now be run in full or in part by the federal government. New Mexico will run its exchange in partnership with the federal government. Though Idaho will receive assistance from the federal government, Idaho Gov. Butch Otter said it will still be a “state-run exchange.”

Pennsylvania Governor Tom Corbett pushed back last week against the Pennsylvania’s Independent Fiscal Office’s (IFO) report, which claimed Medicaid expansion would provide the state as much as $515 million in savings, revenue or underestimated costs to the state. Bev Mackereth, the Acting Secretary of the Department of Public Welfare, sent a letter to the Independent Fiscal Office explaining that the Department had “serious concerns” about some of the assumptions contained in the IFO report. One of Gov. Corbett’s top aides said that if Pennsylvania is to expand Medicaid, it likely will not happen until January 2015. Mackereth said that the administration would need that much time to negotiate with the federal government and create the program.

Four insurers – Aetna, CareFirst Blue Cross Blueshield, Kaiser Permanente and United Healthcare – are planning to offer almost 300 different health insurance policies through the D.C. Health Benefit Exchange.

On May 23, Maine’s Democratic-controlled legislature passed a bill to expand the state’s Medicaid program. Maine Governor Paul LePage (R) immediately began veto procedures.


On May 16, Liberty University argued before the 4th U.S. Circuit Court of Appeals panel that it would face millions of dollars in penalties if it were to refuse to provide employee health insurance. Providing the required insurance, however, would violate the university’s religious beliefs because it is required to cover contraceptives and other drugs the university argues cause abortions.

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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