Health Care Reform Implementation Update August 2014

by Cozen O'Connor

August recess has begun on Capitol Hill. Congressmen and women and senators are home in their districts and states, and Capitol Hill staffers are catching up on piled up work. Nonetheless, last week Congressman Kevin Brady (R-Texas) released a discussion draft of a bill that intends to stem waste, fraud and abuse in Medicare. The Centers for Medicare and Medicaid Services (CMS) released final payment rules for inpatient hospitals and hospice providers and announced that it would be restarting their recovery audit contractor program; and the Department of Health and Human Services (HHS) announced grant awards to states for the Home Visiting Program, which was established under a provision in the Affordable Care Act (ACA).


On August 7, House Ways & Means Health Subcommittee Chair Rep. Kevin Brady (R-Texas) released a discussion draft of a bill he intends to introduce regarding Medicare waste, fraud and abuse. The bill, the Protecting Integrity in Medicare Act of 2014, includes security provisions for social security numbers and provider education initiatives, locks those beneficiaries with a high risk of abusing prescription drugs into particular pharmacies to cut down on prescription drug abuse, and expands the already existing prior authorization demonstration for scheduled ambulance trips. Congressman Brady used data from the recent Medicare Payment Advisory Commission (MedPAC) report that pointed to $44 billion in improper payments to providers due to incorrect or fraudulent Medicare payment claims to support the need for the bill. According to Rep. Brady, the bill includes ideas from bipartisan members of the committee.


On August 4, the CMS released final payment rules for inpatient hospitals and hospice providers. Under the inpatient hospital final rule, Disproportionate Share funds, which help to reimburse uncompensated care costs for hospitals that serve a significant number of low-income patients, are reduced. Though DSH payments are reduced, inpatient hospital payments are increased by 1.4 percent for some acute care hospitals, payments to long term care hospitals will increase by 1.1 percent or an estimated $62 million for fiscal year 2015 under the final rule. CMS chose not to replace or revise its controversial “two midnight” provision in the rule.

Under the hospice final rule, payments to hospice providers will increase by an estimated 1.4 percent in fiscal year 2015, an amount equal to $230 million. Hospice providers will also be required to notify CMS within five days of a beneficiary’s choice to use the Medicare hospice benefit, as opposed to the three-day requirement that was included in the proposed rule from earlier this year. If the notice is not filed within five days of the beneficiary’s decision, the hospice provider itself, rather than CMS, will be responsible for the costs of care during the time between the beneficiary election and when the notice was filed.

Also on August 4, CMS announced that it would restart its Recovery Audit Contractor (RAC) program on a limited basis, after putting the program on hold earlier this year. The RACs would be permitted to conduct a small number of automated and complex claims reviews including those related to spinal fusions, outpatient therapy services, durable medical equipment, and cosmetic procedures. CMS said that the RACs would not be auditing short inpatient stay claims under the restart. The agency is in the process of procuring new RAC contracts.

On August 7, CMS announced that it would delay the review deadline of its Open Payments System, which provides information on payments that doctors receive from drug and medical device makers. The agency said that the delay was needed to investigate reported issues with some of the payment data. Earlier last week, the American Medical Association and more than 100 other physician groups asked CMS for a six-month delay in the publication of the database, which the agency had previously intended to publish on September 30.

The Treasury Department’s Inspector General for Tax Administration (TIGTA) released the results of its investigation examining the IRS’s accuracy in providing taxpayer information to exchanges. TIGTA found that during the month of October 2013, the IRS was 100 percent accurate in verifying the maximum monthly premium tax credits that an individual could be eligible for under the ACA, and over 99.9 percent accurate in verifying household income and family size.


On July 31, the parties who lost in King v. Burwell, filed a petition with the U.S. Supreme Court asking the Court to review the case. In the case of Halbig v. Burwell, the Department of Justice, which lost in that U.S. Court of Appeals for the District of Columbia, filed a review petition with the U.S. Court of Appeals for the District of Columbia asking for a rehearing before the full appellate court. The maneuvers were the result of the July 22 rulings from the two appeals courts, which came to different conclusions on the legality of the federal government providing premium subsidies for individuals receiving health coverage through the federal exchange. In Halbig v. Burwell, a three-judge panel at the U.S. Court of Appeals for the District of Columbia held that the government could not provide such subsidies to states using a federal exchange instead of a state exchange, while in King v. Burwell, a panel at the U.S. Court of Appeals for the 4th Circuit said that it could.

On August 4, Sen. Ron Johnson (R-Wis.) filed an appeal for his lawsuit in which he challenged the policy that required congressional lawmakers and their staff to obtain government-subsidized health coverage through exchanges. His suit had been dismissed last month.

On August 7, the U.S. Court of Appeals for the 9th Circuit dismissed a lawsuit regarding the Independent Payment Advisory Board (IPAB), which was created under a provision in the ACA to provide oversight of Medicare spending to prevent the program from becoming insolvent. President Obama’s administration has yet to nominate any members to the IPAB, even though the panel’s work was slated to begin this year. The lawsuit was brought by two individuals who claimed that the potential cuts to Medicare, which may be proposed by IPAB, would cause them harm, and that IPAB itself is unconstitutional. The U.S. Court of Appeals for the 9th Circuit dismissed the case on the grounds that IPAB has not yet been formed, and therefore any potential cuts to Medicare payments are “highly speculative.” The appeals court did not address the constitutionality issue.


The District of Columbia received its third grant from the Department of Health and Human Services (HHS) to continue the development of its ACA exchange. The Level One establishment grant will be used on several projects to support the ACA exchange and will boost security and IT infrastructure for the online exchange. The grant award for this third round was $25.8 million.

On August 5, Indiana state officials met with members of the Potawatomi Indian tribe to discuss ways in which to improve the state’s Medicaid waiver plan, HIP 2.0. On July 17, CMS sent a letter to Indiana officials notifying them that their Medicaid waiver application was incomplete because the state officials had not consulted with tribal representatives. The state officials were directed by CMS to meet with the Potawatomi representatives to resolve this issue.

On August 4, HHS announced that it would be providing funds to states for the ACA's Home Visiting Program. The grants will expand home visiting services to some pregnant women and parents with children under five. Forty-six states and the District of Columbia will receive a combined $106.7 million in these grants, and the program will be administered by HHS’s Health Resources and Services Administration.

State officials in Massachusetts announced that they will discontinue their efforts to merge with the federal health insurance exchange, Maydad Cohen, the state official managing the state’s own health care exchange, said that the state’s online exchange “works” and after a meeting with CMS Administrator, Marilyn Tavenner, both agreed that the state should continue with their efforts to build and improve upon the existing site.

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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