Health Care Reform Implementation Update August 2014

by Cozen O'Connor

The Centers for Medicare and Medicaid Services (CMS) made announcements this week regarding the Open Payments system and the availability of Affordable Care Act (ACA) Consumer Assistance Program grant funds, issued a request for additional information to ACA enrollees with inconsistent data on their applications, and posted the responses it received to its Request for Information (RFI) regarding the evolution of the Accountable Care Organizations (ACOs). Also, the Department of Health and Human Services announced another significant appointee, and the Government Accountability Office (GAO) released a report regarding CMS’s Medicare claims review process.


On August 8, the GAO released a report that calls for increased CMS oversight of the Medicare claims review process. Recovery audit contractors review providers Medicare claims to ensure payments are proper. The report specifically recommends that CMS should increase its monitoring of the Recovery Audit Data Warehouse, the current database that CMS recovery auditors and other oversight contractors use for reporting and provide information on their reviews. According to the GAO report, the contractors do not always enter complete information on their reviews into the reports, which is necessary to ensure claim accuracy. GAO also highlighted concerns that some recovery audit contractors do not always comply with the requirement to communicate providers’ rights to those providers that may have claims under review. CMS commented that the agency has agreed to develop plans to address the issues outlined in the report.

CMS informed approximately 310,000 individuals who enrolled in the federally facilitated exchange and had citizenship and immigration data inconsistencies that they must provide proof of citizenship or legal residency status to the agency by September 5. CMS said that if proof is not provided in time, coverage for the individuals will be terminated by the end of September.

On August 13 in a Frequently Asked Questions document, CMS announced the availability of $5.3 million in unspent ACA Consumer Assistance Program grant funds from 2010. CMS said it would redistribute those funds to the states that received the grants in 2010. States will be able to use the funds to re-establish, continue or expand upon activities that they began with the 2010 grant funds that they had already received.

On August 14, CMS said that its Open Payments system was back on-line for health care providers to access, a little less than two weeks after the agency took the system down to investigate data issues. The website contains information on payments that physicians and teaching hospitals receive from drug and medical device makers. CMS suspects that approximately one-third of the records in the database still have errors and will not be included on the public version of the website.

CMS announced that it would allow special enrollment periods (SEPs) for individuals who had signed up for health coverage on but were denied either because of a system error or because they resided in a state that had not expanded Medicaid, initially had income below the poverty line, and then had their income increase. CMS is encouraging individuals who believe they are eligible to contact the federal marketplace to explain their situation. Once approved, a new SEPs will last 60 days.

Kevin Thurm, a former HHS deputy director during the Clinton administration and Citigroup executive, was appointed by HHS Secretary Sylvia Burwell as HHS’s senior counselor. In this role, Thurm will work closely with senior staff on “cross-cutting strategic initiatives, key policy challenges, and engagement with external partners.”

On August 19, the Treasury Inspector General for Tax Administration (TIGTA) publically released a report that highlights problems regarding the Internal Revenue Service’s (IRS) enforcement of the medical device tax. According to the report, there is a $117.8 million discrepancy between what was expected in tax revenue and what the IRS actually collected for the medical device tax in 2013. TIGTA reported that the IRS is still struggling to determine which manufacturers who owe the tax have paid it correctly and suggested that the compliance tools for ensuring proper collection be improved.


On August 8, Oracle Corporation, the primary developer of Oregon’s health exchange website Cover Oregon, sued the state agency operating the exchange for breach of contract (for failing to pay bills) in federal district court. The complaint Oracle filed also alleges that state officials promised to pay the company but have not done so. The state has also indicated that it may sue Oracle as well because of issues with the website.

On August 12, a federal district judge said that the state of Indiana and school corporations have standing to challenge the availability of premium tax credits for individuals enrolled in state-based exchanges. The courts dismissed the government’s argument, however, that the ACA employer mandate violates the state’s Tenth Amendment rights. Oral arguments are scheduled for October 9, 2014.

On August 18, the plaintiff in the Halbig case filed a brief with the U.S. Court of Appeals for the D.C. Circuit asking the court to deny the government’s request that the full court review last month’s decision by a three-judge panel of the court. Halbig wrote that the court should wait and see if the U.S. Supreme Court decides to accept a petition from a party in a case from the 4th Circuit that also considered the legality of premium subsidies for individuals receiving health coverage through the federal exchange.

On August 18, the 7th Circuit reversed a decision by a lower court that had ruled that Medicare could provide compensation to a Chicago teaching hospital for “pure research” provided in 1993, 1994, and 1996 — time unrelated to patient diagnosis or treatment. The appeals court agreed with HHS, which had argued that such payments could be denied under the ACA. Under the ACA, Medicare reimbursement for pure research is explicitly prohibited after 2001. However, the ACA did not specify whether such reimbursement was permitted for 1983 to 2001. In 2010, after passage of the ACA, HHS said in rulemaking that pure research was not reimbursable.


The National Business Group on Health announced the results of its annual survey of large employers. According to the survey, large employers are anticipating a 6.5 percent increase in health care costs for 2015 (not accounting for plan design changes). Approximately one-third of large employers are also planning to offer a consumer directed health plan (CDHP) as the only plan option available for employees in 2015. Last year, only 22 percent of large employers said they planned to only offer a CDHP for 2014.

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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