Manatt on Health Reform: Weekly Highlights #4

by Manatt, Phelps & Phillips, LLP

This week, the IRS announces relief for some taxpayers who received excess advanced premium tax credits; Indiana and Arkansas make major announcements on Medicaid expansion and Iowa’s Governor announces a shift towards Medicaid managed care.


IRS Offers Relief for Some Taxpayers Who Received Excess Advanced Premium Tax Credits

The IRS issued Notice 2015-09 allowing some individuals in 2014 who received excess advance premium tax credits (APTC) to waive their related liability payments for one year, helping smooth the transition to the first year of tax filing for ACA-related coverage. The relief will be applied to taxpayers who are otherwise current with their tax filing and payment obligations, have a balance due to the IRS resulting from excess APTC and who report the amount of excess APTC on their tax return.

CBO Reduces Estimates of ACA Coverage Costs in Budget and Economic Outlook Report

The Congressional Budget Office (CBO) estimates that the ACA’s health insurance coverage expansions will cost $571 billion between fiscal years 2015 and 2020, a 20% reduction from the Agency's prediction in March 2010. The reduction is primarily caused by a slowdown in healthcare spending and lower-than-anticipated premiums, according to CBO director Douglas Elmendorf. The CBO estimates that in total, ACA expansions will cost $76 billion in 2015 and $1,350 billion between 2016 and 2025. In addition, federal Medicaid spending is expected to rise by 11% in 2015 as more states expand Medicaid, and that enrollment in the program will reach 75 million by 2020. The Agency reduced its estimate of 2015 marketplace enrollment from 13 million to 12 million, primarily because of lower than expected November and December 2014 enrollment, and higher than expected attrition in 2014 plans.

Supreme Court to Decide Whether Providers May Sue States for Low Provider Reimbursement

The Supreme Court is hearing arguments in Armstrong v. Exceptional Child Center, a case hinged on whether Medicaid providers are permitted to sue states in federal court over enforcement of the Medicaid Act. The case originated in Idaho, where a group of providers sued the State’s Medicaid Agency for not implementing reimbursement rates sufficiently high to comply with federal payment requirements. While the providers argue that courts should decide such rulings because they are based on whether federal laws supersede conflicting state laws, the State argues that Congress has not authorized the suits and that HHS should hear them. Ruling in favor of the state could have negative implications on provider participation in Medicaid. The Justices appear divided on the case, according to Modern Healthcare.


Arkansas: Governor Announces Support for Continuation of Private Option Amidst Broader Health Reform

In his first major speech on healthcare, Governor Asa Hutchinson (R) announced his support to continue the State's Private Option approach to Medicaid expansion through the end of 2016, when the State's current 1115 waiver ends; the program must be reauthorized by a 75% supermajority during this legislative session in order to continue. After Governor Hutchinson's speech, Senator Jim Hendren (R) introduced SB96, which would:

  • Create the Arkansas Health Reform Legislative Task Force, responsible for studying an “alternative healthcare coverage model and legislative framework to ensure the continued availability of healthcare services for vulnerable populations” enrolled in the Private Option and broader reforms to the State Medicaid program;
  • Permit the State to apply for a federal waiver by July 2016 to “transform the Arkansas Medicaid Program into a program with maximum state flexibility in the use of the funds for innovative and cost-effective solutions for the provision of healthcare services”; and,
  • Eliminate Private Option enabling legislation requirements related to: (1) transitioning children enrolled in CHIP and parents with incomes less than 17% of the federal poverty level (FPL) into the Private Option and (2) imposing cost sharing on individuals with incomes less than 100% FPL.

California: Governor Appoints Jennifer Kent as Medicaid Director

Governor Edmund Brown (D) appointed Jennifer Kent as Director of the California Department of Health Care Services, which oversees the state's Medi-Cal program. If the appointment is approved by the State Senate, Kent would succeed Toby Douglas as Director, who will resign the position at the end of the month. Previously, Kent served in various positions in the private sector and state government, including a previous tenure in the Department as an Associate Director.

Indiana: CMS Approves Medicaid Expansion Under the Healthy Indiana Plan

Governor Mike Pence (R) announced CMS approval of the Healthy Indiana Plan 2.0 (“HIP 2.0”), which will expand Medicaid to adults under 138% of the federal poverty level (FPL) beginning on February 1. Under the approved plan, enrollees with incomes less than 100% FPL will have a choice to enroll in a “HIP basic” Medicaid benefit plan with required co-payments on some services, or to contribute sliding scale payments per month (not to exceed 2% of income) to a health savings account in order to access “HIP Plus.” HIP Plus includes enhanced benefits, such as vision or dental coverage, and only one co-payment on repeat non-emergency use of the emergency room. If an individual with income less than 100% FPL ceased paying contributions for HIP Plus, he would be automatically enrolled in the “basic” benefit package. All individuals with incomes above 100% FPL, on the other hand, are required to enroll in “HIP Plus” and contribute to the health savings account; these individuals may be disenrolled and “locked out” of coverage for six months for failure to pay into the account. In addition, HIP 2.0 will help pay employer sponsored insurance (ESI) premiums for Medicaid eligible individuals with access to ESI, and will refer program enrollees to State job training and job search programs. HIP 2.0 is expected to extend Medicaid coverage to 350,000 Indiana residents. An estimated 120,000 non-disabled adults currently enrolled in Medicaid or in the Marketplace in the State will also be transitioned into the Healthy Indiana Plan.

Iowa: Insurance Commissioner Recommends Liquidation of CoOportunity Health, Requiring Current Enrollees to Find New Coverage

Having taken CoOportunity Health off of the Marketplace and into rehabilitation earlier this month, Iowa Insurance Commissioner Gerhart announced his intent to ask the court to liquidate CoOportunity Health, having determined that the insurer cannot be rehabilitated. The liquidation is expected to occur at the end of February, and all current Iowa and Nebraska enrollees covered by CoOportunity Health will need to find new coverage beginning by March 1. Enrollees that had signed up for coverage by December 15 had not yet been required to find new coverage. Federal Senator Chuck Grassley (R) is leading an investigation into the Federal Government’s role in the matter and Representative Dave Loebsack (D) has asked for a hearing by the Energy and Commerce Committee.

Massachusetts: Governor Appoints Medicaid and Marketplace Directors, Elevates Medicaid Director's Position

Governor Charlie Baker (R) appointed Daniel Tsai as the Assistant Secretary for MassHealth, a newly elevated position that will report directly to the Health and Human Services Secretary and allow for greater coordination between the State's Medicaid program and other agencies. Previously, Tsai worked in private practice. Governor Baker also tapped Louis Gutierrez for the Executive Director position for the Massachusetts Health Connector. Gutierrez previously served in state government as the CIO for Governor Romney and has spent the last seven years at an IT consulting firm.

Nevada: Mental Health Services Costs to Drop Due to Medicaid Expansion

The Nevada Division of Public and Behavioral Health reported to a legislative committee that the cost to the Nevada general fund for the provision of needed mental health services will drop to $3.2 million from $10.5 million as a result of Medicaid expansion. Of the 12,000 patients cared for by the Department, 80% are now eligible for Medicaid versus only 23% prior to expansion, according to a report by the Division to the Nevada Senate Finance Committee and the Assembly Ways and Means Committee on the 2016/2017 Division budget.

New York: Governor Proposes Health Plan Issuer Fee to Sustain Marketplace

Governor Andrew Coumo's (D) Executive Budget includes an assessment on all individual, small group, and large group health insurance issuers to fund the operational expenses of the New York State of Health. The assessment, which would take effect on April 1, 2015 if the budget is passed, applies to issuers both on and off the Marketplace based on the gross premiums the issuer receives, excluding for Medicaid, Medicare, CHIP, or the Basic Health Program. The Governor's office estimates this assessment will result in an approximately $25 per premium per year fee.

Ohio: Governor Promotes Medicaid Expansion in Six-State Tour

Governor John Kasich (R), considered a contender for the next presidential election, discussed the benefits of Medicaid expansion with leaders in Utah, South Dakota, Idaho, Montana, Wyoming and North Dakota as part of a tour publicized as garnering support for a Balanced Budget Amendment; the tour has received broad coverage in the media, particularly due to Governor Kasich’s comment in Montana that refusing the expansion funding “on an ideological basis, when people can lose their lives because they get no help, doesn't make a lot of sense.” While Ohio’s expansion will be up for debate with Governor Kasich’s next budget proposal, House Speaker Cliff Rosenberger (R), a vocal opponent of expansion in the past, has expressed that he will not seek to repeal Medicaid expansion.

Pennsylvania: Governor Names Two New Cabinet Members

Newly elected Governor Tom Wolf (D) named Ted Dallas to be Secretary of Human Services and Karen Murphy to be Secretary of Health. Dallas is currently Secretary of Maryland's Department of Human Resources and Murphy is a nurse who previously served as CEO of Moses Taylor Health Care System in Scranton and is currently the director of the State Innovation Models (SIM) program at the Center for Medicare and Medicaid Innovation (CMMI).

Vermont: Marketplace Officials Expect $9.7 Million More in Costs than Anticipated

Officials from Vermont Health Connect (VHC) estimate the Marketplace will cost $9.7 million more than originally budgeted in the upcoming fiscal year, predominantly as a result of a mid-year IT vendor change and ongoing technology complexity, reports the Vermont Digger. The State General Fund would cover $3.5 million of the total request, while the remainder would come from the federal government through Medicaid global commitment money and direct grants. A bipartisan group of State lawmakers announced they will submit a bill to begin a transition from a State-based Marketplace to a Federally Supported State-based Marketplace, which, they indicate, would allow the State to operate its Marketplace while utilizing technology.


California: Judge Orders Medicaid Agency to Process Applications within 45 Days or Provide Temporary Coverage

A Superior Court judge ordered the California Department of Health Care Services to process Medi-Cal applications within 45 days, as is required in federal regulations. As reported by the Sacramento Business Journal, the ruling was in response to a lawsuit against the Medicaid agency's application backlog, which grew to more than 900,000 unprocessed applications in 2014 due to ongoing technology issues. While the agency has largely resolved these issues and now processes most applications within the time limit, the State will provide temporary Medi-Cal coverage to applicants who do not receive an eligibility determination within 45 days.

Iowa: Governor Proposes Shifting Medicaid to Managed Care

Governor Terry Branstad (R) announced a plan to use one or multiple managed care organizations (MCOs) to operate Iowa's Medicaid program, according to the Des Moines Register. Iowa currently uses two MCOs, though for limited Medicaid services. Full details of the plan are expected in March 2015, with the first contract beginning in January 2016. The Governor's office estimates this plan will save $51.3 million in the first six months.

Maryland: Governor Identifies Medicaid as Largest Spending Driver and Proposes Reduced Provider Reimbursement

In his “Budget Challenge” presentation, the newly elected Governor Larry Hogan Jr. (R) identified Medicaid as the largest single contributor to the total $300 million shortfall in the FY 2015 budget. He attributed the $200 million Medicaid deficiency to higher than anticipated health coverage enrollment, higher costs of new Hepatitis C drugs, and shortfalls in settlement payments from tobacco companies used for Medicaid spending. Further, he proposed using $45 million from the Maryland Health Insurance Program, the State’s high risk pool, to help offset the shortfall and enacting a 50% reduction to FY 2015 increases in provider rates. The Governor also identified Medicaid as the largest driver of baseline spending for FY 2016 and proposed reducing provider reimbursement to FY 2014 levels to slow this spending growth.

Wisconsin: Budget Proposal To Include Mandatory Drug Tests For Medicaid Recipients

Governor Scott Walker (R) announced that his proposed budget will require drug testing for beneficiaries of various public assistance programs. The Governor’s spokeswoman Laurel Patrick explained that the State will seek permission to test all childless adults on Medicaid and able-bodied adults using the State’s supplemental nutrition assistance program. Governor Walker also announced that the State will provide free substance abuse programs and job training for those who fail the drug test.


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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