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A Republican Alternative to the Affordable Care Act

Almost four years after the enactment of the Patient Protection and Affordable Care Act, three Senate Republicans have unveiled their own version of a health care reform bill. ​The measure, introduced Monday by Senators Richard Burr (N.C.), Tom Coburn (Oklahoma) and Orrin Hatch (Utah), contains some similarities to the ACA, but (as one would expect) a number of differences as well.

As with the ACA, low- and middle-income Americans would receive tax subsidies to help them buy insurance. Those who decide not to buy insurance would also face potential financial pain. However, rather than a tax penalty (which is the case under the ACA), the Republican plan would permit insurers to charge them more for pre-existing conditions when they finally do buy coverage. Insurance carriers would not be able to exclude pre-existing conditions or charge more for them for individuals who maintain continuous coverage.

The Real Health Care Reform Isn't Waiting Until 2014

Sarah Kliff of the Washington Post reports:

There are two big parts of the health reform law going into effect today. One penalizes hospitals if patients are re-admitted to the hospital within one month of a visit for a condition that should have been dealt with on the first trip. The other seeks to redistribute higher Medicare payments to the hospitals that are delivering better care.

Both are part of an effort to fundamentally transform the health-care system in the United States by moving it from a system that pays for value rather than volume. If efforts like these succeed, hospitals will become more concerned with delivering higher quality health care. If they don’t, health providers will continue to earn a living the way they have for decades: By earning a fee for every service they deliver.

via www.washingtonpost.com

When most of us talk about the health care reform law, we tend to focus on the insurance changes -- the exchanges, the individual mandate, the essential health benefits, and so on. Arguably, however, the more important changes are reforms like the ones described here.

The health care economists that I read uniformly cite America's traditional fee-for-service model as one reason for runaway health care costs. The equation is simple: The health care provider performs a test or procedure, and someone pays him for it. It doesn't take a great deal of thought to realize that performing more procedures and tests produces more payments to the provider.

I am not so cynical as to think that doctors perform unnecessary tests and procedures just to boost their incomes. They order these things because they believe there are sound medical reasons for doing so. However, the medical-only perspective may not necessarily contemplate a cost-benefit analysis of a test or an operation.

The goal behind these reforms is to get hospitals and doctors to ask, at least more often: How much good will this (test/procedure/treatment) do? How much will it cost? Given the cost and the odds of failure, does it make sense to go forward with it? What will the outcome be for the patient of going forward vs. not going forward?

Whether these changes will result in slowing down the growth of costs while improving patient outcomes is anyone's guess. If it works, look for a lot of similar changes to come over the next 10 years. It should be interesting to see.

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Health Care Reform Primer -- Q&A's, Part 2

[author: Robert Ellerbrock]

Questions continue to pour in about how to work with the mechanics of the Health Care Reform.  We list a few here that might help guide your group health plan administration:

How would several 10-15 hour per week employees be defined?

For purposes of determining large employer status, an employer would aggregate part-time employee and then divide by 30 to determine the number of full-time equivalents.  Part-time employee hours are used to determine the full-time equivalent for purposes of determining of an employer is "large," but the employer does not have to pay a penalty for part-time employees.  

Once an employer drops a plan and pays the penalty, are employers able to reinstate a plan in future years, or are plans no longer an option once the employer has paid the penalty?  

The employer would be able to start a new plan.  Once the employer offers qualifying health coverage, the penalties would cease. 

When is the non-discrimination clause effective?

Health Care Reform initially required compliance with the nondiscrimination rules for insured plans for plan years beginning on or after September 23, 2010.   However, IRS Notice 2011-1  provides that employers can postpone compliance until the agencies have issued regulations or other guidance regarding the rules.

Will the employees need to enroll their dependents to avoid the penalty when they file their taxes?

Dependents will be required to have coverage, although the coverage does not have to be through the employer’s plan.

via www.jdsupra.com

More Q&A's on health care reform from the law firm of Constangy, Brooks & Smith, LLP. See my previous post for part one.

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Health Care Reform Primer -- Q&A's, Part 1

Just yesterday, our colleagues Dana Thrasher and Bob Ellerbrock conducted a webinar that discussed the impact on company operations, now that the United States Supreme Court has weighed in on health care reform in its June 28 decision.  That webinar prompted some pressing questions, some of the general ones are here (more complex fact patterns need more analysis than a Q&A can provide).  We edited listeners' questions only for clarity.  Yet, this is what people in the field want to know -- the practical details tied to daily operation of health plans, at this juncture:

Is the part-time employee aggregate penalty applicable if we offer health benefits to only full time employees­?

All employees, whether part-time or full-time, are counted towards the Full Time Equivalent (FTE) total.  Once the employer gets the FTE total, it subtracts the first 30 FTEs, to arrive at the total FTEs against which to multiply the $2000 penalty.

­Is the 50 employee threshold assessed by EIN (employer identification number) or by commonly owned entities?  If you have one owner of two S-Corps each with 30 FTE, are you a large employer?­

The FTE count is across control group members.  One owner of two S-Corps in your example would have 60 FTEs.

­Do vacation hours count towards FTE calculations?­

Yes.  We believe that any paid working hours are counted towards FTE calculations.

The “penalty” only applies to large employers." Please define "large employer."

A large employer is one with 50 FTEs or more.  An FTE is one who works 30 hours or more.  Part-time employee hours are added to determine FTE count.  Three part-time employees who work 10 hours each becomes one FTE.

­If an employee refuses insurance offered by employer, and wants to purchase insurance through an exchange, will the employer be required to assist in the payment voucher through the exchange?

No.  If the employee declines the employer’s plan, the employer has no payment obligation with respect to the exchange.

via www.jdsupra.com

I stumbled on this blog today completely by accident (thank you, Twitter!). This law firm is answering some quite nitty-gritty questions about the Affordable Care Act. I'm posting part one in its entirety here. Part two will be the substance of my next post.

I encourage all you have an interest in this subject to check out the blog.

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Health Care Reform Primer: The U.S. Supreme Court

It's 5:10 P.M. on Thursday, June 28, 2012, and unless you've completely avoided all forms of electronic communication today, by now you know that the U.S. Supreme Court ruled today that most of the Patient Protection and Affordable Care Act is constitutional. The court's decision marked the end of a legal fight that began literally on the day the president signed the law -- state attorneys general filed lawsuits to block it before the ink was dry.

I heard a commentator say that the court essentially said, "This is no longer a legal question -- it's a political one. Mr. President, Congress -- you work it out." How they work it out is no clearer tonight than it was this morning. Supporters and opponents of the law both feel very passionately about their positions. It would have a been an issue in this fall's elections in any case, but today's events have certainly elevated it. From now until November 6, we will have one long national conversation (or, unfortunately but more likely, a shouting match) over the direction the U.S. health care system should take. There seems to be consensus that the current system is not sustainable in the long run. How it should change is a question that is far from settled.

I started this primer to bring out the facts about the law. It hasn't been easy, and it's really not finished. The law is very complex, and once I finished the insurance changes, my motivation for slogging on declined considerably. Now that the court has given it a grudging seal of constitutional approval, I will wade back into the PPACA waters from time to time. I would like to review the cost-control provisions in the law (beyond the IPAB, which was the subject of three posts a few weeks ago.) Judging from the table of contents, there is much in the law that has little to do with insurance and much to do with attempting to raise the quality of care that patients receive and limit the amount of money that payers have to fork over for it.

No one will ever describe this law as perfect, and I believe that both its supporters and detractors make valid points. However, as of this morning, we can describe it as constitutional, at least in the opinions of five voting justices of the Supreme Court. It's not enough to settle the argument, but it's a start.

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Health Care Reform Primer: Independent Payment Advisory Board (Part 3)

This is the third part in my examination of the controversial Independent Payment Advisory Board, created by the Patient Protection and Affordable Care Act. Part one explained who is on the board and what their qualifications must be. Part two looked at what the board can do. The IPAB develops proposals and submits them to the president and the Congress. What happens next?

Starting in 2014, the IPAB must submit a proposal to the president and Congress by January 15 if the chief actuary of the Centers for Medicare & Medicaid Services has projected that Medicare costs will grow faster than the targeted rate or that medical inflation will grow faster than consumer inflation. The proposal must contain recommendations for meeting the savings target, along with explanations and justifications for them. It must also contain an actuarial opinion from the chief actuary, certifying that the proposal will meet its objectives. Finally, the proposal must contain an actual legislative proposal for implementing the recommendations, and any other information the board deems appropriate. If the IPAB fails to make this proposal, the federal Department of Health and Human Services must do it. The president then has two days to submit the proposal to Congress.

Once Congress receives it, the proposal is formally introduced in each house as a bill and referred to the appropriate committees (Ways and Means and Energy and Commerce in the House; Finance in the Senate.) The committees must report the bill with Medicare-related amendments by April 1. The IPAB's recommendations cannot be repealed or changed in ways that would cause them to miss the savings target or increase Medicare spending.

The recommendations go into effect unless three-fifths of the voting members of each house vote to reject them. Significantly, the bill cannot be filibustered in the Senate, and there are specific time limits for Senate debate on amendments to the bill. If Congress does not override the recommendations, HHS must implement them by August 15 of that year.

And that's the IPAB. Essentially, Congress has admitted that it's not capable of controlling Medicare spending through the normal legislative process, so it has ceded the work to a Federal Reserve-like commission. Congress still has the last say, but a large majority of members must agree to reject the recommendations to stop them from becoming law.

To be sure, Medicare is a very politically sensitive program; the people who benefit from it tend to vote in greater proportion than do their younger fellow citizens. Reports that Congress is "cutting Medicare" tend to alarm them, and they respond accordingly. Consequently, Congresses for the last 47 years have tended to expand Medicare, not reduce it. The most recent example was the addition of the prescription drug benefit nearly 10 years ago.

On the other hand, making decisions about the best way to allocate public funds is kind of the Congress's job. Is the IPAB an admission of failure by our national legislative body? Yes, the members of IPAB are subject to Senate confirmation, but does it not still represent a large delegation of power to people who do not appear on any ballot?

Also, given the constraints on the IPAB (no rationing, no benefit cuts, no increased deductibles or co-pays), its recommendations will be limited to procedural and medical practice reforms. How many options will it really have? Can it be effective with these constraints? The great thing about being a blogger is that I can ask all kinds of rhetorical questions for which I have no clue as to the answers. 

I will say this: The IPAB is not socialism. Socialism is government ownership of the means of production and allocation of the goods and services produced. IPAB is just a method for government to attempt to get a handle on the costs of one of its three largest programs (Social Security and national defense being the other two.)

"Faceless bureaucrats" are not going to look at grandma's medical file and decide she doesn't need that heart valve repair. However, I can see them them deciding that paying for some medical treatments does not make sense in some cases because the evidence shows that the treatments are ineffective for certain groups. Is it rationing if the IPAB recommends against having Medicare pay $5,000 per year per patient for a certain diabetes drug if the evidence shows that the drug lengthens lifespans by more than six months for only 15 percent of patients? Or is that prudent decision-making? And would my answer change if the patient in question is my grandma? It's not hard to imagine the answer being "yes" to all three questions.

Health care spending is a difficult topic, which is why we as a country have struggled so much with it. If a state government decides not to build a new highway or resurface an old one, the effects may be tragic for my car's suspension but not for the vast majority of people. If government (which already pays for half the health care in the U.S.) decides not to cover a certain medical procedure, someone's life will change and perhaps end.

I don't know whether IPAB is the best way to control Medicare costs, but there's no denying that growing Medicare costs are a national problem. When people complain about runaway government spending, whether they realize it or not, they're talking about Medicare. And let me be clear -- Medicare is one of the programs that makes this country great. A great country takes care of its senior citizens, and the U.S. is a great country. But Medicare is incredibly expensive, and we must do a better job of managing it. No one likes higher tax bills, and no one likes being denied medical care. Until we work out a good balance between the two, we will continue to struggle.

I will now climb down off my soapbox and turn the discussion over to you. What do you think? Is IPAB worth trying or is it a horrible idea? I'd love to hear your thoughts. I just ask that you keep the discussion civil and respectful. We're all Americans who want what's best for our country. 

Chime in when ready.

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Health Care Reform Primer: Independent Payment Advisory Board (Part 2)

Last time, I started the examination of the Independent Payment Advisory Board in the Patient Protection and Affordable Care Act by discussing what it is and who its members will be. Now let's look at its actual duties.

The process will start each year (beginning in 2013) by April 30, when the chief actuary of the Centers for Medicare & Medicaid Services must determine whether the projected Medicare per capita growth rate for the year after the next will exceed a target growth rate. If it will, then the IPAB is charged with developing a proposal with recommendations for achieving cost savings. Before 2018, the target growth rate is the average of the projected percentage increase in consumer inflation and consumer medical inflation. After 2017, the target growth rate will equal the projected growth rate in per capita nominal gross domestic product plus one percent (nominal GDP does not separate the effect of inflation.)

If the projected Medicare growth rate will exceed the target, the chief actuary must calculate a savings target. This will equal a stated percentage of projected total Medicare spending -- the lesser of the percentage in excess of the target, or 0.5 percent in 2015;1.0 percent in 2016; 1.25 percent in 2017; and 1.5 percent in years thereafter. 

Starting in 2014, the IPAB by January 15 may submit an advisory report to Congress on Medicare issues. In addition, in those years for which the actuary has set a savings target, the IPAB must develop and submit a proposal containing recommendations to reduce the Medicare per capita growth rate to meet the savings target. Their proposals are subject to the following restrictions:

• They cannot recommend health care rationing, increased revenues or Medicare beneficiary premiums, increased Medicare benefciary cost-sharing (including deductibles, coinsurance, and co-payments), or otherwise restrict benefits or modify eligibility criteria.
• Before 2019, they cannot recommend new reductions in payments to service providers and suppliers.
• They may recommend reduced payments under Medicare Parts C and D, such as direct subsidies to Medicare Advantage and prescription drug plans that are related to administrative expenses and profit.
• They may make recommendations only with regard to the Medicare program.
• Their recommendations may be designed to help reduce the growth rate in per capita health care spending while maintaining or enhancing beneficiary access to quality care.

When developing its proposals, the IPAB must, "to the extent feasible":

• Give priority to recommendations that extend Medicare solvency
• Include recommendations that improve the health care delivery system and health outcomes, and protect and improve Medicare beneficiaries' access to necessary and evidence-based items and services, including in rural and frontier areas
• Target Medicare spending reductions to sources of excess cost growth
• Consider how changes in payments to providers will affect beneficiaries
• Consider the unique needs of those eligible for both Medicare and Medicaid
• Consider the findings in an annual report on system-wide health care costs, patient access to care, utilization, and quality-of-care.

The proposals cannot result in an increase in total Medicare spending beyond what would have occurred with no action over a 10-year period.

What happens to this proposal after it leaves the IPAB? That will be the subject of part 3. Stay tuned.

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Health Care Reform Primer: Independent Payment Advisory Board (Part 1)

It has been months since I added anything new to the health care reform primer. I covered virtually all of the insurance-related provisions last year, and the remainder of the Patient Protection and Affordable Care Act, while still important, is less relevant to IIABNY members. However, one of my original reasons for doing this series of posts was to combat the spread of misinformation about the law. I still feel that, while reasonable people may support it or despise it, they should take those positions based on what is actually in the law's text, not on what talk radio or letters to the editor say.

One provision that has been the source of frequent criticism is the creation of an Independent Payment Advisory Board (IPAB). The IPAB has been referred to as "the real death panel, the true seat of rationing, and the royal road to health-care socialism." Others have called it "the most promising cost control in the Affordable Care Act..." The rapid rise of health care costs is one of the problems the PPACA is supposed to address. So, is the IPAB part of the solution, or is it the first slide down the slippery slope of health care rationing? 

In this series of blog posts, I will summarize what the law says and leave it to you to decide whether this is good or bad. I expect that readers will differ on their conclusions, but at least you will know what the facts (as reflected in the law's text) are. For reference, all provisions relating to IPAB are in Title 42 of the United States Code, Section 1395kkk. 

What is the IPAB?

The IPAB is an independent board within the federal government charged with developing and submitting proposals containing recommendations to reduce the growth rate in per capita Medicare costs in any year in which the projected growth rate exceeds a target rate. (see subsection (b))

Who will sit on the IPAB?

The IPAB will have 15 members, nominated by the president and subject to confirmation by the Senate. The secretary of Health and Human Services, the administrator of the Center for Medicare & Medicaid Services, and the adminstrator of the Health Resources and Services Administration will be non-voting members. The members must have national recognition for their expertise in:

• Health finance and economics
• Actuarial science
• Health facility management
• Health plans and integrated delivery systems
• Reimbursement of health facilities

Other qualified individuals include allopathic and osteopathic physicians, other health service providers, those in related fields, "who provide a mix of different professionals, broad geographic representation, and a balance between urban and rural representatives." Health service providers cannot make up the majority of the board members.

Members will serve six-year terms and may serve up to two consecutive full terms. The chair of the board is also subject to confirmation by the Senate. (All of this is in subsection (g))

What power does the IPAB actually have? That's the subject of tomorrow's post.

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Health Care Reform Primer: Linking Payment to Quality Outcomes in Medicare

Time for another issue of Health Care Reform Primer, and this time we'll get started on Title III, Improving the Quality and Efficiency of Health Care. Subtitle A, Transforming the Health Care Delivery System, is made up of three parts. Today, we'll look at Part 1--Linking Payment To Quality Outcomes Under the Medicare Program.

• The Department of Health and Human Services must create a program under which hospitals that meet certain performance standards can receive value-based incentive payments each year, starting in October 2012.
• Physicians whao fail to satisfactorily submit data on quality measures for their services will see their Medicare reimbursements reduced by 1.5 percent in 2015 and 2 percent starting in 2016. Long-term care hospitals, in-patient rehabilitation hospitcals and hospice programs will also see their reimbursements cut by two percent starting in 2014 if they fail to submit their quality data.
• HHS has the option to make physician participation in a Maintenance of Certification Program and successful completion of a practice assessment part of the quality of care measures on which Medicare reimbursements will be based. 
• Cancer hospitals will have to submit quality data starting in 2014, and this data will be available to the public.
• HHS must develop a plan for a value-based purchasing program for Medicare payments to skilled unrsing facilities, home health agencies, and ambulatory surgical centers. 
• Starting in 2015, physician reimbursements under Medicare will be modified to reflect the quality of care provided compared to the cost of care.
• Starting in 2015, Medicare payments to hospitals will be adjusted to reflect the rate of health conditions patients acquire during their admissions to the hospital.

Next time: The national strategy to improve health care quality.

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Health Care Reform Primer: Public Programs

Title II of the federal Patient Protection and Affordable Care Act is titled Role of Public Programs. Since it does not relate to private insurance or employer-sponsored plans, I won't spend a great deal of time on it. Some of the high points:

• Individuals with incomes under 133 percent of the poverty line are eligible for Medicaid, starting in 2014. The federal government will reimburse the states for 100 percent of the additional cost until 2017, between 30 and 35 percent in 2017 and 2018, and 32.3 percent starting in 2019. States may phase in eligibility for lower-income individuals sooner if they wish, and they may also choose to make individuals with incomes above 133 percent of the poverty line eligible. States recovering from major disasters may be eligible for increased federal assistance with their Medicaid costs. Medicaid must provide at least the minimum essential benefits.
• States will receive increased federal assistance for the Childrens Health Insurance Program (CHIP) from fiscal years 2013 through 2019. 
• States must simply enrollment procedures for Medicaid and CHIP and coordinate them with the exchanges.
• Medicaid will provide coverage for freestanding birth center services.
• States will have the option to designate certain needy groups as eligible for family planning services.
• States have the option of providing medical assistance for home and community-based attendant services for certain low-income individuals. Federal funds are available to help states cover the cost of aging and disability resource centers.
• The Medicaid prescription drug rebate percentage is increased and the types of excluded drugs are reduced. Reimbursement rates for pharmacies are increased.
• Payments to hospitals to cover the cost of treating uninsured patients will be reduced once the percentage of uninsured individuals is reduced to a certain threshold.
• Health care quality will be measured and payments adjusted based on the quality of care provided.
• There are a number of "demonstration projects" designed to test reforms as to whether they improve quality and reduce costs.
• American Indians and native Alaskans enrolled in coverages through exchanges have no cost-sharing if their incomes are below three times the poverty line.
• Maternal, infant and early childhood home visiting programs are strengthened, with improved coordination of services and assessments of high-risk populations.
• There is increased support for services, education and research on postpartum depression. States will receive funding for "personal responsibility education."

Yikes! This section of the law is incredibly long and complex. To be candid, I don't think there's any way a mere mortal could understand all of this. When people say the bill was too large and too complex, this is what they mean. I understand why the administration and the majorities in Congress felt it was advantageous to pass one, sweeping comprehensive bill, but a good argument can be made for considering these changes individually.

My head hurts and it's time to go home. Until next time...

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