As has been widely reported, on July 22, 2014, two circuit court panels handed down conflicting decisions on whether ACA insurance premium tax credits are available for insurance purchased on federal, rather than state, insurance Marketplaces/Exchanges. On the one hand, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled 2-1 that insurance tax credits established by the ACA are “unambiguously: restricted to insurance purchased on Exchanges “established by the State.” The Court therefore vacated IRS regulations making tax credits available as a form of subsidy to individuals who purchase health insurance on an Exchange established by the federal government. Hours later, a three-judge panel of the Fourth Circuit Court of Appeals ruled unanimously that IRS can indeed extend credits to federal Exchanges; given that the “applicable statutory language is ambiguous and subject to multiple interpretations,” the IRS determination is “a permissible exercise of the agency’s discretion.” The Obama Administration will seek an en banc hearing before the D.C. Circuit, but the issue may ultimately be left to the Supreme Court. At stake is the continued availability of subsidies for individuals purchasing health insurance in the 36 states where the federal government – rather than the state -- operates the health insurance Exchange.
Reed Smith Analysis and Overview of the Medicare Shared Savings Program for Accountable Care Organizations
The Centers for Medicare & Medicaid Services’ (“CMS”) Medicare Shared Savings Program final rule offers potential opportunities as well as risks to health care providers and suppliers interested in forming accountable care organizations (“ACOs”). While the core principle of the Medicare Shared Savings Program is simple—reward improvements in quality and cost containment through a share of the resulting savings—the regulatory and operational requirements associated with the program are much more complex.
Reed Smith attorneys have prepared a comprehensive Client Alert summarizing and analyzing the final rule, focusing on provisions we believe are of greatest interest to health care providers and medical device and pharmaceutical manufacturers. We also summarize companion guidance documents published by various federal agencies, including the Office of Inspector General, the Department of Justice, the Federal Trade Commission, and the Internal Revenue Service. Our Alert details changes from the proposed rule, discusses CMS’s response to public comments, identifies the practical impact of the final rule, and flags questions and concerns associated with the program.
In addition, Reed Smith will be hosting a teleseminar on this topic Wednesday, December 7, 2011. For more information or to register for this program, please click here.
Click here to read the full Alert (PDF).
The IRS has issued updated guidance to drug manufacturers on the Affordable Care Act’s annual fee imposed on covered entities engaged in the business of manufacturing or importing branded prescription drugs. The guidance addresses submission of required information, IRS notification of covered entities of their preliminary fee calculation; submission of error reports for the dispute resolution process, and notification of final fee calculations. Among other things, the guidance provides that:
- Each covered entity that elects to submit a completed Form 8947, “Report of Branded Prescription Drug Information,” for the fee year 2012 (reporting sales for the sales year 2010) must do so by December 15, 2011.
- IRS will mail each covered entity a paper notice of its 2012 preliminary fee calculation by April 2, 2012. This mailing will include an NDC attachment that lists the covered entity's NDCs and the sales data reported to the IRS by each governmental program.
- A covered entity may request a CD-ROM with the NDC attachment in an Excel spreadsheet. The request must be made by March 1, 2012 by telephone or by e-mail.
- If a covered entity wishes to submit an error report regarding its preliminary fee calculation it must do so by May 16, 2012. To file an error report, the covered entity must use the template on a CD-ROM that was mailed to it with its preliminary fee calculation.
- IRS will notify each covered entity of its final fee calculation for 2012 by August 31, 2012.
- The covered entity must pay this fee by September 30, 2012.
Today the Centers for Medicare & Medicaid Services (CMS) released its long-awaited final rule to implement the Medicare Shared Savings Program as authorized by Section 3022 of the Affordable Care Act (ACA). The Shared Savings Program is intended to encourage physicians, hospitals, and certain other types of providers and suppliers to form accountable care organizations (ACOs) to provide cost-effective, coordinated care to Medicare beneficiaries. Under the final rule, an ACO that meets established quality and performance standards and surpasses a minimum savings target will be able to share a percentage of savings (in addition to traditional fee-for-service payments under Medicare Parts A and B). While the ACA requires CMS to "establish" the Shared Savings Program no later than January 1, 2012, CMS has indicated that it will begin accepting applications for the Shared Savings Program January 1, 2012, but the start date will be later in 2012. In the final rule, CMS made a number of notable changes to the proposed rule, as highlighted after the jump.
The Patient Protection and Affordable Care Act (“PPACA”), enacted in March 2010, requires that the Secretary (“Secretary”) of the Department of Health & Human Services (“HHS”) establish a Medicare “Shared Savings Program” by January 1, 2012. The Shared Savings Program is intended to encourage physicians, hospitals, and certain other types of providers and suppliers to form accountable care organizations (“ACOs”) to provide cost-effective, coordinated care to Medicare beneficiaries. Physicians, hospitals, physician groups, other providers, policymakers, and many other stakeholders in the health care industry have eagerly anticipated the issuance of the ACO proposed rule. On March 31, 2011, under the authority of the Secretary, the Centers for Medicare & Medicaid Services (“CMS”) issued the proposed rule.
Reed Smith attorneys and analysts have prepared a comprehensive Client Alert which first provides a brief overview of the ACO model, then summarizes the proposed rule, listing areas of comment solicited by CMS and identifying the practical impact of the proposed rule, as well as questions and concerns that may emerge. Finally, this Client Alert summarizes the jointly issued CMS and OIG notice with comment period discussing the waiver of the physician self-referral law, the anti-kickback statute, and certain provisions of the civil monetary penalty law in connection with the Medicare Shared Savings Program. The Alert provides a summary and analysis of those provisions of the proposed rule and the proposed waiver that we believe are of greatest interest to health care providers, and medical device and pharmaceutical manufacturers. Click here to read the full Alert (PDF).
On March 23, 2011, the Centers for Medicare & Medicaid Services (CMS) published a notice announcing that the 2011 Medicare application fee for institutional providers (excluding physicians and nonphysician practitioners) is $505. Note that CMS has adopted a broad definition of institutional entities subject to the application fee; it applies to “any provider or supplier that submits a paper Medicare enrollment application using the CMS-855A, CMS-855B (not including physician and nonphysician practitioner organizations), CMS-855S or associated Internet-based PECOS enrollment application.” As authorized under CMS’s February 2, 2011 final Medicare/Medicaid/CHIP provider screening rule, institutional providers must pay the application fee when enrolling in Medicare, revalidating their Medicare enrollment, or adding a new Medicare practice location, effective March 25, 2011. Likewise, effective March 25, 2011 prospective or re-enrolling Medicaid or CHIP providers must submit the applicable application fee unless: (1) the provider is an individual physician or nonphysician practitioner; or (2) the provider is enrolled in Medicare or another state’s Medicaid or CHIP program and has already paid an application fee. The application fee will be used to fund new provider screening tools, such as unannounced site visits, background checks, and fingerprinting, and other program integrity efforts. The provider screening rule established a hardship exception process and allows Medicaid to waive the fees in certain circumstances. CMS also has released information on the mechanics of making application fee payments. For more information about the rule, see Reed Smith’s alert.
CMS Final Rule Expands Medicare/Medicaid/CHIP Provider and Supplier Screening Requirements Under Affordable Care Act Authority
On February 2, 2011, the Centers for Medicare & Medicaid Services (CMS) published a final rule with comment period (Final Rule) implementing provisions of the Affordable Care Act (ACA) that strengthen provider and supplier screening provisions under Medicare, Medicaid, and the Children's Health Insurance Program (CHIP). The rule is effective March 25, 2011, as mandated by the ACA (although CMS is delaying the effective date of a provision requiring fingerprint-based criminal history record checks for certain providers until after additional subregulatory guidance is issued).
Among many other things, the Final Rule applies various screening tools, including unannounced site visits, background checks, and fingerprinting, based on the level of risk associated with different provider and supplier types. The Final Rule also: imposes application fees on institutional providers and suppliers; authorizes CMS and states to impose moratoria on new provider enrollment to protect against a high risk of fraud; authorizes the suspension of payments pending an investigation of a credible allegation of fraud; provides guidance to states regarding termination of providers from Medicaid and CHIP if terminated by Medicare or another state program; and addresses termination of providers and suppliers from Medicare if terminated by a Medicaid state agency. The rule also discusses comments regarding an ACA requirement that providers or suppliers in certain industry sectors establish compliance programs; these comments will be considered in a future rulemaking.
CMS notes it has identified specific provisions surrounding implementation of fingerprinting for certain providers and suppliers that may be subject to change based on public comments; comments on the fingerprinting requirements only will be accepted until April 4, 2011.
Our full alert provides an analysis of the major provisions of the extensive Final Rule.
The Institute of Medicine (IOM) has begun work on advising the HHS Secretary on how to define EHBs for purposes of the ACA insurance package provisions. The IOM Board on Health Care Services held a workshop on this topic in January 2011, and the next meeting is scheduled for March 2-3 in Costa Mesa, CA.
The House of Representatives has voted to repeal the ACA, by a largely party-line vote of 245 to 189. The House subsequently passed H. Res. 9, to instruct four House committees (Education and the Workforce, Energy and Commerce, Judiciary, and Ways and Means) to report legislation to replace the law with provisions that achieve a number of objectives, including: removing excessive regulations and wasteful spending, decreasing health insurance premiums through increased competition and choice, medical liability system reform, increasing the number of insured Americans, increasing state flexibility to administer Medicaid, and encouraging personal responsibility for health care coverage and costs, among others. As previously reported, the President has said he would not sign the repeal bill if it ever reached his desk (which is unlikely in light of Democratic control of the Senate). In his State of the Union address on January 25, 2011, President Obama offered to work with lawmakers to “improve this law by making care better or more affordable.”
On January 6, 2011, CMS published a notice formally announcing the establishment of a new Center for Consumer Information and Insurance Oversight within CMS to implement the provisions of the ACA that address private health insurance. The new Center replaces the Office of Consumer Information and Insurance Oversight within the Office of the Secretary.
The Government Accountability Office (GAO) has announced the appointment of 15 members to the Methodology Committee of the Patient-Centered Outcomes Research Institute (PCORI). The Committee is charged with helping PCORI develop methodological standards and guidance for comparative clinical effectiveness research.
IRS Extends Filing Date for Reporting 2009 Sales of Branded Prescription Drugs Under the Affordable Care Act, Clarifies Information Requested From Covered Entities
On January 14, 2011, the Internal Revenue Service ("IRS") issued Notice 2011-9 (the "Notice"), which extended the filing date for reporting on Form 8947 a covered entity's 2009 sales of branded prescription drugs under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act" or the "ACA"). The filing date for Form 8947 with respect to 2009 sales of branded prescription drugs was extended from January 20, 2011 to February 11, 2011. In addition, in response to numerous comments received by the IRS, the Notice made certain changes to Notice 2010-71, 2010-50 IRB (the "Initial Notice"), primarily with respect to the information requested from covered entities. Please click here to view the full alert prepared by Reed Smith Tax and Life Sciences Health Industry attorneys.
On November 29, 2010, the IRS issued the Initial Notice, which provided guidance on the calculation of the annual fee imposed on certain manufacturers and importers of branded prescription drugs for calendar years beginning after December 31, 2010. Click here to view Reed Smith's previous alert which includes a detailed description of the Initial Notice, including the definitions of "branded prescription drugs," "covered entity," "Sales Year" and "Fee Year."
The new Republican leadership of the House of Representatives are moving ahead on legislation (H.R. 2) to repeal the Patient Protection and Affordable Care Act and the health care-related provisions in the Health Care and Education Reconciliation Act of 2010 (collectively known as the ACA). On January 7, the House approved a procedural motion to allow a vote on H.R. 2 and a companion measure, H.Res. 9, instructing relevant committees to report legislation replacing the “job-killing health care law” with provisions that achieve a number of objectives, including: removing excessive regulations and wasteful spending, decreasing health insurance premiums through increased competition and choice, medical liability system reform, increasing the number of insured Americans, increasing state flexibility to administer Medicaid, and encouraging personal responsibility for health care coverage and costs, among others. The Congressional Budget Office estimates that H.R. 2 would increase the deficit by approximately $230 billion over the 2012–2021 period, although supporters of the legislation dispute that figure.) While the “repeal and replace” measures are expected to pass the House, the President has said that he would not sign the repeal bill if it ever reached his desk, which is unlikely in light of Democratic control of the Senate.
The Internal Revenue Service (IRS) has issued several ACA guidance documents, including notices on the use of health flexible spending arrangements for purchases of over-the counter medicines and the prohibition on health plans discriminating in favor of highly-compensated individuals.
CMS has announced it is establishing the “Federal Coordinated Health Care Office,” which is mandated by the ACA to ensure more effective integration of Medicare and Medicaid benefits for individuals eligible for both programs and improving coordination between the federal government and states in the delivery of benefits for such individuals.
CMS has issued guidance to state Medicaid directors on Section 6505 of the ACA, under which a state may not make payments for items or services provided under the state Medicaid plan or under a waiver to any financial institution or entity located outside of the United States. The provision is effective January 1, 2011, unless the Secretary determines that implementation requires state legislation other than funding legislation) to comply with this provision. According to the CMS guidance, certain tasks that support the administration of the Medicaid state plan (e.g., outsourcing enrollment or claims adjudication call centers) that may require payments to financial institutions or entities located outside of the U.S. are not prohibited by the statute. However, CMS states that payments for items or services provided under the state plan to financial institutions or entities (e.g., provider bank accounts or business agents) located outside of the U.S., Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa are prohibited. CMS also asserts that the ACA provision prohibits payments to telemedicine providers and pharmacies located outside of the U.S. or its territories. The impact on US-based telemedicine suppliers who employ or contract with physicians who provide services from outside the US via electronic means is unclear.
The Senate Health, Education, Labor and Pensions (HELP) Committee is planning a series of hearings on the Affordable Care Act, with the first hearing on January 27 focusing on insurance market reforms. Other hearings will include such issues as quality of care and fraud and abuse provisions; dates for those hearings have not yet been announced.
HHS published a proposed rule on December 23, 2010 regarding the disclosure and review of “unreasonable” health insurance premium increases under the ACA. The proposed rule would establish a rate review program to ensure that all rate increases that meet or exceed an established threshold are publicly disclosed and reviewed by a state or HHS to determine whether the rate increases are unreasonable. An unreasonable rate increase would be defined as one that is excessive (that is, it causes insurance premiums to be unreasonably high in relation to the benefits provided under the coverage), unjustified, or unfairly discriminatory. For rate increases filed in a state on or after July 1, 2011 (or effective on or after July 1, 2011 in a state that does not require a rate increase to be filed), the threshold for whether rates are subject to review would be whether the average weighted increase in the rate filing (alone or in combination with prior increases in the preceding 12 month period) is 10% or more. After 2011, state-specific thresholds for review would be established. Additional background information is posted here.
On December 28, 2010, the Obama Administration published a request for information regarding how group health plans and health insurance issuers can employ value-based insurance design in the coverage of recommended preventive services. The notice seeks information on, among other issues: specific plan design tools to incentivize patient behavior; how to identify high-value treatment settings, providers, and delivery mechanisms; and ways to ensure that patients with particular co-morbidities or other special circumstances receive the medically-appropriate level of care. Comments are due February 28, 2011.
IRS Guidance on ACA Fee on Prescription Drug Manufacturers/Importers; Comment Request on Medical Device Excise Tax.
The Internal Revenue Service (IRS) has issued documents related to the annual fee for manufacturers and importers of brand name pharmaceuticals under section 9008 of the ACA, which is payable beginning in 2011. Specifically, IRS Notice 2010-71 describes a proposed methodology for calculating the fee (including a discussion of covered entities, sales taken into account; an adjustment methodology; information submission requirements; and the fee calculation methodology). It also describes how the IRS will provide each covered entity with a preliminary 2011 fee calculation that will serve as a basis for comments by the covered entity on the proposed methodology. Preliminary 2011 fee calculations will be based on information submitted by manufacturers on Form 8947, Report of Branded Prescription Drug Information, which should be submitted to the IRS by January 20, 2011. The preliminary fee will be calculated and sent to each covered entity by May 2, 2011. If the IRS subsequently promulgates regulations that modify the fee calculation methodology, the modified methodology will be used to determine final fee amounts for 2011 that will be sent to each covered entity by August 15, 2011. The IRS seeks comments on all aspects of its prescription drug fee procedures; comments are due June 2, 2011. A Reed Smith analysis of the guidance is available here. Separately, the IRS has released a request for public comments on issues to be addressed in future guidance on the new ACA excise tax on medical devices, which applies to sales of taxable medical devices after December 31, 2012. Comments specifically are requested on the excise tax exemption for any medical device “determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use,” and on issues pertaining to the application of existing Chapter 32 rules (pertaining to Manufacturers Excise Taxes) to this provision. The comment deadline is March 3, 2011. The solicitation notice (Notice 2010-89) will be published in IRB 2010-52, dated December 27, 2010.