The ACA’s Pre-Existing Condition Insurance Plan (PCIP) program is a temporary high-risk health insurance program for uninsured individuals who have been denied health insurance because of a pre-existing condition. While the PCIP was intended to serve as a “bridge” until Affordable Insurance Exchanges are operational in 2014, the Department of Health and Human Services (HHS) suspended acceptance of new enrollment applications earlier this year due to funding limitations. HHS has now determined that additional adjustments to PCIP provider payment rates are needed to ensure there is sufficient funding to cover currently-enrolled individuals until the program ends. Payment rates for covered services (with the exception of covered prescription drug, organ/tissue transplant, dialysis, and durable medical equipment benefits) will be capped at Medicare payment rates, with special rules when Medicare payment rates cannot be implemented. Facilities and providers also will be prohibited from “balance billing” enrollees in the federally-administered PCIP for the difference between the PCIP plan allowance and their charges to other patients for those covered services, effective for dates of service beginning on June 15, 2013. CMS will accept comments on the rule until July 22, 2013.
On June 4, 2013, CMS published a final rule that builds on and revises previously-adopted regulations on the administration of the ACA’s Small Business Health Options Program (SHOP), which will help small employers offer employees a variety of qualified health plans (QHPs). Specifically, the rule adds changes in eligibility for state premium assistance under Medicaid or CHIP to the list of triggering events that create a special SHOP enrollment period for qualified employees and/or their eligible dependents. In addition, the rule amends the duration of certain special enrollment periods for the SHOP to 30 days for most applicable triggering events. CMS also has finalized its proposal that SHOPs would not be required to provide an employee choice model in 2014; SHOPs must provide qualified employers the option to offer qualified employees a choice of any QHP at a single “metal level” starting with plan years beginning on or after January 1, 2015.
CMS published a final rule on May 23, 2013 that implements new medical loss ratio (MLR) requirements for the Medicare Advantage (MA) program and the Part D prescription drug program. Under the new requirements, which were mandated by the ACA, MA organizations and Part D plan sponsors are required to report their MLR (percentage of revenue used for patient care), and are subject to financial and other penalties for a failure to meet a new statutory requirement that they have an MLR of at least 85%. The rule is generally effective for contract years beginning on or after January 1, 2014.
CMS has announced an open period for additional organizations to be considered for participation in Model 1 of the Bundled Payments for Care Improvement initiative. Under this program, participating organizations will focus on improving care coordination for Medicare beneficiaries who are hospitalized and, in certain cases, when they leave the hospital. In Model 1, the episode of care is defined as the inpatient stay in the acute care hospital, and Medicare pays participating hospitals a discounted amount from the fee-for-service Medicare inpatient prospective payment system payment. The open period will close on July 31, 2013.
CMS has published a proposed rule setting forth a methodology to implement aggregate reductions to state Medicaid Disproportionate Share Hospital (DSH) allotments for FY 2014 and 2015, as required by the ACA. The rule also proposes to add additional DSH reporting requirements for use in implementing the DSH health reform methodology. Comments on the proposed rule will be accepted until July 12, 2013.
On May 8, the Department of Labor (DOL) issued guidance regarding the ACA requirement that employers provide notice to employees describing the coverage options available under Health Insurance Marketplaces/Exchanges. DOL also has released model notices to employees of coverage options. A Reed Smith summary of DOL’s guidance is available here.
On May 31, 2013, the Medicare Board of Trustees released its annual assessment of the financial condition of the Social Security and Medicare trust funds. The Board projects that the Medicare hospital insurance trust fund will remain solvent until 2026, which is two years later than forecast last year. The Board attributes the improved outlook in part to lower-than-expected Medicare Part A spending in 2012 (particularly for skilled nursing facilities) and lower projected Medicare Advantage costs. The Board points out, however, that projections of Medicare costs are highly uncertain due to a number of factors, including questions about whether Congress will continue to override the Medicare physician fee schedule/sustainable growth rate (SGR) formula and how the ACA will impact spending.
On May 29, 2013, the Internal Revenue Service and the Department of Labor (DOL) and HHS released final regulations regarding wellness programs integrated with employer-sponsored health plans. The new wellness program standards apply to insured and self-insured programs, grandfathered and non-grandfathered, and are effective for plan years beginning on and after January 1, 2014. A Reed Smith Client Alert summarizing the regulations is available here.
The Government Accountability Office (GAO) has provided a status report on seven states’ efforts to establish health insurance exchanges -- online marketplaces mandated by the ACA to enable eligible individuals and small business employers to compare and select health insurance coverage offered by qualified health plans. States can establish and operate an exchange themselves or partner with HHS, otherwise HHS will operate a federally-facilitated exchange for the state. As of March 14, 2013, 18 states had announced they would be establishing a state-based exchange, 7 states intend to partner with HHS, and HHS will establish a federally-facilitated exchange in 26 states. The GAO report provides details on the implementation efforts of the District of Columbia, Iowa, Minnesota, Nevada, New York, Oregon, and Rhode Island. Six of the states will operate a state-based exchange, while the seventh -- Iowa -- will partner with HHS. The seven selected states expect they will be ready for enrollment by the October 1, 2013 deadline, with health insurance coverage effective January 1, 2014. The report addresses the states’ efforts to: decide which QHPs will be included in the exchange; develop an information technology infrastructure; implement a consumer outreach and assistance program; and sustain their exchange financially.
Recent Congressional hearings focusing on health policy include the following:
- The House Energy and Commerce Committee held hearings on health insurance premiums under the ACA and drug compounding. The House Energy and Commerce Health Subcommittee also held a hearing on "Reforming SGR (Sustainable Growth Rate): Prioritizing Quality in a Modernized Physician Payment System," which reviewed draft SGR reform legislative language. A June 12 hearing will focus on the state perspective on the need for Medicaid reform, and a June 14 hearing will examine the federal government's response to the prescription drug abuse crisis.
- A House Ways and Means Committee Health Subcommittee hearing addressed the “President's and Other Bipartisan Proposals to Reform Medicare," and the panel has scheduled a June 14 hearing to concentrate on proposals to reform Medicare post-acute care payments.
- The Homeland Security Committee held a second hearing on “Oversight and Business Practices of Durable Medical Equipment Companies.”
- The Senate Special Committee on Aging held a hearing entitled “10 Years Later: A Look at the Medicare Prescription Drug Program."
CMS has scheduled two calls to discuss the application process for the ACA’s Medicare Shared Savings Program for the January 1, 2014 start date. This initiative is designed to help providers participate in accountable care organizations to improve quality of care for Medicare patients. A June 20 call will feature an overview and updates to the Shared Savings Program application process, and a July 18 call will provide an opportunity to ask questions of CMS subject matter experts.
HHS is holding a meeting on June 25, 2013 to discuss the HHS risk adjustment data validation process that will be conducted when HHS operates the ACA insurance market risk adjustment program on behalf of a state. The stakeholder meeting is being offered as both an in-person meeting (registration deadline is June 7) and web conference (registration deadline is June 19).
On Mayl 10, 2013, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule updating Medicare inpatient prospective payment system (IPPS) and long-term acute care hospital prospective payment system (LTCH PPS) rates and policies for fiscal year (FY) 2014, which begins October 1, 2013. Comments on the proposed rule will be accepted until June 25, 2013. Highlights of the sweeping rule include the following:
- The proposed rule would increase IPPS operating rates by 0.8% after accounting for all adjustments (if a hospital does not successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program, this update is reduced by 2.0 percentage points). The 0.8% update reflects the hospital market basket of 2.5% reduced by a -0.4 percentage point multi-factor productivity adjustment and an additional -0.3 percentage point reduction in accordance with the Affordable Care Act (ACA). The rate is further decreased by 0.8% for a proposed documentation and coding recoupment adjustment required by the American Tax Relief Act of 2012 and by a 0.2% proposed adjustment to offset the cost of a proposal addressing its inpatient medical review criteria. Specifically, CMS proposes to clarify its medical review criteria to presume that Part A hospital inpatient status is appropriate if the beneficiary is admitted to the hospital pursuant to a physician order and receives care for at least two midnights. On the other hand, hospital inpatient admissions spanning less than two midnights will presumptively be inappropriate under Part A. Appropriate documentation could rebut the presumption.
- The proposed rule includes a number of hospital quality initiatives. For instance, CMS is proposing to implement the ACA’s Hospital-Acquired Condition (HAC) Reduction Program. Under this provision, effective beginning in FY 2015, hospitals that rank among the lowest-performing 25% with regard to HACs will be paid 99% of the IPPS payment that otherwise would be made. The proposed rule addresses, among other things, the payment adjustment, measure selection, risk-adjustment and scoring methodology; performance scoring; public availability of hospital-specific performance information; and limitation of administrative and judicial review. CMS also proposes to update the Hospital Value-Based Purchasing (VBP) Program, which adjusts IPPS payments based on how well a hospital performs or improves performance on a set of quality measures. For FY 2014, CMS proposes increasing the applicable percent reduction to base operating DRG payment amounts to 1.25%, increasing the total estimated amount available for value-based incentive payments (approximately $1.1 billion), and adding new measures to the program. In addition, the proposed rule would expand the Hospital Readmissions Reduction Program, under which CMS currently assesses hospitals’ penalties using three readmissions measures (heart attack, heart failure, and pneumonia). The maximum payment reduction will increase from 1% to 2% in FY 2014, as mandated by the ACA. For FY 2014, CMS also proposes to add two new measures to calculate readmission penalties effective for FY 2015: readmissions for hip/knee arthroplasty and chronic obstructive pulmonary disease. CMS also proposes a revised methodology to take into account planned readmissions for the existing readmissions measures. The proposed rule also would revise IQR program measures.
- CMS proposes to implement new cost centers for Implantable Devices, MRIs, CT scans, and cardiac catheterization for FY 2014, which would increase the total number of cost-to-charge ratios (CCRs) used to calculate the FY 2014 proposed relative weights from 15 to 19. The additional CCRs generally increase the relative weight values for surgical Medicare severity diagnosis related group (MS-DRGs) and decrease the relative weight values for medical MS-DRGs.
- CMS proposes to implement an ACA provision revising how Medicare disproportionate share hospital (DSH) payments are paid. Under the proposed rule, hospitals will receive 25% of the payment they otherwise would receive, and the remaining 75% percent will be adjusted for decreases in the national rate of uninsured individuals and distributed to hospitals payments based on the hospital’s share of uncompensated care relative to all Medicare DSH hospitals.
- The proposed rule also addresses, among many other things: MS-DRG classifications for certain procedures; applications for new technology add-on payments; direct graduate medical education and indirect medical education payments; and the rate-of-increase limits for certain hospitals excluded from the IPPS that are paid on a reasonable cost basis subject to these limits. In addition, CMS proposes to revise the conditions of participation (CoPs) for hospitals relating to the administration of vaccines by nursing staff, and the CoPs for critical access hospitals relating to the provision of acute care inpatient services.
- With regard to the LTCH PPS, CMS proposes a 1.8% annual update for LTCHs, which would increase the standard federal rate to $40,622.06. The rule also includes a number of other LTCH PPS payment and policy provisions, including a proposal to allow the regulatory moratorium on the full application of the “25% Rule” to lapse, new quality measures, and solicitation of comments on patient criteria-based payment adjustments. Reed Smith has prepared a Client Alert with additional details on the LTCH PPS provisions.
IRS Proposes Regulations to Implement Certain ACA Insurance Premium Tax Credit, Medical Loss Ratio Provisions
On May 3, 2013, the Internal Revenue Service (IRS) published proposed regulations implementing the ACA’s health insurance premium tax credit, as amended by subsequent legislation. These proposed regulations affect individuals who enroll in qualified health plans through Affordable Insurance Exchanges (Exchanges) and claim the premium tax credit, and Exchanges that make qualified health plans available to individuals and employers. The proposed regulations also address determinations of whether health coverage under an eligible employer-sponsored plan provides minimum value. Comments and requests for a public hearing will be accepted until July 2, 2013. These regulations are proposed to apply for taxable years ending after December 31, 2013, and taxpayers may apply the proposed regulations for taxable years ending before January 1, 2015.
In separate document published May 13, 2013, the IRS proposed regulations that provide guidance to Blue Cross and Blue Shield organizations, and certain other health care organizations, on computing and applying the medical loss ratio added to the Internal Revenue Code by the ACA, applicable to tax years beginning after December 31, 2013). Comments on the regulations will be accepted until August 12, 2013, and a September 17, 2013 public hearing has been scheduled on the regulations.
The ACA established the Early Retiree Reinsurance Program (ERRP) as a temporary program to reimburse employer and union sponsors of participating employment-based plans for a portion of the cost of health benefits for early retirees and their spouses, surviving spouses, and dependents. CMS has published a notice that sets forth termination dates for several operational processes in preparation for the January 1, 2014 ERRP program sunset date. These operational processes include: the submission of changes to information in a plan sponsor’s ERRP application; the reporting of plan sponsor change of ownership; the submission of reimbursement requests; the reporting and correction of data inaccuracies; and the request for reopenings of reimbursement determinations. The notice is effective April 19, 2013.
On May 8, 2013, the House Energy and Commerce Subcommittee on Health approved by voice vote H.R. 1407, legislation to reauthorize and combine the Animal Drug User Fee Act and the Animal Generic Drug User Fee Act. TheEnergy and Commerce Committee also recently held hearings on: the Administration’s HHS budget proposal; the Center for Consumer Information and Insurance Oversight and implementation of the ACA; the lack of transparency and consumer driven market forces in U.S. health care system; and the impact of HIPAA on patient care and public safety. The House Ways and Means Health Subcommittee held a hearing on Medicare physician payment reform, and the Senate Finance Committee has scheduled a May 14 hearing on this topic. Other Senate panels also recently held hearings on health policy issues, including: a HELP Committee hearing on "Successful Primary Care Programs: Creating the Workforce We Need"’ a Homeland Security Committee hearing on “Oversight and Business Practices of Durable Medical Equipment Companies”; and a Special Committee on Aging hearing on "The National Plan to Address Alzheimer's Disease: Are We On Track to 2025?"
The ACA’s controversial Independent Payment Advisory Board (IPAB) is charged with submitting detailed proposals to Congress and the President to reduce Medicare per-capita spending if projected spending growth exceeds a specified target based initially on inflation and then growth in the economy. IPAB’s proposals will go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions). The ACA authorizes the IPAB’s first recommendations to be submitted by January 2014 for implementation in 2015 if the Medicare per capita target growth rate is exceeded. The CMS Office of the Actuary has just determined, however, that the Medicare spending target will not be triggered for 2015, and as a result IPAB savings proposals will not be needed for that year. Specifically, in an April 30, 2013 memo, the Actuary explained that because the projected 5-year Medicare per capita growth rate (1.15%) for the period of 2011 to 2015 does not exceed the Medicare per capita target growth rate (3.03%), there is no applicable savings target for 2015. Note that to date, no members have been appointed to the IPAB, and there have been repeated legislative attempts to repeal the IPAB provision (although the Obama Administration’s proposed FY 2014 budget would strengthen the IPAB by reducing the target rate of Medicare cost growth that triggers IPAB recommendations).
CMS has released a list of teaching hospital “covered recipients” to which payments and other transfers of value must be reported by applicable drug and device manufacturers under the ACA Physician Payment Sunshine Act Final Rule, as discussed in a posting on our Life Sciences Legal Update blog. The posting also discusses industry efforts to obtain CMS clarification on various outstanding questions related to the reporting requirements. In addition, CMS has announced a May 22 National Provider Call on the Sunshine Act reporting requirements, directed to physicians and teaching hospitals and covering the Final Rule, key dates, the role of covered recipients, and resources available to covered recipients.
On April 2, 2013, CMS published a final rule establishing increased Federal Medical Assistance Percentage (FMAP) rates for certain adult populations under states’ Medicaid programs effective January 1, 2014, as authorized by the Affordable Care Act (ACA). The rule sets forth the method states will use to claim the matching rate that is available for Medicaid expenditures of individuals with incomes up to 133% of the federal poverty level and who are defined as “newly eligible” and are enrolled in the new eligibility group. Under the rule, the federal government will pay 100% percent of the cost of this newly eligible adult population through 2016, and this rate will be phased down to a permanent 90% matching rate by 2020. The rule also describes a temporary general increase in FMAP rates for certain expansion states that meet required statutory criteria. The rule is effective June 3, 2013. Comments will be accepted until June 3, 2013 on a limited number of provisions of the rule, including the threshold methodology states will be required to use to document claims for the increased FMAP rate.