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Go Slow On Reference Pricing: Why The Federal Agencies Have It Wrong On Regulations

March 9th, 2015

Despite concerns outlined in our previous post on reference pricing, federal oversight agencies essentially have taken a hands-off approach. First, they announced that for large group and self-insured plans, the Affordable Care Act’s (ACA) annual maximum limits on out-of-pocket costs do not apply to charges above the reference price.

These limits are already high: $6,600 for an individual and $13,200 for family coverage in 2015. Without any discussion the agencies asserted that non-designated providers are out-of-network, and therefore cost sharing falls within the ACA’s exclusion of out-of-network cost from the maximum limits.

This ruling is inconsistent with the ACA and harmful to patients, effectively allowing plans to circumvent the Act’s crucial out-of-pocket cost limits. The ACA’s annual out-of-pocket maximums are meant to apply to in-network care. If plan members receive care inside this provider network, the Act mandates that they are to be protected by these maximums.

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Go Slow On Reference Pricing: Not Ready For Prime Time

March 9th, 2015

Editor’s note: This post is part one of two on reference pricing. 

The use of reference pricing by health insurers and employee health benefit plans stands high on the policy and regulatory agenda because it is gaining popularity, particularly now that federal agencies have blessed its use by large group insurers and self-insured plans, while imposing only relatively lax requirements. The purpose of reference pricing is to enable patients to “shop” for care and to spur provider competition by creating a group of “designated” in-network providers that agree to abide by the reference price while others do not (“non-designated providers”).

Patients who select more expensive non-designated providers must pay extra, letting them decide whether the extra out-of-pocket cost is worth it. Providers compete, either by agreeing to the reference price or by lowering their prices to approach it. Prices are driven downward.

Reference pricing is superficially appealing because it invokes powers that consumers exercise every day, as they weigh cost and value for items ranging from cold cereal to new cars. But it also raises significant issues regarding quality and access to care and has the potential to discriminate against sick and vulnerable patients. The strategy may also prove costly in relation to the benefits it confers. We urge a go-slow approach and more careful regulation.

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King v Burwell: The NFIB Medicaid Coercion Argument Returns

March 5th, 2015

Editor’s note: Watch Health Affairs Blog for more posts on King v. Burwell and the Supreme Court oral arguments in the case by Tim Jost, Grace-Marie Turner, and others.

The March 4, 2015 oral argument in King v Burwell, which will determine whether millions of low- and moderate-income Americans will continue to have access to affordable health insurance coverage, revealed a United States Supreme Court very much in play.  In this climate, observers inevitably are paying heightened attention to each of the many parries and thrusts that unfolded over more than an hour of rapid give-and-take between the Justices and the lawyers, as they battled over the meaning of 4 words in a 1000-page statute.

Perhaps no exchange will receive more attention than the one between Justice Anthony Kennedy and Michael Carvin (representing the challengers) that took place approximately 5 minutes into his argument.  It was Justice Sotomayor who actually kicked things off with the following observation:

The choice the state had was to establish [an] Exchange or let the Federal government establish it. . . .That was the choice.  If we read [the statute] the way you’re saying, then we’re going to read a statute as intruding on the Federal-State relationship, because then the States are going to be coerced into establishing their own Exchanges. . . Tell me how that is not coercive in an unconstitutional way?  And if it is coercive in an unconstitutional way [isn’t there] a primary statutory command that we read a statute in a way where we don’t impinge on the basic Federal-State relationship?

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HHS Proposed Policy On Non-Discrimination: Does It Adequately Protect Children?

February 19th, 2015

On November 26, 2014, the United States Department of Health and Human Services (HHS) published a proposed 2016 Notice of Benefits and Payment Parameters, an omnibus regulation published annually that sets “rules of the road” for the administration of federally regulated insurance plans. Among other matters, this year’s Notice contained a discussion of non-discrimination in coverage.

The concept of non-discrimination in coverage is a basic tenet health plans subject to the Affordable Care Act (ACA)’s “essential health benefit” requirements applicable to non-grandfathered health plans sold in the individual and small group markets (42 U.S.C. §18022, added by PPACA §1302). The non-discrimination standard is a watershed in U.S. law that extends the reach of prior federal civil rights laws and regulates the design, content, and administration of health insurance including Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act, Title VI and VII of the Civil Rights Act of 1964, and the Age Discrimination Act of 1975.

In accordance with its provisions, the HHS Secretary is barred from “mak[ing] coverage decisions, determin[ing] reimbursement rates, establish[ing] incentive programs, or design[ing] benefits that discriminate against individuals because of their age, disability, or expected length of life,” (42 U.S.C. §18022(b)(4)(B)). The provision further requires the Secretary to “take into account” the health needs of “diverse segments of the population including women, children, persons with disabilities, and other groups,” (42 U.S.C. §18022(b)(4)(C)).

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Additional Requirements For Charitable Hospitals: Final Rules On Community Health Needs Assessments And Financial Assistance

January 23rd, 2015

On December 29, the Department of the Treasury and the Internal Revenue Service released long-awaited final regulations implementing Affordable Care Act provisions that impose additional obligations on charitable hospital organizations covered by §501(c)(3) of the Internal Revenue Code.  Published in the Federal Register on December 31 2014, the regulations are massive, consolidating a series of prior proposals into a single final body of regulatory law.  The regulations affect more than 80 percent of U.S. hospitals, both the 60 percent that operate as private nonprofit entities and the 23 percent that operate as governmental units.

Because state and local governments typically condition their own sales, property, and corporate income tax exemptions for nonprofit entities to a hospital’s §501(c)(3) status, the final regulations carry broad and deep implications from both a policy and financial perspective.  According to the Congressional Budget Office the 2002 the national value of the federal tax exemption exceeded $12 billion, a figure that undoubtedly has risen considerably.

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Ebola And EHRs: An Unfortunate And Critical Reminder

October 28th, 2014

The Dallas hospital communication lapse that led to the discharge of a Liberian man with Ebola symptoms is an example of the failure of American health care system to effectively share health information, even within single institutions. It is not possible to know whether a faster response would have saved Thomas Eric Duncan’s life or reduced risk to the community and health workers.

What is clear is that rapid sharing of information is one of the elements critical to halting the spread of Ebola. Had all members of the initial care team known of the patient’s recent arrival from an Ebola-stricken country and acted appropriately to quarantine Mr. Duncan, this would have limited the chance of exposing the public and enabled faster preventive protocols for treating personnel.

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Tax-Exempt Status For Nonprofit Hospitals Under The ACA: Where Are The Final Treasury/IRS Rules?

October 23rd, 2014

Months have now stretched into years, and there still remains no sign of final Treasury/IRS regulations interpreting the Affordable Care Act (ACA)’s provisions covering the expanded obligations of nonprofit hospitals that seek tax-exempt status under §501(c)(3) of the Internal Revenue Code.

The ACA amendments do not depend on formal agency policy to take effect. Nonetheless, Congress directed the Treasury Secretary to issue regulations and guidance necessary to carry out the reforms (26 U.S.C. §501(r)(7)). To this end, two important sets of proposed rules were issued: the first in June, 2012; and the second, in April 2013. While an informative IRS website lists various proposed rules and guidelines important to nonprofit hospitals, final rules seem to have performed a disappearing act.

Apparently recognizing the problems created by its delays, the agency has gone so far as to issue a special Notice letting nonprofit hospitals (and presumably the public) know that they can rely on its proposed rules. But this assurance overlooks the fact that the proposed rules themselves contained crucial areas in which final agency policy has not yet been adopted.

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After Hobby Lobby: How Might Policymakers Mitigate The Decision’s Impact On Women And Families?

July 3rd, 2014

On June 30, the U.S. Supreme Court handed down a ruling that has the potential to undermine an important provision of the Affordable Care Act (ACA) that establishes for women a federal guarantee of coverage for their full range of contraceptive methods, services, and counseling without any out-of-pocket costs. This guarantee is administered through private health plans, whether purchased in the individual market or made available through the insurers and plan administrators that provide group coverage.

The 5-4 ruling in Burrell v. Hobby Lobby Stores, written by Justice Samuel Alito on behalf of the Court’s conservative bloc, held that closely held for-profit corporations that assert a religious objection to some or all forms of contraception cannot be required to include such coverage in the health plans they sponsor for employees and their families. As emphasized by Justice Ruth Bader Ginsburg in her dissent (joined in whole by Justice Sotomayor and in part by Justices Kagan and Breyer), the Court’s decision could have serious and widespread consequences.

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Encouraging Nonprofit Hospitals To Invest In Community Building: The Role Of IRS ‘Safe Harbors’

February 11th, 2014

Hospitals as public health actors. A notable development in public health policy is the growing emphasis on community health improvement as part of the community benefit activities required of nonprofit hospitals that seek federal tax exempt status under §501(c)(3) of the Internal Revenue Code. Key industry leaders, such as the Catholic Health Association, have sought to increase the role of hospitals as public health actors. A report by the Hilltop Institute recognizes the potential link between hospitals’ community benefit expenditure activities and community health and describes states that have sought to involve hospitals in health planning to improve public health.

Two important policy developments have breathed further life into the effort to emphasize public health investments as part of a community benefit strategy. This post reviews these policy advances and proposes that the Internal Revenue Service (IRS) establish “safe harbors” describing in advance certain evidence-based investments by nonprofit hospitals in their communities that will automatically count as required community benefit activities.

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Against All Odds: What One Family’s Experience Tells Us About Medicaid’s Enduring Role

September 27th, 2013

Medicaid is nearly 50 years old. Is it a relic of a different era that should be repealed and replaced, or does its importance endure?

Ann Yurcek’s moving “Narrative Matters” essay in the September issue of Health Affairs demonstrates Medicaid’s vital role in health care. Re-imagined a quarter century later, her story underscores just how much this vital role endures. Indeed, Becca Yurcek’s very life is emblematic of the degree to which Medicaid goes where other payers fear to tread.

Ann’s Story

The events Ann Yurcek relates began nearly 25 years ago in 1989.

For readers familiar with Medicaid’s role in American life — especially its role in that incredible space in which health and disability policy intersect — Becca’s story is hardly uncommon. It started with young parents of a healthy and growing family, who were struggling to make ends meet even as a new baby was on the way. The father had begun a new job, but as a result of the peculiarities (a polite term under the circumstances) of the pre-reform insurance system, he was forced to pay for COBRA coverage at his old job even as he paid premiums at the new job — the new employer-sponsored health plan refused to cover Ann.

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A Lost Opportunity For Persons With Disabilities? The Final Essential Health Benefits Rule

March 11th, 2013

Among its myriad elements, the Affordable Care Act contains a breakthrough provision that, if implemented, could dramatically alter the way that health insurance coverage works for persons with disabilities. [PPACA § 1302(b)(4)(B)] This provision applicable to health insurance products sold in the individual and small group markets and therefore subject to the essential health benefits (EHB) coverage standard, requires the Secretary of Health and Human Services to bar the use of insurance coverage rules that discriminate on the basis of disability. See

However, final EHB rules issued on February 20th, 2013 effectively leave this ban unimplemented. A draft CMS document made available to the public on February 21 by Inside Health Policy suggests that the agency will monitor qualified health plans (QHPs) for potential discrimination. But the monitoring process suggested in the draft excludes any mechanism for detecting one of the most potent forms of plan discrimination, the use of benefit designs and coverage determination procedures that cause the denial of coverage for children and adults whose disabilities prevent them from “recovering” from their disability. Whether the ACA protections are left unimplemented remains to be seen.

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The Administration’s Decision On Partial Medicaid Implementation: True To The Law

December 19th, 2012

Ever since the United States Supreme Court decided NFIB v Sebelius in June 2012, all eyes have focused on the question of how the Obama Administration would interpret the Court’s blockbuster ruling on the constitutionality of the Affordable Care Act’s Medicaid expansion. On December 10, 2012, the Administration answered the question as part of a lengthy series of “Frequently Asked Questions (FAQs)” published by the Centers for Medicare and Medicaid Services (CMS). Buried near the end was the following:

26. Can a state expand to less than 133% of FPL and still receive 100% federal matching funds?

A. No.

Of course, the Administration’s answer is hardly so abrupt, although it is quite brief, taking only two paragraphs. But it is thorough, well reasoned, and consistent both with the text and structure of the Affordable Care Act (ACA) and with HHS’ other interpretations of the ACA and the underlying Medicaid statute.

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Will Increased Transparency Requirements For Nonprofit Hospitals Bring Greater Community Health Investments?

October 24th, 2012

Sweeping reforms implemented by the IRS and Treasury in 2009 have pulled back the veil surrounding the community benefit investments required of all nonprofit hospitals seeking federal tax exempt status. Will this new transparency, in combination with important tax law reforms enacted by Congress as part of the Affordable Care Act, lead to greater hospital investment in community health?

The Evolution Of Community Benefit Law

Since the 1950s, federal tax law has recognized that in order to qualify for tax-exempt status, nonprofit hospitals owe certain duties to the communities they serve. IRS Revenue Ruling 56-185 (1956) established a “financial ability” standard that required charitable hospitals to be “operated to the extent of [their] financial ability for those not able to pay for the services rendered and not exclusively for those who are able and expected to pay.” In 1969, this early ruling was amended by Revenue Ruling 69-545, which substituted a more amorphous “community benefit” standard that has essentially survived into the present time, although with important modifications under the Affordable Care Act.

As noted by the Joint Committee on Taxation, the express purpose of Revenue Ruling 69-545 was to eliminate any enforceable obligation on the part of tax-exempt hospitals to furnish financial assistance to indigent inpatients. Following an unsuccessful legal challenge to the validity of the ruling (Eastern Kentucky Welfare Rights Organization v Simon, 370 F. Supp. 325, 338 (D.D.C. 1973), rev’d, 506 F.2d 1278 (D.C. Cir. 1974), vacated on other grounds, 426 U.S. 26 (1976)), the community benefit standard remained moribund and essentially went unexplored for decades.

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CBO’s Updated Affordable Care Act Estimates: Resting On Shaky Assumptions?

July 31st, 2012

On July 24th, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) released updated estimates that project the budgetary impact on the Affordable Care Act of the United States Supreme Court’s decision in NFIB v Sebelius. In NIFB, the Court ruled that the federal government could not remove all […]

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The Supreme Court’s Medicaid Ruling: ‘A Shift In Kind, Not Merely Degree’

June 28th, 2012

This is a day to think about the Constitutional, rather than the practical, implications of the Patient Protection and Affordable Care Act.  Nonetheless, the hallmark of the remarkable decision handed down today is the degree to which it navigates multiple political and ideological currents in order to create and hold a majority for the constitutionality […]

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Sara Rosenbaum: Trying To Make Sense Of The States’ Medicaid Coercion Arguments

March 28th, 2012

Despite Paul Clement’s brilliant representation of his clients throughout the oral arguments, the coercion doctrine itself that remains murky. Furthermore, whatever the doctrine might mean, its application to the Affordable Care Act’s Medicaid expansion appears to have raised grave doubts in the minds of many of the Justices.

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Sara Rosenbaum On SCOTUS Day Two: Rashomon On The Potomac

March 27th, 2012

In Rashomon, the classic film exploration of truth, director Akira Kurosawa offers a meditation on the degree to which point of view colors reality.  A Rashomon of sorts played out during the second day of Supreme Court oral arguments on the Affordable Care Act.  For reasons that are not entirely clear other than pure sensationalism, […]

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Sara Rosenbaum On Day One Of The SCOTUS Health Reform Arguments: What Was That Medicaid Discussion?

March 26th, 2012

As has been widely reported, a sea of skepticism from all points on the Supreme Court’s ideological spectrum greeted arguments by Robert Long, who had been designated as the Court-appointed defender of the position that the Anti-Injunction Act (AIA), 26 U.S.C. § 7421(a), bars a pre-penalty challenge to the Affordable Care Act’s minimum essential coverage […]

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The Misleading Arguments In The States’ Medicaid Coercion Brief

January 19th, 2012

On January 10th, the states filed their latest arguments in their bid to have the ACA’s Medicaid expansion declared an unconstitutional coercion.  Following an effort to piece together a coercion doctrine from dicta found in a handful of Supreme Court cases, the states assert that the “[t]he ACA is Premised on the Understanding that It […]

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The States’ Medicaid ‘Coercion’ Claim: More Rhetoric Than Fact

December 14th, 2011

Among the issues on which the United States Supreme Court has agreed to hear oral arguments in the Affordable Care Act cases is the question of whether its minimum Medicaid coverage requirements are constitutional. The states have based their appeal on a legal theory known as the “coercion doctrine.”  Citing a long history of precedents, […]

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