Health Affairs

Editor’s note: Health Affairs Blog has been proud to host Tim Jost’s series of posts, “Implementing Health Reform, tracking the implementation of the Affordable Care Act. In recent days the implementing agencies — Health and Human Services, Labor, and Treasury — have been issuing regulations, proposed regulations, frequently asked questions, and other guidances on an almost daily basis, and new posts by Tim have consequently often appeared almost daily as well. Going forward, to keep up with the flow of ACA guidance in an orderly fashion, Tim’s posts will generally appear twice a week, usually Mondays and Thursdays. When major rules or proposed rules are released, such as the final rules on eligibility and appeals, wellness, and the SHOP marketplaces currently under final review by the Office of Management and Budget, we will feature additional posts in Tim’s series.

You can continue to look to Tim’s post for current information on ACA implementation. When new guidance appears, Tim will update his most recent post (a practice we have in fact already begun); we will note that there has been an addition at the beginning of the updated post and normally add the new material at the end of the post, so you can skip rereading the rest. We will also Tweet significant updates. From time to time, we correct a post when we find a typographical error or Tim receives new information as to the meaning of an issuance. If the correction is more than trivial, we will note this as well.

We hope that this new approach will make this series even more useful to our readers.

On May 17, 2013, at the end of an otherwise quiet week, CMS released an interim final rule on the Preexisting Condition Insurance Plan (PCIP). CMS also released a letter to state Medicaid directors on Facilitating Medicaid and CHIP Enrollment and Renewal in 2014. This post will discuss these issuances

New regulatory issuances and guidances are appearing on a daily basis from the federal agencies responsible for implementing the Affordable Care Act. In order to keep up, my posts are likely to appear even more frequently for the immediate future. This post addresses three issuances: an HHS proposed rule on Medicaid disproportionate share hospital payment reductions; an IRS notice of proposed rulemaking on medical loss ratios for Blue Cross and Blue Shield plans that receive certain tax preferences; and a set of frequently asked questions on the Utah SHOP exchange.

Medicaid DSH payments. The Department of Health and Human Services issued a proposed rule for cuts in disproportionate share hospital payments on May 13, 2013. The DSH program has since 1981 provided federal funding to state Medicaid programs to allow those programs to offer additional support to hospitals that serve a disproportionate share of low-income patients with special needs. The Medicaid DSH program, together with a similar Medicare program, has provided essential support to hospitals that have often borne the brunt of providing services to the uninsured.

With the Affordable Care Act’s expansion of coverage of the uninsured through the expanded Medicaid program and premium tax credits and cost-reduction payments, Congress concluded that DSH payments would be less necessary and cut both the Medicaid and Medicare programs. Since 1998, Medicaid DSH payments to each state have been limited to an annual allotment. The ACA requires reductions in these allotments, beginning with $500,000 for 2014 and increasing to $5.6 million for 2019, before dropping to $4 million of 2020. It also lists five factors that HHS must consider in reducing the state allotments. It does not specify, however, how those factors should be applied or weighted. The proposed rule addresses this question.

If you missed last week’s Health Affairs briefing on our May issue, “Tackling The Cost Conundrum,” or if you just want to see it again, video and speaker materials are now available on the Health Affairs website. You can watch the whole briefing or select particular panels or speakers.

Following the third straight year in which the Centers for Medicare and Medicaid Services estimated the growth in national health expenditures to be a record-low 3.9 percent, considerable speculation on the causes of slower spending growth has come from a variety of sources. There seems to be a consensus among actuaries, academics, and other analysts that the recession and the associated increase in unemployment and decline in insurance coverage led individuals to cut back on their use of health care services. (See here, here, But, while the recession is clearly associated with the dramatic slowdown in spending growth from 2007-2009, there is also evidence that the slowdown in spending preceded the recent recession and seems to be continuing during the modest economic recovery.

Observers of this more general trend have begun to suggest that fundamental structural changes in the health system are playing a role in recent spending trends. The ability of some high profile providers and health systems to achieve high quality outcomes with greater efficiency has garnered a lot of attention and some suggest that more salaried employment of physicians could be altering the practice patterns that developed under a fee-for-service system. Others have pointed to patient-centered medical homes, accountable care organizations, and other payment and delivery system reforms as potential contributors to the slowdown in spending growth. The Obama administration has also argued that the Affordable Care Act has started to have a moderating effect on spending growth.

The extent to which the economy versus broader systemic changes has been driving slower spending growth has enormous implications for forecasting future spending trends. If the economy has been the primary driver of recent trends, we should expect spending growth to return to historically high levels as the economy recovers. The Congressional Budget Office (CBO) and the CMS actuaries have revised their Medicare and Medicaid forecasts downward to reflect the latest trends, but both entities seem to suggest that spending growth over the long term will return to historical levels. If, however, more structural changes are at work, then perhaps there is reason to be hopeful that health care spending growth will continue at a rate much closer to the rate of growth in the economy.

Tens of millions of uninsured people will soon have the ability to gain health coverage as the first enrollment period under the Affordable Care Act (ACA) begins on October 1, 2013, with actual coverage starting in January 2014. New marketplaces will be established for the purchase of private insurance, pre-existing coverage exclusions and discriminatory premiums will end, and comprehensive benefits will be included in health plans.

Most significantly for the vast majority of uninsured Americans, the ACA offers unprecedented financial assistance (in the form of a tax credit) to make private health plan premiums more affordable and, in many states, expanded Medicaid coverage.

The ACA represents a truly historic series of improvements – a legislative triumph that eluded many presidents before Barack Obama. As noteworthy as this achievement is, however, substantial coverage expansion will only occur if uninsured families learn about these new opportunities and actually get enrolled in private or public health coverage.

Enroll America was formed in 2011 with that goal of educating consumers about the new law and helping them to enroll in the plan that is right for them. There remains an enormous amount of work to do and challenges to overcome to make sure the ACA lives up to its potential.

In a publication released in numerous states as well as a JAMA Forum article and a recent list of ten supposed “myths” about Medicaid expansion, the Heritage Foundation repeatedly cites our paper for the proposition that “40 of 50 states are projected to see increases in costs due to the Medicaid expansion,” and that expansion would force such states “to dig deep into their already overstretched budgets.” Even in the 10 remaining states, according to Heritage, the budget gains we projected to result from expansion were speculative and uncertain, since they supposedly relied on states cutting payments for hospital uncompensated care.

These claims distort our work. We identified 10 states in which Medicaid expansion would yield net savings based on just one factor—namely, unusually generous prior Medicaid coverage, for which states could claim enhanced federal matching funds. The modest additional gains resulting from uncompensated care savings did not tip any state from the red into the black.

Medicaid Expansion Offers Budget Savings, Revenue, and Economic Gains to States

More importantly, Heritage ignored our explanation that, because we were limited to “data available for all 50 states and the District of Columbia, we were unable to estimate several potential sources of state fiscal gain;” and that if additional, state-specific factors were considered, “many more states could realize net fiscal gains.” Nor did Heritage acknowledge that all states must pay for national health reform but only those that expand Medicaid will receive large, offsetting allotments of federal Medicaid dollars, with resulting economic activity, jobs, and state revenue.

Yesterday, Senator Orrin Hatch (R-Utah) and Representative Fred Upton (R-Mich.) released their plan for “Making Medicaid Work.” One of the blueprint’s key proposals is to implement per capita caps, which would impose a cap on the funds that the federal government contributes to states for each Medicaid beneficiary. In April Health Affairs released a Health Policy Brief that explains how a per capita cap would work and looks at the arguments for and against the approach:

Supporters contend that instituting a system of per capita caps would moderate the growth of federal spending on Medicaid. They describe the approach as a middle ground between the program as it currently operates and other proposals such as block grants, which would more dramatically change the way federal Medicaid funding is calculated.

Critics contend that a per capita cap approach would not necessarily slow the rate of growth of Medicaid spending. If it did, they say, it would do so by shifting the costs to the states, which would face even greater pressures to cut services or limit eligibility, ultimately limiting many poor Americans’ access to care. What’s more, they contend that setting up a system of per capita caps would be very complex and difficult to administer.

As a longtime physician, I know that having access to stable, affordable health coverage is a critical step in achieving better health outcomes.

That view is underscored in a study that appeared in today’s (May 2) New England Journal of Medicine (NEJM) on the effects of Medicaid coverage on individuals’ health and finances. Led by researchers at Harvard and MIT, the study—the Oregon Health Insurance Study—offers a good snapshot of how being insured can help low-income Americans.

Here’s the background: In 2008, Oregon officials created a lottery giving uninsured, low-income adults a chance to apply for Medicaid. Nearly 90,000 people signed up, and approximately 30,000 were selected. By randomly providing health insurance to some, but not all, Oregon effectively established both treatment and control groups, presenting a unique opportunity to analyze the effects of having public health insurance.

The study in NEJM highlighted the latest data from the experiment. It showed that enrollment in Medicaid, after about two years, profoundly increased patients’ use of needed medical services, and vastly reduced the financial strain that previously limited their care.

So far, late April 2013 has brought little in the way of formal rulemaking under the private insurance reform and Medicaid titles of the Affordable Care Act. The implementing agencies, however, (the Centers for Medicare and Medicaid Services (CMS) of the Department of Health and Human Services (HHS), the Department of Labor, and the Department of Treasury) have been issuing a steady stream of guidance in the form of Frequently Asked Questions (FAQs) illuminating issues that have arisen under both titles.

On April 29, 2013, the agencies issued ACA Implementation FAQs-Set 15 addressing a range of these issue. The first FAQ answers the question of whether a health plan that was granted a waiver from the annual dollar limit prohibition under the “mini-med” waiver program can extend the expiration date of the waiver by changing its plan year (or, in the individual market, policy year) before the expiration of the waiver. Since the 2014 insurance reforms do not take effect until the beginning of the first plan (or policy) year after January 1, 2014, some insurers have been amending their plans or policies to push the expiration date deeper into 2014 and delay the effective date of the 2014 changes. The FAQ clarifies that a plan cannot delay the effective date of the annual dollar limit prohibition through this strategy. When the current waiver expires, an insurer or self-insured plan must eliminate dollar limits (although it can, of course, do so earlier).

Discrimination against providers based on licensure. The second FAQ of Set 15 asks whether regulations can be expected to implement the provision of the ACA prohibiting licensure-status-based discrimination, by non-grandfathered insurers or plans, against health providers acting within their scope of practice under state law. The FAQ states that the provision is self-executing and regulations will not be issued in the near future. Pending further guidance, insurers must implement the provision pursuant to a reasonable, good faith interpretation of the law. The law does not require plans or issuers to accept all types of providers into a network nor does it necessarily require equal provider reimbursement rates, but an insurer cannot refuse, for example, to cover the services of a nurse practitioner or anesthetist simply because he or she is not a medical doctor.

April 2013 has been a quiet month for new Affordable Care Act rules and guidance. Activity to implement the ACA, of course, is moving full speed ahead at the federal level as efforts continue to implement the federal exchange and to gear up for federal enforcement of the market reforms in a number of states. The Centers for Medicare and Medicaid Services (CMS) is in the process of holding stakeholder calls in every state where a federal exchange (now called a “marketplace”) will be established. It is also locating navigator programs, signing up insurers, and preparing for the October 1, 2013 beginning of open enrollment. The states have also been very active, either trying to implement their own state exchanges and the 2014 ACA market reforms or doing everything they can dream up to keep implementation from moving ahead.

Final rules have been issued governing the exchanges, the 2014 market reforms, the premium tax credits, and the premium stabilization programs, while guidance has been issued on the federal exchanges and the navigator program. Final rules on Medicaid eligibility and appeals are expected shortly. A public hearing was held on April 23, 2013 regarding the proposed employer responsibility regulations, while another will be held on May 29, 2013 reviewing proposed individual responsibility regulations. Final rules will follow in due course. In sum, implementation is progressing, although a lot of ground must be covered between now and 2014.

A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation discusses per capita caps, a proposed reform to Medicaid that would limit the amount of federal spending per beneficiary. The proposal’s supporters contend that it could help control the growth of federal spending on Medicaid. Critics disagree, saying that instead of slowing the rate of spending growth, it would only shift the costs to the state, ultimately limiting poor Americans’ access to care.

The recent moves by states to bring their Medicaid prescription drug benefits under managed Medicaid plans has fully taken root: the percentage of Medicaid prescriptions filled under managed Medicaid plans jumped from 19 percent in September 2011 to 46 percent in June 2012. As yet, the impact this might be having on patient care has not been examined. While it is early days to see the impact on health outcomes and whether better preventive services are being provided at lower cost, any changes in the utilization of prescription drugs can be an early indicator of longer term impact.

At the IMS Institute for Healthcare Informatics, we have looked at four states — Kentucky, New Jersey, New York and Ohio — and compared changes in the use of anti-psychotic, respiratory and diabetes medications between patients who switched to managed Medicaid coverage and those who remained in fee for service. Although this is a limited-scale review, we thought this could be a useful contribution at a time when state (and federal) decision-makers are crafting plans that will have important long-term impacts on many Americans from 2014 on.

While our analysis shows there are early signs indicating a change in care received by patients, the lack of consistent measureable change suggests that states’ efforts to bring better care at lower costs to their Medicaid beneficiaries has yet to be fully realized.

In his post “Why don’t Republicans Have a Vision for Health Reform” (April 2, 2013) John Goodman offers interesting comments on my earlier post “Reflections on The Federal Budget Resolutions” (March 21, 2013). I thank him for the comments.

My post was focused strictly on the vision for U.S. health care that Democrats and Republicans on Capitol Hill now project through the Senate budget resolution and the House budget resolution. Goodman, on the other hand, builds from my post a bridge to the vision some Republicans – including Goodman himself – have in the past projected for U.S. health care.

I can understand why Goodman used the well-known technique of the bridge, because he believes that Republicans currently do not have vision for health care. On this point, however, I beg to differ. There actually is a current Republican vision. It has been expressed through the House budget resolution.

On Good Friday, March 29, 2013, the Department of Health and Human Services released a final rule regarding increased federal Medicaid percentage changes under the Affordable Care Act for covering adults who are newly eligible under the ACA’s Medicaid expansions. HHS published the original proposed rule on this topic in August of 2011 as part of a larger rule on the ACA’s Medicaid changes. Other parts of this rule dealing with Medicaid eligibility were finalized in March of 2012, but the parts of the proposed rule dealing with federal financial assistance were not included at that time. Because the final rule contains significantly more detail than the proposed rule, HHS is publishing the rule as final, but soliciting further comment on parts of the rule. HHS also released on March 29, 2013, a series of Frequently Asked Questions, explaining its approach to the expansion of Medicaid through the use of Medicaid funds to purchase private insurance for Medicaid recipients in the exchange, the approach that Arkansas and possibly other states are proposing. This FAQ is discussed at the end of this post.

A Health Affairs Web First article released today describes the new rapid-cycle approach to program evaluation at the recently established Center for Medicare and Medicaid Innovation. The Affordable Care Act created the Innovation Center within the Centers for Medicare and Medicaid Services (CMS) to test payments and service delivery models, reduce costs in Medicare and Medicaid, and improve quality.

As the Innovation Center moves ahead with innovative payment and service delivery models, the Rapid Cycle Evaluation Group at the center delivers frequent feedback to providers while evaluating the outcomes of each model tested. When a model is considered for testing, staff from the Rapid Cycle Evaluation Group and CMS’ Office of the Actuary are immediately assigned to help create the model. The Office of the Actuary provides timely and impartial actuarial, economic, and statistical estimates–and monitors Innovation Center initiatives once testing has begun. This group’s rigorous and speedy assessment and evaluation is driven by performance metrics and robust new methodologies.

Researchers from the evaluation group have also been organized into “affinity groups” and use CMS data to answer critical policy questions that may shape future payment and service delivery models. The Innovation Center also plans to identify and promote population health metrics–measures of the functional status, healthy behavior, and health outcomes of a population–to promote disease prevention and achieve a more accountable, equitable, and coordinated health care system. All these efforts will contribute to the Innovation Center’s success in carrying out its mission of improving the quality of care combined with the slowing spending growth.

For those who like to look for silver linings, there are at least two events in the past few weeks that could provide a glimmer of hope. First, both the Budget Committee in the Republican controlled House has passed a budget and, for the first time in four years, the budget committee in the Democratic controlled Senate has also passed a budget. Both the House and the Senate have passed their budgets. The Senate’s budget passed by a slim 50 to 49 vote margin. And for a short time, there had been some uncertainty whether the House would approve its budget because it doesn’t eliminate the deficit fast enough for some House conservatives – some indication of the pressure the right is putting on the leadership.

The second glimmer of hope is that the President has been reaching out to Congressional Republicans in a way that he had not done during his first term–taking a group of Senate Republicans to dinner and meeting with the House Republican leadership on their home turf. However, as Mitch McConnell (R KY) was quick to point out, meeting with Republicans is far different than finding common ground or strategies for compromise.

To no great surprise, the budget documents themselves suggest two very different and divergent views of the country’s future–differences that will make finding a compromise a serious challenge.

One of the interesting features of the Affordable Care Act is that reform basically takes place at the state level. Yet the states are very different. Some spend more than twice as much on health care as others, as a percent of state income.

For example, health care spending in three states — Maine, West Virginia and Mississippi — accounts for one out of every five dollars of state GDP. Conversely, Wyoming spends less than 9 percent. (See the table at the end of this post.) If every state were like Wyoming, the United States as a whole would be spending less of its income on health care than about three-fourths of the other developed countries.

But the other states are not like Wyoming and the United States spends considerably more on health care than other countries, at least by conventional measures (although these measures have been challenged). Many believe that the key to why the U.S. spends more lies in the way private sector medicine is practiced across the different states. Among the fifty states, however, a study by the National Center for Policy Analysis finds that the public sector exhibits much more variability from state to state than the private sector; public sector medicine, rather than private sector medicine, may be the culprit.

According to a process laid out in the Budget Act of 1974, the budget resolutions put forth by the House of Representatives and the Senate emerge as modifications, sometimes substantial, of the budget to be submitted by the first Monday in February by the President of the United States.

Alas, for governance, the President has missed that deadline for fiscal 2014 (starting in October 1, 2013). He is likely to submit a budget only by early April – two months late. In the meantime, both chambers have worked up their own budget resolutions, without the President’s budget as a starting point. It shows, because the tax- and spending numbers in these two budgets, and the visions for America they reflect, differ so starkly that it is hard to imagine the emergence of a joint conference report reconciling the two budgets in one that could pass both chambers.

But all is not lost. At least the American people now have before them the visions the two parties have for our country, especially in regard to health policy.

For decades before the passage of the Affordable Care Act, health care costs outstripped inflation, without corresponding improvements in health care quality. Our system didn’t incentivize quality or efficiency. We paid providers for the quantity of care, not the quality of care. And we were not using technology to deliver smarter care.

The Affordable Care Act includes steps to improve the quality of health care and lower costs for you and for our nation as a whole. This means avoiding costly mistakes and readmissions, keeping patients healthy, rewarding quality instead of quantity, and creating the health information technology infrastructure that enables new payment and delivery models to work.

Here are just a few ways that the health care law builds a smarter health care system and incentivizes quality of care – not quantity of care – to drive down costs and save you money.

The March issue of Health Affairs, released today, includes a variety of articles revolving around health and wellness, including an examination of mortality rates among American men and women by county. The issue also addresses whether physicians will see a return on investment from the adoption of electronic health records (EHRs), and it raises questions about cost savings from workplace wellness programs and the impact on less healthy workers.

Female mortality rates increased in 42.8 percent of counties in the United States during 1992–2006. Although mortality rates are falling in most counties in the United States, female mortality rates increased in 1,224 counties, compared to an increase in 108 counties for men, write David Kindig, professor emeritus of population health sciences at the University of Wisconsin–Madison, and Erika Cheng, a doctoral candidate there. Their study is the first to examine the relationship between socioeconomic and behavioral factors and mortality at the county level.

The authors found that for both men and women, factors associated with lower mortality included having a college degree, higher median household income, Hispanic ethnicity, and living in a higher population density area. For women, living in counties in the South and West was associated with a 6 percent higher mortality rate than living in the Northeast. Smoking rates were also a key factor in higher mortality rates. The researchers recommend targeted approaches that are suited to the unique needs of a county; they observe that investments in health care, public health, behavioral change, and social and physical environment will be needed to improve mortality rates.