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

In the May Health Affairs Narrative Matters essay, two graduate students describe their fight with the bureaucracy to gain coverage for their son under the Children’s Health Insurance Program, and they express the hope that provisions of the Affordable Care Act will cut the red tape. The article, “To Cover Their Child, One Couple Navigates A Health Insurance Maze In Pennsylvania, is by Ari Friedman, a fifth-year medical-doctoral student in health economics at the University of Pennsylvania’s Perelman School of Medicine and Wharton School, and Tara Mendola is a sixth-year graduate student in comparative literature at New York University.

The release of average charges for common procedures in more than 3,000 U. S. hospitals last week by the Centers for Medicare and Medicaid Services (CMS) elicited divergent reactions – not surprisingly. On one hand, it was front-page news for most of the major newspapers: “Hospital Billing Varies Wildly, Government Billing Data Shows,” was the headline in the New York Times. The article went on to speculate that these new data would likely “intensify a long debate over the methods that hospitals use to determine their charges.”

On the other hand the data were “old hat” to most health policy analysts. Several colleagues mentioned to me that “this is old news” and “it isn’t meaningful at all because we all know that charges don’t mean anything.”

“No one pays charges” is the common refrain. “Charges are merely an accounting fiction.”

Charges Do Matter — They Matter A Great Deal

Counter to the belief of both hospital industry representatives and many of my colleagues, hospital charge levels and rapidly escalating charges matter a great deal. While individual states and the Affordable Care Act (ACA) have instituted limits on the amounts low-income uninsured patients pay hospitals, insured patients that receive care at hospitals that are “Non-Par” or “out-of-network” are still victims of hospital’s exorbitant charging practices. When patients receive emergency services at an out-of-network hospital, the patient and/or insurance company (depending on insurer cost sharing for out-of-network care) pay full charges.

High and increasing hospital charges, combined with increasing proportions of cases admitted through the hospital Emergency Department (ED), are major factors behind the ever-declining negotiating leverage of private health insurers. This situation, coupled with the increased pricing power of the ever-more-concentrated provider industry, will be a major contributor to the almost certain rapid escalation in total U.S. health care costs in coming years.

The list of most-read Health Affairs Blog posts for April includes four posts in Tim Jost’s ongoing series on implementing the Affordable Care Act; number one on the top-ten list is Tim’s post about proposed regulations on health insurance exchange navigators. The list also includes posts on accountable care organizations, patient-centered care, controlling health care costs. and more.

The full list is below:

Affordable Care Act guidance is now literally arriving on a daily basis from the implementing agencies, particularly HHS. Major rules remain to be finalized, including a lengthy eligibility and appeals rule, a rule on wellness, the employer and individual responsibility rules, and a number of shorter rules. More proposed rules or amendments to rules are also promised. These could arrive any day. But in the meantime there is the steady flow of frequently asked questions (FAQs) and other guidances, which often appear unannounced.

This post deals with three sets of FAQS released by HHS on May 13 and 14. (It may be updated on May 15 or May 16 to note further guidance released over the course of those days.) Two of the FAQs concern the use of section 1311 funding, one dealing with section 1311 funding in state partnership marketplaces and in states with federally facilitated marketplaces, the other addressing the use of such funding in consumer partnership marketplaces. The third FAQ is simply titled “Frequently Asked Questions on Health Insurance Marketplaces,” but primarily deals with enforcement, reporting, and administration requirements. (Since HHS seems irrevocably committed to the unfortunate term “marketplace,” I am going to try to use the term from now on, rather than “exchange,” in these posts.)

Section 1311 of the ACA establishes the marketplaces. It also appropriates an unspecified amount of funding, to be determined by the Secretary of HHS, to make awards to the states as necessary to establish the exchanges. HHS has issued more than $3.5 billion in establishment grants to date. Section 1311 is one of the few uncapped sources of implementation funding available to the agencies, which are otherwise being starved by Congress of necessary ACA appropriations.

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.

As Affordable Care Act implementation inexorably moves into place, guidance continues to issue forth from the implementing agencies — now almost on a daily basis — shoring up the edifice that is becoming the reality of health care reform. On May 8, the Department of Labor’s Employee Benefits Security Administration released a guidance detailing the notices that employers must give to their employees concerning the employee’s coverage options under the ACA, as well as an updated model election notice under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The ACA amends the Fair Labor Standards Act (FLSA) to require employers to give their employees notice of the coverage options that are available to them under the marketplace (formerly known as the exchange).

This provision requires employers to notify new employees, as well as current employees no later than March 1, 2013:
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1. of the existence of the marketplace, the services it offers, and how employees can contact it;
2. that if the employer’s share of total allowed costs of benefit provided by the benefits plan is less that 60 percent of total costs (that is, it does not meet minimum value requirements), the employee may be eligible for a premium tax credit through the marketplace; and
3. that if the employee obtains coverage through the marketplace, the employee will lose the employer’s contribution and corresponding tax benefits.

States are beginning to release information on what health insurance premiums will be in 2014. That’s when the Affordable Care Act’s (ACA) market reform rules that apply to the individual and small group markets will go into effect. The natural temptation will be to simply compare the 2014 premiums to those in 2013 to determine how the ACA may have affected premiums beyond any usual changes due to rising medical spending. But such comparisons will mask not only the reasons for any premium changes, but also how premium changes will differ across states and individuals. Premiums will go up for some individuals and down for others.

When examining how premiums change beginning in 2014, it is important to understand the various factors underlying these changes. These factors include the effectiveness of the individual mandate and premium subsidies at attracting low-cost enrollees into the insurance market; the new benefit requirements that may lead to higher premiums but lower out-of-pocket costs; employer decisions regarding whether to continue offering insurance and the health status of those whose coverage is dropped; how each state’s current issue and rating rules compare to those beginning in 2014; and each individual’s demographic characteristics and health status (and income when determining premiums net of subsidies).

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.

The torrent of Affordable Care Act guidance that marked the end of April has continued into May, as the Centers for Medicare and Medicaid Services (CMS) released on May 1, 2013, a Health Insurance Marketplace Guidance on the role of agents, brokers, and web brokers in the health insurance marketplaces, formerly known—and still referred to here—as the exchanges.

Agents and brokers are the traditional channel through which most Americans and their employers have purchased health insurance coverage. The ACA and implementing guidance offer new forms of assistance to help consumers enroll in insurance coverage, including navigators, in-person assisters, enrollment counselors, and the exchange itself with its call center and web portal. Nevertheless, if the exchanges are to fulfill expectations by signing up millions of Americans for health insurance coverage, agents and brokers, including web-based brokers, will pay a vital role. They will play a particularly important role in assisting small employers in signing up for the SHOP exchanges. This guidance describes their role.

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.

In six months, open enrollment for the Affordable Care Act’s health insurance marketplaces will begin around the country. Massachusetts’ experience has proven to be instructive. In 2006, the state created an insurance exchange, called the Commonwealth Health Insurance Connector Authority. The Connector, which began offering unsubsidized commercial insurance products in 2007, now provides an array of options for consumers, including subsidized coverage to people with incomes below 300 percent of the poverty level.

A new study, released today as a Web First by Health Affairs, surveyed 393 families in unsubsidized Connector plans. It found that 38 percent of surveyed families reported financial burden associated with their health care and 45 percent reported higher-than-expected out-of-pocket costs. This study is one of the first to evaluate the prevalence of and risk factors for financial burden and unexpected costs among families in unsubsidized health insurance exchange plans.

On April 9, 2013, the Centers for Medicare and Medicaid Services of the Department of Health and Human Services announced the availability of $54 million to fund navigator programs in states that have federally facilitated or partnership exchanges. This funding is not available for states that operate their own exchanges, which must pay for their own navigator programs.

Since federal establishment grants cannot be used to fund state navigator programs, it is possible that some states with state exchanges will not have navigator programs up and running until after their exchanges open and begin to generate their own revenue. It is hoped, however, that the gap in these states will be filled by consumer in-person assisters, who can be paid from establishment grants and should become available this year.

Each state will qualify for at least $600,000 in funds, with states with larger uninsured populations qualifying for larger amounts. Texas, for example, will qualify for $8,181.185 in grants; Florida for $5,851,072. Thirteen states will qualify for the minimum $600,000. (Curiously, the list of federal exchanges includes Utah, which earlier received contingent approval to establish a state exchange). If all the funds allocated to any state are not awarded within that state, any remaining funds will be awarded to grant applicants from other states based on their meeting the funding criteria. Applications are due June 7, 2013, and awards will be made on August 15, 2013. Funds will be provided through cooperative agreements rather than grants, the distinction turning on the greater federal programmatic involvement under cooperative agreements.

On April 5, 2013, the Department of Health and Human Services released its final Letter to Issuers on Federally Facilitated and State Partnership Exchanges. This letter lays down guidelines for insurers that will sell qualified health plans on the federal exchanges in 2014. A proposed version of this letter was published for comment on March 1, 2013, which I blogged about here. The final issuer letter tracks the proposed letter with few significant changes. In part because I am supposed to be on vacation in France and in part because of limited access to technology, I am not going to review the issuer letter in depth, but rather refer the reader to my earlier post, providing here only a brief overview of the final letter that highlights the respects in which it differs from the proposed rule discussed in my earlier post.

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.