End of Week Roundup

This week, the focus of the health care world has been on the oral arguments at the U.S. Supreme Court concerning the constitutionality of the Patient Protection and Affordable Care Act (PPACA). Our editors have contributed a great deal of summary and analysis on the different issues involved, including the following:

  • Day 1: Arguments on whether the Court can even hear the case. Is the penalty for not purchasing health insurance a tax? 
  • Day 2: Arguments on whether the individual mandate is constitutional.
  • Day 3: Arguments on the severability of the mandate and expansion of Medicaid.
  • Synopsis of amicus briefs regarding the issues of Medicaid and severability.
  • Discussion of whether Medicaid should be expanded under the law.
  • An overview of public vs. legal opinions on the case.

Also this week:

  • Can those who bring lawsuits against generic drug manufacturers find relief?
  • An extension of the HIPAA Enforcement Discretion Period.
  • CMS’ initiative to reduce hospitalizations for nursing facility residents.
  • Direct solicitation” prohibition for DMEPOS suppliers is amended.
  • Paul Ryan’s plan for Medicaid block grants gets scrutinized.

Switch to Medicaid Block Grants Gets Close Scrutiny

The budget proposal unveiled by Rep. Paul Ryan (R-WI) on March 20 includes a plan to convert the current federal share of Medicaid spending into a block grant to each state. The block grant would be indexed to inflation and adjusted to meet changes in a state’s population. According to Ryan, “States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations.  

The switch to block grants has been supported by Republican legislators for years; Newt Gingrich supported such a policy change when he was Speaker of the House and Bill Clinton was governor. But the proposal is looked at warily by some governors – even Republican governors. As reported in the publication The Hill, Gov. Scott Walker (R-WI) called for block grants to be an option for states, something they could either opt in or out for. 

In 2011, when Ryan first proposed a block grant approach, Walker was much more direct in his support. Walker wrote in the New York Times “Block grants would bring a truce to the tug-of-wars between Washington and the states. This is the best option for Medicaid, facing a midlife crisis, to survive.” 

According to Ryan, his budget plan would reduce federal Medicaid spending by $750 billion over 10 years. The Congressional Budget Office has estimated that the Ryan plan would reduce federal Medicaid spending from 2 percent of gross domestic product in 2011 to 1¼ percent in 2030 and 1 percent in 2050. Federal Medicaid spending would be 75 percent less in 2050 under Ryan’s plan than under current policy, according to the CBO. 

The Kaiser Commission on Medicaid and the Uninsured has followed the issue of Medicaid block grants for years. In a 2011 report, Kaiser notes, “While a block grant can be structured in a number of ways, block grants generally provide fixed federal allotments to states that are based on current expenditures trended forward using a pre-determined growth rate.” Kaiser also highlighted some of the issues that always arise whenever the talk in Washington moves to block grants – 

  • To achieve federal savings under block grants, Medicaid funding would have to be set below expected levels.
  • Pre-determined levels of funding would not be responsive to program needs.
  • Allocating limited federal funds equitably across states is difficult.
  • A block grant would eliminate the entitlement to Medicaid, so coverage would not be guaranteed.
  • To maintain accountability for federal dollars, capped financing arrangements generally impose requirements on states. 

The Kaiser report also looked at the implications of block grants on beneficiaries, long-term care, providers, state economies, and federal government control over the Medicaid benefit. 

Beneficiaries. Under a block grant, Medicaid would stop being an entitlement program and states would have the ability to eliminate current recipients of Medicaid benefits from eligibility. States also could cut back on the types of benefits offered. This could lead to an increase in a state’s uninsured population. States would also have the ability to increase cost-sharing for Medicaid recipients. 

Long-term care. Under a block grant, states could limit eligibility, extend waiting lists to nursing home services. States could eliminate current protections against the impoverishment of spouses of nursing home residents and also require adult children or other family members to contribute to the costs of nursing home care of their Medicaid-eligible parents or siblings.  

Providers. Medicaid is the largest payer for long-term care and public mental health services. These provider types would be at a higher risk if federal Medicaid financing were reduced or capped. According to Kaiser, “Many safety-net providers that rely heavily on Medicaid revenues make trauma and emergency room services available to the broader community. Limited provider payments could restrict these services.”

State budgets. Assuming that a federal Medicaid block grant would result in less federal money flowing to states, a block grant program would reduce state revenues, leading to a potential decrease in state economic growth and state employment. It will also expose states to more financial liability if there is an economic downturn. 

Federal oversight. Providing states with more flexibility will likely lead to more variation in  Medicaid programs from state to state, and the federal government will have less accountability relating to states providing a basic level of medical services under Medicaid.

Better Care, Less Hospitalizations for Nursing Facility Residents

Nursing facility residents may see some improvements in their care and experience less hospital admissions, as part of a new CMS initiative to reduce avoidable hospital admissions among these residents. The initiative is focused on long-stay nursing facility residents who are enrolled in the Medicare and Medicaid programs, with the goal of reducing avoidable inpatient hospitalizations.

CMS introduced this program in response to research showing that nursing facility residents often experience potentially avoidable inpatient hospitalizations. According to CMS, these hospitalizations are “expensive, disruptive, and disorienting for frail elders and people with disabilities.” Further, nursing facility residents tend to be especially vulnerable to the risks that accompany hospital stays and transitions between nursing facilities and hospitals, including medication errors and hospital-acquired infections.

“Being readmitted to a hospital is very difficult for low-income seniors, people with disabilities and their families,” said Acting Administrator Marilyn Tavennerin a recent CMS press release. “Through this initiative, we will work with nursing facilities and hospitals to provide better, person-centered care. By catching and resolving issues early, we can help people avoid costly and stressful hospitalizations.”

Additionally, many nursing facility residents are enrolled in both the Medicare and Medicaid programs (Medicare-Medicaid enrollees). CMS research on Medicare-Medicaid enrollees in nursing facilities found that approximately 45% of hospital admissions among those receiving either Medicare skilled nursing facility services or Medicaid nursing facility services could have been avoided, accounting for 314,000 potentially avoidable hospitalizations and $2.6 billion in Medicare expenditures in 2005.

To help reduce these costs and improve quality for nursing facility residents, CMS plans to collaborate with organizations (which CMS refers to as “enhanced care and coordination providers”) that will partner with nursing facilities to implement evidence-based interventions which will improve care and lower costs. Up to $128 million has been committed to the project by CMS to support a diverse portfolio of these interventions aiming to provide enhanced on-site services and supports to nursing facility residents. The organizations will then work with nursing facilities and states to provide coordinated, person-centered care with the goal of reducing avoidable hospital stays. Interventions from each participating organization will be implemented in at least 15 partnering nursing facilities.

Eligible organizations may include physician practices, care management organizations, and other entities. For-profit and not-for-profit organizations are eligible to apply. A “Request for Applications” was issued by CMS on Thursday, March 15. Organizations interested in participating in this initiative are required to submit an application no later than June 14, 2012.

As part of their application, those wishing to participate must propose an intervention that meets the objectives of the initiative. CMS will then select applications with the expectation that those interventions selected will then be implemented. Interventions will be evaluated for their effectiveness in improving health outcomes and providing residents with a better care experience. It is CMS’ plan that all participants will have staff on-site at nursing facilities to provide preventive services and improve coordination and communication among providers, helping to provide the resident with a more seamless transition between care settings.

The initiative supports CMS’ Partnership for Patients’ goal of reducing hospital readmission rates by 20% by the end of 2013. Partnership for Patients is a public-private partnership aiming to cut preventable errors in hospitals by 40 percent and reduce preventable hospital readmissions by 20 percent over a three-year period.

“Direct Solicitation” DMEPOS Rule is Unfeasible as Written, CMS Says

In a final rule published on August 27, 2010, CMS addressed and modified several durable medical equipment prosthetics orthotics and supplies (DMEPOS) supplier standards at 42 C.F.R. §424.57, which lists the special payment rules for items furnished by DMEPOS suppliers and issuance of DMEPOS supplier billing privileges. One provision that was amended involved the prohibition against the “direct solicitation” of Medicare beneficiaries by DMEPOS suppliers (see 42 C.F.R. §424.57(c)(11)).

The August 2010 final rule expanded the scope of the prohibition on direct solicitation to include in-person contacts, email, and instant messaging. Prior to the final rule, the definition of direct solicitation generally was limited to telephonic contact. Since the adoption of the “direct supervision” definition, CMS found that the implementation of the expansion of this provision was unfeasible. So, in an April 4, 2011 proposed rule, CMS proposed removing the definition of “direct solicitation,” revising 42 C.F.R. §424.57(c)(11) to remove all references to “direct solicitation,” and clarifying that the prohibition was limited to telephonic contact.

On March 14, 2012, CMS issued a final rule amending the regulation at 42 C.F.R. §424.57. In addition to removing the definition of “direct supervision” and any reference to “direct supervision,” the final rule allows DMEPOS suppliers to contract with licensed agents to provide DMEPOS supplies unless prohibited by state law, removes the requirement for compliance with local zoning laws, and modifies certain state licensure requirement exceptions. 

Commenters criticized the definition of “direct solicitation” as overly broad as it covered some types of marketing activity outside the bounds of what CMS intended to prohibit under the regulations. One commenter recommended that the standard be revised to allow beneficiaries to give verbal permission for a supplier to contact them and allow DMEPOS suppliers to contact beneficiaries when they have received a written order or prescription for a Medicare-covered item to be furnished from the patient’s physician prior to contact with the beneficiary. CMS disagreed with the recommendation of verbal consent due to the potential for abuse, stating that there needs to be a documented record of the beneficiary’s approval of the contract.

The rule at §424.57(c)(11) now states that DMEPOS suppliers must agree not to contact a beneficiary by telephone when supplying a Medicare-covered item unless one of the following applies: (1) the individual has given written permission to the supplier to contact them by telephone concerning the furnishing of a Medicare-covered item that is to be rented or purchased, (2) the supplier has furnished a Medicare-covered item to the individual and the supplier is contacting the individual to coordinate the delivery of the item, or (3) if the contact concerns the furnishing of a Medicare-covered item other than a covered item already furnished to the individual, the supplier has furnished at least one covered item to the individual during the 15-month period preceding the date on which the supplier makes such contact.

Although CMS has finalized its proposal to delete the definition of “direct solicitation” from the regulation, CMS has taken steps to resolve unwanted and unsolicited communications and will continue to actively monitor the issue of unwanted and unsolicited communications between DMEPOS suppliers and beneficiaries. In addition, CMS will be working with law enforcement agencies to determine if further agency intervention is required. If CMS determines that action needs to be taken to limit DMEPOS suppliers’ communications with Medicare beneficiaries, it will engage in further rulemaking.

CMS has addressed concerns about this standard in its Frequently Asked Questions. Click on “DME Supplier Telemarketing Frequently Asked Questions” under the Downloads section.