Congress on February 17 approved legislation that will prevent a 27.4 percent decrease in Medicare payments to physicians slated to go into effect March 1. The bill would freeze physician payments at their current rates until December 31, 2012. The provision is included in legislation that will extend the existing payroll tax cut to the end of the year. President Obama said he would sign the legislation as soon as it reaches his desk.
Under the legislation, the Government Accountability Office and HHS are directed to submit reports to Congress on developing a long-term replacement for the existing Medicare physician payment system. One of the downsides of the 10-month extension of the existing law is that a lame-duck Congress will have to address this issue again after the November elections and before January 1, 2013.
The “Middle Class Tax Relief and Job Creation Act of 2012” (HR 3630) includes extensions of several existing Medicare-related statutes that were set to expire at the end of the month. To pay for some of these extensions and the freezing of physician payments, the legislation includes several offsets that will affect hospitals, laboratories, and other health care providers.
Extensions. Hospital geographic reclassifications authorized under section 508 of the Medicare Modernization Act, which expired on December 1, 2011, would be extended through March 31, 2012. The outpatient “hold harmless” provision, which expires on February 29, 2012, would be extended through December 31, 2012, except for sole community hospitals with more than 100 beds.
Under current law, the Medicare physician fee schedule is adjusted geographically for physician work, practice expense, and medical malpractice insurance to reflect differences in the cost of resources needed to produce physician services. The new legislation would extend the existing 1.0 floor on the “physician work” index through December 31, 2012. Current law places annual per beneficiary payment limits for all outpatient therapy services provided by non-hospital providers, but includes an exceptions process for cases in which the provision of additional therapy services is determined to be medically necessary.
The legislation would extend the exception process through December 31, 2012. The provision also extends the cap to services received in hospital outpatient departments only through December 31, 2012. The ability of independent laboratories to receive direct payments for the technical component for certain pathology services would be extended through June 30, 2012. The add-on payment for ground and air ambulance services, including in super-rural areas, would be extended through December 31, 2012.
The Qualifying Individual (QI) program, which allows Medicaid to pay the Medicare Part B premiums for low-income Medicare beneficiaries with incomes between 120 percent and 135 percent of poverty, and which is set to expire at the end of the month, would be extended until December 31, 2012.
Transitional Medical Assistance (TMA) , which allows low-income families to maintain their Medicaid coverage as they transition into employment and increase their income, and which also expires February 29, would be extended until December 31, 2012.
Offsets. Under current law, Medicare reimburses providers for beneficiaries’ unpaid coinsurance and deductible amounts between 70 and 100 percent of beneficiary bad debt. The legislation would phase down bad debt reimbursement for all providers to 65 percent. Providers currently reimbursed 100 percent of their bad debt would have a three-year transition of 88 percent, 76 percent and then 65 percent. Providers reimbursed 70 percent of their bad debt would be reduced to 65 percent.
Medicare currently pays for clinical laboratory services under a carrier-specific fee schedules subject to national payment limits. Most lab services receive the national payment. This provision resets clinical lab payment rates by 2 percent in 2013.
Disproportionate Share Hospital (DSH) payments, which under the Patient Protection and Affordable Care Act (P.L. 111-148) would be reduced starting in 2014, would be reduced for one additional year, until 2021, under the legislation.
PPACA also included a provision known as the “disaster-recovery FMAP” designed to help states adjust to drastic changes in Federal Medical assistance Percentages (FMAP) following a statewide disaster. Once triggered, the policy would provide assistance for as many as seven years following the disaster, as long as the state continued to experience an FMAP drop of more than three percentage points. The legislation would make a makes a technical correction in this statute.
PPACA also established a Prevention and Public Health Trust Fund; authorizations to the fund were set to increase from $500 million in 2010 to $2 billion in 2015 and each year thereafter; the legislation would reduce the trust fund by $5 billion over 10 years.
CCH Chicago Bureau, February 17, 2012
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The Patient Protection and Affordable Care Act’s (ACA) state health insurance exchanges for small businesses are estimated to cover nearly 10 million employees, in addition to the 15.3 million individuals who will gain coverage through the individual exchanges when the law is fully implemented, according to an article in the February issue of Health Affairs. The article is part of a cluster of articles in the journal about the Small Business Health Care Options Program (SHOP), the formal name for the small business exchanges.
The cluster of articles, supported by The Commonwealth Fund, examine SHOP’s potential to provide affordable insurance options for small employers who now face high premiums and administrative costs when they insure their employees. Under the ACA, the SHOP exchanges, along with the exchanges for individuals, are expected to be open for business on Jan. 1, 2014.
The ACA grants states considerable flexibility in designing their exchanges, such as allowing them to combine their small business and individual exchanges, limiting enrollment to companies with 50 or fewer employees or opening to firms of up to 100 employees through 2015, or reducing the ability of insurers in the exchange to charge premiums on the basis of age beyond what the law allows. Examining all of these options, the research found that merging the small business and individual market exchanges would bring 2 million more people into the exchanges, for a total of nearly 27 million, would reduce premiums for individuals by an average of $600 annually, and would reduce federal spending on premium subsidies by $4 billion. However, few of the other options had significant effects on coverage or costs. The study concluded that “these results suggest that states can make these design choices based on local support and preferences without fear of dramatic repercussions for overall coverage and cost outcomes.”
In an overview of the cluster of articles, Timothy Jost at Washington and Lee University School of Law asserts there is a real need for the SHOP exchanges as small businesses struggle to afford and manage health insurance for their employees. Jost concludes that in order to be successful, the SHOP exchanges will have to provide small employers with a more attractive alternative to the options currently available; keep costs affordable; offer employees choice, limit the burden posed by the insurance process; perform administrative functions; manage enrollment periods; and, perhaps most importantly, protect against adverse selection, which would lead to a disproportionate number of sicker individuals in the exchanges.
The Business Case. Author Jon Kingsdale, founding director of the Massachusetts Connector exchange, draws on his experience, and examples from Utah’s already functioning exchange for small businesses, to lay out a business case for the SHOP exchanges. He contends that in order to attract and retain small employers, while also fulfilling the goals of health reform the SHOP exchanges must
- be affordable, contain administrative costs, and create efficiencies for small businesses;
- attract and promote high value, lower-cost health plans, that are not typically available to employees of small firms; and
- provide small business employees a wider choice of plans as opposed to the traditional offer of one plan.
Terry Gardiner, vice president for policy with the Small Business Majority and former Alaska state legislator, observes that often overwhelmed small-business owners need an exchange that will fulfill many of the functions served by the human resources departments of larger businesses. Exchanges should assist small employers with other health insurance-related functions, such as wellness programs, COBRA coverage, and flexible spending accounts.
Self-Insured Plans. Concerns that recent trends towards self-insurance, meaning employers pay benefits directly to their employees, might draw small businesses away from the SHOP exchanges and cause higher costs in the exchanges by taking healthier participants out of the risk pool, are addressed in two separate articles. Christine Eibner and colleagues at the RAND Corporation find that self-insuring with “stop-loss” coverage may be less expensive to small businesses with healthy employees because they are not subject to state regulations and several provisions in the ACA.
The study concludes that allowing small businesses to continue to self-insure would have little to no effect on premiums in the SHOP exchanges and would likely increase the number of small business employees with health insurance. Mark Hall at Wake Forest University School of Law addresses what measures states might take if the trend towards self-insurance does lead to adverse selection in the exchanges.
Large Employers. Beginning in 2017 states can choose to open their exchanges to large employers. William Kramer, executive director for national health policy for the Pacific Business Group on Health, investigates the likelihood of larger employers joining the exchanges if they become open to them. He concludes that in the short-term (2014-2016), large employers may rely on the individual exchanges to provide coverage for their pre-Medicare retirees and part-time employees. However, large employer participation in the SHOP exchanges will depend on how viable the exchange marketplaces become, whether the ACA survives mostly intact, and whether the labor market becomes competitive again.
For more information, visit http://www.commonwealthfund.org.
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