Health Care Reform Implementation Update May 20, 2014

This past week proved to be a busy one for legislators focused on health care and agency officials at the Department of Health and Human Services (HHS).  Sylvia Burwell faced her second Senate panel regarding her nomination for Secretary of HHS, a pair of Republican senators introduced a bill to recoup funds for failed Affordable Care Act (ACA) exchanges, and a House committee chairman expressed his growing frustration in a letter to exiting Secretary Sebelius.  At the agencies, the Centers for Medicare and Medicaid Services (CMS) released another flurry of final rules on numerous aspects of ACA implementation.  This past week also saw the release of numerous studies and reports from various health care related organizations on issues ranging from health care records to the employer mandate.


On May 14, Sylvia Burwell, President Obama’s nominee for HHS Secretary, appeared before the Senate Finance Committee for a confirmation hearing.  Much like the Senate Health, Education, Labor and Pensions Committee hearing on Burwell’s nomination, there was widespread support for the nominee.  She is widely expected to be confirmed.  Highlights from the hearing included witness testimony from Senator Tom Coburn (R-OK) in support of her nomination, Burwell’s promise to work with Congress on a permanent repeal of the Sustainable Growth Rate (SGR) formula, and her pledge to use the “full extent of the law” to recoup federal funds from states with failed ACA exchange websites.  A vote on Burwell’s confirmation is expected to take place in the next few weeks.

Senator John Barrasso (R-WY) and Senator Orrin Hatch (R-UT) introduced a bill on May 14 that would require states with “failed” ACA exchange websites to return federal funds used to build those websites back to the government.  Specifically, the bill, the “State Exchange Accountability Act,” would require those states that abandon their own state-run exchanges to join the federal exchange run through, to pay back all establishment and early innovator grants to the federal government over a 10-year period. 

In a May 14 letter to HHS Secretary Kathleen Sebelius, House Committee and Oversight Reform Committee Chairman, Darrell Issa (R-CA), asserted that Secretary Sebelius failed to provide the Committee with requested documents regarding ACA exchanges.  The letter states that the Committee staff has provided “extraordinary accommodations” to HHS’s questions regarding the need for the documentation, and that HHS “did not produce any of the requested documents, or answer in writing any of the questions,” by the deadline date the Committee imposed of October 24, 2013.  Although the letter does report that HHS has produced some documents, it also asserts that the redactions and omissions from those documents “appear to be unnecessarily overbroad.” 


On May 20, CMS released a final rule on Policy and Technical Changes to the Medicare Advantage (MA) and the Medicare Prescription Drug Benefit Programs (Part D). The rule revises the MA program regulations in accordance with the Affordable Care Act.  In particular, the rule modifies agent/broker compensation, implements overpayment provisions of the Social Security Act, and prohibits the submission of diagnoses for additional payment after the final risk adjustment data submission deadline.  In terms of Part D, the rule requires physicians who participate in Part D to enroll or officially opt-out of Medicare, increases transparency by releasing data on physician rates and billing practices, and allows CMS to rescind Medicare enrollment for providers with a proven history of over-prescribing or writing fraudulent prescriptions.  The rule also includes the controversial "maximum allowable cost" standards which would set reimbursement rates to pharmacies according to a list of maximum costs dictated by pharmacy benefit managers and other Part D sponsors.

On Friday May 16, CMS released an important final rule that addressed a variety of open issues related to health care plans, exchanges, Navigators, risk corridors and others.  In the rule, CMS stated that it will pursue other sources of funding in the case of shortfalls in its risk corridor program, which is intended to assist insurers with the financial risks they face under the ACA.  The agency notes in the rule, however, that using risk corridor money from other funding sources requires that appropriations be available.  CMS also said that states could further postpone the employee choice option for Small Business Health Options Program (SHOP) exchanges, which had already been postponed to 2015, until 2016.  Additionally, CMS finalized a requirement for ACA exchange health plans in which insurers must notify enrollees of any changes to their coverage, including cancellations, with standardized forms.  CMS also included a prohibition in the final rule against various state laws that placed limits on the use of Navigators.  Navigators are individuals that are employed to assist individuals with ACA health plan enrollment via the exchanges.  Finally, CMS said that the threshold for reinsurance payments in 2015 will be $45,000 for a person—the same level that it used for 2014.

CMS released Part D plan guidance last week that indicates that the agency will not be expanding medication therapy management in 2015.  In January, CMS had proposed to require medication therapy management for beneficiaries with two or more chronic diseases who are also prescribed two or more covered Part D medications.  As is the current policy, the new guidance from last week said that Part D plans could continue to limit medication therapy management to beneficiaries with three chronic diseases.

The Internal Revenue Service (IRS) finalized a rule that specifies reporting requirements for state exchanges.  State exchanges will be required to report the names, addresses, birthdays, and premium information for individuals that receive private coverage through the state exchanges.

CMS plans to release a test version of the SHOP website in three to five states in advance of the nationwide launch of the website, which is scheduled to occur on November 15, 2014.  Small businesses in the 36 states where HHS administers will be able to use the SHOP website to purchase private health insurance for their employees.

CMS is also testing a new hospice payment program to evaluate whether Medicare beneficiaries who receive early hospice care have better quality of life and less Medicare expenditures.  The program, called the Medicare Care Choices Model, will be available for Medicare beneficiaries with a limited set of conditions, including advanced cancer, congestive heart failure and HIV/AIDS.  Hospices must apply by mid-June to participate in the three-year program, and CMS has said that it will select at least 30 hospices to participate.  The selected hospices will receive $400 per month per beneficiary.

The Department of Defense (DOD) recently reported that by the end of this summer it will release a request for proposals for an $11 billion contract to update its electronic health records system.  This contract will represent the largest federal government IT overhaul since the launch of last fall.  With millions of records for active duty personnel and their dependents needing updates, this will be a significant undertaking for any contractor.  Numerous IT contractors have reportedly been preparing to execute this contract for years.

Robert Petzel, the top health official at the Department of Veteran’s Affairs (VA), resigned on Friday after allegations of false reporting activities from VA hospitals.  The accused facilities, most notably in Arizona, reportedly withheld information regarding waiting times for veterans seeking medical care.


The White House Rural Council, in conjunction with HHS and United States Department of Agriculture (USDA), spent $70 million in 2012 and 2013 to support rural “telehealth” programs in various states.  In a May 12 blog post from the Office of the National Coordinator for Health Information Technology (ONC) at CMS, it was announced that the White House would be working with health officials in Tennessee to expand this program in the state’s poorest rural communities.  This program is intended to assist rural health facilities with updating their technology to can support the use of telemedicine.  


Maryland, Nevada, Massachusetts and Oregon have all experienced great difficulties with their state-run exchanges.  At this time, only Oregon has officially decided to join the federal exchange website, but the other states are seriously considering following suit.  According to estimates, these four state exchanges have cost $474 million to the federal government.

On May 12, the National Governors Association announced that Colorado, Indiana, Kentucky, Minnesota, North Carolina, Oklahoma and Wisconsin are joining efforts to improve the health care workforce in their states.  Officials from these states will meet to discuss best practices for recruitment, retention, licensing, reimbursements and training for health care workers.  

Seventeen health insurers in Washington State reported that there will be rate increases for health plans in 2015.  The average rate increase was 8.25 percent.  This average rate was determined by using both ACA plans and private non-ACA plans.  Although these rate increases are now under review, the state insurance commissioner reported that this average rate increase is the lowest the state has had in seven years.  Other states, such as Virginia and Kentucky have also reported modest increases to FY2015 insurance rates. 

On May 15, Indiana Governor Mike Pence (R-IN) provided details for his waiver request and plan to expand Medicaid under the ACA in his state.  The proposal includes certain eligibility requirements for enrollees such as: payment responsibility, avoiding the use of emergency rooms for certain care, and work programs for unemployed enrollees.  The proposal will undergo a 30-day review from CMS and must be approved before the state can go forward with the Medicaid expansion.

The most recent grant application deadline for states seeking funds to assist with the costs of developing and implementing their own state-run exchange websites was May 15, 2014.  On a related note, on May 2, CMS awarded Utah, New York, New Hampshire and Rhode Island a combined $116 million in these federally-funded “establishment” grants.


Insurers in the District of Columbia may sue to halt a planned one percent annual tax on health plans sold in the District.  The tax was approved by the city council on May 6 and is effective for 90 days.  In early June, the council will vote again on whether to extend it for another 225 days, and congressional approval is needed before the tax can become permanent.  The tax will provide funding for the District’s exchange website.  Insurance companies are unhappy with this tax and have reported that they may sue to have it rescinded.

A federal appeals court in Virginia heard arguments on May 14 in a suit challenging the provision of tax subsidies to individuals who purchase coverage through the federally facilitated exchange, rather than through state-based exchanges.  The IRS argued that Congress intended for the subsidies to be available through both the federal and state-based exchanges.  Courts have upheld the IRS regulation in two similar cases.


James Madera, CEO of the American Medical Association (AMA), sent a letter to CMS Administrator Marilyn Tavenner lamenting the agency’s recent release of physician payment data.  The letter, dated May 15, 2014, claims that the payment data only served to create “a series of sensationalist news stories, the majority of which inaccurately reported the data.”  The letter is requesting that CMS allow physicians to “correct and explain their data.”

The AMA also sent a letter to CMS that provides its insight on ways to improve the agency’s Electronic Health Records Meaningful Use Program (MU).  The MU program is intended to encourage and assist physicians with implementing the use of electronic health records in their practices.  The letter, dated May 8, claims that the financial penalties and extensive requirements of the MU program discourage physicians from participating in the program.

On May 14, health insurance companies Aetna, Humana, and UnitedHealthcare announced that they will begin publishing their healthcare prices online beginning next year.  The three companies have agreed to use a free portal that will be created and managed by the Health Care Cost Institute (HCCI) to share this information with the public.  HCCI has reported that other companies will be joining this consortium soon.

The Urban Institute released a report that advocates ending the ACA’s employer mandate.  The report says that ending the mandate would not have a large impact on employer behavior and is not critical to expanding health coverage.  However, ending the mandate would cost $130 billion in lost penalty payments.  Initially under the ACA, businesses with 50 or more full time employees were required to provide minimum essential coverage to their full-time employees or pay a penalty starting in 2014, but the mandate was postponed for one year for all businesses and until 2016 for employers with less than 100 employees.  The Urban Institute report claims that the employer mandate creates “arbitrary thresholds” for employers that may adversely affect their employees.  The report also claims that 251.1 million people will have coverage under the employer mandate and that that number would drop to only 250.9 million if the mandate was rescinded. 

In an effort to encourage legislative action, the Information Technology & Innovation Foundation recently released a report encouraging the federal government to lessen regulatory requirements for telemedicine.  The report details recommendations for encouraging interoperability among states for prescription-drug monitoring, creating a standard definition for telemedicine and location-neutral payment policies.

The Commonwealth Fund released a report that found that insurance companies paid over $1.5 billion dollars in rebates to enrollees between 2011 and 2012 because of higher than permitted administrative expenses.  Under the ACA, insurance companies are required to spend at least 80 percent of their premiums on medical care and related activities or return a portion of the difference to enrollees.  Insurance companies also reduced administrative expenses by approximately $1.75 billion during the same time period.

An analysis conducted by Avalere Health found that Medicaid enrollment still grew in 17 of the 26 states that had not expanded their Medicaid programs under the ACA.  Over 500,000 individuals enrolled in Medicaid in these states through the end of March.

Medicaid Health Plans of America (MHPA) sent a letter to CMS on May 13 asking the agency to release formal guidance regarding the Health Insurance Providers Fee, also known as the ACA insurer tax. The tax imposes an annual fee on all health insurers, including private Medicaid plans.  MHPA wants CMS to require state Medicaid programs to include the costs of the tax when setting capitation rates and payments.  Thus far, the agency has only provided informal guidance on the matter and MHPA wrote that there is much confusion on the issue.  

A study published on May 12 in the Journal of the American Medical Association Internal Medicine, found that every year up to 42 percent of Medicare beneficiaries receive at least one unneeded medical procedure, costing taxpayers up to $8.5 billion.