Expected Program Cuts to Affordable Care Act and Federal Budget Impact

Orthopedic surgeon, Dr. Tom Price is now in charge of Health & Human Services and here is an analysis of the laws he may try to dismantle, programs which could lose government support, and the ensuing federal budget implications. This article is based on actual facts, not “alternate facts” which are popular with the Trump Administration.

Budget Implications

The Patient Protection and Affordable Care Act has been a revenue generator, while also providing medical insurance for 20 million low income people and has helped to reduce the federal deficit. (ObamaCareFacts.com, 2017) According to the Office of Management and Budget (OMB) and the Joint Committee on Taxation (JCT), repeal of the Affordable Care Act would cause the federal deficit to grow by $137,000,000,000 by 2025. (Congressional Budget Office, 2015) That’s right, a repeal of the ACA would increase the deficit by 137 billion dollars.  Here are some of the provisions which have generated money for the government, which are likely to be repealed by the Republican Congress under the Trump Administration.

Pay or Play-Taxes generated from income tax filers who did not have an exemption to the requirement for obtaining medical insurance and are required to pay a tax penalty.

Luxury Plan Tax-This tax is applied to health insurance plans which cost more than twice the national average for an enrollee.

Insurance Company Tax-Insurance companies pay a premium tax which goes into the fund to pay for medical insurance for low-income residents and the provisions of the Affordable Care Act.

Medical Device Tax-Orthopedic and cardiac device manufacturers have been required to pay a 2.9% tax on the cost of the device, which funds provisions under the ACA including healthcare for low-income people.

Estate and Trust Tax-This tax applied to undistributed net income, which affects larger trusts, and is 3.8% of that income.  Again, the money goes toward health insurance subsidies for low income persons.

Employer Tax-Failure to offer minimum essential benefits in a health insurance plan will generate a tax, up to $3,000 per effected employee.

Medicare Payroll Tax Increase-The payroll tax used to fund Medicare, was increased by .90% (less than 1% not 90%, if Sec. of Education DeVos is quoting this). This tax is paid equally by the employee and employer and is used to pay for Medicare programs. Don’t kid yourself, Congress will never reduce your payroll tax as this is necessary to shore up Medicare.

Medicare Changes from the Affordable Care Act

Most of the Centers for Medicare and Medicaid(CMS) changes under the ACA involve improving health quality (clinical quality based on patient results) and transparency (in terms of payment and performance). Will these programs also be terminated under HHS Cabinet Secretary Price?

1.       Subsidies for Medicare Advantage (HMO) payments based on counties with a higher density of low income residents-This benefits rural areas as well as the urban poor.

2.       Health care quality rankings impact how much the facilities receive, as well as the Medicare Advantage enrollment population. This is a pay-for-performance initiative.

3.       Insurance companies selling Medicare Advantage Plans must use 85% of annual collected premiums to pay for enrollee claims and plan services, which caps opportunistic accounting charges which contribute to inflated premiums. Insurance companies should be able to administer their plans for 15% as Medicare does it for 6%.

4.       Designating medical homes for patients, is a patient management tool, and has been shown effective in care management, especially for diabetes and other chronic diseases.

5.       Mandatory 90-day review period before the government will pay for durable medical equipment, which is frequently marketed to senior citizens without regard to efficacy or best fit analysis.

6.       Fraud Detection-A special commission in Health and Human Services was established to compare tax records to aid in identification of criminals who are stealing money from our government through fraudulent claims, etc.

Medicaid Changes from the Affordable Care Act

Under the Trump Administration many programs impacting low-income Americans are likely to be modified, reduced or cut and here is the list:

1.       Expansion of Medicaid to include all low-income people, not just children. This was modified through a court order and now applies to 33 states which opted to expand their Medicaid coverage, thus reducing stress on state health systems. Will these states lose the federal matching money they are currently receiving for providing this coverage for low income residents with incomes within 138% of the federal poverty range?

2.       State employees became eligible to enroll their children on the Children’s Health Plan (CHIP) because of the Affordable Care Act, will this be repealed?

3.       Free standing birth centers, such as midwifery and other women’s health facilities, such as Planned Parenthood, became eligible to receive Medicaid funding for additional services under the ACA. Congress has already indicated a desire to defund Planned Parenthood, but what about the other facilities under this provision? This means program cuts for preventive care for women. I guess Trump expects women to build a wall around the uterus, just like Mexico.

4.       Creation of Medical Home designations for patients with at least two chronic conditions, which provides funding for better care management. Participating medical facilities received additional compensation to assume enhanced care coordination through the medical home provisions. Will community health organizations lose this funding?

5.       Hospital Safety-net Demonstration Project-This is an initiative involving several hospitals to identify vulnerabilities in hospital systems across the nation, which are primarily urban trauma centers, to prevent hospital closures. Tom Price has said he does not favor the Centers for Medicare and Medicaid Demonstration Projects. (Pear, 2016)

6.       Greater mental health treatment funding for hospitals with a significant population of indigent patients (urban trauma centers) was part of the ACA. Will there be funding cuts for vulnerable populations and will the mental health parity insurance mandate be repealed?

7.       Medicaid Waiver or Section 1115 Programs have been around a long time and they are primarily a vehicle to increase cost sharing for recipients and reduce expenses for the states which fund them. The standardization of this process will probably not go away as states continue to seek relief from spiraling Medicaid costs.

8.       Improvement of funding for state Medicaid matching for noninstitutionalized care programs-will this be torpedoed?

Improving Health Quality and Paying for Performance

Accountable Care Organizations

The Accountable Care Organization Act became effective in 2012 and is administered by the Centers for Medicare and Medicaid. This program saved CMS over 700 million in the first five years, through better monitoring of preventable health events. (David Blumenthal, 2015) At present, 15% of all Medicare enrollees are served through Accountable Care Organizations. The ACO program identifies high cost health care events, such as hospital re-admissions and links improved clinical outcomes to performance, by paying health systems more money for achieving these targets. Health systems voluntarily participate in the program. There are 480 participating health care organizations within the U.S. and nine million people benefit from accountable care provisions. (Centers for Medicare Services, 2017)The Centers for Medicare and Medicaid have indicated this program saved the government 466 million in 2015. (Centers for Medicare and Medicaid, n.d.)

Financial and Clinical Efficacy

The Accountable Care Act created the Federal Coordinated Health Care Office whose purpose is to study health programs, gauge results, and seek ways to optimize the government expenditures with patient care. Will this agency be terminated because Dr. Price, who is a member of the Tea Party coalition, thinks doctors and hospitals should have less oversight? Hospitals are now huge corporations, often controlling entire regions, dictating prices, and are not typically subject to anti-trust laws. Shouldn’t some independent government agency be reviewing their programs, the costs, and the impacts on consumers?

Clinical Effectiveness and Research

The Institute for Clinical Effectiveness, known as the Patient Centered Outcomes Research Institute (PCORI), was created to identify and promote best healthcare practices for patient safety and clinical health, based on the following criteria:

1.       Assessment of preventative, diagnostic, and health care treatment options

2.       Improving health systems

3.       Improving health care decision making and patient communications

4.       Addressing health disparities (why patients in different demographic groups have different health outcomes/services)

5.       Accelerating patient centered research to identify ways to economically and clinically improve health

Funding for the PCORI agency was provided through the American Recovery and Rehabilitation Act in 2009, which taxes insurance companies $1 to $2 per enrollee. PCORI is taxed with identifying ways to cut waste, reduce unnecessary procedures, and improve disease surveillance to improve health outcomes.  The oversight organization has put a spotlight on medical suppliers, pharmaceutical companies, insurers, and other agents in the national healthcare landscape. For more information on this, read Chapter 3, pages 27-29 in my 2013 book, Unraveling U.S. Healthcare-A Personal Guide. (Winter, 2013) https://www.amazon.com/Unraveling-U-S-Health-Care-Personal/dp/1442222972

 Of course, medical lobbyists have been deluging Congress with appeals to remove the “onerous taxes” which impact their businesses adversely (hardly at all) resulting in higher costs for American consumers. These companies simply want more money to reward their shareholders and enrich their stock option plans. No one in Congress is exempt from the influence of healthcare industry lobbyists, because even stalwart Democrats, Elizabeth Warren (MA) and Al Franken (MN) have lobbied to get the 3% medical device tax removed, because Boston Scientific, St. Jude Medical, and Medtronic are big employers located in their respective states. Removal of this tax would not result in lower costs for any patient or health system which buys any of their devices.  Increasing pricing transparency for cardiac and orthopedic devices would potentially result in savings for health systems and patients, but you don’t hear any lobbying for that. If anything, this scenario illustrates more acutely why we need independent government agency oversight for our healthcare system.

Returning to the 1950’s model for healthcare will not lower costs across the health system and it is important for consumers to understand that your insurance premiums are but one aspect of the healthcare system. We all need to be concerned about that for which we pay for our health care, the conflicts of interest inherent in the system, and that which is negotiable. Isn’t this how we would handle any other significant purchase? Keep reading this column for up-to-date information on healthcare concerns, actions, and facts. And this is the healthpolicymaven signing off wishing you fully informed consent for your next vote, purchase, or procedure. Read the fine print and do use “actual facts” from vetted sources for decision-making.

Roberta E. Winter, MHA, MPA is a freelance journalist and consultant, with analytical experience in the insurance industry, hospital systems, regulatory analysis, healthcare research, and patient advocacy.

References

Centers for Medicare and Medicaid. (n.d.). 2016 Fact Sheets Medicare Shared Savings Program. Retrieved February 15, 2017, from Centers for Medicare and Medicaid.gov: https://www.cms.gov/newsroom/mediareleasedatabase/fact-sheets/2016-fact-sheets-items/2016-08-25.html

Centers for Medicare Services. (2017, February 15). CMS Medicare Shared Savings Programs. Retrieved from CMS.gov: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/All-Starts-MSSP-ACO.pdf

Congressional Budget Office. (2015). Budgetary and Economic Effects of Repealing the Affordable Care Act. United States Congress. Washington, D.C.: Congressional Budget Office. Retrieved February 15, 2017, from https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/50252-Effects_of_ACA_Repeal.pdf

David Blumenthal, M. M. (2015, June 18). The Afforable Care Act at 5 Years. (M. Mary Beth Hamel, Ed.) The New England Journal of Medicine, 372, pp. 2451-2458. doi:10.1056/NEJMhpr1503614

ObamaCareFacts.com. (2017, February 15). ObamaCareFacts.com. Retrieved February 15, 2017, from ObamaCareFacts.com: http://obamacarefacts.com/sign-ups/obamacare-enrollment-numbers/

Pear, R. (2016, November 28). Tom Price, Obama Care Critic is Trump's Choice for Health Secretary. Retrieved from The New York Times: https://www.nytimes.com/2016/11/28/us/politics/tom-price-secretary-health-and-human-services.html

Winter, R. E. (2013). Evidence-Based Planning-What It Means and Why You Should Care. In R. E. Winter, Unraveling U.S. Healthcare-A Personal Guide (pp. 27-29). Lanham, Maryland: Rowman & Littlefield.

Employer Rules for PPACA Grandfathered Health Care Plans

Rules for Employers with Grandfather Exceptions for the Health Care Mandates

The Patient Protection and Affordable Care Act mandates that employers with health care programs meet certain requirements for employee participation, coverage limits, and treatment of pre-existing conditions upon enrollment. Having just spent the past few days studying the grandfather provisions for the health care reform implementation in 2014, this article is meant to provide a bit of illumination to any confused employers or their staff. Generally grandfathered group health care programs will have a calendar year or a fiscal year plan renewal date. Since this is the time when changes are introduced each year, if a plan has a June anniversary date, it would have had to apply for grandfather status by the June 2011 anniversary. Hence the first anniversary of a grandfathered plan is likely to have occurred by now and this is the time when a plan administrator may be required to show the plan meets the PPACA requirements.

What is NOT Affected by the Grandfather Provision

Provisions which are unaffected by the grandfather provision are lifetime benefit limits and the rescission rules. Rescission rules allow insurance companies to retroactively cancel insurance contracts due to fraud. Individual insurance contracts can have benefit limitations, which can be maintained in the contracts after January 1, 2014. Insurance companies must now meet certain standards in order to cancel a contract retroactively; specifically they must show the individual insured intentionally defrauded the insurance company at the time of the application.

Grandfathering Election-Opting Out of the Mandates

In order to opt out of the insurance mandates, employers can elect to have their current health care plan arrangement remain in force until January 1, 2014, when all plans must comply with the PPACA requirements.  However, the grandfather rules are murky and this article highlights some of the sticking points. The main reasons employers may choose to keep their current plans in force and wait out the health care reform implementation are to save money, avoid some of the mandates, and aversion to change.  Unfortunately once an employer elects to grandfather an existing health care program, there are strict rules which must be followed, subject to reporting, and audited by the government.  Let’s examine what these requirements are: disclosure and documentation, phase-in levels for lifetime benefit limits, measuring benefit parity, assessing increases in employee copayments, and calculating employee cost sharing increases.

Disclosure and Documentation

Presently under the ERISA rules, employers who have health & welfare plans are required to provide employees with a Summary Plan Description of plan benefits, identification of the plan administrator, and other pertinent contact information. The PPACA expands on these mandates by requiring documentation of the Patient Protection Provisions such as disclosure of patient rights for emergency room parity, parity between in-network and out-of-network cost sharing for certain services, and the ability to self designate a personal provider for pediatrics or OBGYN without a referral. The insurance company who has the contract will incorporate these mandates into the annual Summary Plan Description as it does for all other state and federal requirements.

Calculating Benefit Parity for Your Plan

To establish benefit parity there are three methods to assess appropriate levels of plan benefits for non-network services including; contract payment at in-network levels, payment at Medicare levels, and payment at out-of-network benefit levels.  The rule states that whichever method provides the highest benefit payment for the insured is the deciding factor for compliance. There are several ways an employer sponsored medical plan can meet this mandate, including having the same benefit level, such as 80% for all essential services. Grandfathered plans do not have to comply with this provision until 2014.

Phase-In of Lifetime Benefit Limits

Since September 23, 2010 all new insurance plans must offer an unlimited lifetime benefit for essential medical insurance services. Essential services include hospitalization and non-elective doctor’s services among other things. There is a phase-in provision for existing plans, which must comply with this schedule for contract limitations for essential benefits:

October 23, 2011-$750,000

October 23, 2012-$1,250,000

October 23, 2013-$2,000,000

Special Enrollee Provision

If you are one of the unfortunate thousands of people who have maxed out on their insurance contract benefits, you may now enroll on the group insurance plan via the Health Insurance Portability and Accountability (HIPAA) rules. Also the group insurance rules do apply to an individual plan if it was obtained when a group insurance plan was cancelled. The HIPAA rules stipulate that the individual must have 18 months of creditable coverage from the group plan in order to be eligible. HIPAA also stipulates the insurance company may only look-back six months to determine a pre-existing condition and the exclusion period cannot exceed 12 months for those conditions. And finally, in order to secure the provision, the individual must not have had a break-in-coverage longer than 63 days. The previous employer (if this is the case) must notify the newly eligible special enrollee with a 30 day window for re-enrollment on the group medical plan. Anyone who has maxed out of the prior contract benefits must be notified of this right to re-enroll.

Limits on Increasing the Deductible or Co-payments for Grandfathered Medical Insurance Plans

If your firm has elected to grandfather its health insurance plan, the ability to increase the plan deductible between 2010 and 2014 is limited to the CPI or Consumer Price Index plus 5% per year.  Co-payment increases are limited to a $5 increase per contract year.  And finally, a decrease in a benefit, such as the emergency room benefit of more than 5% may disqualify the plan. Anything larger than any of these thresholds is likely to trigger a disqualification of the grandfathered exception.

Pre-Existing Condition Waiver Rules

All plans must comply as of January 1, 2014 with removal of any pre-existing condition clause for enrollees. However, for children, this restriction was removed as of September 23, 2010.

Transitional Rules for Cost Sharing

The Accountable Care Act allows the employer to elect to change the non-fixed cost sharing arrangement in the medical plan without losing its grandfathering status. Changes made after March 23, 2010 and adopted by June 14, 2010 are OK until the next plan year. The formula for calculating the acceptable zone for a fixed-amount cost sharing scenario is as follows:

1.        Determine the CPI based index ($387.14 in 2010)

2.       Add the CPI factor to this base

3.       Convert to a percentage increase

4.       Determine the net allowable increase

5.       Generally a maximum of 15% is an allowable increase

The easiest way for an employer to avoid this hassle is simply to change its group insurance plan from a fixed amount cost sharing formula to a percentage cost sharing formula. In the years when I was in the benefits brokerage business, all of my clients had a percentage co-payment arrangement anyway. The government probably had to come up with this formula for certain industries, a necessary complication I suppose.

Rules to Avoid Disqualification of a Grandfathered Medical Insurance Program

The rules are fairly straight forward here including:

1.       Benefits may not be reduced below allowable levels

2.       Essential benefits may not be eliminated

3.       Increases in co-payments may not be increased beyond the stated level

4.       Employer contributions to the medical plan may not be reduced beyond the allowable level

5.       Annual benefit limits must comply with the phase-in schedule

6.       Documentation of plan benefits must comply with the new rules

7.       Evasion of compliance or overtly attempting to usurp the standards is not allowed

For What it’s Worth-Professional Education for Insurance Agents

I spent about three days studying a college level course on the Accountable Care Insurance Mandate Requirements in order to become familiar enough with the rules to pass a Washington State approved continuing education course exam for renewal of my insurance license. Though I no longer sell insurance, I do keep my license current to competently critique the field. I was actually surprised by the rigor of the course material, but it should be noted that insurance agents can choose to sit in seminars where no testing is required to meet the continuing education edicts or they can opt for less challenging material.  Washington State requires 24 hours of continuing education to renew a life and health (disability) insurance license every two years. Not all states require this much rigor, but most states have some education requirement in order for the agent to renew his or her license. And the good news is, for all of those who hate federal edicts; these requirements are determined by each state, with an elected insurance commissioner. The only exception to this is for those representatives who sell Medicare supplement contracts, who must undergo even more rigorous education and marketing oversight, which are nationally mandated. The latter is also a good thing, as the elderly are vulnerable and the Medicare program is paid for with our tax dollars, so oversight is warranted.

This is the healthpolicymaven signing off, license in hand.

This article may be reprinted with the permission of Roberta E. Winter, MHA, MPA.