The Department of Health and Human Services (HHS) essentially gave in a little on crafting rigorous essential benefits under the Patient Protection and Affordable Care Act (PPACA) and punted the final decisions to states. PPACA called for HHS to set essential benefits for non-grandfathered health benefits under health reform and outlined 10 categories of services that must be covered. Earlier this year, the Institute of Medicine (IOM) upset advocates’ dreams of having rich essential benefits mandated nationwide when it recommended a cost-effectiveness strategy in setting the benefits that come into play in 2014. Among other strategies, IOM said that essential benefits should be benchmarked against the actuarial value of a typical small business employer plan.
Some wondered whether HHS would simply can IOM’s recommendations and dictate the levels in all 10 categories. But HHS seems to have struck more of a middle ground. It has recommended having essential benefits similar to how the State Children’s Health Insurance Program (SCHIP) benefits are done. HHS issued an interim bulletin before regulations are issued. States will have the flexibility to set essential benefits by choosing among several possible options: (1) one of the three largest small group plans in the state; (2) one of the three largest state employee health plans; (3) one of the three largest federal employee health plan options; and (4) the largest HMO plan offered in the state’s commercial market. If a state doesn’t adopt one, the default benchmark would be the state’s largest small group market plan based on enrollment. If a state is missing coverage in a certain category, it must adopt the coverage in that category from another benchmark plan.
HHS has upset one constituency here – the advocates. Advocates should be happy that the proposal errs on the side of bigger more generous coverage. But while coverage will be mandated in the 10 categories, from their standpoint the proposed paradigm will mean major inconsistencies in benefits across states. The federal employee package and state employee packages are relatively generous, while commercial coverage and small group coverage are less generous. (The actual coverage differences could be less when the federal government issues final rules on benefits as well as copays, deductibles, actuarial valuation, etc.)
But it perhaps picks up at least soft support from two other groups – states who wanted flexibility and businesses who stressed cost controls. The decision also may be regarded as a political touch of genius as the Supreme Court moves toward deciding health reform’s fate. Could the flexibility built in by HHS be viewed favorably by enough justices? As well, since HHS issued only bulletin guidance, Congress cannot intervene and modify or suspend it as they might a published regulation.
The move also appears to help save various state insurance mandates passed by lawmakers over the years. The problem here is that many of these mandates have no basis in cost effectiveness or sound clinical practice, but were passed as political sops to special interests over the years. But advocates at least had something to smile about here.
Businesses in many states may still not be happy as some of the benchmarks are extremely generous, including state employee plans governed by union negotiations. So the new health reform could very well continue striking differences in benefit costs between states, thereby impacting many states’ economic competitiveness. It also could lead to a massive transfer of governmental subsidies between states. A state with a very rich package might reap a larger share of federal government subsidies than others. But states that tend to be more generous social safety net states also tend to be richer and send more to federal coffers in the first place.
Medicare doc fix
As of this writing, the Medicare physician fee fix is being held hostage in Congress as the two houses fight over the length of the proposed payroll tax reduction extension. But as it has in the past, CMS has come to the rescue. In hopes that the congressional impasse will be over when House lawmakers return to Capitol Hill, CMS is holding payments until January 17 so as to not reduce reimbursement by 27.4%. The problem is that the Senate does not return until a week later. There is still a chance that a deal could be reached in December.
HHS and CMS announced its finalists for the Pioneer ACO demonstration project. While the demonstration uses many of the same elements of the regular ACO shared-savings program, it is separate and has more experienced hospital-based and physician-group entities. Some of the chosen entities previously were in the physician group practice demonstration project. There were 80 applicants and 32 were chosen. Five of the demonstration projects will be in eastern Massachusetts, from which former CMS administrator Donald Berwick hails.