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PPACA, Medicaid and Medicare Updates

Governors question PPACA progress

Governors are increasingly expressing frustration with the lack of clarity related to setting up the state Exchanges and Medicaid expansion under the Patient Protection and Affordable Care Act (PPACA). This was made clear at a July closed-door meeting in Washington, D.C. of the National Governors Association (NGA). The NGA compiled about two dozen threshold questions involving PPACA’s Exchange and Medicaid expansion rollout.
Issues that came up during the meeting include:

  • If states forego operating their own Exchanges, will states have input and can portions of operating the Exchanges be delegated to them?
  • What will the true costs of a Medicaid expansion be? Will full federal funding be offered to states that only partially expand or expand over time? Will those who are already eligible based on income but not yet enrolled in Medicaid be covered at 100%?
  • Where are the final rules on the essential health benefits?
  • Will states share in a portion of the user fees charged to help administer the Exchanges?
  • When will more be known about the disproportionate share hospital (DSH) funding cuts and policies?

While the Department of Health and Human Services (HHS) has issued some exhaustive rules and regulations regarding implementation, in some cases they have punted on key questions in favor of “guidance” to states. While some states are far down the road of implementing both expansions, some states refused to take any action until the Supreme Court ruled on the status of the health reform law. The combination of the two means at least half of all states likely will not be able to implement one or more of the expansions in time for a January 1, 2014 launch.

Hospital quality rules issued

The Centers for Medicare and Medicaid Services (CMS) issued the final inpatient prospective payment rules, which includes implementation of PPACA’s value-based purchasing program (VBP) and the enhanced hospital readmissions program. PPACA not only focused on establishing a Medicare Advantage Star bonus program, but also stressed important reforms to boost quality in the traditional Medicare fee-for-service (FFS) program. The VBP changes will penalize hospitals that show poor quality outcomes over time and includes two new measures (including a Medicare spending per beneficiary efficiency measure). The readmissions penalties will reduce funding for hospitals if beneficiaries are readmitted to the hospital for certain conditions.

In one controversy, CMS is not adjusting the measures for the socio-economic demographics of the hospital patients, which concerns some large charity care, safety net, and teaching hospitals. CMS argues that many of these hospitals do as well or better on the measures and that an adjustment is not needed.

Medicare doc fix expensive proposition

The Congressional Budget Office (CBO) says that averting reductions in Medicare physician pay rates will cost Medicare $271 billion over ten years. President Obama’s Office of Management and Budget pegs the cost at almost $400 billion over the same timeframe. CBO also issues estimates of various other options, including partial cuts and increases over time.

If nothing is done, as of January 1, 2013, Medicare doctor rates drop by about 27 percent. Given the sheer size of a long-term fix, look to Congress in late 2013 or early 2014 to institute one of their short-term fixes on reductions to save political face.

Employers seek to dodge PPACA mandates

There is more evidence that employers will look to find ways to avoid various PPACA mandates. A new study suggests that 1 in 10 employers will drop insurance coverage for workers due to expected PPACA costs, including the essential benefits mandate hitting in 2014. The essential benefit mandate will require that certain types of services be covered at specific thresholds, including mental health, substance abuse, maternity, and likely brand name drugs. The survey also found additional businesses may do so over time as well.

And some small employers are now looking to self-insure as PPACA rolls out to avoid some of the mandates embodied in at-risk insurance products. Self-insuring is risky for small insurers given claims exposure related to small covered life bases. However, more businesses appear likely to gamble on this possible exposure instead of the absolute costs of the new PPACA mandates. The major cost drivers that could impact small businesses if they stay in risk products include the essential benefits mandate and changes to premium calculation.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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