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Supreme Court PPACA Fallout

The 10 days since the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA) have been a combination of frenzied activity on the part of the federal government and anxiety for states and many stakeholders.

With polls still showing a public bitterly divided over health reform, the Obama administration and the Department of Health and Human Services (HHS) quickly went on the offensive to show momentum toward implementing PPACA. HHS Secretary Kathleen Sebelius announced new grants to aid states in implementing the Insurance Exchanges, which must be operational by January 1, 2014. In reality, HHS has said the Exchanges need to be certified as ready in early 2013 and a majority of states are at risk of missing the deadline.
And just this week, HHS announced the 89 additional Accountable Care Organizations (ACOs) that have been approved for a July 1, 2012 start date. They serve 1.2 million people with Medicare in 40 states and Washington, D.C. As we noted in an earlier blog, contrary to predictions, physician groups have banded together in many states to go it alone without a formal hospital stakeholder for their ACO. The 89 ACOs bring the total entities involved in the shared savings initiatives to about 150 with about 2.3 million members. The Centers for Medicare and Medicaid Services (CMS) is struggling with the fact that just a handful of first and second round applicants are choosing the two-sided risk model.

These organizations will work to reduce costs in the massive and fractured transaction-based Medicare fee for service (FFS) environment. Since enrollment in both Medicare Advantage (MA) and ACOs is still less than a third of beneficiaries, CMS has also announced initiatives to better enhance care coordination outside of regular office visits and improve quality among traditional Medicare members.

In a proposed regulation, certain family doctors would get a 7 percent rate hike in 2013 with the proposal of a new code to pay for care-coordination services in the month following inpatient hospital discharges and certain outpatient procedures. (Other PCP doctors will get a 3 to 5 percent hike.)

Second, CMS is pushing down the road to implement the PPACA reforms to the Physician Quality Reporting System (PQRS). The changes will begin in 2015 based on 2013 performance. It is initially focusing on provider groups with 25 or more. If a group has successfully reported in the past, the group can opt for no negative adjustment in the future or for an upward/downward incentive based on tiered performance. For those groups that have not met reporting requirements in the past or did not participate in the initial PQRS, they will be subject to an automatic 1.5% reduction and then are at risk for an additional 1% for performance.

The moves above tie to other reforms in PPACA being rolled out, including the quality measures for ACOs as well as FFS reforms and rate reductions related to readmissions, hospital acquired conditions, and value based purchasing.

Meanwhile, states initially opposed to the health reform law are struggling with what to do now that the Medicaid expansion has largely been upheld. About 22 million are slated to enter the Medicaid system. But the Urban Institute notes that about 18 million or so would remain uninsured if no states expanded Medicaid, with just 4.6 million likely qualifying for the Exchanges.

The reality is that less than half the states are contemplating opting out. And fewer than those will actually do so. Notwithstanding the 100% funding in the first few years, these states argue that real costs will occur and state budgets are in no situation to shoulder any greater costs. Opponents to state expansions cite some initial costs not covered within the 100% funding in the health reform law as well as definitions in PPACA that could mean states cover 100% of costs of certain residents who come into the system but are not “newly eligible” to Medicaid. These concerns have led some big states to already declare they will not set up state Exchanges and/or expand Medicaid, including Florida and Texas.

The National Association of State Medicaid Directors (NASMD) has put together a comprehensive list of questions and concerns for CMS regarding the PPACA Medicaid expansion. Some of the major issues include:

  • Can there be a partial expansion under PPACA. For example, moving eligibility to 100% instead of 133%? And would states get 100% match for partial expansions?
  • Under PPACA, it would appear that those between 100% and 133% are eligible for Medicaid or state Exchanges. NASMD wants confirmation that if Medicaid is expanded just to 100% that those with higher incomes will receive Exchange subsidies.
  • Can states phase in a Medicaid expansion or delay past 2014?
  • NASMD wants clarification on the definition of “newly eligible.” As alluded to above, this has been a thorny subject in the past for states. Previously, as with the SCHIP expansion, states did not receive enhanced funding if a beneficiary was previously eligible but not yet enrolled in a government program. CMS may seek to clarify its approach to encourage greater Medicaid expansion. It has already signaled such flexibility to some states.

The court’s clarification on Medicaid has worried providers and advocates alike. As the law is written, millions would remain uninsured if certain states opt out of Medicaid expansion. Safety net providers might actually receive more money if the 4.6 million Americans ended up the commercial Exchanges where pay to providers is better. But overall they will lose out as dollars for uncompensated care and other hospital set asides have shrunk given tightening CMS policies and state budgetary crises.

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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