Archive for December, 2011

Some Year-End Cheer

Wednesday, December 28th, 2011

Many of us in the advocacy world have been quick to point out examples of things we’d rather re-gift this season. But, as the days start to get longer, it’s worth acknowledging a big win for consumers in 2011 – the preservation of the medical loss ratio (MLR).

The MLR, or the proportion of a premium spent on medical claims vs. profit and administration, was a topic that previously interested only the wonkiest of health wonks. But this year it became a hot issue that moved thousands of consumers across the country to contact their insurance commissioners and demand greater transparency and understanding of how our premium dollars are spent. And in a surprising turn in early December, the U.S. Department of Health and Human Services released regulations on the MLR that kept one of the more controversial parts of the MLR, broker fees, as part of the calculation.

More recently, there were some significant state wins on retaining a strong MLR standard. Both Florida and Michigan insurance commissioners applied to “adjust” (read: reduce) the amount that insurers must spend on medical claims. After strong advocacy by state partners in FL and MI, the Center for Consumer Information and Insurance Oversight (CCIIO), the federal agency charged with deciding the MLR rule, denied both states’ requests to ease the MLR for insurers. The headline: consumer protections won out over insurers’ financial interests.

So what does this mean? One reason the MLR is a big deal is that if insurers do not actually meet the MLR standards, they must provide consumers with rebates, starting in 2012. This very tangible benefit of the ACA was improved by CCIIO’s recent decision to make these rebates tax-free, and to require notices to consumers detailing the amount of the rebate and health plan’s MLR along with an explanation of what it means. Stay tuned for more details from CCIIO on how those rebates will roll out. And for now, be thankful that the Affordable Care Act provided this valuable tool to help protect consumers.

– Christine Barber, Senior Policy Analyst

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Sunshine in December: Modern Healthcare Goes Deep on Charity Care Spending as IRS Shores Up Future Reporting

Friday, December 23rd, 2011

Two important pieces of news on the health access and transparency front arrived in time for the holidays:

  1. Modern Healthcare’s analysis of non-profit hospital tax reports shows, for the first time ever , what hospitals spend nationally on charity care, and
  2. The IRS held firm on requiring non-profit hospitals to report how they’re complying with ACA requirements on charity care (financial assistance), billing and debt collection for tax year 2011.

Here’s how these pieces connect. Starting with Fiscal Year 2009 tax documents (specifically, Schedule H of Form 990), the IRS finally required hospitals to break down and report community benefit spending, including charity care. After the tax forms were submitted in 2010 and made their way to the not-for-profit service GuideStar, Modern Healthcare took the data and did a comprehensive analysis. It found that half the non-profit hospitals spent 1.52 percent or less of total expenses on charity care, and two-thirds of non-profit hospitals spent 2 percent or less on charity care. The median profit margin was 3.13 percent.

Those numbers—in the aggregate, at least—aren’t pretty. But they’re not the whole story, either. Yes, it’s true that hospitals can choose to spend their community benefit dollars in ways other than charity care, and that those dollars can be well-spent (see Following the Leaders: How Some Hospitals Use Community Benefit Programs to Address Health Equity). But with charity care numbers this low, and unemployment and uninsured rates so high, we have to wonder: are hospitals running their community benefit programs in a way that sidesteps the need for financial assistance in their communities?

Holly Lang, an advocate in Georgia, put the Modern Healthcare findings into context in a “Marketplace” segment on American Public Media, saying that in an experiment she did with 34 hospitals in Georgia last summer, only two provided information about charity care (also called financial assistance) for uninsured patients. Clearly, there is room for improvement in the ways hospitals communicate with patients who need financial help. And we think improvement is on the horizon.

Last week, the IRS announced that, come Tax Year 2011, non-profit hospitals will have to report how they’re complying with new ACA requirements that deal with how hospitals run key parts of their community benefit programs, not just how much they spend. For example, non-profit hospitals will have to report on the contents of their financial assistance policies, including the steps they take to publicize them to the community—just the kind of information Lang found to be in short supply in Georgia last year.

This is an important step. Additional reporting will provide the data necessary for communities to assess their hospitals’ contributions to the community in a broader context than the charity care figures provided on 2009 documents, by including details about the financial assistance policy eligibility criteria, dissemination of the policy, and billing and collections practices. The data will also be crucial to inform further public policymaking.

Will everyone be pleased with these changes? Probably not. The IRS issued a 2010 Schedule H that reflected the requirements of the ACA. But, after pressure from the American Hospital Association and others, the IRS decided to make the reporting optional for 2010. (See our previous blog, Two Steps Forward, One Step Back on Hospital Transparency.)

But we’re glad the IRS has beefed up reporting. We need information about hospital spending and the particulars of key community benefit programs to understand how hospitals meet community needs, and where there’s room for improvement. At the end of the day, we believe transparency and sunshine will drive real change. So the next time Lang has an uninsured patient who needs hospital care in Georgia, we hope more than two provide life-saving information about charity care. Now let’s schedule that follow-up appointment…

– Anna Dunbar-Hester, Policy Analyst

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The Unhealthy Consequences of Congressional Dysfunction

Thursday, December 22nd, 2011

After caving in to a rebellion from the tea-party wing of the House Republican caucus, Speaker Boehner has pulled the plug on a bipartisan agreement to do a two month extension on a number of expiring federal policies — including a patch on the Medicare physician Sustainable Growth Rate formula, an extension of unemployment benefits and continuation of a payroll tax reduction. The two-month extension was meant to give House and Senate negotiators more time to find agreement on a longer term deal.

At this point, with the Senate adjourned and the House rejecting the short-term extension, it is hard to see how the issue will get resolved. However, in a year that has featured several near shut-downs of government and routine 11th hour legislating, we can’t discount the possibility that some agreement will be reached. Still, it can’t be taken for granted that Congress will pull yet another rabbit out of its hat, and the cost of failure, in health care terms, will be high.

Although the most high profile health issue in the debate is preventing a 27 percent cut in the Medicare physician fee schedule, there are other important provisions at risk, including an extension of the “QI” program, which pays the Medicare Part B premium for low-income Medicare beneficiaries, and Transitional Medical Assistance, which allows families who would lose Medicaid eligibility as a result of an increase in earnings to temporarily retain that coverage. But the problem doesn’t stop there.

A failure to extend unemployment benefits and the payroll tax cut will have significant consequences for health care. First, at least some people losing unemployment insurance will end up on Medicaid, increasing the cost of that program as states struggle to recover from the recession and replace the lost federal Medicaid funds. Secondly, taking the purchasing power of unemployment benefits and the payroll tax cut out of the economy will be a drag on employment and will translate into further increases in the number of uninsured and people on Medicaid.

So what we are faced with is yet another example of Speaker Boehner and the House Republican caucus electing to play chicken, placing important health care programs and our fragile economic recovery at risk. This has become something of a pattern ever since they threatened to force a default on U.S. government debt earlier this year. Unfortunately, chicken is a risky game that often results in someone getting hurt.

– Michael Miller, Policy Director

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The Essential Health Benefits Bulletin: Happy Holidays?

Wednesday, December 21st, 2011

Last Friday, the United States Department of Health and Human Services (HHS) released a bulletin, sub-regulatory guidance, on the essential health benefits (EHB) package. This highly anticipated guidance was a bit of a letdown—kind of like the ugly reindeer sweater that your mother knits you for Christmas (you appreciate the thought, but it’s not really what you needed or wanted).

The EHB is the floor, created in the Affordable Care Act (ACA), for what benefits many health plans will have to cover. It applies to all new health plans in the individual and small group markets beginning in 2014 (both those sold inside and outside Exchanges) as well as to Medicaid benchmark coverage.

The bulletin is relatively short but jam-packed with consequence. Instead of creating one national standard or even a national minimum benefit package, the bulletin allows each state, within certain parameters, to adopt their own definition of the EHB. States must benchmark their EHB to one of four existing health plan options. Let’s do the math—I believe that’s potentially 50 different EHBs nationwide (not exactly the national floor we hoped for)! But, in the holiday spirit, let’s shelve the sarcasm for a moment and review what the bulletin is, and what it’s not.

Laying Out the Benchmark Options
HHS will allow states to choose: (1) any of the three largest Federal Employees Health Benefits Program (FEHBP) plans by enrollment, (2) any of the three largest state employee health benefit plans by enrollment, (3) the largest plan by enrollment in any of the three largest small group insurance products offered in the state, or (4) the largest commercial non-Medicaid Health Maintenance Organization (HMO) plan in the state. The bulletin argues that the scope of benefits in small group plans tend to be in line with the federal and state employee plans and the largest non-Medicaid HMO plan, noting that these plans “do not differ significantly in the range of services they cover.”

Additionally, HHS also notes that the “largest plan by enrollment in the largest product in the State’s small group market” is the “default benchmark plan for the State” in event a state does not elect to choose an EHB benchmark. A reasonable assumption is that what this really means is that a federal Exchange operating in a state would use the default benchmark plan as the EHB. However, because the EHB applies not only to individual and small group plans sold through Exchanges but those sold in the outside market as well, this raises the question of whether HHS is really willing (or able) to impose the default benchmark plan on the outside market (as seems to be required by the ACA).

  • • What it is: A benchmark plan approach to setting benefits.
  • • What it’s not: A premium target approach, as recommended by the Institute of Medicine. HHS specifically states that the goal of the bulletin is to instruct states on how to model their scope of benefits — it does not address cost sharing or actuarial value in any way.

States Keep Their Mandates, for Now
State benefit mandates are a concern for state advocates and state officials from both a comprehensiveness of coverage and a cost perspective; the bulletin gives mandates a grace period. The ACA requires the states to defray the costs of any state mandates beyond the EHB package—a potentially significant problem for mandates that advocates want to preserve. Under the bulletin, however, if a state chooses a benchmark plan as the EHB that includes their state mandates (e.g., one of the small group plan options), they do not have to cover the cost of the mandates. However, if they choose an option not required to offer state mandates (e.g., one of the FEHBP plan options), a state does have to cover the cost of those mandates.

Essentially, this is a powerful incentive for states to choose one of the small group plan options for at least 2014 and 2015 as well as an incentive for states to eliminate their mandates during those two years. This is because the bulletin notes that in 2016 this issue will be revisited and states may not continue to be given an option to include their states as part of the EHB without bearing the cost for these benefits.

  • • What it is: A delaying tactic on the mandate problem. Advocates will need to work hard over the next two years to secure the future of key mandates at both the federal and state levels.
  • • What it’s not: Any kind of resolution on mandates. The guidance punts any final decision on this by HHS to 2016.

What About Those 10 Categories?
The statute demands that the EHB provide benefits across ten categories: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services, including behavioral health treatment, (6) prescription drugs, (7) rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and wellness services and chronic disease management, and (10) pediatric services, including oral and vision care. Of note, the statute also demands that the EHB be balanced across these ten categories, reflecting coverage found in a “typical employer plan.”

If you peg benefit scope to one of the small group plan options, are all 10 categories covered? HHS says, essentially, “yes . . . well mostly . . . well . . . we hope so.” The bulletin makes clear that HHS struggled to define what is “typical,” noting that if categories are missing from the benchmark they nevertheless must be included, using benefits from any other benchmark option. However, HHS remains uncertain as to how to supplement missing categories that are not traditionally covered, citing habilitative care and pediatric oral and vision care as particular issues.

  • • What it is: A balancing act. Categories are filled by services offered in existing plans, leaving potential gaps in some benefits. The bulletin signals that any additional services will be based on other plans that cover those additional categories.
  • • What it’s not: A clear method to fill in and balance the benefit categories. The specificity that consumer advocates hoped for is absent from the bulletin.

HHS Gives the Gift of Flexibility Not Just to States but to Insurers
As explained above, the bulletin will allow states to modify plans to reflect the 10 categories. But, in addition, the bulletin gives insurers a lot of wiggle room, saying that insurer flexibility promotes innovation. HHS notes in the bulletin that it is considering whether or not substitution may occur by insurers within and across EHB benefit categories and whether substitution across categories requires a “higher level of scrutiny.” Indeed, it does.

Due to the ability of states to choose their own benchmark plan, there will be inevitably be EHB variation across states. By also allowing modifications of plans by insurers within states, there will likely be additional variation among plans with respect to numerical limits, when a type of treatment would be approved, and the availability of particular drugs.

This is troubling on two fronts. First, it undermines the ability for consumers to make apples to apples comparisons across plans. Second, it can lead to discrimination against consumers with some health conditions. In other words, insurers may substitute some services that are needed by someone with a more costly health condition with services that woo healthier consumers.

  • • What it is: Potentially, a high level of health plan variation.
  • • What it’s not: A way to empower consumers to compare plans. The potential substitution allowance by HHS is risky—and without a clear monitoring plan, may put at risk necessary covered benefits for vulnerable consumers.

Is There Anything Else Under the Tree?
It doesn’t seem there’s a secret gift waiting for consumers in the bulletin that hasn’t been noticed yet, but the good news is that some of the more troubling aspects of the bulletin are “under consideration.” However, the general approach is unlikely to change. How this turns out now depends on getting HHS to at least modify its approach in a more positive direction as well as on how robust existing state plans are and which plans states choose. And all of this ultimately means that advocates need to voice their concerns at both federal and state levels as we move forward. The short-term opportunity for this is to submit comments to HHS on the bulletin by January 31, 2012 to essentialhealthbenefits@cms.hhs.gov.

—Eva Marie Stahl, Policy Analyst

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Congress’s Gifts: Coal and a Bit of Gold

Tuesday, December 20th, 2011

Viewed through the lens of the approaching holidays, the spending bill Congress wrapped up last weekend is a mixed bag for the Affordable Care Act and other health programs.

Overall, the big gift is that the major health care cuts House Republicans had proposed earlier in the year were averted. But some programs and ACA initiatives will get Grinch treatment if President Obama signs the omnibus spending bill as expected. And perversely that may leave even less money for next year.

The bill authorizes nearly $1 trillion in spending to keep nine major areas of the federal government in operation through the end of the federal fiscal year which ends September 30, 2012. It was passed by the House Friday and the Senate Saturday, avoiding the gridlock of last year largely because the spending totals were defined by the Budget Control Act of August as part of the deal to raise the amount of money the federal government could borrow. But the details of how $6 billion in cuts would be spread across the nine areas were decided by congressional committees over the last few weeks.

One key Affordable Care Act initiative designed to help hold down growing health costs – the Independent Payment Advisory Board – got gutted. The ACA established the board to recommend cuts in Medicare spending starting in 2013 if needed. But the board, yet to be set up, has been a favorite target of those opposing the ACA, and the new spending bill cuts the board’s funding from $15 million to $5 million. It’s unclear if the board will be able to fulfill its promise of recommending smart savings.

Congress took a more charitable view toward the Prevention and Public Health Fund, including the full $1 billion authorized in the ACA, which will help reduce spending in the long run by preventing illness. Some of the money is being used to backfill programs previously supported with other federal dollars, such as the proven Racial and Ethnic Approaches to Community Health program. Community Transformation Grants are funded at $280 million, up from $145 million in 2011.

The expansion of community health centers to serve millions more people, another provision of the ACA, will continue. The centers got level operating funding, and about a $200 million increase from funding in the ACA. And Children’s Hospitals Graduate Medical Education Program will also be level funded (although the program still requires long-term reauthorization).

Other areas got more coal in their stockings:

  • • The ACA initiative to support development of Consumer Operated and Oriented Plans (CO-Ops) to compete with private insurers will be cut $400 million (following a $2.2 billion cut last year), leaving only $3.4 billion to support start-up.
  • • The Substance Abuse and Mental Health Services Administration will be cut $27 million, although two programs that send money to the states – the Substance Abuse Block Grants and Mental Health Block Grants – will see increases.
  • • The National Health Service Corps, which trains doctors to serve disadvantaged communities, will be cut by $24 million, a substantial chunk of change that is partly offset by funding in the Affordable Care Act.

It isn’t a great year for ribbons and bows.

-- Alice Dembner, Deputy Policy Director

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The Affordable Care Act is Keeping Young Adults Healthy for the Holidays

Thursday, December 15th, 2011

Thanks to a key provision of the Affordable Care Act (ACA), 2.5 million young adults will be healthy for the holidays this year. As we’ve blogged about previously, the ACA allows most young adults under 26 to remain on their parents’ health plans if they don’t yet have access to coverage through their job. Prior to the ACA, insurers had the option of removing enrolled children usually when they turned 19 or perhaps a few years later if they were full-time students. By allowing young adults to continue to receive coverage through a parent’s plan, the ACA gives young adults and their families peace of mind that the transition to adulthood doesn’t have to mean forgoing access to essential health care.

The new figures released by National Center for Health Statistics confirm that since the provision went into effect in September 2010, an additional 2.5 million young adults gained coverage even as other age brackets remained steady in coverage levels. This means that from September 2010 to June 2011 the percentage of adults 19 to 25 with coverage increased from 64 percent to 73 percent and it’s clear that the higher levels of coverage are because of the changes brought about by the ACA.

We can’t think of a better way to start the New Year than healthy and worry free and the ACA has already made that a reality for 2.5 million young adults. This is truly something to celebrate during this festive time of year.

—Nicole Tambouret, Project Director
and Patrick M. Tigue, Senior Policy Analyst

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Weakening Affordability Protections (Again): The Wrong Way to Pay for the Doc-Fix

Thursday, December 8th, 2011

Congress must act before the end of the year to prevent an automatic 27 percent rate cut for Medicare doctors (the “doc-fix”, as it is generally known in DC). To pay for it, some Republican Members of Congress are floating the idea of further eroding health insurance affordability protections for low- and middle-income people under the Affordable Care Act (ACA). While averting a pay cut for Medicare’s doctors is an important priority, the costs of this adjustment should not come directly from the pockets of struggling families.

What’s the Proposal?
When the Exchanges are running in 2014, individuals can receive premium tax credits in advance to help pay for their health insurance coverage. But if their income rises during the year, they may no longer be eligible for those tax credits, or they may be eligible for a smaller tax credit than they were receiving.

In that case, they will have to pay back some of their subsidy when they file their taxes at the end of the year. To strike a balance between recapturing subsidies and not hitting working families too hard, the ACA capped how much an individual would have to pay back.

Congress has already increased this cap twice – once to pay for last year’s “doc-fix” and then again to pay to repeal enhanced tax reporting requirements on small businesses. Some in Congress are now proposing increasing that cap a third time, or even eliminating the cap altogether, to pay for this year’s doc-fix.

This proposal would hurt low-income people and the long-term success of the ACA by:

  • • Imposing financial hardship on low- and moderate-income families. It could force them to pay thousands’ of dollars in penalties for having found a better job or gotten a raise.
  • • Increasing the number of uninsured. Fearing this type of unexpected cost, fewer people will enroll in the advanced tax credits. In fact, when the CBO scored similar provisions in the past, most of the savings came from lower take-up of tax credits not from increased revenues.
  • • Jeopardizing public support for the ACA. The prospect that families will have a large unexpected cost at the end of the year is likely to undermine public support for the law.

Just Say “No”
The Republicans floating this proposal are well aware of its potential to undermine the ACA by reducing the number of insured and generating backlash against the law. This policy is a poison pill for health reform, and Democrats and President Obama should think twice before swallowing it again.

But the case against this proposal is broader than that. In his recent speech, President Obama spoke out forcefully about the need to address income inequality. Paying for physicians’ higher reimbursements by taking money from low- and moderate-income families is hardly a step in the right direction.

-Katherine Howitt, Senior Policy Analyst

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The Good, the Bad, and the Ugly: Disappointing New Federal Guidance on Health Insurance Exchanges

Friday, December 2nd, 2011

Earlier this week, the Centers for Medicare & Medicaid Services (CMS) issued sub-regulatory guidance aimed at clarifying some of the outstanding questions related to implementing health insurance Exchanges as part of the Affordable Care Act (ACA). On the whole, we found the guidance (which posed and answered thirteen questions in total) disappointing. Here’s a rundown of the key issues addressed in the guidance (the good, the bad and the ugly).

The Good

CMS does attempt to resolve some issues in a way that is positive for consumers such as:

  • • Reaffirming that consumers purchasing coverage through a federally-facilitated Exchange will have access to premium tax credits (including in advance).
  • • Clarifying that the federal government will not penalize states in audits or error-reduction programs for using streamlined Medicaid and the Children’s Health Insurance Program (CHIP) eligibility procedures required by rulemaking to implement the ACA.

A Mixed Bad

  • • Allowing states to receive establishment grants all the way through the end of 2014 to support state activities to interface with a federally-facilitated Exchange. This will give states more time and resources to build an Exchange, which may include needed improvements to IT and eligibility systems. But it’s not clear to us why states should be eligible for grant funding if they are not actually working on an Exchange. It is also concerning that this could give states a further incentive to not take constructive steps to move forward with Exchange implementation in a timely manner.
  • • Noting that states cannot use Exchange establishment grants to investigate the feasibility of the Basic Health Program (BHP). Given how important the BHP is to making coverage as affordable as possible for consumers and given how interconnected policy decisions about the BHP and the Exchange are, this seems overly restrictive to us. However, this concern is at least somewhat mitigated because the guidance goes on to say establishment grants can be used for activities related to the BHP that overlap with specific Exchange functions (e.g., establishing a call center that provides information on a range of coverage options including the BHP).

The Ugly

The points made in the guidance that are most deeply concerning are:

  • • Granting a large number of options to states concerning how responsibility for determining Medicaid and CHIP eligibility will be handled. In particular, we are deeply disappointed to see that if a state opts for a federally-facilitated Exchange, they will be able to retain final authority over Medicaid and CHIP eligibility determinations. This type of arrangement will make it difficult to ensure that consumers have the kind of streamlined application experience that the ACA envisions. In addition, the potential loss of control of Medicaid eligibility processes was a useful incentive to get reluctant states to act on a state Exchange – this tool will now be off the table.
  • CMS also proposes that even states choosing to implement a state-based Exchange can pick and choose which eligibly functions it wants to do and which it wants to outsource to the federal government. This kind of flexibility is going to lead to a dizzying array of arrangements that will likely be difficult for HHS to effectively administer, leaving consumers caught in the crossfire.
  • • Clarifying that a federally-facilitated Exchange will defer to existing state insurance laws whenever possible. While harmonizing rules and standards inside and outside of the Exchange is a part of preventing adverse selection, it won’t matter much if the federal government succeeds in limiting adverse selection at the expense of access to essential consumer protections like robust network adequacy standards, rigorous marketing materials standards, and strong consumer complaint processes. Of course, there’s nothing wrong with deferring to state standards where these are strong but the approach should be for CMS to determine the standards as a floor and then determine to what extent using state standards is desirable.

Where does all of this leave us? While we know the Administration is trying to walk a line between discretion and valor in implementation to keep the disparate interest groups together, in this instance, we think they have strayed too far. We need a commitment from CMS to move forward aggressively on implementation, which includes raising the bar in states. This means advocates at both the national and—most importantly—the state level need to redouble efforts to make their voices heard to ensure that Exchanges are implemented in the most consumer-friendly way possible across the country. Together, we can make this vision a reality despite the challenges we face.

– Patrick M. Tigue, Senior Policy Analyst

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