Health Care Reform Implementation Update October 15, 2014

In the past week, CMS has released several advisories including updates to the rating system for nursing homes, premium and deductible information for Medicare Part B and Part D for 2015, Pioneer ACO results, payment dispute settlements, and insurance fee FAQs. Even though they are out of session, a group of congressional members asked the Government Accountability Office (GAO) for a legal opinion regarding the risk corridor program under the Affordable Care Act (ACA). The Medicare Payment Advisory Commission held its most recent round of meetings on October 9 and 10. Countdown to the second open enrollment period under the ACA is one month now.


In response to a letter from Senator Jeff Sessions (R-Ala.) and Representative Fred Upton (R-Mich.), GAO’s general counsel released a legal opinion regarding the ACA’s risk corridor program. Under the risk corridor program, insurance companies that make 3 percent less than their premium revenue can recoup some of those lower than expected revenues from the risk corridor fund. In order to pay for the fund, insurance companies that make over 3 percent more than their premium revenue must contribute to the risk corridor fund. Many Republican lawmakers have referred to the risk corridor program as a “bailout” for insurance companies. In the letter, the lawmakers had requested that GAO clarify whether or not the Department of Health and Human Services (HHS) had the legal right to collect and distribute funds from the risk corridor program. GAO’s legal opinion is that Congress must draft and approve specific bill language that allows HHS to collect and distribute risk corridor funds.

On October 9 and 10, the Medicare Payment Advisory Commission (MedPAC), whose primary mandate is to advise Congress on Medicare payments, held a public meeting to discuss policy issues and work on recommendations to Congress regarding the Medicare program. The two-day meeting focused on the following topics: international comparison of hospital rates, Medicare Part D risk sharing, opioid use under Medicare Part D, the next generation of Medicare beneficiaries, Medicare entitlements for disabilities, private-sector post-acute care management, and the validity of relative value units in the Medicare fee schedule. MedPAC’s next regular meeting will be held November 6 and 7.


On October 9, CMS’s Director of Provider Compliance Melanie Combs-Dyer had a call with hospital representatives in which she discussed clarifications regarding the settlement offer CMS made to providers for disputed Medicare claims. Under the settlement, CMS has offered to pay 68 percent of all of providers’ outstanding disputed claims, if the provider drops all of their disputed claim appeals. During the call, Combs-Dyer said that the interest in the settlement has been good and they expect to see a significant participation rate in the settlement by the October 31 deadline. Combs-Dyer also made sure to clarify certain aspects of the settlement process including ensuring that rebilled claims under Part B would be eligible for settlement. Combs-Dyer also advised participants on the call that denied claims from Medicare administrative contractors, zone program integrity contractors, and the Comprehensive Error Rate Testing program of the HHS Office of Inspector General were also eligible for the settlement, not just those claim denials from recovery audit contractors.

On October 6, CMS announced that it will be making changes to its five-star rating program for nursing homes, Nursing Home Compare. CMS will, for example, develop an auditable quarterly electronic reporting system that nursing homes can use to report payroll data, which will be used to calculate overall staffing ratios, retention and turnover rates, and staffing mix. The payroll data will be collected starting in 2015 and reported on starting in 2016. Two additional changes to the rating program regarding quality measures and auditing will be added 2015. Under these additional changes, CMS will increase the number of quality measures it uses for the ratings program and add data on use of anti-psychotics and rehospitalization rates. CMS will also audit and validate the quality of nursing home data reporting on a national basis. CMS had previously piloted such an auditing system in a handful of states.

On October 10, CMS released star ratings information for Medicare Advantage and Medicare stand-alone drug plans for 2015. The plans are rated based on quality and performance on a scale of 1 to 5, with 5 stars as the highest rating possible. According to CMS, approximately 60 percent of MA enrollees are enrolled in plans with four or more stars for 2015 and 53 percent of Part D enrollees are enrolled in stand-alone prescription drug plans with four or more stars for 2015. The star ratings information can be found on CMS’s Medicare Plan Finder tool website.

On October 9, CMS also released information on Medicare premiums and deductibles for 2015. The standard monthly Part B premium for 2015 will be $104.90, the same amount as last year and the standard Part B deductible will also remain at $147 for 2015, the same amount as last year. For those who pay Part A premiums, the premium will decrease to $407 per month, and the Part A inpatient deductible will increase slightly to $1,260 for 2015.

CMS will be penalizing 2,610 hospitals under the latest round of the Hospital Readmissions Reduction Program. The penalty is based on the 30-day readmission rate for patients with certain medical conditions. Under the program, CMS will decrease future payments to the hospitals for hospital stays between October 2014 and September 2015. This is the third year of the program, and the maximum penalty this year is 3 percent of the hospital’s Medicare payments.

On October 7, CMS released a Frequently Asked Questions (FAQ) document that provides information on how states can cover the ACA’s health insurance tax. Under the ACA, most health insurers — including Medicaid managed care plans — are required to pay the tax based on their market share starting in 2014. In the FAQ, CMS wrote that states can incorporate the tax in their capitated payment rates to Medicaid managed care plans because the tax is a reasonable business cost.

On October 8, CMS released information on the financial and quality performance of accountable care organizations (ACOs) participating in the Pioneer ACO program. According to the results, first year health spending decreased by as much as 7 percent for some ACOs and increased as much as 5 percent for other ACOs. In the second year of the program, spending slowed by as much as 5.4 percent for ACOs that had cost decreases and grew by as much as 5.6 percent for ACOs that had cost increases. Overall, the Pioneer ACOs saved Medicare approximately $41 million for 2013.


On October 9, 2014, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed a new complaint against HHS in the U.S. District Court for the District of Columbia regarding the Health Resources and Services Administration’s (HRSA’s) July 2014 interpretive rule on the 340B program. HRSA’s interpretation said that the ACA’s exemption of orphan drugs from the 340B program for safety net hospitals does not apply when the drugs are used to treat non-orphan conditions. PhRMA contends that HRSA’s interpretation of the statute is incorrect and that manufacturers are not permitted to provide the discounts to the providers.

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Health Care Reform Implementation Update October 3, 2014

Congress is in recess and therefore much of the action surrounding the Affordable Care Act (ACA) is at the agency level.  However, Congressman Darrel Issa (R-CA) did subpoena the U.S. Department of Treasury for their records on the Internal Revenue Service (IRS) regulation regarding ACA subsidies.  The Department of Health and Human Services (HHS) reported on hospital savings under the ACA and touted the increase in number of insurance companies that have decided to participate in this year’s exchanges for the upcoming ACA enrollment period; the HHS Office of Inspector General released a report regarding security at and two state exchange websites; and the IRS, HHS and the Department of Labor finalized regulations on health care benefits exempt from certain ACA and Health Insurance Portability and Accountability Act (HIPAA) requirements.


HHS released a report on September 24 that estimated that hospitals will save $5.7 billion in uncompensated care costs in 2014.  Approximately three-fourths of the savings will go to hospitals located in the 26 states that had expanded Medicaid before the ACA’s first open enrollment period.  The hospitals had major decreases in the number of uninsured patients they treated and increases in Medicaid-covered admissions.

On September 23, HHS announced that there will be a 25 percent increase in the number of health insurance issuers offering health coverage through ACA exchanges for 2015, based on preliminary data from 43 states and the District of Columbia.  For 2015, a total of 248 health insurance issuers will be offering coverage through the federally facilitated exchange, and 67 will be offering coverage in the 8 states with state-based exchanges that had available information.

The HHS Office of the Inspector General (OIG) released a report on September 23 on the security of information technology on as well as the exchange websites of Kentucky and New Mexico.  The OIG concluded that while CMS had implemented controls to secure personally identifiable information on, there were still areas where the Centers for Medicare and Medicaid Services (CMS) needed additional oversight and management.  The OIG found that Kentucky had “sufficiently protected” the information but that opportunities still existed for improvement.  It also found that New Mexico’s information technology policies and procedures did not always meet federal requirements regarding securing and processing of sensitive information.  The OIG did not release the specific details of the vulnerabilities it uncovered due to the sensitivity of the information.

According to a report released by CMS on September 29, Medicare recovery audit contractors (RACs) identified and corrected improper payment claims that enabled them to collect $3.65 billion in overpayments in fiscal year 2013.  The RACs also identified and returned  $102.4 million in underpayments during the same time period.

On September 26, the IRS, HHS and the Department of Labor issued final rules regarding health care benefits exempt from certain ACA and Health Insurance Portability and Accountability Act (HIPAA) requirements.  The final rules address limited excepted benefits which include limited scope vision and dental benefits, and long term care benefits.  Overall, the agencies finalized the proposed rules that had been issued last year, with only minor modifications.  Under the final rules, vision, dental and long term care benefits qualify as excepted benefits if employees can decline the benefits or if claims for the benefits are administered under a contract that is separate from other plan benefits.  The agencies postponed addressing limited wraparound coverage, saying that rules for such coverage would be forthcoming after the agencies take into account the extensive comments that were received on the subject.

The ACA’s Sunshine Act section authorizes CMS to make public information on payments physicians and hospital receive from pharmaceutical companies and medical device manufactures. The Open Payments website, through which CMS is doing this, launched on September 30.  The website contains information on payments that physicians and hospitals received from pharmaceutical companies and medical device manufacturers.  Approximately 40 percent of the information on the site is currently de-identified, meaning that the payments are not linked to specific providers.  CMS said that the data was de-identified in situations where there were questions about the payments or when the providers did not have time to review the data before publication.

On September 19, CMS announced that between the end of 2011 and 2013, the use of antipsychotic drugs to sedate nursing home residents had decreased by 15 percent.  CMS and other members of the National Partnership to Improve Dementia Care said they are working so that there will be a 25 percent decrease in antipsychotic use by the end of 2015 and a 30 percent decrease by the end of 2016.  CMS is planning to include data on the use of antipsychotic drugs in its nursing home quality rating system.


Congressman Darrell Issa (R-CA), Chairman of the House Oversight and Government Reform Committee, subpoenaed U.S. Treasury documents regarding IRS regulation on subsidies for health insurance exchanges.  The IRS regulation allows individuals to use their subsidies in all 50 states and the District of Columbia even if the states did not create their own state-run exchanges.  In a letter submitted by Issa on September 23 to the Secretary of Treasury Jack Lew, Issa questions whether the ACA allows subsidies to be used nationwide or only in those states that have created their own exchanges.  This same argument is being used in legal challenges to the ACA such as the Halbig v. Burwell case, which is currently under review by U.S. Circuit Court of Appeals by the District of Columbia.


On September 19, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s dismissal of a suit brought by the Association of American Physicians and Surgeons challenging the IRS’s delay of enforcement of the ACA’s employer mandate.  The Seventh Circuit said that the plaintiffs did not have standing to bring the suit.  The court said that since the plaintiffs were not personally harmed by the delay, the suit had to be dismissed.

On September 30, a federal court in Oklahoma held that the text of the ACA required the court to strike down an IRS rule that provided tax subsidies to federal exchange enrollees.  The case and the ruling are similar to the initial panel decision of the U.S. Court of Appeals for the District of Columbia.  Oklahoma had brought suit earlier this year alleging that the IRS could not impose penalties on employers of residents of states that did not establish their own exchanges.  The federal government is expected to appeal the decision.


The Virginia General Assembly voted against expanding Virginia’s Medicaid program.  Governor McAuliffe (D-VA) had proposed a modified Medicaid expansion plan that would insure a reduced amount of Virginians from previous plans he had proposed.  The primarily Republican General Assembly voted in a special session not to move forward with the modified plan.


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Health Care Reform Implementation Update September 15, 2014

Congress is back in session, and work on a Continuing Resolution is underway. The Affordable Care Act (ACA) is back center stage with House Republicans attaching a medical device tax repeal provision to a jobs package set for a floor vote this week and the House Ways and Means Committee holding a hearing to discuss the status of the ACA’s implementation with CMS Deputy Administrator Andy Slavitt and IRS Commissioner John Koskinen. On the adminsitrative front, the Department of Health and Human Services (HHS) responded to an unfavorable Government Accountability Office (GAO) report regarding the Arkansas Medicaid waiver plan, and the Centers for Medicare and Medicaid Services (CMS) made announcements regarding the Star Ratings Program for Medicare Advantage and prescription drug plans and dialysis centers, and released another rule regarding electronic health records.


On September 10, CMS Deputy Administrator Andy Slavitt and IRS Commissioner John Koskinen testified at a House Ways and Means Hearing regarding the upcoming enrollment period for ACA exchanges. Slavitt testified that CMS is focused on improving the consumer experience overall and will streamline the enrollment process for new and reenrolling customers. Slavitt did not promise a mistake-free ACA marketplace, and warned that there would “always be ongoing challenges.” IRS Commissioner Koskinen focused his testimony on premium tax credit and the individual mandate and was questioned by members on the process for ensuring that taxpayer income information is correct so that they receive the subsidy amount for which they are eligible. The commissioner testified that the IRS plans to update its website to provide clarification to taxpayers on how they can update their income data if needed.

On September 9, the House passed a bill that would delay enforcement through 2014 of a CMS rule that requires physician supervision of certain therapeutic services at Critical Access Hospitals. Congresswoman Lynn Jenkins (R-Kan.) is the sponsor of the bill and claims that the rule, which CMS began enforcing in January, places an undue burden on hospitals and providers in rural areas by requiring physician supervision of services such as drawing blood. The Senate has passed similar legislation, but it is unclear whether the Senate will take up the House bill version for a vote.

The Medicare Payment Advisory Commission (MedPAC) met for the first time since April to discuss Medicare payment policy, service provision based on clinical evidence, Accountable Care Organizations, Medicare Advantage, hospital short stat policy issues and the impact of home health payment rebasing on beneficiary access to and quality of care.


On September 8, the Government Accountability Office (GAO) released a report criticizing HHS for not ensuring that Arkansas’ Medicaid waiver plan was budget neutral. According to the report, Arkansas will be spending $778 million more than a normal Medicaid expansion would have cost in the state. GAO also highlighted that HHS did not require Arkansas to provide any data to justify its funding levels. In response to the report, HHS claimed that its analysis was based on other states’ experiences and that GAO’s $778 number is inaccurate because it used only a small subset of available data to estimate cost levels. 

CMS announced that it was creating two new special enrollment periods (SEPs) for those individuals who were asked to submit documentation regarding immigration-related issues by September 5. The individuals who were required to clear up their immigration status with were supposed to be dropped from enrollment at the end of September if they did not resolve the issues; however the Obama administration is providing leeway for those who could not get the documents in on time. The first SEP is for individuals who can attest that they attempted to submit the necessary documents by the September 5 deadline and who have been verified as eligible for coverage through the exchanges. The second SEP is for individuals who cannot make such an attestation but who do submit the necessary documentation within 60 days.

On September 8, CMS announced that it would delay by one year terminations of Medicare Advantage and prescription drug plans with continual low star ratings. Under the Star Ratings Program, the agency was to terminate plans that received less than three out of five stars in the ratings program for three consecutive years. CMS said that it was delaying the terminations because of concerns that the program disadvantages plans that serve disproportionately high numbers of low-income beneficiaries. 

CMS announced that it would delay a Star Ratings Program for dialysis facilities by three months, until January 2015.  CMS said that the delay would be used to educate the public about the program, and not be used to modify program metrics, which disappointed dialysis providers and patient groups, who argue that the agency, which announced the program in July of 2014, should have gone through notice and comment rulemaking procedures before introducing this program.

HHS’s Office of the National Coordinator for Health Information Technology released a final rule on September 10 that modifies the 2014 certification requirements that electronic health record (EHR) systems must meet to qualify for Medicare and Medicaid meaningful use programs. The Office decided not to adopt a new version of EHR certification and not to implement a new procedure to certify EHR technology outside of the meaningful use program.

On September 8, HHS awarded $60 million in grants to navigators to assist with enrollment in federally facilitated and state partnership exchanges before and during the 2015 open enrollment period. A total of 90 organizations, including charities, universities and nonprofits, tribal, and religious groups, received the grants.

On September 8, HHS Secretary Sylvia Matthews Burwell made a speech on the ACA and committed to improving the open-enrollment process for 2015 and stressed her belief in effective management, transparency and working across party lines. She also said that she intends to respond to Congressional information requests within 30 days.


On September 9, New York state settled with GHI, a subsidiary of EmblemHealth Inc. and New York’s largest health insurer, regarding the company’s inadequate disclosure of out-of-network benefits to its customers. New York state Attorney General Schneiderman announced that GHI will have to establish a $3.5 million dollar fund to reimburse GHI customers who were affected, improve its disclosure of benefits to its customers, and pay $300,000 in fines to the Attorney General’s Office.

On September 8, Governor Terry McAuliffe (D-Va.) unveiled a plan for partial Medicaid expansion in Virginia. The plan would extend coverage to 25,000 Virginia citizens, but falls far short of the governor’s original plan to fully expand Medicaid in the state. The Virginia General Assembly will resume debate on Medicaid expansion and the governor’s new plan during the third week of September.


On September 5, the Federation of State Medical Boards released a final model “compact” that would facilitate physician licensure and practice in more than one state. The compact outlines a process for licensing physicians to practice in more than one state.

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Health Care Reform Implementation Update September 5, 2014

As summer rolls to a close, the agencies continue to make announcements and roll out additional regulations. The Department of Health and Human Services (HHS) introduced the new CEO of, awarded grants to 147 health centers across the country, and released new rules regarding nonprofit religious organizations and the Affordable Care Act (ACA) contraception mandate. The Centers for Medicare and Medicaid Services (CMS) issued a final rule that will enable consumers in the federal exchange to automatically re-enroll in coverage for 2015, made announcements regarding ICD-10 testing and responding to reports on their budget and recovery audit contractors. In Pennsylvania, Governor Tom Corbett announced that CMS approved a modified version of Pennsylvania’s alternative Medicaid expansion plan, Healthy PA. Finally, the U.S. Court of Appeals for the District of Columbia decided to rehear the Halbig v. Burwell case.


On August 27, the Congressional Budget Office (CBO) released a budget report that updated its April forecast for federal government spending for Medicare. According to the report, Medicare spending over the next 10 years will be $62 billion less than the CBO had predicted in April. According to CBO, an improved economic outlook overall is the main factor in the updated forecast. Federal spending on health care programs is still expected to grow from 4.9 percent of GDP in 2015 to 5.9 percent by 2024.

On August 26, Congressman Elijah Cummings (D-Md.), the lead Democrat on the House Oversight Committee, wrote a letter to CMS Administrator Marilyn Tavenner regarding the rating system used for nursing home facilities. In his letter, Congressman Cummings expressed concern that nursing homes are “gaming” the rating system through which CMS relies heavily on self-reporting by the nursing homes themselves. Congressman Cummings is requesting that CMS prepare a briefing on the agency’s nursing home rating system and ensure oversight of the program.


On August 29, CMS finalized its rule on electronic health records (EHR), which had been proposed in May. The rule gives providers more time and flexibility to meet goals defined by the 2009 HITECH Act. Under the rule, physicians and hospitals can continue to utilize EHR systems that were certified under the 2011 program and still receive meaningful use incentive payments in the 2014 reporting period. Providers will not be required to use 2014-certified EHR software until 2015. The final rule extends this “stage 2” of the EHR program through 2016 and begins “stage 3” in 2017.

On August 29, CMS announced that it would offer an administrative agreement mechanism to acute care and critical access hospitals that agree to withdraw pending appeals regarding short-term inpatient hospital claims with admission dates prior to October 1, 2013. The agreement is being offered in order to alleviate the number of appeals currently in the Medicare system. Under the agreement, CMS would make partial payments equal to 68 percent of the “net allowable amount” that was under appeal. Hospitals have until October 31, 2014 to decide if they wish to participate in the settlement, and CMS said that payments will be made within 60 days of when an agreement is reached.

On September 2, CMS finalized its proposed rule regarding re-enrollment in ACA plans for 2015. Under the final rule, individuals who already have coverage in the federal exchange will receive notices that will explain the auto-enrollment process, how individuals can learn if they qualify for additional premium assistance, and how they can shop for other plans available through the federal exchange. If these individuals take no action, they will be automatically re-enrolled in the same coverage they had for 2014 and with the same level of subsidy.

A report released by the HHS Office of the Inspector General (OIG) found that one-third of CMS’s contracts were over budget as of February of 2014 and that many of its largest contracts were over budget. The OIG did not include any recommendations in the report, but noted that it will continue to examine the agency’s contracting in future reports.

On August 25, HHS named Kevin Counihan as the new CEO of the federal ACA exchange website,, and director of the agency’s Center for Consumer Information and Insurance Oversight (CCIIO). Counihan is known for his management of Connecticut’s successful state-run exchange, Access Health CT, and prior to that was the architect of the Massachusetts state exchange that served as a model for the ACA.

On August 26, the Department of Health and Human Services (HHS) awarded $35.7 million to 147 health centers across the country. These grants will assist health centers in improving their patient-centered medical homes model through construction improvements and facility renovations. The awards will support 21 new constructions and 126 renovation projects in 44 states, the District of Columbia and Puerto Rico.

CMS announced that they have scheduled ICD-10 testing dates in advance of the ICD-10 coding compliance deadline of October 1, 2015. The testing weeks will take place November 17-21, March 2-6, and June 1-5.

On August 22, the Obama administration issued an interim final rule that makes it easier for religious nonprofits to be exempt from providing contraceptive coverage to their employees. The new rule would require nonprofits to notify HHS directly of their objection to providing contraception coverage as opposed to the previous process in which religious nonprofits were required to inform their insurance providers of their objection to such coverage. After HHS is notified of the objection, the agency and the Department of Labor, along with third party administrators, will ensure that contraception coverage is made available to the religious nonprofit’s employees. The response from religious nonprofits has been largely negative, with many claiming that the rule does not go far enough in addressing their concerns.


On September 4, the U.S. Court of Appeals for the District of Columbia has decided to rehear theHalbig v. Burwell case, which questions the legality of the federal government providing premium subsidies for individuals receiving health coverage through the federal exchange. In July, a three-judge panel of the court had ruled in this case that the premium subsidies could only be provided in state-run exchanges. Oral arguments for the rehearing of Halbig v. Burwell are scheduled for December.

On August 26, the Center for Medicare Advocacy filed a class action lawsuit against HHS in a Connecticut federal court claiming that the agency routinely violates the 90-day statutory limit for resolving Medicare claims appeals. According to the Center for Medicare Advocacy, the current wait time for administrative law judges to decide on these appeals is 489 days.

In a widely expected move, the state of Oregon sued Oracle America and five of its executives, alleging that they lied, breached contracts, and engaged in racketeering activity regarding the state’s exchange website, Cover Oregon. Oracle sued the state last month.


On August 28, Governor Tom Corbett announced that a modified version of Pennsylvania’s alternative Medicaid expansion plan, Healthy PA, was approved by CMS after months of negotiations. As many as 600,000 new enrollees could be eligible for federal subsidies to purchase private insurance in Pennsylvania as opposed to the traditional outright expansion of Medicaid in the state. The approved plan also includes components that encourage employment and require some cost sharing.

In a letter to CMS, Congressman Darrell Issa (R-Calif.), chairman of the House Oversight Committee, requested that the agency recover improper Medicaid payments made to the state ofNew York. According to the letter, Issa and other congressional members are concerned that decision-makers, some of whom are former health care lobbyists, in New York are misusing the $8 billion that the state is supposed to be using to restructure its Medicaid program. Although the letter does note that CMS has already refused to pay $1.26 billion in improper overpayments to New York, Chairman Issa urges CMS to recover as many improper Medicaid payments made to New York state as possible.

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Posted in ACA, Washington, D.C.

Health Care Reform Implementation Update August 21, 2014

The Centers for Medicare and Medicaid Services (CMS) made announcements this week regarding the Open Payments system and the availability of Affordable Care Act (ACA) Consumer Assistance Program grant funds, issued a request for additional information to ACA enrollees with inconsistent data on their applications, and posted the responses it received to its Request for Information (RFI) regarding the evolution of the Accountable Care Organizations (ACOs). Also, the Department of Health and Human Services announced another significant appointee, and the Government Accountability Office (GAO) released a report regarding CMS’s Medicare claims review process.


On August 8, the GAO released a report that calls for increased CMS oversight of the Medicare claims review process. Recovery audit contractors review providers Medicare claims to ensure payments are proper. The report specifically recommends that CMS should increase its monitoring of the Recovery Audit Data Warehouse, the current database that CMS recovery auditors and other oversight contractors use for reporting and provide information on their reviews. According to the GAO report, the contractors do not always enter complete information on their reviews into the reports, which is necessary to ensure claim accuracy. GAO also highlighted concerns that some recovery audit contractors do not always comply with the requirement to communicate providers’ rights to those providers that may have claims under review. CMS commented that the agency has agreed to develop plans to address the issues outlined in the report.

CMS informed approximately 310,000 individuals who enrolled in the federally facilitated exchange and had citizenship and immigration data inconsistencies that they must provide proof of citizenship or legal residency status to the agency by September 5. CMS said that if proof is not provided in time, coverage for the individuals will be terminated by the end of September.

On August 13 in a Frequently Asked Questions document, CMS announced the availability of $5.3 million in unspent ACA Consumer Assistance Program grant funds from 2010. CMS said it would redistribute those funds to the states that received the grants in 2010. States will be able to use the funds to re-establish, continue or expand upon activities that they began with the 2010 grant funds that they had already received.

On August 14, CMS said that its Open Payments system was back on-line for health care providers to access, a little less than two weeks after the agency took the system down to investigate data issues. The website contains information on payments that physicians and teaching hospitals receive from drug and medical device makers. CMS suspects that approximately one-third of the records in the database still have errors and will not be included on the public version of the website.

CMS announced that it would allow special enrollment periods (SEPs) for individuals who had signed up for health coverage on but were denied either because of a system error or because they resided in a state that had not expanded Medicaid, initially had income below the poverty line, and then had their income increase. CMS is encouraging individuals who believe they are eligible to contact the federal marketplace to explain their situation. Once approved, a new SEPs will last 60 days.

Kevin Thurm, a former HHS deputy director during the Clinton administration and Citigroup executive, was appointed by HHS Secretary Sylvia Burwell as HHS’s senior counselor. In this role, Thurm will work closely with senior staff on “cross-cutting strategic initiatives, key policy challenges, and engagement with external partners.”

On August 19, the Treasury Inspector General for Tax Administration (TIGTA) publically released a report that highlights problems regarding the Internal Revenue Service’s (IRS) enforcement of the medical device tax. According to the report, there is a $117.8 million discrepancy between what was expected in tax revenue and what the IRS actually collected for the medical device tax in 2013. TIGTA reported that the IRS is still struggling to determine which manufacturers who owe the tax have paid it correctly and suggested that the compliance tools for ensuring proper collection be improved.


On August 8, Oracle Corporation, the primary developer of Oregon’s health exchange website Cover Oregon, sued the state agency operating the exchange for breach of contract (for failing to pay bills) in federal district court. The complaint Oracle filed also alleges that state officials promised to pay the company but have not done so. The state has also indicated that it may sue Oracle as well because of issues with the website.

On August 12, a federal district judge said that the state of Indiana and school corporations have standing to challenge the availability of premium tax credits for individuals enrolled in state-based exchanges. The courts dismissed the government’s argument, however, that the ACA employer mandate violates the state’s Tenth Amendment rights. Oral arguments are scheduled for October 9, 2014.

On August 18, the plaintiff in the Halbig case filed a brief with the U.S. Court of Appeals for the D.C. Circuit asking the court to deny the government’s request that the full court review last month’s decision by a three-judge panel of the court. Halbig wrote that the court should wait and see if the U.S. Supreme Court decides to accept a petition from a party in a case from the 4th Circuit that also considered the legality of premium subsidies for individuals receiving health coverage through the federal exchange.

On August 18, the 7th Circuit reversed a decision by a lower court that had ruled that Medicare could provide compensation to a Chicago teaching hospital for “pure research” provided in 1993, 1994, and 1996 — time unrelated to patient diagnosis or treatment. The appeals court agreed with HHS, which had argued that such payments could be denied under the ACA. Under the ACA, Medicare reimbursement for pure research is explicitly prohibited after 2001. However, the ACA did not specify whether such reimbursement was permitted for 1983 to 2001. In 2010, after passage of the ACA, HHS said in rulemaking that pure research was not reimbursable.


The National Business Group on Health announced the results of its annual survey of large employers. According to the survey, large employers are anticipating a 6.5 percent increase in health care costs for 2015 (not accounting for plan design changes). Approximately one-third of large employers are also planning to offer a consumer directed health plan (CDHP) as the only plan option available for employees in 2015. Last year, only 22 percent of large employers said they planned to only offer a CDHP for 2014.

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Health Care Reform Implementation Update August 12, 2014

August recess has begun on Capitol Hill. Congressmen and women and senators are home in their districts and states, and Capitol Hill staffers are catching up on piled up work. Nonetheless, last week Congressman Kevin Brady (R-Texas) released a discussion draft of a bill that intends to stem waste, fraud and abuse in Medicare. The Centers for Medicare and Medicaid Services (CMS) released final payment rules for inpatient hospitals and hospice providers and announced that it would be restarting their recovery audit contractor program; and the Department of Health and Human Services (HHS) announced grant awards to states for the Home Visiting Program, which was established under a provision in the Affordable Care Act (ACA).


On August 7, House Ways & Means Health Subcommittee Chair Rep. Kevin Brady (R-Texas) released a discussion draft of a bill he intends to introduce regarding Medicare waste, fraud and abuse. The bill, the Protecting Integrity in Medicare Act of 2014, includes security provisions for social security numbers and provider education initiatives, locks those beneficiaries with a high risk of abusing prescription drugs into particular pharmacies to cut down on prescription drug abuse, and expands the already existing prior authorization demonstration for scheduled ambulance trips. Congressman Brady used data from the recent Medicare Payment Advisory Commission (MedPAC) report that pointed to $44 billion in improper payments to providers due to incorrect or fraudulent Medicare payment claims to support the need for the bill. According to Rep. Brady, the bill includes ideas from bipartisan members of the committee.


On August 4, the CMS released final payment rules for inpatient hospitals and hospice providers. Under the inpatient hospital final rule, Disproportionate Share funds, which help to reimburse uncompensated care costs for hospitals that serve a significant number of low-income patients, are reduced. Though DSH payments are reduced, inpatient hospital payments are increased by 1.4 percent for some acute care hospitals, payments to long term care hospitals will increase by 1.1 percent or an estimated $62 million for fiscal year 2015 under the final rule. CMS chose not to replace or revise its controversial “two midnight” provision in the rule.

Under the hospice final rule, payments to hospice providers will increase by an estimated 1.4 percent in fiscal year 2015, an amount equal to $230 million. Hospice providers will also be required to notify CMS within five days of a beneficiary’s choice to use the Medicare hospice benefit, as opposed to the three-day requirement that was included in the proposed rule from earlier this year. If the notice is not filed within five days of the beneficiary’s decision, the hospice provider itself, rather than CMS, will be responsible for the costs of care during the time between the beneficiary election and when the notice was filed.

Also on August 4, CMS announced that it would restart its Recovery Audit Contractor (RAC) program on a limited basis, after putting the program on hold earlier this year. The RACs would be permitted to conduct a small number of automated and complex claims reviews including those related to spinal fusions, outpatient therapy services, durable medical equipment, and cosmetic procedures. CMS said that the RACs would not be auditing short inpatient stay claims under the restart. The agency is in the process of procuring new RAC contracts.

On August 7, CMS announced that it would delay the review deadline of its Open Payments System, which provides information on payments that doctors receive from drug and medical device makers. The agency said that the delay was needed to investigate reported issues with some of the payment data. Earlier last week, the American Medical Association and more than 100 other physician groups asked CMS for a six-month delay in the publication of the database, which the agency had previously intended to publish on September 30.

The Treasury Department’s Inspector General for Tax Administration (TIGTA) released the results of its investigation examining the IRS’s accuracy in providing taxpayer information to exchanges. TIGTA found that during the month of October 2013, the IRS was 100 percent accurate in verifying the maximum monthly premium tax credits that an individual could be eligible for under the ACA, and over 99.9 percent accurate in verifying household income and family size.


On July 31, the parties who lost in King v. Burwell, filed a petition with the U.S. Supreme Court asking the Court to review the case. In the case of Halbig v. Burwell, the Department of Justice, which lost in that U.S. Court of Appeals for the District of Columbia, filed a review petition with the U.S. Court of Appeals for the District of Columbia asking for a rehearing before the full appellate court. The maneuvers were the result of the July 22 rulings from the two appeals courts, which came to different conclusions on the legality of the federal government providing premium subsidies for individuals receiving health coverage through the federal exchange. In Halbig v. Burwell, a three-judge panel at the U.S. Court of Appeals for the District of Columbia held that the government could not provide such subsidies to states using a federal exchange instead of a state exchange, while in King v. Burwell, a panel at the U.S. Court of Appeals for the 4th Circuit said that it could.

On August 4, Sen. Ron Johnson (R-Wis.) filed an appeal for his lawsuit in which he challenged the policy that required congressional lawmakers and their staff to obtain government-subsidized health coverage through exchanges. His suit had been dismissed last month.

On August 7, the U.S. Court of Appeals for the 9th Circuit dismissed a lawsuit regarding the Independent Payment Advisory Board (IPAB), which was created under a provision in the ACA to provide oversight of Medicare spending to prevent the program from becoming insolvent. President Obama’s administration has yet to nominate any members to the IPAB, even though the panel’s work was slated to begin this year. The lawsuit was brought by two individuals who claimed that the potential cuts to Medicare, which may be proposed by IPAB, would cause them harm, and that IPAB itself is unconstitutional. The U.S. Court of Appeals for the 9th Circuit dismissed the case on the grounds that IPAB has not yet been formed, and therefore any potential cuts to Medicare payments are “highly speculative.” The appeals court did not address the constitutionality issue.


The District of Columbia received its third grant from the Department of Health and Human Services (HHS) to continue the development of its ACA exchange. The Level One establishment grant will be used on several projects to support the ACA exchange and will boost security and IT infrastructure for the online exchange. The grant award for this third round was $25.8 million.

On August 5, Indiana state officials met with members of the Potawatomi Indian tribe to discuss ways in which to improve the state’s Medicaid waiver plan, HIP 2.0. On July 17, CMS sent a letter to Indiana officials notifying them that their Medicaid waiver application was incomplete because the state officials had not consulted with tribal representatives. The state officials were directed by CMS to meet with the Potawatomi representatives to resolve this issue.

On August 4, HHS announced that it would be providing funds to states for the ACA’s Home Visiting Program. The grants will expand home visiting services to some pregnant women and parents with children under five. Forty-six states and the District of Columbia will receive a combined $106.7 million in these grants, and the program will be administered by HHS’s Health Resources and Services Administration.

State officials in Massachusetts announced that they will discontinue their efforts to merge with the federal health insurance exchange, Maydad Cohen, the state official managing the state’s own health care exchange, said that the state’s online exchange “works” and after a meeting with CMS Administrator, Marilyn Tavenner, both agreed that the state should continue with their efforts to build and improve upon the existing site.

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Infrastructure Alert – July 29, 2014

The Senate begins debate today on a bill to prevent the insolvency of the Highway Trust Fund. The bill, already passed by the House and supported by the White House, provides the best chance for Congress to prevent the projected insolvency given the upcoming August recess. Although the Senate is considering four amendments to the bill, under the short time frame before recess and the urgency to pass a stopgap measure, the bill is likely to pass without amendment so that it will not have to return for another vote in the House.


On July 15, the House passed H.R. 5021, the Highway and Transportation Funding Act of 2014, a bill to extend the solvency of the Highway Trust Fund through May. The bill passed by a vote of 367-55, and now awaits a vote in the Senate. The vote for the bill was 186 Democrats and 181 Republicans, whereas 45 Republicans and 10 Democrats voted against. No floor amendments were permitted. The $11 billion, 10-month bill includes a $1 billion LUST Trust Fund transfer, $3.5 billion in customs fees, and $6.4 billion in “pension smoothing” to bolster the Highway Trust Fund.

The Senate will begin debate on the H.R. 5021 this afternoon. Under a unanimous consent agreement, only four amendments will be considered: Wyden #3582, Carper-Corker-Boxer #3583, Lee #3584 and Toomey #3585. The amendment proposed by Sen. Ron Wyden (D-Ore.) is the text of the Preserving America’s Transit and Highways Act, the Senate Finance Committee’s Highway Trust Fund patch. The Carper-Corker-Boxer amendment would remove the pension-smoothing provision and extend the solvency of the Highway Trust Fund only through the end of the year. The amendment proposed by Sen. Mike Lee (R-Utah) is the text of S. 1702, the Transportation Empowerment Act, that would “devolve” most of the responsibility of raising and disbursing transportation funds to the states and cut the federal gasoline tax to 3.7¢ per gallon. The amendment proposed by Sen. Pat Toomey (R-Pa.) would waive most environmental reviews in post-disaster situations to expedite the re-construction of transportation infrastructure.

The White House released a Statement of Administration Policy supporting the passage of the bill to “provide for continuity of funding for the Highway Trust Fund” but notes that “Congress should work to pass a long-term authorization bill well before the expiration date set forth in H.R. 5021.”


On July 25, Anne Ferro of the Federal Motor Carrier Safety Administration announced she would resign from her post, after serving as Administrator for five years.

Also on July 25, the Senate approved Victor Mendez as Deputy Secretary of Transportation and Peter Rogoff as Undersecretary for Policy. Both had been serving in as acting in that capacity. Therese McMillan, the Deputy Administrator of the Federal Transit Administration (FTA), will be nominated to replace Rogoff as Administrator of the FTA. On July 15, Chip Jaenichen was confirmed by the Senate as Maritime Administrator. He has been with the Maritime Administration since July 2012, when he was appointed Deputy Maritime Administrator.

On July 23, the Department of Transportation announced a major notice of proposed rulemaking designed to curtail accidents of trains carrying Bakken crude oil. The increase of crashes in 2014 alone have drawn public scrutiny, and the day following the rule announcement a derailment occurred in Seattle. The notice of proposed rulemaking predicts “15 mainline derailments for 2015, falling to a prediction of about 5 mainline derailments annually by 2034” without the proposed rule.

On July 23, the Government Accountability Office published a report titled “Aviation Safety: FAA’s Efforts to Implement Recommendations to Improve Certification and Regulatory Consistency Face Some Challenges.”

On July 21, Secretary of Transportation Anthony Foxx and 11 former secretaries of transportation published an open letter to Congress, urging Members to pass a sustainable surface transportation bill.

On July 14, the Maritime Administration requested comments on its draft Programmatic Environmental Assessment to evaluate potential environmental impacts associated with the execution of the Marine Highway program.


California: The Third District Court of Appeals in Sacramento upheld the proposed Pacheco Pass route in California’s High-Speed Rail plans. The court ruled that the project must abide by state environmental rules, despite the state arguing that it was exempt from the California Environmental Quality Act because the project is overseen by the Surface Transportation Board.

New York: A Long Island Rail Road (LIRR) strike was averted on July 17 after Governor Cuomo intervened. The potential strike was looming as four years had passed since the last labor contract expired. Under the new contract, union workers will receive a raise of 17 percent over the next six and a half years, though workers will now pay 2 percent of their pay towards their health care coverage cost. Previous to the agreement, the unions had requested the 17 percent pay raise over six years, whereas the Metropolitan Transit Authority had insisted it be spread over seven years.

Virginia:On July 26, the initial 12-mile phase of the Washington Metropolitan Area Transit Authority’s Silver Line began operation. The Silver Line will expand another 11 miles by 2018 to Dulles International Airport. This first stretch cost $2.9 billion, and the remaining extension is expected to cost an additional $2.7 billion. The Silver Line was approved for a $1.9 billion TIFIA loan in May.

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Health Care Reform Implementation Update – July 28, 2014

Last week, two courts issued contradictory rulings on the authority of the federal government to provide subsidies in states using the federal exchange. The House held hearings regarding the Affordable Care Act’s (ACA) effects on Medicare Advantage plans, a Government Accountability Oversight (GAO) report on ACA subsidy applications, and whether or not a lawsuit against President Obama should move forward. At the agencies, Secretary Burwell announced a major staff appointment, and the Internal Revenue Service (IRS) released the long-awaited forms regarding the ACA employer mandate.


On July 23, Senator Mark Warner (D-Va.) sent a letter to the Department of Treasury requesting that the agency create less burdensome regulations regarding the ACA employer mandate or delay the mandate for another year. In the letter, Senator Warner expressed his concern that regulations released in March did not address all of the problems he had expressed in earlier communications about the employer mandate regulations.

In a vote of 7-4 along party lines, the House Rules Committee passed House Resolution 676 (H. Res. 676), which allows Speaker John Boehner (R-Ohio) to advance his plan to file a lawsuit on behalf of the House against President Obama and his administration. The central focus of the lawsuit is that the president overstepped his constitutional authority when the administration delayed implementation of the employer mandate under the ACA. Now that H. Res. 676 has passed out of the committee, it is expected to be debated on the House floor this week.

On July 23, the House Ways and Means Subcommittee on Oversight held a hearing regarding a GAO report investigating health care subsidies under the ACA. According to the report, 11 out of 12 of the fake applications submitted by GAO investigators attempting to gain approval for the subsidies were accepted. Although the GAO representatives at the hearing claim that the investigation is still underway and that the sample represented in the report is too small to “draw conclusions,” Republicans on the committee claim the report highlights that fraud is prevalent in implementation of the ACA. The GAO says that more complete results of their investigation could be released in the next several months.

On July 24, the House Ways and Means Subcommittee on Health held a hearing on the future of Medicare Advantage (MA) health plans. Republican members focused on the proposed cuts to MA plans due to provisions in the ACA that require the Centers for Medicare and Medicaid Services (CMS) to reduce payment reimbursement to private health plans. The Congressional Budget Office (CBO) has estimated that cuts to MA plans will total more than $300 billion by 2023.

On July 23, Congressman Dan Maffei (D-N.Y.) introduced the “Members Play by the Same Rules Act,” legislation, which would eliminate subsidies for congressional members who purchase ACA health coverage. The bill would also require House and Senate members to purchase ACA coverage through the exchanges designated for their home states. Congressmen Ron Barber (D-Ariz.) and John Barrow (D-Ga.) cosponsored the bill upon its introduction.


On July 24, the IRS posted to its website drafts of forms employers will have to fill out in compliance with the employer mandate. The forms signal that the IRS is planning to move forward with the twice-delayed ACA requirement that large employers provide health insurance to certain employees or pay fines for not providing the coverage.

Also on July 24, the Department of Health and Human Services (HHS) announced that health plan enrollees will receive more than $330 million this year in refunds as a result of the medical loss ratio (MLR) provisions of the ACA. Under the provisions, health plans that do not spend at least 80 to 85 percent of their premiums on medical care and quality improvement activities are required to return a portion of those expenses back to consumers. Since 2011, insurers have returned approximately $9 billion to consumers under the MLR provisions.

The Health Resources and Services Administration (HRSA) released what it called an interpretive rule regarding its 340B discount program. In the rule, HRSA restated its position that orphan drugs that are not used to treat rare diseases can be purchased at discounted rates under HRSA’s 340B program. The rule is effective immediately. In May, the U.S. District Court for the District of Columbia ruled that HRSA did not have the authority to issue a legislative rule to allow certain types of safety net providers to purchase orphan drugs at a discounted rate when they are not used as treatment for rare diseases.

In a “frequently asked questions” (FAQ) document prepared by the Departments of Labor, Health and Human Services, and Treasury, the government clarified health plan notification requirements regarding opt-out of the ACA’s contraceptive mandate. According to the FAQ, if a health plan provided by a closely held corporation that is subject to the Employee Retirement Income Security Act (ERISA) wishes to exclude coverage of contraceptives without employee cost-sharing in the middle of a plan year, it must provide a notification to its employees of the coverage reduction. The FAQ was released in the wake of the Supreme Court’s Hobby Lobby ruling, which held that closely held, for-profit employers could assert a “religious objection” to the ACA contraceptive coverage mandate.

On July 23, Sylvia Burwell announced that Leslie Dach will be joining that Department of Health and Human Services in the newly created senior counselor position. Dach previously served as the executive vice president of corporate affairs at Wal-Mart. His new responsibilities include execution of the second open enrollment for the federal exchange.


On July 22, two different U.S. appeals courts came to different conclusions on the legality of the government providing premium subsidies for individuals receiving health coverage through the federal exchange. In Halbig v. Burwell, a three-judge panel at the U.S. Court of Appeals for the District of Columbia held that the government could not provide such subsidies, while in King v. Burwell, a panel at the U.S. Court of Appeals for the 4th Circuit said that it could. Following the Halbig ruling, the government announced that it would request an en banc rehearing before the full appeals court panel on the decision. At issue is an Internal Revenue Service (IRS) regulation that said that the government could provide the premium subsidies for qualifying individuals in both federal and state exchanges notwithstanding the ACA’s language that subsidies can be given in states with state-run exchanges. According to a recent estimate, approximately 5.4 million of the 8 million individuals who enrolled in exchanges during the open enrollment period enrolled in the federal exchange.

Also on July 22, the Obama administration filed a legal brief saying that it plans to modify the religious objection accommodation process that is currently in place for certain religious nonprofits that object to the ACA’s contraceptive mandate. Under the current policy, nonprofits are required to fill out a form that permits a third-party to provide the coverage. The administration is developing the new process in response to a recent Supreme Court order that said Wheaton College, which sued the government because of the mandate, could simply file a letter with the government rather than fill out the form. The new process is still under development, but according to the brief, the administration will issue an interim final rule on the new process within a month.

On July 21, a judge dismissed the lawsuit brought by Senator Ron Johnson (R-Wis.) challenging the policy that required congressional lawmakers and their staff to obtain government-subsidized health coverage through exchanges. The judge wrote that Johnson did not have standing to challenge the policy because he was not injured by it.


In letters dated July 16, HHS informed all U.S. territories that they are officially exempt from the ACA requirements that states must follow. HHS had previously claimed that territories fit the definition of state and would have to abide by ACA requirements. HHS, however, reversed that decision after “a careful review” of the ACA statute. In the letters, HHS states that CMS will release regulations soon that will clarify and confirm this new position.


The Kaiser Family Foundation released a report showing that out-of-pocket costs for individuals on Medicare have increased significantly since 2000. The report used data from the Medicare Current Beneficiary Cost and Use file between 2000 and 2010. According to the report, long-term care facilities represent the biggest cost to seniors who are on Medicare. In order to curb these costs, the Kaiser report recommends preventing unnecessary hospitalization and improving post-acute care.

To view our compilation of recent health care reform implementation news, click here.

To view and search our library of Health Care Reform Implementation Updates, visit our Affordable Care Act Databook.

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Health Care Reform Implementation Update – July 21, 2014

Last week the Senate debated a bill to reverse the Supreme Court’s contraception mandate decision, a group of House Republicans introduced a bill to replace Affordable Care Act (ACA) cuts to the Medicare home health benefit with a measure that would instead base payments of value of care delivered, the Department of Health and Human Services (HHS) announced a new contract solicitation for managing  and the House passed an appropriations bill that would cut the IRS’ budget for implanting the ACA.


On July 16, Senate Democrats attempted to bring a bill to the floor that would prohibit employers from refusing to provide coverage for contraception. The bill was intended to negate the Supreme Court’s recent decision to allow closely held companies to opt-out of contraception coverage for its employees. The bill was defeated on a procedural vote of 56 to 43. There is a possibility that the bill, or similar legislation, will be brought up again in the Senate later this year.

The House Rules Committee held a hearing on July 16 to explore the legality of the lawsuit against President Obama currently being considered by House Republican leadership. The lawsuit claims that President Obama violated his Constitutional duties by delaying the implementation of the employer mandate under the Affordable Care Act (ACA). The panel of four witnesses split their opinions along party lines as to whether there is legal standing to bring the lawsuit.

On July 16 the House passed an appropriations bill that would cut the IRS’s budget by $1 billion in fiscal year 2015. Among other things, the bill would block the IRS from further implementing the ACA. President Obama has said that he will veto the bill if it makes it to his desk.

The Congressional Budget Office (CBO) released a report on July 15 that says the ACA will reduce federal health care spending. According to the report, over the next 25 years, health care spending will represent 8 percent of the gross domestic product (GDP), an amount that is .01 percent less than CBO’s projection last year. The CBO estimates that this 8 percent figure amounts to $250 billion in savings.

On July 15, Congressmen Greg Walden (R-Ore.) and Tom Price (R-Ga.), along with Reps. Cathy McMorris Rodgers (R-Wash.), Renee Ellmers (R-N.C.), David McKinley (R-W.Va.), Sean Duffy (R-Wis.), and Sam Graves (R-Mo.), Glenn Thompson (R-Wis.), Tom Latham (R-Iowa), Charles Boustany (R-La.), and Erik Paulsen (R-Minn.) introduced the “Securing Access Via Excellence (SAVE) Medicare Home Health Act.” The bill would reverse the cuts made to home health care in January and replace them with a value-based payments plan. The bill would aim to reduce hospital readmissions and would implement the value-based purchasing program by 2019. Under the bill, CMS would develop performance measures for the program and a bonus would be paid to well performing home health providers.


On July 11, CMS reported that 6.7 million more individuals had enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) by May of 2014 compared to September of 2013. Of those enrolled in Medicaid or CHIP, 56 percent are children. CMS also reported that the states that had expanded Medicaid under the ACA had 17 percent more individuals enroll in the two programs.

On July 15, HHS announced that it would make up to $100 million dollars of funding available to states under the Medicaid Innovation Accelerator Program (IAP). The program would offer technical assistance to states to help accelerate payment and service delivery reforms and improve health and lower costs. The program will provide funds to help identify and advance new models of payment and care delivery, analyze data, improve quality measurement, and support state-to-state learning and federal evaluation. The IAP will focus on specific categories of Medicaid enrollees such as pregnant women, newborns, children and individuals with mental illness and those receiving long term care services.

On July 16, CMS posted a new solicitation for a contractor to oversee next year. The new contractor will be responsible for analysis, design, development, testing, maintenance and support. The solicitation also requires that the company chosen be responsible for redesigning parts of the online exchange application and constructing parts of the site that will ensure proper payments to insurers. Accenture, the current company overseeing, was awarded a one-year contract that is set to expire in the beginning of 2015. It is unclear whether the company will bid for this new contract.

On July 18, CMS released a 13-page letter addressed to all Medicare Part D Plan sponsors and Medicare hospice providers regarding Part D drug payments for Medicare beneficiaries enrolled in Medicare’s hospice program. Under Medicare payment rules, hospice covers payments for drugs related to a beneficiary’s terminal diagnosis, while Part D covers payments for drugs for other conditions. In March, CMS had issued a memorandum that required prior authorizations for all drugs needed by Medicare hospice beneficiaries in order to determine whether the drug was covered under Part D. In the July 18 letter, however, CMS recognized the difficulties experienced by both Part D sponsors and Medicare hospice beneficiaries with respect to the prior authorizations, and wrote that it “strongly encourage[s]” prior authorization for hospice patients only needing four categories of drugs, specifically analgesics, anti-nauseants, laxatives and anti-anxiety drugs.

On July 18, CMS announced that it had awarded 14 new contracts for quality improvement organizations (QIOs). This announcement is the second the phase of the new Quality Innovation Network (QIN) program through CMS. These QIOs will work with providers and communities using gathered data to improve quality of care with the specific goals of reducing admissions, promoting prevention and reducing health disparities.


On June 27 and July 9, CMS sent letters to a total of 13 states asking them to address the backlog of Medicaid enrollee applications in their states. In the June 27 letters, CMS asked six states to come up with mitigation plans for clearing their enrollment backlogs but did not offer a confirmed deadline for completion. In the July 9 letters, CMS said that it would conduct its own reviews of the states’ Medicaid eligibility and enrollment systems.

Wisconsin’s alternative to Medicaid expansion enrolled 110,000 childless adults by the end of June 2014, surpassing projections that the state would only enroll 99,000 childless adults by June 2015. Proponents claim that the larger than projected enrollee numbers illustrate the success of the program, while opponents are questioning where the state will get the funds to pay for the higher level of enrollees. Governor Walker opposed the ACA and had opted not to accept federal funds for Medicaid expansion.

In a move that could spread to other states, a new law in Kentucky will now allow nurse practitioners to prescribe routine medications without a doctor’s input. The law, which went into effect on July 15, will provide this authority to nurse practitioners who have completed a four-year collaboration with a practicing physician who was willing to oversee their work. Nurse practitioners across the country are pushing to implement similar laws in their own states, particularly in states with rural areas that may have shortage of primary care doctors.


On July 10, the Chief Administrative Law Judge (ALJ) for the Office of Medicare Hearings and Appeals (OMHA) told lawmakers at an Oversight and Government Reform Health subcommittee meeting that it is planning to hire seven additional ALJs to deal with the current backlog of provider appeals for the Medicare claims. On July 11, OMHA announced that it would be implementing two pilot programs to assist with the backlog. One would create a new settlement conference between providers and suppliers, and the other would allow providers with a large volume of claim disputes to use statistical sampling to help expedite the process. OMHA had approximately 800,000 appeals pending as of July 1, 2014.

The U.S. Court of Appeals for the 11th Circuit announced on July 16 that it would hear oral arguments in a lawsuit challenging the delay of the ACA employer mandate provisions. The Obama administration delayed the effective date of the mandate from 2014 to 2016. Kawa Orthodontics brought the suit in in October of 2013 and claimed it had spent substantial time and money preparing for the mandate.


A report released by the Robert Wood Johnson Foundation and athenahealth says that the ACA has not increased new patient volume for providers. According to the report, overall visits with new patients actually decreased slightly. However, primary care doctors in states that expanded Medicaid did report an increase in Medicaid patients from 12.3 percent last December to 15.6 percent currently.

To view our compilation of recent health care reform implementation news, click here.

To view and search our library of Health Care Reform Implementation Updates, visit our Affordable Care Act Databook.

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Health Care Reform Implementation Update – July 10, 2014

On June 30, in one of the most highly anticipated cases affecting the Affordable Care Act (ACA), the Supreme Court ruled that closely held companies could assert a “religious objection” to the ACA contraceptive coverage mandate. Members on the Hill reacted both positively and negatively, with some calling for legislative action. The Centers for Medicare and Medicaid Services (CMS) released annual payment rate and policy proposed rules for home health, end-stage renal disease, hospitals, ambulatory surgical centers and the physician fee schedule, and the Internal Revenue Service (IRS) released a final rule on tax credits for employee health insurance expenses for small employers.


Numerous congressional members reacted to the Supreme Court’s contraception mandate ruling quickly after it was announced. Senate Republican Leader Mitch McConnell (R-Ky.) hailed the decision as evidence that “the Obama administration cannot trample on the religious freedoms Americans hold dear.” Many Democrat senators said they would introduce legislation that would undermine the Supreme Court’s decision. For example, Senator Dick Durbin (D-Ill.) says that he will introduce a bill that will require corporations opting out of the contraception mandate to disclose that to employees and job applicants, and on July 9 a group of Senate Democrats introduced a bill that would not allow for-profit corporations to seek exemption from the ACA contraception mandate.

On June 27, Senators Jay Rockefeller (D-W.Va.) and Pat Roberts (R-Kan.), chairman and ranking member of the Senate Finance Committee’s Subcommittee on Health, sent a letter to CMS Administrator Marilyn Tavenner, requesting that CMS suspend recent guidance regarding Medicare Part D and hospice payments for certain drugs. Seventy senators signed the letter in which they specifically request clarification from CMS on the process it uses to authorize payments to Medicare Part D hospice patients. The letter claims that the recent updated guidance has caused confusion over who is ultimately responsible for paying for medications for hospice patients and may therefore delay access to those medications.

On June 26, Congresswoman DeLauro (D-Conn.) and Senators Sherrod Brown (D-Ohio) and Richard Blumenthal(D-Conn.) introduced a bill that would require insurance companies to finalize their Medicare Advantage (MA) physician networks 60 days before the fall open enrollment period begins and would prohibit the companies from dropping physicians from their networks without cause until the following open enrollment period. The bill, “The Medicare Advantage Participant Bill of Rights Act,” is intended to ensure that MA patients will not be forced to switch to higher cost or out-of-network doctors mid-year. The bill would also require that Medicare Advantage insurers disclose their reasons for ending contracts with providers. The legislation was introduced in response to cuts in provider networks made by UnitedHealth Group last year.


On June 26, the IRS issued a final rule establishing eligibility requirements for the ACA small business tax credit. Employers are eligible if they have no more than 25 “full time equivalent” employees, the employees earn no more than $50,800 in average annual wages, and the employers contribute at least 50 percent of the cost of premiums. Once those criteria are met, the employers can claim a tax credit equal to 50 percent of the premiums they paid.

On July 1, the Centers for Medicare and Medicaid Services (CMS) announced a proposed rule that would cut Medicare payments to home health providers. According to CMS, the 0.3 percent cut amounts to $58 million. The proposed rule would also ease the requirement that physicians have to provide a detailed narrative of a patient’s circumstances to CMS before they could determine whether or not a patient was eligible for home health care.

On July 2, CMS proposed a rule regarding end-stage renal disease (ESRD) policies and payment rates that would increase total Medicare payments by 0.3 percent or $30 million in 2015, with slight variations in the increase depending on the type of ESRD facility. For example, urban facilities that treat ESRD will see a 0.4 percent increase, while rural facilities can expect payments to decrease by 0.5 percent. The rule also proposes to change payment policies related to coverage of and payment for durable medical equipment, prosthetics, orthotics and supplies, as well as to modify the quality incentive program for ESRD providers.

On July 3, CMS released a proposed update to payments under the Medicare hospital outpatient prospective payment system (OPPS) and payments to ambulatory surgical centers (ASC) for 2015. CMS proposes to raise Medicare hospital outpatient payments by 2.1 percent. The proposed rule would also increase payments to ASCs by 1.2 percent in 2015. The update intends to further the transition from a fee schedule model to a complete prospective payment system. The proposal would also continue to provide higher payments to specific types of rural and community hospitals and cut Medicare reimbursements to hospitals that do not meet certain outpatient quality reporting requirements by 2 percent.

Also on July 3, CMS released a proposed rule on physician payments that would hold payments flat for the first three months of 2015, as was required under the “doc fix” legislation enacted earlier this year. The rule further proposes to incorporate a notice and comment process for determining changes to payment rates beginning in 2016; a new payment for non-face-to-face chronic care management services provided by primary care physicians to patients with two or more chronic conditions; and modifications to several physician quality reporting initiatives, such as the Physician Quality Reporting System, the Medicare Electronic Health Record Incentive Program and the Medicare Shared Savings Program (MSSP). With respect to the MSSP, the physician proposed payment rule would change the quality measures for the Medicare Shared Savings Program for accountable care organizations (ACOs) including increasing the total number of measures that the agency uses for quality reporting and providing additional quality improvement awards to ACOs for improving the quality of care they provide over time.

On July 7, Health and Human Services (HHS) announced that it will award $83.4 million in grants to community and tribal clinic residency programs for primary care physicians. The grants are intended for federally qualified health centers, rural clinics, tribal clinics and similar community health providers. Specifically, the grants will support graduate medical education programs at Teaching Health Centers (THCs), which are designed to expand primary care services in community-health based settings. The funding will support training for 550 residents during the 2014-2015 academic year.

Last week, the HHS Office of the Inspector General (OIG) released a report analyzing enrollment processing by the federal insurance exchange and state operated exchanges between October and December 2013. The OIG found that the federal exchange as well as some state exchanges had processed millions of applications that contained either inconsistent or erroneous information. It also reported that exchanges were unable to resolve most of the issues, particularly those related to citizenship and income. The federal exchange was unable to resolve issues, the OIG reported, because its eligibility system was not fully operational at the time. CMS agreed with the OIG’s recommendation that it develop a detailed plan on how it will resolve the inconsistencies and to make the plan public.

CMS announced that some Medicare Part B providers could appeal certain Medicare claims decisions without first having the decision reviewed by an administrative law judge. Instead, under the pilot program, the providers could utilize “Settlement Conference Facilitation” — an alternative dispute resolution process that uses mediation principles to resolve their disputes.


On July 2, the White House Council of Economic Advisers released a report intended to highlight the negative effect to states that chose not to expand Medicaid under the ACA. According to the report, the states that chose to opt out of Medicaid expansion lost a total of $88 billion in federal funding through 2016. The report also said that Medicaid expansion in the opt-out states could have equated to 400,000 new jobs and 5.7 million more people with insurance. The report used data from the Urban Institute and is intended to place added pressure on the states refusing Medicaid expansion.


The Supreme Court ruled on June 30 that closely held, for-profit employers, such as Hobby Lobby, could assert a “religious objection” to the ACA contraceptive coverage mandate. Hobby Lobby and Conestoga Wood argued in the case that four of the 20 types of contraception the ACA required them to offer in insurance plans to their employees violated their religious beliefs. The Court held that the ACA provision violated the Religious Freedom Restoration Act and the religious liberties of some small businesses. The Court also wrote that the government could directly provide birth control to women, rather than through employer-provided health coverage.


On July 1, Indiana Governor Mike Pence (R) submitted a request to CMS to expand Medicaid using a state developed plan. The proposal, the Healthy Indiana Plan 2.0, would still rely on federal funding for Medicaid expansion but is also intended to promote personal responsibility through the use of health savings accounts and patient feedback.

In a report requested by Senator Orrin Hatch (R-Utah), the Government Accountability Office (GAO) revealed information on small group policy provider premiums across states. The report concluded that Connecticut and Alaska small businesses and nonprofits pay more than other states in providing health care coverage to their workers. Connecticut’s per individual average annual premium for small business was $6,080 in 2013, compared to Kentucky’s per individual premium cost of $1,311. Senator Hatch requested the report in order to establish a baseline of small group premium costs before the ACA was implemented in an effort to illustrate premium increases after implementation occurred.

During the last week of June, the Federation of State Medical Boards (FSMB) released draft legislation that would promote the use of telemedicine across the country. The draft legislation takes the form of a compact agreement between the states that would choose to participate. Standards for physicians that would perform telemedicine services under the compact would be set by an interstate commission. FSMB members from various states have claimed that they will encourage their state legislatures to consider the draft legislation.

To view our compilation of recent health care reform implementation news, click here.

To view and search our library of Health Care Reform Implementation Updates, visit our Affordable Care Act Databook.

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For many businesses, nothing seems more remote than the maneuvering of Beltway insiders. But what happens in Washington and in state and local government is critically important to your company and your industry. With government more involved in business than at any time since the 1930s, organizations that can negotiate the government labyrinth of politics, policy, and process will come out on top.
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