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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