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Health Care Reform Memo: March 22, 2010

Deloitte Center for Health Solutions publication

The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the new administration and implications for the C-suite and various stakeholder groups.

House approves bills to advance health reform; attention shifts to Senate

At 10:44 p.m. EDT Sunday night, after a procedural vote (224-206) on the rules of debate, the House approved HR3590, the Senate bill, by a vote of 219-212 and its companion bill amending the Senate bill by a vote of 220-211. The President is expected to sign HR3590 into law early this week, and the Senate will begin debate under rules of reconciliation (debate limited to 20 hours) with this week.

The cost of the total reform package, as it would be modified by the House reconciliation bill, is $940 billion over 10 years. Major expenses are:

  • $434 billion for expansion of Medicaid and Children's Health Insurance Plans enrollment
  • $466 billion for subsidies to fund insurance for individuals and families up to 400 percent of the federal poverty level
  • $40 billion for small employer tax credits

Among the proposed sources of funding from the Congressional Budget Office’s (CBO) preliminary analysis combining HR3590 and HR4872 are:

  • $60 billion penalties paid by individuals and employers that do not buy insurance*
  • $196 billion in reduced Medicare scheduled payments
  • $36 billion in cuts to Medicare and Medicaid Disproportionate Share (DSH) payments
  • $70 billion from premiums for long-term care insurance (CLASS Act)
  • $132 billion in cuts to Medicare Advantage Plans
  • $32 billion from taxes on high-cost health plans*
  • $210.2 billion in new Medicare taxes on wages and self-employment income (0.9 percent) and on investment income (3.8 percent)*
  • $60 billion in fees on insurance companies (2014-2018), plus $14.3 billion per year plus adjustment thereafter*
  • $27 billion in fees on manufacturers and importers of branded pharmaceutical (2010-2019), plus $2.8 billion per year thereafter*
  • 2.3 percent excise tax on medical devices*
  • $58 billion Pell Grant privatization (unrelated to health reform)

Source: CBO Preliminary Analysis, March 20, 2010; Joint Committee on Taxation (JCX-17-10) (March 20, 2010)

* To find a more definitive analysis of the tax implications of the reconciliation bill, please click here to access the Deloitte Center for Tax Policy report.

The table below provides a snapshot of major changes to the Senate bill included in the reconciliation bill. If the Senate passes the reconciliation bill, the combination is the reform package that becomes law. However, until passage, HR3590 is the law in effect upon signing by the President.

In the chart below, items in red reflect major changes from the Senate version in the reconciliation bill. Otherwise, provisions of the Senate bill, HR3590, become law provided the President signs the bill.

Major Areas

Senate bill (HR3590)

"Patient Protection and Affordable Care Act"

12/24/09

Reconciliation bill (HR4872)

"Health Care and Education Affordability Act of 2010"

3/21/10

Expanded access: Medicaid eligibility and state financial support

Result: Increased enrollment 16 million with eligibility at 133 percent of the FPL with essential benefits set by Secretary of HHS.

Medicaid match: 100 percent federal funding to states for incremental enrollment growth 2014-2016, then 9-18 percent responsibility born by states requiring maintenance of enrollment.

State concessions: Nebraska, which gets 100 percent FMAP funding permanently; all other states FMAP set at 95 percent; Louisiana receives $300 M one-time provision for Katrina-related Medicaid costs.

 

Result: Increased enrollment 16 million with eligibility at 133 percent of the FPL and essential benefits defined by Secretary of HHS.

Medicaid match: 100 percent federal funding for 2014-2016, then FMAP formula changes by year: 95 percent federal financing in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 thereafter.

State concessions: A phase in funding for states with expanded eligibility for adults up to 100 percent of the FPL; elimination of Nebraska concession; maintains Louisiana special funding.

PCP payments: 100 percent federal funding to states for increased payments to PCPs to increase rates to Medicare for 2013-2014.

(Begins January 1, 2014)

Expanded access: Children’s Health Insurance Plan (CHIP)

Eligibility: Requires states to maintain current eligibility levels for children in Medicaid and CHIP through 2019 and funding for CHIP through 2015. Starting in 2015, states receive a 23 percent increase in the CHIP matchup to a cap of 100 percent. CHIP eligibles unable to enroll in CHIP due to enrollment caps will be eligible for tax credits to purchase coverage through state Exchanges.

Eligibility: Require states to maintain current eligibility levels for children in Medicaid and CHIP through 2019 and funding for CHIP through 2015. Starting in 2015, states receive a 23 percent increase in the CHIP matchup to a cap of 100 percent. CHIP eligibles unable to enroll in CHIP due to enrollment caps will be eligible for tax credits to purchase coverage through state Exchanges.

Expanded access: Subsidies/ tax credits for individuals/ families/ small businesses to purchase insurance through Health Exchanges

Result: Increased insurance coverage for 15 million adults via subsidies up to 400 percent of FPL.

 

Eligibility: US citizens and legal immigrants who are not eligible for employer-sponsored coverage that meets 60 percent actuarial value threshold or those for whom the premium cost exceeds 9.8 percent of their income (scale with annual adjustments calibrated to overall health costs relative to GDP: 2.8 percent of income up to 133 percent of FPL to 9.8 percent 300-400 percent of FPL).

 

Abortion funding: Credits/federal subsidies for abortion not provided per Hyde Amendment provisions.

 

State sponsored plans: Allows state to sponsor Basic Health Plan for individuals between 133-200 percent of the FPL offered through health exchanges.

Result: Increased insurance coverage for 16 million adults via subsidies up to 400 percent of FPL with increase in subsidies for lower-middle income eligibles (133-250 percent of the FPL).

Eligibility: US citizens and legal immigrants who are not eligible for employer-sponsored coverage that meets 60 percent actuarial value threshold or those for whom the premium cost exceeds 9.5 percent of their income (scale adjusted annually based on health costs: 2.0 percent for 100-133 percent of FPL to 9.5 percent for 300-400 percent FPL).

Abortion funding: Credits/federal subsidies for abortion not provided per Hyde Amendment provisions. The President said 3/21/10 he would sign an Executive Order limiting federal funding for abortions in community health centers or through health insurance exchanges.

 

State sponsored plans: Allows state to sponsor Basic Health Plan for individuals between 133-200 percent of the FPL offered through health exchanges.

Increased access: Dependent coverage

Young invincibles: Provide dependent coverage for children up to 26 for all individual and group policies.
(Effective six months following passage)

Young invincibles: Provide dependent coverage for children up to 26 for all individual and group policies.
(Effective six months following passage)

Increased access: Employer mandates and incentives (tax credits) to provide employee coverage

Eligibility: Employers with 50+ employees that do not offer coverage and have at least one full-time employee who receives a tax credit will pay a fee of $750 per full-time employee. For purposes of determining whether an employer employs 50+ employees, full-time equivalents are included. Employers with 50+ employees that offer coverage but have at least one full-time employee receiving a tax credit pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full-time employee. For employers that impose a waiting period before employees can enroll in coverage, require payment of $400 for any full-time employee in a 30-60 day waiting period and $600 for any employee in a 60-90 day waiting period.

(Effective January 1, 2014) 

 

Vouchers to employees: Requires employers with 50+ employees that offer coverage to provide voucher to

employees with incomes less than 400 percent FPL whose share of the premium exceeds 8 percent but is less than 9.8 percent of their income and who choose to enroll in a plan in the Exchange. The voucher amount is equal to what the annual premium costs the employer would have paid to provide coverage to the employee under the employer’s plan and will be used to offset the premium costs for the plan in which the employee is enrolled. Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the Exchange.

(Effective January 1, 2014)

 

Enrollment: Requires employers with 200+ employees to automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.

 

Tax credits: To small businesses (25 or fewer employees with average compensation below $50,000) that provide insurance based on total wages and number of employees: Sliding scale and phase in starting 2010 with 50 percent credits for companies that purchase insurance through health exchanges (with 100 percent credits for businesses that employ 10 or fewer employees).

Eligibility: Employers with 50+ employees (including FTEs) that do not offer coverage and have at least one full-time employee who receives a tax credit will pay a fee of $2,000 per full-time employee (excluding the first 30). Employers with 50+ employees that offer coverage but have at least one full-time employee receiving a premium tax credit pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full-time employee.

(Effective January 1, 2014)

 

 

 

 

 

 

Vouchers to employees: Require employers that offer coverage to their employees to provide a voucher to employees with incomes less than 400 percent FPL whose share of the premium exceeds 8 percent but is less than 9.8 percent of their income and who choose to enroll in a plan in the Exchange. The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer’s plan and will be used to offset the premium costs for the plan in which the employee is enrolled. Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the Exchange.

(Effective January 1, 2014) 

 

Enrollment: Requires employers with 200+ employees to automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.

 

Tax credits: To small businesses (25 or fewer employees with average compensation below $50,000) that provide insurance based on total wages and number of employees: Sliding scale and phase in starting 2010 with 50 percent credits for companies that purchase insurance through health exchanges (with 100 percent credits for businesses that employ 10 or fewer employees).

Increased access: Individual mandate

Penalty: In 2014, annual penalty of $95 or 1.0 percent of their income (up to $285 per family) and in subsequent years the greater of (1) a flat fee of $750 or (2) 2.5 percent of their income (up to $2,085 per family).

 

 

Exemptions: Native Americans, financial hardship, illegal immigrants, people without coverage for less than 3 months and individuals/families where cost of lowest cost insurance is more than 8 percent of an individual’s income.

Penalty: In 2014, annual penalty of $95 or 1.0 percent of their income (up to $285 per family) and in subsequent years the greater of (1) a flat fee of $695 or (2) 2.5 percent of their income (up to $2,085 per family).

(Phased in 2014-2016)

 

Exemptions: Native Americans, financial hardship, illegal immigrants, people without coverage for less than 3 months and individuals/families where cost of lowest cost insurance is more than 8 percent of an individual’s income.

Expanded access: Regulation of health insurance industry business practices and creation of health exchanges

Exchanges: Creates Consumer Operated and Oriented Plan (CO-OP) program to operate non-profit, member-run health insurance companies in 50 states and District of Columbia offering qualified health plans. ($6 billion to finance the program and award loans and grants to establish CO-OPs by July 1, 2013.)

 

Benefit plans through exchanges: Exchanges must offer four benefit categories of plans plus separate catastrophic plan for eligible

individuals and small businesses:

  •  Bronze plan – minimum creditable coverage and providing essential health benefits, cover 60 percent of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010)
  • Silver plan – provides essential health benefits, covers 70 percent of the benefit costs of the plan, with the HSA out-of-pocket limits
  • Gold plan – provides the essential health benefits, covers 80 percent of benefit costs of the plan, with the HSA out-of-pocket limits
  • Platinum plan – provides the essential health benefits, covers 90 percent of benefit costs of the plan, with the HSA out-of-pocket limits
  • Catastrophic plan – available to those up to age 30 or to those who are exempt from mandate to purchase coverage and provides catastrophic coverage only with coverage level set at the HSA current law levels except that prevention benefits and coverage for three primary care visits would be exempt from the deductible.

 

Out of pocket limits: Reduce co-pay limits for those with incomes up to 400 percent FPL per the following levels:

  • 100-200 percent FPL: one-third of the HSA limits ($1,983 per individual and $3,967 per family)
  • 200-300 percent FPL: one-half of the HSA limits ($2,975 per individual and $5,950 per family)
  • 300-400 percent FPL: two-thirds of the HSA limits ($3,987 per individual and $7,973 per family).

 

Guaranteed issue: Required guarantee issue and renewability and with variation based only on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio) in the individual and the small group markets and the Exchange. (Effective January 1, 2014)

 

Required transparent performance standards: Transparent quality, inclusion of adequate provider networks, claims payment procedures, claims denials, coverage and denial policies, cost-sharing arrangements, grievance procedures, and enrollee communications “in plain English.”

 

Guaranteed issue, lifetime limits, insurance plan coverage requirements for individual and small group markets: Requires insurance plans to guarantee issue without regard to pre-existing conditions, offer insurance plan options that align with four benefits categories in Exchange offered plans, eliminates lifetime limits, and Limits deductibles in the small group market to $2,000 for individuals and $4,000 for families unless contributions are offered that offset deductible amounts above these limits. (Effective January 1, 2014)

 

 

 

 

State oversight: Creates American Health Benefit Exchange and Small Business Health Options Program (SHOP) Exchange for individuals and small businesses to oversee compliance regulations, consumer protections, et al.

Exchanges: Creates Consumer Operated and Oriented Plan (CO-OP) program to operate non-profit, member-run health insurance companies in 50 states and District of Columbia offering qualified health plans. ($6 billion to finance the program and award loans and grants to establish CO-OPs by July 1, 2013.)

 

Benefit plans through exchanges: Exchanges must offer four benefit categories of plans plus separate catastrophic plan for eligible

individuals and small businesses:

  •  Bronze plan – minimum creditable coverage and providing essential health benefits, cover 60 percent of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010)
  • Silver plan–provides essential health benefits, covers 70 percent of the benefit costs of the plan, with the HSA out-of-pocket limits
  • Gold plan – provides the essential health benefits, covers 80 percent of benefit costs of the plan, with the HSA out-of-pocket limits
  • Platinum plan – provides the essential health benefits, covers 90 percent of benefit costs of the plan, with the HSA out-of-pocket limits
  • Catastrophic plan – available to those up to age 30 or to those who are exempt from mandate to purchase coverage and provides catastrophic coverage only with coverage level set at the HSA current law levels except that prevention benefits and coverage for three primary care visits would be exempt from the deductible.

 

Out of pocket limits: Reduce co-pay limits for those with incomes up to 400 percent FPL per the following levels:

  • 100-200 percent FPL: one-third of the HSA limits ($1,983 per individual and $3,967 per family)
  • 200-300 percent FPL: one-half of the HSA limits ($2,975 per individual and $5,950 per family)
  • 300-400 percent FPL: two-thirds of the HSA limits ($3,987 per individual and $7,973 per family).

 

Guaranteed issue: Required guarantee issue and renewability and with variation based only on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio) in the individual and the small group markets and the Exchange. (Effective January 1, 2014)

 

Required transparent performance standards: Transparent quality, inclusion of adequate provider networks, claims payment procedures, claims denials, coverage and denial policies, cost-sharing arrangements, grievance procedures, and enrollee communications “in plain English.”

 

Guaranteed issue, lifetime limits, insurance plan coverage requirements for individual and small group markets: Requires insurance plans to guarantee issue without regard to pre-existing conditions, offer insurance plan options that align with four benefits categories in Exchange offered plans, eliminates lifetime limits, and Limits deductibles in the small group market to $2,000 for individuals and $4,000 for families unless contributions are offered that offset deductible amounts above these limits. (Effective January 1, 2014 except elimination of pre-existing condition for children under 2 effective six months from passage.)

 

State oversight: Creates American Health Benefit Exchange and Small Business Health Options Program (SHOP) Exchange for individuals and small businesses to oversee compliance regulations, consumer protections, et al.

Expanded access: Increased supply of primary care providers and community health agencies

Funding: Increased Medicaid payments to Medicare levels for PCPs (internists, family physicians, and pediatricians) get Medicaid payments starting in 2013 and 2014 equal to Medicare payments.

Funding: Increased Medicaid payments to Medicare levels for PCPs (internists, family physicians and pediatricians) get Medicaid payments starting in 2013 and 2014 equal to Medicare payments.

Reduced costs: Increased surveillance of fraud and abuse

Funding increased by $250 million over 10 years

 

Medicaid, Medicare fraud: Targeted to Medicaid fraud indexed based on increases in the Consumer Price Index. Develops database to capture and share data across federal and state programs, increase penalties for submitting false claims, and increase funding for anti-fraud activities.

 

Funding increased by $250 million over 10 years

 

Medicare, Medicaid fraud: Targeted to Medicaid fraud indexed based on increases in the Consumer Price Index. Develops database to capture and share data across federal and state programs, increase penalties for submitting false claims, and increase funding for anti-fraud activities. Adds 90-day period of accelerated oversight for initial claims of DME suppliers in areas identified as high-risk of fraud in all public programs, and requires Medicare and Medicaid program providers and suppliers to establish compliance programs.

Reduced costs: Administrative simplification

Standardization: Adopt standardization for financial and administrative transactions between providers and plans to promote administrative simplification. (Effective on passage)

Standardization: Adopt standardization for financial and administrative transactions between providers and plans to promote administrative simplification.

(Effective on passage)

Reduced costs: Prohibitions about physician owned hospitals

Self-referrals: Established prohibitions retrospective to 1/1/09.

Self referrals: Establishes 12/31/10 deadline for prohibitions of self-referral to physician-owned hospitals.

Reduced costs: Implementation of comparative effectiveness program

Structure: Creates a non-profit Patient-Centered Outcomes Research Institute to identify research priorities and oversee analytics about the clinical effectiveness of medical treatments. The Institute will be overseen by an appointed multi-stakeholder Board of Governors. Funding for pilot programs to expedite use of CER analytics available for 5 years.

Structure: Creates a non-profit Patient-Centered Outcomes Research Institute to identify research priorities and oversee analytics about the clinical effectiveness of medical treatments. The Institute will be overseen by an appointed multi-stakeholder Board of Governors. Funding for pilot programs to expedite use of CER analytics available for 5 years.

Reduced costs: Impose tax on expensive employer-sponsored health benefits plans (High-cost plan taxes)

Benefit plans: 40 percent tax applied to employer-sponsored plans above $8,500 and family plans above $23,000 starting in 2014. The thresholds are increased by $1,300 and $3,000 for qualified retirees and workers in high-risk professions (police, firefighters, communications workers, pipefitters, et al); anticipated tax collection: $149 billion over 2010-2019.

Benefit plans: 40 percent tax applied to employer-sponsored plans above $10,200 and family plans above $27,500 starting in 2018; the additional amount for qualified retirees and high-risk professions is $1,650 single and $3,400 family; anticipated tax collection: $32 billion over 2010-2019.

Reduced costs: Cuts in Medicare payments (rate of growth)

Goal: Reduce CAGR 1.3 percent 2010-2019

 

Payment rates: Creates independent Payment Advisory Board of 15 members to oversee Medicare payment formula beginning FY2013.

 

Automatic updates: Reduce annual market basket updates for inpatient hospital, home health, skilled nursing facility, hospice and other Medicare providers, and adjust for productivity.

 

Medicare Advantage Plans: Reduced payments for Part C plans phased in over four years starting in 2014 with bonuses for quality and care coordination ($118 billion over 10 years savings). Special concessions for Florida Part C enrollees.

Goal: Reduce CAGR 1.4 percent 2010-2019

 

Payment rates: Creates independent Payment Advisory Board of 15 members to oversee Medicare payment formula beginning FY2013.

 

Automatic updates: Reduce annual market basket updates for inpatient hospital, home health, skilled nursing facility, hospice and other Medicare providers, and adjust for productivity.

 

Medicare Advantage Plans: Reduced payments to Part C plans phased in starting 2012 for 3-6 years with bonuses for plans that achieve 4/5 star performance per the new Medicare Advantage Quality Rating program starting in 2012. Includes penalties to Part C plans if MLR falls below 85 percent of premiums starting in 2014. Net result: $132 billion over 10 year savings; Florida concessions taken out of bill.

Regional Variation: Adds 5-15 percent additional payments to Medicare regions that are cost effective and reduces payments 5 percent for inefficient regions (Related to Dartmouth Atlas data regarding variation in costs): HHS Secretary Sebelius will ask the National Academy of Sciences to recommend a methodology to allocate Medicare payments appropriately to low cost, high quality regions.

Reduced costs: Lower DSH payments to states

DSH formula: Lowers 10 year Disproportionate Share Hospital payment cuts $18.1 billion.

DSH formula: Reduces Medicare Disproportionate Share Hospital (DSH) payments by 75 percent initially and increases payments based on the percent of the population uninsured and the amount of uncompensated care provided. Results: Payment cuts of $14.1 billion over 10 years.

(Effective fiscal year 2014)

Reduced costs: High-risk pools in states

Catastrophic pools: Establishes temporary national high-risk pool to individuals with pre-existing medical conditions uninsured for at least six months. Premiums for the pool will be established for a standard population, may vary by no more than 4 to 1 due to age and maximum cost-sharing will be limited to the current law HSA limit ($5,950 per individual and $11,900 per family in 2010). (Appropriation: $5 billion to finance the program).

(Effective March 24, 2010 through January 1, 2014)

Catastrophic pools: Establishes temporary national high-risk pool to individuals with pre-existing medical conditions uninsured for at least six months. Premiums for the pool will be established for a standard population, may vary by no more than 4 to 1 due to age and maximum cost-sharing will be limited to the current law HSA limit ($5,950 per individual and $11,900 per family in 2010). (Appropriation: $5 billion to finance the program).

(Effective March 24, 2010 through January 1, 2014)

Reduced costs: Increased use of performance based payments/bundled payments to enhance care coordination

Delivery systems: Allows provider organizations organized as Accountable care Organizations to participate in Medicare savings via demonstration of quality and cost efficiency.

(Begins January 2012)

Innovation: Creates Center for Innovation in CMS to sponsor innovations in care delivery that reduce cost and improve quality.

 

Value-based purchasing: Creates Value-Based Purchasing program in Medicare to fund quality efforts in hospitals to 2012 and expand to skilled nursing, home health, and ambulatory surgery centers in October 2012.

Delivery system: Allows provider organizations organized as Accountable care Organizations to participate in Medicare savings via demonstration of quality and cost efficiency.

(Begins January 2012) 

Innovation: Creates Center for Innovation in CMS to sponsor innovations in care delivery that reduce cost and improve quality.

Value-based purchasing: Creates Value-Based Purchasing program in Medicare to fund quality efforts in hospitals to 2012 and expand to skilled nursing, home health, and ambulatory surgery centers in October 2012.

Improved quality: Overall direction and priorities

Create national strategy for health care quality improvement—report to Congress by January 1, 2011.

 

Program focus: Implement at comparative clinical effectiveness program over 10 years; align incentives with performance, enhance transparency of safety, quality and costs, deploy clinical information technology, enhance the health care workforce skills, increase supply of primary care providers, and eliminate inappropriate regional variation.

 

Connect Health and Human Services via the creation of Community-based Collaborative Care Network Program to support consortiums of health care providers.

 

Preventive health: Establishes the National Prevention, Health Promotion and Public Health Council to coordinate federal prevention, wellness, and public health activities. Eliminates cost sharing (co-payments) arrangements for Medicare and Medicaid enrollees that preclude access to preventive health services deemed “essential” by the Secretary of Health and Human Services. Provides access to comprehensive Health Risk Assessment for all Medicare enrollees. Provides and incentives (increased deductibility) to employers to offer employee wellness programs. And requires increased disclosure of nutritional information by chain restaurants.

 

Long term care: Establishes a national, voluntary insurance program for purchasing community living assistance services and supports (CLASS program). Following a five-year vesting period, the program will provide individuals with functional limitations a cash benefit of not less than an average of $50 per day to purchase non-medical services and supports necessary to maintain community residence. The program is financed through voluntary payroll deductions: All working adults will be automatically enrolled in the program, unless they choose to opt-out.

(Effective January 1, 2011)

Create national strategy for health care quality improvement—report to Congress by January 1, 2011.

 

Program focus: Implement at comparative clinical effectiveness program over 10 years; align incentives with performance, enhance transparency of safety, quality and costs, deploy clinical information technology, enhance the health care workforce skills, increase supply of primary care providers, and eliminate inappropriate regional variation.

 

Connect Health and Human Services via the creation of Community-based Collaborative Care Network Program to support consortiums of health care providers.

 

Preventive health: Establishes the National Prevention, Health Promotion and Public Health Council to coordinate federal prevention, wellness, and public health activities. Eliminates cost sharing (co-payments) arrangements for Medicare and Medicaid enrollees that preclude access to preventive health services deemed “essential” by the Secretary of Health and Human Services. Provides access to comprehensive Health Risk Assessment for all Medicare enrollees. Provides and incentives (increased deductibility) to employers to offer employee wellness programs. And requires increased disclosure of nutritional information by chain restaurants.

 

Long term care: Establishes a national, voluntary insurance program for purchasing community living assistance services and supports (CLASS program). Following a five-year vesting period, the program provides individuals a cash benefit of not less than an average of $50 per day to purchase non-medical services and supports necessary to maintain community residence. The program is financed through voluntary payroll deductions: All working adults will be automatically enrolled in the program, unless they choose to opt-out.

(Effective January 1, 2011)

Improved quality: Improved coordination of care

Bundled payments: Establishes national Medicare pilot program to develop and evaluate paying a bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post-acute care services for an episode of care that begins three days prior to a hospitalization and spans 30 days following discharge.

(Pilot begin by January 1, 2013) Funding for Medicaid bundled payment pilots included.

 

Medical home: Creates the Independence at Home demonstration program to provide high need Medicare beneficiaries with primary care services in their home and allow health professionals to share in any savings for reduced preventable hospitalizations, readmissions, improved health outcomes, improved efficiency, reduced cost, increased patient satisfaction.

(Effective January 1, 2012)

 

Implement medic al home model for Medicaid enrollees with two or more chronic condition or designated risk factors

 

Dual eligibles: Improve coordination of care for Medicaid dual eligibles via creation of Federal Coordinated Health Care Office in CMS.

(March 2010) 

Bundled payments: Establishes national Medicare pilot program

to develop and evaluate paying a bundled payment for acute, inpatient hospital services, physician services, outpatient hospital services, and post-acute care services for an episode of care that begins three days prior to a hospitalization and spans 30 days following discharge.

(Pilot begin by January 1, 2013) Funding for Medicaid bundled payment pilots included.

 

Medical home: Creates the Independence at Home demonstration program to provide high need Medicare beneficiaries with primary care services in their home and allow health professionals to share in any savings for reduced preventable hospitalizations, readmissions, improved health outcomes, improved efficiency, reduced cost, increased patient satisfaction.

(Effective January 1, 2012)

 

Implement medic al home model for Medicaid enrollees with two or more chronic condition or designated risk factors.

 

Dual eligibles: Improve coordination of care for Medicaid dual eligibles via creation of Federal Coordinated Health Care Office in CMS.

(March 2010)

Improved quality: Essential benefits in insurance programs

Basic benefits: Requires the Secretary of Health and Human Services to define and annually update the benefit package through a transparent and public process services considered essential to basic health that would be required in all health insurance plans offered through health exchanges and commercial plans targeting the individual and small group markets–minimal actuarial value of 60 percent.

(Effective January 1, 2014)

Basic benefits: Requires the Secretary of Health and Human Services to define and annually update the benefit package through a transparent and public process services considered essential to basic health that would be required in all health insurance plans offered through health exchanges and commercial plans targeting the individual and small group markets–minimal actuarial value of 60 percent.

(Effective January 1, 2014)

Improved quality: Biologics and therapeutics

Biologics: Authorizes Food and Drug Administration (FDA) to approve generic versions of biologic drugs and grant biologics manufacturers 12 years data exclusivity before generics can be marketed.

(Effective upon enactment)

Biologics: Authorizes Food and Drug Administration (FDA) to approve generic versions of biologic drugs and grant biologics manufacturers 12 years data exclusivity before generics can be marketed.

(Effective upon enactment)

Improved quality: The Part D Doughnut hole

Part D doughnut hole: Senate bill did not close doughnut hole for seniors: Left provisions of 12/03 MMA intact: Seniors pay 20 percent for drug costs to $2,850; 100 percent of costs to $6,350; then 5 percent thereafter.

Part D doughnut hole: Medicare beneficiaries receive $250 to cover expenses when they cross into the gap this year. Next year, the beneficiaries get a 50 percent discount on brand name drugs (with the cost being paid for by the pharmaceutical industry). In subsequent years, the discounts are expanded, with coverage extended to generic drugs. By 2020, the discounts would reach 75 percent.

Funding reform: Total cost and 10 year impact

$871 billion over 10 years

$940 billion over 10 years

Funding sources

Individual mandate penalty: Tax on individuals without qualifying coverage of greater of $750 per year up to a maximum of three times that amount or 2 percent of household income to be phased-in beginning in 2014.

 

MSA/Flex/Health Savings Account changes: Exclude costs for OTC drugs not prescribed by a doctor from reimbursement through HRA or FSA; Increase tax on distributions from a health savings account or Archer MSA not used for qualified medical expenses to 20 percent (from 10 percent for HSAs and from 15 percent for Archer MSAs) of the disbursed amount; limits contributions to FSA for medical expenses to $2,500 per year with annual COL adjustment.

(Effective January 1, 2011)

 

Itemized deductions: Increase threshold for unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent of adjusted gross income for regular tax purposes; waived for individuals age 65 and older for tax years 2013 through 2016.

(Effective January 1, 2013)

 

Medicare payroll tax: Impose an additional Medicare Part A (hospital insurance) tax rate on wages and earnings from self-employment on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly; funds deposited into the Medicare Part A Trust Fund.

(Effective January 1, 2013)

 

 

 

 

 

 

 

 

 

 

 

New Industry fees:

$2.3 billion annual fee on the pharmaceutical manufacturing sector

(Effective for sales after December 31, 2008)

 

 

 

$2 billion annual fee on the medical device manufacturing sector increasing to $3 billion after 2017 (Effective for sales after December 31, 2009)

 

Annual fees on the health insurance sector:

  • $2 billion in 2011
  • $4 billion in 2012
  • $7 billion in 2013
  • $9 billion in 2014-2016
  • $10 billion in 2017 and thereafter

(Effective for net premiums written after December 31, 2009)

 

 

 

 

 

 

 

 

 

 

 

 

Executive compensation: Limit deductibility of executive and employee compensation to $500,000 per applicable individual for health insurance providers. (Effective January 1, 2013)

 

Indoor tanning: Impose a tax of 10 percent on the amount paid for indoor tanning

(Effective January 1, 2010)

 

Hospital avoidable error: Reduced payments (1 percent) to hospitals for avoidable readmissions (effective 2012) and hospital acquired infections.

(Effective 2015)

 

Drug rebates: Increase Medicaid drug rebate for brand name drugs to 23.1 percent (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1 percent); increase the Medicaid rebate for non-innovator, multiple source drugs to 13 percent of average manufacturer price; and extend the drug rebate to Medicaid managed care plans.

(Effective January 1, 2010)

Individual mandate penalty: Tax on individuals without qualifying coverage of the greater of $695 per year up to a maximum of three times that amount or 2.5 percent of household income to be phased-in beginning in 2014.

 

MSA/Flex/Health Savings Account changes: Exclude costs for OTC drugs not prescribed by a doctor from reimbursement through HRA or FSA; Increase tax on distributions from a health savings account or Archer MSA not used for qualified medical expenses to 20 percent (from 10 percent for HSAs and from 15 percent for Archer MSAs) of the disbursed amount; limits contributions to FSA for medical expenses to $2,500 per year with annual COL adjustment.

(Effective January 1, 2011)

 

Itemized deductions: Increase threshold for unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent of adjusted gross income for regular tax purposes; waived for individuals age 65 and older for tax years 2013 through 2016.

(Effective January 1, 2013)

 

Medicare payroll tax: Impose an additional Medicare Part A (hospital insurance) tax rate on wages and earnings from self-employment of on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly; funds deposited into the Medicare Part A Trust Fund.

 

Medicare tax on unearned income: Under the reconciliation bill, starting in 2013, individuals with modified adjusted gross income above $200,000 single and $250,000 married also would face a 3.8 percent tax on investment income, such as interest, capital gains and dividends.

(Effective January 1, 2013)

 

New Industry fees: 

Pharmaceutical manufacturing:

Manufacturing sector, according to the following schedule:

  • $2.5 billion in 2011
  • $2.8 billion in 2012-2013
  • $3.0 billion in 2014-2016
  • $4.0 billion in 2017
  • $4.1 billion in 2018
  • $2.8 billion in 2019 and later 

2.3 percent excise tax on the sale of any taxable medical device.

(Effective for sales starting January 1, 2013) 

 

Annual fees on health insurance

sector:

  • $8 billion in 2014
  • $11.3 billion in 2015-2016
  • $13.9 billion in 2017
  • $14.3 billion in 2018

For subsequent years, the fee shall be the amount from the previous year plus the annual rate of premium growth for each plan. Non-profit insurance companies net premium increase will be discounted 50 percent in the calculation, and discounted 80 percent if their revenues are 80 percent or higher from government plans that target low income/elderly populations, people with disabilities, and VEBAs not established by an employer.

(Effective January 1, 2014)

 

Executive compensation: Limit deductibility of executive and employee compensation to $500,000 per applicable individual for health insurance providers. (Effective January 1, 2013)

 

Indoor tanning: Impose a tax of 10 percent on the amount paid for indoor tanning

(Effective January 1, 2010)

 

Hospital avoidable error: Reduced payments (1 percent) to hospitals for avoidable readmissions (effective 2012) and hospital acquired infections.

(Effective 2015)

 

Drug rebates: Increase Medicaid drug rebate for brand name drugs to 23.1 percent (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1 percent); increase the Medicaid rebate for non-innovator, multiple source drugs to 13 percent of average manufacturer price; and extend the drug rebate to Medicaid managed care plans.

(Effective January 1, 2010)

Deficit/surplus: 2010-2019 per CBO* Preliminary estimates

$118 billion*

$138 billion*

Impact on Medicare solvency

Increases Medicare Trust Fund solvency by 8 years per CBO

Extends Medicare trust fund 9 years from 2017 to 2026 per CBO

 

About the CBO

The Congressional Budget Office is a nonpartisan agency that produces policy analyses, cost estimates of legislation, and budget and economic projections as a basis for the Congress's decisions about spending and taxes. The agency is a public-sector "think tank" that employs a multidisciplinary staff of professional analysts–public-policy and budget experts, economists, and other critical thinkers who enjoy challenges–at levels ranging from undergraduate and graduate interns to researchers with doctorates and substantial experience. It also relies on a team of outside economists and advisors and integrates peer reviewed and industry analytics in its opinions.

HiTech Update: AHA weighs in on meaningful use; ONC issues temporary certification guidelines

Last Monday, the American Hospital Association submitted a series of suggestions to the Office of the National Coordinator for Health IT (ONC) relative to meaningful use calling for (1) delineation between roles and responsibilities of providers and IT vendors, (2) realistic timeframes for implementation, and (3) mechanisms for grandfathering legacy HER platforms already installed. The AHA letter was among 2,700 submissions by health care organizations during the 60-day comment period.

Meanwhile, ONC announced a temporary certification program March 10, 2010 to make EHR certification opportunities available in time for eligible professionals and hospitals to qualify under the "meaningful use" (Stage 1) criteria and become eligible to receive the incentive payments under the Act, which begin in 2011.

Wisconsin Senator asks drug makers to explain prices

Wednesday, Senator Herb Kohl (D-WI) sent letters to top drug manufacturers requesting information about drug pricing in the US compared to other developed nations. Kohl is Chair of the Special Committee on Aging that previously requested information from seven leading group purchasing organizations to explain how supply-chain transactions are negotiated between drug and device companies and providers via the GPOs. “While I firmly believe that drug quality should not be sacrificed for cost, the large discrepancies in the cost of identical drugs cannot be explained by differences in production or manufacturing,” Kohl wrote.

State-led reforms in spotlight

Massachusetts Attorney General Martha Coakley continued a year-long investigation into health costs increases and variation across the state. Tuesday, she issued a statement: "We found that healthcare costs most closely correlated the market leverage of hospitals and physician groups, rather than other issues that we would expect—like quality of care or patient population. Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and among providers offering similar levels of service and price variations for hospitals and physicians are not explained by quality of care and similar factors.”

Wednesday, Idaho Governor C.L. “Butch” Otter (R-ID) signed a measure requiring the state attorney general to sue the federal government if residents are forced to buy health insurance. Similar legislation is pending in 37 other states. Constitutional law experts say the movement is mostly symbolic because federal laws supersede those of the states.

National Health Reform: What Now? National Health Reform: What Now?
National health reform is here. The Patient Protection and Accountable Care Act and the House-passed reconciliation bill will trigger sweeping change and disruption – some rather quickly and some over many years – and the industry is asking, “What now?” At Deloitte, we continue to explore and debate the key questions facing the industry, and we look forward to helping our clients find and implement the right answers for their organizations. To learn more, visit www.deloitte.com/us/healthreform today.

 

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