San Francisco Medical Society Blog

Physician-Lead ACOs Better Model for Health Care Savings

Thu, 16 May 2013 13:48:51 GMT

Physician-led accountable care organizations (ACOs) could have more opportunities to create savings in patient care with a little help from health insurers, a leading health reform expert said Wednesday.

Doctor-centric ACOs can do a better job at controlling costs than hospital-led organizations, Paul Ginsburg, PhD, president of the Center for Studying Health System Change, said at an ACO summit hosted by America's Health Insurance Plans.

Entrepreneurial insurance companies can offer loans to provider groups to expand or re-engineer to become ACOs through Medicare or commercial payers. Others can create innovative programs that have physicians take additional risk to improve outcomes and lower costs for patients.

"I think physician-led ACOs inherently make markets more competitive because they have an opportunity to shift patients toward higher-value hospitals," Ginsburg said. "It means that a hospital market that might not have large competition going, all of a sudden, if there's a physician-led ACO, those hospitals have to compete on price for the allegiance of those physician-led ACOs."

Unlike in hospital-led ACOs, doctor-led ACOs aren't compromised financially by reducing hospital admissions and emergency department visits, he pointed out.

In fact, physician-led ACOs already outnumber their hospital counterparts, the latest data from the Centers for Medicare and Medicaid Services (CMS) show. However, doctor-organized groups typically treat fewer patients than those formed by hospitals.

Charlie Baker, former Secretary of Health and Human Services Secretary in Massachusetts, noted that nearly every shared-risk model in Medicare Advantage is with physician groups and not hospitals, he says, because insurers know that's how to save money.

Baker said he believes there will be more growth in small providers pooling resources to become ACOs. "My big fear is they're starting behind the larger players, way behind," Baker said.

Physician groups are still skeptical of quality metrics used to determine the shared savings in ACOs, Ginsburg said.

However, CMS rules on ACOs favor hospital-led organizations. "The CMS rules are making it exceedingly difficult for an independent physician group to form an ACO," Baker said.

To that point, Ginsburg noted the federal government can play a larger role in facilitating physician-led ACOs.

"I think of the federal support for the HMOs in the 1970s as to whether it'd be feasible to have the federal government support the development of physician organizations as an investment for viable markets in the future," Ginsburg said.

No matter what happens, whatever strategy emerges to control costs must tackle provider payments—an area public and private payers seem to be in agreement on.

Source: MedPage Today, May 15, 2013.

Health Care Leaders Expect Shift Toward Outpatient Care

Tue, 30 Apr 2013 12:43:16 GMT

As the care delivery models of hospitals and health systems evolve, health care executives and practice area managers predict a major shift in admissions from inpatient to outpatient settings.

According to Premier Healthcare Alliance's Spring 2013 Economic Outlook, 69% of the survey participants predict that outpatient volume will rise in 2013, as compared to last year's volume. And as outpatient admissions are projected to increase, nearly 24% of respondents suggest that inpatient volume this year will drop.

“With reimbursement cuts and changes in care delivery threatening today's status quo, health care providers face a significant change imperative as they transition toward more accountable, value-based care models,” Mike Alkire, CEO of Premier, said in a news release. “Ensuring patients are cared for in the most efficient manner—without compromising quality—is key to success. This means more care is being shifted to less intensive and expensive outpatient care sites, with lower reimbursement rates.”

In fact, nearly half of survey participants—48%—cited reimbursement cuts as having the greatest impact on their organizations, though the largest expenditures are expected to go toward healthcare information technology and telecommunications, according to 43% of those surveyed. That's up 21% from two years ago.

Respondents also pointed to accountable care organizations as a method for integrating care across the continuum. About 22% are currently involved in an ACO, and that number is expected to more than double by the end of next year.

Source: Modern Healthcare, April 29, 2013.

Bipartisan Policy Center Releases Health Care Cost Containment Plan

Fri, 19 Apr 2013 12:09:04 GMT

On Thursday, the Bipartisan Policy Center released a health care cost containment plan that would reduce the federal deficit by about $560 billion over the next decade, including about $300 billion in Medicare savings.

The report was compiled by former Democratic and Republican congressional lawmakers and health care experts, including former Senate Majority Leader Tom Daschle (D-S.D.), former Congressional Budget Office Director Alice Rivlin, and MIT economist Jonathan Gruber.

The plan offers a variety of recommendations to change health care delivery and how it is financed, including the elimination of the sustainable growth rate formula at a cost of $138 billion.

Further, health care providers in areas that have not received a rural exemption from HHS would not receive an increase in their fee-for-service payments. The fixed payments plan was proposed in an effort to drive providers into new "Medicare networks," which build upon the Affordable Care Act's accountable care organizations (ACOs).

According to BPC staff, the proposal is expected to expand the 250 existing ACOs in order to enroll about 40% of all Medicare beneficiaries within the first 10 years. The networks would be offered as a third option for Medicare beneficiaries, alongside traditional fee-for-service and Medicare Advantage. The plans would offer enrollees lower premiums and cost-sharing, while providing financial incentives to providers, hospitals and other health care providers to better coordinate care. However, the plan would equalize office visit payments, regardless of the site of care, which would save about $8.7 billion over 10 years.

In addition, the BPC's plan would combine deductibles for Medicare parts A and B into a single $500 annual deductible, with a $5,315 cap on beneficiary out-of-pocket cost sharing. Further, the report proposes expanding cost-sharing assistance to Medicare beneficiaries with annual incomes of up to 150% of the federal poverty level, or $17,235 for an individual.

The report's authors say the recommendations have been well received by congressional lawmakers and White House staff.

Source: California Healthline, April 19, 2013.

FAQs: Affordable Care Act Primary Care Rate Increase & Medi-Cal State Plan Amendment

Fri, 12 Apr 2013 12:41:22 GMT

Under the provisions of the federal Affordable Care Act (ACA), Medi-Cal is required to pay primary care physicians at Medicare rates for primary care services for two years. The increase is fully funded by the federal government. The requirement began January 1, 2013 and ends December 31, 2014.

The California Department of Health Care Services (DHCS) submitted their state plan amendment (SPA) to implement the rate increase on March 29, 2013. Approval of the SPA is required by the Centers for Medicare and Medicaid Services (CMS) before the state can implement the rate adjustment. It is unclear when the rate adjustment will be approved by CMS and implemented by DHCS. In previous communications, DHCS has indicated that they expect implementation will begin in July 2013. However, the rate adjustment will be retroactive to the beginning of the year.

Below are answers to frequently asked questions about implementation of the rate adjustment as outlined in the SPA. Please note these provisions are subject to change pending approval by the CMS.

Why is the SPA just being filed now?

Federal guidance on the implementation of the rate increase was delayed until November 2012. The DHCS claims that the federal delay and the complications involved with applying the rate increase to managed care delayed the submission of the SPA.

Who qualifies as a “primary care physician”?

Any physician who is board-certified in internal medicine, family medicine, or pediatrics by the American Board of Physician Specialties, the American Board of Medical Specialties, or the American Osteopathic Association. This includes recognized physician subspecialties of the above board certified specialties.

Or, any physician who practices (but is not board certified) in a specialty or sub-specialty of internal medicine, family medicine, or pediatrics who also bills at least 60% of services rendered for qualifying codes. DHCS has indicated that billing 60% of services for qualifying codes alone does not qualify a physician unless they also can legitimately attest to practicing in internal medicine, family medicine or pediatric medicine or a subspecialty of internal medicine family medicine or pediatric medicine recognized by the ABMS, ABPS or AOA.

Click here to view the list of qualifying primary care providers (PCP).

How will physicians prove that they qualify?

Generally, physicians will self-attest that they qualify for the increased rates. DHCS is developing an online registry that physicians will use to register. However, managed care plans are allowed to choose to either use the DHCS attestation tool or develop their own.

What counts as a primary care service?

The rate increase applies to:

Evaluation and management codes 99201-99499
Vaccine administration codes 90460, 90461, and 90471-90474
Preventive care codes 99381-99387 and 99391-99397
Counseling risk/behavior intervention codes 99401, 99404, 99408-409, 99411, 99412, 99420 and 99429

The rate increase also applies to state-specific “Z” codes—Z0100, Z0102, Z0104, Z0106 and Z0108. These codes are relevant to some state-only programs, such as Family PACT, as well as many services provided in neonatal and prenatal intensive care units (NICU and PICU).

What Medicare rates will Medi-Cal use? Will they apply the GPCIs?

Per the SPA, rates will be based on the 2009 Medicare Fee Schedule. Geographic Payment Center Indices (GPCIs) will apply. SFMS/CMA urged the DHCS to adopt this approach based on our analysis that this approach would benefit California physicians.

Are clinics or physician employers eligible for the Medi-Cal reimbursement adjustment?

No, only the physician who is personally providing the service is eligible for the increase.

Does the increase apply to managed care?

Yes. Plans will be receiving increased payments, through the State of California, to pay providers at Medicare rates. The increase is fully funded by the federal government for 2 years beginning January 1, 2013 and ending December 31, 2014.

How will the state guarantee that the money actually makes it to the physician?

Plans will be contractually obligated to prove that they are paying primary care physicians at least the Medicare rates. The payments made to plans to cover the increased cost of higher rates will be separate from their general capitation payments, allowing for separate accounting. The SPA included plan reporting requirements to ensure the rate adjustment funding is going to the service providing physician.

Questions & Assistance

SFMS/CMA members with questions about Medi-Cal reimbursements can receive complimentary one-on-one assistance by contacting our Member Helpline at (800) 786-4262.

Four Key Questions for Affordable Care Act

Wed, 13 Feb 2013 15:23:26 GMT

Thanks to the Supreme Court ruling and Barack Obama's re-election, the Affordable Care Act isn't going away. The issue now is how it will work.

Even by Washington standards, implementing this law is extraordinarily complex. The federal government last year issued 70,000 pages of guidance, including 130 pages on the look of websites for new marketplaces where many will shop for insurance.

Here’s a quick look at how it will impact consumers, employers, states, and health care providers.

What will consumers do?

Most will do pretty much what they do now. About 55% of Americans of all ages get health insurance through an employer; another 32% through a government program. For most, not much will change, though workers are likely to pay more for health care as employers pass along costs. Also, the law will require employers who offer skimpy benefits to provide more robust ones.

The challenge is to prompt one group of consumers to change—the 18 million 20- and 30-somethings who don't have health insurance. The arithmetic of Obamacare depends on getting more Americans to buy health insurance. If the young and healthy don't show up, the math doesn't work—and the cost of insurance for those who do shop in the new exchanges will be higher.

What will employers do?

Mostly wait and see. Even employers flirting with getting out of the benefits business or giving workers a fixed sum and letting them shop for insurance won't move quickly.

Implementing the Affordable Care Act is extraordinarily complex. One provision already appears to be having unwelcome, unintended consequences. It requires employers with more than 50 workers to offer insurance to anyone who works 30 hours a week or more. That gives fast-food, retail and other employers who rely heavily on low-wage, part-timers an incentive to keep workers to 29 hours or less; word is that many already are doing so. Smaller firms have reason not to expand their workforces above 50, or to game the system by subdividing themselves.

The Congressional Budget Office estimates that about 8 million fewer workers, about 5% of the total, will get insurance through employers five years from now than would have been the case without the Affordable Care Act.

But no one really knows how many employers will find ways to drop coverage or to structure benefits so sicker, costlier workers get insurance at the new exchanges.

What will states do?

They have until Friday to decide whether to create an exchange or let the federal government set one up. New York and California already are committed to fully running their own exchanges; Texas and Georgia have signaled they won't take on any of the tasks. It isn't clear how much help the abstainers will offer Washington in crafting the marketplaces and recruiting customers. State resistance would be an obstacle to an already tough task.

And then there is Medicaid, the state-federal program for the poor. The law substantially expands eligibility, at Washington's expense for the first three years, but the Supreme Court ruled that states don't have to go along. CBO projects that in the next five years, Medicaid rolls will grow to 45 million from 36 million.

About half of the governors (including six of the 29 who are Republican) have decided to expand their Medicaid programs; turning down federal money is hard.

But about half say they won't (including 13 Republicans) or are still on the fence (including 11 Republicans). States that don't expand Medicaid likely will have more uninsured, which means, among other things, that health-care providers and employers who do offer insurance will, effectively, pick up the cost of caring for the uninsured when they do get care.

What will health care providers do?

Merge and grow bigger. The law encourages the integration of hospitals, doctors, and nursing homes. It takes aim at the underlying problem: The U.S. has evolved the developed world's most inefficient health-care delivery system, one that too often rewards volume of care and not quality. Integrated health providers such as Kaiser Permanente and Geisinger Health System are seen as models of low costs and high quality.

But there is a risk or—if you talk to insurers—a nightmare. The proliferation of hospital mergers and hospitals' appetite for buying doctors' practices—in part to assure a steady stream of patients to fill hospital beds—could create local monopolies that raise prices without increasing efficiency.

Source: The Wall Street Journal, February 13, 2013.

CMS Releases Long-Overdue 'Sunshine Act' Rule

Mon, 04 Feb 2013 17:18:04 GMT

CMS announced the long-awaited final rule on the Physician Payments Sunshine Act last Friday, which will raise public awareness of the financial relationships between medical device and pharmaceutical companies and doctors and teaching hospitals.

The Sunshine Act—established under the Affordable Care Act—requires medical industry companies to disclose all transfers of monetary value over $10 to physicians and teaching hospitals.

Under the final rule, manufacturers of pharmaceutical and biological drugs, medical devices and medical supplies—covered by Medicare, Medicaid and CHIP—starting August 1 will be expected to report all consulting fees, travel reimbursements, research grants and other gifts with values over $10 that they give to physicians and teaching hospitals. In addition, the manufacturers and group purchasing organizations will be responsible for reporting physician ownership and investment interests.

CMS set the August 1 start-date for data collection to give the affected entities time to prepare, officials said. All data collected from August through December must be reported to CMS by March 31, 2014, according to the rule. The agency will publish the data on a public website by September 30, 2014, one year later than the date originally set in the ACA.

Physicians will be given a 45-day "review and correction" period to ensure the accuracy of any disclosures to CMS, according to the final rule. The rule also notes that the Sunshine Act overrides similar state laws, creating the possibility of "cost-savings, since a single reporting system for reporting this information is less burdensome than multiple programs".

The final rule is scheduled for publication in the Federal Register at the end of this week.

Source: California Healthline, February 4, 2013.

Brown Highlights Budget, Health Care in State of the State Address

Fri, 25 Jan 2013 11:06:42 GMT

Governor Jerry Brown promoted his fiscal year 2013-2014 budget proposal and discussed several state health care initiatives in In his State of the State address yesterday.

Budget Comments

Earlier this month, Brown released his budget plan. He said that if implemented, the proposal would leave the state with a budget surplus of $851 million. The plan projects $98.5 billion in revenue and transfers, and it estimates $97.7 billion in spending.

Brown's plan includes an expansion of Medi-Cal to individuals with incomes up to 138% of the federal poverty level. The expansion—included in the Affordable Care Act—is expected to add up to 1.5 million newly eligible adults to the program.

The budget plan also includes a 4.9% funding increase for In-Home Supportive Services—with an assumption that the state will implement a 20% reduction in IHSS service hours in November—and a $142 million funding increase for Cal-WORKs, the state's welfare-to-work program

In addition, the budget proposal allocates $1.6 billion for a court-appointed federal overseer to manage continued improvements in the state's prison health care system.

Health Care Comments

Discussing the Medi-Cal expansion, Brown called the initiative "incredibly complex" and said it will "test our ingenuity" and "will not be achieved overnight." He said, "Given the costs involved, great prudence should guide every step of the way."

Brown also said that the state must develop "the right relationship with the counties" to successfully implement the expansion.

Brown also called for a special session of the Legislature beginning next week that will focus on implementing ACA provisions.

Source: California Healthline, January 25, 2013.

Calif. Health Exchange Board Outlines Agenda Prior to 2014 Launch

Tue, 22 Jan 2013 11:28:33 GMT

The California Health Benefit Exchange Board officials outlined an agenda to prepare the exchange to launch on January 1, 2014.

Exchange Details

The Affordable Care Act requires states to launch online insurance marketplaces by 2014. California's exchange—named Covered California—primarily will serve individuals and small businesses.

Supporters hope that the exchange will function similar to websites like Amazon and Expedia so that users will be able to choose between various health plans through an easily navigable online store.

Earlier this month, the Obama administration granted conditional approval to California's plan to build and operate a statewide health insurance exchange.

Last week, federal officials awarded $674 million to the exchange, which will help fund the program through the end of 2014.

Details of Agenda

Officials said that the state expects to develop seven geographical exchanges to serve markets in:

The Central Coast
The Greater San Francisco Bay Area
Los Angeles
Northern California
Sacramento
San Joaquin Valley
Southern California

Officials also established an action plan for recruiting translators fluent in 13 languages spoken in California to help with outreach efforts.

In addition, officials said they would use the new federal grant funding to develop a Web portal for the exchange.

Plans Will Use 'Metal Ratings'

Recently, exchange officials told Gov. Jerry Brown (D) and the Legislature that health plans offered through Covered California will be classified by "metal ratings."

According to officials, "Every insurance policy offered inside and outside the Covered California marketplace will be given a 'metal rating' based on 'actuarial value' calculations."

Platinum plans will offer 90% coverage;
Gold plans will offer 80% coverage;
Silver plans will offer 70% coverage; and
Bronze plans will offer 60% coverage.

Plan members will have to pay out of pocket for the percentage not covered by the plan.

Source: California Healthline, January 22, 2013.

Obamacare—Past, Present, and Future, Part 4

Wed, 28 Nov 2012 14:47:43 GMT

By Andy Calman, MD, PhD

Note: This article was originally published in the October 2012 issue of San Francisco Medicine. Due to members' request for more information on health care reform and its impact on medicine, SFMS is publishing a four-part series in the SFMS blog section. Click here to read Part 3 of this 4-part series on Obamacare and its impact on U.S. physicians and patients.

How Is Obamacare Paid for?

The main new source of revenue for Obamacare has nothing to do with Medicare. Beginning next year, there is a new 3.8% tax on “unearned” income, such as capital gains, dividends, and interest income, for those with total incomes over $200,000 per year ($250,000 for couples). This is coupled with a 0.9% increase in the Medicare tax on earned income over $200,000/$250,000. These new taxes on upper-income taxpayers, though receiving little ink or airtime, are among the most important reasons why Obamacare has been targeted for repeal.

Other, smaller sources of revenue are a 40% excise tax on so-called “Cadillac” health plans (those having premiums over $27,500 per family); taxes on the pharmaceutical, insurance, indoor tanning, and medical device industries; and limitations on cafeteria-plan and health expense deductions.

Over the next ten years, Obamacare (including its associated taxes) is estimated by the Congressional Budget Office to result in net savings to the federal government of $109 billion. However, this does not include the cost of SGR repeal, the “crowd-out” phenomenon, employment migration due to the elimination of “job-lock,” increases in medical inflation, and other factors that are inherently difficult to predict and are outside the scope of this article.

Impact on Physician Practices

Most physicians will be impacted by Obamacare, regardless of their specialty and mode of practice. Combined with the subsidies for EHR in the HITECH Act, Obamacare will drive medicine toward more data-driven, technology-intensive, outcomes-oriented reporting in order to be eligible for contracting and payment. This has already begun in the Medicare system with PQRI and PQRS initiatives and is spreading to the private insurance sector. Additionally, the ACO initiative will likely accelerate the trend toward practice integration and buyouts by larger entities.

In fifteen months, approximately 30 million Americans will begin to enroll in Medicaid and subsidized private health insurance plans. Access problems, especially for Medicaid enrollees, are inevitable. Mandated managed care plans for Medicare-Medicaid dual-eligibles may accentuate this problem. Access problems may drive state legislation toward increased scope of practice for limited license practitioners in order to meet the increased need.

It should not escape physicians’ notice that “bending the cost curve” is aimed squarely at our profession. In addition to finding new ways to limit physician compensation, Medicare and private insurers will look to physicians to limit their use of costly diagnostics, pharmaceuticals, and procedures and to justify everything we do with outcomes reporting.

On the other hand, the health exchanges and subsidies will, for the first time, allow many working-class and middle-class families the opportunity to have real health insurance. We may be shocked in the next few years at the backlog of previously untreated patients who are now crowding our waiting rooms, and we may be gratified at our increased ability to provide the care that these members of our community need.

The challenges posed to our profession by Obamacare are real. We will need to become more efficient in the face of increased electronic documentation requirements and declining or stable reimbursements. However, physicians are resourceful and energetic people. Just as we have met the challenges of incorporating new knowledge and techniques and found ways to make the difficult transition from paper charts to computers, we will find ways to handle the transitions of the next few years as well. Regardless of legislative and electoral outcomes, the nation and our patients need our services, and the huge, dysfunctional, but ultimately homeostatic health care economy will find ways to adjust. Obamacare as enacted in 2010 is not the final word on the subject. By staying informed and uniting as a profession to advocate for fair, responsible solutions, we can help shape a positive outcome.

Dr. Andrew Calman practices ophthalmology at CPMC-St. Luke’s and teaches at CPMC and UCSF. He is past president of the California Academy of Eye Physicians and Surgeons, chair of the SFMS’s Political Action Committee, and served for many years on California’s Medicare Carrier Advisory Committee as well as the National Health Policy Committee of the American Academy of Ophthalmology.

California Health Benefit Exchange Adopts Solicitation Regulations; Network Adequacy Remains a Concern

Mon, 26 Nov 2012 16:21:15 GMT

After months of tweaking, the California Health Benefit Exchange has formally adopted the solicitation regulations for plans hoping to be included in the exchange.

The action comes more than three months after the board adopted a set of solicitation guidelines that had been vetted by various stakeholders. Adoption of the solicitation itself was then postponed last month to allow additional study and comment on specific provisions of the solicitation.

From a physician standpoint, several aspects of the solicitation regulations have improved since first being released back in August; however, major areas of concern still exist.

The most notable problem continues to be questions over whether network adequacy will be effectively monitored and enforced under the dual regulator system favored by the exchange. The current regulation, which includes the solicitation, calls for the Department of Managed Health Care (DMHC) and Department of Insurance (DOI) to monitor network adequacy, effectively keeping today’s status quo in place.

As many stakeholders, including the SFMS/CMA, have noted, DMHC and DOI have struggled to ensure adequate networks are maintained by payors, and it’s highly likely that the problem will only increase when a flood of exchange plans are added to their workload in 2013 and 2014.

Further compounding these network monitoring and enforcement concerns is the exchange’s decision to allow two-tier networks for essentially all exchange plans, as it is unclear whether DMHC and DOI even have the capability to assess the adequacy of individual tiers within a network. This could lead to a situation where enrollees have inadequate access to providers at a lower level of patient cost-sharing. SFMS/CMA has vigorously opposed this decision by the exchange.

These concerns were raised, once again, during the public comment period of the exchange’s most recent meeting, but it remains to be seen whether the board will take these comments to heart.

Peter Lee, the exchange’s executive director, noted that the monitoring of network adequacy would be an issue that continues to evolve into the first year of the exchange’s operation, along with a host of other elements related to plan design standardization, such as the specific levels of patient cost-sharing that will be permitted in the exchange.

To date, however, the exchange has been mum in regard to the host of questions and concerns raised about the issue of network adequacy and two-tier networks, and it remains to be seen whether that stance will change in the future.

Another issue of concern included in the finalized solicitation regulations is that the exchange is now backing away from its adopted recommendation to use the FAIR Health database as a tool for standardizing out-of-network benefits. This apparent about-face poses considerable concern to physicians, as it is unclear what direction they will pursue on standardizing out-of-network benefits.

Obamacare—Past, Present, and Future, Part 3

Mon, 26 Nov 2012 15:51:41 GMT

By Andy Calman, MD, PhD

Note: This article was originally published in the October 2012 issue of San Francisco Medicine. Due to members' request for more information on health care reform and its impact on medicine, SFMS is publishing a four-part series in the SFMS blog section. Click here to read Part 2 of this 4-part series on Obamacare and its impact on U.S. physicians and patients.

Alternative Delivery and Payment Models

A large component of Obamacare is an attempt to “bend the cost curve” and reduce the rate of Medicare expenditure growth. There are several components to this, many of which have been greeted with skepticism from the provider community. It is worth noting that past efforts to limit Medicare spending through Medicare Plus Choice and Medicare Advantage (essentially HMOs and PPOs) have actually increased costs compared to traditional fee-for-service (FFS) Medicare. The HMO experiment has already been done twice and was a failure. However, most members of Congress are not well versed in the scientific method, are convinced that FFS is evil and rewards greedy providers, and are inclined to keep trying similar experiments in the hopes that this time they will actually work.

Currently, the Medicare Payment Advisory Commission (MedPAC) makes recommendations to Congress on changes to Medicare payment and program rules, but it has no power to enact such rules itself. However, beginning in 2014, the new Independent Payment Advisory Board (IPAB), dubbed “MedPAC on steroids,” will have the power to set Medicare payment rates and rules for the following year, and its rulings can only be overturned by a Congressional supermajority. The AMA and other physician groups have set the elimination or restriction of IPAB as a high legislative priority, as its powers are viewed by many as excessive and unchecked.

In addition to IPAB, Obamacare has established a Patient-Centered Outcomes Research Institute to perform comparative effectiveness research. Its recommendations may be considered by CMS but are not binding. There is also a new Center for Medicare and Medicaid Innovation within CMS, which is tasked with overseeing new delivery and payment methods in order to improve care while lowering costs.

Obamacare also sets up new entities dubbed Accountable Care Organizations (ACOs), which are groups of providers who contract to provide care for Medicare FFS beneficiaries. These ACOs may include individual providers, IPAs, and/or hospitals. ACOs will, in theory, be rewarded financially for quality and efficiency of care. The initial response from the medical community was lukewarm, with few groups willing to accept the downside risk of bidding for ACO contracts.

In response, CMS released updated ACO guidelines in 2011, which streamlined the organizational and reporting requirements and limited the downside risk. Whether ACOs will be a successful component of Medicare remains unknown, but the larger local IPAs, HMOs, and hospital chains can be expected to organize and compete in this arena in the years to come. Individual providers may feel compelled to join with larger entities in order to retain their patient bases and remain viable.

Obamacare has also set up a new Federal Coordinated Health Care Office, targeting dual-eligible Medicare-Medicaid beneficiaries, primarily the low-income elderly and disabled, for cost savings. States are encouraged to set up programs to integrate care for these beneficiaries. California, at the behest of Governor Brown, has requested a CMS waiver to expand an existing “pilot project” from four counties (including Los Angeles) to involve the entire state. This project, opposed by CMA, would force California’s low-income seniors into managed care, with a six- or twelve-month “lock-in” provision. Physician fees and access to dual-eligible patients may be severely affected, even though most of the savings from such a forced migration would probably come from long-term care rather than physician services.

What about the SGR?

One of organized medicine’s highest priorities for the past several years has been the repeal of the Sustainable Growth Rate (SGR), which adjusts aggregate Medicare physician payments based on the gross domestic product rather than the actual demographic growth rate of the Medicare population, the medical inflation rate, or the cost of new technologies. As a result, medicine faces an annual threatened payment reduction of about 30%, which is usually averted at the last minute by Congressional action, often after a temporary payment cutoff to physicians.

It is worth noting that the House of Representative's version of Obamacare, championed by our own member of Congress and by House Democrats, contained a complete repeal of SGR and was generally much more favorable to physicians. However, it was the Senate version that prevailed (after the election of Senator Scott Brown provided a forty-first vote for a filibuster, and the final Senate bill was amended through reconciliation), and Obamacare as passed did not address the SGR. The main reason for this is that keeping the SGR in the payment formula allows Congress and the administration to maintain future cost estimates that are artificially optimistic, while averting drastic payment cuts in an annual Congressional drama. However, there is no guarantee that a future Congress, in a deficit-cutting mood, will continue to avert these annual SGR disasters.

HHS Releases Proposed ACA Rules On Essential Health Benefits

Wed, 21 Nov 2012 11:43:59 GMT

On Tuesday, the Obama administration proposed three rules outlining how provisions under the Affordable Care Act would work. The three rules—listed below—are not yet final and will be open for comment until December 26.

Proposed Rule To Prohibit Insurers From Discriminating Against Certain Patients

HHS proposed a rule implementing an ACA provision that prevents insurers from discriminating against individuals with pre-existing or chronic conditions.

The rule would prevent insurers from denying coverage to patients with pre-existing or chronic conditions. It also would prevent insurers from charging higher premiums to certain beneficiaries because of current or past insurance programs, gender, occupation and industry or employer size.

However, the rule would allow insurance companies to vary premiums—within limits—based on age, tobacco use, family size, and geography.

According to HHS, the rule targets 50 million to 129 million U.S. residents who have conditions that insurance companies have cited in coverage denials or insurance cost increases.

The rule also requires states to establish a single statewide risk pool for individual and small employer markets, unless a state opts to combine the two pools. Premiums and yearly rates would be based on the entire pool. In addition, the rule calls for a catastrophic plan in the individual market for young adults and individuals who cannot find affordable coverage.

Proposed Rule To Establish Essential Health Benefits

This proposed rule delineates an ACA provision that creates essential health benefits for plans in the individual and small group markets. Specifically, the rule ties essential benefits to a state’s benchmark plan, including the state’s largest small group plan, and must include items and services in at least the following 10 categories:

Ambulatory patient services;
Emergency services;
Hospitalization;
Laboratory services;
Maternity and newborn care;
Mental health and substance use disorder services;
Pediatric services;
Prescription drugs;
Preventive and wellness services and chronic disease managements; and,
Rehabilitative services and devices.

Most states are using the benefits provided by the largest health plan in the state’s small-group insurance market as a benchmark. However, the rule requires insurers to provide additional benefits, including dental care and vision services for children, mental health and drug misuse treatment, and “habilitative services” for individuals with conditions such as autism or cerebral palsy.

The proposed rule also addresses the actuarial value component of the essential health benefits, which is the percentage of the total average costs for benefits that a plan covers. In 2014, a “bronze” plan must cover 60% of all covered benefits, a “silver” plan must cover 70%, a “gold” plan must cover 80% and a “platinum” plan must cover 90%.

Proposed Rule To Establish, Expand Wellness Programs

The third proposed rule would establish and expand workplace wellness programs that promote health and control health spending. The rule allows employers to award employees as much as 30% of their health coverage costs for participating in wellness programs, an increase from the current 20%. Meanwhile, workers that enroll in smoking cessation programs could earn back as much as 50% of their coverage costs, HHS said.

The rule also requires employer-based wellness programs to provide alternative ways to qualify for rewards for individuals with special medical conditions.

Source: HHS News Release, November 20, 2012 and California Healthline, November 21, 2012.

Obamacare—Past, Present, and Future, Part 2

Tue, 20 Nov 2012 11:36:18 GMT

By Andy Calman, MD, PhD

Note: This article was originally published in the October 2012 issue of San Francisco Medicine. Due to members' request for more information on health care reform and its impact on medicine, SFMS will be publishing a four-part series in the SFMS blog section. Click here to read Part 1 of this 4-part series on Obamacare and its impact on U.S. physicians and patients.

Medicaid Expansion and Private Insurance Subsidies

The heart of the Obamacare program—and its most costly provision—is an expansion of access to affordable health insurance. This expansion relies on two prongs: a massive expansion of Medicaid for low-income individuals and families, coupled with income-based subsidies for the middle class to purchase private insurance.

Under Obamacare, in 2014 Medicaid eligibility will be expanded to cover all individuals and families up to 133% of FPL, including adults without dependent children. Federal funds are provided to the states to cover this expansion. However, several states (not including California) have opted out of this Medicaid expansion, fearing long-term runaway costs. Chief Justice Roberts’s decision provided that such states cannot be excessively penalized from opting out. Although they will forfeit the new federal funds for Medicaid expansion, they will not lose their existing Medicaid matching funds.

Federal funds are also provided to bring Medicaid physician reimbursement levels up to 80% of Medicare allowable. However, these funds will only apply to primary care providers, and only for 2016 and 2017. How these millions of new Medicaid patients will find access to care—including specialty care—is a huge open question, especially in the large states like California that reimburse less than the cost of providing care.

For working-class and middle-class families earning between 133% and 400% of FPL, Obamacare provides sliding-scale subsidies, in the form of a refundable tax credit, to purchase private insurance policies through the state exchanges. For example, a family of four at 150% of FPL earning $34,575 would pay no more than $115 per month (4 percent of income) for a Silver plan and would receive additional subsidies to reduce out-of-pocket expenses.

These provisions will not completely eliminate barriers to care. However, the nonpartisan Congressional Budget Office estimates that under Obamacare, the number of uninsured Americans will be reduced to 20 million people in 2016, a 60% reduction. The majority of the uninsured after 2015 will consist of young, healthy adults and low-income individuals in states that have declined to expand Medicaid. Additionally, undocumented immigrants will not be covered under Obamacare.

Substantial reductions in uncompensated emergency room and hospital care under EMTALA can be expected, as the vast majority of Americans will be insured. As a corollary, Federal DSH (Disproportionate Share Hospital) subsidies will be substantially reduced.

Employer Subsidies and Penalties

For 2014 and 2015, the subsidies for small employers (fewer than twenty-five employees, with average employee salaries under $50,000) will increase to a maximum of 50% of employee premiums. These subsidies phase out with increased numbers of employees and increased average salaries. For example, a small doctor’s office with four employees and an average employee salary of $40,000 would receive a tax credit of 20% of employee premiums. However, large employers (fifty or more employees) would be required to provide coverage for their employees or pay a $2,000 per-employee penalty.

After 2014

Beginning in 2015, Medicare physician payment rates will be modified to reflect quality of care, not just volume. The extent to which “quality” will be based on outcomes, use of EHR, low use, patient satisfaction, checking off boxes as in PQRS, or some combination of these, is unclear. This is an area where organized medicine will play a crucial role in advocating for payment methodologies that reflect common sense and real quality (rather than meaningless busywork), rewarding neither overuse nor underuse, and maintaining fairness to physicians.

Beginning in 2017, states can apply to HHS for State Innovation Waivers to provide alternative, state-based health delivery models, as long as coverage and affordability are not inferior to Obamacare. Vermont has already announced its intention to pursue a waiver for a state-based single-payer system. Legislation has been introduced to allow waivers to be issued as early as 2014. States operating under waivers would be exempt from the individual mandate and employer penalties and would receive federal funding equivalent to Obamacare.

In 2018, all existing insurance plans must provide preventive care without co-pays or deductibles. In 2020, the Medicare doughnut hole is entirely phased out.

Obamacare—Past, Present, and Future, Part 1

Mon, 19 Nov 2012 16:34:20 GMT

By Andy Calman, MD, PhD

Note: This article was originally published in the October 2012 issue of San Francisco Medicine. Due to members' request for more information on health care reform and its impact on medicine, SFMS will be publishing a four-part series in the SFMS blog section.

Obamacare/PPACA—Beyond the Politics

Few people think it’s perfect, or anywhere near perfect. Many Americans believe Obamacare went too far. Others wish it had gone farther and had offered Medicare for all. But love it or hate it, the Patient Protection and Affordable Care Act of 2010—now referred to by both parties as Obamacare—is no longer a bill. It’s the law, and it's already being implemented. It’s time to get past the politics and familiarize ourselves with the many changes that have already taken place, the flood of newly insured patients arriving in little more than a year, and the long-term changes that will alter—for better or worse—nearly every aspect of how we practice our profession. Only a handful of Capitol Hill staffers and CMS bureaucrats know everything packed into the 907 pages of the PPACA, and the thousands of pages of its enabling regulations. But because every doctor needs to be aware of the key provisions, it is worthwhile to review a succinct implementation timeline.

What Has Already Changed

A number of the provisions of Obamacare have already taken effect.

Small businesses employing fewer than twenty-five employees—whose average wages are less than $50,000 per year—can currently receive subsidies of up to 35% for insuring their employees during tax years 2010 through 2013. The Medicare doughnut hole has been reduced by 50% and will be eliminated in 2020, with phased-in discounts for drugs in the doughnut hole. Insurers can no longer discriminate against children with preexisting conditions.
For adults with preexisting conditions, temporary high-risk pools (Pre-Existing Condition Insurance Plans, www.pcip.gov) have been created to bridge the gap until the state insurance exchanges begin enrollment in 2014. These plans are priced at the same community rates as those for healthy patients, with a maximum annual out-of-pocket of $5,950 and guaranteed issue—an excellent value for cancer patients and others who cannot otherwise obtain insurance.
There is a ban on lifetime coverage caps, and on rescission of coverage for Americans who get sick. All new individual plans must offer preventive care including mammograms and colonoscopies, as well as contraception (with exemptions for certain religious organizations), with no co-pays or deductibles.
Young adults can now stay on their parents’ policies until age 26, even if they reside elsewhere. States who provide Medicaid up to 133% of FPL (federal poverty level) receive federal matching funds. And last month, thousands of astonished Americans received rebate checks from their health insurance companies due to a provision requiring that 80% of premium revenue (85% for large groups) be spent on actual health care.

2014: Individual Mandate, Medicaid Expansion, and Health Insurance Exchanges

Although many of the provisions implemented so far are popular, some of the provisions that will transform health care beginning in 2014—just over a year away—are more controversial. Americans who are not already covered by public or private health insurance will be required to purchase an individual plan or pay a penalty. CBO estimates that about 1.2% of the population will pay the penalty in 2016.

The penalty—1% of income, rising to 2.5% in 2016, with a minimum of $695 per year for individuals and $2,095 for families—is rather small compared to the cost of health insurance, and many Americans will elect to pay the penalty/tax instead of purchasing expensive coverage. Persons with religious exemptions, such as Christian Scientists, are exempt from the penalty. Additionally, there is an exemption if the least expensive available plan exceeds 8% of family income. These people, as well as individuals under 30, will have the option to purchase cheaper “catastrophic” high-deductible plans instead.

Beginning in 2014, the ban on discrimination against people with preexisting conditions will apply to adults as well as children. Annual spending caps will be banned. Consumers and small businesses will be able to shop for plans in “health insurance exchanges” set up by each state, comparing the cost and features of standardized Bronze, Silver, Gold, and Platinum benefits packages. These benefits packages must provide specified “minimum essential benefits” and will be actuarially standardized so that, for example, a Bronze Plan would cover 60% and a Platinum Plan 90% of services for an average population, with the remainder paid by co-payments and deductibles. However, the annual out-of-pocket maximum would be capped at $5,950 per individual ($11,900 per family) for individual plans and at $2,000 ($4,000 per family) for small group plans.

Policies offered by the exchanges must offer “guaranteed issue” and “community rating,” where premiums are adjusted only by geographic region, age, and tobacco use, without regard to gender or preexisting conditions.

Some states have declined to set up their own exchanges. The department of HHS is empowered to set up exchanges for these states, but funding for these federal exchanges is uncertain and depends on the will of the next Congress.

What Health Law Changes Will Be Evident In 2013

Mon, 22 Oct 2012 16:38:44 GMT

Health care reform is here to stay—for the foreseeable future. So for the millions of Americans with health insurance at their workplaces, this fall’s “open enrollment” period will be one of the most important in years.

2013 will see some of the many significant changes brought on by the Affordable Care Act, including easy-to-read plan summaries and caps on flexible spending accounts. The ability of health insurers to place limits on annual spending is also on its way out, while earlier reforms such as adding adult children to their parents' plans offer new options to consumers.

Most of the really big changes—including health-insurance exchanges and tax credits to help people buy coverage—aren’t coming into play until 2014. Still, the provisions going into effect in 2013, along with those that have already been introduced, can affect any changes you might want to make to your health coverage.

And the presidential election is unlikely to change the landscape for people picking health plans this fall. If President Obama is re-elected, the changes stay. If GOP candidate Mitt Romney wins, getting rid of the law is unlikely to be a quick or easy process, given that the Democrats are expected to retain control of the Senate.

Here are five things you need to know as you sift through your plan options over the next few weeks.

1. Higher Premiums

First, the bad news: You will likely be paying higher premiums next year, with 13% of companies planning to raise their employees' contributions to health-care costs by five percentage points or more, and 42% planning premium increases of one to five percentage points, according to a July survey of employers by benefits consultant Towers Watson.

Some good news: The pace of that growth is slowing. Employer health-care costs are expected to rise by 5.3% in 2013, compared with 5.9% this year, according to the survey.

Premium increases have been held down thanks to the requirement that insurers give rebates to consumers if insurers spent less than 80% of premiums on medical care, says Cheryl Fish-Parcham, deputy director of health policy at Families USA, a health-care consumer group in Washington.

2. Straightforward Summaries

The most visible change in your packet of insurance options for 2013 is a new form called a “Summary of Benefits and Coverage.”

The health-care law requires plans to provide these as of last month. The summary is meant to be a simple, easy-to-read description of how a plan works, what it covers and doesn't cover—there is no fine print allowed. Every health plan must have one, allowing you to compare two different plans side by side.

The form also will include examples to show you what each plan would generally cover in two common medical situations, the normal delivery of a baby and Type-2 Diabetes.

The plan is also supposed to provide you with a new glossary of insurance lingo—words like deductible, coinsurance and copayment that consumers may not understand.

3. FSA Limits

For 2013, the amount you can put into a workplace flexible spending account will be capped at $2,500.

FSAs let you set aside tax-free money that can be used to pay for qualifying out-of-pocket expenses, such as copayments for doctor visits and prescriptions. It can't be used for premiums. Go to the Internal Revenue Service website for a list of qualifying expenses.

Keep in mind that if you don't use the full amount that you set aside, you will lose it. So it's important to estimate your out-of-pocket expenses wisely.

4. Dependent Coverage

Dependent coverage has gotten a boost from the health-law provision, allowing many adult children up to age 26 to remain on their parents' policies.

If you haven't already, consider adding qualified dependents to your plan.

Keep in mind that a few plans were grandfathered in—or exempted from the requirement—when the provision was enacted, if they made minimal changes to their existing design.

5. Higher Spending Cap

If you suffer from a chronic or costly medical condition, it may come as some relief that annual limits on how much an insurer will pay for care will be going up next year—and on their way out—for many plans.

For 2013, the cap rises to $2 million, from $1.25 million this year. The cap goes away entirely in 2014.

Source: Wall Street Journal, October 21, 2012.

How Does the Affordable Care Act Cover the Uninsured?

Thu, 06 Sep 2012 14:25:51 GMT

Source: Commonwealth Fund.

Lawmakers Warned of Dwindling Solo Medical Practices

Mon, 30 Jul 2012 10:59:39 GMT

Health system reform may be driving some of the decline, but some say medical homes and accountable care organizations offer new opportunities for small groups. How Private Practice May be Encouraged to Stay in Business, from the Physicians Foundation Report Findings.

Physicians and health analysts testified to lawmakers that growing evidence shows doctors are shutting down their small private practices to join larger health organizations due to administrative, payment, and medical liability pressures — and that health system reform may be playing a part.

The specter of declining payment, especially with the sustainable growth rate formula threatening cuts to Medicare payments each year, as well as increased reporting requirements and doubts over future earning potential, “are driving private practice physicians to seek employed positions,” said Louis McIntyre, MD, who testified on behalf of the American Assn. of Orthopaedic Surgeons.

Doctors also are facing increases in overhead costs and a decline in office visits as health plans and Medicare place a tighter hold on managing clinical decisions, according to a separate report from the non-profit Physicians Foundation.

Pressures of this type are what prompted Dr. McIntyre and his partners to forgo their private orthopedic practice in Westchester County, NY, to join a hospital in 2011.

The need for huge outlays for technology improvements is another stressor for small practices, Dr. McIntyre said. His practice invested in a $500,000 electronic medical record system in the hopes that the new technology would reduce costs and improve quality. It initially saved the practice money, but the need to hire more information technology personnel and install upgrades eventually negated these savings. Quality data collection and reporting rules for federal EMR incentives also presented a significant burden for the practice, he said.

Still, ACOs need to be driven by physicians because their offices are “where the care is given,” said Joseph Yasso Jr., DO, medical director of Heritage Physicians Group, a small physician practice owned by the Hospital Corporation of America.

“There’s no reason why solo practices can’t be a part of these delivery models” provided they can work with other entities within the ACO, Dr. Yasso said following the hearing, where he testified on behalf of the American Osteopathic Assciation. In his testimony, he said both ACOs and medical homes encourage care coordination and allow physicians to share resources.

Physicians on the panel suggested additional steps Congress could take to ease the burden on small or solo practices and encourage them to stay in private practice.

One key step is to eliminate Medicare’s SGR formula, said Jerry Kennett, MD, who testified on behalf of the American College of Cardiology. A stable platform for payment that reflects the appropriate services provided should be established so that physicians don’t have to keep guessing on a monthly or yearly basis what their payments are going to be, he said.

Dr. McIntyre said private practices should be allowed “to band together to negotiate rates without onerous overhead structures” so they could compete with larger entities. Also, medical liability reform “would go a long way to decreasing costs of not just private practices but medicine in general,” he said.

At its House of Delegates Annual Meeting in June, the American Medical Association approved new policy to channel AMA resources to protect and support solo and small group practices, and their ability to provide quality care.

Source: American Medical News, July 30, 2012.

How private practices might be encouraged to stay in business

Physicians are seeing their independence deteriorate as they face increasing costs and declining office visits while health plans and Medicare tighten management of clinical decisions, according to the Physicians Foundation. A report from the group makes several recommendations for policymakers to help sustain private practices.

Boost Medicare fees by 30% for both management of clinical problems and diagnostic decisions. Make the increase applicable to primary care physicians as well as such diagnostic decision-makers as radiologists, cardiologists and pathologists.

Develop patient-centered medical homes and other new practice models to improve physician productivity and diversify the services offered by practices.

Reduce hospital payments for outpatient imaging and surgical services relative to the fees offered for the same services in lower-cost, private settings.

Eliminate the Medicare site-of-service differential that allows hospitals to charge more for physician services offered in a facility setting than for those offered in a private practice office.

Source: “The Future of Medical Practice: Creating Options for Practicing Physicians to Control Their Professional Destiny,” The Physicians Foundation, July 17, 2012.

US Supreme Court Upholds Health Care Reform Law

Thu, 28 Jun 2012 07:36:00 GMT

The Supreme Court in a 5-4 ruling upheld the federal health reform law’s individual mandate, reaffirming the law's requirement that most U.S. residents must purchase health insurance.

The justices said that the individual mandate—the requirement that most Americans buy health insurance or pay a fine—is constitutional as a tax.

Chief Justice John Roberts—a conservative appointed by President George W. Bush—provided the key vote to preserve the landmark health care law.

The government had argued that Congress had the authority to pass the individual mandate as part of its power to regulate interstate commerce; the court disagreed with that analysis, but preserved the mandate because the fine amounts to a tax that is within Congress’ constitutional taxing powers.

The announcement will have a major impact on the nation’s health care system, the actions of both federal and state governments, and the course of the November presidential and congressional elections.

While the individual mandate remained 18 months away from implementation, many other provisions already have gone into effect, such as free wellness exams for seniors and allowing children up to age 26 to remain on their parents’ health insurance policies.

Click here to view the full 193-page Supreme Court decision.

Throughout the health care reform debate, SFMS/CMA has strongly advocated for affordable access to care for California’s uninsured and for expansion of health insurance coverage. The physician organization has also supported eliminating egregious health plan rescission practices, pre-existing condition bans, and ending excessive insurer profit and administrative costs. SFMS/CMA was also instrumental in arguing for state based health insurance exchanges, rather than one national exchange of private health plan choices and urged reinvestments in primary care, public health and the physician workforce.

California Poised To Gain From Reform Law

California stands to be one of the biggest recipients of federal funding from the reform law because of its large number of uninsured residents. The state has 7 million uninsured residents, making up nearly 20% of its population.

Under the reform law, California could receive as much as $9 billion annually to expand Medi-Cal, the state’s Medicaid program. According to calculations from the Urban Institute, the state could receive an additional $6 billion annually for low- and middle-income residents who buy subsidized insurance through the state health insurance exchange. In addition, California physicians could receive an additional $700 million annually in increased reimbursements under the law for treating patients who obtain coverage under the Medi-Cal expansion.

Following the Supreme Court ruling, House Minority Leader Nancy Pelosi (D-Calif.) in a statement said, “This decision is a victory for the American people. With this ruling, Americans will benefit from critical patient protections, lower costs for the middle class, more coverage for families, and greater accountability for the insurance industry."

Click here to view the health reform implementation timeline.

11 Facts About the Affordable Care Act

Tue, 26 Jun 2012 15:42:00 GMT

The Washington Post compiled a refresher on some of the health care reform law’s most significant policies and consequences:

By 2022, the Congressional Budget Office estimates the Affordable Care Act will have extended coverage to 33 million Americans who would otherwise be uninsured. Here’s the graph:
Families making less than 133% of the poverty line—that’s about $29,000 for a family of four—will be covered through Medicaid. Between 133% and 400% of the poverty line—$88,000 for a family of four—families will get tax credits on a sliding scale to help pay for private insurance.
For families making less than 400% of the poverty line, premiums are capped.
When the individual mandate is fully phased-in, those who can afford coverage—which is defined as insurance costing less than 8% of their annual income—but choose to forgo it will have to pay either $695 or 2.5% of the annual income, whichever is greater.
Small businesses that have fewer than 10 employees, average wages beneath $25,000, and that provide insurance for their workers will get a 50% tax credit on their contribution. The tax credit reaches up to small businesses with up to 50 employees and average wages of $50,000, though it gets smaller as the business get bigger and richer. The credit lasts for two years, though many think Congress will be pressured to extend it, which would raise the long-term cost of the legislation.
Insurance companies are not allowed to discriminate based on preexisting conditions. They are allowed to discriminate based “on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio).”
Starting in 2018, the law imposes a 35% tax on employer-provided health plans that exceed $10,200 for individual coverage and $27,500 for family coverage. The idea is a kind of roundabout second-best to capping the tax code’s (currently unlimited) deduction for employer-provided heath insurance. The policy idea is to give employers that much more reason to avoid expensive insurance policies and thus give insurers that much more reason to hold costs down.
The law requires insurers to spend between 80 and 85 percent of every premium dollar on medical care (as opposed to administration, advertising, etc). If insurers exceed this threshold, they have to rebate the excess to their customers. This policy is already in effect, and insurers are expected to rebate $1.1 billion this year.
The law is expected to spend a bit over $1 trillion in the next 10 years. The law’s spending cuts—many of which fall on Medicare—and tax increases are expected to either save or raise a bit more than that, which is why the Congressional Budget Office estimates that it will slightly reduce the deficit. As time goes on, the savings are projected to grow more quickly than the spending, and CBO expects that the law will cut the deficit by around a trillion dollars in its second decade.
In recent years, health-care costs have slowed dramatically. Much of this is likely due to the recession. Some of it may just be chance. But there’s also evidence that the law has accelerated changes in the way the medical system delivers care, as providers prepare for the law’s efforts to move from fee-for-service to quality-based payments.
The law’s long-term success at controlling costs will likely hinge on its efforts to change the way health care is delivered, most of which have gotten very little attention. They include everything from encouraging Accountable Care Organizations to spreading medical homes to penalizing hospitals with high rates of preventable infections to creating an independent board able to quickly implement new reforms through the Medicare system.

Click here to view a comprehensive summary of the health care reform law and Affordable Care Act’s provisions produced by the Kaiser Family Foundation.

Source: Erza Klein WonkBlog post, The Washington Post, June 2, 2012.

Essential Health Benefit Bill Clears Committee

Wed, 11 Apr 2012 11:09:21 GMT

Bill Monning, chair of the Assembly Committee on Health, knew the moment was a big one.

Monning introduced AB 1453, which laid out a plan for what essential benefits will be covered in California under the Affordable Care Act. The proposed set of benefits is modeled on the Kaiser small group HMO plan.

The federal government requires states to choose essential benefits in 10 broad categories. In California, that process looked daunting because of the many health care mandates passed by the Legislature, including coverage of autism.

This package includes all current California mandates—including autism coverage—and everything in the package fits the federal profile as well, which means there would be no extra mandate costs to the state, Monning said.

The Kaiser small group plan covers reproductive services, acupuncture, prescription drugs and all of California’s current mandates, Monning said. “And best of all, it is affordable,” he said.

There was no stated opposition to the bill, but Nick Louizos of the California Association of Health Plans said his organization has some reservations about the bill. He was pleased, he said, to see the legislative discussion focus on selection of the benchmark plan.

The bill passed committee, and now heads to Appropriations.

Source: California Healthline, April 11, 2012.