Supreme Court Case

Revisiting the key components of the Affordable Care Act

Revisiting the key components of the Affordable Care Act November 27th, 2012

by Jonathan H. Burroughs, Hospital Impact Since the U.S. Supreme Court’s landmark decision in June and Obama’s re-election this month, it is clear, that for at least the next four years, the provisions of the Patient Protection and Affordable Care Act will stand with the exception of the mandate to expand Medicaid to 133 percent of the federal poverty level (FPL) in 2014.

This article outlines the fundamental components of the ACA and the affect they will likely have over the next four years.

I. Insurance Reform

At the heart of this law is insurance reform as, of all the industrialized nations, we have the largest private sector third-party coverage of any healthcare system in the world. This is a historic federalism versus state rights conflict that has defined our nation throughout our entire history and continues to divide us politically, as evidenced in the recent presidential election.

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The key components of insurance reform include:

Mandate all individuals without qualifying healthcare coverage to purchase insurance with a penalty by 2016 of $695/year or 2.5 percent of household income.
Optional expansion of Medicaid by 2014 to 133 percent of FPL with the right of states to opt out without penalty. Federal government will provide 100 percent support that decreases to 90 percent support by 2020.
Prohibit insurance carriers from restricting access to coverage based upon pre-existing conditions, healthcare status and gender.
Establish state health insurance exchanges by 2014 (rules still pending), through which individuals and small business can purchase health insurance in a more transparent and comparative way.
Create consumer operated and oriented plans (CO-Ops), which are member-run health insurance companies licensed by their states to ensure greater access of affordable healthcare coverage by channeling profits to lower premiums, improve benefits and improve the quality of care delivered to its beneficiaries.
Create small business health options program (SHOP) exchanges administered by a government or non-profit agency through which individuals and small businesses with up to 100 employees may purchase healthcare coverage.
Require each state-run exchange to offer at least two multi-state plans to ensure intra-state competition.
Provide premium tax credits and cost savings for Americans to purchase healthcare insurance on a sliding scale up to 400 percent of the FPL.
Provide reinsurance support for employers who offer retirees between the ages of 55 and 64 affordable health insurance coverage.
Permit states to offer a basic health plan for uninsured individuals with incomes between 133 percent and 200 percent of the FPL.
Create a temporary national high-risk pool to provide health insurance coverage to individuals with pre-existing medical conditions for individuals who have been uninsured for at least six months.
Permit audit by state insurance commission and U.S. Department of Health & Human Services personnel of insurance carriers that request significant premium increases.

II. Quality Improvement

Utilizing World Health Organization (WHO) or Commonwealth Fund data, the United States has quality metrics that average 37th in the world. This is because our traditional fee-for-service payment methodology does not provide adequate reimbursement for preventive or ambulatory services and over-emphasizes procedures and ancillary testing provided in an inpatient setting.

Thus, we rank high in many critical care and surgical services, but rank low in overall morbidity and mortality rates due our lack of comprehensive horizontally integrated healthcare services that extend far beyond our hospital borders. Parts of the ACA seek to address the quality aspects of this deficit by the following:

Support patient safety organizations by providing grants to organizations that demonstrate reduced medical error.
Five-year demonstration grants to implement tort reform and reduce defensive testing, which cost Americans >$300 billion/year.
Partner with the National Quality Forum and the Agency for Healthcare Research and Quality to create a national quality improvement strategy to improve healthcare outcomes, healthcare delivery and population health.
Develop additional quality metrics to be utilized in future pay-for-value reimbursement methodologies.
Increase primary care reimbursement by 2014 to 100 percent Medicare rates to support better ambulatory and preventive care.
Invest in community health centers to ensure improved access.
Provide free preventive screening (with no deductible or co-payment) evaluations for Medicare and Medicaid beneficiaries.
Provide support for improved care of seniors with chronic medical conditions, such as diabetes or hypertension.
Promote preventive health screenings at all ages.
Add residency and training positions for primary care and mid-level practitioner training programs and reduce the number of slots for specialty and sub-specialty training programs.
Invest in the National Health Service Corps and loan repayment programs to expand the number of qualified healthcare personnel.
Expand patient-centered outcomes research.
Establish Community Living Assistance Services and Support (CLASS) to enable individuals with chronic disabilities to remain in their homes and communities longer.
Fill the Medicare Prescription Drug (Medicare Part D) “donut hole” to ensure better compliance with evidence-based recommendations.
Maintain funding the for Children’s Health Insurance Program (CHIP) through at least 2015.
Establish a regulatory pathway for Federal Drug Administration consideration of bio-similar versions of previously licensed biologic products.
Require greater transparency and oversight of skilled nursing facilities to promote comparative quality and cost data.

III. Payment Cuts

We spend approximately 18.4 percent of our gross domestic product (GDP) on healthcare, which is almost double that of any other industrialized nation. Part A of the Medicare Trust Fund is due to go bankrupt in 2017. Thus, the following cuts are included in the ACA:

Reduce market basket updates for productivity reimbursement by $112.6 billion over the 10-year period (2010-2019).
Reduce Medicare disproportionate share hospital (DSH) payments by $22.1 billion over 10 years beginning in 2014.
Increase Medicare payroll taxes from 2.9 percent to 3.8 percent (shared between employer and employee).
Create Independent Payment Advisory Board to reduce Medicare reimbursement by at least $14.7 billion over the next 10 years.
Reduce medical and surgical specialty reimbursement by 6 percent a year over the next three years.
Reduce over-payment to Medicare Advantage Plans (Medicare Part C) by up to 14 percent on average.
Crack down on fraud, abuse, and waste by expanding federal support for healthcare recovery auditors (RACs).
Implement a fee on carriers that offer high-cost health insurance plans by 2018 to encourage the creation of more cost-effective plans.
Increase user fees for durable medical equipment and medical device companies.
Increase tax penalties on non-qualified distributions of healthcare savings accounts (HSAs) and capping federal savings account (FSA) contributions to $2,500 in 2013.
Increase penalty for failure to report hospital quality data to 2 percent of annual payment update.
Increase penalty for hospital-acquired conditions to 1 percent of Medicare/Medicaid reimbursement by 2015.
Increase penalty for failure to meet core/patient safety measures and Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey scores to 2 percent of Medicare/Medicaid reimbursement by 2016.
Increase penalty for preventable readmissions to 3 percent of Medicare/Medicaid reimbursement by 2016.
Increase penalty for failure to satisfy meaningful use criteria to 5 percent of Medicare/Medicaid reimbursement by 2018.

IV. Healthcare Reform

The need to offer higher healthcare quality and service at lower costs requires incentives for innovative delivery systems and new ways of working with fewer resources. Thus, the ACA encourages the following innovative models through the creation of “shared savings” programs that reward organizations that achieve pre-defined quality metrics at lower costs and other pay-for-value reimbursement methodologies:

Accountable care organizations (ACOs) to provide coverage for at least 5,000 Medicare beneficiaries through a more integrated delivery system to create at-risk payments based upon shared savings or shared losses.
Patient-centered medical homes (PCMHs) to provide more horizontally integrated primary care by utilizing nurse navigators, patient registries, home health services and telemonitoring techniques to reduce preventable readmissions and overall costs.
Bundled-payment programs (e.g., orthopedics and cardiology acute care episode) to create incentives to provide capitated reimbursement (cost per covered life per month) for a defined bundled service.
Transition Medicare/Medicaid reimbursement from pay-for-volume to pay-for-value methodology that will combine a base capitated payment with incentives for higher quality/safety/service and lower costs.

The ACA is a complex law that combines systemic, payment and insurance reforms with a greater focus on optimizing quality and reducing costs. Its complexity is magnified by the incremental ways in which the law takes effect each year, subject to administrative regulations by HHS and the inevitable political winds that pit those for and against public versus private markets and federal versus state control to either accelerate or decelerate the implementation process.

Either way, healthcare is both an economic and quality challenge in the guise of a political conflict that must be addressed over the coming decade through both the ACA and the subsequent healthcare reform laws that follow.

Jonathan H. Burroughs, MD, MBA, FACHE, FACPE is a certified physician executive and a fellow of the American College of Physician Executives. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation’s top healthcare consulting organizations to provide “best practice” solutions and training to healthcare organizations.

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Will health reform survive the election?

Will health reform survive the election? October 25, 2012 | By Karen Cheung-Larivee, FierceHealthcare The survival of healthcare reform hinges on the election for president, only weeks away–and perhaps more importantly, if Republicans or Democrats will take the congressional seats.Former Massachusetts Gov. Mitt Romney has vowed to repeal the 2010 Affordable Care Act on his first day of office, Washington Post columnist Ezra Klein wrote in a Bloomberg column. Although he aims to repeal most of the health reform law, the Republican incumbent said he would retain certain provisions, such as including covered children under 26 on their parents’ health plans, as well as maintaining coverage for beneficiaries with pre-existing conditions. However, Romney would only maintain coverage for people with pre-existing conditions who have had continuous coverage. To see a repeal go though, Romney would still need a filibuster-proof 60 percent Republican majority in Congress, as Jonathan Burroughs, president and CEO of The Burroughs Healthcare Consulting Network in New Hampshire, noted in a Hospital Impact blog post. According to the New York Times’ FiveThirtyEight blog, Obama has a 71 percent chance of winning with 50 percent of the popular vote and 48.8 percent of votes anticipated to go to Romney. The NYT also predicts Democrats will have a 87.6 percent chance of winning the Senate majority with 52.4 seats, compared to the anticipated 47.6 seats going to Republicans. If President Barack Obama wins reelection, Americans can expect most of the 2010 healthcare reform law will be implemented in 2014, including health insurance exchanges, the phasing out of annual insurance limits, and protections for those with pre-existing conditions, according to the Healthcare.gov timeline. The one key piece that differs from the original 2010 law is Medicaid expansion, which is now left up to the states with the U.S. Supreme Court’s decision. So far, at least six states have rejected Medicaid expansion–Florida, Georgia, Louisiana, Mississippi, South Carolina and Texas. Yet, Obama, if reelected will still need the support of Congress to fund those provisions.

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Hospitals seek clarification on Medicaid expansion

By Julie Bird

The American Hospital Association is asking U.S. Department of Health & Human Services Secretary Kathleen Sebelius to clarify how the Supreme Court ruling upholding healthcare reform will affect Medicaid payments to hospitals.

In a letter dated Aug. 20, the AHA zeroes in on the court’s decision that the expansion of Medicaid under the Patient Protection and Affordable Care Act cannot be enforced by withholding Medicaid funds from nonparticipating states.

The AHA asked for clarification in a dozen areas, including:

Whether patients with incomes between 100 percent and 138 percent of the federal poverty level are eligible for subsidies through an insurance exchange.
Whether states can expand Medicaid coverage to certain individuals, such as single, childless adults and parents of Medicaid patients, or phase in coverage over several years.
Whether HHS will consider ways to help states manage patients currently eligible for but not enrolled in Medicaid who might be enrolled under the new mandate.
How to minimize the administrative burden of patients “churning” between Medicaid and exchanges
When CMS will issue regulations related to reduced Medicare disproportionate share hospital (DSH) payments.

The letter is signed by Rich Umbdenstock, president and CEO of the organization representing 5,000 hospitals and 42,000 individual members.

Budget directors in six states surveyed earlier this summer by the Government Accountability Officeexpressed concern about the costs and technicalities involved in expanding Medicaid under the Affordable Care Act. The budget officials in Colorado, Georgia, Iowa, Minnesota, New York and Virginia also said they hadn’t received enough guidance on the change from CMS.

The National Governors Association and the National Association of Medicaid Directors also have requested clarification from HHS on Medicaid expansion.

The governors group asked about options and federal assistance for states that decide against expanding Medicaid coverage, among other issues. The Medicaid directors group wanted better definition of newly eligible individuals in states that already expanded some coverage to additional groups.

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Health Care: A Not Too Distant Future

JUN 12, 2012 11:20am ET

Health Data Management Over my six-month hiatus from this blog, many things have changed in the health care industry. Two of the most significant have been the delay of the ICD-10 implementation and the Supreme Court’s review of the Affordable Care Act.

But one thing has stayed constant: We still seem to be struggling with two divergent views on how to improve health care in this country. Vested interests and ideologies are as deeply ingrained as they were six months ago, and the numerous studies and counter-studies may not have done much to shift opinion one way or another.

My thoughts: However well-intentioned the ACA might be, and however many positive steps forward it may contain, it by itself will not be enough. The fundamental change needs to behavioral, and it should happen on both sides of the aisle—I’m not talking about Democrats and Republicans, but consumers and care providers. Market conditions will determine the course, as they always have.

Let’s look at two basic scenarios:

* All the data points that I have seen over the last few years seem to indicate that the individual markets are here to stay. So why worry about the constitutionality of state insurance exchanges? Why not focus on the core ingredient, i.e., theindividual? Why not improve the service offerings for the individual? Why not provide more telemedicine capabilities? Think about a single mom who has to take a crying toddler to the pediatrician’s office through a clogged beltway, and then shell out a $40 co-pay. If the physician is willing to see the child through a Web-based telemedicine portal, the mom may be willing to pay a few extra dollars via the co-pay for the convenience while not having to spend money on gas. The physician could then prescribe online, and the pharmacy could deliver the medicine to the patient’s home. Everybody is happy, including mom, the physician who gets a slightly better (not to mention immediate) reimbursement, and the insurer, which could possibly get away with a slightly lower reimbursement to offset the additional co-pay. This is not rocket science. It has been done many times in other industries–banks broke the code on convenience 30 years ago. Health care can now do the same.

* Mobile devices have become as much a part of the culture as TV. So why not use them? Why not create real-time health care app stores that provide functionality, such as mobile member liability estimation at the point of service to avoid confusion about EOBs and post-procedural follow-ups, recouping costs that add to administrative overhead? More pervasive clinical decision support so that the physicians can provide improved quality of care and eliminate redundant procedures? Integrated and real-time claims adjudication so that administrative load and infrastructure costs could be reduced on the health plan side (not to mention the confidence it could elicit from providers in knowing what they will get paid for and how much)? Imagine how much the consumer would appreciate the fact that before they go through a procedure, they know exactly what they would be paying for; they know what process of elimination the provider went through to arrive at the procedural conclusion; they know that there likely won’t be a need for any redundant procedures as all providers have access (based on consent) to all their clinical information; and by the way, they know they can pick up their prescription on their way home and pay for the cost-share through their checking account automatically; and they know they will be able to get an easy-to-read integrated report on their mobile device. Utopia.

If such services could be provided, wouldn’t the need for trying to change the system through mandates become less and less relevant? The arguments and counter-arguments become moot, and we can actually focus on reforms. Granted there will still be the need to accommodate the population that is hard-strapped for cash to pay for these services; and yes, there should be provisions to support them. But the vast majority of inefficiencies could be easily weeded out simply through a slightly creative and non-traditional thought processes, thereby creating surplus dollars to support those who actually need it.

That brings me back to my headline, “Health Care: A Not Too Distant Future”.

To me that future will look something like this, using the need for a procedure as an example: A consumer has symptoms; the consumer consults via telemedicine with the provider of choice (who could be recommended through an intelligence portal supported by the consumer’s insurer); the patient knows exactly what he/she needs to pay and can do quick research on the provider’s capabilities as well as the typical market prices for that procedure; the consumer agrees; the provider schedules the procedure; the insurer does an automatic pre-auth; the provider e-prescribes; the consumer pays his/her share either through a personal account, or redirects to an assistance agency in cases of subsidized consumers; the procedure takes place on schedule; the associated post-op services are automatically pre-authorized; the claim is auto-adjudicated; the co-pays are automatically deducted from the consumer’s HSA/FSA account; clinical records are automatically updated to reflect the latest procedure and its impact on future care service; and the consumer is auto enrolled into post-op care programs.

And all of this on a tablet while that consumer is attending his or her daughter’s soccer game.

Much of this is possible with the current state of technology without having to worry about the outcome of the Supreme Court’s deliberations on the ACA.

All it will take is a technology-savvy, forward-looking organization with somewhat deep pockets and willingness to forego immediate-term profit concerns in lieu of long-term windfall. Any candidates out there?

Rajiv Sabharwal is director at Deloitte Consulting LLP, a member firm of Deloitte Touche Tohmatsu Limited (DTTL), a UK private company limited by guarantee.

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Resources Examine Legal and Implementation Issues in the Affordable Care Act’s Medicaid Expansion

Resources Examine Legal and Implementation Issues in the Affordable Care Act’s Medicaid Expansion

August 28, 2012

Two new briefs from the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured examine the recent Supreme Court decision on the Affordable Care Act’s Medicaid expansion and explore questions about the expansion that may arise for states as they look ahead to the implementation of the law in 2014.

A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion provides background on the Medicaid program and the legal challenge to the Medicaid expansion under health reform, and summarizes the controlling and dissenting opinions of the Court regarding the Medicaid expansion.

A companion brief, Implementing the ACA’s Medicaid-Related Health Reform Provisions After the Supreme Court Decision, addresses questions that may arise for states in the wake of the Court decision, including what parts of the ACA are affected by the decision, whether states can opt in and out of the Medicaid expansion over time, whether federal payments to hospitals for uncompensated care will still be reduced if a state does not expand its Medicaid program, and whether the Court decision affects the ACA’s maintenance of effort provisions.

Also available is a new brief that examines how states historically have responded to new opportunities to draw down federal funds to provide health coverage for low-income people, a timely issue as states weigh the costs and benefits of expanding their Medicaid programs under the ACA.

The Kaiser Family Foundation, a leader in health policy analysis, health journalism and communication, is dedicated to filling the need for trusted, independent information on the biggest health issues facing our nation and its people. The Foundation is a non-profit private operating foundation, based in Menlo Park, California.

http://www.kff.org/healthreform/8347.cfm

http://www.kff.org/healthreform/8348.cfm

http://www.kff.org/medicaid/8349.cfm

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Bill would boost CMS, HHS funding for health reform

Bill would boost CMS, HHS funding for health reform June 14, 2012 | By Alicia Caramenico, FierceHealthcare

The U.S. Department of Health & Human Services may get an extra $1.38 billion in spending next year to help implement health reform previsions, despite Republican objections.

The Senate Appropriations subcommittee voted 10 to 7 to provide $158.8 billion for the departments of Labor, Education, Health and Human Services and related agencies in 2013, the committee announced Tuesday.

To further help fund the Patient Protection and Affordable Care Act, the bill also would boost the Center for Medicare & Medicare Services’ budget to $3.16 billion from $2.61 billion this year.

Under the bill, funding for healthcare fraud prevention and enforcement would double to $610 million in 2013, according to the announcement. With current anti-fraud funding, the government expects to recover $1.2 billion for the first half of fiscal 2012.

But health reform funding may be hard to preserve if the U.S. Supreme Court strikes down previsions of the ACA later this month, The Hill‘s On The Money blog noted.

On top of that, Republicans have maintained their efforts to defund health reform. Ranking member Richard Shelby (R-Ala.) told The Hill he would never support a bill that funds health reform implementation. “The majority of Americans do not want the ACA because they know it will lead to higher taxes and lower quality of care,” he said.

The full committee votes on the 2013 funding bill today, noted On The Money.

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Supreme Court aside, insurers ‘still committed’ to reform

Supreme Court aside, insurers ‘still committed’ to reform April 2, 2012 | By Dina Overland, FierceHealthPayer

In the courtroom, with the strike of a pen, by the Supreme Court Justices. Ever play the game of Clue? This week, with all the coverage and analysis of the Supreme Court’s health reform hearings, I’m repeatedly reminded of that favorite childhood game of mine. It seems to me that everyone wants to solve a murder before it’s even occurred. Will the individual mandate bite the dust? Maybe the whole law will get rubbed out? Pundits, political experts and industry insiders all are espousing their interpretation of the justices’ comments and predicting how they will rule.

But, at the end of the day, none of the forecasting matters (except perhaps for personal bragging rights). Fortunately, it seems that, based on insurers’ responses to the landmark oral arguments, they’re acutely aware that predicting the future is a waste of time. Cigna, for example, is working toward providing its members with access to quality, affordable healthcare, regardless of whether the individual mandate is ruled constitutional. Healthcare reform should “strive for a value-based market” that rewards doctors for providing accessible, quality care and positive outcomes. “The individual mandate, in and of itself, does not address these issues,” Cigna spokesperson Gloria Barone Rosanio told FierceHealthPayer.

Blue Cross Blue Shield of North Carolina (BCBSNC) had a similar reaction to the Supreme Court hearings. “Whichever way the decision goes, we are still committed to transforming the larger issues facing the healthcare system,” BCBSNC spokesperson Lew Borman told FierceHealthPayer. “We face systematic inefficiencies and demographic trends that will continue to strain our system. Nothing that happens in Washington, be it in the courts or in Congress, will change these factors.”

Perhaps Robert Zirkelbach, spokesperson for America’s Health Insurance Plans, said it best: “We aren’t speculating on the ruling,” he told FierceHealthPayer. “Nobody knows what the Supreme Court is going to do.”

Although the justices pondered Wednesday whether their ruling could render insurers bankrupt, and thereby potentially extinct, I don’t think that’s the fate of the health insurance industry. Private insurers already have proven themselves adept at taking charge of reform–overhauling payment models, establishing accountable care organizations, incentivizing preventive care, opening new retail stores. The success stories abound; just peruse through FierceHealthPayer for an overflow of examples (Here are some for your immediate reading pleasure: Illinois Blues ACO reduces hospital, ER visits, Cigna ACO leads to readmission rates drop, Blue Shield ACO reduces readmission rates, CareFirst succeeds with tailored payment reform). And payment reform has become a hot trend this year, with UnitedHealth, aetna and WellPoint leading the charge toward a healthcare system focusing on quality care and healthier patients. These initiatives are clear evidence that insurers know how to remake themselves.

And it would behoove insurers to continue reforming how they provide health coverage while they wait for the Supreme Court to issue its ruling in late June. “They have to operate on assumption that the health exchanges, essential health benefits, and other provisions of the law will stand and advise their group and individual policyholders accordingly,” Paul Keckley, executive director of the Deloitte Center for Health Solutions, told FierceHealthPayer.

Of course, the health insurance industry inevitably will face market changes if the mandate is struck down but the rest of the law is upheld. “The impact will be felt in two areas: plans will see shrinkage in their group market over time as premiums will increase and groups will drop coverage,” Keckley said. “Their retail businesses will grow somewhat, but not equivalent to the loss in the group business. The net result: bigger, more stable plans will survive. Smaller plans will no doubt be forced into merger/consolidation discussions.”

But, again, I think the key takeaway is that insurers have thus far weathered the storm. Since reform went into law in 2010, for example, health plans have posted better-than-average financial results, further solidifying themselves as strong and stable market participants. Humana and aetna just saw their profits soar 86 percent and 73 percent, respectively, in fourth quarter 2011.

It won’t always be smooth sailing, of course. Insurers surely will face choppy waters that run the risk of blocking or even completely thwarting some reform efforts. But I have no doubt that these resilient companies will reformulate and try again.

So while others continue to play the guessing game, I shall retire my favorite Clue candlestick game piece and sit this round out, confident that the insurance industry isn’t going the way of the dinosaurs anytime soon. The industry might not resemble the original concept of a simple payer of healthcare services, but I know we’ll be talking about aetna, Cigna, UnitedHealth, WellPoint and the like for years to come. -Dina (@HealthPayer)

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Hospitals to see more bad debt without health reform

June 8, 2012 | By Alicia Caramenico, FierceHealthPayer

While the industry awaits the U.S. Supreme Court’s ruling later this month, a new report from Moody’s Investors Service warns that a full or partial repeal of the health reform law will hurt for-profit hospitals.

If the Supreme Court strikes down the entire Patient Protection and Affordable Care Act, for-profit hospitals would face more financial pressure as individuals remain without health insurance, as well as market uncertainty over government cost control activity, Moody’s said Wednesday in a statement. If only the individual mandate is ruled unconstitutional, for-profit hospitals still will face increased exposure to bad-debt and reduced reimbursements.

But if the Supreme Court upholds the ACA, the expected influx of newly insured patients would lower bad-debt charges at for-profit hospitals, according to the report.

The new report echoes Moody’s bleak outlook in April, which concluded that fully or partially repealing the ACA would limit for-profit hospital operators’ revenue growth and profit margins and constrain cash flow. It warned that HCA, Community Health Systems and Tenet Healthcare Corp. would be most vulnerable, FierceHealthFinance previously reported.

Fitch Ratings also said that the health coverage expansion under the ACA will positively affect for-profit hospitals, according to its most recent quarterly report. The ratings agency also noted that a boost in outpatient volumes in the first quarter of 2012 helped increase adjusted admissions and profitability across the for-profit hospital sector.

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Uncertainty Over Law Casts Shadow Over Health Care Innovations

By Jordan Rau, KHN Staff Writer

Jun 17, 2012

This story was produced in collaboration with

The health care law placed the force and money of the federal government behind a decade’s worth of ideas on how to improve patient care and change the ways doctors and hospitals function.

While this part of the health care law is at the periphery of the Supreme Court challenge, these changes could be halted if the court throws out the entire law, and some experts say they might be hobbled even if the justices excise just parts of the Affordable Care Act.

The provisions include a wide variety of efforts, including increasing the role of primary care, especially for low-income patients; forcing hospitals and doctors to work together closely; and even reducing pay to hospitals if they don’t meet patients’ expectations or outcome benchmarks set by the government. While hospitals, doctors and insurers had been moving toward paying for results even before the law was passed, many experts say these changes were accelerated when the government’s insurance programs, particularly Medicare, put their weight behind the effort.

“We have to change and we know that,” said Ken Raske, president and CEO of the Greater New York Hospital Association, which represents 250 hospitals and medical care facilities. “But it’s easier if you’re going to build the building to have the shovels and picks and the hammer and nails than trying to dig it out with your hands. That’s what the Affordable Health Care Act is.”

One of the concerns raised during the debate over the law was that expanding coverage would lead to a shortage of primary care doctors. The law allocates more money to provide primary care to people, especially the poor. The theory is that seeking early care or preventive measures will help more people keep well enough to avoid expensive hospitalizations or develop chronic conditions.

The government has already spent $1.9 billion to build and expand community health centers, and $512 million to train more health care workers, including primary care doctors, physician assistants and nurse practitioners, according to the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)

Also at stake are a variety of new methods to pay doctors and hospitals to reward good and efficient medical care, and ongoing efforts to come up with different reimbursement models. Many of these changes are being implemented by the Centers for Medicare & Medicaid Services. These include 65 collaborations among hospitals and doctors, which are working as “accountable care organizations.” Freed from antitrust laws, they can earn bonuses from Medicare if they provide care more cheaply without sacrificing quality.

While only those organizations that volunteered are in ACOs, another change starting in October would automatically affect most hospitals in the country. Medicare has announced hospitals will receive financial penalties or earn bonuses depending on their rates of readmissions, reviews by patients and thoroughness in following basic guidelines for clinical care. Physicians, too, will ultimately see their Medicare pay rise or fall based on the quality of their care and the degree to which their patients don’t overuse Medicare services.

The health law’s authors want to supplant the current, widely used piecemeal payment system in which providers earn more for a great number of tests and treatments without any concern about quality.

The federal Center for Medicare & Medicaid Innovation is experimenting with dozens of other targeted trials, giving money to groups that seek to reduce the prevalence and costs of asthma in New England, strokes in Louisiana, chronic pain in North Carolina and dental problems and diabetes among Native Americans on South Dakota reservations.

If the government’s efforts are curtailed, it is not clear whether the private health care market will still move forward with changes to coordinate care and operate more efficiently.

“I don’t think we’d be where we are today in accountable care but for the Affordable Care Act,” said Douglas Hastings, a health care lawyer in Washington. He noted that nearly half of all people in the country with coverage get it through the government. “When I sit in on meetings with private payers, they say ‘we model a lot on what Medicare does.’ Accountable care may still move forward in the private market, but if this law is deemed unconstitutional, it slows down or stops the momentum.”

But J. Peter Rich, a health care lawyer in Los Angeles, said the movement to transform the way care is provided will continue even without the law, with providers joining together into larger systems, forming new affiliations and being held to new standards for keeping down expenses and delivering results to patients.

“There’s tremendous cost pressure nationwide on health plans as well as hospitals, primary care physicians and other providers,” he said. “With an aging population and the increasing financial burden of chronic diseases like type 2 diabetes, these cost pressures are not going to go away.”

Even if the law is struck down, some supporters say Medicare may be able to resurrect some of these ventures as demonstration projects. But it would need congressional authority to expand them nationwide, said Gail Wilensky, a former Medicare administrator.

“If (the court) literally invalidated everything, they’d need new legislative authority,” she said.

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California Bullish On Health Exchange—No Matter What

Topics: States, Health Reform, Marketplace, Insurance

By Pauline Bartolone, Capital Public Radio

Jun 15, 2012

This story is part of a reporting partnership that includes Capital Public Radio, and Kaiser Health News.

Many states have done nothing to implement the health overhaul law, saying they’ll wait and see how the Supreme Court rules. Not California.

The country’s most populous state got out in front first on implementing the law, and it hasn’t slowed down in recent weeks as the rest of the country waits to hear from the High Court.

“California has been moving ahead 100 percent assuming it will upheld,” says Peter Lee, who left his Washington job as a health policy official in the Obama administration to lead California’s Health Benefit Exchange. “We [aren't] doing anything in the way of contingency planning because it makes no sense to plan for what seems like an outer bounds of possibility, and rather, we’ve got a big job to do to get ready to cover what will be millions of Californians in 18 months.”

Lee has a staff of 36 that is working feverishly to be ready – and he is optimistic about the exchange’s future in California even if the court overturns the requirement that most people buy insurance. He argues that the tax subsidies to allow some people to buy insurance will be enough to entice customers to buy their insurance in the online marketplace his agency is setting up.

“The reason the exchange is going to have – we project – over 2 million people in it after a few years, [has] very little to do with the mandate,” Lee said. “We’re a place where people can get subsidies for care, and can make informed choices.”

Without the requirement that everyone buy insurance, known as the individual mandate, Lee estimates that the exchange would lose a few hundred thousand people; it would still be a viable marketplace for California, however.

But Patrick Johnston, president and CEO of the California Association of Health Plans, says the federal law wouldn’t work without the mandate.

“We need to have a group of people that is big enough and has enough people who for the most part are healthy to make sure that the insurance costs will be shared and not high,” Johnston said. “States that decided to say ‘Everybody gets insurance at the same price but you can buy it whenever you want,’ found that prices just went way up and people dropped out.”

Still, on the legislative side, California lawmakers have been introducing legislation that would replicate key pieces of the federal law, including bills defining standard health benefits and guaranteeing coverage to people with preexisting conditions.”I’m going to remain fully committed to figuring out how do we preserve and protect what was the vision of President Obama, to replicate that in California by any means necessary,” says Assemblyman Bill Monning (D), chair of the state assembly’s health committee. “We will figure out how to do it.”

Monning and his counterpart Sen. Ed Hernandez (D) hesitate to say they’d propose a state health insurance mandate, without knowing the court decision. But Hernandez says he would author a bill that would “start the discussion” about compelling people into the market. Hernandez worries, though, that funding a new state marketplace without federal help would be difficult.

“The state just doesn’t have any money,” he said, “my biggest fear and concern is if we lose the federal subsidies, I just don’t know how we can make it…work.”

Republican Assemblyman Dan Logue is a fierce opponent of the health law. He thinks the Democratic majority in California would succeed in passing a state mandate if the federal one goes down. But if a state mandate were proposed, he would take it to the voters.

“I think once they realize the dynamics and the cost and how it would put California at risk financially with the rest of the country, that it would go down in flames easily,” Logue said.

Lee of the health exchange says he isn’t losing any sleep over the thought of the mandate being thrown out: “I’ve seen community groups, I’ve seen hospitals, I’ve seen health plans, I’ve seen the business community, not throwing rocks at our effort, but rather, joining in to make this thing work.”

Despite Lee’s optimism, a recent survey by the Public Policy Institute of California showed 63 percent of Californians were against the mandate.

This story is part of a reporting partnership that includes Capital Public Radio, NPR and Kaiser Health News.

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