A comprehensive reference guide interpreting and applying healthcare reform law for consultants, appraisers, accountants, and attorneys
The Financial Consultants'Guide to Healthcare Reform provides an historical backdrop on how the healthcare system got to its present state including the Massachusetts Reform and Medicare Advantage along with an explanation of the principal types of health insurance in the United States and how "insurance" actually works. A review and explanation of each of the reform provisions follows, including an analysis of what the implications are for providers, consumers and business and what responses each of these communities might have to the Reform. Using the authors' insights and firsthand experiences in U.S. healthcare finance, this book explains the new healthcare law for individuals and businesses alike, what to expect from it and what actions they need to take to comply.
- Interprets and applies the health care reform law
- Provides examples of what the impact of the law might look like
- Extensive use of sidebars to provide in-depth analysis or background on particular topics of import, where the reader may need more detail to understand the context of Reform's changes.
- Written for consultants, appraisers, accountants, and attorneys
- Written by major figures in the world of healthcare valuation and consulting
The Financial Consultants' Guide to Healthcare Reform provides a complete handbook to healthcare reform for financial consultants, both for understanding this important legislation as well as for planning responses to it.
The Financial Consultants'Guide to Healthcare Reform provides an historical backdrop on how the healthcare system got to its present state including the Massachusetts Reform and Medicare Advantage along with an explanation of the principal types of health insurance in the United States and how "insurance" actually works. A review and explanation of each of the reform provisions follows, including an analysis of what the implications are for providers, consumers and business and what responses each of these communities might have to the Reform. Using the authors' insights and firsthand experiences in U.S. healthcare finance, this book explains the new healthcare law for individuals and businesses alike, what to expect from it and what actions they need to take to comply.
- Interprets and applies the health care reform law
- Provides examples of what the impact of the law might look like
- Extensive use of sidebars to provide in-depth analysis or background on particular topics of import, where the reader may need more detail to understand the context of Reform's changes.
- Written for consultants, appraisers, accountants, and attorneys
- Written by major figures in the world of healthcare valuation and consulting
The Financial Consultants' Guide to Healthcare Reform provides a complete handbook to healthcare reform for financial consultants, both for understanding this important legislation as well as for planning responses to it.
Table of Contents
Foreword xviiPreface xix
Acknowledgments xxiii
CHAPTER 1 Introduction 1
A Brief Recap of the History of Reform 1
Early Reform Efforts 1
Tax Deductibility of Health Insurance 1
The Great Society: Medicare and Medicaid 2
The 1970s: Medicare HMOs and ERISA 3
Regulation: The Anti-Kickback Statute 3
Prospective Payment Systems 3
The 1990s 3
Rise of Managed Care 4
The Stark Law: Anti-Referral Statute 4
Balanced Budget Act of 1997 5
Balanced Budget Revision Act and Benefits Improvement and Protection Act 6
Failure of Managed Care 7
Provider Integration and Consolidation 7
Summary of the Healthcare Market in 2000 8
The New Century 9
One Size Fits All? Geographic Disparities in the U.S. Healthcare System 11
Profit and Nonprofit Hospitals and Health Insurers 12
History of Blue Plans 13
Medicare: The Other White Meat 14
Other Market-Based Studies 14
Geo-Clinical Differences 15
Summary 18
CHAPTER 2 Massachusetts 21
The Time Line of Massachusetts Reform 22
Early Reform Legislation in Massachusetts 22
Acts of 1996 23
Targeting the Small Group Market 23
Targeting the Trade Associations Offering Health Insurance to their Members 23
The Intervening Years 24
Components of the 2006 Massachusetts Legislation 24
Merging the Small Group and Individual Markets 24
Commonwealth Care Subsidies 24
Key Features of Massachusetts Reform 25
Recounting the Results of Reform in Massachusetts 25
Universal Coverage 25
Response of the Healthcare Provider Community 26
Differing Views of Massachusetts Reform 26
Special Commission on the Health Care Payment System 27
The Alternative Quality Contract 28
State Government Reports Tracking the Results of Reform 28
The Small Group and Individual Market versus Self-Insured Market 29
Massachusetts Quarterly Reports 31
Massachusetts Attorney General’s Report 33
Similar Experience in Other Markets 34
Specific Comparisons 34
Take from the Poor and Give to the Rich? 36
Impact on Market Share of Financially Weaker Providers 37
Most Favored Nation Clauses 37
Tiered Pricing 38
Recent Legislative Changes through August 2010 38
Open Hearings in December 2009 38
August 2010 Changes in Massachusetts 39
Open Enrollment 40
Review of Premium Increases 40
Tiered Network Requirement 41
What CanWe Learn from the Massachusetts Experience? 41
CHAPTER 3 Insurance Reforms 47
What is Insurance? 47
Components of Health Insurance and Healthcare Entitlement 48
Sources of Coverage 48
Medicare 49
Medicaid 50
Self-Insured Employers 50
Small Group (Small Business) Insureds 50
Individual Insureds 50
Large Group—Business Not Self-Insuring 50
Uninsured 50
Health Insurers 50
How Do Health Insurers Provide Health Insurance? 51
Understanding Acturial Risk 54
How Does Self-InsuranceWork? 56
Regional and Industry Factors in Health Insurance 58
The Reform of Health Insurance 59
Minimum Essential Coverage 60
PreventiveMedicine Services 61
The Precious Metals of Health Insurance Policies 61
Defining Actuarial Value 62
Deductibles 62
Glossary of Health Insurance and Medical Terms 62
Consumer Protection Provisions 63
Guaranteed Availability and Renewability of Insurance in the Small Group and Individual Market 64
Elimination of Lifetime Limits on Coverage 64
Elimination of Annual Limits on Coverage 64
Prohibition Against Rescission of Coverage 65
Appeals of Benefit Denials 65
Self-Insured Plans 66
Insured Plans 66
Government Review of Premium Increases 68
Waiting Periods for Coverage 68
Protections for Children 68
Prohibition Against Exclusion for Preexisting Conditions 69
Administrative Simplification 69
Grandfathered Health Insurance Plans 70
Medical Loss Ratios 71
Cost Containment 72
Insurer Provisions 72
Provider Provisions 72
Cost-Effective Medicine 72
Rating and Other Reforms in the Small Group and Individual Market 73
Different Forms of Rating Health Insurance Policies 73
Merger of Small Group and Individual Markets 74
Illustration 74
Mini-Med Plans 78
Insurance Exchanges 78
Establishment of the Exchanges 79
Requirements of Exchanges 79
Qualified Health Plans 79
Open Enrollment Periods 80
Functional Requirements 80
Benefit Requirements 81
The Massachusetts Experience 81
Chapter Summary 84
Implications and Responses for Small Business 85
Implications and Responses for Larger Businesses 85
Implications for the Provider Community 85
Some Thoughts for Lenders and Small-Business Investors 86
Appendix 3.1: Selected Legislative Text for Insurance Exchanges 86
Appendix 3.2: CMS Proposed Regulations—Glossary of Health Insurance and Medical Terms 89
Appendix 3.3: Using the Massachusetts Health Connector 91
CHAPTER 4 Medicare Advantage Plans 99
How Many Medicare Beneficiaries are in Medicare Advantage Plans? 101
HealthMaintenance Organization (HMO) Plans 101
Preferred Provider Organization (PPO) Plans 101
Private Fee-for-Service (PFFS) Plans 101
Special Needs Plans (SNP) 102
Geographic Distribution of Medicare Advantage Enrollees 102
History ofMedicare Advantage and Its Predecessors 104
Age, Gender, Severity of Illness, and Risk Score Adjustments to the Capitation Rates 105
Medicare Advantage and the Medicare Modernization Act 107
Enrollee Benefits 110
Choosing a Medicare Advantage Plan 111
Changes from the Reform 112
Minimum Medical Loss Ratio 112
Payment Rates 112
Effect on Beneficiary ‘‘Rebates’’ or Enhanced Benefits 113
Quality-Based Incentive Payments 115
Rebates 117
Low Enrollment Plans 117
New Plans 117
Implications for the Provider Community 118
Implications for Insurers 118
Implications forMedicare Advantage Beneficiaries 118
Appendix 4.1: PPACA Sections Affecting Medicare Advantage 119
HCERA } 1102. Medicare Advantage Payments 119
HCERA } 1103. Savings from Limits on MA Plan Administrative Costs 120
PPACA } 3203. Benefit Protections and Simplifications 120
PPACA } 3204. Simplification of Annual Beneficiary Election Period 121
PPACA } 3206. Extension of Reasonable Cost Contracts 121
PPACA } 3208. Making Senior Housing Facility Demonstration Permanent 122
PPACA } 3209. Authority to Deny Plan Bids 122
CHAPTER 5 Medicaid Expansion 125
Introduction and Overview 125
Medicaid Enrollment and Spending 126
Eligibility Changes 128
Basic Categories of Medicaid-Eligible Individuals 128
New Rules 128
Maintenance of Effort (MOE) Requirement 128
Modified Adjusted Gross Income or MAGI 129
Presumptive Eligibility 129
Key Expansion Groups 129
Coverage of Men 129
Coverage of Women without Children 130
Community First Choice Option 130
Legislative Provisions 132
Other Incentives for Home and Community-Based Services 134
Spousal Impoverishment and Home and
Community-Based Services 134
Other Requirements 135
Benefits 135
New Standards for Benchmark-Equivalent Coverage 135
Preventive Care for Adults 137
Medical or Health Homes 137
Birthing Centers 142
Prescription Drug Coverages 142
Miscellaneous Provisions 143
Financing the Changes 143
Expansion States 143
Special Adjustment to FMAP for States Recovering from a Major Disaster 144
Implications and Responses for Low-Income Uninsured and Taxpayers 147
Appendix 5.1: Table of Medicaid Provisions in the PPACA 148
Appendix 5.2: Subtitle D—Medicare Part D Improvements for Prescription Drug Plans and MA-PD Plans 149
CHAPTER 6 Mandates, Subsidies, Penalties . . . and Taxes 151
The Individual Mandate 151
Amount of the Penalty 151
Examples 152
Example: Single Individual with No Dependents, 2014 to 2016, with Household Income up to $50,000 152
Example: Single Individual with No Dependents, 2014 to 2016, with Household Income up to $500,000 152
Example: Family of Four, 2014 to 2016, with Household Income up to $125,000 152
Failure to Pay Penalty Imposed on Individuals 153
Impact of the Mandate 153
Congressional Budget Office Analysis 153
Government Accountability Office 154
Geographic Disparities in the Cost of Insurance 155
Subsidy Eligibility 157
Tax Credits and Subsidies 158
Tax Credits 158
IRS Credit Examples for Middle-Class Families 159
Subsidies 160
How the Credits and Subsidies Impact Premium Cost 160
Employer Requirements 162
Definition of Large Employer 162
Large Employers Not Offering Coverage 162
Large Employers Offering Coverage 162
Large Employers with More Than 200 FTEs 163
Notice 2011–36 164
The Role of the Tax Code and the Internal Revenue Service 169
Nondiscrimination Rules in the Provision of Health Insurance 169
Suspension of Compliance and Penalties 170
Possible Solution to the Nondiscrimination Provision for Insured Businesses 170
Inexplicable Changes to Flexible Spending Accounts: Notices 2000–59 and 2011–5 172
Payment or Reimbursement of Medicines or Drugs Prescribed after January 1, 2011 172
Exceptions 172
Debit Cards 172
Inventory Information Approval System (IIAS) 173
Maximum Deferral 173
Itemized Deductions for Medical Expenses 173
Reporting of Health Benefits on Form W-2 173
Aggregate Cost of Applicable Employer-Sponsored Coverage 174
Reportable Coverage 174
Example for Family Coverage 175
Examples Where Flexible Spending Account (FSA) Exists 175
Methods of Calculating the Cost of Coverage 175
COBRA Applicable Premium Method 175
Modified COBRA Applicable Premium Method 176
Terminated Employees 176
Health Insurance Information Provided by Employers to All Employees 176
Annual Return to IRS on Coverage 177
Tax Treatment of Healthcare Benefits Provided with Respect to Children under Age 27: Notice 2010–38 177
Tax Credit for Employee Health Insurance Expenses of Small Employers: Notices 2010–44 and 2010–82 177
Definition of Eligible Employer 178
Steps to Determine Whether an Employer Is Eligible for a Credit 178
Determine the Employees Who Are Taken into Account for Purposes of the Credit 178
Determine the Number of Hours of Service Performed by Those Employees 179
Calculate the Number of the Employer’s FTEs 179
Determine the Average Annual Wages Paid Per FTE 179
Determine the Qualifying Premiums Paid by the Employer That Are Taken into Account for Purposes of the Credit 179
Years Prior to 2014 179
Premiums Taken into Account 180
Phaseout 180
Example for Taxable Small Employer 181
Example for a Tax-Exempt Small Employer 181
Tax-Exempt Employers Not Described in } 501(c) and Exempt Under } 501(a) 182
Consumer Operated and Oriented Plan (CO-OP Program) 182
Funding of Patient-Centered Outcomes Research: Notice 2011–35 182
Excise Tax on High-Cost Employer-Sponsored Health Coverage 182
Applicable Employer-Sponsored Coverage 182
Computation of Annual Limit in 2018 183
Health-Cost Adjustment Percentage 183
Self-Insured Plans 183
Exceptions 183
Computation of Annual Limit after 2018 183
Entity Responsible for Paying the Tax 183
AddedMedicare Tax on the Upper-Middle Class and High-Income Individuals 184
Wages 184
Investment Income 184
Threshold Amount 184
Net Investment Income 184
Application to Estates and Trusts 185
Active Interests in Partnerships and S Corporations 185
Modified Adjusted Gross Income 186
Increased Medicare Part B Premium 186
Increased Medicare Part D Premium 186
Internal Revenue Code Changes for Tax-Exempt Hospitals 186
Required Financial Assistance Policy 186
Limitation of Charges to Patients Eligible for Financial Assistance 187
Prohibition against Extraordinary Collection Actions 189
Section 4959 Excise Tax 190
Form 990 Requirements 190
Implications and Responses for Small Business 190
Tax Changes 190
Implications and Responses for Larger Business 191
Implications and Responses for Individual Taxpayers and Consumers 191
Mandate and Subsidies 191
Taxes 192
Some Thoughts for Lenders and Small-Business Investors 192
Appendix 6.1: Table of Internal Revenue Service Notices 192
Appendix 6.2: Table of Regulations (Treasury Decisions) 193
CHAPTER 7 Delivery System Reforms 197
Overview of Delivery System Reforms 197
Hospital Value-Based Purchasing 197
Hospital VBP Rulemaking 198
Purpose 199
Use of Measures 199
Scoring Methodology 199
Quality Measures 200
Performance Periods 203
Performance Standards 204
Funding 208
Value-Based Incentive Payment 208
Demonstration Programs 214
Hospital Readmissions Reduction Program 216
Defining Readmissions 216
Calculation of the Adjustment Factor 217
Risk Adjustment, Timing, and Reporting 218
Payment Adjustments for Conditions Acquired in Hospitals 219
Payment Bundling 220
The Argument for Bundling 221
Voluntary National Pilot Program 221
HHS Obligations 222
Revisions of Market Basket Updates and Incorporation of Productivity Improvements intoMarket Basket Updates 223
Independent Payment Advisory Board 226
IPAB Cost Containment Proposals 226
Membership 227
Annual Reporting 228
Medicare Geographic Payment Disparities 229
Medicare and Medicaid Disproportionate Share Hospital Payment Program 231
Medicare DSH 231
Medicaid DSH 232
CHAPTER 8 Accountable Care Organizations 239
Historical Parallels 239
Precursor to ACOs: Physician Group Practice (PGP) Demonstration 240
Program Results According to CMS 240
Center for Medicare andMedicaid Innovation 241
Independence at Home Medical Practices 241
The Proposed Regulations of March 31, 2011, and the Final Regulations of October 20, 2011 242
Eligibility and Governance 242
Eligibility 242
ACO Professional 246
Hospital 246
Provider Identification 246
Legal Structure and Governance 246
Leadership and Management Structure 247
Agreement Requirement 249
Starting Dates for ACO Agreement 249
Processes to Promote Evidence-Based Medicine and Patient Engagement 249
Primary Care Providers and the Assignment of Beneficiaries to the ACO 250
Post-Agreement Declines in Beneficiaries Below 5,000 254
Annual Reporting 254
Data Sharing 254
Sharing of Claims Data with the ACO 254
Initial Data Sharing 255
Subsequent Data Sharing 255
Data Use Agreement (DUA) 256
Beneficiary Opportunity to Opt Out of Data Sharing 256
Future Regulatory Changes 257
Future Changes to the ACO 257
Examples of Significant ACO Changes as Specified by CMS 257
Material Changes 257
Quality and Other Reporting Requirements 258
Design of Quality Measure Table 258
CMS Program, NQF Measure Number, Measure Steward 260
National Quality Forum (NQF) 260
Physician Quality Reporting System Measures 265
EHR Incentive Program Measures 266
Hospital Inpatient Quality Reporting Program 266
Consumer Assessment of Healthcare Providers and Systems (CAHPS) 266
Calculating the Performance Score for Each Measure within a Domain 266
Aggregating the Individual Domain Scores 268
Public Reporting of Quality Performance Standard Scores 271
Shared Savings Determination 271
Track 1 271
Track 2 271
Setting the ACO Budget or Expenditure Benchmark 272
Included Expenditures 272
Adjustments 273
Catastrophic Claims Adjustment 273
CMS Outline of Steps to Determine Budget 273
Other Adjustment Issues 274
Minimum Savings Rate (MSR) 274
Limits on Shared Savings or Sharing Cap: Performance Payment Limit 275
One-Sided Model 275
First Dollar Shared Savings 275
Withhold of Shared Savings 276
Loss Factors Specific to the Two-Sided Model 276
Minimum Loss Rate (MLR) 276
Shared Loss Rate 277
Comment from the Regulations 277
Maximum Shared Loss Cap 277
Example from the Proposed Regulations 277
Repayment of Loss Mechanism 278
Comparing the Features of the Two Tracks or Models 278
Claims Run-Out 278
ACO Distribution of Shared Savings 282
Public Reporting of Shared Savings 282
Termination of the ACO Agreement 283
By CMS 283
By the ACO 284
Overlap with Other Shared Savings Initiatives 284
Pioneer ACOs 284
Advanced Payment ACOModel 285
Eligibility 285
Advanced Payment Structure 286
Recoupment of Advance Payments 286
Antitrust Issues 286
The Internal Revenue Service and ACOs 287
Implications for Beneficiaries 288
Implications for Providers 289
Performance Factors to Watch in the Future 289
Some Thoughts for Lenders and Small-Business Investors 290
CHAPTER 9 Healthcare Workforce 293
Innovations in the Healthcare Workforce 294
National Health Care Workforce Commission 294
State Workforce Development Grants 296
National Center for Health Workforce Analysis 297
Increasing the Supply of the Healthcare Workforce 298
Federally Supported Loan Funds and Retention Programs 298
Commissioned and Reserve Corps 299
Healthcare Workforce Education and Training 301
Enhanced Primary Care Training 301
Training Grant and Demonstration Programs 302
United States Public Health Sciences Track 305
Support of the Existing Healthcare Workforce 306
Primary Care Reimbursement and Other Workforce Improvements 308
Medicare Bonus Payments to Primary Care Physicians and
General Surgeons 308
FQHC Improvements 310
Distribution of Unused Residency Positions 311
Counting Resident Time and Non-Provider Settings 312
Counting Resident Didactic and Scholarly Activities 313
Preserving Resident Caps from Closed Hospitals 314
Other Provisions 314
Improving Access to Healthcare Services 316
Funding of FQHCs and CHCs 316
Designating MUPs and HPSAs 317
Other Access Improvement Provisions of PPACA 318
CHAPTER 10 Transparency and Program Integrity 321
Physician Ownership and Other Transparency 322
Limitation on Physician Ownership of Hospitals 322
Transparency of Physician Ownership 324
Physician-Owned Imaging Services 327
Prescription Drug Transparency 328
PBM Transparency 328
Nursing Home and SNF Transparency 329
Compliance Program Accountability 329
Nursing Home Compare 331
Cost Reporting Reforms 331
CMP Reduction 332
Independent Monitor Demonstration 334
Facility Closure 335
Culture Change 336
Nationwide Background-Check Program 336
Patient-Centered Outcomes Research 337
Medicare, Medicaid, and CHIP Integrity Provisions 340
Provider Screening and Other Enrollment Requirements under Medicare, Medicaid, and CHIP 340
Enhanced Medicare and Medicaid Program Integrity Provisions 341
National Practitioner Data Bank 346
Maximum Medicare Claims Submission Period 346
Enrollment Requirement and Documentation on
Referrals for Ordering Physicians 347
Face-to-Face Encounter Requirement for Home Health and DME 347
Enhanced Civil Monetary Penalties 347
Stark Self-Referral Disclosure Protocol 348
Expansion of the DMEPOS Competitive Bid Process 351
Expansion of the Recovery Audit Contractor (RAC) Program 351
Additional Medicaid Program Integrity Provisions 353
Additional Program Integrity Provisions 354
Elder Justice Act 354
Healthcare Fraud Enforcement 356
CHAPTER 11 Section 340B Expansion 361
Overview of the 340B Program and Reforms 361
Expansion of Covered Entities 363
Program Integrity Provisions 366
Manufacturer Compliance 366
Covered Entity Compliance 366
Administrative Dispute Resolution 367
Regulations Implementing 340B Legislation 368
Proposed Rule on Civil Monetary Penalty 368
Proposed Rule on Administrative Dispute Resolution Process 369
Proposed Rule on Orphan Drugs 370
CHAPTER 12 Medical Tort Litigation Demonstration Program 373
ACA Demonstration Program Provisions 374
HEALTH Act 376
CHAPTER 13 Other Provisions 379
Physician Quality Reporting System 379
Physician Feedback Program 381
Impact of the ACA 381
Misvalued Codes Under the Physician Fee Schedule 382
Proposal for Validation of RVUs 383
Proposal for Consolidating Reviews of Potentially Misvalued Codes 384
Modification of Equipment Utilization Factor for Advanced Imaging Services 384
Adjustment in Technical Component Discount on Single-Session Imaging to Consecutive Body Parts 387
About the Authors 389
Index 391
Author
Mark DietrichGregory Anderson
