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THE ACCOUNTABLE CARE ACT: WHERE ARE WE NOW AND WHERE ARE WE HEADED

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Title: Health Care Reform Legislation: From Concept to Reality Author: Tammy Fulwider Last modified by: Bill.Young Created Date: 11/27/2012 4:10:16 PM – PowerPoint PPT presentation

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Title: THE ACCOUNTABLE CARE ACT: WHERE ARE WE NOW AND WHERE ARE WE HEADED


1
THE ACCOUNTABLE CARE ACT WHERE ARE WE NOW AND
WHERE ARE WE HEADED
  • David Lewis
  • LifePoint Hospitals
  • John Voigt
  • Sherrard Roe, PLC
  • Bill Young
  • Tennessee Attorney Generals Office

2
ACA
  • Patient Protection and Affordable Care Act
    (ACA)
  • Pub. L. 111-148, 124 Stat. 119, to be codified
    at scattered sections of the Internal Revenue
    Code and in Title 42 of the U.S. Code.
  • Signed by the President on March 23, 2010.

3
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4
HISTORY
George Santayana (1863-1952), a renowned
philosopher and essayist, stated
  • Those who cannot remember the past are condemned
    to repeat it.
  • Thus, it is useful in this discussion to
    understand the evolution of health insurance in
    the United States before we tackle ACA.

5
THE BEGINNING
  • In 1929 a man named Justin Ford
  • Kimball (1872-1956) went to work
  • as a Vice President of Baylor Universitys
    hospital in Dallas, Texas.
  • Discovered a large number of unpaid bills, many
    from Dallas school teachers.
  • To address this problem, he developed a plan
    whereby teachers could prepay 6.00 a year for 21
    days of hospitalization at Baylor University.
  • Beginning of national Blue Cross movement.

6
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7
TIME MARCHES ON 1930s-1940s
  • 1939 American Hospital Association adopts Blue
    Cross symbol as emblem for plans meeting certain
    standards (affiliation terminated 1972)
  • Post World War II health insurance viewed as an
    employment benefit
  • 1940-1945 56-80 Blue Cross (hospital) plans,
    enrollment increased from 6 million to 19
    million Blue Shield (doctor) enrollment
    approximately 3 million
  • 1948 proposed merger between Blue Cross and Blue
    Shield organizations failed due to opposition
    from American Medical Association, which was
    concerned that such a move between hospitals and
    doctors would create anti-trust problems

8
TIME MARCHES ON 1950s-PRESENT
  • 1950s advent of commercial for profit health
    insurance companies to compete with Blue
    Cross/Blue Shield not-for-profits. 1951 for
    profit insurers 40 million members, Blue Cross
    members 37.4 million
  • 56 million members in Blue Cross plans (about 77
    nationwide) by 1961 1/3 of U.S. population
  • 1960s Medicare/Medicaid Acts passed and changed
    healthcare landscape (by 1970 half of 10 billion
    in premiums Blue Cross plans were collecting came
    from government agencies)
  • Medicare enrollment 34.3 M (1990) to 47.5 M
    (2010) Medicaid enrollment 42.8 M (2000) to 61.8
    M (2009) per National Data Book
  • 1970s to present health costs spiral

9
MAJOR LANDSCAPE CHANGES 1945/TODAY
  • In 1945, in contrast to today
  • Mainly not-for-profit/community healthcare
    organizations involved in providing health
    insurance and delivering healthcare
  • Health insurance coverage primarily limited to
    catastrophic events (like car/home insurance) did
    not cover routine medical benefits
  • Cost of care lower/quality lower
  • Health care delivery not centralized/local
    control
  • Physician practices mostly independent and small

10
Health Reform Legislation
  • President Obama signed Patient Protection and
    Affordable Care Act into law on March 23, 2010
    (ACA)
  • Interpretation of the Reform Legislation requires
    examining both sources and many details and
    interpretations will follow through regulation
    from the Secretary of Health and Human Services
    and other agencies
  • Numerous legal challenges to ACA were ultimately
    resolved by the Supreme Court In June 2012 when
    it upheld the constitutionality of ACA

11
Impact of 2012 ACA Reform
  • The Reform Legislation regulates all players in
    the healthcare arena, including hospitals and
    nursing homes, physicians, and other healthcare
    providers
  • The Reform Legislation also effects employers,
    individuals and health insurance plans

12
Overview of the Health Reforms
  • Expands coverage to approximately 32 million
    individuals by 2019 through a variety of public
    program expansions and private sector health
    insurance reforms
  • Beginning in 2014, individuals would have to
    obtain coverage or face a tax penalty
  • Individuals without employer plans can obtain
    coverage through state health insurance
    exchanges
  • Subsidies are available to assist low-income
    individuals with the payment of premiums and the
    Medicaid program is expanded to provide coverage
    for the poor

13
Overview of the Health Reforms Continued
  • Employers are not required to provide coverage,
    but will charged a free rider assessment if
    their employees purchase health insurance through
    the exchange with federal subsidies
  • Reform Legislation amends provisions in the
    Social Security Act, the Fair Labor Standards
    Act, the Internal Revenue Code, the Employee
    Retirement Income Security Act, the False Claims
    Act, the Indian Health Services Act, the Public
    Health Service Act and several provisions of the
    U.S. Criminal Code
  • Title X of PPACA amends other provisions of PPACA
    and the Reconciliation Act also amends certain
    provisions in PPACA

14
Provisions That Apply To All Employer Health Plans
  • Apply to private and governmental plans
  • Apply to insured and self-insured plans
  • Apply to union and non-union plans
  • Apply to grandfathered and non-grandfathered
    plans
  • Reconciliation Act makes grandfathered plans
    subject to certain of the health care and health
    insurance market reforms

15
Establish Coverage Standards
  • Establish Qualified Health Plans
  • Require Minimum Essential Coverage
  • Improve Coverage
  • No lifetime or annual limits
  • Prohibition on rescissions
  • Extension of dependent coverage
  • Uniform explanation of coverage documents
  • Appeals process
  • Patient protections

16
Provisions That Apply To All Employer Health Plans
  • Auto enrollment of full-time employees
  • Effective date unknown
  • Employers with greater than 200 full-time
    employees
  • Regulations should specify effective date
  • Employees may opt out

17
Provisions That Apply To All Employer Health
Plans Continued
  • Effective March 2012
  • Provide coverage summary
  • Must use HHS required format
  • Must disclose whether employer provides minimum
    essential coverage and whether it pays 60 or
    more of medical costs
  • 60 days advance notice of changes
  • Report various aspects of managed care and
    wellness programs to Department of Health and
    Human Services (HHS) and plan enrollees

18
Provisions That Apply To All Employer Health
Plans Continued
  • Effective 2013
  • Health Flexible Spending Arrangements (FSAs)
    limited to 2,500 (thereafter indexed)
  • Notice to employees re available individual
    coverage and premium credits
  • Employers lose tax deduction to extent of federal
    subsidy for Medicare Part D drug coverage for
    retirees
  • Employers still get subsidy, but lose tax
    deduction

19
Health Plan Taxes
  • Beginning in 2014, annual fee on an insurers net
    premiums (self-insured plans are exempt)
  • 2 per enrollee tax on plans to fund bills
    comparative effectiveness plan
  • Effective 2018 40 percent tax on Cadillac
    employer health plans
  • Individual value greater than10,200
  • Other (e.g., family) coverage value greater than
    27,500

20
Health Plan Taxes Continued
  • Indexing applies after 2018 (unless medical
    inflation is greater than expected before 2018)
  • Includes on-site medical clinic value
  • For multi-employer plans, the figure is 27,500
    for all coverages
  • At 7 inflation, 10,200 in 2018 is 5,936 today
    (495/mo.)
  • At 7 inflation, 27,500 in 2018 is 16,005 today
    (1,334/mo.)

21
Expansion of Medicaid Program
  • Reform Legislation also expands Medicaid program
    to individuals at 133 per cent of the Federal
    Poverty Level
  • Provides increased primary care physician rates
    (equal to Medicare rates) to induce primary care
    physician participation in Medicaid
  • Expansion of Medicaid will initially be supported
    by federal dollars, with increased state
    responsibility over time

22
Changes to Medicare Program
  • Assumption is that providers will see less
    indigent patients and cost-shifting can be
    eliminated
  • Medicare disproportionate share hospital (DSH)
    payment goes away over time
  • Shift from fee for service to pay for performance
    system over time
  • Penalties for readmissions and hospital-acquired
    conditions
  • Various pilots and demonstration projects

23
Changes to Medicare Program Continued
  • Creation of Independent Payment Advisory
    Board-develop proposals to reduce Medicare
    spending when growth exceeds targets
  • No change in physician reimbursement formula
    (SGR), but emphasis on quality and cost reporting

24
Transparency/Fraud and Abuse
  • Mandatory compliance programs
  • Obligation to return federal program overpayments
    within 60 days
  • Increased funding for enforcement
  • In-office ancillary services disclosure
    requirement
  • Changes to Stark Whole Hospital Exception
  • Supply companies

25
Transparency/Fraud and Abuse Continued
  • Change in intent requirement for Anti-Kickback
    Statute
  • Increased disclosure in provider applications
  • Disclosures concerning physician ownership of and
    payments by drug, device and medical

26
Liability Reform
  • The Reform Legislation does not address
    professional liability reform in a substantive
    fashion
  • It does provide grant funding for state
    demonstration projects to study alternatives to
    civil litigation which emphasize patient safety,
    the disclosure of errors and early settlement
    offers
  • Provides protection under Federal Tort Claims Act
    for volunteers, employees, independent
    contractors and directors of free clinics

27
Financial Impact of Health Reform
  • Some large employers have predicted significant
    negative financial impact based on changing tax
    treatment of some employee benefit plans (retiree
    prescription drug plans) and taken charges to
    account for such impact
  • Without control of health care costs, private
    health insurance plan premiums could rise over
    time, depending on how Health Reform is
    implemented and the extent to which health care
    costs are controlled
  • Congress has already began to discuss federal
    oversight of premium increases

28
LOCAL NEWS FINANCIAL IMPACT
  • Blue Cross Blue Shield of Tennessee warns members
    that insurance premiums will go up beginning in
    January 2014, and have launched a website to
    explain why. See www.KnowTheCostTN.com
  • On 4/4/13 Tennessee Senate approved a one-year
    extension of 4.52 assessment on hospitals,
    sending the bill to Governor Haslam who is
    expected to sign it. Raises 450 million and
    expected to bring an additional 842 million in
    federal matching funds to TennCare

29
  • The Legal Challenges to ACA
  • National Federation of Independent Business, et
    al. vs. Sebelius,
  • 132 S.Ct. 2566, 567 U.S. ___ (2012)
  • Plaintiffs 26 states, 2 individuals, National
    Federation of Independent Business

30
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31
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32
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33
Issues
  • Whether the Anti-Injunction Act bars review at
    this time.

34
Issues
  • Whether the Anti-Injunction Act bars review at
    this time.
  • Whether the individual mandate is a
    constitutional exercise of power.

35
Issues
  • Whether the Anti-Injunction Act bars review at
    this time.
  • Whether the individual mandate is a
    constitutional exercise of power.
  • Whether the individual mandate is severable from
    the rest of the Act.

36
Issues
  • Whether the Anti-Injunction Act bars review at
    this time.
  • Whether the individual mandate is a
    constitutional exercise of power.
  • Whether the individual mandate is severable from
    the rest of the Act.
  • Whether ACAs expansion of Medicaid constitutes
    an unconstitutional coercion of the States to
    participate in the expanded program.

37
Issue 1 The Anti-Injunction Act
  • No suit for the purpose of restraining the
    assessment or collection of any tax shall be
    maintained in any court by any person, whether or
    not such person is the person against whom such
    tax was assessed.
  • 26 U.S.C.  7421(a). Adopted 1867.

38
Court Finding on Issue 1
  • The penalty is not a tax for purposes of this
    Act
  • Congress labeled it a penalty, not a tax, which
    it may do because that AIA is a statute and
    Congress can call it what it wishes.
  • Directed IRS to assess and collect it in the
    same manner as it would a penalty.
  • - BUT it prohibited the IRS from using normal
    enforcement tools such as criminal prosecution or
    levies to collect it.

39
Issue 2 The Individual Mandate
  • Requires all applicable individuals to purchase
    minimum essential health insurance coverage
    by January 1, 2014.

40
Penalty
  • An annual shared responsibility payment
    (penalty) rising over 3 years to the greater of
  • (i) 695 per year (maximum of 2,085)
    or
  • (ii) 1.0 of household income in 2014, 2.0 in
    2015, and 2.5 in 2016 and thereafter paid on
    federal tax return for that year.

41
First Argument Commerce Clause
  • Congress power to regulate commerce is broad.
  • Extends to activities that have a substantial
    effect on interstate commerce.
  • U.S. v. Darby, 312 US 100,118-119 (1941).

42
Commerce Clause
  • But the power to regulate assumes there is
    already something to be regulated.
    Opinion at 19.
  • Our prior cases construing the scope of the
    commerce power . . . all have one thing in
    common They uniformly describe the power as
    reaching activity.
  • Opinion at 19.

43
Commerce Clause
  • The individual mandate, however, does not
    regulate existing commercial activity. It
    instead compels individuals to become active in
    commerce by purchasing a product on the ground
    that their failure to do so affects interstate
    commerce.
  • Opinion at 20. (Italics in original)

44
Commerce Clause
  • Government argument All citizens are active in
    the market for health care
  • Response
  • Argument has no constitutional significance
    since most of those regulated by the individual
    mandate are not currently engaged in any
    commercial activity involving health care . . .
    it is a class whose commercial inactivity rather
    than activity is its defining feature .
  • Opinion at 25.

45
Commerce Clause
  • Government argument Everyone subject to this
    regulation is in or will be in the health care
    market.
  • Response
  • Everyone will likely participate in the markets
    for food, clothing, transportation, shelter, or
    energy that does not authorize Congress to
    direct them to purchase particular products in
    those or other markets today.
  • Opinion at 26.

46
Commerce ClauseConclusion
  • The Commerce Clause is not a general license to
    regulate an individual from cradle to grave,
    simply because he will predictably engage in
    particular transactions. Any police power to
    regulate individual as such, as opposed to their
    activities, remains vested in the States.
  • Opinion at 26.

47
Second Argument The Necessary and Proper Clause
  • This clause does not license the exercise of any
    great substantive and independent powers
    beyond those specifically enumerated.
  • Rather, it is merely a declaration . . . that
    the means of carrying into execution those
    powers otherwise granted are included in the
    grant.
  • Citing Kinsella v. United States ex rel.
    Singleton, 361 U.S. 234, 247 (1960). (Emphasis
    added.)

48
Necessary and Proper Conclusion
  • That application cannot be sustained here because
    the individual mandate . . . vests Congress with
    the extraordinary ability to create the necessary
    predicate to the exercise of an enumerated
    power.
  • Translation That argument wont work because
    Congress is taking upon itself the ability to
    create the power to which the Necessary and
    Proper clause would then be applied.

49
Third ArgumentThe Taxing Power
  • Government argument
  • The mandate is not a legal command to buy
    insurance. Rather, it makes going without
    insurance just another thing the Government
    taxes, like buying gasoline or earning income.

50
The Set Up
  • If a statute has two possible meanings, one of
    which violates the Constitution, courts should
    adopt the meaning that does not do so.
  • In determining whether this is a constitutional
    use of the power to tax the question is not
    whether that is the most natural interpretation
    of the mandate, but only whether it is a fairly
    possible one.

51
The Taxing Power
  • The individual mandate penalty has many
    characteristics of a tax
  • - It produces revenue for the government
  • - It is not punitive in nature
  • - It has no scienter requirement
  • - It is to be collected through normal
    governmental tax collection means (here, the IRS)

52
Individual MandateConclusion
  • The Federal Government does not have the power
    to order people to buy health insurance. . . .
    The Federal Government does have the power to
    impose a tax on those without health insurance. .
    . . The individual mandate is therefore
    constitutional, because it can reasonably be read
    as a tax.
  • Opinion at 44-45.

53
Fancy Footwork
  • So
  • The individual mandate is not a tax for purposes
    of the Anti-Injunction Act because Congress did
    not call it a tax.
  • BUT
  • 2. The individual mandate is a tax for purposes
    testing its constitutionality even though
    Congress did not call it a tax.

54
Issue 4 Medicaid Expansion
  • Would require states to engage in a massive
    expansion of Medicaid program or risk losing all
    of their federal matching Medicaid funds, not
    just those related to the expansion.
  • Justified as an exercise of Congress spending
    power.

55
Medicaid Expansion
  • Spending Clause legislation is in the nature of
    a contract between the Federal Government and
    the States.
  • Its legitimacy rests on whether the State
    voluntarily and knowingly accepts the terms of
    the contract.
  • It can be used to incentivize States to act, but
    not to compel them to do so.

56
When does incentive turn to compulsion?
  • Medicaid spending accounts for over 20 percent
    of the average States total budget, with federal
    funds covering 50 to 58 percent of those costs.
  • The threatened loss of over 10 percent of a
    States overall budget . . . is economic
    dragooning that leaves the States with no real
    option but to acquiesce in the Medicaid
    expansion.

57
Medicaid Expansion Conclusion
  • So, where is that line between incentive and
    coercion?
  • We have no need to fix a line . . .. It is
    enough for today that wherever that line may be,
    this statute is surely beyond it.
  • Opinion at 55.

58
Provider Considerations After the Court Decision
  • Provider associations generally supported ACA due
    to the promise of more insured patients- will
    that happen?
  • What will happen with Medicaid expansion in
    Tennessee and contiguous states
  • DSH goes away under ACA as a result of promise of
    more insured patients-Pressure to restore it

59
Additional Provider Considerations
  • Supreme Court decision means full-speed ahead on
    reforms contained in ACA, such as accountable
    care, payment incentives for quality and other
    changes in delivery models
  • Pace of physician-hospital integration and
    hospital consolidation will continue to be swift
  • Health information technology will be critically
    important for successful provider integration and
    participation in exchanges

60
Other Considerations
  • The Medicare Sustainable Growth Rate- around 30
    percent cut in physician payments scheduled at
    end of 2012 if Congress does not act, big
    budgetary problem now delayed until 12/31/2013
  • Viability of health Insurance Exchanges
  • The Fiscal Cliff ?

61
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62
ACA and Medicaid Expansion
  • Potential Medicaid Expansion
  • 133 of Federal Poverty Level (FPL) ?
  • FPL 10,830 for one person
  • 133 14,403
  • 100 22,050 for four-person family
  • 133 29,326
  • 1,680,000 26 of population

63
ACA and Income Changes
Income Changes Over Time Adults Ages 19 60
Incomes Initially Under 133 of FPL
64
Newly Eligible for TN Medicaid
Tennesseans eligible for Medicaid expansion by
prior coverage, using 2009 income statistics
Health Insurance Coverage Segment Non Elderly Income/Poverty lt133
Employer Provided 185,000
Direct Purchase 48,000
Not Covered 378,000
Total 611,000
65
ACA and Subsidized Exchange
  • Exchange
  • Premium subsidies up to 400 of FPL
  • Family of one 43,320
  • Family of four 88,200
  • 4,448,000 69 of population qualifies by income
  • If covered by employer, not eligible for Exchange
  • Complicated sliding scale formula
  • with maximum premium based on percentage of
    income

66
Tennessee Access to Care
  • 7 Dimensional Analysis of Functional Access in TN
    by Zip Code

67
Medicaid Expansion and Tennessee
  • Expected Annual Revenue
  • Fed Money for 100 133 FPL-1,250 million
  • Fed Money for lt 100 FPL - 750 million
  • Expected Annual Costs
  • State Cost for 100 133 FPL - 125 million
  • State Cost for lt 100 FPL - 375 million
  • Actual Revenue and Costs will vary year over year
    and are implemented gradually

68
ACAs Winners and Losers
Winners Losers
Uninsured Currently Insured
Sick Healthy
Old Young
Employers (short term) Tax Payers
Providers
Poor States Rich States
69
Future of ACA after NFIB v. Sebelius
  • Still many hurdles to achieve full ACA
    implementation
  • (1) Even after election, ACA faces strong
    resistance in Congress/States
  • (2) State Non-Participation in Exchanges/Medicaid
    Expansion (full Medicaid expansion estimated to
    cover additional 17 million Americans)

70
CURRENT COUNT EXCHANGES/EXPANSION
  • 17 declared state-based exchange (California, New
    York, Kentucky)
  • 26 default to federal exchange (Tennessee, Texas,
    Pennsylvania, Ohio, Florida, Wisconsin)
  • 7 planning for state/federal partnership exchange
    (Arkansas, Illinois, Michigan)
  • Medicaid expansion latest count (27 states
    support, 19 oppose, 5 weighing options (mostly
    opposed are in South/Midwest))
  • See Kaiser State Health Facts website,
    www.statehealthfacts.org

71
Rules, Rules and More Rules!
72
Preliminary Impact of ACA
  • Trends include
  • (1) Rapid consolidation among healthcare players
    (Aetna buys Coventry Cigna buys Healthspring
    Wellpoint buys Amerigroup)
  • (2) Decline of independent physicians (half of
    physicians now employed by hospital/system) and
    potential physician shortage
  • (3) Increased Government role in establishing
    benefits/pricing (Independent Payor Advisory
    Board)

73
Cost Containment?
74
WHERE IS TENNESSEE?
  • No on exchange
  • No, but . . . on expansion, Governor Haslem
    announced wants federal government to support
    Tennessee Plan, which includes using federal
    Medicaid funds to purchase private health
    insurance (presumably thru the Tennessee federal
    exchange) without increasing TennCare enrollment
  • General Assembly hostile to ACA implementation
    (HB476/SB666 of 108th General Assembly would ban
    Tennessee insurance companies from participating
    in any exchange House delayed consideration
    until 2014).

75
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77
Questions?
78
  • Presenters
  • David Lewis
  • LifePoint Hospitals
  • david.lewis_at_lpnt.net
  • John Voigt
  • Sherrard Roe, PLC
  • jvoigt_at_sherrardroe.com
  • Bill Young
  • Tennessee Attorney Generals Office
  • Bill.young_at_ag.tn.gov
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