Government sets “essential health benefits”

The Feds set broad coverage standards and ask states to work out the details.

By By Jeff Atkinson | Reform Recap | Summer 2013


This year, the federal government issued final regulations to set “essential health benefits” for individual and small group health plans operating under the Patient Protection and Affordable Care Act.

The regulations take effect January 1, 2014, and individual and small group health plans must provide the specified benefits after that date. Revised regulations for large groups and employer-sponsored health plans will be issued later and are likely to be similar in the nature of services that are covered.

Under the regulations, the federal government sets broad standards for what must be covered and then leaves it to each state to work out the details. The federal government lists 10 categories of services that must be covered. The list includes traditional areas of health insurance coverage, such as hospitalization, emergency services, ambulatory care and prescription drugs.

Expanded benefits in some areas
What is comparatively new—and often not covered by current health plans—is pediatric oral and vision care. In addition, there will be increased coverage for mental health services under the Affordable Care Act.

The Obama administration estimates that 32 million people will receive mental health coverage that did not have it before, and that the scope of coverage for many who already have mental health coverage will improve. (For the list of the 10 categories of services, see the sidebar on page 23.)

If a state wishes to require that insurance provided in the state cover benefits beyond those required by the federal government, the state is free to do so, but the state will need to absorb the added costs, such as the cost of providing extra insurance for Medicaid patients.

The regulations direct states to select a “base-benchmark plan” that will define specific benefits that will be covered under each of the 10 categories. The benchmark plan can be selected from several options, including one of the three largest small group insurance products offered in the state, the state employee health plan, or one of the three largest federal employee health plans. For most states, the benchmark will be a plan offered by BlueCross BlueShield; for California it will be the Kaiser Foundation Health Plan; and for New York it will be Oxford Health Insurance.

If a benchmark plan selected by a state does not provide benefits in one or more of the 10 categories, then the state must select another plan to define the benefits in the missing category.

Coverage between states may vary
The deference given to states in selecting benchmark plans means that package of specific health benefits will vary from state to state. Regarding drug benefits, for example, the formulary of a benchmark plan chosen in one state may list 500 drugs while the formulary of a benchmark plan in another state may offer 1,000 drugs.

Under the federal regulations, however, “A health plan providing essential health benefits must have procedures in place that allow an enrollee to request and gain access to clinically appropriate drugs not covered by the health plan.”

The federal regulations also affirm the principle under the Affordable Care Act that health plans may not discriminate against individuals on the basis of health condition, age or quality of life.

The regulations track the Affordable Care Act regarding giving consumers a choice of levels of coverage, which will affect the premium the consumers will pay. The different amounts of coverage are described as “metal levels.” A bronze level plan will cover 60 percent of a patient’s expenses; a silver plan, 70 percent; a gold plan, 80 percent; and a platinum plan, 90 percent.

Regardless of which metal plan a consumer chooses, there are limits to the annual deductible that can be imposed on people obtaining coverage through the small group market. For an individual, the maximum deductible is $2,000. For coverage of two or more people, the limit is $4,000. After 2014, the deductible limits may increase with inflation. In addition, if a patient is in a network plan and chooses to receive care out of network, the added cost of receiving out-of-network care is borne by the patient and is not part of the annual limit.

Trade-offs of expanded coverage  
The “essential benefit plan” is designed to accomplish at least two goals—to provide a base level of coverage for people obtaining coverage through the individual and small group markets (subject to variation between states), and to give consumers a better opportunity to compare insurance plans.
By requiring insurance companies to standardize their products regarding scope of coverage and the levels of deductibles, consumers will better be able to compare the value of products that are offered.

Under the new regulations, the cost of insurance is likely to go up, particularly for healthy young adults. More people will be covered by insurance, but the costs for some will be more difficult to bear.

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.



Dealing with the shortage of primary care providers

Methods for easing a shortage of primary care providers include increasing Medicaid reimbursement rates and changing policy for graduate medical education.

By By Jeff Atkinson | Reform Recap | Spring 2013


A hallmark of the Affordable Care Act is increasing the number of Americans covered by health insurance. Three of the main ways of accomplishing that are the expansion of the Medicaid system, the individual mandate to purchase health insurance, and the availability of tax credits to help purchase insurance for persons earning less than 400 percent of the poverty level. In 2012-13, 400 percent of the poverty level is $44,680 for an individual and $92,200 for a family of four.

With these initiatives, approximately 32 million more people will be covered by health insurance by 2014. In addition, a growing number of Americans are reaching Medicare age, and their health care needs are greater than those of Americans in younger age groups. The Census Bureau projects that in the next 10 years there will be a 36 percent increase in the number of Americans over 65.

Shortage of 62,900 in 2015
The growth in the number of people covered by public and private health insurance means an increased need for health care providers. The Association of American Medical Colleges estimates that there will be a shortage of 62,900 physicians in 2015 and a shortage of 91,500 physicians by 2020—about half in primary care.

Health care policy analysts generally recommend that between 40 and 50 percent of the physician workforce provides primary care. In recent years, the proportion of primary care physicians is 32 percent according to a 2010 report from the Department of Health and Human Services Council on Graduate Medical Education (COGME).

To increase the number of primary care providers, the Affordable Care Act seeks to attract more providers to primary care by increasing Medicaid payments to 100 percent or more of Medicare rates. Physicians eligible for the increased payments are family physicians, pediatricians, internists and certain subspecialists.

Eligible physicians need to be board certified in one of the designated primary care specialties or attest that at least 60 percent of the Medicaid codes they billed in the previous calendar year were for primary care codes specified by the Affordable Care Act and its regulations. Obstetricians and gynecologists do not qualify for the increased rates, even though they provide primary care.

The increased rates for primary care include payments for work done by advanced practice nurses and physician assistants if they are operating under the supervision of a physician, but the higher rates are not available if the nurses or physician assistants are working independently.

Payment impact varies by state
The impact on pay for primary care physicians will vary significantly from state to state since currently each state sets its own reimbursement rate. Nationwide, in 2012 the average fees for Medicaid physicians were 66 percent of the Medicare rates according to a survey commissioned by the Kaiser Family Foundation.

The lowest rate was in Rhode Island (58 percent of Medicare rates); the highest rate was in Alaska (242 percent of the Medicare rates). The foundation said that, on average, Medicaid fees for primary care services will rise by 73 percent. A state-by-state summary of the new Medicaid physician fees is available online at

The cost of raising primary care Medicaid rates for 2013 and 2014 is estimated to be $11.9 billion—a cost that will be borne fully by the federal government. The Accountable Care Act does not specify what happens to the rates after 2014. If the rates drop or if the federal government tries to shift a significant amount of the added costs to the states, the program may be less successful in securing the services of primary care physicians willing to accept Medicaid patients.

To help meet the need for more physicians, 18 more medical schools are being established. The Association of American Medical Colleges reports there will be an additional 7,000 graduates every year for the next decade.

Currently, however, there is not a plan for a corresponding increase in the number of residency positions paid by the Medicare system. The federal government through the Medicare program (and, to a lesser extent, the Medicaid program) has been the primary funder of graduate medical education (GME)—paying $11.5 billion per year to more than 1,000 hospitals at a cost of about $100,000 per resident per year.

Another U.S. government agency in the Department of Heath and Human Services—the Health Resources and Services Administration—also is working to increase the supply of primary care physicians. In February, the Health Resources and Services Administration announced it was making a $4 million grant to the Wright Center for Graduate Medical Education in Scranton, Pa., and the A.T. Still University of Health Sciences’ School of Osteopathic Medicine in Mesa, Ariz., to train osteopathic residents in primary care.

During the first year, the program is expected to place 29 residents in community health centers in medically underserved areas throughout the country (not just in Pennsylvania and Arizona).  Dr. Thomas McWilliams, associate dean for graduate medical education at ATSU, said that currently, more than half of the available seats are unoccupied for the July 1 start date, but he expects more applications to be made after the allopathic match in March.  For more information on the program, see

Conflicting policies on paying for GME
Graduate Medical Education is caught between conflicting policy goals. On the one hand, there are calls for increased funding, particularly for primary care training programs. The Association of American Medical Colleges has recommended a 15 percent increase in GME positions (4,000 per year) to meet growing health care needs.

On the other hand, the cost of GME is considered by many to be excessive. The number of residency slots has been capped at 1996 levels, although some exceptions have been made, and the Accountable Care Act provides for a moderate increase of 300 physician training positions per year. The political pressure to avoid further increased deficits makes it difficult to obtain increased funding for GME. Congress and the White House have not developed a unified plan to handle the issue.

The Institute of Medicine, part of the National Academy of Sciences, is studying the issue of GME and how best to align financing with the needs of the public for the health care workforce. The Institute’s report is due in 2014. Among the issues that will be considered will be the appropriate level of funding for teaching hospitals and proportion of funding for teaching hospitals versus community-based clinics and health centers. Recruitment of physicians, particularly for primary care, also could be increased by more use of medical school scholarships and loan forgiveness programs.

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.



Implementing the Affordable Care Act

Following the election, the Obama administration moves forward with insurance mandates, Medicaid expansion, insurance exchanges and more.

By Jeff Atkinson | Reform Recap | Uncategorized | Winter 2013


With the reelection of President Obama and the upholding of most provisions of the Affordable Care Act by the U.S. Supreme Court, the path for continued implementation of the act has been cleared, although implementation is likely to take longer than originally hoped by the Obama administration.

A key feature of the act is expanding health insurance for more than 30 million people who are currently without health insurance. This will be accomplished in several ways.

Individual mandate in 2014

The individual mandate for persons to acquire health insurance if it is not provided by their employers or other sources is scheduled to take effect January 1, 2014. The mandate applies to persons who are required to file federal tax returns. (In 2012, that threshold was $9,000 for individuals under 65, and $19,000 for married persons under 65 filing jointly.)

The penalty for people who do not obtain health insurance starts low and grows higher. In 2014, the penalty will be $95 per adult or 1 percent of family income, whichever is greater. In 2016, the penalty will be $695 per adult or 2.5 percent of family income, whichever is greater. The penalty was upheld by the Supreme Court in 2012 as a constitutional use of Congress’ taxing power. A potential problem for effective implementation of the act is that the penalties are low enough that some people may choose to pay the penalties rather than spend a larger amount on health insurance.

Employers of more than 50 people also are required to provide health insurance to their employees or pay a penalty of $3,000 per worker per year for each employee that received a tax credit for purchasing the employee’s own insurance.

Medicaid expansion

The Medicaid program will be expanded to cover individuals and families who are at 133 percent of the poverty level. In 2012, 133 percent of the poverty level is $14,856 for an individual and $30,657 for a family of four in the 40 contiguous states—and higher dollar amounts for Alaska and Hawaii. The expansion of the Medicaid program will cover about 17 million more people and also is scheduled to take effect in 2014.

Republican governors in six southern states (Florida, Georgia, Louisiana, Mississippi, South Carolina, Texas) have threatened to block Medicaid expansion in their states, even though the federal government will pay the added costs of expansion until 2016. It is possible that state legislatures in those states may override the governors or induce the governors to change their minds.

For people with incomes above the eligibility level for Medicaid, tax credits will be available to help pay for health insurance. The tax credits apply to persons with incomes up to 400 percent of the poverty level. (In 2012, 400 percent of the poverty level is $44,680 for an individual and $92,200 for a family of four.)

Establishing insurance exchanges

The uncertainty of whether President Obama or Mitt Romney would win the election caused a showdown in implementation of some parts of the Affordable Care Act. States were supposed to decide in November whether they would establish their own insurance exchanges, establish exchanges in cooperation with the federal government, or leave the establishment of exchanges to the federal government.

Insurance exchanges would facilitate purchase of health insurance by individuals and small employers by spreading the risk to larger groups and (hopefully) making insurance less expensive than it would be under the current system of purchasing insurance for individuals and small employers.

Approximately one-third of states have announced plans for establishing insurance exchanges. For the remainder of states, the Obama administration has granted an extension of time to decide whether to establish insurance exchanges. Generally, Republican states are more likely to be undecided or not willing to establish their own exchanges. If a state does not establish its own exchange, the federal government will.

New regulations on the horizon

Implementing the Patient Protection and Affordable Care Act (or any complex new law) requires a lot of regulations to work out the details. Since health care reform was a highly controversial issue in the election, the Obama administration slowed down the release of new regulations in the months prior to the election, probably to avoid yet more controversy.

Now that the election is over, the pace of new regulations and proposed regulations will increase. Subjects of the regulations will include the specific “essential benefits package” that health insurance plans must cover, exceptions to the insurance mandate for individuals and employers, excise taxes on medical devices, and the requirements of non-for-profit hospitals to maintain tax-exempt status.

Payments to physicians

Payments to physicians for primary care will rise under the Affordable Care Act. Effective January 1, 2013, Medicaid payment rates for primary care providers will be set at 100 percent of the Medicare rates. The increased payments will apply to family medicine, general internal medicine and pediatric medicine. The federal government will pay all of the added costs from the increased rates through the end of 2014 at which time some of the added costs may shift to the states.

Although there is added emphasis on primary care and increased payments to primary care providers, cost containment is a high priority under the Affordable Care Act. Methods for containing costs while promoting quality care include increased use of bundled payments and payments to accountable care organizations (ACOs).

With bundled payments, groups of providers—including hospitals, physicians and home care agencies—will receive a fixed sum for a patient’s inpatient care and post acute care services rather than individual payments for each service performed. Depending on the plan to which providers agree, payments may be increased or decreased depending on whether the providers meet quality and cost-containment goals.

A Medicare pilot program for bundled payments will begin in 2013. One of the challenges will be to develop equitable systems for dividing the fixed payments between providers. If the bundled payments work out, their use will be expanded, both by the government as well as private insurers.

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.



Comparing reform plans

By Jeff Atkinson | Fall 2012 | Reform Recap


One of the biggest differences between Mitt Romney’s and Barack Obama’s health policies is who is responsible for making available health insurance coverage. Mitt Romney would place primary reliance on state governments and the private sector. Barack Obama would rely more on the federal government.

Romney’s plan, according to his website, “will begin by returning states to their proper place in charge of regulating local insurance markets and caring for the poor, uninsured and chronically ill.” He says on his first day in office, he will issue an executive order issuing waivers to all 50 states allowing them to develop their own health plans (including Medicaid) without most of the regulations that are currently set by the Obama administration. Romney also would ask Congress to repeal the Patient Protection and Affordable Care Act.

Fewer regulations under Romney

Under the Romney approach, there would be fewer federal regulations regarding how state Medicaid programs and private health insurance plans would operate. States would receive block grants with reduced restrictions on how money is spent. For covering persons who are difficult to insure, Romney favors high-risk pools and reinsurance. In addition, small businesses and individuals would be encouraged to form purchasing pools.

Medicare also would change under Romney as he seeks to have seniors obtain more of their health insurance coverage from the private market rather than from government-run Medicare. Under his plan, seniors would receive a “defined contribution or premium support” from which they could buy health care coverage from Medicare or from the private sector. Although Romney favors less regulation of insurance, he would require private insurance plans that offer alternatives to Medicare to provide coverage comparable to Medicare.

The amount of the contribution or support for health coverage for seniors has not been announced. According to the Romney campaign, “Lower income seniors will receive more generous support to ensure that they can afford coverage; wealthier seniors will receive less support.”

Perhaps to avoid scaring current Medicare beneficiaries or those soon to be eligible for Medicare, the campaign says: “This plan has no effect on current seniors or those nearing retirement. It will go into effect for younger Americans when they reach retirement in the future.”

Romney maintains that “a competitive, market-oriented system” is the best way to deliver health care and that private insurers competing with each other will promote quality and hold down costs. To that end, Romney would allow insurance plans to be purchased across state lines.

Obama standing on his record

President Obama is quite willing to stand on his record. The “health care” portion of the Obama-Biden website leads off with a statement that the Affordable Care Act will “restore health care as a basic cornerstone of middle-class security in America.”

The Obama campaign cites the changes that are taking place, including: providing coverage for 34 million Americans without insurance; ending discrimination based on preexisting conditions; allowing young adults to stay on their parents’ insurance policies until they turn age 26; providing more preventive services to Medicare beneficiaries and persons covered by private insurance; closing the Medicare “doughnut hole” on payments for prescription drugs; and ending lifetime limits on insurance coverage.

Obama says the Affordable Care Act will reduce the federal deficit by $127 billion between 2012 and 2021. He also noted that the Affordable Care Act requires insurance companies to spend 80 percent of premiums on health care (instead of overhead, marketing and profits). Insurance companies that do not meet that criteria will have to pay rebates to consumers.

When President Obama seeks to provide more uniform health care rights for Americans, the vehicle for that is federal law and regulation.

Areas of agreement

Although Mitt Romney and President Obama differ significantly on their methods of achieving health care reform, they do share some approaches.

Prevention of discrimination on the basis of preexisting conditions
Both candidates favor laws that would prevent insurance companies from discriminating against individuals seeking health insurance on the basis of preexisting conditions. Romney emphasizes that the protection should apply to persons who have maintained continuous coverage.


If a person changes jobs, they should be able to maintain their insurance.

Quality measures

To help promote quality and informed choice, both Romney and Obama favor obtaining and disseminating information about the quality of service by health care providers and insurance companies.

Information technology

Both candidates also support increased use of information technology to promote efficiency in the health care system.

Alternatives to fee-for-service

Both candidates recognize the need to control costs and promote quality by developing alternatives to fee-for-service. Such options would include bundling payments to a group of providers for a single episode of care and higher payments to providers for better
quality care.

Medical malpractice reform

Obama and Romney favor medical malpractice reform, including using non-litigation alternatives to dispute resolution. In addition, Romney emphasizes placing caps on non-economic damages. Obama places more emphasis on providing immunity to providers if they follow recognized guidelines.

The presidential election will set the path for future health care reforms—with the alternative paths being continuation and expansion of the federal government’s involvement in health care versus curtailment of the federal government’s involvement and more reliance on states and private insurance. In either case, the makeup of Congress also will affect the pace of future reforms.

For more information about the health care policies of the candidates from their websites, see:
• Barack Obama
• Mitt Romney (Health care) (Medicare)

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.



Easing regulatory burdens

To promote efficiency and save costs, the federal government has issued new regulations covering telemedicine, staff privileges and other subjects.

By Jeff Atkinson | Reform Recap | Summer 2012


In 2011, President Obama issued an Executive Order (No. 13563) directing each agency of the federal government to review its existing regulations and repeal or modify regulations that are “outmoded, ineffective, insufficient or excessively burdensome.”

The Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services responded with revised regulations on multiple issues. The new regulations affecting physicians reflect changes in the way medicine is practiced and an increased use of technology.

Credentialing for telemedicine

Telemedicine is a method of providing clinical services to patients from a distance. It can include communication and examination of patients by audio-visual electronic communication as well as non-simultaneous services such as teleradiology. Telemedicine facilitates providing services to rural locations and giving prompt access to experts in a variety of settings.

Under old CMS rules, a provider of telemedicine services (who often was affiliated with a major hospital) had to be credentialed not only at his or her home hospital, but also at any hospital at which the patient was being treated.

CMS concluded “that our present requirement is a duplicative and burdensome process for physicians, practitioners, and the hospitals involved in this process, particularly small hospitals….” CMS also noted that small hospitals may not have the expertise to evaluate physicians in a wide range of specialties.

Related: Read more about health care reform at

A new final rule, issued in 2011, allows hospitals obtaining telemedicine services to rely on the credentialing process of the provider’s home institution rather than go through its own credentialing process.

Under the rule, the hospital at which the physician is based must provide the hospital at which the patient is located with evidence of the internal review of the physician’s credentials.

The rule provides “[a]t minimum, this information must include all adverse events that result from the telemedicine services provided by the distant-site physician or practitioner to the hospital’s patients and all complaints the hospital has received about the distant-site physician or practitioner.”

CMS estimates that the streamlined credentialing process will save approximately $1,500 per physician credentialed in time spent by physicians, hospital administrators and attorneys. The new regulation and official comments about the regulations are available online at

Hospital privileges to non-physicians

CMS issued a proposed rule in October 2011 to allow more flexibility for hospitals to grant privileges to non-physicians.

Under the proposed rule, if state law allows certain categories of non-physician practitioners, those practitioners also may obtain privileges to work at hospitals within the scope of their practices. Examples of such practitioners include advance practice registered nurses, physician assistants, physical therapists, speech language pathologists and doctors of pharmacy.

The proposed rule states that being a member of the medical staff is not a prerequisite to being granted privileges. The hospital may treat the non-physicians as members of the medical staff, but is not required to do so. Another option for hospitals is to have additional categories of staff membership such as “associate” or “limited” memberships for non-physicians.

For multi-hospital systems, CMS said it did not believe that a separate medical staff is necessary for each hospital within the system. Instead, multi-hospital systems, if they wish, could grant practitioners privileges which would encompass more than one hospital.

CMS has sought comments about whether clarification of the rules on this issue was necessary. Under a related proposal, systems with more than one hospital will have the option of having a single governing body for all the hospitals in the system rather than separate governing bodies for each hospital.

Other efficiency initiatives

Other proposed regulations to streamline procedures and save costs include:

• Increased use of pre-printed and electronic standing orders.
Hospitals may use such orders as long as they “have been reviewed and approved by the medical staff in consultation with the hospital’s nursing and pharmacy leadership” and “are consistent with nationally recognized and evidence-based guidelines.”

• Patient self-administration of medications.
Hospitals will have the option of allowing patients (or caregivers) to self-administer medications issued by the hospital as well as medications the patient has brought to the hospital. The practitioner responsible for the patient’s care will have to approve the arrangement, and procedures will need to be in place to ensure the safety of the administration of medications.

• Interdisciplinary care plans.
Instead of having a patient’s nursing care plan be separate from other parts of the patient’s record, hospitals may use interdisciplinary care plans that incorporate a nursing plan.

• Revising HIPAA rules.
While maintaining privacy rights for health care records, the Department of Health and Human Services plans to reduce the burden associated with distributing notices of privacy practices under the Health Insurance Portability and Accountability Act (HIPAA). In addition, the department plans to make it easier to distribute students’ immunization records to schools. The department estimates the changes in rules could save up to 2 million “burden hours” and $120 million.

• Uniform ID number for health plans.
The Department of Health and Human Services plans to establish “unique health plan identifiers” of a standard length and format for each health plan. Currently, a wide range of identifiers are used, and this results in misrouting of transactions, rejection of transactions due to insurance identification errors, and difficulty in determining patient eligibility. The department estimates this change will save providers and health plans $4.6 billion over the next 10 years.

For reasons of pragmatics as well as politics, the administration directed CMS and the Department of Health and Human Services to pause and consider how existing regulations can be made more efficient.

The most recent round of rules and proposed rules should indeed save time and money, although there also will be costs in implementing the new rules.

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.



Affordable Care Act bringing changes to Medicaid

More patients will be covered under Medicaid, and primary care providers will receive higher payments

By Jeff Atkinson | Reform Recap


An important component for reforming health care under the Patient Protection and Affordable Care Act is expansion of the Medicaid system. Currently, Medicaid (established in 1965) and its associated program, the Children’s Health Insurance Program—CHIP—(established in 1997) cover nearly 60 million Americans, particularly low-income adults and children.

The federal Centers for Medicare & Medicaid Services (CMS) explains that the “Affordable Care Act fills in current gaps in coverage for the poorest Americans by creating a minimum Medicaid income eligibility level across the country.” And, CMS notes, beginning in January 2014, people under age 65 with income below 133 percent of the federal poverty level will be eligible for Medicaid.

In 2012, 133 percent of the poverty level was $14,856 for an individual and $30,657 for a family of four. (The method used by the government to define “modified adjusted gross income” will have the effect of raising the eligibility for Medicaid to 138 percent of the federal poverty level.) more »



Insurance exchanges explained

State insurance exchanges are designed to make health insurance more accessible to individuals and small employers.

By Jeff Atkinson | Reform Recap


One of the techniques for making health insurance more available under the Patient Protection and Affordable Care Act (PPACA) is the establishment of insurance exchanges. Although PPACA was passed by Congress in 2010, the insurance exchanges are not scheduled to become operational until Jan. 1, 2014.

In July 2011, the U.S. Department of Health and Human Services issued proposed rules regarding insurance exchanges. After receiving and evaluating comments on the rules, the department will issue final rules in 2012.

Leveling the playing field
Insurance exchanges are designed to make insurance more available to individuals and small employers. (A “small employer” is defined as an employer with an average of 100 or fewer workers in the preceding calendar year.) When issuing the proposed rule, the department said that “[i]nsurance companies will compete for business on a level playing field” and the program will “give individuals and small businesses the same purchasing clout as big businesses.”

Health and Human Services Secretary Kathleen Sebelius said it was currently common for small employers to pay up to 18 percent more than large employers for the same level of coverage for employees.

The federal government has provided large grants to help states set up insurance exchanges. It anticipated that most states will set up their own insurance exchanges, but states also have the option of joining together to establish a regional exchange.

If a state does not set up an insurance exchange, the federal government will establish an exchange directly or will contract with a non-profit entity to establish the exchange. Although states are supposed to have a working exchange by 2014, the federal government has the option of giving states an additional year to set up the exchanges.

Qualified health plans
The insurance exchanges will offer—in the terminology of the proposed rule—“qualified health plans,” most of which are likely to be provided by private insurance companies. All plans must offer “minimum essential coverage.” That level of coverage will be set by the federal government with guidance from the Institute of Medicine, an arm of the National Academy of Sciences, which provides unbiased scientific information to the government and public.

Under the PPACA and the proposed rules, qualified health plans may not refuse coverage or discriminate against applicants for insurance on the basis of a pre-existing condition. Qualified health plans also must include in their provider networks “essential community providers” that serve predominantly low-income and medically underserved individuals. Privacy rules for electronic transactions of exchanges will be governed by the Health Insurance Portability and Accountability Act (HIPAA).

Applicants will be offered plans that pay a varying percent of covered services (90 percent for a “platinum plan,” 80 percent for a “gold plan,” 70 percent for a “silver plan,” and 60 percent for a “bronze plan”).

Insurance exchanges are required to establish “navigator programs” to provide “fair, accurate and impartial” information and services to health insurance consumers about the health plans that are available and to facilitate enrollment in those plans. (Health insurance companies cannot serve as “navigators.”) As with many private insurance programs, there will be an open enrollment period.

Tax credits are available to persons with low to middle income to purchase insurance through the exchanges. The tax credits will be based on the federal poverty level, with sliding scale tax credits being available to persons at 100 to 400 percent of the poverty level. (In 2011, a family of four in the 48 contiguous states and District of Columbia was at the poverty level with an income of $22,350 or less; four times the poverty level for a family of four would be $89,400.) In addition, under the PPACA, persons with incomes at 133 percent of the poverty level will be eligible for Medicaid.

Will insurance be affordable?
A challenge for many families will be: Will insurance through exchanges be affordable—even if there are economies of scale by obtaining insurance through the exchanges and even if the government provides tax credits for some families? Families might be able to reduce one type of health care cost by purchasing “bronze plans” instead of “platinum plans.” But if a family has significant health expenses in a given year, the savings on premiums is likely to be exceeded by the added out-of-pocket costs.

A report by the Kaiser Family Foundation said that annual health insurance premiums for employer-sponsored family health coverage increased to $15,073 in 2011. Employers, on average, paid $10,944 and workers paid $4,129. The 2011 insurance premiums were a 9 percent increase from 2010 for family coverage—a significantly higher rate of increase than the preceding several years.

Health insurance exchanges will make insurance more available and are likely to make the cost of insurance less than it would be without the exchanges. Nonetheless, a challenge will remain to control health care costs while also providing high-quality care.

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.




ACOs to become operational

The Medicare program's use of Accountable Care Organizations will impact how medicine is practiced and physicians are paid.

By Jeff Atkinson | Fall 2011 | Reform Recap


Establishment of Accountable Care Organizations (ACOs) has been described as the most significant change in health care delivery since the Medicare and Medicaid programs were begun in the 1960s.

The creation of ACOs is part of the “Medicare Shared Savings Program” of the Patient Protection and Affordable Care Act passed by Congress in 2010.
Starting January 1, 2012, the federal government will pay ACOs for caring for Medicare patients. The goal is to have health care providers join together to deliver care in a high-quality, cost-efficient manner. If costs are saved, the ACOs will receive bonuses that will be shared with the providers. If costs exceed benchmarks established by the Centers for Medicare and Medicaid Services (CMS), the ACOs will have to pay back some of the funds they have received.

In April 2011, CMS issued a proposed rule governing ACOs. Health care providers and members of the public had two months in which to submit comments on the rule. After considering the comments and probably making some modifications to the proposed rule, CMS will issue a final rule.

Requirements for ACOs
Under the proposed rule, in order to qualify as an ACO, the organization must care for at least 5,000 Medicare beneficiaries and enter into a three-year agreement with CMS to provide care. CMS will assign beneficiaries to an ACO if a beneficiary has received a plurality of his or her primary care from physicians associated with the ACO, although beneficiaries are free to change physicians (and ACOs) if they wish.

Use of electronic health records is an important part of achieving the goals of ACOs to improve quality and reduce costs. Under the proposed rule, at least 50 percent of the primary care physicians in an ACO must be “meaningful users” of electronic health records. (“Meaningful use” of electronic health records is the subject of other federal regulations. It includes recording and transmitting patient demographics, vital signs, diagnoses, allergies, clinical quality measures and prescriptions, as well as use of electronic systems for clinical decision support.)

Physicians who are working with an ACO are likely to find their practice of medicine more subject to controls by the organization than would be the case in small medical practices. Under the proposed rule, “The ACO must implement evidence-based medical practice or clinical guidelines and processes for delivering care consistent with the aims of better care for individuals, better health for populations, and lower growth in health care expenditures.” The rule adds that the guidelines should “tak[e] into account the circumstances of individual beneficiaries.”

Management of ACOs
The proposed rule is flexible regarding what types of organizations can set up ACOs. The most likely types of organizations are hospitals, large groups of physicians and insurance companies. An organization will need significant amounts of capital and administrative support to establish an ACO.

Clinical management of an ACO must, in the words of the rule, be handled “by a full-time senior-level medical director who is physically present on a regular basis in an established ACO location, and who is a board-certified physician and licensed in the State in which the ACO operates.” The rule also provides that “At least 75 percent control of the ACO’s governing body must be held by ACO participants.” ACO participants include physicians, hospitals, skilled nursing facilities, hospices, home care agencies and suppliers.

Two tracks for level of payments
The proposed rule provides two tracks for payments to ACOs. Both tracks make reference to “benchmarks” established by CMS for each ACO that are based on multiple factors, including the claims history of Medicare beneficiaries cared for by the ACO, the health status of the beneficiaries, and CMS’s estimate of what it would have paid for services without the cost-saving measures being implemented by the ACO. The tracks involve different levels of payment and risk for the ACOs, and the ACOs may choose which track to be on.

Under Track 1, also known as the “one-sided model,” in the first two years of the program, participating ACOs may receive bonuses up to 7.5 percent of its benchmark for savings achieved, provided the ACO achieved a minimum level of savings. That minimum level of savings varies between 2 and 3.6 percent of Medicare Part A and Part B payments, depending on the number of beneficiaries served. In the first two years, there is no downside. If costs exceed the benchmark, the ACO would not be obliged to pay back money to CMS. In the third year, however, ACOs on Track 1 would be sharing risks as well as the savings. The maximum payback amount (“recoupment”) in the third year would be 5 percent of the benchmark.

Under Track 2, also known as the “two-sided model,” ACOs share in the risk as well as the potential savings, beginning in the first year of the program. In exchange for the added risk, ACOs on Track 2 will have a higher cap on savings they may share—up to 10 percent of its benchmark (rather than the 7.5 percent limit for ACOs on Track 1). In addition, Track 2 ACOs share in the first dollar of savings and do not have to wait until a minimum level of savings is achieved. The maximum payback amount would be higher for ACOs on Track 2 than ACOs on Track 1: 5 percent in the first year, 7.5 percent in the second year, and 10 percent in the third year.

ACOs on both tracks can receive added bonuses for providing services for Federally Qualified Health Centers and Rural Health Centers. In order to receive bonus payments, ACOs, in addition to achieving savings, will need to meet quality performance measures in five areas: (1) patient/care giver experience, (2) care coordination, (3) patient safety, (4) preventative health, and (5) at-risk population/frail elderly health.

Potential losses
Although many providers would be pleased to receive bonuses for effective cost-saving programs, enthusiasm for ACOs is tempered by the high cost of setup and operation, which may exceed bonuses received. If an ACO incurs expenses that exceed the benchmarks set by CMS, the ACO will have to pay back money to CMS, and thus experience a loss for participation in the program.

For physicians considering participating in an ACO, it will be important to determine the degree to which individual physicians will share the savings or be at risk, depending on whether savings goals and quality measures are met. Under the proposed rule, ACOs must describe to CMS how savings will be shared with participants, but the rule does not specify how savings must be shared.

For now, participation in the program is optional as the government seeks the best way to promote the dual goals of improving quality and saving costs. If, a few years from now, the government continues to believe that ACOs are the preferred way to deliver care, we can expect that participation in ACOs may be more mandatory, or there will be financial penalties for providers that do not participate. In addition, private insurers may adopt payment models similar to those used by the government if the insurers find that ACOs are a useful method for controlling costs.

Jeff Atkinson ( teaches health care law at DePaul University College of Law in Chicago.




The constitutionality debate continues

Courts have issued conflicting rulings regarding whether health care reform legislation is constitutional

By Jeff Atkinson | Reform Recap | Summer 2011


The constitutionality of the Patient Protection and Affordable Care Act (PPACA) eventually will be determined by the U.S. Supreme Court. As of June 2011, five federal district courts (trial courts) have ruled on the issue. Three courts have upheld the law; one court struck down the mandate that individuals acquire health insurance; and one court struck down the entire law.

Starting in 2014, the PPACA requires citizens and legal residents of the United States to obtain health insurance unless they meet certain narrow exceptions, such as being a member of a recognized religious sect that is conscientiously opposed to accepting public or private health insurance benefits. Persons who do not obtain health insurance will be required to pay a monetary penalty with their tax returns.

The district court rulings are being appealed to the U.S. Circuit Court of Appeals in different circuits. When one or more of the Circuit Courts of Appeal issue their rulings (probably in the summer or fall), the Supreme Court is very likely to take the case(s) and settle the issue.

Challenges under the Commerce Clause 

The primary legal challenge is based on the Commerce Clause to the United States Constitution. Article I, Section 8, clause 3 of the Constitution gives Congress the power “To regulate Commerce … among the several states.” more »



Impact of the elections on health care reform

Reforms will impact physicians on many fronts, including insurance coverage for patients and possible changes in the malpractice system.

By By Jeff Atkinson | Reform Recap | Winter 2011


After the November 2 election, Senate Republican leader Mitch McConnell (R-Ky.) said, “We can—and should—propose and vote on straight repeal” of President Obama’s health care legislation. At the same time, Sen. McConnell acknowledged that a full repeal of the Patient Protection and Affordable Care Act (PPACA) was not likely. Although Republicans now have a majority in the House of Representatives, Democrats still have a majority in the Senate, and President Obama can veto legislation that reaches his desk.

The likely strategy of the Republicans is to seek to block implementation of portions of new laws they do not like by refusing to give full funding to certain programs. High on the list of health reforms disfavored by Republicans and some Democrats are the mandates on individuals and employers to purchase insurance and requiring states to expand Medicaid coverage.
The mandate on individuals to acquire health insurance also is the subject of challenges in the courts. On December 13, a federal trial court in Virginia held that the requirement that most Americans obtain health insurance was unconstitutional because it exceeded the power granted to Congress by the Commerce Clause. Two other federal trial courts, however, have upheld PPACA, including the individual mandate. Ultimately, the issue is likely to be decided by the Supreme Court. more »




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