Weekly Washington Healthcare Update

November 4, 2013

Pardon Our Dust

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This Week: House committees hear testimony from HHS officials… HELP Committee clears Children’s Hospitals Graduate Medical Education (CHGME) legislation… South Carolina dual-eligible demonstration project gets green light

1. Congress

House of Representatives

Senate

2. Administration

HHS

IRS

3. State Activities

4. Regulations Open for Comment

5. Reports

GAO

1. Congress

House

Energy and Commerce Hears from HHS Secretary Sebelius

On Oct. 30, the House Energy and Commerce Committee held a hearing entitled “PPACA Implementation Failures: Answers from HHS,” in which the committee heard testimony from HHS Secretary Sebelius regarding the recent “glitches” that have hampered enrollment in President Obama’s signature health reform law. According to Secretary Sebelius, initial enrollment in ACA health insurance marketplaces is likely to be low, due to the website’s technical problems, though no official numbers will be available until mid-November. However, Sebelius also noted that the system can create up to 17,000 accounts each hour, and that users should expect to be able to navigate and enroll in health plans without disruption by the end of November.

Witness:

Hon. Kathleen Sebelius
Secretary
U.S. Department of Health and Human Services

For more information, or to view the hearing, please visit:energycommerce.house.gov

Ways and Means Hearing Explores ACA Health Insurance Launch

On Oct. 29, the House Ways and Means Committee held a hearing to examine issues associated with the Department of Health and Human Services (HHS) launch of federally facilitated health insurance exchanges, as well as other healthcare market reforms established in the ACA. The lone witness was recently confirmed CMS Administrator Marilyn Tavenner. Of concern to committee Republicans were issues related to the testing that the new system was subjected to prior to its launch on Oct. 1, the integrity of the system’s privacy and security functions necessary to protect consumers’ privacy, and a decision made late in the process of the computer program’s launch to disable a “window shopping” feature of the website that would have allowed consumers to browse health insurance products and their cost without creating an account in the system.

Witness:

Marilyn Tavenner
Administrator
Centers for Medicare & Medicaid Services (CMS)

For more information, or to view the hearing, please visit:waysandmeans.house.gov

Camp, Baucus Announce Framework for Medicare Physician Payment Reform

Senate Finance Committee Chairman Baucus (D-MT), Ranking Member Hatch (R-UT), House Ways and Means Committee Chairman Dave Camp (R-MI) and House Ways and Means Committee Ranking Member Sander Levin (D-MI) havereleased a discussion draft outline to permanently fix the Medicare Sustainable Growth Rate (SGR) formula, replacing the often drastic cuts called for under the SGR with a flat schedule over the next 10 years. While essentially imposing a pay freeze for physicians instead of cuts, the bicameral plan would gradually replace the existing Medicare fee-for-service (FFS) reimbursement system with a value-based system focused on medical outcomes rather than procedures. CBO has estimated that a 10-year freeze in the physician fee schedule would cost $138 billion. In late July, the House Energy and Commerce Committee advanced similar legislation that would have instituted a 0.5 percent increase in physician payments over five years, while moving to a value-based payment system. CBO estimated that bill would cost $175 billion.

Senate

Senate HELP Committee Approves Children’s Hospital GME Reauthorization

On Oct. 30, the Senate Health, Education, Labor and Pensions (HELP) Committeeapproved a bill that would reauthorize funding for the graduate medical education programs in children’s hospitals. The Children’s Hospital GME Support Reauthorization Act of 2013, which aims to help train pediatric physicians, would fund the program for five years up to $300 million per year. Across the country, 55 hospitals in 29 states and the District of Columbia participate in the program, which supports the training of more than 6,000 resident physicians annually. The House has approved similar legislation (H.R. 297) earlier this year.

Upcoming Finance Committee Hearing to Feature Sec. Sebelius

Senate Finance Committee Chairman Baucus (D-MT) has scheduled a hearing entitled “Health Insurance Exchanges: An Update from the Administration.” The hearing will take place on Wednesday, Nov. 6 at 10 a.m. in Room 215 Dirksen Building, and the sole witness will be HHS Secretary Sebelius.

Witness:

Hon. Kathleen Sebelius
Secretary
U.S. Department of Health and Human Services

For more information, or to view the hearing, please visit:www.finance.senate.gov

Upcoming HELP Committee Hearing on Health Insurance Marketplace

Senate HELP Committee Chairman Harkin (D-IA) has announced his committee will explore issues related to the launch of the federal health insurance exchange, or marketplace, in a hearing entitled “The Online Federal Health Insurance Marketplace: Enrollment Challenges and the Path Forward.” The hearing will take place on Tuesday, Nov. 5 at 10 a.m. in Room 106 Dirksen Senate Office Building, and will feature CMS Administrator Tavenner as the only witness.

Witness:

Marilyn Tavenner
Administrator
Centers for Medicare & Medicaid Services (CMS)

For more information, or to view the hearing, please visit:www.help.senate.gov

2. Administration

Department of Health and Human Services (HHS)

Part A Deductibles to Rise in 2014 While Part B Premiums Remain Flat

CMS has announced the cost beneficiaries will pay for premiums and deductibles under three parts of Medicare. For inpatient care,Medicare Part A deductibles are slated to increase by $32, to $1,216 in 2014, while Part A monthly premiums, which most beneficiaries don’t pay, will decline by $9, to $234. CMS said it estimated that 626,000 enrollees would voluntarily enroll in Medicare Part A by paying the full premium and estimated the total aggregate savings to enrollees paying these premiums in CY 2014 compared to CY 2013 will be about $119 million. Thestandard Part B premium will stay the same in 2014, at $104.90. The Medicare Part D deductible will also stay the same, at $147. The new rates are consistent with the recent slowdown in the growth of Medicare spending.

Many Young Adults Will See Low Premiums Due to ACA Assistance

The Department of Health and Human Services (HHS)released a report on Oct. 28 concerning the affordability of health insurance within the exchanges for young adults. Research within the report showed that 46 percent of single adults who are uninsured and eligible for coverage could get coverage for $50 or less per month. Examining 34 federally facilitated and state partnership exchanges, the report said there are 2.9 million single young adults aged 18 to 34 who are eligible for coverage; of that population, 1.3 million could enroll in a bronze plan for $50 per month or less after tax credits. This report complements an earlier HHS finding that 1 million eligible uninsured single adults may qualify for Medicaid in states that have chosen to expand the program. Within the report, the department noted that young adults are the most likely age group to be without health insurance.

IRS

Despite Website Glitches, 330,000 ACA Tax Credit Calculations Made

As of Oct. 28, the Internal Revenue Service has responded to more than 330,000 requests from state and federal health care marketplaces for eligibility calculations for premium tax credits. The ACA grants tax credits to offset the cost of health insurance premiums to individuals who make less than $45,960 or families of four that make less than $94,300. On October 26, HHS Secretary Kathleen Sebelius wrote in ablog post that nearly 700,000 people have registered for health insurance through the online marketplaces. IRS spokesperson Julianne Fisher Breitbeil said, “The IRS remains on track with implementing its portion of the Affordable Care Act and continues actively supporting the Health Insurance Marketplaces.” However, the technological glitches with healthcare.gov and the delay to the 2014 tax filing season as a result of the government shutdown may make it more challenging for lower-income families and individuals to purchase health care through the exchange, according to Brian Haile, Senior Vice President for Health Policy at Jackson Hewitt Tax Service Inc. He said due to the glitches, many people were not able to enroll in October, meaning they will have to enroll in November and December, a time when many families are strapped for cash due to the holidays. The delay in filing period means taxpayers will receive their tax refund later than expected. Haile suggested extending the open enrollment period through April 15 to match the tax filing season.

3. State Activities

South Carolina Wins CMS Approval of Dual-Eligible Demonstration Project

On Oct. 25, the Centers for Medicare and Medicaid Servicesapproved a demonstration project by South Carolina that intends to improve care coordination for dual-eligibles. South Carolina is the ninth state to take part in CMS’s Financial Alignment Initiative, which “tests financial models to improve care delivery by aligning financial incentives for providers serving dual eligibles.” South Carolina’s demonstration project, called Healthy Connections Prime, will enroll about 53,600 Medicare-Medicaid participants. CMS said the project “will offer a multidisciplinary care team to ensure the integration of the member’s medical, behavioral health, long-term services and supports, and social needs.”

4. Regulations Open for Comment

Basic Health Plan Proposed Rule

On Sept. 20, CMS issued aproposed rule to guide the introduction of Basic Health Plans, as required by Section 1331 of the Affordable Care Act. The Basic Health Program provides states the flexibility to establish a health benefits coverage program for low-income individuals who would otherwise be eligible to purchase coverage through the state’s Affordable Insurance Exchange (Exchange, also called a Health Insurance Marketplace). The Basic Health Program would complement and coordinate with enrollment in a Qualified Health Plan (QHP) through the Exchange, as well as with enrollment in Medicaid and the Children’s Health Insurance Program (CHIP). This proposed rule sets forth a framework for Basic Health Program eligibility and enrollment, benefits, delivery of health care services, transfer of funds to participating states and federal oversight. Additionally, this rule would amend other rules issued by the Secretary of the Department of Health and Human Services (Secretary) in order to clarify the applicability of those rules to the Basic Health Program. Comments are due by Nov. 25, 2013.

CMS Proposed Rule for Federally Qualified Health Center Payments

On Sept. 18, CMS released aproposed rule that establishes a new Prospective Payment System (PPS) and increases Medicare reimbursement payments for federally qualified health centers (FQHC). In the rule, Medicare payments would increase 30 percent for FQHC services provided to beneficiaries in medically underserved areas. Under the PPS, Medicare would pay the FQHCs a single encounter-based rate per beneficiary per day for all services provided. The proposed rate would be calculated based on an average cost per encounter, which is estimated to be $155.90, adjusted for geographic variation, with additional consideration given to new Medicare beneficiaries.

“These health centers serve some of our most vulnerable populations,” HRSA Administrator Mary Wakefield said in a Sept. 18 statement. “We are excited about our collaboration with CMS to create a payment system that enables these vital health centers to keep doing such important work.” CMS estimates that during the first five years of implementation, the annual Medicare spending for the FQHCs would be $33 million in 2014, increasing to at least $200 million every year afterward until 2018. Comments on the proposed rule are due on Nov. 18, 2013.

IRS Proposed Rule — ACA Employer Information Reporting Mandates

On Sept. 5, the IRS issuedproposed regulations providing guidance to employers that are subject to the information reporting requirements under Section 6056 of the Internal Revenue Code (Code), enacted by the Affordable Care Act. Section 6056 requires those employers to report to the IRS information about their compliance with the employer shared responsibility provisions of Section 4980H of the Code and about the health care coverage they have offered employees. Section 6056 also requires those employers to furnish related statements to employees so that employees may use the statements to help determine whether, for each month of the calendar year, they can claim on their tax returns a premium tax credit under Section 36B of the Code (premium tax credit). In addition, that information will be used to administer and ensure compliance with the eligibility requirements for the employer shared responsibility provisions and the premium tax credit. The proposed regulations affect applicable large employers (generally meaning employers with 50 or more full-time employees, including full-time equivalent employees, in the prior year), employees and other individuals.

IRS will accept comments on specific aspects of the proposed rule, such as whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility, and how the quality, utility and clarity of the information to be collected may be enhanced. A public hearing will be held at 10 a.m. on Nov. 18.

IRS Proposed Rule — Reporting On ACA Minimum Essential Coverage

On Sept. 5, the IRS issuedproposed regulations providing guidance to providers of minimum essential health coverage that are subject to the information reporting requirements of Section 6055 of the Internal Revenue Code (Code), enacted by the Affordable Care Act. Health insurance issuers, certain employers and others that provide minimum essential coverage to individuals must report to the IRS information about the type and period of coverage and furnish related statements to covered individuals. These proposed regulations affect health insurance issuers, employers, governments and other persons that provide minimum essential coverage to individuals. Under the proposed rules, health insurance issuers are not required to submit Section 6055 information returns on minimum essential coverage they provide in the individual market through the ACA health insurance exchanges, or marketplaces; however, sponsors of self-insured group health plans are required to report minimum essential coverage under the proposed rule. In addition, self-insured group health plans or arrangements covering employees of related corporations are treated as sponsored by more than one employer and each employer must report for its employees.

IRS will accept comments on specific aspects of the proposed rule, such as whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, whether the information will have practical utility, and how the quality, utility and clarity of the information to be collected may be enhanced. A public hearing will be held at 10 a.m. on Nov. 19.

IRS Proposed Rule — ACA Small Business Tax Credit

The IRS has issuedproposed rules on the ACA’s small-business tax credit, available only to certain businesses with 25 or fewer full-time employees purchasing health coverage through a SHOP exchange. Under the proposed rule, for taxable years beginning during or after 2014, the maximum credit for an eligible small employer other than a tax-exempt eligible small employer is 50 percent of the eligible small employer’s premium payments made on behalf of its employees under a qualifying arrangement for QHPs offered through a SHOP exchange. For a tax-exempt eligible small employer for those years, the maximum credit is 35 percent. The employer’s tax credit is subject to several adjustments and limitations as set forth in this preamble.

In addition, all employees (determined under the common law standard) who perform services for the employer during the taxable year are taken into account in determining FTEs and average annual wages, including those who are not performing services in the employer’s trade or business. An employee’s hours of service for a year include hours for which the employee is paid, or entitled to payment, for the performance of duties for the employer during the employer’s taxable year. Hours of service also include hours for which the employee is paid for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. Hours of service do not include the hours of seasonal employees who work for 120 or fewer days during the taxable year, nor do they include hours worked for a year in excess of 2,080 for a single employee.

Comments are due Nov. 21, 2013.

5. Reports

Health Care Fraud and Abuse Control Program: Indicators Provide Information on Program Accomplishments, but Assessing Program Effectiveness is Difficult

According to the GAO, Congress established the Health Care Fraud and Abuse Control (HCFAC) program and provided funding to HHS and DOJ to help reduce fraud and abuse in Medicare and Medicaid. However, the GAO states that due to the size, scope and complexity of Medicare and Medicaid, the programs are vulnerable to fraud. In its report, the GAO found that DOJ and HHS do not have an effective way to evaluate fraud reduction caused by HCFAC-funded activities. GOA stated that the “indicators agencies use to track HCFAC activities provide information on the outputs or accomplishments of HCFAC activities, not on the effectiveness of the activities in actually reducing fraud and abuse.” HHS is currently undertaking a project to establish a baseline of probable fraud in home health care and will then determine whether the program should be expanded to other areas of health care.

Biomedical Research: NIH Should Assess the Impact of Growth in Indirect Costs on Its Mission

According to arecent report by GAO, the National Institutes of Health should do more to assess the impact of growth in indirect costs on its mission, including, as necessary, planning for how to deal with potential future increases in indirect costs that could limit the amount of funding available for total research. Specifically, GAO found that stakeholders — university officials, Department of Health and Human Services (HHS) officials and others — identified several key factors that may lead to increases in reimbursements for indirect costs provided to universities and reported that reimbursements for one part of indirect costs — the facilities component — help to support research innovation by providing funding for the development and maintenance of state-of-the-art research facilities. However, officials in HHS’s Division of Cost Allocation, which is responsible for determining indirect cost rates, stated that the uncapped facilities component of the indirect cost rate provides universities with few, if any, incentives for controlling these costs.

If you have any questions, please contact Stephanie Kennan, Senior Vice President, or Brian Looser, Assistant Vice President, at McGuireWoods Consulting.

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering state and federal government relations, national/multistate strategies, infrastructure and economic development, strategic communications and grassroots issue management services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and in 2010 was ranked in the Top 20 of The National Law Journal‘s “The Influence 50,” an annual report of the top public affairs firms in Washington, D.C.

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