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