IHA Federal Health Care
Reform Summary
Iowa’s Environment
• 302,000 – Iowans do not have insurance. (approx 10
percent of population)
• 171,000 – Iowans with non-group insurance and will be
able to get affordable coverage through the health insurance
exchange.
• 187,000 residents could qualify for premium tax credits to
help them purchase health coverage
• 505,000 seniors would receive free preventive services
Source: U.S. Department of Health and Human Services
Iowa’s Environment
• Small Businesses:
– 76 percent of all Iowa businesses are considered small
businesses.
– 42 percent of those small businesses offered health
coverage benefits in 2008.*
– 48,600 small businesses could be helped by the small
business tax credit to make insurance more affordable.
* Source: Center for Financing, Access and Cost Trends, Agency for Healthcare Research and Quality,
Medical Expenditure Panel Survey – Insurance Component, 2008
New Health Reform Law
• Estimated to extend coverage to 32 million individuals
– Covers 95 percent of those legally residing in U.S.;
– Covers 92 percent of total residing in country
• Estimated to cost $940 billion over 10 years (FY2010-2019)
• Financed by:
– Medicare and Medicaid provider payment reductions
– Taxing high-premium health insurance plans
– Raising the Medicare tax for high-income individuals,
and
– Annual fees on various industries in the health sector.
Coverage
Expands to 32 Million Individuals by 2019 Through:
Medicaid Expansion, Exchanges, Premium Subsidies,
and Insurance Reform
Creation of a
nationwide, high-risk
insurance pool
2010
Medicaid expansion up
to 133% FPL
2012
2011
Coverage for children
with pre-existing
conditions
Dependent coverage for
adults up to 26 years old
Coverage for adults with
pre-existing conditions
2014
2013
Individual Mandate
Employer
Requirements
Establishment of State-Based Health
Insurance Marketplaces Called
“Exchanges”
• Provider payments: negotiated rates
• Premium subsidies for individuals and
families with incomes up to 400% FPL
Individual Mandate
• By 2014 the law requires All U.S. citizens and legal residents to
maintain minimum essential health care coverage.
• There will be a tax penalty for those who fail to have coverage:
$95 in 2014, $325 in 2015, $695 in 2016, and up to 2% of
income by 2016.
• Families will pay half of the penalty for children up to a $2,250
cap for the entire family. After 2016, the dollar amounts for the
penalties will be increased by an annual cost of living
adjustment. There is a hardship exemption.
• Individuals who are below the tax filing threshold are exempted
from this mandate.
Employer Mandate
Begins 2014 – “Play or Pay”
• Employers with more than 50 employees that choose to
not to provide health insurance will be assessed if any
employees elect to receive the government tax credit.
Employers will pay $2000 per full-time employee. (But
are allowed to subtract 30 employees from the
calculation.)
• Requires employers that offer coverage to their employees
to provide a free choice voucher to employees with
incomes less than 400% FPL whose share of the premium
exceeds 8% but is less than 9.8% of their income and who
choose to enroll in a plan in the Health Insurance
Exchange rather than using the company policy.
Employer Mandate (cont.)
• Requires employers with more than 200
employees to automatically enroll employees into
health insurance plans offered by the employer.
Employees may opt out of coverage.
• Imposes a max 90-day waiting period limit
before employees must be enrolled in the
company’s coverage benefit.
• Employers with 50 or fewer employees are
exempt from any of these penalties.
The Math
• Critical Access Hospitals will see a modest increase in payments as the home
health rural add-on will bring Iowa nearly $710,000 in additional funding.
PPS Payment
2011
2012
Tweener Adjustment
+$4.6 million
+$4.6 million
Geographic Variation
+$12.5 million
+20.7 million
Coding Offset
-$28 million
TBD 2012 IPPS
Marketbasket Update
+$17 million*
TBD 2012 IPPS
Total:
$6.1 million
$25.3 + MB – coding offset
• But Coding Offset issue could be addressed legislatively resulting in an
increased net.
• Increased Geographic Variation payments in FY 2012 should lessen the impact
of potential additional coding offsets should they not be prevented by Congress
and are proposed again by CMS and could result in a larger net payment gain
despite the cuts.
*Note: The net FY 2011 MB Update is 2.35 percent compared to 3.6 percent in
2009. The FY 2011 MB Update includes the .25 percent MB reduction as
mandated in the health care reform law.
Key Hospital Provisions
• Delivery System Reforms
– Hospital Value-Based Purchasing Program
– Pilot project to test bundled Medicare payments
– Pilot project to form Accountable Care
Organizations and share in Medicare cost savings
– Center for Medicare and Medicaid Innovation to
test payment service delivery models
– Independent Payment Advisory Board
Medicare Payment
Bundling Pilot
Effective dates:
• By January 1, 2013
• By 2016, CMS must report
results of pilot, making
recommendations to Congress for
its expansion
Payment Bundling Pilot
• Voluntary, five-year program
• Bundle payments for ten conditions
• Cover three days prior to hospital admission to
30 days following discharge
• Include:
• acute care inpatient;
• outpatient, including ED;
• physician services in and out of the hospital;
and
• post-acute care
• Secretary will develop bundled payment rates
and will test payments based on bids.
• Payments cannot exceed what would otherwise
be paid for the same services under current
Medicare.
• After January 1, 2016, the Secretary may
expand the program
Medicare Shared
Savings Accountable
Care Organization
(ACO) Program
Effective date:
• By January 1, 2012 the Secretary
must establish the program
Impact:
• $4.9 billion in shared savings
between ACOs and the Medicare
program nationwide over ten
years
Medicare Shared Savings Program
• Groups of providers and suppliers can apply to
be recognized as ACOs
• ACOs must act as the primary care provider for
at least 5,000 Medicare fee-for-service
beneficiaries and agree to do so for at least
three years
• Share in savings achieve for the Medicare
program
• Hospitals can take the lead in establishing
ACOs
• ACOs may include:
• group practice arrangements;
• networks of individual physician practices;
• partnerships or joint venture arrangements
between hospitals and practitioners;
• other groups of providers and suppliers; and
• hospitals employing practitioners.
Independent Payment
Advisory Board (IPAB)
Effective date:
• By 2014 IPAB must begin
making recommendations
Impact:
• $13 billion reduction
nationwide over ten years
IPAB
• 15-member IPAB appointed by the President
• By 2014 it must begin to submit reports to Congress that
would reduce Medicare spending by targeted amounts if
it is determined that there is excess cost growth in the
Medicare program
• 0.5 percentage point reduction in 2015, increasing to a
1.5 percentage point reduction in 2018.
• Congress may modify or pass an alternative to the
proposals, but is required to maintain the targeted level
of Medicare savings for the year.
• Should Congress fail to act, IPAB’s original proposal
must be implemented.
Exemptions From IPAB
• Inpatient PPS, home health agencies, outpatient,
psychiatric, rehabilitation, and LTC hospitals and
hospices will be exempt from IPAB decisions until 2019.
• Critical Access Hospitals are NOT exempt.
Key Hospital Provisions
• Provisions included to begin addressing
geographic variation in Medicare spending
• Enhanced payments for small and rural hospitals
• Extends expiring Medicare provisions
• Expands the 340B program
• Financial penalties for “excessive” readmissions
and “high” rates of hospital-acquired conditions
• Physician-Owned Hospitals and Self-Referral
Health Reform and
PPS Hospitals
•
•
•
•
•
•
•
Hospital value-based purchasing program
Payments to hospitals in “low-cost” counties
Low-volume/tweener payment adjustment
Readmission penalty
Hospital Acquired Conditions penalty
Medicare Payment Reductions and IPAB exemption
DSH reductions
Medicare Value-Based
Purchasing
Inpatient Value-Based Purchasing
• Budget-neutral with each year’s pool fully
distributed to hospitals in that same year
• Credit for both improvement and attainment
• Funded by IPPS payment reductions,
beginning with a 1.0% reduction in FFY
2013 and increasing to 2.0% for FFY 2017
and subsequent years.
• FFY 2014 include efficiency measures
• Demonstration for CAHs and small volume
rural hospitals
Effective dates:
• FFY 2013 implementation of
VBP for inpatient hospitals
•2012 establish a CAH and small
volume rural hospital
demonstration
• By 2016 establish VBP pilot
programs for inpatient
rehabilitation, inpatient
psychiatric, LTC and cancer
hospitals and hospice
Percent Carve-Out for VBP Pool
2.5
2.0
1.5
1.0
0.5
0.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Geographic Variation and Hospital
VBP
• The hospital VBP will consider Medicare
spending per beneficiary on specific DRGs.
– Concept is to calculate efficiency into Medicare
payments and reward states that provide high quality
at low cost.
– States with lower spending per Medicare beneficiary
would see higher payments.
Geographic Variation—Payments to hospitals in
“Low Cost” Counties
• Immediate Funding: $400 million in FYs 20102011 to boost payments to PPS hospitals located
in counties within the lowest quartile of total
Medicare spending per enrollee.
• 20 Iowa hospitals qualify
• $33.1 million in increased payments to those
hospitals over two years.
Geographic Variation—Next Steps
Additional steps:
• Two IOM studies to evaluate and reform the Medicare
system to address all geographic disparities for doctors
and hospitals and implementation of IOM
recommendations by December 2012.
• Additional direction to the new Center for Medicare and
Medicaid innovation to further test innovative models to
incent high quality, low cost care across the provider
spectrum.
• Convene a National Summit on Geographic Variation
Cost, Access, and Value in Health Care later this year.
Rural PPS Hospitals
• Low-volume/tweener payment adjustment
• Effective FY 2011 and 2012
• A low-volume hospital will be defined as one that is more
than 15 road miles from another comparable hospital and has
up to 1,600 Medicare discharges.
• Eligible Iowa hospitals must provide evidence to WPS (FI
Contractor) that it meets the necessary requirements by
September 1.
Medicare Marketbasket
Update Reductions
and Productivity
Offsets
Marketbasket (MB) Update Cuts
• Applied to: inpatient and outpatient hospital,
inpatient rehabilitation, and inpatient psychiatric,
LTCH, home health agencies, hospice
Effective date:
• 2010—update cuts begin
• 2012—productivity offsets begin
Impact:
• $157 billion reduction nationwide
over ten years
Productivity Offsets
• Applied in addition to the MB cuts
• Current economy-wide productivity factor is 1.3%
• Applied to all providers subject to MB cut plus
skilled nursing facilities
Productivity
Marketbasket Cut
Hospital Update Reductions
2.5
2.0
1.5
1.0
0.5
0.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Medicare and Medicaid
Disproportionate Share
Hospital (DSH)
Reductions
Effective date: FFY 2014
Impact:
• $36 billion reduction to hospitals
nationwide ($22 billion Medicare,
$14 billion Medicaid) over ten
years
Medicare DSH
• DSH payments reduced to 25 percent of current level in
2014.
• A portion of the 75 percent cut will be used to establish a
fund to pay for ongoing uncompensated care under a new
payment method – these payments reduce each year and
end after 2019.
Medicaid DSH
• Reductions set by the legislation.
Percent Reduction in DSH
Medicaid DSH
Medicare DSH
Percent Decrease in Uninsured
0%
-20%
-40%
-60%
-80%
2014
2015
2016
2017
2018
2019
Medicare Inpatient
Hospital Readmissions
Payment Policy
Effective date:
• FFY 2013 for inpatient acute
care hospitals
Impact:
• $7.1 billion reduction
nationwide over ten years
Readmissions
• Acute care hospitals with higher than expected riskadjusted readmissions rates will receive reduced
payments for every discharge
• In the first and second years, applies to three
conditions: heart failure, heart attack, and pneumonia
• Expand to additional conditions in future years,
including all-cause readmissions
• Establish a quality improvement program for
hospitals with high severity-adjusted readmissions
• Develop a Community Care Transition Program for
hospitals with high readmissions rates
Medicare and Medicaid
Health Care-Acquired
Conditions (HACs)
Payment Policies
Effective dates:
• New Medicare HACs inpatient
hospital policy begins FFY 2015
• By January 1, 2012, the
Secretary must report to
Congress on current hospital
policy and recommend extension
of it to other care settings
• Medicaid HAC policy begins
July 1, 2011
Medicare HACs
• FFY 2015, inpatient hospitals in the worst 25th
percentile of risk-adjusted HAC rates will be subject to
a 1.0% penalty
• The reduction will be applied in addition to current
CMS payment adjustments for HACs
Report to Extend the Current Medicare HAC
Policy
• Report by January 1, 2012 on extending the policy to
other settings
Medicaid HACs
• Beginning on July 1, 2011, states must adopt policies
ensuring that higher Medicaid payments are not made
for cases with conditions covered by the Medicare
HAC policy.
Critical Access Hospitals
CAHs are exempt from harmful payment reductions
and policies, but included in IPAB.
– Method II Billing issue corrected
• The law ensures that CAHs are paid 101 percent of costs
for all outpatient services they provide, regardless of the
billing method elected, and for providing qualifying
ambulance services.
– Expands the 340B program – now accepting
applications from eligible hospitals.
Tax-Exempt Status of
Hospitals
Effective date:
• These provisions apply to
taxable years beginning after the
date of the enactment, except
the community health needs
assessment, which is applicable
two years later
New Requirements for Tax-Exempt Hospitals
• Establishes additional criteria for hospitals to
maintain their Section 501(c)3 tax-exempt
status:
• Implementation of strategies to meet
community needs—based on the findings of
periodic health needs assessments.
• Adoption of financial assistance policy that
limits charges and prohibits extraordinary
collection actions.
• Failure to meet the community health plan
requirements will result in a $50,000 fine.
• Requires the Secretary to report to Congress
on the levels of charity care, bad debt,
unreimbursed costs of non means-tested
government programs, and the cost of
community benefit activities incurred by taxexempt, taxable, and public hospitals.
Physicians
• Medicare Payment Incentives for Primary Care/ General Surgery
Providers:
– Primary care providers will receive a 10 percent bonus payment for five
years, beginning January 1, 2011. (Practitioners in specialties of family
medicine, internal medicine, geriatric medicine, pediatric medicine,
nurse practitioners, clinical nurse specialists, and physician assistants
qualify.)
– Qualifying practitioners providing care in a health professional
shortage area (HPSA) will also receive the 10 percent bonus
– General surgeons providing care in a HPSA will receive a 10 percent
bonus on major procedure codes for five years, beginning January 1,
2011.
Physicians
• Geographic Variation and Physicians:
Provides immediate funding of $400 million
for the to increase payments to physicians
practicing in areas with below average
payment rates.
• This will directly increase Iowa providers’
reimbursements under Medicare Part B by 5
percent in 2010 and 5 percent in 2011.
Next Steps: Implementing Health Care Reform
•
•
Major Provider Medicare and Medicaid changes will be implemented over the next 3-5
years
CMS is in the process of prioritizing implementation and has already released
instructions to its contractors to begin implementing:
•
•
•
•
•
Ground ambulance add-on payments
Air ambulance services
“Super rural” ambulance add-on payments
Extension of the outpatient hold-harmless provision
Extension of reasonable cost payment for clinical lab tests performed by hospitals with
fewer than 50 beds in qualified rural areas
• Extension of moratorium that allows independent laboratories to bill for the technical
component of physician pathology services furnished to hospital patients
• Extension of exceptions process for therapy caps
• Physician Self-Referral
•
•
Focus is on critical regulatory process
– Watch for special rules to implement the law
Upcoming Geographic Disparities Summit and continued pressure to begin IOM studies
Health Information Technology (IT)
• The Economic Stimulus bill provided $19 billion to
encourage the adoption of electronic health records in
hospitals as well as in the physician community.
• CMS has defined standards for qualification including
requiring hospitals to adopt new technologies, report
progress as well as additional quality measures to be
considered “meaningful users” of health information
technology.
• CMS’ heard the call from hospital advocates and did add
more flexibility for hospitals and made some positive
improvements to the regulation, though some additional
concerns remain.
Health IT
Iowa Health IT
• IHA and Iowa Health System have each been
awarded grants to help increase broadband
connections among hospitals in the state.
• Progress is currently underway to connect Iowa’s
hospitals to the Iowa Communications Network.
• Once connected, hospitals will be better prepared to
connect to the health insurance exchanges and will
have much of the needed broadband infrastructure to
ease the transition toward electronic health records.
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