Health Care Reform Blog : Health Care Law Reform : McDermott Will & Emery Law Firm

The Facts

Neither the House nor the Senate will pass health reform legislation before adjourning for the summer recess.  Despite a breakthrough deal yesterday with fiscally conservative Democrats that allowed the House Energy and Commerce Committee to resume markup of its health reform bill on July 30, 2009, health reform legislation will not be considered on the House floor until September, at the earliest, according to House leadership.  Meanwhile, Senate Majority Leader Harry Reid (D-NV) announced July 23, 2009, that health reform legislation also will not be considered on the Senate floor until after the summer recess.  The Senate delay is intended to give a bipartisan group of Senate Finance Committee members additional time to negotiate a bipartisan health reform proposal.  Finance Committee Chairman Max Baucus (D-MT) announced July 29, 2009, that the group of six Finance Committee senators working behind closed doors are nearing an agreement.  Chairman Baucus hopes for a near-term agreement from the bipartisan talks, which could allow for a public committee markup of the agreement the week of August 3, 2009, the final week the Senate is scheduled to be in session prior to recess.

What’s at Stake

Passage of systemic health reform, which is expected to make sweeping changes to the health sector, is at stake.  While the president had earlier pressed for passage by the House and Senate before the August congressional recess, the president's rhetoric has recently recalibrated and now both he and congressional leaders speak of passing health system reform by the end of the year.  However, these delays will make completion of health reform legislation this year a challenge.  An enormous amount of work remains before a bill can be ready for the president's signature, and there now will be a short amount of time in which to complete that work.

Steps to Consider

Watch for the emerging Finance Committee bipartisan agreement and evaluate how its concepts would affect your operation.  Contrast the impact of the bill approved by the Senate HELP Committee and House committees and the expected Finance bipartisan agreement.  Assess the impact of the bills working their way through the House.

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The Facts

The Office of the National Coordinator for Health Information Technology’s HIT Policy Committee has taken another important step towards defining “meaningful use” under the American Recovery and Reinvestment Act of 2009 (ARRA). Hospitals and eligible providers must meet the requirements for “meaningful use” of certified electronic health records (EHRs) in order to qualify for Medicare incentive payments under ARRA. Recently, the HIT Policy Committee approved revised recommendations for an initial definition of “meaningful use.” These recommendations are outlined in a lengthy matrix, which sets forth measures for meeting specified objectives for each of the years 2011, 2013 and 2015:

• Goal for 2011 objectives – Capacity to electronically capture in coded format and report health information, and use that information to track key clinical conditions
• Goal for 2013 objectives – Ability to guide and support care processes and care coordination
• Goal for 2015 objectives – Capability to achieve and improve performance and support care processes and key health system outcomes

The HIT Policy Committee also recommended that the incentives be paid according to an “adoption year” timeframe rather than a calendar year timeframe. Accordingly, the objectives and measures for the year 2011 would apply to an organization’s first adoption year, if an organization is not ready for incentive payments until after 2011. The U.S. Department of Health and Human Services (HHS) will use the recommendations to develop regulations to implement the incentive payments under ARRA. 

What’s at Stake

Hospitals and eligible providers that meet the requirements of “meaningful use” of certified EHRs will be eligible for Medicare incentive payments beginning in 2011. Medicare payments may be reduced to hospitals and providers that do not meet the requirements for “meaningful use” of certified EHRs by 2015.

Steps to Consider

Evaluate how the 2011 Objectives and Measures in the Meaningful Use Matrix may require changes in the operations of your organization, anticipating that some form of the objectives and measures may ultimately be included in the regulations promulgated by HHS. Monitor regulatory actions by HHS regarding the definition of “meaningful use” and Medicare incentive payments under ARRA.

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The Facts

Health care reform legislation introduced in the House, the America's Affordable Health Choices Act of 2009, provides key details on financing health system reform. Significant revenue-raising proposals include the following:

• A surcharge on high-income individuals of 1 percent on adjusted gross income between $350,000 and $500,000 (married filing a joint return), a 1.5 percent surcharge on incomes between $500,000 and $1 million, and a 5.4 percent surcharge on income in excess of $1 million, to raise $543.9 billion over 10 years
• Corporate and international tax proposals that have narrow application or were widely expected by the business community, or both, including a further delay in the application of worldwide interest allocation rules relevant to U.S.-based multinationals for foreign tax credit purposes, denial of treaty benefits for groups parented by non-treaty country entities, and the long-anticipated codification of the economic substance doctrine applicable to a wide range of taxpayers, to raise $37.2 billion over 10 years

What's at Stake

As the House and Senate seek to pay for health system reform, it is expected that one-third to one-half of the cost of reform will be paid for through increased revenue from the tax code. Certain companies and high-income individuals may see significant increases in their tax liability. The Senate Finance Committee is considering a range of revenue-raising options. If the Senate selects different revenue-raising provisions, then the House and Senate will have to reconcile their differences in Conference, which could make passage of a bill more difficult.

Steps to Consider

• Watch the Senate Finance Committee, which is working to craft its own revenue raising proposals for health reform. It is expected that the Senate will turn to revenue-raising provisions not included in the House bill.  
• Small businesses should pay close attention to the surcharge proposal because many small businesses report profits on individual tax returns. Some members of the House are clamoring for changes to the surtax prior to House floor action. 
• Thus far, tax writers have indicated that the more controversial corporate and international revenue-raising provisions in the president’s budget will not be considered as part of health care reform, but companies should monitor the situation. 

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The Facts

On July 14, 2009, the chairmen of three House Committees with jurisdiction over health policy introduced the America’s Affordable Health Choices Act of 2009. The fraud and abuse provisions from the first House bill remain with some changes to strengthen penalties or make technical corrections. The bill also includes several new provisions and provides for $100 million additional annual funding of the Health Care Fraud and Abuse Control Fund.

Changes or technical corrections to existing provisions include the following:

• Authorization for the Secretary to disenroll certain providers of services or suppliers for failing to establish a compliance program with required core elements
• Clarification that a provider's repayment of an overpayment does not limit the provider's potential exposure to other governmental actions such as interest, fines, civil or criminal sanctions it if is later determined that the overpayment was related to fraud by the provider or supplier or by provider or suppliers employees or agents
• Expansion of the requirement for physician face-to-face encounters with patients prior to certifying eligibility for home health services to also mandate this requirement prior to ordering durable medical equipment or any other service if the Secretary determines it would reduce the risk of fraud waste and abuse 

New provisions include the following:

• Language addressing the period and effect of the Office of Inspector General exclusion authority
• A requirement for billing agents and clearinghouses to register with the Secretary
• Amendments to conform the Civil Monetary Penalties law to the recent False Claims Act amendments

What’s at Stake?

The health care reform fraud and abuse provisions have a wide reach and touch on nearly every aspect of providing health care—from enrolling as a provider to payment for services. Strict enforcement and penalty provisions will raise the compliance bar to new heights.

Steps to Consider

Consider how current compliance programs, policies and procedures, including those for repaying overpayments, will need to be modified to manage proactively the government’s increased focus on fraud and abuse.

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On a parallel track with health reform initiatives, the Centers for Medicare and Medicaid Services (CMS) continues its annual process of proposing changes to the existing Medicare payment systems.  The proposed 2010 Medicare Physician Fee Schedule Update, published in the July 13, 2009, Federal Register (74 Fed. Reg. 33520), includes a number of important changes to physician reimbursement, including a significant reduction in physician fees (unlikely to survive the final rule intact) as well as the "usual" array of technical revisions to the Medicare Physician Fee Schedule.  Click here for a brief summary of key proposals.

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Democrats in the U.S. House of Representatives issued on July 14, 2009, a revised health care reform bill: America’s Affordable Health Choices Act of 2009. 

A whopping 1,018 pages long, the draft legislation addresses many of the key topics relating to health care reform, including the following:

• Medicare and Medicaid reforms
• Creation of health insurance exchanges in local service area, all of which would include a public plan option
• Provisions to promote preventive and wellness services
• Measures to improve efforts to combat fraud, waste and abuse

The revised bill also includes new provisions, such as a proposed tax on self-insured health plans, to fund the proposed health care reform.

Click here for a description of the legislation, released in conjunction with the bill.

Click here for a section-by-section summary of the bill.

Click here for a document comparing this July 14, 2009, bill to the initial draft bill issued by House Democrats on June 17, 2009.  Click here for a summary of top-line changes between the June 17, 2009, and July 14, 2009, versions of the legislation.

Click here for additional information about the proposed legislation, including descriptive documents released in connection with the bill, that is available on the House Committee on Energy and Commerce website.

Click here for a timeline in which the proposed legislation would be implemented.

Click here for the Congressional Budget Office's preliminary analysis of the legislation's cost.

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The Facts

Draft health care reform bills circulating on Capitol Hill would seek to expand access to health insurance by creating “health insurance exchanges” or “gateways” (Exchanges) at the state or local level. Qualified individuals and small businesses could purchase health insurance offered by a private entity participating in an Exchange, or, if adopted, a public plan option.

• Covering essential benefits:   The draft House “Tri-Committee” bill released on June 19, 2009, would require qualified health benefits plans to cover “essential” benefits through defined benefit packages that would vary by the insured’s cost-sharing obligation. Plan sponsors could elect to offer benefit plans that include additional benefits, such as vision care. The amended Senate bill proposed by Democrats on the HELP Committee would permit sponsors of qualified health plans to provide “essential” benefits through benefit plans with one of three cost-sharing variations. States could require these plans to cover additional benefits.
• Sponsors of Qualifying Health Plans:  Both bills anticipate that private entities (including health insurers and HMOs) would participate in the Exchanges by sponsoring these qualified health plans. The House bill contemplates a bidding process with selected entities entering into a minimum one-year contract to offer plans in the Exchanges. The Senate bill would authorize the Exchanges’ administrators to permit participation of “certified” sponsors that are “determined” to offer plan(s) that are “in the interests of qualified individuals and qualified employers.”

What’s at Stake

For health care providers, whether their services would be part of the “essential” benefits defined for these qualifying health plans, and the terms and conditions (including payment) of participation will be key. For health insurers and other managed care organizations, a significant question is the extent to which the conditions of participation in the Exchanges—including mandatory acceptance of all enrollees and participation in the risk-pooling mechanism established for the Exchanges—affect the ability to offer the essential benefits (and any permissible additional benefits) at an affordable rate. 

The role of a public plan option, if any, will be critical for all potential participants.

Steps to Consider

Both bills offer general parameters for defining the “essential” benefits, setting provider network requirements, and adopting criteria for qualifying health plan sponsors. The details, however, likely will be addressed through the administrative rulemaking process, albeit in accordance with any requirements included in the final legislation.

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The Facts
In May 2009, the leadership of the Senate Finance Committee announced a set of options for financing a mammoth health care reform proposal, including capping the exclusion from income for health insurance, reducing the tax benefits of flexible spending accounts and health savings accounts, and limiting the definition of qualified medical expenses. Under current tax laws, employer contributions towards health insurance and health care for active and retired employees are excluded from an individual’s income and employment taxes. The Senate Finance Committee proposals would limit these tax exclusions in several important ways:

• Place a cap on the income tax exclusion for employer provided health insurance based on various indices, with some proposals phased out for taxpayers with high adjusted gross incomes (AGI)
• Repeal the Code Section 213 deduction for medical expenses in excess of 7.5 percent of AGI
• Eliminate the exclusion from income and employment taxes for contributions made through health flexible spending accounts and health reimbursement arrangements

What’s at Stake
The Congress’ Joint Committee on Taxation estimated that as stand-alone proposals, each of the proposals would result in a reduction in the number of people receiving employer sponsored health insurance in the range of 10 to 12 million people based on a full repeal of the tax exclusions, and in the range of one million people if the tax exclusions for health insurance were to be capped. Of course, the outcome could be different if the tax proposals were included as part of a comprehensive reform of the health care system. 

Steps to Consider
Employers should analyze the impact of these proposals on the group health plans they sponsor for employees. Employers should also consider analyzing the effect of these proposed tax changes on additional employee income and employment taxes. 

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