Employers that currently receive a federal subsidy for providing retiree prescription drug coverage will no longer be able to take a deduction for those retiree drug expenses with respect to that subsidy as of 2013 under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010.
Click here to view the full article.
On May 6, 2010, McDermott Will & Emery reported on the Patient Protection and Affordable Care Act’s new Early Retiree Reinsurance Program (the Program) interim final regulations. The Program went into effect on June 1, 2010. A prerequisite for participation in the Program is for a plan sponsor to submit a timely application for certification to the Secretary, or the Secretary’s designee.
On June 1, 2010, a draft application and set of instructions for the Program was posted to the website of the Office of Management and Budget. A final application will be available at a later date in June, prior to the date on which the U.S. Department of Health and Human Services (HHS) will begin accepting applications, and will be posted on the HHS Office of Consumer Information and Insurance Oversight’s website. McDermott will keep you informed when this final application is posted.
In the meantime, if you have any written comments on the interim final regulations, the Firm can forward your input to HHS on an anonymous basis. The comment deadline is June 4, 2010.
Health Reform Provisions
The Internal Revenue Service (IRS) issued Notice 2010-38, which provides guidance under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, (collectively, the Act) on the tax treatment of health coverage and medical reimbursements for children under age 27. Taxpayers may rely on Notice 2010-38, pending the issuance of amended U.S. Treasury regulations.
Section 105(b) of the Internal Revenue Code generally excludes from an employee’s gross income employer-provided reimbursements made to an employee for the medical care of the employee, the employee’s spouse or the employee’s dependents. Coverage under an employer-provided accident or health plan is excluded from an employee’s gross income under Code Section 106. Effective March 30, 2010, the Act extended these exclusions to coverage under an employer-provided plan and to expenses incurred for the medical care of an employee’s child who has not attained age 27 as of the end of the taxable year.
Notice 2010-38 also clarifies the tax treatment of these dependent benefits under cafeteria plans, VEBAs and Section 401(h) accounts.
Your Next Moves
Cafeteria plans must be amended by December 31, 2010, in order to cover children under age 27 for the 2010 plan year. Amendments for the 2011 and subsequent plan years should be made prospectively. Employer sponsors of group health plans should analyze their current benefit plan design to determine whether they will extend health coverage to children under age 27 in the 2010 plan year or wait until 2011 to implement this change.
Click here to view the full article.
Health Reform Provisions
Employers providing health coverage to early retirees should be aware of the new retiree reinsurance program under health care reform that goes into effect June 1, 2010. Recent guidance issued by the U.S. Department of Health and Human Services specifies the qualifications for eligibility, the steps plan sponsors must take in the application process and the requirements for reimbursement. The program is scheduled to begin on June 1, 2010, and will end on January 1, 2014, or until the $5 billion in funding allocated to the program is exhausted.
Eligibility to participate in the program is not automatic. A plan sponsor is eligible to participate in the program if the plan sponsor submits a timely application for certification to the secretary, or the secretary’s designee, containing the necessary information. Applications will be processed in the order received. Incomplete applications will be returned, and any revised applications will be processed based on the date the revised submission is received, not based on the date of the original, returned submission. Due to the limited duration and budget for this program, it is important for plan sponsors interested in the program to become certified as quickly as possible.
Your Next Moves
Employers providing health coverage to early retirees should analyze their current benefit plan design and cost structure to determine whether they will apply to the program.
Click here to view the full article.
Health Reform Provisions
The reimbursement models in the health reform legislation—including accountable care organizations, bundled payments and payments for quality—create powerful incentives for hospital/physician consolidation. Strategic options include hospital acquisitions of physician practices or other, usually contractual, forms of hospital/physician clinical and financial alignment. In addition, many non-governmental payors have implemented or are planning similar reimbursement initiatives, which will further reinforce the hospital/physician consolidation trend.
Your Next Moves
Hospital boards and senior managers should have as their first priority the development, and effective and rapid implementation, of a hospital/physician consolidation strategy appropriate to the realities of their markets. Leaders considering forming or joining a consolidated provider system should carefully analyze several factors at the next board meeting or strategic planning session. For instance, these consolidated provider systems will need the infrastructure, such as information technology, necessary to meet the reimbursement goals. Another key agenda item is whether the organizations have the financial strength to bear greater financial risk for the cost of care provided to patients.
A hospital’s fate, and, perhaps, existence, in the post-2015 world of fully implemented payment reform will depend upon actions taken, or not taken, in the next year.
New requirements contained in the health care reform legislation increase the pressure on health care providers, suppliers, Medicare Advantage and Part D Plan sponsors, and others to return identified Medicare and Medicaid overpayments in a timely fashion, at risk of being alleged to have violated the False Claims Act.
Click here to read the full article.
The recently enacted federal Patient Protection and Affordable Care Act (PPACA) includes significant fraud fighting and program integrity initiatives, in addition to the more widely publicized provisions dealing with health insurance coverage. Some of these provisions apply to all providers and suppliers under federal health care programs, while others are aimed at specific health industry sectors. By far the most extensive provider-specific terms are aimed at skilled nursing facilities and nursing facilities. These provisions have created greater transparency with respect to complex ownership structures as well as enhanced data available to consumers and regulators on quality of care, staffing profiles and training issues.
Click here to read the full article.
The 340B drug discount program allows certain hospitals and federal-grant-funded clinics to purchase covered outpatient drugs at prices substantially lower than available to other facilities. The Patient Protection and Affordable Care Act expanded the types of hospitals eligible to participate in the program and instituted new programs for ensuring that both pharmaceutical manufacturers and covered entities comply with 340B program requirements.
Click here to read the full article.
The recently enacted Patient Protection and Affordable Care Act has generated significant interest in a new form of integrated delivery system known as an accountable care organization (ACO). The Act specifically creates a separate ACO demonstration project within the Medicare Program, and provides for the implementation of several other coordinated care demonstration programs and the creation of a new entity within the Centers for Medicare and Medicaid Services that has the authority to test proposed methods of coordinated care delivery. All health systems, community hospitals and physician groups should swiftly consider and carefully analyze forming or otherwise participating in an ACO or similar organization in order to respond effectively to the emerging changes in U.S. health care flowing from the new federal health care reform law and related initiatives sponsored by commercial payors.
Click here to read the full article.
The Facts
Recently enacted health reform legislation will establish reimbursement incentives to reward highly efficient hospitals. Under the new law, $400 million has been made available, over fiscal years 2011 and 2012, for hospitals located in counties in the lowest quartile of age-, sex- and race-adjusted Medicare Part A and B spending.
In fiscal years 2011 and 2012, a qualifying hospital will receive, in addition to its regular Medicare reimbursement, a portion of the $400 million based on the ratio of the hospital’s fiscal year 2009 reimbursement relative to total reimbursement in 2009 for all qualifying hospitals.
According to a review of available Medicare databases, hospitals most likely to benefit will be those located in counties in southern, northwestern or midwestern states that are more sparsely populated and that have a lower number of chronically ill enrollees, including Kentucky, Montana, Wisconsin, Nebraska, Colorado and Arkansas.
What’s at Stake
This reimbursement incentive is one of many changes intended to incentivize quality and efficiency over quantity. Although non-qualifying hospitals will not be penalized, this section of the legislation clearly incentivizes greater efficiency and shows a commitment by the U.S. Congress and the Centers for Medicare & Medicaid Services (CMS) to consider new methods of hospital reimbursement.
Steps to Consider
Although CMS will have to create new databases to implement this provision, hospitals can make some early rough predictions about whether they may be located in a qualifying county by consulting the Dartmouth Atlas of Health Care and data available on the CMS website.
The massive health care reform legislation enacted on March 23, 2010, (and subsequently amended on March 30, 2010) includes only a few changes directly affecting Medicare-certified ambulatory surgery centers (ASCs), but these changes will affect Medicare reimbursements in the near-term and may portend even greater reimbursement changes in the future. ASCs should carefully review the legislation to determine how their businesses will be affected.
Click here to read full article.
The Facts
The Senate health care bill, the Patient Protection and Affordable Care Act, includes provisions (detailed in Sections 6301 and 6302) establishing a nonprofit corporation, the Patient-Centered Outcomes Research Institute (PCORI). The PCORI will conduct research and disseminate findings with respect to “the relative health outcomes, clinical effectiveness, and appropriateness” of medical treatments, services and items. The PCORI will not be permitted “to mandate coverage, reimbursement, or other policies for any public or private payer.” However, the government may use comparative clinical effectiveness research in coverage decisions “if such use [of the research] is through an iterative and transparent process which includes public comment and considers the effect on subpopulations” and under other constraints.
What’s at Stake
Regardless of whether this particular bill is passed, comparative effectiveness research is likely to become an ever greater part of how government determines whether and what it will choose to reimburse. Companies with a stake in governmental reimbursement will need to be aware of the direction of comparative effectiveness research and be prepared to justify services and products on that basis.
Steps to Consider
The Facts
The health care fraud provisions in the Affordable Health Care for America Act (H.R. 3162), the House health reform bill released last week, are largely the same as those in earlier proposals (click here and here for more information), and similar to those included in the Senate Finance Committee Bill, signaling clear potential for these provisions to become part of any final health reform package. The latest House bill now includes a provision requiring the Secretary of HHS to establish a self-disclosure protocol to enable health care providers and suppliers to disclose actual or potential violations of the physician self-referral law (Stark Law). Additional provisions from the Senate Finance Committee bill that overlap with the latest House bill include the following:
What’s at Stake
The fraud and abuse provisions in both the House and Senate health reform bills are quietly moving through the health reform process. It is likely that any health reform package passed by Congress will include significant fraud and abuse provisions. In addition to increased scrutiny, these provisions will require additional commitment and resources for compliance efforts.
Steps to Consider
Providers should closely monitor these proposals and consider how current compliance programs, policies and procedures will need to be updated to address requirements common to the health reform proposals.
The Facts
The health care reform process is speeding along with various proposals that could have substantial impact on the market for pharmaceuticals, particularly those favored by hospitals. A subset of these proposals would expand the 340B Drug Program and increase manufacturer Medicaid Drug Rebate Program (MDRP) payment obligations.
Both the House Tri-Committee Bill (H.R. 3200) and the Senate HELP Committee Bill include provisions that would expand the categories of facilities that qualify as “covered entities” under the 340B Program. Children’s hospitals, certain DSH hospitals and critical access hospitals are among the six categories included in the proposed changes. Both bills would extend 340B pricing to drugs administered n connection with inpatient services.
H.R. 3200 would significantly affect the MDRP by expanding the scope of included classes of trade to Medicaid managed care organizations (Section 1743 of H.R. 3200) and Medicaid/Medicare dual eligibles (Section 1181 of H.R. 3200). Section 1181 would expand the scope of the program. Section 1742 would raise the minimum rebate percentage amount from 15.1 percent to 22.1 percent. Section 1742 also would impose a higher rebate percentage on new formulations of older single source or innovator multiple source drugs. Note that the Senate Finance Committee Chairman's Markup proposes an even larger increase in the minimum rebate percentage to 23.1 percent
What’s At Stake
While the 340B-related proposals in the House and Senate Bills would increase the market for discounted drugs, the MDRP proposals from both the House and Senate would also increase the cost to a manufacturer participating in the MDRP.
Steps to Consider
The Facts
The health reform proposal pending before the Senate Finance Committee includes many significant fraud and abuse changes that would affect hospitals, physicians, group purchasing organizations (GPOs) and device manufacturers, among others. Following are some of the more significant changes:
What’s at Stake
The health sector should expect that increased fraud and abuse scrutiny and enforcement will be included in any health reform package passed by Congress. While most of the proposals reflect increased scrutiny for providers, the proposal for a Stark Law self-disclosure protocol could be a significant positive development for providers that are looking for a pathway to deal with so-called “technical” Stark Law violations, where there is no fraudulent or abusive conduct, yet the statutory damages are significant.
Steps to Consider
Providers that are subject to the Stark Law should closely monitor the proposals for a self-disclosure protocol in the health reform package and in a stand-alone bill introduced by Rep. McDermott (H.R. 3556).
The Facts
Senate Finance Committee Chairman Max Baucus (D-MT) put forth his much-anticipated Framework for Comprehensive Health Reform on September 8, 2009. The Framework outlines a plan for consideration by the Finance Committee’s “Gang of Six” bipartisan negotiators and includes policies that reflect the work of the committee throughout the summer. In addition to other areas of health reform, the Framework includes policies specific to both “transparency and program integrity” and “fraud, waste and abuse”:
Additional details about these provisions will be contained in the Chairman’s Mark of the bill, which will be made available prior to committee markup, which is expected later this month. Importantly, similar provisions are contained in the House health reform bill, America’s Affordable Health Choices Act of 2009. The Senate Health, Education, Labor and Pensions Committee (HELP) bill also includes provisions related to fraud and abuse enforcement.
What’s at Stake
Each health reform proposal to date includes provisions designed to prevent or deter fraud and abuse. Furthermore, reducing the rising cost of health care is a goal shared by lawmakers on both sides of the aisle, and reduction in fraud, waste and abuse is generally viewed as an area of significant savings. The health sector should expect that increased fraud and abuse scrutiny and enforcement will be included in any health reform package passed by Congress.
Steps to Consider
Evaluate the impact of fraud and abuse proposals in pending legislation. Assess how current compliance programs, policies and procedures will need to be updated to address requirements common to health reform proposals.
The Facts
Health reform legislation approved by the House Energy and Commerce Committee on July 31, 2009, includes an amendment to strike the so-called Part D “non-interference” clause, which prohibits the Secretary of the U.S. Department of Health and Human Services (the Secretary) from interfering with negotiations between pharmaceutical manufacturers, pharmacies and Part D Plan Sponsors. Click here for an overview of the underlying legislation.
The amendment would authorize the Secretary to directly negotiate with pharmaceutical manufacturers the prices—including discounts, rebates and other price concessions— that may be charged to Part D Plan Sponsors for covered Part D drugs. The negotiated prices would apply beginning in CY 2011, and would not prevent Part D Plan Sponsors from obtaining further reductions or discounts.
What’s at Stake
Inclusion of this amendment renews debate on the role of competition within the Medicare prescription drug benefit, and whether the federal government or private health plans are better suited to achieve greater reductions on prescription drug costs for Medicare beneficiaries (and taxpayers). That this concept is part of health reform legislation also is noteworthy for potentially signaling a first step towards federal price setting for pharmaceuticals.
Steps to Consider
Part D Plan Sponsors, pharmacies and pharmaceutical manufacturers alike should closely watch reconciliation of the Energy and Commerce Committee’s bill with the bills adopted by the two other House committees of jurisdiction to see the fate of this clause. Whether the Senate Finance Committee includes such a provision in its draft legislation also will be significant.
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:
New provisions include the following:
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.
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.
The Facts
The first draft of the House Democrats’ health care reform legislation published June 19, 2009, portends the government’s continued focus on Medicare program integrity, fraud and abuse reform, and transparency in industry-physician relationships. The bill includes several provisions that propose to enhance existing program penalties for fraud and abuse. Further, the bill explicitly provides that existing authority relating to program integrity and the authority to prevent and prosecute fraud, waste and abuse will apply equally to the public health insurance option. Other provisions of the bill propose to strengthen significantly compliance requirements for Medicare program participation.
Proposals for increasing existing penalties include enhanced penalties for:
Proposals aimed at enhancing program and provider protections include:
What’s at Stake
The provisions in the proposed bill underscore the federal government’s objective to fund some of the cost of health care reform through increased program penalties, reducing fraud, waste and abuse and enhancing payment protections. Physicians, providers and suppliers may see increased enforcement activities bolstered by greater scrutiny of program activities.
Steps to Consider
The Facts
On June 19, 2009, House Democrats unveiled their first draft of health care reform legislation. Despite exceeding 850 pages, the draft bill is still a work-in-progress. Many of the anticipated Medicare program payment reductions and revisions are absent from this draft, but providers should not draw too much comfort from that. President Obama has called for more than $600 billion in savings from Medicare, and those savings will be required to pay for the massive overhaul. Providers should still expect significant savings provisions to be added later.
In the meantime, the bill still includes considerable change, including:
What’s at Stake
The proposed bill foreshadows a new reimbursement paradigm that focuses on accountability for quality, cost savings, coordinated care, and increased scrutiny to preclude conflicts of interest and other skewed incentives. Health care service providers will face new systems, obligations and incentives that will dramatically alter how providers furnish services and interact with Medicare and its beneficiaries.
Steps to Consider
The Facts
The proposals under consideration in the Senate Finance Committee’s first of three anticipated health reform option papers, released on April 29, 2009, would impose new transparency obligations on physicians, hospitals, nursing homes and pharmaceutical manufacturers. Transparency proposals include amending the Stark Law in-office ancillary services exception to require physicians to disclose financial interests in certain imaging services; eliminating the Stark Law “whole hospital” and rural provider exceptions with limited grandfather provisions; requiring manufacturers to disclose financial relationships with physicians; and requiring nursing homes to disclose ownership information, implement employee compliance programs and report staffing data. The Committee also proposes to strengthen compliance requirements and enforcement activity by increasing funding to federal enforcement programs, strengthening the screening process for Medicare program provider applications, requiring providers to implement compliance programs as a condition of participation in Medicare and Medicaid, and amending the Civil Monetary Penalties (CMPs) Law to increase penalties and extend the use of CMPs for certain violations.
What’s at Stake
The federal government may increase enforcement activities bolstered by easier access to publicly available information on existing arrangements and relationships. Providers could face increased penalties or suspension of payment for compliance failures.
Steps to Consider
Senator Kennedy’s Senior Health Policy Advisor John McDonough, one of the key architects of the health reform effort, spoke at McDermott’s Washington, D.C., office in mid-April 2009 on the outlook for health reform. Other speakers included principals from Speaker Pelosi’s health care advisory team, Families USA and America’s Health Insurance Plans. McDonough affirmed that systemic health reform will happen in this Congress. Unlike in the Clinton years, all stakeholders are aligned and coordinating towards this end. Both the House and Senate intend to pass bills by the August 2009 recess. If Republicans block reform in 2009, the Democrats will change tactics to accomplish reform through budget reconciliation, which is not subject to filibuster. Click here to read John McDonough’s core predictions and our insights on how those policies, if adopted, would affect the health care industry.
Enter keywords:
Add this blog to your feeds. Or, receive email notifications by typing your email address in the box below.