Health Care Law Reform : Health Care Lawyer & Attorney : McDermott Will & Emery Law Firm : Managed Care, Product Regulations

The Facts 

Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate health reform bill, H.R. 3590 (Patient Protection and Affordable Care Act), include provisions establishing one or more health insurance marketplaces (exchanges). The exchanges would serve as an organized and transparent marketplace designed to facilitate access to, evaluation of and purchase of qualified health insurance plans by individuals and small businesses. Premium subsidies would be available through the exchange, and benefit packages would be structured in standardized tiers. An exchange would seek to create a large enough risk pool so that competition among insurers would increase not only with respect to pricing but on quality and service aspects as well. Insurance market reforms in both bills would disallow preexisting condition exclusions and impose medical loss ratio requirements. 

There are key differences between the House and Senate proposals. The House bill would create one national exchange overseen by a new federal agency, the Health Choices Administration (HCA), with an opt-out provision for states under certain circumstances. The HCA would oversee the health plans and premiums charged for policies available through the exchange. Under the House bill, the exchange would be the exclusive marketplace for all individual (non-group) policies, other than grandfathered policies. Insurers would be required to bid to participate in the exchange, with the HCA able to negotiate terms before allowing a plan to participate in the exchange. By contrast, the Senate bill provides for each state to establish and administer its own exchange, subject to compliance with minimum federal standards, with federal intervention if a state does not provide an exchange. 

What’s at Stake

The exchanges will be at the crux of revamping the individual and small business markets. Whether there is a single national exchange or separate state exchanges will have significant implications for providers, payors and consumers. The House proposal could offer greater economies of scale and potential efficiencies for products offered across state lines, but would represent a significant shift from how insurance is currently regulated at the state level. The Senate proposal would retain the benefit of the local market knowledge of the states and would preclude an additional layer of federal regulation. 

Steps to Consider

Understand the impact of the exchanges on structure and oversight of the insurance market, evaluate current plans and prepare for refinements needed to transition to new exchanges.

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The Facts

Both the House health reform bill, H.R. 3962 (Affordable Health Care for America Act), and the Senate version (Patient Protection and Affordable Care Act), include provisions (House Section 1301 and Senate Section 3022) establishing Accountable Care Organizations (ACOs).  ACOs are provider-centric organizations focused on the costs and quality of care received by a designated population of patients over time.  ACOs can consist of vertically and horizontally positioned providers, including physician groups and hospitals.  In its most basic concept, although paid on a fee-for-service basis, ACOs that meet quality-of-care targets and reduce the aggregate costs of care rendered to their patient population relative to a spending benchmark are rewarded with a share of the savings they achieve for the Medicare program.

What’s at Stake

Regardless of whether health reform legislation is passed, providers will be increasingly challenged to adopt operating models through which they are responsible and accountable for the quality, cost and overall care of a defined population of patients.  Emphasis will be placed on clinical processes and outcomes, the patient care experience and utilization.

Steps to Consider

• Evaluate why and assess those actions necessary to migrate from a financially driven model to a clinically integrated driven model if you previously operated a Physician Hospital Organization (PHO) that did not succeed. 
• Evaluate investments in infrastructure and redesigned care processes for high quality and efficient service delivery.
• Establish appropriate committees to explore and evaluate adoption of clinical best practices.
• Bolster capabilities to capture and report on quality measures.
• Coordinate with other providers to facilitate the sharing of effective strategies on quality improvement, care coordination and efficiency.
• Assess hospital-physician relationships and your ability to promote and sustain quality based initiatives.

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The Facts

On November 7, 2009, the House of Representatives passed H.R. 3962, the Affordable Health Care For America Act. Unlike the Senate Finance bill, which would fund reform largely with excise taxes on “Cadillac” insurance plans and on various health care sectors, the House bill would raise much of its new revenue—$739 billion over 10 years—through tax law changes largely unrelated to health care. Notable provisions include the following:

• Imposing a 5.4 percent surtax on adjusted gross income of individuals earning over $500,000 ($1 million for joint filers), raising $460.5 billion over the next decade
• Excluding “black liquor” from the biofuel producer tax credit, saving $23.9 billion over the next seven years 
• Requiring reporting to the Internal Revenue Service of most business-to-business payments over $600, a provision that is also included in the Senate Finance bill and is expected to increase revenues by $17.1 billion over 10 years
• Limiting treaty benefits for some foreign multinationals, raising $7.5 billion over the next decade
• Repealing the planned reform of interest allocation by multinationals, raising $6.0 billion over the next decade
• Codifying and tightening the common-law economic substance doctrine, with corresponding increase in penalties, raising $5.7 billion over 10 years

The House bill would also raise revenue through several health-care-related tax provisions that would affect businesses across sectors:

• A new payroll tax on employers that do not offer coverage, raising $135 billion over 10 years
• Imposing limits and higher penalties on health flexible spending accounts, raising nearly $20 billion over the next decade

What’s at Stake

Businesses in sectors far removed from health care may experience adverse tax changes and new reporting burdens. As the focus now moves to the Senate, additional changes, possibly including new revenue raising proposals, are likely.

Steps to Consider

Entities outside the health care sector should monitor the progress of the health reform debate for tax changes having an impact beyond their employees’ health care.

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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:

• “Physician Payment Sunshine” provisions require drug and device manufacturers to report certain payments to physicians and other health providers. 
• Physicians are required to document referrals to programs at high risk of waste and abuse, such as durable medical equipment or home health services, as well as face-to-face encounters with patients prior to certifying eligibility for home health services or ordering durable medical equipment. The Secretary may apply this requirement to any other service upon a finding that it would reduce the risk of fraud waste and abuse. 
• Medicare and Medicaid overpayments must be returned within 60 days of identification of overpayments. Failure to return overpayments constitutes a false claim for purposes of the False Claims Act.

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.

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