Week of 6/17/2013

HRI regulatory center weekly newsletter
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This week’s regulatory and legislative news

State Medicaid programs challenged by ACA payment provision

A handful of state Medicaid agencies say they are struggling to implement an ACA provision that allows primary care physicians to receive higher, Medicare-level payments when treating Medicaid patients. Medicaid directors in six states and the District of Columbia say they have had difficulty identifying eligible providers, modifying claims payment systems, and aligning Medicaid and Medicare procedure codes. Some Medicaid managed care companies had to change their provider contracts and adjust capitation rates so that the increased payment was given to physicians. Under the ACA, physicians who specialize in family, internal, or pediatric medicine are eligible for the higher payments in 2013 and 2014.

HRI impact analysis: The provision was included in the ACA to ensure that the millions of Americans who will become newly eligible for Medicaid would have access to primary care physicians—some of whom are reluctant to add new patients. Since many states use different procedure codes, it’s critical for physicians to accurately document their evaluation, management, and vaccination services. For example, some states will pay for pediatric vaccine administration using a service code for the vaccine—not the actual procedure. Medicaid officials may need to standardize codes that are specific to their state to those that are used by Medicare. 

Proposed exchange rule helps “unbanked” pay for plan premiums

In an attempt to make health insurance more accessible, HHS has made it easier for individuals without credit cards or bank accounts to pay for health coverage. In a proposed regulation released last week, the department spelled out how consumers can pay exchange plan premiums, including with cashier’s checks, money orders, and pre-paid debit cards. The proposed rule also addresses a number of other issues, including standards for risk management programs, rules for state small business exchange oversight, agent and broker requirements, consumer assistance functions, and program standards for state exchanges.

HRI impact analysis: In 2011, one in twelve US households—which translates to about 17 million adults—did not have bank accounts, according to a 2012 FDIC survey. While the latest regulations could mean some minor administrative headaches for insurers that are already scrambling to meet exchange requirements, they could pay off in the long run if more individuals purchase coverage via the new marketplaces. Some insurers are already incorporating creative payment methods into their consumer outreach strategies, such as partnerships with local retailers to allow individuals to make cash payments, and in-person customer service centers that help enrollees sign up for coverage and pay for premiums on the spot.

Supreme Court rules on pharma "pay-for-delay" agreements

Supporters and opponents of “pay-for-delay” agreements between branded and generic drugmakers are claiming victory under a Supreme Court ruling issued Monday. The deals refer to when the manufacturer of an innovative drug pays its generic competitor to delay the marketing of its product. The Federal Trade Commission, which was involved in the case, has argued that the agreements are anticompetitive and cost consumers $3.5 billion annually in higher drug prices. But drugmakers argued before the court that the agreements help speed access to lower-cost generics by bringing lengthy court battles to a quicker conclusion. 

HRI impact analysis: The high court ruled that the “pay-for-delay” agreements should not be presumed illegal. That pleased drugmakers who feared having to prove that their settlements were not anticompetitive. However, the justices rejected the industry’s argument that the agreements should be shielded from any challenge by regulators. Instead the court said that each agreement will be scrutinized on case-by-case basis. That could open the door to a number of new legal challenges as purchasers continue to struggle with rising drug costs driven by a significant rise in the approval and use of more expensive specialty products.

FDA promotes new safeguards to protect medical devices from cyber attacks

The FDA is urging medical device manufacturers to take steps to prevent their products from being manipulated by computer hackers. The agency recently released draft guidance that recommends device makers review cyber security practices such as providing routine updates for the security software that runs on devices. As devices increasingly become connected to hospital computer networks, the FDA recommended that these facilities also beef up protections. Hospitals are urged to make sure that core elements of certain devices—such as those that monitor vital signs or are necessary to sustain life—can still function even if they experience a cyber attack. 

HRI impact analysis: According to HRI’s report on Top health industry issues for 2013, only 46% of hospitals have a security strategy regulating the use of mobile devices. Sensitive patient data stored on medical devices and hospital networks could be at greater risk as more providers turn to mobile devices to deliver services. That has consumers worried about ensuring their medical data remains private. HRI’s report, Old data learns new tricks, discusses the data security issues facing hospitals and doctors. 

2014 medical cost trend projected by HRI to dip even lower

HRI has released its annual report on healthcare spending growth in the coming year. For 2014, HRI projects a medical cost trend of 6.5% with a net growth rate of 4.5% after anticipated benefit design changes such as higher deductibles. The report focuses on employer-sponsored coverage. While costs are still rising, they are projected to do so at a slower rate than in many years. Aggressive and creative steps by employers, new venues and models for delivering care, and elements of the ACA will exert continued downward pressure on the health sector next year. But the slowdown is a double-edged sword: Savings for consumers and employers translate into added pressure for an industry already operating on smaller margins. To read the findings and see video interviews, visit HRI's Behind the Numbers website.

Full impact of employer shift to self-funding unclear

As 2014 inches closer, attention has re-shifted to the growing trend of employers abandoning insured group coverage in favor of self-insurance. There has always been a gap in the costs between insured group coverage and self-insurance, mainly due to premium taxes, profit and risk charges, and state benefit mandates. The ACA adds to that by placing an annual tax on the health insurance industry, which is passed on to employers. This has prompted more small and mid-sized employers to move toward self-insurance. According to PwC’s annual Touchstone Survey, 31% of businesses with less than 500 employees were self-insured in 2013, up from 22% in 2012.  

HRI impact analysis: While self-insurance has the potential for significant employer savings, many fear that the shift to self-funding could increase premiums in small group markets and small business exchanges by reducing the number of  younger, healthier workers from risk pools. One of the reasons small employers believe they can afford to self-insure is because of the availability of stop-loss coverage. Stop-loss coverage is secondary insurance that protects employers against high-cost claims. States such as Colorado and Rhode Island are tightening regulation of stop-loss insurance by requiring a minimum dollar threshold before coverage kicks in and establishing strong data reporting requirements for stop-loss issuers. Many states, however, have minimal restrictions and reporting requirements for self-insured plans and stop-loss issuers, making it difficult to assess the full market impact of the shift to self-funding.

Upcoming events & deadlines

  • June 28 – Comments due on the proposed rule revising requirements for the Medicare Incentive Reward program and provider enrollment.
  • July 12 – Comments due on the proposed rule implementing methodology for reducing Medicaid DSH allotments.
  • July 22 – Comments due on the interim final rule setting payment rates for healthcare services provided to individuals in the Pre-Existing Condition Insurance Plan. 
  • July 30 – Comments due to the FDA on new models of antibacterial drug development.
  • July 31 – CMS receives state recommendations and final plan data for state partnership exchanges.

Quote of the week

“While interim deadlines missed thus far may not impact the establishment of exchanges, any additional missed deadlines closer to the start of enrollment could do so,” noted the Government Accountability Office (GAO) in a report on the readiness of the federally facilitated health insurance exchanges. GAO offered a similar assessment of the small business health insurance exchanges in a second report.

In the news

An article by the Washington Post takes a look at how hospitals are turning to the arts, humanities, and other therapeutic programs to ease the stress of nurses in an effort to prevent and overcome burnout.

Factually correct

6.5% - the 2014 medical cost trend projected by HRI, which is a full percentage point lower than the 7.5% estimate for 2013. To learn more about the 2014 medical cost trend and the factors that will impact it, visit HRI’s Behind the Numbers website.


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