Apply By August 8 To Receive Health Reform Funds For Employer Health Programs

The Department of Health and Human Services (HHS) has announced that it is making available $10 million from the Patient Protection and Affordable Care Act's Prevention and Public Health Fund to establish and evaluate comprehensive workplace health promotion programs across the nation to improve the health of American workers and their families. The initiative's goal is to improve workplace environments to support healthy lifestyles and reduce risk factors for chronic medical conditions such as heart disease, cancer, stroke, and diabetes, the HHS said. Applications must be submitted by August 8.

"Spiraling health care costs and declines in worker productivity due to poor health are eroding the bottom line of American businesses," said Kathleen Sebelius, HHS Secretary. "This new initiative will help companies of all sizes implement strategies to improve employee health and contain health costs driven largely by chronic diseases."

Project funds will support evidence-based initiatives to build worksite capacity and improve workplace culture in support of health, the HHS explained. Examples of such strategies include establishing tobacco-free campus policies, promoting flextime to allow employees to be more physically active, and offering more healthy food choices in worksite cafeterias and vending machines. A core principle of the initiative is to maximize employee engagement in designing and implementing the programs so they have the greatest chances of success.

The funds will be awarded through a competitive contract to an organization with the expertise and capacity to work with groups of employers across the nation to develop and expand workplace health programs in small and large worksites. Participating companies will educate employees about good health practices and establish work environments that promote physical activity and proper nutrition and discourage tobacco use --the key lifestyle behaviors that reduce employees' risk for chronic disease.

"This is an exciting opportunity to help employers deliver effective workplace health programs on a national scale," said Thomas Frieden, director of HHS' Centers for Disease Control and Prevention, which oversees the initiative. "The promise of this strategy is a win-win: workers will be healthier and more productive, and companies will be more profitable."

For more information on submitting proposals for the Comprehensive Health Programs to Address Physical Activity, Nutrition, and Tobacco Use in the Workplace, visit http://www.fbo.gov.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

New Studies Suggest Employer Sponsored Coverage May Increase Because Of Health Reform

Several new studies suggest that the Patient Protection and Affordable Care Act (ACA) will help to reverse a decade-long reduction in employer-provided coverage.

The studies are in part a response to a McKinsey and Company report that as many as 30% of employers will drop employer provided insurance when the ACA is fully implemented after 2014. According to an already published report from the International Foundation of Employee Benefit Plans (IFEBP), fewer than 1% of employers (0.7%) plan to stop providing employees with health care coverage in 2014, when "play or pay" provisions become effective.

Robert Wood Johnson Reports

Two reports released by the Robert Wood Johnson Foundation (RWJF) show there has been a significant erosion in employer-sponsored insurance (ESI) over the last decade, but that the ACA is expected to help reverse the trend among small employers.

A report from the State Health Access Data Assistance Center (SHADAC) at the University of Minnesota shows the percentage of nonelderly Americans who get their health insurance through their jobs declined eight percentage points in a decade --from 69% in 1999/2000 to 61% in 2008/2009 --with low- and moderate-income families hardest hit. The SHADAC report, State-Level Trends in Employer-Sponsored Health Insurance, found that 7.3 million fewer people have ESI than approximately one decade ago.

Recent analysis from the Urban Institute finds that the ACA will likely help stem this decline, especially among small businesses.

Nationwide, the share of private employers offering ESI declined by 3.6% age points between 1999/2000 and 2008/2009. The decline among small businesses, those with less than 50 workers, was greater --from 47% in 1999/2000 to 42% in 2008/2009.

Focusing on small business, where the coverage erosion has been greatest, the Urban Institute analysis, in The Effects of Health Reform on Small Employers and Their Workers finds that the ACA will likely help reverse these trends due largely to the introduction of the Small Business Health Options Program (SHOP) and reforms to health insurance markets.

Using Urban's Health Insurance Policy Simulation Model, researchers estimated that insurance offer rates for all firms with fewer than 100 employees would increase by 9.7% under ACA. The biggest jump would be seen in the smallest firms, with a projected increase in offer rates of 14.2% among businesses with fewer than ten employees. When combined with a projected drop in premium costs, the report indicated that ESI coverage will increase modestly for workers employed by firms with fewer than 50 employees, as well as for their dependents.

For more information, visit http://www.rwjf.org/newsroom/product.jsp?id=72527. The SHADAC report is available at http://www.rwjf.org/files/research/72528shadac201106.pdf. The Urban Institute report is at http://www.urban.org/uploadedpdf/412295-Employer-Sponsored-Insurance.pdf.

Avalere Report

A report from Avalere Health that reviewed a number of analyses conducted by economists and policy analysts and published employer surveys suggests that the ESI market will be fairly stable after 2014 when key ACA coverage provisions go into effect.

According to Avalere, "Stability in ESI is driven by expectations that large firms, whose policies cover more people than small-and medium-firm policies combined, will continue offering health benefits. Moreover, small businesses that will benefit from new economies of scale in the small business exchanges are likely to offer coverage for their employees through the exchange and possibly newly offer coverage if they previously did not."

While the overall ESI market is likely to remain fairly stable, Avalere noted that there is agreement that that some firm types and covered subgroups are likely to experience changes in coverage soon after 2014. Large and small firms with low-wage workers are likely to pay the new ACA employer penalties and allow employees to enroll in Medicaid or subsidized coverage through health insurance exchanges. Also, the offers of early retiree coverage are likely to decline dramatically. This type of coverage is a significant cost for many companies and does not directly benefit the employer. Consequently, many early retirees are likely to receive defined contributions from employers to purchase coverage through the exchange in 2014 or soon thereafter.

McKinsey Response

In response to criticism of its report, including calls from some members of Congress to explain its results McKinsey & Company released details of its survey methodology and said that it stood "by the integrity and methodology of the survey."

According to McKinsey, "The survey was not intended as a predictive economic analysis of the impact of the ACA. Rather, it captured the attitudes of employers and provided an understanding of the factors that could influence decision making related to employee health benefits.

As such, our survey results are not comparable to the healthcare research and analysis conducted by others....Comparing the McKinsey survey to economic estimates, such as the [estimates from the Congressional Budget Office], is comparing apples to oranges." While McKinsey cited CBO estimates, "Any comparison is not apt. We understand how the language in the article could lead the reader to think the research was a prediction, but it is not."

The McKinsey response is at http://www.mckinsey.com/en/US_employer_healthcare_survey.aspx. The CBO report referred to by McKinsey is at http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Enrollment tops 20,000 in health reform's temporary high-risk pool

More than 21,000 individuals have enrolled in the Pre-Existing Condition Insurance Plan (PCIP), a temporary high risk health insurance pool established under the Patient Protection and Affordable Care Act, according to the most recent data from the Center For Consumer Information and Insurance Oversight (CCIIO).

As of April 30, there were 21,454 individuals enrolled in the PCIP nationwide, which is 3,141 more than were enrolled as of March 31. Nevertheless, the enrollment figures are far below the 5 million expected to enroll in the $5 billion program.

The CCIIO announced earlier this month that premiums in the PCIP will be reduced by as much as 40% in 18 states and that eligibility standards will be eased in 23 states and the District of Columbia to help more individuals with preexisting conditions sign up for the program.

The PCIP is designed to provide health insurance coverage for individuals who have been uninsured for six months and who have been denied a policy because they have preexisting conditions. The pool will run until Jan. 1, 2014, when American Health Insurance Exchanges take effect.

Pennsylvania had the highest number of enrollees (3,191), followed by California (1,858) enrollees, and Texas (1,528). North Dakota had the fewest number of enrollees.

Wave goodbye to waivers

The Centers for Medicare and Medicaid Services (CMS) has announced that, after September 22, 2011, no new applications (or requests for extensions) for waivers from the annual limit restrictions under the Patient Protection and Affordable Care Act will be considered.

Additionally, any plans receiving these waivers will have to alert consumers that the plan has restrictive coverage, including low annual limits that could result in high out-of-pocket spending if you need hospital or other high-cost services.

In 2014, annual limits for new health plans will be banned as high-quality, affordable, and comprehensive health insurance plans are made available through Health Insurance Exchanges. Until then, annual limits are phased out in order to preserve access to needed benefits and the affordability of coverage. CMS has granted temporary waivers from the annual limits provision of the law for plans that demonstrate that compliance with the phase-out of limits would result in a significant decrease in access to benefits or a significant increase in premiums.

Plans with low annual limits (e.g., $10,000) are most likely to need waivers to prevent a significant increase in premiums or decrease in access to coverage to comply with the current limit of $750,000. Many of these plans have already received a waiver. Plans with higher annual limits are less likely to qualify for a waiver because complying with the new rules is unlikely to lead to a significant increase in premiums or decrease in access to care. Still, the policy gives all plans and issuers with restricted annual limits below $2 million a reasonable opportunity to apply for a waiver.

“In 2014, thanks to the Affordable Care Act, all Americans will have access to high-quality, affordable, and comprehensive health insurance,” said Steve Larsen, Director of the Center for Consumer Information and Insurance Oversight, which oversees the program at CMS. “Mini-med plans do not provide comprehensive health coverage but unfortunately they are the only insurance options some consumers have today. These waivers have ensured that over 3 million people, 2 percent of all privately insured Americans, can keep the limited coverage they have as we transition to a better insurance marketplace.”

This guidance imposes new, more stringent disclosure requirements and requires health plans with waivers to tell consumers that their health care coverage is subject to an annual dollar limit lower than what is allowed under the law. Insurers also must include the dollar amount of the annual limit along with a description of the plan benefits to which the limit applies. Plans also must show how the annual limit would affect a consumer who was hospitalized to help people understand how far their coverage will reach if they become seriously ill. Finally, plans with waivers must attest annually to their compliance with the consumer disclosure requirement.

In addition, CMS has released updated lists of insurance plans whose applications for a waiver have been approved or denied. That information is available by city and state at cciio.cms.gov/resources/files/approved_applications_for_waiver.html.

As the health law required, in September 2010, insurance plans began phasing out their annual limits. Today, most plans cannot impose an annual limit that is lower than $750,000. Beginning in September, that allowable limit increases to $1.25 million and to $2 million for plan years beginning in September 2012. Some plans currently have annual limits above $750,000 and below $2 million. Actuarial analysis suggests that most of these plans can meet the increased annual limit of $1.25 million with minimal premium increases (less than one percent). Similarly, increasing annual limits from $1.25 million to $2 million the following year is predicted to have a small impact on premiums.

Commenting on calories more fun than counting them

You still have time to comment on the proposed requirements for providing nutrition information for standard menu items in certain chain restaurants and similar retail food establishments. The Food and Drug Administration (FDA) has extended the comment period until July 5, 2011, for the proposed rule, which was published in the Federal Register on April 6, 2011 (76 FR 19192).

You may recall that the Patient Protection and Affordable Care Act (ACA) amended the Food, Drug, and Cosmetic Act to require restaurants and similar retail food establishments that are part of a chain with 20 or more locations doing business under the same name and offering for sale substantially the same menu items to provide calorie and other nutrition information for standard menu items, including food on display and self-service food.

Ways to submit comments. You may submit comments, identified by Docket No. FDA-2011-F-0172 and/or RIN 0910-AG57, by any of the following methods:

Submit electronic comments in the following way: Federal eRulemaking Portal: http://www.regulations.gov/. Follow the instructions for submitting comments.

Submit written submissions in the following ways:

• FAX: 301-827-6870.
• Mail/Hand delivery/Courier (for paper, disk, or CD-ROM submissions): Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852.
  

Let’s talk turkey. More than 300 comments have been submitted so far, ranging from topics such as trans fat to alcoholic beverages. Why not add your favorite nutrition topics to the list? I don’t know about you, but I’d rather comment on calories than count them.

Democrats push back against controversial McKinsey study

Both the White House and Democrats in Congress have pushed back against the recent controversial findings by consultants McKinsey and Company on the effect the ACA will have on the number of employers providing employer-sponsored health coverage after 2014. As we discussed here last week, McKinsey's findings indicated that about 30% of employers may stop offering coverage once the bulk of the ACA's provisions become effective in 2014.

At the White House, Nancy-Ann DeParle, Assistant to the President and Deputy Chief of Staff, countered with a list of three studies (by The Rand Corporation, The Urban Institute, and Mercer) predicting either much smaller drops in employer-sponsored coverage, or suggesting that not much will change.

In a stronger response, Senator Max Baucus (D-MT), Chairman of the Senate Finance Committee, asked McKinsey representatives to meet with SFC staffers to explain the study's findings in detail. On June 16, Baucus announced that McKinsey has agreed to have that conversation. Baucus wants answers from McKinsey to questions on several aspects of the study, including who funded the study, and the nature of the sampling design for the survey.

A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.

PPACA funding: a useful tracking resource

The skirmishes in Congress these days over the future of PPACA take place on two fronts: 1) the future of specific provisions and 2) the amount of money appropriated to implement the Act's provisions.

With regard to appropriations, the latest update of a report from the Congressional Research Service does a good job of tracking individual PPACA appropriations and reporting on their current status. "Appropriations and Fund Transfers in the Patient Protection and Affordable Care Act" (R41301) also offers a brief primer on the way federal spending works, e.g., the differences between mandatory and discretionary spending, annual vs. multiple-year appropriations, etc...

Table 1 in the report offers a description of the PPACA program and its related appropriation (or, in some cases, Medicare Trust Fund transfer). Table 2 shows the amounts appropriated or transferred for each provision by fiscal year, over the 10-year period FY 2010 through FY2019.

Table 1 also offers recent updates on the implementation effort for a given provision. So, for example, by looking at Tables 1 and 2 we see that five billion dollars were appropriated without fiscal year limitation in order to fund the temporary high-risk health insurance pools established under Act Sec. 1101. However, we can also see from Table 1 that HHS recently reduced premium amounts and took other steps to boost enrollment in the program. Participation in (and therefore spending for) the program appears to be lower than originally planned.

Employers focus on employee health to lower costs

When considering longer-term health cost trends, some employers worry about the effect of the ACA on the cost of employer-provided health care. In the short term, employers want to rely more on employee lifestyle changes to decrease health care costs. However, the inability to motivate and change habits has prompted concern. These are key findings of a recent survey of 1,028 employers from Aon Hewitt.

 The 2011 Health Care Survey found that the top health care outcomes organizations would like to achieve this year are improving employee health habits (56%), lowering health care cost increases (49%), decreasing worker health risk (44%), increasing participant awareness of health issues (37%), and enhancing participation in health improvement/disease management programs (37%). However, Aon Hewitt noted that success in these areas may be difficult, as 56% of respondents said that motivating participants to change unhealthy behaviors is the most significant challenge to accomplishing 2011 health care program goals.


In 2010, 70% of companies offered disease management programs, followed by health and wellness improvement programs (64%) and behavioral health programs (60%), according to Aon Hewitt. In addition, many organizations plan to expand efforts during the next three to five years and implement strategies that focus on total well being to improve physical and mental health (60%), absence management (53%), and integrated safety and health improvement efforts (50%).


As a way to influence employees to participate in these programs, 22% of employers will provide incentives to employees, while 10% will use programs to penalize employees for exhibiting unhealthy behaviors. Employers currently offer incentives to employees for participation in key initiatives, such as biometric screenings (33%), health risk assessments (33%), wellness programs (31%), and tobacco cessation programs (27%). Conversely, Aon Hewitt found that some employers impose a penalty for not participating in biometric screenings (5%), health risk assessments (5%), wellness programs (2%), and tobacco cessation programs (6%).

A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.

What will 2014 mean for employees if ACA is still around?

We’re all waiting for the Court of Appeals in Atlanta to make a decision about the constitutionality of the ACA, but, in the meantime, I can’t help wondering what the practical effect of the law will be on employees, if healthcare reform survives the assorted legal challenges it is facing across the country. Should workers be worried that their coverage, assuming they like it, will disappear?

Predictions certainly vary. For example, McKinsey & Company took a survey in early 2011 of a wide variety of 1,300 employers, and is anticipating that about 30% of them will definitely or probably stop offering employer-sponsored health insurance after 2014, when many of the ACA’s provisions become effective. Even more disturbing is their finding that, among employers with a high awareness of reform, more than 50% plan to stop offering coverage. McKinsey also reports that alternatives to traditional employee-sponsored health insurance, such as defined contribution health plans or insurance that is offered to only a select group of employees, is expected to be pursued by 45% to 50% of employers surveyed.

In contrast, a survey of 1,350 benefits and human resource professionals, general and financial managers, and other professionals, just released by the International Foundation of Employee Benefit Plans (IFEBP) shows that only 0.7% plan to stop providing employees with health care coverage in 2014, and only 0.9% will completely close off benefits to new hires.

Is there an explanation for this disparity? McKinsey posits that, the more employers are aware of healthcare reform, the more interested they are in pursuing alternatives to traditional coverage. McKinsey states that respondents to its survey were questioned about their rationale for providing employee healthcare benefits, and that this prompted a consideration on the part of those surveyed to consider all the factors that would influence their decision about healthcare in 2014. On a positive note for employees, McKinsey predicts that, of those employers that drop employee health coverage completely, most will provide employees with increased salaries, vacation time, or retirement benefits. That would be nice, although employees would be right to be skeptical of this speculation, since the whole point of dropping coverage is to save money, and employers may not want to pay for benefits that would truly compensate workers for a loss of healthcare coverage.
 
Many of the employers surveyed by IFEBP had also thought through the implications of healthcare reform, though. IFEBP reports that 60% of the employers it surveyed had already conducted an analysis of the cost impact of the ACA, and that few anticipated being able to retain grandfathered status for their plans. The employers in the IFEBP survey seem to anticipate dealing with healthcare increases, not by discontinuing coverage for their employees, but by increasing their employees' shares of the costs of premiums, raising in-network deductibles, and increasing employees' proportion of the coverage cost of dependents. The use of high deductible health plans were also seen as a good way to manage costs.
 
It's therefore hard to anticipate exactly how healthcare coverage and options are going to change, and American workers may have no choice but to simply adopt a wait and see approach, at least until the 11th Circuit and then probably the U.S. Supreme Court come to a decision. It seems, however, that employees of the companies surveyed by IFEBP may have less to worry about than the rest of us.
 
A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.

AMA points out potential problems with CMS proposals on ACOs

Recently, the Centers for Medicare and Medicaid Services (CMS) issued proposed regulations (76 FR 18,528, April 7, 2011) for implementing ACA Sec. 3022, which provides for the creation of a Medicare shared savings program via Accountable Care Organizations (ACOs). The purpose of the regulations is to facilitate the improvement of care for those on Medicare in ways that generate savings for the Medicare program and to test new delivery and payment models so that medical providers can improve the program and to share in a portion of the generated savings. Under the provisions of the proposed regulations, providers of medical services and suppliers can continue to receive traditional Medicare fee-for-service payments under Parts A and B, and be eligible for additional payments based on meeting specified quality and savings requirements.

Who better than the American Medical Association (AMA) to point out any errors in judgment those over at the CMS may have made when coming up with the proposed regulations? The AMA has sent a letter to the CMS regarding the proposed regulations, recommending that certain provisions be changed in favor of physicians opting to participate in ACOs.

The CMS is apparently planning to keep a substantial percentage of savings achieved by the new ACOs. For example, the CMS will retain the first two percent of each ACO’s savings and, for most ACO’s, approximately 40% to 50% of savings after that. Now, in the new proposed regulations, the CMS also apparently plans to apply a flat 25% withholding rate annually to each ACOs earned performance payment. The AMA points out that this provision would penalize the best-performing ACOs, with no impact on the poorest performing ACOs, because it is based on a percentage of the savings the ACO initially achieves, not on the total expenditures it is working to reduce. In other words, the better an ACO performs in the first two years, the bigger the penalty the CMS will impose on it.

The CMS is also proposing that ACOs pay a penalty to Medicare if patient costs are higher than projected CMS levels. Two models are provided in the regulations - Track 1 and Track 2. In the first track, ACOs will be eligible to recieve shared savings for their first two years, but would have to repay any losses to Medicare beyond the CMS projections starting in year three. In the latter, ACOs would be responsible for any losses to Medicare starting in year one.

The AMA is strongly recommending that the regulations be changed, to provide a higher percentage of savings potential for ACOs, especially in the first few years of operation. The AMA has an extensive list of reasons why ACOs should not have to assume this risk of loss, especially in their first few years. For example, at the moment, providers do not have access to Medicare claims data for purposes of assessing the extent of financial risk they would be taking if they participated in an ACO. Also, the way the proposed regulations are currently written, no ACOs would know which patients are being assigned to them until after the fact. Third, there is no provision in the regulations for adjustment of the CMS projected cost levels if, as is likely, the health status of patients attributed to various ACOs changes dramatically. Furthermore, the AMA points out that ACOs that attract sicker patients, which is presumably what the CMS would want them to do, may be the most likely to see an increase in costs over time.

It's not surprising that the AMA is advocating for more savings for medical providers and fewer payments for the CMS, but it's hard to deny that physicians and other medical providers and suppliers will have to have a good incentive to join ACOs. It will be interesting to see if the CMS utilizes the AMA recommendations in final regulations.

A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.

Everyone agrees on healthcare IT

There may be contention between political parties and among voters and healthcare organizations about healthcare reform, but no one seems to disagree about the need for improved information technology (IT) in the healthcare industry. On June 2, the Bipartisan Policy Center (BPC), which was founded by senators on both sides of the aisle, announced the creation of a new task force on healthcare delivery system reform and health IT. The task force is to be led by former Senate Majority Leaders Tom Daschle and Bill Frist.

The task force has already issued a publication, entitled "The Role of Health IT in Supporting Health Care Transformation: Building a Strong Foundation for America’s Health Care System," which recommends, according to a press release issued by the BPC, "improving coordination and alignment of health IT and reform efforts to identify opportunities for synergy and develop shared solutions for common needs; integrating lessons learned from early implementation efforts associated with large-scale programs to address unanticipated needs and issues; and enhancing strategies for engaging consumers in reform efforts through the use of health IT and emerging consumer technologies."

To create greater uniformity of electronic transactions and information, the ACA has already added new provisions to Social Security Act (SSA) Sec. 1173, which sets forth standards for health information transactions and data elements.


The BPC's report also recommends increased focus and public-private sector collaboration on the expansion of implementation assistance and workforce training, espcially for small practices and hospitals serving rural and underserved populations. Finally, the task force is recommending collaboration on the achievement of the well-designed exchange of privacy-protected health information.


An introduction to the report on the BOC website states that, "There is general bipartisan consensus that effective utilization of health IT is the foundation of a modern and sustainable health care system." Better health IT will create, according to a forward in the report, insurance market reforms, delivery system and payment reforms, and an increased focus on prevention and wellness programs. It is also promoted as an important fix to the problems of rising costs, eroding coverage, and inconsistent quality.

In the BPC press release, Senator Daschle is quoted as saying, "An important first step in the transformation of our health care system is the continued development and widespread use of health IT....Our recommendations show that, if used wisely, health IT promises smarter, coordinated and more efficient health care. We have compiled a top-notch group of experts on our Task Force who will develop a careful plan, which we hope will build on existing efforts and capitalize on health IT’s great potential to improve quality and reduce costs."


A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.

Health Reform Provisions Will Save Medicare $120 Billion

Medicare stands to save $120 billion over the next five years due to program improvements, including implementation of many provisions in the Affordable Care Act, a new analysis released by the Centers for Medicare and Medicaid Services (CMS) reported. The improvements include new tools and resources to help crack down on fraud, waste, and abuse in the Medicare system, and reforming payment systems to reward high quality care. “These efforts are aimed at creating better health, better care, and lower costs for patients, providers, and taxpayers,” the CMS said.
The types of reforms and the anticipated resulting savings are as follows:

Health Care Delivery System Reforms Savings through 2015
Reforming provider payments—rewarding quality of care $55 billion
Improving patient safety—lowering hospital readmissions and hospital-acquired conditions $10 billion through 2013*
Cracking down on fraud and abuse in the Medicare system $1.8 billion**
Getting the best value for Medicare beneficiaries and taxpayers for durable medical equipment $2.9 billion ($17 billion over ten years)
Reducing excessive Medicare payments to insurance companies $50 billion

* Amount shown represents the reduction in Medicare expenditures that could be achieved if the CMS goals for reducing readmissions and hospital-acquired conditions are met.
** Estimated savings for Medicare program integrity provisions in the ACA; does not include other, ongoing CMS initiatives.

“Just a year after passage, we are seeing savings in Medicare begin to materialize from provisions in the ACA,” said Donald Berwick, CMS Administrator. “This work is laying the groundwork for a larger transformation of Medicare and our health care delivery system, from simply paying for the volume of services provided to rewarding the quality of care delivered. We remain committed to achieving a health care system that pursues better care, better health, and lower cost through improvement.”

In addition to the provisions generating savings to date, the report highlights several steps CMS is taking to achieve long-term savings and reform the health care delivery system:
• Better coordinated care for Medicare and Medicaid enrollees;
• Creation of the Center for Medicare and Medicaid Innovation to test innovative payment and service delivery models;
• Promotion of accountable care organizations (although the potential effectiveness of ACOs is controversial);
• Broader value-based purchasing programs;
• Creation of the Independent Payment Advisory Board to recommend ways to best improve quality of care for Medicare beneficiaries while lowering costs;
• Expanding use of electronic health records;
• Administrative simplification;
• Medicare Advantage payment reform;
• Enhanced program integrity, fraud, waste, and abuse prevention work (Medicare recovered $4 billion in fiscal year 2010 alone); and
• Promoting prevention and wellness.

The CMS has set a goal of reducing preventable hospital-acquired conditions by 40%, preventing 1.8 million injuries and averting 60,000 deaths of hospital inpatients over the next three years. The CMS is also targeting a 20% reduction in hospital readmissions, which would result in eliminating 1.6 million unnecessary rehospitalizations. In total, achieving these targets could save up to $35 billion across the U.S. health care system over three years, including up to $10 billion for Medicare alone.

On Jan. 1, 2011, CMS implemented a competitive bidding mechanisms for durable medical equipment, such as power wheelchairs, and other supplies, including oxygen, in nine metropolitan areas. Under this new payment mechanism, Medicare is paying an average of 32% less for these items, the CMS reported.

A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.

High Risk Pool Premiums Will Drop, Eligibility Expand

As it gains experience, the Federal government continues to “tweak” health reform measures to make them more useful to more people. The latest effort comes from the Department of Health and Human Services (HHS) which has announced that premiums in the Pre-Existing Condition Insurance Plan (PCIP) will be reduced by as much as 40% in 18 states with federally-administered PCIPs. And HHS will ease PCIP eligibility standards in 23 states and the District of Columbia to help more individuals with preexisting conditions sign up for the program.

You will recall that the Affordable Care Act established the PCIP for so called “high risk” (read “expensive”) individuals with preexisting conditions who have been uninsured for at least six months. The PCIP is supposed to end on Jan. 1, 2014, when individuals enrolled in a PCIP will be transferred to coverage in a state-based Health Insurance Exchange. In 23 states and the District of Columbia, the PCIP program is federally-administered. The remaining states operate their own PCIP programs using federal funds provided by the ACA.

The PCIP premium decreases will help bring PCIP premiums closer to the rates in each of the affected state’s individual insurance market. Premiums will remain the same in the remaining six states (Hawaii, Idaho, Massachusetts, North Dakota, Vermont, and Wyoming) where PCIP premiums were already well-aligned with state premiums, HHS said.

Also, starting July 1, 2011, individuals applying for coverage under the PCIP can simply provide a letter from a doctor, physician assistant, or nurse practitioner dated within the immediately preceding 12 months stating that they have, or at any time in the past had, a medical condition, disability, or illness. Applicants will no longer have to wait for an insurance company to send them a coverage denial letter, although they will still need to meet other eligibility criteria, such as of U.S. citizenship or legal residence and uninsured for six months.

A comprehensive analysis of the Affordable Care Act, including the full text of the law and additional information on health reform implementation, and other recent developments in employee benefits, is available here.