On May 11, 2009, the second of three expected policy options papers on health system reform was released by the Senate Finance Committee. The second paper (Options Paper) addresses options for expanding coverage, increasing competition in the insurance markets, reforming the Medicaid and SCHIP programs and creating incentives for preventative care, wellness and the creation of a medical home.
With respect to insurance reform, the Options Paper discusses new ratings proposals for micro-group (2-10 employees) and non-group insurance aimed at leveling the playing field among plans. Insurance companies would be required to issue micro-group and small-group (11-50 employees) insurance plans and there would be no bar for individuals with pre-existing conditions. Similar to the Massachusetts model, micro-groups could purchase insurance through a Health Insurance Exchange (Exchange) once a federal rating was established. The Secretary of the U.S. Department of Health and Human Services (HHS) would be responsible for certain components of the Exchange, including developing standards for enrollment applications, marketing requirements and the format used to present insurance options and networks. The Exchange would be available to individuals for enrollment, conceptually, in hospitals, schools, emergency rooms and other locations for outreach purposes. The Options Paper also conceived of the development of multiple Exchanges and the involvement of state insurance commissioners in establishing the Exchanges.
Standardized benefits would be required in the non-group and small group market, including preventative and primary care, emergency services, hospitalization, physician services, outpatient services, day surgery, diagnostic imaging and maternal and newborn care. Plans would be prohibited from establishing lifetime limits on coverage or annual limits on any benefits. A proposed tax credit would be available for low income taxpayers (between 100 and 400 percent of the federal poverty level (FPL)) who purchase health insurance through the Exchange. Eligible low-income individuals, including employees of small and large businesses, would be able to use the credit to purchase health coverage through the Exchange. A small business insurance tax credit based upon a firm's size and average employee earnings also is proposed.
Recognizing several major holes that would need to be addressed with regard to a public insurance plan, the Options Paper discusses whether to mandate participation by providers, how providers might be reimbursed, how a network would be created, whether reserve funds would be required or whether or not the premiums collected would be required to cover costs or if any shortfall would be subsidized by the U.S. Treasury. Public options might take the form of a Medicare-like plan, a third party administrator plan option, or a state-run public plan. The Options Paper also discussed an alternative that abandons the public plan option altogether, relying instead on expanded coverage through insurance market reform and regulation.
With respect to Medicaid, the Options Paper makes clear that eligibility would be standardized for all parents, children and pregnant women below 150 percent FPL ($33,000 a year for a family of four). Alternatives outlined in the Options Paper for the Medicaid program include increasing coverage through the existing structure, through the Exchange or through a combination of the existing structure and the Exchange. No proposals are offered to change the structure of SCHIP prior to its current reauthorization period (through September 30, 2013). The Options Paper indicates that additional coverage options would be available to low-to-moderate income levels as the Exchange becomes fully operational. Conceptually, once the Exchange is up and running, SCHIP enrollees would obtain their primary coverage through the Exchange, with secondary benefits being paid for by the SCHIP program, with specific federal-state cost-sharing outlined in legislation. The Options Paper also addresses specific details on FMAP, Medicaid 1115 waiver and transparency requirements and prescription drug benefits.
Disproportionate share hospital (DSH) funds would be distributed directly by the Centers for Medicare and Medicaid Services (CMS) to qualifying hospitals. In addition to claims data already submitted, hospitals would submit data to CMS related to the level of uncompensated care provided. The Secretary of HHS would identify specific services eligible for DSH payments through regulation and would determine and pay the appropriate reimbursement rates for Medicaid services and uncompensated care. The Options Paper also acknowledges a possible reallocation of DSH funds among states.
In addition to fair share buy-in proposals, the Options Paper provides several alternatives for incentivizing preventative services and healthy lifestyles, including a tax credit for employers who provide a "qualified wellness program" for their employees during a taxable year.
As with the first options paper, the range of ideas in the second Options Paper, is wide and some concepts are laid out in more detail than others. Healthcare providers should stay engaged and watch carefully to see how these proposals may impact their ability and the manner in which they deliver care to their patients.
A third roundtable addressing the financing of healthcare reform was held on May 12, 2009, and Baker Hostetler will provide an analysis of the options paper released in connection with this topic in the next issue of the Health Law Update.
The health reform train has left the station and there appears to be no turning back. There does not appear to be a significant constituency that does not believe that healthcare reform will pass, in some form, this year.