Health Law Update

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As we head into the mid-term election cycle, the ongoing implementation of the Patient Protection and Affordable Care Act (ACA) continues to consume the nation’s healthcare industry and political leaders in 2014. On the horizon are several issues likely to dominate congressional time, despite the health policy fatigue felt by most legislators. Below is a list of five health policy issues to watch this year.

1. The Sustainable Growth Rate (SGR) or “Doc Fix”—Kicking the Can Down the Road … Again?

In 1997, Congress created the SGR payment formula that tied dollars budgeted for Medicare physician payment to projected growth in the gross domestic product. Within a few years, healthcare costs outpaced the growth of the economy and this created and continues to create a multibillion dollar shortfall in funding for Medicare payments to physicians. As a result, Congress has voted to delay cuts imposed by the SGR formula to physician payments 17 times. With the most recent vote on March 31, 2014, Congress continued the decade-plus tradition of kicking the can down the road for another year after coming tantalizingly close to agreement on a bicameral, bipartisan payment redesign. In the final analysis, the legislators could not agree on offsets for the $150 billion price tag. While the pressure may have subsided on the current Congress, the perennial issue of how to pay for a permanent fix to the SGR formula remains an intractable problem. Advocates will continue to press for a feasible solution and any Medicare or appropriations bill that comes before Congress could be a likely vehicle for a permanent solution.

2. Changes to the ACA—Will It Stay or Will It Go? 

Healthcare providers and insurers are steeped in managing the governmental program, private market changes and extensions and delays driven by the implementation of the ACA. The country is plagued by an almost even split among the states regarding Medicaid expansion and the adoption of the insurance Exchanges under the ACA. With regard to the ACA in Congress, the question remains what, if any, changes or modifications will be made to the ACA? Further, the continued appropriation of federal dollars to fund the ACA remains a major question as elements of the ACA continue to unfold. The healthcare industry will need to watch closely as it works to implement the law, but also remain agile with regard to reforms, both in the market and in Congress as the political mix following the mid-term elections likely will shift.

3. Medicaid Expansion—Will No-Expansion States Reverse Course? 

Approximately half of the states in the nation refused to expand their Medicaid programs under the ACA and, having done so, have left federal dollars on the table causing some state legislators and governors to reconsider their original approach. As the ACA undergoes implementation, several state governors and state legislatures are debating alternative mechanisms for obtaining federal dollars to expand Medicaid in a manner that satisfies the political and policy goals of these states. The mechanism of choice has been the Medicaid 1115 waiver, which states may use to create a form of demonstration project, individual to that state. Many of these proposed 1115 waivers would allow the states to use the federal revenues made available under the ACA for Medicaid beneficiaries to purchase health insurance on the state or federal Exchange. Thus, federal and state dollars would be used to purchase private policies in the new marketplace. Some of these proposed 1115 waivers contain requirements that tie evidence of work to the receipt of healthcare coverage. These developments will be important regarding the continued implementation of the ACA, as well as the manner in which policy is developed in Congress to address changes to the ACA. The precedent set by the approval of various 1115 waivers likely will set a new trend in alternatives to providing Medicaid benefits to individuals. Through these waiver programs, many healthcare providers may need to look more specifically at contracting with managed care organizations on the Exchanges to continue treating Medicaid program beneficiaries or managing the uninsured. The complexion of network development and a provider’s place in various networks either on or off the Exchanges will assume greater importance as this aspect of market reform continues to develop.

4. Medicaid and Medicare Entitlement Reform—Show Me the Revenue! 

The never-ending search for revenue offsets in the budget for healthcare spending does not bode well for several government programs, including Medicare and Medicaid. For many years now, the Medicaid and Medicare programs have been the subject of study to determine how to modify spending in the programs to sustain their longevity. As Congress looks to manage the budget, the historic issues of entitlement reform, including block grants for Medicaid and raising the eligibility age in Medicare, likely will resurface. The makeup of Congress following the mid-term elections will impact these discussions and the direction of Medicare and Medicaid program policy.

5. ACA Insurance and Employment Issues—Continuing Challenges Continue 

Many of the issues associated with obtaining insurance, either under the new market of the state and federal Exchanges or in the existing marketplace of employer-sponsored insurance, will continue to evolve post-ACA implementation. Potential changes to ACA provisions, either by executive order or congressional action, are likely. The issues involving premium pricing, coverage of services, such as contraception which is the subject of continuing litigation, and the continuity of insurance policies that failed to provide the “essential benefits” required under the ACA, will be areas for the healthcare and employment industries to watch. In the Medicaid program and in the private insurance market, the pricing pressures associated with risk-based payment and payment tied to quality outcomes has impacted providers and insurers. Health industry providers are managing network adequacy issues and the narrowing of networks, as insurers work to manage tighter pricing and premium pressures presented on the Exchanges and in the Medicaid and Medicare managed care programs. Legislation, at a state and federal level, may be necessary to address inconsistencies that may occur with regard to access to care by individuals in the Medicaid, Medicare and larger insurance markets.

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Five Health Policy Issues to Watch in 2014