Recently, the American Medical Association gave a stunning endorsement of the American’s Affordable Health Care Choices Act though they have backed off this week. So we did an analysis based on the bill and summary produced by the think tank Rand Corporation.
What we found was that the “American’s Affordable Health Care Choices Act” will mainly do one thing: cost doctors a lot of money.
At least 17 state AMA chapters and some specialty societies think the same and are launching a counter initiative to support their efforts.
It also poses as a way to help doctors make more money but, with all the recent changes and speculation out employer taxes, Medicare reimbursement (or lack there of), and mandates (or essential benefits), profits appear more like problems.
While the bill certainly offers numerous financial (e.g. grants, scholarships, research investments, funds, etc.) opportunities, the cost of paying for them has yet to pass public scrutiny.
Even if Congress is able to pass this so called “health reform,” the chances of it bankrupting health care providers is more likely to happen sooner than any American would be able to take advantage of these monies. The main question is will the cost outweigh the benefits? Below is a summary of some of the highlights from a Rand survey.
STANDARDS GUARANTEEING ACCESS TO AFFORDABLE COVERAGE
The Act will force all health insurance plans to have a medical loss ratio—which is the cost ratio of total benefits used compared to revenues received—of at least 85%. If plans exceed, rebates are required.
In addition, the bill requires all health insurance plans to have to cover 70% of the ‘essential benefits.’ These benefits will be determined by the Health Choices Commissioner (appointed by the President), and will include things like eyecare, dental, pre-natal services, and so on.
Next, employers who offer coverage through the Health Insurance Exchange created by the Act must contribute at least the required contribution toward such coverage and permit their employees the freedom to choose any plan within the Exchange. In other words, employers will have to cover the previously mentioned 70% of ‘essential benefits,’ with the chances of their employees opting for different plans that may require additional coverage percentage.
Furthermore, each participating insurance plan within the Exchange must provide one basic plan in each service area in which they operate. The differences between the three main plans (e.g. basic, enhanced and premium) are the levels of cost-sharing required. There is a fourth tier called premium-plus. In this package, plans can offer extra benefits like dental or vision coverage for adults, or other non-covered benefits.
Analysis:
What this means for physicians is insurance companies will be squeezing out all the money they can from you in order to keep their costs down, physicians will be looking at Medicare re-imbursement rates as the standard.
PUBLIC HEALTH INSURANCE OPTION
Premiums for the public option will be geographically-adjusted and are required to be set so as to fully cover the cost of coverage as well as administrative costs. This means that there will still be continued disparities for costs of premiums in certain states where there are health disparities, as well as geographic limitations (e.g. rural, small populations). For the first three years, the provider payment rates are based on Medicare rates with a 5% add-on for practitioners who also participate in the Medicare program. This increase also applies to practitioners, like pediatricians, who do not typically participate in Medicare.
Under the public option, a sliding scale for affordability credits will also be created to ensure that people with incomes up to 400% of the federal poverty have affordable health coverage. Family and individual incomes must be below 400% of the federal poverty limit for access. This will basically attempt to bring under a large amount of the estimated 45 million people without health insurance. Essentially, the affordability credits will first bring the people under Medicaid, and then apportion them to the public option within the Exchange.
For employees who are offered employer coverage, they are ineligible for affordability credits within the Exchange for the first five years. Beginning in year two, employees who meet an affordability test showing that coverage under their employer-provided plan would cost more than 10% of income, are eligible to obtain income-based affordability credits in the Exchange. Starting in year five, employees of any income can choose to decline their employer-sponsored coverage and enter the Exchange and, if eligible, obtain affordability credits. Basically, this creates a way for the government to gradually push everyone into the public option, and take all the business away from private insurers, either forcing them to reduce their costs or take their business elsewhere.
The affordable premium amount is calculated on a sliding scale starting at 1% of income for those at or below 133% of poverty and phasing out at 10% of income for those at 400% of poverty. The affordability cost-sharing credit reduces cost-sharing for individuals and families up to 400% of the federal poverty limit on a sliding scale basis. Illegal immigrants are not eligible. Essentially, this allows people who are or become eligible for the public option to have adjustments to the amount of premiums the pay but, the tax increases for the rest of America will surely still pay for the remaining difference.
Analysis
This is all insurance speak for price controls on physician re-imbursement
Employer Responsibility
In general, employers will be required to offer all of their employees the option of selecting individual or family health coverage.
· The minimum employer contribution in the case of an offering employer is 72.5 % of the premium for individual coverage, and 65 % of the premium for family coverage or a proportional amount for non-fulltime employees.
· Employers must contribute to the Exchange for each employee who declines the employer’s coverage offer and obtains an affordability credit for coverage through the Exchange. The contribution is 8 % of the employee’s wages.
Analysis
Many physician offices are staffed with part time employees or those who are already covered by their spouses insurance. This would mean that each employee would cost a minimum of 8% more per employee to a physicians office. More forms less workers….
AMENDMENTS TO INTERNAL REVENUE CODE OF 1986
Unfortunately, to pay for the public option’s ‘hope’ of insuring 45 million, the Act provides for a two percent additional tax on the adjusted gross income of an individual who does not obtain acceptable health coverage. The act also establishes a payroll tax of 8 % of the wages an employer pays to its employees for employers who choose not to offer coverage (certain small employers are exempt). Thus, both individuals and employers are forced to pay significant amounts of their income to taxes in order to pay for others health insurance.
Next, although the Act provides for a tax credit equal to 50 percent of the amount paid by a small employer for employee health coverage, the tax credit is phased out in the case of an employer with 10 to 25 employees, and is also phased out in the case of an employer with average wages of $20,000 to $40,000 per year.
With regards to controlling costs, the Act imposes a market basket freeze for the second, third and fourth quarters of fiscal year 2010 for skilled nursing facility payment updates and Inpatient rehabilitation facility payment updates. These freezes not only place unnecessary burden on the employees (who will be paying more taxes on their income already to pay for the healthcare) but it will also create discontent in an already understaffed population of providers and services.
The Act also attempts to incorporate a productivity adjustment into the market basket update for inpatient hospitals, skilled nursing facilities, inpatient rehabilitation hospitals, psychiatric hospitals and hospice care beginning in 2010. But who will determine just exactly what is productive, and how will they reward productivity increases when more people are going to be insured and going in for services, which will only stress the already dismal provider numbers?
In addition, the act also provides a budget neutral adjustment within the payment system to improve payment accuracy for nontherapy ancillary services and therapy services, and creates an outlier payment for nontherapy ancillary services. This attempt will seek to essentially eliminate fraud and waste, but the government has done a terrible job doing this for Medicare, how do we expect them to change?
The legislation also allows Medicare reimbursement for primary care services to grow at a higher, and does not reduce physician pay rates for increases in spending on drugs or lab services. The policy encourages physicians to form Accountable Care Organizations by providing these organizations with targets and update factors. Hopefully this will be the biggest focus of future health care reform and legislation in order to address the growing needs and disparities in this population. The incentive payments in the Medicare program to physicians practicing in areas that are identified as being the most cost-efficient areas of the country will also be important.
Another attempt at incentives for physicians is to extend payments under the PQRI program through 2012, to physicians who report quality data to Medicare. Once again, who will determine what ‘quality data’ is, and who will determine what incentive to provide and when? Sounds like a campaign promise not to tax employer benefits for health care…
The bill also includes extended payment at cost for brachytherapy and therapeutic radiopharmaceuticals for two years through 2011, probably the ‘pork’ from a Congressman’s constituency or campaign contributor.
Another increased cost for physicians in the bill is that it increases the practice expense units for imaging services to reflect a presumed utilization rate of 75 percent instead of 50 percent. It also adjusts the technical component discount on single session imaging studies on contiguous body parts from 25 percent to 50 percent. Basically, this will attempt to discourage the use of all our advances in imaging services that have created numerous breakthroughs in detecting diseases in early stages, and tracking successful implementation of treatments.
With regards to Medicare readmissions, the Act will adjust payments beginning in 2011 for 1886(d) hospitals and critical access hospitals based on the dollar value of each hospital’s percentage of potentially preventable Medicare readmissions for 3 conditions with risk adjusted readmission measures that are endorsed by the National Quality Forum. Basically, the bill hopes to prevent readmissions costs because they are so high without addressing the real issue of the low reimbursement costs doctors receive, which forces them to limit there services.
The legislations also hopes to close a loophole in the self-referral rules that allows physicians to refer patients to hospitals in which they have a direct financial interest, and prohibits physician ownership in hospitals that are new as of January 1, 2009. This provision seems to limit the freedom of business and entrepreneurship more then helping improve patient care and outcomes. We have yet to see any studies produced on the negative impact on patients for referral to hospitals, in which doctors had financial interests. Should we wait until the government runs all our hospitals?
For Medicare Advantage plans with medical loss ratios below 85%, the Act will allow the imposition of increasing penalties over time, including eventual termination of contracts. This provision misses completely: they should just get rid of MA plans totally since they are abused severely, and fraudulent claims are almost more common than actual ones.
IMPROVEMENTS TO MEDICARE PART D
The bill attempts to address the recent craze in pharmaceutical company ‘promises’ by requiring drug manufacturers to provide rebates for drugs used by dual eligibles and full subsidy-eligible enrollees. It also eliminates Part D donut hole, beginning with a $500 reduction in 2011. But for most people on Medicare, $500 equals one x-ray or visit, is this a joke?
The Act also tries to create an alternative payment model within fee-for-service Medicare, and attempts to increase the Medicare payment rate by 5% for primary care services. It will also try to waive cost sharing (both co-insurance and deductibles) for preventive services. These are all important goals, but whether physicians can still accept the level of reimbursement is questionable at best.
The legislation also clarifies that the deductible is waived for a screening colonoscopy, and increases the payment rate for psychiatric services by 5 percent for two years, both positive improvements.
Moreover, the Act requires that State Medicaid programs reimburse for primary care services furnished by physicians and other practitioners at no less than 80% of Medicare rates in 2010, 90% in 2011, and 100 percent in 2012 and after. The federal government would pay 100% of the costs attributable to this requirement.
Additionally, the bill will provide enhanced federal matching payments (90% for development and installation, 75% for operation) for implementation of electronic eligibility systems. However, critics still maintain that there are numerous security, compatibility, and privacy issues for electronic records, and no research has shown them to save any more money or be more efficient/effective.
The bill also provides 100% federal Medicaid matching payments for the costs of Part B premiums for beneficiaries between 120% and 135% of the federal poverty level, but that’s assuming that will be enough reimbursement for physicians to accept.
Analysis
For your additional 5% in Medicare re-imbursement you get all these additional price freezes.
PHYSICIAN PAYMENTS SUNSHINE PROVISIONS
Requires manufacturers or distributors to electronically report to the HHS OIG any payments or other transfers of value above a $5 de minimis made to a “covered recipient” and requires hospitals or entities that bill Medicare to report any ownership share by a physician. Failure to report is subject to civil monetary penalties from $1000 to $10,000 (max $150,000 per year) per payment, transfer of value, or investment interest not disclosed; penalties for knowing failure to report range from $10,000 to $100,000 per payment, not to exceed $1,000,000 in one year or .1% of revenues for that year.
Analysis
God forbid you are an entrepreneur and a physician. As we have mentioned in numerous articles, without industry and physician support in the past, we would not have the breakthroughs we have today.
INCREASED FUNDING TO FIGHT WASTE, FRAUD, AND ABUSE
If it was not bad enough to empty physician’s pockets, the legislation also threatens to establish civil monetary penalties of $50,000 per violation, and $15,000 per day for delaying or refusing to grant timely access to the HHS OIG for audits.
Analysis
If your billing secretary screws up, leave the country.
Closing Thoughts
In the end you scratch your head and ask, “so why did the AMA endorse this” that is a question all physicians should be asking themselves and as small business owners should be letting their congressman know to vote against the house version.