A court in the Southern District of New York (“SDNY” or the “Court”) recently released an important decision applying the Supreme Court’s landmark Escobar ruling to a qui tam action involving percentage fee arrangements for billing agents. Among other claims, the City of New York (“the City”) and its billing agent, Computer Sciences Corporation (“CSC”) allegedly used an illegal incentive-based compensation arrangement for CSC’s services when billing New York Medicaid for services provided to eligible children under New York’s Early Intervention Program (“EIP”). EIP provides “early intervention services” to certain children with development delays using federal funds provided under the Individuals with Disabilities Education Act. EIP allows municipalities like the City to pay providers directly for EIP services and then seek reimbursement from other payors, like third party payors and New York Medicaid.
Continuing its annual tradition, the U.S. Department of Justice (“DOJ”) and the U.S. Department of Health and Human Services (“HHS”) announced last week the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force. As part of the national health care fraud takedown, the government charged 412 defendants with approximately $1.3 billion in alleged fraud. In addition to these charges, HHS Office of Inspector General (“OIG”) is in the process of excluding 295 health care providers from participating in federal health care programs.
Our colleagues on the Employment Matters blog recently analyzed a budget proposal by the Massachusetts Senate that would authorize the Governor to collect additional funds from employers to offset increasing MassHealth costs. MassHealth, Massachusetts’s Medicaid program, offers low-cost, benefit rich coverage to low-income individuals. Eligible individuals sometimes forgo employer coverage in lieu of MassHealth coverage, a trend that is unsustainable for the Commonwealth.
In Governor Baker’s fiscal year 2018 budget, he called on Massachusetts employers to help pay for the increasing Medicaid costs. To support this initiative, the Senate recently introduced a proposal that would allow the Governor to select from two options to offset these rising costs: (1) a “play-or-pay” option that would impose a per employee assessment on companies that do not offer their workers health plans, or (2) an across the board increase in the Employer Medical Assistance Contribution (or “EMAC”). The Employment Matters post analyzes how the increase in the EMAC may be more administratively feasible for the Commonwealth, while the “pay-or-play” option is potentially preempted by the Employee Retirement Income Security Act of 1974 (ERISA).
Check out their full analysis here.
While we continue to monitor Congressional efforts to repeal and replace the ACA, we are also monitoring CMS’s efforts to implement the administration’s Medicaid program goals without Congressional action. The future of the Medicaid program depends not only on the final outcome of a repeal and replace bill, but also on the Secretary Price’s and CMS Administrator Verma’s strategy and vision for the program. In two recent Letters to Governors from Secretary Price and Administrator Verma, we see how some legislative provisions from the AHCA that are still the subject of debate could be implemented despite the lack of legislative action. Continue Reading Medicaid Reform Beyond the AHCA
Health care services cost money. Often times, a lot of money. This fundamental truism captures the challenge facing Congressional Republicans as they consider coverage of low income populations as part of their so-called Repeal and Replace effort.
The Medicaid program covers more people than Medicare but spends less on health care services (MACPAC 2016a, MedPAC and MACPAC 2017). Additionally, Medicaid pays substantially less for health care services than private sector insurance plans (MACPAC 2016a). Recent growth in Medicaid spending is primarily due to growth in enrollment (MACPAC 2016b). State Medicaid programs depend on the altruism of the medical profession to provide health care services at a lower rate, which can be below cost. This leads to Medicaid beneficiaries often having less access than those covered by private insurance because financial pressures limit the ability of some providers to take Medicaid beneficiaries.
Republicans in Congress are contemplating moving coverage for the “able bodied” from Medicaid to private insurance. There are many questions to be answered before such a policy change could be implemented, but the threshold question is simple: how could such a policy proposal not cost more than current law?
Medicaid beneficiaries have limited ability to pay for services. An individual with an income of $15,800 is currently Medicaid eligible. Assuming that the policy does not increase financial expectations from the beneficiary, it does not seem possible that Congressional Republicans could write a policy that moves coverage of Medicaid beneficiaries into subsidized private insurance coverage without spending more money. This leads us to the real question for Congressional Republicans: what would they have to do to ensure that this change would not result in spending more money?
Demography remains a constant pressure on payments to stakeholders. While stakeholders might look at movement away from Medicaid to private insurance coverage for any population as positive, there is a very high probability that any shift from Medicaid to private insurance coverage will come with strings to limit provider payments.
Republicans have been talking about remodeling the Medicaid program through block grants or per capita caps for years. Both block grants and per capita caps are designed to limit federal spending by providing a state with a set amount of federal money to fund its Medicaid program. With the sweeping Republican victory, Republicans are in a position to move forward with these policies, primarily focused on block grants. But, there are three main questions to consider in designing a block grant program, each of which could prove controversial.
Which populations would be included in the block grant?
Any block grant proposal must determine which populations are included in the block grant. While some proposals have included all Medicaid populations, others have specifically excluded the elderly and disabled, leaving them in the existing Medicaid program.
What services would be covered by Medicaid under the block grant?
Currently, states are required to provide a set of mandatory services in order to receive federal funds. A block grant proposal must consider and address whether the current set of services would still need to be covered under the block grant funds, and if not, what services would be covered. Any reduction in the coverage of mandatory services would likely be hotly debated.
What federal funds would be provided to the states?
A block grant proposal must also determine what federal funds will be provided to the states. Funding includes two parts: (1) the initial amount provided, and (2) how much is providing moving forward. In any block grant proposal written with the express purpose of reducing federal spending on Medicaid, the funding choices will be extremely controversial and perhaps rejected by states, including those with Republican governors.
While the road to Medicaid block grants may be open for Republicans come January, there are still many questions as to how such a policy would be implemented and how it will fit with other health reform proposals.
The Children’s Health Insurance Program (“CHIP”), created in 1997, helps states provide health care coverage to low-income children up to age 19 whose families fall above the Medicaid eligibility threshold but are unable to afford private insurance. Over the past ten years, federal funding for CHIP has steadily increased. Congress reauthorized CHIP in 2015 through MACRA, but the program, which represents one of the last remaining annual (or semi-annual) vehicles for Congress to advance health policy initiatives, will lapse September 30, 2017. CHIP has traditionally received bipartisan support but the question of whether to continue funding the program has recently been at issue.
For the past several years, some experts believed CHIP would slowly wind down as the uninsured rate for children dropped in light of other coverage options under the Affordable Care Act (“ACA”). According to the U.S. Census Bureau, the period of 2013-2015 saw the largest decline in uninsured children ever going from 7.1 to 4.8 percent uninsured. While the ACA provides additional coverage options for low-income families, CHIP remains popular because in some cases it offers better benefits at lower costs than plans on the exchanges. This was the subject of debate during the last reauthorization, and in the lead up to MACRA’s passage, the Medicaid and CHIP Payment and Access Commission (“MACPAC”) advised Congress “to extend federal CHIP funding for a transition period of two additional years, during which time policies can be developed to address concerns about affordability and adequacy, with the ultimate goal being integration of children in Medicaid, employer-sponsored, or exchange coverage depending upon their family circumstances.”
Currently, low-income children who are not eligible for Medicaid have three options for healthcare coverage: through their parents’ employer-based plan, through an exchange plan under the ACA, and through CHIP. These three coverage options differ in the benefits offered and cost-sharing requirements for families. As Republicans determine the fate of CHIP in 2017 and beyond, they will need to consider if coverage variations for low-income children should continue. In other words, when approaching the ACA, Republicans need to keep in mind the positive aspects of CHIP that may not be included in the current marketplace or employer-based plans.
CHIP has been a bipartisan program throughout its existence, but decisions about whether to extend the program are inextricably tied to decisions regarding the ACA.
As we look ahead to the 115th Congress, Republicans are likely to take up repeal and replacement of the Affordable Care Act. Repeal and replace is more accurately described as a transition where Republicans design a version of health care reform they will own and defend. In doing so, Republicans must consider three important factors as they look at policy. The first two, talking with insurers and avoiding coverage disruption, were discussed in our prior blogs. The third is making hard choices.
The economist Thomas Sowell is often credited with this quote “There are no solutions, only tradeoffs.” In 2009, the Democrats made tradeoffs in constructing the Affordable Care Act. Now it will be the Republicans’ turn to make tradeoffs as they move to transition away from the Affordable Care Act. Republicans will consult stakeholders and experts and will engage the Congressional Budget Office, especially around coverage and costs. Republicans will then have to make hard choices based on the information they receive.
One specific example will involve Medicaid. Will Republicans reduce the special matching rate states receive to cover those who are newly eligible under the Affordable Care Act? They are certain to be told that drastically reducing the matching rate will cost millions of Americans their Medicaid coverage. States have made the decision to cover these low-income individuals, but if the payment is reduced, it is highly likely that state budgetary pressures will force many states to make the difficult decision of reducing or eliminating coverage.
Republicans are going to receive information about the coverage and cost consequence of their policy choices. They are going to be told things they may not have expected or wanted to hear. They will then have to decide if they want to reconsider or proceed and face the consequences.
In the end, Republicans are about to be able to engage in health care policy making in a way they weren’t in 2009. Republicans want to show they have a better way (the title of the House Republican platform). Their policies will produce coverage and cost numbers. They must decide then how they will proceed. Decisions will have consequences, and they will own those consequences.
In the coming days, we’ll be continuing to cover health care reform in the 115th Congress with a focus on specific health care programs. Stay tuned!
Last week, the OIG issued a favorable opinion to a hospice provider seeking to make supplemental payments to skilled nursing facilities. Under the proposed arrangement, the hospice provider would make a supplemental payment to the nursing facility for dual-eligible individuals electing the hospice benefit that would be in addition to and separate from what the managed care organization (“MCO”) pays the nursing facility.
This supplemental payment by the hospice provider is different than the traditional payments that hospice providers make to nursing facilities for dual-eligible individuals. Traditionally, when a dual-eligible individual residing in a nursing facility elects the hospice benefit, Medicare pays the hospice provider a per diem rate that does not include room and board. Medicaid is responsible for paying the individual’s room and board. Medicaid pays room and board to the hospice provider and the hospice provider pays the nursing facility the negotiated rate. In a 1998 Special Fraud Alert on nursing home arrangements with hospices, the OIG specifically stated that this payment arrangement, in which the hospice provider pays the nursing facility only after receiving payment from Medicaid, is acceptable. Continue Reading OIG Gives Green Light to Hospice Provider’s Payment to Nursing Facilities
As noted in a post published yesterday, CMS issued the final rule regarding Medicaid managed care earlier this week. With this rule, CMS is taking a much more active role in overseeing states’ Medicaid managed care contracts. CMS will now require states to submit managed care contracts and rates for review. Given that 80% of Medicaid enrollees are served through managed care delivery systems, this action is significant.
This regulation impacts state Medicaid managed care contracts in three major areas.
- Actuarial Soundness. State must now demonstrate that payments to Medicaid managed care are actuarially sound. Before, CMS let states determine their own methods to certify actuarial soundness, but that was clearly lacking. A 2010 GAO report found that CMS inconsistently reviewed state Medicaid plans’ rate setting and had not even reviewed rates for Medicaid programs in Nebraska and Tennessee. With the new regulation, CMS will now require more stringent documentation and transparency in rate certification.
- Medical Loss Ratio. The new regulations create a medical loss ratio (MLR) for Medicaid managed care plans. Previously, there was no MLR federal policy for Medicaid. The final rule aligns Medicaid with commercial Qualified Health Plans and Medicare Advantage Plans, which have been operating under an enforceable 85% MLR since they were created through the Affordable Care Act, and this change will require additional tracking and accountability on state Medicaid spending.
- Network Adequacy Standards. CMS will now require states to establish network adequacy standards that mirror those in commercial Qualified Health Plans, to ensure that Medicaid beneficiaries also have access to important services. Now, states must set time and distance standards for specific providers in Medicaid managed care plans. Further, these plans will now be required to provide provider directory updates.
For many years, Medicaid advocates complained that CMS was far too laissez faire in their review of state Medicaid managed care contracts. With this regulation, CMS is taking an active role to ensure that state Medicaid managed care plans meet the standards set for commercial Qualified Health Plans. As states look to managed care plans to address rising Medicaid costs (e.g., Iowa), these new regulations will be critical to the negotiations between CMS and the states.