Manatt on Health Reform: Weekly Highlights

This week, Medicaid expansion gains traction in Montana, California submits its waiver application to renew DSRIP and to propose several new delivery system transformation and alignment initiatives, and the Supreme Court finds that providers lack legal standing to challenge the adequacy of state Medicaid rates.

FEDERAL NEWS

Bipartisan SGR Fix and CHIP Extension Passes in the House

After more than a decade of short term fixes, the House passed a long term solution to Medicare’s Sustainable Growth Rate (SGR) formula for reimbursing physicians last Thursday. The Medicare Access and CHIP Reauthorization Act (MACRA) will move to the Senate, where it also enjoys bipartisan support, after the spring recess. President Obama has said he would sign the bill. MACRA replaces the much-reviled SGR with a five-year period of stable annual updates of 0.5 percent to physician payments, at which point a new “Merit-Based Incentive Payment System” (MIPS) would go into effect. MIPS consolidates the three existing Medicare payment incentive programs that focus on quality, resource use, and meaningful use of electronic records. The bill includes cost-saving measures, such as income-related premium increases for higher income beneficiaries; Medigap reform that would prohibit plans from covering the Part B deductible for future retirees starting in 2020; and changes in payments to hospitals and post-acute providers. The bill also reauthorizes CHIP for two years, through September 30, 2017.

Supreme Court: No Private Right of Action for Medicaid Providers

Today, in a 5-4 ruling, the Supreme Court found that Medicaid providers do not have the right under federal law to seek judicial intervention to raise reimbursement rates. The ruling puts to rest a longstanding debate about whether healthcare providers serving Medicaid patients could go to court to seek enforcement of provisions under federal law governing Medicaid reimbursement. In Armstrong v. Exceptional Child, Medicaid providers in Idaho argued that they were reimbursed at rates so low that they violated federal Medicaid requirement that states assure payments “consistent with efficiency, economy, and quality of care . . .[while] safeguard[ing] against unnecessary utilization of . . . care and services.” The Supreme Court found in favor of the state Medicaid agency, holding that such disputes should be addressed by the U.S. Department of Health and Human Services, not the courts.

Cost of Uncompensated Care Drops by $7.4 Billion

According to a new HHS report, hospitals have saved an estimated $7.4 billion in uncompensated care since 2013 as a result of ACA coverage expansions. Five billion dollars of the total reduction is attributable to states that have expanded Medicaid, while $2.4 billion is attributable to non-expansion states. The report estimates that if non-expansion states were to expand coverage, and see Medicaid enrollment increase at similar levels as existing expansion states, uncompensated care costs would be reduced by an additional $1.4 billion.

Medical Loss Ratio Requirement Benefits Consumers

A new report by the Commonwealth Fund finds that the Medical Loss Ratio (MLR) requirement has resulted in total consumer benefits of more than $5 billion in its first three years, from 2011 to 2013. Under the MLR provision in the ACA, insurers are required to spend a minimum percentage of premiums on medical claims and quality expenses, or refund the difference to consumers. Consumer benefits resulted from both direct refunds to consumers and reduced administrative overhead. Refunds paid to consumers in 2013 ($325 million) represented a more than two-thirds reduction from 2011, indicating greater issuer compliance with the MLR requirement.

STATE MEDICAID ACTIVITY

Arkansas: General Assembly Votes on Private Option Bills

After recently reauthorizing the State’s Private Option for Medicaid expansion for Fiscal Year 2016, the Arkansas General Assembly voted on two bills related to the expiration of the program at the end of 2016. The General Assembly approved HB1363, which requires the Department of Human Services (DHS) to notify Private Option enrollees at the time of enrollment or renewal that the program will end on December 31, 2016. This bill has been sent to Governor Asa Hutchinson (R) for signature. In addition, the Senate has proposed that the notifications to enrollees include information on the legislative task force charged with identifying alternative coverage models to the Private Option; the measure has passed the Senate and has been sent to the House, as reported by The Associated Press. The Senate rejected SB312, which directs DHS to seek federal approval to freeze enrollment in the Private Option program as of December 31, 2015 so that "the State does not enroll additional individuals in the last year" of the program "only to remove the insurance coverage." According to The Associated Press, the federal government indicated that it would not grant a waiver permitting the State to freeze enrollment.

California: Health Department Submits Medicaid Transformation and Alignment Waiver Application

On March 27, the California Department of Health Care Services submitted its “Medi-Cal 2020” waiver application to the Centers for Medicare and Medicaid Services. The Department seeks to build on its "Bridge to Reform" waiver from 2010. The proposed waiver includes continued authority for DSRIP and features several new initiatives: a series of delivery system transformation and alignment programs that will provide additional participation and collaboration incentives for providers and managed care plans; a global, value-based payment system for care for the remaining uninsured; and a new federal-state shared savings model. The Department will work with CMS over the coming months to finalize the waiver and, if approved, begin implementation on November 1.

Colorado: Governor Creates State Innovation Model (SIM) Office to Oversee $65 Million Grant

Governor John Hickenlooper (D) issued an Executive Order to create the State Innovation Model (SIM) Office and the State Innovation Model (SIM) Advisory Board for Colorado, to develop an implementation plan for the state’s four-year, $65 million SIM grant from the CMS Innovation Center. The focus of the SIM grant is to better integrate primary care and behavioral health systems in Colorado, improving care coordination and accountability. The Executive Order continues through January 31, 2019.

Montana: State Senate Endorses Bipartisan Medicaid Expansion Bill

On March 27, a bipartisan majority in the Senate endorsed a Medicaid expansion bill that would extend state-funded health coverage to an estimated 70,000 low-income Montanans. Seven Senate Republicans and twenty-one Senate Democrats voted to endorse the bill , which also has the support of Governor Steve Bullock (D). The bill will now progress to the Montana House where it will likely face opposition from the conservative Republicans and House GOP leadership.

MARKETPLACE UPDATES

Arizona: Governor Signs Bill Banning Exchange Abortion Coverage

Governor Doug Ducey (R) signed SB 1318 into law, prohibiting qualified health plans offering coverage on the federal Marketplace from covering abortions, except in the case of rape or incest. The new law also requires that physicians performing an abortion inform patients that it may be possible to reverse the effects of a medical abortion and that the Arizona Department of Health Services post similar information on their website.

Vermont: Gov. Shumlin Announces Marketplace Contingency Plan

Governor Peter Shumlin (D) announced that he would present a plan to transition Vermont Health Connect (VHC) to a Supported State Based Exchange Model in November if the State-based Marketplace fails to become fully functional ahead of the 2016 open enrollment period. Gov. Shumlin set forth two milestones for the marketplace and its lead contractor, Optum, to meet in order to ensure his continued support of VHC: (1) the development of automated processes for updating both personal and plan information by May, and (2) plan renewals by October, reports the Vermont Digger. Though Shumlin says he is "optimistic" that VHC will become fully operational before these dates, he suggested his preference for transitioning to a Supported State Based Model, in which Vermont would maintain authority over the plans offered on the marketplace, should this become necessary. In the meantime, Shumlin is expected to outline his plan in August for VHC's operation during the 2015 open enrollment period.

STAFFING NEWS

Connecticut: Governor Nominates New Insurance Commissioner

Connecticut Governor Dannel Malloy (D) nominated Katherine Wade, a former vice president of Cigna, to be the State’s next insurance commissioner. During her time at Cigna, Wade managed government affairs across all fifty states, including extensive work on implementation of various aspects of the Affordable Care Act. Wade will begin serving as interim commissioner effective March 24, while her nomination awaits approval by the State Legislature.

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