Breaking Down Healthcare

The new Patient Protection and Affordable Care Act carries many provisions. The April 2010 issue of Medical Office Manager details many of these provisions to give a broad scope overview of the important pieces in the bill. We have excerpted portions of that article below.

Here is an overview of the main points of the bill that affect medical offices and their patients.

The insurance mandate
By 2014, just about all legal residents will have to have a specific amount of health insurance coverage or pay an annual fine to the IRS. For individuals, the fine will start out at $95 or 1% of income, whichever is greater, and steadily increase until 2016 when it goes to $695 or 2.5% of income. For families, the penalty goes as high as $2,085.
The exchanges
States have until 2014 to set up health insurance exchanges. An exchange is a government market place where people can buy health insurance. The exchanges aren’t insurers. Instead, they contract with private insurers. Mostly they will make coverage available to people who don’t get it from their employers. There will also be separate exchanges for small businesses to buy coverage.

Essential benefits
All plans – exchange or not – will have to cover at least 60% of a list of essential benefits. The list includes these items:
ambulatory care
emergency services
hospitalization
mental health and substance abuse care
prescription drugs
rehab services
laboratory services
preventive and wellness care
chronic disease management
maternity and newborn care
pediatric care, including oral and vision care

What everybody gets
• Medicare prescription drugs. The bill gradually closes Medicare’s “doughnut hole,” which is the drug expense area from $2,830 to $4,550 where there is currently no coverage.

• Medicaid expansion. Medicaid gets expanded to all people under age 65 with incomes of 133% of the federal poverty level, which comes to $29,327 for a family of four.

• Tax subsidies. People with incomes lower than four times the federal poverty level (individual $43,320; family of four $88,200) will get subsidies for buying insurance from a state exchange.

• Private insurance coverage. There are a lot of provisions here.
– By midyear, people who have pre-existing conditions and have been uninsured for at least six months can get coverage from high-risk insurance plans. The government will subsidize the premiums. This is a temporary fix that will continue only until 2014 when the exchanges come in.
– Also beginning this year, insurance companies cannot deny coverage for children because of preexisting conditions.
– Beginning in 2014, payers cannot deny coverage for adults because of pre-existing conditions.
– Payers have to accept every employer and every individual in the state who applies for coverage, regardless of medical condition, past claims, or genetic information.
– Payers can’t set rates based on health status. Rates can differ only on a basis of type of coverage, rating area, age, and tobacco use.
– By 2014, payers will have to cover maternity care at the same level they cover other medical procedures.
– Effective this year, unmarried dependent children can stay on their parents’ plans until age 26.
– Payers can’t end coverage because a beneficiary gets sick. They can only end it for fraud or intentional misrepresentation of facts.
– Beginning in 2014 there can be no annual or lifetime limit on coverage.

• Public health. By 2014, restaurants and food vendors with 20 or more locations will have to give the calorie counts for their foods on menus, drive-through menus, and vending machines.

Employers’ obligations
Employers with 50 or more full-time employees don’t have to offer coverage, but it will be in their best interest to do so, because if any one full-time employee gets a premium subsidy from the government to buy individual insurance, the employer has to pay a fine. The amount is $2,000 for every full-time employee. There is a limiting factor there, however. The fee doesn’t apply to the first 30 employees.
There’s more. Even if an employer does offer coverage, it will have to help out its low-income employees (those who make less than four times the federal poverty level) who don’t want the office’s coverage but want to buy insurance from the state exchange instead.
If those employees’ share of the exchange premium is more than 8% of income, the employer has to provide each one with a “free choice voucher” equal to what it would have paid to provide coverage for them in the company plan. Employers with fewer than 50 employees don’t face any fines.

New rules for insurance companies
Lots of new requirements here:
– Each plan will have to report how much of its premium revenues goes to medical care and how much goes to administrative costs – including executive salaries.
And next year, any plan that spends too much on itself will have to give rebates to its customers.
– Payers will have to explain benefits and costs clearly to their customers, and there are standards for doing so.
– Deductibles for small-group plans will be limited to $2,000 for individuals and $4,000 for families.
– There will be a new government entity that controls rates.
– Effective this year, new plans can’t charge co-pays or deductibles for preventive care and medical screenings.

Abortion
Because there was debate on whether the language in the bill could allow federal funds to be used for abortion, the President issued an executive order forbidding it. The order states that plans in the exchanges cannot use their federal money to cover abortions except in cases of rape, incest, or risk to the mother’s life.

Illegal aliens
People who are not “lawfully present in the United States” will not be allowed to buy health insurance in the exchanges, even if they pay completely with their own money.

Medicare Advantage
Medicare Advantage, which is the private portion of Medicare, does not have a bright future.
The new law freezes their reimbursement at the 2010 level and gradually cuts their reimbursements to the level of traditional Medicare.

Paying for it all
To pay for it all, the government will cut $500 billion from Medicare over the next decade. It will also raise $438 billion though new taxes and fees. Here are the major revenue sources.
• Hospitals. Beginning in 2012, hospitals with high rates of preventable readmissions will get their Medicare payments cut.
• The wealthy. Wealthy is defined as an individual earning more than $200,000 a year or a married couple earning more than $250,000 a year.
– There will be an increase in their Medicare payroll tax. Starting in 2013, the Medicare hospital insurance tax rate will go up from the current 1.45% to 2.35%.
– Also starting in 2013 the Medicare Payroll Tax will be expanded to include unearned income such as dividends and interest, and people defined as wealthy will have to pay an additional 3.8% tax on their investment income. Currently, the investment tax is 15%.
• Individuals. There are two main elements here.
– The threshold for getting tax deductions on unreimbursed medical expenses will go up from 7.5% to 10% of the adjusted gross income.
– Beginning in 2013, the amount of tax-free money people can put into health savings accounts will be lowered to $2,500. Currently it is $3,050 for individuals.
• Insurance companies. In 2018, insurance companies will start paying a 40% excise tax on the Cadillac plans they offer. Those are the more expansive plans that have high annual premiums. The tax applies if the annual premium is more than $10,200 for individuals or $27,500 for families.
• Drug manufacturers. Next year, pharmaceutical manufacturers with more than $5 million in annual sales will have to pay a $2.3 billion fee that will be determined by their market share and will increase over time. Over the next 10 years, drug makers will pay $33 billion.
• Medical device manufacturers. Starting in 2013, these manufacturers will have to pay a 2.3% tax on their sales. However, eyeglasses, contact lenses, and hearing aids will be exempt.
• Tanning salons. Starting in July, there will be a 10% tax on using indoor tanning salons.

Doctors pay for it too
As for doctors, the new bill cuts Medicare all around in an effort to reduce its projected growth for the next 10 years by $500 billion. Of that, $116 billion will come from payment cuts to the Medicare Advantage plans. But a lot of it will come from hospitals and providers. Medicaid rates for primary care services will go up to the level of Medicare.

159 new government agencies
The bill creates 159 new government boards, grant programs, and agencies to oversee everything.
They range from agencies that will determine eligibility for exchange participation to agencies that will develop quality measures, treatment protocols, new Medicare and Medicaid payment programs, and new methods for doling out payments to doctors and hospitals.

16,500 new IRS agents
In all, the law creates 15 new taxes and tax increases, all of which are being overseen by the IRS.
As a result, the IRS will add 16,500 new employees to its current force to examine and audit the new tax information requirements and also to collect the money.

Legal challenges ahead
Within an hour of the bill’s being signed, 13 states filed a lawsuit challenging its constitutionality.
Their position is that requiring everybody to purchase insurance or pay a fine does not fall within the scope of the taxing powers the Constitution gives to Congress.

A few other items
Effective immediately:
– The period for submitting Medicare claims is reduced to only one year from the date of service. For services provided before January 1 of this year, the submission deadline is December 31.
– The Stark exception for hospital ownership is coming to an end. Ownership is now limited to hospitals that already have physician ownership, and the number of rooms and beds cannot be increased.
– Doctors must have face-to-face encounters with patients before ordering home health services or DME items. They must also keep documentation of their home health and DME orders and claims or face Medicare exclusion.

Effective July 1:
– For home health and DME, both the ordering physician and the treating physician have to be enrolled in Medicare.

Effective in August:
– Both new and existing providers will be subject to enhanced screening that will include state licensure checks, background checks, fingerprinting, and unannounced site visits.
And the doctors have to pay for it – $200 for individual providers and $500 for institutional providers.
– New Medicare providers will have a provisional period of from 30 days to a year when they will see caps on payments and prepayment reviews. And new DME providers will have their payments withheld for 90 days after the first claim is filed.
– The government can impose a temporary moratorium on enrolling certain types of new providers where it decides there is risk of fraud and abuse.

Effective January 1, 2011:
– The Recovery Audit Contractors will expand their auditing to Medicaid as well as to Medicare Parts C and D.
– Third-party Medicaid billing services will have to be registered.
– The NPIs will be required on all claims as well as on all enrollment materials.

Effective April 1, 2012:
– Drug manufacturers will have to report the names and addresses of all the providers to whom they deliver prescription drugs.

Effective March 31, 2013:
– Manufacturers of drugs and medical supplies will have to report all payments they make to physicians. That includes honoraria, speaking fees, gifts, consulting fees, and compensation. They will also have to report all the physician ownership and investment interests they have.