[Senate Report 111-89]
[From the U.S. Government Publishing Office]
111th Congress Report
SENATE
1st Session 111-89
_______________________________________________________________________
Calendar No. 184
AMERICA'S HEALTHY FUTURE ACT
OF 2009
----------
R E P O R T
[To accompany S. 1796]
on
PROVIDING AFFORDABLE, QUALITY HEALTH CARE FOR ALL AMERICANS AND
REDUCING THE GROWTH IN HEALTH CARE SPENDING, AND FOR OTHER PURPOSES
together with
ADDITIONAL AND MINORITY VIEWS
----------
COMMITTEE ON FINANCE
UNITED STATES SENATE
October 19, 2009.--Ordered to be printed
AMERICA'S HEALTHY FUTURE ACT OF 2009
111th Congress
1st Session SENATE Report
111-89
_______________________________________________________________________
Calendar No. 184
AMERICA'S HEALTHY FUTURE ACT
OF 2009
__________
R E P O R T
[To accompany S. 1796]
on
PROVIDING AFFORDABLE, QUALITY HEALTH CARE FOR ALL AMERICANS AND
REDUCING THE GROWTH IN HEALTH CARE SPENDING, AND FOR OTHER PURPOSES
together with
ADDITIONAL AND MINORITY VIEWS
__________
COMMITTEE ON FINANCE
UNITED STATES SENATE
October 19, 2009.--Ordered to be printed
C O N T E N T S
----------
Page
I. Background and Need for Legislation..............................1
II. Explanation of the Bill..........................................9
TITLE I--HEALTH CARE COVERAGE.................................... 9
Subtitle A--Insurance Market Reforms......................... 9
Sec. 1001. Insurance Market Reforms in the Individual and
Small Group Markets.................................... 9
Sec. 2200. Ensuring Essential and Affordable Health
Benefits Coverage for All Americans................ 9
Sec. 2201. General Requirements and Definitions...... 10
Sec. 2202. Prohibition on Preexisting Condition
Exclusions......................................... 12
Sec. 2203. Guaranteed Issue and Renewal for Insured
Plans.............................................. 12
Sec. 2204. Premium Rating Rules...................... 12
Sec. 2205. Use of Uniform Outline of Coverage
Documents.......................................... 13
Sec. 2211. Rating Areas; Pooling of Risks; Phase In
of Rating Rules in Small Group Markets............. 14
Sec. 2212. Risk Adjustment........................... 14
Sec. 2213. Establishment of Transitional Reinsurance
Program for Individual Markets in Each State....... 14
Sec. 2214. Establishment of Risk Corridors for Plans
in Individual and Small Group Markets.............. 15
Sec. 2215. Temporary High Risk Pools for Individuals
with Preexisting Conditions........................ 16
Sec. 2216. Reinsurance for Retirees Covered by
Employer-Based Plans etc........................... 17
Sec. 2221. Grandfathered Health Benefit Plans........ 17
Sec. 2225. Continued State Enforcement of Insurance
Regulations........................................ 18
Sec. 2226. Waiver of Health Insurance Reform
Requirements....................................... 19
Sec. 2227. Provisions Relating to Offering of Plans
in More Than One State............................. 20
Sec. 2228. State Flexibility to Establish Basic
Health Plans for Low-Income Individuals not
Eligible for Medicaid.............................. 21
Sec. 2230. Other Definitions and Rules............... 23
Subtitle B--Exchanges and Consumer Assistance................ 24
Sec. 1101. Establishment of Qualified Health Benefits
Plans Exchanges........................................ 24
Sec. 2231. Rights and Responsibilities Regarding
Choice of Coverage Through Exchange................ 24
Sec. 2232. Qualified Individuals and Small Employers:
Access Limited to Citizens and Lawful Residents.... 25
Sec. 2235. Establishment of Exchanges by States...... 26
Sec. 2236. Functions Performed by Secretary, States,
and Exchanges...................................... 26
Sec. 2237. Duties of the Secretary to Facilitate
Exchanges.......................................... 27
Sec. 2238. Procedures for Determining Eligibility for
Exchange Participation, Premium Credits, and Cost-
Sharing Subsidies.................................. 27
Sec. 2239. Streamlining of Procedures for Enrollment
through an Exchange and State Medicaid and CHIP
Programs........................................... 28
Sec. 1102. Encouraging Meaningful Use of Electronic
Health Records......................................... 29
Subtitle C--Making Coverage Affordable....................... 29
PART I--ESSENTIAL BENEFITS COVERAGE...................... 29
Sec. 1201. Provisions To Ensure Coverage to Essential
Benefits............................................... 29
Sec. 2241. Requirements for Qualified Health Benefits
Plan............................................... 30
Sec. 2242. Essential Benefits Package Defined........ 30
Sec. 2243. Levels of Coverage........................ 32
Sec. 2244. Application of Certain Rules to Plans in
Group Markets...................................... 33
Sec. 2245. Special Rules Relating to Coverage of
Abortion Services.................................. 33
Sec. 1202. Application of State and Federal Laws
Regarding Abortion..................................... 34
Sec. 1203. Application of Emergency Services Laws........ 35
PART II--LOW INCOME AND SMALL BUSINESS CREDITS AND
SUBSIDIES.............................................. 35
Sec. 1205. Premium Tax Credits and Cost-sharing Subsidies 35
Sec. 1206. Cost-sharing Subsidies and Advance Payments of
Premium Credits and Cost-Sharing Subsidies............. 40
Sec. 2246. Premium Credits for Low-Income Individuals 42
Sec. 2247. Cost-sharing Subsidies for Low-Income
Individuals Enrolling in Qualified Health Benefit
Plans.............................................. 42
Sec. 2248. Advance Determination and Payment of
Premium Credits and Cost-sharing Subsides.......... 43
Sec. 1207. Disclosures to Carry Out Eligibility
Requirements for Certain Programs...................... 44
Sec. 1208. Premium Credits and Subsidy Refunds and
Payments Disregarded for Federal and Federally-Assisted
Programs............................................... 46
Sec. 1209. Fail-safe Mechanism To Prevent Increase in
Federal Budget Deficit................................. 46
Sec. 1221. Small Business Tax Credit..................... 47
Subtitle D--Shared Responsibility............................ 50
PART I--INDIVIDUAL RESPONSIBILITY........................ 50
Sec. 1301. Penalty on Individuals Without Essential
Health Benefits Coverage............................... 50
Sec. 1302. Reporting of Health Insurance Coverage........ 53
PART II--EMPLOYER RESPONSIBILITY......................... 54
Sec. 1306. Employer-Provided Health Insurance Coverage... 54
Subtitle E--Federal Program for Health Care Cooperatives..... 57
Sec. 1401. Establishment of Federal Program for Health
Care Cooperatives...................................... 57
Sec. 2251. Federal Program To Assist Establishment
and Operation of Nonprofit, Member-Run Health
Insurance Issuers.................................. 59
Subtitle F--Transparency and Accountability.................. 62
Sec. 1501. Provisions Ensuring Transparency and
Accountability......................................... 62
Sec. 2229. Requirements Relating to Transparency and
Accountability..................................... 62
Sec. 1502. Reporting on Utilization of Premium Dollars
and Standard Hospital Charges.......................... 62
Sec. 1503. Development and Utilization of Uniform Outline
of Coverage Documents.................................. 62
Sec. 1504. Development of Standard Definitions, Personal
Scenarios, and Annual Personalized Statements.......... 64
Subtitle G--Role of Public Programs.......................... 64
PART I--MEDICAID COVERAGE FOR THE LOWEST INCOME
POPULATIONS............................................ 64
Sec. 1601. Eligibility Standards and Methodologies....... 64
Sec. 1602. Income Eligibility for Nonelderly Determined
Using Modified Gross Income............................ 71
Sec. 1603. Requirement to Offer Premium Assistance for
Employer-Sponsored Insurance........................... 72
Sec. 1604. Treatment of the Territories.................. 73
Sec. 1605. Medicaid Improvement Fund Rescission.......... 73
PART II--CHILDREN'S HEALTH INSURANCE PROGRAM............. 74
Sec. 1611. Additional Federal Financial Participation for
CHIP................................................... 74
Sec. 1612. Technical Corrections......................... 75
PART III--ENROLLMENT SIMPLIFICATION...................... 76
Sec. 1621. Enrollment Simplification and Coordination
with State Health Insurance Exchanges.................. 76
Sec. 1622. Permitting Hospitals to Make Presumptive
Eligibility Determinations for All Medicaid Eligible
Populations............................................ 78
Sec. 1623. Promoting Transparency in the Development,
Implementation, and Evaluation of Medicaid and CHIP
Waivers and Section 1937 State Plan Amendments......... 79
Sec. 1624. Standards and Best Practices to Improve
Enrollment of Vulnerable and Underserved Populations... 81
PART IV--MEDICAID SERVICES............................... 82
Sec. 1631. Coverage of Free-standing Birth Centers....... 82
Sec. 1632. Concurrent Care for Children.................. 82
Sec. 1633. Funding to Expand State Aging and Disability
Resource Centers....................................... 83
Sec. 1634. Community First Choice Option................. 83
Sec. 1635. Protection for Recipients of Home and
Community-Based Services Against Spousal Impoverishment 85
Sec. 1636. Incentives for States to Offer Home and
Community-Based Services as a Long-Term Care
Alternative to Nursing Homes........................... 86
Sec. 1636A. Removal of Barriers to Providing Home and
Community-Based Services............................... 87
Sec. 1637. Money Follows the Persons Rebalancing
Demonstration.......................................... 88
Sec. 1638. Clarification of Definition of Medical
Assistance............................................. 89
Sec. 1639. State Eligibility Option for Family Planning
Services............................................... 89
Sec. 1640. Grants for School-Based Health Centers........ 90
Sec. 1641. Therapeutic Foster Care....................... 90
Sec. 1642. Sense of the Senate Regarding Long-Term Care.. 91
PART V--MEDICAID PRESCRIPTION DRUG COVERAGE.............. 91
Sec. 1651. Prescription Drug Rebates..................... 91
Sec. 1652. Elimination of Exclusion of Coverage of
Certain Drugs.......................................... 93
Sec. 1653. Providing Adequate Pharmacy Reimbursement..... 94
Sec. 1654. Study of Barriers to Appropriate Utilization
of Generic Medicine in Medicaid........................ 95
PART VI--MEDICAID DISPROPORTIONATE SHARE PAYMENTS........ 96
Sec. 1655. Disproportionate Share Hospital Payments...... 96
PART VII--DUAL ELIGIBLES................................. 97
Sec. 1661. 5-Year Period for Demonstration Projects...... 97
Sec. 1662. Providing Federal Coverage and Payment
Coordination for Low-Income Medicare Beneficiaries..... 97
PART VIII--MEDICAID QUALITY.............................. 99
Sec. 1671. Adult Health Quality Measures................. 99
Sec. 1672. Payment Adjustment for Health Care-Acquired
Conditions............................................. 100
Sec. 1673. Demonstration Project to Evaluate Integrated
Care Around a Hospitalization.......................... 101
Sec. 1674. Medicaid Global Payment System Demonstration
Project................................................ 102
Sec. 1675. Pediatric Accountable Care Organization
Demonstration Project.................................. 102
Sec. 1676. Medicaid Emergency Psychiatric Demonstration
Project................................................ 103
PART IX--MEDICAID AND CHIP PAYMENT AND ACCESS COMMISSION. 104
Sec. 1681. MACPAC Assessment of Policies Affecting All
Medicaid Beneficiaries................................. 104
PART X--AMERICAN INDIANS AND ALASKA NATIVES.............. 105
Sec. 1691. Special Rules Relating to Indians............. 105
Sec. 1692. Elimination of Sunset for Reimbursement for
All Medicare Part B Services Furnished by Certain
Indian Hospitals and Clinics........................... 106
Subtitle H--Addressing Health Disparities.................... 107
Sec. 1701. Standardized Collection of Data............... 107
Sec. 1702. Required Collection of Data................... 108
Sec. 1703. Data Sharing and Protection................... 109
Sec. 1704. Inclusion of Information about the Importance
of Having a Health Care Power of Attorney in Transition
Planning for Children Aging out of Foster Care and
Independent Living Programs............................ 109
Subtitle I--Maternal and Child Health Services............... 111
Sec. 1801. Maternal, Infant, and Early Childhood Home
Visiting Programs...................................... 111
Sec. 1802. Support, Education, and Research for
Postpartum Depression.................................. 113
Sec. 1803. Personal Responsibility Education for
Adulthood Training..................................... 114
Sec. 1804. Restoration of Funding for Abstinence
Education.............................................. 115
Subtitle J--Programs of Health Promotion and Disease
Prevention................................................. 116
Sec. 1901. Programs of Health Promotion and Disease
Prevention............................................. 116
Subtitle K--Elder Justice Act................................ 119
Sec. 1911. Short Title................................... 121
Sec. 1912. Definitions................................... 121
Sec. 1913. Elder Justice................................. 122
Subtitle L--Provisions of General Application................ 135
Sec. 1921. Protecting Americans and Ensuring Taxpayer
Funds in Government Health Care Plans Do Not Support or
Fund Physician-Assisted Suicide; Prohibition Against
Discrimination on Assisted Suicide..................... 135
Sec. 1922. Protection of Access to Quality Health Care
Through the Department of Veterans Affairs and the
Department of Defense.................................. 136
Sec. 1923. Continued Application of Antitrust Law........ 136
TITLE II--PROMOTING DISEASE PREVENTION AND WELLNESS.............. 137
Subtitle A--Medicare......................................... 137
Sec. 2001. Coverage of Annual Wellness Visit Providing a
Personalized Prevention Plan........................... 137
Sec. 2002. Removal of Barriers to Preventive Services.... 138
Sec. 2003. Evidence-Based Coverage of Preventive Services 140
Sec. 2004. GAO Study and Report on Medicare Beneficiary
Access to Vaccines..................................... 140
Sec. 2005. Incentives for Healthy Lifestyles............. 140
Subtitle B--Medicaid......................................... 141
Sec. 2101. Improving Access to Preventive Services for
Eligible Adults........................................ 141
Sec. 2102. Coverage of Comprehensive Tobacco Cessation
Services for Pregnant Women............................ 142
Sec. 2103. Incentives for Healthy Lifestyles............. 143
Sec. 2104. State Option to Provide Health Homes for
Enrollees with Chronic Conditions...................... 145
Sec. 2105. Funding for Childhood Obesity Demonstration
Project................................................ 146
Sec. 2106. Public Awareness of Preventive and Obesity-
related Services....................................... 147
TITLE III--IMPROVING THE QUALITY AND EFFICIENCY OF HEALTH CARE... 147
Subtitle A--Transforming the Health Care Delivery System..... 147
PART I--LINKING PAYMENT TO QUALITY OUTCOMES UNDER THE
MEDICARE PROGRAM....................................... 147
Sec. 3001. Hospital Value-Based Purchasing Program....... 147
Sec. 3002. Improvements to the Physician Quality
Reporting System....................................... 152
Sec. 3003. Improvements to the Physician Feedback Program 153
Sec. 3004. Quality Reporting for Long-term Care
Hospitals, Inpatient Rehabilitation Hospitals, and
Hospice Programs....................................... 154
Sec. 3005. Quality Reporting for PPS-exempt Cancer
Hospitals.............................................. 156
Sec. 3006. Plans for a Value-Based Purchasing Program for
Skilled Nursing Facilities and Home Health Agencies.... 156
Sec. 3007. Value-based Payment Modifier Under the
Physician Fee Schedule................................. 157
Sec. 3008. Payment Adjustment for Conditions Acquired in
Hospitals.............................................. 158
PART II--STRENGTHENING THE QUALITY INFRASTRUCTURE........ 159
Sec. 3011. National Strategy............................. 159
Sec. 3012. Interagency Working Group on Health Care
Quality................................................ 161
Sec. 3013. Quality Measure Development................... 161
Sec. 3014. Quality Measure Endorsement................... 163
PART III--ENCOURAGING DEVELOPMENT OF NEW PATIENT CARE
MODELS................................................. 165
Sec. 3021. Establishment of Center for Medicare and
Medicaid Innovation within CMS......................... 165
Sec. 3022. Medicare Shared Savings Program............... 168
Sec. 3023. National Pilot Program on Payment Bundling.... 170
Sec. 3024. Independence at Home Pilot Program............ 174
Sec. 3025. Hospital Readmissions Reduction Program....... 177
Sec. 3026. Community-Based Care Transitions Program...... 179
Sec. 3027. Extension of Gainsharing Demonstration........ 180
PART IV--STRENGTHENING PRIMARY CARE AND OTHER WORKFORCE
IMPROVEMENTS........................................... 181
Sec. 3031. Expanding Access to Primary Care Services and
General Surgery Services............................... 181
Sec. 3031A. Medicare Federally Qualified Health Center
Improvements........................................... 182
Sec. 3032. Distribution of Additional Residency Positions 183
Sec. 3033. Counting Resident Time in Outpatient Settings
and Allowing Flexibility for Jointly Operated Residency
Training Programs...................................... 186
Sec. 3034. Rules for Counting Resident Time for Didactic
and Scholarly Activities and Other Activities.......... 187
Sec. 3035. Preservation of Resident Cap Positions from
Closed and Acquired Hospitals.......................... 188
Sec. 3036. Workforce Advisory Committee.................. 189
Sec. 3037. Demonstration Projects To Address Health
Professions Workforce Needs; Extension of Family-to-
Family Health Information Centers...................... 190
Sec. 3038. Increasing Teaching Capacity.................. 192
Sec. 3039. Graduate Nurse Education Demonstration Program 195
PART V--HEALTH INFORMATION TECHNOLOGY.................... 197
Sec. 3041. Free Clinics and Certified EHR Technology..... 197
Subtitle B--Improving Medicare for Patients and Providers.... 198
PART I--ENSURING BENEFICIARY ACCESS TO PHYSICIAN CARE AND
OTHER SERVICES......................................... 198
Sec. 3101. Increase in the Physician Payment Update...... 198
Sec. 3102. Extension of the Work Geographic Index Floor
and Revisions to the Practice Expense Geographic
Adjustment Under the Medicare Physician Fee Schedule... 198
Sec. 3103. Extension of Exceptions Process for Medicare
Therapy Caps........................................... 200
Sec. 3104. Extension of Payment for Technical Component
of Certain Physician Pathology Services................ 200
Sec. 3105. Extension of Ambulance Add-Ons................ 200
Sec. 3106. Extension of Certain Payment Rules for Long-
term Care Hospital Services and of Moratorium on the
Establishment of Certain Hospitals and Facilities...... 201
Sec. 3107. Extension of Physician Fee Schedule Mental
Health Add-on.......................................... 202
Sec. 3108. Permitting Physician Assistants To Order Post-
Hospital Extended Care Services and to Provide for
Recognition of Attending Physician Assistants as
Attending Physicians To Serve Hospice Patients......... 202
Sec. 3109. Recognition of Certified Diabetes Educators as
Certified Providers for Purposes of Medicare Diabetes
Outpatient Self-Management Training Services........... 203
Sec. 3110. Exemption of Certain Pharmacies from
Accreditation Requirements............................. 204
Sec. 3111. Part B Special Enrollment Period for Disabled
TRICARE Beneficiaries.................................. 205
Sec. 3112. Payment for Bone Density Tests................ 206
Sec. 3113. Revision to the Medicare Improvement Fund..... 207
Sec. 3114. Treatment of Certain Complex Diagnostic
Laboratory Tests....................................... 207
Sec. 3115. Improved Access for Certified-Midwife Services 208
Sec. 3116. Working Group on Access to Emergency Medical
Care................................................... 209
PART II--RURAL PROTECTIONS............................... 210
Sec. 3121. Extension of Outpatient Hold Harmless
Provision.............................................. 210
Sec. 3122. Extension of Medicare Reasonable Costs
Payments for Certain Clinical Diagnostic Laboratory
Tests Furnished to Hospital Patients in Certain Rural
Areas.................................................. 210
Sec. 3123. Extension of the Rural Community Hospital
Demonstration Program.................................. 211
Sec. 3124. Extension of the Medicare-Dependent Hospital
(MDH) Program.......................................... 211
Sec. 3125. Temporary Improvements to the Medicare
Inpatient Hospital Payment Adjustment for Low-Volume
Hospitals.............................................. 211
Sec. 3126. Improvements to the Demonstration Project on
Community Health Integration Models in Certain Rural
Counties............................................... 212
Sec. 3127. MedPAC Study on Adequacy of Medicare Payments
for Health Care Providers Serving in Rural Areas....... 213
Sec. 3128. Technical Correction Related to Critical
Access Hospital Services............................... 213
Sec. 3129. Extension of and Revisions to Medicare Rural
Hospital Flexibility Program........................... 214
PART III--IMPROVING PAYMENT ACCURACY..................... 214
Sec. 3131. Payment Adjustments for Home Health Care...... 214
Sec. 3132. Hospice Reform................................ 217
Sec. 3133. Improvement to Medicare Disproportionate Share
Hospital (DSH) Payments................................ 219
Sec. 3134. Misvalued Codes Under the Physician Fee
Schedule............................................... 220
Sec. 3135. Modification of Equipment Utilization Factor
for Advanced Imaging Services.......................... 221
Sec. 3136. Revision of Payment for Power-Driven
Wheelchairs............................................ 222
Sec. 3137. Hospital Wage Index Improvement............... 223
Sec. 3138. Treatment of Certain Cancer Hospitals......... 225
Sec. 3139. Payment for Biosimilar Biological Products.... 225
Sec. 3140. Public Meeting and Report on Payment Systems
for New Clinical Laboratory Diagnostic Tests........... 226
Sec. 3141. Medicare Hospice Concurrent Care Demonstration
Program................................................ 226
Sec. 3142. Application of Budget Neutrality on a National
Basis in the Calculation of the Medicare Hospital Wage
Index Floor for Each All-Urban and Rural State......... 227
Sec. 3143. HHS Study on Urban Medicare-Dependent
Hospitals.............................................. 228
Subtitle C--Provisions Relating to Part C.................... 228
Sec. 3201. Medicare Advantage Payment.................... 228
Sec. 3202. Benefit Protection and Simplification......... 235
Sec. 3203. Application of Coding Intensity Adjustment
During MA Payment Transition........................... 237
Sec. 3204. Simplification of Annual Beneficiary Election
Periods................................................ 237
Sec. 3205. Extension for Specialized MA Plans for Special
Needs Individuals...................................... 238
Sec. 3206. Extension of Reasonable Cost Contracts........ 240
Sec. 3207. Technical Correction to MA Private Fee-For-
Service Plans.......................................... 240
Sec. 3208. Making Senior Housing Facility Demonstration
Permanent.............................................. 241
Sec. 3209. Development of New Standards for Certain
Medigap Plans.......................................... 242
Subtitle D--Medicare Part D Improvements for Prescription
Drug Plans and MA-PD Plans................................. 242
Sec. 3301. Medicare Prescription Drug Discount Program
for Brand-Name Drugs................................... 242
Sec. 3302. Improvement in Determination of Medicare Part
D Low-income Benchmark Premium......................... 245
Sec. 3303. Voluntary de minimus Policy for Subsidy
Eligible Individuals Under Prescription Drug Plans and
MA-PD Plans............................................ 246
Sec. 3304. Special Rule for Widows and Widowers Regarding
Eligibility for Low-Income Assistance.................. 246
Sec. 3305. Improved Information for Subsidy Eligible
Individuals reassigned to Prescription Drug Plans and
MA-PD Plans............................................ 248
Sec. 3306. Funding Outreach and Assistance for Low-Income
Programs............................................... 248
Sec. 3307. Improving Formulary Requirements for
Prescription Drug Plans and MA-PD Plans with Respect to
Certain Categories or Classes of Drugs................. 249
Sec. 3308. Reducing Part D Premium Subsidy for High-
Income Beneficiaries................................... 250
Sec. 3309. Simplification of Plan Information............ 253
Sec. 3310. Limitation on Removal or Change of Coverage of
Covered Part D Drugs Under a Formulary Under a
Prescription Drug Plan or an MA-PD Plan................ 253
Sec. 3311. Elimination of Cost Sharing for Certain Dual
Eligible Individuals................................... 255
Sec. 3312. Reducing Wasteful Dispensing of Outpatient
Prescription Drugs in Long-term Care Facilities Under
Prescription Drug Plans and MA-PD Plans................ 255
Sec. 3313. Improved Medicare Prescription Drug Plan and
MA-PD Plan Complaint System............................ 256
Sec. 3314. Uniform Exceptions and Appeals Process for
Prescription Drug Plans and MA-PD Plans................ 257
Sec. 3315. Office of the Inspector General Studies and
Reports................................................ 258
Sec. 3316. HHS Study and Annual Reports on Coverage for
Dual Eligibles......................................... 259
Sec. 3317. Including Costs Incurred by AIDS Drug
Assistance Programs and Indian Health Service in
Providing Prescription Drugs Toward the Annual Out-of-
Pocket Threshold Under Part D.......................... 260
Subtitle E--Ensuring Medicare Sustainability................. 260
Sec. 3401. Revision of Certain Market Basket Updates and
Incorporation of Productivity Improvements into Market
Basket Updates that Do Not Already Incorporate Such
Improvements........................................... 260
Sec. 3402. Temporary Adjustment to the Calculation of
Part B Premiums........................................ 264
Sec. 3403. Medicare Commission........................... 264
Sec. 3404. Ensuring Medicare Savings are Kept in the
Medicare Program....................................... 270
Subtitle F--Patient-Centered Outcomes Research............... 270
Sec. 3501. Patient-Centered Outcomes Research............ 270
Sec. 3502. Coordination with Federal Coordinating Council
for Comparative Effectiveness Research................. 280
Sec. 3503. GAO Report on National Coverage Determinations
Process................................................ 281
Subtitle G--Administrative Simplification.................... 281
Sec. 3601. Administrative Simplification................. 281
Subtitle H--Sense of the Senate Regarding Medical Malpractice 285
Sec. 3701. Sense of the Senate Regarding Medical
Malpractice............................................ 285
TITLE IV--TRANSPARENCY AND PROGRAM INTEGRITY..................... 286
Subtitle A--Limitation on Medicare Exception to the
Prohibition on Certain Physician Referrals for Hospitals... 286
Sec. 4001. Limitation on Medicare Exception to the
Prohibition on Certain Physician Referrals for
Hospitals.............................................. 286
Subtitle B--Physician Ownership and Other Transparency....... 288
Sec. 4101. Transparency Reports and Reporting of
Physician Ownership or Investment Interests............ 288
Sec. 4102. Disclosure Requirements for In-office
Ancillary Services Exception to the Prohibition on
Physician Self-referral for Certain Imaging Services... 290
Sec. 4103. Prescription Drug Sample Transparency......... 290
Sec. 4104. Pharmacy Benefit Managers Transparency
Requirements........................................... 291
Subtitle C--Nursing Home Transparency and Improvement........ 292
PART I--IMPROVING TRANSPARENCY OF INFORMATION............ 292
Sec. 4201. Required Disclosure of Ownership and
Additional Disclosable Parties Information............. 292
Sec. 4202. Accountability Requirements for Skilled
Nursing Facilities and Nursing Facilities.............. 294
Sec. 4203. Nursing Home Compare Medicare Website......... 295
Sec. 4204. Reporting of Expenditures..................... 296
Sec. 4205. Standardized Complaint Form................... 297
Sec. 4206. Ensuring Staffing Accountability.............. 297
Sec. 4207. GAO Study and Report on Five-Star Quality
Rating System.......................................... 298
PART II--TARGETING ENFORCEMENT........................... 298
Sec. 4211. Civil Monetary Penalties...................... 298
Sec. 4212. National Independent Monitor Pilot Program.... 299
Sec. 4213. Notification of Facility Closure.............. 300
Sec. 4214. National Demonstration Projects on Culture
Change and Use of Information Technology in Nursing
Homes.................................................. 301
PART III--IMPROVING STAFF TRAINING....................... 301
Sec. 4221. Dementia and Abuse Prevention Training........ 301
Subtitle D--Nationwide Program for National and State
Background Checks on Direct Patient Access Employees of
Long-Term Care Facilities and Providers.................... 302
Sec. 4301. Nationwide Program for National and State
Background Checks on Direct Patient Access Employees of
Long-Term Care Facilities and Providers................ 302
TITLE V--FRAUD, WASTE, AND ABUSE................................. 303
Subtitle A--Medicare, Medicaid, and CHIP Provisions.......... 303
Sec. 5001. Provider Screening and Other Enrollment
Requirements Under Medicare and Medicaid............... 303
Sec. 5002. Enhanced Medicare and Medicaid Program
Integrity Provisions................................... 305
Sec. 5003. Elimination of Duplication Between the
Healthcare Integrity and Protection Data Bank and the
National Practitioner Data Bank........................ 310
Sec. 5004. Maximum Period of Submission of Medicare
Claims Reduced to not More Than 12 Months.............. 311
Sec. 5005. Physicians who Order Items and Services
Required to be Medicare Enrolled Physicians or Eligible
Professionals.......................................... 312
Sec. 5006. Requirement for Physicians to Provide
Documentation on Referrals to Programs at High Risk of
Waste and Abuse........................................ 312
Sec. 5007. Face-to-Face Encounter with Patient Required
Before Physicians May Certify Eligibility for Home
Health Services or Durable Medical Equipment Under
Medicare............................................... 312
Sec. 5008. Enhanced Penalties............................ 313
Sec. 5009. Medicare Self-Referral Disclosure Protocol.... 314
Sec. 5010. Adjustments to the Medicare Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies
Competitive Acquisition Program........................ 316
Sec. 5011. Expansion of the Recovery Audit Contractor
(RAC) Program.......................................... 316
Subtitle B--Additional Medicaid Provisions................... 318
Sec. 5101. Termination of Provider Participation Under
Medicaid if Terminated Under Medicare or Other State
Plan................................................... 318
Sec. 5102. Medicaid Exclusion from Participation Relating
to Certain Ownership, Control, and Management
Affiliations........................................... 318
Sec. 5103. Billing Agents, Clearinghouses, or Other
Alternate Payees Required to Register Under Medicaid... 319
Sec. 5104. Requirement To Report Expanded Set of Data
Elements Under MMIS to Detect Fraud and Abuse.......... 319
Sec. 5105. Prohibition on Payments to Institutions or
Entities Located Outside of the United States.......... 320
Sec. 5106. Overpayments.................................. 320
Sec. 5107. Mandatory State Use of National Correct Coding
Initiative............................................. 320
Sec. 5108. General Effective Date........................ 321
TITLE VI--REVENUE PROVISIONS..................................... 321
Sec. 6001. Excise Tax on High Cost Insurance............. 321
Sec. 6002. Employer Health Insurance Reporting........... 328
Sec. 6003. Modify the Definition of Qualified Medical
Expenses............................................... 329
Sec. 6004. Increase in Additional Tax on Distributions
from HSAs not Used for Medical Expenses................ 331
Sec. 6005. Limitation on Health Flexible Spending
Arrangements Under Cafeteria Plans..................... 332
Sec. 6006. Require Information Reporting on Payments to
Corporations........................................... 334
Sec. 6007. Requirements for Section 501(c)(3) Hospitals.. 336
Sec. 6008. Imposition of Annual Fee on Branded
Prescription Pharmaceutical Manufacturers and Importers 340
Sec. 6009. Imposition of Annual Fee on Medical Device
Manufacturers and Importers............................ 343
Sec. 6010. Imposition of Annual Fee on Health Insurance
Providers.............................................. 345
Sec. 6011. Study and Report of Effect on Veterans Health
Care................................................... 348
Sec. 6012. Elimination of Deduction for Expenses
Allocable to Medicare Part D Subsidy................... 349
Sec. 6013. Modify the Itemized Deduction for Medical
Expenses............................................... 350
Sec. 6014. Limitation on Deduction for Remuneration Paid
by Health Insurance Providers.......................... 351
Sec. 6021. Provide Income Exclusion for Indian Tribe
Health Benefits........................................ 356
Sec. 6022. Establishment of SIMPLE Cafeteria Plans for
Small Businesses....................................... 358
Sec. 6023. Investment Credit for Qualifying Therapeutic
Discovery Project...................................... 361
III. Budget Effects of the Bill....................................364
IV. Votes of the Committee........................................410
V. Changes in Existing Law.......................................430
VI. Additional Views..............................................431
VII. Minority Views................................................448
Calendar No. 184
111th Congress Report
SENATE
1st Session 111-89
======================================================================
AMERICA'S HEALTHY FUTURE ACT OF 2009
_______
October 19, 2009.--Ordered to be printed
_______
Mr. Baucus, from the Committee on Finance, submitted the following
R E P O R T
together with
ADDITIONAL AND MINORITY VIEWS
[To accompany S. 1796]
[Including cost estimate of the Congressional Budget Office]
The Committee on Finance, having considered an original
bill, S. 1796, to provide affordable, quality health care for
all Americans and reduce the growth in health care spending,
and for other purposes, reports favorably thereon and
recommends that the bill do pass.
I. BACKGROUND AND NEED FOR LEGISLATION
The U.S. health system is in crisis. In 2008, over 46
million Americans were uninsured and millions more have lost
their health coverage as a result of the recent economic
downturn. Another 25 million people are underinsured, with
coverage that is insufficient to protect against the cost of a
major illness. The rising cost of health care outpaces wages by
a factor of five to one, placing an ever greater strain on
family, business, and government budgets.
Improving the health system is one of the most important
challenges we face as a nation, and the inability to achieve
comprehensive health reform will undermine any efforts to
secure a full and lasting economic recovery. Health reform is
an essential part of restoring America's overall economy and
maintaining our global competitiveness.
Health care reform is also necessary to protect the
finances of working families. Between 2000 and 2009, average
family premiums for employer-sponsored health coverage
increased by 93 percent--increasing from $6,772 to $13,073--
while wages increased by only 19 percent in the same period.
Rising health care costs and mounting medical debt account for
half of all filed bankruptcies--affecting two million people a
year.
Countless studies have shown that those without health
coverage generally experience worse health outcomes and poorer
health compared to those who are insured. The uninsured are
less likely to receive preventive care or even care for
traumatic injuries, heart attacks, and chronic diseases. As a
result, 23 percent forgo necessary care every year due to cost,
while 22,000 uninsured adults die prematurely each year as a
result of lacking access to care.
A majority of the uninsured has low or moderate incomes--
with two-thirds in families with an annual income less than
twice the Federal poverty level (FPL). Eight in ten of the
uninsured are in working families in which workers are either
not offered coverage by their employer or they do not qualify
for employer-offered coverage.
Hospitals and clinics provide an estimated $56 billion
annually in uncompensated care to people without health
insurance, and those with health coverage pay the bill through
higher health care costs and increased premiums. This so-called
``hidden health tax'' cost the average family over $1,000 in
high premiums last year. An estimated ten percent of health
care premiums in California are attributable to cost shifting
due to the uninsured.
Rising health costs have taken a toll on U.S. businesses as
well. An estimated 159 million Americans receive health
benefits through an employer, with the average cost of this
coverage reaching $4,824 for single coverage and $13,375 for
family coverage in 2009. Over the last decade, employer-
sponsored coverage has increased by 131 percent, forcing
employers--particularly small employers--to make difficult
choices among painful options to offset increasing health
costs. These choices include raising workers' premiums,
limiting raises or reducing bonus pay, eliminating family
health benefits, or providing less-than-comprehensive health
coverage.
Federal and state governments have also struggled with
health care costs. The Congressional Budget Office has noted
that rising health care costs represent the ``single most
important factor influencing the Federal Government's long-term
fiscal balance.'' The U.S. spends more than 16 percent of our
gross domestic product (GDP) on health care--a much greater
share than other industrialized nations with high-quality
systems and coverage for everyone. By 2017, health care
expenditures are expected to consume nearly 20 percent of the
GDP, or $4.3 trillion annually. Spending for Medicare and
Medicaid, due to many of the same factors found in the private
sector, is projected to increase by 114 percent in ten years.
Over the same period, the GDP will grow by just 64 percent.
Despite high levels of spending on health care, a recent
study by the Institute of Medicine concludes that the current
health system is not making progress toward improving quality
or containing costs for patients or providers. Research
documenting poor quality of care received by patients in the
U.S. is shocking. A 2003 RAND Corporation study found that
adults received recommended care for many illnesses only 55
percent of the time. Needed care for diabetes was delivered
only 45 percent of the time and for pneumonia 39 percent of the
time. Patients with breast cancer fared better, but still did
not receive recommended care one-quarter of the time.
Compared to other industrialized countries, our quality of
care does not reflect the level of our investment. The U.S.
ranks last out of 19 industrialized countries in unnecessary
deaths and 29th out of 37 countries for infant mortality--tied
with Slovakia and Poland, and below Cuba and Hungary. Our rate
of infant mortality is double that of France and Germany.
In short, Americans are not getting their money's worth
when patients receive services of little or no value--such as
hospitalizations that could have been prevented with
appropriate outpatient treatment, duplicate tests, or
ineffective tests and treatments. Yet the current system does
little to steer providers toward the right choices. Even though
more care does not necessarily mean better care, Medicare and
most other insurers continue to pay for more visits, tests,
imaging services, and procedures, regardless of whether the
treatment is effective or necessary, and pay even more when
treatment results in subsequent injury or illness.
Providers are not consistently encouraged to coordinate
patients' care or to supply preventive and primary care
services, even though such actions can improve quality of care
and reduce costs. Rewarding providers that furnish better
quality care, coordinate care, and use resources more
judiciously could reduce costs and, most importantly, better
meet the health care needs of millions more American patients.
Each of the key challenges facing our health care system--
lack of access to care, the cost of care, and the need for
better-quality care--must be addressed together in a
comprehensive approach. Covering millions of uninsured through
a broken health system is fiscally unsustainable. Attempting to
address the inefficiencies plaguing our system and the perverse
incentives in the delivery system without covering the
uninsured will not alleviate the burden of uncompensated care
and cost shifting. The time for incremental improvements has
passed; health care reform must be comprehensive in scope.
It is in this context that the Finance Committee developed
the legislative proposal that would become the ``America's
Healthy Future Act.'' The legislation approved by the Finance
Committee addresses the challenges facing our health care
system by expanding health coverage to 29 million Americans,
improving quality of care and transforming the health care
delivery system, and reducing Federal health spending and the
Federal deficit over the ten year budget window and in the long
run.
As a general principle, the bill allows those who like
their health insurance to keep what they have today. For the
millions of Americans who don't have employer-sponsored
coverage, cannot afford to purchase coverage on their own, or
who are denied coverage by health insurance companies due to a
pre-existing condition, the Chairman's Mark reforms the
individual and small-group markets, making health coverage
affordable and accessible. These market reforms would require
insurance companies to issue coverage to all individuals
regardless of health status, prohibit insurers from limiting
coverage based on pre-existing conditions and allow only
limited variation in premium rates.
The Mark would make purchasing health insurance coverage
easier and more understandable by creating state-based web
portals, or ``exchanges'' that would direct consumers to all
available health plan options. The exchanges would offer
standardized health insurance enrollment applications, a
standard format companies would use to present their insurance
plans, and standardized marketing materials. Small businesses
would have access to state-based Small Business Health Options
Program (SHOP) exchanges. These exchanges--like the individual
market exchanges--would be web portals that make comparing and
purchasing health care coverage easier for small businesses.
The Mark standardizes benefits to force insurance companies
to compete on price and quality and not their ability to select
the healthiest individuals and ensures that every policy
offered in the individual and small group market provides
meaningful coverage for essential services. Those age 25 or
under will also have access to an affordable young invincible
plan that would provide catastrophic coverage and first dollar
coverage for prevention. Plans would not be allowed to set
lifetime or annual coverage limits.
The Chairman's Mark would standardize Medicaid eligibility
for all parents, children, pregnant women and childless adults
with incomes at or below $30,000 a year for a family of four
($14,400 for an individual), beginning in 2014. Individuals
between 100 percent of FPL and 133 percent of FPL would be
given the choice of enrolling in either Medicaid or in a
private health insurance plan offered through a health
insurance exchange. The federal government would provide
significant additional funding to states to cover the cost of
providing services to newly eligible Medicaid beneficiaries.
To ensure that health coverage is affordable, the Mark
would provide an advanceable, refundable tax credit for low and
middle-income individuals (between 100-400 percent of FPL) to
help offset the cost of private health insurance premiums.
Undocumented immigrants are prohibited from benefiting from the
credit. A cost-sharing subsidy would be provided to limit the
amount of out-of-pocket costs that individuals and families
between 100-200 percent of FPL have to pay. The cost-sharing
subsidy would be designed to buyout any difference in cost
sharing between the insurance purchased and a higher actuarial
value plan.
A tax credit would also be available to small businesses.
In 2011 and 2012, eligible employers can receive a small
business credit for up to 35 percent of their contribution.
Once the exchanges are up and running in 2013, qualified small
employers purchasing insurance through the exchange can receive
a tax credit for two years that covers up to 50 percent of the
employer's contribution. Small businesses with 10 or fewer
employees and with average taxable wages of $20,000 or less
will be able to claim the full credit amount. The credit phases
out for businesses with more than 10 employees and average
taxable wages over $20,000, with a complete phase-out at 25
employees or average taxable wages of $40,000. Non-profit
organizations with 25 or fewer employees would also be eligible
to receive tax credits if they meet the same requirements.
These organizations would be eligible for a 25 percent credit
from 2011-2013 and a 35 percent credit in 2013 and thereafter.
The Mark creates authority for the formation of the
Consumer Owned and Oriented Plans (CO-OPs). These plans can
operate at the state, regional or national level to serve as
non-profit, member-run health plans to compete in the reformed
non-group and small group markets. These plans will offer
consumer-focused alternatives to existing insurance plans. Six
billion dollars in federal seed money would be provided for
start-up costs and to meet state solvency requirements.
To ensure the insurance market reforms function properly,
the Mark would create a personal responsibility requirement for
health care coverage, with exceptions provided for religious
conscience (as defined in Medicare) and undocumented
individuals. Those who fail to meet the requirement are subject
to a penalty. Appropriate exemptions are made from the penalty.
The Chairman's Mark does not require employers to offer
health insurance. However, effective July 1, 2013, all
employers with more than 50 employees who do not offer coverage
would be required to reimburse the government for each full-
time employee (defined as those working 30 or more hours a
week) receiving a health care affordability tax credit in the
exchange equal to the average national exchange credit and
subsidy up to a cap of $400 per total number of employees
(whether they are receiving a tax credit and subsidy or not). A
Medicaid-eligible individual can always choose to leave the
employer's coverage and enroll in Medicaid. In this
circumstance, the employer is not required to pay a fee.
In addition to provisions that expand health care coverage,
the Chairman's Mark would make critical investments in policies
to promote healthy living and help prevent costly chronic
conditions like diabetes, cancer, heart disease and obesity.
Preventive screenings enable doctors to detect diseases
earlier, when treatment is most effective, thereby averting
more serious, costly health problems later.
The Mark would provide Medicare beneficiaries with a free
visit to their primary care provider every year to create and
update a personalized prevention plan designed to address
health risks and chronic health problems and to develop a
schedule for regular recommended preventive screenings. It
would eliminate out-of-pocket costs for recommended preventive
services for Medicare beneficiaries and provide incentives for
states to cover recommended services and immunizations in
Medicaid. And finally, the Mark establishes an initiative to
reward Medicare and Medicaid participants for healthier
choices. Funding will be available to provide participants with
incentives for completing evidence-based, healthy lifestyle
programs and improving their health status. Programs will focus
on lowering certain risk factors linked to chronic disease such
as blood pressure, cholesterol and obesity.
The legislation makes significant steps to reform the
health care delivery system. Medicare currently reimburses
health care providers on the basis of the volume of care they
provide--regardless of whether the treatment contributes to
helping a patient recover. The Chairman's Mark includes various
proposals to move the Medicare fee-for-service system towards
paying for quality and value. These proposals include hospital
value-based purchasing--and value-based purchasing for other
Medicare providers including physicians, home health agencies,
nursing homes, long-term care hospitals, inpatient
rehabilitation facilities, PPS-exempt cancer hospitals and
hospice providers.
To encourage greater collaboration among health care
providers, the Chairman's Mark would allow high-quality
providers that coordinate care across a range of health care
settings to share in the savings they achieve for the Medicare
program. It would create an Innovation Center at the Centers
for Medicare & Medicaid Services (CMS) that would have
authority to test new patient-centered payment models designed
to encourage evidence-based, coordinated care for Medicare,
Medicaid, and CHIP. Payment reforms that are shown to improve
quality and reduce costs could be expanded throughout the
Medicare program. It would also implement a national pilot
program on payment bundling and start to pay hospitals less for
avoidable hospital readmissions.
Efforts to reduce costs and improve quality in the health
care delivery system will require an investment in the health
care infrastructure necessary to support coordinated quality
care and create a more effective, efficient delivery system.
The legislation would provide additional resources to
strengthen the quality measure development processes for
purposes of improving quality, informing patients and
purchasers, and updating payments under federal health
programs. The Mark would also invest in research on what
treatments work best for which patients and ensure that
information is available and accessible to patients and
doctors, such as through the establishment of an independent
institute to research the effectiveness of different health
care treatments and strategies. These provisions are carefully
crafted so that patients would never be denied treatment based
on age, disability status or other related factors as a result
of the research findings.
To promote primary care and maintain adequate access to
health care providers, the Chairman's Mark would provide
primary care practitioners and targeted general surgeons with a
Medicare payment bonus of ten percent for five years. It would
strengthen the health care workforce by increasing graduate
medical education (GME) training positions through a slot re-
distribution program for currently unused training slots, with
priority given to increasing training in primary care and
general surgery. The provision would also encourage additional
training in outpatient settings, including teaching health
centers, and ensure communities retain vital training slots if
a hospital closes.
The Mark also improves the accuracy of Medicare payments to
providers by reducing overpayments to providers. It would
cancel a scheduled 21.5 percent reduction to physician payments
in 2010 and replace the impending cut with a positive update.
The legislation would improve the value of Medicare Advantage
by reforming payments so that the program appropriately pays
insurers for their costs and promotes plans that offer high
quality, efficient health care for seniors. To preserve
beneficiary access to certain services they now receive, the
legislation would grandfather MA plans in areas where plans
currently bid at or below 75 percent of traditional fee-for-
service Medicare to deliver benefits, so plans will continue to
offer the plans they currently offer and pay what they
currently pay to deliver benefits for existing beneficiaries.
For rural providers, the Mark includes important provisions
to ensure rural health care facilities and providers have the
resources they need to continue delivering quality care in
their communities. Specifically, the Mark would extend and
improve many rural access protections.
Sharply rising costs throughout the health system threaten
Medicare's sustainability in the long term. If costs are not
constrained, the Medicare program will be insolvent by 2017. To
ensure the fiscal solvency and sustainability of the Medicare
program, the Chairman's Mark would create a new independent
Medicare Commission tasked with presenting Congress with
comprehensive proposals to reduce excess cost growth and
improve quality of care for Medicare beneficiaries. In years
when Medicare costs are projected to be unsustainable, the
Commission's proposals will take effect unless Congress passes
an alternative measure that achieves the same level of savings.
Congress would be allowed to consider an alternative provision
on a fast-track basis. The Commission would be prohibited from
making proposals that ration care, raise taxes or Part B
premiums, or change Medicare benefit, eligibility, or cost-
sharing standards. The Mark would also reduce annual market
basket updates for hospitals, home health providers, nursing
homes, hospice providers, long-term care hospitals and
inpatient rehabilitation facilities, including adjustments to
reflect expected gains in productivity. Payment updates for
Part B providers would be reduced by an estimate of increased
productivity, and income-related premiums would be adopted in
Part D.
To improve the transparency of insurance products so that
individuals know what they are purchasing, the services which
are covered and the associated out-of-pocket costs, the Mark
would create standards so that individuals receive an outline
of coverage presented in a uniform format. The Mark would also
require insurance companies to publish the share of their
premium revenue that is used for administrative expenses and
would impose new requirements on insurers to meet standards for
the electronic exchange of payment and other health care
information with hospitals, doctors and other providers.
Reducing fraud, waste, and abuse in Medicare, Medicaid and
CHIP will reduce costs and improve quality throughout the
system. The Medicare improper payment rate for 2008 was 3.6
percent of payments, or $10.4 billion and the National Health
Care Anti-Fraud Association estimates that fraud amounts to at
least three percent of total health care spending, or more than
$60 billion per year. The Chairman's Mark includes several
significant provisions to combat fraud, waste and abuse in our
health care system.
The America's Healthy Future Act is fully offset and would
reduce the deficit and reduce Federal health spending over the
long run. In addition to the Medicare Commission, the other
policy that contributes to this goal is the high cost insurance
excise tax. Beginning in 2013, this provision would levy a non-
deductible excise tax on insurance companies and plan
administrators for any health insurance plan that is above the
threshold of $8,000 for singles and $21,000 for family plans.
The threshold would be higher for workers with high risk jobs
or for retirees aged 55 and up. The tax would apply to self-
insured plans and plans sold in the group market, but not to
plans sold in the individual market. A transition rule would
increase the threshold for the 17 highest cost states for the
first three years.
Other revenue measures include a limit on the amount of
contributions to health Flexible Spending Accounts (FSAs)
beginning in 2011, a provision to conform the definition of
qualified medical expenses for Health Savings Accounts (HSAs),
health FSAs, and HRAs to the definition used for the itemized
deduction, an increased penalty for use of HSA funds for non-
qualified medical expenses, and an increase in the threshold
for claiming the itemized deduction for medical expenses.
The legislation also includes an annual flat fee of $2.3
billion on the pharmaceutical manufacturing sector, an annual
flat fee of $4 billion on the medical device manufacturing
sector, and an annual flat fee of $6.7 billion on the health
insurance sector. Each of these non-deductible fees would be
allocated across the respective industry according to market
share. The device fee would not apply to companies with sales
of medical devices in the U.S. of $5 million or less and would
not apply to sales of Class I products or Class II products
that retail for less than $100 under the FDA product
classification system.
Taken together, this legislation achieves the goals of
expanding health care coverage to the uninsured, reducing
health care costs and improving the quality of care by
transforming the health care delivery system. This
comprehensive legislation represents a significant milestone in
our nation's pursuit of quality, affordable health care for all
Americans.
LEGISLATIVE HISTORY AND COMMITTEE ACTION
The Finance Committee has spent two years working on health
reform, learning about the problem and identifying solutions.
In the past two years, the committee held 20 hearings on health
care reform. Last June the committee hosted a day-long health
care summit at the Library of Congress featuring Federal
Reserve Chairman Ben Bernanke and Dr. J. Craig Venter, genomic
research pioneer, as keynote speakers.
Leading up to the markup, the committee held three
roundtable discussions reflecting the three major areas of
reform--access, cost and quality. In connection with each
roundtable--the committee hosted experts from around the
country with many different perspectives. Finance Committee
members asked many questions of these experts and delved into
the issues. Along with each roundtable, the committee put out a
detailed policy options paper and held three closed-door walk-
through sessions to discuss those options.
In sum, the hearings, summit, roundtables and walk-through
sessions demonstrated an open and exhaustive consideration of
this health care proposal.
In moving forward with the markup, the Finance Committee
distributed the Chairman's Mark and posted it on the committee
website on September 16, a full week prior to the start of the
markups. Members submitted 564 amendments to the Chairman's
Mark, all of which were posted on the website--a measure in the
name of transparency that has never been taken by the committee
before.
The markup of America's Healthy Future Act lasted for eight
days. These days were long days, often running past 10:00 p.m.
On the last day of considering amendments, the committee worked
past 2:00 a.m. All in all, it has been more than 22 years since
the Finance Committee met for eight days on a single bill.
During those eight days, the committee considered 135
amendments and conducted 79 roll call votes, adopting 41
amendments. A final amendment was adopted prior to the vote on
October 13, 2009 to report the bill. And the final vote to
report the bill was 14-9.
The legislation resulting from the committee's effort is a
balanced, sensible plan that takes the best ideas from both
sides of the aisle. It achieves President Obama's vision to
improve America's health care system, and it is a plan designed
to get the 60 votes it needs to pass. The Congressional Budget
Office confirms that the legislation will reduce the deficit by
$81 billion in the first 10 years, and that the legislation
will reduce the deficit further in the next 10 years. Coverage
is expanded to 29 million Americans, increasing the rate of
insurance to 94 percent at a cost of $829 billion.
II. EXPLANATION OF THE BILL
Title I--Health Care Coverage
Subtitle A--Insurance Market Reforms
SEC. 1001. INSURANCE MARKET REFORMS IN THE INDIVIDUAL AND SMALL GROUP
MARKETS
The Committee Bill would amend the Social Security Act (42
U.S.C. 301 et seq.) by adding a new Title XXII at the end:
``Title XXII--Health Insurance Coverage''
SEC. 2200. ENSURING ESSENTIAL AND AFFORDABLE HEALTH BENEFITS COVERAGE
FOR ALL AMERICANS
Present Law
No provision.
Committee Bill
The purpose of Title I would be to ensure that all
Americans have access to affordable and essential health
benefits coverage (1) by requiring that all new health benefits
plans offered to individuals and employers in the individual
and small group market are qualified health benefit plans
(QHBPs) that meet the insurance rating reforms and essential
health benefits coverage requirements under this bill, (2) by
establishing State exchanges to provide greater access to and
information about QHBPs, (3) by making health benefits coverage
more affordable with premium credits and cost-sharing
subsidies, and (4) by establishing the CO-OP program to
encourage the establishment of nonprofit health care
cooperatives.
PART A--INSURANCE REFORMS
``Subpart 1--Requirements in the Individual and Small Group Markets''
SEC. 2201. GENERAL REQUIREMENTS AND DEFINITIONS
Present Law
Certain commonly used terms in health insurance are defined
in statute. For example, ``group health plan'' is defined in
Sec 5000(b) of the Internal Revenue Code, as a ``plan
(including a self-insured plan) of, or contributed to by, an
employer (including a self-employed person) or employee
organization to provide health care (directly or otherwise) to
the employees, former employees, the employer, others
associated or formerly associated with the employer in a
business relationship, or their families''.
Committee Bill
The provisions would codify some new definitions in health
insurance. Each state would require that each health benefits
plan (other than grandfathered plans) offered in the individual
or small group market within the State would be a ``qualified
health benefits plan'' (QHBP). A QHBP would be defined as a
plan that has a certification issued or recognized by the State
that it meets the requirements relating to insurance market
reforms and meets health insurance affordability requirements.
Additionally, the offeror of the plan would be licensed by the
State and comply with other requirements established by the
Secretary or the State.
The term ``health benefits plan'' would include health
insurance coverage and group health plans. Except as specified
in the bill, a health benefits plan would not include a plan
that is not subject to certain state law requirements (self-
funded plans and multiple employer welfare arrangements--
MEWAs).
The term ``health benefits offeror'' would mean the issuer
offering coverage and for a group health plan, the plan sponsor
or employer.
The term ``group market'' refers to a group health plan
maintained by an employer. ``Individual market'' refers to the
market other than in connection with a group health plan.
Present Law
Pertaining to Sec. 2202-2206: The private health insurance
market consists of three segments: large group market, small
group market, and the individual (nongroup) market. A variety
of Federal and state laws and regulations apply to these
markets; sometimes the requirements are distinct for each
market segment and other times they overlap. Regulation of the
private health insurance market is primarily done at the state
level. State regulatory authority is broad in scope and
includes requirements related to the issuance and renewal of
coverage, benefits, rating, consumer protections, and other
issues. Federal regulation of the private market is more narrow
in scope and applicable mostly to employer-sponsored health
insurance (i.e., through the Employee Retirement Income
Security Act of 1974 (ERISA)).
The Federal Health Insurance Portability and Accountability
Act of 1996 (HIPAA, P.L. 104-191), which amended ERISA,
established Federal rules regarding coverage for pre-existing
health conditions, guaranteed issue and availability, and
guaranteed renewability in the individual and small group
markets for certain persons eligible for HIPAA protections.
HIPAA limits the duration that coverage for pre-existing health
conditions may be excluded for ``HIPAA eligible'' individuals
with group coverage. Group plans may impose pre-existing
condition exclusions for no longer than 12 months (18 months in
the case of a late enrollee), and must decrease that exclusion
period by the number of months an enrollee had prior
``creditable coverage.'' HIPAA also prohibits individual
issuers from excluding coverage for pre-existing health
conditions for HIPAA eligibles. All States require health
issuers to reduce the period of time when coverage for pre-
existing health conditions may be excluded, in compliance with
HIPAA. As of January 2009 in the small group market, 21 states
had pre-existing condition exclusion rules that provided
consumer protection above the Federal standard. And as of
December 2008 in the individual market, 42 states reduce the
period of time when coverage for pre-existing health conditions
may be excluded for non-HIPAA eligible enrollees.
HIPAA requires that coverage sold to firms with 2-50
employees must be sold on a guaranteed issue basis. That is,
the issuer must accept every small employer that applies for
coverage. Guaranteed issue does not affect (and is not affected
by) rating or benefits. HIPAA also guarantees renewal of both
small and large group coverage at the option of the plan
sponsor (e.g., employer), with some exceptions. HIPAA
guarantees that each issuer in the individual market make at
least two policies available to all ``HIPAA eligible''
individuals, and renewal of individual coverage is at the
option of such individuals, with some exceptions. In addition,
a number of states have enacted guaranteed issue rules. All
states require issuers to offer policies to firms with 2-50
workers on a guaranteed issue basis. As of January 2009, 13
states also require small group issuers to offer policies on a
guaranteed issue basis to self-employed ``groups of one.'' As
of January 2009 in the individual market, 14 states require
issuers to offer some or all of their individual insurance
products on a guaranteed issue basis.
There are no Federal rating rules applicable to the private
health insurance market. Most States currently impose rating
rules on insurance carriers in the small group market, the
individual market, or both. Existing state rating rules
restrict an insurer's ability to price insurance policies
according to the risk of the person or group seeking coverage,
and vary from state to state. Such restrictions may specify the
case characteristics (or risk factors) that may or may not be
considered when setting a premium, such as gender. The spectrum
of existing state rating limitations ranges from pure community
rating, to adjusted (or modified) community rating, to rate
bands, to no restrictions. Pure community rating means that
premiums cannot vary based on any characteristic, including
health. Adjusted community rating means that premiums cannot
vary based on health, but may vary based on other key risk
factors, such as age.
Rate bands allow premium variation based on health, but
such variation is limited according to a range specified by the
state. Rate bands are typically expressed as a percentage above
and below the index (i.e., the rate that would be charged to a
standard population if the plan is prohibited from rating based
on health factors ). For example, if a state establishes a rate
band of +/-25 percent, then insurance carriers can vary
premiums, based on health factors, up to 25 percent above and
25 percent below the index. Both adjusted community rating and
rate bands allow premium variation based on any other permitted
case characteristic, such as gender. For each characteristic,
the state typically specifies the amount of allowable
variation, as a ratio. For example, a 5:1 ratio for age would
allow insurers to charge an individual no more than five times
the premium charged to any other individual, based on age
differences. As of January 2009, two states have pure community
rating rules, ten have adjusted community rating rules, and 35
have rate bands in the small group market. As of January 2009
in the individual market, one state has pure community rating,
seven have adjusted community rating rules, and eleven have
rating bands. The remaining states have no limitations on
rating set in law in the individual market.
Committee Bill
SEC. 2202. PROHIBITION ON PREEXISTING CONDITION EXCLUSIONS
QHBPs would be prohibited from excluding coverage for
preexisting conditions, or otherwise imposing limits or
conditions on coverage based on any health status-related
factors. Such factors would include health status, medical
condition (including both physical and mental illnesses),
claims experience, receipt of health care, medical history,
genetic information, evidence of insurability (including
conditions arising out of acts of domestic violence), and
disability.
SEC. 2203. GUARANTEED ISSUE AND RENEWAL FOR INSURED PLANS
QHBPs would be required to offer coverage in the individual
and small group markets on a guaranteed issue and guaranteed
renewal basis. If a plan has a capacity limit, as determined
under regulations promulgated by the Secretary, the plan would
be allowed to limit enrollment to that limit as long as the
plan selects enrollees on the basis of order in which
individuals applied for enrollment. With respect to the
guaranteed renewal provision, this provision would require (1)
any rescissions of coverage to be treated in the same manner as
non-renewals of coverage, and (2) the premium at the time of
renewal be determined using the same categories of rate
adjustment factors used at the time the policy was first
issued.
SEC. 2204. PREMIUM RATING RULES
Health benefit plans offered in a rating area would be
allowed to vary premiums only according to specified ratios for
the following risk factors:
Family enrollment:
Individual, 1:1
Adult with child, 1.8:1
Two adults, 2:1
Family, 3:1
Age, 4:1
Tobacco Use, 1.5:1
The Secretary would establish age bands to implement the
provision relating to premium variation based on age. Health
benefit plans would be prohibited from rating based on health
status related factors, gender, class of business, claims
experience, or any other factor not specified above.
SEC. 2205. USE OF UNIFORM OUTLINE OF COVERAGE DOCUMENTS
Health benefits plans would be required to provide an
outline of the plan's coverage that meets the standards of
uniformity adopted by the Secretary under Sec. 1002 to (1) an
applicant at the time of application, (2) an enrollee at the
time of enrollment, and (3) a policyholder at the time the
policy is issued.
``Subpart 2--Reforms Relating to Allocation of Risks''
Present Law
Pertaining to Sec. 2211-2215: There are no Federally-
established rating areas in the private health insurance
market. However, some states have enacted rating rules in the
individual and small group markets that include geography as a
characteristic on which premiums may vary. In these cases, the
state has established rating areas. Typically, states use
counties or zip codes to define those areas.
Pooling refers to the industry practice of pooling the
insurance risk of individuals or groups in order to determine
premiums. In the individual market premiums are typically based
on the risk of the applicant, such as an individual or family.
In the small group market, premiums are typically based on the
collective risk of the small group. Some states have imposed
requirements on health insurance issuers that limit the
issuers' ability to base premiums on the risk of individuals or
small groups applying for coverage--see Present Law description
under Sec. 2202.
Medicare Advantage (MA) is an alternative way for Medicare
beneficiaries to receive covered benefits. Under MA, private
health plans are paid a per-person amount to provide all
Medicare-covered benefits (except hospice) to beneficiaries who
enroll in their plan. Payments to MA plans are risk adjusted to
control for variations in the cost of providing health care
among Medicare beneficiaries. For example, if sicker and older
patients all sign up for one plan, risk adjustment is designed
to compensate the plan for their above average health expenses.
Medicare Advantage payments are currently risk adjusted for the
health history of the enrollee, as well as for demographic
variables such as age, gender, working status, Medicaid
coverage, institutionalized status, and whether the beneficiary
originally qualified for Medicare on the basis of disability.
The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA, P.L. 108-173) established an
outpatient voluntary prescription drug benefit under a new
Medicare Part D, effective January 1, 2006. MMA established
risk corridors to limit plans' overall risks or profits under
the new program. Under risk corridors, Medicare limits a plan's
potential losses, or gains, by financing some of the higher
than expected costs, or recouping excessive profits. Risk
corridors are defined as specified percentages above and below
a target amount and are set separately for each plan. The
target amount is based on the total risk-adjusted subsidy
payments paid to the plan plus beneficiary premiums, reduced by
the administrative expenses assumed in the bid. The target
amount is then compared to the plan's actual allowable costs.
If actual costs exceed the target amount, Medicare reimburses
plans for a portion of their losses, and if costs are lower
than the target, the sponsor may owe money to the Center for
Medicare and Medicaid Services (CMS).
Committee Bill
SEC. 2211. RATING AREAS; POOLING OF RISKS; PHASE IN OF RATING RULES IN
SMALL GROUP MARKETS
Each state would be required to establish one or more
rating areas within the state for purposes of applying the
requirements of Title I. The Secretary would review the rating
areas to ensure the adequacy of such areas in carrying out the
Title I requirements. The Secretary would be allowed to
establish rating areas for those states whose rating areas are
determined to be inadequate.
Individual health insurance issuers offering an insured
QHBP in an area covered by an exchange would be required to
consider all enrollees in the plan as members of a single risk
pool, including individuals who do not purchase such a plan
through an exchange. Likewise, small group issuers offering a
QHBP in an area covered by an exchange would be required to
consider all enrollees in the plan as members of a single risk
pool, including individuals who do not purchase such a plan
through an exchange. States would have the option to merge the
individual and small group markets for purposes of applying the
pooling requirements. Upon approval by the Secretary, states
would be allowed to phase in the application of the insurance
reforms under Subpart 1 to the small group market over a
consecutive period of plan years (not greater than 5).
SEC. 2212. RISK ADJUSTMENT
Each state would be required to adopt a risk-adjustment
model, established by the Secretary, to apply risk adjustment
to QHBPs (whether or not purchased through an exchange) and
grandfathered plans in the individual and small group markets.
The Secretary would establish one or more risk adjustment
models that take into account differences in the risk
characteristics of individuals and employer enrolled under
different plans to minimize the impact of adverse selection of
enrollees in those plans. States have the option to establish
their own risk adjustment model if the state establishes a
model, to the satisfaction of the Secretary, that (1) would
produce substantially similar results to the model(s)
established by the Secretary and (2) would not increase Federal
costs.
The Secretary would be required to pre-qualify entities
capable of conducting risk-adjustment and the states would have
the option to pick among those entities. The entities pre-
qualified by the Secretary cannot be a plan offeror, or an
entity owned or operated by a plan offeror.
SEC. 2213. ESTABLISHMENT OF TRANSITIONAL REINSURANCE PROGRAM FOR
INDIVIDUAL MARKETS IN EACH STATE
No later than July 1, 2013, each state would be required to
establish a reinsurance program based on model regulation
developed by the National Association of Insurance
Commissioners (NAIC). Offerors of health benefit plans that are
offered in the individual market would be required to
contribute to a temporary reinsurance program for individual
policies that is administered by a non-profit reinsurance
entity. Such contributions would begin July 1, 2013 and
continue for a 36-month period.
In development of the model regulation, the NAIC would be
required to include these components: the method by which
individuals would be identified as high risk for purposes of
the reinsurance program, the formula for determining the
amounts to be paid to offerors of plans that insure high risk
individuals, the method for determining the amount each plan
offeror would be required to contribute under the reinsurance
program. The aggregate contribution amounts for all states,
without regard to administrative expenses, would be equal to
the following amounts for each 12-month plan year beginning on
July 1 of the following years: $10 billion in 2013, $6 billion
in 2014, and $4 billion in 2015. Plan offeror contributions to
the reinsurance program established under this section are in
addition to contribution amounts required under Sec. 2216. The
contribution amounts allocated and used in any of the three-
years may vary based on the reinsurance needs of a particular
year or to reflect experience in the prior year. In the event
that all funds are not expended in the three year period, the
reinsurer may continue to make payments under a state
reinsurance program in the individual market for a 24-month
period beginning on July 1, 2016, but no new contributions
would be collected beyond June 20, 2016.
The non-profit reinsurance entity would coordinate the
funding and operation of the reinsurance program. A state may
have more than one reinsurer to carry out the reinsurance
program in the state, and two or more states may enter into
agreements to allow a reinsurer to operate the reinsurance
program in those states. Reinsurance entities under this
section are tax exempt for Federal tax purposes. The state
would be required to eliminate or modify a state high risk pool
to the extent necessary to carry out the reinsurance program
established under this section.
SEC. 2214. ESTABLISHMENT OF RISK CORRIDORS FOR PLANS IN INDIVIDUAL AND
SMALL GROUP MARKETS
The Secretary would establish and administer risk corridors
for plan years during a 36-month period beginning on July 1,
2013, under which QHBPs in the individual and small group
markets would be allowed to participate in a payment adjustment
system modeled after the program applied to regional
Participating Provider Organizations in Medicare, Part D.
For the purpose of this provision, ``allowable costs''
means the total amount of costs that the plan incurred in
providing benefits covered by the plan reduced by the portion
of such costs attributable to administrative expenses. The term
``target amount'' means an amount equal to the total annual
premium amounts (including any premium subsidies) collected,
reduced by the amount of administrative expenses. If the
allowable costs for the plan for the year are greater than 103
percent, but not greater than 108 percent, of the target amount
for the plan and year, the Secretary would make a payment to
the plan equal to 50 percent of the difference between the
allowable costs and 103 percent of the target amount. If the
allowable costs for the plan for the year are greater than 108
percent of the target amount for the plan and year, the
Secretary would make a payment to the plan equal to the sum of
2.5 percent of the target amount and 80 percent of the
difference between the allowable costs and 108 percent of the
target amount. If the allowable costs for the plan for the year
are less than 97 percent, but greater than or equal to 92
percent, of the target amount for the plan and year, the
Secretary would receive a payment from the plan equal to 50
percent of the difference between 97 percent of the target
amount and the allowable costs. If the allowable costs for the
plan for the year are less than 92 percent of the target amount
for the plan and year, the Secretary would receive a payment
from the plan equal to the sum of 2.5 percent of the target
amount; and 80 percent of the difference between 92 percent of
such target amount and such allowable costs. If the allowable
costs for the plan for the year are at least 97 percent, but do
not exceed 103 percent, of the target amount for the plan and
year, there would be no payment adjustment for the plan and
year.
SEC. 2215. TEMPORARY HIGH RISK POOLS FOR INDIVIDUALS WITH PREEXISTING
CONDITIONS
No later than one year after enactment, the Secretary would
establish one or more temporary high risk pools to provide all
eligible individuals access to coverage that does not impose
any coverage exclusions for preexisting health conditions. The
Secretary could carry out this section directly or through
agreements or contracts with states or others as appropriate.
The high risk pool(s) established under this section would
provide coverage for the essential benefits package specified
under Sec. 2242, and would provide the bronze level of coverage
specified under Sec. 2243. The premiums charged under the high
risk pool would be equal to the standard premium rate for a
plan providing coverage for the essential benefits package and
the bronze level of coverage. The Secretary could vary premiums
in the same manner that a QHBP may vary premiums under Sec.
2204.
There would be appropriated out of the Treasury $5 billion
to finance the claims and administrative expenses of the high
risk pool(s) in excess of the premiums collected from
enrollees. If in any fiscal year there is a shortage of
aggregate amounts for payments of pool expenses, the Secretary
would make adjustments to eliminate the shortage.
Coverage under a high risk pool would end as of the end of
June 30, 2013, with exceptions. The Secretary could extend high
risk pool coverage if the Secretary determines that such
extension is necessary to avoid a lapse in coverage resulting
from the transition of enrollees from the high risk pool into
QHBPs offered through an exchange. Eligible individuals for
high risk pool participation include individuals who: (1) have
been denied coverage due to a preexisting health condition, (2)
have been uninsured for a continuous period of at least six
months, (3) are not eligible for essential health benefits
coverage (as defined in Sec. 5000(A)(d)), and are citizens or
nationals of the U.S., legal permanent residents, or lawfully
present aliens.
SEC. 2216. REINSURANCE FOR RETIREES COVERED BY EMPLOYER-BASED PLANS
Present Law
No provision.
Committee Bill
No later than 90 days after enactment, the Secretary would
establish a temporary reinsurance program to provide
reimbursement to assist participating employment-based plans
with the cost of providing health benefits to eligible retirees
who are 55 and older (and not eligible for Medicare) and their
dependents, including eligible and surviving spouses. Health
benefits would be required to include medical, surgical,
hospital, prescription drug, and other benefits determined by
the Secretary. An employment-based plan would submit an
application to the Secretary, as required. A participating
employment-based program would submit claims for reimbursement
to the Secretary, documenting the actual cost of items and
services for each claim. Each claim would be based on the
actual amount expended by the participant. The participating
employment-based plan would take into account any negotiated
price concessions, such as discounts, subsides, and rebates.
The cost of deductibles and cost-sharing would be included in
the cost of the claim, along with the amounts paid by the plan.
For any valid claim, the Secretary would reimburse the plan for
80 percent of the portion of costs above $15,000 and below
$90,000. This amount would be adjusted annually based on the
percent increase in the medical care component of the Consumer
Price Index, rounded to the nearest multiple of $1,000. Amounts
paid to a participating employment-based plan would be used to
lower cost directly to participants and beneficiaries in the
form of premiums, co-payments, deductible, co-insurance, or
other out-of-pocket costs, but would not be used to reduce the
costs of an employer maintaining the employment-based plan. The
Secretary would establish an appeals process for denied claims,
procedures to protect against fraud, waste, and abuse, and
would conduct annual audits of claims date.
The Secretary of the Treasury would establish a separate
account within the Treasury of the United States for deposit of
$5 billion to the Secretary of HHS which is collected through
the reinsurance program established in Sec. 2213 of this bill.
Amounts in the account would be appropriated for use by the
Secretary to carry out reinsurance for retirees. The Secretary
would have the authority to stop taking applications or take
other steps to reduce expenditures to ensure that expenditures
did not exceed available funds.
``Subpart 3--Preservation of Right to Maintain Existing Coverage''
SEC. 2221. GRANDFATHERED HEALTH BENEFIT PLANS
Present Law
No provision.
Committee Bill
Plans could continue to offer coverage in a grandfathered
policy in both the individual and group market. Enrollment
would be limited to those who were currently enrolled, their
dependents, or in the case of an employer, to new employees and
their dependents. Beginning July 1, 2013, Federal rating rules
would be phased in for grandfathered policies in the small
group market, over a period of up to five years, as determined
by the state with the approval from the Secretary.
Health insurance coverage in the individual market (in
effect before enactment) that is actuarially equivalent to a
catastrophic plan for young individuals (as defined in Sec.
2243(c) of the bill), would be treated as grandfathered plans.
``Subpart 4--Continued Role of States''
Present Law
Pertaining to Sec. 2225-2227: Regulation of the private
health insurance market is primarily done at the state level.
State regulatory authority is broad in scope and includes
requirements related to licensing, solvency, the issuance and
renewal of coverage, benefits, rating, consumer protections,
and other issues. Such rules vary from state to state. An
insurance carrier must be licensed in each state in which it
operates, and comply with the applicable laws and regulations
of each state.
Committee Bill
SEC. 2225. CONTINUED STATE ENFORCEMENT OF INSURANCE REGULATIONS
No later than 12 months after enactment, the NAIC would
develop a Model Regulation to implement the requirements for
plans offered in the individual and small group markets within
a state. The Secretary would promulgate regulations to
implement the Model Regulation developed by the NAIC. If the
NAIC does not establish the Model Regulation within the 12
months after enactment, the Secretary would establish Federal
standards implementing the applicable requirements. States
would have until July 1, 2013 to adopt and have in effect the
Model Regulation or Federal standards established by the
Secretary, or a state law or regulation that implements the
applicable requirements.
If a state fails to adopt or substantially enforce the
Model Regulation, Federal standards, or state laws or
regulations, the Secretary would be required to enforce those
provisions related to the issuance, sale, renewal, and offering
of health benefits plans until the state adopts and enforces
such provisions. The Secretary would have enforcement authority
under Sec. 2722(b) of the Public Health Services Act to impose
civil money penalties on plans that fail to meet such
provisions. The Model Regulation, Federal standards, or state
laws and regulations implemented by a state must include a
requirement that adopted standards (including existing
standards under state law that offer more protection to
consumers than standards set forth in this title) are applied
uniformly to all offerors of health benefits plans in the
individual or small group market.
By no later than July 1, 2013, a state would be required to
establish and have in operation one or more exchanges,
including Small Business Health Options Program (SHOP)
exchanges, that meet the requirements regarding the offer of
QHBPs. If states do not establish these exchanges within 2
years of enactment (or if the Secretary determines the
exchanges will not be operational by July 1, 2013), the
Secretary would be required to contract with a nongovernmental
entity to establish the exchanges within the state. States
would be required to establish interim exchanges for use by
state residents as soon as practicable in the period from
January 1, 2010 to June 30, 2013. If these interim exchanges
are not operational within a reasonable period after enactment,
the Secretary would be required to contract with a
nongovernmental entity to establish state exchanges during this
interim period.
This title would not replace state laws that establish,
implement, or continue any standards or requirements relating
to health benefits plans that offer more protection to
consumers than the protection offered by standards or
requirements included in this title. These standards or
requirements would refer to consumer protections (e.g. claims
grievance procedures, external review of claims determinations,
oversight of insurance agent practices, and others); premium
rating reviews; solvency and reserve requirements related to
health insurance issuers' licensures; and the assessment of
sate-based premium taxes on health insurance issuers. The
provisions in this title would not affect ERISA provisions with
respect to group health plans.
States could institute programs to provide that offerors of
qualified health benefit plans, small employers, and exchanges
offering plans in the state's individual and small group market
could automatically enroll individuals and employees in (or
continue enrollment of individuals in) QHBPs. Automatic
enrollment programs would be required to allow individuals or
employees to opt out of any coverage in which they were
automatically enrolled.
Each state would require offerors of QHBPs through an
exchange to provide for a claims review process, to notify
enrollees in clear language and in the enrollees' primary
language of available internal and external appeals processes,
and to allow enrollees to review their files, present evidence,
and maintain their insurance coverage during the appeals
process. States would be required to provide for an external
review process that includes consumer protections set forth in
the NAIC's Uniform External Review Model Act, and ensure that
enrollees can seek judicial review through Federal or state
procedures.
SEC. 2226. WAIVER OF HEALTH INSURANCE REFORM REQUIREMENTS
Present Law
No provision.
Committee Bill
A state could apply for a waiver of any and all
requirements of Title I and the IRC for plan years beginning on
or after July 1, 2015. The waiver application would have to (1)
be filed at a time and manner specified by the Secretary, and
(2) provide required information, including a comprehensive
description of the State legislation or program for
implementing a plan meeting the waiver requirements, and a 10-
year budget plan that is budget neutral for the Federal
Government.
In order for the Secretary to grant a request for a waiver,
the Secretary would have to determine that (1) the State plan
would provide coverage at least as comprehensive as that
required under a QHBP offered through exchanges, (2) the State
plan received input from its citizens, and (3) the State plan
would not increase the Federal deficit and would lower the
growth in health spending, improving delivery system
performance, providing affordable choices of all citizens,
expanding protection against excessive out-of-pocket spending,
and providing coverage to the same number of uninsured as this
title.
The Secretary would determine the scope of the waiver,
including which Federal laws and requirements would not apply
to the state. This determination would be made within 180 days
of receiving a waiver application from the state. The Secretary
would notify the state if the waiver is granted, or would
notify the state and the appropriate committees of Congress the
reasons that the waiver was not granted.
SEC. 2227. PROVISIONS RELATING TO OFFERING OF PLANS IN MORE THAN ONE
STATE
Present Law
No provision.
Committee Bill
``Health care choice compacts'' would allow for the offer
of one or more QHBPs in the individual market across state
lines. By July 1, 2013, the National Association of Insurance
Commissioners (NAIC) would develop model rules for these
compacts. The compacts would exist between two or more states,
but the QHBP would only be subject to the laws and regulations
of the state in which the plan was written or issued. However,
the offeror of the QHBP would be subject to laws and
regulations concerning provisions on market conduct, unfair
trade practices, network adequacy, and consumer protections in
all states that offered the plan. The offeror of the compact
would also be licensed in each state in which it offered the
plan, and would notify purchasers that the policy might not be
subject to all the laws and regulations of the purchaser's
state. States must enact a law authorizing the compacts. These
compacts would not begin before January 1, 2015.
An offeror of a QHBP in the individual or small group
market could sell the plan in more than one state, including
all states, and not be subject to any state laws mandating
benefit coverage. However, a state may pass a law opting out of
this type of policy. For all participating states, the offeror
would be required to (1) have a uniform benefits package for
each state; (2) be licensed in each state and meet State
standards and requirements as detailed in Sec. 2225 (relating
to consumer protections, premium rating reviews, and solvency
and reserve requirement, and state-based premium taxes); (3)
meet all the requirements with respect to QHBPs, including
offering a silver and gold level plan in each state; and (4)
determine each state's premiums on the basis of the rating
rules in that state for the rating areas in which the plan is
offered. The NAIC would develop model rules for offering QHBPs
on a national basis by 2012, including implementing benefit
categories that take into account benefits offered in a
majority of States, and harmonization between State authorities
of insurance regulation. Each participating state would be
required to include the NAIC Model rules for the offering of
QHBPs on a national basis in the Model Regulation, Federal
standard, or State law and regulation that it adopts and has
its effect under Sec. 2225(a)(2).
SEC. 2228. STATE FLEXIBILITY TO ESTABLISH BASIC HEALTH PLANS FOR LOW-
INCOME INDIVIDUALS NOT ELIGIBLE FOR MEDICAID
Present Law
There is no existing Federal law providing direct on-going
program financing to the States for health insurance coverage
of low-income individuals not eligible for Medicaid either
under standard criteria or via waivers. The Committee Bill is
modeled after the Washington State Basic Health (BH) Plan
program administered and financed by the Washington State
Health Care Authority (HCA). BH started as a pilot program
established by the Washington State ``Health Care Access Act of
1987''. In 1993, Washington State made the program permanent as
part of the Health Services Act. Current eligibility
requirements include the following: (1) Must be a Washington
State resident; (2) May not be eligible for free or purchased
Medicare; (3) May not be institutionalized at the time of
enrollment; (4) May not be attending school full time in the
United States on a student visa; and (5) Must be within the
income guidelines (gross monthly income of $1,733.41 for an
individual and $3,533.50 for a family of four).
Committee Bill
The Committee Bill would require the Secretary to establish
a program where a state or a regional compact of states would
establish 1 or more qualified basic health plans to provide at
least an essential benefits package to eligible individuals
rather than offering coverage to them through an exchange
established under part B. States would enroll income-eligible
persons in their Basic Health Plan that meets the competitive
procurement requirements and the requirements to provide
premium and cost-sharing subsidies to eligible individuals. The
Committee Bill would require that the Secretary certify that
the state's qualified basic health plan has premiums and cost-
sharing for any plan year that does not exceed the estimated
average cost for a QHBP within the state and offered through
the exchanges, and that the benefits provided under the
qualified basic health plan covers the items and services
required under an essential benefits package in the exchange.
The Committee Bill would define a qualified basic health
plan in this program as a plan established and maintained by
the state under which only eligible individuals enroll. The
Committee Bill would further define the plan as providing at
least an essential benefits package as required for the
exchange, and it would require at least a medical loss ratio of
85 percent. The Committee Bill would also require meeting the
competitive procurement requirements and the requirements to
provide premium and cost-sharing subsidies to eligible
individuals.
The Committee Bill would require states to establish a
competitive process to enter into contracts with coverage
providers under the plan. Contract negotiations would include
payment rates, premiums, cost-sharing, and extra benefits.
States would be encouraged to include innovative features in
their health plan contracting, including, but not limited to
care coordination and care management (emphasizing chronic
conditions), incentives for use of preventive services, and
establishment of patient/doctor relationships that maximize
patient involvement in health care decision-making, including
awareness of the incentives and disincentives in using the
health care plan. States would be required to consider and make
suitable allowance for differences in health care needs of
enrollees and differences in local availability of health care
provider resources. The competitive process would also require
consideration of contracting with managed care systems or with
systems that offer as many of the attributes of managed care as
feasible in the local health care market. The Committee Bill
would also include consideration in the competitive process of
establishment of specific performance measures and standards
for coverage of providers that focus on quality of care and
improved outcomes, in addition to requiring providers to report
measures and standards. The Committee Bill would require making
performance and quality information available to enrollees in a
useful form.
Under the Committee Bill, states would be instructed to
seek participation by multiple health plans to allow enrollees
a choice between two or more plans, whenever possible. The
Committee Bill would also allow states entering into health
care choice compacts to form multi-state risk pools for the
purposes of negotiating with health care systems. The Committee
Bill would encourage state administrators to find ways to
integrate their negotiations with any Medicaid or other state
administered health care programs to maximize efficiency and
improve the continuity of care between all state administered
health programs. State administrators would seek to contract
with managed care systems, or with systems that offer as many
of the attributes of managed care as are feasible in the local
health care market. State administrators, in conjunction with
HHS, would establish specific performance measures and
standards for participating health care systems that focus on
quality of care and improved health outcomes. Participating
health care systems would report to the state on the measures.
Their performance and quality information would be made
available to the Secretary of HHS and to the Basic Health Plan
enrollees to help enrollees choose the best health care system.
Under the Committee Bill, if the Secretary determines that
a state meets the requirements of the program, then the
Secretary would provide funds to participating states in order
to provide affordable health care coverage through private
health care systems under contract. A state's Basic Health Plan
funding level would be based on the Secretary's estimates of 85
percent of the value of individual tax credits and cost sharing
subsidies that would otherwise have been made for a QHBP based
on enrollment in that state. This amount would be calculated on
a per enrollee basis. Funds distributed to the states would be
provided to independent trusts and would be used by the states
only to reduce the premiums and cost sharing for eligible
enrolled individuals.
Under the Committee Bill an eligible individual is defined
by the following (1) must be a resident of the State who is not
eligible to enroll in the State's Medicaid program for benefits
that, at a minimum, are consistent with the essential benefits
package in section 2242; (2) must have a household income
between 133 percent and 200 percent of the Federal Poverty
Level (FPL) for the size of the family involved; (3) is not
eligible for an employer-sponsored plan that is not affordable
coverage; and (4) has not attained the age of 65 as of the
beginning of the plan year. The Committee Bill would also
include in the definition of the term, individuals who are
eligible for enrollment by reason of their relationship to the
individual meeting the eligibility criteria. The Committee Bill
would stipulate that an eligible individual would not be able
to use the exchange.
The Committee Bill would require the Secretary to conduct a
review of each state program on an annual basis to ensure
compliance with the requirements of the program. Specifically
the Committee Bill would require the Secretary to ensure state
programs meet (1) eligibility verification requirements; (2)
the requirements for use of Federal funds received by the
program; and (3) the quality and performance standards.
The Committee Bill would stipulate that a state may provide
that a participating provider in a qualified basic health plan
may include a licensed health maintenance organization, a
licensed health insurer, or a network of health care providers.
The Committee Bill would also stipulate that any term used in
this section and section 36B of the Internal Revenue Code of
1986 would have the meaning established by the latter.
``Subpart 5--Other Definitions and Rules''
SEC. 2230. OTHER DEFINITIONS AND RULES
Present Law
No provision.
Committee Bill
In connection with a group health plan, the term ``large
employer'' would mean an employer who employed an average of at
least 101 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first
day of the plan year.
In connection with a group health plan, the term ``small
employer'' would mean an employer who employed an average of at
least 1 but not more than 100 employees on business days during
the preceding calendar year and who employs at least 1 employee
on the first day of the plan year. Employers who initially meet
the definition of small employer may continue to be treated as
such, even if they later employ more than 100 employees.
For plan years beginning before January 1, 2015, states
have the option to change the definition of large employer to
those with at least 51 employees, and limit small employers to
those with 1 to 50 employees.
Employers treated as a single employer under the IRC would
also be treated as a single employer for purposes of
determining whether an employer was small or large. For
employers not in existence throughout the preceding calendar
year, the determination of whether the employer is considered
small or large would be based on reasonable expectations of the
average number of employees during business days in the current
year.
Subtitle B--Exchanges and Consumer Assistance
SEC. 1101. ESTABLISHMENT OF QUALIFIED HEALTH BENEFITS PLANS EXCHANGES
PART B--EXCHANGE AND CONSUMER ASSISTANCE
``Subpart 1--Individuals and Small Employers Offered Affordable
Choices''
Present Law
Pertaining to Sec. 2231-Sec. 2239: No specific provision
exists in Federal law today regarding a health insurance
exchange. At the state level, however, Massachusetts
established a connector authority, which is described below for
illustrative purposes.
In 2006, in tandem with substantial private health
insurance market reforms, Massachusetts created the
Commonwealth Health Insurance Connector Authority, governed by
a Board of Directors, to serve as an intermediary that assists
individuals in acquiring health insurance. In this role, the
Health Connector manages two programs. The first is
Commonwealth Care, which offers a government-subsidized plan at
three benefit levels from a handful of health insurers to
individuals up to 300 percent of the FPL who are not otherwise
eligible for traditional Medicaid or other coverage (e.g., job-
based coverage). The second is Commonwealth Choice, which
offers an unsubsidized selection of four benefit tiers (gold,
silver, bronze, and young adult) from six insurers to
individuals and small groups.
Under state law, the Board of Directors, with its 11 board
members, has numerous responsibilities, including the
following: determining eligibility for and administering
subsidies through the Commonwealth Care program, awarding a
seal of approval to qualified health plans offered through the
Connector's Commonwealth Choice program, developing regulations
defining what constitutes ``creditable coverage,'' constructing
an affordability schedule to determine if residents have access
to ``affordable'' coverage and may therefore be subject to tax
penalties if they are uninsured, and developing a system for
processing appeals related to eligibility decisions for the
Commonwealth Care program and the individual mandate.
Committee Bill
SEC. 2231. RIGHTS AND RESPONSIBILITIES REGARDING CHOICE OF COVERAGE
THROUGH EXCHANGE
Qualified individuals could choose to enroll or not to
enroll in a QHBP offered through an exchange in the State in
which they reside. Each qualified small employer could choose
to offer its employees an exchange-offered QHBP that covers the
small group market for the state in which the employee resides.
Each employee of a small employer could choose to enroll or not
to enroll in such a plan. A qualified small employer may limit
the QHBP or levels of coverage that employees may enroll in
through an exchange. A qualified small employer that offers
coverage under a self-insured plan may not offer plans through
an exchange.
Members of Congress and Congressional employees would be
treated as qualified individuals with the right to enroll in a
QHBP in the individual market offered through an exchange. Any
employer contribution on behalf of the Member or employee could
be paid only to the offeror of a QHBP in which the Member or
employee enrolled. The contribution on behalf of Member or
employee would be actuarially adjusted for age and paid
directly to an exchange. A Congressional employee would be one
whose pay is disbursed by the Secretary of the Senate or the
Clerk of the House of Representatives.
All plan offerors of a QHPB would be required to offer the
plan through the exchange and may offer the plan outside of the
exchange. An offeror of a QHBP in the individual or small group
market within a State must offer at least one silver level and
one gold level QHBP, and may offer 1 or more bronze and
platinum level plans, as well as a catastrophic plan. Each
exchange that offers plan in the individual or small group
market must offer all QHBPs in the state that are licensed by
the State.
Each exchange within a State would be required to allow an
offeror that only provides oral health benefits to offer the
plan through the exchange (either separately or in conjunction
with a QHBP). The plan would be treated as a QHBP.
The Secretary would establish procedures requiring states
to allow agents or brokers to enroll individuals in any QHBP in
the individual or small group market as soon as the plan is
offered through an exchange in the State and to assist
individuals in applying for premium credits and cost-sharing
subsidies for plans sold through an exchange.
SEC. 2232. QUALIFIED INDIVIDUALS AND SMALL EMPLOYERS: ACCESS LIMITED TO
CITIZENS AND LAWFUL RESIDENTS
The term ``qualified individual'' would mean an individual
seeking to enroll in an exchange-offered QHBP in the individual
market who resides in the State that established the exchange.
This would not include an individual who is incarcerated, other
than those pending the disposition of charges.
The term ``qualified small employer'' would mean an
employer that elects to make all full-time employees eligible
for 1 or more QHBPs offered through an exchange that offers
QHBPs in the small group market.
If, for the entire plan year, an individual was not
reasonably expected to be a citizen or national of the U.S, not
lawfully admitted to the U.S. for permanent residence, or not
lawfully present in the U.S. he or she would not be considered
to be a qualified individual and could not enroll in an
exchange-offered QHBP in the individual market. The individual
could not enroll as an employee of (or as an individual bearing
a relationship to an employee) a qualfied small employer in an
exchange-offered QHBP in the small group market.
``Subpart 2--Establishment of Exchanges''
SEC. 2235. ESTABLISHMENT OF EXCHANGES BY STATES
No later than July 1, 2013, each state would be required to
establish (1) an exchange to facilitate the enrollment of
qualified individuals in QHBPs offered in the individual
market, and (2) a Small Business Health Options Program (``SHOP
exchange'') to assist qualified small employers in facilitating
the enrollment of their employees into QHBPs offered in either
the individual or small group market. States could establish
one exchange to serve both individuals and small businesses, so
long as the exchange has separate resources to assist
individuals and employers. An exchange or SHOP exchange could
operate in more than one state if each state agrees to
operation of the exchange in that state, and the Secretary
approves.
A state could authorize an exchange to contract with an
eligible entity to carry out one or more exchange
responsibilities. An eligible entity would (1) be incorporated
under and subject to state law, (2) have demonstrated
experience administering health insurance benefits in the
individual and small group markets, and (3) not be a health
insurance issuer or treated under Sec. 52 of the IRC as a
member of the same controlled group of corporations of such an
issuer. A state could authorize an exchange to enter into an
agreement with the state Medicaid agency for the purposes of
establishing individual eligibility for the exchange, and for
the premium credit under Sec. 36B of the Internal Revenue Code
of 1986 and the cost-sharing subsidy established under Sec.
2247, if such an agreement complies with requirements
promulgated by the Secretary. Each state would provide for the
establishment of rate schedules for broker commissions paid by
the plans through an exchange. Beginning in 2017, each state
could allow QHBP offerors in the large group market to offer
plans through an exchange.
Each state, as soon as practicable after enactment, would
establish an interim exchange through which enrollment in
eligible health insurance coverage is offered beginning Jan. 1,
2010 through June 30, 2013. Eligible coverage would include any
coverage that meets the requirements specified under Sec. 2244
(regarding cost-sharing and spending limits) which is offered
by a state-licensed insurance carrier in the individual or
small group market. Eligible coverage would not include limited
benefit plans, as determined under regulations promulgated by
the Secretary. The Secretary would provide technical assistance
to each state in establishing exchanges.
SEC. 2236. FUNCTIONS PERFORMED BY SECRETARY, STATES, AND EXCHANGES
The Secretary of HHS would enter into an agreement with
each state outlining exchange-related functions that would be
performed by the Secretary, the state, or the exchange. Such an
agreement would provide for the state to establish
certification procedures for QHBPs to participate in an
exchange. Such an agreement would address the conduct for the
following outreach and eligibility activities: establishment of
an outreach plan, establishment and maintenance of call
centers, development of a template for an Internet portal,
establishment of a rating system to rate QHBPs, and
determination of individuals and employers as qualified (or
disqualified) to participate in an exchange. Such an agreement
would provide for the establishment and implementation of an
enrollment process, which would address enrollment through a
variety of media and venues, establishment of open and special
enrollment periods, establishment of a uniform enrollment form
and standardized marketing requirements, development of a
standardized format for presenting health benefit options in
the exchange, and dissemination of information regarding
eligibility requirements for Medicaid and the Children's Health
Insurance Program (CHIP). Such an agreement would provide for
the establishment and use of a tool to determine cost of
coverage after application of any premium or cost-sharing
credit, and implementation of the responsibilities specified
under Sec. 2248 regarding advance determinations and payments
of such credits. Such an agreement would establish procedures
for granting annual certification attesting that an individual
is exempt from the individual mandate because there is no
affordable QHBP available, and for transferring to the Treasury
Secretary a list of such individuals.
SEC. 2237. DUTIES OF THE SECRETARY TO FACILITATE EXCHANGES
The Secretary of HHS and the Treasury Secretary would carry
out the responsibilities specified under Sec. 2248, regarding
advance determinations and payments of premium and cost-sharing
credits that are delegated specifically to such authorities.
The Secretary would designate an office with the U.S.
Department of Health and Human Services to provide technical
assistance to states to facilitate the participation of
qualified small businesses in SHOP exchanges. The Secretary
would pay each state an amount estimated by the Secretary for
the unreimbursed start-up costs for any exchange or SHOP
exchange. No payments could be made for any operations costs of
an exchange.
SEC. 2238. PROCEDURES FOR DETERMINING ELIGIBILITY FOR EXCHANGE
PARTICIPATION, PREMIUM CREDITS, AND COST-SHARING SUBSIDIES
The Secretary of HHS would establish procedures for
determining whether or not individuals who want to enroll in an
exchange-offered QHBP or to claim a premium credit or cost-
sharing subsidy, meet the requirements regarding citizenship or
immigration status. Additionally, for those individuals
claiming a credit or subsidy, the Secretary would determine
whether the individual meets applicable insurance and coverage
requirements and if so, the amount of the credit or subsidy.
The Secretary of HHS also would establish procedures for
determining (1) if an individual's coverage under an employer-
sponsored plan is considered unaffordable, and (2) whether or
not to grant an annual certification to the individual that
would provide an exemption from the individual mandate
requirements because there is no affordable QHBP available.
In applying for enrollment in a QHBP offered through an
exchange, the applicant would be required to provide
individually identifiable information, including name, address,
date of birth, and citizenship or immigration status. In the
case of an individual claiming a premium credit or cost-sharing
subsidy, the individual would be required to submit to the
exchange income and family size information and information
regarding changes in marital or family status or income.
Personal information provided to the exchange would be
submitted to the Secretary of HHS. In turn, the Secretary would
submit applicable information to the Social Security
Commissioner, Homeland Security Secretary, and Treasury
Secretary for verification purposes. The Secretary of HHS would
be notified of the results following verification, and would
notify the exchange of such results. The provision specifies
actions to be undertaken if inconsistencies are found. The
Secretary of HHS, in consultation with the Treasury Secretary,
Homeland Security Secretary, and Social Security Commissioner,
would establish procedures for appealing determinations
resulting from the verification process, and redetermining
eligibility on a periodic basis. The personal information
submitted for verification would be used only to the extent
necessary for verification purposes and not disclosed to anyone
not identified in this provision. Any individual who submits
false information due to negligence or disregard of any rules
would be subject to a civil penalty of not more than $25,000.
Any individual who intentionally provides false information
would be guilty of a felony and, upon conviction, fined not
more than $250,000, imprisoned for not more than 5 years, or
both. Any person who intentionally uses the personal
information in violation of this provision would be guilty of a
felony and, upon conviction, fined not more than $5,000,
imprisoned for not more than 5 years, or both.
SEC. 2239. STREAMLINING OF PROCEDURES FOR ENROLLMENT THROUGH AN
EXCHANGE AND STATE MEDICAID AND CHIP PROGRAMS
The Secretary would establish a process for allowing state
residents to apply for and participate in applicable state
health subsidy programs. In establishing this process, the
Secretary would (1) develop a single, streamlined application
form for all applicable state health subsidy programs that may
be filed through a variety of means, and (2) provide a notice
of eligibility to applicants without any need for additional
information or paperwork, unless specifically required by law.
The Secretary would develop for each state a secure
electronic interface that the applicable state health subsidy
program may use for eligibility determination, verification,
and updating of information. The Secretary, in consultation
with the Treasury Secretary, Homeland Security Secretary,
Social Security Commissioner, and any applicable state
authorities, would require the use of the interface for
purposes of determining eligibility for, and amount of, premium
credits and cost-sharing subsidies. The Secretary could enter
into agreements regarding the exchange of data through the
interface.
An exchange could contract with an entity or state Medicaid
agency for carrying out its activities under this title.
Nothing in this section would change any requirement that
eligibility for participation in a state's Medicaid program be
determined by a public agency.
Applicable state health subsidy programs would include
QHBPs offered through an exchange, including premium credits
and cost-sharing subsidies, state Medicaid programs, state
children's health insurance programs, and a state program
establishing qualified basic health plans as specified under
Sec. 2228.
SEC. 1102. ENCOURAGING MEANINGFUL USE OF ELECTRONIC HEALTH RECORDS
Present Law
Congress enacted the Health Information Technology for
Economic and Clinical Health (HITECH) Act as part of the
American Recovery and Reinvestment Act of 2009 (P.L. 111-5) to
promote the widespread adoption of interoperable electronic
health records (EHRs). Among its provisions, the HITECH Act
authorized bonus payments for eligible professionals and
hospitals participating in Medicare and Medicaid as an
incentive for them to become meaningful users of certified EHR
systems. The HITECH Act defines meaningful use to include using
certified EHR technology for the purpose of exchanging clinical
information to improve the coordination and quality of care,
and using such technology to report clinical quality measures.
Beginning in 2011, Medicare incentives will be paid to eligible
professionals and hospitals that are meaningful EHR users.
These incentive payments will be phased out over time and,
beginning in 2015, replaced with financial penalties for
providers that have not become meaningful EHR users. In
addition to the Medicare incentives, the HITECH Act authorized
a 100 percent Federal match for payments to qualifying Medicaid
providers for the adoption and meaningful use of certified EHR
technology. Medicaid incentive payments will be available for a
period of up to six years.
Committee Bill
The Committee Bill would require the HHS Secretary to
conduct a study on methods that can be used by QHBPs offered
through an exchange to encourage meaningful use of EHRs by
providers. Such methods include incentive payments and
promotion of low-cost EHR software, including systems available
through the Veterans Administration. Within 24 months of
enactment, the Secretary would be required to submit to
Congress a report containing the results of the study, together
with recommendations on the feasibility and effectiveness of
such payment incentives. The Secretary would be required to
disseminate the report to exchanges no later than 12 months
after submitting the report to Congress.
Subtitle C--Making Coverage Affordable
PART I--ESSENTIAL BENEFITS COVERAGE
SEC. 1201. PROVISIONS TO ENSURE COVERAGE TO ESSENTIAL BENEFITS
Title XXII of the Social Security Act is amended by adding
the following.
PART C--MAKING COVERAGE AFFORDABLE
``Subpart 1--Essential Benefits Coverage''
SEC. 2241. REQUIREMENTS FOR QUALIFIED HEALTH BENEFITS PLAN
Present Law
No provision.
Committee Bill
A health benefits plan would be a QHBP only if the plan
provides an essential benefits package (Sec. 2242); the plan
provides coverage at the bronze, silver, gold, or platinum
level (Sec. 2243); and the plan's offeror charges the same
premium whether the plan is purchased through an exchange, the
offeror, or an agent.
SEC. 2242. ESSENTIAL BENEFITS PACKAGE DEFINED
Present Law
Federal law does not define an essential benefit package
for the private health insurance market. States have the
primary responsibility of regulating the business of insurance
and may define state benefit mandates. However, Federal law
requires that private health insurance include certain benefits
and protections, for services covered by a plan. HIPAA and
subsequent amendments require, for example, that group health
plans and insurers who cover maternity care also cover minimum
hospital stays for the maternity care, provide parity in annual
and lifetime limits for any offered mental health benefits, and
offer reconstructive breast surgery if the plan covers
mastectomies.
Committee Bill
As described below, an essential benefits package would be
required to (1) provide payment for a specified set of
services; (2) limit-cost sharing; (3) meet requirements for
specific items and services; and (4) not impose any annual or
lifetime limits.
Provide payment for a specified set of services: all plans
would be required to provide the following set of services:
Hospitalization;
Outpatient hospital and outpatient clinic
services, including emergency department services;
Professional services of physicians and
other health professionals;
Medical and surgical care;
Services, equipment, and supplies incident
to physician and health professional care in
appropriate settings;
Prescription drugs;
Rehabilitative and habilitative services;
Mental health and substance use disorder
services, including behavioral health treatment;
Preventive services, as specified;
Maternity benefits; and
Well baby and well child care and oral
health, vision, and hearing services, equipment, and
supplies for children under 21.
Limit cost-sharing: The essential benefits package would be
subject to cost-sharing requirements, with no cost-sharing
allowed for required preventive items and services.
For plan years beginning in 2013, cost-sharing under an
essential benefits package could not exceed the dollar amounts
for the sum of the annual deductible and out-of-pocket limits
in effect for an HSA for self-only and family coverage, as
appropriate. For plan years beginning in 2014, these cost
sharing dollar amounts would increase by the premium adjustment
percentage (PAP). The PAP is defined as the percentage (if any)
by which the average per capita premium for health insurance
coverage in the U.S. for the preceding calendar year exceeds
the 2012 average value. These averages would be estimated by
the Secretary by October 1st of the relevant preceding year.
The cost-sharing dollar amount for individual coverage would be
the cost-sharing amount for 2013 increased by the PAP, while
the cost sharing dollar amount for family coverage would be
twice that amount, rounded down to the nearest $50.
Deductibles for the essential benefits package would be
limited. In the small group market, the deductible could not
exceed $2,000 for an individual plan, and $4,000 for any other
plan. These amounts could be increased by the amount of any
mandatory employer contributions to a health benefits
arrangement. The deductible limitations would be applied so as
not to affect the actuarial value of any QHBP, including
bronze-level plans. Catastrophic plans would be exempt from
these limitations.
Cost-sharing under an essential benefits package would be
the same for the treatment of conditions within each of the
following four categories (1) hospitalization; (2) outpatient
hospital and outpatient clinic services, including emergency
department services; (3) professional services of physicians
and other health professionals; and (4) services, equipment,
and supplies incident to physician and health professional care
in appropriate settings.
Value-based plans would be exempt from certain
requirements; they could charge cost-sharing for preventive
services and they could charge different cost-sharing within
the four categories specified directly above. A value-based
design is defined as a methodology that would reduce or
eliminate cost-sharing for the clinically beneficial preventive
screenings, lifestyle interventions, medications,
immunizations, diagnostic tests and other procedures and
treatments to reflect their high value and effectiveness.
Meet requirements for specific items and services:
Essential benefits packages would be subject to certain rules.
At least meet the class and category of drug
coverage requirements specified in Medicare Part D;
At least meet the minimum standards required
by Federal or State law for coverage of mental health
and substance use disorder services;
Any plan that varies premiums based on
tobacco use must also provide coverage for
comprehensive tobacco cessation programs including
counseling and pharmacotherapy;
Include coverage of day surgery and related
anesthesia, diagnostic images and screening, and
radiation or chemotherapy;
If a health benefits plan offered stand-
alone dental benefits through an exchange, another
health benefits plan offered through the exchange would
not fail to be treated as a QHBP solely because it did
not cover the same dental benefits; and
For emergency care, the plan would be
required to provide coverage without prior
authorization and without limitation on coverage if the
provider does not have a contractual relationship with
the plan. Cost-sharing for out-of-network emergency
services could not exceed cost-sharing for in-network
emergency services.
Beginning July 1, 2012, the Secretary of HHS would be
required to define and update the categories of covered
treatments, items and services within benefit classes no less
than annually. The Secretary could not define a package that is
more extensive than a typical employer plan as certified by the
Centers for Medicare and Medicaid Services, Office of the
Actuary. Some flexibility in plan design would be allowed as
long as it did not encourage adverse selection. The Secretary
would be required to update or modify these definitions to
account for changes in medical evidence or scientific
advancement or to address any gaps in access or changes in the
evidence base.
Each state would be required to ensure that at least one
plan offered in the exchange is at least actuarially equivalent
to the standard Blue Cross Blue Shield plan offered to Federal
employees.
If any item or service covered by a QHPB is provided by a
Federally-qualified Health Center to an enrollee, the plan
offeror would pay the center at least the amount that would
have been paid to the center under Medicaid.
SEC. 2243. LEVELS OF COVERAGE
Present Law
Generally, Federal law has certain requirements regarding
actuarially equivalent benefit options only in the context of
private plan offerings through Federal health insurance
programs (e.g., Medicare Parts C and D, the State Children's
Health Insurance Program). There is no Federal law regarding
actuarially equivalent benefit options in group and individual
private health insurance. However, states may have such
standards.
For example, Massachusetts defines a standard gold benefit
package for private health insurance available in its
Connector. According to the state's 2006 guidance to health
insurers, a plan with a different design could be qualified as
gold if it had an actuarial value within five percent of the
standard gold's value. The state permits two other benefit
packages available to all individuals in the Connector:
Insurers were instructed that as silver benefit packages were
to be 80 percent of gold (plus or minus 7.5 percent), and
bronze packages were to be 60 percent of gold (plus or minus
two percent). However, these amounts were not set in statute
and have changed somewhat over time. An additional option is
available to young adults in Massachusetts; plans may exclude
prescription drugs and/or limit annual plan benefit payments.
Committee Bill
A health benefits plan would be required to provide a
bronze, silver, gold or platinum benefit package. The bronze
benefit package would provide benefits that are actuarially
equivalent to 65 percent of the essential benefits package. The
silver, gold, and platinum would provide benefits that are the
actuarially equivalent to 70 percent, 80 percent, and 90
percent of the essential benefits package, respectively.
A separate catastrophic plan would be available for those
who are younger than 26 before the beginning of the plan year,
as well as those who have a certification in effect that they
are exempt from the individual responsibility requirement
because there is no affordable QHBP available to them in the
exchange. The catastrophic plan would have the same deductible
as required by a Health Savings Account (HSA)-eligible high
deductible health plan, with no cost-sharing for required
preventive services.
Plans could be offered only to children; the same QHBP
offered at any level of coverage could also be offered with
enrollment limited to those under the age of 21.
State insurance commissioners could allow de minimus
variation around the benefit target valuations to account for
differences in actuarial estimates.
SEC. 2244. APPLICATION OF CERTAIN RULES TO PLANS IN GROUP MARKETS
Health insurance plans offered in the large or small group
market in a state could not impose unreasonable annual or
lifetime limits (within the meaning of section 223 of the
Internal Revenue Code (IRC)). This provision would not apply to
grandfathered plans.
For plan years beginning after June 30, 2013, in the case
of a health benefits plan offered in the large group market,
the state would require the plan to meet the requirements
relating to annual limits on cost-sharing, including not
allowing cost-sharing for required preventive items and
services.
Each state would require any employer with more than 200
employees that offers enrollment in one or more health benefit
plans to automatically enroll new full-time employees in one of
those plans and to continue the enrollment of current employees
in a plan. Auto-enrollment programs would be required to
include adequate notice and an opportunity for an employee to
opt out.
SEC. 2245. SPECIAL RULES RELATING TO COVERAGE OF ABORTION SERVICES
Present Law
Currently, Federal funds may be used to pay for abortions
only if a pregnancy is the result of an act of rape or incest,
or where a woman suffers from a physical disorder, physical
injury, or physical illness that would place the woman in
danger of death unless an abortion is performed. Many private
insurance plans, however, include coverage for abortion beyond
these limited categories
In addition, Federal conscience protection laws prohibit
recipients of certain Federal funds from discriminating against
certain medical personnel and health care entities for engaging
in, or refusing to engage in, specified activities related to
abortion.
Committee Bill
Under the bill, a health benefits plan would not be
required to provide coverage for abortions. The offeror of a
health benefits plan would determine whether or not the plan
provides coverage of abortion as part of its essential benefits
package for the plan year.
The Secretary would ensure that in any exchange, at least
one qualified health benefits plan does not provide coverage of
abortions beyond those for which the expenditure of Federal
funds appropriated for the Department of Health and Human
Services is permitted (herein called ``the Hyde limitations'').
A QHBP would be treated as not providing coverage of abortions
beyond the Hyde limitations if it does not provide coverage for
any abortions. The Secretary would also ensure that in any
exchange, at least one QHBP provides coverage for abortions
beyond the Hyde limitations. If a state has one exchange
covering both the individual and small group markets, the
Secretary would be required to provide the aforementioned
assurances with respect to each market.
The offeror of a QHBP that provides coverage of abortions
beyond the Hyde limitations may could not use any amount
attributable to a premium assistance credit or any cost-sharing
subsidy to pay for such services. In addition, the offeror
would be required to segregate all premium assistance credits
and cost-sharing subsidies from an amount equal to the
actuarial value of providing abortions beyond the Hyde
limitations for all enrollees, as estimated by the Secretary.
The Secretary would be required to estimate, on an average
actuarial basis, the basic per enrollee, per month cost of
including coverage of abortions beyond the Hyde limitations. In
making such estimate, the Secretary could take into account the
impact of including such coverage on overall costs, but could
not consider any cost reduction estimated to result from
providing such abortions, such as prenatal care. The Secretary
would be required to estimate the costs as if coverage were
included for the entire covered population, but the costs could
not be estimated at less than $1 per enrollee, per month.
Qualified health benefits plans could not discriminate
against any individual health care provider or health care
facility because of its willingness or unwillingness to
provide, pay for, provide coverage of, or refer for abortions.
SEC. 1202. APPLICATION OF STATE AND FEDERAL LAWS REGARDING ABORTION
Present Law
The performance of and payment for abortions is regulated
by both state and Federal laws. State law, for example,
sometimes prescribes parental notification requirements,
mandatory waiting periods and other procedural requirements
before an abortion may be performed. Under Federal law, certain
kinds of Federal funds may not be used to pay for abortions and
certain recipients of Federal funds may not discriminate
against specified health care entities that perform or refuse
to perform, pay for, provide referrals for, or provide training
for abortions.
Committee Bill
This provision would ensure that state laws regarding the
prohibition or requirement of coverage or funding for
abortions, and state laws involving abortion-related procedural
requirements are not preempted. The provision similarly
provides that Federal conscience protection and abortion-
related antidiscrimination laws would not be affected by the
bill. The rights and obligations of employees and employers
under Title VII of the Civil Rights Act of 1964 would also not
be affected by the bill.
SEC. 1203. APPLICATION OF EMERGENCY SERVICES LAWS
Present Law
As a condition of Medicare participation, the Emergency
Medical Treatment and Active Labor Act (EMTALA) requires
hospitals with emergency departments to provide an initial
screening examination and any necessary treatment to stabilize
any emergency medical conditions discovered. Care must be
provided to anyone who comes to the hospital and requests
emergency medical services regardless of whether an individual
is insured, has the ability to pay for services, is lawfully
present within the United States, or any other characteristic.
In addition to this Federal requirement, some states impose
similar obligations on hospitals and other health care
providers. For example, California requires all health care
facilities to provide emergency medical services and care to
any person if the facility has appropriate facilities and
qualified personnel.
Committee Bill
This provision would prohibit any construction of the Act
that would relieve health care providers of their obligations
to provide emergency services as required by state or Federal
law, including EMTALA.
PART II--LOW INCOME AND SMALL BUSINESS CREDITS AND SUBSIDIES
``Subpart A--Low-Income Credits and Subsidies''
SEC. 1205. PREMIUM TAX CREDITS AND COST-SHARING SUBSIDIES
Present Law
Currently there is no tax credit that is generally
available to low or middle income individuals or families for
the purchase of health insurance. Some individuals may be
eligible for health coverage through State Medicaid programs
which consider income, assets, and family circumstances.
However, these Medicaid programs are not in the Code.
Health Coverage Tax Credit
Certain individuals are eligible for the health coverage
tax credit (HCTC). The HCTC is a refundable tax credit equal to
80 percent of the cost of qualified health coverage paid by an
eligible individual. In general, eligible individuals are
individuals who receive a trade adjustment allowance (and
individuals who would be eligible to receive such an allowance
but for the fact that they have not exhausted their regular
unemployment benefits), individuals eligible for the
alternative trade adjustment assistance program, and
individuals over age 55 who receive pension benefits from the
Pension Benefit Guaranty Corporation. The HCTC is available for
``qualified health insurance,'' which includes certain
employer-based insurance, certain State-based insurance, and in
some cases, insurance purchased in the individual market.
The credit is available on an advance basis through a
program established and administered by the Treasury
Department. The credit generally is delivered as follows: the
eligible individual sends his or her portion of the premium to
the Treasury, and the Treasury then pays the full premium (the
individual's portion and the amount of the refundable tax
credit) to the insurer. Alternatively, an eligible individual
is also permitted to pay the entire premium during the year and
claim the credit on his or her income tax return.
Individuals entitled to Medicare and certain other
governmental health programs, covered under certain employer-
subsidized health plans, or with certain other specified health
coverage are not eligible for the credit.
COBRA Continuation Coverage Premium Reduction
The Consolidated Omnibus Reconciliation Act of 1985 (COBRA,
P.L. No. 99-272) requires that a group health plan must offer
continuation coverage to qualified beneficiaries in the case of
a qualifying event (such as a loss of employment). A plan may
require payment of a premium for any period of continuation
coverage. The amount of such premium generally may not exceed
102 percent of the ``applicable premium'' for such period and
the premium must be payable, at the election of the payor, in
monthly installments.
Section 3001 of the American Recovery and Reinvestment Act
of 2009 (ARRA, P.L. No. 111-5) provides that, for a period not
exceeding nine months, an assistance eligible individual is
treated as having paid any premium required for COBRA
continuation coverage under a group health plan if the
individual pays 35 percent of the premium. Thus, if the
assistance eligible individual pays 35 percent of the premium,
the group health plan must treat the individual as having paid
the full premium required for COBRA continuation coverage, and
the individual is entitled to a subsidy for 65 percent of the
premium. An assistance eligible individual generally is any
qualified beneficiary who elects COBRA continuation coverage
and the qualifying event with respect to the covered employee
for that qualified beneficiary is a loss of group health plan
coverage on account of an involuntary termination of the
covered employee's employment (for other than gross
misconduct). In addition, the qualifying event must occur
during the period beginning September 1, 2008, and ending
December 31, 2009.
The COBRA continuation coverage subsidy also applies to
temporary continuation coverage elected under the Federal
Employees Health Benefits Program and to continuation health
coverage under State programs that provide coverage comparable
to continuation coverage. The subsidy is generally delivered by
requiring employers to pay the subsidized portion of the
premium for assistance eligible individuals. The employer then
treats the payment of the subsidized portion as a payment of
employment taxes and offsets its employment tax liability by
the amount of the subsidy. To the extent that the aggregate
amount of the subsidy for all assistance eligible individuals
for which the employer is entitled to a credit for a quarter
exceeds the employer's employment tax liability for the
quarter, the employer can request a tax refund or can claim the
credit against future employment tax liability.
There is an income limit on the entitlement to the COBRA
continuation coverage subsidy. Taxpayers with modified adjusted
gross income exceeding $145,000 (or $290,000 for joint filers),
must repay any subsidy received by them, their spouse, or their
dependent, during the taxable year. For taxpayers with modified
adjusted gross incomes between $125,000 and $145,000 (or
$250,000 and $290,000 for joint filers), the amount of the
subsidy that must be repaid is reduced proportionately. The
subsidy is also conditioned on the individual not being
eligible for certain other health coverage. To the extent that
an eligible individual receives a subsidy during a taxable year
to which the individual was not entitled due to income or being
eligible for other health coverage, the subsidy overpayment is
repaid on the individual's income tax return as additional tax.
However, in contrast to the HCTC, the subsidy for COBRA
continuation coverage may only be claimed through the employer
and cannot be claimed at the end of the year on an individual
tax return.
Committee Bill
Premium Tax Credit
The Committee Bill provides a refundable tax credit for
eligible individuals and families who purchase health insurance
through the state exchanges. The premium tax credit, which is
refundable and payable in advance directly to the insurer,
subsidizes the purchase of certain health insurance plans
through the state exchanges. The premium tax credit is
available for individuals (single or joint filers) with
modified gross incomes (MGI) up to 400 percent of the Federal
poverty level (FPL). MGI is defined as an individual's (or
couple's) total income without regard to sections 911
(regarding the exclusion from gross income for citizen or
residents living abroad), 931 (regarding the exclusion for
residents of specified possessions), and 933 (regarding the
exclusion for residents of Puerto Rico), plus any tax-exempt
interest received during the tax year, plus the MGI of
dependents listed on the return. Thus, certain deductions from
gross income that are allowed in determining adjusted gross
income but not total income, such as the deduction for
contributions to an individual retirement arrangement, are
disregarded. In order to be eligible for the premium tax credit
taxpayers who are married (within the meaning of Code section
7703) must file a joint return. Individuals who are listed as
dependants on a return are ineligible for the premium tax
credit.
Under the Committee Bill, an eligible individual enrolls in
a plan offered through a state exchange and reports his or her
MGI to the exchange. States are permitted to enter into
contracts with State Medicaid agencies to make eligibility
determinations for the credit. Based on the information
provided to the state exchange, the individual receives a
premium tax credit based on income according to the schedule
outlined below, and the Treasury pays the premium tax credit
amount directly to the insurance plan in which the individual
is enrolled. The individual then pays to the plan in which he
or she is enrolled the dollar difference between the premium
tax credit amount and the total premium charged for the
plan.\1\ Individuals who fail to pay all or part of the
remaining premium amount are given a mandatory three-month
grace period prior to an involuntary termination of their
participation in the plan. For employed individuals who
purchase health insurance through a state exchange, the premium
payments are made through payroll deductions. Initial
eligibility for the premium tax credit is based on the
individual's MGI for the tax year ending two years prior to the
enrollment period. Individuals (or couples) who experience a
change in marital status or other household circumstance,
experience a decrease in income of more than 20 percent, or
receive unemployment insurance, may update eligibility
information or request a redetermination of their tax credit
eligibility.
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\1\Although the credit is generally payable in advance directly to
the insurer, individuals may elect to purchase health insurance out-of-
pocket and apply to the IRS for the credit at the end of the taxable
year.
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For purposes of the premium tax credit, state exchange
participants must provide information from their tax return
from two years prior during the open enrollment period for
coverage during the next calendar year. The IRS is authorized
to disclose to HHS limited tax return information to verify a
taxpayer's MGI based on the most recent return information
available to establish eligibility for the premium tax credit.
Existing privacy and safeguard requirements apply. As described
above, individuals who do not qualify for the premium tax
credit on the basis of their prior year income may apply for
the premium tax credit based on specified changes in
circumstances. For individuals and families who did not file a
tax return in the prior tax year, the Secretary of HHS will
establish alternative income documentation that may be provided
to determine income eligibility for the premium tax credit.
In all cases, eligibility is reconciled annually on the
individual's Federal income tax return, subject to a ``safe
harbor.'' For filers whose current income is less than 300
percent of FPL--and who received a premium tax credit in excess
of the level for which they qualified--the ``safe harbor''
limits the amount that the taxpayer has to repay to $250 for
single filers and $400 for joint filers (and for those filing
as the head of household). For filers whose current income
exceeds 300 percent of FPL, however, there is no a safe harbor
and they must repay any premium tax credit received. Filers who
overpaid will receive the balance of their credit as a refund
from the IRS.
Beginning in 2013, premium tax credits are available on a
sliding scale basis for individuals and families between 134-
300 percent of FPL to help offset the cost of private health
insurance premiums. Beginning in 2014, the credits are also
available to individuals and families between 100-133 percent
of FPL. However, individuals subject to a five-year waiting
period under Medicaid or CHIP are eligible for the premium tax
credit beginning in 2013. The credits are based on the
percentage of income the cost of premiums represents, rising
from two percent of income for those at 100 percent of FPL to
12 percent of income for those at 300 percent of FPL.
Individuals between 300-400 percent of FPL are eligible for a
premium tax credit based on capping an individual's share of
the premium at a flat 12 percent of income. The percentages of
income are indexed to the excess of premium growth over income
growth beginning in 2014 (in order to hold the share of
premiums that enrollees at a given poverty level pay the same
over time). For purposes of calculating household size, illegal
immigrants are not included in FPL. The premium tax credit
amount is tied to the cost of the second lowest-cost silver
plan in the area where the individual resides (by age according
to standard age factors defined by the Secretary of Health and
Human Services), and is available for any plan purchased
through the Exchange.
A credit-eligible individual enrolled in any exchange
offered plan pays the lesser of the applicable percentage of
income or the plan premium. If an individual purchases the
second lowest cost silver plan in the area where he or she
resides, or any less expensive silver or bronze plan, the
individual must only pay the applicable percentage of income
(e.g., 12 percent for an individual at 300 percent of FPL). If,
however, an individual enrolls in a plan that is more expensive
than the second lowest cost silver plan the individual is
responsible for the applicable percentage of income plus the
difference in premium between the second lowest cost silver
plan and the premium of the chosen plan.
Employer Offer of Health Insurance Coverage
As a general matter, if an employee is offered employer-
provided health insurance coverage, the individual is
ineligible for the premium tax credit for health insurance
purchased through a state exchange.
If an employee is offered unaffordable coverage by his or
her employer or the coverage offered to the employee (and his
or her dependent) has an actuarial value of less than 65
percent, or the however, the employee can be eligible for the
premium tax credit, but only if the employee declines to enroll
in the coverage and purchases coverage through the exchange
instead. Unaffordable is defined as coverage with a premium
required to be paid by the employee that is ten percent or more
of the employee's income, based on the type of coverage
applicable (e.g., individual or family coverage). This income
limit is indexed to the per capita growth in premiums for the
insured market as determined by the Secretary of HHS. If the
employee seeks to receive a credit on the basis that an
employer offered plan is unaffordable, the employee must seek
an affordability waiver from the state exchange and provide
information as to family income and the premium of the lowest
cost employer option offered to them. The state exchange then
provides the waiver to the employee.
For purposes of determining if coverage is unaffordable,
required salary reduction contributions are treated as payments
required to be made by the employee. However, if an employee is
reimbursed by the employer for any portion of the premium for
health insurance coverage purchased through the exchange,
including any reimbursement through salary reduction
contributions under a cafeteria plan, the coverage is employer-
provided and the employee is not eligible for premium tax
credits. Thus, an individual is not permitted to purchase
coverage through the exchange, apply for the premium tax
credit, and pay for the individual's portion of the premium
using salary reduction contributions under the cafeteria plan
of the individual's employer.
No later than five years after the date of the enactment of
the provision, the Secretary of the Treasury, in consultation
with the Secretary of HHS, must conduct a study of whether the
percentage of household income used for purposes of determining
whether coverage is affordable is the appropriate level for
determining whether coverage is affordable for an employee and
whether such level can be lowered without significantly
increasing the costs to the Federal Government and reducing
employer-provided health coverage. The Secretary of the
Treasury reports the results of such study to the appropriate
committees of Congress, including any recommendations for
legislative changes.
Eligibility Verification
In order to prevent undocumented aliens from obtaining the
premium tax credits, the provision requires that an
individual's personal data be verified under the procedures
established by Section 2238 of the Social Security Act.
Information Used to Determine Tax Credit Eligibility
All personal information used to determine eligibility for
the tax credit submitted to a state exchange shall be protected
by restrictions on use and disclosure in Section 2238 of the
Social Security Act and Section 6103 of the Internal Revenue
Code.
Cost-Sharing Subsidy
A cost-sharing subsidy is provided to buyout any difference
in cost sharing between the insurance purchased and the
actuarial values specified below. For individuals between 100-
150 percent of FPL, the subsidy brings the value of the plan to
90 percent actuarial value. For those between 150-200 percent
of FPL, the subsidy brings the value of the plan to 80 percent
actuarial value. For individuals above 200 percent of FPL, no
subsidy for cost sharing is provided. The amount received by an
insurer in a cost-sharing subsidy on behalf of an individual,
as well as any spending by the individual out-of-pocket, counts
towards the out-of-pocket limit. As with the premium tax
credit, the IRS is authorized to disclose to HHS limited tax
return information to verify a taxpayer's MGI based on the most
recent return information available.
Effective Date
The provision is effective July 1, 2013.
SEC. 1206. COST-SHARING SUBSIDIES AND ADVANCE PAYMENTS OF PREMIUM
CREDITS AND COST-SHARING SUBSIDIES
Present Law
Currently there is no tax credit that is generally
available to low or middle income individuals or families for
the purchase of health insurance. Some individuals may be
eligible for health coverage through state Medicaid programs
which consider income, assets, and family circumstances.
However, these Medicaid programs are not in the tax code.
Certain individuals are eligible for the health coverage
tax credit (HCTC). The HCTC is a refundable tax credit equal to
80 percent of the cost of qualified health coverage paid by an
eligible individual. In general, eligible individuals are
individuals who receive a trade adjustment allowance (and
individuals who would be eligible to receive such an allowance
but for the fact that they have not exhausted their regular
unemployment benefits), individuals eligible for the
alternative trade adjustment assistance program, and
individuals over age 55 who receive pension benefits from the
Pension Benefit Guaranty Corporation. The credit is available
for ``qualified health insurance,'' which includes certain
employer-based insurance, certain State-based insurance, and in
some cases, insurance purchased in the individual market.
Individuals entitled to Medicare and certain other governmental
health programs, covered under certain employer-subsidized
health plans, or with certain other specified health coverage
are not eligible for the credit.
The credit is available on an advance basis through a
program established and administered by the Treasury
Department. The credit generally is delivered as follows: the
eligible individual sends his or her portion of the premium to
the Treasury, and the Treasury then pays the full premium (the
individual's portion and the amount of the refundable tax
credit) to the insurer. Alternatively, an eligible individual
is also permitted to pay the entire premium during the year and
claim the credit on his or her income tax return.
The Consolidated Omnibus Reconciliation Act of 1985 (COBRA,
P.L. 99-272) requires that a group health plan must offer
continuation coverage to qualified beneficiaries in the case of
a qualifying event (such as a loss of employment). A plan may
require payment of a premium for any period of continuation
coverage. The amount of such premium generally may not exceed
102 percent of the ``applicable premium'' for such period and
the premium must be payable, at the election of the payor, in
monthly installments.
Section 3001 of the American Recovery and Reinvestment Act
of 2009 (ARRA, P.L. 111-5) provides that, for a period not
exceeding nine months, an assistance eligible individual is
treated as having paid any premium required for COBRA
continuation coverage under a group health plan if the
individual pays 35 percent of the premium. Thus, if the
assistance eligible individual pays 35 percent of the premium,
the group health plan must treat the individual as having paid
the full premium required for COBRA continuation coverage, and
the individual is entitled to a subsidy for 65 percent of the
premium. An assistance eligible individual generally is any
qualified beneficiary who elects COBRA continuation coverage
and the qualifying event with respect to the covered employee
for that qualified beneficiary is a loss of group health plan
coverage on account of an involuntary termination of the
covered employee's employment (for other than gross
misconduct). In addition, the qualifying event must occur
during the period beginning September 1, 2008, and ending
December 31, 2009.
The low income tax credit also applies to Temporary
Continuation Coverage elected under the Federal Employees
Health Benefits Program (FEHBP) and to continuation health
coverage under State programs that provide coverage comparable
to continuation coverage. The subsidy is generally delivered by
requiring employers to pay the subsidized portion of the
premium for assistance eligible individuals. The employer then
treats the payment of the subsidized portion as a payment of
employment taxes and offsets its employment tax liability by
the amount of the low-income tax credit. To the extent that the
aggregate amount of the subsidy for all assistance eligible
individuals for which the employer is entitled to a credit for
a quarter exceeds the employer's employment tax liability for
the quarter, the employer can request a tax refund or can claim
the credit against future employment tax liability.
There is an income limit on entitlement to the low-income
tax credit. Taxpayers with modified adjusted gross income
exceeding $145,000 (or $290,000 for joint filers), must repay
any subsidy received by them, their spouse, or their dependents
during the taxable year. For taxpayers with modified adjusted
gross incomes between $125,000 and $145,000 (or $250,000 and
$290,000 for joint filers), the amount of the subsidy that must
be repaid is reduced proportionately. The subsidy is also
conditioned on the individual not being eligible for certain
other health coverage. To the extent that an eligible
individual receives a subsidy during a taxable year to which
the individual was not entitled due to income or being eligible
for other health coverage, the subsidy overpayment is repaid on
the individual's income tax return as additional tax. However,
in contrast to the HCTC, the subsidy for COBRA continuation
coverage may only be claimed through the employer and cannot be
claimed at the end of the year on an individual tax return.
Committee Bill
Adds to the Social Security Act as amended by the bill.
``Subpart 2--Premium Credits and Cost-Sharing Subsidies''
SEC. 2246. PREMIUM CREDITS
The Committee Bill would provide premium assistance in the
form of a refundable tax credit for individuals with incomes
less than 400 percent of the FPL as calculated by Sec. 1205 of
the bill.
SEC. 2247. COST-SHARING SUBSIDIES FOR INDIVIDUALS ENROLLING IN
QUALIFIED HEALTH BENEFIT PLANS
The Committee Bill would define an eligible insured as an
individual not more that 400 percent of the FPL (for the family
size involved) enrolled in a QHBP at the bronze or silver level
of coverage in an exchange. The Secretary would notify the plan
that the individual is eligible and the plan would reduce the
cost-sharing by reducing the out-of-pocket limit under the bill
by the following amounts by income category (for the family
size involved):
\2/3\ for household income greater than 100
percent and less than 200 percent of the FPL,
\1/2\ for household income greater than 200
percent and less than 300 percent of the FPL,
\1/3\ for household income greater than 300
percent and less than 400 percent of the FPL.
The Committee Bill would instruct the Secretary to
establish procedures whereby the plan would provide additional
reductions in cost-sharing. The reductions would be consistent
with the plan's share of total allowable costs being 90 percent
for an eligible individual whose household income is between
100 percent and 150 percent of the FPL for the family size
involved and 80 percent for an eligible individual whose
household income is between 150 percent and 200 percent of the
FPL for the family size involved. The proposal is part of the
fail-safe mechanism to prevent an increase in Federal budget
deficit under Sec. 1209 and would reduce the reduction in cost-
sharing by the percentage specified by that section of the
proposal.
The plan would notify the Secretary of cost-sharing
reductions and the Secretary would make periodic and timely
payments to the plan equal to the value of the reductions in
cost-sharing. The Committee Bill authorizes the Secretary to
establish a capitated payment system with appropriate risk
adjustments.
The Committee Bill would implement special rules for
Indians (as defined by the Indian Health Care Improvement Act)
and undocumented aliens. For Indians whose household income is
not more than 300 percent FPL (for the family size involved)
and is enrolled in a QHBP through an exchange, then the
individual would be treated as an eligible and the plan would
eliminate any cost-sharing. The Committee Bill would also
mandate that if that Indian were to be furnished an item or
service directly by the Indian Health Service, an Indian Tribe,
Tribal Organization, Urban Indian Organization, or through
referral under contract health services, no cost-sharing under
the plan would be imposed for that item or service, and the
plan would not reduce the payment to the entity. The Secretary
would pay the QHBP the amount necessary to reflect the
actuarial value of this proposal.
For undocumented aliens the Committee Bill would prohibit
cost-sharing reductions and the individual would not be taken
into account in determining the family size involved, but the
individual's modified gross income would be taken into account
in determining household income. The Committee Bill would treat
an individual as an undocumented alien unless the information
required is provided.
The Committee Bill would define any term used in this
section that is also used by section 36B of the Internal
Revenue Code of 1986 as having the same meaning as defined by
the latter. The Committee Bill would also deny subsidies to
dependents, with respect to whom a deduction under 151 of the
Internal Revenue Code is allowable to another taxpayer for a
taxable year beginning in the calendar year in which the
individual's taxable year begins. Further, the Committee Bill
would not permit a subsidy for any month that is not treated as
a coverage month.
SEC. 2248. ADVANCE DETERMINATION AND PAYMENT OF PREMIUM CREDITS AND
COST-SHARING SUBSIDIES
The Committee Bill would instruct the Secretary, in
consultation with the Secretary of the Treasury, to establish a
program whereupon at the request of an exchange, advance
determinations are made for determining income eligibility of
individuals enrolling in a QHBP through the exchange for
premium credits and cost-sharing subsidies. The Committee Bill
would require the Secretary to notify the exchange and the
Secretary of the Treasury of the advance determinations, and
the Secretary of the Treasury would make advance payments of
the credit or subsidy to the QHBPs.
The Committee Bill would require the Secretary to provide,
under the program, that advanced determination during the
annual open enrollment period be applicable to the individual
or another enrollment period that may be specified by the
Secretary. The Committee Bill would require that the advance
determination be made on the basis of the individual's
household income for the second taxable year preceding the
taxable year in which enrollment through the enrollment period
first takes effect.
The Committee Bill also would require the Secretary to
provide procedures for making advanced determinations in cases
where information included with an application form
demonstrates substantial changes in income, changes in family
size, a change in filing status, the filing of an application
for unemployment benefits, or other significant changes
affecting eligibility including (1) allowing an individual
claiming a decrease of 20 percent of more in income, or filing
an application of unemployment benefits, to have eligibility
for the credit determined on the basis of household income for
a later period or on the basis of the individual's estimate of
such income for the taxable year; and (2) the determination of
household income in cases where the taxpayer was not required
to file a return of tax imposed by this chapter for the second
preceding taxable year.
The Committee Bill would require the Secretary to notify
the Secretary of the Treasury and the exchange through which
the individual is enrolling of the advanced determinations
made. The Committee Bill would require the Secretary of the
Treasury to make the advance payment for a premium credit to
the QHBP on a monthly basis or such other periodic basis as the
Secretary may provide. The Committee Bill would require the
QHBP that would be receiving advanced payments to reduce the
premium charged for any period by the amount of the advanced
payment received for the period. The QHBP would also be
required to notify the Secretary of Health and Human Services
of the reduction, notify the Secretary of any cases of
nonpayment of premiums by the insured, and allow a three-month
grace period for nonpayment of premiums before discontinuing
coverage.
The Committee Bill stipulates that no advance payment would
be made unless there has been a verification of the
individual's citizenship or nationality or lawful presence in
the United States.
SEC. 1207. DISCLOSURES TO CARRY OUT ELIGIBILITY REQUIREMENTS FOR
CERTAIN PROGRAMS
Present Law
Section 6103 provides that returns and return information
are confidential and may not be disclosed by the Internal
Revenue Service (``IRS''), other Federal employees, State
employees, and certain others having access to such information
except as provided in the Internal Revenue Code. Section 6103
contains a number of exceptions to the general rule of
nondisclosure that authorize disclosure in specifically
identified circumstances. For example, section 6103 provides
for the disclosure of certain return information for purposes
of establishing the appropriate amount of any Medicare Part B
premium subsidy adjustment.
Section 6103(p)(4) requires, as a condition of receiving
returns and return information, that Federal and State agencies
(and certain other recipients) provide safeguards as prescribed
by the Secretary of the Treasury by regulation to be necessary
or appropriate to protect the confidentiality of returns or
return information. Unauthorized disclosure of a return or
return information is a felony punishable by a fine not
exceeding $5,000 or imprisonment of not more than five years,
or both, together with the costs of prosecution.\2\ The
unauthorized inspection of a return or return information is
punishable by a fine not exceeding $1,000 or imprisonment of
not more than one year, or both, together with the costs of
prosecution.\3\ An action for civil damages also may be brought
for unauthorized disclosure or inspection.\4\
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\2\Sec. 7213.
\3\Sec. 7213A.
\4\Sec. 7431.
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Committee Bill
Under the Committee Bill, individuals will submit income
and family size information to the state exchanges as part of
an application process in order to claim the cost-sharing
subsidy and the tax credit on an advance basis.\5\ The
Department of Health and Human Services (HHS) serves as the
centralized verification agency for information submitted by
individuals to the state exchanges with respect to the subsidy
and the tax credit to the extent provided on an advance basis.
The bill permits the IRS to substantiate the accuracy of income
and family size information that has been provided to HHS for
eligibility determination.
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\5\Under the bill, the state exchanges are permitted to contract
with its state Medicaid agencies to perform certain exchange functions.
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Specifically, upon written request of the Secretary of HHS,
the IRS is permitted to disclose the following return
information of any taxpayer applying to a state exchange whose
income and family size is relevant in determining the amount of
the tax credit or cost-sharing subsidy or eligibility for
participation in the specified State health subsidy programs
(i.e., a State Medicaid program under title XIX of the Social
Security Act, a State's children's health insurance program
under title XXI of such Act, or a basic health program under
section 2228 of such Act): (1) taxpayer identity; (2) the
filing status of such taxpayer; (3) the modified gross income
(as defined in new sec. 36B of the Code) of such taxpayer and
of any other individual for whom a dependency deduction is
allowed with respect to such taxpayer; (4) such other
information as is prescribed by Treasury regulation as might
indicate whether such taxpayer is eligible for the credit or
subsidy (and the amount thereof); and (5) the taxable year with
respect to which the preceding information relates, or if
applicable, the fact that such information is not available.
HHS is permitted to disclose to officers, employees and
contractors of the state exchanges, or of the State agency
administering the programs referenced above whether there is a
discrepancy between the information submitted and IRS records.
The disclosed return information may be used only for the
purposes of, and only to the extent necessary in establishing
eligibility for participation in the exchange, and verifying
the appropriate amount of the tax credit, and cost-sharing
subsidy, or eligibility for the specified State health subsidy
programs.
Recipients of the confidential return information are
subject to the safeguard protections and civil and criminal
penalties for unauthorized disclosure and inspection. The IRS
is required to make an accounting for all disclosures.
Effective Date
The Committee Bill is effective on the date of enactment.
SEC. 1208. PREMIUM CREDITS AND SUBSIDY REFUNDS AND PAYMENTS DISREGARDED
FOR FEDERAL AND FEDERALLY-ASSISTED PROGRAMS
Present Law
Currently there is no tax credit that is generally
available to low or middle income individuals or families for
the purchase of health insurance.
Committee Bill
Any premium tax credits and cost-sharing subsidies provided
to an individual under the Committee Bill are disregarded for
purposes of determining that individual's eligibility for
benefits or assistance, or the amount or extent of benefits and
assistance, under any Federal program or under any State or
local program financed in whole or in part with Federal funds.
Specifically, any amount of premium tax credit provided to an
individual is not counted as income, and cannot be taken into
account as resources for the month of receipt and the following
two months. Any cost sharing subsidy provided on the
individual's behalf is treated as made to the health plan in
which the individual is enrolled.
SEC. 1209. FAIL-SAFE MECHANISM TO PREVENT INCREASE IN FEDERAL BUDGET
DEFICIT
Present Law
No provision.
Committee Bill
Failsafe
Beginning in 2012, the President must certify annually in
the President's Budget whether or not the provisions in this
bill will increase the budget deficit in the coming fiscal
year. In the event the President determines that the provisions
in this bill will increase the deficit, he or she would be
required to include with the certification, the percentage by
which the exchange credits and subsidies in this bill need to
be reduced, such that the aggregate amount of such reductions
is equal to the amount of the deficit increase. The President
must then instruct the Secretary of Health and Human Services
and the Secretary of the Treasury to make such reductions in
these credits and subsidies.
Effective Date
The provision is effective for the President's Budget
submitted in 2012.
``Subpart B--Credit for Small Employers''
SEC. 1221. SMALL BUSINESS TAX CREDIT
Present Law
The Code does not provide a tax credit for employers that
provide health coverage for their employees. The cost to an
employer of providing health coverage for its employees is
generally deductible as an ordinary and necessary business
expense for employee compensation.\6\ In addition, the value of
employer-provided health insurance is not subject to employer
paid Federal Insurance Contributions Act (FICA) tax.
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\6\Sec. 162. However see special rules in sections 419 and 419A for
the deductibility of contributions to welfare benefit plans with
respect to medical benefits for employees and their dependents.
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The Code generally provides that employees are not taxed on
the value of employer-provided health coverage under an
accident or health plan. That is, these benefits are excluded
from gross income. In addition, medical care provided under an
accident or health plan for employees, their spouses, and their
dependents is excluded from gross income. Active employees
participating in a cafeteria plan may be able to pay their
share of premiums on a pre-tax basis through salary
reduction.\7\ Such salary reduction contributions are treated
as employer contributions and thus also are excluded from gross
income.
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\7\Sec. 125.
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Committee Bill
Small business employers eligible for the credit
Under the Committee Bill, a tax credit is provided for a
qualified small employer for contributions to purchase health
insurance for its employees. A qualified small business
employer for this purpose generally is an employer with no more
than 25 full-time equivalent employees (FTEs) employed during
the employer's taxable year, and whose employees have annual
full-time equivalent wages that average no more than $40,000.
However, the full amount of the credit is available only to an
employer with ten or fewer FTEs and whose employees have
average annual fulltime equivalent wages from the employer of
less than $20,000. These wage limits are indexed to CPI-U for
years beginning in 2014. Under the provision, an employer's
FTEs are calculated by dividing the total hours worked by all
employees during the employer's tax year by 2080. For this
purpose, the maximum amount of hours that are counted for any
single employee are 2080. Wages are defined the same as for
purposes of FICA and the average wage is determined by dividing
the total wages paid by the small employer by the number of
FTEs. Hours worked and wages earned by seasonal workers are
exempt from these calculations for purposes of determining
eligibility for the small business tax credit. A seasonal
worker is defined as an individual who performs labor or
services on a seasonal basis where, ordinarily, the employment
pertains to or is the kind exclusively performed at certain
seasons or periods of the year and which, by nature, may not be
continuous or carried on throughout the year.
The credit is only available to offset actual tax liability
and is claimed on the employer's tax return. The credit is not
payable in advance to the taxpayer or refundable. Thus, the
employer must pay the employees' premiums during the year and
claim the credit at the end of the year on its income tax
return. The credit is a general business credit, and can be
carried back for one year and carried forward for 20 years. The
credit is available for tax liability under the alternative
minimum tax.
Years the credit is available
Phase I
Under the provision, the credit is initially available for
a maximum of two taxable years for any qualified small business
employer offering health insurance. Health insurance coverage
for Phase I is health insurance coverage within the meaning of
Code section 9832 which is generally health insurance coverage
purchased from an insurance company licensed under State law.
This initial phase of the credit is available for tax years
2011 and 2012.
Phase II
For taxable years beginning in 2013, the credit is only
available for a small business employer that purchases health
insurance coverage for its employees through the State exchange
but only with respect to premiums for coverage after June 30,
2013. If a State has not yet adopted the reformed rating rules,
qualifying small business employers in the State are not
eligible to receive the credit. The credit is available for the
first two years that a qualified small employer purchases
health insurance coverage for its employees through the State
exchange.
Calculation of credit amount
Phase I
The credit is equal to the applicable percentage of the
small business employer's contribution to the health insurance
premium for each covered employee. Only non-elective
contributions by the employer are taken into account in
calculating the credit. Therefore, any amount contributed
pursuant to a salary reduction arrangement under a cafeteria
plan within the meaning of section 125 is not treated as an
employer contribution for purposes of this credit. The credit
is equal to the dollar amount of the employer's contribution
multiplied by an applicable percentage. The first step in
determining the applicable percentage is to calculate the
employer's contribution as a percentage of the lesser of (1)
the total premium for an employee's coverage or (2) a small
business bench mark premium. This tax credit is only available
if this percentage is at least 50. If the employer contribution
percentage is at least 50, the applicable tax credit percentage
is 35.
The bench mark premium is the average total premium cost in
the small group market for employer sponsored coverage in the
employer's State. The premium and the benchmark premium vary
based on the type of coverage being provided to the employee
(i.e., single, adult with child, family or two adults).
Phase II
The credit is equal to the applicable percentage of the
small business employer's contribution to the health insurance
premium for each covered employee. Only non-elective
contributions by the employer are taken into account in
calculating the credit. Therefore, any amount contributed
pursuant to a salary reduction arrangement under a cafeteria
plan within the meaning of section 125 is not treated as an
employer contribution for purposes of this credit. The credit
is equal to the dollar amount of the employer's contribution
multiplied by an applicable percentage. The first step in
determining the applicable percentage is to calculate the
employer's contribution as a percentage of the lesser of (1)
the total premium for an employee's coverage or (2) a small
business bench mark premium. This tax credit is only available
if this percentage is at least 50. If the employer contribution
percentage is at least 50, the applicable tax credit percentage
is 50. The bench mark premium is the average total premium cost
in the small group market for employer sponsored coverage in
the employer's State. The premium and the benchmark premium
vary based on the type of coverage being provided to the
employee (i.e., single, adult with child, family or two
adults).
Special rules
For both the Phase I and Phase II credits, the employer is
entitled to a deduction under section 162 equal to the amount
of the employer contribution minus the dollar amount of the
credit. For example, if a qualified small employer pays 100
percent of the cost of its employees' health insurance coverage
and the tax credit under this provision is 50 percent of that
cost, the employer is able to claim a section 162 deduction for
the other 50 percent of the premium cost.
The credit is phased out for employers with more than ten
FTEs but not more than 25 FTEs by six percent of the base
credit percentage for each employee above ten. Simultaneously,
the credit phases out for an employer for whom the average
wages per employee is between $20,000 and $40,000 at a rate of
five percent for each $1,000 increase of average wages above
$20,000.
The employer is determined by applying the employer
aggregations rules in section 414(b), (c), and (m). In
addition, the definition of employee includes a leased employee
within the meaning of section 414(n).\8\
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\8\Section 414(b) provides that, for specified employee benefit
purposes, all employees of all corporations which are members of a
controlled group of corporations are treated as employed by a single
employer. There is a similar rule in section 414(c) under which all
employees of trades or businesses (whether or not incorporated) which
are under common are treated under regulations as employed by a single
employer, and, in section 414(m), under which employees of an
affiliated service group (as defined in that section) are treated as
employed by a single employer. Section 414(n) provides that leased
employees, as defined in that section, are treated as employees of the
service recipient for specified purposes. Section 414(o) authorizes the
Treasury to issue regulations to prevent avoidance of the certain
requirement under section 414(m) and 414(n).
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Organizations exempt from tax under section 501(a) by
reason of being described in section 501(c)(3) (i.e.,
charitable organizations) that otherwise qualify for the small
business tax credit are eligible to receive the credit.
However, for tax-exempt organizations, the applicable
percentage for the credit during Phase I is limited to 25 and
the applicable percentage for the credit during Phase II is
limited to 35. The small business tax credit is otherwise
calculated in the same manner for tax-exempt organizations that
are qualified small employers as the tax credit is calculated
for all other qualified small employers. Charitable
organizations are eligible to apply the tax credit against the
organization's liability as an employer for payroll taxes for
the taxable year to the extent of: (1) the amount of income tax
withheld from its employees under section 3401(a), (2) the
amount of hospital insurance tax withheld from its employees
under section 3101(b), (3) and the amount of the hospital tax
imposed on the organization under section 3111(b). However, the
charitable organization is not eligible for a credit in excess
of the amount of these payroll taxes.
Self-employed individuals, including partners and sole
proprietors, two percent share-holders of an S Corporation, and
five percent owners of a C Corporation are not treated as
employees for purposes of this credit. There is also a special
rule to prevent sole proprietorships from receiving the credit
for the owner and their family members. Thus, no credit is
available for contribution to the purchase of health insurance
for these individuals and the individual is not taken into
account in determining the number of employees or average full-
time equivalent wages.
Effective Date
The Committee Bill is effective for taxable years beginning
after December 31, 2010.
Subtitle D--Shared Responsibility
PART I--INDIVIDUAL RESPONSIBILITY
SEC. 1301. PENALTY ON INDIVIDUALS WITHOUT ESSENTIAL HEALTH BENEFITS
COVERAGE
Present Law
Federal law does not require individuals to have health
insurance. Only the Commonwealth of Massachusetts, through its
statewide program, requires that individuals have health
insurance (although this policy has been considered in other
states, such as California, Maryland, Maine, and Washington).
All adult residents of Massachusetts are required to have
health insurance that meets ``minimum creditable coverage''
standards if it is deemed ``affordable'' at their income level
under a schedule set by the board of the Commonwealth Health
Insurance Connector Authority (``Connector''). Individuals
report their insurance status on State income tax forms.
Individuals can file hardship exemptions from the mandate;
persons for whom there are no affordable insurance options
available are not subject to the requirement for insurance
coverage.
For taxable year 2007, an individual without insurance and
who was not exempt from the requirement did not qualify under
Massachusetts law for a State income tax personal exemption.
For taxable years beginning on or after January 1, 2008, a
penalty is levied for each month an individual is without
insurance. The penalty consists of an amount up to 50 percent
of the lowest premium available to the individual through the
Connector. The penalty is reported and paid by the individual
with the individual's Massachusetts State income tax return at
the same time and in the same manner as State income taxes.
Failure to pay the penalty results in the same interest and
penalties as apply to unpaid income tax.
Committee Bill
Personal responsibility requirement
Beginning July 1, 2013, all U.S. citizens and legal
residents are required to maintain health insurance coverage.
Coverage may be acquired through the individual market, a
public program such as Medicare, Medicaid, the Children's
Health Insurance Program, Veteran's Health Care Program,
TRICARE, or through an employer (or as a dependent of a covered
employee). If coverage is acquired through an employer in the
small group market, it must meet or exceed the requirements of
a bronze plan in the exchange. If the employer is in the large
group market, the plan must provide first dollar coverage for
prevention-related services,\9\ have no unreasonable annual or
lifetime limits on coverage, and have a maximum out-of-pocket
limit that is less than that provided by the standards
established under the HSA Present Law limit in order to meet
minimum creditable coverage. Exemptions from the requirement to
have health coverage are allowed for religious objections that
are consistent with those allowed under Medicare, and for
undocumented aliens. An individual enrolled in a grandfathered
plan, or individuals of any age enrolled in ``young
invincibles'' policies in an exchange are deemed to have met
the responsibility requirement.
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\9\Except in cases where value-based insurance design is used.
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In order to ensure compliance, individuals are required to
report on their Federal income tax return the months for which
they maintain the required minimum health coverage for
themselves and all dependents under age 18. In addition,
insurers (including employers who self-insure), must report
information on health insurance coverage to both the covered
individual and to the IRS. Insurers will be required to
identify the primary insured individual and any other
individuals covered by the policy, as well as the dates during
which the individual maintained coverage during the tax year.
Insurers may be required to include other relevant information
as determined by the Secretary. A similar reporting requirement
applies to employers with respect to individuals enrolled in
public health insurance plans or group health plans if the
reporting is not provided by the insurer (e.g. in the case of
self-insured plans).
Open enrollment in the individual market
The initial open-enrollment period for eligible individuals
in the individual and small-group market (excluding
grandfathered plans) lasts from March 1, 2013 through May 31,
2013, and during the same period in subsequent years. Special
enrollment periods are allowed for qualifying events,
consistent with those included in the Public Health Service
Act, such as when an individual becomes a dependent through
marriage or birth, or when an individual loses other health
insurance coverage. There may be additional special enrollment
periods allowed, consistent with those allowed under Medicare
Part D (for example, special enrollment periods may be allowed
for exceptional circumstances as determined by the Secretary of
Health and Human Services). During each annual open enrollment
period individuals may change plans or remain in their current
plan.
Penalty
Individuals who fail to maintain essential health benefits
coverage are subject to a penalty of $750 per adult in the
household, with a maximum of two adults per household. This per
adult penalty is phased in as follows: $0 for 2013; $200 for
2014; $400 for 2015; $600 in 2016, $750 in 2017 and indexed to
CPI-U beginning in 2018 and thereafter.
The penalty applies to any period during which the
individual is not covered by a health insurance plan with the
minimum required benefit but is prorated for partial years of
noncompliance. No penalty is assessed for individuals not
maintaining health insurance for a period less than or equal to
three months in the tax year. However, penalties are assessed
for those not insured for more than three months during the tax
year.
The penalty is assessed through the Code and accounted for
as an additional amount of Federal tax owed. However, it is not
subject to the enforcement provisions of subtitle F of the tax
code.\10\ Instead, in cases in which payment is not forthcoming
following the initial notice and demand for payment, collection
is limited to withholding of Federal payments otherwise due to
the uninsured individual. The use of liens and seizures
otherwise authorized for collection of taxes does not apply to
the collection of this penalty. Non-compliance with the
personal responsibility requirement to have health coverage is
not subject to criminal or civil penalties under the Code and
interest does not accrue for failure to pay such assessments in
a timely manner.
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\10\IRS authority to assess and collect taxes is generally provided
in subtitle F ``Procedure and Administration'' in the Code. That
subtitle establishes the rules governing both how taxpayers are
required to report information to the IRS and pay their taxes as well
as their rights. It also establishes the duties and authority of the
IRS to enforce the Code, including civil and criminal penalties.
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Exemptions from the penalty are allowed for individuals
where the full premium of the lowest cost option available to
them (net of subsidies and employer contribution, if any)
exceeds eight percent of their AGI in 2013. This income limit
is indexed to the excess of premium growth over income growth
beginning in 2014. Exemptions from the penalty are also allowed
for individuals below 100 percent of the Federal Poverty Level,
individuals with sincerely held beliefs who participate in
health arrangements provided by established religious
organizations (e.g., those participating in Health Sharing
Ministries), individuals experiencing hardship situations (as
determined by the Secretary of HHS) and individuals who are
Indians as defined in section 4 of the Indian Health Care
Improvement Act. Determinations of an individuals' exemption,
do not take into account income from individuals not subject to
the requirement.
The Government Accountability Office must undertake a study
of the affordability of coverage, including the impact of the
provision of small business and individual tax credits in
maintaining and expanding coverage, the availability of
affordable plans, and the ability of Americans to meet the
personal responsibility requirement. Such report shall be made
to the Congressional committees of jurisdiction no later than
February 1, 2014. The committees must report legislation no
later than April 1, 2014 to examine the implementation and
assessment of the provision and to bring such legislation to
the floor in each chamber within 15 days of reporting by such
committees. In the Senate, this legislation is subject to 30
hours of debate. Once passed by both chambers, the conference
report is limited to ten hours of debate in the Senate.
Automatic enrollment
Employers with 200 or more employees must automatically
enroll employees into health insurance plans offered by the
employer. Employees may decline employer coverage, however, if
they are able to demonstrate that they have coverage from
another source (e.g., through a public program such as
Medicare, Medicaid or the Children's Health Insurance Program
or as a dependent in a spouse or other family member's health
benefits).
Additionally, States have the option to establish a process
for auto-enrollment of individuals and families into policies
offered in the individual and small group markets. State
programs for auto enrollment must be approved by the Secretary
of HHS.
Effective Date
The Committee Bill is effective for taxable years beginning
after December 31, 2012.
SEC. 1302. REPORTING OF HEALTH INSURANCE COVERAGE
Present Law
No provision.
Committee Bill
Under the Committee Bill, insurers (including employers who
self-insure and therefore act as insurers) that provide
essential health benefits coverage to an individual coverage
must report certain health insurance coverage information to
both the covered individual and to the Internal Revenue
Service. In the case of coverage provided by a governmental
unit or any agency or instrumentality of a governmental unit,
the reporting requirement applies to the person or employee who
enters into the agreement to provide coverage (or their
designee).
The information required to be reported includes the name,
address and taxpayer identification number of the primary
insured and each other individual obtaining coverage under the
policy, the dates during which the individual was covered under
the policy during the calendar year, the amount of any premium
tax credit or cost-sharing subsidy received by the individual
with respect to such coverage, and such other information as
the Secretary may require.
To the extent the coverage is provided through the group
health plan of the individual's employer, the insurer is also
required to report the name, address and employer
identification number of the employer, the portion of the
premium, if any, required to be paid by the employer, and any
information the Secretary may require to administer the new tax
credit for qualified small employers.
The insurer is required to report the above information,
along with the name, address and contact information of the
reporting insurer, to the covered individual on or before
January 31 of the year following the calendar year for which
the information is required to be reported to the Internal
Revenue Service.
Effective Date
The Committee Bill is effective for calendar years
beginning after 2012.
PART II--EMPLOYER RESPONSIBILITY
SEC. 1306. EMPLOYER-PROVIDED HEALTH INSURANCE COVERAGE
Present Law
Currently, there is no Federal requirement that employers
offer health insurance coverage to employees or their families.
However, as with other compensation, the cost of employer-
provided health coverage is a deductible business expense under
section 162 of the Code.\11\ In addition, employer-provided
health insurance coverage is generally not included in an
employee's gross income.\12\
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\11\Sec. 162. However see special rules in sections 419 and 419A
for the deductibility of contributions to welfare benefit plans with
respect to medical benefits for employees and their dependents.
\12\Sec. 106.
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Employees participating in a cafeteria plan may be able to
pay the portion of premiums for health insurance coverage not
otherwise paid for by their employers on a pre-tax basis
through salary reduction.\13\ Such salary reduction
contributions are treated as employer contributions for
purposes of the Code, and are thus excluded from gross income.
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\13\Sec. 125.
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One way that employers can offer employer-provided health
insurance coverage for purposes of the tax exclusion is to
offer to reimburse employees for the premiums for health
insurance purchased by employees in the individual health
insurance market. The payment or reimbursement of employees'
substantiated individual health insurance premiums is
excludible from employees' gross income.\14\ This reimbursement
for individual health insurance premiums can also be paid for
through salary reduction under a cafeteria plan.\15\ However,
this offer to reimburse individual health insurance premiums
constitutes a group health plan.
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\14\Rev. Rul. 61-146 (1961-2 CB 25).
\15\Proposed Treas. Reg. sec. 1.125-1(m).
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The Employee Retirement Income Security Act of 1974
(ERISA)\16\ preempts State law relating to certain employee
benefit plans, including employer-sponsored health plans. While
ERISA specifically provides that its preemption rule does not
exempt or relieve any person from any State law which regulates
insurance, ERISA also provides that an employee benefit plan is
not deemed to be engaged in the business of insurance for
purposes of any State law regulating insurance companies or
insurance contracts. As a result of this ERISA preemption,
self-insured employer-sponsored health plans need not provide
benefits that are mandated under State insurance law.
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\16\P.L. 93-406.
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While ERISA does not require an employer to offer health
benefits, it does require compliance if an employer chooses to
offer health benefits, such as compliance with plan fiduciary
standards, reporting and disclosure requirements, and
procedures for appealing denied benefit claims. There are other
Federal requirements for health plans which include, for
example, rules for health care continuation coverage.\17\ The
Code imposes an excise tax on group health plans that fail to
meet these other requirements.\18\ The excise tax generally is
equal to $100 per day per failure during the period of
noncompliance and is imposed on the employer sponsoring the
plan.
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\17\These rules were added to ERISA and the Code by the
Consolidated Omnibus Budget Reconciliation Act of 1985 (``COBRA'')
(Pub. L. No. 99-272).
\18\Sec. 4980B.
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Under Medicaid, States may establish ``premium assistance''
programs, which pay a Medicaid beneficiary's share of premiums
for employer-sponsored health coverage. Besides being available
to the beneficiary through his or her employer, the coverage
must be comprehensive and cost-effective for the State. An
individual's enrollment in an employer plan is considered cost-
effective if paying the premiums, deductibles, coinsurance and
other cost-sharing obligations of the employer plan is less
expensive than the State's expected cost of directly providing
Medicaid-covered services. States are also required to provide
coverage for those Medicaid-covered services that are not
included in the private plans. A 2007 analysis showed that 12
States had Medicaid premium assistance programs as authorized
under Present Law.
Committee Bill
Penalty for employees receiving premium credits
Any employer with more than 50 employees that does not
offer coverage for all its full-time employees, does not
provide coverage that is affordable, or does not provide
coverage with an actuarial value of at least 65 percent, is
required to pay a penalty. The penalty is an excise tax that is
imposed for each employee who receives a premium tax credit for
health insurance purchased through a state exchange. The number
of employees is determined based on the number of full-time
employees during the most recent year using the definition of
employee that applies for purposes of determining if an
employer is eligible for the small employer exception from
COBRA continuation coverage.\19\
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\19\Treas. Reg. 54.4980B-3, Q&A 2.
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For each full-time employee (defined as working 30 hours or
more each week) receiving a premium tax credit through a state
exchange, the employer is required to pay a flat dollar amount
set by the Secretary of HHS and published in a schedule each
year. The flat dollar amount is equal to the national average
tax credit. These payments are not linked to an individual
employee, but are contributed to a general fund. The penalty
for each employer is capped at an amount equal to $400
multiplied by the total number of employees of the employer
(regardless of how many are receiving the premium tax credit).
This amount is indexed to premium growth in the state exchanges
beginning in 2014.
Thus, the employer must pay the lesser of the flat dollar
amount multiplied by the number of full-time employees
receiving a tax credit or an excise tax of $400 per employee
paid on its total number of full-time employees. For example,
Employer A, who does not offer health coverage, has 100
employees, 30 of whom receive a tax credit for enrolling in a
state exchange offered plan. If the flat dollar amount set by
the Secretary of HHS for that year is $3,000, Employer A should
owe $90,000. Since the maximum amount an employer must pay per
year is limited to $400 multiplied by the total number of
employees (for Employer A, 100), however, Employer A must pay
only $40,000 (the lesser of the $40,000 maximum and the $90,000
calculated tax).
The excise taxes imposed under this provision are payable
on an annual, monthly or other periodic basis as the Secretary
of Treasury may prescribe. The excise taxes imposed under this
provision for employees receiving premium tax credits are not
deductible under section 162 as a business expense.
Employer offer of health insurance coverage
Under the Committee Bill, as under Present Law, an employer
is not required to offer health insurance coverage. If an
employee is offered health insurance coverage by his or her
employer and chooses to enroll in the coverage, the employer-
provided portion of the coverage is excluded from gross income.
The tax treatment is the same whether the employer offers
coverage outside of a state exchange or the employer offers a
coverage option through a state exchange.
Definition of coverage
As a general matter, if an employee is offered affordable
employer-provided health insurance coverage, the individual is
ineligible for a premium tax credit for health insurance
purchased through a state exchange.
Unaffordable coverage
If an employee is offered unaffordable coverage by their
employer or coverage with an actuarial value of less than 65
percent, however, the employee can be eligible for the premium
tax credit, but only if the employee declines to enroll in the
coverage and purchases coverage through the exchange instead.
Unaffordable is defined as coverage with a premium required to
be paid by the employee that is more than 10 percent of the
employee's household MGI (as defined for purposes of the
premium tax credits provided under the bill). This percentage
of the employee's income is indexed to the per capita growth in
premiums for the insured market as determined by the Secretary
of HHS. The employee must seek an affordability waiver from the
state exchange and provide information as to family income and
the premium of the lowest cost employer option offered to them.
The state exchange then provides the waiver to the employee.
The employer penalty applies for any employee(s) receiving an
affordability waiver.
For purposes of determining if coverage is unaffordable,
required salary reduction contributions are treated as payments
required to be made by the employee. However, if an employee is
reimbursed by the employer for any portion of the premium for
health insurance coverage purchased through the exchange,
including any reimbursement through salary reduction
contributions under a cafeteria plan, the coverage is employer-
provided and the employee is not eligible for premium tax
credits. Thus, an individual is not permitted to purchase
coverage through the exchange, apply for the premium tax
credit, and pay for the individual's portion of the premium
using salary reduction contributions under the cafeteria plan
of the individual's employer.
Within five years of implementation, the Secretary of HHS
must conduct a study to determine if the definition of
affordable could be lowered without significantly increasing
costs or decreasing employer coverage.
Effect of Medicaid enrollment
A Medicaid-eligible individual can always choose to leave
the employer's coverage and enroll in Medicaid, and an employer
is not required to pay an excise tax for any employees enrolled
in Medicaid.
Report on the effect of the excise taxes
The Secretary of Labor is required to review and report to
Congress the effect of the excise taxes and assessments on
workers' wages. In order to conduct the statistical analysis
necessary to conduct this review, the secretary of Labor must
use the Bureau of Labor Statistics' National Compensation
Survey. The National Compensation Survey provides comprehensive
measures of wages and employment costs. Earnings data is
available for metropolitan and rural areas, broad geographic
regions and on a national basis.\20\
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\20\The Department of Labor currently administers several programs
where they have an obligation to determine that an activity will not
adversely affect American workers' salaries or working conditions. For
example, the Department's Employment Training Administration performs
that function under the foreign labor certification program.
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Effective Date
The effective date for this provision is July 1, 2013.
Subtitle E--Federal Program for Health Care Cooperatives
SEC. 1401. ESTABLISHMENT OF FEDERAL PROGRAM FOR HEALTH CARE
COOPERATIVES
PART D--FEDERAL PROGRAM FOR HEALTH CARE COOPERATIVES
Present Law
There is no Present Law facilitating the creation of non-
profit, member-run health insurance companies. Furthermore,
there is no Present Law authorizing the Secretary to provide
grants or loans to existing non-profit, member-run health
insurance companies. The Committee Bill builds, in part, on
existing non-profit tax law which is summarized below.
Health insurance may be provided by different types of
insurance companies including mutual, stock ownership, life,
and property and casualty. Present law provides special rules
for determining the taxable income of insurance companies. Both
mutual insurance companies (e.g. collective owned by its
members) and stock insurance companies are subject to Federal
income tax under these rules. Separate sets of rules apply to
life insurance companies and to property and casualty insurance
companies. Insurance companies are subject to Federal income
tax at regular corporate income tax rates.
An insurance company that provides health insurance is
subject to Federal income tax as either a life insurance
company or as a property insurance company, depending on its
mix of lines of business and on the resulting portion of its
reserves that are treated as life insurance reserves. For
Federal income tax purposes, an insurance company is treated as
a life insurance company if the sum of its (1) life insurance
reserves and (2) unearned premiums and unpaid losses on non-
cancellable life, accident or health contracts not included in
life insurance reserves, comprises more than 50 percent of its
total reserves.
The IRC generally provides for exemption from Federal
income tax for certain organizations. These organizations
include, among other, those that engage in insurance activities
including: (1) certain fraternal beneficiary societies, orders,
or associations operating under the lodge system or for the
exclusive benefit of their members, that provide for the
payment of life, sick, accident, or other benefits to the
members or their dependents; (2) certain voluntary employees'
beneficiary societies that provide for the payment of life,
sick, accident, or other benefits to the members of the
association or their dependents or designated beneficiaries;
(3) certain benevolent life insurance associations of a purely
local character; (4) certain small, non-life insurance
companies with annual gross receipts of no more than $600,000
($150,000 in the case of a mutual insurance company); (5)
certain membership organizations established to provide health
insurance to certain high-risk individuals; (6) certain
organizations established to provide workers' compensation
insurance.
Certain health maintenance organizations (HMOs) have been
held to qualify for tax exemption as charitable organizations.
Specifically, the Tax Court held that a staff model HMO
qualified as a charitable organization. A staff model HMO
generally employs its own physicians and staff and serves its
subscribers at its own facilities. The court concluded that the
HMO satisfied the community benefit standard, as its membership
was open to almost all members of the community. Although
membership was limited to persons who had the money to pay the
fixed premiums, the court held that this was not disqualifying
because the HMO had a subsidized premium program for persons of
lesser means to be funded through donations and Medicare and
Medicaid payments. The HMO also operated an emergency room open
to all persons regardless of income. Generally speaking, the
Courts have held that a healthcare provider must make its
services available to all in the community plus provide
additional community or public benefits. The benefit must
either further the function of government-funded institutions
or provide a service that would not likely be provided within
the community but for the subsidy. Further, the additional
public benefit conferred must be sufficient to give rise to a
strong inference that the public benefit is the primary purpose
for which the organization operates.
Tax law also provides that an organization may not be
exempt from tax unless no substantial part of its activities
consists of providing commercial-type insurance. For this
purpose, commercial-type insurance excludes, among other
things: (1) insurance provided at substantially below cost to a
class of charitable recipients and (2) incidental health
insurance provided by an HMO of a kind customarily provided by
such organizations. At enactment of this law in 1986, the
following reasons for the provision were stated: (1) concern
that exempt charitable and social welfare organizations that
engaged in insurance activities are engaged in an activity
whose nature and scope is so inherently commercial that tax
exempt status is inappropriate; (2) belief that the tax-exempt
status of organizations engaged in insurance activities
provides an unfair competitive advantage to these
organizations; and (3) the availability of tax-exempt status
provides incentive for some large insurance entities to compete
directly with commercial insurance companies.
Committee Bill
PART D--FEDERAL PROGRAM FOR HEALTH CARE COOPERATIVES
SEC. 2251. FEDERAL PROGRAM TO ASSIST ESTABLISHMENT AND OPERATION OF
NONPROFIT, MEMBER-RUN HEALTH INSURANCE ISSUERS
The Committee Bill authorizes $6 billion in funding for,
and instructs the Secretary, to establish the Consumer Operated
and Oriented Plan (CO-OP) program to foster the creation of
non-profit, member-run health insurance companies that offer
qualified health benefits that serve eligible individuals in
one or more states. CO-OP grantees would compete in the
reformed individual and small group insurance markets on a
level regulatory playing field. Federal funds would be
distributed as loans for start-up costs and grants for meeting
solvency requirements.
Under the Committee Bill, no later than January 1, 2010,
the Secretary would make the grant and loan awards. The
Secretary would make grant and loan awards after taking into
account the recommendations of the advisory board chaired by
the Secretary or a designate. The Secretary would make grant
and loan awards giving priority to applicants that will offer
qualified health benefits on a statewide basis, that use an
integrated care model, and have significant private support.
The Secretary would ensure that there is sufficient funding to
establish at least one qualified non-profit health insurance
issuer in each state and the District of Columbia. If no health
insurance issuer applies within a state, the Secretary may use
funds for the program to award grants to encourage the
establishment of qualified issuers within the state or the
expansion of an issuer from another state to the state with no
applicants.
The Committee Bill would require that those receiving loans
or grants under the CO-OP program enter into an agreement with
the Secretary requiring the recipient of CO-OP funds to meet
and continue to meet any requirement to be treated as a
qualified nonprofit health insurance issuer, and any
requirements to receive the loan or grant. The Committee Bill
would also require that the agreement prohibit the use of loan
or grant funds for carrying on propaganda, attempting to
influence legislation, or marketing. The Committee Bill further
stipulates that if the Secretary determined that a grantee
failed to meet the aforementioned requirements, and failed to
implement appropriate corrective action within a reasonable
period of time after being made aware of such failure, then the
grantee would repay the Secretary 110 percent of the aggregate
amount of the loans and grants received plus interest. The
Secretary would then notify the Secretary of the Treasury of
any failure that results in the termination of the issuer's tax
exempt status under the Committee Bill.
The Committee Bill would require the Secretary to award
loans and grants under the CO-OP program no later than January
1, 2012. The Committee Bill would further require that the
Secretary make such awards after receiving recommendations from
an advisory board consisting of 15 members appointed by the
Comptroller General of the United States meeting the same
qualifications for appointment to the Medicare Payment Advisory
Commission. Board members would be required to be appointed
within three months of enactment of the Committee Bill and
would be required to satisfy ethics and conflict of interest
standards protecting against insurance industry involvement and
interference. Board members would also generally be subject to
the requirements of the Federal Advisory Committee Act. Board
members would not be compensated in any way except for travel
expenses, including a per diem.
The Committee Bill would define a qualified nonprofit
health insurance issuer as an organization meeting the
following requirements:
(1) It must be organized as a non-profit, member
corporation under State law;
(2) It must not be an existing organization that
provides insurance as of July 16, 2009, and must not be
an affiliate or successor of any such organization;
(3) Substantially all of its activities must consist
of the issuance of qualified health benefit plans in
the individual and small group markets in each state in
which it is licensed to issue such plans;
(4) It must not be sponsored by a state, county, or
local government, or any government instrumentality;
(5) Its governing documents incorporate ethics and
conflict of interest standards protecting against
insurance industry involvement and interference;
(6) Governance of the organization must be subject to
a majority vote of its members;
(7) It must operate with a strong consumer focus,
including timeliness, responsiveness, and
accountability to members in accordance with
regulations to be promulgated by the Secretary of HHS;
(8) It must be in compliance with all the other
requirements that other qualified health benefits plans
must meet in any state, including solvency and
licensure requirements, rules on payments to providers,
rules on network adequacy, rates and form filing rules,
and any applicable state premium assessments.
Additionally, the organization would be required to
coordinate with state insurance reforms described in
Sec. 2225(a)(2)(A); and
(9) Any profits made would be required to be used to
lower premiums, improve benefits, or other programs
intended to improve the quality of health care
delivered to members.
The Committee Bill would permit organizations participating
in the CO-OP program to enter into collective purchasing
arrangements for services and items that increase
administrative and other cost efficiencies, especially to
facilitate start-up of the entities, including claims
administration, general administrative services, health
information technology, and actuarial services. The Committee
Bill would permit establishment of a purchasing council to
execute these collective purchasing agreements. The council
would be explicitly prohibited from setting payment rates for
health care facilities and providers. There would not be any
representatives of Federal, state, or local government or any
employee or affiliate of an existing private insurer on the
council. The council would be subject to existing anti-trust
statutes.
The Committee Bill would prohibit the Secretary of HHS from
participation in any negotiations between qualified health
insurance issuers or a private purchasing council and any
health care facilities, providers or drug manufacturer. The
Secretary would also be prohibited from establishing or
maintaining a price structure or interfering in any way with
the competitive nature of providing health benefits through the
program.
Under the Committee Bill, an organization receiving a grant
or loan under the CO-OP program qualifies for exemption from
Federal income tax only with respect to periods for which the
organization is in compliance with the requirements of the CO-
OP program and with the terms of any CO-OP grant or loan
agreement to which such organization is a party. CO-OP
organizations would also be subject to organizational and
operational requirements applicable to certain non-profits
under tax law, including the prohibitions on net earnings
benefiting any private shareholder or individual, on
substantial involvement in political activities, and on
lobbying activities.
CO-OP grantees would be required to file an application for
exempt status with the Internal Revenue Service and would be
subject to annual information reporting requirements under the
Committee Bill. In addition, CO-OP grantees would be required
to disclose on their annual information return the amount of
reserves required by each state in which it operates
(``solvency requirement'') and the amount of reserves on hand.
Under the Committee Bill, the Comptroller General of the
United States would be instructed to have the U.S. Government
Accountability Office (GAO) conduct an ongoing study of
competition and market concentration in the health insurance
market after implementation of the reforms made by this
proposal. The study would include an analysis of new health
insurance companies in the market and any recommendations for
administrative or legislative changes deemed necessary or
appropriate to increase competition in the health insurance
market. The GAO would report their findings no later than
December 31 of each even-numbered year beginning with 2014.
Subtitle F--Transparency and Accountability
SEC. 1501. PROVISIONS ENSURING TRANSPARENCY AND ACCOUNTABILITY
SEC. 2229. REQUIREMENTS RELATING TO TRANSPARENCY AND ACCOUNTABILITY
Present Law
No provision.
Committee Bill
States would be required to establish an ombudsmen program
to address complaints related to health benefits plans issued
within the state. The program would (1) require each offeror of
a health benefits plans within a state to provide an internal
claims appeals process, (2) authorize an individual covered by
a plan to have access to the services of an ombudsman if the
internal appeal lasts more than three months or involves a
life-threatening issue, or (3) to resolve problems with
obtaining premium credits or cost-sharing subsidies.
Each state would establish a competitive program to provide
grants to eligible entities to develop, support, and evaluate
consumer assistance programs related to navigating options for,
and selecting appropriate, health plan coverage. The grant
application process would be fair and open and attempt to
ensure regional and geographic equity. Grantee organizations
may include Small Business Development Centers (SBDCs) as well
as commercial fishing organizations, ranching and farming
organizations, and other organizations capable of conducting
community based health care outreach and enrollment assistance
for hard to reach and rural workers. Organizations would be
required to collect and report data to the Secretary on
problems and inquiries. There would be $30 million appropriated
for fiscal year 2014 to carry out these activities and such
sums as necessary in future years.
SEC. 1502. REPORTING ON UTILIZATION OF PREMIUM DOLLARS AND STANDARD
HOSPITAL CHARGES
Present Law
No provision.
Committee Bill
For plan years beginning after December 31, 2009, as
prescribed by the Secretary of HHS, each offeror of a health
benefits plan would report to the Secretary the percent of the
premiums collected that are used to pay for items other than
medical care. Beginning each calendar year after 2009, each
hospital operating within the U.S. would establish (and update)
a list of its standard charges of items and services it
provides, including each diagnosis-related group included under
Medicare.
SEC. 1503. DEVELOPMENT AND UTILIZATION OF UNIFORM OUTLINE OF COVERAGE
DOCUMENTS
Present Law
No provision.
Committee Bill
This provision mandates the development and utilization of
uniform outline of coverage documents. The Secretary of HHS
would request the National Association of Insurance
Commissioners (NAIC) to develop and submit to the Secretary,
not later than 12 months after the date of enactment of this
Act, standards for use by health insurance issuers in compiling
and providing to enrollees an outline of coverage that
accurately describes the coverage under the applicable health
insurance plan. In developing such standards, the NAIC shall
consult with a working group composed of representatives of
consumer advocacy organizations, issuers of health insurance
plans, and other qualified individuals.
The standards shall ensure that the outline of coverage is
presented in a uniform format of no more than four pages, with
print of at least 12-point font, and written in language that
is understandable to the average health plan enrollee. The
standards shall also ensure that the outline of coverage
includes uniform definitions of standard insurance terms as
well as a description of the coverage, including dollar amounts
for the following benefits: daily hospital room and board,
miscellaneous hospital services, surgical services, anesthesia
services, physician services, prevention and wellness services,
prescription drugs, and other benefits as identified by the
NAIC.
The standards should also ensure that the outline of
coverage includes the exceptions, reductions and limitations on
coverage; the cost-sharing provisions, including deductible,
coinsurance and co-payment obligations; the renewability and
continuation of coverage provisions; a statement that the
outline is a summary of the policy or certificate and that the
coverage document itself should be consulted to determine the
governing contractual provisions and; a contact number for the
consumer to call with additional questions as well as a web
link where a copy of the actual individual coverage policy or
group certificate of coverage can be reviewed and obtained. For
individual policies issued prior to January 1, 2000, the health
insurance issuer will be deemed compliant with the web link
requirement if the issuer makes a copy of the actual policy
available upon request.
If the NAIC submits the standards to the Secretary of HHS
within 12 months of enactment, the Secretary has up to 60 days
after the submission to promulgate regulations to apply such
standards to entities described below. If the NAIC fails to
submit to the Secretary the standards within the 12-month
period, the Secretary shall, not later than 90 days after the
expiration of such 12-month period, promulgate regulations
providing for the application of Federal standards for outlines
of coverage to entities.
Not later than 24 months after enactment of legislation,
each entity described below shall deliver an outline of
coverage pursuant to the standards promulgated by the Secretary
to an applicant at the time of application; an enrollee at the
time of enrollment; or a policyholder or certificate holder at
the time of issuance of the policy or delivery of the
certificate.
An entity may provide this information in paper or
electronic form. An entity includes a health insurance issuer
(including a group health plan) offering health insurance
coverage within the U.S., a carrier for the Federal Employees
Health Benefits Program, the Secretary of HHS with regard to
specified Federal health insurance program. The standards would
preempt any related state standards that require an outline of
coverage. An entity that willfully fails to provide the
information required under this section shall be subject to a
fine of not more than $1,000 for each such failure. Such
failure with respect to each enrollee shall constitute a
separate offense for purposes of this subsection.
SEC. 1504. DEVELOPMENT OF STANDARD DEFINITIONS, PERSONAL SCENARIOS, AND
ANNUAL PERSONALIZED STATEMENTS
Present Law
No provision.
Committee Bill
The Secretary of HHS would be required to do the following:
Develop standard definitions for health insurance
terms including premium, deductible, co-insurance, co-payment,
out-of-pocket limit, preferred provider, non-preferred
provider, out-of-network co-payments, UCR (usual, customary and
reasonable) fees, excluded services, grievance and appeals, and
such other terms as the Secretary determines.
Develop standard definitions for medical terms
including hospitalization, hospital outpatient care, emergency
room care, physician services, prescription drug coverage,
durable medical equipment, home health care, skilled nursing
care, rehabilitation services, hospice services, emergency
medical transportation, and such other terms as the Secretary
determines.
Develop scenarios which include information
regarding on estimated out-of-pocket cost-sharing and
significant exclusions or benefit limits for such scenarios.
Develop standards for an annual personalized
statement that summarizes an individual's (including any
covered dependents) use of health care services and claims paid
in the previous year.
Subtitle G--Role of Public Programs
PART I--MEDICAID COVERAGE FOR THE LOWEST INCOME POPULATIONS
SEC. 1601. ELIGIBILITY STANDARDS AND METHODOLOGIES
Present Law
Eligibility Standards and Methodologies. Medicaid is a
means-tested entitlement program operated by states within
broad Federal guidelines. Eligibility for Medicaid is
determined not only based on financial requirements, but also
on categorical requirements--that is, to be eligible for
Medicaid, one must be a member of a covered group, such as
children, pregnant women, families with dependent children, the
elderly, or the disabled. ``Childless adults'' (non-elderly
adults who are not disabled, pregnant, and/or parents of
dependent children) on the other hand, are generally not
eligible for Medicaid, regardless of their income.
Medicaid's income eligibility requirements place limits on
the maximum amount of assets and income individuals may
possess. Additional guidelines specify how states should
calculate these amounts. The specific asset and income
limitations that apply to each eligibility group are set
through a combination of Federal parameters and state
definitions. Consequently, these standards vary across states,
and different standards apply to different population groups
within states. For some Medicaid eligibility groups, states are
required to disregard certain amounts and/or types of income
and expenses. State application of income counting rules expand
eligibility to higher-income individuals.
Of the approximately 50 different eligibility ``pathways''
into Medicaid, some are mandatory while others may be covered
at state option. Examples of mandatory groups include pregnant
women and children under age six with family income below 133
percent of the Federal poverty level (FPL), children ages six
through 18 up to 100 percent of FPL, and certain individuals
with disabilities or over age 64 who qualify for cash
assistance under the Supplemental Security Income (SSI)
program. Examples of optional groups include pregnant women and
infants with family income exceeding 133 percent FPL up to 185
percent FPL, and ``medically needy'' individuals who meet
categorical requirements with income up to 133 percent of the
maximum payment amount applicable under states' former Aid to
Families with Dependent Children (AFDC) programs based on
family size.
Parents are eligible for Medicaid if they would have been
eligible for the former AFDC program as of July 1, 1996. The
upper-income threshold for AFDC eligibility in 1996 ranged
across states from 11 percent to 68 percent of FPL, although
states have the flexibility to raise eligibility to higher
levels (in some states, parents are eligible for Medicaid up to
200 percent of FPL) through a state plan amendment.
Under Present Law, states are permitted to make presumptive
eligibility determinations to enroll children, pregnant women,
and certain women with breast or cervical cancer, for a limited
period of time before full Medicaid applications are filed and
processed. Medicaid enrollment for such individuals is based on
a preliminary determination by Medicaid providers of likely
Medicaid eligibility.
Medicaid Benefits. Medicaid benefits are identified in
Federal statute and regulations and include a wide range of
medical care and services. Some benefits are specific items,
such as eyeglasses and prosthetic devices. Other benefits are
defined in terms of specific types of providers (e.g.,
physicians, hospitals). Still other benefits define specific
types of services (e.g., family planning services and supplies,
pregnancy-related services) that may be delivered by any
qualified medical provider that participates in Medicaid.
Finally, additional benefits include premium payments for
coverage provided through managed care arrangements and
Medicare premium and cost-sharing support for individuals
dually eligible for both Medicare and Medicaid.
Some Medicaid benefits are mandatory, meaning they must be
made available by states to the majority of Medicaid
populations (i.e., those classified as ``categorically
needy''). Other benefits may be covered at state option.
Examples of standard, mandatory benefits include inpatient
hospital services, physician services, services provided by
Federally qualified health centers, and nursing facility
services for individuals ages 21 and over. Examples of
standard, optional benefits include prescription drugs (covered
by all states), services furnished by other licensed
practitioners (e.g., optometrists, podiatrists, psychologists),
nursing facility services for individuals under age 21, and
physical therapy. States define the specific features of each
mandatory and optional service within broad Federal guidelines.
Most Medicaid children under age 21 are entitled to early
and periodic screening, diagnostic and treatment (EPSDT)
services. Under EPSDT, children must receive well-child visits,
immunizations, laboratory tests, vision services, dental
services, and hearing services at regular intervals. In
addition, medical care that is necessary to correct or
ameliorate identified defects, physical and mental illness, and
other conditions must be provided. As an alternative to
providing all of the mandatory and selected optional benefits
under traditional Medicaid, states have the option to enroll
certain state-specified groups in benchmark and benchmark-
equivalent benefit plans as permitted under section 1937 of the
Social Security Act. These benefit plans are nearly identical
to those offered through the Children's Health Insurance
Program (CHIP). The benchmark options include: (1) the Blue
Cross/Blue Shield preferred provider plan under the Federal
Employees Health Benefits Program (FEHBP), (2) a plan offered
to state employees, (3) the largest commercial health
maintenance organization in the state, and (4) Secretary-
approved coverage appropriate for the targeted population.
Benchmark-equivalent coverage must have the same actuarial
value as one of the benchmark plans identified above. Such
coverage includes the following basic services: (1) inpatient
and outpatient hospital services, (2) physician services, (3)
lab and x-ray services, (4) well-child care including
immunizations, and (5) other appropriate preventive care as
designated by the Secretary. Such plans must also include at
least 75 percent of the actuarial value of coverage under the
benchmark plan for: (1) prescribed drugs, (2) mental health
services, (3) vision care, and (4) hearing services. Medicaid
beneficiaries enrolled in benchmark and benchmark-equivalent
plans must also have access to services provided by rural
health clinics and Federally-qualified health centers.
Medicaid Cost-Sharing Rules. Under traditional Medicaid,
states are allowed to require certain beneficiaries to share in
the cost of Medicaid services, although there are limits on (1)
the amounts that states can impose, (2) the beneficiary groups
that can be required to pay, and (3) the services for which
cost-sharing can be charged. The rules for service-based cost-
sharing (e.g., copayments paid to a provider at the time of
service delivery) are different from those for participation-
related cost-sharing (e.g., premiums paid by beneficiaries
typically on a monthly basis independent of any services
rendered). States may seek approval under the section 1115
waiver authority to modify certain Medicaid cost-sharing
requirements.
As an alternative to traditional Medicaid, the Deficit
Reduction Act of 2005 (DRA; P.L. 109-171) provides states with
a new option for premiums and service-related cost-sharing that
vary by family income (i.e., <100 percent of FPL, 100 percent
of FPL-150 percent of FPL, and >150 percent of FPL). Under this
option, states may apply premiums and cost-sharing to selected
groups, through Medicaid state plan amendments rather than
through waiver authority, subject to specific restrictions
(e.g., the total aggregate amount of all cost-sharing
regardless of family income cannot exceed 5 percent of monthly
or quarterly family income).
Under this DRA option, certain groups (e.g., some children,
pregnant women, and individuals with special needs) are exempt
from paying premiums. Also, certain groups and services (e.g.,
preventive care for children, emergency care, and family
planning services) are exempt from the service-related cost-
sharing provisions. Nominal cost-sharing amounts in regulations
are indexed by medical inflation over time. Special rules apply
to cost-sharing for non-preferred prescription drugs, and for
emergency room copayments for non-emergency care. Under certain
circumstances, DRA also allows states to condition continuing
Medicaid eligibility on the payment of premiums, and allows
providers to deny care for failure to pay service-related cost-
sharing.
Medicaid Program Payments. Medicaid is financed by the
Federal government and the states. The Federal share for most
Medicaid expenses for benefits is determined by the Federal
medical assistance percentage (FMAP). FMAP is based on a
formula that provides higher reimbursement to states with lower
per capita income relative to the national average (and vice
versa). FMAPs have a statutory minimum of 50 percent and
maximum of 83 percent, although some Medicaid services receive
a higher Federal match rate. FY2009 FMAPs ranged from a high of
75.8 percent in Mississippi to a low of 50.0 percent in 13
other states.
States' expenditures to administer their Medicaid programs
are generally matched by Federal funding at a 50 percent
matching rate. Federal matching rates for administrative
expenditures are the same for all states, although some
activities are matched at higher rates. Within broad Federal
guidelines, states generally control Medicaid spending levels
by tailoring eligibility, benefits, cost-sharing and premiums
paid by beneficiaries, provider reimbursement rates, and other
program components to achieve their budget and policy goals. To
receive payment for the Federal share of Medicaid expenditures,
states submit quarterly expenditure reports to the Centers for
Medicare & Medicaid Services (CMS).
Committee Bill
New Mandatory Eligibility Group. The Committee Bill would
create a new mandatory Medicaid eligibility category for all
non-elderly, non-pregnant individuals (e.g., childless adults
and certain parents) who are otherwise ineligible for Medicaid.
For such individuals, the Committee Bill would establish 133
percent of FPL (based on modified gross income as described
below) as the new mandatory minimum Medicaid income eligibility
level beginning on January 1, 2014.
Beginning on January 1, 2011 states would be able to
provide Medicaid coverage through a state plan amendment to
non-elderly, non-pregnant individuals based on income, so long
as the state does not extend coverage to individuals with
higher incomes before those with lower incomes.
States that opt to make medical assistance available to
pregnant woman or children during a period of presumptive
eligibility would also be permitted to provide for a period of
presumptive eligibility for medical assistance (not to exceed
60 days) for the new mandatory Medicaid eligibility category of
all non-elderly, non-pregnant individuals.
In the case of non-elderly, non-pregnant individuals who
are parents, caretaker relatives or non-custodial parents of a
child under 19 years of age (or such higher age as the state
may have elected) who is Medicaid eligible, such parent may not
enroll in Medicaid unless their child is enrolled in the state
plan, a waiver, or in other health coverage.
The Committee Bill would also change the mandatory Medicaid
upper income eligibility standard for children ages 6 to 19
from 100 percent FPL to 133 percent FPL (as applies to children
under age 6).
New Optional Eligibility Group. Beginning on January 1,
2014, the proposal would create a new optional Medicaid
eligibility category for all non-elderly, non-pregnant
individuals (e.g., childless adults and certain parents) who
are otherwise ineligible for Medicaid. For such individuals,
family income would exceed 133 percent of FPL (based on
modified gross income as described below) but would not be
permitted to exceed the highest income eligibility level
established under the State plan or under a waiver of the plan
as of the date of enactment.
States would be permitted to phase in Medicaid coverage
through a state plan amendment to these new optional non-
elderly, non-pregnant individuals based on income, so long as
the state does not extend coverage to individuals with higher
incomes before those with lower incomes.
States that opt to make medical assistance available to
pregnant woman or children during a period of presumptive
eligibility would also be permitted to provide for a period of
presumptive eligibility for medical assistance (not to exceed
60 days) for the new optional Medicaid eligibility category of
all non-elderly, non-pregnant individuals.
In the case of optional non-elderly, non-pregnant
individuals who are parents, caretaker relatives, or
noncustodial parents of a child under 19 years of age (or such
higher age as the state may have elected) who is Medicaid
eligible, such parent may not enroll in Medicaid unless their
child is enrolled in the state plan, a waiver, or in other
health coverage.
Maintenance of Medicaid Income Eligibility. The Committee
Bill also includes a Medicaid maintenance of effort (MOE) for
eligibility for all beneficiaries. States would not be eligible
for Medicaid payments for calendar quarters during the period
that begins on the date of enactment of the Committee Bill and
ends on the date which the Secretary determines that an
exchange (established by the state under section 2235 of this
bill) is fully operational, if eligibility standards,
methodologies, or procedures under its Medicaid plan or waiver)
are more restrictive than the eligibility standards,
methodologies, or procedures, under such plan or waiver that
are in effect as of the date of enactment . Compliance with the
requirement to measure income using modified gross income, as
defined below, would not violate the MOE requirement. The MOE
requirement would continue through December 31, 2013 for adults
whose modified gross income (defined below) is at or below 133
percent of poverty, and through September 30, 2019 for any
child who is under age 19 (or such higher age as the State may
have elected).
Between January 1, 2011 and January 1, 2014, a state would
be exempt from the MOE requirement for optional, non-pregnant,
non-disabled, adult populations whose family income is above
133 percent of FPL if the state certifies to the Secretary that
the state is currently experiencing a budget deficit or
projects to have a budget deficit in the following state fiscal
year. The state may make such certification on or after
December 1, 2010. Upon submission of a satisfactory
certification, the MOE requirement will not apply for the
remainder of the three-year period described above.
Medicaid Benefits. Newly-eligible, non-elderly, non-
pregnant individuals would receive benchmark or benchmark-
equivalent coverage consistent with the requirements of section
1937 of the Social Security Act, as amended by this bill. The
newly eligible beneficiaries who meet the definition of
currently exempted populations under section 1937, e.g., blind
or disabled persons, hospice patients, etc. would continue to
be exempted.
The Committee Bill would also make changes to Medicaid
benchmark and benchmark-equivalent packages that would apply to
all eligible populations. Such packages would be required to
provide at least essential benefits (as described in section
2242 of the Committee Bill and as defined and specified
annually by the Secretary of HHS). For Medicaid benchmark-
equivalent plans, prescription drugs and mental health services
would be added to the list of services that must be covered at
actuarial equivalence.
Benchmark benefit package or benchmark-equivalent coverage
would be required to ensure that the financial requirements and
treatment limitations applicable to such benefits comply with
the mental health services parity requirements of section
2705(a) of the Public Health Services Act in the same manner as
such requirements apply to a group health plan. Coverage that
provides EPSDT services would be deemed as meeting the mental
health services parity requirement.
The Committee Bill would allow non-elderly, non-pregnant
individuals whose income is above 100 percent of FPL but below
133 percent of FPL to choose between Medicaid coverage or
coverage purchased through a state exchange.
Medicaid Program Payments. Under the Committee Bill, states
would continue to receive Federal financial assistance as
determined by FMAP. However, beginning on January 1, 2014
additional Federal financial assistance would be provided to
states in order to defray the costs of covering ``newly-
eligible'' individuals (defined below). Those states that, as
of the date of enactment, offer minimal or no coverage of the
``newly-eligible'' population or that offer coverage only to
parents or only to non-pregnant childless adults (called
``Other States'') would receive more assistance initially than
those states that cover at least some non-elderly, non-pregnant
individuals ( ``Expansion States''--defined below). For 2014 to
2018, the additional assistance would be provided through a
percentage point increase in FMAP, according to the following
schedule:
------------------------------------------------------------------------
Expansion states Other states
For any fiscal year quarter (percentage point (percentage point
occurring in the calendar year: increase is): increase is):
------------------------------------------------------------------------
2014............................ 27.3 37.3
2015............................ 28.3 36.3
2016............................ 29.3 35.3
2017............................ 30.3 34.3
2018............................ 31.3 33.3
------------------------------------------------------------------------
For the purpose of the above table, ``Expansion States''
are those with health benefits coverage for parents and non-
pregnant childless adults whose family income is at least 100
percent of FPL. Such health benefit coverage may not be
dependent on access to employer coverage or employment. While
coverage may be less comprehensive than Medicaid, the proposal
would require such coverage to be more than: (1) premium
assistance, (2) hospital-only benefits, (3) a high deductible
health plan (as defined in section 223(c)(2) of the Internal
Revenue Code of 1986) purchased through a health savings
account (HSA) (as defined under section 223(d) of the Internal
Revenue Code), or (4) alternative benefits under a
demonstration program authorized under section 1938 (health
opportunity accounts).
Between January 1, 2014 and December 31, 2018, costs
associated with services provided to ``newly eligible''
(defined below) individuals would be fully financed by the
Federal government for ``high need'' states. ``High-need''
states would be defined as one of the 50 States or the District
of Columbia that (1) has total Medicaid enrollment (under the
state plan or under any waiver of the plan) that is below the
national average for Medicaid enrollment as a percentage of
state population on the date of enactment of this Act, and (2)
had a seasonally-adjusted unemployment rate that was at least
12 percent, as determined by the Bureau of Labor Statistics of
the Department of Labor for August 2009.
Beginning January 1, 2019, and for succeeding fiscal years,
amounts expended for medical assistance on ``newly eligible''
individuals with family income less than 133 percent of FPL,
the FMAP would be increased by 32.3 percentage points.
Finally, except for the temporary help for ``high-needs''
states, FMAP rates for amounts expended for medical assistance
on ``newly eligible'' individuals (including percentage point
increases) would not be permitted to exceed 95 percent in any
year.
``Newly eligible'' individuals would be defined as non-
elderly, non-pregnant individuals with family income below 133
percent of FPL who are: (1) not under the age of 19 (or such
higher age as the state may have elected under section
1902(l)(1)(D)); and (2) not eligible under the state plan (or a
waiver) for full Medicaid benefits or Medicaid benchmark or
benchmark-equivalent coverage, or who are eligible but not
enrolled due to a capped waiver (or those individuals who are
on a waiting list) for such benefits as of the date of
enactment.
For the period that begins on October 1, 2013 and ends on
September 30, 2019, the FMAP rate for applicable states or the
District of Columbia with respect to amounts expended for
medical assistance for individuals who are ``not newly''
eligible (as defined above) would be increased by 0.15
percentage point and in the case of the territories, would be
increased by 0.075 percentage points. The increase in the FMAP
rate would not be permitted to apply with respect to:
Disproportionate Share Hospital Payments;
Payments under title IV of the Social
Security Act;
Payments under title XXI of the Social
Security Act (the Children's Health Insurance Program);
and
Payments under title XIX of the Social
Security Act that are based on the CHIP enhanced FMAP
rate.
New Reporting Requirements. The Committee Bill would
require states to report changes in Medicaid enrollment
beginning in January 2015, and every year thereafter. States
would be required to report the total number of newly enrolled
individuals in the State plan or under a waiver for the fiscal
year ending on September 30th of the preceding calendar year
disaggregated by: (1) children, (2) parents, (3) non-pregnant,
childless adults, (4) disabled individuals, (5) elderly
individuals, and (6) such other categories or sub-categories of
individuals eligible for Medicaid as the Secretary may require.
States would also be required to report on the outreach and
enrollment processes they used to achieve such enrollment. The
Secretary would be required to submit a report to the
appropriate committees of Congress beginning in April 2015, and
every year thereafter, on total new enrollment in Medicaid, on
a national and state-by-state basis. Such report would be
required to include any recommendations to Congress for
improving Medicaid enrollment.
SEC. 1602. INCOME ELIGIBILITY FOR NONELDERLY DETERMINED USING MODIFIED
GROSS INCOME
Present Law
Eligibility for Medicaid is determined not only based on
categorical requirements, but also financial requirements.
Medicaid's income eligibility requirements place limits on the
maximum amount of assets and income individuals may possess.
Additional guidelines specify how states should calculate these
amounts. The specific asset and income limitations that apply
to each eligibility group are set through a combination of
Federal parameters and state definitions. Consequently, these
standards vary across states, and different standards apply to
different groups within states. For some Medicaid eligibility
groups, states are required to disregard certain amounts and/or
types of income and sometimes expenses. State application of
income counting rules expanded eligibility to higher-income
individuals.
Committee Bill
Effective July 1, 2013, income disregards (including type
of expense, block of income, or other income disregards), and
asset or resource tests would no longer apply when calculating
the income eligibility. Instead, the income eligibility for an
individual or a family would be measured based on modified
gross income (MGI) as determined for eligibility to receive a
tax credit in the state exchanges, described in section 1205 of
the Committee Bill.
MGI would also be used to determine income for any other
purpose applicable under the state plan, such as determining
cost-sharing amounts that states may impose on an individual or
a family. Existing Medicaid income counting rules would
continue to apply for determining eligibility for certain
exempted groups including (1) individuals that are eligible for
Medicaid through another program (e.g., foster care children,
or individuals receiving Supplemental Security Income (SSI)),
(2) the elderly or Social Security Disability Insurance (SSDI)
program beneficiaries, (3) the medically needy, (4) enrollees
in a Medicare Savings Program (e.g., Qualified Medicare
Beneficiaries, or QMBs), and (5) CHIP optional targeted low-
income children). In addition, MGI would not affect eligibility
determinations through Express Lane or for Medicare
prescription drug low-income subsidies or Medicaid long-term
care services. Any individual enrolled in Medicaid (under the
state plan or a waiver) on July 1, 2013, who would be
determined ineligible for medical assistance under the
application of the new MGI income counting rule would remain
Medicaid eligible (and subject to the same premiums and cost-
sharing as applied to the individual on that date) until the
later of March 31, 2014, or their next Medicaid eligibility
redetermination date. Finally, the Secretary would not be
permitted to waive compliance with the requirements of this
provision, except to the extent necessary to permit a state to
coordinate eligibility requirements for dual eligible
individuals.
SEC. 1603. REQUIREMENT TO OFFER PREMIUM ASSISTANCE FOR EMPLOYER-
SPONSORED INSURANCE
Present Law
Under current Federal law, states can offer premium
assistance to Medicaid-eligible individuals who have access to
employer-sponsored insurance (ESI), rather than enrolling them
in traditional Medicaid, if it is determined to be cost-
effective and the benefits are comprehensive. A Medicaid
beneficiary's enrollment in an employer health plan is
considered cost-effective if paying the applicable premiums,
deductible, coinsurance and other cost-sharing obligations of
the employer plan is less expensive than the state's expected
cost of providing Medicaid-covered services directly. To meet
the comprehensiveness test under Medicaid, states are required
to provide Medicaid covered services that are not included in
private plans.
The recent CHIP Reauthorization Act (CHIPRA, P.L. 111-3)
created a new state plan option for providing premium
assistance for Medicaid and CHIP-eligible children and/or
parents of Medicaid/CHIP children. For families that have
access to ESI coverage that meets certain requirements--
including that the employer pays at least 40 percent of the
total premium--states can offer premium assistance through a
state plan amendment. States choosing to do so are required to
provide ``wrap-around'' benefit coverage for employer plans
that do not meet CHIP benefit standards. If the CHIP cost of
covering the entire family in the employer-sponsored plan is
less than regular CHIP coverage for the eligible individual(s)
alone, then the premium assistance subsidy may be used to pay
the entire family's share of the premium.
Committee Bill
Effective July 1, 2013, the Committee Bill would require
states to offer premium assistance and wrap-around benefits to
all Medicaid beneficiaries who are offered ESI if it is cost-
effective to do so, based on Present Law requirements.
SEC. 1604. TREATMENT OF THE TERRITORIES
Present Law
Five territories (American Samoa, Guam, the Northern
Mariana Islands, Puerto Rico, and the U.S. Virgin Islands)
operate Medicaid programs under rules that differ from those
applicable to the 50 states and the District of Columbia
(hereafter referred to as the states). The territories are not
required to cover the same eligibility groups, and they use
different financial standards (income and asset tests) in
determining eligibility. For example, states must cover certain
mandatory groups such as pregnant women, children, and
qualified Medicare beneficiaries, but for the territories these
groups are optional.
In the states, Medicaid is an individual entitlement. In
addition, there are no limits on Federal payments for Medicaid
provided that the state contributes its share of the matching
funds. In contrast, Medicaid programs in the territories are
subject to annual Federal spending caps. All five territories
typically exhaust their caps prior to the end of the fiscal
year. Once the cap is reached, the territories assume the full
costs of Medicaid services or, in some instances, may suspend
services or cease payments to providers until the next fiscal
year.
The Federal share for most Medicaid service costs is
determined by the Federal medical assistance percentage (FMAP),
which is based on a formula that provides higher reimbursement
to states with lower per capita incomes relative to the
national average (and vice versa). FMAPs have a statutory
minimum of 50 percent and maximum of 83 percent. The FMAP for
territories is set at 50 percent.
Committee Bill
The Committee Bill would increase spending caps for the
territories by 30 percent and the applicable FMAP by five
percentage points--to 55 percent--beginning on January 1, 2011
and for each fiscal year thereafter.
Beginning with fiscal year 2014, payments made to the
territories with respect to amounts expended for medical
assistance for newly eligible individuals (i.e., certain non-
elderly, non-pregnant individuals) would not count towards the
applicable Medicaid spending caps in the territories.
SEC. 1605. MEDICAID IMPROVEMENT FUND RESCISSION
Present Law
Under section 7002 of the Supplemental Appropriations Act,
2008 (War Supplemental, P.L. 110-252), Congress required the
Secretary of Health and Human Services to establish the
Medicaid Improvement Fund (MIF). The MIF would be available for
the Centers for Medicare & Medicaid Services (CMS) to use to
improve the management of the Medicaid program, including
oversight of contracts and contractors and evaluation of
demonstration projects. Payments made for these activities were
intended to be in addition to payments that would otherwise be
made for such activities. MIF was to have $100 million
available in FY2014, and $150 million in FYs 2015-2018.
Committee Bill
The Committee Bill would rescind funds available in the MIF
for fiscal years 2014 through 2018 (which total $700 million).
PART II--CHILDREN'S HEALTH INSURANCE PROGRAM
SEC. 1611. ADDITIONAL FEDERAL FINANCIAL PARTICIPATION FOR CHIP
Present Law
The Children's Health Insurance Program (CHIP) builds on
Medicaid by providing health care coverage to low-income,
uninsured children in families with income above Medicaid
income standards. States may also extend CHIP to pregnant women
when certain conditions are met. In designing their CHIP
programs, states may choose to expand Medicaid, create a
standalone program, or use a combined approach. As with
Medicaid, states have the flexibility under CHIP to disregard
amounts or types of income and expenses, effectively expanding
eligibility to higher-income individuals. Federal
appropriations are currently provided through FY2013.
Like Medicaid, CHIP is a Federal-state program. For each
dollar of state spending, the Federal government makes a
matching payment drawn from CHIP allotments. A state's share of
program spending for Medicaid is equal to 100 percent minus
FMAP (described above). But for CHIP, the Federal share is
higher--the enhanced FMAP for CHIP lowers the state's share of
CHIP expenditures by 30 percent compared to the regular
Medicaid FMAP.
Federal law permits states to impose premiums and service-
related cost-sharing for some enrollees and some benefits under
CHIP. States that cover CHIP-eligible children through their
Medicaid programs must follow the nominal premium and cost-
sharing rules applicable to Medicaid. Under these rules, the
majority of such children are exempt. In general, premiums are
prohibited except for children enrolled in Medicaid expansion
programs with incomes above 150 percent of the Federal poverty
level (FPL). Service-related cost-sharing for children enrolled
in Medicaid expansion programs may vary by income level.
Aggregate cost-sharing for all individuals is capped at five
percent of family income.
Different cost-sharing limits apply in states that provide
CHIP coverage through stand alone (non-Medicaid) programs. For
example, nominal premiums specified in Medicaid statute apply
to children in families with income at or below 150 percent of
FPL in standalone programs. Service-related cost-sharing is
limited to the nominal amounts in Medicaid for the subgroup
with income below 100 percent of FPL and slightly higher
amounts are permitted for the subgroup with income between 100
and 150 percent of FPL. For children in families with income
over 150 percent of FPL, cost-sharing can be applied in any
amount, provided that cost-sharing for higher-income children
is not less than cost-sharing for lower-income children and
that it does not exceed the out-of-pocket limit of five percent
of family income.
Preventive services are exempt from all cost-sharing for
all CHIP families regardless of income.
States are permitted to use alternative premiums and
service-related cost-sharing established in the Deficit
Reduction Act of 2005 (DRA, P.L. 109-171) that allow higher
premiums and cost-sharing for certain Medicaid beneficiaries.
Children under 18 who are covered under mandatory eligibility
groups (the lowest income categories) are exempt from the DRA
premium and cost-sharing provisions.
Committee Bill
The Committee Bill would maintain the current CHIP
structure, although the bill does not provide CHIP
appropriations for FY2014 or after.
Upon enactment, states would be required to maintain income
eligibility levels for CHIP through September 30, 2019.
Specifically, with the exception of waiting lists for enrolling
children in CHIP, states could not implement eligibility
standards, methodologies, or procedures that were more
restrictive than those in place on the date of enactment.
However, states could expand their current income eligibility
levels--that is, state could enact less restrictive standards,
methodologies or procedures.
From FY2014 to FY2019, states would receive a 23 percentage
point increase in the CHIP match rate, subject to a cap of 100
percent. States would also receive an increase of 0.15
percentage points in their Medicaid match rate to offset the
additional state costs due to the Medicaid maintenance of
effort provision related to children.
CHIP-eligible children who cannot enroll in CHIP due to
Federal allotment caps would be eligible for tax credits in the
state exchange.
The Medicaid and CHIP enrollment bonuses included in the
Children's Health Insurance Program Reauthorization Act of 2009
(CHIPRA, P.L. 111-3) would not apply beyond the current
reauthorization period; bonus payments would not be available
in FY2014 or after.
CHIP eligibility would be based on existing income
eligibility rules, including the use of income disregards. In
addition, the CHIP benefit package and cost-sharing rules would
continue as under Present Law.
The new section regarding Medicaid programs' coordination
with state health insurance exchanges (described below in
section 16231) would also apply to CHIP programs.
SEC. 1612. TECHNICAL CORRECTIONS
Present Law
The Children's Health Insurance Program Reauthorization Act
of 2009 (CHIPRA, P.L. 111-3) was signed into law on February 4,
2009, to extend and improve CHIP Federal and for other
purposes. The American Recovery and Reinvestment Act of 2009
(ARRA, P.L. 111-5) was signed into law on February 17, 2009, to
make supplemental appropriations for job preservation and
creation, infrastructure investment, energy efficiency and
science, assistance to the unemployed, and state and local
fiscal stabilization, for fiscal year ending September 30,
2009, and for other purposes.
Committee Bill
The Committee Bill would make corrections to selected
provisions in CHIPRA and ARRA, including for example, (1) would
make an adjustment to the FY2009 and FY2010 CHIP allotments to
account for changes in projected spending for certain
previously approve expansion programs, (2) would change a
reference to legal immigrants in CHIP statute, (3) would delete
a reference to CHIP funds set aside for coverage of certain
Medicaid non-pregnant childless adult waivers when those funds
are not expended by September 30, 2011, (4) would make
adjustments to the CPS to improve estimates used to identify
high performing states (those with the lowest percentage of
uninsured, low-income children) for CHIP purposes, (5) would
stipulate that the alternative premiums and cost-sharing
provision in Medicaid would not supersede or prevent the
application of premium and cost-sharing protections for Indians
under Medicaid and CHIP as established in P.L. 111-5, and (6)
other technical changes.
PART III--ENROLLMENT SIMPLIFICATION
SEC. 1621. ENROLLMENT WEBSITE THAT COORDINATES WITH STATE HEALTH
INSURANCE EXCHANGES
Present Law
No provision.
Committee Bill
As a condition of the Medicaid state plan for receipt of
any Federal financial assistance for calendar quarters after
January 1, 2013, states would be required to ensure that the
following requirements are met:
(1) States would be required to establish procedures for:
enrolling individuals who are identified by
a state exchange as being eligible for Medicaid or the
Children's Health Insurance Program (CHIP), without any
further determination by the state;
ensuring that individuals who apply for
Medicaid and/or CHIP but are determined ineligible for
either program are able to apply for and be enrolled in
coverage through a state exchange and, if applicable,
obtain premium credits for state exchange coverage and
receive information regarding any other assistance or
subsidies available through the state exchange;
ensuring that the state Medicaid agency, the
state CHIP agency, and the state exchange utilize a
secure electronic interface sufficient to allow for a
determination of an individual's eligibility for their
programs; and
ensuring that coverage provided to Medicaid-
eligible individuals who are also enrolled in a state
exchange plan is coordinated.
(2) The state Medicaid agency and the state CHIP agency may
enter into an agreement with the state exchange under which
each agency may determine whether a state resident is eligible
for premium credits for state exchange coverage, so long as the
agreement meets requirements that the Secretary of the Treasury
may prescribe to reduce administrative costs and the likelihood
of eligibility errors and disruptions in coverage.
(3) The state Medicaid agency and the state CHIP agency
would be required to participate in and comply with the
requirements for the system established under section 2239
(relating to streamlined procedures for enrollment through a
state exchange, Medicaid and CHIP--e.g., a single application
form usable for all the programs).
(4) The Committee Bill would require states to establish a
website to allow Medicaid and CHIP eligible individuals to
enroll or reenroll in Medicaid and CHIP, and consent to
enrollment or reenrollment through an electronic signature. In
addition, the website would be linked to all websites
established by any state exchange so that individuals who are
identified by a state exchange as Medicaid or CHIP eligible are
able to enroll in Medicaid or CHIP online without having to
submit an additional or separate application. The website would
also allow individuals who apply for Medicaid but are
determined ineligible to apply for and be enrolled in coverage
through an Exchange. If applicable, such individuals could
obtain premium credits for Exchange coverage without having to
submit an additional or separate application. The website would
also provide information regarding any other assistance or
subsidies available through the Exchange.
The Committee Bill would also require the website to allow
the state to assess an individual for purposes of providing
home and community-based services under the state plan or under
a waiver for individuals who would be Medicaid eligible if they
were in a medical institution, and with respect to whom there
has been a determination that, but for the provision of home
and community-based services under a waiver, they would require
the level of care provided in a hospital, nursing facility, or
intermediate care facility for the mentally retarded.
The website would also be required to allow individuals who
are eligible for Medicaid and who are also eligible to receive
premium credits for Exchange coverage to compare the benefits,
premiums, and cost-sharing available to the individual under
Exchange plans. In the case of a child, the website would allow
for the comparison of the coverage that would be provided to
the child through Medicaid with coverage that would be provided
to the child through enrollment in family coverage under
Exchange coverage including any supplemental coverage provided
by the state under Medicaid. The website would be required to
be functional no later than January 1, 2013.
States would be required to ensure that a non-pregnant,
non-elderly adult whose family income exceeds 100 percent but
does not exceed 133 percent of poverty who is Medicaid eligible
and who is also eligible to receive premium credits for state
exchange coverage is offered an option to elect to enroll
themselves (or their family if applicable) in a state exchange
plan instead of Medicaid. In the case of an adult, such
individual would waive services under Medicaid (including
Medicaid assistance for premiums and cost-sharing). Such
individual must receive information comparing the benefits and
cost-sharing that would be available under Medicaid for the
adult (or, if applicable, the adult's family), with the
benefits and cost-sharing that would be available under state
exchange plans. Such individuals that elect to enroll
themselves and/or their families in a state exchange plan would
also be provided with assistance in selecting and enrolling in
a state exchange plan.
While parents electing state exchange coverage over
Medicaid coverage would waive their rights to Medicaid covered
services and applicable cost-sharing requirements, states would
be required to ensure that all children of parents who choose
state exchange coverage would continue to receive the Medicaid
benefits to which they are entitled, including early and
periodic screening, diagnostic, and testing (EPSDT), and
Medicaid assistance sufficient to cover the costs of premiums
and cost-sharing that exceed the allowable amounts for children
under Medicaid.
Beginning in 2014, states would be required to make an
annual payment to the Secretary for Medicaid-eligible
individuals who elect coverage through the state exchange. The
amount would be the total calculated monthly for each
applicable population as follows:
the number of individuals eligible for full-
benefit Medicaid who are enroll in a state exchange
plan, multiplied by
the average Medicaid cost multiplied by
the state share of Medicaid expenditures.
In calculating the average Medicaid cost for children, only
``essential benefits'' (described in section 1201) would be
included.
SEC. 1622. PERMITTING HOSPITALS TO MAKE PRESUMPTIVE ELIGIBILITY
DETERMINATIONS FOR ALL MEDICAID ELIGIBLE POPULATIONS
Present Law
Presumptive eligibility is a Medicaid option that allows
states to enroll certain individuals (e.g., children, pregnant
women, and certain women with breast and cervical cancer) into
Medicaid for a limited period of time before full Medicaid
applications are filed and processed, based on a preliminary
determination by a Medicaid provider of likely Medicaid
eligibility. Presumptive eligibility begins on the date a
qualified Medicaid provider determines that the applicant
appears to meet eligibility criteria and ends on the earlier of
(1) the date on which a formal determination is made regarding
the individual's application for Medicaid, or (2) in the case
of an individual who fails to apply for Medicaid following the
presumptive eligibility determination, the last day of the
month following the month in which presumptive eligibility
begins. During periods of presumptive eligibility, children and
certain women with breast and cervical cancer have access to
the full Medicaid benefit package offered by states, while
pregnant women have access to ambulatory prenatal care.
Committee Bill
The Committee Bill would permit all hospitals that
participate in Medicaid under state plans to make presumptive
eligibility determinations for all Medicaid eligible
populations. The time period of presumptive eligibility would
be consistent with Present Law. In implementing this provision,
states would not be required to cover other presumptive
eligibility options in Present Law. The provision would be
effective on January 1, 2014 without regard to whether or not
final regulations to carry out this amendment have been
promulgated by such date. However, if the Secretary determined
that state legislation (other than for appropriations) was
needed in order for the state Medicaid plan to meet the
additional requirements of this section, a state plan would not
be regarded as non-compliant until a specified time after the
close of the state's first legislative session following
enactment.
SEC. 1623. PROMOTING TRANSPARENCY IN THE DEVELOPMENT, IMPLEMENTATION,
AND EVALUATION OF MEDICAID AND CHIP WAIVERS AND SECTION 1937 STATE PLAN
AMENDMENTS
Present Law
Section 1115 of the Social Security Act authorizes the
Secretary to waive certain statutory requirements for
conducting research and demonstration projects that further the
goals of titles XIX (Medicaid) and XXI (CHIP). States submit
proposals outlining the terms and conditions of the
demonstration program to the Centers for Medicare & Medicaid
Services (CMS) for approval prior to implementation.
In 1994, CMS issued program guidance that impacts the
waiver approval process and includes the procedures states are
expected to follow for public involvement in the development of
a demonstration project. States were required to provide CMS a
written description of their process for public involvement at
the time their proposal was submitted.
Public involvement requirements for the waiver approval
process continued through the early 2000s. In a letter to state
Medicaid directors issued May 3, 2002, CMS listed examples of
ways a state may meet requirements for public involvement
(e.g., public forums, legislative hearings, a website with
information and a link for public comment).
States are required to submit a state plan describing the
nature and scope of a state's Medicaid program to the Secretary
of HHS for approval. The state plan must provide assurances
that the program conforms to the requirements of Medicaid and
to any other official program issuances (e.g., rules,
regulations, program guidance, etc.). After approval of the
original state plan by the Secretary, any subsequent changes
(e.g., those required by new Federal or state statutes, rules,
regulations, policy interpretations, guidance, court decisions,
changes in the state's operation of the Medicaid program, etc.)
must be submitted by the state to CMS in the form of a state
plan amendment (SPA) so that the Secretary may determine
whether the Medicaid state plan continues to meet Federal
requirements. Federal regulations dictate the SPA approval
process including requirements for gubernatorial review, CMS
regional office review, disapproval of a SPA, and judicial
review (i.e., after a state's failure to conform to Federal
requirements). Federal law dictates time frames associated with
the SPA review process, and requirements that the CMS
Administrator must meet when notifying a state that CMS intends
to withhold Federal matching payments for portions of the state
plan that are out of compliance.
Committee Bill
The Committee Bill would impose statutory requirements
regarding transparency in the development, implementation, and
evaluation of Medicaid and CHIP section 1115 demonstration
programs that impact eligibility, enrollment, benefits, cost-
sharing, or financing. States would be required to: (1) provide
notice of the state's intent to develop and/or renew a section
1115 waiver and convene at least one meeting of the state's
medical care advisory board to discuss the impacts of the
proposed changes; (2) publish for written comment a notice of
the proposal that provides information on how the public can
submit comments to the state and includes state projections and
assumptions regarding the likely impact of the waiver; (3) post
the waiver proposal on the State's Medicaid or CHIP website;
and (4) convene open meetings over the course of the
development of the proposal to discuss proposed changes. States
would also be required to include information regarding the
actions taken to meet the above-listed public notice
requirements as a part of their waiver submission to CMS.
The Committee Bill would also impose additional
transparency-related statutory requirements on the Secretary of
HHS. The Secretary would be required to: (1) publish a Federal
Register notice identifying monthly waiver submissions,
approvals, denials, and information regarding methods by which
comments on the waiver will be received from the public; (2)
publish a copy of the proposed waiver to the CMS website; and
(3) allow for, respond to, and make available public comments
received about the proposal after it has been posted to the CMS
website. Once approved, the Secretary would have to post waiver
terms and conditions and related waiver approval documents,
quarterly state-reported data and three-year evaluations to the
CMS website. The Secretary would also be required to publish a
Federal Register notice identifying monthly waiver approvals,
denials, and returns to the state without action. In addition,
the Secretary would be required to follow requirements
associated with an independent evaluation of the demonstration
project.
$4.5 million would be appropriated for fiscal year 2010 and
each fiscal year thereafter for the purpose of carrying out
independent evaluations of section 1115 demonstration waivers.
Among the evaluation criteria, the Secretary would be required
to assess the use of services by beneficiaries, the extent to
which special populations are able to access needed health care
services, the amount of out-of-pocket costs for health care
services incurred by beneficiaries, administrative costs
incurred under the waiver, etc.
The Committee Bill would add transparency-related statutory
requirements associated with the SPA approval process for
proposals that limit benefits. States would have to: (1)
provide notice of the state's intent to develop a SPA and
convene at least one meeting of the state's medical advisory
board to discuss the impacts of the changes requested in the
proposed SPA; (2) publish a notice of the proposal that
provides information on how the public can submit comments to
the state and includes state projections and assumptions
regarding the likely impact of the SPA; (3) post the SPA
proposal on the state's Medicaid or CHIP website; and (4)
convene at least one open meeting to discuss the proposed SPA.
States would also be required to include information regarding
the actions taken to meet the above-listed public notice
requirements as a part of their SPA submission to CMS.
The Committee Bill would also impose additional
transparency-related statutory requirements on the Secretary of
HHS. The Secretary would be required to: (1) publish a Federal
Register notice identifying monthly SPA submissions and
information regarding methods by which comments on each SPA
will be received from the public; (2) publish a copy of the
proposed SPA to the CMS website; and (3) publish a Federal
Register notice identifying monthly SPA approvals, denials, and
returns to the state without action.
SEC. 1624. STANDARDS AND BEST PRACTICES TO IMPROVE ENROLLMENT OF
VULNERABLE AND UNDERSERVED POPULATIONS
Present Law
CHIPRA (P.L. 111-3) included provisions to facilitate
access and enrollment in Medicaid and CHIP. Among the
provisions related to outreach and enrollment, CHIPRA
appropriated $100 million in outreach and enrollment grants
above and beyond the regular CHIP allotments for fiscal years
2009 through 2013. Ten percent of the outreach and enrollment
grants will be directed to a national enrollment campaign, and
10 percent will be targeted to outreach for American Indian and
Alaska Native children. The remaining 80 percent will be
distributed among state and local governments and to community-
based organizations for purposes of conducting outreach
campaigns with a particular focus on rural areas and
underserved populations. Grant funds will also be targeted at
proposals that address cultural and linguistic barriers to
enrollment. Also as a part of the outreach-related provisions,
CHIPRA requires State plans to describe the procedures used to
reduce the administrative barriers to the enrollment of
children and pregnant women in Medicaid and CHIP, and to ensure
that such procedures are revised as often as the State
determines is appropriate to reduce newly identified barriers
to enrollment.
Committee Bill
The Committee Bill would require the Secretary of HHS, not
later than April 1, 2011, to issue guidance to states regarding
standards and best practices to help improve enrollment of
vulnerable and underserved populations eligible for Medicaid
and CHIP, including children, unaccompanied homeless youth,
children and youth with special health care needs, pregnant
women, racial and ethnic minorities, rural populations, victims
of abuse or trauma, individuals with mental health or
substance-related disorders, and individuals with HIV/AIDS.
The guidance would (1) detail information on effective ways
to inform vulnerable populations about coverage available under
Medicaid and CHIP; (2) identify ways to assist vulnerable
populations to enroll in the programs; (3) identify ways that
application and enrollment barriers can be eliminated for such
populations; and (4) address specific methods for outreach and
enrollment, including out-stationing of eligibility workers,
the Express Lane eligibility option, residency requirements,
documentation of income and assets, presumptive eligibility,
continuous eligibility, and automatic renewal. The Secretary
would work with appropriate stakeholders, including
representatives of states and children's groups, to ensure that
the guidance is developed and implemented effectively.
Finally, not later than two years after the enactment of
this Act and annually thereafter, the Secretary would review
and report to Congress on the progress made by states in
implementing the standards and best practices indentified in
the guidance and increasing the enrollment of vulnerable
populations under Medicaid and CHIP.
PART IV--MEDICAID SERVICES
SEC. 1631. COVERAGE OF FREE-STANDING BIRTH CENTERS
Present Law
Some Medicaid benefits are mandatory, but others are
optional. Examples of optional benefits that are offered by
many states include prescription drugs and skilled nursing
facility services for individuals under age 21.
While there is statutory authority under Medicaid to pay
for services rendered by nurse midwives, there is no explicit
statutory authority to provide for direct payments to free-
standing birthing centers for facility services.
Committee Bill
The Committee Bill would make coverage of services provided
by free-standing birthing centers a mandatory benefit under
Medicaid. Free-standing birth center services would be defined
as services furnished to an individual at a health facility
that is not a hospital, and where childbirth is planned to
occur away from the pregnant woman's residence, and is licensed
or otherwise authorized by the state to provide prenatal labor
and delivery services covered under the plan. In addition,
states would be required to separate payments to providers
administering prenatal labor and delivery or postpartum care in
a free-standing birth center, such as nurse midwives and other
providers of services such as birth attendants recognized under
state law, as deemed appropriate by the Secretary.
This provision would be effective on the date of enactment
of this Act and would apply to services furnished on or after
such date.
SEC. 1632. CONCURRENT CARE FOR CHILDREN
Present Law
Currently, states have the option to offer hospice services
under Medicaid. In states that offer hospice services, Medicaid
beneficiaries who elect to receive such services must waive the
right to all other services related to the individual's
diagnosis of a terminal illness or condition, including
treatment.
Committee Bill
The provision would allow payment for services provided to
children, as defined by the state, who are eligible for
Medicaid and have voluntarily elected to receive hospice
services, without foregoing coverage of and payment for other
services that are related to the treatment of the child's
condition for which a diagnosis of terminal illness has been
made.
SEC. 1633. FUNDING TO EXPAND STATE AGING AND DISABILITY RESOURCE
CENTERS
Present Law
Title II, Sect. 202 of the Older Americans Act (OAA)
establishes various functions of the Administration on Aging
(AoA) and Assistant Secretary for Aging. Subsection
(a)(20)(B)(iii) establishes responsibilities for a National
Center on Senior Benefits Outreach and Enrollment, including
efforts for Aging and Disability Resource Centers (ADRCs), and
other public and private State and community-based
organizations, such as faith-based organizations and
coalitions, to serve as benefits enrollment centers for Federal
and state programs. Subsection (b)(8) requires the Assistant
Secretary to implement ADRCs in all states.
Committee Bill
The Committee Bill would appropriate to the Secretary of
HHS, $10 million for each of FYs 2010 through 2014 to carry out
ADRC initiatives.
SEC. 1634. COMMUNITY FIRST CHOICE OPTION
Present Law
A personal care attendant is a person who cares for an
individual with a significant disability by providing
assistance with activities of daily living (ADLs) and
instrumental activities of daily living (IADLs). ADLs include
eating, bathing and showering, toileting, dressing, walking
across a small room, and transferring (getting in or out of a
bed or chair). IADLs include preparing meals, managing money,
shopping for groceries or personal items, performing housework,
using a telephone, doing laundry, getting around outside the
home, and taking medications.
Optional Personal Care State Plan Benefit. Under current
Medicaid law, states have the option to cover personal care
services under their Medicaid state plan for Medicaid
beneficiaries who need assistance with ADLs and IADLs. The
Medicaid statute defines personal care as services furnished to
an individual at home or in another location (excluding
institutional settings) that are either authorized by a
physician, or at state option, under a plan of care. In
addition to providing care in a beneficiary's place of
residence, states may also cover attendant care services to
assist beneficiaries at work and in participating in community
activities. Further, all relatives, except ``legally
responsible relatives'' (i.e., spouses and parents of minor
children) can be paid under Medicare for providing personal
care services to beneficiaries.
Optional Self-Directed Personal Care State Plan Benefit.
States also have the option to cover self-directed personal
care under their Medicaid state plan. Services that states can
cover are similar to those that may be covered under the
optional personal care state plan benefit, yet under this
benefit, beneficiaries are encouraged to take on more
responsibility for hiring and firing personal care workers and
establishing worker schedules and job responsibilities.
Optional Home and Community-Based Services State Plan
Benefit. This Medicaid option allows states to cover one or
more home and community-based services, including personal
care, for certain individuals with long term services and
supports needs. States are not required to make services
available on a statewide basis. This benefit is limited to
individuals whose incomes do not exceed 150 percent FPL and who
meet a state-determined level of need criteria. If states cover
this option, the needs-based criteria must be less stringent
than that used for institutional care eligibility. Services are
limited to homemaker/home health aide, personal care, adult day
health, habilitation, respite care, day treatment or other
partial hospitalization services, psycho-social rehabilitation
services, and clinic services for individuals with chronic
mental illness. States may limit the number of individuals
served.
Personal Care Under Medicaid Waivers. Under waiver
authority in section 1915(c) of the Social Security Act, states
may offer home and community-based services, including personal
care services, as well as a broad range of other services, to
selected persons who would otherwise require the level of care
offered in Medicaid-covered institutions. States that choose to
offer Medicaid services under section 1115 waivers may also
include personal care services as part of a benefit plan.
Committee Bill
Beginning January 1, 2014, the Committee Bill would
establish an optional Medicaid benefit under which states could
offer community-based attendant services and supports to
Medicaid beneficiaries with disabilities who would otherwise
require the level of care offered in a hospital, nursing
facility, or intermediate care facility for the mentally
retarded.
These services and supports would include assistance with
ADLs, IADLs, and health-related tasks through hands-on
assistance, supervision, or cueing, under a person-centered
services and supports plan based on an assessment of functional
need and agreed to in writing by the individual (or his/her
representative). Services would also include: the acquisition,
maintenance and enhancement of skills necessary for the
individual to accomplish ADLs, IADLs, and health-related tasks;
back-up systems or mechanisms (such as the use of beepers or
other electronic devices); and training on how to select,
manage, and dismiss attendants. Services and supports may
include expenditures for transition costs such as rent and
utility deposits, bedding, basic kitchen supplies, among
others, and expenditures relating to a need identified in an
individual's person-centered plan that would increase
independence or substitute for human assistance. Excluded
services and supports would be room and board costs, special
education and related services provided under the Individuals
with Disabilities Education Act and vocational rehabilitation
services, certain assistive technology devices and services,
medical supplies and equipment, or home modifications.
Services would be provided in a home or community setting
and under an agency-provider model, in which entities would
contract for the provision of services and supports, or under
another model, such as the provision of vouchers and direct
cash payments. Services and supports would be selected,
managed, and dismissed by the individual (or, when appropriate,
his or her representative); controlled, to the maximum extent
possible, by the individual; and provided by a qualified
individual (as defined by the Secretary), including family
members. States that choose the Community First Choice Option
would be eligible for an enhanced Federal match rate of an
additional six percentage points for reimbursable expenses in
the program. The option would sunset after five years.
To obtain approval from the Secretary to offer this
benefit, states would be required to: (1) develop and implement
the benefit in collaboration with a Development and
Implementation Council established by the state that would
include a majority of members with disabilities, elderly
individuals, and their representatives; (2) provide community-
based attendant services and supports to individuals on a
state-wide basis and in the most integrated setting appropriate
to the individual's needs; (3) maintain or exceed the level of
state Medicaid expenditures for individuals with disabilities
or elderly individuals attributable to the preceding fiscal
year, or otherwise to individuals with disabilities or elderly
individuals attributable to the proceeding year; (4) establish
and maintain a comprehensive, continuous quality assurance
system with respect to the community-based attendant services
and supports that would incorporate feedback from consumers and
their representatives, monitor the health and well-being of
each individual, collect information for the purpose of
approving the state plan amendment and facilitate Federal
oversight, among others.
A state would be required to ensure that services and
supports would be provided in accordance with requirements of
the Fair Labor Standards Act of 1938, and applicable Federal
and state laws regarding Federal and state income and payroll
taxes, the provision of unemployment and workers compensation
insurance; maintenance of general liability insurance, and
occupational health and safety.
The Secretary would be required to conduct an evaluation of
the community-based attendant services and supports. No later
than December 31, 2017, the interim findings of this evaluation
would be required to be submitted to Congress, and the final
report must be submitted by December 31, 2019.
SEC. 1635. PROTECTION FOR RECIPIENTS OF HOME AND COMMUNITY-BASED
SERVICES AGAINST SPOUSAL IMPOVERISHMENT
Present Law
Medicaid law includes spousal impoverishment provisions
intended to prevent the impoverishment of a spouse whose
husband or wife seeks Medicaid coverage for long term services
and supports. The law requires that spousal impoverishment
rules for eligibility and post-eligibility treatment of income
be applied to non-institutionalized spouses (i.e., community
spouses) of persons residing in a medical institution or
nursing facility for at least 30 consecutive days.
Although Medicaid law grants states the option to apply
spousal impoverishment rules to the counting of income and
assets for a couple during the eligibility determination for
persons applying to section 1915(c) and (d) waivers, it does
not allow states to apply these rules to the eligibility
determination for 1915(e) waivers. In addition, Medicaid law
prohibits the application of spousal impoverishment rules for
the post-eligibility treatment of income for purposes of
1915(c), (d), and (e) waivers for those who qualify for
Medicaid through a state's medically needy eligibility pathway.
The Secretary of HHS may grant authority for states to apply
spousal impoverishment rules for eligibility and post-
eligibility determination of income under section 1115 waivers
which are sometimes used to offer HCBS instead of section
1915(c) waivers.
Committee Bill
The Committee Bill would amend Medicaid law to require
states to apply spousal impoverishment rules to applicants who
would receive HCBS under sections 1915(c), (d), (i), and (k)
(as added by section 1634 of the Committee Bill) and under
section 1115 of the Social Security Act. States would also be
required to apply spousal impoverishment rules to people who
would receive HCBS and apply for Medicaid through the medically
needy, 209(b) spend-down, and other eligibility pathways. This
provision would apply for a five-year period beginning on
January 1, 2014.
SEC. 1636. INCENTIVES FOR STATES TO OFFER HOME AND COMMUNITY-BASED
SERVICES AS A LONG-TERM CARE ALTERNATIVE TO NURSING HOMES
Present Law
Under Medicaid, states make available a broad range of
institutional and home and community-based services (HCBS) to
certain Medicaid enrollees. States are required to offer some
but not all of these services. For those services that are
offered, states may define them differently, using criteria
that place limits on the amount, duration, and scope of the
benefits. States may also restrict benefits to individuals who
demonstrate medical necessity for the benefit. Under Medicaid,
institutional services are generally defined as care provided
in nursing facilities, intermediate care facilities for people
with mental retardation (ICFs/MR), inpatient hospital services
and nursing facility services for persons aged 65 and older in
institutions for mental diseases. HSCBS is generally defined as
long-term services and supports offered under Medicaid's home
health state plan benefit, personal care state plan benefit,
case management or targeted case management benefit,
respiratory care benefit for persons who are ventilator-
dependent, PACE (All-Inclusive Care for the Elderly),
transportation benefit, HCBS state plan option, and Medicaid
HCBS 1915(c) and (d) waivers.
Medicaid is an open-ended Federal state matching program.
The Federal government's share of most Medicaid service costs
is determined by the Federal medical assistance percentage
(FMAP), which varies by state and is determined by a formula
set in statute. For Medicaid administrative costs, the Federal
share does not vary by state, and is generally 50 percent.
Committee Bill
States that spend less than 50 percent of their total
FY2009 Medicaid spending on non-institutionally-based long-term
services and supports and that meet certain other conditions
would receive an FMAP rate increase for the purpose of
providing new or expanded offerings of such services (including
expansion through offering such services to increased numbers
of enrollees). Among these states, those that spend less than
25 percent of their total Medicaid long-term care expenditures
for fiscal year 2009 on HCBS would set their target for such
spending at 25 percent for these services, to be achieved by
October 1, 2015. Such states would receive a five percentage
point increase in their FMAP. Other participating states would
set their target percentage for home and community-based
services as a percentage of their Medicaid long term services
and supports spending at 50 percent, to be achieved by October
1, 2015. These states would receive a two percentage point
increase.
To participate in the state balancing incentive payment
program, qualifying states would be required to submit an
application to the Secretary of HHS for approval. In addition
to other requirements, the state would have to provide a
description of the new and expanded non-institutionally-based
long-term services and supports financed under the state
balancing incentive payment program, and a description of the
eligibility requirements to access such services. States would
also be required to submit projected increases in service
utilization and state expenditures related to the expansion of
such services.
Among the conditions that would be required for qualifying
states to access the higher Federal matching funds under this
provision is that states would have to maintain their
eligibility standards, methodologies, or procedures for
determining eligibility for such services at levels that are no
more restrictive than those in place on December 31, 2010.
States would also be required to agree to use the additional
Federal funds paid to the state for the purposes of providing
new or expanded offerings of non-institutionally-based long-
term services and supports.
States would also be required to implement several
structural changes to their Medicaid programs no later than six
months after the state submits its application, including: (1)
the implementation of a ``no wrong door policy'' whereby
beneficiaries would be able to access all long-term services
and supports through a coordinated network, agency, or other
statewide system; (2) the development of conflict-free case
management services to assist beneficiaries with the transition
between institutional and non-institutional services the
development of a service plan; and (3) the development of core
standardized assessment instruments to determine eligibility
for non-institutionally-based long-term services and supports.
Additional data would be collected that would track person-
level service use, quality (across a core set of measures as
defined by the Secretary of HHS), and outcomes to measure
beneficiary and family caregiver experience and satisfaction
with services and other outcomes. No more than $3 billion in
Federal matching funds would be available to balancing
incentive states for the five-year period between October 1,
2011 and September 30, 2016.
SEC. 1636A. REMOVAL OF BARRIERS TO PROVIDING HOME AND COMMUNITY-BASED
SERVICES
Present Law
Under Medicaid, states make available a broad range of
institutional and home and community-based services (HCBS) to
certain Medicaid enrollees. States are required to offer some
but not all of these services. For those services that are
offered, states may define them differently, using criteria
that place limits on the amount, duration, and scope of the
benefits. States may also restrict benefits to individuals who
demonstrate medical necessity for the benefit. Under Medicaid,
institutional services are generally defined as care provided
in nursing facilities, intermediate care facilities for people
with mental retardation (ICFs/MR), inpatient hospital services
and nursing facility services for persons aged 65 and older in
institutions for mental diseases. HSCBS is generally defined as
long-term services and supports offered under Medicaid's home
health state plan benefit, personal care state plan benefit,
case management or targeted case management benefit,
respiratory care benefit for persons who are ventilator-
dependent, PACE (All-Inclusive Care for the Elderly),
transportation benefit, HCBS state plan option, and Medicaid
HCBS 1915(c) and (d) waivers.
Committee Bill
The Committee Bill would apply specific measures to remove
barriers to providing HCBS. These measures include: state-level
oversight and assessment of HCBS resources, coordination of
HCBS across all providers, and procedures for patients to file
complaints. States would also have the option to provide more
types of HCBS through a state plan amendment to individuals
with higher levels of need rather than through a waiver, and
states could extend full Medicaid benefits to individuals
receiving HCBS under a state plan amendment. States would not
have to comply with requirements for statewideness and would be
able to phase-in services and eligibility as they become
available, targeting the services to specific populations.
SEC. 1637. MONEY FOLLOWS THE PERSONS REBALANCING DEMONSTRATION
Present Law
Section 6071 of the Deficit Reduction Act of 2005 (DRA;
P.L. 109-171) established the Money Follows the Person (MFP)
Rebalancing Demonstration. The program authorizes the Secretary
of HHS to award competitive grants with the following
objectives: (1) increase the use of HCBS, rather than
institutional, long-term care services and supports; (2)
eliminate barriers that prevent or restrict the flexible use of
Medicaid funds to enable Medicaid-eligible individuals to
receive support for appropriate and necessary long-term care
services in the settings of their choice; (3) increase the
ability of the Medicaid program to assure continued provision
of HCBS to eligible individuals who choose to transition from
an institutional to a community setting; and (4) ensure that
procedures are in place to provide quality assurance for
eligible individuals receiving Medicaid HCBS and to provide for
continuous quality improvement in such services.
For individuals to participate in the MFP demonstration
project, they must: (1) reside in, and have been residing in
for not less than six months and not more than two years, an
inpatient facility; (2) receive Medicaid benefits for inpatient
services furnished by such inpatient facility; and (3) with
respect to whom a determination has been made that, but for the
provision of HCBS, the individual would continue to require the
level of care provided in an inpatient facility, among other
requirements.
The DRA also required the Secretary to provide for research
on, and to conduct a national evaluation of, the demonstration
project and to make a final report to the President and
Congress no later than September 30, 2011.
Committee Bill
The Committee Bill would extend the MFP Rebalancing
Demonstration through September 30, 2016 and would extend the
deadline for the submission of the final evaluation report to
September 30, 2016.
The Committee Bill would also change the eligibility rules
for individuals to participate in the demonstration project by
requiring that individuals reside in an inpatient facility for
not less than 90 consecutive days. The provision would also
exclude Medicare-covered short-term rehabilitative services
from the counting of the 90-day period.
The provision would take effect 30 days after this
enactment.
SEC. 1638. CLARIFICATION OF DEFINITION OF MEDICAL ASSISTANCE
Present Law
The term ``medical assistance'' means payment of part or
all of the cost of care and services identified in Federal
statute. This term is repeated throughout title XIX of the
Social Security Act.
Committee Bill
The Committee Bill would clarify that ``medical
assistance'' encompasses both payment for services provided and
the services themselves.
SEC. 1639. STATE ELIGIBILITY OPTION FOR FAMILY PLANNING SERVICES
Present Law
Family planning services and supplies are a mandatory
Medicaid benefit for individuals classified as categorically
needy and must be available to individuals of childbearing age
who are eligible under the state Medicaid plan and who desire
such services and supplies. States are permitted to provide
family planning services under Medicaid for populations who are
not otherwise eligible for traditional Medicaid (e.g., non-
pregnant, non-disabled childless adults) after a special waiver
has been filed and approved by the Secretary of HHS.
Committee Bill
The Committee Bill would add a new optional categorically-
needy eligibility group to Medicaid. This new group would be
comprised of (1) non-pregnant individuals with income up to the
highest level applicable to pregnant women covered under the
Medicaid or CHIP state plan, and (2) at state option,
individuals eligible under the standards and processes of
existing section 1115 waivers that provide family planning
services and supplies. Benefits would be limited to family
planning services and supplies (as per section 1905(a)(4)(C) of
the Social Security Act) but would also include related medical
diagnosis and treatment services.
The Committee Bill would also allow states to make a
presumptive eligibility determination for individuals eligible
for such services through the new optional eligibility group.
That is, states may enroll such individuals for a limited
period of time before completed Medicaid applications are filed
and processed, based on a preliminary determination by Medicaid
providers of likely Medicaid eligibility. Such individuals must
then formally apply for coverage within a certain timeframe to
continue receiving this benefit.
This provision would be effective upon enactment.
SEC. 1640. GRANTS FOR SCHOOL-BASED HEALTH CENTERS
Present Law
The Children's Health Insurance Program Reauthorization Act
of 2009 (P.L. 111-3,CHIPRA) defines ``school-based health
centers'' to include a health care clinic that: (1) is located
in or near a school facility of a school district or board of
an Indian tribe or tribal organization (I/T/U); (2) is
organized through school, community, and health provider
relationships; (3) is administered by a sponsoring facility
(e.g., hospital, public health department, community health
center, nonprofit health care agency, school or school system,
or a program administered by the Indian Health Service or
Bureau of Indian Affairs, or operated by an I/T/U; (4) provides
primary health services through health professionals to
children in accordance with state and local law, including laws
relating to licensure and certification; and (5) satisfies such
other requirements as a state may establish for the operation
of such a clinic.
Committee Bill
The proposal would establish a grant program to support the
operation of school-based health centers (as defined in
CHIPRA). The Committee Bill would appropriate $100 million for
such program. The use of any such funds for any service that is
not authorized or allowed by state or local law would be
prohibited. The Secretary would be authorized to establish
criteria and application procedures for the awarding of grants
in this program. The Secretary would be directed to give
preference in awarding grants to school-based health centers
serving a large population of children eligible for Medicaid or
CHIP.
SEC. 1641. THERAPEUTIC FOSTER CARE
Present Law
In general, therapeutic foster care (TFC) temporarily
places troubled youth (individuals with serious emotional and
behavioral issues) with specially trained foster families.
Although TFC programs vary, children/adolescents are generally
placed for six to seven months in a structured environment
where they are rewarded for positive social behavior and
penalized for disruptive and aggressive behavior. TFC also
separates repeat juvenile offenders from delinquent peers and
provides close home and school supervision.
TFC is not specifically addressed in Medicaid law, although
it sometimes is considered a service under the rehabilitative
services benefit, where states have the option to cover
rehabilitative services, including medical or remedial services
to reduce physical or mental disability and restoration of best
possible functional level.
Committee Bill
The Committee Bill would clarify that states would have the
option under Medicaid to cover TFC for Medicaid eligible
children in out-of-home placements. The provision also defines
TFC as a foster care program that provides certain services to
parents and children including: (1) structured daily activities
that develop, improve, monitor, and reinforce age-appropriate
social, communication, and behavioral skills; (2) crisis
intervention and crisis support services; (3) medication
monitoring; (4) counseling; and (5) case management services.
In addition, TFC would encompass specialized training for
foster parents and consultation with foster parents on the
management of children with mental illnesses and related health
and developmental problems.
SEC. 1642. SENSE OF THE SENATE REGARDING LONG-TERM SERVICES AND
SUPPORTS
Present Law
No provision.
Committee Bill
The Committee Bill would express the Sense of the Senate
that during the 111th session of Congress, Congress should
address long-term services and supports in a comprehensive way
that guarantees elderly and disabled individuals the care they
need. The provision would further express the Sense of the
Senate that long term services and supports should be made
available in the community as well as in institutions.
PART V--MEDICAID PRESCRIPTION DRUG COVERAGE
SEC. 1651. PRESCRIPTION DRUG REBATES
Present Law
Drug manufacturers must enter into rebate agreements with
the Secretary in order to sell their products to state Medicaid
programs. The rebate agreements require drug manufacturers to
provide Medicaid programs with rebates for drugs dispensed to
Medicaid beneficiaries, although selected drug purchases are
exempted from the Medicaid rebate agreements. Drug purchases
excluded from Medicaid's rebate agreements include drugs
dispensed by Medicaid managed care organizations (when
prescription drugs are included in the capitation agreement),
inpatient drugs, and drugs dispensed in physicians' or
dentists' offices. Some states exclude drug benefits from their
Medicaid MCO contracts. In these cases, Medicaid managed care
beneficiaries receive their prescribed drugs through Medicaid's
fee-for-service (FFS) delivery system, and states may claim
manufacturer rebates for these purchases.
States use a variety of service delivery mechanisms to
provide medical and related services to Medicaid beneficiaries.
Service delivery mechanisms range from full-risk capitation
agreements with managed care organizations (MCOs) to FFS. Under
full-risk capitation agreements, MCOs are paid a fixed amount
for all the care Medicaid beneficiaries will need, including
prescription drugs. Services provided to about 64 percent of
Medicaid beneficiaries are paid for on a partially capitated
basis, while approximately 38 percent of Medicaid
beneficiaries, primarily children and non-disabled adults,
receive services under full risk-based capitation contracts.
Under Medicaid rebate agreements, drug makers must report
to the Centers for Medicare & Medicaid Services (CMS) the
following two prices for each outpatient drug covered by
Medicaid: (1) the average manufacturer price (AMP), which is
the average price that manufacturers receive for sales to the
retail class of trade; and (2) the lowest transaction price, or
``best price,'' that manufacturers receive from sales to
private buyers of the drug. AMP and best price serve as
reference points for determining manufacturers' rebate
obligations.
For the purpose of determining rebates, Medicaid
distinguishes between two types of drugs: (1) single source
drugs (generally those still under patent) and innovator
multiple source drugs (drugs originally marketed under a patent
or original new drug application but for which generic
alternatives now exist); and (2) non-innovator, multiple source
drugs. Rebates for the first category of drugs--drugs still
under patent or those once covered by patents--have two
components: a basic rebate and an additional rebate. Medicaid's
basic rebate is determined by the larger of either a comparison
of a drug's quarterly AMP to the best price for the same
period, or a flat percentage (15.1 percent) of the drug's
quarterly AMP. Drug manufacturers owe an additional rebate when
their unit prices for individual products increase faster than
inflation.
A manufacturer's total per drug rebate amount is determined
by adding together the basic and the additional rebates, and
there is no limit on total rebate liability. Currently,
modifications to existing drugs--new dosages or formulations--
are generally considered new products for purposes of reporting
AMPs to CMS. As a result, drug makers sometimes can avoid
incurring additional rebate obligations by making slight
alterations to existing products, sometimes called line-
extensions, while significantly increasing the price on these
products. The line extension formulations of these products
receive a new, higher base period AMP. With a higher base
period AMP, drug manufacturers would likely owe less of an
additional Medicaid rebate.
Section 340B of the Public Health Service Act (PHSA),
requires pharmaceutical drug manufacturers that participate in
the Medicaid drug rebate program, to enter into a
pharmaceutical pricing agreement (PPA). Under these PPAs,
manufacturers agree to provide discounts on covered outpatient
drugs purchased by public health facilities, called covered
entities. Covered entities include hospitals owned or operated
by state or local government that serve higher percentages of
Medicaid beneficiaries and other publicly funded health clinics
and programs. Covered entities are forbidden to divert drugs
purchased under the 340B program to other organizations and are
prohibited from obtaining multiple discounts, including
participation in group purchasing arrangements.
Committee Bill
Beginning with drugs dispensed on January 1, 2010, the flat
rebate percentage used to calculate Medicaid's basic rebate for
single source and innovator multiple source outpatient
prescription drugs would increase from 15.1 percent to 23.1
percent, except that clotting factors and outpatient drugs
approved by the Food and Drug Administration exclusively for
pediatric indications would increase to 17.1 percent. Also on
January 1, 2010, the basic rebate percentage for multi-source,
non-innovator drugs would increase from 11 percent to 13
percent.
This provision also would require drug manufacturers to pay
rebates for drugs dispensed to Medicaid beneficiaries who
receive care from a Medicaid MCO (as defined in Medicaid law)
similar to the way rebates are required under Present Law for
FFS beneficiaries. Drug manufacturers would be required to pay
the MCO rebates directly to states, as they do under FFS.
Capitation rates paid to Medicaid MCOs under this provision
would be required to be based on the MCOs actual cost
experience (including the drug rebate) and would be subject to
Medicaid law covering actuarially sound rates. This provision
would not prohibit MCOs from negotiating with drug
manufacturers and wholesalers for rebates above Medicaid's
statutory rebates.
Any formularies established by Medicaid MCOs subject to
this provision may be based on the selection of these drugs by
a formulary committee as long as drugs excluded from the
formulary are available through prior authorization. Covered
outpatient drugs would be excluded from the requirements in
this provision when the drugs were dispensed by a health
maintenance organization or Medicaid MCO that received
discounts under section 340B of the PHSA.
The additional rebate for new formulations of existing
single source or innovator multiple source drugs would be the
greater of the basic rebate for the new product or the product
of: (1) the total number of units of each dosage form and
strength of the new formulation paid for by the state, (2) the
AMP of the new formation the drug, and (3) the highest
additional rebate (calculated as a percentage AMP) for any
strength of the original single source or innovator multiple
source drug. New formulations of orphan drugs would be
exempted, regardless of whether the market exclusivity period
has expired, so the additional rebate obligation for orphan
drugs would be calculated on the new product's baseline AMP as
it is under Present Law.
In addition, this proposal would limit the total rebate
liability on each dosage form and strength an individual single
source or innovator multiple source drug to no more than 100
percent of AMP for that drug. Other features of the drug rebate
program, such Medicaid's best price provision, would remain
unchanged.
SEC. 1652. ELIMINATION OF EXCLUSION OF COVERAGE OF CERTAIN DRUGS
Present Law
Medicaid law excludes 11 drug classes, including
barbiturates, benzodiazepines, and smoking cessation products.
States have the option to cover these drugs, and most states
cover barbiturates, benzodiazepines, and smoking cessation
drugs. States receive Federal financial participation (FFP)
when they cover these drugs. Coverage of prescription drugs for
full benefit dual eligibles (individuals who are eligible for
both Medicare and Medicaid) was transferred from state Medicaid
programs to Medicare when Part D was implemented in January
2006.
Barbiturates and benzodiazepines were excluded from Part D.
However, under the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA, P.L. 110-271), Medicare
prescription drug plans and Medicare Advantage plans will be
required to include benzodiazepines in their formularies for
prescriptions dispensed beginning January 1, 2013. Barbiturates
also will be required to be included in Medicare formularies
for the indications of epilepsy, cancer, or chronic mental
health disorder.
Committee Bill
Beginning with drugs dispensed on January 1, 2014, the
Committee Bill would remove smoking cessation drugs,
barbiturates, and benzodiazepines from Medicaid's excluded drug
list.
SEC. 1653. PROVIDING ADEQUATE PHARMACY REIMBURSEMENT
Present Law
Medicaid requires the Secretary to establish upper limits
on the Federal share of payments for prescription drug
acquisition costs. These limits are intended to encourage
substitution of lower-cost generic equivalents for more costly
brand-name drugs. When applied to multiple source drugs, those
limits are referred to as Federal upper payment limits (FULs).
FULs apply to aggregate state expenditures for each drug. CMS
calculates FULs and periodically publishes these prices. Under
the Deficit Reduction Act of 2005 (DRA, P.L. 109-171), new FULs
issued after January 2007 were to equal 250 percent of the
average manufacturer price (AMP) of the least costly
therapeutic equivalent (excluding prompt pay discounts). AMP is
defined in statute to be the average price paid to the
manufacturer by wholesalers for drugs distributed to the retail
pharmacy class of trade. Manufacturers are required to report
AMP to CMS. Present Law allows the Secretary to contract for a
survey of retail prices that represent a nationwide average of
consumer prices for drugs, net of all discounts and rebates.
National pharmacy associations legally challenged a
proposed rule CMS issued in 2007 on implementation of the DRA
provision covering AMP pricing. The court issued an injunction
on December 19, 2007 which prohibited CMS from setting FULs for
Medicaid covered generic drugs based on AMP, and from
disclosing AMP data except within HHS or to the Department of
Justice (DOJ). The injunction is still in effect.
The Medicare Improvements for Patients and Providers Act of
2008 (MIPPA, P.L. 110-275) imposed a moratorium on the use of
AMPs to set FULs until October 1, 2009 so that Congress could
determine whether to amend the statutory definition of AMP. In
the interim, FULs are set based on the pre-DRA methodology. The
FUL is set at 150 percent of the lowest published price (i.e.,
wholesale acquisition cost, average wholesale price or direct
price) for each dosage and strength of generic drug products.
Committee Bill
The proposal would require the Secretary to calculate the
FUL as no less than 175 percent of the weighted average
(determined on the basis of utilization) of the most recently
reported monthly AMPs for pharmaceutically and therapeutically
equivalent multiple source drugs available nationally through
commercial pharmacies. The Secretary would be required to
implement a smoothing process for average manufacturer prices,
which would be similar to the process used in determining the
average sales price for drugs and biologics under the Medicare
program.
This provision would clarify the definition of AMP to
include sales by (1) wholesalers for drugs distributed to
retail community pharmacies and (2) retail community pharmacies
that purchase drugs directly from manufacturers. In addition,
AMP would exclude customary prompt pay discounts extended to
wholesalers and service fees paid by manufacturers to
wholesalers or retail pharmacies. Further, AMP would exclude
reimbursement by manufacturers for recalled, damaged, expired,
or otherwise unsalable returned goods reimbursement.
Moreover, AMP would exclude payments received from and
rebates or discounts provided to pharmacy benefit managers,
MCOs, health maintenance organizations, insurers, hospitals,
clinics, mail order pharmacies, long-term care providers,
manufacturers, or any other entity that does not conduct
business as a wholesaler or retail community pharmacy. This
provision would further clarify that the following manufacturer
price concessions would be included in the AMP of covered
outpatient drugs: any other discounts, rebates, payments, or
other financial transactions that are received by, paid by, or
passed through to retail community pharmacies.
The provision also would expand the disclosure requirement
to include monthly weighted average AMPs and retail survey
prices. The survey of retail prescription drugs prices would be
modified to apply to retail community pharmacies.
The provisions in this subsection would take effect on the
first day of the first calendar year quarter after enactment of
the Committee Bill, regardless of whether final regulations to
implement these provisions have been promulgated.
SEC. 1654. STUDY OF BARRIERS TO APPROPRIATE UTILIZATION OF GENERIC
MEDICINE IN MEDICAID
Present Law
No provision.
Committee Bill
The Government Accountability Office (GAO) would be
required to conduct a study of state laws that have a negative
impact on generic drug utilization in Federal health care
programs. GAO's study would consider at least the impact of
following restrictions: limits on pharmacists' ability to
provide a generic drug substitute for a prescribed name brand
drug and carve-outs of certain drug classes from generic
substitution as well as any other relevant restrictions. GAO
would be required to submit its report to Congress by April 1,
2012.
PART VI--MEDICAID DISPROPORTIONATE SHARE PAYMENTS
SEC. 1655. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS
Present Law
States pay disproportionate share (DSH) adjustments to
hospitals serving a disproportionate share of low-income
individuals and Medicaid beneficiaries.
Special rules apply to ``low DSH states,'' comprised of
states in which total DSH payments for FY2000 were less than
three percent of the state's total Medicaid spending on
benefits. DSH allotments for such states were raised for FY2004
through FY2008 to an amount that is 16 percent above the prior
year's amount. For FY2009 forward, the allotment for low DSH
states for each year will be equal to the prior year amount
increased by the change in the CPI-U, as for all other states.
States cannot obtain Federal matching payments for DSH that
exceed the state's DSH allotment.
As a condition of receiving Federal Medicaid payments
beginning FY2004, states are required to submit to the
Secretary of HHS a detailed annual report and an independent
certified audit on their DSH payments to hospitals.
States have flexibility in establishing the designation of
DSH hospitals, but must include all hospitals meeting either of
two minimum criteria: (1) a Medicaid inpatient utilization rate
in excess of one standard deviation above the mean rate for the
state, or (2) a low-income patient utilization rate of 25
percent. States may not include hospitals with a Medicaid
utilization rate below one percent.
States also have flexibility in calculating DSH payment
amounts to hospitals, but must pay DSH hospitals at least: (1)
an amount calculated using the Medicare DSH payment
methodology, or (2) an amount calculated using a payment
methodology that increases each hospital's adjustment as the
hospital's Medicaid inpatient utilization rate exceeds the
statewide average. DSH hospital payments cannot exceed a
hospital-specific cap, set at 100 percent of the costs of
providing inpatient and outpatient services to Medicaid and
uninsured patients, less payments received from Medicaid and
uninsured patients for public hospitals.
Five states and the District of Columbia have used at least
a portion of their DSH allotment to expand Medicaid eligibility
through a section 1115 waiver.
Committee Bill
State DSH allotments would remain intact as under Present
Law until a state trigger is tripped. The trigger would be
tripped the first fiscal year after FY2012 for which a state's
uninsured rate, as measured by the Census Bureau's American
Community Survey, decreases by at least 50 percent, compared to
an initial uninsured rate for FY2009. Once the trigger is
tripped, low DSH state allotments would be decreased by 25
percent. DSH allotments for other states would be decreased by
50 percent.
Each year thereafter, if the state's rate of uninsurance
decreases further, the state's DSH allotment would be further
reduced by a percentage equal to the product of the percentage
reduction in uninsurance and 35 percent. For low DSH states,
the percentage reduction would be multiplied by 17.5 percent.
These percentage reductions would not be applied to any portion
of a state's DSH allotment approved by the Secretary to cover
costs of providing Medicaid or other health coverage under a
waiver in effect on July 2009. For FY2013 forward, in no case
would a state's DSH allotment be less than 35 percent of the
state's allotment in FY2012, increased by the percentage change
in the CPI-U for each previous year occurring before the fiscal
year.
PART VII--DUAL ELIGIBLES
SEC. 1661. FIVE-YEAR PERIOD FOR DEMONSTRATION PROJECTS
Present Law
Some elderly individuals qualify for health insurance under
both Medicare and Medicaid. Based on a report published in
February 2009, it was estimated that 7.9 million individuals
were dually eligible (duals) for both Medicare and Medicaid in
2005. These dual eligible individuals qualify for Medicare Part
A and/or Parts B and D and, because they are elderly and have
limited income and assets, also are eligible for Medicaid.
Under Medicaid, states may apply to the Secretary to waive
some Medicaid requirements, to use Medicaid funds to target
otherwise ineligible populations, or to use innovative methods
for delivering or paying for Medicaid services. Section 1115 of
the Social Security Act allows for the waiver of any provision
of Medicaid law for demonstrations likely to assist in
promoting the objectives of the program. Demonstration waivers
have traditionally been granted for research purposes, like
testing a program improvement (such as a new reimbursement
methodology), and run for a limited period. Some demonstration
waivers have been approved under both Medicare and Medicaid
authorities. These Medicare and Medicaid demonstrations have
mostly been statewide initiatives that have coordinated service
delivery, benefit packages, and reimbursement for dual
eligibles.
The Office of Management and Budget (OMB) reviews all
section 1115 waivers and, since 1982, has required waivers to
be budget neutral (there are no statutory requirements for
determining budget neutrality). Section 1115 waivers do not
have a set duration, but larger demonstrations might be
extended to accommodate more startup time and more thorough
evaluation.
Committee Bill
The Committee Bill would clarify that Medicaid waivers for
coordinating care for dual eligibles could be authorized for as
long as five years.
SEC. 1662. PROVIDING FEDERAL COVERAGE AND PAYMENT COORDINATION FOR LOW-
INCOME MEDICARE BENEFICIARIES
Present Law
No provision.
Committee Bill
The Committee Bill would require the Secretary to establish
by March 1, 2010 a Federal Coordinated Health Care Office
(CHCO) within CMS. The CHCO director would report directly to
the Administrator of CMS. The purpose of the CHCO would be to
bring together officials of the Medicare and Medicaid programs
at CMS to (1) more effectively integrate benefits under the
Medicare and Medicaid programs, and (2) improve the
coordination between the Federal and state governments for
individuals eligible for benefits under both Medicare and
Medicaid (dual eligibles) to ensure that dual eligibles have
full access to the items and services to which they are
entitled. The CHCO would have the following goals:
Providing dual eligible individuals full access to
the benefits to which such individuals are entitled under the
Medicare and Medicaid programs.
Simplifying the processes for dual eligible
individuals to access the items and services they are entitled
to under the Medicare and Medicaid programs.
Improving the quality of health care and long-term
services for dual eligible individuals.
Increasing beneficiary understanding of and
satisfaction with coverage under the Medicare and Medicaid
programs.
Eliminating regulatory conflicts between rules
under the Medicare and Medicaid programs.
Improving care continuity and ensuring safe and
effective care transitions.
Eliminating cost-shifting between the Medicare and
Medicaid programs and among related health care providers.
Improving the quality of performance of providers
of services and suppliers under the Medicare and Medicaid
programs.
The Committee Bill would establish the following specific
responsibilities for the CHCO:
Providing states, specialized Medicare Advantage
plans for special needs individuals (special needs plans, as
defined in section 1859(b)(6) of the Social Security Act),
physicians, and other relevant entities or individuals with the
education and tools necessary for developing programs that
align Medicare and Medicaid benefits and programs for dual
eligible individuals.
Supporting state efforts to coordinate and align
acute care and long-term care services for dual eligible
individuals with other items and services furnished under the
Medicare program.
Providing support to states and CMS for
coordination of contracting and oversight for the integration
of the Medicare and Medicaid programs that support the goals
described above.
The Committee Bill would require the Secretary to submit an
annual report to Congress under the annual budget transmittal.
The annual report would contain recommendations for legislation
that would improve care coordination and benefits for dual
eligible individuals.
PART VIII--MEDICAID QUALITY
SEC. 1671. ADULT HEALTH QUALITY MEASURES
Present Law
The Children's Health Insurance Program Reauthorization Act
(CHIPRA, P.L. 111-3) included several provisions designed to
improve the quality of care provided to children under Medicaid
and the Children's Health Insurance Program (CHIP). The law
directs the Secretary of HHS to develop child health quality
measures, a standardized format for reporting information, and
procedures to encourage states to voluntarily report on the
quality of pediatric care in these two programs. Examples of
these initiatives include: (1) grants and contracts to develop,
test, update and disseminate evidence-based measures, (2)
demonstrations to evaluate promising ideas for improving the
quality of children's health care under Medicaid and CHIP, (3)
a demonstration to develop a comprehensive and systematic model
for reducing childhood obesity, and (4) a program to encourage
the creation and dissemination of a model electronic health
record format for children enrolled in these two programs. The
Federal share of the costs associated with developing or
modifying existing state data systems to store and report child
health measures is based on the matching rate applicable to
benefits (FMAP) rather than one of the typically lower matching
rates applied to different types of administrative expenses.
CHIPRA also improved the availability of public information
regarding enrollment of children in Medicaid and CHIP. Several
reporting requirements are added to states' annual CHIP
reports, including, for example, data on eligibility criteria,
access to primary and specialty care, and data on premium
assistance for employer-sponsored coverage. CHIPRA also
required the Secretary to improve the timeliness of the
enrollment and eligibility data for Medicaid and CHIP children
contained in the Medicaid Statistical Information System (MSIS)
based on annual state reported enrollment and claims data and
maintained by CMS.
Committee Bill
Similar to the quality provisions enacted in CHIPRA, the
Committee Bill would direct the Secretary of HHS, in
consultation with the states, to identify and publish a
recommended set of health care quality measures specific to
adults who are eligible for Medicaid, as well as disseminate
best practices among states for measuring and reporting on the
quality of care for Medicaid adults. The Committee Bill would
establish the Medicaid Quality Measurement Program which would
expand upon existing quality measures, identify gaps in current
quality measurement, establish priorities for the development
and advancement of quality measures and consult with relevant
stakeholders. The Secretary would regularly report to Congress
the progress made in identifying quality measures and
implementing them in each state's Medicaid program. States
would receive grant funding to support the development and
reporting of quality measures. For each year from FY2010
through FY2014, $60 million would be appropriated for this
effort, and would remain available until expended.
SEC. 1672. PAYMENT ADJUSTMENT FOR HEALTH CARE-ACQUIRED CONDITIONS
Present Law
Subject to Federal rules, states generally establish their
own payment policies, rates, and reimbursement methodologies
for Medicaid providers, including inpatient facilities such as
hospitals, nursing facilities, and intermediate care facilities
for the mentally retarded. Federal regulations require that
Medicaid provider rates be sufficient to enlist enough
providers so that covered services are available at least to
the extent that comparable care and services are available to
the general population within that geographic area.
In Medicare, hospitals are reimbursed under a prospective
payment system (PPS), where each admission is classified into a
Medicare severity adjusted diagnosis-related group (MS-DRG)
based on the patient's diagnosis and procedures performed. Each
MS-DRG has a predetermined reimbursement amount. In general, a
hospital is paid the same amount for an MS-DRG regardless of
how long patients stay in the hospital or what is required to
treat the patient. In some situations under Medicare's PPS,
patients with certain complicating conditions could be
reclassified into different MS-DRGs where the hospital would
receive a higher payment.
To avoid additional hospital payments for complications
that were acquired during patients' admissions, the Deficit
Reduction Act of 2005 (DRA, P.L. 109-171) required the
Secretary to initiate a hospital acquired condition (HAC)
program for Medicare. In creating the HAC program, the
Secretary was to select conditions that: (1) were high cost,
high volume, or both; (2) were identified as complicating
conditions or major complicating conditions; and (3) were
reasonably preventable through the application of evidenced-
based guidelines. Starting October 1, 2007, CMS required
hospitals to report whether Medicare patients had certain
conditions when they were admitted. Beginning October 1, 2008,
if the HAC conditions identified by the Secretary were coded as
present at admission, the conditions would not be considered to
be acquired during the patient's hospital stay, and the case
could not receive additional MS-DRG payment. In addition to the
HAC policy, in January 2009, CMS issued three national coverage
determinations that precluded Medicare from paying any amount
for certain serious preventable medical care errors.
For Medicaid, CMS issued guidance to States in July 2008 to
help states appropriately align Medicaid inpatient hospital
payment policies with Medicare's HAC payment policies. In the
guidance, CMS indicated that for patients eligible for both
Medicare and Medicaid (dual eligibles), hospitals that were
denied payment under Medicare might attempt to bill Medicaid
for HACs as the secondary payer. CMS instructed state Medicaid
agencies to deny payment when dual eligible beneficiaries
acquired HACs during a hospitalization. CMS also encouraged
Medicaid agencies to implement policies to deny payment when
other Medicaid beneficiaries acquired HACs during a
hospitalization. CMS directed states to several Medicaid
authorities to deny payment appropriately for HACs, but unlike
Medicare, DRA did not specifically apply the HAC initiative to
Medicaid. Several states have developed and implemented
policies to prohibit Medicaid payments for conditions acquired
during the course of care.
Committee Bill
Under the Committee Bill, the Secretary would be required
to issue regulations to be effective July 1, 2011, that would
prohibit Federal payments to states for Medicaid services
related to health care-acquired conditions. These regulations
would be required to ensure that the prohibition on payment for
health care-acquired conditions would not affect the care or
services provided to Medicaid beneficiaries. The Secretary
would define health care-acquired conditions, consistent with
Medicare's definition of hospital acquired conditions, but
would not be limited to conditions acquired in hospitals. In
implementing the requirements in this subsection, the Secretary
may elect to apply to state Medicaid plans (or waivers) the
regulations used by the Medicare program for prohibiting
payments for health care-acquired conditions. The Secretary
also would be required to identify current state practices that
prohibit payments for certain health care-acquired conditions.
SEC. 1673. DEMONSTRATION PROJECT TO EVALUATE INTEGRATED CARE AROUND A
HOSPITALIZATION
Present Law
No provision.
Committee Bill
The Secretary would be required to establish a
demonstration project under Medicaid to evaluate the use of
bundled payments to hospitals and physicians for integrated
care delivered to a Medicaid beneficiary during a
hospitalization. The project would take place in up to eight
states, as determined by the Secretary and based on
consideration of the potential to lower costs under Medicaid
while improving care for beneficiaries. Under the project,
selected states could target particular categories of
beneficiaries (subject to certain conditions), those with
certain diagnoses, or those in particular geographic regions.
The project would be required to focus on those conditions in
which opportunity exists for service providers and suppliers to
improve the quality of care furnished to Medicaid beneficiaries
while reducing total expenditures under the state's Medicaid
program.
Participating states would be required to specify the one
or more episodes of care the state proposes to address, the
services to be included in the bundled payments, among others.
The Secretary may modify the episodes of care and services to
be included in the bundled payment and vary such factors among
the different participating states. The Secretary would also be
required to ensure that payments are adjusted for severity of
illness and other characteristics, among others requirements.
Medicaid beneficiaries would not be liable for any additional
cost-sharing than if care had not been subject to payment under
the demonstration project.
Hospitals participating in the project would be required to
have, or to establish, robust discharge planning programs to
ensure that beneficiaries are appropriately placed in, or have
access to, post-acute care. Beneficiaries could not be provided
fewer items and services under the project than they would have
been provided. The Secretary would be given the authority to
waive statutory requirements to accomplish the goals of this
demonstration, to ensure beneficiary access to acute and post-
acute care, and to maintain quality of care. Each participating
state would be required to provide the Secretary with relevant
data necessary to monitor outcomes, costs, and quality, and to
evaluate the rationales for the selection of the episodes of
care and services specified by the state.
No later than one year after the conclusion of the
demonstration project, the Secretary would be required to
submit a report to Congress on the project's results.
SEC. 1674. MEDICAID GLOBAL PAYMENT SYSTEM DEMONSTRATION PROJECT
Present Law
No provision.
Committee Bill
The Secretary, in coordination with the CMS Innovation
Center (established under section 3021 of the Committee Bill),
would be required to establish and evaluate the Medicaid Global
Payment System Demonstration Project, which would create an
alternative payment methodology for safety net hospital
systems. Participating states would be required to adjust the
payments made to an eligible safety net hospital system or
network from a fee-for-service payment structure to a global,
capitated payment model. The Secretary would select no more
than five states to participate in the demonstration project,
which would operate during fiscal years 2010 to 2012. The
Innovation Center would be required to test and evaluate the
demonstration project to examine any changes in health care
quality outcomes and spending by the eligible safety net
hospital systems or networks. The Committee Bill would exempt
the demonstration project from budget-neutrality requirements
(demonstration projects cannot result in a higher level of
Federal spending than otherwise would have been the case under
the state Medicaid program if the demonstration project were
not implemented) during the initial testing period by the
Innovation Center. The Secretary would be required to submit a
report, not later than one year after the date of completion of
the demonstration project, to Congress that presents the
findings of the Innovation's Center evaluation and testing,
together with recommendations for such legislative and
administrative action as the Secretary determines appropriate.
SEC. 1675. PEDIATRIC ACCOUNTABLE CARE ORGANIZATION DEMONSTRATION
PROJECT
Present Law
No provision.
Committee Bill
The Committee Bill would establish a demonstration project,
which would authorize participating states to allow pediatric
medical providers who meet certain criteria to be recognized as
accountable care organizations (ACOs) for the purposes of
receiving incentive payments, in the same manner as an ACO
would be recognized and provided with incentive payments under
Medicare as per section 3022 of the Committee Bill.
In consultation with states and pediatric providers, the
Secretary would be required to develop performance guidelines
to ensure that the quality of care delivered to individuals by
the ACOs would be at least as high as it would have been absent
the demonstration project. Participating States, in
consultation with the Secretary, would be required to establish
an annual minimum level of savings in expenditures for items
and services covered under Medicaid and CHIP that would need to
be achieved by an ACO in order for the ACO to receive an
incentive payment. ACOs that meet the performance guidelines
established by the Secretary and achieve savings greater than
the annual minimal savings level established by the state would
receive an incentive payment for such year equal to a portion
(as determined appropriate by the Secretary) of the amount of
such excess savings. The Secretary would have the authority to
establish an annual cap on incentive payments for an ACO.
SEC. 1676. MEDICAID EMERGENCY PSYCHIATRIC DEMONSTRATION PROJECT
Present Law
Medicaid does not reimburse for treatment provided to
patients receiving care in institutions for mental disease
(IMD), except to those patients under age 21 receiving
inpatient psychiatric care and individuals age 65 and over.
IMDs are defined under Medicaid statute as hospitals, nursing
facilities, or other institutions of more than 16 beds that are
primarily engaged in providing diagnosis and treatment of
persons with mental diseases, including medical attention,
nursing care and related services.
Federal law requires that hospital-based IMDs which have
emergency departments provide a medical screening examination
to individuals for whom an examination or treatment for a
medical condition is requested. In such cases, the hospital-
based IMD must provide for an appropriate medical screening
examination to determine whether or not a medical emergency
exists. If a medical emergency exists, then the hospital-based
IMD must provide, within the staff and facilities available at
the hospital, for further medical examination and treatment as
may be required to stabilize the medical condition, or to
transfer the individual to another medical facility, subject to
certain limitations.
Committee Bill
The Secretary of HHS would be required to establish a
three-year Medicaid demonstration project for up to eight
states in which eligible states would be required to reimburse
certain IMDs that are not publicly owned or operated for
services provided to Medicaid eligibles between the ages of 21
and 65 who are in need of medical assistance to stabilize a
psychiatric emergency medical condition.
The Secretary would be required to establish a mechanism
for in-stay review to determine whether or not the patient has
been stabilized. This mechanism would commence before the third
day of the inpatient stay. The term ``stabilized'' would mean
that the psychiatric emergency medical condition no longer
exists with respect to the individual and that the individual
is no longer dangerous to his or her self or others.
Eligible states would be selected by the Secretary based on
geographic diversity and would manage the provision of these
benefits under the project through utilization review,
authorization or management practices, or the application of
medical necessity and appropriateness criteria applicable to
behavioral health.
$75 million would be appropriated for fiscal year 2010.
Such funds would remain available for obligation through
December 31, 2012.
To implement this demonstration, the Secretary would be
required to waive requirements pertaining to limitations on
payments for serving individuals under age 65 in IMDs,
statewideness, and comparability.
The Secretary would be required to submit annual reports to
Congress on the progress of the demonstration project, as well
as a final report that includes an evaluation of the
demonstration's impact on the functioning of the health and
mental health service system and on Medicaid enrollees.
PART IX--MEDICAID AND CHIP PAYMENT AND ACCESS COMMISSION
SEC. 1681. MACPAC ASSESSMENT OF POLICIES AFFECTING ALL MEDICAID
BENEFICIARIES
Present Law
The Children's Health Insurance Program Reauthorization Act
(CHIPRA, P.L. 111-3) established a new Federal commission
called the Medicaid and CHIP Payment and Access Commission, or
MACPAC. This commission will review program policies under both
Medicaid and CHIP affecting children's access to benefits,
including: (1) payment policies, such as the process for
updating fees for different types of providers, payment
methodologies, and the impact of these factors on access and
quality of care; (2) the interaction of Medicaid and CHIP
payment policies with health care delivery generally; and (3)
other policies, including those relating to transportation and
language barriers.
Beginning in 2010, by March 1 of each year, the commission
will submit a report to Congress containing the results of
these reviews and MACPAC's recommendations regarding these
policies. Also beginning in 2010, by June 1 of each year, the
commission will submit another report to Congress containing an
examination of issues affecting Medicaid and CHIP, including
the implications of changes in health care delivery in the U.S.
and in the market for health care services.
MACPAC must also create an early warning system to identify
provider shortage areas or other problems that threaten access
to care or the health care status of Medicaid and CHIP
beneficiaries.
Committee Bill
The Committee Bill would clarify the topics to be reviewed
by MACPAC including Federal Medicaid and CHIP regulations,
additional reports of state-specific data, as well as other
changes. The provision would also authorize $11 million for
MACPAC for FY2010. Of this total, $9 million would come from
the Treasury out of any funds not otherwise appropriated, and
$2 million would come from CHIP funds, and would remain
available until expended.
The Committee Bill also expands MACPAC's mission to include
assessment of adult services in Medicaid, including for dual
eligbles, and more detailed reporting requirements for states
and Congress. This assessment would be done in consultation
with the Medicare Payment Advisory Commission (MedPAC), and
with respect to recommendations regarding dual eligibles, in
consultation with the Federal Coordinated Health Care Office
(established in section 1662 of the Committee Bill).
In addition, in 2012 and thereafter, to the extent
feasible, MedPAC shall report aggregate Medicaid and commercial
trends in spending, utilization, and financial performance for
providers where, on an aggregate national basis, a significant
portion of revenue and/or services is associated with Medicaid.
Where appropriate, this review shall be done in consultation
with the Medicaid and CHIP Payment and Access Commission
(MACPAC).
PART X--AMERICAN INDIANS AND ALASKA NATIVES
SEC. 1691. SPECIAL RULES RELATING TO INDIANS
Present Law
No provision for cost sharing in a state exchange. By
regulation (42 CFR 136.61), the Indian Health Service (IHS) is
payer of last resort for contract health services. Section 206
of the Indian Health Care Improvement Act (IHCIA, P.L. 94-437)
specifies that the Indian Health Service (IHS), and an Indian
Tribe or a tribal organization (I/T/U) has the right to recover
reimbursements from third parties for the provision of health
services. These specified Indian entities can recover costs of
health services in cases where the individuals would have been
reimbursed or paid the costs of services if services had been
provided by a non-governmental provider. Section 206 also
specifies that these specified Indian entities have the right
to recover reimbursements from state worker's compensation and
state no-fault automobile insurance programs and prohibits the
Federal government's right of recovery in instances where
health services provided were covered under a self-insurance
plan that was funded by an I/T/U.
Sections 1395qq and 1396j of IHCIA permit IHS and I/T/Us to
receive reimbursements from Medicare and Medicaid and section
2105(c)(6)(B) of the Social Security Act permitted these
entities to receive reimbursements from CHIP.
The Children's Health Insurance Program Reauthorization Act
of 2009 (CHIPRA, P.L. 111-3) created a state option to
facilitate Medicaid enrollment. Under CHIPRA, states can rely
on a finding from specified ``Express Lane'' agencies (e.g.,
those that administer programs such as Temporary Assistance for
Needy Families, Medicaid, CHIP, and Food Stamps) to determine
whether a child under age 19 (or an age specified by the state
not to exceed 21 years of age) has met one or more of the
eligibility requirements necessary to determine an individual's
initial eligibility, eligibility redetermination, or renewal of
eligibility for medical assistance under Medicaid or CHIP. With
family consent, states will have the option to institute
automatic enrollment through an Express Lane eligibility
determination. Under Present Law, Indian entities including IHS
and I/T/Us are not eligible ``Express Lane'' agencies.
Section 1139 of the Social Security Act, as amended by
CHIPRA, encourages states to take steps to enroll Indians
residing in or near reservations in Medicaid and CHIP. These
steps may include outstationing eligibility workers; entering
into agreements with Indian entities to provide outreach;
education regarding eligibility, benefits, and enrollment; and
translation services. The Secretary must facilitate cooperation
between states and Indian entities in providing benefits to
Indians under Medicaid and CHIP. This section defined Indians
in terms of section 4 of the Indian Health Care Improvement
Act. Under this definition, an Indian is a person who is a
member of a Federally recognized tribe, band, nation, or other
organized group or community, including any Alaska Native
village or group, or regional or village corporation, as
defined in or established pursuant to the Alaska Native Claims
Settlement Act (P.L. 92-203).
Committee Bill
The Committee Bill would prohibit cost-sharing for Indians
enrolled in a qualified health benefit plan in the individual
market through a state exchange. The provision would also
specify that nothing in the Committee Bill or the amendments
made by the Committee Bill would affect the right of IHS and I/
T/Us to recover reimbursements from a third-party in accordance
with section 206 of IHCIA.
The Committee Bill would add IHS and I/T/Us to the list of
agencies that could serve as an ``Express Lane'' agency able to
determine Medicaid and CHIP eligibility.
SEC. 1692. ELIMINATION OF SUNSET FOR REIMBURSEMENT FOR ALL MEDICARE
PART B SERVICES FURNISHED BY CERTAIN INDIAN HOSPITALS AND CLINICS
Present Law
Medicare covers specified Part B services provided by, or
at the direction of, a hospital or ambulatory care clinic
(whether provider-based or free-standing) that is operated by
IHS or an I/T/U. These services include physician services,
health practitioners (physician assistants, nurse anesthetists,
certified nurse-midwives, clinical social workers, clinical
psychologists, and registered dietitians or nutrition
professionals) and outpatient physical therapy services
provided by physical or occupational therapists. Section 630 of
the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA, P.L. 108-173) instituted a five-year
expansion of the items and services covered under Medicare Part
B when furnished in, or at the direction of, IHS or I/T/U
hospitals or ambulatory care clinics, applying to items and
services on or after January 1, 2005. The current five-year
reimbursement extension will expire on January 1, 2010.
Committee Bill
The Committee Bill would remove the sunset and allow IHS,
IT, and TO services to continue to be reimbursed by Medicare
Part B indefinitely beginning January 1, 2010.
Subtitle H--Addressing Health Disparities
SEC. 1701. STANDARDIZED COLLECTION OF DATA
Present Law
The Office of Management and Budget (OMB) Directive 15
outlines standards for the collection of race and ethnicity
data on Federally-sponsored surveys, administrative forms, and
other records. OMB Directive 15 does not mandate collection of
such data. Generally, Federal agencies and Federally-sponsored
entities must use the Directive 15 categories when collecting
race and ethnicity data. The requirements may be waived if an
organization can demonstrate that it is unreasonable to use the
categories in a particular situation, or if it can be shown
that race and ethnicity data are not critical to the
administration of the program seeking this information. OMB
standards do not apply to state and municipal public health
departments or to Medicaid. While the standards do apply to the
Children's Health Insurance Program (CHIP), they are not
binding on states that opt to use CHIP funding to finance a
Medicaid expansion or that employ a combined approach.
Data on race and ethnicity can be collected by asking
either one or two questions. When data on race and ethnicity
are collected in two questions, Directive 15 requires using a
minimum of five racial categories (White, Black or African
American, American Indian or Alaska Native, Asian, Native
Hawaiian or Other Pacific Islander) and two ethnic categories
(``Hispanic or Latino'' or ``not Hispanic or Latino'') and the
ethnicity question must be asked first. Alternately, if data
are collected by one question, a minimum of six categories must
be used, including the five listed above, as well as ``Hispanic
or Latino.'' Data collection instruments may include additional
categories such as Mexican-American, Chicano, Puerto Rican,
Cuban, or Filipino, as long as these categories can be
aggregated to the standard categories. When individuals are
asked to self-identify (OMB's preferred method), Directive 15
also requires that respondents be given the opportunity to
report multiple races in response to a single question.
Including ``multiracial'' as an option is not acceptable.
Finally, persons who identify as Alaska Native should also be
asked for their tribal affiliation.
While OMB Directive 15 does not address data on primary
language, CMS mandates that this information be reported for
Medicaid beneficiaries. CMS does not require the collection of
primary language data for CHIP enrollees, their parents, or
legal guardians. Present Law does not require the collection of
data on access to care for disabled individuals for any Federal
health care program or other Federally-sponsored entities.
Committee Bill
The Committee Bill would require the Secretary, in
consultation with the Director of the Office of Personnel
Management, the Secretary of Defense, the Secretary of Veterans
Affairs, and the head of other appropriate Federal agencies, to
establish procedures to ensure that, beginning on January 1,
2011, all data collected on race, ethnicity, sex, and primary
language under Federal and state health care programs complies
with: (1) OMB Directive 15; (2) OMB guidance for Federal
agencies that collect or use aggregate data on race; and (3)
OMB guidance for Federal agencies for the allocation of
multiple race responses for use in civil rights monitoring and
enforcement.
The Committee Bill would also require the Secretary, in
consultation with the above-mentioned agencies, to establish
procedures, by January 1, 2012, for the CMS Administrator to
collect data under Federal and state health care programs to
assess access to care and treatment for individuals with
disabilities. The section would require such procedures to
include surveying health care providers to identify: (1) the
locations where people with disabilities receive primary care,
acute (including intensive) care, and long-term care; (2) the
number of providers with accessible facilities and equipment;
and (3) the number of employees of health care providers
trained in disability awareness and in caring for patients with
disabilities.
This section would apply to any Federal health care
program, funded directly, in whole or in part, by the Federal
Government.
SEC. 1702. REQUIRED COLLECTION OF DATA
Present Law
OMB Directive 15 does not require the collection of data on
race and ethnicity. Many Federal data collection efforts
include items measuring race and ethnicity; however, surveys
often have an insufficient sample size to ensure reliable
estimates with appropriate statistical precision for
subpopulations. Sample size also influences the type of
statistical analysis that can be conducted, for example,
multivariate analysis to examine reasons for disparities. Some
surveys use oversampling to increase the precision of
subpopulation estimates. Other times, data from multiple years
are combined to produce stable and precise estimates for
subpopulations.
The Medicare Improvements for Patients and Providers Act of
2008 (MIPAA, P.L. 110-275) instructed the Secretary to evaluate
approaches for collecting disparities data on Medicare
beneficiaries, and to provide a report to Congress, including
recommendations for reporting nationally recognized quality
measures, such as Healthcare Effectiveness Data and Information
Set (HEDIS) measures, on the basis of race, ethnicity, and
gender. MIPAA further instructed the Secretary to implement the
approaches identified in the initial report and, subsequently,
report back to Congress with recommendations for improving the
identification of health care disparities among Medicare
beneficiaries based on an analysis of those efforts.
Committee Bill
The Committee Bill would require that Federally-funded
population surveys collect sufficient data relating to racial,
ethnic, sex, primary language, and disability subgroups to
generate statistically reliable estimates in studies comparing
health disparities among populations. It would ensure that any
quality reporting requirements under a Federal health care
program include requirements for the collection of data on
individuals receiving health care items or services under these
programs by race, ethnicity, sex, primary language, and type of
disability. The Committee Bill would also extend the MIPAA
provisions regarding the collection of health disparities data
on the Medicare population to Medicaid and CHIP.
The Committee Bill would require that the Secretary submit
two reports to Congress. The first, to be submitted not later
than 18 months after the date of enactment, will include
approaches for identifying, collecting and evaluating data on
health care disparities on the basis of race, ethnicity, sex,
primary language and types of disability for programs under
Medicaid and CHIP. The report would also include
recommendations on the most effective strategies for reporting
HEDIS and other quality measures, as appropriate, on such
bases. The Committee Bill would also require the Secretary to
implement the approaches from the evaluation within 24 months
after the date of enactment.
The second, to be submitted not later than four years after
the date of enactment, and four years thereafter, will include
recommendations for improving identification of health
disparities for Medicaid and CHIP beneficiaries.
SECTION 1703. DATA SHARING AND PROTECTION
Present Law
There is no Present Law that requires the Secretary of HHS
to share health disparities measures, data, and analyses with
other HHS agencies.
Committee Bill
The Committee Bill would require the Secretary of HHS in
consultation with other appropriate Federal agencies to
establish procedures for sharing data and relevant analyses on
race, ethnicity, gender, primary language, and type of
disability collected under a Federal health care or insurance
program with other Federal and state agencies, as well as
agencies within HHS.
The Committee Bill would also require the Secretary to
ensure all appropriate privacy and security safeguards are
followed for the collection, analysis, and sharing of these
data.
SEC. 1704. INCLUSION OF INFORMATION ABOUT THE IMPORTANCE OF HAVING A
HEALTH CARE POWER OF ATTORNEY IN TRANSITION PLANNING FOR CHILDREN AGING
OUT OF FOSTER CARE AND INDEPENDENT LIVING PROGRAMS
Present Law
Transition Planning. A State is required to have in place a
case review system for each child in foster care to, among
other things, periodically review the child's status in foster
care and to develop and carry out a permanency plan for the
child. As part of the case review system for older children in
care, a child's caseworker, and as appropriate, other
representative(s) of the child, are to assist and support him
or her in developing a transition plan that is to be
implemented 90 days prior to the time when the child will age
out of foster care. The plan is to be personalized by the child
and as detailed as the child may elect. It must include
specific options on housing, health insurance, education, local
opportunities for mentors and continuing support services, and
workforce supports and employment services.
Independent Living Education. Under the John H. Chafee
Foster Care Independence Program (CFCIP), States may apply for
funds to carry out independent living programs for older
children in foster care and children who have aged out of
foster care. As part of their application, States must meet
certain certifications regarding how their programs will be
carried out.
Health Oversight and Coordination Plan. Under Title IV-B of
the Social Security Act, a State is required to maintain a plan
for child welfare services. As part of the plan, states must
develop a coordinated strategy and oversight plan to ensure
access to health care, including mental health services and
dental care, for all children in foster care. This coordinated
strategy and oversight plan must be a collaborative effort
between the state child welfare agency and the state agency
that administers Medicaid, in consultation with pediatric and
other health care experts, as well as experts in, or recipients
of, child welfare services. The strategy and plan must outline:
(1) a schedule for initial and follow-up health screens; (2)
how the health needs identified by those screens will be
monitored and treated; (3) how medical information for children
in care will be updated and appropriately shared; (4) steps to
ensure continuity of health care services; (5) oversight of
prescription medicines; and (6) how the State actively consults
with and involves medical and non-medical professionals in
assessing the health and well-being of children in foster care
and determining their appropriate medical treatment.
Committee Bill
The Committee Bill maintains all of the Present Law
provisions for transition planning but adds that the transition
plan must also address health care treatment decisions.
Specifically, it stipulates that the plan is to include
information about the importance of designating another
individual to make health care treatment decisions on behalf of
the child if the child becomes unable to participate in these
decisions and he or she does not have, or does not want, a
relative who would otherwise be authorized, under state law, to
make such decisions. In addition, the plan must provide the
child with the option to execute a health care power of
attorney, health care proxy, or other similar document
recognized under state law.
The Committee Bill adds a certification that States are to
ensure that an adolescent participating in the CFCIP is
provided with education about the importance of designating
another individual to make health care treatment decisions on
his or her behalf if the adolescent becomes unable to
participate in these decisions and the adolescent does not
have, or does not want, a relative who would otherwise be
authorized, under state law, to make such decisions. The
certification must also ensure that the adolescent is educated
about whether a health care power of attorney, health care
proxy, or other similar document is recognized under State law,
and how to execute such a document if the adolescent wants to
do so.
The Committee Bill adds a requirement that the health care
strategy and plan must also outline steps to ensure that the
components of the transition plan (for children aging out of
foster care) that address health care needs, are met. These
components include options for health insurance; information
about a health care power of attorney, health care proxy, or
other similar document recognized by State law; and the option
for the child to execute such a document.
This Committee Bill would be effective on October 1, 2010.
Subtitle I--Maternal and Child Health Services
SEC. 1801. MATERNAL, INFANT, AND EARLY CHILDHOOD HOME VISITING PROGRAMS
Present Law
Title V of the SSA authorizes the Maternal and Child Health
(MCH) block grant program. The MCH block grant, which is
administered by the Health Resources and Services
Administration (HRSA), allocates funding to States based on a
statutory formula. States use the Title V funds to design and
implement a wide range of maternal and child health programs.
The MCH block grant program seeks to: (1) reduce infant
mortality; (2) increase the number of children appropriately
immunized against disease; (3) increase the number of children
in low-income families who receive health assessments and
follow-up care; (4) provide comprehensive prenatal care to low-
income and at-risk pregnant women; (5) provide preventive and
child-care services, and rehabilitative services to disabled
children; and (6) develop comprehensive, family-centered,
community-based, culturally-competent, coordinated systems of
care for children with special health care needs.
States must submit annual reports on Title V-funded
activities and demonstrate progress made towards standardized
MCH status indicators (e.g., live birth rate, low birth weight,
maternal death rates, and poverty levels) in order to
facilitate comparison between states. The Secretary compiles
the data submitted by the states in an annual report to
Congress. States are required to audit and report on the use of
their funds at least once every two years.
Committee Bill
The Committee Bill would add a new Section 511 in Title V
of the Social Security Act, Early Childhood Home Visitation
Programs. The new provision would require States, as a
condition of receiving the MCH block grant funds for FY2011, to
conduct a needs assessment to identify communities that are at
risk for poor maternal and child health and have few quality
home visitation programs. The needs assessment would identify
communities that have a concentration of risk factors for
premature birth, low-birth weight infants, infant mortality,
poor maternal and child health, poverty, crime, domestic
violence, high drop-out rates, substance abuse, unemployment,
and child maltreatment. The needs assessment, which would be
separate from but coordinated with the assessments currently
required under Title V and the Head Start Act, would also
review the state's capacity to provide appropriate services to
those communities. State would be required to submit the
results of their needs assessment and their proposed activities
to the Secretary.
In addition, the Committee Bill would establish a new state
grant program for early childhood home visitation. Grantees of
this new program would be required to establish appropriate
process and three and five year outcome benchmarks to measure
improvements in maternal and child health, childhood injury
prevention, school readiness, juvenile delinquency, family
economic factors and the coordination of community resources.
Grantees who do not demonstrate improvement in at least four
specified areas at the end of the third year of funding would
receive expert technical assistance.
The program model(s) chosen to deliver services would
conform to a clear consistent home visitation model that has
been in existence for at least three years and is research-
based, grounded in relevant empirically-based knowledge, linked
to program determined outcomes, associated with a national
organization or institution of higher education that has
comprehensive home visitation standards that ensure high
quality service delivery and continuous program quality
improvement, and sustained positive outcomes. The programs can
be evaluated using well-designed and rigorous randomized
controlled research designs and the evaluation results have
been published in a peer-reviewed journal, or the programs have
been evaluated using well-designed and rigorous quasi-
experimental research designs. In addition, the grantees would
be permitted to use 25 percent of the award to fund a promising
new program model(s) that would be rigorously evaluated.
Grantees would have to use evidence-based practices to meet
the process and outcome benchmarks, employ well-trained staff
and specialists as appropriate, maintain high-quality
supervision, possess strong organizational capacity and
linkages in the community, monitor the fidelity of the program
to ensure that services are delivered in accordance with the
model, and use research-based models. There would be a priority
to provide services to families who are determined to be at-
risk by the needs assessment, and other indicators including
low-income, young maternal age, and involvement with child
welfare.
In order to apply for the grant, eligible entities would
need to submit a description of the target population, and
service delivery model, demonstrate consistency with findings
of the needs assessments, procedures and the benchmarks to be
used. Grantees would be required to meet maintenance of effort
standards based on previous spending by using new funds to
supplement not supplant.
The provision would require the Secretary to conduct
evaluations of the state assessments and home visitation
programs by grant, contract or interagency agreement, including
a report to Congress by December 31, 2015. It would also
require intra-agency collaboration among Federal agencies
including the Administration for Children and Families, the
Centers for Disease Control and Prevention, National Institute
of Child Health and Human Development, and the Office of
Juvenile Justice and Delinquency Prevention, the Institute of
Education Sciences of the Department of Education.
The provision would appropriate $1.5 billion between FY2010
and FY2014 for home visitation programs: $100 million for
FY2010; $250 million in $250; $350 million for FY2012; $400
million for FY2013; and $400 million for FY2014. Three percent
would be used to provide home visitation services to Indian
families, with eligible entities of Indian tribe, tribal
organization, and urban Indian organization. At the beginning
of FY2012, the Secretary may determine which other non-profit
entities have the capacity to carry out the program and are
eligible for unexpended amounts to serve a state that did not
get a grant.
SEC. 1802. SUPPORT, EDUCATION, AND RESEARCH FOR POSTPARTUM DEPRESSION
Present Law
No comparable provision exists in Present Law. However,
PHSA Sec. 508 authorizes the Secretary to provide residential
substance abuse treatment for pregnant and postpartum women.
Committee Bill
The Committee Bill would promote efforts to expand and
intensify activities to address postpartum conditions as
follows. It would define the term postpartum condition to mean
``postpartum depression or postpartum psychosis,'' and
encourage the Secretary to continue specified types of
research, including epidemiology, clinical research, and public
education, to expand the understanding of the causes and
treatments for postpartum conditions.
The Committee Bill states that it is the sense of Congress
that the Director of the National Institute of Mental Health
(NIMH) may conduct a nationally representative longitudinal
study (during the period FY2010-FY2019) on the relative mental
health consequences for women of resolving a pregnancy,
intended and unintended, in various ways. Those ways include
carrying the pregnancy to term and parenting the child,
miscarriage, and having an abortion. Subject to the completion
of such a study, beginning within five years of enactment and
periodically thereafter for the duration of the study, the NIMH
Director may submit to Congress reports on the study's
findings.
Additionally, the Committee Bill would add to the end of
Title V of the SSA a new Sec. 512, Services to Individuals with
a Postpartum Condition and their Families. This provision would
authorize the Secretary to award grants, in addition to any
other funds that would be provided to states under this title,
to eligible entities to establish, operate and coordinate
effective and cost-efficient systems for the delivery of
essential services to individuals with postpartum conditions
and their families. The provision would specify that grant
funds be used to carry out certain activities such as providing
education, delivering outpatient and home-based services,
enhancing inpatient care management, and improving health care
and social services. It would authorize the Secretary to
integrate with other grant programs that the Secretary carries
out, including the health centers program under Sec. 330 of the
PHSA.
Grantees would have to agree to the following requirements:
(1) no more than five percent of the grant funds may be used
for administrative functions; (2) grant funds may not supplant
other existing funds; (3) the grantee must abide by any
limitations that the Secretary places on payment for services;
(4) grant funds may not used for services that can be paid for
by certain other payers; (5) the grantee must post conspicuous
notices about applicable Federal policies on charges; and (6)
the grantee must submit a report for each grant period on how
funds were used. The Secretary would be authorized to provide
technical assistance to help grantees meet these requirements.
The following provisions in Title V would apply to the
grant program: (1) Sec. 504(b)(6), relating to prohibition of
payments to certain excluded individuals and entities; (2) Sec.
504(c), relating to the use of funds for purchase of technical
assistance; (3) Sec. 504(d), relating to a limitation on
administrative expenditures; (4) Sec. 506, relating to reports
and audits; (5) Sec. 507, relating to penalties and false
statements; (6) Sec. 508, relating to non-discrimination; and
(7) Sec. 509(a), relating to grant administration. Entities
eligible for a grant would include public or nonprofit private
entities, state or local government public-private
partnerships, recipients of a Healthy Start grant, public or
nonprofit private hospitals, community-based organizations,
hospices, ambulatory care facilities, community health centers,
migrant health centers, public housing, primary care centers,
or homeless health centers. The provision would authorize the
appropriation of $3 million for FY2010, and such sums as may be
necessary for FY2011 and FY2012 to carry out the grant program.
The Secretary would be required to study the benefits of
screening for postpartum conditions and, within two years of
enactment, submit a report to Congress. Finally, the Secretary
would be prohibited from using funds under this section to
duplicate any other HHS activities or programs.
SEC. 1803. PERSONAL RESPONSIBILITY EDUCATION FOR ADULTHOOD TRAINING
Present Law
No provision.
Committee Bill
The new provision would amend Title V of the Social
Security Act to directly appropriate funding for a new program,
the Personal Responsibility Education for Adulthood Training.
Programs must be evidence-based, medically accurate. It would
be a state formula grant program for FY2010 through FY2014 to
provide personal responsibility education on topics for
adulthood preparation including healthy relationships,
adolescent development, financial literacy, parent-child
communication, educational and career success, financial self-
sufficiency, health life skills for decision making, pregnancy
prevention, including abstinence and contraception, and
awareness of sexually transmitted infection, including HIV/
AIDS.
Under the funding allocation formula, each state would
receive an amount based on the size of its youth population as
a percentage of the national population. However, each state
would receive a minimum allotment of at least $250,000 for each
fiscal year.
In order to receive the grant, states would have to submit
an application containing information on recent teen pregnancy
rates and teen birth rates, state-established goals for
reduction in teen pregnancy, the state's plan for using the
funds to reduce pregnancies among certain at-risk youth, and
other information that the Secretary may require. States would
be allowed to expend allotted funds through the end of the
second succeeding fiscal year. States that do not accept the
grant in FY2010 and FY2011 would not be eligible to apply for
the funds allotted for the period FY2010 through FY2014. The
Secretary would be required to use unexpended funds resulting
from states not submitting an application, or states not
expending their allocation, to award three-year grants to local
organizations, including faith-based organizations or
consortia, in each of FY2012, FY2013 and FY2014, for use as
required in states that do not apply for the allocations. The
provision would require maintenance of effort by the state or
organization receiving these allotments at the FY2009 level.
The Secretary would be required to reserve certain portions
of the funds appropriated to carry out this provision for
certain specified purposes. The Secretary would be required to
reserve $10 million (out of the $75 million appropriation) to
award grants to implement innovative teen pregnancy prevention
strategies and target certain high-risk youth, as specified.
Grantees would be required to agree to participate in a
rigorous evaluation of their grant activities. The proposal
would also require the Secretary to reserve five percent of the
remainder of the appropriated funds to award grants to Indian
tribes and tribal organizations. In addition, the Secretary
would be required to reserve ten percent of the remainder of
the funds: (1) to establish a teen pregnancy prevention
resource center; (2) to conduct research, training and
technical assistance on allotted and grantee programs; and (3)
to evaluate the activities funded by allotments and grants.
The Committee Bill would require the Secretary to create a
national teen pregnancy prevention resource center. The purpose
of the resource center would be to provide information and
technical assistance for states, Indian tribes, local
communities and other organizations that are seeking to reduce
teen pregnancy rates. The resource center would carry out
certain specified activities such as synthesizing and
disseminating effective and promising practices to prevent teen
pregnancy. The resource center would be required to collaborate
with other entities with relevant expertise, as specified.
The Committee Bill would appropriate $75 million for each
of FY2010 through FY2014 to carry out this section. Amounts
appropriated under this subsection would remain available until
expended.
SEC. 1804. RESTORATION OF FUNDING FOR ABSTINENCE EDUCATION
Present Law
Section 510 of the Social Security Act, the Title V
Abstinence Education Block Grant to states was authorized under
P.L. 104-193 (the 1996 welfare reform law). The law provided
$50 million per year for five years (FY1998-FY2003) in Federal
funds specifically for the abstinence education program. The
Title V Abstinence Education program is considered a mandatory
program and is funded by mandatory spending. It is a formula
grant program. State funding is based on the proportion of low-
income children in the state compared to the national total.
Although the program has not been reauthorized, the last
extension, contained in P.L. 110-275, continued funding for the
abstinence-only block grant through June 30, 2009. Funds must
be requested by states when they solicit Title V Maternal and
Child Health (MCH) block grant funds and must be used
exclusively for teaching abstinence. To receive Federal funds,
a state must match every $4 in Federal funds with $3 in state
funds.
Committee Bill
The Committee Bill would amend Sec. 510 of the SSA, by
appropriating $50 million for each of FY2010 through FY2014.
For FY2010, the date the appropriation is made would be the
date of enactment of America's Healthy Future Act of 2009.
Subtitle J--Programs of Health Promotion and Disease Prevention
SEC. 1901. PROGRAMS OF HEALTH PROMOTION AND DISEASE PREVENTION
Present Law
The Health Insurance Portability and Accountability Act of
1996 (HIPAA, P.L. 104-191) amended the Employee Retirement
Income Security Act (ERISA), the Public Health Service Act
(PHSA), and the Internal Revenue Code (IRC) to improve
portability and continuity of health coverage. Title I of HIPAA
created certain nondiscrimination requirements, which provide,
among other things, that a group health plan and a health
insurance issuer offering group health coverage may not require
an individual to pay a higher premium or contribution than
another ``similarly situated'' participant, based on certain
health-related factors such as claims experience, receipt of
health care, medical history, genetic information, evidence of
insurability, or disability. However, HIPAA clarifies that this
requirement ``do[es] not prevent a group health plan and a
health insurance issuer from establishing premium discounts or
rebates or modifying otherwise applicable copayments or
deductibles in return for adherence to programs of health
promotion and disease prevention (i.e., wellness programs).''
HIPAA regulations provide standards under which a group
health plan or a health insurance issuer may offer rewards such
as premium discounts or rebates premiums, waivers of all or
part of a cost-sharing mechanism under the plan (such as
deductibles, co-payments or coinsurance), the absence of a
surcharge, or the value of a benefit which would otherwise not
be provided under the plan, in exchange for adherence to
wellness programs.
The HIPAA wellness program regulations divide wellness
programs into two categories. In the first category are
programs in which rewards are based solely on program
participation. Examples in the existing regulation include
reimbursing enrollees for the cost of gym membership, waiving
copayments for parental care, and reimbursing enrollees for the
cost of smoking cessation programs, regardless of whether they
successfully quit smoking. Programs in this category are
automatically permissible.
Programs in the second category are those in which rewards
are based on the attainment of certain health standards--for
example, achieving a targeted cholesterol level, maintaining a
certain body mass index, quitting smoking, or losing a
specified amount of weight. Under current regulations, health
plans can offer such financial incentives only if five criteria
are met--one of these being that the reward cannot exceed 20
percent of the cost of the employee's coverage (i.e., the
employee's premium plus the employer's contribution). The
regulations also provide that the reward under the program must
be available to all similarly situated individuals. As part of
this requirement, a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward
must be available for any individual for whom it is
``unreasonably difficult'' due to a medical condition to
satisfy the otherwise applicable standard or it is ``medically
inadvisable'' to attempt to satisfy the otherwise applicable
standard.
The Federal Employees Health Benefits Act (P.L. 86-382),
establishes a program under which Office of Personnel
Management (OPM) has the authority to contract with insurance
carriers to provide health insurance to Federal employees,
retirees, and their families. The Act sets out various
additional requirements required for the plans that are
offered.
Committee Bill
The Committee Bill would codify and enhance provisions of
the HIPAA wellness program regulations, which allow rewards to
be provided to employees for participation in or for meeting
certain health standards related to a wellness program.
Consistent with current regulation, the proposal indicates
that wellness programs that do not require an individual to
satisfy a standard related to a health factor as a condition
for obtaining a reward, or do not offer a reward, are not in
violation of the HIPAA non-discrimination requirements
(assuming that participation in the programs is made available
to all similarly situated individuals). Wellness programs that
meet this requirement include the following programs:
A program that reimburses all or part of the cost
for memberships in a fitness center.
A diagnostic testing program that provides a
reward for participation and does not base any part of the
reward on outcomes.
A program that encourages preventive care by
waiving co-payments or deductibles under a group health plan
for the costs of, for example, prenatal care or well-baby
visits.
A program that reimburses employees for the cost
of smoking cessation programs without regard to whether the
employee quits smoking.
A program that provides a reward to employees for
attending a monthly education seminar.
The Committee Bill would also allow group health plans and
health insurance issuers offering coverage in group markets to
provide rewards, including insurance premium discounts or
rebates, based on an individual's or an employee's
participation in wellness programs in which the condition for
obtaining a reward is based on an individual satisfying a
standard that is related to a health factor. Under these types
of wellness programs, additional requirements would have to be
met. For example, the proposal would cap the reward at 30
percent of the cost of the employee-only coverage under the
plan, and would allow the Secretaries of Health and Human
Services, Department of Labor, and Department of the Treasury
the discretion to increase the reward up to 50 percent of the
cost of coverage for adherence to or participation in a
reasonably designed program of health promotion and disease
prevention. For purposes of this paragraph, the cost of
coverage is determined based on the combined amount of
employers and employee contributions for the benefit package
under which the employee is (or the employee and any dependents
are) receiving coverage. In addition, the reward must be
available to all ``similarly situated'' individuals. As part of
this requirement, a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward
must be available for any individual for whom it is
``unreasonably difficult'' due to a medical condition to
satisfy the otherwise applicable standard or it is ``medically
inadvisable'' to attempt to satisfy the otherwise applicable
standard. The wellness program may require verification of
these circumstances, including a statement from an individual's
physician.
In addition, programs which provide rewards based on the
attainment of certain health standards would need to meet the
following criteria:
Be reasonably designed to promote health or
prevent disease. A program complies with the preceding sentence
if the program has a reasonable chance of improving the health
of, or preventing disease in, participating individuals and it
is not overly burdensome, is not a subterfuge for
discrimination based on a health status factor, and is not
highly suspect in the method chosen to promote health or
prevent disease. The plan or issuer shall evaluate the
program's reasonableness at least once per year.
Provide individuals eligible for the program the
opportunity to qualify for the reward under the program at
least once a year.
Plan materials describing the terms of the
wellness program must disclose the availability of the
reasonable alternative standard for similarly situated
individuals, or the possibility that the standard will be
waived.
The Committee Bill would apply the above described
provisions to carriers providing Federal Employees Health
Benefit Plans. This section would be effective on the date of
enactment of the proposal, and would apply to contracts that
take effect with respect to calendar years beginning more than
one year after that date.
The proposal would require the Secretaries of Health and
Human Services and the Treasury to establish a ten-state pilot
program in 2014. States that choose to participate in the pilot
program would be allowed to apply the above described
provisions to programs of health promotion offered in the
individual market in a manner that is similar to the manner in
which such provisions apply to group health plans and health
insurance issuers offering coverage in group markets. States
participating in the pilot program would be required to ensure
that consumer protections are met in programs of health
promotion in the individual market, including verification that
premium discounts do not create undue burdens or lead to cost
shifting. In 2017, the demonstration program may be expanded to
include other states, pending evidence of the program's
effectiveness as determined by the Secretary of Health and
Human Services in consultation with the Secretary of Treasury.
Nothing in this section would preempt any state law (related to
programs of health promotion offered by a health insurance
issuer in the individual market) that was established or
adopted by state law on or after the date of enactment of this
section.
Furthermore, this provision would require the Secretary of
Health and Human Services, in consultation with the Secretary
of Treasury, and the Secretary of Labor, to submit to the
appropriate committees of Congress a report examining the
effectiveness of wellness and disease prevention programs in
promoting health and preventing disease, the impact of a
wellness program on a participant's access to care and the
affordability of coverage, and the impact of premium-based and
cost-sharing incentives on employee behavior and their role of
such programs and from state and Federal agencies in changing
behavior. In developing the report, the Secretaries will gather
relevant information from employers who provide employees with
access to wellness programs to gather the above-described
information. The report will be due no later than three years
after the date of enactment of the proposal.
Subtitle K--Elder Justice Act
The following are the findings of Congress:
1. The proportion of the United States population age 60 or
older will drastically increase in the next 30 years as more
than 76,000,000 baby boomers approach retirement and old age.
2. Each year, anywhere between 500,000 and 5,000,000 elders
in the United States are abused, neglected, or exploited.
3. Elder abuse, neglect, and exploitation have no
boundaries, and cross all racial, social class, gender, and
geographic lines.
4. Victims of elder abuse, neglect, and exploitation are
not only subject to injury from mistreatment and neglect, they
are also 3.1 times more likely than elders who were not victims
of elder abuse, neglect, and exploitation to die at an earlier
age than expected.
5. There is a general dearth of data as to the nature and
scope of elder abuse, neglect and exploitation. In recognition
of the need to improve data collection efforts with respect to
elder abuse, neglect, and exploitation, Congress required the
Secretary to conduct a study by the end of 2008 on establishing
a uniform national database on elder abuse under section 405 of
title IV of Division C of the Tax Relief and Health Care Act of
2006 (Public Law 109-432).
6. Despite the dearth of data in the field, experts agree
that most cases of elder abuse, neglect, and exploitation are
never reported and that abuse, neglect, and exploitation
shorten a victim's life, often triggering a downward spiral of
an otherwise productive, self-sufficient elder's life. Programs
addressing other difficult issues such as domestic violence and
child abuse and neglect have demonstrated the need for a
multifaceted law, combining public health, social service and
law enforcement approaches.
7. For over 20 years, Congress has been presented with
facts and testimony calling for a coordinated Federal effort to
combat elder abuse, neglect, and exploitation.
8. The Federal government has been slow to respond to the
needs of victims of elder abuse, neglect, and exploitation or
to undertake prevention efforts.
9. No Federal law has been enacted that adequately and
comprehensively addresses the issues of elder abuse, neglect,
and exploitation and there are very limited resources available
to those in the field that directly deal with the issues.
10. Differences in State laws and practices in the areas of
elder abuse, neglect, and exploitation lead to significant
disparities in prevention, protective, and social services,
treatment systems, and law enforcement, and lead to other
inequities.
11. The Federal government has played an important role in
promoting research, training, public safety, and data
collection, and the identification, development, and
dissemination of promising health care, social and protective
services, and law enforcement practices, relating to child
abuse and neglect, domestic violence, and violence against
women. The Federal government should promote similar efforts
and protections relating to elder abuse, neglect, and
exploitation.
12. The Federal government should provide leadership and
assist States and communities in efforts to protect elders in
the United States by--
A. promoting coordinated planning among all levels of
government;
B. generating and sharing knowledge relevant to
protecting elders;
C. providing leadership to combat the abuse, neglect,
and exploitation of the Nation's elders; and
D. providing resources to States and communities to
promote elder justice.
13. The problem of elder abuse, neglect, and exploitation
requires a comprehensive approach that--
A. integrates the work of health, legal, and social
services agencies and organizations;
B. emphasizes the need for prevention, reporting,
investigation, assessment, treatment, and prosecution
of elder abuse, neglect, and exploitation at all levels
of government;
C. ensures that sufficient numbers of properly
trained personnel with specialized knowledge are in
place to treat, assess, and provide services related to
elder abuse, neglect, and exploitation and carry out
the elder protection duties;
D. is sensitive to ethnic and cultural diversity;
E. recognizes the role of mental health, disability,
dementia, substance abuse, medication mismanagement,
and family dysfunction problems in increasing and
exacerbating elder abuse, neglect, and exploitation;
and
F. balances elders' right to self-determination with
society's responsibility to protect elders.
14. The human, social, and economic cost of elder abuse,
neglect, and exploitation is high and includes unnecessary
expenditures of funds from many public programs.
15. The failure to coordinate activities relating to, and
comprehensively prevent and treat, elder abuse, neglect, and
exploitation threatens the future and well-being of millions of
elders in the United States.
16. All elements of society in the United States have a
shared responsibility in responding to a national problem of
elder abuse, neglect, and exploitation.
The following are the purposes of the Elder Justice Act:
1. To enhance the social security of the Nation by ensuring
adequate public-private infrastructure and resolving to
prevent, detect, treat, understand, intervene in, and where
appropriate, aid in the prosecution of, elder abuse, neglect,
and exploitation.
2. To bring a comprehensive approach to preventing and
combating elder abuse, neglect, and exploitation, a long
invisible problem that afflicts the most vulnerable among the
aging population of the United States.
3. To raise the issue of elder abuse, neglect, and
exploitation to national attention, and to create the
infrastructure at the Federal, State and local levels to ensure
that individuals and organizations on the front lines, who are
fighting elder abuse, neglect, and exploitation with scarce
resource and fragmented systems, have the resources and
information needed to carry out their fight.
4. To bring a comprehensive multidisciplinary approach to
elder justice.
5. To set in motion research and data collection to fill
gaps in knowledge about elder abuse, neglect, and exploitation.
6. To supplement the activities of service providers and
programs, to enhance training, and to leverage scarce resources
efficiently, in order to ensure that elder justice receives the
attention it deserves as the Nation's population ages.
7. To recognize and address the role of mental health,
disability, dementia, substance abuse, medication
mismanagement, and family dysfunction problems in increasing
and exacerbating elder abuse, neglect and exploitation.
8. To create short- and long-term strategic plans for the
development and coordination of elder justice research,
programs, studies, training, and other efforts nationwide.
9. To promote collaborative efforts and diminish overlap
and gaps in efforts in developing the important field of elder
justice.
10. To honor and respect the right of all individuals with
diminished capacity to decision making autonomy, self-
determination, and dignity of choice.
11. To respect the wishes of individuals with diminished
capacity and their family members in providing supportive
services and care plans intended to protect elders from abuse,
neglect (including self-neglect), and exploitation.
SEC. 1911. SHORT TITLE
Present Law
No provision.
Committee Bill
The Committee Bill sets forth the title as the Elder
Justice Act of 2009.
SEC. 1912. DEFINITIONS
Present Law
No provision.
Committee Bill
The Committee Bill would adopt the meaning of any term that
is defined in Section 2011 of the Social Security Act, as the
meaning set forth by such section of the Committee Bill.
SEC. 1913. ELDER JUSTICE
Elder Justice
Present Law
No provision.
Committee Bill
The Committee Bill would amend the Social Security Act
(SSA) by inserting ``Elder Justice'' to an amended Title XX,
that would be entitled ``Block Grants to States for Social
Services and Elder Justice.'' The provision would insert a new
``Subtitle 1--Block Grants to States for Social Services''
before Section 2001 of the SSA and add a new ``Subtitle 2--
Elder Justice.''
Definitions
Present Law
Under Present Law ``abuse,'' ``caregiver,'' ``elder
justice,'' ``exploitation,'' ``fiduciary,'' ``long-term care,''
``long-term care facility,'' ``neglect,'' ``nursing facility,''
and ``self-neglect'' are defined in the Older Americans Act
(OAA), and ``sexually violent offense'' is defined in the
Violent Crime Control and Enforcement Act.
Committee Bill
The Committee Bill also defines the following terms: abuse,
adult protective services, caregiver, direct care, elder, elder
justice, eligible entity, exploitation, fiduciary, grant,
guardianship, Indian tribe, law enforcement, long-term care,
loss of capacity for self-care, long-term care facility,
neglect, nursing facility, self-neglect, serious bodily injury,
criminal sexual abuse, social, state legal assistance
developer, and State Long-Term Care Ombudsman.
General Provisions
Present Law
Section 264 of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA, P.L. 104-191) governs the
protection of individual health privacy.
Committee Bill
The Committee Bill would require the Secretary to ensure
the protection of individual health privacy consistent with the
regulations promulgated under section 264(c) of HIPAA and
applicable state and local privacy regulations. It would
prohibit the proposed subtitle from being construed to
interfere with or abridge an elder's right to practice his or
her religion through reliance on prayer alone for healing when
this choice is: (1) expressed, either orally or in writing, (2)
set forth in a living will, health care proxy, or other advance
directive documents, or (3) may be deduced from an elder's life
history.
PART I--NATIONAL COORDINATION OF ELDER JUSTICE ACTIVITIES AND RESEARCH
``Subpart A--Elder Justice Coordinating Council and Advisory Board on
Elder Abuse, Neglect, and Exploitation''
Elder Justice Coordinating Council
Present Law
No provision.
Committee Bill
The provision would establish an Elder Justice Coordinating
Council in the Office of the Secretary composed of the
following members: the Secretary who will chair the Council and
the Attorney General. Membership would also include the head of
each Federal department or agency, identified by the Chair, as
having administrative responsibility or administering programs
related to elder abuse, neglect or exploitation. The Council
would be required to make recommendations to the Secretary
regarding coordination of activities of HHS, the Department of
Justice (DoJ), and other relevant Federal, state, local, and
private agencies and entities, relating to prevention of elder
abuse, neglect, and exploitation and other crimes against
elders. The Council would be required to submit a report to the
appropriate committees of Congress within two years of
enactment and every two years thereafter that describes its
activities and challenges; and makes recommendations for
legislation, model laws, and other actions deemed appropriate.
The provision also sets forth requirements for powers of the
Council, membership, meeting requirements, travel expenses, and
detail of Federal government employees to the Council. Section
14 of the Federal Advisory Committee Act would not apply to the
Council.
Advisory Board on Elder Abuse, Neglects and Exploitation
Present Law
No provision.
Committee Bill
The Committee Bill would establish the Advisory Board on
Elder Abuse, Neglect, and Exploitation to create a short- and
long-term multidisciplinary plan for development of the field
of elder justice and make recommendations to the Elder Justice
Coordinating Council. The Board would be composed of 27 members
from the general public appointed by the Secretary to serve for
staggered three-year terms, and must have experience and
expertise in prevention of elder abuse, neglect, and
exploitation. The Secretary would be required to publish a
notice in the Federal Register soliciting nominations for
Advisory Board membership. The Advisory Board would be required
to develop collaborative approaches to improving the quality of
long-term services and supports and to establish
multidisciplinary panels to address these subjects by examining
relevant research and identifying best practices. Within 18
months of enactment, and annually thereafter, the Board would
be required to prepare and submit to the Elder Justice
Coordinating Council and the appropriate committees of Congress
a report containing information on Federal, state, and local
public and private elder justice activities. The report would
also contain recommendations on programs, research, services,
practice, enforcement, and coordination among entities that
carry out elder justice and other related activities;
modifications needed in Federal and state laws, research,
training, and national data collection; and on a
multidisciplinary strategic plan to guide the field of elder
justice. The provision sets forth requirements relating to
powers of the Board, vacancies, expired terms, election of
officers, travel expenses, and detail of government employees
to the Board. Section 14 of the Federal Advisory Committee Act
would not apply to the Council.
Research Protections
Present Law
Subpart A of Part 46 of title VL, Code of Federal
Regulations, known as the Common Rule, that governs most
Federally-funded human subjects research, currently defines the
term ``legally authorized representative'' as ``an individual
or judicial or other body authorized under applicable law to
consent on behalf of a prospective subject to the subject's
participation in the procedure(s) involved in the research.''
No guidelines are currently in place to assist researchers who
work in the areas of elder abuse, neglect, and exploitation,
with issues relating to human subjects research.
Committee Bill
The Committee Bill would define ``legally authorized
representative,'' for purposes of research under this subpart,
to mean, unless otherwise provided by law, the individual, or
judicial or other body authorized under the applicable law to
consent to medical treatment on behalf of another person. It
would also require the Secretary to promulgate guidelines to
assist researchers working in the areas of elder abuse,
neglect, and exploitation, with issues relating to human
subjects protections.
Authorization of Appropriations
Present Law
No provision.
Committee Bill
To carry out the functions under this subpart, the
Committee Bill would authorize to be appropriated $6.5 million
for FY2010, and $7.0 million for each of FYs 2011-2013.
``Subpart B--Elder Abuse, Neglect, Exploitation Forensic Centers''
Establishment and Support of Elder Abuse, Neglect, and Exploitation
Forensic Centers
Present Law
No provision.
Committee Bill
The Committee Bill would require the Secretary, in
consultation with the Attorney General, to award grants to
eligible entities to establish and operate both stationary and
mobile forensic centers and to develop forensic expertise
pertaining to elder abuse, neglect, and exploitation. With
respect to the stationary forensic centers, the Committee Bill
would require the Secretary to make four grants to higher
education institutions with demonstrated expertise in forensics
or commitment to preventing or treating elder abuse, neglect,
or exploitation; and, with respect to mobile forensic centers,
the Committee Bill would require the Secretary to make six
grants to appropriate entities. Funding would be authorized for
the centers to: (1) develop forensic markers that would
determine whether abuse or neglect occurred and whether a crime
was committed, and determine methodologies for how and when
intervention should occur; (2) develop forensic expertise with
respect to elder abuse, neglect, and exploitation in order to
provide relevant evaluation, intervention, support and
advocacy, case review and tracking; and (3) in coordination
with the Attorney General, use data made available by grant
recipients under this section to develop the capacity of
geriatric health care professionals and law enforcement to
collect forensic evidence, including forensic evidence relating
to a potential determination of elder abuse, neglect, or
exploitation. The provision would authorize to be appropriated
$4 million in FY2010, $6 million in FY2011, and $8 million for
each of FYs 2012 and 2013 to carry out these activities.
PART II--PROGRAMS TO PROMOTE ELDER JUSTICE
Enhancement of Long-Term Care
Present Law
The Omnibus Budget and Reconciliation Act of 1987 (OBRA
1987, P.L. 100-203) established Federal minimum statutory
requirements that nursing homes must meet in order to receive
payments for providing health care services to Medicare and
Medicaid beneficiaries. These provisions apply to skilled
nursing facilities (SNF) participating in Medicare and nursing
facilities (NF) participating in Medicaid. Often these
provisions are identical. OBRA 1987 also established
requirements pertaining to the survey and certification process
for determining whether providers meet the requirements for
participation, and it included penalties the Secretary and
states may impose against noncompliant providers. The Secretary
has promulgated regulations and issued accompanying guidance on
the implementation of the statute. For the purposes of
determining compliance with these requirements, the Secretary
contracts with State survey, licensing, and certification
agencies, often referred to as ``state survey agencies,'' who
then assume oversight of those providers participating in
Medicare only and those dually participating in Medicare and
Medicaid. The state assumes responsibility for oversight of
those providers participating only in the Medicaid program.
Medicare and Medicaid law require nursing facilities to
meet certain Federal statutory requirements for the training
and competency levels of certified nurse aides (CNAs) working
in facilities that participate in these programs. Present Law
and Federal regulation 42 CFR 483.75(e)(2) state that a
facility may not use a nurse aide for more than four months, on
a full-time basis, unless the nurse aide has completed a Nurse
Aide Training and Competency Evaluation Program (NATCEP)
approved by the state, or completed a competency evaluation
exam that meets Federal standards. Federal regulation 42 CFR
483.152 specifies that a state-approved nurse aide training
program must consist of a minimum of 75 hours of training,
which includes at least 16 hours of supervised practical or
clinical training. Some states have chosen to require
additional hours of classroom and clinical training. Under
Federal regulation 42 CFR 483.75, facilities must also complete
a performance review of each CNA at least every 12 months and
provide a minimum of 12 hours of in-service training per year
based on the outcome of these reviews.
Existing health professions education and training programs
authorized under Title VII of the Public Health Service Act
(PHSA) provide funding to medical schools and other facilities
to promote community-based and rural practice, primary care,
and opportunities for minorities and disadvantaged students.
Title VIII of the PHSA authorizes a comparable set of programs
to promote nursing education and training. Appropriations
authority for most Title VII and VIII programs has expired,
though many of them continue to receive funding. However, Title
VII and VIII PHSA education and training programs are not
specifically directed toward individuals seeking employment as
direct care providers in long-term care facilities.
Committee Bill
The Committee Bill would require the Secretary to carry out
activities that provide incentives for individuals to train
for, seek, and maintain employment providing direct care in
long-term care facilities. Specifically, the Secretary would be
required to coordinate activities with the Secretary of Labor
to provide incentives for individuals to train for and seek
employment as direct care providers in long-term care
facilities. The Secretary would be required to award grants to
long-term care facilities to conduct programs that offer direct
care employees continuing training and varying levels of
certification. Grants would also be used to provide for or make
arrangements with employers to pay bonuses, or other increased
compensation or benefits, to employees who obtain
certification. To receive grant funds, long-term care
facilities would submit applications directly to the Secretary.
The Secretary would also be required to award grants to
long-term care facilities for training and technical assistance
to eligible employees regarding management practices using
methods that are demonstrated to promote retention such as
those specified. Long-term care facilities would submit
applications to the Secretary to qualify for grant funds. The
Secretary would be required to develop accountability measures
to ensure that funded activities under this subsection benefit
eligible employees and increase the stability of the long-term
care workforce.
The Secretary would be authorized to make grants to long-
term care facilities (the ``Informatics Systems Grant
Program'') for specified activities that would assist such
entities in offsetting the costs related to purchasing,
leasing, developing, and implementing standardized clinical
health care informatics systems designed to improve patient
safety and reduce adverse events and health care complications
resulting from medication errors. Long-term care facilities
would submit applications to the Secretary to qualify for grant
funds. The Secretary would be required to develop
accountability measures to ensure that funded activities under
this subsection help improve patient safety and reduce adverse
events and health care complications resulting from medication
errors.
Within one year of enactment of the Committee Bill, the
Secretary would be required to ensure that the department
includes, as part of the information provided for comparison of
nursing facilities on the Federal government's Nursing Home
Compare website for Medicare beneficiaries, specified
information related to the number of adjudicated instances of
criminal violations by a nursing facility or crimes committed
by an employee of a nursing facility. Within one year of
enactment of the Committee Bill, the Secretary would be
required to ensure that the Department, as part of the
information provided for comparison of nursing facilities on
the Federal government's Nursing Home Compare website, develops
and includes a consumer rights information page, as specified.
The Secretary would be required to develop and adopt
uniform and open electronic standards for the submission of
clinical data by long-term care facilities to the Secretary.
Such standards shall include messaging and nomenclature
standards. The standards developed and adopted must be
compatible with standards established under part C of Title XI,
standards established under subsections (b)(2)(B)(i) and (e)(4)
of section 1860D-4 of the Social Security Act (SSA), and with
general health information technology standards. Within ten
years after the date of the Committee Bill's enactment, the
Secretary would be required to have procedures in place to
accept the optional electronic submission of clinical data by
long-term care facilities.
The Secretary would be required to promulgate regulations
to carry out: (1) the inclusion of certain crimes on the
Nursing Home Compare website; (2) consumer rights information
page on Nursing Home Compare website; and (3) standards
involving clinical data by long-term care facilities. Such
regulations would require a state, as a condition of the
receipt of funds under Part B, to conduct such data collection
and reporting as the Secretary determines necessary. The
provision would authorize to be appropriated $20 million for
FY2010, $17.5 million for FY2011, and $15 million for each of
FYs 2012 and 2013 to carry out these activities.
Adult Protective Service Functions and Grant Program
Present Law
No provision exists in Present Law for state formula grants
that are solely and specifically targeted at providing adult
protective services and carrying out projects to employ workers
having caseloads of elders alone. Provisions related to some
functions of adult protective services are found in Title XX of
SSA, the Social Services Block Grant program (SSBG),
administered by the Administration on Children and Families
(ACF), and in the Older Americans Act (OAA), administered by
the Administration on Aging (AoA), both in HHS, as follows.
Title XX of SSA permanently authorizes SSBG as a ``capped''
entitlement to states to carry out a wide range of social
services on behalf of various groups. The statute sets out a
number of goals for the use of these funds, including the goal
of ``preventing or remedying neglect, abuse, or exploitation of
children and adults unable to protect their own interests. . .
.'' Funds are generally administered by state social services
or human services agencies (for this purpose, sometimes
referred to as adult protective services offices), and/or state
agencies on aging. No match is required for Title XX funds, and
Federal law does not specify a sub-state allocation formula. In
other words, states have complete discretion for the
distribution of funds within their borders.
Title II of OAA authorizes the HHS Assistant Secretary for
Aging to designate within AoA a person with responsibility for
elder abuse prevention and services to develop objectives,
priorities, policy, and a long-term plan for facilitating the
development, implementation, and improvement of a coordinated,
multidisciplinary elder justice system; providing Federal
leadership to support state efforts in carrying out elder
justice programs; establishing Federal guidelines and
disseminating best practices for data collection and reporting
by states; working with states, the DoJ, and other Federal
entities to disseminate data relating to elder abuse, neglect,
and exploitation; conducting research related to elder abuse,
neglect, and exploitation; and promoting collaborative efforts
and reducing duplicative efforts in the development and
carrying out of elder justice programs at the Federal, state
and local levels, among other things. It is also the Assistant
Secretary's duty, acting through the person with responsibility
for elder abuse prevention and services, to assist states and
other eligible entities under Title VII to develop strategic
plans to better coordinate elder justice activities, research,
and training (see below).
Title II of the OAA also requires the Assistant Secretary
to establish a National Center on Elder Abuse, administered by
the AoA. The Center is required to, among other things,
compile, publish and disseminate research and training
materials on prevention of elder abuse, neglect, and
exploitation; maintain a clearinghouse on programs showing
promise in preventing elder abuse, neglect, and exploitation;
conduct research and demonstration projects that identify
causes and prevention, and treatment; and provide technical
assistance to state agencies and other organizations in
planning and improving prevention programs.
Title III of the OAA authorizes, but does not require,
state agencies on aging to conduct various activities related
to prevention of elder abuse, neglect and exploitation. No
Federal funds are separately appropriated for this purpose
under Title III, and states decide how much of their Title III
allotments are to be used for prevention activities. In many
states, state agencies on aging administer funds for adult
protective services funded under Title XX of the SSA (described
above).
Title VII of the OAA authorizes a program of grants to
states to carry out activities related to prevention of elder
abuse, neglect, and exploitation. Funds are administered by
state agencies on aging. Title VII, Subtitle B, Native American
Organization and Elder Justice Provisions of the OAA, also
authorizes a state grant program to promote comprehensive elder
justice systems. The Assistant Secretary is authorized to award
competitive grants to states for elder justice systems which
are to provide for convenient public access to the range of
available elder justice information, programs and services;
coordinate the efforts of public health, social service and law
enforcement authorities to identify and diminish duplication
and gaps in the system; and provide a uniform method for
standardization, collection, management, analysis and reporting
data on elder justice issues.
No provision in Present Law specifically authorizes a
dedicated amount of funds for state adult protective service
demonstration programs. However, the OAA authorizes a related
demonstration program, but no specific authorization is
specified by law. Section 413 of the OAA, Older Individuals'
Protection from Violence Projects, requires the Assistant
Secretary to award funds to states, area agencies on aging,
nonprofit organizations, or tribal organizations to carry out a
wide range of projects related to protection of older persons
from violence. Funds are to be used to: support local
communities to coordinate activities regarding intervention in
and prevention of abuse, neglect, and exploitation; develop
outreach to assist victims; expand access to family violence
and sexual assault programs as well as mental health services,
safety planning, and other services; and promote research on
legal organization and training impediments to providing
services through shelters and other programs.
Committee Bill
The Committee Bill would require the Secretary to ensure
that HHS: (1) provides authorized funding to state and local
adult protective services offices that investigate reports of
elder abuse, neglect, and exploitation of elders; (2) collects
and disseminates related data in coordination with the
Department of Justice; (3) develops and disseminates
information on best practices regarding, and provides training
on, carrying out adult protective services; (4) conducts
research related to the provision of adult protective services;
and (5) provides technical assistance to states and other
entities that provide or fund the provision of adult protective
services. To carry out these functions, the provision would
authorize to be appropriated $3 million for FY2010, and $4
million for each of FYs 2011-2013.
The Committee Bill would also provide for grants to improve
Adult Protective Services. Specifically, the Secretary would be
required to award annual grants to enhance adult protective
service programs provided by states and local governments.
Distribution of funds to states would be based on a formula
that takes into account the number of elders (people age 60 or
older) residing in a state relative to the total U.S.
population of elders. States would receive no less than 0.75
percent of the grant program's annual appropriation. The
District of Columbia, Puerto Rico, the U.S. Virgin Islands,
Guam, and American Samoa would receive no less than 0.1 percent
of the annual appropriation. In order to comply with these
minimum amount requirements, the Secretary would be required to
make pro rata reductions in amounts to be allotted.
Funds would be authorized to be used only by states and
local governments to provide adult protective services. States
receiving funds would be required to provide these funds to the
agency or unit of state government having legal responsibility
for providing adult protective services in the state. Each
state would be required to use these funds to supplement and
not supplant other Federal, state, and local public funds
expended to provide adult protective services. Each state would
be required to submit a report to the Secretary on the number
of elders served by the grants, as specified. The provision
would authorize to be appropriated $100 million for each of FYs
2010-2013.
The provision would require the Secretary to establish
grants to states for adult protective service demonstration
programs. Funds may be used by state and local units of
government to conduct demonstration programs that test:
training modules developed for the purpose of detecting or
preventing elder abuse; methods to detect or prevent financial
exploitation and elder abuse; whether training on elder abuse
forensics enhances the detection of abuse by employees of state
or local government; and other related matters. States would be
required to submit applications to the Secretary. Each state
receiving funds would be required to submit a report on the
demonstration to the Secretary, as specified. The provision
would authorize to be appropriated $25 million for each of FYs
2010-2013 to carry out these activities.
Long-Term Care Ombudsman Program Grants and Training
Present Law
Title VII of the OAA authorizes allotments for vulnerable
elder rights protection activities, including the State Long-
Term Care Ombudsman programs administered by AoA. The purpose
of the programs are to investigate and resolve complaints made
by, or on behalf of, older persons who are residents of long-
term care facilities. There are 53 state Long-Term Care
Ombudsman programs operating in all 50 States, the District of
Columbia, Guam, and Puerto Rico, and 569 local programs as of
2007.
Title II of the OAA requires the Assistant Secretary for
Aging to establish the National Long-Term Care Ombudsman
Resource Center under the Director of the Long-Term Care
Ombudsman program. The Center is required to, through grants
and contracts, conduct research, provide training, technical
assistance and information to support the activities of state
and local long-term care ombudsmen. The Center also assists
state long-term care ombudsmen in the implementation of the
State Long-term Care Ombudsman program.
Committee Bill
The Committee Bill would require the Secretary to award
grants to eligible entities with relevant expertise and
experience in abuse and neglect in long-term care facilities or
long-term care ombudsman programs to: (1) improve the capacity
of state long-term care ombudsman programs to respond to and
resolve abuse and neglect complaints; (2) conduct pilot
programs with state or local long-term care ombudsman offices;
and (3) provide support for such state Long-Term Care Ombudsman
Programs and such pilot programs. The Committee Bill would
authorize to be appropriated $5 million for FY 2010, $7.5
million for FY 2011, and $10 million for FYs 2012 and 2013. The
Committee Bill would also require the Secretary to establish
programs to provide and improve ombudsman training with respect
to elder abuse, neglect, and exploitation for national
organizations and State Long-Term Care Ombudsman programs. The
Committee Bill would authorize to be appropriated $10 million
for each of FYs 2010-2013.
Provision of Information Regarding, and Evaluation of, Elder Justice
Programs
Present Law
No provision.
Committee Bill
To be eligible to receive a grant under Part B--Programs to
Promote Elder Justice, the Committee Bill would require an
applicant to (1) agree to provide the required information to
eligible entities conducting an evaluation of the activities
funded through the grant; and (2) in the case of an applicant
for a grant under the ``Informatics Systems Grant Program,'' as
established in the Committee Bill, to provide the Secretary
with such information as may be required by the Secretary. The
provision would require the Secretary to reserve a portion of
the funds appropriated in each program under Part B (no less
than two percent) to be used to provide assistance to eligible
entities to conduct validated evaluations of the effectiveness
of the activities funded under that program. To be eligible to
receive these funds, an eligible entity must submit an
application to the Secretary following the timing requirement
prescribed by the Secretary including a proposal for the
evaluation. Entities would be required to submit to the
Secretary and appropriate congressional committees a report
containing the results of the evaluation together with any
recommendations deemed appropriate. The report would be due by
the date specified by the Secretary. These evaluation
activities would not apply to the Informatics Systems Grant
Program, instead the Secretary would be required to conduct an
evaluation of the activities funded under these grants.
Report
Present Law
Section 402 of the Social Security Act (SSA) regarding
eligible states and state plan requirements for Temporary
Assistance to Needy Families (TANF) does not require State
agency assistance with the employment of welfare recipients or
recipients of TANF in long-term care facilities or other
occupations related to elder care.
Title XI, Part A of the SSA provides for general provisions
related to various administrative functions established under
the Act. Section 1128A of the SSA specifies conditions for
imposing civil monetary penalties, the process for determining
the amount or scope of a penalty, assessment, or exclusion, and
the process for appeal.
No present law exists concerning a National Training
Institute for surveyors or grants to state survey agencies.
No present law exists concerning Federal requirements for
mandatory reporting of elder abuse. Most states mandate certain
individuals who assume the care for older adults, including
health care providers, to report known or suspected cases of
elder abuse. However, state laws vary as to who is a mandated
reporter and who is encouraged to report incidents of elder/
adult abuse. State law also varies as to whether there are
statutory consequences for failure of mandated reporters to
report abuse and with regard to specifying a time frame within
which reporters are required to report suspicion of abuse.
If a long-term care facility that receives Federal funds
through participation in Medicare and/or Medicaid closes,
current Federal laws and regulations provide some guidance on
the parties that need to be notified and the process for
relocating residents. If a facility wants to terminate its
status as a Medicare provider (for example, due to facility
closure), the facility must notify both the CMS and the public
no later than 15 days in advance of the proposed termination
date. If a facility wants to terminate its status as a Medicaid
provider, Federal regulations do not specify a timeframe for
notifying Federal or state agencies; however, the facility is
required to notify Medicaid residents at least 30 days before
transferring or discharging them. Facility closure is one
circumstance in which a resident would need to be transferred.
The state Medicaid agency has the primary responsibility
for relocating Medicaid patients and for ensuring their safe
and orderly transfer from a facility that no longer
participates in Medicaid to a participating facility that meets
acceptable standards. CMS has provided guidance to States
concerning relocating patients. Each State is expected to have
a plan that describes the relocation of patients. Additionally,
the notice to residents is to include information as to how to
contact the state Long-Term Care Ombudsman established by the
OAA.
Medicare and Medicaid law require states to establish and
maintain a nurse aide registry of all individuals who have
satisfactorily completed a state approved nurse aide training
and competency evaluation program, or a nurse aide competency
evaluation program. No present law exists concerning a nurse
aide registry study.
Committee Bill
The Committee Bill would set forth reporting requirements
and add an option for a state's TANF plan to assist individuals
seeking employment in long-term care facilities. Not later than
October 1, 2013, the Secretary would be required to submit a
report to the Elder Justice Coordinating Council and
appropriate congressional committees, compiling, summarizing,
and analyzing state reports submitted under the Adult
Protective Services grant programs and recommendations for
legislative or administrative action. The provision would also
amend Section 402(a)(1)(B) of the SSA to add an option for a
state's TANF plan to indicate whether the state intends to
assist individuals who train for, seek, and maintain employment
providing direct care in a long-term care facility or in other
occupations related to elder care. States that add this option
would be required to provide an overview of such assistance.
The amendment would take effect on January 1, 2010.
The provision would also require the Secretary to enter
into a contract to establish and operate the National Training
Institute for Federal and state surveyors to carry out
specified activities that provide and improve the training of
surveyors investigating allegations of abuse, neglect, and
misappropriation of property in programs and long-term care
facilities that receive payments under Medicare and/or
Medicaid. The Committee Bill would authorize to be appropriated
$12 million for each of FYs 2010-2013 to carry out these
activities.
The Secretary would be required to award grants to state
survey agencies that perform surveys of Medicaid and/or
Medicare participating facilities to design and implement
complaint investigation systems, as specified. The Committee
Bill would authorize $5 million for each of FYs 2010-2013 to
carry out these activities.
The Committee Bill would amend Part A of Title XI of the
SSA by adding the following new Section 1150A related to
``Reporting to Law Enforcement of Crimes Occurring in Federally
Funded Long-Term Care Facilities.'' It would require the
reporting of crimes occurring in Federally funded long-term
care facilities that receive at least $10,000 during the
preceding year. The owner or operator of these facilities would
be required to annually notify each individual who is an owner,
operator, employee, manager, agent, or contractor of a long-
term care facility that they are required to report any
reasonable suspicion of a crime against any person who is a
resident of or receiving care from the facility. These
individuals are referred to in this section as ``covered
individuals.'' Suspected crimes must be reported to the
Secretary and one or more law enforcement entities for the
political subdivision in which the facility is located.
If the events that cause the suspicion of a crime result in
serious bodily injury, the covered individual must report the
suspicion immediately, but not later than two hours after
forming the suspicion. If the events that cause the suspicion
do not result in serious bodily injury, the individual must
report the suspicion not later than 24 hours after forming the
suspicion. If a covered individual does not report suspicion of
a crime within the timeframe described above, the individual
will be subject to a civil money penalty of up to $200,000, or
the Secretary would be required to classify the individual as
an ``excluded individual'' (i.e., any employer of the
individual is unable to receive Federal funds) for a period of
not more than three years.
If a covered individual does not report his/her suspicion
of a crime within the timeframe described above and this
violation exacerbates the harm to the victim, or results in
harm to another person, the individual will be subject to a
civil money penalty of up to $300,000, and the Secretary shall
classify the individual as an ``excluded individual'' (i.e.,
any employer of the individual is unable to receive Federal
funds) for a period of not more than three years. If an
individual is classified as an ``excluded individual,'' any
entity that employs that individual will not be eligible to
receive Federal funds. The Secretary would be authorized to
take into account the financial burden on providers with
underserved population, as defined, in determining any penalty
to be imposed under this section.
A long-term care facility may not retaliate against an
employee for making a report, causing a report to be made, or
for taking steps to make a report. Retaliation includes
discharge, demotion, suspension, threats, harassment, denial of
a promotion or other employment-related benefit, or any other
manner of discrimination against an employee in the terms and
conditions of employment because of lawful acts done by the
employee. Long-term care facilities may also not retaliate
against a nurse by filing a complaint or report with the
appropriate State professional disciplinary agency because of
lawful acts done by the nurse. If a long-term care facility
does retaliate, it would be subject to a civil money penalty of
up to $200,000, or the Secretary may exclude it from
participation in any Federal health care program for a period
of two years. Each long-term care facility must post
conspicuously, in an appropriate location, a sign specifying
the rights of employees under this section, as described.
The Committee Bill would also amend Part A of Title XI of
the SSA to add a new section ``Ensuring Safety of Residents
when Federally Funded Long-Term Care Facilities Close.'' The
new Section 1150B would require the owner or operator of a
long-term care facility (that receives at least $10,000 in
Federal funds during the previous year) to submit to the
Secretary and the appropriate State regulatory agency written
notification of an impending closure within 60 days prior to
the closure. In the notice, the owner or operator must include
a plan for transfer and adequate relocation of residents, as
specified. Within ten days after the facility closes, the owner
or operator of the facility must submit to the Secretary, and
the appropriate state agency, information on where the
residents were transferred to and when. In the case of a long-
term care facility for which the Secretary has issued a
termination notice for the facility to close by no later than
15 days after issuance of such notice, the Secretary would be
required to establish requirements for the notification,
transfer, and adequate relocation of residents within an
appropriate timeframe.
Anyone who owns a skilled nursing facility that fails to
comply with the notification of closure and reporting
requirements would be subject to a civil monetary penalty of up
to $1 million, exclusion from participation in the programs
under the SSA, and any other applicable civil monetary
penalties and assessments. A civil monetary penalty or
assessment will be imposed in the same manner as a civil
monetary penalty, assessment or exclusion under Section 1128A
of the SSA (other than subsection (a) and (b) and the second
sentence of subsection (f)).
The Secretary, in consultation with appropriate government
agencies and private sector organizations, would be required to
conduct a study on establishing a national nurse aide registry
that includes an evaluation, as specified. In conducting the
study and preparing the report the Secretary would be required
to take into consideration the findings and conclusion of
relevant reports and resources, as specified. Not later than 18
months after the date of enactment of the Committee Bill, the
Secretary would be required to submit a report to the Elder
Justice Coordinating Council and appropriate congressional
committees containing the findings and recommendations of the
study. The Committee Bill would require funding not to exceed
$500,000 for this study. It would also require the appropriate
congressional committees to take appropriate action based on
the recommendations contained in the report. The Committee Bill
would authorize to be appropriated such sums as may be
necessary to carry these activities.
Subtitle L--Provisions of General Application
SEC. 1921. PROTECTING AMERICANS AND ENSURING TAXPAYER FUNDS IN
GOVERNMENT HEALTH CARE PLANS DO NOT SUPPORT OR FUND PHYSICIAN-ASSISTED
SUICIDE; PROHIBITION AGAINST DISCRIMINATION ON ASSISTED SUICIDE
Present Law
Section 3 of the Assisted Suicide Funding Restriction Act
of 1997 (P.L. 105-12) prohibits funds appropriated by Congress
to be used to (1) provide any health care item or service
furnished for the purpose of causing, or assisting in causing,
the death of any individual, such as by assisted suicide,
euthanasia, or mercy killing; (2) pay for such an item or
service, including payment of expenses relating to such an item
or service; or (3) pay for health benefit coverage that
includes any coverage of such an item or service or of any
related expenses. Nothing in the Act is construed to apply to
or to affect any limitation related to (1) the withholding or
withdrawing of medical treatment or medical care; (2) the
withholding or withdrawing of nutrition or hydration; (3)
abortion; or (4) the use of an item, good, benefit, or service
furnished for the purpose of alleviating pain or discomfort,
even if such use may increase the risk of death, so long as it
is not also furnished for the purpose of causing, or assisting
in causing, death. These funding restrictions apply to the
following programs: Medicare, Medicaid, Title XX Social
Services Block Grant, Maternal and Child Health Block Grant,
Public Health Service Act, Indian Health Care Improvement Act,
Federal Employees Health Benefits Program, Military Health Care
System (including Tricare and CHAMPUS), Veterans Medical Care,
health services for Peace Corps volunteers, and medical
services for Federal prisoners.
With respect to health care items or services, Section 3 of
the Act also prohibits an item or service furnished for the
purpose of causing, or assisting in causing, the death of any
individual, such as by assisted suicide, euthanasia, or mercy
killing from being furnished by or in a health care facility
owned or operated by the Federal government, or by any
physician or other individual employed by the Federal
government. This applies to facilities and personnel of the
Military Health Care System, Veterans Medical Care, and the
Public Health Service.
Committee Bill
The provision would prohibit the Federal government, and
any State or local government or health care provider that
receives Federal financial assistance under this Committee Bill
(or under an amendment made by this Committee Bill) or any
health plan created under this Committee Bill (or under an
amendment made by this Committee Bill) from (1) paying for or
reimbursing any health care entity to provide for any health
care item or service furnished for the purpose of causing, or
for the purpose of assisting in causing, the death of any
individual, such as by assisted suicide, euthanasia, or mercy
killing and (2) subjecting an individual or institutional
health care entity to discrimination on the basis that the
entity does not provide any health care item or service
furnished for the purpose of causing, or assisting in causing,
the death of any individuals, such as by assisted suicide,
euthanasia, or mercy killing. The HHS Office of Civil Rights
would be designated to receive complaints of discrimination on
this basis.
Nothing in the above would be construed to apply or to
affect any limitation relating to (1) the withholding or
withdrawing of medical treatment or medical care; (2) the
withholding or withdrawing of nutrition or hydration; (3)
abortion; or (4) the use of an item, good, benefit, or service
furnished for the purpose of alleviating pain or discomfort,
even if such use may increase the risk of death, so long as it
is not also furnished for the purpose of causing, or assisting
in causing, death.
SEC. 1922. PROTECTION OF ACCESS TO QUALITY HEALTH CARE THROUGH THE
DEPARTMENT OF VETERANS AFFAIRS AND THE DEPARTMENT OF DEFENSE
Present Law
No comparable provision. In general, eligibility for health
care services provided by the Department of Veterans Affairs
(VA) is based primarily on veteran's status, disability
resulting from military service, and income. Veterans generally
must enroll in the VA health care system to receive inpatient
and outpatient medical care. VA provides this care through its
network of medical centers, nursing homes, and community-based
outpatient clinics (CBOCs). Under certain circumstances, VA
also pays for care provided to veterans by independent
providers and practitioners on a fee basis. Eligible dependents
of veterans receive inpatient and outpatient care in the
private sector under the Civilian Health and Medical Program of
the Department of Veterans Affairs (CHAMPVA).
The Department of Defense (DOD) health care system and its
health plan known as ``TRICARE,'' offers benefits to active
duty personnel and other beneficiaries, including dependents of
active duty personnel, military retirees, and dependents of
retirees. TRICARE has four main benefit plans including a
health maintenance organization option (TRICARE Prime), a
preferred provider option (TRICARE Extra), a fee-for-service
option (TRICARE Standard), and a Medicare wrap-around option
(TRICARE for Life) for Medicare-eligible retirees. Options
available to beneficiaries vary by the beneficiary's duty
status and location. The DOD health system provides health care
services through either its own medical treatment facilities,
as space is available, or, through private health care
providers.
Committee Bill
The Committee Bill stipulates that nothing in the bill
shall prohibit or penalize veterans, eligible military health
care beneficiaries, or their eligible family members from
receiving timely access to quality health care from a VA or DOD
medical treatment facility or a contracted health care provider
(TRICARE or TRICARE for Life).
SEC. 1923. CONTINUED APPLICATION OF ANTITRUST LAW
Present Law
Current policy is that absent the provision of a specific
antitrust exemption, one is generally not implied. Thus, the
antitrust laws are generally assumed to apply to any market
participant's behavior.
Committee Bill
The section makes clear that no provision in the Act
``shall be construed to modify, impair, or supersede the
operation of any of the antitrust laws.'' ``Antitrust laws''
are defined as those laws set out in subsection (a) of the
first section of the Clayton Act (15 U.S.C. Sec. 12(a), i.e.,
the Sherman Act (15 U.S.C. Sec. Sec. 1-7, the Wilson Tariff Act
(15 U.S.C. Sec. Sec. 8-11), and the Clayton Act itself (15
U.S.C. Sec. Sec. 12-27)); and also includes section 5 of the
Federal Trade Commission Act (15 U.S.C. Sec. 45) to the extent
that it applies to ``unfair methods of competition.''
Title II--Promoting Disease Prevention and Wellness
Subtitle A--Medicare
SEC. 2001. COVERAGE OF ANNUAL WELLNESS VISIT PROVIDING A PERSONALIZED
PREVENTION PLAN
Present Law
In addition to a number of specific preventive services
enumerated in law, Medicare covers a one-time initial
preventive physical examination (IPPE), with no deductible. The
IPPE is reimbursable only if provided within one year of
Medicare Part B enrollment. Medicare does not otherwise cover
periodic routine health examinations.
The United States Preventive Services Task Force (USPSTF),
administered by the Health and Human Services Agency for
Healthcare Research and Quality (AHRQ), is an independent panel
of private-sector experts in primary care and prevention that
assesses scientific evidence of the effectiveness of clinical
preventive services, including screening, counseling, and
preventive medications. It provides evidence-based
recommendations for the use of preventive services, which may
vary depending on age, gender, and risk factors for disease,
among other considerations. Services are given a rating of A,
B, C, D or I. Services rated A or B are recommended. For
services rated C, USPSTF makes no recommendation for or against
their routine use. For services rated D, USPSTF recommends
against routinely providing the service to asymptomatic
patients, based on evidence that the service is not beneficial
and may be harmful. Finally, services rated I are deemed to
have insufficient evidence to recommend for or against their
routine use.
Committee Bill
Beginning in 2011, Medicare would cover an annual wellness
visit and personalized prevention plan services. Such services
would include a comprehensive health risk assessment, to be
completed prior to or as part of a visit with a health
professional. Health professionals authorized to conduct such a
visit would be physicians, physician assistants, nurse
practitioners, clinical nurse specialists, certified registered
nurse anesthetists, certified nurse-midwives, clinical social
workers, clinical psychologists, other medical professionals
(including health educators, registered dietitians, or
nutrition professionals), or a team of medical professionals,
as determined appropriate by the Secretary, under the
supervision of a physician.
The personalized prevention plan would take into account
the findings of the health risk assessment and include the
following required elements: review and update of medical and
family history; a five- to ten-year screening schedule and
referral for services recommended by USPSTF; a list of
identified risk factors and conditions and a strategy to
address them; a list of all medications currently prescribed
and all providers regularly involved in the patient's care;
health advice and referral to education and preventive
counseling or community-based interventions to address
modifiable risk factors such as weight, physical activity,
smoking, and nutrition; measurement of height, weight, body
mass index (or waist circumference, if appropriate), and blood
pressure; and other elements determined appropriate by the
Secretary. Optional elements could include review or referral
for testing and treatment of possible chronic conditions, a
cognitive impairment assessment, and administration of or
referral for appropriate Medicare-covered immunizations and
screening tests, among others.
Within one year of enactment, the Secretary would be
required to publish guidelines for health risk assessments and
a health risk assessment model. Guidelines would identify
chronic diseases, modifiable risk factors, and urgent health
needs. The assessment could be provided through an interactive
telephonic or web-based program, during an encounter with a
health professional, or through other means established by the
Secretary. The Secretary would be required to set standards for
the electronic tools that could be used to deliver the
assessment, take steps to make beneficiaries and providers
aware of the need to conduct such assessment prior to or in
conjunction with receipt of the personalized prevention plan
service; and encourage the use of appropriate health
information technology in carrying out these activities.
All enrolled beneficiaries would be eligible for the
wellness visit once every year. No co-payment or deductible
would apply. The Secretary would be required to issue guidance
regarding the frequency at which specific elements of the plan
must be furnished. During the first year of Part B enrollment,
beneficiaries could receive either the IPPE or the personalized
prevention plan service, but not both. All required and
optional plan elements must be covered for the first
personalized prevention plan visit.
The amendments made by this section would apply to services
furnished on or after January 1, 2011.
SEC. 2002. REMOVAL OF BARRIERS TO PREVENTIVE SERVICES
Present Law
In general, Medicare authorizes the Secretary to cover
services for the diagnosis and treatment of illness, while
coverage of preventive services has generally required
legislation. Section 1861 of the Social Security Act requires
coverage of a number of specified preventive services under
Medicare Part B, but there is no definition of preventive
services in the law that refers to them collectively. The
Social Security Act outlines specific coverage criteria for
many preventive services, including factors such as the types
of screenings covered and the age or risk profiles to which a
service applies. Also, in section 101 of the Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA,
P.L. 110-275), Congress provided administrative authority for
the Secretary to add coverage of additional preventive
services, if, among other things, such a service is recommended
with a grade of A or B by the USPSTF. Under Present Law,
beneficiaries would not be required to make a co-payment for
any additional preventive service covered under this new
authority, but the deductible would apply.
Section 1833(a) of the Social Security Act establishes
coinsurance for the beneficiary, generally requiring Medicare
to cover 80 percent of the costs of covered services under Part
B, with specified exceptions. Section 1833(b) establishes an
annual deductible for which the beneficiary is responsible.
These sections have been amended over the years to waive
coinsurance and/or the deductible for many, but not all,
covered preventive services.
Committee Bill
The Committee Bill would amend section 1861 of the Social
Security Act to define preventive services covered by Medicare
to mean a specified list of currently covered services,
excluding an electrocardiogram, and including colorectal cancer
screening services regardless of the code applied. The list
would also include the IPPE, and the personalized prevention
plan services that would be covered pursuant to section 2001 of
the Committee Bill. This provision would also clarify the
definition of additional preventive services that could be
added pursuant to the Secretary's authority. Coverage would
continue to be subject to all criteria that apply to each
listed preventive service under Present Law.
The Committee Bill would amend section 1833(a) of the
Social Security Act to waive beneficiary coinsurance
requirements for most preventive services, requiring Medicare
to cover 100 percent of the costs. Services for which no
coinsurance would be required are the IPPE, personalized
prevention plan services, any additional preventive service
covered under the Secretary's administrative authority, and any
currently covered preventive service (including medical
nutrition therapy and excluding electrocardiograms) if it is
recommended with a grade of A or B by the USPSTF. The
subsection would make conforming amendments to clarify that the
above waivers of coinsurance would apply when such services
were furnished by hospital outpatient departments.
The Committee Bill would generally waive the application of
the deductible for the same types of preventive services for
which coinsurance would be waived. The deductible waiver would
apply to colorectal cancer screening services even if, as noted
above, diagnostic or treatment services were furnished in
connection with the screening. This provision would not,
however, waive the application of the deductible to any
additional preventive service covered under the Secretary's
administrative authority.
The amendments made by this section would apply to services
furnished on or after January 1, 2011.
SEC. 2003. EVIDENCE-BASED COVERAGE OF PREVENTIVE SERVICES
Present Law
Although the Secretary has the authority to add additional
preventive services if, among other things, the USPSTF
recommends such services, the Secretary is not authorized to
modify any statutory criteria for the coverage of currently
authorized preventive services. Such criteria do not always
comport with current USPSTF recommendations regarding the use
of these services.
Committee Bill
The Committee Bill would authorize the Secretary to modify
the coverage of any currently covered preventive service
(including services included in the IPPE, but not the IPPE
itself), to the extent that the modification is consistent with
USPSTF recommendations. The Committee Bill would also prohibit
payment for any currently covered preventive service rated D by
the USPSTF. The enhanced authority and the prohibition would
not apply to services furnished for the purposes of diagnosis
or treatment. The Committee Bill would appropriate $15 million
from the Treasury to the Centers for Medicare & Medicaid
Services (CMS) for FY2010, to remain available until expended,
for a provider and beneficiary outreach program regarding
covered preventive services. The Secretary would be authorized
to use up to $1 million of these funds to study and report to
Congress certain aspects of preventive services coverage under
Medicare.
The Committee Bill would also appropriate $2 million for a
Government Accountability Office (GAO) study of the utilization
of and payment for Medicare covered preventive services, the
use of health information technology in coordinating such
services, and whether there are barriers to the utilization of
such services.
SEC. 2004. GAO STUDY AND REPORT ON MEDICARE BENEFICIARY ACCESS TO
VACCINES
Present Law
Medicare coverage and administration of vaccines is
established in statute. Section 1861(s) of the Social Security
Act provides Medicare Part B coverage and administration of
three vaccines: influenza, pneumococcal, and for individuals at
increased risk, hepatitis B. The Medicare Modernization Act of
2003 (MMA, P.L. 108-173) provided coverage and administration
of any other vaccine that is approved by the Food and Drug
Administration under Part D (when prescribed by a physician).
Committee Bill
The Committee Bill would require a GAO study and report to
Congress on coverage of vaccines under Medicare Part D and the
impact on access to those vaccines. The Committee Bill would
appropriate from the Treasury $1 million for FY2010 for this
study.
SEC. 2005. INCENTIVES FOR HEALTHY LIFESTYLES
Present Law
No provision.
Committee Bill
The Committee Bill would require the Secretary to conduct a
Medicare demonstration project to test programs that provide
incentives to reduce the risk of avoidable health problems
associated with lifestyle choices, including smoking, exercise,
and diet. Prior to establishing the initiative, the Secretary
would review evidence concerning healthy lifestyle programs and
provide incentives to individuals for participating in such
programs. The Secretary would be required to select not more
than 10 project sites, according to specific criteria; to
conduct the project for an initial period of three years,
beginning not later than July 1, 2010; and to continue for an
additional two years any program or program component that is
determined to be effective. The project would include evidence-
based approaches for tobacco cessation; management of weight,
cholesterol, and blood pressure; diabetes prevention or
management; falls prevention; and other effective approaches as
determined by the Secretary.
Each participating site would be required to monitor
participation, validate changes in health risks and outcomes,
and establish standards and health status targets among
participating beneficiaries. The Secretary would be required to
submit an interim report to Congress by January 1, 2014, that
includes a preliminary evaluation of the project (including an
independent evaluation of any impact on utilization of health
services and costs to the Medicare program) and any programs or
parts of the project that are determined to be effective that
will be authorized to continue for another two years. The
Secretary would be required to submit a final report on the
program to Congress by January 1, 2016, including any
recommendations for legislative and administrative action.
Any incentives provided to a participating Medicare
beneficiary could not be taken into account in determining the
beneficiary's eligibility for, or amount of benefits under, any
Federal program.
To carry out this program, the Committee Bill would
appropriate from the Treasury to CMS $15 million for each of
six fiscal years 2010 through 2015. Funds would remain
available until expended. Of these amounts, $5 million would be
available for the required evaluations.
Subtitle B--Medicaid
SEC. 2101. IMPROVING ACCESS TO PREVENTIVE SERVICES FOR ELIGIBLE ADULTS
Present Law
The United States Preventive Services Task Force (USPSTF),
administered by the Health and Human Services Agency for
Healthcare Research and Quality (AHRQ), is an independent panel
of private-sector experts in primary care and prevention that
assesses scientific evidence of the effectiveness of clinical
preventive services, including screening, counseling, and
preventive medications. It provides evidence-based
recommendations for the use of preventive services, which may
vary depending on age, gender, and risk factors for disease,
among other considerations. Services are given a rating of A,
B, C, D or I. Services rated A or B are recommended. For
services rated C, USPSTF makes no recommendation for or against
their routine use. For services rated D, USPSTF recommends
against routinely providing the service to asymptomatic
patients, based on evidence that the service is not beneficial
and may be harmful. Finally, services rated I are deemed to
have insufficient evidence to recommend for or against their
routine use.
Under Medicaid, states are required to cover a package of
well-child and preventive service benefits for the majority of
eligible children under the age of 21, called the early and
periodic screening, diagnostic, and treatment (EPSDT) services.
For eligible beneficiaries including adults, states are
required to cover family planning services and supplies, and
certain pregnancy-associated services, including prenatal,
delivery and postpartum care. Otherwise, state coverage of
screening and preventive services for eligible adults is
optional.
With some exceptions, premiums and enrollment fees are
generally prohibited under traditional Medicaid. When premiums
and enrollment fees are applicable, nominal amounts for such
charges range from roughly $1 to $19 per month, depending on
family income. States are also allowed to establish nominal
service-related cost-sharing requirements, which generally
range from $0.50 to $3, depending on the cost of the service
provided.
The Deficit Reduction Act of 2005 (DRA, P.L. 109-171) gave
states an option to apply higher premium and cost-sharing
obligations to certain Medicaid beneficiaries. As with
traditional Medicaid, specific groups (e.g., some children,
pregnant women, and individuals with special needs) are exempt
from the DRA premium provisions. Likewise, specific services
and groups (e.g., some children, pregnant women for pregnancy-
related services, individuals receiving hospice care, and
residents of certain institutions) are exempt from service-
related cost-sharing under both traditional Medicaid and the
DRA.
Committee Bill
The current state option to provide other diagnostic,
screening, preventive, and rehabilitation services would be
expanded to include: (1) any clinical preventive service
assigned a grade of A or B by the USPSTF and (2) with respect
to adults, immunizations recommended by the Advisory Committee
on Immunization Practices (ACIP) and their administration.
States that elect to cover these additional services and
vaccines, and also prohibit cost-sharing for such services and
vaccines, would receive an increased Federal medical assistance
percentage (FMAP) of one percentage point for these services,
and for counseling and pharmacotherapy for cessation of tobacco
use by pregnant women (described below). The effective date for
this provision would be January 1, 2013.
SEC. 2102. COVERAGE OF COMPREHENSIVE TOBACCO CESSATION SERVICES FOR
PREGNANT WOMEN
Present Law
Under the optional Medicaid prescription drug benefit,
states are permitted to exclude coverage of 11 drug classes,
including barbiturates, benzodiazepine, and smoking cessation
products. Medicaid programs may cover tobacco cessation
counseling services for pregnant women.
With some exceptions, premiums and enrollment fees are
generally prohibited under traditional Medicaid. When premiums
and enrollment fees are applicable, nominal amounts for such
charges range from roughly $1 to $19 per month, depending on
family income. States are also allowed to establish nominal
service-related cost-sharing requirements, which generally
range from $0.50 to $3, depending on the cost of the service
provided.
The Deficit Reduction Act of 2005 (DRA, P.L. 109-171) gave
states an option to apply higher premium and cost-sharing
obligations to certain Medicaid beneficiaries. As with
traditional Medicaid, specific groups (e.g., some children,
pregnant women, and individuals with special needs) are exempt
from the DRA premium provisions. Likewise, specific services
and groups (e.g., some children, pregnant women for pregnancy-
related services, individuals receiving hospice care, and
residents of certain institutions) are exempt from service-
related cost-sharing under both traditional Medicaid and the
DRA.
Committee Bill
States would be required to provide Medicaid coverage for
counseling and pharmacotherapy to pregnant women for cessation
of tobacco use. Such services would include diagnostic, therapy
and counseling services, and pharmacotherapy (including the
coverage of prescription and nonprescription tobacco cessation
agents approved by the Food and Drug Administration) for
cessation of tobacco use by pregnant women. These services
would be limited to those recommended for pregnant women in
``Treating Tobacco Use and Dependence'' (published by the
Public Health Service in May 2008, or any subsequent
modification of such Guideline), and other services that the
Secretary recognizes to be effective for cessation of tobacco
use by pregnant women. These services would exclude coverage
for drugs or biologics that are not otherwise covered under
Medicaid.
With respect to the prescription drug benefit under
Medicaid, states would continue to be allowed to exclude
coverage of agents used to promote smoking cessation, except in
the case of pregnant women, in accordance with this provision
as described above.
Finally, the Committee Bill would prohibit cost-sharing
under traditional Medicaid for counseling and pharmacotherapy
provided to pregnant women for cessation of tobacco use, as
well as for covered outpatient prescription and non-
prescription drugs used by pregnant women to promote tobacco
cessation. With respect to the DRA cost-sharing option, the
provision would also prohibit cost-sharing for counseling and
pharmacotherapy provided to pregnant women for cessation of
tobacco use.
These provisions would take effect on October 1, 2010.
SEC. 2103. INCENTIVES FOR HEALTHY LIFESTYLES
Present Law
No provision.
Committee Bill
The Secretary of HHS would award grants to states to
provide incentives for Medicaid beneficiaries to participate in
programs providing incentives for healthy lifestyles. These
programs must be comprehensive and uniquely suited to address
the needs of Medicaid-eligible beneficiaries and must have
demonstrated success in helping individuals lower or control
cholesterol and/or blood pressure, lose weight, quit smoking
and/or manage or prevent diabetes, and may address co-
morbidities, such as depression, associated with these
conditions. The purpose of this initiative is to test
approaches that may encourage behavior modification and
determine scalable solutions.
The Committee Bill authorizes $100 million in funding for
these grants during a five-year period. The Secretary shall
award grants beginning on January 1, 2011 or when the Secretary
develops program criteria, whichever comes first. These
criteria will be developed using relevant evidence-based
research including the Guide to Community Preventive Services,
the Guide to Clinical Preventive Services, and the National
Registry of Evidence-Based Programs and Practices. State
initiatives shall last at least 3 years and must be carried out
during the five-year authorization period.
In order to carry out this initiative the Secretary may
waive Medicaid requirements related to statewideness and
comparability.
The Secretary would set targets for measuring health status
improvements. After the Secretary develops criteria and
institutes an outreach and education campaign to make states
aware of the grants, states could design a proposal and apply
for such funds to provide incentives to Medicaid enrollees who
successfully complete healthy lifestyle programs. States are
permitted to collaborate with community-based programs, non-
profit organizations, providers, and faith-based groups, among
others. The state is required to establish a system to monitor
beneficiary participation and validate health outcomes,
establish standards and health status targets for participants,
evaluate the effectiveness of the program and provide the
Secretary with these evaluations, report to the Secretary on
processes that have been developed and lessons learned, and
report on preventive services as part of reporting on quality
measures of Medicaid managed care programs. A state awarded a
grant shall submit semi-annual reports including information on
the specific use of the funds, an assessment of program
implementation, an assessment of quality improvements, and an
estimate of the cost savings resulting from such program.
The Committee Bill provides for an independent assessment
of the initiatives as well. An initial report shall be
submitted to Congress by the Secretary no later than January 1,
2014. This initial report shall include an interim evaluation
based on information provided by the states and a
recommendation regarding whether funding for expanding or
extending the initiatives should continue beyond January 1,
2016. A final report would be submitted not later than July 1,
2016 that would include the independent assessment together
with recommendations for appropriate legislative and
administrative actions.
Any incentives received by a beneficiary shall not be taken
into account for the purpose of determining eligibility for, or
the amount of benefits under, any program funded with Federal
funds.
SEC. 2104. STATE OPTION TO PROVIDE HEALTH HOMES FOR ENROLLEES WITH
CHRONIC CONDITIONS
Present Law
No provision.
Committee Bill
Beginning January 1, 2011, the Committee Bill would
establish a new Medicaid state plan option under which Medicaid
enrollees with: (1) at least two chronic conditions or (2) one
chronic condition and at risk of having a second chronic
condition (including a serious and persistent mental health
condition), could designate a provider as a health home.
Qualifying health home providers, including providers that work
in teams of health care professionals, would provide:
comprehensive, timely, and high-quality care management; care
coordination and health promotion; transitional care, including
appropriate follow-up from inpatient to other settings; patient
and family support; referral to community and social support
services, if relevant; and use of health information technology
to link services, as feasible and appropriate.
Health home providers would include physicians, clinical
practice or clinical group practices, rural clinics, community
health centers, community mental health centers, home health
agencies, or other entities or providers (including
pediatricians and obstetricians) approved by the Secretary.
They would be required to meet certain standards established by
the Secretary and to demonstrate that they have the systems and
infrastructure in place to provide health home services. Teams
of health care professionals would include physicians and other
professionals, such as a nurse care coordinator, nutritionist,
social worker, behavioral health professional, or any
professional deemed appropriate by the state. Such teams could
be free-standing, virtual, or based at a hospital, community
health clinic, clinical practice, clinical group practice, or
academic health center, as deemed appropriate by the state and
approved by the Secretary.
States would be required to make Medicaid payments to each
provider, or to the team of health home professionals, for the
health home services it provides to each eligible participant.
The state would be required to specify the methodology it would
use to pay health home providers in its state plan amendment.
Such methodologies would be required to result in sufficient
payments to enlist enough providers in a geographic area, and
be consistent with efficiency, economy, and quality of care,
among other requirements. Methodologies could also be tiered to
reflect the severity or number of each individual's chronic
conditions, and the specific capabilities of the provider or
team. Methodologies would not be limited to a per-member per-
month payment.
States would be reimbursed by the Federal government at an
enhanced FMAP rate of 90 percent for these payments for the
first eight fiscal quarters that the state plan amendments
would be in effect. In addition, the Secretary would award
planning grants to states, the total of which could not exceed
$25 million, to develop state plan amendments for health home
services. States must also contribute its state's share for
each fiscal year for which the grant is awarded.
States would be required to mandate Medicaid-participating
hospitals to establish procedures for referring any eligible
individual with chronic conditions who seeks or needs treatment
in a hospital emergency department to designated providers. As
appropriate, states would also be required to consult and
coordinate with the Substance Abuse and Mental Health Services
Administration in addressing the prevention and treatment of
mental illness and substance abuse among eligible individuals
with chronic conditions.
The state plan amendment would include methodology for
tracking avoidable hospital readmissions and calculating
savings that result from improved chronic care coordination and
management. It would also include a proposal for the use of
health information technology in providing these Medicaid-
covered health home services and in improving service delivery
and coordination across the care continuum.
Designated providers would be required to report to the
state on all applicable measures, in accordance with
requirements specified by the Secretary, to determine the
quality of such services. When appropriate and feasible, a
designated provider would be required to use health information
technology to provide the state with such information.
The Secretary would be allowed to establish higher levels
of eligibility in regards to the number or severity of chronic
or mental health conditions. Chronic conditions would include,
a mental health condition, substance abuse, asthma, diabetes,
heart disease, and being overweight, as evidenced by a body
mass index (BMI) over 25.
No later than January 1, 2013, the Secretary would be
required to enter into a contract with an independent entity or
organization to conduct an evaluation and assessment of the
states that have elected the option to provide coordinated care
through a health home for Medicaid beneficiaries with chronic
conditions to determine its effect on reducing hospital
readmissions, emergency room visits, and admissions to skilled
nursing facilities. The Secretary would be required to report
to Congress on this evaluation and assessment no later than
January 1, 2017.
No later than January 1, 2014, the Secretary would be
required to survey states and report to Congress on the nature,
extent, and use of this option, particularly as it pertains to
hospital admission rates, chronic disease management, and
coordination of care for individuals with chronic conditions,
among others. States would be required to report to the
Secretary, as necessary, on processes that have been developed
and lessons learned.
SEC. 2105. FUNDING FOR CHILDHOOD OBESITY DEMONSTRATION PROJECT
Present Law
The Children's Health Insurance Program Reauthorization Act
of 2009 (CHIPRA, P.L. 111-3) included several provisions
designed to improve the quality of care under Medicaid and
CHIP. Among other quality initiatives this law directed the
Secretary to initiate a demonstration project to develop a
comprehensive and systematic model for reducing childhood
obesity. Twenty-five million dollars was authorized to be
appropriated over fiscal years 2009 through 2013.
Committee Bill
The Committee Bill authorizes and appropriates $25 million
for the childhood obesity demonstration project and adjusts the
demonstration time period to fiscal years 2010 through 2014.
SEC. 2106. PUBLIC AWARENESS OF PREVENTIVE AND OBESITY-RELATED SERVICES
Present Law
No provision.
Committee Bill
This Committee Bill would require the Secretary to provide
guidance and relevant information to states and health care
providers regarding preventive and obesity-related services
that are available to Medicaid enrollees, including obesity
screening and counseling for children and adults. Each state
would be required to design a public awareness campaign to
educate Medicaid enrollees regarding availability and coverage
of such services. The Secretary would be required to report to
Congress on these efforts, beginning on January 1, 2011, and
every three years thereafter, through January 1, 2017.
Title III--Improving the Quality and Efficiency of Health Care
Subtitle A--Transforming the Health Care Delivery System
PART I--LINKING PAYMENT TO QUALITY OUTCOMES UNDER THE MEDICARE SYSTEM
SEC. 3001. HOSPITAL VALUE-BASED PURCHASING PROGRAM
Present Law
As required by the Medicare Prescription Drug, Improvement
and Modernization Act (MMA, P.L. 108-173), since FY2005, acute
care hospitals that submit required quality data have received
higher payments than those hospitals that do not submit such
information under Medicare's Reporting Hospital Quality Data
for Annual Payment Update (RHQDAPU) program (often referred to
as the hospital pay-for-reporting program or P4R program). As
subsequently modified by Section 5001(a) of the Deficit
Reduction Act of 2005 (DRA, P.L. 109-171), beginning in FY2007,
hospitals were required to submit data for an expanded set of
quality measures to participate in the RHQDAPU program, and
nonparticipating hospitals received a reduction of 2.0
percentage points in their Medicare annual update for that
fiscal year.
The Secretary has the authority to expand the set of
measures that are included in the RHQDAPU program.
Specifically, the Secretary can add other measures that reflect
consensus among affected parties and, to the extent feasible
and practicable, can include measures set forth by one or more
national consensus building entities. The Secretary may replace
any measures or indicators in appropriate cases, such as where
all hospitals are effectively in compliance or the measures or
indicators have been subsequently shown not to represent the
best clinical practice.
Currently, there are 44 quality measures collected in the
RHAQDPU program that impact the FY2010 payment update. In some
cases, the Centers for Medicare and Medicaid Services (CMS)
gathers quality information by abstracting claims data. In
these instances, hospitals are not required to report data on
these specific measures since the information is collected
directly by CMS. Today, the RHAQDPU program collects quality
data on the following conditions: acute myocardial infarction
(AMI); heart failure; pneumonia; and surgical care improvement.
The program also collects information on 30-day mortality rates
for AMI, heart failure and pneumonia patients; readmission
rates for heart failure, AMI, and pneumonia; a nursing
sensitive measure; several Agency for Health Care Research and
Quality (AHRQ) Patient Safety and Inpatient Quality Indicators;
a indicator for participation in the cardiac surgery data base;
and patients' experience of care through the Hospital Consumer
Assessment of Healthcare Providers and Systems (HCAHPS) survey.
Procedures for making reported quality data available to
the public must be established and hospitals must be granted
the opportunity to review quality data prior to such
information being made public. The required quality measures of
process, structure, outcome, patients' perspectives on care,
efficiency, and costs of care that relate to services furnished
in inpatient settings in hospitals must be reported on the
Internet website of CMS. Currently, individual hospital
performance on specific quality measures and on certain
conditions is available on Hospital Compare available on the
CMS website.
DRA also required the Secretary to formulate and report on
a plan to implement a value-based purchasing program for
payments under the Medicare program for acute care hospitals
(also referred to as IPPS or subsection (d) hospitals)
beginning with FY2009. On November 17, 2007, CMS responded to
this mandate by releasing the report, ``Report to Congress:
Plan to Implement a Medicare Hospital Value-Based Purchasing
Program.'' This report recommends expanding the RQHDAPU program
in order to financially reward hospitals differentially for
performance, rather than for simply reporting quality data.
Public reporting of performance would be a key component, as
well.
As of 2008, nearly 95 percent of the acute care hospitals
successfully participated in the RHAQDPU program, which means
that the majority of the hospitals paid under Medicare's
inpatient prospective payment system (IPPS) complied with the
quality data reporting requirements and were not subject to
payment penalties that would have occurred in the case of not
meeting the reporting requirements.
Committee Bill
Starting for discharges on October 1, 2012, the Secretary
would establish a hospital value-based purchasing (VBP) program
in Medicare to provide incentive payments to acute care
hospitals (referred to as subsection (d) hospitals) that meet
established performance standards for the performance period in
a fiscal year. The first year of the program would be a data
collection/performance baseline year. Beginning in FY2013,
hospital payments would be adjusted based on performance under
the VBP program. Certain hospitals would be excluded from the
VBP program, including those that fail to report quality
measures under the RHQDAPU program; those that have been cited
by the Secretary for deficiencies that posed immediate jeopardy
to the health or safety of patients during the performance
period; and hospitals for which a minimum number of patients
with conditions related to the quality measures or a minimum
number of quality measures do not apply. The Secretary would
conduct an independent analysis to determine the standard to
determine these minimum numbers.
The Secretary would select measures for the hospital VBP
program from those used in the RHQDAPU program. In FY2013, the
measures would cover at least the following five conditions:
heart attack (AMI); heart failure; pneumonia; surgeries (as
measured by the Surgical Care Improvement Project); patient
perception of care; and healthcare-associated infections (as
measured by the prevention metrics and targets established by
the HHS Action Plan to Prevent Healthcare-Associated Infections
or any successor plan issued by the Department of Health and
Human Services plan). For VBP payments for discharges occurring
during FY2014 and subsequently, the Secretary would ensure that
measures would include efficiency measures. Such measures would
include Medicare spending per beneficiary adjusted by factors
including age, sex, race, severity of illness and other
appropriate factors.
The Secretary would not select a measure for the VBP
program for a performance period in a fiscal year unless it has
been included the RQHDAPU program and included on the Hospital
Compare Internet website for at least 1 year prior to the
beginning of the performance period. The measures would not
apply to a hospital if it does not furnish services appropriate
to the measure. The Secretary would have the same authority to
replace a measure if it is found that all hospitals are
effectively in compliance with the measure or if the measure no
longer represents a best practice as in the RQHDAPU program.
The Secretary would establish performance standards with
respect to the VBP measures for a performance period for a
fiscal year. These standards would include levels of
achievement and improvement. The performance standards would be
announced at least 60 days prior to the performance period for
which they would apply. The following factors would be
considered when establishing the standards: practical
experience with the measures, historical performance standards,
improvement rates, and the opportunity for continued
improvement. The established performance period would begin and
end prior to the beginning of the fiscal year.
The Secretary would develop a methodology for assessing the
total performance of each hospital based on the standards for
the selected measures for the period. Using this methodology,
the Secretary would provide for an assessment or hospital
performance score for each hospital for the relevant period.
The Secretary would ensure that the resulting distribution
of value-based incentive payments among hospitals with
different levels of performance scores was appropriate;
hospitals with the highest scores would receive the largest VBP
payments. The methodology would provide that the hospital
performance score is determined using the higher of its
achievement or improvement score for each measure. This
methodology would include the assignment of weights for
appropriate categories of measures. There would not be a
minimum performance standard in determining the performance
score for any hospital. A hospital's performance score would
reflect the measures that apply to the hospital.
Hospitals that meet or exceed the established standards for
a performance period would receive an increased base operating
DRG payment for each discharge in the fiscal year. The increase
would be the VBP payment amount which a percentage of the base
operating DRG payment, as specified by the Secretary for a
hospital. In establishing this percentage, the Secretary would
ensure that the percentage increase is related to the
hospital's performance score and the total amount of VBP
payments to hospitals in a fiscal year equals the total amount
available for such payments. This total amount would equal the
amount of the reduction in acute care hospital payments.
Starting in FY2013, the Secretary would reduce the base
operating DRG payment for a hospital for each discharge in a
fiscal year by an applicable percentage. These reductions would
apply to all hospitals regardless of whether or not the
hospital would receive a VBP payment for that year. The
applicable percentage would be 1.0 percent in FY2013; 1.25
percent in FY2014; 1.5 percent in FY2015; 1.75 percent in
FY2016; and 2.0 percent in FY2017 and in subsequent years. The
base operating DRG payment would be the IPPS payment amount
that would otherwise be paid for a discharge reduced by any
payment attributable to outlier status, indirect medical
education adjustments, disproportionate share hospital
adjustments, or low volume hospital adjustments. Special
payments to Medicare dependent hospitals and sole community
hospitals would be exempt as well.
The Secretary would inform each hospital of the adjustments
to the discharge payments no later than 60 days prior to the
start of each fiscal year. Payment adjustments or reductions
under the hospital VBP program would only apply to a relevant
fiscal year and would not be taken into account in calculating
payments in future fiscal years.
Individual hospital performance on each specific quality
measure, on each condition or procedure, and on total
performance would all be publicly reported. The Secretary would
ensure that a hospital has the opportunity to review and
correct the information prior to it being publicly reported.
The information would be posted on the Hospital Compare
Internet website in an easily understandable format. Aggregate
information on VBP payments would be periodically published
including the number of hospitals receiving incentive payments
(as well as the range and total amount of the VBP payments) and
the number of hospitals receiving less than the maximum VBP
incentive payments (as well as the range and total amount of
the VBP payments).
A process would be established that allows hospitals to
appeal their performance assessment and score; these appeals
would be resolved in a timely manner. There would be no
judicial or administrative review of the following items: (1)
the methodology used to determine the amount and determination
of the VBP payments; (2) the determination of the amount of
available VBP payments; (3) the establishment of the hospital
performance standards; (4) the quality measures that are
selected for inclusion in RHQDAPU or the VBP program; (5) the
methodology that is used to calculate hospital performance
scores and the calculation of those scores; and (6) the
methodology for validating hospital performance.
The Secretary would consult with small rural and urban
hospitals on the application of the VBP program to such
hospitals. The selection of measures, the development of the
methodology for calculating performance scores and the
development of the methodology for calculating VBP payments
would be established through the promulgation of regulation.
The RHAQDPU program would be modified. The Secretary would
be able to require hospitals to submit data on measures that
are not used for the determination of VBP payments. Also,
effective for FY2013 payments, the Secretary would be required
to provide for appropriate risk adjustment for quality measures
for outcomes of care.
The requirement that the Secretary add measures that
reflect consensus among affected parties and include, to the
extent possible, measures that are set forth by one or more
consensus building entities would terminate in FY2012.
Effective for FY2013 payments, each specified measure would be
endorsed by qualified consensus-based entities or, if not,
established under the process established in Sec. 3014. The
Secretary would, with input from consensus organizations and
other stakeholders, take steps to ensure that RHAQDPU measures
are coordinated and aligned with measures applicable to
physicians and other providers of services and supplies.
In addition, the requirement that the Secretary establish
procedures for submitting data under RHAQDPU would be changed
to indicate that the information regarding submitted measures
would be available publicly. The Secretary would develop
standard Internet website reports after seeking input from
stakeholders. The Hospital Compare Internet website would be
modified to make information more readily available. The
Secretary would establish an appropriate process to validate
RHAQDPU measures including the auditing a sufficient number of
randomly selected hospitals that have an opportunity to appeal
the validation of their measures.
The Government Accountability Office (GAO) would conduct a
study of the VBP program including an analysis of the impact of
the program on the quality of care provided to Medicare
beneficiaries, Medicare program expenditures, the quality
performance among safety net hospitals, and small rural and
small urban hospitals. GAO would submit an interim report
including recommendations regarding necessary legislative and
administrative action by October 1, 2015. A final report to
Congress would be due by July 1, 2017.
The Secretary would conduct a study of the VBP program
including an analysis of necessary program improvements to
address unintended consequences. The report to Congress,
including recommendations regarding necessary legislative and
administrative action, would be due by January 1, 2016. Such
study shall also evaluate whether the VBP program resulted in
lower Medicare spending or other financial savings to hospitals
and the appropriateness of the Medicare program sharing in the
savings generated through this program.
In addition, no later than 2 years from enactment, the
Secretary would establish three-year VBP demonstration projects
in critical access hospitals (CAHs) and in hospitals excluded
from VBP because of an insufficient number of qualifying cases.
These demonstration programs would include an appropriate
number of participants to ensure representation of the spectrum
of CAHs and small hospitals. The Secretary would waive Medicare
and Medicaid program requirements as necessary. The Secretary
would be required to submit a report to Congress, including
recommendations on the permanent establishment of VBP programs
for these providers as well as necessary legislative and
administrative action, no later than 18 months after completion
of the projects.
SEC. 3002. IMPROVEMENTS TO THE PHYSICIAN QUALITY REPORTING SYSTEM
Present Law
TRHCA required the establishment of a physician quality
reporting system that would include an incentive payment, based
on a percentage of the allowed Medicare charges for all such
covered professional services, to eligible professionals who
satisfactorily report data on quality measures. CMS named this
program the Physician Quality Reporting Initiative (PQRI).
MIPPA made this program permanent and extended the bonuses
through 2010; the incentive payment was increased from 1.5
percent of total allowable charges under the physician fee
schedule in 2007 and 2008 to two percent in 2009 and 2010.
Providers that successfully report for services provided in
calendar year 2009 will receive an incentive payment of two
percent of total allowable charges for the physician fee
schedule. Providers may choose claims-based reporting or
registry-based reporting. For claims-based reporting, providers
seeking incentive payments for the entire calendar year may
meet the requirement by reporting on one measures group for a
sample of 30 consecutive Medicare Part B fee-for-service
patients (FFS), or report for one measures group for 80 percent
of applicable Medicare Part B FFS. For providers seeking to
report for the six-month period beginning July 1, 2009, similar
criteria apply for those that report through CMS approved
registries.
Committee Bill
The Committee Bill would extend PQRI incentive payments
beyond 2010. Eligible professionals who successfully report in
2010 would receive a 1 percent bonus in 2011, and eligible
professionals who successfully report in 2011 would receive a
0.5 percent bonus in 2011. Eligible professionals who failed to
participate successfully in the program would face a 1.5
percent payment penalty in 2013, based on their 2012 reporting
period. The incentive payments and adjustments in payment would
be based on the allowed charges for all covered services
furnished by the eligible professional, based on the applicable
percent of the fee schedule amount. For 2013, the applicable
percent would be calculated as 98.5 percent of their total
allowed charges. For 2014 and in subsequent years, the
penalties for non-reporting would be two percent, calculated as
98 percent of the provider's total allowed Medicare charges.
The penalty would be assessed on an annual basis and would not
be cumulative.
The Committee Bill would establish a new PQRI option in
addition to the options within the current program detailed
above. Beginning with the 2011 reporting period, CMS would be
required to make PQRI incentive payments available for two
successive years to eligible professionals who voluntarily
complete the following on a biennial (every two years) basis:
(1) participate in a qualified American Board of Medical
Specialties certification, known as Maintenance of
Certification (MOC), or equivalent programs, and (2) complete a
qualified MOC practice assessment. A qualified MOC practice
assessment would include an initial assessment of a
participant's practice, designed to demonstrate the physician's
use of evidence-based medicine, and would seek to improve
quality of care through follow-up assessments. The methods,
measures, and data used for the MOC would be submitted by the
Boards to CMS in accordance with requirements established by
the Secretary in consultation with the Boards. As part of this
consultation, the Secretary would ensure that methods, measures
and data to be submitted allow for innovation and
appropriateness by specialty.
The Committee Bill would require CMS to develop a plan to
integrate the PQRI program with the standards for meaningful
use of certified electronic health records as created in the
American Recovery and Reinvestment Act of 2009. The bill would
require CMS to make two additional enhancements to the program.
First, CMS would be required to provide timely feedback to
eligible professionals on their performance with respect to
satisfactorily submitting data on quality measures. Second, CMS
would be required to establish an appeals process for providers
who participate in the PQRI program but do not qualify for
incentive payments during their performance period.
SEC. 3003. IMPROVEMENTS TO THE PHYSICIAN FEEDBACK PROGRAM
Present Law
Both MedPAC and GAO have recently recommended providing
information to physicians on their resource use. MedPAC asserts
that physicians would be able to assess their practice styles,
evaluate whether they tend to use more resources than their
peers or what evidence-based research (if available)
recommends, and revise practice styles as appropriate. MedPAC
notes that in certain instances, the private sector use of
feedback has led to a small downward trend in resource use. The
GAO noted that certain public and private health care
purchasers routinely evaluate physicians in their networks
using measures of efficiency and other factors and that the
purchasers it studied linked their evaluation results to a
range of incentives to encourage efficiency.
MIPPA established a physician feedback program with the
intent to improve efficiency and to control costs. Under the
Physician Feedback Program, the Secretary will use Medicare
claims data to provide confidential reports to physicians that
measure the resources involved in furnishing care to Medicare
beneficiaries. The resources to be considered in this program
may be measured on an episode basis, on a per capita basis, or
on both an episode and a per capita basis. The GAO will conduct
a study of the Physician Feedback Program, including the
implementation of the program, and will submit a report to
Congress by March 1, 2011 containing the results of the study,
together with recommendations for such legislation and
administrative action as the Comptroller General determines
appropriate.
Committee Bill
The Committee Bill would require the Secretary, beginning
in 2012, to provide reports to physicians that compare their
resource use with that of other physicians or groups of
physicians caring for patients with similar conditions.
Resource use would be measured based on the items and services
furnished or ordered by physicians or groups of physicians.
Feedback reports would be based on an episode-grouper
methodology established by the Secretary that would combine
separate but clinically-related services into an episode of
care for which the physician is accountable. The episode-
grouper would be required to be developed by January 1, 2012.
The Secretary would be required to make the methodology
available to the public, and the Secretary would be required to
seek endorsement of the episode-grouper by the entity with a
contract with the Secretary under section 1890(a) of the Social
Security Act.
In preparing feedback reports, the Secretary would be
required to make appropriate data adjustments, including
adjustments to (1) account for differences in the demographic
characteristics and health status of individuals, so as not to
penalize those physicians who tend to serve less healthy
individuals who may require more intensive interventions; and
(2) eliminate the effect of geographic adjustments in payment
rates.
The Secretary would have the authority to exclude certain
information regarding an item or service from feedback reports
if the Secretary determines that there is insufficient
information relating to such item or service to provide a valid
assessment of utilization. The Secretary would be required to
provide for education and outreach activities to physicians on
the operation of, and methodologies used, under the Feedback
Program. The Secretary would coordinate the physician feedback
program with other relevant value-based purchasing reforms
under the Medicare program.
Beginning in 2014, payment would be reduced by 5 percent if
an aggregation of the physician's resource use is at or above
the 90th percentile of national utilization. After five years,
the Secretary would have the authority to convert the 90th
percentile threshold for payment reductions to a standard
measure of utilization, such as deviations from the national
mean.
SEC. 3004. QUALITY REPORTING FOR LONG-TERM CARE HOSPITALS, INPATIENT
REHABILITATION HOSPITALS AND HOSPICE PROGRAMS
Present Law
Under Present Law, inpatient rehabilitation facilities
(IRFs), long term care hospitals (LTCHs) and hospices are not
required to report quality data to CMS. However, Medicare does
require an IRF to submit a clinician's comprehensive assessment
of each Medicare patient upon admission and again at discharge.
These documented assessments must be based on the direct
observation of and communication with the patient and
information may be supplemented with information from other
sources, including family members or other clinicians. The
IRF's patient assessment instrument (PAI) form, the Uniform
Data Set for Medical Rehabilitation (UDSMR), encompasses about
55 questions used to ascertain a patient's functional
independence including motor skills and cognitive capacities
and to establish a patient's co-morbidities. A patient's
assessments (from both admission and discharge) are transmitted
to CMS electronically in one submission. Failure to meet the
IRF-PAI transmission deadlines results in a 25 percent
reduction in Medicare's payment in all but extraordinary
circumstances. No comparable patient reporting requirements
have been established for LTCHs and hospices.
Medicare pays for inpatient care provided by IRFs and LTCHs
using different prospective payment systems (PPS). Each PPS is
updated annually using a market basket (MB) index which
measures the estimated change in the price of goods and
services purchased by the provider to produce a unit of output.
Medicare payments to hospices are predetermined fixed amounts
for each case, according to the general type of care provided
to a beneficiary on a daily basis. Payments for hospice care
are based on one of four prospectively determined units of
payment, which correspond to four different levels of care
(i.e., routine home care, continuous home care, inpatient
respite care, and general inpatient care) for each day a
beneficiary is under the care of the hospice. Hospice payments
are updated annually based on the hospital MB index.
Committee Bill
The Secretary would be directed to establish quality
reporting programs for LTCHs, IRFs, and hospices.
Starting in rate year 2014, LTCHs would be required to
submit data on specified quality measures. The required
measures would be selected from those that have been endorsed
by qualified consensus-based entities or, if not, established
under the process established in Sec. 3014 of this legislation.
No later than October 1, 2012, the required measures for rate
year 2014 would be published. The Secretary would establish
procedures for making this data publicly available. These
procedures would ensure that LTCHs have the opportunity to
review their data prior to it being made available. Quality
measures would be reported on the Internet website of CMS.
LTCHs that did not submit the required quality measures would
have reduction in their annual update of two percentage points.
Any reduction would not affect payments in subsequent rate
years.
Starting in FY2014, IRFs would be required to submit data
on specified quality measures. The required measures would be
selected from those that have been endorsed by qualified
consensus-based entities or, if not, established under the
process established in Sec. 3014 of this legislation. No later
than October 1, 2012, the required measures for FY2014 would be
published. The Secretary would establish procedures for making
this data publicly available. These procedures would ensure
that IRFs have the opportunity to review their data prior to it
being made available. Quality measures would be reported on the
Internet website of CMS. IRFs that did not submit the required
quality measures would have reduction in their annual update of
2 percentage points. Any reduction would not affect payments in
subsequent rate years.
Starting in FY2014, hospices would be required to submit
data on specified quality measures. The required measures would
be selected from those that have been endorsed by qualified
consensus-based entities or, if not, established under the
process established in Sec. 3014 of this legislation. No later
than October 1, 2012, the required measures for FY2014 would be
published. The Secretary would establish procedures for making
this data publicly available. These procedures would ensure
that hospices have the opportunity to review their data prior
to it being made available. Quality measures would be reported
on the Internet website of CMS. IRFs that did not submit the
required quality measures would have reduction in their annual
update of 2 percentage points. Any reduction would not affect
payments in subsequent rate years.
SEC. 3005. QUALITY REPORTING FOR PPS-EXEMPT CANCER HOSPITALS
Present Law
Eleven cancer hospitals are exempt from the Medicare
inpatient prospective payment system (IPPS) used to pay
inpatient hospital services provided by acute care hospitals.
As part of these exemptions, these facilities are paid on a
reasonable cost basis for providing inpatient services, subject
to certain payment limitations and incentives. These hospitals
are also held harmless under the outpatient prospective payment
system (OPPS) and will not receive less from Medicare under
this payment system than under the prior outpatient payment
system. Under OPPS, Medicare pays for outpatient services using
ambulatory payment classification (APC) groups. Currently,
there are no quality reporting requirements for these
hospitals.
Committee Bill
The Secretary would be directed to establish quality
reporting programs for IPPS-exempt cancer hospitals starting
FY2014. The required measures would be selected from those that
have been be endorsed by qualified consensus-based entities or,
if not, established under the process established in Sec. 3014
of this legislation. No later than October 1, 2012, the
required measures for FY2014 would be published. The Secretary
would establish procedures for making this data publicly
available. These procedures would ensure that cancer hospitals
have the opportunity to review their data prior to it being
made available. Quality measures would be reported on the
Internet website of CMS.
SEC. 3006. PLANS FOR A VALUE-BASED PURCHASING PROGRAM FOR SKILLED
NURSING FACILITIES AND HOME HEALTH AGENCIES
Present Law
As required by Section 5201(c) of the Deficit Reduction Act
of 2005 (DRA, P.L. 109-171), beginning in 2007, home health
agencies (HHAs) were required to submit data for a set of
quality measures. HHAs that did not submit these data received
a reduction of 2.0 percent in their Medicare annual update for
that year. As a Medicare condition of participation, skilled
nursing facilities (SNFs) are required to submit data on
quality to the Secretary.
Currently, individual HHA and SNF performance data on
specific quality measures and on certain conditions are
available on Home Health Compare and Nursing Home Compare,
which are available on the CMS website.
Medicare payment demonstrations have been or are to be
implemented that will test value-based purchasing for HHAs and
SNFs.
Section 5201(d) of the DRA also required the Medicare
Payment Advisory Commission (MedPAC) to submit a report to
Congress on considerations for implementing a value-based
payment system for Medicare home health services. MedPAC
submitted this report to Congress in June 2007.
Committee Bill
The Secretary would be required to develop a plan to
implement a Medicare value-based purchasing program for HHAs
and SNFs and submit a report to Congress on these plans by
FY2011 and FY2012, respectively.
In developing the plan for HHAs and SNFs, the Secretary
would be required to consider the following for each: (1) the
development, selection, and modification process of measures,
to the extent feasible and practicable, of all dimensions of
quality and efficiency; (2) the reporting, collection, and
validation of quality data; (3) a structure of proposed value-
based payment adjustments, including the determination of
thresholds or improvements in quality that would substantiate a
payment adjustment, the size of such payments, and the sources
of funding for value-based incentive payments; (4) methods for
publicly disclosing performance information on SNFs; and (5)
and any other issues determined appropriate by the Secretary.
In developing each plan, the Secretary would be required to
consult with relevant affected parties; and take into
consideration experience with demonstrations that are relevant
to value-based purchasing in each setting.
SEC. 3007. VALUE-BASED PAYMENT MODIFIER UNDER THE PHYSICIAN FEE
SCHEDULE
Present Law
Medicare payments for services of physicians and certain
non-physician practitioners are made on the basis of a fee
schedule system, which assigns a reimbursement to each of over
7,500 service codes, also known as the Healthcare Common
Procedure Coding System (HCPCS). The reimbursement system
assigns relative value units (RVUs) according to a resource-
based relative value scale to each service that reflects
physician work (i.e., time, skill, and intensity it takes to
provide the service), practice expenses, and malpractice costs.
Committee Bill
The Committee Bill would create a new ``value-based payment
modifier'' that would provide for differential payment to a
physician or a group of physicians under the Medicare fee
schedule based upon the relative quality of care compared to
the relative cost of the care furnished by a physician or group
of physicians to Medicare beneficiaries. The value-based
payment modifier would be separate from the geographic
adjustment factors.
The quality of care would be evaluated based on a composite
of measures of the quality of care furnished as established by
the Secretary, as follows. The Secretary would establish
appropriate measures of the quality of care furnished by a
physician or group of physicians to Medicare enrollees, such as
measures that reflect health outcomes. The measures would be
risk adjusted as determined appropriate by the Secretary. The
Secretary would seek endorsement of the quality measures by the
consensus-based entity (such as the National Quality Forum)
with a contract with the Secretary under section 1890(a) of the
Social Security Act.
In constructing the value-based payment modifier, the
Secretary would evaluate a composite of appropriate measures of
costs that eliminate the effect of geographic adjustments in
payment rates, and take into account risk factors such as the
demographic characteristics and health status of Medicare
beneficiaries and other factors determined appropriate by the
Secretary.
Not later than January 1, 2012, the Secretary would publish
the following: (1) the measures of quality of care and costs
mentioned above; (2) the dates for implementation of the
payment modifier; and (3) the initial performance period. The
Secretary would begin implementing the value-based payment
modifier through the rule-making process during 2013 for the
Medicare fee schedule. The initial performance period would
begin during 2014. During the initial performance period, the
Secretary would provide information to physicians and groups of
physicians about the quality of the care compared to the cost
of the care furnished by the physician or group of physicians
to Medicare beneficiaries.
The Secretary would apply the value-based payment modifier
for items and services furnished (1) beginning on January 1,
2015, with respect to specific physicians and groups of
physicians the Secretary determines appropriate; and (2)
beginning not later than January 1, 2017, with respect to all
physicians and groups of physicians.
The value-based payment modifier would be implemented in a
budget neutral manner. The Secretary would apply the value-
based payment modifier in a manner that would promote systems-
based care, and take into account the special circumstances of
physicians or groups of physicians in rural areas and other
underserved communities, as appropriate.
The initial application of the value-based payment modifier
would apply to ``physicians'' as defined under Present Law (SSA
section 1861(r)) during the period beginning on January 1,
2015, and ending on December 31, 2016. On or after January 1,
2017, the Secretary could apply the value-based payment
modifier to eligible professionals (as defined in subsection
(k)(3)(B)), as the Secretary determines appropriate.
SEC. 3008. PAYMENT ADJUSTMENT FOR CONDITIONS ACQUIRED IN HOSPITALS
Present Law
Medicare pays for inpatient services provided by acute care
hospitals under section 1886(d) of the Social Security Act
using the inpatient prospective payment system (IPPS), where
each patient is classified into a Medicare severity adjusted
diagnosis-related group (MS-DRG) based on diagnoses and
procedures performed. Generally, except for outlier cases, a
hospital receives a predetermined amount for a given MS-DRG
regardless of the services provided to a patient. In some
instances, Medicare patients may be assigned to a different MS-
DRG with a higher payment rate based on secondary diagnoses.
Inpatient services provided by acute care hospitals in Maryland
are paid under a state-specific Medicare payment system under
section 1814(b)(3) of the Social Security Act.
As established by the Deficit Reduction Act of 2005 (DRA,
P.L. 109-171), hospitals will not receive additional Medicare
payment for complications that were acquired during a patient's
hospital stay. By statute, these hospital acquired conditions
(HACs) are: (1) high cost, high volume, or both; (2) identified
though a secondary diagnosis that will result in the assignment
to a different, higher paid MS-DRG; and (3) reasonably
preventable through the application of evidence-based
guidelines. Starting October 1, 2007 (FY2008), CMS required
hospitals to report whether certain conditions (secondary
diagnoses) for Medicare patients were present at admission.
Starting October 1, 2008, IPPS hospitals do not receive
additional payment for secondary diagnoses resulting from HACs
for certain select conditions.
Committee Bill
Starting for discharges during FY2015, acute care hospitals
(including those in Maryland paid under their state specific
Medicare system) in the top quartile of national, risk-adjusted
HAC rates for an applicable period in a fiscal year would
receive 99 percent of their otherwise applicable Medicare
payments for inpatient hospital services in a given year. ANHAC
would be defined as a condition that an individual acquires
during a hospital stay, as determined by the Secretary.
Prior to FY2015, the hospitals would receive confidential
reports with respect to their HAC conditions. The information
would be made publicly available on the Hospital Compare
Internet website after the hospital has the opportunity to
review and correct the data.
There would be no administrative or judicial review of the
HAC ranking criteria, the specification of HACs, the
specification of an applicable period, the provision of reports
to hospitals, or the information made publicly available.
PART II--STRENGTHENING THE QUALITY INFRASTRUCTURE
SEC. 3011. NATIONAL STRATEGY
Present Law
There are no provisions in Present Law requiring the
Secretary to develop a national quality strategy, strategic
plan, or improvement priorities. However, MIPPA requires the
Secretary to identify and have in effect a contract with a
consensus-based entity, such as the National Quality Forum
(NQF), to perform the following duties: (1) synthesize evidence
and convene stakeholders to make recommendations, with respect
to activities conducted under this Act, on an integrated
national strategy and priorities for health care performance
measurement in all applicable settings; (2) provide for the
endorsement of standardized health care performance measures;
(3) establish and implement a process to ensure that endorsed
measures are updated or retired based on new evidence; (4)
promote the development of electronic health records that
facilitate the collection of performance measurement data; and
(5) report annually to Congress. The NQF has been awarded this
contract and recently released its first report, Improving
Healthcare Performance: Setting Priorities and Enhancing
Measurement Capacity, in fulfillment of this statutory
requirement.
Committee Bill
Generally, this section would direct the Secretary to
establish a national quality improvement strategy, to include
both the development of national priorities for quality
improvement and a comprehensive strategic plan to achieve these
priorities. The Secretary would be required to ensure that the
national priorities for quality improvement would achieve
certain aims (e.g., reducing health disparities) and the
strategic plan would include provisions for addressing a number
of issues, including coordination among agencies within the
Department of Health and Human Services.
This section would direct the Secretary to establish a
national quality improvement strategy, including the
development of national priorities for improvement, to improve
the delivery of health care services, patient health outcomes,
and population health through a transparent and collaborative
process.
In developing these priorities, the Secretary would ensure
that they will: (1) have the greatest potential for improving
health outcomes, efficiency, and patient-centeredness of health
care; (2) identify areas in the delivery of health care
services that have the potential for rapid improvement in the
quality and efficiency of patient care; (3) address gaps in
quality, efficiency, and health outcomes measures and data
aggregation techniques; (4) improve Federal payment policy to
emphasize quality and efficiency; (5) enhance the use of health
care data to improve quality, efficiency, transparency, and
outcomes; (6) address the health care provided to patients with
high-cost chronic diseases; (7) improve strategies and best
practices to improve patient safety and reduce medical errors,
preventable admissions and readmissions, and health care-
associated infections; (8) reduce health disparities across
health disparity populations and geographic areas; and (9)
address other areas as determined appropriate by the Secretary.
In addition, in identifying these priorities, the Secretary
would be required to consider both the recommendations
submitted by qualified consensus-based entities, as required
under Sec. 3014 of this Act and the recommendations of the
Interagency Coordinating Working Group on Health Care Quality
established under Sec. 3012 of this Act.
The national strategy would also include a comprehensive
strategic plan to achieve the priorities described above. At a
minimum, the strategic plan would include provisions for
addressing coordination among agencies within HHS; agency-
specific strategic plans and annual benchmarks to achieve the
priorities; a process for regular reporting by the agencies to
the Secretary on the implementation of the strategic plan;
strategies to align incentives among public and private payers
with regard to quality and patient safety efforts; and
incorporating quality improvement and measurement in the
strategic plan for health information technology (required by
ARRA).
The Secretary would update the national strategy not less
than triennially and the first report would be due to Congress
not later than December 31, 2010. Any update would include a
review of short- and long-term goals as well as an analysis of
progress in meeting these goals. In addition, the Secretary
would create an Internet website to make public information
regarding the national priorities for health care quality
improvement; the agency-specific strategic plans for health
care quality; and other information the Secretary may determine
to be appropriate.
SEC. 3012. INTERAGENCY WORKING GROUP ON HEALTH CARE QUALITY
Present Law
No provision.
Committee Bill
This section would require the President to convene a
working group consisting of senior level representatives of
relevant Federal departments and agencies\21\ with the goals of
achieving (1) collaboration, cooperation and consultation
between Federal departments and agencies with respect to
developing and disseminating strategies, goals, models, and
timetables that are consistent with the national priorities for
improvement; and (2) avoidance of duplication of quality
improvement efforts and resources. The Working Group would be
chaired by the Secretary, and members of the Working Group
would serve as Vice Chair on a rotating basis. Not later than a
date determined appropriate by the Secretary, and annually
thereafter, the Working Group would submit a report to the
relevant Committees of Congress, and make publicly available, a
report on the progress and recommendations of the Working
Group.
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\21\Relevant Federal departments and agencies shall include: The
Centers for Medicare and Medicaid Services (CMS), National Institutes
of Health (NIH), Centers for Disease Control and Prevention; Food and
Drug Administration (FDA), The Health Resources and Services
Administration (HRSA), The Agency for Healthcare Research and Quality
(AHRQ), and the Administration on Children and Families within The
Department of Health and Human Services (HHS); The Department of Labor;
The Department of Defense; The Department of Veterans Affairs; The
Veterans Health Administration; The Department of Commerce; The Office
of Personnel Management; The Office of Management and Budget; The U.S.
Coast Guard; The Federal Bureau of Prisons; The National Highway
Transportation and Safety Administration; and The Federal Trade
Commission.
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SEC. 3013. QUALITY MEASURE DEVELOPMENT
Present Law
The Agency for Healthcare Research and Quality (AHRQ) has
significant authorities with respect to the development of
quality measures. Specifically, the Agency's mission, among
other things, is to promote healthcare quality improvement by
conducting and supporting research that develops and presents
scientific evidence regarding all aspects of health care,
including methods for measuring quality and strategies for
improving quality. AHRQ also is required to provide support for
public and private efforts to improve healthcare quality,
including the ongoing development, testing, and dissemination
of quality measures. To comply with this last requirement, the
Agency has established the National Quality Measures
Clearinghouse, an online resource that compiles and catalogues
quality measures. AHRQ also develops annual reports to Congress
on trends in healthcare quality and in healthcare disparities.
Finally, AHRQ is required to coordinate all research,
evaluations, and demonstrations related to health services
research, quality measurement and quality improvement
activities undertaken and supported by the Federal Government.
Committee Bill
Generally, this section would facilitate quality measure
development by requiring the Secretary to identify and measure
gaps, and award grants to entities to develop measures in these
gap areas. Measures developed by entities receiving such
grants, contracts or agreements would have to meet certain
requirements (e.g., be free of charge to users, be publicly
available), and the Secretary would prioritize the development
of measures with specific characteristics (e.g., measures that
allow the assessment of coordination of health care across
episodes of care).
This section would require the Secretary to identify, not
less than triennially, gaps where no quality measures exist, or
where current quality measures must be improved, updated or
expanded consistent with the national strategy and priorities.
A qualified consensus-based entity that receives a grant or
contract under Sec. 3014 would be required to submit a report,
not less than annually, to the Secretary describing areas where
gaps in quality measures exist and areas in which evidence is
insufficient to support endorsement of quality measures in the
priority areas identified by the Secretary in the national
strategy. In identifying measure gaps, the Secretary would take
into consideration the gaps identified by the consensus-based
entity.
The Secretary would award grants, contracts or
intergovernmental agreements to eligible entities for purposes
of developing, updating, or expanding quality measures in
identified gap areas. In awarding these grants, contracts or
agreements, the Secretary would give priority to the
development of measures that allow the assessment of health
outcomes and functional status of patients; the coordination of
health care across episodes of care and care transitions; the
meaningful use of health information technology; safety,
effectiveness, patient-centeredness, appropriateness, and
timeliness of care; efficiency of care; equity of health
services across health disparity populations and geographic
areas; patient experience and satisfaction; and other areas
determined appropriate by the Secretary.
Entities eligible for a grant or contract under this
section would have to demonstrate expertise and capacity in the
development and evaluation of quality measures; have procedures
in place to take into account the view of payers or providers
whose performance will be assessed by the measures and the
views of other parties who will use the measures, such as
consumers and health care purchasers; have transparent policies
regarding governance and conflicts of interest; and collaborate
with a qualified consensus-based entity and the Secretary, so
that measures developed by the eligible entity will meet the
requirements to be considered for endorsement by such qualified
consensus-based entity.
An entity that receives a grant under this section would
use such funding to develop quality measures that meet the
following requirements: build on measures required to be
reported pursuant to Title XVIII of the Social Security Act;
can be collected, using health information technologies, to the
extent practicable; are free of charge to users of such
measures; and are publicly available on an Internet website.
The Secretary may use amounts available under this section to
update and test, where applicable, quality measures endorsed by
a qualified consensus-based entity or adopted by the Secretary.
The section would authorize to be appropriated $75 million
for each of the fiscal years 2010 through 2014 to carry out
this section.
SEC. 3014. QUALITY MEASURE ENDORSEMENT
Present Law
MIPPA requires the Secretary to identify and have in effect
a contract with a consensus-based entity, such as the National
Quality Forum (NQF), to perform the following duties: (1)
synthesize evidence and convene stakeholders to make
recommendations, with respect to activities conducted under
this Act, on an integrated national strategy and priorities for
health care performance measurement in all applicable settings;
(2) provide for the endorsement of standardized health care
performance measures; (3) establish and implement a process to
ensure that endorsed measures are updated or retired based on
new evidence; (4) promote the development of electronic health
records that facilitate the collection of performance
measurement data; and (5) report annually to Congress. The NQF
has been awarded this contract and recently released its first
report, Improving Healthcare Performance: Setting Priorities
and Enhancing Measurement Capacity, in fulfillment of this
statutory requirement.
Committee Bill
Generally, this section would allow for the provision of a
grant or contract to a qualified consensus-based entity to
carry out a number of duties, including identifying gaps in
endorsed quality measures, updating endorsed measures, and
making recommendations to the Secretary for national priorities
for performance improvement. This entity would also provide
guidance on the selection of measures for use in public
reporting or Federal health programs. The Secretary would be
required to establish a pre-rulemaking process to obtain input
on the selection of measures and to review and disseminate
quality measures, among other things.
This section would allow a qualified consensus-based entity
to receive a grant or contract to (1) make recommendations to
the Secretary for national priorities for performance
improvement; (2) identify gaps in endorsed quality measures;
(3) identify and endorse quality measures; (4) update endorsed
quality measures at least every three years; (5) make endorsed
measures publicly available and have a plan for dissemination
of such endorsed measures; and (6) transmit endorsed quality
measures to the Secretary. This entity would provide a report
to the Secretary outlining where gaps exist, and regarding
areas in which evidence is insufficient to support endorsement
of quality measures in priority areas identified by the
Secretary under Sec. 3011. In addition, this entity would
evaluate evidence and convene multi-stakeholder groups to make
recommendations to the Secretary for national priorities for
improvement. In convening multi-stakeholder groups, the entity
would provide for an open and transparent process, and would
ensure that the selection of members of these groups provide
for public nominations for, and the opportunity for public
comment on, such selection.
The entity would also convene multi-stakeholder groups to
provide guidance on the selection of individual or composite
measures for use in reporting performance information to the
public or for use in Federal health programs. These measures
would be selected from those endorsed by the entity and those
that have not been considered for endorsement by the entity,
but are used, or proposed to be used, by the Secretary in
Federal health programs.
The Secretary would be required to establish a pre-
rulemaking process to obtain input from the consensus-based
entity and multi-stakeholder group on the selection of quality
measures. Under this process, by not later than December 1st of
each year, starting in 2010, the Secretary shall make public a
list of measures being considered for selection with respect to
quality reporting and payment systems under Title XVIII of the
Social Security Act. Not later than February 1st of each year,
beginning with 2011, the entity must transmit to the Secretary
the guidance of the multi-stakeholder groups. In convening the
multi-stakeholder groups, the entity would provide for an open
and transparent process, and would ensure that the selection of
members of these groups provide for public nominations for, and
the opportunity for public comment on, such selection.
With respect to endorsed quality measures, the Secretary
could make a determination to use such measures only after
taking into account the guidance of the multi-stakeholder
groups as provided through the pre-rulemaking process. With
respect to non-endorsed measures, the Secretary could use a
measure that has not been endorsed, provided that the Secretary
transmits the measure to the entity for consideration for
endorsement and for the multi-stakeholder consultation process;
publishes the rationale for the use of the measure in the
Federal Register; and phases out use of the measures upon a
decision of the entity not to endorse the measure, contingent
on the availability of an adequate alternative endorsed measure
(as determined by the Secretary). If an adequate alternative is
not available, the Secretary would support the development of
such an alternative endorsed measure.
Not less than once every three years, the Secretary would
review quality measures used by the Secretary to determine
whether to maintain use of such measures or to phase them out.
In conducting this review, the Secretary would seek to avoid
duplication of measures and take into consideration both
current innovative strategies for quality improvement and
measures endorsed by a quality consensus-based entity since the
previous review.
The Secretary would also set forth a process to disseminate
measures used by the Secretary and incorporate such measures,
where applicable, in workforce programs, training curricula,
payment programs, and any other means of dissemination deemed
appropriate by the Secretary. The Secretary would establish a
process to disseminate such quality measures to the Working
Group established in Sec. 3012 of this Act. The Secretary would
be allowed to contract with one or more entities to carry out
this dissemination process. These entities must be non-profit;
have at least five years experience in developing and
implementing quality improvement strategies; have operated
programs on a statewide or multi-state basis to improve patient
safety and quality of health care delivered in hospitals,
including at minimum, in hospital intensive care units,
hospital associated infections, hospital peri-operative patient
safety and hospital emergency rooms; and have worked with a
variety of health care providers in implementing these
initiatives.
In addition, the Secretary would provide technical
assistance to providers of services and suppliers required to
report on measures under Title XVIII of the Social Security
Act. In providing such assistance, the Secretary would
prioritize rural and urban providers of services and suppliers
with limited infrastructure to implement quality improvement
activities and providers of services and suppliers with poor
performance scores and with disparities in care among subgroups
or patients.
For purposes of carrying out this section, the Secretary
would provide for the transfer of $50 million for each of the
fiscal years 2010 through 2014 from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary Medical
Insurance Trust Fund (in such proportion as the Secretary
determines appropriate), to the CMS Program Management Account.
PART III--ENCOURAGING DEVELOPMENT OF NEW PATIENT CARE MODELS
SEC. 3021. ESTABLISHMENT OF CENTER FOR MEDICARE AND MEDICAID INNOVATION
WITHIN CMS
Present Law
Under the Social Security Act, the Secretary of HHS has
broad authority to develop research and demonstration projects
to test new approaches to paying providers, delivering health
care services, or providing benefits to Medicare beneficiaries.
Specifically, demonstrations designed to test changes in
provider payment are required to increase the efficiency and
economy of health care services without adversely affecting
quality. Currently, CMS is conducting approximately 30 Medicare
demonstrations. Some of the key themes addressed in these
demonstrations include care coordination, pay for performance,
Health Information Technology, and quality improvement.
Although demonstrations may be initiated by both the agency and
Congress, the number of congressionally mandated demonstrations
has increased in recent years.
Section 646 of the MMA mandated CMS to conduct a five-year
demonstration program to test ways to improve health outcomes
while increasing efficiency. This demonstration, called the
Medicare Health Care Quality Demonstration (Section 1866C of
the Social Security Act), aims to improve patient safety,
enhance quality, and reduce variation in medical practice that
may result in higher cost. One of the major goals of this
demonstration is to determine whether Medicare can improve
outcomes while simultaneously achieving cost savings.
Improvements in care coordination are one strategy that CMS
anticipates providers will attempt as they strive to improve
quality while simultaneously reducing costs. Two demonstration
projects under this demonstration are scheduled to begin in
2009, with two others to begin soon thereafter.
Committee Bill
This Committee Bill would require the Secretary, no later
than January 1, 2011, to establish a Medicare and Medicaid
Innovation Center within CMS. The Innovation Center (hereafter
called the ``Center'') would test innovative payment and
service delivery models to reduce program expenditures under
Medicare, Medicaid, and CHIP while preserving or enhancing the
quality of care furnished to individuals under such titles. In
selecting such models, the Secretary shall give preference to
models that also improve the coordination, quality, and
efficiency of health care services furnished to such
individuals. The Center may also give preference to the testing
of models that would improve the coordination, quality, and
efficiency of health care services for individuals who are
dually-eligible for Medicare and Medicaid. In carrying out this
section, the Secretary would consult with individuals and
stakeholders, as specified.
This section sets forth requirements for both the testing
of these models (PHASE I) and the expansion of these models
(PHASE II). The section would require the Secretary to select
models to be tested where the Secretary determines that there
is evidence that the model addresses a defined population for
which there are deficits in care leading to poor clinical
outcomes or potentially avoidable expenditures. The models
selected may include, but not be limited to, those with any of
sixteen specified characteristics, including, for example,
those that promote broad payment and practice reform in primary
care, contract directly with groups of providers of services
and suppliers to promote innovative care delivery models,
promote care coordination between providers of services and
suppliers that transition health care providers away from fee-
for-service based reimbursement and toward salary-based
payment, and utilize medication therapy management services,
among others.
Additionally, this section would require the Center, when
selecting models for testing, to consider the following seven
factors: (1) whether the model includes a regular process for
monitoring and updating patient care plans in a manner that is
consistent with the needs and preferences of Medicare
beneficiaries; (2) whether the model places the Medicare
beneficiary at the center of the care team; (3) whether the
model provides for in-person contact with Medicare
beneficiaries; (4) whether the model utilizes technology, such
as electronic health records and patient-based remote
monitoring systems, to coordinate care over time and across
settings; (5) whether the model provides for the maintenance of
a close relationship between care coordinators, primary care
practitioners, specialist physicians, and other providers of
services and suppliers; (6) whether the model relies on a team-
based approach to interventions, such as comprehensive care
assessments, care planning, and self-management coaching; and
(7) whether, under the model, providers of services and
suppliers are able to share information with other providers of
services and suppliers on a real time basis.
The Secretary would conduct an evaluation of each model
tested, including an analysis of (i) the quality of care
furnished under the model, including the measurement of
patient-level outcomes; and (ii) the changes in spending under
the applicable titles by reason of the model.
Under this section, the Secretary could not require, as a
condition for testing a model, that the design of the model
ensure that the model is budget neutral initially with respect
to expenditures under Titles XVIII and XIX of the Social
Security Act. The Secretary would terminate or modify the
design and implementation of a model unless the Secretary
determines that the model is expected to (1) improve the
quality of patient care without increasing spending; (2) reduce
spending under such Titles without reducing the quality of
care; or (3) improve quality and reduce spending.
With respect to the expansion of models, this section would
allow the Secretary to expand the duration and the scope of a
model that is being tested under this section or a
demonstration project, to the extent determined appropriate by
the Secretary, if the Secretary determines that such expansion
would reduce spending under this title without reducing the
quality of patient care. In determining whether to expand the
scope or duration of a model or demonstration project, the
Secretary would consider the results of the evaluation
conducted under this section.
The Center would be headed by a director who would report
directly to the Administrator of CMS. In addition, for the
purposes of carrying out the provisions of this section, this
section would allow the Secretary to waive such requirements of
Title XI (General Provisions, Peer Review, and Administrative
Simplification) and Title XVIII (Medicare), and Section
1902(a)(1), Section 1902(a)(13) and Section 1903(m)(2)(A)(iii)
of the Social Security Act which require state Medicaid plans
to be in effect statewide, provide for a public process for
determining payment rates for hospital services, nursing
facility services and services of intermediate care facilities
for the mentally retarded, and which provide for payments for
Medicaid managed care plans, as the Secretary determines
appropriate solely for purposes of carrying out this section.
The Secretary would provide for the transfer, from the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund, of $10 billion for
the activities initiated under this section for the period of
fiscal years 2011 through 2019. Funding would remain until
expended. Out of the amounts transferred, not less than $25
million would be made available each fiscal year to design,
implement, and evaluate models.
The Center would be allowed to carry out activities under
this section with respect to CHIP (Title XXI) in the same
manner as provided under this section with respect to Medicare
and Medicaid (Titles XVIII and XIX) of the Social Security Act.
In addition, there would be no administrative or judicial
review (under Section 1869 and 1878 of the Social Security Act)
of the following: (1) the selection of models to be tested; (2)
the selection of organizations, sites, or participants to test
those models selected; (3) the termination of a model or site
at which a model is tested; and (4) the determination of models
to be expanded.
Beginning in 2012, and not less than once every other year
thereafter, the Secretary would be required to submit to
Congress a report on activities under this section. Each such
report shall describe: (1) the models tested by the Center,
including the number of individuals participating in such
models and payments made under the applicable titles for
services on behalf of such individuals, (2) any models chosen
for expansion, and (3) the results from evaluations under this
section. In addition, each such report shall provide such
recommendations as the Secretary determines are appropriate for
legislative action to facilitate the development and expansion
of successful payment models.
Finally, this section would strike ``five-year'' each place
it appears in subsections (b) and (f) of Section 1866C of the
Social Security Act, thus removing this time limit from the
Health Care Quality Demonstration Program.
SEC. 3022. MEDICARE SHARED SAVINGS PROGRAM
Present Law
There are no existing laws that directly address the
ability of organizations or systems of integrated providers to
share in the efficiency gains resulting from the joint
responsibility and care of Medicare beneficiaries. However,
while some providers who deliver care in a vertically
integrated managed care environment under Medicare are able to
achieve these efficiency gains (e.g., a staff-model managed
care organization), other providers face obstacles to this type
of practice and related potential sharing (e.g., fee-for-
service providers who practice across a range of separate legal
entities).
Experts define groups of providers (e.g. combinations of
one or more hospitals, physician groups including primary care
physicians and possibly specialists, and other health care
providers) that are jointly responsible, through shared bonuses
or penalties, for the quality and cost of health care services
for a population of beneficiaries as accountable care
organizations (ACOs). MedPAC has been among the proponents that
have encouraged this type of gain sharing through accountable
care organizations.
Medicare has some practical experience with ACO-like
organizations. The Medicare Physician Group Practice (PGP)
Demonstration, mandated by BIPA, created pay-for-performance
incentives for physician groups (being paid fee-for-service) to
coordinate the overall care delivered to Medicare patients. The
physician groups were rewarded for improving the quality and
cost efficiency of health care services through increased
coordination of Part A and Part B services, investment in care
management programs, process redesign, and improved patient
health outcomes, especially for beneficiaries with chronic
illness, multiple co-morbidities and those near the end of
life. CMS selected ten physician groups on a competitive basis
to participate in the demonstration, favoring multi-specialty
physician groups with well-developed clinical and management
information systems. The ten physician groups represented 5,000
physicians and 224,000 Medicare fee-for-service beneficiaries.
Groups that were able to meet quality-of-care benchmarks and
reduce their total expected Medicare spending by more than two
percent were allowed to share in the savings they generate to
the Medicare program.
Results from the PGP demo suggest that the concept shows
promise. Preliminary results from the demonstration and reports
from participants suggest that the program has achieved its
goals of better coordination of care for the chronically ill,
careful attention to hospital discharge processes, expanded
role for non-physician providers, and investments in
information technology. In the most recent year of the PGP
demo, all participants demonstrated improvements in quality and
achieved below average growth in costs. In addition, four were
awarded with incentive payments for reducing costs below the
two percent threshold. Accountable care organizations would go
beyond the PGP model, which is based on physician groups, to
include additional providers.
Committee Bill
The Committee Bill would allow groups of providers who
voluntarily meet certain statutory criteria, including quality
measurements, to be recognized as ACOs and be eligible to share
in the cost-savings they achieve for the Medicare program.
Beginning on Jan. 1, 2012, eligible ACOs would have the
opportunity to qualify for an incentive bonus.
Eligible ACOs would be defined as groups of providers and
suppliers who have an established mechanism for joint decision
making. The following groups of providers and suppliers would
be eligible for participation: practitioners in group practice
arrangements; networks of practices; partnerships or joint-
venture arrangements between hospitals and practitioners;
hospitals employing practitioners; and such other groups of
providers of services and suppliers as the Secretary determines
appropriate. Practitioners would be defined as physicians,
regardless of specialty, nurse practitioners, physician
assistants, and clinical nurse specialists.
To qualify as an ACO, an organization would have to meet at
least the following criteria: (1) agree to become accountable
for the overall care of their Medicare fee-for-service
beneficiaries; (2) agree to a minimum three-year participation;
(3) have a formal legal structure that would allow the
organization to receive and distribute bonuses to participating
providers; (4) include the primary care physicians for at least
5,000 Medicare fee-for-service beneficiaries; (5) provide CMS
with information regarding practitioners participating in the
ACO as the Secretary deems appropriate; (6) have in place a
leadership and management structure, including with regard to
clinical and administrative systems; (7) define processes to
promote evidence-based medicine, report on quality and costs
measures, and coordinate care such as through the use of
telehealth, remote patient monitoring, and other such enabling
technologies; and (8) demonstrate to the Secretary that it
meets patient-centeredness criteria determined by the
Secretary, such as use of patient and caregiver assessments or
the use of individualized care plans.
To earn the incentive payment, the organization would have
to meet certain quality thresholds. In determining the quality
of care furnished by an ACO, the Secretary would be required to
use measures such as: (1) clinical processes and outcomes; (2)
patient perspectives on care; and (3) utilization (such as
rates of ambulatory-sensitive admissions and readmissions).
ACOs would be required to submit data on measures the Secretary
determines necessary to evaluate the quality of care furnished
by the ACO. The Secretary would be required to establish
performance standards for measures of the quality of care
furnished by ACOs. The Secretary would be required to seek to
improve the quality of care furnished by ACOs over time by
specifying higher standards for purposes of assessing quality
of care.
The Secretary would be authorized to incorporate reporting
requirements and incentive payments and penalties related to
the physician quality reporting initiative (PQRI), electronic
prescribing, electronic health records, and other similar
initiatives into the reporting requirements for ACOs.
CMS would assign Medicare fee-for-service beneficiaries to
ACOs based on their use of Medicare items and services in
preceding periods. The achievement thresholds and rewards for
the ACO would be as follows. The spending baseline would be
determined by using the most recent three years of total per
beneficiary spending for Medicare parts A and B for those
beneficiaries assigned to the ACO. The benchmark would be set
by the baseline amount that is adjusted for beneficiary
characteristics and updated by the projected absolute amount of
growth in national per capita expenditures for parts A and B
services under the Medicare fee-for-service program. Benchmarks
would be re-set at the end of the three-year period.
ACOs with three-year average Medicare expenditures that are
determined by CMS to be below their benchmark for the
corresponding period would be eligible for shared savings at a
rate determined appropriate by the Secretary. The Secretary
would be required to set a minimum threshold of savings that
would need to be achieved by an ACO before savings would be
shared. The Secretary would have the authority to adjust the
savings thresholds to account for the varying sizes of
participating ACOs. If the Secretary determines that an ACO has
taken steps to avoid at-risk patients in order to reduce the
likelihood of increasing costs, the Secretary would be
authorized to impose an appropriate sanction, including
terminating agreements with participating ACOs.
SEC. 3023. NATIONAL PILOT PROGRAM ON PAYMENT BUNDLING
Present Law
Medicare pays for most acute care hospital stays and post-
acute care services, including inpatient rehabilitation and
long term care hospital stays, skilled nursing facility (SNF)
stays, and home health care visits, under prospective payment
systems (PPSs) established for each type of provider. Under
each PPS, a predetermined rate is paid for each unit of
service, such as a hospital discharge, or a payment
classification group. Payment classification groups are based
on an estimate of the relative resources needed to care for a
patient with a specific diagnosis and set of care needs. (The
patient classification system used by hospitals, for example,
is referred to as Medicare Severity diagnosis related groups or
MS-DRGs).
Generally, PPS payments include a national standardized
amount adjusted by a wage index that is associated with the
area where the provider is located or, for some hospitals,
where it has been reclassified. Medicare law provides for
annual updates of the program payments to reflect inflation and
other factors. In some cases, these updates are linked to the
consumer price index for all urban consumers (CPI-U) or to a
provider-specific market basket (MB) index which measures the
change in the price of goods and services purchased by the
provider to produce a unit of output.
As Medicare beneficiaries with complex health conditions
and multiple co-morbidities move between hospital stays and a
range of post-acute care providers, Medicare makes separate
payments to each provider for covered services. The Medicare
Payment Advisory Commission (MedPAC), among others, has
suggested that Medicare test new incentives and payment models
to encourage providers to better coordinate across patients'
episodes of care and to evaluate the full spectrum of care a
patient may receive during these episodes. Specifically, in its
June 2008 report, MedPAC recommended that a bundled payment
system for an episode of care be explored in a pilot program.
Under this voluntary program, a single provider entity would
receive a bundled payment intended to cover the costs of the
full range of care needed over the hospitalization episode,
including 30 days post-discharge.
Committee Bill
The Secretary would be required to develop, test and
evaluate alternative payment methodologies through a national,
voluntary pilot program that is designed to provide incentives
for providers to coordinate patient care across the continuum
and to be jointly accountable for the entire episode of care,
starting in 2013. If evaluations find that the pilot program
achieves goals of improving patient outcomes, reducing costs
and improving efficiency, then the Secretary would be required
to submit an implementation plan to Congress on expanding the
pilot program to an extent to be determined by the Secretary.
Prior to the start of the pilot program, the Secretary
would be required to determine which patient assessment
instrument (such as the Continuity Assessment Record and
Evaluation, or CARE tool) should be used to evaluate a
patient's clinical condition for the purposes of determining
the most clinically-appropriate site for post-acute care. The
Secretary would be required to work with the Agency for
Healthcare Research and Quality (AHRQ) and the qualified
consensus-based entity as defined in MIPPA to develop episode
of care quality measures and post-acute quality measures in
compliance with the quality measurement and endorsement
procedures laid out in Quality Infrastructure section of this
legislation. Finally, the Secretary would be required to
determine which Medicare statutory provisions and related
regulations would be appropriate to waive in order to conduct
the pilot program.
The duration of the pilot project would be for five years.
However, the Secretary would be able to extend the pilot
program for participating providers, if the Secretary
determines that an extension of the pilot program would result
in either (1) an improvement in the quality of patient care
without an increase in expenditures under this title, or (2) a
reduction in expenditures under this title without a reduction
in the quality of patient care. The length of the extension
would be determined by the Secretary.
The Secretary would select eight conditions to be included
in the pilot program by considering the following factors: (1)
a mix of chronic and acute conditions; (2) a mix of surgical
and medical conditions; (3) conditions for which there is
evidence of opportunity for providers to improve quality of
care while reducing total expenditures; (3) conditions with
significant variation in readmissions and post acute care
spending; (4) conditions with high-volume or high post acute
care spending; and (5) conditions that are deemed most amenable
to bundling across spectrum of care given current practice
patterns. To be an applicable beneficiary under this pilot
program, individuals must be entitled to, or enrolled in part A
and enrolled in part B, but not enrolled in part C, and be
admitted to a hospital for an applicable condition.
The pilot program may cover the following services: acute
care inpatient services; physician services delivered inside
and outside of the acute care hospital setting; outpatient
hospital services, including emergency department visits;
services associated with acute care hospital readmissions; PAC
services including home health, skilled nursing, inpatient
rehabilitation, long term care hospital; and other services
that the Secretary determines appropriate.
The episode of care established in the pilot program would
start three days prior to a qualifying admission to the
hospital and span the length of the hospital stay and 30 days
following the patient discharge, unless the Secretary
determines another timeframe is more appropriate for purposes
of the pilot. The Secretary would develop policies to ensure
the traditional fee-for-service program provides payment for
PAC services in the appropriate setting for those patients who
require continued PAC services after the 30th day following the
discharge.
With respect to payments for the participating providers in
the pilot program, the Secretary could test alternative payment
methodologies, which could include bundled payments or
arrangements in which providers continue to receive
reimbursement under current payment systems, but are held
jointly accountable for the quality and cost of care provided
to Medicare patients. Payments would be adjusted for patient
severity of illness and other patient characteristics,
including having a major diagnosis of substance abuse or mental
illness, resources needed to provide care as well as
adjustments for differences in hospital average hourly wages,
physician work, practice expense, malpractice expense, and
geographic adjustment factors. The pilot program's payment
methodology would also take into account the provision of
services such as care coordination, medication reconciliation,
discharge planning and transitional care services and other
patient-centered activities as defined appropriate by the
Secretary.
The pilot program's bundled payment would be made to a
Medicare provider or other entity comprised of multiple
providers to cover the costs of acute care inpatient and
outpatient hospital services, physician services and post-acute
care. The comprehensive bundled payment would include the costs
of any rehospitalizations that occur during the covered period.
The bundled payment for each of the eight selected conditions
would be based on the average hospital, physician, and post-
acute care payments made over the episode of care for patient.
Any Medicare provider, including hospitals, physician
groups, or post-acute entities interested in assuming
responsibility for the bundled payment would be able to apply
to participate in the pilot program. Any entity assuming
responsibility for the bundled Medicare payment would be
required to have an arrangement with an acute hospital for
initiation of bundled services. All services provided under the
bundle would be required to be provided or directed by
Medicare-participating providers. Eligible entities would
receive the bundled payment for each patient served, regardless
of whether patient receives certain levels of physician or post
acute care.
In those instances a condition selected for the pilot
program is also subject to Medicare's readmissions policy,
hospitals participating in the pilot would be exempt from
readmissions penalty for that condition. The bundled payment to
a pilot participant would cover any preventable readmissions
within the covered period. In the case where a patient with a
selected condition is readmitted for a preventable readmission
at a different hospital than the initial hospitalization, the
Secretary would reimburse the subsequent hospital its base
operating and capital MS-DRG payment amounts that would
otherwise be made if this policy did not apply. The Secretary
would then adjust the bundled payment to recoup these same
amounts.
The Secretary would be directed to establish quality
measures related to care provided across all providers
participating in the pilot. These quality measures would be
risk-adjusted and would include: episode of care measures;
measures of improved functional status; rates of readmission;
rates of preventable readmissions as defined in the
readmissions policy; rates of return to the community; rates of
admission to the ER after hospitalization (as distinctly
separate from readmission rates); efficiency measures; measures
of patient-centeredness of care; patient perception of care
measures; measures to monitor and detect the under provision of
necessary care; and other measures deemed appropriate by the
Secretary.
The Secretary would be given the authority to delete,
revise, and add quality measures as deemed appropriate related
to the care being provided to patients within the pilot
program. All providers who participate in pilot would be
required to report to the Secretary on quality measures during
each year of the program. At the discretion of the Secretary,
to the extent practicable, these measures would be required to
be reported through a qualified electronic health record in a
manner prescribed by the Secretary.
The Secretary would be required to conduct an independent
evaluation of the pilot program and submit an interim report to
Congress no later than two years after date of implementation
of the pilot program and a final report no later than three
years after date of the implementation. The evaluation would
include an examination of the extent of performance improvement
related to quality measures, health outcomes, access to care
and financial outcomes.
If the Secretary finds that the pilot program results in
either improvements in the quality of patient care without an
increase in Medicare expenditures or a reduction in Medicare
expenditures without a reduction in the quality of patient
care, then the Secretary would be required to submit an
implementation plan to Congress not later than January 1, 2016
with recommendations regarding expansion of the pilot program
by not later than January 1, 2018, to an extent determined
appropriate by the Secretary.
The Secretary would also consult with representatives of
small and rural hospitals, including critical access hospitals
(CAHs), to determine appropriate and effective methods for
hospitals to participate in the pilot program or in a similar
pilot program. The Secretary would consider innovative methods
of implementing bundling in these hospitals, including the
challenges associated with the small volume of services
provided to Medicare beneficiaries by these facilities. Not
later than two years after the date of enactment of this Act,
the Secretary would submit to Congress a report on the results
of this consultation including recommendations with the respect
to the appropriate application of bundling to small and rural
hospitals, including CAHs.
SEC. 3024. INDEPENDENCE AT HOME PILOT PROGRAM
Present Law
The Department of Veterans Affairs has been implementing a
Home Based Primary Care (HBPC) program since 1972. HBPC
provides comprehensive, interdisciplinary primary care in the
homes of veterans with complex medical, social, and behavioral
conditions for whom routine clinic-based care is not effective.
HBPC targets frail, chronically ill veterans who require
interdisciplinary health care teams, continuity, coordination
of care, and the integration of diverse services to cover their
complex medical, social, rehabilitative, and behavioral care
needs. These veterans need comprehensive, longitudinal home
care services as they age to maximize function, minimize
institutionalization, and maintain quality of life. HBPC
currently operates at over 130 locations in 48 states and
Puerto Rico, and has shown substantial reductions in hospital
days, nursing home days, and total costs of care.
Committee Bill
The Committee Bill would require the Secretary to conduct a
Medicare pilot program, beginning no later than January 1,
2012, to test a payment incentive and service delivery model
that utilizes physician and nurse practitioner directed home-
based primary care teams designed to reduce expenditures and
improve health outcomes in the provision of items and services
to certain chronically ill Medicare beneficiaries. The pilot
would be required to test whether such a model, which is
accountable for providing comprehensive, coordinated,
continuous, and accessible care to high-need populations at
home and coordinating health care across all treatment
settings, would result in the following goals of reducing
preventable hospitalizations; preventing hospital readmissions;
reducing emergency room visits; improving health outcomes
commensurate with the beneficiaries' stage of chronic illness;
improving the efficiency of care, such as by reducing
duplicative diagnostic and laboratory tests; reducing the cost
of Medicare health care services covered under this proposed
legislation; and achieving beneficiary and family caregiver
satisfaction.
The Secretary would enter into agreements with qualifying
independence at home medical practices, legal entities
comprised of an individual physician or nurse practitioner or
group of physicians and nurse practitioners that provide care
as part of a team that includes physicians, nurses, physician
assistants, pharmacists, and other health and social services
staff, as appropriate. These practice staff would have
experience providing home-based primary care services to
applicable beneficiaries. The practice would be organized in
part for the purpose of providing the services of a physician,
who has the medical training or experience to fulfill the
physician's role in the practice; would have documented
experience in providing home-based primary care services to
high-cost chronically ill beneficiaries; would have the
capacity to provide services to at least 200 applicable
beneficiaries; and would use electronic health information
systems, remote monitoring, and mobile diagnostic technology.
Practice staff would make in-home visits, and be available
24 hours per day, seven days per week to implement care plans
tailored to the individual beneficiary's chronic conditions and
designed to reduce expenditures and improve health outcomes in
the provision of items and services to applicable
beneficiaries. The practice would be required to report on
quality measures and other data, as specified by the Secretary.
The Secretary would be required to develop quality performance
standards for practices participating in the pilot program. A
home-based primary care team could be led by a nurse
practitioner or physician assistant, if such providers have the
medical training or experience to fulfill these roles in the
practice, comply with the requirements of this provision, and
act consistently with State law.
The provision would not prohibit practices from including
participating provider or practitioners that are affiliated
with the medical practice under an arrangement structured so
that such provider or practitioner would participate in the
pilot program and share in any of its savings. A participating
practitioner is defined as a physician assistant, nurse
practitioner, clinical nurse specialist, certified registered
nurse anesthetist, certified nurse-midwife, clinical social
worker, clinical psychologist, or registered dietitian or
nutrition professional.
The Secretary would establish a methodology for sharing
savings with independence at home medical practices. Target
spending levels for each practice would account for normal
variation in expenditures for items and services covered under
parts A and B for each participating independence at home
medical practice based upon the size of the practice,
characteristics of the enrolled individuals, and other factors
the Secretary would determine to be appropriate. The Secretary
would annually designate the total amount of savings achieved
for beneficiaries enrolled in independence at home practices.
The Secretary would be required to establish how savings
beyond the first five percent are to be apportioned among
practices, taking into account the number of beneficiaries
served by each practice, the characteristics of the individuals
enrolled in each practice, the practices' performance on
quality performance measures, and other factors as the
Secretary determines appropriate. The Secretary must limit
payments for shared savings to each practice so that aggregate
expenditures for applicable beneficiaries would not exceed the
amount that the Secretary estimates, less five percent, would
be expended for such services for such beneficiaries enrolled
in an independence at home medical practice if the pilot
program had not been implemented.
An applicable beneficiary would be defined as an individual
who the independence at home practice has determined:
(A) is entitled to, or enrolled for, benefits under part A
and enrolled for benefits under Part B;
(B) is not enrolled in a Medicare Advantage plan C, a
Program for All-Inclusive Care for the Elderly program, or an
accountable care organization under section 1899 or any other
shared savings program under Medicare;
(C) has two or more chronic illnesses, such as congestive
heart failure, diabetes, dementias designated by the Secretary,
chronic obstructive pulmonary disease, ischemic heart disease,
stroke, Alzheimer's Disease and neurodegenerative diseases, and
other diseases and conditions designated by the Secretary which
result in high costs under this title;
(D) within the past 12 months has had a nonelective
hospital admission and received acute or subacute
rehabilitation services or skilled home care services;
(E) has two or more functional dependencies requiring the
assistance of another person (e.g., bathing, dressing,
toileting, walking, or feeding); and
(F) fulfills other criteria as the Secretary determines
appropriate.
The Secretary would be required to determine a method to
ensure that beneficiaries' have agreed to participate in an
independence at home practice and that their agreement to
participate is voluntary. Physicians or nurse practitioners
must not take any elements of this proposed legislation as
encouraging them to limit applicable beneficiary access to
services covered under this title. Beneficiaries who do agree
to participate do not relinquish access to any Medicare
benefits as a condition of receiving services from a practice.
Agreements with practices under the program could cover a
3-year period. No independence at home practice participating
in the accountable care organization pilot program or the
medical home pilot program would be eligible to participate in
this pilot program.
The Secretary would be required to give preference, in
selecting practices, to medical practices in high costs areas
of the country, that have experience in furnishing health care
services to applicable beneficiaries in the home, and that use
electronic medical records, health information technology, and
individualized plans of care. The Secretary could waive certain
provisions in the Social Security Act to implement this pilot
program.
The Secretary would be required to enter into agreements
with as many qualified independence at home practices as
practicable to test the independence at home medical practice
model to achieve cost reductions and improve health outcomes
for applicable beneficiaries. When selecting qualified
practices, the Secretary is required to limit to 10,000 the
number of applicable beneficiaries allowed to participate in
the pilot program.
The Secretary must evaluate each independence at home
medical practice under the pilot program to assess whether the
practice reduced preventable hospitalizations and hospital
readmissions, reduced emergency room visits, improved health
outcomes, improved the efficiency of care, reduced the costs of
health care services, and achieved beneficiary and family
caregiver satisfaction.
The Secretary must also conduct an independent evaluation
of the pilot program and submit to Congress an interim and a
final report. These reports would be required to include an
analysis of best practices under the pilot program and the
impact of the pilot program on coordination of care,
expenditures under this title, access to services, and the
quality of health care services provided to applicable
beneficiaries, in addition to other areas as determined by the
Secretary.
Subject to the evaluation of the pilot program contained in
the interim and final reports to Congress, the Secretary may
enter into additional agreements with practices to further test
and refine models with respect to qualifying practices. If, and
to the extent that, the practice models are beneficial to this
pilot program and the Chief Actuary of the CMS certifies that
the model would result in estimated spending that would be less
than without the expansion, then the Secretary may issue
regulations to implement, on a permanent basis, the
independence at home practice model. In so doing, the
Secretary, would take into account the evaluation of each
independence at home practice and the evaluation of the pilot
program contained in the interim and final reports.
For purposes of administering and carrying out the pilot
program (other than for payments for items and services
furnished under Medicare, shared savings and monthly fees, or
other related payments such as interim payments), the provision
would appropriate to the Secretary for CMS Program Management
Account $5 million (from out of either general revenues or out
of part A or B of the Medicare Trust Fund) for each of fiscal
years 2010 through 2015. Amounts appropriated for a fiscal year
would be available until expended.
SEC. 3025. HOSPITAL READMISSIONS REDUCTION PROGRAM
Present Law
Medicare pays for inpatient care provided by acute care
hospitals using a prospectively determined payment for each
discharge under section 1886(d) of the Social Security Act.
Payment also depends on the relative resource use associated
with a patient classification group, referred to as the
Medicare Severity diagnosis related groups (MS-DRGs), to which
the patient is assigned. Under Medicare's inpatient prospective
payment system (IPPS), each MS-DRG is paid based on an estimate
of the average resources needed to care for a patient with a
specific diagnosis and set of care needs.
The Medicare program currently has payment policies in
place related to how the Medicare program must reimburse
hospitals in cases where Medicare beneficiaries are transferred
between two hospitals through the course of their acute care
episodes. Under the current transfer payment policy, the
sending acute care hospital (the hospital that transfers the
patient to another acute care hospital) is paid on a per diem
basis at a level that can be no greater than the otherwise
applicable full MS-DRG payment amount if the transfer meets
certain conditions. The final discharging acute care hospital
(the hospital that receives the patient) receives the full MS-
DRG payment amount. Payment changes resulting from such
transfers are implemented via Medicare's claims processing
systems.
The Balanced Budget Act of 1997 (BBA, P.L. 105-33) directed
the Secretary to apply the acute care transfer policy to a
broader set of circumstances. Specifically, BBA directed the
Secretary to select ten MS-DRGs with high volumes of discharges
to post-acute care or disproportionate use of post-acute
services and pay these cases as transfers beginning in FY1999.
Post-acute care includes long-term care hospitals, inpatient
rehabilitation facilities or distinct part units, psychiatric
hospitals or units, skilled nursing facilities, and clinically
related home health care provided within three days after the
date of discharge. After FY2000, the Secretary was authorized
to expand this post acute care (PAC) transfer policy to
additional MS-DRGs.
According to the Medicare Payment Advisory Commission's
(MedPAC's) June 2007 Report to Congress, analysis of 2005
Medicare data showed that 6.2 percent of hospitalizations of
Medicare beneficiaries resulted in readmission within 7 days
and 17.6 percent of hospitalizations resulted in readmission
within 30 days. The 17.6 percent of hospital readmission
accounts for $15 billion in Medicare spending. These
readmission rates reflect the total number of readmissions,
including those that may not have been related to the initial
diagnosis and may not have been preventable. MedPAC, the
Centers for Medicare and Medicaid Services (CMS), and others
have expressed concern that providers do not have financial
incentives to reduce potentially preventable readmissions. In
addition, MedPAC, in its June 2008 report, recommended that
Medicare's payments to hospitals with relatively high
readmission rates for select conditions be reduced.
Committee Bill
Starting for discharges on October 1, 2012, the Secretary
would establish a hospital readmissions reduction program for
subsection (d) hospitals for certain potentially preventable
Medicare inpatient hospital readmissions covering eight
conditions with high volume or high rate (or both). Starting in
FY2016 and in subsequent years, the list of conditions could be
expanded, taking into account whether the condition has a high
volume or high rate (or both) of potentially preventable
inpatient readmissions or results in high Medicare spending.
Before the beginning of the fiscal year, the national
average readmission rate related to each condition would be
calculated. The rate would be the weighted average of all MS-
DRGs related to the condition, risk-adjusted for patient
severity and other appropriate patient characteristics. A
hospital-specific readmission rate related to each condition
would also be calculated with the same risk and other
adjustments.
A readmission would be an individual who is discharged from
a subsection (d) (or an acute care) hospital and admitted to
the same or another hospital or critical access hospital within
30 days from the date of such discharge. A readmission would
not include a planned readmission; a readmission related to
major or metastatic malignancies, burn care or trauma care; a
readmission of a patient where the original admission had
discharge status of ``left against medical advice''; and a
transfer from another hospital.
For each fiscal year, all acute care hospitals would be
ranked based on the national average and hospital-specific
readmission rate for each selected condition for a specific
period as determined by the Secretary. The quartile of
hospitals with the highest readmission rates for each condition
would be identified. Starting for discharges on October 1,
2013, if an individual is readmitted and the prior discharge is
related to a condition selected for that fiscal year, the
Medicare payment for the prior discharge would be reduced by an
applicable percentage. The payment adjustment for a discharge
in a fiscal year would only apply to an acute care hospital in
the highest readmission quartile for the condition for the
fiscal year. Any payment reductions would only apply for the
fiscal year involved and would not be taken into account in
subsequent fiscal years. The applicable percentage reduction
would be 20 percent for a readmission that occurs within 7 days
of the prior discharge and would be 10 percent for a
readmission that occurs within 15 days of the prior discharge.
Information on the readmission rates for each acute care
hospital would be made publicly available after the hospital
has the opportunity to review and submit corrections to the
information. The information would be posted on the Hospital
Compare website in an easily understandable format.
There would be no administrative or judicial review of the
determination of the payment amount for the prior discharge;
the methodology for selecting conditions, determining ranks,
and making payment adjustments; the readmission reports
provided to acute care hospitals; or the publicly available
hospital readmission information.
SEC. 3026. COMMUNITY-BASED CARE TRANSITIONS PROGRAM
Present Law
No provision.
Committee Bill
Beginning in 2011, the Committee Bill would establish a
five-year Community Care Transitions Program under Medicare.
Under this program, the Secretary would fund eligible hospitals
and community-based organizations to provide transition
services to certain Medicare beneficiaries at risk of re-
hospitalization or a substandard transition into post-
hospitalization care. High-risk Medicare beneficiaries would
include those beneficiaries who have attained a minimum
hierarchical condition category score (specified by the
Secretary) based on a diagnosis of multiple chronic conditions,
including one of the following conditions: cognitive
impairment, depression, a history of multiple hospital
readmissions, and any other chronic disease or risk factor as
determined by the Secretary.
Eligible hospitals would be those identified by the
Secretary as having high readmission rates, such as above the
75th percentile for selected conditions. The Secretary would
give priority for participation in the Community-Based Care
Transitions Program to eligible community-based organizations
and hospitals (that partner with community-based organizations)
that provide services to medically underserved populations,
small communities and rural areas. Applications by community-
based organizations and hospitals to participate in this
program would be required to propose at least one care
transition intervention (this intervention could not include
the discharge planning activities already required of Medicare-
participating hospitals under Medicare's Conditions of
Participation). Examples of such interventions could include:
1. Initiating care transition services for targeted
high-risk beneficiaries no later than 24 hours prior to
the beneficiary being discharged from the participating
hospital;
2. Arranging timely post-discharge follow-up to
educate patients and, as appropriate, the primary
caregiver, about responding to health symptoms that may
indicate additional health problems or a deteriorating
condition;
3. Assisting patients and caregivers in ensuring
productive and timely interactions with post-acute and
outpatient providers;
4. Assessing and actively engaging with a beneficiary
and caregiver through the provision of self-management
support and relevant information that is specific to
the beneficiary's conditions; and
5. Conducting comprehensive medication review and
management, including self-management support, if
appropriate.
A total of $500 million would be transferred by the
Secretary from the Federal Hospital Insurance Trust Fund and
the Federal Supplementary Medical Insurance Trust Fund for this
program and would be required to remain available until
expended. The Secretary would have the authority to continue or
expand the scope and duration of the program if the Secretary
determined that expansion would improve quality of care and the
CMS Office of the Actuary certifies that expansion would reduce
projected Medicare spending.
SEC. 3027. EXTENSION OF GAINSHARING DEMONSTRATION
Present Law
Section 5007 of the Deficit Reduction Act of 2005 (DRA,
P.L. 109-171) authorizes a gainsharing demonstration to
evaluate arrangements between hospitals and physicians designed
to improve the quality and the efficiency of care provided to
beneficiaries. In the absence of this DRA authority,
gainsharing arrangements are restricted by the Civil Monetary
Penalty law. CMS is currently operating two projects, each
consisting of one hospital in New York and West Virginia.
Although authorized to begin on January 1, 2007, the project
began on October 1, 2008 and will end as mandated on December
31, 2009. The Secretary was required to submit a report on
quality improvement and achieved savings as a result of the
demonstration no later than December 1, 2008. The final report
on these issues was due on May 1, 2010. The project was
appropriated $6 million in FY2006 to be available for
expenditure through FY2010.
Committee Bill
The authority to conduct the gainsharing demonstration
project in operation as of October 1, 2008 would be extended
until September 30, 2011. The due date of the quality
improvement and achieved savings report would be extended from
December 1, 2008, to March 31, 2011. The final report would be
due March 31, 2013, instead of May 1, 2010. An additional $1.6
million would be appropriated in FY2010. All appropriations
would be available for expenditure through FY2014 or until
expended.
PART IV--STRENGTHENING PRIMARY CARE AND OTHER WORKFORCE INVESTMENTS
SEC. 3031. EXPANDING ACCESS TO PRIMARY CARE SERVICES AND GENERAL
SURGERY SERVICES
Present Law
Medicare uses a fee schedule to reimburse physicians for
the services they provide. In certain circumstances, physicians
receive an additional payment to encourage targeted activities.
These bonuses, typically a percentage increase above the
Medicare fee schedule amounts, can be awarded for a number of
activities including demonstrating quality achievements,
participating in electronic prescribing, or practicing in
underserved areas.
Section 1833(m) of the Social Security Act provides bonus
payments for physicians who furnish medical care services in
geographic areas that are designated by the Health Resources
and Services Administration (HRSA) as primary medical care
health professional shortage areas (HPSAs) under section
332(a)(1)(A) of the Public Health Service (PHS) Act. In
addition, for claims with dates of service on or after July 1,
2004, psychiatrists furnishing services in mental health HPSAs
are also eligible to receive bonus payments.
The bonus payment equals ten percent of what would
otherwise be paid under the fee schedule. HPSAs may be
designated as having a shortage of primary medical care, dental
or mental health providers. They may be urban or rural areas,
population groups or medical or other public facilities.
Committee Bill
The Committee Bill would establish a new 10 percent bonus
on select evaluation & management codes under the Medicare fee
schedule for five years, beginning January 1, 2011. The groups
of codes to which this bonus would apply would be office
visits, home visits, nursing facility visits, and domiciliary,
rest home (e.g., boarding home), or custodial care services.
The bonus would be available to primary care practitioners
who: (1) have a specialty designation of family medicine,
internal medicine, geriatric medicine, or pediatric medicine or
are nurse practitioners, clinical nurse specialists or
physician assistants; and (2) furnish 60 percent of their
services in the select primary care service codes. The
following healthcare common procedure coding system (HCPCS)
services, identified as of January 1, 2009, would be considered
primary care services: (i) 99201 through 99215 (office visits);
(ii) 99304 through 99340 (nursing facility care, domiciliary,
rest, or home visits and custodial care); and (iii) 99341
through 99350 (home visits and services). The Secretary could
subsequently modify this list. The bonus payments under this
subsection and under the physician quality reporting program
would each be determined independently.
In addition, general surgeons (physicians who have
designated general surgery as their primary specialty code in
their application for the submission of Medicare claims) who
provide care in a HPSA would also be eligible for a ten percent
bonus on major procedure codes for five years, beginning
January 1, 2011. Half (50 percent) of the cost of the bonuses
would be offset through an across-the-board reduction to all
other codes (by modifying the conversion factor for all codes),
except for physicians who primarily provide services in a HPSA
zip code.
SEC. 3031A. MEDICARE FEDERALLY QUALIFIED HEALTH CENTER IMPROVEMENTS
Present Law
A Federally qualified health center (FQHC) is a type of
provider defined by the Medicare and Medicaid statutes. FQHCs
include all organizations receiving grants under section 330 of
the Public Health Service Act (PHSA), clinics that have been
certified as meeting such requirements (called FQHC Look-
Alikes) or outpatient facilities that are operated by tribal
organization or urban Indian organizations.
FQHC services are defined by Medicare statute as rural
health clinic services (such as physician services, those
provided by physician assistants, nurse practitioners, nurse
midwives, visiting nurses, clinical psychologist or social
workers and related services and supplies), diabetes outpatient
self-management training services, medical nutrition therapy
services and preventive primary health services required under
section 330 of the PHSA. The preventive services as defined by
the PHSA include prenatal and perinatal services; appropriate
cancer screening; well-child services; immunizations against
vaccine-preventable diseases; screenings for elevated blood
lead levels, communicable diseases, and cholesterol; pediatric
eye, ear, and dental screenings to determine the need for
vision and hearing correction and dental care; voluntary family
planning services; preventive dental services.
FQHCs receive cost-based reimbursement from Medicare,
subject to a per-visit payment limit and certain productivity
standards. Medicare pays FQHCs on an interim basis for covered
services furnished to beneficiaries using an all-inclusive rate
for each visit (except for certain vaccines which are paid on a
cost basis). Generally, the FQHC's final payment rate is
calculated by dividing the FQHC's total allowable cost for such
services by the total visits which is subject to the maximum
per-visit payment limit. The payment limits are increased each
year by the Medicare Economic Index (MEI) and are different for
urban and rural FQHCs. The upper payment limit per visit for
urban FQHCs is $119.29 starting January 1, 2009, through
December 31, 2009 and per visit limit for rural FQHCs is
$102.58 effective January 1, 2009.
As established by the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (MMA, P.L. 108-173)
the Centers for Medicare & Medicaid Services (CMS) provides
supplemental payments to FQHCs that contract with Medicare
Advantage (MA) organizations to cover the difference, if any,
between the payment received by the FQHC for treating MA
enrollees and the payment to which the FQHC would be entitled
to receive under the cost-based all-inclusive payment rate. An
FQHC is only eligible to receive this supplemental payment when
FQHC services are provided during a face-to-face encounter
between an MA enrollee and one or more of the following FQHC
covered core practitioners: physicians, nurse practitioners,
physician assistants, certified nurse midwives, clinical
psychologists, or clinical social workers. The supplemental
payment is made directly to each qualified FQHC by the Medicare
contractor.
Committee Bill
Effective for services starting on January 1, 2011, the
Committee Bill would expand the statutory definition of FQHC
services to include the Medicare definition of preventive
services at 1861(ddd)(3) that would be established in Sec. 2002
of this legislation. These services would include screening and
preventive services (other than electrocardiograms), an initial
preventive physical examination, and personalized prevention
plan services.
The Committee Bill would also change Medicare's payments to
FQHCs. For services starting January 1, 2012, during the fiscal
year that ends in 2012), an FQHC would be paid a rate based on
the average of its reasonable costs of providing services
during 2010 and 2011, subject to appropriate tests of
reasonableness, but not per visit payment limits or
productivity screens. These payments, except for certain
vaccine services, would not exceed 80 percent of the costs.
Services furnished during the FQHC's fiscal year during 2013
(and succeeding years) would be paid on an amount calculated on
a per visit basis (without application of productivity screens
or per visit limits) increased by the MEI applicable to primary
care services. The update amount for an FQHC's fiscal year
during 2014 (and succeeding years) would be the percentage
increase in a market basket index of FQHC costs as developed by
the Secretary and established during the rule making process.
FQHC payments would be adjusted to account for any increase or
decrease in the scope of services, including a change in the
type, intensity, duration, or amount of services furnished by
the center during the fiscal year less any applicable copayment
amounts. Other than certain vaccine services, Medicare's
payment for FQHC services would not exceed 80 percent of the
established payment amount (without regard to coinsurance
amounts which are established at 20 percent charges.) Payment
rules would be established for entities that first qualify as
FQHCs in fiscal years after 2011. Medicare's supplemental
payments to FQHC services provided to a beneficiary enrolled in
a MA plan would continue at 100 percent of the established FQHC
payment amount.
SEC. 3032. DISTRIBUTION OF ADDITIONAL RESIDENCY POSITIONS
Present Law
Medicare pays for the costs of graduate medical education
(GME) in teaching hospitals through an indirect medical
education (IME) adjustment within its inpatient prospective
payment system (IPPS) and direct graduate medical education
(DGME) payments made outside of the IPPS. With certain
exceptions, the Balanced Budget Act of 1997 (BBA, P.L. 105-33)
limited the number of allopathic and osteopathic residents that
Medicare would reimburse a teaching hospital at the level
reported in its cost report ending on or before December 31,
1996. The limit does not include dental or podiatry residents.
The Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA, P.L. 108-173) authorized the
redistribution of up to 75 percent of each teaching hospital's
unused resident positions to hospitals seeking to increase
their medical residency training programs. Any adjustments made
to teaching hospitals' resident limits would be permanent.
Rural teaching hospitals with less than 250 beds were exempt
from the redistribution of any of their unfilled positions.
Under the redistribution program, teaching hospitals were
allowed to request up to an additional 25 full time equivalent
(FTE) positions for DGME and IME payments. Hospitals were
required to demonstrate the likelihood that the redistributed
positions would be filled within three cost reporting periods
beginning July 1, 2005. MMA required that the unused slots be
redistributed according to specific priorities: rural
hospitals, urban hospitals located in areas with a population
of one million or less, specialty training programs that are
the only specialty program in a state, and all other hospitals.
The redistribution was effective for portions of cost reporting
periods starting July 1, 2005. The redistributed resident slots
have different IME and DGME payment formulas from those used to
reimburse hospitals' previous residents.
Committee Bill
The Secretary would reduce the otherwise applicable
resident limit for a teaching hospital that has residency
positions that are unused. Unused positions would be
established when a hospital's reference residence level is less
than its otherwise applicable resident limit. The reduction
would be effective for portions of cost reporting periods
occurring on or after July 1, 2011 and would equal 65 percent
of the difference between a hospital's reference level and its
limit. Rural teaching hospitals with less than 250 beds would
be exempt from the redistribution of any of their unfilled
positions. Hospitals who had an approved voluntary reduction
plan under Section 1886(h)(6) would also be exempt from the
redistribution policy if they demonstrate that they have a
specified plan in place for filling the unused residency
positions within two years of enactment of this legislation.
A hospital's reference residence level would be established
as determined appropriate by the Secretary.
The Secretary would be required to increase the otherwise
applicable resident limit for each qualifying hospital that
submits a timely application by such number determined by the
Secretary. The aggregate number of increases in resident limits
would be equal to the estimated aggregate reduction in resident
limits. A hospital that receives an increase in its otherwise
applicable resident limit would be required to ensure during a
five year period beginning on the date of the increase that (1)
the number of FTE primary care residents as determined by the
Secretary is not less than the average number of FTE primary
care residents during the three most recent cost reporting
periods ending prior to the date of enactment; and (2) that not
less than 75 percent of the positions attributable to such an
increase are in a primary care or general surgery residency as
determined by the Secretary.
The Secretary would determine whether a hospital has met
the requirements during the five year period in an appropriate
manner and time, including at the end of the period.
A hospital that does not meet these requirements would have
its otherwise applicable resident limit reduced by the amount
of the increase authorized under this provision. Those
positions would be subsequently distributed according to the
priorities established in this provision.
When determining the increase in a hospital's otherwise
applicable resident limit, the Secretary would take into
account: (1) the demonstrated likelihood that a hospital would
fill the positions within the first three cost reporting
periods beginning on or after July 1, 2011; (2) whether a
hospital would take part in an innovative delivery model that
promotes quality and care coordination; and (3) whether a
hospital would have an accredited rural training track
residency program.
The Secretary would distribute the increase in the
otherwise applicable resident limit based on the following
factors: (1) to hospitals located in states with resident-to-
population ratios in the lowest quartile; (2) to hospitals
located in a state that is among the top ten states in terms of
the ratio of the total population living in a health
professional shortage area (HPSA) determined by the Department
of Health and Human Services as of the date of enactment
compared to total population of the state based on the most
recent state population projections by the Census Bureau; and
(3) to hospitals located in rural areas.
From the pool of available slots, 70 percent of such slots
would be reserved and distributed to hospitals in states
meeting the first criteria, (those with low resident-to-
population ratios). The remaining 30 percent of slots would be
reserved and distributed to those hospitals in states meeting
the second and third criteria (to hospitals in the ten states
with highest proportion of population living in health
professional shortage areas and hospitals located in rural
states). Any resident positions that are not allocated within
one year from the date of enactment from a given category may
be distributed to hospitals in the other category in accordance
with the above considerations and priorities.
Hospitals would not receive more than 75 additional FTE
residency positions under this provision. The increase in
resident positions would be distributed no later than three
years after the date of enactment.
The per resident amounts (PRAs) for the resident positions
distributed under this provision would equal the hospitals'
PRAs for primary and non-primary care positions for the
purposes of calculating direct graduate medical payments. The
indirect medical education adjustment for these resident
positions distributed under this provision would be reimbursed
at the full IME adjustment factor.
SEC. 3033. COUNTING RESIDENT TIME IN OUTPATIENT SETTINGS AND ALLOWING
FLEXIBILITY FOR JOINTLY OPERATED RESIDENCY TRAINING PROGRAMS
Present Law
Medicare currently reimburses the direct costs of graduate
medical education (DGME) for approved residency training
programs in a non-hospital setting where the residents'
activities relating to patient care are performed as long as
the hospital incurs all, or substantially all, of the costs for
the training program in that setting. Through regulation, CMS
has defined all, or substantially all costs, as 90 percent of
resident stipends and fringe benefits and costs associated with
a supervising physician. However, as presently administered, a
hospital that jointly operates a residency program with another
hospital cannot include the time spent by residents working at
a non-hospital site if it incurs, all or substantially all of
the costs, for only a portion of the residents in that program
at the non-hospital site.
Committee Bill
Effective for cost reporting periods beginning on or after
July 1, 2010, all time spent by a resident would count toward
Medicare's DGME payment, without regard to the setting where
the activities are performed, if the hospital continues, or in
the case of a jointly operated residency program, the involved
entities continue to incur the costs of the stipends and the
fringe benefits of the resident during the time the resident
spends in the setting.
Effective for discharges on or after July 1, 2010, all the
time spent by a resident in patient care activities in a non-
hospital setting would be counted towards Medicare's IME
payment if the hospital continues, or in the case of a jointly
operating residency training program, the entities continue to
incur the costs of the stipends and fringe benefits of the
resident during the time spent in that setting.
An eligible training site would be an ambulatory or non-
hospital training site. A jointly operated residency training
program means an approved medical residency training program
that is jointly operated by one or more hospitals or by one or
more eligible training sites under a written agreement which
specifies a method for an equitable distribution of time spent
by the resident in activities relating to patient care.
Each hospital or eligible training site participating in
the operation of a jointly operated residency training program
would submit the written agreement to the Secretary. In the
case of a jointly operated residency training program, the
direct graduate medical education and the indirect medical
education payments would not exceed the aggregate payments that
would have been made to the hospitals and the eligible training
sites if the training program had been independently operated.
The provisions would not be implemented in a manner that
would require reopening of any settled hospital cost reports
where there is not a jurisdictionally proper appeal pending on
IME and DGME payments as of the date of enactment.
SEC. 3034. RULES FOR COUNTING RESIDENT TIME FOR DIDACTIC AND SCHOLARLY
ACTIVITIES AND OTHER ACTIVITIES
Present Law
Medicare pays teaching hospitals the costs of approved
medical residency training programs through two mechanisms: an
indirect medical education (IME) adjustment within the
inpatient prospective payment system (IPPS) and direct graduate
medical education (DGME) payments made outside of the IPPS.
Certain non-patient care activities that are part of an
approved training program are not allowable for DGME or IME
payment purposes. With respect to training that occurs in
hospital settings, Medicare would not include the time that
residents spend in non-patient care activities, including
didactic activities, when calculating IME payments; these
activities would be included when calculating DGME payments in
hospital settings. With respect to training that occurs in non-
hospital settings, Medicare would not count the time that
residents spend in non-patient care activities, including
didactic activities, when calculating DGME or IME payments.
Committee Bill
When calculating DGME payments, Medicare would count the
time that residents in approved training programs spend in
certain non-patient care activities in a non-hospital setting
that is primarily engaged in furnishing patient care. The term
``non-hospital setting that is primarily engaged in furnishing
patient care'' would be a non-hospital setting in which the
primary activity is the care and treatment of patients as
defined by the Secretary. Reimbursable non-patient care
activities would include didactic conferences and seminars, but
would not include research that is not associated with the
treatment or diagnosis of a particular patient. In addition,
Medicare would count all the vacation, sick leave and other
approved leave spent by resident in an approved training
program as long as the leave time does not extend the program's
duration.
When calculating IME payments, Medicare would adopt the
same rules about counting residents' leave time. Medicare would
also include all the time spent by residents in approved
training programs on certain non-patient care activities
(including didactic conferences and seminars, but not in
certain research activities that are not associated with the
treatment or diagnosis of a particular patient) if the hospital
is an IPPS hospital, a hospital paid under the IPPS for Puerto
Rico, is a hospital paid under a state specific hospital
reimbursement system, or is a provider-based hospital
outpatient department.
These provisions would be effective as of dates determined
appropriate by the Secretary, but would not be applied in a
manner that would require reopening of any settled hospital
cost reports where there is not a jurisdictionally proper
appeal pending on IME and DGME payments as of the date of
enactment.
SEC. 3035. PRESERVATION OF RESIDENT CAP POSITIONS FROM CLOSED AND
ACQUIRED HOSPITALS
Present Law
The Centers for Medicare and Medicaid Services (CMS) has
established certain regulations governing Medicare's provider
enrollment requirements that determine under which
circumstances providers can bill the Medicare program including
those involved in change of ownership transactions. Very
generally, in order to acquire a teaching hospital's resident
cap under a change of ownership transaction, the acquiring
entity must retain the original provider number. However, the
acquiring entity would also assume all liabilities associated
with that provider number.
Starting August 29, 2005 (the day after Hurricane Katrina),
hospitals were permitted to form emergency affiliation
agreements if located in Federally declared disaster areas
starting the first day of a Section 1135 emergency period.
Under 42 Code of Federal Regulations (CFR) 413.79, a home
hospital located in such an area that experiences at least a 20
percent decline in inpatient occupancy can temporarily transfer
its resident cap to a host hospital.
Committee Bill
The Secretary would promulgate regulations to establish a
process where the residency allotments in a hospital with an
approved medical residency program that closes on or after the
enactment date for Balanced Budget Act of 1997 (BBA, P.L. 105-
33) could be used to increase the otherwise applicable
residency limit for other hospitals.
The increase in residency positions would be distributed in
the following priority order. First priority would be given to
hospitals located in the same or contiguous core-based
statistical area as the hospital that closed; second priority
would be given to hospitals located in the same State as the
hospital that closed; third priority would be given to
hospitals located in the same region of the country as the
hospital that closed; and fourth priority, to be used only if
the residents are not distributed under the other priorities,
would be the priorities established for the distribution of
additional residency positions established previously in this
legislation. Preference would be given within each category to
hospitals that are members of the same affiliated group. The
residency positions would be distributed to those hospitals
that demonstrate a likelihood of filling the position within
three years. The aggregate increase in hospitals' applicable
resident limits would equal the number of resident positions in
applicable approved medical programs that closed.
A special rule for acquired hospitals would be established.
Specifically, when a hospital is acquired through any mechanism
by another entity with approval of a bankruptcy court during a
period determined by the Secretary, but not less than within
three years, the applicable resident limit of the acquired
hospital would be the limit of the acquired hospital as of the
date immediately before the acquisition. The acquiring entity
would be required to continue operation of the hospital that
was acquired and to furnish services, medical residency
programs, and the volume of patients similar to those of the
hospital that was acquired during such period. This provision
would apply only to instances where the acquiring entity waives
the right to establish a resident limit as a new teaching
program.
The provisions would not be implemented in a manner that
would require reopening of any settled hospital cost report
where there is not a jurisdictionally proper appeal pending on
Medicare's IME and DGME payments as of the date of enactment.
The Secretary would give consideration to the effects of
these provisions on the temporary adjustment to a hospital's
FTE resident cap established under 42 CFR 413.79 as in effect
on the date of enactment in order to assure that there is no
duplication of FTE slots. These provisions would have no affect
on resident reference limit for the replacement hospital for
the former Martin Luther King Jr. Hospital.
SEC. 3036. WORKFORCE ADVISORY COMMITTEE
Present Law
No provision.
Committee Bill
The provisions would require the Secretary of HHS to
establish a Workforce Advisory Committee (the ``Committee'')
comprised of members appointed by the Secretary among specified
groups. No later than a date determined appropriate by the
Secretary, the Committee would be required to develop and
submit to Congress and the heads of relevant Federal agencies a
national workforce strategy to recruit, train, and retain a
health care workforce that meets the current and projected
health care needs of the United States. The Committee would be
required to consult with the heads of relevant Federal
agencies, as specified, and with State and local entities in
developing such national workforce strategy.
The Committee would be required to conduct a study on the
U.S. health care workforce. Such study shall include an
analysis of, at minimum: the current and projected health care
workforce supply; the current and projected demand for health
professionals; the capacity of education and training for the
health care workforce; the implications of current and proposed
Federal laws and regulations affecting the health care
workforce; and the health care workforce needs of specific
populations, including minorities, rural and urban populations
and medically underserved populations.
On a biannual basis, the Committee would be required to
submit to Congress and the heads of relevant Federal agencies a
report containing results from this study with recommendations
for legislation and administrative action, as determined
appropriate.
The Committee would also be required to conduct studies on
specific high-priority topics, as described, and submit to
Congress and the heads of relevant Federal agencies a report
containing the results of each study with recommendations for
such legislation and administrative action, as determined
appropriate. The Committee would be required to make the
biannual report and each study of high-priority topics
available to the public.
SEC. 3037. DEMONSTRATION PROJECTS TO ADDRESS HEALTH PROFESSIONS
WORKFORCE NEEDS; EXTENSION OF FAMILY-TO-FAMILY HEALTH INFORMATION
CENTERS
Present Law
Existing health professions education and training programs
authorized under Title VII of the PHSA provide funding to
medical schools and other facilities to promote community-based
and rural practice, primary care, and opportunities for
minorities and disadvantaged students. Title VIII of the PHSA
authorizes a comparable set of programs to promote nursing
education and training. Appropriations authority for most Title
VII and VIII programs has expired, though many of them continue
to receive funding.
There are no Federal requirements related to training
personal or home care aides. The Medicare program does not
cover personal care attendant services. States may choose to
offer personal care services through their Medicaid state plan
and/or Medicaid waiver programs. For states that offer
Medicaid-funded personal care services, the State Medicaid
Manual requires them to develop provider qualifications for
personal care aides. The manual does not list specific
qualifications, but rather offers examples of areas where
states may establish requirements including: criminal
background checks or screens for attendants before they are
employed; training for attendants; use of case managers to
monitor the competency of personal care providers; and/or
establishment of minimum requirements related to age, health
status, and/or education.
Section 501(c)(1)(A)(iii) of the SSA authorizes sums to be
appropriated for the purpose of enabling the Secretary (through
grants, contracts, or otherwise) to provide for special
projects of regional and national significance for the
development and support of family-to-family health information
centers. Specifically, there is appropriated to the Secretary,
out of any money in the Treasury not otherwise appropriated: $3
million for FY2007; $4 million for FY2008; and $5 million for
FY2009.
Committee Bill
The Committee Bill establishes demonstration grants to
address needs in the health professions workforce. It would
establish a demonstration grant program through competitive
grants to provide aid and supportive services to low-income
individuals with the opportunity to obtain education and
training for occupations in the health care field that pay well
and are expected to experience labor shortages or be in high
demand. These grants would be made by the Secretary of Health
and Human Services, in consultation with the Secretary of
Labor, to states, Indian tribes, tribal organizations,
institutions of higher education, local workforce investment
boards under the Workforce Investment Act, or community-based
organizations. At least three grants must be awarded to an
Indian tribe, Tribal organization, or Tribal College or
University. Grantees must consult with the state agency
administering the Temporary Assistance for Needy Families
(TANF) block grant, and, if the grantee is not a local
workforce investment board, consult with local and state
workforce investment boards. The demonstration grant is to
serve low-income persons, including recipients of assistance
under state Temporary Assistance for Needy Families (TANF)
programs. The demonstration program shall provide eligible
individuals, if appropriate, with financial aid; child care,
case management; and supportive services. Financial aid,
services, or incentives received from the demonstration program
shall not be considered income, and shall be disregarded in
determining eligibility for TANF, Medicaid, the Supplemental
Nutrition Assistance Program (SNAP), Low Income Home Energy
Assistance Program, and any program administered by the
Department of Housing and Urban Development. Grantees must
submit interim reports and a final report to the Secretary of
HHS on their activities, which will assess the project's
effectiveness in improving outcomes for participants and
address health professions workforce needs in the project
areas. The Secretary of HHS must evaluate the demonstration
project. The evaluation will identify successful activities for
creating and sustaining a health professions workforce that has
accessible entry meets, meets high standards for education,
training, certification and professional development; and
provides increased wages, health care coverage, and other
benefits for the workers. The Secretary of HHS shall submit
interim and final reports on the demonstration to Congress.
The Committee Bill also establishes a demonstration program
to competitively award grants to up to six states for three
years to develop core training competencies and certification
programs for personal and home care aides. In selecting states
to participate, the Secretary will establish criteria to ensure
geographic and demographic diversity. In addition, a state must
offer medical assistance for personal care services under its
Medicaid state plan, not reduce the number of hours of training
from pre-demonstration levels or below levels required by state
or Federal law; and recruit a minimum number of health and long
term care providers to participate in the project.
Participating states must demonstrate that their existing
training standards are different from other states and
different from the competencies described in the demonstration.
The demonstration will determine the efficacy of developing
core training competencies in the following areas: the role of
the personal or home care aid; consumer rights, ethics, and
confidentiality; communication, cultural, and linguistic
competence and sensitivity, problem solving, behavior
management, and relationship skills; personal care skills;
health care support; nutritional support; infection control;
safety and emergency training; training specific to an
individual consumer's needs; and self-care. The project will
also evaluate the methods used to implement these competencies
including: length of training; appropriate student to trainer
ratio; time spent in the classroom compared to on-site; trainer
qualifications; content for hands-on training and written
certification exam; and continuing education requirements. The
Secretary of Health and Human Services will develop an
experimental or control group testing protocol, in consultation
with an independent evaluation contactor, to evaluate the
impact of core training competencies on: job satisfaction;
mastery of job skills; beneficiary and family satisfaction with
services; and on existing training infrastructure and resources
of the States. The evaluation must also address whether a
minimum number of hours of initial training should be required
for personal or home care aides. The Secretary will make an
interim report to Congress within two years after enactment and
a final report within a year of completion of the demonstration
project.
The Committee Bill appropriates $85 million per year for
five years (FY2010-FY2014) for these demonstrations, with no
more than $5 million per year for three years (FY2010-FY2012)
allowed for the personal and home care aid demonstration.
Extension of Family-to-Family Health Information Centers
Present Law
The Deficit Reduction Act of 2005 (DRA, P.L. 109-171)
provided dedicated funding for the development and support of
family-to-family health information centers. The centers assist
families of children with disabilities or special health care
needs make informed choices about health care to promote good
treatment decisions, cost effectiveness, and improved health
outcomes for such children; provide information regarding the
health care needs of children with disabilities or special
health care needs; identify successful health delivery models
for such children; develop models of collaboration between
families of such children and health professionals; provide
training and guidance with regard to the care of such children;
and conduct outreach activities to families of such children,
health care providers, schools, and other appropriate entities
and individuals. Family-to-family health information centers
are staffed by members of families with expertise in Federal,
State and private health systems and health professionals. In
Fiscal Year 2009, family-to-family health information centers
are funded at $5 million. No funds are appropriated for years
after FY2009.
Committee Bill
The Chairman's Mark would extend funding for family-to-
family health information centers at $5 million per year for
FY2010 through FY2012.
SEC. 3038. INCREASING TEACHING CAPACITY
Present Law
Under Section 747 of the Public Health Service Act (PHSA),
the Secretary may, among other things, make grants to or enter
into contracts with hospitals, medical and osteopathic schools,
and other nonprofit entities for health professions training
programs in family medicine, general internal medicine, or
general pediatrics, and comparable programs in dentistry. When
making awards under this section the Secretary is required to
give preference to programs that would establish or expand
training programs and to entities that collaborate with
departments of primary care. It also specifies that for
programs that propose to train residents, the Secretary is
required to give priority to programs that have a high or
recently improved record of training graduates who remain in
primary care practice and who have a record of training
individuals from disadvantaged backgrounds. Authority for
appropriations for these grants or contracts expired at the end
of FY2002.
Sections 751 and 752 of the PHSA authorizes the Area Health
Education Centers (AHEC) program that may fund community-based
residency training. The AHEC program provides grant funding to
schools of medicine and schools of osteopathic medicine, and
consortia of such schools, or the parent institutions of such
schools for the planning, development and operation of the AHEC
program. AHECs aim to improve the supply, diversity, quality
and distribution of health personnel. Among other activities,
AHEC funds may be used to support community-based primary care
residency programs, but are currently not connected to Medicare
GME payments. The appropriations authority for the AHEC program
expired at the end of FY2002.
Sections 331, 338A, 338B, and 338I of the PHSA authorize
the National Health Service Corps (NHSC), administered by the
Health Resources and Services Administration. The NHSC provides
scholarship and loan repayment programs for medical school
students, nurse practitioners, nurse midwives, physician
assistants, dental school students, and allied health
professionals who enter primary care in health professional
shortage areas (HPSAs). NHSC clinicians may fulfill their
service commitments in health centers, rural health clinics,
public or nonprofit medical facilities, Federal or state
correctional facilities, or within other community-based
systems of care. Section 338D specifies the conditions by which
NHSC clinicians can obtain a waiver from their NHSC commitment
in order to fulfill their service obligation in a private
practice located in HPSA.
With respect to the Medicare law, the costs of approved
residency training programs in teaching hospitals are
recognized under two payment mechanisms: an indirect medical
education (IME) adjustment within the inpatient prospective
payment system (IPPS) and direct graduate medical education
(DGME) payments made outside of the IPPS. With certain
exceptions, the Balanced Budget Act of 1997 (BBA; P.L. 105-33)
limited the number of allopathic and osteopathic residents that
Medicare will reimburse at the level reported by the hospital
in its most recent cost report ending on or before December 31,
1996. Rural teaching hospitals, hospitals that established new
training programs before August 5, 1997, and urban teaching
hospitals that operate certain rural residency training
programs are partially exempt from the cap. Other restrictions
apply to hospitals with new programs established after that
date.
BBA permitted the Secretary to make Medicare payments
directly to ``qualified nonhospital providers'' who incur
direct teaching costs in the operation of an approved medical
residency training program. Prior to this, only hospitals could
receive Medicare teaching payments for residents training in
nonhospital sites. BBA stated that the definition of a
qualified nonhospital provider must include Federally Qualified
Health Centers (FQHCs), Rural Health Centers (RHCs), Medicare
Advantage organizations and ``other such entities as the
Secretary deems to be appropriate.'' Any qualified nonhospital
provider would only receive direct graduate medical education
payment and not indirect medical education payments.
The Health Care Financing Administration (HCFA), now CMS,
promulgated a final rule in 1998 that designated FQHCs, RHCs,
and Medicare+Choice organizations as ``qualified nonhospital
providers'' that are eligible to receive direct teaching
payments. These payments became effective for portions of cost
reporting periods occurring on or after January 1, 1999. The
payments are made only if the nonhospital provider incurs ``all
or substantially all'' of the costs of the training program in
the nonhospital setting. The definition of ``all or
substantially all'' is the same as used for determining when a
hospital is eligible for payment.
Committee Bill
The provision would amend the Public Health Service Act
(PHSA) to insert a new section.
SEC. 749. TEACHING HEALTH CENTERS DEVELOPMENT GRANTS
The new section would authorize the Secretary to establish
a grant program to award funds to teaching health centers to
establish newly accredited or expanded primary care residency
training programs. The provision would require that grants be
awarded for not more than 2 years with the maximum award of
$500,000. Grantees would be required to use funds for: costs
associated with curriculum development; recruitment, training
and retention of residents and faculty; accreditation (by
either the Accreditation Council for Graduate Medical Education
or the American Osteopathic Association); and faculty salaries
during the development phase. Funds for technical assistance
provided by an eligible entity would be required to be used for
materials development; staff salaries; travel; and
administrative costs.
Entities would be required to submit an application to the
Secretary in such time, in such manner, and containing such
information as the Secretary may require. The Secretary would
be required to give priority to funding training programs at
FQHCs, RHCs, Indian health centers, and to newly established
residency programs, integrated rural training programs, rural
training tracks, and to residencies with a mission to train
physicians for rural and underserved practice. The Secretary
would be required to give further preference to applications
that document an existing affiliation agreement with an AHEC as
defined in PHSA Sec. 751 and 799B.
The provision would define ``eligible entity'' to mean an
organization capable of providing technical assistance
including an AHEC as defined in PHSA Sec. 751 and 799B; and
``primary care residency program'' to mean an approved medical
residency program under SSA Sec. 1886(h)(5)(A) in the fields of
family medicine, general pediatrics, general internal medicine,
or obstetrics and gynecology.
It would also define ``teaching health center'' to mean a
facility that is a community-based, ambulatory patient care
center; and is establishing or expanding a primary care
residency program as defined by SSA Sec. 1886(h)(5)(A) in a
high-need specialty as determined by the Secretary. The
definition also includes FQHCs, community health centers,
health care for the homeless centers, RHCs, migrant health
centers, Native American health centers operated by the Indian
Health Service, an Indian tribe or tribal organization, and
other not-for-profit community-based clinical entities.
There would be authorized to be appropriated $25 million
for FY2010, $50 million for FY2011 and FY2012, and such sums as
may be necessary for each fiscal year thereafter. No more than
$5 million annually may be used for technical assistance
program grants.
The provision would also amend PHSA Sec. 338C(a) to allow
up to 50 percent of the time spent teaching to count as full-
time service for the purpose of fulfilling the contractual NHSC
service obligation for scholarship or loan repayment. This
provision would not apply to individuals who are fulfilling
their NHSC service requirement through work in private
practice.
The Medicare statute would also be modified to permit
payments to qualified teaching health centers for direct and
other indirect expenses associated with operating approved
graduate medical residency training programs. Such programs are
operated by a qualified teaching health center that meets
criteria for accreditation as established by the Accreditation
Council for Graduate Medical Education or the American
Osteopathic Association.
The Secretary would determine the basis of payment and
funding calculations for both the direct and indirect payments
and would promulgate regulations under existing rulemaking
requirements to establish this program. These payments would be
in addition to any indirect or direct graduate medical
education payments made to teaching hospitals and would not
count against the limitation on the number of total full-time-
equivalent residents paid for by Medicare in teaching
hospitals. A total of $230 million would be transferred from
the Medicare Part A Hospital Insurance trust fund for purposes
of the program and would be available until expended from
FY2011 to FY2015.
Both ``approved graduate medical residency training
programs'' and ``direct medical education costs'' would be
defined according to the Medicare statute. A primary care
residency program would be an approved medical residency
program in family medicine, internal medicine, pediatrics,
medicine-pediatrics, obstetrics and gynecology, psychiatry and
geriatrics. A qualified teaching health center would be an
entity that is a community based, ambulatory patient care
center and operates a primary care residency program. These
would include Federally qualified health centers, community
mental health centers, a community health center, health care
for the homeless centers, rural health centers, migrant health
centers, health centers operated by the Indian Health Service,
Indian tribes and tribal organizations, or urban Indian
organizations, and Title X clinics.
SEC. 3039. GRADUATE NURSE EDUCATION DEMONSTRATION PROGRAM
Present Law
Title VIII of the Public Health Service Act (PHSA) contains
several provisions on nursing workforce development, including
programs to support graduate nurse education and training.
Section 811 of the PHSA authorizes the Secretary to provide
Advanced Education Nursing Grants to qualified entities to fund
projects that support the enhancement of advanced nursing and
practice, and traineeships for individuals in advanced nursing
programs. Section 831 authorizes the Secretary to provide Nurse
Education, Practice, and Retention Grants to qualified entities
to expand nursing education, practice and retention.
Section 801 of the PHSA defines a school of nursing to mean
a collegiate, associate degree, or diploma school of nursing.
The section defines ``accredited'' to mean a program, hospital,
school, college or university or unit thereof, accredited by a
recognized body or bodies, or by a State agency, approved for
such purpose by the Secretary of Education that is included on
the list that the Secretary is required to publish of such
accrediting bodies.
Medicare will pay hospitals for the costs associated with
provider-operated nursing or allied health education programs
on a pass-through basis. To be eligible for these payments, the
training program must be recognized by a nationally approved
body or state licensing organization. Also, the provider must
directly incur the training costs, directly control the program
curriculum; control the administration of the program; employ
the teaching staff; and provide and control both the necessary
classroom instruction and clinical training. In some
circumstances, hospitals that do not directly operate a health
training program may receive payments for the net costs of
training they incur if they received payment for these services
in 1989 and if other requirements are met. Net costs are
determined by deducting tuition, student fees, and state and
local grants from a provider's total education costs. In 2001,
MedPAC reported that Medicare spends about $300 million for the
costs associated with training nurses and allied health
professionals.
Committee Bill
Fifty million dollars would be appropriated from the
Hospital Insurance Trust Fund each fiscal year from 2012
through 2015 for the establishment of a graduate nurse
education demonstration program in Medicare. These funds would
be available until spent. The Secretary would assure that only
those appropriated funds are used for the conduct of this
demonstration.
Starting January 1, 2012, the Secretary would establish a
demonstration program to increase the supply of highly skilled
advanced practice nurses. Participating hospitals would receive
reasonable costs reimbursement from Medicare for the
educational costs (including faculty salaries, any student
stipends, clinical instruction costs, and other direct and
indirect costs) of a hospital and affiliated schools
attributable to the training of advanced practice nurses. Costs
would be limited to those associated with an increase in the
enrollment and the number of advanced practice nurse graduates
in each education or training program over the comparable
average number from 2006 to 2010.
The demonstration program would provide these nurses with
the necessary skills to provide primary and preventive care,
transitional care, chronic care management, and other
appropriate nursing services through affiliation with one or
more accredited nursing schools and in partnership with two or
more non-hospital community-based patient care settings where
at least half of all clinical training occurs. The Secretary
would be able to waive the requirement for affiliation with
accredited nursing schools for clinical training of advanced
practice registered nurses in rural and medically underserved
areas.
No payment would be made to a hospital unless the hospital
has in effect an enforceable legal agreement with the schools
of nursing and non-hospital settings. These hospitals would
also be required to make timely, complete payments to such a
school or setting (through the school when the setting is
arranged through the school).
For purposes of the demonstration program, the term
`advanced practice nurse' would include a clinical nurse
specialist, nurse practitioner, certified registered nurse
anesthetist, and certified nurse midwife.
PART V--HEALTH INFORMATION TECHNOLOGY
SEC. 3041. CLARIFICATION REGARDING INCLUSION OF FREE CLINICS AS
PROVIDERS ELIGIBLE FOR INCENTIVES FOR ADOPTION AND MEANINGFUL USE OF
CERTIFIED EHR TECHNOLOGY
Present Law
The HITECH Act authorized bonus payments for eligible
professionals and hospitals participating in Medicare and
Medicaid as an incentive to become meaningful users of
certified EHR systems: see Present Law description for Sec.
1102. For the Medicare incentives, an eligible professional
means a physician, as defined under SSA Section 1861(r). For
the Medicaid incentives, an eligible professional is defined as
(1) a non-hospital physician, dentist, certified nurse mid-wife
or nurse practitioner with at least a 30 percent Medicaid
patient volume (pediatricians must have at least a 20 percent
Medicaid patient volume); (2) physician assistants that meet
certain specified requirements; and (3) Federally qualified
health centers and rural health clinics with at least a 30
percent patient volume made up of needy individuals, as
defined.
Free clinics are safety-net health care organizations,
staffed by volunteers, that provide a range of medical, dental,
pharmacy, and/or behavioral health services to economically
disadvantaged individuals who are predominately uninsured.
Facilities that otherwise meet the above definition, but charge
a nominal fee to patients, may still be considered free clinics
provided essential services are delivered regardless of the
patient's ability to pay. Free clinics are 501(c)(3) tax-exempt
organizations. They do not bill Medicare, Medicaid, or private
payers for the health care services they provide.
Committee Bill
The Committee Bill would amend the definition of a
professional that is eligible to receive Medicare EHR
incentives (and subject to Medicare penalties for failure to
become a meaningful EHR user) by clarifying that nothing in the
provision would prevent a physician furnishing items and
services in a free clinic (as defined above) from being
considered so eligible.
The Committee Bill would further amend the definition of a
professional eligible to receive Medicaid EHR incentives, by
clarifying that nothing in the provision would prevent a
physician, dentist, certified nurse mid-wife, nurse
practitioner, or physician assistant furnishing items and
services in a free clinic (as defined above) from being
considered so eligible.
Subtitle B--Improving Medicare for Patients and Providers
PART I--ENSURING BENEFICIARY ACCESS TO PHYSICIAN CARE AND OTHER
SERVICES
SEC. 3101. INCREASE IN THE PHYSICIAN PAYMENT UPDATE
Present Law
Medicare payments for services of physicians and certain
non-physician practitioners are made on the basis of a fee
schedule. The fee schedule assigns relative values to services
that reflect physician work (i.e., time, skill, and intensity
it takes to provide the service), practice expenses, and
malpractice costs. The relative values are adjusted for
geographic variation in costs. The adjusted relative values are
then converted into a dollar payment amounts by a conversion
factor. The law specifies a formula, commonly referred to as
the sustainable growth rate formula (SGR), for calculating the
annual update to the conversion factors and the resultant fees.
Section 101 of the Medicare, Medicaid, and SCHIP Extension Act
of 2007 (MMSEA, P.L. 110-173) increased the update to the
conversion factor for Medicare physician payment by 0.5 percent
compared with 2007 rates for the first six months of 2008. The
Medicare Improvements for Patients and Providers Act of 2008
(MIPPA, P.L. 110-275) extended the 0.5 percent increase in the
physician fee schedule that was set to expire on June 30, 2008,
through the end of 2008 and set the update to the conversion
factor to 1.1 percent for 2009. The conversion factor for 2010
and subsequent years will be computed as if this modification
had never applied, so unless further legislation is passed, the
update formula will require a 21 percent reduction in physician
fees beginning January 1, 2010 and by additional amounts
annually for at least several years thereafter.
Committee Bill
The Committee Bill would set the annual update to the
conversion factor used in the determination of the Medicare fee
schedule at a 0.5 percent increase in 2010. The conversion
factor for 2011 and subsequent years would be computed as if
the increase in 2010 had never applied.
SEC. 3102. EXTENSION OF THE WORK GEOGRAPHIC INDEX FLOOR AND REVISIONS
TO THE PRACTICE EXPENSE GEOGRAPHIC ADJUSTMENT UNDER THE MEDICARE
PHYSICIAN FEE SCHEDULE
Present Law
The Medicare fee schedule is adjusted geographically for
three factors to reflect differences in the cost of resources
needed to produce physician services: physician work, practice
expense, and medical malpractice insurance. The geographic
adjustments are indices that reflect how each area compares to
the national average in a ``market basket'' of goods. A
geographic practice cost index (GPCI) with a value of 1.00
represents an average across all areas. A series of laws sets a
temporary floor value of 1.00 on the physician work index
beginning January 2004; most recently, Section 134 of the MIPPA
extended the application of this floor when calculating
Medicare physician reimbursement through December 2009. The
other geographic indices (for practice expense and medical
malpractice) were not modified by these acts.
Committee Bill
The Committee Bill would extend the 1.00 floor for the
geographic index for physician work for an additional three
years through December 31, 2012.
The Committee Bill would also direct the Secretary to
adjust the practice expense geographic practice cost index (PE
GPCI) for 2010 and in subsequent years. For 2010, the PE GPCI
would reflect \3/4\ of the difference between the relative
costs of employee wages and rents in each of the different fee
schedule areas and the national averages. For 2011, the
adjustment would reflect \1/2\ of the difference between the
relative costs of employee wages and rents in each of the
different fee schedule areas and the national averages (i.e., a
blend of \1/2\ local and \1/2\ national). The Committee Bill
includes a hold harmless provision that would protect any areas
adversely affected by the adjustment in 2010 or 2011.
The Secretary would analyze current methods of establishing
practice expense geographic adjustments under the Medicare
physician fee schedule and evaluate data that fairly and
reliably establishes distinctions in the costs of operating a
medical practice in the different Medicare payment localities.
This analysis would include an evaluation of the following: (1)
the feasibility of using actual data or reliable survey data
developed by recognized medical organizations, such as the
American Medical Association, on the costs of operating a
medical practice, including office rents and non-physician
staff wages, in the different Medicare payment localities; (2)
the office expense portion of the PE GPCI, including the extent
to which types of office expenses are determined in local
markets instead of national markets; and (3) the weights
assigned to each of the categories within the practice expense
GPCI.
For 2012 and in subsequent years, the Secretary would make
appropriate adjustments to the PE GPCI no later than January 1,
2012 to ensure accurate geographic adjustments across payment
areas. These adjustments would include the following: (1)
basing the office rents component and its weight on office
expenses that vary among fee schedule areas; and (2)
considering a representative range of professional and non-
professional personnel employed in a medical office based on
the use of the American Community Survey data or other reliable
data for wage adjustments. The adjustments made in 2012 and for
subsequent years would be made without regard to the
adjustments made in 2010 and 2011 and would be made in a budget
neutral manner.
If the Secretary does not complete the required analysis as
described above and does not make appropriate adjustments in
the Medicare Physician Fee Schedule rule for 2012 or for a
subsequent year, the 2011 payment rule (including the hold
harmless) would remain in effect.
SEC. 3103. EXTENSION OF EXCEPTIONS PROCESS FOR MEDICARE THERAPY CAPS
Present Law
Present Law places two annual per beneficiary payment
limits for all outpatient therapy services provided by non-
hospital providers. For 2009, the annual limit on the allowed
amount for outpatient physical therapy and speech-language
pathology combined is $1,840, and there is a separate limit for
occupational therapy of $1,840. The Secretary was required to
implement an exceptions process for 2006, 2007, and the first
half of 2008 for cases in which the provision of additional
therapy services was determined to be medically necessary.
Section 141 of the MIPPA extended the exceptions process for
therapy caps through December 31, 2009.
Committee Bill
The Committee Bill would extend the exceptions process for
therapy caps for 2 years, through December 31, 2011.
SEC. 3104. EXTENSION OF PAYMENT FOR THE TECHNICAL COMPONENT OF CERTAIN
PHYSICIAN PATHOLOGY SERVICES
Present Law
In 1999, the Health Care Financing Administration, (now the
Centers for Medicare and Medicaid Services or CMS), proposed
terminating an exception to a payment rule that had permitted
laboratories to receive direct payment from Medicare when
providing technical pathology services that had been outsourced
by certain hospitals. The Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000 (BIPA, P.L.
106-554) extended this exception for 2 years until January 1,
2003. The Medicare Prescription Drug, Improvement and
Modernization Act (MMA, P.L. 108-173) extended the exception
for 2005 and 2006 to permit independent laboratories to receive
direct payments for the technical component for certain
inpatient pathology services. The Medicare Improvements for
Patients and Providers Act of 2008 (MIPPA, P.L. 110-275)
extended the provision until January 1, 2010.
Committee Bill
The Committee Bill would extend the direct payments
provision until January 1, 2012.
SEC. 3105. EXTENSION OF AMBULANCE ADD-ONS
Present Law
The Medicare Prescription Drug, Improvement and
Modernization Act (MMA, P.L. 108-173) established bonus
payments for ground ambulance services furnished on or after
July 1, 2004 and before January 1, 2010 that originate in a
qualified rural area. The qualified rural areas are those with
the lowest population densities that collectively represent a
total of 25 percent of the population.
The Medicare Improvements for Patients and Providers Act of
2008 (MIPPA, P.L. 110-275) provided that the Medicare rate for
ground ambulance services otherwise established for the year
would be increased an additional three percent for rural
ambulance services and two percent for other areas for the
period July 1, 2008 through December 31, 2009. Areas designated
as rural on December 31, 2006 are treated as rural for purposes
of payments for air ambulance services during this period as
well.
Committee Bill
The Committee Bill would extend the bonus payments and the
increased ground ambulance payments until January 1, 2012. The
provision to pay certain urban air ambulance services as rural
would be extended until January 1, 2012 as well.
SEC. 3106. EXTENSION OF CERTAIN PAYMENT RULES FOR LONG-TERM CARE
HOSPITAL SERVICES AND OF MORATORIUM ON THE ESTABLISHMENT OF CERTAIN
HOSPITALS AND FACILITIES
Present Law
Long-term care hospitals (LTCHs) are designed to provide
extended medical and rehabilitative care for patients who are
clinically complex and have multiple acute or chronic
conditions. LTCHs that are distinct part units of other
hospitals are not explicitly permitted by the Medicare statute.
Over time, however, the LTCH industry has evolved to include
co-located hospitals-within-hospitals (HwHs) or satellite
facilities in addition to traditional freestanding facilities.
CMS has implemented additional organizational requirements on
these LTCHs, in an attempt to ensure that these are separate
entities. Certain LTCHs (grandfathered HwHs) have been exempted
from the requirements. Starting October 1, 2004, CMS
established limits on the number of discharged Medicare
patients that an HwHs and satellite LTCHs (except grandfathered
LTCHs) can admit and be paid as independent LTCHs; after that
threshold has been reached, generally, the LTCH will receive a
substantially lower payment for subsequent patient admissions
who have been discharged from the host hospital. Starting July
1, 2007, CMS extended this payment policy to other types of
LTCHs, including grandfathered entities. Among other LTCH
changes, the Medicare, Medicaid and SCHIP Extension Act of 2007
(MMSEA, P.L. 110-173), as modified by the American Recovery and
Reinvestment Act of 2009 (ARRA, P.L. 111-5), provided for a
three year moratorium on the application of this payment policy
for certain LTCHs starting December 29, 2007.
Effective for the first cost reporting period beginning on
or after October 1, 2002, LTCHs are paid according to a
prospective payment system (PPS), subject to a five year
transition period. Under this PPS, Medicare pays a LTCH a
predetermined amount per discharge, depending upon the
patient's assignment into one of the Medicare-severity long
term diagnosis related groups (MS-LTC-DRGs). The LTCH patient
classification system, MS-LTC-DRGs, is based on Medicare
severity diagnosis related groups (MS-DRGs) used in the
inpatient prospective payment system (IPPS) to pay acute care
hospitals. By statute, total payments under LTCH-PPS must be
equal to the amount that would have been paid if the PPS had
not been implemented in the initial year of implementation. CMS
proposed to review LTCH payments and make a one-time
prospective adjustment to the LTCH PPS to correct for any
errors in the original budget neutrality calculations. MMSEA
established a three year moratorium on that one-time budget
neutrality adjustment starting December 29, 2007 (the enactment
date of MMSEA).
The LTCH-PPS includes certain case level adjustments for
short stay and interrupted stay cases. CMS adopted a very
short-stay outlier payment policy starting July 1, 2007 to
reduce payments for patients who have lengths of stay that are
less than or equal to one standard deviation from the geometric
average length of stay (ALOS) of the same MS-DRG under the
IPPS. This very short stay outlier policy is subject to the
three year moratorium established by MMSEA.
Finally, MMSEA, as modified by ARRA, also established a
three year moratorium on the establishment of new LTCHS,
including HwHs and satellite facilities, and on the increase of
hospital beds in existing LTCHs.
Committee Bill
The provisions would extend the three year moratorium
established by MMSEA for certain LTCH payment rules concerning
HwHs and satellite facilities, the very short stay outlier
policy, and the budget neutrality adjustment for two years
until December 29, 2012. The existing three year moratorium on
the establishment of new LTCHs and on the increase in hospital
beds in LTCHs would be extended for two years as well.
SEC. 3107. EXTENSION OF PHYSICIAN FEE SCHEDULE MENTAL HEALTH ADD-ON
Present Law
The Medicare Improvements for Patients and Providers Act of
2008 (MIPPA, P.L. 110-275) increased payments for certain
Medicare mental health services by five percent.
Committee Bill
The Committee Bill would extend the add-on payment
provision through December 31, 2011.
SEC. 3108. PERMITTING PHYSICIAN ASSISTANTS TO ORDER POST-HOSPITAL
EXTENDED CARE SERVICES AND TO PROVIDE FOR RECOGNITION OF ATTENDING
PHYSICIAN ASSISTANTS AS ATTENDING PHYSICIANS TO SERVE HOSPICE PATIENTS
(a) Ordering Post-Hospital Extended Care Services
Present Law
In a skilled nursing facility (SNF), Medicare law allows
physicians, as well as nurse practitioners and clinical nurse
specialists who do not have a direct or indirect employment
relationship with a SNF, but who are working in collaboration
with a physician, to certify the need for post-hospital
extended care services for purposes of Medicare payment.
Section 20.2.1 of Chapter 8 of the Medicare Benefit Policy
Manual defines post-hospital extended care services as services
provided as an extension of care for a condition for which the
individual received inpatient hospital services. Extended care
services are considered ``post-hospital'' if they are initiated
within 30 days after discharge from a hospital stay that
included at least three consecutive days of medically necessary
inpatient hospital care.
Committee Bill
The Committee Bill would allow a physician assistant who
does not have a direct or indirect employment relationship with
a SNF, but who is working in collaboration with a physician, to
certify the need for post-hospital extended care services for
Medicare payment purposes.
This provision would apply to items and services furnished
on or after January 1, 2011.
(b) Recognition of Attending Physician Assistants as Attending
Physicians to Serve Hospice Patients
Present Law
Under the Medicare program, hospice services may only be
provided to terminally ill individuals under a written plan of
care established and periodically reviewed by the individual's
attending physician and the medical director (and by the
interdisciplinary group of the hospice program). For purposes
of a hospice written plan of care, Medicare defines an
attending physician as a physician or nurse practitioner who
may be employed by a hospice program and who the individual
identifies as having the most significant role in the
determination and delivery of medical care to the individual at
the time the individual makes an election to receive hospice
care.
For an individual to be eligible for Medicare-covered
hospice services, the individual's attending physician (not
including a nurse practitioner) and the medical director (or
physician member of the interdisciplinary group of the hospice
program) must each certify in writing that the individual is
terminally ill at the beginning of the first 90-day period of
hospice.
Committee Bill
For purposes of a hospice written plan of care, the
Committee Bill would include a physician assistant in the
definition of an attending physician. The provision would
continue to exclude physician assistants from the authority to
certify an individual as terminally ill.
SEC. 3109. RECOGNITION OF CERTIFIED DIABETES EDUCATORS AS CERTIFIED
PROVIDERS FOR PURPOSES OF MEDICARE DIABETES OUTPATIENT SELF-MANAGEMENT
TRAINING SERVICES
Present Law
Medicare covers diabetes self-management training (DMST),
under certain conditions, to help a beneficiary learn how to
successfully manage their diabetes. When Congress passed the
DMST benefit in 1997, it did not include Certified Diabetes
Educators (CDEs) as providers. At the time the DSMT benefit
took effect, most CDEs worked in hospital outpatient clinics
where diabetes education and care was generally covered by
Medicare.
Many hospital DSMT programs have now closed, thus limiting
access to DSMT programs. Because CDEs in private practice are
not recognized under Medicare as providers of DSMT, many
beneficiaries are unable to receive self management training
outside the hospital setting to help treat and control their
diabetes.
Committee Bill
The Committee Bill would define CDEs, set certain
qualifying conditions for CDE certification, and recognize CDEs
as Medicare providers of DSMT services. CDEs would still
provide DSMT following a physician referral, but they would be
able to work in appropriate, non-hospital locations and bill
Medicare for these services as appropriate.
The proposed change would take effect on January 1, 2011.
SEC. 3110. EXEMPTION OF CERTAIN PHARMACIES FROM ACCREDITATION
REQUIREMENTS
Present Law
MMA required the Secretary to establish and implement
quality standards for suppliers of durable medical equipment,
prosthetics and supplies (DMEPOS) under Part B of Medicare.
MIPPA requires DMEPOS suppliers to prove their compliance with
the quality standards by being accredited by October 1, 2009.
MIPPA, however, exempted eligible professionals from having to
comply with the accreditation requirement unless the standards
and accreditation requirements being applied were specifically
designed to be applied to those professionals. The statutes
defines the following as eligible professionals: physicians,
physical or occupational therapists, qualified speech-language
pathologists, qualified audiologists, physician assistants,
nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists, certified nurse-midwives,
clinical social workers, clinical psychologists, or registered
dietitians or nutrition professionals. The Secretary was given
authority to exempt additional professionals from the
accreditation requirements. Pharmacists and pharmacies were not
listed as exempt from the accreditation requirements.
Committee Bill
Effective January 1, 2010, the Committee Bill would make
certain pharmacies eligible for an exemption from the
accreditation requirements. A pharmacy would be exempt from the
accreditation requirements under the following circumstances:
(1) the pharmacy submits an attestation that its total Medicare
DMEPOS billings are, and continue to be, less than a rolling
three year average of five percent of total pharmacy sales; (2)
the pharmacy submits an attestation that it is enrolled as a
provider of durable medical equipment, prosthetics, orthotics,
and supplies under the Medicare program for at least 5 years
and has had no adverse determination against it for the last
five years due to fraud; and (3) the pharmacy is willing to
submit documentation to the Secretary (based on a random sample
of pharmacies) that would allow the Secretary to verify the
information in (1) and (2). The documentation submitted for (3)
would be required to consist of an accountant certification or
filing of tax returns by the pharmacy.
The provision would also allow the Secretary to determine
accreditation standards that are more appropriate for
pharmacies. The Secretary would have the authority to implement
this amendment by program instruction or otherwise.
SECTION 3111. MEDICARE PART B SPECIAL ENROLLMENT PERIOD FOR DISABLED
TRICARE BENEFICIARIES
Present Law
TRICARE is the health care plan under the Department of
Defense (DoD) that covers members of the uniformed services,
their families and survivors. TRICARE coverage was extended to
Medicare-eligible military retirees, their Medicare-eligible
spouses and dependent children and Medicare-eligible widow/
widowers by the Floyd D. Spence National Defense Authorization
Act of 2001 (P.L. 106-398). This law authorized a program known
as TRICARE For Life (TFL) which acts as a secondary payer to
Medicare and provides supplemental coverage to TRICARE-eligible
beneficiaries who are entitled to Medicare Part A based on age,
disability or end stage renal disease (ESRD). In order to
participate in TFL, these TRICARE-eligible beneficiaries must
enroll in and pay premiums for Medicare Part B.
Under Present Law (10 U.S.C. 1086(d)), TRICARE-eligible
beneficiaries who are entitled to Medicare Part A based on age,
disability or ESRD, but decline Part B, lose eligibility for
TRICARE benefits. Veterans' advocacy groups have reported that
many beneficiaries are not aware that their TRICARE coverage is
dependent upon Part B enrollment. Individuals who choose not to
initially enroll in Medicare Part B upon becoming eligible may
elect to do so later during a January 1 through March 31 annual
enrollment period. However, Medicare Part B coverage is
effective July 1 of the year during which enrollment occurs and
the Medicare Part B late enrollment penalty, (ten percent for
each 12 month period in which the individual could have been
enrolled but did not) would apply. In addition to the late-
enrollment penalty, late-enrollers are liable for all medical
expenses incurred during the period they are not enrolled in
Part B.
Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA, P.L. 108-173) provided enrollment incentives
to TRICARE beneficiaries who were entitled to Medicare Part A,
but were not enrolled in Medicare Part B during their initial
eligibility period. Further, the law directed the Secretary to
provide a Part B special enrollment period for TRICARE
beneficiaries who had not enrolled in Part B as of the date of
MMA's enactment--December 8, 2003. The law mandated that this
special enrollment period begin as soon as possible after MMA's
enactment and end on December 31, 2004. In addition the MMA
waived premium surcharges for TRICARE beneficiaries who
enrolled in Medicare Part B from 2001 through 2004.
Committee Bill
The Committee Bill creates a twelve-month special
enrollment period (SEP) for military retirees, their spouses
(including widows/widowers) and dependent children, who are
otherwise eligible for TRICARE and entitled to Medicare Part A
based on disability or ESRD, but who have declined Part B. This
twelve-month special enrollment period (SEP) would be available
to an individual once in their lifetime and begin on the day
after the last day of the initial enrollment period. If the
individual was notified of retroactive Medicare Part A and Part
B entitlement, the twelve-month period would begin with the
month in which the individual was notified of Medicare Part B
entitlement. For this population, the Part B coverage period
would begin on the first day of the month in which the
individual enrolls during the SEP. The individual would also
have the option of choosing Part B coverage retroactive to the
first month after the initial enrollment period. The late
enrollment penalty would not apply to individuals who enroll
during the SEP. The Secretary of Defense would be required to
identify and notify individuals of their eligibility for the
SEP; the Secretary of Health and Human Services and the
Commissioner for Social Security would support these efforts.
The provision would become effective on the date of enactment.
SEC. 3112. PAYMENT FOR BONE DENSITY TESTS
Present Law
Dual energy X-ray absorptiometry (DXA) machines are used to
measure bone mass to identify individuals who may have or are
at risk of having osteoporosis. For those individuals who are
eligible, Medicare will pay for a bone density study once every
two years, or more frequently if the procedure is determined to
be medically necessary.
Medicare reimburses for imaging procedures, including DXA,
differently based on where the test is performed. Medicare
reimbursement for bone density procedures is comprised of a
professional component, the amount paid for the physician's
interpretation of the results of the scan, and a technical
component, the amount paid for all other services including
technician and equipment costs. Procedures performed in an
Independent Diagnostic Testing Facility (IDTF) or a physician
office are reimbursed under the Medicare Physician Fee
schedule. In a hospital outpatient department (HOPPS), the
technical component is reimbursed under an Ambulatory Payment
Classification under Medicare's hospital outpatient department
prospective payment system.
Under the physician fee schedule, relative values are
assigned to services. These relative values reflect physician
work (based on time, skill, and intensity involved), practice
expenses (including the cost of nurses and other staff), and
malpractice expenses. The relative values are adjusted for
geographic variations in the costs of practicing medicine.
These geographically adjusted relative values are converted
into a dollar payment amount by a conversion factor.
As reported by CMS and MedPAC, spending for imaging
services reimbursed under the Medicare physician fee schedule
grew rapidly between 2003 and 2005. The Deficit Reduction Act
of 2005 (DRA; P.L. 109-171) capped reimbursement of the
technical component for x-ray and imaging services at the
lesser rate of the hospital outpatient rate or the physician
fee schedule. Specifically, designated imaging services with a
Medicare physician fee schedule technical payment (prior to
geographic adjustment) that exceeds the comparable hospital
outpatient prospective payment system (HOPPS) technical payment
(prior to geographic adjustment), are capped at the 2007 HOPPS
payment amount. (The professional component is not affected by
the DRA provision.) Bone density procedures are subject to the
DRA provisions.
Payments for imaging services have also been affected by
revisions to payments for practice expense in the 2007
physician fee schedule rule. CMS implemented a new methodology
for determining resource-based practice expense payments for
all services that has led to reductions in the professional
component reimbursement. The new formula is being phased in
over four years from 2007 to 2010.
It is estimated that reimbursement rates for DXA services
have been reduced by more than half since 2006.
Committee Bill
This Committee Bill would change the payment amounts for
CPT codes 76075 and 76077 (relating to dual energy x-ray
absorptiometry (DXA)), and any successor to such codes
furnished during 2010 and 2011. The payments would be set at 70
percent of the 2006 reimbursement rates for these services.
The Committee Bill would also direct the Secretary to
arrange with the Institute of Medicine of the National
Academies to study and report to the Secretary and Congress on
the ramifications of Medicare reimbursement reductions for DXA
on beneficiary access to bone mass measurement benefits.
SEC. 3113. REVISION TO THE MEDICARE IMPROVEMENT FUND
Present Law
Section 188 of MIPPA established the Medicare Improvement
Fund (MIF), available to the Secretary to make improvements
under the original fee-for-service program under Parts A and B
for Medicare beneficiaries. Under Present Law, $22.29 billion
are available for services provided in years 2014 through 2017.
Committee Bill
The Committee Bill would eliminate the funding in the MIF.
SEC. 3114. TREATMENT OF CERTAIN COMPLEX DIAGNOSTIC LABORATORY TESTS
Present Law
In general, clinical laboratory services are billed to
Medicare on the date when the specimen is collected, not
necessarily on the date when the service is ordered or
performed. A test ordered on a specimen collected from a
patient during an inpatient stay or outpatient visit would be
considered for billing purposes as being provided by the
hospital. The hospital would bear financial responsibility for
the test, even if the test is performed after the patient has
left the hospital. The laboratory services are bundled as part
of the hospital's Medicare payment and the laboratory would
receive payment from the hospital rather than directly from
Medicare.
Committee Bill
The Committee Bill would allow laboratories to bill the
Medicare program separately for certain complex diagnostic
tests during a two-year period beginning July 1, 2011. If a
laboratory were to perform a covered complex diagnostic
laboratory test (see below) on a specimen collected from an
individual while a patient of a hospital and if such test were
performed after such period, the specimen would be considered
as if it had been collected directly by the laboratory and the
laboratory would be able to bill for direct payment.
The term ``covered complex diagnostic laboratory test''
would mean a diagnostic laboratory test that (a) is an analysis
of gene or protein expression, topographic genotyping, or a
cancer chemotherapy sensitivity assay, (b) is described in the
section that defines diagnostic laboratory and other diagnostic
tests under current Medicare statute (section 1861(s)(3) of the
Social Security Act (42 U.S.C. 1395x(s)(3)), (c) is performed
only by the laboratory offering the test, and (d) is not
furnished by the hospital where the specimen was collected to a
patient of such hospital, directly or under arrangements with
the hospital.
This modification would apply to tests furnished on or
after July 1, 2011, and before the earlier of (a) July 1, 2013
and (b) the date that the CMS Chief Actuary submits the
spending report described below to the Committee on Ways and
Means and the Committee on Energy and Commerce of the House of
Representatives and the Committee on Finance of the Senate and
to the Secretary of Health and Human Services.
The CMS Chief Actuary would monitor Medicare expenditures
as a result of the modifications of this section during the
two-year period beginning on July 1, 2011. If the Chief Actuary
were to determine that, during the two-year period, either of
the following conditions have been met, the Chief Actuary would
submit a report to the Committee on Ways and Means and the
Committee on Energy and Commerce of the House of
Representatives and the Committee on Finance of the Senate and
to the Secretary of Health and Human Services that includes a
statement regarding this determination.
The conditions that would trigger the CMS Chief Actuary's
report would be the following: (i) Medicare expenditures during
the two-year period as a result of the provisions of this
subsection were to reach $100 million; or (ii) Medicare
payments to laboratories during the two-year period as a result
of these provisions were to reach $100 million.
SEC. 3115. IMPROVED ACCESS FOR CERTIFIED-MIDWIFE SERVICES
Present Law
Sec. 1833 of the SSA provides for payments from the
Medicare Part B Trust Fund for services received by covered
individuals. With respect to certified nurse-midwife services,
the amount required to be paid is 80 percent of the lesser of
either (1) the actual charge for the services, or (2) the
amount determined by a fee schedule established by the
Secretary. The fee schedule is not allowed to exceed 65 percent
of the prevailing charge that would be allowed for same
services performed by a physician.
Committee Bill
The Committee Bill would amend Sec. 1833(a)(1)(K) by adding
that for services provided after January 1, 2011, the fee
schedule for certified-midwife services would not be allowed to
exceed 100 percent of the fee schedule amount provided under
Sec. 1848 for the same service performed by a physician.
SEC. 3116. WORKING GROUP ON ACCESS TO EMERGENCY MEDICAL CARE
Present Law
Title XXVIII, Subtitle B of the Public Health Service Act
established the Office of the Assistant Secretary for
Preparedness and Response (ASPR). The Office advises the HHS
Secretary on matters related to bioterrorism and other public
health emergencies, and coordinates medical incident response
assets and activities, among other functions. The Emergency
Care Coordination Center, located within ASPR, was established
in January 2009.
The Emergency Medical Treatment and Labor Act (EMTALA,
Section 1867 of the SSA) requires hospital emergency
departments to examine and treat any individual who comes to
the hospital with an emergency medical condition, and any woman
who is in labor. EMTALA further requires hospitals to offer
treatment, within their capacity and with the individual's
consent, to stabilize the emergency condition, or transfer the
individual to another medical facility, subject to certain
restrictions. EMTALA does not preempt state or local laws
unless they directly conflict with its specific requirements.
In addition, the Act prohibits discrimination and delay in
examining or treating emergency patients, and provides
protections to whistleblowers who report violations of its
provisions.
Committee Bill
The Committee Bill would require the Secretary, within 60
days of enactment, to establish a Working Group on Access to
Emergency Medical Care. Membership of the Working Group would
include at least two individuals from each of the following:
(1) representatives of emergency medical personnel; (2)
appropriate elected or appointed officials; (3) health care
consumer advocates; and (4) representatives of emergency care
hospitals and health systems. Working Group members would be
required to serve without compensation. HHS would be required
to provide administrative support, technical assistance and the
use of facilities for the Working Group.
Duties of the Working Group would include identifying and
examining: (1) barriers causing delays in timely inpatient
admission of certain patients who present at emergency
departments; (2) factors in the health care delivery,
financing, and legal systems that impede or prevent the
effective delivery of emergency department services, as
required under EMTALA; and (3) best practices to improve
patient flow within hospitals. The Working Group would be
required to develop recommendations for admission, boarding and
diversion standards. It would also be required to develop
guidelines, measures and incentives to ensure proper
implementation, monitoring and enforcement of the standards.
The Working Group would be required to submit a report to
Congress and the Secretary containing their recommendations for
admission, boarding, and diversion standards for hospital
emergency departments, including guidelines and incentives for
enforcing those standards, as well as recommendations for
legislative and administrative actions regarding (1) Federal
programs, policies and financing needed to assure the
availability of emergency services, and (2) coordination of
Federal, state and local programs for disaster response and
emergencies. The Working Group would terminate upon submission
of their report.
PART II--RURAL PROTECTIONS
SEC. 3121. EXTENSION OF OUTPATIENT HOLD HARMLESS PROVISION
Present Law
Small rural hospitals (with no more than 100 beds) that are
not sole community hospitals (SCHs) can receive additional
Medicare payments if their outpatient payments under the
prospective payment system are less than under the prior
hospital outpatient department (HOPD) reimbursement system. For
calendar year (CY) 2006, these hospitals received 95 percent of
the difference between payments under the prospective payment
system and those that would have been made under the prior
reimbursement system. The hospitals receive 90 percent of the
difference in CY2007 and 85 percent of the difference in CY2008
and CY2009. Sole community hospitals with not more than 100
beds receive 85 percent of the payment difference for covered
HOPD services furnished on or after January 1, 2009, and before
January 1, 2010.
Committee Bill
The provision would establish that small rural hospitals
would receive 85 percent of the payment difference in CY2010
and CY2011. SCHs with not more than 100 beds would receive 85
percent of the payment difference in CY2010 and CY2011. The
100-bed limitation for SCHs would be removed so that all SCHs
would receive 85 percent of the payment difference in CY2010
and CY2011.
SEC. 3122. EXTENSION OF MEDICARE REASONABLE COSTS PAYMENTS FOR CERTAIN
CLINICAL DIAGNOSTIC LABORATORY TESTS FURNISHED TO HOSPITAL PATIENTS IN
CERTAIN RURAL AREAS
Present Law
Generally, hospitals that provide clinical diagnostic
laboratory services under Part B are reimbursed using a fee
schedule. Hospitals with under 50 beds in qualified rural areas
(certain rural areas with low population densities) receive 100
percent of reasonable cost reimbursement for the clinical
diagnostic laboratories covered under Part B that are provided
as outpatient hospital services. Reasonable cost reimbursement
for laboratory services provided by these hospitals ended July
1, 2008.
Committee Bill
Reasonable cost reimbursement for clinical diagnostic
laboratory service for qualifying rural hospitals with under 50
beds would be reinstated from July 1, 2010 and extended for two
years, ending July 1, 2012.
SEC. 3123. EXTENSION OF THE RURAL COMMUNITY HOSPITAL DEMONSTRATION
PROGRAM
Present Law
As required by Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA, P.L. 108-173), the Centers for
Medicare and Medicaid Services (CMS) is conducting a five-year
Rural Community Hospital Demonstration Program to test the
feasibility and advisability of reasonable cost reimbursement
for small rural hospitals (those with fewer than 51 beds) in
low population density areas. No more than 15 hospitals can
participate in the demonstration. Currently, there are ten
hospitals participating in the program.
Committee Bill
This provision would extend the demonstration program for
an additional two years, expand the maximum number of
participating hospitals to 30 for that period, and expand the
eligible sites to rural areas in all states until January 1,
2012. The Secretary would provide for the continued
participation for those hospitals that are in the demonstration
at the end of the initial five-year period during the two year
extension unless the hospital elects to discontinue such
participation.
SEC. 3124. EXTENSION OF THE MEDICARE-DEPENDENT HOSPITAL PROGRAM
Present Law
Medicare-dependent hospitals (MDHs) are small rural
hospitals with a high proportion of patients who are Medicare
beneficiaries. Specifically, the hospitals have at least 60
percent of acute inpatient days or discharges attributable to
Medicare in FY1987 or in two of the three most recently audited
cost reporting periods. As specified in regulation, they cannot
be a sole community hospital and must have 100 or fewer beds.
MDHs receive special treatment, including higher payments,
under Medicare's inpatient prospective payment system. The
sunset date for the MDH classification has been periodically
extended by legislation. As established by the Deficit
Reduction Act of 2005 (DRA, P.L. 109-171), the MDH
classification would expire September 30, 2011.
Committee Bill
The MDH classification would be extended two years, until
September 30, 2013.
SEC. 3125. TEMPORARY IMPROVEMENTS TO THE MEDICARE INPATIENT HOSPITAL
PAYMENT ADJUSTMENT FOR LOW-VOLUME HOSPITALS
Present Law
Under Medicare's inpatient prospective payment system
(IPPS), certain low-volume hospitals receive a payment
adjustment to account for their higher costs per discharge. A
low-volume hospital is defined as an acute care hospital that
is located more than 25 road miles from another comparable
hospital and that has less than 800 total discharges during the
fiscal year. Under Present Law, the Secretary is required to
determine an appropriate percentage increase for these low-
volume hospitals based on the empirical relationship between
the standardized cost-per-case for such hospitals and their
total discharges to account for the additional incremental
costs (if any) that are associated with such number of
discharges. The low-volume adjustment is limited to no more
than 25 percent. Accordingly, under regulations, qualifying
hospitals (those located more than 25 road miles from another
comparable hospital) with less than 200 total discharges
receive a 25 percent payment increase for every Medicare
discharge.
Committee Bill
A temporary adjustment that would increase payment in
FY2011 and FY2012 for certain low-volume hospitals would be
created. A low-volume hospital could be located more than 15
road miles from another comparable hospital and have 1,500
discharges of individuals entitled to or enrolled for Medicare
Part A benefits. The Secretary would determine the applicable
percentage increase using a continuous linear sliding scale
ranging from 25 percent for low-volume hospitals with 200 or
fewer discharges of individuals with Medicare Part A benefits
to no adjustment for hospitals with greater than 1,500
discharges of individuals with Medicare Part A benefits.
SEC. 3126. IMPROVEMENTS TO THE DEMONSTRATION PROJECT ON COMMUNITY
HEALTH INTEGRATION MODELS IN CERTAIN RURAL COUNTIES
Present Law
Section 123 of the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA, P.L. 110-275), authorized a
demonstration project to allow eligible entities to develop and
test new models for the delivery of health care services in
eligible counties for the purpose of improving access to, and
better integrating delivery of, acute care, extended care, and
other essential health care services to Medicare beneficiaries.
Those eligible to participate in the demonstration project
are limited to a Rural Hospital Flexibility Program grantee
under section 1820(g) of the Social Security Act that are
located in States with at least 65 percent of its counties with
six or fewer residents per square mile. Based on these
criteria, the Secretary is instructed to select up to four
states to participate in the demonstration program, and within
those states, up to six counties. For a county to be eligible
to participate, it must have 6 or fewer residents per square
mile and contain a critical access hospital (CAH) that
furnished one or more specified services (home health, hospice,
or rural health clinic) and had a daily inpatient census of
five or less as of date of enactment; skilled nursing facility
services must be available in the eligible county.
The 3-year demonstration project is to begin on October 1,
2009 and be done in a budget neutral manner.
Committee Bill
The limit of six eligible counties that may participate in
the demonstration project within the qualifying states would be
eliminated. Rural health clinic services would no longer be a
required CAH service for entities participating in the
demonstration program. Rural health clinic services would be
removed from the definition of other essential services and
replaced with physician services.
SEC. 3127. MEDPAC STUDY ON ADEQUACY OF MEDICARE PAYMENTS FOR HEALTH
CARE PROVIDERS SERVING IN RURAL AREAS
Present Law
No provision.
Committee Bill
The Medicare Payment Advisory Commission (MedPAC) would be
required to review payment adequacy for rural health care
providers and suppliers serving the Medicare program and
provide a report to Congress by January 1, 2011. MedPAC would
analyze rural payment adjustments; beneficiaries' access to
care in rural communities; adequacy of Medicare payments to
rural providers and suppliers; and quality of care in rural
areas. MedPAC would submit a report to Congress including
recommendations no later than January 1, 2011.
SEC. 3128. TECHNICAL CORRECTION RELATED TO CRITICAL ACCESS HOSPITAL
SERVICES
Present Law
Critical Access Hospitals (CAHs) are limited-service rural
facilities that are located more than 35 miles from another
hospital (15 miles in certain circumstances) or designated by
the state as a necessary provider of health care; offer 24-hour
emergency care; have no more than 25 acute care inpatient beds
and have a 96-hour average length of stay. Generally, a rural
hospital designated as a CAH receives 101 percent reasonable,
cost based reimbursement for inpatient and outpatient care
rendered to Medicare beneficiaries. A CAH may elect an all-
inclusive outpatient payment which is equal to 101 percent of
reasonable costs for facility services plus 115 percent of the
Medicare physician fee schedule payment for professional
services when the physician or practitioner has reassigned his
or her billing rights to the CAH. As part of its FY2010
rulemaking process, starting October 1, 2009, CMS will lower
the facility component of the all-inclusive, elective payment
method to 100 percent of the CAH's reasonable costs; the
payment for professional services will remain at 115 percent of
the fee schedule amount.
Medicare will pay for ambulance services provided by a CAH
or by an entity owned and operated by a CAH at 100 percent of
reasonable costs, but only if CAH or the entity is the only
supplier or provider of ambulance services with a 35-mile drive
of the CAH or the entity.
Committee Bill
Medicare would pay the facility component of the all-
inclusive elective CAH payment for outpatient services at 101
percent of reasonable costs. Medicare would pay for qualifying
ambulance services provided by a CAH or by an entity owned and
operated by a CAH at 101 percent of reasonable cost. These
provisions would take effect as if they were included in the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA, P.L. 108-173).
SEC. 3129. EXTENSION OF AND REVISIONS TO MEDICARE RURAL HOSPITAL
FLEXIBILITY PROGRAM
Present Law
The Balanced Budget Act of 1997 (BBA, P.L. 105-33)
established the Medicare Rural Hospital Flexibility Program,
which created the critical access hospital (CAH) designation
under Medicare and authorized a grant program (FLEX grants)
that is administered by the Health Resources and Services
Administration (HRSA). Under this program, FLEX grants may be
awarded to States to develop and implement rural health care
plans and rural health networks, to designate critical access
hospitals, to upgrade data systems and to improve the provision
of rural emergency medical services.
The Medicare Rural Hospital Flexibility Program also
authorized up to $50,000 for the Small Rural Hospital
Improvement (SHIP) Grant Program. This program provides funding
to small rural hospitals to provide assistance with any or all
of the following: (1) to pay for costs related to the
implementation of Medicare's prospective payment systems; (2)
to comply with provisions of the Health Insurance Portability
and Accountability Act; and (3) to reduce medical errors and
support quality improvement. To be eligible for these grants, a
hospital must have less than 50 beds and be located in a rural
area and may include critical access hospitals (CAHs).
As established by the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA, P.L. 110-275), the Secretary
may also award grants to States to increase the delivery of
mental health services or other health services deemed
necessary to meet the needs of veterans and other residents of
rural areas, including rural census tracks. There are certain
limitations imposed on the use of grant funds for
administrative expenses, both at the state and Federal level.
The FLEX grant program is authorized at $55 million for each
fiscal year from 2009 and 2010 and the new rural mental health
and other services grants would be authorized at $55 million
for each of fiscal years 2009 and 2010.
Committee Bill
The FLEX grant program would be extended two years until
2012 authorized at such sums as may be necessary in each year
to be available until expended. Starting January 1, 2010, SHIP
funding may also be used to assist small rural hospitals in
participating in the delivery system reforms included in this
legislation, such as value-based purchasing programs,
accountable care organizations, bundling and other programs
deemed appropriate by the Secretary.
PART III--IMPROVING PAYMENT ACCURACY
SEC. 3131. PAYMENT ADJUSTMENTS FOR HOME HEALTH CARE
Present Law
Home health agencies (HHAs) are paid under a prospective
payment system (PPS) that provides payments based on 60-day
episodes of care for beneficiaries, subject to several
adjustments. The home health (HH) base payment amount is
increased annually by an update factor that is determined, in
part, by the projected increase in the HH market basket (MB)
index (a measure of changes in the costs of goods and services
purchased by HHAs to provide HH services). HHAs that submit
quality data to the Secretary receive a full MB increase, while
HHAs that do not submit quality data receive a reduced update
equivalent to the MB minus two percentage points. For CY2010,
the HH MB update is 2.2 percent. The base payment amount is
adjusted for differences in the care needs of patients (case
mix) using ``HH resource groups'' (HHRGs) and outlier
adjustments (to account for extraordinarily costly patients),
among other adjustments. Presently, there is no difference
between urban and rural base payment amounts.
In CY2008, refinements to the Medicare HH PPS included,
among other changes, a reduction in the payment rate for four
years (to continue through CY2011) to adjust for increases in
case mix that are related to changes in coding instead of
increased patient severity of illness. The proposed CMS rule
for CY2010 would continue with the 2.75 reduction to the HH PPS
rates for CY2010. Among other things, the proposed rule would
also implement a cap on outlier payments to be no more than 2.5
percent of total HH PPS payments.
In its March 2009 Report to Congress: Medicare Payment
Policy, MedPAC reported that most HHAs continued to be paid
above costs. Accounting for the payment refinements in CY2008
and the MB update under Present Law, MedPAC estimates that HHAs
would have margins of 12.2 percent in CY2009. In this report,
MedPAC recommends that the CY2010 HH payment update be
eliminated in CY2010. MedPAC also recommends that the planned
coding reductions for CY2011 be advanced to CY2010 and HH
payments be rebased in CY2011 to more closely reflect the cost
of visits and other services delivered in the average HH
episode.
Committee Bill
Updating Home Health Payments Through Rebasing. Starting in
CY2013, the Secretary would be directed to rebase payments by a
percentage considered appropriate by the Secretary to, among
other things, reflect the number, mix and level of intensity of
HH services in an episode, and the average cost of providing
care. In doing so, the Secretary would be required to consider
the differences between HH agencies in regards to hospital-
based and freestanding providers; for-profit and non-profit
providers; and resource costs between urban and rural
providers. In addition, the Secretary would be directed to
phase in the new reimbursement system according to the
following schedule: in CY2013, 25 percent of current payment
rates would be rebased and 75 percent would be based on amounts
calculated under the prior payment system; in CY2014, 50
percent would be rebased and 50 percent would be based on the
prior payment system; in CY2015, 75 percent would be rebased
and 25 percent would be based on the prior payment system; and
in CY2016, 100 percent of the payments would be rebased.
As part of the rebasing proposal, the Secretary would be
directed to ensure adjustments in home health spending as a
result of this policy will be no greater than 3.5 percent per
year during the four-year transition relative to home health
payment levels at the date of enactment of this legislation.
MedPAC would be directed to report to Congress on the
implementation of the new system, with particular emphasis on
how rebasing changes impact: access to care for beneficiaries,
quality outcomes, supply of HH providers; and any differential
financial impacts on rural, urban, non-profit and for-profit
providers. No later than January 1, 2015, MedPAC would be
required to submit to Congress a report on this study, together
with recommendations for legislative and administrative action.
Provider-Specific Cap on Home Health Outlier Payments.
Starting in CY2011, the Secretary would be directed to
establish a provider-specific annual cap of ten percent of
revenues that a HH agency may be reimbursed in a given year
from outlier payments. The Secretary would continue to withhold
5 percent from episode payments for the outlier pool, with
payouts capped at 2.5 percent.
Reinstatement of Rural Home Health Payment Adjustment. For
visits ending on or after January 1, 2010 and before January 1,
2016, the Secretary would be directed to provide for a three
percent add-on payment for HH providers serving rural areas.
Study Regarding the Development of Home Health Payment
Reforms To Ensure Access to Care and Quality Services:
1. The Secretary shall conduct a study to evaluate the
costs and quality of care among efficient home health providers
relative to their peers in providing ongoing access to care and
in treating beneficiaries with varying severity levels of
illness and develop recommendations on ways to reform home
health payments and case mix adjustments based on this
analysis.
2. In conducting the study, the Secretary shall consider
whether certain factors should be used to measure patient
severity of illness and access to care. Factors to consider in
this analysis may include, but are not limited to, population
density and relative patient access to care; variations in
service costs for providing care to Medicare-Medicaid dual
eligible beneficiaries; presence of severe and/or chronic
diseases as evidenced by multiple, discontinuous home health
episodes; poverty status as evidenced by the receipt of a
Supplemental Security Income; absence of caregivers; language
barriers; atypical transportation costs; and security costs.
3. The study may include recommendations on:
a. Methods to revise the home health payment system
to more accurately account for the costs related to
patient severity of illness or to improving beneficiary
access to care, including payment adjustments for
services that may be under or over-valued; necessary
changes to reflect the resource use relative to
providing home health care to low-income beneficiaries
or beneficiaries living in medically underserved areas;
ways the outlier payment may be improved to more
accurately reflect the cost of treating beneficiaries
with high severity levels of illness; the role of
quality of care incentives and penalties in driving
provider and patient behavior; and improvements in the
application of a wage index;
b. An assessment of the validity and reliability of
responses on the OASIS instrument with particular
emphasis on questions that relate to higher PPS payment
and higher outcome scores under ``Home Care Compare'';
c. Additional research or payment modifications that
may be necessary to set home health rates based on
costs of high-quality and efficient home health
providers or to improve beneficiary access to care; and
d. Other areas deemed appropriate by the Secretary.
4. In conducting the study, the Secretary shall seek input
from stakeholders representing home health providers and
beneficiaries. The Secretary shall also seek input from the
Medicare Payment Advisory Commission, the HHS Inspector General
and the Government Accountability Office in its development and
design of the study.
5. The Secretary shall issue a report on its findings and
recommendations to the Congress by no later than March 1, 2011.
The report shall include a timetable for the potential
implementation of the recommendations and a statement as to
which recommendations require a change in statute and those
that can be implemented under the regulatory authority of the
Secretary.
6. In addition, no later than January 1, 2012, based on the
findings of this report and if the Secretary deems appropriate,
the Secretary shall establish a temporary Medicare payment
adjustment targeted toward ensuring access to care for
beneficiaries with high severity of illness or to improve
access to care for low-income or underserved beneficiaries.
This temporary Medicare add-on payment may be no greater than
three percent of the base PPS payment amount for any covered
home health service furnished to an eligible beneficiary based
on the findings of this report. Payments made under this
section shall not exceed $500 million in total from 2011-2019.
SEC. 3132. HOSPICE REFORM
Present Law
Medicare covers hospice care for terminally ill
beneficiaries instead of most other Medicare services related
to the curative treatment of their illness. Using an
interdisciplinary team, Medicare's hospice benefit provides
care that specializes in the relief of the pain and symptoms
associated with a terminal illness and the provision of
supportive and counseling services to patients and their
families during the final stages of a patient's illness and
death. For a person to be considered terminally ill and
eligible for Medicare's hospice benefit, the beneficiary's
attending physician and the medical director of the hospice (or
physician member of the hospice team) must certify that the
individual has a life expectancy of six months or less.
Beneficiaries electing hospice are covered for two 90-day
periods, followed by an unlimited number of 60-day periods. The
medical director or physician member of the hospice team must
recertify at the beginning of each period that the beneficiary
is terminally ill. Services must be provided under a written
plan of care established and periodically reviewed by the
individual's attending physician and the medical director of
the hospice.
Medicare payments to hospices are predetermined fixed
amounts for each case, according to the general type of care
provided to a beneficiary on a daily basis. Such payments are
intended to pay for the costs of care for a hospice
beneficiary, on average. Payments for hospice care are based on
one of four prospectively determined units of payment, which
correspond to four different levels of care (i.e., routine home
care, continuous home care, inpatient respite care, and general
inpatient care) for each day a beneficiary is under the care of
the hospice. Payment would thus vary by the length of the
patient's period in the hospice program as well as by the
characteristics of the services (intensity and site) furnished
to the beneficiary. Hospices bill separately for additional
physician services not covered under the payment categories
described above.
The hospice cost report data collected by CMS contain
provider-reported cost and statistical data for free-standing
hospice providers. The data set is normally updated quarterly
and is available on the last day of the month following the
quarter's end.
Committee Bill
The Secretary would be required to collect additional data
and information to revise payments for hospice care after
consulting with hospice providers and the Medicare Payment
Advisory Commission. Collection of the additional data and
information would be required to begin by January 1, 2011. The
Secretary would be required to collect the additional data and
information on: (1) charges and payments, (2) the number of
days of hospice care attributable to Medicare beneficiaries,
(3) with respect to each type of hospice service, the number of
days, cost, and payment of hospice care attributable to the
type of service; charitable contributions and other revenue of
the hospice program, the number of hospice visits, the type of
practitioner providing visits, and the length of the visit and
other information regarding the visit.
No later than October 1, 2013, the Secretary would be
required to, by regulation, implement revisions to the
methodology for determining payment rates for routine home care
and other services included in hospice. Such revisions could be
based on an analysis of data and information described above.
Such adjustments could reflect changes in resource intensity in
providing such care and services during the course of the
entire episode of hospice care.
Payment revisions would be required to be budget neutral in
that they would result in the same estimated amount of
aggregate Medicare expenditures for hospice care furnished in
the fiscal year in which such revisions in payment would be
implemented as would have been under Medicare for such care if
such revisions had not been implemented.
The Secretary would be required to implement changes to the
payment methodology for hospice care as appropriate based on
the additional data and information collected. These changes
may include per diem payments to hospices that reflect changes
in resource intensity in providing hospice services during the
course of the entire episode or additional payments (end-of-
episode payment) reflecting resource intensity of services
provided at the end of episode if the patient is not
transferred to another hospice or revokes election of the
hospice benefit. These changes would be implemented in FY2014
through rulemaking and would be budget neutral.
The Secretary would impose certain requirements on hospice
providers as follows: (1) that a hospice physician or advanced
practice nurse have a face-to-face encounter with the
individual to determine continued eligibility prior to the
180th day recertification and each subsequent recertification,
and attest that such visits took place; and (2) that all stays
in excess of 180 days be medically reviewed by CMS or its
contractors for hospices for which stays exceeding 180 days
make up a certain level of their total cases, as determined
appropriate by the Secretary.
SEC. 3133. IMPROVEMENT TO MEDICARE DISPROPORTIONATE SHARE HOSPITAL
(DSH) PAYMENTS
Present Law
The Medicare disproportionate share hospital (DSH)
adjustment was included in the inpatient prospective payment
system (IPPS) in 1986 on the premise that low-income patients
are more costly to treat and those acute care hospitals
(referred to as subsection (d) hospitals) serving a large
number of such patients would be likely to have higher costs
for their Medicare patients than would otherwise similar
institutions. Over time, as the formulas for Medicare's DSH
adjustment have been changed, the justification for the higher
payments has evolved and the adjustment is viewed as a way to
insure access to hospital care.
Medicare's DSH payments are distributed through a hospital-
specific percentage increase to its prospective payment rate.
In most instances, the size of a hospital's DSH adjustment
would depend upon the number of patient days provided to low-
income Medicare patients or Medicaid patients. However, small
urban hospitals and many rural hospitals have their DSH
adjustment capped at 12 percent.
In its March 2007 Report to Congress, MedPAC found that
about three-quarters of the Medicare DSH payments (accounting
for about $5.5 billion in FY2004) was not empirically justified
in terms of higher patient care costs. Also, Medicare's DSH
payments were poorly targeted to hospitals' shares of
uncompensated care.
Committee Bill
Starting in FY2015 and for subsequent fiscal years, the
Secretary would make DSH payments equal to 25 percent of what
otherwise would be made, a payment that represents the
empirically justified amount as determined by MedPAC in its
March 2007 Report to Congress.
In addition to this amount, the Secretary would pay to such
acute care hospitals an additional amount using a formula that
is the product of three factors: the difference in hospitals'
DSH payments after reducing DSH payments to empirically
justified levels as compared to Present Law; the difference in
the percentage change in the uninsured under-65 population from
2012; and the percentage of uncompensated care provided by a
hospital (relative to all acute care hospitals).
The measure to establish the percentage change in the
uninsured under-65 population would be one minus the difference
of percent of individuals under 65 who are uninsured in 2012
minus those who are uninsured in the most recent period for
which data is available (divided by 100). For FY2015 through
FY2017, the data would be estimated by the Secretary based on
the most recent estimates from the Director of the
Congressional Budget Office. Starting in FY2018 and in
subsequent years, the data would be estimated by the Secretary
based on data from the Census Bureau or other appropriate
sources as certified by the Chief Actuary of the Centers for
Medicare and Medicaid Services.
The factor related to uncompensated care shall be based on
the amount of uncompensated care provided by a hospital as a
percentage of the aggregate amount of uncompensated care for
all such hospitals. The Secretary will be directed to use
appropriate data on uncompensated care, or alternative data if
it serves as a better proxy for the costs of treating the
uninsured.
There would be no administrative or judicial review of any
estimate that is used in determining any of the three factors;
any period of time for that formula; or any alternative DSH
percentage.
SEC. 3134. MISVALUED CODES UNDER THE PHYSICIAN FEE SCHEDULE
Present Law
The Medicare physician fee schedule is based on assigning
relative weights to each of the approximately 7,500 physician
service codes used to bill Medicare. The relative value for a
service compares the relative work involved in performing one
service with the work involved in providing other physicians'
services. The scale used to compare the value of one service
with another is known as a resource-based relative value scale
(RBRVS).
The Center for Medicare and Medicaid Services (CMS), which
is responsible for maintaining and updating the fee schedule,
continually modifies and refines the methodology for estimating
relative value units (RVUs). CMS relies on advice and
recommendations from the American Medical Association/Specialty
Society Relative Value Scale Update Committee (RUC) in its
assessments. In general, as currently implemented, increases in
RVUs for a service or number of services lowers the resultant
fees for other physician services. One consequence has been
that the payments for evaluation and management codes, whose
RVUs typically are not increased over time, have fallen
relative to other codes whose RVUs have increased and as a
consequence of new technologies that have been introduced into
coverage with relatively high RVUs. CMS is required to review
the RVUs no less than every five years.
In determining adjustments to the relative value units
(RVUs) used as the basis for calculating Medicare physician
reimbursement under the fee schedule, the Secretary has
authority to adjust the number of RVUs for any service code to
take into account changes in medical practice, coding changes,
new data on relative value components, or the addition of new
procedures. The Secretary is required to publish an explanation
of the basis for such adjustments.
These adjustments are subject to a budget neutrality
condition. With the exception of certain expenditures that are
exempt by statute, the adjustments may not cause the amount of
expenditures made under the Medicare physician fee schedule to
differ from year to year by more than $20,000,000 from the
expenditures that would have been incurred without such an
adjustment.
Committee Bill
The Committee Bill would require the Secretary to
periodically identify physician services as being potentially
misvalued, and make appropriate adjustments to the relative
values of such services under the Medicare physician fee
schedule. For purposes of identifying potentially misvalued
services, the Secretary shall examine codes for which there has
been the fastest growth; codes that have experienced
substantial changes in practice expenses; codes for new
technologies or services after the relative values are
initially established for such codes; multiple codes that are
frequently billed in conjunction with furnishing a single
service; codes with low relative values, particularly those
that are often billed multiple times for a single treatment;
codes which have not been subject to review since the
implementation of the RBRVS; and such other codes determined to
be appropriate by the Secretary. Adjustments to misvalued
procedures would be subject to budget neutrality requirements.
SEC. 3135. MODIFICATION OF EQUIPMENT UTILIZATION FACTOR FOR ADVANCED
IMAGING SERVICES
Present Law
Under the Medicare fee schedule, some services have
separate payments for the technical component and the
professional component. For example, imaging procedures
generally have two parts: the actual taking of the image (the
technical component), and the interpretation of the image (the
professional component). Medicare pays for each of these
components separately when the technical component is furnished
by one provider and the professional component by another. When
both components are furnished by one provider, Medicare makes a
single global payment that is equal to the sum of the payment
for each of the components.
CMS's method for calculating the Medicare fee schedule
reimbursement rate for advanced imaging services assumes that
imaging machines are operated 25 hours per week, or 50 percent
of the time that practices are open for business. Setting the
equipment use factor at a lower--rather than at a higher--rate
has led to higher payment for these services. Citing evidence
showing that the utilization rate is 90 percent, rather than
the 50 percent previously assumed, MedPAC is urging CMS to use
the higher utilization rate in the calculation of fee schedule
payments for advanced imaging services.
According to MedPAC and the Government Accountability
Office (GAO), there are opportunities to improve the efficiency
of the Medicare fee schedule. In 2005, MedPAC recommended
reducing certain fees to account for efficiencies and savings
from the technical preparation and supplies achieved when
multiple imaging services are furnished sequentially on
contiguous body parts during the same visit. Starting January
1, 2006, physicians receive the full technical component fee
for the highest paid imaging service in a visit, but technical
component fees for additional imaging services are reduced by
25 percent.
Committee Bill
The Committee Bill would increase the utilization rate
assumption for calculating the payment for advanced imaging
equipment from 50 percent to 65 percent for 2010 through 2013.
The rate would be further increased to 75 percent beginning in
2014.
In addition, the Committee Bill would increase the
technical component payment reduction for sequential imaging
services on contiguous body parts during the same visit from 25
percent to 50 percent.
The Comptroller General would conduct a study on the
estimated impact of the adjustment in practice expense to
reflect higher presumed utilization under the amendments made
by this subsection on the following: (1) Medicare beneficiary
access to advanced diagnostic imaging services (as defined in
section 1834(e)(1)(B) of the Social Security Act (42 U.S.C.
1395m(e)(1)(B)), including such access in rural areas; (2)
utilization of advanced diagnostic imaging services (as so
defined); and (3) the estimated savings to the Medicare program
under title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.) during the period of 2010 through 2019 as a result of
such adjustment.
The Comptroller General would report to Congress by January
1, 2013, on the results of the study, together with
recommendations for such legislation and administrative action
as the Comptroller General determines appropriate.
SEC. 3136. REVISION OF PAYMENT FOR POWER-DRIVEN WHEELCHAIRS
Present Law
Wheelchairs, including power-driven wheelchairs, are
covered by Medicare under the capped-rental category of the
durable medical equipment (DME) benefit. Medicare pays for
power-driven wheelchairs in one of two ways: either Medicare
will pay the supplier a monthly rental amount during the
beneficiary's period of medical need (though payments are not
to exceed 13 continuous months), or the payment is made on a
lump-sum basis at the time the supplier furnishes the chair if
the beneficiary chooses the lump-sum payment option. If the
reasonable lifetime of a power-driven wheelchair is reached, or
the wheelchair is lost or irreparably damaged, Medicare will
pay for a replacement. The beneficiary may elect to have the
replacement purchased through either monthly rental payments
not to exceed 13 months, or a lump-sum payment.
Rental payments for wheelchairs are statutorily determined
as ten percent of the purchase price of the chair for each of
the first three months of rental and 7.5 percent of the
purchase price for each of the remaining ten months of the
rental period.
Medicare pays for most DME on the basis of a fee schedule.
However, the Medicare Prescription Drug Improvement and
Modernization Act of 2003 (MMA, 108-173) required the Secretary
to establish a competitive acquisition program for specified
durable medical equipment; the competitive acquisition program
would replace the Medicare fee schedule payments. The program
is to be phased-in, starting in nine of the largest
metropolitan statistical areas (MSAs) in 2009; expanding to 80
of the largest MSAs in 2011 and remaining areas after 2011.
Committee Bill
Starting January 1, 2011, the Committee Bill would limit
the option to purchase a power-driven wheelchair with a lump-
sum payment only to complex, rehabilitative power wheelchairs.
The lump-sum payment option would be eliminated for all other
wheelchairs. The provision would also eliminate the lump-sum
purchase option for replacing a wheelchair for all chairs
except complex, rehabilitative power wheelchairs. This
provision would not apply to competitive acquisition areas
prior to January 1, 2011.
Also starting January 1, 2011, the Committee Bill would
change the calculation of the rental payment for power-driven
wheel chairs. The rental payment for power-driven wheelchairs
would be 15 percent of the purchase price for each of the first
three months (instead of ten percent), and six percent of the
purchase price for each of the remaining ten months of the
rental period (instead of 7.5 percent).
SEC. 3137. HOSPITAL WAGE INDEX IMPROVEMENT
Present Law
A hospital wage index is used to adjust the standardized
amount to account for the local wage variation or cost of labor
in the hospital's area. Medicare defines hospital labor market
areas using definitions of statistical areas established by the
Office of Management and Budget (OMB). The wage index is
intended to measure the average wage level for hospital workers
in each urban area (a modified core based statistical area or
CBSA) or rural area (comprised of counties that have not been
assigned to any CBSA) relative to the national average wage
level. Some states where every county is included in an urban
area have no rural wage index. There is a statutory requirement
that the wage index for any urban area in a state cannot be
less than the rural wage index of that state (often referred to
as the rural floor).
Hospitals submit data on their hours, wages, and labor-
related costs annually in their Medicare cost report. There is
a four-year lag in the data used to calculate the wage index;
the FY2008 wage index was calculated using data submitted by
hospitals for cost reporting periods beginning in FY2004.
Generally, CMS calculates an area's average hourly wage (AHW)
using the data on compensation and hours submitted by every
hospital in the area. Starting in FY2005, CMS has adjusted this
data to account for the relative skill mix of the hospitals in
the area. This occupationally mix adjusted average hourly wage
is then divided by the same measure calculated using data from
all hospitals in the nation to establish the area's adjusted
wage index.
The Tax Relief and Health Care Act of 2006 (TRHCA, P.L.
109-432) required that MedPAC submit a report to Congress on
wage index revisions, including recommendations on alternatives
by June 30, 2007. The Secretary was directed to consider
MedPAC's recommendations and include in the fiscal year 2009
inpatient prospective payment proposed rule one or more
proposals to revise the wage index. TRHCA also requires that
CMS consider specific issues of Congressional concern such as
eliminating exceptions, minimizing variation in the wage index
across county borders and using the hospital wage index in
different settings. MedPAC issued its mandated report by June
2007. CMS did consider the report's recommendations in its
FY2009 rulemaking process and has hired an independent
consulting firm to further evaluate the impact of making the
recommended changes.
Unlike other providers, acute care hospitals may apply to
the Medicare Geographic Classification Review Board (MGCRB) for
a change in classification from a rural area to an urban area,
or reassignment from one urban area to another urban area. If
reclassification is granted, the new wage index will be used to
calculate the hospital's Medicare payment for inpatient and
outpatient services. Other services offered by the hospital
such as rehabilitation services in a distinct part unit will be
paid using the wage index from the hospital's original area.
Generally, for an individual hospital to qualify for
reclassification, it must demonstrate a close proximity to the
area where the hospital seeks to be reclassified. After
establishing appropriate proximity, a hospital may qualify for
the wage index of another area if it proves that its incurred
costs are comparable to those of hospitals in that area. To use
an area's wage index, a hospital must demonstrate that its own
AHW is within a certain percentage of the AHW of the area to
which it seeks redesignation. Until recently, in order to
reclassify to a different area, a rural hospital had to
demonstrate that its AHW is equal to at least 82 percent of the
area's AHW; an urban hospital's AHW had to be 84 percent of the
area's AHW. Starting in FY2010, the reclassification threshold
has been raised two percentage points to 84 percent for rural
hospitals and 86 percent for urban hospitals. MGCRB hospital
reclassifications are established on a budget neutral basis so
aggregate inpatient payments will not increase as a result of
reclassified hospitals' higher payments.
Section 508 of the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 (MMA, P.L. 108-173) provided $900
million for a one-time, three year geographic reclassification
of certain hospital who were otherwise unable to qualify for
administrative reclassification to areas with higher wage index
values. These reclassifications were extended from March 31,
2006 to September 30, 2007 by the Tax Relief and Health Care
Act of 2006 (TRHCA, P.L. 109-432). The Medicare, Medicaid and
SCHIP Extension Act (MMSEA, P.L. 110-173) extended the
reclassifications to September 30, 2008. The Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA,
P.L. 110-275) extended the reclassifications until September
30, 2009. These extensions were exempt from any budget
neutrality requirements.
Committee Bill
The Section 508 reclassifications would be extended until
September 30, 2011. The Secretary would be required to use the
wage index data that was promulgated by the Secretary in the
Federal Register on August 27, 2009 (74 Fed. Reg. 43754), and
any subsequent corrections, for purposes of the extension.
By December 31, 2011, the Secretary would be required to
provide a plan to Congress on how to comprehensively reform the
Medicare wage index system. This plan would be required to take
into account the goals set forth in the MedPAC June 2007 report
including establishing a new hospital compensation index system
that: (1) uses Bureau of Labor Statistics data, or other data
or methodologies, to calculate relative wages for each
geographic area involved; (2) minimizes wage index adjustments
between and within CBSA and statewide rural areas; (3) includes
methods to minimize the volatility of wage index adjustments
that result from implementation of policy, while maintaining
budget neutrality in applying such adjustments; (4) takes into
account the effect that implementation of the proposal would
have on health care providers and on each region of the
country; (5) addresses issues related to occupational mix, such
as staffing practices and ratios, and any evidence on the
effect on quality of care or patient safety as a result of
implementation of policy in this section; and (6) provides for
a transition period. The Secretary would be required to consult
with relevant affected parties in developing the plan.
The Secretary would also be required to restore the
reclassifications thresholds used in determine hospital
reclassifications to the percentages used for FY2009 MGCRB
decisions, starting FY2011. This change would be in effect
until the first fiscal year one year after the Secretary
submits the plan to reform the Medicare wage index system as
referenced above. This provision would be implemented in a
budget neutral fashion.
SEC. 3138. TREATMENT OF CERTAIN CANCER HOSPITALS
Present Law
Eleven cancer hospitals are exempt from the inpatient
prospective payment system (IPPS) used to pay inpatient
hospital services provided by acute care hospitals. As part of
this exemption, these facilities are paid on a reasonable cost
basis, subject to certain payment limitations and incentives.
These hospitals are also held harmless under the outpatient
prospective payment system (OPPS) and will not receive less
from Medicare under this payment system than under the prior
outpatient payment system. Under OPPS, Medicare pays for
outpatient services using ambulatory payment classification
(APC) groups.
Committee Bill
The Secretary would be required to conduct a study to
determine if the outpatient costs incurred by IPPS-exempt
cancer hospitals with respect to Medicare's APCs exceed those
costs incurred by other hospitals reimbursed under OPPS. If the
costs in the IPPS-exempt cancer hospitals are excessive, the
Secretary would be required to provide for an appropriate
adjustment under Section 1833(t) of the Social Security Act for
services furnished starting January 1, 2011.
SEC. 3139. PAYMENT FOR BIOSIMILAR BIOLOGICAL PRODUCTS
Present Law
A biologic is a preparation, such as a therapeutic product
or a vaccine, that is made from living organisms. The
legislative proposal assumes the enactment of legislation that
would expand the regulatory activities of FDA by opening a
pathway for the approval of biosimilars, also referred to as
follow-on biologics. The new regulatory pathway would be
analogous to the FDA's existing authority for approving generic
chemical drugs under the Drug Price Competition and Patent Term
Restoration Act of 1984 (P.L. 98-417). Often referred to as the
Hatch-Waxman Act, this law allows the generic company to
establish that its drug product is chemically the same as the
already approved innovator drug, and thereby its application
for FDA approval relies on FDA's previous finding of safety and
effectiveness for the approved drug.
Medicare Part B pays for a limited number of drugs for
beneficiaries in several different ways, depending on the
setting in which the drug is administered, the type of drug,
and the patient's eligibility for Medicare. Part B covers
certain drugs administered to patients in physician offices and
hospital outpatient departments, or those administered through
durable medical equipment (DME) and billed by pharmacy
suppliers. In certain limited instances, Part B will pay for
drugs billed as supplies and self-administered by the patient.
CMS assigns a Healthcare Common Procedure Coding System
(HCPCS) code to each drug. Medicare payments for Part B drugs
are based on average sales price (ASP) for each HCPCS code. CMS
uses the same HCPCS code for all drug products listed as
therapeutically equivalent in FDA's Orange Book. Therefore, a
brand-name drug and any generic versions of the same drug would
have the same HCPCS code and the prices would be averaged
together for ASP determinations.
Committee Bill
The Committee Bill would allow a Part B biosimilar product
approved by the Food and Drug Administration and assigned a
separate billing code to be reimbursed at the ASP of the
biosimilar plus six percent of the ASP of the reference
product. A biosimilar biological product would mean a product
approved under an abbreviated application for a license of a
biological product that relies in part on data or information
in an application for another biological product licensed under
the Public Health Service Act. The term reference biological
product means the licensed biological product that is referred
to in the application for the biosimilar product.
SEC. 3140. PUBLIC MEETING AND REPORT ON PAYMENT SYSTEMS FOR NEW
CLINICAL LABORATORY DIAGNOSTIC TESTS
Present Law
No Present Law.
Committee Bill
The Committee Bill would require the Secretary to convene a
public meeting on mechanisms of payment for new clinical
laboratory diagnostic tests under the Medicare program. The
public meeting would include a discussion of how to reform
Medicare payment mechanisms for such tests. The Secretary would
submit a report to Congress containing a summary of the public
meeting, together with recommendations for such legislation and
administrative action that the Secretary would determine to be
appropriate.
SEC. 3141. MEDICARE HOSPICE CONCURRENT CARE DEMONSTRATION PROGRAM
Present Law
No provision.
Committee Bill
The Committee Bill would require the Secretary to conduct a
three-year demonstration program that would allow patients who
are eligible for hospice care to also receive all other
Medicare covered services during the same period of time. The
Secretary would establish 26 sites across the country in both
urban and rural areas to examine improvement in patient care,
quality of life, and cost-effectiveness that results from the
demonstration project. An independent evaluation of this
delivery model would be conducted with reports submitted to the
Secretary and Congress. This demonstration would be required to
be budget neutral relative to such funds that would otherwise
be paid to hospice programs in a given year.
SEC. 3142. APPLICATION OF BUDGET NEUTRALITY ON A NATIONAL BASIS IN THE
CALCULATION OF THE MEDICARE HOSPITAL WAGE INDEX FLOOR FOR EACH ALL-
URBAN AND RURAL STATE
Present Law
A hospital wage index is used to adjust the standardized
amount to account for the local wage variation or cost of labor
in a hospital's area. The wage index is intended to measure the
average wage level for hospital workers in each urban area (a
modified core based statistical area or CBSA) or rural area
(comprised of counties that have not been assigned to any CBSA)
relative to the national average wage level as established by
Section 4410 of the Balanced Budget Act of 1997 (BBA, P.L. 105-
33), the wage index for any urban area in a state cannot be
less than the rural wage index of that state (often referred to
as the rural floor). In some states, every county is included
in an urban area; as a result, there is no rural wage index for
that state and no rural floor. Beginning in FY2006, the Centers
for Medicare and Medicaid Services (CMS) established an
``imputed'' rural floor for states that did not have any acute
care hospitals in rural areas.
The effect of the rural floor (that is, raising the wage
index for urban areas in a state to that state's rural wage
index) is required to be implemented on a budget neutral basis.
BBA established that the budget neutrality requirement for the
rural floor be achieved by adjusting the wage index of all
other hospitals not affected by the rural floor. Until FY2009,
CMS funded the budget neutrality requirement associated with
the impact of the rural and imputed rural floor though a
nationwide adjustment. Starting in FY2009, CMS began a
transition to fund the budget neutrality requirement through a
state-specific adjustment; the statewide adjustment would be
fully implemented in FY2011. States with no hospitals receiving
the rural floor wage index would not experience reduced
payments; those hospitals within each state with urban areas
paid at the higher rural wage index would fund the higher
payments for the affected hospitals.
Committee Bill
The Committee Bill would require application of budget
neutrality requirement associated with the effect of the
imputed rural and rural floor on a national, rather than state-
specific adjustment (through a uniform, national adjustment to
the area wage index).
SEC. 3143. HHS STUDY ON URBAN MEDICARE-DEPENDENT HOSPITALS
Present Law
Medicare dependent hospitals (MDHs) are small rural
hospitals with a high proportion of patients who are Medicare
beneficiaries. Specifically, the hospitals in rural areas have
at least 60 percent of acute inpatient days or discharges
attributable to Medicare in FY1987 or in two of the three most
recently audited cost reporting periods. As specified in
regulation, they cannot be a sole community hospital (SCH) and
must have 100 or fewer beds. MDHs receive special treatment,
including higher payments, under Medicare's inpatient
prospective payment system (IPPS).
IPPS includes certain payment adjustments, such as the
indirect medical education (IME) adjustment for teaching
hospitals, to compensate hospitals for higher average costs
which might not be in their control. The disproportionate share
hospital (DSH) adjustment increases payments for hospitals that
serve a relatively high proportion of low-income Medicare and
Medicaid patients. Certain hospitals, such as rural referral
centers, SCHs, and MDHs, receive special treatment under IPPS.
Other small, limited service critical access hospitals (CAHs)
are exempt from IPPS and paid 101 percent of their reasonable
costs.
Committee Bill
The Secretary would conduct a study on the need for
additional Medicare payments for urban Medicare-dependent
hospitals paid under IPPS which receive no additional payments
through either an IME or a DSH adjustment or who are not
classified as an RRC, SCH, or MDH. CAHs would be excluded as
well. For the purposes of the study, urban Medicare-dependent
hospitals would be defined as those hospitals with more than 60
percent of their inpatient days or discharges paid by Medicare.
The study will examine the Medicare inpatient margins of these
hospitals compared to other IPPS hospitals that receive one or
more of the additional payments or adjustments and would
consider the applicability to these urban hospitals of the
existing payment adjustment for Medicare-dependent rural
hospitals. The Secretary would submit a report including
recommendations for legislative and administrative actions to
Congress no later than nine months from the date of enactment.
Subtitle C--Provisions Relating to Part C
SEC. 3201. MEDICARE ADVANTAGE PAYMENT
Present Law
Under the Medicare Advantage (MA) program, beneficiaries
have the option to receive Medicare benefits through private
health insurance plans. MA plans are paid a monthly per-capita
amount to provide all Medicare-covered benefits (except
hospice) to beneficiaries who enroll in their plan.
Section 1853 of the Social Security Act requires the
Secretary each year to calculate monthly benchmark amounts for
MA plans for each county of the country (and the territories).
These benchmark amounts are administered prices--that is, they
are set by statutory formula and used to determine how MA plans
are paid under Medicare. Present Law also requires MA plans to
submit bids to the Secretary on an annual basis that represent
their average monthly revenue requirements for providing
Medicare-covered benefits per enrollee for the following year.
The monthly bid amounts reflect plans' estimated costs of
delivering Medicare benefits per enrollee, as well as their
administrative costs, such as profits and expenses for sales,
marketing, and care management activities. MA plans also submit
separate monthly bids for benefits that they offer under Part
D.
MA benchmarks are calculated differently for local plans
and regional plans. The local benchmark is based solely on
statutory county-level rates. The regional benchmark consists
of two components: statutory county-level rates and a weighted
average of regional plan bids. The latter component introduces
an element of price competition among regional plans by basing
a portion of the benchmark amount on bids submitted by the
plans.
Medicare payments to MA plans are determined by comparing
their bids to the benchmark rates. If an MA plan bid is equal
to or above the benchmark, its payment is the benchmark, and it
must charge an enrollee premium equal to the difference between
its bid and the benchmark. If an MA plan bid is below the
benchmark, its payment is its bid. MA plans that bid below the
MA benchmarks are also paid a ``rebate'' amount in addition to
their bid. Specifically, MA plans that bid below the benchmarks
are paid 75 percent of the difference between their bids and
the benchmarks. Thus, the Medicare payment to MA plans that bid
below the statutory benchmark is equal to each plan's bid plus
75 percent of the difference between each bid and the benchmark
rate.
The ``rebate'' paid to MA plans must be used to provide
benefits that are not covered by Medicare. These extra benefits
can take the form of lower Medicare cost sharing under Parts A,
B or D, reduced or eliminated monthly Part B premium, or added
benefits and services beyond those covered by statute. Rebate
payments to MA plans vary widely across the country. Areas with
high statutory benchmark rates--mainly areas with the highest
levels of per capita Medicare spending--tend to have the
highest rebates paid to MA plans. Consequently, MA plans in
high cost areas can offer significantly more extra benefits
than MA plans in areas with average or low per capita Medicare
costs. Under Present Law, the average rebate amount is about
$100 per month, or $1,200 per year. Rebate payments enable MA
plans to compete on extra benefits rather than on the price or
quality of care they offer.
In general, the MA benchmarks in each local area (county)
are updated annually by the national per capita growth rate in
Medicare expenditures, otherwise known as the national MA per
capita growth percentage. In certain years (known as rebasing
years), MA benchmarks are reset as the greater of the prior
years' rate updated by the national MA per capita growth
percentage or 100 percent of local fee-for-service (FFS) costs,
with adjustments.
Determination of a plan's service area differs for local
and regional MA plans. Local plans choose the counties they
wish to serve. Regional plans must agree to serve an entire
region defined by the Secretary, and may choose to serve more
than one region. MA regions are made up of states or groups of
states. If a local plan eliminates a service area, the plan may
allow all or some of the former enrollees from the affected
area to continue their enrollment if the enrollees agree to see
providers designated by the plan and there are no other plans
available in the area.
Current payments to MA plans (bids plus rebate payments)
are risk adjusted. The Centers for Medicare and Medicaid
Services (CMS) uses characteristics, such as age, sex,
disability status and prior health history to estimate the
relative risk of each beneficiary enrolled in a plan. MA plans
are paid their bids plus rebate payments adjusted by their
enrollees' risk scores. If MA plans enroll beneficiaries with
higher costs, their payments are adjusted upward to account for
the costs of covering sicker enrollees. If MA plans enroll
beneficiaries with lower costs, their payments are adjusted
downward to account for the lower cost of covering healthier
enrollees.
Other than risk adjusting payments, the statute does not
contain explicit financial incentives for MA plans to manage or
coordinate care for high cost, chronically ill beneficiaries.
Section 1854 of the Social Security Act gives the Secretary
broad authority to set guidelines and review the actuarial
soundness of the monthly bid amounts submitted by MA plans. The
statute requires that the Secretary only accept bid amounts or
proportions that reasonably reflect the revenue requirements of
benefits provided under the plan. Present Law also allows the
Secretary to negotiate with plans regarding the bid amounts and
supplemental benefits, which is similar to the authority
provided to the Director of the Office of Personnel Management
with respect to the Federal Employee Health Benefits Program
(FEHBP). There is one exception: the Secretary is not allowed
to review the actuarial bases of the bid amounts or use
negotiation authority with respect to private fee-for-service
plans.
The Medicare Prescription Drug, Improvement and
Modernization Act (MMA, P.L 108-173) required all MA
organizations to have a quality improvement program. As part of
this program, plans must collect, analyze, and report data that
measure health outcomes and other indicators of performance.
The quality measures reported by MA plans are summarized by CMS
into a composite quality score for each plan. MA plan quality
scores are published annually by CMS. MA plans are also
required to annually assess the impact and effectiveness of
their quality improvement programs and take timely action to
correct any systemic problems that come to their attention.
Committee Bill
The Committee Bill would base the calculation of MA
benchmarks on actual plan costs as reflected in plan bids
rather than statutorily set rates. Using plan bids to set MA
benchmarks would encourage plans to compete more directly on
the basis of price and quality rather than on the level of
extra benefits offered to enrollees. It also provides cost
savings to Medicare because in nearly all areas of the country
plan bids are lower than the current benchmark rates.
MA Benchmarks and Rebates. Beginning in 2011, the Committee
Bill would transition MA benchmarks to reflect plan bids. In
2011, the national MA per capita growth percentage would be
reduced by three percentage points. Starting in 2012, local MA
benchmarks would be blended with plan bids. Specifically, local
MA benchmarks would be based on 33 percent of the enrollment
weighted average of plan bids for each payment area and 67
percent of the Present Law MA benchmarks. In 2013, a greater
share of the benchmark rates would reflect actual plan bids.
Specifically, 67 percent of the benchmark rates would be based
on the enrollment weighted average of plan bids for each
payment area, while the remaining 33 percent would be based on
the Present Law MA benchmarks. The Secretary would use
enrollment figures from the most recent month from which data
is available. In addition, the coding intensity adjustment of
MA plan risk scores would be extended during the transition
from statutory benchmarks to competitively bid benchmark rates
from 2011 through 2013.
In 2014, the local MA benchmarks would be based on the
actual plan bids from the prior year. That is, the 2014 MA
benchmarks would be equal to 100 percent of the enrollment
weighted average of the 2013 plan bids increased by the
national MA growth percentage for 2014. Beginning in 2015, the
MA local benchmarks would be determined by the enrollment
weighted average of all MA bids in each payment area. In the
case of a payment area where only a single plan is offered, the
weight would be equal to one. In the case of a payment area
where no MA plans were offered in a prior year and multiple
plans bid in the following year, the Secretary would use a
simple average to calculate the MA benchmark in that area. An
upper bound would be established in each area so that local
benchmarks could not exceed the levels that would have existed
under Present Law. Bids from all local MA plans (except
regional plans, PACE plans and 1876 cost plans) would be used
to set the MA benchmarks.
Regional plan benchmarks would continue to be calculated as
a weighted blend of the regional bids and local MA benchmarks.
However, the statutory portion would be based on the new MA
benchmarks instead of statutory rates.
In 2011, 2012, and 2013, local and regional MA plans would
still receive 75 percent of the difference between their bids
and the benchmark rates as a rebate payment. Beginning in 2014,
MA plans that bid below the new benchmark rates would receive a
rebate amount equal to 100 percent of the difference between
their bids and the new benchmarks (rather than 75 percent of
the difference as under Present Law). Just as required under
Present Law, local and regional MA plans that bid equal to or
above the new benchmark rates would be paid the benchmark
amount and must charge an enrollee premium equal to the
difference between their bids and the benchmarks.
The Committee Bill would also risk adjust bid and rebate
payments to plans as under Present Law. Also, MA plans would be
required to use 100 percent of any rebate amount to provide
additional benefits to their enrollees. Plans would still be
allowed to offer supplemental benefits for which they would
charge beneficiaries an added premium, as under Present Law.
Bidding Rules. The Committee Bill would require bid
information submitted by MA plans to be certified by a member
of the American Academy of Actuaries (MAAA) beginning with plan
year 2012. The Secretary would continue to use current
statutory authority to review and negotiate plan bids and set
guidelines with respect to the actuarial standards that bids
must meet. The Secretary, acting through the Chief Actuary,
would be required to establish bidding rules that plans would
follow in order to protect the integrity and fairness of the
bidding process when the bids are used to set benchmarks
amounts in payment areas. The Secretary would be required to
deny bids that do not meet the actuarial standards and
guidelines or abide by the rules established with respect to
the competitive bid process. The Chief Actuary would report
plan actuaries who were found to repeatedly not comply with
bidding rules and standards to the Actuarial Standards Board
for Counseling and Discipline. In addition, the Secretary would
have authority to refuse to accept additional bids from MA
organizations that had submitted bids with consistent
misrepresentations.
Payment Areas. The Committee Bill would require the
Secretary to establish new MA payment areas for urban areas for
plan years beginning in 2012. In urban areas, payment areas
would be based on the definition of ``Core-Based Statistical
Areas'' as determined by the Office of Management and Budget.
The Secretary would be required to divide CBSAs that cover more
than one state. Beginning in 2015, the Secretary would be
allowed to adjust CBSA payment areas to reflect patterns of
actual health care use. The Secretary would be required to base
the adjustments on recent analyses of patterns of care. In
2012, payments areas for rural or non-urban areas would be
counties, as under Present Law. Beginning in 2015, the
Secretary would be allowed to combine one or more rural
counties in a state into a single service area. The Committee
Bill would require that new payment areas established by the
Secretary in rural areas also reflect recent research on actual
patterns of care.
The Committee Bill would provide additional authority to
the Secretary to make limited exceptions to payment area
requirements for plans that have historical agreements with
other plans that preclude the offering of benefits throughout
an entire payment area or that have historical limitations in
their structural capacity to offer benefits throughout an
entire payment area as a result of their delivery model.
Under the Committee Bill, bidding and service areas would
be the same as payment areas beginning in 2012. MA plans would
be allowed to choose which payment areas they would like to
serve, but they must bid and serve the entire payment area, and
would no longer be allowed to apply different premiums to
different segments of their service area.
Bonus Payments. The Committee Bill would establish two new
bonus payments for local and regional MA plans. When added
together, the two bonus payments would equal a maximum of six
percent of the national adjusted average per capita Medicare
cost for the year on a per member per month basis. These bonus
payments would be available to MA plans, beginning in 2014,
regardless of plan type or service area (except not for
enrollees under the grandfather policy as described below).
Unlike rebate payments, bonus payments would be available to
plans that meet certain performance criteria and would not
depend on benchmark rates.
The Committee Bill would create a new bonus payment for
care coordination and management activities that are conducted
by MA plans. Up to two percent of the national adjusted average
per capita Medicare cost for the year would be available to MA
plans that demonstrate to the Secretary that they conduct
activities in four of eight areas. A plan would be eligible to
earn \1/2\ percent for each of the following separate areas in
which they conduct activities:
1. Care management programs that target individuals with
one or more chronic conditions, identify gaps in care, and
facilitate improved care by using additional resources like
nurses, nurse practitioners, and physician assistants.
2. Programs that focus on patient education and self-
management of health conditions, including interventions that
help manage chronic conditions, reduce declines in health
status and foster patient/provider collaboration.
3. Transitional care interventions that focus on care
provided around a hospital inpatient episode, including
programs that target post-discharge patient care in order to
reduce unnecessary health complications and re-admissions.
4. Patient safety programs, including provisions for
hospital-based patient safety programs in their contracts with
hospitals.
5. Financial policies that promote systematic coordination
of care by primary care physicians across the full spectrum of
specialties and sites of care, such as medical homes,
capitation arrangements or pay-for-performance programs.
6. Medication therapy management programs that are more
extensive than those required under Present Law.
7. Health information technology programs, including
electronic health records, clinical decision support and other
tools to facilitate data collection and ensure patient-
centered, appropriate care.
8. Programs that address, identify, and ameliorate health
care disparities among principal at-risk subpopulations.
The Secretary would be authorized to add care management
and coordination programs as appropriate. MA plans would be
allowed to implement care managements and coordination programs
in ways that are appropriate for urban and rural areas.
The Committee Bill would create a second bonus for prior
year achievement or improvement in plan quality performance.
Performance would be measured based on a ranking system that
measures clinical quality and enrollee satisfaction at the
contract or plan level as feasible. MA plans would be eligible
to receive two percent of the national adjusted average per
capita Medicare cost for the year if they achieve a three-star
rating on a five-star ranking system or four percent if they
achieve between four-and five-stars on a five-star ranking
system. Plans that do not achieve at least a three-star rating
would be eligible for a one percent quality bonus if their
ratings improve over a prior year. If the Secretary does not
use a five-star ranking system to measure quality under the MA
program, bonus payments would continue to be available to plans
at levels that reflect similar levels of achievement and
improvement as the five-star ranking system. In making quality
bonus payments to plans, the Secretary would use quality
ratings from the preceding year. Plans that failed to report
data used to determine the quality ratings would be counted as
having the lowest performance and improvement ratings.
The Committee Bill would make accommodations for the
quality bonus for new and low-enrollment plans for limited time
frames. New MA plans would be eligible for a two percent bonus
for the first three years of operation. In the fourth year of
operation, new plans would be evaluated in the same manner as
other plans with comparable enrollment.
For plans with low enrollment, the Secretary would use the
regional or local mean for any quality measure that precludes a
plan with insufficient data from being evaluated for quality
performance using a five-star ranking system. The Secretary
would have authority to create alternative mechanisms of
measuring quality for purposes of the quality bonus for plans
with persistently low enrollment.
The performance bonuses--both care coordination and quality
bonus payments--would be risk adjusted to reflect the
demographics and actual health status of each enrollee in the
same manner as rebate payments are risk adjusted under the
Committee Bill and Present Law. MA plans would be required to
use 100 percent of the performance bonus payment amounts to
cover the costs of additional benefits offered to their
enrollees as specified in Section 3202 below. Plans would still
be allowed to offer supplemental benefits for which they charge
beneficiaries an added premium, as under Present Law.
Grandfather Policy. MA plans would be allowed to
grandfather the extra benefits for their current enrollees
(defined as those who are enrolled in MA plans on the date of
enactment of the Committee Bill) in certain areas of the
country where average plan bids are not greater than 75 percent
of local per capita fee-for-service costs. Plans would be able
to grandfather enrollees beginning in 2012. The amount of extra
benefits in 2012 would be the amount that was available though
the plan in 2011; the amount would be reduced by 5 percent each
year beginning 2013.
Plans that choose to retain or ``grandfather'' their
current enrollees would also be required to submit bids under
competitive bidding in those areas. The bids for covered
Medicare benefits under competitive bidding would be used as
the base payment to plans for grandfathered enrollees in 2012
and 2013. In 2014, the base payment to plans for grandfathered
enrollees would be the new competitive benchmark amounts
applicable to the grandfathered area. Plans would be paid
additional amounts for extra benefits: in 2012 and 2013, non-
grandfathered enrollees would receive their plans' rebate,
whereas enrollees under the grandfather would receive the
grandfathered amount; in 2014, non-grandfathered enrollees
would receive their plans' performance bonus and rebate
payments under competitive bidding, whereas enrollees under the
grandfather would receive only the grandfathered amount.
Performance bonus and rebate payments would not be available to
enrollees in grandfathered plans. The base payment and extra
benefits for grandfathered enrollees would be risk adjusted in
the same manner as for non-grandfathered enrollees. Upon
approval by the Secretary, the bid payments (e.g., base
payment) for enrollees in grandfathered plans may be adjusted
up to \1/2\ percent per year to reflect differences in
utilization of care for Medicare covered services by
grandfathered enrollees that are not reflected in the
competitive bid and that could result from the larger amount of
extra benefits under the grandfather policy. MA plans would
submit information to substantiate the need for the adjustment.
Transitional Benefits. Beginning in 2012, the Secretary
would be required to provide for transitional extra benefits to
beneficiaries who enroll in Medicare Advantage plans and would
experience a significant reduction in extra benefits under
competitive bidding. The Secretary would provide for
transitional benefits in certain areas: (1) the two largest
metropolitan areas of the country if extra benefits in those
areas are greater than $100 per member per month, and (2)
counties where the MA benchmark amount in 2011 is equal to the
legacy urban floor amount, the Medicare Advantage enrollment
penetration is greater than 30 percent, and the MA plans bid
below local per capita fee-for-service costs. The Secretary
could also provide transitional benefits in counties contiguous
to these areas. In addition, the Secretary would be required to
review plan bids to ensure transitional benefits made available
are passed on to beneficiaries. The total amount available for
transitional benefits would be $5 billion through 2019.
PACE Plans. The Committee Bill would exempt PACE plans
authorized under Section 1894 of the Social Security Act from
provisions of Section 3201, except the provision that would
reduce the national MA per capita growth percentage by three
percentage points in 2011.
CMS Actuary Certification. The Committee Bill would strike
the MA provisions of the Committee Bill related to competitive
benchmarks and performance bonus payments if the Chief Actuary
of CMS certifies that beneficiaries participating in MA on the
date of enactment would lose Medicare-covered benefits when the
provisions of the Committee Bill are implemented. The Chief
Actuary of CMS would be required to make this certification
three months after the enactment of this legislation.
SEC. 3202. BENEFIT PROTECTION AND SIMPLIFICATION
Present Law
Under the Medicare Advantage (MA) program, the cost sharing
(i.e., coinsurance, copayments, and deductibles) that an
enrollee must pay for covered health benefits is determined on
a plan-by-plan basis. Cost sharing for any service offered by
an MA plan may be greater than or less than cost sharing for
the same service under the traditional Medicare program.
However, the total value of cost sharing required by an MA plan
is constrained by the estimated actuarial value of total cost
sharing under original Medicare.
Payments to MA plans are based on the relation between the
bid and the benchmark, as explained above. If a plan's bid is
below the benchmark, the plan is paid its bid plus 75 percent
of the difference in the form of a rebate. The rebate must be
used to provide additional benefits to enrollees. MA plans have
broad authority to determine how they use their rebates to
cover the costs of additional benefits. They can reduce
Medicare cost sharing expenses under Parts A, B or D. They can
also reduce a beneficiary's monthly Part B premium or
prescription drug premium. They may also use rebates to pay for
benefits that are not covered by traditional Medicare. MA plans
also have full discretion to determine how to apportion their
rebates among these additional benefits. For this reason, the
type and composition of additional benefits that are paid for
by rebates varies widely among plans.
Regardless of whether a plan bids above or below the
benchmark, a plan may choose to provide benefits not covered
under original Medicare and charge a supplemental premium.
Committee Bill
The Committee Bill would include several protections for
beneficiaries with respect to the cost sharing amounts charged
by MA plans. The Committee Bill would also make additional
benefits that are offered by MA plans and paid for by rebates
and bonus payments more consistent across plans.
Beginning in 2011, The Committee Bill would prohibit MA
plans from charging cost sharing that exceeds the cost sharing
under the original Medicare program for certain services for
which beneficiaries need the highest level of predictability
and transparency, such as chemotherapy treatment, renal
dialysis and skilled nursing care. The Secretary would be given
authority to identify additional services for which this
provision would apply. MA plans would be allowed to charge non-
discriminatory levels of cost sharing for Medicare-covered
services where there is no cost sharing under the original fee-
for-service program.
The Committee Bill would also modify how plans can use
their rebates and bonuses for additional benefits beginning
with 2012. MA plans would have to apply the full amount of
rebates and bonuses to cover the cost of additional benefits in
the following priority order:
First, plans would use the most significant share to
meaningfully reduce Part A, B, and D cost sharing relative to
the traditional FFS program. Cost sharing would include
copayments, co-insurance, deductibles, as well as out-of-pocket
caps on total beneficiary spending. The Secretary could provide
guidance on what constitutes meaningful cost sharing
reductions, but could not set the amounts for each plan. The
Committee Bill would remove authority of MA plans to reduce or
eliminate the Part B premium as an additional benefit. In
addition, any out-of-pocket spending limits that plans offer
would be required to apply to all Part A and B benefits. In
other words, MA plans would not be able to exclude certain
services, like chemotherapy drugs, from out-of-pocket spending
limits.
Second, plans would use the next largest share to add
preventive and wellness benefits, such as preventive care
visits, smoking cessation programs, and free flu shots.
Third, plans would be able to use the remainder to add non-
covered benefits, such as eye examinations and dental coverage.
In addition, the Committee Bill would simplify information
about additional benefits that are offered by MA plans.
Beginning in 2011, the Secretary would categorize MA plans in
each payment area into two or more distinct categories
according to the share that rebates, bonuses and supplemental
premiums are of each plan's bid. Any marketing materials used
must reflect the plan's category. For example, the Secretary
could decide to create three categories of plans: Bronze,
Silver and Gold. The intent is to help beneficiaries compare
and distinguish the additional benefits that MA plans offer
above original fee-for-service Medicare.
SEC. 3203. APPLICATION OF CODING INTENSITY ADJUSTMENT DURING MA PAYMENT
TRANSITION
Present Law
Payments to Medicare Advantage plans are risk adjusted to
reflect the actual health status of the beneficiaries that
enroll in them, as required by the Balanced Budget Act of 1997
(P.L. 105-33). The Deficit Reduction Act (DRA) of 2005 (P.L.
109-171) included a provision to phase-out a budget neutrality
adjustment that the Centers for Medicare and Medicaid Services
(CMS) used in implementing risk adjusted payments to private
plans. Also included in the DRA was a provision that requires
the Secretary to adjust risk scores for differences in coding
patterns between Medicare Advantage plans and the original fee-
for-service program. The Secretary is required to make the
coding intensity adjustment through 2010.
Committee Bill
The Committee Bill would extend the coding intensity
adjustment during the transition from statutorily defined
benchmarks to competitively bid benchmarks from 2011 through
2013. It would also allow the Secretary to incorporate the
adjustment into risk scores under competitive bidding, if
appropriate, beginning in 2014.
SEC. 3204. SIMPLIFICATION OF ANNUAL BENEFICIARY ELECTION PERIODS
Present Law
According to the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA, P.L. 108-173), Medicare
beneficiaries may enroll in or change their enrollment in
Medicare Advantage (MA) and Part D plans from November 15 to
December 31 each year in the annual coordinated election
period. These changes become effective on January 1 of the next
year. During a continuous enrollment and disenrollment period
in the first three months of the new benefit year beneficiaries
can enroll in an MA plan, and individuals enrolled in an MA
plan can either switch to a different MA plan or return to
original Medicare. However, during the three-month period,
beneficiaries cannot change their drug coverage elections.
In a December 2008 report, the Government Accountability
Office (GAO) found that about 15 percent of beneficiaries who
chose to switch plans in the Part D annual coordinated election
period for the 2008 benefit year were not fully enrolled in
their new plan by January 1, primarily because of the volume of
applications submitted late in the period. GAO recommended that
Congress consider authorizing the Secretary of HHS to amend the
current coordinated election period to include a sufficient
processing interval to fully enroll beneficiaries prior to the
effective date of their new coverage.
Committee Bill
The Committee Bill would shift the annual enrollment period
dates for Medicare Advantage and Part D to October 15 to
December 7. The change would be effective beginning in 2011.
Also, beginning in 2011, the continuous enrollment and
disenrollment period for MA and MA-PD plans that occurs between
January 1 and March 31 each year would be eliminated. The
Committee Bill would institute a limited disenrollment period
from January 1 through February 15 in order for beneficiaries
who enroll in Medicare Advantage or prescription drug plans
during the annual enrollment period to disenroll during that
period. These changes are intended to simplify the time frames
under which beneficiaries would need to make enrollment
decisions.
SEC. 3205. EXTENSION FOR SPECIALIZED MA PLANS FOR SPECIAL NEED
INDIVIDUALS
Present Law
Under the Medicare Modernization Act of 2003 (MMA, P.L.
108-173), Congress created a new type of Medicare Advantage
coordinated care plan for individuals with special needs.
Special needs plans (SNPs) are allowed to target enrollment to
one or more types of individuals identified by Congress as: (1)
institutionalized; (2) dually eligible for Medicare and
Medicaid; and/or (3) individuals with severe or disabling
chronic conditions.
Congress has since passed additional legislation affecting
SNPs. The original SNP authority established by MMA was to
expire on December 31, 2008. Passage of the Medicare, Medicaid,
and SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173)
authorized the SNP program through December 31, 2009, but also
established a moratorium on the creation of SNPs after January
1, 2008. More recently, the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA, P.L. 110-275), lifted the
moratorium and authorized the SNP program through December 31,
2010. In addition to legislative changes affecting SNPs, CMS
has issued regulatory guidance for the legislative changes.
Most recently, the Centers for Medicare and Medicaid Services
(CMS) issued a Final Rule in the January 12, 2009 Federal
Register.
The number of SNPs has increased dramatically since 2004,
the first year of operation. In 2004, CMS approved 11 SNPs, but
by January 2008, CMS had approved 787 SNPs, including 442 dual-
eligible SNPs, 256 chronic care SNPs, and 89 institutional
SNPs. In September 2008, there were 1.2 million beneficiaries
in SNPs.
Under MIPPA, the SNP program was authorized through
December 31, 2010. MIPPA also required that new SNP enrollment
be limited to individuals that meet the criteria for which the
SNP is designated: dual-eligible, chronic care, and
institutional care. Further, MIPPA required that dual-eligible
SNPs contract with state Medicaid agencies to provide medical
assistance services in order to serve new areas. Such contracts
with states may include long-term care services. However, there
is no requirement for state Medicaid agencies to contract with
SNPs in order for SNPs to serve new areas.
MIPPA also modified the definition of a chronic care SNP to
focus on beneficiaries who are at the greatest risk for
hospitalizations and who may have the greatest need for care
coordination. In addition, MIPPA required that all SNPs have
models of care that are appropriate to their populations and
include personalized care plans for each beneficiary that they
enroll.
MIPPA further required SNPs to collect, analyze, and report
data related to their model of care. These data are required to
be reported for each plan sponsored by an organization. CMS
provided additional guidance in an interim final rule that
requires data that demonstrates compliance with 10 quality
indicators. CMS coordinated with the National Committee on
Quality Assurance to develop quality measures for SNPs.
However, there is no statutory requirement that SNP participate
in the NCQA quality measurement requirement or be approved by
NCQA.
Present Law covering SNPs does not address requirements for
the transition to other appropriate MA plans or FFS Medicare if
beneficiaries fail to meet the target definition for the types
of SNP plans in which they are enrolled. Further, the Secretary
does not have the authority to adjust payment levels for dual-
eligible SNP plans. Under the Program for All-inclusive Care
for the Elderly (PACE) program authority, CMS may provide for
frailty adjustments for PACE organizations that treat a greater
number of frail enrollees.
There is no requirement for the Secretary to assess how
well the risk adjustment model functions with respect to plans,
like SNPs, with high enrollment of chronically ill and severely
disabled beneficiaries or to make changes to address any
deficiencies.
Committee Bill
The Committee Bill would extend the authority for MA SNPs
to target their enrollment to certain populations through
December 31, 2013. In addition, the MIPPA requirement for SNPs
to restrict enrollment to individuals who are within the
classes of special needs individuals would be made permanent
and apply to all enrollees in SNPs. The Committee Bill would
authorize the Secretary to transition beneficiaries enrolled in
SNPs to other MA plans or original Medicare if the
beneficiaries do not meet the definitions established for such
plans. The Secretary also would be permitted to make time-
limited exceptions to the transition for dual-eligible
beneficiaries who may have temporarily lost their Medicaid
status in order to give them time to reapply for Medicaid
benefits.
The Committee Bill would create a new payment adjustment
for fully integrated dual-eligible SNPs beginning in 2011.
Specifically, it would give the Secretary authority to provide
a frailty adjustment for fully integrated dual-eligible SNPs
that have similar average levels of frail beneficiaries as PACE
plans, as defined by the Secretary. The Secretary would only be
able to adjust payments to dual-eligible SNPs that fully
integrate benefits covered under Titles 18 and 19 of the Social
Security Act. In order to qualify, dual-eligible SNPs would
need to integrate Medicare and Medicaid benefits as well as
payments through an MA contract with the Secretary and a
contract with the state Medicaid agency that includes the
provision of long-term care.
The Committee Bill would extend, until December 31, 2012, a
provision in MIPPA that granted SNPs that serve dual-eligible
beneficiaries temporary authority to continue to operate even
though they have not established contracts with state Medicaid
programs. By 2013, all dual-eligible SNPs would need to have
contracts with states in order to operate as SNPs in any area
of the country.
Beginning in 2012, the Secretary would require that SNPs be
approved by the National Committee for Quality Assurance (NCQA)
in order to serve targeted populations. Also beginning in 2011,
the Secretary would use a risk score for new enrollees in
chronic care SNPs that reflects the known underlying risk
profile and chronic health status of similar individuals. The
new risk score would be applied in lieu of the default risk
score for new enrollees of non-SNP MA plans.
For 2011 and periodically thereafter, the Secretary would
be required to evaluate and revise the methodology used to risk
adjust MA plan payments in order to as accurately as possible
account for higher medical and care coordination costs
associated with frailty, individuals with multiple, co-morbid
chronic conditions, enrollees with a mental illness diagnosis
and also to account for costs that may be associated with
higher concentrations of beneficiaries with these conditions.
The Secretary would be required to publish a description of
its evaluations and any modifications with the announcement of
final payment rates.
SEC. 3206. EXTENSION OF REASONABLE COST CONTRACTS
Present Law
Reasonable cost plans are Medicare Advantage (MA) plans
that are reimbursed by Medicare for the actual cost of
providing services to enrollees. Cost plans were created in the
Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982. The
Balanced Budget Act of 1997 included a provision to phase out
the reasonable cost contracts, however, the phase-out has been
delayed over the years through Congressional action. These
plans are allowed to operate indefinitely, unless two other
plans of the same type (i.e., either two local or two regional
plans) offered by different organizations operate for the
entire year in the cost contract's service area. After January
1, 2010, the Secretary may not extend or renew a reasonable
cost contract for a service area if: (a) during the entire
previous year there were either two or more MA regional plans
or two or more MA local plans in the service area offered by
different MA organizations; and (b) these regional or local
plans meet minimum enrollment requirements.
Committee Bill
The Committee Bill would extend for three years--from
January 1, 2010, to January 1, 2013--the length of time
reasonable cost plans may continue operating regardless of any
other MA plans serving the area.
SEC. 3207. TECHNICAL CORRECTION TO MA PRIVATE FEE-FOR-SERVICE PLANS
Present Law
Present Law allows different types of private plans to
participate in the MA program, including coordinated care plans
(CCPs, such as health maintenance organizations (HMOs) and
preferred provider organizations (PPOs)), and private fee-for-
service plans (PFFS). CCPs are required to meet medical access
requirements by forming networks of contracted providers.
Private fee-for-service plans (PFFS) can meet access
requirements either by establishing payment rates for providers
that are not less than rates paid under original Medicare or by
developing contracts and agreements with a sufficient number
and range of providers within a category to provide covered
services under the terms of the plan. Beginning in 2011, the
Medicare Improvements for Patients and Providers Act of 2008
(MIPPA, P.L. 110-275) requires PFFS plans sponsored by
employers or unions to establish contracted networks of
providers to meet access requirements. PFFS plans that are not
sponsored by employers are required to establish contracted
networks of providers in areas defined as areas having at least
two plans with networks (such as HMOs or PPOs). In areas
without at least two network-based plans, PFFS plans retain the
ability to establish access requirements through establishing
payment rates that are not less than those under original
Medicare. The Secretary has the authority to waive or modify
requirements that hinder the design of, the offering of, or the
enrollment in employer or union sponsored MA plans. The CMS
Medicare Managed Care Manual for Employer/Union Sponsored Group
Health Plans specifies the circumstances under which the
Secretary would exercise authority to waive some service-area
network requirements for employer-sponsored coordinated care
plans.
Committee Bill
The Committee Bill would clarify that, in defining areas in
which PFFS plans (not sponsored by employers) must establish
contracted networks of providers, a network area would be
defined as an area served by two or more MA organizations. The
Committee Bill would also allow the Secretary to grant
employer-direct PFFS plans (as defined under 1857(i)(2)) a
waiver from the network requirements in a manner similar to the
Secretary's authority to waive or modify other MA requirements
for employer-contracted coordinated care plans as specified in
a 2008 service area extension waiver policy, as modified in an
April 11, 2008 CMS memo entitled ``2009 Employer Group Waiver-
Modification of the 2008 Service Area Extension Waiver Granted
to Certain MA Local Coordinated Care Plans.'' Only employer-
direct PFFS plans that had enrollment as of October 1, 2009
would be eligible for the waiver.
SEC. 3208. MAKING SENIOR HOUSING AUTHORITY DEMONSTRATION PERMANENT
Present Law
Erickson Advantage is a Medicare Advantage demonstration
project administered by Evercare and available exclusively to
Erickson Retirement Community residents. In general, Medicare
Advantage plans are required to serve an area no smaller than a
county, which prevents plans from targeting smaller areas of
healthier, low-cost enrollees. The Erickson Advantage plan
received a waiver of this requirement to be able to restrict
enrollment to community residents.
Committee Bill
Effective January 1, 2010, the Committee Bill would allow
Medicare Advantage plans that meet specific criteria to limit
their service areas to a senior housing facility within a
geographic area. MA plans would be eligible if they serve
beneficiaries who reside in a continuing care retirement
community, have a sufficient number of on-site primary care
providers as determined by the Secretary, supply transportation
benefits to other providers, and were in existence under a
demonstration for at least one year by December 31, 2009.
SEC. 3209. DEVELOPMENT OF NEW STANDARDS FOR CERTAIN MEDIGAP PLANS
Present Law
Many Medicare beneficiaries have individually purchased
health insurance policies, commonly referred to as ``Medigap''
policies. Beneficiaries with Medigap insurance typically have
coverage for Medicare's deductibles and coinsurance; they may
also have coverage for some items and services not covered by
Medicare. Individuals generally select from one of a set of
standardized plans (Plan ``A'' through Plan ``L'', though not
all plans are offered in all states). The law incorporates by
reference, as part of the statutory requirements, certain
minimum standards established by the National Association of
Insurance Commissioners (NAIC) and provides for modification
where appropriate to reflect program changes. Policy issuers
are required to offer at least policies with benefit packages
``A'', and if they are to offer others, they must offer at
least ``C'' or ``F''.
Beginning in 2010, two new packages may be offered--Plan
``M'' and Plan ``N.'' Plan ``M'' includes 50 percent coverage
of the Part A deductible, and no coverage of the Part B
deductible. Plan ``N'' includes 100 percent coverage of the
Part A deductible but no coverage for the Part B deductible. In
addition, coverage for the Part B coinsurance is limited to up
to $20 for an office visit and up to $50 for an emergency room
visit.
Committee Bill
The Committee Bill would request that NAIC create new model
plans for C and F that include nominal cost sharing to
encourage the use of appropriate Part B physician services. The
nominal cost sharing must be based on evidence, either
published or from integrated delivery systems, of how cost
sharing affects utilization of appropriate physician care. The
revisions would be required to be consistent with rules
applicable to changes in NAIC Model Regulations. The new models
C and F would be available in 2015.
Subtitle D--Medicare Part D Improvements
SEC. 3301. MEDICARE PRESCRIPTION DRUG DISCOUNT PROGRAM FOR BRAND-NAME
DRUGS
Present Law
The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA, P.L. 108-173) included a
defined standard benefit structure under the Part D
prescription drug benefit. In 2009, the standard benefit
includes a $295 deductible and 25 percent coinsurance until the
enrollee reaches the initial coverage limit ($2,700 in total
covered drug spending). After the initial coverage limit, there
is a gap in coverage, or ``doughnut hole,'' in which the
beneficiary is responsible for 100 percent of drug costs.
Beneficiaries must spend $3,454.75 out-of-pocket before they
reach the catastrophic benefit. Once they reach catastrophic
coverage, they are responsible for five percent of drug costs.
The plan pays 15 percent and the Medicare program pays 80
percent for the remainder of the benefit year.
Present Law allows Part D plan sponsors to offer benefit
packages that differ from the standard benefit, as long as they
are actuarially equivalent. Most plans offer actuarially
equivalent benefit packages in lieu of the standard benefit
design. Present Law also allows plans to offer ``enhanced''
benefit packages that provide more generous coverage
(typically, enhanced benefit packages have higher premiums).
Most enhanced packages have a reduced or $0 deductible and/or
reduced cost-sharing in the initial coverage period. However,
fewer plans choose to offer benefits during the coverage gap.
Most plans that offer gap coverage only provide benefits for
generic drugs and not brand-name drugs, and many times the
coverage is limited to a subset of the generic drugs listed on
plan formularies. Thus, if a beneficiary wants to purchase a
plan that has both generic and brand-name coverage in the gap,
they are not able to do so because insurers do not offer plans
with those types of benefits. Insurers do not offer broad gap
coverage because it is voluntary and tends to attract sicker,
more expensive beneficiaries with higher drug spending that
would require them to set higher premiums overall.
Committee Bill
The Committee Bill would establish a discount program for
beneficiaries who enroll in Part D and have drug spending that
falls into the coverage gap. The Committee Bill would provide
for manufacturer discounts on brand-name drugs that are covered
under Part D and are on plan formularies (or treated as being
on plan formularies through exceptions and appeals processes).
The discount would be available during the entire coverage
gap--that is, at the point when total prescription costs of a
beneficiary exceed the initial coverage limit ($2,700 in 2009)
and until it reaches the catastrophic coverage limit ($6,153 in
2009) each year. Once the prescription costs of a beneficiary
exceed the catastrophic limit, the discount would end and the
catastrophic portion of the drug benefit would apply as under
Present Law. The discount program would apply to Medicare
beneficiaries who enroll in Part D, do not qualify for the low-
income subsidy, are not enrolled in an employee-sponsored
retiree drug plan, and do not have annual income that exceeds
the Part B income thresholds as determined under Present Law
($85,000 for singles and $170,000 for couples in 2009). For
beneficiaries with supplemental benefits that provide some
savings during the doughnut hole, the discount would be applied
to the costs remaining after the supplemental benefits have
been applied.
Specifically, beginning July 1, 2010, eligible
beneficiaries would automatically receive a 50 percent discount
off the negotiated price for brand-name prescription drugs that
are covered under Part D and covered by their plan's formulary
or are treated as being on plan formularies through exceptions
and appeals processes. For purposes of the discount, the
negotiated price would be the same as defined in 42 CFR
423.100, which is the price that plans pay to pharmacies minus
the amount of price concessions (i.e., rebates and discounts)
that plans pass on to beneficiaries. Dispensing fees would be
excluded from the negotiated price and the discount. That means
beneficiaries who receive the discount would continue to pay
pharmacy dispensing fees as under Present Law. The discount
would be made at the point of sale and apply to sole-source and
multiple-source brand-name drugs. Payment of the discount by
manufacturers would be made to pharmacies no later than 14 days
after the date of dispensing a discounted drug.
The Committee Bill stipulates that drugs sold and marketed
in the U.S. by a manufacturer would not be covered under Part D
unless the manufacturer agrees to participate in the discount
program described above. Manufacturers would be required to
sign an agreement with the Secretary of Health and Human
Services (HHS) in order to participate in the program and have
their drugs covered under Part D. These conditions of coverage
would not apply if the Secretary has made a determination that
the availability of the drug would be essential to the health
of beneficiaries or if the Secretary has determined that there
are extenuating circumstances in the period between July 1,
2010 and September 30, 2010.
For an agreement with a manufacturer to be in effect by
July 2010, the manufacturer would need to enter into an
agreement with the Secretary by March 1, 2010. Initial
agreements would be for 18 months (until December 31, 2011) and
automatically renewed unless terminated by the Secretary or the
manufacturer. The agreement would require manufacturers to
discount drug prices at the pharmacy or through a mail order
service at the point of sale. The Secretary would be allowed to
provide for manufacturer discount after the point-of-sale for a
temporary period (July 1, 2010 through December 31, 2011) until
the necessary data systems are in place to implement the
discount at the point-of-sale. Manufacturers would be required
to collect and have available appropriate data as determined by
the Secretary to ensure that they can demonstrate compliance
with the discount program.
The Secretary would be authorized to terminate an agreement
within 30 days notice for violation of the requirements of the
agreements or for other good cause. The Secretary would be
required to provide, upon request, a hearing concerning such a
termination, but such hearing would not delay the effective
date of the termination. Manufacturers would be allowed to
terminate an agreement for any reason. Such termination would
not be effective until the end of the benefit year if
terminated before January 30 and at the end of the following
benefit year if terminated after January 30. Manufacturers
could reenter the program for a benefit year if they reenter an
agreement by January 30 of the preceding year.
The Committee Bill would also allow 100 percent of the
negotiated price of discounted drugs (excluding dispensing
fees) to count toward the annual out-of-pocket threshold that
is used to define the coverage gap each year. This threshold is
generally referred to as ``true out-of-pocket'' spending. In
other words, the full negotiated price of discounted drugs
would count as incurred costs of beneficiaries for purposes of
Section 1860D-(2)(b)(4)(B) of the Social Security Act. The
Committee Bill includes this provision so that the size of the
coverage gap would not widen and beneficiaries with high
prescription drug costs would not be held back from reaching
the catastrophic benefit as a result of the discount program.
The Committee Bill would require the Secretary to contract
with a third-party entity (or entities) to administer the drug
discount program and would establish performance requirements
and data standards for the third-party contractor(s). At a
minimum, the third party would (1) receive and transmit
information between plans, manufacturers and the Secretary and
(2) receive and distribute, or facilitate the distribution of,
the funds from manufacturers in order to effect the discount to
beneficiaries at the point of sale. Manufacturers would be
required to contract with the same third party under terms
specified by the Secretary in order to carry out their
requirements under the discount program. The Secretary would
not be authorized to receive or distribute funds from
manufacturers under the discount program, except for the period
between July 1, 2010, and December 31, 2010, if the Secretary
determines it necessary to implement the discount program
during that initial period of time.
The Committee Bill would also require manufacturers who
participate in the Part D drug discount program to be audited
for compliance. Manufacturers that do not comply with the
discount would be subject to fines assessed and collected by
the Secretary. Fines would be commensurate with the amount
manufacturers would pay if they had adhered to the discount
program, along with an additional penalty equal to 25 percent
of the discount amount. The Committee Bill would also allow for
a reasonable notice and dispute resolution mechanism before
penalties could be assessed. The Secretary would be authorized
to prohibit a manufacturer's drugs from being covered under
Medicare Part D for repeated non-compliance.
SEC. 3302. IMPROVEMENT IN DETERMINATION OF PART D LOW-INCOME BENCHMARK
PREMIUM
Present Law
The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA, P.L. 108-173) created an
outpatient prescription drug benefit in Medicare. Medicare
beneficiaries who have limited income and resources may qualify
for financial assistance to help pay for their prescription
drug costs under the benefit. Those who qualify for the low-
income subsidy (LIS) receive ``extra help'' paying for their
monthly premiums, yearly deductibles, co-payments, and costs in
the coverage gap. For example, the Federal government pays up
to 100 percent of the Part D premiums for LIS beneficiaries who
enroll in LIS-eligible plans.
A plan qualifies as an LIS-eligible plan if it offers
standard coverage (or an equivalent) with a premium equal to or
lower than a benchmark amount calculated for each region. The
regional low-income benchmark amount, determined annually, is
the weighted average of premiums in each of the 34 prescription
drug plan (PDP) regions for standard prescription drug
coverage, or the actuarial value of standard prescription drug
coverage for plans that offer supplemental, or enhanced,
coverage options. For Medicare Advantage prescription drug
plans (MA-PD), the portion of the premium attributable to
standard prescription drug benefits is used.
Under the Medicare Advantage (MA) program, private health
plans bid to offer Medicare coverage to beneficiaries. The
Secretary bases payment for an MA plan on the relationship
between its bid and a statutorily defined benchmark. The MA
benchmark represents the maximum amount the Federal government
would pay a plan for providing Medicare benefits. If a plan's
bid is less than the benchmark, its payment equals its bid plus
a rebate of 75 percent of the difference between the benchmark
and the bid. The rebate must be used to provide additional
benefits to enrollees, reduce Medicare cost-sharing, or reduce
a beneficiary's monthly Part B or Part D premiums.
MA plans offering prescription drug coverage must submit a
separate bid for the Part D portion of the benefit. Payment for
the portion of the premium attributable to standard
prescription drug benefits is calculated in the same way as it
is for stand-alone PDPs; however the MA plan may choose to
apply some of its MA rebate payments to lower the Part D
premium. If an MA plan uses rebate payments to reduce its Part
D premium, the reduced premium amount, not the actual amount
attributable to standard drug coverage, is factored into the
regional low-income benchmark. This has the effect of lowering
the LIS benchmark and therefore reducing the number of plans
that can serve LIS beneficiaries at fully subsidized or $0
premium.
Committee Bill
The Committee Bill would require the Secretary to exclude
Medicare Advantage rebates and performance bonus payments from
the MA-PDP premium amount when calculating the regional LIS
benchmark amounts. This provision would take effect in 2011. It
would have the effect of increasing the number of plans that
can serve LIS beneficiaries at fully subsidized or $0 premiums.
SEC. 3303. VOLUNTARY DE MINIMUS POLICY FOR SUBSIDY ELIGIBLE INDIVIDUALS
UNDER PRESCRIPTION DRUG PLANS AND MA-PD PLANS
Present Law
No provision.
Committee Bill
The Committee Bill would authorize a policy, beginning in
2011, through which plans that bid a nominal amount above the
regional low-income subsidy (LIS) benchmark amount can choose
to absorb the cost of the small difference between their bid
and the LIS benchmark in order to qualify as a LIS-eligible
plan. The Secretary would be given discretion to auto-enroll
LIS beneficiaries into these plans in order to maintain
adequate LIS plan choices. The de minimus threshold amount
would be established by the Secretary. This provision would
help maintain plans that wish to serve LIS beneficiaries at
fully subsidized or $0 premiums.
SEC. 3304. SPECIAL RULE FOR WIDOWS AND WIDOWERS REGARDING ELIGIBILITY
FOR LOW-INCOME ASSISTANCE
Present Law
To qualify for financial assistance under the Part D low-
income subsidy (LIS) program, Medicare beneficiaries must have
resources no greater than the income and resource limits
established by the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA, P.L. 108-173). Individuals may
qualify for the full subsidy in two ways: (1) if they are
eligible for Medicaid or one of the Medicare Savings Programs
(Qualified Medicare Beneficiary (QMB), Specified Low-Income
Medicare Beneficiary (SLMB), or Qualifying Individual (QI)), or
are recipients of Supplemental Security Income (SSI) benefits,
they are deemed automatically eligible; or (2) if they apply
for the benefit through their State Medicaid agency or through
the Social Security Administration (SSA) and are determined to
have an annual income below 135 percent of the Federal poverty
level (FPL) and have resources below a certain limit (in 2009,
$8,100 for an individual or $12,910 if married). Beneficiaries
may qualify for a partial subsidy if they apply and are
determined to have an annual income below 150 percent of FPL
and their resources do not exceed a certain limit (in 2009,
$12,510 for individuals or $25,010 if married). When
determining whether a beneficiary qualifies for the low-income
subsidy, $1,500 in resources per person is excluded from
consideration if the beneficiary indicates that he/she expects
to use resources for burial expenses.
If beneficiaries experience changes in their personal or
financial circumstances during the year, they may be
responsible for different levels of cost sharing or may no
longer qualify for the low-income subsidy for the next plan
year. Each year, the Secretary conducts a redeeming process to
determine whether those who automatically qualified for the
full subsidy in a given year continue to meet the criteria for
eligibility in the following year. For those who have qualified
for the full or partial subsidy through the application
process, the agency that made the determination decision (SSA
or an individual state) is responsible for monitoring a
recipient's eligibility. For example, for cases in which
eligibility has been established through an application with
SSA, a report of a subsidy-changing event, such as marriage,
divorce, or death of a spouse, will trigger a redetermination
of subsidy eligibility during the calendar year. This can
result in changes to the individual's deductible, premium and
cost sharing subsidy, or even termination of his or her LIS
eligibility status. In the case of the death of a spouse, it is
possible that the surviving spouse, as the sole owner of the
previously combined resources, may exceed the resource limit
for an individual and may no longer qualify for the LIS
program.
Committee Bill
The Committee Bill would require that, beginning in 2011,
the surviving spouse of an LIS-eligible couple undergo a
redetermination of his or her eligibility status no earlier
than one year from the next redetermination that would have
occurred after the death of a spouse. Subsequently, the LIS
widow/widower would be determined or redetermined, as
appropriate, for the LIS program on the same basis as other
LIS-eligible beneficiaries.
SEC. 3305. IMPROVED INFORMATION FOR SUBSIDY ELIGIBLE INDIVIDUALS
REASSIGNED TO PRESCRIPTION DRUG PLANS AND MA-PD PLANS
Present Law
According to the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA, P.L. 108-173), low-income
subsidy (LIS) beneficiaries who are enrolled in plans with
premiums below the low-income regional benchmark amount receive
assistance with premiums and cost sharing. LIS beneficiaries
who are enrolled in LIS-eligible plans whose plan bids exceed
the regional benchmark amount for the next benefit year are
randomly reassigned by the Secretary of HHS to new plans whose
bids are at or below the regional benchmark amount in order to
ensure that these beneficiaries continue to receive a subsidy
of plan premiums. It is possible that the new plan's
exceptions, appeals and grievance mechanisms could differ from
the old plan, and some covered drug(s) a beneficiary is
currently taking would not be covered by the new plan.
Committee Bill
In the case of an LIS beneficiary who has been reassigned
to another LIS plan, the Committee Bill would require the
Secretary, beginning in 2011, to transmit, within 30 days of
the reassignment, information to the beneficiary about
formulary differences between the former plan and the new plan
with respect to the beneficiary's drug regimen, as well as a
description of the beneficiary's rights to request a coverage
determination, exception or reconsideration, or resolve a
grievance.
SEC. 3306. FUNDING OUTREACH AND ASSISTANCE FOR LOW-INCOME PROGRAMS
Present Law
The Medicare Improvements for Patients and Providers Act of
2008 (MIPPA, P.L. 110-275) provided $25 million for fiscal
years 2008 and 2009 for beneficiary outreach and education
activities related to low-income programs related to Medicare
through State Health Insurance Programs (SHIPs), Area Agencies
on Aging (AOAs), Aging and Disability Resource Centers (ADRCs),
and the Administration on Aging.
SHIPs are state-based programs that provide Medicare
beneficiaries with local, personalized assistance with Medicare
benefits and other health insurance programs. MIPPA provided
$7.5 million for grants to the states for SHIPs. Two-thirds is
allocated based on the share of persons in each state with
incomes below 150 percent of poverty and who have not enrolled
in the Part D low-income subsidy program. One-third is
allocated among states based on the share of Part D eligible
beneficiaries residing in rural areas.
MIPPA also required the Secretary of HHS to provide $7.5
million to the Administration on Aging to make grants to Area
Agencies on Aging. Additionally, MIPPA provided $5 million to
the Administration on Aging to make grants to Aging and
Disability Resource Centers under the Aging and Disability
Resource Center grant program. Finally, MIPPA provided $5
million to the Administration on Aging to make a grant or enter
into a contract with an entity to, among other things, maintain
and update web-based decision support tools and integrated
systems designed to inform older individuals about the full
range of benefits for which the individuals may be eligible
under Federal and state programs, and to develop and maintain
an information clearinghouse on best practices and the most
cost effective methods for finding such individuals.
Committee Bill
The Committee Bill would extend MIPPA Section 119 and
provide $45 million for outreach and education activities
related to Medicare low-income assistance programs, including
the Part D low-income subsidy (LIS) program and the Medicare
Savings Program (MSP). Funds would be allocated in the
following manner: $15 million to State Health Insurance
Programs, $15 million to the Administration on Aging for Area
Agencies on Aging, $10 million to Aging Disability Resource
Centers and $5 million for the contract for the National Center
for Benefits Outreach and Enrollment. Funds would be available
for obligation through 2012. The Secretary would have authority
to enlist the support of these entities to conduct outreach
activities aimed at preventing disease and promoting wellness
as an additional use of these funds.
SEC. 3307. IMPROVING FORMULARY REQUIREMENTS FOR PRESCRIPTION DRUG PLANS
AND MA-PD PLANS WITH RESPECT TO CERTAIN CATEGORIES OR CLASSES OF DRUGS
Present Law
The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA, P.L. 108-173) requires Part D
plans to operate formularies that cover drugs within each
therapeutic category and class of covered Part D drugs,
although not necessarily all drugs within such categories and
classes. The Secretary of HHS published a regulation (42 CFR
Section 423.120) that requires Part D plans to have at least
two drugs within each therapeutic category and class.
However, a higher standard of coverage has been established
for six specific classes. Through sub-regulatory guidance, the
Secretary protected access to certain classes of drugs by
requiring Part D plans to cover all, or substantially all, of
the drugs in the following six drug classes: immunosuppressant,
antidepressant, antipsychotic, anticonvulsant, antiretroviral,
and anti-neoplastic.
Section 176 of the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA, P.L. 110-275) codified that,
beginning in plan year 2010, the Secretary would identify the
classes and categories of drugs that should be protected, or
covered entirely by Part D plans, to ensure that beneficiaries
have access to certain therapies and to a wide variety of
therapy options for certain conditions. MIPPA included several
clinical criteria that the Secretary would have to use in order
to identify protected classes of drug. MIPPA also added a
requirement that the Secretary promulgate regulations to
identify the protected classes and make any subsequent changes
to the classes through regulation.
Committee Bill
The Committee Bill would remove the criteria, specified in
Section 176 of MIPPA, that would have been used by the
Secretary to identify protected classes of drugs. The Committee
Bill would give the Secretary authority to identify classes of
clinical concern as defined by the Secretary. Part D plan
sponsors would be required to include all drugs in these
classes in their formularies; the Secretary would be allowed to
establish exceptions if promulgated through a final rule. The
Committee Bill would codify the current six classes of clinical
concern as they are currently specified through sub-regulatory
guidance until the Secretary issues a final rule regarding
classes of clinical concern to be protected on plan
formularies. The provision would be effective beginning with
plan year 2011.
SEC. 3308. REDUCING PART D PREMIUM SUBSIDY FOR HIGH-INCOME
BENEFICIARIES
Present Law
According to the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003, (MMA, P.L. 108-173), Part D
beneficiary premiums account for 25.5 percent of expected total
Part D premium costs for standard coverage. Medicare pays the
remaining 74.5 percent of Part D costs. The Medicare portion of
average Part D costs is determined annually and paid directly
to plans on a monthly basis for each beneficiary they enroll.
However, beneficiaries pay different monthly premiums depending
on the plan they select and whether or not they are entitled to
low-income premium subsidies. If a beneficiary chooses a plan
with lower than average premiums, then their share of their
plan's premium will be lower than the 25.5 percent set
nationally. Beneficiary premiums under Part D are not subject
to income thresholds or means testing.
Beginning in 2007, as required by the MMA, high-income
beneficiaries are required to pay higher premiums for Part B
benefits. Beneficiaries with modified adjusted gross incomes
that exceed a threshold amount are charged additional premiums
based on a sliding scale that ranges from 35 percent to 80
percent of the value of Part B. In 2009, threshold levels
started at $85,000 for an individual tax return and $170,000
for a joint return (based on 2007 returns). The threshold
amounts are specified in law, and are adjusted annually for
inflation using the Consumer Price Index. The income thresholds
are tied to specific premium shares. In 2008, approximately
five percent of Part B enrollees paid the higher premiums.
Section 6103 provides that returns and return information
are confidential and may not be disclosed by the Internal
Revenue Service (``IRS''), other Federal employees, State
employees, and certain others having access to such information
except as provided in the Internal Revenue Code. Section 6103
contains a number of exceptions to the general rule of
nondisclosure that authorize disclosure in specifically
identified circumstances. For example, section 6103 provides
for the disclosure of certain return information for purposes
of establishing the appropriate amount of any Medicare Part B
premium subsidy adjustment.
Specifically, upon written request from the Commissioner of
Social Security, the IRS may disclose the following limited
return information of a taxpayer whose premium, according to
the records of the Secretary, may be subject to adjustment
under section 1839(i) of the Social Security Act (relating to
Medicare Part B): taxpayer identity information with respect to
such taxpayer; the filing status of the taxpayer; the adjusted
gross income of such taxpayer; the amounts excluded from such
taxpayer's gross income under sections 135 and 911 to the
extent such information is available; the interest received or
accrued during the taxable year which is exempt from the tax
imposed by chapter 1 to the extent such information is
available; the amounts excluded from such taxpayer's gross
income by sections 931 and 933 to the extent such information
is available; such other information relating to the liability
of the taxpayer as is prescribed by the Secretary by regulation
as might indicate that the amount of the premium of the
taxpayer may be subject to an adjustment and the amount of such
adjustment; and the taxable year with respect to which the
preceding information relates.
This return information may be used by officers, employees,
and contractors of the Social Security Administration only for
the purposes of, and to the extent necessary in, establishing
the appropriate amount of any Medicare Part B premium subsidy
adjustment.
Section 6103(p)(4) requires, as a condition of receiving
returns and return information, that Federal and State agencies
(and certain other recipients) provide safeguards as prescribed
by the Secretary of the Treasury by regulation to be necessary
or appropriate to protect the confidentiality of returns or
return information. Unauthorized disclosure of a return or
return information is a felony punishable by a fine not
exceeding $5,000 or imprisonment of not more than five years,
or both, together with the costs of prosecution. The
unauthorized inspection of a return or return information is
punishable by a fine not exceeding $1,000 or imprisonment of
not more than one year, or both, together with the costs of
prosecution. An action for civil damages also may be brought
for unauthorized disclosure or inspection.
Committee Bill
The Committee Bill would increase, beginning in 2011, the
Medicare base premium amount for beneficiaries whose modified
adjusted gross income (MAGI) exceeds the thresholds used under
Part B ($85,000 for an individual and $170,000 per couple in
2009). This provision would be implemented in a manner that is
similar to the current income-related reductions in Part B
premium subsidies. Instead of setting the base beneficiary
premium at 25.5 percent of total Part D premiums, the Committee
Bill would increase the base premium by a monthly amount
calculated from the percentages used to decrease the Part B
premium subsidy under Present Law. For individual MAGIs in
2007, the income-related share of total Part B costs were as
follows: 35 percent for incomes between $80,000 and $100,000,
50 percent for incomes between $100,000 and $150,000, 65
percent for incomes between $150,000 and $200,000, and 80
percent for income greater than $200,000. Income thresholds for
couples filing jointly are twice these dollar amounts. These
income thresholds are per 2007 tax returns and have been
inflated by the Consumer Price Index (CPI) for 2008 and 2009.
Increases in base premium amounts would be deducted from
beneficiaries' Social Security income in a manner similar to
deductions for Part B premium increases.
The Committee Bill would also inflate the income thresholds
by the CPI, except for the period between 2010 and 2019 when
the income thresholds would not be updated. Under the Committee
Bill, upon written request from the Commissioner of Social
Security, the IRS may disclose the following limited return
information of a taxpayer whose Medicare Part D premium
subsidy, according to the records of the Secretary, may be
subject to adjustment under the provisions of the Committee
Bill: taxpayer identity information with respect to such
taxpayer; the filing status of the taxpayer; the adjusted gross
income of such taxpayer; the amounts excluded from such
taxpayer's gross income under sections 135 and 911 to the
extent such information is available; the interest received or
accrued during the taxable year which is exempt from the tax
imposed by chapter one to the extent such information is
available; the amounts excluded from such taxpayer's gross
income by sections 931 and 933 to the extent such information
is available; other information relating to the liability of
the taxpayer as is prescribed by the Secretary by regulation as
might indicate that the amount of the Part D premium of the
taxpayer may be subject to an adjustment and the amount of such
adjustment; and the taxable year with respect to which the
preceding information relates.
This return information may be used by officers, employees,
and contractors of the Social Security Administration only for
the purposes of, and to the extent necessary in, establishing
the appropriate amount of any Medicare Part D premium subsidy
adjustment.
For purposes of both the Medicare Part B premium subsidy
adjustment and the Medicare Part D premium subsidy adjustment,
the Committee Bill provides that the Social Security
Administration may redisclose only taxpayer identity and the
amount of premium subsidy adjustment to officers and employees
and contractors of the Centers for Medicare and Medicaid
Services, and officers and employees of the Office of Personnel
Management and the Railroad Retirement Board. This redisclosure
is permitted only to the extent necessary for the collection of
the premium subsidy amount from the taxpayers under the
jurisdiction of the respective agencies.
The Committee Bill further provides that the Social
Security Administration may redisclose the return information
received under this provision to officers and employees of the
Department of Health and Human Services to the extent necessary
to resolve administrative appeals of the Part B and Part D
subsidy adjustments and to officers and employees of the
Department of Justice to the extent necessary for use in
judicial proceedings related to establishing and collecting the
appropriate amount of any Medicare Part B or Medicare Part D
premium subsidy adjustments.
SEC. 3309. SIMPLIFICATION OF PLAN INFORMATION
Present Law
According to the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003, (MMA, P.L. 108-173), Part D
plans can design two general types of benefit packages:
standard (or actuarially equivalent alternatives) and
supplemental. The supplemental, or enhanced, benefit must be of
higher actuarial value than the standard benefit. Enhanced
plans may offer lower or $0 deductible, reduced cost sharing,
an increased initial coverage limit, coverage of some drugs
excluded from Part D and/or some coverage of drugs during the
coverage gap. Plans must also offer a standard option in a
region in order to offer enhanced benefit options.
Beneficiaries and persons assisting them can use the
``Medicare Prescription Drug Plan Finder'' on the Medicare.gov
website to find and compare Part D plans in their area. The
plan finder provides information on monthly premium and annual
deductible amounts, whether there is coverage in the gap and
estimated annual costs to the beneficiary. However, the plan
finder does not indicate whether the benefits offered by a
particular plan are standard, a standard alternative or
enhanced. Additionally, marketing and enrollment materials
provided by the plans may or may not include this information.
Committee Bill
The Committee Bill would require the Secretary to
establish, beginning with the 2011 plan year, two or more
categories of prescription drug plans offered by Part D
sponsors based on ranges of the actuarial values of the
prescription drug benefits provided under the plans. The
Secretary would also be required to develop standardized
nomenclature, definitions, and language to describe and present
the benefit categories on the Part D plan finder and in other
relevant beneficiary communications. For example, the Secretary
could establish three categories of benefit levels--Bronze,
Silver, and Gold. Plans would be required to indicate the
benefit category of each plan in the name of the product and
relevant marketing materials. The Secretary would also be
required to ensure that there are meaningful differences
between the benefit categories.
SEC. 3310. LIMITATION ON REMOVAL OR CHANGE OF COVERAGE OF COVERED PART
D DRUGS UNDER A FORMULARY UNDER A PRESCRIPTION DRUG PLAN OR AN MA-PD
PLAN
Present Law
The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, (MMA, P.L. 108-173) permits Part D
plans to manage drug utilization and costs through formularies,
or lists of drugs that a plan chooses to cover and the terms
under which they are covered. The formulary must be developed
by a Pharmacy and Therapeutics Committee, in which the majority
of members are physicians and/or practicing pharmacists. A
plan's formulary must include at least two drugs in each
category or class used to treat the same medical condition.
Drug plans are also allowed to apply various utilization
management (UM) restrictions to drugs on their formularies.
These restrictions may include assignment of drugs to tiers
that correspond to different levels of cost sharing; prior
authorization, in which the beneficiary must obtain a plan's
approval before it will cover a particular drug; and step
therapy, in which a beneficiary must first try a generic or
less expensive drug; and quantity limits.
Under Present Law, Part D plans may not change the
therapeutic categories and classes in a formulary other than at
the beginning of each plan year, except the Secretary may take
into account new therapeutic uses and newly approved covered
drugs. The law further stipulates that any removal of a covered
drug from a formulary and any change in the preferred or tiered
cost sharing status of such a drug shall take effect only after
appropriate notice is made available to the Secretary, affected
enrollees, physicians, pharmacies, and pharmacists.
The Secretary of HHS published regulations (42 CFR Section
423.120) that also require that, except under certain
circumstances, for example when a covered drug has been deemed
unsafe by the Food and Drug Administration (FDA) or removed
from the market by its manufacturer, a Part D sponsor may not
remove a covered drug from a plan formulary or make any change
in the preferred or tiered cost sharing status of a covered
drug on a plan's formulary between the beginning of the open
enrollment period and 60 days after the beginning of the
contract year associated with that open enrollment period.
After March 1 of a given plan year, Part D sponsors may make
maintenance changes to their formularies, such as replacing
brand name drugs with new generic drugs or modifying
formularies as a result of new information on drug safety or
effectiveness. Part D sponsors can also currently make non-
maintenance changes if they are approved by the Secretary.
According to guidance from the Secretary, if Part D
sponsors remove drugs from their formularies, move covered
drugs to a less preferred tier status, or add utilization
management requirements, these changes must be approved in
advance. Sponsors may make such changes only if enrollees
currently taking the affected drug are exempt from the
formulary change for the remainder of the contract year.
Regulation also allows Part D sponsors to expand
formularies by adding drugs, reducing copayments or coinsurance
by placing a drug on a lower cost sharing tier, or removing
utilization management requirements at any time during the
year.
Committee Bill
The Committee Bill would not allow Part D sponsors,
beginning in 2011, to remove a covered drug from a plan
formulary, apply a cost or utilization management tool that
imposes a restriction or limitation on the coverage of such a
drug (such as through the application of a preferred status,
usage restriction, step therapy, prior authorization, or
quantity limitation), or increase the cost sharing of such a
drug (such as through the placement of a drug on a tier that
would result in higher cost sharing for a beneficiary) other
than the date on which Part D sponsors may begin marketing
their plans with respect to the immediately succeeding plan
year.
This provision would allow for exceptions if the change is
in regard to a brand-name drug for which a generic drug was
approved during the plan year, if the change is in regard to a
safety issue determined by the plan's Pharmacy and Therapeutic
Committee or by the FDA, or if the Secretary establishes a
specific exemption through the promulgation of regulations
relating to plan formularies. During the annual open enrollment
period, Part D sponsors would be required to provide each
enrollee a notice of any change in the formulary or other
restrictions or limitations on coverage of a drug for the
upcoming plan year. This notice would apply to the 2010 annual
coordinated election period. Only the exception for FDA safety
would apply to a drug in a protected category or class as
determined under Section 3307.
SEC. 3311. ELIMINATION OF COST-SHARING FOR CERTAIN DUAL-ELIGIBLE
INDIVIDUALS
Present Law
Cost-sharing subsidies for low-income subsidy (LIS)
enrollees are linked to standard Part D prescription drug
coverage. Full-subsidy eligibles have no deductible, nominal
cost-sharing during the initial coverage limit and coverage
gap, and no cost-sharing over the catastrophic threshold. Other
full-benefit dual-eligible individuals with incomes up to 100
percent of the Federal poverty limit (FPL) have cost-sharing
for all costs up to the catastrophic threshold of $1.10 in 2009
for a generic drug prescription or preferred multiple source
drug prescription and $3.20 in 2009 for any other drug
prescription. Full-subsidy-eligible individuals with incomes
over 100 percent of FPL have cost-sharing for all costs up to
the catastrophic threshold, of $2.40 in 2009 for a generic drug
or preferred multiple source drug and $6.00 in 2009 for any
other drug. Full-benefit dual eligibles who are residents of
medical institutions or nursing facilities have no cost-sharing
during any of the Part D coverage limits.
Committee Bill
Under the Committee Bill, cost-sharing would not apply to
persons who were full-benefit dual eligibles and for whom a
determination was made that but for the provision of home and
community-based care, the individual would require the level of
care provided in an institutional setting. Such home and
community-based care would be that provided under Section 1915
or 1932 of the Social Security Act or under a waiver under
Section 1115 of the Act. The provision would be effective on a
date specified by the Secretary, but not earlier than January
1, 2012.
SEC. 3312. REDUCING WASTEFUL DISPENSING OF OUTPATIENT PRESCRIPTION
DRUGS IN LONG-TERM CARE FACILITIES UNDER PRESCRIPTION DRUG PLANS AND
MA-PD PLANS
Present Law
Part D plans are required to offer a contract to any
pharmacy willing to participate in its long-term care (LTC)
pharmacy network so long as the pharmacy is capable of meeting
certain minimum performance and service criteria and any other
standard terms and conditions established by the plan for its
network pharmacies. Each LTC facility selects at least one
eligible LTC pharmacy to provide Medicare drug benefits to its
residents. Plan formularies must be structured so that they
meet the needs of long-term care residents and provide coverage
for all medically necessary medications at all levels of care.
Currently, the Part D program uses plan sponsors and
pharmacy benefit managers (PBMs) to direct network pharmacies
to dispense drugs in accordance with the State Board of
pharmacy requirements and to conduct cost-effective drug
utilization management. Both physician prescribing patterns and
PBM payment practices result in most prescriptions being
dispensed in 30- or 90-day quantities. In the situation where
the full amount dispensed is not utilized by the patient due to
death, discharge, adverse reactions, medication substitution,
or other reason for discontinuation, the remaining unused
medication become waste. Also, the unused medication could
become an environmental hazard or diverted to illegal use.
Committee Bill
The Committee Bill would authorize the Secretary to
establish dispensing technologies, such as weekly, daily or
automated dose dispensing, that Part D plans would employ to
reduce the quantity dispensed per fill when dispensing
medications to beneficiaries who reside in long-term care
facilities in order to reduce waste associated with 30-day
fills. This provision would apply to plan years starting
January 1, 2012.
SEC. 3313. IMPROVED MEDICARE PRESCRIPTION DRUG PLAN AND MA-PD PLAN
COMPLAINT SYSTEM
Present Law
Under Medicare Part D and Medicare Advantage (MA),
beneficiary complaints are processed and tracked in a variety
of ways. Under Medicare Part D, Medicare beneficiaries who
experience problems with their Part D plan may complain using
one or both of two different processes. A beneficiary can file
a complaint directly with CMS, which will generally forward it
to the appropriate plan sponsor for resolution; or, a
beneficiary can file a complaint directly with the plan sponsor
(known as a grievance). An MA organization also must have
procedures for hearing and resolving grievances between the
organization and enrollees. MA organizations are required to
provide written information to enrollees about these processes.
Part D and MA related complaints are tracked and resolved
through CMS's centralized complaints system, while grievances
are tracked and resolved by each plan sponsor using its own
system. CMS maintains a central repository of Medicare Part C
and Part D-related complaints received by its Regional Offices,
Central Office, or through 1-800-MEDICARE. Complaints are
assigned to various categories and subcategories, including but
not limited to enrollment, disenrollment, benefits, access,
pricing, co-insurance, marketing, fraud, waste, abuse, and
customer service.
Section 1808(c) of the Social Security Act requires the
Secretary of Health and Human Services to appoint a Medicare
Beneficiary Ombudsman who is to receive complaints, grievances,
and requests for information from Medicare beneficiaries with
respect to any aspect of the Medicare Program.
Committee Bill
This Committee Bill would require the Secretary to develop
and maintain a plan complaint system to handle complaints
regarding Medicare Advantage (MA) and Part D plans or their
sponsors. Such complaints may include complaints from MA or
Part D eligible beneficiaries related to marketing, enrollment,
covered drugs, premiums and cost-sharing, plan customer
service, grievances and appeals, and participating providers. A
plan complaint would be defined as a complaint that is received
(including by telephone, letter, email, or any other means) by
the Secretary (including by a regional office, the Medicare
Beneficiary Ombudsman, a sub-contractor, a carrier, a fiscal
intermediary, and a Medicare Administrative Contractor).
The Secretary would be required to develop a model
electronic complaint form to be used for reporting complaints
under the system that would be displayed on the Medicare.gov
and Medicare Beneficiary Ombudsman websites.
The Medicare Ombudsman would conduct an annual report of
the plan complaint system that would include an analysis of the
numbers and types of complaints reported under the system;
geographic variations in the complaints; the timeliness of
agency or plan responses to such complaints; and the resolution
of the complaints.
SEC. 3314. UNIFORM EXCEPTIONS AND APPEALS PROCESS FOR PRESCRIPTION DRUG
PLANS AND MA-PD PLANS
Present Law
Part D sponsors and Medicare Advantage organizations are
required to have procedures in place for making timely coverage
determinations and for handling appeals of coverage
determinations. Under Part D, beneficiaries can use the
coverage determination and appeals process to challenge a
utilization management restriction on a drug on the sponsor's
formulary or to request coverage for a Part D drug that is not
on the sponsor's formulary (i.e. to allow exceptions).
Similarly, MA beneficiaries can use the appeal process to
request coverage of an item or service that the plan denied.
Section 1852(g) of the Social Security Act outlines general
requirements regarding Medicare Advantage exceptions and
appeals processes. The Part D program adapted many of the
existing rules for appeals that apply to Medicare Advantage
program. The coverage and determination and appeals processes
may vary among MA and Part D plans as long as these general
requirements are met.
Committee Bill
This Committee Bill would require prescription drug plan
sponsors or MA organizations offering MA-PD plans to use a
single, uniform exceptions and appeals process with respect to
the determination of prescription drug coverage for an enrollee
under the plan and to provide instant access to this process
through a toll-free telephone number and an Internet website.
To the extent possible, Part D plan sponsors would be required
to use the same form to carry out this process. This provision
would apply to exceptions and appeals made on or after January
1, 2012.
SEC. 3315. OFFICE OF THE INSPECTOR GENERAL STUDIES AND REPORTS
Present Law
Special enrollment rules apply to individuals eligible for
the Part D low-income subsidy. Generally, there is a two-step
process for low-income persons to gain Part D coverage. First,
a determination must be made that they qualify for the
assistance; second, they must enroll, or be enrolled, in a
specific Part D plan. According to Section 1860D-14 of the
Social Security Act, full-benefit dual-eligible individuals who
have not elected a Part D plan are to be auto-enrolled into one
by CMS. If there is more than one plan available that has a
monthly beneficiary premium that does not exceed the premium
assistance amount under the low-income subsidy, the beneficiary
is to be enrolled on a random basis among all such plans in the
PDP region.
In a 2006 report, the Office of Inspector General of the
Department of Health and Human Services (OIG) examined the
extent to which Medicare prescription drug plan formularies
include drugs commonly used by dual eligibles and found that
inclusion of these drugs in Part D plan formularies varied.
Because of this variation, some dual eligibles could find that
they have been auto-enrolled in a plan that may not best meet
their needs. For this reason, beneficiaries are able to change
enrollment at any time, with the new coverage effective the
following month.
When the Medicare prescription drug program was created, it
was expected that drug plan sponsors would negotiate with drug
manufacturers to obtain price concessions on drugs covered
under Part D, and thus reduce total costs to the government and
to beneficiaries. Some studies have suggested that Part D plans
are not obtaining rebates equivalent to those required by
statute under Medicaid, and therefore that the prices paid by
Medicaid for prescription drugs are lower than the prices for
the same drugs under Part D. Information on price concessions
obtained by the private part D plans is considered proprietary;
therefore it is difficult to make comparisons of the prices
paid under Part D to those paid by other third party payers.
Committee Bill
The Committee Bill would require the OIG to report annually
on the extent to which formularies used by prescription drug
plans and MA-PD plans under Part D include drugs commonly used
by full-benefit dual eligible individuals. The first report
would be due to Congress not later than July 1st of each year,
beginning with 2011.
The OIG would also be required to conduct a study comparing
covered prescription drug prices paid under the Medicare Part D
program to those negotiated by state Medicaid plans for the top
200 drugs determined by both volume and expenditures. The
prices should include all rebates and discounts the Medicaid
and Part D plans receive. As part of this study, the OIG would
assess the financial impact of any price discrepancies on the
Federal government and on beneficiaries, and provide
recommendations for legislation and administrative action as
appropriate. In conducting the study, the OIG would be given
the authority to collect all necessary information related to
pricing necessary to produce comparisons of the Medicare and
Medicaid drug benefits. The report would not disclose
information that is deemed proprietary or likely to negatively
impact a Medicaid program or Part D plans ability to negotiate
drug prices. The report would be submitted to Congress no later
than October 1, 2011.
SEC. 3316. HHS STUDY AND ANNUAL REPORTS ON COVERAGE FOR DUAL ELIGIBLES
Present Law
Certain groups of Medicare beneficiaries automatically
qualify (and are deemed eligible) for the full low-income
subsidy under Part D. Dual eligibles who qualify for Medicaid
based on their income and assets are automatically deemed
eligible for Medicare prescription drug low-income subsidies.
Additionally, those who receive premium and/or cost-sharing
assistance from Medicaid through the Medicare savings program,
plus those eligible for SSI cash assistance, are automatically
deemed eligible for low-income subsidies and need not apply for
them. CMS deems individuals automatically eligible for LIS
effective as of the first day of the month that the individual
attains the qualifying status (e.g., becomes eligible for
Medicaid, MSP, or SSI). The end date is, at a minimum, through
the end of the calendar year within which the individual
becomes eligible.
For individuals who are newly full-benefit dual eligibles,
Medicaid prescription drug coverage ceases as soon as the
individual is eligible for part D, regardless of whether the
individual is enrolled in a Part D plan. This creates the risk
of coverage gaps for these individuals. To prevent coverage
gaps between the end of Medicaid prescription drug coverage and
the start of Medicare prescription drug coverage, CMS
regulation specifies that auto-enrollment is effective the
month in which the person becomes a full-benefit dual eligible.
Because Medicaid eligibility is often retroactive, CMS randomly
auto-enrolls new full-benefit dual eligibles into Part D plans
retroactive to the start of their full dual status. If a
beneficiary is already enrolled in a Part D plan, the Part D
sponsor must take steps to ensure that the beneficiary has been
reimbursed for any premiums or cost-sharing the member had paid
that should have been covered by the subsidy.
Committee Bill
The Committee Bill would require the Secretary of Health
and Human Services to monitor and track how many full-benefit
dual eligibles enroll in a plan under Part D and receive
retroactive drug coverage under the plan, the number of months
of retroactive coverage provided, and the amount of
reimbursements paid to individuals for costs incurred during
the retroactive period. In conducting the study, the Secretary
would be required to use drug utilization data reported by Part
D plans. The Secretary would be required to submit a report to
Congress on this study not later than January 1 of each year,
beginning with 2012 and provide recommendations for legislation
and administrative action as appropriate.
The Secretary would also be required to report annually on
total annual expenditures for dual eligibles made under titles
XVIII and XIX together with analyses of health outcomes for
these beneficiaries and the extent to which they are able to
access their benefits under both titles. These reports would be
submitted to Congress not later than January 1 of each year,
beginning with 2013.
SEC. 3317. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS
AND INDIAN HEALTH SERVICE IN PROVIDING PRESCRIPTION DRUGS TOWARD THE
ANNUAL OUT-OF-POCKET THRESHOLD UNDER PART D
Present Law
Under the standard Medicare Part D benefit, beneficiaries
must incur a certain level of out-of-pocket costs ($4,350 in
2009) before catastrophic protection begins. These include
costs that are incurred for the deductible, cost-sharing, or
benefits not paid in the coverage gap. Costs are counted as
incurred, and thus treated as true out-of-pocket (TrOOP) costs
only if they are paid by the individual (or by another family
member on behalf of the individual), paid on behalf of a low-
income individual under the subsidy provisions, or paid under a
State Pharmaceutical Assistance Program. Incurred costs do not
include amounts for which no benefits are provided--for
example, because a drug is excluded under a particular plan's
formulary. Additional payments that do not count toward TrOOP
include Part D premiums and coverage by other insurance,
including group health plans, workers' compensation, Part D
plans' supplemental or enhanced benefits, or other third
parties.
Committee Bill
The Committee Bill would allow costs paid by the Indian
Health Service, Indian tribe or tribal organization or an urban
Indian organization (as defined in Section 4 of the Indian
Health Care Improvement Act) to count toward the out-of-pocket
threshold. Costs paid under an AIDS Drug Assistance Program
under Part B of Title XXVI of the Public Health Service Act
would also count toward the out-of-pocket threshold. The
provision would apply to costs incurred on or after January 1,
2011.
Subtitle E--Ensuring Medicare Sustainability
SEC. 3401. REVISION OF CERTAIN MARKET BASKET UPDATES AND INCORPORATION
OF PRODUCTIVITY IMPROVEMENTS INTO MARKET BASKET UPDATES THAT DO NOT
ALREADY INCORPORATE SUCH IMPROVEMENTS
Present Law
Currently, most fee-for-service Medicare providers receive
predetermined payment amounts established under different,
unique prospective payment systems. Each year, the base payment
amounts in the different Medicare payment systems are increased
by an update factor to reflect the increase in the unit costs
associated with providing health care services. Generally,
Medicare's annual updates are linked to either: (1) projected
changes in specific market basket (MB) indices which are
designed to measure the change in the price of goods and
services (such as labor and equipment) that are purchased by
the provider and intended to reflect the effect of inflation on
providers' costs per service; or (2) the Consumer Price Index
for All Urban Consumers (CPI-U).
Each year, these updates are implemented assuming that the
quantity, quality, and mix of inputs remain constant over time.
According to the Congressional Budget Office, market basket
updates overstate actual costs to providers because they do not
assume increases in provider productivity that could reduce the
actual cost of providing services (such as through new
technology, fewer inputs, etc). Annual updates to the Medicare
physician fee schedule are determined by a separate method that
already incorporates adjustments for gains in physician
productivity.
The Medicare Payment Advisory Commission (MedPAC) makes
payment update recommendations for the different payment
systems each year in its March report to Congress. In making
these recommendations, MedPAC assesses adequacy of payments for
efficient providers in the current year; how providers' costs
may change in the upcoming year; beneficiaries' access to care;
changes in the capacity and supply of providers; changes in the
volume of services; changes in the quality of care; providers'
access to capital; and Medicare payment rates relative to
providers' costs in the given year. Based on this analysis, in
its March 2009 Report to Congress: Medicare Payment Policy,
MedPAC recommended that a number of health care providers
receive reduced or eliminated Medicare market basket updates in
FY2010.
Committee Bill
Generally, the provision would provide for updates based on
the MB or CPI minus full productivity estimates for all Parts A
and B providers and suppliers who are subject to an MB or CPI
update, except for annual inflationary adjustments to Graduate
Medical Education payments. The productivity adjustment would
equal the percentage change in the ten-year moving average of
annual economy-wide private nonfarm business multi-factor
productivity as projected by the Secretary for the relevant
fiscal year or period.
Specifically, this change would implement a full
productivity adjustment for inpatient and outpatient hospital
services, inpatient psychiatric facilities, inpatient
rehabilitation facilities, long term care hospital services and
nursing homes beginning in FY2012. It would implement a full
productivity adjustment for hospice providers beginning in
FY2013. In addition, it would implement a full productivity
adjustment for home health providers beginning in FY2015. For
providers paid through the clinical laboratory test fee
schedule, the Committee Bill would replace the scheduled 0.5
percent payment reduction for calendar years 2011 through 2013
with a full productivity adjustment for calendar year (CY) 2011
and subsequent years. The clinical laboratory productivity
adjustment could not reduce the fee schedule update below zero.
All other productivity adjustments for other Part B providers
would begin in CY2011.
The update factors for Medicare providers and suppliers
would be subject to the productivity adjustment and other
adjustments as follows:
Inpatient acute care hospitals. The MB update for inpatient
acute hospitals services would be reduced 0.25 percentage
points in FY2010 and FY2011. This change would not apply to
discharges occurring before January 1, 2010. Beginning in
FY2012, the full productivity adjustment would be applied. In
addition, from FY2012 through FY2019, the MB update would be
reduced 0.2 percentage points. However, for each of the fiscal
years from FY2014 through FY2019, the reduction to the MB would
be contingent upon the level of the non-elderly insured
population relative to the projection of non-elderly insured
population at time of enactment. Specifically, if the previous
year's total percent of the non-elderly insured population is
more than five percentage points below the projections at the
date of enactment, the additional 0.2 percentage point MB
reduction for the given year would be eliminated.
Skilled nursing facilities. The SNF MB update would be
subject to the productivity adjustment beginning in FY2012.
Long-term care hospitals. The MB update for long-term care
hospitals would be reduced 0.25 percentage points in rate year
2010 and rate year 2011. This change would not apply to
discharges occurring before January 1, 2010. Beginning in rate
year 2012, the full productivity adjustment would be applied.
In addition, from rate year 2012 through rate year 2019, the MB
update would be reduced 0.2 percentage points. However, for
each of the rate years from 2014 through 2019, the reduction to
the MB would be contingent upon the level of the non-elderly
insured population relative to the projection of non-elderly
insured population at time of enactment. Specifically, if the
previous year's total percent of the non-elderly insured
population is more than five percentage points below the
projections at the date of enactment, the additional 0.2
percentage point MB reduction for the given year would be
eliminated.
Inpatient rehabilitation facilities. The MB update for
inpatient rehabilitation facilities would be reduced 0.25
percentage points in FY2010 and FY2011. This change would not
apply to discharges occurring before January 1, 2010. Beginning
in FY2012, the full productivity adjustment would be applied.
In addition, from FY2012 through FY2019, the MB update would be
reduced 0.2 percentage points. However, for each of the fiscal
years from FY2014 through FY2019, the reduction to the MB would
be contingent upon the level of the non-elderly insured
population relative to the projection of non-elderly insured
population at time of enactment. Specifically, if the previous
year's total percent of the non-elderly insured population is
more than five percentage points below the projections at the
date of enactment, the additional 0.2 percentage point MB
reduction for the given year would be eliminated.
Home health agencies. The MB update for home health
services would be reduced by 1.0 percentage point in 2011 and
2012. Beginning in CY2015, the full productivity adjustment
would be applied.
Inpatient psychiatric facilities. The MB update for
inpatient psychiatric facilities would be reduced 0.25
percentage points in rate year 2010 and rate year 2011. This
change would not apply to discharges occurring before January
1, 2010. Beginning in rate year 2012, the full productivity
adjustment would be applied. In addition, from rate year 2012
through rate year 2019, the MB update would be reduced 0.2
percentage points. However, for each of the rate years from
2014 through 2019, the reduction to the MB would be contingent
upon the level of the non-elderly insured population relative
to the projection of non-elderly insured population at time of
enactment. Specifically, if the previous year's total percent
of the non-elderly insured population is more than five
percentage points below the projections at the date of
enactment, the additional 0.2 percentage point MB reduction for
the given year would be eliminated.
Hospice care. The hospice MB update would be subject to the
productivity adjustment beginning in FY2013. In addition, from
FY2013 through FY2019, the MB update would be reduced 0.5
percentage points. However, for each of the fiscal years from
FY2014 through FY2019, the reduction to the MB would be
contingent upon the level of the non-elderly insured population
relative to the projection of non-elderly insured population at
time of enactment. Specifically, if the previous year's total
percent of the non-elderly insured population is more than five
percentage points below the projections at the date of
enactment, the additional 0.5 percentage point MB reduction for
the given year would be eliminated.
Dialysis. The ESRD MB would no longer be subject to a one
percentage point reduction beginning in 2012, but would be
subject to the productivity factor adjustments starting in
2012.
Outpatient hospitals. The MB update for hospital outpatient
services would be reduced 0.25 percentage points in 2010 and
2011. This change would not apply to discharges occurring
before January 1, 2010. Beginning in 2012, the full
productivity adjustment would be applied. In addition, from
2012 through 2019, the MB update would be reduced 0.2
percentage points. However, for each of the fiscal years from
FY2014 through FY2019, the reduction to the MB would be
contingent upon the level of the non-elderly insured population
relative to the projection of non-elderly insured population at
time of enactment. Specifically, if the previous year's total
percent of the non-elderly insured population is more than five
percentage points below the projections at the date of
enactment, the additional 0.2 percentage point MB reduction for
the given year would be eliminated.
Ambulance services. The productive adjustment factor would
be applied to the CPI-U used to increase the ambulance fee
schedule starting in CY2011.
Ambulatory surgical services. The productive adjustment
factor would be applied to the CPI-U used to update payments
for ambulatory surgical services starting in CY2011.
Laboratory services. The existing 0.5 percentage point
reduction to the CPI-U update to the fee schedule in CY2009 and
CY2010 would be retained. The productivity adjustment factor
would be applied to the CPI-U starting in CY2011, but the
application of the adjustment could not reduce the increase to
less than zero. A 1.75 percentage point additional reduction to
the update in CY2011 through CY2014 would be established; for
CY2015, such reduction would be 1.95 percentage points.
Certain durable medical equipment. The productivity
adjustment factor would be applied to the CPI-U used to
increase the fee schedules for certain durable medical
equipment (DME) beginning in CY2011. Under Present Law, certain
DME are to receive a payment increase of CPI-U plus 2
percentage points in CY2014. The provision would eliminate the
two percentage point increase.
Prosthetic devices, orthotics, and prosthetics. The
productivity adjustment factor would be applied to the CPI-U
update for the applicable fee schedule for this DME category
starting in CY2011.
Other items. The productivity adjustment factor would be
applied to the CPI-U update for this DME category starting in
CY2011.
SEC. 3402. TEMPORARY ADJUSTMENT TO THE CALCULATION OF PART B PREMIUMS
Present Law
Medicare beneficiaries have out-of-pocket cost-sharing
requirements that differ according to the services they
receive. Physician and outpatient services provided under Part
B are financed through a combination of beneficiary premiums,
deductibles, and Federal general revenues. In general, Part B
beneficiary premiums equal 25 percent of estimated program
costs for the aged, with Federal general revenues accounting
for the remaining 75 percent. Beginning in 2007, higher-income
enrollees pay a higher percentage of Part B costs--35 percent,
50 percent, 65 percent, or 80 percent, depending on the
enrollees' modified adjusted gross income. In 2009, the income
thresholds for those premium shares are $85,000, $107,000,
$160,000, and $213,000, respectively. (For married couples, the
corresponding income thresholds are twice those values.) The
income thresholds rise each year with changes in the consumer
price index.
Committee Bill
The Committee Bill would freeze the current income
thresholds for the period of 2011 through 2019.
SEC. 3403. MEDICARE COMMISSION
Present Law
No provision.
Committee Bill
The Committee Bill would establish an independent Medicare
commission titled the ``Medicare Commission.'' Specifically,
the Commission would be required to develop and submit
proposals to Congress aimed at extending the solvency of
Medicare, lowering Medicare cost-growth, improving health
outcomes for beneficiaries, promoting quality and efficiency,
and expanding access to evidence-based care. A proposal would
consist of a package of recommendations.
Requirements for Proposals. When developing its annual
proposal for Congress, the Commission would be required to meet
the following conditions: (1) reduce Medicare spending by
targeted amounts (in certain years), (2) as appropriate, reduce
spending under Medicare Parts C and D (such as premium
subsidies and performance bonuses to Medicare Advantage and
Prescription Drug Plans), and (3) include recommendations for
any administrative funding necessary to implement the
Commission's recommendations. The Commission would be
prohibited from making recommendations that would ration care,
raise revenues, increase beneficiary premiums under Sections
1818, 1818A, or 1839, or modify Medicare benefits, eligibility,
or cost-sharing requirements. The Commission would also be
prohibited from developing proposals impacting providers
scheduled to receive a reduction in their payment update in
excess of a reduction due to productivity in a year prior to
December 31, 2019, in which the Commission's proposals would
take effect.
The Commission would also be required, to the extent
feasible, to: (1) make recommendations that target reductions
to sources of excess cost growth; (2) prioritize
recommendations that extend Medicare solvency; (3) include only
those recommendations that improve the health care delivery
system, including the promotion of integrated care, care
coordination, prevention and wellness and quality improvement
and protect beneficiary access to care, including in rural and
frontier areas; (4) consider the effects of changes in provider
and supplier payments on beneficiaries; (5) consider the
effects of proposals on any provider who has, or is projected
to have, negative profit margins or payment updates; and (6)
consider the unique needs of individuals dually eligible for
Medicare and Medicaid.
Beginning January 1, 2014, the Commission would have the
authority to submit to Congress advisory reports that include
supplemental, non-binding recommendations regarding
improvements to payment systems for providers who are otherwise
not subject to the scope of the Commission's proposals. The
provision would apply for reports prior to year 2020.
The Commission would be required to consult regularly with
the Medicaid and CHIP Payment and Access Commission in carrying
out its functions.
Establishment of Savings Targets. Beginning with the 2013
report of the Medicare Trustees, the provision would require
the CMS Office of the Actuary (OACT) to determine whether the
projected Medicare per-capita growth rate for the second
succeeding year exceeds the average of the projected percentage
increase in the Consumer Price Index (CPI) and the Consumer
Price Index for medical care (CPI-M). The Medicare per-capita
growth rate would be calculated as a five-year average of
Medicare spending (Parts A, B, and D) per unduplicated
enrollee, ending with the projection for the year in which the
Commission's proposals would apply. This projection would be
made without regard to the physician fee schedule update. The
projection would also be required to take into account any
delivery system reforms or payment changes either enacted or
published in final rules and any recommendations made by the
Commission to provide the Secretary with additional
administrative funding to implement the proposal.
Prior to 2018, if the projected Medicare per-capita growth
rate exceeds the average of CPI and CPI-M, the Commission would
be required to submit a proposal to Congress by January 1, 2014
that would include recommendations for reducing the Medicare
per-capita growth rate by 0.5 percentage points for 2015, 1.0
percentage points for 2016, 1.25 percentage points for 2017,
and 1.5 percentage points for 2018 and subsequent years. After
2019, the Commission would be required to submit proposals to
Congress if the projected Medicare per-capita growth rate
exceeds the projected increase in the growth rate of real GDP
per capita for the year plus 1.0 percentage point. The
provision would also require that the Commission's proposals
are certified by OACT to not increase spending within the
following ten-year budget window.
Submission of Proposals. The Commission would be required
to submit its proposals to Congress by January 1. The
Commission would be required to submit a draft of its proposal
to MedPAC by September 1 of the preceding year. Once the
proposal is submitted to Congress, MedPAC would be required to
review and present its analysis of the Commission's proposal no
later than February 1. The Commission would also be required to
submit a copy of the draft proposal to the Secretary by
September 1st for the Secretary's review and comment by
February 1st. If the Commission fails to submit a proposal by
the January 1st deadline, the Secretary would be required to
submit a proposal to Congress meeting the same requirements by
no later than January 5, 2014.
Each proposal submitted to Congress would be required to
include an explanation of each recommendation contained in the
proposal and the reason for its inclusion. Each proposal would
also be required to include an actuarial opinion by the OACT
certifying that the proposal meets the applicable requirements.
Congressional Consideration. This section establishes
expedited, or ``fast track,'' parliamentary procedures
governing consideration of legislation containing proposals by
the Medicare Commission or Secretary. Not later than April 1 of
any year in which a proposal is submitted to Congress under
Section 3403, the appropriate committees of Congress must
report legislation either implementing the proposal or
satisfying the fiscal and policy requirements described above.
If an appropriate committee has not reported such legislation
by April 1, then, (1) the committee will be automatically
discharged from further consideration of the legislation, and
(2) any Member in either chamber may introduce legislation
implementing the proposal, which, when introduced, will be
placed directly on that chamber's calendar.
Not less than 15 calendar days after the date on which a
committee has been, or could have been, discharged from
consideration of such legislation, or after the day on which
such legislation is introduced, the Speaker of the House and
the Majority Leader of the Senate, or their designees, shall
make privileged motions that their respective chamber proceed
to consider the legislation. Should they fail to make this
motion, at any time after the conclusion of the 15-day period,
any Member may move to proceed to consider the legislation in
their respective chamber. In either case, the motion to proceed
is non-debatable, and may not be amended, postponed, or
displaced.
All points of order against the legislation and its
consideration, except points of order to strike matter
``extraneous to Medicare'' from the bill or points of order
under the Congressional Budget Act of 1974 (Titles I-IX of P.L.
93-344, 2 U.S.C. 601-688), are waived. If the motion to proceed
is adopted, the Senate or House will immediately proceed to
consider the legislation under its normal rules and procedures
until it is disposed of. In the Senate, consideration of the
legislation is governed by a time cap on consideration of not
to exceed 30 hours equally divided, with a privileged motion in
order to further limit debate.
The parliamentary procedures established by this section
include provisions to facilitate the exchange of legislation
between the House and Senate. If, before voting upon its own
legislation, one chamber receives legislation passed by the
other chamber, that engrossed legislation will automatically
become the one which the receiving chamber acts upon. The
expedited procedures established by this section further
require any conference committee appointed to reconcile
differences in the two chambers' version of the legislation to
file a conference report not later than 15 days after the
appointment of conferees. Debate in each chamber on a
conference agreement is limited to 10 hours, after which a
final vote on the conference report will occur.
Implementation of Proposals. The Secretary shall, with
certain exceptions as described below, implement the
recommendations contained in the proposal submitted by the
Commission or the Secretary to Congress on August 15 of the
year in which the proposal is submitted.
In the case of recommendations that change Medicare payment
rates for an item or service in which payment rate changes are
on a fiscal year basis (or a cost reporting period basis that
relates to a fiscal year), on a calendar year basis (or a cost
reporting period basis that relates to a calendar year), or on
a rate year basis (or a cost reporting period that relates to a
rate year), such recommendation shall apply to items and
services furnished on the first day of the first fiscal,
calendar or rate year (as the case may be) that begins after
such August 15.
In the case of a recommendation relating to payments to
plans under parts C and D, such recommendations shall apply to
plan years beginning on the first day of the first calendar
year that begins after such August 15. In the case of any other
recommendation, such recommendation shall be addressed within
the regular regulatory process timeframe and shall apply as
soon as practicable. The Secretary may use interim final
rulemaking to implement such recommendations.
Joint Resolution Required To Discontinue Automatic
Implementation of Recommendations After 2019. This section
establishes expedited, or ``fast track,'' parliamentary
procedures governing consideration of a joint resolution
approving the discontinuation of the process for consideration
and automatic implementation of the proposals of the Medicare
Commission after 2019. These procedures specify the text of
such a joint resolution and the time period in which it must be
introduced (not later than February 1, 2017) in order to
qualify for ``fast track'' consideration. The expedited
procedures used for consideration of such a joint resolution
are those which already exist in statute and are used to
disapprove regulations under the Congressional Review Act (5
U.S.C. 802). Under these procedures, a joint resolution, when
introduced, is referred to the committee of jurisdiction in
each chamber.
In the Senate, if the committee to which such a joint
resolution is referred has not reported it or an identical
joint resolution by the end of the 20th day of continuous
session occurring after the date the joint resolution is
introduced, the committee may be discharged from further
consideration of the measure upon a petition supported in
writing by 30 Senators. If discharged, the joint resolution is
placed on the calendar.
When a Senate committee has reported the joint resolution
or been discharged as described above, a motion to proceed to
the consideration of the legislation will be in order at any
time. This motion to proceed is in order even if a previous
motion to the same effect has been defeated. The motion to
proceed is non-debatable, and may not be amended, postponed or
displaced, and all points of order against the joint resolution
and its consideration are waived.
If the motion to proceed is adopted, the Senate will
immediately consider the joint resolution under a consideration
cap of not more than 10 hours equally divided, with a non-
debatable motion to further limit debate in order. The joint
resolution may not be amended, postponed or displaced. At the
conclusion of debate, after a single quorum call, if requested,
the Senate will vote on final passage of the joint resolution.
There are no expedited procedures governing House floor
consideration of a joint resolution.
The parliamentary procedures established by this section
also include provisions to facilitate the exchange of
legislation between the House and Senate. If, before voting
upon its own joint resolution, one chamber receives a
resolution passed by the other chamber, that engrossed
legislation will automatically become the one which the
receiving chamber acts upon.
Membership and Structure. The Commission would be composed
of 15 members, appointed by the President with the advice and
consent of the Senate. Members of the Commission would serve
six-year, staggered terms and would continue to serve until
replaced. The Senate Majority Leader, the Speaker of the House,
the Senate Minority Leader, and the House Minority Leader would
each present three recommendations for appointees to the
President. The President, with the advice and consent of the
Senate, would also be required to appoint a Chair for the
Commission. The Commission would elect a Vice Chairman. Members
could only be removed by the President for neglect of duty or
malfeasance in office. In addition to the 15 members of the
commission, the Secretary of Health and Human Services (HHS),
the Administrator of the Center for Medicare and Medicaid
Services (CMS), and the Administrator of the Health Resources
and Services Administration (HRSA) would serve as ex-officio,
non-voting members of the Commission. Qualifications for
membership would be similar to the qualifications required for
members of the Medicare Payment Advisory Commission (MedPAC).
Individuals involved in the delivery or management of health
care services could not constitute a majority of the
Commission. In addition to these qualifications, the President
would be required to establish a system for publicly disclosing
any financial or other conflicts of interests relating to
members. Individuals that engage in any other business,
vocation, or employment could not serve as appointed members of
the Commission. Members would be considered officers in the
executive branch for purposes of applying Title I of the Ethics
in Government Act of 1978. After serving on the Commission,
former members would be barred from lobbying the Commission and
other relevant executive branch departments and agencies and
relevant congressional committees for one year.
The Chair would be responsible for exercising all of the
Commission's executive and administrative functions, including
those related to the appointment and supervision of employees
and the use of funds. All requests for discretionary
appropriations to fund the Commission's activities must be
approved by a majority vote.
Funding. The Commission's funding level would be set at
$15,000,000 per year, indexed to inflation. Sixty percent of
the appropriation would come from the Part A Medicare Trust
Fund and 40 percent from the Part B Trust Fund.
Powers. The Commission would have the authority to conduct
the following activities under this provision: (1) hold
hearings, take testimony, and receive evidence, (2) advise the
Secretary on priorities for health services research,
particularly as they pertain to payment reforms under Medicare,
(3) secure from any Federal department or agency information
necessary to carry out its functions, (4) use the United State
mail service, (5) accept, use, and dispose of gifts or
donations of services, and (6) maintain a principal office and
field offices as it determines necessary.
Personnel. Each member would be compensated at a rate equal
to the annual rate of basic pay for Level III of the executive
schedule. The Chairman would be compensated at a rate equal to
the daily equivalent of the annual rate of pay for Level II of
the Executive Schedule. The members would be allowed travel
expenses, including per diem in lieu of subsistence at rates
authorized for employees of agencies under subchapter I of
chapter 57 of title 5 of the U.S.C.
Staff. The Chairperson would have the authority to appoint
and terminate an executive director and other personnel as
necessary to enable the Commission to perform its duties. The
executive director would be subject to confirmation by the
Commission. The Chairperson would have the authority to fix the
compensation of the Executive Director and other personnel
without regard to Chapter 51 and subchapter III of Chapter 53
of Title 5 of the U.S.C., relating to the classification of
positions and General Schedule pay rates, except that the rate
of pay for the Executive Director and other personnel may not
exceed the rate payable for level V of the Executive Schedule.
Councils. The provision would establish a consumer advisory
council to advise the Commission on the impact of payment
policies on consumers. The Council would be composed of 10
consumer representatives appointed by the Comptroller General
of the United States, each from among the 10 regions
established by the Secretary. The membership would be required
to represent the interests of the consumers and particular
communities. The Council would be required to meet at least 2
times per year and meetings would be open to the public. FACA
would apply to the Council, with the exception of section 14.
GAO Study. The provision would require the GAO to conduct a
study on changes in payment policies, methodologies, rates, and
coverage policies under Medicare. Specifically, the study would
provide an assessment of the effect of the Commission's
proposal on Medicare beneficiary's access to providers,
affordability of premiums and cost-sharing, the potential
impact of changes on other government or private sector
purchasers of care, and the quality of care provided. The
report would be due by July 1, 2015.
SEC. 3404. ENSURING MEDICARE SAVINGS ARE KEPT IN THE MEDICARE PROGRAM
Present Law
No provision.
Committee Bill
This provision would prevent reductions in Medicare outlays
resulting from this Act from being used to offset any outlays
under any other program or activity of the Federal government.
Subtitle F--Patient-Centered Outcomes Research
SEC. 3501. PATIENT-CENTERED OUTCOMES RESEARCH
Present Law
The need for credible information about which clinical
strategies work best, under what circumstances and for whom has
been widely recognized by clinicians, patients, researchers and
policy makers. Commonly referred to as comparative
effectiveness research (CER), the Institute of Medicine (IOM)
defines this type of research as the ``the generation and
synthesis of evidence that compares the benefits and harms of
alternative methods to prevent, diagnose, treat, monitor a
clinical condition and improve delivery of care'' with the aim
of tailoring decisions to the needs of individual patients. CBO
has referred to CER as ``a comparison of the impact of
different options that are available for treating a given
medical condition for a particular set of patients.'' MedPAC
has referred to ``comparative-effectiveness'' as ``analysis
[that] compares the clinical effectiveness of a service (drugs,
devices, diagnostic and surgical procedures, diagnostic tests,
and medical services) with its alternatives.'' The phrase
``patient-centered outcomes research'' has also been used as an
alternate term.
Most recently, comparative effectiveness research has been
addressed in present law by the Medicare Modernization Act of
2003 (MMA, P.L. 108-173) and the American Recovery and
Reinvestment Act of 2009 (ARRA, P.L. 111-5). Section 1013 of
the MMA authorizes the Agency for Healthcare Research and
Quality (AHRQ) to conduct and support research on outcomes,
comparative clinical effectiveness, and appropriateness of
pharmaceuticals, devices, and health care services. The section
also prohibits the Center for Medicare and Medicaid Services
(CMS) from using the data to withhold coverage of a
prescription drug. The ARRA provided $1.1 billion in funds to
support the development and dissemination of CER. ARRA also
asked the Institute of Medicine to recommend national
priorities for the research to be addressed by ARRA funds.
Committee Bill
Patient-Centered Outcomes Research Institute (the
``Institute''). The Committee Bill would authorize the
establishment of a private, non-profit corporation that would
be known as the ``Patient-Centered Outcomes Research
Institute.'' The purpose of the Institute would be to assist
patients, clinicians, purchasers, and policy makers in making
informed health decisions by advancing the quality and
relevance of clinical evidence through research and evidence
synthesis. The research would focus on the manner in which
diseases, disorders, and other health conditions can
effectively and appropriately be prevented, diagnosed, treated,
monitored, and managed, and would consider variations in
patient subpopulations. Research conducted would compare the
clinical effectiveness, risk and benefits of two or more
medical treatments, services or items. The Committee Bill would
define treatment, services and items as: health care
interventions, protocols for treatment, care management and
delivery, procedures, medical devices, diagnostics tools,
pharmaceuticals (including drugs and biological), and any
strategies or items used in the treatment, management, and
diagnosis of, or prevention of illness or injury, in patients.
The Institute would also disseminate their research findings.
The Institute would be subject to the provisions specified
below and, to the extent consistent with the Committee Bill, to
the District of Columbia Non-Profit Corporation Act.
The Committee Bill would establish the duties of the
Institute, which would be tax exempt for Federal tax purposes.
The duties of the Institute would be to (1) identify research
priorities and establish a research agenda, (2) carry out the
research project agenda, (3) study and report on the
feasibility of conducting research in-house, (4) collect
appropriate data from CMS, (5) appoint advisory panels, (6)
support patient and consumer representatives, (7) establish a
methodology committee, (8) provide for a peer-review process
for primary research, (9) disseminate research findings, (10)
adopt priorities, standards, processes, and protocols, (11)
coordinate research and resources and build capacity for
research, and (12) submit annual reports to the Congress, the
President, and the public.
Administration of the Institute. The Committee Bill would
establish a Board of Governors for the Institute. The Board
would be responsible for carrying out the duties of the
Institute. The Board specifically would be prohibited from
delegating the following duties to staff: approving and
monitoring disbursements from the Patient-Centered Outcomes
Research Trust Fund (PCORTF); identifying research priorities;
and adopting priorities, methodological standards, peer review
processes, dissemination protocols.
The Institute's Board would have 15 members appointed by
the Comptroller General of the United States within six months
after enactment and would include three members representing
each of the following groups: patients and health care
consumers; physicians, including surgeons; private payers
(including at least one health insurance plan and one self-
insuring employer); pharmaceutical, device, and diagnostic
manufacturers; and others (including one member representing
each of non-profit health services research organization,
quality improvement and decision support organizations, and
independent health services researchers.)
The Board would have collective scientific expertise in
clinical health sciences research, including epidemiology,
decision sciences, health economics, and statistics. The
Institute's Board members would be appointed for six years,
except for the first appointments, of whom six would be
appointed for six years, six for four years, and six for two
years. Individuals would be prohibited from serving more than
two Board terms. Members whose term expires would serve until a
successor takes office or the end of the calendar year,
whichever is earlier; vacancies would not affect the
functioning of the Board. The Comptroller General would
designate a Chairperson and Vice-Chairperson from among the
Board members to serve a three-year term.
Board members would be entitled to compensation at the per
diem equivalent of the level IV Executive Schedule rate and
allowed travel, subsistence, and other necessary expense
compensation. The Board would employ and set the compensation
for an executive director and other personnel as necessary. It
would be allowed to seek assistance from personnel of
appropriate departments and agencies of the Federal government,
make arrangements and payments necessary for the performance of
the Institute's duties, and prescribe such rules and bylaws as
it deems necessary.
The Board would hold hearings and meetings at the call of
the Chairperson or a majority of the members. Meetings not
solely concerning matters of personnel would be advertised at
least seven days in advance and open to the public. A majority
of the Board members would constitute a quorum, but a lesser
number of members could meet and hold hearings.
The Board would adopt certain positions and activities by
majority vote; these would include the Institute's priorities,
the research project agenda, methodological standards, peer
review process(es), and the dissemination protocols and
strategies. The Institute would be required to refer any of the
above back to staff or to the methodology committee, where
appropriate, for further review in the case where adoption is
not granted.
Research of the Institute. The Committee Bill would charge
the Institute with identifying national priorities for
comparative clinical effectiveness research and establishing a
research project agenda. The Institute would consider the need
for a systematic review of existing research before providing
for the conduct of new research. In setting priorities, the
Institute would consider the following: disease incidence and
prevalence in the U.S.; evidence gaps, in terms of clinical
outcomes; practice variations; the potential for new evidence
to improve health and quality of care; expenditures associated
with a health care treatment strategy or health condition;
patient needs, outcomes, and preferences, including quality of
life; and relevance to assisting patients and clinicians in
making informed health decisions.
The Institute would be required to use the following
methods to provide for the conduct of research and synthesis of
evidence: (1) systematic reviews and assessments of existing
evidence; (2) primary research, such as randomized clinical
trials, molecularly informed trials, and observational studies;
and (3) any other methodologies recommended by the methodology
committee and adopted by the Board. The research and evidence
synthesis would only be conducted in accordance with the
methodological standards adopted by the Board.
The Institute would be allowed to request and obtain data
from Federal, state, and private entities, including data from
clinical databases and registries, if the request is granted by
the entity. The use of such data would be in accordance with
requirements of the data-granting entity with respect to the
release, use, confidentiality and privacy of the data. The
Secretary of HHS would make relevant CMS data available to the
Institute with appropriate safeguards for privacy and
confidentiality.
The Committee Bill would require the Institute to establish
a process for peer-review of primary research, under which
evidence would be reviewed to assess scientific integrity and
adherence to the methodological standards adopted by the
Institute. The Institute would make public a list of names of
individuals contributing to any peer-review process during the
preceding year or years and include the list in the Institute's
annual reports.
Any peer-review process would be designed in a manner so as
to avoid bias and conflicts of interest on the part of the
reviewers; the reviews would be conducted by experts in the
scientific field relevant to the research under review. The
Institute would be allowed to utilize existing peer-review
processes already utilized by entities with which the Institute
contracts. This would include the option to utilize the peer-
review process of appropriate medical journals, if these review
processes met the Institute's own requirements for a peer-
review process.
The Institute would coordinate its own activities and
resources with that of other public and private agencies to
ensure the most efficient use of the Institute's resources and
that research is not unnecessarily duplicated. The Institute
would also be permitted to build capacity for comparative
clinical effectiveness research and related efforts through
activities such as supporting the Cochrane Collaboration and
other organizations that develop and maintain a data network to
collect, link, and analyze data on outcomes and effectiveness
from multiple sources, including electronic health records.
Such payments would be allowed up to 20 percent of the Patient-
Centered Outcomes Research Trust Fund (PCORTF) amounts for a
year.
The Institute would be required to review and update
evidence periodically to take into account new research,
evolving evidence, advances in medical technology and changes
in the standard of care as they become available, as
appropriate. In addition, the Institute would assess the
feasibility of conducting research in-house and to report to
Congress on the results of such assessment within five years of
the date of enactment.
Addressing Subpopulations. The Institute would design
research to take into account potential differences in outcomes
among different subpopulations, such as racial and ethnic
minorities, women, age, and groups of individuals with
different comorbidities, genetic and molecular sub-types, or
quality of life preferences. Members of such subpopulations
would be included in the research as feasible and appropriate.
When appropriate, the Institute would design research that
takes into account different characteristics of treatment
modalities that could affect research outcomes.
Institute Contracts. The Committee Bill would allow the
Institute to enter into contracts with Federal agencies as well
as with appropriate private sector research or study-conducting
entities for the management and conduct of research in
accordance with the research agenda. To contract with Federal
agencies, such as the Agency for Healthcare Research and
Quality (AHRQ), the contracts would have to be authorized under
the agencies' governing statutes. Private contractors would be
required to have experience in conducting comparative clinical
effectiveness research. Both public and private entities would
be required to have demonstrated experience and capacity to
achieve the goals of comparative effectiveness research.
Each entity under contract with the Institute would be
required to (1) abide by the same transparency and conflicts of
interest requirements that apply to the Institute with respect
to the management or conduct of research; (2) comply with the
methodological standards adopted by the Board; (3) take into
consideration public comments, provided for and transmitted by
the Institute, on individual study designs before the
finalization of such designs, and submit responses to such
comments to the Institute which the Institute would publish
with the comments and the finalized study design before the
conduct of research; (4) consult with the rare disease advisory
panel for the relevant study as appropriate; and (5) allow for
a researcher(s) under contract to publish their findings so
long as any research published is consistent with products
disseminated by the Institute. Research entities under contract
that do not meet the publishing requirements set by the
Institute would not be allowed to enter into another contract
with the Institute for a period of not less than five years.
Studies conducted by the Institute would be allowed to
cover cost sharing of research participants to the extent
necessary to preserve the validity of the study results, such
as in the case that a study needs to be blinded.
Advisory Panels. The Committee Bill would require the
Institute, as appropriate, to appoint expert advisory panels to
assist in identifying research priorities and establishing the
research project agenda. These panels would advise the
Institute to ensure that information produced from such
research is clinically relevant to decisions made by clinicians
and patients at the point of care.
In addition, the Institute would appoint expert advisory
panels to assist in carrying out the research project agenda
with respect to primary research (such as clinical trials).
Such panels would, upon request, advise on the research
question, design, or protocol of the study and be available as
a resource for technical questions that may arise during the
conduct of the research.
In the event of a comparative clinical effectiveness study
on a rare disease, the Institute would appoint a separate
expert advisory panel for purposes of assisting in the design
of research studies for rare diseases and for determining the
relative value and feasibility of conducting such research on a
particular rare disease.
The Committee Bill would require such panels to include
representatives of practicing and research clinicians,
patients, and experts in scientific and health services
research, health services delivery, and evidence-based medicine
who have experience in the relevant topic. The Institute would
be permitted to include on the panel a representative of each
manufacturer of each medical technology that is included under
the relevant topic, project, or category for which the panel is
established.
The Committee Bill would also direct the Institute to
provide support and resources to help patient and consumer
representatives who serve on the Board and expert advisory
panels to effectively participate in technical discussions
regarding complex research topics. This would include initial
and continuing education as well as the potential for regular
and ongoing interactions between patients and consumer
representatives. The Institute would also provide a per diem
and other appropriate compensation to the patient and consumer
representatives for their time.
Methodology Committee. The Committee Bill would establish a
standing methodology committee to serve the Institute. The
committee would have responsibility for developing and
improving the science and methods of comparative effectiveness
research. It would consist of no more than 17 members appointed
by the Comptroller General. Members of the methodology
committee would be experts in their scientific field, such as
health services, clinical, and comparative effectiveness
research, biostatistics, genomics, and research methodology.
Stakeholders with such expertise could be appointed to the
methodology committee.
Within two years of enactment (with periodic updates), the
methodology committee would determine a process to establish
and maintain detailed methodological standards for comparative
clinical effectiveness studies. The standards would provide
criteria for study designs that balance generalizability,
timeliness and other factors. Within this time period, the
committee would also provide a translation table that links
comparative effectiveness research methods with specific types
of research questions.
The methodology committee would also establish and maintain
standards regarding clinical outcomes measures, risk-
adjustment, and other aspects of research and assessment; these
standards would be scientifically based and include methods by
which new information, data, or advances in technology may be
considered and incorporated into ongoing research. The process
for developing these standards would include input and allow
for public comment from all relevant experts, stakeholders, and
decision-makers. The standards would also include methods by
which patient subpopulations could be accounted for and
evaluated.
Where appropriate, the methodology committee would build on
existing work on methodological and reporting standards. In
developing and updating such standards, the Institute would
consult or contract with one or more of the following entities:
the Institute of Medicine (IOM), the AHRQ, the National
Institutes of Health (NIH), and academic, non-profit, or other
private entities with relevant expertise.
The methodology committee would also be required to
contract with the IOM within three years after the methodology
committee members are appointed to examine the following: (1)
methods by which aspects of health care delivery systems, such
as benefit design, could be assessed and compared for
effectiveness, risks, benefits, advantages, and disadvantages
in a scientifically valid and standardized way; and (2) methods
by which efficiency and value could be assessed in a
scientifically valid and standardized way.
The methodology committee would submit reports to the Board
concerning the committee's activities and would include
recommendations for the Institute to adopt methodological and
reporting standards and for other actions the committee
determines necessary to comply with such standards, with the
exception of the two three-year studies mentioned above.
Dissemination of Information. The Committee Bill would
require the Institute to disseminate the findings of research
to clinicians, patients, and the public in a comprehensible
manner and form so that they are useful to patients and
providers in making health care decisions. The dissemination of
the research would (1) discuss conclusions and considerations
specific to certain subpopulations, comorbidities, or risk
factors, as appropriate, and (2) include considerations such as
limitations of the research and discussions about what further
research might be needed, as appropriate.
The Institute would be prohibited from disseminating
research findings from a study or assessment that would include
practice guidelines, coverage recommendations, or policy
recommendations. Further, in any dissemination, the inclusion
of data that would violate the privacy of research participants
or violate any confidentiality agreements made with respect to
use of the data would be prohibited.
In order to ensure effective communication for the purpose
of informing higher quality, more effective and timelier
medical decisions, the Institute would develop protocols and
strategies for the dissemination of the research findings. The
Institute would be required to consult with stakeholders in
determining the types of dissemination that would be most
useful to the stakeholders and would be allowed to utilize
multiple formats for conveying findings to different audiences.
Oversight. The Committee Bill would require the Institute
to submit an annual report to Congress, the President, and the
public. The report would contain (1) a description of the
activities conducted during the previous year, including the
use of funds, research projects completed and underway, and a
summary of the findings of such projects; (2) the research
agenda and budget of the coming year; (3) a description of
research priorities, dissemination protocols, and
methodological standards adopted by the Institute; (4) a list
of names of individuals participating in any peer-review
process during a preceding year or years; (5) a description of
the Institute's coordination with other private and public
entities and capacity-building activities for the year; and (6)
any other relevant information such as membership and conflicts
of interest of Board members, Institute staff, advisory panels,
and methodology committees and any bylaws adopted by the Board
during the previous year.
The Committee Bill would establish financial and
governmental oversight of the Institute. The Institute would be
required to undergo annual financial audits conducted by a
private entity. The Comptroller General would also review the
results of the audit and submit a report to Congress annually.
The Comptroller General would have several additional
oversight responsibilities with respect to the Institute. The
Comptroller General would (1) review the processes established
by the Institute, including those regarding the identification
of research priorities and the conduct of research, in order to
determine whether such research is objective and credible,
produced in a manner consistent with the requirements of this
section and developed in a transparent process; (2) review the
overall effectiveness of the Institute and its activities,
including the utilization of the research findings by health
care decision makers and any effect on innovation; (3) submit a
report to Congress at least every five years on the above
reviews, along with recommendations for any such legislative
and administrative action as the Comptroller determines
appropriate; (4) assess the adequacy and use of funding for the
Institute under the PCORTF, including a determination of
whether, based on utilization of the Institute's findings by
public and private payers, funding from private-sector
contributions, the Medicare Trust Funds, and general revenues
are appropriate and should be continued or adjusted. The
Comptroller would submit a report to Congress, together with
any recommendations, on the adequacy of funding assessment not
later than eight years after the date of enactment.
Institute Transparency and Access. The Committee Bill would
direct the Institute to establish procedures to ensure
transparency, credibility, and access through public comment
periods, forums, public availability of information, and
protocols for conflicts of interest.
The Institute would provide for public comment periods of
not less than 45 and not more than 60 days at the following
times: prior to the adoption of national priorities, research
project agendas, methodological standards, peer-review
processes, and dissemination protocols and strategies; prior to
the finalization of individual study designs; and after the
release of draft findings from systematic reviews and
assessments of existing research and evidence. The Institute
would transmit any public comments received in relation to
draft study designs to the entity conducting the research. The
Institute would support additional forums to increase public
awareness and obtain and incorporate public input and feedback
on the identification of research priorities, including
research topics, and the establishment of the research agenda,
research findings, and any other duties, activities, or
processes the Institute determines appropriate.
The Institute would make the following information publicly
available (disclosed through the official public Internet site
and any other forums the Institute deems appropriate): (1) the
process and methods for the conduct of research, including the
identity of the entity conducting research, any links the
entity has to industry (including links that are not directly
tied to particular research being conducted under contract with
the Institute); draft study designs, including research
questions and the finalized study design together with
associated public comments and responses to such comments,
research protocols, including clinical measures taken; methods
of research and analysis used; research results; key decisions
made by the Institute, panels or committees of the Institute;
the identity of investigators conducting such research and any
potential conflicts of interest; and progress reports the
Institute deems appropriate; (2) notice of each of the public
comments periods established by the Institute along with any
deadlines for public comments for such periods; (3) public
comments submitted during each of the public comment periods;
(4) bylaws, processes, and proceedings of the Institute, as
feasible and appropriate; and (5) any report, research
findings, and appropriate related information within 90 days
after the receipt of such article by the Institute.
Conflicts of Interest. The Committee Bill would direct the
Comptroller General to consider and disclose any conflicts of
interest of potential Board appointees. Board members would be
required to recuse themselves when conflicts of interest arise
from participation in Board activities and when such interest
is directly related to and could affect or be affected by the
member's participation. The Committee Bill would require the
Institute to take into consideration any conflicts of interest
of potential appointees, participants, and staff in appointing
members to advisory panels and the methodology committee, in
selecting individuals to contribute to any peer-review process,
and in employing executive staff. Any such conflicts of
interest would be described in the annual report; in the case
of peer-reviewers, such descriptions would not allow peer-
reviewers to be associated with a particular study.
The Institute, its Board or staff, would be prohibited from
accepting gifts, bequeaths, or donations of services or
property. Further, the Institute would be prohibited from
establishing a corporation or generating revenues from
activities other than as provided for under the Committee Bill.
Use of Institute Findings. The Committee Bill would
establish several limitations around the use of the Institute's
comparative effectiveness research findings. First, the
Institute would not mandate coverage, reimbursement, or other
policies for any public or private payer. None of the reports
or research findings would be construed as mandates,
guidelines, or policy recommendations. (The Secretary would not
be prevented from covering the routine costs of clinical care
for Medicare beneficiaries participating in research provided
for by the Institute for whom such costs would normally be
covered under Medicare.)
Second, the Secretary of HHS would be prohibited from
denying coverage based solely on a study conducted by the
Institute. The Secretary would be required to use an iterative
and transparent process when using research from the Institute
in making coverage determinations. The process would allow
stakeholders and other individuals to provide informed and
relevant information with respect to the determination, to
review draft proposals of the determination and to submit
public comments with respect to draft proposals. The Secretary
would be required to consider other relevant evidence and
studies, in addition to research findings from the Institute,
as well as any evidence and research that demonstrates or
suggests a benefit of coverage with respect to subpopulations,
even if the research from the Institute demonstrates or
suggests that, on average with respect to the general
population, the benefits of coverage do not exceed the harm.
The Committee Bill would not supersede or modify the statutory
basis of the reasonable and necessary standard that is used to
make coverage decisions under Present Law.
Third, the Secretary would be prohibited from using the
Institute's research in determining coverage, or creating
reimbursement or incentive programs, for a treatment in ways
that treat extending the life of an elderly, disabled, or
terminally ill patient of lower value than extending the life
of a person who is younger, non-disabled, or not terminally
ill. The Secretary would also be prohibited from using the
Institute's research in determining coverage, or creating
reimbursement or incentive programs, for a treatment in a
manner that precludes, or with intent to discourage, an
individual from choosing a health care treatment based on how
the individual values the tradeoff between extending the length
of their life and the risk of disability.
These limitations would not be construed to limit the
application of differential copayments based on factors such as
cost or type of service. Further, the limitations shall not be
construed to prevent the Secretary from using comparative
effectiveness evidence in determining coverage, reimbursement
or incentive programs based upon comparing the difference in
the effectiveness of alternative treatments in extending a
patient's life due to the patient's age, disability, or
terminal illness. Nothing in the Committee Bill would be
construed to limit comparative effectiveness research or any
other research, evaluation, or dissemination of information
concerning the likelihood that a treatment will result in
disability.
Finally, the Committee Bill would prohibit the Institute
from developing or employing a dollars per quality adjusted
life year (or similar measure that discounts the value of a
life because of a person's disability) as a threshold to
establish what health care is cost-effective or recommended;
and the Secretary shall not use such measure (or similar
measure) as a threshold to determine coverage, reimbursement,
or incentives programs.
Patient-Centered Outcomes Research Trust Fund. The
Committee Bill would create a new trust fund, called the
Patient-Centered Outcomes Research Trust Fund (the `PCORTF') in
the U.S. Treasury to fund the Institute and its activities.
Monies would be directed to this fund from the general fund of
the Treasury as well as the Medicare Trust Funds, as described
below. The Secretary of Health and Humans Services would be the
trustee of the PCORTF.
The following amounts would be transferred to the PCORTF
from the general funds in the Treasury: $10 million in FY2010,
$50 million in FY2011, $150 million in FY2012, and $150 million
for each of FY2013 through FY2019. In addition, the Secretary
would transfer amounts from the Medicare Federal Hospital
Insurance and the Federal Supplemental Medical Trust Funds to
the PCORTF in proportion to total Medicare expenditures that
come from each Fund for a given year. In FY2013, the amount
would be equivalent to $1 multiplied by the average number of
individuals entitled to benefits under Part A or enrolled under
Part B of Medicare during the year. In FY2014 through FY2019,
the amounts would be equivalent to $2, increased by annual
medical inflation after FY2014 multiplied by the average number
of such individuals for the given year.
Additionally, The Committee Bill would transfer $10 million
from funds appropriated to the Secretary under title VIII of
Division A of the American Recovery and Reinvestment Act of
2009 (ARRA) would be transferred to the PCORTF.
In addition to the amounts transferred from the Treasury
and from funds made available by ARRA, the PCORTF would also be
financed from fees on insured and self-insured health plans.
The Committee Bill would create a new Subchapter B of Chapter
34 of the Internal Revenue Code with new sections 4375-4377.
The Committee Bill would impose a fee of $1 in FY2013 and
$2 (updated by the rate of medical inflation in FY2014 and in
subsequent years) in FY2014 through FY2019, on each health
insurance policy in the United States multiplied by the number
of lives covered under that policy. Insurance policies that
primarily provide non-health benefits would be exempt. This fee
would sunset after FY2019.
The Committee Bill would impose a fee of $1 in FY2013 and
$2 (updated by the rate of medical inflation in FY2014 and in
subsequent years) in FY2014 through FY2019, on each self-
insured health plan multiplied by the number of lives covered
under that plan. Applicable self-insured health plans in the
United States would be defined as plans providing accident or
health coverage provided other than through an insurance policy
and maintained by a plan sponsor for the benefit of members,
employees or former employees, or maintained by a multiple
employer welfare arrangement of the Employee Retirement Income
Security Act of 1974 (ERISA, P.L. 93-406), or a rural electric
or telephone cooperative. Plan sponsors would be defined as
employers, employer organizations, or groups or associations
maintaining a plan; or the entity maintaining a plan for two or
more employers, joint employer-employee groups, or employee
organizations, welfare arrangements, or voluntary employee's
beneficiary associations (VEBAs) maintaining such plans. This
fee would sunset after FY2019.
The amounts in the Patient-Centered Outcomes Research Trust
Fund would be available to the Institute to carry out its
duties without further appropriation. However, no amounts could
be appropriated or transferred to the PCORTF if any amounts
expended from the PCORTF were to be used for a purpose that is
not permitted.
SEC. 3502. COORDINATION WITH FEDERAL COORDINATING COUNCIL FOR
COMPARATIVE EFFECTIVENESS RESEARCH
Present Law
Section 804 of Division A of the American Recovery and
Reinvestment Act of 2009 (42 U.S.C. 299b-8) established the
Federal Coordinating Council (FCC) for Comparative
Effectiveness Research, an interagency advisory group that is
required to help coordinate and support the comparative
effectiveness research and to report to the President and
Congress annually. The Federal Coordinating Council for
Comparative Effectiveness Research is composed of up to 15
senior officials (including physicians and others with clinical
expertise) from Federal agencies with health-related programs.
ARRA included language stating that (1) the Council may not
mandate coverage, reimbursement, or other policies for public
and private payers of health care, and (2) Council reports and
recommendations may not be construed as mandates or clinical
guidelines for payment, coverage, or treatment. On March 19,
2009, HHS announced the members of the Council.
Committee Bill
The FCC would be given additional responsibilities with
respect to the new Patient-Centered Outcomes Research
Institute. The FCC would be required to ``provide support'' to
the Institute. The FCC's annual report would be modified to
include (a) an inventory of its activities with respect to
comparative effectiveness research conducted by relevant
Federal departments and agencies; and (b) recommendations
concerning better coordination of comparative effectiveness
research by such departments and agencies. The FCC would
coordinate with the Institute in carrying out its duties under
this section.
SEC. 3503. GAO REPORT ON NATIONAL COVERAGE DETERMINATION PROCESS
Present Law
No provision.
Committee Bill
The Committee Bill would require the Comptroller General to
submit a report to Congress within 18 months after the date of
enactment on the process for making national coverage
determinations under the Medicare program. The report would
include a determination of whether the Secretary of HHS has
complied with applicable law and regulations, including
requirements for consultation with outside experts, providing
appropriate public notice and comment opportunities, and making
appropriate information and data available to the public and to
non-voting members of advisory committees.
Subtitle G--Administrative Simplification
SEC. 3601. ADMINISTRATIVE SIMPLIFICATION
Present Law
To promote the growth of electronic record keeping and
claims processing in the nation's health care system, the
Health Insurance Portability and Accountability Act of 1996
(HIPAA) Administrative Simplification provisions (SSA Sections
1171-1179) instructed the HHS Secretary to adopt standards for
the electronic transmission of routine administrative and
financial health care transactions between health care
providers and health plans, including data elements and code
sets for those transactions. The nine HIPAA-specified
transactions are: (1) health claims or equivalent encounter
information, (2) health care payment and remittance advice, (3)
health claim status inquiry and response, (4) enrollment and
disenrollment in a health plan, (5) eligibility inquiry and
response, (6) health plan premium payments, (7) referral
certification and authorization, (8) first report of injury,
and (9) health claims attachments. HIPAA also directed the
Secretary to adopt a standard for transferring standard data
elements among health plans for the coordination of benefits
and the sequential processing of claims for individuals who
have more than one health plan. The Secretary was to rely on
the recommendations of the National Committee on Vital and
Health Statistics (NCVHS) and consult with other Federal and
state agencies and private organizations. A final rule, which
adopted already widely used standards for seven of the
specified transactions and the coordination of benefits, as
well as code sets to be used in those transactions, was
published in 2000. The transactions standards included: several
Accredited Standards Committee X12 (ASC X12) standards for
health care transactions, and the National Council for
Prescription Drug Programs (NCPDP) standard for pharmacy drug
claim transactions.
The health care payment and remittance advice transaction
is a communication from a health plan to a provider that
includes an explanation of the claim and payment for that
claim. The HIPAA standard for this transaction (i.e., ASC X12
835) can accommodate an electronic funds transfer (EFT), in
which payment is electronically deposited into a designated
bank account. EFT is common in the health care sector--health
plan contracts often require it--but there is no EFT mandate in
Federal law for Medicare, Medicaid, or private health
insurance. However, HHS regulation is gradually requiring
providers in Medicare to receive payments via EFT.
HIPAA does not mandate that providers conduct the
transactions electronically, though health plans increasingly
require it. However, providers that elect to submit one or more
of the HIPAA transactions electronically must comply with the
standard for those transactions. Generally, HIPAA requires
providers and plans to come into compliance within two years of
the standards taking effect. In 2001, Congress enacted the
Administrative Simplification Compliance Act (P.L. 107-105),
which provided for a one-year compliance extension for the
standards adopted in 2000. The Act also mandated that Medicare
claims be submitted electronically in the HIPAA standard
format, with the exception of those from small providers and in
other limited circumstances.
HIPAA directed the Secretary to review and, not more
frequently than once a year, modify the Administrative
Simplification standards. Again, the Secretary was to rely on
the recommendations of the NCVHS and consult with other Federal
and state agencies and private organizations. Any modification
must be completed in a manner that minimizes disruption and the
cost of compliance. On January 16, 2009, CMS published a final
rule adopting updated versions of the HIPAA electronic
transactions standards to replace the versions currently in
use. The compliance deadline for the updated standards is
January 1, 2012.
To date, the Secretary has not issued electronic standards
for two HIPAA transactions: health claims attachment and first
report of injury. In September 2005, the Secretary published a
proposed standard for electronic transmission of health claims
attachments. A claims attachment transaction is used to request
and supply additional data necessary to adjudicate a claim and
typically includes specific clinical information that a health
plan needs in order to decide whether a service should be
covered. The claims attachment standard has yet to be
finalized. The Secretary has not proposed an electronic
standard for first report of injury.
HIPAA also instructed the Secretary to adopt unique
identifiers for health care providers, health plans, employers,
and individuals for use in standard transactions. Unique
identifiers for providers and employers have been adopted,
while the health plan identifier is still under review.
Congress has blocked the development of a unique individual
identifier through language added to the annual Labor-HHS
appropriations bill.
Even though standards have been adopted for seven of the
nine HIPAA transactions, there is still significant variability
in how these transaction standards are implemented by health
plans and clearinghouses. The standards adopted to date do not
include sufficient business guidelines about how to
operationalize them, which allows health plans and
clearinghouses to differ in some of the ways they implement
them. The variability in operating rules around the current
standards makes it challenging, costly, and inefficient for
providers to conduct electronic transactions. This is one of
the reasons providers in the United States do not use
electronic transactions for some of the most basic transactions
related to health care. The Version 5010 and D.0 standards that
will be effective in 2012 will address some but not all of the
issues surrounding this variability with respect to the
implementation of the HIPAA transactions.
This would establish a timeline for accelerating the
development, adoption and implementation of a single set of
consensus-based operating rules for each HIPAA transaction for
which there is an existing standard, with the goal of creating
as much uniformity in the implementation and use of the
transactions standards as possible. Operating rules are defined
as the necessary business rules and guidelines for the
electronic exchange of information that are not defined by the
electronic standards themselves. Also, the Committee Bill would
add EFT for the payment of health claims as a HIPAA
transaction. The Committee Bill would require the HHS Secretary
to adopt a transaction standard for EFT no later than January
1, 2012, to take effect by January 1, 2014.
In adopting the operating rules, the HHS Secretary would
rely on recommendations for such rules developed by a qualified
non-profit entity, as selected by the Secretary. The non-profit
entity would be one that: (1) focuses on administrative
simplification; (2) demonstrates an established multi-
stakeholder, consensus-based process for developing operating
rules; (3) is guided by a public set of principles; (4)
coordinates with the health information technology (HIT) Policy
Committee and HIT Standards Committee, and complements the
efforts of the National Healthcare Coordinator; (5)
incorporates HIPAA standards; (6) supports nondiscrimination
and conflict of interest policies; and (7) allows for public
reviews and updates.
The NCVHS would be required to review the operating rules
developed by the non-profit entity and determine whether the
rules were consistent with the HIPAA standards and with
electronic standards adopted for HIT and whether they
represented a consensus view from the health care industry.
NCVHS would then submit a recommendation to the Secretary on
whether to adopt the operating rules. If so recommended, the
Secretary would be required to adopt the operating rules
through an interim final rule and provide for a 60-day period
of public comment on the rule following its publication.
The Committee Bill would require the HHS Secretary to adopt
operating rules for eligibility for a health plan and health
claim status transactions no later than July 1, 2011, to take
effect by January 1, 2013. Such rules may allow for the use of
a machine readable identification card. Operating rules for
health care payment and remittance advice and EFT would have to
be adopted no later than July 1, 2012, and take effect by
January 1, 2014. The Secretary would have to adopt operating
rules for the remaining completed HIPAA transactions, including
health claims or equivalent encounter information, enrollment
and disenrollment in a health plan, health plan premium
payments, and referral certification and authorization, no
later than July 1, 2014, to take effect by January 1, 2016.
The Committee Bill would also require the HHS Secretary, no
later than January 1, 2014, to establish a review committee to
periodically evaluate the existing HIPAA standards and
operating rules and make recommendations for updating and
improving such standards and rules. The Secretary could
designate the NCVHS as the review committee, or choose any
other appropriate committee within HHS. The review committee
would: (1) no later than April 1, 2014, and not less than
biennially thereafter, conduct hearings to evaluate existing
standards and operating rules; and (2) no later than July 1,
2014, and not less than biennially thereafter, provide
recommendations to the Secretary for updating and improving
such standards and operating rules. The committee would be
required to consider Federal HIT standards and only recommend a
single set of operating rules per transaction standard. The
Secretary would have to adopt the review committee's
recommendations by issuing an interim final rule within 90 days
of receipt of the committee's report, and provide for a 60-day
comment period on the rule following its publication. The
updated standards and operating rules would take effect 25
months after the close of the public comment period and the
same certification and documentation requirements would apply.
The Committee Bill would require health plans, by December
31, 2013, to file a certification statement with the HHS
Secretary that their data and information systems comply with
the most current published standards, including the operating
rules, for the following transactions: eligibility for a health
plan, health claim status, health care payment and remittance
advice and EFT. By December 31, 2015, health plans would be
required to certify to the Secretary that their data and
information systems comply with the most current published
standards and operating rules for the remaining completed HIPAA
transactions, including health claims or equivalent encounter
information, enrollment and disenrollment in a health plan,
health plan premium payments, and referral certification and
authorization. To be certified, health plans would have to
demonstrate that they conduct these electronic transactions in
a manner that fully complies with the regulations and provide
documentation showing that they had completed end-to-end
testing for these transactions with their partners (e.g.,
hospitals and physicians). Health plans would also need to
comply with these certification and compliance requirements for
any entities that provide services through a contract with the
health plan. The Secretary would be permitted to designate an
outside entity to verify that health plans have met the
certification requirements and would have to conduct periodic
audits of plans (as well as the contracted entities mentioned
above) to ensure that they maintain compliance with the
standards and operating rules.
The proposal would require the HHS Secretary, no later than
April 1, 2014, and annually thereafter, to assess a penalty fee
against health plans that fail to meet the certification
requirements. For each day a plan was not in compliance, the
Secretary would assess a fee of $1 per person covered by the
plan for which its data systems for major medical policies are
not in compliance. The fee amount would be increased annually
by the projected percentage increase in total national health
care expenditures, as determined by the Secretary. A health
plan that knowingly misrepresented its compliance status would
be subject to a penalty fee that is double the amount otherwise
imposed. The fee would not exceed a maximum of $20 per covered
life for which the plan's data systems for major medical
policies are not in compliance, except for misrepresentation
where the maximum penalty could reach $40 per covered life.
Data on covered lives would be derived from plans' most recent
corporate filings with the Securities and Exchange Commission.
The HHS Secretary would be required to establish a process
with a reasonable notice and dispute resolution mechanism
before penalties could be assessed by the Secretary of the
Treasury (prior to August 1 of that year). Under the Committee
Bill, the Secretary of the Treasury, acting through the
Financial Management Service (FMS), would be responsible for
the collection of penalty fees. Beginning May 1, 2014, and
annually thereafter, the HHS Secretary would send to the
Treasury Secretary a list of health plans that were assessed a
penalty and the amount of the fee. By August 1, 2014, and
annually thereafter, the Treasury Secretary would provide each
of those health plans with notice of the amount assessed and
the payment due date (November 1 of that year). Unpaid penalty
fees would be increased by an interest payment determined in a
manner similar to underpayment of income taxes and would be
considered debts owed to Federal agencies, which may offset and
reduce the amount of tax refunds otherwise payable to a health
plan. Any fees charged for FMS collection activities would be
passed on to the health plans on a pro-rata basis and added to
the penalty fees.
In addition to the above provisions, the Committee Bill
would require that as of January 1, 2014, no Medicare payment
would be made for benefits delivered under Part A or Part B
other than by EFT or an electronic remittance in a form
specified in the HIPAA payment/remittance advice (i.e., ASC X12
835) standard. It would also require the HHS Secretary, by July
1, 2013, to report to Congress on the extent to which the
Medicare and Medicaid programs and the providers that serve
beneficiaries under those programs transact electronically in
accordance with the HIPAA standards.
Finally, the Committee Bill would require the HHS Secretary
to issue a rule to establish a unique health plan identifier,
based on NCVHS input. The Secretary would be permitted to issue
an interim final rule, which would take effect no later than
October 1, 2012.
Subtitle H--Sense of the Senate Regarding Medical Malpractice
SEC. 3701. SENSE OF THE SENATE REGARDING MEDICAL MALPRACTICE
Present Law
States have the primary authority to define the process for
granting and renewing a medical license, and regulating medical
practice. By extension, states determine the administrative and
legal processes applicable to claims of medical malpractice.
There is a lack of uniformity across states regarding
licensure, medical practice regulation, and legal remedies for
malpractice cases.
Committee Bill
This provision would express the sense of the Senate that
(1) health reform presents an opportunity to address issues
related to medical malpractice and medical liability insurance,
(2) states should be encouraged to develop and test
alternatives to the current malpractice tort system, and (3)
Congress should consider establishing a state demonstration
program to evaluate alternatives to the existing malpractice
tort system with respect to resolution of malpractice claims.
Title IV--Transparency and Program Integrity
Subtitle A--Limitation on Medicare Exception to the Prohibition on
Certain Physician Referrals for Hospitals
SEC. 4001. LIMITATION ON MEDICARE EXCEPTION TO THE PROHIBITION ON
CERTAIN PHYSICIAN REFERRALS FOR HOSPITALS
Present Law
Physicians are generally prohibited from referring Medicare
patients for certain services to facilities in which they (or
their immediate family members) have financial interests.
However, among other exceptions, physicians are not prohibited
from referring patients to whole hospitals in which they have
ownership or investment interests. Providers that furnish
substantially all of their designated health services to
individuals residing in rural areas are exempt as well.
Committee Bill
Beginning no later than 18 months after the date of
enactment, only hospitals meeting certain requirements would be
exempt from the prohibition on self-referral. Hospitals that
have physician ownership and a provider agreement in operation
on November 1, 2009, and that met other specified requirements
would be exempt from this self-referral ban. These requirements
include a limitation on the expansion of the facilities'
service capacity and would address conflict of interest, bona
fide investments, and patient safety issues. In addition, the
hospital could not have converted from an ambulatory surgical
center to a hospital after the date of enactment.
Specifically, to address conflicts of interest, an exempt
hospital would (1) submit an annual report containing the
identity of each physician owner and any other owners or
investors as well as information on the nature and extent of
all ownership interests in the hospital; (2) have procedures in
place to require that any referring physician owner or investor
disclose to each patient (by a time that permits the patient to
make a meaningful decision regarding the receipt of care) their
ownership interest in the hospital and, if applicable, any such
ownership interest of the referring or treating physician; (3)
not condition ownership, either directly or indirectly, on the
physician owners or investors making or influencing referrals
to the hospital; and (4) disclose the fact that the hospital is
owned in whole or in part by physicians on any public website
for the hospital and in public advertising for the hospital.
Information from the annual report would be published and
updated annually on the Internet website of the Centers for
Medicare & Medicaid Services (CMS).
Exempt hospitals would ensure bona fide investments and
proportional returns by meeting the following requirements: (1)
physician owners or investors could not own more than the
percentage of the value of physician ownership determined on
the date of enactment, or the investment interest in an entity
whose assets include the hospital; (2) any ownership or
investment interest offered to a physician could not be offered
on more favorable terms than those offered to an individual who
is not a physician owner or investor; (3) the hospital (or any
owner or investor in the hospital) could not directly or
indirectly provide loans or financing for physician investments
in the hospital; (4) the hospital (or any owner or investor in
the hospital) could not directly or indirectly guarantee a
loan, make a payment toward a loan, or otherwise subsidize a
loan to any individual physician owner or group of physician
owners that is related to acquiring ownership interest in the
hospital; (5) investment returns must be distributed to
investors in the hospital in an amount that is directly
proportional to the ownership or investment interest of the
hospital investor; (6) physician owners and investors could not
receive, directly or indirectly, any guaranteed receipt of or
exclusive right to purchase other business interests related to
the hospital, including the purchase or lease of any property
under the control of other investors in the hospital or located
near the premises of the hospital; and (7) the hospital does
not offer a physician owner the opportunity to purchase or
lease any property under hospital control or under the control
of other owners or investors in the hospital on more favorable
terms than individuals who are not physician owners or
investors.
To ensure patient safety, exempt hospitals would be
required to disclose to all patients prior to admission in the
instance it does not have any physician available on the
premises to provide services during all hours in which the
hospital is providing services. Following such a disclosure,
the hospital would receive a signed acknowledgement from the
patient that no physician will be present. Also the hospital
would be required to have the capacity to provide assessment
and initial treatment for patients and procedures for the
referral and transfer of patients to hospitals with the
capability to treat the needs of the patient involved.
Exempt hospitals would not be permitted to increase the
number of operating rooms, procedure rooms or beds for which
the hospital is licensed after the date of enactment without
going through a process established by the Secretary. A
procedure room includes a room in which catheterizations,
angiographies, angiograms, and endoscopies are performed, but
would not include emergency rooms or departments.
A process would be established to allow certain exempt
hospitals to expand. To implement such a process, the Secretary
would collect physician ownership and investment information
for each hospital. Hospitals eligible for expansion would
include: (1) a hospital that is located in a county where the
population increased during the most recent five year period at
a rate that is at least 150 percent of the State's population
increase, as estimated by the Bureau of Census; (2) a hospital
whose Medicaid inpatient admission percentage is equal to or
greater than the average percentage for all hospitals located
in the county; (3) a hospital that does not discriminate
against beneficiaries of Federal health care programs and does
not permit physicians practicing at the hospital to
discriminate against such beneficiaries; (4) a hospital that is
located in a state with a state average bed capacity less than
the national average; and (5) a hospital that has an average
bed occupancy rate that is greater than the state average bed
occupancy rate. This capacity increase would be limited to
facilities on the main campus of the hospital and could not
exceed 200 percent of the number of operating rooms, procedure
rooms and beds for which the hospital is licensed at the time
of enactment. The process for expansion would allow the
opportunity for community input and should permit an applicable
hospital to apply for the expansion exception up to once every
two years. The Secretary would publish final decisions on an
expansion in the Federal Register no later than 60 days after
receiving a complete application. The Secretary would implement
this process on May 1, 2011, and would promulgate regulations
to carry out this process no later than April 1, 2011. There
would be no administrative or judicial review of this process.
The Secretary would be required to establish policies and
procedures to ensure compliance with these requirements,
beginning on their effective date. The enforcement efforts
would be able to include unannounced site reviews of hospitals.
These audits would begin no later than August 1, 2011. Nothing
in this section would prevent the Secretary from revoking the
hospital's provider agreement if not otherwise in compliance
with Medicare hospital regulations.
Subtitle B--Physician Ownership and Other Transparency
SEC. 4101. TRANSPARENCY REPORTS AND REPORTING OF PHYSICIAN OWNERSHIP OR
INVESTMENT INTERESTS
Present Law
No provision.
Committee Bill
The Committee Bill would amend title XI of the Social
Security Act to provide for transparency in the relationship
between physicians of certain hospitals and applicable
manufacturers with respect to payments and other transfers of
value and physician ownership or investment interests in
manufacturers. It calls for annual transparency reports,
penalties for noncompliance, procedures for the submission of
information and public availability of this information.
The Committee Bill would require any manufacturer of a
covered drug, device, biological, or medical supply that makes
a payment or another transfer of value to a physician, a
physician medical practice, a physician group practice, or a
hospital with an approved medical residency training program to
report annually, in electronic form, specified information on
such transactions to the Secretary of HHS. The report would
include the transfer recipient's name, business address, amount
of the payment, date of the payment, a description of the form
of the payment, a description of the nature of the payment, if
the payment is related to marketing, education, or research
specific to a covered drug, device, biological or medical
supply the name of that product, and any other category of
information that the Secretary determines appropriate. If the
recipient requests a transfer of payment to another entity or
individual at the request of the recipient the manufacturer
should disclose that information. Delayed reporting
requirements would apply for payments made pursuant to a
product development agreement or clinical trial. Some
information would be excluded from these reporting
requirements, including payments or transfers of $10 or less,
unless the aggregate annual payments or transfers to a
recipient exceeds $100, in which case all payments or transfers
must be reported; samples intended for patient use; patient
educational materials; loan of a covered device for a short-
term time period, discounts and rebates, payments made to a
physician for the provision of health care to employees;
payments to a physician who is also a licensed, non-medical
professional if the payment is solely related to non-medical
services; payments to a physician solely for services related
to a civil or criminal action or an administrative proceeding;
and in-kind items used for charity care. This reporting
requirement would begin on March 31, 2012 and continue on the
90th day of each subsequent calendar year.
The Committee Bill also requires any such manufacturer, or
related group purchasing organization to report annually to the
Secretary, in electronic form, certain information regarding
any ownership or investment interest (other than in a publicly
traded security and mutual fund) held by a physician (or an
immediate family member) in the manufacturer or group
purchasing organization during the preceding year.
Manufacturers or group purchasing organizations would be
subject to a civil monetary penalty (CMP) of not less than
$1,000 but not more than $10,000 for each payment or transfer
not reported. The total amount of the penalties for any annual
submission shall not exceed $150,000. Any manufacturer or group
purchasing organization that knowingly fails to submit
information would be subject to a CMP of not less than $10,000
but not more than $100,000 for each payment or transfer not
reported. The total amount of the penalties for this failure to
report category of submissions shall not exceed $1,000,000
annually.
The Committee Bill would require the Secretary to establish
procedures no later than October 1, 2010 to ensure public
availability of this information. Beginning September 30, 2012
and on June 30 of subsequent years, submitted information
should be available on an Internet website that meets
formatting, search, and usability requirements. In addition to
the transfer information, the website should include
information on enforcement actions during the preceding year,
background information on industry-physician relationships, a
separate listing for payments related to clinical research, and
other information that the Secretary deems appropriate. The
Secretary should also allow recipients an opportunity to submit
corrections to their information. This reporting procedure
should be established after consulting the HHS OIG, affected
industry, consumers and other parties in order to ensure that
the information is presented in an appropriate context. The
Secretary would be required to submit an annual report to
Congress and the states beginning April 1, 2012.
Effective January 1, 2011, the Committee Bill would preempt
any state (or political subdivision of a state) law or
regulation that requires manufacturers to disclose the type of
information required under this provision regarding payments or
transfers to covered recipients. The proposal would not preempt
any state (or political subdivision of a state) law or
regulation that requires the disclosure or reporting of (1) any
information not required under this provision; (2) the types of
information excluded from reporting requirements under this
provision, with the exception of the $10 de minimis/$100
aggregate reporting requirement; (3) information by any person
or entity other than an applicable manufacturer or covered
recipient described above; and (4) information reported to a
Federal, state, or local government for public health purposes.
The Secretary would be required to consult with the HHS OIG
on the implementation of this section.
SEC. 4102. DISCLOSURE REQUIREMENTS FOR IN-OFFICE ANCILLARY SERVICES
EXCEPTION TO THE PROHIBITION ON PHYSICIAN SELF-REFERRAL FOR CERTAIN
IMAGING SERVICES
Present Law
Section 1877(b)(2) of the Social Security Act states that
if a physician (or an immediate family member of a physician)
has a financial relationship with an entity, the physician may
not make a referral to the entity for the furnishing of
designated health services (DHS) for which payment may be made
under Medicare or Medicaid, and the entity may not present (or
cause to be presented) a claim to the Federal health care
program or bill to any individual or entity for DHS furnished
pursuant to a prohibited referral. One of the many exceptions
to this prohibition is for in-office ancillary services. This
exception permits the furnishing of certain designated health
services that are ancillary to the referring physician's
medical services and where certain supervision, location, and
billing requirements are met.
Committee Bill
The in-office ancillary exception would include a
requirement that with respect to magnetic resonance imaging,
computed tomography, positron emission tomography, and any
other designated health services as determined by the
Secretary, the referring physician must inform the individual
in writing at the time of the referral that the individual may
obtain the services from a person other than the referring
physician, a physician who is a member of the same group
practice as the referring physician, or an individual who is
directly supervised by the physician or by another physician in
the group practice. The individual must be provided with a
written list of suppliers who furnish these services in the
area in which the individual resides. This new requirement
would apply to services furnished after January 1, 2010.
SEC. 4103. PRESCRIPTION DRUG SAMPLE TRANSPARENCY
Present Law
Section 503 of the Prescription Drug Marketing Act of 1987
(PDMA, P.L. 100-293), regulates the distribution of drug
samples by a drug manufacturer or distributor. Under the
Committee Bill, drug manufacturers or distributors may
distribute drug samples by mail or common carrier to
practitioners licensed to prescribe such drugs or, at the
request of a licensed practitioner, to pharmacies of hospitals
or other health care entities, only in response to a written
request for drug samples, and under a system which requires the
recipient of the drug sample to execute a written receipt for
the drug sample upon delivery and the return of the receipt to
the manufacturer or distributor of record. A written request
for a sample must contain: (1) the name, address, professional
designation, and signature of the practitioner making the
request; (2) the identity of the drug sample requested and the
quantity requested; (3) the name of the manufacturer of the
drug sample requested; and (4) the date of the request. A drug
manufacturer or distributor may distribute drug samples by
means other than mail or a common carrier meets these
requirements and carries out specified additional activities.
Drug manufacturers and distributors must also comply with
certain recordkeeping requirements, including, for a period of
three years, a record of distributions of drug samples which
identifies the drugs distributed and the recipients of the
distributions.
Committee Bill
The Committee Bill would require drug manufacturers and
authorized distributors of an applicable drug to annually
submit to the Secretary of HHS the identity and quantity of
drug samples requested and the identity and quantity of drug
samples distributed under section 503, aggregated by the name,
address, professional designation, and signature of the
practitioner making the request for the sample (or an
individual acting on the practitioner's behalf), as well as any
other category of information that the Secretary determines is
appropriate. An applicable drug is defined to include drugs
that are available by prescription and for which payment is
available under Medicare or Medicaid state plan (or a waiver of
such plan).
SEC. 4104. PHARMACY BENEFIT MANAGERS TRANSPARENCY REQUIREMENTS
Present Law
No provision.
Committee Bill
The Committee Bill would require Pharmacy Benefit Managers
(PBMs) that manage prescription drug coverage under a contract
with a Part D drug plan or a qualified health benefits plan
offered through an exchange established by a state under title
XXII of the Social Security Act to share information with the
Secretary, the plans the PBMs contract with through Medicare
Part D, or the exchanges in a manner, form and timeframe
specified by the Secretary. Plans would only be given access to
information on their own PBM contracts. This information would
be considered confidential except as the Secretary determines
necessary to carry out this provision or the Part D program, to
permit the Government Accountability Office (GAO) or the
Congressional Budget Office (CBO) to review the information, or
for states to carry out title XXII.
The PBM would be required to confidentially disclose
information on: (1) the percent of all prescriptions that are
provided through retail pharmacies compared to mail order
pharmacies, and the generic dispensing and substitution rates
for each type of pharmacy (which includes independent
pharmacies, chain pharmacies, supermarket pharmacies, or mass
merchandiser pharmacies that are licensed as a pharmacy by the
state and that dispense medication to the general public) that
is paid by the PBM under contract; (2) the aggregate amount and
types of rebates, discounts and price concessions that the PBM
negotiates on behalf of the plan and the aggregate amount of
these that are passed through to the plan sponsor and the total
number of prescriptions; and (3) the aggregate amount of the
difference between the amount the plan pays the PBM and the
amount that the PBM pays retail and mail order pharmacies and
the total number of prescriptions. There are not mandates that
these rebates are passed through, only that they be reported to
plans.
Subtitle C--Nursing Home Transparency and Improvement
PART I--IMPROVING TRANSPARENCY OF INFORMATION
SEC. 4201. REQUIRED DISCLOSURE OF OWNERSHIP AND ADDITIONAL DISCLOSABLE
PARTIES INFORMATION
Present Law
In general, Medicare and Medicaid require that skilled
nursing facilities (SNF) and nursing facilities (NF) be
administered in a manner that maintains residents' well being.
To ensure residents' safety, SNF and NF are required to report
the following changes: ownership or controlling interest; the
individuals who are officers, directors, agents or managing
employees; the corporation, association or other company
responsible for facility management; or when changes in the SNF
or NF administrator are provided to state licensing agencies.
Administrators must meet standards established by the
Secretary. SNF and NF also are required to disclose ownership
and other information as a condition of participation,
certification, or re-certification.
A person is considered to have an ownership or controlling
interest, directly or indirectly, when they (1) own five
percent or more of an entity, or they hold a whole or part of
any mortgage, deed of trust, note, or other obligation secured
by the entity (nursing facility) or any property or assets that
equal five percent of the total property; (2) are an officer or
director of the entity, if the entity is organized as a
corporation; or (3) are a partner in the entity if it is
organized as a partnership. To the extent feasible under
regulations, nursing facility entities also are required to
report other ownership and control interests for any people
named as owners or having a control interest in the entity.
Committee Bill
Upon enactment of the Committee Bill and until final
regulations are promulgated by the Secretary covering public
disclosure, SNFs and NF would be required to make available
upon request by the Secretary, the HHS OIG, the state where
facilities are located, and the State LTC Ombudsman,
information on ownership (including direct and indirect
ownership) and additional disclosable parties as well as
information describing the governing body and organizational
structure of the facility. SNF and NF would be required to make
disclosure information available to the public as soon as final
regulations were issued, which the Secretary would be required
to promulgate within two years of enactment of the Committee
Bill.
Information to be disclosed would include the identity of
and information on each member of the governing body of the
facility (name, title, period of service); each person or
entity who is an officer, director, member, partner, trustee,
or managing employee of the facility (name, title, period of
service); and each person or entity who is an additional
disclosable party of the facility. The reporting of each
additional disclosable party's organizational structure also
would be required as well as a description of the relationship
of those additional disclosable parties to the facility and
each other.
SNF and NF would be required to the extent that the
required disclosable party information is submitted to the IRS
as part of Form 990, to the Securities and Exchange Commission,
or to the Secretary, to use that information for reporting.
Ownership and control interests would include direct or
indirect interests, including interests in intermediate
entities. Intermediate interests would include the owner of a
whole or part interest in any mortgage, deed of trust, note or
other obligation secured, in whole or in part, by the entity or
any property or assets of the entity if those interests exceed
five percent of the total property or assets of the entity.
Within two years after enactment, the Secretary would be
required to promulgate final regulations that required SNF and
NF to report the ownership, governing board, and organizational
structure information in a standardized format. These final
regulations would ensure that SNF and NF certify as a condition
of participation and payment under Medicare and Medicaid that
ownership and affiliated party information is accurate and
current. The Secretary would be required to make the
regulations final 90 days after publication in the Federal
Register. The Secretary would also be required to provide
guidance and technical assistance to states on how to adopt the
standardized format.
Additional disclosable parties would be defined as any
person or entity which (1) exercises operational, managerial or
financial control over the facility or part thereof, or
provides policies or procedures for any of the operations of
the facility, or provides financial or cash management services
to the facility; (2) leases or sublease real property to the
facility, or owns a whole or part interest equal to or
exceeding five percent of the total value of such real
property; (3) provides management or administrative services,
management or clinical consulting services, or accounting or
financial services to the facility.
Organizational structure would be defined as officers,
directors and shareholders who have an ownership interest equal
to or greater than five percent in the case of corporations.
For a limited liability company, organizational structure would
be defined as members and managers; for a general partnership,
the partners; for a limited partnership, general partners and
any limited partners who have an ownership interest equal to
ten percent or greater in the limited partnership; for a trust,
the trustees; for an individual, contact information; and for
any other person or entity, such information as the Secretary
determines appropriate.
The Secretary, within one year of promulgating final
regulations requiring reporting by facilities, would be
required to make information about ownership and additional
disclosable parties available to the public.
SEC. 4202. ACCOUNTABILITY REQUIREMENTS FOR SKILLED NURSING FACILITIES
AND NURSING FACILITIES
Present Law
No provision.
Committee Bill
The Committee Bill would require organizations operating
SNFs and NF (operating organizations) to develop and implement
compliance and ethics programs within three years of enactment
of the Committee Bill. The compliance and ethics programs would
need to be effective in preventing and detecting criminal,
civil, and administrative violations and in promoting quality
of care.
Within two years of enactment of the Committee Bill, the
Secretary, working with the HHS OIG, would be required to issue
regulations, for effective ethics and compliance programs,
which may include model compliance programs. The Secretary may
vary program requirements on the elements and formality of the
program based on the size of the organization, with larger
organizations having more formal programs and written policies
that define standards and procedures.
The Secretary would evaluate the compliance and ethics
program regulations and submit a report to Congress within
three years after these regulations are final. The Secretary's
evaluation would determine if the compliance and ethics program
evaluation led to changes in deficiency citations, quality
performance, or changes in other patient care quality metrics.
The Secretary's report to Congress would include
recommendations to improve the compliance and ethics program.
Requirements for operating organizations' compliance and
ethics programs would need to be reasonably designed,
implemented, and enforced to be effective in preventing and
detecting civil, criminal, and administrative violations as
well as promoting quality of care. Operating organizations'
compliance and ethics programs would need to include at least
the following required components:
standards and procedures to guide employees
and other agents that would reduce criminal, civil, and
administrative violations as defined under this
Committee Bill;
identification of individuals with
sufficient authority to be responsible for compliance
with the standards and procedures established by the
organization;
demonstration of diligence in ensuring that
individuals who are at risk for engaging in criminal,
civil, or administrative violations are not delegated
responsibility for implementing or monitoring an
organization's compliance and ethics program;
effective communication of standards and
procedures to employees (and other agents), such as
through training programs or explanatory publications
that practically illustrate what is required;
procedures to detect criminal, civil, and
administrative violations; the use of monitoring and
auditing procedures; and reporting systems that enable
employees and agents to report violations without fear
of retribution;
appropriate disciplinary mechanisms that are
consistently followed to enforce the compliance and
ethics program standards and evidence that, where
appropriate, disciplinary measures were used on
individuals for failing to detect offenses;
appropriate responses to violations and
offenses and mechanisms to prevent future similar
offenses, including modification of operating
organization's compliance and ethics programs; and
processes to periodically reassess
compliance and ethics programs to identify changes
necessary to ensure the program remains effective as
the organization and facilities change.
Before December 31, 2011, the Secretary would be required
to promulgate regulations establishing a quality assurance and
performance improvement (QAPI) plan for SNF and NF. In
addition, the Secretary would be required to provide technical
assistance to facilities on development of ``best practices''
in order to meet QAPI standards. Within one year of the
Secretary issuing final QAPI regulations, facilities would be
required to submit a plan to the Secretary for how facilities
will meet the QAPI standards and implement best practices.
These plans would include how the facility will coordinate the
implementation of the plan with other Medicare and Medicaid
quality assessment and assurance activities.
SEC. 4203. NURSING HOME COMPARE MEDICARE WEBSITE
Present Law
No provision.
Committee Bill
The Committee Bill would require the Secretary to include
additional information on the Medicare Nursing Home Compare
website that is prominent, easily accessible, searchable, and
readily understandable to long-term services and supports
(LTSS) consumers. This additional information would include:
(1) information required to be reported to the Secretary; (2)
information on the ``Special Focus Facility program'' including
the names and locations of those facilities that were newly
enrolled in the program, are enrolled in the program and have
failed to significantly improve, enrolled in the program and
have significantly improved, have gradated from the program and
have closed voluntarily or no longer participate in Medicare or
Medicaid; (3) staffing data for each facility (including
resident census data and data on the hours of care provided per
resident per day, which would include staff turnover and
tenure) in formats that are easily understood by LTSS consumers
(including an explanation of the data); (4) links to state
internet websites regarding state survey and certification
programs, and links to Form 2567 (or successor forms)
inspection reports, links to facility plans of correction or
responses to such reports and information to guide consumers in
how to interpret and understand these reports; (5) a
standardized complaint form (see section 4205 below) including
explanatory material on how to use the complaint forms, and how
to file a complaint with the state survey and certification
program and the State LTSS Ombudsman program; (6) a summary of
information on the number, type, severity and outcome of
substantiated complaints; and (7) the number of adjudicated
instances of criminal violations by a facility or the employees
of a facility that were committed inside the facility.
The Secretary would be required to add the additional
information to the Nursing Home Compare website within one year
of enactment of this Committee Bill, except where the data
would not yet be available.
Also within one year of enactment of this law, the
Secretary would be required to develop and include on the
Nursing Home Compare website a consumer rights information page
that contains links to information along with descriptions on
the following:
documentation that is available to the
public on nursing homes;
general information and tips on choosing a
nursing home that meets the needs of the individual;
general information on consumer rights with
respect to NF;
information on the nursing facility survey
process (on a national and state-specific basis); and
on a state-specific basis, information on
the services available through the State LTSS
Ombudsman.
The Secretary would be required to review the accuracy,
clarity of the presentation, timeliness, and comprehensiveness
of information currently reported on the Nursing Home Compare
website as of the day before enactment of the Committee Bill.
Within one year after implementation of the Committee Bill, the
Secretary would be required to modify or revamp the site in
accordance with comments received from the review. In
conducting the review, the Secretary would be required to
consult with State LTSS Ombudsman programs, consumer advocacy
groups, provider stakeholder groups, and other representatives
of programs or groups as the Secretary determines appropriate.
Within one year after enactment of the Committee Bill,
states would be required to submit survey information to the
Secretary no later than they send such information to the
facility, and the Secretary would be required to update the
Nursing Home Compare website as expeditiously as practicable.
Within one year after enactment of this law, facilities
would be required to have available on request by any
individual reports on surveys, certifications, and complaint
investigations made on the facility for the preceding three
years. Facilities also would be required to post notice of the
availability of such reports in areas of the facility that are
prominent and accessible to the public. The Secretary would be
required to issue guidance to states on establishing electronic
links to Form 2567 reports, to facility plan of correction
reports or other responses to 2567 reports, and posting of
complaint investigation reports.
SEC. 4204. REPORTING OF EXPENDITURES
Present Law
No provision.
Committee Bill
Within two years of enactment of the Committee Bill, SNFs
would be required to separately report wage and benefit
expenditures for direct care staff on facility cost reports.
The reporting of expenditures on wages and benefits for direct
care staff would be required to be broken out into categories
including registered nurses, licensed professional nurses,
certified nurse assistants, and other medical and therapy
staff. Within in one year of enactment of the Committee Bill,
the Secretary would be required to consult with private sector
accountants experienced with Medicare cost reports to assist in
redesigning cost reports to meet the requirements for reporting
expenditures for direct care workers wages and benefits.
Within 30 months of enactment of the Committee Bill, the
Secretary, in consultation with Medicare Payment Advisory
Commission, the Medicaid and CHIP Payment and Access
Commission, HHS OIG, and other experts identified by the
Secretary, would be required to categorize SNF's newly
collected annual expenditure data for each facility, regardless
of payment source, into these functional accounts on an annual
basis: (1) spending on direct care services, including nursing,
therapy, and medical services; (2) spending on indirect care,
including housekeeping and dietary services; (3) capital
assets, including building and land costs; and (4)
administrative services costs.
The Secretary would be required to establish procedures to
make the direct care staff wage and benefit expenditure data
readily available to interested parties upon request, subject
to requirements established by the Secretary.
SEC. 4205. STANDARDIZED COMPLAINT FORM
Present Law
No provision.
Committee Bill
Under the Committee Bill, within one year of enactment of
the Committee Bill, the Secretary would be required to develop
a standardized form for SNF and NF residents and their
representatives to use in filing complaints to state survey and
certification agencies and State LTSS Ombudsman Programs.
States would need to make the new standardized complaint form
available on request to SNF or NF residents; and people acting
on behalf of SNF or nursing facility residents.
States also would be required to establish a complaint
resolution process that ensures that legal representatives of
SNF residents and NF (or other parties responsible for SNF or
NF residents) would not be denied access to residents or
otherwise retaliated against by SNFs or NF for filing quality
of care or other complaints against the facility. States'
complaint resolution procedures would need to include (1)
accurate tracking of complaints including notification to the
complainant that a claim was filed; (2) procedures to determine
complaint severity and to investigate complaints; and (3)
deadlines in which to respond to complaints and for notifying
complainants of investigation outcomes.
SEC. 4206. ENSURING STAFFING ACCOUNTABILITY
Present Law
No provision.
Committee Bill
Within two years after enactment of the Committee Bill, SNF
and NF would be required to electronically submit direct care
staffing information, including agency and contract staff, to
the Secretary. In developing specifications and direct care
staffing data requirements, the Secretary would consult with
State LTSS Ombudsman programs, consumer advocacy groups,
provider stakeholder groups, employees and their
representatives, and other parties deemed appropriate by the
Secretary. The direct care staffing specifications would be
based on payroll and other verifiable data provided by SNFs and
NF to the Secretary in a uniform format.
The reporting requirements would include (1) the category
of work an employee performs such as whether the employee is an
registered nurse, licensed practical nurse, licensed vocational
nurse, certified nurse assistant, therapist, or other medical
personnel; (2) resident census data and information on resident
case mix; (3) a regular reporting schedule; and (4) information
on employee turnover and tenure, and the hours of care provided
per resident per day. The Secretary may first require staffing
data be submitted on selected categories of certified
employees, such as nursing staff, before reporting on other
categories. Reporting on contract staff would be separate from
information on employees.
SEC. 4207. GAO STUDY AND REPORT ON FIVE-STAR QUALITY RATING SYSTEM
Present Law
No provision.
Committee Bill
Under the Committee Bill, the Government Accountability
Office (GAO) would be required to conduct a study on CMS' Five-
Star Quality Rating System for nursing homes which would
include analysis of (1) how the Five-Star System is being
implemented, (2) problems associated with implementation, and
(3) how the Five-Star system could be improved. Within two
years of enactment of the Committee Bill, GAO would be required
to submit a report to Congress on the results of its analysis
of CMS' Five-Star Rating System. The report would include GAO's
recommendations for legislative and administrative action.
PART II--TARGETING ENFORCEMENT
SEC. 4211. CIVIL MONETARY PENALTIES
Present Law
Under Medicaid, states have authority to impose monetary
penalties, deny payments, appoint temporary management to bring
facilities into compliance, and close facilities if NF fail to
meet state plan requirements or have deficiencies that
jeopardize residents' health or safety. State expenses for
enforcement may be funded under the proper and efficient state
plan administration provision of Medicaid. States also have
authority to establish reward programs for NF that deliver the
highest quality care to medical assistance patients and fund
these incentive rewards programs under Medicaid's proper and
efficient administration provisions.
Committee Bill
Within one year of enactment of the Committee Bill and
subject to limitations where reductions are prohibited, if SNFs
or NF self-report and promptly correct deficiencies within ten
calendar days after imposition of a penalty, the Secretary
would be authorized to reduce the imposed civil monetary
penalties (CMPs) by up to 50 percent. Facilities cited for a
repeat deficiency that had been self-reported during the
preceding year where the Secretary had reduced the CMP would
not eligible for a reduction under this provision. In addition,
the Secretary would be prohibited from reducing CMPs where a
deficiency was found to result in a pattern of harm or
widespread harm that immediately jeopardizes the health or
safety of facility residents; or where a deficiency resulted in
the death of a resident.
This provision also would require the Secretary to issue
regulations that provide facilities with the opportunity to
participate in an independent informal dispute resolution
process.
SEC. 4212. NATIONAL INDEPENDENT MONITOR PILOT PROGRAM
Present Law
No provision.
Committee Bill
The Committee Bill would require the Secretary to develop,
test, and implement a two-year pilot for an independent monitor
program. The independent monitor program would oversee large
interstate and intrastate SNF and NF chains.
The Secretary would select SNF and NF chains to participate
in the independent monitor program from among those chains that
apply and submit information as determined by the Secretary.
The Secretary would be required implement the pilot program
under this section within one year after enactment.
The Secretary would evaluate chains to participate in the
independent monitor pilot program based on criteria identified
by the Secretary including where evidence exists that one or
more facilities within the chain experienced serious safety and
quality of care problems. Other criteria the Secretary may use
to select chains to participate in the independent monitor
program would include evaluation of chains with one or more
facilities participating in the ``Special Focus Facility''
program (or a successor), or chains with one or more facilities
with a record of repeated serious safety and quality of care
deficiencies.
Independent monitors that enter into contracts with the
Secretary to participate in this program would (1) conduct
periodic reviews and prepare root-cause quality and deficiency
analyses of chains to assess if chains are in compliance with
state and Federal laws and regulations; (2) undertake sustained
oversight of chains, (public or private) efforts to involve the
owners of, and any additional disclosable parties, the chain in
complying with state and Federal laws and regulations; (3)
analyze the management structure, expenditure distribution, and
nurse staffing levels of chains' individual facilities compared
to resident census, staff turnover rates, and tenure; (4)
report findings and recommendations based on reviews, analyzes,
and oversight the chains, individual facilities of the chain,
the Secretary and states; and (5) publish the results of these
reviews, analyses, and oversight.
Chains that receive a report containing findings and
recommendations from the independent monitor would be required
to submit a report to the independent monitor within ten days
of receipt of the independent monitors report. The report
submitted by the chain would (1) outline corrective actions
that will be taken to implement the recommendations of the
independent monitor or (2) indicate that the chain would not
implement the independent monitor's recommendations. The
independent monitor would have ten days after receiving the
corrective action report from the chain to issue its final
recommendations and submit a report to the chain and facilities
of the chain, the Secretary, and the state or states, as
appropriate. Chains would be responsible for a portion of the
costs associated with appointment of independent monitors.
Within 180 days after completion of the independent monitor
pilot program, the HHS OIG would be required to complete and
submit an evaluation of the independent monitor program. The
HHS OIG's evaluation would contain recommendations as to (1)
the feasibility of making the independent monitor program
permanent; (2) the identification of appropriate procedures and
mechanisms to implement the independent monitor program
permanently; and (3) required legislation and administrative
actions as determined appropriate by the HHS OIG.
SEC. 4213. NOTIFICATION OF FACILITY CLOSURE
Present Law
Medicare and Medicaid law identifies patients' rights and
SNF and NF requirements in ensuring residents are aware of
their rights. Residents have specific discharge and transfer
rights, which include advance notification in cases where
facilities close.
Committee Bill
Within one year after the enactment of the Committee Bill,
administrators of SNF and NF would be required to provide
written notification to the Secretary, the state, the State LTC
Ombudsman, as well as residents and their representatives (or
other responsible parties) of an impending nursing facility
closure. Facilities would be required in the notice to issue a
plan for the transfer and relocation of residents. This
notification would be required to be made at least 60 days
before the SNF or NF closure. In cases where the Secretary
terminates a facility's participation in Medicare or Medicaid,
the notification would be required before the date the
Secretary establishes for the facility termination. The
administrator also would be required to not admit any new
residents after the date the facility closure notice is issued.
Any administrator of a facility that fails to comply with these
requirements would be subject to a civil monetary penalty of up
to $1,000,000 and any other applicable penalties prescribed by
law, and may be subject to exclusion from participation in
Federal health programs.
The resident transfer plan must include assurances that
residents will be transferred to the most appropriate facility
or other settings in terms of quality, services, and location,
taking into consideration the needs and best interests of each
resident. States would be required to ensure that before a
facility closes that all residents have been successfully
relocated to another facility or an alternative home- and
community-based setting. The Secretary would be authorized to
continue making payments during the period beginning with the
notification of intent to close and ending on the date when a
resident is successfully transferred.
SEC. 4214. NATIONAL DEMONSTRATION PROJECTS ON CULTURE CHANGE AND USE OF
INFORMATION TECHNOLOGY IN NURSING HOMES
Present Law
No provision.
Committee Bill
This Committee Bill would require the Secretary to conduct
the following two demonstration projects for SNF and NF: (1)
projects for the development of best practices for facilities
involved in culture change; and (2) projects for the
development of best practices in facilities for the use of
information technology to improve resident care. The Secretary
would be required to submit a report to Congress after
completion of the demonstration projects that evaluates the
projects and makes recommendations for legislation and
administrative actions. The demonstration projects cannot
exceed three years.
Each demonstration project would be required to consider
the special needs of NF and SNF residents with cognitive
impairments, including dementia.
PART III--IMPROVING STAFF TRAINING
SEC. 4221. DEMENTIA AND ABUSE PREVENTION TRAINING
Present Law
Medicare and Medicaid law have provisions that govern
training for nurse aides for both SNF and NF. These laws
require the Secretary to establish requirements for nurse aide
training and competency evaluation programs as well as
parameters for states to use in monitoring these programs.
Committee Bill
Within one year of enactment of the Committee Bill, the
Secretary would be required to revise initial nurse aide
training, competency, and evaluation program requirements to
include dementia management training and patient abuse
prevention. If determined to be appropriate, the Secretary also
may include dementia management training and patient abuse
prevention in ongoing nurse aide training, competency, and
evaluation program requirements.
Subtitle D--Nationwide Program for National and State Background Checks
on Direct Patient Access Employees of Long-Term Care Facilities and
Providers
SEC. 4301. NATIONWIDE PROGRAM FOR NATIONAL AND STATE BACKGROUND CHECKS
ON DIRECT PATIENT ACCESS EMPLOYEES OF LONG-TERM CARE FACILITIES AND
PROVIDERS
Present Law
Section 307 of the Medicare Prescription Drug, Improvement,
and Modernization Act (MMA) of 2003 (P.L. 108-173) established
the framework for a program to evaluate national and state
background checks on prospective employees who have direct
access to patients of long-term services and supports (LTSS)
facilities or providers. A pilot program was administered by
CMS, in consultation with the Department of Justice (DoJ). The
pilot program operated from January 2005 through September 2007
in seven States (Alaska, Idaho, Illinois, Michigan, Nevada, New
Mexico, and Wisconsin) selected by CMS.
Committee Bill
The Committee Bill would require the Secretary to establish
a nationwide program for national and state background checks
on direct patient access employees of certain (LTSS) facilities
or providers and provide Federal matching funds to states to
conduct these activities. Except for certain modifications
described below, the Secretary would be required to carry out
the nationwide program under similar terms and conditions as
the Background Check Pilot program (``pilot program'') under
Section 307 of the MMA, as specified. Under the nationwide
program, the Secretary would be required to enter into
agreements with newly participating states, as specified, and
certain previously participating states, as specified.
According to the procedures established under the pilot
program, certain LTSS providers would be required to obtain
State and national criminal history background checks on their
prospective employees through such means as the Secretary
determines appropriate, efficient, and effective. To conduct
these checks, states would utilize a search of state-based
abuse and neglect registries and specified state and Federal
databases and records. States would be required to describe and
test methods that reduce duplicative fingerprinting, including
the development of a ``rap back'' capability, such that if an
employee is convicted of a crime following the initial
background check and the employee's fingerprints match the
prints on file, the state will immediately inform the employer
of such conviction. States would also require that background
checks conducted under the program remain valid for a period of
time specified by the Secretary.
States that enter into an agreement with the Secretary
would be responsible for monitoring compliance with the
requirements of the nationwide program and have specified
procedures in place, including procedures to: (1) conduct
screening and criminal history background checks; (2) monitor
compliance by LTSS facilities and providers; (3) provide for a
provisional period of employment of a direct patient access
employee, as specified; (4) provide procedures for an
independent process by which a provisional employee or an
employee may appeal or dispute the accuracy of the information
obtained in a background check, as specified; (5) provide for
the designation of a single state agency with specified
responsibilities; (6) determine which individuals are direct
patient access employees; (7) as appropriate, specify offenses,
including convictions for violent crimes; and (8) describe and
test methods that reduce duplicative fingerprinting, as
specified.
States would be required to guarantee (directly or through
donations from public or private entities) a designated amount
of non-Federal contributions to the program. The Federal
government would provide a match equal to three times the
amount a State guarantees; except that Federal funds would not
exceed $3 million for newly participating States and $1.5
million for previously participating States.
The HHS OIG would be required to conduct an evaluation of
the nationwide program, as specified, and submit a report to
Congress no later than 180 days after completion of the
national program. The Secretary of the Treasury would be
required to transfer to HHS an amount specified by the HHS
Secretary as necessary (not to exceed $160 million) to carry
out the nationwide program for fiscal years 2010 through 2012.
Such amounts would be required to remain available until
expended. To provide for conducting the evaluation, the HHS
Secretary would be authorized to reserve no more than $3
million of the amount transferred.
Title V--Fraud, Waste, and Abuse
Subtitle A--Medicare, Medicaid, and CHIP Provisions
SEC. 5001. PROVIDER SCREENING AND OTHER ENROLLMENT REQUIREMENTS UNDER
MEDICARE AND MEDICAID
Present Law
Medicare statute requires the Secretary to establish a
process for enrolling providers and suppliers in the Medicare
program. As part of the enrollment process, the Centers for
Medicare & Medicaid Services (CMS) collects information
necessary to uniquely identify the provider (i.e., proof of
business name, social security number, or tax ID number),
including documentation necessary to verify licensure or
eligibility to furnish Medicare covered items or services. CMS
reserves the right to perform on-site inspections of a provider
or supplier to verify compliance with enrollment requirements.
If these requirements are not met, CMS may revoke Medicare
billing privileges. Although it is not a statutory requirement,
it is CMS policy that providers and suppliers resubmit and
recertify the accuracy of their enrollment information every
five years.
Medicaid statute delegates the administration of the
Medicaid program to the states. There is considerable variation
in how states administer their provider enrollment processes.
State Medicaid agencies determine whether a provider or
supplier is eligible to participate in the Medicaid program
through written agreements with providers and suppliers. The
agreements require that providers and suppliers maintain
specific records, disclose certain ownership information, and
grant access to Federal and state auditors to books and
records. States establish policies for provider and supplier
re-enrollment, although Federal rules must be met for certain
providers, such as nursing facilities and intermediate care
facilities for the mentally retarded (ICF/MRs), which must have
passed survey and certification inspection (at least every 15
months) before they can be re-enrolled as Medicaid providers or
suppliers.
States are required to create a state plan for their
Medicaid and CHIP programs that are subject to approval by CMS.
These documents describe all aspects of each state's Medicaid
and CHIP programs, including administrative activities,
eligibility, enrollment, covered benefits, provider
credentialing, provider reimbursement, quality assurance,
beneficiary cost sharing, and many more program elements. In
creating their Medicaid and CHIP plans, states must conform to
Federal rules and guidance. Whenever states make changes to
their Medicaid or CHIP programs, they must update their state
plans by submitting a state plan amendment (SPA). SPAs also are
subject to review and approval by CMS. As part of the Medicaid
or CHIP plan, states establish participation requirements and
reimbursement rules for different providers and suppliers that
deliver services to Medicaid and CHIP beneficiaries.
Since 1998, the Health and Human Services Office of
Inspector General (HHS OIG) has been issuing a series of
compliance guidance documents for providers participating in
Federal health care programs to assist in preventing fraud,
waste, and abuse. These documents encourage health care
providers to adopt compliance programs and internal control
measures to monitor their adherence to applicable rules,
regulations, and requirements. The adoption of these programs
is not mandatory. There is no Present Law explicitly directing
health care providers to adopt compliance programs.
Committee Bill
The Committee Bill would require that the Secretary, in
consultation with the HHS OIG, establish procedures for
screening providers and suppliers participating in the
Medicare, Medicaid, and CHIP programs. Such procedures must be
established within six months from enactment. Screening
requirements for new providers and suppliers would be effective
within one year and within two years for current providers and
suppliers. The Committee Bill requires that all providers be
screened within three years from the date of enactment.
The Secretary would be required to determine the level of
screening according to the risk of fraud, waste, and abuse with
respect to each category of providers or suppliers. At a
minimum, all providers and suppliers would be subject to
licensure checks. The Secretary would have the authority to
impose additional screening measures based on risk, including
fingerprinting, criminal background checks, multi-state data
base inquiries, and random or unannounced site visits. The
Secretary would also be required to establish procedures for a
provisional period of between 30 days and one year during which
new providers and suppliers would be subject to enhanced
oversight, such as prepayment review and payment caps. The
Secretary would have the authority to impose a moratorium on
enrolling providers within a category of providers and
suppliers if the Secretary determines that a moratorium is
necessary to combat fraud, waste, and abuse. Moratoria would
not be subject to judicial review. In Medicaid, states could
receive exceptions to some of these requirements if they
determined that compliance might reduce beneficiaries' access
to Medicaid services.
An application fee would be imposed on providers and
suppliers to cover the costs of screening. The amount of the
fee would be $350 in 2010, and for 2011 and beyond, the amount
would be the fee for the preceding year adjusted by the
percentage change in the Consumer Price Index (CPI). Current
providers would be offered a discounted screening fee of $250
if they pay it within 12 months of enactment. A hardship
exception to the fee would be permitted. The Secretary would be
required to use all of the fees collected to cover the costs of
screening.
In addition, within 90 days of enactment of this law, CMS
would be required to establish a process for making available
to each state Medicaid and CHIP agency the name, national
provider identifier, and other identifying information for
providers or suppliers who were terminated from the Medicare
program. CMS would be required to make the information on
terminated providers available within 30 days of the providers'
or suppliers' termination.
The Committee Bill would also impose new disclosure
requirements on providers and suppliers enrolling or re-
enrolling in Medicare, Medicaid, or CHIP. Applicants would be
required to disclose current or previous affiliations with any
provider or supplier that has uncollected debt, has had their
payments suspended, has been excluded from participating in a
Federal health care program, or has had their billing
privileges revoked. The Secretary would be authorized to deny
enrollment in these programs if these affiliations pose an
undue risk to a program. Providers would be allowed to appeal
the denial. To satisfy any past-due obligations, the Secretary
would have the authority to adjust future payments to these
providers.
By a date determined by the Secretary, certain providers
and suppliers would be required to establish a compliance
program. The requirements for the compliance program would be
developed by the Secretary and the HHS OIG. In Medicaid, states
would require providers and suppliers to establish a compliance
program for services provided under a Medicaid plan or waiver.
The Secretary would be required to consider the extent to which
compliance programs have been adopted by providers when
creating a timeline for implementation.
States would also be required to comply with the national
system for reporting to the Secretary criminal and civil
convictions, sanctions, negative licensure actions, and other
adverse provider actions. These enhanced state compliance
programs also would require that enrolling or ordering
physicians and referring providers submit NPIs on claims under
a Medicaid state plan or waiver. States could impose other
compliance requirements on providers and suppliers.
SEC. 5002. ENHANCED MEDICARE AND MEDICAID PROGRAM INTEGRITY PROVISIONS
Present Law
Integrated Data Repository. Currently, claims and payment
data for Medicare and Medicaid are housed in multiple
databases. CMS is in the process of consolidating information
stored in these databases into an Integrated Data Repository
(IDR).
Access to Data. The Inspector General Act of 1978 (P.L. 95-
452) and its amendments of 1988 (P.L. 100-504) granted
inspectors general (IGs) substantial independence and powers to
carry out their mandate to combat fraud, waste, and abuse. In
carrying out their functions, IGs have broad authority,
including subpoena power, to access all records and information
of an agency.
Overpayments. In accordance with CMS instructions,
overpayments must be repaid to CMS within 30 days of receiving
a demand letter. If the debt is not paid in full after 30 days,
interest would be assessed and CMS reserves the right to
collect the overpayment by adjusting future payments. Providers
have the option to request an extended repayment plan to pay
off the debt.
National Provider Identifier. Health care providers often
have many different provider numbers, one for billing each
private insurance plan or public health care program. The
administrative simplification provisions of Health Insurance
Portability and Accountability Act (HIPAA, P.L. 104-191)
required the adoption and use of a standard unique identifier
for health care providers or National Provider Identifier
(NPI). CMS issued its final rule implementing the NPI in
January 2004. All health care providers who are considered
covered entities under HIPAA were required to obtain and submit
claims using an NPI as of May 2007. To receive an NPI,
providers must submit an application to CMS. CMS requires an
NPI as a condition of enrollment.
Medicaid Management Information System. States are required
to operate automated claims processing systems, or the Medicaid
Management Information System (MMIS), to administer their state
plans. The Secretary must approve states' MMISs and require
them to meet a number of requirements including compatibility
with Medicare claims processing and information systems, and
consistency with uniform coding systems for claims processing
and data interchange. Among other requirements, MMISs also must
be capable of providing timely and accurate data, meet other
specifications as required by the Secretary, and provide for
electronic transmission of claims data as well as be consistent
with Medicaid Statistical Information Systems data formats.
Permissive Exclusions. HHS OIG has the authority to exclude
health care providers from participation in Federal health care
programs. Exclusions from Federal health programs are mandatory
under certain circumstances and permissive in others (i.e., HHS
OIG has discretion in whether to exclude an entity or
individual). HHS OIG has permissive authority to exclude an
entity or an individual from a Federal health program under
numerous circumstances, including: conviction of certain
misdemeanors relating to fraud, theft, embezzlement, breach of
fiduciary duty or other financial misconduct, and revocation or
suspension of a health care practitioner's license for reasons
bearing on the individual's or entity's professional
competence, professional performance, or financial integrity.
Civil Monetary Penalties. Section 1128A(a) of the Social
Security Act authorizes the imposition of civil monetary
penalties (CMPs) and assessments on a person, including an
organization, agency, or other entity, who engages in various
types of improper conduct with respect to Federal health care
programs, including the imposition of penalties against a
person who knowingly presents or causes to be presented false
or fraudulent claims. This section generally provides for CMPs
of up to $10,000 for each item or service claimed, $15,000 or
$50,000 under other circumstances, and an assessment of up to
three times the amount claimed.
Testimonial Subpoena Authority. The testimonial subpoena
authority grants the authority to issue subpoenas and require
the attendance and testimony of witnesses and the production of
any other evidence that relates to matters under investigation
or in question.
Surety Bonds. To be eligible to receive a provider number
from CMS and bill Medicare, durable medical equipment (DME)
suppliers are required to provide the Secretary with a surety
bond in the amount of $50,000 or greater. A surety bond issued
by a state would satisfy this requirement. The Secretary has
the authority to impose these requirements on other Medicare
Part A and B providers and suppliers, except physicians. Home
health agencies are required to provide the Secretary with a
surety bond equal to ten percent of the aggregate Medicare and
Medicaid payments made to the agency for that year or $50,000,
whichever is smaller. A surety bond for a home health agency is
effective for four years, with limited exceptions.
Payment Suspensions. CMS and its contractors have the
authority to withhold payment in whole or in part if there is
reliable evidence of an overpayment or fraud. CMS regulations
stipulate the procedures CMS and its contractors must follow
when deciding to suspend payment.
Health Care Fraud and Abuse Control Account. Medicare
program integrity and anti-fraud activities are funded through
the Health Care Fraud and Abuse Control (HCFAC) program. HCFAC
was established by HIPAA, which sought to increase and
stabilize Federal funding for health care anti-fraud
activities. HIPAA appropriated funds to HHS, the HHS OIG, the
Department of Justice (DOJ), and the Federal Bureau of
Investigation (FBI) for activities undertaken for fiscal years
1997 through 2003. For each fiscal year after 2003, the amount
was capped at the 2003 level. In December 2006, Congress passed
the Tax Relief and Health Care Act of 2006 (P.L. 109-432) which
extended the mandatory annual appropriation for HCFAC to 2010.
For fiscal years 2007 through 2010, the mandatory annual
appropriation is the limit for the preceding year plus the
percentage increase in the Consumer Price Index for urban
consumers (CPI-U). For each fiscal year beyond 2010, the
mandatory annual appropriation was capped at the FY2010 level.
Every year, HHS and the DOJ are required to release a joint
annual report to Congress on HCFAC results and accomplishments.
These reports include numbers and examples of enforcement
actions, program accomplishments, and amounts deposited into
the Health Insurance Trust Fund resulting from health care
fraud enforcement activities. Congress did not require that HHS
and DOJ include expenditures or results for the Medicare
Integrity Program in these reports.
Medicare and Medicaid Integrity Programs. Under the
Medicare Integrity Program (Medicare MIP), CMS contracts with
private entities to conduct a variety of activities designed to
protect Medicare from fraud, waste, and abuse. Activities
include auditing providers, identifying and recovering improper
payments, educating providers about fraudulent activities, and
instituting a Medicare-Medicaid data matching program.
Established by the Deficit Reduction Act of 2005 (DRA, P.L.
109-171), the Medicaid Integrity Program (Medicaid MIP) is
modeled after Medicare's MIP program. Medicaid MIP provides HHS
with dedicated resources to promote Medicaid integrity; to
contract with entities to reduce fraud, waste, and abuse; and
to add 100 full-time equivalent Medicaid MIP staff. Annual
Medicaid MIP reports to Congress on program accomplishments and
use of funds are required. In addition, the Secretary is
required to develop comprehensive five-year plans for Medicaid
MIP.
Committee Bill
Integrated Data Repository. The Committee Bill would
require CMS to include in the IDR claims and payment data from
the following programs: Medicare (Parts A, B, C, and D),
Medicaid, CHIP, health-related programs administered by the
Departments of Veterans Affairs (VA) and Defense (DOD), the
Social Security Administration, and the Indian Health Service
(IHS). Integrating Medicare and Medicaid data would be a top
priority. Data from the remaining Federal health programs would
be integrated as appropriate.
Access to Data. The Secretary would be required to enter
into data-sharing agreements with the Commissioner of Social
Security, the Secretaries of the VA and DOD, and the Director
of the IHS to help identity fraud, waste, and abuse. The
Committee Bill would grant the HHS OIG and DOJ access to the
IDR for the purposes of conducting law enforcement and
oversight activities consistent with applicable privacy,
security, and disclosure laws, including HIPAA and title V of
the United States Code (USC). For the purpose of protecting
program integrity, the provision would also grant the HHS OIG
authority to obtain information from certain individuals or
entities, such as providers or suppliers that either directly
or indirectly provide medical items and services under a
Federal health care program. This includes access to any
documentation necessary to support a claim under Medicare,
Medicaid, or CHIP (i.e., medical records). The provision would
require the Social Security Commissioner, upon request by the
Secretary or the HHS IG, to enter into an agreement for the
purpose of matching data between SSA and HHS. Agreements would
be required to include safeguards to assure confidentiality.
Individuals who knowingly participate in fraud would be
subject to administrative penalties imposed by the Secretary.
Overpayments. The Committee Bill would require that
overpayments be reported and returned within 60 days from the
date the overpayment was identified or by the date a
corresponding cost report was due, whichever is later.
National Provider Identifier. The Committee Bill would
require the Secretary to issue a regulation mandating that all
Medicare, Medicaid, and CHIP providers include their NPI on
enrollment applications.
Medicaid Management Information System. The Secretary would
have authority to withhold the Federal matching payment to
states for medical assistance expenditures when the state does
not report enrollee encounter data (as defined by the
Secretary) in a timely manner (as determined by the Secretary)
to the state's MMIS.
Permissive Exclusions. The Committee Bill would subject
providers and suppliers to exclusion for providing false
information on any application to enroll or participate in a
Federal health care program. In addition to providers and
suppliers, the provision would apply to Medicaid managed care
organizations, Medicare Advantage (MA) organizations and MA
plans, Prescription Drug Plan (PDP) sponsors and plans, and
providers and suppliers that participate in these Medicare or
Medicaid plans.
Civil Monetary Penalties. The Committee Bill would add
specific actions that would be subject to CMPs. Specifically,
excluded individuals who order or prescribe an item or service,
make false statements on applications or contracts to
participate in a Federal health care program, or who know of an
overpayment and do not return the overpayment would be subject
to CMPs of $50,000 for each violation. In addition to providers
and suppliers, the provision would apply to Medicaid managed
care organizations, Medicare Advantage (MA) organizations and
plans, Prescription Drug Plan (PDP) sponsors and plans, and
providers and suppliers that participate in these Medicare or
Medicaid plans. In addition, such a person may be subject to an
assessment of not more than three times the amount claimed as
the result of the false statement, omission, or
misrepresentation.
Testimonial Subpoena Authority. Sections 205(d) and (e) of
the Social Security Act would apply with respect to the
Secretary's program exclusion authority. The Secretary would be
able to issue subpoenas and require the attendance and
testimony of witnesses and the production of any other evidence
that relates to matters under investigation or in question by
the Secretary. The Secretary would also have the ability to
delegate this authority to the HHS OIG and the Administrator of
CMS for the purposes of a program exclusion investigation.
Certain requirements regarding the serving of subpoenas and
compensation for subpoenaed witnesses may apply. This section
would also provide for judicial enforcement of subpoenas,
including in cases where a person refuses to obey a properly
served subpoena. The Committee Bill would apply to
investigations beginning on or after January 1, 2010.
Surety Bonds. The Committee Bill would require that the
Secretary take into account the volume of billing for a DME
supplier and home health agency when determining the size of
the surety bond. The Secretary would have the authority to
impose this requirement on other providers and suppliers
considered to be at risk by the Secretary. The Committee Bill
would retain the Secretary's authority to waive the requirement
for providers that receive a comparable surety bond under state
law.
Payment Suspensions. The Secretary would have the authority
to suspend payments to a provider or supplier pending a fraud
investigation, except when there is not good cause.
Health Care Fraud and Abuse Control Account. HCFAC funding
would be increased by $10 million each year for fiscal years
2011 through 2020. The provision would also permanently apply
the CPI-U adjustment to HCFAC and MIP funding. Funds would be
allocated in the same manner as in Present Law and would be
available until expended.
Medicare and Medicaid Integrity Programs. The Committee
Bill would require Medicare and Medicaid Integrity Program
contractors to provide the Secretary and the HHS OIG with
performance statistics, including the number and amount of
overpayments recovered, the number of fraud referrals, and the
return on investment for such activities. The Secretary would
also be required to conduct evaluations of eligible entities
not less than every three years. No later than six months after
the end of the fiscal year, the Secretary would be required to
submit a report to Congress describing the use and
effectiveness of MIP funds.
SEC. 5003. ELIMINATION OF DUPLICATION BETWEEN THE HEALTHCARE INTEGRITY
AND PROTECTION DATA BANK AND THE NATIONAL PRACTITIONER DATA BANK
Present Law
The Social Security Act requires the Secretary to develop
and maintain a national health care fraud and abuse data
collection program for the reporting of adverse actions taken
against health care providers or suppliers. The statute
requires the following types of health care related adverse
actions be reported to the Healthcare Integrity and Protection
Data Bank (HIPDB): civil judgments, Federal or state criminal
convictions, actions taken by Federal or state licensing
agencies, and provider exclusions from Medicare and Medicaid.
Only final adverse actions are reportable to the HIPDB.
Administrative fines, citations, corrective action plans, and
other personnel actions are not reportable except under certain
circumstances. Settlements, in which a finding of liability has
not been established, are also not reportable. Federal and
state government agencies as well as health plans are required
to report to the HIPDB. Health plans that fail to report are
subject to a civil monetary penalty of $25,000. The Secretary
is required to publish a report identifying government agencies
that fail to report to the HIPDB. HIPDB cannot duplicate the
reporting requirements established for the National
Practitioner Data Bank (NPDB).
Title IV of the Health Care Quality Improvement Act of 1986
(HCQIA, P.L. 99-660), as amended, established the NPDB. The
NPDB collects and releases data related to the professional
competence of physicians, dentists, and certain health care
practitioners. The types of information included in the NPDB
are medical malpractice payments, certain adverse licensure
actions, adverse privilege actions, adverse professional
society actions, and exclusions from Medicare and Medicaid. The
statute defines the entities eligible to report and query the
databank. Malpractice payers that fail to report are subject to
a civil monetary penalty.
Section 1921 of the Social Security Act expanded the scope
of reporting requirements for the NPDB to encompass additional
adverse licensure actions and actions taken by state licensing
and certification agencies, peer review organizations, and
private accreditation organizations. Section 1921 also required
that actions taken against all health care practitioners be
included in the databank. States are required to have a system
for reporting adverse actions to the NPDB. A final rule
implementing section 1921 has not yet been promulgated.
Committee Bill
The Committee Bill would require the Secretary to maintain
a national health care fraud and abuse data collection program
for reporting certain adverse actions taken against health care
providers, suppliers, and practitioners, and submit information
on the actions to the NPDB. Certain agencies and officials as
well as health care providers that were subject to such adverse
actions would have access to this information, at a reasonable
fee established by the Secretary. During implementation, the
Secretary would be required to take into account the adverse
event reporting requirements established under Part B of the
Health Care Quality Improvement Act of 1986 and those mandated
for states under section 1921 of the Social Security Act.
The Committee Bill would modify the information reporting
requirements for states under Section 1921 and add a
requirement that states have a system for reporting information
with respect to any final adverse action taken against a health
care provider, supplier, or practitioner. States would also be
required to provide the Secretary with access to documents held
by a state licensing or certification agency or state law or
fraud enforcement agency. Individuals and entities would be
protected from any liability with respect to the reporting of
this type of information.
Upon enactment, this provision would require the Secretary
to establish a process to terminate the HIPDB and ensure that
the information that was formerly collected in the HIPDB is
transferred to the NPDB. The transition would be funded from
the fees collected to access the database and from additional
amounts as necessary from the annual HCFAC appropriation
available to the Secretary and the HHS OIG. The Department of
Veterans Affairs (VA) would be exempted from these charges for
one year.
SEC. 5004. MAXIMUM PERIOD OF SUBMISSION OF MEDICARE CLAIMS REDUCED TO
NOT MORE THAN 12 MONTHS
Present Law
Medicare statute requires that payments only be made if a
written request for payment is filed within three calendar
years after the year in which the services were provided. The
Secretary is authorized to reduce this period to no less than
one year if it deems it necessary for the efficient
administration of the program. As established by CMS
regulations, the time limit on submitting a claim for payment
is the close of the calendar year after the year in which the
services were furnished.
Committee Bill
Beginning January 2010, the maximum period for submission
of Medicare claims would be reduced to not more than 12 months.
SEC. 5005. PHYSICIANS WHO ORDER ITEMS AND SERVICES REQUIRED TO BE
MEDICARE ENROLLED PHYSICIANS OR ELIGIBLE PROFESSIONALS
Present Law
Medicare statute defines ``eligible professionals'' as
physicians, certain types of practitioners (i.e., physician
assistants, nurse practitioners, clinical social workers, and
others), physical or occupational therapists, qualified speech
language pathologists, or qualified audiologists.
Committee Bill
Beginning January 1, 2010, the Committee Bill would require
durable medical equipment or home health services to be ordered
by a Medicare eligible professional or physician enrolled in
the Medicare program. The Secretary would have the authority to
extend these requirements to other Medicare items and services,
including covered Part D drugs, to reduce fraud, waste, and
abuse.
SEC. 5006. REQUIREMENT FOR PHYSICIANS TO PROVIDE DOCUMENTATION ON
REFERRALS TO PROGRAMS AT HIGH RISK OF WASTE AND ABUSE
Present Law
HHS OIG has permissive authority to exclude an entity or an
individual from a Federal health care program under numerous
circumstances, including failing to supply documentation
related to payment for items and services.
Committee Bill
Beginning January 1, 2010, the Secretary would have the
authority to disenroll, for no more than one year, a Medicare
enrolled physician or supplier that fails to maintain and
provide access to written orders or requests for payment for
DME, certification for home health services, or referrals for
other items and services. The provision would also extend the
HHS OIG's permissive exclusion authority to include individuals
or entities that order, refer, or certify the need for health
care services that fail to provide adequate documentation to
verify payment.
SEC. 5007. FACE-TO-FACE ENCOUNTER WITH PATIENT REQUIRED BEFORE
PHYSICIANS MAY CERTIFY ELIGIBILITY FOR HOME HEALTH SERVICES OR DURABLE
MEDICAL EQUIPMENT UNDER MEDICARE
Present Law
Home health services are covered under Medicare Parts A and
B. In order to receive payment from Medicare, physicians are
required to certify and re-certify that specified services
(i.e., inpatient psychiatric services, post-hospital extended
care services, and home health services) meet certain
conditions. In the case of home health services, physicians are
required to certify that such services were required because
the individual was confined to his home and needed skilled
nursing care or physical, speech, or occupational therapy; a
plan for furnishing services to the individual has been
established; and such services were provided under the care of
a physician.
In the case of DME, the Secretary is authorized to require
that payment be made for specified covered items and services
only if a physician has submitted to the supplier a written
order for the item.
Committee Bill
The Committee Bill would require that, after January 1,
2010, physicians have a face-to-face encounter (including
through telehealth) with the individual prior to issuing a
certification for home health services or DME as a condition
for payment under Medicare Parts A and B. The Committee Bill
would also apply to physicians making home health and DME
certifications in Medicaid and CHIP. Physicians must document
that they had the face-to-face encounter with the individual
during the six-month period preceding the certification, or
other reasonable timeframe as determined by the Secretary. The
Secretary would be authorized to apply the face-to-face
encounter requirement to other Medicare items and services
based upon a finding that doing so would reduce the risk of
fraud, waste, and abuse.
SEC. 5008. ENHANCED PENALTIES
Present Law
Section 1128A(a) of the Social Security Act authorizes the
imposition of civil monetary penalties (CMPs) and assessments
on a person, including an organization, agency, or other
entity, who engages in various types of improper conduct with
respect to Federal health care programs. This includes the
imposition of penalties against a person who knowingly presents
or causes to be presented false or fraudulent claims. This
section generally provides for CMPs of up to $10,000 for each
item or service claimed, $15,000 or $50,000 under other
circumstances, and an assessment of up to three times the
amount claimed.
Medicare Advantage (MA) plans enter into contracts with the
Secretary to participate in the Medicare program. The Secretary
has the authority to impose sanctions and CMPs on MA plans that
violate the terms of the contract. Among the violations for
which CMPs are authorized are failing to provide medically
necessary care, imposing excess beneficiary premiums, expelling
or refusing to re-enroll beneficiaries, discouraging or denying
enrollment among eligible individuals expected to require
future medical services, misrepresenting or falsifying
information, failing to comply with balance billing
requirements, interfering with a provider's advice to
beneficiaries, and contracting with providers excluded from the
Medicare program. For violations related to discouraging or
denying enrollment or misrepresenting information provided to
the Secretary, the Secretary can impose a maximum penalty of
$100,000. For all other violations, the maximum penalty is
$25,000. The Secretary has the authority to impose additional
penalties for imposing excess beneficiary premiums and engaging
in activities that discourage enrollment.
Committee Bill
The Committee Bill would add a new clause to the CMP
statute: persons who fail to grant timely access, upon
reasonable request to the HHS OIG, for the purpose of audits,
investigations, evaluations, or other statutory functions of
the HHS OIG, would be subject to CMPs of $15,000 for each day
of failure. The provision would also modify the contractual
requirements for MA plans to allow the Secretary to conduct
timely audits and inspections of MA plans.
The Committee Bill would provide that persons who knowingly
make, use, or cause to be made or used any false statement or
record material to a false or fraudulent claim submitted for
payment to a Federal health care program would be subject to a
civil monetary penalty of $50,000 for each violation. This
amendment would apply to violations committed on or after
January 1, 2010.
The Committee Bill would increase the number of violations
that could be subject to the imposition of sanctions and CMPs
by the Secretary. Beginning on the date this bill is enacted,
plans that: (1) enroll individuals in an MA or Part D plan
without their consent (except Part D dual eligibles), (2)
transfer an individual from one plan to another for the purpose
of earning a commission, (3) fail to comply with marketing
requirements and CMS guidance, or (4) employ or contract with
an individual or entity that commits a violation, would be
subject to sanctions imposed by the Secretary. Sanctions would
apply to any employee or agent of an MA or Part D plan, or any
provider or supplier who contracts with an MA or Part D plan.
The Committee Bill would enhance penalties for MA and Part
D plans that misrepresent or falsify information to include an
assessment of up to three times the amount claimed by a plan or
plan sponsor based on the misrepresentation or falsified
information. The provision would apply to violations committed
on or after January 1, 2010.
SEC. 5009. MEDICARE SELF-REFERRAL DISCLOSURE PROTOCOL
Present Law
The Federal prohibition on physician self-referrals
(section 1877 of the Social Security Act) generally provides
that if a physician (or an immediate family member of a
physician) has a financial relationship with an entity, the
physician may not make a referral to the entity for the
furnishing of designated health services (DHS) for which
payment may be made under Medicare or Medicaid. Also, the
entity may not present (or cause to be presented) a claim to
the Federal health care program or bill to any individual,
third-party payer, or other entity for DHS furnished pursuant
to a prohibited referral.
Under section 1128B of the Social Security Act, commonly
referred to as the anti-kickback statute, it is a felony for a
person to knowingly and willfully offer, pay, solicit, or
receive anything of value (i.e., remuneration), directly or
indirectly, overtly or covertly, in cash or in kind, in return
for a referral or to induce generation of business reimbursable
under a Federal health care program.
Violations of these statutes may be subject to various
penalties. Persons found guilty of violating the anti-kickback
statute may be subject to a fine of up to $25,000, imprisonment
of up to five years, and exclusion from participation in
Federal health care programs for up to one year. Violators of
the physician self-referral law may be subject to sanctions
including a denial of payment for relevant services, CMPs, and
exclusion from participation in the Medicare and Medicaid
programs. In addition, the physician self-referral law requires
a person who collects any amount that was billed in violation
of the Social Security Act to refund the amount to the
individual billed in a timely manner.
In 1998, the HHS OIG issued a self-disclosure protocol
(SDP), which included a process by which a health care provider
could voluntarily self-disclose evidence of potential fraud, in
an effort to avoid the costs or disruptions that may be
associated with an investigation or litigation. On March 24,
2009, HHS OIG issued an ``Open Letter to Health Care
Providers'' that makes refinements to the SDP. In the Open
Letter, HHS OIG announced that it would no longer accept
disclosure of a matter that involves only liability under the
physician self-referral law in ``the absence of a colorable
anti-kickback statute violation.'' Further, for anti-kickback-
related submissions accepted into the SDP following the date of
the letter, HHS OIG requires a minimum $50,000 settlement
amount to resolve the matter.
Committee Bill
Within six months of enactment, the Secretary, in
cooperation with the HHS OIG, would be required to establish a
self-referral disclosure protocol (SRDP) to enable health care
providers and suppliers to disclose actual or potential
violations of the physician self-referral law. The SRDP would
be required to include direction to health care providers and
suppliers on: (1) a specific person, official, or office to
which such disclosures would be made and (2) instruction on the
implication of the SRDP on corporate integrity agreements and
corporate compliance agreements.
In addition, the Secretary would be required to post
information on CMS' website to inform stakeholders of how to
disclose actual or potential SRDP violations. The Secretary
would be authorized to reduce the amount for self-referral
violations to an amount less than the amount specified in the
self-referral statute and regulations. In establishing
violation amounts, the Secretary could consider: (1) the nature
and extent of the improper illegal practice, (2) the timeliness
of the self-disclosure, (3) the cooperation in providing
additional information on the disclosure, and (4) other factors
the Secretary considers appropriate.
Within 18 months of establishment of the SRDP, the
Secretary would be required to submit to Congress a report on
the implementation of the self-referral disclosure protocol
under this provision. The Secretary's report would be required
to include: (1) the number of health care providers and
suppliers making disclosures, (2) the amounts collected, (3)
the types of violations reported, and (4) other information
that may be necessary to evaluate the impact of this section.
SEC. 5010. ADJUSTMENTS TO THE MEDICARE DURABLE MEDICAL EQUIPMENT,
PROSTHETICS, ORTHOTICS, AND SUPPLIES COMPETITIVE ACQUISITION PROGRAM
Present Law
Medicare Part B covers a wide variety of durable medical
equipment, prosthetics, orthotics, and other medical supplies
(DMEPOS) if they are medically necessary and are prescribed by
a physician.
Medicare pays for most durable medical equipment (DME) on
the basis of a fee schedule. The Medicare Prescription Drug
Improvement and Modernization Act of 2003 (MMA, P.L. 108-173)
required the Secretary to establish a competitive acquisition
program for specified durable medical equipment; the single
payment amount derived from the competitive acquisition program
would replace the Medicare fee schedule payments. The Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA,
P.L. 110-271) delayed the phase-in and made changes to the
program. The program is to be phased-in, starting in nine of
the largest metropolitan statistical areas (MSAs) in 2009
(round one), expanding to an additional 70 of the largest MSAs
in 2011 (round two), and remaining areas after 2011.
Starting in 2011, the Secretary has the authority to use
information on payments determined in competitive acquisition
areas to adjust payments for items and services in non-
competitive acquisition areas. Before 2015, the following three
types of areas are exempt from the competitive acquisition
program: (a) rural areas; (b) metropolitan statistical areas
(MSA) not selected under round one or round two with a
population of less than 250,000; and (c) areas with a low
population density within an MSA that is otherwise selected to
be part of the competitive acquisition program.
Committee Bill
The Committee Bill would require the Secretary to expand
the number of areas to be included in Round Two of the program
from 79 of the largest MSAs to 100 of the largest MSAs by
including the next 21 largest MSAs by population. The provision
would also require that the Secretary extend the competitive
acquisition program, or apply competitively-bid rates, to the
remaining areas by 2016. All other provisions in Present Law
would remain in place, such as the Secretary's discretion to
exempt rural areas and areas with low population density within
an MSA.
SEC. 5011. EXPANSION OF THE RECOVERY AUDIT CONTRACTOR (RAC) PROGRAM
Present Law
Recovery Audit Contractors (RACs) are private organizations
that contract with the CMS to identify and collect improper
payments made in Medicare's fee-for-service (FFS) program. In
the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA, P.L. 108-173), Congress required the
Secretary to conduct a three-year demonstration of RACs.
However, the Tax Relief and Health Care Act of 2006 (TRHCA,
P.L. 109-432) made the RAC program permanent and mandated its
expansion nationwide by January 1, 2010. The RAC program
expansion still applied only to Medicare Parts A and B. CMS
began the national rollout of the permanent RAC program in 19
states in March 2009.
Committee Bill
By December 31, 2010, states would be required to establish
contracts, consistent with state law, and similar to the
contracts the Secretary has established for the Medicare RAC
program, with one or more RACs. These state RAC contracts would
be established to identify underpayments and overpayments and
to recoup overpayments made for services provided under state
Medicaid plans as well as state plan waivers.
The state Medicaid RAC program would be subject to
exceptions and requirements the Secretary may establish for the
state RAC program or for individual states. States would be
required to provide the Secretary with the following assurances
for their RAC programs:
(1) RACs would be paid only from recovered amounts;
(2) the contracts would be contingent on collecting
overpayments;
(3) payments may be made in such amounts as the state
may specify for identifying underpayments;
(4) the state has a process for appealing adverse RAC
determinations;
(5) the state's RAC program follows requirements
established by the Secretary;
(6) amounts expended by the state would be considered
administrative expenditures (as necessary for the
proper and efficient administration of the state plan
or waiver);
(7) recovered amounts would be subject to a state's
quarterly expenditure estimates and the funding of the
state's share; and
(8) the state will coordinate the efforts of RACs
with other program integrity contractors performing
audits of entities receiving payments for any Medicaid
services, including coordination with Federal and state
law enforcement (the Department of Justice, the Federal
Bureau of Investigation, the HHS OIG, and the state
Medicaid fraud control unit.
The Secretary, acting through CMS, would be required to
coordinate with states on the RAC program expansion to
Medicaid, particularly to ensure that each state enters into a
contract with a RAC prior to December 31, 2010. The Secretary
would be required to promulgate regulations to implement the
RAC program expansion to Medicaid, including conditions for
Federal financial participation.
In addition, the Secretary would be required to submit an
annual report to Congress. The Secretary's report would assess
the effectiveness of the RAC program expansion to Medicaid and
Medicare Parts C and D and also would include recommendations
for expanding or improving the program.
Subtitle B--Additional Medicaid Provisions
SEC. 5101. TERMINATION OF PROVIDER PARTICIPATION UNDER MEDICAID IF
TERMINATED UNDER MEDICARE OR OTHER STATE PLAN
Present Law
Subject to certain exceptions, the Secretary is required to
exclude from Medicare or Medicaid program participation
providers that: (1) have been convicted of a criminal offense
related to the delivery of an item or service under Medicare or
under any state health care program; (2) have been convicted,
under Federal or state law, of a criminal offense relating to
neglect or abuse of patients in connection with the delivery of
a health care item or service; (3) have been convicted of a
felony conviction related to health care fraud, theft,
embezzlement, breach of fiduciary responsibility, or other
financial misconduct; or (4) have been convicted of a felony
relating to the unlawful manufacture, distribution,
prescription, or dispensing of a controlled substance.
The Secretary also may exclude from Medicare or Medicaid
participation providers or individuals involved in acts
specifically prohibited, such as program-related convictions,
license revocation, failure to supply information, and default
on loan or scholarship obligations. CMS must promptly notify
HHS OIG of the receipt of any application for participation
that identifies any principal of a provider that has engaged in
prohibited activities.
Committee Bill
Under the Committee Bill, states would be required to
terminate individuals or entities from their Medicaid programs
if the individuals or entities were terminated from Medicare or
another state's Medicaid program (subject to exclusion
exceptions allowed under the Social Security Act).
SEC. 5102. MEDICAID EXCLUSION FROM PARTICIPATION RELATING TO CERTAIN
OWNERSHIP, CONTROL, AND MANAGEMENT AFFILIATIONS
Present Law
Subject to Federal rules and guidance, states are required
to create a state plan for their Medicaid programs that is
subject to approval by CMS. State plans describe all aspects of
the state's Medicaid program, including participation
requirements and reimbursement rules for different providers
and suppliers that deliver services to Medicaid beneficiaries.
Medicaid law requires states to exclude individuals or entities
from Medicaid participation when a state is directed to do so
by the Secretary and to deny payment for any item or service
furnished by the individual or entity. States are required to
exclude these individuals and deny payment for a period
specified by the Secretary.
Committee Bill
Under the Committee Bill, Medicaid agencies would be
required to exclude individuals or entities from participating
in Medicaid for a specified period of time if the entity or
individual owns, controls, or manages an entity that: (1) has
failed to repay overpayments during the period as determined by
the Secretary; (2) is suspended, excluded, or terminated from
participation in any Medicaid program; or (3) is affiliated
with an individual or entity that has been suspended, excluded,
or terminated from Medicaid participation.
SEC. 5103. BILLING AGENTS, CLEARINGHOUSES, OR OTHER ALTERNATE PAYEES
REQUIRED TO REGISTER UNDER MEDICAID
Present Law
As a condition of participation, certification, or
recertification in Medicaid, the Secretary requires disclosing
entities to supply upon request, either to the Secretary or the
state Medicaid agency, information on the identity of each
person with ownership or control interests in the entity or
subcontractor that is equal to five percent or more of such
entity. Disclosing entities include providers of service,
independent clinical laboratories, renal disease facilities,
managed care organizations or health maintenance organizations,
entities (other than individual practitioners or groups of
practitioners) that furnish or arrange for services, carriers
or other agencies, or organizations that act as fiscal
intermediaries or agents for service providers. Federal rules
applicable to Medicaid state plans also require states to
exclude individuals or entities from Medicaid participation
when a state is directed to do so by the Secretary and to deny
payment for any item or service furnished by the individual or
entity. States are required to exclude these individuals and
deny payment for a period as specified by the Secretary.
Committee Bill
Under the Committee Bill, any agents, clearinghouses, or
other alternate payees that submit claims on behalf of health
care providers would be required to register with the state and
the Secretary in a form and manner specified by the Secretary.
SEC. 5104. REQUIREMENT TO REPORT EXPANDED SET OF DATA ELEMENTS UNDER
MMIS TO DETECT FRAUD AND ABUSE
Present Law
States are required to operate automated claims processing
systems, or the Medicaid Management Information System (MMIS),
to administer their state plans. The Secretary must approve
states' MMISs to ensure that they meet a number of requirements
including compatibility with Medicare claims processing and
information systems and consistency with uniform coding systems
for claims processing and data interchange. Among other
requirements, MMISs also must be capable of providing timely
and accurate data, provide for electronic transmission of
claims data and be consistent with Medicaid Statistical
Information Systems data formats, and meet other specifications
as required by the Secretary.
Committee Bill
Beginning January 1, 2010, states would be required to
submit from the automated data system data elements as
determined necessary by the Secretary for program integrity,
program oversight, and administration. The Secretary also would
determine how frequently these data would need to be submitted.
In addition, Medicaid managed care entities would be required
to submit data elements as determined necessary by the
Secretary for program integrity, program oversight, and
administration. Medicaid managed care organizations would need
to submit these data for contract years beginning January 1,
2010 at a frequency to be determined by the Secretary.
SEC. 5105. PROHIBITION ON PAYMENTS TO INSTITUTIONS OR ENTITIES LOCATED
OUTSIDE OF THE UNITED STATES
Present Law
No provision.
Committee Bill
Under the Committee Bill, states would be prohibited from
making any payments for items or services provided under a
Medicaid state plan or waiver to any financial institution or
entity located outside of the United States.
SEC. 5106. OVERPAYMENTS
Present Law
Under Present Law, when states discover that overpayments
have been made to individuals or other entities, they have 60
days to recover or attempt to recover the overpayment before an
adjustment is made to their Federal matching payment.
Adjustments in Federal payments are made at the end of the 60
days, whether or not recovery is made. When states are unable
to recover overpayments because the debts were discharged in
bankruptcy or were otherwise uncollectable, Federal matching
payments would not be adjusted or would be readjusted in cases
where the 60 day recovery deadline had passed.
Committee Bill
The Committee Bill would extend the period for states to
repay overpayments to one year when a final determination of
the amount of the overpayment has not been determined due to an
ongoing judicial or administrative process. When overpayments
due to fraud are pending, state repayments of the Federal
portion would not be due until 30 days after the date of the
final judgment. This amendment would take effect on the date of
enactment and apply to overpayments discovered after that date.
SEC. 5107. MANDATORY STATE USE OF NATIONAL CORRECT CODING INITIATIVE
Present Law
In 1996, to help ensure correct payment for reimbursement
claims, Centers for Medicare & Medicaid Services implemented a
national correct coding initiative (NCCI). Under NCCI, CMS'
contractors use automated pre-payment edits to review Medicare
claims submitted by Part B providers. Medicare contractors use
software to scan claims and apply NCCI edits designed to detect
anomalies that indicate a claim has incorrect information. For
example, NCCI edits can detect claims with duplicate services
delivered to the same beneficiary on the same date of service.
In addition, by comparing medical billing codes, NCCI software
can identify when medical procedures were billed erroneously as
service bundles (when individual services are grouped together,
but cheaper comprehensive codes are available to describe the
same services) or in other cases when services should have been
billed individually, but were grouped as bundled services.
Medicaid does not require the use of NCCI prepayment edits.
Committee Bill
Beginning October 1, 2010 states would be required to
incorporate into their Medicaid Management Information Systems
methodologies compatible with Medicare's NCCI that promoted
correct coding and controlled improper coding. By September 1,
2010, the Secretary would be required to: (1) identify NCCI
methodologies (or methodologies of any successor initiative)
that are compatible with claims filed for Medicaid payment; and
(2) identify methodologies that would be applicable to
Medicaid, but for which no Medicare NCCI methodologies have
been established. The Secretary also would be required to
notify states of the NCCI methodologies that were identified
and how states should incorporate those methodologies into
their Medicaid claims processing systems. The Secretary would
be required to submit a report to Congress that includes the
notice to states about the NCCI methodologies and analysis that
supports the identification of NCCI methodologies to be applied
to Medicaid claims by March 1, 2011.
SEC. 5108. GENERAL EFFECTIVE DATE
Present Law
No provision.
Committee Bill
States would be required to have implemented fraud, waste,
and abuse programs required under the America's Healthy Future
Act of 2009 before January 1, 2011, regardless of whether final
regulations to implement these provisions were promulgated.
Title VI--Revenue Provisions
SEC. 6001. TAXATION OF INSURANCE COMPANIES
Present Law
Present Law provides special rules for determining the
taxable income of insurance companies (subchapter L of the
Code). Separate sets of rules apply to life insurance companies
and to property and casualty insurance companies. Insurance
companies generally are subject to Federal income tax at
regular corporate income tax rates.
An insurance company that provides health insurance is
subject to Federal income tax as either a life insurance
company or as a property insurance company, depending on its
mix of lines of business and on the resulting portion of its
reserves that are treated as life insurance reserves. For
Federal income tax purposes, an insurance company is treated as
a life insurance company if the sum of its (1) life insurance
reserves and (2) unearned premiums and unpaid losses on
noncancellable life, accident or health contracts not included
in life insurance reserves, comprise more than 50 percent of
its total reserves.\22\
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\22\Sec. 816(a).
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Some insurance providers may be exempt from Federal income
tax under section 501(a) if specific requirements are
satisfied. Section 501(c)(8), for example, describes certain
fraternal beneficiary societies, orders, or associations
operating under the lodge system or for the exclusive benefit
of their members that provide for the payment of life, sick,
accident, or other benefits to the members or their dependents.
Section 501(c)(9) describes certain voluntary employees'
beneficiary associations that provide for the payment of life,
sick, accident, or other benefits to the members of the
association or their dependents or designated beneficiaries.
Section 501(c)(12)(A) describes certain benevolent life
insurance associations of a purely local character. Section
501(c)(15) describes certain small non-life insurance companies
with annual gross receipts of no more than $600,000 ($150,000
in the case of a mutual insurance company). Section 501(c)(26)
describes certain membership organizations established to
provide health insurance to certain high-risk individuals.
Section 501(c)(27) describes certain organizations established
to provide workmen's compensation insurance. A health
maintenance organization that is tax-exempt under section
501(c)(3) or (4) is not treated as providing prohibited\23\
commercial-type insurance, in the case of incidental health
insurance provided by the health maintenance organization that
is of a kind customarily provided by such organizations.
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\23\Sec. 501(m).
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Treatment of employer-sponsored health coverage. As with
other compensation, the cost of employer-provided health
coverage is a deductible business expense under section
162.\24\ Employer-provided health insurance coverage is
generally not included in an employee's gross income.
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\24\Sec. 162. However see special rules in section 419 and 419A for
the deductibility of contributions to welfare benefit plans with
respect to medical benefits for employees and their dependents.
---------------------------------------------------------------------------
In addition, employees participating in a cafeteria plan
may be able to pay the portion of premiums for health insurance
coverage not otherwise paid for by their employers on a pre-tax
basis through salary reduction.\25\ Such salary reduction
contributions are treated as employer contributions for Federal
income purposes, and are thus excluded from gross income.
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\25\Sec. 125.
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Employers may agree to reimburse medical expenses of their
employees (and their spouses and dependents), not covered by a
health insurance plan, through flexible spending arrangements
which allow reimbursement not in excess of a specified dollar
amount (either elected by an employee under a cafeteria plan or
otherwise specified by the employer). Reimbursements under
these arrangements are also excludible from gross income as
employer-provided health coverage.
A flexible spending arrangement for medical expenses under
a cafeteria plan (``Health FSA'') is an unfunded arrangement
under which employees are given the option to reduce their
current cash compensation and instead have the amount made
available for use in reimbursing the employee for his or her
medical expenses.\26\ Health FSAs that are funded on a salary
reduction basis are subject to the requirements for cafeteria
plans, including a requirement that amounts remaining under a
Health FSA at the end of a plan year must be forfeited by the
employee (referred to as the ``use-it-or-lose-it rule'').\27\
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\26\Sec. 125. Prop. Treas. Reg. sec. 1.125-5 provides rules for
Health FSAs. There is a similar type of flexible spending arrangement
for dependent care expenses.
\27\Sec. 125(d)(2). A cafeteria plan is permitted to allow a grace
period not to exceed two and one-half months immediately following the
end of the plan year during which unused amounts may be used. Notice
2005-42, 2005-1 C.B. 1204.
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Alternatively, the employer may specify a dollar amount
that is available for medical expense reimbursement. These
arrangements are commonly called Health Reimbursement
Arrangements (``HRAs''). Some of the rules applicable to HRAs
and Health FSAs are similar (e.g., the amounts in the
arrangements can only be used to reimburse medical expenses and
not for other purposes), but the rules are not identical. In
particular, HRAs cannot be funded on a salary reduction basis
and the use-it-or-lose-it rule does not apply. Thus, amounts
remaining at the end of the year may be carried forward to be
used to reimburse medical expenses in following years.\28\
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\28\Guidance with respect to HRAs, including the interaction of
FSAs and HRAs in the case of an individual covered under both, is
provided in Notice 2002-45, 2002-2 C.B. 93.
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Present Law provides that individuals with a high
deductible health plan (and generally no other health plan) may
establish and make tax-deductible contributions to a health
savings account (``HSA''). An HSA is subject to a condition
that the individual is covered under a high deductible health
plan (purchased either through the individual market or through
an employer). Subject to certain limitations,\29\ contributions
made to an HSA by an employer, including contributions made
through a cafeteria plan through salary reduction, are excluded
from income (and from wages for payroll tax purposes).
Contributions made by individuals are deductible for income tax
purposes, regardless of whether the individuals itemize.
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\29\For 2009, the maximum aggregate annual contribution that can be
made to an HSA is $3,000 in the case of self-only coverage and $5,950
in the case of family coverage ($3,050 and $6,150 for 2010). The annual
contribution limits are increased for individuals who have attained age
55 by the end of the taxable year (referred to as ``catch-up
contributions''). In the case of policyholders and covered spouses who
are age 55 or older, the HSA annual contribution limit is greater than
the otherwise applicable limit by $1,000 in 2009 and thereafter.
Contributions, including catch-up contributions, cannot be made once an
individual is enrolled in Medicare.
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The Employee Retirement Income Security Act of 1974
(``ERISA'')\30\ preempts State law relating to certain employee
benefit plans, including employer-sponsored health plans. While
ERISA specifically provides that its preemption rule does not
exempt or relieve any person from any State law which regulates
insurance, ERISA also provides that an employee benefit plan is
not deemed to be engaged in the business of insurance for
purposes of any State law regulating insurance companies or
insurance contracts. As a result of this ERISA preemption,
self-insured employer-sponsored health plans need not provide
benefits that are mandated under State insurance law.
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\30\Pub. L. No. 93-406.
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While ERISA does not require an employer to offer health
benefits, it does require compliance if an employer chooses to
offer health benefits, such as compliance with plan fiduciary
standards, reporting and disclosure requirements, and
procedures for appealing denied benefit claims. ERISA was
amended (as well as the Public Health Service Act and the
Internal Revenue Code) in the Consolidated Omnibus Budget
Reconciliation Act of 1985 (``COBRA'')\31\ and the Health
Insurance Portability and Accountability Act of 1996
(``HIPAA''),\32\ adding other Federal requirements for health
plans, including rules for health care continuation coverage,
limitations on exclusions from coverage based on preexisting
conditions, and a few benefit requirements such as minimum
hospital stay requirements for mothers following the birth of a
child.
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\31\Pub. L. No. 99-272.
\32\Pub. L. No. 104-191.
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COBRA requires that a group health plan offer continuation
coverage to qualified beneficiaries in the case of a qualifying
event (such as a loss of employment).\33\ A plan may require
payment of a premium for any period of continuation coverage.
The amount of such premium generally may not exceed 102 percent
of the ``applicable premium'' for such period and the premium
must be payable, at the election of the payor, in monthly
installments. The applicable premium for any period of
continuation coverage means the cost to the plan for such
period of coverage for similarly situated non-COBRA
beneficiaries with respect to whom a qualifying event has not
occurred, and is determined without regard to whether the cost
is paid by the employer or employee. There are special rules
for determining the applicable premium in the case of self-
insured plans. Under the special rules for self-insured plans,
the applicable premium generally is equal to a reasonable
estimate of the cost of providing coverage for similarly
situated beneficiaries which is determined on an actuarial
basis and takes into account such other factors as the
Secretary of Treasury may prescribe in regulations.
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\33\A group health plan is defined as a plan (including a self-
insured plan) of, or contributed to by, an employer (including a self-
employed person) or employee organization to provide health care
(directly or otherwise) to the employees, former employees, the
employer, others associated or formerly associated with the employer in
a business relationship, or their families. The COBRA requirements are
enforced through the Code, ERISA, and the Public Health Service Act
(``PHSA'').
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Present Law imposes an excise tax on group health plans
that fail to meet HIPAA and COBRA requirements.\34\ The excise
tax generally is equal to $100 per day per failure during the
period of noncompliance and is imposed on the employer
sponsoring the plan.
---------------------------------------------------------------------------
\34\Secs. 4980B and 4980D.
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Deduction for health insurance costs of self-employed
individuals. Under Present Law, self-employed individuals may
deduct the cost of health insurance for themselves and their
spouses and dependents.\35\ The deduction is not available for
any month in which the self-employed individual is eligible to
participate in an employer-subsidized health plan. Moreover,
the deduction may not exceed the individual's earned income
from self-employment. The deduction applies only to the cost of
insurance (i.e., it does not apply to out-of-pocket expenses
that are not reimbursed by insurance). The deduction does not
apply for self-employment tax purposes. For purposes of the
deduction, a more than two percent shareholder-employee of an S
corporation is treated the same as a self-employed individual.
Thus, the exclusion for employer provided health care coverage
does not apply to such individuals, but they are entitled to
the deduction for health insurance costs as if they were self-
employed.
---------------------------------------------------------------------------
\35\Sec. 162(l).
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Deductibility of excise taxes. In general, excise taxes may
be deductible under section 162 of the Code if such taxes are
paid or incurred in carrying on a trade or business, and are
not within the scope of the disallowance of deductions for
certain taxes enumerated in section 275 of the Code.
Committee Bill
The Committee Bill imposes an excise tax on insurers if the
aggregate value of employer-sponsored health insurance coverage
for an employee exceeds a threshold amount. The tax is equal to
40 percent of the aggregate value that exceeds a threshold
amount. For 2013, the threshold amount is $8,000 for individual
coverage and $21,000 for family coverage. The threshold amounts
are indexed to the Consumer Price Index for Urban Consumers
(``CPI-U'') as determined by the Department of Labor beginning
in 2014, plus one percentage point. The excise tax is imposed
pro rata on the issuers of the insurance. In the case of a
self-insured group health plan, a Health FSA or an HRA, the
excise tax is paid by the entity that administers benefits
under the plan or arrangement (``plan administrator''). Where
the employer acts as plan administrator to a self-insured group
health plan, a Health FSA or an HRA, the excise tax is paid by
the employer. Where an employer contributes to an HSA, the
employer is responsible for payment of the excise tax, as the
insurer.
Employer-sponsored health insurance coverage is health
coverage offered by an employer to an employee without regard
to whether the employer provides the coverage (and thus the
coverage is excludable from the employee's gross income) or the
employee pays for the coverage with after-tax dollars.
Employer-sponsored health insurance coverage includes both
fully-insured and self-insured health coverage excludable from
the employee's gross income, including, in the self-insured
context, on-site medical clinics that offer more than a de
minimus amount of medical care to employees and executive
physical programs. In the case of a self-employed individual,
employer-sponsored health insurance coverage is coverage for
any portion of which the self-employed individual claims a
deduction under section 162(l).
In determining the amount by which the value of employer-
sponsored health insurance coverage exceeds the threshold
amount, the aggregate value of all employer-sponsored health
insurance coverage is taken into account, including coverage in
the form of reimbursements under a Health FSA or an HRA,
contributions to an HSA, and coverage for dental, vision, and
other supplementary health insurance coverage. The value of
employer-sponsored coverage for disability benefits or long
term care under an accident or health plan is not taken into
account in the determination of whether the value of health
coverage exceeds the threshold amount. The value of employer-
sponsored health insurance coverage does not include the value
of fixed indemnity health coverage that is purchased
exclusively by the employee with after-tax dollars; however, it
includes the value of such coverage if any portion of the
coverage is employer-provided. Fixed indemnity health coverage
pays fixed dollar amounts based on the occurrence of qualifying
events, including but not limited to the diagnosis of a
specific disease, an accidental injury or a hospitalization,
provided that the coverage is not coordinated with other health
coverage.
Calculation and proration of excise tax and reporting requirements
Amount of Applicable Premium. Under the provision, the
aggregate value of all employer-sponsored health insurance
coverage, including dental, vision, and other supplementary
health insurance coverage is generally calculated in the same
manner as the applicable premiums for the taxable year for the
employee determined under the rules for COBRA continuation
coverage, but without regard to the excise tax. If the plan
provides for the same COBRA continuation coverage premium for
both individual coverage and family coverage, the plan is
required to calculate separate individual and family premiums
for this purpose. In determining the coverage value for
retirees, employers may elect to treat pre-65 retirees together
with post-65 retirees.
Value of Coverage in the Form of Health FSA Reimbursements.
In the case of a Health FSA from which reimbursements are
limited to the amount of the salary reduction, the value of
employer-sponsored health insurance coverage is equal to the
dollar amount of the aggregate salary reduction contributions
for the year. To the extent that the Health FSA provides for
reimbursement in excess of the amount of the employee's salary
reduction, the value of the coverage generally is determined in
the same manner as the applicable premium for COBRA
continuation coverage. If the plan provides for the same COBRA
continuation coverage premium for both individual coverage and
family coverage, the plan is required to calculate separate
individual and family premiums for this purpose.
Amount Subject to the Excise Tax and Reporting Requirement.
The amount subject to the excise tax on high cost employer-
sponsored health insurance coverage for each employee is the
sum of the aggregate premiums for health insurance coverage,
the amount of any salary reduction contributions to a Health
FSA for the taxable year, and the dollar amount of employer
contributions to an HSA, minus the dollar amount of the
threshold. The aggregate premiums for health insurance coverage
include all employer-sponsored health insurance coverage
including coverage for major medical, dental, vision and other
supplementary health insurance coverage. The applicable premium
for health coverage provided through an HRA is also included in
this aggregate amount.
Under a separate rule (described below), an employer is
required to disclose the aggregate premiums for health
insurance coverage for each employee on his or her annual Form
W-2.
Under the Committee Bill, the excise tax is allocated pro
rata among the insurers, with each insurer responsible for
payment of the excise tax on an amount equal to the amount
subject to the total excise tax multiplied by a fraction, the
numerator of which is the amount of employer-sponsored health
insurance coverage provided by that insurer to the employee and
the denominator of which is the aggregate value of all
employer-sponsored health insurance coverage provided to the
employee. In the case of a self-insured group health plan, a
Health FSA or an HRA, the excise tax is allocated to the plan
administrator. If an employer contributes to an HSA, the
employer is responsible for payment of the excise tax, as the
insurer. The employer is responsible for calculating the amount
subject to the excise tax allocable to each insurer and plan
administrator and for reporting these amounts to each insurer,
plan administrator and the Secretary, in such form and at such
time as the Secretary may prescribe. Each insurer and plan
administrator is then responsible for calculating, reporting
and paying the excise tax to the IRS on such forms and at such
time as the Secretary may prescribe.
For example, if in 2013 an employee elects family coverage
under a fully-insured health care policy covering major medical
and dental with a value of $28,000, the amount subject to the
excise tax is $7,000 ($28,000 less the threshold of $21,000).
The employer reports $7,000 as taxable to the insurer, which
calculates and remits the excise tax to the IRS.
Alternatively, if in 2013 an employee elects family
coverage under a fully-insured major medical policy with a
value of $23,000 and a separate fully-insured dental policy
with a value of $2,000 and contributes $3,000 to a Health FSA,
the employee has an aggregate health insurance coverage value
of $28,000. The amount subject to the excise tax is $7,000
($28,000 less the threshold of $21,000). The employer reports
$5,750 ($7,000 $23,000/$28,000) as taxable to the
major medical insurer and $500 ($7,000 $2,000/
$28,000) as taxable to the dental insurer, each of which then
calculates and remits the excise tax to the IRS. If the
employer uses a third-party administrator for the Health FSA,
the employer reports $750 ($7,000 $3,000/$28,000) to
the administrator and the administrator calculates and remits
the excise tax to the IRS. If the employer is acting as the
plan administrator of the Health FSA, the employer is
responsible for calculating and remitting the excise tax on the
$750 to the IRS.
Penalty for underreporting liability for tax to insurers.
If the employer reports to insurers, plan administrators and
the IRS a lower amount of insurance cost subject to the excise
tax than required, the employer is subject to a penalty equal
to the sum of any additional excise tax that each such insurer
and administrator would have owed if the employer had reported
correctly and interest attributable to that additional excise
tax as determined under Code section 6621 from the date that
the tax was otherwise due to the date paid by the employer.
This may occur, for example, if the employer undervalues the
aggregate premium and thereby lowers the amount subject to the
excise tax for all insurers and plan administrators (including
the employer, when acting as plan administrator of a self-
insured plan). This penalty may be waived if the employer can
show that the failure is due to reasonable cause and not to
willful neglect. The penalty is in addition to the amount of
excise tax owed, which may not be waived.
Transition relief and other rules. Under a transition rule
for health insurance plans maintained in the 17 States with the
highest average cost for employer-sponsored coverage under
health plans based on aggregate premiums for the year ended
December 31, 2012, as determined by the Secretary, the
threshold amount is initially increased by 20 percent. The
Secretary is required to determine the 17 highest cost States
based on the most recent available data as of August 31, 2012.
The initial 20 percent increase is reduced by half each year
thereafter (i.e., to 10 percent for the first taxable year
beginning after December 31, 2013 and to five percent for the
first taxable year beginning after December 31, 2014) until the
additional premium amount is eliminated entirely for taxable
years beginning after December 31, 2015. The transition rule
applies on an individual basis with respect to coverage of a
specific individual based on the individual's residence on the
first day of a coverage period beginning during the transition
period. In addition, this rule applies prior to any additional
transition relief to which an individual is entitled on account
of his or her status as a retiree over age 55 or as a
participant in a plan that covers employees in a high risk
profession.
For retired individuals over the age of 55, the threshold
amount is increased by $1,850 for individual coverage and
$5,000 for family coverage. The additional amounts are also
indexed to the CPI-U plus one percentage point.
For plans that cover employees engaged in high risk
professions, the threshold amount is increased by $1,850 for
individual coverage and $5,000 for family coverage. The
additional amounts are indexed to the CPI-U plus one percentage
point. For purposes of this rule, employees considered to be
engaged in a high risk profession are law enforcement officers,
firefighters, members of a rescue squad or ambulance crew, and
individuals engaged in the construction, mining, agriculture
(but not food processing), forestry or fishing industries.
Individuals engaged in the construction industry include
individuals employed by electrical and telecommunications
companies to repair and install electrical and
telecommunications lines.
Under this provision, an individual's threshold cannot be
increased by more than $1,850 for individual coverage or $5,000
for family coverage (indexed as described above), even if the
individual would qualify for an increased threshold both on
account of his or her status as a retiree over age 55 and as a
participant in a plan that covers employees in a high risk
profession.
Under the provision, the amount of the excise tax imposed
is not deductible for Federal income tax purposes.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2012.
SEC. 6002. EMPLOYER HEALTH INSURANCE REPORTING
Present Law
In many cases, an employer pays for all or a portion of its
employees' health insurance coverage as an employee benefit.
This benefit often includes premiums for major medical, dental,
and other supplementary health insurance coverage. Under
present law, the value of employer-provided health coverage is
not required to be reported to the IRS or any other Federal
agency. The value of the employer contribution to health
coverage is excludible from an employee's income.\36\
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\36\Sec. 106.
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Under Present Law, every employer is required to furnish
each employee and the Federal government with a statement of
compensation information, including wages, paid by the employer
to the employee, and the taxes withheld from such wages during
the calendar year. The statement, made on the Form W-2, must be
provided to each employee by January 31 of the succeeding year.
There is no requirement that the employer report the total
value of employer-sponsored health insurance coverage on the
Form W-2,\37\ although some employers voluntarily report the
amount of salary reduction under a cafeteria plan resulting in
tax-free employee benefits in box 14.
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\37\Any portion of employer sponsored coverage that is paid for by
the employee with after- tax contributions is included as wages on the
W-2 Form.
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Committee Bill
Under the Committee Bill, an employer is required to
disclose on each employee's annual Form W-2 the value of the
employee's health insurance coverage sponsored by the employer.
If an employee enrolls in employer-sponsored health insurance
coverage under multiple plans, the employer must disclose the
aggregate value of all such health coverage (excluding the
value of a health flexible spending arrangement). For example,
if an employee enrolls in employer-sponsored health insurance
coverage under a major medical plan, a dental plan, and a
vision plan, the employer is required to report the total value
of the combination of all of these health related insurance
policies. For this purpose, employers generally use the same
value for all similarly situated employees receiving the same
category of coverage (such as single or family health insurance
coverage).
To determine the value of employer-sponsored health
insurance coverage, the employer calculates the applicable
premiums for the taxable year for the employee under the rules
for COBRA continuation coverage under section 4980B(f)(4) (and
accompanying Treasury regulations), including the special rule
for self-insured plans. The value that the employer is required
to report is the portion of the aggregate premium. If the plan
provides for the same COBRA continuation coverage premium for
both individual coverage and family coverage, the plan would be
required to calculate separate individual and family premiums
for this purpose.
Effective Date
The provision is effective for taxable years beginning
after December 31, 2009.
SEC. 6003. MODIFY THE DEFINITION OF QUALIFIED MEDICAL EXPENSES
Present Law
Individual deduction for medical expenses. Expenses for
medical care, not compensated for by insurance or otherwise,
are deductible by an individual under the rules relating to
itemized deductions to the extent the expenses exceed 7.5
percent of AGI.\38\ Medical care generally is defined broadly
as amounts paid for diagnoses, cure, mitigation, treatment or
prevention of disease, or for the purpose of affecting any
structure of the body.\39\ However, any amount paid during a
taxable year for medicine or drugs is explicitly deductible as
a medical expense only if the medicine or drug is a prescribed
drug or is insulin.\40\ Thus, any amount paid for medicine
available without a prescription (``over-the-counter
medicine'') is not deductible as a medical expense, including
any medicine recommended by a physician.\41\
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\38\Sec. 213(a).
\39\Sec. 213(d). There are certain limitations on the general
definition including a rule that cosmetic surgery or similar procedures
are generally not medical care.
\40\Sec. 213(b).
\41\Rev. Rul. 2003-58, 2003-1 CB 959.
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Exclusion for employer-provided health care. The Code
generally provides that the value of employer-provided health
coverage under an accident or health plan is excluded from
gross income.\42\ In addition, any reimbursements under an
accident or health plan for medical care expenses for
employees, their spouses, and their dependents generally are
excluded from gross income.\43\ An employer may agree to
reimburse expenses for medical care of its employees (and their
spouses and dependents), not covered by a health insurance
plan, through a flexible spending arrangement (``FSA'') which
allows reimbursement not in excess of a specified dollar
amount. Such dollar amount is either elected by an employee
under a cafeteria plan (``Health FSA'') or otherwise specified
by the employer under an arrangement called a health
reimbursement arrangement (``HRA''). Reimbursements under these
arrangements are also excludible from gross income as employer-
provided health coverage. The general definition of medical
care without the explicit limitation on medicine applies for
purposes of the exclusion for employer-provided health coverage
and medical care.\44\ Thus, under an HRA or under a Health FSA,
amounts paid for over-the-counter medicine are treated as
medical expenses, and reimbursements for such amounts are
excludible from gross income.
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\42\Sec. 106.
\43\Sec. 105(b).
\44\Sec. 105(b) provides that reimbursements for medical care
within the meaning of section 213(d) pursuant to employer-provided
health coverage are excludible from gross income. The definition of
medical care in section 213(d) does not include the prescription drug
limitation in section 213(b).
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Medical savings arrangements. Present law provides that
individuals with a high deductible health plan (and generally
no other health plan) purchased either through the individual
market or through an employer may establish and make tax-
deductible contributions to a health savings account
(``HSA'').\45\ Subject to certain limitations,\46\
contributions made to an HSA by an employer, including
contributions made through a cafeteria plan through salary
reduction, are excluded from income (and from wages for payroll
tax purposes). Contributions made by individuals are deductible
for income tax purposes, regardless of whether the individuals
itemize. Distributions from an HSA that are used for qualified
medical expenses are excludible from gross income.\47\ The
general definition of medical care without the explicit
limitation on medicine also applies for purposes of this
exclusion.\48\ Similar rules apply for another type of medical
savings arrangement called an Archer MSA.\49\ Thus, a
distribution from a HSA or an Archer MSA used to purchase over-
the-counter medicine also is excludible as an amount used for
qualified medical expenses.
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\45\Sec. 223.
\46\For 2009, the maximum aggregate annual contribution that can be
made to an HSA is $3,000 in the case of self-only coverage and $5,950
in the case of family coverage ($3,050 and $6,150 for 2010). The annual
contribution limits are increased for individuals who have attained age
55 by the end of the taxable year (referred to as ``catch-up
contributions''). In the case of policyholders and covered spouses who
are age 55 or older, the HSA annual contribution limit is greater than
the otherwise applicable limit by $1,000 in 2009 and thereafter.
Contributions, including catch-up contributions, cannot be made once an
individual is enrolled in Medicare.
\47\Sec. 223(f).
\48\Sec. 223(d)(2).
\49\Sec. 220.
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Committee Bill
Under the Committee Bill, with respect to medicines, the
definition of medical expense for purposes of employer-provided
health coverage (including HRAs and Health FSAs), HSAs, and
Archer MSAs, generally is conformed to the definition for
purposes of the itemized deduction for medical expenses.
However, this change does not apply to over-the-counter
medicine that is prescribed for a patient by a physician. Thus,
under the provision, the cost of over-the-counter medicines
(other than physician prescribed) may not be reimbursed through
a Health FSA or HRA. In addition, the cost of over-the-counter
medicines (other than doctor prescribed) may not be reimbursed
on a tax-free basis through a HSA or Archer MSA.
Effective Date
The Committee Bill is effective for taxable years beginning
after December 31, 2009.
SEC. 6004. INCREASE IN ADDITIONAL TAX ON DISTRIBUTIONS FROM HSAS NOT
USED FOR MEDICAL EXPENSES
Present Law
Present law provides that individuals with a high
deductible health plan (and generally no other health plan) may
establish and make tax-deductible contributions to a health
savings account (``HSA'').\50\ An HSA is a tax-exempt account
held by a trustee or custodian for the benefit of the
individual. An HSA is subject to a condition that the
individual is covered under a high deductible health plan
(purchased either through the individual market or through an
employer). The decision to create and fund an HSA is made on an
individual-by-individual basis and does not require any action
on the part of the employer.
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\50\An individual with other coverage in addition to a high
deductible health plan is still eligible for an HSA if such other
coverage is ``permitted insurance'' or ``permitted coverage.''
Permitted insurance is: (1) insurance if substantially all of the
coverage provided under such insurance relates to (a) liabilities
incurred under worker's compensation law, (b) tort liabilities, (c)
liabilities relating to ownership or use of property (e.g., auto
insurance), or (d) such other similar liabilities as the Secretary may
prescribe by regulations; (2) insurance for a specified disease or
illness; and (3) insurance that provides a fixed payment for
hospitalization. Permitted coverage is coverage (whether provided
through insurance or otherwise) for accidents, disability, dental care,
vision care, or long-term care. With respect to coverage for years
beginning after December 31, 2006, certain coverage under a Health
Flexible Spending Account is disregarded in determining eligibility for
an HSA.
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Subject to certain limitations, contributions made to an
HSA by an employer, including contributions made through a
cafeteria plan through salary reduction, are excluded from
income (and from wages for payroll tax purposes). Contributions
made by individuals are deductible for income tax purposes,
regardless of whether the individuals itemize. Income from
investments made in HSAs is not taxable and the overall income
is not taxable upon disbursement for medical expenses.
For 2009, the maximum aggregate annual contribution that
can be made to an HSA is $3,000 in the case of self-only
coverage and $5,950 in the case of family coverage ($3,050 and
$6,150 for 2010). The annual contribution limits are increased
for individuals who have attained age 55 by the end of the
taxable year (referred to as ``catch-up contributions''). In
the case of policyholders and covered spouses who are age 55 or
older, the HSA annual contribution limit is greater than the
otherwise applicable limit by $1,000 in 2009 and thereafter.
Contributions, including catch-up contributions, cannot be made
once an individual is enrolled in Medicare.
A high deductible health plan is a health plan that has an
annual deductible that is at least $1,150 for self-only
coverage or $2,300 for family coverage for 2009 (increasing to
$1,200 and $2,400 for 2010) and that limits the sum of the
annual deductible and other payments that the individual must
make in respect of covered benefits to no more than $5,800 in
the case of self-only coverage and $11,600 in the case of
family coverage for 2009 (increasing to $5,950 and $11,900 for
2010).
Distributions from an HSA that are used for qualified
medical expenses are excludible from gross income.
Distributions from an HSA that are not used for qualified
medical expenses are includible in gross income. An additional
10 percent tax is added for all HSA disbursements not made for
qualified medical expenses. The additional 10-percent tax does
not apply, however, if the distribution is made after death,
disability, or attainment of age of Medicare eligibility
(currently, age 65). Unlike reimbursements from a flexible
spending arrangement or health reimbursement arrangement,
distributions from an HSA are not required to be substantiated
by the employer or a third party for the distributions to be
excludible from income.
Like IRAs, the individual owns his or her HSA, and thus the
individual is required to maintain books and records with
respect to the expense and claim the exclusion for a
distribution from the HSA on their tax return. The
determination of whether the distribution is for a qualified
medical expense is subject to individual self-reporting and IRS
enforcement.
Committee Bill
The additional tax on distributions from an HSA that are
not used for qualified medical expenses is increased to 20
percent of the disbursed amount.
Effective Date
The change is effective for disbursements made during tax
years starting after December 31, 2010.
SEC. 6005. LIMITATION ON HEALTH FLEXIBLE SPENDING ARRANGEMENTS UNDER
CAFETERIA PLANS
Present Law
Exclusion from income for employer-provided health
coverage. The Code generally provides that the value of
employer-provided health coverage under an accident or health
plan is excludible from gross income.\51\ In addition, any
reimbursements under an accident or health plan for medical
care expenses for employees, their spouses, and their
dependents generally are excluded from gross income.\52\ The
exclusion applies both to health coverage in the case in which
an employer absorbs the cost of employees' medical expenses not
covered by insurance (i.e., a self-insured plan) as well as in
the case in which the employer purchases health insurance
coverage for its employees. There is no limit on the amount of
employer-provided health coverage that is excludable. A similar
rule excludes employer-provided health insurance coverage from
the employees' wages for payroll tax purposes.\53\
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\51\Sec. 106. Health coverage provided to active members of the
uniformed services, military retirees, and their dependents are
excludable under section 134. That section provides an exclusion for
``qualified military benefits,'' defined as benefits received by reason
of status or service as a member of the uniformed services and which
were excludable from gross income on September 9, 1986, under any
provision of law, regulation, or administrative practice then in
effect.
\52\Sec. 105(b).
\53\Secs. 3121(a)(2), and 3306(a)(2). See also section 3231(e)(1)
for a similar rule with respect to compensation for purposes of
Railroad Retirement Tax.
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Employers may also provide health coverage in the form of
an agreement to reimburse medical expenses of their employees
(and their spouses and dependents), not reimbursed by a health
insurance plan, through flexible spending arrangements which
allow reimbursement for medical care not in excess of a
specified dollar amount (either elected by an employee under a
cafeteria plan or otherwise specified by the employer). Health
coverage provided in the form of one of these arrangements is
also excludible from gross income as employer-provided health
coverage under an accident or health plan.\54\
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\54\Sec. 106.
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Flexible spending arrangement under a cafeteria plan. A
flexible spending arrangement for medical expenses under a
cafeteria plan (``Health FSA'') is an unfunded arrangement
under which employees are given the option to reduce their
current cash compensation and instead have the amount of the
salary reduction made available for use in reimbursing the
employee for his or her medical expenses.\55\ Health FSAs are
subject to the general requirements for cafeteria plans,
including a requirement that amounts remaining under a Health
FSA at the end of a plan year must be forfeited by the employee
(referred to as the ``use-it-or-lose-it rule'').\56\ A Health
FSA is permitted to allow a grace period not to exceed two and
one-half months immediately following the end of the plan year
during which unused amounts may be used.\57\ A Health FSA can
also include employer flex-credits which are non-elective
employer contributions that the employer makes for every
employee eligible to participate in the employer's cafeteria
plan, to be used only for one or more tax excludible qualified
benefits (but not as cash or a taxable benefit).\58\
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\55\Sec. 125 and proposed Treas. Reg. sec. 1.125-5.
\56\Sec. 125(d)(2) and proposed Treas. Reg. sec. 1.125-5(c).
\57\Notice 2005-42, 2005-1 C.B. 1204 and proposed Treas. Reg. sec.
1.125-1(e).
\58\Proposed Treas. Reg. sec. 1-125-5(b).
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A flexible spending arrangement including a Health FSA
(under a cafeteria plan) is generally distinguishable from
other employer-provided health coverage by the relationship
between the value of the coverage for a year and the maximum
amount of reimbursement reasonably available during the same
period. A flexible spending arrangement for health coverage
generally is defined as a benefit program which provides
employees with coverage under which specific incurred medical
care expenses may be reimbursed (subject to reimbursement
maximums and other conditions) and the maximum amount of
reimbursement reasonably available is less than 500 percent of
the value of such coverage.\59\
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\59\Sec. 106(c)(2) and proposed Treas. Reg. sec. 1.125-5(a).
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Health reimbursement arrangement. Rather than offering a
Health FSA through a cafeteria plan, an employer may specify a
dollar amount that is available for medical expense
reimbursement. These arrangements are commonly called Health
Reimbursement Arrangements (``HRAs''). Some of the rules
applicable to HRAs and Health FSAs are similar (e.g., the
amounts in the arrangements can only be used to reimburse
medical expenses and not for other purposes), but the rules are
not identical. In particular, HRAs cannot be funded on a salary
reduction basis and the use-it-or-lose-it rule does not apply.
Thus, amounts remaining at the end of the year may be carried
forward to be used to reimburse medical expenses in following
years.\60\
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\60\Guidance with respect to HRAs, including the interaction of
FSAs and HRAs in the case of an individual covered under both, is
provided in Notice 2002-45, 2002-2 C.B. 93.
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Committee Bill
Under the Committee Bill, salary reductions by an employee
for a taxable year for purposes of coverage under a Health FSA
under a cafeteria plan are limited to $2,500.\61\ Thus, when an
employee is given the option to reduce his or her current cash
compensation and instead have the amount of the salary
reduction be made available for use in reimbursing the employee
for his or her medical expenses, the amount of the reduction in
cash compensation is limited to $2,500 for a taxable year. The
provision does not limit the exclusion for health coverage
offered through an HRA.
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\61\The provision does not change the present law treatment as
described in proposed Treas. Reg. sec. 1.125-5 for dependent care
flexible spending arrangements or adoption assistance flexible spending
arrangements.
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Effective Date
The Committee Bill is effective for taxable year beginning
after December 31, 2010.
SEC. 6006. REQUIRE INFORMATION REPORTING ON PAYMENTS TO CORPORATIONS
Present Law
Present law imposes a variety of information reporting
requirements on participants in certain transactions.\62\ These
requirements are intended to assist taxpayers in preparing
their income tax returns and to help the IRS determine whether
such returns are correct and complete.
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\62\Secs. 6031 through 6060.
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The primary provision governing information reporting by
payors requires an information return by every person engaged
in a trade or business who makes payments aggregating $600 or
more in any taxable year to a single payee in the course of
that payor's trade or business.\63\ Payments subject to
reporting include fixed or determinable income or compensation,
but do not include payments for goods or certain enumerated
types of payments that are subject to other specific reporting
requirements.\64\ The payor is required to provide the
recipient of the payment with an annual statement showing the
aggregate payments made and contact information for the
payor.\65\ The regulations generally except from reporting,
payments to corporations, exempt organizations, governmental
entities, international organizations, or retirement plans.\66\
However, the following types of payments to corporations must
be reported: Medical and healthcare payments;\67\ fish
purchases for cash;\68\ attorney's fees;\69\ gross proceeds
paid to an attorney;\70\ substitute payments in lieu of
dividends or tax-exempt interest;\71\ and payments by a Federal
executive agency for services.\72\
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\63\Sec. 6041(a). The information return is generally submitted
electronically as a Form-1099 or Form-1096, although certain payments
to beneficiaries or employees may require use of Forms W-3 or W-2,
respectively. Treas. Reg. sec. 1.6041-1(a)(2).
\64\Sec. 6041(a) requires reporting as to ``other fixed or
determinable gains, profits, and income (other than payments to which
section 6042(a)(1), 6044(a)(1), 6047(c), 6049(a) or 6050N(a) applies
and other than payments with respect to which a statement is required
under authority of section 6042(a), 6044(a)(2) or 6045)[.]'' These
excepted payments include most interest, royalties, and dividends.
\65\Sec. 6041(d).
\66\Treas. Reg. sec. 1.6041-3(p). Certain for-profit health
provider corporations are not covered by this general exception,
including those organizations providing billing services for such
companies.
\67\Sec. 6050T.
\68\Sec. 6050R.
\69\Sec. 6045(f)(1) and (2); Treas. Reg. secs. 1.6041-1(d)(2) and
1.6045-5(d)(5).
\70\Ibid.
\71\Sec. 6045(d).
\72\Sec. 6041(d)(3).
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Failure to comply with the information reporting
requirements results in penalties, which may include a penalty
for failure to file the information return,\73\ and a penalty
for failure to furnish payee statements\74\ or failure to
comply with other various reporting requirements.\75\
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\73\Sec. 6721. The penalty for the failure to file an information
return generally is $50 for each return for which such failure occurs.
The total penalty imposed on a person for all failures during a
calendar year cannot exceed $250,000. Additionally, special rules apply
to reduce the per-failure and maximum penalty where the failure is
corrected within a specified period.
\74\Sec. 6722. The penalty for failure to provide a correct payee
statement is $50 for each statement with respect to which such failure
occurs, with the total penalty for a calendar year not to exceed
$100,000. Special rules apply that increase the per-statement and total
penalties where there is intentional disregard of the requirement to
furnish a payee statement.
\75\Sec. 6723. The penalty for failure to timely comply with a
specified information reporting requirement is $50 per failure, not to
exceed $100,000 for a calendar year.
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Detailed rules are provided for the reporting of various
types of investment income, including interest, dividends, and
gross proceeds from brokered transactions (such as a sale of
stock).\76\ In general, the requirement to file Form 1099
applies with respect to amounts paid to U.S. persons and is
linked to the backup withholding rules of section 3406. Thus, a
payor of interest, dividends or gross proceeds generally must
request that a U.S. payee (other than certain exempt
recipients) furnish a Form W-9 providing that person's name and
taxpayer identification number.\77\ That information is then
used to complete the Form 1099.
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\76\Secs. 6042 (dividends), 6045 (broker reporting) and 6049
(interest) and the Treasury regulations thereunder.
\77\See Treas. Reg. sec. 31.3406(h)-3.
---------------------------------------------------------------------------
Committee Bill
Under the Committee Bill, a business is required to file an
information return for all payments aggregating $600 or more in
a calendar year to a single payee (other than a payee that is a
tax-exempt corporation), notwithstanding any regulation
promulgated prior to the date of enactment. The payments to be
reported include gross proceeds paid in consideration for
property or services.
Effective Date
The Committee Bill is effective for payments made after
December 31, 2011.
SEC. 6007. REQUIREMENTS FOR SECTION 501(C)(3) HOSPITALS
Present Law
Tax exemption. Charitable organizations, i.e.,
organizations described in section 501(c)(3), generally are
exempt from Federal income tax, are eligible to receive tax
deductible contributions,\78\ have access to tax-exempt
financing through State and local governments (described in
more detail below),\79\ and generally are exempt from State and
local taxes. A charitable organization must operate primarily
in pursuit of one or more tax-exempt purposes constituting the
basis of its tax exemption.\80\ The Code specifies such
purposes as religious, charitable, scientific, educational,
literary, testing for public safety, to foster international
amateur sports competition, or for the prevention of cruelty to
children or animals. In general, an organization is organized
and operated for charitable purposes if it provides relief for
the poor and distressed or the underprivileged.\81\
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\78\Sec. 170.
\79\Sec. 145.
\80\Treas. Reg. sec. 1.501(c)(3)-1(c)(1).
\81\Treas. Reg. sec. 1.501(c)(3)-1(d)(2).
---------------------------------------------------------------------------
The Code does not provide a per se exemption for hospitals.
Rather, a hospital qualifies for exemption if it is organized
and operated for a charitable purpose and otherwise meets the
requirements of section 501(c)(3).\82\ The promotion of health
has been recognized by the IRS as a charitable purpose that is
beneficial to the community as a whole.\83\ It includes not
only the establishment or maintenance of charitable hospitals,
but clinics, homes for the aged, and other providers of health
care.
---------------------------------------------------------------------------
\82\Although nonprofit hospitals generally are recognized as tax-
exempt by virtue of being ``charitable'' organizations, some might
qualify for exemption as educational or scientific organizations
because they are organized and operated primarily for medical education
and research purposes.
\83\Rev. Rul. 69-545, 1969-2 C.B. 117; see also Restatement
(Second) of Trusts secs. 368, 372 (1959); see Bruce R. Hopkins, The Law
of Tax-Exempt Organizations, sec. 6.3 (8th ed. 2003) (discussing
various forms of health-care providers that may qualify for exemption
under section 501(c)(3)).
---------------------------------------------------------------------------
Since 1969, the IRS has applied a ``community benefit''
standard for determining whether a hospital is charitable.\84\
According to Revenue Ruling 69-545, community benefit can
include, for example: maintaining an emergency room open to all
persons regardless of ability to pay; having an independent
board of trustees composed of representatives of the community;
operating with an open medical staff policy, with privileges
available to all qualifying physicians; providing charity care;
and utilizing surplus funds to improve the quality of patient
care, expand facilities, and advance medical training,
education and research. Beginning in 2009, hospitals generally
are required to submit information on community benefit on
their annual information returns filed with the IRS.\85\
Present law does not include sanctions short of revocation of
tax-exempt status for hospitals that fail to satisfy the
community benefit standard.
---------------------------------------------------------------------------
\84\Rev. Rul. 69-545, 1969-2 C.B. 117. From 1956 until 1969, the
IRS applied a ``financial ability'' standard, requiring that a
charitable hospital be ``operated to the extent of its financial
ability for those not able to pay for the services rendered and not
exclusively for those who are able and expected to pay.'' Rev. Rul. 56-
185, 1956-1 C.B. 202.
\85\IRS Form 990, Schedule H.
---------------------------------------------------------------------------
Although section 501(c)(3) hospitals generally are exempt
from Federal tax on their net income, such organizations are
subject to the unrelated business income tax on income derived
from a trade or business regularly carried on by the
organization that is not substantially related to the
performance of the organization's tax-exempt functions.\86\ In
general, interest, rents, royalties, and annuities are excluded
from the unrelated business income of tax-exempt
organizations.\87\
---------------------------------------------------------------------------
\86\Secs. 511-514.
\87\Sec. 512(b).
---------------------------------------------------------------------------
Charitable contributions. In general, a deduction is
permitted for charitable contributions, including charitable
contributions to tax-exempt hospitals, subject to certain
limitations that depend on the type of taxpayer, the property
contributed, and the donee organization. The amount of
deduction generally equals the fair market value of the
contributed property on the date of the contribution.
Charitable deductions are provided for income, estate, and gift
tax purposes.\88\
---------------------------------------------------------------------------
\88\Secs. 170, 2055, and 2522, respectively.
---------------------------------------------------------------------------
Tax-exempt financing. In addition to issuing tax-exempt
bonds for government operations and services, State and local
governments may issue tax-exempt bonds to finance the
activities of charitable organizations described in section
501(c)(3). Because interest income on tax-exempt bonds is
excluded from gross income, investors generally are willing to
accept a lower pre-tax rate of return on such bonds than they
might otherwise accept on a taxable investment. This, in turn,
lowers the cost of capital for the users of such financing.
Both capital expenditures and limited working capital
expenditures of charitable organizations described in section
501(c)(3) of the Code generally may be financed with tax-exempt
bonds. Private, nonprofit hospitals frequently are the
beneficiaries of this type of financing.
Bonds issued by State and local governments may be
classified as either governmental bonds or private activity
bonds. Governmental bonds are bonds the proceeds of which are
primarily used to finance governmental functions or which are
repaid with governmental funds. Private activity bonds are
bonds in which the State or local government serves as a
conduit providing financing to nongovernmental persons (e.g.,
private businesses or individuals). For these purposes, the
term ``nongovernmental person'' generally includes the Federal
government and all other individuals and entities other than
States or local governments, including section 501(c)(3)
organizations. The exclusion from income for interest on State
and local bonds does not apply to private activity bonds,
unless the bonds are issued for certain permitted purposes
(``qualified private activity bonds'') and other Code
requirements are met.
Reporting and disclosure requirements. Exempt organizations
are required to file an annual information return, stating
specifically the items of gross income, receipts,
disbursements, and such other information as the Secretary may
prescribe.\89\ Section 501(c)(3) organizations that are
classified as public charities must file Form 990 (Return of
Organization Exempt From Income Tax),\90\ including Schedule A,
which requests information specific to section 501(c)(3)
organizations. Additionally, an organization that operates at
least one facility that is, or is required to be, licensed,
registered, or similarly recognized by a state hospital must
complete Schedule H (Form 990), which requests information
regarding charity care, community benefits, bad debt expense,
and certain management company and joint venture arrangements
of a hospital.
---------------------------------------------------------------------------
\89\Sec. 6033(a). An organization that has not received a
determination of its tax-exempt status, but that claims tax-exempt
status under section 501(a), is subject to the same annual reporting
requirements and exceptions as organizations that have received a tax-
exemption determination.
\90\Social welfare organizations, labor organizations, agricultural
organizations, horticultural organizations, and business leagues are
subject to the generally applicable Form 990, Form 990-EZ, and Form
990-T annual filing requirements.
---------------------------------------------------------------------------
An organization described in section 501(c) or (d)
generally is also required to make available for public
inspection for a period of three years a copy of its annual
information return (Form 990) and exemption application
materials.\91\ This requirement is satisfied if the
organization has made the annual return and exemption
application widely available (e.g., by posting such information
on its website).\92\
---------------------------------------------------------------------------
\91\Sec. 6104(d).
\92\Sec. 6104(d)(4); Treas. Reg. sec. 301.6104(d)-2(b).
---------------------------------------------------------------------------
Committee Bill
Additional requirements for section 501(c)(3) hospitals\93\
In general. The Committee Bill establishes new requirements
applicable to section 501(c)(3) hospitals. The new requirements
are in addition to, and not in lieu of, the requirements
otherwise applicable to an organization described in section
501(c)(3). The requirements generally apply to any section
501(c)(3) organization that operates at least one hospital
facility. For purposes of the provision, a hospital facility
generally includes: (1) any facility that is, or is required to
be, licensed, registered, or similarly recognized by a State as
a hospital; and (2) any other facility or organization the
Secretary of the Treasury (the ``Secretary''), in consultation
with the Secretary of Health and Human Services and after
public comment, determines has the provision of hospital care
as its principal purpose. An organization subject to the
provision is required to comply with the following requirements
with respect to each hospital facility operated by such
organization.
---------------------------------------------------------------------------
\93\No inference is intended regarding whether an organization
satisfies the present law community benefit standard.
---------------------------------------------------------------------------
Community health needs assessment. Each hospital facility
is required to conduct a community health needs assessment at
least once every three taxable years and adopt an
implementation strategy to meet the community needs identified
through such assessment. The assessment may be based on current
information collected by a public health agency or non-profit
organizations and may be conducted together with one or more
other organizations, including related organizations. The
assessment process must take into account input from persons
who represent the broad interests of the community served by
the hospital, including those with special knowledge or
expertise of public health issues. The hospital must disclose
in its annual information report to the IRS (i.e., Form 990 and
related schedules) how it is addressing the needs identified in
the assessment and, if all identified needs are not addressed,
the reasons why (e.g., lack of financial or human resources).
Each hospital facility is required to make the assessment
widely available. Failure to complete a community health needs
assessment in any applicable three-year period results in a
penalty on the organization of up to $50,000. For example, if a
facility does not complete a community health needs assessment
in taxable years one, two or three, it is subject to the
penalty in year three. If it then fails to complete a community
health needs assessment in year four, it is subject to another
penalty in year four (for failing to satisfy the requirement
during the three-year period beginning with taxable year two
and ending with taxable year four). An organization that fails
to disclose how it is meeting needs identified in the
assessment is subject to existing incomplete return
penalties.\94\
---------------------------------------------------------------------------
\94\Sec. 6652.
---------------------------------------------------------------------------
Financial assistance policy. Each hospital facility is
required to adopt, implement, and widely publicize a written
financial assistance policy. Each hospital facility is required
to adopt and implement a policy to provide emergency medical
treatment to individuals. The policy must prevent
discrimination in the provision of emergency medical treatment,
including denial of service, against those eligible for
financial assistance under the facility's financial assistance
policy or those eligible for government assistance. The
financial assistance policy must indicate the eligibility
criteria for financial assistance and whether such assistance
includes free or discounted care. For those eligible for
discounted care, the policy must indicate the basis for
calculating the amounts that will be billed to such patients.
The policy must also indicate how to apply for such assistance.
If a hospital does not have a separate billing and collections
policy, the financial assistance policy must also indicate what
actions the hospital may take in the event of non-response or
non-payment, including collections action and reporting to
credit rating agencies.
Limitation on charges. Each hospital facility is permitted
to bill patients who qualify for financial assistance no more
than the amount generally billed to insured patients. A
hospital facility may not use gross charges (i.e.,
``chargemaster'' rates), when billing individuals who qualify
for financial assistance. It is intended that amounts billed to
those who qualify for financial assistance may be based on
either the best, or an average of the three best, negotiated
commercial rates, or Medicare rates.
Collection processes. Under the provision, a hospital
facility (or its affiliates) generally is required to follow
current Medicare law and regulations regarding collection of
debts, but may not undertake certain extraordinary collection
actions (even if otherwise permitted by law) against a patient
without first making reasonable efforts to inform the patient
about the hospital's financial assistance policy and to
determine whether the patient is eligible for assistance under
such policy. Such extraordinary collection actions include
lawsuits, liens on residences, arrests, body attachments, or
other similar collection processes. The Secretary is directed
to issue guidance concerning what attempts to determine
eligibility for financial assistance constitute reasonable
attempts. It is intended that for this purpose, ``reasonable
attempts'' includes notification by the hospital of its
financial assistance policy upon admission and in written and
oral communications with the patient regarding the patient's
bill, including invoices and telephone calls, before collection
action or reporting to credit rating agencies is initiated.
Reporting and Disclosure Requirements. The Committee Bill
includes new reporting and disclosure requirements. Under the
provision, the IRS is required to review information about a
hospital's community benefit activities (currently reported on
Form 990, Schedule H) at least once every three years. Such
review is intended to be similar to review of companies
registered with the Securities and Exchange Commission.\95\ The
provision also requires each organization to which the
provision applies to file with its annual information return
(i.e., Form 990) a copy of its audited financial statements
(or, in the case of an organization the financial statements of
which are included in a consolidated financial statement with
other organizations, such consolidated financial statements).
---------------------------------------------------------------------------
\95\See http://www.sec.gov/divisions/corpfin/cffilingreview.htm for
SEC procedures.
---------------------------------------------------------------------------
The Committee Bill requires the Secretary, in consultation
with the Secretary of Health and Human Services, to report
annually to Congress the levels of charity care, bad debt
expenses, unreimbursed costs of means-tested government
programs, and unreimbursed costs of non-means tested government
programs incurred by private tax-exempt, taxable, and
governmental hospitals as well as the cost of community benefit
activities incurred by private tax-exempt hospitals. In
addition, the Secretary, in consultation with the Secretary of
Health and Human Services, must conduct a study of the trends
in these amounts with the results of the study provided to
Congress five years from date of enactment.
Effective Date
The Committee Bill generally is effective for taxable years
beginning after the date of enactment. The community health
needs assessment requirement is effective for taxable years
beginning after the date which is two years after the date of
enactment.\96\
---------------------------------------------------------------------------
\96\For example, assume the date of enactment is December 1, 2009.
A calendar year taxpayer would test whether it meets the community
health needs assessment requirement in the taxable year ending December
31, 2012. To avoid the penalty, the taxpayer must have satisfied the
community health needs assessment requirements in 2010, 2011, or 2012.
---------------------------------------------------------------------------
SEC. 6008. IMPOSITION OF ANNUAL FEE ON BRANDED PRESCRIPTION
PHARMACEUTICAL MANUFACTURERS AND IMPORTERS
Present Law
There are two Medicare trust funds under present law, the
Hospital Insurance (``HI'') fund and the Supplementary Medical
Insurance (``SMI'') fund.\97\ The HI trust fund is primarily
funded through payroll tax on covered earnings. Employers and
employees each pay 1.45 percent of wages, while self-employed
workers pay 2.9 percent of a portion of their net earnings from
self-employment. Other HI trust fund revenue sources include a
portion of the Federal income taxes paid on Social Security
benefits, and interest paid on the U.S. Treasury securities
held in the HI trust fund. For the SMI trust fund, transfers
from the general fund of the Treasury represent the largest
source of revenue, but additional revenues include monthly
premiums paid by beneficiaries, and interest paid on the U.S.
Treasury securities held in the SMI trust fund.
---------------------------------------------------------------------------
\97\See 2009 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds, available at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/
tr2009.pdf.
---------------------------------------------------------------------------
IRS authority to assess and collect taxes is generally
provided in subtitle F of the Code (secs. 6001-7874), relating
to procedure and administration. That subtitle establishes the
rules governing both how taxpayers are required to report
information to the IRS and to pay their taxes, as well as their
rights. It also establishes the duties and authority of the IRS
to enforce the Federal tax law, and sets forth rules relating
to judicial proceedings involving Federal tax.
Present law does not impose a fee creditable to the
Medicare trust funds on companies that manufacture or import
prescription drugs for sale in the United States.
Committee Bill
The Committee Bill imposes a fee each calendar year on each
covered entity engaged in the business of manufacturing or
importing branded prescription drugs for sale in the United
States. The fee is due each calendar year on a date to be
determined by the Secretary, but in no event later than
September 30th. Fees collected are credited to the Medicare SMI
trust fund. The aggregate fee under the provision is $2.3
billion payable annually beginning in 2010. Under the
provision, the aggregate fee is apportioned among the covered
entities each year based on each entity's relative market share
of branded prescription drug sales taken into account during
the preceding calendar year.
A covered entity is defined under the provision as any
manufacturer or importer with gross receipts from branded
prescription drug sales. For purposes of the provision, covered
entity includes all persons treated as a single employer under
subsection (a) or (b) of section 52 or subsection (m) or (o) of
section 414. The otherwise applicable exclusion of foreign
corporations under those rules is disregarded for these
purposes.
Under the Committee Bill, branded prescription drug sales
means sales of branded prescription drugs to any specified
government program or pursuant to coverage under any such
program, but does not include sales of orphan drugs.\98\ A
branded prescription drug is any prescription drug for which an
application was submitted under section 505(b) of the Federal
Food, Drug, and Cosmetic Act, or any biological product the
license for which was submitted under section 351(a) of the
Public Health Service Act. A prescription drug is any drug
subject to section 503(b) of the Federal Food, Drug, and
Cosmetic Act.
---------------------------------------------------------------------------
\98\Orphan drugs include any drug or biological product with
respect to which a credit was allowed for any taxable year under
section 45C. Sales of any drug or biological product which qualified
under section 45C will not be excluded after the date on which such
drug or biological product is approved by the Food and Drug
Administration for marketing for any indication other than the
treatment of the rare disease or conditions with respect to which the
section 45C credit was allowed.
---------------------------------------------------------------------------
Under the Committee Bill, specified government program
means the Medicare Part D program, the Medicare Part B program,
the Medicaid program, any program under which branded
prescription drugs are procured by the Department of Veterans
Affairs, any program under which branded prescription drugs are
procured by the Department of Defense, or the TRICARE retail
pharmacy program. The provision requires the Secretary of
Health and Human Services, the Secretary of Veterans Affairs,
and the Secretary of Defense to report to the Secretary of the
Treasury the total branded prescription drug sales for each
covered entity with respect to each specified government
program under such Secretary's jurisdiction.
The Committee Bill authorizes the Secretary of the Treasury
to prescribe the timing and the manner for reporting such
sales. Additionally the provision prescribes a methodology to
be used by the Secretary of Health and Human Services to
compute such amounts for the Medicare Part D, Medicare Part B
programs, and Medicaid programs, by the Secretary of Veterans
Affairs for its programs, and by the Secretary of Defense for
TRICARE and other programs.
Under the Committee Bill, a covered entity's individual
assessment for each calendar year is the total fee multiplied
by the ratio of (1) the covered entity's branded prescription
drug sales taken into account during the preceding calendar
year to (2) the aggregate branded prescription drug sales of
all covered entities taken into account during such preceding
calendar year.
Sales taken into account for this purpose includes zero
percent of a covered entity's branded prescription drug sales
for the preceding calendar year up to $5 million; ten percent
of a covered entity's branded prescription drug sales for the
preceding calendar year over $5 million and up to $125 million;
40 percent of a covered entity's branded prescription drug
sales for the preceding calendar year over $125 million and up
to $225 million; 75 percent of a covered entity's branded
prescription drug sales for the preceding calendar year over
$225 million and up to $400 million; and 100 percent of a
covered entity's branded prescription drug sales for the
preceding calendar year over $400 million.
The following is an example of how the relative market
share would be determined if the market included only three
entities with branded prescription drug sales, Company A with
branded prescription drug sales of $1 million, Company B with
branded prescription drug sales of $100 million, and Company C
with branded prescription drug sales of $899 million, for a
combined market of $1 billion.
----------------------------------------------------------------------------------------------------------------
Applicable branded Covered entity's sales
prescription drug sales Percentage taken into account
(millions) (millions)
----------------------------------------------------------------------------------------------------------------
Company A: Total Branded Prescription
Drug Sales $1m:
Up to $5m........................ 1 0 0
--------------------------------------------------------------------------
Total Sales.................. 1 ....................... 0
Company B: Total Branded Prescription
Drug Sales $100m:
Up to $5m........................ 5 0 0
>$5m up to $125m................. 95 10 10
--------------------------------------------------------------------------
Total Sales.................. 100 ....................... 10
Company C: Total Branded Prescription
Drug Sales $899m:
Up to $5m........................ 5 0 0
>$5m up to $125m................. 120 10 12
>$125m up to $225m............... 100 40 40
>$225m up to $400m............... 175 75 131
>$400m........................... 499 100 499
--------------------------------------------------------------------------
Total Sales.................. 899 ....................... 682
--------------------------------------------------------------------------
Total Market......................... 1,000 ....................... 692
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Relative market share
Covered entity of sales taken into
account (percent)
------------------------------------------------------------------------
Company A...................................... 0.0
Company B...................................... 1.4
Company C...................................... 98.6
------------------------------------------------------------------------
For purposes of procedure and administration under the
rules of subtitle F of the Code, any fee assessed under this
provision is treated as an excise tax with respect to which
only civil actions for refund under subtitle F apply. The
Secretary of the Treasury may readjust covered entities' shares
of the fee for any calendar year for which the statute of
limitations remains open.
The fees are treated as nondeductible taxes under section
275 of the Code for U.S. income tax purposes.
Effective Date
The Committee Bill is effective for calendar years
beginning after 2009. The fee is allocated based on the market
share of branded prescription drug sales for calendar years
beginning after December 31, 2008.
SEC. 6009. IMPOSITION OF ANNUAL FEE ON MEDICAL DEVICE MANUFACTURERS AND
IMPORTERS
Present Law
IRS authority to assess and collect taxes is generally
provided in subtitle F of the Code (secs. 6001-7874), relating
to procedure and administration. That subtitle establishes the
rules governing both how taxpayers are required to report
information to the IRS and to pay their taxes, as well as their
rights. It also establishes the duties and authority of the IRS
to enforce the Federal tax law, and sets forth rules relating
to judicial proceedings involving Federal tax.
Present law does not impose an annual sector fee on
companies that manufacture or import medical devices for sale
in the United States.
Committee Bill
The Committee Bill imposes a fee each calendar year on each
covered entity engaged in the business of manufacturing or
importing medical devices offered for sale in the United
States. The aggregate fee under the provision is $4 billion
payable annually beginning in 2010. The fee is due each
calendar year on a date to be determined by the Secretary, but
in no event later than September 30th. Under the provision, the
aggregate fee would be apportioned among the covered entities
each year based on each entity's relative share of gross
receipts from medical device sales taken into account for the
prior year.
A covered entity is defined under the provision as any
manufacturer or importer with gross receipts from medical
device sales. For purposes of the provision, covered entity
includes all persons treated as a single employer under
subsection (a) or (b) of section 52 or subsection (m) or (o) of
section 414. The otherwise applicable exclusion of foreign
corporations under those rules is disregarded for these
purposes.
Under the Committee Bill, medical device sales means sales
for use in the United States of any medical device, other than
the sales of a medical device that has been classified in class
II under section 513 of the Federal Food, Drug, and Cosmetic
Act and is primarily sold to consumers at retail for not more
than $100 per unit, or has been classified in class I under
such section. A medical device is any device as defined in
section 201(h) of the Federal Food, Drug, and Cosmetic Act
intended for humans.\99\ The Secretary has authority under this
provision to publish guidance necessary to carry out the
purposes of this provision. It is expected that the Secretary
will provide guidance as to class II items primarily sold to
consumers at retail for not more than $100 per unit, such as a
list of class II items excluded under this provision. The
provision is intended to exclude low cost items (such as
pregnancy tests, contact lenses, and blood pressure monitors)
that are normally sold directly to consumers through retail
outlets. The Committee intends that a unit is an entire item as
typically sold (for example a box of 30 disposable contact
lenses), and does not refer to an item's component parts.
Additionally the Secretary may publish guidance for the
treatment of gross receipts from the sale of medical devices by
a covered entity directly to another covered entity for use as
a material in the manufacture or production of, or as a
component part of a medical device for subsequent sale in order
to eliminate double inclusion of the gross receipts from such
sales.
---------------------------------------------------------------------------
\99\A product labeled, promoted or used in a manner that meets the
definition in section 201(h) of the Federal Food, Drug, and Cosmetic
Act. For these purposes, a device is ``an instrument, apparatus,
implement, machine, contrivance, implant, in vitro reagent, or other
similar or related article, including any component, part, or
accessory, which is (1) recognized in the official National Formulary,
or the United States Pharmacopeia, or any supplement to them, (2)
intended for use in the diagnosis of disease or other conditions, or in
the cure, mitigation, treatment, or prevention of disease, in man or
other animals, or (3) intended to affect the structure or any function
of the body of man or other animals, and which does not achieve its
primary intended purposes through chemical action within or on the body
of man or other animals and which is not dependent upon being
metabolized for the achievement of its primary intended purposes.''
---------------------------------------------------------------------------
Under the Committee Bill, each covered entity is required
to file an annual report of its gross receipts from medical
device sales for the preceding calendar year. Under the
provision, a covered entity's individual assessment for each
calendar year is the total fee multiplied by the ratio of (1)
the covered entity's gross receipts from medical device sales
taken into account during the preceding calendar year to (2)
the aggregate gross receipts from medical device sales of all
covered entities taken into account during such preceding
calendar year.
Sales taken into account for this purpose includes zero
percent of a covered entity's gross receipts from medical
device sales for the preceding calendar year up to $5 million;
50 percent of a covered entity's gross receipts from medical
device sales for the preceding calendar year over $5 million
and up to $25 million; and 100 percent of a covered entity's
gross receipts from medical device sales for the preceding
calendar year over $25 million.
The following is an example of how the relative market
share would be determined if the medical device market included
three covered entities, Company A with gross receipts from
covered medical device sales of $1 million, Company B with
gross receipts from covered medical device sales of $20 million
and Company C with gross receipts from covered medical device
sales of $979 million for a combined market of $1 billion.
----------------------------------------------------------------------------------------------------------------
Covered entity's sales
Applicable gross Percentage taken into account
receipts (millions) (millions)
----------------------------------------------------------------------------------------------------------------
Company A: Total Gross Receipts $1m:
Up to $5m........................ 1 0 0
--------------------------------------------------------------------------
Total Sales.................. 1 ....................... 0
Company B: Total Gross Receipts $20m:
Up to $5m........................ 5 0 0
>$5m up to $25m.................. 15 50 8
--------------------------------------------------------------------------
Total Sales.................. 20 ....................... 8
Company C: Total Gross Receipts
$979m:
Up to $5m........................ 5 0 0
>$5m up to $25m.................. 20 50 10
>$25m............................ 954 100 954
--------------------------------------------------------------------------
Total Sales.................. 979 ....................... 964
--------------------------------------------------------------------------
Total Market......................... 1,000 ....................... 972
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
Relative market share
Covered entity of sales taken into
account (percent)
------------------------------------------------------------------------
Company A...................................... 0.0
Company B...................................... 0.8
Company C...................................... 99.2
------------------------------------------------------------------------
For purposes of procedure and administration under the
rules of subtitle F of the Code, any fee assessed under this
provision is treated as an excise tax with respect to which
only civil actions for refund under subtitle F apply. The
Secretary may readjust covered entities' shares of the fee for
any calendar year for which the statute of limitations remains
open.
The fees are treated as nondeductible taxes under section
275 of the Code for U.S. income tax purposes.
Effective Date
The Committee Bill is effective for calendar years
beginning after 2009. The fee is allocated based on the market
share of gross receipts from medical device sales for calendar
years beginning after December 31, 2008.
SEC. 6010. IMPOSITION OF ANNUAL FEE ON HEALTH INSURANCE PROVIDERS
Present Law
Present law provides special rules for determining the
taxable income of insurance companies (subchapter L of the
Code). Separate sets of rules apply to life insurance companies
and to property and casualty insurance companies. Insurance
companies are subject to Federal income tax at regular
corporate income tax rates.
An insurance company that provides health insurance is
subject to Federal income tax as either a life insurance
company or as a property insurance company, depending on its
mix of lines of business and on the resulting portion of its
reserves that are treated as life insurance reserves. For
Federal income tax purposes, an insurance company is treated as
a life insurance company if the sum of its (1) life insurance
reserves and (2) unearned premiums and unpaid losses on
noncancellable life, accident or health contracts not included
in life insurance reserves, comprise more than 50 percent of
its total reserves.\100\
---------------------------------------------------------------------------
\100\Sec. 816(a).
---------------------------------------------------------------------------
Some insurance providers may be exempt from Federal income
tax under section 501(a) if specific requirements are
satisfied. Section 501(c)(8), for example, describes certain
fraternal beneficiary societies, orders, or associations
operating under the lodge system or for the exclusive benefit
of their members that provide for the payment of life, sick,
accident, or other benefits to the members or their dependents.
Section 501(c)(9) describes certain voluntary employees'
beneficiary associations that provide for the payment of life,
sick, accident, or other benefits to the members of the
association or their dependents or designated beneficiaries.
Section 501(c)(12)(A) describes certain benevolent life
insurance associations of a purely local character. Section
501(c)(15) describes certain small non-life insurance companies
with annual gross receipts of no more than $600,000 ($150,000
in the case of a mutual insurance company). Section 501(c)(26)
describes certain membership organizations established to
provide health insurance to certain high-risk individuals.
Section 501(c)(27) describes certain organizations established
to provide workmen's compensation insurance.
An excise tax applies to premiums paid to foreign insurers
and reinsurers covering U.S. risks.\101\ The excise tax is
imposed on a gross basis at the rate of one percent on
reinsurance and life insurance premiums, and at the rate of
four percent on property and casualty insurance premiums. The
excise tax does not apply to premiums that are effectively
connected with the conduct of a U.S. trade or business or that
are exempted from the excise tax under an applicable income tax
treaty. The excise tax paid by one party cannot be credited if,
for example, the risk is reinsured with a second party in a
transaction that is also subject to the excise tax.
---------------------------------------------------------------------------
\101\Secs. 4371-4374.
---------------------------------------------------------------------------
IRS authority to assess and collect taxes is generally
provided in subtitle F of the Code (secs. 6001-7874), relating
to procedure and administration. That subtitle establishes the
rules governing both how taxpayers are required to report
information to the IRS and to pay their taxes, as well as their
rights. It also establishes the duties and authority of the IRS
to enforce the Federal tax law, and sets forth rules relating
to judicial proceedings involving Federal tax.
Committee Bill
Under the Committee Bill, an annual fee applies to any
covered entity engaged in the business of providing health
insurance with respect to United States health risks. The fee
applies for calendar years beginning after 2009. The aggregate
annual fee for all covered entities is $6.7 billion. Under the
Committee Bill, the aggregate fee is apportioned among the
providers based on a ratio designed to reflect relative market
share of U.S. health business.
The annual payment date for a calendar year is determined
by the Secretary of the Treasury, but in no event may be later
than September 30 of that year.
For each covered entity, the fee for a calendar year is an
amount that bears the same ratio to $6.7 billion as (1) the
covered entity's net premiums written during the preceding
calendar year with respect to health insurance for any United
States health risk, bears to (2) the aggregate net written
premiums of all covered entities during such preceding calendar
year with respect to such health insurance.
The Committee requires the Secretary of the Treasury to
calculate the amount of each covered entity's fee for the
calendar year, determining the covered entity's net written
premiums with respect to health insurance for any United States
health risk on the basis of reports submitted by the covered
entity and through the use of any other source of information
available to the Treasury Department. It is intended that the
Treasury Department be able to rely on published aggregate
annual statement data to the extent necessary, and may use
annual statement data and filed annual statements that are
publicly available to verify or supplement the reports
submitted by covered entities. Net written premiums is intended
to mean premiums written, including reinsurance premiums
written, reduced by reinsurance ceded, and reduced by ceding
commissions. Net written premiums do not include amounts
arising under arrangements that are not treated as insurance
(i.e., in the absence of sufficient risk shifting and risk
distribution for the arrangement to constitute insurance).\102\
---------------------------------------------------------------------------
\102\See Helvering v. Le Gierse, 312 U.S. 531 (1941).
---------------------------------------------------------------------------
For this purpose, a covered entity is an entity that
provides health insurance with respect to United States health
risks. Thus for example, an insurance company subject to tax
under part I or II of subchapter L, an organization exempt from
tax under section 501(a), or a foreign insurer, that provides
health insurance with respect to United States health risks, is
a covered entity under the provision. Similarly, an insurer
that provides health insurance with respect to United States
health risks under Medicare Advantage, Medicare Part D, or
Medicaid is a covered entity. A covered entity does not,
however, include an employer to the extent that the employer
self-insures the health risks of its employees, nor does it
include any governmental entity. For example, a manufacturer
that enters into a self-insurance arrangement with respect to
the health risks of its employees is not treated as a covered
entity. As a further example, an insurer that sells health
insurance and that also enters into a self-insurance
arrangement with respect to the health risks of its own
employees is treated as a covered entity with respect to its
health insurance business, but is not treated as a covered
entity to the extent of the self-insurance of its own
employees' health risks.
For purposes of the provision, all persons treated as a
single employer under section 52(a) or (b) or section 414(m) or
(o) are treated as a single covered entity (or as a single
employer, for purposes of the rule relating to employers that
self-insure the health risks of employees), and otherwise
applicable exclusion of foreign corporations under those rules
is disregarded.
A United States heath risk means the health risk of an
individual who is a U.S. citizen, is a U.S. resident within the
meaning of section 7701(b)(1)(A) (whether or not located in the
United States), or is located in the United States, with
respect to the period that the individual is located there. In
general, it is intended that risks in the following lines of
business reported on the annual statement as prescribed by the
National Association of Insurance Commissioners and as filed
with the insurance commissioners of the States in which
insurers are licensed to do business constitute health risks
for this purpose: comprehensive (hospital and medical),
Medicare supplemental, dental, vision, Federal Employees Health
Benefit plan, title XVIII Medicare, title XIX Medicaid, and
other health. However, it is intended that the risk of coverage
of long term care does not constitute a health risk for
purposes of the provision.
For purposes of procedure and administration under the
rules of Subtitle F of the Code, the fee under this provision
is treated as an excise tax with respect to which only civil
actions for refund under Subtitle F apply. The Secretary of the
Treasury may redetermine covered entities' shares of the fee
for any calendar year for which the statute of limitations
remains open.
For purposes of section 275 of the Code, relating to the
nondeductibility of specified taxes, the fee is considered to
be a nondeductible tax described in section 275(a)(6).
A reporting rule applies under the Committee Bill. A
covered entity is required to report to the Secretary of the
Treasury the amount of its net premiums written during any
calendar year with respect to health insurance for any United
States health risk.
The Committee Bill provides authority for the Secretary of
the Treasury to publish guidance necessary to carry out the
purposes of the Committee Bill.
Effective Date
The annual fee is required to be paid in each calendar year
beginning after 2009. The provision applies to net premiums
written after December 31, 2008, with respect to health
insurance for any United States health risk.
SEC. 6011. STUDY AND REPORT OF EFFECT ON VETERANS HEALTH CARE
Present Law
No provision.
Committee Bill
The Committee Bill requires the Secretary of Veterans
Affairs to conduct a study on the effect (if any) of the fees
assessed on manufacturers and importers of branded prescription
drugs, manufacturers and importers of medical devices, and
health insurance providers on (1) the cost of medical care
provided to veterans and (2) veterans' access to branded
prescription drugs and medical devices.
The Secretary of Veterans Affairs will report the results
of the study to the Committee on Ways and Means of the House of
Representatives and to the Committee on Finance of the Senate
no later than December 31, 2012.
Effective Date
The Committee Bill is effective on the date of enactment.
SEC. 6012. ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO MEDICARE
PART D SUBSIDY
Present Law
In general. Sponsors\103\ of qualified retiree prescription
drug plans are eligible for subsidy payments from the Secretary
of Health and Human Services (``HHS'') with respect to a
portion of each qualified covered retiree's gross covered
prescription drug costs (``qualified retiree prescription drug
plan subsidy'').\104\ A qualified retiree prescription drug
plan is employment-based retiree health coverage\105\ that has
an actuarial value at least as great as the Medicare Part D
standard plan for the risk pool and that meets certain other
disclosure and recordkeeping requirements.\106\ These qualified
retiree prescription drug plan subsidies are excludable from
the plan sponsor's gross income for the purposes of regular
income tax and alternative minimum tax (including the
adjustment for adjusted current earnings).\107\
---------------------------------------------------------------------------
\103\The identity of the plan sponsor is determined in accordance
with section 16(B) of ERISA, except that for cases where a plan is
maintained jointly by one employer and an employee organization, and
the employer is the primary source of financing, the employer is the
plan sponsor.
\104\Sec. 1860D-22 of the Social Security Act (``SSA''), 42 U.S.C.
Sec. 1395w-132.
\105\Employment-based retiree health coverage is health insurance
coverage or other coverage of health care costs (whether provided by
voluntary insurance coverage or pursuant to statutory or contractual
obligation) for Medicare Part D eligible individuals (their spouses and
dependents) under group health plans based on their status as retired
participants in such plans. For purposes of the subsidy, group health
plans generally include employee welfare benefit plans (as defined in
section 607(1) of ERISA) that provide medical care (as defined in
section 213(d)), Federal and State governmental plans, collectively
bargained plans, and church plans.
\106\In addition to meeting the actuarial value standard, the plan
sponsor must also maintain and provide the Secretary of HHS access to
records that meet the Secretary of HHS's requirements for purposes of
audits and other oversight activities necessary to ensure the adequacy
of prescription drug coverage and the accuracy of payments made to
eligible individuals under the plan. In addition, the plan sponsor must
disclose to the Secretary of HHS whether the plan meets the actuarial
equivalence requirement and if it does not, must disclose to retirees
the limitations of their ability to enroll in Medicare Part D and that
non-creditable coverage enrollment is subject to penalties such as fees
for late enrollment. 42 U.S.C. 1395w-132(a)(2).
\107\Sec. 139A.
---------------------------------------------------------------------------
Subsidy amounts. For each qualifying covered retiree
enrolled for a coverage year in a qualified retiree
prescription drug plan, the qualified retiree prescription drug
plan subsidy is equal to 28 percent of the portion of the
allowable retiree costs paid by the plan sponsor on behalf of
the retiree that exceed the cost threshold but do not exceed
the cost limit. A ``qualifying covered retiree'' is an
individual who is eligible for Medicare but not enrolled in
either a Medicare Part D prescription drug plan (``PDP'') or a
Medicare Advantage-Prescription Drug (``MA-PD'') plan, but who
is covered under a qualified retiree prescription drug plan.
Generally allowable retiree costs are, with respect to
prescription drug costs under a qualified retiree prescription
drug plan, the part of the actual costs paid by the plan
sponsor on behalf of a qualifying covered retiree under the
plan.\108\ Both the threshold and limit are indexed to the
percentage increase in Medicare per capita prescription drug
costs; the cost threshold was $250 in 2006 ($295 in 2009) and
the cost limit was $5,000 in 2006 ($6,000 in 2009).\109\
---------------------------------------------------------------------------
\108\For purposes of calculating allowable retiree costs, actual
costs paid are net of discounts, chargebacks, and average percentage
rebates, and exclude administrative costs.
\109\Patricia M. Davis, ``Medicare Part D Prescription Drug
Benefit,'' Congressional Research Service. June 1, 2009. The cost
threshold is indexed in the same manner as the Medicare Part D annual
deductible, while the cost limit is indexed in the same manner as the
Medicare Part D annual out-of-pocket threshold.
---------------------------------------------------------------------------
Expenses relating to tax exempt income. In general, no
deduction is allowed under any provision of the Code for any
expense or amount which would otherwise be allowable as a
deduction if such expense or amount is allocable to a class or
classes of exempt income.\110\ Thus, expenses or amount paid or
incurred with respect to the subsidies excluded from income
under section 139A would generally not be deductible. However,
a provision under section 139A specifies that the exclusion of
the qualified retiree prescription drug plan subsidy from
income is not taken into account in determining whether any
deduction is allowable with respect to covered retiree
prescription drug expenses that are taken into account in
determining the subsidy payment. Therefore, under present law,
a taxpayer may claim a business deduction for covered retiree
prescription drug expenses incurred notwithstanding that the
taxpayer excludes from income qualified retiree prescription
drug plan subsidies allocable to such expenses.
---------------------------------------------------------------------------
\110\Sec. 265(a) and Treas. Reg. sec. 1.265-1(a).
---------------------------------------------------------------------------
Committee Bill
The Committee Bill eliminates the rule that the exclusion
for subsidy payments is not taken into account for purposes of
determining whether a deduction is allowable with respect to
retiree prescription drug expenses. Thus, under the provision,
the amount otherwise allowable as a deduction for retiree
prescription drug expenses is reduced by the amount of the
excludable subsidy payments received.
Effective Date
The Committee Bill is effective for taxable years beginning
after December 31, 2010.
SEC. 6013. MODIFY THE ITEMIZED DEDUCTION FOR MEDICAL EXPENSES
Present Law
Regular income tax. For regular income tax purposes,
individuals are allowed an itemized deduction for unreimbursed
medical expenses, but only to the extent that such expenses
exceed 7.5 percent of adjusted gross income (``AGI'').\111\
---------------------------------------------------------------------------
\111\Sec. 213.
---------------------------------------------------------------------------
This deduction is available both to insured and uninsured
individuals; thus, for example, an individual with employer-
provided health insurance (or certain other forms of tax-
subsidized health benefits) may also claim the itemized
deduction for the individual's medical expenses not covered by
that insurance if the 7.5 percent AGI threshold is met. The
medical deduction encompasses health insurance premiums to the
extent they have not been excluded from taxable income through
the employer exclusion or self-insured deduction or have
otherwise not been reimbursed.
Alternative minimum tax. For purposes of the alternative
minimum tax (``AMT''), medical expenses are deductible only to
the extent that they exceed 10 percent of AGI.
Committee Bill
The Committee Bill increases the threshold for the
deduction from 7.5 percent of AGI to ten percent of AGI for
regular income tax purposes. However if either the taxpayer or
the taxpayer's spouse is age 65 or older, the increased
threshold does not apply and the threshold remains at 7.5
percent of AGI. The provision does not change the AMT treatment
of the itemized deduction for medical expenses.
Effective Date
The Committee Bill is effective for taxable years beginning
after December 31, 2012. The continuation of the current
threshold of 7.5 percent of AGI that applies if the taxpayer or
the taxpayer's spouse is age 65 or older applies to taxable
years beginning after December 31, 2012 and ending before
January 1, 2017.
SEC. 6014. LIMITATION ON DEDUCTION FOR REMUNERATION PAID BY HEALTH
INSURANCE PROVIDERS
Present Law
An employer generally may deduct reasonable compensation
for personal services as an ordinary and necessary business
expense. Section 162(m) provides explicit limitations on the
deductibility of compensation expenses in the case of corporate
employers.
Section 162(m)
In general. The otherwise allowable deduction for
compensation paid or accrued with respect to a covered employee
of a publicly held corporation\112\ is limited to no more than
$1 million per year.\113\ The deduction limitation applies when
the deduction would otherwise be taken. Thus, for example, in
the case of compensation resulting from a transfer of property
in connection with the performance of services, such
compensation is taken into account in applying the deduction
limitation for the year for which the compensation is
deductible under section 83 (i.e., generally the year in which
the employee's right to the property is no longer subject to a
substantial risk of forfeiture).
---------------------------------------------------------------------------
\112\A corporation is treated as publicly held if it has a class of
common equity securities that is required to be registered under
section 12 of the Securities Exchange Act of 1934.
\113\Sec. 162(m). This deduction limitation applies for purposes of
the regular income tax and the alternative minimum tax.
---------------------------------------------------------------------------
Covered employees. Section 162(m) defines a covered
employee as (1) the chief executive officer of the corporation
(or an individual acting in such capacity) as of the close of
the taxable year and (2) the four most highly compensated
officers for the taxable year (other than the chief executive
officer). Treasury regulations under section 162(m) provide
that whether an employee is the chief executive officer or
among the four most highly compensated officers should be
determined pursuant to the executive compensation disclosure
rules promulgated under the Securities Exchange Act of 1934
(``Exchange Act'').
In 2006, the Securities and Exchange Commission amended
certain rules relating to executive compensation, including
which executive officers' compensation must be disclosed under
the Exchange Act. Under the new rules, such officers consist of
(1) the principal executive officer (or an individual acting in
such capacity), (2) the principal financial officer (or an
individual acting in such capacity), and (3) the three most
highly compensated executive officers, other than the principal
executive officer or financial officer. In response to the
Securities and Exchange Commission's new disclosure rules, the
Internal Revenue Service issued updated guidance on identifying
which employees are covered by section 162(m).\114\
---------------------------------------------------------------------------
\114\Notice 2007-49, 2007-25 I.R.B. 1429.
---------------------------------------------------------------------------
Remuneration subject to the limit. Unless specifically
excluded, the deduction limitation applies to all remuneration
for services, including cash and the cash value of all
remuneration (including benefits) paid in a medium other than
cash. If an individual is a covered employee for a taxable
year, the deduction limitation applies to all compensation not
explicitly excluded from the deduction limitation, regardless
of whether the compensation is for services as a covered
employee and regardless of when the compensation was earned.
The $1 million cap is reduced by excess parachute payments (as
defined in sec. 280G, discussed below) that are not deductible
by the corporation.
Certain types of compensation are not subject to the
deduction limit and are not taken into account in determining
whether other compensation exceeds $1 million. The following
types of compensation are not taken into account: (1)
remuneration payable on a commission basis; (2) remuneration
payable solely on account of the attainment of one or more
performance goals if certain outside director and shareholder
approval requirements are met (``performance-based
compensation''); (3) payments to a tax-qualified retirement
plan (including salary reduction contributions); (4) amounts
that are excludable from the executive's gross income (such as
employer-provided health benefits and miscellaneous fringe
benefits\115\); and (5) any remuneration payable under a
written binding contract which was in effect on February 17,
1993.
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\115\Sec. 132.
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Remuneration does not include compensation for which a
deduction is allowable after a covered employee ceases to be a
covered employee. Thus, the deduction limitation often does not
apply to deferred compensation that is otherwise subject to the
deduction limitation (e.g., is not performance-based
compensation) because the payment of compensation is deferred
until after termination of employment.
Executive Compensation of Employers Participating in the Troubled
Assets Relief Program
In general. Under section 162(m)(5), the deduction limit is
reduced to $500,000 in the case of otherwise deductible
compensation of a covered executive for any applicable taxable
year of an applicable employer.
An applicable employer means any employer from which one or
more troubled assets are acquired under the ``troubled assets
relief program'' (``TARP'') established by the Emergency
Stabilization Act of 2008\116\ (``EESA'') if the aggregate
amount of the assets so acquired for all taxable years
(including assets acquired through a direct purchase by the
Treasury Department, within the meaning of section 113(c) of
Title I of EESA) exceeds $300,000,000. However, such term does
not include any employer from which troubled assets are
acquired by the Treasury Department solely through direct
purchases (within the meaning of section 113(c) of Title I of
EESA). For example, if a firm sells $250,000,000 in assets
through an auction system managed by the Treasury Department,
and $100,000,000 to the Treasury Department in direct
purchases, then the firm is an applicable employer. Conversely,
if all $350,000,000 in sales take the form of direct purchases,
then the firm would not be an applicable employer.
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\116\Pub. L. No. 110-343.
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Unlike section 162(m), an applicable employer under this
provision is not limited to publicly held corporations (or even
limited to corporations). For example, an applicable employer
could be a partnership if the partnership is an employer from
which a troubled asset is acquired. The aggregation rules of
Code section 414(b) and (c) apply in determining whether an
employer is an applicable employer. However, these rules are
applied disregarding the rules for brother-sister controlled
groups and combined groups in sections 1563(a)(2) and (3).
Thus, this aggregation rule only applies to parent-subsidiary
controlled groups. A similar controlled group rule applies for
trades and businesses under common control.
The result of this aggregation rule is that all
corporations in the same controlled group are treated as a
single employer for purposes of identifying the covered
executives of that employer and all compensation from all
members of the controlled group are taken into account for
purposes of applying the $500,000 deduction limit. Further, all
sales of assets under the TARP from all members of the
controlled group are considered in determining whether such
sales exceed $300,000,000.
An applicable taxable year with respect to an applicable
employer means the first taxable year which includes any
portion of the period during which the authorities for the TARP
established under EESA are in effect (the ``authorities
period'') if the aggregate amount of troubled assets acquired
from the employer under that authority during the taxable year
(when added to the aggregate amount so acquired for all
preceding taxable years) exceeds $300,000,000, and includes any
subsequent taxable year which includes any portion of the
authorities period.
A special rule applies in the case of compensation that
relates to services that a covered executive performs during an
applicable taxable year but that is not deductible until a
later year (``deferred deduction executive remuneration''),
such as nonqualified deferred compensation. Under the special
rule, the unused portion (if any) of the $500,000 limit for the
applicable tax year is carried forward until the year in which
the compensation is otherwise deductible, and the remaining
unused limit is then applied to the compensation.
For example, assume a covered executive is paid $400,000 in
cash salary by an applicable employer in 2008 (assuming 2008 is
an applicable taxable year) and the covered executive earns
$100,000 in nonqualified deferred compensation (along with the
right to future earnings credits) payable in 2020. Assume
further that the $100,000 has grown to $300,000 in 2020. The
full $400,000 in cash salary is deductible under the $500,000
limit in 2008. In 2020, the applicable employer's deduction
with respect to the $300,000 will be limited to $100,000 (the
lesser of the $300,000 in deductible compensation before
considering the special limitation, and $500,000 less $400,000,
which represents the unused portion of the $500,000 limit from
2008).
Deferred deduction executive remuneration that is properly
deductible in an applicable taxable year (before application of
the limitation under the provision) but is attributable to
services performed in a prior applicable taxable year is
subject to the special rule described above and is not double-
counted. For example, assume the same facts as above, except
that the nonqualified deferred compensation is deferred until
2009 and that 2009 is an applicable taxable year. The
employer's deduction for the nonqualified deferred compensation
for 2009 would be limited to $100,000 (as in the example
above). The limit that would apply under the provision for
executive remuneration that is in a form other than deferred
deduction executive remuneration and that is otherwise
deductible for 2009 is $500,000. For example, if the covered
executive is paid $500,000 in cash compensation for 2009, all
$500,000 of that cash compensation would be deductible in 2009
under the provision.
Covered executive. The term covered executive means any
individual who is the chief executive officer or the chief
financial officer of an applicable employer, or an individual
acting in that capacity, at any time during a portion of the
taxable year that includes the authorities period. It also
includes any employee who is one of the three highest
compensated officers of the applicable employer for the
applicable taxable year (other than the chief executive officer
or the chief financial officer and only taking into account
employees employed during any portion of the taxable year that
includes the authorities period).\117\
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\117\The determination of the three highest compensated officers is
made on the basis of the shareholder disclosure rules for compensation
under the Exchange Act, except to the extent that the shareholder
disclosure rules are inconsistent with the provision. Such shareholder
disclosure rules are applied without regard to whether those rules
actually apply to the employer under the Exchange Act. If an employee
is a covered executive with respect to an applicable employer for any
applicable taxable year, the employee will be treated as a covered
executive for all subsequent applicable taxable years (and will be
treated as a covered executive for purposes of any subsequent taxable
year for purposes of the special rule for deferred deduction executive
remuneration).
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Executive remuneration. The provision generally
incorporates the present law definition of applicable employee
remuneration. However, the present law exceptions for
remuneration payable on commission and performance-based
compensation do not apply for purposes of the $500,000 limit.
In addition, the $500,000 limit only applies to executive
remuneration which is attributable to services performed by a
covered executive during an applicable taxable year. For
example, assume the same facts as in the example above, except
that the covered executive also receives in 2008 a payment of
$300,000 in nonqualified deferred compensation that was
attributable to services performed in 2006. Such payment is not
treated as executive remuneration for purposes of the $500,000
limit.
Taxation of insurance companies. Present law provides
special rules for determining the taxable income of insurance
companies (subchapter L of the Code). Separate sets of rules
apply to life insurance companies and to property and casualty
insurance companies. Insurance companies are subject to Federal
income tax at regular corporate income tax rates. An insurance
company generally may deduct compensation paid in the course of
its trade or business.
Committee Bill
Under the Committee Bill, no deduction is allowed for
remuneration which is attributable to services performed by an
applicable individual for a covered health insurance provider
during an applicable taxable year to the extent that such
remuneration exceeds $500,000. As under section 162(m)(5) for
remuneration from TARP participants, the exceptions for
performance based remuneration, commissions, or remuneration
under existing binding contracts do not apply. This $500,000
deduction limitation applies without regard to whether such
remuneration is paid during the taxable year or a subsequent
taxable year. In applying this rule, rules similar to those in
section 162(m)(5)(A)(ii) apply. Thus in the case of
remuneration that relates to services that an applicable
individual performs during a taxable year but that is not
deductible until a later year, such as nonqualified deferred
compensation, the unused portion (if any) of the $500,000 limit
for the year is carried forward until the year in which the
compensation is otherwise deductible, and the remaining unused
limit is then applied to the compensation.
In determining whether the remuneration of an applicable
individual for a year exceeds $500,000, all remuneration from
all members of any controlled group of corporations (within the
meaning of section 414(b)), other businesses under common
control (within the meaning of section 414(c)), or affiliated
service group (within the meaning of sections 414(m) and (o))
are aggregated.
Covered health insurance provider and applicable taxable
year. An insurance provider is a covered health insurance
provider if at least 25 percent of the insurance provider's
gross premium income from health business is derived from
health insurance plans that meet the minimum creditable
coverage requirements in the bill (``covered health insurance
provider''). A taxable year is an applicable taxable year for
an insurance provider if an insurance provider is a covered
insurance provider for any portion of the taxable year.
Employers with self-insured plans are excluded from the
definition of covered health insurance provider.
Applicable individual. Applicable individuals include all
officers, employees, directors, and other workers or service
providers (such as consultants) performing services for or on
behalf of a covered health insurance provider. Thus, in
contrast to the general rules under section 162(m) and the
special rules executive compensation of employers participating
in the TARP program, the limitation on the deductibility of
remuneration from a covered health insurance provided is not
limited to a small group of officers and covered executives but
generally applies to remuneration of all employees and service
providers. If an individual is an applicable individual with
respect to a covered health insurance provider for any taxable
year, the individual is treated as an applicable individual for
all subsequent taxable years (and is treated as an applicable
individual for purposes of any subsequent taxable year for
purposes of the special rule for deferred remuneration).
Effective Date
The Committee Bill is effective for remuneration paid in
taxable years beginning after 2012 with respect to services
performed after 2009.
SEC. 6021. PROVIDE INCOME EXCLUSION FOR INDIAN TRIBE HEALTH BENEFITS
Present Law
Present law generally provides that gross income includes
all income from whatever source derived.\118\ Exclusions from
income are provided, however, for certain health care benefits.
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\118\Sec. 61.
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Exclusion from income for employer-provided health
coverage. Employees generally may exclude from gross income the
value of employer-provided health coverage under an accident or
health plan.\119\ In addition, any reimbursements under an
accident or health plan for medical care expenses for
employees, their spouses, and their dependents generally are
excluded from gross income.\120\ As with cash or other
compensation, the amount paid by employers for employer-
provided health coverage is a deductible business expense.
Unlike other forms of compensation, however, if an employer
contributes to a plan providing health coverage for employees,
their spouses and dependents, the value of the coverage and all
medical care benefits (including reimbursements) under the plan
are excludable from the employees' income for income tax
purposes.\121\ The exclusion applies both to health coverage in
the case in which an employer absorbs the cost of employees'
medical expenses not covered by insurance (i.e., a self-insured
plan) as well as in the case in which the employer purchases
health insurance coverage for its employees. There is no limit
on the amount of employer-provided health coverage that is
excludable.
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\119\Sec. 106.
\120\Sec. 105(b).
\121\Secs. 104, 105, 106, and 125. A similar rule excludes
employer-provided health insurance coverage and reimbursements for
medical expenses from the employees' wages for payroll tax purposes
under sections 3121(a)(2) and 3306(a)(2). Health coverage provided to
active members of the uniformed services, military retirees, and their
dependents are excludable under section 134. That section provides an
exclusion for ``qualified military benefits,'' defined as benefits
received by reason of status or service as a member of the uniformed
services and which were excludable from gross income on September 9,
1986, under any provision of law, regulation, or administrative
practice then in effect.
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In addition, employees participating in a cafeteria plan
may be able to pay the portion of premiums for health insurance
coverage not otherwise paid for by their employers on a pre-tax
basis through salary reduction.\122\ Such salary reduction
contributions are treated as employer contributions and thus
also are excluded from gross income.
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\122\Sec. 125.
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Employers may agree to reimburse medical expenses of their
employees (and their spouses and dependents), not covered by a
health insurance plan, through flexible spending arrangements
which allow reimbursement not in excess of a specified dollar
amount (either elected by an employee under a cafeteria plan or
otherwise specified by the employer). Reimbursements under
these arrangements are also excludible from gross income as
employer-provided health coverage.
The general welfare exclusion. Under the general welfare
exclusion doctrine, certain payments made to individuals have
been excluded from gross income. The exclusion has been
interpreted to cover payments by governmental units under
legislatively provided social benefit programs for the
promotion of the general welfare.\123\
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\123\See, e.g., Rev. Rul. 78-170, 1978-1 C.B. 24 (government
payments to assist low-income persons with utility costs are not
income); Rev. Rul. 76-395, 1976-2 C.B. 16, 17 (government grants to
assist low-income city inhabitants to refurbish homes are not income);
Rev. Rul. 76-144, 1976-1 C.B. 17 (government grants to persons eligible
for relief under the Disaster Relief Act of 1974 are not income); Rev.
Rul. 74-153, 1974-1 C.B. 20 (government payments to assist adoptive
parents with support and maintenance of adoptive children are not
income); Rev. Rul. 74-205, 1974-1 C.B. 20 (replacement housing payments
received by individuals under the Housing and Urban Development Act of
1968 are not includible in gross income); Gen. Couns. Mem. 34506 (May
26, 1971) (Federal mortgage assistance payments excluded from income
under general welfare exception); Rev. Rul. 57-102, 1957-1 C.B. 26
(government benefits paid to blind persons are not income). The courts
have also acknowledged the existence of this doctrine. See, e.g.,
Bailey v. Commissioner, 88 T.C. 1293, 1299-1301 (1987) (new building
facade paid for by urban renewal agency on taxpayer's property under
facade grant program not considered payments under general welfare
doctrine because awarded without regard to any need of the recipients);
Graff v. Commissioner, 74 TC 743, 753-754 (1980) (court acknowledged
that rental subsidies under Housing Act were excludable under general
welfare doctrine but found that payments at issue made by HUD on
taxpayer landlord's behalf were taxable income to him), affd. per
curiam 673 F.2d 784 (5th Cir. 1982).
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The general welfare exclusion generally applies if the
payments: (1) are made from a governmental fund, (2) are for
the promotion of general welfare (on the basis of the need of
the recipient), and (3) do not represent compensation for
services.\124\ A representative of the IRS has recently stated
that the general welfare exclusion does not apply to persons
with significant income or assets, and that any such extension
would represent a departure from well-established
administrative practice.\125\ A representative of the IRS
further stated that application of the general welfare
exclusion to a tribal government providing coverage or benefits
to tribal members is dependent upon the structure and
administration of the particular program.\126\
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\124\See Rev. Rul. 98-19, 1998-1 C.B. 840 (excluding relocation
payments made by local governments to those whose homes were damaged by
floods). Recent guidance as to whether the need of the recipient (taken
into account under the second requirement of the general welfare
exclusion) must be based solely on financial means or whether the need
can be based on a variety of other considerations including health,
educational background, or employment status, has been mixed. Chief
Couns. Adv. 200021036 (May 25, 2000) (excluding state adoption
assistant payments made to individuals adopting special needs children
without regard to financial means of parents; the children were
considered to be the recipients); Priv. Ltr. Rul. 200632005 (April 13,
2006) (excluding payments made by Tribe to members based on multiple
factors of need pursuant to housing assistance program); Chief Couns.
Adv. 200648027 (July 25, 2006) (excluding subsidy payments based on
financial need of recipient made by state to certain participants in
state health insurance program to reduce cost of health insurance
premiums).
\125\Testimony of Sarah H. Ingram, Commissioner, Tax Exempt and
Government Entities, Internal Revenue Service, before the Senate
Committee on Indian Affairs, Oversight Hearing to Examine the Federal
Tax Treatment of Health Care Benefits Provided by Tribal Governments to
Their Citizens, September 17, 2009.
\126\Ibid.
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Committee Bill
The Committee Bill establishes an exclusion from gross
income the value of specified Indian tribe health benefits. The
exclusion applies to the value of: (1) health services or
benefits provided or purchased by the Indian Health Service
(``IHS''), either directly or indirectly, through a grant to or
a contract or compact with an Indian tribe or tribal
organization or through programs of third parties funded by the
IHS;\127\ (2) medical care services (in the form of provided or
purchased medical care services, accident or health insurance
or an arrangement having the same effect, or amounts paid
directly or indirectly, to reimburse the member for expenses
incurred for medical care) provided by an Indian tribe or
tribal organization to a member of an Indian tribe, including
the member's spouse or dependents;\128\ (3) accident or health
plan coverage (or an arrangement having the same effect)
provided by an Indian tribe or tribal organization for medical
care to a member of an Indian tribe and the member's spouse or
dependents; and (4) any other medical care provided by an
Indian tribe that supplements, replaces, or substitutes for the
programs and services provided by the Federal government to
Indian tribes or Indians.
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\127\The term ``Indian tribe'' means any Indian tribe, band,
nation, pueblo, or other organized group or community, including any
Alaska Native village, or regional or village corporation, as defined
by, or established pursuant to, the Alaska Native Claims Settlement Act
(43 U.S.C. 1601 et seq.), which is recognized as eligible for the
special programs and services provided by the United States to Indians
because of their status as Indians. The term ``tribal organization''
has the same meaning in section 4(l) of the Indian Self-Determination
and Education Assistance Act (25 U.S.C. 450b(1)).
\128\The terms ``accident or health insurance'' and ``accident or
health plan'' have the same meaning in sections 104 and 106. The term
``medical care'' is the same as the definition under section 213. For
purposes of the provision, dependents are determined under section 152,
but without regard to subsections (b)(1), (b)(2), and (d)(1)(B).
Section 152(b)(1) generally provides that if an individual is a
dependent of another taxpayer during a taxable year such individual is
treated as having no dependents for such taxable year. Section
152(b)(2) provides that a married individual filing a joint return with
his or her spouse is not treated as a dependent of a taxpayer. Section
152(d)(1)(B) provides that a ``qualifying relative'' (i.e., a relative
that qualifies as a dependent) does not include a person whose gross
income for the calendar year in which the taxable year begins equals or
exceeds the exempt amount (as defined under section 151).
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Under the Committee Bill, no inference is intended as to
the tax treatment of health benefits or coverage prior to the
effective date. Additionally, no inference is intended with
respect to the tax treatment of other benefits provided by
Indian tribes not covered by the provision.
Effective Date
The Committee Bill is effective for health benefits and
coverage provided after the date of enactment.
SEC. 6022. ESTABLISHMENT OF SIMPLE CAFETERIA PLANS FOR SMALL BUSINESSES
Present Law
Definition of a cafeteria plan. If an employee receives a
qualified benefit (as defined below) based on the employee's
election between the qualified benefit and a taxable benefit
under a cafeteria plan, the qualified benefit generally is not
includable in gross income.\129\ However, if a plan offering an
employee an election between taxable benefits (including cash)
and nontaxable qualified benefits does not meet the
requirements for being a cafeteria plan, the election between
taxable and nontaxable benefits results in gross income to the
employee, regardless of what benefit is elected and when the
election is made.\130\ A cafeteria plan is a separate written
plan under which all participants are employees, and
participants are permitted to choose among at least one
permitted taxable benefit (for example, current cash
compensation) and at least one qualified benefit. Finally, a
cafeteria plan must not provide for deferral of compensation,
except as specifically permitted in sections 125(d)(2)(B), (C),
or (D).
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\129\Sec. 125(a).
\130\Proposed Treas. Reg. sec. 1.125-1(b).
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Qualified benefits. Qualified benefits under a cafeteria
plan are generally employer-provided benefits that are not
includable in gross income under an express provision of the
Code. Examples of qualified benefits include employer-provided
health insurance coverage, group term life insurance coverage
not in excess of $50,000, and benefits under a dependent care
assistance program. In order to be excludable, any qualified
benefit elected under a cafeteria plan must independently
satisfy any requirements under the Code section that provides
the exclusion. However, some employer-provided benefits that
are not includable in gross income under an express provision
of the Code are explicitly not allowed in a cafeteria plan.
These benefits are generally referred to as nonqualified
benefits. Examples of nonqualified benefits include
scholarships;\131\ employer-provided meals and lodging;\132\
educational assistance;\133\ and fringe benefits.\134\ A plan
offering any nonqualified benefit is not a cafeteria plan.\135\
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\131\Sec. 117.
\132\Sec. 119.
\133\Sec. 127.
\134\Sec. 132.
\135\Proposed Treas. Reg. sec. 1.125-1(q). Long-term care services,
contributions to Archer Medical Savings Accounts, group term life
insurance for an employee's spouse, child or dependent, and elective
deferrals to section 403(b) plans are also nonqualified benefits.
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Flex-credits under a cafeteria plan. Employer ``flex-
credits'' are non-elective employer contributions that an
employer makes available for every employee eligible to
participate in the cafeteria plan, to be used at the employee's
election only for one or more qualified benefits (but not as
cash or other taxable benefits).
Employer contributions through salary reduction. Employees
electing a qualified benefit through salary reduction are
electing to forego salary and instead to receive a benefit that
is excludible from gross income because it is provided by
employer contributions. Section 125 provides that the employee
is treated as receiving the qualified benefit from the employer
in lieu of the taxable benefit. For example, active employees
participating in a cafeteria plan may be able to pay their
share of premiums for employer-provided health insurance on a
pre-tax basis through salary reduction.\136\
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\136\Sec. 125.
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Nondiscrimination requirements. Cafeteria plans and certain
qualified benefits (including group term life insurance, self-
insured medical reimbursement plans, and dependent care
assistance programs) are subject to nondiscrimination
requirements to prevent discrimination in favor of highly
compensated individuals generally as to eligibility for
benefits and as to actual contributions and benefits provided.
There are also rules to prevent the provision of
disproportionate benefits to key employees (within the meaning
of section 416(i)) through a cafeteria plan.\137\ Although the
basic purpose of each of the nondiscrimination rules is the
same, the specific rules for satisfying the relevant
nondiscrimination requirements, including the definition of
highly compensated individual,\138\ vary for cafeteria plans
generally and for each qualified benefit. An employer
maintaining a cafeteria plan in which any highly compensated
individual participates must make sure that both the cafeteria
plan and each qualified benefit satisfies the relevant
nondiscrimination requirements, as a failure to satisfy the
nondiscrimination rules generally results in a loss of the tax
exclusion by the highly compensated individuals.
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\137\A key employee generally is an employee who, at any time
during the year is (1) a five-percent owner of the employer, or (2) a
one-percent owner with compensation of more than $150,000 (not indexed
for inflation), or (3) an officer with compensation more than $160,000
(for 2009). A special rule limits the number of officers treated as key
employees. If the employer is a corporation, a five-percent owner is a
person who owns more than five percent of the outstanding stock or
stock possessing more than five percent of the total combined voting
power of all stock. If the employer is not a corporation, a five-
percent owner is a person who owns more than five percent of the
capital or profits interest. A one-percent owner is determined by
substituting one percent for five percent in the preceding definitions.
For purposes of determining employee ownership in the employer, certain
attribution rules apply.
\138\For cafeteria plan purposes, a ``highly compensated
individual'' is (1) an officer, (2) a five-percent shareholder, (3) an
individual who is highly compensated, or (4) the spouse or dependent of
any of the preceding categories. A ``highly compensated participant''
is a participant who falls in any of those categories. ``Highly
compensated'' is not defined for this purpose. Under section 105(h), a
self-insured health plan must not discriminate in favor of a ``highly
compensated individual,'' defined as (1) one of the five highest paid
officers, (2) a 10-percent shareholder, or (3) an individual among the
highest paid 25 percent of all employees. Under section 129 for a
dependent care assistance program, eligibility for benefits, and the
benefits and contributions provided, generally must not discriminate in
favor of highly compensated employees within the meaning of section
414(q).
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Committee Bill
Under the Committee Bill, an eligible small employer is
provided with a safe harbor from the nondiscrimination
requirements for cafeteria plans as well as from the
nondiscrimination requirements for specified qualified benefits
offered under a cafeteria plan, including group term life
insurance, coverage under a self-insured group health plan, and
benefits under a dependent care assistance program. Under the
safe harbor, a cafeteria plan and the specified qualified
benefits will be treated as meeting the nondiscrimination rules
if the cafeteria plan satisfies minimum eligibility and
participation requirements and minimum contribution
requirements.
Eligibility requirement. The eligibility requirement is met
only if all employees (other than excludable employees) are
eligible to participate, and each employee eligible to
participate is able to elect any benefit available under the
plan (subject to the terms and conditions applicable to all
participants). However, a cafeteria plan will not fail to
satisfy this eligibility requirement merely because the plan
excludes employees who (1) have not attained the age of 21 (or
a younger age provided in the plan) before the close of a plan
year, (2) have fewer than 1,000 hours of service for the
preceding plan year, (3) have less than one year of service
with the employer as of any day during the plan year, (4) are
covered under an agreement that the Secretary of Labor finds to
be a collective bargaining agreement if there is evidence that
the benefits covered under the cafeteria plan were the subject
of good faith bargaining between employee representatives and
the employer, or (5) are described in section 410(b)(3)(C)
(relating to nonresident aliens working outside the United
States).
Minimum contribution requirement. The minimum contribution
requirement is met if (1) the employer provides flex credits
available for use during the plan year equal to at least two
percent of each eligible employee's compensation for the plan
year, or (2) the value of employer-paid benefits is at least
six percent of each eligible employee's compensation for the
plan year or, if less, twice the amount of the salary reduction
amount for the year of each eligible employee who is not a
highly compensated employee (within the meaning of section
414(q))\139\ or is not a key employee (within the meaning of
section 416(i)) and who participates in the plan.
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\139\Section 414(q) generally defines a highly compensated employee
as an employee (1) who was a five-percent owner during the year or the
preceding year, or (2) who had compensation of $110,000 (for 2009) or
more for the preceding year. An employer may elect to limit the
employees treated as highly compensated employees based upon their
compensation in the preceding year to the highest paid 20 percent of
employees in the preceding year. Five-percent owner is defined by
cross-reference to the definition of key employee in section 416(i).
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An employer is permitted to provide flex credits under the
cafeteria plan in addition to the minimum required matching or
nonelective contributions. However, the contribution
requirement is not satisfied if the matching contributions with
respect to salary reduction contributions for any highly
compensated or key employee are made at a greater rate than the
matching contributions for any employee who is not a highly
compensated or key employee.
Eligible employer. An eligible small employer under the
Committee Report is, with respect to any year, an employer who
employed an average of 100 or fewer employees on business days
during either of the two preceding years. For purposes of the
provision, a year may only be taken into account if the
employer was in existence throughout the year. If an employer
was not in existence throughout the preceding year, the
determination is based on the average number of employees that
it is reasonably expected such employer will employ on business
days in the current year. If an employer was an eligible
employer for any year and maintained a simple cafeteria plan
for its employees for such year, then, for each subsequent year
during which the employer continues, without interruption, to
maintain the cafeteria plan, the employer is deemed to be an
eligible small employer until the employer employs an average
of 200 or more employees on business days during any year
preceding any such subsequent year.
The determination of whether an employer is an eligible
small employer is determined by applying the controlled group
rules of sections 52(a) and (b) under which all members of the
controlled group are treated as a single employer. In addition,
the definition of employee includes leased employees within the
meaning of sections 414(n) and (o).\140\
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\140\Section 52(b) provides that, for specified purposes, all
employees of all corporations which are members of a controlled group
of corporations are treated as employed by a single employer. However,
section 52(b) provides certain modifications to the control group rules
including substituting 50 percent ownership for 80 percent ownership as
the measure of control. There is a similar rule in section 52(c) under
which all employees of trades or businesses (whether or not
incorporated) which are under common control are treated under
regulations as employed by a single employer. Section 414(n) provides
rules for specified purposes when leased employees are treated as
employed by the service recipient and section 414(o) authorizes the
Treasury to issue regulations to prevent avoidance of the requirements
of section 414(n).
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Effective Date
The Committee Report is effective for taxable years
beginning after December 31, 2010.
SEC. 6023. INVESTMENT CREDIT FOR QUALIFYING THERAPEUTIC DISCOVERY
PROJECTS
Present Law
Present law provides for a research credit equal to 20
percent (14 percent in the case of the alternative simplified
credit) of the amount by which the taxpayer's qualified
research expenses for a taxable year exceed its base amount for
that year.\141\ Thus, the research credit is generally
available with respect to incremental increases in qualified
research.
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\141\Sec. 41.
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A 20 percent research tax credit is also available with
respect to the excess of (1) 100 percent of corporate cash
expenses (including grants or contributions) paid for basic
research conducted by universities (and certain nonprofit
scientific research organizations) over (2) the sum of (a) the
greater of two minimum basic research floors plus (b) an amount
reflecting any decrease in nonresearch giving to universities
by the corporation as compared to such giving during a fixed-
base period, as adjusted for inflation. This separate credit
computation is commonly referred to as the ``university basic
research credit.''\142\
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\142\Sec. 41(e).
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Finally, a research credit is available for a taxpayer's
expenditures on research undertaken by an energy research
consortium. This separate credit computation is commonly
referred to as the ``energy research credit.'' Unlike the other
research credits, the energy research credit applies to all
qualified expenditures, not just those in excess of a base
amount.
The research credit, including the university basic
research credit and the energy research credit, expires for
amounts paid or incurred after December 31, 2009.\143\
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\143\Sec. 41(h).
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Qualified research expenses eligible for the research tax
credit consist of: (1) in-house expenses of the taxpayer for
wages and supplies attributable to qualified research; (2)
certain time-sharing costs for computer use in qualified
research; and (3) 65 percent of amounts paid or incurred by the
taxpayer to certain other persons for qualified research
conducted on the taxpayer's behalf (so-called contract research
expenses).\144\ Notwithstanding the limitation for contract
research expenses, qualified research expenses include 100
percent of amounts paid or incurred by the taxpayer to an
eligible small business, university, or Federal laboratory for
qualified energy research.
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\144\Under a special rule, 75 percent of amounts paid to a research
consortium for qualified research are treated as qualified research
expenses eligible for the research credit (rather than 65 percent under
the general rule of section 41(b)(3) governing contract research
expenses) if (1) such research consortium is a tax-exempt organization
that is described in section 501(c)(3) (other than a private
foundation) or section 501(c)(6) and is organized and operated
primarily to conduct scientific research, and (2) such qualified
research is conducted by the consortium on behalf of the taxpayer and
one or more persons not related to the taxpayer. Sec. 41(b)(3)(C).
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Present law also provides a 50 percent credit\145\ for
expenses related to human clinical testing of drugs for the
treatment of certain rare diseases and conditions, generally
those that afflict less than 200,000 persons in the United
States. Qualifying expenses are those paid or incurred by the
taxpayer after the date on which the drug is designated as a
potential treatment for a rare disease or disorder by the Food
and Drug Administration (``FDA'') in accordance with section
526 of the Federal Food, Drug, and Cosmetic Act.
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\145\Sec. 45C.
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Present law does not provide a credit specifically designed
to encourage investment in new therapies relating to diseases.
Committee Bill
In general. The Committee Bill establishes a 50 percent
investment tax credit for qualified investments in qualifying
therapeutic discovery projects. The provision allocates $1
billion during the 2-year period 2009 through 2010 for the
program. The Secretary, in consultation with the Secretary of
Health and Human Services, will award certifications for
qualified investments. The credit is available only to
companies having 250 or fewer employees.\146\
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\146\The number of employees is determined taking into account all
businesses of the taxpayer at the time it submits an application, and
is determined taking into account the rules for determining a single
employer under section 52(a) or (b) or section 414(m) or (o).
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A ``qualifying therapeutic discovery project'' is a project
which is designed to develop a product, process, or therapy to
diagnose, treat, or prevent diseases and afflictions by--(1)
conducting pre-clinical activities, clinical trials, clinical
studies, and research protocols, or (2) by developing
technology or products designed to diagnose diseases and
conditions, including molecular and companion drugs and
diagnostics, or to further the delivery or administration of
therapeutics.
The qualified investment for any taxable year is the
aggregate amount of the costs paid or incurred in such taxable
year for expenses necessary for and directly related to the
conduct of a qualifying therapeutic discovery project. The
qualified investment for any taxable year with respect to any
qualifying therapeutic discovery project does not include any
cost for--(1) remuneration for an employee described in section
162(m)(3), (2) interest expense, (3) facility maintenance
expenses, (4) a service cost identified under Treas. Reg. Sec.
1.263A-1(e)(4), or (5) any other expenditure as determined by
the Secretary as appropriate to carry out the purposes of the
provision. For example, the Secretary may exclude other similar
expenditures not directly related to the qualifying therapeutic
discovery project.\147\
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\147\As appropriate to carry out the purposes of this provision, it
is intended that the Secretary exclude expenditures related to
activities similar to those described in section 41(d)(4).
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Companies must apply to the Secretary to obtain
certification for qualifying investments.\148\ The Secretary,
in determining qualifying projects, will consider only those
projects that show reasonable potential to--(1) result in new
therapies to treat areas of unmet medical need or to prevent,
detect, or treat chronic or acute disease and conditions, (2)
reduce long-term health care costs in the United States, or (3)
significantly advance the goal of curing cancer within a 30-
year period. Additionally, the Secretary will take into
consideration which projects would have the greatest potential
to--(1) create and sustain (directly or indirectly) high
quality, high paying jobs in the United States, and (2) advance
the United States' competitiveness in the fields of life,
biological, and medical sciences.
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\148\The Secretary must take action to approve or deny an
application within 30 days of the submission of such application.
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Qualified therapeutic discovery project expenditures do not
qualify for the research credit, orphan drug credit, or bonus
depreciation.\149\ If a credit is allowed for an expenditure
related to property subject to depreciation, the basis of the
property is reduced by the amount of the credit. Additionally,
expenditures taken into account in determining the credit are
nondeductible to the extent of the credit claimed that is
attributable to such expenditures.
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\149\Any expenses for the taxable year that are qualified research
expenses under section 41(b) are taken into account in determining base
period research expenses for purposes of computing the research credit
under section 41 for subsequent taxable years.
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Election to receive loans in lieu of tax credit. Taxpayers
may elect to receive credits that have been allocated to them
in the form of Treasury loans equal to 50 percent of the
qualifying investment. The Secretary is required to prescribe
rules governing the administration of the loan program.\150\
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\150\It is intended that any guidance issued by the Secretary will
provide for the issuance of 20-year senior notes with an interest rate
equal to the long-term applicable Federal rate. The interest on the
loans will be deductible by the borrower.
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Effective Date
The Committee Bill applies to expenditures paid or incurred
after December 31, 2008, in taxable years beginning after
December 31, 2008
III. BUDGET EFFECTS OF THE BILL
Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
The Committee has determined that the bill contains ten
private sector mandates: (i) 40 percent excise tax on health
coverage in excess of $8,000/$21,000 indexed for inflation by
CPI-U plus 1 percent and increased thresholds for over age 55
retirees or certain high-risk professions; (ii) Conform the
definition of medical expenses for health flexible spending
arrangements to the definition of the itemized deduction for
medical expenses; (iii) Increase the penalty for nonqualified
health savings account distributions to 20 percent; (iv) Limit
health flexible spending arrangements in cafeteria plans to
$2,500; (v) Corporate information reporting; (vi) Impose annual
fee on manufacturers and importers of branded drugs; (vii)
Impose annual fee on manufacturers and importers of certain
medical devices; (viii) Impose annual fee on health insurance
providers; (ix) Eliminate deduction for fee expenses allocable
to Medicare Part D subsidy; and (x) Raise 7.5 percent AGI floor
on medical expenses deduction to 10 percent.
The Committee has determined that the bill contains no
intergovernmental mandate.
Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses. For each such provision identified by the staff of
the Joint Committee on Taxation a summary description of the
provision is provided along with an estimate of the number and
type of affected taxpayers, and a discussion regarding the
relevant complexity and administrative issues.
Following the analysis of the staff of the Joint Committee
on Taxation are the comments of the IRS and Treasury regarding
each of the provisions included in the complexity analysis.
1. Modify the definition of qualified medical expenses
Summary description of the provision. The Committee Bill
generally changes the definition of ``medical expense'' for
purposes of employer-provided health coverage such that the
cost of over-the-counter medicines (other than doctor
prescribed) may no longer be reimbursed through a health
flexible spending arrangement (``Health FSA'') or a health
reimbursement arrangement (``HRA''). In addition, the cost of
over-the-counter medicines (other than doctor prescribed) may
no longer be reimbursed on a tax-free basis through a health
savings account (``HSA'') or Archer MSA.
Number of affected taxpayers. It is estimated that the
Committee Bill will affect more than ten percent of individual
tax returns.
Discussion. Many taxpayers currently use account balances
in Health FSAs, HRAs, HSAs, and Archer MSAs to purchase over-
the-counter medicine such as ibuprofen, acetaminophen, cold
medicine, and suntan lotion with pre-tax dollars. Some
taxpayers make these purchases at the end of the year, or the
end of the grace period, to avoid forfeiting amounts in Health
FSAs.
Taxpayers will no longer be able to use these amounts in
these accounts for this purpose (except to the extent the over-
the-counter medication is doctor prescribed). As a result, less
money will be allocated to these accounts and more money will
be allocated to taxable wages. This change will also increase
the amount of compensation subject to payroll taxes.
It is anticipated that the IRS will be required to revise
the instructions to several forms and to revise several
publications to reflect the changes to present law made by the
provision. In addition, guidance will need to be issued
withdrawing at least one Revenue Ruling and guidance may need
to be issued on substantiation rules for reimbursement
arrangements.
2. Require information reporting on payments to corporations
Summary description of provision. Under the Committee Bill,
information reporting is expanded in two ways. First, taxpayers
are required to file an information return for all payments
aggregating $600 or more in a calendar year to any single payee
(except a tax-exempt corporation), notwithstanding any
regulation promulgated prior to the date of enactment. Second,
the payments to be reported include gross proceeds paid in
consideration for property or services.
Number of affected taxpayers. It is estimated that the
Committee Bill will affect more than ten percent of individual
or small business tax returns.
Discussion. According to the GAO, only eight percent of
approximately 50 million small businesses with less than $10
million in assets filed miscellaneous information return Form
1099-MISC.\151\ If greater reporting from small businesses were
available, the Committee believes that the IRS could more
readily identify areas of underreported income of the payees.
In general, the more payments to which information reporting
and/or withholding applies, the greater the improvement in
compliance.\152\ Thus, requiring information reporting for all
payments aggregating $600 or more in a calendar year to a
corporation could enhance taxpayer compliance and IRS
enforcement efforts.
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\151\Government Accountability Office, IRS Could Do More to Promote
Compliance by Third Parties with Miscellaneous Income Reporting
Requirements, GAO-09-238 (January 2009).
\152\See e.g., ``Tax Year 2001 Individual Income Tax Underreporting
Gap,'' at 2,
finding that information reporting is the primary differentiator in
compliance rates. See also, Joseph Bankman, ``Eight Truths About
Collecting Taxes from the Cash Economy,'' 117 Tax Notes 506, 511
(2007).
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The compliance benefits from the provision may be limited
due to inconsistencies with the manner in which many
corporations compute taxable income. For example, many
corporations compute taxes on a fiscal year basis, whereas the
provision requires calendar year reporting for payments to
corporations. To the extent a corporate taxpayer computes
income on a fiscal year basis, calendar year information
reporting may not accurately reflect income received during the
corporation's taxable year. Similarly, a significant number of
corporations report income on an accrual basis, rather than a
cash basis. For accrual basis taxpayers, the year in which the
taxpayer receives a payment may not correspond to the year in
which the taxpayer must include such payment in income.
Imposing additional information reporting requirements also
will impose additional costs on businesses that should be
weighed against the potential compliance benefits. The
additional reporting requirements will increase the
administrative burden on payers subject to the provision. The
extent of this additional burden may depend on the extent to
which taxpayers subject to the provision have procedures and
systems in place to meet present-law information reporting
requirements that can be adapted to comply with the provision.
The widespread use of computer technology to process and store
business information should minimize the burden associated with
generating and transmitting the information necessary to comply
with the provision, regardless of the extent to which the
taxpayer is currently subject to information reporting.\153\
Moreover, because payments to corporations are generally
excepted from information reporting requirements under present
law, payers are already required to determine whether a payee
is a corporate or non-corporate taxpayer. To the extent the
provision reduces the instances in which payers must determine
the payee's status or the portion of the payment that
represents income, the provision may simplify present-law
reporting requirements.
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\153\See e.g., Government Accountability Office, Costs and Uses of
Third-Party Information Returns, November 2007, GAO-08-266, available
at , wherein the GAO, based on
its case studies, found the compliance costs associated with filing
information returns to be ``relatively low.''
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The extent of the burdens imposed on small businesses may
be ameliorated if the IRS issues expeditious guidance designed
to identify and avoid double reporting of payments (for
example, payments reportable under rules applicable to merchant
credit cards) and to revise forms and instructions to avoid
confusion about what payments are excepted from reporting.
3. Employer health insurance reporting
Summary description of the provision. Under the Committee
Bill, an employer is required to disclose on each employee's
annual Form W-2 the value of the employee's health insurance
coverage sponsored by the employer. If an employee enrolls in
employer-sponsored health insurance coverage under multiple
plans, the employer must disclose the aggregate value of all
such health coverage (excluding the value of a health flexible
spending arrangement).
The employer calculates the value of employer-sponsored
health insurance coverage using the rules for determining the
employer-provided portion of the applicable premiums for COBRA
continuation coverage, including the special rule for self-
insured plans. If the plan provides for the same COBRA
continuation coverage premium for both individual coverage and
family coverage, the plan would be required to calculate
separate individual and family premiums for this purpose.
Number of affected taxpayers. It is estimated that the
Committee Bill will affect more than ten percent of individual
and small business tax returns.
Discussion. The Committee Bill creates an additional
reporting requirement for employers who sponsor health
insurance for employees. The reporting requirement obliges the
provision of the value of each employee's employer-sponsored
health insurance to both the insured individual and the IRS. It
is anticipated that small businesses will have to perform
additional analysis to comply with the new reporting
requirement, including calculating the separate values of
individual and family premiums. It is also anticipated that the
IRS will have to amend the existing Form W-2 to capture the
value of employer-sponsored health insurance, and to revise the
instructions to the Form W-2 to reflect the change. Computer
programming changes will be required to accommodate the amended
Form W-2 that will be filed with the IRS by employers.
4. Modify definition of income qualifying for exchange subsidies
Summary description of the provision. The Committee Bill
provides a refundable credit for eligible individuals and
families who purchase health insurance through the state
exchanges. The credit is payable in advance directly to the
insurer, although individuals may elect to purchase health
insurance out-of-pocket and apply to the Internal Revenue
Service for a tax credit at the end of the taxable year, in
which case the credit is payable to the individual.
The credit is available for individuals with modified gross
incomes (``MGI'') up to 300 percent of the Federal poverty
level (``FPL''). MGI is defined as an individual's (or
couple's) total income without regard to exclusions from gross
income under sections 911 (regarding citizen or residents
living abroad), 931 (regarding residents of specified
possessions), and 933 (regarding residents of Puerto Rico),
plus any tax-exempt interest received during the tax year, plus
the MGI of dependents listed on the return. In addition,
certain deductions from gross income that are allowed in
determining adjusted gross income, such as the deduction for
contributions to an individual retirement arrangement, are
disregarded.
In all cases, income eligibility will be reconciled
annually on the individual's Federal income tax return and
individuals will be required to repay any excess tax credit
received, subject to a ``safe harbor'' for filers whose current
income is less than 300 percent of FPL. For these taxpayers,
the ``safe harbor'' limits the amount of any excess tax credit
received to $250 for single filers and $400 for joint filers
and for those filing as a head of household.
The tax credits are available on a sliding scale basis from
two to twelve percent of income beginning on July 1, 2013 for
individuals and families between 134-300 percent of FLP and for
individuals subject to a five-year waiting period under
Medicaid or the Children's Health Insurance Program. These
individuals are therefore eligible for a tax credit with
respect to health insurance purchased during the final six
months of 2013. Beginning in 2014, the credits are also
available to individuals and families between 100-133 percent
of FPL.
Number of affected taxpayers. It is estimated that the
Committee Bill will affect more than ten percent of individual
tax returns.
Discussion. To determine whether they are eligible for the
credit, taxpayers will have to first ascertain what their MGI
is. The calculation of MGI introduces some complexity for
taxpayers. Taxpayers will have to calculate their MGI by adding
certain items to income that ordinarily would be excluded and
foregoing certain deductions that would ordinarily be allowed.
In addition to their own information, taxpayers must obtain the
income information of dependents listed on the return for
purposes of calculating MGI. For determining both eligibility
of the credit and whether the taxpayer is within the safe
harbor with regard to excess tax credit received, taxpayers
will need to ascertain whether their MGI is less than 300
percent of FPL, another item not found on the return and
possibly not one with which taxpayers are familiar.
It is anticipated that the IRS will have to amend existing
forms and develop new forms to accommodate the refundable tax
credit. The IRS will have to develop new procedures for
compiling information relating to taxpayers' eligibility for
the credit, including computing individual and household MGI.
Although the credit is generally payable in advance directly to
the insurer, the IRS will have to develop, and taxpayers will
have to familiarize themselves with, procedures allowing
individuals who elect to purchase health insurance out-of-
pocket to apply to the IRS for the credit at the end of the
taxable year. The IRS also will have to administer the end-of-
year reconciliation of income eligibility on individual's
Federal income tax returns and the repayment of the credit
amount by individuals who received any excess tax credit
subject to the ``safe harbor'' for filers whose current income
is less than 300 percent of FPL.
The IRS will be required to provide information verifying
the eligibility of individuals for the refundable tax credit.
As a result, the IRS will have to develop new procedures and
reprogram its computers to facilitate this information sharing,
and expend resources for proper oversight to ensure the
security of the private taxpayer information disclosed.
The IRS will be required to prescribe regulations to carry
out the provision, including regulations which provide for (1)
the coordination of the credit with the program for advance
payment of the credit under section 2248 of the Social Security
Act, (2) requirements for information required to be included
on a return of tax with respect to the MGI of individuals other
than the taxpayer, and (3) procedures for situations when the
filing status of the taxpayer for a taxable year is different
from such status used for determining the advance payment of
the credit.
5. Employer responsibility
Summary description of the provision. Under the Committee
Bill, as under Present Law, an employer is not required to
offer health insurance coverage. However, any employer with
more than 50 employees that does not offer coverage for all its
full-time employees, does not provide coverage that is
affordable, or does not provide coverage with an actuarial
value of at least 65 percent, is required to pay a penalty. The
penalty is an excise tax that is imposed for each employee who
receives a premium tax credit for health insurance purchased
through a state exchange. The number of employees is determined
based on the number of full-time employees during the most
recent year using the definition of employee that applies for
purposes of determining if an employer is eligible for the
small employer exception from COBRA continuation coverage.
Coverage is not affordable if the premium required to be paid
by the employee (including any required salary reduction
contributions) is more than 10 percent or more of the
employee's household MGI. This income limit is indexed to the
per capita growth in premiums for the insured market as
determined by the Secretary of Health and Human Services.
The penalty paid by an employer would be equal to the
lesser of (1) a flat dollar amount multiplied by the number of
full-time employees (defined as working 30 hours or more each
week) enrolled in a state exchange and receiving a tax credit
or (2) an amount equal to $400 multiplied by the number of
full-time employees (regardless of how many employees receive
the state exchange credit). The flat dollar amount is equal to
the national average tax credit, as set by the Secretary of
Health and Human Services and published in a schedule each
year.
The penalties assessed under this provision are not
deductible under section 162 as a business expense.
Number of affected taxpayers. It is estimated that the
Committee Bill will affect more than 10 percent of business tax
returns.
Discussion. Any employer with more than 50 employees will
only be liable for a penalty if one or more full-time employees
receives a tax credit for health insurance purchased through a
state exchange. Therefore, the IRS must determine whether any
employer with more than 50 employees has any employee that has
received a low income tax credit and must then inform the
employer of the resultant liability. While some employers will
realize they are liable for the penalty, other employers may be
liable without being aware of the liability because they both
offer health insurance coverage and make a substantial
contribution toward the coverage. Employees offered health
insurance by an employer may be eligible for tax credits if the
employer insurance exceeds ten percent of the total household
income of the employee. The IRS must match an employee
receiving a tax credit to any employer for which the employee
works more than 30 hours per week. This will result in an
increase in filings and collections for the IRS. In addition,
because employers offering health insurance may be liable for
the tax due to the incomes of some employees' households,
appeals are expected as well.
COMPLEXITY ANALYSIS
1. Employer health insurance reporting
The Committee Bill requires an employer to disclose the
value of the benefit provided by the employer for each
employee's health insurance coverage on the employee's annual
Form W-2. To the extent that an employee receives health
insurance coverage under multiple employer-provided plans, the
employer would disclose the aggregate value of all such health
coverage (excluding the value of a health flexible spending
arrangement).
The employer calculates the value of employer-provided
health insurance coverage using the rules for determining the
employer-provided portion of the applicable premiums for COBRA
continuation coverage, including the special rule for self-
insured plans. If the plan provides for the same COBRA
continuation coverage premium for both individual coverage and
family coverage, the plan would be required to calculate
separate individual and family premiums for this purpose.
IRS and Treasury Comments
For calendar years beginning after 2009, Forms W-
2, W-2C, W-3, W-3C, W-2AS, W-2GU, W-2VI, and W-3SS would need
to be revised by adding a new box, changing an existing box,
and/or revising codes to report the value of the health
insurance coverage provided by the employer to the employee.
IRS would need to make computer programming
changes to its existing tax systems to accept this additional
data.
2. Modify the definition of qualified medical expenses
The proposal generally changes the definition of ``medical
expense'' for purposes of employer-provided health coverage
such that the cost of over-the-counter medicines (other than
doctor prescribed) may no longer be reimbursed through a health
flexible spending arrangement or a health reimbursement
arrangement. In addition, the cost of over-the counter
medicines (other than doctor prescribed) may no longer be
reimbursed on a tax-free basis through a health savings account
or Archer MSA.
IRS and Treasury Comments
Guidance would need to be issued on employer-
provided reimbursements for over the counter medicine,
including withdrawing Rev. Rul. 2003-102, and additional
guidance may need to be issued on substantiation rules for
reimbursement arrangements, including FSA debit cards.
For tax years beginning after 2009, the
instructions for Forms 8853 and 8889 and Publications 969 and
15-B would be revised to reflect the change in the law.
These changes will not require programming.
The same records as under Present Law would need
to be maintained (but fewer items would be eligible for
reimbursement).
Issues may arise between IRS and taxpayers
regarding the scope of the provision.
3. Information reporting for payments to corporations
Under the proposal, information reporting is expanded in
two ways. First, taxpayers engaged in a trade or business are
required to file an information return for all payments
(including all purchases of property and services) aggregating
$600 or more in a calendar year to any single payee (except a
tax-exempt corporation), notwithstanding any regulation
promulgated prior to the date of enactment. Second, the payment
to be reported includes gross proceeds paid in consideration
for property or services.
IRS and Treasury Comments
Guidance would be required to prevent double
reporting of payments (i.e., coordinating this provision with
merchant credit card reporting, three percent withholding on
certain government payments to contractors).
For calendar years beginning after 2011, the
general instructions for Forms 1099, 1098, 3921, 3922, 5498,
and W-2G and the instructions for certain other information
returns and publications would need to be revised to reflect
the elimination of the exception for payments to corporations
and the exception for payments other than for services.
IRS would need to modify existing tax systems to
reflect this provision.
4. Definition of income qualifying for exchange subsidies
The proposal provides a refundable tax credit for eligible
individuals and families who purchase health insurance through
the state exchanges. The credit is payable in advance directly
to the insurer.
The tax credit is available for individuals (single or
joint filers) with modified gross incomes (``MGI'') up to 300
percent of the Federal poverty level (``FPL''). MGI is defined
as an individual's (or couple's) total income without regard to
sections 911 (regarding the exclusion from gross income for
citizens or residents living abroad), 931 (regarding the
exclusion for residents of specified possessions), and 933
(regarding the exclusion for residents of Puerto Rico), plus
any tax-exempt interest received during the tax year, plus the
MGI of dependents listed on the return. In addition, certain
deductions from gross income that are allowed in determining
adjusted gross income, such as the deduction for contributions
to an individual retirement arrangement, are disregarded.
In all cases, income eligibility will be reconciled
annually on the individual's Federal income tax return and
individuals will be required to repay any excess tax credit
received, subject to a ``safe harbor'' for filers whose current
income is less than 300 percent of FPL. For those taxpayers,
the ``safe harbor'' limits the amount of any excess tax credit
received to $250 for single filers and $400 for joint filers
(and for those filing as a head of household).
The tax credits are available on a sliding scale basis from
two to twelve percent of income beginning on July 1, 2013 for
individuals and families between 134-300 percent of FLP and for
individuals subject to a five-year waiting period under
Medicaid or the Children's Health Insurance Program. These
individuals are therefore eligible for a tax credit with
respect to health insurance purchased during the final six
months of 2013. Beginning in 2014, the credits are also
available to individuals and families between 100-133 percent
of FPL.
IRS and Treasury Comments
For tax years that include July 1, 2013, a new
form would need to be developed to reconcile the premium
credits paid by Treasury or through the taxpayer's employer to
the taxpayer's insurance plan and the amount of credit to which
the taxpayer is entitled for the year.
Recapture of any credit paid in excess of the
amount to which the taxpayer is entitled would be accomplished
through Form 1040, 1040A, or 1040EZ, subject to the caps
included in the Chairman's Mark. An additional line or write-in
entry would be added on these forms to report the recaptured
credit.
Any credit paid that is less than the amount to
which the taxpayer is entitled would be allowed as a refundable
credit on Form 1040, 1040A, or 1040EZ. An additional line or
box would be added on these forms to report the refundable
credit.
The Modified Gross Income (``MGI'') definition in
the Chairman's Mark is novel in that it includes the income of
dependents included on the tax return. While a number of
families have consistent dependent relationships, as reported
on their tax returns, it is common for other dependent
relationships to change year to year. For example, it is not
uncommon for divorced parents to alternate years claiming
children as dependents. Guidance may need to be issued to
address the application of the MGI definition.
The IRS would also anticipate questions from
taxpayers as to whether it would now be required that
dependents be listed on the tax return (which is not currently
a requirement).
The Chairman's Mark includes the concept of
regional variations in the amount of the premium credit
(insofar as the amount of an individual's premium credit is
tied to the local benchmark premium). The IRS would need to
develop forms and instructions to ensure that taxpayers are
reconciling against the proper credit amount based on the
premium in their geographic location.
The IRS would need to work with the Department of
Health & Human services to develop procedures for taxpayers who
move between regions within a given tax year, if the amount of
the premium subsidy varies across those regions.
The IRS would need to work with the Department of
Health & Human Services (HHS) to develop procedures for
accepting alternative income documentation where individuals
and families have not filed a tax return in the previous year.
If the new legislation requires any individuals
who are currently non-filers to file a tax return for the
purposes of reconciliation, the IRS would need to develop or
amend forms and instructions, answer questions, and partner
with other relevant agencies to reach out to those individuals
and inform them of the filing requirement.
Issues could arise between the IRS and taxpayers
relating to the reconciliation of the credit, including which
dependents' income should count toward premium credit
eligibility, how regional movements may affect the size of the
credit, and other administrative provisions that affect the
calculation of the credit.
IRS would need to develop a number of new systems,
build new interfaces with exchanges and insurance providers,
and modify existing tax systems to reflect this provision.
5. Employer responsibility
Under the proposal, as under Present Law, an employer is
not required to offer health insurance coverage. However, any
employer with more than 50 employees that does not offer health
insurance coverage or that offers health coverage that is not
affordable for all its full-time employees is required to pay a
fee to the Internal Revenue Service for each employee who
receives a premium tax credit for health insurance purchased
through a state exchange. Coverage is not affordable if the
premium required to be paid by the employee (including any
required salary reduction contributions) is ten percent or more
of the employee's income. This income limit is indexed to the
per capita growth in premiums for the insured market as
determined by the Secretary of Health and Human Services.
The fee paid by an employer would be equal to the lesser of
(1) a flat dollar amount multiplied by the number of full-time
employees (defined as working 30 hours or more each week)
enrolled in a state exchange and receiving a tax credit or (2)
an amount equal to $400 multiplied by the number of full-time
employees (regardless of how many employees receive the state
exchange credit). The flat dollar amount is equal to the
national average tax credit, as set by the Secretary of Health
and Human Services and published in a schedule each year.
The fees assessed under this provision are not deductible
under section 162 as a business expense.
IRS and Treasury Comments
For tax years that include July 1, 2013, a new
form would need to be developed for employers to report and pay
the fee for employees who receive a tax credit through a state
exchange.
IRS would need to advise businesses on how to
record and report how many employees are receiving subsidized
health care through the exchange (presumably this would be
determined via payroll deductions or through the presence of an
affordability waiver).
The Chairman's Mark does not make entirely clear
what information may be available to the employer showing which
employees are receiving the subsidy. Should it be left to the
employer's due diligence, the IRS would expect to issue
guidance clarifying what constitutes sufficient due diligence.
IRS would need to issue implementing guidance to
make clear which employees are covered, whether employers are
subject to the fees, and the amount of the fee.
IRS would need to develop new systems and modify
existing systems to reflect this provision.
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, in order to expedite the
business of the Senate, it is necessary to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).
VI. ADDITIONAL VIEWS
Mr. Chairman, with the Committee's passage of America's
Healthy Future Act, we are on a path toward fixing many of the
problems plaguing our health care system today. While this bill
is a start toward comprehensive health care reform, I have
several remaining areas of significant concern, some of which I
have highlighted here. Additionally, I have joined Senators
Stabenow, Kerry, Menendez, and Schumer to express additional
views regarding affordability and the high-cost insurance
excise tax.
Public Health Insurance Option
The Committee mark does not include a public health
insurance option or any viable alternative to actively compete
with private health insurance companies and lower health care
costs for consumers. One of the major disappointments of the
Committee mark is the lack of leverage over private health
insurance industry prices. Families and employers have said
repeatedly that their biggest complaint with their health
insurance is the price of it. According to the Kaiser Family
Foundation, in the last decade, premiums have increased four
times faster than inflation (109 percent versus 26.5 percent).
When wages rise 19 percent from 2000 to 2007, as they did in
West Virginia, and premiums simultaneously rise at four times
that rate, there is an undeniable strain on family budgets. The
Committee mark spends nearly one-half trillion dollars in
federal premium subsidies to supplement high private health
insurance costs, rather than to bring those high costs down for
consumers.
A public health insurance option can force insurers to do
better by their customers and to once again compete for
business by providing a reliable benchmark for cost and
quality. The difference between a public plan and private
insurance is that consumers choosing the public option would
pay less in administrative overhead than under private plans,
which could lower costs by as much as 20 percent, according to
the Urban Institute. The availability of a public option with
the authority to set reasonable provider rates will limit
premium growth and create real cost savings for employers and
families, while also curbing the growth of federal premium
subsidies. (For instance, Medicare's costs rose an average of
4.4 percent between 1997-2007, while private insurance grew by
7.7 percent per capita in the same period.) In turn, employers
would be able to turn those savings into increased wages for
their workers, boosting federal and state tax revenues.
If an average family premium is $13,375, a family wishing
to enroll in the public health insurance option could save
$1,338-$2,676. This is a few mortgage payments, a few car
payments--real money for families. Knowing that premiums will
continue to rise faster than the federal premium subsidies
provided under this bill, I remain extremely concerned that
individuals and families would not have the option of
purchasing a stable, quality product at an affordable price.
At its maximum within the budget window, the Congressional
Budget Office (CBO) estimates only 27 million people will
receive insurance through the exchanges (by 2019). In the four
Congressional reform bills that include a public option, CBO
estimated only one-third of the people in the exchange would
choose it. So, reasonably, only 8-9 million people would enroll
in the public option, if one was included in the Finance
Committee bill: approximately 3 percent of the insured
population.
Arguments against a public option on the grounds of cost-
shifting are unsubstantiated. Such cost-shifting arguments have
been debunked by the national authority on Medicare payment--
the Medicare Payment Advisory Commission (MedPAC). MedPAC
argues that ``high profits from non-Medicare sources permit
hospitals to spend more.'' Hospitals with the greatest
resources are less aggressive about containing costs and
therefore have the highest Medicare ``losses'' (the difference
between Medicare rates and a hospital's average costs). MedPAC
explained this cycle in its March 2009 report to Congress.
MedPAC reported, ``While insurers appear to be unable or
unwilling to ``push back'' and restrain payments to providers,
they have been able to pass costs on to the purchasers of
insurance and maintain their profit margins.'' The real issue
is not whether private plans pay doctors and hospitals more
than government programs, but what is a fair rate based on the
actual cost of providing quality care. MedPAC concluded,
``Increasing Medicare payments is not a long-term solution to
the problem of rising private insurance premiums and rising
health care costs. In the end, affordable health care will
require incentives for health care providers to reduce their
rates of cost growth and volume growth.''
Additionally, CBO has indicated that many hospitals
negotiate higher payments with private insurers as a form of
price discrimination to maximize profits. They demand higher
reimbursements from health insurers because they can, not
because they are shifting costs. Hospitals have had a greater
ability to do this as mergers have given them greater leverage
over private insurance companies. A public option would not
have these profit-maximizing incentives.
I will continue to work with the Members of the Finance
Committee and other Members to provide consumers with the
choice of a strong public health insurance option.
Title I--Health Care Coverage
Subtitle A--Insurance Market Reforms
The Committee mark makes significant changes to private
health insurance coverage in the individual and small group
markets that will improve the adequacy and dependability of
coverage for millions of Americans. These reforms include new
federal rating rules to limit variation in the cost of
coverage, guaranteed issue, guaranteed renewability, no pre-
existing condition exclusions, no lifetime or annual limits on
coverage, and no rescissions. I remain concerned, however, that
these new insurance market reforms do not apply to insurance
products in every single market in order to guarantee that all
consumers are offered comparable health insurance stability and
protection. Additionally, federal oversight and enforcement of
these new insurance market reforms is critical to making sure
insurers actually comply with the new rules.
Self-Insured Market. Approximately half of the insured
population in the United States (between 46 and 55 percent)
obtains health insurance coverage through large, self-insured
employers. These plans are not regulated by state insurance
commissioners, and are instead regulated by the United States
Department of Labor. The Employee Retirement Income Security
Act (ERISA) of 1974 exempts self-insured health plans from
state regulation and state external review processes, which has
resulted in the self-insured market being less regulated and
less accountable than fully-insured products in the private
marketplace today. Yet, under America's Healthy Future Act,
self-insured plans are not subject to the same level of
consumer protections that would apply to health insurance
products in the individual and small group markets. The
Committee mark only includes two new reforms of self-insured
plans--they must provide coverage that is at least equal to 65
percent of the actuarial value of the Blue Cross Blue Shield
standard plan offered through the Federal Employees Health
Benefits Plan (FEHBP), and they must provide first dollar
coverage for preventive health benefits. While these are
important steps, they are not enough to provide the vast
majority of Americans with adequate consumer protections and
insurance security. Throughout this important debate, I have
asserted that the insurance market reforms that are applied to
the individual and small group markets should also apply to
self-insured plans.
Pre-Existing Conditions. The Committee mark eliminates pre-
existing condition exclusions in the individual and small group
markets. However, these provisions are not phased-in until July
1, 2013. In the years prior to 2013, the mark would allow
individuals who are denied coverage based on a pre-existing
condition to enroll in a high-risk pool. The prohibition on
pre-existing condition exclusions is phased-in for large group
plans over five years beginning in 2017, and the prohibition
does not apply to the self-insured market. I remain concerned
that the prohibition on pre-existing condition exclusions in
the individual, small group, and large group markets does not
start immediately on January 1, 2010. I also remain concerned
that the prohibition on pre-existing condition exclusions does
not apply to the self-insured market. I plan to continue
working with Chairman Baucus on an expedited timeframe for the
elimination of pre-existing condition exclusions, including the
immediate elimination of pre-existing condition exclusions for
children in all markets.
Annual and Lifetime Limits. Beginning in 2010, the
Committee mark prohibits insurers from offering plans with
annual or lifetime limits in the exchange. Beginning in 2013,
these limits would apply to all new individual and small group
policies (phased in over five years). The bill also prohibits
large-employer plans (including self-insured plans) from
implementing ``unreasonable'' annual or lifetime limits,
although the term ``unreasonable'' is undefined.
I remain concerned that the mark does not implement a
complete prohibition on annual and lifetime limits for large
employer plans, including those in the self-insured market. I
also remain concerned that the word ``unreasonable'' is not
defined, as it relates to the limits on annual and lifetime
caps. I intend to continue working with Chairman Baucus to
improve the protections in the mark regarding annual and
lifetime limits on coverage to make certain there is equal and
sufficient protections for individuals and their families no
matter what market they access health insurance coverage.
Minimum Medical Loss Ratio. The Committee mark includes
premium subsidies for individuals above 133 percent of poverty
to purchase health insurance coverage in the state exchanges.
According to CBO, these federal subsidies will cost $461
billion over the ten-year budget window. Additionally,
estimates suggest that it will cost approximately $20 billion
more than current law to give Medicaid-eligible populations
between 100-133 percent of poverty premium subsidies to enroll
in private insurance coverage in state exchanges. The Committee
mark also directs the Secretary of Health and Human Services
(HHS) to require private health insurers to report their
medical loss ratios.
While reporting of medical loss ratios is an important
first step, I remain concerned that the Committee mark does not
require private health insurance companies, particularly those
offering federally subsidized coverage through the state
exchanges, to spend the majority of the nearly one-half
trillion dollars in federal premium subsidies on actual medical
care. Without a minimum medical loss ratio to hold insurance
companies accountable there is no limit on the amount of
taxpayer resources that private health insurance companies can
spend on executive compensation, shareholder profits,
marketing, and other activities that do not add value for the
consumer. As I asserted during the Committee debate, I believe
that private health insurers should spend no less than 85
percent of premium dollars on actual medical care, and I look
forward to ongoing discussions with Chairman Baucus on how to
include a minimum medical loss ratio requirement in this
legislation.
Subtitle B--Exchange and Consumer Assistance
State Exchanges. Under the Committee mark, states would be
required to establish an exchange for the individual market and
a Small Business Health Options Program (SHOP) exchange for the
small group market, with technical assistance from the
Secretary, in 2010. After states adopt Federal rating rules and
the exchange is functional for at least three years, states
could permit other entities to operate an exchange (i.e.
multiple competing exchanges)--but only if it met specified
requirements, and subject to approval by the Secretary. States
could, through interstate compacts, form regional exchanges,
subject to approval by the Secretary. I remain concerned about
multiple state exchanges and believe that one national
exchange, implemented and regulated by the HHS Secretary, would
minimize insurance enrollment churning, lower administrative
costs, and improve the value of benefits and coverage while
lowering premiums by creating a larger risk pool.
Subtitle C--Making Coverage Affordable
Minimum Credible Coverage for Children. I commend Chairman
Baucus and the Members of this Committee for supporting the
continuation of the Children Health Insurance Program (CHIP)
for vulnerable children. Medicaid and CHIP are proven programs
that work well for children, and we should continue to build
upon what works. In addition to protections for children
enrolled in Medicaid and CHIP, there should also be adequate
protections for children enrolled in private health insurance
coverage through state exchanges. I remain concerned that cost-
sharing is not limited for children in the exchanges, and I
believe it should follow the cost-sharing protections provided
for children enrolled in CHIP. I also worry that this mark does
not do enough to cover preventive health services, with minimal
cost-sharing, for pregnant women, infants, children, and
adolescents. Additionally, I remain concerned that federal
subsidies for private coverage in the exchanges will
incentivize inefficient provider payments instead of payments
to health care providers that incentivize case management, care
coordination, use of medical home, child health measures, and
culturally and linguistically appropriate care. At a minimum, I
believe the standard for minimum creditable coverage for
children should include the Health Resources and Services
Administration consensus guidelines for children as well as
maternity and newborn care, mental health services,
rehabilitative and habilitative services and devices, and
pediatric services including oral, dental and vision care.
Subtitle D--Shared Responsibility
Employer Mandate. The Committee mark includes a free-rider
provision as an alternative to a true employer mandate. It
would penalize employers with more than 50 employees that do
not offer coverage, but employ individuals eligible for premium
subsidies. This policy results in a net increase in employer-
based coverage of about one million individuals, according to
CBO.
I remain concerned that this provision provides a
disincentive for employers to hire or maintain employment for
low-wage workers. It would be particularly burdensome for
states, like West Virginia, with a higher percentage of low-
wage workers. Additionally, I have concerns about the fact that
the trend in the last few years of the budget window indicates
growing reductions in employer-based coverage of two to three
million every year between 2016 and 2019. In contrast to the
policy included in the Finance mark, the Health, Education,
Labor, and Pensions (HELP) Committee health reform bill, the
Affordable Health Choices Act, has a true employer mandate, and
increases employer-based coverage by 14 million people over the
ten-year budget window. I look forward to continuing to work
with Chairman Baucus and other Members of the Committee to
implement a true employer mandate that creates a fairer system
of employer shared responsibility.
Subtitle E--Creation of Health Care Cooperatives
Consumer Operated and Oriented Plan (CO-OP). The Committee
mark authorizes $6 billion in funding for the Consumer Operated
and Oriented Plan (CO-OP) program. In its preliminary score of
the Committee mark, CBO states that ``the proposed co-ops had
very little effect on the estimates of total enrollment in the
exchanges or federal costs because, as they are described in
the specifications, they seem unlikely to establish a
significant market presence in many areas of the country or to
noticeably affect federal subsidy payments.'' As a result, CBO
estimates that of the $6 billion in federal funds that would be
made available in co-op start-up funding, only about $3 billion
would be spent over the ten-year budget window. As I have
asserted throughout this debate, health insurance cooperatives
are not a substitute for a strong public health insurance
option. Additionally, I remain seriously concerned about the
viability of consumer health cooperatives in the health
insurance marketplace at all.
There has been no significant research into consumer co-ops
as a model for the broad expansion of health insurance. What we
do know, however, is that this model was tried in the early
part of the 20th century and largely failed. There is a lack of
consistent data about the total number of consumer health
insurance cooperatives in existence today, although most
estimates indicate that only between four and seven exist, and
there have been no analyses of the impact of existing health
insurance cooperatives on consumers. All of the consumer health
insurance cooperatives identified by the U.S. Department of
Agriculture and the National Cooperative Business Association
operate and function just like private health insurance
companies. There have been no analyses of the regulatory
structure for existing health insurance cooperatives. Consumer
health insurance cooperatives are currently regulated by the
states, and there have been no studies conducted to evaluate
the consumer experience with them. Health insurance
cooperatives simply have not been proven to meet the policy
goals of cost-containment, transparency, and innovation that a
strong public health insurance option guarantees.
Subtitle F--Transparency and Accountability
Federal Regulation of Insurance. The Committee mark creates
an entirely new construct for the sale and purchase of private
health insurance that is more affordable and comprehensive than
most coverage options for consumers available in the individual
and small group markets today. Additionally, the mark applies
new consumer protections in these reformed markets that
prohibit insurers from using common practices that delay or
deny necessary care. I commend the Chairman for these critical
provisions. However, the Committee mark does not include any
new federal resources or infrastructure to regulate private
health insurance companies and make certain they are actually
abiding by the new insurance market rules. Without a new,
robust federal regulatory role, I remain extremely concerned
that private health insurance companies will continue their
long-standing practice of exploiting loopholes in the law and
skimming on coverage for beneficiaries to increase profits. I
look forward to working with Chairman Baucus to address these
concerns.
Subtitle G--Role of Public Programs
Part I--Medicaid Coverage for the Lowest Income Populations
Medicaid Expansion. The Chairman should be commended for
expanding Medicaid to 133 percent of the federal poverty level.
Medicaid is a program that works. This expansion is long
overdue and will go a long way to help vulnerable populations
historically ineligible for Medicaid. However, as I have stated
several times during the debate in Committee, I am extremely
concerned about the structure of this expansion.
First, as part of the Medicaid expansion, all newly-
eligible, non-pregnant adults would receive a benchmark benefit
package consistent with section 1937 of the Social Security
Act, which was passed as part of the Deficit Reduction Act of
2005 (DRA, P.L. 109-171). The Deficit Reduction Act was enacted
with the stated purpose of reducing Medicaid spending. Many of
the policy changes in the DRA shift costs to Medicaid
beneficiaries and have the effect of limiting health care
coverage and access to services. Specifically, the DRA allows
states to offer more limited benefits for some groups and to
offer different benefits to different groups of enrollees. It
also allows states to impose cost-sharing in the form of
premiums and co-pays on individuals and families who are
economically impoverished. For families who are struggling
financially, even seemingly small amounts of cost-sharing raise
significant barriers to pursuing needed health care services.
While the DRA gave states the option of implementing so-called
``flexible'' benefit packages, the language included in the
Committee mark makes DRA benefit reductions mandatory for
newly-eligible populations, which effectively undermines the
Medicaid entitlement.
Second, effective July 1, 2013, the Committee mark would
require states to offer premium assistance and wrap-around
benefits to Medicaid beneficiaries who are offered employer-
sponsored insurance (ESI) if it is cost-effective to do so,
consistent with current law requirements. Creating mandatory
state Medicaid premium assistance puts beneficiaries, including
children, at risk of losing benefits and creates an unnecessary
burden on states that already have the option to provide
premium assistance under Section 1906 of the Social Security
Act. Historically, premium assistance programs have not been
very successful; they often increase state and federal
expenditures instead of decreasing them. The 2009 CHIP
reauthorization law recognized the limitations of premium
assistance and made changes that have not yet had a chance to
be implemented. I believe Congress should wait for the results
of the GAO study on premium assistance expected in January 2010
before making any changes to current law with regard to premium
assistance.
Third, beginning in 2014, non-elderly, non-pregnant adults
between 100 percent ($22,050 for a family of four) and 133
percent of poverty ($29,327 for a family of four) would be able
to ``choose'' between Medicaid and coverage through their state
exchange. This provision is estimated to cost $20 billion over
the budget window, largely because private insurance is much
more costly--approximately 25 percent more costly--than
Medicaid, which is more efficient and provides better coverage.
This $20 billion is in addition to the $461 billion that we are
giving private insurers in federal tax subsidies.
I remain concerned that the Medicaid overpayments to
private insurers that would be allowable under this bill are
similar to the Medicare Advantage overpayments. States can
already contract with private insurers, in a cost-effective
manner, to enroll Medicaid-eligible populations in private
managed care plans. These existing Medicaid managed care plans
have to meet beneficiary protections required under the
Balanced Budget Act of 1997, which would not be required of
private plans operating in the exchange. Additionally, I am
very concerned that private-fee-for-service plans--the most
inefficient and expensive private plans in the market--would be
able to enroll vulnerable Medicaid populations. Private
insurers have a long history of inadequately serving
vulnerable, low-income populations. I am very concerned that
the Committee mark overlooks the substantial deficiencies in
the private health insurance system--and puts vulnerable
populations at risk of losing critical Medicaid benefits and
cost-sharing protections in the state exchanges. There are no
provisions in this mark that would prohibit states from
creating barriers to Medicaid enrollment so that Medicaid
beneficiaries are forced to ``choose'' inadequate and more
expensive private coverage in the exchange.
I look forward to working with Chairman Baucus to address
each of these concerns.
Part IV--Medicaid Services
Curative and Palliative Care for Children in Medicaid. The
Committee mark includes an important provision that makes
concurrent care--both curative and palliative--available to
children under Medicaid with terminal, hospice-eligible
prognoses. This provides the palliative care these children
need without forcing their parents to make the impossible
choice of foregoing curative measures in order to qualify for
hospice. I look forward to working with the Chairman to also
provide concurrent care to children enrolled in CHIP.
Community First Choice Option. The Chairman should be
commended for including the Community First Option in the
Committee mark. This critical provision will create a state
plan option to provide community-based attendant supports and
services to individuals with disabilities who are Medicaid-
eligible and require an institutional level of care. This is a
significant step in the right direction, but more needs to be
done to improve long-term care supports and services. I look
forward to working with Chairman Baucus and other Members of
the Committee to provide the infrastructure necessary for a
comprehensive long-term care system.
Part VII--Dual Eligibles
Federal Coordinated Health Care Office. The Chairman should
be commended for establishing the Federal Coordinated Health
Care Office (CHCO) within the Centers for Medicare and Medicaid
Services (CMS). The CHCO would substantially improve care
coordination for individuals dually eligible for both Medicare
and Medicaid and is a long overdue improvement to our health
care system.
ADDITIONAL COVERAGE VIEWS
Number of People Covered. The Chairman should be commended
for providing health insurance coverage to 29 million
previously uninsured Americans. I remain concerned, however,
that 16 million men, women, and children will remain uninsured
under the Committee mark. Universal coverage has always been
the goal of health reform. We should spend the resources
necessary to insure every person.
Advance Care Planning. The Committee mark is silent on
advance care planning. As I have asserted throughout this
debate, a critical component of a modernized health system is
the ability to address the health care needs of patients across
the life-span--especially at the end of life. Death is a
serious, personal, and complicated part of the life cycle, and
care at the end of life is eventually relevant to everyone.
Americans deserve end-of-life care that is effective in
providing information about diagnosis and prognosis,
integrating appropriate support services, fulfilling individual
wishes, and avoiding unnecessary disputes.
Most people want to discuss advanced directives when they
are healthy and they want their families involved in the
process. However, the vast majority of Americans have not
completed an advance directive expressing their final wishes.
In 2007, RAND conducted a comprehensive review of academic
literature relating to end-of-life decision-making. This review
found that only 18 to 30 percent of Americans have completed
some type of advance directive expressing their end-of-life
care wishes. Perhaps most alarmingly, between 65 and 76 percent
of physicians whose patients had an advance directive were
unaware of its existence. In its present form, end-of-life
planning and care for most Americans is perplexing, disjointed,
and lacking an active dialogue. In its 1997 report entitled
Approaching Death: Improving Care at the End of Life, the
Institute of Medicine found several barriers to effective
advance planning and end-of-life care that still persist today.
I am extremely concerned that the Committee mark does nothing
to inform consumers of their treatment options at the end of
life or help them document their individual wishes for care.
Need for a Comprehensive Approach to Long-Term Care Policy.
There is no question that we need a long-term care system in
this country--one that provides adequate and affordable long-
term care coverage for all Americans. The Pepper Commission
called for this in 1990, but little if any progress has been
made since that time. Medicaid has become the long-term care
payer of last resort, with recipients having to spend down
their income and assets to the point of impoverishment in order
to qualify. As the baby boomers continue to age, it is
imperative that we have the same sense urgency and commitment
regarding long-term care as we have regarding acute and primary
care reform.
Title II--Promoting Disease Prevention and Wellness
Subtitle C--Workplace Wellness
Incentives for Participation in Voluntary Wellness
Programs. The Committee mark would codify the existing HIPPA
non-discrimination regulation relating to workplace wellness
programs. This rule allows employers or issuing plans to
provide ``rewards'' for employees' participation in a wellness
program or for meeting certain health status targets associated
with that program. Employers, under the regulation, can provide
a reward (or penalty for those who do not participate or do not
meet certain health status targets) to participants of up to 20
percent of the total cost of the plan. Additionally, the
Secretaries of HHS, Labor and Treasury may raise the threshold
to 30 percent of the total cost of the plan. I am very
concerned that these provisions are discriminatory and have not
been shown to be effective. In addition to posing problems for
people with less-than-perfect health, the premium
``incentives'' would unfairly penalize people who have other
barriers to participation in such programs, like working
mothers or people who work two or more jobs. This provision
means that some employees will now have to pay more than their
fellow employees for the same benefits. It also means that
people who do not participate in such wellness programs will be
subsidizing the premiums of those who do participate. There is
evidence that some employees who do not get the discounts will
opt-out of coverage altogether; some of the savings attributed
to the wellness program in fact come from people with health
problems dropping employer-sponsored health insurance. I do not
believe these provisions should remain in the final bill.
Title III--Improving the Quality and Efficiency of Health Care
Subtitle A--Transforming the Health Care Delivery System
Part IV--Strengthening Primary Care and Other Workforce Improvements
Primary Care/General Surgery Bonus. The Chairman should be
commended for including geriatricians among providers eligible
for primary care bonuses. Geriatricians are vital to quality
care for the elderly, including those receiving institutional
or home and community-based services. Such measures also
provide incentives for more medical students to pursue careers
in geriatrics.
Redistribution of Unused GME slots to Increase Access to
Primary Care and Generalist Physicians. The Chairman should be
commended for including geriatricians in the definition of
primary care for the purpose of determining graduate medical
education (GME) slots. Such efforts are important because our
nation is behind in developing the workforce necessary for
current and projected demographic shifts. According to the
American Geriatrics Society, in 2008 there were 7,590 certified
geriatricians in the nation. The Alliance for Aging Research
projects a need for 36,000 geriatricians by 2030. This
provision will help to close the growing workforce gap.
Subtitle B--Improving Medicare for Patients and Providers
Benefits for Seniors. The Committee mark includes important
improvements to Medicare that will have a positive impact on
seniors. Wellness benefits are enhanced, with an annual
wellness visit where a beneficiary's health behaviors are
assessed and discussed with his or her physician. Out-of-pocket
costs are eliminated from preventative health screenings, so
that any barriers to getting these screening on a regular and
timely basis are removed. Half of the Medicare prescription
``doughnut hole'' is closed for beneficiaries, reducing out-of-
pocket drug costs for many. In addition to the improvements in
Medicare benefits for seniors, the mark also includes delivery
system reforms that will ultimately benefit seniors and
individuals with disabilities.
The mark makes progress, but more is needed to improve
Medicare for seniors and those with disabilities. I will
continue to work with Chairman Baucus and other members of this
Committee to make such improvements.
Subtitle D--Improving Payment Accuracy
Hospice Payment Reforms. The Chairman should be commended
for including reform of the Medicare hospice payment
methodology consistent with MedPAC recommendations. This
methodology will pay hospices in a way that better accounts for
the trajectory of care expenditures, and thus pay more
accurately across different diagnoses. The Chairman should also
be commended for including hospice data reporting, which will
be extremely useful in quality assurance and oversight. I
remain concerned, however, that the Medicare Commission as
drafted in the Committee mark would exempt hospices from the
payment reforms recommended by the Medicare Commission. I will
continue to work with Chairman Baucus to correct this
provision.
Subtitle E--Ensuring Medicare Sustainability
Medicare Commission. The Committee mark would establish a
Medicare Commission, charged with providing annual
recommendations for Congress regarding changes to Medicare
payment policies. Congress would have six months to act upon
these policies, and potentially change them, before they would
automatically go into effect. In the event that Medicare
spending exceeds certain growth targets, the Commission would
be required to offer policies that reduce Medicare spending by
set amounts. In years where there is no estimated excess cost
growth in Medicare spending, the Commission has no power to
implement changes to the Medicare program. In the mark, the
Commission is prohibited from reducing reimbursement for
hospitals, hospices, and potentially other providers. CBO also
assumes that the Commission will not reduce reimbursement for
physicians or suppliers of durable medical equipment offered
through competitive bidding.
I remain concerned that the Medicare Commission policy, as
drafted, is flawed and will not achieve success in improving
Medicare over the long-term. First, based on CBO's assumptions,
the providers protected from the Commission's recommendations
constitute half, if not more, of total Medicare spending. By
including a carve-out of any kind to protect a subset of
providers, I am concerned that Commission is fundamentally
unsound because it is barred from looking at Medicare from a
comprehensive perspective. The original intent of the MedPAC
Reform Act (S. 1380), the policy upon which the Medicare
Commission is based, was to protect Medicare's solvency by
taking the special interests out of the process of determining
Medicare coverage and provider reimbursement policy. The
Commission is meant to be a responsible, independent entity
charged with implementing reasonable, evidence-based Medicare
policies that serve to protect access to necessary medical care
for our nation's seniors and disabled. However, the language to
protect certain providers weaves special interests into the
very fabric of the Commission. Furthermore, I am particularly
concerned about CBO's assumption that limiting the Commission's
options for exploring greater efficiencies in Medicare means
that the Commission is likely to decrease premium subsidies for
Medicare beneficiaries enrolled in the prescription drug
program. I look forward to working with Chairman Baucus to
restore the integrity of this Commission by eliminating carve-
outs for all providers and preserving beneficiary cost-sharing
protections.
I also remain concerned that the trigger for the Commission
to issue recommendations is tied to excess cost growth in the
Medicare program as it relates to growth in the gross domestic
product, instead of being tied to the solvency of the Medicare
program. The original intent of the MedPAC Reform Act was to
create an independent commission to drive Medicare quality
improvement and increase the efficiency of the program, so that
it continues to exist for seniors and individuals with
disabilities ten, twenty, and fifty years down the line. It was
never meant to cut costs just for the sake of cutting costs. I
look forward to working with Chairman Baucus to restructure
this policy going forward to make certain the delicate balance
of sustaining the program is not found on the back of our most
vulnerable seniors and disabled.
Finally, I remain concerned that six months for
Congressional review and amendment of the recommendations
included in the mark is too great an opportunity for these same
special interests to water-down, or eliminate altogether, the
policies put forth by the Commission. I will continue to work
with Chairman Baucus to create a more effective timeframe
within which Congress can consider the Commission's
recommendations.
ADDITIONAL DELIVERY SYSTEM VIEWS
Palliative Care. I remain concerned that more was not done
in the Committee mark to improve the delivery of palliative
care. More palliative care specialists are needed, including
palliative medicine physicians. Additionally, general and
continuing medical school education must be strengthened so
that providers are more knowledgeable about palliative and end-
of-life care, and better prepared to counsel patients regarding
advance care planning. I look forward to working with Chairman
Baucus to address the workforce needs in this area.
Health Information Technology. The American Recovery and
Reinvestment Act (ARRA) rightly made substantial new
investments in health information technology (HIT). ARRA
included about $17.5 billion in Medicare and Medicaid
incentives over multiple years to providers that achieve
meaningful use of electronic health records (EHRs), and $2
billion in grants and loans to states for activities necessary
for sharing data across providers, including the building of a
Health Information Exchange infrastructure.
The Committee mark appropriately recognizes the importance
of using HIT in optimal care delivery models. Furthermore, the
mark wisely includes HIT training as a part of health care
workforce development. The mark also recognizes the importance
of including free clinics--crucial to the health care safety
net--in EHR funding.
While progress has been made in this mark, I remain
concerned about the persisting barriers to affordable HIT and
EHRs for all providers, including small rural providers with
very limited financial resources. The availability of open
source solutions, in addition to the current market for more
expensive proprietary solutions, is an area where I will
continue to work with Chairman Baucus to improve. This includes
the expansion of open source governmental software programs,
already developed at taxpayers' expense, such as the Veterans
Health Administration's VistA software and the Indian Health
Service's Resource and Patient Management System. Such
additional options would help health care catch up to other
industries in realizing the potential of information
technology.
Title VI--Revenue Items
Budget Failsafe Provision. The President outlined from the
beginning of this process that this health reform bill must be
deficit-neutral. This Committee has had to make difficult
decisions in order to make sure this standard was met, and I
commend the Chairman for having produced the most fiscally
responsible bill of any of the committees, one that even
decreases the deficit. However, I remain very concerned about
one particular provision in the Committee mark aimed at
reducing the deficit. The Committee mark includes a provision
that requires the Director of the Office of Management and
Budget to annually certify that none of the provisions of the
legislation will increase the budget deficit in the coming
year. In the event that the legislation is projected to
increase the federal deficit in the coming year, then premium
subsidies for families and individuals who cannot otherwise
afford coverage would have to be reduced to make up for the
anticipated increase in the deficit. CBO assumes that the
amended Finance mark would increase the deficit in fiscal years
2015 through 2018. Consequently, under CBO and the Joint
Committee on Taxation's estimates, this provision would require
a reduction in premium subsidies averaging about 15 percent for
fiscal years 2015 through 2018.
This so-called ``failsafe'' provision has the potential to
undermine critical affordability of health insurance. The
failsafe provision would automatically decrease premium
subsidies for low- and middle-income families who would be
relying on them to purchase insurance. I am also concerned that
the annual nature of the review realistically means that it
will make subsidized coverage unstable for consumers because
the subsidies will fluctuate based on the budget. I look
forward to working with Chairman Baucus to guarantee that this
bill offers reliable and consistent subsidies, while finding
other ways to reduce the deficit.
John D. Rockefeller IV.
ADDITIONAL VIEWS OF SENATORS KERRY, ROCKEFELLER, SCHUMER, STABENOW, AND
MENENDEZ
The America's Healthy Future Act of 2009 includes a
provision which provides an excise tax on high cost insurance.
We agree with the view of many economists that there needs to
be restraint on health care spending. The high cost insurance
excise tax will help bend the cost curve, but it needs to
strike the right balance so that in future years it will not
affect the health care plans of hard working American families.
A 40 percent excise tax is imposed on amounts above a
threshold of $8,000 for individual plans and $21,000 for family
plans. During the course of Finance consideration, changes were
made to the provision.
We commend Chairman Baucus for supporting changes to the
provision. The changes substantially improve the distribution
of the proposal. The threshold for the excise tax will be
indexed to the Consumer Price Index plus one percentage point.
In addition, the threshold is increased for retirees over age
55 and for plans covering high risk professionals by $1,850 for
individual plans and $5,000 for family plans.
However, we remain concerned the thresholds are too low and
will impact plans that are not overly generous and that in 2019
far too many plans will be impacted by the excise tax. We plan
to continue to work with Chairman Baucus on this issue to
ensure that provision bends the cost curve, but not at the
expense of middle-income Americans.
John F. Kerry.
John D. Rockefeller IV.
Charles E. Schumer.
Debbie Stabenow.
Robert Menendez.
ADDITIONAL VIEWS ON AFFORDABILITY SUBMITTED BY SENATORS STABENOW,
ROCKEFELLER, MENENDEZ, KERRY, AND SCHUMER
We commend Chairman Baucus for supporting changes to the
America's Healthy Future Act of 2009 to make health insurance
more affordable. Most importantly, bringing down the sliding
scale for subsidies down to 2% through 12% for working middle-
class families is a step in the right direction.
We, however, remain concerned about the overall
affordability of health insurance, which is critical because
the Mark will require people to purchase insurance. Throughout
this important debate, we have asserted that a health plan must
be affordable to ensure maximum participation and coverage. As
the health care debate moves forward, we must do more to
improve the premium subsidies, address cost-sharing, and
strengthen the actuarial values of plans offered in the
exchange. Since 2000, premiums have increased nearly 5 times
greater than families' paychecks. Such increases are
unsustainable for families. The plans offered through the
exchange must remain in reach of the average middle-class
family.
It is important to understand what a family goes through
when paying their monthly bills. In ``Too Great a Burden:
Americans Face Rising Health Care Costs,'' Families USA looked
at the annual costs for a typical family with a household
income of $60,000. After taxes, their income shrank to about
$49,000. Housing and utilities might take up a third of their
income, and food and personal care might take up a fifth. For
most, there is little income left to spend on health care. The
premiums offered through health reform must fit into a family
budget and be affordable.
The Congressional Budget Office estimates that, for those
individuals and families who purchase health care coverage in
2016, the changes included in the Chairman's Mark will reduce
the financial burden of coverage (including both premiums and
out-of-pocket costs) by about one percent, as a percent of
income. While families below 133 percent of poverty are
protected against unaffordable health care costs, families
between 133 and 450 percent of poverty still face substantial
total health care spending. Although their premiums may be
affordable as defined by the Mark, total out of pocket costs,
including premiums, co-payments, and other costs are estimated
to consume upwards of ten to almost twenty percent of a
family's annual income.
We plan to continue working with Chairman Baucus on
affordability so that middle-class Americans do not have to
choose between health insurance and other family needs.
ADDITIONAL VIEWS OF SENATOR MARIA CANTWELL
This bill lays the foundation for the comprehensive reform
America can no longer wait to achieve. The bill contains many
provisions that will help decrease the cost of health care for
all Americans. These provisions must be maintained or expanded
as the bill moves to the Floor.
The bill begins the critical process of reforming
Medicaid's long-term care coverage, providing seniors with the
opportunity to receive care in their homes, rather than being
forced into institutional nursing homes. Currently, most state
Medicaid programs force seniors and the disabled into nursing
homes at a cost to America of $100 billion a year. Better and
cheaper alternatives can be made available. Offering long-term
care in home and community based settings provides patients
with an improved quality of life at a savings of nearly 70
percent; this bill includes the necessary incentives for states
to transition into a well-balanced system of nursing home and
home and community based long-term care.
We also create transparency in the pharmacy benefit manager
industry that will help drive down the price of brand name
drugs by almost ten percent, according to a study by the Human
Resource Policy Association.
In this bill we lay out a clear plan for transitioning
Medicare providers away from the current fee-for-service
system, which reimburses based only on volume with no regard to
the value providers offer their patients. By including a value
modifier in the physician payment formula, we could help to
save $50 billion or more each year in wasted Medicare expenses
that burden seniors and drain Medicare's trust fund.
The basic health plan provides another critical way to
reduce costs. By allowing states to negotiate on behalf of
those Americans who require the largest federal subsidy--people
from 133 to 200 percent of poverty--we can make coverage more
affordable without increasing the total cost of subsidies.
Washington State has seen a 35 to 40 percent cost savings
through this type of Basic Health Plan when compared to
comparable benefit packages in the private market. This model
provides a clear way to offer low-income Americans high-
quality, affordable health coverage.
All of these reforms will help to drive down costs, but it
still does not do enough to drive down health care costs. We
must continue working to bend the cost curve down to a level
that more closely matches the two to three percent general
inflation rate; today's nearly eight percent annual inflation
in the health care industry is unacceptable and unsustainable.
Until we actually get these reforms enacted, such uncontrolled
costs will wreak havoc on American lives.
Insurance companies have a right to make a profit, but a
119 percent increase to premiums and a 428 percent increase in
profits are unacceptable when it means more and more small
businesses can no longer compete while providing health care
for their employees, and when it means 14,000 Americans are
losing their health coverage each day.
We must do more to reverse this trend, including adding a
public option and building on the Basic Health Plan to increase
competition in the health care markets. We must also work to
close the anti-trust loop-hole that allows insurance companies
to fix prices and manipulate markets.
The excise tax on high-cost insurance plans is too harsh on
middle-income workers. We must make sure we do not place any
added burden on workers who have, over the years, negotiated
away salary increases in order to get or keep better health
benefits. Health care reform should help prevent workers from
facing this tradeoff in the future. We must be able to reassure
the 85 percent of Americans who currently have health coverage
that we are focused on making health reform improve their
financial situation, not make it worse. I am worried the excise
tax will not help us achieve this critical goal.
The health insurance exchanges will do a great deal to help
consumers, but they may also be confusing for many Americans.
Tools such as user-friendly websites will play a critical role
in helping people access coverage through the exchange.
However, many of those who will need this access the most may
not have experience sorting through complex information online.
New technological advancements, such as virtual agents, can
help answer questions and walk people through registration
processes. We should encourage states to make use of virtual
agents that offer interactive self-help and intelligent self-
service capabilities, providing feedback using voice, text, and
page navigation. This technology can help Americans choose the
coverage that fits them best.
The hard work and compromise we have put in so far has
established a framework for the reforms our health care system
needs. As the legislative process moves forward we must be sure
to build on this framework to further drive down health care
costs and improve quality, until we have a system that is
stable and affordable for all Americans.
VII. MINORITY VIEWS
------
MINORITY VIEWS SUBMITTED BY SENATORS GRASSLEY, HATCH, KYL, BUNNING,
CRAPO, ROBERTS, ENSIGN, ENZI AND CORNYN
While Republicans agree that changes are needed in our
health care system, we believe that America's Healthy Future
Act of 2009 (AHFA) takes the system in the wrong direction.
Unfortunately, the proposals set forth in the AHFA will, if
enacted, burden taxpayers with increased taxes to pay for
unprecedented government spending. In addition, the changes in
the AHFA would make the largest expansion of Medicaid since its
creation in 1965. All of these changes would be paid for by
Medicare cuts combined with increased premiums on Medicare
prescription drug coverage and Medicare Advantage that will
devastate access for the nation's Medicare beneficiaries. In
addition, this bill will significantly expand the government's
role in health care by adding 32 million to government
subsidized health care, and neither the Committee
deliberations, nor the Chairman's Mark or Modification have
provided clear guidance on the cost of increased government
administration. The AHFA also hides its true cost by delaying
implementation of the new coverage subsidies until July of 2013
by delaying the expansion of Medicaid until 2014. In fact, the
true fully-implemented ten-year cost of the AHFA totals at
least $1.8 trillion.
The challenges facing our health care system affect one-
sixth of the economy and touch the lives of every single
American. These challenges deserve bipartisan solutions. We
have too many people who cannot find affordable insurance
because costs are growing too quickly and insurers deny
coverage because of pre-existing illnesses. The quality of
medical care varies from world-class to inefficient and
wasteful because the system pays based on the quantity of care
provided instead of rewarding quality.
Unfortunately, throughout the Finance Committee process,
Republican efforts to bring effective solutions to these and
other problems were defeated. And in addition to offering
alternative ideas, Republican efforts to shield seniors and
non-elderly consumers from higher prices and reduced benefits
also failed.
It is important for the public to be aware that proposals
in the AHFA will actually result in drastic cost increases for
consumers. At a time when consumers are struggling to keep up
with health care costs, this bill will just make the problem
worse.
New health insurance benefit mandates, based on federally
determined actuarial values, will increase premiums for many
consumers by as much as 44 percent. In some states this
increase, coupled with other regulatory reforms, could raise
premiums will by as much as 73 percent for people purchasing
coverage in the individual market. Seniors will also see the
cost of prescription drug plan premiums go up and Medicare
Advantage benefits reduced. In addition to the $117 billion in
direct cuts to Medicare Advantage, the AHFA gives the newly-
created Medicare Commission the specific authority to make
further cuts to Medicare Advantage and reduce funding for the
Medicare Part D program. These cuts will increase premiums and
cut benefits to pay for a brand new national health care
program. If people were hoping to pay less for health care
after health reform is enacted, this bill is going in the wrong
direction.
Republican efforts to include medical malpractice reforms
were also rebuffed. These amendments would have provided
incentives through Medicaid for states to enact medical
malpractice reforms. Despite the fact that the committee has
often required states to enact certain legislation or meet
other requirements as a condition of funding within the
committee's jurisdiction, these amendments were ruled out of
order. The AHFA should include medical malpractice reform to
reduce abusive lawsuits that drive up costs and limit access to
physicians. Health care reform should be working to create an
environment where doctors don't have to engage in defensive
medicine just to keep their practices open.
The AHFA also has almost half a trillion dollars in
Medicare cuts. Payment cuts of this magnitude will threaten
access to health care for seniors and the disabled. The
Balanced Budget Act of 1997 (BBA) cut Medicare by over $385
billion and threatened the ability of hospitals, nursing homes
and home health agencies to keep their doors open. As a result,
Congress was forced to undo many of these Medicare payment cuts
by passing bills in 1999 and 2000 to return over 20 percent to
providers.
The BBA experience provides two important lessons. The
first lesson is that these Medicare cuts will be devastating to
the program. The second lesson is that in the end, Medicare
cuts will not actually be allowed to go into effect. Congress
will have to intervene and prevent these cuts as soon as they
begin inflicting the damage to health care access that they
will cause. That means that the Medicare cuts this bill relies
on to be fully offset are a mirage.
Another important area of concern is the impact the AHFA
has on Medicaid and the Children's Health Insurance Program
(CHIP). Medicaid and CHIP play an important role in the U.S.
health care system by providing health care coverage to low
income children. According to data from the Centers for
Medicare and Medicaid Services, the number of children ``ever
enrolled'' in public health coverage programs in 2008 was 29.8
million in Medicaid and 7.9 million children in CHIP, for a
combined total of 37.7 million children.
The Medicaid and CHIP programs aspire to provide coverage
to low income children but are hampered by extremely low
provider payment rates. A 2009 study in the journal Health
Affairs\1\ found Medicaid payment rates nationally to be 72
percent of Medicare rates with five states (California,
District of Columbia, New Jersey, New York, and Rhode Island)
reimbursing at less than 60 percent of Medicare rates. Low
reimbursement rates are cited as a primary cause of why
Medicaid patients have difficulty finding doctors to treat
them. A 2002 MedPAC report stated that 40 percent of physicians
restricted access for Medicaid patients and in a 2009 survey of
15 major metropolitan markets found the Medicaid provider
participation rate for five medical specialties to be 55.4
percent.\2\
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\1\Trends in Medicaid Physician Fees, 2003-200. Stephen Zuckerman,
Aimee F. Williams and Karen E. Stockley. Health Affairs, 28, no. 3
(2009): w510-w519. (Published online 28 April 2009).
\2\2009 Survey of Physician Appointment Wait Times. Merritt Hawkins
& Associates. Irving, Texas.
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Expanding the Medicaid program to cover as many as 14
million people without making significant reforms to improve
the program seems imprudent. Throughout 2009, the Finance
Committee considered numerous provisions to improve the
Medicaid program. Ultimately, the AHFA fails to address the
many challenges that currently face the Medicaid program.
During the Coverage Roundtable and Walkthrough, the
Committee considered a provision to increase reimbursement to
providers. Higher reimbursement rates could have provided an
incentive for greater provider participation in Medicaid, and
therefore greater access for recipients to providers. That
provision was not included in the AHFA.
During the Coverage Roundtable and Walkthrough, the
Committee considered a provision to require all states to
provide Medicaid recipients with 12 months' continuous
eligibility for Medicaid. This provision would have prevented a
significant problem faced by Medicaid recipients who have gaps
in their health insurance coverage as their income cycles above
Medicaid eligibility levels. This provision was not included in
the AHFA.
Millions of children benefit from the Early, Periodic,
Screening, Diagnosis, and Treatment (EPSDT) provision in the
Medicaid statute. This benefit provides long term habilitation
and rehabilitation for children with chronic and serious
mental, physical and developmental disabilities. It provides a
class of benefit (e.g., personal care, case management, private
nursing) more extensive than levels of coverage found in a
typical private insurance plan. In 2005, a provision was
included in the Deficit Reduction Act (DRA) that allowed states
to put Medicaid recipients in private-style coverage on the
condition that children received supplemental coverage
consisting of EPSDT benefits. Current law requires that benefit
be available for children up to age 6 and with family incomes
of up to 133 percent of poverty and for children ages 6 to 19
with family incomes of up to 100 percent of poverty. The AHFA
provided that all children up to age 19 with family incomes up
to 250 percent of poverty would receive the EPSDT benefit
through supplemental coverage. The provision to provide
additional supplemental benefits to children similar to the
provision in the DRA was struck from the AHFA through the
Rockefeller Amendment #C21.
The Rockefeller Amendment #C21 to the AHFA is a
particularly ill-conceived provision for providing coverage to
children. The amendment requires states to maintain their
current CHIP eligibility levels from 2014 through 2019.
However, while the amendment states that the CHIP program be
reauthorized by September 30, 2013, if the program is not
reauthorized, states will not have adequate funding from 2014
through 2019 to maintain coverage levels. The Congressional
Budget Office assumes that states will reduce the size of their
CHIP populations by nearly 60 percent from 2014 through 2019,
and the amendment also does not provide states with any
specific tools or guidance as to how they should reduce their
coverage levels over the six-year period. The Rockefeller
Amendment #C21 could reduce benefits available to children, and
force states to remove children from the CHIP program. These
issues must be addressed before it may be considered to become
law.
In addition, the AHFA does not fully consider the impact of
significant Medicaid expansion on the budgets of states. The
Congressional Budget Office projects states will face increased
spending of $33 billion due to the coverage provisions in the
AHFA. As most states operate under a balanced budget
requirement, any increase in state spending will require states
to find offsets through either increased taxes or reduced
spending on other programs. Further, by increasing the federal
share of Medicaid reimbursement to states for adults and higher
income children, the AHFA creates an incentive for states to
focus their resources away from lower income children if not an
outright disincentive.
Finally on Medicaid, given the emphasis placed on providing
greater choices in AHFA, Republican Members of the Senate
Finance Committee also believe that Medicaid beneficiaries
should have the choice to elect coverage under Medicaid or
receive tax subsidies to purchase private coverage in the new
exchanges. The Medicaid program has serious and systemic
problems that restrict patients' ability to see doctors and
often lead to worse health care outcomes. The sole fact that
Medicaid costs less than other forms of insurance is not a
sufficient reason to deny low income Americans the right to
choose the health care program that best meets their needs.
Republican members of the Senate Finance Committee also
have concerns over the financing measures included in the AHFA.
One of our primary concerns with the AHFA is that it calls for
over $400 billion in new taxes. The Congressional Budget Office
(CBO) and the Joint Committee on Taxation (JCT) each testified
that these new taxes will be borne by all taxpayers, including
families with incomes below $250,000 per year (and individuals
with incomes below $200,000 per year). These tax increases
include a new excise tax on high-cost health insurance plans,
fees on health insurance providers, medical device
manufacturers, and manufacturers of prescription drugs, a
limitation on pre-tax contributions to a flexible spending
arrangement (FSA) under a cafeteria plan, the elimination of
tax-free reimbursements for over-the-counter medicines, and a
proposal to raise the 7.5 percent adjusted gross income (AGI)
threshold for the itemized deduction for medical expenses to 10
percent.
Under the AHFA, so-called fees will be imposed on health
insurance providers, medical device manufacturers, and
manufacturers of brand name prescription drugs. JCT has
characterized these so-called fees as excise taxes. CBO and JCT
testified that these excise taxes will be passed through to
health care consumers. The result will be higher health
insurance premiums for policyholders and higher prices for
health care-related products. The Chairman has argued that once
the health insurance reforms in the AHFA are in place, premiums
will decrease. CBO, however, has not confirmed this argument as
fact. Instead, CBO testified--and explained in a September 22,
2009 letter to the Chairman--that health insurance premiums
will be lower for some Americans, while health insurance
premiums for other Americans will be higher. Under the AHFA,
the excise taxes imposed on health insurance providers, medical
device manufacturers, and prescription drug manufacturers
become effective January 1, 2010. The majority of the health
insurance reforms set forth in the AHFA, on the other hand, do
not go into effect until January 1, 2013 (in some cases, July
1, 2013). As a result, for three years (in some cases, three
years and six months), the effect of these fees will be higher
premiums, according to CBO and JCT. We believe that these
arbitrary excise taxes on individual segments of the health
care industry will increase costs for each and every American
and are contrary to efforts to truly reform our nation's health
care system.
The AHFA also limits the amount of salary reduction
contributions an employee may elect for any taxable year for
purposes of coverage under a FSA to $2,500. Under current law,
such FSA salary reduction contributions may be made on a pre-
tax basis. Thus, the new limitation will impose a higher tax
burden on those employees that elect to make FSA salary
reduction contributions in excess of the limit. The majority of
employees that currently make FSA salary reduction
contributions in excess of $2,500 do so to pay for catastrophic
medical expenses. Also, statistics show that the average income
of an employee electing to make FSA salary reduction
contributions is $55,000 per year. As a result, this tax
increase imposed by the AHFA will fall most heavily on middle-
income employees with serious medical conditions.
Another proposal in the AHFA will adversely affect middle-
income individuals who do not purchase health insurance through
an employer, but instead, purchase insurance on their own.
Specifically, the proposal to restrict the eligibility criteria
for the itemized medical expense deduction--by increasing the
7.5 percent AGI threshold to 10 percent--will increase taxes on
taxpayers with income between $50,000 and $75,000 and taxpayers
65 or older. While an amendment to exempt taxpayers 65 or older
from the new 10 percent AGI threshold was approved, the
exemption is only effective from 2013 to 2016. As a result, in
2017, roughly 50 percent of those taxpayers who would be
affected by the proposal will be 65 or older. The Chairman
justifies the change by arguing that health insurance purchased
in the newly created ``exchanges'' will have out-of-pocket
maximums. The Chairman contends that the new out-of-pocket
limits will eliminate--if not mitigate--the need for taxpayers
to claim the itemized medical expense deduction. However, the
Chairman overlooks the fact that many medical expenses that are
deductible will not be covered by exchange insurance. Moreover,
individuals between 210 percent and 400 percent of the Federal
Poverty Level (FPL), who will be required to pay the premiums
for exchange insurance out of their own pocket, will lose a
portion of the itemized medical expense deduction that they may
currently claim. This is a clear-cut example of how taxes will
increase for Americans earning less than $250,000 per year.
Another concern is that the new employer penalties in this
bill are a tax on workers and take-home pay. The Congressional
Budget Office has repeatedly said that the increased costs of
providing new benefits or paying the new employer penalties
will simply be shifted to workers in the form of lower wages.
Employers may also respond by cutting jobs (particularly for
low-income workers), outsourcing more jobs, or relying more on
part-time workers.
With regard to abortion, it remains our strong view that
the AHFA does not sufficiently address concerns regarding the
prohibition of federal taxpayers' dollars being used to
subsidize coverage of elective abortions. The AHFA departs from
the principles embodied in the laws that govern current federal
health programs, which prohibit both direct funding of abortion
(with narrow exceptions) and subsidies to plans that cover
abortion. For example, all of the private plans that
participate in the Federal Employees Health Benefits Program
(FEHBP) currently are prohibited by law from covering abortion,
because they are federally subsidized. Likewise, the Hyde
Amendment that currently covers the Medicaid program prohibits
both direct federal funding of abortion and funding of plans
that cover abortion, and this prohibition covers even state
matching funds. The language contained in the AHFA would
sharply depart from the principles of the Hyde Amendment.
Therefore, we believe that the AHFA as reported by the Finance
Committee must be further modified to codify the Hyde language
so that federal dollars are prohibited from being used to pay
for abortions, or benefits packages covering abortion, except
in cases of rape, incest or when the life of the mother is
endangered. This would bring the legislation into compliance
with all other major federal health programs on this issue,
including the Children's Health Insurance Program and Federal
Employees Health Benefits Program.
In addition, broad regulatory authorities included in the
AHFA could result in federal mandates that require abortion
coverage or abortion access. We believe that the AHFA does not
adequately ensure against such regulatory abortion mandates,
and that further language is necessary to prevent such mandates
and to protect existing state laws. Furthermore, the AHFA is
unprecedented in its call for each region in the Exchange to
include a health plan covering elective abortions--that is, a
plan that violates the federal government's policy in its own
programs.
In addition, we believe the protection of the conscience
rights of health care providers, entities and plans is
essential in any health reform bill. The AHFA does not
adequately protect the conscience rights of health care
providers, entities and plans. The conscience protections
afforded in the Hyde/Weldon conscience clause (included in the
annual appropriations legislation that has funded the
Department of Health and Human Services since 2004) should be
codified in the AHFA. The Hyde/Weldon conscience clause
language prohibits federal agencies and state and local
entities that receive federal dollars from forcing health care
providers to provide, pay for or refer for abortions. It is
vitally important to have specific legislative language in the
AHFA that reflects both the Hyde provision that prohibits
federal dollars from being used to fund elective abortion
coverage, and the Hyde/Weldon language to protect health care
providers' conscience rights instead of relying on a general
reference to a provision that is included in annual
appropriations language.
It is also unclear whether or not the AHFA preempts
constitutional state abortion laws. We believe clarification on
this point is critically important. We look forward to working
with the Chairman and others in resolving these four important
issues so it is absolutely clear that federal funds are not
used to pay for elective abortions or plans that cover elective
abortion; that the AHFA does not provide any basis for
mandating access to elective abortion services and does not
preempt state laws regulating abortions; and that conscience
protections are ensured for health care providers.
Finally, the AHFA significantly expands the federal
government's role in health care. While the Chairman has stated
that he does not intend to grow the government, the Committee
has no idea how many more Federal employees, particularly
employees of the Internal Revenue Service (IRS), will be needed
to administer and enforce the provisions set forth in the AHFA.
Specifically, the AHFA tasks the IRS with administering several
new and very controversial provisions, including the individual
mandate, the employer ``free-rider'' penalty, the premium tax
credit for low-income individuals, the small business tax
credit, and the AHFA requires the IRS to work with the new
``exchanges'' or a new Federal entity to verify income
information. The costs to implement these provisions are not
included in any CBO or JCT estimates. We are concerned that the
additional resources needed could significantly increase the
unprecedented government spending already called for by the
Chairman.
We appreciate the hard work of the Chairman and the
Committee staff on the AHFA, and thank the Chairman for the
opportunity to offer amendments in the normal course, and in
the regular order, of the Committee process.
In order to avoid a damaging outcome to the nation's
economy and the health care system that will be difficult to
reverse, we urge the Chairman and members of the Senate to
consider the concerns outlined above prior to, or
contemporaneous with, full Senate consideration of the AHFA, or
any related legislation.
Charles E. Grassley.
Orrin G. Hatch.
Jon Kyl.
Jim Bunning.
Mike Crapo.
Pat Roberts.
John Ensign.
Michael B. Enzi.
John Cornyn.
ADDITIONAL VIEWS BY SENATOR JIM BUNNING
The Minority Views filed by most Republicans, including
myself, point out that this bill hides the true cost of health
care reform by delaying implementation of many of the
provisions until 2013 and 2014, and that the fully-implemented,
10-year cost of this bill is actually at least $1.8 trillion.
However, there are two other areas that this bill does not
address that could significantly increase the cost of health
care over the next 10 years that are not being adequately
accounted for.
The first one is the bill's failure to permanently address
Medicare's flawed and broken formula for reimbursing physicians
and certain non-physician practitioners. For the past eight
years, doctors have faced decreases in their reimbursement
rates for seeing Medicare patients.
In fact, in 2002 doctors actually received at 5.4% cut in
their reimbursement rates when they saw Medicare patients. The
reductions doctors face have become quite large and truly
unsustainable for many practices to absorb. For example in
2008, doctors faced a 10% cut in their reimbursement rates. In
2009, doctors would have received a 15% cut. For 2010, the
doctors are facing a 21% cut.
However, each year since 2002, Congress has stepped in to
override the reimbursement reduction, by either freezing the
reimbursement level or giving physicians a slight increase in
their reimbursement rates, such as a 0.5% increase or a 1.5%
increase.
The way Congress has dealt with this flawed formula over
the years is unfair to providers. Without knowing how much they
are going to be paid, it is hard for doctors to plan their
budgets and determine how many Medicare patients they can see.
The Chairman's mark overrides the 21% payment cut for just
2010 with a 0.5% increase. The cost is $10.9 billion.
While a one-year fix that is paid for is better than
nothing, I suppose, the Chairman's mark misses the real
opportunity to deal with this broken formula once and for all.
This bill is supposed to provide comprehensive health care
reform, yet it leaves this flawed formula is place.
It makes no sense, is short-sighted, and is unfair to
doctors.
Not permanently fixing this formula also hides the true
cost of health care reform. It is estimated that a permanent
fix for the flawed formula is between $285 billion and $344
billion under current law.
However, this cost isn't included in the Chairman's cost
estimate for the bill. I believe this cost will likely be added
onto the bill at some point, but it isn't clear if it will be
paid for. That means this bill will likely cost another $300
billion, which is not reflected in the cost estimate.
My second area of concern deals with illegal immigrants and
whether or not they will be covered under this bill.
The Chairman's mark tries to prevent them from being
covered under the new law. However, I am concerned that some
recent court rulings and legal precedent may require us to
eventually cover all illegal immigrants, especially if a public
option is included in the final version of the bill.
While I disagree with that idea, I am concerned that when
Congress creates such a large new entitlement program,
particularly with a public plan, that eventually activist
courts will require that illegal immigrants be covered, which
will dramatically increase the costs of this health care reform
bill.
The Congressional Budget Office estimates that under the
Chairman's mark, 25 million people in this country will be
uninsured in 2019, with one-third of these individuals being
illegal aliens. That's eight million more people who would be
covered under the bill.
If we are forced by the courts to cover these individuals,
prices will increase significantly.
We aren't being honest with the American taxpayers about
how much we are spending or how much our future costs will be,
particularly if we eventually provide a permanent fix for the
doctor's payment formula and if we are forced to cover illegal
aliens under health care reform.
We need to be upfront about the costs and we need to live
within our means. That will mean making some hard decisions,
but it is the responsible thing to do.