Health Law and Policy Update
Headlines of the week
Colorado will operate high-risk pool
In the first step toward implementing health care reform, Gov. Bill Ritter informed Health and Human Services Secretary Kathleen Sebelius last week that Colorado will operate its own high-risk pool. "... I anticipate that Colorado will be able to establish an appropriate plan and begin operations by July 1, 2010," the governor said. Twenty-one states have opted to run their own pools so far. HHS will operate pools in states that do not chose to design their own pools, most likely by contracting with a nonprofit entity in each state.
The high-risk pools are scheduled to begin operating July 1. Some questions have been raised, including by Rick Foster, the chief actuary for the Centers for Medicaid and Medicare Services about whether the level of funding for these pools is sufficient to sustain them until 2014 as planned. A total of $5 billion was set aside in the bill; Colorado is likely to receive about $90 million.
Governor establishes health reform Web site
Gov. Bill Ritter recently established a Web site where readers can follow how health reform is implemented in Colorado.
Small business tax credits: IRS sending out information this week
From the governor's health reform Web site: Tax credits are available to small businesses with 25 or fewer employees and an average wage of $50,000 or less that provide health insurance for their employees. Companies with 10 or fewer employees and an average wage of $25,000 or less get the maximum credit - 35 percent of what the employer is paying for employee insurance coverage. The maximum credit rises to 50 percent in 2014.
The tax credit is also available to small nonprofits. For nonprofits, the tax credit is worth up to 25 percent of what the employer is paying for employee insurance coverage. The maximum credit for nonprofits rises to 35 percent in 2014. The tax credits are available now, beginning with the current tax year.
Postcards from the IRS explaining the new tax credits and how business owners can take advantage of them are being mailed to 4 million companies across the country starting this week.
The IRS provides answers to frequently asked questions on the tax credits.
Who's doing what
Sebelius calls for reexamination of WellPoint/Anthem increases
Federal Health and Human Services Secretary Kathleen Sebelius wrote governors and state insurance commissioners Tuesday encouraging them to re-examine any WellPoint health insurance premium increases in their states.
"I therefore urge you to review WellPoint's rate filings for mistakes similar to those made in California, if you have the authority to undertake rate review, and, if you do not, to seek authority to prior-approve health insurance rates. Not only will funding be available to states that have and exercise such authority, but, more importantly, such authority and its exercise will enable state insurance departments to better protect consumers."
Colorado's Division of Insurance is already engaged in a review of Anthem/Blue Cross rate increases.
California review finds Anthem Blue Cross rate increase too high
The California Division of Insurance released a report last week on the rate increases proposed by Anthem Blue Cross of California. Proposed increases ranged from up for 39 percent for individuals and up to 76 percent for some small businesses. The report found Anthem overestimated increases to individuals by as much as 20 percent. Errors included double counting aging and overstating the initial medical trend for known risk factors. Anthem later withdrew the proposed increases.
Consumers are now urging the California Commissioner of Insurance to seek independent actuarial reviews of pending rate increases by all insurers in the individual and most of the small-group markets similar to the review conducted of Anthem. Consumers are also urging the division to work with the governor to seek immediate federal funding to undertake review of all pending rate increases from now until Jan. 1, 2014, when insurance reforms take effect.
End to rescission
More insurers are moving to end the practice of rescission ahead of schedule, according to the New York Times.
Decoder
What is an SGR?
SGR is the Sustainable Growth Rate formula, enacted as part of the Balanced Budget Act of 1997. The SGR formula determines how much Medicare pays for services physicians provide. The formula was designed to be a fixed limit on increases in payments to physicians in the Medicare program.
Under the SGR, cumulative Medicare spending on physicians' services is supposed to follow a target path that depends on the rates of growth in physicians' costs, Medicare enrollment, and real gross domestic product per person. If spending in a given year exceeds the SGR target for that year, then the amounts paid to physicians for each service they provide are supposed to be reduced in the following year to move total spending back toward the target path.
At first, payment rates for physicians under the SGR formula kept pace with, or even exceeded, increases in physicians' costs. By 2002, however, the SGR formula produced cuts in payment rates. Since 2003, Congress has regularly prevented the full cuts required by the SGR from going into effect, although it has not changed the underlying SGR formula or the cumulative spending targets. The formula continues to require cuts in physician payments that become more severe with each passing year, resulting in a scheduled cut of 21.2 percent in 2010. It is estimated that the cumulative reduction or cut will total 40 percent by 2016.
The Medicare Payment Advisory Commission (MedPAC) found that, "in recent years, expenditures for physician services have grown substantially, suggesting that the SGR does not provide a strong check on spending. It does little to counter the inherently inflationary nature of fee-for-service payment. In addition, the SGR is inequitable, treating all providers - regardless of their behavior - and all regions of the country alike."
MedPAC sums up SGR problems as follows: the SGR formula "does not provide incentives for individual physicians to control volume growth, and is inequitable to those physicians who do not increase volume unnecessarily. And it continues to call for substantial negative updates through at least 2016. Such reductions in physician payment rates, if they take place, would threaten beneficiaries' access to physician services."
The Senate has acted six times in the past seven years to prevent significant reductions in Medicare payments. Most agree this is a problem that requires a solution. On April 15, Congress voted to avert the 21.2 percent cut in the Medicare physician payment rate. Physicians will continue to receive 2009 payment rates, but only through May 31.
One major issue is the cost of a fix - more than $200 billion - and whether pay-go rules should apply. The problem is the amount it will cost to fix the SGR increases each year as the SGR schedule falls further and further behind actual cost increases.
For a more thorough analysis and explanation of SGR, see a publication prepared by the Center on Budget Policy Priorities.
What you can do
Schedule a presentation on health reform
Health reform can be confusing. The health staff at the Colorado Center on Law and Policy is ready to help community groups, medical professionals, lawmakers and others understand the complexities of health reform and how it will roll out during the next few years. Please contact us to schedule a presentation.
Health Law and Policy Update is issued weekly by the health staff of the Colorado Center on Law and Policy. Subscribe by e-mail or read previous editions.
Health Care Director
Elisabeth Arenales
Health Care Attorney
Adela Flores-Brennan
Special Counsel
Ed Kahn
Communications Director
Perry Swanson
Released May 6, 2010