Anticipate PPACA revisions

May 1, 2013

The comprehensive context of PPACA continues to change as more information comes to light

Experts believe the provisions of the Patient Protection and Affordable Care Act (PPACA) could see some alternations once the industry gets through practical implementation in 2014. A bit of trial and error could be in order.

One consequence to consider is the effect on hospitals in states that do not expand Medicaid, which will see a reduction in federal disproportionate share hospital (DSH) payments. The pay cut will be further exacerbated by higher uncompensated care costs. PPACA reduces DSH payments by $18 billion through 2020.

For example, Texas, a longtime opponent of PPACA and a state with 6.2 million uninsured, will not expand Medicaid. Its DHS pay will be reduced nonetheless because PPACA’s design originally assumed all states would expand. By expanding Medicaid, states would see lower uncompensated care costs. Thus, the DSH payment reduction was meant to be balanced out by the lessening of uncompensated care.

“What you’re going to find out is hospitals there are going to start getting reductions in DSH pay while not enjoying the rest of the health reform deal,” says Lynn Shapiro Snyder, Esq., senior member of the healthcare and life sciences and litigation practices of Epstein Becker Green, who spoke at a web conference last month.

Editor's Note - The Centers for Medicare & Medicaid Services (CMS) proposed on May 13 that for the next two years, DSH pay reductions would be based partly on a state’s percentage of uninsured residents. The proposal will also  protect funding for increased coverage under Medicaid through waivers. (Updated May 14.)

The comprehensive context of PPACA continues to change as more information comes to light. For example, the Congressional Budget Office (CBO) updated its estimate of the number of uninsured Americans. In 2010, CBO estimated 23 million uninsured or 8% of the under-65 population, but this year CBO is now estimating there are 29 million uninsured or 10% of the under-65 population.

The under-65 population itself was adjusted by CBO to a total of 288 million people in the year 2023, up from 284 million in the year 2020.

“Prior to the law, we had 36 million people on Medicaid and about 13 million nongroup individuals,” Snyder says. “What CBO thinks is going to happen with health reform implemented all the way out to 2023, is that we still have 31 million uninsured.”

The 31 million uninsured represent 11% of the under-65 population in 2023. Even with health reform, exchanges and Medicaid expansion, a significant number of people will remain without coverage.

While the qualified health plans (QHPs) have just barely completed their initial product design for the insurance exchanges, the process is going to ripple through the industry between now and October 1 when enrollment begins.

Payers must reimburse fairly to maintain solid networks, but they also must price their products adequately to attract members and sustain their plans. More than 25 million people are expected to shop for private plans in the insurance exchanges.

However, the filing provisions remain in effect for all rate increases and plans will have to justify subsequent premium hikes if they miscalculate prices early on.

“Pricing pressure is now a bully pulpit more than it is a cap,” she says.

Plans must file with the federal government as well as the states and be prepared for denial of rate increases-especially increases of more than 10%. Snyder says the pricing pressure is not just an issue for plans, it also trickles down to what plans can afford to pay providers. It’s difficult to know right now what kind of allowable charges providers can expect when serving members of exchange products, she says.

And with the minimum essential benefits package and the excise tax on plans-another aspect of PPACA to offset new costs associated with increased Medicaid coverage and subsidies-premiums are likely to be volatile the first few years of exchange operations.

Employers remain a key source of healthcare coverage in the United States with more than 160 million still obtaining insurance through their jobs by 2023, according to CBO. Snyder says for all the questions surrounding the employers’ next move, the most concerning question is whether firms will keep offering coverage or send their employees to the exchanges.

“It’s not a mathematical equation,” she says. “There are union issues and employee satisfaction issues around this.”

Employers generally will keep their health benefits if they perceive that they can bend the cost curve. Some firms even bypass insurers by offering onsite health clinics for employees that emphasize wellness and prevention, for example.

One key issue remains for all stakeholders, however.

“The issue is whether you are going to have adequate margin to make a good living, have a return on your investment and not be too close to the line on losses or be so high on gains as to be a target for reductions,” Snyder says.

This news story was updated May 14 to reflect the new CMS proposal.