Funding issues remain unresolved

August 1, 2010

One of the first visible payoffs of the Patient Protection and Affordable Care Act is the $250 rebate checks sent to thousands of seniors with high drug costs. Other strategies are built on questionable long-term outlooks.

WASHINGTON- One of the first visible payoffs of the Patient Protection and Affordable Care Act is the $250 rebate checks sent to thousands of seniors with high drug costs. The one-time rebates are the first step in closing the donut hole in the Medicare drug program.

The Department of Health and Human Services (HHS) also met a July 1 target for launching a new insurance program for high-risk individuals denied coverage due to pre-existing conditions. HHS will run programs in 29 states and the District of Columbia.

Another 21 states are operating their own pools with support from a $5 billion federal fund, however, the money is unlikely to be sufficient to cover the 350,000 individuals estimated to participate over the next two years.

Another new initiative is an HHS Web site-HealthCare.gov/ -designed to provide information on public and private health insurance options in each state. Consumers will be able to compare quality-of-care indicators among hospitals, including the newly added outpatient indicators.

While employers stand to gain from federal funds that cover some of the cost of providing health benefits, many are up in arms over a rule that will make it hard to retain grandfathered status for company-sponsored health plans. Grandfathered plans are shielded from certain aspects of health reform, such as required coverage of some preventive services. Under an interim rule, employer-sponsored plans could lose their status if they "significantly" eliminate benefits, increase co-payments or reduce the portion of premiums paid by the company.

The administration estimates that half of large employer plans will lose grandfathered status by 2013, as will more than 65% of small companies. Employers say if they have to comply with all the new reform requirements, their costs will rise, and many will drop health benefits for workers.

Much more is on the drawing boards. The administration had hoped to issue a proposal on insurers' medical loss ratios in June, but it's taking federal and state policymakers longer than expected to determine which expenditures count as healthcare, and which count as administrative costs.

Another closely watched proposal involves how much information insurers must submit to HHS and the public to justify premium increases as "reasonable." The National Association of Insurance Commissioners has drafted a premium-increase reporting form that seeks extensive information from insurers on costs and coverage. Even so, consumer advocates say they want more details on executive salaries, sales commissions, administrative costs and the rates that providers actually charge insurers in order to fully document what qualifies as a "reasonable" increase.

STATES COUNTING ON FUNDS

Up on Capitol Hill, partisan bickering in June delayed approval of legislation to provide additional funds for state Medicaid programs and extend COBRA subsidies to help newly laid-off workers pay for health insurance, as sought by the Obama administration. States have been counting on receiving an additional $24 billion next year to help expand Medicaid services to more of the uninsured.

The funds would be provided by extending a higher Federal Medical Assistance Percentage (FMAP), which was boosted by the 2009 federal stimulus bill but is set to expire at the end of the year. Many states have set 2011 budgets based on the expected higher match rate and say they will have to cut from education and state programs if they don't get the FMAP money.

The additional funds were supposed to part of larger jobs bill that also would have postponed the 21% cut in Medicare payments to physicians. Instead, Congress pulled the doctor fix out of the larger measure and approved a measure that delays the rate cut for six months. Now HHS and Congressional leaders have to devise a more permanent solution to the perennial physician payment conundrum by year-end.