Net gain for safety net plans

December 1, 2010

Few plan organizations are whole-heartedly in favor of the Patient Protection and Affordable Care Act. In fact, there might be just one--the Association for Community Affiliated Plans

Few plan organizations are whole-heartedly in favor of the Patient Protection and Affordable Care Act (PPACA). In fact, there might be just one-the Association for Community Affiliated Plans (ACAP), based in Washington, D.C.

CEO Margaret Murray even celebrated the passage of the law in March with streamers and decorations throughout ACAP's offices.

"It is truly a life-saving change for millions of Americans for years to come," Murray said that day.

For Murray, though, the satisfaction goes beyond just the potential increase in plan enrollment.

ACAP influences lawmakers

In the many long months leading up to PPACA's final passage, ACAP lobbied lawmakers on pivotal issues unique to safety-net plans. The group asked Congress to allow such plans-which are often associated with safety-net providers-an exemption from the new excise tax imposed on other insurers.

"We certainly supported reform but didn't think it made sense for the Feds to be essentially taxing states by taxing the safety-net plans," she tells MHE.

ACAP also helped document a definition of such plans in the Senate's bill. According to final PPACA language, a plan must be not-for-profit and have 80% of revenues in public programs to be defined as a safety-net plan. And that definition is important because it's now the qualifier for the excise tax exemption. Approximately 8 million of the 24 million Medicaid managed care beneficiaries are enrolled in such plans.

Murray says another landmark provision in PPACA is the Drug Rebate Equalization (DRE), which allows states for the first time to receive drug rebates for beneficiaries in Medicaid managed care. Rebates had been available only to fee-for-service Medicaid programs.

"It's one of the few provisions in PPACA where states actually save money," she says.

Previously, states carved out pharmacy benefits for Medicaid managed care because it was the only way for them to gain drug rebates-albeit indirectly. Carved-out programs are generally less effective for managing care and monitoring utilization because of the disconnect between medical and pharmacy data. With DRE, it now makes financial sense to move the pharmacy benefit back into the fold of the larger managed-care operation. States will not only reap the drug rebates but can potentially achieve added savings from more integrated care management.

"I'd actually thought of this idea when I was the Medicaid director in New Jersey," Murray says. "The level of rebate for the plans versus what the states got just seemed like a hole in our system."

She and ACAP member plans championed the DRE proposal for eight years before anything was actually done about it. Now DRE is on the legislative books, as is the excise-tax exemption and the plan definition.

MHE: You sound rather positive about PPACA overall.

Murray: Yes, ACAP was unlike some of the other health plan associations and was a strong supporter of the health reform law. Many of our legislative proposals made it in the final law.

We were very supportive of Medicaid expansion, and we were actually the incubator for the DRE, which saves $11 billion. We were very concerned about the states carving drugs out of the capitation rate, and that was growing into a tsunami. With the passage of the DRE, we know for a fact that that stopped Massachusetts and California from carving drugs out. We are anticipating other states will start carving drugs back in. That $11 billion in savings was used in part to fund the Medicaid expansion.

We worked on that for eight years. I was sick of talking about it.

Also in PPACA, Senator Maria Cantwell (D-Wash.) put in legislation that would allow states to set up a basic health plan. The plan would be between Medicaid and the exchange, and it would cover people from 133% to 200% of poverty level. It's not a Medicaid program, but it would be run by the state Medicaid agency.

Medicaid would go up to 133%, and then the basic health plan would go up to 200%, and the subsidies and the exchange would go from 200% up to 400%. It's a much better idea for really low income people to be in health plans that know how to handle their special needs.

It's one of the options states have, but most people don't even know the provision exists. That's why we're trying to talk it up. Because we think for plans and beneficiaries, it's a better option than the exchange.