Lawmakers Examine Medicaid Eligibility

On Friday, September 11 the Energy and Commerce Subcommittee on Health examined ongoing issues related to Medicaid program integrity. Witnesses included officials from the Department of Health and Human Services (HHS) Office of the Inspector General (OIG), a state-based health authority, and the Executive Director of the Medicaid and CHIP Payment and Access Commission (MACPAC). The Committee examined six pieces of legislation that seek to close loopholes in the Medicaid program. Democrats expressed concerns that some of the bills were attempts to scale back eligibility for deserving beneficiaries. The Congressional Budget Office (CBO) reports that Federal Medicaid spending is projected to increase by almost 70% in the next decade alone. Subcommittee chairman, Joe Pitts (R-Pa.) expressed his hope that committee members “can work together on a bipartisan basis to boost Medicaid program integrity, while making the program more sustainable, accountable, and transparent.” The Subcommittee scheduled another Medicaid hearing for Friday titled “Improving the Medicaid Program for Beneficiaries.”

House of Representatives Obtains Procedural Win in ACA Lawsuit Against Obama Administration

This week, a District Judge issued a procedural ruling in House of Representatives v. Burwell, clearing the way for the suit to proceed to a hearing on the merits. Per the ruling, the U.S. House of Representatives has legal standing to bring a lawsuit against the Administration for violating the spending limitation set by Article I: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”

At issue are funds that the Treasury Department paid to insurance companies to provide cost-sharing assistance for lowincome individuals, as required by the Affordable Care Act (ACA). The House alleges that this spending required annual appropriation by Congress. The Administration has countered that the ACA allows the Treasury Department to pay the subsidies without seeking separate congressional approval.

As Judge Collyer stresses in her opinion, this ruling is merely procedural and “the merits of this lawsuit await another day.” When that day might be is unclear: the Administration has stated that it plans to immediately appeal the procedural ruling, which may delay a substantive ruling in the case.

Cadillac Tax: Cost Shifting to Patients? How Soon Will it Impact You

Recent press reports have highlighted the potentially detrimental effect of the “Cadillac tax” on Health Savings Accounts (HSAs) and the health benefits negotiated by various unions. However, often overlooked is the potential detrimental effect the “Cadillac tax” could have on overall premiums and result in major cost-shifting, especially as it relates to specialty

Under the Affordable Care Act (ACA), employers could be subject to a 40 percent tax on the amounts by which the costs of their sponsored plans exceed government-set thresholds. Cost of coverage includes the total contributions paid by both the employer and employees, but not cost-sharing amounts such as deductibles, coinsurance and copays when care is received. For planning purposes, the thresholds for high-cost plans are currently $10,200 for individual coverage, and $27,500 for family coverage. Those thresholds are very close to the average costs of premiums in 2014, which were annual premiums of $6,025 for single coverage and $16,834 for family coverage. This further highlights why a recent study from the nonpartisan Kaiser Family Foundation (KFF) estimated that 26 percent of all employers would face the tax in at least one of their plans during its first year, 2018. Nearly half of larger companies would face the consequences of the tax that same year, because they tend to offer better benefits. The KFF analysis further estimates that the share of employers potentially affected by the tax could grow significantly over time -- to 30 percent in 2023 and 42 percent in 2028 -- if their plans remain unchanged and health benefit costs increase at expected rates. Thus, to reduce the cost of coverage to avoid the Cadillac tax, health plans are shifting more costs to patients through increased out of pocket costs.

In addition to paying specific premiums for insurance coverage, individuals are also responsible for their specified cost sharing. The ACA sets maximum out-of-pocket (OOP) spending limits, but otherwise does not specify the combination of deductibles, copayments, and coinsurance that plans must use to meet the actuarial value requirements (more about actuarial value below). For example, one insurer may choose to have a relatively high deductible but low copayments for office visits and other services, while another may choose a lower deductible but higher copayments or coinsurance for each service. In general, the out-of-pocket maximum may be no more than $6,600 for an individual and $13,200 for two or more people in 2015.

Given the relative flexibility in designing the benefit structure, one key focus of cost containment has been specialty pharmacy. These drugs, typically used to treat chronic, serious, or life-threatening conditions, such as cancer, rheumatoid arthritis, growth hormone deficiency, primary immunodeficiencies, and multiple sclerosis, are often priced much higher than traditional drugs. Expenses for specialty pharmaceuticals, which can cost up to $10,000 for a month of treatment, are on the radar. Traditional pharmacy spending is expected to grow 3.9 percent in 2016, but specialty pharmaceuticals by 22.3 percent, says the National Business Group on Health, citing a report by Express Scripts, a pharmaceutical benefits management firm.

To help reduce the overall expenditures for specialty pharmaceuticals, health plans have instituted three key management strategies: (1) substantial cost sharing for specialty drugs; (2) required diagnostic testing as a condition of coverage; and (3) managing the site of service. All of these cost saving policies can have a direct and detrimental impact on those needing the key medications. Thus, while the overall goal of the ACA was to provide basic health care coverage for everyone, those with severe chronic conditions may be left out in the cold.

Members of Congress have introduced legislation to repeal the tax, but successful repeal likely will need to include mechanisms to offset the projected $80 billion price tag. The Obama Administration has said it is willing to work with lawmakers to improve the ACA, but opposes repealing the tax.

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