PPACA "Essential Benefits" and Costs

The Institute of Medicine reported Friday to HHS that the PPACA “essential health benefits” that every health plan will have to provide beginning in 2014 should be “affordable” and tied to a typical small-employer plan and reflect small employer costs because state insurance exchanges will be offering such coverage mainly to small businesses and individuals.  While HHS does not have to abide by the IOM recommendations in issuing regulations by next May, the IOM also said the initial essential benefits package should be based on the general categories specified under the PPACA.  In addition, the IOM recommended that HHS first determine what the national average premium of typical small employer plans would be in 2014 and then set the essential benefits package under the so-called “silver plan” not exceed this cost.  If states choose to deviate from the HHS regulations, the IOM said the essential benefits package set by each state should be the actuarial equivalent of the federal benefits package.  Both insurers and the Essential Health Benefits Coalition were generally supportive of the IOM recommendations.  Even before the costs of any new essential benefits have been mandated, a recent survey by Aon Hewitt found that per employee health premiums are likely to exceed $10,000 in 2012.

Another Petition on PPACA Sent to Supreme Court

The Virginia Attorney General Kenneth Cuccinelli has filed a petition asking the U.S. Supreme Court to review the ruling by the U.S. Court of Appeals for the Fourth Circuit which held that Virginia lacked standing to challenge the constitutionality of the PPACA’ individual mandate, because the provision does not apply to the state itself and the state does not have the right to defend the constitutional rights of its citizens.  The AG said the court should take up the circuit’s ruling given that it involves the major pertinent issues brought against the law, namely the constitutionality of the individual mandate and the severability of the this provision from the remainder of the law.  The Supreme Court is soon expected to rule whether it will take up PPACA issues during the court’s 2012 term.

MedPAC Approves SGR Replacement

The Medicare Payment Advisory Commission voted 15-2 to recommend that the Medicare SGR formula be replaced with a 10-year fee schedule that would freeze primary care payment rates and cut rates for other providers by 5.9% followed by a three year freeze of those payments.  MedPAC estimated that about 34% of the funding for the changes would come from the drug industry; 21% from skilled nursing facilities and home health agencies; 15% from higher cost-sharing by beneficiaries; and 11% from hospitals.  In addition, MedPAC said that Congress should direct HHS to regularly collect data, including service volume and work time, to establish more accurate work and practice expense values and direct the Secretary to identify overpriced fee-schedule services and reduce their Relative Value Units accordingly.  The commission also recommended that HHS increase the shared savings opportunity for physicians and health professionals who join or lead two-sided risk accountable care organizations.  In general, physician groups reacted negatively to the recommendations.

Proposed Changes in 2013 to Medicare MA and Part D

CMS has proposed that Medicare Advantage Plans and Part D drug plans be scrutinized for their performance and that applications for 2013 be denied if the plans perform poorly under the “star” rating system.  The agency also proposed that Part D plans be allowed to cover benzodiazepines and barbiturates.

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