Houston, We Have a Problem

By on October 29, 2013

Short-term medical plans could be a bigger problem than people think.  Here’s the issue.  The Affordable Care Act (ACA) essentially sets a minimum threshold for health insurance policies (in terms of deductibles, anticipated coverage percentage, benefit levels, etc.).  This means a lot of people are seeing their current (noncompliant) policies canceled as it gets closer to the HC BLOG_rocketJan. 1, 2014, start ACA date.  But the ACA threshold only applies to policies that are a year or longer.  So some insurance companies are issuing 364-day policies with much lower benefit levels, or policies that won’t cover anyone with pre-existing conditions (which ACA-compliant policies must do).

Policyholders will still have to pay the ACA mandate penalty, but at the amounts we’re talking about, the hypothetical Little Rock resident mentioned in the linked article above would save a little more than $1,400 in premiums over the course of the year. That means he or she would need to make more than $140,000 before the penalty exceeds his or her savings.  In subsequent years the increasing penalty cap (from 1 percent of income in 2014 to 2.5 percent in 2016) drops that break-even point to a little more than $56,000, but a lot of people make less than that.

So what’s the problem with all of this?  The ACA insurance policy minimums are there for a reason.  These short-term policies skirt that.  More importantly, as one commentator says in the article, there is a concern that short-term policies with a pre-existing condition exclusion will siphon off the younger and healthier people from the exchange marketplaces, essentially increasing costs for those people.  Basically, that ol’ health insurance death spiral again.

I think it might be even worse than that.  What does the healthy 25-year-old making $40,000 a year do on Day 365 when his short-term policy expires?  Probably renews it, right?  Even at 2016 penalty levels, it makes financial sense for him to do so.  But what does the 25-year-old making $40,000 a year who was diagnosed with cancer a few months back do when his 364-day policy expires?  Or the 30-year-old woman who just found out she’s pregnant?  Even if they were permitted to renew their short-term policies, don’t you think they will be tempted to trade up to the more generous ACA-compliant policies?

So it’s not just a case of these non-ACA policies taking out young and healthy people from the pool.  They’re doing that, then returning them to the ACA pool when they get sick or injured.  Sort of like a death spiral on steroids.  Stay tuned: Something has to give here.

Image courtesy of Flickr by NASA Goddard Space Flight Center

Filed under Affordable Care Act

Why Do Colorado Insurance Exchange Applicants Need to Disclose Asset Information?

By on October 28, 2013

There have been a couple of recent articles about Colorado’s experience enrolling people in expanded Medicaid and qualifying them for subsidies on the state-run insurance exchange.  One problem is a lengthy application form asking for all sorts of personal and financial data, including the applicant’s assets. If there are errors entering the data, the computer system freezes the application, and approval can take weeks.

And why do people who want to access the exchange need to apply for Medicaid first?  There are two main reasons.  The first is that Section 1413 of the Affordable Care Act (ACA) requires there to be a single, streamlined application to allow people to access all health financing options (Medicaid, exchange subsidies, etc.) under the law, although it permits the federal Department of Health and Human Services or various states to do this).  For those who make less than the Medicaid expansion cutoff (138 percent of the poverty line, or about $15,900 per year), the ACA originally assumed they would be eligible for Medicaid and thus eliminated any insurance subsidies.  Since the U.S. Supreme Court’s opinion in National Federation of Independent Business v. Sebelius made Medicaid expansion optional for the states, people in opt-out states making less than that amount are in a really bad position – too wealthy for Medicaid, but not wealthy enough for exchange subsidies.  The point is that before people are deemed eligible for the exchanges, whoever considers their applications must conclude they are not eligible for Medicaid.

That brings us to the second reason why the Department of Health Care Policy and Financing wants to know about applicants’ assets, even though it’s not really pertinent for Medicaid eligibility (and it’s certainly not pertinent for exchange subsidy eligibility).  Colorado has long used a horizontally integrated public benefits admissions process to determine eligibility for public assistance programs.  When people apply for Medicaid, they are automatically considered for the Children’s Health Insurance Program, the Supplemental Nutrition Assistance Program and a number of other welfare programs.  Sound like a potential mess?  You could say that.

Mess or not, the system remains in place to this day.  Before a Colorado resident qualifies for exchange subsidies, he or she must submit an application that it used for Medicaid and all public assistance programs.  It’s called the Program Eligibility and Application Kit (PEAK).  One of the programs for which PEAK determines eligibility is the Medicaid Long-Term Care Program, which pays for nursing facility care for recipients over age 65.  Unlike traditional Medicaid, the eligibility test for that does include a maximum asset component – generally, an applicant won’t be eligible if he or she has more than a couple thousand dollars of qualifying assets (under the theory that those with valuable assets should sell them to pay for their own nursing care before making taxpayers do it).

And there you have it.  That’s why people applying for subsidies on the Colorado health insurance exchange need to disclose various assets, and (indirectly) why the applications of many people are frozen and sent to weeks-long limbo.  Funny thing is, the whole single application and horizontal integration was supposed to make it easier for public assistance applicants, not harder.

Filed under Affordable Care Act, Federal Exchange Subsidies, Medicaid

Pulling the Rug Out – Lawsuits Challenge the Legality of Federal Exchange Subsidies (Part II)

By on October 25, 2013

This post continues the discussion of the handful of lawsuits challenging the legality of the federal subsidies for people shopping on the federally run insurance exchange in states that elected not to run exchanges themselves.  See Part I here.

To recap:  There is a statutory hole in the ACA that – if the plaintiffs in the pending lawsuits are to be believed – makes federal subsidies provided to individuals shopping on the federally run insurance exchange illegal.  Needless to say, this would be a huge blow for the ACA in the states that elected not to operate their own exchanges.

I think there might be a way out of this for the federal government.  My first thought when reading about these lawsuits was “but who has standing?”  Here’s what I mean by that.  In general, you can’t go to federal court to challenge federal or state government HC BLOG_rugspending – there won’t be standing (yes, there is an exception for spending that violates the Establishment Clause, and yes, you can probably imagine a scenario where someone comes up with a creative theory on why they are injured by spending and thus have standing, but bear with me).  But this situation is different because the subsidy mechanism involves more than federal spending; there’s also a penalty component.  Basically, the shared employer responsibility payment statute says that if a large employer doesn’t offer insurance to its employees, and a single employee is eligible for subsidies on a government-run insurance exchange, the employer must pay a penalty equal to the size of that subsidy times the number of its full-time employees.  The Internal Revenue Service has interpreted that to apply in states that run their own exchanges, as well as in those letting the federal government do it.

And there’s the potential window of opportunity.  As long as the GOP controls the House of Representatives – and perhaps just enough senators to filibuster – there can’t be a legislative fix to the ACA.  But there’s nothing stopping the IRS from pulling the rug out from under the plaintiffs in these cases.  How can they do that?  By promulgating new regulations switching course and exempting employers in the federally run exchange states from penalties under this part of the ACA.  Do that, and the plaintiffs in various pending lawsuits would no longer face exposure.  Now, the standing ship has probably sailed – the general rule in federal court is that if standing exists at the start of a case, it will always exist.  But there’s another legal doctrine – mootness – that applies when post-filing events occur to render a lawsuit pointless.  Here, if the IRS removed the employer penalty, the government could then argue that the cases are moot because the impending injury justifying the lawsuits no longer exists.

I should add two caveats.  First, there is an exception to mootness – voluntary cessation – that applies when the event causing mootness is within the control of the party asserting the defense and could re-occur.  Second, there is a creative argument that even individuals receiving subsidies might be “injured” insofar as the subsidies effectively push the price of coverage low enough for the individual mandate to apply to them.  I’m not sure what I think about that, but at the very least, reversing the current IRS interpretation would kick the pending lawsuits out of the federal courts (setting aside the voluntary cessation defense).

Image courtesy of Flickr by Evil Erin

Filed under Affordable Care Act, Federal Exchange Subsidies

This Might Have Legs – Lawsuits Challenge Legality of Federal Exchange Subsidies (Part I)

By on October 25, 2013

Here’s the gist of a decision I read a few weeks ago: One of the main mechanisms in the Affordable Care Act (ACA) was to set up state insurance exchanges where everyone who wasn’t (1) insured through their employers or (2) eligible for Medicaid could purchase the health insurance that they’re now mandated to have.  But health insurance is expensive, so the ACA also provided federal subsidies to people purchasing insurance on the exchanges.

Here’s the thing, though.  Congress can’t just make states establish and run these exchanges – that would (probably) violate the anti-coercion doctrine, which generally says that the federal government can’t “commandeer” the states.  So, Congress set up an alternative to the state exchanges – a federal equivalent for those states that decide they don’t want to do it themselves.  Roughly thirty states have elected to let the federal government run the exchange (the link says 26, but more recent sources put it at 34).  But there’s a tiny problem.  The way the ACA is worded, it looks like only those people shopping on state exchanges are eligible for subsidies.

This has the potential to be a big problem.  Most people shopping on the exchanges won’t be able to afford insurance without the federal subsidies.  Also keep in mind that about half of the states have opted out of the Medicaid expansion.  So in those states, the nondisabled poor and near-poor can’t get Medicaid, and they can’t afford to purchase insurance on the exchanges.  That’s a huge hole in the ACA.  As long as the GOP controls the House, good luck passing a legislative fix.

What to do, what to do?  Well, I have an idea.  Read about it in Part II.

Filed under Affordable Care Act

Have You Consulted With a Tribe Today?

By on October 16, 2013

I recently saw this story.  In a nutshell, one of the goals of the Affordable Care Act (ACA) is to encourage Native Americans to supplement the health care provided by the Indian Health Service (IHS) – which doesn’t cover a lot of procedures and services – by enrolling them in Medicaid or having them purchase a (heavily subsidized) health insurance policy.

This could have a major unintended consequence for state governments.  Why?  It traces back to the 2009 American Recovery and Reinvestment Act (ARRA).  That bill contained a provision, Section 5006(e), that requires states to consult with and solicit advice from any tribes located within their boundaries before they submit a Medicaid state plan amendment likely to directly affect the tribes.  These sorts of consultation requirements are fairly commonplace, though they have seen their fair share of academic criticism over the years.

You can see where I’m going here.  Until the ACA and ARRA, state Medicaid regulators could – more or less – ignore any tribes in their state.  In Colorado, even after ARRA, the only two tribes are located at the southwestern corner of the state, far away from most Medicaid providers, so state plan amendments were unlikely (though not impossible) to have an effect on the tribes.  But as tribe members are encouraged to enroll in Medicaid in increasing numbers, this is almost certain to change.  That’s especially true given the intended usage of the program by Native Americans: The goal is to make off-reservation health care more available to them so that they have access to services not provided by IHS.  One could imagine a situation in which a particular Medicaid service or rate cut that predominately affects one area of the state has a direct effect on tribes hundreds of miles away because that’s the only access their (Medicaid-enrolled) members have to those services.

Does this mean that a state can’t enact those cuts?  No, of course not.  A consultation right doesn’t constitute a veto power.  But state Medicaid agencies (and I’m looking at you Health Care Policy and Financing) would be wise to err on the side of caution and consult with in-state tribes for anything that could even conceivably affect them.

Filed under Affordable Care Act, Indian Health Service

The Future of Medicaid Secondary Payer Reporting Regimes (Part II) – Medicare Secondary Payer Reporting and Medicaid Liens

By on October 12, 2013

In my last post, I offered a general overview of the federal-state Medicaid partnership and the impact of the Affordable Care Act (ACA).  So now we know about the broad framework of Medicaid and how it’s funded.

Let’s switch gears and talk about a new subject – secondary payer issues.  Oftentimes, when someone requires medical care for an accident, some third party is legally responsible for the injury.  Some good examples are an employer being responsible for a workplace injury, or a toxic tortfeasor being held responsible for injuries it causes.  In that scenario, if Medicare or Medicaid pays for care related to the injury, the agency will have a statutory lien against any judgment or settlement obtained from the third party.

But a lien is worthless if no one knows about the settlement or judgment, right?  Historically, the Centers for Medicare and Medicaid Services (CMS) tried to overcome that obstacle by requiring Medicaid beneficiaries to refund any judgment or settlement owed to Medicare within 60 days.  The problem is that sort of “honor system” approach left a lot of secondary payment dollars on the table.  So, since 2007, CMS has used the Section 111 program (called that because it was enacted as Section 111 of the Medicare, Medicaid and SCHIP Extension Act) to require reporting of certain entities (mostly insurers) that are likely to pay money subject to a Medicare lien.  In other words, Section 111 effectively puts the burden on the payer – as well as the beneficiary – to report any settlement or judgment.  (There’s actually a lot of academic and practice-based criticism over Section 111, but since these posts are mostly about Medicaid, I’ll refrain from getting into them.)

As I mentioned above, state Medicaid programs have a similar requirement that the state agency must have a lien over any settlement or judgment intended to pay for medical treatment that was already paid for by Medicaid.  I should note – although it’s not directly relevant to my point – that in its 2006 Arkansas Department of Health and Social Services v. Ahlborn decision, the U.S. Supreme Court interpreted  the federal anti-lien statute to restrict the amount of the lien to the portion of the settlement attributable to health care costs.  Colorado’s, for example, is at C.R.S. 25.5-4-301 (I can’t link to the specific statute, but interested readers can click through here).  It allows:

When the state department has furnished medical assistance to or on behalf of a recipient pursuant to the provisions of this article, and articles 5 and 6 of this title, for which a third party is liable, the state department shall have an automatic statutory lien for all such medical assistance. The state department’s lien shall be against any judgment, award, or settlement in a suit or claim against such third party and shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.

Note:  The italicized phrase is what makes the statute consistent with Ahlborn, as the U.S. District Court for the District of Colorado recently observed (click through for a Word version of the decision).  Disclosure:  This case was litigated by my friend and former boss while I worked at the Colorado AG’s office, though I had no involvement with it.

So what’s the difference between the Medicare and Medicaid lien programs?  It’s Section 111 and the absence of anything remotely resembling it in virtually every state (with the notable exception of Rhode Island).  Most states have some sort of reporting requirement – Colorado, for example, requires Medicaid recipients and their representatives and attorneys to report any settlement or judgment that might be subject to a Medicaid lien.  But anything that relies on a beneficiary doing something that might take significant dollars out of his or her pocket is problematic at best.

One last thing:  Remember how Medicaid funding is structured from Part I?  It’s not all state money, not even close; instead, the federal government provides at least 50 percent and (depending on the state) as much as 75 percent of Medicaid dollars.  When a state Medicaid agency collects on a Medicaid lien, the feds want their share back as well.  Still, getting a quarter-to-half of a judgment or settlement back is better than nothing, right?  Discerning readers should see where I’m going with this.  Stay tuned.

Filed under Affordable Care Act, Medicaid

Medicaid Maintenance of Effort and Program Cuts – How Is It Supposed to Work?

By on October 11, 2013

This is interesting.  In 1996, the federal government passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which, among other things, eliminated Medicaid eligibility for a large swath of noncitizens.  PRWORA did, however, allow states to use state dollars to pay for these noncitizens’ health care if they so desired.  Maine did desire; Colorado didn’t.  Fast forward to 2012, when Maine passed a massive Medicaid overhaul, cutting eligibility for thousands.  (Maine actually sued in the First U.S. Circuit Court of Appeals to expedite the Centers for Medicare and Medicaid Services’ review of the cuts, but that lawsuit was summarily dismissed).  In January 2013, CMS approved some of these cuts, which included slashing noncitizen eligibility, and advocacy groups filed a class action challenging the measure on equal protection grounds.  In March 2013, the federal court denied the plaintiffs’ motion for a preliminary injunction, and they appealed to the First Circuit.

Since I’m a health lawyer, I’m not really interested in the merits of the equal protection claim.  But reading about the case and the background of the Maine Medicaid cuts brought to mind another issue that I’ve been thinking about a lot over the past few years – the so-called Medicaid maintenance of effort (MOE) requirement.  This is a provision included in the Affordable Care Act (ACA) that prohibits states from cutting Medicaid eligibility as it existed when the law was passed in 2010 until 2014 (for adults) or 2019 (for kids).  The purpose of the measure, which was an extension of a similar MOE requirement in the 2009 stimulus law, was twofold.  First, it was intended to ensure that states did not respond to the economic hardship in 2009 and subsequent years by cutting Medicaid eligibility, and second, it was meant to preserve eligibility for the near-poor until the subsidized state exchanges opened in 2014.

But here’s the thing.  There’s a lot of uncertainty surrounding the MOE requirement.  As a threshold matter, it’s unclear whether the provision – which was included in the Medicaid expansion part of the ACA – survived the Supreme Court’s 2013 decision in National Federation of Independent Business v. Sebelius, specifically the part that allowed states to opt out of that expansion.  The general consensus is that it did because NFIB didn’t actually invalidate the expansion – it just allowed states to opt out of it.  That’s never been tested, though (it would have been if the First Circuit had heard Maine’s lawsuit), so we just don’t know.

There’s another area of uncertainty surrounding the ACA’s MOE provision: What type of eligibility cuts does it encompass?  Something like Maine’s proposed plan to slash eligibility for a vast number of previously covered populations is a no-brainer.  Indeed, that seems to be pretty much what the MOE requirement was meant to address.  But what about the sort of judicial and administrative tweaking of in-place eligibility requirements that goes on all the time?  For example, in a case I was involved in, the dispositive issue was whether children with (solely) mental or behavioral disabilities were eligible for a program designed to assist children with medical disabilities severe enough to put them at risk for institutionalization in a nursing facility.  The court of appeals said they weren’t, but let’s pretend the decision came out the other way.  I don’t know for sure, but it’s possible that the state Medicaid agency would have wanted to amend its regulations to clarify that these kids weren’t eligible (unless anyone thinks the Colorado Department of Health Care Policy and Financing is heartless, the children were eligible for another program, albeit one with a waiting list).  Would the ACA MOE requirement have prevented the agency from doing that?  If so, you really have to ask if Congress intended the MOE provision to be used as a one-way ratchet, essentially locking in recipient-favorable state judicial determinations regarding eligibility.  It’s hard to believe that’s true.

I may revisit this issue, but for now let’s conclude by turning back to the Maine noncitizen eligibility case pending in the First Circuit.  I’m curious about one thing.  The plaintiffs’ position is that the noncitizen Medicaid program is part and parcel of the broader state Medicaid program (called MaineCare).  For reasons too complicated to address here (but read the district court’s preliminary injunction and 12(b)(6) decisions for the gory details), if it is, then the plaintiffs probably have a cognizable claim, but if it isn’t, they don’t.  Given that, why didn’t the plaintiffs’ attorneys raise the MOE requirement as separate grounds to invalidate the cuts?  It would seem to follow from their argument – cutting eligibility for an entire previously covered population appears to be what the ACA was meant to stop.  For that matter, why didn’t the state raise the fact that Maine didn’t see the need to submit the noncitizen eligibility cut to CMS for approval in 2012, and CMS didn’t see the need to address it when considering the other proposed Medicaid cuts in January?  Isn’t this prima facie evidence that the state and the feds see noncitizen coverage as something that’s separate and distinct from the traditional Medicaid program?  It makes me wonder if I’m missing something.

Filed under Affordable Care Act, Medicaid

The Future of Medicaid Secondary Payer Reporting Regimes (Part I) – The Federal-State Medicaid Partnership and the ACA

By on October 3, 2013

From the outset, I need to credit Mary Re Knack and David Farber for an excellent webcast they did on this subject on Oct. 1, 2013.  I subscribed to it even though I’ve got all of my general CLEs for the reporting period (though if anyone knows of any interesting ethics CLEs, I’d appreciate the heads-up).  I wasn’t disappointed.  It was hugely informative, and in main part, it’s the impetus for this series of posts.

So what is the federal-state Medicaid partnership and how has that arrangement been affected by the Affordable Care Act (which everyone calls the ACA)?

Medicaid is a program designed to help poor families and individuals.  It has federal and state components.  But how does that work?  The federal government (through the Centers for Medicare and Medicaid Services, which everyone calls CMS) tells the states the minimum groups that they must cover if they want to participate in Medicaid, and it identifies certain other groups that the states can elect to cover if they want to.  CMS also sets the mandatory and optional benefits that must (or may) be provided to eligible beneficiaries.  In exchange, the federal government provides a good chunk of the funding for the state Medicaid programs – anywhere from 50 percent up to 75 percent depending on the state.  Although a state theoretically could opt out of Medicaid, in practice, none have.

Each state that participates in Medicaid (again, all of them) is required to establish a “single State agency” to administer and supervise the state Medicaid plan.  In Colorado, that’s the Department of Health Care Policy and Financing.

The precise mechanics of the Medicaid reimbursement process are a bit complicated, but in general, a state will file a statement once a quarter that estimates its total Medicaid costs and certifies that it will be able to come up with its share of those expenses. Then the federal government hands over the matching funds.  At the beginning of the next quarter, the state files a reconciliation statement detailing what it actually spent.  CMS will adjust its payment of the matching funds for that period based on whether it owes (or is owed) additional money.  Trust me, you’ll see why this is important a couple of posts from now.

In addition to the traditional Medicaid-eligible populations and covered services, states are allowed and encouraged to experiment with test programs, called “waiver” programs (because states must get a waiver from CMS before implementing them).  For example, one typical waiver program is Colorado’s Children’s Waiver, which is designed to provide home-based care for physically disabled (but not mentally or behaviorally disabled, as the Colorado Court of Appeals has said) children who would otherwise be at risk of institutionalization in a nursing facility or hospital.

Enter the Affordable Care Act, aka Obamacare.  Among its many moving parts, it included an expansion of Medicaid eligibility to anyone under age 65 making less than 133 percent of the poverty level, regardless of whether they have children or a disability (in most states, childless, nondisabled adults were flat-out ineligible for Medicaid).  This is a pretty drastic expansion of the program, increasing the state rolls by more than 20 million, or about a third of the pre-expansion population.  In return, the federal government will pay 100 percent of the increased Medicaid costs until 2016, with the state share increasing to no more than 10 percent by 2020.

Originally, participation in the Medicaid expansion program was tied to a state’s ability to offer Medicaid in any form.  This means that if a state declined to expand Medicaid eligibility as contemplated by the ACA, it would lose all Medicaid funding.  However, the U.S. Supreme Court put a stop to that in its monumental 2013 National Federation of Independent Business v. Sebelius decision.  There, the court held that conditioning all federal Medicaid funds on a state’s decision to accept the ACA expansion was too coercive to pass constitutional muster, and it required the federal government to permit states to opt out if they so chose.  To date, more than half of the states have chosen to do just that.

Where does that leave us?  State-federal Medicaid partnership, check.  Federal matching funds, check.  ACA Medicaid expansion, check.  But what does that have to do with the Medicaid secondary payer reporting regime?  Stay tuned.

Filed under Affordable Care Act, Medicaid

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