The Future of Health Care Reform Brian S. Werfel, Esq. Werfel & Werfel, PLLC

29 States are challenging at least one aspect of the Affordable Care Act – 26 states are parties to lawsuit filed by Florida AG – Virginia AG sued separately – Utah is challenging Health Care Exchanges “We already have own exchanges, thank you very much” Dozens of lawsuits by employers, special interest groups, private citizens, etc. Legal Challenges to the Affordable Care Act

Two primary constitutional challenges: 1.Individual Mandate – question as to whether the mandate the requires individuals to maintain/purchase insurance violates the “commerce clause”? 2.Medicaid Expansion – question as to whether the requirement that states extend Medicaid coverage to people earning between 100% % of the FPL is a violation of state sovereignty under the 10 th Amendment. Constitutional Questions

SCOTUS – Oral Arguments SCOTUS heard 3 days of oral arguments on constitutionality of ACA –Day 1 – Jurisdictional Issues –Day 2 – Constitutionality of Individual Mandate –Day 3 – Effect on rest of the law if Individual Mandate is ruled unconstitutional Decision expected in June

1.Individual Mandate is upheld as a valid exercise of Congress’ authority to regulate interstate commerce 2.Individual Mandate is rejected as an impermissible expansion of Commerce Clause, unaffected provisions of ACA are left unaffected 3.Individual Mandate is rejected as an impermissible expansion of Commerce Clause, Justices are unable to separate out unaffected provisions, and, therefore, the entire law is thrown out. Possible Outcomes

Public Opinion

Cost of Health Care Reform

The Underlying Problem…

2010: – –Total cost: $940 billion –Net cost: - $143 billion (Reduces deficit) March 2012: –2012 – 2022 –Total cost: $1.76 trillion –Net cost: $1.25 trillion (Increases deficit) Congressional Budget Office

March 2012 CBO Report

Insurance Coverage –CBO originally estimated that 3 million people that currently have employer-based coverage would lose that coverage –CBO now estimates this number to be 3 – 5 million –Worst case scenario is 20 million –Paradoxically, the more people lose their employer health insurance, the less the bill costs –More amounts paid in employer penalties –Higher income taxes (increased wages to offset loss of healthcare)

Health Care Exchanges (HCEs)

Health Care Exchanges Affordable Care Act requires states to establish state exchanges –Facilitate the purchase of insurance coverage through qualified health plans (QHPs) –Assist qualified employers to enroll employees in QHPs through Small Business Health Options Program (SHOP)

Timeline 15 Passage of ACA Release of Exchange Proposed Rule Release of Essential Health Benefit Guidance Release of Final Exchange Rule Exchanges Implemented

Standards –Relative to the establishment, operation, and minimum functionality of Exchanges, including eligibility standards for insurance affordability programs –For health insurance issuers with respect to participation in an Exchange, including the minimum certification standards for QHPs –For employer participation in the SHOP –Disseminate information to qualified employees –Submit contributions toward premiums –Offer enrollment period for new employees 16 Final Rule re: HCEs

ACA requires Exchanges cover 10 broad categories of services –Emergency services –Ambulatory patient services –Hospitalization –Rehabilitative services HHS released “guidance” end of 2011 AAA comment letter in January 2012 –Urged that emergency and nonemergency ambulance transports be expressly included as part of the basic benefit package 17 Essential Health Benefits

States select a single “benchmark plan” to serve as the standard for QHP Choice for benchmark plans –The largest plan in any of the 3 largest small group insurance products in the State’s small group market –Any of the largest 3 State employee health benefit plans –Any of the largest 3 national FEHBP plan options –The largest insured commercial non-Medicaid Health HMO operating in the State Default – largest small group plan in the State 18 HHS Guidance

State mandated coverage –If the selected benchmark plan is subject to State mandates, then the benchmark must include state mandates on coverage –If the selected benchmark includes a State’s benefit mandates, the State would be required to cover the cost of those mandates outside the EHB package Federal mandated coverage –If the selected benchmark plan does not include an ACA mandatory category it must be added –Federal government would pick up cost 19 HHS Guidance

$610 million awarded to 33 states and D.C. to develop state exchanges –Most other states have received funding for other aspects related to HCEs Implementation varies: –Some states put implementation on hold pending SCOTUS decision –Others moving forward –Many finding that costs are prohibitive, looking to federal government to establish their exchange 20 HCEs – Implementation

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Accountable Care Organizations (ACOs)

“Accountable Care Organization” is a network of hospitals and physicians that will share responsibility for providing care to patients –Would be responsible for pre-hospital, inpatient acute care, and post-acute care of the patient –Goal is to replace the insurance company as the “gatekeeper” Capitated payment regime Accountable Care Organizations

Starting in 2012, ACOs will be eligible to share in cost savings they achieve for the Medicare program Starting in 2013, a 5-year Medicare pilot program would experiment with a bundled payment to ACOs –Cover all care starting 72 hours prior to hospital admission through 30 days post-discharge Accountable Care Organizations

Acceleration of existing trend towards merger of hospitals into larger and larger “health systems” –50% increase post-ACA Bringing physicians into the fold as employees –> 50% of physicians are now employed by hospitals –75% increase since 2000 Horizontal Integration

Health systems becoming more aggressive in acquiring ancillary services –Rehab and long-term care hospitals –SNFs Vertical Integration

AMR (EMSC) –Purchased by Clayton, Dubilier & Rice –$3.2 billion Rural Metro –Purchased by Warburg Pincus –$438 million Falck A/S –2011 acquisition of Lifestar Ambulance –2010 acquisition of Care Ambulance First Call Ambulance (TN) –Purchased by EDG Partners LLC EMS Acquisition Activity

A Vision of the Future?

Medicaid expenditures to increase by $455 billion from FY 2010 – FY 2019 – Largely the result of increased enrollment –11.6 million recipients in FY 2014 –20 million recipients by FY % of the increased costs will be paid by federal government through 2017 – What happens in 2018? Impact of ACA

Projected Medicaid Expenditures

Texas –On June 8, 2011, Texas Legislature approved legislation that would restructure the state’s Medicaid program –Privatization in South Texas –Formation of Healthcare Cooperatives Utah –State officials have released a 91-page blueprint for overhauling the state’s Medicaid program –ACOs Florida –Plan to shift beneficiaries into private-run Medicaid managed care organizations Reaction of States

Alabama – Stopped paying Medicare crossovers – Increased mileage rate from $1 to $3 per mile Florida – Looking to move its entire Medicare population into HMOs Montana – Looking at 5% rate cuts Oklahoma – 3.25% rate cut South Carolina – Repealed a law that prohibited Medicaid Agency from adjusting rates – Prelude to significant rate cuts Rate Cuts

California –Proposed across-the-board cuts of 5 – 10% –Various provider groups sued –Includes ambulance –On hold pending resolution of a case involving SNFs that is currently pending before SCOTUS –February 12, 2012, SCOTUS remands case back to 9 th Circuit for further hearings Rate Cuts

May 6, 2011 Would create a standardized process that states must adhere to when setting Medicaid rates Review must include: –Comparison of Medicaid rate to customary charge –Comparison of Medicaid rate to: –Medicare allowable –Average commercial rate –Medicaid allowable –Estimate of increase or decrease in access attributable to rate change Medicaid Proposed Rule

Brian Werfel, Esq. Werfel & Werfel, PLLC